Document:

urov-ex41_8.htm

 

Exhibit 4.1

 

THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR, SUBJECT TO SECTION 11 HEREOF, AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR ANY APPLICABLE STATE SECURITIES LAWS.

 

THE BERMUDA MONETARY AUTHORITY (THE “BMA”) IN ITS POLICY DATED JUNE 1, 2005 PROVIDES THAT WHERE ANY EQUITY SECURITIES OF A BERMUDA COMPANY ARE LISTED ON AN APPOINTED STOCK EXCHANGE (THE NASDAQ STOCK MARKET (“NASDAQ”) IS SUCH AN EXCHANGE), GENERAL PERMISSION IS GIVEN FOR THE ISSUE AND SUBSEQUENT TRANSFER OF ANY SECURITIES OF THE COMPANY (WHICH INCLUDES THE SHARES ISSUABLE UPON EXERCISE HEREOF) FROM AND/OR TO A NON-RESIDENT OF BERMUDA, FOR AS LONG AS ANY EQUITY SECURITIES OF THE COMPANY REMAIN SO LISTED. NOTWITHSTANDING THE ABOVE GENERAL PERMISSION, WE HAVE OBTAINED FROM THE BMA ITS PERMISSION FOR THE ISSUE AND FREE TRANSFERABILITY OF OUR SHARES (INCLUDING THE SHARES ISSUABLE UPON EXERCISE HEREOF) AND OTHER SECURITIES, AS LONG AS WE HAVE SHARES THAT ARE LISTED ON NASDAQ OR ON AN APPOINTED STOCK EXCHANGE, TO AND AMONG PERSONS WHO ARE NON- RESIDENTS OF BERMUDA FOR EXCHANGE CONTROL PURPOSES.

 

 

WARRANT AGREEMENT

 

to Purchase Common Shares of

 

UROVANT SCIENCES LTD.

 

Dated as of February 20, 2019 (the “Effective Date”)

 

WHEREAS, Urovant Sciences Ltd., an exempted company limited by shares incorporated under the laws of Bermuda (the “Company”), has entered into a Loan and Security Agreement of even date herewith (as amended and in effect from time to time, the “Loan Agreement”) with Hercules Capital, Inc., formerly known as Hercules Technology Growth Capital, Inc., a Maryland corporation, in its capacity as lender (the “Warrantholder”), and in its capacity as administrative and collateral agent, and the other lender parties thereto;

 

WHEREAS, pursuant to the Loan Agreement and as additional consideration to the Warrantholder for, among other things, its agreements in the Loan Agreement, the Company has agreed to issue to the Warrantholder this Warrant Agreement, evidencing the right to purchase Common Shares (as defined below) (this “Warrant” or this “Agreement”);

 

 

 

NOW, THEREFORE, in consideration of the Warrantholder having executed and delivered the Loan Agreement for, among other things, its agreements in the Loan Agreement, and in consideration of making advances thereunder and the mutual covenants and agreements contained herein, the Company and the Warrantholder agree as follows:

SECTION 1.GRANT OF THE RIGHT TO PURCHASE COMMON SHARES.

(a)For value received, the Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase from the Company up to the aggregate number of fully paid and non- assessable Common Shares as determined pursuant to Section 1(b) below, at a purchase price per share equal to the Exercise Price (as defined below). The number and kind of securities purchasable hereunder and the Exercise Price are each subject to adjustment as provided in Section 8. As used herein, the following terms shall have the following meanings:

“Acknowledgement of Exercise” has the meaning set forth in Section 3(a) of this Agreement.

“Act” means the Securities Act of 1933, as amended.

“Business Day” means any day other than Saturday, Sunday or any other day on which banking institutions in the States of California or New York are closed for business

“Charter” means the Company’s Certificate of Incorporation, Memorandum of Association, Amended and Restated Bye-laws or other constitutional document, as may be amended and in effect from time to time.

“Claim” has the meaning set forth in Section 12(o) of this Agreement.

“Common Shares” means the Company’s common shares, par value $0.000037453 per share, as presently authorised under the Charter, and any class and/or series of the Company’s share capital for or into which such common shares may be converted or exchanged in a reorganization, recapitalization or similar transaction.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Registration” means (i) a registration pursuant to which the Company may register up to $150,000,000 of securities in any registered offering or series of offerings declared effective prior to September 30, 2019; (ii) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to an equity option, equity purchase, or similar plan; (iii) a registration relating to an SEC Rule 145 transaction; or (iv) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, provided that, for the avoidance of doubt, the inclusion of information regarding this Warrant and the plan of distribution of and selling securityholder information related to the Common Shares issuable upon exercise of this Warrant, shall not constitute a basis for excluding the Registrable Securities from a registration pursuant to this clause (iv).

“Exercise Price” means $9.02, subject to adjustment from time to time in accordance with the provisions of this Warrant.

“Expiration Time” has the meaning set forth in Section 2 of this Agreement.

“Merger Event” means any of the following: (i) a sale, amalgamation, lease or other transfer of all or substantially all assets of the Company; (ii) any merger or consolidation involving the Company in 

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which the Company is not the surviving entity or in which the outstanding shares of the Company’s share capital are otherwise converted into or exchanged for shares of capital stock or other securities or property of another entity; or (iii) any sale by holders of the outstanding voting equity securities of the Company in a single transaction or series of related transactions of shares constituting a majority of the outstanding combined voting power of the Company.

“Net Settlement” has the meaning set forth in Section 3(a) of this Agreement.

“Notice of Exercise” has the meaning set forth in Section 3(a) of this Agreement.

“Purchase Price” means, with respect to any exercise of this Warrant, an amount equal to the then-effective Exercise Price multiplied by the number of Common Shares as to which this Warrant is then exercised.

“Registrable Securities” means (i) the shares issuable upon exercise of this Warrant and (ii) any other Common Shares issued as a dividend or other distribution with respect to, in exchange for or in replacement of such shares; provided that the securities referred to in (i)-(ii) above shall cease to be Registrable Securities (A) upon the sale of such securities pursuant to the Registration Statement or (B) upon the sale of such securities pursuant to Rule 144.

“Regulation D” means Regulation D under the Act.

“Rule 144” means Rule 144 promulgated under the Act.

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

“Transfer Notice” has the meaning set forth in Section 11 of this Agreement.

(b)Number of Shares. This Warrant shall be exercisable for an aggregate of 33,259 Common Shares, subject to adjustment from time to time in accordance with Section 8 of this Warrant.

SECTION 2.TERM OF THE AGREEMENT.

The term of this Agreement and the right to purchase Common Shares as granted herein shall commence on the Effective Date and shall be exercisable until the earlier of (a) 5:00 p.m. (Eastern Time) on the seventh (7th) anniversary of the Effective Date and (b) the closing of a Merger Event (the “Expiration Time”).

