8-K

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): January 3, 2019

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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)

 Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

On January 3, 2019 (the “Effective Date”), Pacific Mercantile Bank (the “Bank”), the wholly owned banking subsidiary of Pacific Mercantile Bancorp, entered into an Amended and Restated Employment Agreement with Thomas J. Inserra (the “Employment Agreement”), pursuant to which Mr. Inserra will continue to serve as the Executive Vice President, Chief Credit Officer and Chief Risk Officer of the Bank, for a period of three years, commencing as of the Effective Date. The Employment Agreement amends and restates Mr. Inserra's employment agreement with the Bank dated as of May 31, 2016.

The Employment Agreement has a three year term, after which it automatically renews for one additional year unless either party notifies the other that it elects not to renew the agreement. Set forth below is a brief summary of the compensation to be paid and the benefits to be received by Mr. Inserra pursuant to the Employment Agreement. This summary is not intended to be complete and is qualified in its entirety by reference to the Employment Agreement, a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K.

Base Annual Salary. Mr. Inserra’s base salary is $330,000 per year and is subject to annual review and increase by the Compensation Committee.

Bonus or Incentive Compensation. Mr. Inserra will be eligible to receive annual incentive cash awards based upon achievement of performance criteria set forth in a management incentive compensation plan to be established and approved by the Compensation Committee. Mr. Inserra will also be eligible to participate in an annual incentive plan upon the terms and subject to the conditions approved by the Compensation Committee.

Automobile Allowance. Mr. Inserra will receive an automobile allowance of $950 per month to cover the costs to him of using his own automobile on Bank business.

Other Benefits. Mr. Inserra is entitled to participate in all of the health and other benefit plans made available to executive employees from time to time, and will be entitled to four weeks of annual vacation.

Severance Compensation.

Termination without Cause or for Good Reason. If Mr. Inserra’s employment is terminated without Cause or Mr. Inserra terminates his employment for Good Reason (in each case as defined in the Employment Agreement), Mr. Inserra will be entitled to severance compensation consisting of a lump sum payment in an amount equal to one year of his then annual base salary.

Termination due to Disability. If Mr. Inserra’s employment is terminated due to his disability, he would become entitled to receive his salary and a continuation of his medical and health care benefits for a period of six months following such termination of employment.

Termination due to Death. In the event of a termination of employment due to Mr. Inserra’s death, his beneficiaries will be paid all salary and unused vacation accrued to, but unpaid as of, the date of his death.

Termination for Cause or Due to Expiration of Employment Agreement. If Mr. Inserra’s employment is terminated for Cause (as defined in the Employment Agreement) or due to the expiration of the term of the Employment Agreement, he will not be entitled to any severance compensation.

Item  9.01 Financial Statements and Exhibits

(d) Exhibits.

The following exhibits are being filed as part of this report:

Exhibit No.	Description of Exhibit
10.1	Amended and Restated Employment Agreement dated January 3, 2019, between Pacific Mercantile Bank and Thomas J. Inserra.

SIGNATURE

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
Date: January 3, 2019	By:	/s/ THOMAS M. VERTIN
		Thomas M. Vertin, President and Chief Executive Officer

EX-10.1

AMENDED AND RESTATEDEMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") "Effective is madeandenteredinto asofthis 3rd day ofJanuary,2019(the Date"), "Executive"), by andamongThomasJ. Inserra(the on theonehand,andPacificMercantileBank, "Bank"), a California banking corporation (the on the other hand (Executive and the Bank collectively,the "Parties"). RECITALS WHEREAS, Pacific MercantileBancorp("PMB") is a bankholding companyregistered underthe Bank Holding CompanyAct of 1956, as amended,subjectto the primary supervision andregulationofthe BoardofGovernorsofthe FederalReserveSystem("FRB"). WHEREAS, the Bank is a California charteredcommercial bank and wholly-owned subsidiaryofPMB, subjectto theprimary supervisionandregulationoftheCalifomiaDepartment ofBusinessOversight("CDBO") andthe FRB by virtue ofits membershipin the FederalReserve Bank of SanFrancisco. WHEREAS, Executive is currently employed by the Bank pursuant to that certain "Prior EmploymentAgreementdatedasofMay 31, 2016 (the Agreement");and WHEREAS,the Bankdesiresto continueto retaintheservicesofExecutiveandExecutive desiresto continue to provide such servicesto the Bank, upon the terms and subject to the conditions set forth in this Agreement,which amendsand restatesthe Prior Agreementin its entirety. NOW, THEREFORE,basedon the foregoingpremisesandin considerationofthemutual covenantsandrepresentationscontainedherein,the Partiesheretoagreeas follows: "Em^loyer") 1. Tenn. The Bank (the hereby employs Executive, and Executive herebyacceptsemploymentwith Employer,underthe termsofthis Agreement. The term ofthis "Initial Agreementshall be for a period of three (3) years (the Term") commencingas of the Effective Date,subjectto the terminationprovisionsofparagraph4. Theterm ofthis Agreement shall be automaticallyextendedfor one (1) additional year, unlesseither party gives the other written noticeofnon-renewalnot lessthansix (6) monthsbeforetheexpirationoftheInitial Term. Theterm ofthis Agreement,asin effect from time to time in accordancevvith the foregoing,shall "Term". be refen-edto herein as the The period of time betvveenthe Effective Date and the termination of the Executive's employment hereundershall be referred to herein as the "EmploymentPeriod." 2. Employment. (a) Positionsand Reporting. Executive shall be employedas the Executive Vice President,ChiefCreditOfficer andChiefRiskOfficer ofthe Bank. During theEmployment Period,Executiveshall reportdirectly to the ChiefExecutiveOfficer oftheBank. SN'IRM:485961475.3 -1-

