Document:

Exhibit 10.2

 

CHANGE OF CONTROL AGREEMENT

 

This Change of Control Agreement (the “Agreement”), dated and
effective as of February 5, 2010 (the “Effective
Date”), is entered into by and between Summer Infant
(USA), Inc., a Rhode Island corporation (the “Company”), and the Employee of the Company named
on the signature page hereto (the “Employee”).

 

Preliminary
Statements

 

The Board of Directors of the Company (the “Board”) has determined that it is in
the best interest of the Company and its shareholders to assure itself of the
continued availability of the services of the Employee, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company.

 

In order to provide the Employee with enhanced
financial security and sufficient encouragement to remain with the Company
notwithstanding the possibility of a Change of Control,  the Board believes that it is imperative to
provide the Employee with certain severance benefits upon a Change of Control.

 

Agreement

 

In consideration of the foregoing premises and the
respective covenants and agreements of the parties set forth below, and
intending to be legally bound hereby, the parties agree as follows:

 

1.                                      Incentive for Continuous
Employment.  If prior to the last day of the 12th full calendar
month following the date of occurrence of an event constituting a Change of
Control (it being recognized that more than one event constituting a Change of
Control may occur in which case the 12-month period shall run from the date of
occurrence of each such event) (i) the Company terminates the Employee’s
employment other than (A) for Cause (as herein defined), or (B) because
of the Employee’s Disability (as defined below) or death, or (ii) the
Employee terminates his employment for Good Reason (as herein defined) (any
such termination in clauses (i) or (ii) being referred to as a “Payment Event”), then, within ten (10) business
days (or such other time as specified in Section 9(r) hereof)
after such termination (the “Payment Date”)
the Employee shall be entitled to receive from the Company a cash payment (the “Payment”) in one lump sum equal to
the sum of: (i) the Payment Percentage provided for on Schedule 1
attached to this Agreement (“Schedule 1”),
multiplied by the Employee’s annual base salary as in effect at the time of
such termination and (ii) the average of the Employee’s annual cash
bonuses from the Company for the two fiscal years (whether or not paid so long
as accrued and declared by the Company) preceding the fiscal year in which such
termination occurs.  In addition, the
Employee shall be entitled to the severance benefits listed on Schedule 1
(the “Severance Benefits”). The
Employee shall not be entitled to any Payment or any Severance Benefits if the
Employee terminates the Employee’s employment without Good Reason.

 

2.                                      Definitions. 
In addition to the capitalized terms used and defined elsewhere in this
Agreement, the following capitalized terms used in this Agreement shall, for
purposes of this Agreement, have the meanings set forth below.

 

 

“Affiliate” shall mean any Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person, and with respect to any natural person, includes the members of such
person’s immediate family (spouse, children and parents, whether by blood,
marriage or adoption, or anyone residing in such person’s home).

 

“Cause” shall mean the occurrence of one or more
of the following:  (i) Employee’s
willful and continued failure to substantially perform Employee’s reasonably
assigned duties with the Company (other than any such failure resulting from
incapacity due to disability or from the assignment to Employee of duties that
would constitute Good Reason), which failure continues for a period of at least
thirty (30) days after written demand for substantial performance has been
delivered by the Company to the Employee which specifically identifies the
manner in which the Employee has failed to substantially perform his duties; (ii) Employee’s
willful conduct which constitutes misconduct and is materially and demonstrably
injurious to the Company, as determined in good faith by a vote of at least
two-thirds of the non-employee directors of the Company at a meeting of the
Board at which the Employee is provided an opportunity to be heard; (iii) Employee
being convicted of, or pleading nolo contendere to a felony; or (iv) Employee
being convicted of, or pleading nolo contendere to a misdemeanor based in
dishonesty or fraud.

 

“Change
of Control” shall mean (i) individuals who, as of the
Effective Date, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board, provided
that any individual becoming a director subsequent to the Effective Date whose
election, or nomination for election by the Company’s shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Securities Exchange Act of 1934) shall be considered as though such individual
was a member of the Incumbent Board; or (ii) the approval by the
shareholders of the Company of a reorganization, merger, consolidation or other
form of corporate transaction or series of transactions (but not including an
underwritten public offering of the Company’s common stock or other voting
securities (or securities convertible into voting securities of the Company)
for the Company’s own account registered under the Securities Act of 1933), in
each case, with respect to which Persons who were shareholders of the Company
immediately prior to such reorganization, merger, consolidation or other
corporate transaction do not, immediately thereafter, own more than fifty
percent (50%) of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated entity’s then
outstanding voting securities, or a liquidation or dissolution of the Company
or the sale of all or substantially all of the assets of the Company (unless
such reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale is subsequently abandoned or terminated prior
to being consummated); or (iii) the acquisition by any Person, entity or “group”, within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, of more than thirty
percent (30%) of either the then outstanding shares of the Company’s common
stock or the combined voting power of the Company’s then outstanding voting
securities entitled to vote generally in the election of directors (hereinafter
referred to as a “Controlling Interest”)
excluding any acquisitions by (x) the Company or any of its Affiliates, (y) any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any of its Affiliates or (z) any Person, 

 

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entity or “group” that as
of the Effective Date owns beneficially (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934) a Controlling Interest.

 

“Disability” shall mean that the Employee has been
unable to perform his or her Company duties as the result of his or her
incapacity due to physical or mental illness, and such inability, at least
                    
(    ) weeks after its commencement, is determined to be
total and permanent by a physical selected by the Company or its insurers and
acceptable to the Employee or the Employee’s legal representative (such
Agreement as to acceptability not to be unreasonably withheld).  Termination resulting from Disability may
only be affected after at least thirty (30) days’ written notice by the Company
of its intention to terminate the Employee’s employment.  In the event that the Employee resumes the
performance of substantially all of his or her duties hereunder before the
termination of his or her employment becomes effective, the notice of intent to
terminate shall automatically be deemed to have been revoked

 

“Good Reason” shall mean (i) the material
diminution in Employee’s authority, duties or responsibilities; (ii) the
relocation of Employee to a location more than thirty (30) miles from his
employment location at the Effective Date; (iii) a material diminution in
the Employee’s annual base salary as in effect immediately prior to such diminution,
other than in connection with a general diminution in Company compensation
levels and in amounts commensurate with the percentage diminutions of other
Company employees of comparable seniority and responsibility; or (iv) any
other action or inaction which constitutes a material breach by the Company or
any of its Affiliates of any agreement under which the Employee provides
services to the Company or any of its Affiliates.

