GUARANTEEAGREEMENT

 

NATIONALMERCANTILE BANCORP

 

Datedas of July 16, 2001

 

 

 

TABLEOF CONTENTS

 

 

 
| ARTICLE I  DEFINITIONS AND INTERPRETATION                   |
|-------------------------------------------------------------|
| Section 1.1                                                 |   | Definitions  and Interpretation |   |
| ARTICLE  II  POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE |
| Section  2.1                                                |   | Powers  and Duties of the Guarantee Trustee |   |
| Section  2.2                                                |   | Certain  Rights of Guarantee Trustee |   |
| Section  2.3                                                |   | Not  Responsible for Recitals or Issuance of Guarantee |   |
| Section 2.4                                                 |   | Events of  Default; Waiver |   |
| Section 2.5                                                 |   | Events of  Default; Notice |   |
| ARTICLE III  GUARANTEE TRUSTEE                              |
| Section 3.1                                                 |   | Guarantee  Trustee; Eligibility |   |
| Section  3.2                                                |   | Appointment,  Removal and Resignation of Guarantee Trustee |   |
| ARTICLE  IV  GUARANTEE                                      |
| Section  4.1                                                |   | Guarantee |   |
| Section 4.2                                                 |   | Waiver of  Notice and Demand |   |
| Section 4.3                                                 |   | Obligations Not  Affected |   |
| Section 4.4                                                 |   | Rights of Holders |   |
| Section 4.5                                                 |   | Guarantee of Payment |   |
| Section  4.6                                                |   | Subrogation |   |
| Section 4.7                                                 |   | Independent  Obligations |   |
| Section  4.8                                                |   | Enforcement |   |
| ARTICLE  V  LIMITATION OF TRANSACTIONS; SUBORDINATION       |
| Section 5.1                                                 |   | Limitation of  Transactions |   |
| Section  5.2                                                |   | Ranking |   |
| ARTICLE  VI  TERMINATION                                    |
| Section  6.1                                                |   | Termination |   |

 
| ARTICLE VII  INDEMNIFICATION |
|------------------------------|
| Section  7.1                 |   | Exculpation |   |
| Section 7.2                  |   | Indemnification |   |
| Section  7.3                 |   | Compensation;  Reimbursement of Expenses |   |
| ARTICLE VIII  MISCELLANEOUS  |
| Section 8.1                  |   | Successors and  Assigns |   |
| Section  8.2                 |   | Amendments |   |
| Section  8.3                 |   | Notices |   |
| Section  8.4                 |   | Benefit |   |
| Section 8.5                  |   | Governing Law |   |
| Section  8.6                 |   | Counterparts |   |

 

GUARANTEEAGREEMENT

 

This GUARANTEE AGREEMENT(the "Guarantee"), dated as of July 16, 2001, is executed anddelivered by National Mercantile Bancorp, a bank holding company incorporatedin California (the "Guarantor"), and The Bank of New York, as trustee(the "Guarantee Trustee"), for the benefit of the Holders (as definedherein) from time to time of the Capital Securities (as defined herein) ofNational Mercantile Capital Trust 1, a Delaware statutory business trust (the"Issuer").

 

WHEREAS, pursuant to anAmended and Restated Declaration of Trust (the "Declaration"), datedas of July 16, 2001, among the trustees named therein of the Issuer, NationalMercantile Bancorp, as sponsor, and the Holders from time to time of undividedbeneficial interests in the assets of the Issuer, the Issuer is issuing on thedate hereof securities, having an aggregate liquidation amount of up to$15,000,000, designated the 10.25% Fixed Rate MMCapSSM (the"Capital Securities");

 

WHEREAS, as incentivefor the Holders to purchase the Capital Securities, the Guarantor desiresirrevocably and unconditionally to agree, to the extent set forth in thisGuarantee, to pay to the Holders of Capital Securities the Guarantee Payments(as defined herein) and to make certain other payments on the terms andconditions set forth herein; and

 

NOW, THEREFORE, inconsideration of the purchase by each Holder of the Capital Securities, whichpurchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantorexecutes and delivers this Guarantee for the benefit of the Holders.

 

ARTICLEI

DEFINITIONSAND INTERPRETATION

 

Section 1.1           Definitions and Interpretation

 

In this Guarantee,unless the context otherwise requires:

 

(a)  capitalized terms used in this Guarantee butnot defined in the preamble above have the respective meanings assigned to themin this Section 1.1;

 

(b) a term definedanywhere in this Guarantee has the same meaning throughout;

 

(c)  all references to "the Guarantee" or"this Guarantee" are to this Guarantee as modified, supplemented oramended from time to time;

 

(d) all referencesin this Guarantee to Articles andSections are to Articles and Sections of this Guarantee, unless otherwisespecified;

 

(e)  terms defined in the Declaration as at the date of execution of this Guaranteehave the same meanings when used in this Guarantee, unless otherwise defined inthis Guarantee or unless the context otherwise requires; and

 

(f)  a reference to the singular includes theplural and vice versa.

 

"Beneficiaries"means any Person to whom the Issuer is or hereafter becomes indebted or liable.

 

"Corporate TrustOffice" means the office of the Guarantee Trustee at which the corporatetrust business of the Guarantee Trustee shall, at any particular time, beprincipally administered, which office at the date of execution of thisGuarantee Agreement is located at 101 Barclay Street, Floor 21 W, New York, NY10286.

 

"CoveredPerson" means any Holder of Capital Securities.

