Document:

exhibit_10-3.htm

Exhibit 10.3

 

HOME FEDERAL SAVINGS AND LOAN ASSOCIATION OF COLLINSVILLE

EMPLOYMENT AGREEMENT

This Agreement (this “Agreement”) is made effective as of the 8th day of July, 2016 (the “Effective Date”), by and between Home Federal Savings and Loan Association of Collinsville (the “Association”), a federally-chartered institution with its principal offices at 100 East Clay Street, Collinsville, Illinois 62234, and Cynthia T. Knebel (“Executive”).  When used in this Agreement any reference to the “Company” shall refer to Best Hometown Bancorp, Inc.

 

WITNESSETH:

 

WHEREAS, the Association wishes to assure itself of the services of Executive for the period provided in this Agreement; and

 

WHEREAS, Executive is willing to serve in the employ of the Association on a full-time basis as its Chief Financial Officer and Treasurer on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

 

1.POSITION AND RESPONSIBILITIES 

 

During the term of Executive’s employment hereunder, Executive agrees to serve as the Chief Financial Officer and Treasurer of the Association.  Executive shall perform administrative and management services for the Association which are customarily performed by persons in a similar executive officer capacity.  Executive’s principal place of employment shall be at the Association’s principal executive offices.  The Association shall provide Executive, at her principal place of employment, with support services and facilities suitable to her position with the Association and necessary or appropriate in connection with the performance of her duties under this Agreement.

 

2.TERM OF EMPLOYMENT

 

(a)           The term of this Agreement and the period of Executive’s employment under this Agreement will begin as of the Effective Date and will continue for a period of twelve (12) full calendar months thereafter.  As of July 1st each year (the “Renewal Date”), beginning with the first July 1st following the Effective Date, this Agreement shall renew for an additional year such that the remaining term shall again be twelve (12) full calendar months provided, however, that the disinterested members of the Board of Directors of the Association (the “Board of Directors”) shall at least thirty (30) days before the Renewal Date conduct a comprehensive performance evaluation and review of Executive for purposes of determining whether to extend this Agreement.  The Board of Directors shall give Executive notice of its decision whether or not to renew this Agreement at least ten (10) days prior to the Renewal Date.

 

  

  

  

(b)           Notwithstanding anything contained in this Agreement to the contrary, either Executive or the Association may terminate Executive’s employment with the Association at any time during the term of this Agreement, subject to the terms and conditions of this Agreement.

 

(c)           In the event of the Executive’s termination of employment under this Agreement for any reason, such termination shall also constitute the Executive’s resignation from the Board of Directors of the Association, as well as from the Board of Directors of the Company.

 

3.COMPENSATION AND REIMBURSEMENT

 

(a)           The compensation specified under this Agreement shall constitute consideration paid by the Association in exchange for duties described in Section 1 of this Agreement.  The Association shall pay Executive, as compensation, a salary of not less than $83,545.80 per year (“Base Salary”).  Base Salary shall include any amounts of compensation deferred by Executive under any employee benefit plan or deferred compensation arrangement maintained by the Association.  Base Salary shall be payable bi-weekly or, if different, in accordance with the Association’s customary payroll practices.  During the term of this Agreement, Executive’s Base Salary shall be reviewed at least annually by December 31st of each year.  The review shall be conducted by the Board of Directors or by a committee designated by the Board of Directors.  The committee or the Board of Directors may increase, but not decrease, Executive’s Base Salary at any time, except for a decrease not in excess of any decrease generally applicable to all officers of the Association.  Any increase in Base Salary shall become the “Base Salary” for purposes of this Agreement.  The Board of Directors may engage the services of an independent consultant to assist in the determination of the appropriate Base Salary.  In addition to the Base Salary provided in this Section 3, the Association shall also provide Executive with all other benefits as are provided uniformly to full-time employees of the Association, on a basis (including cost) no less favorable than the benefits provided to other senior officers of the Association.

 

(b)           In addition to the Base Salary provided for in Section 3(a), the Association will provide Executive with the opportunity to participate in employee benefit plans, arrangements and perquisites substantially equivalent to those in which Executive was participating or otherwise deriving a benefit from immediately prior to the Effective Date, and any other employee benefit plans, arrangements and perquisites suitable for the Association’s senior executives adopted by the Association subsequent to the Effective Date, and the Association will not, without Executive’s prior written consent, make any changes in the plans, arrangements or perquisites which would adversely affect Executive’s rights or benefits thereunder, without separately providing for an arrangement that ensures Executive receives or will receive the economic value that Executive would otherwise lose as a result of such adverse effect, unless the changes apply equally to all other employees or senior officers of the Association.  Without limiting the generality of the foregoing provisions of this Section 3(b), Executive shall be entitled to participate in or receive benefits under any employee benefit plans, whether tax-qualified or otherwise, including, but not limited to, retirement plans, supplemental retirement plans, deferred compensation plans, pension plans, profit-sharing plans, employee stock ownership plans, stock award or stock option plans, health-and-accident plans, medical coverage or any other employee benefit plan or arrangement made available by the Association in the future to its senior executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of the plans and arrangements (including designation by the Board of Directors of eligibility to participate, if applicable).  Executive shall also be entitled to participate in any incentive compensation or bonus plan or arrangement of the Company or the Association in which Executive is eligible to participate (and she shall be entitled to a pro rata distribution under any incentive compensation or bonus plan as to any year in which a termination of employment occurs, other than Termination for Just Cause).  Nothing paid to Executive under the plans or arrangements will be deemed to be in lieu of other compensation to which Executive is entitled under this Agreement.

 

  

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(c)           In addition to the Base Salary provided for by Section 3(a) and other compensation and benefits provided for by Section 3(b), the Association shall pay or reimburse Executive for all reasonable expenses incurred by Executive in performing her obligations under this Agreement in accordance with the Association’s reimbursement policies, provided that the reimbursement is made within one calendar year following the date on which the expense was incurred and provided further that the right to reimbursement is not exchanged for another benefit.  The amount of expenses eligible for reimbursement during the calendar year may not affect the expenses eligible for reimbursement in any other calendar year.

 

(d)           Executive shall be entitled to paid time off in accordance with the standard policies of the Association for senior executive officers, but in no event less than 20 days paid time off during each year of employment.  Executive shall receive her Base Salary and other benefits during periods of paid leave.  Executive shall also be entitled to paid legal holidays in accordance with the policies of the Association.  Executive shall also be entitled to sick leave in accordance with the policies of the Association, but in no event less than the number of days of sick leave per year to which Executive was entitled at the Effective Date.

 

4.OUTSIDE ACTIVITIES

 

During the term of her employment under this Agreement, except for periods of absence occasioned by illness, reasonable vacation periods and reasonable leaves of absence approved by the Board of Directors, Executive shall devote substantially all her business time, attention, skill, and efforts to the faithful performance of her duties hereunder.  Executive also may serve as a member of the board of directors of business organizations, trade associations, and community and charitable organizations, subject to the annual approval of the Board of Directors; provided that in each case the service shall not materially interfere with the performance of her duties under this Agreement, adversely affect the reputation of the Association or present any conflict of interest.  Executive shall provide to the Board of Directors annually a list of all organizations for which Executive serves as a director or in a similar capacity for purposes of obtaining the approval of the Board of Directors of Executive’s service on the boards of such organizations (it being understood that membership in social, religious, charitable or similar organizations does not require approval of the Board of Directors pursuant to this Section 4).

