-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CV0yS8sua2QeYn0qFc1ft/wZMr0edixOmbAiIe0iN6hEHm1tw6kBr4WfYqlAu/cY DXLW/DDMUvfJjD72ayYByg== 0000912057-00-011490.txt : 20000315 0000912057-00-011490.hdr.sgml : 20000315 ACCESSION NUMBER: 0000912057-00-011490 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000427 FILED AS OF DATE: 20000314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL MERCANTILE BANCORP CENTRAL INDEX KEY: 0000714801 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 953819685 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRE 14A SEC ACT: SEC FILE NUMBER: 001-13015 FILM NUMBER: 569233 BUSINESS ADDRESS: STREET 1: 1840 CENTURY PARK EAST CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3102772265 MAIL ADDRESS: STREET 1: 1840 CENTURY PARK EAST CITY: LOS ANGELES STATE: CA ZIP: 90067 PRE 14A 1 PRE 14A SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant /X/ Filed by a Party other than the Registrant / / Check the appropriate box: /X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) / / Definitive Proxy Statement / / Definitive Additional Materials / / Soliciting Material Pursuant to Section240.14a-11(c) or Section240.14a-12
NATIONAL MERCANTILE BANCORP ------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) ------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): /X/ No fee required. / / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: ---------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ---------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ---------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ---------------------------------------------------------- (5) Total fee paid: ---------------------------------------------------------- / / Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ---------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ---------------------------------------------------------- (3) Filing Party: ---------------------------------------------------------- (4) Date Filed: ----------------------------------------------------------
PRELIMINARY COPY NATIONAL MERCANTILE BANCORP 1840 CENTURY PARK EAST LOS ANGELES, CALIFORNIA 90067 (310) 277-2265 ------------------------ NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT --------------------- Date: Thursday, April 27, 2000 Time: 6:00 p.m. Place: Mercantile National Bank 1840 Century Park East Main Floor Los Angeles, California 90067
[LOGO] March , 2000 Dear Shareholders: We cordially invite you to attend the 2000 Annual Meeting of Shareholders. The meeting will be held on Thursday, April 27, 2000 at 6:00 p.m. at Mercantile National Bank, 1840 Century Park East, Main Floor, Los Angeles, California 90067. Attached are the Notice of the 2000 Annual Meeting of Shareholders, the Proxy Statement, the Proxy Card and a postage prepaid return envelope, as well as a copy of our Annual Report on Form 10-KSB. A copy of our 1999 Summary Annual Report was mailed to you previously. At the meeting, the shareholders will be asked to elect ten directors and to approve an amendment to the Articles of Incorporation to extend the restriction to prohibit, until July 1, 2003, the transfer of shares of common or preferred stock to any person who would become the beneficial owner of more than 4.5% of the Company's outstanding stock as a result of such transfer. At the meeting we will also report on our performance in 1999 and answer your questions regarding the Company. We look forward to seeing you at the meeting. Sincerely, [SIG] [SIG] Robert E. Gipson Scott A. Montgomery CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE OFFICER
TABLE OF CONTENTS
PAGE -------- NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS............... 3 PROXY STATEMENT............................................. 4 INFORMATION ABOUT THE ANNUAL MEETING AND VOTING........... 4 Why did you send me this proxy statement and proxy card?.................................................. 4 What am I voting on?.................................... 4 How many votes do I have?............................... 4 What is "cumulative voting"?............................ 4 How are abstentions and broker non-votes treated?....... 5 How do I vote?.......................................... 5 What does it mean if I receive more than one proxy card?.................................................. 6 How many votes may be cast at the Annual Meeting?....... 6 How many shares do you need to hold the Annual Meeting (what are the quorum requirements)?.................... 6 Who nominates individuals for election to the Board of Directors?............................................. 6 How many votes must the director nominees have to be elected?............................................... 6 How many votes are required to amend the Articles of Incorporation?......................................... 7 Who pays the costs of soliciting these proxies?......... 7 ELECTION OF DIRECTORS..................................... 7 Arrangement for Selection of Director................... 9 Board and Committee Meetings............................ 9 Compensation of Directors............................... 10 Certain Relationships and Related Transactions.......... 10 AMENDMENT TO THE ARTICLES OF INCORPORATION................ 10 Description of Article XIII............................. 10 Reasons for the Amendment............................... 11 Text of the Amendment................................... 11 INFORMATION ABOUT NATIONAL MERCANTILE BANCORP COMMON AND PREFERRED STOCK OWNERSHIP............................... 12 Security Ownership of Principal Shareholders and Management............................................. 12 Compliance with Section 16(a) Beneficial Ownership Reporting.............................................. 13 EXECUTIVE OFFICERS........................................ 13 Compensation of Executive Officers...................... 13 Summary Compensation Table............................ 13 Option/SAR Grants in Fiscal Year 1999................. 14 1999 Option Exercises and Year-End Option Values...... 14 Employment Agreement with Chief Executive Officer....... 14 Compensation Committee Interlocks and Insider Participation.......................................... 15 Report on Executive Compensation for 1999............... 15 PERFORMANCE GRAPH......................................... 17 INDEPENDENT PUBLIC ACCOUNTANTS............................ 17 SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING............. 18
