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                             EMPLOYMENT AGREEMENT


     THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the
1st day of January, 1999 (the "Effective Date"), between MERCANTILE NATIONAL
BANK, a National Banking Association organized and existing under the laws of
the United States (the "Bank"), and SCOTT A MONTGOMERY ("Montgomery").

                                  WITNESSETH:

     A.   The Bank hereby retains Montgomery's exclusive services as its
President and Chief Executive Officer subject to the terms and conditions set
forth in this Agreement.

     B.   Montgomery accepts such employment and enters into this Agreement
subject to the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of mutual promises of the parties set
forth in this Agreement, the Bank and Montgomery hereby agree as follows:


          1.   EMPLOYMENT - The Bank hereby employs Montgomery, and Montgomery
accepts employment, as President and Chief Executive Officer of the Bank, to
perform such duties as may from time to time be appropriate, subject at all
times to the control and direction of the Board of Directors of the Bank and the
terms and conditions of this Agreement.  It is understood and agreed that
Montgomery shall at all times report solely to the Board of Directors of the
Bank and that Montgomery's responsibilities shall at all times be consistent
with those which would normally be assigned to the chief executive officer of a
commercial bank in size and condition similar to the Bank.

               1.1   EXCLUSIVE EMPLOYMENT - During the term of this Agreement,
Montgomery shall devote his time, attention and energies to the business and
affairs of the Bank and to the performance of his duties hereunder and shall
not, without the prior written consent of the Bank, participate in any other
business activity or render services for any other person, firm, corporation or
for-profit organization for compensation, or for any non-profit organization
where such service is or would be related to Montgomery's employment under this
Agreement.

               1.2   PERFORMANCE OF DUTIES OF BANCORP - Montgomery agrees to
perform duties for National Mercantile ("Bancorp") as may be delegated or
assigned to him by Bancorp and are not inconsistent with his duties as President
and Chief Executive Officer of the Bank.  Montgomery shall hold the title of
President and Chief Executive Officer of Bancorp, but Montgomery shall not be
deemed an employee of Bancorp, and shall receive no additional remuneration for
duties he performs pursuant to this paragraph.

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               1.3   DIRECTORSHIPS OF BANK AND BANCORP - Montgomery shall be
elected a member of the respective Boards of Directors of the Bank and Bancorp,
but shall receive no director's fees or other additional remuneration for his
services as a member of said Boards of Directors.

               1.4   PERSONAL INVESTMENTS - Montgomery may from time to time
engage in normal personal investments which do not conflict with or detract from
the performance of his duties hereunder.

               1.5   NON-COMPETITION DURING EMPLOYMENT TERM - During the term of
his employment hereunder, Montgomery shall not, directly or indirectly, either
as an employee, employer, consultant, agent, principal, partner, shareholder,
corporate officer or director, or in any other individual or representative
capacity, engage or participate in any business or activity within the Bank's
primary service area that is in competition with any business in which the Bank
or Bancorp is then presently engaged, or in which Montgomery has knowledge that
the Bank or Bancorp then contemplates becoming engaged, without first obtaining
the written consent of the Bank or Bancorp.

          2.   TERM  Montgomery's employment under this Agreement shall commence
on January 1, 1999, and shall expire on  December 31, 2004; unless terminated
sooner as hereinafter provided (the "term" or "term of employment").  This
Agreement supersedes and replaces the Employment Agreement dated June 21, 1996.

          3.   COMPENSATION AND BENEFITS - In consideration of Montgomery's
performance of his duties and responsibilities as set forth in this Agreement,
Montgomery shall receive the following compensation and benefits:

               3.1   BASE SALARY - From January 1, 1999 until December 31, 2004,
the Bank shall pay Montgomery a semi-monthly salary at an annualized rate of
$250,000, less applicable withholding.  After three years of the term have
passed, the Board of Directors of the Bank and Bancorp shall review Montgomery's
compensation and if, in the opinion of the Board of Directors, the success of
the Bank and the operating profit be appropriate, the Board shall adjust his
compensation upward.