 

5.PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION

 

(a)           Upon the occurrence of an Event of Termination (as herein defined) during Executive’s term of employment under this Agreement, the provisions of this Section 5 shall apply.  As used in this Agreement, an “Event of Termination” shall mean and include any of the following:

 

  

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(i)           the termination by the Association of Executive’s full-time employment hereunder for any reason other than termination governed by Section 6 (Termination for Just Cause), or termination governed by Section 7 (Termination For Disability or Death), or termination governed by Section 8 (Termination Upon Retirement); or

 

(ii)           Executive’s resignation from the Association’s employ for any of the following reasons (each shall be deemed a “Good Reason”):

 

	
  

	
(A)

	
the failure to elect or reelect or to appoint or reappoint Executive to the position set forth under Section 1 of this Agreement;

 

	
  

	
(B)

	
a material change in Executive’s functions, duties, or responsibilities with the Association, which change would cause Executive’s position to become one of lesser responsibility, importance, or scope from the position and attributes described in Section 1 of this Agreement;

 

	
  

	
(C)

	
a relocation of Executive’s principal place of employment by more than 30 miles from the main office of the Association;

 

	
  

	
(D)

	
a material reduction in the benefits and perquisites of Executive from those being provided as of the Effective Date, other than a reduction pursuant to Section 3(a) of this Agreement or a reduction that is part of a Association-wide reduction in pay or benefits;

 

	
  

	
(E)

	
a liquidation or dissolution of the Company or the Association, other than a liquidation or dissolution which does not affect the status of Executive; or

 

	
  

	
(F)

	
a material breach of this Agreement by the Association.

 

Upon the occurrence of any event described in clauses (ii)(A), (B), (C), (D), (E) or (F), above, Executive shall have the right to elect to terminate her employment under this Agreement by resignation upon not less than thirty (30) days prior written Notice of Termination, as defined in Section 9(a), given within ninety (90) days after the event giving rise to said right to elect.  Notwithstanding the preceding sentence, Executive, after giving due notice within the prescribed time frame of an initial event specified above, shall not waive any of her rights under this Agreement by virtue of the fact that Executive has submitted her resignation but has remained in the employ of the Association, provided Executive is engaged in good faith discussions to resolve the occurrence of any event described in clauses (ii)(A), (B), (C), (D), (E) or (F) above.  During this thirty (30) day period, the Association and the Company shall have the right to cure the Good Reason, and in the event that the Association cures said Good Reason, Executive shall no longer have the right to terminate employment and receive a payment under this Agreement.

 

  

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(iii)           The termination of Executive’s employment (other than Termination for Just Cause) by the Association (or any successor thereto) on the effective date of, or at any time following a Change in Control, or Executive’s resignation from the Association’s employ due to  Good Reason (subject to Executive’s notice of Good Reason and the Company’s or the Association’s right to cure, as set forth in Section 5(a)(ii)) on the effective date of, or at any time following a Change in Control, during the term of this Agreement.  For these purposes, a Change in Control shall mean the occurrence of any of the following events:

 

	
  

	
(A)

	
Merger:  The Company or the Association merges into or consolidates with another entity, or merges another bank or corporation into the Association or the Company, and as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Association immediately before the merger or consolidation;

 

	
  

	
(B)

	
Acquisition of Significant Share Ownership:  There is filed, or is required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Company’s or the Association’s voting securities; provided, however, this clause (B) shall not apply to beneficial ownership of the Company’s or the Association’s voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities;

 

	
  

	
(C)

	
Change in Board Composition:  Individuals who constitute the Company’s or the Association’s Board of Directors on the Effective Date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the Effective Date whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board shall be considered, for purposes of this clause (C), as though he or she was a member of the Incumbent Board; or

 

	
  

	
(D)

	
Sale of Assets:  The Company or the Association sells to a third party all or substantially all of its assets.

 

(b)           Upon the occurrence of an Event of Termination under Sections 5(a)(i) or 5(a)(ii) above, on the Date of Termination, as defined in Section 9(b) of this Agreement, the Association shall be obligated to pay Executive, or, in the event of her subsequent death, her beneficiary or beneficiaries, or her estate, as the case may be, as severance pay or liquidated damages, or both, an amount equal to the sum of: (i) her earned but unpaid salary as of the date of her termination of employment with the Association; (ii) the benefits, if any, to which she is entitled as a former employee under the employee benefit plans and programs and compensation plans and programs maintained for the benefit of the Company’s or the Association’s officers and employees; and (iii) the remaining payments of Base Salary that Executive would have earned, in accordance with Section 3(a) if she had continued her employment with the Association for the remaining term of this Agreement plus the bonus or incentive award Executive would have received in each year during the remaining term in an amount equal to the average bonus and/or incentive award earned by her over the three calendar years preceding the year in which the termination occurs (in determining the bonus and/or incentive portion of the payment, the total amount will be determined by: adding the bonuses and/or incentives earned in each of the last three years; dividing the total by 36; and then multiplying the result by the number of whole months in the remaining unexpired term of this Agreement).  Any payments hereunder shall be made in a lump sum within thirty (30) days after the Date of Termination, or in the event that Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) applies to the payment, and Executive is considered a “Specified Employee” under Code Section 409A, on the first day of the seventh month following the Date of Termination.  The payments shall not be reduced in the event Executive obtains other employment following termination of employment.

 

  

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(c)           Upon the occurrence of an Event of Termination under Section 5(a)(iii), on the Date of Termination, as defined in Section 9(b) of this Agreement, the Association shall be obligated to pay Executive, or, in the event of her subsequent death, her beneficiary or beneficiaries, or her estate, as the case may be, as severance pay or liquidated damages, or both, an amount equal to the sum of: (i) her earned but unpaid salary as of the date of her termination of employment with the Association; (ii) the benefits, if any, to which she is entitled as a former employee under the employee benefit plans and programs and compensation plans and programs maintained for the benefit of the Association’s or Company’s officers and employees; and (iii) an amount equal to one (1) times Executive’s “base amount,” as that term is defined for purposes of Code Section 280G.  Any payments hereunder shall be made in a lump sum within five (5) days after the Date of Termination, or in the event that Code Section 409A applies to the payment and Executive is considered a “Specified Employee” under Code Section 409A, on the first day of the seventh month following the Date of Termination.  The payments shall not be reduced in the event Executive obtains other employment following termination of employment.

 

 (d)           Upon the occurrence of an Event of Termination, the Association will cause to be continued at its expense non-taxable medical and dental coverage and life insurance substantially identical to the coverage maintained by the Association for Executive and her family prior to Executive’s termination.  The coverage shall continue for the remaining term of this Agreement in the case of an Event of Termination under Sections 5(a)(i) or 5(a)(ii), and  for a period of twelve (12) months from the Date of Termination in the case of an Event of Termination under Section 5(a)(iii) of this Agreement.  If the Association cannot provide the benefits set forth in this Section 5(d) because Executive is no longer an employee, applicable rules and regulations prohibit the benefits in the manner contemplated, or it would subject the Association to penalties, then the Association shall pay Executive a cash lump sum payment reasonably estimated to be equal to the value of such benefits or the value of the remaining benefits at the time of such determination.  The cash payment shall be made in a lump sum within thirty (30) days after the later of Executive’s date of termination or the effective date of the rules or regulations prohibiting the benefits or subjecting the Association to penalties.

