Prepared by MERRILL CORPORATION









 




 




GUARANTEE

AGREEMENT




 




NATIONAL

MERCANTILE BANCORP




 




Dated

as of July 16, 2001




 




 













 




TABLE

OF 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


  	

   


  





 






















GUARANTEE

AGREEMENT




 




This GUARANTEE AGREEMENT

(the "Guarantee"), dated as of July 16, 2001, is executed and

delivered by National Mercantile Bancorp, a bank holding company incorporated

in California (the "Guarantor"), and The Bank of New York, as trustee

(the "Guarantee Trustee"), for the benefit of the Holders (as defined

herein) from time to time of the Capital Securities (as defined herein) of

National Mercantile Capital Trust 1, a Delaware statutory business trust (the

"Issuer").




 




WHEREAS, pursuant to an

Amended and Restated Declaration of Trust (the "Declaration"), dated

as of July 16, 2001, among the trustees named therein of the Issuer, National

Mercantile Bancorp, as sponsor, and the Holders from time to time of undivided

beneficial interests in the assets of the Issuer, the Issuer is issuing on the

date 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 incentive

for the Holders to purchase the Capital Securities, the Guarantor desires

irrevocably and unconditionally to agree, to the extent set forth in this

Guarantee, to pay to the Holders of Capital Securities the Guarantee Payments

(as defined herein) and to make certain other payments on the terms and

conditions set forth herein; and




 




NOW, THEREFORE, in

consideration of the purchase by each Holder of the Capital Securities, which

purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor

executes and delivers this Guarantee for the benefit of the Holders.




 




ARTICLE

I




DEFINITIONS

AND INTERPRETATION




 




Section 1.1           Definitions and Interpretation




 




In this Guarantee,

unless the context otherwise requires:




 




(a)  capitalized terms used in this Guarantee but

not defined in the preamble above have the respective meanings assigned to them

in this Section 1.1;




 




(b) a term defined

anywhere in this Guarantee has the same meaning throughout;




 




(c)  all references to "the Guarantee" or

"this Guarantee" are to this Guarantee as modified, supplemented or

amended from time to time;




 




(d) all references

in this Guarantee to Articles and

Sections are to Articles and Sections of this Guarantee, unless otherwise

specified;













 




(e)  terms defined in the Declaration as at the date of execution of this Guarantee

have the same meanings when used in this Guarantee, unless otherwise defined in

this Guarantee or unless the context otherwise requires; and




 




(f)  a reference to the singular includes the

plural and vice versa.




 




"Beneficiaries"

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




 




"Corporate Trust

Office" means the office of the Guarantee Trustee at which the corporate

trust business of the Guarantee Trustee shall, at any particular time, be

principally administered, which office at the date of execution of this

Guarantee Agreement is located at 101 Barclay Street, Floor 21 W, New York, NY

10286.




 




"Covered

Person" means any Holder of Capital Securities.




 




"Debentures"

means the junior subordinated debentures of the Guarantor, designated the

10.25% Junior Subordinated Deferrable Interest Debentures due July 25, 2031,

held by the Institutional Trustee (as defined in the Declaration) of the

Issuer.




 




"Event of

Default" has the meaning set forth in Section 2.4.




 




"Guarantee

Payments" means the following payments or distributions, without duplication,

with respect to the Capital Securities, to the extent not paid or made by the

Issuer: (i) any accrued and unpaid Distributions (as defined in the

Declaration) which are required to be paid on such Capital Securities to the

extent the Issuer shall have funds available in the Property Account (as

defined in the Declaration) therefor at such time, (ii) the Redemption Price

(as defined in the Indenture) to the extent the Issuer has funds available in

the Property Account therefor at such time, with respect to any Capital

Securities called for redemption by the Issuer, (iii) the Special Redemption

Price (as defined in the Indenture) to the extent the Issuer has funds

available in the Property Account therefor at such time, with respect to

Capital Securities called for redemption upon the occurrence of a Special Event

(as defined in the Indenture), and (iv) upon a voluntary or involuntary

liquidation, dissolution, winding–up or termination of the Issuer (other

than in connection with the distribution of Debentures to the Holders of the

Capital Securities in exchange therefor as provided in the Declaration), the

lesser of (a) the aggregate of the liquidation amount and all accrued and

unpaid Distributions on the Capital Securities to the date of payment, to the

extent the Issuer shall have funds available in the Property Account therefor

at such time, and (b) the amount of assets of the Issuer remaining available

for distribution to Holders in liquidation of the Issuer after satisfaction of

liabilities to creditors of the Issuer as required by applicable law (in either

case, the "Liquidation Distribution").




 




"Guarantee

Trustee" means The Bank of New York, until a Successor Guarantee Trustee

has been appointed and has accepted such appointment pursuant to the terms of

this Guarantee and thereafter means each such Successor Guarantee Trustee.













