EXHIBIT 10.1

 

EXCHANGE AGREEMENT

 

THIS EXCHANGE AGREEMENT (this “Agreement”), dated as of February 3, 2010, is
made by and between Edwin F. Hale, Sr. (the “Investor”) and FIRST MARINER
BANCORP, a Maryland corporation (the “Company”).

 

RECITALS

 

A.            Reference is made to: (i) that certain Junior Subordinated
Indenture, dated as of December 10, 2002, by and between the Company and The
Bank of New York (the “2002 Indenture”); (ii) that certain Junior Subordinated
Indenture, dated as of August 18, 2003, by and between the Company and The Bank
of New York (the “2003 Indenture”); and (iii) that certain Junior Subordinated
Indenture, dated as of December 28, 2005, by and between the Company and
Wilmington Trust Company (the “2005 Indenture”).  The 2002 Indenture, the 2003
Indenture and the 2005 Indenture are collectively referred to herein as the
“Indentures.”

 

B.            Reference is made to: (i) that certain Amended and Restated Trust
Agreement (the “2002 Trust Agreement”), dated as of December 10, 2002, by and
among the Company, The Bank of New York, as Property Trustee, The Bank of New
York (Delaware), as Delaware Trustee, and the Administrative Trustees named
therein, as Administrative Trustees; (ii) that certain Amended and Restated
Trust Agreement (the “2003 Trust Agreement”), dated as of August 18, 2003, by
and among the Company, The Bank of New York, as Property Trustee, The Bank of
New York (Delaware), as Delaware Trustee, and the Administrative Trustees named
therein, as Administrative Trustees; and (iii) that certain Amended and Restated
Trust Agreement (the “2005 Trust Agreement”), dated as of December 28, 2005, by
and among the

 

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Company, Wilmington Trust Company, as Property Trustee, Wilmington Trust Company
as Delaware Trustee, and the Administrative Trustees named therein, as
Administrative Trustees.  The 2002 Trust Agreement, the 2003 Trust Agreement and
the 2005 Trust Agreement are collectively referred to herein as the “Trust
Agreements.”

 

C.            Mariner Capital Trust II, a Delaware statutory trust ( “Trust
II”), is the holder of a Floating Rate Junior Subordinated Note due 2032 in the
original principal amount of $10,310,000 issued by the Company pursuant to the
2002 Indenture.  Mariner Capital Trust IV, a Delaware statutory trust (“Trust
IV”), is the holder of a Floating Rate Junior Subordinated Note due 2033 in the
original principal amount of $12,380,000 issued by the Company pursuant to the
2003 Indenture.  Mariner Capital Trust VIII, a Delaware statutory trust ( “Trust
VIII”), is the holder of a Junior Subordinated Note due 2035 in the original
principal amount of $10,310,000 issued by the Company pursuant to the 2005
Indenture.  Trust II, Trust IV and Trust VIII are collectively referred to
herein as the “Trusts.”

 

D.            The Investor at the Closing Date (as defined in Section 10.1) will
be the holder of Floating Rate Preferred Securities (the “2002 Preferred
Securities”) in the aggregate liquidation amount of up to $4,000,000 issued by
Trust II pursuant to the 2002 Trust Agreement.  The Investor at the Closing Date
will be the holder of Floating Rate Preferred Securities (the “2003 Preferred
Securities”) in the aggregate liquidation amount of up to $6,000,000 issued by
Trust IV pursuant to the 2003 Trust Agreement.  The Investor at the Closing Date
will be the holder of Preferred Securities (the “2005 Preferred Securities”) in
the aggregate liquidation amount of up to $10,000,000 issued by Trust VIII
pursuant to the 2005 Trust Agreement.  The 2002 Preferred Securities, the 2003
Preferred Securities and the 2005 Preferred Securities actually held on the
Closing Date by the Investor are collectively referred to herein as the
“Preferred Securities”, and

 

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the aggregate liquidation amount of such Preferred Securities is referred to
herein as the “Preferred Securities Amount”.

 

E.            The Investor and the Company desire that the Investor exchange the
Preferred Securities for the consideration set forth herein pursuant to the
terms and conditions of this Agreement (the “Exchange”).  The Exchange and the
other transactions contemplated by this Agreement are collectively referred to
herein as the “Transactions”.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual agreements and subject to the
terms and conditions herein set forth, the parties hereto agree as follows:

 

1.             Exchange of Preferred Securities.

 

Upon and subject to the terms and conditions contained in this Agreement, at the
Closing (as defined in Section 10.1), the Investor shall deliver the Preferred
Securities held by him to the Company, free and clear of all claims, liens and
Encumbrances (as defined in Section 3.2), and the Company shall transfer and
deliver to the Investor the consideration set forth in Section 2.1 of this
Agreement.

 

2.             Consideration for the Exchange.

 

2.1           Exchange Price.

 

The consideration to be delivered to each Investor as set forth in Article 1
(the “Exchange Price”) shall be:

 

(a)                                  A number of shares (the “Initial Shares”)
of the Company’s common stock, par value $.05 per share (“Company Common
Stock”), equal to (x) ten percent (10.00%) of the Preferred Securities Amount
divided by (y) the Fair Market Value of a share

 

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of Company Common Stock as of the Closing Date (the “Conversion Price”).  For
purposes of this Agreement, “Fair Market Value” of any equity security of the
Company, including a share of Company Common Stock, means, as of any date, the
average daily closing price per equity security for the twenty (20) trading days
prior to such date, as reported on any established securities exchange or
national market system on which that equity security is then listed or admitted
to trading or, if the equity security is not so listed or admitted, the fair
market value of that equity security as determined pursuant to a reasonable
method adopted by the Special Committee of the Board of Directors of the Company
in good faith for such purpose in accordance with applicable law.

 

(b)                                 In the event that the Company completes one
or more Offerings (as defined below) by June 30, 2010 in which it sells Company
Common Stock at a price per share that is less than the Conversion Price, then
the Investor shall be issued additional shares (the “Additional Shares”), for no
additional consideration, in an amount such that the sum of the Initial Shares
plus the Additional Shares shall equal (i) ten percent (10.00%) of the Preferred
Securities Amount divided by (ii) the lowest price per share of Company Common
Stock received by the Company in any such Offering completed by June 30, 2010
(the “Lowest Offering Price”).  As

 

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used in this Agreement, the terms “Offerings” and “Offering” mean any of the
following:  (x) a public offering of Company Common Stock other than pursuant to
an employee benefit plan of the Company, including an offering registered with
the Securities and Exchange Commission (the “SEC”) notwithstanding that such
registered offering might be deemed a “private placement” under Rule 5635 of the
NASDAQ Stock Market Rules, or (y) a sale of shares of Company Common Stock
effected pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“1933 Act”), in exchange exclusively for cash consideration.

 

(c)                                  A warrant, in the form attached hereto as
Exhibit A (the “Exhibit A Warrant”), to purchase a number of shares of Company
Common Stock equal to the product of (I) the Initial Shares and (II) .20.  The
Exhibit A Warrant shall be exercisable within five (5) years of the Closing Date
and shall provide for the purchase of the shares at a strike price (the “Strike
Price”) equal to the lowest of (i) the Conversion Price, (ii) in the event that
on or prior to June 30, 2010 the Company consummates an Offering, the Lowest
Offering Price, or (iii) in the event that on or prior to June 30, 2010 the
Company shall have entered into an agreement with a holder (other than the
Investor) of trust preferred securities issued by a trust subsidiary of the
Company, which agreement provides for the exchange of such trust preferred
securities for Company Common

 

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Stock (a “Subsequent Exchange Agreement”), the price utilized in the Subsequent
Exchange Agreement to determine the number of shares of Company Common Stock to
be exchanged for such trust preferred securities exclusive of any warrants,
warrant shares or warrant prices.

 

(d)                                 If issuable in accordance with the terms of
this Section 2.1(d), a warrant, in the form attached hereto as Exhibit B (an
“Exhibit B Warrant” and together with Exhibit A Warrant, the “Warrants”), to
purchase a number of shares of Company Common Stock equal to the Allowable
Number.  An Exhibit B Warrant shall be issuable only in the event that (i) on or
prior to June 30, 2010 the Company shall have entered into a Subsequent Exchange
Agreement, and (ii) (A) the value of the consideration to be issued pursuant to
that Subsequent Exchange Agreement, including warrants (the “Subsequent Exchange
Consideration”), divided by the aggregate liquidation amount of trust preferred
securities to be exchanged pursuant to the Subsequent Exchange Agreement (the
“Relative Subsequent Exchange Consideration”) is greater than (B) the value of
the consideration to be issued by the Company pursuant to subsections
(a) through (c) of Section 2.1 of this Agreement, divided by the Preferred
Securities Amount (the “Relative Consideration”).  For purposes of the preceding
sentence, in calculating the value of consideration to be issued by the

 

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Company, consideration in the form of an equity security of the Company shall be
valued based on the Fair Market Value of such equity security as of the date on
which the value of the Relative Subsequent Exchange Consideration is
established, and consideration in the form of warrants shall be valued as of the
date the Subsequent Exchange Agreement is entered into using the Black-Scholes
method of valuing warrants.  An Exhibit B Warrant shall be issued to the
Investor for each Subsequent Exchange Agreement, to the extent the conditions to
issuance provided in this paragraph with respect to such Subsequent Exchange
Agreement are satisfied.  If the Company and the Investor disagree as to the
value of consideration to be exchanged, then such value shall be determined by
an independent party mutually agreeable to the Company and the Investor.  The
“Allowable Number” shall be a number of shares such that the relative value of
the Relative Consideration, taking into the account the value of all Exhibit B
Warrants to be issued to the Investor, equals the relative value of the Relative
Subsequent Exchange Consideration, provided that in no event shall the Allowable
Number exceed 20% of the Initial Shares.  If issued, an Exhibit B Warrant shall
provide for the purchase of Company Common Stock at the Strike Price determined
consistent with this paragraph and shall be exercisable within five (5) years of
the Closing Date.

