Exhibit 10.1


 


EXCHANGE AGREEMENT


 


THIS EXCHANGE AGREEMENT
(this “Agreement”), dated as of June 30, 2010, is made by and between John P. McDaniel (the “Investor”) and FIRST MARINER BANCORP, a Maryland corporation (the “Company”).


 


RECITALS


 


A.            Reference
is made that certain Junior Subordinated Indenture, dated as of August 18,
2003, by and between the Company and The Bank of New York (the “2003 Indenture”).


 


B.            Reference
is made that certain Amended and Restated Trust Agreement (the “2003 Trust
Agreement”), dated as of August 18, 2003, by and among the Company, The
Bank of New York, as Property Trustee, The Bank of New York (Delaware), as
Delaware Trustee, and the Administrative Trustees named therein, as
Administrative Trustees.


 


C.            Mariner
Capital Trust IV, a Delaware statutory trust (“Trust IV”), is the holder of a
Floating Rate Junior Subordinated Note due 2033 in the original principal
amount of $12,380,000 issued by the Company pursuant to the 2003 Indenture.


 


D.            The
Investor at the Closing Date will be
the holder of Floating Rate Preferred Securities (the “2003 Preferred
Securities”) in the aggregate liquidation amount of up to $1,000,000 issued by
Trust IV pursuant to the 2003 Trust Agreement. 
The 2003 Preferred Securities actually held on the Closing Date by the
Investor are collectively referred to herein as the “Preferred Securities”, and
the aggregate liquidation amount of such Preferred Securities is referred to
herein as the “Preferred Securities Amount”.


 


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


 


AGREEMENT


 


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


 


1.             Exchange of Preferred Securities.


 


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


 


2.             Consideration
for the Exchange.


 


2.1          Exchange
Price.


 


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


 


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


 


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


 


(b)                                 In the event
that the Company completes one or more Offerings (as defined below) by December 31,
2010 in which it sells Company Common Stock at a price per share that is less
than the Conversion Price, then the Investor shall be issued additional shares
(the “Additional Shares”), for no additional consideration, in an amount such
that the sum of the Initial Shares plus the Additional Shares shall equal (i) ten
percent (10.00%) of the Preferred Securities Amount divided by (ii) the
lowest price per share of Company Common Stock received by the Company in any
such Offering completed by December 31, 2010 (the “Lowest Offering Price”).  As used in this Agreement, the terms “Offerings”
and “Offering” mean any of the following: 
(x) a public offering of Company 


 


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


 


(c)                                  A warrant, in the form
attached hereto as Exhibit A (the “Exhibit A Warrant”), to purchase a
number of shares of Company Common Stock equal to the product of (I) the
Initial Shares and (II) .20.  The Exhibit A
Warrant shall be exercisable within five (5) years of the Closing Date and
shall provide for the purchase of the shares at a strike price (the “Strike
Price”) equal to the lowest of (i) the Conversion Price, (ii) in the
event that on or prior to December 31, 2010 the Company consummates an
Offering, the Lowest Offering Price, or (iii) in the event that on or
prior to December 31, 2010 the Company shall have entered into an
agreement with a holder (other than the Investor) of trust preferred securities
issued by a trust subsidiary of the Company, which agreement provides for the
exchange of such trust preferred securities for Company Common Stock (a “Subsequent
Exchange Agreement”), the price utilized in the Subsequent Exchange Agreement
to determine the number of 


 


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shares
of Company Common Stock to be exchanged for such trust preferred securities
exclusive of any warrants, warrant shares or warrant prices.