2 NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS --------------------- The Annual Meeting of Shareholders of National Mercantile Bancorp will be held on Thursday, April 27, 2000 at 6:00 p.m. at Mercantile National Bank, 1840 Century Park East, Main Floor, Los Angeles, California 90067. At the Annual Meeting we will ask you to: 1. Elect ten directors to serve for a term of one year and until their successors are elected and qualified. The persons nominated by the Board of Directors (Donald E. Benson, Joseph N. Cohen, Robert E. Gipson, Alan Grahm, Antoinette Hubenette, M.D., Joseph W. Kiley III, Scott A. Montgomery, Judge Dion G. Morrow, Carl R. Terzian and Robert E. Thomson) are described in the accompanying Proxy Statement; 2. Approve an amendment to Article XIII of the Articles of Incorporation to extend the termination date of that Article from July 1, 2000 to July 1, 2003 (in general, Article XIII prohibits the transfer of shares of common or preferred stock to any person if such person is or would become by reason of such transfer the beneficial owner of more than 4.5% of the Company's capital stock); and 3. Transact any other business that may properly be presented at the meeting. If you owned either Common Stock or Series A Noncumulative Convertible Preferred Stock of the Company on March 17, 2000, the record date, you are entitled to attend and vote at the meeting. By Order of the Board of Directors, [SIG] Alan Grahm CORPORATE SECRETARY March , 2000 3 PROXY STATEMENT FOR NATIONAL MERCANTILE BANCORP 2000 ANNUAL MEETING OF SHAREHOLDERS --------------------- INFORMATION ABOUT THE ANNUAL MEETING AND VOTING WHY DID YOU SEND ME THIS PROXY STATEMENT AND PROXY CARD? We sent you this Proxy Statement and the enclosed proxy card because you own shares of National Mercantile Bancorp. This Proxy Statement provides you with information which will help you to cast your vote at the Annual Meeting. However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card. When you sign the proxy card, you appoint each of Scott A. Montgomery and Robert E. Thomson, Directors of National Mercantile Bancorp, as your representatives at the Annual Meeting (YOUR PROXIES). Mr. Montgomery and Mr. Thomson will vote your shares at the Annual Meeting, as you have instructed them on your proxy card(s). If an issue comes up for vote at the Annual Meeting that is not on the proxy card, Mr. Montgomery and Mr. Thomson will vote your shares, under your proxy, in accordance with their best judgment. We began sending this Proxy Statement, the attached Notice of Annual Meeting and the enclosed proxy card on March , 2000 to all shareholders entitled to vote. Shareholders who owned stock on March 17, 2000 are entitled to vote. On the record date, there were 888,745 shares of Common Stock outstanding and 794,225 shares of Series A Noncumulative Convertible Perpetual Preferred Stock ("Series A Preferred Stock") outstanding which are convertible into two shares of Common Stock for each share of Series A Preferred Stock held for a total of 1,588,450 shares of Common Stock. These are our two classes of voting stock. We have also enclosed our 1999 Annual Report on Form 10-KSB filed with the Securities and Exchange Commission, which includes our financial statements. The Form 10-KSB is not to be considered part of the soliciting materials. A copy of our 1999 Summary Annual Report was mailed to you previously. WHAT AM I VOTING ON? We ask you to vote on the election of ten directors and an amendment to the Articles of Incorporation which would extend the termination date of Article XIII (which imposes certain restrictions on the transfer of our shares). The sections entitled "Election of Directors" and "Amendment to Articles of Incorporation" give you more information on these proposals. At the time this Proxy Statement was printed, we knew of no other matters to be acted on by the shareholders at the Annual Meeting. HOW MANY VOTES DO I HAVE? You have one vote for each share of our Common Stock and two votes for each share of our Series A Preferred Stock. In the election of directors, you may be permitted to "cumulate" your votes. WHAT IS "CUMULATIVE VOTING"? Cumulative voting is a manner of voting in the election of directors in which each shareholder is entitled to a total number of votes equal to the number of directors to be elected multiplied by the number of votes the shareholder would have on a single matter. The number of votes a shareholder has on a single matter is the number of shares of Common Stock held by the shareholder plus two times the number of shares of Series A Preferred Stock held by the shareholder (since each share of 4 Series A Preferred Stock is entitled to two votes). For example, if you hold 1,000 shares of Common Stock and 200 shares of Series A Preferred Stock, you are entitled to 14,000 total votes (10 directors multiplied by one vote per share of Common Stock, or 10,000 votes, plus two votes per share of Series A Preferred, or 4,000 votes). A shareholder may use all of his or her votes for one nominee, or may distribute his or her votes among two or more nominees as the shareholder sees fit. No shareholder may cumulate votes unless at least one shareholder gives notice at the Annual Meeting of his or her intention to cumulate votes. Mr. Montgomery and Mr. Thomson (YOUR PROXIES) may, in their discretion, cumulate votes for shares with respect to which they have proxies. HOW ARE ABSTENTIONS AND BROKER NON-VOTES TREATED? Abstentions and broker non-votes will be included in the number of shares present at the Annual Meeting for purposes of determining the presence of a quorum. For any proposal other than the election of directors, an abstention on the proposal will be counted towards the tabulation of votes cast on the proposal and will have the same effect as a negative vote. A broker non-vote will not be counted either as a vote cast for or against the proposal. Abstentions and broker non-votes have no effect on the election of directors. HOW DO I VOTE? YOU MAY VOTE BY MAIL Whether or not you plan to attend the Annual Meeting, we urge you to complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you mark your voting instructions on the proxy card, your shares will be voted as you instruct. If you return a signed proxy card but do not provide voting instructions, your shares will be voted FOR the election of the nominees for directors identified in this Proxy Statement and FOR the amendment to the Articles of Incorporation. YOU MAY VOTE IN PERSON AT THE MEETING You may attend the Annual Meeting and vote in person. If you hold your shares in street name, you must request a legal proxy from your stockbroker in order to vote at the meeting. Otherwise, we cannot count your votes. MAY I REVOKE MY PROXY? If you have returned your signed proxy card, you may revoke it at any time before it is exercised. You may revoke your proxy in any one of three ways: - You may send in another proxy with a later date. - You may notify National Mercantile Bancorp's Secretary in writing before the Annual Meeting that you have revoked your proxy. - You may vote in person at the Annual Meeting. HOW WILL SHARES I HOLD IN STREET NAME BE VOTED? If your shares are held in street name, your brokerage firm, under certain circumstances, may vote your shares. Brokerage firms have authority under New York Stock Exchange rules to vote customers' shares on certain "routine" matters, including the election of directors. If you do not vote your proxy, your brokerage firm may either vote your shares on routine matters or leave your shares unvoted. 