Exhibit 4.1


 


WARRANT TO PURCHASE COMMON STOCK


 


THE
SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION
STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR
SUCH LAWS. THIS INSTRUMENT IS ISSUED SUBJECT TO THE RESTRICTIONS ON TRANSFER
AND OTHER PROVISIONS OF A SECURITIES PURCHASE AGREEMENT BETWEEN THE ISSUER OF
THESE SECURITIES AND THE INVESTOR REFERRED TO THEREIN, A COPY OF WHICH IS ON
FILE WITH THE ISSUER. THE SECURITIES REPRESENTED BY THIS INSTRUMENT MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH SAID AGREEMENT. ANY
SALE OR OTHER TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENT WILL BE VOID.


 


WARRANT


to purchase


 


764,778


 


Shares of Common Stock


of Unity Bancorp, Inc.


 


Issue Date: December 5, 2008


 


1.                                       Definitions. Unless the context otherwise requires, when used herein the following
terms shall have the meanings indicated.


 


“Affiliate” has the meaning ascribed to it
in the Purchase Agreement.


 


“Appraisal Procedure” means a procedure
whereby two independent appraisers, one chosen by the Company and one by the
Original Warrantholder, shall mutually agree upon the determinations then the
subject of appraisal. Each party shall deliver a notice to the other appointing
its appraiser within 15 days after the Appraisal Procedure is invoked. If
within 30 days after appointment of the two appraisers they are unable to agree
upon the amount in question, a third independent appraiser shall be chosen
within 10 days thereafter by the mutual consent of such first two appraisers.
The decision of the third appraiser so appointed and chosen shall be given
within 30 days after the selection of such third appraiser. If three appraisers
shall be appointed and the determination of one appraiser is disparate from the
middle determination by more than twice the amount by which the other
determination is disparate from the middle determination, then the
determination of such appraiser shall be excluded, the remaining two
determinations shall be averaged and such average shall be binding and
conclusive upon the


 


“Board of Directors” means the board of
directors of the Company, including any duly authorized committee thereof.


 


“Business Combination” means a merger,
consolidation, statutory share exchange or similar transaction that requires the
approval of the Company’s stockholders.


 


“business day” means any day except
Saturday, Sunday and any day on which banking institutions in the State of New
York generally are authorized or required by law or other governmental actions
to close.


 


“Capital Stock” means (A) with respect
to any Person that is a corporation or company, any and all shares, interests,
participations or other equivalents (however designated) of capital or capital
stock of such Person and (B) with respect to any Person that is not a
corporation or company, any and all partnership or other equity interests of
such Person.


 

















 


“Charter” means, with respect to any
Person, its certificate or articles of incorporation, articles of association,
or similar organizational document.


 


“Common Stock” has the meaning ascribed to
it in the Purchase Agreement.


 


“Company” means the Person whose name,
corporate or other organizational form and jurisdiction of organization is set
forth in Item 1 of Schedule A hereto.


 


“conversion” has the meaning set forth in Section 13(B).


 


“convertible securities” has the meaning
set forth in Section 13(B).


 


“CPP” has the meaning ascribed to it in the
Purchase Agreement.


 


“Exchange Act” means the Securities
Exchange Act of 1934, as amended, or any successor statute, and the rules and
regulations promulgated thereunder.


 


“Exercise Price” means the amount set forth
in Item 2 of Schedule A hereto.


 


“Expiration Time” has the meaning set forth
in Section 3.


 


“Fair Market Value” means, with respect to
any security or other property, the fair market value of such security or other
property as determined by the Board of Directors, acting in good faith or, with
respect to Section 14, as determined by the Original Warrantholder acting
in good faith. For so long as the Original Warrantholder holds this Warrant or
any portion thereof, it may object in writing to the Board of Director’s
calculation of fair market value within 10 days of receipt of written notice
thereof. If the Original Warrantholder and the Company are unable to agree on
fair market value during the 10-day period following the delivery of the
Original Warrantholder’s objection, the Appraisal Procedure may be invoked by
either party to determine Fair Market Value by delivering written notification
thereof not later than the 30th day after
delivery of the Original Warrantholder’s objection.


 


“Governmental Entities” has the meaning
ascribed to it in the Purchase Agreement.


 


 “Initial
Number” has the meaning set forth in Section 13(B).


 


“Issue Date” means the date set forth in Item 3 of Schedule A hereto.