(b) Authority andDuties. Executiveshallexercisesuchauthority,performsuch executiveduties and functions and dischargesuch responsibilitiesas are reasonablyassociated vvith Executive'sposition as Executive Vice President,Chief Credit Officer and Chief Risk Officer, commensuratewith the authority vestedin Executivepursuantto this Agreementand consistentwith the bylaws ofthe Bank and ofPMB. During the EmploymentPeriod,Executive shalldevotehis full businesstime, skill andeffortsto thebusinessofEmployerandits subsidiaries and shall not during the EmploymentPeriodengagein any otherbusinessactivities, duties,or pursuitswhatsoever,or directly or indirectly renderany servicesof a business,commercial,or natureto any other or organization,whetherfor compensationor otherwise, professional person "Board"). without the prior written consent of the Board of Directors of Employer (the Notvvithstandingtheforegoing,Executivemay(i) servein anycapacitywith anycivic, educational or charitableorganization,or any tradeassociation,without seekingor obtainingapprovalby the Board, provided such activities and service do not materially interfere or conflict with the performanceofhis dutieshereunderand(ii) with theapprovalofthe Boardserveon theboardsof directorsof other corporationsthat are not involved in commercialbanking or similar business activities;provided,however,Executiveshall not directly or indirectly acquire,hold, or retainany beneficialinterestin anybusinesscompetingwith or similar in natureto the businessofEmployer exceptpassiveshareholderinvestmentsin otherfinancial institutionsandtheir respectiveaffiliates which do not exceedthreepercent(3%) of the outstandingvoting securitiesin the aggregatein anysinglefinancial institution andits affiliates on a consolidatedbasis. (c) Executiveherebyrepresentsand agreesthat the servicesto be performed hereunderare of a special,unique, unusual,extraordinary,and intellectual characterthat gives them a peculiar value, the loss of which cannotbe reasonablyor adequatelycompensatedin damagesin an action at lavv. Executivethereforeexpresslyagreesthat Employer,in additionto any otherrights or remediesthat Employermay possess,shall be entitledto injunctive and other equitablereliefto preventor remedya breachofthis Agreementby Executive. 3. CompensationandBenefits. (a) Salary. During the Term Executiveshall receivean annualbasesalaryof "Base $330,000payablein equalsemimonthlypayments(the Salary"). SuchBaseSalaryshall be subjectto review in the eleventh(11th) monthafterthe EffectiveDate,andat eachanniversaryof the Effective Date thereafter,or during Executive'snormal officer review period, for possible adjustmentby the ChiefExecutiveOfficer in concurrencevvith the CompensationCommitteeof theBankbasedon variousfactorsincluding,but not limited to, marketconditions,theconsolidated resultsofoperationsoftheBankandPMB andtheperformanceofExecutive,but shall in no event be decreasedfrom the level set forth aboveduring the Term. All paymentsof BaseSalaryshall be subjectto applicableadjustmentsfor withholding taxes,pro-rationsfor any partial payment periodsand suchotherapplicablepayroll proceduresofthe Bank. (b) SalaryContinuationDuring Disability. IfExecutivefor any reason(except asexpresslyprovidedbelow) becomestemporarilyor permanentlydisabledso thathe is unableto perform the duties under this Agreement,Executive shall be paid the Base Salary otherwise payableto Executivepursuantto subparagraph3(a) ofthis Agreement,reducedby the amounts receivedby Executivefrom statedisability insurance,or worker'scompensationor othersimilar SMRH:485961475.3 -2-

insurancebenefitsthroughpoliciesprovidedby Employer,for a ofsix (6) monthsfrom the "disability"period dateofdisability. For purposesofthis paragraph3(b), shall be definedasprovidedin the Employer'sdisability insuranceprogram. (c) CashIncentivePayments.Executiveshall be eligible to participatein the ManagementAnnual IncentivePlan. Executive'sbonus,ifany, shall be paid in onelump sumto Executiveat suchtime as otherexecutivebonusesarepaid. The ChiefExecutiveOfficer retains the discretionto determinevvhethera pro-ratabonusis appropriateif the Executiveis terminated or leavesthe employoftheBankprior to the annualdeterminationofbonuses.All cashincentive paymentsshall be subjectto applicableadjustmentsfor applicablewithholding andpayroll taxes. Notwithstandingany provision of any incentive plan or arrangement,no right of continued employmentor anymodificationofthe"at will" natureofExecutive'semploymentwith Employer shall be confen-eduponExecutivethereunderor resulttherefrom. (d) Insurance Benefits. During the Employment Period, Executive shall receive such group life, disability, and health (including medical, dental, vision and hospitalization),accidentand disability insurancecoverageand other benefitswhich Employer extends,as a matterof policy, to all of its executiveemployees,exceptas otherwiseprovided herein,andshall be entitledto participatein all benefitandotherincentiveplansofthe Employer, on the samebasisasotherlike employeesofEmployer. (e) Vacation. Executiveshall be entitledto four (4) weeksof annualvacation during the EmploymentPeriodat his thenexistingrate of BaseSalary,which shall be scheduled in Executive'sdiscretion, subject to and taking into account applicable banking laws and regulationsand businessneeds. Vacationwill accruein accordancewith the Bank'spersonnel policies. (f) Business Expenses. During the Employment Period, Employer shall promptly reimbursethe Executivefor all documentedordinaryand necessarybusinessexpenses incurredby Executivein theperformanceofhis dutiesunderthis Agreement.Executiveshall also be reimbursedfor reasonableexpensesincurred in activities associatedwith promoting the businessof Employer,including expensesfor entertainment,travel, conventions,andeducational programs. All such expensesdescribedabove will be subject to compliancewith applicable policiesof Employer. All suchreimbursementsshall be madeuponpresentationandapprovalof receipts,invoicesor otherappropriateevidenceof suchexpensein accordancewith the policies Employerin effectfrom time to time. (g) Professional License Expenses. During the Employment Period, Employer shall reimbursethe Executive for all documentedordinary and necessaryexpenses incurred by Executive in maintaining professionalbusinesslicensesand certificationsthat he possessesasofthe dateofthis Agreement. All suchexpensesdescribedabovewill be subjectto compliancewith applicablepolicies of Employer. All suchreimbursementsshall be madeupon presentationand approvalof receipts,invoicesor otherappropriateevidenceof suchexpensein accordancevvith the policies Employerin effect from time to time. (h) Car Allovvance. The Bank shall provide the Executive with a monthly automobileallowanceof $950.00per monthduring the EmploymentPeriod. Executiveshall (A) SN'Dy4:485961475.3 -j-

