Exhibit 10.1

 

MERGER AND ACQUISITION AGREEMENT

 

by and among

 

FIRST MARINER BANCORP,

a Maryland corporation,

 

FIRST MARINER BANK,

a Maryland chartered trust company,

 

and

 

RKJS BANK,

a Maryland chartered trust company

 

February 7, 2014

 

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Table of Contents

 

 

 

Page

 

 

 

ARTICLE I.

INTERPRETATION

2

Section 1.01.

Definitions

2

Section 1.02.

Governing Law

10

 

 

 

ARTICLE II.

ASSIGNMENT AND TRANSFER; MERGER

10

Section 2.01.

Assignments and Transfer; Merger

10

Section 2.02.

Purchase Price

11

Section 2.03.

Equity Contribution

11

Section 2.04.

Chapter 11 Bankruptcy Case

12

 

 

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE COMPANIES

12

Section 3.01.

Organization and Qualification

13

Section 3.02.

Authority; Approvals

13

Section 3.03.

No Conflict With Other Instruments

14

Section 3.04.

Capitalization; Title to Other Purchased Assets

14

Section 3.05.

Compliance with Laws, Permits and Instruments

15

Section 3.06.

Financial Statements

16

Section 3.07.

Undisclosed Liabilities

16

Section 3.08.

Litigation

16

Section 3.09.

Consents and Approvals

17

Section 3.10.

Title to FMBank Assets

17

Section 3.11.

Absence of Certain Changes or Events

18

Section 3.12.

Taxes

18

Section 3.13.

Insurance

20

Section 3.14.

Proprietary Rights

21

Section 3.15.

Transactions with Certain Persons and Entities

21

Section 3.16.

Evidences of Indebtedness

21

Section 3.17.

Certain Loans and Related Matters

22

Section 3.18.

Environmental Compliance

23

Section 3.19.

Regulatory Compliance

23

Section 3.20.

Deposits

24

Section 3.21.

Interest Rate Risk Management Instruments

24

Section 3.22.

Community Reinvestment Act

24

Section 3.23.

Fair Housing Act, Home Mortgage Disclosure Act and Equal Credit Opportunity Act

24

Section 3.24.

Consumer Compliance Laws

24

Section 3.25.

Bank Secrecy Act, Foreign Corrupt Practices Act and U.S.A. Patriot Act

25

Section 3.26.

Loans Secured by FMAR Capital Stock

25

Section 3.27.

Absence of Certain Business Practices

25

Section 3.28.

Books and Records

25

Section 3.29.

Internal Controls

25

Section 3.30.

Fiduciary Responsibilities

26

Section 3.31.

Guaranties

26

Section 3.32.

Employee Relationships

26

Section 3.33.

Benefit Plans

26

Section 3.34.

Obligations to Employees

29

 

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Section 3.35.

Contracts and Commitments

29

Section 3.36.

Brokers and Finders

31

 

 

 

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF FMIB

31

Section 4.01.

Organization and Qualification

32

Section 4.02.

Authority; Approvals

32

Section 4.03.

No Conflict With Other Instruments

32

Section 4.04.

Litigation

33

Section 4.05.

Consents and Approvals

33

Section 4.06.

Available Funds

33

Section 4.07.

Brokers and Finders

33

 

 

 

ARTICLE V.

COVENANTS OF THE PARTIES

34

Section 5.01.

Commercially Reasonable Efforts

34

Section 5.02.

Consents and Approvals

34

Section 5.03.

Required Acts

35

Section 5.04.

Prohibited Acts

35

Section 5.05.

Certain Company Contracts

39

Section 5.06.

Confidential Information

39

Section 5.07.

Access; Pre-Closing Investigation

40

Section 5.08.

Attendance at Directors’ and Committee Meetings

41

Section 5.09.

Additional Financial Statements

41

Section 5.10.

Notice of Certain Events

41

Section 5.11.

Indemnification and D&O Insurance; Releases

42

Section 5.12.

Notice of Sale

44

Section 5.13.

Resignations

44

Section 5.14.

Operating Functions

45

Section 5.15.

DIP Financing

45

Section 5.16.

Payment of the Brokers Fee

46

Section 5.17.

Stalking-Horse Bidder Fee

46

Section 5.18.

Debtor-in-Possession

47

Section 5.19.

The Sale Motion

47

Section 5.20.

The Auction Procedures

48

Section 5.21.

Bankruptcy Efforts

52

Section 5.22.

Non-Solicitation of Competing Bids

52

Section 5.23.

Bankruptcy Filings

53

Section 5.24.

Plan

53

Section 5.25.

Appeal

53

Section 5.26.

Update of Representations

53

Section 5.27.

Name Change

53

Section 5.28.

Employee Transition

54

 

 

 

ARTICLE VI.

CONDITIONS TO CLOSING

54

Section 6.01.

Conditions to the Obligations of All Parties

54

Section 6.02.

Conditions to the Obligations of FMIB

55

Section 6.03.

Conditions to the Obligations of the Companies

56

 

 

 

ARTICLE VII.

CLOSING

56

Section 7.01.

Actions to be Taken at the Closing by the Companies

56

Section 7.02.

Actions to be Taken at the Closing by FMIB

58

Section 7.03.

Concurrent Delivery

59

 

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Section 7.04.

Assignment and Transfer of Other Purchased Assets; Merger

59

Section 7.05.

Time and Place of the Closing and Closing Date

59

 

 

 

ARTICLE VIII.

TERMINATION

60

Section 8.01.

Termination

60

Section 8.02.

Effect of Termination

62

 

 

 

ARTICLE IX.

SURVIVAL OF REPRESENTATIONS AND WARRANTIES; TAX MATTERS

62

Section 9.01.

Survival of Representations, Warranties and Covenants

62

Section 9.02.

Transfer Taxes

62

Section 9.03.

Prorations

62

Section 9.04.

Tax Returns

63

Section 9.05.

Cooperation

64

Section 9.06.

Carrybacks

64

Section 9.07.

Amended Tax Returns of FMBank; Settlement of Audit

64

Section 9.08.

Tax Sharing Agreements

64

Section 9.09.

Tax Covenant Involving FMBank

65

Section 9.10.

Additional Tax Covenants

65

 

 

 

ARTICLE X.

MISCELLANEOUS

66

Section 10.01.

Expenses

66

Section 10.02.

Entire Agreement

66

Section 10.03.

Binding Effect; Assignment

66

Section 10.04.

Further Cooperation

66

Section 10.05.

Severability

67

Section 10.06.

Notices

67

Section 10.07.

Waiver of Jury Trial

68

Section 10.08.

Jurisdiction

68

Section 10.09.

Multiple Counterparts

69

Section 10.10.

Specific Performance

69

Section 10.11.

Attorneys’ Fees and Costs

69

Section 10.12.

Rules of Construction

69

Section 10.13.

Articles, Sections, Exhibits and Schedules

69

Section 10.14.

Public Disclosure

69

Section 10.15.

Extension; Waiver

70

Section 10.16.

Amendments

70

Section 10.17.

Automatic Extension of Deadlines and Dates

70

 

Exhibit A

DIP Loan Agreement and Documentation

 

 

Exhibit B

Form of Auction Procedures Order

 

 

Exhibit C

Form of Auction Procedures

 

 

Exhibit D

Form of Sale Order

 

 

Exhibit E

Form of Articles of Merger

 

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MERGER AND ACQUISITION AGREEMENT

 

THIS MERGER AND ACQUISITION AGREEMENT (this “Agreement”) is dated as of
February 7, 2014, by and among FIRST MARINER BANCORP, a Maryland corporation
with its principal offices in Baltimore, Maryland (“FMAR”), FIRST MARINER BANK,
a Maryland chartered trust company and wholly-owned subsidiary of FMAR, with its
principal offices in Baltimore, Maryland (“FMBank,” and together with FMAR, the
“Companies”), and RKJS BANK, a Maryland chartered trust company (“FMIB”).  FMAR,
FMBank and FMIB are sometimes referred to herein individually as a “Party,” and
collectively as the “Parties.”

 

RECITALS

 

WHEREAS, FMAR owns all of the issued and outstanding shares of FMBank, and
intends to file a voluntary bankruptcy petition (the “Bankruptcy Case”) under
Chapter 11 of Title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the
“Bankruptcy Code”), in the United States Bankruptcy Court for the District of
Maryland (the “Bankruptcy Court”) on or after the date this Agreement is
executed (the date of such filing being referred to herein as the “Petition
Date”);

 

WHEREAS, FMIB has received aggregate capital commitments of $100,000,000 from
the investors identified on that certain list of investors provided to FMAR on
the date hereof, each of whom is an “accredited investor” within the meaning of
Regulation D under the Securities Act of 1933, as amended (each such Person
identified on such list, as such list may be updated from time to time by FMIB,
is referred to herein as an “Investor,” and collectively, as the “Investors”),
for the purpose of acquiring and recapitalizing the Bank;

 

WHEREAS, all of the issued and outstanding shares of capital stock of FMIB will,
upon completion of the Equity Contribution (as defined herein), be owned by the
Investors;

 

WHEREAS, FMAR desires to sell, and FMIB and the Investors desire to acquire, all
of the issued and outstanding shares of FMBank (the “FMBank Shares”) held by
FMAR, and certain other assets of FMAR and its Subsidiaries (as defined herein),
free and clear of all Encumbrances, as defined herein (the “Acquisition”), which
Acquisition shall be (i) structured as a merger of FMIB with and into FMBank,
with FMBank being the surviving Person, as defined herein (the “Merger”), and
(ii) effectuated pursuant to an order of the Bankruptcy Court entered upon a
motion by FMAR (the “Sale Motion”) under Sections 105, 363 and 365 of the
Bankruptcy Code approving such transaction; and

 

WHEREAS, concurrently with Closing (as defined herein), immediately prior to the
effective time of the Merger, the Investors shall make the Equity Contribution
to FMIB, on and subject to the terms of this Agreement.

 

NOW, THEREFORE, for and in consideration of the foregoing and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged,

 

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and subject to the conditions set forth below, the Parties, intending to be
legally bound, undertake, promise, covenant and agree with each other as
follows:

 

ARTICLE I.

INTERPRETATION

 

Section 1.01.                         Definitions.  In this Agreement, unless
the context otherwise requires or unless otherwise specifically provided herein:

 

“Accounting Period Change” is defined in Section 9.10(b).

 

“Acquisition” is defined in the Recitals of this Agreement.

 

“Affiliate” means, with respect to any Person, any Person that, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person.  For the purposes of this definition, “control” (including, with
correlative meaning, the terms “controlled by” and “under common control with”)
as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.

 

“Affiliated Group” means any affiliated group within the meaning of
Section 1504(a) of the Code.

 

“Agreement” is defined in the Preamble of this Agreement.

 

“Alternative Transaction” means any plan, agreement or arrangement, other than
this Agreement, or agreement to support or propose to the Bankruptcy Court any
plan, agreement or arrangement, other than this Agreement, the effect and/or
results of which involve the recapitalization or acquisition of FMBank and/or
FMAR by any Person other than the Investors through FMIB.

 

“Articles of Merger” is defined in Section 2.01.

 

“Assumed Bank Related Contracts” is defined in Section 5.05.

 

“Auction” is defined in Section 5.20(i).

 

“Auction Procedures” means the Auction Procedures in substance in the form of
Exhibit C hereto (unless otherwise agreed to by FMIB) approved by the Bankruptcy
Court in the Auction Procedures Order.

 

“Auction Procedures Order” means an order of the Bankruptcy Court in substance
in the form of Exhibit B hereto (unless otherwise agreed to by FMIB) that
approves, inter alia, bidding and Auction Procedures to be followed by the
Companies and all potential bidders of an Alternative Transaction, and the
Stalking Horse Bidder Fee.

 

“Bank D&O Policies” is defined in Section 5.11(b).

 

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“Bank D&O Tail Policy” is defined in Section 5.11(b).

 

“Bank Related Contracts” is defined in Section 2.01.

 

“Bank Subsidiaries” is defined in Section 3.01(c).

 

“Bankruptcy Case” is defined in the Recitals to this Agreement.

 

“Bankruptcy Code” is defined in the Recitals of this Agreement.

 

“Bankruptcy Court” is defined in the Recitals to this Agreement.

 

“Bankruptcy Exception” means, in respect of any agreement, contract, commitment
or obligation, any limitation thereon imposed by any bankruptcy, insolvency,
fraudulent conveyance, reorganization, receivership, moratorium or similar law
affecting creditors’ rights and remedies generally and, with respect to the
enforceability of any agreement, contract, commitment or obligation, by general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing, regardless of whether enforcement is sought in a
proceeding at law or in equity.

 

“Bankruptcy Rules” is defined in Section 5.20(h).

 

“BHCA” means Bank Holding Company Act of 1956, as amended.

 

“Bid Deadline” is defined in Section 5.20(g).

 

“Broker” means Sandler O’Neill & Partners, L.P.

 

“Broker Fees” means the fees payable by FMAR to the Broker upon closing of the
Contemplated Transactions in an aggregate amount equal to the amount set forth
on Disclosure Schedule 3.36.

 

“Burdensome Condition” means any restraint, limitation, term, requirement,
provision or condition that would (i) materially impair any of the benefits to
FMIB or any Investor of the Contemplated Transactions; (ii) require any Person
(including any Investor) other than FMIB to guaranty, support or maintain the
capital of FMBank; (iii) require a material modification of, or impose a
material limitation, restriction or condition on, the activities, governance,
legal structure, or compensation of FMIB or any of its Affiliates or, following
the Closing, FMBank, any Investor or any of their respective Affiliates;
provided, however, that the following shall not be deemed to be a “Burdensome
Condition”:  (y) those restraints, limitations, terms, requirements, provisions
or conditions specifically applicable to FMBank or Bank Subsidiaries by reason
of their condition as of the date hereof and specifically disclosed in
Disclosure Schedule 3.19; and (z) any restraint, limitation, term, requirement,
provision or condition that applies generally to bank holding companies and
banks as provided by statute, regulation, or written and publicly available
supervisory guidance of general applicability, in each case, as in effect on the
date hereof.

 

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“Business Day” means a day that FMBank is open to the public for the conduct of
banking business.

 

“Call Reports” is defined in Section 3.06.

 

“Claim” and “Claims” are defined in Section 5.11(c).

 

“Closing” is defined in Section 7.05.

 

“Closing Date” is defined in Section 7.05.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Companies” is defined in the Preamble to this Agreement.

 

“Company Required Approvals” is defined in Section 3.09.

 

“Competing Acquisition Agreement” is defined in Section 5.20(d)(i).

 

“Constituent Documents” means articles or certificate of incorporation, bylaws
and any other constituted document of a corporate entity.

 

“Contemplated Transactions” means all of the transactions between the Companies
and FMIB contemplated by this Agreement.

 

“Contracts” is defined in Section 3.35.

 

“CRA” is defined in Section 3.22.

 

“DIP Loan” is defined in Section 5.15.

 

“DIP Loan Agreement” is defined in Section 5.15.

 

“Disclosure Schedules” is defined in ARTICLE III.

 

“Employee Plans” is defined in Section 3.33(a).

 

“Encumbrance,” with respect to any asset, means, whether or not registered or
registrable or recorded or recordable, and regardless of how created or
arising:  (i) a Lien, Liability, encumbrance, adverse claim, charge, covenant,
restriction, execution, security interest, pledge against such asset, or a
subordination to any right or claim of others in respect thereof; (ii) a claim
or interest in, to, or against such asset; (iii) an option or other right to
acquire, or to acquire any interest in, such asset; (iv) an interest of a vendor
or lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset; and (v) any other encumbrance of
whatsoever nature and kind in, to, or against such asset.

 

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“Environmental Laws” means the Legal Requirements relating to pollution or
protection of public or employee health or safety or the environment, including
laws relating to (i) emissions, discharges, releases or threatened releases of
Hazardous Materials, into the environment (including ambient air, indoor air,
surface water, ground water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transport or handling of Hazardous Materials, and (iii) underground
and above ground storage tanks containing Hazardous Materials, and related
piping, and emissions, discharges, releases or threatened releases therefrom.

 

“Equity Contribution” is defined in Section 2.03.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” means, with respect to a Person, any other Person bearing a
relationship to the first Person described in Sections 414 (b), (c), (m) or
(o) of the Code, or Section 4001(b) of ERISA, or any regulations or guidance
issued thereunder.

 

“Executive Officer” is defined in Section 3.08.

 

“Expense Reimbursement” is defined in Section 5.17.

 

“FDIA” means Federal Deposit Insurance Act, as amended.

 

“FDIC” means the Federal Deposit Insurance Corporation or any successor thereto.

 

“Final Order” means any order or judgment entered by the Bankruptcy Court or
other court having jurisdiction over any matter; provided, that such order or
judgment has not been reversed, stayed, or vacated pursuant to applicable law or
by an order of the Bankruptcy Court or other court of competent jurisdiction.

 

“FM Counsel is defined in Section 2.01(c).

 

“FM Group” means FMAR and the members of its Affiliated Group.

 

“FM Group Member” means each member of the FM Group.

 

“FMAR” is defined in the Preamble of this Agreement.

 

“FMAR Releasee” is defined in Section 5.11(d).

 

“FMAR Releasor” is defined in Section 5.11(c).

 

“FMAR Subsidiaries” is defined in Section 3.01(a).

 

“FMBank” is defined in the Preamble of this Agreement.

 

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“FMBank Closing Equity” shall mean the “Tier 1 Capital” of FMBank calculated in
accordance with the regulations of the FDIC as of (a) the close of business on
the last Business Day of the month immediately prior to the Closing Date if the
Closing Date is after the tenth Business Day of a month, or (b) the close of
business on the last Business Day of the second month immediately prior to the
Closing Date if the Closing Date is on or before the tenth Business Day of a
month; provided that any amounts paid or to be paid by FMBank for the Bank D&O
Tail Policy shall be deducted as additional liabilities from the calculation of
FMBank Closing Equity, regardless of whether such amounts are required by FDIC
regulations to be included as a liability in calculating Tier 1 Capital.

 

“FMBank Releasee” is defined in Section 5.11(c).

 

“FMBank Releasor” is defined in Section 5.11(d).

 

“FMBank Shares” is defined in the recitals to this Agreement.

 

“FMIB” is defined in the Preamble of this Agreement.

 

“FMIB Required Approvals” is defined in Section 4.05.

 

“Former Related Person” is defined in Section 3.08.

 

“GAAP” means generally accepted accounting principles in effect in the United
States.

 

“Governmental Authority” means any federal, state, municipal, county or regional
government or governmental or regulatory authority, domestic or foreign, and
includes any department, commission, bureau, board, administrative agency or
regulatory body of any of the foregoing or any non-governmental regulatory body
that provides standards for certification.

 

“Hazardous Material” means any pollutant, contaminant or toxic or hazardous
substance, constituent, material or waste regulated under Environmental Laws,
including petroleum, crude oil or any fraction thereof or any petroleum product,
but does not include nominal quantities of any chemical used in the ordinary
course of business as office or cleaning supplies.

 

“Indemnified Parties” is defined in Section 5.11.

 

“Information” is defined in Section 5.06.

 

“Investor” is defined in the Recitals to this Agreement.

 

“IRS” is defined in Section 3.12(c).

 

A Person has “Knowledge” of, or acts “Knowingly” with respect to, a particular
fact or other matter if any individual who is presently serving as a director or
Executive Officer of that Person is actually aware of such fact or other matter,
after due inquiry.

 

“Leased Properties” is defined in Section 3.10.

 

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“Legal Requirement” means any federal, state, local, municipal, foreign,
international, multinational or other constitution, law, ordinance, principle of
common law, code, regulation, statute or treaty.

 

“Liability” means any liability or obligation of any kind, character or
description, whether known or unknown, absolute or contingent, whether or not
accrued, disputed or undisputed, liquidated or unliquidated, secured or
unsecured, joint or several, due or to become due, vested or unvested,
executory, determined, determinable or otherwise, including, without limitation,
any “Claim” as defined in Section 101(5) of the Bankruptcy Code.

 

“Lien” means any lien, pledge, mortgage, deed of trust, interest, security
interest, claim, lease, charge, option, right of first refusal, levy, right of
first offer, easement, servitude, transfer restriction under any shareholder or
similar agreement, Tax (including foreign, federal, state and local Tax), order
of any Governmental Authority, encumbrance or any other restriction or
limitation whatsoever of any kind or nature, whether secured or unsecured,
choate or inchoate, filed or unfiled, scheduled or unscheduled, noticed or
unnoticed, recorded or unrecorded, contingent or non-contingent, material or
non-material, known or unknown.

 

“Material Adverse Change” means any fact, circumstance, event, effect,
development, occurrence or change that (1) has had, or would be reasonably
likely to have, a material and adverse effect on the business, results of
operations, financial condition, assets, properties, employees, liabilities
(absolute, accrued, contingent or otherwise) or reserves of FMBank, excluding
any change with respect to, or effect on, FMBank resulting from (i) changes in
Legal Requirements, GAAP or regulatory accounting requirements, as such would
apply to banks, (ii) changes after the date of this Agreement in national or
regional political conditions or general economic or market conditions
(including changes in prevailing interest rates, credit availability and
liquidity) generally affecting banks and bank holding companies, except to the
extent that such change has a disproportionately adverse effect on FMBank as
compared to similarly situated banks, (iii) any actions or omissions expressly
required by this Agreement or that are taken at the written request of or with
the prior informed written consent of FMIB in contemplation of the Contemplated
Transactions, and (iv) any pre-Closing restriction or conditions imposed on
FMBank as a result of regulatory agreements to which FMBank is a party as of the
date of this Agreement, or (2) prevents or materially impairs the ability of
either or both of the Companies to timely consummate the Contemplated
Transactions.  For purposes of determining whether a Material Adverse Change has
occurred based on an increase in FMBank’s classified loans or other real estate
owned, such determination shall be made from the date of this Agreement.  The
conditions resulting in the filing of the Bankruptcy Case will not be deemed to
be a Material Adverse Change.

 

“Maturity Date” is defined in the DIP Loan Agreement attached as Exhibit A.

 

“Maximum DIP Loan Amount” means the sum of (i) the amount of “Obligations” (as
defined in the DIP Loan Agreement) outstanding under the DIP Loan Agreement as
of the date that is seven (7) days prior to the Bid Deadline (the “DIP Measuring
Date”), the principal amount of which may not exceed $2,500,000, and (ii) the
aggregate amount of additional draws of the DIP Loan anticipated to be made by
FMAR (in accordance with the DIP Loan Agreement)

 

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from and including the DIP Measuring Date through the date of the Sale Hearing,
as estimated in good faith by FMAR in writing (a copy of which shall be provided
by FMAR, within one (1) day after the DIP Measuring Date, to FMIB and each
potential bidder who executes a confidentiality agreement in accordance with
Section 5.20(b), and filed with the Bankruptcy Court); provided that, upon such
estimate by FMAR, the “Commitment” (as defined in the DIP Loan Agreement) shall
be reduced to an amount equal to such Maximum DIP Loan Amount.

 

“MDB” means the Office of the Commissioner of Financial Regulation of the
Maryland Department of Labor, Licensing and Regulation, or any successor
thereto.

 

“Merger” is defined in the recitals to this Agreement.

 

“Minimum Overbid” is defined in Section 5.20(d)(i).

 

“Other Bank Related Contracts” is defined in Section 5.05.

 

“Other Purchased Assets” is defined in Section 2.01.

 

“Owned Properties” is defined in Section 3.10.

 

“Outside Date” is defined in Section 8.01(a).

 

“Overbidder” is defined in Section 5.20(c).

 

“Overbidder Outside Date” is defined in Section 5.20(d)(i).

 

“Overbidder’s Deposit” is defined in Section 5.20(d)(iii).

 

“Parties” is defined in the Preamble of this Agreement.

 

“Permitted Liens” is defined in Section 3.10.

 

“Person” means an individual, legal personal representative, corporation,
limited liability company, partnership, firm, trust, trustee, syndicate, joint
venture, unincorporated organization,  Governmental Authority or other entity of
whatever nature.

 

“Petition Date” is defined in in the Recitals to this Agreement.

 

“Privileged Property” is defined in Section 2.01(c).

 

“Properties” is defined in Section 3.10.

 

“Purchase Price” is defined in Section 2.02.

 

“Qualified Bid” is defined in Section 5.20(e).

 

“Qualified Bidder” is defined in Section 5.20(f).

 

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“Qualified Overbidder” means an Overbidder who submits a Qualified Bid in
accordance with Section 5.20.

 

“Real Estate” is defined in Section 3.10.

 

“Recapitalization Amount” is defined in Section 2.03.

 

“Rev. Proc. 2006-45” is defined in Section 3.12(o).

 

“Sale” is defined in Section 5.19(g)(iii).

 

“Sale Hearing” is defined in Section 2.04(i).

 

“Sale Motion” means the motion filed by FMAR with the Bankruptcy Court seeking,
among other things, entry of the Auction Procedures Order and the Sale Order
(which shall be in form and substance acceptable to FMIB).

