CONTRIBUTION AND JOINT VENTURE
AGREEMENT
DATED
AS OF OCTOBER 7,
2009
BY AND AMONG
FIRST MARINER
BANCORP,
MARINER FINANCE,
LLC,
MF RAVEN HOLDINGS,
INC.
AND
MF HOLDCO, LLC
CONTRIBUTION AND JOINT VENTURE
AGREEMENT
TABLE OF CONTENTS
|
ARTICLE I
DEFINITIONS
|
1
|
|
|
|
|
ARTICLE II
CONTRIBUTIONS AND EXCHANGES
|
9
|
|
Section
2.1.
|
Agreements
to Contribute .
|
9
|
|
Section
2.2.
|
Consideration Exchanged for
Contributions .
|
9
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|
Section
2.3.
|
Delivery of
Contributions .
|
10
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|
Section
2.4.
|
Closing .
|
10
|
|
Section
2.5.
|
Adjustment
to Exchange Amount .
|
10
|
|
Section
2.6.
|
Access;
Information .
|
12
|
|
Section
2.7.
|
Escrow
Agreement
|
13
|
|
|
|
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
|
13
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|
Section
3.1.
|
Representations and Warranties of FMB and the
Company .
|
13
|
|
Section
3.2.
|
Representations and Warranties of JV
Corp
|
30
|
|
Section
3.3.
|
Representations and Warranties of
Holdco
|
32
|
|
|
|
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ARTICLE IV
CONDITIONS PRECEDENT
|
33
|
|
Section
4.1.
|
Conditions
Precedent to Obligation of JV Corp and Holdco
|
33
|
|
Section
4.2.
|
Conditions
Precedent to Obligations of FMB
|
37
|
|
|
|
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ARTICLE V
OTHER AGREEMENTS
|
40
|
|
Section
5.1.
|
Tax
Matters .
|
40
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|
Section
5.2.
|
Approvals
|
42
|
|
Section
5.3.
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Employee
Benefits .
|
43
|
|
Section
5.4.
|
Conduct of
the Business of the Company
|
44
|
|
Section
5.5.
|
Publicity
|
44
|
|
Section
5.6.
|
Non-Solicitation and
Non-Competition.
|
45
|
|
Section
5.7.
|
Further
Assurances
|
47
|
|
Section
5.8.
|
Post-Closing
Access to Information
|
47
|
|
|
|
ARTICLE VI SURVIVAL OF REPRESENTATIONS AND
WARRANTIES AND INDEMNIFICATION
|
47
|
|
Section
6.1.
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Survival of
Representations, Warranties and Covenants
|
47
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|
Section
6.2.
|
Indemnification by FMB
|
47
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|
Section
6.3.
|
Indemnification by JV Corp
|
48
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|
Section
6.4.
|
Assertion of
Indemnification Claim
|
48
|
|
Section
6.5.
|
Limitation
of Liability
|
49
|
|
Section
6.6.
|
Exclusive
Remedy
|
50
|
|
Section
6.7.
|
Liability
Arising Post-Closing
|
50
|
|
|
|
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ARTICLE VII
TERMINATION
|
51
|
|
Section
7.1.
|
Termination
|
51
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Section
7.2.
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Effect of
Termination
|
51
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|
Section
7.3.
|
Payment of
Expenses Upon Termination
|
51
|
|
|
|
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ARTICLE VIII
MISCELLANEOUS
|
51
|
|
Section
8.1.
|
Fees and
Expenses
|
51
|
|
Section
8.2.
|
Notices
|
52
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|
Section
8.3.
|
Entire
Agreement
|
53
|
|
Section
8.4.
|
Binding
Effect; Benefit
|
53
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|
Section
8.5.
|
Section
Headings; Construction
|
53
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|
Section
8.6.
|
Counterparts
|
53
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|
Section
8.7.
|
Applicable
Law
|
53
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|
Section
8.8.
|
Time of
Essence
|
53
|
|
Section
8.9.
|
Severability
|
53
|
CONTRIBUTION AND JOINT VENTURE
AGREEMENT
THIS CONTRIBUTION AND JOINT VENTURE AGREEMENT
(this “Agreement”), dated as of October
7, 2009, is made and entered into by and among First Mariner
Bancorp, a Maryland corporation (“FMB”), Mariner
Finance, LLC, a Maryland limited liability company (the
“Company”), MF Raven Holdings, Inc., a Delaware
corporation (“JV Corp”), and MF Holdco, LLC, a
Delaware limited liability company
(“Holdco”). FMB, the Company, JV Corp
and Holdco are sometimes referred to collectively herein as the
“Parties” and individually as a
“Party.”
RECITALS
A. FMB
owns all of the issued and outstanding membership interests of the
Company (the “Interests”).
B. At
Closing (as defined herein), FMB desires to contribute all of the
Interests to JV Corp (the “FMB Contribution”), and
JV Corp desires to exchange for such Interests a combination
of cash and fifty (50) shares of JV Corp Common Stock (as
defined herein) on the terms and conditions hereinafter set
forth.
C. At
Closing, Holdco desires to contribute the Holdco Contribution (as
defined herein) to JV Corp, and JV Corp desires to exchange
for the Holdco Contribution nine hundred fifty (950) shares of
JV Corp Common Stock on the terms and conditions hereinafter
set forth.
D. The
Parties intend that the FMB Contribution and the Holdco
Contribution, collectively, be treated as a transfer pursuant to
Section 351 of the Code (as defined herein).
E. The
Company desires to join in this Agreement for the purposes of
acknowledging its role in facilitating the consummation of the
Transactions (as defined herein) and setting forth certain
representations, warranties and covenants to cooperate with and
otherwise assist the other Parties with respect thereto.
AGREEMENT
NOW, THEREFORE, in consideration of the premises
and the mutual covenants, promises and undertakings set forth in
this Agreement, the Parties, intending to be legally bound, hereby
agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the indicated
meanings unless the context requires otherwise:
“ Affiliate ” means, with
respect to any Person, another Person that controls, is controlled
by or is under common control with such Person.
“ Agreement ” has the meaning
given such term in the opening paragraph of this
Agreement.
“ Basket ” has the meaning
given such term in Section 6.5(a) of this
Agreement.
“ Borrowed Indebtedness ”
means, as to the Company and the Subsidiaries (i) all
obligations (whether interest, principal, fees, penalties or
otherwise) of the Company for borrowed money, (ii) all
obligations of the Company or any Subsidiary evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
obligations of the Company or any Subsidiary to pay the deferred
purchase price of property or services, except trade accounts
payable arising in the ordinary course of business, (iv) all
obligations of the Company or any Subsidiary under capitalized
equipment leases, and (v) any of the foregoing guaranteed by
the Company or any Subsidiary; excluding, however, any advances
under the Wells Fargo Facility and the FMB Subdebt.
“ Business ” means the
business conducted by the Company and the Subsidiaries.
“ Business Day ” means any
day the banks in Baltimore, Maryland are open for
business.
“ Cap ” has the meaning given
such term in Section 6.5(b) of this
Agreement.
“ Change in Control ” means,
with respect to any Person, any of the following:
(i) the acquisition by any other Person of more than 50% of
the voting securities of such Person, or all or substantially
all of the assets of such Person; (ii) during
any 24-month period, individuals who at the beginning of any
such period constitute the Board of Directors (or similar
governing body) of such Person cease for any reason to constitute
at least a majority thereof, unless the election, or the nomination
for election by such Person’s stockholders, of each director
of such Person first elected during such period was approved by a
vote of at least two-thirds of the directors of such Person then
still in office who were directors of such Person at the beginning
of any such period; (iii) a merger, consolidation, or other
combination transaction involving such Person in which the holders
of the voting securities of such Person prior to such transaction
would not have the ability to cast more than 50% of the votes which
all security holders of the Person surviving such transaction would
be entitled to cast, (iv) any dissolution, liquidation,
bankruptcy, assignment for the benefit of creditors, foreclosure of
all or substantially all of the assets of such Person, or
(v) any similar transaction or occurrence with respect to such
Person.
