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EXHIBIT 10.19
WARRANT AGREEMENT
by and between
NATIONAL MERCANTILE BANCORP
and
CALIFORNIA STATE TEACHERS' RETIREMENT SYSTEM
December 31, 1995
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TABLE OF CONTENTS
Page
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1. Definitions.................................................... 1
2. Grant of Warrant............................................... 5
3. Closing........................................................ 5
4. Representations and Warranties of the Warrant Holder........... 5
5. Representations and Warranties of the Company.................. 7
6. Exercise of Warrant; Transfer of Warrant....................... 9
7. Payment of Taxes............................................... 11
8. Mutilated or Missing Warrant Certificate....................... 11
9. Reservation of Warrant Shares.................................. 11
10. Adjustment to the Number of Warrant Shares Issuable............ 11
11. Fractional Interests........................................... 12
12. Warrant Agent.................................................. 12
13. Conditions Precedent to the Warrant Holder's Obligations....... 13
14. Conditions Precedent to the Company's Obligations.............. 13
15. Recapitalization............................................... 14
16. Survival of the Representations, Warranties, etc............... 14
17. Covenants of the Warrant Holder................................ 14
18. Notices........................................................ 15
19. Miscellaneous.................................................. 16
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WARRANT AGREEMENT
This Warrant Agreement is dated as of December 31, 1995, and is
entered into by and between National Mercantile Bancorp, a California
corporation (the "Company") and California State Teachers' Retirement System, a
retirement system created pursuant to the laws of the State of California (the
"Warrant Holder").
R E C I T A L S
A. The Warrant Holder and Mercantile National Bank, a national banking
association (the "Bank"), are concurrently herewith entering into the Lease
Restructure Agreement (as defined below).
B. The Company, as the sole shareholder of the Bank, will be directly
benefitted by the Lease Restructure Agreement.
C. It is a condition of the Lease Restructure Agreement that this
Warrant Agreement and the Registration Rights Agreement (as defined below) be
executed and delivered before the Company and the Bank may obtain the benefits
of the Lease Restructure Agreement.
D. To obtain such benefits, the Company has agreed to execute and
deliver this Warrant Agreement and the Registration Rights Agreement.
E. The Warrant Holder will be relying on this Warrant Agreement in
entering into the Lease Restructure Agreement and but for this Warrant Agreement
and the Registration Rights Agreement, the Warrant Holder would not enter into
the Lease Restructure Agreement.
F. The Lease Restructure Agreement constitutes full and adequate
consideration for this Warrant Agreement and the Registration Rights Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements hereinafter set forth, and for other fair and adequate consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions.
(i) "Act" shall mean the Securities Act of 1933, as amended.
(ii) "Advisors" shall mean Trust Company of the West, TCW Realty
Advisors and Westmark Realty Advisors, LLC.
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(iii) "Business Day" shall mean any day which banks in the city
of Los Angeles, California are open for business.
(iv) "Capital Stock" shall mean any and all shares or other
equivalents (however designated) of corporate stock, including each
class of Common Stock and Preferred Stock.
(v) "Closing" has the meaning specified in Section 3 hereof.
(vi) "Closing Date" has the meaning specified in Section 3
hereof.
(vii) "Common Stock" shall mean the common stock of the Company,
no par value.
(viii) "Company" shall mean National Mercantile Bancorp, a
California corporation.
(ix) "Education Code" has the meaning specified in Section
4(g).
(x) "Exchange Act" has the meaning specified in Section 5(e)
hereof.
(xi) "Exercise Period" shall mean such period of time
commencing with the issuance of the Warrant and ending December 31,
2002.
(xii) "Exercise Price" shall mean the per share price equal to
the lesser of (a) the lowest price such shares are offered for sale in
an Offering, (b) $1.50, or (c) the lowest price at which such shares
may be purchased by any other person pursuant to any option, warrant or
other right to purchase stock (other than Permitted Options) in the
Company granted at any time on or before December 31, 1997.
(xiii) "Expiration Date" has the meaning specified in Section
6(a) hereof.
(xiv) "Lease Restructure Agreement" shall mean the Lease
Restructure Agreement dated the same date hereas between the Bank and
the Warrant Holder.
(xv) "Offered Interest" has the meaning specified in Section
17(b) hereof.