 


“Market Price” means, with respect to a
particular security, on any given day, the last reported sale price regular way
or, in case no such reported sale takes place on such day, the average of the
last closing bid and ask prices regular way, in either case on the principal
national securities exchange on which the applicable securities are listed or
admitted to trading, or if not listed or admitted to trading on any national
securities exchange, the average of the closing bid and ask prices as furnished
by two members of the Financial Industry Regulatory Authority, Inc.
selected from time to time by the Company for that purpose. “Market Price”
shall be determined without reference to after hours or extended hours trading.
If such security is not listed and traded in a manner that the quotations
referred to above are available for the period required hereunder, the Market
Price per share of Common Stock shall be deemed to be (i) in the event
that any portion of the Warrant is held by the Original Warrantholder, the fair
market value per share of such security as determined in good faith by the
Original Warrantholder or (ii) in all other circumstances, the fair market
value per share of such security as determined in good faith by the Board of
Directors in reliance on an opinion of a nationally recognized independent
investment banking corporation retained by the Company for this purpose and
certified in a resolution to the Warrantholder. For the purposes of determining
the Market Price of the Common Stock on the “trading day” preceding, on or
following the occurrence of an event, (i) that trading day shall be deemed
to commence immediately after the regular scheduled closing time of trading on
the New York Stock Exchange or, if trading is closed at an earlier time, such
earlier time and (ii) that trading day shall end at the next regular
scheduled closing time, or if trading is closed at an earlier time, such
earlier time (for the avoidance of doubt, and as an example, if the Market
Price is to be determined as of the last trading day preceding a specified
event and the closing time of trading on a particular day is 4:00 p.m. and
the specified event occurs at 5:00 p.m. on that day, the Market Price
would be determined by reference to such 4:00 p.m. closing price).


 

















 


“Ordinary Cash Dividends” means a regular
quarterly cash dividend on shares of Common Stock out of surplus or net profits
legally available therefor (determined in accordance with generally accepted
accounting principles in effect from time to time), provided that Ordinary Cash Dividends shall not include any
cash dividends paid subsequent to the Issue Date to the extent the aggregate
per share dividends paid on the outstanding Common Stock in any quarter exceed
the amount set forth in Item 4 of Schedule A hereto, as adjusted for any
stock split, stock dividend, reverse stock split, reclassification or similar
transaction.


 


“Original Warrantholder” means the United
States Department of the Treasury. Any actions specified to be taken by the
Original Warrantholder hereunder may only be taken by such Person and not by
any other Warrantholder.


 


“Permitted Transactions” has the meaning
set forth in Section 13(B).


 


“Person” has the meaning given to it in Section 3(a)(9) of
the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act.


 


“Per Share Fair Market Value” has the
meaning set forth in Section 13(C).


 


“Preferred Shares” means the perpetual preferred stock issued
to the Original Warrantholder on the Issue Date pursuant to the Purchase
Agreement.


 


“Pro Rata Repurchases” means any purchase
of shares of Common Stock by the Company or any Affiliate thereof pursuant to (A) any
tender offer or exchange offer subject to Section 13(e) or 14(e) of
the Exchange Act or Regulation 14E promulgated thereunder or (B) any other
offer available to substantially all holders of Common Stock, in the case of
both (A) or (B), whether for cash, shares of Capital Stock of the Company,
other securities of the Company, evidences of indebtedness of the Company or
any other Person or any other property (including, without limitation, shares
of Capital Stock, other securities or evidences of indebtedness of a
subsidiary), or any combination thereof, effected while this Warrant is
outstanding. The “Effective Date”
of a Pro Rata Repurchase shall mean the date of acceptance of shares for
purchase or exchange by the Company under any tender or exchange offer which is
a Pro Rata Repurchase or the date of purchase with respect to any Pro Rata
Repurchase that is not a tender or exchange offer.


 


“Purchase Agreement” means the Securities
Purchase Agreement – Standard Terms incorporated into the Letter Agreement,
dated as of the date set forth in Item 5 of Schedule A hereto, as amended
from time to time, between the Company and the United States Department of the
Treasury (the “Letter Agreement”),
including all annexes and schedules thereto.


 


“Qualified Equity Offering” has the meaning
ascribed to it in the Purchase Agreement.


 


“Regulatory Approvals” with respect to the
Warrantholder, means, to the extent applicable and required to permit the
Warrantholder to exercise this Warrant for shares of Common Stock and to own
such Common Stock without the Warrantholder being in violation of applicable
law, rule or regulation, the receipt of any necessary approvals and
authorizations of, filings and registrations with, notifications to, or
expiration or termination of any applicable waiting period under, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder.


 


“SEC” means the U.S. Securities and
Exchange Commission.


 


“Securities Act” means the Securities Act
of 1933, as amended, or any successor statute, and the rules and
regulations promulgated thereunder.


 


“Shares” has the meaning set forth in Section 2.


 


“trading day” means (A) if the shares of Common Stock
are not traded on any national or regional securities exchange or association
or over-the-counter market, a business day or (B) if the shares of Common
Stock are traded on any national or regional securities exchange or association
or over-the-counter market, a business day on which such relevant exchange or
quotation system is scheduled to be open for business and on which the shares
of Common Stock (i) are not suspended from trading on any national or
regional securities exchange or association or over-the-counter market for any
period or periods aggregating one half hour or longer; and (ii) have
traded at least


 

















 


once
on the national or regional securities exchange or association or
over-the-counter market that is the primary market for the trading of the
shares of Common Stock.


