AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

BY AND BETWEEN

DEKANIA CORP.

AND

ADVANCED EQUITIES FINANCIAL CORP.

DATED AS OF SEPTEMBER 12, 2008

TABLE OF CONTENTS

 

 

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AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER, dated as of September 12, 2008, is by and between DEKANIA CORP., a Delaware corporation (“ Dekania ”), and ADVANCED EQUITIES FINANCIAL CORP., a Delaware corporation (“ AEFC ”). Capitalized terms used herein and not otherwise defined herein shall have the meanings given such terms in Annex A to this Agreement.

W I T N E S S E T H:

WHEREAS, Dekania has authorized capital consisting of 1,000,000 shares of preferred stock, par value $0.0001 per share (“ Dekania Preferred Stock ”), and 30,000,000 shares of common stock, par value $0.0001 per share (“ Dekania Common Stock ”); and

WHEREAS, AEFC has authorized capital consisting of 8,204,021 shares of Series A Convertible Preferred Stock, par value $.00001 (“ AEFC Series A Preferred Stock ”), 10,000,000 shares of Series B Convertible Preferred Stock, par value $.00001 (“ AEFC Series B Preferred Stock ”), 600,000 shares of Series C Convertible Preferred Stock, par value $.00001 (“ AEFC Series C Preferred Stock ”), 1,250,000 shares of Series D Convertible Preferred Stock, par value $.00001 (“ AEFC Series D Preferred Stock ”), 545,979 shares of undesignated preferred stock (“AEFC Undesignated Preferred Stock”) (collectively, the “ AEFC Preferred Stock ”) and 40,000,000 shares of common stock, par value $.00001 (“ AEFC Common Stock ”); and

WHEREAS, the respective Boards of Directors of Dekania and AEFC have determined that this Agreement and the consummation of the transactions contemplated hereby are advisable and in the best interests of their respective corporations and stockholders; and

WHEREAS, for U.S. federal income tax purposes, the Merger is intended to qualify as a reorganization under Section 368(a)(1)(A) of the Code and a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-2(g);

NOW THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be bound hereby, the parties hereby agree as follows:

 

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ARTICLE I

PLAN OF MERGER; CLOSING

Section 1.1. Plan of Merger .

(a) The Merger . At the Effective Time, and subject to the terms and conditions of this Agreement and the applicable provisions of the General Corporation Law of the State of Delaware (the “ DGCL ”), AEFC shall be merged with and into Dekania (the “ Merger ”), the separate existence of AEFC as a corporation shall cease and Dekania shall continue as the surviving corporation (Dekania, as the surviving corporation after the Merger, is hereinafter sometimes referred to as the “ Surviving Entity ”), with its corporate name being changed to “Advanced Equities Financial Corp.”

(b) Effective Time . As promptly as practicable, and in any event within two (2) Business Days after the satisfaction or waiver of the conditions set forth in Article VI , the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the “ Certificate of Merger ”) with the Secretary of State of the State of Delaware in accordance with the DGCL. The Merger shall become effective at the time of such filing or such later time specified in the Certificate of Merger (the “ Effective Time ”).

(c) Time and Place of Closing . Unless otherwise mutually agreed upon in writing by Dekania and AEFC, the closing of the Merger (the “ Closing ”) will be held at the offices of Foley & Lardner LLP, Chicago, Illinois, at 10:00 a.m., local time, on the first Business Day following the date that all of the conditions precedent specified in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions) have been satisfied or, to the extent permitted by Applicable Law, waived by the party or parties permitted to do so (such date being referred to hereinafter as the “ Closing Date ”).

(d) Initial Merger Consideration . The Initial Merger Consideration (as defined in subparagraph (v) below) plus the aggregate of the Common Stock Equivalent Shares (as defined in Section 1.2 (c) below) totals 20,000,000 shares of Surviving Entity Common Stock (as defined in subparagraph (i) below), subject to adjustment as provided in Section 1.5 and Section 1.6 below. Subject to the terms and conditions of this Agreement and except as provided in Section 1.9 below, at the Effective Time, by virtue of the Merger and without any further action by any party:

(i) each share of AEFC Series A Preferred Stock issued and outstanding as of the Effective Time shall be converted into and exchanged for the right to receive 0.65062854 share of common stock, par value $0.0001 per share, of the Surviving Entity (“ Surviving Entity Common Stock ”);

(ii) each share of AEFC Series B Preferred Stock issued and outstanding as of the Effective Time shall be converted into and exchanged for the right to receive 0.65062854 share of Surviving Entity Common Stock;

(iii) each share of AEFC Series C Preferred Stock issued and outstanding as of the Effective Time shall be converted into and exchanged for 0.65062854 share of Surviving Entity Common Stock;

 

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(iv) each share of AEFC Series D Preferred Stock issued and outstanding as of the Effective Time shall be converted into and exchanged for 0.65062854 share of Surviving Entity Common Stock; and

(v) each share of AEFC Common Stock issued and outstanding as of the Effective Time shall be converted and exchanged for 0.65062854 share of Surviving Entity Common Stock (collectively, the issuances in clauses (i) through (v) being the “ Initial Merger Consideration ”).

(e) Effects of the Merger . At the Effective Time, the effects of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of Dekania and AEFC shall vest in the Surviving Entity, and all debts, liabilities and duties of Dekania and AEFC shall become the debts, liabilities and duties of the Surviving Entity.

(f) Subsequent Actions . If, at any time after the Effective Time, the Surviving Entity shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Entity its right, title or interest in, to or under any of the rights, properties or assets of either Dekania or AEFC acquired or to be acquired by the Surviving Entity as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, the officers and directors of the Surviving Entity shall be authorized to execute and deliver, in the name and on behalf of either Dekania or AEFC, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Entity or otherwise to carry out this Agreement.

(g) Cancellation of Treasury Stock and AEFC-Owned AEFC Common Stock and AEFC Preferred Stock . All shares of AEFC Common Stock or AEFC Preferred Stock that are owned by AEFC or any AEFC Subsidiary or held in the treasury of AEFC shall, by virtue of the Merger and without any action on the part of the holder thereof, be cancelled and retired and shall cease to exist, and no shares of Surviving Entity Common Stock, cash or other consideration shall be delivered or deliverable in exchange therefor.

(h) Certificate of Incorporation and Bylaw s. At the Effective Time, the Certificate of Incorporation and By-Laws of Dekania shall be amended and restated in their entirety in accordance with Annex B and Annex C hereto, respectively, until thereafter amended in accordance with their respective terms and applicable law.

(i) Directors and Officers . From and after the Effective Time, the directors and officers of the Surviving Entity shall be as set forth on Annex D to this Agreement, and such directors and officers shall serve until their successors have been duly elected or appointed and qualified or until their death, resignation or removal in accordance with the Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws of the Surviving Entity.

 

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Section 1.2. Treatment of AEFC Options and Warrants .

(a) Each option (an “ AEFC Option ”) or warrant (an “ AEFC Warrant ”) to acquire one or more shares of AEFC Common Stock, issued and outstanding at the Effective Time, shall become an option or warrant to acquire that number of shares of Surviving Entity Common Stock equal to the product of (i) 0.65062854 multiplied by (ii) the aggregate number of shares of AEFC Common Stock subject to such AEFC Option or AEFC Warrant. The exercise price per share set forth in each such AEFC Option or AEFC Warrant shall be adjusted as provided therein so that the ratio of the exercise price to the fair market value of the shares of Surviving Entity Common Stock subject to the AEFC Option or AEFC Warrant immediately after the Effective Time is no greater than the ratio of the exercise price to the fair market value of the shares of AEFC Common Stock subject to the AEFC Option or AEFC Warrant immediately prior to the Effective Time, and otherwise in a manner so as not to result in a new grant of options for purposes of Section 409A of the Code. Each converted AEFC Option or AEFC Warrant shall be evidenced by a written option agreement in form reasonably acceptable to AEFC and as required such that the converted AEFC Options or AEFC Warrants are not deemed to provide for the deferral of compensation for purposes of Section 409A of the Code.

(b) If AEFC Options or AEFC Warrants having exercise prices of less than $10 per share, after their conversion and repricing pursuant to paragraph (a) above, shall terminate, be forfeited or expire unexercised (“ Terminated Options ”), then (i) the Surviving Entity shall issue and distribute to the recipients of the Initial Merger Consideration, in proportion to the respective number of shares of the Initial Merger Consideration issued to each such recipient, that number of Common Stock Equivalent Shares (as defined in paragraph (c) below) as shall equal the total amount of Common Stock Equivalent Shares subject to the Terminated Options multiplied by a fraction, the numerator of which is the Initial Merger Consideration and the denominator of which is the sum of Initial Merger Consideration and the number of shares of Surviving Entity Common Stock that are subject to AEFC Options or AEFC Warrants, excluding the Terminated Options (“ Outstanding Equity Rights ”) and (ii) a corresponding adjustment shall be made to the number of Outstanding Equity Rights. No similar adjustment shall be made in the event that AEFC Options or AEFC Warrants having an exercise price of $10 per share or more, after conversion and repricing pursuant to paragraph (a) above, shall terminate, be forfeited or expire unexercised.

(c) As used herein, “ Common Stock Equivalent Shares ” shall be that number of shares of Surviving Entity Common Stock calculated with respect to each AEFC Option or AEFC Warrant having an exercise price as adjusted for the Merger of less than $10.00 per share, pursuant to the following formula:

(10 - A) x B

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where A is the exercise price of the AEFC Option or AEFC Warrant as adjusted for the Merger and B is the number of shares of Surviving Entity Common Stock subject to AEFC Options or AEFC Warrants having A as their per share exercise price. For purposes of paragraph (b) above, a separate calculation shall be done for Terminated Options with different exercise prices and the Common Stock Equivalent Shares for Terminated Options for which the calculation is being made shall be the sum of the Common Stock Equivalent Shares attributable to all such Terminated Options.

(d) Distributions and adjustments pursuant to this Section 1.2 for each year (or longer period, if applicable) shall be made on or before April 1 of the following year, commencing with April 1, 2010 or, if such day is not a Business Day, on the next succeeding Business Day.

Section 1.3. Earn-out Consideration .

(a) Additional Consideration . The recipients of Initial Merger Consideration and shares of Surviving Entity Common Stock issued upon exercise of AEFC Options or AEFC Warrants shall be entitled to additional merger consideration (“ Additional Merger Consideration ”) as set forth in this Section 1.3. Additional Merger Consideration shall be allocated among recipients of Adjusted Initial Merger Consideration (as defined in paragraph (b) below) in proportion to the respective number of Shares of Adjusted Initial Merger Consideration issued to each of them.

(b) Maximum Additional Merger Consideration . The maximum amount of Additional Merger Consideration shall be that number of shares of Surviving Entity Common Stock as shall equal (a)(i) 12,500,000 shares of Surviving Entity Common Stock (subject to adjustment as provided in paragraph (g) below) multiplied by (ii) a fraction, the numerator of which is the Adjusted Initial Merger Consideration and the denominator of which is the sum of the Adjusted Initial Merger Consideration plus the number of shares of Surviving Entity Common Stock subject to unexercised AEFC Options and AEFC Warrants, excluding Terminated Options and shares issued pursuant to this Section 1.3, as of the date for which the calculation is being made, less (b) the number of share of Surviving Entity Common Stock previously distributed pursuant to this Section 1.3. For the purposes of this Section 1.3 (b), “ Adjusted Initial Merger Consideration ” means the Initial Merger Consideration plus the number of shares of Surviving Entity Common Stock as to which AEFC Options and AEFC Warrants have been duly and validly exercised through the calculation date.

(c) 2008 Additional Merger Consideration . If the Adjusted GAAP Net Income of AEFC for its fiscal year ending December 31, 2008 (“ Fiscal 2008 ”) equals or exceeds $5,000,000, then the Surviving Entity shall issue an amount of Additional Merger Consideration equal to 2,500,000 shares (subject to adjustment as provided in paragraph (g) below) plus an additional one half of one share (subject to adjustment as provided in paragraph (g) below) for

 

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each dollar by which the Adjusted GAAP Net Income of AEFC for Fiscal 2008 exceeds $5,000,000, to a maximum issuance of 7,500,000 shares (subject to adjustment as provided in paragraph (g) below) of Additional Merger Consideration with respect to Fiscal 2008. If the Additional Merger Consideration for Fiscal 2008 is less than 7,500,000 shares (subject to adjustment as provided in paragraph (g) below), then the difference between the actual amount of such Additional Merger Consideration and 7,500,000 shares (subject to adjustment as provided in paragraph (g) below) shall be issued upon the occurrence of any one of the following events: (i) Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2009 is greater than $29,100,000, (ii) Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2010 is greater than $34,000,000 or (iii) Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2011 is greater than $37,300,000.

(d) Earnout Additional Merger Consideration . In addition to any Additional Merger Consideration payable pursuant to paragraph (c), above, the Surviving Entity shall issue an amount of Additional Merger Consideration equal to not more than 5,000,000 shares of Surviving Entity Common Stock (subject to adjustment as provided in paragraph (g) below) (the “ Secondary Additional Merger Consideration Shares ”) as follows:

(i) If the Adjusted GAAP Net Income of the Surviving Entity for its fiscal year ending December 31, 2009 (“ Fiscal 2009 ”) exceeds $29,100,000, the maximum number of Secondary Additional Merger Consideration Shares shall be issued. If the Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2009 is $25,100,000 or less, no Secondary Additional Merger Consideration Shares shall be issuable with respect to Fiscal 2009. If Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2009 is equal to or less than $29,100,000 but greater than $25,100,000, then the Surviving Entity shall issue an amount of Secondary Additional Merger Consideration Shares equal to (a) 5,000,000 shares of Surviving Entity Common Stock (subject to adjustment as provided in paragraph (g) below) multiplied by (b) a fraction, the numerator of which is the amount by which Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2009 exceeds $25,100,000 and the denominator of which is $4,000,000.