 

“Sale Order” means an order of the Bankruptcy Court in substance in the form of
Exhibit D hereto (unless otherwise agreed to by FMIB).

 

“Stalking Horse Bidder Fee” is defined in Section 5.17.

 

“Straddle Period” means any Tax period beginning before and ending after the
Closing Date.

 

“Straddle Return” has the meaning set forth in Section 9.04(b).

 

“Subsidiary” means, when used with reference to an entity, any corporation, a
majority of the outstanding voting securities of which are owned directly or
indirectly by such entity or any partnership, joint venture or other enterprise
in which any entity has, directly or indirectly, a majority equity interest.

 

“Successful Bid” is defined in Section 5.20(j)(vi).

 

“Successful Bidder” is defined in Section 5.20(j)(vi).

 

“Target Closing Equity” means Twenty-Nine Million Dollars ($29,000,000).

 

“Tax” or “Taxes” means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code §59A),
customs, duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.

 

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“Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

 

“Year-End Date” is defined in Section 9.10(b).

 

Section 1.02.                         Governing Law.  This Agreement and the
agreements contemplated hereby shall be construed and interpreted, and the
rights of the Parties shall be determined, in accordance with the Bankruptcy
Code and the substantive laws of the State of Maryland, in each case without
regard to the conflict of laws principles thereof or of any other jurisdiction.

 

ARTICLE II.

ASSIGNMENTS AND TRANSFER; MERGER

 

Section 2.01.                         Assignments and Transfer; Merger.

 

(a)                                 Subject to the terms and conditions set
forth herein, and subject to entry of the Sale Order, at Closing, (i) FMAR shall
sell, assign and transfer to FMBank, free and clear of all Encumbrances, (A) all
of the contracts of FMAR and the FMAR Subsidiaries (other than FMBank and the
Bank Subsidiaries) that relate to the business of FMBank, all of which shall be
identified by FMIB hereafter in accordance with Section 5.05 (collectively, the
“Bank Related Contracts”), which FMIB has identified in accordance with
Section 5.05 as either an Assumed Bank Related Contract or an Other Bank Related
Contract, (B) all right, title and interest of FMAR and the FMAR Subsidiaries to
any proceeds received or to be received after the Closing Date related to any
Assumed Bank Related Contracts and/or Other Bank Related Contracts, including
any such proceeds from any insurance claims to the extent related to FMBank or
any Bank Subsidiary or the business of FMBank or any Bank Subsidiary, and
(C) all of the assets set forth on Schedule 2.01 (the assets identified in
clauses (A), (B) and (C), collectively, the “Other Purchased Assets”); and,
thereafter, (ii) FMIB shall be merged with and into FMBank, with FMBank being
the surviving Person; thereupon, (A) FMBank shall possess any and all purposes
and powers of FMIB, (B) all property rights, privileges and powers of whatever
nature and description of FMIB shall be transferred to, vested in, and devolved
upon FMBank, without further act or deed, (C) all of the Liabilities of FMIB
shall become the Liabilities of FMBank, (D) the FMBank Shares outstanding prior
to the Merger shall have been transferred free and clear of all Encumbrances,
and (E) the Investors shall have acquired all FMBank Shares in the Merger free
and clear of all Encumbrances.

 

(b)                                 In connection with the Merger, which shall
be effective in accordance with those certain Articles of Merger, in
substantially the same form as Exhibit E (the “Articles of Merger”), (i) each of
the FMBank Shares issued and outstanding immediately prior to the effective time
of the Merger automatically shall be cancelled and retired and shall cease to
exist, and FMAR, as sole holder thereof, shall be entitled to receive, in
exchange therefor, the Purchase Price as full consideration for such FMBank
Shares, and (ii) (A) each share of Common Stock of FMIB issued and outstanding
immediately prior to the effective time of the Merger automatically shall be
cancelled and retired and shall cease to exist, and each Investor, as a holder
thereof, shall be entitled to receive, in exchange therefor, as full
consideration for each such share of Common

 

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Stock, one share of Common Stock of FMBank and (B) each share of Series A
Preferred Stock of FMIB issued and outstanding immediately prior to the
effective time of the Merger automatically shall be cancelled and retired and
shall cease to exist, and each Investor, as a holder thereof, shall be entitled
to receive, in exchange therefor, as full consideration for each such share of
Series A Preferred Stock, one share of Series A Preferred Stock of FMBank.

 

(c)                                  FMIB and FMBank hereby agree that
pre-Merger attorney-client communications and attorney work-product
documentation between FMBank and any of Kilpatrick Townsend & Stockton, LLP,
Kramer, Levin, Naftalis & Frankel LLP, Gordon Feinblatt LLC, and Yumkas,
Vidmar & Sweeney, LLC (collectively, “FM Counsel”), that specifically relate to
this Agreement, the transactions contemplated by this Agreement, or the
analysis, solicitation and/or negotiation of any other potential strategic
transaction involving FMAR or FMBank (“Privileged Property”), will not remain
with FMBank, as the surviving corporation in the Merger, but will pass to FMAR
and become FMAR’s Privileged Property upon consummation of the Merger, and
FMBank, as the surviving entity in the Merger, waives any right to assert the
attorney-client privilege with respect to the Privileged Property.  Privileged
Property inadvertently retained by FMBank as the surviving corporation in the
Merger will be the Privileged Property of FMAR, and FMBank, as the surviving
corporation in the Merger, agrees to immediately return such property to FMAR. 
FMBank, as the surviving entity in the Merger, hereby consents to FM Counsel’s
representation of FMAR in connection with any dispute with FMBank or FMIB with
respect to this Agreement and the transactions contemplated hereby and waives
any conflict of interest related thereto.

 

Section 2.02.                         Purchase Price.

 

(a)                                 The aggregate purchase price payable to FMAR
for its FMBank Shares and the Other Purchased Assets shall be Four Million Seven
Hundred Seventy-Five Thousand Dollars ($4,775,000) (the “Purchase Price”).

 

(b)                                 No later than two Business Days prior to the
Closing Date, the Companies shall deliver to FMIB a balance sheet, prepared in
accordance with GAAP, setting forth the FMBank Closing Equity, certified by
either the chief executive officer or the chief financial officer of the Bank. 
If the FMBank Closing Equity is less than the Target Closing Equity, the
Purchase Price shall be reduced on a dollar-for-dollar basis for each dollar
that the FMBank Closing Equity is less than the Target Closing Equity; or, if
the FMBank Closing Equity is equal to or greater than the Target Closing Equity,
the Purchase Price shall remain the same.

 

(c)                                  The Purchase Price shall, subject to the
terms and conditions of this Agreement, be payable by wire transfer of
immediately available funds (from the Equity Contribution) to an account
designated in writing in advance by FMAR on the Closing Date.  Notwithstanding
the foregoing, FMIB shall have the right to pay a portion of the Purchase Price
by offsetting and reducing the amount due to FMIB under the DIP Loan Agreement.

 

Section 2.03.                         Equity Contribution.  Concurrently with
Closing, immediately prior to the effective time of the Merger, the Investors
shall make an equity contribution (the “Equity Contribution”) to FMIB in an
amount necessary to obtain the FMIB Required Approvals, which

 

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Equity Contribution shall be no less than Eighty-Five Million Dollars
($85,000,000) and no more than One Hundred Million Dollars ($100,000,000) in
cash.  The amount of the Equity Contribution, less the Purchase Price shall, as
a result of the Merger, be cash available to recapitalize FMBank (the
“Recapitalization Amount”).

 

Section 2.04.                         Chapter 11 Bankruptcy Case.

 

Subject to the terms and conditions of this Agreement, the obligations of the
Parties under this Agreement and the Contemplated Transactions are subject to
and contingent upon the approval and authorization of the Bankruptcy Court.  The
Parties agree to cooperate and coordinate FMAR’s filing of the Bankruptcy Case
no more than one Business Day following the execution and delivery of this
Agreement. FMAR shall file the Sale Motion pursuant to Sections 105, 363 and 365
of the Bankruptcy Code seeking, among other things:

 

(i)                                entry of the Auction Procedures Order in
substantially the same form as Exhibit B, or in such other form and manner as
may be acceptable to FMIB:  (A) approving the Auction Procedures in
substantially the same form as Exhibit C; (B) approving the Stalking Horse
Bidder Fee; (C) scheduling an Auction and a hearing to consider the approval of
the Acquisition (the “Sale Hearing”); and (D) approving the Contemplated
Transactions in the form and manner of the notice of the Sale Motion and Sale
Hearing; and

 

(ii)                             entry of the Sale Order in substantially the
same form as Exhibit D as a Final Order, or in such other form and manner as may
be acceptable to FMIB:  (A) finding that notice of Sale Hearing was given in
accordance with the Bankruptcy Code and Bankruptcy Rules, and constitutes such
notice as is appropriate under the particular circumstances; (B) finding that
FMIB is a “good faith” purchaser entitled to the protections afforded by
§363(m) of the Bankruptcy Code; (C) finding that the Other Purchased Assets are
assigned and transferred to FMBank free and clear of all Encumbrances, and that
the Investors are acquiring all FMBank Shares free and clear of all Encumbrances
pursuant to the Merger; and (D) approving the transactions proposed by this
Agreement, including, without limitation, the Merger, the sale, assignment and
transfer of the Other Purchased Assets, and the sale, assumption and assignment
of the Assumed Bank Related Contracts pursuant to Section 365 of the Bankruptcy
Code as contemplated in the Sale Motion.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF THE COMPANIES

 

The Companies hereby, jointly and severally, make the following representations
and warranties to FMIB as of the date of this Agreement; provided, that those
representations and warranties which address matters only as of a particular
date shall have been true and correct only on such date. On or prior to the date
of this Agreement, the Companies have delivered to FMIB that certain document
entitled Disclosure Schedules (the “Disclosure Schedules”) containing the
schedules referred to in this ARTICLE III.

 

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Section 3.01.                         Organization and Qualification.

 

(a)                                 FMAR is a Maryland corporation and bank
holding company registered under the BHCA.  FMAR and each of its Subsidiaries
(the “FMAR Subsidiaries”) are duly organized, validly existing and in good
standing under all laws of the state of their incorporation.  FMAR has all
requisite corporate power and authority (including, without limitation, all
material licenses, franchises, permits and other governmental authorizations as
are required under all applicable Legal Requirements) to own, lease and operate
its properties and assets as now owned, leased or operated, and to carry on its
businesses as presently conducted.  True and complete copies of the Constituent
Documents of FMAR, each as amended to date, have been made available or
delivered to FMIB.

 

(b)                                 FMBank is a Maryland chartered trust
company, duly organized, validly existing and in good standing under the laws of
the State of Maryland.  FMBank has all requisite corporate power and authority
(including, without limitation, all material licenses, franchises, permits and
other governmental authorizations as are required under all applicable Legal
Requirements), to own, lease and operate its properties and assets as now owned,
leased or operated, and to carry on its business as presently conducted.  True
and complete copies of the Constituent Documents of FMBank, as amended to date,
have been delivered to FMIB.  FMBank is an insured bank as defined in the FDIA
and is not a member of the Federal Reserve System.  The FDIC has not been
appointed receiver of FMBank.

 

(c)                                  Except as set forth on Disclosure Schedule
3.01(c), (i) FMBank does not own or control any Affiliate or Subsidiary,
(ii) FMBank has no equity interest, direct or indirect, in any other bank or
corporation or in any partnership, joint venture or other business enterprise or
entity, except as acquired through settlement of indebtedness, foreclosure, the
exercise of creditors’ remedies or in a fiduciary capacity, and (iii) the
business carried on by FMBank has not been conducted by or through any other
direct or indirect Subsidiary or Affiliate of FMBank.  The Subsidiaries of
FMBank (the “Bank Subsidiaries”) have all requisite corporate power and
authority including, without limitation, all material licenses, franchises,
permits and other governmental authorizations as are required under all
applicable Legal Requirements, to own, lease and operate their respective
properties and assets as now owned, leased or operated, and to carry on their
respective businesses as presently conducted.  True and complete copies of the
Constituent Documents of all Bank Subsidiaries, as amended to date, have been
made available or delivered to FMIB.

 

(d)                                 The Companies’ mortgage business and
operations have been conducted as a division of FMBank under the tradename
“First Mariner Mortgage.”  First Mariner Mortgage Corporation, a Maryland
corporation, does not own any of the assets of the Companies’ mortgage business
and operations or conduct any of the Companies’ mortgage business and
operations.

 

Section 3.02.                         Authority; Approvals.  (i) Except as set
forth on Disclosure Schedule 3.02, the Companies have full legal right,
corporate power and authority to enter into this Agreement and to carry out
their respective obligations hereunder in accordance with the Sale Order;
(ii) FMAR has full legal right, corporate power and authority to enter into the
DIP Loan Agreement and to carry out its obligations thereunder; and (iii) the
execution and delivery of this Agreement, the DIP Loan Agreement and all
documents, instruments and agreements required to

 

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be executed and delivered by the Companies pursuant to this Agreement and the
DIP Loan Agreement, and the consummation of the Contemplated Transactions, have
been duly and validly authorized by all necessary corporate action on the part
of the Companies.  This Agreement, the DIP Loan Agreement and all documents,
instruments and agreements required to be executed and delivered by the
Companies pursuant to this Agreement and the DIP Loan Agreement have been duly
executed and delivered by the Companies and (assuming due authorization,
execution and delivery by FMIB), constitute legal, valid and binding obligations
of the Companies, enforceable against the Companies in accordance with their
respective terms, subject to the Bankruptcy Exception.  No other corporate
proceedings, including any shareholder approvals, are necessary for the
execution and delivery by the Companies of this Agreement or by FMAR of the DIP
Loan Agreement, the performance by them of their respective obligations
hereunder or thereunder, or the consummation by them of the Contemplated
Transactions.

 

Section 3.03.                         No Conflict With Other Instruments.  None
of the execution and delivery of this Agreement or the DIP Loan Agreement or the
consummation of the Contemplated Transactions (in accordance with the Sale
Order), or compliance by the Companies with any of the provisions hereof or
thereof, will (i) materially violate, materially conflict with, or result in a
material breach of any provision of, or constitute a material default (or an
event which, with notice or lapse of time or both, would constitute a material
default) under, or result in the termination of, or result in the loss of any
benefit or creation of any material right on the part of any third party under,
or accelerate the performance required by, or result in a right of termination
or acceleration of, or result in the creation of any material Encumbrance upon
any of the material properties or assets of FMAR, FMBank or any other FMAR
Subsidiary or any Bank Subsidiary under any of the terms, conditions or
provisions of (A) the Constituent Documents of FMAR, FMBank or any other FMAR
Subsidiary or any Bank Subsidiary, or (B) except as set forth on Disclosure
Schedule 3.03, any material note, bond, mortgage, indenture, franchise, license,
permit, agreement or other instrument or obligation to which FMAR, FMBank or any
other FMAR Subsidiary or any Bank Subsidiary is a party or by which such Person
may be bound, or to which FMAR, FMBank or any other FMAR Subsidiary or Bank
Subsidiary or any of the properties or assets of FMAR, FMBank or any other FMAR
Subsidiary or any Bank Subsidiary may be subject, or (ii) assuming the Company
Required Approvals and the FMIB Required Approvals are duly obtained, violate in
any material respect any Legal Requirement or any judgment, ruling, order, writ,
injunction or decree applicable to FMAR, FMBank or any other FMAR Subsidiary or
Bank Subsidiary or any of their respective properties or assets.

 

Section 3.04.                         Capitalization; Title to Other Purchased
Assets.

 

(a)                                 The authorized shares of FMBank consists of
152,300 shares of common stock, par value $10.00 per share, of which 152,300
shares are issued and outstanding.  All of such FMBank Shares have been duly
authorized, validly issued, and are fully paid and nonassessable, and have not
been issued in violation of any preemptive or other rights of any Person. All
securities of FMBank have been issued in compliance with the securities laws of
the United States and the State of Maryland.  Except as contemplated herein and
as set forth on Disclosure Schedule 3.04(a), FMAR is, and as of the Closing Date
(immediately prior to the effective time of the Merger) will be, the lawful
record and beneficial owner of all of the

 

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FMBank Shares, free and clear of all Encumbrances (other than transfer
restrictions imposed by applicable federal and state securities laws).

 

(b)                                 Except as set forth on Disclosure Schedule
3.04(b), there are no: (i) outstanding preemptive rights, subscriptions,
options, calls, units, warrants or other rights of any kind or nature to acquire
or which relate to any securities of FMBank or any Bank Subsidiary;
(ii) outstanding securities, instruments or obligations that are or may become
convertible into or exchangeable or exercisable for any securities of FMBank or
any Bank Subsidiary; (iii) Contracts under which FMAR or any FMAR Subsidiary, or
FMBank or any Bank Subsidiary, are or may become obligated to sell, issue or
otherwise dispose of or redeem, purchase or otherwise acquire any securities of
FMBank or any Bank Subsidiary; (iv) shareholder agreements, voting trusts or
other agreements, arrangements or understandings to which FMAR or any FMAR
Subsidiary, or FMBank or any Bank Subsidiary, is a party or of which the
Companies are aware, that may affect the exercise of voting or any other rights
with respect to the capital stock of FMBank or any Bank Subsidiary; or
(v) outstanding bonds, debentures, notes or other indebtedness having the right
to vote on any matters on which the shareholders of FMBank or any Bank
Subsidiary may vote.

 

(c)                                  All of the outstanding shares (or other
equity interests as applicable) of each Bank Subsidiary are directly and
beneficially owned and held by FMBank or any Bank Subsidiary and have been duly
authorized and validly issued, are fully paid and nonassessable, have been
issued in full compliance with all federal and state securities laws and other
Legal Requirements, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities, and are free and
clear of all Encumbrances.

 

(d)                                 Neither FMAR nor any FMAR Subsidiaries
(other than FMBank and the Bank Subsidiaries) (i) owns or has any right to use
any asset or property (whether real, personal, tangible, intangible or
otherwise) used in or held for use in, or related to, the business of FMBank or
the Bank Subsidiaries or (ii) other than Bank Related Contracts, is a party to
any Contract relating to the business of FMBank or Bank Subsidiaries.

 

(e)                                  At the Closing, FMAR will transfer and
deliver good and marketable title to the Other Purchased Assets to FMBank, in
each case, free and clear of any Encumbrances (other than Encumbrances created
in favor of FMIB as collateral for the DIP Loan, which Encumbrance is intended
to be terminated and released as of the consummation of transfer of the Other
Purchased Assets to FMBank pursuant to this Agreement).

 

Section 3.05.                         Compliance with Laws, Permits and
Instruments.  Except as set forth on Disclosure Schedule 3.05, at all times
since January 1, 2013, FMBank and each Bank Subsidiary have in all material
respects performed and abided by all material obligations required to be
performed by it, and has complied with, and is in compliance with in all
material respects, and is not in default (and with the giving of notice or the
passage of time will not be in default) under, or in violation of (i) any
provision of FMBank’s or any Bank Subsidiary’s Constituent Documents, (ii) any
material provision of any mortgage, indenture, lease, contract, agreement or
other instrument applicable to FMBank or its assets, operations, properties or
businesses or the assets, operations, properties or businesses of any Bank
Subsidiary, (iii) any

 

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material Legal Requirement or any material judgment, writ, injunction, order,
decree, award, applicable to FMBank or its assets, operations, properties or
businesses or the assets, operations, properties or businesses of any Bank
Subsidiary (including, without limitation, that certain Order to Cease and
Desist issued by the FDIC to FMBank on September 18, 2009).

 

Section 3.06.                         Financial Statements.  FMAR has furnished
or made available to FMIB true and complete copies of the Reports of Condition
and Income of FMBank for the periods ending December 31, 2012, December 31, 2011
and September 30, 2013 (the “Call Reports”).  The Call Reports (i) fairly
present, in all material respects, the financial position of FMBank and the Bank
Subsidiaries as of the respective dates and the results of their respective
operations for the periods indicated in that Call Report in conformity with the
instructions to the Call Report, and (ii) do not contain any items of special or
nonrecurring income or any other income not earned in the ordinary course of
business except as expressly specified therein.  The allowance for loan losses
shown on the Call Reports was, and the allowance for loan losses to be shown on
any Call Reports of FMBank and the Bank Subsidiaries as of any date subsequent
to the execution of this Agreement will be, calculated in accordance with GAAP
in all material respects as applied to banking institutions and all applicable
rules and regulations, and in the reasonable opinion of management, are, and
will be, adequate in all respects to provide for all possible losses, net of
recoveries relating to loans previously charged off, on loans outstanding
(including accrued interest receivable) of FMBank and Bank Subsidiaries and
other extensions of credit (including letters of credit or commitments to make
loans or extend credit); provided, however, that no representation or warranty
is made as to the sufficiency of collateral securing or the collectability of
such loans.

 

Section 3.07.                         Undisclosed Liabilities.  FMBank and the
Bank Subsidiaries have no Liability that is not reflected in or disclosed in the
appropriate Call Reports, except (a) Liabilities incurred in the ordinary course
of business and consistent with prudent business practices since the date of the
applicable Call Reports, (b) Liabilities that, individually or in the aggregate,
are not material, (c) Liabilities arising from the Contemplated Transactions,
and (d) Liabilities set forth on Disclosure Schedule 3.07.

 

Section 3.08.                         Litigation.  Except as set forth on
Disclosure Schedule 3.08, and except for the Bankruptcy Case and matters
therein, there are no actions, claims, suits, investigations or other legal or
administrative proceedings of any kind or nature at law or in equity, or by or
before any federal, state or municipal court or other Governmental Authority
pending or, to the Knowledge of the Companies, threatened, against FMBank or any
Bank Subsidiary or against any of their directors or “executive officers,” as
such term is defined under 12 C.F.R. Section §215.2(e)(1) of Regulation O
promulgated by the Board of Governors of the Federal Reserve System (an
“Executive Officer”), or any Person serving in any such capacity at any time on
or after January 1, 2009 (each, a “Former Related Person”), relating to the
performance of their duties in such capacities, that in any manner involve
FMBank or any of its properties or capital stock or any of the properties or
capital stock of any Bank Subsidiary. Except as set forth on Disclosure Schedule
3.08, to the Knowledge of the Companies, no legal action, suit or proceeding or
judicial, administrative or governmental investigation is pending or, to the
Knowledge of the Companies, threatened against FMAR, FMBank or any FMAR
Subsidiary or any Bank Subsidiary that would reasonably be expected to have a
material adverse effect on the

 

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validity of this Agreement or the agreements contemplated hereby, or any actions
taken or to be taken by FMAR, FMBank or any FMAR Subsidiary or any Bank
Subsidiary pursuant hereto or thereto, or seeks to enjoin or otherwise restrain
the transactions contemplated hereby or thereby.

 

Section 3.09.                         Consents and Approvals.  Except as set
forth on Disclosure Schedule 3.09 (the “Company Required Approvals”), no consent
or approval of, notice to or filing with any Governmental Authority having
jurisdiction over any aspect of the business or assets of the Companies or their
Affiliates and no consent or approval of or notice to any other Person, is
required in connection with Companies’ execution, delivery or performance of
this Agreement or the agreements contemplated hereby or the completion by the
Companies of the transactions contemplated hereby or thereby.

 

Section 3.10.                         Title to FMBank Assets.  Except as set
forth in Disclosure Schedule 3.10, FMBank and/or one or more of the Bank
Subsidiaries: (a) has good, valid and marketable title to all the properties and
assets reflected in the September 30, 2013, Call Report or acquired after the
date thereof (except properties sold or otherwise disposed of since the date
thereof in the ordinary course of business) (the “Owned Properties”), free and
clear from any Encumbrances other than Encumbrances that, (i) (A) would not, and
would not reasonably be expected to, individually or in the aggregate, affect
the value thereof or interfere with the use made or to be made thereof by FMBank
or any Bank Subsidiaries in any material respect or otherwise be material,
(B) do not secure indebtedness for borrowed money and (C) arose only in the
ordinary course of business, and (ii) in the case of Owned Properties consisting
of Real Estate, (A) statutory liens for amounts not yet delinquent, and
(B) those liens related to real property taxes, local improvement district
assessments, easements, covenants, restrictions and other matters of record
which do not individually or in the aggregate materially adversely affect the
use and enjoyment of the relevant real property (“Permitted Liens”); (b) is the
lessee of all leasehold estates reflected in the September 30, 2013, Call Report
or acquired after the date thereof (except for leases that have expired by their
terms since the date thereof) (the “Leased Properties” and, collectively with
the Owned Properties, the “Properties”; and any Property consisting of real
estate or buildings or improvements thereon (“Real Estate”)), free and clear
from Encumbrances other than Encumbrances that, (i) (A) would not, and would not
reasonably be expected to, individually or in the aggregate, affect the value
thereof or interfere with the use made or to be made thereof by FMBank or any
Bank Subsidiary in any material respect or otherwise be material, (B) do not
secure indebtedness for borrowed money and (C) arose only in the ordinary course
of business, and (ii) in the case of Leased Properties consisting of Real
Estate, Permitted Liens, and each such lease is valid without default thereunder
by the lessee or, to the Knowledge of the Companies, the lessor; and (c) owns or
leases all properties and assets as are used by FMBank or any Bank Subsidiary in
their business.  The Real Estate is in material compliance with all applicable
private agreements, zoning requirements and other Legal Requirements relating
thereto, and there are no condemnation proceedings pending or, to the Knowledge
of the Companies, threatened with respect to any such properties.  True and
complete copies of all deeds and leases for, or other documentation evidencing
ownership of or a leasehold interest in, the properties referred to in
Disclosure Schedule 3.10, title insurance policies for the real property owned
referred to in Disclosure Schedule 3.10 (to the extent available) and all
mortgages, deeds of trust and security agreements to which such property is
subject have been made available to FMIB.  Except as set forth on Disclosure
Schedule 3.10, all tangible assets

 

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used by FMBank and/or Bank Subsidiaries are in good operating condition,
ordinary wear and tear excepted, and materially conform with all applicable
Legal Requirements.  None of FMBank’s or any Bank Subsidiary’s premises or
equipment is in need of maintenance or repairs other than ordinary routine
maintenance and repairs.