SECTION 3.EXERCISE OF THE PURCHASE RIGHTS.

(a)Exercise. The purchase rights set forth in this Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the Expiration Time, by tendering to the Company at its principal office a notice of exercise in the form attached hereto as Exhibit I (the “Notice of Exercise”), duly completed and executed, and the Purchase Price (payable in cash or check in the event the Warrantholder does not elect Net Settlement). Promptly upon receipt of the Notice of Exercise and the Purchase Price in accordance with the terms set forth below, and in no event later than five (5) Business Days thereafter, the Company or its transfer agent shall, at the election of the Company, either (i) issue to the Warrantholder a certificate for the number of Common Shares purchased or (ii) credit the same via book entry to the Warrantholder, and the Company shall execute the acknowledgment of exercise in the form attached hereto as Exhibit II (the “Acknowledgment of Exercise”) indicating the number of Common Shares which remain subject to future purchases under this Warrant, if any.

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The Purchase Price may be paid at the Warrantholder’s election either by (i) cash or check, or (ii) surrender of that number of Common Shares issuable upon exercise of this Warrant having an aggregate current fair market value equal to the Purchase Price (“Net Settlement”). The net number of Common Shares issuable to the Warrantholder upon any Net Settlement shall be calculated as follows:

 

		
	
X = 
	
Y(A-B)

	
 
	
A

 

	
Where:
	
X =
	
the number of Common Shares to be issued to the Warrantholder.

	
 
	
Y =
	
the number of Common Shares requested to be exercised under this Agreement.

	
 
	
A =
	
the current fair market value of one (1) Common Share at the time of exercise of this Warrant.

	
 
	
B =
	
the then-effective Exercise Price.

For purposes of the above calculation, the current fair market value of Common Shares shall mean with respect to each Common Share:

(i)at all times when the Common Shares are traded on a national securities exchange, inter-dealer quotation system or over-the-counter bulletin board service, the current fair market value of one (1) Common Share shall be deemed to be the volume-weighted average of the closing prices over the ten (10) consecutive trading days ending two (2) trading days before the day the current fair market value of the securities is being determined;

(ii)if the exercise is effected automatically pursuant to Section 3(b) in connection with a Merger Event, the current fair market value of a Common Share shall be deemed to be the per share value received by the holders of the outstanding Common Shares pursuant to such Merger Event as determined in accordance with the definitive transaction documents executed among the parties in connection therewith; and

(iii)in cases other than as described in the foregoing clauses (i) and (ii), the current fair market value of one (1) Common Share shall be determined in good faith by the Company’s Board of Directors.

The number of Common Shares issuable upon Net Settlement shall be rounded down to the nearest whole Common Share, with the value of any fractional Common Share being paid to the Warrantholder in cash pursuant to Section 5 below.

Upon partial exercise of this Warrant by either cash or check or Net Settlement prior to the Expiration Time, the Company shall promptly issue an amended Agreement representing the remaining number of Common Shares purchasable hereunder. All other terms and conditions of such amended Agreement shall be identical to those contained herein, including, but not limited to, the Effective Date hereof.

(b)Exercise  Prior to  Expiration. To the extent that the Warrantholder has not exercised its purchase rights under this Warrant to all Common Shares subject hereto prior to the Expiration Time, and if the current fair market value of one (1) Common Share is greater than the Exercise Price then in effect, this Agreement shall be deemed automatically exercised pursuant to Net Settlement in accordance with Section 3(a) (even if not surrendered) as of immediately prior to the Expiration Time, and upon such automatic exercise shall be deemed surrendered. For purposes of such automatic exercise, the current fair market value of one (1) Common Share shall be determined pursuant to Section 3(a). To the extent this Warrant or any portion hereof is deemed automatically exercised pursuant to this Section 3(b), the Company agrees to promptly notify the Warrantholder of the number of Common Shares, if any, the Warrantholder is entitled to receive by reason of such automatic exercise, and to issue or cause its transfer agent to issue a certificate or a book-entry credit to the Warrantholder evidencing such shares.

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SECTION 4.RESERVATION OF SHARES.

During the term of this Agreement, the Company will at all times have authorized and reserved a sufficient number of Common Shares to provide for the exercise of the rights to purchase Common Shares as provided for herein.

SECTION 5.NO FRACTIONAL SHARES OR SCRIP.

No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Agreement, but in lieu of such fractional shares the Company shall make a cash payment therefor in an amount equal to the product of (a) the current fair market value of one (1) Common Share determined in accordance with Section 3(a) multiplied by (b) the fraction of a Common Share that would otherwise be issuable hereunder.

SECTION 6.NO RIGHTS AS SHAREHOLDER.

Without limitation of any provision hereof, the Warrantholder agrees that this Agreement does not entitle the Warrantholder to any voting rights or other rights as a shareholder of the Company prior to the issuance of Common Shares to the Warrantholder pursuant to the exercise of its purchase rights set forth in this Agreement.

SECTION 7.WARRANTHOLDER REGISTRY.

The Company shall maintain a registry showing the name and address of the registered holder of this Agreement. The Warrantholder’s initial address, for purposes of such registry, is set forth in Section 12(g) below. The Warrantholder may change such address by giving written notice of such changed address to the Company.

SECTION 8.ADJUSTMENT RIGHTS.

The number and kind of securities purchasable hereunder, if any, and the Exercise Price are each subject to adjustment from time to time, as follows:

(a)Reclassification of Shares. Except for a Merger Event, if the Company at any time shall, by combination, reclassification, exchange or subdivision of securities or otherwise, change any of the Common Shares as to which purchase rights under this Agreement exist into the same or a different number of securities of any other class or classes of securities, this Agreement shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Agreement immediately prior to such combination, reclassification, exchange, subdivision or other change. The provisions of this Section 8(a) shall similarly apply to successive combination, reclassification, exchange, subdivision or other change.

(b)Subdivision or Combination of Shares. If the Company at any time shall combine or subdivide its Common Shares, (i) in the case of a subdivision, the Exercise Price shall be proportionately decreased and the number of shares for which this Warrant is exercisable shall be proportionately increased, or (ii) in the case of a combination, the Exercise Price shall be proportionately increased and the number of shares for which this Warrant is exercisable shall be proportionately decreased.

(c)Dividends. If the Company at any time while this Agreement is outstanding and unexpired shall:

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(i)pay a dividend with respect to the Common Shares payable in additional Common Shares, then the Exercise Price shall be adjusted, from and after the record date fixed for the determination of the shareholders of the Company entitled to receive such dividend, to that price determined by multiplying the Exercise Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of Common Shares outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of Common Shares outstanding immediately after such dividend or distribution, and the number of Common Shares for which this Warrant is exercisable shall be proportionately increased; or

(ii)make any other dividend or distribution on or with respect to Common Shares, except any dividend or distribution specifically provided for in any other clause of this Section 8, then, in each such case, provision shall be made by the Company such that the Warrantholder shall receive upon exercise or conversion of this Warrant a proportionate share of any such dividend or distribution as though it were the holder of the Common Shares as of the record date fixed for the determination of the shareholders of the Company entitled to receive such dividend or distribution.