 

  

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(e)           Executive shall be entitled to voluntarily terminate her employment other than for Good Reason at any time during the term of this Agreement, provided, however, that Executive shall not be entitled to any compensation or benefits under this Section 5 as a result of such termination.

(f)           Any payments or benefits under Sections 5(a)(i) or 5(a)(ii) of the  Agreement shall be contingent on Executive’s execution and non-revocation of a mutual release (the “Mutual Release”), satisfactory to the Company and the Association, of all claims that Executive or any of Executive’s affiliates or beneficiaries may have against the Company and the Association or any affiliate, and their officers, directors, successors and assigns, releasing said persons from any and all claims, rights, demands, causes of action, suits, arbitrations or grievances relating to Executive’s employment relationship, including claims under the Age Discrimination in Employment Act (“ADEA”), but not including claims for benefits under tax-qualified plans or other benefit plans in which Executive is vested, claims for benefits required by applicable law or claims with respect to obligations set forth in this Agreement that survive the termination of this Agreement.  The Company and the Association shall also execute the Mutual Release, which shall release Executive, her affiliates and beneficiaries from any and all claims rights, demands, causes of action, suits, arbitrations or grievances relating to Executive’s employment relationship, provided, however, that if the Company or the Association refuses to execute the Mutual Release in the time frame set forth below, Executive’s obligation to execute and not revoke the Mutual Release as a precondition to receiving such payments or benefits under Sections 5(a)(i) or 5(a)(ii) shall terminate.  Notwithstanding the foregoing sentence, the Mutual Release shall not release Executive for (i) acts of fraud; (ii) felonious acts for which Executive is convicted, enters a plea of nolo contendere, or enters into a pre-trial diversion or similar program; (iii) intentional misconduct resulting in financial harm to the Company or the Association; or (iv) willful violation of any material federal banking law or regulation.  In order to comply with the requirements of Section 409A of the Code and the ADEA, the release must be provided to Executive no later than the date of her Separation from Service and Executive and the Company and the Association must execute the Mutual Release within twenty-one (21) days after the date of termination without subsequent revocation by Executive within seven (7) days after execution of the release.  This Section 5(f) shall not apply with respect to payments or benefits under Section 5(a)(iii) of this Agreement.

 

(g)           Notwithstanding the foregoing, to the extent required by regulations or interpretations of the Office of the Comptroller of the Currency (“OCC”), all severance payments under the Agreement shall not exceed three (3) times Executive’s average annual compensation (as defined in such regulations or interpretations) over the most recent five (5) taxable years.

 

6.TERMINATION FOR JUST CAUSE 

 

(a)           The term “Termination for Just Cause” shall mean termination because of Executive’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of this Agreement.

 

  

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(b)           Notwithstanding Section 6(a), the Association may not terminate Executive for Just Cause unless and until there shall have been delivered to her a Notice of Termination which shall include a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board of Directors at a meeting of the Board of Directors called and held for that purpose, finding that in the good faith opinion of the Board of Directors, Executive was guilty of conduct justifying Termination for Just Cause.  Executive shall not have the right to receive compensation or other benefits for any period after Termination for Just Cause.  During the period beginning on the date of the Notice of Termination for Just Cause pursuant to Section 6 hereof through the Date of Termination, any unvested stock options and related limited rights granted to Executive under any stock option plan shall not be exercisable nor shall any unvested awards granted to Executive under any stock benefit plan of the Company or the Association or any subsidiary or affiliate thereof, vest.  At the Date of Termination, any such unvested stock options and related limited rights and any such unvested awards shall become null and void and shall not be exercisable by or delivered to Executive at any time subsequent to the Termination for Just Cause.  Executive shall not, as a result of Termination for Just Cause, forfeit any rights to compensation or benefits, including benefits under qualified or non-qualified retirement or deferred compensation plans or programs, earned and vested as of the date of termination.

 

7.TERMINATION FOR DISABILITY OR DEATH

 

(a)           The Association or Executive may terminate Executive’s employment after having established Executive’s Disability.  For purposes of this Agreement, “Disability” means a physical or mental infirmity that impairs Executive’s ability to substantially perform her duties under this Agreement and that results in Executive’s becoming eligible for long-term disability benefits under a long-term disability plan of the Company or the Association (or, if the Company or the Association has no such plan in effect, that impairs Executive’s ability to substantially perform her duties under this Agreement for a period of one hundred eighty (180) consecutive days), provided, however, that in order to receive the payments from the Company or the Association under Section 7(b) of this Agreement, Executive’s “Disability” shall also satisfy the requirements of Code Section 409A.  The Board of Directors shall determine in good faith, based upon competent medical advice and other factors that they reasonably believe to be relevant, whether or not Executive is and continues to be disabled for purposes of this Agreement.  As a condition to any benefits, the Board of Directors may require Executive to submit to such physical or mental evaluations and tests as it deems reasonably appropriate, at the Association’s expense.

 

(b)           In the event of Disability, Executive’s obligation to perform services under this Agreement will terminate.  In the event of such termination, Executive shall be entitled to receive benefits under any disability program sponsored by the Company or the Association.

 

  

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(c)           In the event of Executive’s death during the term of this Agreement, her estate, legal representatives or named beneficiary or beneficiaries (as directed by Executive in writing) shall be paid Executive’s Base Salary, as defined in Section 3(a), at the rate in effect at the time of Executive’s death through the end of the calendar month in which Executive’s death occurs, and the Association will continue to provide Executive’s family the same medical, dental, and other health benefits that were provided by the Association to Executive’s family immediately prior to Executive’s death, on the same terms, including cost, as if Executive were actively employed by the Association, except to the extent the terms (including cost) of such benefits are changed in their application to all continuing employees of the Association, such coverage to continue for a period of one (1) year after the date of Executive’s death.  If the Association cannot provide the benefits set forth in this paragraph because Executive is no longer an employee, applicable rules and regulations prohibit the benefits in the manner contemplated, or it would subject the Association to penalties, then the Association shall pay Executive’s family a cash lump sum payment reasonably estimated to be equal to the value of the benefits or the value of the remaining benefits at the time of the determination.  The cash payment shall be made in a lump sum within thirty (30) days after the later of Executive’s date of death or the effective date of the rules or regulations prohibiting the benefits or subjecting the Association to penalties.

 

8.TERMINATION UPON RETIREMENT

 

Termination of Executive’s employment based on “Retirement” shall mean termination of Executive’s employment by the Association on or after age 70, Executive’s voluntary termination at any time after Executive reaches age 70, or retirement at any time as agreed upon by the Board of Directors and Executive.  Upon termination of Executive based on Retirement, no amounts or benefits shall be due Executive under this Agreement, and Executive shall be entitled to all benefits under any retirement plan of the Association and other plans to which Executive is a party, or in accordance with any other retirement arrangements approved by the Board of Directors.

