10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ Quarterly report pursuant to section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2005 or

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission File Number: 000-50245

NARA BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-4849715
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)

3701 Wilshire Boulevard, Suite 220, Los Angeles, California	90010
(Address of Principal executive offices)	(ZIP Code)

(213) 639-1700

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No þ

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

     As of May 30, 2005, there were 23,654,596 outstanding shares of the issuer’s Common Stock, $0.001 par value.

Table of Contents

		Page
PART I FINANCIAL INFORMATION
Item 1.	FINANCIAL STATEMENTS
	Condensed Consolidated Statements of Financial Condition - March 31, 2005 (unaudited) and December 31, 2004		3
	Condensed Consolidated Statements of Income - Three Months Ended March 31, 2005 and 2004 (unaudited)		5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity - Three Months Ended March 31, 2005 and 2004 (unaudited)		6
	Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 2005 and 2004 (unaudited)		7
	Notes to Condensed Consolidated Financial Statements (unaudited)		9
Item 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		15
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		32
Item 4.	CONTROLS AND PROCEDURES		35
PART II OTHER INFORMATION
Item 1.	Legal Proceeding		38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		38
Item 3.	Defaults Upon Senior Securities		38
Item 4.	Submission of Matters to a Vote of Securities Holders		38
Item 5.	Other Information		38
Item 6.	Exhibits		38
	Signature		39
	Index to Exhibits		40
	Certifications
EX-10.1
EX-10.2
EX-10.3
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements
NARA BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

ASSETS	(Unaudited)
	March 31,		December 31,
	2005		2004
Cash and cash equivalents:
Cash and due from banks	$	28,308,301	$	27,712,221
Federal funds sold		20,500,000		47,500,000
Term federal funds sold		12,000,000		12,000,000
Total cash and cash equivalents		60,808,301		87,212,221
Interest bearing deposits with other financial institutions		95,000		—
Securities available for sale, at fair value		134,282,710		133,385,948
Securities held to maturity, at amortized cost (fair value:
March 31, 2005 - $2,069,658; December 31, 2004- $2,087,717)		2,000,966		2,001,071
Interest-only strips, at fair value		676,928		714,046
Loans held for sale, at the lower of cost or market		7,083,797		4,729,911
Loans receivable, net of allowance for loan losses (March 31, 2005 - $15,715,230; December 31, 2004 - $14,626,760)		1,310,143,738		1,207,107,713
Federal Reserve Bank stock , at cost		1,803,300		1,803,300
Federal Home Loan Bank (FHLB) Stock, at cost		5,193,500		4,801,800
Premises and equipment, net		6,845,891		6,869,553
Accrued interest receivable		6,157,151		5,124,017
Servicing assets		3,688,509		3,668,461
Deferred income taxes		15,477,830		14,073,602
Customers’ liabilities on acceptances		6,834,193		7,447,983
Cash surrender value of life insurance		14,321,650		14,226,314
Goodwill		1,909,150		1,909,150
Intangible assets, net		4,118,347		4,305,450
Other assets		8,791,718		8,284,227
Total assets	$	1,590,232,679	$	1,507,664,767

(Continued)

3

NARA BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES:	(Unaudited)
	March 31,			December 31,
	2005			2004
Deposits:
Noninterest bearing	$	363,614,231		$	328,325,741
Interest bearing:
Money market and other		270,703,090			323,477,365
Savings deposits		111,673,686			118,856,820
Time deposits of $100,000 or more		527,767,763			407,100,231
Other time deposits		83,504,544			78,214,767
Total deposits		1,357,263,314			1,255,974,924
Borrowings from Federal Home Loan Bank		63,500,000			90,000,000
Accrued interest payable		4,345,029			3,411,609
Acceptances outstanding		6,834,193			7,447,983
Interest rate swaps — at fair value		2,321,887			149,349
Subordinated debentures		39,268,000			39,268,000
Other liabilities		12,617,830			10,158,345
Total liabilities		1,486,150,253			1,406,410,210
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value; authorized, 40,000,000 shares at March 31, 2005 and December 31, 2004 issued and outstanding, 23,366,660 and 23,333,338 shares at March 31, 2005 and December 31, 2004, respectively		23,367			23,333
Capital surplus		45,071,723			44,902,604
Deferred compensation		—			(2,556	)
Retained earnings		61,610,738			56,848,237
Accumulated other comprehensive income (loss), net:		(2,623,402	)		(517,061	)
Total stockholders’ equity		104,082,426			101,254,557
Total liabilities and stockholders’ equity	$	1,590,232,679		$	1,507,664,767

See accompanying notes to condensed consolidated financial statements (unaudited)

4

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 2005 and 2004
(Unaudited)

	Three Months Ended March 31,
	2005			2004
				(Restated)
INTEREST INCOME:
Interest and fees on loans	$	22,038,324		$	14,880,016
Interest on securities		1,400,203			1,340,526
Interest on interest rate swaps		416,888			904,944
Interest on federal funds sold and other investments		238,505			120,547
Total interest income		24,093,920			17,246,033
INTEREST EXPENSE:
Interest on deposits		5,458,135			3,082,960
Interest on subordinated debentures		656,672			558,692
Interest on other borrowings		647,023			292,303
Total interest expense		6,761,830			3,933,955
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES		17,332,090			13,312,078
PROVISION FOR LOAN LOSSES		1,650,000			1,500,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		15,682,090			11,812,078
NON-INTEREST INCOME:
Service charges on deposit accounts		1,577,880			2,027,331
Other income and fees		1,878,630			1,926,050
Net gains on sales of SBA loans		749,097			840,879
Net gains on sales of securities available-for sale		15,158			304,976
Net gains (losses) on sales of premises and equipment		(5,879	)		(217	)
Net gains (losses) on interest rate swaps		(35,326	)		719,735
Other than temporary impairment on securities		—			(1,633,166	)
Total non-interest income		4,179,560			4,185,588
NON-INTEREST EXPENSES:
Salaries and employee benefits		5,262,665			5,818,327
Occupancy		1,596,233			1,460,469
Furniture and equipment		510,034			419,195
Advertising and marketing		390,118			306,540
Communications		186,248			161,420
Data processing		609,507			572,601
Professional fees		756,470			329,801
Office supplies and forms		97,422			98,627
Other		1,291,797			1,100,241
Total non-interest expenses		10,700,494			10,267,221
INCOME BEFORE INCOME TAX PROVISION		9,161,156			5,730,445
INCOME TAX PROVISION		3,756,074			2,189,974
NET INCOME	$	5,405,082		$	3,540,471
EARNINGS PER SHARE
Basic	$	0.23		$	0.15
Diluted		0.22			0.14

See accompanying notes to condensed consolidated financial statements (unaudited)

5

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2005 and 2004

(Unaudited)

																Accumulated
																Other
	Number of															Comprehensive
	Shares			Common			Capital			Deferred			Retained			Income			Comprehensive
	Outstanding			Stock			Surplus			Compensation			Earnings			(loss) , net			Income
BALANCE, JANUARY 1, 2005		23,333,338		$	23,333		$	44,902,604		$	(2,556	)	$	56,848,237		$	(517,061	)
Stock options exercised		34,656			35			176,784
Amortization of restricted stock		(1,334	)		(1	)		(7,665	)		639
Forfeiture of restricted stock											1,917
Cash dividends declared ($0.0275 per share)														(642,581	)
Comprehensive income:
Net income														5,405,082					$	5,405,082
Other comprehensive income (loss):
Change in unrealized gain (loss) on securities available for sale and interest-only-strips , net of tax																	(824,013	)		(824,013	)
Change in unrealized gain (loss) on interest rate swaps — net of tax																	(1,282,328	)		(1,282,328	)
Total comprehensive income																			$	3,298,741
BALANCE, MARCH 31, 2005		23,366,660		$	23,367		$	45,071,723		$	—		$	61,610,738		$	(2,623,402	)
BALANCE, JANUARY 1, 2004 (restated)		23,120,178		$	23,120		$	43,046,200		$	(10,222	)	$	39,566,995		$	(54,571	)
Stock options exercised		50,000			50			233,850
Tax benefit from stock options exercised								200,176
Amortization of restricted stock											1,916
Cash dividends declared ($0.0275 per share)														(579,932	)
Comprehensive income:
Net income (restated)														3,540,471					$	3,540,471
Other comprehensive income:
Change in unrealized gain (loss) on securities available for sale and interest-only- strips, net of tax																	1,701,238			1,701,238
Change in unrealized gain (loss) on interest rate swaps — net of tax																	974,578			974,578
Total comprehensive income																			$	6,216,287
BALANCE, MARCH 31, 2004 (restated)		23,170,178		$	23,170		$	43,480,226		$	(8,306	)	$	42,527,534		$	2,621,245

See accompanying notes to condensed consolidated financial statements (unaudited)

6

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(Unaudited)

	2005			2004
				(Restated)
CASH FLOW FROM OPERATING ACTIVITIES
Net income	$	5,405,082		$	3,540,471
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation, amortization, and accretion		799,588			746,396
Other than temporary impairment on investment securities		—			1,633,166
Provision for loan losses		1,650,000			1,500,000
Proceeds from sales of loans		14,108,352			11,208,392
Originations of loans held for sale		(15,713,141	)		(11,844,203	)
Net gains on sales of loans		(749,097	)		(840,879	)
Net gains on sales of securities available for sale		(15,158	)		(304,976	)
Net change in cash surrender value of life insurance		(95,336	)		(127,995	)
Net losses on sales of premises and equipment		5,879			217
Net losses (gains) on interest rate swaps		35,326			(719,735	)
Change in accrued interest receivable		(1,033,134	)		380,231
Deferred income taxes		—			(2,172	)
FHLB stock dividends		—			(48,500	)
Change in other assets		(663,027	)		(837,335	)
Change in accrued interest payable		933,420			121,891
Change in interest-only strips		3,955			(63,093	)
Change in other liabilites		2,459,485			1,375,225
Net cash from operating activities		7,132,194			5,717,101
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans receivable		(104,686,025	)		(51,717,177	)
Purchase of premises and equipment		(409,074	)		(184,125	)
Purchase of securities available for sale		(14,854,998	)		(17,400,790	)
Net change in interest-bearing deposits with other financial institutions		(95,000	)		—
Purchase of FHLB stock		(391,700	)		(396,100	)
Proceeds from sales of premises and equipment		—			508
Proceeds from sales of securities available for sale		7,416,970			6,290,803
Proceeds from matured or called securities available for sale		5,160,131			13,586,399
Proceeds from redemption of FHLB stock		—			1,091,500
Net cash from investing activities		(107,859,696	)		(48,728,982	)

(Continued)

7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(Unaudited)

	2005			2004
				(Restated)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		101,288,390			19,240,025
Payments of cash dividends		(641,627	)		(577,685	)
Payments for FHLB borrowings		(65,000,000	)		(50,000,000	)
Proceeds from FHLB borrowings		38,500,000			42,000,000
Proceeds from exercise of stock options		176,819			233,900
Net cash from financing activities		74,323,582			10,896,240
NET CHANGE IN CASH AND CASH EQUIVALENTS		(26,403,920	)		(32,115,641	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		87,212,221			76,438,497
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	60,808,301		$	44,322,856
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	5,828,410		$	3,812,064
Income taxes paid	$	320,000		$	1,672,500

See accompanying notes to condensed consolidated financial statements (unaudited)

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Nara Bancorp, Inc.

     Nara Bancorp, Inc. (“Nara Bancorp”, on a parent-only basis, and “we” or “our” on a consolidated basis), incorporated under the laws of the State of Delaware in 2000, is a bank holding company, headquartered in Los Angeles, California, offering a full range of commercial banking and consumer financial services through its wholly owned subsidiary, Nara Bank (“Nara Bank”), which was organized in 1989 as a national bank and converted to a California state-chartered bank on January 3, 2005, with branches in California and New York as well as Loan Production Offices in California, Washington, Colorado, Georgia, Illinois, New Jersey, Virginia and Texas.

2. Basis of Presentation

     Our condensed consolidated financial statements included herein have been prepared without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such SEC rules and regulations.

     The condensed consolidated financial statements include the accounts of Nara Bancorp and its wholly owned subsidiaries, principally Nara Bank (the “Bank”). All intercompany transactions and balances have been eliminated in consolidation.

     We believe that we have made all adjustments necessary to fairly present our financial position and the results of our operations for the interim period ended March 31, 2005. Certain reclassifications have been made to prior period amounts to conform to the March 31, 2005 presentation. The results of operations for the interim period are not necessarily indicative of results for the full year.

     These condensed consolidated financial statements should be read along with the audited consolidated financial statements and accompanying notes included in our 2004 Annual Report on Form 10-K.

3. Restatement

The financial information as of and for the three months ended March 31, 2004 is labeled “restated” as it has been revised from the information previously reported and filed for the quarter ended March 31, 2004 on Form 10-Q. The restatement is further discussed in Note 2 to the Consolidated Financial Statements in our 2004 Annual Report on Form 10-K.

4. Stock-Based Compensation

     Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, encourages, but does not require, companies to record compensation cost for stock-based employees compensation plans at fair value. We have elected to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the fair value of our stock at the date of grant over the grant price.

     We have adopted the disclosure only provisions of SFAS No. 123. Had compensation cost for our stock-based compensation plans been determined based on the fair value at the grant date for awards consistent with the provisions of SFAS No. 123, our net income and earnings per share would have been reduced to the pro forma amounts as follows:

9

	For the three months ended
	March 31,
	2005			2004
				(Restated)
Net income—as reported	$	5,405,082		$	3,540,471
Deduct: Total stock-based employee compensation expense determined under the fair value-based method for all awards—net of related tax effects		(278,746	)		(239,038	)
Pro forma net income	$	5,126,336		$	3,301,433
EPS:
Basic—as reported	$	0.23		$	0.15
Basic—pro forma		0.22			0.14
Diluted—as reported	$	0.22		$	0.14
Diluted—pro forma		0.21			0.14

     The fair value of options granted and pro forma effects are computed using option pricing models, using the following weighted-average assumptions as of the grant date.

	March 31,
	2005			2004
Risk-free interest rate		3.9	%		3.5	%
Expected option life (years)		3.3			6.0
Expected stock price volatility		35.7	%		38.5	%
Dividend yield		0.5	%		0.5	%
Weighted average fair value of options granted during the period	$	7.67		$	6.21

See Note 8 for discussions regarding changes in accounting for stock-based compensation that will take an effect on January 1, 2006.

5. Dividends

     On March 10, 2005, we declared a $0.0275 per share cash dividend paid on April 12, 2005 to stockholders of record at the close of business on March 31, 2005. On June 23, 2005, we declared a $0.0275 per share cash dividend payable on July 17, 2005 to stockholders of record at the close of business on July 5, 2005.

6. Earnings Per Share (“EPS”)

     Basic EPS excludes dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Allocated ESOP shares are considered outstanding for this calculation. Diluted EPS reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted to common stock that would then share in our earnings.

10

     The following table shows how we computed basic and diluted EPS for the periods ended March 31, 2005 and 2004.