5 We encourage you to provide instructions to your brokerage firm by voting your proxy. This ensures your shares will be voted at the Annual Meeting. WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD? If you own both Common Stock and Series A Preferred Stock or if you have more than one account at the transfer agent and/or with stockbrokers, you will receive separate proxy cards for each class of stock and for each account. Please sign and return all proxy cards to ensure that all your shares are voted. HOW MANY VOTES MAY BE CAST AT THE ANNUAL MEETING? Based on the number of shares of Common Stock and Series A Preferred Stock outstanding on the record date, up to 2,477,195 votes may be cast on any matter. HOW MANY SHARES DO YOU NEED TO HOLD THE ANNUAL MEETING (WHAT ARE THE QUORUM REQUIREMENTS)? Shares are counted as present at the meeting if the stockholder either: - is present at the meeting, or - has properly submitted a proxy card Shares representing a majority of the outstanding votes on the record date of March 17, 2000 must be present at the meeting in order to hold the meeting and conduct business. This is called a quorum. WHO NOMINATES INDIVIDUALS FOR ELECTION TO THE BOARD OF DIRECTORS? Our bylaws state that nominations for the election of individuals to the Board of Directors may be made by the Board of Directors or by any holder of our voting stock. Nominations, other than those made by the Board of Directors, must be made in writing. If you wish to make such nominations, your notice must be received by the President of National Mercantile Bancorp no more than 60 days prior to the Annual Meeting nor more than 10 days after the Notice of Annual Meeting is sent to shareholders. If the Notice of Annual Meeting is sent to shareholders exactly 10 days before the meeting, then your notice of intention to make a nomination to the Board of Directors must be made no later than the time fixed for the opening of the Annual Meeting as stated in the Notice of Annual Meeting. If you want to make a nomination to the Board of Directors you must give the following information to the extent known to you: - Name and address of each proposed nominee - Principal occupation of each proposed nominee - Number of shares of our stock owned by each proposed nominee - Your name and address and - The number of shares owned by you If nominations to the Board of Directors are not made as outlined above, the Chairman of the meeting may disregard the nominations and instruct the inspectors of election to disregard all votes cast for such nominees. HOW MANY VOTES MUST THE DIRECTOR NOMINEES HAVE TO BE ELECTED? The ten nominees receiving the highest number of votes will be elected as directors. This number is called a plurality. If you do not vote for a particular nominee, or you withhold authority to vote for a particular nominee on your proxy card, your vote will not count either "for" or "against" the nominee. 6 HOW MANY VOTES ARE REQUIRED TO AMEND THE ARTICLES OF INCORPORATION? The Articles of Incorporation will be amended if the amendment is approved by shares representing a majority of the votes entitled to be cast on the matter. Because 2,477,195 votes may be cast at the Annual Meeting, the amendment will be approved if 1,238,598 votes are cast in favor of the amendment. WHO PAYS THE COSTS OF SOLICITING THESE PROXIES? National Mercantile Bancorp pays for distributing and soliciting proxies and reimburses brokers, nominees, fiduciaries and other custodians reasonable fees and expenses in forwarding proxy materials to shareholders. Our directors, officers and regular employees may solicit proxies in person, through mail, telephone or other means. We do not pay those individuals additional compensation for soliciting proxies. ELECTION OF DIRECTORS Our bylaws state that the Board of Directors will consist of not less then six directors nor more than eleven directors, with the exact number fixed from time to time by the Board or by the shareholders. The Board has currently set the number of directors at ten. There are no vacancies on the Board. Based on the recommendation of the Nominating Committee, the Board has nominated the ten current directors for re-election. If you re-elect them, they will hold office until the next annual meeting and their successors are duly elected and qualified. All nominees have indicated that they are willing to serve as a director. If any nominee is unable to serve, Mr. Thomson or Mr. Montgomery (YOUR PROXIES) may vote for another nominee proposed by the Board or the Board may reduce the number of directors to be elected. If any director resigns, dies or is otherwise unable to serve out his term, the Board may fill the vacancy until the next annual meeting. All directors elected at the Annual Meeting, other than Mr. Gipson, will also serve as directors of Mercantile National Bank (which currently has a Board of nine directors). The following information is provided regarding the nominees. DONALD E. BENSON Mr. Benson is Executive Vice President and a director of Director since 1998 Marquette Bancshares, Inc., a bank holding company, an Age 69 affiliate of the Conrad Company. He has served in those positions since 1992. Mr. Benson is also a director of Mesaba Holdings, Inc., commuter airline; Delta Beverage Group, Inc., a soft drink bottler and distributor; Mass Mutual Corporate Investors, a mutual fund; and Mass Mutual Participation Investors, a mutual fund. JOSEPH N. COHEN Mr. Cohen is President of American Entertainment Director since 1998 Investors, Inc., a media financing and consulting firm, Age 54 since February 1996 and a Principal of Abel's Hill Capital Corp., an investment banking firm, since October 1996. From 1994 to 1996 Mr. Cohen was Co-Chairman of Inter Media Film Equities, Inc., a media financing consulting firm.