9.NOTICE

 

(a)           Any notice required under this Agreement shall be in writing and hand-delivered to the other party.  Any termination by the Association or by Executive shall be communicated by Notice of Termination to the other party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon.

 

(b)           “Date of Termination” shall mean (i) if Executive’s employment is terminated for Disability, thirty (30) days after a Notice of Termination is given (provided that she shall not have returned to the performance of her duties on a full-time basis during the thirty (30) day period), and (ii) if her employment is terminated for any other reason, the date specified in the Notice of Termination, provided however, in either case, the “Date of Termination” shall not occur prior to the date on which Executive has a “Separation from Service” within the meaning of Code Section 409A.

 

(c)           If the party receiving a Notice of Termination desires to dispute or contest the basis or reasons for termination, the party receiving the Notice of Termination must notify the other party within thirty (30) days after receiving the Notice of Termination that the a dispute exists, and shall pursue the resolution of the dispute in good faith and with reasonable diligence pursuant to Section 20 of this Agreement. During the pendency of any dispute, neither the Company nor the Association shall be obligated to pay Executive compensation or other payments beyond the Date of Termination.

 

  

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10.POST-TERMINATION OBLIGATIONS

 

Executive shall, upon reasonable notice, furnish any information and assistance honestly and in good faith to the Association or the Company as may reasonably be required by the Company or the Association in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party.  All payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with this Section 10 for one (1) full year after the earlier of the expiration of this Agreement or termination of Executive’s employment with the Association.

 

11.NON-COMPETITION AND NON-DISCLOSURE

 

(a)           As a material inducement of the Association to enter into this Agreement, upon any termination of Executive’s employment hereunder pursuant to the terms of this Agreement, other than a termination of Executive’s employment under Section 5(a)(iii) of this Agreement, Executive agrees not to compete with the Association, the Company or any affiliate of the Association or the Company (collectively said entities are referred to as the “Association” for purposes of this Section 11) for a period of twelve (12) months following such termination within a fifty (50) mile radius of the main office of the Association.  Executive agrees that during this period and within a fifty (50) mile radius of the main office of the Association, Executive shall not work for or advise, consult or otherwise serve with, directly or indirectly, any entity whose business materially competes with the depository, lending or other business activities of the Association.  Executive further agrees that for a period of twelve (12) months following any termination of employment, she shall not directly or indirectly, solicit, hire, or entice any of the following persons or entities to cease, terminate, or reduce any relationship with the Association or to divert any business from the Association: (i) any person who was an employee of the Association during the term of this Agreement; or (ii) any customer or client of the Association.  Further, Executive will not directly or indirectly disclose the names, addresses, telephone numbers, compensation, or other arrangements between the Association and any person or entity described in (a)(i) and (a)(ii) of this Section 11.  The parties hereto, recognizing that irreparable injury will result to the Association, its business and property in the event of Executive’s breach of this Section 11(a), agree that in the event of any such breach by Executive, the Association will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by Executive, Executive’s partners, agents, servants, employees and all persons acting for or under the direction of Executive.  Nothing herein will be construed as prohibiting the Association from pursuing any other remedies available to the Association for such breach or threatened breach, including the recovery of damages from Executive.

 

(b)           Executive recognizes and acknowledges that the knowledge of the business activities, plans for business activities, and all other proprietary information of the Association as it may exist from time to time, are valuable, special and unique assets of the business of the Association.  Executive will not, during or after the term of her employment, disclose any knowledge of the past, present, planned or considered business activities or any other similar proprietary information of the Association to any person, firm, corporation, or other entity for any reason or purpose whatsoever unless expressly authorized by the Board of Directors or required by law.  Notwithstanding the foregoing, Executive may disclose any knowledge of banking, financial and/or economic principles, concepts or ideas which are not solely and exclusively derived from the business plans and activities of the Association. Further, Executive may disclose information regarding the business activities of the Association to any bank regulator having regulatory jurisdiction over the activities of the Association, pursuant to a formal regulatory request.  In the event of a breach or threatened breach by Executive of the provisions of this Section 11, the Association will be entitled to an injunction restraining Executive from disclosing, in whole or in part, the knowledge of the past, present, planned or considered business activities of the Association, or any other similar proprietary information, or from rendering any services to any person, firm, corporation, or other entity to whom such knowledge, in whole or in part, has been disclosed or is threatened to be disclosed.  Nothing herein will be construed as prohibiting the Association from pursuing any other remedies available to the Association for such breach or threatened breach, including the recovery of damages from Executive.

 

  

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(c)           The provisions of this Section 11 are intended to protect the business, operations and assets of the Association, and are a material inducement to the Association to enter into this Agreement.  Executive acknowledges that the provisions of this Section 11 are an essential part of this Agreement and are reasonably necessary for the protection of the business, operations and assets of the Association.

 

12.SOURCE OF PAYMENTS 

 

All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Association.  The Company, however, unconditionally guarantees payment and provision of all amounts and benefits due hereunder to Executive and, if the amounts and benefits due from the Association are not timely paid or provided by the Association, the amounts and benefits shall be paid or provided by the Company.

 

13.EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS 

 

This Agreement contains the entire understanding between the parties hereto and supersedes any prior employment agreement between the Association or any predecessor of the Association and Executive, except that this Agreement shall not affect or operate to reduce any benefit, compensation, tax indemnification or other provision inuring to the benefit of Executive under any agreement between Executive, the Association or the Company.  No provision of this Agreement shall be interpreted to mean that Executive is subject to receiving fewer benefits than those available to her without reference to this Agreement.

 

14.NO ATTACHMENT

 

(a)           Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void, and of no effect.

 

(b)           This Agreement shall be binding upon, and inure to the benefit of, Executive and the Association and their respective successors and assigns.

 

  

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15.MODIFICATION AND WAIVER

 

(a)           This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto.

 

(b)           No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel.  No written waiver shall be deemed a continuing waiver unless specifically stated therein, and each waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future as to any act other than that specifically waived.

 

16.REQUIRED PROVISIONS

 

(a)           The Association may terminate Executive’s employment at any time, but any termination by the Board of Directors other than Termination for Just Cause as defined in Section 5 of this Agreement shall not prejudice Executive’s right to compensation or other benefits under this Agreement.  Executive shall have no right to receive compensation or other benefits for any period after Termination for Just Cause.

 

(b)           If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Association’s affairs by a notice served under Section 8(e)(3) [12 USC §1818(e)(3)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit Insurance Act (the “FDI Act”), the Association’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings.  If the charges in the notice are dismissed, the Association may in its discretion (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations which were suspended.

 

(c)           If Executive is removed and/or permanently prohibited from participating in the conduct of the Association’s affairs by an order issued under Section 8(e)(4) [12 USC §1818(e)(4)] or 8(g)(1) [12 USC §1818(g)(1)] of the FDI Act, all obligations of the Association under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

 

(d)           If the Association is in default as defined in Section 3(x)(1) [12 USC §1813(x)(1)] of the FDI Act, all obligations of the Association under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

 

(e)           All obligations under this Agreement shall be terminated, except to the extent determined that continuation of this Agreement is necessary for the continued operation of the Association, (i) by the Comptroller of the Currency (the “Comptroller”) or his or her designee, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Association under the authority contained in Section 13(c) [12 USC §1823(c)] of the FDI Act; or (ii) by the Comptroller or his or her designee at the time the Comptroller or his or her designee approves a supervisory merger to resolve problems related to operation of the Association or when the Association is determined by the Comptroller to be in an unsafe or unsound condition.  Any rights of the parties that have already vested, however, shall not be affected by such action.

