CONTRIBUTION AND JOINT VENTURE AGREEMENT DATED AS OF OCTOBER 7, 2009 BY AND AMONG FIRST MARINER BANCORP, MARINER FINANCE, LLC, MF RAVEN HOLDINGS, INC. AND MF HOLDCO, LLC
Exhibit
2.1
DATED
AS
OF OCTOBER 7, 2009
BY
AND AMONG
MARINER
FINANCE, LLC,
MF
RAVEN HOLDINGS, INC.
AND
MF
HOLDCO, LLC
TABLE OF
CONTENTS
ARTICLE I
DEFINITIONS
|
1
|
|
ARTICLE II
CONTRIBUTIONS AND EXCHANGES
|
9
|
|
Section
2.1.
|
Agreements to
Contribute.
|
9
|
Section
2.2.
|
Consideration Exchanged for
Contributions.
|
9
|
Section
2.3.
|
Delivery of
Contributions.
|
10
|
Section
2.4.
|
Closing.
|
10
|
Section
2.5.
|
Adjustment to Exchange
Amount.
|
10
|
Section
2.6.
|
Access;
Information.
|
12
|
Section
2.7.
|
Escrow
Agreement
|
13
|
ARTICLE III
REPRESENTATIONS AND WARRANTIES
|
13
|
|
Section
3.1.
|
Representations and Warranties
of FMB and the Company.
|
13
|
Section
3.2.
|
Representations
and Warranties of JV Corp
|
30
|
Section
3.3.
|
Representations
and Warranties of Holdco
|
32
|
ARTICLE IV
CONDITIONS PRECEDENT
|
33
|
|
Section
4.1.
|
Conditions
Precedent to Obligation of JV Corp and Holdco
|
33
|
Section
4.2.
|
Conditions
Precedent to Obligations of FMB
|
37
|
ARTICLE V
OTHER AGREEMENTS
|
40
|
|
Section
5.1.
|
Tax
Matters.
|
40
|
Section
5.2.
|
Approvals
|
42
|
Section
5.3.
|
Employee
Benefits.
|
43
|
Section
5.4.
|
Conduct
of the Business of the Company
|
44
|
Section
5.5.
|
Publicity
|
44
|
Section
5.6.
|
Non-Solicitation
and Non-Competition.
|
45
|
Section
5.7.
|
Further
Assurances
|
47
|
Section
5.8.
|
Post-Closing
Access to Information
|
47
|
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
INDEMNIFICATION
|
47
|
|
Section
6.1.
|
Survival
of Representations, Warranties and Covenants
|
47
|
Section
6.2.
|
Indemnification
by FMB
|
47
|
Section
6.3.
|
Indemnification
by JV Corp
|
48
|
Section
6.4.
|
Assertion
of Indemnification Claim
|
48
|
Section
6.5.
|
Limitation
of Liability
|
49
|
Section
6.6.
|
Exclusive
Remedy
|
50
|
Section
6.7.
|
Liability
Arising Post-Closing
|
50
|
ARTICLE VII
TERMINATION
|
51
|
|
Section
7.1.
|
Termination
|
51
|
Section
7.2.
|
Effect
of Termination
|
51
|
i
Section
7.3.
|
Payment
of Expenses Upon Termination
|
51
|
ARTICLE VIII
MISCELLANEOUS
|
51
|
|
Section
8.1.
|
Fees
and Expenses
|
51
|
Section
8.2.
|
Notices
|
52
|
Section
8.3.
|
Entire
Agreement
|
53
|
Section
8.4.
|
Binding
Effect; Benefit
|
53
|
Section
8.5.
|
Section
Headings; Construction
|
53
|
Section
8.6.
|
Counterparts
|
53
|
Section
8.7.
|
Applicable
Law
|
53
|
Section
8.8.
|
Time
of Essence
|
53
|
Section
8.9.
|
Severability
|
53
|
ii
THIS CONTRIBUTION AND JOINT VENTURE
AGREEMENT (this “Agreement”), dated as of October 7,
2009, is made and entered into by and among First Mariner Bancorp, a Maryland
corporation (“FMB”), Mariner Finance, LLC, a Maryland limited liability company
(the “Company”), MF Raven Holdings, Inc., a Delaware corporation
(“JV Corp”), and MF Holdco, LLC, a Delaware limited liability company
(“Holdco”). FMB, the Company, JV Corp and Holdco are sometimes
referred to collectively herein as the “Parties” and individually as a
“Party.”
RECITALS
A. FMB
owns all of the issued and outstanding membership interests of the Company (the
“Interests”).
B. At
Closing (as defined herein), FMB desires to contribute all of the Interests to
JV Corp (the “FMB Contribution”), and JV Corp desires to exchange for
such Interests a combination of cash and fifty (50) shares of JV Corp
Common Stock (as defined herein) on the terms and conditions hereinafter set
forth.
C. At
Closing, Holdco desires to contribute the Holdco Contribution (as defined
herein) to JV Corp, and JV Corp desires to exchange for the Holdco
Contribution nine hundred fifty (950) shares of JV Corp Common Stock on the
terms and conditions hereinafter set forth.
D. The
Parties intend that the FMB Contribution and the Holdco Contribution,
collectively, be treated as a transfer pursuant to Section 351 of the Code (as
defined herein).
E. The
Company desires to join in this Agreement for the purposes of acknowledging its
role in facilitating the consummation of the Transactions (as defined herein)
and setting forth certain representations, warranties and covenants to cooperate
with and otherwise assist the other Parties with respect thereto.
AGREEMENT
NOW, THEREFORE, in consideration of the
premises and the mutual covenants, promises and undertakings set forth in this
Agreement, the Parties, intending to be legally bound, hereby agree as
follows:
ARTICLE
I
DEFINITIONS
The following terms shall have the
indicated meanings unless the context requires otherwise:
“Affiliate” means,
with respect to any Person, another Person that controls, is controlled by or is
under common control with such Person.
“Agreement” has the
meaning given such term in the opening paragraph of this Agreement.
“Basket” has the
meaning given such term in Section 6.5(a) of this
Agreement.
“Borrowed
Indebtedness” means, as to the Company and the Subsidiaries (i) all
obligations (whether interest, principal, fees, penalties or otherwise) of the
Company for borrowed money, (ii) all obligations of the Company or any
Subsidiary evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of the Company or any Subsidiary to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business, (iv) all obligations of the Company or any
Subsidiary under capitalized equipment leases, and (v) any of the foregoing
guaranteed by the Company or any Subsidiary; excluding, however, any advances
under the Xxxxx Fargo Facility and the FMB Subdebt.
“Business” means the
business conducted by the Company and the Subsidiaries.
“Business Day” means
any day the banks in Baltimore, Maryland are open for business.
“Cap” has the meaning
given such term in Section 6.5(b) of this
Agreement.
“Change in Control”
means, with respect to any Person, any of the following: (i) the
acquisition by any other Person of more than 50% of the voting securities of
such Person, or all or substantially all of the assets of such Person;
(ii) during any 24-month period, individuals who at the beginning of
any such period constitute the Board of Directors (or similar governing
body) of such Person cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by such Person’s
stockholders, of each director of such Person first elected during such period
was approved by a vote of at least two-thirds of the directors of such Person
then still in office who were directors of such Person at the beginning of any
such period; (iii) a merger, consolidation, or other combination
transaction involving such Person in which the holders of the voting securities
of such Person prior to such transaction would not have the ability to cast more
than 50% of the votes which all security holders of the Person surviving such
transaction would be entitled to cast, (iv) any dissolution, liquidation,
bankruptcy, assignment for the benefit of creditors, foreclosure of all or
substantially all of the assets of such Person, or (v) any similar
transaction or occurrence with respect to such Person.
“Changes in Economic
Conditions” means changes in economic conditions affecting financial
institutions generally, including, without limitation, changes in market
interest rates or the projected future interest rate environment.
“Claim” has the
meaning given such term in Section 6.4 of this
Agreement.
“Claim Notice” has the
meaning given such term in Section 6.4 of this
Agreement.
“Claim Response” has
the meaning given such term in Section 6.4 of this
Agreement.
“Closing” has the
meaning given such term in Section 2.4 of this
Agreement.
2
“Closing Date” has the
meaning given such term in Section 2.4 of this
Agreement.
“Closing Date Balance
Sheet” has the meaning given such term in Section 2.5(b)(1) of
this Agreement.
“Closing Net Assets”
has the meaning given such term in Section 2.5(c) of this
Agreement.
“COBRA” has the
meaning given such term in Section 3.1(t)(7) of
this Agreement.
“Code” means the
Internal Revenue Code of 1986, as amended.
“Commitment” and
“Commitments”
have the meanings given such terms in Section 3.1(n)(1) of
this Agreement.
“Company” has the
meaning given such term in the opening paragraph of this Agreement.
“Company Intellectual
Property” has the meaning given such term in Section 3.1(o)(1) of
this Agreement.
“Company Savings Plan”
has the meaning given such term in Section 5.3(b) of this
Agreement.
“Competing Business”
has the meaning given such term in Section 5.6(a)(1) of
this Agreement.
“Covenant Period” has
the meaning given such term in Section 6.1 of this
Agreement.
“Derivative
Transactions” means any swap transaction, option, warrant, forward
purchase or sale transaction, futures transaction, cap transaction, floor
transaction or collar transaction relating to one or more currencies,
commodities, bonds, equity securities, loans, interest rates, prices, values, or
other financial or nonfinancial assets, credit-related events or conditions or
any indexes, or any other similar transaction or combination of any of these
transactions, including collateralized mortgage obligations or other similar
instruments or any debt or equity instruments evidencing or embedding any such
types of transactions, and any related credit support, collateral or other
similar arrangements related to such transactions.
“Disclosed” means,
with respect to FMB or the Company, disclosed in the written information
included in the Schedules attached to this Agreement which describe in
reasonable detail the matters contained therein.
“Employee Benefit
Plan” and “Employee Benefit
Plans” have the meanings given such terms in Section 3.1(t)(1) of
this Agreement.
“Encumbrance” means
any lien, charge, mortgage, pledge, security interest, encumbrance, assessment
or adverse claim by a third party; excluding, however, any lien, charge,
mortgage, pledge, security interest, encumbrance, assessment or adverse claim
created or imposed pursuant to the Xxxxx Fargo Facility, the FMB Subdebt or any
modifications or replacements thereof.
3
“Environmental Laws”
has the meaning given such term in Section 3.1(p) of this
Agreement.
“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate”
means any trade or business (whether or not incorporated) under common control
with the Company within the meaning of Section 414(b), 414(c), 414(m) or 414(o)
of the Code.
“Escrow Agent” has the
meaning given such term in Section 2.3(a)(2) of
this Agreement.
“Escrow Agreement” has
the meaning given such term in Section 2.7 of this
Agreement.
“Escrow Funds” has the
meaning given such term in Section 2.3(a)(1) of
this Agreement.
“Exchange Amount” has
the meaning given such term in Section 2.2(a) of this
Agreement.
“Exchange Stock” has
the meaning given such term in Section 2.3(a) of this
Agreement.
“Final Adjustment
Amount” has the meaning given such term in Section 2.5(b)(3) of
this Agreement.
“Final Closing Net
Assets” has the meaning given such term in Section 2.5(b)(3) of
this Agreement.
“Financial Statements”
has the meaning given such term in Section 3.1(e) of this
Agreement.
“FMB” has the meaning
given such term in the opening paragraph of this Agreement.
“FMB Computation” has
the meaning given such term in Section 2.5(b)(2) of
this Agreement.
“FMB Contribution” has
the meaning given such term in the Recitals of this Agreement.
“FMB Indemnitees” has
the meaning given such term in Section 6.3 of this
Agreement.
“FMB Notice” has the
meaning given such term in Section 2.5(b)(2) of
this Agreement.
“FMB Subdebt” means
the Company’s subordinated indebtedness to FMB in the outstanding principal
amount of $4,000,000.00, which is evidenced by that certain Master Demand Note
dated July 18, 2006 in the face amount of $8,000,000.00, and which shall be amended
at Closing in accordance with Section 4.1(l) of this
Agreement.
4
“GAAP” means generally
accepted accounting principles in the United States, as in effect on the date
thereof, applied on a basis consistent with prior periods.
“General Survival
Period” has the meaning given such term in Section 6.1 of this
Agreement.
“Governmental
Authority” means any foreign, federal, state or local government,
political subdivision or governmental or regulatory authority, agency, board,
bureau, commission, instrumentality or court or quasi-governmental
authority.
“Hazardous Materials”
has the meaning given such term in Section 3.1(p) of this
Agreement.
“Holdco” has the
meaning given such term in the Recitals of this Agreement.
“Holdco Contribution”
means that cash contribution in the amount of $12,825,000.00 to be contributed
by Holdco to JV Corp.
“Holdco Exchange
Stock” has the meaning given such term in Section 2.2(b) of this
Agreement.
“Indemnified Party”
has the meaning given such term in Section 6.4 of this
Agreement.
“Indemnifying Party”
has the meaning given such term in Section 6.4 of this
Agreement.
“Independent
Accountant” has the meaning given such term in Section 2.5(b)(2) of
this Agreement.
“Initial Cash
Consideration” has the meaning given such term in Section 2.3(a)(1) of
this Agreement.
“Initial Exchange
Amount” has the meaning given such term in Section 2.2(a) of this
Agreement.
“Intellectual
Property” has the meaning given such term in Section 3.1(o)(1) of
this Agreement.
“Interests” has the
meaning given such term in the Recitals of this Agreement.
“Interim Balance
Sheet” has the meaning given such term in Section 3.1(e) of this
Agreement.
“Interim Date” has the
meaning given such term in Section 3.1(e) of this
Agreement.
“Interim Statements”
has the meaning given such term in Section 3.1(e) of this
Agreement.
“JV Corp” has the
meaning given such term in the opening paragraph of this
Agreement.
5
“JV Corp Common
Stock” has the meaning given such term in Section 3.2(b) of this
Agreement.
“JV Corp
Computation” has the meaning given such term in Section 2.5(b)(1) of
this Agreement.
“JV Corp
Indemnitees” has the meaning given such term in Section 6.2 of this
Agreement.
“JV Corp
Payments” has the meaning given such term in Section 2.3(a) of this
Agreement.
“Knowledge”
means: (i) with respect to a Person who is an individual,
matters actually known to that Person; (ii) with respect to FMB, matters
actually known to the directors and executive officers of FMB and the Company;
and (iii) with respect to JV Corp, matters actually known to the
directors and executive officers of JV Corp, and with respect to (i), (ii)
and (iii), the knowledge any such Person would have had after reasonable
inquiry.
“Laws” has the meaning
given such term in Section 3.1(d) of this
Agreement.
“Liabilities” has the
meaning given such term in Section 3.1(f) of this
Agreement.
“Licensed Intellectual
Property” has the meaning given such term in Section 3.1(o)(1) of
this Agreement.
“Loan” and “Loans” have the
meanings given such terms in Section 3.1(j)(2) of
this Agreement.
“Losses” has the
meaning given such term in Section 6.2 of this
Agreement.
“Material Adverse
Effect” means, with respect to any Party, any change or effect that
(a) is, or is reasonably likely to be, material and adverse to the
financial condition, results of operations, cash flows, products, product
offering, assets or business of such Party or (b) would materially impair
the ability of such Party to perform its obligations under this Agreement or
otherwise materially threaten or materially impede the consummation of the
Transactions; provided,
however, that in no event shall any matters Disclosed in a Schedule
delivered on the date of this Agreement pursuant to Article III hereof be deemed
to constitute a Material Adverse Effect, nor shall any of the following, alone
or in combination, be deemed to constitute, nor be taken into account in
determining whether there has been or will be, a Material Adverse Effect on any
Party: (i) changes in tax, banking and similar laws of general
applicability or interpretations thereof by courts or governmental authorities,
except to the extent such change has or would have a disproportionate effect on
the business of such Party as compared to other Persons in the industry in which
such Party operates; (ii) changes in GAAP or regulatory accounting
requirements applicable to banks and their Affiliates generally;
(iii) Changes in Economic Conditions; (iv) actions and omissions of
FMB, the Company or JV Corp taken with the prior written consent of the
other Parties in contemplation of the Transactions; (v) any change or effect
resulting from compliance with this Agreement, including expenses incurred by
the Parties in consummating the Transactions; (vi) any natural disaster or
any acts of terrorism, sabotage, military action or war (whether or not
declared) or any escalation or worsening thereof, except to the extent such
event has or would have a disproportionate effect on the business of such Party;
and (vii) in the case of FMB, the Company and the Subsidiaries, any
litigation arising after the date hereof from allegations of a breach of
fiduciary duty or misrepresentation in any disclosure by FMB, the Company or any
of the Subsidiaries relating to this Agreement or the
Transactions.
6
“Modified Note” has
the meaning given such term in Section 4.1(l) of this
Agreement.
“Mortgage Services
Agreement” has the meaning given such term in Section 4.1(i)(11) of
this Agreement.
“Mortgaged Property”
has the meaning given such term in Section 3.1(j)(2)(x) of
this Agreement.
“Mortgage Subsidiary”
means Mariner Finance Mortgage, LLC, a Maryland limited liability
company.
“New Lease” has the
meaning given such term in Section 4.1(i)(7) of
this Agreement.
“Note” means, with
respect to any Loan, the related promissory note together with all riders
thereto and amendments thereof or other evidence of indebtedness of the related
borrower.
“Other Laws” has the
meaning given such term in Section 3.1(q) of this
Agreement.
“Parties” and “Party” have the
meanings given such terms in the opening paragraph of this
Agreement.
“Person” means an
individual, corporation, partnership, limited liability company, joint venture,
trust, or unincorporated organization or other entity, or any Governmental
Authority.
“Preliminary Adjustment
Amount” has the meaning given such term in Section 2.5(a) of this
Agreement.