 

No violation described in
clauses (i) through (iv) above shall constitute Good Reason unless
the Employee has given written notice to the Company specifying the applicable
clause and related facts giving rise to such violation within ninety (90) days
after the occurrence of such violation and the Company has not remedied such violation
to the Employee’s reasonable satisfaction within thirty (30) days of its
receipt of such notice.

 

“Person” shall mean any natural person or entity with legal
status.

 

“Restricted Period” shall mean the period of time after
termination of the Employee’s employment with the Company identified on Schedule
1.

 

3.                                      Restrictive Covenants.  The Employee
acknowledges that in order to assure the Company that it will retain the value
of its business relationships, it is reasonable that the Employee be limited in
utilizing trade secrets and other confidential information of the Company,
Employee’s special knowledge of the business of the Company and Employee’s
relationships with customers, suppliers and others having business
relationships with the Company in any manner or for any purpose other than the
advancement of the interests of the Company, as hereinafter provided.  The Employee acknowledges that the Company
would not enter into this Agreement and provide the benefits provided for
herein without the covenants and agreements of the Employee set forth in this Section 3.  Notwithstanding anything else herein
contained, the term “Company”, as
used in this Section 3, shall refer to the Company and its
Affiliates and their respective successors and assigns.

 

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(a)                                  Confidentiality. 
The Employee acknowledges that in the course of the Employee’s
employment with the Company, Employee has had and is expected to continue to
have extensive contact with Persons with which the Company has, had or
anticipates having business relationships (including current and anticipated
customers and suppliers), and to have knowledge of and access to trade secrets
and other proprietary and confidential information of the Company, including, without
limitation, the identity of Persons with whom the Company has, had or
anticipates having business relationships, technical information, know-how,
plans, specifications, and information relating to the financial condition,
results of operations, employees, products and services, sources, leads or
methods of obtaining new business, pricing formulae, methods or procedures,
cost of supplies or services and marketing strategies of the Company or any
other information relating to the Company that could reasonably be regarded as
confidential or proprietary or which is not in the public domain (other than by
reason of Employee’s breach of the provisions of this section) (collectively,
the “Confidential  Information”), and that such information, even to
the extent it may be developed or acquired by or through the efforts of the
Employee, constitutes valuable, special and unique assets of the Company
developed or acquired at great expense which are the exclusive property of the
Company.  Accordingly, the Employee shall
not at any time, either during the time Employee is employed by the Company or
thereafter, use or purport to authorize any Person to use, reveal, report,
publish, transfer or otherwise disclose to any Person, any Confidential
Information without the prior written consent of the Company, except for
disclosures by the Employee required by applicable law (but only to the extent
the Company is given a reasonable opportunity to object to such disclosure and
protect the Confidential Information) to responsible officers of the Company
and other responsible Persons who are in a contractual or fiduciary
relationship with the Company and who have a need for such information for
purposes in the best interests of the Company. 
Without limiting the generality of the foregoing, the Employee shall
not, directly or indirectly, disclose or otherwise make known to any Person any
information as to the Company’s employees and others providing services to the
Company, including with respect to their abilities, compensation, benefits and
other terms of employment or engagement. 
Upon the termination of the Employee’s employment with the Company, the
Employee shall promptly deliver to the Company all files, correspondence,
manuals, notes, notebooks, computer diskettes, tapes, reports and copies
thereof, and all other materials relating to the Company’s business, including
without limitation any materials incorporating Confidential Information, which
are in the possession or control of the Employee.

 

(b)                                  Restriction on Competition. 
During the Employee’s employment with the Company and thereafter during
the Restricted Period, the Employee shall not, and shall not permit any Persons
subject to Employee’s direction or control (including Employee’s Affiliates)
to, directly or indirectly, whether alone or in association with others, as
principal, officer, agent, consultant, employee, director or owner of any
corporation, partnership, association or other entity, or through the
investment of capital, lending of money or property, rendering of services or
otherwise, engage in, influence, control, have an interest in or otherwise
become actively involved with any business that competes with the Company.  The Employee acknowledges that the business
of the Company is national and international in scope, as its current and
anticipated customers and suppliers are located throughout the United States
and abroad, and that it is therefore reasonable that the restrictions set forth
in this Section 3(b) not be limited to any specified
geographic area.

 

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(c)                                  Non-solicitation. 
During the Employee’s employment with the Company and thereafter during
the Restricted Period, the Employee shall not, and shall not permit any Persons
subject to Employee’s direction or control (including Employee’s Affiliates)
to, directly or indirectly, on their own behalf or on behalf of any other
Person (except the Company or its Affiliates), (i) call upon, accept
business from, or solicit the business of any Person who is, or who had been at
any time during the preceding twelve months, a customer or supplier of the
Company, (ii) otherwise divert or attempt to divert any business from the
Company, (iii) interfere with the business relationships between the
Company and any of its customers, suppliers or others with whom they have
business relationships or (iv) recruit or otherwise solicit or induce, or
enter into or participate in any plan or arrangement to cause, any Person who
is an employee of, or otherwise performing services for, the Company to
terminate his or her employment or other relationship with the Company, or hire
any Person who has left the employ of or ceased providing services to the
Company during the preceding twelve months.

 

(d)                                  Nondisparagement. 
The Employee shall not at any time, either during the time Employee is
employed by the Company or thereafter, directly or indirectly, engage in any
conduct or make any statement, whether in commercial or noncommercial speech,
disparaging or criticizing in any way the Company (including its directors and
employees and other providing services to the Company), or any of its products
or services, nor shall the Employee engage in any other conduct or make any
other statement that could reasonably be expected to impair the goodwill of any
of them, the reputation of any products or services of the Company or the
marketing of such products or services, in each case except as may be required
by law, and then only after consultation with the Company to the extent
possible.

