Document:

exhibit_4-1.htm

Exhibit 4.1

 

WARRANT AGREEMENT

 

            WARRANT AGREEMENT made as of September [·], 2012 (“Issuance Date”), between Pluristem Therapeutics Inc., a Nevada corporation (“Company”), and American Stock Transfer & Trust Company, LLC, a New York limited liability company (“Warrant Agent”).

 

WHEREAS, the Company has sold units (“Units”), each consisting of one share of common stock (“Common Stock”) of the Company and a warrant to purchase 0.35 shares of Common Stock at an exercise price of $5.00 per share of Common Stock, subject to adjustment as described herein (the “Warrants”), pursuant to an Underwriting Agreement between the Company and Jefferies & Company, Inc., as Representative of the Underwriters (the
“Underwriting Agreement”), dated September 13, 2012; and

 

WHEREAS, the Units and the shares issuable upon exercise of the Warrants (“Warrant Shares”) were issued by the Company in a public offering pursuant to an effective shelf registration statement on  Form S-3, Registration No. 333-177009 (“Registration Statement”) filed with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (“Act”); and

 

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange and exercise of the Warrants; and

 

WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

 

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Warrant Agreement.

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:

 

1.         Appointment of Warrant Agent.  The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Warrant Agreement.

 

2.         Warrants.

 

2.1        Form of Warrant.  Each Warrant shall be issued in registered form only, shall be in substantially the form of Exhibit A hereto, the provisions of which are incorporated herein, and shall be signed by, or bear the facsimile signature of, the Chairman of the Board or President and Treasurer, Secretary or Assistant Secretary of the Company, and shall bear a facsimile of the Company’s seal, if any. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the capacity in
which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect as if he or she had not ceased to be such at the date of issuance.

 

  

  

  

 

2.2.       Effect of Countersignature.  Unless and until countersigned by the Warrant Agent pursuant to this Warrant Agreement, a Warrant shall be invalid and of no effect and may not be exercised by the holder thereof.

 

2.3.       Registration.

 

2.3.1.    Warrant Register.  The Warrant Agent shall maintain books (“Warrant Register”), for the registration of original issuance and the registration of transfer of the Warrants.  Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the Company.  The Warrants may be represented by definitive Warrant Certificates in physical form
or by one or more book-entry warrant certificates (“Book-Entry Warrant Certificates”) deposited with the Depository Trust Company (the “Depository”) and registered in the name of Cede & Co., a nominee of the Depository.  Definitive Warrant Certificates shall be in substantially the form annexed hereto as Exhibit A.  Ownership of beneficial interests in the Book-Entry Warrant Certificates shall be shown on, and the transfer of such ownership shall be effected through, records maintained (i) by the Depository or its nominee for each Book-Entry Warrant Certificate; (ii) by institutions that have accounts with the Depository (such institution, with
respect to a Warrant in its account, a “Participant”); or (iii) directly on the book-entry records of the Warrant Agent with respect only to owners of beneficial interests that request such direct registration.

 

If the Depository subsequently ceases to make its book-entry settlement system available for the Warrants, the Company may instruct the Warrant Agent regarding making other arrangements for book-entry settlement within ten (10) days after the Depository ceases to make its book-entry settlement available.  In the event that the Company does not make alternative arrangements for book-entry settlement within ten (10) days or the Warrants are not eligible for, or it is no longer necessary to have the Warrants available in, book-entry form, the Warrant Agent shall provide written instructions to the Depository to deliver to the Warrant Agent for cancellation each Book-Entry Warrant Certificate, and the
Company shall instruct the Warrant Agent to deliver to the Depository definitive Warrant Certificates in physical form evidencing such Warrants.

 

2.3.2.    Beneficial Owner; Registered Holder.  The term “beneficial owner” shall mean any person in whose name ownership of a beneficial interest in the Warrants evidenced by (a) a Book-Entry Warrant Certificate is recorded in the records maintained by the Depository or its nominee or (b) a definitive Warrant Certificate is recorded in the book-entry records of the Warrant Agent.  Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the person in whose name such Warrant shall be registered upon the Warrant Register
(“registered holder”), as the absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on the Warrant Certificate made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

 

2.4.       Detachability of Warrants.  The securities comprising the Units will be separately transferable immediately upon issuance.

 

2.5        Uncertificated Warrants.  Notwithstanding the foregoing and anything else herein to the contrary, the Warrants may be issued in uncertificated form if so specified by the Company.

  

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3.         Terms and Exercise of Warrants.

 

3.1.       Exercise Price.  Each Warrant shall, when countersigned by the Warrant Agent, entitle the registered holder thereof, subject to the provisions of such Warrant and of this Warrant Agreement, to purchase from the Company the number of shares of Common Stock stated therein, at the price of $5 per whole share, subject to the adjustments provided in Section 4 hereof.  The term “Exercise Price” as used in this Warrant Agreement refers to the price per share at which Common Stock may be purchased at the time a
Warrant is exercised.

 

3.2.       Duration of Warrants.  A Warrant may be exercised only during the period (“Exercise Period”) commencing on March 19, 2013 and terminating at 5:00 P.M., Eastern time on September 19, 2017 (“Expiration Date”).  Each Warrant not exercised on or before the Expiration Date shall become void, and all rights thereunder and all rights in respect thereof under this Warrant Agreement shall cease at the close of business on the Expiration
Date.

 

3.3.       Exercise of Warrants.

 

3.3.1.    Exercise and Payment.  A registered holder may exercise a Warrant by delivering, not later than 5:00 P.M., Eastern time, on any Business Day during the Exercise Period (the “Exercise Date”) to the Warrant Agent at its corporate trust department (i) the Warrant Certificate evidencing the Warrants to be exercised, or, in the case of a Book-Entry Warrant Certificate, the Warrants to be exercised (the “Book-Entry Warrants”) free on the records of the Depository
to an account of the Warrant Agent at the Depository designated for such purpose in writing by the Warrant Agent to the Depository from time to time, (ii) an election to purchase the Shares underlying the Warrants to be exercised (“Election to Purchase”), properly completed and executed by the registered holder on the reverse of the Warrant Certificate or, in the case of a Book-Entry Warrant Certificate, properly delivered by the Participant in accordance with the Depository’s procedures, and (iii), except as provided in 3.3.8, the Warrant Price for each Warrant to be exercised in lawful money of the United States of America by certified or official bank check or by bank wire transfer in immediately available funds.

 

If any of (A) the Warrant Certificate or the Book-Entry Warrants, (B) the Election to Purchase, or (C) the Warrant Price therefor, is received by the Warrant Agent after 5:00 P.M., Eastern time, on the specified Exercise Date, the Warrants will be deemed to be received and exercised on the Business Day next succeeding the Exercise Date.  If the date specified as the Exercise Date is not a Business Day, the Warrants will be deemed to be received and exercised on the next succeeding day that is a Business Day. If the Warrants are received or deemed to be received after the Expiration Date, the exercise thereof will be null and void and any funds delivered to the Warrant Agent will be returned to the
registered holder or Participant, as the case may be, as soon as practicable.  In no event will interest accrue on funds deposited with the Warrant Agent in respect of an exercise or attempted exercise of Warrants. The validity of any exercise of Warrants will be determined by the Company in its sole discretion and such determination will be final and binding upon the registered holder and the Warrant Agent.  Neither the Company nor the Warrant Agent shall have any obligation to inform a registered holder of the invalidity of any exercise of Warrants.

