Document:

Exhibit 10.1

 

 

 

 

ASSET PURCHASE
AGREEMENT

 

 

between

 

 

DEERFIELD CAPITAL
MANAGEMENT LLC

 

 

and

 

 

LUKE D. KNECHT

 

 

 

 

Dated as of September 30,
2010

 

 

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I
  DEFINITIONS

  	
  1

  
	
   

  	
   

  
	
  ARTICLE II
  TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES

  	
  4

  
	
  Section 2.1

  	
  Purchase and Sale of Assets

  	
  4

  
	
  Section 2.2

  	
  Excluded Assets

  	
  4

  
	
  Section 2.3

  	
  Assignment and Assumption of Certain Liabilities and
  Expenses

  	
  4

  
	
  Section 2.4

  	
  Limited Warranty; Nonrecourse; Conveyance; Release

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE III
  REPRESENTATIONS AND WARRANTIES OF SELLER

  	
  5

  
	
  Section 3.1

  	
  Organization and Powers

  	
  5

  
	
  Section 3.2

  	
  Corporate Authority

  	
  5

  
	
  Section 3.3

  	
  No Conflicts

  	
  6

  
	
  Section 3.4

  	
  Absence of Certain Liens and Litigation

  	
  6

  
	
  Section 3.5

  	
  Disclaimer of other Representations and Warranties

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV
  REPRESENTATIONS AND WARRANTIES OF PURCHASER

  	
  6

  
	
  Section 4.1

  	
  No Conflicts

  	
  6

  
	
  Section 4.2

  	
  Consents and Approvals

  	
  7

  
	
  Section 4.3

  	
  Absence of Certain Liabilities and Litigation

  	
  7

  
	
  Section 4.4

  	
  No Other Representations and Warranties; Estimates,
  Projections and Other Predictions

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE V
  COVENANTS OF THE PARTIES

  	
  7

  
	
  Section 5.1

  	
  Cooperation

  	
  7

  
	
  Section 5.2

  	
  Use of Names, Trademarks, Service Marks and
  Technology Systems

  	
  8

  
	
  Section 5.3

  	
  Limitations

  	
  8

  
	
  Section 5.4

  	
  Bulk Sales Laws

  	
  9

  
	
  Section 5.5

  	
  Transition Assistance

  	
  10

  
	
  Section 5.6

  	
  Certain Tax Matters

  	
  10

  
	
  Section 5.7

  	
  Possession

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI
  OBLIGATIONS OF PARTIES ON THE CLOSING DATE

  	
  10

  
	
  Section 6.1

  	
  Closing Date and Place

  	
  10

  
	
  Section 6.2

  	
  Obligations of Purchaser on the Closing Date

  	
  10

  
	
  Section 6.3

  	
  Obligations of Seller on the Closing Date

  	
  11

  
	
  Section 6.4

  	
  Additional Payments

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII
  CONDITIONS TO PURCHASER’S OBLIGATION TO CONSUMMATE THE TRANSACTION

  	
  12

  
	
  Section 7.1

  	
  Representations and Warranties

  	
  12

  
	
  Section 7.2

  	
  Compliance with Covenants

  	
  12

  

 

i

 

TABLE
OF CONTENTS

(Continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII
  CONDITIONS TO SELLER’S OBLIGATION TO CONSUMMATE THE TRANSACTION

  	
  12

  
	
  Section 8.1

  	
  Representations and Warranties

  	
  12

  
	
  Section 8.2

  	
  Compliance with Covenants

  	
  12

  
	
  Section 8.3

  	
  Termination Agreement

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX
  INDEMNIFICATION 

  	
  13

  
	
  Section 9.1

  	
  Survival

  	
  13

  
	
  Section 9.2

  	
  Indemnification by Purchaser

  	
  13

  
	
  Section 9.3

  	
  Limitations on Indemnification; Exclusive Remedy

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE X
  TERMINATION

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI
  GENERAL PROVISIONS

  	
  14

  
	
  Section 11.1

  	
  Entire Agreement; Modification; Waiver

  	
  14

  
	
  Section 11.2

  	
  Counterparts; Effectiveness; Third Party
  Beneficiaries

  	
  14

  
	
  Section 11.3

  	
  Interpretation

  	
  14

  
	
  Section 11.4

  	
  Payment of Expenses

  	
  15

  
	
  Section 11.5

  	
  Governing Law; Waiver of Jury Trial; Consent to
  Jurisdiction

  	
  15

  
	
  Section 11.6

  	
  Addresses of Notice

  	
  16

  
	
  Section 11.7

  	
  Intentionally Omitted

  	
  16

  
	
  Section 11.8

  	
  Severability

  	
  16

  
	
  Section 11.9

  	
  Specific Performance

  	
  17

  
	
  Section 11.10

  	
  Rules of Construction

  	
  17

  
	
  Section 11.11

  	
  Employees and Agents of Seller

  	
  17

  
	
  Section 11.12

  	
  Remittances

  	
  17

  

 

ii

 

ANNEXES AND EXHIBITS

 

	
  ANNEX A:

  	
   

  	
  CERTAIN ASSETS AND THE ELIGIBLE EMPLOYEES

  
	
   

  	
   

  	
   

  
	
  ANNEX B:

  	
   

  	
  BILL OF SALE

  

 

 

ASSET PURCHASE AGREEMENT, dated as of September 30,
2010, by and between Deerfield Capital Management LLC, a Delaware limited
liability company (“Seller”), and Luke D. Knecht
(“Purchaser”).

 

W I T N E S S E T H:

 

WHEREAS, Seller owns a license to use certain
proprietary software and related materials for managing the duration of
investment portfolios and other assets (collectively, “Return
Profile Management” or “RPM”);

 

WHEREAS, upon the terms and subject to the
conditions of this Agreement, Seller wishes to sell, convey, assign, transfer
and deliver to Purchaser, and Purchaser desires to acquire from the Seller, the
Acquired Assets, subject to certain liabilities;

 

WHEREAS, prior to or concurrently with the execution
and delivery of this Agreement, and as a condition to the willingness of Seller
to enter into this Agreement, Luke D. Knecht is entering into a termination
agreement with Seller pursuant to which, among other things and subject to
certain conditions, he has agreed to resign from his positions with Seller and
its Affiliates effective as of the Closing (the “Termination
Agreement”).

 

NOW, THEREFORE, in consideration of the foregoing
recitals and the following terms, covenants, and conditions, the parties agree
as follows:

 

ARTICLE I 

DEFINITIONS

 

“Acquired Assets”
means the Equipment, the Software and the Track Record, and all of Seller’s
right, title and interest in RPM, including relevant databases and
spreadsheets.

 

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

 

“Agreement”
means this Agreement as the same may be amended, supplemented or modified from
time to time in accordance with the terms hereof.

 

“Assumed Liabilities”
has the meaning ascribed to it in Section 2.3.

 

“Bill of Sale”  means the bill of sale in substantially the form and
substance attached hereto as Annex B.

 

1

 

“Business Day”
means any day other than Saturday, Sunday or a day on which commercial banks in
New York, New York are authorized or required by Law to close.

 

“Closing”
has the meaning ascribed to it in Section 6.1(a).

 

“Closing Date”
has the meaning ascribed to it in Section 6.1(a).

 

“Code” means
the Internal Revenue Code of 1986, as amended (including any successor code),
and the rules and regulations promulgated thereunder.

 

“Eligible Employees”
has the meaning ascribed to it in Section 11.11.

 

“Equipment”
means the computer hardware, equipment and peripherals, including desktop and
laptop personal computers, listed on Annex A attached hereto.

 

“Excluded Assets”
has the meaning ascribed to it in Section 2.2.

 

“Governmental Entity”
means any (i) region, state, county, municipality, city, town, village,
district or other jurisdiction, (ii) foreign, federal, state, provincial,
local, municipal or other government, (iii) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, self-regulatory organization (including any securities
exchange) or other entity and any court or other tribunal), (iv) body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, policy, regulatory or taxing authority or power of any nature or (v) official
of any of the foregoing.