(xvi) "Offering" shall mean the offer and sale of the Company's
Capital Stock at any time on or prior to December 31, 1997 (a) to the
public pursuant to an effective registration statement filed with the
Securities and Exchange Commission (other than pursuant to an effective
registration statement on Form S-4, or on Form S-8 relating to stock
options and Capital Stock relating thereto or any unregistered offering
to the
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Company's employees or directors, or to the employees of the Company's
subsidiaries pursuant to any employee benefit plan (as defined in Rule
405 under the Act)) under the Act and (b) to individuals or entities
pursuant to an exemption from registration under the applicable federal
and state securities laws.
(xvii) "Outstanding Stock" shall mean the outstanding Capital
Stock of the Company on December 31, 1997.
(xviii) "Ownership Change" shall mean the occurrence of a
Recapitalization which results in a change in the Company's ability to
use its currently existing net operating loss carry forward of
approximately $20,000,000 pursuant to Section 382 of the Internal
Revenue Code.
(xix) "Permitted Options" shall mean options to acquire no more
than 500,000 shares of Capital Stock in the aggregate granted to
officers, directors or employees of the Company or any of its
subsidiaries.
(xx) "Permitted Successors and Assigns" shall mean (a) any
insurance company as defined in Section 2(13) of the Act, (b) any
investment company registered under the Investment Company Act of 1940,
(c) any plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan
has total assets in excess of $5,000,000, (d) any employee benefit plan
within the meaning of the Employee Retirement Income Security Act of
1974 if the investment decision is made by a plan fiduciary, as defined
in Section 3(21) of such act, which is either a bank, insurance company
or registered investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000, (e) any organization described in
Section 501(c)(3) of the Code, corporation, limited liability company,
group trust, Massachusetts or similar business trust, or partnership,
not formed for the purpose of acquiring the securities offered, with
total assets in excess of $5,000,000, (f) any natural person whose
individual net worth, or joint net worth with that person's spouse at
the time of his purchase exceeds $1,000,000, (g) any natural person who
had an individual income in excess of $200,000 in each of the two most
recent years or joint income with that person's spouse in excess of
$300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year, or (h) such other
persons or entities reasonably approved by the Company, which approval
shall not be unreasonably withheld. In the event the Company fails to
disapprove of such persons or entities within twenty (20) days of
receipt of written notice regarding the proposed transferee, such
transferee shall be deemed approved by the Company.
(xxi) "Preferred Stock" shall mean the preferred stock of the
Company.
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(xxii) "Purchase Offer" has the meaning specified in Section
17(b) hereof.
(xxiii) "Purchase Offer Price" has the meaning specified in
Section 17(b) hereof.
(xxiv) "Recapitalization" shall mean any merger or
consolidation of the Company (excluding a merger of the Company into
Mercantile National Bank) or any Offering on or before December 31,
1997.
(xxv) "Registration Rights Agreement" shall mean the
Registration Rights Agreement dated the same date hereas between the
Company and the Warrant Holder.
(xxvi) "Restriction Period" shall mean the period from the date
of issuance of the Warrant and ending three (3) years from the date of
the last Recapitalization but no later than December 31, 2000 unless
either (a) there has been an Ownership Change (in which case the
Restriction Period shall end upon such Ownership Change), or (b) no
Recapitalization occurs (in which case the Restriction Period shall end
on December 31, 1997).
(xxvii) "Sale Notice" has the meaning specified in Section 17(b)
hereof.
(xxviii) "Transfer Agent" shall mean U.S. Stock Transfer
Corporation or such other generally recognized transfer agent as
designated.
(xxix) "Warrant" has the meaning specified in Section 2(a)
hereof.
(xxx) "Warrant Agent" shall mean the Transfer Agent or such
other warrant agent appointed by the parties hereto.
(xxxi) "Warrant Agreement" shall mean this Warrant Agreement
dated December 31, 1995 between the Company and the Warrant Holder.
(xxxii) "Warrant Certificate" has the meaning specified in
Section 2(b) hereof.
(xxxiii) "Warrant Holder" shall mean California State Teachers'
Retirement System, a retirement system created pursuant to the laws of
the State of California, or any Permitted Successors and Assigns.
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(xxxiv) "Warrant Holder Affiliates" shall mean the affiliates,
related entities, agents, officers, board members, trustees,
beneficiaries, employees or internal investment contractors of the
Warrant Holder or any of the Advisors.
(xxxv) "Warrant Shares" has the meaning specified in Section 2
hereof.