 

(e)                                  Exception. 
The ownership or control by the Employee or Employee’s Affiliates, as a
passive investor, of up to two percent of the outstanding voting securities or
securities of any class of an entity with a class of securities registered
under the Securities Exchange Act of 1934, as amended, shall not be deemed to
be a violation of the provisions of this Section 3.

 

4.                                      Remedies. 
The Employee agrees that the restrictions set forth in Section 3,
including the length of the Restricted Period, the geographic area covered and
the scope of activities proscribed, are reasonable for the purposes of
protecting the value of the business and goodwill of the Company.  The Employee acknowledges that compliance
with the restrictions set forth in Section 3 will not prevent
Employee from earning a livelihood, and that in the event of a breach by the
Employee of any of the provisions of Section 3, monetary damages
would not provide an adequate remedy to the Company.  Accordingly, the Employee agrees that, in
addition to any other remedies available to the Company, the Company shall be
entitled to seek injunctive and other equitable relief (without having to
post bond or other security and without having to prove damages or the
inadequacy of available remedies at law) to secure the enforcement of these
provisions, and shall be entitled to receive reimbursement from the Employee
for attorneys’ fees and expenses incurred by it in enforcing these
provisions.  In addition to its other
rights and remedies hereunder, the Company shall have the right to require the
Employee to account for and pay over to it all compensation, profits, money,
accruals and other benefits derived or received, directly or indirectly, by the
Employee from any breach of the covenants of Section 3, and may set
off any such amounts due it from the Employee against any amounts otherwise due
Employee from the Company.  If the
Employee breaches any covenant 

 

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set forth in Section 3,
the running of the Restricted Period as to such covenant only shall be tolled
for so long as such breach continues.  It
is the desire and intent of the parties that the provisions of Sections 3
and 4 be enforced in full; however, if any court of competent jurisdiction
shall at any time determine that, but for the provisions of this paragraph, any
part of this Agreement relating to the time period, scope of activities or
geographic area of restrictions is invalid or unenforceable, the maximum time
period, scope of activities or geographic area, as the case may be, shall be
reduced to the maximum which such court deems enforceable with respect only to
the jurisdiction in which such adjudication is made.  If any other part of this Agreement is determined
by such a court to be invalid or unenforceable, the invalid or unenforceable
provisions shall be deemed amended (with respect only to the jurisdiction in
which such adjudication is made) in such manner as to render them enforceable
and to effectuate as nearly as possible the original intentions and agreement
of the parties.

 

5.                                      Termination of this Agreement. 
This Agreement shall commence on the Effective Date and terminate on December 31,
2012, provided, however, that if an event
constituting a Change of Control shall occur while this Agreement is in effect,
this Agreement shall automatically be extended for twelve (12) months from the
date the Change of Control occurs; provided that the Company may extend this
Agreement in its sole discretion by written notice to the Employee.  For purposes of this Section 5
only (and not for purposes of determining whether the Payment and the Severance
Benefits have become payable), a Change of Control shall be deemed to have
occurred if the event constituting a Change of Control has been consummated on
or prior to expiration of the term of this Agreement or if such event or one or
more other events constituting a Change of Control have not been consummated
but the material agreements for any of such events have been executed and
delivered by the parties to any such event on or prior to expiration of the
term of this Agreement (each such event being referred to as a “Pending Event”). For any Pending
Event, this Agreement shall automatically be extended until such time as the
related material agreements have been unconditionally terminated without
consummation of the applicable Pending Event and if any such Pending Event is
consummated pursuant to the related material agreements (as amended, restated,
supplemented or otherwise modified), this Agreement shall further automatically
be extended for twelve (12) months from the date each such Pending Event is so
consummated. For avoidance of doubt and ambiguity, any event constituting a
Change of Control that occurs after expiration of the term of this Agreement and
during any extension of this Agreement as so extended by virtue of a Pending
Event shall not result in this Agreement being extending after expiration of
its term in accordance with the immediately preceding sentence.

 

6.                                      No Alteration of Employment Terms
or Status.  Except as expressly provided in this
Agreement, nothing herein shall alter in any way any of the terms of employment
of the Employee, including without limitation the Employee’s rights with
respect to any stock options or other equity based awards Employee may have
been granted under the Summer Infant, Inc. 2006 Performance Equity
Plan.  The Company and the Employee
acknowledge that the Employee’s employment is and shall continue to be “at-will”, as defined under applicable law.  If the Employee’s employment is terminated
for any reason, the Employee shall not be entitled to any payments, benefits,
damages, awards or compensation other than as provided by this Agreement or as
may otherwise be established under the Company’s existing employee benefit
plans or policies at the time of termination.

 

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7.                                      Parachute Payments. (a) If Independent Tax Counsel (as defined below) determines that the
aggregate payments and benefits provided or to be provided to the Employee pursuant to this Agreement, and any other
payments and benefits provided or to be provided to the Employee from the
Company or any of its Affiliates or any successors thereto constitute “parachute payments” as defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the “Code”) (or any
successor provision thereto) (“Parachute  Payments”) that would be
subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then, except as otherwise provided in the next
sentence, such Parachute Payments shall be reduced to the extent necessary so
that no portion thereof shall be subject to the Excise Tax. If Independent Tax
Counsel determines that the Employee would receive in the aggregate greater
payments and benefits on an after tax basis if the Parachute Payments were not
reduced pursuant to this Section 7(a), then no such reduction shall
be made; provided, however, that in such case the
provisions of Sections 7(b)(i) and 7(b)(ii) shall not be
operative. The determination of the Independent Tax Counsel under this
subsection (a) shall be final and binding on all parties hereto. The
determination of which payments or benefits to reduce in order to avoid the
Excise Tax shall be determined in the sole discretion of the Employee; provided, however, that unless the Employee gives written
notice to the Company specifying the order to effectuate the limitations
described above within ten (10) days of the Independent Tax Counsel’s
determination to make such reduction, the Company shall first reduce those
payments or benefits that will cause a dollar-for-dollar reduction in total
Parachute Payments, and then by reducing other Parachute Payments, to the
extent possible, in reverse order beginning with payments or benefits that are to
be paid the farthest in time from the date the reduction is to be made. Any
notice given by the Employee pursuant to the preceding sentence, unless
prohibited by law, shall take precedence over the provisions of any other plan,
arrangement or agreement governing the Employee’s rights and entitlement to any
benefits or compensation. For purposes of this Section 7(a), “Independent Tax Counsel” shall mean
an attorney, a certified public accountant with a nationally recognized
accounting firm, or a compensation consultant with a nationally recognized
actuarial and benefits consulting firm with expertise in the area of Employee
compensation tax law, who shall be selected by the Company and shall be
acceptable to the Employee (the Employee’s acceptance not to be unreasonably
withheld), and whose fees and disbursements shall be paid by the Company.