“ Changes in Economic Conditions
” means changes in economic conditions affecting financial
institutions generally, including, without limitation, changes in
market interest rates or the projected future interest rate
environment.
“ Claim ” has the meaning
given such term in Section 6.4 of this
Agreement.
“ Claim Notice ” has the
meaning given such term in Section 6.4 of this
Agreement.
“ Claim Response ” has the
meaning given such term in Section 6.4 of this
Agreement.
“ Closing ” has the meaning
given such term in Section 2.4 of this
Agreement.
“ Closing Date ” has the
meaning given such term in Section 2.4 of this
Agreement.
“ Closing Date Balance Sheet
” has the meaning given such term in
Section 2.5(b)(1) of this Agreement.
“ Closing Net Assets ” has
the meaning given such term in Section 2.5(c) of this
Agreement.
“ COBRA ” has the meaning
given such term in Section 3.1(t)(7) of this
Agreement.
“ Code ” means the Internal
Revenue Code of 1986, as amended.
“ Commitment ” and “
Commitments ” have the meanings given such terms in
Section 3.1(n)(1) of this Agreement.
“ Company ” has the meaning
given such term in the opening paragraph of this
Agreement.
“ Company Intellectual Property
” has the meaning given such term in
Section 3.1(o)(1) of this Agreement.
“ Company Savings Plan ” has
the meaning given such term in Section 5.3(b) of this
Agreement.
“ Competing Business ” has
the meaning given such term in Section 5.6(a)(1) of
this Agreement.
“ Covenant Period ” has the
meaning given such term in Section 6.1 of this
Agreement.
“ Derivative Transactions ”
means any swap transaction, option, warrant, forward purchase or
sale transaction, futures transaction, cap transaction, floor
transaction or collar transaction relating to one or more
currencies, commodities, bonds, equity securities, loans, interest
rates, prices, values, or other financial or nonfinancial assets,
credit-related events or conditions or any indexes, or any other
similar transaction or combination of any of these transactions,
including collateralized mortgage obligations or other similar
instruments or any debt or equity instruments evidencing or
embedding any such types of transactions, and any related credit
support, collateral or other similar arrangements related to such
transactions.
“ Disclosed ” means, with
respect to FMB or the Company, disclosed in the written information
included in the Schedules attached to this Agreement which describe
in reasonable detail the matters contained therein.
“ Employee Benefit Plan ” and
“ Employee Benefit Plans ” have the meanings
given such terms in Section 3.1(t)(1) of this
Agreement.
“ Encumbrance ” means any
lien, charge, mortgage, pledge, security interest, encumbrance,
assessment or adverse claim by a third party; excluding, however,
any lien, charge, mortgage, pledge, security interest, encumbrance,
assessment or adverse claim created or imposed pursuant to the
Wells Fargo Facility, the FMB Subdebt or any modifications or
replacements thereof.
“ Environmental Laws ” has
the meaning given such term in Section 3.1(p) of this
Agreement.
“ ERISA ” means the Employee
Retirement Income Security Act of 1974, as amended.
“ ERISA Affiliate ” means any
trade or business (whether or not incorporated) under common
control with the Company within the meaning of Section 414(b),
414(c), 414(m) or 414(o) of the Code.
“ Escrow Agent ” has the
meaning given such term in Section 2.3(a)(2) of this
Agreement.
“ Escrow Agreement ” has the
meaning given such term in Section 2.7 of this
Agreement.
“ Escrow Funds ” has the
meaning given such term in Section 2.3(a)(1) of this
Agreement.
“ Exchange Amount ” has the
meaning given such term in Section 2.2(a) of this
Agreement.
“ Exchange Stock ” has the
meaning given such term in Section 2.3(a) of this
Agreement.
“ Final Adjustment Amount ”
has the meaning given such term in Section 2.5(b)(3) of
this Agreement.
“ Final Closing Net Assets ”
has the meaning given such term in Section 2.5(b)(3) of
this Agreement.
“ Financial Statements ” has
the meaning given such term in Section 3.1(e) of this
Agreement.
“ FMB ” has the meaning given
such term in the opening paragraph of this Agreement.
“ FMB Computation ” has the
meaning given such term in Section 2.5(b)(2) of this
Agreement.
“ FMB Contribution ” has the
meaning given such term in the Recitals of this
Agreement.
“ FMB Indemnitees ” has the
meaning given such term in Section 6.3 of this
Agreement.
“ FMB Notice ” has the
meaning given such term in Section 2.5(b)(2) of this
Agreement.
“ FMB Subdebt ” means the
Company’s subordinated indebtedness to FMB in the outstanding
principal amount of $4,000,000.00, which is evidenced by that
certain Master Demand Note dated July 18, 2006 in the face amount
of $8,000,000.00 , and which shall be amended at Closing in
accordance with Section 4.1(l) of this
Agreement.
“ GAAP ” means generally
accepted accounting principles in the United States, as in effect
on the date thereof, applied on a basis consistent with prior
periods.
“ General Survival Period ”
has the meaning given such term in Section 6.1 of this
Agreement.
“ Governmental Authority ”
means any foreign, federal, state or local government, political
subdivision or governmental or regulatory authority, agency, board,
bureau, commission, instrumentality or court or quasi-governmental
authority.
“ Hazardous Materials ” has
the meaning given such term in Section 3.1(p) of this
Agreement.
“ Holdco ” has the meaning
given such term in the Recitals of this Agreement.
“ Holdco Contribution ” means
that cash contribution in the amount of $12,825,000.00 to be
contributed by Holdco to JV Corp.
“ Holdco Exchange Stock ” has
the meaning given such term in Section 2.2(b) of this
Agreement.
“ Indemnified Party ” has the
meaning given such term in Section 6.4 of this
Agreement.
“ Indemnifying Party ” has
the meaning given such term in Section 6.4 of this
Agreement.
“ Independent Accountant ”
has the meaning given such term in Section 2.5(b)(2) of
this Agreement.
“ Initial Cash Consideration
” has the meaning given such term in
Section 2.3(a)(1) of this Agreement.
“ Initial Exchange Amount ”
has the meaning given such term in Section 2.2(a) of
this Agreement.
“ Intellectual Property ” has
the meaning given such term in Section 3.1(o)(1) of
this Agreement.
“ Interests ” has the meaning
given such term in the Recitals of this Agreement.
“ Interim Balance Sheet ” has
the meaning given such term in Section 3.1(e) of this
Agreement.
“ Interim Date ” has the
meaning given such term in Section 3.1(e) of this
Agreement.
“ Interim Statements ” has
the meaning given such term in Section 3.1(e) of this
Agreement.
“ JV Corp ” has the
meaning given such term in the opening paragraph of this
Agreement.
“ JV Corp Common Stock ”
has the meaning given such term in Section 3.2(b) of
this Agreement.
“ JV Corp Computation ”
has the meaning given such term in Section 2.5(b)(1) of
this Agreement.
“ JV Corp Indemnitees ”
has the meaning given such term in Section 6.2 of this
Agreement.
“ JV Corp Payments ” has
the meaning given such term in Section 2.3(a) of this
Agreement.