 

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(e)                                  In the event that the consummation of the
Exchange at the Closing would result in the Investor’s ownership of 41.33% or
more of the then outstanding shares of Company Common Stock, assuming the
exercise of the Warrants he would receive upon the Closing (the “Threshold”),
then the Preferred Securities to be exchanged by the Investor at the Closing
shall be reduced by the minimum amount necessary so that immediately following
the Closing the Investor’s ownership of Company Common Stock is below the
Threshold.  In such event, the Exchange Price to be received by the Investor
pursuant to Sections 2.1(a), (b), (c) and (d) of this Agreement shall be
proportionately reduced to reflect the proportionate reduction in the amount of
Preferred Securities to be exchanged.  In the event the Investor continues to
hold Preferred Securities following the Closing as a result of the foregoing
reduction, if in the future the remaining Preferred Securities can be exchanged
without causing the Investor’s ownership of Company Common Stock to exceed the
Threshold, then, subject to the terms and conditions contained in this
Agreement, the Company and the Investor shall complete the Exchange at a
subsequent closing with respect to the remaining Preferred Securities held by
the Investor, with a proportionate adjustment to the Exchange Price to reflect
the proportion of the Preferred Securities to be exchanged.

 

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2.2           Representations and Warranties of the Investor regarding the
Company Common Stock and the Warrants.

 

The Investor represents and warrants to the Company as follows:

 

(a)                                  (i) The Investor is familiar with the
nature of and risks involved in an investment in the Company Common Stock and
Warrants issuable hereunder, (ii) is financially capable of bearing the economic
risk of this investment, and (iii) has carefully considered and evaluated the
risks and advantages of receiving the Company Common Stock and Warrants issuable
hereunder.

 

(b)                                 The Investor understands that (i) the
Company Common Stock and Warrants issuable hereunder have not been registered
under the 1933 Act or any state securities laws and cannot be resold without
registration under the 1933 Act or an exemption therefrom, (ii) the Company
Common Stock and Warrants issuable hereunder are being acquired for investment,
and (iii) neither the Company Common Stock and Warrants issuable hereunder nor
any portion thereof may be sold or distributed by the Investor without
compliance with all applicable securities laws.

 

(c)                                  The Investor is fully aware that the
Company Common Stock and Warrants issuable hereunder are being issued and sold
in reliance upon an exemption provided for by the 1933 Act and the applicable
state securities laws, on the basis that no public offering is involved, and
that the representations set forth in this Agreement

 

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are being relied upon by the Company and are essential to the availability of
such exemption.

 

(d)                                 The Investor acknowledges and understands
that the certificates evidencing its ownership of the Company Common Stock
issuable hereunder and upon the exercise of the Warrants will be imprinted with
a legend substantially in the following form:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. 
THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND NO SALE, TRANSFER OR OTHER DISPOSITION OF THE SHARES
MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO,
(ii) AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR ANY APPLICABLE STATE
SECURITIES LAWS, OR (iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED.

 

(e)                                  The Investor acknowledges and understands
that the certificate evidencing its ownership of the Warrants will be imprinted
with a legend substantially in the following form:

 

NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY
STATE SECURITIES LAWS. THEY HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SALE, TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE
EFFECTED WITHOUT (i) AN

 

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EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL
SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT OR ANY APPLICABLE STATE SECURITIES LAWS, OR (iii) RECEIPT
OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT
THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.

 

(f)                                    The Investor is acquiring the Company
Common Stock and Warrants issuable hereunder for his own account.

 

(g)                                 The offer and purchase of the Company Common
Stock and Warrants issuable hereunder were initiated in a private, negotiated
transaction between the Investor and Company, and no general solicitation was
utilized by the Company.

 

(h)                                 The Investor is a resident, for tax and
other purposes, of the United States.

 

(i)                                     The Investor is an Accredited Investor
(as such term is defined in Rule 501 promulgated under the 1933 Act) of the type
set forth next to his name on the signature page to this Agreement.

 

3.             Other Representations and Warranties of the Investor.

 

The Investor makes the representations and warranties set forth in this
Article 3 to the Company intending that the Company rely on each of such
representations and warranties in order to induce the Company to enter into and
complete the Transactions.  The representations and warranties set forth in this
Article 3 shall survive the consummation of the Transactions until the
expiration of one (1) year from the Closing Date, provided that in the case of
fraud, the representations and warranties shall survive the consummation of the
Transactions without any

 

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time limit. When used with respect to the Investor, the term “Actual Knowledge”
means only those matters of which the Investor has actual knowledge, without
having undertaken any inquiry or investigation.

 

3.1           Execution and Validity (the Investor).

 

The Investor has entered into this Agreement freely and voluntarily, in his
individual capacity, and without reliance on any promises not expressly
contained herein.  The Investor has been afforded an adequate time to review
carefully the terms hereof.  The Investor has the full right, power and
authority to enter into, and the ability to perform his obligations under, this
Agreement and all other agreements and instruments contemplated by this
Agreement.  This Agreement has been duly executed and delivered by the Investor
and is, and the other agreements and instruments to be executed and delivered by
the Investor will be, when executed and delivered by him, the legal, valid and
binding agreements of the Investor, enforceable in accordance with their
respective terms except as enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors’ rights and the
exercise of judicial discretion in accordance with general principles of equity.

 

3.2           Absence of Encumbrances (the Investor).

 

At the Closing Date, the Investor will be the record and beneficial owner of the
Preferred Securities set forth next to his name on the signature page hereto,
free and clear of any liens, pledges, claims, restrictions, agreements, charges
and encumbrances of any kind (“Encumbrances”), and there are, and as of the
Closing Date there will be, no pending or, to the Investor’s Actual Knowledge,
threatened claims or proceedings which would impair or encumber any of such
Preferred Securities.

 

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3.3           Absence of Violations.

 

Neither the execution nor delivery of this Agreement or of any of the other
agreements and instruments contemplated by this Agreement, nor the consummation
of the Transactions or such other agreements and instruments will (a) conflict
with or result in the breach of any term or provision of, or constitute a
default under, or give any third party the right to accelerate any obligation
under, any contract, agreement, indenture, deed of trust, instrument, order, law
or regulation to which the Investor is a party or by which the Investor is, or
any of his assets or properties are, in any way bound or obligated or (b) result
in the creation of any Encumbrance upon any of the Investor’s Preferred
Securities.

 

3.4           Consents.

 

Except as disclosed on Schedule 3.4 to this Agreement (the “Investor Consents
and Filings”), the Investor is not required to obtain any consent, approval,
order or authorization of, or to make any registration, qualification,
designation, declaration or filing with, any governmental authority in
connection with the Transactions; and (b) the Investor not required to obtain
any consent, approval, or waiver from, or procure any other action by, any
person or entity under any contract, instrument or other document to which the
Investor is a party or is subject in connection with the execution and delivery
of this Agreement by the Investor or the consummation by the Investor of the
Transactions.

 

3.5           Brokers.

 

No agent, broker, investment banker or other person or entity acting on behalf
of the Investor or under his authority, is or will be entitled to any broker’s
fee or finder’s fee or any other commission or similar fee, directly or
indirectly, in connection with the Transactions for which the Company or the
Investor is or will become liable.

 

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4.             Representations and Warranties of Company.

 

The Company makes the representations and warranties contained in this Article 4
to the Investor intending that the Investor rely on each of such representations
and warranties in order to induce the Investor to enter into and complete the
Transactions. These representations and warranties shall survive the
consummation of the transaction contemplated by this Agreement until the
expiration of one (1) year from the Closing Date, provided that in cases of
fraud these representations and warranties shall survive the consummation of
such transaction without any time limit.  When used with respect to the Company,
the term “Actual Knowledge” means only those matters actually known by any of
the directors or officers of the Company, without having undertaken any inquiry
or investigation.

 

4.1           Execution and Validity.

 

The Company has the full right, power and authority to enter into, and the
ability to perform its obligations under, this Agreement and all other
agreements and instruments contemplated by this Agreement.  The execution and
delivery of this Agreement by the Company, and the consummation of the
Transactions by the Company, (a) have been duly authorized and approved by the
Board of Directors of the Company and (b) if and when approved by the
stockholders of the Company as contemplated by Section 6.4 and Section 7.4
hereof, will have been duly authorized and approved by all necessary action on
the part of the Company.  This Agreement has been duly executed and delivered by
the Company and is, and the other agreements and instruments to be executed and
delivered by the Company pursuant to this Agreement will be, when executed and
delivered by it, the legal, valid and binding agreements the Company,
enforceable in accordance with their respective terms except as enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,

 

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moratorium or other laws of general application relating to or affecting
enforcement of creditors’ rights and the exercise of judicial discretion in
accordance with general principles of equity.

 

4.2           Organization and Qualification.

 

The Company (a) is duly organized, validly existing and in good standing under
the laws of the State of Maryland, (b) has all the requisite power and authority
to own, lease and operate its properties and to carry on its businesses as such
businesses are presently conducted, and (c) is duly qualified to transact
business as a foreign corporation and is in good standing under the laws of each
of the jurisdictions where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification necessary.

 

4.3           Absence of Encumbrances.

 

The Initial Shares and the Warrants have been duly authorized by all necessary
corporate action.  When issued and sold against receipt of consideration
thereof, the Initial Shares will be validly issued by the Company, fully paid,
non-assessable, will not subject the holders thereof to personal liability and
will not be issued in violation of preemptive rights.  The voting rights
provided for in the terms of the Initial Shares are validly authorized and shall
not be subject to restriction or limitation in any respect except as set forth
in the Company’s Articles of Incorporation or Maryland law.  The Warrants, when
executed and delivered by the Company, will be validly issued.  Any shares of
Company Common Stock issued by the Company upon the exercise of the Warrants in
accordance with their terms will be validly issued by the Company, fully paid,
non-assessable, will not subject the holders thereof to personal liability and
will not be issued in violation of preemptive rights.  The voting rights
provided for in the terms of any shares of Company Common Stock issued upon
exercise of the Warrants will be validly

 

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authorized and shall not be subject to restriction or limitation in any respect
except as set forth in the Company’s Articles of Incorporation or Maryland law.