	For the three months ended March 31,
	2005						2004 (Restated)
	Net Income		Shares		Per Share		Net Income		Shares		Per Share
	(Numerator)		(Denominator)		(Amount)		(Numerator)		(Denominator)		(Amount)
Basic EPS	$	5,405,082		23,353,801	$	0.23	$	3,540,471		23,156,222	$	0.15
Effect of Dilutive Securities:
Stock Options		—		1,315,920				—		1,279,334
Diluted EPS	$	5,405,082		24,669,721	$	0.22	$	3,540,471		24,435,556	$	0.14

7. Stock Splits

     On May 17, 2004, Nara Bancorp announced that its Board of Directors had approved a two-for-one split of its common stock, effected in the form of a 100% stock dividend, which was distributed on June 15, 2004 to stockholders of record on the close of business on May 31, 2004. The effect of this dividend is that stockholders received one additional share of Nara Bancorp common stock for each share owned. All share and per share information has been restated to reflect the stock split.

8. Recent Accounting Pronouncements

     EITF Issue 03-1 entitled, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”, contains accounting guidance regarding other-than temporary impairment on securities that was to take effect for the quarter ended September 30, 2004. However, the effective date of portions of this guidance has been delayed, and more interpretive guidance is to be issued in the near future. The effect of this new and pending guidance on our financial statements is not known, but it is possible this guidance could change management’s assessment of other-than-temporary impairment in future periods. (See also note 11, herein and see discussion in Note 3 of the Notes to Consolidated Financial Statements for year end December 31, 2004 included in our 2004 Annual Report on Form 10-K related to the fair value of securities available for sale.)

     FAS 123, Revised, requires all public companies to record compensation cost for stock options provided to employees in return for employee service. The cost is measured at the fair value of the options when granted, and this cost is expensed over the employee service period, which is normally the vesting period of the options. This will apply to awards granted or modified on or after January 1, 2006. Compensation cost will also be recorded for prior option grants that vest after the date of adoption. The effect on results of operations will depend on the level of future option grants and the calculation of the fair value of the options granted at such future dates, as well as the vesting periods provided, and so the effect cannot currently be predicted.

     SOP 03-3 requires that a valuation allowance for loans acquired in a transfer, including in a business combination, reflect only losses incurred after acquisition and should not be recorded at acquisition. This standard applies to any loan acquired in a transfer that showed evidence of credit quality deterioration since it was made. The effect of this new standard on our financial position and results of operations is not expected to be material upon adoption.

11

9. Loan Receivable and Allowance For Loan Losses

     The following is a summary of loans by major category:

	March 31, 2005			December 31, 2004
Commercial loans	$	465,761,616		$	441,940,400
Real estate loans		796,962,173			717,746,940
Consumer and other loans		66,180,571			64,844,647
		1,328,904,360			1,224,531,987
Unamortized deferred loan fees—net of costs		(3,045,392	)		(2,797,514	)
Allowance for loan losses		(15,715,230	)		(14,626,760	)
Loans receivable—net	$	1,310,143,738		$	1,207,107,713

     Activity in the allowance for loan losses is as follows for the period indicated:

	Three months ended March 31,
	2005			2004
Balance, beginning of period	$	14,626,760		$	12,470,735
Provision for loan losses		1,650,000			1,500,000
Loans charged off		(855,809	)		(717,041	)
Recoveries of charge-offs		294,279			309,984
Balance, end of period	$	15,715,230		$	13,563,678

     At March 31, 2005, December 31, 2004 and March 31, 2004, the Company had classified $2.6 million, $2.8 million and $5.3 million, respectively, of its commercial and real estate loans as impaired, with specific loss allocations of $975 thousand, $797 thousand and $1.3 million, respectively. There were no impaired loans without specific loss allocations. At March 31, 2005, loans on non-accrual status totaled $3.8 million compared to $2.7 million at December 31, 2004 and $5.1 million at March 31, 2004. At March 31, 2005 and December 31, 2004, there were no loans past due more than 90 days and still accruing interest, compared to $179 thousand at March 31, 2004.

10. Derivative Financial Instruments and Hedging Activities

     Under the interest rate swap agreements that the Company has entered into, the Company receives a fixed rate and pays a floating rate. The interest rate swaps qualify as cash flow hedges for accounting purposes, and effectively fix the interest rate received on $140,000,000 of variable rate loans indexed to Prime. As of March 31, 2005, the amounts in accumulated other comprehensive income (loss) associated with these cash flow hedges totaled a loss of $1,456,083 (net of tax benefit of $970,722), of which $48,712 are expected to be reclassified as a reduction into interest income within the next 12 months. As of March 31, 2005, the maximum length of time over which the Company is hedging its exposure to the variability of future cash flows is approximately 7.5 years.

12

Interest rate swap information at March 31, 2005 is summarized as follows:

Current Notional											Unrealized Gain
Amount		Floating Rate	Fixed Rate			Maturity Date		Fair Value			(Loss)
$	20,000,000	H.15 Prime 1		6.95	%		4/29/2005	$	15,390		$	11,643
	20,000,000	H.15 Prime 1		7.59	%		4/30/2007		218,229			117,058
	20,000,000	H.15 Prime 1		6.09	%		10/09/2007		(509,098	)		(509,098	)
	20,000,000	H.15 Prime 1		6.58	%		10/09/2009		(679,572	)		(679,572	)
	20,000,000	H.15 Prime 1		7.03	%		10/09/2012		(753,434	)		(753,434	)
	20,000,000	H.15 Prime 1		5.60	%		12/17/2005		(137,908	)		(137,908	)
	10,000,000	H.15 Prime 1		6.32	%		12/17/2007		(223,430	)		(223,430	)
	10,000,000	H.15 Prime 1		6.83	%		12/17/2009		(252,064	)		(252,064	)
$	140,000,000							$	(2,321,887	)	$	(2,426,805	)

1.  Prime rate is based on Federal Reserve statistical release H.15

     The realized gain or (loss) on interest rate swaps due to hedge ineffectiveness was ($35,326) and $719,735 for the three months ended March 31, 2005 and 2004, respectively.

     During the first quarters of 2005 and 2004, interest income recorded on swap transactions totaled $416,888 and $904,944, respectively. At March 31, 2005, we pledged as collateral to the interest rate swap counterparties agency securities with a book value of $2.0 million and real estate loans of $4.9 million.

11. Business Segments

     Our management utilizes an internal reporting system to measure the performance of our various operating segments. We have identified three principal operating segments for the purposes of management reporting: banking operations, trade finance services (“TFS”), and small business administration (“SBA”) lending services. Information related to our remaining centralized functions and eliminations of inter-segment amounts has been aggregated and included in banking operations. Although all three operating segments offer financial products and services, they are managed separately based on each segment’s strategic focus. The banking operations segment focuses primarily on commercial and consumer lending and deposit operations throughout our branch network. The TFS segment focuses primarily on allowing our import/export customers to handle their international transactions. Trade finance products include the issuance and collection of letters of credit, international collection, and import/export financing. The SBA segment provides our customers with access to the U.S. SBA guaranteed lending program.

     Operating segment results are based on our internal management reporting process, which reflects assignments and allocations of capital, certain operating and administrative costs and the provision for loan losses. Non-interest income and non-interest expense, including depreciation and amortization, directly attributable to a segment are assigned to that business. We allocate indirect costs, including overhead expense, to the various segments based on several factors, including, but not limited to, full-time equivalent employees, loan volume and deposit volume. We allocate the provision for loan losses based on the origination of new loans for the period. We evaluate the overall performance based on profit or loss from operations before income taxes excluding gains and losses that are not expected to reoccur. Future changes in our management structure or reporting methodologies may result in changes to the measurement of our operating segment results.

13

     The following tables present the operating results and other key financial measures for the individual operating segments for the three months ended March 31, 2005 and 2004.

Three Months Ended March 31,
(Dollars in thousands)

Business Segment
Banking
Operations	TFS	SBA	Company

2005
Net interest income, before provision for loan loss	$	13,618	$	1,404	$	2,310	$	17,332
Less provision for loan losses		1,610		20		20		1,650
Non-interest income		2,286		702		1,191		4,179
Net revenue		14,294		2,086		3,481		19,861
Non-interest expense		8,849		716		1,135		10,700
Income before taxes	$	5,445	$	1,370	$	2,346	$	9,161
Goodwill	$	1,909	$	—	$	—	$	1,909
Total assets	$	1,249,708	$	125,763	$	214,762	$	1,590,233
2004 (restated)
Net interest income, before provision for loan loss	$	8,483	$	3,021	$	1,808	$	13,312
Less provision for loan losses		810		430		260		1,500
Non-interest income		2,334		655		1,196		4,185
Net revenue		10,007		3,246		2,744		15,997
Non-interest expense		7,228		2,260		779		10,267
Income before taxes	$	2,779	$	986	$	1,965	$	5,730
Goodwill	$	1,909	$	—	$	—	$	1,909
Total assets	$	1,003,740	$	97,291	$	176,718	$	1,277,749

12. Other-Than-Temporary Impairment

     For the three months ended March 31, 2004 and for the year ended December 31, 2004, we recorded an impairment charge of $1.6 million and $2.6 million, respectively on government sponsored enterprise preferred stocks as a result of other-than-temporary declines in their market values. Management determined that the unrealized losses on these securities at March 31, 2004 and December 31, 2004 should be considered other-than-temporary and therefore recorded as impairment charges as these investments had significant unrealized loss positions for more than one year and it was difficult to forecast significant market value recovery in a reasonable time frame. During the first quarter of 2005, those government sponsored enterprise preferred stocks were sold, resulting in a gain of approximately $15,000.

14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following is management’s discussion and analysis of the major factors that influenced our consolidated results of operations and financial condition for the three-month periods ended March 31, 2005 and 2004. This analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2004 and with the unaudited consolidated financial statements and notes set forth in this report.

GENERAL

     On March 30, 2005, Nara Bancorp filed a Form 8-K announcing that on February 23, 2005, a letter (the “Letter”) dated October 10, 2002 addressed to the former President and Chief Executive Officer of Nara Bancorp, Inc. (the “Company”) and signed by the former Chairman of the Board of the Company was brought to the attention of the Audit Committee. The Letter addressed the relinquishment of certain profit sharing rights held by the former President and Chief Executive Officer payable in 2003 and 2004 and the Letter further provided that Nara Bank, a wholly-owned subsidiary of the Company, purportedly agreed to reimburse the former President and Chief Executive Officer for certain automobile and country club expenses and to provide him with compensation for additional work to be performed after his retirement, all in an amount not to exceed the amount of profit sharing rights to be relinquished by him.

     A special sub-committee of the Audit Committee of the Board of Directors of the Company (the “Subcommittee”) engaged independent counsel to conduct an investigation of matters relating to the Letter. The Subcommittee discovered that the amount the former President and Chief Executive Officer relinquished was approximately $600,000 in 2003 and $0 in 2004. The Subcommittee determined that the failure to disclose and account for the arrangement to reimburse certain expense amounts up to approximately $600,000 contemplated by the Letter had an effect on the Company’s previously issued consolidated financial statements for the years ended December 31, 2003 and 2002. The Subcommittee evaluated the error in accordance with the quantitative and qualitative guidance set forth in SEC Staff Accounting Bulletin No. 99. As a result thereof, on March 24, 2005, the Subcommittee concluded (and on March 25, 2005 the Board of Directors concurred) that the Company should restate its consolidated financial statements for the years ended December 31, 2003 and 2002 and, accordingly, the previously issued financial statements and the related independent auditors reports thereon for the years ended December 31, 2003 and 2002 should no longer be relied upon. The Subcommittee discussed this conclusion with the Company’s independent registered public accounting firm for 2004 as well as its former independent registered public accounting firm for 2003 and 2002. Additionally, the Subcommittee engaged its current independent registered public accounting firm to re-audit the Company’s 2003 and 2002 consolidated financial statements.

     On March 30, 2005, the Company announced in a current report on Form 8-K that it was restating its consolidated financial statements for the fiscal years ended December 31, 2003 and 2002. In the course of the re-audits of the Company’s consolidated financial statements for the fiscal years ended December 31, 2003 and 2002, certain additional errors were also identified (i.e., other than the one relating to the Letter) in the Company’s consolidated financial statements for 2003 and 2002. Specifically, errors were identified in accounting for bank owned life insurance, lease arrangements under which the Company occupies its premises, incentive compensation, profit sharing and bonus payments to certain employees and various other accounting matters. Accordingly, the Company’s 2003 and 2002 consolidated financial statements and previously released information for 2004 were restated for these accounting errors and the restated financial statements were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

     All financial information contained in this Quarterly Report on Form 10-Q as of and for the three months ended March 31, 2004, and as of and for the year ended December 31, 2004 gives effect to the restatement discussed above (the “Restatement”). Information regarding the effect of the restatement on our financial position as of December 31, 2004 and results of operations for the three months ended March 31, 2004 is provided in Note 2 to the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2004.

15

Selected Financial Data

     The following table sets forth certain selected financial data concerning the periods indicated:

	At or For The Three Months Ended March 31,
	2005		2004
	(Dollars in thousands, except per share data)
			(Restated)
Income Statement data:
Interest income	$	24,094	$	17,246
Interest expense		6,762		3,934
Net interest income		17,332		13,312
Provision for loan losses		1,650		1,500
Net interest income after provision for loan losses		15,682		11,812
Non-interest income		4,179		4,185
Non-interest expense		10,700		10,267
Income before income tax provision		9,161		5,730
Income tax provision		3,756		2,190
Net income	$	5,405	$	3,540
Per Share Data: *
Earnings per share — basic	$	0.23	$	0.15
Earnings per share — diluted		0.22		0.14
Book value (period end)	$	4.45	$	3.83
Common shares outstanding		23,366,660		23,170,178
Weighted average shares — basic		23,353,801		23,156,222
Weighted average shares — diluted		24,669,721		24,435,556
Statement of Financial Condition Data — At Period End:
Assets	$	1,590,233	$	1,277,749
Securities available for sale and held to maturity		136,284		127,384
Gross loan, net of deferred loan fees and costs (excludes loans held for sale)		1,325,859		1,048,609
Deposits		1,357,263		1,080,655
Federal Home Loan Bank borrowings		63,500		52,000
Subordinated debentures		39,268		39,268
Stockholders’ equity		104,082		88,644

* Number of shares and per share data were retroactively adjusted for the stock split declared on May 17, 2004.