“ Knowledge ”
means: (i) with respect to a Person who is an
individual, matters actually known to that Person; (ii) with
respect to FMB, matters actually known to the directors and
executive officers of FMB and the Company; and (iii) with
respect to JV Corp, matters actually known to the directors
and executive officers of JV Corp, and with respect to (i),
(ii) and (iii), the knowledge any such Person would have had after
reasonable inquiry.
“
Laws ” has the meaning given such term in
Section 3.1(d) of this Agreement.
“ Liabilities ” has the
meaning given such term in Section 3.1(f) of this
Agreement.
“ Licensed Intellectual Property
” has the meaning given such term in
Section 3.1(o)(1) of this Agreement.
“ Loan ” and “
Loans ” have the meanings given such terms in
Section 3.1(j)(2) of this Agreement.
“ Losses ” has the meaning
given such term in Section 6.2 of this
Agreement.
“ Material Adverse Effect ”
means, with respect to any Party, any change or effect that
(a) is, or is reasonably likely to be, material and adverse to
the financial condition, results of operations, cash flows,
products, product offering, assets or business of such Party or
(b) would materially impair the ability of such Party to
perform its obligations under this Agreement or otherwise
materially threaten or materially impede the consummation of the
Transactions; provided, however , that in no event shall any
matters Disclosed in a Schedule delivered on the date of this
Agreement pursuant to Article III hereof be deemed to
constitute a Material Adverse Effect, nor shall any of the
following, alone or in combination, be deemed to constitute, nor be
taken into account in determining whether there has been or will
be, a Material Adverse Effect on any
Party: (i) changes in tax, banking and similar laws
of general applicability or interpretations thereof by courts or
governmental authorities, except to the extent such change has or
would have a disproportionate effect on the business of such Party
as compared to other Persons in the industry in which such Party
operates; (ii) changes in GAAP or regulatory accounting
requirements applicable to banks and their Affiliates generally;
(iii) Changes in Economic Conditions; (iv) actions and
omissions of FMB, the Company or JV Corp taken with the prior
written consent of the other Parties in contemplation of the
Transactions; (v) any change or effect resulting from compliance
with this Agreement, including expenses incurred by the Parties in
consummating the Transactions; (vi) any natural disaster or
any acts of terrorism, sabotage, military action or war (whether or
not declared) or any escalation or worsening thereof, except to the
extent such event has or would have a disproportionate effect on
the business of such Party; and (vii) in the case of FMB, the
Company and the Subsidiaries, any litigation arising after the date
hereof from allegations of a breach of fiduciary duty or
misrepresentation in any disclosure by FMB, the Company or any of
the Subsidiaries relating to this Agreement or the
Transactions.
“ Modified Note ” has the
meaning given such term in Section 4.1(l) of this
Agreement.
“ Mortgage Services Agreement
” has the meaning given such term in
Section 4.1(i)(11) of this Agreement.
“ Mortgaged Property ” has
the meaning given such term in Section 3.1(j)(2)(x) of
this Agreement.
“ Mortgage Subsidiary ” means
Mariner Finance Mortgage, LLC, a Maryland limited liability
company.
“ New Lease ” has the meaning
given such term in Section 4.1(i)(7) of this
Agreement.
“ Note ” means, with respect
to any Loan, the related promissory note together with all riders
thereto and amendments thereof or other evidence of indebtedness of
the related borrower.
“ Other Laws ” has the
meaning given such term in Section 3.1(q) of this
Agreement.
“ Parties ” and “
Party ” have the meanings given such terms in the
opening paragraph of this Agreement.
“ Person ” means an
individual, corporation, partnership, limited liability company,
joint venture, trust, or unincorporated organization or other
entity, or any Governmental Authority.
“ Preliminary Adjustment Amount
” has the meaning given such term in
Section 2.5(a) of this Agreement.
“ Preliminary Closing Net Assets
” has the meaning given such term in
Section 2.5(a) of this Agreement.
“ Regulatory Agreement ” has
the meaning given such term in Section 3.1(y)(2) of
this Agreement.
“ Representative ” or “
Representatives ” means, with respect to a Person, the
directors, officers, employees, managers, members, partners,
stockholders, investors, counsel, accountants, and other
representatives of such Person.
“ Schedule ” or “
Schedules ” means the Schedules that a Party prepares
and delivers to another Party pursuant to Article III of
this Agreement.
“ Section 362(e)(2)(C) Election
” has the meaning given such term in
Section 5.1(i) of this Agreement.
“ Servicing File ” shall mean
with respect to each Loan, the file retained by the Company or a
Subsidiary (as applicable), in its capacity as a servicer of the
Loan, consisting of all documents that a prudent originator and
servicer would have, including copies of the Note and all other
documents necessary to document and service the Loan.
“ Severance Agreements ”
means, collectively, that certain Severance Agreement –
Change in Control dated April 29, 2002 by and between FMB and
Joshua Johnson, that certain Severance Agreement –
Change in Control dated April 29, 2002 by and between FMB and Scott
Frankle, that certain Severance Agreement – Change in Control
dated April 29, 2002 by and between FMB and Bonnie Klapaska, that
certain Severance Agreement – Change in Control dated
February 9, 2009 by and between FMB and Robert E. Burns, that
certain Severance Agreement – Change in Control dated
February 9, 2009 by and between FMB and Curtis R. Mackinson, and
that certain Severance Agreement – Change in Control dated
February 9, 2009 by and between FMB and Laird R. Oskin.
“ Stockholders Agreement ”
has the meaning given such term in Section 4.1(i)(9) of
this Agreement.
“ Sub Interests ” has the
meaning given such term in Section 3.1(a)(2) of this
Agreement.
“ Subsidiary ” means each of
Mortgage Subsidiary and Virginia Subsidiary. Mortgage
Subsidiary and Virginia Subsidiary are sometimes collectively
referred to herein as “ Subsidiaries
”.
“ Survival Period ” has the
meaning given such term in Section 6.1 of this
Agreement.
“ Target Closing Net Assets ”
means $21,500,000.00.
“ Tax ” or “
Taxes ” means any federal, state, local or foreign
income, gross receipts, payroll, excise, severance, stamp,
occupation, premium, windfall profits tax, environmental, bank
shares, ad valorem, employment, worker’s compensation,
custom, duty, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration,
value added, alternative or add-on minimum, estimated, or other
tax, assessment, fee or levy of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or
not.
“ Tax Opinion ” has the
meaning given such term in Section 4.2(i) of this
Agreement.
“ Tax Returns ” means all
returns, reports, declarations, claims for refund, information
returns or statements relating to Taxes, including any schedule or
attachment thereto, and any amendment thereof.
“ Trademark License Agreement
” has the meaning given such term in
Section 4.1(i)(12) of this Agreement.
“ Transactions ” has the
meaning given such term in Section 2.4 of this
Agreement.
“ Transferred Employees ” has
the meaning given such term in Section 5.3(a) of this
Agreement.
“ Transferred Mortgage Loans
” means those mortgage loans identified on Schedule 1
, each of which is owned by the Company or one of the Subsidiaries,
and all of which are to be sold and assigned to FMB and/or any of
its Affiliates (other than the Company and the Subsidiaries) prior
to Closing in accordance with Section 4.1(m) of this
Agreement.
“ Transition Services Agreement
” has the meaning given such term in
Section 4.1(i)(10) of this Agreement.
“ Virginia Subsidiary ” means
Mariner Finance of Virginia, LLC, a Virginia limited liability
company.
“ Wells Fargo Facility ”
means that $85,000,000.00 secured revolving line of credit with
Wells Fargo Preferred Capital, Inc. as agent for certain lenders,
and, as applicable, such line as modified in accordance with
Section 4.1(k) of this Agreement to, among other
things, increase the amount of the line to
$95,000,000.00.