(d)Notice of Certain Events. If: (i) the Company shall declare any dividend or distribution upon its outstanding Common Shares, payable in shares, cash, property or other securities; (ii) the Company shall offer for subscription pro rata to the holders of its Common Shares any additional shares of any class or other rights; (iii) there shall be any Merger Event; or (iv) there shall be any voluntary dissolution, liquidation or winding up of the Company; then, in connection with each such event, the Company shall give the Warrantholder notice thereof at the same time and in the same manner as it gives notice thereof to the holders of outstanding Common Shares. In addition, if at any time the number of Common Shares (or other securities of any other class or classes of securities of the Company for which this Warrant is then exercisable) outstanding is reduced such that the number of Common Shares or other securities issuable upon exercise of this Warrant shall exceed five percent (5%) of the then outstanding class of such securities, then, within three (3) Business Days of such event, the Company shall give the Warrantholder written notice thereof.

SECTION 9.REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

(a)Reservation of Common Shares. The Company covenants and agrees that all Common Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and non-assessable, and will be free of any taxes, liens, charges or encumbrances of any nature whatsoever; provided that the Common Shares issuable pursuant to this Agreement may be subject to restrictions on transfer under state and/or federal securities laws. The Company has made available to the Warrantholder true, correct and complete copies of its Charter currently in effect. The issuance of certificates or book-entry credit for Common Shares upon exercise of this Warrant shall be made without charge to the Warrantholder for any issuance or transfer tax in respect thereof, or other cost incurred by the Company in connection with such exercise and related issuance of Common Shares; provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer and the issuance and delivery of any certificate in a name other than that of the Warrantholder. 

(b)Due Authority. The execution and delivery by the Company of this Agreement and the performance of all obligations of the Company hereunder, including the issuance to the Warrantholder of the right to acquire the Common Shares, have been duly authorized by all necessary corporate action on the part of the Company. This Agreement: (i) does not violate the Charter; and (ii) does not contravene any law or governmental rule, regulation or order applicable to the Company, except in the case of this clause (ii) as would not reasonably be expected to have a material adverse effect on the business, condition or operations of the Company. This Agreement constitutes a legal, valid and binding agreement of the Company, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors’ rights generally (including, without limitation, fraudulent 

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conveyance laws) and by general principles of equity, regardless of whether considered in a proceeding in equity or at law.

(c)Consents and Approvals. No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Agreement, except for the filing of any notices pursuant to Regulation D and any filing required by applicable state securities law, which filings will be effective by the time required thereby.

(d)Exempt Transaction. Subject to the accuracy of the Warrantholder’s representations in Section 10, the issuance of the Common Shares upon exercise of this Agreement will constitute a transaction exempt from (i) the registration requirements of Section 5 of the Act, in reliance upon Section 4(a)(2) thereof, and (ii) the qualification requirements of the applicable state securities laws.

(e)Information Rights. If at any time prior to the earliest to occur of (i) the date of sale or other disposition by the Warrantholder of this Warrant to a third party not then a party to the Loan Agreement or of all Common Shares issued on exercise of this Warrant, (ii) the date that all Indebtedness (as defined in the Loan Agreement) owed by the Company to the Warrantholder has been repaid or the Warrantholder is no longer a lender under the Loan Agreement and (iii) the Expiration Time, the Company shall not be required to file reports pursuant to Section 13 or 15(d) of the Exchange Act, or shall not have timely filed all such required reports, the Warrantholder shall be entitled to the information rights contained in Sections 7.1(a), (b) and (c) of the Loan Agreement, and in any such event such sections of the Loan Agreement are hereby incorporated into this Agreement by this reference as though fully set forth herein.

(f)Confidentiality. The Warrantholder acknowledges and agrees that any Confidential Information (as defined in the Loan Agreement) it may obtain pursuant to the terms of this Agreement shall be subject to the confidentiality provisions set forth in Section 11.13 of the Loan Agreement, which obligations shall survive any termination of this Agreement

(g)Registration of Shares. If the Company proposes to register (including, for this purpose, a registration effected by the Company for the sale by the Company of its securities and/or the resale of securities of the Company by security holders other than the Warrantholder) the sale or resale of any of its Common Shares or other securities under the Act in connection with the public offering of such securities (other than in an Excluded Registration), the Company shall cause to be registered all of the Registrable Securities in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 9(g) before the effective date of such registration, provided that the Company’s obligations to register the Registrable Securities under this Section 9(g) in any subsequent registration (other than in an Excluded Registration) shall continue following any such termination or withdrawal. All fees and expenses incident to the Company’s performance of or compliance with its obligations under this Section 9(g) (excluding any underwriting discounts and selling commissions) shall be borne by the Company.

(h)Rule 144 Compliance. The Company shall, at all times prior to the earlier to occur of (i) the date of sale or other disposition by the Warrantholder of this Warrant or all Common Shares issued on exercise of this Warrant and (ii) the Expiration Time, use commercially reasonable efforts to timely file all reports required under the Exchange Act and otherwise timely take all actions necessary to permit the Warrantholder to sell or otherwise dispose of this Warrant and the Common Shares issued on exercise hereof pursuant to Rule 144. If the Warrantholder proposes to sell Common Shares issuable upon the exercise of this Agreement in compliance with Rule 144, then, upon the Warrantholder’s written request to the Company, the Company shall furnish to the Warrantholder, within five (5) Business Days after receipt of such request, a written statement confirming the Company’s compliance with the filing and other requirements of such Rule 144.

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SECTION 10.REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.

This Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder:

(a)Investment Purpose. This Warrant and the Common Shares issued or issuable on exercise hereof have been or will be acquired for investment and not with a view to the sale or distribution of any part thereof in violation of applicable federal and state securities laws, and the Warrantholder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption from registration under the Act.

(b)Private Issue. The Warrantholder understands that (i) the Common Shares issuable upon exercise of this Agreement are not, as of the Effective Date, registered under the Act or qualified under applicable state securities laws, and (ii) the Company’s reliance on exemption from such registration is predicated on the representations set forth in this Section 10.

(c)Financial Risk. The Warrantholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, and has the ability to bear the economic risks of its investment.

(d)Accredited Investor. The Warrantholder is, and on each date it exercises this Warrant and pays the Purchase Price in accordance with the terms hereof will be, an “accredited investor” within the meaning of Rule 501 of Regulation D.

