Document:

Exhibit

    
Exhibit 10.1
Execution Copy
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”), effective this 25th day of August, 2015 (the “Effective Date”), is entered into by and between The KEYW Corporation, a Maryland corporation with its principal place of business at 7740 Milestone Parkway, Suite 150, Hanover, Maryland 21076 (the “Company”), and William J. Weber, residing at 44002 Cobham Court, Ashburn, VA  20147 (the “Employee”).
WHEREAS, the Company desires to retain the Employee’s services as provided herein, and the Employee desires to be employed by the Company.  As used herein, the term “KEYW” shall include the Company and all entities now or hereafter controlling, controlled by or under common control with the Company, such term to include The KEYW Holding Corporation, a Maryland corporation (“HoldCo”).
NOW THEREFORE, in consideration of the mutual covenants and promises contained herein the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties agree as follows:
1.Term of Employment.  The Company hereby agrees to employ the Employee, and the Employee hereby accepts employment with the Company, upon the terms set forth in this Agreement, unless terminated in accordance with the provisions of Section 3, commencing on October 1, 2015 (the “Commencement Date”).
2.Title; Capacity; Salary.  
2.1The Employee will serve as the President and Chief Executive Officer of the Company and HoldCo starting on the Commencement Date and continuing until this Agreement is terminated in accordance with Section 3, with such customary duties and responsibilities associated with such titles, and such other duties commensurate with such titles as may, from time to time, be designated by the Board of Directors of HoldCo.  During the term of this Agreement, the Employee will be a member of the Board of Directors of HoldCo and the Company. 
(a)Compensation.  In exchange for such performance, the Company agrees to pay the Employee a base salary of four hundred fifty thousand dollars ($450,000.00) per year, which shall be paid in accordance with the customary payroll practices of the Company, which may be adjusted by the Board of Directors of HoldCo from time to time. Payments of base salary will begin with the Company’s first payroll cycle following the Commencement Date.  The Employee shall be eligible to receive an annual bonus of up to one hundred percent (100%) of the Employee’s annual base salary if the Board determines that the Employee achieved the performance targets and other criteria set in the Annual Incentive Plan (“AIP”). The target bonus pursuant to the AIP may be adjusted by the Board of Directors of HoldCo from time to time.  Notwithstanding the forgoing sentence, for calendar year 2015, the target bonus under the AIP shall be two hundred twenty five thousand dollars ($225,000.00), which amount will be paid to Employee on or before March 31, 2016, if Employee satisfies performance criteria for the period from the Commencement Date to December 31, 2015, as jointly prepared by the Company and Employee.  The Employee shall also be eligible for other benefits provided to employees of the Company, including but not limited to, personal time off (accrued at the rate of twenty-five (25) days per year), health insurance and officers and directors liability insurance pursuant to the terms of the applicable benefit plans or arrangements.  In addition, the Company shall reimburse the Employee for all reasonable, ordinary and necessary business, travel or other expenses incurred by him 

in the performance of his services hereunder in accordance with the policies of the Company as they are from time to time in effect.
(b)Equity Awards.  
(i) Sign-On Shares.  The Company shall make a one-time Award (as defined in Exhibit A) of one hundred thousand (100,000) shares of HoldCo Restricted Stock (as defined in Exhibit A) as a sign-on inducement (the “Sign-On Shares”).  The Sign-On Shares will vest as follows: (i) fifty thousand (50,000) shares on the first anniversary of the Commencement Date, (ii) twenty five thousand (25,000) shares on the third anniversary of the Commencement Date, and (iii) twenty five thousand (25,000) shares on the fourth anniversary of the Commencement Date.  Upon either (x) termination of this Agreement by the Company without Cause, or by Employee with Good Reason or as a result of Employee’s death or disability, or (y) a Change of Control (with effect immediately prior to the scheduled consummation of a Change of Control), all of the Sign-On Shares shall become immediately vested and no longer subject to any risk of forfeiture or contractual restrictions on sale, transfer or other disposition. 
(ii) Long-Term Incentive Shares.  If at any time prior to the fifth (5th) anniversary of the Commencement Date, the closing market price of HoldCo’s registered common stock as reported on the NASDAQ Global Market (or any other market or exchange on which shares of HoldCo’s common stock are listed or registered, if not on the NASDAQ Global Market) over any thirty (30) consecutive trading days is at or greater than the target price set forth in this Section 2(b)(ii) (the “Target Price Per Share”) for each day in such thirty (30)-consecutive trading day period, the Company will award the Employee shares of Stock (as defined in Exhibit A) in an amount equal to the sum of (A) the number of shares listed next to the Target Price Per Share and (B) the number of shares listed next to any lower Target Price Per Share (“Long-Term Incentive Shares”).  Once the Long-Term Incentive Shares applicable to a Target Price Per Share have been awarded, the Company shall make no future awards of Long-Term Incentive Shares with respect to the applicable Target Price(s) Per Share, but the Employee shall be eligible for one or more additional grants with respect to the remaining Target Price Per Share that were not previously achieved or exceeded.  In no event will the Employee receive more than 400,000 Long-Term Incentive Shares.    
	
		
	Target Price Per Share
	Long-Term Incentive Shares

	$13.00
	50,000

	$16.00
	50,000

	$20.00
	100,000

	$25.00
	100,000

	$30.00
	100,000

For purposes of clarity and by way of example, if the closing market price of HoldCo’s registered common stock is reported at $20.00 for thirty (30) consecutive trading days, the Company shall award the Employee 200,000 Long-Term Incentive Shares (100,000 next to the $20 Target Price Per Share plus another 100,000 for the Target Price Per Share for $13 and $16).  If prior to the fifth (5th) anniversary of the Commencement Date, the closing market price of HoldCo’s registered common stock is reported at $35.00 for thirty (30) consecutive trading days, the Company shall award the Employee an additional 200,000 shares (100,000 for $30 and 100,000 for $25).  Because the Employee previously received Long-Term Incentive Shares with respect to the $13, $16 and $20 Target Price Per Share, he is not entitled to a second award with respect to such amounts.
(c)Except as provided in Exhibit A with respect to any Long-Term Shares used to cover tax withholdings, Employee hereby irrevocably agrees not to, directly or indirectly, (i) sell, offer for sale, pledge or otherwise dispose of (except as otherwise provided herein) any Long-Term Incentive Shares issued to the Employee hereunder, or (ii) enter into any swap or other derivative transaction that 

transfers to another, in whole or in part, any of the economic benefits or risks of ownership of the Long-Term Incentive Shares, whether any such transaction described in clauses (i) or (ii) above is to be settled by delivery of common stock or other securities, in cash or otherwise (such restrictions in clauses (i) and (ii), the “Sale Restrictions”).  Long-Term Incentive Shares shall be released from, and no longer subject to, the Sale Restrictions on the first day after the second anniversary of the Grant Date of such shares.  Notwithstanding the foregoing, Long-Term Incentive Shares shall be released from, and no longer subject to, the Sale Restrictions immediately upon the Employee’s death after the Grant Date. 
(d)In all events, the holding and disposition of any shares of Stock acquired hereunder shall be subject to the provisions in Exhibit A hereof, any applicable policies of the Company, and the terms of applicable law.
(e)Employee shall forfeit his right to any Long-Term Incentive Shares if he terminates this Agreement with or without Good Reason at any time prior to the second anniversary of the Commencement Date.
2.2Clawback.  Notwithstanding any other provisions in this Agreement, any performance-based compensation paid or payable to the Employee pursuant to this Agreement or any other agreement or arrangement with the Company that is subject to recovery under any law, government regulation, order, or stock exchange listing requirement, will be subject to adjustment and recovery by the Company.   
(a)If the financial statements of KEYW are restated for any reason other than for accounting changes that require retrospective treatment or other external reasons not attributable to KEYW and its compilation of the financial statements, any performance-based compensation paid to the Employee that was calculated based on the financial statements will be recalculated based on the restated financial statements (“Restatement”).  If the performance-based compensation is reduced as a result of the Restatement, Employee shall repay the Company the difference between the amount of performance-based compensation actually paid and the recalculated performance-based compensation that the Employee should have been paid.  If the performance-based compensation is increased as a result of Restatement, the Company will pay the Employee the difference between the amount of performance-based compensation actually paid and the recalculated performance-based compensation that the Employee should have been paid.   
(b)If the Employee received equity awards (excluding Long-Term Incentive Shares) as performance-based compensation and the Employee continues to own the shares on the date of Restatement, Employee shall return to the Company any shares issued in excess of the amount that the Employee should have received, as recalculated in the Restatement.  If the excess shares have already been disposed of at the time of the Restatement, Employee shall return the proceeds from the sale of the excess shares to the Company.  If the excess shares have been gifted or otherwise transferred, Employee shall return to the Company a number of shares equal to the excess shares or the equivalent fair market value of the excess shares at the time of gifting or transfer.  If a Restatement reveals that an Employee should have received an equity award (excluding Long-Term Incentive Shares) as performance-based compensation, the Company shall issue the number of shares that the Employee should have received based on the Restatement.  
(c)The adjustment period under this Section 2.2 shall extend for three (3) years from the date of receipt of any performance-based compensation.  This Section 2.2 shall survive termination of this Agreement for a period of two (2) years, except that this Section 2.2 shall terminate immediately upon a Change of Control, as defined by Section 4.3(b) of this Agreement or the cessation of the KEYW as a publicly-traded corporation.  
(d)Employee authorizes the Company to withhold from his future wages any amounts that may become due under this Section 2.2.  

3.Termination of Employment.  The employment of the Employee by the Company shall terminate upon the occurrence of any of the following:
3.1By the Company without Cause (as defined below), on sixty (60) days’ prior written notice to the Employee;
3.2At the election of the Company, for Cause (as defined below), immediately upon written notice by the Company to the Employee, which notice shall identify the Cause upon which the termination is based.  For the purposes of this Agreement, “Cause” shall mean (a) a good faith finding by the Board of Directors of Holdco, after notice to Employee and a reasonable opportunity for Employee to appear before the Board, that (i) the Employee has failed to perform his reasonably assigned duties in any material respect and has failed to remedy such failure within ten (10) days following written notice from the Company to the Employee notifying him of such failure, or (ii) the Employee has engaged in dishonesty, gross negligence or misconduct; (b) the conviction of the Employee of, or the entry of a pleading of guilty or nolo contendere by the Employee to any crime involving any felony; (c) the Employee has breached fiduciary duties owed to KEYW or has materially breached the terms of this Agreement or any other agreement between the Employee and KEYW; or (d) the failure of the Employee to maintain his security clearance as a result, directly or indirectly, of any act or omission by Employee if such clearance is necessary to perform the duties assigned hereunder.
3.3At the election of the Employee, on sixty (60) days’ prior written notice to the Company, or immediately upon written notice to the Company in the event the Company fails to remedy any material breach of this Agreement within ten (10) days following written notice from the Employee to the Company notifying it of such breach;
3.4Upon the death or disability of the Employee.  As used in this Agreement, the term “disability” shall mean “disability” as defined under the Company’s or HoldCo’s long-term disability plan for purposes of determining a participant’s eligibility for benefits.  The determination of whether the Employee has a disability shall be made by the person or persons required to make a disability determination under the long-term disability plan.  If at any time neither the Company nor HoldCo sponsor a long-term disability plan, disability shall mean the inability of the Employee, due to a physical or mental disability, for a period of ninety (90) days, whether or not consecutive, during any 360-day period to perform with or without reasonable accommodation the essential functions of his position contemplated under this Agreement as determined by a physician satisfactory to both the Employee (or his representative, guardian or conservator) and the Company, provided that if the Employee (or his representative, guardian or conservator) and the Company do not agree on a physician, the Employee (or his representative, guardian or conservator) and the Company shall each select a physician and these two together shall select a third physician, whose determination as to disability shall be binding on all parties.  Any refusal by the Employee to submit to a medical examination for the purpose of determining disability shall be deemed to constitute conclusive evidence of the Employee’s disability; or
3.5Upon the mutual written agreement of the Employee and the Company to terminate Employee’s employment.
4.Effect of Termination.
4.1Termination for Cause, Upon Mutual Election or at the Election of the Employee, or at Death.  In the event that Employee’s employment is terminated for Cause, upon Employee’s death, at the election of the Employee, or upon mutual election by Employee and the Company, KEYW shall have no further obligations under this Agreement other than to pay to Employee (or his estate) salary and accrued 

but unused paid time off through the last day of the Employee’s actual employment by the Company (the “Termination Date”).
4.2Voluntary Termination by the Company, or for Disability or by the Employee for Good Reason.  In the event the Employee’s employment is terminated solely by the Company without Cause, or due to the Employee’s disability, or by the Employee for Good Reason, the Company shall: (i) pay to the Employee on the first pay date following the Termination Date any salary earned with respect to services performed prior to the Termination Date, any paid time off accrued, but unused, through the Termination Date, and any bonus that the Employee earned under the terms of the AIP with respect to an annual period ending prior to the Termination Date, and for which any performance targets or other criteria were achieved prior to the Termination Date (notwithstanding any requirement of continuous service), but which have not been paid to the Employee; (ii) provided the Employee (or his representative, guardian or conservator on behalf of Employee) executes and does not revoke a waiver and release agreement substantially in the form attached hereto as Exhibit B (the “Release”), unless the payment is subject to the Delay Period described in Section 8.3, pay to the Employee in equal installments over a period of one year after the Termination Date an aggregate amount equal to the sum of (A) and (B) where (A) equals the product of (x) his then current base salary multiplied by (y) two (2), and (B) equals an amount equal to the product of (x) his then current base salary multiplied by (y) a fraction, the numerator of which is the number of days that have elapsed between the first day of such calendar year and the Termination Date and the denominator of which is 365, with the first payment, which will cover the first two installments, to be paid on the sixtieth (60th) day following the Termination Date and the remaining installments to be paid in accordance with the Company’s normal payroll practices; and (iii) provided the Employee elects continued health coverage under section 4980B(f) of the Code (“COBRA”), for each month that the Employee pays to the Company 100% of the applicable premium (as defined within section 4980B(f)(4) of the Code) for such continued health and dental coverage, the Company shall reimburse the Employee, for a period equal to the lesser of the maximum COBRA period or two (2) years, on the first pay date of each month the after-tax cost of the applicable premium; and (iv) make such other payments as expressly provided herein or in any written policy of the Company.  Notwithstanding the foregoing, the Company shall not be required to make payments or reimbursements under this Section 4.2 if the Employee has breached any of the provisions of Sections 5 or 6, inclusive of all subsections.  Further, subject to any overriding laws, the Company shall not be required to reimburse healthcare or dental insurance premiums if Employee is actually covered or becomes covered by an equivalent benefit (at the same or lesser cost to Employee, if any) from another source, which must be reported to the Company within thirty (30) days of first becoming eligible, or if such reimbursement arrangement causes the Company’s group health plan to fail any non-discrimination testing or to be subjected to a fine or penalty under the Affordable Care Act.  If Employee (or his representative, guardian or conservator on behalf of Employee) fails to execute and deliver the Release within twenty-one (21) days thereafter, or if Employee (or his representative, guardian or conservator on behalf of Employee) revokes such Release as provided therein, the Company shall have no obligation to provide the severance payment described above.  In any case in which the Release (and the expiration of any revocation rights provided therein) could only become effective in a particular tax year of Employee, any payment(s) conditioned on execution of the release shall be made within ten (10) days after the Release becomes effective and such revocation rights have lapsed.  In any case in which the Release (and the expiration of any revocation rights provided therein) could become effective in one of two (2) taxable years of the Employee depending on when the Employee (or his representative, guardian or conservator on behalf of Employee) executes and delivers the Release, any payment conditioned on execution of the Release shall be made in the later taxable year.
4.3Termination On or Following a Change of Control.  If at any time prior to the one-year anniversary of the consummation of a Change of Control, the Company terminates the Employee’s employment without Cause or the Employee terminates his employment with the Company for Good Reason (as defined below), the Employee will be entitled to receive: (i) the Employee’s then current base salary for 

