Document:

EX-10.1

 Exhibit 10.1 

FIFTEENTH AMENDMENT TO 

AGREEMENT OF LIMITED PARTNERSHIP OF 

AMERICAN HOMES 4 RENT, L.P. 

DESIGNATION OF 6.25% SERIES H CUMULATIVE REDEEMABLE PERPETUAL PREFERRED UNITS 

September 13, 2018 

Pursuant to Section 4.2 and Section 14.1.B of the Agreement of Limited Partnership of American Homes 4 Rent, L.P., as amended by the
First Amendment, dated as of December 31, 2012, the Second Amendment, dated as of February 28, 2013, the Third Amendment, dated as of June 10, 2013, the Fourth Amendment, dated as of June 10, 2013, the Fifth Amendment, dated as
of October 24, 2013, the Sixth Amendment, dated as of December 27, 2013 the Seventh Amendment, dated as of April 30, 2014, the Eighth Amendment, dated as of September 19, 2014, the Ninth Amendment, dated as of February 26,
2015, the Tenth Amendment, dated as of February 25, 2016, the Eleventh Amendment, dated as of May 17, 2016, the Twelfth Amendment, dated as of June 22, 2016, the Thirteenth Amendment, dated as of April 20, 2017, and the
Fourteenth Amendment, dated as of July 11, 2017 (collectively, the “Partnership Agreement”), the General Partner hereby amends the Partnership Agreement as follows in connection with the issuance to American Homes 4 Rent
(“AH4R”) of Series H Preferred Units (as defined herein) of American Homes 4 Rent, L.P. (the “Partnership”) in exchange for the contribution by AH4R of the net proceeds from the public offering of 6.25% Series H Cumulative
Redeemable Perpetual Preferred Shares of beneficial interest, par value $0.01 per share, of AH4R (the “Series H Preferred Shares”): 

1.     Designation and Number. A series of Preferred Units (as defined herein), designated the “6.25% Series H Cumulative
Redeemable Perpetual Preferred Units,” is hereby established (the “Series H Preferred Units”). The number of Series H Preferred Units shall be 4,600,000. The Series H Preferred Units are being issued to AH4R in connection with
the issuance by AH4R of Series H Preferred Shares. The designations, preferences and other rights of the Series H Preferred Units contained in this Fifteenth Amendment are intended to be substantially similar to the designations, preferences
and other rights (except voting rights) contained in the Articles Supplementary for the Series H Preferred Shares, and AH4R shall interpret this Fifteenth Amendment in a manner consistent with such intent. 

2.     Defined Terms. Capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the
Partnership Agreement. The following defined terms used in this Fifteenth Amendment to the Partnership Agreement shall have the meanings specified below: 

“Articles Supplementary” means the Articles Supplementary dated September 13, 2018 to the Articles of Amendment and Restatement
of Declaration of Trust of AH4R designating the Series H Preferred Shares. 
 “Business Day” shall have the meaning provided in
the Articles Supplementary. 
 “Change of Control” shall have the meaning provided in the Articles Supplementary. 

“Change of Control Conversion Date” shall have the meaning provided in the Articles Supplementary. 

“Change of Control Conversion Right” shall have the meaning provided in Section 9(b)(i). 

“Class A Share Price” shall have the meaning provided in the Articles Supplementary. 

“Distribution Record Date” shall have the meaning provided in Section 5(a). 

“Initial Liquidation Preference” means $25.00 per Series H Preferred Unit. 

“Junior Preferred Units” shall have the meaning provided in Section 4. 

“Liquidation Preference” shall have the meaning provided in Section 6(a). 

 “NYSE” shall have the meaning provided in the Articles Supplementary. 

“Original Issue Date” means September 19, 2018, the first date of issue of any Series H Preferred Units. 

“Parity Preferred Units” shall have the meaning provided in Section 4. 

“Preferred Return” shall have the meaning provided in Section 5(a). 

“Preferred Unit Distribution Payment Date” shall have the meaning provided in Section 5(a). 

“Preferred Units” means all Partnership Interests designated as preferred units by the General Partner from time to time in
accordance with Section 4.2 of the Partnership Agreement. 
 “Redemption Date” shall have the meaning provided in
Section 7(b)(i). 
 “Regular Redemption Right” shall have the meaning provided in Section 7(b)(i). 

“Senior Preferred Units” shall have the meaning provided in Section 4. 

“Share Cap” shall have the meaning provided in the Articles Supplementary. 

“Special Redemption Price” shall have the meaning provided in Section 7(c)(i). 

“Special Redemption Right” shall have the meaning provided in Section 7(c)(i). 

3.     Maturity. The Series H Preferred Units have no stated maturity and will not be subject to any sinking fund or mandatory
redemption. 
 4.     Rank. The Series H Preferred Units will, with respect to distribution rights and rights upon
liquidation, dissolution or winding up of the Partnership, rank (a) senior to all Class A Units, Class B Units, LTIP Units, and any class or series of Partnership Units expressly designated as ranking junior to the Series H Preferred
Units as to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership (collectively, the “Junior Preferred Units”); (b) on a parity with any class or series of Partnership Units issued by the Partnership
expressly designated as ranking on a parity with the Series H Preferred Units as to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership (the “Parity Preferred Units”); and (c) junior to any
class or series of Partnership Units issued by the Partnership expressly designated as ranking senior to the Series H Preferred Units as to distribution rights and rights upon liquidation, dissolution or winding up of the Partnership (the
“Senior Preferred Units”). The term “Partnership Units” does not include convertible or exchangeable debt securities of the Partnership, which will rank senior to the Series H Preferred Units prior to conversion or
exchange. The Series H Preferred Units will also rank junior in right of payment to the Partnership’s existing and future indebtedness. 

5.     Distributions. 

(a)     Subject to the preferential rights of holders of any class or series of Senior Preferred Units of the Partnership,
the holders of Series H Preferred Units shall be entitled to receive, when, as and if authorized by the General Partner and declared by the Partnership, out of funds of the Partnership legally available for payment of distributions, cumulative cash
distributions at the applicable annual rate (the “Preferred Return”): 
  

			
		  	 On and after the Original Issue

Date

		
	 Distribution Rate:
	  	 6.25% per annum on the Initial

Liquidation Preference

 Distributions on the Series H Preferred Units shall accrue and be cumulative from (and including) the
Original Issue Date and shall be payable quarterly, in equal amounts, in arrears, on the last day of each March, June, September and December of each year (each, a “Preferred Unit Distribution Payment Date”); provided, however, if any
Preferred Unit Distribution Payment Date is not a Business Day, then the distribution which would otherwise have been payable on such Preferred Unit Distribution Payment Date may be paid on the next succeeding Business Day with the same force and
effect as if paid on such Preferred Unit Distribution Payment Date, and no interest or additional distributions or other sums shall accrue on the amount so payable from such Preferred Unit Distribution Payment Date to such next succeeding Business
Day. A “distribution period” shall mean the period commencing from, and including, the Preferred Unit Distribution Payment Date to, but excluding, the next succeeding Preferred Unit Distribution Payment Date. The initial
distribution period shall be the period from, and including, the Original Issue Date to, but excluding, December 31, 2018 to holders of record of the Series H Preferred Units as of December 14, 2018. The amount of any distribution
payable on the Series H Preferred Units for any partial distribution period will be prorated and computed on the basis of twelve 30-day months and a 360-day
year. Distributions will be payable in arrears to holders of record of the Series H Preferred Units as they appear on the records of the Partnership at 5:00 P.M., New York time, on the applicable record date, which shall be the March 15,
June 15, September 15, or December 15 immediately preceding the Preferred Unit Distribution Payment Date (each, a “Distribution Record Date”). If a Distribution Record Date does not fall on a Business Day, then such
Distribution Record Date shall be the immediately preceding Business Day. 
 (b)     No distributions on the Series H
Preferred Units shall be authorized by the General Partner or declared, paid or set apart for payment by the Partnership at such time as the terms and provisions of any agreement of the General Partner or the Partnership, including any agreement
relating to the indebtedness of any of them, prohibits such authorization, declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default
thereunder, or if such declaration or payment shall be restricted or prohibited by law. 
 (c)     Notwithstanding
anything to the contrary contained herein, distributions on the Series H Preferred Units will accrue whether or not the restrictions referred to in Section 5(b) exist, whether or not the Partnership has earnings, whether or not there are
funds legally available for the payment of such distributions and whether or not such distributions are authorized or declared. 

(d)     Except as provided in Section 5(e) below, no distributions shall be declared and paid or set apart for
payment, and no other distribution of cash or other property may be declared and made, directly or indirectly, on or with respect to, any Class A Units, Class B Units, LTIP Units, Parity Preferred Units or Junior Preferred Units of the
Partnership (other than a distribution paid in units of, or options, warrants or rights to subscribe for or purchase units of, Class A Units, Class B Units, LTIP Units or Junior Preferred Units) for any period, nor shall Class A
Units, Class B Units, LTIP Units, Parity Preferred Units or Junior Preferred Units be redeemed, purchased or otherwise acquired for any consideration, nor shall any funds be paid or made available for a sinking fund for the redemption of any
such units by the Partnership, directly or indirectly (except by conversion into or exchange for, or options, warrants or rights to purchase or subscribe for, Class A Units, Class B Units, LTIP Units or Junior Preferred Units, and except
for purchases or exchanges pursuant to a purchase or exchange offer made on the same terms to all holders of Series H Preferred Units and all holders of Parity Preferred Units), unless full cumulative distributions on the Series H Preferred Units
for all past distribution periods shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof is set apart for such payment. 

(e)     When distributions are not paid in full (or a sum sufficient for such full payment is not so set apart) on the
Series H Preferred Units and any Parity Preferred Units, all distributions declared on the Series H Preferred Units and any Parity Preferred Units shall be declared pro rata so that the amount of distributions declared per Series H Preferred Unit
and any such Parity Preferred Unit shall in all cases bear to each other the same ratio that accrued distributions per Series H Preferred Unit and any such Parity Preferred Unit (which shall not include any accrual in respect of unpaid distributions
on any Parity Preferred Unit for prior distribution periods if such Parity Preferred Unit does not have a cumulative distribution) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any
distribution payment or payments on Series H Preferred Units which may be in arrears. 

 (f)     Holders of Series H Preferred Units shall not be entitled to any
distribution, whether payable in cash, property or units of the Partnership, in excess of full cumulative distributions on the Series H Preferred Units as provided above. Any distribution made on the Series H Preferred Units shall first be
credited against the earliest accrued but unpaid distributions due with respect to such units which remains payable. Accrued but unpaid distributions on Series H Preferred Units will accumulate as of the Preferred Unit Distribution Payment Date
on which they first become payable or on the date of redemption, as the case may be. 
 (g)     For the avoidance of
doubt, in determining whether a distribution (other than upon voluntary or involuntary liquidation), redemption or other acquisition of the Partnership Units is permitted under Delaware law, no effect shall be given to the amounts that would be
needed, if the Partnership were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of holders of Partnership Units whose preferential rights are superior to those receiving the distribution. 

6.     Liquidation Preference. 

(a)     Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Partnership, before
any distribution or payment shall be made to the holders of any Class A Units, Class B Units, LTIP Units, or Junior Preferred Units, the holders of the Series H Preferred Units then outstanding shall be entitled to be paid, or have the
Partnership declare and set apart for payment, out of the assets of the Partnership legally available for distribution to its Partners after payment or provision for payment of all debts and other liabilities of the Partnership and any liquidation
preference owing in respect of any Senior Preferred Units, a liquidation preference in cash or property at fair market value, as determined by the General Partner, the sum of: (i) the Initial Liquidation Preference and (ii) an amount per
unit equal to any accrued and unpaid distributions to, but excluding, the date of payment or the date the amount for payment is set apart for payment (the “Liquidation Preference”). 

(b)     If upon any such voluntary or involuntary liquidation, dissolution or winding up of the Partnership, the available
assets of the Partnership are insufficient to pay the full amount of the Liquidation Preference on all outstanding Series H Preferred Units and the corresponding amounts payable on all outstanding Parity Preferred Units, then the holders of Series H
Preferred Units and Parity Preferred Units shall share ratably in any such distribution of assets in proportion to the full amount of the Liquidation Preference to which they would otherwise be respectively entitled. 

(c)     Upon any voluntary or involuntary liquidation, dissolution or winding up of the Partnership, after payment shall
have been made in full to the holders of the Series H Preferred Units and any Parity Preferred Units, any other series or class or classes of Junior Preferred Units shall be entitled to receive any and all assets remaining to be paid or distributed,
and the holders of the Series H Preferred Units and any Parity Preferred Units shall not be entitled to share therein. 

(d)     After payment of the full amount of the Liquidation Preference to which they are entitled, holders of Series H
Preferred Units will have no right or claim to any of the remaining assets of the Partnership. 
 (e)     For the
avoidance of doubt, the consolidation or merger of the Partnership with or into another entity, the merger of another entity with or into the Partnership, a statutory unit exchange by the Partnership or the sale, lease, transfer or conveyance of all
or substantially all of the assets or business of the Partnership shall not be considered a liquidation, dissolution or winding up of the affairs of the Partnership. 

(f)     Notice of liquidation, dissolution or winding up of the Partnership shall be consistent with the notice procedures
set forth in paragraph 5(d) of the Articles Supplementary. 
 7.     Redemption. 

(a)     The Series H Preferred Units are not redeemable except as otherwise provided in this Section 7. 

(b)     Redemption by the Partnership. 

	 	i.	 On or after September 19, 2023, if and when AH4R exercises its option to redeem Series H Preferred Shares
as provided in paragraph 6(a)(i) of the Articles Supplementary, the Partnership may redeem some or all of the Series H Preferred Units, for cash, at a redemption price equal to the Liquidation Preference to, but excluding, the date fixed for
redemption (such date, the “Redemption Date”) (such right, the “Regular Redemption Right”). 

  

	 	ii.	 Unless full cumulative distributions on all Series H Preferred Units shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past distribution periods, the Partnership shall not purchase or otherwise acquire directly or indirectly for any consideration, nor shall any
monies be paid to or be made available for a sinking fund for the redemption of, any Series H Preferred Units (except by conversion into or exchange for, or options, warrants or rights to purchase or subscribe for Class A Units, Class B
Units, LTIP Units or Junior Preferred Units of the Partnership); provided, however, that the foregoing shall not prevent the redemption or purchase of Series H Preferred Units by the Partnership in order to ensure that the General Partner
remains qualified as a REIT for federal income tax purposes, or the purchase or acquisition of Series H Preferred Units pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series H Preferred Units.