 


“U.S. GAAP” means United States generally
accepted accounting principles.


 


“Warrantholder” has the meaning set forth
in Section 2.


 


“Warrant” means this Warrant, issued
pursuant to the Purchase Agreement.


 


2.
Number of Shares; Exercise Price. This certifies that, for value
received, the United States Department of the Treasury or its permitted assigns
(the “Warrantholder”) is
entitled, upon the terms and subject to the conditions hereinafter set forth,
to acquire from the Company, in whole or in part, after the receipt of all
applicable Regulatory Approvals, if any, up to an aggregate of the number of
fully paid and nonassessable shares of Common Stock set forth in Item 6 of
Schedule A hereto, at a purchase price per share of Common Stock equal to the
Exercise Price. The number of shares of Common Stock (the “Shares”) and the Exercise Price are
subject to adjustment as provided herein, and all references to “Common Stock,”
“Shares” and “Exercise Price” herein shall be deemed to include any such
adjustment or series of adjustments.


 


3.
Exercise of Warrant; Term. Subject to Section 2, to the extent
permitted by applicable laws and regulations, the right to purchase the Shares
represented by this Warrant is exercisable, in whole or in part by the
Warrantholder, at any time or from time to time after the execution and
delivery of this Warrant by the Company on the date hereof, but in no event
later than 5:00 p.m., New York City time on the tenth anniversary of the
Issue Date (the “Expiration Time”),
by (A) the surrender of this Warrant and Notice of Exercise annexed
hereto, duly completed and executed on behalf of the Warrantholder, at the
principal executive office of the Company located at the address set forth in
Item 7 of Schedule A hereto (or such other office or agency of the Company
in the United States as it may designate by notice in writing to the Warrantholder
at the address of the Warrantholder appearing on the books of the Company), and
(B) payment of the Exercise Price for the Shares thereby purchased:


 


(i) by
having the Company withhold, from the shares of Common Stock that would
otherwise be delivered to the Warrantholder upon such exercise, shares of
Common stock issuable upon exercise of the Warrant equal in value to the
aggregate Exercise Price as to which this Warrant is so exercised based on the
Market Price of the Common Stock on the trading day on which this Warrant is
exercised and the Notice of Exercise is delivered to the Company pursuant to
this Section 3, or


 


(ii) with
the consent of both the Company and the Warrantholder, by tendering in cash, by
certified or cashier’s check payable to the order of the Company, or by wire
transfer of immediately available funds to an account designated by the
Company.


 


If
the Warrantholder does not exercise this Warrant in its entirety, the
Warrantholder will be entitled to receive from the Company within a reasonable
time, and in any event not exceeding three business days, a new warrant in
substantially identical form for the purchase of that number of Shares equal to
the difference between the number of Shares subject to this Warrant and the
number of Shares as to which this Warrant is so exercised. Notwithstanding
anything in this Warrant to the contrary, the Warrantholder hereby acknowledges
and agrees that its exercise of this Warrant for Shares is subject to the
condition that the Warrantholder will have first received any applicable
Regulatory Approvals.


 


4.
Issuance of Shares; Authorization; Listing. Certificates for Shares
issued upon exercise of this Warrant will be issued in such name or names as
the Warrantholder may designate and will be delivered to such named Person or
Persons within a reasonable time, not to exceed three business days after the
date on which this Warrant has been duly exercised in accordance with the terms
of this Warrant. The Company hereby represents and warrants that any Shares
issued upon the exercise of this Warrant in accordance with the provisions of Section 3
will be duly and validly authorized and issued, fully paid and nonassessable
and free from all taxes, liens and charges (other than liens or charges created
by the Warrantholder, income and franchise taxes incurred in connection with
the exercise of the Warrant or taxes in respect of any transfer occurring
contemporaneously therewith). The Company agrees that the Shares so issued will
be deemed to have been issued to the Warrantholder as of the close of business
on the date on which this Warrant and payment of the Exercise Price are
delivered to the Company in accordance with the terms of this Warrant,
notwithstanding that the stock transfer books of the Company may then be closed
or certificates representing such Shares may not be actually delivered on such
date. The Company will at all times reserve and


 

















 


keep
available, out of its authorized but unissued Common Stock, solely for the
purpose of providing for the exercise of this Warrant, the aggregate number of
shares of Common Stock then issuable upon exercise of this Warrant at any time.
The Company will (A) procure, at its sole expense, the listing of the
Shares issuable upon exercise of this Warrant at any time, subject to issuance
or notice of issuance, on all principal stock exchanges on which the Common
Stock is then listed or traded and (B) maintain such listings of such
Shares at all times after issuance. The Company will use reasonable best
efforts to ensure that the Shares may be issued without violation of any
applicable law or regulation or of any requirement of any securities exchange
on which the Shares are listed or traded.