a period of two (2) years payable in equal installments paid in accordance with the Company’s normal payroll practices, with the first installment beginning on the first regular pay date following the Employee’s Termination Date; (ii) compensation and benefits set forth in Sections 4.2(i), and 4.2(iv), and (iii) to the extent not included in the compensation and severance benefits made under Section 4.2(i), an amount equal to the maximum AIP bonus available to Employee for the year in which the termination occurs.  In addition, provided the Employee elects continued health coverage under section 4980B(f) of the Code, for each month that the Employee pays to the Company 100% of the applicable premium (as defined within section 4980B(f)(4) of the Code) for such continued health and dental coverage, the Company shall reimburse the Employee, for a period equal to the lesser of the maximum COBRA period or two (2) years, on the first pay date of each month the after-tax cost of the applicable premium.  Further, subject to any overriding laws, the Company shall not be required to reimburse healthcare and dental insurance premiums if Employee is actually covered or becomes covered by an equivalent benefit (at the same or lesser cost to Employee, if any) from another source, which must be reported to the Company within thirty (30) days of first becoming eligible, or if such reimbursement arrangement causes the Company’s group health plan to fail any non-discrimination testing or to be subjected to a fine or penalty under the Affordable Care Act.  Stock options will remain exercisable for a period of one (1) year following termination (unless such options have terminated or been cashed out in connection with the Change of Control), and any outstanding equity awards shall vest immediately upon the Change of Control (with effect immediately prior to the scheduled consummation of the Change of Control).  
a.In the event that it is determined that any payment or distribution of any type to or for the benefit of the Employee made by the Company, by any of its affiliates, by any person who acquires ownership or effective control or ownership of a substantial portion of the Company’s assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “Code”)) or by any affiliate of such person, whether paid or payable or distributed or distributable pursuant to the terms of an employment agreement (and the attached Exhibit A) or otherwise (the “Total Payments”), such that the Total Payments would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest or penalties, are collectively referred to as the “Excise Tax”) then (i) if the Total Payments exceed the safe harbor threshold by less than 10%, the payments will be reduced to the safe harbor amount or (ii) if the Total Payments exceed the safe harbor threshold by more than 10%, then Employee shall be entitled to receive the “Best Net” for the Employee’s aggregate severance payments and benefits such that aggregate severance payments and benefits that Employee receives will be either (A) the full amount of severance payments and benefits or (B) an amount of severance payments and benefits reduced to the extent necessary so that Employee incurs no excise tax, whichever results in Employee receiving the greater amount, taking into account applicable federal, state, and local income, employment, and other applicable taxes, as well as the excise tax.
b.For the purposes of this Agreement, “Change of Control” means the occurrence of any of (i) an acquisition after the Commencement Date by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended) of in excess of 50% of the voting securities of the Company or HoldCo, (ii) the dissolution or liquidation of the Company or HoldCo or a merger, consolidation, or reorganization of the Company or HoldCo with one or more other entities in which neither the Company nor HoldCo is the surviving entity, unless the holders of the Company or HoldCo’s voting securities immediately prior to such transaction continue to hold at least 51% of such securities following such transaction, (iii) the sale of all or substantially all of the assets of the Company and/or HoldCo in one or a series of related transactions, or (iv) the “completion” or closing by the Company or HoldCo of an agreement to which the Company or HoldCo is a party or by which it is bound, providing for any of the events set forth above in clauses (i), (ii) or (iii).  In the event that any payment 

triggered upon a Change of Control is deferred compensation subject to section 409A of the Code, any Change of Control must satisfy the requirements of Treasury regulation section 1.409A-3(i)(5).
c.For purposes of this Agreement, “Good Reason” means, unless otherwise agreed to in writing by Employee, (i) a reduction in Employee’s base salary; (ii) a material diminution in Employee’s authority, responsibilities or duties; (iii) a relocation of Employee’s primary place of employment to a location more than twenty (20) miles farther from Employee’s primary residence than the current location of the Company’s offices; or (iv) any other material breach by the Company of the terms of this Agreement or any other agreement between the Employee and the Company.  In order to invoke a termination for Good Reason, Employee must deliver a written notice of such breach to the Company within sixty (60) days of the occurrence of the breach, and the Company shall have thirty (30) days to cure the breach (unless such breach is not capable of being cured, in which case this Agreement will terminate fifteen (15) days after notice thereof).  In order to terminate his employment, if at all, for Good Reason, Employee must terminate employment within thirty (30) days of the end of the cure period, if applicable, if the breach has not been cured.
4.4No Mitigation.  The Company agrees that, if the Employee’s employment is terminated during the term of this Agreement, the Employee is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Employee by the Company.  Further, the amount of any payment provided hereunder shall not be reduced by any compensation earned by the Employee from any other sources.
4.5Survival.  The provisions of Sections 4, 5, 6, 8, and 9 shall survive the termination of this Agreement.
5.Non-Competition and Non-Solicitation.
5.1Restricted Activities.  Beginning on the Commencement Date and continuing for one (1) year following termination of employment with KEYW, Employee shall not, directly or indirectly, on his own behalf or as an individual proprietor, partner, stockholder, owner, officer, employee, director, consultant, agent, joint venturer, investor, lender, or in any other capacity whatsoever (other than through investments of Employee in the stock of a publicly-held company where such investment does not exceed three percent (3%) of the total outstanding stock (“Permitted Investments”)) do any of the following: 
a.In any state, province or similar political subdivision, in which KEYW provides services or to which KEYW’s products are delivered during the term of Employee’s employment with KEYW, offer to provide or provide to any Customer or Prospective Customer products or services which compete with the products and services offered by KEYW;
b.Interfere with or disrupt, or attempt to interfere with or disrupt, the relationship of KEYW with any Customer, vendor, supplier, prime contractor, subcontractor or partner;
c.Solicit, offer to hire or hire any current or former employee, consultant, contractor or agent of KEYW (each a “Restricted Person”), or otherwise induce any Restricted Person to discontinue their employment or business relationship with KEYW; or 
d.Solicit or divert, or attempt to solicit or divert, the business or patronage (with respect to products or services of the kind or type developed, produced, marketed, furnished, or sold by KEYW) of any Customer or Prospective Customer of KEYW.
The foregoing restriction in Section 5.1(c) shall not apply to: (i) any Restricted Person whose employment or business relationship was terminated without cause by KEYW, (ii) any Restricted Person whose employment or business relationship was terminated more than twelve (12) months prior to the date 

of hire of such person by Employee, or (iii) any solicitation, offer to hire or hiring of a Restricted Person pursuant to any general advertisement not specifically directed to such Restricted Person. 
For purposes of this Section 5.1, the term “Customer” shall mean any person, firm, organization, entity, state or local government or governmental division, department or agency of the United States Government to which KEYW provided products or services at any time during the Employee’s employment with KEYW. 
For purposes of this Section 5.1, the term “Prospective Customer” shall mean any person, firm, organization, entity, government or governmental division, department or agency which has an outstanding bid or proposal from KEYW, or which was contacted by an employee of KEYW for purposes of soliciting business concerning products or services offered by KEYW, during the six (6) months preceding termination of the Employee’s employment with KEYW.
For purposes of this Section 5.1, the term “KEYW” shall mean (i) during the Employee’s employment, those affiliated entities as described in the recitals to this Agreement that comprise KEYW at any time during the Employee’s employment, and (ii) upon any termination of employment, those affiliated entities as described in the recitals to this Agreement that comprise KEYW as of the Employee’s Termination Date. 
5.2    External Employment. During the period of Employee’s employment with KEYW, Employee shall be prohibited from engaging in external employment without express permission from KEYW.  By way of example, and not limitation, such external employment shall include self-employment, consulting, and engagement by firms conducting business unrelated to the business of KEYW.
5.3    Interpretation. If any restriction set forth in this Section 5 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.
6.Proprietary Information and Developments.
6.1Proprietary Information.
a.The Employee agrees that all information, whether or not in writing, of a private, secret or confidential nature concerning KEYW’s business, business relationships or financial affairs (collectively, “Proprietary Information”) is and shall be the exclusive property of KEYW.  By way of illustration, but not limitation, Proprietary Information may include inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, clinical data, financial data, personnel data, hardware, software and related designs, product costs, specifications and pricing, bid practices and procedures, contract costs and pricing, the terms and conditions of any joint venture, strategic partnership and other contractual arrangements, customer and supplier lists, and contacts at or knowledge of customers or prospective customers of KEYW.  The Employee will not disclose any Proprietary Information to any person or entity other than employees of KEYW or use the same for any purposes (other than in the performance of his duties as an employee of KEYW) without written approval by an officer of the Company, either during or after his employment with the Company, unless and until such Proprietary Information has become public knowledge without fault by the Employee.
b.The Employee agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, laboratory notebooks, program listings, or other written, photographic, or other tangible material containing Proprietary Information, whether created by the Employee or others, which shall come into his custody or possession, shall be and are the exclusive property of KEYW to be used by the Employee 

only in the performance of his duties for KEYW.  All such materials or copies thereof and all tangible property of KEYW in the custody or possession of the Employee shall be delivered to the Company, upon the earlier of (i) a request by KEYW or (ii) termination of his employment.  After such delivery, the Employee shall not retain any such materials or copies thereof or any such tangible property.
c.The Employee agrees that his obligation not to disclose or to use information and materials of the types set forth in paragraphs (a) and (b) above, and his obligation to return materials and tangible property, set forth in paragraph (b) above, also extends to such types of information, materials and tangible property of customers of KEYW or suppliers to KEYW or other third parties who may have disclosed or entrusted the same to KEYW or to the Employee.
6.2Developments.
a.The Employee will make full and prompt disclosure to the Company of all inventions, improvements, discoveries, methods, processes, developments, software, and works of authorship, whether copyrightable, patentable or not, which are created, made, conceived or reduced to practice by him or under his direction or jointly with others during his employment by KEYW, whether or not during normal working hours or on the premises of KEYW (all of which are collectively referred to in this Agreement as “Developments”).
b.To the extent that any Developments do not qualify as works made for hire, the Employee hereby irrevocably assigns to the Company (or any Affiliate, person or entity designated by the Company) all his right, title and interest in and to all Developments and all related patents, patent applications, copyrights and copyright applications, trade secrets, trademarks and all other proprietary rights now or hereafter existing therein.  However, this paragraph (b) shall not apply to Developments which do not relate to the present or planned business or research and development of KEYW and which are made and conceived by the Employee outside the scope of his employment, not during normal working hours, not on KEYW’s premises and not using KEYW’s tools, devices, equipment or Proprietary Information.  The Employee understands that, to the extent this Agreement shall be construed in accordance with the laws of any state which precludes a requirement in an employee agreement to assign certain classes of inventions made by an employee, this paragraph (b) shall be interpreted not to apply to any invention which a court rules and/or the Company agrees falls within such classes.  The Employee also hereby waives all claims to moral rights in any Developments.
c.The Employee agrees to cooperate fully with KEYW, both during and after his employment, with respect to the procurement, maintenance and enforcement of copyrights, patents and other intellectual property rights (both in the United States and foreign countries) relating to Developments.  The Employee shall sign all papers, including, without limitation, copyright applications, patent applications, declarations, oaths, formal assignments, assignments of priority rights, and powers of attorney, which KEYW may deem necessary or desirable in order to protect its rights and interests in any Development.  The Employee further agrees that if KEYW is unable, after reasonable effort, to secure the signature of the Employee on any such papers, any executive officer of the Company shall be entitled to execute any such papers as the agent and the attorney-in-fact of the Employee, and the Employee hereby irrevocably designates and appoints each executive officer of the Company as his agent and attorney-in-fact to execute any such papers on his behalf, and to take any and all actions as KEYW may deem necessary or desirable in order to protect its rights and interests in any Development, under the conditions described in this sentence.
6.3United States Government Obligations.  The Employee acknowledges that KEYW from time to time may have agreements with other parties or with the United States Government, or agencies thereof, which impose obligations or restrictions on KEYW regarding inventions made during the course of work under such agreements or regarding the confidential nature of such work.  The Employee agrees to be 