 

“Initial Payment”
means $150,000.

 

“Judgment”
means any judgment, ruling, order, arbitral award or decree of any Governmental
Entity.

 

“Knowledge” or “Know” and similar
terms means (a) with respect to a natural person, the actual knowledge of
such person as of the date of this Agreement, and (b) with respect to a
person that is not a natural person, the actual knowledge, after reasonable
inquiry, of any director, manager or executive officer of any such non-natural
person as of the date of this Agreement.

 

“Law” means
any writ, injunction, Judgment, law, decision, opinion, statute, rule or
regulation of any governmental, judicial, legislative, executive,
administrative or regulatory authority of the United States, or of any state or
local government or any subdivision thereof, or of any Governmental Entity.

 

“Liabilities”
means all liabilities or obligations of any kind or nature, whether known or
unknown, whether absolute, accrued, contingent, choate, inchoate or otherwise,
whether due or to become due, and whether or not required to be reflected on a
balance sheet prepared in accordance with United States generally accepted
accounting principles, as in effect from time to time.

 

2

 

“Lien” means
any mortgage, deed of trust, lien, security interest, pledge, lease,
conditional sale contract, claim, charge, easement, right of way, assessment,
restriction and other encumbrance or claim of every kind.

 

“New Firm”
has the meaning ascribed to it in Section 5.3(a).

 

“Person”
means any natural person, corporation, general partnership, limited
partnership, limited liability company, proprietorship, other business
organization, trust, union, association or Government Entity.

 

“Purchaser”
has the meaning ascribed to it in the preamble.

 

“Representative”
means, with respect to a particular Person, any director, officer, manager,
employee, agent, consultant, advisor, legal counsel, accountant or other
representative of that Person.

 

“Restricted Period”
has the meaning ascribed to it in Section 5.3(a).

 

“Seller” has
the meaning ascribed to it in the preamble.

 

“Seller’s Clients”
has the meaning ascribed to it in Section 5.3(b).

 

“Software”
means the perpetual, non-exclusive license to use certain software described in
that certain ANALYSIS GROUP, INC./THEORETICS, INC. AGREEMENT RCM
SYSTEM (Agreement No. 91202969) dated as of December 31, 1996, along
with the data files associated with the Software, as such was assigned to
Seller by Dresdner RCM Global Investors LLC (“DRCM”)
pursuant to that certain assignment agreement dated as of May 24, 2002.

 

“Tax Return”
means any report, return or other information required to be supplied to a
taxing authority in connection with Taxes.

 

“Taxes”
means all taxes, charges, fees, levies or other like assessments, including
income, gross receipts, excise, real and personal and intangible property,
sales, use, transfer (including transfer gains taxes), withholding, license,
payroll, recording, ad valorem and franchise taxes imposed by any Governmental
Entity and such term shall include any interest, penalties or additions to tax
attributable to such assessments.

 

“Termination Agreement”
has the meaning ascribed to it in the recitals.

 

“Third Party Consents”
means all consents (or in lieu thereof waivers) from a third party to the
performance by the applicable Person of its obligations under this Agreement
and the other Transaction Documents or to the consummation or performance of
the transactions contemplated hereby and thereby as are required under any
Contract to which such Person is a party or any agreement by which any of the
Acquired Assets are bound or which constitute any of the Acquired Assets.

 

3

 

“Track Record”
means documentation to support the historic performance records of all
portfolios managed by Seller with the use of RPM and related marketing
materials and client correspondence and any documentation previously acquired
by the Seller from DRCM relating to the operation of RPM.

 

“Transaction Documents”
has the meaning ascribed to it in Section 3.2.

 

ARTICLE II 

TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES

 

Section 2.1            Purchase and Sale of Assets.  Upon the terms and subject to the conditions
of this Agreement, Purchaser agrees to purchase from Seller, and Seller agrees
to sell, convey, transfer, assign and deliver, or cause to be sold, conveyed,
transferred, assigned and delivered, to Purchaser at the Closing, all of Seller’s
right, title and interest in, to and under the Acquired Assets.   For the avoidance of doubt, the parties
hereto agree that all accrued fees payable by RPM clients for the third quarter
of 2010 shall be payable to the Seller.

 

Section 2.2            Excluded Assets.  Purchaser expressly understands and agrees
that Purchaser is not acquiring from Seller, and Seller shall retain ownership
of all right, title and interest in and to, any property or asset other than
any right, title or interest in or to the Acquired Assets, including any
interest in or right to use any logo, name, trademark or service mark presently
or previously used by Seller or any of its Affiliates (including the name “Deerfield”
and any related trademarks or service marks) (collectively, the “Excluded Assets”).  Purchaser further expressly understands and
agrees that Seller retains the right to maintain copies of the Track Record and
disclose the Track Record as necessary for legal, regulatory or accounting
purposes.

 

Section 2.3            Assignment and Assumption of
Certain Liabilities and Expenses. 
Subject to the terms and conditions set forth in this Agreement, on the
Closing Date, Seller shall assign to Purchaser, and Purchaser shall
(i) accept and assume from Seller and (ii) thereafter pay, perform
and discharge in a timely manner when due all obligations with respect to and
be liable for any and all Liabilities of Seller arising out of or in connection
with the development, use or ownership of the Acquired Assets that were
incurred or result from actions taken from and after the Closing Date, and any
and all Liabilities expressly provided in this Agreement that are required to
be borne by Purchaser, including Purchaser’s indemnification obligations under Section 9.3
(collectively, the “Assumed
Liabilities”).

 

Section 2.4            Limited Warranty; Nonrecourse;
Conveyance; Release.

 

(a)           THE CONVEYANCE OF ALL ACQUIRED ASSETS PURCHASED BY
PURCHASER UNDER THIS AGREEMENT AND UNDER ANY CONVEYANCE DOCUMENT EXECUTED IN
CONNECTION HEREWITH SHALL BE MADE, AS NECESSARY, BY SELLER’S ASSIGNMENT OR BILL
OF SALE, IN “AS IS” AND “WHERE IS” CONDITION, AND WITHOUT ANY

 

4

 

REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH
RESPECT TO SUCH ACQUIRED ASSETS, EXPRESS OR IMPLIED, WITH RESPECT TO
MERCHANTABILITY, FITNESS FOR A SPECIFIC PURPOSE, ENVIRONMENTAL CONDITION,
ENFORCEABILITY, COLLECTIBILITY, DOCUMENTATION OR FREEDOM FROM LIENS OR
ENCUMBRANCES (IN WHOLE OR IN PART), CONDITION OF PROPERTY OR ANY OTHER MATTER,
AND PURCHASER SHALL NOT BE ENTITLED TO RELY ON ANY REPRESENTATION OR WARRANTY
WHATSOEVER EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE III OF THIS AGREEMENT.

 

(b)           Purchaser shall execute and deliver to Seller, and Seller
shall execute and deliver to Purchaser such further instruments and documents
of conveyance (in form and substance reasonably satisfactory to Seller and
Purchaser) as shall be reasonably necessary to vest in Purchaser the full legal
and equitable title of Seller in and to the Acquired Assets, free and clear of
all Liens.

 

(c)           On and after the Closing Date, Purchaser shall execute,
acknowledge and deliver to Seller all such acknowledgements and other instruments
as Seller shall reasonably request (in form and substance reasonably
satisfactory to Purchaser and Seller) to effectively relieve and discharge
Seller when due from any of the Assumed Liabilities.

 

ARTICLE III 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants to Purchaser as
follows:

 

Section 3.1            Organization and Powers.  Seller is a limited liability company, duly
organized and validly existing under the laws of Delaware.  Seller has the requisite limited liability
company power and authority to own or lease and operate the Acquired Assets.