 

  

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(f)           Any payments made to Executive pursuant to this Agreement or otherwise are subject to and conditioned upon compliance with 12 U.S.C. Section 1828(k) and any rules and regulations promulgated thereunder, including 12 C.F.R. Part 359, and to the extent applicable, 12 C.F.R. §563.39.

 

(g)           Notwithstanding anything else in this Agreement to the contrary, Executive’s employment shall not be deemed to have been terminated unless and until Executive has a Separation from Service within the meaning of Code Section 409A.  For purposes of this Agreement, a “Separation from Service” shall have occurred if the Association and Executive reasonably anticipate that either no further services will be performed by Executive after the date of termination (whether as an employee or as an independent contractor) or the level of further services performed is less than fifty (50) percent of the average level of bona fide services in the thirty-six (36) months immediately preceding the termination.  For all purposes hereunder, the definition of Separation from Service shall be interpreted consistent with Treasury Regulation Section 1.409A-1(h)(ii).

 

17.SEVERABILITY

 

If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provisions of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with law continue in full force and effect.

 

18.HEADINGS FOR REFERENCE ONLY

 

The headings of sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

 

19.GOVERNING LAW

 

This Agreement shall be governed by the laws of the State of Illinois, without regard to its conflict of law principles, unless superseded by federal law or otherwise specified herein.

 

20.ARBITRATION

 

Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by binding arbitration, as an alternative to civil litigation and without any trial by jury to resolve such claims, conducted by a single arbitrator sitting in a location selected by Executive and the Association within fifty (50) miles from the main office of the Association, in accordance with the rules of the American Arbitration Association’s National Rules for the Resolution of Employment Disputes (“National Rules”) then in effect.  The Association shall provide a list of three or more arbitrators to Executive from which Executive shall select the arbitrator.  If the parties are unable to agree within fifteen (15) days from the date the Association presents the list to Executive, the arbitrator shall be appointed for them from a panel of arbitrators selected in accordance with the National Rules.  Judgment may be entered on the arbitrator’s award in any court having jurisdiction.

 

  

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21.PAYMENT OF COSTS AND LEGAL FEES AND REINSTATEMENT OF BENEFITS

 

In the event any dispute or controversy arising under or in connection with Executive’s termination is resolved in favor of Executive, whether by judgment, arbitration or settlement, Executive shall be entitled to the payment of:  (i) all legal fees incurred by Executive in resolving the dispute or controversy; (ii) any back-pay, including salary, bonuses and any other cash compensation, fringe benefits and any compensation and benefits due Executive under this Agreement; and (iii) any other compensation otherwise due Executive as a result of a breach of this Agreement by the Association.  In the event any dispute or controversy arising under or in connection with Executive’s termination is resolved in favor of the Association, whether by judgment, arbitration or settlement, each party shall be responsible for its own legal fees incurred in resolving such dispute or controversy.

 

22.INDEMNIFICATION 

 

The Association and the Company shall provide Executive (including her heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at its expense.  The Association shall indemnify Executive (and her heirs, executors and administrators) to the fullest extent permitted under its Articles of Incorporation, Bylaws and applicable law against all expenses and liabilities reasonably incurred by her in connection with or arising out of any action, suit or proceeding in which she may be involved by reason of her having been a director or officer of the Association (whether or not she continues to be a director or officer at the time of incurring the expenses or liabilities), the expenses and liabilities to include, but not be limited to, advancement of legal fees and expenses, judgments, court costs and attorneys’ fees and the cost of reasonable settlements.  Any such indemnification shall be made consistent with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(k), and the regulations issued thereunder in 12 C.F.R. Part 359.

 

23.SUCCESSOR TO THE BANK

 

The Association shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all the business or assets of the Association, expressly and unconditionally to assume and agree to perform the Association’s obligations under this Agreement, in the same manner and to the same extent that the Association would be required to perform if no such succession or assignment had taken place.

 

24.NON WAIVER

 

The failure of one party to insist upon or enforce strict performance by the others of any provision of this Agreement or to exercise any right, remedy or provision of this Agreement will not be interpreted or construed as a waiver or relinquishment to any extent of such party’s right to enforce or rely upon same in that or any other instance.

 

  

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IN WITNESS WHEREOF the Association and Executive have signed (or caused to be signed) this Agreement this 8th day of July, 2016.

	
Attest:

	
Home Federal Savings and Loan Association of Collinsville

	  	  
	
/s/ Angela J. Davis                                           

	
By:  /s/ LaMont K. Docter                                                                

	
Secretary

	
Title: Chairman of the Board of Directors

	  	  
	  	  
	
Attest:

	
Executive

	  	  
	
/s/ Angela J. Davis                                           

	
/s/ Cynthia T. Knebel                                                                           

	
Secretary

	
Cynthia T. Knebel

	  	  
	  	  
	  	
Best Hometown Bancorp, Inc.

	
Attest:

	
(The Company is executing this Agreement only

for purposes of acknowledging the obligations

of the Company hereunder.)

	  	  
	  	  
	
/s/ Angela J. Davis                                           

	
By:  /s/ LaMont K. Docter                                                                

	
Secretary

	
Title: Chairman of the Board of Directorsex4-3.htm

Exhibit 4.3

 

Form of Representative’s Warrant Agreement

 

THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT FOR A PERIOD OF ONE (1) YEAR FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW) TO ANYONE OTHER THAN (I) ALEXANDER CAPITAL, L.P. OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF ALEXANDER CAPITAL, L.P. OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER.

 

THIS PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO [                                                                                                                                          ] [DATE THAT IS ONE (1) YEAR FROM THE EFFECTIVE DATE OF THE OFFERING]. VOID AFTER 5:00 P.M., EASTERN TIME, [ ] [DATE THAT IS FIVE (5) YEARS FROM THE EFFECTIVE DATE OF THE OFFERING].

 

 

COMMON STOCK PURCHASE WARRANT

 

For the Purchase of [          ] Shares of Common Stock

 

of

 

AZURRX BIOPHARMA, INC.

 

1.           Purchase Warrant. THIS CERTIFIES THAT, in consideration of funds duly paid by or on behalf of Alexander Capital, L.P. (“Holder”), as registered owner of this Purchase Warrant, to AzurRx BioPharma, Inc., a Delaware corporation (the “Company”), Holder is entitled, at any time or from time to time from [] [DATE THAT IS ONE (1) YEAR FROM THE EFFECTIVE DATE OF THE OFFERING] (the “Commencement Date”), and at or before 5:00 p.m., Eastern time, [] [DATE THAT IS FIVE (5) YEARS FROM THE EFFECTIVE DATE OF THE OFFERING] (the “Expiration Date”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to [] shares of common stock of the Company, par value $0.0001 per share (the “Shares”), subject to adjustment as provided in Section 6 hereof. If the Expiration Date is a day on which banking institutions are authorized by law to close, then this Purchase Warrant may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. During the period ending on the Expiration Date, the Company agrees not to take any action that would terminate this Purchase Warrant. This Purchase Warrant is initially exercisable at $[] per Share [120% of the price of the Shares sold in the Offering]; provided, however, that upon the occurrence of any of the events specified in Section 6 hereof, the rights granted by this Purchase Warrant, including the exercise price per Share and the number of Shares to be received upon such exercise, shall be adjusted as therein specified. The term “Exercise Price” shall mean the initial exercise price or the adjusted exercise price, depending on the context.