bound by all such obligations and restrictions which are made known to the Employee and to take all appropriate action necessary to discharge the obligations of KEYW under such agreements.
7.Other Agreements.  The Employee represents that there are no contracts to assign inventions between any person or entity and the Employee.  The Employee further represents that (a) the Employee is not obligated under any consulting, employment or other agreement which would affect KEYW’s rights under this Agreement, (b) there is no action, investigation or proceeding, pending or threatened, or any basis therefore known to him involving the Employee’s prior employment or any consultancy or the use of any information or techniques alleged to be proprietary to any former employer, and (c) the performance of the Employee’s duties as an employee of the Company will not breach or constitute a default under any agreement to which the Employee is bound, including, without limitation, any agreement limiting the use or disclosure of proprietary information during the Employee’s employment by the Company.  The Employee will not, in connection with the Employee’s employment by the Company, use or disclose to the Company any confidential, trade secret or other proprietary information of any previous employer or other person to which the Employee is not lawfully entitled.  Any agreement to which the Employee is a party with any prior employer or relating to nondisclosure, non-competition or non-solicitation of employees, customers, prospective customers, vendors or other parties is listed on Exhibit C attached hereto.  If an order of a court of competent jurisdiction that is not lifted, removed or stayed within 30 days following its initial issuance provides that Employee’s employment with the Company must terminate as a result of any claim or action by a former employer of Employee to enforce any employment or other agreement between Employee and such former employer, such termination shall be deemed to be for Cause hereunder.  Employee hereby agrees to indemnify, defend, save, and hold harmless KEYW, its respective officers, directors, representatives and other agents (other than Employee) from and against all Losses incurred by them resulting from any action or claim with respect to any agreement between Employee and a former employer in connection with which a court of competent jurisdiction determines in a final judgment that Employee has breached, or that Employee’s service hereunder constitutes a breach or default under, any such agreement, or to uphold the restrictions on Employee under such agreement with respect to Employee’s service hereunder.  For purposes of the immediately preceding sentence, “Losses” means damages, judgments, reasonable attorneys’ fees, court costs, and expenses; provided, that in no event shall “Losses” include any punitive, consequential (including any diminution in share value), special or exemplary damages.
8.Section 409A.  This Agreement is intended to comply with section 409A of the Code and its corresponding regulations, or an exemption, and payments may only be made under this Agreement upon an event or in a manner permitted by section 409A of the Code, to the extent applicable.  Any benefits that qualify for the “short-term deferral” exemption or any other exemption shall be paid under the applicable exemption.  To the extent Employee would be subject to the additional twenty percent (20%) tax imposed on certain deferred compensation arrangements pursuant to section 409A of the Code as a result of any provision of this Agreement, such provision shall be deemed amended to the minimum extent necessary to avoid application of such tax and preserve to the maximum extent possible the original intent and economic benefit to the Employee and the Company, and the parties shall promptly execute any amendment reasonably necessary to implement this Section 8.  In no event may the Employee directly or indirectly designate a calendar year of payment.
8.1For purposes of section 409A of the Code, Employee’s right to receive installment payments pursuant to this Agreement including, without limitation, each severance payment and COBRA continuation reimbursement shall be treated as a right to receive a series of separate and distinct payments.
8.2Employee will be deemed to have a date of termination for purposes of determining the timing of any payments or benefits hereunder that are classified as deferred compensation only upon a “separation from service” within the meaning of section 409A of the Code.

8.3Notwithstanding any other provision of this Agreement to the contrary, if at the time of Employee’s separation from service, (i) Employee is a specified employee (within the meaning of section 409A of the Code and using the identification methodology selected by the Company from time to time), and (ii) the Company makes a good faith determination that an amount payable on account of such separation from service to Employee constitutes deferred compensation (within the meaning of section 409A of the Code) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in section 409A of the Code in order to avoid taxes or penalties under section 409A of the Code (the “Delay Period”), then the Company will not pay such amount on the otherwise scheduled payment date but will instead pay it in a lump sum on the first business day after such six-month period (or upon Employee’s death, if earlier), together with interest for the period of delay, compounded annually, equal to the applicable Federal rate for short-term instruments) in effect as of the dates the payments should otherwise have been provided.  To the extent that any benefits to be provided during the Delay Period are considered deferred compensation under section 409A of the Code provided on account of a “separation from service”, and such benefits are not otherwise exempt from Section 409A of the Code, Employee shall pay the cost of such benefit during the Delay Period, and the Company shall reimburse Employee, to the extent that such costs would otherwise have been paid by the Company or to the extent that such benefits would otherwise have been provided by the Company at no cost to Employee, the Company’s share of the cost of such benefits upon expiration of the Delay Period, and any remaining benefits shall be reimbursed or provided by the Company in accordance with the procedures specified herein.  
8.4(A) Any amount that Employee is entitled to be reimbursed under this Agreement will be reimbursed to Employee as promptly as practical and in any event not later than the last day of the calendar year after the calendar year in which expenses are incurred, (B) any right to reimbursement or in kind benefits will not be subject to liquidation or exchange for another benefit, and (C) the amount of the expenses eligible for reimbursement during any taxable year will not affect the amount of expenses eligible for reimbursements in any other taxable year.
8.5Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.
9.Miscellaneous.
9.1Equitable Remedies.  The restrictions contained in Sections 5 and 6 are necessary for the protection of the business and goodwill of KEYW and are considered by the Employee to be reasonable for such purpose.  The Employee agrees that any breach of Sections 5 or 6 is likely to cause KEYW substantial and irreparable harm for which there is no adequate remedy at law and therefore, in the event of any such breach, the Employee agrees that KEYW, in addition to such other remedies which may be available, shall be entitled to specific performance and other injunctive relief without the need to post a bond.  The Company shall be entitled to recover its reasonable attorney’s fees in the event that it prevails in such action. 
9.2Notices.  Any notices delivered under this Agreement shall be deemed duly delivered four business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent for next-business day delivery via a reputable nationwide overnight courier service, in each case to the address of the recipient set forth in the introductory paragraph hereto (in the case of the Company, addressed c/o General Counsel).  Either party may change the address to which notices are to be delivered by giving notice of such change to the other party in the manner set forth in this Section 9.2.
9.3Pronouns.  Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular forms of nouns and pronouns shall include the plural, and vice versa.

9.4Entire Agreement.  This Agreement (including the Exhibits hereto) constitutes the entire agreement between the parties and cancels and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement.
9.5Amendment.  This Agreement may be amended or modified only by a written instrument executed by both KEYW and the Employee.
9.6Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Maryland.  Any action, suit or other legal matter arising under or relating to any provision of this Agreement shall be commenced only in a court of the State of Maryland (or, if appropriate, a federal court located within Maryland), and the Company and the Employee each consents to the jurisdiction of such a court.  The Company and the Employee each hereby irrevocably waive any right to a trial by jury in any action, suit or other legal proceeding arising under or relating to any provision of this Agreement.
9.7Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of both parties and their respective heirs, legal representatives, successors and permitted assigns.  The Company may assign this Agreement to any Affiliate or to any business or entity with which or into which the Company may be merged or which may succeed to its assets or business.  The obligations of the Employee are personal and may not be assigned by him.
9.8Waivers.  No delay or omission by KEYW or Employee in exercising any right under this Agreement shall operate as a waiver of that or any other right.  A waiver or consent given by KEYW or Employee on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion.
9.9Captions.  The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement.
9.10Severability.  In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby.
9.11Counterparts.  This Agreement may be executed by facsimile transmission (including by exchange of copies in pdf) in counterparts, each and all of which shall be deemed an original, and both of which together shall constitute but the same instrument.
9.12Withholding.  The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges that it from time to time is required to withhold.  The Company shall be entitled to rely on the opinion of counsel if any questions as to the amount or requirement of such withholding shall arise.
9.13Legal Fees.  The Company shall reimburse Employee for reasonable attorneys’ fees incurred by Employee in relation to the review and negotiation of this Agreement, such fees not to exceed seven thousand five hundred dollars ($7,500.00).
THE EMPLOYEE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
[signatures on next page]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.

	
		
	 
	The KEYW Corporation

	 
	 

	 
	 

	 
	By: /s/ Philip L. Calamia

	 
	Name: Philip L. Calamia

	 
	Title: Chief Financial Officer

	 
	 

	 
	 

	 
	EMPLOYEE:

	 
	 

	 
	 

	 
	By: /s/ William J. Weber

	 
	Name: William J. Weber

	 
	 

            

Exhibit A

STOCK INCENTIVE PLAN

		
	1.
	DEFINITIONS

Capitalized terms not defined in this Exhibit A shall have the meaning set forth in the that certain employment agreement between the Company and William J. Weber, dated [          ], 2015 (the “Agreement”).
1.1“Affiliate” means, with respect to a Person, any company or other trade or business that controls, is controlled by or is under common control with such Person within the meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary, provided that an entity may not be considered an Affiliate if it results in noncompliance with section 409A of the Code.
1.2“Award” means a grant of Stock or Restricted Stock under the Plan.
1.3    “Board” means the Board of Directors of The KEYW Holding Corporation.
1.4    “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.
1.5    “Fair Market Value” means the value of a share of Stock, determined as follows:  if on the Grant Date or other determination date the Stock is listed on an established national or regional stock exchange, or is publicly traded on an established securities market, the Fair Market Value of a share of Stock shall be the closing price of the Stock on such exchange or in such market (if there is more than one such exchange or market the Board shall determine the appropriate exchange or market) on the Grant Date or such other determination date (or if there is no such reported closing price, the Fair Market Value shall be the mean between the highest bid and lowest asked prices or between the high and low sale prices on such trading day) or, if no sale of Stock is reported for such trading day, on the next preceding day on which any sale shall have been reported.  If the Stock is not listed on such an exchange, quoted on such system or traded on such a market, Fair Market Value shall be the value of the Stock as determined by the Board in good faith in a manner consistent with section 409A of the Code.
1.6    “Grantee” means William J. Weber.
1.7    “Grant Date” means the date on which the Board of HoldCo adopts a resolution or takes other appropriate action expressly granting an Award to the Grantee that specifies the key terms of the Award, or if a later date is set forth in such resolutions, then such later date.
1.8    “Person” means a natural person, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other entity or organization.
1.9    “Plan” means this Stock Incentive Plan.
1.10    “Restricted Stock” means shares of Stock, awarded to the Grantee pursuant to the Agreement, that are subject to restrictions and to a risk of forfeiture.
1.11    “Securities Act” means the Securities Act of 1933, as now in effect or as hereafter amended.

1.12    “Service” means service as an employee, officer, director or other Service Provider of the Company or an Affiliate thereof.  A Grantee’s change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be an employee, officer, director or other Service Provider of the Company or an Affiliate thereof.  Subject to the preceding sentence, whether a termination of Service shall have occurred for purposes of the Plan shall be determined by the Board, which determination shall be final, binding and conclusive.
1.13    “Service Provider” means an employee, officer or director of the Company or an Affiliate thereof, or a consultant or adviser currently providing services to the Company or an Affiliate thereof.
1.14    “Stock” means unregistered common stock, $0.001 par value per share, of HoldCo. 
1.15    “Subsidiary” means any “subsidiary corporation” of the Company within the meaning of section 424(f) of the Code. 
2.    ADMINISTRATION OF THE PLAN
2.1    Terms of Awards.
The Company retains the right to cause a forfeiture of the gain realized by the Grantee on account of actions taken by the Grantee in violation or breach of or in conflict with any employment agreement, non-competition agreement, any agreement prohibiting solicitation of employees or clients of the Company or any Affiliate thereof or any confidentiality obligation with respect to the Company or any Affiliate thereof or otherwise in competition with the Company or any Affiliate thereof.  In addition, the Company may annul an Award if the Grantee is terminated for Cause as defined in the Agreement or the Plan, as applicable.

2.2    Share Issuance/Book Entry.
Notwithstanding any provision of this Plan to the contrary, the issuance of the Stock under the Plan may be evidenced in such a manner as the Board, in its discretion, deems appropriate, including, without limitation, book-entry registration or issuance of one or more Stock certificates.

		
	3.
	terms and conditions of RESTRICTED STOCK 

3.1    Restricted Stock Certificates.
The Company shall issue, in the name of the Grantee, stock certificates representing the total number of shares of Stock or Restricted Stock granted to the Grantee, as soon as reasonably practicable after the applicable Grant Date.  The Board may provide that either (i) the Secretary of the Company shall hold such certificates for the Grantee’s benefit until such time as the Restricted Stock is forfeited to the Company, or the restrictions lapse, or (ii) such certificates shall be delivered to the Grantee; provided, however, that such certificates shall bear a legend or legends that complies with the applicable securities laws and regulations and makes appropriate reference to the restrictions imposed under this Plan and the Agreement.

3.2    Rights in  Restricted Stock.
The Grantee shall have the right to vote Restricted Stock and to receive any dividends declared or paid with respect to such Stock.  The Board may provide that any dividends paid on Restricted Stock must be reinvested in shares of Stock, which may or may not be subject to the same or other vesting conditions and restrictions applicable to such Restricted Stock.  All distributions, if any, received by a Grantee with respect to Restricted Stock as a result of any stock split, stock dividend, combination of shares, or other similar transaction shall be subject to the restrictions applicable to the original Award.

3.3    Termination of Service.
Except as otherwise provided in the Agreement, upon the termination of a Grantee’s Service with the Company or an Affiliate thereof, any shares of Restricted Stock held by such Grantee that have not vested 

and any Long-Term Incentive Shares that have not been Awarded, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed forfeited.  Upon forfeiture of Restricted Stock, the Grantee shall have no further rights with respect to such Award, including, but not limited to, the right to vote Restricted Stock and any right to receive dividends with respect to shares of Restricted Stock.

		
	4.
	WITHHOLDING TAXES

The Company or an Affiliate thereof, as the case may be, shall have the right to deduct from payments of any kind otherwise due to the Grantee any federal, state, or local taxes of any kind required by law to be withheld with respect to the vesting of or other lapse of restrictions applicable to an Award or upon the issuance of any shares of Stock.  At the time of such vesting or lapse, the Grantee shall pay to the Company or the Affiliate thereof, as the case may be, any amount that the Company or the Affiliate thereof may reasonably determine to be necessary to satisfy such withholding obligation.  Subject to the prior approval of the Company or the Affiliate thereof, which may be withheld by the Company or the Affiliate thereof, as the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company or the Affiliate thereof to withhold shares of Stock otherwise issuable to the Grantee or (ii) by delivering to the Company or the Affiliate shares of Stock already owned by the Grantee.  The shares of Stock so delivered or withheld shall have an aggregate Fair Market Value equal to such withholding obligations.  The Fair Market Value of the shares of Stock used to satisfy such withholding obligation shall be determined by the Board as of the date that the amount of tax to be withheld is to be determined.  A Grantee who has made an election pursuant to this Section 4 may satisfy his or her withholding obligation only with shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements.  The maximum number of shares of Stock that may be withheld from any Award to satisfy any federal, state or local tax withholding requirements upon the exercise, vesting, lapse of restrictions applicable to such Award or payment of shares pursuant to such Award, as applicable, cannot exceed such number of shares having a Fair Market Value equal to the minimum statutory amount required by the Company to be withheld and paid to any such federal, state or local taxing authority with respect to such exercise, vesting, lapse of restrictions or payment of shares.  