  

	 	iii.	 Immediately prior to any redemption of Series H Preferred Units, the Partnership shall pay, in cash, any
accrued and unpaid distributions on the Series H Preferred Units to, but excluding, the Redemption Date, unless a Redemption Date falls after a Distribution Record Date and prior to the corresponding Preferred Unit Distribution Payment Date, in
which case each holder of Series H Preferred Units at the close of business on such Distribution Record Date shall be entitled to the distribution payable on such units on the corresponding Preferred Unit Distribution Payment Date (including any
accrued and unpaid distributions for prior distribution periods) notwithstanding the redemption of such units before such Preferred Unit Distribution Payment Date. Except as provided above, the Partnership will make no payment or allowance for
unpaid distributions, whether or not in arrears, on Series H Preferred Units for which a notice of redemption has been given. 

  

	 	iv.	 Notice of redemption of the Series H Preferred Units shall be consistent with the notice procedures set forth
in paragraph 6(a)(ii)(A) of the Articles Supplementary. 

  

	 	v.	 Holders of Series H Preferred Units to be redeemed shall surrender such Series H Preferred Units at the place
or places designated in such notice and, upon surrender of the units, such Series H Preferred Units shall be redeemed by the Partnership at the redemption price plus any accrued and unpaid distributions payable upon such redemption. If notice
of redemption of any of the Series H Preferred Units has been given and if the funds necessary for such redemption have been set apart by the Partnership for the benefit of the holders of any Series H Preferred Units so called for redemption, then,
from and after the Redemption Date, distributions will cease to accrue on such Series H Preferred Units, such Series H Preferred Units shall no longer be deemed outstanding and all rights of the holders of such Series H Preferred Units will
terminate, except the right to receive the redemption price and any accrued and unpaid distributions to, but excluding, the Redemption Date; provided, however, if the Redemption Date falls after a Distribution Record Date and prior to the
corresponding Preferred Unit Distribution Payment Date, each holder of Series H Preferred Units so called for redemption at the close of business on such Distribution Record Date shall be entitled to the distribution payable on such units on the
corresponding Preferred Unit Distribution Payment Date notwithstanding the redemption of such units before such Preferred Unit Distribution Payment Date. 

	 	vi.	 All Series H Preferred Units redeemed or otherwise acquired by the Partnership in any manner whatsoever shall
be retired and reclassified as authorized but unissued Preferred Units, without designation as to class or series, and may thereafter be reissued as any class or series of Preferred Units in accordance with the applicable provisions of the
Partnership Agreement. 

 (c)    Special Redemption Right upon a Change of Control. 

 

	 	i.	 Upon the occurrence of a Change of Control, if and when AH4R exercises its option to redeem Series H Preferred
Shares as provided in paragraph 6(b)(i) of the Articles Supplementary, the Partnership will redeem all or any part of the Series H Preferred Units at any time within 120 days after the date on which the Change of Control has occurred (the
“Special Redemption Right”), for cash equal to the Liquidation Preference, to, but excluding, the Redemption Date (the “Special Redemption Price”). If, prior to the Change of Control Conversion Date, the Partnership
exercises its Regular Redemption Right or Special Redemption Right in connection with a Change of Control, holders of the Series H Preferred Units shall not be permitted to exercise their Change of Control Conversion Right (as defined in
Section 9(b)(i) below). 

  

	 	ii.	 Unless full cumulative distributions on all Series H Preferred Units shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past distribution periods, the Partnership shall not purchase or otherwise acquire directly or indirectly for any consideration, nor shall any
monies be paid to or be made available for a sinking fund for the redemption of, any Series H Preferred Units (except by conversion into or exchange for, or options, warrants or rights to purchase or subscribe for Class A Units, Class B
Units, LTIP Units or Junior Preferred Units of the Partnership); provided, however, that the foregoing shall not prevent the redemption or purchase of Series H Preferred Units by the Partnership in order to ensure that the General Partner
remains qualified as a REIT for federal income tax purposes, or the purchase or acquisition of Series H Preferred Units pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series H Preferred Units.

  

	 	iii.	 Immediately prior to any redemption of Series H Preferred Units, the Partnership shall pay, in cash, any
accrued and unpaid distributions on the Series H Preferred Units to, but excluding, the Redemption Date, unless a Redemption Date falls after a Distribution Record Date and prior to the corresponding Preferred Unit Distribution Payment Date, in
which case each holder of Series H Preferred Units at the close of business on such Distribution Record Date shall be entitled to the distribution payable on such units on the corresponding Preferred Unit Distribution Payment Date (including any
accrued and unpaid distributions for prior distribution periods) notwithstanding the redemption of such units before such Preferred Unit Distribution Payment Date. Except as provided above, the Partnership will make no payment or allowance for
unpaid distributions, whether or not in arrears, on Series H Preferred Units for which a notice of redemption has been given. 

  

	 	iv.	 Notice of redemption of the Series H Preferred Units shall be consistent with the notice procedures set forth
in paragraph 6(b)(ii)(A) of the Articles Supplementary. 

  

	 	v.	 Holders of Series H Preferred Units to be redeemed shall surrender such Series H Preferred Units at the place
or places designated in such notice and, upon surrender of the units, such Series H Preferred Units shall be redeemed by the Partnership at the redemption price plus any accrued and unpaid distributions payable upon such redemption. If notice of
redemption of any of the Series H Preferred Units has been given and if the funds necessary for such redemption have been set apart by the 

	 	
Partnership for the benefit of the holders of any Series H Preferred Units so called for redemption, then, from and after the Redemption Date, distributions will cease to accrue on such Series H
Preferred Units, such Series H Preferred Units shall no longer be deemed outstanding and all rights of the holders of such Series H Preferred Units will terminate, except the right to receive the redemption price and any accrued and unpaid
distributions to, but excluding, the Redemption Date; provided, however, if the Redemption Date falls after a Distribution Record Date and prior to the corresponding Preferred Unit Distribution Payment Date, each holder of Series H Preferred
Units so called for redemption at the close of business on such Distribution Record Date shall be entitled to the distribution payable on such units on the corresponding Preferred Unit Distribution Payment Date notwithstanding the redemption of such
units before such Preferred Unit Distribution Payment Date. 

  

	 	vi.	 All Series H Preferred Units redeemed or otherwise acquired by the Partnership in any manner whatsoever shall
be retired and reclassified as authorized but unissued Preferred Units, without designation as to class or series, and may thereafter be reissued as any class or series of Preferred Units in accordance with the applicable provisions of the
Partnership Agreement. 

 8.    Voting Rights. Holders of the Series H Preferred Units will not have any
voting rights. 
 9.    Conversion. 

(a)    The Series H Preferred Units are not convertible or exchangeable for any other property or securities except as
otherwise provided in this Section 9. 
 (b)    Conversion Upon a Change of Control. 

 

	 	i.	 Upon the occurrence of a Change of Control, each holder of the Series H Preferred Units shall have the right
(the “Change of Control Conversion Right”), subject to the Special Redemption Right of the Partnership, to convert some or all of the Series H Preferred Units held by such holder on the relevant Change of Control Conversion Date into a
number of Class A Units per Series H Preferred Unit equal to the lesser of (A) the quotient obtained by dividing (1) the sum of (x) the Initial Liquidation Preference, plus (y) any accrued and unpaid distributions thereon
to, but excluding, the Change of Control Conversion Date, unless the Change of Control Conversion Date is after a Distribution Record Date for a Preferred Unit Distribution Payment Date for which distributions have been declared and prior to the
corresponding Preferred Unit Distribution Payment Date, in which case no additional amount for such accrued and unpaid distribution will be included in this sum and such declared distribution will instead be paid, on such Preferred Unit Distribution
Payment Date, to the holder of record of the Series H Preferred Units to be converted as of 5:00 P.M. New York time, on such Distribution Record Date), by (2) the Class A Share Price, and (B) the Share Cap. 

 

	 	ii.	 Notice of occurrence of the Change of Control shall be consistent with the notice procedures set forth in
paragraph 10(a)(ii) of the Articles Supplementary. 

  

	 	iii.	 Exercise of the Change of Control Conversion Right shall be consistent with the procedures set forth in
paragraphs 10(a)(iv) and (v) of the Articles Supplementary. 

  

	 	iv.	 No fractional Class A Units shall be issued upon conversion of the Series H Preferred Units. In lieu
of fractional units, holders of the Series H Preferred Units shall be entitled to receive the cash value of such fractional units based on the Class A Unit Price. 

	 	v.	 The Partnership will deliver all Class A Units (including, without limitation, cash in lieu of fractional
Class A Units) and any other property owing upon conversion no later than the fourth (4th) Business Day following the Change of Control Conversion Date. 

10.    Allocation of Profit and Loss. Allocations of the Partnership’s items of income, gain, loss and deduction shall be
allocated among holders of Series H Preferred Units in accordance with Article VI of the Partnership Agreement. 
 11.    Except as
modified herein, all terms and conditions of the Partnership Agreement shall remain in full force and effect, which terms and conditions the General Partner hereby ratifies and confirms. 

 IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the date first set
forth above. 
  

					
	GENERAL PARTNER:
	
	AMERICAN HOMES 4 RENT
		
	By:	 	 /s/ Christopher C. Lau

		 	Name:	  	Christopher C. Lau
		 	Title:	  	Chief Financial Officera02investorrightsagreeme

                                                          EXECUTION VERSION                         INVESTOR RIGHTS AGREEMENT         This INVESTOR RIGHTS AGREEMENT (this “Agreement”), dated as of September 14,  2018,  is  made  by  and  among  Pacific  Mercantile  Bancorp,  a  California  corporation  (the  “Company”),  and  Patriot  Financial  Partners  III,  L.P.,  a  Delaware  limited  partnership  (the  “Investor”).  The Company and the Investor shall sometimes be referred to herein, collectively, as  the “Parties” and individually 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, and is the record and beneficial owner of 100% of  the issued and outstanding capital stock of Pacific Mercantile Bank, a California state chartered  bank (the “Bank”).         B.    Concurrently herewith the Investor has entered into a Stock Purchase Agreement  (the “Stock Purchase Agreement”) with the Company and Carpenter Community BancFund, L.P.  and  Carpenter  Community  BancFund-A,  L.P.  (collectively  referred  to  herein  as  “Carpenter”),  pursuant to which Carpenter will be selling to the Investor, and the Investor will be purchasing  from Carpenter, 1,467,155 shares of the Company’s Series A Non-Voting Preferred Stock, no par  value (the “Series A Preferred Stock”), and 2,169,208 shares of the Company’s common stock, no  par  value  (“Common  Stock”).  Capitalized  terms  used  herein  without  definition  shall  have  the  respective meanings ascribed to them in the Stock Purchase Agreement.         C.    In order to induce the Investor to enter into the Stock Purchase Agreement, the  Company has agreed to grant the Investor the rights set forth below.                                   AGREEMENT         NOW THEREFORE, in consideration of the foregoing and the mutual covenants herein  contained, the Parties hereby agree as follows:         1.    Board/Observer Rights.               (a)   Following the Closing, the Company will promptly cause one representative  of the Investor (the “Board Representative”) to be elected or appointed to the board of directors of  the  Company  (the “Board  of  Directors”),  and  the  board  of  directors  of  the  Bank  (the  “Bank  Board”), subject to all legal, regulatory and Nasdaq listing requirements regarding service and  election  or  appointment  as  a  director  of  the  Company  and  the  Bank  (the  “Qualification  Requirements”), in  each  case,  so  long  as  the  Investor, together  with its  affiliates,  owns  in  the  aggregate  5.0%   or  more  of  the  Common  Stock  then  outstanding  (the  “Minimum  Ownership  Interest”).  So long as the Investor, together with its affiliates, has a Minimum Ownership Interest,  the Company will, subject to applicable law, recommend to its shareholders the election of the  Board Representative to the Board of Directors at a special meeting of the Company's shareholders  or the annual meeting of shareholders, as applicable, subject to satisfaction of the Qualification  Requirements.  If the Investor no longer has a Minimum Ownership Interest, the Investor will have    010-8656-4704/12/AMERICAS  

 

no  further  rights  under  Sections  1(a)  through  1(e)  and,  at  the  written  request  of  the  Board  of  Directors, shall use cause its Board Representative to resign from the Board of Directors and the  Bank Board as promptly as possible thereafter.               (b)   The Board Representative shall, subject to the Qualification Requirements,  be one of the Company’s nominees to serve on the Board of Directors.  The Company shall use its  commercially  reasonable  efforts  to  have  the  Board  Representative  elected  as  a  director  of  the  Company by the shareholders of the Company, and the Company shall solicit proxies for the Board  Representative to the same extent as it does for any of its other Company nominees to the Board  of Directors.  The Investor covenants and agrees to hold any information obtained from its Board  Representative  in  confidence  and  all  such  information  shall  be  deemed  to  be  “Proprietary  Information” of the Company for the purpose of that certain letter agreement dated May 14, 2018,  by  and among the Company, Investor and Carpenter, as amended as of the date hereof (as so  amended, the “Confidentiality Agreement”).  Notwithstanding anything to the contrary contained  herein, at all times when the Investor maintains a Minimum Ownership Interest, it shall comply in  all respects with the Federal Reserve's Policy Statement on equity investments in banks and bank  holding companies and any other guidance promulgated in connection with the matters addressed  therein.               (c)   Subject  to  Section  1(a),  upon  the  death,  resignation,  retirement,  disqualification, or removal from office as a member of the Board of Directors or the Bank Board  of its Board Representative, the Investor shall have the right to designate the replacement for such  Board Representative, which replacement must be reasonably acceptable to the Company and must  also satisfy the Qualification Requirements.  The Board of Directors and the Bank Board shall use  their  respective  commercially  reasonable  efforts  to  take  all  action  required  to  fill  the  vacancy  resulting therefrom with such person, use commercially reasonable efforts to have such person  elected as director of the Company by the shareholders of the Company and solicit proxies for  such person to the same extent as it does for any of its other nominees to the Board of Directors,  as the case may be.  If a Board Representative is nominated by the Company for election to the  Board of Directors or the Bank Board, but fails to be elected, then subject to the proviso set forth  in  this  Section  1(c)  below,  the  Company  or  the  Bank  shall,  as  soon  as  practicable  thereafter,  increase the size of such board of directors and, following the procedures set forth above in this  Section 1, appoint an individual designated in writing by the Investor who is reasonably acceptable  to the Company and meets the Qualification Requirements to be a Board Representative (such  individual to be different from the individual who was not elected) to the Board of Directors of the  Company or the Bank Board (as the case may be).               (d)   The Company hereby agrees that, from and after the Closing Date, for so  long as the Investor and its affiliates in the aggregate have a Minimum Ownership Interest, the  Company shall invite a person designated by the Investor (the “Observer”) to attend meetings of  the Board of Directors and the Bank Board (including any meetings of committees thereof on  which the Board Representative is permitted to attend) in a nonvoting, nonparticipating observer  capacity.  The Observer shall not have any right to make motions or vote on any matter presented  to the Board of Directors or the Bank Board or any committee thereof.  The Company shall give  the Observer written notice of each meeting of the Board of Directors and the Bank Board at the  same time and in the same manner as given to the members of the Board of Directors or the Bank    010-8656-4704/12/AMERICAS  