 

The Warrant Agent shall deposit all funds received by it in payment of the Warrant Price in the account of the Company maintained with the Warrant Agent for such purpose and shall advise the Company at the end of each day on which funds for the exercise of the Warrants are received of the amount so deposited to its account.  The Warrant Agent shall promptly confirm such telephonic advice to the Company in writing.

 

  

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3.3.2.    Issuance of Certificates.  The Warrant Agent shall, within a reasonable time, advise the Company and the transfer agent and registrar in respect of (a) the Shares issuable upon such exercise as to the number of Warrants exercised in accordance with the terms and conditions of this Agreement, (b) the instructions of each registered holder or Participant, as the case may be, with respect to delivery of the Warrant Shares issuable upon such exercise, and the delivery of definitive Warrant Certificates, as appropriate, evidencing the balance, if any, of the Warrants remaining after such exercise, (c) in case of a
Book-Entry Warrant Certificate, the notation that shall be made to the records maintained by the Depository, its nominee for each Book-Entry Warrant Certificate, or a Participant, as appropriate, evidencing the balance, if any, of the Warrants remaining after such exercise and (d) such other information as the Company or such transfer agent and registrar shall reasonably require.

The Company shall, by 5:00 P.M., Eastern time, on the third Business Day next succeeding the Exercise Date of any Warrant and the clearance of the funds in payment of the Warrant Price (the “Warrant Shares Delivery Date”), execute, issue and deliver to the Warrant Agent, the Warrant Shares to which such registered holder or Participant, as the case may be, is entitled, in fully registered form, registered in such name or names as may be directed by such registered holder or the Participant, as the case may be.  Upon receipt of such Warrant Shares, the Warrant Agent shall, by 5:00 P.M., Eastern Time, on the third Business Day
next succeeding such Exercise Date, transmit such Warrant Shares to or upon the order of the registered holder or Participant, as the case may be.

 

In lieu of delivering physical certificates representing the Warrant Shares issuable upon exercise, provided the Company’s transfer agent is participating in the Depository’s Fast Automated Securities Transfer program, the Company shall use its reasonable best efforts to cause its transfer agent to electronically transmit the Warrant Shares issuable upon exercise to the registered holder or the Participant by crediting the account of the registered holder’s prime broker with the Depository or of the Participant through its Deposit Withdrawal Agent Commission system.  The time periods for delivery described in the immediately preceding paragraph shall apply to the electronic
transmittals described herein.

 

If the Warrant Agent fails to comply with the preceding paragraphs in this Section 3.3.2 by the Warrant Shares Delivery Date, then the registered holder will have the right to rescind its exercise.

3.3.3.    Valid Issuance.  All shares of Common Stock issued upon the proper exercise of a Warrant in conformity with this Warrant Agreement shall be validly issued, fully paid and nonassessable.

 

3.3.4.    Dividends.  The accrual of dividends, if any, on the Warrant Shares issued upon the valid exercise of any Warrant will be governed by the terms generally applicable to the Common Stock. From and after the issuance of such Warrant Shares, the former holder of the Warrants exercised will be entitled to the benefits generally available to other holders of Common Stock and such former holder’s right to receive payments of dividends and any other amounts payable in respect of the Warrant Shares shall be governed by, and shall be subject to, the terms and provisions generally applicable to the Common
Stock.

 

3.3.5     No Fractional Exercise.  No fractional Warrant Shares shall be issued upon the exercise of any Warrant.  As to any fraction of a Warrant Share which the registered holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such fraction in an amount equal to such fraction multiplied by the Fair Market Value (as calculated below) less the Exercise Price.  If fewer than all of the Warrants evidenced by a Warrant Certificate are exercised, a new Warrant Certificate for the number of unexercised Warrants remaining shall be
executed by the Company and countersigned by the Warrant Agent as provided in Section 2 of this Agreement, and delivered to the holder of this Warrant Certificate at the address specified on the books of the Warrant Agent or as otherwise specified by such registered holder. If fewer than all the Warrants evidenced by a Book-Entry Warrant Certificate are exercised, a notation shall be made to the records maintained by the Depository, its nominee for each Book-Entry Warrant Certificate, or a Participant, as appropriate, evidencing the balance of the Warrants remaining after such exercise. 

 

  

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3.3.6     No Transfer Taxes.  The Company shall not be required to pay any stamp or other tax or governmental charge required to be paid in connection with any transfer involved in the issue of the Warrant Shares upon the exercise of Warrants; and in the event that any such transfer is involved, the Company shall not be required to issue or deliver any Warrant Shares until such tax or other charge shall have been paid or it has been established to the Company’s satisfaction that no such tax or other charge is due.

 

3.3.7     Date of Issuance.  Each person in whose name any such certificate for shares of Common Stock is issued shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Warrant was surrendered and payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer
books are open.

 

3.3.8     Optional Cashless Exercise.  If at any time during the term of this Warrant there is no effective Registration Statement registering, or no current prospectus available for, the issuance or resale of the Warrant Shares by the registered holder, then this Warrant may also be exercised at such time by means of a “cashless exercise” in which the registered holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

	  	
(A)

	
= the VWAP (as defined below) on the Trading Day immediately preceding the date of such election;

	  	
(B)

	
= the Exercise Price of this Warrant, as adjusted; and

	  	
(X)

	
= the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant by means of a cash exercise rather than a cashless exercise.

The term “VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market (as defined below), the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (Eastern time), (b) if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Warrant Agent and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

  

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The term “Trading Market” means any of the following U.S. markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE, NYSE AMEX, the NASDAQ Capital Market, the NASDAQ Global Market or the NASDAQ Global Select Market (or any successors to any of the foregoing).

 

3.3.9    Disputes.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the registered holder the number of Warrant Shares that are not disputed.

 

3.3.10    Limitations on Exercise.  The Warrant Agent shall not effect any exercise of this Warrant, and a registered holder shall not have the right to exercise any portion of this Warrant to the extent that after giving effect to such issuance after exercise as set forth on the applicable exercise notice, the registered holder (together with the registered holder’s Affiliates, and any other person or entity acting as a group together with the registered holder or any of the registered holder’s Affiliates), would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the registered holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, non-exercised portion of this Warrant beneficially owned by the registered holder or any of its Affiliates and (B) exercise or conversion of the unexercised or non-converted portion of any other securities of the Company (including, without limitation, any other equity equivalent securities) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the registered holder or any of its Affiliates.
Except as set forth in the preceding sentence, for purposes of this Section 3.3.10, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder (the “Exchange Act”), it being acknowledged by the registered holder that the Company is not representing to the registered holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the registered holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 3.3.10 applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the registered holder together with any Affiliates) and of which portion of
this Warrant is exercisable shall be in the sole discretion of the registered holder, and the submission of an exercise notice shall be deemed to be the registered holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the registered holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject the Beneficial Ownership Limitation, and the Company and the Warrant Agent shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act. For purposes of this Section 3.3.10, in determining the number of outstanding shares of Common Stock, a registered holder may rely on the number of outstanding shares of Common Stock as
reflected in (A) the Company’s most recent periodic or annual report as the case may be, (B) a more recent public announcement by the Company or (C) any other notice by the Company or its transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a registered holder, the Company shall within three (3) Business Days  confirm orally and in writing to the registered holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the registered holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.