 


5.
No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon any exercise of this
Warrant. In lieu of any fractional Share to which the Warrantholder would
otherwise be entitled, the Warrantholder shall be entitled to receive a cash
payment equal to the Market Price of the Common Stock on the last trading day
preceding the date of exercise less the pro-rated Exercise Price for such
fractional share.


 


6.
No Rights as Stockholders; Transfer Books. This Warrant does not entitle
the Warrantholder to any voting rights or other rights as a stockholder of the
Company prior to the date of exercise hereof. The Company will at no time close
its transfer books against transfer of this Warrant in any manner which
interferes with the timely exercise of this Warrant.


 


7.
Charges, Taxes and Expenses. Issuance of certificates for Shares to the
Warrantholder upon the exercise of this Warrant shall be made without charge to
the Warrantholder for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificates, all of which taxes and expenses
shall be paid by the Company.


 


8.
Transfer/Assignment.


 


(A) Subject
to compliance with clause (B) of this Section 8, this Warrant and all
rights hereunder are transferable, in whole or in part, upon the books of the
Company by the registered holder hereof in person or by duly authorized
attorney, and a new warrant shall be made and delivered by the Company, of the
same tenor and date as this Warrant but registered in the name of one or more
transferees, upon surrender of this Warrant, duly endorsed, to the office or
agency of the Company described in Section 3. All expenses (other than
stock transfer taxes) and other charges payable in connection with the
preparation, execution and delivery of the new warrants pursuant to this Section 8
shall be paid by the Company.


 


(B) The
transfer of the Warrant and the Shares issued upon exercise of the Warrant are
subject to the restrictions set forth in Section 4.4 of the Purchase
Agreement. If and for so long as required by the Purchase Agreement, this
Warrant shall contain the legends as set forth in Sections 4.2(a) and 4.2(b) of
the Purchase Agreement.


 


9.
Exchange and Registry of Warrant. This Warrant is exchangeable, upon the
surrender hereof by the Warrantholder to the Company, for a new warrant or
warrants of like tenor and representing the right to purchase the same
aggregate number of Shares. The Company shall maintain a registry showing the
name and address of the Warrantholder as the registered holder of this Warrant.
This Warrant may be surrendered for exchange or exercise in accordance with its
terms, at the office of the Company, and the Company shall be entitled to rely
in all respects, prior to written notice to the contrary, upon such registry.


 


10.
Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in the case of any such loss,
theft or destruction, upon receipt of a bond, indemnity or security reasonably
satisfactory to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company shall make and deliver,
in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of
like tenor and representing the right to purchase the same aggregate number of
Shares as provided for in such lost, stolen, destroyed or mutilated Warrant.


 


11.
Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a business day, then such action may be taken or such right may be
exercised on the next succeeding day that is a business day.


 

















 


12.
Rule 144 Information. The Company covenants that it will use its
reasonable best efforts to timely file all reports and other documents required
to be filed by it under the Securities Act and the Exchange Act and the rules and
regulations promulgated by the SEC thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any Warrantholder,
make publicly available such information as necessary to permit sales pursuant
to Rule 144 under the Securities Act), and it will use reasonable best
efforts to take such further action as any Warrantholder may reasonably
request, in each case to the extent required from time to time to enable such
holder to, if permitted by the terms of this Warrant and the Purchase
Agreement, sell this Warrant without registration under the Securities Act
within the limitation of the exemptions provided by (A) Rule 144
under the Securities Act, as such rule may be amended from time to time,
or (B) any successor rule or regulation hereafter adopted by the SEC.
Upon the written request of any Warrantholder, the Company will deliver to such
Warrantholder a written statement that it has complied with such requirements.


 


13.
Adjustments and Other Rights. The Exercise Price and the number of
Shares issuable upon exercise of this Warrant shall be subject to adjustment
from time to time as follows; provided,
that if more than one subsection of this Section 13 is applicable to a
single event, the subsection shall be applied that produces the largest
adjustment and no single event shall cause an adjustment under more than one
subsection of this Section 13 so as to result in duplication:


 


(A) Stock
Splits, Subdivisions, Reclassifications or Combinations. If the Company
shall (i) declare and pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, (ii) subdivide or reclassify the
outstanding shares of Common Stock into a greater number of shares, or (iii) combine
or reclassify the outstanding shares of Common Stock into a smaller number of
shares, the number of Shares issuable upon exercise of this Warrant at the time
of the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be proportionately
adjusted so that the Warrantholder after such date shall be entitled to
purchase the number of shares of Common Stock which such holder would have
owned or been entitled to receive in respect of the shares of Common Stock
subject to this Warrant after such date had this Warrant been exercised
immediately prior to such date. In such event, the Exercise Price in effect at
the time of the record date for such dividend or distribution or the effective
date of such subdivision, combination or reclassification shall be adjusted to
the number obtained by dividing (x) the product of (1) the number of
Shares issuable upon the exercise of this Warrant before such adjustment and (2) the
Exercise Price in effect immediately prior to the record or effective date, as
the case may be, for the dividend, distribution, subdivision, combination or
reclassification giving rise to this adjustment by (y) the new number of
Shares issuable upon exercise of the Warrant determined pursuant to the
immediately preceding sentence.