7 ROBERT E. GIPSON Mr. Gipson is President of Alpha Analytics Investment Director since 1996 Group, LLC, a registered investment advisor, and has Age 53 served in that capacity since its organization in 1998. He is also Of Counsel to the law firm of Gipson Hoffman & Pancione and has been a lawyer with that firm since 1982. Mr. Gipson is also President of Corporate Management Group, Inc., a financial management company, since 1988. He is also a trustee of Meyers Pride Value Fund, a mutual fund, and trustee of Alpha Analytics Investment Trust, mutual funds. Mr. Gipson is Chairman of National Mercantile Bancorp since June 1997 and was Chairman of Mercantile National Bank from June 1997 to December 1998. ALAN GRAHM Mr. Grahm is co-owner of Bonny Doon Vineyards, a winery, Director of Bancorp since 1983 and of the since 1981. He was Chairman of the Board of an import Bank since 1982 company from 1954 to 1996. Mr. Grahm also serves as Age 77 Secretary of National Mercantile Bancorp and Mercantile National Bank since June 1997. ANTOINETTE HUBENETTE, M.D. Dr. Hubenette is President and a director of Director since 1998 Cedars-Sinai Medical Group (formerly Medical Group of Age 51 Beverly Hills), a physician's medical practice group, since 1994. She has been a practicing physician since 1982. From 1992 to 1997 she also served as a director of GranCare, Inc., a nursing home company. JOSEPH W. KILEY III Mr. Kiley has been Executive Vice President--Operations Director since 1997 and Chief Financial Officer of National Mercantile Age 44 Bancorp and Mercantile National Bank since August 1996. From July 1992 to August 1996 he was Executive Vice President and Chief Financial Officer of Hancock Savings Bank, FSB, in Los Angeles. SCOTT A. MONTGOMERY Mr. Montgomery is President and Chief Executive Officer Director since 1995 of National Mercantile Bancorp and Mercantile National Age 58 Bank. He served in that position for the Bank since November 1995. From June 1996 to June 1997 he was Executive Vice President and Chief Administrative Officer of Bancorp and was appointed President and Chief Executive Officer of Bancorp in June 1997. From September 1994 until November 1995, Mr. Montgomery was a consultant for various banks. Mr. Montgomery also served as a director of Tracy Federal Bank F.S.B. in Tracy, California from March 1995 to May 1997 and served as Vice Chairman of the Board of Directors from April 1996 to May 1997. JUDGE DION G. MORROW Judge Morrow has served as a private judge since Director since 1998 November 1995. From February 1978 to October 1995, he Age 67 served as Judge of the Los Angeles Superior Court. Judge Morrow was named Chairman of the Board of Mercantile National Bank in December 1998.
8 CARL R. TERZIAN Mr. Terzian has been Chairman of the Board of Directors Director since 1998 and Chief Executive Officer of Carl Terzian Associates, Age 64 a national public relations consulting firm, since 1969. Mr. Terzian is also a director of Transamerica Investors, Inc., a member of the Transamerica Corp. family, which manages its own mutual funds. ROBERT E. THOMSON Mr. Thomson has been Of Counsel to the law firm of Director of Bancorp since 1983 and of the Jekel & Howard, LLP, since August 1996. He was an Bank since 1982 Executive Consultant to Sterling Forest Corporation, a Age 58 real estate development company, from August 1994 to August 1996. He also served as Interim President and Chief Executive Officer of Mercantile National Bank from August to November 1995. Mr. Thomson has been Vice Chair of National Mercantile Bancorp and Mercantile National Bank since June 1991.
RECOMMENDATION OF THE BOARD OF DIRECTORS THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE BOARD OF DIRECTORS' NOMINEES ARRANGEMENT FOR SELECTION OF DIRECTOR In connection with Conrad Company's purchase of Series A Preferred Stock in our 1997 recapitalization, we agreed with Conrad Company that the Board of Directors would nominate for election as director a person or persons nominated by Conrad Company. The number of persons which Conrad Company can nominate is the number which it and its affiliates would be entitled to elect based on cumulative voting. This agreement with Conrad Company expires when Conrad Company no longer holds any shares of Series A Preferred Stock. Since 1998 Conrad Company has nominated one person, Donald E. Benson, as Director. Mr. Benson is Executive Vice President and a director of Marquette Bancshares, Inc., an affiliate of Conrad Company. BOARD AND COMMITTEE MEETINGS The Board met 12 times during fiscal year 1999. No director attended less than 75% of all meetings of the Board of Directors and Committees on which he or she served held in 1999. The following table describes the Board's committees.