 

Section 3.2            Corporate Authority.  Seller has the requisite limited liability
company power and authority to execute and deliver this Agreement, the
Termination Agreement and any other documents, agreements or instruments
expressly contemplated by this Agreement (collectively, the “Transaction Documents”) to
which Seller is a party and to consummate the transactions contemplated hereby
and thereby.  The execution and delivery
of this Agreement and the other Transaction Documents to which Seller is a
party and the consummation of the transactions contemplated hereby and thereby,
have been duly authorized by all necessary limited liability company action on
the part of Seller and no further limited liability company action on the part
of Seller is necessary to approve this Agreement or any of the other
Transaction Documents to which it is a party or to consummate the transactions
contemplated hereby and thereby.  This
Agreement has been, and as of the Closing Date, each of the other Transaction
Documents to which Seller is a party will have been, duly executed and
delivered by Seller and, assuming the due authorization, execution and delivery
of this Agreement by

 

5

 

Purchaser and each of the
other Transaction Documents to which it is a party by Purchaser, this Agreement
constitutes, and as of the Closing Date each of the other Transaction Documents
to which Seller is a party will constitute, the legal, valid and binding
obligations of Seller enforceable against Seller in accordance with their
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting the enforcement of creditors’ rights generally and by
general principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).

 

Section 3.3            No Conflicts.  Neither the execution or delivery by Seller
of this Agreement or any other Transaction Document to which Seller is a party
nor the performance of the transactions contemplated hereby or thereby to be
performed by either of them shall (a) violate the certificate of formation
or limited liability company agreement of either of them, (b) violate any
applicable Law or (c) require any consent or other action by any Person,
including without limitation any Third Party Consent, under, constitute a
default under or give rise to any right of termination, cancellation or
acceleration of any right or obligation or to a loss of any benefit to which
either of them is entitled under any provision of any agreement or other
instrument binding upon Seller, except in the case of clauses (b) and (c) as
to matters which would not reasonably be expected to have a material adverse
effect on the ability of Seller to perform its obligations hereunder or under
any of the other Transaction Documents to which it is a party.

 

Section 3.4            Absence of Certain Liens and
Litigation.  Seller and its
controlled Affiliates have not created a Lien on, sold, licensed or otherwise
conveyed any of its rights, title or interest in or to any of the Acquired
Assets.  To the Knowledge of Seller,
there are no Liens on the Acquired Assets and there is no Litigation that is
pending or threatened involving or related to the Acquired Assets.

 

Section 3.5            Disclaimer of other
Representations and Warranties. 
Except as expressly set forth in this Article III, neither Seller
nor any of its Affiliates makes any representation or warranty, express or
implied, relating to the Acquired Assets or any other matter, including any
representation or warranty as to merchantability, habitability, profitability,
future performance, fitness for a particular purpose or non-infringement.  All of such additional representations and
warranties are hereby disclaimed.

 

ARTICLE IV 

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser hereby represents and warrants to Seller
as follows:

 

Section 4.1            No Conflicts.  Neither the execution or delivery by
Purchaser of this Agreement or any other Transaction Document to which
Purchaser is a party nor the performance of the transactions contemplated
hereby or thereby to be performed by it shall (a) violate any Law applicable
to Purchaser or (b) require any

 

6

 

consent or other action by
any Person under, constitute a default under or give rise to any right of
termination, cancellation or acceleration of any right or obligation or to a
loss of any benefit to which Purchaser is entitled under any provision of any
agreement or other instrument binding upon Purchaser, except as to matters
which would not reasonably be expected to have a material adverse effect on the
ability of Purchaser to perform its obligations hereunder or under any of the
other Transaction Documents; provided, that, for greater clarity,
nothing in this Section 4.1 shall be deemed to constitute a representation
or warranty as to whether a Third Party Consent is required under any of the
Acquired Assets for Purchaser to accept the sale, conveyance, transfer,
assignment or delivery of all of Seller’s right, title and interest therein.

 

Section 4.2            Consents and Approvals.  Purchaser is not required to obtain any
approval or any Third Party Consents in connection with (a) Purchaser’s
execution and delivery of this Agreement or any Transaction Document to which
it is a party or (b) the consummation by Purchaser of the transactions
contemplated hereby or thereby.

 

Section 4.3            Absence of Certain Liabilities
and Litigation.  To the Knowledge of
Purchaser, there are no Liabilities of Seller or any of its Affiliates created
with the authorization or at the direction of Purchaser arising out of or in
connection with the development, use or ownership of the Acquired Assets and
there is no Litigation that is pending or threatened involving or related to,
directly or indirectly, the Acquired Assets.

 

Section 4.4            No Other Representations and
Warranties; Estimates, Projections and Other Predictions.Purchaser is an
informed and sophisticated purchaser, experienced in the evaluation and
purchase of property and assets such as the Acquired Assets as contemplated
hereunder.  Purchaser has undertaken such
investigation and has been provided with and has evaluated such documents and
information as it has deemed necessary to enable it to make an informed and
intelligent decision with respect to the execution, delivery and performance of
this Agreement and the other Transaction Documents to which it is a party.  Purchaser acknowledges that Seller has given
Purchaser complete and open access to the Acquired Assets and the key employees
and books and records related thereto. 
Purchaser will undertake prior to Closing such further investigation and
request such additional documents and information as it deems necessary.  Purchaser understands that any cost
estimates, projections or other predictions which have been provided to it are
not and shall not be deemed to be representations or warranties of Seller.  Purchaser acknowledges that there are
uncertainties inherent in attempting to make such estimates, projections and
other predictions, that Purchaser is familiar with such uncertainties, that
Purchaser is taking full responsibility for making its own evaluation of the
adequacy and accuracy of all estimates, projections and other predictions so
furnished to it, and that Purchaser shall have no claim against anyone with
respect thereto.

 

ARTICLE V

COVENANTS OF THE PARTIES

 

Section 5.1            Cooperation.  Subject to the terms and conditions of this
Agreement, and unless another standard of efforts is expressly set forth in
this Agreement, Seller and Purchaser shall cooperate with each other and use
their respective commercially reasonable efforts to consummate the transactions

 

7

 

contemplated by this Agreement, and each shall take
all commercially reasonable actions necessary to accomplish such transactions.

 

Section 5.2            Use of Names, Trademarks, Service
Marks and Technology Systems.

 

(a)           Subject to Section 5.2(c), no interest in or right to
use any logo, name, trademark or service mark presently or previously used by
Seller or any of its Affiliates (including the name “Deerfield” and any related
trademarks or service marks) is being conveyed pursuant to this Agreement.

 

(b)           Subject to Section 5.2(c), Purchaser agrees that
after the Closing Date neither it nor any of its Affiliates shall use or
authorize others to use the name “Deerfield” or any related trademarks or
service marks or any similar name, trademark or service mark indicating
affiliation after the Closing with Seller or any of its Affiliates, in
connection with any business activity engaged in by Purchaser or any of its
Affiliates.

 

(c)           As promptly as practicable following the Closing Date and
except as otherwise agreed by Seller in writing, Purchaser shall (i) commence
the removal of Seller’s trade names, names (including any reference to “Deerfield”
or any similar name indicating affiliation after Closing with Seller or any of
its Affiliates), trademarks or service marks, logos, insignia, slogans,
emblems, symbols, designs, and other identifying characteristics (“Names”) from the Acquired
Assets, and from all printed materials and related business literature and (ii) not
make reference to “Deerfield” or Seller or any of its Affiliates in its
marketing, solicitation or client materials other than to factually reference (A) Purchaser’s
period of employment at Seller, (B) the period during which RPM was operated
by Seller, (C) Seller’s continuing interest in the revenue related to RPM
and (D) the terms of this Agreement which have been publicly disclosed.