 


(B) Certain
Issuances of Common Shares or Convertible Securities. Until the earlier of (i) the
date on which the Original Warrantholder no longer holds this Warrant or any
portion thereof and (ii) the third anniversary of the Issue Date, if the
Company shall issue shares of Common Stock (or rights or warrants or other
securities exercisable or convertible into or exchangeable (collectively, a “conversion”) for shares of Common Stock)
(collectively, “convertible securities”)
(other than in Permitted Transactions (as defined below) or a transaction to
which subsection (A) of this Section 13 is applicable) without
consideration or at a consideration per share (or having a conversion price per
share) that is less than 90% of the Market Price on the last trading day
preceding the date of the agreement on pricing such shares (or such convertible
securities) then, in such event:


 


(A) the number of Shares issuable upon the
exercise of this Warrant immediately prior to the date of the agreement on
pricing of such shares (or of such convertible securities) (the “Initial Number”) shall be increased to the
number obtained by multiplying the Initial Number by a fraction (A) the
numerator of which shall be the sum of (x) the number of shares of Common
Stock of the Company outstanding on such date and (y) the number of
additional shares of Common Stock issued (or into which convertible securities
may be exercised or convert) and (B) the denominator of which shall be the
sum of (I) the number of shares of Common Stock outstanding on such date
and (II) the number of shares of Common Stock which the aggregate
consideration receivable by the Company for the total number of shares of
Common Stock so issued (or into which convertible securities may be exercised
or convert) would purchase at the Market Price on the last trading day
preceding the date of the agreement on pricing such shares (or such convertible
securities); and


 


(B) the Exercise Price payable upon exercise of
the Warrant shall be adjusted by multiplying such Exercise Price in effect
immediately prior to the date of the agreement on pricing of such shares (or of
such convertible securities) by a fraction, the numerator of which shall be the
number of shares of Common Stock


 

















 


issuable
upon exercise of this Warrant prior to such date and the denominator of which
shall be the number of shares of Common Stock issuable upon exercise of this
Warrant immediately after the adjustment described in clause (A) above.


 


For
purposes of the foregoing, the aggregate consideration receivable by the
Company in connection with the issuance of such shares of Common Stock or
convertible securities shall be deemed to be equal to the sum of the net
offering price (including the Fair Market Value of any non-cash consideration
and after deduction of any related expenses payable to third parties) of all
such securities plus the minimum aggregate amount, if any, payable upon
exercise or conversion of any such convertible securities into shares of Common
Stock; and “Permitted Transactions”
shall mean issuances (i) as consideration for or to fund the acquisition
of businesses and/or related assets, (ii) in connection with employee
benefit plans and compensation related arrangements in the ordinary course and
consistent with past practice approved by the Board of Directors, (iii) in
connection with a public or broadly marketed offering and sale of Common Stock
or convertible securities for cash conducted by the Company or its affiliates
pursuant to registration under the Securities Act or Rule 144A thereunder
on a basis consistent with capital raising transactions by comparable financial
institutions and (iv) in connection with the exercise of preemptive rights
on terms existing as of the Issue Date. Any adjustment made pursuant to this Section 13(B) shall
become effective immediately upon the date of such issuance.


 


(C) Other
Distributions. In case the Company shall fix a record date for the making
of a distribution to all holders of shares of its Common Stock of securities,
evidences of indebtedness, assets, cash, rights or warrants (excluding Ordinary
Cash Dividends, dividends of its Common Stock and other dividends or
distributions referred to in Section 13(A)), in each such case, the
Exercise Price in effect prior to such record date shall be reduced immediately
thereafter to the price determined by multiplying the Exercise Price in effect
immediately prior to the reduction by the quotient of (x) the Market Price
of the Common Stock on the last trading day preceding the first date on which
the Common Stock trades regular way on the principal national securities
exchange on which the Common Stock is listed or admitted to trading without the
right to receive such distribution, minus the amount of cash and/or the Fair
Market Value of the securities, evidences of indebtedness, assets, rights or
warrants to be so distributed in respect of one share of Common Stock (such
amount and/or Fair Market Value, the “Per
Share Fair Market Value”) divided by (y) such Market Price on
such date specified in clause (x); such adjustment shall be made successively
whenever such a record date is fixed. In such event, the number of Shares
issuable upon the exercise of this Warrant shall be increased to the number
obtained by dividing (x) the product of (1) the number of Shares
issuable upon the exercise of this Warrant before such adjustment, and (2) the
Exercise Price in effect immediately prior to the distribution giving rise to
this adjustment by (y) the new Exercise Price determined in accordance
with the immediately preceding sentence. In the case of adjustment for a cash
dividend that is, or is coincident with, a regular quarterly cash dividend, the
Per Share Fair Market Value would be reduced by the per share amount of the
portion of the cash dividend that would constitute an Ordinary Cash Dividend.
In the event that such distribution is not so made, the Exercise Price and the
number of Shares issuable upon exercise of this Warrant then in effect shall be
readjusted, effective as of the date when the Board of Directors determines not
to distribute such shares, evidences of indebtedness, assets, rights, cash or
warrants, as the case may be, to the Exercise Price that would then be in
effect and the number of Shares that would then be issuable upon exercise of
this Warrant if such record date had not been fixed.