 

Board  (as  the  case  may  be),  shall  provide  the  Observer  with  all  written  materials  and  other  information given to members of the Board of Directors or the Bank Board (as the case may be)  at the same time such materials and information are given to such members and shall permit the  Observer to attend as an observer at all meetings thereof, and in the event the Company proposes  to take any action by written consent in lieu of a meeting, the Company shall give written notice  thereof to the Observer prior to the effective date of such consent along with the proposed text of  such written consents; provided, however, that the Observer (i) shall enter into a confidentiality  agreement in favor of the Company in the form of Exhibit D hereto prior to the Observer being  provided the foregoing notices, materials or information relating to, or attending any meeting of,  the Board of Directors or the Bank Board or any committee thereof, (ii) shall not be provided any  confidential supervisory information, and (iii) may be excluded by the Board of Directors or the  Bank Board or any committee thereof from attending any executive session of such body and from  participating in any attorney-client privileged discussion of such body.               (e) The Board Representative shall be entitled to compensation and indemnification  and insurance coverage in connection with his or her role as a director to the same extent as the  other directors on the Board of Directors or the Bank Board, as applicable, and shall be entitled to  reimbursement  for  reasonable  and  documented  out-of-pocket  expenses  incurred  in  attending  meetings of the Board of Directors and the Bank Board, or any committee thereof in accordance  with Company policy.   The Observer shall not  be entitled to compensation, reimbursement of  expenses or indemnification from the Company or the Bank with respect to such role, provided  however, that the Observer shall be entitled to reimbursement of reasonable and documented out- of-pocket expenses related to attendance at any meeting of the Board of Directors or the Bank  Board at which the Board Representative is not in attendance, whether by telephone or in person,  in the same manner as provided for the Board Representative.                 (f) The Company acknowledges that the Board Representative may have certain  rights  to indemnification, advancement  of  expenses  and/or insurance  provided  by the  Investor  and/or its affiliates (collectively, the “Investor Indemnitors”).  The Company hereby agrees on  behalf  of  itself  and  the  Bank  that  with  respect  to  a  claim  by  the  Board  Representative  for  indemnification arising out of his or her service as a director of the Company and/or the Bank (1)  that the Company and the Bank are the indemnitors of first resort (i.e., the Company and the Bank’s  obligations to the Board Representative with respect to indemnification, advancement of expenses  and/or insurance (which obligations shall be the same as, but in no event greater than, any such  obligations to all other members of the Board of Directors or the Bank Board, as applicable) are  primary  and  any  obligation  of  the  Investor  Indemnitors  to  advance  expenses  or  to  provide  indemnification for the same expenses or liabilities incurred by such Board Representative are  secondary), and (2) the Investor Indemnitors shall have a right of contribution and/or be subrogated  to  the  extent  of  such  advancement  or  payment  to  all  of  the  rights  of  recovery  of  such  Board  Representative against the Company.         2.    Shareholders’ Meeting.               (a)   At the Company’s first annual shareholders’ meeting following the date of  this Agreement, the Company shall seek approval by its shareholders of an amendment to the  Articles of Incorporation (the “Shareholder Approval”), in the form attached hereto as Exhibit A    010-8656-4704/12/AMERICAS  

 

(the “Articles Amendment”).  In furtherance of the foregoing, the Company shall: (A) through its  Board of Directors recommend to its shareholders (the “Company Recommendation”) the approval  and adoption  of  the  Articles  Amendment;  (B)  include such  Company Recommendation  in the  proxy  statement  delivered  to  shareholders;  and  (C)  use  its  commercially  reasonable  efforts  to  obtain  the  Shareholder  Approval.   Neither  the  Board  of  Directors  of  the  Company  nor  any  committee thereof shall withdraw, qualify or modify, or propose publicly to withdraw, qualify or  modify, in a manner adverse to the Investor, the Company Recommendation or take any action, or  make any public statement, filing or release, inconsistent with the Company Recommendation.                (b)   If the Company is unsuccessful in obtaining the Shareholder Approval, the  Company will continue to comply with the foregoing provisions of this Section 2 to obtain such  Shareholder Approval at each successive regularly scheduled annual meeting until such approval  is obtained.          3.    Registration  Rights.   The  Company  and  the  Investor  shall  execute  and  deliver  effective as of the date hereof the Registration Rights Agreement, the form of which is attached  hereto as Exhibit B.         4     Information Rights.                 (a)   From the date of this Agreement, as long as the Investor owns the Minimum  Ownership Amount, the Company shall make available to the Investor all materials delivered to  the  Company’s  Board  of  Directors,  the  Bank  Board,  and  the  committees  thereof;  provided,  however, that the Company shall not be required to deliver such materials to the extent that such  delivery would (i) reasonably be expected to constitute a waiver of the attorney-client privilege,  (ii) reasonably be expected to result in a breach of any contractual confidentiality obligation of the  Company or the Bank or (iii) violate applicable law or regulatory requirements.               (b)   The  Investor  shall  also  be  provided  with  access,  information,  and  other  rights as provided in the Investor VCOC Letter Agreement, a form of which is attached hereto as  Exhibit  C  and  will  be  entered  into  by  the  Company  and  the  Investor  as  of  the  date  of  this  Agreement.               (c)   Each  Party  to  this  Agreement  will  hold,  and  will  use  commercially  reasonable  efforts  to  cause  its  respective  subsidiaries  and  their  directors,  officers,  employees,  agents, consultants and advisors to hold, in strict confidence, unless disclosure to a governmental  entity is reasonably necessary or appropriate in connection with any necessary regulatory approval,  or  request  for  information  or  similar  process,  or  unless  compelled  to  disclose  by  judicial  or  administrative process or, based on the advice of its counsel, by another requirement of law or the  applicable requirements of any governmental entity (in which case, the Party permitted to disclose  such information shall, to the extent legally permissible and reasonably practicable, provide the  other Party with prior written notice of such permitted disclosure so that such other Party may seek  confidential treatment of such information from the applicable governmental entity), all nonpublic  records, books, contracts, instruments, computer data and other data and information (collectively,  “Information”)  concerning  the  other  Party  hereto  furnished  to  it  by  such  other  Party  or  its    010-8656-4704/12/AMERICAS  

 

representatives pursuant to this Agreement and each Party to this Agreement acknowledges and  reaffirms its obligations as set forth in the Confidentiality Agreement.               (d)   The Investor hereby acknowledges that it is aware of the restrictions under  the federal securities laws imposed on a person in possession of material nonpublic information  concerning an issuer, including with respect to purchasing or selling securities of such issuer and  the communication of such information to other persons.  The Investor agrees that neither it nor  its representatives nor any of their respective affiliates will, and will cause any third party not to,  use any data or information in contravention of such securities laws or any rules or regulations  promulgated thereunder.                 (e)   The information rights set forth in this Sections 4(a)-(c) shall terminate and  be of no further force or effect as of the date that the Investor no longer has a Minimum Ownership  Interest.         5.    Bank Holding Company Act.  The Company will not knowingly take any action  which  would  reasonably  be  expected  to  pose  a  substantial  risk  that  the  Investor  or  any  of  its  affiliates will become a “bank holding company” under the Bank Holding Company Act of 1956,  as amended (the “BHC Act”), and the rules and regulations promulgated thereunder, including,  without limitation, undertaking any redemption, recapitalization or repurchase of Common Stock,  of securities or rights, options, or warrants to purchase Common Stock, or securities of any type  whatsoever  that  are,  or  may  become,  convertible  into  or  exchangeable  into  or  exercisable  for  Common  Stock,  in  each  case,  where  the  Investor  is  not  given  the  right  to  participate  in  such  redemption,  recapitalization  or  repurchase  to  the  extent  of  the  Investor’s  pro-rata  proportion; provided, however, that the Company shall not be deemed to have violated this Section  5 if it has given the Investor the opportunity to participate in such redemption, recapitalization or  repurchase to the extent of the Investor’s pro-rata proportion and the Investor fails to so participate.         6.    Voting Agreement.                (a)   The shares of Series A Preferred Stock acquired by Investor, and the shares  of  non-voting  common  stock  of  the  Company  into  which  those  shares  will  be  automatically  converted upon receipt of the Shareholder Approval (collectively, the “Shares”) do not have any  voting rights except as required by law.  With respect to any action for which the Shares have a  voting right under applicable law, Investor shall vote, or shall cause the holder of record on any  applicable record date to vote, all of the Shares (or consent pursuant to an action by written consent  of the Company’s shareholders, if applicable) for or against such action at the same ratio and in  the  same  proportion  as  the  holders  of  Common  Stock  other  than  Investor  and  its  affiliates  collectively voted for or against (or consented or withheld consent with respect to) such action.  In  furtherance of the foregoing, at every meeting of the shareholders of the Company, however called,  and at every adjournment or postponement thereof, and in connection with any action proposed to  be taken by the written consent of the shareholders of the Company, Investor shall, or shall cause  the  holder  of  record  on  any  applicable  record  date  to,  be  present  (in  person  or  by  proxy)  for  purposes of calculating a quorum. In addition to any other limitations on transfer, Investor shall  not transfer any of the Shares in a transaction in which the transferee would receive Shares (and  would not receive Common Stock into which the Shares were automatically converted on such    010-8656-4704/12/AMERICAS  

 

transfer),  unless  prior  to  such  transfer  the  transferee  agrees  in  writing  in  a  form  reasonably  satisfactory  to  the  Company  to  be  bound  by  all  of  the  provisions  of  this  Section  6  that  were  applicable to the Investor with respect to the transferred Shares immediately prior to such transfer.               (b)   Notwithstanding the obligations in Section 6(a), the Investor will retain the  right to vote the Shares in the manner it chooses (i.e., not necessarily in the same proportion as  holders of Common Stock) on any matter on which it is required by law to vote and that would  adversely  affect  the  terms,  rights,  preferences  (other  than  the  $0.0001  per  share  liquidation  preference over Common Stock) or privileges of the Shares in a manner that is inconsistent with  the impact of such matter on the terms, rights, preferences or privileges of the Common Stock.  To  illustrate, a merger of the Company that cashes out or exchanges Common Stock and the Shares  in the same manner and on the same terms would not adversely affect the Shares as contemplated  by  this  provision,  and  Investor  would  be  obligated  to  vote  the  Shares  in  accordance  with  the  provisions of Section 6(a).  In contrast, and for illustrative purposes only, a transaction or other  action that would change the terms of the Shares to cause them to convert into fewer shares of  common stock or otherwise decrease the value of the Shares without so decreasing the value of  Common Stock would adversely affect the terms, rights preferences or privileges of the Shares  and, in such circumstances, Investor would have the right to vote the Shares as it deems appropriate  and without regard to the vote of the holders of Common Stock.         7.    Miscellaneous.               (a)   Any notice or other communication under or pertaining to this Agreement  must be in writing and will be deemed given and received when it is delivered in person, sent by  facsimile or email (with proof of receipt at the facsimile number or email address to which it is  required to be sent), or on the business day after the day on which it is delivered, with charges  prepaid,  to  a  major  nationwide  delivery  service  for  overnight  delivery,  or  on  the  third  (3rd)  business day after the day on which it is mailed by first class mail (postage prepaid) 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: Curt A. Christianssen              Tel: (714) 438-2500              Fax: (714) 438-1076              Email: Curt.Christianssen@pmbank.com              With a copy to:               O’Melveny & Myers LLP              610 Newport Center Drive, 17th Floor              Newport Beach, CA 92660    010-8656-4704/12/AMERICAS  

 

            Attn:  J. Jay Herron and Andor Terner              Tel: (949) 823-6900              Fax: (949) 823-6994              Email: jherron@omm.com and aterner@omm.com              If to the Investor:               Patriot Financial Partners III, L.P.              2929 Arch Street, Floor 27              Philadelphia, PA 19104-2868              Attention: James F. Deutsch              Tel: (215) 399-4650              Fax: (215) 399-4686              Email: jdeutsch@patriotfp.com              With a copy to:               Squire Patton Boggs (US) LLP              201 E. Fourth St., Suite 1900              Cincinnati, OH 45202              Attn:  James J. Barresi              Tel: (513) 361-1260              Fax (513) 361-1201              Email:  james.barresi@squirepb.com        Any Party may change its address for notice purposes by giving written notice of such new  address, by one of the means set forth above in this Section 7(a), which change of address shall be  effective on the tenth (10th) day following its deemed delivery as set forth above in this Section  7(a).         (b)   The provisions of this Agreement may not be assigned by the Investor without the  prior written consent of the Company, which consent may be withheld by the Company in its sole  discretion, and any purported assignment shall be null and void in the absence of such consent.  Subject to the foregoing restriction on assignment, this Agreement will be binding upon, and will  inure to the benefit of and be enforceable by, the Parties hereto and their respective successors and  permitted assigns.         (c)   This  Agreement  and  the  Registration  Rights  Agreement  embodies  the  entire  agreement and understanding between the Parties hereto in respect of the subject matter contained  herein. This Agreement supersedes all prior written and prior or contemporaneous oral agreements  and understandings between the Parties with respect to the subject matter of this Agreement.         (d)   This Agreement will be governed by and construed in accordance with the laws of  the State of California, without regard to conflicts of laws principles.    010-8656-4704/12/AMERICAS  

 

      (e)   If  any  provision  of  this  Agreement  or  the  application  thereof  to  any  person  or  circumstances  is  determined  by  a  court  of  competent  jurisdiction  to  be  invalid,  void  or  unenforceable, the remaining provisions hereof, or the application of such provision to persons or  circumstances other than those as to which it has been held invalid or unenforceable, will remain  in full force and effect and will in no way be affected, impaired or invalidated thereby.         (f)   Any  Party  hereto  may  (a)  extend  the  time  for  the  performance  of  any  of  the  obligations or other acts of the other Party hereto and, (b) waive compliance by the other Party  with any of such other Party’s obligations or covenants contained herein; provided, however, that  any such extension or waiver shall be valid only if set forth in an instrument in writing signed by  each of the Parties to be bound thereby, but no such extension or waiver and no failure to insist on  strict compliance by the other Party hereto with an obligation or covenant hereunder shall operate  as  a  waiver  of,  or  estoppel  with  respect  to,  any  subsequent  failure  to  comply  with  the  same  obligation or covenant or any failure to comply therewith by the Party whose performance was  waived.         (g)   This Agreement may be executed in any number of separate counterparts, each of  which executed counterparts, and any photocopies, facsimile copies or pdf copies of which, will  be deemed to be an original, but all of which, when taken together, will constitute one and the  same instrument.                               [Signature Page Follows]   010-8656-4704/12/AMERICAS  

 

 

 

 

 

                                  Exhibit A                                 Articles Amendment                                    (attached)    010-8656-4704/12/AMERICAS  

 