 




"Holder" means

any holder, as registered on the books and records of the Issuer, of any

Capital Securities; provided, however, that, in determining whether the

holders of the requisite percentage of Capital Securities have given any

request, notice, consent or waiver hereunder, "Holder" shall not

include the Guarantor or any Affiliate of the Guarantor.




 




“Indemnified Person" means the Guarantee Trustee, any Affiliate of

the Guarantee Trustee, or any officers, directors, shareholders,

members, partners, employees, representatives, nominees, custodians or agents

of the Guarantee Trustee.




 




"Indenture"

means the Indenture dated as of July 16, 2001, between the Guarantor and The Bank

of New York, not in its individual capacity but solely as trustee, and any

indenture supplemental thereto pursuant to which the Debentures are to be

issued to the Institutional Trustee of the Issuer.




 




"Liquidation

Distribution" has the meaning set forth in the definition of

"Guarantee Payments" herein.




 




"Majority in

liquidation amount of the Capital Securities" means Holder(s) of

outstanding Capital Securities, voting together as a class, but separately from

the holders of Common Securities, of more than 50% of the aggregate liquidation

amount (including the stated amount that would be paid on redemption,

liquidation or otherwise, plus accrued and unpaid Distributions to, but

excluding, the date upon which the voting percentages are determined) of all Capital

Securities then outstanding.




 




"Obligations"

means any costs, expenses or liabilities (but not including liabilities related

to taxes) of the Issuer, other than obligations of the Issuer to pay to holders

of any Trust Securities the amounts due such holders pursuant to the terms of

the Trust Securities.




 




"Officer's

Certificate" means, with respect to any Person, a certificate signed by

one Authorized Officer of such Person. Any Officer's Certificate delivered with

respect to compliance with a condition or covenant provided for in this

Guarantee shall include:




 




(a)  a statement that each officer signing the

Officer's Certificate has read the covenant or condition and the definitions

relating thereto;




 




(b) a brief

statement of the nature and scope of the examination or investigation

undertaken by each officer in rendering the Officer's Certificate;




 




(c) a statement that

each such officer has made such examination or investigation as, in such

officer's opinion, is necessary to enable such officer to express an informed

opinion as to whether or not such covenant or condition has been complied with;

and




 




(d) a statement as

to whether, in the opinion of each such officer, such condition or covenant has

been complied with.













 




"Person" means

a 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 political

subdivision thereof, or any other entity of whatever nature.




 




"Responsible

Officer" means, with respect to the Guarantee Trustee, any officer within the Corporate Trust Office of

the Guarantee Trustee including any Vice President, Assistant Vice President,

Secretary, Assistant Secretary or any other officer of the Guarantee Trustee

customarily performing functions similar to those performed by any of the above

designated officers and also, with respect to a particular corporate trust

matter, any other officer to whom such matter is referred because of that officer's

knowledge of and familiarity with the particular subject.




 




"Successor

Guarantee Trustee" means a successor Guarantee Trustee possessing the

qualifications to act as Guarantee Trustee under Section 3.1.




 




"Trust

Securities" means the Common Securities and the Capital Securities.




 




ARTICLE

II




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 Guarantee

Trustee for the benefit of the Holders of the Capital Securities, and the

Guarantee Trustee shall not transfer this Guarantee to any Person except a

Holder of Capital Securities exercising his or her rights pursuant to Section

4.4 (b) or to a Successor Guarantee Trustee on acceptance by such Successor

Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The

right, title and interest of the Guarantee Trustee shall automatically vest in

any Successor Guarantee Trustee, and such vesting and cessation of title shall

be effective whether or not conveyancing documents have been executed and

delivered pursuant to the appointment of such Successor Guarantee Trustee.




 




(b) If an Event of

Default actually known to a Responsible Officer of the Guarantee Trustee has

occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee

for the benefit of the Holders of the Capital Securities.




 




(c)  The Guarantee Trustee, before the occurrence

of any Event of Default and after curing all Events of Default that may have

occurred, shall undertake to perform only such duties as are specifically set

forth in this Guarantee, and no implied covenants shall be read into this

Guarantee against the Guarantee Trustee. In case an Event of Default has

occurred (that has not been cured or waived pursuant to Section 2.4) and is

actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee

Trustee shall exercise such of the rights and powers vested in it by this

Guarantee, 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 the

conduct of his or her own affairs.