 

(b) (i) The Employee shall notify the Company in writing within thirty
(30) days of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Employee of an Excise Tax. Upon receipt of
such notice, the Company may, in its sole discretion, contest such claim or
provide the Employee with an additional payment (a “Gross-Up  Payment”) intended to
reimburse the Employee for any such Excise Tax and all taxes (including any
Excise Tax) imposed upon the Gross-Up Payment and any interest or penalties
with respect to such taxes (except to the extent such interest or penalty
results from the Employee’s failure to act in accordance with the Company’s or
a Affiliate’s reasonable directions or the Employee’s failure to exercise due
care), or do nothing. If the Company notifies the Employee in writing that it
desires to contest such claim and that it will bear the costs and provide the
indemnification as required by this sentence, the Employee shall:

 

(A) give the Company any information reasonably requested by the
Company relating to such claim,

 

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(B) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company,

 

(C) cooperate with the Company in good faith in order to
effectively contest the claim, and

 

(D) permit the Company to participate in any proceedings relating
to the claim; provided, however, that the
Company shall pay (or cause to be paid) directly all costs and expenses (including any
interest and penalties, except to the extent such interest or penalty results
from the Employee’s failure to act in accordance with the Company’s or an
Affiliate’s reasonable directions or the Employee’s failure to exercise due
care) incurred in connection with the contest and shall indemnify and hold the
Employee harmless, on an after-tax basis, for any Excise Tax or income or other
tax, including interest and penalties with respect thereto (except to the extent
such interest or penalty results from the Employee’s failure to act in
accordance with the Company’s or a Affiliate’s reasonable directions or the
Employee’s failure to exercise due care), imposed as a result of such
representation and payment of costs and expenses. The Company shall control all
proceedings taken in connection with such contest; provided,
however, that if the Company directs the Employee to pay such claim
and sue for a refund, the Company shall, unless prohibited by law, advance (or
cause to be advanced) the amount of such payment to the Employee, on an
interest-free basis and shall indemnify and hold the Employee harmless, on an
after-tax basis, from any Excise Tax or income or other tax, including interest
or penalties with respect thereto (except to the extent such interest or
penalty results from the Employee’s failure to act in accordance with the
Company’s or a Affiliate’s reasonable directions or the Employee’s failure to
exercise due care), imposed with respect to such advance or with respect to any
imputed income with respect to such advance. If the advancement described in
the preceding sentence is prohibited by law, the Company and the Employee shall
cooperate in an effort to determine an alternative approach to payment of the
claim in a manner permitted by applicable law and consistent with the original
intent and economic benefit to the Employee of this provision.

 

(ii) If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 7(b)(i), the Employee becomes
entitled to receive a refund with respect to a payment by the Company with respect to
such claim, the Employee shall, within ten (10) days after the receipt of
such refund, pay to the Company the amount of such refund, together with any interest
paid or credited thereon after taxes applicable thereto.

 

(iii) Notwithstanding anything herein to the contrary, this Section 7(b) shall
be interpreted (and, if determined by the Company to be necessary, reformed) to
the extent
necessary to fully comply with the Sarbanes-Oxley Act and Section 409A of
the Code; provided that the Company agrees to maintain, to the maximum extent
practicable, the original intent and economic benefit to the Employee of the
applicable provision without violating the  provisions of
the Sarbanes-Oxley Act and Code Section 409A.

 

8.                                      Code Section 409A. 
(a)                 If any provision of this Agreement (or of any payment of compensation,  including benefits) would cause the Employee to incur any additional tax  or interest under Code Section 409A or any regulations or Treasury
guidance promulgated  thereunder, the
Company shall, after consulting with the Employee, reform such provision to  

 

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comply with Code Section 409A; provided that the Company agrees to
make only such  changes as are
necessary to bring such provisions into compliance with Code Section 409A
and  to maintain, to the maximum extent practicable, the original intent and
economic benefit to the Employee of the applicable provision without violating
the provisions of Code Section 409A.

 

(b)                                  Notwithstanding any provision to the contrary in this Agreement, if the
Employee is deemed on the date of termination of employment to be a “specified employee” within the meaning of that term under
Code Section 409A(a)(2)(B), then with regard to any payment or the
provision of any benefit that is required to be delayed in compliance with Section 409A(a)(2)(B) such
payment or benefit shall not be made or provided (subject to the last sentence
hereof) prior to the earlier of (i) the expiration of the six (6)-month
period measured from the date of the Employee’s “separation
from service” (as such term is defined in Treasury Regulations
issued under Code Section 409A) or (ii) the date of his death (the “Deferral Period”). Upon the
expiration of the Deferral Period, all payments and benefits deferred pursuant
to this Section 8 (whether they would have otherwise been payable
in a single sum or in installments in the absence of such deferral) shall be paid
or reimbursed to the Employee in a lump sum, and any remaining payments and
benefits due under this Agreement shall be paid or provided in accordance with
the normal payment dates specified for them herein. Notwithstanding the
foregoing, to the extent that the foregoing applies to the provision of any
ongoing welfare benefits to the Employee that would not be required to be
delayed if the premiums therefor were paid by the Employee, the Employee shall
pay the full cost of premiums for such welfare benefits during the Deferral
Period and the Company shall pay (or cause to be paid) to the Employee an
amount equal to the amount of such premiums paid by the Employee during the
Deferral Period promptly after its conclusion.

 

(c)                                  Any reimbursements by the
Company to the Employee of any eligible expenses under this Agreement that are
not excludable from the Employee’s income for Federal income tax purposes (the “Taxable Reimbursements”) shall be
made by no later than the earlier of the date on which they would be paid under
the Company’s normal policies and the last day of the taxable year of the
Employee following the year in which the expense was incurred.  The amount of any Taxable Reimbursements, and
the value of any in-kind benefits to be provided to the Employee, during any
taxable year of the Employee shall not affect the expenses eligible for
reimbursement, or in-kind benefits to be provided, in any other taxable year of
the Employee.  The right to Taxable
Reimbursements, or in-kind benefits, shall not be subject to liquidation or
exchange for another benefit.