		
	5.
	RESTRICTIONS ON TRANSFER OF SHARES OF STOCK

5.1    Repurchase and Other Rights.
Stock issued pursuant to an Award of Restricted Stock may be subject to such right of repurchase upon termination of Service or other transfer restrictions as the Board may determine, consistent with applicable law. 

5.2    Installment Payments.
In the case of any repurchase of shares of Stock acquired by the Grantee under an Award of Restricted Stock subject to any Sale Restrictions, as defined in Section 2.1(c) of the Agreement, the Company or its permitted assignee may pay the Grantee, transferee, or other registered owner of the Stock the purchase price in three (3) or fewer annual installments.  Interest shall be credited on the installments at the applicable federal rate (as determined for purposes of the Code) in effect on the date on which the purchase is made.  The Company or its permitted assignee shall pay at least one-third of the total purchase price each year, plus interest on the unpaid balance, with the first payment being made on or before the 60th day after the purchase. 

5.3    Legend.
In order to enforce the restrictions imposed upon shares of Stock under this Plan, the Board may cause a legend or legends to be placed on any certificate representing shares issued pursuant to this Plan that 

complies with the applicable securities laws and regulations and makes appropriate reference to the restrictions imposed under it.

		
	6.
	REQUIREMENTS OF LAW

6.1    General.
The Company shall not be required to issue any shares of Stock under any Award if the issuance of such shares would constitute a violation by the Grantee, any other individual exercising a right emanating from such Award, or the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations.  If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any shares subject to an Award upon any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares hereunder, no shares of Stock may be issued to the Grantee or any other individual unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Award.  Without limiting the generality of the foregoing, in connection with the Securities Act, upon the exercise of any right emanating from such Award or the delivery of any shares of Restricted Stock, unless a registration statement under the Securities Act is in effect with respect to the shares of Stock covered by such Award, the Company shall not be required to issue such shares unless the Board has received evidence satisfactory to it that the Grantee or any other individual may acquire such shares pursuant to an exemption from registration under the Securities Act.  Any determination in this connection by the Board shall be final, binding, and conclusive.  The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act.  The Company shall not be obligated to take any affirmative action in order to cause the issuance of shares of Stock pursuant to the Plan to comply with any law or regulation of any governmental authority.

6.2    Securities Representations. 
The shares of Stock being issued to the Grantee are being made by the Company in reliance upon the following express representations and warranties of the Grantee. The Grantee acknowledges, represents and warrants that: 

(a) The Grantee has been advised that he or she may be an “affiliate” within the meaning of Rule 144 under the Securities Act of 1933, as amended (the “Act”) and in this connection the Company is relying in part on his or her representations set forth in this Section. 

(b) If the Grantee is deemed an affiliate within the meaning of Rule 144 of the Act, the Stock issued under this Plan must be held indefinitely unless an exemption from any applicable resale restrictions is available or the Company files an additional registration statement (or a “re-offer prospectus”) with regard to such shares of Stock and the Company is under no obligation to register the shares (or to file a “re-offer prospectus”). 

(c) If the Grantee is deemed an affiliate within the meaning of Rule 144 of the Act, the Grantee understands that the exemption from registration under Rule 144 will not be available unless (i) a public trading market then exists for the Stock of the Company, (ii) adequate information concerning the Company is then available to the public, and (iii) other terms and conditions of Rule 144 or any exemption therefrom are complied with; and that any sales of the shares of Stock may be made only in limited amounts in accordance with such terms and conditions.

6.4    409A.  

(a)  The Plan shall be unfunded.  Neither the Company nor the Board shall be required to establish any special or separate fund or to segregate any assets to assure the performance of its obligations under the Plan.  The Plan is intended to comply with section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith.  Any payments described in the Plan that are due within the “short-term deferral period” as defined in section 409A of the Code shall not be treated as deferred compensation unless applicable laws require otherwise.   Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following the Grantee’s termination of continuous service shall instead be paid on the first payroll date after the six-month anniversary of the Grantee’s separation from service (or the Grantee’s death, if earlier).  In furtherance of this interest, to the extent that any Treasury Regulations or other guidance issued under section 409A of the Code after the date of this Agreement would result in payment of interest or tax penalty under section 409A of the Code, the Company and the Grantee agree, to the extent permissible, to amend this Plan, in order to bring this Plan into compliance with the provisions of section 409A of the Code.  In no event shall the Company or any successor to the Company or their respective affiliates, successors, shareholders, employees, officers or agents have any liability relating to the failure or alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from, the requirements of section 409A.  If the Company, for any reason, does not timely withhold the full amount of payroll tax, withholding or other taxes necessary to satisfy the Company’s withholding obligation to the U.S. Treasury or state taxing authority hereunder and the Recipient receives amounts in excess of the amounts he or she would otherwise be entitled to under this Agreement after taking into account such legal withholding obligations, Recipient agrees to return such excess amounts to the Company within thirty (30) days of the Company’s request to do so. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NONE OF THE COMPANY OR ANY SUCCESSOR TO THE COMPANY OR THEIR RESPECTIVE AFFILIATES, SUCCESSORS, SHAREHOLDERS, EMPLOYEES, OFFICERS OR AGENTS MAKE ANY GUARANTEE OF TAX CONSEQUENCES WITH RESPECT TO THIS AGREEMENT OR ANY BENEFITS OR PAYMENTS PROVIDED FOR HEREIN.
 
		
	7.
	EFFECT OF CHANGES IN CAPITALIZATION

7.1    Changes in Stock.
If the number of outstanding shares of Stock is increased or decreased or the shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the Commencement Date, the number and kinds of shares for which Awards may be made under the Plan shall be adjusted proportionately and accordingly by the Board.  In addition, the number and kind of shares for which Awards are outstanding shall be adjusted proportionately and accordingly so that the proportionate interest of the Grantee immediately following such event shall, to the extent practicable, be the same as immediately before such event.  The conversion of any convertible securities of the Company shall not be treated as an increase in shares effected without receipt of consideration.  Notwithstanding the foregoing, in the event of any distribution to the Company’s stockholders of securities of any other entity or other assets (including an extraordinary dividend but excluding a non-extraordinary dividend of the Company) without receipt of consideration by the Company, the Company shall, in such manner as the Company deems appropriate, adjust the number and kind of shares subject to outstanding Awards to reflect such distribution.

7.2    Reorganization in Which the Company Is the Surviving Entity and in Which No Change of Control Occurs.
If the Company shall be the surviving entity in any reorganization, merger, or consolidation of the Company with one or more other entities and in which no Change of Control occurs, any Award theretofore made pursuant to this Plan shall pertain to and apply to the securities to which a holder of the number of shares of Stock subject to such Award would have been entitled immediately following such reorganization, merger, or consolidation.  In the event of a transaction described in this Section 7.2, Long-Term Incentive Shares shall be adjusted so as to apply to the securities that a holder of the number of shares of Stock subject to the Long-Term Incentive Shares would have been entitled to receive immediately following such transaction.

7.3    Change of Control.
Upon the occurrence of a Change of Control, immediately prior to the scheduled consummation of a Change of Control, all shares of Restricted Stock shall become immediately vested and all Long-Term Incentive Shares that have not been granted shall be granted and become immediately vested.

 7.4    No Limitations on Company.
The making of Awards pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets.

Exhibit B
FORM OF GENERAL RELEASE OF ALL CLAIMS

This General Release of All Claims is made as of _________________ (“General Release”), by and between [] (“Employee”) and The KEYW Corporation (the “Company”).
            WHEREAS, the Company and Employee are parties to an Employment Agreement dated as of [_______] (the “Employment Agreement”);
WHEREAS, the execution of this General Release is a condition precedent to the Company’s obligation to pay the severance payments as set forth in the Employment Agreement; 
WHEREAS, in consideration for Employee’s signing of this General Release, the Company will pay Employee the severance payments pursuant the Employment Agreement, as applicable; and
WHEREAS, Employee and the Company intend that this General Release shall be in full satisfaction of the obligations described in this General Release owed to the Employee by the Company, including those under the Employment Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements herein contained, the Company and Employee agree as follows:  
1.     Employee, for himself, Employee’s spouse, heirs, administrators, children, representatives, executors, successors, assigns, and all other persons claiming through Employee, if any (collectively, “Releasers”), does hereby release, waive, and forever discharge the Company and each of its respective agents, subsidiaries, parents, Affiliates, related organizations, and all of their employees, officers, directors, managers, attorneys, successors, and assigns (collectively, the “Releasees”) from, and does fully waive any obligations of Releasees to Releasers for, any and all liability, actions, charges, causes of action, demands, damages, or claims for relief, remuneration, sums of money, accounts or expenses (including attorneys’ fees and costs) of any kind whatsoever, whether known or unknown, suspected or unsuspected, disclosed or undisclosed,  or contingent or absolute, which heretofore has been or which hereafter may be suffered or sustained, directly or indirectly, by Releasers in consequence of, arising out of, or in any way relating to: (a) Employee’s employment with the Company or any of its subsidiaries or Affiliates; (b) the termination of Employee’s employment with the Company and any of its subsidiaries or Affiliates; (c) the Employment Agreement; (d) violation of any law including but not limited to federal, state or local statutes, or the common law of any jurisdiction; or (e) any events occurring on or prior to the date of this General Release.  Notwithstanding the above, this release and waiver does not apply to: (i) any right to indemnification now existing under the Company’s governing documents or applicable law; (ii) any rights to the receipt of employee benefits which vested on or prior to the date of this General Release; (iii) the right to receive severance payments in accordance with Section 4.2 of the Employment Agreement; and (iv) right to continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act.
2.     Excluded from this General Release and waiver are any claims which cannot be waived by law, including but not limited to the right to participate in an investigation conducted by certain government agencies.  Employee does, however, waive Employee’s right to any monetary recovery should any agency (such as the Equal Employment Opportunity Commission) pursue any claims on Employee’s behalf.  Employee represents and warrants that Employee has not filed any complaint, charge, or lawsuit against the Releasees with any government agency or any court.

3.     Employee agrees that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by the Company, any Releasees, or Employee of any improper or unlawful conduct.
4.     Employee acknowledges and recites that:
(a)        Employee has executed this General Release knowingly and voluntarily;
(b)        Employee has read and understands this General Release in its entirety;
(c)        Employee has been advised and directed orally and in writing (and this subparagraph (c) constitutes such written direction) to seek legal counsel and any other advice Employee wishes with respect to the terms of this General Release before executing it; and
(d)        Employee’s execution of this General Release has not been forced by any employee or agent of the Company.
5.     This General Release shall be governed by the internal laws (and not the choice of laws) of the State of Maryland, except for the application of preemptive Federal law.
6.     Employee shall have 21 calendar days to consider this General Release and 7 calendar days from the date he executes this General Release to revoke his waiver of any Age Discrimination in Employment Act claims by providing written notice of the revocation to the Company, as provided in Section 4.2 of the Employment Agreement.  In the event of such revocation, the terms of Section 4.2 of the Employment Agreement shall govern.  Once signed, in the absence of your revocation of this General Release, the General Release will become effective on the day following the seventh and final day of the revocation period.
7.     Employee expressly agrees that, except to the extent required by law, he will not disclose or cause to be disclosed any negative, adverse or derogatory comments or information about the Company, and will not make any such comments or provide such information to any customer of the Company, to any person associated with any media, to the general public, or to any other person or entity.
8.    Employee agrees that he will keep entirely secret and confidential, and shall not use or disclose to any person or entity, in any manner or for any purpose whatsoever, any information of the Company that is not available to the general public and/or not generally known outside the Company and to which he has had access during the course of her employment by the Company, including, without limitation, the Company's confidential, proprietary, and trade secret information and any information relating to: the Company's business or operations; its plans, strategies, prospects or objectives; its products, technology, processes or specifications; its research and development operations or plans; its customers and customer lists; its manufacturing, distribution, sales, service, support and marketing practices and operations; its financial conditions and results of operations; its pricing, pricing strategies and costs; its operational strengths and weaknesses; its personnel and compensation policies, procedures and transactions; its plans for any strategic exit and all information of third parties for which the Company has an obligation to maintain as confidential.
9.    Employee further agrees that within five (5) business days after the Effective Date of this Agreement, he will return to the Company: (i) all documents, data, material, details and copies thereof in any form (electronic or hard copy) and wherever located (including in personally owned computers, storage media or accounts) that are the property of the Company or were created using the Company's resources or during any hours worked for the Company, including, without limitation, any data referred to in Paragraph 10 herein; and (ii) all other property belonging to the Company, wherever located, including, without limitation, all computer equipment and associated passwords, property passes, keys, credit cards, business cards, and identification badges.

10.    In consideration for the Company's promises and undertakings set forth in this Agreement, Employee, on behalf of himself, and his heirs, representatives, and assigns, hereby agrees and covenants, to the fullest extent permitted by applicable law, not to commence, maintain, prosecute or participate in any action or proceeding of any kind against Releasees based on any of the claims waived and released in Paragraph 1 of this General Release.
11.     Capitalized terms not defined in this General Release have the meanings given in the Employment Agreement. 
PLEASE READ THIS AGREEMENT CAREFULLY.  IT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS. 
	