(e)Restricted Securities. The Warrantholder understands that unless and until a registration statement is effective under the Act covering the resale of the Common Shares issuable upon exercise of this Warrant, it may be required to hold such securities and may not be able to sell such securities when desired. The Warrantholder also understands that any sale of this Warrant or the Common Shares issued hereunder that may be made by it in reliance upon Rule 144 may be made only in accordance with the terms and conditions thereof.

(f)No Short Sales. The Warrantholder has not at any time on or prior to the Effective Date engaged in any short sales, hedging activities or equivalent transactions in the Common Shares. The Warrantholder agrees that at all times from and after the Effective Date and on or before the Expiration Time, it shall not engage in any short sales, hedging activities or equivalent transactions in the Common Shares.

SECTION 11.TRANSFERS.

Subject to compliance with applicable federal and state securities laws, this Agreement and all rights and obligations hereunder are transferable, in whole or in part, without charge to the holder hereof (except for transfer taxes) upon surrender of this Agreement properly endorsed. Each taker and holder of this Agreement, by taking or holding the same, consents and agrees that this Agreement, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Agreement shall have been so endorsed and its transfer recorded on the Company’s books, shall be treated by the Company and all other persons dealing with this Agreement as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented by this Agreement. The transfer of this Agreement shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the “Transfer Notice”) at the Company’s principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. Until the Company receives such Transfer Notice, the Company may treat the registered owner hereof as the owner for all purposes. Notwithstanding anything herein or in any legend to the contrary, the Company shall not require an opinion of counsel in connection with any sale, assignment or other transfer by the Warrantholder of this Warrant (or any portion hereof or any interest herein) or of any Common Shares issued upon any exercise hereof to an affiliate (as defined in 

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Regulation D) of the Warrantholder, provided that such affiliate is an “accredited investor” as defined in Regulation D and agrees to be bound by the terms applicable to such Warrant or Common Shares as provided herein.

SECTION 12.MISCELLANEOUS.

(a)Effective Date. The provisions of this Agreement shall be construed and shall be given effect in all respects as if it had been executed and delivered by the Company on the date hereof. This Agreement shall be binding upon any successors or assigns of the Company.

(b)Remedies. In the event of any default hereunder, the non-defaulting party may proceed to protect and enforce its rights either by suit in equity and/or by action at law, including but not limited to an action for damages as a result of any such default, and/or an action for specific performance for any default where such party will not have an adequate remedy at law and where damages will not be readily ascertainable.

(c)No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be reasonably necessary or appropriate in order to protect the rights of the Warrantholder against impairment. Notwithstanding the foregoing, nothing in this Section 12(c) shall negate or otherwise restrict or impair the Company’s right to effect any changes to the rights, preferences, privileges or restrictions associated with the Common Shares so long as such changes do not adversely affect the rights, preferences, privileges or restrictions associated with the Common Shares issuable upon exercise of this Warrant in a manner different from the effect that such changes have generally on the rights, preferences, privileges or restrictions associated with all other Common Shares.

(d)Attorneys’ Fees. In any litigation, arbitration or court proceeding between the Company and the Warrantholder relating hereto, the prevailing party shall be entitled to reasonable attorneys’ fees and expenses and reasonable costs of proceedings incurred in enforcing this Agreement. For the purposes of this Section 12(e), attorneys’ fees shall include without limitation reasonable fees incurred in connection with the following: (i) contempt proceedings; (ii) discovery;

(iii) any motion, proceeding or other activity of any kind in connection with an insolvency proceeding; (iv) garnishment, levy, and debtor and third party examinations; and (v) post-judgment motions and proceedings of any kind, including without limitation any activity taken to collect or enforce any judgment.

(e)Severability. In the event any one or more of the provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision, which comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision.

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(f)Notices. Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, service of process or other communication that is required, contemplated or permitted under this Agreement or with respect to the subject matter hereof shall be in writing, and shall be deemed to have been validly served, given, delivered and received upon the earliest of: (i) personal delivery to the party to be notified, (ii) when sent by confirmed receipt telex, electronic transmission or facsimile if sent during normal business hours of the recipient, if not, then on the next Business Day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, and (iv) one Business Day after deposit with a nationally recognized overnight courier, specifying next-day delivery, with written verification of receipt, and shall be addressed to the party to be notified as follows:

If to the Warrantholder:

HERCULES CAPITAL, INC.

Legal Department

Attention: Chief Legal Officer and Kristen Kosofsky 400 Hamilton Avenue, Suite 310

Palo Alto, CA 94301

email: legal@herculestech.com, kkosofsky@htgc.com, mdutra@htgc.com

Telephone: 650-289-3060

If to the Company:

UROVANT SCIENCES LTD.

C/O UROVANT SCIENCES, INC.

Legal Department

Attention: Bryan Smith, General Counsel 5151 California Ave.

Irvine, CA 92617

email: bryan.smith@urovant.com 

Telephone: 949-652-6852

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

O’MELVENY & MYERS LLP

Attention: Mark Peterson

610 Newport Center Drive, Suite 1700 Newport Beach, CA 92660

email: mpeterson@omm.com Telephone: 949-823-6971

or to such other address as each party may designate for itself by like notice.

(g)Entire Agreement; Amendments. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof, and supersedes and replaces in their entirety any prior proposals, term sheets, letters, negotiations or other documents or agreements, whether written or oral, with respect to the subject matter hereof. None of the terms of this Agreement may be amended except by an instrument executed by each of the parties hereto.

(h)Headings. The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provisions hereof.

(i)Advice of Counsel. Each of the parties represents to each other party hereto that it has discussed (or had an opportunity to discuss) with its counsel this Agreement and, specifically, the provisions of Sections 12(n), 12(o), 12(p), 12(q) and 12(r).

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(j)No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

(k)No Waiver. Except for the requirement that this Warrant be exercised (or be deemed exercised), if at all, prior to the Expiration Time, no omission or delay by the Warrantholder or the Company at any time to enforce any right or remedy reserved to it, or to require performance of any of the terms, covenants or provisions hereof by Company or the Warrantholder, respectively at any time designated, shall be a waiver of any such right or remedy to which such party is entitled, nor shall it in any way affect the right of such party to enforce such provisions thereafter during the term of this Agreement.

(l)Survival. All agreements, representations and warranties contained in this Agreement or in any document delivered pursuant hereto shall be for the benefit of the Warrantholder and the Company, as applicable, and shall survive the execution and delivery of this Agreement and the expiration or other termination of this Agreement.

(m)Governing Law. This Agreement has been negotiated and delivered to the Warrantholder in the State of California, and shall be deemed to have been accepted by the Warrantholder in the State of California. Delivery of Common Shares to the Warrantholder by the Company under this Agreement is due in the State of California. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of California, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.