 

4.4           Absence of Violations.

 

Neither the execution nor delivery of this Agreement or of any of the other
agreements and instruments contemplated by this Agreement, nor the consummation
of the Transactions, will (a) conflict with or result in the breach of any term
or provision of, or constitute a default under, or give any third party the
right to accelerate any obligation under, any charter provision, bylaw,
contract, agreement, indenture, deed of trust, instrument, order, law or
regulation to which the Company is a party or by which the Company or any of its
assets or properties is in any way bound or obligated; or (b) result in the
creation of any Encumbrance upon any of the assets or properties of the Company.

 

4.5           Consents.

 

Except as disclosed on Schedule 4.5 to this Agreement (the “Company Consents and
Filings”), (a) no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any governmental
authority is required on the part of the Company in connection with the
Transactions; and (b) no consent, approval, waiver or other action by any person
or entity under any contract, instrument or other document is required or
necessary for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the Transactions.

 

4.6           Litigation and Governmental Matters.

 

There is no action, suit or proceeding that has been (a) filed and served,
whether or not purportedly on behalf of the Company, at law or in equity, or
before or by any federal, state, local or other governmental department,
commission, board, bureau, agency or

 

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instrumentality, domestic or foreign, which is pending; or (b) to the Actual
Knowledge of the Company, (i) filed but not served or (ii) threatened against
(including, but not limited to, counterclaims) the Company which involves
(A) the Transactions or (B) the possibility of any judgment or liability which
if determined adversely to the Company would result in a material adverse change
in the business, operations, affairs, properties or assets, or in the financial
condition of the Company; and the Company is not in default with respect to any
final judgment, writ, injunction, decree, rule or regulation of any court or any
federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which would have a
material adverse effect on the Company or on the Company’s ability to consummate
the Transactions.

 

4.7           Compliance.

 

Neither the Company nor its business, nor the use, operation or maintenance of
any of its assets or properties, is in or constitutes a default under, or is in
violation of or contravenes, any applicable (including, without limitation, any
tax, health, employment, customs or interstate or international commerce)
statute, law, ordinance, decree, order, rule or regulation of any governmental
authority, domestic or foreign, except where such default, violation or
contravention would not have a material adverse effect on the Company.  The
Company has not, nor has any entity or individual acting on behalf of the
Company, made any payment of funds prohibited by law, and no funds of the
Company have been set aside to be used for any such payment.

 

4.8           Brokers.

 

No agent, broker, investment banker, or other person or entity acting on behalf
of the Company or under its authority, is or will be entitled to any broker’s
fee or finder’s fee or any

 

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other commission or similar fee, directly or indirectly, in connection with the
Transactions for which the Investor is or will become liable.

 

4.9           Securities Reports.

 

Since January 1, 2009, the Company has filed or made all forms, reports and
documents (the “Reports”) required to be filed or made by it (a) with the SEC
under the Securities Exchange Act of 1934, as amended (the “1934 Act”), and
(b) under the NASDAQ Stock Market Rules, and such Reports did not at the time
filed or made (or if amended or superseded by subsequent Report, then on the
date on which such subsequent Report was filed or made) contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

 

4.10         Securities Law Matters.

 

(a)                                  Neither the Company nor any of its
“affiliates” (as defined in Rule 501(b) of Regulation D under the 1933 Act
(“Regulation D”)), nor any person acting on their behalf, has, directly or
indirectly, made offers or sales of any securities of the Company, or solicited
offers to buy any such securities, under circumstances that would require the
offer or sale to the Investor of any portion of the Exchange Price to be
registered under the 1933 Act or any state securities “blue sky” laws (other
than as contemplated by Article 11 hereof).

 

(b)                                 Neither the Company nor any of its
affiliates, nor any person acting on their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of

 

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Regulation D) in connection with any offer or sale of any of the Exchange Price.

 

4.11         Approval by Disinterested Board Committee.

 

The Board of Directors of the Company has (i) duly established a special
committee, comprised solely of directors of the Company other than the Investor
who have no direct or indirect financial interest in the Transactions (the
“Special Committee”), for the purpose of reviewing, approving and authorizing
the Transactions on behalf of the Board of Directors and the Company, and
(ii) provided the Special Committee with the financial means necessary to retain
all those financial, legal and other advisers that the Special Committee deems
appropriate in connection with fulfilling its duties.  The Special Committee has
(x) reviewed and discussed the Transactions with its financial and legal
advisers and with any other advisers it deemed appropriate, (y) determined, in
good faith, that the Transactions are fair and reasonable to the Company, as
contemplated by Section 2-419 of the Maryland General Corporation Law, and
(iii) authorized and approved the Transactions on behalf of the Board and the
Company.

 

5.             Covenants of the Investor.

 

In addition to other obligations contained in this Agreement, between the date
of this Agreement and the Closing, unless specifically waived, in writing, by
the Company, the Investor shall:

 

5.1           Cooperation.

 

Take no action that would cause the conditions upon which the obligations of the
parties to effect the Transactions not to be fulfilled including, without
limitation, taking or causing to be taken any action that would cause the
representations and warranties made by the

 

19

--------------------------------------------------------------------------------

 

Investor in this Agreement not to be true and correct in all material respects
as of the Closing Date.

 

5.2           Certain Acts.

 

Cooperate with the Company (including, without limitation, by executing required
documents and paying any related fees and expenses required by contract or
otherwise) in connection with any action of the Company necessary to consummate
the Transactions to the extent such actions are dependent upon the actions of
the Investor.

 

5.3           Investor Consents.

 

Promptly take all actions necessary to obtain or make the Investor Consents and
Filings.

 

5.4           No Shop; Standstill.

 

From the date of this Agreement until it is terminated in accordance with
Article 12, refrain from selling, transferring, pledging, encumbering,
hypothecating or otherwise disposing of the Preferred Securities to be held by
him to any person or entity other than the Company, or continuing or entering
into any discussions or negotiations with, or entering into any agreement with,
any other person or entity concerning the matters addressed in this Section 5.4.

 

6.             Covenants of Company.

 

In addition to other obligations contained in this Agreement, between the date
of this Agreement and the Closing Date, unless specifically waived, in writing,
by the Investor, the Company shall:

 

20

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6.1           Cooperation.

 

Take no action that would cause the conditions upon which the obligations of the
parties to effect the Transactions not to be fulfilled including, without
limitation, taking or causing to be taken any action that would cause the
representations and warranties made by the Company in this Agreement not to be
true and correct in all material respects as of the Closing.

 

6.2           Certain Acts.

 

Use commercially reasonable efforts (including, without limitation, executing
required documents and paying any related fees and expenses required by contract
or otherwise) to cause to be fulfilled the conditions precedent to the
Investor’s obligations to consummate the Transaction that are dependent upon the
actions of the Company.

 

6.3           Company Consents.

 

Promptly take all actions necessary to obtain or make the Company Consents and
Filings.

 

6.4           Stockholder Approval.

 

Submit to its stockholders no later than June 1, 2010 a proposal for approval of
the Transactions (“Exchange Proposal”) in compliance with Regulation 14A under
the 1934 Act and the NASDAQ Stock Market Rules.

 

7.             Conditions Precedent to the Obligations of the Investor.

 

Unless each of the following conditions is satisfied or waived, in writing, by
the Investor, the Investor shall not be obligated to effect the Transactions:

 

7.1           Representations and Warranties.

 

The representations and warranties of the Company contained in this Agreement
shall be true and complete in all material respects as of the date of this
Agreement and as of the

 

21

--------------------------------------------------------------------------------

 

Closing Date (as if each were made at such time), and the Investor shall have
received a certificate signed by an authorized officer of the Company to that
effect.

 

7.2           Performance.

 

Each of the agreements, obligations, conditions and covenants to be performed or
complied with by the Company at or prior to the Closing pursuant to the terms of
this Agreement shall have been fully performed or complied with on or before the
Closing, including, without limitation, each of the deliveries to be made by
Company pursuant to Section 10.3.

 

7.3           Absence of Litigation.

 

There shall be no pending or threatened claim, action, litigation, suit or other
proceeding, either judicial or administrative, against the Investor or against
or with respect to the Company for the purpose of enjoining or preventing the
consummation of the Transactions or otherwise claiming that this Agreement or
the consummation of the Transactions is improper or is adversely affecting, or
would adversely affect, the benefit to the Investor of the Transactions.

 

7.4           Consents.

 

All of the Investor Consents and Filings and all of the Company Consents and
Filings, in each case that are required to be obtained or made prior to the
consummation of the Transactions, including, without limitation, the approval of
the Exchange Proposal by the Company’s stockholders (the “Stockholder
Approval”), shall have been obtained or made and all applicable waiting periods
related thereto shall have expired or been terminated.

 

8.             Conditions Precedent to Obligations of Company.

 

Unless each of the following conditions is satisfied or waived, in writing, by
the Company, the Company shall not be obligated to effect the Transactions:

 

22

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8.1           Representations and Warranties.

 

The representations and warranties of the Investor contained in this Agreement
shall be true and complete in all material respects as of the date of this
Agreement and as of the Closing Date (as if each were made at such time), and
the Company shall have received a certificate signed by the Investor to that
effect.

 

8.2           Performance.

 

Each of the agreements, obligations, conditions and covenants to be performed or
complied with by the Investor, at or prior to the Closing, pursuant to the terms
of this Agreement shall have been fully performed or complied with on or before
the Closing, including, without limitation, each of the deliveries to be made by
the Investor pursuant to Section 10.2

 

8.3           Absence of Litigation.

 

There shall be no pending or threatened claim, action, litigation, suit or other
proceeding, either judicial or administrative, against the Company or the
Investor for the purpose of enjoining or preventing the consummation of this
Agreement or otherwise claiming that this Agreement or its consummation is
improper or which would adversely affect the benefit to the Company of the
Transactions.

 

8.4           Consents.

 

All of the Investor Consents and Filings and all of the Company Consents and
Filings, in each case that are required to be obtained or made prior to
consummation of the Transactions, including, without limitation, the Stockholder
Approval, have been obtained or made, as the case may be, and all applicable
waiting periods related thereto shall have expired or been terminated.