The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The registered holder, upon not less than sixty one (61) days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 1(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock upon exercise of this Warrant held by the registered holder and the provisions of this Section 3.3.10 shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this Section 3.3.10 shall be construed, corrected and implemented in a manner so as to effectuate the intended Beneficial Ownership Limitation herein contained. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

  

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3.4.       Buy-in Procedures and Compensation.  If a certificate representing the Warrant Shares is not delivered pursuant to the provisions of Section 3.3.2 on or prior to the Warrant Shares Delivery Date, and if after such date the registered holder is required by its broker to purchase (in an open market transaction or otherwise) or the registered holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the registered holder of the Warrant Shares which the registered holder anticipated receiving upon exercise of the Warrant (a
“Buy-In”), then the Company shall (A) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder given by written notice to the Company and the Warrant Agent, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares
of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. The registered holder shall provide the Company and the Warrant Agent with written notice of the cash amounts referred to in the preceding sentence and, upon request of the Company, evidence thereof. Nothing herein shall limit a registered holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

4.          Adjustments.

 

4.1.       Adjustment upon Subdivision or Combination of Common Stock. If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased.  If the Company at any time on or after the Subscription Date combines (by any stock split, stock
dividend, recapitalization, reorganization, scheme, arrangement or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 4.1 shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

4.2.       Subsequent Rights Offerings.  If the Company, at any time while the Warrant is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the registered holders of the Warrants) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the VWAP at the record date mentioned below, then the Exercise Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common
Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants.

 

  

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4.3.       Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the registered holders of the Warrants) evidence of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock, then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the board of directors of the Company in good faith. In either case the adjustments shall be described in a statement provided to each registered holder of the Warrants of the portion of assets or evidence of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

4.4.       Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another person or entity, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another person or entity) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property or (iv) the Company effects any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the registered holders of the Warrants each  shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such merger, consolidation or disposition of assets by a
holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the
extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to each registered holder of the Warrants a new warrant consistent with the foregoing provisions and evidencing such registered holder’s right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 4.4  and ensuring that the Warrants (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as
defined in Rule 13e-3 under the Exchange Act, or (3) a Fundamental Transaction involving a person or entity not traded on a national securities exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, or the NASDAQ Capital Market, the Company or any successor entity shall pay at each registered holder’s option, exercisable at any time concurrently with or within 30 days after the consummation of the Fundamental Transaction, an amount of cash equal to the value of this Warrant as determined in accordance with the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg L.P. using (A) a price per share of Common Stock equal to the VWAP of the Common Stock for the Trading Day immediately preceding the date of consummation of the applicable Fundamental Transaction, (B) a risk-free interest rate corresponding to the U.S. Treasury rate for
30 day period immediately prior to the consummation of the applicable Fundamental Transaction, (C) an expected volatility equal to the 100 day volatility obtained from the “HVT” function on Bloomberg L.P. determined as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, and (D) a remaining option time equal to the time between the date of the public announcement of such transaction and the Termination Date.

 

  

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4.5.       Notices.  

4.5.1.           Notices of Changes in Warrant. Upon every adjustment of the Warrant Price or the number of shares issuable upon exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.  Upon the
occurrence of any event specified in Sections 4.1 through 4.4, then, in any such event, the Company shall give written notice to each registered holder of a Warrant, at the last address set forth for such holder in the Warrant Register, of the record date or the effective date of the event.  Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.

4.5.2.           Notices of Certain Events to Allow Exercise.  If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to each registered holder of a Warrant,  at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. Each registered holder of a Warrant is entitled to exercise its Warrant during the period commencing on the
date of such notice to the effective date of the event triggering such notice.

 

  

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4.6.       Form of Warrant.  The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued after such adjustment may state the same Warrant Price and the same number of shares as is stated in the Warrants initially issued pursuant to this Warrant Agreement.  However, the Company may at any time in its sole discretion make any change in the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued or countersigned,
whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed.

 

5.         Transfer and Exchange of Warrants.

 

5.1.       Registration of Transfer.  The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register, upon surrender of such Warrant for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions for transfer.  Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent.  The Warrants so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon
request.

 

5.2.       Procedure for Surrender of Warrants.  Warrants may be surrendered to the Warrant Agent, together with a written request for exchange or transfer, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the registered holder of the Warrants so surrendered, representing an equal aggregate number of Warrants; provided, however, that except as otherwise provided herein or in any Book-Entry Warrant Certificate, each Book-Entry Warrant Certificate may be transferred only in whole and only to the Depository, to another nominee of the Depository, to a
successor depository, or to a nominee of a successor depository; provided further, however, that in the event that a Warrant surrendered for transfer bears a restrictive legend, the Warrant Agent shall not cancel such Warrant and issue new Warrants in exchange therefor until the Warrant Agent has received an opinion of counsel for the Company stating that such transfer may be made and indicating whether the new Warrants must also bear a restrictive legend.  Upon any such registration of transfer, the Company shall execute, and the Warrant Agent shall countersign and deliver, in the name of the designated transferee a new Warrant Certificate or Warrant Certificates of any authorized denomination evidencing in the aggregate a like number of unexercised Warrants.

 

5.3.       Fractional Warrants.  The Warrant Agent shall not be required to effect any registration of transfer or exchange which will result in the issuance of a warrant certificate for a fraction of a warrant.

 

5.4.       Service Charges.  No service charge shall be made for any exchange or registration of transfer of Warrants.

 

5.5.       Warrant Execution and Countersignature.  The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the terms of this Warrant Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5, and the Company, whenever required by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose.

  

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6.         Other Provisions Relating to Rights of Registered Holders of Warrants.

 

6.1.       No Rights as Stockholder.  Except as otherwise specifically provided herein, a registered holder, solely in its capacity as a holder of a Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant Agreement be construed to confer upon a registered holder, solely in its capacity as the registered holder of a Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of
stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the registered holder of the Warrant Shares which it is then entitled to receive upon the due exercise of a Warrant. In addition, nothing contained in this Warrant Agreement shall be construed as imposing any liabilities on a registered holder to purchase any securities (upon exercise of a Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. A Warrant does not entitle the registered holder thereof to any of the rights of a stockholder.

 

6.2.       Lost, Stolen, Mutilated, or Destroyed Warrants.  If any Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may on such terms as to indemnity or otherwise as they may in their discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the Warrant so lost, stolen, mutilated, or destroyed.  Any such new Warrant shall constitute a substitute contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant
shall be at any time enforceable by anyone.

 

6.3.       Reservation of Common Stock.  The Company shall at all times reserve and keep available a number of its authorized but unissued shares of Common Stock that will be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Warrant Agreement.

 

6.4.       Noncircumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its corporate charter, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of the Warrants or this Warrant Agreement, and will at all times in good faith carry out all the provisions of the Warrants and this Warrant Agreement. Without limiting the generality of
the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of the Warrants above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of the Warrants, and (iii) shall, so long as the Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Warrants, 100% of the number of shares of Common Stock issuable upon exercise of the Warrants then outstanding (without regard to any limitations on exercise).

7.         Concerning the Warrant Agent and Other Matters.

 

7.1.       Payment of Taxes.  The Company will from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of the Warrants or such shares.

 

  

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7.2.       Resignation, Consolidation, or Merger of Warrant Agent.