16

	For The Three Months Ended March 31,
	2005			2004
	(Dollars in thousands, except per share data)
				(Restated)
Average Balance Sheet Data:
Assets	$	1,533,157		$	1,262,861
Securities available for sale and held to maturity		138,386			127,990
Gross loans, including loans held for sale		1,277,808			1,027,993
Deposits		1,277,592			1,062,369
Stockholder’s equity		102,687			86,363
Selected Performance Ratios:
Return on average assets (1)		1.41	%		1.12	%
Return on average stockholders’ equity (1)		21.05	%		16.40	%
Non-interest expense to average assets (1)		2.79	%		3.25	%
Efficiency ratio (2)		49.74	%		58.68	%
Net interest margin (3)		4.79	%		4.50	%
Regulatory Capital Ratios (4)
Leverage capital ratio (5)		8.74	%		8.70	%
Tier 1 risk-based capital ratio		9.43	%		9.88	%
Total risk-based capital ratio		10.95	%		11.70	%
Asset Quality Ratios:
Allowance for loan losses to gross loans		1.19	%		1.29	%
Allowance for loan losses to non-performing loans		409.46	%		259.15	%
Total non-performing assets to total assets (6)		0.26	%		0.44	%

(1)	Calculations are based on annualized net income.
(2)	Efficiency ratio is defined as non-interest expense divided by the sum of net interest income and noninterest income plus non-interest income.
(3)	Net interest margin is calculated by dividing annualized net interest income by average total interest earning assets.
(4)	The required ratios for the “well-capitalized” institution are 5% leverage capital, 6% tier 1 risk-based capital and 10% total risk-based capital.
(5)	Calculations are based on average quarterly asset balances.
(6)	Non-performing assets include non-accrual loans, other real estate owned, and restructured loans.

Forward-Looking Information

     Certain matters discussed in this report may constitute forward-looking statements under Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. There can be no assurance that the results described or implied in such forward-looking statements will, in fact, be achieved and actual results, performance, and achievements could differ materially because our business involves inherent risks and uncertainties. Risks and uncertainties include possible future deteriorating economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; risks of available for sale securities declining significantly in value as interest rates rise; and regulatory risks associated with the variety of current and future regulations to which we are subject. For additional information concerning these factors, see “Item 1. Business — Factors That May Affect Business or The Value of Our Stock” contained in our Annual Report on Form 10-K for the year ended December 31, 2004.

17

RESULTS OF OPERATIONS

     You should read the following discussion and analysis of our financial condition and results of operations together with our Consolidated Financial Statements and accompanying notes presented elsewhere in this Report. This discussion and analysis may contain forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Business—Factors That May Impact Our Business or the Value of Our Stock” and elsewhere in this Report.

Overview

     Nara Bancorp, Inc. is a bank holding company headquartered in Los Angeles, California. We offer a full range of commercial banking and consumer financial services through our wholly owned subsidiary, Nara Bank, a California state-chartered bank. Nara Bank primarily focuses its business in Korean communities in California and in the greater New York City metropolitan area. Through our network of 16 branches and 8 loan production offices, we offer commercial banking and consumer financial services to our customers, who typically are individuals and small- to medium-sized businesses in our market areas. We accept deposits and originate a variety of loans including commercial loans, commercial real estate loans, trade finance, Small Business Administration (SBA) loans, automobile and various consumer loans.

     Our principal business involves earning interest on loans and investment securities that are funded by customer deposits and other borrowings. Our operating income and net income derives primarily from the difference between interest income received from interest-earning assets and interest expense paid on interest-bearing liabilities and, to a lesser extent, from fees received in connection with servicing loan and deposit accounts and fees from the sale of SBA loans. Our major expenses are the interest we pay on deposits and borrowings and general operating expenses which primarily consist of salaries and employee benefits, occupancy, and provision for loan losses. Interest rates are highly sensitive to many factors that are beyond our control, such as inflation, recession and unemployment. We cannot predict the impact that future changes in domestic and foreign economic conditions might have on our performance.

     Our business is also influenced by the monetary and fiscal policies of the federal government and the policies of regulatory agencies, particularly the Federal Reserve Board (FRB). The FRB implements national monetary policies (with objectives such as curbing inflation and combating recession) through its open-market operations in U.S. government securities, by adjusting the required level of reserves for depository institutions subject to its reserve requirements, and by varying the target federal funds and discount rates applicable to borrowings by depository institutions. The actions of the FRB in these areas influence the growth of bank loans, investments, and deposits and also affect interest rates earned on interest-earning assets and paid on interest-bearing liabilities. The nature and impact on Nara Bancorp and Nara Bank of future changes in monetary and fiscal policies cannot be predicted.

     From time to time, legislation and regulations are enacted which have the effect of increasing the cost of doing business, limiting or expanding permissible activities, or affecting the competitive balance between banks and other financial services providers. Proposals to change the laws and regulations governing the operations and taxation of banks, bank holding companies, and other financial institutions and financial services providers are frequently made in the U.S. Congress, in the state legislatures, and before various regulatory agencies. This legislation may change banking statutes and our operating environment in substantial and unpredictable ways. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. We cannot predict whether any of this potential legislation will be enacted, and if enacted, the effect that it, or any implementing regulations, would have on our financial condition or results of operations.

     We have a significant geographic concentration in the Korean communities in California and in the greater New York City metropolitan area, and our results are affected by economic conditions in these areas. A decline in economic and business conditions in our market areas could have a material impact on the quality of our loan portfolio or the demand for our products and services, which in turn may have a material adverse effect on our results of operations.

     During the first quarter of 2005, we experienced continued growth in our assets due to growth in our existing branches. Our total assets grew by 5% to $1,590.2 million at March 31, 2005 from $1,507.7 million at December 31, 2004. The increase in total assets for the period was primarily due to growth in our loans funded by increases in deposits and borrowings. The loan growth during the first quarter of 2005 was predominantly in real estate and commercial loans and deposit growth was in time deposits that are $100,000 or more.

     Our net income was $5.4 million for the three months ended March 31, 2005 and represents a 54% increase from $3.5 million for the three months ended March 31, 2004. The major contributor to the increase in net income for the three months ended March 31, 2005 was a 30% increase in net interest income for three months ended March 31, 2005 compared to the same period of 2004 as a result of loan growth and an increase in our interest in net interest margin. More detailed discussions are in the various sections below.

18

Net income

     Our net income for the three months ended March 31, 2005 was $5.4 million, or $0.22 per diluted share, compared to $3.5 million, or $0.14 per diluted share, for the same quarter of 2004, which represented an increase of $1.9 million or 54%. The increase resulted primarily from an increase in net interest income due to growth in our loan portfolio. As a result of the Restatement, our net income decreased $603 thousand or $0.02 per diluted share for the three months ended March 31, 2004, compared to amounts previously reported. The adjustments related primarily to non-interest expense and are addressed further below and in Note 2 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2004.

     The annualized return on average assets was 1.41% for the first quarter of 2005 compared to 1.12% for the same period of 2004. The annualized return on average equity was 21.05 % for the first quarter of 2005 compared to 16.40% for the same period of 2004. The resulting efficiency ratio was 49.74% for the three months ended March 31, 2005 compared with 58.68% for the same period of 2004. Our improved efficiency ratio was primarily due to an increase in net interest income from growth in interest earning assets. The recent improvement in efficiency ratio over the past quarters could be negatively affected by the unexpected expenses related to the Restatement.

Net Interest Income and Net Interest Margin

     Net Interest Income

     The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans, interest rate swaps and investments and the interest paid on deposits and borrowed funds. When net interest income is expressed as a percentage of average interest-earning assets, the result is the net interest margin. Net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing deposits and borrowed funds. Net interest income is affected by changes in the volume of interest-earning assets and interest-bearing liabilities as well as by changes in the yield earned on interest-earning assets and the rates paid on interest-bearing liabilities.

     Net interest income before provision for loan losses was $17.3 million for the three months ended March 31, 2005, an increase of $4.0 million, or 30% from net interest income of $13.3 million for the same quarter of 2004. This increase was primarily due to an increase in average interest earning assets, which increased $264.7 million or 22% to $1,448.7 million for the first quarter of 2005 from $1,184.0 million for the same quarter of 2004.

     Interest income for the first quarter of 2005 was $24.1 million, which represented an increase of $6.9 million or 40% over interest income of $17.2 million for the same quarter of 2004. The increase was the net result of a $4.3 million increase in interest income due to an increase in volume of average interest-earning assets (volume change) and a $2.5 million increase in interest income due to an increase in the average yield earned on those average interest-earning assets (rate change).

     Interest expense for the first quarter of 2005 was $6.8 million, an increase of $2.9 million or 74% over interest expense of $3.9 million for the same quarter of 2004. The increase was primarily the result of a $1.1 million increase in interest expense due to an increase in volume of average interest-bearing liabilities (volume change) and a $1.7 million increase in interest expense due to an increase in the average rates paid on interest-bearing liabilities (rate change). Interest-bearing liabilities increased in part as a result of a growth in deposits following a bank-wide marketing campaign promoting new deposit accounts with higher interest rates.

     Net Interest Margin

     The average yield on average interest-earning assets increased to 6.65% for the first quarter of 2005 compared with 5.83% for the same quarter of 2004. The increase was primarily due to an increase in market interest rates, including a 125 basis points increase by the Federal Reserve Board in the prime rate between those periods. The prime rate was increased five times between the two periods in increments of 25 basis points. The weighted average prime rate for the first quarter of 2005 was 5.34% compared to 4.00% during the same quarter of 2004. The average cost of

19

interest-bearing liabilities also increased to 2.53 % for the first quarter of 2005 from 1.87% for the same quarter of 2004.

     The net interest margin was 4.79% for the first quarter of 2005 compared with 4.50% for the same quarter of 2004. Despite a 125 basis point increase in prime rate between the two periods, the net interest margin only increased by 29 basis points primarily due to increases in the cost of interest-bearing liabilities. Due to fierce competition for deposits among Korean-American banks, especially De Novo banks, the cost of deposits increased faster than we anticipated. The average cost of interest bearing deposits increased to 2.32% for the first quarter of 2005 from 1.66% for the same quarter of 2004. The average cost of subordinated debentures, which are mostly tied to 3 month LIBOR adjusting quarterly, also increased as market interest rates increased. The average cost of total deposits, including noninterest bearing deposits, for the first quarter of 2005 was 1.71% compared to 1.15% for the same quarter of 2004.

     The following table presents our condensed consolidated average balance sheet information, together with interest rates earned and paid on the various sources and uses of funds for the periods indicated:

	Three months ended						Three months ended
	March 31, 2005						March 31, 2004
			Interest		Average				Interest		Average
	Average		Income/		Yield/		Average		Income/		Yield/
	Balance		Expense		Rate *		Balance		Expense		Rate *
	(Dollars in thousands)
INTEREST EARNINGS ASSETS:
Loans (1) (2)	$	1,277,808	$	22,455		7.03%	$	1,027,993	$	15,785		6.14%
Other investments		6,728		74		4.40%		5,325		56		4.21%
Securities (3)		138,386		1,400		4.05%		127,990		1,340		4.19%
Federal funds sold		25,746		165		2.56%		22,719		65		1.14%
Total interest earning assets	$	1,448,668	$	24,094		6.65%	$	1,184,027	$	17,246		5.83%
INTEREST BEARING LIABILITITES:
Demand, interest-bearing	$	297,136	$	1,586		2.14%	$	153,420	$	531		1.38%
Savings		113,511		517		1.82%		150,150		651		1.73%
Time certificates of deposit		531,192		3,355		2.53%		439,717		1,901		1.73%
FHLB borrowings		90,381		647		2.86%		59,353		292		1.97%
Subordinated debentures		37,145		657		7.07%		37,115		559		6.02%
Total interest bearing liabilities	$	1,069,365	$	6,762		2.53%	$	839,755	$	3,934		1.87%
Net interest income			$	17,332					$	13,312
Net interest margin						4.79%						4.50%
Net interest spread						4.12%						3.96%
Average interest-earning assets to average interest-bearing liabilities						135.47%						141.00%

*	Annualized
(1)	Interest income on loans includes loan fees and net interest settlement from interest rate swaps.
(2)	Average balances of loans are net of deferred loan fees and costs and include nonaccrual loans and loan held for sale.
(3)	Interest income and yields are not presented on a tax-equivalent basis.

     The following table illustrates the changes in our interest income, interest expenses, and amounts attributable to variations in interest rates, and volumes for the periods indicated. The variances attributable to simultaneous volume and rate changes have been allocated to the changes due to volume and the changes due to rate categories in proportion to the relationship of the absolute dollar amount attributable solely to the change in volume and to the change in rate.

20

	Three months ended
	March 31, 2005 over March 31, 2004
	Net
	Increase			Change due to
	(Decrease)			Rate			Volume
	(Dollars in thousands)
INTEREST INCOME
Interest and fees on loans and interest rate swaps	$	6,670		$	2,487		$	4,183
Interest on other investments		18			3			15
Interest on securities		60			(46	)		106
Interest on federal funds sold		100			90			10
Total interest income	$	6,848		$	2,534		$	4,314
INTEREST EXPENSE
Interest on demand deposits	$	1,055		$	387		$	668
Interest on savings		(134	)		32			(166	)
Interest on time certificates of deposit		1,454			1,002			452
Interest on FHLB borrowings		355			165			190
Interest on subordinated debentures		98			98			—
Total interest expense	$	2,828		$	1,684		$	1,144
Net Interest Income	$	4,020		$	850		$	3,170

Provision for Loan Losses

     The provision for loan losses reflects our judgment of the current period cost associated with credit risk inherent in our loan portfolio. The loan loss provision for each period is dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, assessments by management, third parties’ and regulators’ examination of the quality of the loan portfolio, the value of the underlying collateral on problem loans and the general economic conditions in our market areas. Specifically, the provision for loan losses represents the amount charged against current period earnings to achieve an allowance for loan losses that, in our judgment, is adequate to absorb probable incurred losses inherent in our loan portfolio. Periodic fluctuations in the provision for loan losses result from management’s assessment of the adequacy of the allowance for loan losses; however, actual loan losses may vary from current estimates. If the allowance for loan losses was inadequate, it may have a material adverse effect on our financial condition.

     We recorded a $1.7 million in provision for loan losses during the first quarter of 2005 compared to $1.5 million in the same quarter of 2004. This change reflects the results of our review and analysis of the loan portfolio and the adequacy of our existing allowance for loan losses in light of the growth experienced in our loan portfolio and the level of our net charge-offs and non-performing loans. We believe that the allowance is sufficient to absorb probable incurred losses in our loan portfolio at March 31, 2005. See Allowance for Loan Losses below for further discussion.

Non-interest Income

     Non-interest income includes revenues earned from sources other than interest income. It is primarily comprised of service charges on deposits accounts, fees received from letter of credit operations, net gains or losses on interest rate swaps and net gains on sales of SBA loans and securities available for sale.