 


(D) Certain
Repurchases of Common Stock. In case the Company effects a Pro Rata
Repurchase of Common Stock, then the Exercise Price shall be reduced to the
price determined by multiplying the Exercise Price in effect immediately prior
to the Effective Date of such Pro Rata Repurchase by a fraction of which the numerator
shall be (i) the product of (x) the number of shares of Common Stock
outstanding immediately before such Pro Rata Repurchase and (y) the Market
Price of a share of Common Stock on the trading day immediately preceding the
first public announcement by the Company or any of its Affiliates of the intent
to effect such Pro Rata Repurchase, minus (ii) the aggregate purchase
price of the Pro Rata Repurchase, and of which the denominator shall be the
product of (i) the number of shares of Common Stock outstanding
immediately prior to such Pro Rata Repurchase minus the number of shares of
Common Stock so repurchased and (ii) the Market Price per share of Common
Stock on the trading day immediately preceding the first public announcement by
the Company or any of its Affiliates of the intent to effect such Pro Rata
Repurchase. In such event, the number of shares of Common Stock issuable upon
the exercise of this Warrant shall be increased to the number obtained by
dividing (x) the product of (1) the number of Shares issuable upon
the exercise of this Warrant before such adjustment, and (2) the Exercise
Price in effect immediately prior to the Pro Rata Repurchase giving rise to
this adjustment by (y) the new Exercise Price determined in accordance
with the immediately preceding sentence. For the avoidance of doubt, no
increase to the


 

















 


Exercise
Price or decrease in the number of Shares issuable upon exercise of this
Warrant shall be made pursuant to this Section 13(D).


 


(E) Business
Combinations. In case of any Business Combination or reclassification of
Common Stock (other than a reclassification of Common Stock referred to in Section 13(A)),
the Warrantholder’s right to receive Shares upon exercise of this Warrant shall
be converted into the right to exercise this Warrant to acquire the number of
shares of stock or other securities or property (including cash) which the
Common Stock issuable (at the time of such Business Combination or
reclassification) upon exercise of this Warrant immediately prior to such Business
Combination or reclassification would have been entitled to receive upon
consummation of such Business Combination or reclassification; and in any such
case, if necessary, the provisions set forth herein with respect to the rights
and interests thereafter of the Warrantholder shall be appropriately adjusted
so as to be applicable, as nearly as may reasonably be, to the Warrantholder’s
right to exercise this Warrant in exchange for any shares of stock or other
securities or property pursuant to this paragraph. In determining the kind and
amount of stock, securities or the property receivable upon exercise of this
Warrant following the consummation of such Business Combination, if the holders
of Common Stock have the right to elect the kind or amount of consideration
receivable upon consummation of such Business Combination, then the
consideration that the Warrantholder shall be entitled to receive upon exercise
shall be deemed to be the types and amounts of consideration received by the
majority of all holders of the shares of common stock that affirmatively make
an election (or of all such holders if none make an election).


 


(F) Rounding
of Calculations; Minimum Adjustments. All calculations under this Section 13
shall be made to the nearest one-tenth (1/10th) of a cent or to the
nearest one-hundredth (1/100th) of a share, as the case may be. Any
provision of this Section 13 to the contrary notwithstanding, no
adjustment in the Exercise Price or the number of Shares into which this
Warrant is exercisable shall be made if the amount of such adjustment would be
less than $0.01 or one-tenth (1/10th) of a share of Common Stock, but any
such amount shall be carried forward and an adjustment with respect thereto
shall be made at the time of and together with any subsequent adjustment which,
together with such amount and any other amount or amounts so carried forward,
shall aggregate $0.01 or 1/10th of a share of Common Stock, or more.


 


(G) Timing
of Issuance of Additional Common Stock Upon Certain Adjustments. In any
case in which the provisions of this Section 13 shall require that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (i) issuing to
the Warrantholder of this Warrant exercised after such record date and before
the occurrence of such event the additional shares of Common Stock issuable
upon such exercise by reason of the adjustment required by such event over and
above the shares of Common Stock issuable upon such exercise before giving
effect to such adjustment and (ii) paying to such Warrantholder any amount
of cash in lieu of a fractional share of Common Stock; provided, however,
that the Company upon request shall deliver to such Warrantholder a due bill or
other appropriate instrument evidencing such Warrantholder’s right to receive
such additional shares, and such cash, upon the occurrence of the event
requiring such adjustment.


