Pacific Mercantile Bancorp Announces Exchange Agreement Eliminating All Outstanding Preferred Stock and Warrants

Pacific Mercantile Bancorp PMBC, the holding company of Pacific Mercantile Bank (the "Bank"), a wholly owned banking subsidiary, and PM Asset Resolution, Inc., a wholly owned non-bank subsidiary, today announced the entrance into an Exchange Agreement (the "Exchange Agreement") with SBAV, LP, an affiliate of Clinton Group, Inc. ("SBAV"), and Carpenter Community BancFund, L.P. and Carpenter Community BancFund-A, L.P. (together, the "Carpenter Funds"), pursuant to which SBAV and the Carpenter Funds have agreed to exchange an aggregate of 112,000 shares of the Company's Series B Convertible 8.4% Noncumulative Preferred Stock (the "Series B Shares"), 35,225 shares of the Series C 8.4% Noncumulative Preferred Stock (the "Series C Shares") and warrants to purchase 761,278 shares of the Company's common stock (the "Warrants") for an aggregate of 3,009,148 shares of the Company's common stock, (the "Exchange Transaction"). The Series B Shares, Series C Shares and Warrants to be exchanged by SBAV and the Carpenter Funds in the Exchange Transaction comprise all of the Company's outstanding shares of preferred stock and warrants to purchase shares of the Company's common stock. The closing of the Exchange Transaction is subject to customary closing conditions, including the receipt of required regulatory approvals. Steve Buster, President & CEO of Pacific Mercantile Bancorp, commented, "We are pleased to reach this agreement with the holders of our preferred stock and warrants. The Exchange Agreement will eliminate our quarterly preferred stock dividend accrual, while also simplifying our capital structure." Pursuant to the Exchange Agreement, SBAV will continue to be entitled to designate one individual (the "SBAV Representative") for appointment to the Boards of Directors of each of the Company and its wholly owned subsidiary, Pacific Mercantile Bank (the "Bank"), and the Carpenter Funds will continue to be entitled to designate three individuals (the "Carpenter Funds' Representatives") for appointment to the Boards of Directors of each of the Company and the Bank. The obligation of the Company's Board of Directors to nominate the SBAV Representative and the Carpenter Funds' Representatives for election to the Board of Directors at each annual meeting of shareholders of the Company will end when and if the aggregate ownership of SBAV or the Carpenter Funds, as applicable, falls below specified levels as set forth in the Exchange Agreement. As of the date hereof, Daniel A. Strauss, a current member of the Boards of Directors of the Company and the Bank, is the SBAV Representative, and Edward J. Carpenter, John D. Flemming and Michael P. Hoopis, current members of the Boards of Directors of the Company and the Bank, are the Carpenter Funds' Representatives.