“ Year-End Statements ” has
the meaning given such term in Section 3.1(e) of this
Agreement.
ARTICLE II
CONTRIBUTIONS AND
EXCHANGES
Section 2.1.
Agreements to Contribute . Upon the
terms and subject to the conditions set forth in this Agreement, on
the Closing Date:
(a) FMB
shall contribute, sell, grant, convey, assign, transfer and deliver
to JV Corp, and JV Corp shall accept, purchase and
acquire from FMB, all of the Interests, free and clear of all
Encumbrances; and
(b) Holdco
shall contribute to JV Corp, and JV Corp shall accept
from Holdco, the Holdco Contribution.
Section 2.2.
Consideration Exchanged for Contributions .
(a) JV Corp
shall transfer to or for the account of FMB in exchange for the
Interests consideration consisting of stock and cash having an
aggregate value of $10,500,000.00 (the “Initial Exchange
Amount”), subject to the adjustments set forth in
Section 2.5 (the Initial Exchange Amount, as so
adjusted, the “Exchange Amount”) and as more
particularly described in Section 2.3(a) .
(b) JV Corp
shall transfer to Holdco in exchange for the Holdco Contribution
nine hundred fifty (950) shares of JV Corp Common Stock (the
“Holdco Exchange Stock”), free and clear of all
Encumbrances.
Section 2.3.
Delivery of Contributions .
(a) On
the Closing Date, FMB shall deliver the Interests to JV Corp,
and JV Corp shall issue fifty (50) shares of JV Corp Common
Stock (the “Exchange Stock”), which, for purposes of
this Agreement, shall have at Closing a value of $675,000.00, in
the name of FMB, and deliver by wire transfer of immediately
available funds (the “JV Corp
Payments”):
(1) to
an account designated by FMB, an amount equal to the difference of
(i) $9,825,000.00, adjusted as a result of the calculation of the
Preliminary Adjustment Amount more particularly described in
Section 2.5(a) , minus (ii) the sum of (A) $1,050,000.00
(the “Escrow Funds”) plus (B) the amount, if any, of
outstanding Borrowed Indebtedness as of the Closing Date (the
amount equal to the difference of (i) minus (ii) being the
“Initial Cash Consideration”);
(2) to
an escrow agent appointed by FMB and JV Corp and named in the
Escrow Agreement (the “Escrow Agent”), the Escrow
Funds; and
(3) to
each payee designated on Schedule 2.3(a) (as such
Schedule may be updated at or prior to Closing), such portion of
the Borrowed Indebtedness owed to such payee, on behalf of the
Company.
(b) On
the Closing Date, Holdco shall deliver the Holdco Contribution by
wire transfer of immediately available funds to an account
designated by JV Corp and JV Corp shall issue the Holdco Exchange
Stock in the name of Holdco.
Section 2.4.
Closing . The contribution and exchange of the
Interests, the Exchange Stock, the Holdco Exchange Stock and the
other transactions contemplated hereby (the
“Transactions”) shall occur at a closing (the
“Closing”) to be held on a Friday at the offices of the
Company, located at 3301 Boston Street, Baltimore, Maryland 21224,
at 10:00 a.m., local time, or at such other time, place, and manner
as the Parties shall mutually agree, on a date to be mutually
agreed upon between the Parties (the “Closing Date”),
which date shall be after the receipt of all regulatory approvals
required by law and this Agreement, the expiration of any
applicable waiting periods, and the satisfaction or waiver of all
other conditions required to be satisfied prior to the Closing by
this Agreement.
Section 2.5.
Adjustment to Exchange Amount .
(a)
Preliminary Closing Net Asset Adjustment . Three
(3) Business Days prior to the Closing, FMB will deliver to
JV Corp an estimated consolidated balance sheet of the Company
and the Subsidiaries as of the Closing Date, prepared in accordance
with GAAP applied on a basis consistent with the Interim Balance
Sheet, together with a preliminary statement reflecting its good
faith estimate of the Closing Net Assets of the Company and the
Subsidiaries on such date, which shall be reasonably acceptable to
JV Corp (“Preliminary Closing Net
Assets”). In conjunction with the preparation of
the Preliminary Closing Net Assets, FMB and the Company will make
all work papers, schedules and other supporting materials available
to JV Corp at reasonable times and upon reasonable notice and
upon request will explain to JV Corp and its Representatives
the methods used to calculate such items. The
“Preliminary Adjustment Amount” shall equal the
difference of the Preliminary Closing Net Assets minus the Target
Closing Net Assets. If the Preliminary Adjustment Amount
is positive, the Initial Cash Consideration to be paid in
accordance with Section 2.3(a)(1) shall be increased
dollar-for-dollar by an amount equal to the Preliminary Adjustment
Amount. If the Preliminary Adjustment Amount is
negative, the Initial Cash Consideration to be paid in accordance
with Section 2.3(a)(1) shall be decreased
dollar-for-dollar by an amount equal to the absolute value of the
Preliminary Adjustment Amount.
(b)
Closing Net Asset Adjustment .
(1) No
later than ninety (90) calendar days after the Closing,
JV Corp, at its cost and expense, shall prepare and deliver to
FMB a consolidated balance sheet of the Company and the
Subsidiaries as of the close of business on the Closing Date (the
“Closing Date Balance Sheet”), prepared in accordance
with GAAP applied on a basis consistent with the Company’s
and the Subsidiaries’ past practices, and shall prepare and
deliver to FMB a statement of its calculation of the Closing Net
Assets as of the close of business on the Closing Date (together
with the Closing Date Balance Sheet, the “JV Corp
Computation”). FMB shall cooperate with
JV Corp and make available to JV Corp such assistance,
information and materials as JV Corp may reasonably request in
connection with its preparation of the JV Corp
Computation.
(2) If
FMB objects to the JV Corp Computation provided to it by
JV Corp, then within thirty (30) calendar days of its receipt
of the JV Corp Computation, FMB shall give written notice (the
“FMB Notice”) to JV Corp with a detailed statement
describing its objections to JV Corp’s determination of
such figures and specifying its determination of such figures (the
“FMB Computation”). During such thirty-day
period, FMB and its accountants shall be entitled to review all
work papers, schedules and supporting materials of JV Corp and
its accountants related to the preparation of the JV Corp
Computation. If JV Corp has not received the FMB
Notice within such thirty-day period, FMB shall be deemed to have
no objection to the JV Corp Computation and the JV Corp
Computation shall become final and binding on the Parties hereto as
the Closing Net Assets for all purposes of this
Agreement. JV Corp and FMB shall negotiate in good
faith to resolve any disputes regarding the JV Corp
Computation as promptly as practicable. If JV Corp
and FMB are unable to resolve all disputes within thirty (30)
calendar days of receipt by JV Corp of the FMB Notice, then
only the unresolved disputes shall be submitted to an independent
certified public accounting firm selected by FMB and JV Corp
(the “Independent Accountant”) for determination in the
manner set forth in this Agreement. JV Corp and FMB
shall be entitled to provide the Independent Accountant with
supporting documentation in connection with resolution of such
disputes. The Independent Accountant shall, within
thirty (30) calendar days of its engagement, provide a final and
conclusive resolution of all unresolved disputes related to the
JV Corp Computation and the FMB Computation. All
references in this Agreement to the Closing Net Assets shall mean
the Closing Net Assets as finally determined in accordance with
this Section 2.5(b) , and the resolution of the
Independent Accountant shall be binding on the Parties
hereto. The fees and expenses of the Independent
Accountant shall be shared equally by JV Corp and
FMB.