 

Section 3.11.                         Absence of Certain Changes or Events. 
Except as disclosed in the Call Reports or as disclosed on Disclosure Schedule
3.11, since January 1, 2013, (a) FMBank and the Bank Subsidiaries have conducted
their business only in the ordinary course consistent with past practice (except
as otherwise required by this Agreement and the incurrence of expenses related
to this Agreement and the Contemplated Transactions) and (b) no event has
occurred or circumstance arisen, that individually or in the aggregate, has had
or could reasonably be expected to result in a Material Adverse Change to FMBank
or any Bank Subsidiary.

 

Section 3.12.                         Taxes.

 

(a)                                 Each FM Group Member has duly and timely
filed all material Tax Returns that it was required to file under applicable
Legal Requirements with the appropriate Federal, state, local or foreign
governmental agencies. All such Tax Returns were correct and complete in all
material respects and have been prepared in substantial compliance with all
applicable Legal Requirements. All Taxes due and owing by each FM Group Member
(whether or not shown on any Tax Return) have been paid.  Since January 1, 2011,
no claim has been made by any Governmental Authority in a jurisdiction where the
FM Group Members do not file Tax Returns that any FM Group Member may be subject
to taxation by that jurisdiction. There are no Liens for Taxes (other than
material Taxes not yet due and payable) upon any of the assets or properties of
any of the FM Group Members.

 

(b)                                 Each FM Group Member has withheld and paid
all Taxes required to have been withheld and paid in connection with any amounts
paid or owing to any employee, independent contractor, creditor, shareholder, or
other third party, and all Forms W-2 and 1099 required with respect thereto have
been properly completed and timely filed.

 

(c)                                  There is no dispute or claim concerning any
Tax Liability of any FM Group Member either (i) claimed or raised by any
Governmental Authority in writing or (ii) as to which any officer responsible
for Tax matters of the Companies has Knowledge. Within the past three (3) years,
the Internal Revenue Service (the “IRS”) has not challenged the interest
deduction on any FM Group Member’s debt on the basis that such debt constitutes
equity for federal income Tax purposes.

 

(d)                                 Disclosure Schedule 3.12(d): (i) lists all
Tax Returns filed with respect to the FM Group and each FM Group Member for
taxable periods ended on or after December 31, 2010; (ii) indicates Tax Returns
that have been audited; and (iii) indicates Tax Returns that currently are the
subject of audit. True and complete copies of the Federal income Tax Returns of
the FM Group, as filed with the IRS for the years ended December 31, 2010, 2011
and 2012, have been delivered or made available to FMIB. No FM Group Member has
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.

 

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(e)                                  No FM Group Member has been a United States
real property holding corporation within the meaning of the Section 897(c)(2) of
the Code, during the applicable period specified in Code
Section 897(c)(1)(A)(ii).

 

(f)                                   Each FM Group Member has at all times of
its existence been a member of the FM Group.  The FM Group has consistently
filed a consolidated federal income Tax Return the common parent of which was
and is FMAR. No FM Group Member has been a member of any other group filing a
consolidated Tax Return and none have any Liability for the Taxes of any Person
other than the Companies under Treasury Regulation § 1.1502-6 (or any similar
Legal Requirement), as a transferee or successor, by contract or otherwise.
Except as set forth on Disclosure Schedule 3.12(f), no FM Group Member is a
party to or bound by any Tax allocation or sharing agreement.

 

(g)                                  The unpaid taxes of the FM Group (i) did
not exceed the provisions for current or deferred Taxes on the FM Group’s
consolidated balance sheet dated as of December 31, 2013 (excluding any reserve
for deferred Taxes established to reflect timing differences between book and
Tax income), and (ii) will not exceed such provisions for current or deferred
Taxes as adjusted for the passage of time through the of the Closing Date
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income). The FM Group, and each FM Group
Member, is in compliance with the requirements of FIN 48, and their Tax accrual
work papers explain and support all amounts provided and positions taken by them
with respect to FIN 48.

 

(h)                                 No FM Group Member is required to include
any item of income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing Date as a
result of any: (i) change in method of accounting for a taxable period ending on
or before the Closing Date; (ii) “closing agreement” as described in Code §7121
(or any corresponding or similar provision of state, local, or foreign Tax law)
executed on or before the Closing Date; (iii) intercompany transactions or any
excess loss account described in Treasury Regulations under Code §1502 (or any
corresponding or similar provision of state, local, or foreign Tax law);
(iv) installment sale or open transaction disposition made on or before the
Closing Date; (v) prepaid amount received on or before the Closing Date; or
(vi) election under Code §108(i).

 

(i)                                     No FM Group Member has been a party to
any “reportable transaction” or “listed transaction” as such terms are defined
in Code §6707A(c) and Treasury Regulation §1.6011-4(b)(2) through (6).

 

(j)                                    No FM Group Member has distributed stock
of another Person or has had its stock distributed by another Person, in a
transaction that was purported or intended to be governed in whole or in part by
Code §355 or §361.

 

(k)                                 No FM Group Member has ever made a valid
election to be taxed for federal income Tax purposes as an S corporation or a
qualified S corporation subsidiary (within the meaning of Code §§1361, 1362 and
1361(b)(3)).

 

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(l)                                     The FM Group has disclosed on its
federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code §
6662.

 

(m)                             Disclosure Schedule 3.12(m) lists and contains
an accurate and complete description as to the United States Federal net
operating loss carryforwards (“NOLs”) and capital loss carryforwards of the FM
Group and FMBank (including, without limitation, any limitations of such net
operating or capital loss carry forwards under Code Sections 382, 383 or 384 or
the Treasury Regulations) as of December 31, 2013, and the expiration dates
thereof.  No FM Group Member has undergone an “ownership change” (as such term
is defined in Code Section 382(g)) with respect to any NOLs.

 

(n)                                 Disclosure Schedule 3.12(n) contains a
materially accurate and complete list of FMBank’s adjusted Tax basis in each of
its assets as of December 31, 2013.

 

(o)                                 Each entity that will be an FM Group Member
on the Year-End Date will meet the requirements under Revenue Procedure 2006-45,
2006-2 C.B. 851 (“Rev. Proc. 2006-45”), to obtain automatic approval from the
Commissioner of Internal Revenue to change the accounting period of the FM Group
under Code Section 442 and Treasury Regulation Section 1.442-1(b).

 

Section 3.13.                         Insurance. Disclosure Schedule 3.13 sets
forth an accurate and complete list of all policies of insurance, including
fidelity and bond insurance, relating to FMBank and the Bank Subsidiaries. All
such policies, with regard to FMBank and the Bank Subsidiaries, (a) are valid,
outstanding and enforceable according to their terms, subject to the Bankruptcy
Exception, and (b) are in full force and effect and will remain in effect to the
end of their policy periods, and (c) to the extent this Agreement is executed
after the end of their policy periods, will be renewed, subject to normal
renewal policies and procedures, including the payment of premiums.  With
respect to the Bank D&O Policies, all such policies are valid, outstanding, and
enforceable in accordance with their respective terms, notwithstanding the
Bankruptcy Exception, provided the bankruptcy of any named insured is one in
which the party filing the same is a debtor-in-possession and no bankruptcy
trustee is appointed. No notice has been received of the cancellation, or to the
Knowledge of the Companies, threatened or proposed cancellation, of any such
policy and there are no unpaid premiums due thereon. Neither FMAR, FMBank nor
any Bank Subsidiary is in material default with respect to any such policy, and
neither FMAR, FMBank nor any Bank Subsidiary has failed to give any notice or
present any material claim thereunder in a due and timely fashion. Except as set
forth on Disclosure Schedule 3.13, FMBank and each Bank Subsidiary has not been
refused any insurance with respect to its assets or operations, nor has its
insurance been limited by any insurance carrier to which FMBank and each Bank
Subsidiary has applied for any such insurance within the last two (2) years.
Each property of FMBank and each Bank Subsidiary is insured in amounts deemed
adequate by FMBank’s management against risks customarily insured against. There
have been no claims under any fidelity bonds of FMBank and/or any Bank
Subsidiary within the last three (3) years, and the Companies have no Knowledge
of any facts that would form the basis of a claim under such bonds. Except as
set forth on Disclosure Schedule 3.13, FMBank and each Bank Subsidiary shall,
immediately after the Closing until the end of the policy periods, or

 

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beyond as specified in Section 5.11 herein, continue to have coverage under such
policies and bonds with respect to events occurring prior to the Closing.

 

Section 3.14.                         Proprietary Rights.  Disclosure Schedule
3.14 lists all copyrights, trademarks, service marks, trade names, trade dress,
logos, internet domain names, patents, other proprietary rights, interests, and
protections, all other intellectual property, and all rights therein, in each
case, registered or unregistered, and any and all applications with respect
thereto (collectively, “Intellectual Property”), owned or used by FMBank and/or
the Bank Subsidiaries (collectively, “FMBank Intellectual Property”).  Except as
set forth on Disclosure Schedule 3.14, FMBank and/or the Bank Subsidiaries owns,
possesses, and has good, valid and marketable title to, and the unrestricted
right to use, all FMBank Intellectual Property, free and clear of Encumbrances,
and such FMBank Intellectual Property constitutes all Intellectual Property
necessary to conduct the respective businesses of FMBank and the Bank
Subsidiaries. To the Knowledge of the Companies, neither FMBank nor any Bank
Subsidiary is infringing on or otherwise acting adversely to the Intellectual
Property or other rights of any Person. There is no claim pending or, to the
Knowledge of the Companies, threatened, against FMBank or any Bank Subsidiary
with respect to any Intellectual Property or other such rights.

 

Section 3.15.                         Transactions with Certain Persons and
Entities. Except as disclosed in Disclosure Schedule 3.15 and excluding deposit
liabilities, there are no outstanding amounts payable to or receivable from, or
advances by FMBank or any Bank Subsidiary to, and FMBank and the Bank
Subsidiaries are not otherwise creditors of, any director, Executive Officer, 
Former Related Person, or other Affiliate of FMAR or FMBank,  nor is FMBank or
any Bank Subsidiary a debtor to any such Person, other than as part of the
normal and customary terms of such Person’s employment or service as a director
for FMAR and/or FMBank. Except as set forth on Disclosure Schedule 3.15, to the
Knowledge of the Companies, neither FMBank nor any Bank Subsidiary uses any
asset owned by any shareholder owning five percent (5%) or more of the issued
and outstanding common stock of FMAR, or any director, officer, Former Related
Person, or other Affiliate of FMAR or FMBank, in the operations (other than
personal belongings of such officers and directors located in FMBank’s premises,
the removal of which would not result in a Material Adverse Change). Except as
disclosed in Disclosure Schedule 3.15, neither FMBank nor any Bank Subsidiary is
a party to any material transaction, contract or agreement with any director,
Executive Officer, Former Related Person, or other Affiliate of FMAR or FMBank,
other than credit and consumer banking transactions in the ordinary course of
business.

 

Section 3.16.                         Evidences of Indebtedness.

 

(a)                                 All evidences of indebtedness and leases
that are reflected as assets of FMBank are the legal, valid and binding
obligations of the respective obligors thereof, enforceable in accordance with
their respective terms, subject to the Bankruptcy Exception. No claim or defense
has been asserted, and to the Companies’ Knowledge, there are no acts or
omissions that would give rise to any claim or right of rescission, set off,
counterclaim or defense that may be asserted against FMBank. The credit files of
FMBank contain all material information known to FMAR or FMBank that is
reasonably required to evaluate in accordance with generally prevailing
practices in the banking industry the collectability of the loan portfolio

 

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of FMBank (including loans that will be outstanding if any of them advances
funds they are obligated to advance).

 

(b)                                 To the Knowledge of the Companies, there are
no, nor have the Companies received notice of, any past or present conditions,
events, activities, practices or incidents that may result in a material
violation of any Environmental Law with respect to any real property securing
any indebtedness reflected as an asset of FMBank.

 

(c)                                  With respect to any loan or other evidence
of indebtedness, all or a portion of which has been sold to or guaranteed by any
Governmental Authority, including the Small Business Administration, each of
such loans was made in compliance and conformity with all applicable Legal
Requirements such that such Governmental Authority’s guaranty of such loan is
effective during the term of such loan in all material respects.

 

(d)                                 No representation or warranty is being made
in this Section 3.16 or in this Agreement as to the sufficiency of collateral
securing or collectability of the loans reflected as an asset of FMBank.

 

Section 3.17.                         Certain Loans and Related Matters.

 

(a)                                 Except as set forth on Disclosure Schedule
3.17(a), as of the date of this Agreement (with respect to the matters set forth
in clauses (iii), (iv) and (v) of this Section 3.17(a) below) and as of
December 31, 2013 (with respect to the matters set forth in clauses (i) and
(ii) of this Section 3.17(a) below), FMBank is not a party to any written or
oral (i) loan agreement, note or borrowing arrangement, under the terms of which
the obligor is sixty (60) days or more delinquent in payment of principal or
interest or in default of any other material provisions as of the date of this
Agreement or on non-accrual status; (ii) loan agreement, note or borrowing
arrangement which has been classified or, in the exercise of reasonable
diligence by FMBank or any regulatory agency with supervisory jurisdiction over
FMBank, should have been classified as “substandard”, “doubtful”, “loss”, “other
loans especially mentioned”, or any comparable classifications by such Persons;
(iii) loan agreement, note or borrowing arrangement including any loan guaranty,
with any director, Executive Officer or Former Related Person of FMBank, or any
ten percent (10%) or more shareholder of FMAR, or any Person controlling,
controlled by, or under common control with any of the foregoing Persons;
(iv) loan agreement, note or borrowing arrangement in violation of any Legal
Requirement applicable to FMBank, which violation could result in a Material
Adverse Change with respect to FMBank; or (v) loan agreement, note or borrowing
arrangement which, at the time it was entered into, constituted a violation of
FMBank’s legal lending limit and which remains on FMBank’s books.

 

(b)                                 Disclosure Schedule 3.17(b) contains the
“watch list of loans” of FMBank as of September 30, 2013, and the Companies
shall update such schedule prior to the Closing such that it contains the “watch
list of loans” of FMBank as of the date no earlier than thirty (30) days prior
to the Closing Date. Except as set forth in Disclosure Schedule 3.17(b), to the
Knowledge of the Companies, there is no loan agreement, note or borrowing
arrangement which should be included on a watch list in accordance with FMBank’s
ordinary course of business and with prudent banking principles, which is not
included on such list.

 

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Section 3.18.                         Environmental Compliance.

 

(a)                                 To the Knowledge of the Companies, FMBank
and each of the Bank Subsidiaries, their operations and their respective
Properties are in material compliance with all Environmental Laws. The Companies
do not have Knowledge of, and neither FMAR nor FMBank have received, notice of,
any past, present, or future conditions, events, activities, practices or
incidents that may interfere with or prevent the material compliance of FMBank
or Bank Subsidiaries with all Environmental Laws.

 

(b)                                 FMBank and each of the Bank Subsidiaries has
obtained all material permits, licenses and authorizations that are required by
it under all Environmental Laws.

 

(c)                                  To the Knowledge of the Companies, no
Hazardous Materials exist on, about or within any of the Properties, nor to the
Knowledge of FMAR and FMBank have any Hazardous Materials previously existed on,
about or within or been used, generated, stored, transported, disposed of, on or
released from any of the Properties, except as set forth on Disclosure Schedule
3.18(c). The use that FMBank or the Bank Subsidiaries make and intend to make of
the Properties will not result in the use, generation, storage, transportation,
accumulation, disposal or release of any Hazardous Material on, in or from any
of the Properties.

 

(d)                                 There is no action, suit, proceeding,
investigation, or inquiry before any Governmental Authority pending or to
Companies’ Knowledge threatened against FMBank or the Bank Subsidiaries relating
in any way to any Environmental Law. To the Knowledge of the Companies, neither
FMBank nor any Bank Subsidiary has any Liability for remedial action under any
Environmental Law. Neither FMBank nor any Bank Subsidiary has received any
request for information by any Governmental Authority with respect to the
environmental condition of any of the Properties, nor has FMBank or any Bank
Subsidiary received any notice of any kind from any Governmental Authority or
other Person with respect to any violation of or claimed or potential Liability
of any kind under any Environmental Law.

 

Section 3.19.                         Regulatory Compliance. All reports,
records, registrations, statements, notices and other documents or information
required to be filed by FMBank with any federal or state regulatory authority,
including, without limitation, the MDB and the FDIC, have been duly and timely
filed and all information and data contained in such reports, records or other
documents as of their respective dates (or, if amended prior to the date hereof,
as of the date of such amendment) were true, accurate, correct and complete in
all material respects. Except as set forth on Disclosure Schedule 3.19,
(a) neither FMAR nor FMBank is, and has not within the last five (5) years been,
subject to any commitment letter, memorandum of understanding, cease and desist
order, written agreement or other formal or informal administrative action with
any federal or state regulatory bodies, and FMAR and FMBank are in full
compliance with the requirements of any such commitment letter, memorandum of
understanding, cease and desist order, written agreement or other formal or
informal administrative action, and (b) there are no actions or proceedings
pending or, to the Knowledge of the Companies, threatened against FMBank by or
before any such regulatory bodies or any other Governmental Authority. Without
limiting the foregoing, FMBank is in material compliance with, and since
January 1, 2011 has complied in all

 

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material respects with, Sections 23A and 23B of the Federal Reserve Act, its
implementing regulations, and the Federal Reserve’s Regulation O.

 

Section 3.20.                         Deposits. No deposit of FMBank is a
“brokered” deposit (as such term is defined in 12 C.F.R. § 337.6(a)(2)) or, to
the Knowledge of the Companies, is subject to any Encumbrance, legal restraint
or other legal process (other than garnishments, pledges, set off rights, escrow
limitations and similar actions taken in the ordinary course of business).

 

Section 3.21.                         Interest Rate Risk Management Instruments.
To the Knowledge of the Companies, all interest rate swaps, caps, floors and
option agreements and other interest rate risk management arrangements, whether
entered into for the account of FMBank or for the account of a customer of
FMBank, were entered into in the ordinary course of business and (a) are
consistent with prudent banking practice, (b) are in accordance with applicable
Legal Requirements, and (c) with counterparties believed to be financially
responsible at the time; and each of them constitutes the legal, valid and
binding obligation of FMBank, enforceable according to their terms, subject to
the Bankruptcy Exception. FMBank has duly performed in all material respects all
of its material obligations thereunder to the extent that such obligations to
perform have accrued; and, to the Companies’ Knowledge, there are no material
breaches, violations or defaults or allegations or assertions of such by any
party thereunder.

 

Section 3.22.                         Community Reinvestment Act. FMBank is in
compliance in all material respects with the Community Reinvestment Act (12
U.S.C. §2901 et seq.) (the “CRA”) and all regulations issued thereunder, and
FMBank has made available to FMIB copies of FMBank’s current CRA statement, all
support papers therefor, all letters and written comments received by FMBank
since January 1, 2010, pertaining thereto and any responses by FMBank to those
letters and comments. FMBank has a rating of not less than “satisfactory” as of
its most recent CRA compliance examination, and the Companies have no Knowledge
of any reason why FMBank would not receive a rating of “satisfactory” or better
in its next CRA compliance examination or why the FDIC or any other governmental
entity may seek to restrain, delay or prohibit the Contemplated Transactions as
a result of any act or omission of FMBank under the CRA.

 

Section 3.23.                         Fair Housing Act, Home Mortgage Disclosure
Act and Equal Credit Opportunity Act. Except as set forth in Disclosure Schedule
3.23, FMBank is in material compliance with the Fair Housing Act (42 U.S.C.
§3601 et seq.), the Home Mortgage Disclosure Act (12 U.S.C. §2801 et seq.) and
the Equal Credit Opportunity Act (15 U.S.C. §1691 et seq.) and all regulations
issued thereunder. FMBank has not received any notice of any violation of those
acts or any of the regulations issued thereunder, and FMBank has not received
any notice of, nor do the Companies have Knowledge of, any threatened
administrative inquiry, proceeding or investigation with respect to FMBank’s
non-compliance with such acts.

 

Section 3.24.                         Consumer Compliance Laws. Except as set
forth in Disclosure Schedule 3.24, all loans of FMBank have been made in
material compliance with all applicable statutes and regulatory requirements at
the time of such loan or any renewal thereof, including, without limitation,
Regulation Z (12 C.F.R. §226 et seq.), the Federal Consumer Credit Protection
Act (15 U.S.C. §1601 et seq.), and all statutes governing the operation of
Maryland trust companies.

 

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Section 3.25.                         Bank Secrecy Act, Foreign Corrupt
Practices Act and U.S.A. Patriot Act. FMBank is in material compliance with the
Bank Secrecy Act (12 U.S.C. §§1730(d) and 1829(b)), the United States Foreign
Corrupt Practices Act and the International Money Laundering Abatement and
Anti-Terrorist Financing Act, otherwise known as the U.S.A. Patriot Act, and all
regulations issued thereunder, and FMBank has properly certified all foreign
deposit accounts on all of its deposit accounts; furthermore, FMBank has timely
and properly filed and maintained all requisite Currency Transaction Reports and
other related forms, including any requisite Custom Reports required by any
agency of the United States Treasury Department, including the IRS. To the
Companies’ Knowledge, FMBank has timely filed all Suspicious Activity Reports
with the Financial Crimes Enforcement Network, a bureau of the U.S. Department
of the Treasury, required to be filed by it under the laws and regulations
referenced in this Section.

 

Section 3.26.                         Loans Secured by FMAR Capital Stock.
Except as set forth on Disclosure Schedule 3.26, no borrower of FMBank was
required to purchase capital stock of FMAR in order to obtain a loan or other
form of credit from FMBank.

 

Section 3.27.                         Absence of Certain Business Practices. To
the Knowledge of the Companies, neither FMBank or any Bank Subsidiary, nor any
director, officer, employee, Former Related Person, or agent of FMBank or any
Bank Subsidiary, or any other Person acting on their behalf, has, directly or
indirectly, within the past six (6) years, given or agreed to give any gift or
similar benefit to any customer, supplier, governmental employee or other Person
who is or may be in a position to help or hinder the business of FMBank or any
Bank Subsidiary (or assist FMBank or any Bank Subsidiary in connection with any
actual or proposed transaction) that (a) might be reasonably likely to subject
FMBank or any Bank Subsidiary to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (b) if not given in the past, might
reasonably have resulted in a Material Adverse Change or (c) if not continued in
the future might reasonably result in a Material Adverse Change or might
reasonably subject FMBank or any Bank Subsidiary to suit or penalty in any
civil, criminal or governmental litigation or proceeding.

 

Section 3.28.                         Books and Records. The minute books, stock
certificate books and stock transfer ledgers of FMBank and each Bank Subsidiary
(a) have been kept accurately in the ordinary course of business, (b) are
complete and correct in all material respects, and (c) the transactions entered
therein represent bona fide transactions. Neither FMBank nor any Bank Subsidiary
has sold or disposed of, or otherwise divested itself of the ownership,
possession, custody or control, of any corporate books or records of any nature
that, in accordance with sound business practice, normally are retained for a
period of time after their use, creation or receipt, except at the end of the
normal retention period.

 

Section 3.29.                         Internal Controls. FMBank and each Bank
Subsidiary maintains accurate books and records reflecting its assets and
liabilities and maintains proper and adequate internal accounting controls that
provide assurance that (a) transactions are executed with the authorization of
management and/or FMBank’s (or Bank Subsidiary’s) Board of Directors;
(b) transactions are recorded as necessary to permit preparation of the
consolidated financial statements of FMBank and to maintain accountability for
FMBank’s (or Bank Subsidiary’s)

 

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assets; (c) access to FMBank’s (or Bank Subsidiary’s) assets is permitted only
in accordance with the authorization of management and/or FMBank’s (or Bank
Subsidiary’s) Board of Directors; (d) the reporting of FMBank’s (and each Bank
Subsidiary’s) assets is compared with existing assets at regular intervals; and
(e) extensions of credit and other receivables are recorded accurately, and
proper and adequate procedures are implemented to effect the collection thereof
on a current and timely basis.