     Non-interest income for the first quarter of 2005 was $4.2 million compared to $4.2 million for the same quarter of 2004. During the first quarter of 2005 we originated $15.7 million in SBA loans and sold $14.1 million. During the first quarter of 2004, we originated $11.8 million in SBA loans and sold $11.2 million. Despite the

21

increase in sales of SBA loans, the net gains on sales of SBA loans for the first quarter of 2005 decreased $92 thousand or 11% compared to the same period of 2004. This decrease is primarily due to increases in the fees we paid to the brokers to generate those loans. Servicing fee income related to SBA loans increased due to an increase in average servicing assets. Service charges on deposit accounts decreased primarily due to closing of accounts for check cashing businesses, which generated significant fees and a deposit promotion for no-fee deposit accounts in 2005. For the three months ended March 31, 2004 and for the year ended December 31, 2004, we recorded an impairment charge of $1.6 million and $2.6 million, respectively on government sponsored enterprise preferred stocks as a result of other than temporary declines in their market values. All of those securities were sold during the first quarter of 2005. During the first quarter of 2005, we recorded $15 thousand in net gains from the sale of $7.4 million in these preferred stocks compared to net gains of $305 thousand from the sale of $6.3 million of securities available for sale during the same quarter of 2004. During the first quarter of 2005, we recognized a net loss of $35 thousand from our interest rate swaps compared to a net gain of $720 thousand for the same quarter of 2004. The loss from the interest rate swaps in the quarter ending March 31, 2005 is primarily due to an increase in interest rates, and we expect additional losses as interest rates are expected to continue to increase. The breakdown of changes in our non-interest income by category is illustrated below:

	Three								Three
	Months								Months
	Ended			Increase (Decrease)					Ended
	March 31, 2005			Amount			Percent (%)		March 31, 2004
									(Restated)
	(Dollars in thousands)
Service charges on deposits	$	1,578		$	(449	)		-22%	$	2,027
International service fees		675			13			2%		662
Wire transfer fees		341			42			14%		299
Loan servicing fees, net		399			115			40%		284
Earnings on cash surrender value of life insurance		145			(36	)		-20%		181
Net gains on sales of SBA loans		749			(92	)		-11%		841
Net gains on sales of securities available for sale		15			(290	)		-95%		305
Net gains (losses) on interest rate swaps		(35	)		(755	)		-105%		720
Other than temporary impairment on securities		—			1,633			-100%		(1,633	)
Other		312			(187	)		-37%		499
Total noninterest income	$	4,179		$	(6	)		0%	$	4,185

Non-interest Expense

     Non-interest expense for the first quarter of 2005 was $10.7 million compared to $10.3 million for the same quarter of 2004, an increase of $433 thousand or 4%. Salaries and employee benefits for the three months ended March 31, 2004 were restated to include additional bonuses of $937 thousand to be accrued for the period. Salaries and employee benefits decreased to $5.3 million for the three months ended March 31, 2005 from $5.8 million for the same quarter of 2004. The decrease is primarily related to a decline in the level of bonuses approved by the Bank’s Board of Directors. However, based on the Board of Directors’ review of the financial results for the quarter ending March 31, 2005, the expected financial results for the quarter ending June 30, 2005 and the level of bonuses that are being paid to employees of the Bank’s competitors, the Board of Directors approved an increase in the mid year bonuses that will be paid to employees for first six months of fiscal 2005. Therefore, we are expecting salaries and employee benefits to increase to approximately $5.9 million for the quarter ending June 30, 2005. Further, based on the changes in the expected level of bonuses to be paid for the remainder of fiscal 2005, we expect that salaries and employee benefits will be slightly higher for the remainder of fiscal 2005 compared to the same period of fiscal 2004. Occupancy expense for the three months ended March 31, 2004 was restated to include expense for leases with escalating rents on a straight-line basis over the lease term, rather than as paid, and to correctly account for leasehold improvement amortization. The restatement of occupancy expenses related to such accounting was an increase of $193 thousand for the three months ended March

22

31, 2004. Professional fees for the first quarter of 2005 were $756 thousand compared to $330 thousand for the same quarter of 2004. This increase is primarily due to legal and accounting expenses incurred during the first quarter of 2005 related to the special Subcommittee investigation discussed above under “General.”

     The breakdown of changes in our non-interest expense is illustrated below:

	Three							Three
	Months							Months
	Ended		Increase (Decrease)					Ended
	March 31, 2005		Amount			Percent (%)		March 31, 2004
								(Restated)
	(Dollars in thousands)
Salaries and employee benefits	$	5,263	$	(555	)		-10%	$	5,818
Occupancy		1,597		137			9%		1,460
Furniture and equipment		510		91			22%		419
Advertising and marketing		390		83			27%		307
Communications		186		25			16%		161
Data processing		610		37			6%		573
Professional fees		756		426			129%		330
Office supplies and forms		97		(2	)		-2%		99
Regulatory fees		252		74			42%		178
Director fees		130		7			6%		123
Credit related expenses		92		(17	)		-16%		109
Amortization of intangibles assets		187		11			6%		176
Other		630		116			23%		514
Total non-interest expense	$	10,700	$	433			4%	$	10,267

Provision for Income Taxes

     The provision for income taxes was $3.8 million and $2.2 million on income before income taxes of $9.2 million and $5.7 million for the three months ended March 31, 2005 and 2004, respectively. The effective tax rate for the quarter ended March 31, 2005 was 41% compared with 38% for the quarter ended March 31, 2004. The increase in the effective tax rate during the first quarter of 2005 was primarily due to less nontaxable income during the period and higher state income taxes.

Financial Condition

     At March 31, 2005, our total assets were $1,590.2 million, an increase of $82.5 million or 5% from $1,507.7 million at December 31, 2004. The growth was primarily due to increases in our loans funded by growth in our deposits.

Loan Portfolio

     We carry all loans (except for certain SBA loans held-for-sale) at face amount, less payments collected, net of deferred loan origination fees and costs and the allowance for loan losses. SBA loans held-for-sale are carried at the lower of cost or market value in the aggregate. Interest on all loans is accrued daily. Once a loan is placed on non- accrual status, accrual of interest is discontinued and previously accrued interest is reversed. Loans are placed on non-accrual status when principal and interest on a loan is past due 90 days or more, unless a loan is both well secured and in process of collection.

23

     As of March 31, 2005, our gross loans (net of deferred loan fees and costs) increased by $104.2 million or 9% to $1,325.9 million from $1,221.7 million at December 31, 2004. Commercial loans, which include domestic commercial, international trade finance, SBA loans, and equipment leasing, at March 31, 2005 increased by $23.9 million or 5% to $465.8 million from $441.9 million at December 31, 2004. Real estate loans increased by $79.3 million or 11% to $797.0 million at March 31, 2005 from $717.7 million at December 31, 2004. Although the demand for real estate loans continued to be strong, management continued to make efforts to maintain a balanced mix in the loan portfolio.

     The following table illustrates our loan portfolio by amount and percentage of gross loans in each major loan category at the dates indicated:

	March 31, 2005					December 31, 2004
	Amount			Percent		Amount			Percent
	(Dollars in thousands)
Loan Portfolio Composition:
Commercial loans	$	465,762			35.0%	$	441,940			36.1%
Real estate loans		796,962			60.0%		717,747			58.6%
Consumer and other loans		66,180			5.0%		64,845			5.3%
Total loans outstanding		1,328,904			100.0%		1,224,532			100.0%
Unamortized loan fees, net of costs		(3,045	)				(2,798	)
Allowance for loan losses		(15,715	)				(14,627	)
Loans Receivable, net	$	1,310,144				$	1,207,107

     We normally do not extend lines of credit and make loan commitments to business customers for periods in excess of one year. We use the same credit policies in making commitments and conditional obligations as we do for extending loan facilities to our customers. We perform annual reviews of such commitments prior to the renewal. The following table shows our loan commitments and letters of credit outstanding at the dates indicated:

	March 31, 2005		December 31, 2004
	(Dollars in thousands)
Loan commitments	$	155,230	$	151,726
Standby letters of credit		12,130		22,108
Other commercial letters of credit		28,322		29,035
	$	195,682	$	202,869

     At March 31, 2005, our nonperforming assets (nonaccrual loans, loans past due 90 days or more and still accruing interest, restructured loans, and other real estate owned) were $4.2 million, an increase of $1.3 million from $2.9 million at December 31, 2004. Non-performing assets to total assets was 0.26% and 0.19% at March 31, 2005 and December 31, 2004, respectively. At March 31, 2005, nonperforming loans were $3.8 million, an increase of $1.1 million from $2.7 million at December 31, 2004. This $1.1 million increase is composed of various loans of which $930 thousand was charged off during April and May of 2005. Of the $3.8 million in nonperforming loans, $2.5 million are fully secured by real estate. At March 31, 2005, nonperforming loans to total gross loans was 0.29% compared to 0.22% at December 31, 2004.

24

     The following table illustrates the composition of our nonperforming assets as of the dates indicated.

	March 31, 2005			December 31, 2004
	(Dollars in thousands)
Nonaccrual loans	$	3,838		$	2,679
Loan past due 90 days or more, still accruing		—			—
Total Nonperforming Loans		3,838			2,679
Other real estate owned		—			—
Restructured loans		322			229
Total Nonperforming Assets	$	4,160		$	2,908
Nonperforming loans to total gross loans		0.29	%		0.22	%
Nonperforming assets to total assets		0.26	%		0.19	%

Allowance for Loan Losses

     The allowance for loan losses was $15.7 million at March 31, 2005, compared to $14.6 million at December 31, 2004 and $13.6 million at March 31, 2004. We recorded a provision for loan losses of $1.7 million during the three months ended March 31, 2005 compared to $1.5 million for the same period of 2004. The increase in the provision for loan losses is primarily due to growth in our loan portfolio and increased net charge-offs. Average loans totaled $1.3 billion for the quarter ending March 31, 2005 compared to $1.0 billion for the same quarter last year. During the three months ended March 31, 2005, we charged off $856 thousand and recovered $294 thousand for net charge-offs of $562 thousand compared to net charge-offs of $407 thousand for the same quarter of last year. The allowance for loan losses was 1.19% of gross loans at March 31, 2005, compared to 1.20% at December 31, 2004 and 1.29% at March 31, 2004. The total classified loans at March 31, 2005 were $9.6 million, compared to $10.0 million at March 31, 2004.

     We believe the level of the allowance for loan losses as of March 31, 2005 is adequate to absorb probable incurred losses in the loan portfolio. However, no assurance can be given that economic conditions which adversely affect our service areas or other circumstances will not need to be reflected in increased provisions or loan losses in the future.

     The following table provides a breakdown of the allowance for loan losses by category of loans at March 31, 2005 and December 31, 2004:

	Allocation of Allowance for Loan Losses
(Dollars in thousands)	March 31, 2005				December 31,2004
			% of Loans in				% of Loans in
			Each Category to				Each Category to
Loan Type	Amount		Total Loans		Amount		Total oans
Commercial	$	6,180		35%	$	5,871		36%
Real estate		8,536		60%		7,961		59%
Consumer		966		5%		786		5%
Unallocated		33		N/A		9		N/A
Total allowance	$	15,715		100%	$	14,627		100%

25

     The following table shows the provisions made for loan losses, the amount of loans charged off, the recoveries on loans previously charged off together with the balance in the allowance for loan losses at the beginning and end of each period, the amount of average and total loans outstanding, and other pertinent ratios as of the dates and for the periods indicated:

	Three months ended March 31,
	2005			2004
	(Dollars in thousands)
LOANS:
Average gross loans	$	1,277,808		$	1,027,993
Total gross loans net of deferred loan fees and costs at end of period		1,325,859			1,048,609
ALLOWANCE:
Balance-beginning of period	$	14,627		$	12,471
Less: Loans Charged off:
Commercial		656			314
Real estate		—			—
Consumer		200			403
Total loans charged off		856			717
Plus: Loan Recoveries
Commercial		210			251
Real estate		—			2
Consumer		84			57
Total loan recoveries		294			310
Net loans charged off		562			407
Provision for loan losses		1,650			1,500
Balance-end of period	$	15,715		$	13,564
Net loan charge-offs to average total loans *		0.18	%		0.16	%
Net loan charge-offs to total loans at end of period *		0.17	%		0.16	%
Allowance for loan losses to average total loans		1.23	%		1.32	%
Allowance for loan losses to total loans at end of period		1.19	%		1.29	%
Net loan charge-offs to beginning allowance *		15.37	%		13.05	%
Net loan charge-offs to provision for loan losses		34.06	%		27.13	%

* Annualized

Total loans are net of deferred loan fees and costs of $3,045,000 and $2,798,000 at March 31, 2005 and 2004, respectively.

Investment Securities Portfolio

     We classify our securities as held-to-maturity or available-for-sale under SFAS No.115. Those securities that we have the ability and intent to hold to maturity are classified as “held-to-maturity securities”. All other securities are classified as “available-for-sale”. We did not own any trading securities at March 31, 2005 and December 31, 2004. Securities that are held to maturity are stated at cost, adjusted for amortization of premiums and accretion of discounts. Securities that are available for sale are stated at fair value. The securities we currently hold are government-sponsored agency bonds, corporate bonds, collateralized mortgage obligations, mortgage backed and municipal bonds.

26

     As of March 31, 2005, we had $2.0 million in held-to-maturity securities and $134.3 million in available-for-sale securities compared to $2.0 million and $133.4 million, respectively at December 31, 2004. The total net unrealized loss on the available-for sale securities at March 31, 2005 was $2.1 million compared to net unrealized loss of $718 thousand at December 31, 2004. During the first three months of 2005, a total of $14.9 million in securities available-for-sale were purchased, $7.4 million of government sponsored enterprise preferred stocks were sold, and total gross gains of $15 thousand were recognized.

     Securities with an amortized cost of $5.0 million were pledged to secure public deposits and for other purposes as required or permitted by law at March 31, 2005. Securities with a carrying value of $15.6 million and $85.6 million were pledged to the FHLB of San Francisco and the State of California Treasurer’s Office, respectively, at March 31, 2005.

     The following table summarizes the amortized cost, estimated fair value and distribution of our investment securities portfolio as of the dates indicated:

Investment Portfolio

	At March 31, 2005							At December 31, 2004
	Amortized		Estimated		Net Unrealized			Amortized		Estimated		Net Unrealized
	cost		Fair Value		Gain (Loss)			cost		Fair Value		Gain (Loss)
	(Dollars in thousands)
Available-for-sale:
U.S. Government agency	$	75,518	$	74,424	$	(1,094	)	$	62,657	$	62,512	$	(145	)
Collateralized mortgage obligations		21,867		21,091	$	(776	)		23,735		23,129		(606	)
Mortgage-backed securities		25,427		24,954	$	(473	)		26,751		26,575		(176	)
Municipal Bonds		9,569		9,829	$	260			9,578		9,784		206
Corporate debt securities		3,980		3,985	$	5			3,980		3,983		3
Government sponsored enterprise Preferred Stock		—		—	$	—			7,403		7,403		—
Total available-for-sale	$	136,361	$	134,283	$	(2,078	)	$	134,104	$	133,386	$	(718	)
Held to Maturity:
Corporate debt securities	$	2,001	$	2,070	$	69		$	2,001	$	2,088	$	87
Total held-to-maturity	$	2,001	$	2,070	$	69		$	2,001	$	2,088	$	87
Total investment portfolio	$	138,362	$	136,353	$	(2,009	)	$	136,105	$	135,474	$	(631	)

     The following table shows our investments’ gross unrealized losses and estimated fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss positions, at March 31, 2005.