 

7.2.1.    Appointment of Successor Warrant Agent.  The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company.  If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent.  If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation
or incapacity by the Warrant Agent or by the holder of the Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost.  Any successor Warrant Agent, whether appointed by the Company or by such court, shall be a corporation organized and existing under the laws of the State of New York, in good standing and having its principal office in the Borough of Manhattan, City and State of New York, and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority.  After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties,
and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.

 

7.2.2.    Notice of Successor Warrant Agent.  In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the transfer agent for the Common Stock not later than the effective date of any such appointment.

 

7.2.3.    Merger or Consolidation of Warrant Agent.  Any corporation into which the Warrant Agent may be merged  or converted or with which it may be consolidated or any corporation resulting from any merger, conversion, or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to the business of the Warrant Agent, shall be the successor Warrant Agent under this Warrant Agreement without any further act.

 

7.3.       Fees and Expenses of Warrant Agent.

 

7.3.1.    Remuneration.  The Company agrees to pay the Warrant Agent reasonable remuneration for its services as such Warrant Agent hereunder and will reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder.

 

7.3.2.    Further Assurances.  The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing of the provisions of this Warrant Agreement.

 

  

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7.4.       Liability of Warrant Agent.

 

7.4.1.    Reliance on Company Statement.  Whenever in the performance of its duties under this Warrant Agreement, the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a statement signed by the President or Chairman of the Board of the Company and delivered to the Warrant Agent.  The Warrant Agent may rely upon such statement for any action
taken or suffered in good faith by it pursuant to the provisions of this Warrant Agreement.

 

7.4.2.    Indemnity.  The Warrant Agent shall be liable hereunder only for its own gross negligence, willful misconduct or bad faith.  The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Warrant Agreement except as a result of the Warrant Agent’s gross negligence, willful misconduct, or bad faith.

 

7.4.3.    Exclusions.  The Warrant Agent shall have no responsibility with respect to the validity of this Warrant Agreement or with respect to the validity or execution of any Warrant (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Warrant Agreement or in any Warrant; nor shall it be responsible to make calculations under 3.3.8 or any adjustments required under the provisions of Section 4 hereof or responsible for the manner, method, or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Warrant Agreement or any Warrant or as to whether any shares of Common Stock will when issued be valid and fully paid and nonassessable.

 

7.5.       Acceptance of Agency.  The Warrant Agent hereby accepts the agency established by this Warrant Agreement and agrees to perform the same upon the terms and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently account for, and pay to the Company, all moneys received by the Warrant Agent for the purchase of shares of Common Stock through the exercise of Warrants.

7.6.       Limitation on Liability of Warrant Agent.  In no event shall the Warrant Agent have any liability for any incidental, special, statutory, indirect or consequential damages, or for any loss of profits, revenue, data or cost of cover.

 

8.         Miscellaneous Provisions.

 

8.1.       Successors.  All the covenants and provisions of this Warrant Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns.

 

  

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8.2.       Notices.  Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or on the Company shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:

 

Pluristem Therapeutics Inc.

MATAM Advanced Technology Park

Building No. 20

Haifa, 31905, Israel

Attn: Chief Executive Officer

 

Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company), as follows:

 

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, New York 11219

Attn:  Compliance Department

 

with a copy in each case to:

 

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, New York 11219

Attn:  General Counsel

 

and

 

Jefferies & Company, Inc.

520 Madison Avenue

New York, New York 10022

Facsimile:  (646) 619-4437

Attention:  General Counsel

 

8.3.       Applicable law.  The validity, interpretation, and performance of this Warrant Agreement and of the Warrants shall be governed in all respects by the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction.  The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Warrant Agreement shall be brought and enforced in the courts of the State of New York or 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 inconvenience forum.  Any such 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 8.2 hereof.  Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim.

 

8.4.       Persons Having Rights under this Warrant Agreement.  Nothing in this Warrant Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties hereto and the registered holders of the Warrants, any right, remedy, or claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise, or agreement hereof.  All covenants, conditions, stipulations, promises, and agreements contained in this Warrant Agreement shall be for
the sole and exclusive benefit of the parties hereto and their successors and assigns and of the registered holders of the Warrants.

 

  

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8.5.       Examination of the Warrant Agreement.  A copy of this Warrant Agreement shall be available at all reasonable times at the office of the Warrant Agent in the Borough of Manhattan, City and State of New York, for inspection by the registered holder of any Warrant.  The Warrant Agent may require any such holder to submit his Warrant for inspection by it.

 

8.6.       Counterparts.  This Warrant Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

 

8.7.       Effect of Headings.  The Section headings herein are for convenience only and are not part of this Warrant Agreement and shall not affect the interpretation thereof.

 

8.8        Amendments.  This Warrant Agreement may be amended by the parties hereto without the consent of any registered holder: (i) for the purpose of curing any ambiguity or (ii) of curing, correcting or supplementing any defective provision contained herein or (iii) adding or for the purpose of changing any other provisions with respect to matters or questions arising under this Warrant Agreement as the parties may deem necessary or desirable and that the parties deem shall not materially adversely affect the interest of the registered
holders.  Any modifications or amendments to Section 3.3.10 shall require the written consent of all the registered holders.  All other modifications or amendments, including any amendment to increase the Warrant Price or shorten the Exercise Period, shall require the written consent of the registered holders of Warrants equal to at least 67% of the Warrant Shares issuable upon exercise of all then outstanding Warrants.

8.9        Severability. This Warrant Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Warrant Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Warrant Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

9.         Certain Definitions. For purposes of this Warrant, the following terms shall have the following meanings:

 

9.1        “Affiliate” means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common control with, such Person.

 

9.2        “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law or executive order to remain closed.

 

9.3        “Common Stock” means (i) the Company’s shares of Common Stock and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.

 

                        9.4        “Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.

 

  

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9.5        “Expiration Date” means the date that is the fifth year anniversary of the Issuance Date or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday, as the same may be extended pursuant to Section 3.3.7.

 

9.6        “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

 

[Signature page follows.]

 

  

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IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the parties hereto as of the day and year first above written.

 

PLURISTEM THERAPEUTICS INC.

By:________________________________

Name:

Title:

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC

By:________________________________

Name:

Title:

 

  

 

  

 

EXHIBIT A

WARRANT NUMBER:______________

 

PLURISTEM THERAPEUTICS INC.

WARRANT

THIS CERTIFIES THAT, for value received  

__________________________________

 

is the registered holder of a Warrant or Warrants (the “Warrant”) expiring on September [·], 2017, subject to extension in certain events (“Expiration Date”), to purchase [   ] fully paid and non-assessable share[s] of Common Stock, par value $0.00001 per share (“Shares”), of Pluristem Therapeutics Inc., a Nevada corporation (the
“Company”). The Warrant entitles the holder thereof to purchase from the Company such number of Shares of the Company at the price of $5 per share (subject to adjustment), upon surrender of this Warrant Certificate and payment of the Warrant Price to the Warrant Agent, American Stock Transfer & Trust Company, LLC at its corporate trust department, but only subject to the conditions set forth herein and in the Warrant Agreement between the Company and American Stock Transfer & Trust Company (as may be amended from time to time, the
“Warrant Agreement”).  The Warrant Agreement provides that upon the occurrence of certain events the Warrant Price and the number of Shares purchasable hereunder, set forth on the face hereof, may, subject to certain conditions, be adjusted.  The term “Warrant Price” as used in this Warrant Certificate refers to the price per Share at which Shares may be purchased at the time the Warrant is exercised.  Capitalized terms used and not defined herein shall have the meanings set forth in the Warrant Agreement.