(ii) If fewer than 100% of the Secondary Additional Merger Consideration Shares are issued based on the 2009 Adjusted GAAP Net Income, a similar calculation shall be conducted based on the Surviving Entity’s fiscal year ending December 31, 2010 (“ Fiscal 2010 ”). If the Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2010 exceeds $34,000,000, the maximum number of Secondary Additional Merger Consideration Shares, less the number of Secondary Additional Merger Consideration Shares issued pursuant to subparagraph (i) above, shall be issued. If the Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2010 is $29,500,000 or less, no Secondary Additional Merger Consideration Shares shall be issuable with respect to Fiscal 2010. If the Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2010 is equal to or less than $34,000,000 but greater than $29,500,000, then the Surviving Entity shall issue the number of Secondary Additional Merger Consideration Shares equal to (a) 5,000,000 shares of Surviving Entity Common Stock (subject to adjustment as provided in

 

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paragraph (g) below) multiplied by (b) a fraction, the numerator of which is the amount by which Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2010 exceeds $29,500,000 and the denominator of which is $4,500,000, and (c) the resulting product of (a) multiplied by (b) shall then be reduced by the number of Secondary Additional Merger Consideration Shares issued pursuant to subparagraph (i) above.

(iii) If fewer than 100% of the Secondary Additional Merger Consideration Shares are issued based on the 2009 and 2010 Adjusted GAAP Net Income, a similar calculation shall be conducted based on the Surviving Entity’s fiscal year ending December 31, 2011 (“ Fiscal 2011 ”). If the Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2011 exceeds $37,300,000, the maximum number of Secondary Additional Merger Consideration Shares, less the number of Secondary Additional Merger Consideration Shares issued pursuant to subparagraphs (i) and (ii) above, shall be issued. If the Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2011 is $32,300,000 or less, no Secondary Additional Merger Consideration Shares shall be issuable with respect to Fiscal 2011. If the Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2011 is equal to or less than $37,300,000 but greater than $32,300,000, then the Surviving Entity shall issue the number of Secondary Additional Merger Consideration Shares equal to (a) 5,000,000 shares of Surviving Entity Common Stock (subject to adjustment as provided in paragraph (g) below) multiplied by (b) a fraction, the numerator of which is the amount by which Adjusted GAAP Net Income of the Surviving Entity for Fiscal 2011 exceeds $32,300,000 and the denominator of which is $5,000,000, and (c) the resulting product of (a) multiplied by (b) shall then be reduced by the number of Secondary Additional Merger Consideration Shares issued pursuant to subparagraphs (i) and (ii) above.

(iv) If fewer than 100% of the Secondary Additional Merger Consideration Shares are issued based on the 2009, 2010 and 2011 Adjusted GAAP Net Income, those remaining Secondary Additional Merger Consideration Shares shall be forfeited.

(e) Issuance of Certain Shares Attributable to Terminated Options . Following the end of each fiscal year of the Surviving Entity, the increase in the number of shares of Surviving Entity Common Stock subject to Terminated Options for such fiscal year resulting from the issuance of Additional Merger Consideration (the “ Option Earn-out Share Increase ”), shall be determined. Such determination shall be made on or before April 1 of the fiscal year following the fiscal year for which the determination is being made. Promptly following such determination, the Surviving Entity shall distribute ratably to the recipients of Adjusted Initial Merger Consideration through the date such determination is made that number of shares of Surviving Entity Common Stock (the “ Increased Additional Merger Consideration ”) as shall equal (a) the Option Earn-out Share Increase, multiplied by (b) a fraction, the numerator of which is the Adjusted Initial Merger Consideration and the denominator of which is the sum of the Adjusted Initial Merger Consideration, plus the number of shares of Surviving Entity Common Stock subject to unexercised AEFC Options and AEFC Warrants, excluding Terminated Options. The number of shares subject to AEFC Options and AEFC Warrants, excluding Terminated Options, and the per share exercise price shall be adjusted for the foregoing issuance as provided in the respective terms of the AEFC Options and AEFC Warrants, as applicable.

 

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(f) Issuance of Additional Merger Consideration . Not later than ten (10) Business Days following the filing of the Surviving Entity’s Annual Report on Form 10-K (or any successor form) for each of Fiscal 2009, Fiscal 2010 and Fiscal 2011, the Surviving Entity shall distribute the Additional Merger Consideration and the Increased Additional Merger Consideration, if any, to the persons entitled thereto, together with a statement showing the calculation of the Additional Merger Consideration and Increased Additional Merger Consideration; provided: (i) if the Surviving Entity is not required to file such an Annual Report, the Additional Merger Consideration and Increased Additional Merger Consideration and the statement for any such fiscal year shall be distributed to the persons entitled thereto not later than one hundred twenty (120) days after the end of such fiscal year; (ii) if the Surviving Entity fails to file such Annual Report within the time period permitted by the Exchange Act or Rule 12b-25 thereunder (or any successor thereto), then the Additional Merger Consideration and Increased Additional Merger Consideration and the statement shall be distributed to the persons entitled thereto not later than ten (10) Business Days following the date on which such Annual Report was required to be filed (including any period permitted under Rule 12b-25); and (iii) if no Additional Merger Consideration or Increased Additional Merger Consideration is issuable, a statement to that effect shall be distributed to persons otherwise entitled thereto not later than the last to occur of the dates provided herein for the distribution of Additional Merger Consideration.

(g) Certain Adjustments . If, following the Effective Time, any change in the outstanding shares of capital stock of the Surviving Entity shall occur, including by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, the Additional Merger Consideration and Increased Additional Merger Consideration shall be appropriately adjusted; provided , that no adjustment in the Additional Merger Consideration or Increased Additional Merger Consideration shall be made for any change in the outstanding shares of capital stock of the Surviving Entity (i) after the distribution of such Additional Merger Consideration or Increased Additional Merger Consideration, as the case may be, or (ii) that results from (A) any exercise of options or warrants to purchase shares of AEFC Common Stock outstanding on the date of this Agreement and issuance of shares pursuant thereto, (B) any exercise of options or other securities granted under the Incentive Plan and any issuance of shares pursuant to any such options or other securities or (C) any exercise of the Dekania Warrants and issuance of shares pursuant thereto.

Section 1.4. Surrender and Payment .

(a) At the Effective Time, the Surviving Entity shall appoint an agent (the “ Exchange Agent ”) for the purpose of exchanging for the Initial Merger Consideration certificates representing shares of AEFC Common Stock and AEFC Preferred Stock outstanding immediately prior to the Effective Time (the “ Certificates ”). The Surviving Entity shall make available to the Exchange Agent, as needed, the Initial Merger Consideration to be paid in

 

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respect of the Certificates. Promptly after the Effective Time (but not later than ten (10) Business Days after the Closing), the Surviving Entity shall send, or shall cause the Exchange Agent to send, to each holder of record of a Certificate or Certificates of shares of AEFC Common Stock and AEFC Preferred Stock, that were converted into the right to receive the Initial Merger Consideration pursuant to Section 1.1(d), a letter of transmittal and instructions (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates to the Exchange Agent) and any other documentation deemed necessary or advisable by the Surviving Entity or the Exchange Agent in connection with effecting such exchange.

(b) Each holder of a Certificate representing shares of AEFC Common Stock or AEFC Preferred Stock shall be entitled to receive, upon surrender to the Exchange Agent of such Certificate, together with a properly completed letter of transmittal and any other tax or other ancillary forms reasonably required by the Surviving Entity or the Exchange Agent, the Initial Merger Consideration in respect of the AEFC Common Stock or AEFC Preferred Stock previously represented by such Certificate, but subject to Section 1.8. The shares of Surviving Entity Common Stock constituting the Initial Merger Consideration, at the Surviving Entity’s option, shall be in uncertificated book-entry form; provided that, except with respect to shares then held in the Escrow Account, if such shares of Surviving Entity Stock are in uncertificated book-entry form, upon request by any stockholder, the Surviving Entity shall provide to such Person a certificate of the Surviving Entity’s transfer agent as to the registration of such shares of Surviving Entity Common Stock in the name of such Person. Until so surrendered or transferred, as the case may be, each such Certificate shall represent after the Effective Time for all purposes only the right to receive the Initial Merger Consideration, Additional Merger Consideration and the Increased Additional Merger Consideration, if any, payable in respect of the shares of AEFC Common Stock or AEFC Preferred Stock previously represented by such Certificate.

(c) If any portion of the Initial Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate is registered, it shall be a condition to such payment that (i) such Certificate shall be properly endorsed or shall otherwise be in proper form for transfer, (ii) the letter of transmittal (and other documentation, if required) accompanying the surrendered Certificate is properly and fully completed to reflect such payment to such Person, and (iii) the Person requesting such payment shall pay to the Exchange Agent any transfer or other taxes required as a result of such payment to a Person other than the registered holder of such Certificate or establish to the reasonable satisfaction of the Exchange Agent that such tax has been paid or is not payable.

(d) After the Effective Time, there shall be no further registration of transfers of shares of AEFC Common Stock and AEFC Preferred Stock. If, after the Effective Time, Certificates are presented to the Surviving Entity, they shall be canceled and exchanged for the Initial Merger Consideration and any Additional Merger Consideration and Increased Additional Merger Consideration provided for, and in accordance with the procedures set forth, in this Article I.

 

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(e) Any portion of the Initial Merger Consideration made available to the Exchange Agent pursuant to Section 1.4(a) that remains unclaimed by the persons entitled thereto twelve months after the Effective Time shall be returned to the Surviving Entity, upon demand, and any such holder who has not exchanged shares of AEFC Common Stock and AEFC Preferred Stock for the Initial Merger Consideration in accordance with this Section 1.4 prior to that time shall thereafter look only to the Surviving Entity for payment of the Initial Merger Consideration and, if applicable, any unpaid dividends or other distributions which such holder may be due under applicable law. Notwithstanding the foregoing, none of the Surviving Entity, the Exchange Agent or any of their respective employees, officers, directors, stockholders, agents, or affiliates, shall be liable to any holder of shares of AEFC Common Stock or AEFC Preferred Stock for any amounts paid to a public official pursuant to applicable abandoned property, escheat or similar laws. Any amounts remaining unclaimed by holders of shares of AEFC Common Stock and AEFC Preferred Stock five (5) Business Days prior to such time when the amounts would otherwise escheat to or become property of any Governmental Authority shall become, to the extent permitted by Applicable Law, the property of the Surviving Entity free and clear of any claims or interest of any Person previously entitled thereto.

(f) No dividends or other distributions with respect to Surviving Entity Common Stock constituting part of the Initial Merger Consideration, Additional Merger Consideration or Increased Additional Merger Consideration, and no cash payment in lieu of fractional shares as provided in Section 1.6, shall be paid to the holder of any Certificates not surrendered until such Certificates are surrendered as provided in this Section. Following such surrender, there shall be paid, without interest, to the Person in whose name the shares of the Surviving Entity Common Stock have been registered, at the time of such surrender or transfer, the amount of any cash payable in lieu of fractional shares to which such Person is entitled pursuant to Section 1.6, the amount of all dividends or other distributions, if any, with a record date after the Effective Time previously paid or payable on the date of such surrender with respect to such shares of Surviving Entity Common Stock.

Section 1.5. Certain Adjustments . If, during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of AEFC or Dekania shall occur, including by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, the Initial Merger Consideration, Additional Merger Consideration and Increased Additional Merger Consideration shall be appropriately adjusted; provided that no adjustment to the Initial Merger Consideration or Additional Merger Consideration shall be made for any change in the outstanding shares of capital stock of Dekania that results from any exercise of the Dekania Warrants outstanding at the date of this Agreement, and any issuance of shares pursuant to any such warrants.

Section 1.6. Fractional Shares . No fractional shares of Surviving Entity Common Stock shall be issued in the Merger. All fractional shares of Surviving Entity Common Stock that a holder of shares of AEFC Common Stock or AEFC Preferred Stock would otherwise be entitled to receive, at any given time, as a result of the Merger pursuant to this Agreement shall be aggregated and, if a fractional share results from such aggregation, such holder shall be

 

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entitled to receive, in lieu thereof, an amount in cash without interest determined by multiplying $10.00 (subject to adjustment as provided in Section 1.3 (g) or Section 1.5) by the fraction of a share of Surviving Entity Common Stock to which such holder would otherwise have been entitled.

Section 1.7. Withholding Rights . The Surviving Entity shall be entitled, and shall be entitled to direct the Exchange Agent, to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article I such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign tax law. Any withheld amounts shall be timely remitted to the appropriate Taxing Authority and a receipt therefor shall be delivered to the Person entitled thereto. To the extent that amounts are so deducted and withheld, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares in respect of which the Surviving Entity made such deduction and withholding.

Section 1.8. Lost Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Entity, the posting by such Person of a bond, in such reasonable amount as the Surviving Entity may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue, in exchange for such lost, stolen or destroyed Certificate the Initial Merger Consideration and, if applicable, any Additional Merger Consideration or Increased Additional Merger Consideration to be paid in respect of the shares of AEFC Common Stock or AEFC Preferred Stock represented by such Certificate, as contemplated by this Article I.

Section 1.9. Escrow Account .

(a) Notwithstanding any other provision of this Agreement, at the Effective Time, 1,000,000 shares of Surviving Entity Common Stock (the “ Indemnification Escrow Shares ”) to be issued to holders of AEFC Common Stock and AEFC Preferred Stock in the Merger as Initial Merger Consideration pursuant to Section 1.1(d) shall (in lieu of being delivered to such holders, and with the portion of such Indemnification Escrow Shares attributable to each of such holders being such holder’s “ Indemnification Pro Rata Share ”) be delivered by the Surviving Entity to the Exchange Agent for deposit into a separate account (the “ Indemnification Escrow Account ”) in accordance with the terms of an Escrow Agreement in form and substance reasonably acceptable to Dekania and AEFC. The Indemnification Escrow Shares deposited with the Exchange Agent shall be applied by the Exchange Agent in accordance with the terms of the Escrow Agreement to offset Losses (if any) under Article VII (with such Indemnification Escrow Shares valued at $10.00 per share) (subject to adjustment as provided in Section 1.3 (g)), with all remaining property in the Indemnification Escrow Account to be distributed to such holders in accordance with Section 1.9(c).