         AMENDED AND RESTATED ARTICLES OF INCORPORATION                                        OF                         PACIFIC MERCANTILE BANCORP         Thomas M. Vertin and Curt A. Christianssen certify that:         1.    They are the duly elected and acting President and Chief Executive Officer and  Secretary and Chief Financial Officer, respectively, of Pacific Mercantile Bancorp, a California  corporation.         2.    The Articles of Incorporation of the corporation, as amended to the date of the  filing of this Certificate, are amended and restated to read as set forth in Exhibit A attached  hereto and incorporated herein by this reference.         3.    The foregoing amendment and restatement of Articles of Incorporation has been  duly approved by the board of directors.         4.    The foregoing amendment and restatement of Articles of Incorporation has been  duly approved by the required vote of shareholders in accordance with Sections 902 and 903 of  the California Corporations Code.  The Corporation has shares of Common Stock, and [Preferred  Stock] outstanding.  The total number of outstanding shares entitled to vote with respect to the  amendment are [] shares of Common Stock and [] shares of Preferred Stock.  The number of  shares of each class voting in favor of the amendment equaled or exceeded the vote required.   The percentage vote required of the class was more than 50%.                        [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]   010-8666-6948/4/AMERICAS  

 

      We further declare under penalty of perjury under the laws of the State of California that  the matters set forth in this certificate are true and correct of our own knowledge.         Executed at Costa Mesa, California on [●], [2019].                                       _________________________                                      Thomas M. Vertin                                      President and Chief Executive Officer                                       _________________________                                      Curt A. Christianssen                                      Secretary and Chief Financial Officer    010-8666-6948/4/AMERICAS  

 

                                 EXHIBIT A            AMENDED AND RESTATED ARTICLES OF INCORPORATION                                        OF                         PACIFIC MERCANTILE BANCORP                               ARTICLE ONE:  NAME         The name of this Corporation is:  Pacific Mercantile Bancorp                             ARTICLE TWO:  PURPOSE         The purpose of this Corporation is to engage in any lawful act or activity for which a  Corporation may be organized under the General Corporation Law of California other than the  banking business, the trust company business or the practice of a profession permitted to be  incorporated by the California Corporations Code.                     ARTICLE THREE:  AUTHORIZED SHARES         A.    This Corporation is authorized to issue two classes of stock to be designated  “Common Stock” and “Preferred Stock”, respectively.  The total number of shares that this  Corporation is authorized to issue is eighty-seven million (87,000,000) shares; eighty-five  million (85,000,000) shares shall be Common Stock, no par value per share, and two million  (2,000,000) shares shall be Preferred Stock, no par value per share.         B.    The Common Stock of this Corporation may be issued from time to time in two  series, one of which is designated “Class A Common Stock”, of which this Corporation is  authorized to issue []1 shares, and the other of which is designated “[Class B] Common Stock”,  of which this Corporation is authorized to issue []2 shares.  The rights, preferences, privileges  and restrictions of Class A Common Stock and Class B Common Stock shall be equal and  identical in all respects except (i) that, unless otherwise provided by law or herein, the holders of  shares of Class A Common Stock shall have the exclusive right and power to vote upon the  election of directors and upon all other matters presented to shareholders, and the holders of  shares of Class B Common Stock shall not be entitled to notice of any shareholders’ meeting or  to vote upon the election of directors or upon any other matters of this Corporation, and shall not  be included in determining the number of shares voting or entitled to vote on such matters, and  (ii) as otherwise provided by law or herein.  The holders of shares of Class A Common Stock  shall be entitled to one (1) vote for each share of Class A Common Stock upon all matters  presented to shareholders.    1 NTD: Insert amount equal to 85,000,000 minus the total number of authorized shares of Class B Common Stock.  2 NTD: Insert amount equal to the total number of outstanding shares of Series [] Non-Voting Preferred Stock as  of immediately prior to the filing of this Amended and Restated Articles of Incorporation.                                        A-1   010-8666-6948/4/AMERICAS  

 

      C.    Mandatory Conversion.  Upon the filing of this Amended and Restated Articles of  Incorporation, each share of Common Stock that was outstanding immediately prior to the filing  of this amended and restated Articles of Incorporation shall be converted into one (1) share of  Class A Common Stock, and each share of Series [●] Non-Voting Preferred Stock that was  outstanding immediately prior to the filing of this amended and restated Articles of Incorporation  shall be converted into one (1) share of Class B Common Stock.          D.    Automatic Conversion.  Each share of Class B Common Stock shall convert,  automatically and without any action by any person, into fully paid and non-assessable share or  shares of Class A Common Stock at the then effective Conversion Ratio upon any transfer of  such share to any person other than the Initial Holder or any Affiliate of such Initial Holder  pursuant to clauses (c), (d) or (e) of Section E(i) of this Article Three.          E.    Class B Common Stock Transfer Restrictions.                 (i)   The transfer of shares of Class B Common Stock is only allowed by the  Initial Holder or an Affiliate of the Initial Holder (a) to an Affiliate of the Initial Holder, (b) to  the Corporation, (c) pursuant to any public offering or public sale of securities of the Corporation  (including, without limitation, a public offering registered under the Securities Act of 1933, as  amended (the “Securities Act”) and a public sale pursuant to Rule 144 under the Securities Act  or any similar rule then in force), (d) in a transfer in which no transferee (or group of associated  transferees) would receive 2% or more of any class of voting securities of the Corporation, or (e)  to a transferee that would control more than 50% of the voting securities of the Corporation  without any transfer from the Initial Holder or any Affiliate of such Initial Holder.                (ii)  Notwithstanding the foregoing, the Corporation may restrict such  conversion to the extent it would be inconsistent with, or in violation of, the requirements of any  Regulator with respect to the restrictions on the transfer of the Class B Common Stock that are  required in order to preserve the “non-voting” classification of the Class B Common Stock for  regulatory purposes.  Any such restriction shall be imposed and deemed effective immediately  upon the transmittal by the Corporation of written notice to such holder specifying in reasonable  detail the reason for such restriction; and in the event such notice is transmitted after the event  giving rise to such automatic conversion, the restriction shall be deemed to have been imposed  and effective retroactively to the time of such event, and such conversion shall be deemed not to  have occurred, so long as such notice is transmitted within one hundred eighty (180) days after  the event giving rise to such conversion.  Such notice may be dispatched by first class mail, by  electronic transmission, or by any other means reasonably designed and in good faith intended to  provide prompt delivery to an executive officer (or equivalent) of, or legal counsel to, such  holder.         F.    Adjustments for Certain Events.                 (i)   Changes in Capitalization.  In the event of any stock dividend, stock split,  recombination or other similar event affecting the Class A Common Stock, the then effective  Conversion Ratio shall be adjusted by multiplying such Conversion Ratio by a fraction, (a) the  numerator of which is the number of shares of Class A Common Stock outstanding immediately  after the effective time of such event (excluding for such purpose shares of Class A Common                                        A-2   010-8666-6948/4/AMERICAS  

 

Stock issuable upon the conversion of the Class B Common Stock but including any other  securities convertible into or exchangeable for shares of Class A Common Stock), and (b) the  denominator of which is the number of shares of Class A Common Stock outstanding  immediately prior to the effective time of such event (excluding for such purpose shares of Class  A Common Stock issuable upon the conversion of the Class B Common Stock but including any  other securities convertible into or exchangeable for shares of Class A Common Stock).  For  avoidance of doubt, no issuance of securities shall give rise to the adjustment set forth in this  Section F(i) unless approved by the Board of Directors of the Corporation for the purpose of  affecting all shares of Class A Common Stock (including securities convertible into or  exchangeable for Class A Common Stock) proportionately. In the event the adjustment required  in this Section F(i) would result in an unjust or disproportionate adjustment to the Conversion  Ratio, then such adjustment shall be revised to cause the result to be as nearly as possible  equitable and just as among all holders of the Corporation’s capital stock.                     (ii)  Certain Corporate Transactions.  In the event of (a) the acquisition  by any person (including a group of related persons within the meaning of Rule 13d-2 of the  Securities Exchange Act of 1934, as amended, whether or not such regulation shall then be  applicable to the Corporation or its securities) of (i) more than fifty percent (50%) of the  outstanding capital stock of the Corporation, or (ii) all or substantially all of the assets of the  Corporation (including without limitation the sale of more than two-thirds (2/3) of the capital  stock held by the Corporation in Pacific Mercantile Bank); or (b) a merger of the Corporation  with or into any person, or of any person with or into the Corporation, immediately after which  the shareholders of the Corporation (as measured immediately prior to completion of the  transaction) own less than a majority of the combined capital stock or membership interests of  the surviving entity, then, in each such case, proper provision shall be made so that the holders of  the Class B Common Stock shall be entitled to receive in exchange for or in respect of their  shares of Class B Common Stock the same form and amount of consideration, if any, as the  holders of the Class A Common Stock receive in exchange for or in respect of their shares of  Class A Common Stock, with the amount of such consideration, if any, to be received for or in  respect of each share of Class B Common Stock to be equal to the product of (x) the amount that  would be received by a holder of one share of Class A Common Stock, and (y) the then effective  Conversion Ratio.         G.    Class B Common Stock Dividends.  The holders of Class B Common Stock shall  be entitled to receive ratable dividends as provided herein only if and when dividends are  concurrently declared and payable on the shares of Class A Common Stock of the Corporation,  out of any assets legally available therefor, which dividends shall be payable when, as and if  declared by the Board of Directors; provided, that no dividend may be declared or paid on Class  A Common Stock unless a dividend of equal amount is also concurrently declared or paid, as  applicable, on Class B Common Stock.  The right to receive dividends on the Class B Common  Stock shall not be cumulative.  The full amount and form (whether cash, stock or other property)  of dividends, if any, declared and payable on each share of Class B Common Stock in connection  with the declaration and payment of any dividend on the Class A Common Stock shall be the  amount equal to and in the same form or forms as the dividend concurrently declared and  payable on one share of Class A Common Stock multiplied by the Conversion Ratio in effect as  of immediately prior to the payment of the dividend; provided, however, that any dividend on the  Class A Common Stock that is payable in shares of Class A Common Stock shall not be declared                                        A-3   010-8666-6948/4/AMERICAS  

 

or paid on the Class B Common Stock, but instead shall result in an adjustment to the  Conversion Ratio (in effect as of immediately prior to the payment of the dividend) pursuant to  Section F(i) of this Article Three; and provided further, that if a dividend on the Class A  Common Stock is payable in rights or warrants to subscribe for shares of Class A Common  Stock or purchase Class A Common Stock pursuant to a conversion feature in a debt or equity  security or otherwise, the corresponding dividend on the Class B Common Stock shall consist of  an identical right or warrant except that (a) it shall be to acquire a number of shares of Class B  Common Stock equal to the number of shares of Class A Common Stock that would have been  subject to such right or warrant but for this provision, and (b) the exercise price of such right or  warrant shall be multiplied by an amount equal to the Conversion Ratio.          H.    Liquidation.  Upon the occurrence of a Liquidation Event (as defined below), the  assets of the Corporation or proceeds thereof (whether capital or surplus) remaining available for  distribution to shareholders of the Corporation after payment, or provision for payment, in full of  all claims of creditors of the Corporation and all amounts due on any preferred stock or other  securities of the Corporation that are superior and prior in rank to the Class A Common Stock   and Class B Common Stock, shall be distributed to the holders of the Class A Common Stock  and the Class B Common Stock pro rata based, respectively, on the number of shares of Class A  Common Stock outstanding at such time and the number of shares of Class A Common Stock  into which the Class B Common Stock outstanding at such time would then be convertible if an  event specified in clauses (c), (d) or (e) of Section E(i) of this Article Three had occurred  simultaneously therewith.         I.    The Preferred Stock may be issued from time to time in one or more series by  action of the Board of Directors of this Corporation alone.  The Board of Directors of this  Corporation is hereby authorized to determine the number of series into which the shares of  Preferred Stock may be divided, and (except to the extent such matters are fixed by the Articles  of Incorporation) to determine and alter the rights, preferences, privileges and restrictions  granted to or imposed upon any wholly unissued series of Preferred Stock, to fix the designation  and number of shares constituting any series prior to the issue of shares of that series and to  increase or decrease, within the limits stated in any resolution or resolutions of the Board of  Directors originally fixing the number of shares constituting any series (but not below the  number of shares of such series then outstanding), the number of shares of any such series  subsequent to the issue of shares of that series.         J.    Certain Definitions. For the purposes of this Article Three of the Amended and  Restated Articles of Incorporation:                (i)  the term “Affiliate” means any person or entity that directly or indirectly  controls, is controlled by, or is under common control with the person or entity to which the  defined term refers.  For purposes of this definition, the term “control” means the ability, directly  or indirectly, to direct or influence the direction of the management and policies of the person in  question, whether such ability arises by virtue of ownership interest, contract right or otherwise.   Without limiting the generality of the foregoing, a person is an Affiliate of another person if the  first person (a) is an executive officer (as such term is defined in Rule 405 of the Securities Act)  of the second person; (b) is a director of the second person where such second person is a  corporation; (c) is a manager (or an executive officer, director, general partner or manager of an                                        A-4   010-8666-6948/4/AMERICAS  

 

entity that is a manager) of the second person where such second person is a limited liability  company; (d) is a general partner (or an executive officer, director, general partner or manager of  an entity that is a general partner) of the second person where such second person is a  partnership; or (e) directly or indirectly has or shares the power to vote, or direct the voting of, or  to dispose of, or direct the disposition of, securities representing more than ten percent (10%) of  the combined voting power of the securities of the second person.               (ii)  the term “Conversion Ratio” means the number of shares of Class A  Common Stock into which a share of Class B Common Stock is convertible into.  The  Conversion Ratio shall initially be [●]3 and shall be subject to adjustment as provided herein.               (iii)   the term “Initial Holder” means [Patriot Financial Partners III, L.P.]4              (iv)    the term “Liquidation Event” means a liquidation, dissolution or winding  up of the Corporation, whether voluntary or involuntary.               (v)   the term “Regulator” means any of (a) the Board of Governors of the  Federal Reserve System (whether acting directly or by or through the Federal Reserve Bank of  San Francisco in such bank’s regulatory capacity); (b) the Federal Deposit Insurance  Corporation; (c) the California Department of Business Oversight; (d) any successor agency to  any of the foregoing; or (e) any other federal or state regulatory authority, whether in existence  as of the date hereof or hereafter established, having jurisdiction over the Corporation or its  banking subsidiary as to matters of compliance with the Federal Deposit Insurance Company  Act, the Bank Holding Company Act, the Federal Reserve Act, the Home Owners' Loan Act, the  California Financial Code, any successor statute or amendment to any of the foregoing, or any  regulation adopted pursuant thereto.             ARTICLE FOUR:  LIMITATION OF DIRECTORS’ LIABILITY         The liability of the directors of this Corporation for monetary damages shall be  eliminated to the fullest extent permissible under California law.                        ARTICLE FIVE:  INDEMNIFICATION         This Corporation is authorized to indemnify the directors and officers of this Corporation  to the fullest extent permissible under California law and in excess of that otherwise permitted  under Section 317 of the California Corporations Code.    3 NTD: Insert amount of the Conversion Ratio of the Series [] Non-Voting Preferred Stock as of immediately prior  to the filing of this Amended and Restated Articles of Incorporation  4 NTD: Confirm name of Patriot holder of Series [] Non-Voting Preferred Stock immediately prior to filing of this  Amended and Restated Articles of Incorporation.                                        A-5   010-8666-6948/4/AMERICAS  