		
	Date: __________________________________

	______________________________________
Employee

	
		
	Date: __________________________________

	______________________________________
By: ___________________________________
Title:__________________________________

Exhibit C

Prior Agreements

Employment Agreement, made as of February 29, 2012, between XL Associates, Inc. and William J. WeberExhibit

EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT, dated as of August 28, 2015 (this “Agreement”), is entered into by and among Pacific Mercantile Bancorp, a California corporation (the “Company”), and the security holders of the Company identified on Exhibit A (each, a “Holder” and, collectively, the “Holders”).  The Holders and the Company are collectively referred to herein as the “Parties” and each may be individually referred to as a “Party.”  
RECITALS
A.    The Company is a bank holding company, registered as such under the Bank Holding Company Act of 1956, as amended (the “BHCA”), and is the record and beneficial owner of 100 percent of the issued and outstanding capital stock of Pacific Mercantile Bank, a California banking corporation (the “Bank”).
B.    The Company previously authorized the creation and issuance of (i) two series of Series B preferred stock, designated as its Series B-1 Convertible 8.4% Noncumulative Preferred Stock and its Series B-2 Convertible 8.4% Noncumulative Preferred Stock (together, the “Series B Preferred Stock” or “Series B Shares”), having the rights, preferences and privileges set forth in the Certificate of Determination of Rights, Preferences, Privileges and Restrictions of the Series B Stock (the “Series B Certificate of Determination”), and (ii) Series C 8.4% Noncumulative Preferred Stock (the “Series C Preferred Stock” or “Series C Shares”), having the rights, preferences and privileges set forth in the Certificate of Determination of Rights, Preferences, Privileges and Restrictions of the Series C Stock (the “Series C Certificate of Determination”);
C.    On August 26, 2011, the Parties entered into a Stock Purchase Agreement (the “Series B Purchase Agreement”) pursuant to which each Holder purchased from the Company the number of Series B Shares set forth opposite such Holder’s name on Exhibit A hereto;
D.    In accordance with the Series B Certificate of Determination and Series C Certificate of Determination, the Company previously issued to each Holder the number of Series C Shares set forth opposite such Holder’s name on Exhibit A hereto in satisfaction of the Dividends (as defined below) on the Series B Shares and Series C Shares; 
E.    Noncumulative dividends on the Series B Shares and Series C Shares accrue at a rate of 8.4% per annum, calculated as set forth in the Series B Certificate of Determination and the Series C Certificate of Determination (the “Dividends); 
F.    On April 20, 2012, the Company issued to each Holder common stock purchase warrants (“Warrants”) to purchase the number of shares of the Company’s common stock, no par value per share (“Common Stock”), set forth opposite such Holder’s name on Exhibit A hereto;
G.    The Parties desire for each Holder to exchange, pursuant to the terms and conditions of this Agreement, all of the Series B Shares, Series C Shares and Warrants held by such Holder for shares of Common Stock (the “Exchange”); 
H.    The board of directors of the Company has received a written opinion from Keefe, Bruyette & Woods, Inc., dated the date hereof and subject to the factors, assumptions and limitations set forth therein, that the aggregate consideration to be provided by the Company for the Series B Shares, Series C Shares and Warrants is fair, from a financial point of view, to the Company; and
I.    As an inducement to the Holders to enter into this Agreement, the Company has agreed to provide the Holders with certain rights to representation on the Company’s Board of Directors as set forth in Article V.  
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and other agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

ARTICLE I
EXCHANGE OF SECURITIES; closing
1.1Exchange.  On the terms and subject to the conditions set forth in this Agreement, on the Closing Date (as defined below): 
(a)The Company shall issue to each Holder the number of shares of Common Stock set forth opposite such Holder’s name on Exhibit A hereto (the “Exchange Shares”) in exchange for the number of Series B Shares, Series C Shares and Warrants set forth opposite such Holder’s name on Exhibit A hereto, such number representing all of the Series B Shares, Series C Shares and Warrants owned by each such Holder.  Thereafter, the Holders shall cease to have any further right, title or interest in and to the Series B Shares, Series C Shares and Warrants, which shall cease to be outstanding effective on the Closing Date.
(b)Each Holder forfeits all unpaid Dividends on the Series B Shares and Series C Shares accrued to the Closing Date.
1.2Time and Place of Closing.  The closing of the Exchange (the “Closing”) shall take place on the fourth (4th) business day immediately following the date on which the conditions set forth in Article VII are satisfied (other than those conditions that by their nature are to be satisfied at the Closing or waived pursuant to this Agreement), or such other date as may be agreed upon by the Company and the Holders (the “Closing Date”). The Closing shall be held at the offices of O’Melveny & Myers LLP in Newport Beach, California.

ARTICLE II
CLOSING DELIVERIES
2.1Company Deliveries at Closing.  At the Closing, the Company shall execute, or shall deliver to each Holder, the following documents or instruments (the “Company Closing Deliveries”):
(a)Common Stock Certificates.  One or more Common Stock certificates to evidence the ownership by each Holder of the Exchange Shares set forth opposite such Holder’s name on Exhibit A, endorsed with restrictive legends(s) substantially in the form set forth in Section 8.1 below.
(b)Officers’ Certificate. A certificate executed by the President or Chief Financial Officer of the Company, in their capacities as such, certifying that (i) the representations and warranties of the Company set forth in Article III hereof are true and correct in all material respects (if not qualified as to materiality) and true and correct (if so qualified) as of the date of this Agreement and as of the Closing Date, and (ii) the Company has performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing. 
(c)Registration Rights Agreement. The Registration Rights Agreement, in the form attached as Exhibit B hereto, by and among the Company and the Holders (the “Registration Rights Agreement”), duly executed by the Company.
2.2Deliveries of the Holders.  At the Closing, each Holder shall execute, if applicable, and deliver to the Company, the following documents or instruments (the “Holder Closing Deliveries”): 
(a)Stock Certificates.  The stock certificates issued with respect to the Series B Shares and the Series C Shares issued to the Holder for cancellation.
(b)Warrants.  The common stock purchase warrant agreement(s) evidencing the Warrants issued to the Holder for cancellation.
(c)Officers’ Certificate. A certificate executed by an officer or general partner of the Holder, in their capacities as such, certifying that (i) the representations and warranties of the Holder set forth in Article IV hereof are true and correct in all material respects (if not qualified as to materiality) and true and correct (if so qualified) as of the date of this Agreement and as of the Closing Date, and (ii) the Holder has performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing. 

(d)Registration Rights Agreement. The Registration Rights Agreement, duly executed by such Holder.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Holders that the statements contained in this Article III are true and correct as of the date hereof.
3.1Organization of the Company and the Bank.
(a)The Company is a corporation duly organized, incorporated, validly existing and in good standing under the laws of California, and is a registered bank holding company under the BHCA.  Each of the Company and its subsidiaries, including the Bank, has the requisite corporate power and authority to own, lease and operate its respective properties and to carry on its business as it is now being conducted.  Each of the Company and its subsidiaries, including the Bank, is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that would not, individually or in the aggregate, have any material adverse effect on (i) the business, financial condition, results of operations or assets of the Company and its subsidiaries taken as a whole, or (ii) the ability of the Company to consummate the transactions contemplated by this Agreement.
(b)The copies of the Company’s Articles of Incorporation, as amended (the “Company Articles”), and Bylaws, as amended (the “Company Bylaws”), that are listed as exhibits to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 10-K”) are complete and correct copies thereof as in effect on the date hereof.  The Company is not in violation of any of the provisions of the Company Articles or Bylaws.
3.2Corporate Power; Due Authorization.  The Company has all requisite corporate power and authority to execute and deliver this Agreement, to issue the Exchange Shares and to carry out and perform its obligations under this Agreement.  No shareholder approval is required to issue the Exchange Shares and to carry out and perform the Company’s obligations under this Agreement.  The Company’s Board of Directors has duly approved and authorized the execution and delivery of and the performance by the Company of its obligations under this Agreement.  No other corporate proceedings on the part of the Company are necessary to approve and authorize the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.  This Agreement constitutes (or at the Closing will constitute, as applicable, and assuming this Agreement is a legally valid and binding obligation of the Holders) a valid and legally binding obligation of the Company, which is enforceable against it in accordance with its terms, except as the enforceability thereof may be subject to or limited by (a) bankruptcy, insolvency, reorganization, arrangement, moratorium, or other similar laws, now or hereafter in effect, relating to or affecting the rights of creditors, and (b) general equitable principles, regardless of whether the issue of enforceability is considered in a proceeding in equity or at law.
3.3No Conflict; Required Filings and Consents.
(a)The execution and delivery of this Agreement and the Registration Rights Agreement by the Company do not and the performance by the Company of this Agreement and the consummation of the transactions contemplated hereby and thereby will not (i) conflict with or violate any provision of the Company Articles or the Company Bylaws, (ii) conflict with, or breach or violate any “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K promulgated by the Securities and Exchange Commission) to which the Company or any of its subsidiaries is a party, any law, rule or regulation applicable to the Company or its subsidiaries, or any judgment, order or decree or other restriction of any court or of any government, regulatory body or administrative agency or other governmental authority or body, or (iii) result in any breach of or any loss of any material benefit under, constitute a change of control or default (or an event which with notice or lapse of time or both would become a default) under or give to others any right of termination, vesting, amendment, acceleration or cancellation of, or result in the creation of any mortgage, hypothecation, pledge, security interest, encumbrance, claim, lien (statutory or otherwise) or any similar types of restrictions or limitations on any property or assets of the Company or its subsidiaries or on the 

Exchange Shares pursuant to any contract or other agreement to which the Company or its subsidiaries is a party or to which the Company or its subsidiaries or any of their respective assets are subject,.
(b)Except as specified in Sections 7.2(a)(i) and 7.3(c), the execution and delivery of this Agreement and the Registration Rights Agreement by the Company do not, and the performance by the Company of this Agreement and the consummation of the transactions contemplated hereby and thereby will not, require the Company or the Bank to obtain any consent, approval, authorization or permit of, or to make any filing with or provide any notification to, any government, regulatory body or administrative agency or other governmental authority or body.  Other than as set forth in the respective Investor Rights Agreements entered into between the Company and SBAV on August 26, 2011 and the Company and the Carpenter Funds on February 28, 2011 (collectively, the “Investor Rights Agreements”), no shareholder of the Company has statutory or contractual pre-emptive rights to acquire additional shares of Common Stock of the Company.
3.4Capitalization.
(a)Authorized and Outstanding Capital Stock of the Company.  As of the date hereof, the authorized capital stock of the Company consists of (i) 2,000,000 shares of Preferred Stock, no par value per share, and (ii) 85,000,000 shares of the Common Stock.  As of the date hereof, (i) 190,000 shares of Preferred Stock, designated as the Series B-1 Convertible 8.4% Noncumulative Preferred Stock, are authorized, of which 37,000 shares are outstanding, (ii) 110,000 shares of Preferred Stock, designated as the Series B-2 Convertible 8.4% Noncumulative Preferred Stock, are authorized, of which 75,000 shares are outstanding, (iii) 300,000 shares of Preferred Stock, designated as Series C 8.4% Noncumulative Preferred Stock, are authorized, of which 35,225 shares are outstanding, (iv) aside from the Preferred Stock described in the immediately preceding clauses (i), (ii) and (iii), no other shares of Preferred Stock are designated or outstanding, and (v) 19,806,362 shares of Common Stock are outstanding.  All such outstanding shares of Preferred Stock and Common Stock are fully paid, nonassessable and free of preemptive rights (and were not issued in violation of preemptive rights).  No shares of the Preferred Stock or Common Stock are held in the treasury of the Company or by any of its subsidiaries.
(b)Options, Warrants, Reserved Shares.  As of the date hereof (i) 2,105,262 shares of Common Stock are reserved for issuance on conversion of Series B Shares, (ii) 662,123 shares of Common Stock are reserved for issuance on conversion of Series C Shares, (iii) 761,278 shares of Common Stock are reserved for issuance on exercise of the Warrants, and (iv) 1,229,598 shares of Common Stock are reserved for issuance on the exercise or vesting of stock options, restricted stock or other equity awards currently outstanding under the Company’s shareholder-approved equity incentive plans or otherwise available for future grant under such plans. 
3.5Valid Issuance of Exchange Shares.  When issued against receipt of the Series B Shares, the Series C Shares and the Warrants as provided in this Agreement, the Exchange Shares issued hereunder will be duly authorized and validly issued, fully paid and non-assessable, and, subject to accuracy of the representations and warranties of the Holders in Article IV, will be issued in compliance with applicable federal and state securities laws.  The Exchange Shares will be free and clear of any mortgage, hypothecation, pledge, security interest, encumbrance, claim, lien (statutory or otherwise) or any similar types of restrictions or limitations, other than (a) those created by or imposed upon the holders through any action of the Holders and (b) restrictions on transfer under state and/or federal securities laws.  Other than restrictions on transfer under state and/or federal securities laws, the Exchange Shares issued hereunder will not be subject to any preemptive rights, rights of first refusal or restrictions on transfer.
3.6Offering of the Exchange Shares.  Subject in part to, and assuming the accuracy of, the representations and warranties made by the Holders in Article IV hereof, the issuance of the Exchange Shares to the Holders pursuant to this Agreement will be exempt from the registration and prospectus delivery requirements of the Securities Act, and the securities registration and qualification requirements of the applicable securities laws of the states in which the Holders are resident based upon their addresses set forth in Exhibit A hereto.
3.7SEC Reports; Financial Statements.
(a)The Company has timely filed all registration statements, prospectuses, forms, reports, definitive proxy statements, schedules and other documents and filings required to be filed by it under the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as the case may be (the “SEC Reports”), since January 1, 2015.  None of the Company’s subsidiaries is required to file periodic reports with the Securities and Exchange Commission pursuant to the Exchange Act.  Each SEC Report (i) as of the time it was filed (or if subsequently 

