PACIFIC MERCANTILE BANCORP (Form: 8-K, Received: 12/10/2015 08:14:11)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 08, 2015

PACIFIC MERCANTILE BANCORP

(Exact name of registrant as specified in its charter)



California	0-30777	33-0898238
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

949 South Coast Drive, Costa Mesa, California		92626
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (714) 438-2500

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:


¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Item 5.02	Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers

On December 10, 2015, Pacific Mercantile Bancorp (the “Company”) announced that Steven K. Buster, President and Chief Executive Officer of both the Company and its subsidiary, Pacific Mercantile Bank (the “Bank”), would retire as an officer, employee, and director effective December 31, 2015. The Company and the Bank appointed Thomas M. Vertin to succeed Mr. Buster as President and Chief Executive Officer, and to serve as a member of the Company’s Board of Directors and as a member of the Bank’s Board of Directors, effective January 1, 2016.

Mr. Vertin, age 62, has served as the Bank’s President of the Commercial Bank Division since September 29, 2012. Prior to joining the Bank, Mr. Vertin held senior executive positions at Silicon Valley Bank (SVB), a wholly-owned subsidiary of SVB Financial Group, including Chief Operating Officer and Head of the California Division. Mr. Vertin led three turn-arounds during his eighteen years with SVB and has more than thirty years of banking experience.

There are no arrangements or understandings between Mr. Vertin and any other persons pursuant to which he was selected as an officer or director of the Company or the Bank. There are also no family relationships between Mr. Vertin and any director or executive officer of the Company, and he has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.

New Employment Agreement With Mr. Vertin

In connection with Mr. Vertin’s appointment as President and Chief Executive Officer, on December 8, 2015 the Company and the Bank entered into a new employment agreement with Mr. Vertin (the “Employment Agreement”) effective as of January 1, 2016. The Employment Agreement provides for an initial term of three years, with the term automatically renewing at the end of three years and annually thereafter for an additional twelve months unless terminated at least six months prior to the end of the term then in effect.

Pursuant to the Employment Agreement, Mr. Vertin will receive an annual base salary of $400,000, subject to annual review, and a maximum target incentive payment of 50% of base salary. Mr. Vertin will receive an automobile allowance of $1,250 per month, reimbursement of up to $850 per month of club dues and expenses, and participation in the benefit programs of the Company and the Bank available to executive employees generally. Mr. Vertin will accrue four weeks paid vacation per year. Mr. Vertin will also be granted a stock option on the first business day in January 2016 to purchase up to 100,000 shares of the Company’s common stock at a per share price equal to the closing price of a share of the Company’s common stock on The NASDAQ Stock Market on that date. The stock option will be granted under the Company’s 2010 Equity Incentive Plan and will have a maximum term of ten years. The stock option will be scheduled to vest in one-third installments on each of December 31, 2016, December 31, 2017, and December 31, 2018, subject in each case to Mr. Vertin’s continued service with the Company through that date.

In the event Mr. Vertin’s employment is terminated by the Company without “Cause” or by Mr. Vertin for “Good Reason” (as these terms are defined in the Employment Agreement), Mr. Vertin will, subject to providing a release of claims, be entitled to a lump sum payment equal to twelve months of his annual base salary. If Mr. Vertin’s employment is terminated due to his permanent disability, Mr. Vertin will, subject to providing a release of claims, be entitled to base salary continuation, and certain continued benefits, for a period of six months.

The foregoing description of the Employment Agreement is qualified in its entirety by reference to the full text of the Employment Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference herein.

Transition Agreement With Mr. Buster

On December 8, 2015, the Company and the Bank entered into a Transition Agreement with Mr. Buster. Mr. Buster resigned from all of his positions with the Company and the Bank, including as a member of the Company’s Board of Directors and as a member of the Bank’s Board of Directors, effective December 31, 2015, and provided a release of claims. Pursuant to the Transition Agreement, Mr. Buster will continue to provide consulting services to the Company through December 31, 2016. Mr. Buster will be entitled to a 2015 bonus of $225,000, and a lump sum payment of $292,500 in January 2016. Mr. Buster will also receive a consulting fee of $8,333.33 per month, as well as reimbursement of COBRA premiums to continue healthcare coverage, during the consulting period. Each of Mr. Buster’s stock options that were not scheduled to be vested as of December 31, 2015, and each of Mr. Buster’s other equity awards that were not scheduled to be vested as of April 29, 2016, were terminated. Mr. Buster’s stock options and other equity awards that were vested or scheduled to vest before the applicable date referenced above will otherwise continue to vest and be exercisable according to their existing terms.

The foregoing description of the Transition Agreement is qualified in its entirety by reference to the full text of the Transition Agreement, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated by reference herein.

Item 7.01 Regulation FD Disclosure

The Company issued a press release on December 10, 2015, announcing Mr. Buster’s retirement and the appointment of Mr. Vertin to succeed Mr. Buster as President and Chief Executive Officer and as a director of the Company and the Bank, which is attached hereto as Exhibit 99.1 and is incorporated herein by reference. In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.


Item 9.01	Financial Statements and Exhibits

(d) Exhibits .



Exhibit No.		Description of Exhibit

10.1		Employment Agreement dated December 8, 2015 with Thomas M. Vertin.
10.2		Transition Agreement dated December 8, 2015 with Steven K. Buster.
99.1**		Press release dated December 10, 2015.

________________

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



	PACIFIC MERCANTILE BANCORP
		(Registrant)

Date: December 10, 2015	By:	/s/ Robert E. Sjogren
		Robert E. Sjogren Executive Vice President and Chief Operating Officer

INDEX TO EXHIBITS



Exhibit No.		Description of Exhibit

10.1		Employment Agreement dated December 8, 2015 with Thomas M. Vertin.
10.2		Transition Agreement dated December 8, 2015 with Steven K. Buster.
99.1		Press release dated December 10, 2015.

________________

** Furnished herewith.

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “ Agreement ”) is made and entered into as of the 8 ^th day of December, 2015, by and among Thomas M. Vertin (the “ Executive ”), on the one hand, and Pacific Mercantile Bancorp, a California corporation (“ PMB ”) and Pacific Mercantile Bank, a California banking corporation (the “ Bank ”), on the other hand (Executive, PMB and the Bank collectively, the “ Parties ”).

RECITALS

WHEREAS, PMB is a bank holding company registered under the Bank Holding Company Act of 1956, as amended, subject to the primary supervision and regulation of the Board of Governors of the Federal Reserve System (“ FRB ”).

WHEREAS, Bank is a California chartered commercial bank and wholly-owned subsidiary of PMB, subject to the primary supervision and regulation of the California Department of Financial Institutions (“ CDFI ”) and the FRB by virtue of its membership in the Federal Reserve Bank of San Francisco.

WHEREAS, the parties previously entered into an Employment Agreement on September 24, 2012 (as amended, the “ Prior Employment Agreement ”).

WHEREAS, it is the intention of the Parties to enter into a new employment agreement for the purposes of assuring the services of Executive as the President and Chief Executive Officers of PMB and the Bank on the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, based on the foregoing premises and in consideration of the mutual covenants and representations contained herein, the Parties hereby agree as follows effective as of the Effective Date set forth below:

1. Term . Bank and PMB (collectively and individually referring to each of the Bank and PMB (the “ Employer ”) hereby employ Executive, and Executive hereby accepts employment with Employer, under the terms of this Agreement. The term of this Agreement shall be for a period of three (3) years (the “ Initial Term ”), commencing as of January 1, 2016 (the “ Effective Date ”) subject to the termination provisions of Section 4. Upon the occurrence of the third annual anniversary of the Effective Date, and on each anniversary date thereafter, the term of this Agreement shall be deemed automatically extended for an additional twelve (12) month term (each an “ Extended Term ”), subject to the termination provisions of Section 4, unless, not later than six (6) months prior to the expiration of the Initial Term, or any Extended Term, Employer or Executive shall have given notice to the other that the Initial Term or any Extended Term shall not be so extended. The term of this Agreement, as in effect from time to time in accordance with the foregoing, shall be referred to herein as the “ Term ”. The period of time between the Effective Date and the termination of the Executive’s employment hereunder shall be referred to herein as the “ Employment Period .” The Prior Employment Agreement is hereby superseded in its entirety as of the Effective Date.

2. Employment .

(a) Positions and Reporting . Executive shall be employed as the President and Chief Executive Officer of the Bank and PMB, respectively. During the Employment Period, Executive shall report directly to the boards of directors of the Bank and PMB (the “ Board ”), or a committee thereof, specifically authorized to direct the Executive. Executive shall also serve as a director of the Bank and PMB, subject to satisfaction of applicable election requirements during the Employment Period provided that Executive shall not be entitled to receive any additional compensation (excluding the payment or reimbursement of any expenses incurred by the Executive) for his services as a director of the Bank, PMB or any of their subsidiaries or affiliates.

(b) Authority and Duties . Executive shall exercise such authority, perform such executive duties and functions and discharge such responsibilities as are customarily associated with the position of President and Chief Executive Officer, and commensurate with the authority vested in Executive pursuant to this Agreement and consistent with the bylaws of the Bank and PMB. During the Employment Period, Executive shall devote his full business time, skill and efforts to the business of Employer and shall not during the Employment Period engage in any other business activities, duties, or pursuits whatsoever, or directly or indirectly render any services of a business, commercial, or professional nature to any other person or organization, whether for compensation or otherwise, without the prior written consent of the Board. Notwithstanding the foregoing, Executive may (i) serve in any capacity with any civic, educational or charitable organization, or any trade association, without seeking or obtaining approval by the Board, provided such activities and service do not materially interfere or conflict with the performance of his duties hereunder and (ii) with the approval of the Board serve on the boards of directors of other corporations that are not involved in commercial banking or similar business activities; provided, however, Executive shall not directly or indirectly acquire, hold, or retain any beneficial interest in any business competing with or similar in nature to the business of Employer except passive shareholder investments in other financial institutions and their respective affiliates which no not exceed three percent (3%) of the outstanding voting securities in the aggregate in any single financial institution and its affiliates on a consolidated basis.

(c) Executive hereby represents and agrees that the services to be performed hereunder are of a special, unique, unusual, extraordinary, and intellectual character that gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages in an action at law. Executive therefore expressly agrees that Employer, in addition to any other rights or remedies that Employer may possess, shall be entitled to injunctive and other equitable relief to prevent or remedy a breach of this Agreement by Executive.

3. Compensation and Benefits .

(a) Salary . During the Initial Term Executive shall receive an annual base salary of $400,000 payable in equal semimonthly payments (the “ Base Salary ”). Such Base Salary shall be subject to review in the eleventh (11th) month after the Effective Date, and at each anniversary of the Effective Date thereafter, or during Employee’s normal officer review period, for possible adjustment by the Board in its sole discretion based on various factors including, but not limited to, market conditions, the consolidated results of operations of PMB and the performance of Executive, but shall in no event be decreased from the level set forth above during the Initial Term. The base salary as increased shall be the “Base Salary” for all purposes of this Agreement. All payments of Base Salary shall be subject to applicable adjustments for withholding taxes, pro-rations for any partial payment periods and such other applicable payroll procedures of the Bank.