 


(d)                                 If issuable in accordance
with the terms of this Section 2.1(d), a warrant, in the form attached
hereto as Exhibit B (an “Exhibit B Warrant” and together with Exhibit A
Warrant, the “Warrants”), to purchase a number of shares of Company Common
Stock equal to the Allowable Number.  An Exhibit B
Warrant shall be issuable only in the event that (i) on or prior to December 31,
2010 the Company shall have entered into a Subsequent Exchange Agreement, and (ii) (A) the
value of the consideration to be issued pursuant to that Subsequent Exchange
Agreement, including warrants (the “Subsequent Exchange Consideration”),
divided by the aggregate liquidation amount of trust preferred securities to be
exchanged pursuant to the Subsequent Exchange Agreement (the “Relative
Subsequent Exchange Consideration”) is greater than (B) the value of the
consideration to be issued by the Company pursuant to subsections (a) through
(c) of Section 2.1 of this Agreement, divided by the Preferred
Securities Amount (the “Relative Consideration”).  For purposes of the preceding sentence, in
calculating the value of consideration to be issued by the Company,
consideration in the form of an equity security of the Company shall be valued
based on the Fair Market Value of such 


 


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


 


(e)                                  In the event that the
consummation of the Exchange at the Closing would result in the Investor’s
ownership of 9.99% or more of the 


 


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


 


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


 


The Investor represents and warrants to the Company
as follows:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3.             Other
Representations and Warranties of the Investor.


 


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


 


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


 


3.1          Execution
and Validity (the Investor).


 


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


 


3.2          Absence
of Encumbrances (the Investor).


 


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


 


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3.3          Absence
of Violations.


 


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


 


3.4          Consents.


 


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


 


3.5          Brokers.


 


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


 


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4.             Representations
and Warranties of Company.


 


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


 


4.1          Execution
and Validity.


 


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


 


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


 


4.2          Organization
and Qualification.


 


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


 


4.3          Absence
of Encumbrances.


 


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


 


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


 


4.4          Absence
of Violations.


 


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


 


4.5          Consents.


 


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


 


4.6          Litigation
and Governmental Matters.


 


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


 


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


 


4.7          Compliance.


 


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


 


4.8          Brokers.


 


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


 


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


 


4.9          Securities
Reports.


 


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


 


4.10        Securities
Law Matters.


 


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


 


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


 


17

















 


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


 


4.11        Approval
by Disinterested Board Committee.


 


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


 


5.             Covenants
of the Investor.


 


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


 


5.1          Cooperation.


 


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


 


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


 


5.2          Certain
Acts.


 


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


 


5.3          Investor
Consents.


 


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


 


5.4          No
Shop; Standstill.


 


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


 


6.             Covenants
of Company.


 


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


 


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6.1          Cooperation.


 


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


 


6.2          Certain
Acts.


 


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


 


6.3          Company
Consents.


 


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


 


7.             Conditions
Precedent to the Obligations of the Investor.


 


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


 


7.1          Representations
and Warranties.


 


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


 


20
















 


7.2          Performance.


 


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


 


7.3          Absence
of Litigation.


 


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


 


7.4          Consents.


 


All
of the Investor Consents and Filings and all of the Company Consents and
Filings, in each case that are required to be obtained or made prior to the
consummation of the Transactions shall have been obtained or made and all
applicable waiting periods related thereto shall have expired or been
terminated.


 


8.             Conditions
Precedent to Obligations of Company.


 


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


 


8.1          Representations
and Warranties.


 


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


 


21

















 


8.2          Performance.


 


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


 


8.3          Absence
of Litigation.


 


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


 


8.4          Consents.


 


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


 


9.             [Intentionally
Omitted]


 


10.          Closing
and Post-Closing Covenants.


 


10.1        Time
and Place.


 


The
closing of the exchange contemplated by Article 1 of this Agreement (the “Closing”)
shall take place at 10:00 a.m. on the date that is five business days
following the satisfaction or waiver by the parties of the last condition
precedent set forth in Articles 7, 8, and 


 


22

















 


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


 


10.2        Obligations
of the Investor.


 


At
the Closing, the Investor shall deliver to Company:


 


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


 


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


 


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


 


10.3        Obligations
of the Company.


 


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


 


(i)                                     The Initial
Shares;


 


23

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


24

















 


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


 


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


 


11.          Registration
Rights.


 


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


 


25

















 


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


 


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


 


12.          Indemnification.


 


12.1        Indemnification
by Investor.


 