No fraction of a Share will be issued upon any exercise of a Warrant.  If the holder of a Warrant would be entitled to receive a fraction of a Share upon any exercise of a Warrant, the Company shall, upon such exercise, pay a cash adjustment in accordance with the Warrant Agreement..

 

Upon any exercise of the Warrant for less than the total number of full Shares provided for herein, there shall be issued to the registered holder hereof or the registered holder’s assignee a new Warrant Certificate covering the number of Shares for which the Warrant has not been exercised.

 

Upon surrender of the Warrant Certificate for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions for transfer, the Warrant Agent shall register the transfer.  A new Warrant Certificate or Warrant Certificates evidencing in the aggregate a like number of Warrants shall be issued and the old Warrant Certificate shall be canceled.

 

Warrant Certificates, when surrendered to the Warrant Agent, may be transferred or exchanged in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates evidencing in the aggregate a like number of Warrants.

 

The Company and the Warrant Agent may deem and treat the registered holder as the absolute owner of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

 

  

 

  

 

This Warrant does not entitle the registered holder to any of the rights of a stockholder of the Company.

 

	
By:

	  
	
 

	
 

	
President

	
Secretary

 

COUNTERSIGNED:

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC,

as Warrant Agent

By: ________________________

       Authorized Officer                                                                          

 

  

 

  

 

SUBSCRIPTION FORM

(to be executed by the registered holder in order to exercise Warrants)

The undersigned registered holder irrevocably elects to exercise ______________ Warrants represented by this Warrant Certificate, and to purchase the shares of Common Stock issuable upon the exercise of such Warrants, and requests that Certificates for such shares shall be issued in the name of

 

	
(PLEASE TYPE OR PRINT NAME AND ADDRESS)

	  
	  

 (SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER)

 

and be delivered to:

	 
	
(PLEASE PRINT OR TYPE NAME AND ADDRESS)

 

and, if such number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the balance of such Warrants be registered in the name of, and delivered to, the registered holder at the address stated below:

Dated: _____________________________________

                              

(SIGNATURE)

___________________________________________

___________________________________________

(ADDRESS)

___________________________________________

 

___________________________________________

(TAX IDENTIFICATION NUMBER)

 

  

 

  

 

ASSIGNMENT

(to be executed by the registered holder in order to assign Warrants)

For Value Received, _______________________ hereby sells, assigns, and transfers unto

 

 

	
(PLEASE TYPE OR PRINT NAME AND ADDRESS)

	  
	  

 (SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER)

 

and be delivered to

	 
	
(PLEASE PRINT OR TYPE NAME AND ADDRESS)

 

______________________ of the Warrants represented by this Warrant Certificate, and hereby irrevocably constitutes and appoints _________________________________ Attorney to transfer this Warrant Certificate on the books of the Company, with full power of substitution in the premises.

Dated: _________________________                       _________________________________

                                                                                                                    
 (SIGNATURE)

The signature to the assignment of the Subscription Form must correspond to the name written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever, and must be guaranteed by a commercial bank or trust company or a member firm of the American Stock Exchange, New York Stock Exchange, Pacific Stock Exchange or Chicago Stock Exchange.ex10-1.htm

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made as of the 14th day of September, 2012 (the “Effective Date”), by and between United Community Bank, a banking corporation chartered under the laws of the state of Georgia (the “Bank”), and H. Lynn Harton, a resident of the State of South Carolina (the “Executive”).

RECITALS:

Effective as of the date hereof, the Bank desires to employ the Executive as the Chief Operating Officer of the Bank and Executive desires to accept such employment.

The Bank and the Executive desire to enter into an employment agreement to set forth the terms and conditions of the Executive’s employment.

In consideration of the above premises and the mutual agreements hereinafter set forth, the parties hereby agree as follows:

1.           Duties.

 

              1.1           Position.  The Executive shall be employed as the Chief Operating Officer of the Bank, and, subject to the direction of the Chief Executive Officer, shall perform and discharge well and faithfully the duties and responsibilities which may be assigned to the Executive from time to time in connection with the conduct of the Bank’s business.

 

              1.2           Full-Time Status.  In addition to the duties and responsibilities specifically assigned to the Executive pursuant to Section 1.1 hereof, the Executive shall:  

 

  (a)           subject to Section 1.3, devote all of the Executive’s time, energy and skill during regular business hours to the performance of the duties of the Executive’s employment (reasonable vacations and reasonable absences due to illness excepted) and faithfully and industriously perform such duties; and

  (b)           diligently follow and implement all reasonable and lawful management policies and decisions communicated to Executive by the Chief Executive Officer.

 

              1.3            Permitted Activities. The Executive shall devote the Executive’s entire business time, attention and energies to the business of the Bank and shall not during the Term be engaged (whether or not during normal business hours) in any other business or professional activity, whether or not such activity is pursued for gain, profit or other pecuniary advantage, but as long as the following activities do not interfere with the Executive’s obligations to the Bank, this shall not be construed as preventing the Executive from:

  (a)           investing the Executive’s personal assets in any manner which will not require any services on the part of the Executive in their operation or affairs and in which the Executive’s participation is solely that of an investor; and

  

  

  

 

  (b)           participating in civic and professional affairs and organizations and conferences, preparing or publishing papers or books, teaching or serving on the board of directors of an entity so long as the Chief Executive Officer approves in writing of such activities prior to the Executive’s engaging in them.

2.           Term.       This Agreement shall be in effect for the period beginning with the Effective Date and ending on September 13, 2015 (the “Term”).

3.           Compensation.  The Executive shall receive the following salary and benefits during the Term, except as otherwise provided below:

3.1           Salary.  The Executive shall be compensated an annual base salary of Four Hundred Thousand Dollars ($400,000), as adjusted as provided herein (the “Base Salary”).  The Executive’s Base Salary shall be reviewed by the Board of Directors (or a committee) thereof of the Bank annually for possible adjustments.  The Executive’s Base Salary may not be reduced below its level at any time, except that if base salaries are reduced for all other executive officers of the Bank, the Executive’s Base Salary may be reduced by up to twenty percent (20%) from its highest level, provided that the percentage reduction at any time is no greater than the percentage reduction in base salary for any other executive officer.  The Executive’s Base Salary shall be payable in accordance with the Bank’s normal payroll practices, which shall be no less frequently than monthly.

3.2           Salary Stock.   The Executive shall also be compensated Seventy Five Thousand Dollars ($75,000) annually in salary stock of the Bank’s parent company, United Community Banks, Inc. (the “Company”) pursuant to that certain Stock Grant Agreement between the Company and the Executive dated as of the date hereof.

3.3           Business Expenses.  The Bank shall reimburse the Executive for reasonable and necessary business expenses incurred by the Executive in the performance of the Executive’s duties hereunder in accordance with reimbursement policies of the Bank.  Such expenses of Executive which the Bank currently reimburses include reasonable expenses for professional conferences and conventions, and professional and club memberships.

3.4           Vacation.  The Executive shall be entitled to paid time off in accordance with the Bank’s paid time off policy as the same may be in effect from time to time during the Term; provided, however, that the Executive shall be entitled to thirty (30) paid time off days (for vacation, sick, and personal days) per full calendar year, and if the Executive does not use all of his paid time off days for a year, he may carry over up to five (5) unused paid time off days from the prior year.