obtain and maintain public liability insuranceand property damageinsurancepolicies with insurer(s)acceptableto Employerandwith suchcoveragein suchamountsasmay be reasonably acceptableto Employer,and(B) providecopiesof suchpolicies,endorsementsor otherevidence of insuranceacceptableto Employer. Any amountspaid by Executive for excessinsurance coveragerequiredby Employershall be reimbursed. (i) Incentive Compensation. Executive shall have the opportunity to participatein an annualincentiveplan uponthe termsandsubjectto the conditionsapprovedby theBoardofDirectors(or duly authorizedcommitteethereof)ofPMB. Any suchannualincentive plan may be amended,suspendedor terminated,in whole or in part, by the BoardofDirectors(or duly authorizedcommitteethereof)of PMB in its solediscretion. 4. Terminationof Employment. (a) Terminationfor Cause. The Board of Bank may terminateExecutive's "Cause" "Cause." employment hereunderfor or without For purposesof this Agreement "Cause" terminationfor shall mean(i) convictionof a crime directly relatedto his employment hereunder, (ii) conviction of a crime involving moral turpitude, (iii) willful and gross mismanagementof the businessand affairs of Employer,(iv) willful and intentionalviolation of any stateor federalbankingor securitieslaws, or of the bylaws, rules, policies or resolutionsof Bank, or therulesor regulationsofor anyfinal orderissuedby the FRB, the CDBO, or theFederal "FDIC"), DepositInsuranceCorporation(the (v) any violation ofthe Employer'spolicy against harassment,equal employment opportunity policy, drug and alcohol policy and/or the confidentiality agreementthat Employeeshall executeat the commencementof his employment and(vi) breachofanymaterialprovisionofthis Agreement. For puqiosesofthis Agreement,no "willful" act, or the failure to act, on Executive'spart shall be considered unlessdone,or omitted to be done,not in good faith and without reasonablebeliefthatthe actionor omissionwas in the best interestsof Employer. Executiveshall not be deemedto have beenterminatedfor Cause unlessand until there shall have beendeliveredto him a notice of termination. In the event employmentof Executiveis terminatedpursuantto this subparagraph4(a), Employershall have no further liability to Executiveotherthan for compensationaccruedand for reimbursementof businessexpensesincurredthroughthe dateof terminationbut not yet paid. Terminationunder this subparagraph4(a)shallnotprejudiceanyremedythattheEmployermayhaveat law, in equity, or underthis Agreement. (b) Terminationby EmployerWithout Causeor by Executivefor GoodReason. "Cause" Employer may terminate the employment of Executive vvithout (as defined in subparagraph4(a)) at any time during the Employment Period by giving written notice to Executivespecifyingthereinthe effective dateof termination. Executiveshall havethe right at anytime to terminatehis employmentwith theBankfor anyreasonor for no reason.For purposes of this Agreement, and subject to Employer's opportunity to cure as provided in Section4(c) hereof,Executiveshall have"GoodReason"to terminatehis employmenthereunder if suchterminationshall be the resultof: (i) a material diminution during the Employment Period in the Executive'stitle, duties or responsibilitiesas set forth in Section2 hereofvvithout Executive's consent; SMRM:4S5961475.3 -4-

(ii) a material breachby Employer of the compensationand benefits provisionssetforth in Section3 hereof; (iii) a material breach by Employer of any material terms of this Agreement;or (iv) the relocationof Executive'sprincipal placeof employmentto any locationmorethan50 miles from the Bank'sheadquartersat the Effective Date. (c) NoticeandOpportunityto Cure. Notvvithstandingthe foregoing,it shall be aconditionprecedentto Employer'sright to terminatethis Agreementundersubparagraph4(a)(vi) "Good andExecutive'sright to terminatehis employmentfor Reason"that (1) the party alleging a breachshall first havegiven the otherparty written noticestatingwith specificity the reasonfor the termination("breach")and (2) ifsuch breachis susceptibleofcureor remedy,a period of30 daysfrom and afterthe giving ofsuchnoticeto curethe breach. Ifthe breachcannotreasonably be cured or remediedvvithin 30 days, the period for remedyor cure shall be extendedfor a reasonabletime (not to exceed30 days),providedthe party againstwhom a breachis allegedhas madeandcontinuesto makea diligent effort to effect suchremedyor cure. (d) TerminationUpon Death or PermanentDisability. This Agreementshall "permanent terminateautomaticallyupon: (i) the deathof Executive,and (ii) the disability" of Executiveas suchterm is defined in the disability insuranceprovided by Employer, or if such insuranceis not providedby Employer,the term shall meanthatExecutivehasbeendeemedby a medical careproviderto indefinitely be unableto perform the essentialfunctionsofExecutive's position with or without accommodation.If the EmploymentPeriodis terminatedby reasonof thepermanentdisability oftheExecutive,Employershall give 30-days'advancewritten noticeto thateffectto the Executiveor his representative.EmployerandEmployeeshall comply vvith any obligationstheymayrespectivelyhave,understateor federallaw, to interactregardingreasonable accommodations. 5. Consequencesof Termination. The following are the benefitsto vvhich Executive is entitleduponterminationofemploymentin all positionsvvith Employer,andsuchpaymentsand benefitsshall be the exclusivepaymentsand benefitsto vvhich Executiveis entitled upon such termination. Exceptin the caseof terminationofemploymentby Employerfor Cause,or dueto death,thepost-terminationpayments(otherthanthoserequiredby law) andbenefitsshall only be provided if the Executive first enters into a form of general releaseagreementreasonably satisfactoryto EmployerreleasingEmployerfrom anyandall claims,knownandunknown,related to the Executive'semploymentvvith the Bank. (a) TerminationWithoutCauseor for GoodReason.In theeventoftermination "Cause" ofExecutive'semployment(i) by Employerwithout (otherthanupondeathor permanent "Good disability), or (ii) by Executivefor Reason",Executiveshall be entitled to the following severancepay: (i) SeverancePay- a lump sumamountequalto tvvelve (12) monthsof theExecutive'sannualBaseSalary. This lump sumpaymentshall be paid no laterthanthirty (30) daysafterthe final day ofExecutive'semploymentwith Employer. SMRH:485961475.3 -5-