amended, when amended), complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) did not, at the time it was filed (or if subsequently amended or superseded by an SEC Report, then, on the date of such subsequent filing), contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
(b)The Company’s consolidated financial statements (including, in each case, any notes thereto) contained in the 2014 10-K (the “Company Consolidated Financial Statements”) were prepared in accordance with generally accepted accounting principles as in effect in the United States of America (“GAAP”), applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or as may have been required by regulatory accounting principles applicable to the Company or the Bank) or, in the case of interim consolidated financial statements, where information and footnotes contained in such financial statements are not required to be in compliance with GAAP), and in each case such Company Consolidated Financial Statements fairly presented, in all material respects, the consolidated financial position, results of operations, cash flows and shareholders equity of the Company and its consolidated subsidiaries as of the respective dates thereof and for the respective periods covered thereby (subject, in the case of unaudited financial statements, to normal year-end adjustments which were not and which are not expected to be, individually or in the aggregate, material to the Company and its consolidated subsidiaries taken as a whole).
(c)Except as and to the extent set forth on the consolidated balance sheet of the Company as of December 31, 2014 (the “Company 2014 Balance Sheet”), between December 31, 2014 and the date hereof neither the Company nor any of its consolidated subsidiaries has incurred any debts, liabilities or obligations (whether accrued, absolute, contingent, liquidated or otherwise, whether due or to become due) of a nature that would be required to be reflected on a balance sheet or in notes thereto prepared in accordance with GAAP consistently applied, except for liabilities or obligations (i) that, in the aggregate, are adequately provided for in the Company 2014 Balance Sheet, or (ii) incurred in the ordinary course of business between December 31, 2014 and the date hereof that would not, individually or in the aggregate, have any material adverse effect on (x) the business, financial condition, results of operations or assets of the Company and its subsidiaries taken as a whole, or (y) the ability of the Company to consummate the transactions contemplated by this Agreement.
3.8Exchange Act Registration, NASDAQ.  
(a)The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and is listed on the NASDAQ Global Select Market and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or delisting the Common Stock from the NASDAQ Global Select Market, nor has the Company received any notification that the Securities and Exchange Commission or the NASDAQ Global Select Market is contemplating terminating such registration or listing.
(b)The Company is in compliance with the applicable listing and corporate governance rules and regulations of the NASDAQ Global Select Market, except where the failure to be in such compliance would not have, individually or in the aggregate, any material adverse effect on (i) the business, financial condition, results of operations or assets of the Company and its subsidiaries taken as a whole, or (ii) the ability of the Company to consummate the transactions contemplated by this Agreement.
3.9S-3 Eligibility.  The Company is eligible to use a registration statement on Form S-3 (or any successor form) to register the Holders’ resale of the Exchange Shares to be made on a continuous or delayed basis pursuant to Rule 415 under the Securities Act.
3.10No Integrated Offering.  The Company has not sold or issued, nor will sell or issue any securities that would be integrated with the offering of the Exchange Shares contemplated by this Agreement pursuant to the Securities Act and the rules and regulations or the interpretations thereunder of the Securities and Exchange Commission.  The Company will not make, directly or indirectly, any offers or sales of any security under circumstances that would require the transactions contemplated by this Agreement to be approved by the Company’s shareholders under applicable shareholder approval provisions, including, without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or designated.
3.11Section 16 Exemption.  The Company’s Board of Directors acknowledges that each of the Holders and their affiliates that currently file reports related to the Company pursuant to Section 16 of the Exchange Act 

considers itself to be and files Section 16 reports reflecting itself as a “director by deputization” as a result of the Board of Directors representation rights set forth in Article V hereof and in Section 5 of the Investor Rights Agreements.  In accordance with the exemption from Section 16(b) of the Exchange Act set forth in Rule 16b-3(d) and Rule 16b-3(e) promulgated under the Exchange Act, the Company’s Board of Directors has approved the transactions contemplated by this Agreement, including the Exchange and the issuance of the Exchange Shares to the Holders pursuant to the Exchange.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HOLDERS
Each Holder hereby represents and warrants, severally and not jointly, to the Company, as of the date hereof, the statements contained in this Article IV hereof are true and correct.
4.1Authorization; Corporate/Limited Liability Company/Partnership Power.  Such Holder is duly organized and validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as the case may be) and has all requisite corporate, limited liability company or partnership (as the case may be) power and authority to execute and deliver this Agreement, to receive the Exchange Shares it has agreed to receive hereunder and to carry out and perform its obligations under the terms of this Agreement and the transactions contemplated hereby.  Such Holder’s board of directors or other governing body (as the case may be) has duly approved and authorized the execution and delivery of and the performance by such Holder of its obligations under this Agreement.  No other corporate, limited liability or partnership proceedings (as the case may be) on the part of such Holder is necessary to approve and authorize the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.  This Agreement (or at the Closing will constitute, as applicable, and assuming this Agreement is a legally valid and binding obligation of the Company) constitutes a valid and legally binding obligation of such Holder, enforceable against it in accordance with its terms, except as the enforceability thereof may be subject to or limited by (i) bankruptcy, insolvency, reorganization, arrangement, moratorium, or other similar laws, now or hereafter in effect, relating to or affecting the rights of creditors, and (ii) general equitable principles, regardless of whether the issue of enforceability is considered in a proceeding in equity or at law.
4.2Agreement Not in Contravention; Consents.  The execution, delivery and performance of this Agreement, the Registration Rights Agreement and the consummation of the transactions contemplated hereby and thereby by such Holder do not and will not (i) conflict with or result in any breach of any of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in a violation of, (iv) give any third party the right to modify, terminate or accelerate, or cause the modification, termination or acceleration of, any right, benefit or liability under, (v) result in the creation of any mortgage, hypothecation, pledge, security interest, encumbrance, claim, lien (statutory or otherwise) or any similar types of restrictions or limitations upon the properties or assets of such Holder under, or (vi) other than the Carpenters’ FRBSF Approval (as defined in Section 6.3), require any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any court or of any government, regulatory body or administrative agency or other governmental authority or body or any other person, under the provisions including but not limited to (x) any provision of the articles of incorporation, partnership agreements, bylaws, the articles of formation, operating agreement or any other governing instruments of such Holder or its general partners or managers, (y) any contracts or agreements to which such Holder or its general partners or managers or any of their respective assets are subject or bound, or (z) any law, rule or regulation applicable to such Holder, or any judgment, order or decree or other restriction of any court or of any government, regulatory body or administrative agency or other governmental authority or body by which such Holder or its general partners or managers are bound or subject (except where such conflict, breach, default, violation, modification, termination, or acceleration, or failure to obtain any authority, consent, approval, exemption or other action or to give any notice or make any policy would not, either individually or in the aggregate, materially adversely affect the ability of such Holder to consummate the transactions contemplated by this Agreement).
4.3Title to Securities.  Such Holder has good and marketable and unencumbered title to the Series B Shares, Series C Shares and Warrants to be exchanged pursuant to this Agreement by such Holder.
4.4Purchase for Own Account.  The Exchange Shares to be received by such Holder hereunder will be acquired for investment and only for such Holder’s own account, not as a nominee or agent, and not with a view to 

the public resale or distribution thereof within the meaning of the Securities Act, and such Holder has no present intention of publicly selling, granting, any participation in, or otherwise distributing the same; provided, that, by making the representations herein, other than as set forth herein, such Holder does not agree to hold any of the Exchange Shares for any minimum period of time and reserves the right at all times to sell or otherwise dispose of all or any part of such Exchange Shares pursuant to an effective registration statement under the Securities Act or under an exemption from such registration (provided that such Holder complies with the conditions thereof) and in compliance with applicable federal and state securities laws.
4.5Disclosure of Information.  Such Holder or its officers or other representatives, acting on its behalf, have received or have had full access to all the information which it or they considered necessary or appropriate to make an informed investment decision with respect to the execution and delivery of this Agreement by it and consummation of the transactions contemplated hereby.  Such Holder or its officers or other representatives have had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Exchange Shares and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to such Holder or its officers or other representatives to which they or any of them had access.
4.6Investment Experience.  Such Holder is an experienced investor, having heretofore invested in a number of banks and bank holding companies, and such Holder further acknowledges and represents that: (a) it is able to fend for itself, can bear the economic risk of its investment in the Exchange Shares and has such knowledge and experience in financial or business matters that such Holder is capable of evaluating the merits and risk of this investment and/or (b) has a preexisting personal or business relationship, either directly through its officers, directors, managers or general partner, with the Company or its directors, executive officers or controlling persons of a nature and duration that enable such Holder to be aware of the character, business acumen and financial circumstances of such persons.
4.7Accredited Investor Status.  Such Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Securities Act, as amended.
4.8Restricted Securities.  Such Holder understands and agrees as follows: (a) the Exchange Shares constitute “restricted securities” under the Securities Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering, (b) subject to limited exceptions, the Exchange Shares may be not resold, disposed of or transferred, in whole or in part, without registration under the Securities Act, and (c) such Holder must bear the economic risk of this investment indefinitely unless the Exchange Shares are registered pursuant to the Securities Act, or an exemption from registration is available. 
4.9Residence.  If such Holder is a partnership, corporation, limited liability company or other entity, then such Holder resides in the office or offices of such Holder in which its investment decision was made, which is located at the address or addresses of such Holder set forth on Exhibit A hereto.
4.10Brokers’ and Finders’ Fees.  Neither such Holder, nor its officers, general partners, managers or any other person on its behalf, has incurred, and none of them will incur, directly or indirectly, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this Agreement or any of the transactions contemplated hereby.

ARTICLE V
ADDITIONAL AGREEMENTS
5.1SBAV Board Representation.
(a)Appointment to Company Board of Directors and Committees.  On the Closing Date, and provided the Parties have consummated the Exchange, the Company will appoint, on the terms and conditions set forth hereinafter in this Section 5.1, one (1) individual designated in writing by SBAV, LP (“SBAV”) who meets the qualifications to be an SBAV Nominee (as defined in Section 5.4) to become a member of the respective Boards of Directors of the Company and the Bank to serve until the next annual meeting of shareholders and until a successor director to such SBAV Nominee is elected and qualified.  Any appointment of a new SBAV Nominee shall be effective on the date as of which all approvals or clearances required to be received from the Federal Reserve Bank of San Francisco (the “FRBSF”) or the Commissioner of the Department of Business Oversight of the State of California 

(“DBO”) for appointments to the Board of Directors have been received.  Effective upon appointment to the Company’s Board of Directors, the SBAV Nominee will be eligible (but not required) to serve as a member of the committees of the Board of Directors of the Company as determined by the Company’s Board of Directors, provided that the SBAV Nominee satisfies the requirements under applicable laws, rules and regulations, including NASDAQ rules, with regard to the appointment of members and their service on such committees.  
(b)Effect of Changes in Beneficial Ownership on Director Appointment Rights.  From and after the Closing and for so long as SBAV and its affiliates Beneficially Own (as defined in Section 5.4) in the aggregate shares of Common Stock equal in number to at least 50% of the SBAV Purchased Shares (as defined in Section 5.4), (i) the Company’s and the Bank’s Boards of Directors will nominate the SBAV Nominee, or any person designated by SBAV to serve in his place (provided such person meets the qualifications to be an SBAV Nominee), for election, and shall recommend to the Company’s and the Bank’s shareholders that they vote to elect such SBAV Nominee, to the Company’s and the Bank’s Board of Directors for an additional one year term at each shareholders meeting at which directors are elected.  
(c)Filling of Vacancy in SBAV Board Position.  If the SBAV Nominee ceases to serve as a director of the Company and/or the Bank, as the case may be, for any reason, while SBAV has the right to nominate an SBAV Nominee pursuant to this Section 5.1, the Company shall cause the vacancy or vacancies created thereby to be filled by appointment of an individual designated in writing by SBAV, subject to the Company’s Board of Directors’ reasonable approval of the qualifications of such designated individual to be a SBAV Nominee. 
(d)Failure of SBAV Nominee to be Elected by Shareholders.  
(i)If a SBAV Nominee is nominated by the Company for election to the Board of Directors of the Company or the Bank pursuant to this Section 5.1, but fails to be elected by the Company’s shareholders, then, subject to the proviso in Section 5.1(d)(ii) below, the Company or the Bank shall, as soon as reasonably practicable thereafter, increase the size of such Board of Directors, if required, and appoint an individual (different from the individual who was not elected) who SBAV designates in writing and who is determined, in accordance with the process set forth in Section 5.1(a) above, to qualify as a SBAV Nominee. 
(ii)If an increase in the size of the Board of Directors is required by Section 5.1(d)(i) above, and a corresponding increase to maintain an odd number of directors is required, then the Company and/or the Bank shall make such corresponding increase and the respective Board of Directors shall appoint an individual to fill the vacancy created thereby; provided, however, that no increase in the size of the Board of Directors or of the Bank shall be required by this Section 5.1(d) if it would cause the size of the Company’s Board of Directors or the Bank to exceed the maximum size permitted under the Company’s or the Bank’s articles of incorporation or bylaws and, in such event, the Company and/or the Bank, as the case may be, shall use its respective commercially reasonable efforts to amend its articles of incorporation or bylaws to increase the number of directorships necessary to appoint such SBAV Nominee or such additional director (as the case may be), including, without limitation, submitting a proposal to amend the articles of incorporation or bylaws to increase the maximum number of authorized directors to a vote of shareholders at the Company’s next annual meeting of shareholders. 
(e)Director Compensation. The SBAV Nominee shall receive the same compensation, indemnification, insurance, advancement of expenses and other similar compensatory rights in connection with his or her role as a non-employee director as the other non-employee members of the Board of Directors, and the SBAV Nominee shall be entitled to reimbursement for reasonable out-of-pocket expenses incurred in attending meetings of the Board of Directors or any committee thereof, to the same extent as the other non-employee members of the Board of Directors. The Company shall notify the SBAV Nominee of all regular meetings and special meetings of the Board of Directors (and each written consent in lieu of a meeting) and of all regular and special meetings of any committee of the Board of Directors on which he or she serves (and each written consent in lieu of a meeting) to the same extent as other directors or committee members are so notified. The Company and the Bank shall provide the SBAV Nominee with copies of all notices, minutes, consents, documents, information, presentations, data and other material that it provides to all other members of the Board of Directors concurrently as such materials are provided to the other members and shall provide other information as is reasonably requested. 
5.2Carpenter Board Representation.