 

3.5           Benefits.  In addition to the benefits specifically described in this Agreement, the Executive shall be entitled to such benefits as may be available from time to time to all other executive officers of the Bank.  All such benefits shall be awarded and administered in accordance with the Bank’s standard policies and practices.  Such benefits may include, by way of example only, retirement, health and disability insurance benefits, sick leave and such other benefits as the Bank deems appropriate.

 

  

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3.6           Restricted Stock Units.  Executive shall be eligible to receive one hundred fifty thousand (150,000) restricted stock units of the Company, subject to the terms and conditions of the Company’s Amended and Restated 2000 Key Employee Stock Option Plan, as amended from time to time, and those certain Restricted Stock Unit Award Agreements between the Company and the Executive dated as of the date hereof.

 

3.7           Change in Control Agreement.  Executive shall be eligible to receive certain payments pursuant to that certain Change in Control Severance Agreement between the Company and the Executive dated as of the date hereof.

 

3.8           Annual Discretionary Bonus.  Executive shall be eligible to receive, within fifteen (15) days of each of his anniversary dates with the Bank during the Term, a discretionary bonus determined by the Board of Directors based upon Executive’s contributions to the Bank.  The amount and form of payment of any bonus will be determined in the sole discretion of the Board and will be subject to state and federal regulatory standards.  The Bank guarantees that Executive will receive, during the first three (3) years of employment (assuming Executive remains employed during such period), discretionary bonuses which cumulatively exceeds Five Hundred Thousand Dollars ($500,000).

3.9           Withholding.  The Bank shall deduct from each payment of compensation hereunder all amounts required to be deducted and withheld in accordance with applicable federal and state income, FICA and other withholding requirements.

3.10         Modified Retirement Plan.  Executive shall be eligible to participate in the Company’s Amended and Restated Modified Retirement Plan, as amended from time to time, and receive an One Hundred and Fifty Thousand Dollar ($150,000) annual benefit upon Executive reaching sixty-five (65) years of age, subject to the terms and conditions of such plan.

4.           Termination; Suspension or Reduction of Benefits. 

4.1           Termination of Employment.  During the Term, the Executive’s Termination of Employment under this Agreement shall occur only as follows:

(a)           By the Bank:

(1)           for Cause;

(2)           without Cause at any time, in which event the Bank shall pay the Executive, as severance, an amount equal to two (2) times the Executive’s Annual Base Salary and Salary Stock as in effect on the date of Termination of Employment, with six (6) months of the Base Salary paid over six (6) months in normal payroll periods, and the remainder paid to the Executive in one lump sum in accordance with the provisions of Section 4.2(c).

(3)           upon the expiration of the Disability Period.

  

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(b)           By the Executive:

(1)           for any reason (other than pursuant to Section 4.1(b)(2)), provided that the Executive shall give the Bank not less than thirty (30) days’ prior written notice of the Executive’s intent to effect his Termination of Employment;

(2)           for Good Reason, in which event the Bank shall pay the Executive, as severance, an amount equal to two (2) times the Executive’s Annual Base Salary and Salary Stock as in effect on the date of Termination of Employment, with six (6) months of the Base Salary paid over six (6) months in normal payroll periods, and the remainder paid to the Executive in one lump sum in accordance with the provisions of Section 4.2(c).

(c)           At any time upon mutual, written agreement of the parties.

(d)           Upon expiration of the Term.

(e)           Notwithstanding anything in this Agreement to the contrary, the Term shall end automatically upon the Executive’s death.

4.2           Effect of Termination of Employment and Timing of Payments.

 

(a)           Upon Executive’s Termination of Employment hereunder for any reason, the Bank shall have no further obligations to the Executive or the Executive’s estate, except for the payment of any Base Salary due and owing under Section 3.1 on the effective date of the Termination of Employment, reimbursement under Section 3.3 of expenses incurred up to the effective date of the Termination of Employment, compensation and benefits to which Executive is entitled under the terms of any written compensation or benefit plan or agreement and payment set forth in Section 4.1, if applicable.

 

(b)           Notwithstanding any other provision of this Agreement to the contrary, as a condition of the Bank’s payment of any amount in connection with the Executive’s Termination of Employment, the Executive must execute and return to the Bank within such period of time following Termination of Employment as is permitted by the Bank (and not timely revoke during any revocation period provided pursuant to such release) a separation and release agreement in the form provided by the Bank.  The Bank shall provide such separation and release agreement in sufficient time so that if the Executive timely executes and returns such agreement to the Bank, the revocation period provided therein shall expire before the date severance is required to begin.

 

  

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(c)           All payments of severance under this Agreement shall accrue from the date of Termination of Employment and shall commence no later than the sixtieth (60th) day following the Executive’s Termination of Employment, with any accrued but unpaid severance being paid on the date of the first payment.  Notwithstanding any provision in the Agreement to the contrary, this Agreement shall at all times be interpreted and operated in compliance with the requirements of Code Section 409A, as amended and the standards, regulations or other guidance promulgated thereunder (“Section 409A”).  Specifically, to the extent necessary to avoid the imposition of tax on the Executive under Section 409A, payments payable upon a Termination of Employment shall be suspended until six (6) months following the effective date of Termination of Employment, if, immediately prior to the Executive’s Termination of Employment, the Executive is a “specified employee” (within the meaning of Section 409A).   Each payment hereunder shall be deemed a separate payment for purposes of Section 409A.  The parties intend that no payment pursuant to this Agreement shall give rise to any adverse tax consequences to either party pursuant to Section 409A; however, Executive acknowledges that the Bank does not guarantee any particular tax treatment and that Executive is solely responsible for any taxes owed as a result of this Agreement.

 

(d)           Notwithstanding anything contained in this Agreement to the contrary, no payments shall be made pursuant to Section 4.1 or any other provision herein in contravention of the requirements of the Federal Deposit Insurance Act.

 

4.3           Regulatory Matters.

(a)           If the Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (“FDIA”) (12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Bank  under this Agreement shall terminate, as of the effective date of such order, except for the payment of Base Salary due and owing under Section 3.1 on the effective date of said order, and reimbursement of expenses incurred as of the effective date of termination.

(b)           If the Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)), all obligations of the Bank 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 Bank shall (1) pay the Executive all or part of the compensation withheld while its contract obligations were suspended and (2) reinstate (in whole or in part) any of its obligations which were suspended.

(c)           If the Bank is in default (as defined in Section 3(x)(1) of the FDIA), all obligations under this Agreement shall terminate as of the date of default, but the vested rights of the parties shall not be affected.

(d)           All obligations under this Agreement shall be terminated, except to the extent a determination is made that continuation of the contract is necessary for the continued operation of the Bank (1) by the director of the Federal Deposit Insurance Corporation (the “FDIC”) or his or her designee (the “Director”), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in 13(c) of the FDIA; or (2) by the Director, at the time the Director approves a supervisory merger to resolve problems related to operation of the Bank when the Bank is determined by the Director to be in an unsafe and unsound condition.  Any rights of the Executive that have already vested, however, shall not be affected by such action.

  

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(e)           Notwithstanding anything herein contained to the contrary, any payments to the Executive by the Bank pursuant to this Agreement are subject to and conditioned upon their compliance with Section 18(k) of the FDIA (12 U.S.C. Section 1828(k)), and the regulations promulgated thereunder in 12 C.F.R. Part 359 or otherwise.