 

23

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9.             Condition Precedent to the Closing.

 

Notwithstanding anything herein to the contrary, the Closing may not occur if
the Stockholder Approval has not been obtained.

 

10.           Closing and Post-Closing Covenants.

 

10.1         Time and Place.

 

The closing of the exchange contemplated by Article 1 of this Agreement (the
“Closing”) shall take place at 10:00 a.m. on the date that is five business days
following the satisfaction or waiver by the parties of the last condition
precedent set forth in Articles 7, 8, and 9 (the “Closing Date”), at the offices
of the Company in Baltimore, Maryland, or such other time and/or place as may be
agreed to by the Company and the Investor.  If all of the conditions set forth
in Articles 7, 8 and 9 are not satisfied or waived by such date, subject to
extension as provided in this Agreement, the Company and the Investor, as the
case may be, shall have the right, but not the obligation, to postpone the
Closing from time to time, but not beyond an additional sixty (60) days in the
aggregate.  Notwithstanding the foregoing, if a party’s failure to satisfy a
condition is the result of a breach of, or misrepresentation in, any warranty,
representation, covenant, agreement or certification by that party contained in
this Agreement, then the exercise of an option by any other party pursuant to
this Section 10.1 shall not constitute a waiver by such other party of such
breach or misrepresentation or of the right to seek damages for such breach or
inaccuracy.

 

10.2         Obligations of the Investor.

 

At the Closing, the Investor shall deliver to Company:

 

(a)           The certificate, duly executed and dated as of the Closing Date,
described in Section 8.1;

 

24

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(b)           Assignments duly executed by him, in form and substance reasonably
satisfactory to the Company, effecting the transfer of the Preferred Securities
held by him to the Company; and

 

(c)           Such other certificates, instruments and documents of transfer, if
any, as may be necessary to consummate the Transactions.

 

10.3         Obligations of the Company.

 

(a)           At the Closing, the Company shall deliver to the Investor:

 

(i)            The Initial Shares;

 

(ii)           The duly executed officer’s certificate, dated as of the Closing
Date, described in Section 7.1;

 

(iii)          A certified copy of the resolutions of the Board of Directors of
the Company establishing the Special Committee;

 

(iv)          A certified copy of the resolutions of the Special Committee
authorizing and approving the execution and delivery of the Agreement and the
consummation of the Transactions by the Company;

 

(v)           A certified copy of the resolutions evidencing the Stockholder
Approval;

 

(vi)          Evidence that all other Company Consents and Filings that are
required to be obtained or made prior to the consummation of the Transactions
have been obtained and/or made;

 

25

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(vii)         The Exhibit A Warrants, as described and set forth in
Section 2.1(c), duly executed by the Company;

 

(viii)        If required to be issued at the Closing pursuant to
Section 2.1(b), Additional Shares;

 

(ix)           If required to be delivered at the Closing pursuant to
Section 2.1(d), the Exhibit B Warrant, as described and set forth in
Section 2.1(d), duly executed by the Company; and

 

(x)            Such other certificates, instruments and documents of transfer if
any, as may be necessary to consummate the Transactions.

 

(b)           After the Closing, within ten (10) business days after the date on
which the Company becomes obligated to do so pursuant to Section 2.1, the
Company shall (a) issue Additional Shares to the Investor, and (b) deliver to
the Investor a duly executed Exhibit B Warrant.  In connection with the
foregoing, the Company shall make all filings with and obtain all consents from
any federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, or any self-regulatory
organization as and when required by any applicable law, regulation, rule or
order, including, without limitation, the 1933 Act, any state securities or
“blue sky” law, and/or the NASDAQ Stock Market Rules.

 

26

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11.           Registration Rights.

 

11.1         Registration of Initial Shares and Exhibit A Warrants.  The Company
agrees, at its own expense, within sixty (60) days of the Closing Date, to
prepare and file a registration statement with the SEC to register the resale by
the Investor of the Initial Shares and the Exhibit A Warrants, and all shares of
Common Stock issuable upon the exercise of such Exhibit A Warrants, and
thereafter use its best efforts to cause such registration statement to be
declared effective as soon as is reasonably practicable.

 

11.2         Registration of Additional Shares and Exhibit B Warrants.  In the
event the Company issues Additional Shares or Exhibit B Warrants pursuant to
subsections (b) or (d), respectively, of Section 2.1 after the Closing, the
Company agrees, at its own expense, within sixty (60) days thereafter, to
prepare and file a registration statement, or, if permitted by law, an amendment
or supplement to the registration statement filed pursuant to Section 6.3(a),
with the SEC to register the resale by the Investor of the Additional Shares
and/or the Exhibit B Warrant, and all shares of Company Common Stock issuable
upon the exercise of such Exhibit B Warrant, and thereafter use its best efforts
to cause such registration statement, amendment or supplement to be declared
effective as soon as is reasonably practicable.

 

11.3         Amendments and Supplements to Registration Statements.  In the
event there is any change in the Consideration after the Closing, including,
without limitation, upon the issuance of Additional Shares pursuant to
Section 2.1(b), the Company agrees, at its own expense, within sixty (60) days
after such change, to prepare and file with the SEC any required amendment or
supplement to the registration statement filed pursuant to Section 11.1 or
Section 11.2 to reflect such change, and thereafter to use its best efforts to
cause such amendment or supplement to be declared effective as soon as
reasonably practicable.

 

27

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12.           Indemnification.

 

12.1         Indemnification by Investor.

 

From and after the Closing, the Investor shall indemnify, defend and hold
harmless the Company and its stockholders, directors (other than the Investor),
the officers (other than the Investor), employees (other than the Investor) and
agents and their successors and assigns (collectively, the “Company
Indemnitees”) against and from any loss, claim, damage, cost, obligation,
liability, penalty and expense, including all legal and other expenses
reasonably incurred in connection with investigating or defending against any
such loss, claim, damage, cost, obligation, liability, penalty or expense or
action in respect of such matters (collectively referred to as “Article 12
Damages”), that any of the Company Indemnitees may sustain or which are imposed
on, incurred by, or accrued against them by reason of or which result from any
breach of, or misrepresentation in, any warranty, representation, covenant,
agreement or certification of the Investor contained in this Agreement or any
other agreement provided for in this Agreement.  Indemnification under this
Article 12 shall constitute the Company Indemnitees’ exclusive remedy for any
breach of, or misrepresentation in, any warranty, representation, covenant,
agreement or certification of the Investor contained in this Agreement or any
other agreement provided for in this Agreement, except in cases of fraud.  The
Company Indemnitees may pursue other remedies in addition to indemnification for
fraud.

 

12.2         Indemnification by Company.

 

From and after the Closing, the Company shall indemnify, defend and hold
harmless the Investor and his agents, successors and assigns (collectively, the
“Investor Indemnitees”) against and from any Article 12 Damages that any of the
Investor Indemnitees may sustain or which are imposed on, incurred by, or
accrued against them by reason of or which

 

28

--------------------------------------------------------------------------------

 

result from (a) any breach of, or misrepresentation in, any warranty,
representation, covenant, agreement or certification of the Company or made with
respect to the Company by the Investor contained in this Agreement or any other
agreement contemplated by this Agreement and/or (b) any action, suit, claim,
proceeding, or order arising out of, resulting from or in connection with the
Transactions except to the extent the Investor has indemnification obligations
under Section 12.1 with respect to such action, suit, claim, proceeding, or
order.  Indemnification under this Article 12 shall constitute each Investor’s
exclusive remedy for any breach of, or misrepresentation in, any warranty,
representation, covenant, agreement or certification of the Company contained in
this Agreement or any other agreement provided for in this Agreement, except in
cases of fraud, and/or any action, suit, claim, proceeding, or order arising out
of, resulting from or in connection with the Transactions except to the extent
(i) the Investor has indemnification obligations under Section 12.1 with respect
to such action, suit, claim, proceeding, or order or (ii) the Article 12 Damages
arise out of a breach by the Company of a representation made herein based on
the Company’s Knowledge.  The Investor may pursue other remedies in addition to
indemnification for fraud.

 

12.3         Notice of Indemnification.

 

Subject to Section 12.4, any party to be indemnified (an “Indemnified Party”)
shall give timely notice (a “Claim Notice”) to the party from whom such
indemnification is sought (an “Indemnifying Party”) after the Indemnified Party
has Actual Knowledge of any claim as to which indemnification may be sought for
any Article 12 Damages (a “Claim”) and the amount thereof, if known, and supply
any other information in the possession of the Indemnified Party regarding such
Claim, and will permit the Indemnifying Party (at its expense) to assume the
defense of any third party Claim and any litigation resulting therefrom,
provided

 

29

--------------------------------------------------------------------------------

 

that counsel for the Indemnifying Party who shall conduct the defense of such
Claim or litigation shall be reasonably satisfactory to the Indemnified Party,
and provided further that the failure by the Indemnified Party to give notice as
provided herein will not relieve the Indemnifying Party of its indemnification
obligations hereunder except to the extent that the Indemnifying Party is
materially damaged as a result of the failure to give notice.  The Indemnifying
Party may settle or compromise any third party Claim or litigation only with the
consent of the Indemnified Party which consent may not be unreasonably withheld,
delayed or conditioned.

 

Notwithstanding the fact that the Indemnifying Party has assumed the defense of
any third party Claim, the Indemnified Party shall have the right at all times
to participate in the defense, settlement, negotiation or litigation relating to
such Claim at its own expense.  In the event that the Indemnifying Party does
not assume the defense of any matter which is the proper subject of
indemnification as above provided, then the Indemnified Party shall have the
right to defend any such third party Claim or demand, and will be entitled to
settle any such Claim or demand in its discretion, all at the expense of the
Indemnifying Party. In any event, the Indemnified Party will cooperate in the
defense of any such action at the expense of the Indemnifying Party and the
records of each Party shall be available to the other with respect to such
defense.

 

If the Indemnifying Party fails to give a notice disputing the validity or
amount of a Claim within twenty (20) business days following receipt of a Claim
Notice, then the Claim shall be deemed to be accepted and the Indemnified Party
may pursue whatever legal remedies may be available to recover the Article 12
Damages as to which the Indemnified Party is seeking indemnification.