 

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(b) Notwithstanding any other provision of this Agreement, at the Effective Time, a number of shares of Surviving Entity Common Stock to be issued to holders of AEFC Common Stock and AEFC Preferred Stock in the Merger as Initial Merger Consideration pursuant to Section 1.1(d) (the “ AEFC Earn-out Escrow Shares ”) as shall equal (i) the number of shares of AEFC Common Stock or AEFC Preferred Stock that may be issuable by AEFC, pursuant to any of the agreements listed on Annex E hereto, with respect to an earn-out or other contingent issuance right (“ AEFC Earn-outs ”) multiplied by (ii) 0.63647059, shall (in lieu of being delivered to such holders, and with the portion of such AEFC Earn-out Escrow Shares attributable to each such holder being such holder’s “ AEFC Earn-out Proportionate Share ”) be delivered by the Surviving Entity to the Exchange Agent for deposit in a separate account (the “ AEFC Earn-out Escrow Account ”) with the Exchange Agent in accordance with the terms of the Escrow Agreement. The AEFC Earn-out Escrow Shares shall be distributed in accordance with Section 1.9(d). For the purposes of the definition of “AEFC Earn-out Escrow Shares,” any dividends or other distributions paid on or with respect to an AEFC Earn-out Escrow Share shall not be deemed to be a part of such AEFC Earn-out Escrow Share.

(c) On the first Business Day after the first anniversary of the Closing Date, an amount of Indemnification Escrow Shares equal to (x) the amount of Indemnification Escrow Shares remaining in the Indemnification Escrow Account at such time less (y) such amount of Indemnification Escrow Shares with an aggregate value (calculated as set forth in Section 1.9 (a)) equal to the aggregate amount of bona fide claims for reduction pursuant to Section 7.7 submitted by the Dekania Stockholder Representative in good faith and outstanding at such time, shall be released from the Indemnification Escrow Account for distribution to the holders of AEFC Common Stock and AEFC Preferred Stock immediately prior to the Effective Time in proportion to their Indemnification Pro Rata Shares. The Exchange Agent shall hold the Indemnification Escrow Shares in the Indemnification Escrow pursuant to the Escrow Agreement. Distributions from the Indemnification Escrow Account shall be governed by the terms and conditions of the Escrow Agreement.

(d) To the extent that the Surviving Entity shall be obligated to issue any Surviving Entity Common Stock as a result of any AEFC Earn-outs, the Exchange Agent shall release AEFC Earn-out Escrow Shares to the Persons who are legally entitled to such AEFC Earn-outs an amount sufficient to discharge such obligations. If all or any portion of any AEFC Earn-out shall terminate or expire such that the Surviving Entity shall have no further obligation to issue Surviving Entity Common Stock with respect thereto, the Exchange Agent shall release that number of AEFC Earn-out Escrow Shares as shall equal the number of shares of Surviving Entity Common Stock as to which such contingent obligation shall have terminated or expired from the AEFC Earn-out Escrow Account for distribution to the recipients of Initial Merger Consideration in proportion to their AEFC Earn-out Proportionate Shares.

Section 1.10. Dissenting Shares . Notwithstanding any provision of this Agreement to the contrary, if required by the DGCL (but only to the extent required thereby), shares of AEFC Common Stock and AEFC Preferred Stock that are issued and outstanding immediately prior to the Effective Time and that are held by holders of such shares who have not voted in favor of the adoption of this Agreement or consented thereto in writing and who have properly exercised

 

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appraisal rights with respect thereto in accordance with, and who have complied with, Section 262 of the DGCL (the “ Dissenting Shares ”) shall not be converted into the right to receive the Initial Merger Consideration, Additional Merger Consideration or Increased Additional Merger Consideration, but instead holders of such Dissenting Shares shall only be entitled to such rights as are provided by the DGCL with respect to such Dissenting Shares, unless and until any such holder fails to perfect or effectively withdraws or loses such rights under the DGCL. If, after the Effective Time, any such holder fails to perfect or effectively withdraws or loses such right, such Dissenting Shares will thereupon be treated as if they had been converted into and have become exchangeable for, at the Effective Time, the right to receive the Initial Merger Consideration, without any interest thereon, and the Surviving Entity shall remain liable for payment of any Additional Merger Consideration or Increased Additional Merger Consideration for such shares, subject to Section 1.8. At the Effective Time, any holder of Dissenting Shares shall cease to have any rights with respect thereto, except the rights provided in Section 262 of the DGCL and as provided in the previous sentence. AEFC will give Dekania prompt notice of any demands received by AEFC for appraisals of shares of AEFC Common Stock and AEFC Preferred Stock.

ARTICLE II [INTENTIONALLY OMITTED]

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF AEFC

Except as set forth in writing in a Schedule attached to the Disclosure Letter delivered by AEFC to Dekania on the date hereof (the “ AEFC Disclosure Letter ”), AEFC represents and warrants to Dekania as follows:

Section 3.1. Organization . AEFC and each Subsidiary of AEFC (an “ AEFC Subsidiary ” and, collectively, the “ AEFC Subsidiaries ”) is a legal entity duly organized, validly existing and (where applicable) in good standing under the laws of its jurisdiction of organization. Each of AEFC and the AEFC Subsidiaries has the requisite power and authority to carry on its business in all material respects as it is now being conducted and to own, lease and operate the properties and assets that it purports to own, lease or operate. Each of AEFC and the AEFC Subsidiaries is duly licensed or qualified to do business in each jurisdiction where its business or the character or location of the properties and assets owned, leased or operated by it makes such qualification necessary, except for any failures to be so qualified that, individually or in the aggregate, would not reasonably be expected to have or result in an AEFC Material Adverse Effect. Each Organizational Document of each AEFC Subsidiary is in full force and effect, and such AEFC Subsidiary is not in material violation thereof.

Section 3.2. AEFC Capital Structure .

(a) The numbers of authorized, and issued and outstanding, shares of AEFC Common Stock and AEFC Preferred Stock as of the date of this Agreement are as set forth in Schedule 3.2(a) hereto. All of the issued and outstanding shares of AEFC Common Stock and AEFC Preferred Stock have been duly authorized and validly issued, and are fully paid and non-assessable, and were not issued in violation of any Equity Rights (as hereinafter defined).

 

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(b) Except as set forth in Schedule 3.2(b) hereto, there are no outstanding securities, options, warrants, calls, rights, conversion rights, preemptive rights, rights of first refusal, redemption rights, repurchase rights, plans, “tag along” or “drag along” rights, commitments, agreements, arrangements or undertakings (“ Equity Rights ”) obligating AEFC or any AEFC Subsidiary to issue, deliver, redeem, purchase or sell, or cause to be issued, delivered, redeemed, purchased or sold, any AEFC Common Stock, AEFC Preferred Stock or securities or obligations convertible or exchangeable into or exercisable for, any AEFC Common Stock and AEFC Preferred Stock, or obligating AEFC or any AEFC Subsidiary to issue, grant, adopt or enter into any such Equity Right. Neither AEFC nor any AEFC Subsidiary has any issued and outstanding stock appreciation, phantom stock, profit participation or similar rights with respect to the AEFC Common Stock and AEFC Preferred Stock. Neither AEFC nor any AEFC Subsidiary has any (x) outstanding Indebtedness that, by its terms, provides any Person any rights, whether direct or contingent, to vote on any corporate matters submitted to a vote of stockholders of AEFC or any AEFC Subsidiary, or that is convertible into or exercisable for AEFC Common Stock or AEFC Preferred Stock or any equity securities of any AEFC Subsidiary or (y) outstanding Equity Rights that entitle or convey to any Person the right to vote with stockholders of AEFC or any AEFC Subsidiary on any matter. To the knowledge of AEFC, there are no voting trusts or other similar agreements outstanding with respect to the AEFC Common Stock, AEFC Preferred Stock or the equity securities of any AEFC Subsidiary.

Section 3.3. AEFC Investment Vehicles .

(a) Schedule 3.3(a) sets forth a correct and complete list, as of the date of this Agreement, of (i) each AEFC Investment Vehicle indicating the type of entity and jurisdiction of organization thereof, (ii) the dollar amount of the investment of AEFC or any AEFC Subsidiary in each AEFC Investment Vehicle and (iii) each equity or other investment of greater than $500,000 by any AEFC Investment Vehicle in any Person other than a AEFC Investment Vehicle (each, a “ Non-Affiliate Interest ”). AEFC owns, directly or indirectly, any equity interest in each AEFC Investment Vehicle free and clear of any Liens except for Permitted Liens.

(b) All of the issued and outstanding shares of common stock or other equity interests of each AEFC Investment Vehicle have been duly authorized and validly issued and are fully paid and non-assessable and have not been issued in violation of any Equity Rights.

(c) Except with respect to the AEFC Investment Vehicles, neither AEFC nor any AEFC Subsidiary acts as investment adviser, investment sub-adviser, general partner, managing member, manager or sponsor to any other pooled investment vehicle. No AEFC Investment Vehicle is, or to the knowledge of AEFC, at any time since January 1, 2006 was, required to register as an investment company under the Investment Company Act or the comparable regulatory regime of any other jurisdiction.

 

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(d) Each AEFC Investment Vehicle has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite corporate, partnership, limited liability company, or similar power and authority to own, lease or otherwise hold its properties and assets and carry on its business as it is now conducted. Each AEFC Investment Vehicle possesses all Permits necessary to entitle it to use its name, to own, lease or otherwise hold its properties and assets and to carry on its business as it is now being conducted. Each AEFC Investment Vehicle is duly qualified, licensed or registered to do business in each jurisdiction where it is required to do so under Applicable Law other than any failure to be so qualified that, individually or in the aggregate, would not reasonably be expected to have or result in an AEFC Material Adverse Effect. All outstanding shares or units of each AEFC Investment Vehicle have been issued and sold by such AEFC Investment Vehicle in compliance with Applicable Law, other than any failures to comply which, individually or in the aggregate, would not reasonably be expected to have or result in an AEFC Material Adverse Effect.

Section 3.4. Authority; Validity of Agreements . AEFC has the requisite corporate power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it is specified to be a party, and, subject to obtaining the requisite vote of holders of AEFC Common Stock and AEFC Preferred Stock, to perform its obligations hereunder and thereunder and to consummate the Merger. The execution, delivery and performance by AEFC of this Agreement and each of the Ancillary Agreements and the consummation by AEFC of the Merger have been duly and validly authorized and approved by all necessary corporate action on the part of AEFC, subject to obtaining the requisite vote of holders of AEFC Common Stock and AEFC Preferred Stock. This Agreement and each of the Ancillary Agreements to be executed and delivered at or prior to the Closing, has been or will be, duly and validly executed and delivered by AEFC and, assuming due authorization, execution and delivery by Dekania and any other party (other than AEFC), this Agreement constitutes, and upon its execution prior to or at the Closing each Ancillary Agreement will constitute, a valid and binding obligation of AEFC, enforceable against it in accordance with its terms, except as (a) the enforceability hereof and thereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) the availability of equitable remedies may be limited by equitable principles of general applicability.

Section 3.5. Consents and Approvals . Except (a) as set forth in Schedule 3.5, (b) for the requisite vote of the holders of AEFC Common Stock and AEFC Preferred Stock, and (c) as required under or pursuant to the HSR Act, state securities or “blue sky” laws, the Exchange Act, the DGCL, and the rules or regulations of any Self-Regulatory Organization, none of AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle is required to obtain the Consent of any Governmental Authority or other Person or to obtain any Permit in connection with the execution and delivery by AEFC of this Agreement or the performance of this Agreement and each Ancillary Agreement by AEFC, except for Consents and Permits the failure of which to obtain, individually or in the aggregate, would not reasonably be expected to have or result in an AEFC Material Adverse Effect.

 

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Section 3.6. No Conflicts . Assuming that any Consents referred to in Section 3.5 or Schedule 3.5 are properly submitted and duly obtained and any applicable waiting periods have expired or terminated, the execution, delivery and performance of this Agreement and the Ancillary Agreements by AEFC do not and will not, and the consummation of the Merger will not, conflict with, result in a termination of, contravene or constitute a default under, or be an event that with the giving of notice or passage of time or both would become a default under, or give to any other Person any right of termination, payment, acceleration, vesting or cancellation of or under, or accelerate the performance required by or maturity of, or result in the creation of any Lien or loss of any rights of any of AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle pursuant to any of the terms, conditions or provisions of or under (a) any Applicable Law, (b) the Organizational Documents of AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle or (c) any Contract, Plan or other instrument binding upon AEFC, any AEFC Subsidiary or AEFC Investment Vehicle or to which the property of AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle is subject, except for any conflict, termination, contravention, default, payment, acceleration, vesting, cancellation, Liens or loss of rights that, individually or in the aggregate, would not reasonably be expected to have or result in an AEFC Material Adverse Effect.

Section 3.7. Financial Statements .

(a) Schedule 3.7 contains complete and correct copies of the following financial statements of AEFC (collectively, the “ AEFC Financial Statements ”): (i) consolidated financial statements of AEFC as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005 audited by BDO Seidman, LLP; (ii) consolidated financial statements of AEFC as of December 31, 2006 and 2005 and for the years ended December 31, 2006, 2005 and 2004 audited by BDO Seidman, LLP; and (iii) unaudited interim consolidated financial statements of AEFC as of June 30, 2007 and June 30, 2008 and for the six months ended June 30, 2007 and 2008. Each of the AEFC Financial Statements (including the related notes) presents fairly, in all material respects, the consolidated financial position and consolidated results of operations and cash flows of AEFC and the AEFC Subsidiaries as of the respective dates or for the respective periods set forth therein, all in conformity with GAAP consistently applied during the periods involved, except as otherwise noted therein and subject, in the case of the unaudited interim consolidated financial statements, to the absence of footnotes and to normal year-end adjustments consistent with GAAP.

(b) AEFC and the AEFC Subsidiaries maintain in all material respects internal controls over financial reporting (“ Internal Controls ”) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of AEFC and the AEFC Subsidiaries, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of AEFC and the AEFC Subsidiaries are being made only in accordance with authorizations of the management and directors thereof and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of AEFC and the AEFC Subsidiaries that could have a material effect on the financial statements of AEFC.