 

Section 3.30.                         Fiduciary Responsibilities. To the
Companies’ Knowledge, FMBank and each Bank Subsidiary has performed in all
material respects all of its duties as a trustee, custodian, guardian or as an
escrow agent in a manner that complies in all material respects with all
applicable Legal Requirements.

 

Section 3.31.                         Guaranties. Except as set forth on
Disclosure Schedule 3.31, none of the Liabilities of FMBank or any Bank
Subsidiary are guaranteed by any other Person, and neither FMBank nor any Bank
Subsidiary has guaranteed the Liabilities of any other Person.

 

Section 3.32.                         Employee Relationships. Except as set
forth on Disclosure Schedule 3.32, neither FMBank nor any Bank Subsidiary is a
party to any collective bargaining agreement or to any conciliation agreement
with the United States Department of Labor, the United States Equal Employment
Opportunity Commission, or any federal, state or local agency that requires
equal employment opportunities or affirmative action in employment beyond the
generally applicable Legal Requirements. There are no unfair labor practice
complaints pending against FMBank or any Bank Subsidiary before the National
Labor Relations Board and no similar claims pending before any similar state or
local or foreign agency. To the Knowledge of the Companies, there is no activity
or proceeding of any labor organization (or representative thereof) or employee
group to organize any employees of FMBank or any Bank Subsidiary, nor of any
strikes, slowdowns, work stoppages, lockouts or threats thereof, by or with
respect to any such employees. FMBank and each Bank Subsidiary is in compliance
in all material respects with all applicable Legal Requirements respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and neither FMBank nor any Bank Subsidiary is engaged in any
unfair labor practice.

 

Section 3.33.                         Benefit Plans.

 

(a)                                 Set forth on Disclosure Schedule 3.33(a) is
a complete and accurate list of all “employee benefit plans” (as defined in
Section 3(3) of ERISA), all “multiemployer plans” (as defined in Section 3(37)
of ERISA) and “multiple employer plans” (as defined in Section 413(c) of the
Code), all specified fringe benefit plans as defined in Code Section 6039D, and
all other employment, bonus, incentive, compensation, deferred compensation,
profit sharing, stock option, phantom stock, stock appreciation right, stock
bonus, stock purchase, employee stock ownership, savings, severance,
supplemental unemployment, layoff, salary continuation, retirement, pension,
health, life insurance, disability, group insurance, vacation, holiday, sick
leave, fringe benefit or welfare plan or any other similar plan, agreement,
policy or understanding (qualified or nonqualified), and any trust, escrow or
other agreement related thereto, which (i) are sponsored, maintained or
contributed to by FMBank or any of its ERISA Affiliates, or with respect to
which FMBank or any of its ERISA Affiliates has any Liability, and

 

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(ii) provide benefits, or describe policies or procedures applicable to, or for
the welfare of, any officer, director, independent contractor, employee, service
provider, former officer, director or employee of FMBank or any of its ERISA
Affiliates, or the dependents, spouses or beneficiaries of any such Person,
regardless of whether funded (the “Employee Plans”). True, accurate and complete
copies of the documents comprising each Employee Plan, including each trust,
funding arrangements (including all annuity contracts, insurance contracts, and
other funding instruments), summary plan descriptions and summaries of material
modifications, the most current determination letter issued by the Internal
Revenue Service, Form 5500 Annual Reports and nondiscrimination test results for
the three most recent plan years, and material documents, records, policies,
procedures or other materials related thereto, have been delivered or made
available to FMIB. No unwritten amendment exists with respect to any Employee
Plan.

 

(b)                            There have been no prohibited transactions (as
defined in Code Section 4975(c)(1)), breaches of fiduciary duty or any other
breaches or violations of any Legal Requirement applicable to the Employee Plans
that would subject FMBank or any of its ERISA Affiliates or any Employee Plan to
any Taxes, penalties, or other liabilities (including Liability arising through
indemnification). Each Employee Plan that is represented to be qualified under
Code Section 401(a) has a favorable determination letter or opinion letter that
covers all existing amendments and has no obligation to adopt any amendments for
which the remedial amendment period under Code Section 401(b) has expired, and
neither of the Companies is aware of any circumstances likely to result in
revocation of any such favorable determination letter or opinion letter. To the
Knowledge of the Companies, each such Employee Plan is so qualified and has been
operated in compliance with applicable Legal Requirements and its terms, any
related trust is exempt from federal income Tax under Code Section 501(a) and no
event has occurred that will or reasonably could result in the loss of such Tax
exemption or to Liability for any Tax under Code Section 511. There are no
pending claims, lawsuits or actions relating to any Employee Plan (other than
ordinary course claims for benefits) and, to the Companies’ Knowledge, none are
threatened. Neither FM Bank nor any of its ERISA Affiliates provides welfare
benefits to any service provider or dependent of such service provider after the
termination of the service relationship other than as disclosed in this
Agreement or any schedule hereto or as required by applicable Legal
Requirements. Except as set forth on Disclosure Schedule 3.33(b), no written or
oral representations have been made to any employee or former employee of FMBank
or any of its ERISA Affiliates promising or guaranteeing any employer payment or
funding for the continuation of medical, dental, life or disability coverage or
any other welfare benefit (as defined in ERISA Section 3(1)) for any period of
time beyond the employee’s termination of employment with FMBank or any of its
ERISA Affiliates (except to the extent of coverage required under Code
Section 4980B or applicable state law). Compliance with FAS 106 would not create
any material change to the Call Reports. Except as set forth on Disclosure
Schedule 3.33(b), the completion of the Contemplated Transactions will not cause
a termination or partial termination, or otherwise accelerate the time of
payment, exercise, or vesting, or increase the amount of compensation due to any
employee, officer, former employee or former officer of FMAR or FMBank or any of
their ERISA Affiliates under any Employee Plan except (i) as contemplated by
this Agreement, or (ii) as identified on Disclosure Schedule 3.33(b). There are
no surrender charges, penalties, or other costs or fees that would be imposed by
any Person against FMBank or any of its ERISA Affiliates, an Employee Plan, or
any other Person, including an Employee Plan participant or beneficiary, as a
result of the hypothetical

 

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liquidation as of the Closing Date of any insurance, annuity, or investment
contracts or any other similar investment held by any Employee Plan. No amount
due under any Employee Plan is or will be subject to the excise tax of
Section 4999 of the Code.

 

(c)                                  Since January 1, 2011, no participant or
beneficiary or non-participating employee has been denied any benefit due or to
become due under any Employee Plan, and neither FMBank nor any of its ERISA
Affiliates has willfully misled any Person as to his or her rights under any
Employee Plan, or since January 1, 2011, failed to disclose any information or
provide any documents required to be disclosed or provided. All obligations
required to be performed by FMBank and its ERISA Affiliates under any Employee
Plan have been performed in all material respects, and neither FMBank nor any of
its ERISA Affiliates is in default under or in violation of any provision of any
Employee Plan, which defaults or violations, in the aggregate, would be expected
to result in a Material Adverse Change. To the Knowledge of the Companies, no
event has occurred that would constitute grounds for an enforcement action by
any party against FMBank or any of its ERISA Affiliates under Title 1 of ERISA
under any Employee Plan.

 

(d)                                 With respect to each Employee Plan:

 

(i)                                     All Employee Plans that are “group
health plans” (as defined in Code §5000(b)(1) and ERISA §733(a)) have been
operated up to the Closing in a manner so as to not subject FMBank or any ERISA
Affiliates thereof to any Liability under Code §4980B or §4980D or any provision
of the Patient Protection and Affordable Care Act of 2010 (as amended);

 

(ii)                             No Employee Plan is subject to Title IV of
ERISA or the minimum funding requirements of Section 412 of the Code or
Section 302 of ERISA;

 

(iii)                          neither FMBank nor any of its ERISA Affiliates
has ever maintained, contributed to, or had any direct or indirect obligation
with respect to any “multiemployer plan” (as defined in Section 3(37) of ERISA)
or “multiple employer plan” (as defined in Section 413(c) of the Code).

 

(e)                                  Except as set forth on Disclosure Schedule
3.33(e), all Employee Plan documents, annual reports or returns, audited or
unaudited financial statements, actuarial valuations, summary annual reports,
and summary plan descriptions issued with respect to the Employee Plans are
correct, complete, and current in all material respects, and have been timely
filed and/or distributed to participants to the extent required.

 

(f)                                   No Employee Plan is invested in or
provides the opportunity for the purchase of any employer security (within the
meaning of ERISA §407(d)).

 

(g)                                  Except as set forth on Disclosure Schedule
3.33(g), neither FMAR nor FMBank nor any ERISA Affiliate thereof maintains any
Employee Plan that is a “nonqualified deferred compensation plan” within the
meaning of Code §409A(d)(I) of the Code.  All

 

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Employee Plans listed on Disclosure Schedule 3.33(g) comply with Code §409A and
the regulations thereunder in form and operation.

 

(h)                                                                                                                      
FMBank may withdraw at any time from any Employee Plan to which it contributes
(but does not sponsor or maintain), including any such plan sponsored or
maintained by FMAR, without incurring Liability except for unpaid premiums or
contributions due for the pay period that includes the date of withdrawal or
termination.

 

(i)                                     With respect to the Employee Plan that
is a self-funded health plan: (i) such plan was fully insured until June 30,
2013, and became self-funded as of July 1, 2013; (ii) a complete and accurate
summary of claims incurred and reported for the period commencing on July 1,
2013, and continuing through December 31, 2013, has been delivered or made
available to FMIB; (iii) the Companies have timely paid all claims incurred and
reported; (iv) the Companies’ financial statements accurately reflect any
liability associated with such plan; and (v) stop loss insurance is in force
with respect to such plan, and all premiums therefor have been timely paid.

 

Section 3.34.                         Obligations to Employees. All accrued
obligations and liabilities of and all payments by FMBank and the Bank
Subsidiaries, and all Employee Plans, whether arising by operation of law, by
contract or by past custom, for payments to trusts or other funds, to any
government agency or authority or to any present or former director, officer,
employee or agent (or his or her heirs, legatees or legal representatives) have
been and are being paid to the extent required by applicable Legal Requirements
or by the plan, trust, contract or past custom or practice, and adequate
actuarial accruals and reserves for such payments have been and are being made
by FMBank and the Bank Subsidiaries according to GAAP and applicable Legal
Requirements applied on a consistent basis and actuarial methods with respect
to: (a) withholding taxes, unemployment compensation or social security
benefits; and (b) all Employee Plans. All obligations and liabilities of FMBank
and the Bank Subsidiaries for all other forms of compensation that are or may be
payable to their current or former directors, officers, employees or agents, or
pursuant to any Employee Plan, have been and are being paid to the extent
required by applicable Legal Requirements or by the plan or contract, and
adequate actuarial accruals and reserves for payment therefor have been and are
being made by FMBank and the Bank Subsidiaries according to GAAP and generally
accepted actuarial principles applied on a consistent basis. All accruals and
reserves referred to in this Section are correctly and accurately reflected and
accounted for in all material respects in the Call Reports and the books,
statements and records of FMBank and the Bank Subsidiaries.

 

Section 3.35.                         Contracts and Commitments.

 

(a)                                 Except as set forth in Disclosure Schedule
3.35, neither FMBank nor any Bank Subsidiary is a party to or bound by any of
the following (whether written or oral, expressed or implied) (such agreements
listed on the schedule being referred to herein as the “Contracts”):

 

(i)                                employment contracts, change-in-control
agreements, retention agreements, severance agreements, other than FMBank’s
standard at-will offer letter;

 

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(ii)                             bonus, stock option, deferred compensation,
pension, retirement or other employee benefit arrangement;

 

(iii)                          any lease or license with respect to any
property, real or personal,  whether as landlord, tenant, licensor or licensee
involving an annual expenditure in excess of $10,000;

 

(iv)                         any participation, loan purchase or similar
agreement pursuant to which FMBank or any Bank Subsidiary has (A) acquired an
interest in the indebtedness of any third party or (B) sold an interest in the
indebtedness of any third party;

 

(v)                            contract or commitment for capital expenditures
in excess of $10,000 for any one project;

 

(vi)                         contract or commitment made in the ordinary course
of business for the purchase of materials or supplies or for the performance of
services over a period of more than ninety (90) days from the date of this
Agreement involving an annual expenditure in excess of $25,000;

 

(vii)                      contract or option to purchase or sell any real or
personal property other than in the ordinary course of business;

 

(viii)                   contract, agreement or letter with respect to the
management or operations of FMBank or any Bank Subsidiary imposed by any
Governmental Authority having supervisory jurisdiction over FMBank or any Bank
Subsidiary;

 

(ix)                         agreement, contract or indenture related to the
borrowing by FMBank or any Bank Subsidiary of money other than those entered
into in the ordinary course of business;

 

(x)                            guaranty of, or joint or several obligation with
respect to, any Liability of FMAR, any FMAR Subsidiary, or any other Person;

 

(xi)                         agreement with or extension of credit to any
Executive Officer or director of FMAR, any FMAR Subsidiary, FMBank, any Bank
Subsidiary, any Former Related Person, or holder of more than ten percent (10%)
of the issued and outstanding stock of FMAR, or any Affiliate of such Person;

 

(xii)                      contracts other than the foregoing, with payments
aggregating $25,000 or more not made in the ordinary course of business and not
otherwise disclosed in this Agreement and the Disclosure Schedules;

 

(xiii)                   any agreement containing covenants that limit the
ability of FMBank or any Bank Subsidiary to compete in any line of business or
with any Person, or that

 

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involve any restriction on the geographic area in which, or method by which,
FMBank or any Bank Subsidiary may carry on its business (other than as required
by any Legal Requirement);

 

(xiv)                  any data processing services agreement or contract which
may not be terminated without payment or penalty upon notice of thirty (30) days
or less;

 

(xv)                     any agreement, contract or indenture pursuant to which
FMBank or any Bank Subsidiary may become obligated to invest in or contribute
capital to any Person;

 

(xvi)                  any agreement, contract or indenture involving payments
based on the profits of FMBank or any Bank Subsidiary; or

 

(xvii)               any agreement, contract or indenture that requires the
consent or approval of any third party for the Acquisition to be consummated.

 

(b)                                 Each Contract (i) is valid and binding on
FMBank and, to the Companies’ Knowledge, each other party thereto, and is in
full force and effect; (ii) FMBank is in all material respects in compliance
with and has in all material respects performed all obligations required to be
performed by it under each such Contract; (iii) FMBank has not received any
notice to terminate, in whole or in part, or notice of any material violation or
default (or any condition which with the passage of time or the giving of notice
or both would cause such a violation or default) by any party under any such
Contract; and (iv) no other party to any such Contract is, to the Knowledge of
the Companies, in default or violation in any respect thereunder.

 

(c)                                  Copies of each Contract identified in
Disclosure Schedule 3.35 have been delivered or made available to FMIB.

 

(d)                                 Neither FMAR nor any FMAR Subsidiary is a
party to, or bound by, any license or license agreement with respect to any
property necessary to conduct the respective businesses of FMBank and the Bank
Subsidiaries.

 

Section 3.36.                         Brokers and Finders. Except as set forth
on Disclosure Schedule 3.36, FMAR, FMBank and the Bank Subsidiaries, and their
officers, directors or employees, have not employed any broker, finder,
financial advisor or investment banker or incurred any Liability for any
brokerage, financial advisory, investment banking or other similar fees or
commissions in connection with this Agreement and the transactions contemplated
hereby.

 

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES OF FMIB

 

FMIB hereby makes the following representations and warranties to the Companies
as of the date hereof; provided, that those representations and warranties which
address matters only as of a particular date shall have been true and correct
only on such date:

 

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Section 4.01.                         Organization and Qualification. FMIB is a
Maryland chartered trust company, duly organized, validly existing and in good
standing under the laws of the State of Maryland and was formed solely for the
purpose of engaging in the transactions contemplated hereby and has engaged in
no business or activities other than in connection with the transactions
contemplated by this Agreement. FMIB has all requisite corporate power and
authority (including, without limitation, all material licenses, franchises,
permits and other governmental authorizations as are required under all
applicable Legal Requirements) to own, lease and operate its properties and
assets as now owned, leased or operated, and to carry on its business as
presently conducted.  True and complete copies of the Constituent Documents of
FMIB have been delivered to the Companies.

 

Section 4.02.                         Authority; Approvals. FMIB has full legal
right, corporate power and authority to enter into and deliver this Agreement
and the DIP Loan Agreement and, subject to the Sale Order, to carry out its
obligations hereunder and thereunder; and the execution and delivery of this
Agreement, the DIP Loan Agreement and all documents, instruments and agreements
required to be executed and delivered by FMIB pursuant to this Agreement and the
DIP Loan Agreement and, subject to the Sale Order, the consummation of the
Contemplated Transactions have been duly and validly authorized by all necessary
corporate action on the part of FMIB. This Agreement, the DIP Loan Agreement and
all documents, instruments and agreements required to be executed and delivered
by FMIB pursuant to this Agreement and the DIP Loan Agreement have been duly
executed and delivered by FMIB and (assuming due authorization, execution and
delivery by the Companies), constitute a legal, valid and binding obligation of
FMIB, enforceable against FMIB in accordance with their respective terms,
subject to the Bankruptcy Exception. No other corporate proceedings, including
any shareholder approvals, are necessary for the execution and delivery by FMIB
of this Agreement or the DIP Loan Agreement, the performance by FMIB of its
obligations hereunder or thereunder or the consummation by FMIB of the
Contemplated Transactions.

 

Section 4.03.                         No Conflict With Other Instruments.
Neither the execution and delivery of this Agreement or the DIP Loan Agreement,
nor, subject to the Sale Order, the consummation of the Contemplated
Transactions, nor compliance by FMIB with any of the provisions hereof or
thereof, will (i) materially violate, materially conflict with, or result in a
material breach of any provision of, or constitute a material default (or an
event which, with notice or lapse of time or both, would constitute a material
default) under, or result in the termination of, or result in the loss of any
benefit or creation of any material right on the part of any third party under,
or accelerate the performance required by, or result in a right of termination
or acceleration of, or result in the creation of any material Encumbrance upon
any of the material properties or assets of FMIB under any of the terms,
conditions or provisions of (A) the Constituent Documents of FMIB, or (B) any
material note, bond, mortgage, indenture, franchise, license, permit, agreement
or other instrument or obligation to which FMIB is a party or by which it may be
bound, or to which FMIB or any of the properties or assets of FMIB may be
subject, or (ii) assuming the Company Required Approvals and the FMIB Required
Approvals are duly obtained, violate in any material respect any Legal
Requirement or any judgment, ruling, order, writ, injunction or decree
applicable to FMIB or any of its properties or assets.

 

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Section 4.04.                         Litigation. No legal action, suit or
proceeding or judicial, administrative or governmental investigation is pending
or, to FMIB’s Knowledge, threatened against FMIB that would reasonably be
expected to have a material adverse effect on the validity of this Agreement or
the agreements contemplated hereby or any actions taken or to be taken by FMIB
pursuant hereto or thereto, or seeks to enjoin or otherwise restrain the
transactions contemplated hereby or thereby.

 

Section 4.05.                         Consents and Approvals. Subject to entry
of the Sale Order, except as set forth on Schedule 4.05 (the “FMIB Required
Approvals”), no consent or approval of, notice to or filing with any
Governmental Authority having jurisdiction over any aspect of the business or
assets of FMIB or its Affiliates, and no consent or approval of or notice to any
other Person, is required in connection with FMIB’s execution, delivery or
performance of this Agreement or the agreements contemplated hereby or the
completion by FMIB of the transactions contemplated hereby or thereby. As of the
date of this Agreement, FMIB knows of no reason why any of the FMIB Required
Approvals should not be granted or that any of the Company Required Approvals
will not be granted without imposition of a Burdensome Condition.

 

Section 4.06.                         Available Funds.

 

(a)                                 FMIB has available or committed sources of
funds sufficient to fund the full DIP Loan amount as required by the DIP Loan
Agreement.

 

(b)                                 FMIB has committed sources of funds to
provide, and as of the Closing Date, FMIB will have in hand (or in escrow) the
Equity Contribution, including the Purchase Price.

 

(c)                                  FMIB has entered into Subscription
Agreements (the “Subscription Agreements”), pursuant to which each investor who
is a party thereto has committed, subject to the terms thereof, to invest in
FMIB the cash amounts set forth therein, which represent in the aggregate at
least Eighty-Five Million Dollars ($85,000,000).  FMIB has provided to FMAR a
complete and accurate form of the execution version of the Subscription
Agreements.  The Subscription Agreements are in full force and effect and
constitute legal, valid and binding obligations of FMIB and, to the knowledge of
FMIB, the other parties thereto..

 

Section 4.07.                         Brokers and Finders. Neither FMIB nor any
of its officers, directors or employees have employed any broker, finder,
financial advisor or investment banker or incurred any Liability for any
brokerage, financial advisory, investment banking or other similar fees or
commissions in connection with this Agreement and the transactions contemplated
hereby.

 

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ARTICLE V.

COVENANTS OF THE PARTIES

 

Section 5.01.                         Commercially Reasonable Efforts. The
Companies and FMIB will use commercially reasonable efforts to perform and
fulfill all conditions and obligations to be performed or fulfilled by them
related to the preparation for and submission of the bankruptcy filing under
this Agreement. The Companies and FMIB will use commercially reasonable efforts
to furnish to the Bankruptcy Court evidence of adequate assurance by FMIB of its
future performance under this Agreement and evidence that FMIB has the financial
wherewithal to timely close the Contemplated Transactions. The Companies and
FMIB will use commercially reasonable efforts to obtain the approval of the
Auction Procedures Order and the Sale Order. Subject to the approval of the
Bankruptcy Court, the Companies and FMIB will use commercially reasonable
efforts to perform and fulfill all conditions and obligations on their part to
be performed or fulfilled under this Agreement and to cause the completion of
the Contemplated Transactions in accordance with this Agreement.

 

Section 5.02.                         Consents and Approvals.

 

(a)                                 FMIB and the Companies shall use
commercially reasonable efforts to obtain all FMIB Required Approvals and
Company Required Approvals, and to take or cause to be taken all actions to do,
or cause to be done, all things proper and advisable under any applicable Legal
Requirement to consummate the Contemplated Transactions.

 

(b)                                 The Parties shall cooperate and coordinate
the filing of the Bankruptcy Case and filings to obtain the FMIB Required
Approvals and Company Required Approvals. As soon as practicable following the
filing of the Bankruptcy Case, but in no event later than five (5) Business Days
thereafter, the Parties will cooperate to cause to be published all required
notices and prepare and file all necessary filings in order to obtain the FMIB
Required Approvals and the Company Required Approvals; provided, that nothing
shall require FMIB to provide to the Companies copies of materials in advance
for which confidential treatment will be requested from the Governmental
Authority to which the application will be submitted. FMIB will promptly furnish
the Companies with advance copies of all such regulatory filings and all
correspondence for which confidential treatment has not been requested.

 

(c)                             To the extent permitted by applicable Legal
Requirements, FMIB and the Companies will promptly, but not later than five
(5) Business Days after receipt of a written request by the other Parties,
furnish to the other Party all information, data and documents responding to
such request, including financial statements, required to be included in any
application, notice, petition or statement to be made by or filed by FMAR,
FMBank and/or FMIB with any Governmental Authority in connection with the
Contemplated Transactions while this Agreement is pending, and the Companies and
FMIB represent and warrant that all information so furnished for such
applications, petitions and statements will not omit any material fact required
to be stated therein or necessary to make the statements made, in light of the
circumstances under which they were made, not misleading. FMIB and the Companies
will otherwise fully cooperate in the filing of any applications or other
documents necessary to complete the Contemplated Transactions.