 

2.           Exercise.

 

2.1           Exercise Form. In order to exercise this Purchase Warrant, the exercise form attached hereto must be duly executed and completed and delivered to the Company, together with this Purchase Warrant and payment of the Exercise Price for the Shares being purchased payable in cash by wire transfer of immediately available funds to an account designated by the Company or by certified check or official bank check. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this Purchase Warrant shall become and be void without further force or effect, and all rights represented hereby shall cease and expire.

	
 

	  	  

  

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2.2           Cashless Exercise. If at any time after the Commencement Date there is no effective registration statement registering, or no current prospectus available for, the resale of the Shares by the Holder, then in lieu of exercising this Purchase Warrant by payment of cash or check payable to the order of the Company pursuant to Section 2.1 above, Holder may elect to receive the number of Shares equal to the value of this Purchase Warrant (or the portion thereof being exercised), by surrender of this Purchase Warrant to the Company, together with the exercise form attached hereto, in which event the Company shall issue to Holder, Shares in accordance with the following formula:

Y(A-B)

X   =            A

 

Where,

X = The number of Shares to be issued to Holder;

Y = The number of Shares for which the Purchase Warrant is being exercised;

A = The fair market value of one Share; and

B = The Exercise Price.

 

For purposes of this Section 2.2, the fair market value of a Share is defined as follows:

 

(i)           if the Company’s common stock is traded on a securities exchange, the fair market value shall be deemed to be the closing price on such exchange on the trading day immediately prior to the date the exercise form is submitted to the Company in connection with the exercise of the Purchase Warrant; or

 

(ii)           if the Company’s common stock is actively traded over-the-counter, the fair market value shall be deemed to be the closing bid price on the trading day immediately prior to the date the exercise form is submitted to the Company in connection with the exercise of the Purchase Warrant; or

 

(iii)           if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Company’s Board of Directors.

 

2.3           Legend. Each certificate for the securities purchased under this Purchase Warrant shall bear a legend as follows unless such securities have been registered under the Securities Act of 1933, as amended (the “Act”):

 

“The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “Act”), or applicable state law. Neither the securities nor any interest therein may be offered for sale, sold or otherwise transferred except pursuant to an effective registration statement under the Securities Act, or pursuant to an exemption from registration under the Securities Act and applicable state law which, in the opinion of counsel to the Company, is available.”

	
 

	
 

	  

  

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3.           Transfer.

 

3.1           General Restrictions. The registered Holder of this Purchase Warrant agrees by his, her or its acceptance hereof, that such Holder will not: (a) sell, transfer, assign, pledge or hypothecate this Purchase Warrant for a period of one (1) year following the Effective Date to anyone other than: (i) Alexander Capital, L.P. (“Alexander”) or an underwriter or a selected dealer participating in the Offering, or (ii) a bona fide officer or partner of Alexander or of any such underwriter or selected dealer, in each case in accordance with FINRA Conduct Rule 5110(g)(1), or (b) cause this Purchase Warrant or the securities issuable hereunder to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of this Purchase Warrant or the securities hereunder, except as provided for in FINRA Rule 5110(g)(2). On and after one (1) year after the Effective Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws. In order to make any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto duly executed and completed, together with the Purchase Warrant and payment of all transfer taxes, if any, payable in connection therewith. The Company shall within five (5) Business Days transfer this Purchase Warrant on the books of the Company and shall execute and deliver a new Purchase Warrant or Purchase Warrants of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Shares purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.

 

3.2           Restrictions Imposed by the Securities Act. The securities evidenced by this Purchase Warrant shall not be transferred unless and until: (i) the Company has received the opinion of counsel for the Holder that the securities may be transferred pursuant to an exemption from registration under the Securities Act and applicable state securities laws, the availability of which is established to the reasonable satisfaction of the Company (the Company hereby agreeing that the opinion of Cozen O’Connor shall be deemed satisfactory evidence of the availability of an exemption), or (ii) a registration statement or a post-effective amendment to the Registration Statement relating to the offer and sale of such securities has been filed by the Company and declared effective by the U.S. Securities and Exchange Commission (the “Commission”) and compliance with applicable state securities law has been established.

 

4.           Registration Rights.

 

4.1           Demand Registration.

 

4.1.1           Grant of Right. The Company, upon written demand (a “Demand Notice”) of the Holder(s) of at least 51% of the Purchase Warrants and/or the underlying Shares (“Majority Holders”), agrees to register, on one occasion, all or any portion of the Shares underlying the Purchase Warrants (collectively, the “Registrable Securities”). On such occasion, the Company will file a registration statement with the Commission covering the Registrable Securities within sixty (60) days after receipt of a Demand Notice and use its reasonable best efforts to have the registration statement declared effective promptly thereafter, subject to compliance with review by the Commission; provided, however, that the Company shall not be required to comply with a Demand Notice if the Company has filed a registration statement with respect to which the Holder is entitled to piggyback registration rights pursuant to Section 4.2 hereof and either: (i) the Holder has elected to participate in the offering covered by such registration statement or (ii) if such registration statement relates to an underwritten primary offering of securities of the Company, until the offering covered by such registration statement has been withdrawn or until thirty (30) days after such offering is consummated. The demand for registration may be made at any time during a period of four (4) years beginning on the Commencement Date. The Company covenants and agrees to give written notice of its receipt of any Demand Notice by any Holder(s) to all other registered Holders of the Purchase Warrants and/or the Registrable Securities within ten (10) days after the date of the receipt of any such Demand Notice.

	
 

	
 

	  

  

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4.1.2           Terms. The Company shall bear all fees and expenses attendant to the registration of the Registrable Securities pursuant to Section 4.1.1, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. The Company agrees to use its reasonable best efforts to cause the filing required herein to become effective promptly and to qualify or register the Registrable Securities in such States as are reasonably requested by the Holder(s); provided, however, that in no event shall the Company be required to register the Registrable Securities in a State in which such registration would cause: (i) the Company to be obligated to register or become licensed to do business in such State or submit to general service of process in such State, or (ii) the principal shareholders of the Company to be obligated to escrow their shares of capital stock of the Company. The Company shall cause any registration statement filed pursuant to the demand right granted under Section 4.1.1 to remain effective for a period of at least twelve (12) consecutive months after the date that the Holders of the Registrable Securities covered by such registration statement are first given the opportunity to sell all of such securities. The Holders shall only use the prospectuses provided by the Company to sell the shares covered by such registration statement, and will immediately cease to use any prospectus furnished by the Company if the Company advises the Holder that such prospectus may no longer be used due to a material misstatement or omission. Notwithstanding the provisions of this Section 4.1.2, the Holder shall be entitled to a demand registration under this Section 4.1.2 on only one (1) occasion and such demand registration right shall terminate on the fifth anniversary of the effectiveness of the registration statement in accordance with FINRA Rule 5110(f)(2)(G)(iv).