 

(d)           Except as specifically provided in this Agreement, neither
Seller nor any of its Affiliates shall have any obligation to provide any
services (transition or otherwise) to Purchaser in respect of the Acquired
Assets or any other matter.  For a period
of three months following the Closing Date, upon reasonable advance notice from
Purchaser, Seller will use commercially reasonable efforts to provide
Purchaser, at Purchaser’s sole cost and expense and during normal business
hours, with reasonable consulting services related to matters concerning the
manner in which the Software functioned within Seller’s information technology
systems (it being acknowledged that Seller shall not have any obligation to
provide such consulting services to the extent doing so would unreasonably
interfere with the business or operations of Seller or to make available any
particular employee of Seller to provide such consulting services).

 

Section 5.3            Limitations.

 

(a)           Purchaser will have the right to affiliate with any other
investment management firm (a “New Firm”)
for the purpose of continuing to offer RPM

 

8

 

to existing RPM clients of Seller and other
prospective clients; provided that an affiliation with any New Firm during the
one year period following Closing Date (the “Restricted
Period”) shall be require the Seller’s prior written consent,
not to be unreasonably withheld.

 

(b)           Purchaser will not solicit any client of the Seller (“Seller’s Clients”) for any product
other than RPM without the Seller’s prior written consent during the Restricted
Period.  Purchaser and Seller shall agree
in writing upon a list of Seller’s Clients prior to Closing.  During the Restricted Period, any New Firm
shall be prohibited from soliciting the Seller’s Clients for investments in
high yield bonds and bank loans, residential mortgage backed securities and
asset backed securities and structured products secured by any of the preceding
classes of assets unless the New Firm had a pre-existing relationship with such
Seller’s Client.

 

(c)           Purchaser will not sell, convey, transfer, assign or
deliver or cause to be sold, conveyed, transferred, assigned or delivered any
of Purchaser’s right, title or interest in, to and under the Acquired Assets,
or any of the economics related thereto, to another Person without securing
such Person’s written agreement, in form and substance reasonably acceptable to
the Seller, to abide by the terms and provisions of the Transaction Documents,
including, without limitation, the obligations under this Article V and Section 6.4
of this Agreement.

 

(d)           Seller will not acquire, build or offer an investment
product with a strategy substantially similar to that of RPM (i.e., duration
management in the U.S. Treasury bond market or similar markets for government
debt issued by G-7 countries) nor solicit existing RPM clients for such a
product during the Restricted Period; provided, however, that Seller shall be
permitted to solicit existing RPM clients for investments in other investment
products offered by Seller as of the Closing Date .  After the Restricted Period, nothing in any Transaction
Document shall be construed to prohibit or otherwise limit or restrict the
ability of Seller or its Affiliates to engage or participate in (including as
an owner, partner, member, shareholder, investor, financing source, manager,
adviser, agent or otherwise), or render services for, any Person or entity
engaged in any asset management of related business.

 

(e)           During the three months following the Closing Date,
Purchaser shall use reasonable efforts to cooperate in Seller’s efforts to
introduce other investment products managed or to be managed by Seller to
existing RPM clients, including by making introductions of senior personnel of
the Seller, provided that such investment products do not compete with products
managed by any New Firm.

 

(f)            During the twenty-four months following the Closing Date,
Seller shall use reasonable efforts to promptly refer any inquiries regarding
the RPM product to the Purchaser.

 

Section 5.4            Bulk Sales Laws.  Each of the parties hereby waives compliance
with all applicable provisions of the “bulk sales” or similar laws of any
jurisdiction and all bulk sales tax provisions in all states.

 

9

 

Section 5.5            Transition Assistance.  Seller shall, and shall cause its Affiliates
to, cooperate reasonably with Purchaser and otherwise take such actions as may
be reasonably requested by Purchaser in connection with the transfer of the
Track Record to the Purchaser during the sixty days following the Closing Date.

 

Section 5.6            Certain Tax Matters.

 

Seller and Purchaser shall provide each other with
such assistance as reasonably may be requested by either of them in connection
with (i) the preparation of any Tax Return related to, or with respect to,
the Acquired Assets, or (ii) any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for Taxes arising from, or with regard to, the Acquired Assets.  The party requesting assistance hereunder
shall reimburse the other party for reasonable out-of-pocket expenses incurred
in providing such assistance, provided, however, that, for
purposes of receiving reimbursement, no independent contractors, such as
accountants or attorneys, shall be consulted without the written consent of the
party requesting assistance, which consent shall not be unreasonably withheld.

 

Section 5.7            Possession.  Purchaser shall be permitted to take
possession of, and use and otherwise enjoy all of Seller’s rights, title and
interest in all of the Acquired Assets immediately following the Closing.  Immediately following the Closing, Seller
shall take, and shall cause its Affiliates to take, such steps as may be
required to put Purchaser in actual possession and operating control of the
Acquired Assets.

 

ARTICLE VI 

OBLIGATIONS OF PARTIES ON THE CLOSING DATE

 

Section 6.1            Closing Date and Place.

 

(a)           Subject to the satisfaction or waiver of the conditions
set forth in Articles VII and VIII, the closing of the sale and purchase of the
Acquired Assets and the assumption and assignment of the Assumed Liabilities
(the “Closing”) shall
take place at the offices of Seller in Rosemont, Illinois on the date
hereof (the “Closing Date”).  The transfer of the Acquired Assets to
Purchaser and the assumption of the Assumed Liabilities, if any, by Purchaser
shall be deemed to occur at 10:00 a.m. on the Closing Date.

 

(b)           Any deliveries, assignments, or transfers required under
this Agreement, other than the foregoing, shall be made at the time and date
specified in this Agreement (and where no time is specified, on or before the
close of business on the date specified) and in the manner and place specified
in this Agreement.

 

Section 6.2            Obligations of Purchaser on the
Closing Date.  Subject to the
satisfaction or waiver of all conditions precedent to Purchaser’s obligations
and the simultaneous delivery by Seller of all items required under
Section 6.3, Purchaser shall deliver to Seller at the Closing:  (a) the Initial Payment; and (b) duly
executed copies of

 

10

 

the Bill of Sale and
Termination Agreement and such other documents as Seller may reasonably request
and are necessary or appropriate to consummate the transactions contemplated by
this Agreement.

 

Section 6.3            Obligations of Seller on the
Closing Date.  Subject to the
satisfaction or waiver of all conditions precedent to Seller’s obligations and
the simultaneous delivery by Purchaser of all items required under
Section 6.2, Seller shall deliver or cause to be delivered, as applicable,
to Purchaser at the Closing:  duly
executed copies of the Bill of Sale and Termination Agreement and such other
documents as Purchaser may request and are necessary or appropriate to
consummate the transactions contemplated by this Agreement.

 

Section 6.4            Additional Payments.  Following the Closing Date, the Purchaser
shall make (a) five annual payments to the Seller each in an amount equal
to (i) the annual gross revenues earned by Purchaser, any New Firm and/or
any Affiliate thereof relating to RPM and derived from RPM clients of Seller
existing as of the Closing Date (and any Affiliates of such clients) during
each of the five consecutive 12-month periods following the Closing Date
multiplied by (ii) 20%, payable in each case within 30 days of the
applicable anniversary of the Closing Date (or, if any applicable payments from
any RPM client are not received within 30 days, within five days after receipt
solely with respect to such payment) and (b) a one-time payment equal to (i) the
gross revenues relating to RPM and derived from all RPM clients of Purchaser,
any New Firm and/or any Affiliate thereof (other than those RPM clients of
Seller existing as of the Closing Date (and any Affiliates of such clients))
earned by Purchaser, any New Firm and/or any Affiliate thereof during the fifth
12-month period following the Closing Date multiplied by (ii) 10%, payable
within 30 days of the fifth anniversary of the Closing Date (or, if any
applicable payments from any RPM client are not received within 30 days, within
five days after receipt solely with respect to such payment); provided,
however, that any payment pursuant to Section 6.4(a) of this
Agreement relating to the first 12-month period after the Closing Date shall be
reduced by the amount of the Initial Payment (not less than zero).  Within 10 Business Days of the end of each
calendar quarter following the Closing Date, Purchaser shall deliver to Seller
copies of the quarterly invoice for management fees prepared for each of the
RPM clients of Seller existing as of the Closing Date (and any Affiliates of
such clients) or, if copies of such invoices are not available, an estimate of
such management fees.  The copies of the
fourth quarterly invoices for each 12-month period following the Closing Date
shall be accompanied by the Purchaser’s payment required by Section 6.4(a) of
this Agreement.  The Purchaser’s payment
required by Section 6.4(b) of this Agreement shall be accompanied by
a computation of the payment in a form similar to the one used by Purchaser to
invoice RPM clients for management fees. 
Unless Seller notifies Purchaser within 30 days of receipt of an annual
payment that Seller disputes the amount of such payment, then such payment
shall be deemed to be final.  Any Seller
disputes shall be resolved by mutual agreement of Seller and Purchaser or, if
they fail to agree following discussions for a reasonable period of time, by an
accounting, investment banking, valuation or appraisal firm designated mutually
by Seller and Purchaser, one half of whose fees shall be paid by each of Seller
and Purchaser.