 




(d) No provision of

this Guarantee shall be construed to relieve the Guarantee Trustee from

liability for its own negligent action, its own negligent failure to act, or

its own willful misconduct, except that:




 




(i)   prior to the occurrence of any Event of

Default and after the curing or waiving of all such Events of Default that may

have occurred:




 




(A) the

duties and obligations of the Guarantee Trustee shall be determined solely by

the express provisions of this Guarantee, and the Guarantee Trustee shall not

be liable except for the performance of such duties and obligations as are

specifically set forth in this Guarantee, and no implied covenants or obligations

shall be read into this Guarantee against the Guarantee Trustee; and




 




(B) in

the absence of bad faith on the part of the Guarantee Trustee, the Guarantee

Trustee may conclusively rely, as to the truth of the statements and the

correctness of the opinions expressed therein, upon any certificates or

opinions furnished to the Guarantee Trustee and conforming to the requirements

of this Guarantee; but in the case of any such certificates or opinions

furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty

to examine the same to determine whether or not they conform to the

requirements of this Guarantee;




 




(ii) the

Guarantee Trustee shall not be liable for any error of judgment made in good

faith by a Responsible Officer of the Guarantee Trustee, unless it shall be

proved that such Responsible Officer of the Guarantee Trustee or the Guarantee

Trustee was negligent in ascertaining the pertinent facts upon which such

judgment was made;




 




(iii) the

Guarantee Trustee shall not be liable with respect to any action taken or

omitted to be taken by it in good faith in accordance with the written

direction of the Holders of not less than a Majority in liquidation amount of

the Capital Securities relating to the time, method and place of conducting any

proceeding for any remedy available to the Guarantee Trustee, or exercising any

trust or power conferred upon the Guarantee Trustee under this Guarantee; and




 




(iv) no

provision of this Guarantee shall require the Guarantee Trustee to expend or

risk its own funds or otherwise incur personal financial liability in the

performance of any of its duties or in the exercise of any of its rights or

powers, if the Guarantee

Trustee shall have reasonable grounds for believing that the repayment of such funds is not reasonably

assured to it under the terms of this Guarantee, or security and indemnity,

reasonably satisfactory to the Guarantee Trustee, against such risk or

liability is not reasonably assured to it.













 




Section 2.2             Certain Rights of Guarantee

Trustee




 




(a)           Subject to the provisions of Section

2.1:




 




(i) The

Guarantee Trustee may conclusively rely, and shall be fully protected in acting

or 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 document

believed by it to be genuine and to have been signed, sent or presented by the

proper party or parties.




 




(ii) Any

direction or act of the Guarantor contemplated by this Guarantee shall be

sufficiently evidenced by an Officer's Certificate.




 




(iii) Whenever,

in the administration of this Guarantee, the Guarantee Trustee shall deem it

desirable that a matter be proved or established before taking, suffering or omitting

any action hereunder, the Guarantee Trustee (unless other evidence is herein

specifically prescribed) may, in the absence of bad faith on its part, request

and conclusively rely upon an Officer's Certificate of the Guarantor which,

upon receipt of such request, shall be promptly delivered by the Guarantor.




 




(iv) The

Guarantee Trustee shall have no duty to see to any recording, filing or

registration of any instrument (or any rececording, refiling or registration

thereof).




 




(v) The

Guarantee Trustee may consult with counsel of its selection, and the advice or

opinion of such counsel with respect to legal matters shall be full and

complete authorization and protection in respect of any action taken, suffered

or omitted by it hereunder in good faith and in accordance with such advice or

opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates

and may include any of its employees. The Guarantee Trustee shall have the

right at any time to seek instructions concerning the administration of this

Guarantee from any court of competent jurisdiction.




 




(vi) The

Guarantee Trustee shall be under no obligation to exercise any of the rights or

powers vested in it by this Guarantee at the request or direction of any

Holder, unless such Holder shall have provided to the Guarantee Trustee such

security and indemnity, reasonably satisfactory to the Guarantee Trustee,

against the costs, expenses (including attorneys' fees and expenses and the

expenses of the Guarantee Trustee's agents, nominees or custodians) and

liabilities that might be incurred by it in complying with such request or

direction, including such reasonable advances as may be requested by the

Guarantee Trustee; provided, however, that nothing contained in this

Section 2.2(a)(vi) shall be taken to relieve the Guarantee Trustee, upon the

occurrence of an Event of Default, of its obligation to exercise the rights and

powers vested in it by this Guarantee.













 




(vii) The

Guarantee Trustee shall not be bound to make any investigation into the facts

or 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 the

Guarantee Trustee, in its discretion, may make such further inquiry or

investigation into such facts or matters as it may see fit.




 




(viii) The

Guarantee Trustee may execute any of the trusts or powers hereunder or perform

any duties hereunder either directly or by or through agents, nominees,

custodians or attorneys, and the Guarantee Trustee shall not be responsible for

any misconduct or negligence on the part of any agent or attorney appointed

with due care by it hereunder.




 




(ix) Any

action taken by the Guarantee Trustee or its agents hereunder shall bind the

Holders of the Capital Securities, and the signature of the Guarantee Trustee

or its agents alone shall be sufficient and effective to perform any such

action. No third party shall be required to inquire as to the authority of the

Guarantee Trustee to so act or as to its compliance with any of the terms and

provisions of this Guarantee, both of which shall be conclusively evidenced by

the Guarantee Trustee's or its agent's taking such action.