 

30

--------------------------------------------------------------------------------

 

12.4         Basket.

 

Except as otherwise provided in this Agreement, neither the Investor, on the one
hand, nor the Company, on the other hand, shall have any liability for
indemnification pursuant to Article 12 unless the total Article 12 Damages for
which the indemnifying party would otherwise be liable exceeds $25,000 in the
aggregate (the “Basket”) for the Company or for the Investor in total, in which
case the liability for indemnification shall include such $25,000, provided,
however, that the Basket shall not apply to any fraud by any party hereto and
shall only apply to any breach of, or misrepresentation in, any warranty,
representation, covenant, agreement or certification of the parties hereto.

 

13.           Abandonment of Transactions.

 

The Transactions may be abandoned at any time prior to the Closing:

 

13.1         By mutual written consent of the Company and the Investor.

 

13.2         By the Company (provided that the Company is not then in material
breach of any representation, warranty, covenant or other agreement contained
herein), in the event of a breach of, or misrepresentation in, any warranty,
representation, covenant, agreement or certification of the Investor in this
Agreement or any agreement contemplated by this Agreement, which breach cannot
be or has not been cured within thirty (30) days after the giving of written
notice (setting forth the basis on which the right to terminate is asserted) to
the Investor of such breach, provided that such breach is reasonably likely,
individually or in the aggregate with other breaches, to adversely affect the
benefit to the Company of the Transactions.

 

13.3         By the Investor (provided that the Investor is not then in material
breach of any representation, warranty, covenant or other agreement contained
herein), (a) in the event

 

31

--------------------------------------------------------------------------------

 

of a breach of, or misrepresentation in, any warranty, representation, covenant,
agreement or certification of the Company in this Agreement or any agreement
contemplated by this Agreement, which breach cannot be or has not been cured
within thirty (30) days after the giving of written notice (setting forth the
basis on which the right to terminate is asserted) to the Company, provided that
such breach is reasonably likely, individually or in the aggregate with other
breaches, to adversely affect the benefit to the Investor of the Transactions,
or (b) if the Company has not obtained the Stockholder Approval by June 30, 2010

 

13.4         Automatically if the Closing has not occurred on or before June 30,
2010, provided that the failure of the Closing to occur by such date is not the
result of a breach of, or misrepresentation in, any warranty, representation,
covenant, agreement or certification of any party to this Agreement.

 

The abandonment of the Transactions pursuant to Section 13.2 or Section 13.3
shall not constitute a waiver by the Company or the Investor, respectively, of
any breach or other condition affording such right of abandonment or of the
right to seek damages for such breach or condition.

 

14.           Effect of Abandonment.

 

Sections 3.5 and 4.8 and Articles 12, 13, 14, 15 and 16 shall survive the
abandonment of the Transactions.

 

15.           Specific Performance.

 

Notwithstanding anything to the contrary contained herein, if either party to
this Agreement breaches any warranty, covenant, or agreement of such party made
in this Agreement or in any other agreement contemplated by this Agreement, each
party hereto agrees that the other parties would suffer irreparable harm from
such breach.  In the event of an alleged or

 

32

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threatened breach of such a warranty, covenant or agreement, the aggrieved party
may, in addition to all other rights and remedies existing in its favor, apply
to any court of competent jurisdiction for specific performance and/or
injunctive relief in order to enforce, or prevent any breach of, such warranty,
covenant or agreement.

 

16.           Miscellaneous.

 

16.1         Notices.

 

All notices, demands or requests provided for or permitted to be given pursuant
to this Agreement must be in writing and shall be delivered or sent, with the
copies indicated, by personal delivery, telecopy (with confirmation and
additional copy sent by overnight delivery service) or overnight delivery
service (by a reputable international carrier) to the parties as follows (or at
such other address as a party may specify by notice given pursuant to this
Section):

 

To the
Investor:                                                                                                         
Edwin F. Hale, Sr.

1501 S. Clinton Street, 16th Floor

Baltimore, Maryland  21224

Fax:  (410) 558 - 4495

Email:  csmith@1stmarinerbank.com

 

With a Copy
to:                                                                                                          
Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC

The Garrett Building

233 East Redwood Street

Baltimore, Maryland 21202

Attn:       Abba David Poliakoff, Esquire

Fax:         (410) 576-4032

Email:      apoliakoff@gfrlaw.com.

 

To
Company:                                                                                                                       
FIRST MARINER BANCORP

1501 S. Clinton Street

Baltimore, Maryland 21224

Attn: Eugene A. Friedman

Fax: (410) 342-4127.

 

With a copy
to:                                                                                                            
Kilpatrick Stockton LLP

607 14th Street, NW

Suite 900

Washington, DC  20005

 

33

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Attn: Gary R. Bronstein

Fax: (202) 508-5858

Email: gbronstein@kilpatrickstockton.com.

 

All notices shall be deemed given and received one business day after their
delivery to the addresses for the respective party(ies), with the copies
indicated, as provided in this Section 16.1.

 

16.2         Entire Agreement.

 

This Agreement, the documents which are Exhibits to this Agreement and any other
contemporaneous written agreements entered into by the parties contain the sole
and entire binding agreement among and representations made by the parties to
each other and supersede any and all other prior written or oral agreements and
representations among them.

 

16.3         Amendment.

 

No amendment or modification of this Agreement shall be valid unless, in
writing, and duly executed by the parties affected by the amendment or
modification.

 

16.4         Binding Effect.

 

This Agreement shall be binding upon and inure to the benefit of the parties and
their respective representatives, heirs, successors and permitted assigns.

 

16.5         Waiver.

 

Waiver by any party of any breach of any provision of this Agreement shall not
be considered as or constitute a continuing waiver or a waiver of any other
breach of the same or any other provision of this Agreement.

 

34

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16.6         Captions.

 

The captions contained in this Agreement are inserted only as a matter of
convenience or reference and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any of its provisions.

 

16.7         Construction.

 

In the construction of this Agreement, whether or not so expressed, words used
in the singular or in the plural, respectively, include both the plural and the
singular and the masculine, feminine and neuter genders include all other
genders. Since all parties have engaged in the drafting of this Agreement, no
presumption of construction against any party shall apply.

 

16.8         Sections.

 

All references contained in this Agreement to Articles and Sections shall be
deemed to be references to Articles and Sections of this Agreement, except to
the extent that any such reference specifically refers to another document.  All
references to Articles and Sections shall be deemed to also refer to all
Sections and subsections of such Articles and Sections, if any.

 

16.9         Severability.

 

In the event that any portion of this Agreement is illegal or unenforceable, it
shall affect no other provisions of this Agreement, and the remainder of this
Agreement shall be valid and enforceable in accordance with its terms.

 

16.10       Absence of Third-Party Beneficiaries.

 

Nothing in this Agreement, express or implied, is intended to (a) confer upon
any person or entity other than the parties to this Agreement, any rights or
remedies under or by reason of this Agreement as a third-party beneficiary or
otherwise; or (b) authorize anyone not a

 

35

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party to this Agreement to maintain an action or institute an arbitration
proceeding pursuant to or based upon this Agreement.

 

16.11       Business Day.

 

As used in this Agreement, the term “business day” means any day other than a
Saturday, Sunday or legal or bank holiday in the City of New York, NY (the
“City”).  If any time period set forth in this Agreement expires on other than a
business day in the City, such period shall be extended to and through the next
succeeding business day in the City.

 

16.12       Assignment.

 

Neither this Agreement nor any rights under this Agreement may be assigned by
any party without the written consent of all other parties.

 

16.13       Other Documents.

 

The parties shall take all such actions and execute all such documents which may
be necessary to carry out the purposes of this Agreement, whether or not
specifically provided for in this Agreement.

 

16.14       Governing Law.

 

This Agreement and the interpretation of its terms shall be governed by the laws
of the State of Maryland, without application of conflicts of law principles.

 

16.15       Attorneys Fees.

 

(a)                                  The Company shall pay the Investor’s
attorneys’ fee and expenses for the Investor’s negotiation and preparation of
this Agreement, the Exhibits, Schedules and other agreements contemplated by or
required in connection with the Transactions, and for any

 

36

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governmental or other filing required of the Investor in connection with the
Transactions.

 

(b)                                 The Company shall also pay its attorneys’
fees and expenses for its negotiation and preparation of this Agreement, the
Exhibits, Schedules and other agreements contemplated by or required in
connection with the Transactions, and for any governmental or other filing
required of the Company in connection with the Transactions.

 

16.16       Public Disclosure.

 

No party to this Agreement shall make any public disclosure or publicity release
pertaining to the existence of the subject matter contained in this Agreement
without notifying and consulting with the other parties and upon approval of a
joint press release; provided, however, that notwithstanding the foregoing, each
party shall be permitted, after notice to the other party, to make such
disclosures to the public or to governmental agencies as its counsel shall deem
necessary to maintain compliance with, and to prevent violation of, applicable
laws, federal, state and local, domestic and foreign, including federal and
state securities laws.

 

16.17       Execution; Counterparts.

 

The parties may execute this Agreement by manual or facsimile signature.  This
Agreement may be executed and delivered in two or more counterparts, each of
which shall be deemed to be an original and all of which, taken together, shall
be deemed to be one agreement.

 

[The Remainder of the Page is Intentionally Left Blank]

 

37

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The parties have executed this Agreement, as an instrument under seal, as of the
date set forth above.

 

 

 

FIRST MARINER BANCORP,

 

A Maryland Corporation

 

 

 

 

 

By:

/s/ John Brown, III

(SEAL)

 

 

 

 

 

 

Name: John Brown, III

 

 

 

 

 

 

 

Title: Director and Chairman of the Special

 

 

 

Committee

 

 

38

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INVESTOR:

/s/ Edwin F. Hale, Sr.

(SEAL)

 

Name:              Edwin F. Hale, Sr.