(b) TerminationUpon Disability. In the eventof terminationofExecutive's employmenthereunderby Employeron accountof permanentdisability, Employershall pay to Executivethe accruedBaseSalaryand accruedand unusedvacationeamedthroughthe dateof disability. Suchpaymentshall be madeno laterthansixty (60) daysafterthe dateofdisability. (c) TeiTnination Upon Death. In the event of termination of Executive's employmenthereunderon account of Executive'sdeath, Employer shall pay to Executive's beneficiaryor beneficiariesor his estate,asthe casemay be, theaccruedBaseSalaryandaccrued andunusedvacationeamedthroughthe dateof death. Suchpaymentshall be madeno laterthan sixty (60) daysafterthe dateofdeath. In addition,Executive'sbeneficiary(ies)or his estateshall be entitled to the paymentof benefitspursuantto any life insurancepolicy of Executive, as providedfor in Section3(d) above. Executive'sbeneficiaryor estateshallnot berequiredto remit to Employerany paymentsreceivedpursuantto any life insurancepolicy purchasedpursuantto Section3(d) above. (d) Termination for Causeor Due to End of the Term. In the event the employmentof Executiveis terminatedby Employerfor Cause,no severancepaymentor benefit shall be provided. In the event the employmentof Executiveis terminatedas a result of the expirationoftheTerm, Executiveshall be entitledto no severancepaymentor benefitofanykind notwithstandinganyprovisionto thecontraryin the Employer'semployeemanualor policiesthen in effect, except as to matters such as coverageunder The ConsolidatedOmnibus Budget ReconciliationAct of 1985 ("COBRA") andunusedvacationrequiredby law withoutreferenceto suchmanualor policies. (e) Accrued Rights. Notwithstanding the foregoing provisions of this Section5, in the eventof terminationofExecutive'semploymenthereunderfor any reasonor for no reason,Executiveshall beentitledto paymentofanyunpaidportionofhis BaseSalarythrough the effective date of termination,paymentof any unreimbursedexpensesincurred pursuantto Sections3(f) or 3(g)above,andpaymentofany accruedbut unpaidbenefitssolely in accordance with thetermsofany incentivebonusor employeebenefitplan or programofEmployer. (f) Non-assignability.NeitherExecutivenor any otherpersonor entity acting on his behalfor as his representativeshall haveany povveror right to transfer,assign,anticipate, hypothecate,mortgage,commute,modify, or othervviseencumberin advanceany of the rights or benefitsofExecutiveunderthis Section5, nor shall any of said rights or benefitsbe subjectto seizurefor the paymentof any debts,judgments,alimony or separatemaintenance,owed by Executiveor any other personor entity, or be transferableby operationof law in the event of bankruptcy, insolvency or othervvise. The terms of this Section 5(f) shall not affect the interpretationofany otherprovisionofthis Agreement. (g) Regulatory Restrictions. Notwithstanding anything to the contrary containedin this Agreement: (i) If Executive is removed and/or permanently prohibited from participating in the conductof Employer'saffairs by an order issuedunder Section 8(e)(4) or 8(g)(l) ofthe FederalDeposit InsuranceAct ("FDIA") (12 U.S.C. 1818(e)(4)and (g)(l)), all obligationsof Employer underthis Agreementshall terminate,as ofthe effective date of such SMRI-I:485961475.3 -6-

order, exceptfor the paymentof BaseSalarydue and owing on the effectivedateof said order, reimbursementof businessexpensesincurred as of the effective date of terminationand such mattersrequiredby law. (ii) If Executive is suspendedand/or temporarily prohibited from participating in the conductof Employer'saffairs by a notice servedunder Section 8(e)(3) or 8(g)(l) ofthe FDIA (12 U.S.C. 1818(e)(3)and (g)(l)), all obligationsof Employer underthis Agreementshall be suspendedasofthedateofservice,unlessstayedby appropriateproceedings. If the chargesin the notice are dismissed,Employer shall (i) pay Executiveall or part of the compensationvvithheld while its contractobligationswere suspendedand (ii) reinstate(in whole or in part) any of its obligationswhich weresuspended. (iii) If Bank is in default(asdefinedin Section3(x)(l) oftheFDIA), all obligationsunderthis Agreementshall terminateasofthe dateofdefault,but the vestedrights of thepartiesshall not be affected. (iv) All obligationsunderthis Agreementshall be terminated,exceptto the extenta determinationis madethat continuationofthecontractis necessaryfor the continued "Director"), operationof Employer(i) by the directorof the FDIC or his or her designee(the at thetime theFDIC entersinto anagreementto provideassistanceto or on behalfofEmployerunder the authority containedin 13(c) of the FDIA; or (ii) by the Director, at the time the Director approvesa supervisorymergerto resolveproblemsrelatedto operationof Employer vvhen the Employeris determinedby the Directorto be in an unsafeandunsoundcondition. Any rights of the Executivethathavealreadyvested,hovvever,shall not be affectedby suchaction. (v) No paymentsshallbemadepursuantto this paragraph5 or anyother provision herein in violation of the requirementsof Section 18(k) of the FDIA (12 U.S.C. §1828(k)). (h) IRC Section 280G. In no event shall the payment(s)describedin this paragraph5 exceedthe amountpermittedby Section280GoftheIntemalRevenueCodeof 1986, asamendedf'Section280G"). Therefore,ifthe aggregatepresentvalue(determinedasofthedate ofthechangeofcontrol in accordancevvith theprovisionsof Section280G)ofboththe severance paymentandall otherpaymentsto Executivein the natureof compensationvvhich are contingent on a changein ownershipor effectivecontrolofBankor PMB or in the ownershipofa substantial "Aggregate '"parachute portion of the assetsof the Bank (the Severance")vvould result in a asdefinedunderSection280G,thenthe AggregateSeveranceshall not be greaterthan payment," "base "base an amountequalto 2.99 multiplied by Executive's amount"for the period," as those terms are defined under Section280G. In the eventthe AggregateSeveranceis requiredto be reducedpursuantto this subparagraph5(h), the lastpaymentsin time shall be reducedfirst. (i) Conditionsto SeveranceBenefits. The Bank shall have the right to seek repaymentof the severancepaymentsandbenefitsor to terminatepaymentsor benefitsprovided by this paragraph5 (i) in theeventthattheExecutivefails to honor,in accordancewith theirterms, the provisionsofparagraphs6 or 9 hereofor(ii) to the extentsuchpaymentsor benefitsvvould violate Section18(k) ofthe FDIA (12 U.S.C. §1828(k)). SN'1RH:485961475.3 -7-