(b) Salary Continuation During Disability . If Executive for any reason (except as expressly provided below) becomes temporarily or permanently disabled so that he is unable to perform the duties under this Agreement, Executive shall be paid the Base Salary otherwise payable to Executive pursuant to Section 3(a) of this Agreement, reduced by the amounts received by Executive from state disability insurance, or worker’s compensation or other similar insurance benefits through policies provided by Employer, for a period of six (6) months from the date of disability. For purposes of this Section 3(b), “disability” shall be defined as provided in the Employer’s disability insurance program.

(c) Cash Incentive Payments . Executive shall be eligible to receive annual incentive amounts in the form of cash awards based upon the satisfaction of performance criteria (the “ Performance Goals ”) that will be established by the Board in its sole discretion and in consultation with the Executive at the beginning of each year. The maximum target incentive payments available shall be up to 50% of Executive’s annual Base Salary then in effect, as determined in the sole discretion of the Board. Performance Goals will include goals consistent with the Bank’s business plan for the year, as established by the Bank’s management and subject to the review and approval of the Board. The final determinations as to the actual corporate and individual performance against the Performance Goals shall be made by the Board in its sole discretion. Executive’s bonus, if any, shall be paid in one lump sum to Executive at such time as other executive bonuses are paid, but in no event later than the 15 ^th day of the third month following the year for which it is earned. Subject to any other agreements, the Board retains the discretion to determine whether a pro- rata bonus is appropriate if the Executive is terminated or leaves the employ of the Bank prior to the annual determination of bonuses. All cash incentive payments shall be subject to applicable adjustments for applicable withholding and payroll taxes. Notwithstanding any provision of any incentive plan or arrangement, no right of continued employment or any modification of the “at will” nature of Executive’s employment with Employer shall be conferred upon Executive thereunder or result therefrom.

(d) Benefits . During the Employment Period, Executive shall receive such group life, disability, and health (including medical, dental, vision and hospitalization), accident and disability insurance coverage, pension and other benefits which Employer extends, as a matter of policy, to all of its executive employees, except as otherwise provided herein, and shall be entitled to participate in all benefit and other incentive plans of the Employer, on the same basis as other like employees of Employer.

(e) Vacation . Executive shall accrue vacation at a rate of four (4) weeks per year during the Employment Period. Vacation shall be scheduled in Executive’s discretion, subject to and taking into account applicable banking laws and regulations and business needs. Vacation will accrue in accordance with the Bank’s personnel policies.

(f) Business Expenses . During the Employment Period, Employer shall promptly reimburse the Executive for all documented ordinary and necessary business expenses incurred by Executive in the performance of his duties under this Agreement. Executive shall also be reimbursed for reasonable expenses incurred in activities associated with promoting the business of Employer, including expenses for entertainment, travel, conventions, and educational programs. All such expenses described above will be subject to compliance with applicable policies of Employer. All such reimbursements shall be made upon presentation and approval of receipts, invoices or other appropriate evidence of such expense in accordance with the policies of Employer in effect from time to time.

(g) Car Allowance . The Bank shall provide the Executive with a monthly automobile allowance of $1,250.00 per month during the Employment Period. Executive shall (A) obtain and maintain public liability insurance and property damage insurance policies with insurer(s) acceptable to Employer and with such coverage in such amounts as may be reasonably acceptable to Employer, and (B) provide copies of such policies, endorsements or other evidence of insurance acceptable to Employer.

(h) Club Membership . Executive and Employer agree that the Executive’s participation in the membership of a country club or similar club will assist in promoting Employer’s business. For this reason, Employer shall be reimburse Executive for the monthly dues and expenses related to such membership up to $850 per month, as well as those reasonable entertainment costs that are business related (without regard, however, to whether such costs are deductible for income tax purposes), provided that appropriate documentation is provided regarding the entertainment costs.

(i) Stock Options . As of the first business day in January 2016, PMB shall grant to Executive a non-qualified stock option (the “ Stock Option”) to purchase up to 100,000 of the PMB’s duly authorized and reserved shares of common stock pursuant to PMB’s 2010 Equity Incentive Plan (the “ Plan ”). The per share exercise price of such Stock Option shall be equal to the closing price, in regular trading, of a share of PMB’s common stock on The NASDAQ Stock Market on such date. The Stock Option shall have a maximum term of ten (10) years. The Stock Option shall vest as to thirty-three and one-third percent (33 ¹ / ₃ %) of the shares covered thereby on each of December 31, 2016, December 31, 2017 and December 31, 2018, subject to Executive’s continued service through the applicable vesting date. The Stock Option shall be evidenced by, and subject to, a stock option agreement in the form currently used by PBM for stock option grants under the Plan (the “ Stock Option Agreement ”). Notwithstanding any provision of the Plan, the Stock Option Agreement or this Agreement or any other stock option or equity award agreement to the contrary, no right of continued employment or any modification of the “at will” nature of Executive’s employment with Employer shall be conferred upon Executive thereunder or result therefrom.

4. Termination of Employment .

(a) Termination for Cause . The Board of Bank and/or PMB may terminate Executive’s employment hereunder for “Cause” or without “Cause.” For purposes of this Agreement, and subject to Executive’s opportunity to cure as provided in Section 4(c), termination for “ Cause ” shall mean (i) conviction of a crime directly related to his employment hereunder, (ii) conviction of a crime involving moral turpitude, (iii) willful and gross mismanagement of the business and affairs of Employer, (iv) willful and intentional violation of any state or federal banking or securities laws, or of the bylaws, rules, policies or resolutions of Bank or PMB, or the rules or regulations of or any final order issued by the FRB, the CDFI, or the Federal Deposit Insurance Corporation, and (v) breach of any material provision of this Agreement. For purposes of this Agreement, no act, or the failure to act, on Executive’s part shall be considered “willful” unless done, or omitted to be done, not in good faith and without reasonable belief that the action or omission was in the best interests of Employer. Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a notice of termination, which shall include a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the members of the Board at a meeting of the Board called and held for that purpose (which may be telephonic) finding that, in the good faith opinion of the Board, Executive engaged in conduct justifying termination for Cause and specifying the particulars thereof in detail. In the event employment of Executive is terminated pursuant to this Section 4(a), Employer shall have no further liability to Executive other than for compensation accrued and for reimbursement of business expenses incurred through the date of termination but not yet paid. Termination under this Section 4(a) shall not prejudice any remedy that the Employer may have at law, in equity, or under this Agreement.

(b) Termination by Employer Without Cause or by Executive for Good Reason . Employer may terminate the employment of Executive without “Cause” (as defined in Section 4(a)) at any time during the Employment Period by giving written notice to Executive specifying therein the effective date of termination. Executive shall have the right at any time to terminate his employment with the Bank for any reason or for no reason. For purposes of this Agreement, and subject to Employer’s opportunity to cure as provided in Section 4(c) hereof, “ Good Reason ” shall mean:

(i) a material diminution during the Employment Period in the Executive’s title, duties, responsibilities or authorities as set forth in Section 2 hereof without Executive’s consent;

(ii) a material breach by Employer of the compensation and benefits provisions set forth in Section 3 hereof;

(iii) a material breach by Employer of any material terms of this Agreement; or

(iv) the relocation of Executive’s principal place of employment to any location more than 35 miles from the Bank’s headquarters at the Effective Date.

(c) Notice and Opportunity to Cure . Notwithstanding the foregoing, it shall be a condition precedent to Employer’s right to terminate Executive’s employment for “Cause” and Executive’s right to terminate his employment for “Good Reason” that (i) the party alleging a breach shall first have given the other party written notice stating with specificity the reason for the termination (“ breach ”) and (ii) if such breach is susceptible of cure or remedy, a period of 30 days from and after the giving of such notice to cure the breach. If the breach cannot reasonably be cured or remedied within 30 days, the period for remedy or cure shall be extended for a reasonable time (not to exceed 30 days), provided the party against whom a breach is alleged has made and continues to make a diligent effort to effect such remedy or cure. In no event may Executive resign for

“Good Reason” as a result of a given event or circumstance more than two years after the event or circumstance giving rise to such “Good Reason” claim has occurred.

(d) Termination Upon Death or Permanent Disability . This Agreement shall terminate automatically upon: (i) the death of Executive, and (ii) the “permanent disability” of Executive as such term is defined in the disability insurance provided by Employer, or if such insurance is not provided by Employer, the term shall mean that Executive has been unable to perform or is likely to be unable to perform his duties under this Agreement for a period of at least 90 consecutive days or 120 days in any 180 day period. If the Employment Period is terminated by reason of the permanent disability of the Executive, Employer shall give 30-days’ advance written notice to that effect to the Executive or his representative.

5. Consequences of Termination . The following are the severance pay and benefits to which Executive is entitled upon termination of employment in all positions with Employer, and such payments and benefits shall be the exclusive payments and benefits to which Executive is entitled upon such termination. Except in the case of termination of employment by Employer for Cause, or due to death, the post-termination payments (other than those required by law) and benefits shall only be provided if the Executive first enters into a form of general release agreement in the form attached hereto as Exhibit A (provided that Employer may make changes in such form from time to time to address any changes in applicable law).

(a) Termination Without Cause or for Good Reason . In the event of termination of Executive’s employment hereunder (i) by Employer without “Cause” (other than upon death or permanent disability), or (ii) by Executive for “Good Reason,” Executive shall be entitled to the following severance pay and benefits:

(i) Severance Pay - a lump sum amount equal to twelve (12) months of the Executive’s annual Base Salary.

(b) Termination Upon Disability. In the event of termination of Executive’s employment hereunder by Employer on account of permanent disability, Executive shall be entitled to the following severance pay and benefits.

(i) Severance Pay - severance payments in the form of continuation of the Executive’s Base Salary as in effect immediately prior to such termination for a period of 6 months following the first date of disability; and

(ii) Benefits Continuation - continuation (to the extent permitted by law and the terms of the applicable plan) of coverage under the group medical care, disability and life insurance benefit plans or arrangements in which Executive is participating at the time of the permanent disability, with Employer continuing to pay its share of premiums and associated costs as if Executive continued in the employ of Employer, to be provided during the Employment Period while Executive is suffering from a permanent disability and for a period of 6 months following the effective date of termination of employment by reason of permanent disability.

(c) Termination Upon Death . In the event of termination of Executive’s employment hereunder on account of Executive’s death, Employer shall pay to Executive’s beneficiary or beneficiaries or his estate, as the case may be, the accrued Base Salary and accrued and unused vacation earned through the date of death. Such payment shall be made no later than sixty (60) days after the date of death. In addition, Executive’s beneficiary(ies) or his estate shall be entitled to the payment of benefits pursuant to any life insurance policy of Executive, as provided for in Section 3(d) above. Executive’s beneficiary or estate shall not be required to remit to Employer any payments received pursuant to any life insurance policy purchased pursuant to Section 3(d) above.

(d) Termination for Cause or Due to End of the Term . In the event the employment of Executive is terminated by Employer for Cause, no severance payment or benefit shall be provided in such instance. In the event the employment of Executive is terminated as a result of the expiration of the Term, Executive shall be entitled to no severance payment or benefit of any kind notwithstanding any provision to the contrary in the Employer’s employee manual or policies then in effect, except as to matters such as coverage under The Consolidated Omnibus Budget Reconciliation Act of 1985 (“ COBRA ”) and unused vacation required by law without reference to such manual or policies.