 

4.2           “Piggy-Back” Registration.

 

4.2.1           Grant of Right. In addition to the demand right of registration described in Section 4.1 hereof, the Holder shall have the right, for a period of no more than seven (7) years from the date of effectiveness of the registration statement in accordance with FINRA Rule 5110(f)(2)(G)(v), to include the Registrable Securities as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to Form S-8 or any equivalent form); provided, however, that if, solely in connection with any primary underwritten public offering for the account of the Company, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation on the number of shares of Common Stock which may be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to which the Holder requested inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of Registrable Securities shall be made pro rata among the Holders seeking to include Registrable Securities in proportion to the number of Registrable Securities sought to be included by such Holders; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities.

 

4.2.2           Terms. The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 4.2.1 hereof, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than thirty (30) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company until such time as all of the Registrable Securities have been sold by the Holder. The holders of the Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice within ten (10) days of the receipt of the Company’s notice of its intention to file a registration statement. Except as otherwise provided in this Purchase Warrant, there shall be no limit on the number of times the Holder may request registration under this Section 4.2.2; provided, however, that such registration rights shall terminate upon the earlier of (i) the exercise and completion of the demand registration right pursuant to Section 4.1 for all of the Registrable Securities, and (ii) on the sixth anniversary of the Commencement Date.

 

  

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4.3           General Terms.

 

4.3.1           Indemnification. The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Securities Act or Section 20 (a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters contained in Section 5.1 of the Underwriting Agreement between the Underwriters and the Company, dated as of [], 2015. The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Securities Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 5.2 of the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company.

 

4.3.2           Exercise of Purchase Warrants. Nothing contained in this Purchase Warrant shall be construed as requiring the Holder(s) to exercise their Purchase Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.

 

4.3.3           Documents Delivered to Holders. The Company shall furnish to each Holder participating in any of the foregoing offerings and to each underwriter of any such offering, if any, a signed counterpart, addressed to such Holder or underwriter, of: (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, an opinion dated the date of the closing under any underwriting agreement related thereto), and (ii) a “cold comfort” letter dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the underwriting agreement) signed by the independent registered public accounting firm which has issued a report on the Company’s financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten public offerings of securities. The Company shall also deliver promptly to each Holder participating in the offering requesting the correspondence and memoranda described below and to the managing underwriter, if any, copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times as any such Holder shall reasonably request.

	
 

	
 

	  

  

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4.3.4           Underwriting Agreement. The Company shall enter into an underwriting agreement with the managing underwriter(s), if any, selected by any Holders whose Registrable Securities are being registered pursuant to this Section 4, which managing underwriter shall be reasonably satisfactory to the Company. Such agreement shall be reasonably satisfactory in form and substance to the Company, each Holder and such managing underwriters, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the benefit of such Holders. Such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to such Holders, their Shares and their intended methods of distribution.

 

4.3.5           Documents to be Delivered by Holder(s). Each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.

 

4.3.6           Damages. Should the registration or the effectiveness thereof required by Sections 4.1 and 4.2 hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the Holder(s) shall, in addition to any other legal or other relief available to the Holder(s), be entitled to obtain specific performance or other equitable (including injunctive) relief against the threatened breach of such provisions or the continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security.

 

5.           New Purchase Warrants to be Issued.

 

5.1           Partial Exercise or Transfer. Subject to the restrictions in Section 3 hereof, this Purchase Warrant may be exercised or assigned in whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Warrant for cancellation, together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax if exercised pursuant to Section 2.1 hereto, the Company shall cause to be delivered to the Holder without charge a new Purchase Warrant of like tenor to this Purchase Warrant in the name of the Holder evidencing the right of the Holder to purchase the number of Shares purchasable hereunder as to which this Purchase Warrant has not been exercised or assigned.

 

5.2           Lost Certificate. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Warrant and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase Warrant of like tenor and date. Any such new Purchase Warrant executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.

 

6.           Adjustments.

 

6.1           Adjustments to Exercise Price and Number of Securities. The Exercise Price and the number of Shares underlying the Purchase Warrant shall be subject to adjustment from time to time as hereinafter set forth:

 

6.1.1           Share Dividends; Split Ups. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is increased by a stock dividend payable in Shares or by a split up of Shares or other similar event, then, on the effective day thereof, the number of Shares purchasable hereunder shall be increased in proportion to such increase in outstanding Shares, and the Exercise Price shall be proportionately decreased.

	
 

	
 

	  

  

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6.1.2           Aggregation of Shares. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is decreased by a consolidation, combination or reclassification of Shares or other similar event, then, on the effective date thereof, the number of Shares purchasable hereunder shall be decreased in proportion to such decrease in outstanding Shares, and the Exercise Price shall be proportionately increased.

 

6.1.3           Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding Shares other than a change covered by Section 6.1.1 or 6.1.2 hereof or that solely affects the par value of such Shares, or in the case of any share reconstruction or amalgamation or consolidation of the Company with or into another corporation or other entity (other than a consolidation or share reconstruction or amalgamation in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding Shares), or in the case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Purchase Warrant shall have the right thereafter (until the expiration of the right of exercise of this Purchase Warrant) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, share reconstruction or amalgamation, or consolidation, or upon a dissolution following any such sale or transfer, by a Holder of the number of Shares of the Company obtainable upon exercise of this Purchase Warrant immediately prior to such event; and if any reclassification also results in a change in Shares covered by Section 6.1.1 or 6.1.2, then such adjustment shall be made pursuant to Sections 6.1.1, 6.1.2 and this Section 6.1.3. The provisions of this Section 6.1.3 shall similarly apply to successive reclassifications, reorganizations, share reconstructions or amalgamations, or consolidations, sales or other transfers.

 

6.1.4           Changes in Form of Purchase Warrant. This form of Purchase Warrant need not be changed because of any change pursuant to this Section 6.1, and Purchase Warrants issued after such change may state the same Exercise Price and the same number of Shares as are stated in the Purchase Warrants initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance of new Purchase Warrants reflecting a required or permissive change shall not be deemed to waive any rights to an adjustment occurring after the Commencement Date or the computation thereof.

 

6.2           Substitute Purchase Warrant. In case of any consolidation of the Company with, or share reconstruction or amalgamation of the Company with or into, another corporation or other entity (other than a consolidation or share reconstruction or amalgamation which does not result in any reclassification or change of the outstanding Shares), the corporation or other entity formed by such consolidation or share reconstruction or amalgamation shall execute and deliver to the Holder a supplemental Purchase Warrant providing that the holder of each Purchase Warrant then outstanding or to be outstanding shall have the right thereafter (until the stated expiration of such Purchase Warrant) to receive, upon exercise of such Purchase Warrant, the kind and amount of shares of stock and other securities and property receivable upon such consolidation or share reconstruction or amalgamation, by a holder of the number of Shares of the Company for which such Purchase Warrant might have been exercised immediately prior to such consolidation, share reconstruction or amalgamation, sale or transfer. Such supplemental Purchase Warrant shall provide for adjustments which shall be identical to the adjustments provided for in this Section 6. The above provision of this Section shall similarly apply to successive consolidations or share reconstructions or amalgamations.