 

(d)                                  Payment of any Taxable Reimbursements under this
Agreement must be made by no later than the end of the taxable year of the
Employee following the taxable year of the Employee in which the Employee
remits the related taxes.

 

9.                                      Miscellaneous.

 

(a)                                  Entire Agreement. 
This Agreement (including Schedule 1) sets forth the entire
understanding of the parties with respect to the subject matter hereof and
merges and supersedes any prior or contemporaneous agreements (whether written
or oral) between the parties pertaining thereto, including without limitation
any prior agreements, arrangements, understandings or commitments of any nature
whatsoever relating to severance payments or 

 

9

 

other compensation in
connection with termination of Employee’s employment.  The Employee acknowledges that he has read
and understands the provisions of this Agreement.  The Employee further acknowledges that he has
been given an opportunity for his legal counsel to review this Agreement and
that the provisions of this Agreement are reasonable.

 

(b)                                  Amendment. 
This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.

 

(c)                                  Waiver. 
No waiver by any party of any of its rights under this Agreement shall
be effective unless in writing and signed by the party against which the same
is sought to be enforced.  No such waiver
by any party of its rights under any provision of this Agreement shall
constitute a waiver of such party’s rights under such provisions at any other
time or a waiver of such party’s rights under any other provision of this
Agreement.  No failure by any party
hereto to take any action against any breach of this Agreement or default by
another party shall constitute a waiver of the former party’s right to enforce
any provision of this Agreement or to take action against such breach or
default or any subsequent breach or default by such other party.

 

(d)                                  Successors and Assigns. 
The Employee shall not have the right to assign Employee’s rights or
obligations hereunder.  The Company shall
not have the right to assign its rights or obligations under this Agreement
without the prior written consent of the Employee, except in accordance with
subsection (j) below.  Subject to
the foregoing, this Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their legal representatives, heirs, successors and
permitted assigns.  Except as otherwise
specifically provided herein, the rights and obligations of the parties under
this Agreement shall be unaffected by a Change of Control of the Company.

 

(e)                                  Additional Acts. 
The Employee and the Company shall execute, acknowledge and deliver and
file, or cause to be executed, acknowledged and delivered and filed, any and
all further instruments, agreements or documents as may be necessary or
expedient in order to consummate the transactions provided for in this
Agreement and do any and all further acts and things as may be necessary or
expedient in order to carry out the purpose and intent of this Agreement.

 

(f)                                    Communications. 
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been given at the time
personally delivered, on the business day following the day such communication
is sent by national overnight delivery service, upon electronic confirmation of
recipient’s receipt of a facsimile of such communication, or five days after
being deposited in the United States mail enclosed in a registered or certified
postage prepaid envelope, return receipt requested, and addressed to the
recipient at the address set forth beneath the recipient’s signature to this
Agreement, or sent to such other address as a party may specify by notice to
the other party in accordance herewith, provided that notices of change of
address shall only be effective upon receipt.

 

(g)                                 Severability. 
If any provision of this Agreement is held to be invalid or
unenforceable by a court of competent jurisdiction, such invalidity or
unenforceability shall not affect the validity and enforceability of the other
provisions of this Agreement and the provision 

 

10

 

held to be invalid or unenforceable
shall be enforced as nearly as possible according to its original terms and
intent to eliminate such invalidity or unenforceability.

 

(h)                                 Withholding Taxes. 
The Company may withhold from amounts payable under this Agreement such
federal, state and local taxes as are required to be withheld pursuant to any
applicable law or regulation and the Company shall be authorized to take such
action as may be necessary in the opinion of the Company’s counsel to satisfy
all obligations for the payment of such taxes.

 

(i)                                    Governing Law. 
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Rhode Island applicable
to agreements made and to be performed entirely in such state, without regard to
the conflict of laws principles of such state.

 

(j)                                    Consolidation, Merger or Sale of
Assets.  If the Company consolidates or merges into or with, or transfers all or
substantially all of its assets to, another entity the term “Company” as used in this Agreement shall mean such other
entity and this Agreement shall continue in full force and effect. In the case
of any transaction in which a successor would not by the foregoing provision or
by operation of law be bound by this Agreement, the Company shall require such
successor expressly and unconditionally to assume and agree to perform the
Company’s obligations under this Agreement, in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place.

 

(k)                                Headings. 
The section and other headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
any provisions of this Agreement.

 

(l)                                    Counterparts. 
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original but all of which together shall constitute
one and the same instrument.  In the
event that any signature to this Agreement is delivered by facsimile transmission
or email attachment, such signature shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or email-attached signature page were
an original thereof.

 

(m)                              Litigation; Prevailing Party. 
If any litigation is instituted regarding this Agreement, the prevailing
party shall be entitled to receive from the non-prevailing party, and the
non-prevailing party shall pay, all reasonable fees and expenses of counsel for
the prevailing party.

 

(n)                                 Waiver of Jury Trial. 
Each party hereto knowingly, irrevocably and voluntarily waives its
right to a trial by jury in any litigation which may arise under or involving
this Agreement.

 

(o)                                  Venue; Jurisdiction. 
If any litigation is to be instituted regarding this Agreement, it shall
be instituted in the state and federal courts located in Providence County,
Rhode Island, and each party irrevocably consents and submits to the personal
jurisdiction of such courts in any such litigation, and waives any objection to
the laying of venue in such courts. 
Service of process in any such litigation shall be effective as to any
party if given to such party 

 

11

 

by registered or
certified mail, return receipt requested, or by any other means of mail that
requires a signed receipt, postage prepaid, mailed to such party as provided in
Section 9(f).

 

(p)                                  Remedies Cumulative. 
No remedy made available by any of the provisions of this Agreement is
intended to be exclusive of any other remedy, and each and every remedy shall
be cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity.