(e) Accrued Rights . Notwithstanding the foregoing provisions of this Section 5, in the event of termination of Executive’s employment hereunder for any reason or for no reason, Executive shall be entitled to payment of any unpaid portion of his Base Salary through the effective date of termination, payment of any unreimbursed business expenses incurred pursuant to Section 3(f) above, and payment of any accrued but unpaid benefits solely in accordance with the terms of any incentive bonus or employee benefit plan or program of Employer.

(f) Non-assignability . Neither Executive nor any other person or entity acting on his behalf or as his representative shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise encumber in advance any of the rights or benefits of Executive under this Section 5, nor shall any of said rights or benefits be subject to seizure for the payment of any debts, judgments, alimony or separate maintenance, owed by Executive or any other person or entity, or be transferable by operation of law in the event of bankruptcy, insolvency or otherwise. The terms of this Section 5(f) shall not affect the interpretation of any other provision of this Agreement.

(g) Regulatory Restrictions . Notwithstanding anything to the contrary contained in this Agreement:

(i) If Executive is removed and/or permanently prohibited from participating in the conduct of Employer’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (“ FDIA ”) (12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of Employer under this Agreement shall terminate, as of the effective date of such order, except for the payment of Base Salary due and owing on the effective date of said order, reimbursement of business expenses incurred as of the effective date of termination, provision of vested rights under any compensation and/or benefit plan of the Employer or any of its affiliates (to the extent permitted by applicable law), and such matters required by law.

(ii) If Executive is suspended and/or temporarily prohibited from participating in the conduct of Employer’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the FDIA (12 U.S.C. 1818(e)(3) and (g)(1)), all obligations of Employer under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, Employer shall (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended and (ii) reinstate (in whole or in part) any of its obligations which were suspended.

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

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

(v) No payments shall be made pursuant to this Section 5 or any other provision herein in violation of the requirements of Section 18(k) of the FDIA (12 U.S.C. 1828(k)).

(h) IRC Section 280G . Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by Employer to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a “ Payment ”) would be nondeductible by Employer for federal income tax purposes because of Section 280G of the Internal Revenue Code of 1986, as amended (the “ Code ”), then the aggregate present value of amounts payable or distributable to or for the benefit of Executive pursuant to this Agreement (“ Agreement Payments ”) shall be reduced (a “ Reduction ”) to the extent necessary, but not below zero, so that no portion of the Agreement Payments is nondeductible by Employer pursuant to Section 280G of the Code. The Reduction shall be applied before any reduction of any other Payments that are not Agreement Payments unless the plan or agreement calling for such Payments expressly provides to the contrary making specific reference to this Agreement. For purposes of this Section 5(h), present value shall be determined in accordance with Section 280G(d)(4) of the Code. In the event a Reduction is required, the Agreement Payments to be reduced will be determined in a manner which has the least economic cost to Executive and, to the extent the economic cost is equivalent, will be reduced in the inverse order of when payment would have been made to Executive until the Reduction is achieved. Employer shall select a firm of certified public accountants of national standing, (the “ Accounting Firm ”), which may be the firm regularly auditing the financial statements of Employer or any affiliate of Employer. The Accounting Firm shall make all determinations required to be made under this Section 5(h) and shall provide detailed supporting calculations to Employer and Executive within 30 days after the date of termination of Executive’s employment with Employer or such earlier time as is requested by Employer. Any such determination by the Accounting Firm shall be binding upon Employer and Executive. The Accounting Firm shall determine which and how much of the Agreement Payments shall be eliminated or reduced consistent with the requirements of this Section 5(h).

(i) Conditions to Severance Benefits . The Bank shall have the right to seek repayment of the severance payments and benefits or to terminate payments or benefits provided by this Section 5 in the event that the Executive fails to honor, in accordance with their terms, the provisions of Sections 6 or 9 hereof.

(j) Allocation of Payment Obligations Between Bank and PMB . Employer’s payment obligations to Executive hereunder shall be allocated between them to reflect the relative responsibilities, time spent by Executive between the two entities and their affiliates, as well as other factors deemed relevant by the Boards of Bank and PMB; provided, however, each of Bank and PMB shall be jointly and severally liable to Executive for Employer’s obligations hereunder.

6. Confidentiality . Executive agrees that he will not at any time during the Employment Period or at any time thereafter for any reason, in any fashion, form or manner, except as required by law to comply with legal process, either directly or indirectly, divulge, disclose or communicate to any person, firm, corporation or other business entity, in any manner whatsoever, any financial information or trade or business secrets, including, without limiting the generality of the foregoing, the techniques, methods or systems of its operation or management, any information regarding its financial matters, customer lists, computer

software, or any other information concerning the business or operations of Employer, its subsidiaries, affiliates and any of its customers, governmental relations, customer contacts, underwriting methodology, loan program configuration and qualification strategies, marketing strategies and proposals, its manner of operation, its plans or other material data, or any other information concerning the business of the Employer, its subsidiaries or affiliates, and the Employer’s goodwill (the “ Business ”). The provisions of this Section 6 shall not apply to (i) information disclosed in the performance of Executive’s duties to Employer based on his good faith belief that such a disclosure is in the best interests of Employer; (ii) information that is, at the time of the disclosure, public knowledge; (iii) information disseminated by Employer to third parties in the ordinary course of business; (iv) information lawfully received by Executive from a third party who, based upon inquiry by Executive, is not bound by a confidential relationship to Employer or otherwise improperly received the information; or (v) information disclosed under a requirement of law or as directed by applicable legal authority having jurisdiction over Executive. In the event Executive is required by law to disclose such information described above, Executive will provide Employer and their counsel with immediate notice of such request so that they may consider seeking a protective order. Notwithstanding the foregoing, Executive may disclose such information concerning the business or operations of Employer and its subsidiaries and affiliates as may be required by the FRB, CDFI, FDIC or other regulatory agency having jurisdiction over the operations of Employer in connection with an examination of Bank or PMB or other proceeding conducted by such regulatory agency.

Executive agrees that all written, printed or electronic material, notebooks and records including, without limitation, computer disks, used and/or developed by Executive for Employer during the Term of this Agreement, other than Executive’s personal address lists, telephone lists, notes and diaries, are solely the property of Employer, and that Executive has no right, title or interest therein. Upon termination of Executive’s employment, Executive or Executive’s representative shall promptly deliver possession of all such materials (including any copies thereof) to the Bank.

7. Key-man Life Insurance . Employer shall have the right to obtain and hold a “key- man” life insurance policy on the life of Executive with the Bank as beneficiary of the policy. Executive agrees to provide any information required for the issuance of such policy and submit himself to any physical examination required for such policy.

8. Unsecured General Creditor . Neither Executive nor any other person or entity shall have any legal right or equitable rights interests or claims in or to any property or assets of Employer under the provisions of this Agreement. No assets of Employer shall be held under any trust for the benefit of Executive or any other person or entity or held in any way as security for the fulfilling of the obligations of Employer under this Agreement. All of Employer’s assets shall be and remain the general, unpledged, unrestricted assets of Employer. Employer’s obligations under this Agreement are unfunded and unsecured promises, and to the extent such promises involve the payment of money, they are promises to pay money in the future. Executive and any person or entity claiming through him shall be unsecured general creditors with respect to any rights or benefits hereunder.

9. Business Protection Covenants .

(a) Covenant Not to Compete . Executive agrees that he will not, during the Employment Period, voluntarily or involuntarily, directly or indirectly, (i) engage in any banking or financial products or service business, loan origination or deposit-taking business or any other business competitive with that of the Bank, PMB or their subsidiaries or affiliates (“ Competitive Business ”) within Orange County, Los Angeles County, San Diego County and San Bernardino County (the “ Market Area ”), (ii) directly or indirectly own any interest in (other than less than three percent (3%) of any publicly traded company or mutual fund), manage, operate, control, be employed by, or provide management or consulting services in any capacity to any firm, corporation, or other entity (other than Employer or its subsidiaries or affiliates) engaged in any Competitive Business in the Market Area, or (iii) directly or indirectly solicit or otherwise intentionally cause any employee, officer, or member of the Board or any of its subsidiaries or affiliates to engage in any action prohibited under (i) or (ii) of this Section 9(a).

(b) Inducing Employees To Leave The Bank; Employment of Employees . Any attempt on the part of the Executive to induce others to leave Employer’s employ, or the employ of any of its subsidiaries or affiliates, or any effort by Executive to interfere with Employer’s relationship with its other employees would be harmful and damaging to Employer. Executive agrees that during the Employment Period and for a period of twelve (12) months thereafter, Executive will not in any way, directly or indirectly: (i) induce or attempt to induce any employee of the Employer or any of its subsidiaries of affiliates to quit employment with Employer or the relevant subsidiary or affiliate; (ii) otherwise interfere with or disrupt the relationships between Employer and its subsidiaries and affiliates and their respective employees; (iii) hire or engage any employee of Employer or any subsidiary or affiliate or any former employee of Employer or any subsidiary or affiliate whose employment with Employer or the relevant subsidiary or affiliate ceased less than twelve (12) months before the date of such hiring or engagement unless the Employer terminated the employment of such former employee in which case Executive may hire such former employee immediately. Notwithstanding the foregoing, it shall not be a violation of this Section 9(b) for Executive to solicit or hire his personal assistant or for Executive to solicit, directly or indirectly, any current or former employee through generalized solicitations not targeted specifically at such employees.

(c) Nonsolicitation of Business . For a period of twelve (12) months from the date of termination of employment, Executive will not divert or attempt to divert from Employer or any of its subsidiaries or affiliates, any business Employer or a relevant subsidiary or affiliate had enjoyed or solicited from its customers, borrowers, depositors or investors during the twelve (12) months prior to termination of his employment.

(d) Bank’s Ownership of Inventions . To the extent that Executive has intellectual property rights of any kind in any pre-existing works which are subsequently incorporated in any work or work product produced in rendering services to Bank, PMB or any their subsidiaries or affiliates, Executive hereby grants Bank a royalty-free, irrevocable, world- wide, perpetual non-exclusive license (with the right to sublicense), to make, have made, copy, modify, use, sell, license, disclose, publish or otherwise disseminate or transfer such subject matter. Similarly, Executive agrees that all inventions, discoveries, improvements, trade secrets, original works of authorship, developments, formulae, techniques, processes, and know-how, whether or not patentable, and whether or not reduced to practice, that are conceived, developed or reduced to practice during Executive’s employment with Employer, either alone or jointly with others, if on Employer’s time, using Employer’s facilities, or relating to Employer shall be owned exclusively by the Bank, and Executive hereby assigns to the Bank all of Executive’s right, title and interest throughout the world in all such intellectual property. Executive agrees that the Bank shall be the sole owner of all domestic and foreign patents or other rights pertaining thereto, and further agrees to execute all documents that the Bank reasonably determines to be necessary or convenient for use in applying for, prosecuting, perfecting, or enforcing patents or other intellectual property rights, including the execution of any assignments, patent applications, or other documents that the Bank may reasonably request. This provision is intended to apply to the extent permitted by applicable law and is expressly limited by Section 2870 of the California Labor Code, which is set forth in its entirety in Exhibit B to this Agreement. By signing this Agreement, Executive acknowledges that this Section shall constitute written notice of the provisions of Section 2870.