 




(x) Whenever

in the administration of this Guarantee the Guarantee Trustee shall deem it

desirable to receive instructions with respect to enforcing any remedy or right

or taking any other action hereunder, the Guarantee Trustee (A) may

request instructions from the Holders of a Majority in liquidation amount of

the Capital Securities, (B) may refrain from enforcing such remedy or right or

taking such other action until such instructions are received and (C) shall be

protected in conclusively relying on or acting in accordance with such instructions.




 




(xi) The

Guarantee Trustee shall not be liable for any action taken, suffered, or

omitted to be taken by it in good faith and reasonably believed by it to be

authorized or within the discretion or rights or powers conferred upon it by

this Guarantee.




 




(b) No provision of

this Guarantee shall be deemed to impose any duty or obligation on the

Guarantee Trustee to perform any act or acts or exercise any right, power, duty

or obligation conferred or imposed on it, in any jurisdiction in which it shall

be illegal or in which the Guarantee Trustee shall be unqualified or

incompetent in accordance with applicable law to perform any such act or acts

or to exercise any such right, power, duty or obligation. No permissive power

or authority available to the Guarantee Trustee shall be construed to be a

duty.













 




Section 2.3           Not Responsible for Recitals or

Issuance of Guarantee




 




The recitals contained

in this Guarantee shall be taken as the statements of the Guarantor, and the

Guarantee Trustee does not assume any responsibility for their correctness. The

Guarantee Trustee makes no representation as to the validity or sufficiency of

this Guarantee.




 




Section 2.4           Events of Default, Waiver




 




(a) An Event of

Default under this Guarantee will occur upon the failure of the Guarantor to

perform any of its payment or other obligations hereunder.




 




(b) The Holders of

a Majority in liquidation amount of Capital Securities may, voting or

consenting as a class, on behalf of the Holders of all of the Capital

Securities, waive any past Event of Default and its consequences. Upon such

waiver, any such Event of Default shall cease to exist, and shall be deemed to

have been cured, for every purpose of this Guarantee, but no such waiver shall

extend to any subsequent or other default or Event of Default or impair any

right consequent thereon.




 




Section 2.5           Events of Default, Notice




 




(a)  The Guarantee Trustee shall, within 90 days

after the occurrence of an Event of Default, transmit by mail, first class

postage prepaid, to the Holders of the Capital Securities, notices of all

Events of Default actually known to a Responsible Officer of the  Guarantee Trustee, unless such defaults have

been cured before the giving of such notice, provided, however, that the

Guarantee Trustee shall be protected in withholding such notice if and so long

as a Responsible Officer of the Guarantee Trustee in good faith determines that

the withholding of such notice is in the interests of the Holders of the

Capital Securities.




 




(b) The Guarantee

Trustee shall not be deemed to have knowledge of any Event of Default unless

the Guarantee Trustee shall have received written notice from the Guarantor or

a Holder of the Capital Securities (except in the case of a payment default),

or a Responsible Officer of the Guarantee Trustee charged with the

administration of this Guarantee shall have obtained actual knowledge, thereof.




 




ARTICLE

III




GUARANTEE

TRUSTEE




 




Section 3.1           Guarantee Trustee, Eligibility




 




(a)                     There shall at all times be

a Guarantee Trustee which shall:




 




(i)         not be an Affiliate of the Guarantor;

and




 




(ii)        be a corporation organized and doing

business under the laws of the United States of America or any State or

Territory thereof or of the District of Columbia, or Person authorized under

such laws to exercise corporate trust powers, having a combined capital and

surplus of at least 50 million U.S. dollars ($50,000,000), and subject to

supervision or examination by Federal, State, Territorial or District of

Columbia authority. If such corporation publishes reports of condition at least

annually, pursuant to law or to the requirements of the supervising or

examining authority referred to above, then, for the purposes of this Section

3.1 (a) (ii), the combined capital and surplus of such corporation shall be

deemed to be its combined capital and surplus as set forth in its most recent

report of condition so published.













 




(b) If at any time

the 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 the

effect set out in Section 3.2(c).




 




(c) If the

Guarantee Trustee has or shall acquire any "conflicting interest"

within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee

Trustee shall either eliminate such interest or resign to the extent and in the

manner provided by, and subject to this Guarantee.




 




Section 3.2           Appointment Removal and

Resignation of Guarantee Trustee




 




(a) Subject to

Section 3.2(b), the Guarantee Trustee may be appointed or removed without cause

at any time by the Guarantor except during an Event of Default.




 




(b) The Guarantee

Trustee shall not be removed in accordance with Section 3.2(a) until a

Successor Guarantee Trustee has been appointed and has accepted such

appointment by written instrument executed by such Successor Guarantee Trustee

and delivered to the Guarantor.




