Lease Restructure Agreement Dated 12/31/95

LEASE RESTRUCTURE AGREEMENT


THIS LEASE RESTRUCTURE AGREEMENT (this "Agreement") is made and entered into as of December 31, 1995, by and between CALIFORNIA STATE TEACHERS' RETIREMENT SYSTEM, a retirement system created pursuant to the laws of the State of California ("Landlord"), and MERCANTILE NATIONAL BANK, a national banking association ("Tenant").


RECITALS


A. Landlord's predecessor, Northrop Corporation ("Northrop"), and Tenant previously entered into that certain lease (the "Ground Floor Lease") dated as of December 21, 1982, respecting certain "Premises" originally designated as consisting of 9,830 rentable square feet of floor area located on the ground floor of the building located at 1840 Century Park East, Los Angeles, California 90067.


B. Northrop and Tenant also previously entered into that certain lease (the "Original Second Floor Lease") dated as of December 21, 1982, respecting certain "Premises" consisting of 16,168 rentable square feet of floor area located on the second floor of the building located at 1840 Century Park East, Los Angeles, California 90067.


C. The Original Second Floor Lease was supplemented and amended by that certain Amendment to Lease between Northrop and Tenant dated June 9, 1986 (the "First Amendment to Second Floor Lease") pursuant to which the second floor "Premises" were expanded to include an additional 16,411 rentable square feet of floor area located on the third floor of said building.


D. The Original Second Floor Lease, as so amended, was further amended by that certain Second Amendment to Lease between Landlord and Tenant dated December 18, 1992 (the "Second Amendment to Second Floor Lease") pursuant to which the rent payable for said third floor premises was modified.


E. The Original Second Floor Lease, as amended by the First Amendment to Second Floor Lease and the Second Amendment to Second Floor Lease, is hereinafter referred to as the "Second Floor Lease". The Ground Floor Lease and the Second Floor Lease are hereinafter individually referred to as a "Lease" and collectively referred to as the "Leases". All terms used but not defined herein shall have the meanings ascribed to such terms in the Leases.


F. In addition to the Leases, Landlord and Tenant entered into that certain Standard Form Storage Agreement (the "Storage 2 Agreement") dated August 6, 1993, respecting certain storage facilities located in the Building.


G. Tenant, as Sublessor, and The Lewis Horwitz Organization ("Horwitz"), as Sublessee, entered into that certain Sublease Agreement dated July 3, 1986, covering 2,115 rentable square feet of floor area located in the ground floor Premises. The Sublessee's interest under such Sublease Agreement was assigned to and assumed by Imperial Bank ("Imperial") pursuant to that certain Assignment, Assumption and Consent Agreement among Tenant, Imperial and Horwitz, and consented to by Northrop dated August 15, 1989. Pursuant to that certain Sublease Amendment and Option Exercise Agreement dated July 1, 1992, Tenant and Imperial extended the term of and granted each other termination rights under said Sublease Agreement. Said Sublease Agreement, as so assigned, assumed, extended and modified, is hereinafter referred to as the "Ground Floor Sublease" and the Sublessee thereunder is hereinafter referred to as the "Ground Floor Subtenant".


H. Tenant, as Sublessor, and Charlston, Revich & Williams ("Charlston"), as Sublessee, entered into that certain Office Sublease dated December 16, 1992, covering 16,411 rentable square feet of floor area consisting of the entire third floor of the Premises. Said Office Sublease is hereinafter referred to as the "Third Floor Sublease" and the Sublessee thereunder is hereinafter referred to as the "Third Floor Subtenant".


I. The Ground Floor Sublease and the Third Floor Sublease are hereinafter individually referred to as a "Sublease" and collectively referred to as the "Subleases". The Ground Floor Subtenant and the Third Floor Subtenant are hereinafter individually referred to as a "Subtenant" and collectively referred to as the "Subtenants".


J. Landlord and Tenant now desire to further supplement, and modify the Leases and Storage Agreement, and deal with the Subleases as hereinafter provided.


AGREEMENT


NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:


1. Conditions Precedent. This Agreement shall be of no force or effect unless all of the following conditions are satisfied on or before January 12, 1996, or such later date as Landlord, in its sole and absolute discretion, may designate in writing. The date all such conditions are satisfied shall be established by written notice from Landlord to Tenant and is hereinafter referred to as the "Effective Date":


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(a) Delinquent Rent. Tenant shall pay to Landlord the sum of $288,838.63 on account of all Rent and other charges and payments due under the Leases and Storage Agreement without regard to this Agreement prior to November 1, 1995. Such payment shall be final and conclusive.


(b) Rent. Tenant shall pay to Landlord all amounts due on account of the Rent and other charges due on or after November 1, 1995 and through the Effective Date under the Leases and Storage Agreement as modified hereby.


(c) Warrants. Tenant shall cause National Mercantile Bancorp, a California corporation ("Bancorp"), to issue to Landlord a warrant (the "Warrant") to purchase shares of Bancorp's stock together with registration rights with respect to such shares. The specific terms and provisions of the Warrant, registration rights and related documents (collectively the "Warrant Documents") must have been reviewed and approved by Landlord.