From and after the Closing, the Investor shall
indemnify, defend and hold harmless the Company and its stockholders, directors
(other than the Investor), the officers (other than the Investor), employees
(other than the Investor) and agents and their successors and assigns
(collectively, the “Company Indemnitees”) against and from any loss, claim,
damage, cost, obligation, liability, penalty and expense, including all legal
and other expenses reasonably


 


26

















 


incurred
in connection with investigating or defending against any such loss, claim,
damage, cost, obligation, liability, penalty or expense or action in respect of
such matters (collectively referred to as “Article 12 Damages”), that any
of the Company Indemnitees may sustain or which are imposed on, incurred by, or
accrued against them by reason of or which result from any breach of, or
misrepresentation in, any warranty, representation, covenant, agreement or
certification of the Investor contained in this Agreement or any other
agreement provided for in this Agreement. 
Indemnification under this Article 12 shall constitute the Company
Indemnitees’ exclusive remedy for any breach of, or misrepresentation in, any
warranty, representation, covenant, agreement or certification of the Investor
contained in this Agreement or any other agreement provided for in this
Agreement, except in cases of fraud.  The
Company Indemnitees may pursue other remedies in addition to indemnification
for fraud.


 


12.2        Indemnification
by Company.


 


From and after the Closing, the Company shall
indemnify, defend and hold harmless the Investor and his agents, successors and
assigns (collectively, the “Investor Indemnitees”) against and from any Article 12
Damages that any of the Investor Indemnitees may sustain or which are imposed
on, incurred by, or accrued against them by reason of or which result from (a) any
breach of, or misrepresentation in, any warranty, representation, covenant,
agreement or certification of the Company or made with respect to the Company
by the Investor contained in this Agreement or any other agreement contemplated
by this Agreement and/or (b) any action, suit, claim, proceeding, or order
arising out of, resulting from or in connection with the Transactions except to
the extent the Investor has indemnification obligations under Section 12.1
with respect to such action, suit, claim, proceeding, or order.  Indemnification under this Article 12
shall constitute each Investor’s exclusive remedy for any breach of, or


 


27

















 


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


 


12.3        Notice
of Indemnification.


 


Subject to Section 12.4, any party to be
indemnified (an “Indemnified Party”) shall give timely notice (a “Claim Notice”)
to the party from whom such indemnification is sought (an “Indemnifying Party”)
after the Indemnified Party has Actual Knowledge of any claim as to which
indemnification may be sought for any Article 12 Damages (a “Claim”) and
the amount thereof, if known, and supply any other information in the
possession of the Indemnified Party regarding such Claim, and will permit the
Indemnifying Party (at its expense) to assume the defense of any third party
Claim and any litigation resulting therefrom, provided that counsel for the
Indemnifying Party who shall conduct the defense of such Claim or litigation
shall be reasonably satisfactory to the Indemnified Party, and provided further
that the failure by the Indemnified Party to give notice as provided herein
will not relieve the Indemnifying Party of its indemnification obligations
hereunder except to the extent that the Indemnifying Party is materially
damaged as a result of the failure to give notice.  The Indemnifying Party may settle or
compromise any third party Claim or litigation only with the consent of the
Indemnified Party which consent may not be unreasonably withheld, delayed or
conditioned.


 


28

















 


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


 


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


 


12.4        Basket.


 


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


 


29

















 


only
apply to any breach of, or misrepresentation in, any warranty, representation,
covenant, agreement or certification of the parties hereto.


 


13.          Abandonment
of Transactions.


 


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


 


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


 


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


 


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


 


30
















 


13.4         Automatically
if the Closing has not occurred on or before August 31, 2010, provided
that the failure of the Closing to occur by such date is not the result of a
breach of, or misrepresentation in, any warranty, representation, covenant,
agreement or certification of any party to this Agreement.


 


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


 


14.           Effect
of Abandonment.


 


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


 


15.           Specific
Performance.


 


Notwithstanding anything to the contrary contained
herein, if either party to this Agreement breaches any warranty, covenant, or
agreement of such party made in this Agreement or in any other agreement
contemplated by this Agreement, each party hereto agrees that the other parties
would suffer irreparable harm from such breach. 
In the event of an alleged or threatened breach of such a warranty,
covenant or agreement, the aggrieved party may, in addition to all other rights
and remedies existing in its favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive relief in order to
enforce, or prevent any breach of, such warranty, covenant or agreement.