               3.2   INCENTIVE COMPENSATION - In the event the Bank achieves a
pretax net profit during any calendar (January 1 - December 31) year during the
term of Montgomery's employment, Montgomery shall receive an incentive bonus in
an amount equivalent to five percent (5%) of the Bank's pretax net profit for
that calendar year, less applicable withholding.  Such incentive bonus shall be
paid, if earned, on or before April 1 of the year following the year during
which the applicable pretax net profit was earned.  Additionally, in the event
the Bank achieves a pretax net profit AND a return ratio of at least one and
one-half percent (1.5%) of pretax net profit to assets during a calendar year,
the Board of Directors shall award Montgomery an additional incentive bonus in
an amount equivalent to two percent (2%) of the Bank's pretax 

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net profit for that calendar year, less applicable withholding.  Such 
additional incentive bonus shall be paid, if earned, on or before April 1 of 
the year following the year during which the applicable pretax net profit was 
earned.  Montgomery understands and agrees that nothing in this Agreement is 
intended to create or imply any right on his part to receive, or duty on the 
part of the Bank to pay, a bonus or incentive compensation for any calendar 
year in which the Bank FAILS to achieve a pretax net profit; provided, 
however, that in the event the Bank fails to achieve a pretax net profit or 
suffers a pretax net loss during any calendar year during the term of 
Montgomery's employment, the Bank's Board of Directors may, in its sole and 
absolute discretion, award Montgomery a discretionary incentive bonus in an 
amount it deems appropriate under the circumstances, taking into account such 
factors as Montgomery's performance of his duties hereunder, the Bank's net 
profit for that calendar year, and the economic climate within which the Bank 
is operating.  However, in no event shall such annual bonuses, whether 
incentive or discretionary, exceed an amount which, when added to 
Montgomery's base compensation for the calendar year for which the applicable 
pretax profit (or loss) is calculated, bring Montgomery's total compensation 
for the calendar year to an amount in excess of $400,000.

               3.3   STOCK OPTIONS - In the discretion of the Board of
Directors, Montgomery shall be awarded options and participate in the National
Mercantile Bancorp 1990 Stock Option Plan and the 1996 Stock Incentive Plan and
the National Mercantile Bancorp Amended 1996 Stock Incentive Plan according to
the terms thereof and as they may, from time to time, be amended by action of
the Board of Directors.

                     3.3.1 Stock Options may not be exercised by Montgomery to
the extent that the exercise of such Stock Options will cause an ownership
change to occur pursuant to Section 382 of the Internal Revenue Code.  Section
382 provides, among other things, that utilization of net operating losses will
be restricted if there is a change in ownership of the loss corporation  Changes
in ownership are determined by reference to five percent (5%) shareholders.

                     3.3.2 Stock Options shall not be considered for the
purposes of Paragraph 3.2 of this Agreement when determining whether
Montgomery's total compensation for any calendar year exceeds the salary caps
set forth in Paragraph 3.2.

               3.4   STOCK APPRECIATION RIGHTS - Pursuant to a separate stock
rights agreement and pursuant to shareholder approval of the 1996 Stock
Incentive Plan, Bancorp granted Montgomery a non-qualified stock option
("Option") and tandem stock appreciation right ("Tandem SAR") with respect to
16,500 shares of Bancorp common stock (the "Option and Tandem SAR") under the
1996 Plan.  Such stock rights agreement, which was executed by Montgomery and
Bancorp, includes, among others, the following terms and conditions:

                     3.4.1 The Option and Tandem SAR were granted on the first
business day immediately following shareholder approval of the 1996 Plan
described in Paragraph 3.4.5, below.

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                     3.4.2 Subject to the terms of Paragraph 3.4.8, below, the
Option and Tandem SAR with respect to 16,500 of said shares shall have vested
and become exercisable on June 30, 1998, and shall expire ninety (90) days after
the term hereof or Montgomery's discharge without cause.

                     3.4.3 Any portion of the Option and Tandem SAR which is
vested but has not been exercised at the time Montgomery ceases to be employed
by the Bank for any reason shall expire ninety (90) days after the date
Montgomery ceases to be employed by the Bank.

                     3.4.4 The exercise price for each Option under the Option
and Tandem SAR were equal to the fair market value of a share of Bancorp common
stock on the date of grant. "Fair market value" shall mean the average of the
bid and asked prices of Bancorp common stock as quoted on the NASDAQ stock
markets on the applicable date.  If, for any reason, no such price is available,
"fair market value" shall mean the fair market value of a share of Bancorp
common stock as determined by the Stock Option Committee of Bancorp's Board of
Directors in their sole discretion.