 

"Debentures"means the junior subordinated debentures of the Guarantor, designated the10.25% Junior Subordinated Deferrable Interest Debentures due July 25, 2031,held by the Institutional Trustee (as defined in the Declaration) of theIssuer.

 

"Event ofDefault" has the meaning set forth in Section 2.4.

 

"GuaranteePayments" means the following payments or distributions, without duplication,with respect to the Capital Securities, to the extent not paid or made by theIssuer: (i) any accrued and unpaid Distributions (as defined in theDeclaration) which are required to be paid on such Capital Securities to theextent the Issuer shall have funds available in the Property Account (asdefined in the Declaration) therefor at such time, (ii) the Redemption Price(as defined in the Indenture) to the extent the Issuer has funds available inthe Property Account therefor at such time, with respect to any CapitalSecurities called for redemption by the Issuer, (iii) the Special RedemptionPrice (as defined in the Indenture) to the extent the Issuer has fundsavailable in the Property Account therefor at such time, with respect toCapital Securities called for redemption upon the occurrence of a Special Event(as defined in the Indenture), and (iv) upon a voluntary or involuntaryliquidation, dissolution, winding–up or termination of the Issuer (otherthan in connection with the distribution of Debentures to the Holders of theCapital Securities in exchange therefor as provided in the Declaration), thelesser of (a) the aggregate of the liquidation amount and all accrued andunpaid Distributions on the Capital Securities to the date of payment, to theextent the Issuer shall have funds available in the Property Account thereforat such time, and (b) the amount of assets of the Issuer remaining availablefor distribution to Holders in liquidation of the Issuer after satisfaction ofliabilities to creditors of the Issuer as required by applicable law (in eithercase, the "Liquidation Distribution").

 

"GuaranteeTrustee" means The Bank of New York, until a Successor Guarantee Trusteehas been appointed and has accepted such appointment pursuant to the terms ofthis Guarantee and thereafter means each such Successor Guarantee Trustee.

 

"Holder" meansany holder, as registered on the books and records of the Issuer, of anyCapital Securities; provided, however, that, in determining whether theholders of the requisite percentage of Capital Securities have given anyrequest, notice, consent or waiver hereunder, "Holder" shall notinclude the Guarantor or any Affiliate of the Guarantor.

 

“Indemnified Person" means the Guarantee Trustee, any Affiliate ofthe Guarantee Trustee, or any officers, directors, shareholders,members, partners, employees, representatives, nominees, custodians or agentsof the Guarantee Trustee.

 

"Indenture"means the Indenture dated as of July 16, 2001, between the Guarantor and The Bankof New York, not in its individual capacity but solely as trustee, and anyindenture supplemental thereto pursuant to which the Debentures are to beissued to the Institutional Trustee of the Issuer.

 

"LiquidationDistribution" has the meaning set forth in the definition of"Guarantee Payments" herein.

 

"Majority inliquidation amount of the Capital Securities" means Holder(s) ofoutstanding Capital Securities, voting together as a class, but separately fromthe holders of Common Securities, of more than 50% of the aggregate liquidationamount (including the stated amount that would be paid on redemption,liquidation or otherwise, plus accrued and unpaid Distributions to, butexcluding, the date upon which the voting percentages are determined) of all CapitalSecurities then outstanding.

 

"Obligations"means any costs, expenses or liabilities (but not including liabilities relatedto taxes) of the Issuer, other than obligations of the Issuer to pay to holdersof any Trust Securities the amounts due such holders pursuant to the terms ofthe Trust Securities.

 

"Officer'sCertificate" means, with respect to any Person, a certificate signed byone Authorized Officer of such Person. Any Officer's Certificate delivered withrespect to compliance with a condition or covenant provided for in thisGuarantee shall include:

 

(a)  a statement that each officer signing theOfficer's Certificate has read the covenant or condition and the definitionsrelating thereto;

 

(b) a briefstatement of the nature and scope of the examination or investigationundertaken by each officer in rendering the Officer's Certificate;

 

(c) a statement thateach such officer has made such examination or investigation as, in suchofficer's opinion, is necessary to enable such officer to express an informedopinion as to whether or not such covenant or condition has been complied with;and

 

(d) a statement asto whether, in the opinion of each such officer, such condition or covenant hasbeen complied with.

 

"Person" meansa legal person, including any individual, corporation, estate, partnership,joint venture, association, joint stock company, limited liability company,trust, unincorporated association, or government or any agency or politicalsubdivision thereof, or any other entity of whatever nature.

 

"ResponsibleOfficer" means, with respect to the Guarantee Trustee, any officer within the Corporate Trust Office ofthe Guarantee Trustee including any Vice President, Assistant Vice President,Secretary, Assistant Secretary or any other officer of the Guarantee Trusteecustomarily performing functions similar to those performed by any of the abovedesignated officers and also, with respect to a particular corporate trustmatter, any other officer to whom such matter is referred because of that officer'sknowledge of and familiarity with the particular subject.

 

"SuccessorGuarantee Trustee" means a successor Guarantee Trustee possessing thequalifications to act as Guarantee Trustee under Section 3.1.

 

"TrustSecurities" means the Common Securities and the Capital Securities.

 

ARTICLEII

POWERS,DUTIES AND RIGHTS OF GUARANTEE TRUSTEE

 

Section 2.1   Powers and Duties of the Guarantee Trustee

 

(a)  This Guarantee shall be held by the GuaranteeTrustee for the benefit of the Holders of the Capital Securities, and theGuarantee Trustee shall not transfer this Guarantee to any Person except aHolder of Capital Securities exercising his or her rights pursuant to Section4.4 (b) or to a Successor Guarantee Trustee on acceptance by such SuccessorGuarantee Trustee of its appointment to act as Successor Guarantee Trustee. Theright, title and interest of the Guarantee Trustee shall automatically vest inany Successor Guarantee Trustee, and such vesting and cessation of title shallbe effective whether or not conveyancing documents have been executed anddelivered pursuant to the appointment of such Successor Guarantee Trustee.