 

11

 

ARTICLE VII 

CONDITIONS TO PURCHASER’S OBLIGATION

TO CONSUMMATE THE TRANSACTION

 

The obligations of Purchaser under this Agreement
are subject to the satisfaction or waiver, on or before the Closing Date, of
the following conditions:

 

Section 7.1            Representations and Warranties.  The representations and warranties of Seller
contained in this Agreement that are not qualified by a materiality standard
shall be true and correct in all material respects and the representations and
warranties of Seller contained in this Agreement that are qualified by a
materiality standard shall be true and correct in all respects, in each case,
on and as of the Closing Date with the same force and effect as though such
representations and warranties were made at the Closing (or, if given as of a
specific date, at and as of such date).

 

Section 7.2            Compliance with Covenants.  The covenants required to be performed by
Seller at or prior to the Closing pursuant to the terms of this Agreement shall
have been duly performed in all material respects.

 

Any conditions specified in this Article VII
may be waived by Purchaser; provided, that no such waiver shall be
effective unless it is set forth in a writing executed by Purchaser.

 

ARTICLE VIII 

CONDITIONS TO SELLER’S OBLIGATION

TO CONSUMMATE THE TRANSACTION

 

The obligations of Seller under this Agreement to be
performed at the Closing shall be subject to the satisfaction or waiver, on or
before the Closing Date, of the following conditions:

 

Section 8.1            Representations and Warranties.  The representations and warranties of
Purchaser contained in this Agreement that are not qualified by a materiality
standard shall be true and correct in all material respects, and the
representations and warranties of Purchaser contained in this Agreement that
are qualified by a materiality standard shall be true and correct in all
respects, in each case, on and as of the Closing Date with the same force and
effect as though such representations and warranties were made at the Closing
(or, if given as of a specific date, at and as of such date).

 

Section 8.2            Compliance with Covenants.  The covenants required to be performed by
Purchaser at or prior to the Closing pursuant to the terms of this Agreement
shall have been duly performed in all material respects.

 

Section 8.3            Termination Agreement.  No portion of the Termination Agreement,
including any release thereunder, shall have been revoked.

 

12

 

Any conditions specified in this Article VIII
may be waived by Seller; provided, that no such waiver shall be
effective unless it is set forth in writing executed by Seller.

 

ARTICLE IX 

INDEMNIFICATION

 

Section 9.1            Survival.  The representations and
warranties contained in this Agreement shall survive the Closing for a period
of one year, except that the representations and warranties set forth in
Sections 3.1, 3.2 and 3.3 and Sections 4.1, and 4.2  shall survive indefinitely, and the representations
and warranties set forth in Section 4.3 shall survive until the date which
is ninety (90) days after the end of the applicable statute of limitations
(after giving effect to any waiver, mitigation or extension (whether automatic
or with permission) thereof).  Unless a
specific period is set forth in this Agreement (in which event such specified
period shall control), all other covenants and agreements contained in this
Agreement which are required to be performed after the Closing shall survive
the Closing and remain in effect indefinitely.

 

Section 9.2            Indemnification by Purchaser.  From and after the Closing, subject to the
terms and limitations set forth herein, Purchaser shall indemnify, defend and
hold harmless Seller, each of its Affiliates, and each of their Representatives
(together, the “Seller
Indemnified Parties”), from and against any and all
Indemnifiable Losses relating to, resulting from or arising out of any of the
following:

 

(a)           any breach of or any inaccuracy in any representation or
warranty made by Purchaser in this Agreement or the Bill of Sale;

 

(b)           any breach of any covenant or undertaking of Purchaser
contained in this Agreement or the Bill of Sale; or

 

(c)           (i) any liability or obligation of any nature or
kind, known or unknown, fixed, accrued, absolute or contingent or any claim,
demand or condition to the extent related to the Acquired Assets that is
incurred or results from actions taken from and after the Closing (other than
by reason of the breach of any representation or warranty or covenant of Seller
in this Agreement or any failure by Seller or its Affiliates to obtain any
Third Party Consent), and (ii) any Assumed Liabilities.

 

Section 9.3            Limitations on Indemnification;
Exclusive Remedy.

 

(a)           Following the Closing, the provisions of this
Article IX shall be the exclusive remedy for any and all claims relating
to the subject matter of this Agreement or any of the other Transaction
Documents, except for fraud and any injunctive or other equitable remedy to which
either party may be entitled.

 

(b)           To the extent that Seller or Purchaser shall have any
obligation to indemnify and hold harmless any other Person hereunder, such
obligation

 

13

 

shall not include (i) consequential, special,
punitive, incidental or indirect damages (and the injured party shall not
recover for such amounts) or (ii) any damages measured by lost profits,
lost revenues, multiple of earnings, business interruption, cost of capital or
loss of business reputation or opportunity, in any case for any breach or
default under, or any act or omission arising out of or resulting from, this
Agreement or the other Transaction Documents or the transactions contemplated
hereby and thereby, under any form of action whatsoever, whether in contract or
otherwise (other than indemnification for fraud or for amounts paid or payable
to third parties in respect of any third party claim for which indemnification
hereunder is otherwise required).

 

ARTICLE X 

TERMINATION

 

Intentionally
Omitted.

 

ARTICLE XI 

GENERAL PROVISIONS

 

Section 11.1          Entire Agreement; Modification;
Waiver.  This Agreement, including
all Annexes hereto, the other Transaction Documents and the documents referred
to herein constitutes the entire agreement of the parties pertaining to the
subject matter contained herein and this Agreement supersedes all prior or
contemporaneous agreements, representations and understandings of the
parties.  No supplement, modification or
amendment to, or waiver of this Agreement shall be binding unless executed in
writing by Seller and Purchaser.  No
waiver of any provision of this Agreement shall be deemed or shall constitute a
waiver of any other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver.  No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. 
The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by Law.

 

Section 11.2          Counterparts; Effectiveness; Third
Party Beneficiaries.  This Agreement
may be executed in two or more counterparts (by facsimile or otherwise), each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. 
This Agreement shall become effective when each party hereto shall have
received a counterpart hereof signed by the other party hereto.  No provision of this Agreement is intended to
confer any rights, benefits, remedies, obligations, or liabilities hereunder
upon any Person other than the parties hereto and their respective successors
and assigns.

 

Section 11.3          Interpretation.  When a reference is made in this Agreement to
Annexes, such reference shall be to an Annex to this Agreement unless
otherwise indicated.  When a reference is
made in this Agreement to Articles or Sections, such

 

14

 

reference shall be to an
Article or Section of this Agreement unless otherwise indicated.  For purposes of this Agreement, the words “include,”
“includes” and “including” shall be deemed in each case to be followed by the
words “without limitation.”  The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.