 

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Section 3.8. Absence of Certain Changes . Since June 30, 2008, other than (i) as set forth in Schedule 3.8 or (ii) as expressly contemplated by this Agreement or any Ancillary Agreement, (x) AEFC and each AEFC Subsidiary has in all material respects conducted its operations and business in the ordinary course of business, (y) there has not occurred or come to exist any AEFC Material Adverse Effect and (z) AEFC and the AEFC Subsidiaries have not taken any action that would have been prohibited by Section 5.1(b) of this Agreement, had such Section 5.1(b) been applicable since such date.

Section 3.9. Assets . AEFC and the AEFC Subsidiaries have good and marketable title to or, in the case of leased assets, good and valid leasehold interests in, or otherwise have full or sufficient and legally enforceable rights to use all of the properties and assets (other than real property, and whether tangible or intangible) used or held for use in the business of AEFC and the AEFC Subsidiaries as currently conducted, in each case free and clear of any Liens other than Permitted Liens, except for any failure to have such titles, interests or rights that, individually or in the aggregate, would not reasonably be expected to have an AEFC Material Adverse Effect. AEFC and the AEFC Subsidiaries, have and, after giving effect to the Merger, the Surviving Entity and its Subsidiaries will have, maintained in all material respects all tangible Assets in good repair, working order and operating condition, subject only to ordinary wear and tear.

Section 3.10. Real Property . None of AEFC or any AEFC Subsidiary has any material ownership interest in real property. Schedule 3.10 identifies (i) all material office locations in which AEFC or any AEFC Subsidiary is occupying space that is leased or licensed by any of them, and (ii) all other material Leases to which AEFC or any AEFC Subsidiary is a party. Except as set forth in Schedule 3.10, such leased real property constitutes all of the material real property leased, subleased, licensed or otherwise used in the operation of the business of AEFC or any AEFC Subsidiary as presently conducted. True and correct copies of such Leases have been delivered or made available to Dekania. Neither AEFC nor any AEFC Subsidiary is in material breach or default under any material Lease and, to the knowledge of AEFC, no event has occurred or failed to occur which, with the passage of time or giving of notice, or both, would constitute a material default, in the performance of the obligations under any of such Leases by AEFC or any AEFC Subsidiary or, to the knowledge of AEFC, by any other party to any of such material Leases. Except as may be limited by bankruptcy, insolvency, reorganization and similar applicable Laws affecting creditors generally and by the availability of equitable remedies (a) each of the material Leases to which AEFC or any AEFC Subsidiary is a party is a valid and binding obligation of AEFC or an AEFC Subsidiary, as applicable, and, to the knowledge of AEFC, each other party to such Lease and (b) each of the Leases is enforceable against AEFC or an AEFC Subsidiary, as applicable, and, to the knowledge of AEFC, each other party to such Lease, except in each case for failures that, individually or in the aggregate, would not reasonably be expected to have a AEFC Material Adverse Effect. Neither AEFC nor any

 

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AEFC Subsidiary has received any written communication from the landlord or lessor under any of such material Leases claiming that it is in breach of its obligations under such Leases, except for written communications claiming breaches that, individually or in the aggregate, would not reasonably be expected to have or result in a AEFC Material Adverse Effect.

Section 3.11. Material Contracts; Certain Contracts .

(a) Schedule 3.11(a) contains a correct and complete list of all Material Contracts of AEFC and the AEFC Subsidiaries in existence on the date of this Agreement (the “ AEFC Material Contracts ”). AEFC has made available or delivered to Dekania complete and correct copies of all written AEFC Material Contracts and accurate and complete descriptions of all material terms of all oral AEFC Material Contracts.

(b) Each AEFC Material Contract is valid and binding on AEFC and/or one or more AEFC Subsidiaries, as applicable, and is enforceable against AEFC or any AEFC Subsidiary that is a party thereto, as the case may be, and, to the knowledge of AEFC, each other party thereto, in accordance with its terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) the availability of equitable remedies may be limited by equitable principles of general applicability. Each of AEFC and any AEFC Subsidiary has performed all of its material obligations under each such AEFC Material Contract to the extent that such obligations have accrued. Except as set forth on Schedule 3.11(b), the enforceability of any AEFC Material Contract will not be affected by the execution, delivery or performance of this Agreement or any Ancillary Agreement except to the extent that the effect on such enforceability would not reasonably be expected to have or result in an AEFC Material Adverse Effect. There are no existing defaults (or circumstances, occurrences, events or acts that, with the giving of notice or lapse of time or both would become defaults) of AEFC or any AEFC Subsidiary or, to the knowledge of AEFC, any other party thereto under any AEFC Material Contract, except in each case for any defaults that, individually or in the aggregate, would not reasonably be expected to have an AEFC Material Adverse Effect.

(c) Except for any AEFC Material Contracts and as set forth in Schedule 3.11(c), as of the date of this Agreement, neither AEFC nor any AEFC Subsidiary has entered into or is bound by or subject to any of the following:

(i) any Contract (including any so-called take-or-pay or keep well agreements) under which (A) any Person has directly or indirectly guaranteed or assumed Indebtedness, liabilities or obligations of AEFC or any AEFC Subsidiary or (B) AEFC or any AEFC Subsidiary has directly or indirectly guaranteed Indebtedness, liabilities or obligations of any Person in each case in excess of $500,000 individually or in the aggregate in excess of $1,500,000;

(ii) other than pursuant to Contracts entered into in the ordinary course of business, any Contract providing for the indemnification of any Person with respect to liabilities, whether absolute, accrued, contingent or otherwise that would be material to AEFC and the AEFC Subsidiaries, taken as a whole;

 

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(iii) other than in the ordinary course of business, any Contract under which AEFC or any AEFC Subsidiary has made or is obligated to make, directly or indirectly, any loans, extensions of credit or other similar advances to any Person, in each case in excess of $500,000 individually or $1,500,000 in the aggregate;

(iv) any Contract prohibiting or materially restricting the ability of AEFC or any AEFC Subsidiary from conducting its business, engaging in any business or operating in any geographical area or competing with any Person;

(v) other than Contracts entered into in the ordinary course of business, any Contract to cap fees, share fees, share expenses, waive fees or to reimburse or assume any or all fees or expenses thereunder that would be material to AEFC on a consolidated basis;

(vi) other than Contracts entered into in the ordinary course of business, any Contract that provides for future earn-out or other similar contingent payment obligations of AEFC or any AEFC Subsidiary;

(vii) other than Contracts entered into in the ordinary course of business, any Contract which contains (A) a “clawback” or similar undertaking requiring the reimbursement or refund of any fees (whether performance based or otherwise) paid to AEFC or any AEFC Subsidiary or (B) a “most favored nation” or similar provision, in each case of (A) and (B) where the obligations of AEFC or any AEFC Subsidiary under each undertaking or provision would be material to AEFC on a consolidated basis; or

(viii) any Contract requiring AEFC or any AEFC Subsidiary (A) to co-invest with any other Person, (B) to provide seed capital or similar investment or (C) to invest in any investment product, in each case in an amount in excess of $500,000 individually or $1,500,000 in the aggregate.

(d) For the purpose of this Section 3.11, the phrase “ordinary course of business” shall be deemed to be limited to the ordinary course of business, consistent with past practice, of AEFC and the AEFC Subsidiaries, taken as a whole.

Section 3.12. Litigation . Schedule 3.12 sets forth a list of all pending and served and, to the knowledge of AEFC, pending and not served or threatened Litigation with respect to AEFC or any AEFC Subsidiary, other than any such pending or threatened Litigation which would not reasonably be expected to have or result in an AEFC Material Adverse Effect. Except as set forth on Schedule 3.12, there is no Proceeding pending and served or, to the knowledge of AEFC, pending and not served or threatened against AEFC or any AEFC Subsidiary, or any of their respective properties, assets or rights or businesses, other than Proceedings that, individually or in the aggregate, would not reasonably be expected to have or result in an AEFC Material Adverse Effect.

 

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Section 3.13. Affiliate Arrangements .

(a) Except as set forth in Schedule 3.13(a), there is no material Contract, arrangement, liability or obligation (whether or not evidenced by a writing) between an AEFC Subsidiary or AEFC Investment Vehicle, on the one hand, and AEFC or any of its Affiliates (other than an AEFC Subsidiary or AEFC Investment Vehicle), on the other hand (any such Contract, liability or obligation, an “ AEFC Affiliate Arrangement ”).

(b) To the knowledge of AEFC, no director or executive officer of AEFC or any AEFC Subsidiary: (i) owns, directly or indirectly, any economic or ownership interest (other than an equity interest of 5% or less in any entity which has a class of equity securities that is publicly traded on a national securities exchange) in (x) any material property or asset, real or personal, tangible or intangible, used in or held for use in connection with the business of AEFC or any AEFC Subsidiary, (y) any Client or (z) any supplier, lessor, lessee or competitor of AEFC or any AEFC Subsidiary, in each case of (x), (y) and (z) where such interest would be material to AEFC and the AEFC Subsidiaries, taken as a whole, (ii) serves as a trustee, officer, director or employee of any Person that is a Client, supplier, lessor, lessee or competitor of AEFC or any AEFC Subsidiary or (iii) has received any loans from or is otherwise a debtor of, or made any loans to or is otherwise a creditor of AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle.

(c) None of AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle has any loan outstanding, has extended or maintained credit or has arranged for the extension of credit to any director or executive officer of any of them which will not be terminated prior to the Effective Date.

Section 3.14. Compliance with Law; Government Regulation; Etc .

(a) (i) Each of AEFC, the AEFC Subsidiaries and the AEFC Investment Vehicles is in compliance in all material respects with all Applicable Laws and (ii) since January 1, 2005, none of them has received any written notice from any Governmental Authority asserting any violation by any of them of any Applicable Law, except as set forth in Schedule 3.14(a) and in each case for such violations or notices that, individually or in the aggregate, would not reasonably be expected to have or result in an AEFC Material Adverse Effect.

(b) AEFC and each AEFC Subsidiary hold all licenses, registrations, franchises, permits, orders, approvals and authorizations (collectively, “ Permits ”) that are required in order to permit AEFC and each AEFC Subsidiary to own or lease their properties and assets and to conduct their respective businesses under and pursuant to all Applicable Laws, other than such Permits the failure of which to obtain would not reasonably be expected to have or result in an AEFC Material Adverse Effect. All such Permits are in full force and effect and are not subject

 

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to any suspension, cancellation, modification or revocation or any Proceedings related thereto, and, to the knowledge of AEFC, no such suspension, cancellation, modification or revocation or Proceeding is threatened in writing, except, in each case, for such failures to be in full force or effect, suspensions, cancellations, modifications, revocations or Proceedings that, individually or in the aggregate, would not reasonably be expected to have an AEFC Material Adverse Effect. Each employee of AEFC or an AEFC Subsidiary who is required to be registered or licensed as a registered principal, registered representative, investment adviser representative, sales person or an equivalent person with any Governmental Authority is duly registered as such and such registration is in full force and effect, except for such failures to be so registered or for such registration to remain in full force and effective that, individually or in the aggregate, would not reasonably be expected to have or result in an AEFC Material Adverse Effect.

(c) Each AEFC Subsidiary identified in Schedule 3.14(c) is duly registered as an investment adviser under the Advisers Act. Each AEFC Subsidiary that is required to be is duly registered, licensed or qualified as an investment adviser in each state or other jurisdiction where the conduct of its business requires such registration, licensing or qualification, except where the failure to be so registered, licensed or qualified would not reasonably be expected to have an AEFC Material Adverse Effect. AEFC is not required to be registered, licensed or qualified under the Advisers Act or any other Applicable Law. Each AEFC Subsidiary identified in Schedule 3.14 (c) is in compliance in all material respects with Rule 206(4)-7 under the Advisers Act.

(d) Each AEFC Subsidiary that is required to be is duly registered, licensed or qualified as a broker or dealer in each jurisdiction where the conduct of its business requires such registration, licensing or qualification, except where the failure to be so registered, licensed or qualified would not reasonably be expected to have or result in an AEFC Material Adverse Effect. Each AEFC Subsidiary that is required to be is in compliance, and at all times required by Applicable Law during the past three years has complied, with all regulatory capital requirements under Applicable Law. AEFC and each applicable AEFC Subsidiary has made available to Dekania true, complete and correct copies of its Form BD, including all amendments thereto. AEFC is not required to be registered, licensed or qualified as a broker or dealer under any Applicable Law.

(e) Except as set forth in Schedule 3.14(e) or for any failures to be so registered, licensed or qualified that would not reasonably be expected to have or result in an AEFC Material Adverse Effect, no AEFC Subsidiary is required to be registered, licensed or qualified as a commodity pool operator, futures commission merchant, commodity trading advisor, bank, trust company, real estate broker, insurance company, insurance broker or transfer agent under any Applicable Law. Except as set forth in Schedule 3.14(e), neither AEFC nor any AEFC Subsidiary has received written notice of any Proceeding concerning any failure to obtain any commodity pool operator, futures commission merchant, commodity trading advisor, bank, trust company, real estate broker, insurance company, insurance broker or transfer agent registration, license or qualification.

 

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(f) Neither AEFC, any AEFC Subsidiary nor any “affiliated person” (as defined in the Investment Company Act) of any of them is (taking into account any applicable exemption) ineligible pursuant to Section 9(a) or 9(b) of the Investment Company Act to serve as an investment adviser (or in any other capacity contemplated in the Investment Company Act) to act in the capacities set forth in said Section 9(a) or 9(b) and there is no Proceeding pending and served or, to the knowledge of AEFC, pending and not served or threatened by any Governmental Authority, which would reasonably be expected to have or result in such ineligibility. Neither AEFC, any AEFC Subsidiary nor “affiliated persons” (as defined in the Advisers Act) of any of them is ineligible pursuant to Section 203 of the Advisers Act to serve as a registered investment adviser or “associated person” (as defined in the Advisers Act) of a registered investment adviser, and there is no Proceeding pending and served or, to the knowledge of AEFC, pending and not served or threatened by any Governmental Authority, which would reasonably be expected to result in the ineligibility of AEFC, any AEFC Subsidiary or any “affiliated person” to serve in any such capabilities. None of AEFC, any AEFC Subsidiary or their associated persons is ineligible pursuant to Section 15(b) of the Exchange Act to serve as a broker-dealer or as an “associated person” (as defined in the Exchange Act) of a registered broker-dealer, as applicable, and there is no Proceeding pending and served or, to the knowledge of AEFC, pending and not served or threatened by any Governmental Authority, which would reasonably be expected to result in the ineligibility of any of AEFC, any AEFC Subsidiary or any “affiliated person” to serve in any such capacities.