(e) Bank’s Ownership of Copyrights . Executive agrees that all original works of authorship not otherwise within the scope of Section 9(d) above that are conceived or developed during Executive’s employment with Employer, either alone or jointly with others, if on Employer’s time, using Employer facilities, or relating to Employer, or its subsidiaries or affiliates, are “works for hire” to the greatest extent permitted by law and shall be owned exclusively by the Bank, and Executive hereby assigns to the Bank all of Executive’s right, title, and interest in all such original works of authorship. Executive agrees that the Bank shall be the sole owner of all rights pertaining thereto, and further agrees to execute all documents that the Bank reasonably determines to be necessary or convenient for establishing in the Bank’s name the copyright to any such original works of authorship.

10. Resignations . The Executive agrees that upon termination of employment, for any reason, he will submit his resignations from all offices and directorships with the Bank, PMB and all of their subsidiaries and affiliates.

11. Other Agreements . The Parties further agree that to the extent of any inconsistency between this Agreement and any employee manual or policy of Employer, that the terms of this Agreement shall supersede the terms of such employee manual or policy.

12. Notice . For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be personally delivered or (unless otherwise specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, or sent by facsimile, provided that the facsimile cover sheet contains a notation of the date and time of transmission, and shall be deemed received: (i) if personally delivered, upon the date of delivery to the address of the person to receive such notice, (ii) if mailed in accordance with the provisions of this Section 12, two (2) business days after the date placed in the United States mail, (iii) if mailed other than in accordance with the provisions of this Section 12 or mailed from outside the United States, upon the date of delivery to the address of the person to receive such notice, or (iv) if given by facsimile, when sent. Notices shall be addressed as follows:

If to the Employer:

Pacific Mercantile Bank

949 South Coast Drive

Third Floor

Costa Mesa, California, 92626

Attn: Chairman of the Board of Directors

If to the Executive:

At his address last reflected in the Employer’s records

With a copy to:

Jeremy L. Goldstein & Associates, LLC

119 Old Church Road

Greenwich, Connecticut 06830

Attn: Jeremy L. Goldstein, Esq.

or to such other respective addresses as the Parties hereto shall designate to the other by like notice, provided that notice of a change of address shall be effective only upon receipt thereof.

13. Arbitration . Any dispute or controversy arising under or in connection with this Agreement, the inception or termination of the Executive’s employment, or any alleged discrimination or tort claim related to such employment, including issues raised regarding the Agreement’s formation, interpretation or breach, shall be settled exclusively by binding arbitration in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association (“ AAA ”). Without limiting the foregoing, the following potential claims by Executive would be subject to arbitration under the Arbitration Agreement: claims for wages or other compensation due; claims for breach of any contract or covenant (express or implied) under which the Executive believes he would be entitled to compensation or benefits; tort claims related to such employment; claims for discrimination and harassment (including, but not limited to, race, sex, religion, national origin, age, marital status or medical condition, disability, sexual orientation, or any other characteristic protected by federal, state or local law); claims for benefits (except where an employee benefit or pension plan specifies that its claims procedure shall culminate in an arbitration or other procedure different from this one); and claims for violation of any public policy, federal, state or other governmental law, statute, regulation or ordinance. The arbitration will be conducted in Orange County, California. The arbitration shall provide for written discovery and depositions adequate to give the Parties access to documents and witnesses that are essential to the dispute. The arbitrator shall have no authority to add to or to modify this Agreement, shall apply all applicable law, and shall have no lesser and no greater remedial authority than would a court of law resolving the same claim or controversy. The arbitrator shall issue a written decision that includes the essential findings and conclusions upon which the decision is based, which shall be signed and dated. Executive and the Bank shall each bear his or its own costs and attorneys’ fees incurred in conducting the arbitration, provided that the Bank shall bear all fees and administrative costs charged by the arbitrator and AAA. Judgment may be entered on the arbitrator’s award in any court having jurisdiction.

14. Waiver of Breach . Any waiver of any breach of this Agreement shall not be construed to be a continuing waiver or consent to any subsequent breach on the part either of the Executive or of Employer. Except as otherwise provided in Section 4(c), no delay or omission in the exercise of any power, remedy, or right herein provided or otherwise available to any party shall impair or affect the right of such party thereafter to exercise the same. Any extension of time or other indulgence granted to a party hereunder shall not otherwise alter or affect any power, remedy or right of any other party, or the obligations of the party to whom such extension or indulgence is granted except as specifically waived.

15. Non-Assignment; Successors . Neither party hereto may assign his or its rights or delegate his or its duties under this Agreement without the prior written consent of the other party; provided, however, that: (i) this Agreement shall inure to the benefit of and be binding upon the successors and assigns of Employer upon any sale of all or substantially all of Employer’s assets, or upon any merger, consolidation or reorganization of Bank or PMB with or into any other corporation, all as though such successors and assigns of the Bank and PMB and their respective successors and assigns were the Bank or PMB; and (ii) this Agreement shall inure to the benefit of and be binding upon the heirs, assigns or designees of Executive to the extent of any payments due to them hereunder. As used in this Agreement, the terms “Bank”, “PMB” or “Employer” shall be deemed to refer to any such successor or assign of the Bank, PMB or Employer referred to in the preceding sentence.

16. Withholding of Taxes . All payments required to be made by Employer to the Executive under this Agreement shall be subject to the withholding and deduction of such amounts, if any, relating to tax, and other payroll deductions as Employer may reasonably determine it should withhold and/or deduct pursuant to any applicable law or regulation (including, but not limited to, Executive’s portion of social security payments and income tax withholding) now in effect or which may become effective any time during the term of this Agreement.

17. Section 409A . If Executive determines, in good faith, that any compensation or benefits provided by this Agreement may result in the application of Section 409A of the the Code, Executive shall provide written notice thereof (describing in reasonable detail the basis therefor) to Employer, and Employer shall, in consultation with Executive, modify this Agreement in the least restrictive manner necessary in order to exclude such compensation from the definition of “deferred compensation” within the meaning of such Section 409A of the Code or in order to comply with the provisions of Section 409A of the Code, other applicable provision(s) of the Code and/or any rules, regulations or other regulatory guidance issued under such statutory provisions and without any diminution in the value of the payments to Executive. Any payments that, under the terms of this Agreement, qualify for the “short-term” deferral exception under Treasury Regulations Section 1.409A-1(b)(4), the “separation pay” exception under Treasury Regulations Section 1.409A-1(b)(9)(iii) or another exception under Section 409A of the Code will be paid under the applicable exceptions to the greatest extent possible. Each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code. Anything in this Agreement to the contrary notwithstanding, if at the time of Executive’s separation from service within the meaning of Section 409A of the Code, Executive

is considered a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, and if any payment that Executive becomes entitled to under this Agreement is considered deferred compensations subject to interest, penalties and additional tax imposed pursuant to Section 409A of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, then no such payment shall be payable prior to the date that is the earlier of (i) six months and one day Executive’s separation from service or (ii) Executive’s death. In no event shall the date of termination of Executive’s employment be deemed to occur until Executive experiences a “separation from service” within the meaning of Section 409A of the Code, and notwithstanding anything contained herein to the contrary, the date on which such separation from service takes place shall be the date of termination. All reimbursements provided under this Agreement shall be provided in accordance with the requirements of Section 409A of the Code, including, where applicable, the requirement that (A) the amount of expenses eligible for reimbursement during one calendar year will not affect the amount of expenses eligible for reimbursement in any other calendar year; (B) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the calendar year in which the expense is incurred; and (C) the right to any reimbursement will not be subject to liquidation or exchange for another benefit. Notwithstanding the foregoing, Employer makes no representation or covenant to ensure that the payments and benefits under this Agreement are exempt from, or compliant with, Section 409A of the Code.

18. Indemnification . To the fullest extent permitted by law, regulation, and the Articles of Incorporation and Bylaws of Bank and PMB, Bank and PMB as appropriate shall pay as and when incurred all expenses, including legal and attorney costs, incurred by, or shall satisfy as and when entered or levied a judgment or fine rendered or levied against, Executive in an action brought by a third party against Executive (whether or not the Bank is joined as a party defendant) to impose a liability or penalty on Executive for an act alleged to have been committed by Executive while a director or an officer of the Bank. Payments authorized hereunder include amounts paid and expenses incurred in settling any such action or threatened action. All rights hereunder are limited by any applicable state or Federal laws.

19. Severability . To the extent any provision of this Agreement or portion thereof shall be invalid or unenforceable, it shall be considered deleted therefrom (but only for so long as such provision or portion thereof shall be invalid or unenforceable) and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect to the fullest extent permitted by law if enforcement would not frustrate the overall intent of the Parties (as such intent is manifested by all provisions of the Agreement including such invalid, void, or otherwise unenforceable portion).

20. Payment . All amounts payable by the Bank to Executive under this Agreement shall be paid promptly on the dates required for such payment in this Agreement without notice or demand. Any salary, benefits or other amounts paid or to be paid to Executive or provided to or in respect of the Executive pursuant to this Agreement shall not be reduced by amounts owing from Executive to Bank.

21. Expenses . The Bank shall promptly reimburse Executive for any fees and expenses incurred by him in the drafting, review and negotiation of this Agreement, subject to a cap of $10,000.

22. Authority . Each of the Parties hereto hereby represents that each has taken all actions necessary in order to execute and deliver this Agreement.

23. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

24. Governing Law . This Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of California, without giving effect to the choice of law principles thereof.

25. Entire Agreement; Amendments . This Agreement and written agreements, if any, entered into concurrently herewith constitute the entire agreement by Employer, on the one hand, and Executive on the other hand with respect to the subject matter hereof and merges and supersedes any and all prior discussions, negotiations, agreements or understandings between Executive and Employer with respect to the subject matter hereof, whether written or oral. This Agreement may be amended or modified only by a written instrument executed by Executive and Employer. With regard to such amendments, alterations, or modifications, facsimile signatures shall be effective as original signatures. Any amendment, alteration, or modification requiring the signature of more than one party may be signed in counterparts.

26. Further Actions . Each party agrees to perform any further acts and execute and deliver any further documents reasonably necessary to carry out the provisions of this Agreement.

27. Time of Essence . Time is of the essence of each and every term, condition, obligation and provision hereof.

28. No Third Party Beneficiaries . This Agreement and each and every provision hereof are for the exclusive benefit of the Parties and not for the benefit of any third party.

29. Headings . The headings in this Agreement are inserted only as a matter of convenience, and in no way define, limit, or extend or interpret the scope of this Agreement or of any particular provision hereof.

30. Regulatory Approval of this Agreement . The Parties acknowledge and agree that entry into this Agreement is and payment of severance under Section 5 may be subject to receipt of approval from the FRB pursuant to Section 1828(k) and Part 359 of the FDIC Rules and Regulations and the CDFI. If such approval is required and not obtained or is subject to modifications specified by the FRB or the CDFI the Parties agree to negotiate in good faith to amend this Agreement to provide for substantially equivalent terms consistent with regulatory requirements.

31. Full Settlement . The Company’s obligation to make the payments provided for in this Agreement shall not be affected by any off-set which the Employer may have against the Executive or others (other than as contemplated by Section 16). In no event shall the Executive be obligated to seek other employment or otherwise mitigate the amounts payable to the Executive under this Agreement.