6. Confidentialitv. Executive agrees that he will not at any time during the EmploymentPeriodor atanytime thereafterfor anyreason,in anyfashion,form or manner,except as requiredby law to comply vvith legal process,eitherdirectly or indirectly, divulge, discloseor communicateto anyperson,firm, corporationor otherbusinessentity, in anymannerwhatsoever, any financial information or trade or businesssecretsof Employer, its subsidiariesor affiliates including,without limiting the generalityoftheforegoing,thetechniques,methodsor systemsof its operationor management,any information regardingits financial matters,customerlists, computersoftware,anyofits customerslists, governmentalrelationsstrategiesandmethodologies, customercontacts,underwriting methodology, loan program configuration and qualification strategies,marketingstrategiesand its mannerof operation,its plansor othermaterial "Busmess"). proposals, data(the Theprovisionsofthis Section6 shall not apply to (i) informationdisclosed in the performanceofExecutive'sdutiesto Employerbasedon his good faith beliefthatsucha disclosureis in thebestinterestsofEmployer;(ii) informationthatis, atthetime ofthedisclosure, public knowledge;(iii) infoiTnation disseminatedby Employer to third parties in the ordinary courseofbusiness;(iv) informationlawfully receivedby Executivefrom a third party who, based upon inquiry by Executive,is not boundby a confidentialrelationshipto Employeror otherwise improperly receivedthe information; or (v) informationdisclosedundera requirementof law or asdirectedby applicablelegalauthorityhavingjurisdictionoverExecutive. In theeventExecutive is requiredby lavv to disclosesuchinformationdescribedabove,Executivewill provideEmployer and their counselvvith immediatenotice of such requestso that they may considerseekinga protective order. Notwithstandingthe foregoing, Executive may disclose such information concerningthe businessor operationsof Employerand its subsidiariesand affiliates as may be required by the FRB, CDBO, FDIC or other regulatory agencyhaving jurisdiction over the operationsof Employerin connectionwith an examinationof Bank or PMB or otherproceeding conductedby suchregulatoryagency. Executive agreesthat all written, printed or electronicmaterial, notebooksand records including, without limitation, computerdisks,usedand/ordevelopedby Executivefor Employer during the Term ofthis Agreement,otherthanExecutive'spersonaladdresslists, telephonelists, notesand diaries, are solely the property of Employer, and that Executivehas no right, title or interest therein. Upon termination of Executive's employment, Executive or Executive's representativeshall promptly deliver possessionof all such materials (including any copies thereof)to the Bank. Notwithstandingany otherprovision in this Agreement,Executiveshall not be held liable for a disclosureof Employer'strade secret(s)that is made either (i) in confidenceeither to a governmentofficial, either directly or indirectly, or to an attorney solely for the purposeof reportingor investigatinga suspectedviolation ofthelaw; or (ii) in a complaintor otherdocument filed in a lawsuit so long asthe filing is madeunderseal. To the extentExecutivefiles a lavvsuit allegingretaliationby the Employerfor reportinga suspectedviolation ofthe lavv, Employeemay disclosethe trade secretto Executive'sattorneyand use the tradesecretinformation in a court proceedingso long as Employeefiles any documentcontainingthe trade secretunder seal and doesnot disclosethetradesecretexceptpursuantto court order. 7. Key-manLife Insurance.Employershall havethe right to obtainandhold a "key- man" life insurancepolicy on the life of Executivevvith the Bank as beneficiaryof the policy. SIVIRFI:485961475.3 -8-

Executiveagreesto provide any infoi-mation requiredfor the issuanceof suchpolicy and submit himselftoany physicalexaminationrequiredfor suchpolicy. 8. UnsecuredGeneralCreditor. NeitherExecutivenor anyotherpersonor entity shall have any legal right or equitablerights interestsor claims in or to any property or assetsof Employerundertheprovisionsofthis Agreement.No assetsofEmployershall be heldunderany trust for the benefitof Executiveor any otherpersonor entity or held in any way as securityfor the fulfilling oftheobligationsofEmployerunderthis Agreement.All ofEmployer'sassetsshall be and remainthe general,unpledged,unrestrictedassetsofEmployer. Employer'sobligations under this Agreementare unfi.inded and unsecuredpromises,and to the extent such promises involve the paymentof money,they arepromisesto pay moneyin the future. Executiveandany personor entity claiming throughhim shall be unsecuredgeneralcreditorswith respectto any rights or benefitshereunder. 9. BusinessProtectionCovenants. (a) CovenantNot to Compete. Executiveagreesthat he will not, during the EmploymentPeriod,voluntarily or involuntarily, directly or indirectly, (i) engagein any banking or financial productsor servicebusiness,loan originationor deposit-takingbusinessor any other businesscompetitivevvith thatoftheBankor its subsidiariesor affiliates("CompetitiveBusiness") vvithin OrangeCounty, Los AngelesCounty, SanDiego Countyand SanBernardinoCounty(the "Market Area"), (ii) directly or indirectly own any interestin (other than lessthanthreepercent (3%) ofanypublicly tradedcompanyor mutualfund), manage,operate,control,be employedby, or provide managementor consultingservicesin any capacityto any firm, coi-poration,or other entity (otherthan Employeror its subsidiariesor affiliates) engagedin any CompetitiveBusiness in the Market Area, or (iii) directly or indirectly solicit or otherwiseintentionally causeany employee,officer, or memberofthe Boardor any ofits subsidiariesor affiliates to engagein any actionprohibitedunder(i) or (ii) ofthis paragraph9(a). (b) InducingEmployeesTo LeaveTheBank;EmploymentofEmployees.Any attempton the part ofthe Executiveto induceothersto leaveEmployer'semploy, or the employ of any of its subsidiariesor affiliates, or any effort by Executiveto interfere with Employer's relationshipwith its other employeesvvould be harmful and damagingto Employer. Executive agreesthat during the EmploymentPeriod and for a period of twelve (12) monthsthereafter, Executivewill not in any vvay, directly or indirectly: (i) induceor attemptto induceany employee ofthe Employeror any of its subsidiariesofaffiliates to quit employmentwith Employeror the relevantsubsidiaryor affiliate; (ii) otherwiseinterferewith or disrupt the relationshipsbetween Employerand its subsidiariesand affiliates and their respectiveemployees;(iii) solicit or recruit any employeeof Employeror any subsidiaryor affiliate or any former employeeof Employeror any subsidiaryor affiliate. (c) NonsolicitationofBusiness. For a period oftwelve (12) monthsfrom the date of termination of employment, Executive vvill not, using Employer's trade secretsor confidential information, divert or attemptto divert from Employer or any of its subsidiariesor affiliates,anybusinessEmployeror a relevantsubsidiaryor affiliate hadenjoyedor solicitedfrom its customers,borrovvers,depositorsor investorsduringthetwelve(12) monthsprior to termination ofhis employment. SN'IRFI:485961475.3 -9-