“Preliminary Closing Net
Assets” has the meaning given such term in Section 2.5(a) of this
Agreement.
“Regulatory Agreement”
has the meaning given such term in Section 3.1(y)(2) of
this Agreement.
“Representative” or
“Representatives”
means, with respect to a Person, the directors, officers, employees, managers,
members, partners, stockholders, investors, counsel, accountants, and other
representatives of such Person.
“Schedule” or “Schedules” means the
Schedules that a Party prepares and delivers to another Party pursuant to Article III of this
Agreement.
7
“Section 362(e)(2)(C)
Election” has the meaning given such term in Section 5.1(i) of this
Agreement.
“Servicing File” shall
mean with respect to each Loan, the file retained by the Company or a Subsidiary
(as applicable), in its capacity as a servicer of the Loan, consisting of all
documents that a prudent originator and servicer would have, including copies of
the Note and all other documents necessary to document and service the
Loan.
“Severance Agreements”
means, collectively, that certain Severance Agreement – Change in Control dated
April 29, 2002 by and between FMB and Xxxxxx Xxxxxxx, that certain
Severance Agreement – Change in Control dated April 29, 2002 by and between FMB
and Xxxxx Xxxxxxx, that certain Severance Agreement – Change in Control dated
April 29, 2002 by and between FMB and Xxxxxx Xxxxxxxx, that certain Severance
Agreement – Change in Control dated February 9, 2009 by and between FMB and
Xxxxxx X. Xxxxx, that certain Severance Agreement – Change in Control dated
February 9, 2009 by and between FMB and Xxxxxx X. Xxxxxxxxx, and that certain
Severance Agreement – Change in Control dated February 9, 2009 by and between
FMB and Xxxxx X. Xxxxx.
“Stockholders
Agreement” has the meaning given such term in Section 4.1(i)(9) of
this Agreement.
“Sub Interests” has
the meaning given such term in Section 3.1(a)(2) of
this Agreement.
“Subsidiary” means
each of Mortgage Subsidiary and Virginia Subsidiary. Mortgage
Subsidiary and Virginia Subsidiary are sometimes collectively referred to herein
as “Subsidiaries”.
“Survival Period” has
the meaning given such term in Section 6.1 of this
Agreement.
“Target Closing Net
Assets” means $21,500,000.00.
“Tax” or “Taxes” means any
federal, state, local or foreign income, gross receipts, payroll, excise,
severance, stamp, occupation, premium, windfall profits tax, environmental, bank
shares, ad valorem, employment, worker’s compensation, custom, duty, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax, assessment, fee or levy of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
“Tax Opinion” has the
meaning given such term in Section 4.2(i) of this
Agreement.
“Tax Returns” means
all returns, reports, declarations, claims for refund, information returns or
statements relating to Taxes, including any schedule or attachment thereto, and
any amendment thereof.
“Trademark License
Agreement” has the meaning given such term in Section 4.1(i)(12) of
this Agreement.
8
“Transactions” has the
meaning given such term in Section 2.4 of this
Agreement.
“Transferred
Employees” has the meaning given such term in Section 5.3(a) of this
Agreement.
“Transferred Mortgage
Loans” means those mortgage loans identified on Schedule 1, each of
which is owned by the Company or one of the Subsidiaries, and all of which are
to be sold and assigned to FMB and/or any of its Affiliates (other than the
Company and the Subsidiaries) prior to Closing in accordance with Section 4.1(m) of this
Agreement.
“Transition Services
Agreement” has the meaning given such term in Section 4.1(i)(10) of
this Agreement.
“Virginia Subsidiary”
means Mariner Finance of Virginia, LLC, a Virginia limited liability
company.
“Xxxxx Fargo Facility”
means that $85,000,000.00 secured revolving line of credit with Xxxxx Fargo
Preferred Capital, Inc. as agent for certain lenders, and, as applicable, such
line as modified in accordance with Section 4.1(k) of this
Agreement to, among other things, increase the amount of the line to
$95,000,000.00.
“Year-End Statements”
has the meaning given such term in Section 3.1(e) of this
Agreement.
ARTICLE
II
CONTRIBUTIONS
AND EXCHANGES
Section 2.1. Agreements to
Contribute. Upon the terms
and subject to the conditions set forth in this Agreement, on the Closing
Date:
(a) FMB
shall contribute, sell, grant, convey, assign, transfer and deliver to
JV Corp, and JV Corp shall accept, purchase and acquire from FMB, all
of the Interests, free and clear of all Encumbrances; and
(b) Holdco
shall contribute to JV Corp, and JV Corp shall accept from Holdco, the
Holdco Contribution.
Section 2.2. Consideration Exchanged for
Contributions.
(a) JV Corp
shall transfer to or for the account of FMB in exchange for the Interests
consideration consisting of stock and cash having an aggregate value of
$10,500,000.00 (the “Initial Exchange Amount”), subject to the adjustments set
forth in Section 2.5 (the Initial
Exchange Amount, as so adjusted, the “Exchange Amount”) and as more particularly
described in Section 2.3(a).
(b) JV Corp
shall transfer to Holdco in exchange for the Holdco Contribution nine hundred
fifty (950) shares of JV Corp Common Stock (the “Holdco Exchange Stock”),
free and clear of all Encumbrances.
9
Section 2.3. Delivery of
Contributions.
(a) On
the Closing Date, FMB shall deliver the Interests to JV Corp, and
JV Corp shall issue fifty (50) shares of JV Corp Common Stock (the
“Exchange Stock”), which, for purposes of this Agreement, shall have at Closing
a value of $675,000.00, in the name of FMB, and deliver by wire transfer of
immediately available funds (the “JV Corp Payments”):
(1) to
an account designated by FMB, an amount equal to the difference of (i)
$9,825,000.00, adjusted as a result of the calculation of the Preliminary
Adjustment Amount more particularly described in Section 2.5(a), minus (ii)
the sum of (A) $1,050,000.00 (the “Escrow Funds”) plus (B) the amount, if any,
of outstanding Borrowed Indebtedness as of the Closing Date (the amount equal to
the difference of (i) minus (ii) being the “Initial Cash
Consideration”);
(2) to
an escrow agent appointed by FMB and JV Corp and named in the Escrow
Agreement (the “Escrow Agent”), the Escrow Funds; and
(3) to
each payee designated on Schedule 2.3(a)
(as such Schedule may be updated at or prior to Closing), such portion of the
Borrowed Indebtedness owed to such payee, on behalf of the Company.
(b) On
the Closing Date, Holdco shall deliver the Holdco Contribution by wire transfer
of immediately available funds to an account designated by JV Corp and JV Corp
shall issue the Holdco Exchange Stock in the name of Holdco.
Section 2.4. Closing. The
contribution and exchange of the Interests, the Exchange Stock, the Holdco
Exchange Stock and the other transactions contemplated hereby (the
“Transactions”) shall occur at a closing (the “Closing”) to be held on a Friday
at the offices of the Company, located at 0000 Xxxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxx 00000, at 10:00 a.m., local time, or at such other time, place, and
manner as the Parties shall mutually agree, on a date to be mutually agreed upon
between the Parties (the “Closing Date”), which date shall be after the receipt
of all regulatory approvals required by law and this Agreement, the expiration
of any applicable waiting periods, and the satisfaction or waiver of all other
conditions required to be satisfied prior to the Closing by this
Agreement.
Section 2.5. Adjustment to Exchange
Amount.
(a) Preliminary Closing Net
Asset Adjustment. Three (3) Business Days prior to the
Closing, FMB will deliver to JV Corp an estimated consolidated balance
sheet of the Company and the Subsidiaries as of the Closing Date, prepared in
accordance with GAAP applied on a basis consistent with the Interim Balance
Sheet, together with a preliminary statement reflecting its good faith estimate
of the Closing Net Assets of the Company and the Subsidiaries on such date,
which shall be reasonably acceptable to JV Corp (“Preliminary Closing Net
Assets”). In conjunction with the preparation of the Preliminary
Closing Net Assets, FMB and the Company will make all work papers, schedules and
other supporting materials available to JV Corp at reasonable times and
upon reasonable notice and upon request will explain to JV Corp and its
Representatives the methods used to calculate such items. The
“Preliminary Adjustment Amount” shall equal the difference of the Preliminary
Closing Net Assets minus the Target Closing Net Assets. If the
Preliminary Adjustment Amount is positive, the Initial Cash Consideration to be
paid in accordance with Section 2.3(a)(1) shall
be increased dollar-for-dollar by an amount equal to the Preliminary Adjustment
Amount. If the Preliminary Adjustment Amount is negative, the Initial
Cash Consideration to be paid in accordance with Section 2.3(a)(1) shall
be decreased dollar-for-dollar by an amount equal to the absolute value of the
Preliminary Adjustment Amount.
10
(b) Closing Net Asset
Adjustment.
(1) No
later than ninety (90) calendar days after the Closing, JV Corp, at its
cost and expense, shall prepare and deliver to FMB a consolidated balance sheet
of the Company and the Subsidiaries as of the close of business on the Closing
Date (the “Closing Date Balance Sheet”), prepared in accordance with GAAP
applied on a basis consistent with the Company’s and the Subsidiaries’ past
practices, and shall prepare and deliver to FMB a statement of its calculation
of the Closing Net Assets as of the close of business on the Closing Date
(together with the Closing Date Balance Sheet, the “JV Corp
Computation”). FMB shall cooperate with JV Corp and make
available to JV Corp such assistance, information and materials as
JV Corp may reasonably request in connection with its preparation of the
JV Corp Computation.
(2) If
FMB objects to the JV Corp Computation provided to it by JV Corp, then
within thirty (30) calendar days of its receipt of the JV Corp Computation,
FMB shall give written notice (the “FMB Notice”) to JV Corp with a detailed
statement describing its objections to JV Corp’s determination of such
figures and specifying its determination of such figures (the “FMB
Computation”). During such thirty-day period, FMB and its accountants
shall be entitled to review all work papers, schedules and supporting materials
of JV Corp and its accountants related to the preparation of the
JV Corp Computation. If JV Corp has not received the FMB
Notice within such thirty-day period, FMB shall be deemed to have no objection
to the JV Corp Computation and the JV Corp Computation shall become
final and binding on the Parties hereto as the Closing Net Assets for all
purposes of this Agreement. JV Corp and FMB shall negotiate in
good faith to resolve any disputes regarding the JV Corp Computation as
promptly as practicable. If JV Corp and FMB are unable to
resolve all disputes within thirty (30) calendar days of receipt by JV Corp
of the FMB Notice, then only the unresolved disputes shall be submitted to an
independent certified public accounting firm selected by FMB and JV Corp
(the “Independent Accountant”) for determination in the manner set forth in this
Agreement. JV Corp and FMB shall be entitled to provide the
Independent Accountant with supporting documentation in connection with
resolution of such disputes. The Independent Accountant shall, within
thirty (30) calendar days of its engagement, provide a final and conclusive
resolution of all unresolved disputes related to the JV Corp Computation
and the FMB Computation. All references in this Agreement to the
Closing Net Assets shall mean the Closing Net Assets as finally determined in
accordance with this Section 2.5(b), and the
resolution of the Independent Accountant shall be binding on the Parties
hereto. The fees and expenses of the Independent Accountant shall be
shared equally by JV Corp and FMB.
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(3) Once
the Closing Net Assets have been finally determined in accordance with this
Section 2.5(b) (the “Final Closing Net
Assets”), the amount of the Preliminary Closing Net Assets shall be subtracted
from the amount of the Final Closing Net Assets and the amount of such
difference shall be the “Final Adjustment Amount”. To the extent the
amount of the Final Adjustment Amount is positive, JV Corp shall within
five (5) Business Days pay to FMB an amount equal to the Final Adjustment Amount
in cash by wire transfer of immediately available funds to an account designated
by FMB. To the extent the amount of the Final Adjustment Amount is
negative, FMB shall within five (5) Business Days pay to JV Corp an amount
equal to the absolute value of the Final Adjustment Amount in cash by wire
transfer of immediately available funds to an account designated by
JV Corp.
(c) Closing Net
Assets. As used herein the term “Closing Net Assets” shall
mean (a) total assets, namely the sum of cash, net loans, OREO property,
net property and equipment, goodwill and other intangibles, and “other” assets
of the Company and the Subsidiaries (but excluding fair market value of swap and
deferred income of amended swap), as of the close of business on the Closing
Date, as determined in accordance with GAAP, applied consistently with the
Interim Balance Sheet, but updated for activity through the close of business on
the Closing Date, less (b) total Liabilities, including the sum of
(i) the Xxxxx Fargo Facility, (ii) FMB Subdebt, and
(iii) accounts payable of the Company and the Subsidiaries, accrued
expenses of the Company and the Subsidiaries, insurance payables, dealer
reserves and “other” Liabilities due to FMB, in each case as of the close of
business on the Closing Date, as determined in accordance with GAAP, applied
consistently with the Interim Balance Sheet. A sample calculation of
the Closing Net Assets of the Company as of December 31, 2008 is set forth
for illustrative purposes on Schedule 2.5 attached
hereto.
Section 2.6. Access;
Information.
(a) FMB
agrees that upon reasonable notice and subject to applicable laws relating to
the exchange of information, it shall afford JV Corp and JV Corp’s
Representatives who have a need to access such information to carry out the
terms of this Agreement and consummate the Transactions, such access during
normal business hours throughout the period prior to the Closing Date to the
books, records (including, without limitation, Tax Returns and work papers of
independent auditors), properties, personnel and to such other information of
the Company and the Subsidiaries as JV Corp may reasonably request and,
during such period, it shall furnish promptly to JV Corp such other
information concerning the business, properties and personnel of the Company and
the Subsidiaries as JV Corp may reasonably request.
(b) Each
Party agrees that it will not, and will cause its Representatives not to, use
any information obtained pursuant to this Section 2.6 (as well as any other
information obtained prior to the date hereof in connection with the entering
into of this Agreement) for any purpose unrelated to the consummation of the
Transactions. Subject to the requirements of law, each Party will
keep confidential, and will cause its Representatives to keep confidential, all
information and documents obtained pursuant to this Section 2.6 (as well as
any other information obtained prior to the date hereof in connection with the
entering into of this Agreement) unless such information (i) was already
known to such Party, (ii) becomes available to such Party from other
sources not known by such Party to be bound by a confidentiality obligation,
(iii) is disclosed with the prior written approval of the Party to which
such information pertains or (iv) is or becomes readily ascertainable from
published information or trade sources through no breach of this Section 2.6. In
the event that this Agreement is terminated or the Transactions shall otherwise
fail to be consummated, each Party shall promptly cause all copies of documents
or extracts thereof containing information and data as to another Party to be
destroyed or returned to the Party which furnished the same. No
investigation by either Party of the business and affairs of the other shall
affect or be deemed to modify or waive any representation, warranty, covenant or
agreement in this Agreement, or the conditions to either Party’s obligation to
consummate the Transactions.
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Section 2.7. Escrow
Agreement. The Escrow Funds will be held by Escrow Agent
pursuant to the terms and conditions of an escrow agreement in a form reasonably
acceptable to FMB and JV Corp (the “Escrow Agreement”) to secure the
indemnity obligations of FMB pursuant to the provisions of Article VI
hereof. The Escrow Funds shall be held by the Escrow Agent in an
interest-bearing account pursuant to the terms of the Escrow Agreement, which
will provide, inter alia, (i) that
the Escrow Funds shall be available to JV Corp in order to satisfy the
indemnification obligations of FMB to JV Corp pursuant to the provisions of
Article VI hereof,
(ii) for the release to FMB of one half of the Escrow Funds (as reduced by
any claims of JV Corp against such Escrow Funds) upon payment of the Final
Adjustment Amount (or the determination that no such payment is required), and
(iii) the balance of the Escrow Funds (as reduced by any claims of JV Corp
against such Escrow Funds) on the date that is eighteen (18) months following
the Closing Date. Any fees charged by the Escrow Agent for the
establishment of the escrow account to hold the Escrow Funds will be borne
equally by JV Corp and FMB.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
Section 3.1. Representations and Warranties of FMB
and the Company. Except as Disclosed, FMB and the Company make
the following representations and warranties to JV Corp, as of the date
hereof and as of the Closing (except to the extent that a representation and
warranty expressly speaks to a specified earlier date):
(a) Ownership of Interests and
Sub Interests.
(1) The
Interests are all of the issued and outstanding securities of the Company, and
were issued in compliance with all applicable state and federal securities
laws. The Interests are owned by FMB, free and clear of all
Encumbrances. FMB has not pledged, hypothecated or otherwise granted
or assigned any interest in, or otherwise restricted the transfer of, any of the
Interests. The Interests have been validly issued. There
are no outstanding or authorized subscriptions, options, warrants, calls,
rights, commitments or any other agreements or arrangements of any character
obligating the Company to issue any other securities or evidencing the right to
subscribe for any membership interests. There are no limits or
restrictions of any kind on the voting of any of the Interests.
(2) Except
as Disclosed on Schedule 3.1(a)(2),
the Company holds all of the issued and outstanding equity in the Subsidiaries
(the “Sub Interests”), free and clear of all Encumbrances. The Sub
Interests were issued in compliance with all applicable state and federal
securities laws and have not been pledged or hypothecated. The Sub
Interests have been validly issued. There are no outstanding or
authorized subscriptions, options, warrants, calls, rights, commitments or any
other agreements or arrangements of any character (i) obligating either
Subsidiary to issue any other securities or evidencing the right to subscribe
for any membership interests, or (ii) granting or assigning any interest in
the Sub Interests. There are no limits or restrictions of any kind on
the voting or transfer of any of the Sub Interests.
13
(b) Organization and
Qualification; Articles of Organization and Operating Agreement;
Subsidiaries.