 

                                  Exhibit B                            Registration Rights Agreement                                    (attached)    010-8656-4704/12/AMERICAS  

 

                    REGISTRATION RIGHTS AGREEMENT         THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is made and entered  into as of this 14 day of September, 2018 by and among Pacific Mercantile Bancorp, a California  corporation  (the  “Company”),  and  Patriot  Financial  Partners  III,  L.P.,  a  Delaware  limited  partnership  (the  “Holder”).   Capitalized  terms  used  herein  shall  have  the  meanings  set  forth  in Section 1 below.                                    RECITALS         A.    Concurrently herewith the Holder has entered into a Stock Purchase Agreement  (the “Stock Purchase Agreement”) with the Company and Carpenter Community Bancfund, L.P.  and  Carpenter  Community  Bancfund-A,  L.P.  (collectively  referred  to  herein  as  “Carpenter”),  pursuant  to  which  Carpenter  will  be  selling  to  the  Holder,  and  the  Holder  will  be  purchasing  from  Carpenter,  1,467,155  shares  of  the  Company’s  Series  A  Preferred  Stock  and  2,169,208  shares of the Company’s Common Stock.         B.    In  connection  with  entering  into  the  Stock  Purchase  Agreement  and  consummating the transactions contemplated thereby, the Company and the Holder have entered  into an Investor Rights Agreement pursuant to which the parties have agreed to enter into this  Agreement.          NOW,  THEREFORE,   in  consideration  of  the  promises  and  the  mutual  covenants  contained  herein  and  for  other  good  and  valuable  consideration,  the  receipt  and  adequacy  of  which are hereby  acknowledged  by the  Parties,  the  Company  and  the Holder  hereby  agree  as  follows:                                   AGREEMENT   1.    DEFINITIONS. As used in this Agreement, the following terms shall have the following  meanings:         1.1.  “Affiliate” means, with respect to any Person, any other Person which directly or  indirectly controls, is controlled by, or is under common control with, such Person.         1.2.  “Blue Sky Application” shall have the meaning set forth in Section 6.1 below.         1.3.  “Business Day” means a day, other than a Saturday or Sunday, on which banks in  New York City are open for the general transaction of business.         1.4.  “Common Stock” means the Company’s common stock, no par value.         1.5.  “Effective Date” means the date on which the Registration Statement is declared  effective by the SEC.         1.6.  “Effectiveness Period” shall have the meaning set forth in Section 4.1 below.    010-8656-8769/9/AMERICAS  

 

      1.7.   “Exchange  Act” means  the Securities  Exchange  Act  of  1934,  as  amended,  and  the rules and regulations promulgated thereunder.         1.8.   “Filing Deadline” means, with respect to the Registration Statement required to  be filed pursuant to Section 2.1(a), the date that is the first (1st) anniversary of the Closing Date;  provided that if the Filing Deadline falls on a Saturday, Sunday or other day that the Commission  is closed for business, the Filing Deadline shall be extended to the next Business Day on which  the Commission is open for business.         1.9.   “Holder  Indemnified  Parties”  shall  have  the  meaning  set  forth  in Section 6.1 below.         1.10. “Inspectors” shall have the meaning set forth in Section 4.14 below.         1.11. “Non-Voting Common Stock" means the Company's non-voting common stock,  no par value per share, into which the Series A Preferred Stock is automatically convertible as of  the  close  of  business  on  the  effective  date  of  an  amendment  to  its  articles  of  incorporation  authorizing said stock following approval of such amendment by the Company’s stockholders.         1.12. “Parties” means, collectively, the Company and the Holder, and “Party” means,  individually, each of the Company and the Holder.         1.13. “Person” means an individual, corporation, partnership, limited liability company,  trust,  business  trust,  association,  joint  stock  company,  joint  venture,  sole  proprietorship,  unincorporated organization, governmental authority or any other form of entity not specifically  listed herein.         1.14. “Prospectus” shall mean the prospectus included in the Registration Statement, as  amended  or  supplemented  by  any  prospectus  supplement,  with  respect  to  the  terms  of  the  offering of any portion of the Registrable Securities covered by the Registration Statement and  by  all  other  amendments  and  supplements  to  the  prospectus,  including  post-effective  amendments and all material incorporated by reference in such prospectus.         1.15. “Records” shall have the meaning set forth in Section 4.14 below.         1.16. “Register,”  “registered”  and  “registration”  refer  to  a  registration  made  by  preparing  and  filing  a  Registration  Statement  or  similar  document  in  compliance  with  the  Securities  Act  (as  defined  below),  and  the  declaration  or  ordering  of  effectiveness  of  the  Registration Statement or document.         1.17. “Registrable Securities” means all of the Shares, the Underlying Shares and any  securities issued or issuable upon any stock split, dividend or other distribution, recapitalization  or similar event with respect to the Shares or the Underlying Shares, provided that Shares or the  Underlying  Shares  shall  cease  to  be  Registrable  Securities  upon  the  earliest  to  occur  of  the  following:  (A) a sale pursuant to a Registration Statement or Rule 144 under the Securities Act  (in which case, only such security sold shall cease to be a Registrable Security); (B) becoming  eligible  for  sale  without  time,  volume  or  manner  of  sale  restrictions  by  the  Holder  under                                        2    010-8656-8769/9/AMERICAS  

 

Rule 144; (C) if such Shares or Underlying Shares have ceased to be outstanding; or (D)  if such  Shares or Underlying Shares have been sold in a private transaction in which the Holder's rights  under this Agreement have not been assigned to the transferee.         1.18. “Registration  Statement”  shall  mean  the  registration  statement  of  the  Company  filed under the Securities Act that covers the resale of the Registrable Securities pursuant to the  provisions  of  this  Agreement,  amendments  and  supplements  to  such  Registration  Statement,  including post-effective amendments, all exhibits and all material incorporated by reference in  such Registration Statement.         1.19. “SEC” means the Securities and Exchange Commission.         1.20. “Securities Act” means the Securities Act of 1933, as amended, and the rules and  regulations promulgated thereunder.         1.21. “Series  A  Preferred  Stock”  means  the  mandatorily  convertible  noncumulative  perpetual preferred stock, Series A, no par value, having the rights, preferences and privileges set  forth  in  its  Certificate  of  Determination  of  the  Rights,  Preferences  and  Privileges  and  Restrictions.         1.22. "Shares" means the shares of Common Stock and the shares of Series A Preferred  Stock sold to the Holder pursuant to the Stock Purchase Agreement.         1.23. “Suspension” shall have the meaning set forth in Section 3.1 below.         1.24. “Suspension Notice” shall have the meaning set forth in Section 3.1 below.         1.25. “Underlying Shares” means the shares of Non-Voting Common Stock into which  the shares of Series A Preferred Stock are convertible.  2.    REGISTRATION.         2.1.  Registration Statement.               (a)   On  or  prior  to  the  Filing  Deadline,  the  Company  shall  prepare  and  file  with the SEC a Registration Statement on Form S-3 (the “Registration Statement”) covering the  resale of up to all of the Registrable Securities in an offering to be made on a continuous basis  pursuant  to  Rule  415  or,  if  Rule  415  is  not  available  for  offers  and  sales  of  the  Registrable  Securities  by  such  other  means  of  distribution  of  Registrable  Securities  as  the  Company  may  reasonably determine.  The Registration Statement also shall cover, to the extent allowable under  the  Securities  Act  and  the  rules  and  regulations  promulgated  thereunder,  such  indeterminate  number  of  additional  shares  of  Registrable  Securities  that  may  become  issuable  as  a  result  of  stock splits, dividends or other distributions, recapitalizations or other similar transactions with  respect to the Registrable Securities that occur during the Effectiveness Period.  The Registration  Statement  (and  each  amendment  or  supplement  thereto,  and  each  request  for  acceleration  of  effectiveness  thereof)  shall  be  provided  in  accordance  with Section  4 to  the  Holder  and  its  counsel prior to its filing or other submission.                                        3    010-8656-8769/9/AMERICAS  

 

            (b)   The Company represents and warrants that, as of the date hereof, it meets  the  requirements  for  the  use  of  Form  S-3  for  registration  of  the  resale  of  the  Registrable  Securities by the Holder.  The Company will file all reports required to be filed by the Company  with the SEC in a timely manner so as to preserve its eligibility for the use of Form S-3.         2.2.  Expenses.  The  Company  will  pay  all  expenses  associated  with  registration,  including  filing  and  printing  fees,  the  Company’s  counsel  and  accounting  fees  and  expenses,  costs associated with clearing the Registrable Securities for sale under applicable state securities  laws  and  listing  fees,  but  excluding  discounts,  commissions,  fees  of  underwriters,  selling  brokers,  dealer  managers  or  similar  securities  industry  professionals  with  respect  to  the  Registrable Securities being sold.         2.3.  Effectiveness.  The  Company  shall  use  commercially  reasonable  efforts  to  have  the  Registration  Statement  declared  effective  within  60  days  after  the  date  the  Registration  Statement  was  filed  with  the  SEC; provided, however,  that  the  Company  shall  be  entitled  to  delay  or  defer  the  effectiveness  of  the  Registration  Statement  if  the  Company  reasonably  believes, considering the advice of counsel, that the Company may, in the absence of a delay or  deferral, be required under state or federal securities laws to disclose any corporate development,  the disclosure of which could reasonably be expected to have a material adverse effect upon the  Company, its stockholders, a potentially material transaction or event involving the Company, or  any negotiations, discussions or proposals directly relating thereto. The Company shall notify the  Holder  by  facsimile  or  email  as  promptly  as  practicable,  and  in  any  event,  within  two  (2)  Business Days, after the Registration Statement is declared effective and shall provide the Holder  with copies of any related Prospectus to be used in connection with the sale or other disposition  of the securities covered thereby.  Notwithstanding anything to the contrary, the Company may  not delay or defer the effectiveness of the Registration Statement for a period to exceed in the  aggregate sixty (60) days.   3.    SUSPENSION.         3.1.  Subject to Section 3.2 below, in the event: (i) of any request by the SEC or any  other federal or state governmental authority, during the Effectiveness Period, for amendments or  supplements to the Registration Statement or related Prospectus or for additional information so  that the Registration Statement will not contain an untrue statement of a material fact or omit to  state a material fact required to be stated therein or necessary to make the statements therein not  misleading or otherwise fail to comply with the applicable rules and regulations of the federal  securities  laws;  (ii) of  the  issuance  by  the  SEC  or  any  other  federal  or  state  governmental  authority  of  any  stop  order  suspending  the  effectiveness  of  the  Registration  Statement  or  the  initiation  of  any  proceedings  for  that  purpose;  (iii) of  the  receipt  by  the  Company  of  any  notification with respect to the suspension of the qualification or exemption from qualification of  any of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding  for  such  purpose,  provided  that,  considering  the  advice  of  counsel,  the  Company  reasonably  believes  that  it  must  qualify  in  such  jurisdiction;  (iv) of  any  event  or  circumstance  that,  considering the advice of counsel, the Company reasonably believes necessitates the making of  any changes in the Registration Statement or related Prospectus, or any document incorporated  or  deemed  to  be  incorporated  therein  by  reference,  so  that,  in  the  case  of  the  Registration                                        4    010-8656-8769/9/AMERICAS  

 

Statement, it will not contain any untrue statement of a material fact or any omission to state a  material  fact  required  to  be  stated  therein  or  necessary  to  make  the  statements  therein  not  misleading, and that in the case of a related Prospectus, it will not contain any untrue statement  of  a  material  fact  or  any  omission  to  state  a  material  fact  required  to  be  stated  therein  or  necessary to make the statements therein, in the light of the circumstances under which they were  made,  not  misleading;  or  (v) that  the  Company reasonably believes,  considering the  advice  of  counsel, that the Company may, in the absence of a suspension described hereunder, be required  under  state or federal  securities  laws  to  disclose any  corporate  development, the  disclosure  of  which  could  reasonably  be  expected  to  have  a  material  adverse  effect  upon  the  Company,  its  stockholders,  a  potentially  material  transaction  or  event  involving  the  Company,  or  any  negotiations, discussions or proposals directly relating thereto; then the Company shall, promptly  following the occurrence of any of the foregoing events, deliver a certificate in writing to the  Holder  (the  “Suspension  Notice”)  to  the  effect  of  the  foregoing  (but  in  no  event,  without  the  prior written consent of the Holder, shall the Company disclose to the Holder any of the facts or  circumstances  regarding  any  material  nonpublic  information)  and,  upon  receipt  of  such  Suspension Notice, the Holder will refrain from selling any Registrable Securities pursuant to the  Registration Statement (a “Suspension”) until the Holder’s receipt of copies of a supplemented  or  amended  prospectus  prepared  and  filed  by  the  Company  or  until  the  Holder  is  advised  in  writing by the Company that the current Prospectus may be used and the Holder has received  copies of any additional or supplemental filings that are incorporated or deemed incorporated by  reference in any such Prospectus; provided that, in the case of a suspension due to (x) an event  described in clause (i), (ii), or (iii) of this Section 3.1, the Suspensions shall not be for more than  an  aggregate  of  ninety  (90) days  in  any  365  day  period  and  (y) an  event  described  in  clause (iv) or (v) of this Section 3.1, the Suspensions shall not be for more than an aggregate of  sixty (60) days in any 365 day period.         3.2.  The Company will use commercially reasonable efforts to terminate a Suspension  as promptly as practicable after delivery of a Suspension Notice to the Holder.   4.    COMPANY OBLIGATIONS. The Company will use commercially reasonable efforts to  effect  the  registration  of  the  Registrable  Securities  in  accordance  with  the  terms  hereof,  and  pursuant thereto the Company will, as expeditiously as possible:         4.1.  cause the Registration Statement to become effective and to remain continuously  effective  for  a  period  that  will  terminate  on  the  date  on  which  all  securities  covered  by  the  Registration Statement cease to be Registrable Securities (the “Effectiveness Period”) and advise  the Holder in writing when the Effectiveness Period has expired;         4.2.  (i)  prepare  and  file  with  the  SEC  such  amendments  and  post-effective  amendments  to  the  Registration  Statement and such supplements  to  the  Prospectus  as  may be  necessary  to  keep  the  Registration  Statement  effective  for  the  period  specified  in Section 4.1,  (ii) respond  as  promptly as  reasonably  possible  to  any  comments  received from  the  SEC  with  respect  to  each  Registration  Statement  or  any  amendment  thereto,  and  (iii) comply  with  the  provisions of the Securities Act and the Exchange Act with respect to the distribution of all of  the Registrable Securities covered thereby during the Effectiveness Period;                                         5    010-8656-8769/9/AMERICAS  