2. Grant of Warrant.
(a) Upon the basis of the representations and warranties,
and subject to the terms and conditions set forth in the Warrant Agreement, the
Company shall grant to the Warrant Holder on the Closing Date, a warrant to
purchase a number of shares of the Company's Capital Stock ("Warrant") to be
determined in accordance with Section 6(b) hereof (the "Warrant Shares"),
subject to adjustment as provided in the Warrant Agreement, at the Exercise
Price, during the Exercise Period and upon the basis of the representations and
warranties, and subject to the terms and conditions set forth in the Warrant
Agreement, the Warrant Holder shall acquire from the Company on the Closing Date
the Warrant.
(b) A certificate representing the Warrant ("Warrant
Certificate") to be delivered pursuant to the Warrant Agreement shall be
substantially in the form set forth in Exhibit A attached hereto and shall be
registered in the books and records of the Company in the name of the Warrant
Holder.
3. Closing. The closing (the "Closing") of the transaction
contemplated by the Lease Restructure Agreement shall take place on January __,
1996, at 10:00 a.m. at the offices of Cox, Castle & Nicholson located at 2049
Century Park East, Los Angeles, California, or at such other date, time and
place as the Warrant Holder and the Company may agree upon in writing (such time
and date for the Closing, the "Closing Date"). The Warrant Certificate to be
acquired by the Warrant Holder shall be delivered by, or on behalf of, the
Company at the above-mentioned offices, on the Closing Date.
4. Representations and Warranties of the Warrant Holder. The
Warrant Holder understands, and represents and warrants to the Company, on the
date hereof and on each exercise of the Warrant by the Warrant Holder that:
(a) The Warrant is being issued and the Warrant Shares
will be issued in reliance on specific exemptions from the registration
requirements of federal and state securities laws and the Company is relying
upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Warrant Holder set forth herein to
determine the applicability of such exemptions and the suitability of the
Warrant Holder to acquire the Warrant and the Warrant Shares.
(b) The Warrant and the Warrant Shares have not been and,
except as provided in the Registration Rights Agreement, will not be registered
under the Act and may only be offered or sold by the Warrant Holder pursuant to
registration under the Act or an available exemption therefrom.
(c) The transactions contemplated by the Warrant
Agreement are not part of a plan or scheme to evade the registration provisions
of the Act.
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(d) Except as contemplated by the Registration Rights
Agreement, the Warrant Holder is purchasing the Warrant, or the Warrant Shares,
as the case may be, for its own account and not with a view to, or for sale in
connection with, any "distribution" (as such term is used in Section 2(11) of
the Act) thereof or of the Warrant Shares.
(e) The Warrant Holder, by reason of its business or
financial experience, or the business or financial experience of its
professional advisors who are unaffiliated with and who are not compensated by
the Company, or any of its affiliates, directly or indirectly, could be
reasonably assumed to have the capacity to protect the Warrant Holder's interest
in connection with the acquisition of the Warrant, or the Warrant Shares, as the
case may be.
(f) The Warrant Holder is an "accredited investor" as
defined in Regulation D under the Act.
(g) The Warrant Holder is a unit of the California State
and Consumer Services Agency established pursuant to Title I, Division 1, Part
13 of the California Education Code, Sections 22000, et seq., as amended (the
"Education Code"). The Warrant Holder is restricted from engaging in
transactions with a "school district or other employing agency" or a "member,
retirant or beneficiary" (as those terms are defined in the Education Code) in
violation of the Education Code.
(h) The Warrant Holder is subject to restrictions and
requirements under the Internal Revenue Code, 26 U.S.C. Section 1 et seq.
(i) Except as disclosed in a letter substantially in the
form of Schedule 4(i) hereto delivered to the Company on the date hereof and at
the time of each exercise of the Warrant, as of the date set forth in such
letter, which date shall be no earlier than three (3) Business Days prior to the
date the letter is delivered, the Warrant Holder does not beneficially own,
within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), any Capital Stock of the Company.
(j) If the Warrant were exercised on the Closing Date,
the purchase of the Warrant Shares by the Warrant Holder pursuant thereto would
not violate any law or regulation presently existing and applying specifically
to the Warrant Holder.
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(k) To the Warrant Holder's knowledge, neither the
Warrant Holder nor its Advisors have received any contribution or contributions
as such terms are used in the Education Code from the Company.