 


(H) Completion
of Qualified Equity Offering. In the event the Company (or any successor by
Business Combination) completes one or more Qualified Equity Offerings on or
prior to December 31, 2009 that result in the Company (or any such
successor ) receiving aggregate gross proceeds of not less than 100% of the
aggregate liquidation preference of the Preferred Shares (and
any preferred stock issued by any such successor to the Original
Warrantholder under the CPP), the number of shares of Common Stock underlying
the portion of this Warrant then held by the Original Warrantholder shall be thereafter
reduced by a number of shares of Common Stock equal to the product of (i) 0.5
and (ii) the number of shares underlying the Warrant on the Issue Date
(adjusted to take into account all other theretofore made adjustments pursuant
to this Section 13).


 


(I) Other
Events. For so long as the Original Warrantholder holds this Warrant or any
portion thereof, if any event occurs as to which the provisions of this Section 13
are not strictly applicable or, if strictly applicable, would not, in the good
faith judgment of the Board of Directors of the Company, fairly and adequately
protect the purchase rights of the Warrants in accordance with the essential
intent and principles of such provisions, then the Board of Directors shall
make such adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of the Board of Directors, to protect such purchase rights
as aforesaid. The Exercise Price or the number of Shares into which this
Warrant is exercisable shall not be adjusted in the event of a change in the
par value of the Common Stock or a change in the jurisdiction of incorporation
of the Company.


 

















 


(J) Statement
Regarding Adjustments. Whenever the Exercise Price or the number of Shares
into which this Warrant is exercisable shall be adjusted as provided in Section 13,
the Company shall forthwith file at the principal office of the Company a
statement showing in reasonable detail the facts requiring such adjustment and
the Exercise Price that shall be in effect and the number of Shares into which
this Warrant shall be exercisable after such adjustment, and the Company shall
also cause a copy of such statement to be sent by mail, first class postage
prepaid, to each Warrantholder at the address appearing in the Company’s
records.


 


(K) Notice
of Adjustment Event. In the event that the Company shall propose to take
any action of the type described in this Section 13 (but only if the
action of the type described in this Section 13 would result in an
adjustment in the Exercise Price or the number of Shares into which this
Warrant is exercisable or a change in the type of securities or property to be
delivered upon exercise of this Warrant), the Company shall give notice to the
Warrantholder, in the manner set forth in Section 13(J), which notice
shall specify the record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice shall also
set forth the facts with respect thereto as shall be reasonably necessary to
indicate the effect on the Exercise Price and the number, kind or class of
shares or other securities or property which shall be deliverable upon exercise
of this Warrant. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 10 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 15
days prior to the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of any such
action.


 


(L) Proceedings
Prior to Any Action Requiring Adjustment. As a condition precedent to the
taking of any action which would require an adjustment pursuant to this Section 13,
the Company shall take any action which may be necessary, including obtaining
regulatory, New York Stock Exchange, NASDAQ Stock Market or other applicable
national securities exchange or stockholder approvals or exemptions, in order
that the Company may thereafter validly and legally issue as fully paid and
nonassessable all shares of Common Stock that the Warrantholder is entitled to
receive upon exercise of this Warrant pursuant to this Section 13.


 


(M) Adjustment
Rules. Any adjustments pursuant to this Section 13 shall be made
successively whenever an event referred to herein shall occur. If an adjustment
in Exercise Price made hereunder would reduce the Exercise Price to an amount
below par value of the Common Stock, then such adjustment in Exercise Price
made hereunder shall reduce the Exercise Price to the par value of the Common
Stock.


 


14.
Exchange. At any time following the date on which the shares of Common
Stock of the Company are no longer listed or admitted to trading on a national
securities exchange (other than in connection with any Business Combination),
the Original Warrantholder may cause the Company to exchange all or a portion
of this Warrant for an economic interest (to be determined by the Original
Warrantholder after consultation with the Company) of the Company classified as
permanent equity under U.S. GAAP having a value equal to the Fair Market Value
of the portion of the Warrant so exchanged. The Original Warrantholder shall
calculate any Fair Market Value required to be calculated pursuant to this Section 14,
which shall not be subject to the Appraisal Procedure.


 


15.
No Impairment. The Company will not, by amendment of its Charter or
through any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all the provisions of this Warrant and in taking of all
such action as may be necessary or appropriate in order to protect the rights
of the Warrantholder.