 

      4.3.  (i) provide copies to and permit counsel designated by the Holder to review the  Registration Statement and any amendments or supplements thereto and any comments made by  the staff of the SEC and the Company’s responses thereto no fewer than five (5) days prior to its  filing  with  the  SEC  or  its  receipt  from  the  SEC,  as  applicable,  and  (ii) shall  duly  consider  comments made by such counsel thereon and shall not file any Registration Statement and any  amendments   or   supplements  thereto  to   which   such   counsel  reasonably  objects; provided, however, that Holder’s counsel will be deemed to have no objections if such  counsel has not provided written comments to the Company and its counsel no later than three  (3) Business Days after  the Holder’s counsel has been provided with copies of the documents  listed  in  clause (i) of  this Section 4.3.  The  Company  shall  not  unreasonably  reject  comments  from  such  counsel  prior  to  the  Company’s  submission  of  a  request  for  acceleration  of  the  effectiveness  of  a  Registration  Statement  or  any  amendment  or  supplement  thereto.   The  Company shall reasonably cooperate with such counsel in performing the Company’s obligations  pursuant to this Section 4.3;         4.4.  furnish to the Holder and its legal counsel, without charge, (i) promptly after the  same is prepared and publicly distributed, filed with the SEC, or received by the Company (but  not later than two (2) Business Days after the filing date, receipt date or sending date, as the case  may be) one (1) copy of the Registration Statement and any amendment thereto, the preliminary  prospectus, free writing prospectus and Prospectus and each amendment or supplement thereto  (as applicable), and each letter written by or on behalf of the Company to the SEC or the staff of  the SEC, and each item of correspondence from the SEC or the staff of the SEC, relating to the  Registration  Statement  (other  than  any  portion  of  any  thereof  which  contains  information  for  which  the  Company  has  sought  confidential  treatment),  and  (ii) an  electronic  copy  of  a  Prospectus,  including  a  preliminary  prospectus  and  any  free  writing  prospectus,  and  all  amendments and supplements thereto and such other documents as counsel for the Holder may  reasonably request in connection with the disposition of such Registrable Securities owned by  the Holder that are covered by the Registration Statement;         4.5.  within  two (2) Business  Days  after  a  Registration  Statement  which  covers  Registrable Securities is declared effective by the SEC, deliver, and shall cause legal counsel for  the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the  Holder whose Registrable Securities are included in such Registration Statement) confirmation  that such Registration Statement has been declared effective by the SEC in such form that the  transfer agent may reasonably request;         4.6.  use commercially reasonable efforts to (i) prevent the issuance of any stop order  or other suspension of effectiveness and, (ii) if such order is issued, obtain the withdrawal of any  such order  at  the earliest  practicable  time and to  notify  the  Holder of the  issuance of such  an  order and the resolution thereof;         4.7.  prior  to  the  Effective  Date,  use  commercially  reasonable  efforts  to  register  or  qualify  or  cooperate  with  the  Holder  and  their  counsel  in  connection  with  the  registration  or  qualification of the Registrable Securities for offer and sale by the Holder under the securities or  blue sky laws of such jurisdictions requested by the Holder, provided that, considering the advice  of  the  Company’s  counsel,  the  Company  reasonably  believes  that  it  must  qualify  in  such                                        6    010-8656-8769/9/AMERICAS  

 

jurisdiction  or  jurisdictions,  and  do  any  and  all  other  commercially  reasonable  acts  or  things  necessary  or  advisable  to  enable  the  distribution  by  the  Holder  in  such  jurisdictions  of  the  Registrable  Securities  covered  by  the  Registration  Statement; provided, however,  that  the  Company shall not be required in connection therewith or as a condition thereto to (i) qualify to  do  business  in  any  jurisdiction  where  it  would  not  otherwise  be  required  to  qualify  but  for  this Section 4.7,  (ii) subject  itself  to  general  taxation  in  any  jurisdiction  where  it  would  not  otherwise be so subject but for this Section 4.7, or (iii) file a general consent to service of process  in any such jurisdiction. The Company shall promptly notify the Holder who holds Registrable  Securities and its legal counsel of the receipt by the Company of any notification with respect to  the suspension of the registration or qualification of any of the Registrable Securities for sale by  the Holder under the securities or “blue sky” laws of any jurisdiction in the United States or its  receipt of actual notice of the initiation or threatening of any proceeding for such purpose;         4.8.  use commercially reasonable efforts to cause all shares of Common Stock covered  by  the  Registration  Statement  to  be  listed  on  each  securities  exchange,  interdealer  quotation  system  or  other  market  on  which  similar  securities  issued  by  the  Company  are  then  listed  (it  being understood that the Company has no obligation to cause any other shares of Registrable  Securities, including shares of the Series A Preferred Stock or Non-Voting Common Stock, to be  listed on any securities exchange, interdealer quotation system or other market);         4.9.  otherwise use commercially reasonable efforts to comply with all applicable rules  and  regulations  of  the  SEC  under  the  Securities  Act  and  the  Exchange  Act,  take  such  other  actions as may be reasonably necessary to facilitate the registration of the Registrable Securities  hereunder;         4.10. promptly  (and  in  any  event  within  two  (2) Business  Days  following  discovery)  notify the Holder in writing, at any time when a Prospectus relating to Registrable Securities is  required to be delivered under the Securities Act, upon discovery that, or upon the happening of  any event as a result of which, the Prospectus included in the Registration Statement, as then in  effect, includes an untrue statement of a material fact or omits to state any material fact required  to be stated therein or necessary to make the statements therein not misleading in light of the  circumstances then existing, and at the request of any the Holder, promptly prepare and furnish  to  the  Holder  a  reasonable  number  of  copies  of  a  supplement  to  or  an  amendment  of  such  Prospectus  as  may  be  necessary  so  that,  as  thereafter  delivered  to  the  purchasers  of  such  Registrable Securities, such Prospectus shall not include an untrue statement of a material fact or  omit  to state a  material fact  required to  be  stated  therein or necessary to make the statements  therein  not  misleading  in  light  of  the  circumstances  then  existing.  The  Company  shall  also  promptly  notify  the  Holder  and  its  legal  counsel  in  writing  (i) when  a  prospectus  or  any  prospectus supplement or post-effective amendment has been filed,  and  when the Registration  Statement or any post-effective amendment has become effective, (ii) of any request by the SEC  for  amendments  or  supplements  to  the  Registration  Statement  or  related Prospectus  or  related  information,  and  (iii) of  the  Company’s  reasonable  determination  of  whether  a  post-effective  amendment to the Registration Statement would be appropriate;         4.11. with  a  view  to  making  available  to  the  Holder  the  benefits  of  Rule  144  (or  its  successor  rule)  and  any  other  rule  or  regulation  of  the  SEC  that  may  at  any  time  permit  the                                        7    010-8656-8769/9/AMERICAS  

 

Holder  to  sell  shares  of  Common  Stock  to  the  public  without  registration,  the  Company  covenants  and  agrees  to:  (a) make  and  keep  public  information  available,  as  those  terms  are  understood and defined in Rule 144, during the Effectiveness Period; (b) file with the SEC in a  timely  manner  all  reports  and  other  documents  required  of  the  Company  under  the  Exchange  Act;  and  (c) furnish  to  the  Holder  upon  request,  as  long  as  the  Holder  owns  any  Registrable  Securities,  (i) a  written  statement  by  the  Company  that  it  has  complied  with  the  reporting  requirements of the Exchange Act, (ii) a copy of the Company’s most recent Annual Report on  Form  10-K  or  Quarterly  Report  on  Form  10-Q,  and  (iii) such  other  information  as  may  be  reasonably  requested  in  order  to  avail  the  Holder  of  any  rule  or  regulation  of  the  SEC  that  permits the selling of any such Registrable Securities without registration;         4.12. hold  in  confidence  and  not  make  any  disclosure  of  information  concerning  the  Holder provided to the Company unless (i) disclosure of such information is necessary to comply  with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid  or  correct  a  misstatement  or  omission  in  any  Registration  Statement,  (iii) the  release  of  such  information is ordered pursuant to a subpoena or other final, non-appealable order from a court  or  governmental  body  of  competent  jurisdiction,  or  (iv) such  information  has  been  made  generally available to the public other than by disclosure in violation of this Agreement or any  other agreement of which the Company has knowledge.  The Company agrees that it shall, upon  learning that disclosure of such information concerning the Holder is sought in or by a court or  governmental body of competent jurisdiction or through other means, give prompt written notice  to the Holder and allow the Holder, at the Holder’s expense, to undertake appropriate action to  prevent disclosure of, or to obtain a protective order for, such information;         4.13. if requested by the Holder, (i) as soon as practicable incorporate in a prospectus  supplement or post-effective amendment such information as the Holder reasonably requests to  be  included  therein  relating  to  the  sale  and  distribution  of  Registrable  Securities,  including,  without  limitation,  information  with  respect  to  the  number  of  Registrable  Securities  being  offered or sold, the purchase price being paid therefor and any other terms of the offering of the  Registrable Securities to be sold in such offering; (ii) as soon as practicable make all required  filings  of  such  prospectus  supplement  or  post-effective  amendment  after  being  notified  of  the  matters  to  be  incorporated  in  such  prospectus  supplement  or  post-effective  amendment;  and  (iii) as  soon  as  practicable,  supplement  or  make  amendments  to  any  Registration  Statement  if  reasonably  requested  by  the  Holder  holding  any  Registrable  Securities  to  the  effect  of  the  foregoing;         4.14. make available for inspection by (i) the Holder, (ii) legal counsel for the Holder  and  (iii) one  firm  of  accountants  or  other  agents  retained  by  the  Holder  (collectively,  the  “Inspectors”), all  pertinent  financial and other records,  and pertinent  corporate documents  and  properties  of  the  Company  (collectively,  the  “Records”),  as  shall  be  reasonably  deemed  necessary  by  each  Inspector,  and  cause  the  Company’s  officers,  directors  and  employees  to  supply  all  information  which  any  Inspector  may  reasonably  request;  provided,  however,  that  each Inspector shall agree to hold in strict confidence and shall not make any disclosure (except  to the Holder who has agreed to receive such information and hold in strict confidence any such  information) or use of any Record or other information which the Company determines in good  faith to be confidential, and of which determination the Inspectors are so notified, unless (a) the                                        8    010-8656-8769/9/AMERICAS  

 

disclosure of such Records is necessary to avoid or correct a misstatement or omission in any  Registration Statement or is otherwise required under the Securities Act, (b) the release of such  Records  is  ordered  pursuant  to  a  final,  non-appealable  subpoena  or  order  from  a  court  or  government  body  of  competent  jurisdiction,  or  (c) the  information  in  such  Records  has  been  made generally available to the public other than by disclosure in violation of this or any other  agreement of which the Inspector has knowledge. The Holder agrees that it shall, upon learning  that disclosure of such Records is sought in or by a court or governmental body of competent  jurisdiction or through other means, give prompt notice to the Company and allow the Company,  at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective  order  for,  the  Records  deemed  confidential.  Nothing  herein  (or  in  any  other  confidentiality  agreement between the Company and the Holder) shall be deemed to limit the Holder’ ability to  sell Registrable Securities in a manner which is otherwise consistent with applicable laws and  regulations; and         4.15. if  the  Holder  is  required  under  applicable  securities  law  to  be  described  in  the  Registration Statement as an underwriter and which is otherwise conducting diligence of the sort  that an underwriter could conduct, at the reasonable request of any the Holder, use commercially  reasonable efforts to deliver to the Holder, on the date of the effectiveness of the Registration  Statement and thereafter from time to time on such dates as the Holder may reasonably request  (i) a  letter,  dated  such  date,  from  the  Company’s  independent  certified  public  accountants  in  form  and  substance  as  is  customarily  given  by  independent  certified  public  accountants  to  underwriters  in  an  underwritten  public  offering,  addressed  to  the  Holder,  and  (ii) an  opinion,  dated as of such date, of counsel representing the Company  for purposes of such Registration  Statement,  in  form,  scope  and  substance  as  is  customarily  given  in  an  underwritten  public  offering, addressed to the Holder.   5.    OBLIGATIONS OF HOLDER.         5.1.  The Holder shall furnish in writing to the Company such information regarding  itself,  the  Registrable  Securities  held  by  it  and  the  intended  method  of  disposition  of  the  Registrable Securities held by it, as shall be required to effect the registration of such Registrable  Securities  and  shall  execute  such  documents  in  connection  with  such  registration  as  the  Company may reasonably request. At least five (5) Business Days prior to the anticipated filing  date of the Registration Statement, the Company shall notify the Holder of the information the  Company requires from the Holder. The Holder shall provide such information to the Company  at least two (2) Business Days prior to the anticipated filing date of the Registration Statement.         5.2.  The Holder agrees to cooperate with the Company as reasonably requested by the  Company in connection with the preparation and filing of a Registration Statement hereunder.         5.3.  The  Holder  agrees  that,  upon  receipt  of  any  notice  from  the  Company  of  the  commencement  of  a  Suspension  pursuant  to Section 3,  it  will  immediately  discontinue  disposition of Registrable  Securities  pursuant  to the Registration Statement, until the Holder’s  receipt of the supplemented or amended prospectus filed with the SEC and until any related post- effective  amendment  is  declared  effective  or  until  the  Holder  is  advised  in  writing  by  the  Company  that the  current  Prospectus  may be  used  and  the  Holder has  received  copies  of  any                                         9    010-8656-8769/9/AMERICAS  