(3) Once
the Closing Net Assets have been finally determined in accordance
with this Section 2.5(b) (the “Final
Closing Net Assets”), the amount of the Preliminary Closing
Net Assets shall be subtracted from the amount of the Final Closing
Net Assets and the amount of such difference shall be the
“Final Adjustment Amount”. To the extent the
amount of the Final Adjustment Amount is positive, JV Corp
shall within five (5) Business Days pay to FMB an amount equal to
the Final Adjustment Amount in cash by wire transfer of immediately
available funds to an account designated by FMB. To the
extent the amount of the Final Adjustment Amount is negative, FMB
shall within five (5) Business Days pay to JV Corp an amount
equal to the absolute value of the Final Adjustment Amount in cash
by wire transfer of immediately available funds to an account
designated by JV Corp.
(c)
Closing Net Assets . As used herein the term
“Closing Net Assets” shall mean (a) total assets,
namely the sum of cash, net loans, OREO property, net property and
equipment, goodwill and other intangibles, and “other”
assets of the Company and the Subsidiaries (but excluding fair
market value of swap and deferred income of amended swap), as of
the close of business on the Closing Date, as determined in
accordance with GAAP, applied consistently with the Interim Balance
Sheet, but updated for activity through the close of business on
the Closing Date, less (b) total Liabilities, including the
sum of (i) the Wells Fargo Facility, (ii) FMB Subdebt,
and (iii) accounts payable of the Company and the
Subsidiaries, accrued expenses of the Company and the Subsidiaries,
insurance payables, dealer reserves and “other”
Liabilities due to FMB, in each case as of the close of business on
the Closing Date, as determined in accordance with GAAP, applied
consistently with the Interim Balance Sheet. A sample
calculation of the Closing Net Assets of the Company as of
December 31, 2008 is set forth for illustrative purposes on
Schedule 2.5 attached hereto.
Section 2.6. Access;
Information .
(a) FMB
agrees that upon reasonable notice and subject to applicable laws
relating to the exchange of information, it shall afford
JV Corp and JV Corp’s Representatives who have a
need to access such information to carry out the terms of this
Agreement and consummate the Transactions, such access during
normal business hours throughout the period prior to the Closing
Date to the books, records (including, without limitation, Tax
Returns and work papers of independent auditors), properties,
personnel and to such other information of the Company and the
Subsidiaries as JV Corp may reasonably request and, during
such period, it shall furnish promptly to JV Corp such other
information concerning the business, properties and personnel of
the Company and the Subsidiaries as JV Corp may reasonably
request.
(b) Each
Party agrees that it will not, and will cause its Representatives
not to, use any information obtained pursuant to this
Section 2.6 (as well as any other information
obtained prior to the date hereof in connection with the entering
into of this Agreement) for any purpose unrelated to the
consummation of the Transactions. Subject to the
requirements of law, each Party will keep confidential, and will
cause its Representatives to keep confidential, all information and
documents obtained pursuant to this Section 2.6 (as
well as any other information obtained prior to the date hereof in
connection with the entering into of this Agreement) unless such
information (i) was already known to such Party,
(ii) becomes available to such Party from other sources not
known by such Party to be bound by a confidentiality obligation,
(iii) is disclosed with the prior written approval of the
Party to which such information pertains or (iv) is or becomes
readily ascertainable from published information or trade sources
through no breach of this Section 2.6 . In
the event that this Agreement is terminated or the Transactions
shall otherwise fail to be consummated, each Party shall promptly
cause all copies of documents or extracts thereof containing
information and data as to another Party to be destroyed or
returned to the Party which furnished the same. No
investigation by either Party of the business and affairs of the
other shall affect or be deemed to modify or waive any
representation, warranty, covenant or agreement in this Agreement,
or the conditions to either Party’s obligation to consummate
the Transactions.
Section 2.7. Escrow
Agreement . The Escrow Funds will be held by
Escrow Agent pursuant to the terms and conditions of an escrow
agreement in a form reasonably acceptable to FMB and JV Corp
(the “Escrow Agreement”) to secure the indemnity
obligations of FMB pursuant to the provisions of Article VI
hereof. The Escrow Funds shall be held by the Escrow
Agent in an interest-bearing account pursuant to the terms of the
Escrow Agreement, which will provide, inter alia ,
(i) that the Escrow Funds shall be available to JV Corp
in order to satisfy the indemnification obligations of FMB to
JV Corp pursuant to the provisions of Article VI
hereof, (ii) for the release to FMB of one half of the Escrow
Funds (as reduced by any claims of JV Corp against such Escrow
Funds) upon payment of the Final Adjustment Amount (or the
determination that no such payment is required), and (iii) the
balance of the Escrow Funds (as reduced by any claims of
JV Corp against such Escrow Funds) on the date that is
eighteen (18) months following the Closing Date. Any
fees charged by the Escrow Agent for the establishment of the
escrow account to hold the Escrow Funds will be borne equally by
JV Corp and FMB.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES
Section 3.1. Representations
and Warranties of FMB and the Company . Except as Disclosed, FMB and the
Company make the following representations and warranties to
JV Corp, as of the date hereof and as of the Closing (except
to the extent that a representation and warranty expressly speaks
to a specified earlier date):
(a)
Ownership of Interests and Sub Interests .
(1) The
Interests are all of the issued and outstanding securities of the
Company, and were issued in compliance with all applicable state
and federal securities laws. The Interests are owned by
FMB, free and clear of all Encumbrances. FMB has not
pledged, hypothecated or otherwise granted or assigned any interest
in, or otherwise restricted the transfer of, any of the
Interests. The Interests have been validly
issued. There are no outstanding or authorized
subscriptions, options, warrants, calls, rights, commitments or any
other agreements or arrangements of any character obligating the
Company to issue any other securities or evidencing the right to
subscribe for any membership interests. There are no
limits or restrictions of any kind on the voting of any of the
Interests.
(2) Except
as Disclosed on Schedule 3.1(a)(2) , the Company holds
all of the issued and outstanding equity in the Subsidiaries (the
“Sub Interests”), free and clear of all
Encumbrances. The Sub Interests were issued in
compliance with all applicable state and federal securities laws
and have not been pledged or hypothecated. The Sub
Interests have been validly issued. There are no
outstanding or authorized subscriptions, options, warrants, calls,
rights, commitments or any other agreements or arrangements of any
character (i) obligating either Subsidiary to issue any other
securities or evidencing the right to subscribe for any membership
interests, or (ii) granting or assigning any interest in the
Sub Interests. There are no limits or restrictions of
any kind on the voting or transfer of any of the Sub
Interests.
(b)
Organization and Qualification; Articles of Organization and
Operating Agreement; Subsidiaries .
(1) The
Company is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of
Maryland, and has all requisite power and authority to own, lease
and operate its properties (real, personal and mixed, and whether
tangible or intangible), and to carry on its business as now being
conducted. The Company is duly qualified to transact
business as a foreign limited liability company and is in good
standing under the laws of Delaware, New Jersey, Pennsylvania,
Tennessee and Virginia, which are all of the jurisdictions where
the character of the properties owned, leased or operated by it or
the nature of its business makes such qualification necessary,
except for any jurisdictions where the failure to be so qualified,
individually or in the aggregate, would not have a Material Adverse
Effect on the Company. True and complete copies of the
Articles of Organization and Operating Agreement of the Company, in
each case as amended to date, have previously been delivered to
JV Corp. Except for its equity investments in
Mortgage Subsidiary and Virginia Subsidiary and except as Disclosed
in Schedule 3.1(b) , the Company has no equity
investments in any Person.