4.4           TARP Treatment.  Notwithstanding anything herein contained to the contrary, this Agreement shall at all times be interpreted and operated in compliance with that certain Securities Purchase Agreement between the United States Department of the Treasury and the Company and Section 111(b)(3)(D) of the Emergency Economic Stabilization Act of 2008 (collectively with 31 C.F.R. Section 30.1 and other any standards, regulations or other guidance promulgated under Section 111(b)(3)(D), or any amendments thereto under the American Recovery and Reinvestment Act of 2009 or otherwise, the “TARP Restrictions”) and all payments and benefits under this Agreement shall be subject to, and their payment or granting conditioned on, the Company’s compliance with the TARP Restrictions.

5.                              Employer Information.

5.1           Ownership of Employer Information.   All Bank Information received or developed by the Executive during the Term or while employed by the Bank will remain the sole and exclusive property of the Bank.

5.2           Obligations of the Executive.  The Executive agrees:

                                  (a)            to hold Bank Information in strictest confidence;

 

                                  (b)           not to use, duplicate, reproduce, distribute, disclose or otherwise disseminate Bank Information or any physical embodiments of Bank Information; and

 

                                  (c)            in any event, not to take any action causing or fail to take any action necessary in order to prevent any Bank Information from losing its character or ceasing to qualify as Confidential Information or a Trade Secret.

In the event that the Executive is required by law to disclose any Bank Information, the Executive will not make such disclosure unless (and then only to the extent that) the Executive has been advised by independent legal counsel that such disclosure is required by law and then only after prior written notice is given to the Bank when the Executive becomes aware that such disclosure has been requested and is required by law.  This Section shall survive for a period of two (2) years following termination of this Agreement for any reason with respect to Confidential Information, and shall survive termination of this Agreement for any reason for so long as is permitted by applicable law, with respect to Trade Secrets.

5.3           Delivery upon Request or Termination.  Upon request by the Bank, and in any event upon the Executive’s Termination of Employment, the Executive shall promptly deliver to the Bank all property belonging to the Bank and its Affiliates, including, without limitation, all Bank Information then in the Executive’s possession or control.

 

  

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6.           Non-Competition.  The Executive agrees that during the period of time he is employed by the Bank, and in the event of the Executive’s Termination of Employment for any reason, for a period of one (1) year thereafter, the Executive will not (except on behalf of or with the prior written consent of the Bank, within the Area, either directly or indirectly, on the Executive’s own behalf or in the service or on behalf of others, perform for any Competing Business services which are the same as the services the Executive provided for the Bank.

7.           Non-Solicitation of Customers.  The Executive agrees that during the period of time he is employed by the Bank, and in the event of the Executive’s Termination of Employment for any reason, for a period of two (2) years thereafter, the Executive will not (except on behalf of or with the prior written consent of the Bank) on the Executive’s own behalf or in the service or on behalf of others, solicit, divert or appropriate or attempt to solicit, divert or appropriate, any business from any of the Bank’s customers, including prospective customers actively sought by the Bank, with whom the Executive had material contact during the last two (2) years of the Executive’s employment, for purposes of providing products or services that are competitive with those provided by the Bank.

8.           Non-Solicitation of Employees.  The Executive agrees that during the period of time he is employed by the Bank, and in the event of the Executive’s Termination of Employment for any reason, for a period of two (2) years thereafter, the Executive will not on the Executive’s own behalf or in the service or on behalf of others, solicit, recruit or hire away or attempt to solicit, recruit or hire away, any employee of the Bank with whom the Executive had material contact during the last two (2) years of the Executive’s employment.

9.           Remedies.  The Executive agrees that the covenants contained in Sections 5 through 8 of this Agreement are of the essence of this Agreement; that each of the covenants is reasonable and necessary to protect the business, interests and properties of the Bank, and that irreparable loss and damage will be suffered by the Bank should the Executive breach any of the covenants.  Therefore, the Executive agrees and consents that, in addition to all the remedies provided by law or in equity, the Bank shall be entitled to a temporary restraining order and temporary and permanent injunctions to prevent a breach or contemplated breach of any of the covenants.  Furthermore, in addition to any other remedies, the Executive agrees that any violation of the covenants in Section 5 through 8 will result in the immediate forfeiture of any remaining payment that otherwise is or may become due under Section 4.1, if applicable.  The Bank and the Executive agree that all remedies available to the Bank or the Executive, as applicable, shall be cumulative.

10.         Severability.  The parties agree that each of the provisions included in this Agreement is separate, distinct and severable from the other provisions of this Agreement and that the invalidity or unenforceability of any Agreement provision shall not affect the validity or enforceability of any other provision of this Agreement.  Further, if any provision of this Agreement is ruled invalid or unenforceable by a court of competent jurisdiction because of a conflict between the provision and any applicable law or public policy, the provision shall be redrawn to make the provision consistent with, and valid and enforceable under, the law or public policy.

 

  

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11.           No Set-Off by the Executive.  The existence of any claim, demand, action or cause of action by the Executive against the Bank whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement by the Bank of any of its rights hereunder.

12.           Notice.  All notices, requests, waivers and other communications required or permitted hereunder shall be in writing and shall be either personally delivered, sent by reputable overnight courier service or mailed by first class mail, return receipt requested, to the recipient at the address below indicated:

 

	 	
If to the Bank:

	 	 	
United Community Bank

	 	 	
125 Highway 515 East

	 	 	
Blairsville, Georgia 30512

	 	 	
Attention:  Chief Executive Officer

	 	 	 
	 	
If to the Executive:

	 	 	
H. Lynn Harton

	 	 	
310 McDaniel Avenue

	 	 	
Greenville, South Carolina 29601

 

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.  All such notices, requests, waivers and other communications shall be deemed to have been effectively given:  (a) when personally delivered to the party to be notified; (b) when sent by confirmed facsimile to the party to be notified; (c) five (5) business days after deposit in the United States Mail postage prepaid by certified or registered mail with return receipt requested at any time other than during a general discontinuance of postal service due to strike, lockout, or otherwise (in which case such notice, request, waiver or other communication shall be effectively given upon receipt) and addressed to the party to be notified as set forth above; or (d) one (1) business day after deposit with a national overnight delivery service, postage prepaid, addressed to the party to be notified as set forth above with next-business-day delivery guaranteed. A party may change its or his notice address given above by giving the other party ten (10) days’ written notice of the new address in the manner set forth above.

13.           Assignment.  The rights and obligations of the Bank under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Bank, as applicable, including without limitation, a purchaser of all or substantially all the assets of the Bank.  If the Agreement is assigned pursuant to the foregoing sentence, the assignment shall be by novation and the Bank shall have no further liability hereunder, and the successor or assign, as applicable, shall become the employer hereunder, but the Executive will not be deemed to have experienced a Termination of Employment by virtue of such assignment.  The Agreement is a personal contract and the rights and interest of the Executive may not be assigned by the Executive.  This Agreement shall inure to the benefit of and be enforceable by the Executive and the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

  

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14.           Waiver.  A waiver by one party to this Agreement of any breach of this Agreement by the other party to this Agreement shall not be effective unless in writing, and no waiver shall operate or be construed as a waiver of the same or another breach on a subsequent occasion.

15.           Applicable Law and Choice of Forum.  This Agreement shall be construed and enforced under and in accordance with the laws of the State of Georgia.  The parties agree that any appropriate state court located in Union County, Georgia or federal district court having jurisdiction over Union County, Georgia shall have exclusive jurisdiction of any case or controversy arising under or in connection with this Agreement and shall be a proper forum in which to adjudicate such case or controversy.  The parties consent and waive any objection to the jurisdiction or venue of such courts.