(l) To the Warrant Holder's knowledge, none of the
Warrant Holder, the Advisors or the Warrant Holder Affiliates has received or
will receive, directly or indirectly, from the Company any payment,
consideration or other benefit from and no Warrant Holder Affiliate has any
agreement or arrangement with, the Company, in each case relating to the
transactions contemplated by the Warrant Agreement except as expressly set forth
in the Warrant Certificate, the Warrant Agreement, the Registration Rights
Agreement and the Lease Restructure Agreement, together with the Bill of Sale
and the Attornment Agreements contemplated by the Lease Restructure Agreement.
(m) The Lease Restructure Agreement, the Warrant
Agreement and the documents executed and delivered by the Warrant Holder
pursuant thereto, the Registration Rights Agreement and the documents executed
and delivered by the Warrant Holder pursuant thereto, have been duly authorized,
executed and delivered by the Warrant Holder and each is a valid and binding
agreement enforceable in accordance with its respective terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity; and the Warrant Holder has full
power and authority necessary to enter into the Lease Restructure Agreement, the
Warrant Agreement and the Registration Rights Agreement and to perform its
obligations hereunder and thereunder.
(n) No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over the
Warrant Holder is required for execution of the Lease Restructure Agreement, the
Warrant Agreement or the documents executed and delivered by the Warrant Holder
pursuant thereto, the Registration Rights Agreement or the documents executed
and delivered by the Warrant Holder pursuant thereto. The execution and delivery
of the Lease Restructure Agreement, the Warrant Agreement and the Registration
Rights Agreement by the Warrant Holder does not result in a violation of any
law, rule or regulation, or any order, judgment or decree of any court, or
governmental agency applicable to the Warrant Holder.
5. Representations and Warranties of the Company. The
Company represents and warrants to the Warrant Holder that:
(a) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of California.
(b) The Warrant Agreement, the Warrant Certificate and
the Registration Rights Agreement have been duly authorized, executed and
delivered by the Company and each is a valid and binding agreement enforceable
in accordance with its
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respective terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity;
and the Company has full corporate power and corporate authority necessary to
enter into such agreements and to perform its obligations hereunder and
thereunder.
(c) No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over the
Company is required for execution of the Warrant Agreement, the Warrant
Certificate or the Registration Rights Agreement. The execution and delivery of
the Warrant Agreement, the Warrant Certificate and the Registration Rights
Agreement by the Company and the issuance of the Warrant to the Warrant Holder
does not result in a violation of any law, rule or regulation, or any order,
judgment or decree of any court, or governmental agency applicable to the
Company.
(d) The Warrant and all Warrant Shares upon issuance in
accordance with the terms hereof:
(i) are, or will be, free and clear of any security
interests, liens, claims or other encumbrances;
(ii) have been, or will be, duly and validly
authorized and will be duly and validly issued;
(iii) shall be fully paid and nonassessable; and
(iv) will not have been issued or sold in violation
of any preemptive or other similar rights of the holders of any
securities of the Company.
(e) The Company has filed all reports required to be
filed by Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 (the
"Exchange Act") during the preceding twelve (12) months and has been subject to
such filing requirements for the past 90 days.
(f) The Company's Common Stock is quoted for trading on
the Nasdaq Stock Market.
(g) The Company owns 100% of the Bank, the Tenant under
the Leases (as those terms are defined in the Lease Restructure Agreement).
(h) Except as set forth on Schedule 5(h) hereto, no
options, warrants or other rights to purchase shares of the Company's Capital
Stock exist.
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(i) Except as set forth on Schedule 5(i) hereto, there
currently exist no taxes which would be attributable to the issuance of the
Warrant Shares upon the exercise of the Warrant.
(j) The Company has 10,000,000 shares of Common Stock
authorized, of which 3,078,146 are outstanding and 1,000,000 shares of Preferred
Stock authorized, of which there are no outstanding shares.
(k) The Company is not a school district or other
employing agency as such terms are defined in the Education Code.
(l) To the Company's knowledge, the Company has not made
any contribution or contributions as such terms are used in the Education Code
to the Warrant Holder.
(m) To the Company's knowledge, neither a school district
nor other employing agency (as those terms are defined in the Education Code) is
related to the Company by any relationship described in Section 267(b) of the
Internal Revenue Code.