(2) Mortgage
Subsidiary is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of
Maryland, and has all requisite power and authority to own, lease
and operate its properties (real, personal and mixed, and whether
tangible or intangible), and to carry on its business as now being
conducted. Mortgage Subsidiary is duly qualified to
transact business as a foreign limited liability company and is in
good standing under the laws of Alabama, Delaware, Pennsylvania,
Virginia, West Virginia and the District of Columbia, which are all
of the jurisdictions where the character of the properties owned,
leased or operated by it or the nature of its business makes such
qualification necessary, except for any jurisdictions where the
failure to be so qualified, individually or in the aggregate, would
not have a Material Adverse Effect on the Mortgage
Subsidiary. True and complete copies of the Articles of
Organization and Operating Agreement of Mortgage Subsidiary, in
each case as amended to date, have previously been delivered to
JV Corp. Except as Disclosed in Schedule
3.1(b) , Mortgage Subsidiary has no equity investments in any
Person.
(3) Virginia
Subsidiary is a limited liability company duly formed, validly
existing and in good standing under the laws of the Commonwealth of
Virginia, and has all requisite power and authority to own, lease
and operate its properties (real, personal and mixed, and whether
tangible or intangible), and to carry on its business as now being
conducted. Virginia Subsidiary is duly qualified to
transact business as a foreign limited liability company and is in
good standing under the laws of each of the
jurisdictions where the character of the properties owned, leased
or operated by it or the nature of its business makes such
qualification necessary, except for any jurisdictions where the
failure to be so qualified, individually or in the aggregate, would
not have a Material Adverse Effect on the Virginia
Subsidiary. True and complete copies of the Articles of
Organization and Operating Agreement of Virginia Subsidiary, in
each case as amended to date, have previously been delivered to
JV Corp. Except for its equity investment in
Mortgage Subsidiary and except as Disclosed in Schedule
3.1(b) , Virginia Subsidiary has no equity investments in any
Person.
(c)
Authority . Each of FMB and the Company has
the absolute and unrestricted right, power, authority and capacity
to execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the
Transactions. The execution and delivery of this
Agreement by FMB and the Company, the consummation by FMB and the
Company of the Transactions, and the performance by FMB and the
Company of their respective obligations hereunder have been duly
authorized by all necessary action on the part of FMB and the
Company. This Agreement has been duly executed and
delivered by FMB and the Company and (assuming the due
authorization, execution and delivery by JV Corp and Holdco)
constitutes the legal, valid and binding obligation of FMB and the
Company, enforceable against FMB and the Company in accordance with
its terms, except as enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting
enforcement of creditors’ rights and the exercise of judicial
discretion in accordance with general principles of
equity.
(d)
No Violation . Except as Disclosed in Schedule
3.1(d) , the execution and delivery of this Agreement by FMB
and the Company, and the consummation of the Transactions by FMB
and the Company, do not and will not, with or without the giving of
notice or the lapse of time, or both, (i) violate any foreign,
federal, state or local laws, ordinances, rules, regulations, codes
or administrative directives (“Laws”) or violate any
existing term or provision of any order, writ, judgment, injunction
or decree of any court, governmental department, commission, board,
agency or instrumentality applicable to FMB, the Company, or the
Subsidiaries or any of their properties or assets; (ii) violate,
result in any breach of, or constitute a default (or give rise to
any right of termination, cancellation or acceleration) under any
contract, agreement, indenture, mortgage or deed of trust, security
agreement, license, instrument or obligation to which any of FMB,
the Company, or the Subsidiaries is a party or by which any of them
is bound; (iii) require any consent, approval, filing or notice of
or with any Person; or (iv) result in the creation or
imposition of any Encumbrance upon FMB, the Company, or the
Subsidiaries or any of their properties or assets.
(e)
Financial Statements . FMB has delivered to
JV Corp (i) true and complete copies of the Company and
the Subsidiaries’ balance sheets as of December 31, 2008,
2007 and 2006 and the related statements of income and
members’ capital for the fiscal years then ended
(collectively, the “Year-End Statements”), and
(ii) true and complete copies of the Company and the
Subsidiaries’ balance sheet (the “Interim Balance
Sheet”) as of August 31, 2009 (the “Interim
Date”) and the related statements of income and
members’ capital for the period between December 31, 2008 and
the Interim Date (together with the Interim Balance Sheet, the
“Interim Statements”; and together with the Year-End
Statements and the Interim Balance Sheet, the “Financial
Statements”). Except as Disclosed on Schedule
3.1(e) , the Financial Statements have been prepared in
conformity with GAAP, applied on a consistent basis, and present
fairly the financial condition, results of operations, and changes
in members’ capital of the Company and the Subsidiaries as of
the dates thereof and for the periods included therein;
provided, however , that the Year-End Statements lack
footnotes, and the Interim Statements lack normal year-end
adjustments and footnotes. The Financial Statements are
consistent with the books and records of the
Company. The Financial Statements have been reviewed,
but not audited, by Stegman & Company, an independent
registered public accounting firm.
(f)
No Undisclosed Liabilities . None of the Company
or the Subsidiaries is liable for or subject to any liabilities,
debts or obligations, absolute, accrued, known or unknown,
contingent or otherwise (collectively, “Liabilities”)
except (i) Liabilities which are fully reflected or reserved
against on the Interim Balance Sheet; (ii) Liabilities
incurred since the Interim Date in the ordinary course of business,
consistent with the past practices of the Company or the respective
Subsidiary; and (iii) as Disclosed in Schedule 3.1(f) to
this Agreement.
(g)
Tax Matters .
(1) All
Tax Returns required to be filed by or with respect to each of the
Company and the Subsidiaries have been duly and timely filed and
each such Tax Return is true, correct and complete. All
Taxes owed by each of the Company and the Subsidiaries have been
or, with respect to Taxes not yet due and payable, will be timely
paid. There is adequate provision on the face of the
Interim Statements for all Taxes of the Company and the
Subsidiaries not yet due and payable as of the Interim Date, and
such provision will remain adequate as adjusted through the Closing
Date. Neither the Company nor any Subsidiary is the
beneficiary of any extension of time within which to file any Tax
Return in respect of any fiscal year that has not since been
filed. No deficiencies for any Tax, assessment or
governmental charge have been proposed, asserted or assessed
(tentatively or definitely) against the Company or any
Subsidiary. Except as Disclosed in Schedule
3.1(g) , neither the Company nor any Subsidiary is undergoing,
nor with respect to any of them is there proposed, pending or, to
the Knowledge of FMB, threatened any audit, action, dispute, claim
or examination with respect to Taxes. All Taxes required
to be withheld and paid over by the Company or any Subsidiary in
connection with payments to employees, independent contractors,
creditors, members or third parties or other Persons have been so
withheld and paid over, and each of the Company and the
Subsidiaries has complied with all information reporting and backup
withholding requirements.
(2) Except
as Disclosed in Schedule 3.1(g) , no Tax authority in a
jurisdiction where any of the Company or the Subsidiaries does not
file Tax Returns has made a written claim, assertion or threat (or,
to FMB’s Knowledge, a verbal claim, assertion or threat) that
the Company or any of the Subsidiaries is or may be subject to Tax
in such jurisdiction.
(3) There
are no Encumbrances on any assets of the Company or any of the
Subsidiaries with respect to Taxes, except Encumbrances for Taxes
not yet due and payable.
(4)
Schedule 3.1(g) lists all federal, state, local and foreign
Tax Returns filed with respect to the Company or any of the
Subsidiaries for taxable periods ended on or after December 31,
2005 and indicates those Tax Returns that have been
audited.
(5) Neither
the Company nor any Subsidiary is the subject of any waiver of any
statute of limitations in respect of Taxes or any extension of time
with respect to a Tax assessment or deficiency.