 


16.
Governing Law. This Warrant will be governed by and construed in
accordance with the federal law of the United States if and to the extent such
law is applicable, and otherwise in accordance with the laws of the State of
New York applicable to contracts made and to be performed entirely within such
State. Each of the Company and the Warrantholder agrees (a) to submit to
the exclusive jurisdiction and venue of the United States District Court for
the District of Columbia for any civil action, suit or proceeding arising out
of or relating to this Warrant or the transactions contemplated hereby, and (b) that
notice may be served upon the Company at the address in Section 20 below
and upon the Warrantholder at the address for the Warrantholder set forth in
the registry maintained by the Company pursuant to Section 9 hereof. To
the extent permitted by applicable law, each of the Company and the
Warrantholder hereby unconditionally waives trial by jury in any civil legal
action or proceeding relating to the Warrant or the transactions contemplated
hereby or thereby.


 

















 


17.
Binding Effect. This Warrant shall be binding upon any successors or
assigns of the Company.


 


18.
Amendments. This Warrant may be amended and the observance of any term
of this Warrant may be waived only with the written consent of the Company and
the Warrantholder.


 


19.
Prohibited Actions. The Company agrees that it will not take any action
which would entitle the Warrantholder to an adjustment of the Exercise Price if
the total number of shares of Common Stock issuable after such action upon
exercise of this Warrant, together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon the exercise of
all outstanding options, warrants, conversion and other rights, would exceed
the total number of shares of Common Stock then authorized by its Charter.


 


20.
Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the other will be in writing and will be deemed to
have been duly given (a) on the date of delivery if delivered personally,
or by facsimile, upon confirmation of receipt, or (b) on the second
business day following the date of dispatch if delivered by a recognized next
day courier service. All notices hereunder shall be delivered as set forth in
Item 8 of Schedule A hereto, or pursuant to such other instructions as may
be designated in writing by the party to receive such notice.


 


21.
Entire Agreement. This Warrant, the forms attached hereto and Schedule A
hereto (the terms of which are incorporated by reference herein), and the
Letter Agreement (including all documents incorporated therein), contain the
entire agreement between the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous arrangements or undertakings with
respect thereto.


 


[Remainder of page intentionally left blank]


 

















 


[Form of Notice of Exercise]




	
  Date:

  	
   

  






 


TO:


 


 


RE:  Election to Purchase Common Stock


 


The
undersigned, pursuant to the provisions set forth in the attached Warrant,
hereby agrees to subscribe for and purchase the number of shares of the Common
Stock set forth below covered by such Warrant. The undersigned, in accordance
with Section 3 of the Warrant, hereby agrees to pay the aggregate Exercise
Price for such shares of Common Stock in the manner set forth below. A new
warrant evidencing the remaining shares of Common Stock covered by such
Warrant, but not yet subscribed for and purchased, if any, should be issued in
the name set forth below.


 


	
  Number
  of Shares of Common Stock

  	
   

  



 


Method
of Payment of Exercise Price (note if cashless exercise pursuant to
Section 3(i) of the Warrant or cash exercise pursuant to Section 3(ii) of
the Warrant, with consent of the Company and the Warrantholder)                                       


 


	
  Aggregate
  Exercise Price:

  	
   

  	
   

  



 


 




	
   

  	
  Holder:

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  






 

















 


IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by a
duly authorized officer.


 


Dated:
December 5, 2008


 


 


	
   

  	
   

  	
  Unity Bancorp, Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  James A. Hughes

  
	
   

  	
   

  	
  Name:

  	
  James
  A. Hughes.

  
	
   

  	
   

  	
  Title:

  	
  President
  and Chief

  Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attest:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Linda B. McDermott

  
	
   

  	
   

  	
  Name:

  	
  Linda
  B.McDermott

  
	
   

  	
   

  	
  Title:

  	
  Assistant
  Corporate Secretary

  



 

















 


SCHEDULE A


 


Item 1


 


Name:  Unity Bancorp, Inc.


Corporate
or other organizational form: 
Corporation


Jurisdiction
of organization: New Jersey


 


Item
2


 


Exercise
Price:    $4.05


 


Item 3


 


Issue
Date:  December 5, 2008


 


Item 4


 


Amount
of last dividend declared prior to the Issue Date:  Unity Bancorp, Inc. issued a press
release on June 23, 2008 announcing the declaration of a cash dividend of
$0.05 per common share, payable on July 25, 2008 to shareholders of record
as of July 11, 2008


 


Item 5


 


Date
of Letter Agreement between the Company and the United States Department of the


Treasury:  December 5, 2008


 


Item 6


 


Number
of shares of Common Stock: 764,778


 


Item 7


 


Company’s
address:  Unity Bancorp, Inc., 64
Old Highway 22, Clinton, NJ 08809


 


Item 8


 


Notice
information:


 


	
   

  	
   

  	
  James
  A. Hughes

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
  Unity
  Bancorp, Inc.

  
	
   

  	
   

  	
  64
  Old Highway 22

  
	
   

  	
   

  	
  Clinton,
  NJ 08809