                     3.4.5 In accordance with the terms of the 1996 Plan,
Montgomery may exercise the Option and Tandem SAR by either (i) exercising the
Option portion of the Option and Tandem SAR and paying the exercise price with
respect to the shares of Bancorp common stock underlying the exercised Option
and receiving such shares of Bancorp common stock or (ii) exercising the Tandem
SAR portion of the Option and Tandem SAR in which case Bancorp shall pay to
Montgomery an amount equal to the excess, if any, of the fair market value of a
share of the stock on the exercise date over the fair market value of the stock
on the date of grant, multiplied by the number of shares of stock for which the
Option and Tandem SAR is exercised, which amount may, in the sole discretion of
the Stock Option Committee of the Board of Directors of Bancorp, be paid to
Montgomery in cash or in Bancorp common stock, subject to all other terms and
conditions of the 1996 Plan.  In the event Montgomery elects to exercise the
Option with respect to any portion of the Option and Tandem SAR, Montgomery
shall be deemed to have forfeited the Tandem SAR with respect to that portion of
the Option and Tandem SAR.  In the event Montgomery elects to exercise the
Tandem SAR with respect to any portion of the Option and Tandem SAR, Montgomery
shall be deemed to have forfeited the Option with respect to that portion of
Option and Tandem SAR.

                     3.4.6 The Option and Tandem SAR issued pursuant to
paragraph 3.4 of this Agreement shall be subject to all terms and conditions,
including the anti-dilution provisions, contained in the 1996 Plan.

                     3.4.7 Notwithstanding the foregoing provisions, no portion
of the Option and Tandem SAR may be exercised by Montgomery to the extent that
the exercise of such Option and Tandem SAR will cause an ownership change to
occur pursuant to Section 382 of the Internal Revenue Code.  Section 382
provides, among other things, that utilization of net 

                                                                             4

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operating losses will be restricted if there is a change in ownership of the 
loss corporation.  Changes in ownership are determined by reference to 5% 
shareholders.

                     3.4.8 The Option and Tandem SAR, and amounts received by
Montgomery as a consequence of partial or total exercise of the Option and
Tandem SAR, shall not be considered for the purposes of Paragraph 3.2 of this
Agreement when determining whether Montgomery's total compensation for any
calendar year exceeds the salary caps set forth in Paragraph 3.2.

               3.5   VACATION - Montgomery shall be entitled to vacation time at
an annualized rate of twenty (20) days per year, during which time compensation
hereunder shall be paid in full. Montgomery shall take ten (10) days of such
vacation consecutively during each calendar year. However, Montgomery shall not
take MORE than ten (10) business days of vacation consecutively without prior
approval of the Chairman of the Bank's Board of Directors. Montgomery shall make
every effort to utilize his vacation time during the calendar year in which it
was earned. In the event that Montgomery does not utilize all of his
vacation~time during the calendar year in which it was earned, such vacation
time shall carry over to the next calendar year; provided, however, that in the
event that Montgomery's vacation carryover from prior years together with the
current year's accrual reaches 30 days, no further vacation shall accrue until
Montgomery has taken a vacation and his accrued vacation account has dropped
below his maximum 30 day entitlement. No vacation days will be earned for the
period during which Montgomery has accumulated 30 days of vacation.

               3.6   ATHLETIC CLUB MEMBERSHIP - During the term of Montgomery's
employment, the Bank shall pay the initiation fee or other initial expense, and
any periodic dues, with respect to Montgomery's membership in an athletic club
of his choice, provided that Montgomery's membership in such club is deemed by
the Board of Directors of the Bank to be beneficial to the business interests of
the Bank. This provision shall not entitle Montgomery to membership in a golf
club or country club. It is understood and agreed by Montgomery that the Bank
shall have no liability to Montgomery or any third party for club dues, expenses
or any charges whatsoever relating to any period after the termination of
Montgomery's employment with the Bank

               3.7   LUNCHEON OR DINING CLUB MEMBERSHIP - During the term of
Montgomery's employment, the Bank shall pay the initiation fee or other initial
expense, and any periodic dues, with respect to Montgomery's membership in a
luncheon or dining club of his choice, provided that Montgomery's membership in
such club is deemed by the Board of Directors of the Bank to be beneficial to
the business interests of the Bank. This provision shall not entitle Montgomery
to membership in a golf club or country club. It is understood and agreed by
Montgomery that the Bank shall have no liability to Montgomery or any third
party for club dues, expenses or any charges whatsoever relating to any period
after the termination of Montgomery's employment with the Bank.