(6) FMB
is not a foreign person within the meaning of Section 1445 of
the Code.
(7) Neither
the Company nor any of the Subsidiaries is subject to any private
ruling from, or agreement with, a Tax authority.
(8) Neither
the Company nor any of the Subsidiaries (i) is a party to any
Tax allocation or sharing agreement, (ii) has Liability for
the Taxes of another Person, whether by Law or regulation, as
transferee or successor, by contract, or otherwise.
(9) Neither
the Company nor any Subsidiary is a party to any partnership for
federal income Tax purposes.
(10) Since
the respective formation of each of them, each of the Company and
the Subsidiaries has been validly treated for both federal and
state income Tax purposes as a disregarded entity (as defined under
Treasury Regulation Section 301.7701-2(a)). None of the
Company or any of the Subsidiaries has elected to be treated for
income Tax purposes as a corporation.
(h)
Books and Records . The books of account,
membership record books and other records of the Company and the
Subsidiaries, all of which have been made available to
JV Corp, are complete and correct in all material respects and
have been maintained in accordance with sound business
practices. At the Closing, all of the books and records
of the Company will be in the possession of the Company and all of
the books and records of each Subsidiary will be in the possession
of such Subsidiary.
(i)
Title to Properties; Absence of Encumbrances
. Except as Disclosed in Schedule 3.1(i) , the
Company and the Subsidiaries have good, valid and marketable title
to, or in the case of leased properties and assets, valid leasehold
interests in, their respective properties and assets (real,
personal and mixed and whether tangible or intangible), free and
clear of all Encumbrances.
(j)
Loan Portfolio .
(1) Except
as Disclosed in Schedule 3.1(j)(1) , all evidences of
indebtedness reflected as assets in the books and records of the
Company and the Subsidiaries, and all evidences of the security
interests of the Company and the Subsidiaries in the collateral
pledged to secure such indebtedness, are the obligations of the
respective obligors named therein, enforceable in all material
respects in accordance with their respective terms, which terms are
set forth in writing in the Note and other documents in the
Servicing File; except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting
enforcement of creditors’ rights and the exercise of judicial
discretion in accordance with general principles of
equity.
(2) FMB
has made available to JV Corp a listing, as of July 31, 2009,
of all loan agreements, notes or borrowing arrangements (including
leases, credit enhancements and interest-bearing assets) payable to
the Company or a Subsidiary (each, a “Loan” and
collectively, the “Loans”), including the aggregate
outstanding principal amount, the borrower, the origination date,
maturity date, interest rate, days past due, and other relevant
information (the “Loan Schedule”). The
information set forth in the Loan Schedule with respect to each
Loan is complete, true and correct in all material
respects. Except as Disclosed on Schedule
3.1(j)(2) , with respect to each Loan listed on the Loan
Schedule:
(i) The
payments on the Loan are current, with the first monthly payment
having been made prior to the second scheduled monthly payment
becoming due.
(ii) The
Loan is not subject to any defenses, setoffs, or counterclaims,
including without limitation the defense of usury, and no such
defense, setoff, or counterclaim has been asserted with respect
thereto, nor will the operation of any of the terms of a Note, or
the exercise of any right thereunder, render the Note
unenforceable, in whole or in part. To FMB’s
Knowledge, no borrower in respect of the Loan was a debtor in any
state or Federal bankruptcy or insolvency proceeding at the time
the Loan was originated.
(iii) In
originating, servicing and collecting the Loan, the Company and the
Subsidiaries complied in all material respects with the
requirements of all applicable Laws, including, without limitation,
Laws relating to usury, truth-in-lending, predatory and abusive
lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity and disclosure
obligations.
(iv) No
material omission, misrepresentation or similar occurrence has
taken place, nor, to the Knowledge of FMB, has any fraud or
negligence taken place, with respect to a Loan on the part of the
Company or any Subsidiary in connection with the origination of the
Loan.
(v) The
proceeds of the Loan have been fully disbursed and there is no
further requirement for future advances thereunder, and any and all
requirements as to completion of any on-site or off-site
improvement and as to disbursements of any escrow funds therefor
have been complied with.
(vi) The
Loan Schedule identifies which of the Company, Mortgage Subsidiary
or Virginia Subsidiary is the holder of the Loan, and such Person
as identified is the sole owner and holder of the
Loan. All Loans acquired by such Person from third
parties (including Affiliates) were acquired in a true and legal
sale pursuant to which such third party sold, transferred, conveyed
and assigned to the Company, Mortgage Subsidiary or Virginia
Subsidiary (as applicable) all of its right, title and interest in,
to and under such Loan and retained no interest in such
Loan.
(vii) The
Loan, to the extent it was made by the Company or any Subsidiary,
was made (A) in accordance with the written policies, practices and
procedures, including, without limitation, underwriting guidelines,
of the Company or one of the Subsidiaries (as applicable) with any
exceptions thereto exercised in a prudent manner based on
compensating factors and having no adverse effect upon the value of
the related Loan or the borrower’s ability to perform
thereunder, and (B) on the standard loan documents of the Company
or one of the Subsidiaries (as applicable).
(viii) To
FMB’s Knowledge, (A) there is no default, breach, violation
or event of acceleration existing under the Note and (B) no event
has occurred which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default,
breach, violation or event of acceleration, and neither the Company
nor any Subsidiary has waived any default, breach, violation or
event of acceleration.
(ix) All
escrow deposits and escrow payments made to the Company, Mortgage
Subsidiary or Virginia Subsidiary are in the possession of, or
under the control of, the Company, Mortgage Subsidiary or Virginia
Subsidiary (as applicable) and there exist no deficiencies in
connection therewith for which customary arrangements for repayment
thereof have not been made. The collection of any escrow payments
has complied in all material respects with applicable Laws. Any
escrow of funds is not prohibited by applicable Laws and has been
established in an amount sufficient to pay for every item that
remains unpaid and has been assessed but is not yet due and
payable. No escrow deposits or escrow payments or other charges or
payments due the Company, Mortgage Subsidiary or Virginia
Subsidiary (as applicable) have been capitalized under the Note.
All interest rate adjustments, if any, have been made in strict
compliance with state and federal law and the terms of the related
Note. Any interest required to be paid pursuant to state, federal
and local law has been properly paid and credited.
(x) If
the Loan is secured by real property (including all improvements,
buildings, fixtures, building equipment and personal property
thereon and all additions, alterations and replacements made at any
time with respect to the foregoing) (the “Mortgaged
Property”), the Servicing File contains either (A) an
appraisal of the related Mortgaged Property signed prior to the
approval of the Loan application by a qualified appraiser, duly
appointed by the Company or one of the Subsidiaries (as
applicable), who had no interest, direct or indirect in the
Mortgaged Property or in any loan made on the security thereof, and
whose compensation is not affected by the approval or disapproval
of the Loan, and the appraisal and appraiser both satisfy the
requirements of Fannie Mae or Freddie Mac and Title XI of the
Federal Institutions Reform, Recovery, and Enforcement Act of 1989
as amended and the regulations promulgated thereunder, all as in
effect on the date the Loan was originated, or (B) an appraisal of
the related Mortgaged Property conducted by an employee of the
Company or one of the Subsidiaries (as applicable) signed prior to
the approval of the Loan application by such employee.
(xi) The
Company and the Subsidiaries did not originate the Loan without
giving due regard for the borrower’s ability to repay the
Loan.
(xii) Each
of the Company and the Subsidiaries, or where none of the Company
or the Subsidiaries was the original credit grantor, to FMB’s
Knowledge, the original credit grantor, had full power and
authority to make the Loan.