(d) Bank's Ownership of Inventions. To the extent that Executive has intellectual property rights of any kind in any pre-existing vvorks which are subsequently incorporatedin any work or work productproducedin renderingservicesto Bank, PMB or any their subsidiariesor affiliates, ExecutiveherebygrantsBank a royalty-free, irrevocable,world- wide, perpetualnon-exclusivelicense(with the right to sublicense),to make,havemade,copy, modify, use, sell, license, disclose,publish or othervvisedisseminateor transfer such subject matter. Similarly, Executiveagreesthat all inventions,discoveries,improvements,tradesecrets, original vvorks of authorship,developments,formulae, techniques,processes,and knovv-hovv, whetheror not patentable,andwhetheror not reducedto practice,that are conceived,developed or reducedto practiceduringExecutive'semploymentwith Employer,eitheraloneorjointly with others,ifon Employer'stime, usingEmployer'sfacilities, or relatingto Employershall be ovvned exclusivelyby the Bank, and Executiveherebyassignsto the Bank all ofExecutive'sright, title andinterestthroughoutthe world in all suchintellectualproperty. Executiveagreesthatthe Bank shall be the soleownerof all domesticand foreignpatentsor otherrights pertainingthereto,and further agreesto executeall documentsthat the Bank reasonablydeterminesto be necessaryor convenient for use in applying for, prosecuting, perfecting, or enforcing patents or other intellectual property rights, including the executionof any assignments,patentapplications,or otherdocumentsthattheBankmay reasonablyrequest. This provision is intendedto apply to the extentpermittedby applicablelavv andis expresslylimited by Section2870oftheCaliforniaLabor Code,which is setforth in its entiretyin Exhibit A to this Agreement. By signingthis Agreement, Executiveacknowledgesthat this Paragraphshall constitutevvritten notice of the provisionsof Section2870. (e) Bank'sOvvnershipofCopyrights. Executiveagreesthat all original works of authorshipnot othervvise within the scope of paragraph9(d) above that are conceivedor developedduring Executive'semploymentwith Employer,either aloneorjointly with others,if on Employer'stime, using Employer facilities, or relating to Employer, or its subsidiariesor "vvorks affiliates, are for hire" to the greatestextent permitted by law and shall be ovvned exclusivelyby the Bank, and Executiveherebyassignsto the Bank all ofExecutive'sright, title, andinterestin all suchoriginal works ofauthorship. Executiveagreesthat the Bank shall be the sole owner of all rights pertainingthereto,and further agreesto executeall documentsthat the Bankreasonablydeterminesto be necessaryor convenientfor establishingin the Bank'snamethe copyrightto any suchoriginal vvorks ofauthorship. 10. Resignations.The Executiveagreesthatuponterminationofemployment,for any reason,he will submit his resignationsfrom all offices vvith the Bank and PMB and all of their respectivesubsidiariesandaffiliates. 11. OtherAgreements.ThePartiesfurtheragreethatto the extentofanyinconsistency betvveenthis Agreementand any employeemanualor policy of Employer,that the termsof this Agreementshall supersedethetermsof suchemployeemanualor policy. 12. Notice. For the purposesof this Agreement,notices, demandsand all other communicationsprovided for in this Agreementshall be in vvriting and shall be personally delivered or (unlessothervvisespecified) mailed by United Statescertified or registeredmail, return receiptrequested,postageprepaid,or sentby facsimile,providedthat the facsimile cover SMRM:485961475.3 -10-

sheetcontainsa notationofthedateandtime oftransmission,and shall be deemedreceived:(i) if personallydelivered,uponthe dateofdeliveryto the addressofthepersonto receivesuchnotice, (ii) ifmailed in accordancewith the provisionsofthis Section12, two (2) businessdaysafterthe dateplacedin the United Statesmail, (iii) if mailedotherthan in accordancewith the provisions ofthis Section12 or mailedfrom outsidetheUnited States,uponthedateofdeliveryto theaddress of the personto receivesuchnotice, or (iv) if given by facsimile,when sent. Notices shall be addressedasfollows: IftotheEmployer: Pacific MercantileBank 949 SouthCoastDrive Third Floor CostaMesa,Califomia, 92626 Attn: ChiefExecutiveOfficer Ifto the Executive,to: Mr. ThomasJ. Inserra 30312ChapalaCourt LagunaNiguel,CA 92677 or to suchotherrespectiveaddressesasthePartiesheretoshalldesignateto theotherby like notice, providedthatnoticeofa changeofaddressshall be effectiveonly uponreceiptthereof. 13. Arbitration. Any disputeor controversyarisingunderor in cormectionvvith this Agreement, the inception or termination of the Executive's employment, or any alleged discriminationor tort claim relatedto such employment,including issuesraisedregardingthe Agreement'sformation, inteipretation or breach, shall be settled exclusively by binding arbitration. Theonly exceptionto therequirementofbindingarbitrationshall befor claimsarising underthe National Labor RelationsAct which are broughtbeforethe National Labor Relations Board, claims for medical and disability benefitsunderthe Califomia Workers' Compensation Act, EmploymentDevelopmentDepartmentclaims,or as may otherwisebe requiredby stateor federal law. Hovvever, nothing herein shall prevent the Executive from filing and pursuing proceedingsbeforethe California Departmentof Fair Employmentand Housing, or the United StatesEqual EmploymentOpportunity Commission(althoughif Executivechoosesto pursuea claim follovving the exhaustionofsuchadministrativeremedies,thatclaim would be subjectto the provisionsofthis Agreement).In additionto anyotherrequirementsimposedby law, thearbitrator selectedshall be a retiredCalifomiaSuperiorCourtJudge,or an otherwisequalified individual to vvhom the partiesmutually agree,and shall be subjectto disqualificationon the samegroundsas vvould apply to ajudgeofsuchcourt. All rules ofpleading(including the right ofdemurrer),all rules of evidence,all rights to resolution of the dispute by meansof motions for summary judgmentjudgmenton the pleadings,andjudgmentunderCodeofCivil ProcedureSection631.8 shall apply andbe observed.The arbitratorshall havethe immunity ofajudicialofficer from civil liability when acting in the capacity of an arbitrator, which immunity supplementsany other existing immunity. Likewise, all communicationsduring or in connectionwith the arbitration SMRH:485961475.3 -11-