(n) To the Company's knowledge, none of the Warrant
Holder, the Advisors or the Warrant Holder Affiliates has received or will
receive, directly or indirectly, from the Company any payment, consideration or
other benefit from, and no Warrant Holder Affiliate has any agreement or
arrangement with, the Company, in each case relating to the transactions
contemplated by the Warrant Certificate, the Warrant Agreement and the
Registration Rights Agreement except as expressly set forth in the Warrant
Certificate, the Warrant Agreement, the Registration Rights Agreement and the
Lease Restructure Agreement.
(o) If the Warrant were exercised on the Closing Date,
the sale of the Warrant Shares to the Warrant Holder pursuant thereto would not
violate any law or regulation presently existing of general application to such
exercise or sale and applicable to the Company.
6. Exercise of Warrant; Transfer of Warrant.
(a) Upon the terms and subject to the conditions set
forth in this Warrant Agreement and the Warrant Certificate, the Warrant Holder
shall have the right, to receive from the Company the number of fully paid and
nonassessable Warrant Shares which the Warrant Holder may at the time be
entitled to receive on exercise, in full or in part, from time to time, of the
Warrant and payment of the Exercise Price for such Warrant Shares during the
Exercise Period. If the Warrant is not exercised prior to 5:00 p.m., California
time, December 31, 2002 (the "Expiration Date"), the Warrant shall expire and
all rights thereunder and all rights in respect thereof under the Warrant
Agreement and the Warrant Certificate shall cease as of such time.
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(b) Subject to the terms and conditions set forth herein,
the Warrant Holder shall be entitled to acquire pursuant to the Warrant up to
the following number of Warrant Shares:
(i) that number which when divided by the sum of
itself plus the number of the shares of Outstanding Stock (with the
result expressed as a percentage) equals 9.9% of the value of the
Outstanding Stock.
(ii) Notwithstanding anything to the contrary
contained herein, at no time during the Restriction Period may the
Warrant Holder exercise the Warrant to acquire Capital Stock of the
Company that would result (for purposes of Section 382 of the Code) in
the ownership or constructive ownership by the Warrant Holder of more
than 4.99% of the value of the outstanding stock as such value is
computed immediately after the exercise, in whole or in part, of the
Warrant.
(c) The Warrant Holder, during the Exercise Period and
subject to the conditions set forth herein, may exercise from time to time, the
Warrant as to all or a portion of the Warrant Shares remaining under the Warrant
provided that any partial exercise shall be for a minimum of the lesser of
20,000 Warrant Shares or the remaining number of Warrant Shares available under
the Warrant.
(d) The Warrant may be exercised by delivery of the form
of election to purchase, duly completed and signed, together with surrender to
the Company at its principal office of the Warrant Certificate (if such exercise
is for all of the Warrant Shares remaining under the Warrant) and upon payment
to the Company of the Exercise Price plus transfer taxes (if applicable pursuant
to Section 7) for each of the Warrant Shares in respect of which the Warrant is
then exercised. Payment of the aggregate Exercise Price shall be made in
immediately available funds.
(e) Subject to the provisions of Section 7 hereof, upon
such surrender of the Warrant (if such exercise is for all of the Warrant Shares
remaining under the Warrant) and payment of the Exercise Price, the Company
shall issue and cause to be delivered with all reasonable dispatch to or upon
the written order of the Warrant Holder and in the name of the Warrant Holder, a
certificate or certificates for the number of Warrant Shares for which the
Warrant has been exercised. Such certificate or certificates shall be deemed to
have been issued and the Warrant Holder shall be deemed to have become a holder
of record of the number of Warrant Shares identified in the form of election to
purchase as of the date of delivery of the form of election to purchase, duly
completed and signed, and payment of the Exercise Price, together with the
surrender of the Warrant (if such exercise is for all of the Warrant Shares
remaining under the Warrant).
(f) The Warrant Certificate surrendered upon the full
exercise of the Warrant shall be canceled and disposed of by the Company in
accordance with applicable law.
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(g) The Warrant may not be sold, assigned, conveyed,
pledged, hypothecated or in any other manner disposed of or transferred except
to Permitted Successors and Assigns.
7. Payment of Taxes. The Warrant Holder will pay all taxes
attributable to the issuance of the Warrant Shares upon the exercise of the
Warrant.