 

Section 11.4          Payment of Expenses.  Except as otherwise expressly provided in
this Agreement, whether or not the transactions contemplated hereby are
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses.

 

Section 11.5          GOVERNING LAW; WAIVER OF JURY
TRIAL; CONSENT TO JURISDICTION.

 

(a)           THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO THE
CONFLICT OF LAW PRINCIPLES OF SUCH STATE THAT WOULD REQUIRED THE APPLICATION OF
ANY OTHER LAW.

 

(b)           EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 

(c)           PURCHASER AND SELLER EACH IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF (I) THE COURTS OF THE STATE OF ILLINOIS, COOK
COUNTY, AND (II) THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS, FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF THIS AGREEMENT OR THE RELATED DOCUMENTS AND ANY TRANSACTION
CONTEMPLATED HEREBY OR THEREBY (AND EACH AGREES THAT NO SUCH ACTION, SUIT OR
PROCEEDING RELATING TO THIS AGREEMENT OR THE RELATED DOCUMENTS SHALL BE BROUGHT
BY IT OR ANY OF ITS AFFILIATES EXCEPT IN SUCH COURTS).  EACH OF PURCHASER AND THE SELLER FURTHER
AGREES THAT THE SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S.
REGISTERED MAIL TO SUCH PERSON’S RESPECTIVE ADDRESS SET FORTH IN
SECTION 11.6 SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY ACTION, SUIT OR
PROCEEDING IN ILLINOIS WITH RESPECT TO ANY MATTERS TO WHICH IT HAS SUBMITTED TO
JURISDICTION AS SET FORTH ABOVE IN THE IMMEDIATELY PRECEDING SENTENCE.  EACH OF PURCHASER AND SELLER IRREVOCABLY AND
UNCONDITIONALLY WAIVES (AND AGREES NOT TO PLEAD OR CLAIM) ANY OBJECTION TO THE
LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT
OR THE OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY IN (I) THE COURTS OF THE STATE OF ILLINOIS, COOK

 

15

 

COUNTY OR (II) THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS, OR THAT ANY SUCH ACTION, SUIT OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

Section 11.6          Addresses of Notice.  All notices, requests, demands and other
communications provided for under this Agreement and under the related
documents shall be in writing (including telegraphic communication) and mailed
(by registered or certified mail, return receipt requested, or delivered by
Federal Express or other similar express overnight delivery service), or
telegraphed, telecopied or delivered to the applicable party at the addresses
indicated below.

 

	
  If to Purchaser:

  	
  Luke Knecht

  
	
   

  	
  285 West Westminster Road

  
	
   

  	
  Lake Forest, IL 60045

  
	
   

  	
   

  
	
  If to Seller:

  
	
   

  	
  Deerfield Capital Management LLC

  
	
   

  	
  6250 North River Road, 12th Floor

  
	
   

  	
  Rosemont, Illinois 60018

  
	
   

  	
  Attention:   General Counsel

  
	
   

  	
  Facsimile:   (771) 380-1695

  

 

or,
to each party, at such other address that party designates in a written notice
to the other party in accordance with this section.  All such notices, requests, demands or other
communications shall be deemed delivered (i) if sent by messenger, upon
personal delivery to the party to whom the notice is directed, (ii) if
sent by facsimile, upon electronic or telephonic confirmation of receipt from
the receiving facsimile machine, (iii) if sent by reputable overnight courier,
one Business Day after delivery to such courier, or (iv) if sent by mail,
three Business Days following deposit in the United States mail, postage
prepaid, certified mail, return receipt requested.

 

Section 11.7          Intentionally Omitted.

 

Section 11.8          Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party.  Upon such a determination, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby be consummated as originally
contemplated to the fullest extent possible.

 

16

 

Section 11.9          Specific Performance.  The parties hereto agree that irreparable
damage would occur if any provision of this Agreement were not performed in accordance
with the terms hereof and that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement or to enforce specifically
the performance of the terms and provisions hereof in (i) the courts of
the State of Illinois, Cook County or (ii) the United States District
Court for the Northern District of Illinois, in addition to any other remedy to
which they are entitled at law or in equity.

 

Section 11.10       Rules of Construction.  The parties to this Agreement agree that they
have been represented by counsel, or had the opportunity to be represented by
counsel, during the negotiation and execution of this Agreement and, therefore,
waive the application of any Law or rule of construction providing that
ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.

 

Section 11.11       Employees and Agents of Seller.  Purchaser is under no legal obligation to
employ any personnel formerly employed by Seller.  However, after the Closing Date, Purchaser
may, but shall not be required to, offer employment to those Employees set
forth on Annex A hereto and, except as provided in this Agreement and
the Termination Agreement, each such individual shall have the right, but only
to the extent necessary, to accept such employment without breaching any
non-competition, non-solicitation or non-hire covenant or confidentiality
obligations solely with respect to the Acquired Assets made by him or her in
favor of Seller or its Affiliates or incurring any obligation to Seller or its
Affiliates (the “Eligible Employees”), who
shall be third party beneficiaries of this Section 11.11); provided,
however, that Purchaser shall require, or cause any New Firm to require, that a
condition to any Eligible Employee’s acceptance of an offer of employment by
Purchaser or any New Firm be that such Eligible Employee release Seller from
any obligation to provide severance to such Eligible Employee and waive any
right to severance from Seller related to such Eligible Employee’s departure
from Seller, in each case upon terms acceptable to Seller.

 

Section 11.12       Remittances.  Seller shall use commercially reasonable
efforts to cause all remittances, mail and other communications relating to the
Acquired Assets, Assumed Liabilities or the Purchaser received by Seller after
the Closing Date to be promptly forwarded to Purchaser.

 

[Remainder of Page Intentionally
Left Blank]

 

17

 

IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.

 

	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  DEERFIELD CAPITAL MANAGEMENT LLC  

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert A. Contreras

  
	
   

  	
   

  	
  Name:

  	
  Robert A. Contreras

  
	
   

  	
   

  	
  Title:

  	
  General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  LUKE D. KNECHT

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Luke D. Knecht

  

 

18

 

ANNEX A

 

ASSETS AND ELIGIBLE EMPLOYEES

 

Assets

 

1.                                      Knecht’s laptop
computer, external monitor and all locally installed software and data files
(excluding anything specific to Seller and not relevant to the operation of the
RPM product or servicing of the RPM clients).

2.                                      Frye’s trading
desk computer, monitors and all locally installed software and data files
(excluding anything specific to Seller and not relevant to the operation of RPM
or the servicing of the RPM clients).

3.                                      Knecht’s
trading desk computer, monitors and all locally installed software and data
files (excluding anything specific to Seller and not relevant to the operation
of the RPM product or servicing of the RPM clients).

4.                                      The Synopsis
software license and all installs of the software and the associated files
necessary to make the software function (Knecht’s laptop, Frye’s trading desk
computer and Knecht’s trading desk computer)

5.                                      All RATs
software, licenses and related data files as contained on the above mentioned
computers and network T drive

6.                                      All data files
necessary for the Synopsis and RATs software to function (files located on the
T drive under the directory DDM

7.                                      All
spreadsheets relating to the historic results or simulated results of DDM and
RPM as contained in the network T drive under the DDM directory in various
sub-folders

8.                                      All Power
Point, Word documents, PDF files and Excel files containing client update or
marketing material specific to RPM including those on the T drive under the DDM
directory as well as those on the Presentations Drive in the directory
Marketing/RPM

9.                                      Hard copy RPM
client files maintained by Knecht

10.                               Hard copy of
historic presentations to RPM clients and prospects

11.                               All manuals and
other documentation regarding Synopsis and RATs whether in electronic (MS Word,
PDF, Excel, Power Point or Access) or hard copy form.

12.                               Hard copies of
all client contracts and correspondence relating to RPM maintained by Legal and
Accounting

13.                               Copies of all
client records necessary to support the historic performance record of RPM
including the records acquired by Seller when it acquired the product from RCM
and copies of all month-end RPM custodial statements.