[The signature page follows on the next page.]

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.



PACIFIC MERCANTILE BANK

By:		/s/ Edward J. Carpenter
Name:		Edward J. Carpenter
Title:		Chairman of the Board

PACIFIC MERCANTILE BANCORP

By:		/s/ Edward J. Carpenter
Name:		Edward J. Carpenter
Title:		Chairman of the Board

EXECUTIVE:

		/s/ Thomas M. Vertin
		Thomas M. Vertin

EXHIBIT A

GENERAL RELEASE AGREEMENT

1. Release by Executive . Thomas M. Vertin (“ Executive ”), on his own behalf and on behalf of his descendants, dependents, heirs, executors, administrators, assigns and successors, and each of them, hereby acknowledges full and complete satisfaction of and releases and discharges and covenants not to sue Pacific Mercantile Bancorp, a California corporation (“ PMB ”), Pacific Mercantile Bank, a California banking corporation (the “ Bank ”), their respective divisions, subsidiaries, parents, or affiliated corporations, past and present, and each of them, as well as each of their assignees, successors, directors, officers, stockholders, partners, representatives, attorneys, agents or employees, past or present, or any of them (individually and collectively, “ Releasees ”), from and with respect to any and all claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected, arising out of or in any way connected with Executive’s employment or any other relationship with or interest in the Bank and PMB or either of them individually (PMB and the Bank are referred to herein, collectively and individually, as the “ Employer ”) or the termination thereof, including without limiting the generality of the foregoing, any claim for severance pay, profit sharing, bonus or similar benefit, pension, retirement, life insurance, health or medical insurance or any other fringe benefit, or disability, or any other claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected resulting from any act or omission by or on the part of Releasees committed or omitted prior to the date of this General Release Agreement (this “ Release Agreement ”) set forth below, including, without limiting the generality of the foregoing, any claim under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Family and Medical Leave Act, the California Fair Employment and Housing Act, California Labor Code Section 132a, the California Family Rights Act, or any other federal, state or local law, regulation, ordinance, constitution or common law (collectively, the “ Claims ”); provided, however, that the foregoing release does not apply to any obligation of the Employer to Executive pursuant to any of the following: (1) any right to indemnification that Executive may have pursuant to the Employer’s bylaws, its corporate charter or under any written indemnification agreement with the Employer (or any corresponding provision of any subsidiary or affiliate of the Employer) with respect to any loss, damages or expenses (including but not limited to attorneys’ fees to the extent otherwise provided) with respect to his service as an employee, officer or director of the Employer or any of its subsidiaries or affiliates; (2) with respect to any rights that Executive may have to insurance coverage for such losses, damages or expenses under any Employer (or subsidiary or affiliate) directors and officers liability insurance policy; (3) any rights to continued medical and dental coverage that Executive may have under the Consolidated Omnibus Budget Reconciliation Act of 1985; (4) any rights to payment of vested and accrued benefits that Executive may have under a compensation or benefit plan sponsored or maintained by the Employer; and (5) any rights to compensation or benefits that Executive may have pursuant to Section 5(a) or 5(b) of Executive’s employment agreement with Employer. In addition, this release does not cover any Claim that cannot be so released as a matter of applicable law. Notwithstanding anything to the contrary herein, nothing in this Release Agreement prohibits Executive from filing a charge with or participating in an investigation conducted by any state or federal government agencies. Executive does waive, however, the right to receive any monetary or other recovery, should any agency or any other person pursue any claims on Executive’s behalf arising out of any claim released pursuant to this Release Agreement. Executive acknowledges and agrees that he has received any and all leave and other benefits that he has been and is entitled to pursuant to the Family and Medical Leave Act of 1993.

2. Acknowledgement of Payment of Wages . Executive acknowledges that he has received all amounts owed for his regular and usual salary (including, but not limited to, any bonus, severance, or other wages), and usual benefits through the date of this Release Agreement.

3. Waiver of Civil Code Section 1542 . This Release Agreement is intended to be effective as a general release of and bar to each and every Claim hereinabove specified. Accordingly, Executive hereby expressly waives any rights and benefits conferred by Section 1542 of the California Civil Code and any similar provision of any other applicable state law as to the Claims. Section 1542 of the California Civil Code provides:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

Nevertheless, Executive hereby waives, as to the Claims, any claims, demands, and causes of action that might arise as a result of such different or additional claims, demands, causes of action or facts.

4. ADEA Waiver . Executive expressly acknowledges and agrees that by entering into this Release Agreement, he is waiving any and all rights or claims that he may have arising under the Age Discrimination in Employment Act of 1967, as amended (“ ADEA ”), which have arisen on or before the date of execution of this Release Agreement. Executive further expressly acknowledges and agrees that:

(a) He is hereby advised in writing by this Release Agreement to consult with an attorney before signing this Release Agreement;

(b) He was given a copy of this Release Agreement on [___________, 20__] and informed that he had twenty-one (21) days within which to consider this Release Agreement and that if he wished to execute this Release Agreement prior to expiration of such 21-day period, he should execute the Acknowledgement and Waiver attached hereto as Exhibit B-1 ;

(c) Nothing in this Release Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law; and

(d) He was informed that he had seven (7) days following the date of execution of this Release Agreement in which to revoke this Release Agreement, and this Release Agreement will become null and void if Executive elects revocation during that time. Any revocation must be in writing and must be received by the Employer during the seven-day revocation period. In the event that Executive exercises this revocation right, neither the Employer nor Executive will have any obligation under this Release Agreement. Any notice of revocation should be sent by Executive in writing to the Employer (attention Robert E. Sjogren), 949 South Coast Drive, Suite 300, Costa Mesa, CA 92626, so that it is received within the seven-day period following execution of this Release Agreement by Executive. Executive agrees to also promptly provide a copy of any such notice to the board of directors of each Employer.

5. No Transferred Claims . Executive represents and warrants to the Employer that he has not heretofore assigned or transferred to any person not a party to this Release Agreement any released matter or any part or portion thereof.

6. Miscellaneous . The following provisions shall apply for purposes of this Release Agreement:

(a) Number and Gender . Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders.

(b) Headings . The headings in this Release Agreement are inserted only as a matter of convenience, and in no way define, limit, or extend or interpret the scope of this Release Agreement or of any particular provision hereof.

(c) Authority . Each of the parties hereto hereby represents that each has taken all actions necessary in order to execute and deliver this Release Agreement.

(d) Governing Law . This Release Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of California, without giving effect to the choice of law principles thereof.

(e) Severability . If any provision of this Release Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of this Release Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Release Agreement are declared to be severable.

(f) Modifications . This Release Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Release Agreement, which agreement is executed by both of the parties hereto.

(g) Waiver . No waiver of any breach of any term or provision of this Release Agreement shall be construed to be, nor shall be, a waiver of any other breach of this Release Agreement. No waiver shall be binding unless in writing and signed by the party waiving the breach.

(h) Arbitration . Any controversy arising out of or relating to this Release Agreement shall be submitted to arbitration in accordance with the arbitration provisions of Executive’s employment agreement entered with Employer.

(i) Counterparts . This Release Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

[Remainder of page intentionally left blank]

The undersigned have read and understand the consequences of this Release Agreement and voluntarily sign it. The undersigned declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

EXECUTED this ____ day of _________________, 20____, at Orange County, California.

“EXECUTIVE”

Thomas M. Vertin

EXECUTED this ____ day of _________________, 20____, at Orange County, California.

PACIFIC MERCANTILE BANK

By:

Name: ___________________________________

Title: ____________________________________

PACIFIC MERCANTILE BANCORP

By:

Name: ___________________________________

Title: ____________________________________

EXHIBIT B

California Labor Code § 2870

Employment agreements; assignment of rights

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

TRANSITION AGREEMENT

This Transition Agreement (this “ Transition Agreement ”) is made and entered into as of December 8, 2015 (the “ Effective Date ”) by and between Pacific Mercantile Bancorp, a California corporation (“ PMB ”), Pacific Mercantile Bank, a California banking corporation (the “ Bank ”), and Steven K. Buster (“ Executive ,” and together with PMB and the Bank, the “ Parties ”).

RECITALS

WHEREAS, the Parties entered into an Employment Agreement as of April 18, 2013 (as amended, the “ Employment Agreement ”); and

WHEREAS, the Parties desire to enter into this Transition Agreement to set forth the terms of Executive’s separation from PMB and the Bank (collectively and individually, the “ Employer ”).

NOW, THEREFORE, for good and valuable consideration, the Parties agree as follows:

1. Termination of Employment . Executive’s employment with the Employer will terminate effective at the end of the day on December 31, 2015, unless earlier terminated in accordance with Section 2(c) below (the last day of Executive’s employment by an Employer is referred to as the “ Termination Date ”). Executive hereby resigns as President and Chief Executive Officer of each of PMB and the Bank, as a director of each of PMB and the Bank, and from each and every other office and position he may then hold with PMB, the Bank, and any of their respective affiliates effective as of the Termination Date. (The period of time from the Effective Date through the Termination Date is referred to herein as the “ Transition Period ”.)

2. Transition Period .

(a) Duties during Transition Period . During the Transition Period, Executive will continue to perform the duties of President and Chief Executive Officer of the Employer. Executive shall also perform such other duties as are reasonably assigned to Executive by the Board of Directors of the Employer, shall devote his full business time and attention, and his best efforts, to the business and affairs of the Employer. During the Transition Period, Executive shall assist the Employer in the process of transitioning the position of President and Chief Executive Officer of the Employer to a successor and shall consult with the Board of Directors of each Employer and with any successor President and/or Chief Executive Officer regarding such transition and any other matters as either Employer may request. During the Transition Period, Executive shall be permitted to serve on boards and committees and to manage his personal investments to the same extent as provided in Section 2(b) of the Employment Agreement.

(b) Compensation, Benefits and Perquisites during Transition Period . During the Transition Period, Executive shall continue to be eligible for medical, dental and other standard employee benefits offered by the Employer to its employees generally in accordance with, and subject to, the terms and conditions of the applicable plan(s). During the Transition Period, Executive shall be paid a base salary at the same annualized rate as in effect on the Effective Date ($450,000) and shall continue to receive any perquisites he is currently provided by the Employer on the same terms and conditions as currently in effect. As payment for his 2015 bonus and subject to Section 7, Executive shall be paid a lump sum cash payment in an amount equal to $225,000 to be paid on or after January 1, 2016, but no later than January 15, 2016 (the “ 2015 Bonus ”). Following the Effective Date, Executive shall not be eligible to receive any new grants of equity incentive awards by either Employer or any of their respective affiliates, and shall not be entitled to any bonus, incentive, or other form of compensation or benefit except as otherwise expressly set forth in this Transition Agreement. Except as otherwise expressly provided in this Transition Agreement and except for Executive’s accrued and unused vacation days (approximately 184 accrued and unused vacation days as of the Effective Date), Executive acknowledges that he has received all amounts owed for his regular and usual salary, other compensation (including, but not limited to, any bonus, severance, or other wages), and usual benefits through the Effective Date. Executive represents and warrants that any business expenses incurred by Executive that he has not yet submitted for reimbursement are consistent in all material respects with past practice.