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               3.8   AUTOMOBILE - The Bank shall provide Montgomery with a 1998
BMW 740IL, or equivalent vehicle, to be leased or owned by the Bank at the
Bank's discretion. Upon the termination of his employment, Montgomery shall have
the right to purchase said automobile at the depreciated book value of the
automobile calculated on the effective date of his termination.

               3.9   PERSONAL COMPUTER - The Bank shall purchase a portable
laptop computer for Montgomery's exclusive use during the term of his employment
with the Bank.  Montgomery shall return said computer to the Bank upon the
termination of his employment with the Bank.  Upon the termination of his
employment hereunder, Montgomery may purchase said computer at the depreciated
book value of the computer calculated on the effective date of his termination.

               3.10  OTHER FRINGE BENEFITS - During the term of his employment,
Montgomery shall be entitled to and shall receive the benefits from the Bank's
group major medical insurance program as well as any other health, accident or
other insurance programs, any pension or other retirement programs, and any
other fringe benefits and perquisites that the Bank may from time to time
generally accord to its senior executives ("executive benefits programs").  The
Bank reserves the right to cancel or to alter or modify the terms, conditions
and/or scope of any of the executive benefit programs any time and from time to
time by substituting a plan of equal or greater value.

               3.11  EXPENSES AND REIMBURSEMENT - The Bank shall pay directly or
shall reimburse Montgomery for all reasonable, ordinary and necessary business
expenses incurred or paid by Montgomery during the term of his employment and in
connection with the performance of his services pursuant to this Agreement,
provided that Montgomery presents to the Chairman of the Bank's Board of
Directors or the Chairman of the Audit Committee of the Bank's Board of
Directors expense statements or vouchers and such other supporting information
as the audit committee may from time to time reasonably request, and further
provided that, to the extent that such expenses exceed $2,500 in any month, the
Chairman of the Board or the Chairman of the Audit Committee approves such
expenses. The Bank shall reimburse Montgomery for reasonable business expenses
incurred in entertaining business guests at any club joined by Montgomery in
accordance with Paragraphs 4.6 and 4.7 of this Agreement. In the event any
month's expenses in excess of $2,500 are not approved by the Chairman of the
Board or the Chairman of the Audit Committee, Montgomery shall submit a summary
of those expenses to the Audit Committee, and Montgomery shall receive
reimbursement for those expenses only upon the approval of a majority of the
Audit Committee. In the event of the termination of Montgomery's employment for
any reason, whether by the Bank or by Montgomery, Montgomery shall be reimbursed
within thirty (30) days of termination for any reasonable, ordinary and
necessary documented business expenses incurred prior to termination, to the
extent that such expenses would otherwise be reimbursable pursuant to the terms
of this Paragraph, upon presentation of expense statements or vouchers and such
other supporting information as the Bank may reasonably request.

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               3.12  WITHHOLDING - Bank shall have the right to withhold from
any payment otherwise due to Montgomery under this Agreement the amount of
income and any other taxes required to be withheld by Bank as employer by
applicable city, state or federal law.

          4.   INDEMNIFICATION - Montgomery shall be fully indemnified by the
Bank and Bancorp to the extent permitted by California law, and shall be
defended and held harmless absolutely and irrevocably by the Bank and Bancorp to
the extent permitted by California law, from and against all claims, demands,
liabilities, costs, expenses, damages and causes of action of any nature
whatsoever arising out of, relating to or incidental to Montgomery's good faith
execution of his duties under this Agreement and/or the good faith execution of
his duties as an officer, employee and/or director of the Bank or Bancorp,
provided that Montgomery shall advise the Bank and Bancorp immediately of any
such claim or litigation and cooperate fully with the Bank and Bancorp in
connection therewith, and provided further that the Bank and Bancorp shall have
the right to assume and control the defense of such action and to take whatever
action is necessary to discharge their obligations. The provisions hereof are in
addition to and do not limit any other right to indemnity that Montgomery has by
way of law or agreement.

          5.   LIFE INSURANCE - The Bank shall have the right, but not the
obligation, to take out insurance on the life of Montgomery at its sole cost and
expense and for its sole benefit, and Montgomery acknowledges that he shall have
no right in or to such insurance or the proceeds of that insurance. Montgomery
agrees to cooperate with the Bank in obtaining such insurance and to submit, at
his reasonable convenience, to the usual medical and other examinations required
in connection with obtaining such insurance.