(3) Attached
hereto as Schedule 3.1(j)(3) is a true, complete and correct
copy of the loan losses and default rates of the loan portfolio of
the Company and the Subsidiaries since January 1,
2006.
(4) Except
as disclosed in the Financial Statements of the Company and the
Subsidiaries, since December 31, 2008, none of the Company or the
Subsidiaries have incurred any unusual or extraordinary loan losses
which have had or are likely to have a Material Adverse Effect on
the Company and the Subsidiaries and in light of the
Company’s and the Subsidiaries’ historical loan loss
experiences and their managements’ analyses of the quality
and performance of its loan portfolios.
(k)
Legal Proceedings . Except as Disclosed in
Schedule 3.1(k):
(1) there
are no pending or, to FMB’s Knowledge, threatened legal,
administrative, governmental or other claims, actions, suits,
proceedings or governmental investigations (i) to which the Company
or any Subsidiary is a Party or (ii) relating to any of the Company
or any Subsidiary’s properties or rights or otherwise
affecting the Company or any Subsidiary; and
(2) to
FMB’s Knowledge, there is no reasonable basis for any claim,
action, suit, proceeding or investigation against or relating to
the Company or any Subsidiary or any of their respective properties
or rights.
(l)
Insurance . The Company and the
Subsidiaries presently maintain, and during their existence have
maintained, casualty and liability insurance policies covering all
of the material assets, properties and operations of the Company
and the Subsidiaries. There are no material claims
pending under any such policy, nor is there, to the Knowledge of
FMB, any basis for any such claim, nor has any such claim been
denied in the past three (3) years.
Schedule 3.1(l) contains a complete list and brief
description of all policies of casualty, liability and other forms
of insurance held by the Company and the Subsidiaries.
(m)
Employment Matters . There are no administrative
investigations, actions, suits, claims, labor disputes or
grievances pending or, to FMB’s Knowledge, threatened or
reasonably anticipated relating to any labor, safety, wage rate or
discrimination matters involving any employee of the Company or the
Subsidiaries. No unfair labor practice complaint or
arbitration against or affecting the Company or the Subsidiaries is
pending before the National Labor Relations Board, and no labor
strike, dispute, slowdown or stoppage is pending against or
affecting the Company or the Subsidiaries, and there is no
collective bargaining or similar agreement involving the Company or
any Subsidiary as a Party. To FMB’s Knowledge,
there is no union or collective bargaining organizational activity
occurring among the employees of the Company or the
Subsidiaries. Each of the Company and the Subsidiaries
is in material compliance with all applicable foreign, federal,
state and local laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages
and hours with respect to its employees. To FMB’s
Knowledge, no employee of the Company or any Subsidiary has
violated any employment contract, nondisclosure agreement or
noncompetition agreement by which such employee is
bound. Except as Disclosed in
Schedule 3.1(m) , none of FMB, the Company or any
Subsidiary has made any promise or representation to any employee
of the Company or the Subsidiaries regarding continuation of such
employee’s employment by the Company, either Subsidiary or
JV Corp following the Closing.
(n)
Commitments .
(1)
Schedule 3.1(n) lists each contract or agreement (including
any and all amendments thereto) to which the Company or either
Subsidiary is a Party, or by which the Company or either Subsidiary
is bound (each, a “Commitment” and collectively, the
“Commitments”), of the following types:
(i) Commitments
for the sale of any real or personal (tangible or intangible)
properties other than in the ordinary course of business, or for
the grant of any option or preferential rights to purchase any such
properties;
(ii) Commitments
for the construction, modification or repair of any building,
structure or facility or for any capital expenditures or for the
acquisition of fixed assets, providing for aggregate payments in
excess of $100,000.00;
(iii) Commitments
relating to the acquisition by the Company (or either Subsidiary)
of any operating business or the capital stock or equity interest
of any other Person that has not been consummated or that has been
consummated but contains representations, covenants, guaranties,
indemnities or other obligations that remain in effect;
(iv)
Commitments pursuant to which
any Party is required to purchase or sell a stated portion of its
requirements or output to another Party or perform a stated amount
of service for, on behalf of, or upon the referral of another
Party;
(v) Commitments
under which the Company or either Subsidiary agrees to indemnify
any Person;
(vi)
Commitments containing covenants of
the Company or any Subsidiary not to compete, do business in any
line of business or in any geographical area or with any Person, or
to disclose certain information, or covenants of any Person not to
compete with the Company or any Subsidiary in any line of business
or in any geographical area or disclose information concerning the
Company or any Subsidiary;
(vii)
Commitments in respect of any joint
venture, partnership or other similar arrangement (including,
without limitation, any joint development agreement);
(viii) Commitments
relating to any Governmental Authority;
(ix) Commitments
relating to warehouse lines of credit, outstanding letters of
credit or performance bonds or creating any Liability as guarantor,
surety, co-signer, endorser, co-maker, indemnitor or otherwise in
respect of the obligation of any Person, except as endorser or
maker of checks endorsed or made in the ordinary course of
business;
(x) Commitments
(other than loan commitments to customers and those specified in
any of clauses (i) through (ix) above) which are material to the
Business; and
(xi) Commitments
currently in negotiation by the Company or any Subsidiary of a type
which if entered into would be required to be listed in Schedule
3.1(n) or to be Disclosed on any other
Schedule hereto.
(2) Complete
copies of all Commitments required to be listed in Schedule
3.1(n) , including all amendments thereto, have been delivered
to JV Corp.
To FMB’s Knowledge, there is no breach,
violation or default by the Company or any Subsidiary and no event
which, with notice or lapse of time or both, would constitute a
breach, violation or default by the Company or any Subsidiary, or
give rise to any Encumbrance or right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration under any Commitment listed in Schedule 3.1(n)
.
To FMB’s Knowledge, no other Party to any
of the Commitments listed in Schedule 3.1(n) is in arrears
in respect of the performance or satisfaction of the terms and
conditions on its part to be performed or satisfied under any of
such Commitments, except for arrears which, individually and in the
aggregate, have not had, and are not expected to have, a Material
Adverse Effect on the Company or any Subsidiary, and no material
waiver or material indulgence has been granted by any of the
parties thereto.
FMB has no Knowledge that any change will occur
in the relationships of the Company or any Subsidiary with any of
its respective customers or suppliers, whether or not as a result
of the consummation of the Transactions, which would have a
Material Adverse Effect on the Company.
After the date of this Agreement, none of the
Company or the Subsidiaries will incur any Liability (whether as an
indemnity, compensation, reimbursement or otherwise) for
terminating any Commitment in accordance with the terms thereof at
the end of any stated term, except as expressly set forth in any
Commitment or as agreed to by JV Corp.
FMB does not have, nor will it have immediately
after the Closing Date, any financial interest in any party, other
than the Company or a Subsidiary, to any of the Commitments, and,
to FMB’s Knowledge, all of the Commitments were negotiated on
an arm’s length basis.
(o)
Intellectual Property .
(1)
Schedule 3.1(o)(1) sets forth a true, correct and complete
list and, where appropriate, a description of, all intellectual
property licenses (including, without limitation, software licenses
but excluding shrink-wrap and over-the-counter licenses), patents,
trade names, trademarks, service marks, domain names, trade secrets
and copyrights (“Intellectual Property”) which are
owned by the Company or any Subsidiary (the “Company
Intellectual Property”) or which are used in the conduct of
the Business pursuant to a third party license or other agreement
(“Licensed Intellectual Property”). Except
as Disclosed on Schedule 3.1(o)(1) , none of the
Company or the Subsidiaries is a party to any written or oral
license (either as licensor or licensee), sublicense (either as
sublicensor or sublicensee) with respect to the Company
Intellectual Property.