 


31

















 


16.           Miscellaneous.


 


16.1         Notices.


 


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


 


	
  To
  the Investor:

  	
  John
  P. McDaniel

  
	
   

  	
  13032
  Highland Road,

  
	
   

  	
  Highland,
  MD 20777

  
	
   

  	
  Fax:
  (301) 854-2778

  
	
   

  	
  Email:
  john.p.mcdaniel@hrfmail.com

  
	
   

  	
   

  
	
  With
  a Copy to:

  	
  Gordon, Feinblatt, Rothman,
  Hoffberger & Hollander, LLC

  
	
   

  	
  233
  East Redwood Street

  
	
   

  	
  Baltimore,
  Maryland 21202

  
	
   

  	
  Attn:
  Abba David Poliaokff

  
	
   

  	
  Fax:
  (410) 576-4032

  
	
   

  	
  Email:
  apoliakoff@gfrlaw.com

  
	
   

  	
   

  
	
  To
  Company:

  	
  FIRST MARINER BANCORP

  
	
   

  	
  1501
  S. Clinton Street

  
	
   

  	
  Baltimore,
  Maryland 21224

  
	
   

  	
  Attn: Eugene A. Friedman

  
	
   

  	
  Fax: (410) 342-4127.

  
	
   

  	
   

  
	
  With
  a copy to:

  	
  Kilpatrick
  Stockton LLP

  
	
   

  	
  607
  14th Street, NW

  
	
   

  	
  Suite 900

  
	
   

  	
  Washington,
  DC 20005

  
	
   

  	
  Attn:
  Gary R. Bronstein

  
	
   

  	
  Fax:
  (202) 508-5858

  
	
   

  	
  Email:
  gbronstein@kilpatrickstockton.com.

  



 


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


 


32

















 


16.2         Entire
Agreement.


 


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


 


16.3         Amendment.


 


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


 


16.4         Binding
Effect.


 


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


 


16.5         Waiver.


 


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


 


16.6         Captions.


 


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


 


33

















 


16.7         Construction.


 


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


 


16.8         Sections.


 


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


 


16.9 Severability.


 


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


 


16.10       Absence
of Third-Party Beneficiaries.


 


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


 


16.11       Business Day.


 


As
used in this Agreement, the term “business day” means any day other than a
Saturday, Sunday or legal or bank holiday in the City of New York, NY (the “City”).  If any time 


 


34

















 


period
set forth in this Agreement expires on other than a business day in the City,
such period shall be extended to and through the next succeeding business day
in the City.


 


16.12       Assignment.


 


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


 


16.13       Other Documents.


 


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


 


16.14       Governing Law.


 


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


 


16.15       Attorneys
Fees.


 


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


 


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


 


35

















 


other
filing required of the Company in connection with the Transactions.


 


16.16       Public
Disclosure.


 


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


 


16.17       Execution;
Counterparts.


 


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


 


[The Remainder of the Page is Intentionally Left Blank]


 


36

















 


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


 


 


	
   

  	
  FIRST MARINER BANCORP.,

  
	
   

  	
  A Maryland Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John Brown, III

  	
  (SEAL)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  John
  Brown, III

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director
  and Chairman of the Special Committee

  



 


37

















 


	
  INVESTOR:

  	
  /s/
  John P. McDaniel

  	
   

  
	
   

  
	
  Name:

  	
  John
  P. McDaniel

  
	
  Address:

  	
   

  
	
   

  
	
   

  
	
  Liquidation Preference Amount
  of 2003 Preferred Securities held:       
  1,000,000

  
	
   

  
	
  Class of Accredited
  Investor:

  
				



 


38

















 


LIST OF EXHIBITS AND SCHEDULES


 


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


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


 


Schedule
3.4 – Investor Consents and Filings


Schedule
4.5 – Company Consents and Filings


 


39

















 


EXHIBIT A


 


FORM OF WARRANT


 
















 


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


 


Date:
                                  ,
2010


 