8. Mutilated or Missing Warrant Certificate. In case the
Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company
shall issue in exchange and substitution for and upon cancellation of the
mutilated Warrant Certificate, or in lieu of and substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor,
but only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of such Warrant Certificate and indemnity, if
requested, satisfactory to it. A request for a substitute Warrant Certificate by
the Warrant Holder also shall comply with such other reasonable regulations and
pay such other reasonable charges as the Company may prescribe.
9. Reservation of Warrant Shares.
(a) The Company will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued Capital Stock for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of the Warrant, the maximum
number of shares of Capital Stock (as adjusted from time to time pursuant
hereto) which may then be deliverable upon the exercise of the Warrant.
(b) The Transfer Agent and every subsequent transfer
agent for any shares of the Company's Capital Stock issuable upon the exercise
of any of the rights of purchase aforesaid will be irrevocably authorized and
directed, at all times to reserve such number of authorized shares as shall be
required for such purpose. The Company will keep a copy of this Warrant
Agreement on file with the Transfer Agent and with every subsequent transfer
agent for any shares of the Company's Capital Stock issuable upon the exercise
of the rights of purchase represented by the Warrant. The Company will supply
such Transfer Agent with duly executed certificates for such purposes.
(c) All fees, costs and expenses of the Transfer Agent
shall be paid by the Company.
10. Adjustment to the Number of Warrant Shares Issuable. The
number of Warrant Shares issuable upon the exercise of the Warrant is subject to
adjustment from time to time as set forth in this Section 10.
(a) Stock Dividends and Stock Splits. If at any time
before 5:00 p.m., California time, on the Expiration Date, (i) the Company shall
fix a record date for the issuance
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of any dividend payable in shares of Capital Stock or (ii) the number of shares
of Capital Stock shall have been increased by a subdivision or split-up of
shares of Capital Stock, then, on the record date fixed for the determination of
holders of Capital Stock entitled to receive such dividend or immediately after
the effective date of such subdivision or split-up, as the case may be, the
number of shares to be delivered upon exercise of the Warrant will be
appropriately increased so that the Warrant Holder thereafter will be entitled
to receive the number of shares of Capital Stock that Warrant Holder would have
owned immediately following such action had the Warrant (for any remaining
Warrant Shares under the Warrant) been fully exercised immediately prior
thereto, and the Exercise Price will be appropriately adjusted. The time of
occurrence of an event giving rise to an adjustment made pursuant to this
Section 10(a) shall, in the case of a subdivision or split-up, be the effective
date thereof and shall, in the case of a stock dividend, be the record date
thereof.
(b) Combination of Stock. If the number of shares of
Capital Stock outstanding at any time before 5:00 p.m., California time, on the
Expiration Date shall have been decreased by a combination of the outstanding
shares of Capital Stock, then, immediately after the effective date of such
combination, the number of shares of Capital Stock to be delivered upon exercise
of the Warrant will be appropriately decreased so that Warrant Holder thereafter
will be entitled to receive the number of shares of Capital Stock that Warrant
Holder would have owned immediately following such action had the Warrant (for
any remaining Warrant Shares under the Warrant) been fully exercised immediately
prior thereto, and the Exercise Price will be appropriately adjusted.
(c) Readjustments, etc. If an adjustment is made under
paragraph (a) or (b) above, and the event to which the adjustment relates does
not occur, then any adjustments in the Exercise Price or Warrant Shares that
were made in accordance with such paragraphs shall be adjusted back to the
number of Warrant Shares or the Exercise Price that were in effect immediately
prior to the record date for such event.
11. Fractional Interests. The Company shall not be required
to issue fractional Warrant Shares on any exercise of the Warrant.
12. Warrant Agent.
(a) The Transfer Agent shall serve as Warrant Agent under
this Warrant Agreement unless and until replaced as hereinafter provided. The
Warrant Agent shall perform all such duties and shall have such rights as are
reasonable and customary in the industry. The Company and the Warrant Holder may
appoint a new warrant agent acceptable to both parties. Such new warrant agent
shall be a corporation doing business under the laws of the United States or any
state thereof and in good standing. After acceptance in writing of such
appointment by the new warrant agent, it shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named herein as
the warrant agent, without any further assurance, conveyance, act or deed. If
for any reason it shall be necessary or expedient to
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execute and deliver any further assurance, conveyance, act or deed, but if the
same shall be done at the expense of the Company and shall be legally and
validly executed and delivered by the Company.