(n)Consent to Jurisdiction and Venue. All judicial proceedings arising in or under or related to this Agreement may be brought in any state or federal court of competent jurisdiction located in the State of California. By execution and delivery of this Agreement, each party hereto generally and unconditionally: (i) consents to personal jurisdiction in Santa Clara County, State of California; (ii) waives any objection as to jurisdiction or venue in Santa Clara County, State of California; (iii) agrees not to assert any defense based on lack of jurisdiction or venue in the aforesaid courts; and (iv) irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. Service of process on any party hereto in any action arising out of or relating to this Agreement shall be effective if given in accordance with the requirements for notice set forth in Section 12(g), and shall be deemed effective and received as set forth in Section 12(g). Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of either party to bring proceedings in the courts of any other jurisdiction.

(o)Mutual Waiver of Jury Trial. Because disputes arising in connection with complex financial transactions are most quickly and economically resolved by an experienced and expert person and the parties wish applicable state and federal laws to apply (rather than arbitration rules), the parties desire that their disputes arising under or in connection with this Warrant be resolved by a judge applying such applicable laws. EACH OF THE COMPANY AND THE WARRANTHOLDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY THE COMPANY AGAINST THE WARRANTHOLDER OR ITS ASSIGNEE OR BY THE WARRANTHOLDER OR ITS ASSIGNEE AGAINST THE COMPANY RELATING TO THIS WARRANT. This waiver extends to all such Claims, including Claims that involve persons or entities other the Company and the Warrantholder; Claims that arise out of, or are in any way connected to the relationship between the Company and the Warrantholder; and any Claims for damages, breach of contract, specific performance, or any equitable or legal relief of any kind, arising out of this Agreement.

(p)Arbitration. If the Mutual Waiver of Jury Trial set forth in Section 12(p) is ineffective or unenforceable, the parties agree that all Claims shall be submitted to binding arbitration in accordance with 

11

 

 

the commercial arbitration rules of JAMS, such arbitration to occur before one arbitrator, which arbitrator shall be a retired California state judge or a retired Federal court judge. Such proceeding shall be conducted in Santa Clara County, State of California, with California rules of evidence and discovery applicable to such arbitration. The decision of the arbitrator shall be binding on the parties, and shall be final and nonappealable to the maximum extent permitted by law. Any judgment rendered by the arbitrator may be entered in a court of competent jurisdiction and enforced by the prevailing party as a final judgment of such court.

(q)Pre-arbitration Relief. In the event Claims are to be resolved by arbitration, either party may seek from a court of competent jurisdiction identified in Section 12(o), any prejudgment order, writ or other relief and have such prejudgment order, writ or other relief enforced to the fullest extent permitted by law notwithstanding that all Claims are otherwise subject to resolution by binding arbitration.

(r)Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts (including by facsimile or electronic delivery (PDF)), and by different parties hereto in separate counterparts, each of which when so delivered shall be deemed an original, but all of which counterparts shall constitute but one and the same instrument.

(s)Specific Performance. The parties hereto hereby declare that it is impossible to measure in money the damages which will accrue to the Warrantholder or the Company by reason of the other party’s failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable by the Warrantholder and the Company. If the Warrantholder and the Company institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that the Company or the Warrantholder, respectively has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.

(t)Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.

(u)Legends. To the extent required by applicable laws, this Warrant and the Common Shares issuable hereunder may be imprinted with a restricted securities legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR ANY APPLICABLE STATE SECURITIES LAWS.

THE BERMUDA MONETARY AUTHORITY (THE “BMA”) IN ITS POLICY DATED JUNE 1, 2005 PROVIDES THAT WHERE ANY EQUITY SECURITIES OF A BERMUDA COMPANY ARE LISTED ON AN APPOINTED STOCK EXCHANGE (THE NASDAQ STOCK MARKET (“NASDAQ”) IS SUCH AN EXCHANGE), GENERAL PERMISSION IS GIVEN FOR THE ISSUE AND SUBSEQUENT TRANSFER OF ANY SECURITIES OF THE COMPANY (WHICH INCLUDES THE SHARES ISSUABLE UPON EXERCISE HEREOF) FROM AND/OR TO A NON- RESIDENT OF BERMUDA, FOR AS LONG AS ANY EQUITY SECURITIES OF THE COMPANY REMAIN SO LISTED. NOTWITHSTANDING THE ABOVE GENERAL PERMISSION, WE HAVE OBTAINED FROM THE BMA ITS PERMISSION FOR THE ISSUE AND FREE TRANSFERABILITY OF OUR SHARES (INCLUDING THE SHARES ISSUABLE UPON EXERCISE HEREOF) AND OTHER SECURITIES, AS LONG AS WE HAVE SHARES THAT ARE LISTED ON NASDAQ OR ON AN APPOINTED STOCK EXCHANGE, TO AND AMONG PERSONS WHO ARE NON- RESIDENTS OF BERMUDA FOR EXCHANGE CONTROL PURPOSES.

[Remainder of Page Intentionally Left Blank]

12

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the Effective Date.

 

	
COMPANY:
	
UROVANT SCIENCES LTD.

	
 
	
 

	
 
	
By:
	
/s/ Keith Katkin

	
 
	
Name:
	
Keith Katkin

	
 
	
Title:
	
Principal Executive Officer

 

	
WARRANTHOLDER:
	
HERCULES CAPITAL, INC.

	
 
	
 

	
 
	
By:
	
/s/ Zhuo Huang

	
 
	
Name:
	
Zhuo Huang

	
 
	
Title:
	
Associate General Counsel

 

 

 

13

 

 

EXHIBIT I

NOTICE OF EXERCISE

	
To:
	
Urovant Sciences Ltd.

	
(1)
	
The undersigned Warrantholder hereby elects to purchase [ ] Common Shares of Urovant Sciences Ltd. (the “Company”), pursuant to the terms of the Warrant Agreement dated February 20, 2019 (the “Agreement”) between the Company and Hercules Capital, Inc., and tenders herewith payment of the Purchase Price in full, together with all applicable transfer taxes, if any. [NET SETTLEMENT: elects pursuant to Section 3(a) of the Agreement to effect a Net Settlement.]

	
(2)
	
Please issue a certificate or certificates or book-entry credit(s) representing said Common Shares in the name of the undersigned or in such other name as is specified below.

 

	
	
 

	
 

	
(Name)

	
 

	
 

	
(Address)

 

	
WARRANTHOLDER:
	
 
	
HERCULES CAPITAL, INC.

	
 
	
 
	
 
	
 

	
 
	
 
	
By:
	
 

	
 
	
 
	
Name:
	
 

	
 
	
 
	
Title:
	
 

 

 

14

 

 

EXHIBIT II 

ACKNOWLEDGMENT OF EXERCISE

The undersigned [                                                                    ], hereby acknowledges receipt of the “Notice of Exercise” from Hercules Capital, Inc. to purchase [ ] Common Shares of Urovant Sciences Ltd., pursuant to the terms of the Warrant Agreement by and between Urovant Sciences Ltd. and Hercules Capital, Inc., dated February 20, 2019 (the “Warrant Agreement), and further acknowledges that [               ] shares remain subject to purchase under the terms of the Warrant Agreement.