(c) Early Termination of Transition Period . Either the Employer or Executive may terminate the Transition Period at any time with or without cause. If the Employer elects to terminate Executive’s employment before December 31, 2015 other than as a result of a material breach by Executive of any of Executive’s obligations under this Transition Agreement, Executive will be entitled to receive (1) the payments and benefits provided in Section 8 below (except in such circumstances the lump sum cash payment in Section 8(b) shall be an amount equal to $450,000 instead of $292,500) and (2) Executive’s 2015 bonus in such amount as determined by the Board in the ordinary course. If Executive elects to resign Executive’s employment before December 31, 2015 or if the Employer terminates Executive’s employment before December 31, 2015 as a result of a material breach by Executive of any of Executive’s obligations under this Transition Agreement, Executive will be not be entitled to receive the 2015 Bonus or the payments and benefits provided in Section 8 below, except the Accrued Rights described in Section 8(a) below.

(d) Treatment of Equity Awards . Any stock options previously granted to Executive by PMB that are outstanding on the Effective Date but scheduled to vest after December 31, 2015 shall be, and hereby are, terminated on the Effective Date, and Executive will have no further rights with respect thereto or in respect thereof. Any other equity awards (including, without limitation, any restricted stock and stock unit awards) previously granted to Executive by PMB that are outstanding on the Effective Date but scheduled to vest after April 29, 2016 shall be, and hereby are, terminated on the Effective Date, and Executive will have no further rights with respect thereto or in respect thereof. For clarity, 3,702 shares of the restricted stock awarded on March 6, 2015 will vest, in accordance with the existing terms of such award, on March 6, 2016, subject to Executive’s continued service under the Consulting Agreement (as defined below) through such date. For purposes of any portion of stock option granted by PMB to Executive that is vested and outstanding as of December 31, 2015, Executive’s service with an Employer will, in accordance with the existing terms and conditions of such award, include any period Executive performs the consulting services contemplated by Section 9.

3. General Release . Executive, on his own behalf and on behalf of his descendants, dependents, heirs, executors, administrators, assigns and successors, and each of them, hereby acknowledges full and complete satisfaction of and releases and discharges and covenants not to sue PMB, the Bank, their respective divisions, subsidiaries, parents, or affiliated corporations, past and present, and each of them, as well as each of their assignees, successors, directors, officers, stockholders, partners, representatives, attorneys, agents or employees, past or present, or any of them (individually and collectively, “ Releasees ”), from and with respect to any and all claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected, arising out of or in any way connected with Executive’s employment or any other relationship with or interest in the Bank and PMB or either of them individually, or the termination thereof, including without limiting the generality of the foregoing, any claim for severance pay, profit sharing, bonus or similar benefit, pension, retirement, life insurance, health or medical insurance or any other fringe benefit, or disability, or any other claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected resulting from any act or omission by or on the part of Releasees committed or omitted prior to the Effective Date, including, without limiting the generality of the foregoing, any claim under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Family and Medical Leave Act, the California Fair Employment and Housing Act, California Labor Code Section 132a, the California Family Rights Act, or any other federal, state or local law, regulation, ordinance, constitution or common law (collectively, the “ Claims ”); provided, however, that the foregoing release does not apply to any obligation of the Employer to Executive pursuant to any of the following: (1) any right to indemnification that Executive may have pursuant to the Employer’s bylaws, its corporate charter or under any written indemnification agreement with the Employer (or any corresponding provision of any subsidiary or affiliate of the Employer) with respect to any loss, damages or expenses (including but not limited to attorneys’ fees to the extent otherwise provided) that Executive may in the future incur with respect to his service as an employee, officer or director of the Employer or any of its subsidiaries or affiliates; (2) with respect to any rights that Executive may have to insurance coverage for such losses, damages or expenses under any Employer (or subsidiary or affiliate) directors and officers liability insurance policy; (3) any rights to continued medical and dental coverage that Executive may have under The Consolidated Omnibus Budget Reconciliation Act of 1985; and (4) any rights to payment of benefits that Executive may have under a retirement plan sponsored or maintained by the Employer that is intended to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”). In addition, this release does not cover any Claim that cannot be so released as a matter of applicable law. Notwithstanding anything to the contrary herein, nothing in this Transition Agreement prohibits Executive from filing a charge with or participating in an investigation conducted by any state or federal government agencies. Executive does waive, however, the right to receive any monetary or other recovery, should any agency or any other person pursue any claims on Executive’s behalf arising out of any claim released pursuant to this Transition Agreement. Executive acknowledges and agrees that he has received any and all leave and other benefits that he has been and is entitled to pursuant to the Family and Medical Leave Act of 1993.

4. Waiver of Unknown Claims . This Transition Agreement is intended to be effective as a general release of and bar to each and every Claim hereinabove specified. Accordingly, Executive hereby expressly waives any rights and benefits conferred by SECTION 1542 OF THE CALIFORNIA CIVIL CODE and any similar provision of any other applicable state law as to the Claims. SECTION 1542 of the California Civil Code provides:

Executive acknowledges that he later may discover claims, demands, causes of action or facts in addition to or different from those which Executive now knows or believes to exist with respect to the subject matter of this Transition Agreement and which, if known or suspected at the time of executing this Transition Agreement, may have materially affected its terms. Nevertheless, Executive hereby waives, as to the Claims, any claims, demands, and causes of action that might arise as a result of such different or additional claims, demands, causes of action or facts.

5. ADEA Waiver . Executive expressly acknowledges and agrees that by entering into this Transition Agreement, he is waiving any and all rights or claims that he may have arising under the Age Discrimination in Employment Act of 1967, as amended (the “ ADEA ”), which have arisen on or before the Effective Date. Executive further expressly acknowledges and agrees that:

(a) In return for this Transition Agreement, he will receive consideration beyond that which he was already entitled to receive before executing this Transition Agreement;

(b) He is hereby advised in writing by this Transition Agreement to consult with an attorney before signing this Transition Agreement;

(c) He was given a copy of this Transition Agreement on December 8, 2015, and informed that he had twenty-one (21) days within which to consider this Transition Agreement and that if he wished to execute this Transition Agreement prior to the expiration of such 21-day period, he should execute the Acknowledgement and Waiver attached hereto as Exhibit A ;

(d) Nothing in this Transition Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law; and

(e) He was informed that he had seven (7) days following the date of execution of this Transition Agreement in which to revoke this Transition Agreement, and this Transition Agreement will become null and void if Executive elects revocation during that time. Any revocation must be in writing and must be received by the Employer during the seven-day revocation period. In the event that Executive exercises this revocation right, neither the Employer nor Executive will have any obligation under this Transition Agreement. Any notice of revocation should be sent by Executive in writing to the Employer (attention Robert E. Sjogren), 949 South Coast Drive, Suite 300, Costa Mesa, CA 92626, so that it is received within the seven-day period following execution of this Transition Agreement by Executive. Executive agrees to also promptly provide a copy of any such notice to the board of directors of each Employer.

6. No Transferred Claims . Executive warrants and represents to the Employer that he has not heretofore assigned or transferred to any person not a party to this Transition Agreement any released matter or any part or portion thereof.

7. Additional Release . The payment and provision of any and all severance benefits pursuant to Sections 2(c) and 8 of this Transition Agreement (other than pursuant to Section 8(a)), as well as the 2015 Bonus, and any obligation of the Employer to Executive pursuant to the Consulting Agreement (as defined below), are conditioned upon and subject to execution of a Release of Claims by Executive in the form attached to this Transition Agreement as Exhibit B (the “ Release ”) upon or following the Termination Date, Executive’s delivery of such executed Release to the Employer not later than twenty-one (21) days following the Termination Date, and Executive not revoking such Release pursuant to any revocation rights afforded by applicable law.

8. Severance Pay . Notwithstanding anything to the contrary in Section 5 of the Employment Agreement, and subject to the requirements of Section 7 above and further subject to the early termination provisions (if applicable) of Section 2(c) above, the Employer agrees to provide to Executive the following severance benefits:

Accrued Rights . On the Termination Date, Employer shall pay Executive any accrued and unpaid portion of Executive’s base salary due from the Employer together with any accrued and unused vacation time with Employer. Executive agrees to promptly submit to the Employer any business expenses incurred by Executive in the course of his employment with Employer that are reimbursable by the Employer pursuant to Section 3(f) of the Employment Agreement, and the Employer agrees to promptly reimburse Executive for such expenses. Any benefit due Executive pursuant to the terms of any retirement plan of the Employer in which Executive has participated and that is intended to be qualified under Section 401(a) of the Code shall be paid in accordance with the terms of such plan.


b.	Special Transition Payment . A lump sum cash payment in an amount equal to $292,500 to be paid in January 2016.

9. Consulting Agreement . Concurrent with the execution of this Transition Agreement, Executive and the Employer will enter into the Consulting Agreement in the form attached hereto as Exhibit C (the “ Consulting Agreement ”). The Consulting Agreement shall be null and void if Executive’s employment with the Company ends before December 31, 2015.

10. Continuing Effect of Certain Provisions; Breach of Certain Agreements . Executive agrees to abide by the terms of Sections 6 and 9 of the Employment Agreement (together, the “ Continuing Obligations ”), which shall continue in effect in accordance with their existing terms. Executive warrants and represents that he has not previously breached any of the Continuing Obligations. In the event Executive breaches any of the Continuing Obligations, from and after the date of such breach and not in any way in limitation of any right or remedy otherwise available to the Employer, Executive will no longer be entitled to, and

the Employer will no longer be obligated to pay, any remaining unpaid portion of the 2015 Bonus and the severance benefits specified in Sections 2(c) and 8 of this Transition Agreement.

11. Non-Disparagement; Return of Property .

(a) Executive agrees that, at all times after the Effective Date, Executive will not make critical, negative or disparaging remarks, orally or in writing or in any other form, about the Employer or any Employer’s affiliates, or any of their respective owners, members, investors, directors, officers, or employees, including, but not limited to, comments about any of its or their assets, services, management, business or employment practices, and that Executive will not voluntarily aid or voluntarily assist any person in any way with respect to any third party claims pursued against any such person. The Employer agrees to instruct its officers and directors to not to make any critical, negative or disparaging remarks, orally or in writing or in any other form, about Executive. Nothing in this Section 11(a) will, however, prevent any person from responding fully and accurately to any question, inquiry or request for information when required by applicable law or legal process, nor is it intended to limit Executive’s rights as an employee to discuss the terms, wages, and working conditions of Executive’s employment, as protected by applicable law.

(b) Executive agrees that on the Termination Date he will return to the Employer any and all property of the Employer or any of their respective affiliates that he was provided or otherwise had in his possession. If Executive later discovers that any such property is in his possession, Executive agrees that he will promptly return it to the Employer.