27

	Less than 12 months					12 months or longer					Total
Description of	Estimated		Unrealized			Estimated		Unrealized			Estimated		Unrealized
Securities:	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
	(Dollars in thousands)
U.S. Government agency	$	72,422	$	(1,096	)	$	—	$	—		$	72,422	$	(1,096	)
Collateralized mortgage obligations		12,050		(460	)		6,411		(325	)	$	18,461	$	(785	)
Mortgage-backed securities		17,369		(247	)		5,467		(263	)	$	22,836	$	(510	)
Municipal bonds		420		(2	)		—		—		$	420	$	(2	)
Total Temporarily Impaired Securities	$	102,261	$	(1,805	)	$	11,878	$	(588	)	$	114,139	$	(2,393	)

     The unrealized losses were created due to what we believe is a temporary condition, mainly fluctuations in interest rates, and do not reflect a deterioration of credit quality of the issuers. For the three months ended March 31, 2005 and 2004, we did not have any sales of investment securities resulting in realized losses. For investments in an unrealized loss position at March 31, 2005, we have the intent and ability to hold these investments until full recovery. During the three months ended March 31, 2004, we recognized $1.6 million in impairment charges related to other than temporary declines in market values for government sponsored enterprise preferred stocks. We did not record any other than temporary declines in market values during the three months ended March 31, 2005.

Deposits and Other Borrowings

     Deposits. Deposits are our primary source of funds used in our lending and investment activities. At March 31, 2005, our deposits increased by $101.3 million or 8% to $1,357.3 million from $1,256.0 million at December 31, 2004. Noninterest bearing demand deposits totaled $363.6 million at March 31, 2005, an increase of $35.3 million or 11% from $328.3 million at December 31, 2004. Time deposits of $100,000 or more totaled $527.8 million, an increase of $120.7 million or 30% from $407.1 million at December 31, 2004. Interest-bearing demand deposits, including money market and super now accounts, totaled $270.7 million, a decrease of $52.8 million or 16% from $323.5 million at December 31, 2004. This decrease was primarily due to the transfer of money market accounts to either time deposits or for personal use. Most of those accounts were opened during a money market account promotional period in the second quarter of 2004. The growth in deposits was the result of a deposit promotion for our time deposits as well as normal internal growth. There has been fierce competition in the market to solicit deposit customers as loan demand continues to be strong. Most of the demand accounts were in the interest-bearing deposits where customers seek higher rates. As demand for loans has continued, competition has intensified to attract new customers and additional deposits that may be used to fund the loans. During February of 2005, we launched a bank-wide deposit campaign with the new “Prime CD”, which has a variable rate tied to the prime rate, adjusting quarterly. Approximately $81.0 million in Prime CDs were opened during the first quarter of 2005.

     At March 31, 2005, 27% of the total deposits were non-interest bearing demand deposits, 45% were time deposits, and 28% were interest bearing demand deposits. By comparison, at December 31, 2004, 26% of the total deposits were non-interest bearing demand deposits, 39% were time deposits, and 35% were interest bearing demand deposits.

     At March 31, 2005, we had a total of $84.9 million in brokered deposits and $75.0 million in State deposits compared to $45.1 million and $65.0 million at December 31, 2004, respectively. During the first quarter of 2005, we had an increase of $39.8 million in brokered deposits. Due to fierce competition and higher rates offered for deposits, brokered deposits have been a stable alternative and cost effective source of funds. The State deposits were collateralized with securities with a carrying value of $85.6 million at March 31, 2005. The State deposits are subject to withdrawal based on the State’s periodic evaluations.

     Other Borrowings. Advances may be obtained from the FHLB of San Francisco to supplement our supply of lendable funds. Advances from the FHLB of San Francisco are typically secured by a pledge of mortgage loans and/or securities with a market value at least equal to the outstanding advances plus our investment in FHLB stock.

28

     The following table shows our outstanding borrowings from the FHLB at March 31, 2005. All FHLB advances carry fixed interest rates.

FHLB Advances	Issue Date	Maturity Date	Interest Rate
$    5,000,000	10/19/00	10/19/07	6.70%
4,000,000	12/17/04	04/18/05	2.52%
8,000,000	12/27/04	04/27/05	2.60%
8,000,000	12/30/04	12/31/07	3.65%
9,000,000	02/28/05	02/28/08	4.10%
3,500,000	03/31/05	04/01/05	2.88%
26,000,000	03/31/05	05/02/05	2.84%
$ 63,500,000			3.38%

     At March 31, 2005 and December 31, 2004, five wholly-owned subsidiary grantor trusts established by Nara Bancorp had issued $38 million of pooled Trust Preferred Securities (“trust preferred securities”). Trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in the related indentures. The trusts used the net proceeds from the offering to purchase a like amount of subordinated debentures (the “Debentures”) of Nara Bancorp. The Debentures are the sole assets of the trusts. Nara Bancorp’s obligations under the subordinated debentures and related documents, taken together, constitute a full and unconditional guarantee by Nara Bancorp of the obligations of the trusts. The trust preferred securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. Nara Bancorp has the right to redeem the Debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date.

Off-Balance-Sheet Activities And Contractual Obligations

     We routinely engage in activities that involve, to varying degrees, elements of risk that are not reflected, in whole or in part, in the consolidated financial statements. These activities are part of our normal course of business and include traditional off-balance-sheet credit-related financial instruments, interest rate swap contracts, operating leases and long-term debt.

     Traditional off-balance-sheet credit-related financial instruments are primarily commitments to extend credit and standby letters of credit. These activities could require us to make cash payments to third parties in the event certain specified future events occur. The contractual amounts represent the extent of our exposure in these off-balance-sheet activities. However, since certain off-balance-sheet commitments, particularly standby letters of credit, are expected to expire or be only partially used, the total amount of commitments does not necessarily represent future cash requirements. These activities are necessary to meet the financing needs of our customers.

     We also enter into interest rate swap contracts under which we are required to either receive cash from or pay cash to counterparties depending on changes in interest rates. We utilize interest rate swap contracts to help manage the risk of changing interest rates. Our accounting for interest rate swap contracts is discussed below under Item 3.

     We do not anticipate that our current off-balance-sheet activities will have a material impact on future results of operations and financial condition. Further information regarding our financial instruments with off-balance-sheet risk can be found in Item 3– “Quantitative and Qualitative Disclosures about Market Risks”.

     We continue to lease our banking facilities and equipment under non-cancelable operating leases with terms providing monthly payments over periods up to 30 years.

29

     The following table shows our contractual obligations and commitments as of March 31, 2005.

Contractual Obligations and commitments	Payments due by period
(dollars in thousands)	Total		Less than 1 year		1-3 years		3-5 years		Over 5 years
Time Deposits	$	611,272	$	591,451	$	19,337	$	384	$	100
Subordinated Debentures		39,268		—		—		—		39,268
Federal Home Loan Bank Borrowings		63,500		41,500		22,000		—		—
Operating Lease Obligations		42,740		5,191		8,921		7,445		21,183
Unused commitments to extend credit		155,230		155,230		—		—		—
Standby letters of credit		12,130		12,130		—		—		—
Other commercial letters of credits		28,322		28,322		—		—		—
Employment agreement		710		275		435		—		—
Total	$	953,172	$	834,099	$	50,693	$	7,829	$	60,551

Stockholders’ Equity and Regulatory Capital

     To ensure adequate levels of capital, we conduct an ongoing assessment of projected sources and uses of capital in conjunction with projected increases in assets and levels of risk. We consider on an ongoing basis, among other things, cash generated from operations, access to capital from financial markets or the issuance of additional securities, including common stock or notes, to meet our capital needs. Total stockholders’ equity was $104.1 million at March 31, 2005. This represented an increase of $2.8 million or 3% over total stockholders’ equity of $101.3 million at December 31, 2004.

     The federal banking agencies require a minimum ratio of qualifying total capital to risk-adjusted assets of 8% and a minimum ratio of Tier I capital to risk-adjusted assets of 4%. In addition to the risk-based guidelines, federal banking regulators require banking organizations to maintain a minimum amount of Tier 1 capital to total assets, referred to as the leverage ratio. For a banking organization rated in the highest of the five categories used by regulators to rate banking organizations, the minimum leverage ratio of Tier I capital to total assets must be 4%. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.

     At March 31, 2005, our Tier I capital, defined as stockholders’ equity less intangible assets, plus proceeds from the Trust Preferred Securities (subject to limitations), was $133.5 million, compared to $127.0 million at December 31, 2004, representing an increase of $6.5 million or 5% over total Tier I. This increase was primarily due to net income of $5.4 million reduced by the payments of cash dividends. At March 31, 2005, we had a ratio of total capital to total risk-weighted assets of 10.95% and a ratio of Tier I capital to total risk- weighted assets of 9.43%. The Tier I leverage ratio was 8.74% at March 31, 2005.

     As of March 31, 2005, the Bank has met the criteria as a “well capitalized institution” under the regulatory framework for prompt corrective action. The following table presents the amounts of our regulatory capital and capital ratios, compared to regulatory capital requirements for capital adequacy purposes as of March 31, 2005 and December 31, 2004.

     As a result of a recent regulatory examination, our regulatory agencies are expected to place additional restrictions and requirements on our Company, which may limit our growth and expansion and our ability to pay cash dividends without prior regulatory approval.

30

	As of March 31, 2005
(Dollars in thousands)	Actual					Required					Excess
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Leverage ratio	$	133,524		8.7	%	$	61,091		4.0	%	$	72,433		4.7	%
Tier I risk-based capital ratio	$	133,524		9.4	%	$	56,659		4.0	%	$	76,865		5.4	%
Total risk-based capital ratio	$	155,126		11.0	%	$	113,319		8.0	%	$	41,807		3.0	%

	As of December 31, 2004
	Actual					Required					Excess
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Leverage ratio	$	126,971		8.9	%	$	56,979		4.0	%	$	69,992		4.9	%
Tier I risk-based capital ratio	$	126,971		9.7	%	$	52,357		4.0	%	$	74,614		5.7	%
Total risk-based capital ratio	$	149,123		11.4	%	$	104,713		8.0	%	$	44,410		3.4	%

Liquidity Management

     Liquidity risk is the risk to earnings or capital resulting from our inability to meet our obligations when they come due without incurring unacceptable losses. Liquidity risk includes the ability to manage unplanned decreases or changes in funding sources and to recognize or address changes in market conditions that affect our ability to liquidate assets quickly and with a minimum loss of value. Factors considered in liquidity risk management are stability of the deposit base; marketability, maturity, and pledging of investments; and the demand for credit.

     Our primary sources of liquidity are derived from financing activities, which include customer and broker deposits, federal funds facilities, and advances from the Federal Home Loan Bank of San Francisco. These funding sources are augmented by payments of principal and interest on loans and the routine liquidation of securities from our available-for-sale portfolio. Our primary uses of funds include withdrawal of and interest payments on deposits, originations of loans, purchases of investment securities, and payment of operating expenses.

     We manage liquidity risk by controlling the level of federal funds and by maintaining lines of credit with correspondent banks, the Federal Reserve Bank, and the Federal Home Loan Bank of San Francisco. The sale of investment securities available-for-sale can also serve as a contingent source of funds. Increasing the deposit rates is considered a last resort in raising funds to increase liquidity.

     As a means of augmenting our liquidity, we have established federal funds lines with corresponding banks and the Federal Home Loan Bank of San Francisco. At March 31, 2005, our borrowing capacity included $56.0 million in federal funds line facilities from correspondent banks and $251.4 million in unused Federal Home Loan Bank of San Francisco advances. In addition to these lines, our liquid assets include cash and due from banks, federal funds sold and securities available for sale that are not pledged. The aggregate book value of these assets totaled $90.5 million at March 31, 2005 compared to $121.8 million at December 31, 2004. We believe our liquidity sources to be stable and adequate.

     Because our primary sources and uses of funds are deposits and loans, the relationship between gross loans and total deposits provides a useful measure of our liquidity. Typically, the higher the ratio of loans to deposits, the more we rely on borrowings and our loan portfolio to provide short-term liquidity needs. Because repayment of loans tends to be less predictable than the maturity of investments and other liquid resources, the higher the loan to deposit ratio, the less liquid are our assets. At March 31, 2005, our gross loan to deposit ratio was 97.7% an increase from 97.0% at December 31, 2004.

     The results of a recent regulatory examination indicate that our liquidity will need to be carefully monitored in the future as we continue to grow our deposits, particularly as we may be unable to retain our California State Treasurer’s deposits totaling $75.0 million at March 31, 2005.

31

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     The objective of our asset and liability management activities is to improve our earnings by adjusting the type and mix of assets and liabilities to effectively address changing conditions and risks. Through overall management of our balance sheet and by controlling various risks, we seek to optimize our financial returns within safe and sound parameters. Our operating strategies for attaining this objective include managing net interest margin through appropriate risk/return pricing of asset and liabilities and emphasizing growth in retail deposits, as a percentage of interest-bearing liabilities, to reduce our cost of funds. We also seek to improve earnings by controlling non-interest expense, and enhancing non-interest income. We also use risk management instruments to modify interest rate characteristics of certain assets and liabilities to hedge against our exposure to interest rate fluctuations with the objective of reducing the effects these fluctuations might have on associated cash flows or values. Finally, we perform internal analyses to measure, evaluate and monitor risk.

     Interest Rate Risk

     Interest rate risk is the most significant market risk impacting us. Market risk is the risk of loss to future earnings, to fair values of our assets and liabilities, or to future cash flows that may result from changes in the price of a financial instrument. Interest rate risk occurs when interest rate sensitive assets and liabilities do not reprice simultaneously and in equal volume. A key objective of asset and liability management is to manage interest rate risk associated with changing asset and liability cash flows and values of our assets and liabilities and market interest rate movements. The management of interest rate risk is governed by policies reviewed and approved annually by the Board of Directors. Our Board delegates responsibility for interest rate risk management to the Asset and Liability Management Committee (“ALCO”), which is composed of Nara Bank’s senior executives and other designated officers.

     The fundamental objective of our ALCO is to manage our exposure to interest rate fluctuations while maintaining adequate levels of liquidity and capital. Our ALCO meets regularly to monitor the interest rate risk, the sensitivity of our assets and liabilities to interest rate changes, the book and market values of assets and liabilities, investment activities and directs changes in the composition of the statement of financial condition. Our strategy has been to reduce the sensitivity of our earnings to interest rate fluctuations by more closely matching the effective maturities or repricing characteristics of our assets and liabilities. Certain assets and liabilities, however, may react in different degrees to changes in market interest rates. Furthermore, interest rates on certain types of assets and liabilities may fluctuate prior to changes in market interest rates, while interest rates on other types may lag behind. We consider the anticipated effects of these factors when implementing our interest rate risk management objectives.

     Swaps

     As part of our asset and liability management strategy, we may enter into derivative financial instruments, such as interest rate swaps, with the overall goal of minimizing the impact of interest rate fluctuations on our net interest margin. Interest rate swaps involve the exchange of fixed-rate and variable-rate interest payment obligations without the exchange of the underlying notional amounts. During 2002, we entered into eight different interest rate swap agreements.

     Under the interest rate swap agreements, we receive a fixed rate and pay a variable rate based on H.15 Prime. The swaps qualify as cash flow hedges under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, and are designated as hedges of the variability of cash flows we receive from certain of our Prime-indexed loans. In accordance with SFAS No. 133, these interest rate swap agreements are measured at fair value and reported as assets or liabilities on the consolidated statement of financial condition. The portion of the change in the fair value of the interest rate swaps that is deemed effective in hedging the cash flows of the designated assets are recorded in accumulated other comprehensive income (loss) (“OCI”), net of tax and reclassified into interest income when such cash flows occur in the future. Any ineffectiveness resulting from the hedges is recorded as a gain or loss in the consolidated statements of income as a part of non-interest income. As of March 31, 2005, the amounts in accumulated OCI associated with these cash flow hedges totaled a loss of $1,456,083 (net of tax of $970,722), of which $48,712 is expected to be reclassified as a reduction into interest income within the next 12 months. As of

32

March 31, 2005, the maximum length of time over which we are hedging our exposure to the variability of future cash flows is approximately 7.5 years.

