Summary of PACIFIC MERCANTILE BANCORP

Item 1.01. Entry into a Material Definitive Agreement.

On October 6, 2009, Pacific Mercantile Bancorp, a California corporation (the "Company"), filed a Certificate of Determination of Rights, Preferences, Privileges and Restrictions of Series A Convertible 10% Cumulative Preferred Stock (the "Certificate of Determination") with the California Secretary of State for the purpose of creating, from its authorized but unissued "blank check" preferred stock, a series, consisting of 155,000 shares, of preferred stock designated as the Company's Series A Convertible 10% Cumulative Preferred Stock (the "Series A Preferred Stock" or "Series A Shares"), and fixing the relative rights and preferences and the privileges of and the restrictions on the Series A Shares. The Series A Preferred Stock is the first series of preferred stock to be issued by the Company.

The Series A Shares will be offered and sold to a select number of "accredited investors" (as defined in Regulation D), or qualified institutional buyers (as defined in Rule 144A), under the Securities Act of 1933, as amended (the "Securities Act"), at a price of $100.00 per share. Cumulative dividends will accrue on the Series A Shares at a rate of 10% per annum and each Series A Share will be convertible at the option of its holder, at a conversion price of $7.65 per share, into approximately 13.07 shares of common stock and, if not sooner converted, all of the Series A Shares will automatically convert into common stock at that same conversion price (as the same may be adjusted under certain anti-dilution provisions applicable to the Series A Shares) on the Mandatory Conversion Date, as defined below.

The Company expects to use the proceeds from the sale of the Series A Shares for general corporate purposes, which will include making a capital contribution to its wholly owned banking subsidiary, Pacific Mercantile Bank, to increase its equity capital and which it can use to fund loans and other interest-earning assets, the growth of its banking franchise and its working capital requirements.

Description of Series A Shares

The following is a summary of the rights, preferences and privileges of and restrictions on the Series A Shares, which summary is qualified in its entirety by reference to the Certificate of Determination, a copy of which is attached as Exhibit 3.1 to, and by this reference is incorporated into, this Current Report.

Ranking. The Series A Preferred Stock will, with respect to dividend rights and rights on liquidation, winding-up and dissolution, rank (i) senior to the Common Stock; and (ii) on parity with any other class or series of preferred stock that might be established after the Series A Preferred Stock is issued, if the terms of that other class or series of preferred stock expressly provide that it will rank on a parity with the Series A Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution of the Company ("Parity Securities"). If, on the other hand, any new class or series of preferred stock is established after the Series A Preferred Stock is issued, but does not expressly provide that such class or series will rank on a parity with the Series A Preferred Stock, then such class or series of shares will rank junior to the Series A Preferred Stock with respect to dividend rights and rights on liquidation, winding-up and dissolution ("Junior Securities").

As described below, without the approval of the holders of a majority of the Series A Shares outstanding, the Company may not sell or issue any preferred stock that ranks senior to the Series A Preferred Shares with respect to dividend rights or rights on liquidation, winding-up and dissolution (collectively, "Senior Securities").

Conversion and Anti-Dilution Provisions. Each Series A Share will be convertible at an initial conversion price of $7.65 per share (the "Conversion Price"), into 13.07 shares of the Company's Common Stock, at the option of holder of the Series A Shares until the second (2nd) anniversary of the date of the Company's initial issuance of Series A Shares in the Offering (the "Mandatory Conversion Date"), which is subject to extension in certain circumstances. If any Series A Shares remain outstanding as of the Mandatory Conversion Date, each such Series A Share will automatically convert, at the same Conversion Price, into 13.07 shares of Common Stock (which number of shares will be subject to proportional adjustments for any stock dividend, stock split, reverse stock split, or recapitalization of the Common Stock). In addition, the Conversion Price will be subject to adjustment, in accordance with a broad-based weighted average formula, to prevent dilution as a result of the Company's issuance of additional shares of Common Stock at a purchase price, or other convertible shares or securities

with a conversion price, that is less than the then closing price of the Company's shares of Common Stock, as reported by NASDAQ, except that no such adjustments will be made for share issuances (i) on the grant or exercise of options or other equity incentives issued pursuant to any Company stock option or other equity incentive plans, (ii) in any acquisition of or business combination with another company or business approved by the Company's Board of Directors, (iii) on or by reason of the conversion of any Series A Shares and
(iv) if and to the extent that such an adjustment would cause the total number of Common Shares that shall have been or shall be issuable on conversion of the Series A Shares to exceed 19.9% of the number of shares of the Company's Common Stock that were outstanding as of the date on which the first Series A Share was issued, or to reduce the Conversion Price to less than the Company's book value per share as of June 30, 2009, which was approximately $7.55 per share (except as may be adjusted proportionately for any stock dividend, stock split, reverse stock split or recapitalization of the Common Stock).

Effect of Sale or Merger of the Company. If we were to consummate, at any time prior to the Mandatory Conversion Date, a sale, merger or other business combination transaction with another business (a "Business Combination Transaction"), and the Company's shareholders, immediately prior to the consummation of that transaction, will not own at least 50.1% of the outstanding voting securities of the surviving corporation in that transaction or of its parent company, if any (whether the Company or another business entity is surviving corporation in such transaction), the then outstanding Series A Shares will be converted automatically into Common Stock, effective immediately prior to the consummation of that Business Combination Transaction, at the then applicable Conversion Price, plus the payment in cash or additional shares of our Common Stock of all unpaid dividends then accrued on the Series A Shares, in . . .