 

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Section 5.03.                         Required Acts. Except as otherwise
provided in this Agreement or as may be otherwise required by any Governmental
Authority having jurisdiction over the Companies or by the Bankruptcy Code or
Bankruptcy Court having jurisdiction over FMAR, between the date of this
Agreement and the Closing, unless otherwise permitted in writing by FMIB, which
consent will not be unreasonably withheld, conditioned or delayed, FMBank shall,
and FMAR shall cause FMBank to:

 

(a)                                 Operate in all material respects only in the
ordinary course of business and consistent with prudent banking practices;

 

(b)                                 Use commercially reasonable efforts to
maintain and preserve its business organization and business relationships with
its customers, depositors and employees, and to maintain all properties and
assets owned, leased or used by it (whether under its control or the control of
others), in good operating condition and repair, ordinary wear and tear
excepted;

 

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

 

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

 

Section 5.04.                         Prohibited Acts. Except as otherwise
provided in this Agreement or as may be otherwise required by any Governmental
Authority having jurisdiction over the Companies, or by the Bankruptcy Code or
Bankruptcy Court having jurisdiction over FMAR, between the date of this
Agreement and the Closing, unless otherwise permitted in writing by FMIB, which
consent will not be unreasonably withheld, conditioned or delayed, FMBank shall
not, and FMAR shall cause FMBank not to:

 

(a)                                 Intentionally take or fail to take any
action that would be reasonably expected to cause the representations and
warranties made in ARTICLE III to be inaccurate at the time of the Closing or
preclude the Companies from making such representations and warranties at the
time of the Closing;

 

(b)                            Except as otherwise provided herein or in the
ordinary course of business, consistent with past practices, merge into,
consolidate with or sell its assets and properties to any other Person, or amend
FMBank’s Constituent Documents;

 

(c)                             Except as explicitly permitted hereunder,
Knowingly engage in any transaction with any Affiliate of FMAR or FMBank, or any
Former Related Person or Affiliate thereof, or allow such Persons to acquire any
assets from FMBank, except (i) in the form of wages, salaries, fees for
services, reimbursement of expenses and benefits already granted or accrued
under the Employee Plans, (ii) any deposit (in any amount) made by an officer,
director

 

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or employee or (iii) Loans made in accordance with Regulation O promulgated by
the Federal Reserve;

 

(d)                            Discharge or satisfy any Encumbrance or pay any
Liability, except in the ordinary course of business consistent with past
practices and except for liabilities incurred in connection with the
Contemplated Transactions;

 

(e)                             Incur or guarantee any additional debt
obligation or other obligation for borrowed money (other than indebtedness,
including deposit liabilities, Federal Home Loan Bank advances and advances from
the Federal Reserve discount window, of FMBank incurred in the ordinary course
of business consistent with past practices);

 

(f)                              Issue, reserve for issuance, grant, sell or
authorize the issuance of any shares or other equity interest of FMBank or any
capital stock or other equity interest of any Bank Subsidiaries, or other
securities or subscriptions, options, warrants, calls, rights or commitments of
any kind relating to the issuance thereto;

 

(g)                             Repurchase, redeem, or otherwise acquire or
exchange (other than in accordance with the terms of this Agreement), directly
or indirectly, any shares, or any securities convertible into or exchangeable or
exercisable for any shares, of the capital stock of FMBank or any Bank
Subsidiaries, or make, declare, pay or set aside for payment any dividend, or
set any record date for, or declare or make, any other distribution in respect
of the capital stock or other equity interests of FMBank or any Bank
Subsidiaries;

 

(h)                            Accelerate the vesting of pension or other
benefits in favor of employees of FMBank and/or any Bank Subsidiary, except
according to the Employee Plans or as otherwise contemplated by this Agreement;

 

(i)                                Acquire any capital stock or other equity
securities or acquire any equity or ownership interest in any bank, corporation,
partnership or other entity (except (i) through settlement of indebtedness,
foreclosure, or the exercise of creditors’ remedies or (ii) in a fiduciary
capacity, the ownership of which does not expose FMBank to any Liability from
the business, operations or liabilities of such Person);

 

(j)                               Subject to any Encumbrance any of its
property, business or assets, tangible or intangible except (i) statutory liens
not yet delinquent, (ii) consensual landlord liens, (iii) minor defects and
irregularities in title and encumbrances that do not materially impair the use
thereof for the purpose for which they are held, and (iv) pledges of assets to
secure public funds deposits;

 

(k)                            Except as set forth on Schedule 5.04(k), sell,
transfer, lease to others or otherwise dispose of any of its assets (except any
sales of securities with a value of less than Five Hundred Thousand Dollars
($500,000) or sales of loans or sales of “other real estate owned” with a value
of less than Two Hundred Fifty Thousand Dollars ($250,000) in the ordinary
course of business consistent with past practices) or cancel or compromise any
debt or claim, or waive or release any right or claim of a value in excess of
Fifty Thousand Dollars ($50,000);

 

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(l)                               Make any material change in the rate or timing
of payment of compensation, commission, bonus or other direct or indirect
remuneration payable, or pay or agree or orally promise to pay, conditionally or
otherwise, any bonus, extra compensation, pension or severance or vacation pay,
to or for the benefit of any of its shareholders, directors, officers, employees
or agents, or Former Related Persons, other than periodic increases in
compensation consistent with past practices, and bonuses, commissions, and
incentives consistent with past and normal FMBank practices to FMBank and/or
Bank Subsidiary employees and officers;

 

(m)                        Enter into any Employee Plan or collective bargaining
agreement;

 

(n)                            Except (i) as otherwise provided herein and
(ii) for payments or distributions for which FMBank is contractually obligated
as of the date of this Agreement, make payments or distributions related to
management incentive plans, including, but not limited to, stock option plans
and employment contracts, applicable to FMBank and/or Bank Subsidiary employees;

 

(o)                            Except as set forth on Schedule 5.04(o), make any
capital expenditures or capital additions or betterments in excess of an
aggregate of Fifty Thousand Dollars ($50,000), except that FMBank may make such
expenditures reasonably necessary to maintain existing assets in good repair and
expenditures with a total aggregate cost of not more than Two Hundred Fifty
Thousand Dollars ($250,000) for improvements or betterments relating to
Properties;

 

(p)                            Hire or employ any Person as a replacement for an
existing executive position with an annual salary greater than the salary paid
to the former executive employee at the time of termination or hire or employ
any Person for any newly created officer or executive position;

 

(q)                            Make any, or acquiesce with any, change in any
(i) credit underwriting standards or practices, including loan loss reserves,
(ii) asset liability management techniques, or (iii) accounting methods,
principles or material practices, except as required by changes in GAAP as
concurred with by the Companies’ independent auditors, or as required by any
applicable regulatory authority;

 

(r)                               Sell (but payment at maturity is not a sale)
or purchase any investment securities, other than sales or purchases of less
than Twenty-Five Million Dollars ($25,000,000) during any one-month period of
obligations in which FMBank is permitted to invest under its investment policy
in effect as of the date of this Agreement and with a duration of four (4) years
or less;

 

(s)                              Except as set forth on Schedule 5.04(s), make
or acquire any extension of credit or participation therein or issue a
commitment (including a letter of credit) or renew or extend an existing
commitment for any extension of credit or participation therein, or amend or
modify in any material respect any extension of credit or participation therein
(including in any manner that would result in any additional extension of
credit, principal forgiveness, or effect any uncompensated release of
collateral, i.e., at a value below the fair market value thereof as

 

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determined by FMBank), except (i) new extensions of credits or participations
therein not in excess of $1,000,000, (ii) extensions of credits or
participations therein or commitments therefor that have previously been
approved by FMBank prior to the date of this Agreement not in excess of
$1,000,000, (iii) with respect to amendments or modifications that have
previously been approved by FMBank prior to the date hereof, amendments or
modifications of any existing extension of credit or participation therein rated
“special mention” or worse by FMBank, with total credit exposure not in excess
of $1,500,000, or (iv) with respect to any such actions that have previously
been approved by FMBank prior to the date hereof, amendments or modifications
(in any material respect) of any extension of credit or participation therein in
a manner that would result in any additional extension of credit, principal
forgiveness, or effect any uncompensated release of collateral, i.e., at a value
below the fair market value thereof as determined by FMBank, in each case not in
excess of $1,000,000;

 

(t)                               Make any change in any Tax or accounting
principles, practices or methods or systems or internal accounting controls,
except as may be required to conform to changes in Tax laws or regulatory
accounting requirements or GAAP;

 

(u)                            Commence any action, legal or regulatory
proceeding, lawsuit, litigation or other claim, other than in the ordinary
course of business, or settle, waive or release or agree or consent to the
issuance of any judgment or order in connection with any legal proceeding
(i) involving any Liability of FMBank or any Bank Subsidiary for money damages
in excess of Fifty Thousand Dollars ($50,000), except as set forth on Schedule
5.04(u), or (ii) arising out of or relating to the transactions contemplated
hereby;

 

(v)                            Except as set forth on Schedule 5.04(v),
(i) Enter into, renew, extend, modify, amend or terminate any (A) Contract that
calls for aggregate annual payments of Fifty Thousand Dollars ($50,000) or more,
except in the ordinary course of business consistent with past practices,
(B) Contract referenced in Section 3.36 (or any other Contract with any broker
or finder in connection with the Merger or any of the Contemplated
Transactions), or (C) Contract, plan, arrangement or other understanding with
any Affiliate of FMAR or FMBank, or any Former Related Person or Affiliate
thereof (other than, in the case of sub-clause (A), Contracts that can be
terminated on less than 30 days’ notice with no prepayment Liability or other
obligation); (ii) make any material amendment or modification to any Contract
described in clause (i), other than in the ordinary course of business
consistent with past practices; or (iii) waive, release, compromise or assign
any material rights or claims under any Contract described in clause (i);

 

(w)                          Enter into any new line of business or change in
any material respect its lending, investment, risk and asset-liability
management, interest rate, fee pricing or other material banking or operating
policies except as required by applicable Legal Requirements;

 

(x)                            Alter materially its interest rate or fee pricing
policies with respect to depository accounts of FMBank or waive any material
fees with respect thereto;

 

(y)                            Enter into any securitizations of any loans or
extensions of credit or create any special purpose funding or variable interest
entity other than on behalf of clients;

 

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(z)                             Foreclose upon or take a deed or title to any
commercial real estate without first conducting a Phase I environmental
assessment (except where such an assessment has been conducted in the preceding
twelve months) of the property or foreclose upon any commercial real estate if
such environmental assessment indicates the presence of Hazardous Material at,
on or below the property;

 

(aa)                    Enter into any acquisitions or leases of real property,
including new leases and lease extensions; and

 

(bb)                     Add, amend or modify in any respect the duties or
obligations of indemnification by FMBank or any Bank Subsidiary with respect to
their respective directors, officers, employees, Former Related Persons, agents
or other Persons.

 

Section 5.05.                         Certain Company Contracts. The Companies
shall, at the Closing, pursuant to Section 365 of the Bankruptcy Code, assume
(and take all actions reasonably requested by FMIB, including the payment of, or
escrowing an amount to cover, cure costs, to effect assumption) assign and sell
to FMBank those Bank Related Contracts as identified by FMIB by written notice
given to the Companies no later than three (3) Business Days after entry of the
Auction Procedures Order (such Bank Related Contracts, the “Assumed Bank Related
Contracts”). In addition, FMAR shall cause the FMAR Subsidiaries (other than
FMBank and the Bank Subsidiaries), at or prior to the Closing, to assign to
FMBank those Bank Related Contracts of such FMAR Subsidiaries as identified by
FMIB by written notice given to the Companies contemporaneously with the notice
given by FMIB in accordance with the preceding sentence (such Bank Related
Contracts, the “Other Bank Related Contracts”). In connection with the
Bankruptcy Case, FMAR shall include in the Sale Motion, in form and substance
acceptable to FMIB in its sole discretion, a request for authorization to assume
and assign to FMBank the Assumed Bank Related Contracts. To the extent that,
under any applicable non-bankruptcy Legal Requirement, any Assumed Bank Related
Contract or Other Bank Related Contract may not be assigned to FMBank by FMAR
(or any FMAR Subsidiary, as the case may be) absent the waiver or consent of, or
notice to, one or more Persons, the Companies and FMIB shall use their
commercially reasonable best efforts to obtain all such waivers or consents and
to make all such notices prior to the Closing and shall cooperate in all
respects with respect thereto. Notwithstanding anything in this Agreement to the
contrary, the only liabilities or obligations that will be assigned to or
assumed by FMBank with respect to the Assumed Bank Related Contracts and Other
Bank Related Contracts will be those liabilities and obligations that first
arise after Closing and not any liabilities or obligations for breaches or
defaults occurring on or before Closing.

 

Section 5.06.                         Confidential Information.

 

(a)                            The Parties acknowledge the confidential and
proprietary nature of the “Information” (as herein defined) which has heretofore
been exchanged or otherwise received, and which will be exchanged or otherwise
received, from each other hereunder (including, without limitation, Information
of FMBank received by FMAR and/or FMIB or its respective employees or agents),
and agree to hold and keep the same confidential. Such Information will include,
without limitation, any and all financial, technical, commercial, marketing,
customer or other information concerning the business, operations and affairs of
a Party that may be provided

 

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to any other Party, irrespective of the form of the communications, by such
Party’s employees or agents. Such Information shall not include information
which is or becomes generally available to the public other than as a result of
a disclosure by a Party or its employees or agents in violation of this
Agreement. The Parties agree that the Information will be used solely for the
purposes contemplated by this Agreement and that such Information will not be
disclosed to any Person other than employees and agents of a Party who are
directly involved in implementing the Contemplated Transactions, who shall be
informed of the confidential nature of the Information and directed individually
to abide by the restrictions set forth in this Section 5.06. The Information
shall not be used in any way detrimental to a Party, including use directly or
indirectly in the conduct of any Party’s business or any business or enterprise
in which such Party may have an interest, now or in the future, and whether or
not now in competition with any Party.

 

(b)                            If (x) this Agreement is terminated prior to
consummation of the Merger, or (y) Closing occurs, each Party shall, upon the
written request of any Party, at its election return to such Party or destroy
(such destruction to be confirmed in writing to such Party upon further written
request) all materials, documentation, data, records and other papers and copies
thereof (whether on paper or in electronic, magnetic, photographic, mechanical
or optical storage) relating to FMIB or its Affiliates or to FMAR, FMBank, the
Bank Subsidiaries, the FMBank Shares, or the businesses of FMBank and the Bank
Subsidiaries, which are confidential and which are in the possession of such
Party, and maintain the confidentiality of all such Information, and not use any
such Information for any purpose whatsoever; provided that a Party may maintain
such Information to the extent that such information would be commercially
impracticable to return or destroy or as required by applicable Legal
Requirements or such Party’s bona fide document retention policies (including
any practice or requirement to retain e-mail on an automated e-mail archival
system) or relating to the safeguarding or backup storage of electronic data or
in connection with a dispute with any Party.

 

(c)                             From and after Closing, any and all Information
of FMBank shall be, and be deemed to be, confidential and proprietary
Information of FMBank and its Affiliates (but not FMAR and its Affiliates).

 

(d)                            The obligations of each Party set forth in this
Section 5.06 shall survive Closing or termination of this Agreement (as the case
may be).

 

Section 5.07.                         Access; Pre-Closing Investigation. Subject
to the provisions of Section 5.06 and upon reasonable notice to the Companies,
FMAR will, and will cause FMBank to, afford the respective officers, directors,
employees, attorneys, accountants, investment bankers and authorized
representatives of FMIB and the Investors reasonable access, to the extent
legally permissible, to the properties, books, contracts and records of the
Companies, permit FMIB to make such inspections as it may require and furnish to
FMIB, to the extent legally permissible, during such period all such Information
concerning the Companies and their Affiliates and their affairs as FMIB or any
of the Investors may reasonably request, in order that FMIB and the Investors
may have full opportunity to make such reasonable investigation as any of them
desires to make of the affairs of the Companies and their Affiliates, including,
without limitation, access sufficient to verify the value of the assets and the
liabilities of the Companies and their Affiliates

 

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and the satisfaction of the conditions precedent to FMIB’s obligations described
in ARTICLE VI of this Agreement. FMIB will use its commercially reasonable
efforts not to disrupt the normal business operations of FMAR and FMBank. The
Companies agree at any time, and from time to time, to furnish to FMIB and the
Investors as soon as reasonably practicable, any additional Information that
FMIB or any Investor may reasonably request. All inspections by FMIB or any
Investor under this Section 5.07 will be at the expense of FMIB or the Investor,
as applicable, and shall be reasonably related to the Contemplated
Transactions.  Notwithstanding the foregoing, no Party shall be required to
provide access to or to disclose Information where such access or disclosure
relates to matters involving the Agreement, would violate the rights of such
entity’s customers, jeopardize the attorney-client privilege of the entity in
possession or control of such information, or contravene any law, rule,
regulation, order, judgment, decree or binding agreement entered into prior to
the date of this Agreement.  The Parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
previous sentence apply.

 

Section 5.08.                         [Reserved]

 

Section 5.09.                         Additional Financial Statements. The
Companies will cause FMBank to promptly furnish FMIB with true and complete
copies of each Call Report of FMBank prepared after the date of this Agreement
promptly after such reports are made available to the FDIC.

 

Section 5.10.                         Notice of Certain Events.

 

(a)                                 The Companies will promptly notify FMIB in
writing:

 

(i)                                of the institution of any litigation against
the Companies or the threat of any claim, controversy or contingent Liability
that might reasonably be expected to become the subject of litigation involving
the Companies or affecting any of their properties or assets that, if pending on
the date hereof, would have been required to have been disclosed pursuant to
Section 3.08 or that might reasonably be expected to result in a Material
Adverse Change to FMBank,

 

(ii)                             of any legal action, suit or proceeding or
judicial, administrative or governmental investigation commenced or, to the
Knowledge of the Companies, threatened against the Companies that would
reasonably be expected to have a material adverse effect on the validity of this
Agreement or the agreements contemplated hereby or any actions taken or to be
taken by the Companies pursuant hereto or thereto, or seeks to enjoin or
otherwise restrain the transactions contemplated hereby or thereby, and

 

(iii)                          if any change or development has occurred or, to
the Knowledge of the Companies, been threatened (or any development has occurred
or been threatened involving a prospective change) that (A) is reasonably likely
to have, individually or in the aggregate, a Material Adverse Change on FMBank,
(B) would be reasonably likely to adversely affect, prevent or delay the
obtaining of any regulatory approval for the completion of the Contemplated
Transactions, or (C) would be reasonably likely to cause the conditions in
Section 6.01 or Section 6.02 not to be met.

 

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(b)                                 FMIB will promptly notify the Companies in
writing if:

 

(i)                                any legal action, suit or proceeding or
judicial, administrative or governmental investigation, pending or, to the
Knowledge of FMIB, threatened that would reasonably be expected to have a
material adverse effect on the validity of this Agreement or the agreements
contemplated hereby or any actions taken or to be taken by FMIB pursuant hereto
or thereto or seeks to enjoin or otherwise restrain the transactions
contemplated hereby or thereby, and

 

(ii)                             if any change or development has occurred or,
to the Knowledge of FMIB, been threatened (or any development has occurred or
been threatened involving a prospective change) that (A) would be reasonably
likely to adversely affect, prevent or delay the obtaining of any regulatory
approval for the completion of the Contemplated Transactions, or (B) would be
reasonably likely to cause the conditions in Section 6.01 or Section 6.03 not to
be met.

 

(c)                                  Any notice provided by the Parties pursuant
to this Section 5.10 shall not alter or diminish the right of the other Parties
to terminate this Agreement pursuant to ARTICLE VIII hereof.

 

Section 5.11.                         Indemnification and D&O Insurance;
Releases.

 

(a)                            From and for a period of six (6) years after the
Closing, FMBank shall not, and shall not permit or cause its Affiliates or any
other Person to, amend, repeal or otherwise modify any exculpation,
indemnification and limitation of liability provisions of the Constituent
Documents of FMBank in effect as of the date hereof in any manner that would
adversely affect the rights of any Person entitled to indemnification thereunder
(the “Indemnified Parties”).  All provisions for exculpation, indemnification
and limitation of liability now existing in favor of the Indemnified Parties as
provided by any applicable Legal Requirement or in the Constituent Documents of
FMBank in effect as of the date hereof shall survive the Closing for a period of
six (6) years and shall continue in full force and effect (with respect to acts
or omissions occurring prior to the Closing that were committed by such
Indemnified Parties in their capacity as officers, directors or employees of
FMBank) for such six (6) year period, or, in the case of matters occurring prior
to the Closing that have been raised but have not been finally resolved prior to
the sixth (6th) anniversary of the Closing, until such matters are finally
resolved.

 

(b)                                 FMBank shall purchase and obtain, as soon as
is reasonably possible and in any event, no later than effective at the time of
the Merger, a six-year “tail” policy (the “Bank D&O Tail Policy”) under the
directors’ and officers’ liability insurance policies currently maintained by
FMAR on behalf of itself, FMBank and their respective Affiliates, and any
directors’ and officers’ liability insurance policies maintained directly by
FMBank (collectively, the “Bank D&O Policies”) that provides equivalent primary
and excess coverage to the existing coverage under the Bank D&O Policies. FMBank
shall fully pay the premiums for the D&O Tail Policy, and upon such purchase and
payment in full prior to the filing of the Bankruptcy Case, evidence of the same
shall be provided by FMBank or FMAR to FMIB.

 

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(c)                                  Effective as of the Closing, FMAR, for
itself and on behalf of its past, present and future officers, directors and/or
other Affiliates (other than FMBank and the Bank Subsidiaries), and each of its
and their past, present and future officers, directors, partners, managers,
trustees, stockholders, members, employees, successors, assigns, heirs,
executors, attorneys, agents and representatives (each, an “FMAR Releasor”),
hereby irrevocably and unconditionally, knowingly and voluntarily, releases,
acquits, remises, exonerates and forever discharges each of FMBank, each of the
Bank Subsidiaries, each of the Investors, and each of its and their past,
present and future officers, directors and/or other Affiliates, and each of its
and their past, present and future officers, directors, partners, managers,
trustees, stockholders, members, employees, successors, assigns, heirs,
executors, attorneys, agents and representatives (each, an “FMBank Releasee”),
of and from, and forever waives and relinquishes, any and all claims, demands,
liabilities, defenses, affirmative defenses, setoffs, counterclaims, actions,
causes of action, suits, debts, sums of money, accounts, demands, grievances,
allegations, covenants, contracts, controversies, promises, agreements, damages,
costs, expenses, attorneys fees, judgments and obligations, of whatever kind or
nature, whether known or unknown, fixed or contingent, now existing or which may
develop in the future, in law or in equity or otherwise (each, a “Claim,” and
collectively, “Claims”), which any FMAR Releasor (directly, or through FMAR or
any Affiliate of FMAR) ever had, now has, or can, shall or may have in the
future, against the FMBank Releasees (or any of them), from the beginning of
time through the Closing, except for (i) Claims arising under, or in connection
with, this Agreement or any of the Contemplated Transactions, (ii) Claims
arising under, or in connection with, deposits or other accounts of the FMAR
Releasors (or any of them) at FMBank and/or any of the Bank Subsidiaries, and
(iii) Claims arising under, or in connection with, willful misconduct, willful
malfeasance, and/or any criminal activity.  From and after Closing, FMAR shall,
and shall cause each FMAR Releasor to, refrain from, directly or indirectly,
asserting any Claim or commencing, instituting or maintaining, or causing to be
commenced, instituted or maintained, any legal or arbitral proceeding of any
kind against any FMBank Releasee with respect to any matter released pursuant to
this Section 5.11(c); provided that if any FMAR Releasor asserts any such Claim
or takes any such action with respect to any such Claim, such FMAR Releasor,
automatically, and without any further action by any FMBank Releasee, shall not
be, or be deemed to be, an “FMAR Releasee,” as defined in
Section 5.11(d) hereof. This is a general release. The execution of this
Agreement shall not constitute an acknowledgment of, or an admission by, any
FMAR Releasor or FMBank Releasee of the existence of any Claims for any matter
or precedent upon which any Claims may be asserted.

 

(d)                            Effective as of the Closing, FMBank, as the
surviving entity in the Merger, for itself and on behalf of its past, present
and future officers, directors and/or other Affiliates (other than FMAR and the
FMAR Subsidiaries), and each of its and their past, present and future officers,
directors, partners, managers, trustees, stockholders, members, employees,
successors, assigns, heirs, executors, attorneys, agents and representatives
(each, an “FMBank Releasor”), hereby irrevocably and unconditionally, knowingly
and voluntarily, releases, acquits, remises, exonerates and forever discharges
each of FMAR, each of the FMAR Subsidiaries (other than FMBank and the Bank
Subsidiaries), and each of its and their past, present and future officers,
directors and/or other Affiliates (other than FMBank and the Bank Subsidiaries),
and each of its and their past, present and future officers, directors,
partners, managers, trustees, stockholders, members, employees, successors,
assigns, heirs, executors, attorneys, agents and

 

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representatives (each, an “FMAR Releasee”), of and from, and forever waives and
relinquishes, any and all Claims which any FMBank Releasor (directly, or through
FMBank or any Affiliate of FMBank) ever had, now has, or can, shall or may have
in the future, against the FMAR Releasees (or any of them), from the beginning
of time through the Closing, except (i) Claims arising under, or in connection
with, this Agreement or any of the Contemplated Transactions,  (ii) Claims
arising under, or in connection with, deposits or other accounts of the FMAR
Releasees (or any of them) at FMBank and/or any of the Bank Subsidiaries, and
(iii) Claims arising under, or in connection with, willful misconduct, willful
malfeasance, and/or any criminal activity.  From and after the Closing, FMBank,
as the surviving entity in the Merger, shall, and shall cause each FMBank
Releasor to, refrain from, directly or indirectly, asserting any Claim or
commencing, instituting or maintaining, or causing to be commenced, instituted
or maintained, any legal or arbitral proceeding of any kind against any FMAR
Releasee with respect to any matter released pursuant to this Section 5.11(d);
provided that if any FMAR Releasee asserts any Claim, or commences, institutes
or maintains, or causes to be commenced, instituted or maintained, any legal or
arbitral proceeding of any kind against any FMBank Releasee with respect to any
matter released pursuant to Section 5.11(c) hereof, such FMAR Releasee,
automatically, and without any further action by any FMBank Releasor, shall not
be, or be deemed to be, an FMAR Releasee. This is a general release. The
execution of this Agreement shall not constitute an acknowledgment of, or an
admission by, any FMBank Releasor or FMAR Releasee of the existence of any
Claims for any matter or precedent upon which any Claims may be asserted.