(g) No director, managing director or executive officer or, to the knowledge of AEFC, no other officer or trustee of AEFC or any AEFC Subsidiary is, or at any time since January 1, 2005 has been, (i) subject to any cease and desist, censure or other disciplinary or similar order issued by, (ii) a party to any consent agreement, memorandum of understanding or disciplinary agreement with, or (iii) subject to any written order from, any Governmental Authority.

(h) Since January 1, 2005, AEFC and each AEFC Subsidiary has filed all registration statements, reports, prospectuses, proxy statements, statements of additional information, sales literature and notices required to be filed by it with any Governmental Authority, including all material amendments or supplements to any of the above (the “ Filings ”), except for Filings the failure to be made would not reasonably be expected to have an AEFC Material Adverse Effect. Such Filings complied as to form in all material respects with the requirements of Applicable Law and did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were or are made, not misleading. Since January 1, 2005 each AEFC Investment Vehicle has made all required Filings, except for Filings the failure to be made would not reasonably be expected to have or result in an AEFC Material Effect.

 

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(i) Except for routine examinations conducted by any Governmental Authority in the ordinary course of the business of AEFC and the AEFC Subsidiaries as applicable, (i) no Governmental Authority has initiated any Proceeding or, to the knowledge of AEFC, no such Proceeding, investigation, examination, audit or review into the business of AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle is ongoing, unresolved or threatened by any Governmental Authority and (ii) neither AEFC, any AEFC Subsidiary nor any AEFC Investment Vehicle has received any written notice or communication (A) of any unresolved violation or exception by any Governmental Authority with respect to any report or statement by any Governmental Authority relating to any examination made by them, (B) threatening to revoke or condition the continuation of any Permit or (C) restricting or disqualifying their activities (except for restrictions generally imposed by rule, regulation or administrative policy on similarly regulated Persons generally), other than any of the forgoing that would not reasonably be expected to have or result in an AEFC Material Adverse Effect.

(j) Each of AEFC and the AEFC Subsidiaries currently has in effect one or more formal codes of ethics, insider trading policies, personal trading policies and other material policies as and to the extent required by Applicable Law, a complete and correct copy of each of which has been delivered or made available to Dekania. Such codes of ethics, insider trading polices, personal trading policies and other material policies comply in all material respects with Applicable Law. The policies of AEFC and the AEFC Subsidiaries as of the date of this Agreement with respect to avoiding conflicts of interest are as set forth in their most recent manuals, which have been made available to Dekania. Since January 1, 2006, there have been no violations by any officer or investment professional of AEFC or any AEFC Subsidiary of such codes of ethics, insider trading polices and personal trading policies, other than violations which would not reasonably be expected to have or result an AEFC Material Adverse Effect.

(k) Since January 1, 2005 AEFC, the AEFC Subsidiaries and the AEFC Investment Vehicles have complied with all Applicable Laws regarding the privacy of Clients and other Persons (except where the failure to so comply would not reasonably be expected to have or result in an AEFC Material Adverse Effect) and have established and complied in all material respects with policies and procedures in this regard reasonably designed to ensure compliance with Applicable Law.

(l) Since January 1, 2005 AEFC, the AEFC Subsidiaries and the AEFC Investment Vehicles have, to the extent required by Applicable Law, established written anti-money laundering programs and a written customer identification program in compliance with Applicable Law and have complied with the terms of such program, except where the failure to so comply would not reasonably be expected to have or result in an AEFC Material Adverse Effect.

(m) AEFC and each AEFC Subsidiary, and, to the knowledge of AEFC, its solicitors, third-party administrators, managers, brokers and distributors, have marketed, sold and issued investment products and securities in compliance with Applicable Law governing sale processes and practices, except in each case as would not reasonably be expected to have or result in an AEFC Material Adverse Effect.

 

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Section 3.15. No Convictions, Injunctions, etc., against Registered Personnel . Schedule 3.15 sets forth all of the principals, representatives or other personnel of AEFC and any AEFC Subsidiary for whom registration, qualification or licensure is required under the Commodities Exchange Act, the Securities Act, the Exchange Act, the Advisers Act or the Investment Company Act. No employee, officer, manager or member of AEFC and, to the knowledge of AEFC, no registered representative of AEFC within the last ten years has been convicted of any felony or misdemeanor involving the purchase or sale of any security or any insurance, annuity or similar contract or arising out of such person’s conduct as, or by reason of any misconduct is permanently or temporarily enjoined by order, judgment or decree of any court of competent jurisdiction from acting as, an underwriter, broker, dealer, investment adviser, municipal securities dealer, government securities broker, government securities dealer, transfer agent, insurance agent, or entity or person required to be registered under the Commodities Exchange Act, the Securities Act, the Exchange Act, the Advisers Act or the Investment Company Act, or as a salesman or employee of any investment company, bank, insurance company, insurance agency or entity or person required to be registered under the Commodities Exchange Act, the Securities Act, the Exchange Act, the Advisers Act or the 1940 Act, or is so permanently or temporarily enjoined from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any security or any insurance, annuity or similar contract.

Section 3.16. Assets Under Management; Clients .

(a) Each Client to which AEFC or an AEFC Subsidiary provides investment management, advisory or sub-advisory services that is (i) an employee benefit plan, as defined in Section 3(3) of ERISA that is subject to Title I of ERISA, (ii) a Person acting on behalf of such a plan or (iii) any entity whose assets include the assets of such a plan, within the meaning of ERISA and applicable regulations (hereinafter referred to as an “ ERISA Client ”) has, since January 1, 2005, been managed by AEFC or an AEFC Subsidiary such that the exercise of such management or provision of any services is in compliance with the applicable requirements of ERISA, except for any such failure to comply that would not reasonably be expected to have or result in an AEFC Material Adverse Effect. AEFC or an AEFC Subsidiary, to the extent it is regulated under the Advisers Act, satisfies the requirements of Prohibited Transaction Class Exemption 84-14 for a “qualified professional asset manager” (as such term is used in Prohibited Transaction Class Exemption 84-14).

(b) Since January 1, 2005, (i) all performance information prepared by AEFC or an AEFC Subsidiary and provided by AEFC or an AEFC Subsidiary to any Client or potential Client has complied in all material respects with Applicable Law; and (ii) AEFC or an AEFC Subsidiary, as applicable, has maintained all documentation necessary to form the basis for, demonstrate or recreate the foregoing performance calculations as required by Applicable Law.

(c) Since January 1, 2005, each Client account has been operated in all material respects in compliance with the terms of the relevant Investment Advisory Arrangement, except for any such failures to comply that would not reasonably be expected to have an AEFC Material Adverse Effect.

 

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(d) Since January 1, 2005, there has existed no material unremedied “out of balance” condition, pricing error or similar condition with respect to any Client account maintained by AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle, other than any of the foregoing that would not reasonably be expected to have or result in an AEFC Material Adverse Effect.

(e) AEFC and AEFC Subsidiaries that are registered investment advisers have adopted and implemented procedures or practices for the allocation of securities purchased for their Clients that comply in all material respects with Applicable Laws.

Section 3.17. Taxes .

(a) All material Tax Returns required to be filed with respect to AEFC and the AEFC Subsidiaries have been duly and timely filed with the appropriate Governmental Authority, and all such Tax Returns are true, correct and complete in all material respects. AEFC and the AEFC Subsidiaries have timely paid all material Taxes reflected as due and owing on such Tax Returns, and the AEFC Financial Statements reflect adequate reserves or accruals for Taxes not yet due or owing in accordance with GAAP or, if applicable, accounting principles of any other jurisdiction.

(b) There are no Liens for Taxes upon any of the assets of AEFC or any AEFC Subsidiary other than statutory Liens for Taxes not yet due and payable.

(c) No (A) waiver of any statute of limitations in respect of Taxes, (B) agreement for any extension of time with respect to a Tax assessment or deficiency or (C) power of attorney has been granted with respect to Taxes, in each case, relating to AEFC or any AEFC Subsidiary. None of AEFC and the AEFC Subsidiaries is a party to, bound by, or has any obligation under, any tax allocation or sharing agreement or arrangement.

(d) There is no current audit, examination, deficiency, refund litigation or proposed adjustment with respect to any Taxes relating to any of AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle. There has not been any written notice of any claim made by a Governmental Authority in a jurisdiction where a Tax Return has not been filed with respect to AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle, that material taxation by that jurisdiction is due by AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle, where such claim has not been resolved favorably to AEFC, such AEFC Subsidiary or such AEFC Investment Vehicle.

(e) None of the AEFC Subsidiaries is or was a member of any consolidated, combined or affiliated group of corporations that filed or was required to file consolidated, combined or unitary Tax Returns other than any group for which AEFC is or was the common parent.

 

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(f) Neither AEFC nor any AEFC Subsidiary has constituted either a “distributing corporation” or “controlled corporation” (within the meaning of Section 355(e)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (A) in the two (2) years prior to the date of this Agreement or (B) in a distribution which could otherwise constitute a “plan” or “series of related transactions” (within the meaning of Section 355 of the Code) with the transactions contemplated by this Agreement.

(g) There has been made available to Dekania correct and complete copies of (i) the relevant portion of all federal and other material Tax Returns of AEFC and the AEFC Subsidiaries for the taxable periods ending after December 31, 2001, which have been filed and (ii) all audit reports within the last five years relating solely to any material Taxes due from or with respect to AEFC or any AEFC Subsidiary.

(h) AEFC and the AEFC Subsidiaries are in material compliance with all applicable information reporting and Tax withholding requirements under applicable Tax laws.

(i) For all taxable years since its inception, each AEFC Investment Vehicle has elected to be treated as, and has qualified to be treated as, a partnership for U.S. federal income tax purposes and any similar provisions or sate or local law in any jurisdiction in which it filed or was required to file, a Tax Return. Each AEFC Investment Vehicle has (i) duly and timely filed with the appropriate Governmental Authority all material Tax Returns required to be filed and all such Tax Returns are true, correct and complete in all material respects and (ii) has timely paid, or withheld and paid over, all Taxes due or claimed to be due by any Governmental Authority or with respect to Taxes not yet due and payable, made an adequate provision on its financial statements in accordance with GAAP.

(j) Neither AEFC nor any AEFC Subsidiary has participated in any “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(c)(3)(i)(A) involving any of them. Neither AEFC nor any AEFC Subsidiary has promoted, marketed, offered to sell, sold or advised in respect of any “listed” transactions involving AEFC or any AEFC Subsidiary.

(k) Each of AEFC and the AEFC Subsidiaries is in material compliance with all applicable rules and regulations regarding the solicitation, collection and maintenance of any forms, certifications and other information required in connection with federal, state, local or foreign Tax withholding or reporting in connection with the conduct of their respective businesses.

(l) Schedule 3.17(l) lists all foreign, state and local jurisdictions in which AEFC or any AEFC Subsidiary files Tax Returns including the ownership or operation of the Business.

 

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Section 3.18. Benefit Plans; Employees .

(a) Each “employee pension benefit plan” (as defined in Section 3(2) of ERISA), each “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), and each other plan, arrangement or policy (written or oral) relating to stock options, stock purchases, deferred compensation, bonus, severance, fringe benefits or other employee benefits, in each case maintained or contributed to, or required to be maintained or contributed to, by AEFC or any AEFC Subsidiary for the benefit of any of their employees, or any plans, arrangements or policies mandated by Applicable Law is herein referred to as an “ AEFC Benefit Plan .” Each individual employment, collective bargaining, consulting, severance and change-in-control Contract under which AEFC or any AEFC Subsidiary has any present or future liability is herein referred to as an “ AEFC Employment Agreement .” Schedule 3.18(a) contains a true and complete list, as of the date of this Agreement, of each AEFC Benefit Plan and each material AEFC Employment Agreement. AEFC has delivered or made available to Dekania true, correct and complete copies of (A) each AEFC Benefit Plan, (B) the two (2) most recent annual reports on Form 5500 (including all schedules and attachments thereto) filed with the Internal Revenue Service with respect to each AEFC Benefit Plan (if any such report was required by Applicable Law), (C) the most recent summary plan description (or similar document) for each AEFC Benefit Plan and (D) each AEFC Employment Agreement. Neither AEFC nor any AEFC Subsidiary has any commitment to establish any new AEFC Benefit Plan or to materially modify any AEFC Benefit Plan.

(b) Each AEFC Benefit Plan has been administered in all material respects in accordance with its terms and in compliance with the applicable provisions of ERISA, the Code, all other Applicable Laws and the terms of all applicable collective bargaining agreements. There are no material investigations by any Governmental Authority, material termination proceedings or other material claims or Proceedings against or involving any AEFC Benefit Plan or asserting any rights to or claims for benefits under any AEFC Benefit Plan.

(c) No AEFC Benefit Plan is subject to Title IV of ERISA or Section 412 of the Code. Neither AEFC nor any AEFC Subsidiary would reasonably be expected to incur any liability under Title IV of ERISA as a result of being treated as a single employer with AEFC or any of its respective Affiliates for purposes of Section 414(b), (c), (m) or (o) of the Code.

(d) Each AEFC Benefit Plan intended to be qualified under Section 401(a) of the Code, and the trust (if any) forming a part thereof, has received a favorable determination letter from the Internal Revenue Service as to its qualification under the Code and to the effect that each such trust is exempt from taxation under Section 501(a) of the Code, and, to the knowledge of AEFC, there exist no circumstances likely to result in the loss of such qualification or tax-exempt status.

(e) Neither AEFC nor any AEFC Subsidiary has included within a multiemployer plan (as defined in Section 3(37) of ERISA) or incurred any liability under Section 4204 of ERISA that has not been satisfied in full.

(f) No amounts payable under any of AEFC Benefit Plans or any other Contract with respect to which AEFC or any AEFC Subsidiary may have any liability could fail to be deductible for federal income tax purposes by virtue of Section 280G of the Code as a result of the Merger.