12. Arbitration and Remedies . Except as otherwise provided below, any dispute, claim or controversy arising out of or relating to this Transition Agreement, its enforcement or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of its provisions, including the determination of the scope or applicability of this agreement to arbitrate, shall be submitted to final and binding arbitration in accordance with Section 13 of the Employment Agreement, incorporated herein by this reference and to apply to this Transition Agreement as though set forth herein. Executive agrees that a breach by Executive of any of the covenants in Sections 10 and 11 of this Transition Agreement would cause immediate and irreparable harm to the Employer that would be difficult or impossible to measure, and that damages to the Employer for any such injury would therefore be an inadequate remedy for any such breach. Therefore, Executive agrees that in the event of any breach or threatened breach of any provision of Sections 10 or 11, the Employer shall be entitled, in addition to and without limitation upon all other remedies the Employer may have under this Transition Agreement, at law or otherwise, to obtain specific performance, injunctive relief and/or other appropriate relief (without posting any bond or deposit) in order to enforce or prevent any violations of the provisions of Sections 10 or 11, or require Executive to account for and pay over to the Employer all compensation, profits, moneys, accruals, increments or other benefits derived from or received as a result of any transactions constituting a breach of Sections 10 or 11 if and when final judgment of a court of competent jurisdiction or arbitrator, as applicable, is so entered against Executive.

13. Waiver of Breach . Any waiver of any breach of this Transition Agreement shall not be construed to be a continuing waiver or consent to any subsequent breach on the part either of Executive or of Employer. No delay or omission in the exercise of any power, remedy, or right herein provided or otherwise available to any party shall impair or affect the right of such party thereafter to exercise the same. Any extension of time or other indulgence granted to a party hereunder shall not otherwise alter or affect any power, remedy or right of any other party, or the obligations of the party to whom such extension or indulgence is granted except as specifically waived.

14. Non-Assignment; Successors . Neither party hereto may assign his or its rights or delegate his or its duties under this Transition Agreement without the prior written consent of the other party; provided, however, that: (i) this Transition Agreement shall inure to the benefit of and be binding upon the successors and assigns of Employer upon any sale of all or substantially all of Employer’s assets, or upon any merger, consolidation or reorganization of Bank or PMB with or into any other corporation, all as though such successors and assigns of the Bank and PMB and their respective successors and assigns were the Bank or PMB; and (ii) this Transition Agreement shall inure to the benefit of and be binding upon the heirs, assigns or designees of Executive to the extent of any payments due to them hereunder. As used in this Transition Agreement, the terms “Bank”, “PMB” or “Employer” shall be deemed to refer to any such successor or assign of the Bank, PMB or Employer referred to in the preceding sentence.

15. Withholding of Taxes . All payments and benefits required to be made or provided by Employer to Executive under this Transition Agreement shall be subject to the withholding and deduction of such amounts, if any, relating to tax, and other payroll deductions as Employer may reasonably determine it should withhold and/or deduct pursuant to any applicable law or regulation (including, but not limited to, Executive’s portion of social security payments and income tax withholding) now in effect or which may become effective any time during the payment or provision of such amounts or benefits. Except for such withholding right, Executive will be responsible for any and all tax liability with respect to this Transition Agreement as well as for any and all tax liability with respect to the Consulting Agreement.

16. Section 409A . This Transition Agreement shall be construed and interpreted, to the extent possible, to comply with, and avoid any tax, penalty or interest under, 409A of the Code. Notwithstanding the foregoing, Employer makes no representation or covenant to ensure that the payments and benefits under this Transition Agreement are exempt from, or compliant with, Section 409A of the Code.

17. Severability . To the extent any provision of this Transition Agreement or portion thereof shall be invalid or unenforceable, it shall be considered deleted therefrom (but only for so long as such provision or portion thereof shall be invalid or unenforceable) and the remainder of such provision and of this Transition Agreement shall be unaffected and shall continue in full force and effect to the fullest extent permitted by law if enforcement would not frustrate the overall intent of the Parties (as such intent is manifested by all provisions of this Transition Agreement including such invalid, void, or otherwise unenforceable portion).

18. Authority . Each of the Parties hereto hereby represents that each has taken all actions necessary in order to execute and deliver this Transition Agreement.

19. Counterparts . This Transition Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

20. Governing Law . This Transition Agreement shall be construed, interpreted and enforced in accordance with the laws of the State of California, without giving effect to the choice of law principles thereof.

21. Entire Agreement; Amendments . This Transition Agreement constitutes the entire agreement by Employer, on the one hand, and Executive on the other hand with respect to the subject matter hereof and merges and supersedes any and all prior discussions, negotiations, agreements or understandings between Executive and Employer with respect to the subject matter hereof, whether written or oral. This Transition Agreement may be amended or modified only by a written instrument executed by Executive and Employer. With regard to such amendments, alterations, or modifications, facsimile signatures shall be effective as original signatures. Any amendment, alteration, or modification requiring the signature of more than one party may be signed in counterparts. For clarity, the Continuing Obligations are outside of the scope of the integration provisions of this Section 21. Without limiting the generality of the foregoing, Executive has no further rights, and the Employer shall have no further obligation, under the Employment Agreement, except that Executive’s rights under Section 18 of the Employment Agreement shall continue in effect.

22. Time of Essence . Time is of the essence of each and every term, condition, obligation and provision hereof.

23. Number and Gender . Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders.

24. Headings . The headings in this Transition Agreement are inserted only as a matter of convenience, and in no way define, limit, or extend or interpret the scope of this Transition Agreement or of any particular provision hereof.

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IN WITNESS WHEREOF , each of the Parties has executed this Transition Agreement, in the case of the Employer by its duly authorized officer, at Orange County, California on the day and year first above written.

PACIFIC MERCANTILE BANK EXECUTIVE

By: /s/ Edward J. Carpenter By: /s/ Steven K. Buster

Name: Chairman of the Board Name: Steven K. Buster

PACIFIC MERCANTILE BANCORP

By: /s/ Edward J. Carpenter

Name: Chairman of the Board

EXHIBIT A

ACKNOWLEDGMENT AND WAIVER

I, Steven K. Buster, hereby acknowledge that I was given 21 days to consider the foregoing Transition Agreement and voluntarily chose to sign the Transition Agreement prior to the expiration of the 21-day period.

I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

EXECUTED this 8 ^th day of December 2015, at Orange County, California.

/s/ Steven K. Buster

Steven K. Buster

Exhibit B

GENERAL RELEASE AGREEMENT

1. Release by Executive . Steven K. Buster (“ Executive ”), on his own behalf and on behalf of his descendants, dependents, heirs, executors, administrators, assigns and successors, and each of them, hereby acknowledges full and complete satisfaction of and releases and discharges and covenants not to sue Pacific Mercantile Bancorp, a California corporation (“ PMB ”), Pacific Mercantile Bank, a California banking corporation (the “Bank”), their respective divisions, subsidiaries, parents, or affiliated corporations, past and present, and each of them, as well as each of their assignees, successors, directors, officers, stockholders, partners, representatives, attorneys, agents or employees, past or present, or any of them (individually and collectively, “ Releasees ”), from and with respect to any and all claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected, arising out of or in any way connected with Executive’s employment or any other relationship with or interest in the Bank and PMB or either of them individually (PMB and the Bank are referred to herein, collectively and individually, as the “ Employer ”) or the termination thereof, including without limiting the generality of the foregoing, any claim for severance pay, profit sharing, bonus or similar benefit, pension, retirement, life insurance, health or medical insurance or any other fringe benefit, or disability, or any other claims, agreements, obligations, demands and causes of action, known or unknown, suspected or unsuspected resulting from any act or omission by or on the part of Releasees committed or omitted prior to the date of this General Release Agreement (this “ Release Agreement ”) set forth below, including, without limiting the generality of the foregoing, any claim under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Family and Medical Leave Act, the California Fair Employment and Housing Act, California Labor Code Section 132a, the California Family Rights Act, or any other federal, state or local law, regulation, ordinance, constitution or common law (collectively, the “ Claims ”); provided, however, that the foregoing release does not apply to any obligation of the Employer to Executive pursuant to any of the following: (1) the Transition Agreement dated December 8, 2015 by and between the Company and you (the “ Transition Agreement ”); (2) any right to indemnification that Executive may have pursuant to the Employer’s bylaws, its corporate charter or under any written indemnification agreement with the Employer (or any corresponding provision of any subsidiary or affiliate of the Employer) with respect to any loss, damages or expenses (including but not limited to attorneys’ fees to the extent otherwise provided) that Executive may in the future incur with respect to his service as an employee, officer or director of the Employer or any of its subsidiaries or affiliates; (3) with respect to any rights that Executive may have to insurance coverage for such losses, damages or expenses under any Employer (or subsidiary or affiliate) directors and officers liability insurance policy; (4) any rights to continued medical and dental coverage that Executive may have under the Consolidated Omnibus Budget Reconciliation Act of 1985; and (5) any rights to payment of benefits that Executive may have under a retirement plan sponsored or maintained by the Employer that is intended to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended. In addition, this release does not cover any Claim that cannot be so released as a matter of applicable law. Notwithstanding anything to the contrary herein, nothing in this Release Agreement prohibits Executive from filing a charge with or participating in an investigation conducted by any state or federal government agencies. Executive does waive, however, the right to receive any monetary or other recovery, should any agency or any other person pursue any claims on Executive’s behalf arising out of any claim released pursuant to this Release Agreement. Executive acknowledges and agrees that he has received any and all leave and other benefits that he has been and is entitled to pursuant to the Family and Medical Leave Act of 1993.

Executive acknowledges that he later may discover claims, demands, causes of action or facts in addition to or different from those which Executive now knows or believes to exist with respect to the subject matter of this Release Agreement and which, if known or suspected at the time of executing this Release Agreement, may have materially affected its terms. Nevertheless, Executive hereby waives, as to the Claims, any claims, demands, and causes of action that might arise as a result of such different or additional claims, demands, causes of action or facts.

(a) In return for this Release Agreement, he will receive consideration under the Transition Agreement beyond that which he was already entitled to receive before entering into this Release Agreement;

(b) He is hereby advised in writing by this Release Agreement to consult with an attorney before signing this Release Agreement;

(c) He was given a copy of this Release Agreement on December 8, 2015 and informed that he had twenty-one (21) days within which to consider this Release Agreement and that if he wished to execute this Release Agreement prior to expiration of such 21-day period, he should execute the Acknowledgement and Waiver attached hereto as Exhibit B-1 ;

(d) Nothing in this Release Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law; and

(e) He was informed that he had seven (7) days following the date of execution of this Release Agreement in which to revoke this Release Agreement, and this Release Agreement will become null and void if Executive elects revocation during that time. Any revocation must be in writing and must be received by the Employer during the seven-day revocation period. In the event that Executive exercises this revocation right, neither the Employer nor Executive will have any obligation under this Release Agreement. Any notice of revocation should be sent by Executive in writing to the Employer (attention Robert E. Sjogren), 949 South Coast Drive, Suite 300, Costa Mesa, CA 92626, so that it is received within the seven-day period following execution of this Release Agreement by Executive. Executive agrees to also promptly provide a copy of any such notice to the board of directors of each Employer.

6. Miscellaneous . The following provisions shall apply for purposes of this Release Agreement:

(a) Number and Gender . Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders.

(c) Authority . Each of the parties hereto hereby represents that each has taken all actions necessary in order to execute and deliver this Release Agreement.

(h) Arbitration . Any controversy arising out of or relating to this Release Agreement shall be submitted to arbitration in accordance with the arbitration provisions of the Transition Agreement.

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EXECUTED this ____ day of _________________, 20____, at Orange County, California.

“EXECUTIVE”

________________

Steven K. Buster

EXECUTED this ____ day of _________________, 20____, at Orange County, California.