 

(b) If an Event ofDefault actually known to a Responsible Officer of the Guarantee Trustee hasoccurred and is continuing, the Guarantee Trustee shall enforce this Guaranteefor the benefit of the Holders of the Capital Securities.

 

(c)  The Guarantee Trustee, before the occurrenceof any Event of Default and after curing all Events of Default that may haveoccurred, shall undertake to perform only such duties as are specifically setforth in this Guarantee, and no implied covenants shall be read into thisGuarantee against the Guarantee Trustee. In case an Event of Default hasoccurred (that has not been cured or waived pursuant to Section 2.4) and isactually known to a Responsible Officer of the Guarantee Trustee, the GuaranteeTrustee shall exercise such of the rights and powers vested in it by thisGuarantee, and use the same degree of care and skill in its exercise thereof,as a prudent person would exercise or use under the circumstances in theconduct of his or her own affairs.

 

(d) No provision ofthis Guarantee shall be construed to relieve the Guarantee Trustee fromliability for its own negligent action, its own negligent failure to act, orits own willful misconduct, except that:

 

(i)   prior to the occurrence of any Event ofDefault and after the curing or waiving of all such Events of Default that mayhave occurred:

 

(A) theduties and obligations of the Guarantee Trustee shall be determined solely bythe express provisions of this Guarantee, and the Guarantee Trustee shall notbe liable except for the performance of such duties and obligations as arespecifically set forth in this Guarantee, and no implied covenants or obligationsshall be read into this Guarantee against the Guarantee Trustee; and

 

(B) inthe absence of bad faith on the part of the Guarantee Trustee, the GuaranteeTrustee may conclusively rely, as to the truth of the statements and thecorrectness of the opinions expressed therein, upon any certificates oropinions furnished to the Guarantee Trustee and conforming to the requirementsof this Guarantee; but in the case of any such certificates or opinionsfurnished to the Guarantee Trustee, the Guarantee Trustee shall be under a dutyto examine the same to determine whether or not they conform to therequirements of this Guarantee;

 

(ii) theGuarantee Trustee shall not be liable for any error of judgment made in goodfaith by a Responsible Officer of the Guarantee Trustee, unless it shall beproved that such Responsible Officer of the Guarantee Trustee or the GuaranteeTrustee was negligent in ascertaining the pertinent facts upon which suchjudgment was made;

 

(iii) theGuarantee Trustee shall not be liable with respect to any action taken oromitted to be taken by it in good faith in accordance with the writtendirection of the Holders of not less than a Majority in liquidation amount ofthe Capital Securities relating to the time, method and place of conducting anyproceeding for any remedy available to the Guarantee Trustee, or exercising anytrust or power conferred upon the Guarantee Trustee under this Guarantee; and

 

(iv) noprovision of this Guarantee shall require the Guarantee Trustee to expend orrisk its own funds or otherwise incur personal financial liability in theperformance of any of its duties or in the exercise of any of its rights orpowers, if the GuaranteeTrustee shall have reasonable grounds for believing that the repayment of such funds is not reasonablyassured to it under the terms of this Guarantee, or security and indemnity,reasonably satisfactory to the Guarantee Trustee, against such risk orliability is not reasonably assured to it.

 

Section 2.2             Certain Rights of GuaranteeTrustee

 

(a)           Subject to the provisions of Section2.1:

 

(i) TheGuarantee Trustee may conclusively rely, and shall be fully protected in actingor refraining from acting upon, any resolution, certificate, statement,instrument, opinion, report, notice, request, direction, consent, order, bond,debenture, note, other evidence of indebtedness or other paper or documentbelieved by it to be genuine and to have been signed, sent or presented by theproper party or parties.

 

(ii) Anydirection or act of the Guarantor contemplated by this Guarantee shall besufficiently evidenced by an Officer's Certificate.

 

(iii) Whenever,in the administration of this Guarantee, the Guarantee Trustee shall deem itdesirable that a matter be proved or established before taking, suffering or omittingany action hereunder, the Guarantee Trustee (unless other evidence is hereinspecifically prescribed) may, in the absence of bad faith on its part, requestand conclusively rely upon an Officer's Certificate of the Guarantor which,upon receipt of such request, shall be promptly delivered by the Guarantor.

 

(iv) TheGuarantee Trustee shall have no duty to see to any recording, filing orregistration of any instrument (or any rececording, refiling or registrationthereof).

 

(v) TheGuarantee Trustee may consult with counsel of its selection, and the advice oropinion of such counsel with respect to legal matters shall be full andcomplete authorization and protection in respect of any action taken, sufferedor omitted by it hereunder in good faith and in accordance with such advice oropinion. Such counsel may be counsel to the Guarantor or any of its Affiliatesand may include any of its employees. The Guarantee Trustee shall have theright at any time to seek instructions concerning the administration of thisGuarantee from any court of competent jurisdiction.