(1) The
Company is a limited liability company duly formed, validly existing and in good
standing under the laws of the State of Maryland, and has all requisite power
and authority to own, lease and operate its properties (real, personal and
mixed, and whether tangible or intangible), and to carry on its business as now
being conducted. The Company is duly qualified to transact business
as a foreign limited liability company and is in good standing under the laws of
Delaware, New Jersey, Pennsylvania, Tennessee and Virginia, which are all 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, except for
any jurisdictions where the failure to be so qualified, individually or in the
aggregate, would not have a Material Adverse Effect on the
Company. True and complete copies of the Articles of Organization and
Operating Agreement of the Company, in each case as amended to date, have
previously been delivered to JV Corp. Except for its equity
investments in Mortgage Subsidiary and Virginia Subsidiary and except as
Disclosed in Schedule 3.1(b), the Company has
no equity investments in any Person.
(2) Mortgage
Subsidiary is a limited liability company duly formed, validly existing and in
good standing under the laws of the State of Maryland, and has all requisite
power and authority to own, lease and operate its properties (real, personal and
mixed, and whether tangible or intangible), and to carry on its business as now
being conducted. Mortgage Subsidiary is duly qualified to transact
business as a foreign limited liability company and is in good standing under
the laws of Alabama, Delaware, Pennsylvania, Virginia, West Virginia and the
District of Columbia, which are all 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, except for any jurisdictions where the
failure to be so qualified, individually or in the aggregate, would not have a
Material Adverse Effect on the Mortgage Subsidiary. True and complete
copies of the Articles of Organization and Operating Agreement of Mortgage
Subsidiary, in each case as amended to date, have previously been delivered to
JV Corp. Except as Disclosed in Schedule 3.1(b), Mortgage
Subsidiary has no equity investments in any Person.
(3) Virginia
Subsidiary is a limited liability company duly formed, validly existing and in
good standing under the laws of the Commonwealth of Virginia, and has all
requisite power and authority to own, lease and operate its properties (real,
personal and mixed, and whether tangible or intangible), and to carry on its
business as now being conducted. Virginia Subsidiary is duly
qualified to transact business as a foreign limited liability company 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, except for any
jurisdictions where the failure to be so qualified, individually or in the
aggregate, would not have a Material Adverse Effect on the Virginia
Subsidiary. True and complete copies of the Articles of Organization
and Operating Agreement of Virginia Subsidiary, in each case as amended to date,
have previously been delivered to JV Corp. Except for its equity
investment in Mortgage Subsidiary and except as Disclosed in Schedule 3.1(b), Virginia
Subsidiary has no equity investments in any Person.
14
(c) Authority. Each of FMB and the
Company has the absolute and unrestricted right, power, authority and capacity
to execute and deliver this Agreement and to perform its obligations hereunder
and to consummate the Transactions. The execution and delivery of
this Agreement by FMB and the Company, the consummation by FMB and the Company
of the Transactions, and the performance by FMB and the Company of their
respective obligations hereunder have been duly authorized by all necessary
action on the part of FMB and the Company. This Agreement has been
duly executed and delivered by FMB and the Company and (assuming the due
authorization, execution and delivery by JV Corp and Holdco) constitutes
the legal, valid and binding obligation of FMB and the Company, enforceable
against FMB and the Company in accordance with its 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.
(d) No
Violation. Except as Disclosed in Schedule 3.1(d), the
execution and delivery of this Agreement by FMB and the Company, and the
consummation of the Transactions by FMB and the Company, do not and will not,
with or without the giving of notice or the lapse of time, or both,
(i) violate any foreign, federal, state or local laws, ordinances, rules,
regulations, codes or administrative directives (“Laws”) or violate any existing
term or provision of any order, writ, judgment, injunction or decree of any
court, governmental department, commission, board, agency or instrumentality
applicable to FMB, the Company, or the Subsidiaries or any of their properties
or assets; (ii) violate, result in any breach of, or constitute a default (or
give rise to any right of termination, cancellation or acceleration) under any
contract, agreement, indenture, mortgage or deed of trust, security agreement,
license, instrument or obligation to which any of FMB, the Company, or the
Subsidiaries is a party or by which any of them is bound; (iii) require any
consent, approval, filing or notice of or with any Person; or (iv) result
in the creation or imposition of any Encumbrance upon FMB, the Company, or the
Subsidiaries or any of their properties or assets.
(e) Financial
Statements. FMB has delivered to JV Corp (i) true
and complete copies of the Company and the Subsidiaries’ balance sheets as of
December 31, 2008, 2007 and 2006 and the related statements of income and
members’ capital for the fiscal years then ended (collectively, the “Year-End
Statements”), and (ii) true and complete copies of the Company and the
Subsidiaries’ balance sheet (the “Interim Balance Sheet”) as of August 31,
2009 (the “Interim Date”) and the related statements of income and members’
capital for the period between December 31, 2008 and the Interim Date (together
with the Interim Balance Sheet, the “Interim Statements”; and together with the
Year-End Statements and the Interim Balance Sheet, the “Financial
Statements”). Except as Disclosed on Schedule 3.1(e), the
Financial Statements have been prepared in conformity with GAAP, applied on a
consistent basis, and present fairly the financial condition, results of
operations, and changes in members’ capital of the Company and the Subsidiaries
as of the dates thereof and for the periods included therein; provided, however, that the
Year-End Statements lack footnotes, and the Interim Statements lack normal
year-end adjustments and footnotes. The Financial Statements are
consistent with the books and records of the Company. The Financial
Statements have been reviewed, but not audited, by Xxxxxxx & Company, an
independent registered public accounting firm.
15
(f) No Undisclosed
Liabilities. None of the Company or the Subsidiaries is liable
for or subject to any liabilities, debts or obligations, absolute, accrued,
known or unknown, contingent or otherwise (collectively, “Liabilities”) except
(i) Liabilities which are fully reflected or reserved against on the
Interim Balance Sheet; (ii) Liabilities incurred since the Interim Date in
the ordinary course of business, consistent with the past practices of the
Company or the respective Subsidiary; and (iii) as Disclosed in Schedule 3.1(f) to
this Agreement.
(g) Tax
Matters.
(1) All
Tax Returns required to be filed by or with respect to each of the Company and
the Subsidiaries have been duly and timely filed and each such Tax Return is
true, correct and complete. All Taxes owed by each of the Company and
the Subsidiaries have been or, with respect to Taxes not yet due and payable,
will be timely paid. There is adequate provision on the face of the
Interim Statements for all Taxes of the Company and the Subsidiaries not yet due
and payable as of the Interim Date, and such provision will remain adequate as
adjusted through the Closing Date. Neither the Company nor any
Subsidiary is the beneficiary of any extension of time within which to file any
Tax Return in respect of any fiscal year that has not since been
filed. No deficiencies for any Tax, assessment or governmental charge
have been proposed, asserted or assessed (tentatively or definitely) against the
Company or any Subsidiary. Except as Disclosed in Schedule 3.1(g),
neither the Company nor any Subsidiary is undergoing, nor with respect to any of
them is there proposed, pending or, to the Knowledge of FMB, threatened any
audit, action, dispute, claim or examination with respect to
Taxes. All Taxes required to be withheld and paid over by the Company
or any Subsidiary in connection with payments to employees, independent
contractors, creditors, members or third parties or other Persons have been so
withheld and paid over, and each of the Company and the Subsidiaries has
complied with all information reporting and backup withholding
requirements.
(2) Except
as Disclosed in Schedule 3.1(g), no
Tax authority in a jurisdiction where any of the Company or the Subsidiaries
does not file Tax Returns has made a written claim, assertion or threat (or, to
FMB’s Knowledge, a verbal claim, assertion or threat) that the Company or any of
the Subsidiaries is or may be subject to Tax in such jurisdiction.
(3) There
are no Encumbrances on any assets of the Company or any of the Subsidiaries with
respect to Taxes, except Encumbrances for Taxes not yet due and
payable.
(4) Schedule 3.1(g) lists
all federal, state, local and foreign Tax Returns filed with respect to the
Company or any of the Subsidiaries for taxable periods ended on or after
December 31, 2005 and indicates those Tax Returns that have been
audited.
(5) Neither
the Company nor any Subsidiary is the subject of any waiver of any statute of
limitations in respect of Taxes or any extension of time with respect to a Tax
assessment or deficiency.
16
(6) FMB
is not a foreign person within the meaning of Section 1445 of the
Code.
(7) Neither
the Company nor any of the Subsidiaries is subject to any private ruling from,
or agreement with, a Tax authority.
(8) Neither
the Company nor any of the Subsidiaries (i) is a party to any Tax
allocation or sharing agreement, (ii) has Liability for the Taxes of
another Person, whether by Law or regulation, as transferee or successor, by
contract, or otherwise.
(9) Neither
the Company nor any Subsidiary is a party to any partnership for federal income
Tax purposes.
(10) Since
the respective formation of each of them, each of the Company and the
Subsidiaries has been validly treated for both federal and state income Tax
purposes as a disregarded entity (as defined under Treasury Regulation Section
301.7701-2(a)). None of the Company or any of the Subsidiaries has
elected to be treated for income Tax purposes as a corporation.
(h) Books and
Records. The books of
account, membership record books and other records of the Company and the
Subsidiaries, all of which have been made available to JV Corp, are
complete and correct in all material respects and have been maintained in
accordance with sound business practices. At the Closing, all of the
books and records of the Company will be in the possession of the Company and
all of the books and records of each Subsidiary will be in the possession of
such Subsidiary.
(i) Title to Properties; Absence
of Encumbrances. Except as Disclosed in Schedule 3.1(i), the
Company and the Subsidiaries have good, valid and marketable title to, or in the
case of leased properties and assets, valid leasehold interests in, their
respective properties and assets (real, personal and mixed and whether tangible
or intangible), free and clear of all Encumbrances.
(j) Loan
Portfolio.
(1) Except
as Disclosed in Schedule 3.1(j)(1),
all evidences of indebtedness reflected as assets in the books and records of
the Company and the Subsidiaries, and all evidences of the security interests of
the Company and the Subsidiaries in the collateral pledged to secure such
indebtedness, are the obligations of the respective obligors named therein,
enforceable in all material respects in accordance with their respective terms,
which terms are set forth in writing in the Note and other documents in the
Servicing File; except as enforceability 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.
17
(2) FMB
has made available to JV Corp a listing, as of July 31, 2009, of all loan
agreements, notes or borrowing arrangements (including leases, credit
enhancements and interest-bearing assets) payable to the Company or a Subsidiary
(each, a “Loan” and collectively, the “Loans”), including the aggregate
outstanding principal amount, the borrower, the origination date, maturity date,
interest rate, days past due, and other relevant information (the “Loan
Schedule”). The information set forth in the Loan Schedule with
respect to each Loan is complete, true and correct in all material
respects. Except as Disclosed on Schedule 3.1(j)(2),
with respect to each Loan listed on the Loan Schedule:
(i) The
payments on the Loan are current, with the first monthly payment having been
made prior to the second scheduled monthly payment becoming due.
(ii) The
Loan is not subject to any defenses, setoffs, or counterclaims, including
without limitation the defense of usury, and no such defense, setoff, or
counterclaim has been asserted with respect thereto, nor will the operation of
any of the terms of a Note, or the exercise of any right thereunder, render the
Note unenforceable, in whole or in part. To FMB’s Knowledge, no
borrower in respect of the Loan was a debtor in any state or Federal bankruptcy
or insolvency proceeding at the time the Loan was originated.
(iii) In
originating, servicing and collecting the Loan, the Company and the Subsidiaries
complied in all material respects with the requirements of all applicable Laws,
including, without limitation, Laws relating to usury, truth-in-lending,
predatory and abusive lending, real estate settlement procedures, consumer
credit protection, equal credit opportunity and disclosure
obligations.
(iv) No
material omission, misrepresentation or similar occurrence has taken place, nor,
to the Knowledge of FMB, has any fraud or negligence taken place, with respect
to a Loan on the part of the Company or any Subsidiary in connection with the
origination of the Loan.
(v) The
proceeds of the Loan have been fully disbursed and there is no further
requirement for future advances thereunder, and any and all requirements as to
completion of any on-site or off-site improvement and as to disbursements of any
escrow funds therefor have been complied with.
(vi) The
Loan Schedule identifies which of the Company, Mortgage Subsidiary or Virginia
Subsidiary is the holder of the Loan, and such Person as identified is the sole
owner and holder of the Loan. All Loans acquired by such Person from
third parties (including Affiliates) were acquired in a true and legal sale
pursuant to which such third party sold, transferred, conveyed and assigned to
the Company, Mortgage Subsidiary or Virginia Subsidiary (as applicable) all of
its right, title and interest in, to and under such Loan and retained no
interest in such Loan.
(vii) The
Loan, to the extent it was made by the Company or any Subsidiary, was made (A)
in accordance with the written policies, practices and procedures, including,
without limitation, underwriting guidelines, of the Company or one of the
Subsidiaries (as applicable) with any exceptions thereto exercised in a prudent
manner based on compensating factors and having no adverse effect upon the value
of the related Loan or the borrower’s ability to perform thereunder, and (B) on
the standard loan documents of the Company or one of the Subsidiaries (as
applicable).
18
(viii) To
FMB’s Knowledge, (A) there is no default, breach, violation or event of
acceleration existing under the Note and (B) no event has occurred which, with
the passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of acceleration,
and neither the Company nor any Subsidiary has waived any default, breach,
violation or event of acceleration.
(ix) All
escrow deposits and escrow payments made to the Company, Mortgage Subsidiary or
Virginia Subsidiary are in the possession of, or under the control of, the
Company, Mortgage Subsidiary or Virginia Subsidiary (as applicable) and there
exist no deficiencies in connection therewith for which customary arrangements
for repayment thereof have not been made. The collection of any escrow payments
has complied in all material respects with applicable Laws. Any escrow of funds
is not prohibited by applicable Laws and has been established in an amount
sufficient to pay for every item that remains unpaid and has been assessed but
is not yet due and payable. No escrow deposits or escrow payments or other
charges or payments due the Company, Mortgage Subsidiary or Virginia Subsidiary
(as applicable) have been capitalized under the Note. All interest rate
adjustments, if any, have been made in strict compliance with state and federal
law and the terms of the related Note. Any interest required to be paid pursuant
to state, federal and local law has been properly paid and
credited.
(x) If
the Loan is secured by real property (including all improvements, buildings,
fixtures, building equipment and personal property thereon and all additions,
alterations and replacements made at any time with respect to the foregoing)
(the “Mortgaged Property”), the Servicing File contains either (A) an appraisal
of the related Mortgaged Property signed prior to the approval of the Loan
application by a qualified appraiser, duly appointed by the Company or one of
the Subsidiaries (as applicable), who had no interest, direct or indirect in the
Mortgaged Property or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of the Loan, and the
appraisal and appraiser both satisfy the requirements of Xxxxxx Xxx or Xxxxxxx
Mac and Title XI of the Federal Institutions Reform, Recovery, and Enforcement
Act of 1989 as amended and the regulations promulgated thereunder, all as in
effect on the date the Loan was originated, or (B) an appraisal of the related
Mortgaged Property conducted by an employee of the Company or one of the
Subsidiaries (as applicable) signed prior to the approval of the Loan
application by such employee.
(xi) The
Company and the Subsidiaries did not originate the Loan without giving due
regard for the borrower’s ability to repay the Loan.
(xii) Each
of the Company and the Subsidiaries, or where none of the Company or the
Subsidiaries was the original credit grantor, to FMB’s Knowledge, the original
credit grantor, had full power and authority to make the Loan.
(3) Attached
hereto as Schedule
3.1(j)(3) is a true,
complete and correct copy of the loan losses and default rates of the loan
portfolio of the Company and the Subsidiaries since January 1,
2006.
19
(4) Except
as disclosed in the Financial Statements of the Company and the Subsidiaries,
since December 31, 2008, none of the Company or the Subsidiaries have incurred
any unusual or extraordinary loan losses which have had or are likely to have a
Material Adverse Effect on the Company and the Subsidiaries and in light of the
Company’s and the Subsidiaries’ historical loan loss experiences and their
managements’ analyses of the quality and performance of its loan
portfolios.
(k) Legal
Proceedings. Except as Disclosed in Schedule
3.1(k):
(1) there
are no pending or, to FMB’s Knowledge, threatened legal, administrative,
governmental or other claims, actions, suits, proceedings or governmental
investigations (i) to which the Company or any Subsidiary is a Party or (ii)
relating to any of the Company or any Subsidiary’s properties or rights or
otherwise affecting the Company or any Subsidiary; and
(2) to
FMB’s Knowledge, there is no reasonable basis for any claim, action, suit,
proceeding or investigation against or relating to the Company or any Subsidiary
or any of their respective properties or rights.
(l) Insurance. The Company and
the Subsidiaries presently maintain, and during their existence have maintained,
casualty and liability insurance policies covering all of the material assets,
properties and operations of the Company and the Subsidiaries. There
are no material claims pending under any such policy, nor is there, to the
Knowledge of FMB, any basis for any such claim, nor has any such claim been
denied in the past three (3) years. Schedule 3.1(l)
contains a complete list and brief description of all policies of casualty,
liability and other forms of insurance held by the Company and the
Subsidiaries.