(b) Any corporation into which the new warrant agent may
be merged or any corporation resulting from any consolidation to which the new
warrant agent shall be a party or any corporation to which the new warrant agent
transfers substantially all of its corporate trust or shareholders services
business shall be a successor warrant agent under this Warrant Agreement without
any further act; provided that such corporation (i) would be eligible for
appointment as successor to the warrant agent under the provisions of this
Section 12 or (ii) is a wholly owned subsidiary of the warrant agent. Any such
successor warrant agent shall promptly cause notice of its succession as warrant
agent to be mailed (by first class mail, postage prepaid) to the Warrant Holder
at such Warrant Holder's last address as shown on the register maintained by the
Warrant Agent pursuant to this Warrant Agreement.
(c) All fees, costs and expenses of the Warrant Agent
shall be paid by the Company.
13. Conditions Precedent to the Warrant Holder's Obligations.
The obligations of the Warrant Holder hereunder are subject to the performance
by the Company of its obligations hereunder and to the satisfaction of the
following additional conditions precedent:
(a) The representations and warranties made by the
Company in this Warrant Agreement shall, unless waived by the Warrant Holder, be
true and correct as of the date hereof and at the Closing Date, with the same
force and effect as if they had been made on and as of the Closing Date.
(b) No general suspension of, or limitation on prices
for, quotes for the Common Stock on Nasdaq stock market shall have occurred.
14. Conditions Precedent to the Company's Obligations. The
obligations of the Company hereunder are subject to the performance by the
Warrant Holder of its obligations hereunder and to the satisfaction of the
following additional condition precedent:
(a) The representations and warranties made by the
Warrant Holder in this Warrant Agreement shall, unless waived by the Company, be
true and correct.
(b) The Closing shall have occurred.
(c) The Warrant Holder, upon exercise of the Warrant, in
full or in part, shall have delivered the Exercise Price in immediately
available funds and shall have provided the Company an updated Schedule 4(i).
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(d) The Warrant Certificate shall bear a legend stating:
THE WARRANT EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR QUALIFIED OR REGISTERED UNDER ANY STATE
SECURITIES OR BLUE SKY LAWS, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATING TO
THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO NATIONAL
MERCANTILE BANCORP TO THE EFFECT THAT THERE IS AN AVAILABLE EXEMPTION THEREFROM.
(e) The Warrant Shares shall bear a legend stating:
THE SHARES OF COMMON STOCK OF NATIONAL MERCANTILE BANCORP TO BE ISSUED UPON ANY
EXERCISE OF THE WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR QUALIFIED OR REGISTERED UNDER ANY STATE
SECURITIES OR BLUE SKY LAWS, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATING TO
THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO NATIONAL
MERCANTILE BANCORP TO THE EFFECT THAT THERE IS AN AVAILABLE EXEMPTION THEREFROM.
15. Recapitalization. The Company shall provide to the
Warrant Holder notice of the terms and conditions of any Recapitalization at
such time as the Company provides such notice to its shareholders.
16. Survival of the Representations, Warranties, etc. The
respective agreements, representations, warranties, indemnities and other
statements made by or on behalf of the Company and the Warrant Holder,
respectively, pursuant to the Warrant Agreement, shall remain in full force and
effect.
17. Covenants of the Warrant Holder.
(a) The Warrant Holder, at any time before the exercise
of the Warrant during the Restriction Period, shall provide to its securities
investment advisors, if any, such notice in the form attached as Exhibit B
hereto.
(b) If at any time the California State Teachers'
Retirement System ("STRS") desires to transfer all or any portion of the
Warrant, STRS shall provide the Company a written notice (the "Sale Notice")
notifying the Company of STRS's intention and the portion
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of the Warrant (which may be the entire Warrant or some portion thereof) STRS
desires to transfer (the "Offered Interest"). The Company or its designee may,
within twenty (20) days of its receipt of the Sale Notice, deliver to STRS a
written offer to purchase all, but not less than all, of the Offered Interest
(the "Purchase Offer") for a cash price set forth in the Purchase Offer (the
"Purchase Offer Price"). If STRS has not received a Purchase Offer within said
twenty (20) days, the Purchase Offer Price shall be deemed to be zero. STRS may
accept or reject the Purchase Offer, in its sole discretion, by delivery of
written notice of such acceptance or rejection within twenty (20) days of its
receipt of the Purchase Offer. Failure to deliver notice of such acceptance or
rejection within such twenty (20) days shall be deemed a rejection. If STRS
accepts the Purchase Offer, the closing of such purchase shall take place no
later than ten (10) days after the date of the Company's receipt of STRS
acceptance. If STRS rejects, or is deemed to reject, the Purchase Offer, STRS
shall have a period of six (6) months from the date of its receipt of the
Purchase Offer (or six (6) months and twenty (20) days from the date of its
delivery of the Sale Notice if no Purchase Offer is received) to sell the
Offered Interest to Permitted Successors and Assigns for the aggregate price (if
there is more than one purchaser) not less than the Purchase Offer Price before
STRS is again required to provide the notice and rights required under this
Section 17(b) to the Company. Any purchaser of the Warrant, or any portion
thereof, from STRS shall acquire the Warrant or portion thereof and all rights
thereunder free and clear of the restrictions of this Section 17(b). The
provisions of this Section 17(b) do not apply to any Warrant Shares owned by
STRS.