 

(q)                                  No Duty to Mitigate. 
The Employee shall not be required to mitigate the amount of any payment
contemplated by this Agreement, nor shall any such payment be reduced by any
earnings that the Employee may receive from any other source.

 

(r)                                  Release.  Notwithstanding any provision herein to the contrary, the Company shall
not have any obligation to pay (or cause to be paid) any amount or provide any
benefit under this Agreement unless and until the Employee executes, within sixty (60) days
after a Payment Event, a release of the Company and its Affiliates and related
parties, in such form as the Company may reasonably request, of all claims
against the Company and its Affiliates and related parties relating to the
Employee’s employment and termination thereof and unless and until any  revocation period applicable to such release has
expired.

 

[Remainder of Page Left
Intentionally Blank]

 

12

 

IN WITNESS WHEREOF, the parties hereto have each duly executed this
Agreement as of the date set forth above.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUMMER
  INFANT (USA), INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jason Macari

  
	
   

  	
   

  	
  Name:

  	
  Jason Macari

  
	
   

  	
   

  	
  Title:

  	
  /s/ President and Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/
  Steven Gibree

  
	
   

  	
  Steve
  Gibree

  
	
   

  	
  1275
  Park East Drive

  
	
   

  	
  Woonsocket,
  RI 02895

  

 

 

Schedule
1

 

	
  Employee:

  	
   

  	
  Steve Gibree

  
	
   

  	
   

  	
   

  
	
  Position/Title:

  	
   

  	
  EVP — Product
  Development

  
	
   

  	
   

  	
   

  
	
  Payment Percentage:

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  
	
  Severance Benefits:

  	
   

  	
  For a period commencing
  with the month in which termination of employment shall have occurred and
  ending - 12 months thereafter, the Employee and, as applicable, the
  Employee’s covered dependents shall be entitled to all benefits under the
  Company’s welfare benefit plans (within the meaning of
  Section 3(1) of the Employee Retirement Income Security Act of
  1974, as amended), as if the Employee were still employed during such period,
  at the same level of benefits and at the same dollar cost to the Employee as
  is in effect at the time of termination. If and to the extent that equivalent
  benefits shall not be payable or provided under any such plan, the Company
  shall pay or provide (or cause to be paid or provided) equivalent benefits on
  an individual basis. The benefits provided in accordance herewith shall be
  secondary to any comparable benefits provided to the Employee and, as
  applicable, the Employee’s covered dependents by another employer of the
  Employee.

  
	
   

  	
   

  	
   

  
	
  Restricted Period:

  	
   

  	
  12 monthsExhibit 10.1

 

EXCHANGE AGREEMENT

 

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

 

RECITALS

 

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

 

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

 

1

 

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

 

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

 

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

 

2

 

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

 

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

 

AGREEMENT

 

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

 

1.             Exchange of Preferred
Securities.

 

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

 

2.             Consideration for the Exchange.

 

2.1           Exchange Price.

 

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

 

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

 

3

 

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

 

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

 

4

 

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

 

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

 

5

 

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

 

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

 

6

 

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

 

7

 

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

 

8

 

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 

 

9

 

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

 

10

 

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 

 

11

 

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.

 

12

 

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.

 

13

 

4.             Representations and Warranties of Company.

 

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

 

4.1           Execution and Validity.

 

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

 

14

 

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

 

4.2           Organization and Qualification.

 

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

 

4.3           Absence of Encumbrances.

 

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

 

15

 

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

 

16

 

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 

 

17

 

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 

 

18

 

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

 

4.11         Approval by Disinterested Board Committee.

 

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

 

5.             Covenants of the Investor.

 

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

 

5.1           Cooperation.

 

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

 

19

 

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

 

5.2           Certain Acts.

 

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

 

5.3           Investor Consents.

 

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

 

5.4           No Shop; Standstill.

 

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

 

6.             Covenants of Company.

 

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

 

20

 

6.1           Cooperation.

 

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

 

6.2           Certain Acts.

 

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

 

6.3           Company Consents.

 

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

 

6.4           Stockholder Approval.

 

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

 

7.             Conditions Precedent to the Obligations
of the Investor.

 

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

 

7.1           Representations and Warranties.

 

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

 

21

 

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

 

7.2           Performance.

 

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

 

7.3           Absence of Litigation.

 

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

 

7.4           Consents.

 

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

 

8.             Conditions Precedent to Obligations of Company.

 

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

 

22

 

8.1           Representations and Warranties.

 

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

 

8.2           Performance.

 

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

 

8.3           Absence of Litigation.

 

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

 

8.4           Consents.

 

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

 

23

 

9.             Condition Precedent to the Closing.

 

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

 

10.           Closing and Post-Closing Covenants.

 

10.1         Time and Place.

 

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

 

10.2         Obligations of the Investor.

 

At the Closing, the Investor shall deliver to
Company:

 

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

 

24

 

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

 

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

 

10.3         Obligations of the Company.

 

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

 

(i)            The Initial Shares;

 

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

 

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

 

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

 

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

 

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

 

25

 

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

 

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

 

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

 

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

 

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

 

26

 

11.           Registration Rights.

 

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

 

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

 

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

 

27

 

12.           Indemnification.

 

12.1         Indemnification by Investor.

 

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

 

12.2         Indemnification by Company.

 

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

 

28

 

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

 

12.3         Notice of Indemnification.

 

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

 

29

 

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

 

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

 

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

 

30

 

12.4         Basket.

 

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

 

13.           Abandonment of Transactions.

 

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

 

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

 

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

 

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

 

31

 

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

 

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

 

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

 

14.           Effect of Abandonment.

 

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

 

15.           Specific Performance.

 

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

 

32

 

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

 

16.           Miscellaneous.

 

16.1         Notices.

 

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

 

To the Investor:                                                                                                          Edwin F. Hale, Sr.

1501
S. Clinton Street, 16th Floor

Baltimore,
Maryland  21224

Fax:  (410) 558 - 4495

Email:  csmith@1stmarinerbank.com

 

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

The
Garrett Building

233
East Redwood Street

Baltimore,
Maryland 21202

Attn:       Abba David Poliakoff,
Esquire

Fax:         (410) 576-4032

Email:      apoliakoff@gfrlaw.com.