(m) Employment
Matters. There are no administrative investigations, actions,
suits, claims, labor disputes or grievances pending or, to FMB’s Knowledge,
threatened or reasonably anticipated relating to any labor, safety, wage rate or
discrimination matters involving any employee of the Company or the
Subsidiaries. No unfair labor practice complaint or arbitration
against or affecting the Company or the Subsidiaries is pending before the
National Labor Relations Board, and no labor strike, dispute, slowdown or
stoppage is pending against or affecting the Company or the Subsidiaries, and
there is no collective bargaining or similar agreement involving the Company or
any Subsidiary as a Party. To FMB’s Knowledge, there is no union or
collective bargaining organizational activity occurring among the employees of
the Company or the Subsidiaries. Each of the Company and the
Subsidiaries is in material compliance with all applicable foreign, federal,
state and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours with respect
to its employees. To FMB’s Knowledge, no employee of the Company or
any Subsidiary has violated any employment contract, nondisclosure agreement or
noncompetition agreement by which such employee is bound. Except as
Disclosed in Schedule 3.1(m),
none of FMB, the Company or any Subsidiary has made any promise or
representation to any employee of the Company or the Subsidiaries regarding
continuation of such employee’s employment by the Company, either Subsidiary or
JV Corp following the Closing.
20
(n) Commitments.
(1) Schedule 3.1(n) lists
each contract or agreement (including any and all amendments thereto) to which
the Company or either Subsidiary is a Party, or by which the Company or either
Subsidiary is bound (each, a “Commitment” and collectively, the “Commitments”),
of the following types:
(i) Commitments
for the sale of any real or personal (tangible or intangible) properties other
than in the ordinary course of business, or for the grant of any option or
preferential rights to purchase any such properties;
(ii) Commitments
for the construction, modification or repair of any building, structure or
facility or for any capital expenditures or for the acquisition of fixed assets,
providing for aggregate payments in excess of $100,000.00;
(iii) Commitments
relating to the acquisition by the Company (or either Subsidiary) of any
operating business or the capital stock or equity interest of any other Person
that has not been consummated or that has been consummated but contains
representations, covenants, guaranties, indemnities or other obligations that
remain in effect;
(iv)
Commitments pursuant to which any Party is
required to purchase or sell a stated portion of its requirements or output to
another Party or perform a stated amount of service for, on behalf of, or upon
the referral of another Party;
(v) Commitments
under which the Company or either Subsidiary agrees to indemnify any
Person;
(vi)
Commitments containing covenants of the Company or
any Subsidiary not to compete, do business in any line of business or in any
geographical area or with any Person, or to disclose certain information, or
covenants of any Person not to compete with the Company or any Subsidiary in any
line of business or in any geographical area or disclose information concerning
the Company or any Subsidiary;
(vii)
Commitments in respect of any joint venture, partnership
or other similar arrangement (including, without limitation, any joint
development agreement);
(viii) Commitments
relating to any Governmental Authority;
(ix) Commitments
relating to warehouse lines of credit, outstanding letters of credit or
performance bonds or creating any Liability as guarantor, surety, co-signer,
endorser, co-maker, indemnitor or otherwise in respect of the obligation of any
Person, except as endorser or maker of checks endorsed or made in the ordinary
course of business;
(x) Commitments
(other than loan commitments to customers and those specified in any of clauses
(i) through (ix) above) which are material to the Business; and
21
(xi) Commitments
currently in negotiation by the Company or any Subsidiary of a type which if
entered into would be required to be listed in Schedule 3.1(n) or to
be Disclosed on any other Schedule hereto.
(2) Complete
copies of all Commitments required to be listed in Schedule 3.1(n),
including all amendments thereto, have been delivered to JV Corp.
To FMB’s
Knowledge, there is no breach, violation or default by the Company or any
Subsidiary and no event which, with notice or lapse of time or both, would
constitute a breach, violation or default by the Company or any Subsidiary, or
give rise to any Encumbrance or right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or acceleration
under any Commitment listed in Schedule
3.1(n).
To FMB’s
Knowledge, no other Party to any of the Commitments listed in Schedule 3.1(n) is in
arrears in respect of the performance or satisfaction of the terms and
conditions on its part to be performed or satisfied under any of such
Commitments, except for arrears which, individually and in the aggregate, have
not had, and are not expected to have, a Material Adverse Effect on the Company
or any Subsidiary, and no material waiver or material indulgence has been
granted by any of the parties thereto.
FMB has
no Knowledge that any change will occur in the relationships of the Company or
any Subsidiary with any of its respective customers or suppliers, whether or not
as a result of the consummation of the Transactions, which would have a Material
Adverse Effect on the Company.
After the
date of this Agreement, none of the Company or the Subsidiaries will incur any
Liability (whether as an indemnity, compensation, reimbursement or otherwise)
for terminating any Commitment in accordance with the terms thereof at the end
of any stated term, except as expressly set forth in any Commitment or as agreed
to by JV Corp.
FMB does
not have, nor will it have immediately after the Closing Date, any financial
interest in any party, other than the Company or a Subsidiary, to any of the
Commitments, and, to FMB’s Knowledge, all of the Commitments were negotiated on
an arm’s length basis.
(o) Intellectual
Property.
(1) Schedule 3.1(o)(1)
sets forth a true, correct and complete list and, where appropriate, a
description of, all intellectual property licenses (including, without
limitation, software licenses but excluding shrink-wrap and over-the-counter
licenses), patents, trade names, trademarks, service marks, domain names, trade
secrets and copyrights (“Intellectual Property”) which are owned by the Company
or any Subsidiary (the “Company Intellectual Property”) or which are used in the
conduct of the Business pursuant to a third party license or other agreement
(“Licensed Intellectual Property”). Except as Disclosed on Schedule 3.1(o)(1),
none of the Company or the Subsidiaries is a party to any written or oral
license (either as licensor or licensee), sublicense (either as sublicensor or
sublicensee) with respect to the Company Intellectual
Property. Except as Disclosed in Schedule 3.1(o)(1),
none of the Company or the Subsidiaries has granted to any Person any right,
title, or interest in any Company Intellectual Property and the Company or a
Subsidiary owns the complete, unencumbered, unrestricted and exclusive right,
title, and interest in the Company Intellectual Property.
22
(2) Except
as Disclosed in Schedule 3.1(o)(2),
to FMB’s Knowledge, (i) the use of the Company Intellectual Property and
Licensed Intellectual Property by the Company and the Subsidiaries has not
infringed, misappropriated or otherwise violated the rights of any Person, and
does not now infringe, misappropriate or otherwise violate the rights of any
Person, (ii) no claim with respect to the foregoing has been asserted by
any Person, (iii) no claim has been asserted by any Person challenging or
questioning the right of the Company or any Subsidiary to use any of the
Intellectual Property being used by them, and (iv) except for license
agreements Disclosed in Schedule 3.1(o)(1),
no Person has made a claim asserting the right to use the Company Intellectual
Property.
(3) Except
as Disclosed in Schedule 3.1(o)(3),
none of FMB, the Company or any Subsidiary has granted or committed to grant any
rights of any nature in the Company Intellectual Property to any Person other
than authorizations granted to employees or consultants for use within the scope
of their employment or consultation.
(4) Except
as Disclosed in Schedule 3.1(o)(4),
FMB has no Knowledge of any unauthorized use, infringement or misappropriation
by any Person of any Company Intellectual Property or Licensed Intellectual
Property, including, but not limited to, any employee or consultant or former
employee or consultant of the Company or the Subsidiaries.
(5) Except
as Disclosed in Schedule 3.1(o)(5),
neither FMB nor any other Person, including, but not limited to, any employee or
consultant or former employee or consultant of the Company or a Subsidiary, owns
or has any right, title, or interest in or to any Company Intellectual Property
or Licensed Intellectual Property. The Company and the Subsidiaries
have obtained invention disclosure and assignment agreements from all Persons,
including, without limitation, former and current employees and consultants, who
participated in any way in the development of any Intellectual Property for the
Company or the Subsidiaries.
(6) The
execution and performance of this Agreement will not, by themselves, result in
any change in the Company’s or a Subsidiary’s right, title, and interest in any
Company Intellectual Property or Licensed Intellectual Property.
(7) To
FMB’s Knowledge, there is no Intellectual Property which is not currently owned
or lawfully used by the Company or any Subsidiary which is required for the
continued operation of its Business as presently conducted.
23
(p) No Violation of
Environmental Laws. To FMB’s Knowledge, except as Disclosed in Schedule 3.1(p), the
Company and the Subsidiaries are in material compliance with all applicable
federal, state or local laws, ordinances, rules, regulations, codes and
administrative directives, and all licenses, permits, authorizations, approvals,
consents, legal doctrines, orders, directives, executive or administrative
orders, judgments, decrees, injunctions, requirements and agreements with any
Governmental Authority relating to (i) the protection, preservation or
restoration of the environment (which includes, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, structures, soil,
surface land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety, or (ii) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of, Hazardous Materials
(“Environmental Laws”), and no charge, complaint, action, suit, proceeding,
hearing, investigation, claim demand, notice or inquiry has been received by
FMB, the Company or any Subsidiary, or, to FMB’s Knowledge, is threatened,
alleging any failure to comply with any such Environmental Laws. For
purposes of this paragraph, the term “Hazardous Materials” means any substance
which is or could be detrimental to human health or safety or to the
environment, currently listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under any Environmental
Laws, whether by type or by quantity, including any substance containing any
such substance as a component.
(q) Compliance with Other
Laws. Except as Disclosed in Schedule 3.1(q), the Company and
the Subsidiaries are in material compliance with all federal, state and local
laws, ordinances, rules, regulations, codes and administrative directives other
than Environmental Laws (“Other Laws”) which apply to or materially affect the
operation, conduct or ownership of their respective business and assets, and
neither FMB nor the Company has received any notice of any claimed violation of
any Other Laws.
(r) Licenses and
Permits. The Company and the Subsidiaries have all material
permits, licenses, certificates and authorizations of Governmental Authorities
necessary for the conduct of its business as presently conducted. All
such permits, licenses, certificates and authorizations of Governmental
Authorities are listed in Schedule 3.1(r) and are in full
force and effect. No material violations have occurred or are
continuing in respect of any such permit, license, certificate and authorization
of Governmental Authorities that threaten to cause the revocation, suspension or
limitation of such license, franchise, permit, approval, registration or
authorization. No proceeding is pending or, to FMB’s Knowledge,
threatened to revoke, suspend or limit any such permits, licenses, certificates
and authorizations of Governmental Authorities. FMB makes no
representation or warranty that after the Closing (i) any of the Company or
any Subsidiary’s permits, licenses, certificates and authorizations of
Governmental Authorities will be of any use to JV Corp or
(ii) JV Corp or the Company or the Subsidiaries will not be required
to obtain licenses, permits, approvals, franchises, registrations or other
authorizations different from or in addition to those held immediately prior to
the Closing by FMB or the Company. Schedule 3.1(r) also sets forth a
list of business activities in which the Company or one of the Subsidiaries is
engaged, and for which the Company or such Subsidiary, as applicable, has not
obtained a license, permit, approval, franchise, registration or other
authorization based on an exemption available to it as an Affiliate of First
Mariner Bank.
(s) Absence of
Changes.
(1) Except
as Disclosed in Schedule 3.1(s), since the
Interim Date, there has not been:
24
(i) any
change in the business, results of operations, earnings, backlog, prospects,
properties, assets, Liabilities or condition, financial or otherwise, affecting
the Company or a Subsidiary other than changes in the ordinary course of
business, which, singly or in the aggregate, has had a Material Adverse Effect
on the Company;
(ii) any
damage, destruction or loss of any of the Company or any Subsidiary’s assets
(whether or not covered by insurance) which has had, or is expected to have, a
Material Adverse Effect on the Company;
(iii)
except in the ordinary course of business for full and fair value
received, any sale, assignment, transfer or other disposition of any tangible or
intangible asset of the Company or any Subsidiary;
(iv) any
material change in the business or commercial practices or accounting methods
customarily followed by the Company or any Subsidiary; or
(v) any
change in method of accounting (including Tax accounting), the making, changing
or revoking of any election with respect to Taxes, or the entering into any
agreement or arrangement with respect to Taxes affecting the Company or any
Subsidiary.
(2) Since
the Interim Date, except as Disclosed in Schedule 3.1(s), the Company has
not (and each Subsidiary has not):
(i) purchased,
issued, redeemed, sold, or otherwise acquired or disposed of any membership
interests in the Company (or any Subsidiary), or granted any options, warrants
or other rights to purchase or convert any obligation into membership interests
in the Company (or any Subsidiary);
(ii) incurred,
assumed or guaranteed or entered into any commitment in respect of any
indebtedness for borrowed money or materially changed any of its indebtedness
except in the ordinary course of business;
(iii) made
any material increase in the compensation payable or to become payable by it to
its employees and other service providers or adopted any increase in any bonus,
insurance, pension or other Employee Benefit Plan, payment or arrangement made
to, for or with its employees and other service providers;
(iv) made
any distributions to FMB;
(v) entered
into any material commitment, contract, agreement, license, lease or transaction
other than in the ordinary course of business; or
(vi) entered
into any agreements, whether in writing or otherwise, to take any action
described in this Section 3.1(s).
25
(t) Employee Benefit
Plans.
(1) Schedule 3.1(t) is an
accurate and complete list of each “employee benefit plan” within the meaning of
Section 3(3) of ERISA and each employment, consulting, termination,
retirement, change in control or retention arrangements, and retirement, profit
sharing, deferred compensation, severance pay, healthcare, dental, disability,
life insurance, stock bonus, stock purchase, and fringe benefit plan that is
sponsored or maintained by FMB, the Company or any Subsidiary that cover one or
more employees and/or former employees of the Company or any Subsidiary, or with
respect to which the Company or any of its ERISA Affiliates has or may in the
future have any Liability (each, an “Employee Benefit Plan” and collectively,
the “Employee Benefit Plans”).
(2) Except
as Disclosed in Schedule 3.1(t), each
Employee Benefit Plan has been maintained and operated in material compliance
with its terms and the requirements of ERISA and the Code. Each
Employee Benefit Plan intended to be qualified under Section 401 of the Code has
been determined to be so qualified in form by the Internal Revenue Service, each
such Employee Benefit Plan has satisfied, in form and operation, the
qualification requirements of Section 401(a) of the Code and no action has been
taken and no condition exists that has or is reasonably expected to have a
material adverse impact on the continued qualification of such Employee Benefit
Plan. Each arrangement that provides deferred compensation to any
employee of the Company that is subject to Code Section 409A has been maintained
and operated in material compliance with its terms and the requirements of
Section 409A.
(3) No
complete or partial termination of any Employee Benefit Plan has occurred or,
except as Disclosed in Schedule 3.1(t), is
expected to occur solely as a result of this Agreement and the consummation of
the Transactions.
(4) None
of FMB, the Company or any Subsidiary has any current commitment or
understanding to create, modify or terminate any Employee Benefit Plan, except
in connection with the consummation of the Transactions or solely as required by
applicable law.
(5) No
condition or circumstance exists that would prevent the subsequent amendment or
termination of any Employee Benefit Plan in accordance with applicable
law.
(6) Neither
FMB, the Company, the Subsidiaries nor any of their respective ERISA Affiliates
maintains, contributes to or has ever maintained or contributed to, and has no
Liability (contingent or otherwise) with respect to, any “multiemployer plan”
(as defined in Section 3(37) of ERISA). No Liability under Section
412 of the Code, Section 302 of ERISA or Title IV of ERISA has been or is
reasonably expected to be incurred by FMB, the Company, the Subsidiaries or any
of their respective ERISA Affiliates with respect to any Employee Benefit Plan,
including any lien on any property or rights to property of the Company or the
Subsidiaries.
26
(7) Neither
FMB, the Company, the Subsidiaries nor any of their respective ERISA Affiliates
maintain or have any obligation under any Employee Benefit Plan providing for
health or life insurance benefits, or other similar welfare benefits, continuing
after the last day of the month following termination of employment, except as
required by the health plan continuation coverage requirements of ERISA Sections
601 – 608 (“COBRA”). No employee of the Company or the Subsidiaries
is entitled to any severance benefits following termination of employment,
except for such retirement benefits as an employee may be vested in before
termination.
(8) No
actions, suits or claims are pending or, to FMB’s Knowledge, threatened against
the Employee Benefit Plans or the assets of any Employee Benefit Plan (other
than routine claims for benefits), and FMB has no Knowledge of the existence of
any facts which could give rise to any actions, suits or claims against the
Employee Benefit Plans or the assets of the Employee Benefit Plans (other than
routine claims for benefits).
(9) No
Employee Benefit Plan, or any fiduciary thereof, is or has been the subject of
an audit, investigation or examination by any Governmental Authority that
resulted in, or, to the Knowledge of FMB, could result in, a finding of a
material breach of ERISA or the Code.
(10) Full
payment has been made, or by the Closing will have been made, of all
contributions or other amounts which the Company or either of the Subsidiaries
is required to pay, under applicable law or under any Employee Benefit Plan, as
to each Company and the Subsidiaries’ employee’s service through Closing, or
adequate reserves have been provided for in the Financial Statements of the
Company.
(11) All
contributions by the Company and the Subsidiaries under an Employee Benefit Plan
have been deducted, or can be deducted, for the taxable year for which such
contributions are made; and, no such contribution deduction has been challenged
or disallowed. There is no commitment to which any of the Company or
the Subsidiaries is a Party covering any employee or former employee of the
Company or the Subsidiaries that, individually or collectively, could give rise
to the payment of any amount that would not be deductible pursuant to Section
404 of the Code.
(12) None
of the Company, the Subsidiaries or FMB has engaged in any non-exempt prohibited
transaction with respect to any Employee Benefit Plan or materially breached any
applicable fiduciary duty with respect to any Employee Benefit
Plan.
(13) FMB
has made available to JV Corp true and complete copies of all of the
following documents with respect to each Employee Benefit
Plan: (i) all plan documents in effect on the date hereof,
together with all amendments thereto; (ii) all current summary plan
descriptions and summaries of material modifications; (iii) all current
trust agreements and other documents establishing funding arrangements (and all
amendments thereto); (iv) the most recent Internal Revenue Service
determination letter for each plan intended to be qualified under Section 401 of
the Code; (v) the annual report (Form 5500) for each of the last three
(3) plan years for each plan required to file such report; (vi) the most
recent financial statements for each plan (if prepared and if separate from the
statement in the Form 5500); and, (vii) all contractual obligation
documents relating to each Employee Benefit Plan, including service provider
agreements, insurance contracts, annuity contracts, investment management
agreements, subscription agreements, participation agreements and record-keeping
agreements.