 

(vi) TheGuarantee Trustee shall be under no obligation to exercise any of the rights orpowers vested in it by this Guarantee at the request or direction of anyHolder, unless such Holder shall have provided to the Guarantee Trustee suchsecurity and indemnity, reasonably satisfactory to the Guarantee Trustee,against the costs, expenses (including attorneys' fees and expenses and theexpenses of the Guarantee Trustee's agents, nominees or custodians) andliabilities that might be incurred by it in complying with such request ordirection, including such reasonable advances as may be requested by theGuarantee Trustee; provided, however, that nothing contained in thisSection 2.2(a)(vi) shall be taken to relieve the Guarantee Trustee, upon theoccurrence of an Event of Default, of its obligation to exercise the rights andpowers vested in it by this Guarantee.

 

(vii) TheGuarantee Trustee shall not be bound to make any investigation into the factsor matters stated in any resolution, certificate, statement, instrument,opinion, report, notice, request, direction, consent, order, bond, debenture,note, other evidence of indebtedness or other paper or document, but theGuarantee Trustee, in its discretion, may make such further inquiry orinvestigation into such facts or matters as it may see fit.

 

(viii) TheGuarantee Trustee may execute any of the trusts or powers hereunder or performany duties hereunder either directly or by or through agents, nominees,custodians or attorneys, and the Guarantee Trustee shall not be responsible forany misconduct or negligence on the part of any agent or attorney appointedwith due care by it hereunder.

 

(ix) Anyaction taken by the Guarantee Trustee or its agents hereunder shall bind theHolders of the Capital Securities, and the signature of the Guarantee Trusteeor its agents alone shall be sufficient and effective to perform any suchaction. No third party shall be required to inquire as to the authority of theGuarantee Trustee to so act or as to its compliance with any of the terms andprovisions of this Guarantee, both of which shall be conclusively evidenced bythe Guarantee Trustee's or its agent's taking such action.

 

(x) Wheneverin the administration of this Guarantee the Guarantee Trustee shall deem itdesirable to receive instructions with respect to enforcing any remedy or rightor taking any other action hereunder, the Guarantee Trustee (A) mayrequest instructions from the Holders of a Majority in liquidation amount ofthe Capital Securities, (B) may refrain from enforcing such remedy or right ortaking such other action until such instructions are received and (C) shall beprotected in conclusively relying on or acting in accordance with such instructions.

 

(xi) TheGuarantee Trustee shall not be liable for any action taken, suffered, oromitted to be taken by it in good faith and reasonably believed by it to beauthorized or within the discretion or rights or powers conferred upon it bythis Guarantee.

 

(b) No provision ofthis Guarantee shall be deemed to impose any duty or obligation on theGuarantee Trustee to perform any act or acts or exercise any right, power, dutyor obligation conferred or imposed on it, in any jurisdiction in which it shallbe illegal or in which the Guarantee Trustee shall be unqualified orincompetent in accordance with applicable law to perform any such act or actsor to exercise any such right, power, duty or obligation. No permissive poweror authority available to the Guarantee Trustee shall be construed to be aduty.

 

Section 2.3           Not Responsible for Recitals orIssuance of Guarantee

 

The recitals containedin this Guarantee shall be taken as the statements of the Guarantor, and theGuarantee Trustee does not assume any responsibility for their correctness. TheGuarantee Trustee makes no representation as to the validity or sufficiency ofthis Guarantee.

 

Section 2.4           Events of Default, Waiver

 

(a) An Event ofDefault under this Guarantee will occur upon the failure of the Guarantor toperform any of its payment or other obligations hereunder.

 

(b) The Holders ofa Majority in liquidation amount of Capital Securities may, voting orconsenting as a class, on behalf of the Holders of all of the CapitalSecurities, waive any past Event of Default and its consequences. Upon suchwaiver, any such Event of Default shall cease to exist, and shall be deemed tohave been cured, for every purpose of this Guarantee, but no such waiver shallextend to any subsequent or other default or Event of Default or impair anyright consequent thereon.

 

Section 2.5           Events of Default, Notice

 

(a)  The Guarantee Trustee shall, within 90 daysafter the occurrence of an Event of Default, transmit by mail, first classpostage prepaid, to the Holders of the Capital Securities, notices of allEvents of Default actually known to a Responsible Officer of the  Guarantee Trustee, unless such defaults havebeen cured before the giving of such notice, provided, however, that theGuarantee Trustee shall be protected in withholding such notice if and so longas a Responsible Officer of the Guarantee Trustee in good faith determines thatthe withholding of such notice is in the interests of the Holders of theCapital Securities.

 

(b) The GuaranteeTrustee shall not be deemed to have knowledge of any Event of Default unlessthe Guarantee Trustee shall have received written notice from the Guarantor ora Holder of the Capital Securities (except in the case of a payment default),or a Responsible Officer of the Guarantee Trustee charged with theadministration of this Guarantee shall have obtained actual knowledge, thereof.

 

ARTICLEIII

GUARANTEETRUSTEE

 

Section 3.1           Guarantee Trustee, Eligibility

 

(a)                     There shall at all times bea Guarantee Trustee which shall:

 

(i)         not be an Affiliate of the Guarantor;and

 

(ii)        be a corporation organized and doingbusiness under the laws of the United States of America or any State orTerritory thereof or of the District of Columbia, or Person authorized undersuch laws to exercise corporate trust powers, having a combined capital andsurplus of at least 50 million U.S. dollars ($50,000,000), and subject tosupervision or examination by Federal, State, Territorial or District ofColumbia authority. If such corporation publishes reports of condition at leastannually, pursuant to law or to the requirements of the supervising orexamining authority referred to above, then, for the purposes of this Section3.1 (a) (ii), the combined capital and surplus of such corporation shall bedeemed to be its combined capital and surplus as set forth in its most recentreport of condition so published.