Address:

 

Liquidation Preference Amount of 2002 Preferred Securities held:

 

4,000,000

 

 

 

 

 

Liquidation Preference Amount of 2003 Preferred Securities held:

 

6,000,000

 

 

 

 

 

Liquidation Preference Amount of 2005 Preferred Securities held:

 

10,000,000

 

 

 

 

 

Class of Accredited Investor:

 

 

 

 

39

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LIST OF EXHIBITS AND SCHEDULES

 

Exhibit A — Form of Warrant to be issued pursuant to Section 2.1(c)

Exhibit B — Form of Warrant to be issued pursuant to Section 2.1(d)

 

Schedule 3.4 — Investor Consents and Filings

Schedule 4.5 — Company Consents and Filings

 

40

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EXHIBIT A

 

FORM OF WARRANT

 

NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY
STATE SECURITIES LAWS. THEY HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SALE, TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO,
(ii) AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR ANY APPLICABLE STATE
SECURITIES LAWS, OR (iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED.

 

Date:                                   , 2010

 

COMMON STOCK WARRANT

 

OF

 

FIRST MARINER BANCORP

 

INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND

 

THIS CERTIFIES THAT, for value received, Edwin F. Hale, Sr. (the “Investor”) is
entitled to subscribe for and purchase shares (the “Shares”) of the fully paid
and nonassessable Common Stock of FIRST MARINER BANCORP, a Maryland corporation
(the “Company”), subject to the provisions and upon the terms and conditions
hereinafter set forth.  As used herein, the term “Common Stock” shall mean the
Company’s duly authorized Common Stock, and any stock into or for which such
Common Stock may hereafter be exchanged pursuant to the Articles of
Incorporation of the Company as from time to time amended as provided by law and
in such Articles, and the term “Grant Date” shall mean the date set forth above.

 

This Warrant is issued in connection with the Exchange Agreement of even date
herewith executed by and between the Investor and the Company (the “Exchange
Agreement”).

 

1.               TERM.  Subject to the terms hereof, the purchase right
represented by this Warrant is exercisable, in whole, at any time from and after
the Grant Date and at or prior to 11:59 p.m. Eastern Standard Time on the date
five (5) years following the Grant Date (the “Expiration Date”).  The number of
Shares, type of security and Exercise Price (as that term is defined in
Section 2 hereof) are subject to adjustment as provided herein, and all
references to “Exercise Price” herein shall be deemed to include any such
adjustment or series of adjustments. Terms used herein and not otherwise defined
shall have the meaning as set forth in the Exchange Agreement.

 

--------------------------------------------------------------------------------

 

2.               NUMBER OF SHARES AND EXERCISE PRICE.  Subject to the terms and
conditions hereinafter set forth, the Investor is entitled, upon surrender of
this Warrant prior to the Expiration Date, to purchase from the Company,
           shares of Common Stock.  The purchase price for the shares of the
Common Stock purchased pursuant to this Warrant shall be equal to the lesser of
(i) $         per share, (ii) in the event that on or prior to June 30, 2010 the
Company consummates an Offering (as defined below), the Lowest Offering Price
(as defined below), or (iii) in the event that on or prior to June 30, 2010 the
Company shall have entered into an agreement with the holder of trust preferred
securities issued by a trust subsidiary of the Company where the holder is not
an Investor, which agreement provides for the exchange of such trust preferred
securities for Company Common Stock (a “Subsequent Exchange Agreement”), the
price utilized in the Subsequent Exchange Agreement to determine the number of
shares of Company Common Stock to be exchanged for such trust preferred
securities exclusive of any warrants, warrant shares or warrant prices (the
“Exercise Price”).  As used herein, the term “Offering” means any of the
following:  (x) a public offering of Common Stock other than pursuant to an
employee benefit plan of the Company, including an offering registered with the
Securities and Exchange Commission notwithstanding that such registered offering
might be deemed a “private placement” under Rule 5635 of the NASDAQ Stock Market
Rules, or (y) a sale of shares of Common Stock effected pursuant to
Section 4(2) of the Securities Act of 1933, as amended, in exchange exclusively
for cash consideration.  As used herein, the term “Lowest Offering Price” means
the lowest price per share of Company Common Stock received by the Company in
any such Offering completed by June 30, 2010.

 

3.               METHOD OF EXERCISE. The purchase right represented by this
Warrant may be exercised by the Investor, in whole or in part and from time to
time, by the surrender of this Warrant (with the notice of exercise form
attached hereto as Exhibit A duly executed) at the principal office of the
Company accompanied by payment to the Company, by certified check, or wire
transfer payable to the Company, in an amount equal to the then applicable
Exercise Price per share multiplied by the number of Shares then being
purchased. Thereupon, the Investor, as the holder of this Warrant, shall be
entitled to receive from the Company a stock certificate representing the number
of Shares so purchased which shall be delivered to the Investor as soon as
possible and in any event within thirty (30) days of receipt of such notice,
surrendered Warrant and proper payment, and a new warrant in substantially
identical form and dated as of such date of exercise shall be issued to the
Investor for the purchase of that number of Shares equal to the difference, if
any, between the number of Shares subject to this Warrant and the number of
Shares as to which this Warrant is so exercised. The Investor shall be deemed to
have become the holder(s) of record of, and shall be treated for all purposes as
the record holder(s) of, the Shares represented thereby (and such Shares shall
be deemed to have been issued) immediately prior to the close of business on the
date or dates upon which this Warrant is exercised.

 

4.               STOCK FULLY PAID: RESERVATION OF SHARES.  The Shares that may
be issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be fully paid and non assessable, and free from all taxes, liens and
charges with respect to the

 

1

--------------------------------------------------------------------------------

 

issue thereof.  During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved for the purpose of issuance upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of Shares to provide for the
exercise of the right represented by this Warrant.

 

5.               ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.  The number
and kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:

 

a.               Reclassification or Merger.  If at any time while this Warrant
remains outstanding and unexpired, in case of any reclassification, change or
conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), or in
case of any merger of the Company with or into another corporation (other than a
merger with another corporation in which the Company is a continuing corporation
and which does not result in any reclassification or change of outstanding
securities issuable upon exercise of this Warrant), or in case of any sale of
all or substantially all of the assets of the Company, the Company, or such
successor or purchasing corporation, as the case may be, shall execute a new
Warrant (in form and substance reasonably satisfactory to the Investor)
providing that the Investor shall have the right to exercise such new Warrant
and upon such exercise to receive, in lieu of each share of Common Stock
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change or merger by a holder of one share of Common Stock.
Such new Warrant shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Paragraph 5.  The provisions of this subparagraph (a) shall similarly apply to
successive reclassification, changes, mergers and transfers by the Company or
any successor or purchasing corporation.

 

b.              Subdivisions or Combination of Shares.  If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Common Stock, the number of Shares issuable upon exercise hereof
shall be proportionally adjusted and the Exercise Price shall be adjusted so
that the aggregate Exercise Price of this Warrant shall at all time remains
equal.

 

c.               Common Stock Dividends.  If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend payable in shares of
Common Stock (except any distribution specifically provided for in the foregoing
subparagraphs (a) and (b)), then the Exercise Price shall be adjusted, from and
after the date of determination of stockholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Exercise
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution and the number of
Shares subject to this Warrant shall be proportionately adjusted.

 

d.              No Impairment.  The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Paragraph 5 and in the taking of all such action as maybe
necessary or appropriate in order to protect the rights of the Investor against
impairment.

 

6.               NOTICE OF ADJUSTMENTS.  Whenever the Exercise Price shall be
adjusted pursuant to the provisions hereof, the Company shall within thirty (30)
days of such adjustment deliver a certificate signed by its chief financial
officer to the Investor setting forth, in reasonable detail, the event requiring
the adjustment, the

 

--------------------------------------------------------------------------------

 

amount of the adjustment, the method by which such adjustment was calculated,
and the Exercise Price after giving effect to such adjustment.

 

7.               FRACTIONAL SHARES.  No fractional Shares of Common Stock will
be issued in connection with any exercise hereunder, but in lieu of such
fractional Shares the Company shall make a cash payment equal to the excess of
the average daily closing price of the Company’s common stock for the twenty
(20) business days prior to the exercise date for such fractional shares above
the Exercise Price for such fractional shares.

 

8.               TRANSFERS AND EXCHANGES. This Warrant shall be transferable by
the Investor provided that the Investor in connection with such transfer
delivers to the Company an opinion of counsel, in form and substance
satisfactory to the Company, that registration is not required under the
Securities Act of 1933, as amended, or any applicable state securities laws.

 

9.               RIGHTS AS STOCKHOLDERS. The Investor, as holder of this
Warrant, shall not be entitled to vote or receive dividends or be deemed the
holder of Common Stock, or any other securities of the Company which may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the Investor, any of the rights of
a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise until this Warrant shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as provided
herein.

 

10.         REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  This Warrant is
issued and delivered on the basis of the following:

 

a.               This Warrant has been duly authorized and executed by the
Company and when delivered will be the valid and binding obligation of the
Company enforceable in accordance with its terms;

 

b.              The Shares have been duly authorized and reserved for issuance
by the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable;

 

c.               The rights, preferences, privileges and restrictions granted to
or imposed upon the Shares and the Investor are as set forth in the Company’s
Articles of Incorporation, as amended;

 

d.              The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company’s Articles of
Incorporation or bylaws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do not and
will not contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration with or the taking of any action in respect of or
by, any federal state or local government authority or agency or other person.

 

11.         REPRESENTATIONS AND WARRANTIES OF INVESTOR.  The Investor hereby
represents and warrants that:

 

a.               Purchase Entirely for Own Account.  This Warrant is issued to
the Investor in reliance upon Investor’s representation to the Company, which by
its acknowledgment of this Warrant Investor hereby confirms, that the Warrant
and the Common Stock issuable upon exercise of the Warrant (collectively, the
“Securities”) will be acquired for investment for the Investor’s own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same.  By
acknowledging this Warrant, the Investor represents that it does not have any
contract, undertaking, agreement, or arrangement with any person to sell,
transfer, or

 

--------------------------------------------------------------------------------

 

grant participations to such person or to any third person with respect to any
of the Securities.  The Investor has full power and authority to acknowledge
this Warrant.