 

	
COMPANY:
	
 
	
UROVANT SCIENCES LTD.

	
 
	
 
	
 
	
 

	
 
	
 
	
By:
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
Title:
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
Date:
	
 

 

 

15

 

 

EXHIBIT III 

TRANSFER NOTICE

(To transfer or assign the foregoing Warrant Agreement by and between Urovant Sciences Ltd. and Hercules Capital, Inc., dated February 20, 2019 (the “Warrant Agreement), execute this form and supply required information. Do not use this form to purchase shares.)

FOR VALUE RECEIVED, the foregoing Warrant Agreement and all representations, warranties, rights and obligations evidenced thereby are hereby transferred and assigned to

 

	
 
	
 

	
(Please Print)
	
 

	
 
	
 

	
whose address is
	
 
	
 

	
 
	
 

	
 
	
 

	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
Dated:
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
Holder’s Signature:
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
Holder’s Address:
	
 
	
 

	
 
	
 

	
 
	
 
	
 

	
 
	
 

	
Signature Guaranteed:
	
 
	
 

 

NOTE: The signature to this Transfer Notice must correspond with the name as it appears on the face of the Warrant Agreement, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant Agreement.

16Exhibit

Exhibit 10.314

EMPLOYMENT AGREEMENT

This Agreement, as amended, is made and entered into effective as of March 13, 2008 by and between The Charles Schwab Corporation, a Delaware Corporation (hereinafter referred to as the "Company"), and Charles R. Schwab, an individual (hereinafter referred to as the "Executive") .

WITNESSETH:

WHEREAS, the Company desires to reward the Executive for his continuing contribution to the Company and provide additional security for the Executive and to provide an inducement to the Executive to remain with the Company and not to engage in competition with it.

NOW THEREFORE, in consideration of the mutual obligations herein contained, the parties hereto, intending to be legally bound hereby, covenant and agree as follows:

1.    EMPLOYMENT

(a) The Company hereby employs the Executive to render services to the Company in the position of Chairman of the Board in the capacity defined in the Bylaws of the Company, as may be amended from time to time. The Executive shall perform such duties commensurate with his position and shall have authority and responsibility in working with the Chief Executive Officer, subject to the control of the Board of Directors, for the overall strategic direction and leadership of the Company.

(b) Throughout the term of this Agreement, the Executive shall devote his full business time and undivided attention to the business and affairs of the Company and its subsidiaries, except for reasonable vacations and except for illness or incapacity, but nothing in the Agreement shall preclude the Executive from devoting reasonable periods required for serving, as appropriate, on Boards of Directors of other companies, and from engaging in charitable and public service activities provided such activities do not materially interfere with the performance of his duties and responsibilities under this Agreement.

2.    TERM

This Agreement shall commence on March 31, 2003, and shall continue through March 31, 2008, subject to the terms and conditions herein set forth.  Beginning on March 31, 2004, and on each subsequent anniversary of this date, one year shall be added to the term of the Agreement, unless, prior to such anniversary, the Company or the Executive has notified the other party hereto that such extension will not become effective.

3.    COMPENSATION

For services rendered by the Executive during the term of this Agreement, and for his performance of all additional obligations of employment, the Company agrees to pay the Executive and the Executive 

agrees to accept the following salary, other compensation, and benefits:

(a) Base Salary.  During the term of this Agreement, the Company shall pay the Executive in periodic installments, a base salary at the annual rate of $900,000, such base salary to be reviewed on March 31, 2004, and on each subsequent anniversary the Board may adjust it up or down, taking into account, among other things, individual performance, competitive practice, and general business conditions.

(b) Annual Incentive.  In addition to the base salary provided in Section 3(a) above, the Executive shall be eligible to receive an annual incentive award based upon the Company's attainment of pre-established performance targets relative to specified performance standards.  The performance standards upon which annual incentive payments will be earned shall be adopted at the beginning of each year by the Compensation Committee of the Board of Directors (the "Committee"), to be selected by the Committee from among the following: revenue growth, net revenue growth, operating revenue growth, consolidated pretax profit margin, consolidated pretax operating margin, consolidated after-tax profit margin, consolidated after-tax operating profit margin, customer net new asset growth, stockholder return, return on assets, earnings per share, return on equity, and return on investment.

For each fiscal year during the term of this Agreement, the Executive's incentive opportunity shall be computed as the amount of total cash compensation earned pursuant to the formula-based matrix, which shall be adopted each year by the Compensation Committee of the Board of Directors of the Company, minus the Executive's actual base salary paid during that year.  For the 2003 fiscal year, the target total annual cash compensation amount (including base salary) is $5,400,000; therefore, the incentive target is $4,500,000 for achieving specified objectives (see above).

The formula-based matrix, as amended at the sole discretion of the Committee, shall be the sole basis for determining the Executive's annual incentive award.  The Committee shall annually review and approve the performance standards and targets with respect to the Executive's incentive opportunity, which review and approval shall be completed no later than the 90th day of the Company's fiscal year for which such incentive opportunity may be earned.

Notwithstanding anything to the contrary, the Executive's maximum annual cash compensation (including base salary and annual incentive) may not exceed $8,000,000.

(c) Long-Term Incentive.  The Executive will be considered for stock options in accordance with the Company's 2001 Stock Incentive Plan, as amended, or any successor thereto ("Stock Option Program") and any other long-term incentives offered to other executives of the Company from time to time during the term of this Agreement.

(d) Benefits. The Executive shall be entitled to participate, as long as he is an employee of the Company, in any and all of the Company's present or future employee benefit plans, including without limitation pension plans, thrift and savings plans, insurance plans, 

2

and other benefits that are generally applicable to the Company's executives; provided, however, that the accrual and/or receipt by the Executive of benefits under and pursuant to any such present or future employee benefit plan shall be determined by the provisions of such plan.

(e) Perquisites.  The Executive will be provided such additional perquisites as are customary for senior level executives of the Company provided that each perquisite is approved by the Board of Directors.

(f) Business Expenses.  The Executive will be reimbursed for all reasonable expenses incurred in connection with the conduct of the Company's business upon presentation of evidence of such expenditures, including but not limited to travel expenses incurred by the Executive in the performance of his duties, security for the Executive, his family, and principal residence, professional organization dues, and club initiation fees, dues and expenses.

(g) Any annual incentive award earned by Executive under this Section 3 shall be paid on or after January 1st and on or before March 15th of the calendar year immediately following the end of the fiscal year on which the award is based; provided, however, that if any such payment would be nondeductible to the Company under Section 162(m) of the Internal Revenue Code (the “Code”), then any nondeductible amounts shall be deferred from year to year until the payment of such amounts is deductible by the Company.