COMMON STOCK WARRANT


 


OF


 


FIRST MARINER BANCORP


 


INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND


 


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


 


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


 


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


 

















 


2.              NUMBER OF SHARES AND
EXERCISE PRICE.  Subject to
the terms and conditions hereinafter set forth, the Investor is entitled, upon
surrender of this Warrant prior to the Expiration Date, to purchase from the
Company,            shares of
Common Stock.  The purchase price for the
shares of the Common Stock purchased pursuant to this Warrant shall be equal to
the lesser of (i) $         per
share, (ii) in the event that on or prior to December 31, 2010 the
Company consummates an Offering (as defined below), the Lowest Offering Price
(as defined below), or (iii) in the event that on or prior to December 31,
2010 the Company shall have entered into an agreement with the holder of trust
preferred securities issued by a trust subsidiary of the Company where the
holder is not an Investor, which agreement provides for the exchange of such
trust preferred securities for Company Common Stock (a “Subsequent Exchange
Agreement”), the price utilized in the Subsequent Exchange Agreement to
determine the number of shares of Company Common Stock to be exchanged for such
trust preferred securities exclusive of any warrants, warrant shares or warrant
prices (the “Exercise Price”).  As used
herein, the term “Offering” means any of the following:  (x) a public offering of Common Stock
other than pursuant to an employee benefit plan of the Company, including an
offering registered with the Securities and Exchange Commission notwithstanding
that such registered offering might be deemed a “private placement” under Rule 5635
of the NASDAQ Stock Market Rules, or (y) a sale of shares of Common Stock
effected pursuant to Section 4(2) of the Securities Act of 1933, as
amended, in exchange exclusively for cash consideration.  As used herein, the term “Lowest Offering
Price” means the lowest price per share of Company Common Stock received by the
Company in any such Offering completed by December 31, 2010.


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 

















 


immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution and the number of
Shares subject to this Warrant shall be proportionately adjusted.


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


	
  To
  Investor:

  	
  John
  P. McDaniel

  
	
   

  	
  13032
  Highland Road,

  
	
   

  	
  Highland,
  MD 20777

  
	
   

  	
  Fax:
  (301) 854-2778

  
	
   

  	
  Email:
  john.p.mcdaniel@hrfmail.com

  



 

















 


	
  With
  a Copy to:

  	
  Gordon,
  Feinblatt, Rothman, Hoffberger & Hollander, LLC

  
	
   

  	
  233
  East Redwood Street

  
	
   

  	
  Baltimore,
  Maryland 21202

  
	
   

  	
  Attn:
  Abba David Poliaokff

  
	
   

  	
  Fax:
  (410) 576-4032

  
	
   

  	
  Email:
  apoliakoff@gfrlaw.com

  
	
   

  	
   

  
	
  To Company:

  	
  FIRST MARINER BANCORP

  
	
   

  	
  1501 S. Clinton Street

  
	
   

  	
  Baltimore,
  Maryland 21224

  
	
   

  	
  Attn:
  Chief Executive Officer

  
	
   

  	
  Fax:
  (410) 342-4127

  
	
   

  	
   

  
	
  With a copy to:

  	
  Kilpatrick Stockton LLP

  
	
   

  	
  607
  14th Street, NW

  
	
   

  	
  Suite 900

  
	
   

  	
  Washington,
  DC 20005

  
	
   

  	
  Attn:
  Gary R. Bronstein

  
	
   

  	
  Fax:
  (202) 508-5858

  
	
   

  	
  Email:
  gbronstein@kilpatrickstockton.com

  



 


 


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


 


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


 


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


 

















 


stock certificate, or like tenor, in lieu of the lost, stolen, destroyed
or mutilated Warrant or stock certificate.