NUMBER OF MEETINGS NAME OF COMMITTEE AND MEMBERS FUNCTIONS OF THE COMMITTEE IN 1999 - ----------------------------- ------------------------------------------------ --------- AUDIT COMMITTEE - Recommends the selection of independent 3 Donald E. Benson, Chairman auditors to the Board Joseph N. Cohen - Approves the scope of the audits by the Robert E. Gipson independent auditors and outside consultants Dion G. Morrow - Reviews audit reports, findings and accounting policies of independent auditors and outside consultants - Reviews recommendations about internal controls - Meets with management and also meets privately, outside the presence of management, with the independent auditors and outside consultants
9
NUMBER OF MEETINGS NAME OF COMMITTEE AND MEMBERS FUNCTIONS OF THE COMMITTEE IN 1999 - ----------------------------- ------------------------------------------------ --------- COMPENSATION AND - Oversees and directs the overall compensation 6 STOCK OPTION COMMITTEE policy Judge Dion G. Morrow, Chairman - Reviews and recommends to the Board of Alan Grahm Directors all elements of compensation for Antoinette Hubenette, M.D. the executive officers Scott A. Montgomery - Has authority to grant options under the Robert E. Thomson stock option and stock incentive plans NOMINATING COMMITTEE - Recommends candidates to fill vacancies on 1 Robert E. Gipson, Chairman the Board of Directors Donald E. Benson - Recommends the slate of directors to be Scott A. Montgomery elected at the annual meeting of shareholders Carl R. Terzian - Considers nominees for the Board of Directors recommended by shareholders
COMPENSATION OF DIRECTORS In 1999, non-employee directors received the following compensation: - The Chairman of National Mercantile Bancorp received a monthly retainer of $300 and the Chairman of the Bank received a monthly retainer of $500. The Chairmen also received an additional $400 for each Board meeting attended and $150 for each Board Committee meeting attended. - Each other non-employee Director received a monthly retainer of $400 and an additional $400 for each Board meeting attended and $100 for each Board Committee meeting attended. - The Chairman of the Loan Committee received a monthly retainer of $150 and each other non-employee member of the Loan Committee received a monthly retainer of $100. Directors who are employees (Messrs. Montgomery and Kiley) received no separate compensation for their services as directors. We do not reimburse directors for travel and other related expenses incurred in attending shareholders, Board or committee meetings. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS From time to time we have made loans to directors and executive officers. All of these loans which were either made or were outstanding in 1999 were made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. These loans do not involve more than the normal risk of collectability or present other unfavorable features. AMENDMENT TO THE ARTICLES OF INCORPORATION The Board of Directors has approved an amendment to Article XIII of the Articles of Incorporation to extend the termination date of that Article from July 1, 2000 to July 1, 2003. DESCRIPTION OF ARTICLE XIII Article XIII prohibits the transfer of shares of Common Stock and Series A Preferred Stock to a person if such person is or would become by reason of such transfer the beneficial owner of more than 4.5% of the Company's stock (as the term "stock" is defined, and such ownership is determined, under Section 382 of the Internal Revenue Code of 1986). The transfer restriction will expire (i) July 1, 2000 10 or (ii) upon the occurrence of any transaction in which holders of all outstanding shares of capital stock receive, or are offered the opportunity to receive, cash, stock or other property for all such shares and upon the consummation of which the acquiror will own at least a majority of the outstanding shares of capital stock. In addition, the Board of Directors is expressly empowered to waive application of this transfer restriction to any specific transaction provided that such waiver is by resolution of the Board of Directors duly considered and approved by at least a majority of the Board of Directors prior to any such transfer of stock. This transfer restriction was originally adopted because National Mercantile Bancorp had substantial tax net operating loss carryforwards ("NOLs") in 1997. Federal and state income tax laws provide that following an ownership change of a corporation with a NOL, a net unrealized built-in loss or tax credit carryovers, the amount of annual post-ownership change taxable income that can be offset by pre-ownership change NOLs, built-in losses or tax credit carryovers, generally cannot exceed a prescribed annual limitation. The annual limitation generally equals the product of the fair market value of the corporation immediately before the ownership change (subject to certain adjustments) and the federal long term tax-exempt rate prescribed monthly by the Internal Revenue Service. If such limitations were to apply to the Company, the ability of the Company to reduce future taxable income by the NOLs could be severely limited. In addition, the use of certain other deductions attributable to events occurring in periods before such an ownership change, that are claimed within the five-year period after such ownership change, may also be limited (such deductions, together with net operating loss carryforwards, "pre-change losses"). REASONS FOR THE AMENDMENT As of December 31, 1999, we had NOLs of $20.3 million and $4.7 million for federal and California purposes, respectively. The Board of Directors approved the amendment to minimize the risk that our use of these NOLs would be limited under Section 382 without the consent of the Board by extending the share transfer restriction; without such restriction, transfers by some shareholders could result in a change in ownership under Section 382. TEXT OF THE AMENDMENT The amendment would revise subparagraph (D) to read as follows (with the change shown by strikeout): "(D) TERMINATION. This Article XIII shall have no applicability and shall be of no force and effect notwithstanding notations to the contrary on any certificates evidencing ownership of any securities of the Corporation, (i) on or after July 1, <#>2000 2003 or (ii) upon the occurrence of any transaction which holders of all outstanding shares of capital stock receive, or are offered the opportunity to receive, cash, stock or other property for all such shares and upon the consummation of which the acquirer will own at least a majority of the outstanding shares of capital stock." RECOMMENDATION OF THE BOARD OF DIRECTORS THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO ARTICLE XIII OF THE ARTICLES OF INCORPORATION TO EXTEND THE SHARE TRANSFER RESTRICTION 11 INFORMATION ABOUT NATIONAL MERCANTILE BANCORP COMMON AND PREFERRED STOCK OWNERSHIP SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT The following table provides information as of the record date regarding the Common Stock and the Series A Preferred Stock beneficially owned by: (i) each person we know to beneficially own more than 5% of the outstanding Common Stock or outstanding Series A Preferred Stock; (ii) each of our directors; (iii) each of our current executive officers named in the Summary Compensation Table included in this Proxy Statement; and (iv) all of our current executive officers and directors as a group. Except as may be indicated in the footnotes to the table and subject to applicable community property laws, to our knowledge each person identified in the table has sole voting and investment power with respect to the shares shown as beneficially owned.