27
(14) Except
as Disclosed in Schedule 3.1(t),
neither the Company nor any of the Subsidiaries is a party to any contract or
plan that has resulted or will result, separately or in the aggregate, in the
payment of (i) any “excess parachute payment” within the meaning of Code Section
280G (or any corresponding provision of state, local or foreign tax law) or (ii)
any amount that will not be fully deductible as a result of Code Section
162(m). Except as Disclosed on Schedule 3.1(t),
the execution of this Agreement and the consummation of the Transactions (alone
or together with any other event which, standing alone, would not by itself
trigger such entitlement or acceleration) will not (i) entitle any employee of
the Company or the Subsidiaries to any payment, forgiveness of indebtedness,
vesting, distribution, or increase in benefits under or with respect to any
Employee Benefit Plan or (ii) trigger any obligation to fund any Employee
Benefit Plan.
(u) At Will
Employees. Except as Disclosed in Schedule 3.1(u) and
except with regard to any employment agreements entered into pursuant to the
terms of this Agreement, none of the Company or the Subsidiaries is a party to
any employment agreement that causes any employee to be other than an “at will”
employee.
(v) No
Brokers. Except for and with respect to Xxxxxx Xxxxx
Xxxxxxxxxx, LLC, the compensation of which shall be payable by FMB, none of FMB,
the Company or any Subsidiary has employed any broker, finder or intermediary or
incurred any Liability for any brokerage fees, commissions or finders’ fees in
connection with this Agreement or the Transactions, and no action by any of FMB,
the Company or the Subsidiaries will cause or support any claim to be asserted
against it by any broker, finder or intermediary in connection with the
Agreement or the Transactions.
(w) Relationships with Related
Persons. Except as
Disclosed on Schedule 3.1(w),
neither FMB nor any Affiliate of FMB (other than the Company) has any interest
in any property (whether real, personal, or mixed and whether tangible or
intangible) used in or pertaining to the Company’s business, and to FMB’s
Knowledge, there is no tangible asset currently used by the Company which the
Company does not own or lease. Neither FMB nor any Affiliate of FMB
(other than the Company) is, or since the first day of the next to last
completed fiscal year of the Company has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person
that has (i) had business dealings or a material financial interest in any
transaction with the Company (other than business dealings or transactions
conducted in the ordinary course of business with the Company at substantially
prevailing market prices and on substantially prevailing market terms), or
(ii) engaged in competition with the Company with respect to any line of
the products or services of the Company in any market presently served by the
Company. Except as Disclosed on Schedule 3.1(w),
neither FMB nor any Affiliate of FMB (other than the Company) is a party to any
Commitment with, or has any claim or right against, the
Company.
28
(x) Leases. All real and personal
property leases and subleases to which the Company or any Subsidiary is a party
are listed on Schedule 3.1(x). FMB
has delivered to JV Corp correct and complete copies of such leases and
subleases (including any amendments thereto). With respect to each
such lease or sublease: (i) to FMB’s Knowledge, there are no
disputes, oral agreements or forbearance programs in effect as to the lease or
sublease; (ii) neither the Company nor any Subsidiary has assigned,
transferred, conveyed, mortgaged or encumbered any interest in the leasehold or
subleasehold; (iii) to FMB’s Knowledge, all facilities leased or subleased
thereunder have received all material approvals of Governmental Authorities
(including licenses and permits) required in connection with the operation
thereof and operation of the Company’s (or a Subsidiary’s) business therein; and
(iv) all facilities leased or subleased thereunder have been operated and
maintained in all material respects in accordance with applicable Environmental
Laws and Other Laws.
(y) Reports; Regulatory
Matters.
(1) Except
as Disclosed on Schedule 3.1(y)(1),
each of the Company and the Subsidiaries has timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that it was required by applicable Laws to file since
January 1, 2006 with any Governmental Authority, and has paid all fees and
assessments due and payable in connection therewith. Except for
normal examinations conducted by any Governmental Authority in the ordinary
course of the business of the Company and the Subsidiaries, no Governmental
Authority has initiated since January 1, 2006 any proceeding, enforcement action
or, to FMB’s Knowledge, investigation into the business, disclosures or
operations of the Company or any Subsidiary except as Disclosed on Schedule 3.1(y)(1). Except
as Disclosed on Schedule 3.1(y)(1),
since January 1, 2006, no Governmental Authority has resolved any proceeding,
enforcement action or, to FMB’s Knowledge, investigation into the business,
disclosures or operations of the Company or any Subsidiary. Except as
Disclosed on Schedule 3.1(y)(1),
there is no unresolved violation, criticism, comment or exception by any
Governmental Authority with respect to any report or statement relating to any
examinations or inspections of the Company or and Subsidiary. Except
as Disclosed on Schedule 3.1(y)(1),
since January 1, 2006, there has been no formal or informal inquiries by, or
disagreements or disputes with, any Governmental Authority with respect to the
business, operations, policies or procedures of the Company or any Subsidiary
(other than normal examinations conducted by a Governmental Authority in the
ordinary course of the business of the Company or any Subsidiary).
(2) Except
as Disclosed on Schedule 3.1(y)(2),
none of the Company and the Subsidiaries is subject to any cease-and-desist or
other order or enforcement action issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or has been ordered to pay any civil money penalty by, or has
been since January 1, 2006 a recipient of any supervisory letter from, or since
January 1, 2006 has adopted any policies, procedures or board resolutions at the
request or suggestion of, any Governmental Authority (each item in this
sentence, a “Regulatory Agreement”), nor has the Company or any Subsidiary been
advised since January 1, 2006 by any Governmental Authority that it is
considering issuing, initiating, ordering or requesting any such Regulatory
Agreement.
29
(z) Risk Management
Instruments. All Derivative Transactions entered into for the
account of the Company or any Subsidiary were entered into in the ordinary
course of business consistent with past practice and in accordance with prudent
practice and applicable Laws and in accordance with the investment, securities,
commodities, risk management and other policies, practices and procedures
employed by the Company and the Subsidiaries, and with counterparties believed
at the time to be financially responsible and able to understand (either alone
or in consultation with their advisers) and to bear the risks of such Derivative
Transactions. All of such Derivative Transactions are legal, valid
and binding obligations of the Company or one of the Subsidiaries enforceable
against it in accordance with their terms (except as 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), and are in full force and effect. The Company or one of the
Subsidiaries, as applicable, has duly performed its obligations under the
Derivative Transactions to the extent that such obligations to perform have
accrued and, to FMB’s Knowledge, there are no breaches, violations or defaults
or allegations or assertions of such by any party thereunder.
(aa) Securitizations. None
of the Company and the Subsidiaries is party to any agreement pursuant to which
it has securitized any of its assets.
(bb) Disclosure. No representation or
warranty by FMB contained in this Agreement, nor any document, exhibit,
Schedule, or certificate furnished to JV Corp by or for FMB pursuant to
this Agreement, contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained in such
representation, warranty, document, exhibit, Schedule or certificate in light of
the circumstances under which it was made, not misleading.
(cc) Investment
Intent. FMB is acquiring the shares of JV Corp Common
Stock payable as the Exchange Stock solely for investment, solely for FMB’s own
account, not for the account of any other Person, and not for distribution,
assignment or resale to others. FMB acknowledges that (i) such shares
have not been, and will not be, registered under the Securities Act of 1933, as
amended, or any state securities laws, (ii) there is no public market for
such shares and there can be no assurance that a public market shall develop,
and (iii) it must bear the economic risk of its investment in such shares
for an indefinite period of time. As of the Closing, FMB will be an
“accredited investor” within the meaning of the Securities and Exchange
Commission Rule 501 of Regulation D of the Securities Act of 1933, as presently
in effect.
Section 3.2. Representations
and Warranties of JV Corp. JV Corp
makes the following representations and warranties to FMB and Holdco, as of the
date hereof and as of the Closing (except to the extent that a representation
and warranty expressly speaks to a specified earlier date):
(a) Organization and
Qualification of JV Corp. JV Corp is a corporation
duly incorporated, legally existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority, corporate and
otherwise, to own, operate and lease its properties and assets and to conduct
its business as it is now being conducted. JV Corp is duly
qualified to transact business as a foreign corporation and is in good standing
under the laws of every state or jurisdiction in which the nature of its
activities or of its properties owned, leased or operated makes such
qualification necessary and in which the failure to be so qualified could
reasonably be expected to have a Material Adverse Effect on
JV Corp. JV Corp has been incorporated solely for the
purpose of engaging in the Transactions and, since the date of its
incorporation, JV Corp has not carried on any business or conducted any
operations other than the execution of this Agreement and other documents,
instruments, and certificates contemplated hereby, the performance of its
obligations hereunder and thereunder and matters ancillary hereto and
thereto.
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(b) Capitalization. The
authorized capital stock of JV Corp consists of 1,000 shares of common
stock, par value $0.001 per share (the “JV Corp Common
Stock”). Upon issuance of the Exchange Stock, the Exchange Stock
shall represent five percent (5%) of the issued and outstanding JV Corp
Common Stock. Except with respect to the issuance of shares of the
Holdco Exchange Stock to Holdco and the Exchange Stock to FMB, there are no
outstanding or authorized subscriptions, options, warrants, calls, rights,
commitments or any other agreements or arrangements of any character obligating
JV Corp to issue any shares of JV Corp Common Stock or other equity
securities, or evidencing the right to subscribe for any JV Corp Common
Stock or other equity securities of JV Corp. The Exchange Stock,
when issued and exchanged for in accordance with the terms hereof, will
represent validly authorized, duly issued and fully paid and nonassessable
shares of JV Corp Common Stock.
(c) Financial
Capability. JV Corp has the financial means to pay the
Exchange Amount, perform its other obligations hereunder and consummate all
other Transactions, as and when contemplated herein.
(d) Authority. This
Agreement has been duly executed and delivered by JV Corp and (assuming the
due authorization, execution and delivery by FMB, the Company and Holdco)
constitutes the legal, valid and binding obligation of JV Corp, enforceable
against JV Corp in accordance with its 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.
(e) No
Violation. Except as disclosed on Schedule 3.2(e),
the execution and delivery of this Agreement by JV Corp, and the
consummation of the Transactions by JV Corp, will not (i) violate any
federal, state or local laws, ordinances, rules, regulations, codes or
administrative directives or violate any existing term or provision of any
order, writ, judgment, injunction or decree of any court, governmental
department, commission, board, agency or instrumentality applicable to
JV Corp or its properties or assets; (ii) violate, result in any
breach of, or constitute a default (or give rise to any right of termination,
cancellation or acceleration) under any contract, agreement, indenture, mortgage
or deed of trust, security agreement, license, instrument or obligation to which
JV Corp is a party or by which JV Corp is bound; (iii) require
any consent, approval, filing or notice of or with any Person; or
(iv) result in the creation or imposition of any Encumbrance upon
JV Corp or any of its properties or assets.
(f) Litigation. There
is no action, suit, investigation or proceeding pending against, or to the
Knowledge of JV Corp, threatened against, JV Corp before any
arbitrator or Governmental Authority which in any manner challenges or seeks to
prevent, alter or materially delay the Transactions or which could have a
Material Adverse Effect on JV Corp.
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(g) No Reliance on Forecasts,
Etc. JV Corp’s decision to execute, deliver and perform
under this Agreement was not based on, and JV Corp hereby expressly
disclaims any reliance on, any estimates, forecasts, and/or projections relating
in any manner to the Company and the Subsidiaries that were prepared or provided
by or on behalf of FMB, the Company or the Subsidiaries.
(h) Consents and
Approvals. Except as disclosed in Schedule 3.2(h), no
consent, approval, or authorization of or designation, declaration, or filing
with any Governmental Authority or other Person is required on the part of
JV Corp in connection with the execution or delivery of this Agreement or
the consummation of the Transactions.
(i)
Investment
Intent. JV Corp is acquiring the Interests solely for
investment, solely for JV Corp’s own account, not for the account of any
other Person, and not for distribution, assignment or resale to
others. JV Corp acknowledges that (i) the Interests have
not been, and will not be, registered under the Securities Act of 1933, as
amended, or any state securities laws, (ii) there is no public market for
the Interests and there can be no assurance that a public market shall develop,
and (iii) it must bear the economic risk of its investment in the Interests
for an indefinite period of time. As of the Closing, JV Corp
will be an “accredited investor” within the meaning of the Securities and
Exchange Commission Rule 501 of Regulation D of the Securities Act of 1933, as
presently in effect.
(j)
Brokers. JV Corp
has not employed any broker, finder or intermediary or incurred any Liability
for any brokerage fees, commissions or finders’ fees in connection with this
Agreement or the Transactions, and no action by JV Corp will cause or
support any claim to be asserted against JV Corp by any broker, finder or
intermediary in connection with the Agreement or the Transactions.
(k) Disclosure. No
representation or warranty by JV Corp contained in this Agreement, nor any
document, exhibit, Schedule, or certificate furnished to FMB by or for
JV Corp pursuant to this Agreement, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained in such representation, warranty, document, exhibit, Schedule or
certificate in light of the circumstances under which it was made, not
misleading.
Section 3.3. Representations
and Warranties of Holdco. Holdco
makes the following representations and warranties to JV Corp, as of the
date hereof and as of the Closing (except to the extent that a representation
and warranty expressly speaks to a specified earlier date):
(a) Organization and
Qualification of Holdco. Holdco is a limited liability company
duly formed, validly existing and in good standing under the laws of the State
of Delaware, and has all requisite power and authority to own, operate and lease
its properties and assets and to conduct its business as it is now being
conducted. Holdco is duly qualified to transact business as a foreign
limited liability company and is in good standing under the laws of every state
or jurisdiction in which the nature of its activities or of its properties
owned, leased or operated makes such qualification necessary and in which the
failure to be so qualified could reasonably be expected to have a Material
Adverse Effect on Holdco. Holdco has been formed solely
for the purpose of engaging in the Transactions and, since the date of its
formation, Holdco has not carried on any business or conducted any operations
other than the execution of this Agreement and other documents, instruments, and
certificates contemplated hereby, the performance of its obligations hereunder
and thereunder and matters ancillary hereto and thereto.
32
(b) Authority. This
Agreement has been duly executed and delivered by Holdco and (assuming the due
authorization, execution and delivery by FMB, the Company and JV Corp)
constitutes the legal, valid and binding obligation of Holdco, enforceable
against Holdco in accordance with its 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.
(c) Investment
Intent. Holdco is acquiring the shares of JV Corp Common
Stock payable as the Holdco Exchange Stock solely for investment, solely for
Holdco’s own account, not for the account of any other Person, and not for
distribution, assignment or resale to others. Holdco acknowledges
that (i) such shares have not been, and will not be, registered under the
Securities Act of 1933, as amended, or any state securities laws,
(ii) there is no public market for such shares and there can be no
assurance that a public market shall develop, and (iii) it must bear the
economic risk of its investment in such shares for an indefinite period of
time. As of the Closing, Holdco will be an “accredited investor”
within the meaning of the Securities and Exchange Commission Rule 501 of
Regulation D of the Securities Act of 1933, as presently in effect.
ARTICLE
IV
CONDITIONS
PRECEDENT
Section 4.1. Conditions
Precedent to Obligation of JV Corp and Holdco. The obligation of
JV Corp and Holdco to consummate the Transactions is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
any or all of which may be waived in whole or in part by JV Corp or Holdco,
to the extent permitted by applicable Law:
(a) Accuracy of Representations
and Warranties. All of the representations and warranties of
FMB and the Company contained in this Agreement shall be true and correct in all
material respects when made and on the Closing Date as if made on and as of such
date (except to the extent they relate to a particular date, in which case they
shall remain true and correct as of such date).
(b) Performance of
Agreements. FMB and the Company shall have performed or
complied with, in all material respects, all covenants, obligations and
agreements contained in this Agreement to be performed or complied with by them
prior to or at the Closing, and all other agreements to be executed and
delivered by the Company or FMB hereby shall have been executed and
delivered.
(c) Certificate of
Officer. JV Corp shall have received a certificate of
FMB, signed by an appropriate officer of FMB and dated as of the Closing Date,
to the effect that the conditions specified in paragraphs (a) and (b) above have
been fulfilled.
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(d) Receipt of
Consents. JV Corp, FMB and the Company shall have
obtained and maintained such licenses, permits, consents, approvals,
authorizations, qualifications and orders of all Persons as are necessary for
consummation of the Transactions and the continued operation of the Business
from and after the Closing in the same manner as operated prior to Closing,
including, without limitation, required lending licenses, consents of all
lenders under the Company’s warehouse lines of credit, consents of all the
Company’s landlords, consents of all the Company’s computer hardware and
software vendors, and consents required under the Commitments.
(e) Prohibited Actions.
After the date of
this Agreement, except as expressly provided for in this Agreement or with
JV Corp’s consent, neither the Company nor any Subsidiary shall
have:
(1) issued
any membership interests or granted any option or issued any warrant to purchase
or subscribe for membership interests or issue any securities convertible into
membership interests;
(2) incurred
any obligation or Liability, except Liabilities incurred and obligations entered
into in the ordinary course of business consistent with past
practice;
(3) mortgaged,
pledged, or otherwise subjected to any Encumbrance any of its assets or
properties;
(4) sold,
assigned, distributed or transferred any of its assets except in the normal
course of business consistent with past practice;
(5) been
affected by any change in method of accounting (including Tax accounting), the
making, changing or revoking of any election with respect to Taxes, or the
entering into any agreement or arrangement with respect to Taxes;
(6) waived
any rights of material value;
(7) materially
modified, amended, altered or terminated any Commitment;
(8) taken
or permitted any act or omission constituting a material breach or default under
any Commitment;
(9) materially
altered the terms, status or funding condition of any Employee Benefit
Plan;
(10) distributed
or transferred any assets to FMB other than the Transferred Mortgage Loans and
the marks “Mariner Finance” and “Mariner Finance and Design”, pursuant,
respectively, to Trademark Registration Numbers 3,521,490 and 3,521,489;
or
(11) committed
or agreed to do any of the foregoing in the future.