4.    TERMINATION OF EMPLOYMENT

(a) Resignation.  Notwithstanding Section 2 hereof, this Agreement may be terminated by the Executive at any time upon six (6) months written notice of resignation by the Executive to the Company, and in such event any payments pursuant to Section 3 and 4 of this Agreement shall automatically terminate (except for the Company's obligations relating to voluntary termination under its compensation and benefit plans, as specified in the various plan documents, and the Executive's obligations set forth in Section 5).  Subsequent payments may be made to the Executive as provided pursuant to Section 6 of this Agreement.

Termination under this Section 4(a) shall continue to be a “Voluntary Termination” for purposes of the Assignment and License Agreement entered into as of March 31, 1987, as amended.

(b) Separation from Service Other Than for Cause.  An involuntary Separation from Service (as defined below) other than for Cause, as defined in Section 4(c) below, shall cause the Company to make payments to the Executive hereunder pursuant to the provisions of this Section 4(b).  Such involuntary Separation from Service shall require at least sixty (60) business days' prior notice and must be signed by at least three-fourths (3/4) of all the non-employee members of the Board of Directors.

Notwithstanding anything to the contrary contained in the Stock Option Program or any agreement or document related thereto, the Executive's total outstanding and unvested shares and/or options under the Stock Option Program shall at the date of Separation from Service 

3

under this Section 4(b) be 100% vested.  No further grants of stock or options shall be made under the Stock Option Program after such termination.

With respect to base salary and annual incentive compensation, the Company's obligation shall be to pay the Executive, according to the terms of this Agreement and for a period of thirty-six (36) months, an amount equal to the annual salary and incentive paid to the Executive at the bonus level for the year prior to which such Separation from Service occurs unless performance of the Company as defined in the matrix referenced in Section 3(b) is better in the year of Separation from Service, in which event such bonus shall be based on the matrix calculation as described in Section 3(b), such annual amounts to be paid in equal monthly installments commencing on Separation from Service.

If the Executive is a Specified Employee (as defined below), a lump sum representing six (6) of the monthly installment payments under this Section 4(b) shall be paid, and the remaining thirty (30) monthly installments payable under this Section 4(b) shall commence upon the first day of the seventh month following the Executive's Separation from Service (or on the date of the Executive's death, if earlier).

If the Board of Directors fails to reelect the Executive to a position comparable to that described in Section 1(a) of this Agreement or, without terminating the Executive's employment, removes the Executive from his position for reasons other than Cause, substantively reduces the Executive's duties and responsibilities, reduces his pay and/or benefits without the written consent of the Executive, forces relocation, or requires excessive travel, then the Executive may, by notice to the Company, Separate from Service and treat such Separation from Service as an involuntary Separation from Service pursuant to this Section 4(b).

In the event of the Executive's death before the completion of the payments pursuant to this Section 4(b), the remaining payments hereunder shall be made to the beneficiary or beneficiaries designated by the Executive to the Company in writing or, absent such a designation, to his estate.

The term "Specified Employee" means an employee treated as a "specified employee" as defined under Code Section 409A as of the date of his Separation from Service.  Generally, a specified employee is one of the top 50 most highly compensated officers.

The term "Separation from Service" or "Separate(s) from Service" shall mean a "separation from service" within the meaning of Code Section 409A.  Generally, a separation from service occurs when an individual ceases to provide services for the Company and its affiliates.

Termination under this Section 4(b) shall continue to be an “Involuntary Termination” for purposes of the Assignment and License Agreement entered into as of March 31, 1987, as amended.

(i) Post-Employment Benefits.  In the event the Executive’s employment terminates under Section 4(b), the Executive 

4

shall be entitled to all benefits and perquisites as provided for in this Agreement, including office space and secretarial support, comparable to that provided to the Executive during his employment by the Company for a period of thirty-six (36) months following his Separation from Service.  All benefits or perquisites that the Executive receives following his Separation from Service that are covered under Code Section 409A ("409A Benefits") shall be administered consistent with the following requirements as set forth in Treas. Reg. § 1.409A-3(i)(1)(iv):  (1) Executive's eligibility for benefits in one year will not affect Executive's eligibility for benefits in any other year; (2) any reimbursement of eligible expenses will be made on or before the last day of the year following the year in which the expense was incurred; and (3) Executive's right to benefits is not subject to liquidation or exchange for another benefit.

If the Executive is a Specified Employee, then the Executive shall pay all applicable costs associated with the provision of 409A Benefits during the first six (6) months following the Executive's Separation from Service.  The Company shall reimburse the Executive for all expenses actually paid by the Executive under this Section 4(b) (i) upon the first day of the seventh month following the Executive's Separation from Service.

(c) Termination by the Company for Cause.  The Company may terminate the Executive's employment for Cause if the Executive has committed a felonious act, or the Executive, in carrying out his duties hereunder has been willfully and grossly negligent or has committed willful and gross misconduct resulting, in either case, in material harm to the Company.  An act or omission shall be deemed "willful" only if done, or omitted to be done, in bad faith and without reasonable belief that it was in the best interest of the Company.  In the event of termination of the Executive by the Company for Cause, the Executive shall no longer be entitled to receive any payments or any other rights or benefits under this Agreement.

(d) Disability. In the event the Executive becomes Disabled (as defined below), he will continue to receive the same base salary and benefits which he was receiving prior to such disability for 36 months, offset by payments under the Company's Long-Term Disability Plan.  Such payments shall commence within 90 days of such disability.  In addition, he shall receive a pro-rated annual incentive payment for the year in which his employment is terminated, based on the formula described in Section 3(b).  Such payment shall be made as soon as practicable following the Executive becoming Disabled, but in no event later than 90 days following the Executive becoming Disabled.  The term “Disabled” under this Section 4(d) means disabled within the meaning of Section 409A of the Code and the regulations thereunder.  Generally, this means that the Executive is unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or is, by reason of a medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company.

    

5

(e) Death. In the event of the death of the Executive during the term of this Agreement, the rights and benefits under employee benefit plans and programs of the Company, including life insurance, will be determined in accordance with the terms and conditions of such plans and programs as in effect on his date of death.  In such event, the Company shall pay in a lump sum to the Executive's estate an amount equal to five times the then current rate of the Executive's base salary, and no further payments shall be required pursuant to this Agreement.  The lump-sum described in this Section 4(e) shall be paid to the Executive’s estate as soon as practicable following the date of the Executive’s death, but in no event later than 90 days following the Executive’s death.