 

(b) If at any timethe Guarantee Trustee shall cease to be eligible to so act under Section 3.1(a), the Guarantee Trustee shall immediately resign in the manner and with theeffect set out in Section 3.2(c).

 

(c) If theGuarantee Trustee has or shall acquire any "conflicting interest"within the meaning of Section 310(b) of the Trust Indenture Act, the GuaranteeTrustee shall either eliminate such interest or resign to the extent and in themanner provided by, and subject to this Guarantee.

 

Section 3.2           Appointment Removal andResignation of Guarantee Trustee

 

(a) Subject toSection 3.2(b), the Guarantee Trustee may be appointed or removed without causeat any time by the Guarantor except during an Event of Default.

 

(b) The GuaranteeTrustee shall not be removed in accordance with Section 3.2(a) until aSuccessor Guarantee Trustee has been appointed and has accepted suchappointment by written instrument executed by such Successor Guarantee Trusteeand delivered to the Guarantor.

 

(c) The GuaranteeTrustee appointed to office shall hold office until a Successor GuaranteeTrustee shall have been appointed or until its removal or resignation. TheGuarantee Trustee may resign from office (without need for prior or subsequentaccounting) by an instrument in writing executed by the Guarantee Trustee anddelivered to the Guarantor, which resignation shall not take effect until aSuccessor Guarantee Trustee has been appointed and has accepted suchappointment by an instrument in writing executed by such Successor GuaranteeTrustee and delivered to the Guarantor and the resigning Guarantee Trustee.

 

(d) If no SuccessorGuarantee Trustee shall have been appointed and accepted appointment asprovided in this Section 3.2 within 60 days after delivery of an instrument ofremoval or resignation, the Guarantee Trustee resigning or being removed maypetition any court of competent jurisdiction for appointment of a SuccessorGuarantee Trustee. Such court may thereupon, after prescribing such notice, ifany, as it may deem proper, appoint a Successor Guarantee Trustee.

 

(e) No GuaranteeTrustee shall be liable for the acts or omissions to act of any SuccessorGuarantee Trustee.

 

(f) Upontermination of this Guarantee or removal or resignation of the GuaranteeTrustee pursuant to this Section 3.2, the Guarantor shall pay to the GuaranteeTrustee all amounts owing to the Guarantee Trustee under Sections 7.2 and 7.3accrued to the date of such termination, removal or resignation.

 

ARTICLEIV

GUARANTEE

 

Section 4.1           Guarantee

 

(a) The Guarantorirrevocably and unconditionally agrees to pay in full to the Holders theGuarantee Payments (without duplication of amounts theretofore paid by theIssuer), as and when due, regardless of any defense (except as defense ofpayment by the Issuer), right of set–off or counterclaim that the Issuermay have or assert. The Guarantor's obligation to make a Guarantee Payment maybe satisfied by direct payment of the required amounts by the Guarantor to theHolders or by causing the Issuer to pay such amounts to the Holders.

 

(b) The Guarantorhereby also agrees to assume any and all Obligations of the Issuer and in theevent any such Obligation is not so assumed, subject to the terms andconditions hereof, the Guarantor hereby irrevocably and unconditionallyguarantees to. each Beneficiary the full payment, when and as due, of any andall obligations to such Beneficiaries. This Agreement is intended to be for theBeneficiaries who have received notice hereof.

 

Section 4.2           Waiver of Notice and Demand

 

The Guarantor herebywaives notice of acceptance of this Guarantee and of any liability to which itapplies or may apply, presentment, demand for payment, any right to require aproceeding first against the Issuer or any other Person before proceedingagainst the Guarantor, protest, notice of nonpayment, notice of dishonor,notice of redemption and all other notices and demands.

 

Section 4.3           Obligations Not Affected

 

The obligations,covenants, agreements and duties of the Guarantor under this Guarantee shall inno way be affected or impaired by reason of the happening from time to time ofany of the following:

 

(a) therelease or waiver, by operation of law or otherwise, of the performance orobservance by the Issuer of any express or implied agreement, covenant, term orcondition relating to the Capital Securities to be performed or observed by theIssuer;

 

(b) the extensionof time for the payment by the Issuer of all or any portion of theDistributions, Redemption Price, Special Redemption Price, LiquidationDistribution or any other sums payable under the terms of the CapitalSecurities or the extension of time for the performance of any other obligationunder, arising out of, or in connection with, the Capital Securities (otherthan an extension of time for payment of Distributions, Redemption Price,Special Redemption Price, Liquidation Distribution or other sum payable thatresults from the extension of anyinterest payment period on the Debentures or any extension of the maturity dateof the Debentures permitted by the Indenture);

 

(c) any failure,omission, delay or lack of diligence on the part of the Holders to enforce,assert or exercise any right, privilege, power or remedy conferred on theHolders pursuant to the terms of the Capital Securities, or any action on thepart of the Issuer granting indulgence or extension of any kind;

 

(d) the voluntaryor involuntary liquidation, dissolution, sale of any collateral, receivership,insolvency, bankruptcy, assignment for the benefit of creditors,reorganization, arrangement, composition or readjustment of debt of, or othersimilar proceedings affecting, the Issuer or any of the assets of the Issuer;

 

(e) any invalidityof, or defect or deficiency in, the Capital Securities;

 

(f) the settlementor compromise of any obligation guaranteed hereby or hereby incurred; or

 

(g) any othercircumstance whatsoever that might otherwise constitute a legal or equitable dischargeor defense of a guarantor, it being the intent of this Section 4.3 that theobligations of the Guarantor hereunder shall be absolute and unconditionalunder any and all circumstances.