 

Section 5.12.        Notice of Sale. Notice of this Agreement and notice of the
Sale Motion and Sale Order and the hearings therefor shall be duly and properly
given by FMAR by notice to all appropriate creditors and the appropriate parties
in interest in the Bankruptcy Case.

 

Section 5.13.        Resignations; Agreement Terminations. The Companies shall
deliver to FMIB, with respect to each member of the Board of Directors of
FMBank, a written resignation effective as of the Closing Date. In addition, (i)
with respect to each individual identified on Disclosure Schedule 3.33(a) as
being a party to an Employment Agreement listed under the heading “Employment
Agreements” on such Disclosure Schedule 3.33(a), the Companies shall deliver to
FMIB (contemporaneously with the execution and delivery of this Agreement, which
delivery is acknowledged to by FMIB) a fully-executed Employment Agreement (in
form and substance approved by FMIB as of the date of this Agreement), dated as
of the date of this Agreement but effective as of the Closing Date, which
replaces the respective current Employment Agreement to which such individual is
a party, and (ii) with respect to each individual identified on Disclosure
Schedule 3.33(a) as being a party to a Retention and Success Bonus Agreement
listed under the heading “Retention Agreements” on such Disclosure Schedule
3.33(a), the Companies shall deliver to FMIB (contemporaneously with the
execution and delivery of this Agreement, which delivery is acknowledged to by
FMIB) a fully-executed First Amendment to Retention and Success Bonus Agreement
(in form and substance approved by FMIB as of the date of this Agreement), dated
as of the date of this Agreement but effective as of the Closing Date, which
amends the respective current Retention and Success Bonus Agreement to which
such individual is a party.

 

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Section 5.14.        Operating Functions. FMAR, FMBank and the Bank Subsidiaries
shall cooperate with FMIB in connection with planning for the efficient and
orderly combination of FMBank and FMIB and the operation of FMBank after the
Merger. Without limiting the foregoing, FMBank shall provide office space and
support services (and other reasonably requested support and assistance) in
connection with the foregoing, and senior officers of FMAR, FMBank and FMIB
shall meet from time to time as FMIB may reasonably request to review the
financial and operational affairs of FMBank, and FMBank shall give due
consideration to FMIB’s input on such matters, with the understanding that,
notwithstanding any other provision contained in this Agreement, (a) FMIB shall
not under any circumstance have any right, or be permitted, to exercise control
of FMBank or any Bank Subsidiaries prior to the consummation of the Merger, (b)
neither FMAR nor FMBank shall be under any obligation to act in a manner that
could reasonably be deemed to constitute anti-competitive behavior under federal
or state antitrust Legal Requirements, and (c) neither FMAR nor FMBank shall be
required to agree to any material obligation that is not contingent upon the
consummation of the Merger.

 

Section 5.15.        DIP Financing.

 

(a)         Simultaneously with commencement of the Bankruptcy Case and pursuant
to that certain Super-Priority Debtor-in-Possession Credit Agreement between
FMIB as lender and FMAR as borrower, attached hereto as Exhibit A (the “DIP Loan
Agreement”), FMIB will, subject to Section 5.15(b) below, provide to FMAR up to
Two Million Five Hundred Thousand Dollars ($2,500,000) as Debtor in Possession
financing (the “DIP Loan”) in order to permit FMAR to pay the reasonable and
documented out-of-pocket third party fees and expenses actually incurred in
connection with the Contemplated Transactions and the Bankruptcy Case.

 

(b)         The DIP Loan Agreement will become effective upon (i) approval by
the Bankruptcy Court and (ii) satisfaction of the conditions as set forth herein
and in the DIP Loan Agreement. All amounts outstanding under the DIP Loan
Agreement will become due and payable on the Maturity Date.

 

(c)          The obligations of FMAR under the DIP Loan Agreement will be
secured by a lien on substantially all of the assets of FMAR, including, without
limitation, a pledge of the FMBank Shares and Other Purchased Assets.  In
addition, the obligations of FMAR under the DIP Loan Agreement will be entitled
to super-priority administrative claim status pursuant to Section 364(c)(1) of
the Bankruptcy Code.

 

(d)         The Auction Procedures Order shall provide that if the Bankruptcy
Court enters an order approving an Alternative Transaction, then on the first
Business Day following entry of the Alternative Transaction Order, FMAR shall
pay to FMIB, in accordance with wire transfer instructions provided by FMIB,
from the Overbidder’s Deposit of the Successful Bidder, an amount equal to all
obligations of FMAR then outstanding under the DIP Loan, which payment shall be
irrevocable and free and clear of all Encumbrances.  No Qualified Bid may
contain any provision that purports to alter or restrict the foregoing. The
Companies shall not reduce or otherwise alter the Overbidder’s Deposit required
of any Qualified Bidder under the Auction Procedures or the Auction Procedures
Order without the prior written consent of FMIB. 

 

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For the avoidance of doubt, in the event the Overbidder’s Deposit of the
Successful Bidder is insufficient to satisfy in full all obligations owing under
the DIP Loan Agreement, FMAR will pay the remainder in full as promptly as
possible from the proceeds of the substitute DIP Loan facility provided by the
Successful Bidder or from any other source, including the proceeds of the sale
to the Successful Bidder.  Unless otherwise defined in this Agreement,
capitalized terms as used in this subparagraph have the meaning set forth in
Exhibit C hereto.

 

Section 5.16.        Payment of the Broker Fees. At the Closing (immediately
after the effective time of the Merger), subject to the receipt of customary
release letters from the Broker in favor of the Parties in form and substance
reasonably satisfactory to the Parties, FMBank shall pay to the Broker the
Broker Fees in the amount of Two Million Dollars ($2,000,000) in full
satisfaction of all obligations of FM Bank or any Bank Subsidiary in connection
with any engagement letters or other agreements of FMBank or any Bank Subsidiary
with the Broker, including any agreement to which FMAR and FM Bank are both
parties, and FMAR will cause the Broker to deliver to FMBank, the Bank
Subsidiaries and FMIB a “pay off letter” in respect thereof in form and
substance reasonably satisfactory to FMIB.

 

Section 5.17.        Stalking Horse Bidder Fee. In consideration for FMIB
serving as the stalking horse bidder, making a valuable offer for the FMBank
Shares and the Other Purchased Assets, creating a bidding framework for higher
and better offers, and agreeing to effect the Equity Contribution, and this
Agreement being subject to termination in the event that the Companies receive a
higher and better bid consistent with the Auction Procedures, and regardless of
whether or not FMIB makes any matching or competing bids, the Companies shall
pay to FMIB a stalking horse bidder fee (the “Stalking Horse Bidder Fee”) in an
aggregate amount equal to the sum of (i) One Million Dollars ($1,000,000), of
which:  Seven Hundred Fifty Thousand Dollars ($750,000) shall be payable by
FMBank, and Two Hundred fifty Thousand Dollars ($250,000) shall be payable by
FMAR; and (ii) an expense reimbursement of all reasonable and documented fees
and expenses incurred by FMIB and the Investors in connection with the
Contemplated Transactions, including but not limited to, legal, accounting, due
diligence and other fees and expenses associated with the preparation of its
bid, not to exceed One Million Seven Hundred Fifty Thousand Dollars ($1,750,000)
(the “Expense Reimbursement”). The Stalking Horse Bidder Fee shall be payable to
FMIB in full in cash (in accordance with wire transfer instructions to be
provided by FMIB) on the first Business Day following entry of an order by the
Bankruptcy Court approving an Alternative Transaction. The Parties intend that
the Stalking Horse Bidder Fee shall be treated as a superpriority administrative
expense in the Bankruptcy Case.

 

The Companies acknowledge and agree that: (i) the approval of the Stalking Horse
Bidder Fee is an integral part of the transactions contemplated by this
Agreement; (ii) in the absence of the Companies’ obligation to pay the Stalking
Horse Bidder Fee, FMIB would not have entered into this Agreement; (iii) the
entry of FMIB into this Agreement is necessary for preservation of the estate of
the Companies and is beneficial to the Companies because, in the Companies’
business judgment, it will enhance the Companies’ ability to maximize the value
of FMAR’s assets for the benefit of its creditors and other stakeholders; (iv)
the Stalking Horse Bidder Fee is reasonable in relation to FMIB’s expenses
incurred in, and FMIB’s lost opportunities resulting from the time spent,
pursuing the Contemplated Transactions; and (v)

 

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time is of the essence with respect to the entry of the Auction Procedures Order
by the Bankruptcy Court, approving, among other things, the process by which
bids may be solicited in connection with the sale pursuant to Section 363 of the
Bankruptcy Code as contemplated in this Agreement. The Companies’ agreement to
pay the Stalking Horse Bidder Fee in accordance with the terms of this Agreement
is subject to Bankruptcy Court approval, which approval shall be set forth in
the Auction Procedures Order. The Auction Procedures Order shall provide,
without limitation, that the Companies are authorized and directed to pay the
Stalking Horse Bidder Fee to FMIB in full in cash, in accordance with the terms
of this Agreement without further order of the Bankruptcy Court, which payment
shall be indefeasible and free and clear of all Encumbrances.

 

Section 5.18.        Debtor-in-Possession.  During the pendency of the
Bankruptcy Case, FMAR shall continue to operate its business as
debtor-in-possession pursuant to the Bankruptcy Code.

 

Section 5.19.        The Sale Motion. On or within one (1) Business Day
following the Petition Date, FMAR shall file a sale motion with the Bankruptcy
Court (the “Sale Motion”) seeking relief from the Bankruptcy Court in a form and
substance reasonably acceptable to FMIB, including, without limitation, the
following:

 

(a)         Hearing to approve the Auction Procedures and entry of the Auction
Procedures Order no later than twenty-five (25) days following the Petition
Date;

 

(b)         Bid Deadline no later than thirty (30) days following the entry of
the Auction Procedures Order;

 

(c)          Auction held no later than five (5) days following the Bid
Deadline;

 

(d)         Sale Hearing to take place no later than two (2) days following the
Auction, or, if there are no Qualified Overbidders, no later than five (5) days
following the Bid Deadline;

 

(e)          Requesting entry of the Sale Order, including provisions
authorizing and approving the sale, assignment and transfer of the Other
Purchased Assets to FMBank (including the sale, assignment and assumption of the
Assumed Bank Related Contracts, if any), free and clear of all Encumbrances, and
the Acquisition and Merger contemplated herein, including the merger of FMIB
with and into FMBank with FMBank being the surviving Person, the transfer of the
FMBank Shares outstanding prior to the Merger, free and clear of all
Encumbrances, and the Acquisition of all FMBank Shares by the Investors in the
Merger, free and clear of all Encumbrances;

 

(f)          Subject to the Bankruptcy’s Court waiver of Bankruptcy Rule 6004,
confirmation that FMIB and the Companies may cause the Closing to occur as soon
as reasonably practicable after the entry of the Sale Order; and

 

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(g)          Approval of findings of fact and conclusions of law in the Sale
Order reasonably similar to,  but not limited to, the following:

 

(i)           the Notice of Sale, and the parties who were served with copies of
such Notice, were in compliance with Sections 102(1) and 363 of the Bankruptcy
Code and Bankruptcy Rules 2002, 6004, and 9014 and any other applicable
provision of the Bankruptcy Code, the Bankruptcy Rules, or any local bankruptcy
rule governing the sale of assets free and clear of Encumbrances, or as directed
by the Bankruptcy Court as long as the Bankruptcy Court finds that such notice
is sufficient under the circumstances;

 

(ii)          the requirements imposed by Section 363(f) of the Bankruptcy Code
for the sale of the FMBank Shares and the assignment and transfer of the Other
Purchased Assets, free and clear of Encumbrances, have been satisfied;

 

(iii)         the Successful Bidder is a purchaser of FMBank and the Other
Purchased Assets in “good faith” pursuant to Section 363(m) of the Bankruptcy
Code, and the sale pursuant to the Sale Order (the “Sale”) is entitled to the
protections of Section 363(m);

 

(iv)        the Successful Bidder and the Companies did not engage in any
conduct which would allow this Agreement to be set aside pursuant to Section
363(n) of the Bankruptcy Code;

 

(v)         the Assumed Bank Related Contracts have been assumed and assigned to
the Successful Bidder pursuant to Section 365 of the Bankruptcy Code;

 

(vi)        the Companies and FMIB are authorized and directed to proceed with
the Merger in accordance with the provisions of this Agreement;

 

(vii)       pursuant to Sections 105 and 363 of the Bankruptcy Code, any
creditors of the Companies or their Subsidiaries are prohibited from taking any
actions against the Successful Bidder or the Companies in respect of FMBank
Shares or the Other Purchased Assets; and

 

(viii)        the terms and provisions of the Sale are fair and reasonable.

 

Section 5.20.        The Auction Procedures.

 

(a)         The Auction Procedures and the Auction Procedures Order shall be in
form and substance reasonably acceptable to FMIB.

 

(b)         Subject to the Auction Procedures, to be qualified to receive any
confidential Information from the Companies, a potential bidder must submit to
the Companies, prior to the receipt of any such Information, an executed
confidentiality agreement which shall inure to the benefit of the Successful
Bidder, in a form and substance acceptable to the Companies and on terms no more
favorable than those provided by FMAR in the confidentiality agreement dated
November 25, 2013 between FMAR and RKJS, Inc. To be qualified (i) to be an

 

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Overbidder (defined below), and (ii) to participate in the Auction, a potential
bidder must submit to the Companies before the Bid Deadline (defined below)
current audited financial statements and the latest unaudited financial
statements of the potential bidder or, if such potential bidder is an entity
formed for the purpose of acquiring the FMBank Shares and the Other Purchased
Assets, current audited financial statements and the latest unaudited financial
statements of the equity holders or sponsors of such potential bidder who will
guarantee the obligations of such potential bidder, or such other form of
financial disclosure and/or credit quality support or enhancement, if any, that
will allow FMAR to make a reasonable determination as to such potential bidder’s
financial and other capabilities to consummate the Sale (including, but not
limited to, the ability to obtain all necessary regulatory approvals and to fund
the Equity Contribution (or the financial equivalent thereof) for the ownership
of the FMBank Shares and the Other Purchased Assets on a timely basis).

 

(c)          Subject to the Auction Procedures, based on the materials received
by it, FMAR shall determine whether any potential bidder that has timely
submitted the materials referred to in Section 5.20(b) above qualifies to submit
a bid (such qualifying potential bidder, an “Overbidder”).

 

(d)         Subject to the Auction Procedures, in order to participate at the
Auction, an Overbidder must submit the following to the Companies:

 

(i)          a proposed acquisition agreement (the “Competing Acquisition
Agreement”) executed by the Overbidder, along with a redlined, marked copy
showing all changes between the Competing Acquisition Agreement and this
Agreement, that: (A) is on substantially the same terms and conditions as those
in this Agreement (provided that a Competing Acquisition Agreement may provide
for a structure for the Acquisition other than a merger); (B) provides for a
purchase price to be paid to FMAR that exceeds the Purchase Price by at least
the amount of the Stalking Horse Bidder Fee (for purposes hereof, the amount of
the Expense Reimbursement shall be deemed to be the maximum amount set forth in
Section 5.17 hereof) plus Two Hundred Fifty Thousand Dollars ($250,000) (such
aggregate amount of the Purchase Price, the Stalking Horse Bidder Fee, and Two
Hundred Fifty Thousand Dollars ($250,000), the “Minimum Overbid”); (C) will
result in a recapitalization of FMBank of at least the Recapitalization Amount
(or the financial equivalent thereof); (D) remains irrevocable until the earlier
of the closing of a purchase of the FMBank Shares and the Other Purchased Assets
by the Successful Bidder and April 30, 2014, or such later date as may be agreed
by the Companies and the Overbidder (the “Overbidder Outside Date”); (E)
disclaims any right of the Overbidder to receive any fee analogous to the
Stalking Horse Bidder Fee, any transaction or breakup fee, expense reimbursement
or similar fee or payment; (F) contains a proposed closing date that is not
later than the Overbidder Outside Date; and (G) provides for a portion of the
Successful Bidder’s Overbidder’s Deposit to be applied, no later than one
Business Day after the Bankruptcy Court’s approval of the Successful Bid, to pay
in full all obligations outstanding under the DIP Loan Agreement, including all
accrued interest, costs, expenses and fees contemplated thereunder;

 

(ii)         a proposed replacement postpetition financing facility (the
“Replacement DIP Facility”) to replace the DIP Loan on terms that are
substantially the same, and at least as favorable to the Debtor, as the terms of
the DIP Loan Agreement.  In order to

 

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satisfy this requirement, the Overbidder shall include an executed mark-up of
the DIP Loan Agreement, along with an electronic mark-up showing all changes to
the DIP Loan Agreement.

 

(iii)        a cashier’s check made payable to the order of FMAR, or wire
transfer to FMAR, in either case, to be deposited into a separate
debtor-in-possession account, in the amount of (A) the Stalking Horse Bidder Fee
(for purposes hereof, the amount of the Expense Reimbursement shall be deemed to
be the maximum amount set forth in Section 5.17 hereof), plus (B) the Minimum
Overbid amount of $250,000, plus (C) the Maximum DIP Loan Amount (such sum being
referred to herein as the “Overbidder’s Deposit”), which will be retained by
FMAR as a nonrefundable good faith deposit for application against the purchase
price at the closing of the transaction or returned to the Overbidder in
accordance with Section 5.20(m) or otherwise applied as set forth in Section
5.20(n);

 

(iv)        reasonable information establishing that the Overbidder has the
financial ability to pay the purchase price set forth in the Competing
Acquisition Agreement and close the transactions contemplated thereby; and

 

(v)         be accompanied by reasonable information establishing that the
Overbidder is capable of obtaining all required regulatory approvals to perform
all of its obligations under the Competing Acquisition Agreement and to close
the transactions contemplated thereby not later than the Overbidder Outside
Date.

 

(e)           To be a “Qualified Bid,” a bid received from an Overbidder must
meet the requirements set forth above. FMAR will have a right to determine
whether a bid received from an Overbidder (and any bid submitted at the Auction
by an Overbidder) meets such requirements if, in the good faith opinion of FMAR,
after consulting with its investment bankers and financial and legal advisors,
(i) the requirements set forth above are met, (ii) such bid is determined not to
be materially more burdensome or conditional than the terms of this Agreement
and (iii) FMAR reasonably believes that such bid can be consummated before the
Overbidder Outside Date if selected as a Successful Bid. FMIB’s Acquisition
proposal (as set forth in this Agreement), and bids received from FMIB at the
Auction, shall also be Qualified Bids.

 

(f)            FMIB, and any entity that is determined to have submitted a
Qualified Bid by FMAR, shall each be deemed a “Qualified Bidder” and may bid for
the FMBank Shares and Other Purchased Assets at the Auction. Only Qualified
Bidders and their duly authorized representatives will be permitted to attend
and participate in the Auction. FMAR shall, promptly upon receipt of any
overbid, provide copies of such overbid to FMIB.

 

(g)           Subject to the terms of the Auction Procedures, the deadline for
submitting bids by an Overbidder shall be five (5) days before the Auction (the
“Bid Deadline”).

 

(h)           Subject to the terms of the Auction Procedures, if on the Bid
Deadline, no conforming Qualified Bid is received from a Qualified Overbidder,
FMAR shall not conduct an Auction; FMIB shall be deemed the Successful Bidder;
and FMAR shall proceed to request at the Sale Hearing that the Bankruptcy Court
approve this Agreement, including the Merger and the sale, assignment and
transfer of the Other Purchased Assets, and the sale, assumption and

 

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assignment of the Assumed Bank Related Contracts, and request that the Sale
Order be entered by the Bankruptcy Court and that the Sale Order shall be made
immediately effective upon entry, notwithstanding the provisions of Rule 6004(h)
of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) and Rule
62(g) of the Federal Rules of Civil Procedure.

 

(i)            Subject to the terms of the Auction Procedures, if on the Bid
Deadline, one or more timely conforming Qualified Bids from one or more
Qualified Overbidders are received, the Companies shall conduct an auction of
the FMBank Shares and Other Purchased Assets (the “Auction”), in which FMIB and
all Qualified Overbidders may participate.

 

(j)          Subject to the terms of the Auction Procedures, the following
procedures will govern the Auction:

 

(i)          all Qualified Overbidders shall be deemed to have consented to the
exclusive and core jurisdiction of the Bankruptcy Court and to have waived any
right to jury trial in connection with any disputes relating to the Auction, the
Merger and sale, assignment and transfer of the Other Purchased Assets, and any
other matter relating to, or contemplated by, this Agreement, any Competing
Acquisition Agreement or the Sale Motion;

 

(ii)         in valuing bids, and for purposes of calculating each successive
overbid by FMIB at the Auction, the Companies shall deem each bid by a Qualified
Overbidder to have been automatically reduced by the amount of the Stalking
Horse Bidder Fee (and for purposes hereof, the amount of the Expense
Reimbursement shall be deemed to be the maximum amount set forth in Section 5.17
hereof);

 

(iii)         bidding will start at the amount of the highest bid submitted by a
Qualified Overbidder, as determined by FMAR;

 

(iv)        each subsequent bid shall be in increments of no less than Two
Hundred Fifty Thousand Dollars ($250,000);

 

(v)         FMIB shall have the right to credit-bid any and all obligations
outstanding under the DIP Loan Agreement;

 

(vi)        immediately before concluding the Auction, the Companies shall: (a)
review each Qualified Bid for its financial and contractual terms and the
factors relevant to the Sale process and the best interests of the Companies’
estate, its creditors and other parties-in-interest therein; and (b) determine
and identify the highest or otherwise best Qualified Bid (the “Successful Bid”)
and the Qualified Bidder submitting such bid (the “Successful Bidder”);

 

(vii)       if, at the Auction’s conclusion and consistent with the Auction
Procedures’ terms, FMIB’s final bid is greater than the highest bid made by any
Qualified Overbidder, the Bankruptcy Court shall approve this Agreement,
including the Acquisition, and the amount of FMIB’s final bid shall constitute
the Purchase Price under this Agreement; and

 

(viii)      FMAR may elect to deem a final bid to be the highest or otherwise
best bid, notwithstanding the receipt of an apparently higher bid from an
Overbidder, if FMAR

 

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reasonably concludes that such final bid is more beneficial to its bankruptcy
estate and stakeholders.

 

(k)           FMIB has standing and is deemed to be a party in interest with
standing to be heard on any motion, hearing or other matter related to this
Agreement or any bid, or other sale of any FMBank Shares and Other Purchased
Assets.

 

(l)            A hearing to consider approval of the Sale to the Successful
Bidder (or to approve this Agreement if no Auction is held or the Successful Bid
is by FMIB) will take place no later than forty (40) days after entry of the
Auction Procedures Order in the Bankruptcy Court (the “Sale Hearing”).

 

(m)          Except as otherwise provided in the Auction Procedures, or as set
forth below with respect to any Successful Bidder, the Overbidder’s Deposit for
all Overbidders required to submit such a deposit under the Auction Procedures
shall be returned within three (3) Business Days after the Auction concludes,
or, if no Auction is held, within three (3) days after the Sale Hearing.

 

(n)           On the first Business Day following entry of the Sale Order
relating to an Alternative Transaction with a Successful Bidder other than FMIB,
a portion of the Overbidder’s Deposit shall be paid by FMAR to the DIP Loan
lender to indefeasibly pay in full all outstanding obligations under the DIP
Loan Agreement (including all principal, accrued interest and fees contemplated
thereby), to satisfy all obligations of FMAR under the DIP Loan Agreement, and
the DIP Loan lender shall have no further obligations of any kind under the DIP
Loan Agreement. Contemporaneously with such payment, a portion of the
Overbidder’s Deposit of the Successful Bidder shall be paid to FMIB in
accordance with Section 5.17 hereof. The remaining amount of the Overbidder’s
Deposit of the Successful Bidder shall be held until the closing of such
transaction and applied in accordance with the Successful Bid. If any sale to a
Successful Bidder other than FMIB fails to close on or before the Overbidder
Outside Date, such Successful Bidder’s Overbidder’s Deposit shall be forfeited
to, and retained by, the Companies.