 




(c) The Guarantee

Trustee appointed to office shall hold office until a Successor Guarantee

Trustee shall have been appointed or until its removal or resignation. The

Guarantee Trustee may resign from office (without need for prior or subsequent

accounting) by an instrument in writing executed by the Guarantee Trustee and

delivered to the Guarantor, which resignation shall not take effect until a

Successor Guarantee Trustee has been appointed and has accepted such

appointment by an instrument in writing executed by such Successor Guarantee

Trustee and delivered to the Guarantor and the resigning Guarantee Trustee.




 




(d) If no Successor

Guarantee Trustee shall have been appointed and accepted appointment as

provided in this Section 3.2 within 60 days after delivery of an instrument of

removal or resignation, the Guarantee Trustee resigning or being removed may

petition any court of competent jurisdiction for appointment of a Successor

Guarantee Trustee. Such court may thereupon, after prescribing such notice, if

any, as it may deem proper, appoint a Successor Guarantee Trustee.













 




(e) No Guarantee

Trustee shall be liable for the acts or omissions to act of any Successor

Guarantee Trustee.




 




(f) Upon

termination of this Guarantee or removal or resignation of the Guarantee

Trustee pursuant to this Section 3.2, the Guarantor shall pay to the Guarantee

Trustee all amounts owing to the Guarantee Trustee under Sections 7.2 and 7.3

accrued to the date of such termination, removal or resignation.




 




ARTICLE

IV




GUARANTEE




 




Section 4.1           Guarantee




 




(a) The Guarantor

irrevocably and unconditionally agrees to pay in full to the Holders the

Guarantee Payments (without duplication of amounts theretofore paid by the

Issuer), as and when due, regardless of any defense (except as defense of

payment by the Issuer), right of set–off or counterclaim that the Issuer

may have or assert. The Guarantor's obligation to make a Guarantee Payment may

be satisfied by direct payment of the required amounts by the Guarantor to the

Holders or by causing the Issuer to pay such amounts to the Holders.




 




(b) The Guarantor

hereby also agrees to assume any and all Obligations of the Issuer and in the

event any such Obligation is not so assumed, subject to the terms and

conditions hereof, the Guarantor hereby irrevocably and unconditionally

guarantees to. each Beneficiary the full payment, when and as due, of any and

all obligations to such Beneficiaries. This Agreement is intended to be for the

Beneficiaries who have received notice hereof.




 




Section 4.2           Waiver of Notice and Demand




 




The Guarantor hereby

waives notice of acceptance of this Guarantee and of any liability to which it

applies or may apply, presentment, demand for payment, any right to require a

proceeding first against the Issuer or any other Person before proceeding

against 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 in

no way be affected or impaired by reason of the happening from time to time of

any of the following:




 




(a) the

release or waiver, by operation of law or otherwise, of the performance or

observance by the Issuer of any express or implied agreement, covenant, term or

condition relating to the Capital Securities to be performed or observed by the

Issuer;













 




(b) the extension

of time for the payment by the Issuer of all or any portion of the

Distributions, Redemption Price, Special Redemption Price, Liquidation

Distribution or any other sums payable under the terms of the Capital

Securities or the extension of time for the performance of any other obligation

under, arising out of, or in connection with, the Capital Securities (other

than an extension of time for payment of Distributions, Redemption Price,

Special Redemption Price, Liquidation Distribution or other sum payable that

results from the extension of any

interest payment period on the Debentures or any extension of the maturity date

of 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 the

Holders pursuant to the terms of the Capital Securities, or any action on the

part of the Issuer granting indulgence or extension of any kind;




 




(d) the voluntary

or 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 other

similar proceedings affecting, the Issuer or any of the assets of the Issuer;




 




(e) any invalidity

of, or defect or deficiency in, the Capital Securities;




 




(f) the settlement

or compromise of any obligation guaranteed hereby or hereby incurred; or




 




(g) any other

circumstance whatsoever that might otherwise constitute a legal or equitable discharge

or defense of a guarantor, it being the intent of this Section 4.3 that the

obligations of the Guarantor hereunder shall be absolute and unconditional

under any and all circumstances.




 




There shall be no

obligation of the Holders to give notice to, or obtain consent of, the

Guarantor with respect to the happening of any of the foregoing.




 




Section 4.4           Rights of Holders




 




(a)  The Holders of a Majority in liquidation

amount of the Capital Securities have the right to direct the time, method and

place of conducting any proceeding for any remedy available to the Guarantee

Trustee in respect of this Guarantee or to direct the exercise of any trust or

power conferred upon the Guarantee Trustee under this Guarantee; provided,

however, that (subject to Sections 2.1 and 2.2) the Guarantee Trustee shall

have the right to decline to follow any such direction if the Guarantee Trustee

shall determine that the actions so directed would be unjustly prejudicial to

the Holders not taking part in such direction or if the Guarantee Trustee being

advised by counsel determines that the action or proceeding so directed may not

lawfully be taken or if the Guarantor Trustee in good faith by its board of

directors or trustees, executive committees or a trust committee of directors

or trustees and/or Responsible Officers shall determine that the action or

proceedings so directed would involve the Guarantee Trustee in personal

liability.