(d) Opinion of Counsel. Tenant shall cause to be delivered to Landlord an opinion from counsel and in form and content acceptable to Landlord to the effect that (i) both Tenant and Bancorp are duly incorporated and in good standing with the corporate power and corporate authority to enter into and perform their respective duties and obligations under this Agreement, the Warrant Documents and the transactions contemplated hereby and thereby; (ii) this Agreement, the Warrant Documents and any and all other documents executed in connection with this Agreement or the Warrant Documents have been duly and validly authorized, executed and delivered by the Tenant and Bancorp, as the case may be; (iii) the Warrant has been duly and validly authorized and issued to Landlord; (iv) the Warrant Documents, this Agreement and any and all other documents executed in connection with this Agreement or the Warrant Documents are enforceable against Tenant and Bancorp, as the case may be, in accordance with their terms; and (v) the exercise of the Warrant and purchase of "Warrant Shares" (as defined in the Warrant Documents) pursuant thereto, if made as of the date hereof, may be made without a registration statement being in effect thereto under the Securities Act of 1933, as amended.


(e) Bill of Sale. Tenant shall execute and deliver to Landlord a Bill of Sale in form and content acceptable to Landlord covering the furniture and art work described on Exhibit A attached hereto.


(f) Subtenants. With respect to the Subleases and the Subtenants:


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(i) Financial Condition. Each of the Subtenants' financial condition and the terms of each of the Subleases shall have been reviewed and found acceptable by Landlord.


(ii) Attornment/New Lease. Each of the Subtenants shall execute and deliver to Landlord an agreement, in form and content acceptable to Landlord, agreeing to attorn to Landlord under its Sublease. At Landlord's option, the documentation of either or both of such attornments may take the form of a new direct lease from Landlord to the applicable Subtenant on substantially the same economic terms as the applicable Sublease.


(iii) Estoppel. Each Subtenant shall execute and deliver to Landlord an estoppel certificate, in form and content acceptable to Landlord, including usual and customary estoppel items together with confirmation of the amount of the Subtenant's security deposit. In addition, as to the Third Floor Subtenant, such estoppel certificate shall contain verification that the $61,000 tenant improvement allowance originally provided for under the Third Floor Sublease has been exhausted and is of no further force or effect and that title to the furniture and art work described on Exhibit A attached hereto is owned by Landlord and that the Third Floor Subtenant is obligated to return such personal property to Landlord upon the termination of the Third Floor Sublease.


(iv) Release. The Subtenants shall each execute and deliver to Landlord a release and waiver, similar in scope to the release and waiver given by Tenant in this Agreement, with respect to any and all liability arising prior to the date of such release and waiver.


(v) Rent. Tenant shall have collected from the Subtenants and delivered to Landlord all rent and other charges due under the Subleases for the period of November 1, 1995 through the Effective Date.


(vi) Security Deposit. Tenant shall deliver to Landlord $20,349.64 representing the Third Floor Subtenant's security deposit. Tenant hereby represents and warrants to Landlord that Tenant has not collected any security deposit or advance payment from the Ground Floor Subtenant.


(vii) Accounting. Tenant shall deliver to Landlord in reasonable detail an accounting of each of the Subtenant's payments on account of its Proportionate Share of Building Operating Costs to enable Landlord to effectively enforce and administer the Subtenants' obligations with respect thereto going forward.


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(g) Inspection. Landlord shall have inspected the third floor and the space on the ground floor of the Building which is to be excluded from the Premises and been satisfied that such space remains in a good and sound condition, free of any damage or deferred maintenance which is the Tenant's duty to repair or maintain under the Lease.


(h) Fees and Expenses. All expenses incurred by Landlord pursuant to this Agreement shall be paid by Tenant. Specifically, and without limitation, Tenant shall pay to Landlord the amount of all attorneys' fees and costs incurred by Landlord in the analysis, negotiation and preparation of this Agreement, and all other documents and agreements contemplated hereby or entered into in connection herewith, not to exceed $40,000.


2. Ground Floor Lease Modifications. Effective upon the satisfaction of all of the conditions precedent set forth in Section 1 above, the following existing provisions of the Ground Floor Lease shall be modified as set forth below:


(a) Premises. The parties hereby stipulate that the ground floor Premises shall be deemed to contain a total of 9,830 rentable square feet. Tenant hereby surrenders to Landlord the portion, but only the portion, of the ground floor Premises currently subleased to the Ground Floor Subtenant, which the parties stipulate shall be deemed to consist of 2,115 rentable square feet as set forth in the Ground Floor Sublease. Accordingly, the ground floor Premises shall consist of only the portion thereof not currently subleased to the Ground Floor Subtenant, which the parties stipulate shall be deemed to contain a total of 7,715 rentable square feet. As part of this transaction, Tenant is assigning all of its right, title and interest in and to the Ground Floor Sublease to Landlord. Tenant and Landlord agree that, unless Landlord shall otherwise consent in writing, insofar as it affects the Ground Floor Sublease, the fee title to the ground floor subleased premises and the leasehold estate therein created by the Ground Floor Lease shall not merge but shall remain separate and distinct, notwithstanding the union of said estates in Landlord or any third party by purchase, assignment or otherwise.


(b) Ground Floor Base Rent. As of November 1, 1995 and cont ...