PERCENT OF CLASS OF NUMBER OF RIGHT TO NUMBER OF COMMON AND COMMON ACQUIRE PREFERRED SERIES A NAME AND ADDRESS OF SHARES COMMON PERCENT SHARES PERCENT PREFERRED SHARES BENEFICIAL OWNER(1)(2) OWNED SHARES(3) OF CLASS OWNED(4) OF CLASS COMBINED(4) - ---------------------- ---------- --------- -------- ---------- -------- ---------------- Conrad Company................................ 26,244 -0- 3.0 907,914 57.2 37.7 3800 Dain Bosworth Plaza 60 South Sixth Street Minneapolis, Minnesota 55402 9830 Investments No. 1, a California Limited Partnership............ -0- -0- -0- 126,564 8.0 5.1 9830 Wilshire Boulevard Beverly Hills, California 90212 Wildwood Enterprises Inc. Profit Sharing Plan & Trust................. -0- -0- -0- 100,880 6.4 4.1 1901 Avenue of the Stars Suite 1100 Los Angeles, California 90067 Donald E. Benson.............................. 27,600 1,600 3.3 -0- -0- 1.2 Joseph N. Cohen............................... 150 1,600 -- -0- -0- -- Robert E. Gipson.............................. 37,256 1,600 4.4 446 -- 1.6 Alan Grahm.................................... 10,818 1,050 1.3 10,000 -- -- Antoinette Hubenette, M.D..................... 200 1,600 -- -0- -0- -- Joseph W. Kiley III........................... 220 16,027 1.8 -0- -0- -- Scott A. Montgomery........................... 10,880 177,508 17.7 6,758 -- 7.4 Judge Dion G. Morrow.......................... 2,850 1,600 -- -0- -0- -- Carl R. Terzian............................... 175 1,600 -- -0- -0- -- Robert E. Thomson............................. 3,136 1,050 -- 1,278 -- -- All directors and executive officers as a group (10 persons).......................... 93,285 205,535 27.5 18,482 1.2 12.0
- ------------------------------ - -- Less than one percent (1%) (1) "Beneficial ownership" is a technical term broadly defined by the SEC to mean more than ownership in the usual sense. For example, you "beneficially" own common or preferred stock not only if you hold it directly, but also if you own it indirectly (THROUGH A RELATIONSHIP, A POSITION AS A DIRECTOR OR TRUSTEE, OR A CONTRACT OR UNDERSTANDING), have or share the power to vote the stock, to sell it or have the right to acquire it within 60 days. (2) The business address of each director and executive officer is c/o National Mercantile Bancorp, 1840 Century Park East, Los Angeles, California 90067. (3) Shares that can be acquired by exercising stock options within 60 days of the record date. (4) Assumes conversion of each outstanding share of Series A Preferred Stock into two shares of Common Stock. 12 COMPLIANCE WITH SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and 10% shareholders to file reports with the Securities and Exchange Commission on changes in their beneficial ownership of Common Stock or Series A Preferred Stock and to provide us with copies of the reports. Based on our review of these reports, we believe that all of these persons have filed all required reports on a timely basis in 1999. EXECUTIVE OFFICERS COMPENSATION OF EXECUTIVE OFFICERS The following table shows certain information regarding compensation paid during the last three years to the Chief Executive Officer and each other executive officer whose salary and bonus exceeded $100,000 during 1999 (the "Named Executive Officers"). SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ANNUAL COMPENSATION --------------------- NAME AND ------------------------ SECURITIES UNDERLYING ALL OTHER PRINCIPAL POSITIONSS YEAR SALARY ($) BONUS ($) OPTIONS/SAR'S (#) COMPENSATION ($) - -------------------- -------- ----------- ---------- --------------------- ----------------- Scott A. Montgomery .......... 1999 250,000 50,700(1) -0- 8,159 President and Chief 1998 233,333 32,250(1) 73,000 15,290 Executive Officer 1997 213,333 11,600(1)(2) 60,504(3) 2,724 Joseph W. Kiley III .......... 1999 127,201 35,000 15,000 16,684(4) Executive Vice President-- 1998 128,333 20,000 24,770 14,580 Operations and 1997 122,917 14,000 8,800 14,400 Chief Financial Officer Randall G. Ewig .............. 1999 120,000 -- -- 4,200 Executive Vice President and 1998 60,000 10,000 10,000 2,100 Chief Credit Officer(5) 1997 -- -- -- --
- ------------------------ (1) Incentive bonus based on 5% of pretax net profit pursuant to employment agreement. (2) Includes discretionary bonus of $5,000. (3) Includes an option and tandem stock appreciation rights ("SAR") for 16,500 shares of common stock. (4) Consists of club membership fees, automobile allowance and Company-matching 401(k) contribution. (5) Mr. Ewig commenced employment with the Company on July 1, 1998 and resigned on January 31, 2000. 13 The following table sets forth information concerning options granted to the Named Executive Officers during 1999. OPTION/SAR GRANTS IN FISCAL YEAR 1999 (INDIVIDUAL GRANTS)
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF NUMBER OF PERCENT OF TOTAL STOCK PRICE SECURITIES OPTIONS/SARS APPRECIATION UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(1) OPTIONS/SARS EMPLOYEES BASE PRICE EXPIRATION ---------------------- NAME GRANTED (#) IN FISCAL YEAR(2) PER SHARE ($) DATE 5% ($) 10% ($) - ---- ------------ ----------------- ------------- ---------- -------- -------- Joseph W. Kiley III....... 5,000 5.5% 4.88 02/26/09 15,345 38,887 Joseph W. Kiley III....... 10,000 10.9% 4.59 08/27/09 28,866 73,153