14.                               Microsoft
Outlook PST files for Knecht and Frye including contacts

15.                               Copies of RPM
daily trading records

 

Eligible Employees

 

 

Christine Frye

 

A-1

 

ANNEX B

 

BILL OF SALE

 

THIS BILL OF SALE (this “Bill of Sale”) is made and
entered into as of [date], 2010, by and between Deerfield Capital Management LLC,
a Delaware limited liability company (“Seller”),
and Luke D. Knecht (“Purchaser”).  Unless otherwise defined herein, all
capitalized terms used in this Bill of Sale shall have the respective meanings
ascribed to them in the Agreement (defined below).

 

WHEREAS, pursuant to
the Asset Purchase Agreement, dated as of [ 
], 2010 (the “Agreement”),
by and between Seller and Purchaser, Purchaser has agreed to purchase from
Seller, and Seller has agreed to sell and deliver to Purchaser, all of its
right, title and interest in and to the Acquired Assets.

 

NOW, THEREFORE, in
consideration of the foregoing and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged by Seller, Seller
does hereby sell, convey, assign, transfer and deliver to Purchaser, and its
successors and assigns, all of Seller’s right, title and interest in and to the
Acquired Assets.

 

In accordance with the Agreement, the Acquired
Assets shall not include, and Purchaser is not acquiring from Seller, any of
the Excluded Assets, and Seller shall retain ownership of all right, title and
interest in and to the Excluded Assets.

 

Seller covenants and agrees with Purchaser that
Seller will from time to time execute, acknowledge and deliver such other and
further instruments and will take such other action as may be necessary or
desirable to carry out more effectively the transfer of the Acquired Assets
provided for herein.

 

Nothing in this instrument, express or implied, is
intended or shall be construed to confer upon, or give to, any Person other
than Purchaser and its successors and permitted assigns, any remedy or claim
under or by reason of this instrument or any agreements, covenants or terms
hereof, and all the agreements, covenants and terms contained in this
instrument shall be for the sole and exclusive benefit of Purchaser and its
successors and permitted assigns.

 

This Bill of Sale shall inure to the benefit of and
be binding upon and enforceable against Seller, Purchaser and their respective
successors and permitted assigns.

 

This Bill of Sale shall be governed by and construed
in accordance with the laws of the State of Illinois, without regard to the
conflict of laws principles thereof that would require the application of any
other law.

 

EXCEPT AS EXPRESSLY SET FORTH IN THE AGREEMENT,
NEITHER SELLER NOR ANY OF ITS AFFILIATES MAKES ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, RELATING TO

 

B-1

 

THE
ASSETS OR ANY OTHER MATTER, INCLUDING ANY REPRESENTATION OR WARRANTY AS TO
MERCHANTABILITY, HABITABILITY, PROFITABILITY, FUTURE PERFORMANCE, FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT, AND THE PURCHASE AND SALE OF THE ASSETS
IS BEING MADE ON AN “AS IS, WHERE IS” BASIS.

 

The terms of the Agreement (including the
definitions and usage provisions) are incorporated herein by reference and will
not be superseded, modified, replaced, amended, changed, rescinded or otherwise
affected by this Bill of Sale, but will remain in full force and effect to the
full extent provided therein.  If there
is any inconsistency between the Agreement and this Bill of Sale, the Agreement
will control and govern.

 

This Bill of Sale may not be amended, supplemented
or otherwise modified except in a written document executed by the party
against whose interest the modification will operate.

 

This Bill of Sale may be executed in any number of
counterparts (including by facsimile or otherwise), each of which shall be
deemed to be an original, and all of which together shall be deemed to be one
and the same instrument.

 

This Bill of Sale is given pursuant to the
Agreement, and, except as herein otherwise provided, the transfer of the
property hereunder is made subject to the terms and provisions of the
Agreement.

 

IN WITNESS WHEREOF, this Bill of
Sale has been duly executed and delivered by the duly authorized office of
Seller as of the date first written above.

 

	
   

  	
  DEERFIELD CAPITAL MANAGEMENT LLC  

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  AGREED
  AND ACCEPTED:

  
	
   

  
	
   

  	
  LUKE D. KNECHT

  
	
   

  	
   

  
	
   

  	
   

  	
   

  

 

B-2Exhibit 10.1

 

EXCHANGE AGREEMENT

 

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

 

RECITALS

 

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

 

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

 

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

 

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

 

1

 

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

 

AGREEMENT

 

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

 

1.             Exchange of Preferred Securities.

 

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

 

2.             Consideration
for the Exchange.

 

2.1          Exchange
Price.

 

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

 

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

 

2

 

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

 

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

 

3

 

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

 

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

 

4

 

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

 

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

 

5

 

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

 

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

 

6

 

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.

 

7

 

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 

 

8

 

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

 

9

 

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

 

10

 

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.

 

11

 

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.

 

12

 

4.             Representations
and Warranties of Company.

 

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

 

4.1          Execution
and Validity.

 

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

 

13

 

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 

 

14

 

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

 

15

 

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 

 

16

 

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

 

4.9          Securities
Reports.

 

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

 

4.10        Securities
Law Matters.

 

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

 

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

 

17

 

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

 

4.11        Approval
by Disinterested Board Committee.

 

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

 

5.             Covenants
of the Investor.

 

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

 

5.1          Cooperation.

 

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

 

18

 

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:

 

19

 

6.1          Cooperation.

 

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

 

6.2          Certain
Acts.

 

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

 

6.3          Company
Consents.

 

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

 

7.             Conditions
Precedent to the Obligations of the Investor.

 

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

 

7.1          Representations
and Warranties.

 

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

 

20

 

7.2          Performance.

 

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

 

7.3          Absence
of Litigation.

 

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

 

7.4          Consents.

 

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

 

8.             Conditions
Precedent to Obligations of Company.

 

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

 

8.1          Representations
and Warranties.

 

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

 

21

 

8.2          Performance.

 

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

 

8.3          Absence
of Litigation.

 

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

 

8.4          Consents.

 

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

 

9.             [Intentionally
Omitted]

 

10.          Closing
and Post-Closing Covenants.

 

10.1        Time
and Place.

 

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

 

22

 

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

 

10.2        Obligations
of the Investor.

 

At
the Closing, the Investor shall deliver to Company:

 

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

 

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

 

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

 

10.3        Obligations
of the Company.

 

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

 

(i)                                     The Initial
Shares;

 

23

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

24

 

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

 

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

 

11.          Registration
Rights.

 

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

 

25

 

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

 

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

 

12.          Indemnification.

 

12.1        Indemnification
by Investor.

 

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

 

26

 

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

 

12.2        Indemnification
by Company.

 

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

 

27

 

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

 

12.3        Notice
of Indemnification.

 

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

 

28

 

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

 

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

 

12.4        Basket.

 

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

 

29

 

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

 

13.          Abandonment
of Transactions.

 

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

 

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

 

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

 

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

 

30

 

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

 

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

 

14.           Effect
of Abandonment.

 

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

 

15.           Specific
Performance.

 

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

 

31

 

16.           Miscellaneous.

 

16.1         Notices.

 

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

 

	
  To
  the Investor:

  	
  John
  P. McDaniel

  
	
   

  	
  13032
  Highland Road,

  
	
   

  	
  Highland,
  MD 20777

  
	
   

  	
  Fax:
  (301) 854-2778

  
	
   

  	
  Email:
  john.p.mcdaniel@hrfmail.com

  
	
   

  	
   

  
	
  With
  a Copy to:

  	
  Gordon, Feinblatt, Rothman,
  Hoffberger & Hollander, LLC

  
	
   

  	
  233
  East Redwood Street

  
	
   

  	
  Baltimore,
  Maryland 21202

  
	
   

  	
  Attn:
  Abba David Poliaokff

  
	
   

  	
  Fax:
  (410) 576-4032

  
	
   

  	
  Email:
  apoliakoff@gfrlaw.com

  
	
   

  	
   

  
	
  To
  Company:

  	
  FIRST MARINER BANCORP

  
	
   

  	
  1501
  S. Clinton Street

  
	
   

  	
  Baltimore,
  Maryland 21224

  
	
   

  	
  Attn: Eugene A. Friedman

  
	
   

  	
  Fax: (410) 342-4127.