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(f) Opinion of Counsel for
FMB. JV Corp shall have received an opinion of counsel to
FMB, dated as of the Closing Date, in the form reasonably acceptable to
JV Corp, addressing various matters other than those addressed in the Tax
Opinion.
(g) Adverse
Proceedings. No action or proceeding by or before any
Governmental Authority shall have been instituted or threatened by any Person
whatsoever which shall seek to restrain, prohibit or invalidate the Transactions
or which might materially affect the right of FMB to contribute and assign the
Interests, or affect the right of JV Corp to own the Interests or to own or
operate the business of the Company after the Closing.
(h) Update. FMB
shall have provided JV Corp with a true, correct and complete update, as of
the Closing Date, of all Schedules required by Section 3.1 of this
Agreement. None of the information contained in such updated
Schedules shall be materially adverse from the information contained in such
Schedules on the date hereof.
(i)
Closing
Deliveries. JV Corp shall have received at or prior to
the Closing such documents, instruments or certificates as JV Corp may
reasonably request in connection with the consummation of the Transactions,
including, without limitation:
(1) a
fully-executed assignment, in form and substance reasonably satisfactory to
JV Corp, effecting the transfer of the Interests to
JV Corp;
(2) certificates
as to the legal existence and good standing of the Company and each Subsidiary,
issued by such entities’ states of organization and each state where the Company
or any Subsidiary is qualified to do business;
(3) a
certified copy of the Articles of Incorporation of FMB and all amendments and
supplements thereto;
(4) a
copy of the Bylaws of FMB and all amendments and supplements
thereto;
(5) copies
of all consents, approvals, licenses and other authorizations required to be
obtained by FMB and the Company by this Agreement;
(6) fully-executed
employment agreements with Xxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxx and Xxxxxx X.
Xxxxxxxx, each in form and substance reasonably satisfactory to JV Corp and
the employee;
(7) a
fully-executed real property lease for the Company’s offices at 0000 Xxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000 (the “New Lease”), in form and substance
reasonably satisfactory to JV Corp;
(8) the
Escrow Agreement, executed by FMB, in form and substance reasonably satisfactory
to JV Corp;
35
(9) a
stockholders agreement among JV Corp, FMB and Holdco with respect to the
JV Corp Common Stock, which shall provide, among other things, for certain
restrictions on the transfer of JV Corp Common Stock, and which may provide,
among other things, for (i) the right for Holdco or an Affiliate of Holdco to
purchase all of FMB’s shares of JV Corp Common Stock for fair value upon a
Change in Control of FMB and (ii) the pledge of the JV Corp Common Stock
issued in the name of FMB to secure any indemnity obligations of FMB pursuant to
the provisions of Article VI hereof in excess of (A) the Escrow Funds (less
any amounts released to FMB) (the “Stockholders Agreement”) and (B) the set off
right described in the last paragraph of Section 6.4 of this
Agreement, executed by FMB, in form and substance reasonably satisfactory to
JV Corp;
(10) a
transition services agreement allowing for the continuation and separation of
computer systems and information technologies, and payroll services and
benefits, the transfer of certain phone numbers from FMB to the Company, and
certain other actions (the “Transition Services Agreement”) executed by FMB, in
form and substance reasonably satisfactory to JV Corp;
(11) an
agreement between the Company and First Mariner Bank with respect to the
employment or engagement of, and the provision of mortgage origination services
by, certain individuals specified therein, for a period of up to twelve (12)
months, for consideration of $60,000.00 per month (the “Mortgage Services
Agreement”) executed by First Mariner Bank, in form and substance reasonably
satisfactory to JV Corp;
(12) a
trademark license agreement executed by FMB, in form and substance reasonably
satisfactory to JV Corp, with respect to FMB’s marks “Mariner Finance” and
“Mariner Finance and Design”, pursuant, respectively, to Trademark Registration
Numbers 3,521,490 and 3,521,489, as more specifically described in such
trademark license agreement (the “Trademark License Agreement”);
(13) if
necessary, executed assignments transferring all right, title and interest to
any Intellectual Property owned or used by the Company or the Subsidiaries or
other proprietary rights as required by this Agreement, in form and substance
reasonably satisfactory to JV Corp; and
(14) a
copy of the Tax Opinion (as defined in Section 4.2(i)); provided, however, that, in
providing a copy of the Tax Opinion, FMB makes no express or implied
representation or warranty to any Party with respect to any matter set forth
therein.
(j) Changes. No
change shall have occurred in the business, results of operations, assets or
prospects of the Company or any Subsidiary that has had, or is likely to have, a
Material Adverse Effect on the Company or such Subsidiary,
respectively. Since the date of this Agreement, except as
JV Corp has otherwise consented in writing, each of the Company and the
Subsidiaries shall have conducted its business only in the ordinary course
consistent with past practice.
(k) Continuation of Xxxxx Fargo
Facility. The Company shall have been permitted to continue
and amend the Xxxxx Fargo Facility, on terms and in form and substance
reasonably acceptable to JV Corp, and the lender party thereto shall have
consented to the Transactions.
36
(l) Modification of FMB
Subdebt. At Closing, the note evidencing the FMB Subdebt shall
have been modified, in form and substance reasonably acceptable to JV Corp,
to reflect: (i) a maturity date of five (5) years from the Closing Date,
(ii) an interest rate payable on the unpaid principal balance of seven
percent (7%) per annum, (iii) the set off right described in the last
paragraph of Section 6.4 of this
Agreement and the integrated nature of such right and this Agreement,
(iv) the termination of the Master Loan Agreement dated July 18, 2006, by
and between FMB and the Company, (v) that the note may not be assigned by
the holder, other than to First Mariner Bank, without first offering
JV Corp or an Affiliate of JV Corp the right to purchase the note,
(vi) the right for JV Corp or an Affiliate of JV Corp to purchase the
note upon any Change in Control of the holder, and (vii) in the event of any
assignment of the note, the assignee shall acknowledge the terms of the note,
including without limitation, the set off right described in the last paragraph
of Section 6.4 of
this Agreement and the integrated nature of such right and this Agreement (the
“Modified
Note”).
(m) Transferred Mortgage
Loans. The Company and the Subsidiaries shall have sold and
assigned all of their right, title and interest in and to the Transferred
Mortgage Loans to FMB and/or its Affiliates for cash in an amount equal to the
sum of the outstanding principal plus accrued and unpaid interest on the
Transferred Mortgage Loans, and the documents governing such sale and assignment
shall be in form and substance reasonably acceptable to
JV Corp.
Section 4.2. Conditions
Precedent to Obligations of FMB. The
obligations of FMB to consummate the Transactions are subject to the
satisfaction, at or prior to the Closing Date, of each of the following
conditions, any or all of which may be waived in whole or in part by FMB, to the
extent permitted by applicable law:
(a) Accuracy of Representations
and Warranties. All of the representations and warranties of
JV Corp and Holdco contained in this Agreement shall be true and correct in
all material respects when made and on the Closing Date as if made on and as of
such date (except to the extent they relate to a particular date, in which case
they shall remain true and correct as of such date).
(b) Performance of
Agreements. JV Corp shall have performed or complied
with, in all material respects, all covenants, obligations and agreements
contained in this Agreement to be performed or complied with by it prior to or
at the Closing, and all other agreements to be executed and delivered by
JV Corp hereby shall have been executed and delivered.
(c) Officer’s
Certificate. FMB shall have
received a certificate of JV Corp, signed by an appropriate officer of
JV Corp and dated as of the Closing Date, to the effect that the conditions
specified in paragraphs (a) and (b) above have been fulfilled.
(d) Receipt of
Consents. JV Corp and the Company shall have obtained and
maintained such licenses, permits, consents, approvals, authorizations,
qualifications and orders of all Persons as are necessary for consummation of
the Transactions, including, without limitation, required lending licenses,
consents of all lenders under the Company’s warehouse lines of credit, consents
of all the Company’s landlords, consents of all the Company’s computer hardware
and software vendors, and consents required under the
Commitments.
37
(e) Modification of FMB
Subdebt. At Closing, the FMB Subdebt shall have been modified
as provided in Section 4.1(l) of this
Agreement.
(f) Termination of
Guarantees. JV Corp, FMB and the Company shall have taken
all actions necessary to ensure that FMB’s obligations under its Amended and
Restated Guaranty dated as of April 9, 2008 in favor of Xxxxx Fargo Preferred
Capital, Inc., as agent for certain lenders in connection with the Xxxxx Fargo
Facility, and under each other agreement or instrument set forth on Schedule 4.2(f)
hereto pursuant to which FMB has guaranteed the performance of any obligation of
the Company, shall be fully discharged, extinguished and terminated as of the
effective time of the Transactions; provided, however, that the foregoing
shall not require JV Corp or any of its Affiliates to provide replacement
guarantees in respect of any agreement or instrument other than the Xxxxx Fargo
Facility.
(g) Payment of JV Corp
Payments. JV Corp shall have paid at the Closing the
JV Corp Payments in accordance with Section 2.3(a) of this
Agreement.
(h) Opinion of Counsel to
JV Corp. FMB shall have received an opinion of counsel to
JV Corp with respect to existence, power and authority, and enforceability,
dated as of the Closing Date, in form reasonably acceptable to FMB.
(i) Opinion of Counsel Regarding
Tax Matters. FMB shall have received an opinion from Xxxxx
Xxxxxx LLP or other counsel reasonably acceptable to FMB, dated as of the
Closing Date, in the form reasonably acceptable to FMB and rendered in
accordance with Treasury Department Circular 230 (Rev. 4-2008) (and any
amendment thereto or replacement thereof), to the effect that it is more likely
than not that (i) the transfers of property and cash by each of FMB and
Holdco to JV Corp and the assumption by JV Corp of the liabilities of the
Company and the Subsidiaries contemplated by the Transactions will constitute a
transfer to a controlled corporation meeting the requirement of section 351(a)
of the Code, and (ii) except as provided in section 351(b) of the Code and
section 357(c) of the Code, no gain or loss will be recognized by FMB or Holdco
(the “Tax Opinion”). The issuance of the Tax Opinion shall be
conditioned upon the receipt by such counsel of representation letters from each
of the Parties, in each case, in form and substance reasonably satisfactory to
such counsel, upon which such counsel shall be entitled to rely. Each
such representation letter shall be dated on or before the date of the Tax
Opinion and shall not have been withdrawn or modified in any material
respect.
(j) Adverse
Proceedings. No order, injunction or decree issued by any
Governmental Authority of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Transactions shall be in
effect. No Law shall have been enacted, entered, promulgated or
enforced by any Governmental Authority which prohibits, restricts or makes
illegal the consummation of the Transactions.
(k) Update. JV
Corp shall have provided FMB with a true, correct and complete update, as of the
Closing Date, of all Schedules required by Section 3.2 of this
Agreement. None of the information contained in such updated
Schedules shall be materially adverse from the information contained in the
Schedules on the date hereof.
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(l) Closing
Deliveries. FMB shall have received at or prior to the Closing
such documents, instruments or certificates as FMB may reasonably request in
connection with the consummation of the Transactions, including, without
limitation:
(1) a
certificate issued by the Secretary of State of the State of Delaware as to the
legal existence and good standing of JV Corp in the State of
Delaware;
(2) a
certified copy of the Certificate of Incorporation of JV Corp and all amendments
and supplements thereto;
(3) a
copy of the Bylaws of JV Corp and all amendments and supplements
thereto;
(4) a
certified copy of the Certificate of Formation of Holdco and evidence of
Holdco’s authorization of the Transactions, and all amendments and supplements
thereto;
(5) the
New Lease, in form and substance reasonably satisfactory to FMB;
(6) the
Escrow Agreement, executed by JV Corp, in form and substance reasonably
satisfactory to FMB;
(7) the
Stockholders Agreement executed by JV Corp, in form and substance
reasonably satisfactory to FMB;
(8) the
Transition Services Agreement executed by JV Corp, in form and substance
reasonably satisfactory to FMB;
(9) the
Mortgage Services Agreement executed by the Company, in form and substance
reasonably satisfactory to FMB;
(10) the
Trademark License Agreement executed by the Company, in form and substance
reasonably satisfactory to FMB;
(11) copies
of the executed documents and instruments evidencing the Xxxxx Fargo
Facility;
(12) the
Modified Note executed by the Company and the Subsidiaries, in form and
substance reasonably satisfactory to FMB;
(13) copy
of the stock certificate evidencing the Exchange Stock, executed by officers of
JV Corp; and
39
(14) copies
of all consents, approvals, licenses and other authorizations required to be
obtained by JV Corp by this Agreement.
ARTICLE
V
OTHER
AGREEMENTS
Section 5.1. Tax
Matters.
(a) Transfer
Taxes. FMB shall file or cause to be filed, on a timely basis,
any Tax Returns required to be filed in connection with any sales, use,
transfer, recording, stamp, documentary, real estate transfer, registration and
other similar Taxes (“Transfer Taxes”) incurred on the contribution of the
Interests by FMB to JV Corp pursuant to Section 2.1(a), and FMB
and JV Corp shall each pay 50% of any such Transfer Taxes. For
the avoidance of doubt, any Transfer Taxes arising out of the sale and
assignment of the Transferred Mortgage Loans pursuant to Section 4.1(m) shall not
be considered incurred on the contribution of the Interests by FMB to
JV Corp and shall be paid solely by FMB.
(b) Preparation and Filing of
Pre-Closing Tax Returns. JV Corp shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns of the Company and the
Subsidiaries for all periods ending on or prior to the Closing Date which are
filed after the Closing Date. Except as otherwise required by Laws,
JV Corp shall prepare or cause to be prepared such Tax Returns in a manner
consistent with the past practices of the Company and the
Subsidiaries. JV Corp shall deliver a copy of each such Tax Return to
FMB at least fifteen (15) days prior to its filing for FMB’s review and
approval, such approval not to be unreasonably withheld, conditioned or
delayed. FMB shall pay to JV Corp the amount of the Taxes with
respect to such Tax Returns within five (5) days of demand by JV Corp for such
payment. Notwithstanding the preceding two sentences, if FMB does not
approve of any such Tax Return and does not pay to JV Corp the amount of the
Taxes with respect thereto, JV Corp shall be entitled to file the Tax Return
without FMB’s approval, but the amount of Taxes for which JV Corp is
entitled to payment or indemnification under this Agreement shall be limited to
the amount of Taxes that is ultimately mutually agreed to by FMB and JV Corp or,
if they are unable to reach agreement, the amount ultimately determined by an
accounting firm that is mutually selected by the parties, notwithstanding the
fact that the Tax Return filed by JV Corp reflects a different
amount.
(c) Preparation and Filing of
Straddle Tax Returns. JV Corp shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns of the Company and the
Subsidiaries for all periods beginning on or prior to the Closing Date that end
after the Closing Date. Except as otherwise required by Laws, JV Corp
shall prepare or cause to be prepared such Tax Returns in a manner consistent
with the past practices of the Company and the Subsidiaries. JV Corp
shall deliver a copy of each such Tax Return to FMB at least fifteen (15) days
prior to its filing for FMB’s review and approval, such approval not to be
unreasonably withheld, conditioned or delayed. FMB shall pay to JV
Corp the amount of the Taxes with respect to such Tax Returns equal to the
portion of such Taxes which relates to the portion of the taxable period ending
on the Closing Date (as determined pursuant to Section 5.1(e)) within
five (5) days of demand by JV Corp for such payment. Notwithstanding
the preceding two sentences, if FMB does not approve of any such Tax Return and
does not pay the amount of the Taxes pursuant to the preceding sentence, JV Corp
shall be entitled to file the Tax Return without FMB’s approval, but the amount
of Taxes for which JV Corp is entitled to payment or indemnification under this
Agreement shall be limited to the amount of Taxes that is ultimately mutually
agreed to by FMB and JV Corp or, if they are unable to reach agreement, the
amount ultimately determined by an accounting firm that is mutually selected by
the parties, notwithstanding the fact that the Tax Return filed by JV Corp
reflects a different amount.
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(d) Income Tax
Responsibility. FMB will include or have included in its
income Tax Returns for all taxable periods or portions thereof ending on or
before the Closing Date the income of the Company and the Subsidiaries and will
pay or cause to be paid all income Taxes attributable to such
income. For the avoidance of doubt, any income arising out of the
sale and assignment of the Transferred Mortgage Loans pursuant to Section 4.1(m) shall be
attributable to a taxable period or portion thereof ending on or before the
Closing Date.
(e) Allocation.
(1) If
the Company and the Subsidiaries are permitted but not required under applicable
Tax Laws to treat the Closing Date as the last day of a taxable period, then the
Parties shall treat that day as the last day of a taxable period.
(2) In
the case of any Taxes that are imposed on a periodic basis and are payable for a
taxable period that includes, but does not end on, the Closing Date, the portion
of such Tax which relates to the portion of such taxable period ending on the
Closing Date shall (i) in the case of any Taxes, other than Taxes based
upon or related to income, receipts or expenses (e.g., payroll Taxes), be deemed
to be the amount of such Tax for the entire taxable period multiplied by a
fraction the numerator of which is the number of days in the taxable period
ending on the Closing Date and the denominator of which is the number of days in
the entire taxable period, and (ii) in the ease of any Tax based upon or
related to income, receipts or expenses (e.g., payroll Taxes), be deemed equal
to the amount which would be payable if the relevant taxable period ended as of
the end of the Closing Date.