 

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(g) The consummation of the Merger will not result in an increase in the amount of compensation or benefits or the acceleration of the vesting or timing of payment of any compensation or benefits payable to or in respect of or on behalf of any employee of AEFC or any AEFC Subsidiary, or entitle any such Person to any severance or similar compensation or benefits.

(h) Each Independent Contractor, and any other Person that AEFC or any AEFC Subsidiary treats as an independent contractor for Tax purposes, qualifies as an independent contractor under all applicable Tax statutes, regulations and rules.

(i) Neither AEFC nor any AEFC Subsidiary has any obligation to provide medical, dental or life insurance benefits (whether or not insured) to any of their employees or former employees after retirement (other than (i) coverage mandated by Applicable Law and (ii) benefits, the full direct cost of which is borne by such employee or former employee (or beneficiary thereof)).

(j) None of the AEFC Benefit Plans restricts the ability of AEFC to amend or terminate such plan.

Section 3.19. Intellectual Property; Information Technology .

(a) Schedule 3.19(a) sets forth a complete and correct list of all of the following, in each case owned by AEFC or any AEFC Subsidiary: (i) patents and patent applications; (ii) trademark applications and registrations; (iii) copyright registrations and (iv) domain names.

(b) To the knowledge of AEFC, neither it nor any AEFC Subsidiary infringes on or otherwise violates the Intellectual Property of any other Person. Neither AEFC nor any AEFC Subsidiary has received any written notice alleging such infringement or violation which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to have an AEFC Material Adverse Effect. To the knowledge of AEFC, no Person is infringing on or otherwise violating the Intellectual Property owned by AEFC or any AEFC Subsidiary, which infringement or violation would reasonably be expected to have an AEFC Material Adverse Effect.

(c) To the knowledge of AEFC, the Intellectual Property set forth on Schedule 3.19(a) is valid, enforceable and in full force and effect. Each of AEFC and the AEFC Subsidiaries has taken commercially reasonable steps to protect the confidentiality of the material trade secrets owned by it. All Information Technology used in connection with the business of AEFC and the AEFC Subsidiaries performs substantially in accordance with its documentation, except as has not had and would not reasonably be expected to have or result in an AEFC Material Adverse Effect.

 

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Section 3.20. Insurance . AEFC and each AEFC Subsidiary maintain, or AEFC maintains on behalf of the AEFC Subsidiaries, such worker’s compensation and employers liability, commercial property, commercial general liability, errors and omissions, directors’ and officers’, fidelity and other insurance or bonds as they may be required to maintain under Applicable Laws. AEFC and each AEFC Subsidiary has complied in all material respects with the terms and provisions of such policies and bonds.

Section 3.21. Compliance with Environmental Law . To the knowledge of AEFC, AEFC and each of the AEFC Subsidiaries has complied and is in compliance in all material respects with all applicable Environmental Laws pertaining to any of their respective properties and assets including any real property now or previously owned by them and the use and ownership thereof. There are no Proceedings by any Governmental Authority pending, or to the knowledge of AEFC, threatened against AEFC or any AEFC Subsidiary under any Environmental Law. There are no facts, circumstances or conditions relating to the past or present business or operations of AEFC or any AEFC Subsidiary (including the disposal of any wastes, hazardous substances or other materials), and no environmental conditions at any facilities or properties of AEFC or any AEFC Subsidiary (including any previously owned or operated properties) that, individually or in the aggregate, could reasonably be expected to give rise to any Proceedings or to any material liability, under any Environmental Law.

Section 3.22. Derivative Products . To the knowledge of AEFC, all interest rate swaps, caps, floors, option agreements, futures and forward Contracts and other similar risk management arrangements and derivative financial instruments entered into for the account of one or more of the Clients, were entered into (i) in accordance with applicable Client guidelines, prospectuses or offering memoranda to the extent entered into for Clients and (ii) in accordance in all material respects with all Applicable Laws and (iii) with counter-parties as directed by the applicable Client (where the Client so directs). To the knowledge of AEFC, no other party thereto is in material breach of any of its obligations under any such agreement or arrangement.

Section 3.23. Brokers and Finders . Except as set forth on Schedule 3.23, no broker, finder or similar intermediary has acted for or on behalf of, or is entitled to any broker’s, finder’s or similar fee or other commission from, AEFC or any AEFC Subsidiary in connection with this Agreement or the Ancillary Agreements or the Merger.

Section 3.24. Board of Directors Approvals . The Board of Directors of AEFC, at a meeting duly called and held, unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable, fair to, and in the best interests of AEFC and the holders of AEFC Common Stock and AEFC Preferred Stock, (ii) approved and adopted this Agreement and the transactions contemplated hereby, including the Merger, and (iii) resolved to recommend that the holders of AEFC Common Stock and AEFC Preferred Stock approve and adopt this Agreement and the transactions contemplated hereby, including the Merger.

 

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Section 3.25. Absence of Undisclosed Liabilities . Neither AEFC nor any AEFC Subsidiary is subject to any liabilities or obligations (whether known, unknown, absolute, accrued, contingent or otherwise), and there are no existing conditions, situations or facts that would or would reasonably be expected to result in any such obligation or liability, except (a) as reflected in the AEFC Financial Statements or in the notes thereto or (b) for obligations and liabilities (i) incurred in the ordinary course of business, consistent with past practice, or (ii) that individually or in the aggregate would not reasonably be expected to have or result in a AEFC Material Adverse Effect.

Section 3.26. Vote Required . The affirmative votes of the holders of (i) a majority of the shares of AEFC Common Stock outstanding, voting as a class, (ii) a majority of the shares of AEFC Preferred Stock outstanding, voting as a class, and (iii) a majority of the voting power of the shares of AEFC Common Stock and AEFC Preferred Stock outstanding, voting together as a single class, are the only votes of the holders of any class or series of the Company’s capital stock necessary to adopt this Agreement and approve the Merger.

Section 3.27. Representations Complete . Except for the representations and warranties of AEFC contained in this Article III, neither AEFC nor any AEFC Subsidiary or AEFC Investment Vehicle makes any express or implied representation or warranty on behalf of AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle to Dekania hereunder.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF DEKANIA

Except as set forth in writing in a Schedule attached to the Disclosure Letter delivered by Dekania to AEFC on the date hereof (the “ Dekania Disclosure Letter ”), Dekania represents and warrants to AEFC as follows:

Section 4.1. Organization . Dekania is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Dekania has the requisite corporate power and authority to carry on its business as it is now being conducted and to own, lease and operate all of its properties and assets that it purports to own, lease or operate. Dekania is duly licensed or qualified to do business in each jurisdiction where its business or the character or location of the properties and assets owned, leased or operated by it makes such qualification necessary, except for any failures to be so qualified that, individually or in the aggregate, would not reasonably be expected to have a Dekania Material Adverse Effect. Each Organizational Document of Dekania is in full force and effect, and Dekania is not in material violation thereof.

Section 4.2. Capital Structure .

(a) The authorized capital stock of Dekania consists of 30,000,000 shares of Dekania Common Stock, of which 12,699,900 shares are issued and outstanding, and 1,000,000 shares of Dekania Preferred Stock, of which no shares are issued and outstanding. All of the issued and outstanding shares of Dekania Common Stock have been duly authorized and validly issued, are fully paid and non-assessable and have not been issued in violation of any Equity Rights.

 

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(b) Except as set forth in Schedule 4.2(b), there are no outstanding Equity Rights (i) obligating Dekania to issue, deliver, redeem, purchase or sell, or cause to be issued, delivered, redeemed, purchased or sold, any capital stock of Dekania, including any Dekania Common Stock or Dekania Preferred Stock, or securities or obligations convertible or exchangeable into or exercisable for, any capital stock of Dekania, (ii) giving any Person a right to subscribe for any capital stock of Dekania or (iii) requiring or obligating Dekania to issue, grant, adopt or enter into any such Equity Right. Dekania does not have any outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights with respect to the capital stock or equity of Dekania. Dekania has no (x) outstanding Indebtedness that, by its terms, provides any Person the right to vote on any corporate matter requiring a vote of stockholders of Dekania, or that is convertible into or exercisable for any capital stock or equity of Dekania or (y) outstanding or authorized Equity Rights that entitle or convey to any Person the right to vote with the stockholders of Dekania on any matter. To the knowledge of Dekania, there are no voting trusts or similar agreements outstanding with respect to any capital stock or equity securities of Dekania.

Section 4.3. No Subsidiaries . Except as described in Schedule 4.3, Dekania does not own, and has not owned, any equity or other securities of, interests in, or Equity Rights with respect to, and has no right to acquire any equity or other securities of, or Equity Rights with respect to, any Person.

Section 4.4. Authority; Validity of Agreements . Dekania has the requisite corporate power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it is specified to be a party, and, subject to obtaining the Dekania Stockholder Vote (as defined in Annex A hereto), to perform its obligations hereunder and thereunder and to consummate the Merger. The execution, delivery and performance by Dekania of this Agreement and each of the Ancillary Agreements and the consummation by Dekania of the Merger, have been duly and validly authorized and approved by all necessary corporate action on the part of Dekania, subject to obtaining the Dekania Stockholder Vote. This Agreement and each of the Ancillary Agreements to be executed and delivered at or prior to the Closing has been or will be duly and validly executed and delivered by Dekania, and, assuming due authorization, execution and delivery by AEFC and any other party (other than Dekania) hereto and thereto, this Agreement constitutes and upon its execution prior to or at Closing each Ancillary Agreement will constitute, a valid and binding obligation of Dekania, enforceable against it in accordance with its terms, except as (a) the enforceability hereof or thereof may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (b) the availability of equitable remedies may be limited by equitable principles of general applicability.

 

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Section 4.5. Consents and Approvals . Except (a) as set forth in Schedule 4.5(a), (b) as required under the HSR Act, and (c) for the Dekania Stockholder Vote, Dekania is not required to obtain the Consent of any Governmental Authority or other Person or to obtain any Permit in connection with the execution and delivery by Dekania of this Agreement or the performance of this Agreement and each Ancillary Agreement by Dekania, except for Consents and Permits the failure of which to obtain, individually or in the aggregate, would not reasonably be expected to have or result in a Dekania Material Adverse Effect.

Section 4.6. No Conflicts . Assuming that any Consents referred to in Section 4.5 are properly submitted and duly obtained and any applicable waiting periods have expired or terminated and except as set forth in Schedule 4.6, the execution, delivery and performance of this Agreement and the Ancillary Agreements by Dekania do not, and will not, and the consummation of the Merger will not, conflict with, result in a termination of, contravene or constitute a default under, or be an event that with the giving of notice or passage of time or both will become a default or potential default under, or give to any other Person any right of termination, payment, acceleration, vesting or cancellation of or under, or accelerate the performance required by or maturity of, or result in the creation of any Lien or loss of any rights of Dekania pursuant to any of the terms, conditions or provisions of or under (a) any Applicable Law, (b) the Organizational Documents of Dekania or (c) any Contract, Plan or other instrument binding upon Dekania, or to which the property of Dekania is subject, except for, in the case of this clause (c), any conflict, termination, contravention, default, payment, acceleration, vesting, cancellation, Liens or loss of rights that, individually or in the aggregate, would not reasonably be expected to have or result in a Dekania Material Adverse Effect.

Section 4.7. SEC Matters .

(a) Dekania has filed or furnished, as applicable, on a timely basis all forms, statements, certifications, reports, exhibits and other documents required to be filed or furnished by it with the SEC under the Exchange Act, the Securities Act, the Sarbanes-Oxley Act, the rules and regulations promulgated under any of the foregoing, or otherwise (the forms, statements, certifications, reports, exhibits and other documents filed or furnished prior to, on or subsequent to the date hereof including any amendments or supplements thereto, the “ Dekania SEC Reports ”). Each of the Dekania SEC Reports was prepared and complied in all material respects with the applicable requirements of the Securities Act, the Exchange Act, the Sarbanes-Oxley Act and any other Applicable Law applicable to the Dekania SEC Reports as in effect at the time it was filed or furnished (or, in the case of any registration statement or proxy statement, on the date of effectiveness or the date of mailing, respectively, and in the case of any Dekania SEC Report amended or superseded by a filing prior to the date of this Agreement, then on the date of such amending or superseding filing). As of their respective dates of filing, effectiveness or mailing, as applicable (or, if amended or supplemented, as of the dates of such amendments or supplements) the Dekania SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.

(b) Dekania has been and is in compliance with the applicable listing, corporate governance and other applicable rules and regulations of the American Stock Exchange, Inc.

 

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(c) Dekania has established and maintains disclosure controls and procedures required by Exchange Act Rules 13a-14 and 15d-14. Such disclosure controls and procedures are adequate and effective to ensure that information required to be disclosed by Dekania is recorded and reported on a timely basis to its chief executive officer and chief financial officer by others within those entities.

(d) Each of the consolidated financial statements of Dekania contained in the Dekania SEC Reports (the “ Dekania Financial Statements ”), together with the related schedules and notes thereto, complied as to form in all material respects, as of the date of filing with the SEC, with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, and fairly presents, in all material respects, the financial position of Dekania as of the dates indicated and the statement of operations and stockholders’ equity and cash flows of Dekania for the periods then ended. The Dekania Financial Statements have been prepared in accordance with GAAP, applied on a consistent basis throughout the periods involved (except, in the case of unaudited quarterly financial statements, subject to normal year-end adjustments consistent with GAAP).

(e) The Dekania Common Stock is registered pursuant to Section 12(g) of the Exchange Act and no action has been taken or, to the best of Dekania’s knowledge, is contemplated, and no proceeding is pending or has been threatened in writing that would result in the suspension, cancellation or termination of such registration.

Section 4.8. Absence of Certain Changes . Since June 30, 2008, other than as expressly contemplated by this Agreement or any Ancillary Agreement, (x) Dekania has in all material respects conducted its business in the ordinary course of business, (y) there has not occurred or come to exist any Dekania Material Adverse Effect or any fact, occurrence, condition, change, development, effect, circumstance or event that, individually or in the aggregate, would reasonably be expected to have or result in a Dekania Material Adverse Effect, and (z) Dekania has not taken any action that would be prohibited by the terms of Section 5.1(b) of this Agreement, had such Section been applicable since such date.