 

additional or supplemental filings that are incorporated or deemed incorporated by reference in  any such Prospectus and, if so directed by the Company, the Holder shall deliver to the Company  (at  the  expense  of  the  Company)  or  destroy  (and  deliver  to  the  Company  a  certificate  of  destruction)  all  copies  in  the  Holder’s  possession  of  the  Prospectus  covering  the  Registrable  Securities current at the time of receipt of such notice.   6.    INDEMNIFICATION.         6.1.  Indemnification  by  the  Company.  The  Company  agrees  to  indemnify  and  hold  harmless, to the fullest extent permitted by law, the Holder and its directors, officers, employees,  general  partners,  members,  stockholder  and  each  Person  who  controls  the  Holder  (within  the  meaning  of  the  Securities  Act)  (collectively,  the  “Holder  Indemnified  Parties”)  against  any  losses, claims, damages, liabilities and expense (including reasonable attorneys’ fees) resulting  from or which arise out of or are based upon: (i) any untrue statement or alleged untrue statement  of a material fact or any omission or alleged omission of a material fact required to be stated in  the Registration Statement or Prospectus or preliminary prospectus or free writing prospectus or  amendment or supplement thereto; (ii) any blue sky application or other document executed by  the Company specifically for that purpose or based upon written information furnished by the  Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable  Securities  under  the  securities  laws  thereof  (any  such  application,  document  or  information  herein called a “Blue Sky Application”); (iii) the omission or alleged omission to state therein a  material  fact  required  to  be  stated  therein  or  necessary  to  make  the  statements  therein  not  misleading;  (iv) any  violation  by  the  Company  or  its  agents  of  any  rule  or  regulation  promulgated  under  the  Securities  Act  applicable  to  the  Company  or  its  agents  and  relating  to  action or inaction required of the Company in connection with such registration; (v) any failure  to register or qualify the resale of the Registrable Securities included in any such registration in  any state where the Company or its agents has affirmatively undertaken or agreed in writing that  the Company will undertake such registration or qualification on the Holder’s behalf, or (vi) any  breach of this Agreement by the Company, and will reimburse the Holder Indemnified Parties  for any legal and other expenses reasonably incurred as such expenses are reasonably incurred by  the  Holder  Indemnified  Party  in  connection  with  investigating,  defending,  settling,  compromising  or  paying  any  such  loss,  claim,  damage,  liability,  expense  or  action; provided, however,  that  the  Company  will  not  be  liable  in  any  such  case  if  and  to  the  extent  that  any  such  loss,  claim,  damage  or  liability  arises  out  of  or  is  based  upon  an  untrue  statement or alleged untrue statement or omission or alleged omission based upon information  furnished  by  the  Holder  in  writing  specifically  for  use  in  the  Registration  Statement  or  Prospectus or preliminary prospectus or free writing prospectus. The Company shall notify the  Holder promptly of the institution, threat or assertion of any proceeding of which the Company is  aware in connection with the transactions contemplated by this Agreement.         6.2.  Indemnification  by  the  Holder.  The  Holder  agrees,  severally  but  not  jointly,  to  indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors,  officers,  employees,  stockholders  and  each  Person  who  controls  the  Company  (within  the  meaning  of  the  Securities  Act)  against  any  losses,  claims,  damages,  liabilities  and  expense  (including reasonable attorneys’ fees) resulting from or which arise out of or are based upon any  untrue  statement  or  alleged  untrue  statement  of  a  material  fact  or  any  omission  or  alleged                                        10    010-8656-8769/9/AMERICAS  

 

omission of a material fact required to be stated in the Registration Statement or Prospectus or  preliminary  prospectus  or  free  writing  prospectus  or  amendment  or  supplement  thereto  or  necessary to make the statements therein not misleading, to the extent, but only to the extent that  such  untrue  statement  or  omission  or  alleged  statement  or  omission  is  contained  in  any  information furnished in writing by the Holder to the Company specifically for inclusion in the  Registration  Statement  or  Prospectus  or  free  writing  prospectus  or  amendment  or  supplement  thereto, and will reimburse the Company and its directors, officers, employees, stockholders or  controlling Persons for any legal and other expenses reasonably incurred as such expenses are  reasonably  incurred  by  such  Person  in  connection  with  investigating,  defending,  settling,  compromising or paying any such loss, claim, damage, liability, expense or action. In no event  shall  the  liability  of  the  Holder  be  greater  in  amount  than  the  dollar  amount  of  the  proceeds  received by the Holder upon the sale of the Registrable Securities included in the Registration  Statement giving rise to such indemnification obligation, except in the case of fraud or willful  misconduct.         6.3.  Conduct of Indemnification Proceedings. Any Person entitled to indemnification  hereunder  shall  (i) give  prompt  notice  to  the  indemnifying  party  of  any  claim  with  respect  to  which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of  such  claim  with  counsel  reasonably  satisfactory  to  the  indemnified  party;  provided  that  any  Person entitled to indemnification hereunder shall have the right to employ separate counsel and  to participate in the defense of such claim, but the fees and expenses of such counsel shall be at  the  expense  of  such  Person  unless  (a) the  indemnifying  party  has  agreed  to  pay  such  fees  or  expenses,  or (b) the indemnifying  party  shall  have failed to  assume  the  defense of such claim  within  five (5) Business  Days  after  written  notice  thereof  and  employ  counsel  reasonably  satisfactory to such Person or (c) in the reasonable judgment of any such Person, considering the  advice of counsel, a conflict of interest exists between such Person and the indemnifying party  with  respect  to  such  claims  (in  which  case,  if  the  Person  notifies  the  indemnifying  party  in  writing that such Person elects to employ separate counsel at the expense of the indemnifying  party, the indemnifying party shall not have the right to  assume the defense of such claim on  behalf of such Person); and provided, further, that the failure of any indemnified party to give  notice as provided herein shall not relieve the indemnifying party of its obligations hereunder,  except  to  the  extent  that  such  failure  to  give  notice  shall  materially  adversely  affect  the  indemnifying  party  in  the  defense  of  any  such  claim  or  litigation.  It  is  understood  that  the  indemnifying  party  shall  not,  in  connection  with  any  proceeding  in  the  same  jurisdiction,  be  liable for fees or expenses of more than one additional firm of attorneys at any time for all such  indemnified  parties.  No  indemnifying  party  will,  except  with  the  consent  of  the  indemnified  party, consent to entry of any judgment or enter into any settlement that does not include as an  unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a  release from all liability in respect of such claim or litigation.         6.4.  Contribution.  If  for  any  reason  the  indemnification  provided  for  in Sections  6.1 or 6.2 is  unavailable  to  an  indemnified  party  or  insufficient  to  hold  it  harmless  as  contemplated therein, then the indemnifying party shall contribute to the amount paid or payable  by the indemnified party as a result of such loss, claim, damage or liability in such proportion as  is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as  well  as  any  other  relevant  equitable  considerations.  No  Person  guilty  of  fraudulent                                        11    010-8656-8769/9/AMERICAS  

 

misrepresentation within the meaning of Section 11(f) of the Securities Act shall be entitled to  contribution from any Person not guilty of such fraudulent misrepresentation. In no event shall  the  contribution  obligation  of  the  Holder  be  greater  in  amount  than  the  dollar  amount  of  the  proceeds  received  by  it  upon  the  sale  of  the  Registrable  Securities  giving  rise  to  such  contribution obligation.   7.    MISCELLANEOUS.         7.1.  Governing 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  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,  (iii) 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 7.2. 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  in  whole  or  in  part  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) one  of  the  inducements  to  each  such  Party  to  enter  into  this  Agreement  by,  among  others, are the waivers and certifications contained in this Section 7.1(c).         7.2.  Notices.  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),                                         12    010-8656-8769/9/AMERICAS  

 

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: Curt A. Christianssen              Tel: (714) 438-2500              Fax: (714) 438-1076              Email: Curt.Christianssen@pmbank.com              With a copy to:               O’Melveny & Myers LLP              610 Newport Center Drive, 17th Floor              Newport Beach, CA 92660              Attn:  J. Jay Herron and Andor Terner              Tel: (949) 823-6900              Fax: (949) 823-6994              Email: jherron@omm.com and aterner@omm.com              If to the Holder:               Patriot Financial Partners III, L.P.              2929 Arch Street, Floor 27              Philadelphia, PA 19104-2868              Attention: James F. Deutsch              Tel: (215) 399-4650              Fax: (215) 399-4686              Email: jdeutsch@patriotfp.com              With a copy to:               Squire Patton Boggs (US) LLP              201 E. Fourth St., Suite 1900              Cincinnati, OH 45202              Attn:  James J. Barresi              Tel: (513) 361-1260              Fax (513) 361-1201              Email:  james.barresi@squirepb.com                                        13    010-8656-8769/9/AMERICAS  

 

      7.3.  Entire Agreement. This Agreement and any agreements and documents executed  by  the  Parties  simultaneously  herewith,  including  the  Stock  Purchase  Agreement  and  the  Investor Rights Agreement, 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.         7.4.  Assignment;  Successors  and  Assigns.  The  rights  under  this  Agreement  may  be  assigned  (but  only  with  all  related  obligations)  by  the  Holder  to  a  transferee  of  Registrable  Securities that is an Affiliate, partner, member, limited partner, retired partner, retired member,  or stockholder of the Holder; provided that (a) prior to such transfer, the Company is furnished  with written notice stating the name and address of such transferee and identifying the securities  with respect to which such registration rights are being transferred, and (b) such transferee agrees  in writing to be bound by and subject to the terms and conditions of this Agreement.  Subject to  the foregoing, the provisions of this Agreement shall inure to the benefit of and are binding upon  the respective successors and permitted assignees of the Parties.         7.5.  Waiver  and  Amendment.  Except  with  respect  to  statutory  requirements,  and  subject to the provisions of the last sentence of  this Section, any Party hereto may by written  instrument  extend the time  for  the  performance  of any of the  obligations  or other  acts  of  any  other Party hereto and may waive (i) any inaccuracies in the representations or warranties of any  of the other Parties contained in this Agreement or in any document delivered pursuant hereto,  (ii) compliance  with  any  of  the  covenants,  undertakings  or  agreements  by  any  of  the  other  Parties, or satisfaction of any of the conditions to the waiving Party’s obligations, contained in  this Agreement or (iii) the performance (including performance to the satisfaction of a Party or  its counsel) by any of the other Parties of any  of the obligations of such other Party set forth  herein.  No  failure  or  delay  on  the  part  of  any  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  of  such  Party.   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  both  the  Company  and  the  Holder.         7.6.  Headings. 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 or application of any of the terms or provisions  of this Agreement.         7.7.  Severability. In case any provision contained in this Agreement should be held by  a  court  of  competent  jurisdiction  to  be  invalid,  illegal  or  unenforceable  in  any  respect  in  any  jurisdiction, then, such provision shall be ineffective to the extent of such invalidity, illegality or  unenforceability,  in  such  jurisdiction  and  the  validity,  legality  and  enforceability  of  the  remaining provisions contained herein shall not in any way be affected or impaired thereby.                                         14    010-8656-8769/9/AMERICAS  

 

      7.8.  Counterparts. This Agreement may be executed in two 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.         7.9.  Further Assurances. Each Party hereto agrees to execute and deliver all such other  and  additional  instruments  and  documents  and  do  all  such  other  acts  and  things  as  may  be  necessary to more fully effectuate the purposes of this Agreement.                               [Signature Page Follows]                                         15    010-8656-8769/9/AMERICAS  

 

      IN  WITNESS  WHEREOF,  the  Parties  hereto  have  executed  this  Registration  Rights  Agreement as of the date first above written.                                       PACIFIC MERCANTILE BANCORP                                       By:                                       Name:                                       Title:                                        PATRIOT FINANCIAL PARTNERS III, L.P.                                       By:                                       Name: James F. Deutsch                                      Its:  Managing Partner                        [Signature page to Registration Rights Agreement]  

 

                                  Exhibit C                                    VCOC Letter                                    (attached)    010-8656-4704/12/AMERICAS  

 

                                                        EXECUTION VERSION                       PATRIOT VCOC LETTER AGREEMENT                               Pacific Mercantile Bancorp                           949 South Coast Drive, Suite 300                             Costa Mesa, California 92626                                September 14, 2018   Patriot Financial Partners III, L.P.  Cira Centre  2929 Arch Street, Floor 27  Philadelphia, PA 19104-2868   Dear Sir/Madam:         Reference is made to the Stock Purchase Agreement, dated as of September 14, 2018 (the  “Agreement”),  by  and  between  Pacific  Mercantile  Bancorp,  a  California  corporation  (the  “Corporation”), Patriot Financial Partners III, L.P., a Delaware limited partnership (the “VCOC  Investor”), Carpenter Community BancFund, L.P., a Delaware limited partnership (“Carpenter  BancFund”),  and  Carpenter  Community  BancFund-A,  L.P.,  a  Delaware  limited  partnership  (“Carpenter  BancFund  A”  and,  together  with  Carpenter  BancFund,  each  a  “Seller”  and  collectively the “Sellers”), pursuant to which the VCOC Investor has agreed to purchase from  the Sellers the Corporation’s common stock, no par value per share (the “Common Shares”) and  the  Corporation’s  Series  A  Non-Voting  Preferred  Stock  (the  “Preferred  Shares”).  Capitalized  terms used herein without definition shall have the respective meanings in the Agreement.         For  good  and  valuable  consideration  acknowledged  to  have  been  received,  the  Corporation  hereby  agrees  that  for  so  long  as  the  VCOC  Investor,  directly  or  through  one  or  more  affiliates,  continues to  hold any shares of  Common Shares  or Preferred  Shares  acquired  pursuant  to  the  Agreement  (or  other  securities  of  the  Corporation  into  which  such  shares  of  Common  Shares  or  Preferred  Shares  may  be  converted  or  for  which  such  shares  of  Common  Shares or Preferred Shares may be exchanged), the Corporation shall:         •  Without  limitation  or  prejudice  of  any  the  rights  provided  to  the  VCOC  Investor  under  the  Agreement,  the  Investor  Rights  Agreement  and  the  Registration  Rights  Agreement,  each  as  defined  in  the  Agreement,  or  any  other  agreement  or  otherwise,  provide  the  VCOC  Investor or an individual designated by the VCOC Investor with:         (i)   the right to visit and inspect any of the offices and properties of the Corporation  and its subsidiary and inspect the books and records of the Corporation and its subsidiary, at such  times as the VCOC Investor shall reasonably request upon three (3) business days’ notice but not  more frequently than once per calendar year, provided, however, that such rights shall not extend  to confidential bank supervisory communications, customer financial records or other “exempt  records”  as  defined  by  12  C.F.R.  Part  309,  or  reports  of  examination  of  any  national  or  state  chartered  insured  bank,  which  information  may  only  be  disclosed  by  the  Corporation  or  its  subsidiary of the Corporation in accordance with the provisions and subject to the limitations of  applicable law or regulation;    010-8666-9954/5/AMERICAS  

 