16.           Interpretation.  Words importing any gender include all genders.  Words importing the singular form shall include the plural and vice versa.  The terms “herein,” “hereunder,” “hereby,” “hereto,” “hereof” and any similar terms refer to this Agreement.  Any captions, titles or headings preceding the text of any article, section or subsection herein are solely for convenience of reference and shall not constitute part of this Agreement or affect its meaning, construction or effect.

17.           Entire Agreement.  This Agreement embodies the entire and final agreement of the parties on the subject matter stated in this Agreement.  No amendment or modification of this Agreement shall be valid or binding upon the Bank, or the Executive unless made in writing and signed by all parties.  All prior understandings and agreements relating to the subject matter of this Agreement are hereby expressly terminated.

18.           Rights of Third Parties.  Nothing herein expressed is intended to or shall be construed to confer upon or give to any person, firm or other entity, other than the parties hereto and their permitted assigns, any rights or remedies under or by reason of this Agreement.

19.           Survival.  The obligations of the Executive shall survive the Executive’s Termination of Employment and termination or expiration of this Agreement for the period designated under each respective section.

20.           Representation Regarding Restrictive Covenants.  The Executive represents that the Executive is not and will not become a party to any non-competition or non-solicitation agreement or any other agreement which would prohibit the Executive from entering into this Agreement or providing the services for the Bank contemplated by this Agreement on or after the Effective Date.  In the event the Executive is subject to any such agreement, this Agreement shall be rendered null and void and the Bank shall have no obligations to the Executive under this Agreement.

21.           Definitions.  Whenever used in this Agreement, the following terms and their variant forms shall have the meanings set forth below:

(a)           “Affiliate” shall mean any entity which controls another entity, is controlled by or is under common control with another entity.  For this purpose, “control” means ownership of more than fifty percent (50%) of the ordinary voting power of the outstanding equity securities of an entity.

  

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(b)           “Agreement” shall mean this Agreement and any exhibits incorporated herein together with any amendments hereto made in the manner described in this Agreement.

(c)           “Area” shall mean the geographic area within a twenty (20) mile radius of any branch location or other office of the Bank.  It is the express intent of the parties that the Area as defined herein is the area where the Executive performs services on behalf of the Bank under this Agreement.

(d)           “Business of the Bank” shall mean the business conducted by the Bank, which is commercial and consumer banking.

(e)           “Cause” shall mean:

(1)         A material breach of the terms of this Agreement by the Executive, including, without limitation, failure by the Executive to perform the Executive’s duties and responsibilities in the manner and to the extent required under this Agreement;

(2)         Conduct by the Executive that amounts to fraud, dishonesty, misappropriation (including, without limitation, the use of funds of the Bank for personal or other non-business purposes), disloyalty or willful misconduct in the performance of the Executive’s duties and responsibilities hereunder;

 

(3)          Arrest for, charged in relation to (by criminal information, indictment or otherwise), or conviction of the Executive of a crime involving breach of trust or moral turpitude or any felony;

 

(4)          Fraudulent, dishonest, or inappropriate action by the Executive which would, in the reasonable judgment of the Board of Directors of the Bank, adversely impact on the reputation of the Bank;

 

(5)          Conduct by the Executive that amounts to gross and willful insubordination, material failure to perform the Executive’s duties and responsibilities hereunder, or gross negligence in the performance of the Executive’s duties and responsibilities hereunder;

 

(6)          Receipt of any form of notice, written or otherwise, that any regulatory agency having jurisdiction over the Bank intends to institute any form of formal or informal regulatory action against the Executive or the Bank, provided that the Board of Directors of the Bank determines in good faith that such action involves acts or omissions by or under the supervision of the Executive or that Executive’s Termination of Employment could materially advance the Bank’s compliance with the purpose of the action or would materially assist the Bank in avoiding or reducing the restrictions or adverse effect to the Bank related to the regulatory action;

 

  

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(7)          The Executive purchasing securities in any corporation that results in the Executive collectively owning beneficially at any time five percent (5%) or more of the equity securities of any Competing Business; or

 

(8)          Executive’s removal and/or permanent prohibition from participating in the conduct of the affairs of the Bank.

(f)            “Code” shall mean the Internal Revenue Code of 1986, as amended.

(g)            “Competing Business” shall mean any entity (other than the Bank or its Affiliates) that is conducting any business that is the same or substantially the same as any Business of the Bank.

(h)            “Confidential Information” means data and information relating to the business of the Bank and its Affiliates (which does not rise to the status of a Trade Secret) which is or has been disclosed to the Executive or of which the Executive became aware as a consequence of or through the Executive’s relationship to the Bank and its Affiliates and which has value to the Bank and its Affiliates and is not generally known to its competitors.  Confidential Information shall not include any data or information that has been voluntarily disclosed to the public by the Bank or its Affiliates, provided that such public disclosure shall not be deemed to be voluntary when made without authorization by the Executive or any other employee of Bank or an Affiliate, or that has been independently developed and disclosed by others, or that otherwise enters the public domain through lawful means.

(i)             “Disability” shall mean the Executive’s physical or mental disability or infirmity which would constitute a disability under an accident and health plan maintained by the Bank that provides income replacement benefits or, if the Bank does not maintain such a plan, the Executive’s inability to perform the essential functions of the Executive’s job with or without reasonable accommodation as a result of a physical or mental disability or infirmity.

(j)             “Disability Period” shall mean the period beginning on the date the Bank determines that the Executive is subject to a condition that constitutes a Disability and ending on either the date that is six (6) months after such determination or the date the Executive begins receiving income replacement benefits under any long-term disability policy maintained by the Bank, whichever occurs first.

(k)            “Bank Information” means Confidential Information and Trade Secrets.

(l)             “Good Reason” shall mean that neither Jimmy C. Tallent nor Executive is serving as the President or the Chief Executive Officer of the Bank (and thus other people fill both such positions); provided, however, that for a Termination of Employment by the Executive to be for Good Reason, the Executive must notify the Bank in writing of the event giving rise to Good Reason within thirty (30) days following the occurrence of the event (or, if later, thirty (30) days following the Executive’s knowledge of occurrence of the event), the event must remain uncured after the expiration of thirty (30) days following the delivery of written notice of such event to the Bank by the Executive, and the Executive must resign effective no later than sixty (60) days following the Bank’s failure to cure the event and must give at least thirty (30) days advance written notice prior to the Executive’s effective date of resignation.

 

  

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(m)           “Term” shall mean the period the Agreement is in effect pursuant to Section 2.1.

 

(n)            “Termination of Employment” shall mean a termination of the Executive’s employment that constitutes a “separation from service” within the meaning of Section 409A.

 

(o)            “Trade Secrets” means information of the Bank or an Affiliate including, but not limited to, technical or nontechnical data, formulas, patterns, compilations, programs, devices, methods, techniques, drawings, processes, financial data, financial plans, product plans or lists of actual or potential customers or suppliers which:

(a)           derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(b)           is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

IN WITNESS WHEREOF, the Bank, and the Executive have executed and delivered this Agreement as of the date first shown above.

 

	 	
UNITED COMMUNITY BANK

	 	 	 
	 	 	 
	 	By:	 
	 	Name:	 
	 	Title:	 
	 	 	 
	 	 	 
	 	 	 
	 	 
	 	
H. LYNN HARTON

 

 

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