     During the first quarter of 2005 and 2004, interest income recorded from swap transactions totaled $416,888 and $904,944, respectively. At March 31, 2005, we pledged as collateral to the interest rate swap counterparties agency securities with a book value of $2.0 million and real estate loans of $4.9 million.

     Interest Rate Sensitivity

     Our monitoring activities related to managing interest rate risk include both interest rate sensitivity “gap” analysis and the use of a simulation model. While traditional gap analysis provides a simple picture of the interest rate risk embedded in the statement of financial condition, it provides only a static view of interest rate sensitivity at a specific point in time and does not measure the potential volatility in forecasted results relating to changes in market interest rates over time. Accordingly, we combine the use of gap analysis with the use of a simulation model, which provides a dynamic assessment of interest rate sensitivity.

     The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets anticipated to reprice within a specific time period and the amount of interest-bearing liabilities anticipated to reprice within that same time period. A gap is considered positive when the amount of interest rate sensitive assets repricing within a specific time period exceeds the amount of interest-bearing liabilities repricing within that same time period. Positive cumulative gaps suggest that earnings will increase when interest rates rise and decrease when interest rates fall. Negative cumulative gaps suggest that earnings will increase when interest rates fall and decrease when interest rates rise.

     The following table shows our gap position as of March 31, 2005.

	0-90 days			91-365 days			1-5 years		Over 5 yrs		Total
	(Dollars in thousands)
Total Investments *	$	37,210		$	8,650		$	95,065	$	34,951	$	175,876
Total Loans, including loans held for sale		1,226,378			24,131			74,012		11,467		1,335,988
Rate Sensitive Assets	$	1,263,588		$	32,781		$	169,077	$	46,418	$	1,511,864
Deposits
Time Deposits of $100,000 or more	$	281,909		$	226,878		$	18,881	$	100	$	527,768
Other Time Deposits		42,912			39,752			840		—		83,504
Money Market		257,256			—			—		—		257,256
NOW Accounts		13,447			—			—		—		13,447
Savings Deposits		111,674			—			—		—		111,674
FHLB Borrowings		41,500			—			22,000		—		63,500
Subordinated Debentures		—			—			—		39,268		39,268
Rate Sensitive Liabilities	$	748,698		$	266,630		$	41,721	$	39,368	$	1,096,417
Interest Rate Swap	$	(120,000	)	$	20,000		$	80,000	$	20,000	$	—
Net GAP Position	$	394,890		$	(213,849	)	$	207,356	$	27,050	$	415,447
Net Cumulative Gap Position	$	394,890		$	181,041		$	388,397	$	415,447

* Includes investment securities, federal funds sold, FRB stock, FHLB stock, and interest bearing deposits with other financial institutions.

33

     The simulation model discussed above also provides our ALCO with the ability to simulate our net interest income. In order to measure, at March 31, 2005, the sensitivity of our forecasted net interest income to changing interest rates, both rising and falling interest rate scenarios were projected and compared to base market interest rate forecasts. One application of our simulation model measures the impact of market interest rate changes on the net present value of estimated cash flows from our assets and liabilities, defined as our market value of equity. This analysis assesses the changes in market values of interest rate sensitive financial instruments that would occur in response to an instantaneous and sustained increase in market interest rates.

     At March 31, 2005, our net interest income and market value of equity exposed to these hypothetical changes in market interest rates are illustrated in the following table.

	Estimated
	Net Interest	Market Value of
Simulated Rate Changes	Income Sensitivity	Equity Volatility
+ 200 basis points	5.6%	17.1%
+ 100 basis points	3.1%	8.6%
- 100 basis points	(1.7)%	(9.3)%
- 200 basis points	(4.6)%	(18.7)%

34

Item 4. Controls and Procedures

     a. Evaluation of disclosure controls and procedures

     We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Acting Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act) as of March 31, 2005. Based upon that evaluation, our Chief Executive Officer and Acting Chief Financial Officer determined that, as a result of errors identified in the financial statements for the previously reported years ended December 31, 2002, and 2003 and quarters and year-to-date periods ended March 31, 2004, June 30, 2004 and September 30, 2004, our disclosure controls and procedures were not effective to ensure that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported as and when required. These errors resulted in the restatement of the financial statements for such periods.

     In light of this determination and as part of the work undertaken in connection with this report, we have applied compensating procedures and processes as necessary to ensure the reliability of our financial reporting. Accordingly, management believes, based on its knowledge, that (i) this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the period covered by this report and (ii) the financial statements, and other financial information included in this report, fairly present in all material respects our financial condition, results of operations and cash flows as of, and for, the periods presented in this report.

     b. Management’s responsibility for financial statements

     Our management is responsible for the integrity and objectivity of all information presented in this report. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management’s best estimates and judgments. Management believes the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the Company’s financial position and results of operations for the periods and as of the dates stated therein.

     The Audit Committee of the Board of Directors, which is composed solely of independent directors, meets regularly with our independent registered public accounting firm, Crowe Chizek and Company LLP, and representatives of management to review accounting, financial reporting, internal control and audit matters, as well as the nature and extent of the audit effort. The Audit Committee is responsible for the engagement of the independent auditors. The independent auditors have free access to the Audit Committee.

35

     c. Changes in internal control over financial reporting

     As previously disclosed in Item 9A of our annual report on Form 10-K for the year ended December 31, 2004 and filed on June 30, 2005, there were four material weaknesses in our internal control over financial reporting relating to accounting for deferred compensation agreements, accounting for various related compensation, accounting for lease arrangements and accounting for bank owned life insurance. In fiscal 2005, and through the date of this filing, we have taken the following steps to improve our internal controls over financial reporting:

               1. Accounting for Deferred Compensation Arrangements. The Company is implementing enhancements to its internal control over financial reporting to provide reasonable assurance that accounting errors and control deficiencies of this type will not recur. These steps include:

                    • Amending of the Company’s Bylaws to state that Board members are not officers of the Company and may not sign contracts on behalf of the Company.

                    • Amending of the Company’s Code of Business Conduct and Ethics by adding the following two paragraphs:

                                 All contracts, letters, memoranda of understanding or other agreements relating to employment matters for senior management must be signed on behalf of Nara Bank or Nara Bancorp only upon the approval of the Compensation Committee of Nara Bancorp or the Board of Directors of Nara Bancorp.

                                 All material contracts and agreements must be reviewed by in-house counsel, and disclosed quarterly to the Audit Committee of Nara Bancorp or to the Company’s independent auditors.

               2. Accounting for Various Employee Related Compensation. The Company is implementing enhancements to its internal control over financial reporting to provide reasonable assurance that accounting errors and control deficiencies of this type will not recur. These steps include:

               • Developing and implementing a detailed bonus accrual methodology.

               • Approval of the bonus accrual methodology by the Board of Directors and adoption of a procedure whereby the Board of Directors will approve such bonus accrual methodology on an annual basis.

36

                    • Adoption of a procedure whereby the quarterly bonus accrual calculations are reviewed and approved by the Board of Directors prior to reporting the Company’s quarterly financial results.

                    • Adoption of a procedure whereby the quarterly bonus accrual calculations will be disclosed to the Company’s independent auditors.

               3. Accounting for Lease Arrangements. The Company is implementing enhancements to its internal control over financial reporting to provide reasonable assurance that accounting errors and control deficiencies of this type will not recur. These steps include:

                    • Adoption of a procedure that all new lease agreements will be reviewed and approved by in-house counsel.

                    • Adoption of a procedure that all lease agreements will be reviewed and approved by the Chief Financial Officer for proper accounting implementation.

                    • Adoption of a procedure whereby, on a quarterly basis, the Controller will review all new additions to leasehold improvements to determine the proper amortization period.

                    • Adoption of a procedure whereby, on a quarterly basis, the Controller will update the analysis of lease agreements, to determine if all leases are properly classified as operating or capital leases and to determine if the impact of rent escalation clauses has been accounted for on a straight line basis.

                    • Adoption of a procedure whereby all new lease agreements and the Company’s related accounting analyses will be disclosed to the Company’s independent auditors on a quarterly basis.

               4. Accounting for Bank Owned Life Insurance. The Company has implemented enhancements to its internal control over financial reporting to provide reasonable assurance that accounting errors and control deficiencies of this type will not recur. These steps include:

                    • Amending certain split dollar life insurance agreements during the fourth quarter of 2004 to eliminate the requirement that the Company continue to maintain the policies, or replace them with comparable life insurance policies, until the death of the split dollar participants.

                    • Updating the calculation of the cash surrender value of life insurance discounts with disclosure to the Company’s independent auditors on a quarterly basis.

               Other than as described above, there have been no changes in our internal control over financial reporting during the quarter ended March 31, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

37

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

     We are a party to routine litigation incidental to our business, none of which is considered likely to have a material adverse effect on us. See further discussion in Note 13 – Commitments and Contingencies of the Notes to Consolidated Financial Statements included in our 2004 Annual Report on Form 10-K. For a discussion of litigation risks relating to our recent accounting restatement, please refer to the discussion in our Annual Report on Form 10-K for the Year ended December 31, 2004 under the caption “Business-Factors That May Impact Our Business or the Value of Our Stock – We face risks related to our recent accounting restatements including potential litigation and regulatory actions,” included in Item 1 Business of our 2004 Annual Report on Form 10-K.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

     (a) – (c) None.

Item 3. Defaults Upon Senior Securities

     None

Item 4. Submission of Matters to a Vote of Security Holders

     None

Item 5. Other Information

     None

Item 6. Exhibits

     Exhibits

     The exhibits listed on the accompanying index to exhibits are filed or incorporated by reference (as stated herein) as part of this Quarterly Report on Form 10-Q.

38

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NARA BANCORP, INC.
Date: June 30, 2005	/s/ Ho Yang
	Ho Yang
	President and Chief Executive Officer
	(Principal executive officer)
Date: June 30, 2005	/s/ Christine Oh
	Christine Oh
	Acting Chief Financial Officer
	(Principal financial officer)

39

INDEX TO EXHIBITS

Number	Description of Document
3.1	Amended Certificate of Incorporation (filed as an exhibit to Nara Bancorp’s registration statement filed on Form S-8 on February 5, 2003 and incorporated herein by this reference)
3.2	Amended and Restated Bylaws of Nara Bancorp (filed as an exhibit to Nara Bancorp’s current report on Form 8-K filed June 9, 2005 and incorporated herein by this reference)
10.1	Lease for premise located at 1890 West Redondo Beach Boulevard, Gardena, California
10.2	Lease for premise located at 10055 Garden Grove Boulevard Unit A, Garden Grove, California
10.3	Lease for premise located at 209-01 Northern Boulevard, Bayside, New York
31.1	Certification of Chief Executive Officer pursuant to section 302 of Sarbanes-Oxley of 2002
31.2	Certification of Acting Chief Financial Officer pursuant to section 302 of Sarbanes-Oxley of 2002
32.1	Certification of Chief Executive Officer pursuant to section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002
32.2	Certification of Acting Chief Financial Officer pursuant to section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002

40

EX-10.1

Exhibit 10.1

LEASE AGREEMENT

Between

THE 1890 BUILDING

(Landlord)

And

NARA BANK
(Tenant)

Dated: January 27, 2005

1

     This LEASE AGREEMENT (the “Lease”), dated this 27 day of January 2005, is made and entered into by and between 1890 Building, a Partnership (“Landlord”), and Nara Bank (“Tenant”).

Section 1.

The Premises

     Landlord is the owner of certain land, buildings, and improvements located at 1890 West Redondo Beach Boulevard, Gardena, California 90247, as more particularly described in Exhibit “A” attached hereto and incorporated herein by reference (the “Premises”). Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises on the terms and conditions set forth herein.

     Landlord shall deliver the Premises to Tenant in a demised “broom clean” “as is” condition. All electrical, plumbing, HVAC, and other related systems shall be in good repair to support the Premises and Landlord hereby agrees to maintain, at its sole cost and expense, all of the aforementioned systems in good repair during the first two years of the Lease Term.

Section 2.

Lease Term

     The term of this Lease (“Term”) shall be for a period of one-hundred twenty (120) months beginning on the “Commencement Date”, as defined below, unless sooner terminated pursuant to the terms of this Lease.

     The Commencement Date shall be the first day Tenant begins conducting its normal business activities from the Premises or sixty (60) days following the date of delivery of the Premises to Tenant (the “Delivery Date”); whichever shall first occur.

     Provided that (i) Tenant is not then in material default under the Lease and (ii) Tenant, or an assignee or sublessee, is then occupying the Premises, Tenant shall have two (2) separate and consecutive options to extend the Term for a period of five (5) years each. Upon the proper and timely exercise of the option to extend (as hereinafter provided), and provided that Tenant is not in default under this Lease as of the end of the initial Term, the Term, as it applies to the Premises, shall be extended for five (5) years. The option shall be exercised by Tenant upon receipt of prior written notice by Landlord not less than one hundred and eighty (180) days prior to the expiration of the initial Term, or the extended term, stating that Tenant is exercising its option.

     Notwithstanding any other provisions of this Lease, Tenant shall have the right to terminate and forever cancel its obligations under this Lease (i) in the event Tenant does not obtain all governmental (regulatory) approvals and corporate approvals necessary to conduct its banking business from the Premises; (ii-i) should Tenant determine that a banking office and/or automatic teller (“ATM”) machines may not lawfully be operated from the Premises; (iii) if Tenant notifies Landlord of any defects in the Premises, in writing, within sixty (60) days of the Delivery Date, and Landlord does not agree to correct said defects within ten (10) days of receiving notice of the alleged defects; or (iv) in the event Tenant is not given physical possession of the Premises on or before February 1, 2005. Except as expressly provided herein, Tenant’s right to cancel the lease under this Section 2 will end at the Commencement Date of the lease or at the date associated with Section 2 subsection (iii) hereinabove, whichever is later.

2

Section 3.

Rent

     During the Term of this Lease, Tenant shall pay rent to Landlord in the sum of $6,750.00 per month (“Base Rent”) triple net during the Term commencing on the Commencement Date. Rent shall be payable in advance on the first day of each month at the following address: 16012 S. WESTERN AVENUE, SUITE #303, GARDENA, CA 90247 or at another address that Landlord may from time to time designate by written notice to Tenant. Base Rent shall increase by three percent (3%) each year on the anniversary of the Commencement Date throughout the initial term of this Lease.