 

There shall be noobligation of the Holders to give notice to, or obtain consent of, theGuarantor with respect to the happening of any of the foregoing.

 

Section 4.4           Rights of Holders

 

(a)  The Holders of a Majority in liquidationamount of the Capital Securities have the right to direct the time, method andplace of conducting any proceeding for any remedy available to the GuaranteeTrustee in respect of this Guarantee or to direct the exercise of any trust orpower conferred upon the Guarantee Trustee under this Guarantee; provided,however, that (subject to Sections 2.1 and 2.2) the Guarantee Trustee shallhave the right to decline to follow any such direction if the Guarantee Trusteeshall determine that the actions so directed would be unjustly prejudicial tothe Holders not taking part in such direction or if the Guarantee Trustee beingadvised by counsel determines that the action or proceeding so directed may notlawfully be taken or if the Guarantor Trustee in good faith by its board ofdirectors or trustees, executive committees or a trust committee of directorsor trustees and/or Responsible Officers shall determine that the action orproceedings so directed would involve the Guarantee Trustee in personalliability.

 

(b) Any Holder ofCapital Securities may institute a legal proceeding directly against the Guarantorto enforce the Guarantee Trustee's rights under this Guarantee, without firstinstituting a legal proceeding against the Issuer, the Guarantee Trustee or anyother Person. The Guarantor waives any right or remedy to require that any suchaction be brought first against the Issuer, the Guarantee Trustee or any otherPerson before so proceeding directly against the Guarantor.

 

Section 4.5           Guarantee of Payment

 

This Guarantee creates aguarantee of payment and not of collection.

 

Section 4.6           Subrogation

 

The Guarantor shall besubrogated to all (if any) rights of the Holders of Capital Securities againstthe Issuer in respect of any amounts paid to such Holders by the Guarantorunder this Guarantee; provided, however, that the Guarantor shall not(except to the extent required by applicable provisions of law) be entitled toenforce or exercise any right that it may acquire by way of subrogation or anyindemnity, reimbursement or other agreement, in all cases as a result ofpayment under this Guarantee, if, after giving effect to any such payment, anyamounts are due and unpaid under this Guarantee. If any amount shall be paid tothe Guarantor in violation of the preceding sentence, the Guarantor agrees tohold such amount in trust for the Holders and to pay over such amount to theHolders.

 

Section 4.7           Independent Obligations

 

The Guarantoracknowledges that its obligations hereunder are independent of the obligationsof the Issuer with respect to the Capital Securities and that the  Guarantor shall be liable as principal andas debtor hereunder to make Guarantee Payments pursuant to the terms of thisGuarantee notwithstanding the occurrence of any event referred to insubsections (a) through (g), inclusive, of Section 4.3 hereof.

 

Section 4.8           Enforcement.

 

A Beneficiary mayenforce the obligations of the Guarantor contained in Section 4.1(b) directlyagainst the Guarantor, and the Guarantor waives any right or remedy to requirethat any action be brought against the Issuer or any other person or entity beforeproceeding against the Guarantor.

 

The Guarantor shall besubrogated to all rights (if any) of any Beneficiary against the Issuer inrespect of any amounts paid to the Beneficiaries by the Guarantor under thisGuarantee; provided, however, that the Guarantor shall not (except tothe extent required by applicable provisions of law) be entitled to enforce orexercise any rights that it may acquire by way of subrogation or any indemnity,reimbursement or other agreement, in all cases as a result of payment underthis Guarantee, if, after giving effect to such payment, any amounts are dueand unpaid under this Guarantee.

 

ARTICLEV

LIMITATIONOF TRANSACTIONS; SUBORDINATION

 

Section 5.1           Limitation of Transactions

 

So long as any CapitalSecurities remain outstanding, if (a) there shall have occurred and becontinuing an Event of Default or (b) the Guarantor shall have selected anExtension Period as provided in the Declaration and such period, or anyextension thereof, shall have commenced and be continuing, then the Guarantormay not (x) declare or pay any dividends or distributions on, or redeem,purchase, acquire, or make a liquidation payment with respect to, any of theGuarantor's capital stock or (y) make any payment of principal of or interestor premium, if any, on or repay, repurchase or redeem any debt securities ofthe Guarantor that rank *pari passu*in all respects with or junior in interest to the Debentures (other than (i)payments under this Guarantee, (ii) repurchases, redemptions or other acquisitionsof shares of capital stock of the Guarantor in connection with any employmentcontract, benefit plan or other similar arrangement with or for the benefit ofone or more employees, officers, directors, or consultants, in connection witha dividend reinvestment or stockholder stock purchase plan or in connectionwith the issuance of capital stock of the Guarantor (or securities convertibleinto or exercisable for such capital stock) as consideration in an acquisitiontransaction entered into prior to occurrence of the Event of Default or theapplicable Extension Period, (iii) as a result of any exchange of conversion ofany class or series of the Guarantor's capital stock (or any capital stock of asubsidiary of the Guarantor) for any class or series of the Guarantor's capitalstock or of any class or series of the Guarantor's indebtedness for any classor series of the Guarantor's capital stock, (iv) the purchase of fractionalinterests in shares of the Guarantor's capital stock pursuant to the conversionor exchange provisions of such capital stock or the security being converted orexchanged, (v) any declaration of a dividend in connection with anystockholder's rights plan, or the issuance of rights, stock or other propertyunder any stockholder's rights plan, or the redemption or repurchase of rightspursuant thereto, or (vi) any dividend in the form of stock, warrants, optionsor other rights where the dividend stock or the stock issuable upon exercise ofsuch warrants, options or other rights is the same stock as that on which thedividend is being paid or ranks *pari passu*with or junior to such stock).