proceedingsare privileged in accordancewith Cal. Civil Code Section47(b). As reasonably requiredto allow full useand benefitofthis agreement'smodificationsto the Act's procedures, thearbitratorshall extendthetimessetby theAct for the giving ofnoticesandsettingofhearings. Avvards shall includethe arbitrator'swritten reasonedopinion. Resolutionofall disputesshall be basedsolely uponthe lavv governingthe claimsanddefensespleaded,and the arbitratormay not invoke any basis(includingbut not limited to, notionsof'justcause")otherthansuchcontrolling law. By this binding arbitrationprovision,both ExecutiveandEmployergive up their respective right to trial byjury ofany claim onemayhaveagainstthe other. 14. Waiver of Breach. Any vvaiver of any breachof this Agreementshall not be construedto be a continuingvvaiver or consentto any subsequentbreachon the part eitherofthe Executiveor of Employer. No delayor omissionin the exerciseof any power, remedy,or right hereinprovidedor otherwiseavailableto any party shall impair or affect the right of suchparty thereafterto exercisethe same. Any extensionof time or other indulgencegrantedto a party hereundershall not othervvisealteror affectany power,remedyor right of any otherparty, or the obligationsof the party to whom suchextensionor indulgenceis grantedexceptas specifically waived. 15. Non-Assignment;Successors.Neitherparty heretomay assignhis or its rights or delegatehis or its dutiesunderthis Agreementwithout theprior written consentoftheotherparty; provided,hovvever,that: (i) this Agreementshall inure to the benefit of and be binding uponthe successorsandassignsofEmployeruponany saleofall or substantiallyall ofEmployer'sassets, or upon any merger,consolidationor reorganizationof Bank vvith or into any othercoiporation, all as thoughsuchsuccessorsandassignsofthe Bank andtheir respectivesuccessorsandassigns vvere the Bank; and(ii) this Agreementshall inureto the benefitofandbe bindinguponthe heirs, assignsor designeesofExecutiveto the extentofany paymentsdueto themhereunder.As used in this Agreement,theterm "Bank" or "Employer" shall be deemedto referto any suchsuccessor or assignofthe Bank or Employerreferredto in theprecedingsentence. 16. Withholding of Taxes. All paymentsrequiredto be madeby Employer to the Executiveunderthis Agreementshallbesubjectto thewithholdinganddeductionofsuchamounts, if any, relating to tax, and other payroll deductionsas Employer may reasonablydetermineit shouldwithhold and/ordeductpursuantto any applicablelavv or regulation(including, but not limited to, Executive'sportion ofsocial securitypaymentsand incometax withholding) now in effect or vvhich may becomeeffectiveany time during theterm of this Agreement. 17. Section409A. If Executivedetermines,in good faith, that any compensationor benefitsprovidedby this Agreementmayresultin the applicationofSection409A ofthe Internal "Code"), RevenueCodeof 1986, as amended(the Executiveshall provide written noticethereof (describing in reasonabledetail the basis therefor) to Employer, and Employer shall, in consultationwith Executive,modify this Agreementin the leastrestrictivemannernecessaryin order to excludesuch compensationfrom the definition of "deferredcompensation"within the meaningof suchSection409A of the Codeor in orderto comply with the provisionsof Section 409A ofthe Code,otherapplicableprovision(s)ofthe Codeand/orany rules,regulationsor other regulatoryguidanceissuedundersuchstatutoryprovisionsandvvithoutanydiminutionin thevalue ofthe paymentsto Executive. Any paymentsthat, underthe termsofthis Agreement,qualify for SMRH:485961475.3 -12-

the "short-term" defen-al exception under Treasury RegulationsSection 1.409A-l(b)(4), the "separation pay" exceptionunder TreasuryRegulationsSection 1.409A-l(b)(9)(iii) or another exceptionunder Section409A of the Code will be paid underthe applicableexceptionsto the greatestextent possible. Each paymentunder this Agreementshall be treated as a separate paymentfor purposesof Section409A ofthe Code. Anything in this Agreementto the contrary notwithstanding,if at the time of Executive'sseparationfrom service within the meaningof Section409A ofthe Code,Executiveis considereda "specifiedemployee"within the meaningof Section409A(a)(2)(B)(i)oftheCode,andifany paymentthatExecutivebecomesentitledto under this Agreementis considereddeferredcompensationssubjectto interest,penaltiesandadditional tax imposedpursuantto Section409A of the Code as a result of the application of Section 409A(a)(2)(B)(i)of the Code,thenno suchpaymentshall be payableprior to the datethat is the earlierof(i) six monthsandonedayExecutive'sseparationfrom serviceor (ii) Executive'sdeath. In no event shall the date of terminationof Executive'semploymentbe deemedto occur until Executiveexperiencesa "separationfrom service" vvithin the meaningof Section409A of the Code, and notvvithstandinganything containedherein to the contrary, the date on which such separationfrom servicetakesplaceshallbetheDateofTermination.All reimbursementsprovided underthis Agreementshall be providedin accordancevvith the requirementsof Section409A of the Code,including, whereapplicable,the requirementthat (A) the amountof expenseseligible for reimbursementduring one calendaryear vvill not affect the amountof expenseseligible for reimbursementin any othercalendaryear; (B) the reimbursementof an eligible expensevvill be madeno later than the last day of the calendaryear following the calendaryear in which the expenseis incurred;and (C) the right to any reimbursementwill not be subjectto liquidation or exchangefor anotherbenefit. Notwithstandingthe foregoing,Employermakesno representation or covenantto ensurethat the paymentsand benefitsunderthis Agreementare exemptfrom, or compliantwith, Section409A ofthe Code. 18. Indemnification.To thefullest extentpermittedby lavv, regulation,andtheArticles of IncorporationandBylavvs ofBankandPMB, the Bank and/orPMB asappropriateshall pay as andvvhenincurredall expenses,including legal andattorneycosts,incurredby, or shall satisfyas and vvhen enteredor levied ajudgmentor fine renderedor levied against,Executivein an action broughtby a third party againstExecutive(whetheror not the Bankis joinedasa partydefendant) to impose a liability or penalty on Executive for an act allegedto have been committed by Executivewhile an officer oftheBankand/orPMB; provided,however,thatExecutivewasacting in good faith, vvithin what Executive reasonablybelieved to be the scope of Executive's employmentor authorityand for a purposewhich the Executivereasonablybelievedto be in the best interestsof the Bank or the Bank's shareholdersand the best interestsof PMB or PMB's shareholders,andin the caseofacriminal proceeding,thatthe Executivehadno reasonablecause to believe that Executive'sconduct vvas unlavvful. Paymentsauthorized hereunderinclude amountspaid and expensesincurredin settling any suchactionor threatenedaction. All rights hereunderare limited by any applicablestateor Federallavvs. Anything hereinto the contrary notvvithstanding,this Agreementis subjectto the requirementsand limitations set forth in state and federal laws, rules, regulationsor ordersregardingthe indemnificationand prepaymentof legal expenses,including Section 18(k) of the FDIA and Part 359 of the FDIC's Rules and Regulationsor anysuccessorregulationthereto. Further,andto theextentthatthereis anyconflict betvveenstateandfederallavv, federallaw shall supersedeandcontrol. SMRH:485961475.3 -13-