- ------------------------ (1) We are required by the Securities and Exchange Commission to use a 5% and 10% assumed rate of appreciation over the option term. These amounts do not represent our estimate or projection of the future price of the Common Stock. If the Common Stock does not appreciate, the optionees will receive no benefit from the options. (2) Total options include option grants to non-employee directors. The following table sets forth certain information regarding options exercised during 1999 by the Named Executive Officers and the options held by the Named Executive Officers at year-end. 1999 OPTION EXERCISES AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS SHARES AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)(1) ACQUIRED ON VALUE --------------------------- --------------------------- NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ---- ------------ -------- ----------- ------------- ----------- ------------- Scott A. Montgomery........ -0- -0- 169,258(2) 8,250 -- -- Joseph W. Kiley III........ -0- -0- 16,027 23,743 -- -- Randall G. Ewig............ -0- -0- 3,334 6,666 -- --
- ------------------------ (1) In accordance with Securities and Exchange Commission rules, the value of unexercised "in-the-money" options is the difference between the closing sale price of the Common Stock on December 31, 1999 ($4.50 per share) and the exercise price of the option, multiplied by the number of shares subject to the option. No options were in-the-money at December 31, 1999. (2) Includes an option with tandem stock appreciation rights (SARs) with respect to 16,500 shares of Common Stock. EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER Mr. Montgomery and Mercantile National Bank entered into an employment agreement in 1996 and in 1999 entered into a new employment agreement effective as of January 1, 1999 and terminating December 31, 2004. Under the new agreement, Mr. Montgomery is entitled to: (1) an annual base salary of $250,000 (subject to increase at the discretion of the Board); (2) an incentive bonus equal to 5% of the Bank's pretax net profit in any year; (3) an additional incentive bonus of 2% of the Bank's pretax net profit in any year in which the Bank achieves both a pretax net profit and return ratio of at least 1.5% of pretax net profit to assets; and (4) certain other benefits, including a company automobile and payment of club membership dues. Pursuant to the agreement, Mr. Montgomery's cash 14 compensation (salary and bonus) may not exceed $400,000 in any calendar year. The Bank may terminate Mr. Montgomery's employment at any time with or without cause, provided that if termination is without cause, Mr. Montgomery would be entitled to receive as severance pay his base salary for 18 months following termination. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During 1999 Mr. Grahm, Dr. Hubenette, Mr. Montgomery, Judge Morrow and Mr. Thomson served as members of the Compensation & Stock Option Committee. All members of the Committee during 1999 were outside directors, except for Mr. Montgomery, President and Chief Executive Officer. Mr. Montgomery was excluded from participating in any action taken by the Committee or the full Board of Directors relating to his own compensation. REPORT ON EXECUTIVE COMPENSATION FOR 1999 This report of the Compensation & Stock Option Committee is not deemed incorporated by reference by any general statement incorporating this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this information by reference. The Compensation and Stock Option Committee of the Board administers our executive compensation program. The Committee has furnished the following report on executive compensation for 1999. COMPENSATION POLICY The main objective of our executive compensation program is to offer competitive compensation to attract and retain qualified executives, to motivate performance and to achieve our long-term goals. We believe our compensation program has an appropriate relationship between executive pay and enhancing shareholder value. The compensation program consists of base salary, stock options and bonuses. During 1999, the compensation program has been more directly related to performance. For example, the base salaries of the senior executives were fixed for 1999 at 1998 levels and Mr. Montgomery's base compensation has been fixed through 2001. Executive bonus compensation is directly related to increased earnings and shareholder value. Hence, the executive management team's bonus compensation may increase or decrease based on the Company's increased or decreased earnings. The Committee or the full Board of Directors may authorize discretionary bonuses to executives and other key personnel for outstanding contributions to our growth and profitability, or to attract and retain qualified executives based on factors other than earnings. BASE SALARY We pay salaries that are competitive with those paid by other banks and financial institutions of similar size and performance which are located in the same general geographic area. We obtain peer group data from various sources, including compensation surveys, industry studies and proxy statements of other financial institutions. We review and set salary ranges annually to ensure that the base salary ranges reflect competitive job market conditions. We pay cash compensation based upon the executive's experience, past and potential future contributions to National Mercantile Bancorp and Mercantile National Bank. Annual salary increases are based on the executive's responsibilities, performance and achievement of pre-established goals. However, as mentioned above, executive base salaries are capped at 1998 levels for 1999 and for Mr. Montgomery until 2001. 