 

Section 5.2           Ranking

 

This Guarantee willconstitute an unsecured obligation of the Guarantor and will rank subordinateand junior in right of payment to all present and future Senior Indebtedness(as defined in the Indenture) of the Guarantor. By their acceptance thereof,each Holder of Capital Securities agrees to the foregoing provisions of thisGuarantee and the other terms set forth herein.

 

The right of the Guarantor to participate in any distributionof assets of any of its subsidiaries upon any such subsidiary'sliquidation or reorganization or otherwise is subject to the prior claims ofcreditors of that subsidiary, except to the extent the Guarantor may itself berecognized as a creditor of that subsidiary. Accordingly, the Guarantor'sobligations under this Guarantee will be effectively subordinated to allexisting and future liabilities of the Guarantor's subsidiaries, and claimantsshould look only to the assets of the Guarantor for payments thereunder. ThisGuarantee does not limit the incurrence or issuance of other secured orunsecured debt of the Guarantor, including Senior Indebtedness of theGuarantor, under any indenture or agreement that the Guarantor may enter intoin the future or otherwise.

 

ARTICLEVI

TERMINATION

 

Section 6.1           Termination

 

This Guarantee shallterminate as to the Capital Securities (i) upon full payment of the RedemptionPrice or the Special Redemption Price, as the case may be, of all CapitalSecurities then outstanding, (ii) upon the distribution of all of theDebentures to the Holders of all of the Capital Securities or (iii) upon fullpayment of the amounts payable in accordance with the Declaration upon dissolutionof the Issuer. This Guarantee will continue to be effective or will bereinstated, as the case may be, if at any time any Holder of Capital Securitiesmust restore payment of any sums paid under the Capital Securities or underthis Guarantee.

 

ARTICLEVII

INDEMNIFICATION

 

Section 7.1           Exculpation

 

(a) No IndemnifiedPerson shall be liable, responsible or accountable in damages or otherwise tothe Guarantor or any Covered Person for any loss, damage or claim incurred byreason of any act or omission performed or omitted by such Indemnified Personin good faith in accordance with this Guarantee and in a manner that suchIndemnified Person reasonably believed to be within the scope of the authorityconferred on such Indemnified Person by this Guarantee or by law, except thatan Indemnified Person shall be liable for any such loss, damage or claimincurred by reason of such Indemnified Person's negligence or willfulmisconduct with respect to such acts or omissions.

 

(b) An IndemnifiedPerson shall be fully protected in relying in good faith upon the records ofthe Issuer or the Guarantor and upon such information, opinions, reports orstatements presented to the Issuer or the Guarantor by any Person as to mattersthe Indemnified Person reasonably believes are within such other Person'sprofessional or expert competence and who, if selected by such IndemnifiedPerson, has been selected with reasonable care by such Indemnified Person,including information, opinions, reports or statements as to the value and amountof the assets, liabilities, profits, losses, or any other facts pertinent tothe existence and amount of assets from which Distributions to Holders ofCapital Securities might properly be paid.

 

Section 7.2           Indemnification

 

(a) The Guarantoragrees to indemnify each Indemnified Person for, and to hold each IndemnifiedPerson harmless against, any and all loss, liability, damage, claim or expenseincurred without negligence or willful misconduct on the part of theIndemnified Person, arising out of or in connection with the acceptance oradministration of the trust or trusts hereunder, including but not limited tothe costs and expenses (including reasonable legal fees and expenses) of theIndemnified Person defending itself against, or investigating, any claim orliability in connection with the exercise or performance of any of theIndemnified Person's powers or duties hereunder. The obligation to indemnify asset forth in this Section 7.2 shall survive the resignation or removal of theGuarantee Trustee and the termination of this Guarantee.

 

(b) Promptly afterreceipt by an Indemnified Person under this Section 7.2 of notice of thecommencement of any action, such Indemnified Person will, if a claim in respectthereof is to be made against the Guarantor under this Section 7.2, notify theGuarantor in writing of the commencement thereof; but the failure so to notifythe Guarantor (i) will not relieve the Guarantor from liability under paragraph(a) above unless and to the extent that the Guarantor did not otherwise learnof such action and such failure results in the forfeiture by the Guarantor ofsubstantial rights and defenses and (ii) will not, in any event, relieve theGuarantor from any obligations to any Indemnified Person other than theindemnification obligation provided in paragraph (a) above. The Guarantor shallbe entitled to appoint counsel of the Guarantor's choice at the Guarantor'sexpense to represent the Indemnified Person in any action for whichindemnification is sought (in which case the Guarantor shall not thereafter beresponsible for the fees and expenses of any separate counsel retained by theIndemnified Person or Persons except as set forth below); provided, however,that such counsel shall be satisfactory to the Indemnified Person.Notwithstanding the Guarantor's election to appoint counsel to represent theGuarantor in an action, the Indemnified Person shall have the right to employseparate counsel (including local counsel), and the Guarantor shall bear thereasonable fees, costs and expenses of such separate counsel if (i) the use ofcounsel chosen by the Guarantor to represent the Indemnified Person wouldpresent such counsel with a conflict of interest, (ii) the actual or potentialdefendants in, or targets of, any such action include both the IndemnifiedPerson and the Guarantor and the Indemnified Person shall have reasonablyconcluded that there may be legal defenses available to it and/or otherIndemnified Person which are different from or additional to those available tothe Guarantor, (iii) the Guarantor shall not have employed counsel satisfactoryto the Indemnified Person to represent the Indemnified Person within areasonable time after notice of the institution of such action or (iv) theGuarantor shall authorize the Indemnified Person to employ separate counsel atthe expense of the Guarantor. The Guarantor will not, without the prior writtenconsent of the Indemnified Persons, settle or compromise or consent to theentry of any judgment with respect to any pending or threatened claim, action,suit or proceeding in respect of which indemnification or contribution may besought hereunder (whether or not the Indemnified Persons are actual orpotential parties to such claim or action) unless such settlement, compromise orconsent includes an unconditional release of each Indemnified Person from allliability arising out of such claim, action, suit or proceeding.