Section 4.9. Litigation . Schedule 4.9 sets forth a list of all pending and served and, to the knowledge of Dekania, pending and not served or threatened Litigation and governmental investigations concerning or involving Dekania, other than any such pending or threatened Litigation which would not reasonably be expected to result in a Dekania Material Adverse Effect. Except as set forth in Schedule 4.9, there is no Proceeding pending and served or, to the knowledge of Dekania, pending and not served or threatened against Dekania or any of its Affiliates, or any of their respective properties, assets, businesses or rights, other than Proceedings that, individually or in the aggregate, would not reasonably be expected to have a Dekania Material Adverse Effect.

 

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Section 4.10. Compliance with Law; Government Regulation; Etc .

(a) (i) Dekania is in compliance in all material respects with all Applicable Laws and (ii) Dekania has not received any written or, to the knowledge of Dekania, oral, notice from any Governmental Authority asserting any violation by Dekania of any Applicable Law, except in each case for such violations or notices that, individually or in the aggregate, would not reasonably be expected to have a Dekania Material Adverse Effect.

(b) Dekania holds all Permits that are required in order to permit Dekania to own or lease its properties and assets and to conduct its business under and pursuant to all Applicable Laws, except in each case as would not reasonably be expected to result in a Dekania Material Adverse Effect.

(c) All such Permits are in full force and effect and are not subject to any suspension, cancellation, modification or revocation or any Proceedings related thereto, and, to the knowledge of Dekania, no such suspension, cancellation, modification or revocation or Proceeding is threatened.

Section 4.11. Dekania Benefit Plans; Employees . Dekania does not have any employees or any employee benefit plans, nor does it have any obligations to provide any such plans or benefits. No officer or director of Dekania has an employment Contract with Dekania.

Section 4.12. Intellectual Property; Information Technology . No material Intellectual Property or Information Technology is necessary for the conduct of Dekania’s business or operations as currently conducted. To the knowledge of Dekania, it does not infringe on or otherwise violate the Intellectual Property of any other Person. Dekania has not received any written notice alleging such infringement or violation which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to have a Dekania Material Adverse Effect. To the knowledge of Dekania, no Person is infringing on or otherwise violating the Intellectual Property owned by Dekania, which infringement or violation would reasonably be expected to have a Dekania Material Adverse Effect.

Section 4.13. Insurance . Dekania maintains such worker’s compensation and employers liability, commercial property, commercial general liability, errors and omissions, directors’ and officers’, fidelity and other insurance or bonds as it may be required to maintain under Applicable Laws. Dekania has complied in all material respects with the terms and provisions of such policies and bonds.

Section 4.14. Affiliate Arrangements .

(a) Except as set forth in Schedule 4.14(a), there is no material Contract, arrangement, liability or obligation (whether or not evidenced by a writing) between Dekania and any current or former officer, director, shareholder or Affiliate (any such Contract, liability or obligation, a “ Dekania Affiliate Arrangement ”).

 

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(b) To the knowledge of Dekania, except as set forth on Schedule 4.14(b) or in the Dekania SEC Reports, no director or executive officer of Dekania: (i) owns, directly or indirectly, any economic or ownership interest (other than an equity interest of 5% or less in any entity which has a class of equity securities that is publicly traded on a national securities exchange) in (x) any material property or asset, real or personal, tangible or intangible, used in or held for use in connection with Dekania’s business or (y) any supplier, lessor, lessee or competitor of Dekania, where such interest would be material to Dekania, (ii) serves as a trustee, officer, director or employee of any Person that is a supplier, lessor, lessee or competitor of Dekania or (iii) has received any loans from or is otherwise a debtor of, or made any loans to or is otherwise a creditor of, Dekania.

(c) Dekania has no loan outstanding, has not extended or maintained credit, and has not arranged for the extension of credit, to any director, officer or employee of any of them.

Section 4.15. Real Properties . Except as set forth in Schedule 4.15, Dekania neither owns nor leases any real or personal property material to its operations.

Section 4.16. Material Contracts .

(a) Schedule 4.16(a) contains a correct and complete list of all Material Contracts of Dekania in existence on the date of this Agreement (the “ Dekania Material Contracts ”). Each Dekania Material Contract is valid, binding and in full force and effect, and is enforceable against Dekania and, to the knowledge of Dekania, each other party thereto, in accordance with its terms. Dekania has duly performed all of its material obligations under each such Material Contract to the extent that such obligations have accrued. Except as set forth on Schedule 4.16(a), the enforceability of any Dekania Material Contract will not be affected by the execution, delivery or performance of this Agreement or any Ancillary Agreement. There are no existing defaults (or circumstances, occurrences, events or acts that, with the giving of notice or lapse of time or both would become defaults) of Dekania or, to the knowledge of Dekania, any other party thereto under any Material Contract, except in each case for any defaults that, individually or in the aggregate, would not reasonably be expected to have a Dekania Material Adverse Effect. To the knowledge of Dekania, there are no circumstances, occurrences, events or acts that, with the giving of notice or lapse of time or both, would permit Dekania, to alter or amend any of the material terms or conditions of any Material Contract or would permit or would result in any increased liability or penalty, except for such circumstances, occurrences, events or acts that, individually or in the aggregate, would not reasonably be expected to have a Dekania Material Adverse Effect.

(b) Except as set forth in Schedule 4.16(b), Dekania has not entered into or is bound by or subject to any Contract prohibiting or materially restricting the ability of Dekania to conduct its business, to engage in any business or operate in any geographical area or to compete with any Person.

 

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Section 4.17. Brokers and Finders . Except as set forth in Schedule 4.17, no broker, finder or similar intermediary has acted for or on behalf of, or is entitled to any broker’s, finder’s or similar fee or other commission from, Dekania in connection with this Agreement or the Ancillary Agreements or the Merger.

Section 4.18. Taxes .

(a) All material Tax Returns required to be filed with respect to Dekania have been duly and timely filed with the appropriate Governmental Authority, and all such Tax Returns are true, correct and complete in all material respects. Dekania has timely paid all material Taxes reflected as due and owing on such Tax Returns, and the Dekania Financial Statements reflect adequate reserves or accruals for Taxes not yet due or owing in accordance with GAAP or, if applicable, accounting principles of any other jurisdiction.

(b) There are no Liens for Taxes upon any of the assets of Dekania other than statutory Liens for Taxes not yet due and payable.

(c) No (A) waiver of any statute of limitations in respect of Taxes, (B) agreement for any extension of time with respect to a Tax assessment or deficiency or (C) power of attorney has been granted with respect to Taxes, in each case, relating to Dekania. Dekania is not a party to, or bound by, nor does it have any obligation under, any tax allocation or sharing agreement or arrangement.

(d) There is no current audit, examination, deficiency, refund litigation or proposed adjustment with respect to any Taxes relating to Dekania. There has been any written notice of any claim made by a Governmental Authority in a jurisdiction where a Tax Return has not been filed with respect to Dekania, that material taxation by that jurisdiction is due by Dekania, where such claim has not been resolved favorably to Dekania.

(e) No Subsidiary of Dekania is, or ever has been, a member of any consolidated, combined or affiliated group of corporations that filed or was required to file consolidated, combined or unitary Tax Returns other than any group for which Dekania is or was the common parent.

(f) Dekania has not constituted either a “distributing corporation” or “controlled corporation” (within the meaning of Section 355(e)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (A) in the two (2) years prior to the date of this Agreement or (B) in a distribution which could otherwise constitute a “plan” or “series of related transactions” (within the meaning of Section 355 of the Code) with the transactions contemplated by this Agreement.

(g) There has been made available to AEFC correct and complete copies of (i) the relevant portion of all federal and other material Tax Returns of Dekania for the taxable periods ending after December 31, 2001, which have been filed and (ii) all audit reports within the last five (5) years relating to any material Taxes due from or with respect to Dekania.

 

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(h) Dekania is in material compliance with all applicable information reporting and Tax withholding requirements under applicable Tax laws.

(i) Dekania has not participated in any “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(c)(3)(i)(A). Dekania has not promoted, marketed, offered to sell, sold or advised in respect of any “listed” transactions involving Dekania.

(j) Dekania is in material compliance with all applicable rules and regulations regarding the solicitation, collection and maintenance of any forms, certifications and other information required in connection with federal, state, local or foreign tax withholding or reporting in connection with the conduct its business.

(k) Schedule 4.18(k) lists all foreign, state and local jurisdictions in which Dekania files Tax Returns.

Section 4.19. Board of Directors Approvals . The Board of Directors of Dekania, at a meeting duly called and held, unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable, fair to, and in the best interests of Dekania and the holders of Dekania Common Stock, (ii) duly and validly adopted a resolution approving this Agreement and the transactions contemplated hereby, including the Merger and (iii) recommended that the stockholders of Dekania approve and adopt this Agreement and the Merger, and none of the aforesaid actions by such Board of Directors has been amended, rescinded or modified.

Section 4.20. Vote Required . The Dekania Stockholder Vote is the only vote of the holders of any class or series of Dekania’s capital stock, including the Dekania Common Stock, necessary to adopt this Agreement and approve the transactions contemplated hereby, including the Merger.

Section 4.21. Non-Applicability of Takeover Statutes . Dekania and its Board of Directors have taken all actions necessary such that no restrictive provisions of any “fair price,” “moratorium,” “control share acquisition,” “business combination,” “stockholder protection,” “interested stockholder” or other similar anti-takeover or regulation, including (without limitation) Section 203 of the DGCL, or any similar provisions of any of the Organizational Document of Dekania is, or at the Effective Time will be, applicable to Dekania, AEFC, any AEFC Subsidiary or AEFC Investment Vehicle, the Dekania Common Stock or this Agreement or any of the transactions contemplated hereby, including the Merger.

 

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Section 4.22. Absence of Undisclosed Liabilities . Dekania is not subject to any liabilities or obligations (whether known, unknown, absolute, accrued, contingent or otherwise), and there are no existing conditions, situations or facts that would reasonably be expected to result in any such obligation or liability, except (a) as reflected in the Dekania Financial Statements or in the notes thereto or (b) for obligations and liabilities (i) incurred in the ordinary course of business, consistent with past practice, or (ii) that individually or in the aggregate, have not had and would not reasonably by expected to have or result in a Dekania Material Adverse Effect.

Section 4.23. Representations Complete . Except for the representations and warranties of Dekania contained in this Article IV, Dekania does not make any express or implied representation or warranty to AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle hereunder.

ARTICLE V

COVENANTS

Section 5.1. Conduct of Business . During the period from the date of this Agreement and until the earlier of the Effective Time and the termination of this Agreement in accordance with its terms, except as (x) expressly contemplated by this Agreement or any Ancillary Agreement, (y) set forth in Schedule 5.1 to the AEFC Disclosure Letter or the Dekania Disclosure Letter, as the case may be, or (z) consented to in writing by either Dekania or AEFC, as the case may be (any request of such consent by AEFC or Dekania to be considered in good faith and the grant of such consent not to be unreasonably withheld, conditioned or delayed), each of AEFC (with respect to AEFC) and Dekania (with respect to Dekania) shall, and, in the case of AEFC, shall cause the AEFC Subsidiaries to:

(a) (i) carry on its businesses in the ordinary course in all material respects consistent with past practice, and (ii) use commercially reasonable efforts to keep its business and operations intact in all material respects and preserve its material rights, franchises, goodwill and relations with its clients, customers, lessors, suppliers and others with whom it does business so that they will be preserved as of and after the Effective Time.

(b) without limiting the generality of the foregoing,

(i) not amend in any material respect the Organizational Documents of AEFC or any AEFC Subsidiary or Dekania, as applicable (except as shall be necessary to discharge its obligations under this Agreement);

(ii) not make any distribution or declare, pay or set aside any dividend with respect to, or split, combine, redeem, reclassify, purchase or otherwise acquire directly, or indirectly, any equity interests or shares of capital stock of, or other equity or voting interest in, AEFC, any AEFC Subsidiary or Dekania, as applicable, or make any other changes in the capital structure of AEFC or any AEFC Subsidiary or Dekania, as applicable;

 

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(iii) except in connection with Equity Rights existing on the date of this Agreement and disclosed on Schedule 3.2(b) or 4.2(b), as applicable, not authorize for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver (i) any equity interests or capital stock of or other equity or voting interest in, AEFC, any AEFC Subsidiary or Dekania as applicable, or (ii) any Equity Rights in respect of, security convertible into, exchangeable for or evidencing the right to subscribe for or acquire either (A) any equity interests or shares of capital stock of, or other equity or voting interest in, AEFC, any AEFC Subsidiary or Dekania, as applicable, or (B) any securities convertible into, exchangeable for, or evidencing the right to subscribe for or acquire, any shares of the capital stock of, or other equity or voting interest in, AEFC, any AEFC Subsidiary or Dekania, as applicable;

(iv) not sell, transfer, assign, convey, lease, license mortgage, pledge or otherwise subject to any material Lien any of its properties or assets, tangible or intangible, except for Permitted Liens or in the ordinary course of business consistent with past practice;

(v) not incur, assume or guarantee (including by way of any agreement to “keep well” or of any similar arrangement) or cancel or waive any claims under any Indebtedness or other claims or rights of substantial value or amend or modify the terms relating to any such Indebtedness, claims or rights, except for any such incurrence, assumption or guarantee of Indebtedness or amendment of the terms of such Indebtedness in the ordinary course of business involving not more than $500,000;

(vi) not change any material financial accounting principle, method or practice (including any principles, methods or practices relating to the estimation of reserves or other liabilities), other than changes required by GAAP or Applicable Law;

(vii) not (A) other than routine wage or salary increases in the ordinary course of business consistent with past practice, make or agree to make any material increase in compensation (other than bonuses and commissions earned or paid in the ordinary course of business pursuant to compensatory arrangements in effect on the date of this Agreement or entered into in the ordinary course of business consistent with past practice with personnel hired after the date of this Agreement), pension, or other fringe benefits or perquisites payable to any officer or investment professional, (B) grant or agree to grant any severance or termination pay or enter into any Contract to make or grant any severance or termination pay or pay any bonus, other than in the ordinary course of business consistent with past practice, (C) other than in the ordinary course of business consistent with past practice or as required by Applicable Law, grant or agree to grant or accelerate the time of vesting or payment of any awards under a Plan, including an AEFC Benefit Plan, or (D) other than in the ordinary course of business consistent with past practice, establish, adopt, amend, modify or terminate any Plan, including an AEFC Benefit Plan, except, in the case of each of clauses (A) through (D) above, as necessary or required to comply with Applicable Law (including, without limitation, Section 409A of the Code;

 

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(viii) except as set forth in Schedule 5.1(b)(viii), not acquire any business or Person that would be material to AEFC or Dekania, as applicable, by merger, consolidation, purchase of substantial assets or equity interests, or by any other manner, in a single transaction or a series of related transactions, or enter into any Contract to do any of the foregoing;

(ix) not enter into, amend in any material respect, or terminate any Material Contract, other than in the ordinary course of business consistent with past practice;

(x) not amend, breach, terminate or allow to lapse any material Permit other than in the ordinary course of business or as required by Applicable Law;

(xi) not enter into or amend in any material respect any limited liability company, joint venture, partnership, strategic alliance, stockholders’ agreement, co-marketing, co-promotion, joint development or similar agreement, except in the ordinary course of business consistent with past practice;

(xii) not make or incur any capital expenditure or other financial commitment (other than up-front payments made in the ordinary course of business consistent with past practice to registered representatives upon joining AEFC or any AEFC Subsidiary) requiring payments in each case in excess of $500,000;

(xiii) not make or change any material Tax election, settle and/or compromise any material Tax liability, or amend any Tax Return in a manner inconsistent with past practice;

(xiv) not take any action that would be inconsistent in any material respect with each AEFC Investment Vehicle’s prospectuses and other offering, advertising and marketing materials, as amended or supplemented;

(xv) other than in the ordinary course of business, not pay, discharge, settle or satisfy any claim, liability or obligation (whether absolute, accrued, asserted or unasserted, contingent or otherwise) in excess of $500,000; and

(xvi) not enter into any Contract to take any action prohibited by or not in compliance with any provision of this Section 5.1, or otherwise commit or agree to take any such action.