(f) Cooperation. JV Corp
and FMB shall, and shall each cause its Affiliates to, provide to the other such
cooperation and information, as and to the extent reasonably requested, in
connection with the filing of any Tax Return, determining Liability for Taxes or
in conducting any audit, litigation or other proceeding with respect to
Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings and other determinations by Tax authorities, and relevant records
concerning the ownership and Tax basis of property, which any such party may
possess.
(g) FIRPTA
Certificate. FMB shall deliver to JV Corp on the Closing
Date a duly completed and executed certification of non-foreign status pursuant
to Section 1.1445-2(b)(2) of the Treasury regulations.
(h) Tax
Status. None of FMB, the Company, the Subsidiaries or their
Affiliates will take or fail to take, or cause to be taken or fail to cause to
be taken, any action that could result in any of the Company or the Subsidiaries
being treated as other than disregarded entities for income Tax
purposes.
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(i) Contribution Transaction;
Election. The Parties shall (A) report the FMB
Contribution and the Holdco Contribution as a transfer effected pursuant to
Section 351 of the Code and shall not take any position inconsistent therewith
in any Tax Return or administrative or judicial proceeding relating to Taxes,
and (B) make the election set forth in Section 362(e)(2)(C) of the
Code (the “Section 362(e)(2)(C) Election”) in connection with such contributions
to reduce the Tax basis of the JV Corp Common Stock acquired by FMB (and
not the Tax basis of the assets of the Company and the Subsidiaries) in the time
and in the form and manner of certification set forth in the “Procedures”
section of Notice 2005-70, 2005-2 C.B. 694 (or any superseding
guidance).
(j) 351
Status. None of the Parties shall, nor shall they permit any
of their Affiliates to, take or cause to be taken any action that reasonably
could be expected to prevent the FMB Contribution and Holdco Contribution from
qualifying as exchanges under Section 351(a) of the Code. In the
context of a judicial or administrative proceeding relating to Taxes, the
Parties agree that so long as FMB and its Affiliates provide any Person who
challenges the position that the FMB Contribution and the Holdco Contribution
qualify as exchanges under Section 351(a) of the Code with a copy of the
Tax Opinion and a statement that the foregoing contributions satisfy the
statutory provisions of Section 351(a) and that FMB relied on the Tax
Opinion in taking such position, then FMB and its Affiliates shall not
(i) be considered to have breached the first sentence of this covenant in
such judicial or administrative proceeding or (ii) have any further
obligation to defend such challenge in the event it is maintained.
Section 5.2. Approvals. The
Parties shall use their reasonable best efforts, and cooperate with each other,
to promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions, amendments, filings and refilings, and to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Authorities which are
necessary or advisable to consummate the Transactions. Each of
JV Corp, FMB and the Company shall have the right to review in advance, and
to the extent practicable each will consult the other on, in each case subject
to applicable laws relating to the exchange of information, all the information
relating to JV Corp, FMB or the Company, as the case may be, and any of
their respective Affiliates, which appears in any filing made with, or written
materials submitted to, any Governmental Authority, in connection with the
Transactions. In exercising the foregoing right, each of the Parties
hereto shall act reasonably and as promptly as practicable. The
Parties hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all
Governmental Authorities necessary or advisable to consummate the Transactions
and each party will keep the other apprised of the status of matters relating to
completion of the Transactions. Each of JV Corp, FMB and the
Company shall, upon request, furnish each other with all information concerning
themselves, their Affiliates, directors, officers and shareholders and such
other matters as may be reasonably necessary or advisable in connection with any
other statement, filing, notice or application made by or on behalf of
JV Corp, FMB or the Company, or any of their respective Affiliates to any
Governmental Authority in connection with the Transactions. Each of
JV Corp, FMB and the Company shall promptly furnish each other with copies
of written communications received by it from any Governmental Authority in
respect of the Transactions.
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Section 5.3. Employee
Benefits.
(a) General. JV Corp
agrees that, immediately after the Closing, JV Corp shall cause the Company
and each of its Subsidiaries to continue the employment of all individuals
employed by the Company and its Subsidiaries on the Closing Date (which
employees, as of the date of this Agreement, are listed, categorized by position
and listed with years of service and base salary or hourly wage, as applicable
on Schedule
5.3(a) (the “Transferred Employees”). Except as provided in
Section 5.3(c) and
Section 5.3(e), on
and after Closing (1) Company and the Subsidiaries will cease to maintain
and/or be a participating employer in, and will have no Liability for, the
Employee Benefit Plans, including without limitation, the Severance Agreements,
and (2) Transferred Employees will be entitled to such employee benefits as
JV Corp in its discretion decides that Company will offer.
(b) 401(k) Plan
Benefits. No contributions will be made by or on behalf of
Transferred Employees to the First Mariner Bancorp 401(k) Plan on account of any
compensation earned after Closing. JV Corp shall cause the
Company, or a Subsidiary of the Company, to establish and maintain, or cause the
Company and its Subsidiaries to become participating employers in, a defined
contribution plan that is intended to be qualified under Section 401(a) of the
Code covering the Transferred Employees and is funded through a related trust
that is intended to be exempt under Section 501(a) of the Code (the “Company
Savings Plan”). The Company Savings Plan shall recognize service
under the First Mariner Bancorp 401(k) Plan as service under the Company Savings
Plan for eligibility and vesting purposes. JV Corp shall cause
the Company Savings Plan to accept the rollover of Transferred Employees’
accounts, including any outstanding loan balances in-kind, under the First
Mariner Bancorp 401(k) Plan. FMB shall cause First Mariner Bancorp
401(k) Plan to permit the rollover distribution of Transferred Employees’
accounts, including any outstanding loan balances in-kind, under the First
Mariner Bancorp 401(k) Plan to the Company Savings Plan. Nothing in
the preceding sentence will prevent the occurrence of a deemed distribution
under Code Section 72(p), or an event of default under applicable loan
documentation, for any loan under the First Mariner Bancorp 401(k) Plan if a
Transferred Employee does not timely apply for the loan’s rollover distribution
to the Company Savings Plan. The benefits to be provided by the
Company Savings Plan will be determined by JV Corp in its
discretion.
(c) Health
Insurance. If allowed by CareFirst Blue Cross Blue Shield and
to the extent the Company and its Subsidiaries do not sponsor their own health
insurance policies as of the Closing, Transferred Employees will remain covered
under the health insurance policies (including vision, dental and prescription
drug) of FMB that they were covered by before Closing, until the sooner of such
time as Company obtains its own health insurance policies or 180 days following
Closing. Company agrees to make reasonable best efforts to obtain its
own health insurance policies as soon as practicable after
Closing. Company intends to obtain policies that provide benefits
that are as similar as possible to the benefits provided before Closing, but
cannot guaranty that it will do so. Company will promptly reimburse
FMB for all premiums paid under FMB’s health insurance policies with respect to
Transferred Employees, for all periods from and after Closing (including a
prorated reimbursement for the premiums paid for the month of Closing), in
accordance with the terms of the Transition Services Agreement.
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(d) COBRA
Matters. FMB retains sole responsibility for providing COBRA
continuation coverage under ERISA Sections 601-608 with respect to any Person
who is a qualified beneficiary as, or on account of, an employee of Company or
the Subsidiaries and whose COBRA qualifying event occurs on or before the
Closing Date.
(e) Other
Insurance. To the extent not sponsored exclusively by the
Company and its Subsidiaries as of the Closing, in addition to the health
insurance plan addressed in Section 5.3(c),
Transferred Employees of Company and the Subsidiaries will remain covered under
any life and disability insurance policies of FMB that covered such employees on
the day before Closing (and under no other employee benefit plans of FMB), until
the soonest of such time as Company obtains its own applicable plan or policy,
FMB determines to no longer offer such a plan or policy, or 180 days following
Closing. Company agrees to make reasonable best efforts to adopt its
own employee benefit plans as soon as practicable after
Closing. Company intends to adopt other employee benefit plans that
provide benefits that are as similar as possible to the benefits provided before
Closing, but cannot guaranty that it will do so. Company will
promptly reimburse FMB for all expenses incurred under the life and disability
policies with respect to Transferred Employees of Company and its Subsidiaries,
for all periods from and after Closing.
(f) Communications with
Employees. JV Corp and FMB shall cooperate with one
another in making any required communications with the Transferred Employees
regarding any Employee Benefit Plans or any arrangements to be established or
maintained by the Company or any of its Subsidiaries as of, or after, the
Closing. Nothing in the preceding sentence requires FMB or the
Company to obtain the approval of JV Corp before making any communications
regarding any Employee Benefit Plans, to the extent such communications would be
made without regard to the Transactions. JV Corp and FMB shall
use their reasonable best efforts to take such other actions as may be required
in order to effectuate the purposes of this Section 5.3, and agree
to exchange data, records, and information as necessary to implement the mutual
undertakings set forth herein.
Section 5.4. Conduct
of the Business of the Company. The
Company shall, and the Company shall cause each of the Subsidiaries to,
(a) conduct the Business in the usual, regular and ordinary course
consistent with past practice and prudent business principles, (b) continue
to use the accounting methods that customarily have been followed by the Company
and the Subsidiaries, and (c) use its best efforts to maintain and preserve
intact for itself and for JV Corp its business organization, employees,
goodwill with customers and advantageous business relationships and retain the
services of its officers and key employees.
Section 5.5. Publicity. Except
as otherwise required by any Other Laws, neither JV Corp, the Company nor
FMB shall, or shall permit any of their respective Affiliates to, issue or cause
the publication of any press release or other public announcement with respect
to, or otherwise make any public statement (including any employee or customer
communication) concerning, the Transactions without the consent of the other
Party, which consent shall not be unreasonably withheld. In the event
such press release, public announcement, or public statement (including any
employee or customer communication) is required by any Other Law, the announcing
Party will give the other Party advance notice of such and provide a copy of the
proposed release, announcement or statement to the other
Party. Without limiting the scope of the foregoing, JV Corp
acknowledges that Other Laws will require FMB to file a Current Report on Form
8-K with the Securities and Exchange Commission within four (4) Business Days of
each of (i) the Parties’ execution of this Agreement and (ii) the consummation
of the Transactions to disclose the occurrence of such events and certain other
information required by Form 8-K, and that FMB’s failure to timely file such
Current Reports could result in administrative sanctions against or other
adverse consequences to FMB.
44
Section 5.6. Non-Solicitation and
Non-Competition.
(a) For
a period of five (5) years after the Closing Date, FMB shall not do any of the
following, and shall cause its Affiliates (whether existing on the date hereof
or at any time during such period) not to do any of the following, directly or
indirectly, without the prior written consent of JV Corp:
(1) engage
or participate in any business anywhere in the world that competes with the
businesses conducted or intended to be conducted by the Company or the
Subsidiaries prior to the Closing Date (a “Competing Business”); provided however, that the
foregoing shall not be deemed to restrict (i) FMB or any of its Affiliates
from engaging or participating in any activity in which FMB or one of its
Affiliates, other than First Mariner Bank, the Company and the Subsidiaries, is
engaged as of the date hereof, or (ii) First Mariner Bank from directly
engaging or participating in any activity in which it may lawfully
engage;
(2) become
interested in (as owner, stockholder, partner, co-venturer, director, officer,
employee, associate, agent, lender, creditor, adviser or consultant) or
otherwise be connected in any manner with any Person engaged in a Competing
Business; provided, however, that notwithstanding the foregoing, FMB may hold up
to five percent (5%) of the outstanding publicly traded securities of any
company;
(3) influence
or attempt to influence any licensor, licensee, contractor, agent, strategic
partner, distributor, or other Person to terminate or modify any agreement,
arrangement or course of dealing with any of the Company, the Subsidiaries,
JV Corp, or any of their respective Affiliates; or
(4) employ,
engage as an independent contractor, or solicit for employment or for engagement
as an independent contractor any Person who was employed by, or any Person who
was engaged as an independent contractor by, any of the Company, the
Subsidiaries, or JV Corp within the twenty-four (24) month period
immediately preceding any employment, engagement, or solicitation by FMB or any
Affiliate of FMB; urge any such Person to reduce his or her employment with or
provision of services to any of the Company, the Subsidiaries, or JV Corp;
or arrange to have any other Person employ or engage such Person; provided, however, that a
general solicitation through a public medium not specifically directed toward
any Person shall not be considered a breach of paragraphs (a)(3) or (a)(4) of this Section 5.6; and provided, further,
that nothing contained in this Section 5.6(a) shall be
deemed to impair the rights of FMB and its Affiliates with respect to the
leasing of the Company’s mortgage originator employees pursuant to that certain
Agreement by and between First Mariner Bank and the Company dated as of
March 1, 2009 or the Mortgage Services Agreement, as each may be modified
or replaced from time to time.
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(b) For
a period of five (5) years after the Closing Date, JV Corp, the Company and
the Subsidiaries shall not do any of the following, and shall cause their
respective Affiliates not to do any of the following, directly or indirectly,
without the prior written consent of FMB:
(1) influence
or attempt to influence any licensor, licensee, contractor, agent, strategic
partner, distributor, or other Person to terminate or modify any agreement,
arrangement or course of dealing with FMB or any Person who is an Affiliate of
FMB after the Closing; or
(2) employ,
engage as an independent contractor, or solicit for employment or for engagement
as an independent contractor any Person who was employed by, or any Person who
was engaged as an independent contractor by, FMB or any Person who is an
Affiliate of FMB after the Closing; urge any such Person to reduce his or her
employment with or provision of services to FMB or any such Affiliate; or
arrange to have any other Person employ or engage such Person; provided, however, that a
general solicitation through a public medium not specifically directed toward
any Person shall not be considered a breach of paragraphs (b)(1) or (b)(2) of this Section 5.6; and provided, further, that
nothing contained in this Section 5.6(b) shall be
deemed to prohibit the Company or any of the Subsidiaries from continuing the
employment or engagement of any Person who is an employee or consultant of the
Company or the Subsidiaries as of Closing but who is leased to FMB and/or one of
its Affiliates pursuant to that certain Agreement by and between First Mariner
Bank and the Company dated as of March 1, 2009 or the Mortgage Services
Agreement, as each may be modified or replaced from time to time, upon the
termination of the lease of such Person and/or the termination of either such
agreement.
(c) FMB,
on the one hand, and JV Corp, Company and the Subsidiaries, on the other
hand, acknowledge that the restrictions on their activities imposed by this
Section 5.6
constitute a material inducement to the consummation of the Transactions, and
further acknowledge, stipulate and agree that a breach by them of any of the
obligations and agreements set forth in this Section 5.6 will result in
irreparable harm and continuing damage to the other Party for which there will
be no adequate remedy at law and further agrees that in the event of any breach
of said obligations and agreements, the non-breaching Party and its successors
and assigns will be entitled to injunctive relief and to such other relief as is
proper under the circumstances, including attorney’s fees and
costs.
(d) Whenever
possible, each provision and term of this Section 5.6 shall be
interpreted in a manner to be effective and valid but if any provision or term
of this Section 5.6 is held to
be prohibited or invalid, then such provision or term will be ineffective only
to the extent of such prohibition or invalidity, without invalidating or
affecting in any manner whatsoever the remainder of such provision or term or
the remaining provisions or terms of this Section 5.6. If
any of the covenants set forth in this Section 5.6 are held to
be unreasonable, arbitrary or against public policy, such covenants will be
considered divisible with respect to scope, time and geographic area, and in
such lesser scope, time and geographic area, will be effective, binding and
enforceable against the Parties and their Affiliates.
46
Section 5.7. Further
Assurances. From
time to time after the Closing, without additional consideration, each Party
hereto will (or, if appropriate, cause its Affiliates to) execute and deliver
such further instruments and take such other action as may be necessary or
reasonably requested by any other Party or otherwise required to make effective
the Transactions and to provide the such other Party with the intended benefits
of this Agreement.
Section 5.8. Post-Closing
Access to Information. For
a period of five (5) years following the Closing Date, JV Corp and the
Company shall permit FMB reasonable access, at reasonable times and in a manner
so as not to unreasonably interfere with the normal operation of the Company’s
businesses, to any books and records of the Company and the Subsidiaries,
relating to the pre-Closing business of the Company and the Subsidiaries, as may
reasonably be required by FMB in connection with any regulatory, Tax, or similar
filings that may be required to be made by FMB after Closing, or for FMB to
respond to any proper request for information from any Governmental Authority in
connection with an examination, audit, investigation, or similar proceeding, or
in connection with any third party action, suit, or claim against
FMB.
ARTICLE
VI
SURVIVAL
OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
Section 6.1. Survival
of Representations, Warranties and Covenants. Notwithstanding
any investigation by any Party or any of its Representatives, the
representations and warranties of the Company, FMB and JV Corp shall
survive the Closing for a period of eighteen (18) months thereafter (the
“General Survival Period”); provided however, that the
representations and warranties set forth in (i) Section 3.1(a), Section 3.1(b), Section 3.1(c), Section 3.1(g), Section 3.1(p),
Section 3.1(q), Section 3.1(r), Section 3.1(t), Section 3.2(a),
Section 3.2(b) and
Section 3.2(d)
shall survive until the date that is thirty (30) days following the date that
the applicable statute of limitations (including extensions) expires (each such
survival period, including the General Survival Period, being a “Survival
Period”). Any claim by a Party based upon any such representation or
warranty shall be of no further force and effect after the expiration of the
applicable Survival Period, except to the extent that a Party has asserted a
claim in accordance with this Article VI for breach of any
such representation or warranty prior to the expiration of such Survival Period,
in which event any representation or warranty to which such claim relates shall
survive with respect to such claim until such claim is resolved as provided in
this Article
VI. All covenants and agreements of the Parties shall survive
the Closing until performed in accordance with their terms (each such survival
period, being a “Covenant Period”).