 

b.              Disclosure of Information.  The Investor has had an opportunity
to ask questions and receive answers from the Company regarding the terms and
conditions of the offering of the Warrant.

 

c.               Investment Experience.  The Investor acknowledges that it can
bear the economic risk of its investment.

 

d.              Accredited Investor.  The Investor is an “accredited investor”
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.

 

e.               Restricted Securities.  The Investor understands that the
Securities it is purchasing are characterized as “restricted securities” under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances.  In this connection, the Investor
represents that it is familiar with Rule 144 under the Act, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.

 

f.                 Legends.  It is understood that the certificates evidencing
the Securities may bear one or all of the following legends:

 

i.      “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.  THESE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
MORTGAGED, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933 OR AN
OPINION OF COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT.”

 

12.         MODIFICATION AND WAIVER.  This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.

 

13.         NOTICES.  All notices, demands or requests provided for or permitted
to be given pursuant to this Agreement must be in writing and shall be delivered
or sent, with the copies indicated, by personal delivery, telecopy (with
confirmation and additional copy sent by overnight delivery service) or
overnight delivery service (by a reputable international carrier) to the parties
as follows (or at such other address as a party may specify by notice given
pursuant to this Section);

 

To Investor:

Edwin F. Hale, Sr.

 

1501 S. Clinton Street, 16th Floor

 

Baltimore, MD 21224

 

Fax:

 

Email:

 

 

With a Copy to:

                                                         

 

                                               

 

                                               

 

Attn:

                                               

 

Fax:

                                               

 

--------------------------------------------------------------------------------

 

 

Email:                    

 

 

 

 

To Company:

FIRST MARINER BANCORP

 

1501 S. Clinton Street

 

Baltimore, Maryland 21224

 

Attn: Eugene A. Friedman

 

Fax: (410) 342-4127

 

 

With a copy to:

Kilpatrick Stockton LLP

 

607 14th Street, NW

 

Suite 900

 

Washington, DC 20005

 

Attn: Gary R. Bronstein

 

Fax: (202) 508-5858

 

Email: gbronstein@kilpatrickstockton.com

 

All notices shall be deemed given and received one business day after their
delivery to the addresses for the respective party(ies), with the copies
indicated, as provided in this Section 13.

 

14.         BINDING EFFECT ON SUCCESSORS.  The terms and provisions of this
Warrant shall be binding upon the Company and its respective successors and
assigns and the Investor.  All of the obligations of the parties relating to the
Common Stock issuable upon the exercise of this Warrant shall survive the
exercise and termination of this Warrant and all of the covenants and agreements
of each party relating thereto shall inure to the benefit of the successors and
assigns of the other.  The Company will, at the time of the exercise of this
Warrant, in whole or in part, upon request of the Investor but at the Company’s
expense, acknowledge in writing its continuing obligation to the Investor in
respect of any rights (including, without limitation, any right to registration
of the shares of Registrable Securities) to which the Investor shall continue to
be entitled after such exercise in accordance with this Warrant; provided, that
the failure of the Investor to make any such request shall not affect the
continuing obligation of the Company to the Investor in respect of such rights.

 

15.         LOST WARRANTS OR STOCK CERTIFICATES.  The Company covenants to the
Investor that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant or any stock
certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, or like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.

 

16.         DESCRIPTIVE HEADINGS.  The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.

 

17.         GOVERNING LAW.  This Agreement and the interpretation of its terms
shall be governed by the laws of the State of Maryland, without application of
conflicts of law principles.

 

18.         CONFIDENTIALITY; NO PUBLIC DISCLOSURE. The terms and conditions of
this Warrant are confidential. Neither party shall make any public disclosure
concerning the terms and conditions of this Warrant without the prior written
consent of the other party, except as required by the rules and regulations of
the Securities and Exchange Commission, the NASDAQ Stock Market, Inc. or any
other applicable stock exchanges.

 

19.         ATTORNEYS FEES. Except as otherwise set forth in the Exchange
Agreement, the Company and Investor shall pay their respective attorneys’ fees
and expenses for the negotiation and preparation of this Warrant and the other
agreements contemplated by this Warrant.

 

--------------------------------------------------------------------------------

 

20.         COUNTERPARTS. This Agreement may be executed and delivered in two or
more counterparts, each of which shall be deemed to be an original and all of
which, taken together, shall be deemed to be one agreement.

 

[Remainder of Page Intentionally Left Blank]

 

--------------------------------------------------------------------------------

 

The parties have executed this Warrant as of the date set forth above.

 

 

Investor:

 

 

 

 

 

 

By:

 

 

 

 

 

Name: Edwin F. Hale, Sr.

 

 

 

 

 

 

Company:

FIRST MARINER BANCORP,

 

A Maryland corporation

 

 

 

 

 

 

 

By:

 

 

Name:  John Brown, III

 

Title:   Director and Chairman of the Special

Committee

 

 

--------------------------------------------------------------------------------

 

EXHIBIT A

NOTICE OF EXERCISE

 

To: FIRST MARINER BANCORP

1501 S. Clinton Street

Baltimore, Maryland  21224

Attn:

 

1.               The undersigned hereby elects to purchase                   
Shares of Common Stock of FIRST MARINER BANCORP pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
Shares in full.

 

2.               Please issue a certificate or certificates representing said
Shares in the name of the undersigned or in such other name or names as are
specified below:

 

Name:

 

                                             

Address:

 

                                             

 

                                             

 

                                             

 

3.               The undersigned represents that the aforesaid Shares being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such Shares.

 

 

 

By:

 

 

 

 

Name: Edwin F. Hale, Sr.

 

--------------------------------------------------------------------------------

 

EXHIBIT B

 

FORM OF WARRANT

 

NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY
STATE SECURITIES LAWS. THEY HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SALE, TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO,
(ii) AN OPINION OF COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR ANY APPLICABLE STATE
SECURITIES LAWS, OR (iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED.

 

Date:                         , 2010

 

COMMON STOCK WARRANT

 

OF

 

FIRST MARINER BANCORP

 

INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND

 

THIS CERTIFIES THAT, for value received, Edwin F. Hale, Sr. (the “Investor”) is
entitled to subscribe for and purchase shares (the “Shares”) of the fully paid
and nonassessable Common Stock of FIRST MARINER BANCORP, a Maryland corporation
(the “Company”), subject to the provisions and upon the terms and conditions
hereinafter set forth.  As used herein, the term “Common Stock” shall mean the
Company’s duly authorized Common Stock, and any stock into or for which such
Common Stock may hereafter be exchanged pursuant to the Articles of
Incorporation of the Company as from time to time amended as provided by law and
in such Articles, and the term “Grant Date” shall mean the date set forth above.

 

This Warrant is issued in connection with the Exchange Agreement of even date
herewith executed by and between the Investor and the Company (the “Exchange
Agreement”).

 

21.         TERM.  Subject to the terms hereof, the purchase right represented
by this Warrant is exercisable, in whole, at any time from and after the Grant
Date and at or prior to 11:59 p.m. Eastern Standard Time on
                    , 2015.  The number of Shares, type of security and Exercise
Price (as that term is defined in Section 2 hereof) are subject to adjustment as
provided herein, and all references to “Exercise Price” herein shall be deemed
to include any such adjustment or series of adjustments.  Terms used herein and
not otherwise defined shall have the meaning as set forth in the Exchange
Agreement.

 

22.         NUMBER OF SHARES AND EXERCISE PRICE.  Subject to the terms and
conditions hereinafter set forth, the Investor is entitled, upon surrender of
this Warrant prior to the Expiration Date, to purchase from the Company,
           shares of Common Stock.  The

 

1

--------------------------------------------------------------------------------

 

purchase price for the shares of the Common Stock purchased pursuant to this
Warrant shall be equal to $         per share (“Exercise Price”).

 

23.         METHOD OF EXERCISE. The purchase right represented by this Warrant
may be exercised by the Investor, in whole or in part and from time to time, by
the surrender of this Warrant (with the notice of exercise form attached hereto
as Exhibit A duly executed) at the principal office of the Company accompanied
by payment to the Company, by certified check, or wire transfer payable to the
Company, in an amount equal to the then applicable Exercise Price per share
multiplied by the number of Shares then being purchased. Thereupon, the
Investor, as the holder of this Warrant, shall be entitled to receive from the
Company a stock certificate representing the number of Shares so purchased which
shall be delivered to the Investor as soon as possible and in any event within
thirty (30) days of receipt of such notice, surrendered Warrant and proper
payment, and a new warrant in substantially identical form and dated as of such
date of exercise shall be issued to the Investor for the purchase of that number
of Shares equal to the difference, if any, between the number of Shares subject
to this Warrant and the number of Shares as to which this Warrant is so
exercised. The Investor shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of, the Shares
represented thereby (and such Shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised.

 

24.         STOCK FULLY PAID: RESERVATION OF SHARES.  The Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be fully paid and non assessable, and free from all taxes, liens and
charges with respect to the issue thereof.  During the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized and reserved for the purpose of issuance upon exercise of
the purchase rights evidenced by this Warrant, a sufficient number of Shares to
provide for the exercise of the right represented by this Warrant.

 

25.         ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.  The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:

 

a.               Reclassification or Merger.  If at any time while this Warrant
remains outstanding and unexpired, in case of any reclassification, change or
conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), or in
case of any merger of the Company with or into another corporation (other than a
merger with another corporation in which the Company is a continuing corporation
and which does not result in any reclassification or change of outstanding
securities issuable upon exercise of this Warrant), or in case of any sale of
all or substantially all of the assets of the Company, the Company, or such
successor or purchasing corporation, as the case may be, shall execute a new
Warrant (in form and substance reasonably satisfactory to the Investor)
providing that the Investor shall have the right to exercise such new Warrant
and upon such exercise to receive, in lieu of each share of Common Stock
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change or merger by a holder of one share of Common Stock.
Such new Warrant shall provide for adjustments that shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Paragraph 5. 