          6.   PROPERTY RIGHTS.

               6.1   CONFIDENTIAL OR PROPRIETARY INFORMATION - Montgomery
acknowledges that all information concerning or pertaining to the business,
plans and prospects, of the Bank, Bancorp, or any of their related or affiliated
entities, including but not limited to financial information, customer lists,
files, documents, records or specifications, which Montgomery may now possess or
may obtain during or after the term of this Agreement, is confidential and is
the property of the Bank, Bancorp and/or their affiliated entities. Montgomery
agrees that he shall not, without the prior written consent of the Bank or
Bancorp, cause or permit such information to be published, disclosed, divulged
or otherwise made accessible to any other firm, person or corporation either
during or after the term of his employment, and Montgomery further agrees that
such information will at no time be used by him except in connection with the
business of and for the exclusive benefit of the Bank or Bancorp. Montgomery
shall return to the Bank all documents, files, records or other tangible
evidence of such confidential or proprietary information, including all
photocopies, extracts or summaries, prior to the termination of his employment.
The provisions of this Paragraph 6.1 shall survive the expiration, suspension or
termination, for any reason, of this Agreement and/or Montgomery's employment
with the Bank.

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               6.2   OWNERSHIP OF MATERIALS AND IDEAS/USE OF NAME - The Bank, as
Montgomery's employer, shall own, and Montgomery hereby transfers and assigns to
the Bank, all rights in and to any material and/or ideas written, suggested or
submitted by Montgomery in the course of his employment under this Agreement,
and all other results and proceeds of Montgomery's services under this
Agreement, all without the necessity of any additional compensation; provided,
however, that nothing in this Paragraph 6.2 shall be deemed in any manner to
restrict or qualify Montgomery's ownership or possession of personal notes,
memoranda, correspondence, books or records not constituting trade secrets or
other property of the Bank. During the term of Montgomery's employment, the Bank
and Bancorp shall also have the right (but not the obligation) to use
Montgomery's name without additional consideration in connection with his
services pursuant to this Agreement.

               6.3   DELIVERY OF PROPERTY - Other than as provided in Sections
3.8 and 3.9, upon the termination of Montgomery's employment under this
Agreement, Montgomery shall immediately deliver to the Bank any and all property
in his possession or under his control belonging to the Bank or Bancorp, in good
condition, ordinary wear and tear and damage by any cause beyond his reasonable;
control excepted.

          7.   REPRESENTATION AND WARRANTY - Montgomery represents and warrants
that he will be breaching no contract with any other person or entity by
entering into this Agreement and/or by performing the services provided for in
this Agreement.

          8.   TERMINATION OF EMPLOYMENT - Notwithstanding any provision of this
Agreement to the contrary, Montgomery's employment hereunder may be terminated
prior to the expiration of the term of this Agreement under the following
circumstances:

               8.1   Employment hereunder shall terminate automatically upon
Montgomery's death.

               8.2   The Bank may terminate Montgomery's employment hereunder
upon the happening of any of the following events:

                     8.2.1 The Bank may terminate Montgomery's employment in the
event of Montgomery's permanent disability. For the purposes of this Agreement,
Montgomery shall be deemed to have become "permanently disabled" if (a) after
completing the sixty (60)-day waiting period for coverage under the Bank's
long-term disability program (the "LTD Program"), Montgomery, because of ill
health or physical or mental disability, shall have become entitled to immediate
disability payments under the LTD Program or (b) Montgomery, because of ill
health, physical or mental disability, incompetency or incapacity, shall have
been unable to perform his duties and responsibilities under this Agreement in
the ordinary and usual manner required of a person in his position either for
ninety (90) days consecutively, or ninety (90) days in any particular period of
one hundred twenty (120) consecutive days.

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                     8.2.2 The Bank may terminate Montgomery's employment
hereunder at any time for cause. For purposes of this Agreement, the term
"cause" shall mean , (a) any act of dishonesty, unauthorized disclosure of
confidential information or fraud by Montgomery in the performance of his duties
hereunder; (b) the commission of a felony ~ involving theft or fraud of any
kind; (c) the commission of a fraud or misappropriation or embezzlement of
property of the Bank, Bancorp or of any affiliate or customer of the Bank or
Bancorp; (d) a willful and material breach by Montgomery of obligations under
this Agreement, all (a, b, c and d) with or without prosecution or conviction,
(e) the inability of the Bank to secure a bond for the services of Montgomery,
or Montgomery engaging in conduct that would preclude the Bank's ability to bond
Montgomery; or (f) a written order or directive from the Office of the
Comptroller of the Currency or the Board of Governors of the Federal Reserve
System ordering the removal of Montgomery as an executive officer or director of
the Bank or Bancorp.