 




(b) Any Holder of

Capital Securities may institute a legal proceeding directly against the Guarantor

to enforce the Guarantee Trustee's rights under this Guarantee, without first

instituting a legal proceeding against the Issuer, the Guarantee Trustee or any

other Person. The Guarantor waives any right or remedy to require that any such

action be brought first against the Issuer, the Guarantee Trustee or any other

Person before so proceeding directly against the Guarantor.




 




Section 4.5           Guarantee of Payment




 




This Guarantee creates a

guarantee of payment and not of collection.




 




Section 4.6           Subrogation




 




The Guarantor shall be

subrogated to all (if any) rights of the Holders of Capital Securities against

the Issuer in respect of any amounts paid to such Holders by the Guarantor

under this Guarantee; provided, however, that the Guarantor shall not

(except to the extent required by applicable provisions of law) be entitled to

enforce or exercise any right that it may acquire by way of subrogation or any

indemnity, reimbursement or other agreement, in all cases as a result of

payment under this Guarantee, if, after giving effect to any such payment, any

amounts are due and unpaid under this Guarantee. If any amount shall be paid to

the Guarantor in violation of the preceding sentence, the Guarantor agrees to

hold such amount in trust for the Holders and to pay over such amount to the

Holders.




 




Section 4.7           Independent Obligations




 




The Guarantor

acknowledges that its obligations hereunder are independent of the obligations

of the Issuer with respect to the Capital Securities and that the  Guarantor shall be liable as principal and

as debtor hereunder to make Guarantee Payments pursuant to the terms of this

Guarantee notwithstanding the occurrence of any event referred to in

subsections (a) through (g), inclusive, of Section 4.3 hereof.




 




Section 4.8           Enforcement.




 




A Beneficiary may

enforce the obligations of the Guarantor contained in Section 4.1(b) directly

against the Guarantor, and the Guarantor waives any right or remedy to require

that any action be brought against the Issuer or any other person or entity before

proceeding against the Guarantor.




 




The Guarantor shall be

subrogated to all rights (if any) of any Beneficiary against the Issuer in

respect of any amounts paid to the Beneficiaries by the Guarantor under this

Guarantee; provided, however, that the Guarantor shall not (except to

the extent required by applicable provisions of law) be entitled to enforce or

exercise 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 under

this Guarantee, if, after giving effect to such payment, any amounts are due

and unpaid under this Guarantee.













 




ARTICLE

V




LIMITATION

OF TRANSACTIONS; SUBORDINATION




 




Section 5.1           Limitation of Transactions




 




So long as any Capital

Securities remain outstanding, if (a) there shall have occurred and be

continuing an Event of Default or (b) the Guarantor shall have selected an

Extension Period as provided in the Declaration and such period, or any

extension thereof, shall have commenced and be continuing, then the Guarantor

may not (x) declare or pay any dividends or distributions on, or redeem,

purchase, acquire, or make a liquidation payment with respect to, any of the

Guarantor's capital stock or (y) make any payment of principal of or interest

or premium, if any, on or repay, repurchase or redeem any debt securities of

the 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 acquisitions

of shares of capital stock of the Guarantor in connection with any employment

contract, benefit plan or other similar arrangement with or for the benefit of

one or more employees, officers, directors, or consultants, in connection with

a dividend reinvestment or stockholder stock purchase plan or in connection

with the issuance of capital stock of the Guarantor (or securities convertible

into or exercisable for such capital stock) as consideration in an acquisition

transaction entered into prior to occurrence of the Event of Default or the

applicable Extension Period, (iii) as a result of any exchange of conversion of

any class or series of the Guarantor's capital stock (or any capital stock of a

subsidiary of the Guarantor) for any class or series of the Guarantor's capital

stock or of any class or series of the Guarantor's indebtedness for any class

or series of the Guarantor's capital stock, (iv) the purchase of fractional

interests in shares of the Guarantor's capital stock pursuant to the conversion

or exchange provisions of such capital stock or the security being converted or

exchanged, (v) any declaration of a dividend in connection with any

stockholder's rights plan, or the issuance of rights, stock or other property

under any stockholder's rights plan, or the redemption or repurchase of rights

pursuant thereto, or (vi) any dividend in the form of stock, warrants, options

or other rights where the dividend stock or the stock issuable upon exercise of

such warrants, options or other rights is the same stock as that on which the

dividend is being paid or ranks pari passu

with or junior to such stock).