15 STOCK OPTIONS We believe that stock ownership by executives and employees provides valuable performance incentive. We have granted stock options under various stock plans since 1983. We also believe that stock ownership by executives and employees creates a vital long term partnership between management and other shareholders. The Committee views stock options as a strong incentive and an important component for management to increase shareholder value. Historically, we have granted stock options at fair market value of the Common Stock at the date of grant. CEO COMPENSATION During 1999 the Company's Chief Executive Officer, Scott Montgomery, was compensated in accordance with his employment agreement. See "Executive Officers--Employment Agreement with Chief Executive Officer." During 1999 the Committee evaluated Mr. Montgomery's performance and determined that Mr. Montgomery had been a vital factor in increasing the Company's profitability and success and had performed in an outstanding manner. TAX LIMITS ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), places a limit of $1,000,000 on the amount of compensation that may be deducted by the Company in any year with respect to each of the Company's five most highly paid executive officers. The compensation expense associated with the exercise of non-incentive options in certain circumstances by an executive officer could be included towards the $1,000,000 limit. All compensation paid to the Company's executive officers in 1999 will be deductible. Dated: March , 2000 Compensation & Stock Option Committee Dion G. Morrow, Chairman Alan Grahm Antoinette Hubenette, M.D. Scott A. Montgomery Robert E. Thomson
16 PERFORMANCE GRAPH The following graph shows a five-year comparison of cumulative total returns (STOCK PRICE APPRECIATION PLUS REINVESTED DIVIDENDS) for the Common Stock, the NASDAQ Market Index and a selected peer group. The peer group includes the following companies: City National Corporation, First Charter Corporation, First Regional Bancorp, Imperial Bancorp and Professional Bancorp, Inc. The closing price of our Common Stock on December 31, 1999 was $4.50 per share. The stock price performance of our Common Stock shown in the graph below represents past performance only and does not necessarily indicate future performance. COMPARISON OF FIVE-YEAR TOTAL SHAREHOLDER RETURN AMONG NATIONAL MERCANTILE BANCORP, NASDAQ MARKET INDEX AND PEER GROUP INDEX EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE 12/30/1994 12/29/1995 FISCAL YEAR ENDING 12/31/1997 12/31/1998 COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS 12/31/1996 COMPANY/INDEX/MARKET National Mercantile 100.00 57.14 40.47 50.34 33.56 Customer Selected Stock List 100.00 150.65 228.97 429.51 380.57 NASDAQ Market Index 100.00 129.71 161.18 197.16 270.08 COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE 12/31/1999 COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS COMPANY/INDEX/MARKET National Mercantile 37.76 Customer Selected Stock List 367.68 NASDAQ Market Index 490.46
Assumes $100 invested on December 30, 1994 and that dividends are reinvested through December 31, 1999. INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP audited our financial statements for the year ended December 31, 1999. We expect a representative from Arthur Andersen LLP will be present at the Annual Meeting. We will provide the representative with the opportunity to make a statement if desired and to respond to appropriate questions by shareholders. 17 SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING If you wish to submit proposals to be included in our proxy statement for the 2001 Annual Meeting of Shareholders, we must receive them on or before , 2000. Please address your proposals to: Corporate Secretary, National Mercantile Bancorp, 1840 Century Park East, Los Angeles, California 90067.] By Order of the Board of Directors [SIG] Alan Grahm CORPORATE SECRETARY Dated: March , 2000 18 PROXY PRELIMINARY COPY NATIONAL MERCANTILE BANCORP ANNUAL MEETING OF SHAREHOLDERS, APRIL 27, 2000 The undersigned hereby appoints Scott A. Montgomery and Robert E. Thomson, and each of them, the proxy or proxies of the undersigned with full powers of substitution to each, to attend the Annual Meeting of Shareholders of National Mercantile Bancorp (the "Meeting") to be held on April 27, 2000 at Mercantile National Bank, 1840 Century Park East, Main Floor, Los Angeles, CA 90067, beginning at 6:00 p.m. local time, and any adjournments thereof, and to vote all shares of stock that the undersigned would be entitled to vote if personally present in the manner indicated below and on the reverse side, and on any other matters properly brought before the Meeting or any adjournments thereof, all as set forth in the March , 2000 proxy statement. PLEASE MARK YOUR CHOICE LIKE THIS /X/ IN BLACK OR BLUE INK. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ALL NOMINEES AND "FOR" THE AMENDMENT TO THE ARTICLES OF INCORPORATION 1. Election of the following nominees as directors: Donald E. Benson, Joseph N. Cohen, Robert E. Gipson, Alan Grahm, Antoinette Hubenette, M.D., Joseph W. Kiley III, Scott A. Montgomery, Judge Dion G. Morrow, Carl R. Terzian and Robert E. Thomson. / / FOR / / WITHHOLD (Authority to vote for any nominee may be withheld by lining through or otherwise striking out the name of such nominee). 2. Amendment to Article XIII of the Articles of Incorporation to extend the termination date for the Article XIII (which imposes a share transfer restriction) from July 1, 2000 to July 1, 2003. / / FOR / / AGAINST / / ABSTAIN
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE DATE, SIGN AND RETURN PROMPTLY. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING, PROXY STATEMENT AND ANNUAL REPORT ON FORM 10-KSB OF NATIONAL MERCANTILE BANCORP. (Signature should be exactly as name or names appear on this proxy. If stock is held jointly each holder should sign. If signature is by attorney, executor, administrator, trustee or guardian, please give full title.) Dated: , 2000 Signature Signature if held jointly I plan to attend the Meeting: Yes / / No / / This proxy will be voted FOR the nominees unless otherwise indicated, and in the discretion of the proxies on all other matters properly brought before the Meeting.
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