     Upon Tenant’s exercise of its options to extend the term of the Lease under the provisions of Section 2(c) hereof and commencing on the first month immediately following the expiration of the initial Term of the Lease or the first option to extend the term of the Lease, the monthly rent shall be increased by the higher of [i] the percentage increase in the Consumer Price Index for All Urban Consumers in the Los Angeles-Anaheim-Riverside Area, published by the United States Department of Labor, Bureau of Labor Statistics (1982-84 = 100), as of the Commencement Date and the first day of the first month of any extended term of the Lease or [ii] a five percent (5%) increase over the Base Rent paid during the last month of the prior term. Base Rent will increase by 3% annually on the anniversary of the Commencement Date thereafter during each exercised option period term.

Section 4.

Left intentionally blank.

Section 5.

Utilities

     During the Term, and any extended term created by Tenant’s exercise of the option(s) set forth herein, Tenant shall pay, before delinquency, all charges or assessments for telephone, water, sewer, gas, heat, electricity, garbage disposal, and all other utilities and services of any kind that may be used on the Premises.

Section 6.

Taxes.

     During the term, and any extended term created by Tenant’s exercise of the option(s) set forth herein, Tenant shall pay to the public authorities charged with the collection on or before the last day on which payment may be made without penalty or interest, all property taxes, permit, inspection, and license fees, and other public charges of whatever nature that are assessed against the Premises or arise because of the occupancy, use, or possession of the Premises incurred subsequent to the Commencement Date, but excluding any income, corporate, franchise, capital stock, estate or inheritance taxes. Tenant shall also be obligated to pay any increased property taxes incurred, in the event the Premises shall be transferred during the initial Term or any extension thereof pursuant to the terms of this Lease, and a reassessment of taxes imposed upon or attributable to the Premises pursuant to Proposition 13 occurs.

     Landlord agrees to give appropriate written instructions to public authorities for taxes, assessments, and public charges payable by Tenant to ensure that statements and billings will be mailed directly by public authorities to Tenant at the address set forth in Section 19. If Tenant fails to pay taxes, assessments, and charges on or before the last day on which payment may be made without penalty or

3

interest, Landlord may, but shall not be obligated to, pay those taxes, assessments, or charges, together with interest and penalties. Any amounts that Landlord may pay pursuant to this provision shall be repaid to Landlord by Tenant on demand.

     All real estate taxes levied on the Premises for the tax year in which the Commencement Date falls shall be appropriately prorated between Landlord and Tenant, so that Tenant’s share will reflect the portion of that tax year in which Tenant had possession of the Premises under this Lease. Tenant shall pay Tenant’s share of the taxes directly to Landlord and not to the public authorities charged with the collection. That payment shall constitute full performance by Tenant, and Landlord shall pay from those funds and Landlord’s own funds all of the taxes for that tax year. Taxes levied on the Premises for the tax year in which the lease is terminated shall be similarly prorated between Landlord and Tenant to reflect the period of Tenant’s possession of the Premises during that tax year. Tenant shall pay Tenant’s share of those taxes to Landlord directly rather than to the public authorities, and that payment shall constitute full performance under this Lease with respect to such tax liability, if any

     All taxes levied on the Premises for the tax year in which the Commencement Date falls shall be appropriately prorated between Landlord and Tenant, so that Tenant’s share will reflect the portion of that tax year in which Tenant had possession of the Premises under this Lease. Taxes levied on the Premises for the tax year in which the Termination Date occurs shall be similarly prorated between Landlord and Tenant to reflect the period of Tenant’s possession of the Premises during that tax year.

Section 7.

Security Deposit

     Tenant shall deposit with Landlord a security deposit for the Premises upon execution of this Agreement, the sum of $6,750 (“Security Deposit”), to be held in a separate account during the term of the Lease and any extensions thereof. It is agreed that if Landlord shall ever apply the Security Deposit for any reason, Tenant shall immediately deposit with Landlord funds sufficient to restore the Security Deposit to its original amount.

Section 8.

Use of Premises

     The Premises may be used for or as General offices, including, without limitation, to offer banking services and marketing of any other financial services or investment products, including insurance products, or for any other legal purpose.

     Tenant shall not do or permit to be done in or about the Premises or Building or bring, keep or permit to be brought or kept therein, anything which is prohibited by any standard form fire insurance policy or which will cause a weight load or stress on the floor or any other portion of the Premises in excess of the weight load or stress which the floor or other portion of the Premises is designed to bear. Landlord acknowledges that Tenant may elect to install a vault at the Premises   Landlord makes no representation or warranty that the flooring is suitable to hold the vault nor any other representations or warranties whatsoever as to the physical condition, zoning condition, governmental requirements, or any other condition relating to the Premises or the Tenant’s intended use of the Premises.

     For the purposes of this Lease, the term “Hazardous Material” means any chemical, substance, material, controlled substance, object, condition, waste or combination thereof which is or may be hazardous to human health or safety or to the environment due to its radioactivity, ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogencity, infectiousness or other harmful or potentially harmful properties or effects, including, without limitation, medical products, petroleum and petroleum products, asbestos, radon, polychlorinated biphenyls (PCBs) and all of those chemicals, substances, materials, controlled substances, objects, conditions, wastes or combinations thereof which are now or become in the future listed, defined or regulated in any manner by any federal, state or local law based upon, directly

4

or indirectly, such properties or effects. The term “Hazardous Material” shall exclude small amounts of cleaning fluids, inks, toners, etc, that may be used by Tenant or its agents in the normal course of its business.

     Tenant hereby represents, warrants and covenants that: Tenant’s business operations in the Premises do not involve the use, storage or generation of Hazardous Material; Tenant shall not cause or permit any Hazardous Material to be brought upon, stored, manufactured, generated, blended, handled, recycled, disposed of, used or released on, in, under or about the Premises, Building or Project by Tenant or Tenant’s agents, employees, contractors, subtenants, assigns and invitees.

Section 9.

Signage and Parking

     Tenant, at its sole expense, shall have the right to place its signs on the Premises and be permitted to erect signage subject to reasonable approval by Landlord and the appropriate governmental bodies. Tenant’s ATMs shall have signage consistent with its overall ATM sign program. In addition, Tenant, with the consent of Landlord, shall have the right to place a sign for any approved monument or pylon signs, if such monument or pylon signs are legally allowed. Tenant shall also be entitled to place its signs on or about the Premises at any locations which Tenant reasonably believes are likely to be the most beneficial for its business and marketing objectives, subject to reasonable approval by Landlord.

     Tenant and its employees, customers and invitees shall have exclusive use of the parking lot and may reconfigure, subject to reasonable approval by Landlord and the city of Gardena , at Tenant’s sole cost and expense, and in compliance with all legal codes, regulations and requirements.

Section 10.

Tenant Improvements, Alterations and Repairs

     Tenant, at its sole option, may demolish existing tenant improvements and install teller counters, a vault, a night depository and up to two through-the-wall ATMS in the Premises. All tenant improvements constructed by Tenant shall be approved in writing by Landlord prior to commencement; such approval not to be unreasonably withheld, delayed, or conditioned.

     Tenant may enter the Premises prior to the Commencement Date, but after delivery of the Premises to Tenant (the “Delivery Date”) without payment of any Rent for the purpose of performing all Tenant Improvements, Alterations and Repairs to the Premises. All other terms of this Lease (including but not limited to Tenant’s obligations to carry insurance and to maintain the Premises) shall, however, be in effect after the delivery date.

     From and after the Delivery Date, Tenant, at its sole cost and expense, shall have the right upon receipt of Landlord’s written and reasonable consent, which consent shall not be unreasonably delayed, withheld or denied, to make alterations, additions, or improvements to the Premises provided that such alterations, additions or improvements: (a) are normal for general office and banking use, (b) do not adversely affect the utility or value of the Premises for future tenants, (c) do not substantially alter the exterior appearance of the Premises, (d) are not of a structural nature, and (e) are not otherwise prohibited under the Lease. Such alterations, additions, and improvements to the Premises made by or for Tenant following the Delivery Date are collectively called the “Alterations.” Tenant shall be permitted to make non-structural Alterations up to Twenty Thousand Dollars) ($20,000.00), without Landlord’s approval or requirement to give prior written notice so long as Tenant provides “as-built” documents upon completion.

     Any Alterations installed by Tenant during the Term shall be done in a first-class workmanlike manner and in conformity with a valid building permit and/or all other permits or licenses when and where required, copies of which shall be furnished to Landlord at least fourteen (14) days before the work is

5

commenced, and any work not acceptable to any governmental authority or agency having or exercising jurisdiction over such work, or not reasonably satisfactory to Landlord, shall be promptly replaced and corrected at Tenant’s sole cost and expense.

     Except as set forth in this Section 10 above, Tenant or Tenant’s contractors will in no event be allowed to make plumbing, mechanical, or electrical improvements to the Premises or any structural modification to the Premises without first obtaining Landlord’s written consent, which consent shall not be unreasonably delayed, withheld, conditioned or denied.

     All work by Tenant shall be diligently and continuously pursued from the date of its commencement through its completion; and

     Excepting Landlord’s obligations as set forth is Section 11, Tenant shall, at its sole cost and expense, maintain the Premises in good and sanitary condition and repair at all times during the Term. All damage, injury or breakage to any part or portion of the Premises caused by the willful misconduct or negligent act or omission of Tenant or Tenant’s agents, employees or invitees shall be promptly repaired by Tenant at its sole cost and expense.

     Tenant shall at all times keep the Premises free from any liens arising out of any work performed or allegedly performed, materials furnished or allegedly furnished or obligations incurred by or on behalf of Tenant. Tenant agrees to indemnify, defend with counsel to be mutually agreed to by Landlord and Tenant, and hold Landlord harmless from and against any and all claims for mechanics’, materialmen’s or other liens in connection with any alterations, repairs, or any work performed, materials furnished or obligations incurred by or on behalf of Tenant. Landlord reserves the right to enter the Premises for the purpose of posting such notices of non-responsibility as may be permitted by law or desired by Landlord.

     If Tenant installs a vault in the Premises, Tenant may elect to remove the vault at the expiration of the Term or earlier termination of this Lease. If Tenant elects to leave the vault in the Premises, Landlord shall exercise the option to require Tenant to remove the vault from the Premises at the expiration of the Term or earlier’termination of this Lease. In the event that Tenant elects to remove the vault and/or Landlord requires Tenant to remove the vault, Tenant shall be responsible for the full cost and expense of removing the vault from the Premises and shall repair any damage to the Premises caused by such removal. If the Tenant fails to remove the vault upon the Landlord’s request, then the Landlord may (but shall not be obligated to) remove the vault and the cost of removal and repair of any damage together with all other damages which the Landlord may suffer by reason of the failure of the Tenant to remove the vault, shall be charged to the Tenant and paid by the Tenant upon demand.

     The removal of all other alterations from the Premises installed by Tenant shall be governed as follows. Except to the extent the Tenant requests and the Landlord designates otherwise at the time the Landlord approves such Alterations, all or any part of the Alterations (including, without limitation, wall-to-wall carpeting and any wiring), whether made with or without the consent of the Landlord, shall, at the election of the Landlord, either be removed by the Tenant at the Tenant’s sole cost and expense before the expiration of the Term or shall remain upon the Premises and be surrendered therewith at the expiration of the Term or earlier termination of this Lease as the property of the Landlord. If the Landlord requires the removal of all or part of any Alterations, the Tenant, at the Tenant’s sole cost and expense, shall repair any damage to the Premises caused by such removal. If the Tenant fails to remove the Alterations upon the Landlord’s request, then the Landlord may (but shall not be obligated to) remove them and the cost of removal and repair of any damage together with all other damages which the Landlord may suffer by reason of the failure of the Tenant to remove the Alterations, shall be charged to the Tenant and paid by the Tenant upon demand.

6

Section 11.

Landlord’s Obligations to Repair and Maintain

     Landlord shall, at its sole expense, maintain and repair the roof and structural elements of the building as the same may exist from time to time. Landlord shall have no obligation to make repairs under this Section until a reasonable time after receipt of written notice of the need for such repairs has elapsed. Landlord will make repair within thirty (30) days following his receipt of the written notice, if the repair work can be completed within thirty (30) days.

     Upon at least twenty four (24) hours prior written notice received by Tenant, Landlord shall be permitted to enter the Premises during business hours for the purpose of making any alterations, additions, improvements or repairs to the Premises as Landlord may deem necessary or desirable, so long as such alterations, additions, improvements or repairs do not disrupt or interfere with Tenant’s business. In the event of an emergency, Landlord may enter the Premises without prior notice accompanied by a bank officer or a police or fire department officer.

Section 12.

Building Services

Left intentionally blank.

Section 13.

Assignment and Subletting

     Only upon Landlord’s prior written consent, which consent shall not be unreasonably withheld, delayed, conditioned or denied, Tenant may assign its interest in this Lease or in the Premises, or sublease all or any part of the Premises, or allow any other person or entity to occupy or use all or any part of the Premises. Any purported assignment or sublease without Landlord’s prior written consent shall be voidable at the election of Landlord. No consent to one assignment or sublease shall constitute a waiver of the provisions of this Section 13, with respect to another assignment or sublease. Section 13 shall not be applicable in the event that Tenant has merged into, and/or acquired by, another company.

     Tenant shall provide written notice to Landlord of: (i) Tenant’s intent to assign this Lease or sublease all or any part of the Premises, (ii) the name of the proposed assignee or sublessee, and (iii) the terms of the proposed assignment or sublease. Landlord shall, as soon as practicably possible, but in no event later than thirty (30) days of receipt of such notice, and any additional information requested by Landlord concerning the proposed assignee’s or sublessee’s financial responsibility, elect to either consent to such proposed assignment or sublease or refuse such consent, which refusal shall be on reasonable grounds, including, but not limited to, the net worth, financial condition, operating history, and general reputation of the proposed assignee or sublessee.

     Occupancy of all or part of the Premises by a wholly owned parent, subsidiary, or affiliated company of Tenant shall not be deemed as assignment or sublease provided that such parent, subsidiary or affiliated company was not formed as a subterfuge to avoid the requirements of this Section 13.

     Landlord shall have the right from time to time to sell, encumber, convey, transfer, and/or assign any of its rights and obligations under the Lease. However, such sale or transfer shall not be made unless the new landlord agrees in writing to assume Landlord’s rights and obligations to Tenant under the Lease and to recognize the Lease as a continuing obligation irrespective of any transfers or ownership changes.

7

Section 14.

Representations and Warranties

     As a material inducement to Tenant to enter into this Lease, and subject to the terms hereof, Landlord represents and warrants to Tenant as follows: (a) [Landlord is a general partnership duly organized, validly existing and in good standing under the laws of the State of California]; (b) and Landlord has all the necessary power and authority to carry on its present business, to enter into this Lease and perform Landlord’s obligations thereunder in accordance with its terms; (c) the execution and delivery of this Lease and the performance by Landlord of its obligations hereunder will not violate or constitute an event of default under the terms or provisions of any agreement, document or instrument to which Landlord is a party or by which Landlord is bound; (d) Landlord is the owner of the Premises and the Premises are not subject to any other lease or sublease of any kind; and (e) except as otherwise contained in this Lease, there are no representation or warranties of any kind whatsoever, express or implied, made by Tenant.