 

--------------------------------------------------------------------------------

 

The provisions of this subparagraph (a) shall similarly apply to successive
reclassification, changes, mergers and transfers by the Company or any success
or purchasing corporation.

 

b.              Subdivisions or Combination of Shares.  If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Common Stock, the number of Shares issuable upon exercise hereof
shall be proportionally adjusted and the Exercise Price shall be adjusted so
that the aggregate Exercise Price of this Warrant shall at all time remains
equal

 

c.               Common Stock Dividends.  If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend payable in shares of
Common Stock (except any distribution specifically provided for in the foregoing
subparagraphs (a) and (b)), then the Exercise Price shall be adjusted, from and
after the date of determination of stockholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Exercise
Price in effect immediately prior to such date of determination by a fraction
(i) the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution and the number of
Shares subject to this Warrant shall be proportionately adjusted.

 

d.              No Impairment.  The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Paragraph 5 and in the taking of all such action as maybe
necessary or appropriate in order to protect the rights of the Investor against
impairment.

 

26.         NOTICE OF ADJUSTMENTS.  Whenever the Exercise Price shall be
adjusted pursuant to the provisions hereof, the Company shall within thirty (30)
days of such adjustment deliver a certificate signed by its chief financial
officer to the Investor setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the Exercise Price after giving effect to such
adjustment.

 

27.         FRACTIONAL SHARES.  No fractional Shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
Shares the Company shall make a cash payment equal to the excess of the average
daily closing price of the Company’s common stock for the twenty (20) business
days prior to the exercise date for such fractional shares above the Exercise
Price for such fractional share.

 

28.         TRANSFERS AND EXCHANGES. This Warrant shall be transferable by the
Investor provided that the Investor in connection with such transfer delivers to
the Company an opinion of counsel, in form and substance satisfactory to the
Company, that registration is not required under the Securities Act of 1933, as
amended, or any applicable state securities laws.

 

29.         RIGHTS AS STOCKHOLDERS. The Investor, as holder of this Warrant,
shall not be entitled to vote or receive dividends or be deemed the holder of
Common Stock, or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the Investor, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to receive
notice of meetings, or to receive dividends or subscription rights or otherwise
until this Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.

 

30.         REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  This Warrant is
issued and delivered on the basis of the following:

 

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e.               This Warrant has been duly authorized and executed by the
Company and when delivered will be the valid and binding obligation of the
Company enforceable in accordance with its terms;

 

f.                 The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable;

 

g.              The rights, preferences, privileges and restrictions granted to
or imposed upon the Shares and the Investor are as set forth in the Company’s
Articles of Incorporation, as amended;

 

h.              The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company’s Articles of
Incorporation or bylaws, do not and will not contravene any law, governmental
rule or regulation, judgment or order applicable to the Company, and do not and
will not contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration with or the taking of any action in respect of or
by, any federal state or local government authority or agency or other person.

 

31.         REPRESENTATIONS AND WARRANTIES OF INVESTOR.  The Investor hereby
represents and warrants that:

 

a.               Purchase Entirely for Own Account.  This Warrant is issued to
the Investor in reliance upon Investor’s representation to the Company, which by
its acknowledgment of this Warrant Investor hereby confirms, that the Warrant
and the Common Stock issuable upon exercise of the Warrant (collectively, the
“Securities”) will be acquired for investment for the Investor’s own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same.  By
acknowledging this Warrant, the Investor represents that it does not have any
contract, undertaking, agreement, or arrangement with any person to sell,
transfer, or grant participations to such person or to any third person with
respect to any of the Securities.  The Investor has full power and authority to
acknowledge this Warrant.

 

b.              Disclosure of Information.  The Investor has had an opportunity
to ask questions and receive answers from the Company regarding the terms and
conditions of the offering of the Warrant.

 

c.               Investment Experience.  The Investor acknowledges that it can
bear the economic risk of its investment.

 

d.              Accredited Investor.  The Investor is an “accredited investor”
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.

 

e.               Restricted Securities.  The Investor understands that the
Securities it is purchasing are characterized as “restricted securities” under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances.  In this connection, the Investor
represents that it is familiar with Rule 144 under the Act, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.

 

f.                 Legends.  It is understood that the certificates evidencing
the Securities may bear one or all of the following legends:

 

i.      “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933.  THESE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
MORTGAGED, PLEDGED,

 

 

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HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF
COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT.”

 

32.         MODIFICATION AND WAIVER.  This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.

 

33.         NOTICES.  All notices, demands or requests provided for or permitted
to be given pursuant to this Agreement must be in writing and shall be delivered
or sent, with the copies indicated, by personal delivery, telecopy (with
confirmation and additional copy sent by overnight delivery service) or
overnight delivery service (by a reputable international carrier) to the parties
as follows (or at such other address as a party may specify by notice given
pursuant to this Section);

 

To Investor:

Edwin F. Hale, Sr.

 

1501 S. Clinton Street, 16th Floor

 

Baltimore, MD 21224

 

Fax:

 

Email:

 

 

With a Copy to:

 

 

 

 

Attn:

 

Fax:

 

Email:

 

 

To Company:

FIRST MARINER BANCORP

 

1501 S. Clinton Street

 

Baltimore, Maryland  21224

 

Attn: Chief Executive Officer

 

Fax: (410) 342-4127

 

 

With a copy to:

Kilpatrick Stockton LLP

 

607 14th Street, NW

 

Suite 900

 

Washington, DC 20005

 

Attn: Gary R. Bronstein

 

Fax: (202) 508-5858

 

Email: grbonstein@kilpatrickstockton.com

 

All notices shall be deemed given and received one business day after their
delivery to the addresses for the respective party(ies), with the copies
indicated, as provided in this Section 13.

 

34.         BINDING EFFECT ON SUCCESSORS.  The terms and provisions of this
Warrant shall be binding upon the Company and its respective successors and
assigns and the Investor.  All of the obligations of the parties relating to the
Common Stock issuable upon the exercise of this Warrant shall survive the
exercise and termination of this Warrant and all of the covenants and agreements
of each party relating thereto shall inure to the benefit of the successors and
assigns of the other.  The Company will, at the time of the exercise of this
Warrant, in whole or in part, upon request of the Investor but at the Company’s
expense, acknowledge in writing its continuing obligation to the Investor in
respect of any rights (including, without

 

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limitation, any right to registration of the shares of Registrable Securities)
to which the Investor shall continue to be entitled after such exercise in
accordance with this Warrant; provided, that the failure of the Investor to make
any such request shall not affect the continuing obligation of the Company to
the Investor in respect of such rights.

 

35.         LOST WARRANTS OR STOCK CERTIFICATES.  The Company covenants to the
Investor that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant or any stock
certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, or like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.

 

36.         DESCRIPTIVE HEADINGS.  The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.

 

37.         GOVERNING LAW.  This Agreement and the interpretation of its terms
shall be governed by the laws of the State of Maryland, without application of
conflicts of law principles.

 

38.         CONFIDENTIALITY; NO PUBLIC DISCLOSURE. The terms and conditions of
this Warrant are confidential. Neither party shall make any public disclosure
concerning the terms and conditions of this Warrant without the prior written
consent of the other party, except as required by the rules and regulations of
the Securities and Exchange Commission, the NASDAQ Stock Market, Inc. or any
other applicable stock exchanges.

 

39.         ATTORNEYS FEES. Except as otherwise set forth in the Exchange
Agreement, the Company and Investor shall pay their respective attorneys’ fees
and expenses for the negotiation and preparation of this Warrant and the other
agreements contemplated by this Warrant.

 

40.         COUNTERPARTS. This Agreement may be executed and delivered in two or
more counterparts, each of which shall be deemed to be an original and all of
which, taken together, shall be deemed to be one agreement.

 

[Remainder of Page Intentionally Left Blank]

 

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The parties have executed this Warrant as of the date set forth above.

 

 

Investor:

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

Name: Edwin F. Hale, Sr.

 

 

 

 

Company:

FIRST MARINER BANCORP,

 

A Maryland corporation

 

 

 

 

 

By:

 

 

Name: John Brown, III

 

Title:    Director and Chairman of the Special Committee

 

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EXHIBIT A

NOTICE OF EXERCISE

 

To: FIRST MARINER BANCORP

1501 S. Clinton Street

Baltimore, Maryland  21224

Attn:

 

4.               The undersigned hereby elects to purchase                   
Shares of Common Stock of FIRST MARINER BANCORP pursuant to the terms of the
attached Warrant, and tenders herewith payment of the purchase price of such
Shares in full.

 

5.               Please issue a certificate or certificates representing said
Shares in the name of the undersigned or in such other name or names as are
specified below:

 

Name:

 

                                            

Address:

 

                                            

 

                                            

 

                                            

 

6.               The undersigned represents that the aforesaid Shares being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such Shares.

 

 

By:

 

 

 

 

Name: Edwin F. Hale, Sr.

 

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SCHEDULE 3.4

INVESTOR CONSENTS AND FILINGS

 

Pursuant to Section 13 of the Exchange Act and the rules promulgated thereunder,
the Investor is required to file an amendment to his Schedule 13D that is on
file with the SEC promptly after the execution of this Agreement.

 

Pursuant to Section 16 of the Exchange Act and the rules promulgated thereunder,
the Investor is required to file (i) a Form 4 with the SEC within two
(2) business days after the exchange of Preferred Securities for Company Common
Stock and Exhibit A Warrants, and (ii) a Form 4 with the SEC within two
(2) business days after the issuance, if any, of Exhibit B Warrants.

 

1

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SCHEDULE 4.5

COMPANY CONSENTS AND FILINGS

 

The Company is required to solicit its stockholders for approval of the Exchange
Proposal and must obtain the Stockholder Approval.

 

The Company is required under the NASDAQ Stock Market Rules to file a Listing of
Additional Shares Notification with the NASDAQ Stock Market.

 

Pursuant to Section 4(2) of the Securities Act and Rule 506 promulgated
thereunder, the Company may be required to file a Form D with the Securities and
Exchange Commission within 15 calendar days after the exchange of the Preferred
Stock for Company Common Stock and Exhibit A Warrants.

 

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