 

Section 5.21.        Bankruptcy Efforts. FMIB and the Companies shall use their
commercially reasonable best efforts to cause the Bankruptcy Court to (a) enter
the Auction Procedures Order and the Sale Order, and (b) approve the Stalking
Horse Bidder Fee.

 

Section 5.22.        Non-Solicitation of Competing Bids. Except in accordance
with the Auction Procedures Order (once entered by the Bankruptcy Court) and
except to the extent the Companies reasonably believe is required to fulfill the
fiduciary duties owed to FMAR or FMBank, the Companies shall not, and shall
cause their Affiliates and representatives not to, (a) solicit or negotiate with
any Person (and to cease immediately any such ongoing activity), or enter into
any agreement or understanding with respect to, or approve or recommend, any
direct or indirect sale of any equity interest in, or any material portion of
the assets of, FMAR or FMBank or any extraordinary corporate transaction
directly or indirectly involving FMAR or FMBank or (b) provide any Person (other
than FMIB and its Affiliates, agents and representatives) with access to the
books, records, operating data, contracts, documents or other information
relating to FMBank. The Companies shall promptly notify FMIB of any proposals or
offers from any third party to acquire, directly or indirectly, all or any
substantial portion of the

 

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assets, properties, rights and interests of FMAR or FMBank received by the
Companies after the date hereof until the Bankruptcy Court shall have entered
the Auction Procedures Order, and the Companies shall promptly communicate to
FMIB the material terms of such offer or bid. From and after the date of this
Agreement, the Company shall provide FMIB with the names of Persons who enter
into a confidentiality agreement with the Companies with respect to a potential
transaction involving FMBank as provided for in the Auction Procedures within
two (2) Business Days of entry into the same. FMIB shall treat the names of the
Persons entering into such confidentiality agreements as Information and in
accordance with the provisions of Section 5.06 hereof.

 

Section 5.23.        Bankruptcy Filings. From and after the date of this
Agreement until the Closing, each party to this Agreement shall use its
reasonable best efforts to provide the other parties with a copy of such papers
or pleadings as soon as practicable before filing any papers or pleadings in the
Bankruptcy Case that relate in any way to this Agreement, the Sale, the Auction
Procedures, the Proposed Transaction, the Companies or FMIB.

 

Section 5.24.        Plan. The Companies covenant and agree that if the Sale
Order is entered, the terms of any plan of reorganization or liquidation
submitted, supported or sponsored by FMAR for confirmation shall not conflict
with, supersede, abrogate, nullify, modify or restrict the terms of this
Agreement and the rights of FMIB hereunder, or in any way prevent or interfere
with the consummation or performance of the transactions contemplated by this
Agreement, including any transaction that is approved pursuant to the Sale
Order.

 

Section 5.25.        Appeal. If the Sale Order or the Auction Procedures Order
is appealed by any Person, or petition for certiorari or motion for rehearing,
reconsideration or rehearing is filed with respect thereto, the Companies agree
to take all action as may be reasonably necessary to defend against and oppose
such appeal, petition or motion.

 

Section 5.26.        Update of Representations. If between the date of this
Agreement and the Closing Date, any event occurs (which, for the avoidance of
doubt shall include the Companies first obtaining Knowledge of an event
occurring prior to the date of this Agreement) which would make any
representation or warranty of the Companies in ARTICLE III hereof untrue or
inaccurate in all respects (in the case of any representation or warranty
qualified by materiality or Material Adverse Change ) or in all material
respects (in the case of any representation or warranty not qualified by
materiality or Material Adverse Change ), then the Companies shall promptly
notify FMIB of such events in writing (together with all material information
relating thereto).  If between the date of this Agreement and the Closing Date,
any event occurs (which, for the avoidance of doubt shall include FMIB first
obtaining Knowledge of an event occurring prior to the date of this Agreement)
which would make any representation or warranty of FMIB in ARTICLE IV hereof
untrue or inaccurate, then FMIB shall promptly notify the Companies of such
events in writing (together with all material information relating thereto).

 

Section 5.27.        Name Change.  Within five (5) days after the entry of the
Sale Order, but subject to Bankruptcy Court approval, FMAR shall change its name
to a name that no longer has any variation of “First Mariner” or “1st Mariner,”
or any words that would be associated with such words.

 

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Section 5.28.                         Employee Transition. The Parties shall use
reasonable efforts to address issues related to employee transition, if
necessary.

 

ARTICLE VI.

CONDITIONS TO CLOSING

 

Section 6.01.                         Conditions to the Obligations of All
Parties. The obligations of each Party to consummate the Contemplated
Transactions shall be subject to the fulfillment, at or prior to Closing, of
each of the following conditions:

 

(a)                            Government and Other Approvals. FMIB shall have
received all of the FMIB Required Approvals, and the Companies shall have
received all of the Company Required Approvals, which approvals shall not impose
any Burdensome Condition in the reasonable opinion of FMIB, and all applicable
waiting periods having expired. Further, the approvals and the Contemplated
Transactions shall not have been contested or threatened to be contested by any
Governmental Authority.

 

(b)                           Bankruptcy Court Approvals. The Bankruptcy Court
shall have entered (i) the Auction Procedures Order in substantially the same
form as Exhibit B as a Final Order, or in such other form and manner as may be
reasonably acceptable to FMIB, which order shall include, among other provisions
reasonably acceptable to FMIB, provisions (A) approving the bidding procedures
in substantially the same form as Exhibit C, (B) approving the Stalking Horse
Bidder Fee, (C) scheduling an Auction and a Sale Hearing, and (D) approving the
form and manner of notice of the Sale Motion and Sale Hearing, and (ii) the Sale
Order in substantially the same form as Exhibit D as a Final Order, or in such
other form and manner as may be reasonably acceptable to FMIB, which order shall
include, among other provisions acceptable to FMIB, provisions (A) finding that
notice of Sale Hearing was given in accordance with the Bankruptcy Code and
constitutes such notice as is appropriate under the particular circumstances,
(B) finding that FMIB is a “good faith” purchaser entitled to the protections
afforded by §363(m) of the Bankruptcy Code, (C) finding that FMIB’s acquisition
of the FMBank Shares and Other Purchased Assets pursuant to this Agreement shall
be free and clear of all Encumbrances, and (D) approving the transactions
proposed by this Agreement.

 

(c)                             No Litigation. No action shall have been taken,
and no statute, rule, regulation or order has been promulgated, enacted,
entered, enforced or deemed applicable to the Agreement by any Governmental
Authority or by any court, including the entry of a preliminary or permanent
injunction, that would (i) make this Agreement or any other agreement
contemplated hereby, or the transactions contemplated hereby or thereby illegal,
invalid or unenforceable, (ii) prohibit, restrict, make illegal or impose
material limits on the ability of any Party to this Agreement to perform its
obligations and agreements under this Agreement or any other agreement
contemplated hereby, or consummate the transactions contemplated hereby or
thereby, or (iii) if this Agreement or any other agreement contemplated hereby,
or the transactions contemplated hereby or thereby are completed, subject FMBank
or any officer, director, shareholder or employee of FMBank to criminal or civil
Liability.  Further, no action or proceeding before any court or Governmental
Authority or by any other Person shall have been

 

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threatened, instituted or pending that would reasonably be expected to result in
any of the consequences referenced in clauses (i) through (iii) above.

 

Section 6.02.                         Conditions to the Obligations of FMIB. The
obligations of FMIB to consummate the Contemplated Transactions are subject to
the satisfaction, at or prior to Closing, of each of the following conditions,
which may be waived in whole or in part by FMIB:

 

(a)                            Representations and Warranties. All
representations and warranties made by the Companies in this Agreement or in any
document or schedule delivered to FMIB in connection with this Agreement shall
be true and correct in all respects (in the case of any representation or
warranty qualified by materiality or Material Adverse Change) or in all material
respects (in the case of any representation or warranty not qualified by
materiality or Material Adverse Change) as of the date of this Agreement and as
of the Closing with the same force and effect as if such representations and
warranties were made as of the Closing, except with respect to those
representations and warranties specifically made as of an earlier date (in which
case such representations and warranties must have been true as of such earlier
date).

 

(b)                            Performance of Obligations. The Companies shall
have duly performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed by or
complied with by the Companies at or before the Closing; provided, that, with
respect to agreements, covenants and conditions that are qualified by
materiality, the Companies shall have performed such agreements, covenants and
conditions, as so qualified, in all respects.

 

(c)                             No Material Adverse Change. From the date of
this Agreement, there shall not have occurred any Material Adverse Change, nor
shall any event or events have occurred that, individually or in the aggregate,
with or without the lapse of time, could reasonably be expected to result in a
Material Adverse Change.

 

(d)                            Deliverables. The Companies shall have provided,
or caused to be provided, to FMIB the documents required to be delivered by the
Companies as set forth in Section 7.01.

 

(e)                             KPMG Opinion.  FM Bank shall have received an
opinion from KPMG (dated as of the Closing Date), reasonably satisfactory to
FMIB, to the effect that, (i) based on the most current information available
prior to the Closing as provided by FMAR and FMBank to KPMG, it is more likely
than not that Section 382(l)(6) of the Code will apply to the Contemplated
Transactions such that the “value” of FMBank (within the meaning of
Section 382(e) of the Code) for purposes of calculating the “section 382
limitation” (within the meaning of Section 382(b) of the Code) shall include any
and all capital contributed by FMIB to FMBank pursuant to, and in connection
with, the Contemplated Transactions, and (ii) an “ownership change” (within the
meaning of Section 382 of the Code) has not occurred in the three (3) years
prior to the Closing.

 

(f)                              Regulatory Orders. From the date of this
Agreement until the Closing Date, (i) FMBank shall not have been subject to any
new commitment letter, memorandum of understanding, cease and desist order,
written agreement or other formal or informal

 

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administrative action with any Governmental Authority, and, except with respect
to any requirement to meet specified capital requirements, FMBank shall have
been in material compliance with the requirements of any commitment letter,
memorandum of understanding, cease and desist order, written agreement or other
formal or informal administrative action in existence as of the date of this
Agreement, and (ii) there shall not have been any, and there are no, actions or
proceedings pending or, to the Knowledge of the Companies, threatened against
FMBank by or before any such Governmental Authority.

 

(g)                             Bank D&O Policies. FMBank shall have purchased
and obtained, and shall have fully paid the premiums for, the Bank D&O Tail
Policy in accordance with Section 5.11(b) hereof.

 

(h)                            Delivery of Resignations and/or Termination
Evidence.  FMIB shall have received from the Companies the items required by
Section 5.13.

 

Section 6.03.                         Conditions to the Obligations of the
Companies. The obligations of the Companies to consummate the Contemplated
Transactions under this Agreement are subject to the satisfaction, at or prior
to Closing, of each of the following conditions, which may be waived in whole or
in part by the Companies:

 

(a)                            Representations and Warranties. All
representations and warranties made by FMIB in this Agreement or in any document
or schedule delivered to the Companies in connection with this Agreement shall
be true and correct in all respects (in the case of any representation or
warranty qualified by materiality or Material Adverse Change) or in all material
respects (in the case of any representation or warranty not qualified by
materiality or Material Adverse Change) as of the date of this Agreement and as
of the Closing with the same force and effect as if such representations and
warranties were made as of the Closing, except with respect to those
representations and warranties specifically made as of an earlier date (in which
case such representations and warranties must have been true as of such earlier
date).

 

(b)                            Performance of Obligations. FMIB shall have duly
performed and complied in all material respects with all agreements, covenants
and conditions required by this Agreement to be performed by or complied with by
FMIB at or before the Closing; provided, that, with respect to agreements,
covenants and conditions that are qualified by materiality, FMIB shall have
performed such agreements, covenants and conditions, as so qualified, in all
respects.

 

(c)                             Deliverables. FMIB shall have provided, or
caused to be provided, to the Companies the documents required to be delivered
by FMIB as set forth in Section 7.02.

 

ARTICLE VII.

CLOSING

 

Section 7.01.                         Actions to be Taken at the Closing by the
Companies. At the Closing, the Companies will deliver to FMIB such documents and
certificates contemplated to be delivered pursuant to this Agreement or
reasonably necessary to carry out the terms of this

 

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Agreement and to evidence the Contemplated Transactions, including the following
(all of such actions constituting conditions precedent to FMIB’s obligations to
close hereunder):

 

(a)                                 The Articles of Merger, duly executed by
FMBank, and one or more certificates evidencing and representing the FMBank
Shares, duly endorsed by FMAR in blank or accompanied by stock powers signed by
FMAR in blank, and/or an affidavit of lost certificate, in form and substance
reasonably satisfactory to FMIB, with respect to any certificate representing
FMBank Shares that has been lost;

 

(b)                                 All conveyance, transfers, assignments,
instruments or other documents which are necessary to assign and transfer the
Other Purchased Assets (including the sale, assignment and assumption of the
Assumed Bank Related Contracts, if any, and the assignment and assumption of the
Other Bank Related Contracts, if any) to FMBank, in either case, as contemplated
by this Agreement, in such form and content as FMIB may require, acting
reasonably;

 

(c)                                  True, correct and complete copies of
FMBank’s Constituent Documents and all amendments thereto, duly certified (as
applicable) as of a recent date by the MDB;

 

(d)                                 True, correct and complete copies of the
Constituent Documents of each of the Bank Subsidiaries, certified as of a recent
date by the applicable Governmental Authority of the state of their
incorporation;

 

(e)                                  Good standing and existence certificates
for FMBank and each of the Bank Subsidiaries, dated as of a recent date, issued
by the appropriate state officials, duly certifying as to the existence and good
standing of FMBank in Maryland;

 

(f)                                   A certificate, dated as of a recent date,
issued by the FDIC, duly certifying that the deposits of FMBank are insured by
the FDIC pursuant to the FDIA;

 

(g)                                  A certificate, dated as of the Closing
Date, signed by the Secretary or an Assistant Secretary of FMAR, pursuant to
which FMAR will certify: (i) the due adoption by its Board of Directors of
corporate resolutions attached to such certificate authorizing the execution and
delivery of this Agreement and the other agreements and documents contemplated
hereby and the taking of all actions contemplated hereby and thereby; (ii) the
incumbency and true signatures of those officers of FMAR duly authorized to act
on its behalf in connection with the Contemplated Transactions and to execute
and deliver this Agreement and other agreements and documents contemplated
hereby and the taking of all actions contemplated hereby and thereby on behalf
of FMAR; and (iii) that the copy of the Bylaws of FMAR attached to such
certificate is true and correct and such Bylaws have not been amended except as
reflected in such copy;

 

(h)                                 A certificate duly signed by the Secretary
of FMBank, acting solely in his or her capacity as an officer of FMBank,
pursuant to which FMBank will certify that the copy of FMBank’s Bylaws attached
to such certificate is true and correct and such Bylaws have not been amended
except as reflected in such copy;

 

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(i)                                     A certificate, dated as of the Closing
Date, signed by the chief executive officer of FMAR, acting solely in his or her
capacity as an officer of FMAR, as applicable, pursuant to which FMAR will
certify that: (i) the conditions set forth in Sections 6.02(a) and (b) have been
satisfied; and (ii) there has been no Material Adverse Change since
September 30, 2013.

 

(j)                               A filed copy of the Sale Order;

 

(k)                            All consents required from third parties to
complete the Contemplated Transactions, including those listed on Disclosure
Schedule 3.09 and Schedule 4.05;

 

(l)                                Endorsements on terms reasonably satisfactory
to FMIB with respect to any insurance policies included in the Other Purchased
Assets that, among other things, confirm the assignment of such policies, and
provide that FMBank and each Bank Subsidiary will have the right to give notice
with respect to, control and receive the proceeds of any claims under such
policies relating to FMBank and any Bank Subsidiary;

 

(m)                        Evidence of mutual termination of all existing
incentives sponsored by or to which FMAR or FMBank is a party that are
applicable to senior management officials of FMBank, including, but not limited
to, stock option plans and employment contracts, shall be provided to FMIB. All
such existing senior management incentives shall have been terminated by FMAR or
FMBank and each applicable senior management official of FMBank;

 

(n)                            Except as otherwise agreed by the FMIB in
writing, the written resignation letters of all of the officers and directors of
FMBank, which resignations shall be effective as of the Closing Date;

 

(o)                            The payoff letter in the form and substance
reasonably satisfactory to FMIB and the Companies from the Broker as set forth
in Section 5.16;

 

(p)                            A completed IRS Form 1128 (Application to Adopt,
Change, or Retain a Tax Year), duly executed by FMAR; and

 

(q)                            All other documents required to be delivered to
FMIB by the Companies under this Agreement, and all other documents,
certificates and instruments as are reasonably requested by FMIB or its counsel.

 

Section 7.02.                         Actions to be Taken at the Closing by
FMIB. At the Closing, FMIB will deliver to the Companies such documents and
certificates necessary to carry out the terms and provisions of this Agreement
and to evidence the Contemplated Transactions, including the following (all of
such actions constituting conditions precedent to the Companies’ obligations to
close hereunder):

 

(a)                                 The Articles of Merger, duly executed by
FMIB, and one or more wire transfers to an account designated by FMAR in the
amount of the Purchase Price;

 

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(b)                                 True, correct and complete copies of FMIB’s
Constituent Documents and all amendments thereto, duly certified (as applicable)
as of a recent date by the MDB;

 

(c)                                  Good standing and existence certificates
for FMIB, dated as of a recent date, issued by the appropriate state officials,
duly certifying as to the existence and good standing of FMIB in Maryland;

 

(d)                                 A certificate, dated as of the Closing Date,
signed by the Secretary of FMIB pursuant to which FMIB will certify (i) the due
adoption by the Board of Directors of FMIB of corporate resolutions attached to
such certificate authorizing the execution and delivery of this Agreement and
the other agreements and documents contemplated hereby and the taking of all
actions contemplated hereby and thereby; (ii) the incumbency and true signatures
of those officers of FMIB duly authorized to act on its behalf in connection
with the Contemplated Transactions and to execute and deliver this Agreement and
other agreements and documents contemplated hereby and the taking of all actions
contemplated hereby and thereby on behalf of FMIB; and (iii) that the copy of
the Bylaws of FMIB attached to such certificate is true and correct and such
Bylaws have not been amended except as reflected in such copy;

 

(e)                                  A certificate, dated as of the Closing
Date, signed by a duly authorized officer of FMIB, pursuant to which FMIB will
certify that the conditions set forth in Sections 6.03(a) and (b)  have been
satisfied; and

 

(f)                                   All other documents required to be
delivered to the Companies by FMIB under this Agreement.

 

Section 7.03.                         Concurrent Delivery. It shall be a
condition of the Closing that all matters of payment and execution and delivery
of documents, in each case, at the Closing by any Party to the other, pursuant
to the terms of this Agreement, shall be concurrent requirements and that
nothing will be complete at the Closing until everything required as a condition
precedent to the Closing shall have been paid, executed and delivered, as the
case may be.

 

Section 7.04.                         Sale, Assignment and Transfer of Other
Purchased Assets; Merger. Subject to the terms and conditions set forth in this
Agreement, and subject to the entry of a Sale Order, the sale, assignment and
transfer of the Other Purchased Assets (including the sale, assignment and
assumption of the Assumed Bank Related Contracts, if any, and the assignment and
assumption of the Other Bank Related Contracts, if any) to FMBank, and the
Merger, shall be deemed to take effect on the Closing Date.

 

Section 7.05.                         Time and Place of the Closing and Closing
Date. On a date mutually acceptable to FMIB and FMAR that is the later of
(a) the receipt of all necessary regulatory, corporate, and other approvals and
the expiration of any mandatory waiting periods, or (b) within (i) five
(5) Business Days of the entry of a Sale Order by the Bankruptcy Court as a
Final Order, or in such other form and manner as may be acceptable to FMIB and
FMAR, or (ii) two (2) Business Days of a transaction between the Companies and
the Successful Bidder failing to timely close (the “Closing Date”), a meeting
(the “Closing”) will take place at which the Parties to this Agreement will
exchange certificates, letters and other documents in order to determine whether
all of the conditions set forth in ARTICLE VI have been satisfied or waived or
whether

 

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any condition exists that would permit a Party to this Agreement to terminate
this Agreement. If none of the foregoing conditions then exists or if no Party
elects to exercise any right it may have to terminate this Agreement, then the
Parties will execute such documents and instruments as may be necessary or
appropriate in order to effect the Contemplated Transactions. The Closing will
take place at the offices of Venable LLP, 750 East Pratt Street, Baltimore,
Maryland 21202 at 10:00 a.m., or at such other time and place to which the
Parties may agree.  If the applicable Closing Date would occur during the first
10 Business Days of a month, at the election of FMIB, such closing may be
delayed until the twelfth (12th)  Business Day of such month.

 

ARTICLE VIII.

TERMINATION

 

Section 8.01.                         Termination.

 

(a)                                 In the event that the Closing has not
occurred on or before April 30, 2014, or such later date as may be agreed in
writing by the Parties (the “Outside Date”), either FMIB or the Companies may
terminate this Agreement, in which event the Parties will be released from all
obligations under this Agreement except that the Companies will not be released
from the obligation to pay the Stalking Horse Bidder Fee in accordance with
Section 5.17 hereof unless FMIB is in material breach of this Agreement;
provided, however, that the right to terminate this Agreement pursuant to this
Section 8.01(a) shall not be available to any party whose failure to perform
(including, in the case of the right of FMAR, FMBank’s failure to perform) any
obligation under this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur on or prior to such date. In
all events, the DIP Loan shall be repaid in accordance with the DIP Loan
Agreement as contemplated in Section 5.15 hereof.

 

(b)                                 This Agreement may also be terminated prior
to the Closing:

 

(i)                                     by the mutual consent of FMIB and the
Companies, duly authorized by the Board of Directors of each of FMIB and the
Companies;

 

(ii)                                  by either FMIB or the Companies, if FMIB
or any of its Affiliates received written notice by a Governmental Authority
that it will not grant (or intends to rescind or revoke if previously approved)
any of the FMIB Required Approvals or Company Required Approvals, or receives
written notice from or is otherwise advised by such Governmental Authority that
it will not grant any such FMIB Required Approval or Company Required Approval
on the terms contemplated by this Agreement without imposing any Burdensome
Condition;

 

(iii)                               by FMIB, if the Bankruptcy Court has not
entered the Auction Procedures Order, in a form reasonably satisfactory to FMIB,
within thirty (30) days of the Petition Date or if the Auction Procedures Order
has been entered but stayed;

 

(iv)                              by either FMIB or the Companies, if the
Bankruptcy Court declines to enter the Auction Procedures Order in a form
reasonably satisfactory to FMIB;

 

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(v)                                 by FMIB upon two (2) days’ prior written
notice by FMIB to the Companies, if the Bankruptcy Court fails to approve the
Stalking Horse Bidder Fee as part of the Auction Procedures Order; provided that
such notice of termination is provided to the Companies not later than the end
of the tenth Business Day following the entry of such Auction Procedures Order;

 

(vi)                              by FMIB (solely in the event any portion of
the DIP Loan has been advanced and is outstanding), if the DIP Loan Agreement
has been terminated or the outstanding loans thereunder have been accelerated in
accordance with the terms thereof, except if (a) payment in full of all
obligations thereunder has been made, or (b) such termination of the DIP Loan
Agreement is due to FMIB’s material breach of its obligations thereunder;

 

(vii)                           by the Companies, if FMIB fails to fund a
properly made request for a DIP Loan under Section 2.2 of the DIP Loan Agreement
within seven (7) Business Days of such request (provided that neither Company is
in “Default” of the DIP Loan Agreement);

 

(viii)                        by FMIB or the Companies, if the Bankruptcy Court
enters a Sale Order approving the Sale to a Qualified Overbidder, in which case,
the Companies shall pay the Stalking Horse Bidder Fee in accordance with
Section 5.17 hereof;

 

(ix)                              by FMIB, upon written notice to the Companies,
if FMIB is not in material breach of any of the terms of this Agreement, and
there has been a breach of any representation, warranty, covenant or agreement
made by FMAR or FMBank in this Agreement, or any such representation and
warranty shall have become untrue after the date of this Agreement, such that
the condition set forth in Section 6.02(a) or Section 6.02(b) would not be
satisfied and such breach is not curable or, if curable, is not cured within
thirty (30) days after written notice thereof is given by FMIB to the Companies;

 

(x)                                 by the Companies, upon written notice to
FMIB, if the Companies are not in material breach of any of the terms of this
Agreement, and there has been a breach of any representation, warranty, covenant
or agreement made by FMIB in this Agreement, or any such representation and
warranty shall have become untrue after the date of this Agreement, such that
the condition set forth in Section 6.03(a) or Section 6.03(b) would not be
satisfied and such breach is not curable or, if curable, is not cured within
thirty (30) days after written notice thereof is given by the Companies to FMIB;

 

(xi)                              by FMIB, upon written notice to the Companies,
if any condition to the obligation of FMIB to consummate the Closing set forth
in Section 6.01 or Section 6.02 shall have become incapable of fulfillment other
than as a result of a breach by FMIB of any covenant or agreement contained in
this Agreement;

 

(xii)                           by FMIB in the event that FMAR or FMBank has
breached the terms of Section 5.22 in any respect adverse to FMIB;

 

(xiii)                        by the Companies, upon written notice to FMIB, if
any condition to the obligation of the Companies to consummate the Closing set
forth in Section 6.01 or

 

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Section 6.03 shall have become incapable of fulfillment other than as a result
of a breach by the Companies of any covenant or agreement contained in this
Agreement;

 

(xiv)                       by FMIB, if the Bankruptcy Court has not entered the
Sale Order approving the Sale to FMIB by forty (40) days after entry of the
Auction Procedures Order, if such Sale Order has been entered but is stayed or
has been reversed or vacated on such date, or if such Sale Order has been
entered but has been amended or modified in a manner adverse to FMIB without the
prior written consent of FMIB on or before such date; or

 

(xv)                          by FMIB, if the Petition Date does not occur on
the date required in this Agreement.