18. Notices. All communications hereunder shall be in writing,
and, if sent to the Warrant Holder shall be sufficient in all respects if
delivered, sent by overnight courier, or registered mail, or by telecopy or
other means of facsimile and confirmed to the Warrant Holder at:
California State Teachers' Retirement System
c/o Westmark Realty Advisors
865 South Figueroa Street, Suite 3500
Los Angeles, California 90017
Attention: Hugh Dirstine
Telecopy: (213) 683-4201
Telephone: (213) 683-4200
or, if sent to the Company, shall be delivered, sent by overnight courier, or
registered mail, or by telecopy or other means of facsimile and confirmed to the
Company at:
National Mercantile Bancorp
1840 Century Park East
Los Angeles, California 90067
Attention: President
Telecopy: (310) 201-0629
Telephone: (310) 277-2265
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19. Miscellaneous.
(a) The Warrant Agreement may be executed in one or more
counterparts and it is not necessary that signatures of all parties appear on
the same counterpart, but such counterparts together shall constitute but one
and the same agreement.
(b) The Warrant Agreement shall inure to the benefit of
and be binding upon the parties hereto, the Permitted Successors and Assigns and
the Company's successors.
(c) THE WARRANT AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT
GIVING EFFECT TO CONFLICTS OF LAWS PRINCIPLES).
(d) The heading of the sections of this document have
been inserted for convenience of reference only and shall not be deemed to be a
part of the Warrant Agreement.
(e) The Warrant Agreement shall terminate at 5:00 p.m.,
California time, on the Expiration Date. Notwithstanding the foregoing, this
Warrant Agreement shall not terminate until the obligations of the Company with
respect to the delivery of Warrant Shares to the Warrant Holder who exercises
such Warrant at any time prior to 5:00 p.m., California time, on or before the
Expiration Date have been satisfied.
(f) Nothing in the Warrant Agreement shall be construed
to give to any person or corporation other than the Company and the Warrant
Holder any legal or equitable right, remedy or claim under the Warrant
Agreement. The Warrant Agreement shall be for the sole and exclusive benefit of
the Company and the Warrant Holder.
(g) The provisions of the Warrant Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner effect such clause or
provision in any other jurisdiction or any other clause or provision of the
Warrant Agreement in any jurisdiction.
(h) Unless otherwise defined in any certificate, notice
or other document made or delivered pursuant to the Warrant Agreement, each term
defined herein shall have the meaning ascribed thereto in the Warrant Agreement,
when any such term is used in any such certificate, notice or other document.
(i) The words "hereof," "herein" and "hereunder" and
words of similar import when used herein shall refer to the Warrant Agreement as
a whole and not to any
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particular provision of the Warrant Agreement, and section, subsection, schedule
and exhibit references are to the Warrant Agreement unless otherwise specified.
(j) Unless the context shall otherwise indicate, all
terms defined herein include the plural as well as the singular and the singular
as well as the plural.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered the Warrant Agreement, all as of the day and year first above written.
NATIONAL MERCANTILE BANCORP
By: /s/ SCOTT A. MONTGOMERY
Name: Scott A. Montgomery
Title: Director
CALIFORNIA STATE TEACHERS'
RETIREMENT SYSTEM
By: Trust Company of the West, a California
corporation as Investment Manager
By: /s/ GARY NEUMEIER
Name: Gary Neumeier
Title: Authorized Signatory
By: /s/ HUGH DIRSTINE
Name: Hugh Dirstine
Title: Authorized Signatory
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