 




Section 5.2           Ranking




 




This Guarantee will

constitute an unsecured obligation of the Guarantor and will rank subordinate

and 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 this

Guarantee and the other terms set forth herein.




 




The right of the Guarantor to participate in any distribution

of assets of any of its subsidiaries upon any such subsidiary's

liquidation or reorganization or otherwise is subject to the prior claims of

creditors of that subsidiary, except to the extent the Guarantor may itself be

recognized as a creditor of that subsidiary. Accordingly, the Guarantor's

obligations under this Guarantee will be effectively subordinated to all

existing and future liabilities of the Guarantor's subsidiaries, and claimants

should look only to the assets of the Guarantor for payments thereunder. This

Guarantee does not limit the incurrence or issuance of other secured or

unsecured debt of the Guarantor, including Senior Indebtedness of the

Guarantor, under any indenture or agreement that the Guarantor may enter into

in the future or otherwise.













 




ARTICLE

VI




TERMINATION




 




Section 6.1           Termination




 




This Guarantee shall

terminate as to the Capital Securities (i) upon full payment of the Redemption

Price or the Special Redemption Price, as the case may be, of all Capital

Securities then outstanding, (ii) upon the distribution of all of the

Debentures to the Holders of all of the Capital Securities or (iii) upon full

payment of the amounts payable in accordance with the Declaration upon dissolution

of the Issuer. This Guarantee will continue to be effective or will be

reinstated, as the case may be, if at any time any Holder of Capital Securities

must restore payment of any sums paid under the Capital Securities or under

this Guarantee.




 




ARTICLE

VII




INDEMNIFICATION




 




Section 7.1           Exculpation




 




(a) No Indemnified

Person shall be liable, responsible or accountable in damages or otherwise to

the Guarantor or any Covered Person for any loss, damage or claim incurred by

reason of any act or omission performed or omitted by such Indemnified Person

in good faith in accordance with this Guarantee and in a manner that such

Indemnified Person reasonably believed to be within the scope of the authority

conferred on such Indemnified Person by this Guarantee or by law, except that

an Indemnified Person shall be liable for any such loss, damage or claim

incurred by reason of such Indemnified Person's negligence or willful

misconduct with respect to such acts or omissions.




 




(b) An Indemnified

Person shall be fully protected in relying in good faith upon the records of

the Issuer or the Guarantor and upon such information, opinions, reports or

statements presented to the Issuer or the Guarantor by any Person as to matters

the Indemnified Person reasonably believes are within such other Person's

professional or expert competence and who, if selected by such Indemnified

Person, has been selected with reasonable care by such Indemnified Person,

including information, opinions, reports or statements as to the value and amount

of the assets, liabilities, profits, losses, or any other facts pertinent to

the existence and amount of assets from which Distributions to Holders of

Capital Securities might properly be paid.













 




Section 7.2           Indemnification




 




(a) The Guarantor

agrees to indemnify each Indemnified Person for, and to hold each Indemnified

Person harmless against, any and all loss, liability, damage, claim or expense

incurred without negligence or willful misconduct on the part of the

Indemnified Person, arising out of or in connection with the acceptance or

administration of the trust or trusts hereunder, including but not limited to

the costs and expenses (including reasonable legal fees and expenses) of the

Indemnified Person defending itself against, or investigating, any claim or

liability in connection with the exercise or performance of any of the

Indemnified Person's powers or duties hereunder. The obligation to indemnify as

set forth in this Section 7.2 shall survive the resignation or removal of the

Guarantee Trustee and the termination of this Guarantee.




 