(a)Appointment to Company Board of Directors and Committees. On the Closing Date, and provided the Parties have consummated the Exchange, the Company will appoint, on the terms and conditions set forth hereinafter in this Section 5.2, three (3) individuals, designated in writing by Carpenter Community BancFund, L.P. and Carpenter Community BancFund-A, L.P. (together, the “Carpenter Funds”), who meet the qualifications to be a Carpenter Nominee (as defined in Section 5.4) to become members of the respective Boards of Directors of the Company and the Bank to serve until the next annual meeting of shareholders and until a successor director to such Carpenter Nominee is elected and qualified; provided, however, that at least one Carpenter Nominee shall also meet the qualifications to be a Carpenter Independent Director Nominee. Any appointment of a new Carpenter Nominee shall be effective on the date as of which all approvals or clearances required to be received from the FRBSF or the DBO for appointments to the Board of Directors have been received. Effective upon his or her appointment to the Company’s Board of Directors, each Carpenter Nominee will be eligible (but not required) to serve as a member of the committees of the Board of Directors of the Company as determined by the Company’s Board of Directors, provided that such Carpenter Nominee satisfies the requirements under applicable laws, rules and regulations, including NASDAQ rules, with regard to the appointment of members and their service on such committees. In addition, and for the avoidance of doubt, following his or her appointment to the Company Board of Directors, the Carpenter Independent Director Nominee, if he or she meets the requirements of Rule 10A-3 under the Exchange Act, will be eligible to serve as a member of the Audit Committee of the Board of Directors of the Company as determined by the Board of Directors of the Company. 
(b)Effect of Changes in Beneficial Ownership on Director Appointment Rights. The respective Boards of Directors of the Company and the Bank shall nominate the Carpenter Nominees, or any person designated by the Carpenter Funds to serve in any Carpenter Nominee’s place (provided such person meets the qualifications to be a Carpenter Nominee or Carpenter Independent Director Nominee, as applicable), for election, and shall recommend to the Company’s and the Bank’s shareholders that they vote to elect such Carpenter Nominee, to the Company’s and the Bank’s Board of Directors for an additional one year term at each shareholders meeting at which directors are elected, until the Carpenter Funds Beneficially Own (as defined in Section 5.4) a lesser percentage of Carpenter Purchased Shares (as defined in Section 5.4) as follows: 
(i)Subject in all cases to the limitations set forth in subparagraph (iv) of this Section 5.2(b) below, if the Carpenter Funds Beneficially Own in the aggregate shares of Common Stock equal in number to at least 78% of the Carpenter Purchased Shares, the Carpenter Funds may designate three (3) Carpenter Nominees, one (1) of whom meets the qualifications to be a Carpenter Independent Director Nominee to become and serve as a member of the respective Boards of Directors of the Company and the Bank; 
(ii)Subject in all cases to the limitations set forth in subparagraph (iv) of this Section 5.2(b) below, if the Carpenter Funds Beneficially Own in the aggregate shares of Common Stock equal in number to at least 50% but less than 78% of the Carpenter Purchased Shares, then the number of Carpenter Nominees who may be appointed or elected to and serve on the respective Boards of Directors of the Company and the Bank shall be reduced to two (2), one (1) of whom meets the qualifications to be a Carpenter Independent Director Nominee; 
(iii)Subject in all cases to the limitations set forth in subparagraph (iv) below, if the Carpenter Funds Beneficially Own in the aggregate shares of Common Stock equal in number to at least 25% but less than 50% of the Carpenter Purchased Shares, then the number of Carpenter Nominees who may be appointed or elected to and serve on the respective Boards of Directors of the Company and the Bank shall be reduced to one (1); and 
(iv)Notwithstanding anything to the contrary that may be contained elsewhere in this Section 5.2 or in this Section 5.2(b), in no event shall the Carpenter Funds be entitled to designate a number of individuals for appointment or election to the respective Boards of Directors of the Company and the Bank which exceeds the product of: (i) the percentage of the Company’s outstanding Common Stock then Beneficially Owned by the Carpenter Funds, and (ii) as applicable, the total number of directors on the respective Boards of Directors of the Company and the Bank, provided that if such product is not a whole number, it shall be rounded up to the next whole number and provided, further, in no event shall this subparagraph (iv) entitle the Carpenter Funds to designate a number of individuals for appointment or election to the respective Boards of Directors of the Company and the Bank pursuant to this Section 5.2 which exceeds the number permitted by whichever of subparagraphs (i), (ii) or (iii) of this Section 5.2(b) is then applicable. 

(c)Filling of Vacancies in Carpenter Board Positions. If a Carpenter Independent Director Nominee or a Carpenter Nominee ceases to serve as a director of the Company and/or the Bank, as the case may be, for any reason, while the Carpenter Funds would otherwise have the right to nominate such Carpenter Independent Director Nominee or Carpenter Nominee pursuant to this Section 5.2, the Company shall cause the vacancy or vacancies created thereby to be filled by appointment of an individual designated in writing by the Carpenter Funds, subject to the Company’s Board of Directors’ reasonable approval of the qualifications of such designated individual to be a Carpenter Independent Director Nominee or a Carpenter Nominee, as the case may be. 
(d)Failure of Carpenter Nominee to be Elected by Shareholders.
(i)If a Carpenter Independent Director Nominee or Carpenter Nominee is nominated by the Company for election to the Board of Directors of the Company or the Bank pursuant to this Section 5.2, but fails to be elected by the Company’s shareholders, then, subject to the proviso in Section 5.2(d)(ii) below, the Company or the Bank shall, as soon as reasonably practicable thereafter, increase the size of such Board of Directors, if required, and appoint an individual (different from the individual who was not elected) who the Carpenter Funds designate in writing and who is determined, in accordance with the process set forth in Section 5.2(a) above, to qualify as a Carpenter Independent Director Nominee or a Carpenter Nominee, as the case may be. 
(ii)If an increase in the size of the Board of Directors is required by Section 5.2(d)(i) above, and a corresponding increase to maintain an odd number of directors is required, then the Company and/or the Bank shall make such corresponding increase and the respective Board of Directors shall appoint an individual to fill the vacancy created thereby; provided, however, that no increase in the size of the Board of Directors or of the Bank shall be required by this Section 5.2(c) if it would cause the size of the Company’s or the Bank’s Board of Directors to exceed the maximum size permitted under the Company’s or the Bank’s articles of incorporation or bylaws and, in such event, the Company and/or the Bank, as the case may be, shall use its respective commercially reasonable efforts to amend its articles of incorporation or bylaws to increase the number of directorships necessary to appoint such Carpenter Independent Director Nominee or Carpenter Nominee or such additional director (as the case may be), including, without limitation, submitting a proposal to amend the articles of incorporation or bylaws to increase the maximum number of authorized directors to a vote of shareholders at the Company’s next annual meeting of shareholders.
(e)Director Compensation. The Carpenter Nominees shall receive the same compensation, indemnification, insurance, advancement of expenses and other similar compensatory rights in connection with his or her role as a non-employee director as the other non-employee members of the Board of Directors, and the Carpenter Nominees shall be entitled to reimbursement for reasonable out-of-pocket expenses incurred in attending meetings of the Board of Directors or any committee thereof, to the same extent as the other non-employee members of the Board of Directors. The Company shall notify the Carpenter Nominees(s) of all regular meetings and special meetings of the Board of Directors (and each written consent in lieu of a meeting) and of all regular and special meetings of any committee of the Board of Directors on which they serve (and each written consent in lieu of a meeting) to the same extent as other directors or committee members (as the case may be) are so notified. The Company and the Bank shall provide the Carpenter Nominees with copies of all notices, minutes, consents, documents, information, presentations, data and other material that it provides to all other members of the Board of Directors concurrently as such materials are provided to the other members and shall provide other information as is reasonably requested. 
5.3Related Party Transactions.  The approval of the independent directors on the Company’s Board of Directors shall be required for any proposed transaction, or a series of related transactions, involving more than one million ($1,000,000), between the Company and the Bank and (i) any director or executive officer of the Company or the Bank, (ii) any nominee for election as a director of the Company or the Bank, and (iii) any security holder who is known to the Company to own of record or beneficially more than 5% of any class of the Company’s voting securities, or (iv) any affiliate of or member of the immediate family of any of the foregoing persons (each, a “Related Party Transaction”); provided that no independent director who is not disinterested with respect to the transaction shall be entitled to vote on the approval of the transaction; and provided further, that if the value of a Related Party Transaction exceeds five million ($5,000,000), the Company or the Bank must first obtain a written opinion from a nationally-recognized investment bank reasonably acceptable to the Company’s independent directors who are not disinterested with respect to the transaction opining that the Related Party Transaction is fair from a financial point of view to the Company or the Bank, as applicable.  Notwithstanding the foregoing, however, the foregoing requirement shall not 

apply to any loan or extension of credit or any other banking transaction in the ordinary course of the Bank’s business that is on arms-length terms and which complies with applicable banking laws and regulations.
5.4Definitions.  Capitalized terms used in this Article V but not otherwise defined herein shall have the meanings set forth below:
(a)“Beneficial Ownership” or “Beneficially Owned” (when used with reference to shares of the Company’s Common Stock) shall be determined in accordance with Rule 13d-3 under the Exchange Act. Notwithstanding anything to the contrary that may be contained herein or in Rule 13d-3 under the Exchange Act, however, if two or more persons would be deemed, under Rule 13d-3, to share Beneficial Ownership of any shares of the Company’s Common Stock, the number of such shares of the Company’s Common Stock shall be computed without duplication.
(b)“Carpenter Independent Director Nominee” means an individual designated in writing by the Carpenter Funds to serve as a director of the Company and the Bank who satisfies the qualifications of a Carpenter Nominee and will qualify, on his or her appointment or election, under the then applicable definition of “independent director” as defined in NASDAQ Marketplace Rule 5605(a)(2) (or any similar requirement that may become applicable hereafter to the Company), to the extent necessary to enable the Company or the Bank to meet applicable NASDAQ rules, or any other applicable stock exchange or SEC rules, requiring Boards of Directors to be comprised of a majority of independent directors.  As of the date hereof, Michael P. Hoopis, a current member of the Board of Directors of the Company and the Bank, is designated by the Carpenter Funds to be the Carpenter Independent Director Nominee. 
(c)“Carpenter Nominee” means an individual designated in writing by the Carpenter Funds to serve as a director of the Company and the Bank and who satisfies the following qualifications: (i) is reasonably acceptable to the Company, and (ii) satisfies all regulatory requirements and receives all regulatory approvals to serve as a director of the Company and the Bank.  As of the date hereof, Edward J. Carpenter and John D. Flemming, current members of the Board of Directors of the Company and the Bank, are designated by the Carpenter Funds to be the Carpenter Nominees.
(d)“Carpenter Purchased Shares” means the Exchange Shares issued to the Carpenter Funds under this Agreement as set forth opposite their respective names on Exhibit A hereto and the 4,201,278 shares of the Company’s common stock purchased by the Carpenter Funds pursuant to that certain Amended and Restated Common Stock Purchase Agreement dated as of February 28, 2012 by and among the Company and the Carpenter Funds.
(e)“SBAV Nominee” means an individual designated in writing by SBAV to serve as a director of the Company and the Bank who satisfies the following qualifications: (i) is reasonably acceptable to the Company, (ii) meets the then applicable definition of “independent director” as defined in NASDAQ Marketplace Rule 5605(a)(2) (or any similar requirements that may become applicable hereafter to the Company), to the extent necessary to enable the Company or the Bank to meet applicable NASDAQ rules, or any other applicable stock exchange or SEC rules, requiring Boards of Directors to be comprised of a majority of independent directors and (iii) satisfies all regulatory requirements and receives all regulatory approvals to serve as a director of the Company or the Bank.  As of the date hereof, Daniel A. Strauss, a current member of the Board of Directors of the Company and the Bank, is designated by SBAV to be the SBAV Nominee.
(f)“SBAV Purchased Shares” means the Exchange Shares issued to SBAV under this Agreement as set forth opposite SBAV’s name on Exhibit A hereto.

ARTICLE VI
CLOSING COVENANTS

6.1Reasonable Best Efforts.  Subject to the terms and conditions of this Agreement, the Company and each of the Holders agrees to use their commercially reasonable best efforts in good faith to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable so as to enable the Company to issue, and each Holder to receive, the Exchange Shares and to consummate the other transactions contemplated hereby which are required to be performed prior to or at the Closing Date, including the satisfaction of 

the conditions set forth in this Agreement, and the Parties shall cooperate fully with each other to that end; provided that, for purposes of this Section 6.1, “commercially reasonable best efforts” shall not require any Party to comply with any condition that such Party sell, transfer, dispose of, divest or otherwise encumber, or hold separate, before or after the Closing, of any assets, licenses, operations, rights, product lines, businesses or interest therein of such Party (or any of such Party’s subsidiaries or affiliates).
6.2Company Application for Regulatory and Listing Approval.  The Company shall use its commercially reasonable best efforts as soon as reasonably practicable following the date hereof and prior to the Closing Date to (a) prepare and file all necessary applications, filings, notifications or other submissions, if any, with respect to this Agreement and the issuance of the Exchange Shares required by (i) the FRBSF, and (ii) the NASDAQ Global Select Market; provided, that, subject to the proviso set forth in Section 6.1, each Holder shall reasonably cooperate with the Company in connection with the preparation and making of all such filings; and (b) receive any necessary approval from the FRBSF to issue the Exchange Shares and consummate the transactions contemplated hereby (the “Company FRBSF Approval”).
6.3Carpenter Funds Application for Regulatory Approval.  The Carpenter Funds shall use their commercially reasonable best efforts as soon as reasonably practicable following the date hereof and prior to the Closing Date to (a) prepare and file all necessary applications, filings, notifications or other submissions, if any, with respect to this Agreement and the receipt of the Exchange Shares required by the FRBSF; provided, that, subject to the proviso set forth in Section 6.1, the Company shall reasonably cooperate with the Carpenter Funds in connection with the preparation and making of all such filings; and (b) receive any necessary approval from the FRBSF to acquire the Exchange Shares and consummate the transactions contemplated hereby (the “Carpenters’ FRBSF Approval”).

ARTICLE VII
CONDITIONS TO OBLIGATIONS TO CLOSE
7.1Conditions to the Parties’ Obligations to Close.  The respective obligations of each Party to consummate the transactions to be consummated pursuant to this Agreement on the Closing Date shall be subject to the satisfaction on or prior to the Closing Date of the following conditions, any or all of which may be waived in writing, in whole or in part, to the extent permitted by Section 10.7.
7.2Conditions Precedent to Consummation of this Agreement by All Parties.  
(a)FRBSF Approvals.  
(i)The Company FRBSF Approval, if any is required, shall have been received and such approval shall not contain any conditions, restrictions or requirements which would reasonably be expected to impose any burdensome conditions on any of the Parties or have any material adverse effect on (i) the business, financial condition, results of operations or assets of the Company and its subsidiaries taken as a whole, or (ii) the ability of the Parties to consummate the transactions contemplated by this Agreement.
(ii)The Carpenters’ FRBSF Approval shall have been received and such approval shall not contain any conditions, restrictions or requirements which would reasonably be expected to impose any burdensome conditions on the Carpenter Funds or their affiliates or subsidiaries or have any material adverse effect on (i) the business, financial condition, results of operations or assets of the Carpenter Funds or their affiliates or subsidiaries, or (ii) the ability of the Parties to consummate the transactions contemplated by this Agreement.
(b)No Order; No Litigation.  No government, regulatory body or administrative agency or other governmental authority or body, nor any federal or state court of competent jurisdiction or arbitrator, shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, judgment, injunction or arbitration award or other order (in each case, whether temporary, preliminary or permanent) which is in effect and prevents or prohibits consummation of the transactions contemplated by this Agreement and no litigation or court or administrative proceedings shall be pending against any of the Parties by any government, regulatory body or administrative agency or other governmental authority or body or other third party seeking to restrain, enjoin, prevent or otherwise prohibit consummation of the transactions contemplated hereby.