 

To Company:                                                                                                                        FIRST MARINER BANCORP

1501 S. Clinton Street

Baltimore, Maryland 21224

Attn: Eugene A. Friedman

Fax: (410) 342-4127.

 

With a copy to:                                                                                                             Kilpatrick
Stockton LLP

607 14th Street, NW

Suite 900

Washington, DC 
20005

 

33

 

Attn: Gary R. Bronstein

Fax: (202) 508-5858

Email: gbronstein@kilpatrickstockton.com.

 

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

 

16.2         Entire Agreement.

 

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

 

16.3         Amendment.

 

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

 

16.4         Binding Effect.

 

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

 

16.5         Waiver.

 

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

 

34

 

16.6         Captions.

 

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

 

16.7         Construction.

 

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

 

16.8         Sections.

 

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

 

16.9         Severability.

 

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

 

16.10       Absence of Third-Party Beneficiaries.

 

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

 

35

 

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

 

16.11       Business Day.

 

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

 

16.12       Assignment.

 

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

 

16.13       Other Documents.

 

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

 

16.14       Governing Law.

 

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

 

16.15       Attorneys Fees.

 

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

 

36

 

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

 

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

 

16.16       Public Disclosure.

 

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

 

16.17       Execution; Counterparts.

 

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

 

[The Remainder of the Page is
Intentionally Left Blank]

 

37

 

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

 

 

	
   

  	
  FIRST
  MARINER BANCORP,

  
	
   

  	
  A Maryland Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/ John
  Brown, III

  	
  (SEAL)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:
  John Brown, III

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:
  Director and Chairman of the Special

  	
   

  
	
   

  	
   

  	
  Committee

  	
   

  

 

38

 

	
  INVESTOR:

  	
  /s/ Edwin F.
  Hale, Sr.

  	
  (SEAL)

  

 

Name:              Edwin
F. Hale, Sr.

Address:

 

	
  Liquidation Preference Amount
  of 2002 Preferred Securities held:

  	
   

  	
  4,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Liquidation Preference Amount
  of 2003 Preferred Securities held:

  	
   

  	
  6,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Liquidation Preference Amount
  of 2005 Preferred Securities held:

  	
   

  	
  10,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Class of Accredited
  Investor:

  	
   

  	
   

  	
   

  

 

39

 

LIST OF EXHIBITS AND SCHEDULES

 

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

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

 

Schedule
3.4 — Investor Consents and Filings

Schedule
4.5 — Company Consents and Filings

 

40

 

EXHIBIT A

 

FORM OF WARRANT

 

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

 

Date:
                                  ,
2010

 

COMMON STOCK WARRANT
 
OF
 
FIRST MARINER BANCORP
 

INCORPORATED UNDER
THE LAWS OF THE STATE OF MARYLAND

 

THIS CERTIFIES THAT, for value received, Edwin F. Hale, Sr. (the “Investor”) is entitled to subscribe for and purchase shares (the “Shares”) of the fully paid and nonassessable Common Stock of FIRST MARINER BANCORP, a Maryland corporation (the “Company”), subject to the provisions and upon the terms and conditions hereinafter set forth.  As used herein, the term “Common Stock” shall mean the Company’s duly authorized Common Stock, and any stock into or for which such Common Stock may hereafter be exchanged pursuant to the Articles of Incorporation of the Company as from time to time amended as provided by law and in such Articles, and the term “Grant Date” shall mean the date set forth above.
 
This Warrant is issued in connection with the Exchange Agreement of even date herewith executed by and between the Investor and the Company (the “Exchange Agreement”).
 
1.               TERM.  Subject to the terms hereof, the purchase right represented by this Warrant is exercisable, in whole, at any time from and after the Grant Date and at or prior to 11:59 p.m. Eastern Standard Time on the date five (5) years following the Grant Date (the “Expiration Date”).  The number of Shares, type of security and Exercise Price (as that term is defined in Section 2 hereof) are subject to adjustment as provided herein, and all references to “Exercise Price” herein shall be deemed to include any such adjustment or series of adjustments. Terms used herein and not otherwise defined shall have the meaning as set forth in the Exchange Agreement.
 

 

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

 

3.               METHOD OF EXERCISE. The purchase right represented by this Warrant may be exercised by the Investor, in whole or in part and from time to time, by the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A duly executed) at the principal office of the Company accompanied by payment to the Company, by certified check, or wire transfer payable to the Company, in an amount equal to the then applicable Exercise Price per share multiplied by the number of Shares then being purchased. Thereupon, the Investor, as the holder of this Warrant, shall be entitled to receive from the Company a stock certificate representing the number of Shares so purchased which shall be delivered to the Investor as soon as possible and in any event within thirty (30) days of receipt of such notice, surrendered Warrant and proper payment, and a new warrant in substantially identical form and dated as of such date of exercise shall be issued to the Investor for the purchase of that number of Shares equal to the difference, if any, between the number of Shares subject to this Warrant and the number of Shares as to which this Warrant is so exercised. The Investor shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the Shares represented thereby (and such Shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised.
 
4.               STOCK FULLY PAID: RESERVATION OF SHARES.  The Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and non assessable, and free from all taxes, liens and charges with respect to the
 
1

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

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

	
  To Investor:

  	
  Edwin F. Hale, Sr.

  
	
   

  	
  1501 S. Clinton Street, 16th Floor

  
	
   

  	
  Baltimore, MD 21224

  
	
   

  	
  Fax:

  
	
   

  	
  Email:

  

 

 

	
  With a Copy to:

  	
                                                           

  
	
   

  	
                                                 

  
	
   

  	
                                                 

  
	
   

  	
  Attn:

  	
                                                 

  
	
   

  	
  Fax:

  	
                                                 

  

 

 

	
   

  	
  Email:
                     

  
	
   

  	
   

  
	
   

  	
   

  
	
  To Company:

  	
  FIRST
  MARINER BANCORP

  
	
   

  	
  1501 S. Clinton
  Street

  
	
   

  	
  Baltimore, Maryland
  21224

  
	
   

  	
  Attn: Eugene A.
  Friedman

  
	
   

  	
  Fax: (410) 342-4127

  
	
   

  	
   

  
	
  With a copy to:

  	
  Kilpatrick Stockton LLP

  
	
   

  	
  607 14th Street, NW

  
	