PACIFIC MERCANTILE BANK

By:

Name: ___________________________________

Title: ____________________________________

PACIFIC MERCANTILE BANCORP

By:

Name: ___________________________________

Title: ____________________________________

EXHIBIT B-1

ACKNOWLEDGMENT AND WAIVER

I, Steven K. Buster, hereby acknowledge that I was given 21 days to consider the foregoing Release Agreement and voluntarily chose to sign the Release Agreement prior to the expiration of the 21-day period.

I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

EXECUTED this ____ day of _________________, 20____, at Orange County, California.

________________

Steven K. Buster

EXHIBIT C

CONSULTING AGREEMENT

December 8, 2015

Steven K. Buster

Dear Steven:

This letter agreement (this “ Consulting Agreement ”) confirms that Pacific Mercantile Bancorp, a California corporation, and Pacific Mercantile Bank, a California banking corporation (collectively, the “ Company ”), engages you to consult with the Company on such matters as the Company may request from time to time during the Term (the “ Services ”). The “ Term ” shall commence on January 1, 2016 (the “ Effective Date ”) and shall terminate on December 31, 2016, subject to earlier termination as described below.

The Term may be terminated by you for any reason upon 30 days written notice to the Company. The Term may be terminated by the Company upon a material breach by you of any of your obligations to the Company under this Consulting Agreement, the Transition Agreement dated December 8, 2015 by and between the Company and you (the “ Transition Agreement ”), or the General Release Agreement to be entered into by and between the Company and you (the “ Release Agreement ”). The Term shall also end should you die before December 31, 2016. Should the Term end in any of such cases, the Company will have no obligation to pay you any remaining portion of the consulting fee, other than a pro-rated payment for the month in which your Services end, and will have no obligation to pay you reimbursements for COBRA premiums, other than any premiums for the month in which your Services end. The Term may also be terminated by the Company for any reason. In the event the Company terminates the Term other than due to a material breach by you of any of your obligations to the Company under this Consulting Agreement, the Transition Agreement, or the Release Agreement, the Company will continue to pay you the consulting fee and will continue to pay you any reimbursement for COBRA premiums, for the remainder of the Term.

In consideration for rendering the Services for any month during the Term, the Company will pay you a consulting fee of $8,333.33 for such month. In no event will the aggregate consulting fee paid to you pursuant to this Consulting Agreement exceed $100,000. In addition, if you make a timely election for COBRA coverage, the Company will pay your COBRA premiums or will reimburse you for such premiums to continue healthcare coverage under the Company’s group medical insurance plans for you and your eligible dependents for a period commencing on the Effective Date and ending on the earlier to occur of (i) the date that you and/or your eligible dependents become eligible for substantially equivalent (or better) healthcare coverage from any subsequent employer of you, (ii) the last day you provide consulting services to the Company, or (ii) December 31, 2016. The consulting fee and COBRA reimbursements for any particular calendar month shall be paid to you promptly after the end of that calendar month.

Except as otherwise expressly provided above, you will not be entitled to any compensation for your services and agreements as set forth herein. Without limiting the generality of the preceding sentence, you will not be entitled to participate in, and you hereby waive (as to your services under this Consulting Agreement) participation in, the benefit and other compensation plans and programs of the Company and its affiliates.

In performing the Services, you will operate at all times as an independent contractor of the Company on a “fee for service” basis. Without limiting the generality of the foregoing, you do not have the authority to execute contracts for or on behalf of, make commitments for or on behalf of, or otherwise bind to any obligation whatsoever the Company or any of its affiliates, and nothing in this Consulting Agreement shall be construed as creating an employer/employee relationship, partnership, joint venture, or other business group or concerted action.

You will be solely responsible for any and all income, unemployment, social security, worker’s compensation, FICA or any other taxes or amounts payable with respect to the compensation paid or provided to you pursuant to this Consulting Agreement. You are not entitled to worker’s compensation benefits or unemployment compensation benefits provided by the Company. The Company will not contribute to a state unemployment fund for you.

Section 6 of your Employment Agreement with the Company entered into as of April 18, 2013 is incorporated herein by this reference. You agree to comply with such provisions and acknowledge that such provisions apply to any information provided to you in the course of your performing the Services.

This Consulting Agreement may not be amended or modified other than by a written agreement executed by you and by the Chief Executive Officer of the Company. This Consulting Agreement is personal to you and shall not, without the prior written consent of the Company, be assignable by you.

This Consulting Agreement contains the entire agreement and final understanding concerning your provision of the Services and the other subject matters addressed herein between the parties, and supersedes and replaces all prior negotiations and all agreements proposed or otherwise, whether written or oral, concerning the subject matters hereof. Any representation, promise or agreement

not specifically included in this Consulting Agreement regarding any such matter shall not be binding upon or enforceable against either party. This Consulting Agreement constitutes an integrated agreement.

This Consulting Agreement shall, without regard to principles of conflict of laws, be governed by the laws of the State of California.

This Consulting Agreement may be executed in counterparts, and each counterpart, when executed, shall have the efficacy of a signed original. Photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

This Consulting Agreement shall be construed and interpreted so as to avoid any tax, penalty or interest under Section 409A of the Internal Revenue Code.

Please sign and date the enclosed duplicate where indicated to acknowledge that you have read this letter and agree to comply with its terms, and return the signed copy to me.

Very truly yours,

/s/ Edward J. Carpenter

Name: Edward J. Carpenter

Title: Chairman of the Board

ACCEPTED AND AGREED:

By: /s/ Steven K. Buster

Steven K. Buster

Exhibit 99.1

949 South Coast Drive, Third Floor

Costa Mesa, CA 92626



FOR IMMEDIATE RELEASE	Member FDIC

For more information contact	Equal Housing Lender
Robert Sjogren, Chief Operating Officer, 714-438-2500

Thomas M. Vertin Named President and Chief Executive Officer of Pacific Mercantile Bancorp

Steven K. Buster to retire from President and CEO position on December 31, 2015

COSTA MESA, Calif., December 10, 2015 (Globenewswire) - Pacific Mercantile Bancorp (NASDAQ: PMBC) (the “Company”), the holding company of Pacific Mercantile Bank (the “Bank”), today announced the appointment of Thomas M. Vertin as President and Chief Executive Officer of the Company and the Bank, effective January 1, 2016. Mr. Vertin, currently President of Commercial Banking for Pacific Mercantile Bank, will succeed Steven K. Buster, who has announced his retirement from the Company effective December 31, 2015.

“Since joining Pacific Mercantile Bank in 2012, Tom has demonstrated the dedication and skills necessary to be a successful CEO,” said Edward J. Carpenter, Chairman of the Board of Directors of Pacific Mercantile Bancorp. “During his time here, he was instrumental in transitioning Pacific Mercantile to a commercial banking, relationship-based model and growing our customer base of small- and middle market businesses. Tom’s 15 years in senior management roles for Silicon Valley Bank have prepared him well to lead Pacific Mercantile and we look forward to working with him to enhance the value of our franchise.

“We are greatly appreciative of Steve Buster’s service to Pacific Mercantile Bank. Steve took over as CEO during a very challenging time for the Company. Under his leadership, the condition of the Bank has improved dramatically as evidenced by the resolution of a large volume of problem assets, the return to profitability, the termination of legacy bank regulatory enforcement actions and the development of a long-term strategic focus that has positioned the Bank for future growth and profitability. We wish Steve well in his future endeavors,” said Mr. Carpenter.

“I look forward to leading the Pacific Mercantile organization and continuing to grow as a commercial banking force in Southern California,” said Mr. Vertin. “Over the past three years, we have developed the product set we need to compete as a commercial bank, recruited experienced, proven commercial bankers, and instilled a consultative-approach that delivers a superior value proposition to small- and middle-market businesses. We now have an excellent foundation in place to deliver a higher level of profitability. We will continue to make adjustments to our operating model to shift personnel to loan and deposit production positions, which we believe will enhance overall efficiencies and drive improved balance sheet growth. I am confident that our performance in the coming years will create significant value for our shareholders.”

“I am very proud of the work we have done at Pacific Mercantile over the past three years and I have enjoyed the opportunity to lead an organization with so many great people,” said Mr. Buster. “I’ve worked very closely with Tom Vertin and I am very impressed with his passion, expertise and strategic thinking. I’m certain that Tom will do an outstanding job as CEO.”

Mr. Vertin, 62, joined Pacific Mercantile Bank as President of the Commercial Banking Division in September 2012. Mr. Vertin’s 25 years of management experience includes executive-in-residence at Carpenter and Company and 18 years with Silicon Valley Bank (SVB), a wholly-owned subsidiary of Silicon Valley Financial Group (SIVB). He began his banking career at Bank of America in Northern California.

During his tenure with SVB, Mr. Vertin served as Chief Operating Officer, Head of the California Division and Head of Global Sales and Service. He also led three turn-arounds: two regional offices and the nation-wide Asset Based Lending group. During his tenure at SVB, his responsibilities included sales and portfolio risk management, client service operations, and product advisory (e.g., investments, cash management, and international trade services).

Earlier in his banking career, Mr. Vertin taught finance for eight years at San Jose State University. Prior to his career in banking, he served for three years with the World Health Organization in Geneva, Switzerland.

Exhibit 99.1

Mr. Vertin served on the board of governors of San Francisco’s Commonwealth Club of California, the nation’s oldest and largest public affairs forum. He was a board member of the Churchill Club, Silicon Valley’s business and technology forum and has served on numerous non-profit and philanthropic boards.

Mr. Vertin earned a bachelor’s degree in political science and psychology and a master’s degree in public administration from San Jose State University.

About Pacific Mercantile Bancorp

Pacific Mercantile Bancorp is the parent holding company of Pacific Mercantile Bank, which opened for business March 1, 1999. The Bank, which is an FDIC insured, California state-chartered bank and a member of the Federal Reserve System, provides a wide range of commercial banking services to businesses, business professionals and individual clients through its combination of traditional banking financial centers and comprehensive, sophisticated electronic banking services.

The Bank operates a total of seven financial centers in Southern California, four in Orange County and one each in Los Angeles and San Diego County, and another in San Bernardino County. The four Orange County financial centers are located in the cities of Newport Beach, Costa Mesa, La Habra and San Juan Capistrano. Our Los Angeles County financial center is located in the city of Beverly Hills. Our San Diego County financial center is located in La Jolla and our San Bernardino County financial center is located in the city of Ontario. In addition, the Bank offers comprehensive online banking services accessible at www.pmbank.com.

Forward-Looking Information

This news release contains statements regarding our expectations, beliefs and views about our plans to continue to build our loan portfolio and supporting systems and processes. These statements, which constitute "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." These forward-looking statements are subject to numerous risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements because such statements are inherently subject to significant assumptions, risks and uncertainties, many of which are difficult to predict and are generally beyond our control. These risks and uncertainties include, but are not limited to, the following: the impact of interest rates and other external economic factors and competition among financial services providers. We undertake no obligation (and expressly disclaim any such obligation) to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. For additional information concerning factors that could cause actual conditions, events or results to materially differ from those described in the forward-looking statements, please refer to the factors set forth under the headings "Risk Factors" in our most recent Form 10-K and 10-Q reports and to our most recent Form 8-K reports, which are available online at www.sec.gov . No assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on our results of operations or financial condition.

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