 


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


 


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


 


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


 


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


 


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


 


[Remainder of Page Intentionally Left Blank]


 

















 


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


 


 


	
  Investor:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:
  John P. McDaniel

  
	
   

  	
   

  
	
   

  	
   

  
	
  Company:

  	
  FIRST MARINER BANCORP,

  
	
   

  	
  A Maryland corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  John
  Brown, III

  
	
   

  	
  Title:

  	
  Director
  and Chairman of the Special Committee

  
				



 
















 


EXHIBIT A


NOTICE OF EXERCISE


 


To: FIRST MARINER BANCORP


1501
S. Clinton Street


Baltimore,
Maryland 21224


Attn:


 


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


 


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


 


Name:


 


Address:


 


 


 


 


 


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


 


 


	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  



 

















 


EXHIBIT B


 


FORM OF WARRANT


 

















 


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


 


Date:
                        ,
2010


 


COMMON STOCK WARRANT


 


OF


 


FIRST MARINER BANCORP


 


INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


a.               Reclassification
or Merger.  If at any
time while this Warrant remains outstanding and unexpired, in case of any
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or in case of any merger of the Company with or
into another corporation (other than a merger with another corporation in which
the Company is a continuing corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as
the case may be, shall execute a new Warrant (in form and substance reasonably 


 

















 


satisfactory to the Investor) providing that the Investor shall have
the right to exercise such new Warrant and upon such exercise to receive, in
lieu of each share of Common Stock theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, change or merger by a holder of
one share of Common Stock. Such new Warrant shall provide for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Paragraph 5.  The provisions
of this subparagraph (a) shall similarly apply to successive
reclassification, changes, mergers and transfers by the Company or any success
or purchasing corporation.


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


of any action in respect of or by, any federal state or local
government authority or agency or other person.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


ii.   “THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933.  THESE SHARES
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION 


 

















 


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


 


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


 


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


 


	
  To
  Investor:

  	
  John
  P. McDaniel

  
	
   

  	
  13032
  Highland Road,

  
	
   

  	
  Highland,
  MD 20777

  
	
   

  	
  Fax:
  (301) 854-2778

  
	
   

  	
  Email:
  john.p.mcdaniel@hrfmail.com

  
	
   

  	
   

  
	
  With
  a Copy to:

  	
  Gordon, Feinblatt, Rothman,
  Hoffberger & Hollander, LLC

  
	
   

  	
  233
  East Redwood Street

  
	
   

  	
  Baltimore,
  Maryland 21202

  
	
   

  	
  Attn:
  Abba David Poliakoff

  
	
   

  	
  Fax:
  (410) 576-4032

  
	
   

  	
  Email:
  apoliakoff@gfrlaw.com

  
	
   

  	
   

  
	
  To Company:

  	
  FIRST MARINER BANCORP

  
	
   

  	
  1501 S. Clinton Street

  
	
   

  	
  Baltimore,
  Maryland 21224

  
	
   

  	
  Attn:
  Chief Executive Officer

  
	
   

  	
  Fax:
  (410) 342-4127

  
	
   

  	
   

  
	
  With a copy to:

  	
  Kilpatrick Stockton LLP

  
	
   

  	
  607
  14th Street, NW

  
	
   

  	
  Suite 900

  
	
   

  	
  Washington,
  DC 20005

  
	
   

  	
  Attn:
  Gary R. Bronstein

  
	
   

  	
  Fax:
  (202) 508-5858

  
	
   

  	
  Email:
  grbonstein@kilpatrickstockton.com

  



 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 
















 


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


 


[Remainder of Page Intentionally Left Blank]


 

















 


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


 


 


	
   

  	
  Investor:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:
  John P. McDaniel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Company:

  	
  FIRST MARINER BANCORP,

  
	
   

  	
  A Maryland corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  John
  Brown, III

  
	
   

  	
  Title:

  	
  Director
  and Chairman of the Special Committee

  
					



 

















 


EXHIBIT A


NOTICE OF EXERCISE


 


To: FIRST MARINER BANCORP


1501 S. Clinton Street


Baltimore, Maryland 21224


Attn:


 


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


 


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


 


Name:


 


 Address:


 


 


 


 


 


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


 


 


	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:  Edwin F. Hale, Sr.

  



 

















 


SCHEDULE 3.4


INVESTOR CONSENTS AND FILINGS


 


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


 

















 


SCHEDULE 4.5


COMPANY CONSENTS AND FILINGS


 


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


 


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