  
	
   

  	
   

  
	
  With
  a copy to:

  	
  Kilpatrick
  Stockton LLP

  
	
   

  	
  607
  14th Street, NW

  
	
   

  	
  Suite 900

  
	
   

  	
  Washington,
  DC 20005

  
	
   

  	
  Attn:
  Gary R. Bronstein

  
	
   

  	
  Fax:
  (202) 508-5858

  
	
   

  	
  Email:
  gbronstein@kilpatrickstockton.com.

  

 

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

 

32

 

16.2         Entire
Agreement.

 

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

 

16.3         Amendment.

 

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

 

16.4         Binding
Effect.

 

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

 

16.5         Waiver.

 

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

 

16.6         Captions.

 

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

 

33

 

16.7         Construction.

 

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

 

16.8         Sections.

 

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

 

16.9 Severability.

 

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

 

16.10       Absence
of Third-Party Beneficiaries.

 

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

 

16.11       Business Day.

 

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

 

34

 

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

 

16.12       Assignment.

 

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

 

16.13       Other Documents.

 

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

 

16.14       Governing Law.

 

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

 

16.15       Attorneys
Fees.

 

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

 

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

 

35

 

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

 

16.16       Public
Disclosure.

 

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

 

16.17       Execution;
Counterparts.

 

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

 

[The Remainder of the Page is Intentionally Left Blank]

 

36

 

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

 

 

	
   

  	
  FIRST MARINER BANCORP.,

  
	
   

  	
  A Maryland Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John Brown, III

  	
  (SEAL)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  John
  Brown, III

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director
  and Chairman of the Special Committee

  

 

37

 

	
  INVESTOR:

  	
  /s/
  John P. McDaniel

  	
   

  
	
   

  
	
  Name:

  	
  John
  P. McDaniel

  
	
  Address:

  	
   

  
	
   

  
	
   

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

  
	
   

  
	
  Class of Accredited
  Investor:

  
				

 

38

 

LIST OF EXHIBITS AND SCHEDULES

 

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

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

 

Schedule
3.4 – Investor Consents and Filings

Schedule
4.5 – Company Consents and Filings

 

39

 

EXHIBIT A

 

FORM OF WARRANT

 

 

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

 

Date:
                                  ,
2010

 

COMMON STOCK WARRANT

 

OF

 

FIRST MARINER BANCORP

 

INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND

 

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

 

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

 

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

 

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

	
  To
  Investor:

  	
  John
  P. McDaniel

  
	
   

  	
  13032
  Highland Road,

  
	
   

  	
  Highland,
  MD 20777

  
	
   

  	
  Fax:
  (301) 854-2778

  
	
   

  	
  Email:
  john.p.mcdaniel@hrfmail.com

  

 

 

	
  With
  a Copy to:

  	
  Gordon,
  Feinblatt, Rothman, Hoffberger & Hollander, LLC

  
	
   

  	
  233
  East Redwood Street

  
	
   

  	
  Baltimore,
  Maryland 21202

  
	
   

  	
  Attn:
  Abba David Poliaokff

  
	
   

  	
  Fax:
  (410) 576-4032

  
	
   

  	
  Email:
  apoliakoff@gfrlaw.com

  
	
   

  	
   

  
	
  To Company:

  	
  FIRST MARINER BANCORP

  
	
   

  	
  1501 S. Clinton Street

  
	
   

  	
  Baltimore,
  Maryland 21224

  
	
   

  	
  Attn:
  Chief Executive Officer

  
	
   

  	
  Fax:
  (410) 342-4127

  
	
   

  	
   

  
	
  With a copy to:

  	
  Kilpatrick Stockton LLP

  
	
   

  	
  607
  14th Street, NW

  
	
   

  	
  Suite 900

  
	
   

  	
  Washington,
  DC 20005

  
	
   

  	
  Attn:
  Gary R. Bronstein

  
	
   

  	
  Fax:
  (202) 508-5858

  
	
   

  	
  Email:
  gbronstein@kilpatrickstockton.com

  

 

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

[Remainder of Page Intentionally Left Blank]

 

 

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

 

 

	
  Investor:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:
  John P. McDaniel

  
	
   

  	
   

  
	
   

  	
   

  
	
  Company:

  	
  FIRST MARINER BANCORP,

  
	
   

  	
  A Maryland corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  John
  Brown, III

  
	
   

  	
  Title:

  	
  Director
  and Chairman of the Special Committee

  
				

 

 

EXHIBIT A

NOTICE OF EXERCISE

 

To: FIRST MARINER BANCORP

1501
S. Clinton Street

Baltimore,
Maryland 21224

Attn:

 

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

 

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

 

Name:

 

Address:

 

 

 

 

 

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

 

 

	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  

 

 

EXHIBIT B

 

FORM OF WARRANT

 

 

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

 

Date:
                        ,
2010

 

COMMON STOCK WARRANT

 

OF

 

FIRST MARINER BANCORP

 

INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

	
  To
  Investor:

  	
  John
  P. McDaniel

  
	
   

  	
  13032
  Highland Road,

  
	
   

  	
  Highland,
  MD 20777

  
	
   

  	
  Fax:
  (301) 854-2778

  
	
   

  	
  Email:
  john.p.mcdaniel@hrfmail.com

  
	
   

  	
   

  
	
  With
  a Copy to:

  	
  Gordon, Feinblatt, Rothman,
  Hoffberger & Hollander, LLC

  
	
   

  	
  233
  East Redwood Street

  
	
   

  	
  Baltimore,
  Maryland 21202

  
	
   

  	
  Attn:
  Abba David Poliakoff

  
	
   

  	
  Fax:
  (410) 576-4032

  
	
   

  	
  Email:
  apoliakoff@gfrlaw.com

  
	
   

  	
   

  
	
  To Company:

  	
  FIRST MARINER BANCORP

  
	
   

  	
  1501 S. Clinton Street

  
	
   

  	
  Baltimore,
  Maryland 21224

  
	
   

  	
  Attn:
  Chief Executive Officer

  
	
   

  	
  Fax:
  (410) 342-4127

  
	
   

  	
   

  
	
  With a copy to:

  	
  Kilpatrick Stockton LLP

  
	
   

  	
  607
  14th Street, NW

  
	
   

  	
  Suite 900

  
	
   

  	
  Washington,
  DC 20005

  
	
   

  	
  Attn:
  Gary R. Bronstein

  
	
   

  	
  Fax:
  (202) 508-5858

  
	
   

  	
  Email:
  grbonstein@kilpatrickstockton.com

  

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

[Remainder of Page Intentionally Left Blank]

 

 

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

 

 

	
   

  	
  Investor:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:
  John P. McDaniel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Company:

  	
  FIRST MARINER BANCORP,

  
	
   

  	
  A Maryland corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  John
  Brown, III

  
	
   

  	
  Title:

  	
  Director
  and Chairman of the Special Committee

  
					

 

 

EXHIBIT A

NOTICE OF EXERCISE

 

To: FIRST MARINER BANCORP

1501 S. Clinton Street

Baltimore, Maryland 21224

Attn:

 

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

 

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

 

Name:

 

 Address:

 

 

 

 

 

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

 

 

	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:  Edwin F. Hale, Sr.

  

 

 

SCHEDULE 3.4

INVESTOR CONSENTS AND FILINGS

 

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

 

 

SCHEDULE 4.5

COMPANY CONSENTS AND FILINGS

 

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

 

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

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