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Section 6.2. Indemnification
by FMB. Subject
to Section 6.5
hereof, during the applicable Survival Period and the applicable Covenant
Period, FMB shall (on behalf of itself and on behalf of the Company and the
Subsidiaries prior to the Closing) indemnify and hold JV Corp and its
Affiliates and their respective directors, officers, managers, members,
partners, stockholders, employees, agents and representatives (collectively, the
“JV Corp Indemnitees”) harmless from and against (a) all claims,
costs, expenses (including reasonable attorney’s fees), Liabilities,
obligations, losses (including, without limitation, any losses arising by reason
of a loss or reduction of Tax basis), damages, actions, suits and proceedings of
any nature (“Losses”) that any of JV Corp 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 FMB or the Company;
(b) any Losses with respect to Taxes imposed on or relating to the Company
or any Subsidiary or their assets, properties or business with respect to any
taxable period or portion thereof ending on or before the Closing Date;
(c) any Losses with respect to Taxes imposed on or relating to another
Person for which the Company or any Subsidiary has Liability under Law or
regulation by reason of the relationship of the Company or any Subsidiary with
such other Person on or before the Closing Date; (d) any Losses with
respect to Taxes imposed on or relating to the Company or any Subsidiary as
transferee, successor, by contract or otherwise to the extent the Taxes or
events giving rise to the Taxes are with respect to any taxable period or
portion thereof ending on or before the Closing Date; and (e) any Losses
under any Employee Benefit Plans, including without limitation, the Severance
Agreements, but excluding Losses relating to contributions, benefit payments or
expenses of administration of health, life and disability insurance described in
Section 5.3(c) and
Section 5.3(e) for
periods following the Closing for any individual who is or becomes an employee
of the Company and/or the Subsidiaries on or after the Closing Date.
Section 6.3. Indemnification
by JV Corp. Subject
to Section 6.5
hereof, during the applicable Survival Period and the applicable Covenant
Period, JV Corp shall indemnify and hold FMB and its Affiliates and their
respective directors, officers, managers, members, partners, stockholders,
employees, agents and representatives (collectively, the “FMB Indemnitees”)
harmless from and against all Losses that any of FMB 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
JV Corp.
Section 6.4. Assertion
of Indemnification Claim. Subject
to Section 6.5,
any of the FMB Indemnitees or any of the JV Corp Indemnitees under Section 6.2 or Section 6.3, as the case may
be (an “Indemnified Party”), shall give timely notice (a “Claim Notice”) to the
Party from whom such indemnification is sought (each, an “Indemnifying Party”)
after the Indemnified Party has actual knowledge of any claim as to which
indemnification may be sought (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, including, without limitation, any audit by any Governmental
Authority with respect to Taxes, 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.
48
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 (a “Claim Response”) within
twenty 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 Losses as to which the Indemnified
Party is seeking indemnification.
The Parties acknowledge and agree that
JV Corp shall have the right to set off any Loss with respect to which any
JV Corp Indemnitee has a right to indemnification hereunder against any
obligations of JV Corp under the Modified Note or, if pledged pursuant to
the Stockholders Agreement, to exercise its rights with respect to the
JV Corp Common Stock to satisfy any Loss with respect to which any
JV Corp Indemnitee has a right to indemnification hereunder, and such
rights shall in no way limit any other right or remedy available to JV Corp
under this Agreement, at law or in equity, provided however, that
(i) JV Corp shall not set off against the Modified Note until the
Escrow Funds held by the Escrow Agent (calculated after deduction for amounts
claimed with respect to then pending or unresolved matters) have been exhausted
or disbursed to FMB in accordance with this Agreement and the Escrow Agreement,
and (ii) JV Corp shall not exercise any rights with respect to
the JV Corp Common Stock (if pledged pursuant to the Stockholders
Agreement) until its set off rights against the Modified Note have been
exhausted. Other than the right to set off against the balance due
under the Modified Note, no JV Corp Indemnitee shall have any recourse
against the holder of the Modified Note simply by virtue of the fact that such
holder holds the Modified Note.
Section 6.5. Limitation
of Liability. Notwithstanding
anything to the contrary contained in this Article VI:
(a) Subject
to paragraph (d) of
this Section 6.5, no
Indemnifying Party shall be required to indemnify an Indemnified Party with
respect to any Claim unless and until the aggregate amount of all Claims for
which an Indemnified Party would otherwise be entitled to seek indemnification
hereunder exceeds 0.40% of the Initial Exchange Amount (the “Basket”); provided, however, that,
subject to paragraphs
(b) and (c) of
this Section, once such threshold is exceeded, the Indemnifying Party shall be
liable for the entire amount of such Claims.
(b) Subject
to paragraph (d) of
this Section 6.5, FMB
shall not be liable for indemnification hereunder for any Claims made or filed
against or incurred by JV Corp Indemnitees that, when added to all such
Claims for which indemnification has already been made by FMB, exceed fifty
percent (50%) of the Initial Exchange Amount in the aggregate (the
“Cap”).
49
(c) Subject
to paragraph (d) of
this Section 6.5,
JV Corp shall not be liable for indemnification hereunder for any
Claims made or filed against or incurred by FMB Indemnitees that, when added to
all such Claims for which indemnification has already been made by JV Corp,
exceed fifty percent (50%) of the Exchange Amount in the aggregate.
(d) Notwithstanding
the foregoing, any Losses arising out of, resulting from, or in connection with
(i) any misrepresentation or breach of any representation or warranty of
Section 3.1(a),
Section 3.1(b),
Section 3.1(c),
Section 3.1(g), Section
3.1(p), Section 3.1(q), Section 3.1(r), Section 3.1(t),
Section 3.2(a), Section 3.2(b) or Section 3.2(d), or
(ii) any breach of a covenant or agreement, including any covenant or
agreement relating to Taxes or the indemnification provided for in Section 6.2(b), Section 6.2(c), Section 6.2(d), or Section 6.2(e) shall not
be subject to the Basket or Cap.
Section 6.6. Exclusive
Remedy. Notwithstanding
anything to the contrary contained in this Agreement and except for claims
involving fraud:
(a) JV Corp’s
rights to indemnification under Article VI shall constitute
JV Corp’s exclusive remedy for any breach of, or misrepresentation in, any
warranty or representation of FMB or the Company; and
(b) FMB’s
rights to indemnification under Article VI shall constitute
FMB’s exclusive remedy for any breach of, or misrepresentation in, any warranty
or representation of JV Corp.
Section 6.7. Liability
Arising Post-Closing. JV Corp
and the Company, at all times on and after the Closing Date, shall, jointly and
severally, defend, indemnify and hold harmless FMB, its Affiliates and their
respective directors, officers, employees, agents and representatives from and
against all demands, suits, claims, actions or causes of action, assessments,
losses, damages, Liabilities, costs, judgments and expenses, including, without
limitation, interest, penalties, reasonable attorneys’ fees, disbursements and
expenses, and reasonable consultants’ fees, disbursements and expenses, imposed
on, asserted against or incurred by FMB based upon, arising out of, or resulting
from, directly or indirectly, the ownership of the Interests and the operation
of the Company and the Subsidiaries after the Closing Date (except to the extent
based upon, arising out of, or resulting from FMB’s ownership or sale of
JV Corp Common Stock); provided, however, that for
the avoidance of doubt, this Section 6.7 shall not
apply to, and shall not require JV Corp or the Company to indemnify or hold
harmless FMB, its Affiliates or their respective directors, officers, employees,
agents and representatives for, any Losses addressed in clauses (c) or (d) of Section 6.2 or addressed
in clause (a) of
Section 6.2 by
reason of a breach by FMB of its covenants set forth in Section 5.1(i). The
obligations of JV Corp and the Company imposed pursuant to this Section 6.7 are
independent of, and are not subject to any limitation contained in, Section 6.1, Section 6.3, Section 6.5 or Section 6.6 of this
Agreement.
50
ARTICLE
VII
TERMINATION
Section 7.1. Termination. Notwithstanding
any other provision of this Agreement, this Agreement may be terminated and the
Transactions contemplated hereby abandoned at any time prior to the Closing
Date:
(a) By
the mutual consent of FMB and JV Corp;
(b) By
JV Corp or FMB (provided that the Party seeking termination is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein), in the event of either: (i) a breach by the
other Party of any representation or warranty contained herein, which breach
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching Party of such breach; or (ii) a breach by the other
Party of any of the covenants or agreements contained herein, which breach
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching Party of such breach, provided that such breach (whether
under (i) or (ii)) would be reasonably likely, individually or in the aggregate
with other breaches, to result in a Material Adverse Effect on a
Party;
(c) At
any time after December 15, 2009 by either JV Corp or FMB in writing if the
Closing has not occurred by the close of business on such date, and the Party
giving the notice is not in breach of any of its representations, warranties,
covenants or undertakings herein.
Section 7.2. Effect of
Termination. Article I and Sections 2.6(b), 5.5, 7.2, 7.3,
8.1 through 8.5,
inclusive, 8.7 and
8.9 shall survive the
termination of this Agreement.
Section 7.3. Payment
of Expenses Upon Termination. Notwithstanding
Section 8.1 of this
Agreement, but subject to Article VI of this Agreement,
should the Transactions not be consummated because of a Party’s breach of this
Agreement, in addition to such damages as may be recoverable in law or equity,
the other Party shall be entitled to recover from the breaching party upon
demand, itemization, and documentation, its reasonable outside legal,
accounting, consulting, and other out-of-pocket expenses.
ARTICLE
VIII
MISCELLANEOUS
Section 8.1. Fees and
Expenses. Whether
or not the Transactions are consummated, but subject to Section 7.3, each of the
Parties shall pay its own fees and expenses incident to the negotiation,
preparation and execution of this Agreement, including attorneys’ and
accountants’ fees. FMB will pay all amounts payable to any finder,
investment banker or broker retained by FMB or the Company in connection with
this Agreement and the Transactions, and JV Corp will pay all amounts
payable to any finder, investment banker or broker retained by JV Corp in
connection with this Agreement and the Transactions. The Company and
FMB will cause the Company not to incur any out-of-pocket expenses in connection
with this Agreement, except that the Company may incur expenses in connection
with obtaining any licenses or permits from any Governmental Authority,
including, without limitation, any state lending licenses, that (a) are
required to consummate the Transactions and (b) the Company is required to
have as of the Closing but does not and is not required by any Other Law to hold
as of the date of this Agreement because of the Company’s affiliation with FMB
and/or FMB’s bank subsidiary.
51
Section 8.2. Notices. All
notices, consents, waivers, and other communications under this Agreement must
be in writing and will be deemed to have been duly given when (a) delivered
by hand (with written confirmation of receipt), (b) deposited in the United
States Mail by registered or certified mail, return receipt requested,
(c) sent by telecopier (with electronic confirmation of receipt), provided
that a copy is mailed by registered or certified mail, return receipt requested,
or (d) received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
or telecopier numbers set forth below (or to such other addresses and telecopier
numbers as a Party may designate by notice to the other Parties):
if to
FMB, as follows:
0000
Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxx 00000
Attention: Xxxx
X. Xxxxxx, President
Facsimile: (000)
000-0000;
with a
copy to:
Xxxxxx X.
Xxxxxx, Esquire
Xxxxxx,
Feinblatt, Rothman, Hoffberger & Xxxxxxxxx, LLC
000 Xxxx
Xxxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxx 00000
Facsimile: (000)
000-0000;
if to
JV Corp or Holdco, to:
c/o
Milestone Partners III, L.P.
000
Xxxxxxxxx Xxxxxx
Xxxxx
000
Xxxxx
Xxxxxx, XX 00000
Attention: W.
Xxxxx Xxxxxx
Facsimile: (000)
000-0000;
with a
copy to:
Xxxxx X.
Xxxxxx, Esquire
Xxxxxx
Xxxxxxxx LLP
0000 Xxx
Xxxxx Xxxxxx
Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000-0000
Facsimile: (000)
000-0000;
52
or to
such other Person or address as either Party shall specify by notice in writing
to the other Party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery or
on the third Business Day after the mailing thereof.
Section 8.3. Entire
Agreement. This
Agreement constitutes the entire agreement between the Parties with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, oral and written, between the Parties with respect to the
subject matter hereof. This Agreement may not be amended except by a
written agreement executed by all of the Parties.
Section 8.4. Binding
Effect; Benefit. This
Agreement shall inure to the benefit of and be binding upon the Parties and
their respective successors and assigns. Nothing in this Agreement,
whether expressed or implied, is intended to confer on any Person other than the
Parties or their respective successors and assigns, any rights, remedies,
obligations or Liabilities under or by reason of this Agreement. No
Party may assign its rights or obligations hereunder to any other Person without
the prior written consent of the other Party except that JV Corp may assign
its rights and obligations hereunder to an entity controlled by
JV Corp.
Section 8.5. Section
Headings; Construction. The
section headings contained in this Agreement are inserted for convenience of
reference purposes only and shall not affect the meaning or interpretation of
this Agreement. All words used in this Agreement will be construed to
be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word “including” does not limit the preceding
words or terms.
Section 8.6. Counterparts. This
Agreement may be executed in any number of counterparts, 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.
Section 8.7. Applicable
Law. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Delaware without regard to its conflict of laws
provisions. THE PARTIES HERETO EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY
JURY OR RIGHT TO DEMAND TRIAL BY JURY IN ANY ACTION BROUGHT TO ENFORCE THIS
AGREEMENT, OR ANY PROVISION HEREOF, OR FOR DAMAGES DUE AS A RESULT OF AN ALLEGED
BREACH OF THIS AGREEMENT. In the event of a dispute between the
Parties as to any provision in this Agreement, the prevailing Party shall be
entitled to recover all costs and attorneys fees from the other
Party.
Section 8.8. Time
of Essence. With
regard to all dates and time periods set forth or referred to in this Agreement,
time is of the essence.
Section 8.9. Severability. If
any provision of this Agreement is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.
53
[SIGNATURES
APPEAR ON NEXT PAGE]
[SIGNATURES]
IN WITNESS WHEREOF, the Parties have
executed this Agreement as of the date first above written.
FMB:
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|||
By:
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/s/ Xxxx X. Xxxxxx
|
||
Name:
|
Xxxx
X. Xxxxxx
|
||
Title:
|
President
|
||
THE
COMPANY:
|
|||
MARINER
FINANCE, LLC
|
|||
By:
|
/s/ Xxxx X. Xxxxxx
|
||
Name:
|
Xxxx
X. Xxxxxx
|
||
Title:
|
President
of First Mariner Bancorp, the
|
||
Sole
Member of Mariner Finance, LLC
|
|||
JV
CORP:
|
|||
MF
RAVEN HOLDINGS, INC.
|
|||
By:
|
/s/ Xxxx Xxxxxx
|
||
Name:
|
Xxxx
Xxxxxx
|
||
Title:
|
President
|
||
HOLDCO:
|
|||
MF
HOLDCO, LLC
|
|||
By: Milestone
Partners Management Co., LP, its sole member
|
|||
By:
|
Milestone
Partners Management Co. GP LLC,
its
general partner
|
||
By:
|
/s/ W. Xxxxx Xxxxxx
|
||
Name:
|
W.
Xxxxx Xxxxxx
|
||
Title:
|
Authorized
Signatory
|
INDEX OF FMB
SCHEDULES*
Schedule
1 – Transferred Mortgage Loans
Schedule 2.3(a)
– Borrowed Indebtedness
Schedule 2.5
– Sample Calculation of Closing Net Assets
Schedule 3.1(a)(2)
– Sub Interests
Schedule 3.1(b)
– Equity Investments
Schedule 3.1(d)
– Violations
Schedule 3.1(e)
– Financial Statement Exceptions
Schedule 3.1(f)
– Undisclosed Liabilities
Schedule 3.1(g)
– Tax Matters
Schedule 3.1(i)
– Exceptions to Asset Ownership; Encumbrances
Schedule 3.1(j)(1)
– Exceptions to Binding Effect of Loans
Schedule
3.1(j)(2) – Loan Exceptions
Schedule 3.1(j)(3)
– Loan Losses and Default Rates
Schedule 3.1(k)
– Pending Legal Proceedings
Schedule 3.1(l)
– List of Business Insurance Policies
Schedule 3.1(m)
– Commitments to Retain Employees
Schedule 3.1(n)
– Commitments
Schedule 3.1(o)(1)
– Intellectual Property
Schedule
3.1(o)(2) – Infringement of Third Party Rights
Schedule 3.1(o)(3)
– Rights Given to Third Parties
Schedule 3.1(o)(4)
– Infringement by Third Parties
Schedule
3.1(o)(5) – Rights Held by Third Parties
Schedule 3.1(p)
– Violations of Environmental Laws
Schedule 3.1(q)
– Noncompliance with Other Laws
Schedule 3.1(r)
– Licenses and Permits
Schedule 3.1(s)
– Changes Since Interim Date
Schedule 3.1(t)
– Employee Benefit Plans
Schedule 3.1(u)
– At Will Employees
Schedule 3.1(w)
– Related Party Transactions
Schedule 3.1(x)
– Leases
Schedule
3.1(y)(1) – Regulatory Matters
Schedule
3.1(y)(2) – Enforcement Actions and Penalties
Schedule
4.2(f) – Guarantees of FMB
Schedule 5.3(a)
– Transferred Employees
INDEX OF JV CORP
SCHEDULES*
Schedule
3.2(e) – Violations
Schedule
3.2(h) – Consents and Approvals
*
All of the foregoing schedules
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. First
Mariner Bancorp hereby agrees to furnish supplementally a copy of any omitted
schedule to the Securities and Exchange Commission upon
request.