 

6.3           Elimination of Fractional Interests. The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the Purchase Warrant, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up or down, as the case may be, to the nearest whole number of Shares or other securities, properties or rights.

	
 

	
 

	  

  

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7.           Reservation and Listing. The Company shall at all times reserve and keep available out of its authorized Shares, solely for the purpose of issuance upon exercise of the Purchase Warrants, such number of Shares or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Purchase Warrants and payment of the Exercise Price therefor, in accordance with the terms hereby, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any shareholder. The Company further covenants and agrees that upon exercise of the Purchase Warrants and payment of the exercise price therefor, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any shareholder. As long as the Purchase Warrants shall be outstanding, the Company shall use its commercially reasonable efforts to cause all Shares issuable upon exercise of the Purchase Warrants to be listed (subject to official notice of issuance) on all national securities exchanges (or, if applicable, on the OTC Bulletin Board or any successor trading market) on which the Shares issued to the public in the Offering may then be listed and/or quoted.

 

8.           Certain Notice Requirements.

 

8.1           Holder’s Right to Receive Notice. Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to receive notice as a shareholder for the election of directors or any other matter, or as having any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of the Purchase Warrants and their exercise, any of the events described in Section 8.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the shareholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder a copy of each notice given to the other shareholders of the Company at the same time and in the same manner that such notice is given to the shareholders.

 

8.2           Events Requiring Notice. The Company shall be required to give the notice described in this Section 8 upon one or more of the following events: (i) if the Company shall take a record of the holders of its Shares for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company, (ii) the Company shall offer to all the holders of its Shares any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or share reconstruction or amalgamation) or a sale of all or substantially all of its property, assets and business shall be proposed.

 

8.3           Notice of Change in Exercise Price. The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 6 hereof, send notice to the Holders of such event and change (“Price Notice”). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company’s Chief Financial Officer.

	
 

	
 

	  

  

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8.4           Transmittal of Notices. All notices, requests, consents and other communications under this Purchase Warrant shall be in writing and shall be deemed to have been duly made when hand delivered, or mailed by express mail or private courier service: (i) if to the registered Holder of the Purchase Warrant, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, to following address or to such other address as the Company may designate by notice to the Holders:

If to the Holder:

Alexander Capital, L.P.

17 State Street, 5th Floor

New York, NY  10004

Attn: Mr. Jonathan Gazdak, Managing Director – Head of Investment Banking

Fax No.: (212) 687-5649

 

with a copy (which shall not constitute notice) to:

 

Cozen O’Connor

277 Park Avenue

New York, NY 10172

Attn: Christopher J. Bellini, Esq. Martin Schrier,Esq.

Fax No.: (612) 260-9091

 

If to the Company:

 

AzurRx BioPharma, Inc.

760 Parkside Avenue

Downstate Biotechnology Incubator

Suite 217

Brooklyn, NY 11226

Attention:  Johan M. (Thijs) Spoor, President

Fax No: [●]

 

with a copy (which shall not constitute notice) to:

 

Loeb & Loeb LLP

345 Park Avenue

New York, NY 10154

Attention: Fran Stoller, Esq.; David J. Levine, Esq.

Fax No: (212) 407-4000

 

9.           Miscellaneous.

 

9.1           Amendments. The Company and Alexander may from time to time supplement or amend this Purchase Warrant without the approval of any of the Holders in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder that the Company and Alexander may deem necessary or desirable and that the Company and Alexander deem shall not adversely affect the interest of the Holders. All other modifications or amendments shall require the written consent of and be signed by the party against whom enforcement of the modification or amendment is sought.

	
 

	
 

	  

  

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9.2           Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Purchase Warrant.

 

9.3           Entire Agreement. This Purchase Warrant (together with the other agreements and documents being delivered pursuant to or in connection with this Purchase Warrant) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.

 

9.4           Binding Effect. This Purchase Warrant shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their permitted assignees, respective successors, legal representative and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Warrant or any provisions herein contained.

 

9.5           Governing Law; Submission to Jurisdiction; Trial by Jury. This Purchase Warrant shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Warrant shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 8 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company and the Holder agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and the Holder hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

 

9.6           Waiver, etc. The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Warrant shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Warrant or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Warrant. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Warrant shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.

 

9.7           Execution in Counterparts. This Purchase Warrant may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Such counterparts may be delivered by facsimile transmission or other electronic transmission.

 

9.8           Exchange Agreement. As a condition of the Holder’s receipt and acceptance of this Purchase Warrant, Holder agrees that, at any time prior to the complete exercise of this Purchase Warrant by Holder, if the Company and Alexander enter into an agreement (“Exchange Agreement”) pursuant to which they agree that all outstanding Purchase Warrants will be exchanged for securities or cash or a combination of both, then Holder shall agree to such exchange and become a party to the Exchange Agreement.

[Signature Page Follows]

	
 

	
 

	  

  

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IN WITNESS WHEREOF, the Company has caused this Purchase Warrant to be signed by its duly authorized officer as of the ______ day of ________________, 2015.

 

AZURRX BIOPHARMA, INC.

 

By:                                                                              

Name:

Title:

	
 

	
 

	  

  

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[Form to be used to exercise Purchase Warrant]

 

Date: _______________, 20___

 

 

The undersigned hereby elects irrevocably to exercise the Purchase Warrant for                                                                                                                                 shares of Class A common stock, par value $0.0001 per share (the “Shares”), of AzurRx BioPharma, Inc., a Delaware corporation (the “Company”), and hereby makes payment of $  (at the rate of $ per Share) in payment of the Exercise Price pursuant thereto. Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been exercised.

 

or

 

The undersigned hereby elects irrevocably to convert its right to purchase ___ Shares of the Company under the Purchase Warrant for ______ Shares, as determined in accordance with the following formula:

 

	
  X  =

	
 Y(A-B)

      A

Where,

X = The number of Shares to be issued to Holder;

Y = The number of Shares for which the Purchase Warrant is being exercised;

A = The fair market value of one Share which is equal to $_____; and

B = The Exercise Price which is equal to $______ per share

 

The undersigned agrees and acknowledges that the calculation set forth above is subject to confirmation by the Company and any disagreement with respect to the calculation shall be resolved by the Company in its sole discretion.

 

Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been converted.

 

Signature

 

Signature Guaranteed                                                                                     

	
 

	
 

	  

  

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INSTRUCTIONS FOR REGISTRATION OF SECURITIES

 

Name:

(Print in Block Letters)

 

Address:                                                                           

 

NOTICE: The signature to this form must correspond with the name as written upon the face of the Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.

	
 

	
 

	  

  

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[Form to be used to assign Purchase Warrant]

 

ASSIGNMENT

 

(To be executed by the registered Holder to effect a transfer of the within Purchase Warrant):

 

FOR VALUE RECEIVED, __________________ does hereby sell, assign and transfer unto the right to purchase shares of Class A common stock, par value $0.0001 per share, of AzurRx BioPharma, Inc., a Delaware corporation (the “Company”), evidenced by the Purchase Warrant and does hereby authorize the Company to transfer such right on the books of the Company.

 

Dated: __________, 20__

 

Signature

 

Signature Guaranteed                                                                                                

 

NOTICE: The signature to this form must correspond with the name as written upon the face of the within Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.

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