7.3Conditions Precedent to Consummation of this Agreement by the Holders.
(a)Representations and Warranties of the Company.  The representations and warranties of the Company set forth in this Agreement shall have been true and correct in all material respects (if not qualified as to materiality) and true and correct (if so qualified) when made and as of the Closing Date.
(b)Performance of Covenants by the Company.  The Company shall have performed in all material respects all of its agreements and covenants in this Agreement required to be performed by it in order for the Parties to execute and deliver this Agreement and consummate the transactions contemplated hereby.
(c)NASDAQ Global Select Market.  The Common Stock (i) shall be listed on the NASDAQ Global Select Market and (ii) shall not have been suspended, as of the Closing Date, by the SEC or the NASDAQ Global Select Market from trading on the NASDAQ Global Select Market nor shall suspension by the SEC or the NASDAQ Global Select Market have been threatened, as of the Closing Date, either (1) in writing by the SEC or the NASDAQ Global Select Market or (2) by falling below the minimum listing maintenance requirements of the NASDAQ Global Select Market.
(d)Delivery of Securities for Exchange.  All of the Holders shall have satisfied and delivered the Holder Closing Deliveries required pursuant to Section 2.2(a)-(b) above.
(e)Delivery of Company Closing Deliveries.  The Company shall have satisfied and delivered the Company Closing Deliveries required pursuant to Section 2.1 above.
(f)No Material Adverse Effect.  There shall not have been since June 30, 2015 any material adverse effect on (i) the business, financial condition, results of operations or assets of the Company and its subsidiaries taken as a whole, or (ii) the ability of the Company to consummate the transactions contemplated by this Agreement.
7.4Conditions Precedent to Consummation of this Agreement by the Company.
(a)Representations and Warranties of the Holders.  The representations and warranties of each of the Holders set forth in this Agreement shall have been true and correct in all material respects (if not qualified as to materiality) and true and correct (if so qualified) when made and as of the Closing Date.
(b)Performance of Covenants of Holders.  Each of the Holders shall have performed in all material respects all of its respective agreements and covenants in this Agreement required to be performed by it in order for the Parties to execute and deliver this Agreement and consummate the transactions contemplated hereby.
(c)Delivery of the Holder Closing Deliveries.  Each of the Holders shall have satisfied and delivered the Holder Closing Deliveries required by it pursuant to Section 2.2 above.
(d)SBAV Ownership of Company Common Stock. SBAV shall not have purchased or otherwise acquired shares of Common Stock such that completion of the transactions contemplated by this Agreement would cause SBAV’s pro forma ownership to increase to more than 9.9% of the total shares of Common Stock outstanding following consummation of the transactions contemplated hereby.

ARTICLE VIII
ADDITIONAL AGREEMENTS OF THE PARTIES
8.1Legends.  Each Holder acknowledges that all certificates or other instruments representing the Exchange Shares subject to this Agreement may, at the option of the Company, bear a restrictive legend substantially to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND SUCH SECURITIES MAY NOT BE SOLD, OTHERWISE DISPOSED OF OR TRANSFERRED, IN WHOLE OR IN PART, EXCEPT PURSUANT TO A REGISTRATION STATEMENT RELATING THERETO UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS OR SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 

144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Upon the written request of a Holder, the Company shall cause the restrictive legend required by this Section 8.1 to be removed from the stock certificate(s) representing the Exchange Shares issued to such Holder pursuant to this Agreement by issuing a new stock certificate(s) to such Holder without the restrictive legend or by electronically delivering such Exchange Shares to the applicable balance account at the Depository Trust Company (“DTC”), if, unless otherwise required by state securities laws, (i) such Exchange Shares are registered for resale under the Securities Act, (ii) in connection with a sale, assignment or other transfer, such Holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Exchange Shares may be made without registration under the applicable requirements of the Securities Act, or (iii) the Exchange Shares can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities Act.  The Company shall be responsible for the fees of its transfer agent and all DTC fees associated with the removal of the restrictive legend and the reissuance of the Exchange Shares.  Each Holder shall have the right to pay such fees otherwise payable by the Company to its transfer agent and DTC on behalf of the Company, and the Company agrees to promptly reimburse such Holder for any such fees paid by such Holder.  Payment by the Holder of such fees on behalf of the Company shall not prejudice or act as a waiver of any other rights of such Holder under this Agreement.
8.2Listing.  The Company shall use commercially reasonable efforts to maintain the listing of the Exchange Shares on the NASDAQ Global Select Market or such other national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed.
8.3Additional Registration Statements.  Until the date that is ninety (90) calendar days from the earlier of (a) the Effective Date (as defined in the Registration Rights Agreement) and (b) the date all of the Registrable Securities (as defined in the Registration Rights Agreement) may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, the Company will not file a registration statement under the Securities Act relating to securities that are not the Exchange Shares, except for a registration statement with respect to shares issuable pursuant to any of the Company’s “employee benefit plans” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended.

ARTICLE IX
TERMINATION
9.1Termination.  This Agreement may be terminated, and the issuance of the Exchange Shares by the Company to the Holders and the other transactions contemplated hereby may be abandoned, at any time prior to the Closing Date:
(a)By either the Company or any Holder (with respect to such Holder’s rights and obligations under this Agreement), if the Closing Date shall not have occurred on or before September 30, 2015 (the “Termination Date”); provided, however, that the right to terminate this Agreement under this Section 9.1 shall not be available to any Party whose failure to fulfill any of its obligations under this Agreement (other than the requirement of the Company to have received the Company FRBSF Approval and the Carpenter Funds to have received the Carpenters’ FRBSF Approval) shall have been a principal reason for or a principal cause of the failure of the Closing Date to occur on or before such Termination Date;
(b)By either the Company or any Holder, if any government, regulatory body or administrative agency or other governmental authority or body shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement;
(c)By a Holder (with respect to such Holder’s rights and obligations under this Agreement) if an event or act occurs or circumstances exist which makes any of the conditions precedent set forth in Section 7.2 or Section 7.3 incapable of being satisfied on or prior to the Termination Date, provided that such event, act or circumstance was not due primarily to or caused primarily by any action or inaction by such Holder; or
(d)By the Company if an event or act occurs or circumstances exist which makes any of the conditions precedent set forth in Section 7.2 or Section 7.4 incapable of being satisfied on or prior to the Termination 

Date, provided that such event, act or circumstance was not due primarily to or caused primarily by any action or inaction by the Company.

ARTICLE X
MISCELLANEOUS
10.1Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury.
(a)Governing Law.  This Agreement shall be deemed to be made in and in all respects shall be interpreted, construed and governed by and in accordance with the law of the state of California.
(b)Consent to Jurisdiction.  Each Party irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction any state or federal court sitting in the County of Orange, State of California, in any proceeding arising out of or relating to this Agreement or the agreements delivered in connection herewith or the transactions contemplated hereby or thereby or for recognition or enforcement of any judgment relating thereto, and each Party hereby irrevocably and unconditionally (i) agrees not to commence any such proceeding except in such courts, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such courts, (ii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such proceeding, and (iv) waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such proceeding.  Each Party hereto agrees that a final non-appealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law.  Each Party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.4.  Nothing in this Agreement will affect the right of any Party to this Agreement to serve process in any other manner permitted by applicable law.
(c)Waiver of Jury Trial.  Each Party acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues, and therefore each such Party hereby irrevocably and unconditionally waives any right such Party may have to a trial by jury in respect of any litigation directly or indirectly arising out of or relating to this Agreement or the transactions contemplated by this Agreement.  Each Party certifies and acknowledges that (i) no representative, agent or attorney of any other Party has represented, expressly or otherwise, that such other Party would not, in the event of litigation, seek to enforce the foregoing waiver, (ii) each such Party understands and has considered the implications of this waiver, (iii) each such Party makes this waiver voluntarily, and (iv) each such Party has been induced to enter into this Agreement by, among other things, the waivers and certifications in this Section 10.1.
10.2Specific Performance.  The Parties hereto agree that irreparable damage could occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the Parties shall be entitled to seek an injunction or injunctions, without the posting of any bond, to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.
10.3Press Releases.  The Company and the Holders shall consult with each other before issuing any press release with respect to this Agreement or the transactions contemplated hereby and shall not issue any such press release or make any such public statements without the prior consent of the other Parties, which shall not be unreasonably withheld or delayed; provided, however, that a Party may, without the prior consent of the other Parties (but after such consultation, to the extent practicable under the circumstances), issue such press release or make such public statements as may, upon the advice of outside counsel, be required by law or the rules or policies of the NASDAQ Global Select Market.
10.4Notices.  Any notice or other communication under this Agreement must be in writing and will be deemed given when it is delivered in person or sent by facsimile or email (with proof of receipt at the facsimile number or email address to which it is required to be sent), on the business day after the day on which it is delivered to a major nationwide delivery service for overnight delivery, or on the fifth business day after the day on which it is mailed by first class mail from within the United States, to the following addresses (or such other address as may be specified after the date of this Agreement by the Party to which the notice or communication is sent):

If to the Company:
Pacific Mercantile Bancorp
949 South Coast Drive, Suite 300
Costa Mesa, California 92626
Attn.    Robert E. Sjogren
Tel: (714) 438-2500
Fax: (714) 438-1084
With a copy to:
O’Melveny & Myers LLP
610 Newport Center Drive, 17th Floor
Newport Beach, CA 92660
Attn:    J. Jay Herron and Shelly Heyduk 
Tel: (949) 823-6922
Fax: (949) 823-6994
If to the Holders: to the address set forth on Exhibit A.
10.5Entire Agreement.  This Agreement, the Exhibits hereto and any documents executed by the Parties simultaneously herewith represent the entire understanding and agreement of the Parties with reference to the transactions set forth herein and supersede all prior understandings and agreements (written or oral) made by the Parties.  Except as otherwise expressly provided herein, no Person other than the Parties hereto shall have any right hereunder or be entitled to the benefit of any provision hereof.
10.6No Assignment; Successors and Assigns.  No Party hereto may assign any of its rights or delegate any of its duties under this Agreement, except that the Holders may assign any such rights (but only with all related obligations) to their respective affiliates; provided that (a) prior to such assignment, the Company is furnished with written notice stating the name and address of such assignee, and (b) such assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement.  Subject to the foregoing restriction on assignment, the provisions hereof shall inure to the benefit of, and be binding upon, the successors and permitted assigns of the Parties hereto.
10.7Waiver and Amendment.  Except with respect to statutory requirements, and subject to the provisions of the last sentence of this Section 10.7, any Party hereto may by written instrument extend the time for the performance of any of the obligations or other acts of the other Party and may waive (a) any inaccuracies of the other in the representations or warranties contained in this Agreement or in any document delivered pursuant hereto, (b) compliance with any of the covenants, undertakings or agreements of the other Party, or satisfaction of any of the conditions to its obligations, contained in this Agreement or (c) the performance (including performance to the satisfaction of a Party or its counsel) by the other Party of any of its obligations set out herein.  No failure or delay on the part of either Party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  Except as otherwise expressly provided in this Agreement, an amendment of this Agreement or the waiver or modification of any provision of this Agreement will be effective only upon the written consent of (i) the Company, on the one hand, and (ii) the Holders, on the other hand.
10.8Headings.  The headings of the various sections and subsections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of or be considered in connection with the interpretation of any of the terms or provisions of this Agreement.
10.9Severability.  In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect in any jurisdiction, as to such jurisdiction, such provision shall be ineffective to the extent of such invalidity, illegality or unenforceability, and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

10.10Counterparts.  This Agreement may be executed in one or more counterparts, and by the different Parties hereto in separate counterparts, each of which executed counterparts, and any photocopies and facsimile copies thereof, shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.
[Signatures of Parties follow on next page.]

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed, where applicable by their duly authorized representatives, as of the date first above written.
	
				
	COMPANY:
	 
	PACIFIC MERCANTILE BANCORP

	 
	By:
	 
	/s/ Steven K. Buster

	 
	 
	Name:
	Steven K. Buster

	 
	 
	Title:
	President & CEO

	 
	 
	 
	 

	HOLDERS:
	 
	SBAV LP

	 
	By:
	 
	SBAV GP LLC, its General Partner

	 
	 
	By:
	/s/George Hall

	 
	 
	Name:
	George Hall

	 
	 
	Title:
	Managing Member

	 
	 
	 
	 

	 
	 
	CARPENTER COMMUNITY BANCFUND, L.P.; and CARPENTER COMMUNITY BANCFUND-A L.P.

	 
	By:
	 
	CARPENTER FUND MANAGER GP, LLC, their General Partner

	 
	 
	By:
	/s/ John D. Flemming

	 
	 
	Name:
	John D. Flemming

	 
	 
	Title:
	Managing Member

[Signature Page to Exchange Agreement]

EXHIBIT A
	
					
	Holder
	Series B Shares
	Series C Shares
	Warrants
	Exchange Shares

	SBAV, LP
	75,000
	23,597
	352,444
	2,015,055

	Carpenter Community BancFund, LP 
	1,256
	384
	13,900
	33,745

	Carpenter Community BancFund-A, LP 
	35,744
	11,244
	394,934
	960,348

	 
	 
	 
	 
	 

	Totals:
	112,000
	35,225
	761,278
	3,009,148

Addresses of Holders
SBAV, LP
c/o Clinton Group, Inc.
601 Lexington Avenue
51st Floor
New York, NY 10022
Attention: George Hall
Daniel Strauss
Facsimile: (212) 825-0084

With a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Attention: Joseph Vitale
Facsimile: (212) 593-5955

Carpenter Funds
5 Park Plaza, Suite 950
Irvine, CA 92614
Attention: John Flemming

With a copy to:
Sheppard, Mullin, Richter & Hampton LLP
650 Town Center Drive
Fourth Floor
Costa Mesa, CA 92626
Attention: Joshua A. Dean
Facsimile: (714) 428-5991

A-1

EXHIBIT B
Registration Rights Agreement
See attached.

A-2

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