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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
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NATIONAL MERCANTILE BANCORP
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/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:
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(2) Aggregate number of securities to which transaction
applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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NATIONAL MERCANTILE BANCORP
1840 CENTURY PARK EAST
LOS ANGELES, CALIFORNIA 90067
(310) 277-2265
------------------------
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
---------------------
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Date: Thursday, April 27, 2000
Time: 6:00 p.m.
Place: Mercantile National Bank
1840 Century Park East
Main Floor
Los Angeles, California 90067
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[LOGO]
March 28, 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]
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<S> <C>
Robert E. Gipson Scott A. Montgomery
CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
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
</TABLE>
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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 28, 2000
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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 28, 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 892,437 shares of Common Stock outstanding and
792,379 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
1,584,758 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
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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.
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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.
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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.
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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.
</TABLE>
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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.
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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.
</TABLE>
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.
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<CAPTION>
NUMBER OF
MEETINGS
NAME OF COMMITTEE AND MEMBERS FUNCTIONS OF THE COMMITTEE IN 1999
- ----------------------------- ------------------------------------------------ ---------
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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
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF
MEETINGS
NAME OF COMMITTEE AND MEMBERS FUNCTIONS OF THE COMMITTEE IN 1999
- ----------------------------- ------------------------------------------------ ---------
<S> <C> <C>
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
</TABLE>
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
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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
<PAGE>
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.
<TABLE>
<CAPTION>
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)
- ---------------------- ---------- --------- -------- ---------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Conrad Company................................ 26,244 -0- 2.9 907,914 57.3 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 21.1 6,758 -- 7.9
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).......................... 93,285 205,235 33.4 18,482 1.2 12.8
</TABLE>
- ------------------------------
- -- 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
<PAGE>
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 $100,000 during 1999 (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------
NAME AND ------------------------ SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITIONSS YEAR SALARY ($) BONUS ($) OPTIONS/SAR'S (#) COMPENSATION ($)
- -------------------- -------- ----------- ---------- --------------------- -----------------
<S> <C> <C> <C> <C> <C>
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 -- -- -- --
</TABLE>
- ------------------------
(1) Incentive bonus based on 5% of pretax net profit pursuant to employment
agreement.
(2) Includes discretionary bonus of $5,000.
(3) Includes an option and tandem stock appreciation rights ("SAR") for 16,500
shares of common stock.
(4) Consists of club membership fees, automobile allowance and Company-matching
401(k) contribution.
(5) Mr. Ewig commenced employment with the Company on July 1, 1998 and resigned
on January 31, 2000.
13
<PAGE>
The following table sets forth information concerning options granted to the
Named Executive Officers during 1999.
OPTION/SAR GRANTS IN FISCAL YEAR 1999
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENT OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(1)
OPTIONS/SARS EMPLOYEES BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#) IN FISCAL YEAR(2) PER SHARE ($) DATE 5% ($) 10% ($)
- ---- ------------ ----------------- ------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
- ------------------------
(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
<TABLE>
<CAPTION>
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
- ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
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 -- --
</TABLE>
- ------------------------
(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
<PAGE>
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
<PAGE>
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.
<TABLE>
<S> <C>
Dated: March 28, 2000 Compensation & Stock Option Committee
Dion G. Morrow, Chairman
Alan Grahm
Antoinette Hubenette, M.D.
Scott A. Montgomery
Robert E. Thomson
</TABLE>
16
<PAGE>
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
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C>
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
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE 12/31/1999
COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS
COMPANY/INDEX/MARKET
<S> <C>
National Mercantile 37.76
Customer Selected Stock List 367.68
NASDAQ Market Index 490.46
</TABLE>
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
<PAGE>
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
November 29, 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 28, 2000
18
<PAGE>
PROXY
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 28, 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
<TABLE>
<S> <C>
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 Article XIII (which
imposes a share transfer restriction) from July 1, 2000 to
July 1, 2003.
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE DATE, SIGN AND RETURN
PROMPTLY.
<PAGE>
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING,
PROXY STATEMENT AND ANNUAL REPORT ON FORM 10-KSB OF NATIONAL MERCANTILE BANCORP.
<TABLE>
<S> <C>
(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 and FOR the
Amendment to Article XIII of the Articles of Incorporation,
unless otherwise indicated, and in the discretion of the
proxies on all other matters properly brought before the
Meeting.
</TABLE>