                     8.2.3 The Bank, by resolution of its Board of Directors, at
any time in its sole and absolute discretion, may terminate Montgomery's
employment hereunderwithout cause, for any reason.

               8.3   Upon any termination pursuant to this Paragraph 8,
Montgomery shall be entitled to all salary and benefits to be paid or provided
by the Bank under this Agreement up to the date of such termination. In
addition, and in lieu of any and all other rights or remedies which Montgomery
may have, if this Agreement is terminated prior to the expiration of its term,
Montgomery shall have the following rights and remedies:

                     8.3.1 In the event of termination based on death or
permanent disability as set forth in Paragraphs 8.1 or 8.2.1 above, the Bank
shall not have any obligation to continue to pay salary, bonus and other
benefits provided for in Paragraph 3 and its subparts above, or any other sums
proposed hereunder, except that Montgomery shall be entitled to receive any
salary, bonus and benefits accrued but unpaid as of the date of termination, and
Montgomery, or his heirs in the event of his death, shall be entitled to all
benefits under any death or disability plans provided under Paragraph 3.10
above, to the extent the Bank adopts or establishes any such plan covering
Montgomery.

                     8.3.2 If Montgomery's employment is terminated for cause,
as set forth and defined in Paragraph 8.2.2 above, Montgomery shall be entitled
to receive all base salary and benefits accrued but unpaid or stock options
vested but not redeemed or exercised as of the date of termination. The Bank
shall have no further obligation to pay the salary and other benefits provided
for in Paragraph 3 and its subparts above, or any other sums provided hereunder,
except as may be required by applicable law. Such payment shall be made to
Montgomery within thirty (30) days after the date of his termination.

                     8.3.3 If Montgomery is terminated by the Bank prior to the
expiration of this Agreement without cause, or if the Bank substantially and
adversely changes

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Montgomery's status, title, position or responsibilities as provided for in 
this Agreement and Montgomery resigns as a consequence, or if the Bank 
requires Montgomery to be based at any place outside a thirty (30) mile 
radius from the Bank's current headquarters except for reasonably required 
travel on the Bank's business and Montgomery resigns as a consequence, 
Montgomery shall be entitled to receive as severance his base salary at the 
then annual rate paid semi-monthly for eighteen (18) months from the date of 
such termination, along with any unpaid bonus which Montgomery had been 
awarded but not paid by the Bank's Board of Directors under the terms of 
Paragraph 3.2 of this Agreement; provided, however, that such payments shall 
cease and not be owing in the event that Montgomery breaches any part of 
Paragraphs 6 or 9 of this Agreement.

                     8.3.4 If Montgomery terminates his employment with the Bank
for any reason other than those set forth in Paragraph 8.3.3 above, he shall be
entitled to no severance payments hereunder, and he shall have no greater rights
and obligations than if his employment was terminated for cause under Paragraph
8.2.2.

                     8.3.5 In the event Montgomery is terminated without cause,
is receiving severance hereunder, and is rehired by the Bank or Bancorp during
the period of his severance payments, such severance payments, if any remain,
shall be suspended during the term of such reemployment, and shall be
reinstituted at the expiration of such reemployment.

                     8.3.6 Regardless of the reason for his termination of
employment, Montgomery (and his dependents and beneficiaries, as applicable)
shall be entitled to continued coverage under the Bank's benefit programs to the
same extent as applicable generally to employees of the Bank who have terminated
employment. In the event Montgomery is entitled to severance pursuant to
Paragraph 8.3.3, above, Montgomery's benefits shall continue during the period
during which he is receiving such severance payments as though he were still
an employee of the Bank.

               8.4   NOTICE OF NON-RENEWAL - The Bank shall give notice, no less
than one hundred eighty (180) days prior to the end of the term of this
Agreement, of its intention to renew or not to renew this Agreement.  Such
notice shall not be a termination, and none of the rights or duties set forth
herein shall be affected thereby.  If notice is not given, this contract shall
be extended on the same terms for one (1) year.  If notice is given not to
extend, Montgomery shall receive as salary continuation twelve (12) months'
salary following the expiration date of the contract, but not participation in
net profit under Paragraph 3.2, above.