Section 5.2. Information Prior to Closing . (a) Subject to the provisions of Section 5.6 and Applicable Law and the confidentiality obligations set forth in the Confidentiality Agreement, between the date hereof and the earlier of the Effective Time and the termination of this Agreement in accordance with its terms, each of Dekania and AEFC shall, and AEFC shall cause

 

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the AEFC Subsidiaries to, instruct their respective management personnel to reasonably cooperate with the other party and its representatives during normal business hours and provide the other party and its accountants, employees, attorneys and other representatives acting on behalf of the other party with reasonable access during normal business hours to, and permit such Persons to review, their respective properties, books, Contracts, accounts and records, and shall provide such other information to the other party and its representatives as they may reasonably request; provided that any such access and review shall be granted and conducted in such manner as not to interfere unreasonably with the conduct of the business of AEFC, the AEFC Subsidiaries or Dekania, as applicable.

(b) Between the date hereof and the earlier of the Closing Date and the termination of this Agreement in accordance with its terms, (i) AEFC shall provide Dekania on a monthly basis promptly as they become available copies of all regularly prepared monthly financial statements and reports of AEFC, as appropriate, including statements of operations and balance sheets, and (ii) Dekania shall provide AEFC promptly as they become available copies of all Dekania SEC Reports.

Section 5.3. Notification of Certain Matters .

(a) Between the date hereof and the earlier of the Closing Date and the termination of this Agreement in accordance with its terms,

(i) AEFC shall give prompt notice to Dekania of (A) the occurrence or existence of (1) the breach in any material respect of a representation or warranty made by AEFC in this Agreement, (2) any fact, circumstance or event that would reasonably be expected to prevent or materially delay any condition precedent to any party’s obligations from being satisfied, and/or (3) an AEFC Material Adverse Effect, in each case of which AEFC becomes aware; (B) any notice or other written communication (other than routine notices or communications in the ordinary course of business) from any Governmental Authority with respect to the Merger; or (C) any notice or other written communication from any Person alleging that the Consent of such Person is or may be required in connection with the Merger; and

(ii) Dekania shall give prompt notice to AEFC of (A) the occurrence or existence of (1) the breach in any material respect of a representation or warranty made by Dekania in this Agreement, (2) any fact, circumstance or event that would reasonably be expected to prevent or materially delay any condition precedent to any party’s obligations from being satisfied, and/or (3) a Dekania Material Adverse Effect, in each case of which Dekania becomes aware; (B) any notice or other written communication (other than routine notices or communications) from any Governmental Authority with respect to the Merger; and (C) any notice or other written communication from any Person alleging that the Consent of such Person is or may be required in connection with the Merger.

 

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(b) Between the date hereof and the earlier of the Closing Date and the termination of this Agreement in accordance with its terms, unless prohibited by Applicable Law, AEFC shall make available to Dekania, promptly after the same become available, complete and correct copies of all inspection reports and material correspondence relating to any inquiry or investigation provided to AEFC, any AEFC Subsidiary or any AEFC Investment Vehicle, by any Governmental Authority.

Section 5.4. No Solicitation, Etc .

(a) During the period from the date hereof continuing through the Closing or the termination of this Agreement in accordance with its terms, whichever occurs first, AEFC shall not, and shall use commercially reasonable efforts to cause the AEFC Subsidiaries and all of the respective officers, directors, employees, agents, representatives, consultants, financial advisors, attorneys or accountants thereof (collectively, the “ AEFC Representatives ”) not to, directly or indirectly, initiate, solicit, engage in or knowingly encourage discussions or negotiations with, or provide any information to, any Person, other than Dekania (and its Affiliates and the Dekania Representatives), concerning any acquisition by, or issuance to, such Person of any Equity Rights, capital stock or other equity securities of AEFC or any material AEFC Subsidiary, other than as permitted or contemplated by this Agreement, including Section 5.1 hereto, or the AEFC Disclosure Letter, or any merger, sale of all or a substantial portion of the assets of, recapitalization or similar transaction involving AEFC or any material AEFC Subsidiary. AEFC will notify Dekania as soon as practicable if any Person makes any proposal, offer or inquiry to AEFC or any AEFC Representative with respect to the foregoing and shall describe in reasonable detail the identity of any such Person and the substance and material terms of any such proposal or offer. Notwithstanding any other provision contained herein, the members of AEFC’s Board of Directors shall not be prevented from complying with their fiduciary duties under Applicable Law, and the AEFC Representatives shall not be prevented from assisting the AEFC Board of Directors in so complying, including without limitation engaging in discussions or negotiations or furnishing information (in each case only to the extent necessary to comply with such disclosure obligations or fiduciary duties), provided that AEFC shall not be authorized to enter into any agreement providing for an acquisition of AEFC or any substantial part of its Equity Rights, capital stock or other equity securities or assets prior to the termination of this Agreement in accordance with its terms.

(b) During the period from the date hereof continuing through the Closing, Dekania shall not, and shall use commercially reasonable efforts to cause its Affiliates and all of its and their respective officers, directors, employees, agents, representatives, consultants, financial advisors, attorneys or accountants (collectively, the “ Dekania Representatives ”) not to, directly or indirectly, initiate, solicit, engage in or knowingly encourage discussions or negotiations with, or provide any information to, any Person, other than AEFC (and its Affiliates and the AEFC Representatives), concerning any acquisition by, or issuance to, such Person of any Equity Rights, capital stock or other securities of Dekania, other than as permitted or contemplated by this Agreement, including Section 5.1 hereto, or the Dekania Disclosure Letter, or any merger, asset sale, recapitalization or similar transaction involving Dekania. Dekania will notify AEFC

 

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as soon as practicable if any Person makes any proposal, offer or inquiry to Dekania or any Dekania Representative with respect to the foregoing and shall describe in reasonable detail the identity of any such Person and the substance and material terms of any such proposal or offer. Notwithstanding any other provision contained herein (i) Dekania and its Board of Directors shall not be prohibited from complying with their disclosure obligations under Rules 14d-9 and 14e-2 under the Exchange Act so long as the requirements set forth in this Section 5.4(b) are satisfied and provided that such Rules shall in no way eliminate or modify the effect that any action pursuant to such Rules would otherwise have under this Agreement, and (ii) the members of the Dekania Board of Directors shall not be prevented from complying with their fiduciary duties under Applicable Law, and the Dekania Representatives shall not be prevented from assisting the Dekania Board of Directors in so complying, including without limitation engaging in discussions or negotiations or furnishing information (in each case only to the extent necessary or advisable to comply with such fiduciary duties), provided that Dekania shall not be authorized to enter into any agreement providing for an acquisition of Dekania or any substantial part of its Equity Rights, capital stock or other equity securities or assets prior to the termination of this Agreement in accordance with its terms.

Section 5.5. Confidentiality and Announcements .

(a) In the event of the termination of this Agreement at any time prior to the Effective Time, and subject to the terms of the Confidentiality Agreement, Dekania shall keep confidential, and use commercially reasonable efforts to cause its Affiliates and other Dekania Representatives to keep confidential, all non-public information in its possession provided by AEFC or any AEFC Representative relating to AEFC, the AEFC Subsidiaries, the AEFC Investment Vehicles, and the respective businesses and operations thereof, except (i) as required by Applicable Law or administrative process, (ii) for information that is or becomes known or available to the public at the time of disclosure, or thereafter becomes known to the public other than as a result of a breach of this Section 5.5(a) or (iii) for information that is or was received from a third party that, to the knowledge of such party to this Agreement, is or was (at the relevant time) not in breach of a confidentiality obligation with regard to such information.

(b) Neither party to this Agreement shall, nor shall any of their respective Affiliates or representatives (including accountants, lenders, counsel or investment bankers), without the approval of the other party, issue any press release or make any other public disclosure regarding the execution of this Agreement or the transactions contemplated hereby, including the Merger, or otherwise disclose any of the contents of this Agreement or the Ancillary Agreements, except as may be determined in good faith by a party to be required by Applicable Law or regulation or by obligations pursuant to any listing agreement with any national securities exchange (in which case such party shall consult, to the extent reasonably practicable, with the other party prior to issuing such press release or making such public disclosure).

 

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Section 5.6. Regulatory Matters; Third-Party Consents .

(a) The parties to this Agreement shall cooperate with each other and use commercially reasonable best efforts to prepare and file, as promptly as practicable, all necessary documentation, to effect all applications, notices, petitions and filings, and to obtain as promptly as practicable all Consents of all third parties and Governmental Authorities set forth in Schedules 3.5 and 4.5 or that are necessary to consummate the Merger; provided, however , that (i) no party shall be required to make any payment to obtain any Consent from a third party (or Governmental Authority), except that Dekania shall pay the required filing fees for any applications under the HSR Act or any registration statement or proxy statement filed with the SEC or any listing application filed with any national securities exchange, and (ii) neither party nor any Subsidiary thereof shall agree orally or in writing to any material amendments to any Material Contract of such party, to any material concessions in any material commercial arrangements or to any material loss of rights (whether to have effect prior to or after the Effective Time), in each case, in connection with obtaining any Consents from any private third-party or Governmental Authority without obtaining the prior written consent of the other party hereto, which consent shall not be unreasonably delayed, cancelled or withheld.

(b) If any required Consent of any third party (excluding any Governmental Authority) is not obtained prior to the Closing, the parties hereto, each without cost, expense or liability to the other (except as provided in Article VII hereof), shall cooperate in good faith to seek prior to Closing, if possible, a reasonable alternative arrangement to achieve the economic results intended; provided, however , that the provisions of this Section 5.6(b) shall not affect the conditions set forth in Section 6.2(d) and 6.3(d) hereof.

(c) Subject to Applicable Law and any applicable confidentiality restrictions, including as set forth in this Agreement or the Confidentiality Agreement, Dekania and its counsel, on the one hand, and AEFC and its counsel, on the other hand, shall have the right to review (in advance to the extent practicable) any information relating to Dekania or AEFC, as the case may be, that appear in any filing made with, or written materials submitted to, any Governmental Authority in connection with the Merger, provided that nothing contained herein shall be deemed to provide any party to this Agreement with a right to review any such information provided to any Governmental Authority on a confidential basis in connection with the Merger.

Section 5.7. AEFC Client Consents .

(a) If Consent or other action is required by Applicable Law or by the Investment Advisory Arrangement of any Client for the Investment Advisory Arrangement with such Client to continue after Closing, as promptly as practicable following the date hereof, AEFC shall, or shall cause an AEFC Subsidiary to, send a notice complying with Applicable Law and the terms of such Client’s Investment Advisory Arrangement in form and substance reasonably acceptable to Dekania (the “ Notice ”) informing such Client of the Merger and requesting such Consent in writing or other required action.

 

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(b) Subject to Applicable Law, Dekania and AEFC agree that any Consent required for any Investment Advisory Arrangement with a Client (other than a Public Fund) to continue after the Effective Time shall be deemed given for all purposes under this Agreement (A) if written Consent is required under Applicable Law or the respective Investment Advisory Arrangement, upon receipt of the written Consent requested in the Notice prior to the Closing Date or (B) if Consent other than written Consent is permitted under Applicable Law and the respective Investment Advisory Arrangement, (x) upon receipt of a written Consent requested in the Notice prior to the Closing Date or (y) if no such written Consent is received, if forty-five (45) days shall have passed since the sending of written notice (“ Negative Consent Notice ”) to such Client (which Negative Consent Notice may be included in the Notice) requesting written Consent as aforesaid and informing such Client: (I) of the intention to complete the Merger, which will result in a deemed assignment of such Client’s Investment Advisory Arrangement; (II) of the Surviving Entity’s or one or more of its Subsidiaries’ intention to continue to provide the advisory services pursuant to the existing Investment Advisory Arrangement with such Client after the Closing if such Client does not terminate such agreement prior to the Closing; and (III) that the Consent of such Client will be deemed to have been granted if such Client continues to accept such advisory services for a period of at least forty-five (45) days after the sending of the Negative Consent Notice without termination; provided that, in any case under clause (A) or (B), no Consent shall be deemed to have been given for any purpose under this Agreement if at any time prior to the Closing such Client indicates, either orally or in writing, that such Client (1) has not so consented or has terminated or intends to withdraw its Consent or terminate, in whole or in part, its Investment Advisory Ar