 (f) Change in Control.  In the event of a change in control of the Company, as set forth below, the Executive may at any time and in his complete discretion during a 24-month period following a change in control, elect to terminate his employment with the Company.  For purposes of this Agreement, a "change in control" shall mean a change in ownership of the Company that would be required to be reported in response to Item 1(a) of a Current Report on Form 8-K pursuant to the Securities and Exchange Act of 1934 ("Exchange Act"), as in effect on the date hereof, except that any merger, consolidation or corporate reorganization in which the owners of the capital stock entitled to vote in the  election of directors of the Employer or the Company ("Voting  Stock") prior to said combination, own 75% or more of the resulting entity's Voting Stock shall not be considered a change in control for the purposes of this Agreement; provided that, without limitation, such a change in control shall be deemed to have occurred if (i) any "person" (as that term is used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company is or becomes the beneficial owners (as that is used in Section 13(d) of the Exchange Act), directly or indirectly, of 30% or more of the Voting Stock of the Company or its successor; or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company ("Incumbent Board") cease for any reason to constitute at least a majority thereof; provided, however, that any person becoming a director of the Company after the beginning of the period whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board shall, for the purposes hereof, be considered as though he were a member of the Incumbent Board; or (iii) there shall occur the sale of all or substantially all of the assets of the Company.  Notwithstanding anything in the foregoing to the contrary, no change in control of the Company shall be deemed to have occurred for purposes of this Agreement by virtue of any transaction which results in the Executive, or a group of persons which includes the Executive acquiring, directly or indirectly, more than 30 percent of the combined voting power of the Company's outstanding securities.  If any of the events constituting a change in control shall have occurred during the term hereof, the Executive shall be entitled to the privilege provided in subparagraph (f) herein to terminate his employment.

Any termination by the Executive pursuant to this Section shall be communicated by a written "Notice of Termination."

    

6

If, following a change in control, the Executive shall for any reason voluntarily terminate his employment during the 24-month period following a change in control, then the Company shall pay base salary up to the date of termination and a prorated annual incentive award based on the calculated bonus for the year in which termination occurred, as defined in Section 3(b), in a lump sum on the thirtieth (30th) day following the Date of Termination.

5.    COVENANT NOT TO COMPETE

(a) As a material inducement to the Company's entering into this Agreement, the Executive agrees that during the term of this Agreement, he will not become associated with, render service to or engage in any other business competitive with any existing or contemplated business of the Company or its subsidiaries, except that the Executive may serve as a member of the board of directors of other companies or organizations, provided that he provides written notice to the Board of each significant activity, and that he will do nothing inconsistent with his duties and responsibilities to the Company.

(b) If the Executive voluntarily resigns from the employ of the Company prior to the expiration of the term of this Agreement, he specifically agrees that for a period of five (5) years commencing with the date of his voluntary resignation he will not engage in or perform any services either on a full-time or a part-time or on a consulting or advisory basis for any business organization that is in competition with the Company at the time such services are being performed by Executive, with the exception that this Section 5(b) shall not apply in the event the Executive resigns voluntarily following a change in control of the Company as defined in Section 4(f).

(c) The Executive will not at any time, whether while employed by the Company or after voluntary or involuntary termination or after retirement, reveal to any person, firm or entity any trade or business secrets or confidential, secret, or privileged information about the business of the Company or its subsidiaries or affiliates except as shall be required in the proper conduct of the Company's business.

6.    CONSULTING ARRANGEMENT

Following the Executive’s Separation from Service pursuant to Section 4(a) or Separation from Service following a change in control under Section 4(f), or an involuntary Separation from Service subsequent to a change in control of the Company, for any reason but during a 24-month period following a change in control as defined in Section 4(f), after the Executive ceases to render services as the Chairman, he may in his sole discretion elect to act as a consultant to the Company for a period of five (5) years.  During this period of consulting services, the Executive shall, at reasonable times and places, taking into account any other employment or activities he may then have, hold himself available to consult with and advise the officers, directors, and other  representatives of the Company.  As compensation therefore, the Executive shall be entitled to receive, and Company shall pay, an annual amount equal to seventy-five percent (75%) of his annual base salary rate in effect immediately prior to his Separation from Service, but in no event an annual amount to exceed 

7

$1,000,000, for each year of such period, payable in equal monthly installments commencing on Separation from Service.

If the Executive is a Specified Employee, a lump sum representing six (6) of the monthly installment payments under this Section 6 shall be paid, and the remaining monthly installments payable under this Section 6 shall commence upon the first day of the seventh month following the Executive's Separation from Service.

7.    WITHHOLDING

All amounts payable hereunder which are or may become subject to withholding under pertinent provisions of law or regulation shall be reduced for applicable income and/or employment taxes required to be withheld.

8.    MISCELLANEOUS

(a) This Agreement supersedes any prior agreements or understandings, oral or written, with respect to employment of the Executive and constitutes the entire Agreement with respect thereto; provided, however, that nothing contained herein shall supersede that certain Assignment and License Agreement entered into as of March 31, 1987, as amended. This Agreement cannot be altered or terminated orally and may be amended only by a subsequent written agreement executed by both of the parties hereto or their legal representatives, and any material amendment must be approved by a majority of the voting shareholders of the Company.

(b) This Agreement shall be governed by and construed in accordance with the laws of the State of California.

(c) This Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns.  In that this constitutes a personal service agreement, it may not be assigned by the Executive and any attempted assignment by the Executive in violation of this covenant shall be null and void.

(d) For the purpose of this Agreement, the phrase "designated beneficiary or beneficiaries" shall include the estates of such beneficiaries in the event of their death before the receipt of all payments under this Agreement and shall also include any alternate or successor beneficiaries designated in writing to the Company by the Executive.

(e) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions, which shall remain in full force and effect.

(f) The Section and Paragraph headings contained herein are for reference purposes only and shall not in any way affect the meanings or interpretation of this Agreement.

(g) Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of arbitrators in accordance with the rules of the American Arbitration Association then in effect.  Judgment may be 

8

entered on the arbitrators’ award in any court having jurisdiction. The expense of such arbitration shall be borne by the Company.

(h) Any notices, requests or other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address he has filed in writing with the Company or, in the case of the Company, at its principal offices.

9.    COMPLIANCE WITH CODE SECTION 409A

With respect to any compensation payable or benefits to be provided under this Agreement that are subject to Code Section 409A, this Agreement is intended to comply with the provisions of Code Section 409A.  In furtherance of this intent, to the extent that any compensation payable or benefits to be provided under this Agreement are subject to Code Section 409A, this Agreement shall be interpreted, operated, and administered in a manner consistent with these intentions, and the parties agree to amend this Agreement further (if necessary) in order to avoid the adverse tax consequences of Code Section 409A.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written.          
                     
	
				
	ATTEST
	Company:
THE CHARLES SCHWAB CORPORATION

	By:
	/s/ Carrie Dwyer      
	By:
	/s/ Jay Allen                    

	 
	Carrie Dwyer
	 
	Jay Allen

	 
	Corporate Secretary
	 
	Executive Vice President –
Human Resources

	
				
	 
	 
	Executive:
	/s/ Charles R. Schwab 

	 
	 
	 
	Charles R. Schwab

9

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