          9.   NO SOLICITATION OF CUSTOMERS OR EMPLOYEES - In the event of the
termination of Montgomery's employment for any reason, whether by the Bank or by
Montgomery, Montgomery agrees that he shall not, alone or as a member, employee,
or agent of any partnership, or as an officer, agent, employee, director, or
stockholder of any other corporation, whether directly or indirectly, for a
period of one (1) year after the effective date of such termination, (a) solicit
any then existing customer of the Bank or Bancorp for the opportunity to provide
any services of the kind offered to or provided to that customer by Bank 

                                                                             10

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or Bancorp, or (b) solicit for employment any person employed by the Bank or 
Bancorp, or encourage or induce any such person to terminate his or her 
employment by the Bank or Bancorp.

          10.  GENERAL

               10.1  GOVERNING LAW - This Agreement shall be governed by and 
construed and enforced in accordance with the laws of the State of California 
applicable to agreements made and to be performed entirely in California.

               10.2  CAPTIONS - The paragraph headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement or define, limit or extend the scope
of this Agreement or of any particular article or paragraph of this Agreement.

               10.3  ENTIRE AGREEMENT - This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter of
this Agreement, and supersedes any and all prior agreements, arrangements and
understandings, written or oral, between the parties relating to the subject
matter, except that the Indemnity Agreement between the Bank and Montgomery
dated November 1, 1995, ("Indemnity Agreement") shall remain in full force and
effect. Other than the Indemnity Agreement, all prior understandings,
representations, negotiations or agreements, if any, between the parties hereto
relating to the employment of Montgomery by the Bank, including the CEO Term
Sheet between Montgomery and the Bank dated November 1, 1995, are hereby
terminated, rescinded and superseded by this Agreement, and Montgomery agrees
that any rights and remedies, if any, he may have under any such prior
understandings, representations, negotiations or agreements are hereby waived
and terminated.

               10.4  NO OTHER REPRESENTATIONS - No representation, promise, 
inducement or statement of intention has been made by a party that is not 
embodied in this Agreement, and no party shall be bound by or liable for any 
alleged representation, promise, inducement or statement of intention not so 
set forth.

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               10.5  ASSIGNMENT - This Agreement, and Montgomery's rights and
obligations under this Agreement, may not be assigned by Montgomery. The Bank
may assign its rights, together with its obligations, under this Agreement in
connection with any sale, transfer or other disposition of all or substantially
all of its business and assets; and such rights and obligations shall inure to,
and be binding upon, any successor to the business or substantially all of the
assets of the Bank or Bancorp, whether by merger, purchase of stock or assets or
otherwise. This Agreement shall be binding upon, and shall inure to the benefit
of, the respective successors and permitted assigns of the parties.

               10.6  WAIVER AND MODIFICATION - This Agreement may not be
amended, modified, superseded, canceled, renewed or extended, and the terms,
conditions or covenants of this Agreement may not be waived, unless by a written
instrument executed by the parties to this Agreement. The failure of a party at
any time or times to require performance of any provision of this Agreement
shall in no manner affect its right at a later time to enforce the same. No
waiver by a party of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Agreement.

               10.7  ACKNOWLEDGMENT - Montgomery hereby acknowledges that this
Agreement is, from the outset, without liability to, or recourse against, any
officer or director of either Bank or Bancorp, and that, except with respect to
Bancorp's indemnity under Paragraph 4, his sole recourse under this Agreement
shall be against Bank.

               10.8  SEVERABILITY/CURTAILMENT - Nothing contained in this
Agreement shall be construed to require the commission of any act contrary to
law, and wherever there is any conflict between any provision of this Agreement
and any material statute, law, ordinance or regulation contrary to which the
parties have no legal right to contract, then the latter shall prevail, but in
any such event the provisions of this Agreement so affected shall be curtailed
and limited only to the minimum extent necessary to bring it within the legal
requirements. The remainder of the affected provision and the other provisions
of this Agreement shall continue in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties shall immediately employ
their best efforts in good faith to negotiate a valid provision to substitute
for the invalidated one.

               10.9  FURTHER ASSURANCES - Montgomery and the Bank each agree,
without the necessity of any further consideration, to execute and deliver such
other documents and take such other actions as may be reasonably requested by
any other party in order to consummate more effectively and carry out more fully
the intent and subject matter of this Agreement.