(b) Promptly after

receipt by an Indemnified Person under this Section 7.2 of notice of the

commencement of any action, such Indemnified Person will, if a claim in respect

thereof is to be made against the Guarantor under this Section 7.2, notify the

Guarantor in writing of the commencement thereof; but the failure so to notify

the Guarantor (i) will not relieve the Guarantor from liability under paragraph

(a) above unless and to the extent that the Guarantor did not otherwise learn

of such action and such failure results in the forfeiture by the Guarantor of

substantial rights and defenses and (ii) will not, in any event, relieve the

Guarantor from any obligations to any Indemnified Person other than the

indemnification obligation provided in paragraph (a) above. The Guarantor shall

be entitled to appoint counsel of the Guarantor's choice at the Guarantor's

expense to represent the Indemnified Person in any action for which

indemnification is sought (in which case the Guarantor shall not thereafter be

responsible for the fees and expenses of any separate counsel retained by the

Indemnified 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 the

Guarantor in an action, the Indemnified Person shall have the right to employ

separate counsel (including local counsel), and the Guarantor shall bear the

reasonable fees, costs and expenses of such separate counsel if (i) the use of

counsel chosen by the Guarantor to represent the Indemnified Person would

present such counsel with a conflict of interest, (ii) the actual or potential

defendants in, or targets of, any such action include both the Indemnified

Person and the Guarantor and the Indemnified Person shall have reasonably

concluded that there may be legal defenses available to it and/or other

Indemnified Person which are different from or additional to those available to

the Guarantor, (iii) the Guarantor shall not have employed counsel satisfactory

to the Indemnified Person to represent the Indemnified Person within a

reasonable time after notice of the institution of such action or (iv) the

Guarantor shall authorize the Indemnified Person to employ separate counsel at

the expense of the Guarantor. The Guarantor will not, without the prior written

consent of the Indemnified Persons, settle or compromise or consent to the

entry of any judgment with respect to any pending or threatened claim, action,

suit or proceeding in respect of which indemnification or contribution may be

sought hereunder (whether or not the Indemnified Persons are actual or

potential parties to such claim or action) unless such settlement, compromise or

consent includes an unconditional release of each Indemnified Person from all

liability arising out of such claim, action, suit or proceeding.













 




Section 7.3           Compensation, Reimbursement of

Expenses




 




The Guarantor agrees:




 




(a) to pay to the

Guarantee Trustee from time to time such compensation for all services rendered

by it hereunder as the parties shall agree to from time to time (which

compensation shall not be limited by any provision of law in regard to the

compensation of a trustee of an express trust); and




 




(b) except as

otherwise expressly provided herein, to reimburse the Guarantee Trustee upon

request for all reasonable expenses, disbursements and advances incurred or

made by it in accordance with any provision of this Guarantee (including the

reasonable compensation and the expenses and disbursements of its agents and

counsel), except any such expense, disbursement or advance as may be

attributable to its negligence or willful misconduct.




 




The provisions of this

Section 7.3 shall survive the resignation or removal of the Guarantee Trustee

and the termination of this Guarantee.




 




ARTICLE

VIII




MISCELLANEOUS




 




Section 8.1           Successors and Assigns




 




All guarantees and

agreements contained in this Guarantee shall bind the successors, assigns,

receivers, trustees and representatives of the Guarantor and shall inure to the

benefit of the Holders of the Capital Securities then outstanding. Except in

connection with any merger or consolidation of the Guarantor with or into

another entity or any sale, transfer or lease of the Guarantor's assets to

another entity, in each case, to the extent permitted under the Indenture, the

Guarantor may not assign its rights or delegate its obligations under this

Guarantee without the prior approval of the Holders of at least a Majority in

liquidation amount of the Capital Securities.




 




Section 8.2           Amendments




 




Except with respect to

any changes that do not adversely affect the rights of Holders of the Capital

Securities in any material respect (in which case no consent of Holders will be

required), this Guarantee may be amended only with the prior approval of the

Holders of not less than a Majority in liquidation amount of the Capital

Securities. The provisions of the Declaration with respect to amendments

thereof shall apply equally with respect to amendments of the Guarantee.













 




Section 8.3           Notices




 




All notices provided for

in this Guarantee shall be in writing, duly signed by the party giving such

notice, and shall be delivered, telecopied or mailed by first class mail, as

follows:




 




(a) If given to the Guarantee Trustee, at the

Guarantee Trustee's mailing address set forth below (or such other address as the

Guarantee Trustee may give notice of to the Holders of the Capital Securities):




 




The

Bank of New York




101

Barclay Street, Floor 21W




New

York, NY 10286




Attention:

Corporate Trust Administration




Telecopy:

212–815–5915




 




(b) If given to the

Guarantor, at the Guarantor's mailing address set forth below (or such other

address as the Guarantor may give notice of to the Holders of the Capital

Securities and to the Guarantee Trustee):




 




National

Mercantile Bancorp




1840

Century Park East




Los

Angeles, California 90067




Attention:

Scott A. Montgomery




Telecopy:

310–201–0629




 




(c)  If given to any Holder of the Capital

Securities, at the address set forth on the books and records of the Issuer.




 




All such notices shall

be deemed to have been given when received in person, telecopied with receipt

confirmed, or mailed by first class mail, postage prepaid except that if a

notice or other document is refused delivery or cannot be delivered because of

a changed address of which no notice was given, such notice or other document

shall be deemed to have been delivered on the date of such refusal or inability

to deliver.




 




Section 8.4           Benefit




 




This Guarantee is solely

for the benefit of the Holders of the Capital Securities and, subject to

Section 2.1(a), is not separately transferable from the Capital Securities.




 




Section 8.5           Governing Law




 




THIS GUARANTEE SHALL BE

GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW

YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.













 




Section 8.6           Counterparts




 




This Guarantee may

contain more than one counterpart of the signature page and this Guarantee may

be executed by the affixing of the signature of the Guarantor and the Guarantee

Trustee to any of such counterpart signature pages. All of such counterpart

signature pages shall be read as though one, and they shall have the same force

and effect as though all of the signers had signed a single signature page.




 













 




 




                THIS

GUARANTEE 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