19. Severability. To theextentanyprovisionofthis Agreementor portionthereofshall be invalid or unenforceable,it shall be considereddeletedtherefrom(but only for so long as such provisionor portionthereofshallbe invalid or unenforceable)andthe remainderofsuchprovision andofthis Agreementshall be unaffectedand shall continuein full force andeffectto the fullest extentpermittedby law ifenforcementwould not frustratetheoverall intentoftheParties(assuch intent is manifestedby all provisionsoftheAgreementincluding suchinvalid, void, or otherwise unenforceableportion). 20. Payment. All amountspayableby the Bank to Executiveunderthis Agreement shall bepaidpromptly on the datesrequiredfor suchpaymentin this Agreementwithout noticeor demand. Any salary,benefitsor otheramountspaid or to be paid to Executiveor providedto or in respectof the Executivepursuantto this Agreementshall not be reducedby amountsowing from Executiveto Bank. 21. Expenses.Eachparty shall pay his or its ovvn feesand expensesincurredby him or it in the drafting, reviewandnegotiationofthis Agreement. 22. Authority. Each of the Partiesheretoherebyrepresentsthat each has taken all actionsnecessaryin orderto executeanddeliverthis Agreement. 23. Counterparts.This Agreementmay be executedin oneor morecounterparts,each of which shall be deemedto be an original but all of which togethervvill constituteone and the sameinstrument. 24. GoverningLaw. This Agreementshall be construed,interpretedand enforcedin accordancewith the lavvs of the Stateof California, vvithout giving effect to the choiceof lavv principlesthereof. 25. Entire Agreement;Amendments.This Agreementandwritten agreements,ifany, enteredinto concurrentlyherewithconstitutethe entireagreementby Employer,on the onehand, and Executive on the other hand with respectto the subject matter hereofand mergesand supersedesany and all prior discussions,negotiations,agreementsor understandingsbetween Executive and Employer with respectto the subject matter hereof, whether vvritten or oral, including the Prior Agreement. This Agreementmay be amendedor modified only by a written instrumentexecutedby Executiveand Employer. With regardto suchamendments,alterations, or modifications,facsimile signaturesshall be effective as original signatures.Any amendment, alteration, or modification requiring the signatureof more than one party may be signed in counterparts. 26. FurtherActions. Eachparty agreesto perform any further acts and executeand deliverany furtherdocumentsreasonablynecessaryto carry out theprovisionsofthis Agreement. 27. Time of Essence. Time is of the essenceof each and every term, condition, obligationandprovisionhereof. 28. No Third PartyBeneficiaries.This Agreementandeachandeveryprovisionhereof is for the exclusivebenefitofthe Partiesandnot for the benefitofanythird party. SMRM:485961475.3 -14-

29. Headings. The headingsin this Agreementare inserted only as a matter of convenience,andin no vvay define,limit, or extendor interpretthe scopeofthis Agreementor of anyparticularprovisionhereof. 30. RegulatoryApproval ofthis Agreement. The Partiesacknowledgeand agreethat entry into this Agreementis andpaymentofseveranceunderparagraph5 maybe subjectto receipt of approval from the FRB pursuantto Section 1828(k) and Part 359 of the FDIC Rules and Regulations,the FDIC and the CDBO. If suchapproval is requiredbut not obtainedor if such approval is conditionedupon modificationsspecifiedby the FRB, the FDIC or the CDBO the Partiesagreeto negotiatein good faith to amendthis Agreementto provide for substantially equivalenttermsconsistentwith regulatoryrequirements. [signaturepagefollows] SMRI-I:485961475.3 -15-

IN WITNESS WHEREOF,the Partieshaveexecutedthis Agreementas ofthe datefirst written above. PACIFIC MERCANTILE BANK By: ^ Name: ThomasM. Vertin Title: PresidentandChiefExecutiveOfficer EXECUTIVE: ^j ThomasJ. Inserra SMRJ-I:485961475.3 -16-

EXHIBIT A CaliforniaLaborCode§2870 Employmentagreements;assignmentof rights (a) Any provisionin an employmentagreementvvhich providesthatan employeeshall assign,or offer to assign,any of his or her rights in an inventionto his or her employershall not apply to an inventionthat the employeedevelopedentirely on his or her own time without usin^ the employer's equipment, supplies, facilities, or trade secret information except for those inventionsthat either: (1) Relateat the time ofconceptionor reductionto practiceofthe inventionto the employer'sbusiness,or actual or demonstrablyanticipatedresearchor developmentof the employer;or (2) Resultfrom any work performedby the employeefor the employer. (b) To the extent a provision in an employmentagreementpurports to require an employeeto assignan invention otherwiseexcludedfrom being requiredto be assignedunder subdivision(a), theprovisionis againstthe public policy ofthis stateandis unenforceable. SMRH:485961475.3 -17-