               10.10 DISPUTE RESOLUTION - Any controversy or claim arising out
of this Agreement or out of Montgomery's employment with the Bank or Bancorp,
whether based on

                                                                            12

<PAGE>

contract, tort, statute or otherwise, including but not limited to federal 
and state statutes proscribing age discrimination or any other form of 
discrimination, shall be submitted exclusively to final and binding 
arbitration in Los Angeles, California, to an arbitrator chosen in accordance 
with the then existing labor arbitration rules of the American Arbitration 
Association. Any such arbitration shall comply with and be governed by the 
provisions of the California Arbitration Act, Paragraphs 1280 through 1294.2 
of the California Code of Civil Procedure. Except as provided therein, each 
party expressly waives any right it may have to seek-redress in any other 
forum. The arbitrator chosen by the parties shall have all the powers granted 
under the rules of the American Arbitration Association and the California 
Arbitration Act including, without limitation, the power to grant any 
monetary or other remedy which could be granted by a court of competent 
jurisdiction considering such claim based on contract, tort, statutes or 
otherwise, including, without limitation, any state, federal or local statute 
or ordinance concerning employment. Any and all controversies or claims 
arising out of this Agreement or out of Montgomery's employment by the Bank, 
whether based on contract, tort, statute or otherwise, shall be asserted, if 
at all, within six (6) months after the act or omission giving rise to such 
controversy or claim unless otherwise agreed in writing by the Bank and 
Montgomery.

               10.11 INJUNCTION - Notwithstanding the dispute resolution
provision of Paragraph 11.10, in the event of a breach of the confidentiality
provisions of Paragraph 6.1 or the non-solicitation provisions of Paragraph 10
of this Agreement, or in the event of conduct injurious to the Bank or Bancorp
or either of their business reputations, Montgomery agrees that in addition to
any other rights the Bank or Bancorp may have, the Bank and/or Bancorp may seek
injunctive relief in an appropriate state or federal court to preclude further
violation or to seek to collect damages.

               10.12 ATTORNEYS' FEES - Should Montgomery, the Bank or Bancorp
institute any action or proceeding to enforce any provision of this Agreement,
or for damages by reason of any alleged breach of any provision hereof, or for a
declaration of any party's rights or obligations hereunder, or to set aside any
provision hereof, or for any other remedy, the prevailing party shall be
entitled to be reimbursed by the losing party for all costs, expenses and
reasonable attorneys fees incurred in such action or proceeding.

               10.13 MONTGOMERY'S ATTORNEYS' FEES - The Bank shall reimburse
Montgomery for his reasonable attorneys' fees and legal expenses incurred in
assisting in the preparation of this Agreement, provided however, that the Bank
shall not be obligated to reimburse Montgomery for attorneys' fees and legal
expenses in excess of $1,000.00.

               10.14 LIMITATION ON PAYMENT - If all or any portion of the
payments payable to Montgomery pursuant to this Agreement, together with other
payments which Montgomery has the right to receive from the Bank or Bancorp,
would cause a deduction disallowance under Section 280G of the Internal Revenue
Code or would cause the imposition of an excise tax under Section 4999 of the
Internal Revenue Code, such payments shall reduced to the extent necessary to
make Section 280G and Section 4999 inapplicable. All payments to 

                                                                            13

<PAGE>

Montgomery from the Bank or Bancorp under this Agreement or any other 
agreement between Montgomery and the Bank or Bancorp shall be subject to 12 
U.S.C. Section 1828(k) and 12 C.F.R. part 359 and any other applicable 
provision of law.

     IN WITNESS WHEREOF, Mercantile National Bank caused this Agreement to be
executed by its duly authorized officers, and Scott A. Montgomery has duly
executed this Agreement, as of the date set forth against their respective
signatures.

                              MERCANTILE NATIONAL BANK



Dated: 3-11-99             By /s/ Dion G. Morrow
      -----------            -----------------------

                                   Title: Chairman of the Board of Directors
                                         -----------------------------------


Dated: 3-11-99                /s/ Scott A. Montgomery
      -----------             -----------------------------
                              Scott A. Montgomery



     Agreed as to the obligations of National Mercantile Bancorp specified in
the foregoing Agreement.


                              NATIONAL MERCANTILE BANCORP



Dated:                        By /s/ Rober E. Gipson
                                ------------------------

                              Title  Chairman of the Board of Directors
                                   ------------------------------------

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