 

Section 7.3           Compensation, Reimbursement ofExpenses

 

The Guarantor agrees:

 

(a) to pay to theGuarantee Trustee from time to time such compensation for all services renderedby it hereunder as the parties shall agree to from time to time (whichcompensation shall not be limited by any provision of law in regard to thecompensation of a trustee of an express trust); and

 

(b) except asotherwise expressly provided herein, to reimburse the Guarantee Trustee uponrequest for all reasonable expenses, disbursements and advances incurred ormade by it in accordance with any provision of this Guarantee (including thereasonable compensation and the expenses and disbursements of its agents andcounsel), except any such expense, disbursement or advance as may beattributable to its negligence or willful misconduct.

 

The provisions of thisSection 7.3 shall survive the resignation or removal of the Guarantee Trusteeand the termination of this Guarantee.

 

ARTICLEVIII

MISCELLANEOUS

 

Section 8.1           Successors and Assigns

 

All guarantees andagreements contained in this Guarantee shall bind the successors, assigns,receivers, trustees and representatives of the Guarantor and shall inure to thebenefit of the Holders of the Capital Securities then outstanding. Except inconnection with any merger or consolidation of the Guarantor with or intoanother entity or any sale, transfer or lease of the Guarantor's assets toanother entity, in each case, to the extent permitted under the Indenture, theGuarantor may not assign its rights or delegate its obligations under thisGuarantee without the prior approval of the Holders of at least a Majority inliquidation amount of the Capital Securities.

 

Section 8.2           Amendments

 

Except with respect toany changes that do not adversely affect the rights of Holders of the CapitalSecurities in any material respect (in which case no consent of Holders will berequired), this Guarantee may be amended only with the prior approval of theHolders of not less than a Majority in liquidation amount of the CapitalSecurities. The provisions of the Declaration with respect to amendmentsthereof shall apply equally with respect to amendments of the Guarantee.

 

Section 8.3           Notices

 

All notices provided forin this Guarantee shall be in writing, duly signed by the party giving suchnotice, and shall be delivered, telecopied or mailed by first class mail, asfollows:

 

(a) If given to the Guarantee Trustee, at theGuarantee Trustee's mailing address set forth below (or such other address as theGuarantee Trustee may give notice of to the Holders of the Capital Securities):

 

TheBank of New York

101Barclay Street, Floor 21W

NewYork, NY 10286

Attention:Corporate Trust Administration

Telecopy:212–815–5915

 

(b) If given to theGuarantor, at the Guarantor's mailing address set forth below (or such otheraddress as the Guarantor may give notice of to the Holders of the CapitalSecurities and to the Guarantee Trustee):

 

NationalMercantile Bancorp

1840Century Park East

LosAngeles, California 90067

Attention:Scott A. Montgomery

Telecopy:310–201–0629

 

(c)  If given to any Holder of the CapitalSecurities, at the address set forth on the books and records of the Issuer.

 

All such notices shallbe deemed to have been given when received in person, telecopied with receiptconfirmed, or mailed by first class mail, postage prepaid except that if anotice or other document is refused delivery or cannot be delivered because ofa changed address of which no notice was given, such notice or other documentshall be deemed to have been delivered on the date of such refusal or inabilityto deliver.

 

Section 8.4           Benefit

 

This Guarantee is solelyfor the benefit of the Holders of the Capital Securities and, subject toSection 2.1(a), is not separately transferable from the Capital Securities.

 

Section 8.5           Governing Law

 

THIS GUARANTEE SHALL BEGOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEWYORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.

 

Section 8.6           Counterparts

 

This Guarantee maycontain more than one counterpart of the signature page and this Guarantee maybe executed by the affixing of the signature of the Guarantor and the GuaranteeTrustee to any of such counterpart signature pages. All of such counterpartsignature pages shall be read as though one, and they shall have the same forceand effect as though all of the signers had signed a single signature page.

 

 

 

                THISGUARANTEE is executed as of the day and year first above written.

 
|   |   | NATIONAL MERCANTILE  BANCORP,  as Guarantor   |
|--------|--------|-----------------------------------------------|
|   |   |                                          |
|   | By:    |   /s/   Scott. A Montgomery         |
|   |   | Name: Scott A.  Montgomery                    |
|   |   | Title: President and  Chief Executive Officer |
|   |   |                                          |
|   |   |                                          |
|   |   |                                          |
|   |   | THE BANK OF NEW YORK                          |
|   |   | as Guarantee Trustee                          |
|   |   |                                          |
|   |   |                                          |
|   | By:    |   /s/   Mary LaGumina               |
|   |   | Name: MARY  LaGUMINA                     |
|   |   | Title: Vice President                         |