   

  	
  Suite 900

  
	
   

  	
  Washington, DC 20005

  
	
   

  	
  Attn: Gary R. Bronstein

  
	
   

  	
  Fax: (202) 508-5858

  
	
   

  	
  Email:
  gbronstein@kilpatrickstockton.com

  
			

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

[Remainder of Page Intentionally
Left Blank]

 

 

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

 

 

	
  Investor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: Edwin F. Hale, Sr.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Company:

  	
  FIRST MARINER BANCORP,

  
	
   

  	
  A Maryland corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  John
  Brown, III

  
	
   

  	
  Title:   Director
  and Chairman of the Special

  
	
  Committee

  	
   

  
				

 

 
EXHIBIT A

NOTICE OF EXERCISE

 

To: FIRST MARINER BANCORP

1501 S. Clinton Street

Baltimore, Maryland  21224

Attn:

 

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

 

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

 

Name:

 

                                             

Address:

 

                                             

 

                                             

 

                                             

 

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

 

 

	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name: Edwin F.
  Hale, Sr.

  

 

 

EXHIBIT B

 

FORM OF WARRANT

 

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

 

Date:
                        ,
2010

 

COMMON STOCK WARRANT
 
OF
 
FIRST MARINER BANCORP
 

INCORPORATED UNDER
THE LAWS OF THE STATE OF MARYLAND

 

THIS CERTIFIES THAT, for value received, Edwin F. Hale, Sr. (the “Investor”) is entitled to subscribe for and purchase shares (the “Shares”) of the fully paid and nonassessable Common Stock of FIRST MARINER BANCORP, a Maryland corporation (the “Company”), subject to the provisions and upon the terms and conditions hereinafter set forth.  As used herein, the term “Common Stock” shall mean the Company’s duly authorized Common Stock, and any stock into or for which such Common Stock may hereafter be exchanged pursuant to the Articles of Incorporation of the Company as from time to time amended as provided by law and in such Articles, and the term “Grant Date” shall mean the date set forth above.
 
This Warrant is issued in connection with the Exchange Agreement of even date herewith executed by and between the Investor and the Company (the “Exchange Agreement”).
 
21.         TERM.  Subject to the terms hereof, the purchase right represented by this Warrant is exercisable, in whole, at any time from and after the Grant Date and at or prior to 11:59 p.m. Eastern Standard Time on                     , 2015.  The number of Shares, type of security and Exercise Price (as that term is defined in Section 2 hereof) are subject to adjustment as provided herein, and all references to “Exercise Price” herein shall be deemed to include any such adjustment or series of adjustments.  Terms used herein and not otherwise defined shall have the meaning as set forth in the Exchange Agreement.
 
22.         NUMBER OF SHARES AND EXERCISE PRICE.  Subject to the terms and conditions hereinafter set forth, the Investor is entitled, upon surrender of this Warrant prior to the Expiration Date, to purchase from the Company,            shares of Common Stock.  The

 

1

 
purchase price for the shares of the Common Stock purchased pursuant to this Warrant shall be equal to $         per share (“Exercise Price”).
 
23.         METHOD OF EXERCISE. The purchase right represented by this Warrant may be exercised by the Investor, in whole or in part and from time to time, by the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A duly executed) at the principal office of the Company accompanied by payment to the Company, by certified check, or wire transfer payable to the Company, in an amount equal to the then applicable Exercise Price per share multiplied by the number of Shares then being purchased. Thereupon, the Investor, as the holder of this Warrant, shall be entitled to receive from the Company a stock certificate representing the number of Shares so purchased which shall be delivered to the Investor as soon as possible and in any event within thirty (30) days of receipt of such notice, surrendered Warrant and proper payment, and a new warrant in substantially identical form and dated as of such date of exercise shall be issued to the Investor for the purchase of that number of Shares equal to the difference, if any, between the number of Shares subject to this Warrant and the number of Shares as to which this Warrant is so exercised. The Investor shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the Shares represented thereby (and such Shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised.
 
24.         STOCK FULLY PAID: RESERVATION OF SHARES.  The Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be fully paid and non assessable, and free from all taxes, liens and charges with respect to the issue thereof.  During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved for the purpose of issuance upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of Shares to provide for the exercise of the right represented by this Warrant.
 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

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

 

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

 

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

 

	
  To Investor:

  	
  Edwin F. Hale, Sr.

  
	
   

  	
  1501 S. Clinton Street,
  16th Floor

  
	
   

  	
  Baltimore, MD 21224

  
	
   

  	
  Fax:

  
	
   

  	
  Email:

  

 

 

	
  With
  a Copy to:

  	
   

  
	
   

  	
   

  
	
   

  	
  Attn:

  
	
   

  	
  Fax:

  
	
   

  	
  Email:

  

 

 

	
  To
  Company:

  	
  FIRST MARINER BANCORP

  
	
   

  	
  1501 S. Clinton Street

  
	
   

  	
  Baltimore,
  Maryland  21224

  
	
   

  	
  Attn: Chief Executive
  Officer

  
	
   

  	
  Fax: (410) 342-4127

  

 

 

	
  With a copy to:

  	
  Kilpatrick
  Stockton LLP

  
	
   

  	
  607 14th Street, NW

  
	
   

  	
  Suite 900

  
	
   

  	
  Washington, DC 20005

  
	
   

  	
  Attn: Gary R. Bronstein

  
	
   

  	
  Fax: (202) 508-5858

  
	
   

  	
  Email:
  grbonstein@kilpatrickstockton.com

  
			

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

[Remainder of Page Intentionally
Left Blank]

 

 

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

 

 

	
  Investor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: Edwin F.
  Hale, Sr.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Company:

  	
  FIRST MARINER BANCORP,

  
	
   

  	
  A Maryland corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: John
  Brown, III

  
	
   

  	
  Title:    Director and Chairman of the Special Committee

  
				

 

 

EXHIBIT A

NOTICE OF EXERCISE

 

To: FIRST MARINER BANCORP

1501 S. Clinton
Street

Baltimore,
Maryland  21224

Attn:

 

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

 

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

 

1

 

SCHEDULE 4.5

COMPANY CONSENTS AND FILINGS

 

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

 

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

 

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

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