      (ii)  consolidated  balance  sheets  and  statements  of  income  and  cash  flows  of  the  Corporation  and  its  subsidiary  prepared  in  conformity  with  generally  accepted  accounting  principles in the United States applied on a consistent basis (A) as of the end of each quarter of  each fiscal year as soon as practicable after preparation thereof but in no event later than ninety  (90) days after the end of such quarter, and (B) with respect to each fiscal year end statement, as  soon as practicable after preparation thereof but in no event later than one hundred twenty (120)  days after the end of such fiscal year and together with an auditor’s report thereon of a firm of  established national reputation; and         (iii)  to the extent the Corporation or its subsidiary is required by law or pursuant to the  terms  of  any  outstanding  indebtedness  of  the  Corporation  or  its  subsidiary  to  prepare  such  reports, any annual reports, quarterly reports and other periodic reports pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934, as amended, or otherwise, actually prepared by the  Corporation or its subsidiary as soon as available; provided that, in each case, if the Corporation  makes  the  information  described  in  clauses  (ii)  and  (iii)  of  this  bullet  point  available  through  public  filings  on  the  EDGAR  system  or  any  successor  or  replacement  system  of  the  U.S.  Securities and Exchange Commission, the delivery of the information shall be deemed satisfied  by such public filings.         •  Make  appropriate  officers  and  directors  of  the  Corporation  and  its  subsidiary  available  periodically  and  at  such  times  as  reasonably  requested  by  the  VCOC  Investor  for  consultation with the VCOC  Investor or its designated representative, but not more frequently  than once per calendar  year, with respect to matters relating to the business and affairs of the  Corporation and its subsidiary;         •  To the extent consistent with applicable law (and with respect to events which require  public disclosure, only following the Corporation’s public disclosure thereof through applicable  securities  law  filings  or  otherwise)  and  so  long  as  the  VCOC  Investor  does  not  have  a  representative or observer on the Corporation’s board of directors, inform the VCOC Investor or  its designated representative in advance with respect to any significant corporate actions, and to  provide  the  VCOC  Investor  or  its  designated  representative  with  the  right  to  consult  with  the  Corporation  and  its  subsidiaries  in  advance  with  respect  to  such  actions  should  the  VCOC  Investor elect to do so; provided that, notwithstanding any such election, the Corporation shall be  under  no  obligation  to  provide  the  VCOC  Investor  with  any  material  non-public  information  with respect to such significant corporate action. The VCOC Investor is aware that it may receive  material non-public information about the Corporation, and the VCOC Investor agrees that it is  aware of and shall comply with the federal and state securities laws that restrict any person who  has material, non-public information about a company from purchasing or selling securities of  the company or from communicating such information to any other person under circumstances  in which it is reasonably foreseeable that such person is likely to purchase or sell such securities;  and          •  exercise  commercially  reasonable  efforts  to  provide  the  VCOC  Investor  or  its  designated  representative  with  such  other  rights  of  consultation  which  the  VCOC  Investor’s  counsel  may  determine  to  be  reasonably  necessary  under  applicable  legal  authorities  promulgated  after  the  date  hereof  to  qualify  its  investment  in  the  Corporation  as  a  “venture  capital investment” for purposes of the United States Department of Labor Regulation published                                         2  010-8666-9954/5/AMERICAS  

 

at 29 C.F.R. Section 2510.3-101(d)(3)(i) (the “Plan Asset Regulation”), and cooperate in good  faith with the VCOC Investor to amend this letter agreement to reflect such other rights that are  mutually satisfactory to the Corporation and the VCOC Investor and consistent with the Federal  Reserve Policy Statement on Equity Investments in Banks and Bank Holding Companies and the  fiduciary obligations of the Corporation’s directors and officers, provided that such consultation  rights shall be limited to once per calendar quarter.         The  Corporation  agrees  to  consider, in  good  faith,  the  recommendations  of the  VCOC  Investor or its designated representative in connection with the matters on which it is consulted  as described above, recognizing that the ultimate discretion with respect to all such matters shall  be retained by the Corporation.         The VCOC Investor agrees, and will require each designated representative of the VCOC  Investor to agree, to hold in confidence and not use or disclose to any third party (other than its  legal counsel and accountants) any confidential information provided to or learned by such party  in  connection  with  the  VCOC  Investor’s  rights  under  this  letter  agreement  except  as  may  otherwise be required by law or legal, judicial or regulatory process, provided that the VCOC  Investor  takes  commercially  reasonable  steps  to  minimize  the  extent  of  any  such  required  disclosure.         In  the  event  the  VCOC  Investor  transfers  all  or  any  portion  of  its  investment  in  the  Corporation to an affiliated entity (or to a direct or indirect wholly-owned conduit subsidiary of  any  such  affiliated  entity)  that  is  intended  to  qualify  as  a  venture  capital  operating  company  under the Plan Asset Regulation, such affiliated entity shall be afforded the same rights that the  Corporation  has  afforded  to  the  VCOC  Investor  hereunder  and  shall  be  treated,  for  such  purposes, as a third party beneficiary hereunder.         The  rights  of  the  VCOC  Investor  under  this  letter  agreement  are  unique  to  the  VCOC  Investor  and  shall  not  be  assignable  or  transferrable  other  than  to  an  affiliated  entity  that  is  intended to qualify as a venture capital operating company under the Plan Asset Regulation.           The VCOC Investor acknowledges that the Corporation has made no representation that  it  qualifies,  or  in  the  future  will  qualify,  as  a  “venture  capital  operating  company”  or  that  an  investment  in  the  Corporation  qualifies  as  a  “venture  capital  investment”  as  those  term  are  defined in 29 CFR 2510.3-101 and disclaims any responsibility therefor.          The  letter  agreement  will  expire  when  the  VCOC  Investor,  directly  or  through  one  or  more affiliates, no longer holds any shares of Common Shares or Preferred Shares.         This letter agreement and the rights and the duties of the parties hereto shall be governed  by, and construed in accordance with, the laws of the State of California and may be executed in  counterparts, each of which when so executed shall be deemed to be an original and all of which  taken together shall constitute one and the same instrument.                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]                                          3  010-8666-9954/5/AMERICAS  

 

                  PACIFIC MERCANTILE BANCORP                      By:__________________________________                     Name:                     Title:    [Signature Page to Patriot VCOC Letter Agreement] 

 

Agreed and acknowledged as of the date first above written:                                       PATRIOT FINANCIAL PARTNERS III, L.P.                                        By:__________________________________                                       Name: James F. Deutsch                                      Title:   Managing Partner                      [Signature Page to Patriot VCOC Letter Agreement] 

 

                                  Exhibit D                              Confidentiality Agreement                                    (attached)    010-8656-4704/12/AMERICAS  

 

                                                          EXECUTION VERSION                            CONFIDENTIALITY AGREEMENT   David J. Honold  Cira Centre  2929 Arch Street, Floor 27  Philadelphia, PA 19104-2868   September 14, 2018   Dear Mr. Honold:   In  connection  with  your  service  as  an  observer  (an  “Observer”)  of  the  board  of  directors  of  Pacific  Mercantile  Bancorp,  a  California  corporation  (the  “Company”)  and  the  board  of  directors  of  Pacific  Mercantile Bank, a California state chartered bank (the “Bank”), the Company, the Bank and their respective  advisors and agents are prepared to make available to you certain information.   “Confidential Information” shall mean all information concerning the Company or the Bank, including,  without  limitation,  projections  and  any  financial  analyses,  and  information  concerning  their  respective   businesses and their respective operations obtained or ascertained by you as a result of any visit to any  branch  or facility  occupied  by  the Company  or  the  Bank  or furnished or  made available  to  you  by the  Company or the Bank or any of their respective directors, officers, employees, affiliates (as such term is  used in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), agents,  advisors, counsel, investment bankers, representatives or controlling persons within the meaning of Section  20 of the Exchange Act and other representatives (collectively, “Representatives”), whether prepared by the  Company, the Bank, any of their respective Representatives or otherwise and whether obtained or furnished  before or after the date hereof and regardless of the manner in which it is furnished, together with all reports,  analyses,  compilations,  memoranda,  notes,  studies  or  other  documents  or  records  or  electronic  media  prepared by you that contain or otherwise reflect or are generated from such information, but does not  include information which (i) is or becomes generally available to the public other than as a result of a  disclosure by you, (ii) was available to you on a non-confidential basis prior to its disclosure to you by the  Company, the Bank or any of their respective Representatives from a person other than the Company, the  Bank or any of their respective Representatives who is not otherwise known to you (after reasonable inquiry)  to be bound not to disclose such information pursuant to a contractual, legal or fiduciary obligation, or (iii)  becomes available to you on a non-confidential basis from a person other than the Company, the Bank or  any of their respective Representatives who is not otherwise known to you (after reasonable inquiry) to be  bound not to disclose such information pursuant to a contractual, legal or fiduciary obligation.   Unless otherwise agreed to in writing by the Company and the Bank, you agree: (i) to keep all Confidential  Information  confidential  and  not  to  disclose  or  reveal  in  any  manner  whatsoever  any  Confidential  Information to any person other than Patriot Financial Partners, L.P. or its affiliates (as such term is used in  Rule 12b-2 under the Exchange Act) (collectively, “Patriot”), it being understood, and by signing below,  Patriot hereby agrees, that all Confidential Information you disclose or reveal to Patriot shall be deemed to  be “Proprietary Information” of the “Company” as such terms are defined in that certain letter agreement,  dated May 14, 2018, by and among Patriot, Carpenter Fund Manager GP, LLC and the Company; (ii) to the  extent that any Confidential Information may include materials subject to the attorney-client privilege, work  product doctrine or any other applicable privilege concerning pending or threatened legal proceedings or  governmental investigations, the parties understand and agree that they have a commonality of interest with  respect to such matters and it is their mutual desire, intention and understanding that the sharing of such  material is not intended to, and shall not, waive or diminish in any way the confidentiality of such material  or its continued protection under the attorney-client privilege, work product doctrine or other applicable  privilege,  and  that  all  Confidential  Information  that  is  entitled  to  protection  under  the  attorney-client    010-8667-1507/4/AMERICAS  

 

privilege,  work  product  doctrine  or  other  applicable  privilege  or  doctrine  shall  remain  entitled  to  such  protection under these privileges or doctrines, under this Confidentiality Agreement (the “Agreement”) and  under  the joint defense  doctrine;  and  (iii)  all  Confidential  Information  shall  remain  the  property  of the  Company, the Bank and/or their respective Representatives, and no license or, except as otherwise provided  herein, right to use or similar rights with respect to the Confidential Information is granted to you or Patriot,  by implication or otherwise.   You agree that you will make all reasonable, necessary and appropriate efforts to safeguard the Confidential  Information from disclosure to anyone other than as permitted hereby and that you will be responsible for  any breach of the terms hereof.   In the event that you are requested pursuant to, or required by, applicable law or regulation or by legal  process to disclose any Confidential Information, you agree that you will (to the extent permissible by law)  provide the Company and the Bank with prompt written notice of such request(s) or requirement(s) to enable  the Company and the Bank to seek an appropriate protective order, waive compliance with the provisions  of this Agreement or take other appropriate action. You agree to use your reasonable best efforts to assist  the Company, the Bank and their respective Representatives in obtaining such a protective order. If, in the  absence of a protective order or the receipt of a waiver hereunder, you are nonetheless, upon the advice of  your counsel, compelled to disclose the Confidential Information to any tribunal or else stand liable for  contempt or suffer other censure or significant penalty, you, after written notice to the Company and the  Bank, may disclose to such tribunal only such Confidential Information that you are compelled to disclose  and, to the extent permissible by law, regulation or tribunal, provide the Company and the Bank with notice  of such disclosure promptly but in any case no later than five (5) business days following such disclosure.   Upon the request of the Company or the Bank at any time, you will promptly either destroy or deliver to the  Company all of the Confidential Information, including all copies, reproductions, summaries, analyses or  extracts thereof or based thereon, in your possession. Any such return or destruction shall be certified in  writing  by  you.  Notwithstanding  such  return  or  destruction,  you  will  continue  to  be  bound  by  your  obligations under this Agreement. Notwithstanding the foregoing, you shall be entitled to retain one copy  of any portion of the Confidential Information that is required to be retained pursuant to applicable law or  regulation or Patriot’s bona fide internal document retention policies.   During the time period in which you are an Observer, you will not initiate or maintain contact (except for  those contacts that (1) are made in the ordinary course of business and do not reference or use any of the  Confidential Information, or otherwise made in connection with your service as an Observer, and (2) are  made in full compliance with your obligations under this Agreement) with any officer, director, shareholder,  employee, consultant, advisor, agent, client, or commercial, business or real estate banking customer of the  Company or the Bank regarding the business, operations, prospects, or finances of the Company, the Bank  or  any  of  their  respective  subsidiaries,  except  with  the  prior  written  permission  of  the  chairman  of  the  Company’s  board  of  directors  (which  permission  may  be  provided  through  email  or  other  electronic  transmission).   In addition, you hereby acknowledge that you are aware of your responsibility under the federal securities  laws with respect to purchasing or selling securities of a company about which you have material nonpublic  information and agree that you will comply at all times with such laws.   It is understood and agreed that money damages would not be a sufficient remedy for any breach of this  Agreement by you and that the Company and the Bank shall each be entitled to specific performance and  injunctive relief as remedies for any such breach or any threat of such breach without posting any bond.  Such remedies shall not be deemed to be the exclusive remedies for any such breach of this Agreement but  shall be in addition to all other remedies at law or in equity available to the Company or the Bank.                                          2  010-8667-1507/4/AMERICAS  

 

This Agreement shall be governed by and construed in accordance with the laws of the State of California,  without giving effect to its conflict of laws principles that would cause the laws of another jurisdiction to  apply. Each of the parties hereto consents to personal jurisdiction in such State and voluntarily submits to  the jurisdiction of courts of such State in any action or proceeding with respect to this Agreement, including  the federal district courts in such State. You agree that you may be served with process at your address set  forth on the first page hereof.    The term “person” shall be broadly interpreted to include, without limitation, the media, any bank, savings  association, corporation, company, group, partnership, trust or other business entity or any individual.   It  is  further  understood  and  agreed  that  no  failure  or  delay  by  the  Company,  the  Bank  or  any  of  their  respective Representatives in exercising any right, power or privilege hereunder shall operate as a waiver  thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the  exercise of any other right, power or privilege hereunder.   Any assignment of this Agreement by you without the prior written consent of the Company and the Bank  shall be null and void ab initio.   In  the  event  any  court  of  law  with  applicable  jurisdiction  shall  determine  that  any  provision  of  this  Agreement  is  invalid,  such  determination  shall  not  affect  the  validity  of  any  other  provision  of  this  Agreement,  which  shall  remain  in  full  force  and  effect  and  shall  be  construed  so  as  to  be  valid  under  applicable law.   This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but both  of which shall constitute one and the same Agreement.   This Agreement shall terminate on the date that is one (1) year from the date when you cease to be an  Observer.                                 [Signature page follows]                                          3  010-8667-1507/4/AMERICAS  

 

Please confirm your agreement to the foregoing by signing and returning to the undersigned the duplicate  copy of this letter enclosed herewith.                                       Very truly yours,                                       Pacific Mercantile Bancorp                                        By: _____________________________                                          Name:                                           Title:                                        Pacific Mercantile Bank                                        By: _____________________________                                          Name:                                           Title:     Accepted and agreed as of the date first written above:    ___________________________________  David J. Honold   Acknowledged and agreed to, as of the date first written above, with respect to the obligations of Patriot:   Patriot Financial Partners, L.P.   By: ___________________________________      Name: James F. Deutsch       Title:    Managing Partner                    [Signature Page to Board Observer Confidentiality Agreement]

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