 

Section 8.02.                         Effect of Termination.  In the event of
the termination of this Agreement pursuant to Section 8.01, this Agreement shall
become void and have no effect, except that (i) the provisions of Section 5.06,
Section 5.17, Section 8.01, this Section 8.02 and ARTICLE X shall survive any
such termination, and (ii) no such termination shall relieve the breaching Party
from Liability resulting from any breach by that Party of this Agreement.

 

ARTICLE IX.

SURVIVAL OF REPRESENTATIONS AND WARRANTIES; TAX MATTERS

 

Section 9.01.                         Survival of Representations, Warranties
and Covenants. All representations, warranties, covenants and agreements of the
Parties contained in this Agreement, or in any instrument delivered pursuant to
this Agreement, shall terminate at the Closing Date other than those covenants
and agreements of the Parties which by their terms apply in whole or in part
after Closing.

 

Section 9.02.                         Transfer Taxes. The payment of any
transfer, documentary, sales, use, stamp, registration and other such Taxes and
fees (including any penalties and interest) incurred in connection with the
consummation of the Contemplated Transactions will be borne fifty percent (50%)
each by FMAR, on the one hand, and FMIB, on the other hand.  Each Party shall,
as required by applicable Legal Requirements, cooperate, and cause its
Affiliates to cooperate, as necessary in the execution and filing of any Tax
Returns and other documentation required to be filed with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and fees.

 

Section 9.03.                         Prorations. Except as otherwise provided
in this Agreement, FMAR shall be responsible for all Taxes payable by FMBank and
the Bank Subsidiaries for periods ending on or prior to the Closing Date,
regardless of whether such Taxes are due prior to or after the Closing Date.
FMIB shall be responsible for all Taxes payable by FMBank and the Bank
Subsidiaries attributable to periods beginning after the Closing Date. Taxes
measured or based on income, sales, use or similar income-based, revenue-based,
or transactional Taxes with respect to a Straddle Period shall be allocated as
if the relevant Tax year of FMBank terminated as of the end of the Closing Date
on an interim closing of the books basis. All other Taxes not

 

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described in the prior sentence for a Straddle Period allocated to the period
ending on the Closing Date shall be the product of (x) the amount of such Taxes
due for the entire Straddle Period and (y) a fraction with the numerator equal
to the number of days in the Straddle Period up to and including the Closing
Date and the denominator equal to the number of days in the entire Straddle
Period. FMAR or FMIB, as applicable, shall invoice the other Party for the
amount of Taxes that the other party is responsible for pursuant to this
Section 9.03 but were paid by FMIB or FMAR, as applicable, and such amount shall
be paid within twenty (20) days of receipt of such invoice, but in no case shall
such payment be required to be made more than five (5) days prior to the due
date of the Tax Return to which such Taxes relate.

 

Section 9.04.                         Tax Returns.

 

(a)                                 Except as otherwise provided in Section 9.02
hereof, FMAR shall prepare or cause to be prepared, and file or cause to be
filed, at FMAR’s sole expense, and on a basis reasonably consistent with past
practice (to the extent permissible by applicable Legal Requirements), all Tax
Returns for FMAR, FMBank and the Bank Subsidiaries for all periods ending on or
before the Closing Date that are filed after the Closing Date (each, a “Prior
Period Return”).  FMAR will permit a representative of FMIB to review each Prior
Period Return at least ten (10) days prior to the due date for the filing of
such Prior Period Return (taking into account extensions). Pursuant to such
review, if FMIB in good faith determines that a position taken on such Prior
Period Return would result in an increase in the Tax obligations of FMBank or a
Bank Subsidiary in a taxable period commencing after the Closing Date, FMIB will
be allowed to comment on such Prior Period Return and FMAR shall incorporate the
comments that are reasonably requested by FMIB on each Prior Period Return.

 

(b)                                 Except as otherwise provided in Section 9.02
hereof, FMIB shall prepare or cause to be prepared, and file or cause to be
filed, at FMIB’s sole expense,  all Tax Returns for FMBank and the Bank
Subsidiaries other than the Prior Period Returns and the Consolidated Returns
(as defined in Section 9.04(c) hereof); provided, however, that with respect to
any Tax Return due after the Closing Date for a Straddle Period (each, a
“Straddle Return”), FMIB shall provide FMAR with a copy of such Straddle Return
for its review and consent, at least ten (10) days prior to the due date for the
filing of such Straddle Return (taking into account extensions), which consent
shall not be unreasonably withheld, conditioned or delayed.

 

(c)                                  FMAR shall include the income, if any, of
FMBank and the Bank Subsidiaries (including any deferred items triggered into
income by Treasury Regulation Section 1.1502-13 and any excess loss account
taken into income under Treasury Regulation Section 1.1502-19, and determined by
closing the books of FMBank and the Bank Subsidiaries as of the Closing Date) on
its consolidated federal, and, as applicable, state and local, income Tax
Returns (“Consolidated Returns”) for all periods through the Closing Date, and
FMAR shall pay any federal, and, as applicable, state and local, income Taxes
attributable to such income.  For all taxable periods ending on or before the
Closing Date, FMAR shall cause FMBank and the Bank Subsidiaries to be included
in the Consolidated Returns.  FMAR shall prepare and file all Consolidated
Returns on a basis reasonably consistent with past practice (to the extent
permissible by applicable Legal Requirements).

 

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Section 9.05.                         Cooperation. FMIB and FMAR will (and FMAR
will cause each of the FMAR Subsidiaries and Bank Subsidiaries to) cooperate
fully, as and to the extent reasonably requested by any Party, in connection
with the filing of Tax Returns and any audit, litigation or other proceeding
with respect to Taxes. Such cooperation shall include the retention and (upon
such Party’s request) the provision of records and information reasonably
relevant to any such audit, litigation, or other proceeding. Following the
Closing Date, FMIB and FMAR shall cooperate, as to the extent reasonably
requested by the other Party, in connection with the Bankruptcy Case including
the provision of records and information reasonably relevant to the activities
of the Companies and the Bankruptcy Case.

 

Section 9.06.                         Carrybacks.  FMAR shall pay to FMIB any
Tax refund (or reduction in Tax Liability) resulting from a carryback of a
post-acquisition Tax attribute of FMBank or a Bank Subsidiary into a
Consolidated Return no later than ten (10) days after such refund (or reduction)
is realized by the FM Group.  At FMIB’s request, FMAR shall use commercially
reasonable efforts to cooperate with FMBank or a Bank Subsidiary in obtaining
such refund (or reduction), including through the filing of amended Tax Returns
or refund claims, and FMIB shall reimburse FMAR for all reasonable out of pocket
expenses incurred by the FM Group in such cooperation.

 

Section 9.07.                         Amended Tax Returns of FMBank; Settlement
of Audit.

 

(a)                                 Unless required by applicable Legal
Requirements, neither FMAR nor FMIB shall file or cause to be filed any amended
Tax Returns for FMBank or any Bank Subsidiary covering, or adjusting any Taxes
for, (i) any Tax period ending on or before the Closing Date or (ii) a Straddle
Period, in each case with respect to the preceding clauses “(i)” and “(ii),”
without the prior written consent of the other Party, which consent shall not be
unreasonably withheld, delayed or conditioned.

 

(b)                                 Notwithstanding anything herein to the
contrary, FMAR shall not (i) compromise, resolve, or settle any audit of a
Consolidated Return that would have the effect of increasing the Tax Liability
of FMBank or any Bank Subsidiary for any period ending after the Closing Date or
decreasing any Tax attribute of any of FMBank or any Bank Subsidiary existing on
the Closing Date, or (ii) file any amended Consolidated Return that would have
the effect of increasing the Tax Liability of FMBank or any Bank Subsidiary for
any period ending after the Closing Date or decreasing any Tax attribute of any
of FMBank or any Bank Subsidiary existing on the Closing Date, in each case with
respect to the preceding clauses “(i)” and “(ii)”, without the prior written
consent of FMIB, which consent shall not be unreasonably withheld, conditioned
or delayed.

 

Section 9.08.                         Tax Sharing Agreements. All Tax-sharing
agreements or similar agreements with respect to or involving FMBank or any Bank
Subsidiary shall be terminated as of the Closing Date with respect to FMBank and
each Bank Subsidiary, and, after the Closing Date, neither FMBank nor any Bank
Subsidiary shall be bound thereby or have any Liability thereunder.

 

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Section 9.09.                         Tax Covenant Involving FMBank. Without the
prior written consent of FMIB, FMAR shall not (and shall cause the FM Group and
each FM Group Member not to) make or change any election, change an annual
accounting period, adopt or change any accounting method, file an amended Tax
Return, enter into any closing agreement, settle any Tax Claim or assessment
relating to FMAR or FMBank, surrender any right to claim a refund of Taxes,
consent to any extension or waiver of the limitation period applicable to any
Tax Claim or assessment relating to FMAR or FMBank, or take any other similar
action relating to the filing of any Tax Return or the payment of any Tax, if
such election, adoption, change, amendment, agreement, settlement, surrender,
consent or other action would have the effect of increasing the Tax Liability of
FMBank or any Bank Subsidiary for any period ending after the Closing Date or
decreasing any Tax attribute of any of FMBank or any Bank Subsidiary existing on
the Closing Date.

 

Section 9.10.                         Additional Tax Covenants .

 

(a)                                 FMIB and FMAR agree that FMBank shall cease
to be a member of the FM Group as of the end of business on the Closing Date
pursuant to Treas. Reg. §1.1502-76(b)(1)(ii).  On its consolidated federal
income Tax Return for the taxable year in which the Closing Date occurs, FMAR
shall elect under Treas. Reg. §1.1502-36(d) to reduce FMAR’s adjusted Tax basis
in its FMBank Shares to the extent necessary to prevent any reduction of
FMBank’s Tax attributes.  All Tax Returns filed by the FM Group, each FM Group
Member, FMBank and the Bank Subsidiaries shall be consistent with this
provision. In addition, each FM Group Member agrees to take any other action
reasonably requested by FMIB or FMBank to preserve FMBank’s Tax attributes. At
FMIB’s discretion, FMAR shall make, or shall forego making (and shall cause the
FMAR Subsidiaries to make or forego making), the election under
Section 108(b)(5) of the Code on FM Group’s consolidated federal income Tax
Return for the taxable year in which the Closing Date occurs. Upon request by
FMIB, FMAR shall deliver to FMIB its preliminary calculation of how FMAR would
apply the provisions of Section 108 of the Code to any excluded cancellation of
debt income, and within thirty (30) days of receipt thereof, FMIB shall provide
direction to FMAR on making or not making the election.  FMAR shall not make an
election under Section 336(e) of the Code with respect to the acquisition of the
FMBank Shares pursuant to this Agreement.

 

(b)                                 FMAR shall cause each entity that will be an
FM Group Member on the last day of the month of the Closing Date (the “Year-End
Date”) to meet the requirements under Rev. Proc. 2006-45 to obtain automatic
approval from the Commissioner of Internal Revenue to change the accounting
period of the FM Group under Code Section 442 and Treasury Regulation
Section 1.442-1(b) to a taxable year ending on the Year-End Date (the
“Accounting Period Change”). In addition, FMAR agrees to effect such Accounting
Period Change. To facilitate such Accounting Period Change, FMAR shall cause
each entity that will be an FM Group Member on the Year-End Date to (i) take all
actions necessary to comply with the requirements of Rev. Proc. 2006-45 to
obtain automatic approval from the Commissioner of Internal Revenue to effect
such Accounting Period Change (including, without limitation, the timely filing
of IRS Form 1128, Application to Adopt, Change, or Retain a Tax Year), and
(ii) refrain from taking any action that could cause any such entity to fail to
meet the requirements of Rev. Proc. 2006-45.

 

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ARTICLE X.

MISCELLANEOUS

 

Section 10.01.                  Expenses. Except as otherwise provided in this
Agreement, each of the Parties is obligated to pay all of its expenses and costs
(including all counsel fees and expenses and brokerage fees and commissions)
incurred in connection with this Agreement and the consummation of the
Contemplated Transactions.

 

Section 10.02.                  Entire Agreement. This Agreement and the other
agreements, documents, schedules and instruments signed and delivered by the
Parties to each other at the Closing are the full understanding of the Parties,
a complete allocation of risks between them and a complete and exclusive
statement of the terms and conditions of their agreement relating to the subject
matter hereof and supersede any and all prior agreements, whether written or
oral, that may exist between the Parties with respect thereto, including,
without limitation, (i) that certain Summary of Terms, dated November 21, 2013
and amended on December 23, 2013, by and among FMAR, FMBank and FMIB (provided,
however, that if this Agreement is terminated and the Stalking Horse Bidder Fee
is not payable, or is not paid (in any case, for any or no reason), the
Companies shall reimburse FMIB for its fees and expenses in accordance with
Part II (Expense Reimbursement) of such Summary of Terms (for this purpose,
notwithstanding the reference therein to the Parties not entering into a “Merger
Agreement”)), and (ii) all non-disclosure and/or standstill agreements among the
Investors and FMAR and/or FMBank. Except as otherwise specifically provided in
this Agreement, no conditions, usage of trade, course of dealing or performance,
understanding or agreement purporting to modify, vary, explain or supplement the
terms or conditions of this Agreement is binding unless hereafter made in
writing and signed by the Party to be bound, and no modification will be
effected by the acknowledgment or acceptance of documents containing terms or
conditions at variance with or in addition to those set forth in this Agreement.

 

Section 10.03.                  Binding Effect; Assignment. Subject to
Bankruptcy Court approval, all of the terms, covenants, representations,
warranties and conditions of this Agreement are binding upon, and inure to the
benefit of and are enforceable by, the Parties and their respective successors,
representatives and permitted assigns. Nothing expressed or referred to herein
is intended or is to be construed to give any Person other than the Parties
hereto any legal or equitable right, remedy or claim under or in respect of this
Agreement, it being the intent of the Parties that this Agreement, and the terms
hereof are for the sole benefit of the Parties to this Agreement and not for the
benefit of any other Person, except that (i) the current directors and officers
of FMBank included in the term “Indemnified Parties” shall be deemed to be
third-party beneficiaries of the provisions of Section 5.11(a); and (ii) the
Investors shall be deemed to be third-party beneficiaries with respect to the
Companies’ obligations under this Agreement. No Party to this Agreement may
assign this Agreement, by operation of law or otherwise, in whole or in part,
without the prior written consent of the other Parties, and any assignment made
or attempted in violation of this Section is void and of no effect.

 

Section 10.04.                  Further Cooperation. The Parties agree that they
will, at any time and from time to time after the Closing, upon request by the
other and without further consideration, do, perform, execute, acknowledge and
deliver all such further acts, deeds, assignments,

 

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assumptions, transfers, conveyances, powers of attorney, certificates and
assurances as may be reasonably required in order to complete the Contemplated
Transactions or to carry out and perform any undertaking made by the Parties
hereunder.

 

Section 10.05.                  Severability. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under present or future Legal
Requirements, then (a) this Agreement is to be construed and enforced as if such
illegal, invalid or unenforceable provision were not a part hereof; (b) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by such illegal, invalid or unenforceable provision or by
its severance from this Agreement; and (c) there will be added automatically as
a part of this Agreement a provision mutually agreed to which is similar in
terms to such illegal, invalid or unenforceable provision as may be possible and
still be legal, valid and enforceable.

 

Section 10.06.                  Notices. Any and all payments (other than
payments at the Closing), notices, requests, instructions and other
communications required or permitted to be given under this Agreement after the
date of this Agreement by any Party hereto to any other Party may be delivered
personally or by nationally recognized overnight courier service or sent by mail
or (except in the case of payments) by facsimile transmission or electronic
mail, at the respective addresses or transmission numbers set forth below and is
deemed delivered (a) in the case of personal delivery, facsimile transmission or
electronic mail, when received; (b) in the case of mail, upon the earlier of
actual receipt or five (5) Business Days after deposit in the United States
Postal Service, first class certified or registered mail, postage prepaid,
return receipt requested; and (c) in the case of an overnight courier service,
one (1) Business Day after delivery to such courier service with and
instructions for overnight delivery. The parties may change their respective
addresses and transmission numbers by written notice to all other parties, sent
as provided in this Section. All communications must be in writing and addressed
as follows:

 

If to FMIB or (after Closing) FMBank:

 

Robert D. Kunisch, Jr.

President

RKJS Bank

12997 Jerome Jay Dr.

Telephone: 410-241-0839

Facsimile:

Electronic Mail:  kunisch@comcast.net

 

With a copy to:

 

Michael D. Schiffer, Esq.

Venable LLP

750 East Pratt Street

Baltimore, Maryland 21202

Telephone: 410-244-7546

Facsimile: 410-244-7742

Electronic Mail:  mschiffer@venable.com

 

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If to FMAR or (prior to Closing) FMBank:

 

First Mariner Bancorp

First Mariner Bank

1601 South Clinton

Baltimore, Maryland  21224

Attn:  Mark A. Keidel

Telephone: 410-558-4281

Facsimile: 443-573-4912

Electronic Mail:  mkeidel@1stmarinerbank.com

 

With a copy to:

 

Gary Bronstein, Esq.

Kilpatrick Townsend & Stockton LLP

Suite 900

607 14th Street, NW

Washington, DC 20005-2018

Telephone: 202-508-5893

Facsimile: 202-204-5616

Electronic Mail:  gbronstein@kilpatricktownsend.com

 

Section 10.07.                  Waiver of Jury Trial. EACH OF THE PARTIES HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

 

Section 10.08.                  Jurisdiction. Each of the Parties agrees that
any suit, action or proceeding seeking to enforce any provision of, or based on
any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby shall be brought in the United States
Bankruptcy Court for the District of Maryland, so long as such court shall have
subject matter jurisdiction over such suit, action or proceeding (provided, that
if such Bankruptcy Court does not have jurisdiction over any matter, or if it
has jurisdiction but does not exercise such jurisdiction for any reason, then
such suit, action or proceeding shall be brought in any Maryland state court or
Federal court of the United States sitting in Baltimore Maryland), and that any
cause of action arising out of this Agreement shall be deemed to have arisen
from a transaction of business in the State of Maryland, and each of FMIB and
the Companies hereby irrevocably consents to the jurisdiction of such courts
(and of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in such courts or that any such suit, action or
proceeding brought in such courts has been brought in an inconvenient forum.
Process in any such suit, action or proceeding may be served on any Party
anywhere in the world, whether within or without the jurisdiction of such
courts. Without limiting the foregoing, each Party agrees that

 

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service of process on such Party as provided in Section 10.06 shall be deemed
effective service of process on such Party.

 

Section 10.09.                  Multiple Counterparts. For the convenience of
the Parties hereto, this Agreement may be signed in multiple counterparts, each
of which will be deemed an original, and all counterparts hereof so signed by
the Parties hereto, whether or not such counterpart will bear the execution of
each of the Parties hereto, will be deemed to be, and is to be construed as, one
and the same Agreement. Electronic or facsimile transmission of a signed
counterpart of this Agreement will be sufficient to bind the Party or Parties
whose signature(s) appear thereon.

 

Section 10.10.                  Specific Performance. Each of the Parties hereto
acknowledges that the other Parties would be irreparably damaged and would not
have an adequate remedy at law for money damages if any of the covenants
contained in this Agreement were not performed in accordance with its terms or
otherwise were materially breached. Each of the Parties hereto therefore agrees
that, without the necessity of proving actual damages or posting bond or other
security, the other Party may be entitled to seek temporary and/or permanent
injunction or injunctions which a court of competent jurisdiction concludes is
justified to prevent breaches of such performance and to specific enforcement of
such covenants in addition to any other remedy to which they may be entitled, at
law or in equity.

 

Section 10.11.                  Attorneys’ Fees and Costs. If attorneys’ fees or
other costs are incurred to secure performance of any of the obligations herein
provided for, or to establish damages for the breach thereof, or to obtain any
other appropriate relief, the prevailing Party is entitled to recover reasonable
attorneys’ fees and costs incurred therein and determined by the court to be
justified.

 

Section 10.12.                  Rules of Construction. The descriptive headings
in this Agreement are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement. Each use herein of the masculine, neuter or feminine gender is deemed
to include the other genders. Each use herein of the plural will include the
singular and vice versa, in each case as the context requires or as it is
otherwise appropriate. The word “or” is used in the inclusive sense. No Party
shall be required to take any action under this Agreement to the extent that
such action would require the Party to violate any applicable Legal Requirement.

 

Section 10.13.                  Articles, Sections, Exhibits and Schedules. All
articles and sections referred to herein are articles and sections,
respectively, of this Agreement and all exhibits and schedules referred to
herein are exhibits and schedules, respectively, attached to this Agreement. 
Any and all schedules, exhibits, certificates or other documents or instruments
referred to herein or attached hereto are and will be incorporated herein by
reference hereto as though fully set forth herein.

 

Section 10.14.                  Public Disclosure. None of the Parties shall
make any announcement, statement, press release, acknowledgment or other public
disclosure of the existence of, or reveal the terms, conditions or the status
of, this Agreement or the Contemplated Transactions without the prior written
consent of the other Parties to this Agreement; but any Party is permitted to

 

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make any public disclosures or governmental filings as legal counsel may deem
necessary to maintain compliance with or to prevent violations of any Legal
Requirement or that may be necessary to obtain regulatory approval for the
Contemplated Transactions and such disclosure required by Section 5.12 of this
Agreement, in which case the Party required to make the release or disclosure
shall use its reasonable best efforts to allow the other Party reasonable time
to comment on such release or disclosure in advance of the issuance thereof. 
The Parties have agreed upon the form of a joint press release announcing the
execution of this Agreement.

 

Section 10.15.                  Extension; Waiver. No failure to exercise, nor
any delay in exercising any right, power or privilege hereunder (including,
without limitation, the right to terminate this Agreement in accordance with
Article VIII hereof) by any Party hereto will operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder will
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver of any Party of any right or remedy on any
one occasion will not be construed as a bar to any right or remedy that such
Party would otherwise have on any future occasion or to any right or remedy that
any other Party may have hereunder. Any Party may unilaterally waive a right
which is solely applicable to it.

 

Section 10.16.                  Amendments. To the extent permitted by
applicable law, this Agreement may be amended, modified or supplemented only by
an instrument in writing signed by the Party against which enforcement of the
amendment, modification or supplement is sought.

 

Section 10.17.                  Automatic Extension of Deadlines and Dates. In
the event the Bankruptcy Court is not fully operational on a Business Day(s) due
to a cessation of the operations of the U.S. Federal government, partial or
otherwise, then all required deadlines and actions required to be completed by
certain dates as may be set forth set forth herein or in the Exhibits hereto,
including, but not limited to, the required filing of the Sale Motion, that are
directly or indirectly impacted such that the actions to be completed by those
deadlines or dates cannot be reasonably completed, shall be automatically
extended by the number of days that the Bankruptcy Court is not fully
operational or as may otherwise be agreed by the Parties. The automatic
extensions provided in this Section 10.17 shall not exceed thirty (30) Business
Days and such automatic extensions shall not extend the Outside Date set forth
in Section 8.01(a).

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, FMAR, FMBank and FMIB have caused this Agreement to be
signed by their duly authorized officers as of the date first above written.

 

 

 

FIRST MARINER BANCORP

 

 

 

 

 

 

 

 

By:

/s/ Mark A. Keidel

(SEAL)

 

Name: Mark A. Keidel 

 

 

Title: Interim Chief Executive Officer 

 

 

 

 

 

 

 

 

FIRST MARINER BANK

 

 

 

 

 

 

 

 

By:

/s/ Mark A. Keidel

(SEAL)

 

Name: Mark A. Keidel 

 

 

Title: Interim Chief Executive Officer 

 

 

 

 

 

 

 

 

RKJS BANK

 

 

 

 

 

 

 

 

By:

/s/ Robert D. Kunisch, Jr.

(SEAL)

 

Name: Robert D. Kunisch, Jr. 

 

 

Title: President, Chief Operating Officer and Secretary 

 

 

[Signature Page to Merger and Acquisition Agreement]

 

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