     Landlord further represents and warrants to Tenant that Landlord is unaware of any Hazardous Materials (defined above) or underground storage tanks in, on, or under the Premises, except those that are both (i) in compliance with all environmental laws and with permits issued pursuant thereto and (ii) fully disclosed to Tenant in writing; (b) there are no past, present or threatened Releases (defined below) of Hazardous Material in, on, under or from the Premises which have not been fully remediated in accordance with environmental law; (c) there is no threat of any Release of Hazardous Materials migrating to the Premises; (d) there is no past or present violation of Environmental Laws, or with permits issued pursuant thereto, in connection with the Property which has not been fully remediated in accordance with environmental law; (e) Landlord does not have actual knowledge of, and has not received, any written or oral notice or other communication from any person (including, but not limited to, a governmental entity) relating to Hazardous Materials or remediation thereof at or from the Premises, of asserted liability of any person having a relationship to the Premises under any environmental law, other environmental conditions in connection with the Premises, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing; and (f) Landlord has truthfully and fully provided to Tenant, in writing, any and aII information relating to conditions in, on, under or from the Premises that is known to Landlord and that is contained in files and records of Landlord, including, but not limited to, any reports relating to Hazardous Materials in, on, under or from the Premises and/or to the environmental condition of the Premises. Landlord hereby assume liability for, and hereby agree to pay, protect, defend (at trial and appellate levels) and with attorneys, consultants and experts acceptable to Landlord, and save Tenant harmless from and against, and hereby indemnify Tenant from and against any and all present or future liens, damages, losses, liabilities, obligations, settlement payments, penalties, assessments, citations, directives, claims, litigation, demands, defenses, judgments, suits, proceedings, costs, disbursements and expenses of any kind or of any nature whatsoever (including, without limitation, reasonable attorneys’, consultants’ and experts’ fees and disbursements actually incurred in investigating, defending, settling or prosecuting any claim, litigation or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against Tenant or the Premises, and arising directly or indirectly from or out of the violation of any present or future local, state or federal law, rule or regulation pertaining to environmental regulation, contamination or clean-up, except where such violation results from the actions, negligence or gross negligence of Tenant, or Tenant’s agents, employees or invitees.

     As a material inducement to Landlord to enter into this Lease, and subject to the terms hereof, Tenant represents, warrants, covenants and acknowledges as follows: (a) Tenant is a corporation duly organized, validly existing and in good standing under the laws of the United States; (b) Tenant has all the necessary power and authority to carry on its present business, to enter into this Lease and perform Tenant’s obligations thereunder in accordance with its terms; (c) the execution and delivery of this Lease and the performance by Tenant of its obligations hereunder will not violate or constitute an event of default under the terms or provisions of any agreement, document or instrument to which Tenant is a party or by which Tenant is bound; and (d) except as otherwise contained in this Lease, there are no representation or warranties of any kind whatsoever, express or implied, made by Landlord.

8

Section 15.

Insurance and Indemnification

     Tenant shall at its sole cost and expense defend, protect, indemnify, and hold Landlord and his agents, contractors, licensees, employees, directors, officers, partners, lenders, trustees and invitees (collectively, the “Landlord’s Agents”) harmless from and against any and all claims, arising out of or in connection with Tenant’s use of the Premises, the conduct of Tenant’s business, any activity, work or things done, permitted or allowed by Tenant in or about the Premises, the nonobservance or nonperformance by Tenant of any statute, law, ordinance, rule or regulation, or any willful misconduct or negligent act or omission of Tenant. Notwithstanding the foregoing provisions of this Section, however, Tenant shall have no obligation to defend, protect, indemnify, or hold Landlord harmless for any claim, loss or damage that is caused in whole or in part by the willful misconduct or negligence of Landlord or any representative or agent of Landlord.

     Tenant shall obtain at its sole cost and expense and keep in full force at all times after Landlord’s delivery of the Premises to Tenant, policies of insurance covering the Premises and perils related to the Tenant’s business activities on the Premises, including workers’ compensation and Employer’s Liability insurance which Tenant customarily maintains in effect with respect to its other branch locations in Southern California.

     The Landlord and any lenders or other parties specified by the Landlord shall be named as additional insureds under the Tenant’s general liability portion of the property insurance for the Premises. Tenant’s general liability insurance coverage, which shall include Landlord and any lenders or other parties specified by the Landlord as additional insureds, shall include, but not be limited to any commercial general liability insurance coverage in addition to coverage for automobile liability, excess umbrella liability, contents and loss of income procured by Tenant for the Premises. Insurance provided by the Tenant shall be primary as to all covered claims and any insurance carried by the Landlord is not excess and is non-contributing. Landlord may contact the Tenant’s insurance company directly in the event that the Landlord elects to make a claim under the Tenant’s insurance, after obtaining written approval from Tenant, which shall not be unreasonably withheld, delayed or conditioned. Copies of policies or original certificates of insurance with respect to each policy shall be delivered to the Landlord prior to the delivery of the Premises to Tenant and thereafter, at least thirty (30) days before the expiration of each existing policy.

     Landlord and Tenant release each other from any claims and demands of whatever nature for damage, loss or injury to the Premises, or to the other’s property in, on or about the Premises, that are caused by or result from risks or perils insured against under any insurance policies required by the Lease to be carried by Landlord and/or Tenant and in force at the time of any such damage, loss or injury. Neither Landlord nor Tenant shall be liable to the other for any damage caused by fire or any of the risks insured against under any insurance policy required by the Lease. Both Landlord and Tenant agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Landlord or Tenant, as the case may be, so long as the insurance is not invalidated thereby.

     Landlord shall maintain at all times after date of delivery of the Premises to the Tenant, and throughout the entire Term of this Lease and any extended option term at Tenant’s expense (Tenant shall pay the cost of such insurance promptly upon receipt of invoices thereof from the Landlord), liability insurance as described herein below, in addition to, and not in lieu of, the insurance required to be maintained by Tenant. Tenant shall not be named as an additional insured therein.

     Landlord’s Liability Insurance-Building, Improvements and Rental Value:

     (a) Building and Improvements. The Landlord shall obtain and keep in force a policy or policies in the name of Landlord, with loss payable to Landlord and to any Landlord(s) insuring loss or damage to the Premises. The amount of such insurance shall be equal to the full replacement cost of the Premises, as the same shall exist from time to time, or the amount required by any Lenders, but in no

9

event more than the commercially reasonable and available insurable value thereof. From and after Landlord’s delivery of the Premise to Tenant and throughout the Term of the Lease and any extension thereof, Tenant shall maintain insurance on Tenant’s owned alterations, Tenant’s utility installations, Tenant’s trade fixtures and Tenant’s personal property. If the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage including coverage for debris removal and the enforcement of any and all applicable laws, covenants or restrictions of record, building codes, regulations and/or ordinances requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. If such insurance coverage has a deductible clause, the deductible amount shall not exceed $1,000 per occurrence and Tenant shall be liable for such deductible amount in the event of an Insured Loss.

     (b) Rental Value. The Landlord shall obtain and keep in force a policy or policies in the name of Landlord with loss payable to Landlord and any Lender, insuring the loss of the full Rent for one (1) year. Said insurance shall provide that in the event the Lease is terminated by reason of an insured loss, the period of indemnity for such coverage shall be extended beyond the date of the completion of repairs or replacement of the Premises, to provide for one full year’s loss of Rent from the date of any such loss. Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent otherwise payable by Tenant, for the next twelve (12) month period. Tenant shall be liable for any deductible amount in the event of such loss, which deductible amount shall not exceed $1,000.

Section 16.

Damage or Destruction

     If, at any time prior to the expiration or earlier termination of the Lease or any extension thereof, the Premises or the Building are wholly or partially damaged or destroyed by a casualty, which casualty renders the Premises totally or partially inaccessible or unusable by Tenant in the ordinary conduct of its business, and adequate insurance proceeds are available to Landlord, then:

     (a) If all repairs to such Premises or Building or Project can be completed within three (3) months following the date of notice to Landlord of such damage or destruction without the payment of overtime or other premiums, and if such damage or destruction is not the result of the willful misconduct or negligence of Tenant, Landlord shall, at Landlord’s expense, repair the same and this Lease shall remain in full force and effect and a proportionate reduction of Rent shall be allowed Tenant for such portion of the Premises as shall be rendered inaccessible to or unusable by Tenant during the period of time that such portion is inaccessible or unusable, but not to exceed the proceeds received from the rental value of insurance; and

     (b) If such damage or destruction is not the result of the willful misconduct or negligence of Tenant and if all such repairs cannot be completed within three (3) months following the date of notice to Landlord of such damage or destruction without the payment of overtime or other premiums, Landlord may, at Landlord’s sole and absolute option, upon written notice to Tenant given within thirty (30) days after notice to Landlord of the occurrence of such damage or destruction, elect to repair such damage or destruction at Landlord’s expense, and in such event, this Lease shall continue in full force and effect but the Rent shall be proportionately reduced as hereinabove provided but not to exceed the proceeds received from the rental value of insurance. If Landlord does not elect to make such repairs, then either party may, upon written notice to the other, terminate this Lease.

     If, at any time prior to the expiration or earlier termination of this Lease, the Premises is totally or partially damaged or destroyed by a casualty, the loss to Landlord from which is not fully covered by insurance maintained by Landlord or for Landlord’s benefit, which casualty renders the Premises

10

inaccessible or unusable to Tenant in the ordinary course of its business, Landlord may, at its option and at its expense, upon written notice to Tenant within thirty (30) days after the occurrence of such damage or destruction, elect to repair or restore such damage or destruction, or may elect to terminate this Lease effective upon sixty (60) days notice to Tenant. In the event Landlord elects to repair or restore the premises, Rent shall be abated until the time Tenant is able to resume conducting its normal business operations from the Premises but not to exceed the proceeds received from the rental value of insurance.

     In the event Landlord elects to terminate this Lease in lieu of repairing or restoring the Premises, Tenant shall have the option, exercisable at any time prior to the effective date of Landlord’s termination notice, to repair or restore the Premises at its cost and expense in which event the Lease shall not terminate but Rent shall be abated until such time as Tenant is able to resume its normal business activities from the Premises but not to exceed the proceeds received from the rental value of insurance.

     Notwithstanding anything to the contrary contained in this Section, if the Premises is wholly or partially damaged or destroyed within the final twelve (12) months of the Term, Landlord or Tenant may, at its option and by giving the other party notice within thirty (30) days after notice of the occurrence of such damage or destruction, elect to terminate this Lease.

Section 17.

Eminent Domain

     If the whole of the Premises, or so much of the Premises as to render the balance unusable by Tenant, shall be taken under the power of eminent domain, the Lease shall automatically terminate as of the date of final judgment in such condemnation, or as of the date possession is taken by the condemning authority, whichever is earlier. A sale by Landlord under threat of condemnation shall constitute a “taking” for the purpose of this Section. No award for any partial or entire taking shall be apportioned and Tenant assigns to Landlord any award which may be made in such taking or condemnation, together with all rights of Tenant to such award, including, without limitation, any award or compensation for the value of all or any part of the leasehold estate; provided that nothing contained in this Section shall be deemed to give Landlord any interest in or to require Tenant to assign to Landlord any award made to Tenant for (a) the taking of Tenant’s personal property, or (b) interruption of or damage to Tenant’s business, (c) Tenant’s unamortized cost of the Tenant Improvements to the extent paid for by Tenant, or (d)Tenant’s cost of relocating to new location, including any award sufficient to cover increased rent or lease payments.

     In the event of a partial taking which does not result in a termination of the Lease, Rental shall be proportionately reduced based on the portion of the Premises rendered unusable, and Landlord shall restore the Premises or the Building to the extent of available condemnation proceeds.

     No temporary taking of the Premises or any part of the Premises and/or of Tenant’s rights to the Premises or under this Lease shall terminate this Lease unless the taking renders the balance unusable by Tenant, in Tenant’s sole and absolute discretion, or give Tenant any right to any abatement of any payments owed to Landlord pursuant to this Lease; any award made to Tenant by reason of such temporary taking shall belong entirely to Tenant.

     Upon termination of the Lease pursuant to this Section, Tenant and Landlord hereby agree to release each other from any and all obligations and liabilities with respect to the Lease except such obligations and liabilities which arise or accrue prior to such termination.

Section 18.

Defaults

     Each of the following shall be an “Event of Default” by Tenant and a material breach of this Lease:

11

     (a) Tenant shall fail to make any payment owed by Tenant under the Lease, as and when due, and where such failure is not cured within ten (10) business days after receipt of written notice to Tenant; and

     (b) Tenant shall fail to observe, keep or perform any of the terms, covenants, agreements or conditions under the Lease that Tenant is obligated to observe or perform, other than that described in Section 18(a) above, for a period of thirty (30) days after receipt of written notice to Tenant of said failure; provided however, that if the nature of Tenant’s default is such that more than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in default so specified within said thirty (30) day period and diligently prosecutes the same to completion, which extended period in no event shall exceed three (3) months.

     Landlord shall not be in default in the performance of any obligation required to be performed under this Lease unless Landlord has failed to perform such obligation within thirty (30) days after the receipt of written notice from Tenant specifying in detail Landlord’s failure to perform; provided, however, that if the nature of Landlord’s obligation is such that more than thirty (30) days is required for its performance, Landlord shall not be deemed in default if Landlord shall commence such performance within thirty (30) days and thereafter diligently pursues the same to completion.

     Upon an Event of Default by Tenant, the Landlord shall have the right, in addition to all other rights available to Landlord under this Lease or now or later permitted at law or in equity, to terminate this Lease by providing Tenant with a written notice of termination, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearage in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim or damages therefor; and Landlord may recover from Tenant the following: (i) The worth at the time of award of any unpaid Rent which had been earned at the time of such termination; (ii) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such Rent loss that Tenant proves could have been reasonably avoided; (iii) The worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such Rent loss that Tenant proves could be reasonably avoided; and (iv) All reasonable attorney fees incurred by Landlord relating to the default and termination of this Lease plus interest on all sums due Landlord by Tenant at the legal interest rate not to exceed ten percent (10%) per year (“Default Rate”).

     As used herein, the “worth at the time of award” is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).

     Landlord shall have the remedy described in Civil Code §1951.4 (lessor may continue lease in effect after lessee’s breach and abandonment and recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due.

     Upon an Event of Default by Tenant, Landlord shall also have the right, with or without terminating this Lease, to re-enter the Premises and remove all persons and Tenant’s Personal Property from the Premises, such property being removed and stored in a public warehouse or elsewhere at Tenant’s sole cost and expense. No removal by Landlord of any persons or property in the Premises shall constitute an election to terminate this Lease. Such an election to terminate may only be made by Landlord in writing, or decreed by a court of competent jurisdiction. Landlord’s right of entry shall include the right to remodel the Premises and re-let the Premises. Rents collected by Landlord from any other tenant which occupies the Premises shall be offset against the amounts owed to Landlord by Tenant. Tenant shall be responsible for any amounts not recovered by Landlord from any other tenant. Any

12

payments made by Tenant shall be credited to the amounts owed by Tenant. No re-entry by Landlord shall prevent Landlord from later terminating the Lease by written notice.

     The rights and remedies of the parties as set forth herein are not exclusive, and Landlord or tenant may exercise any other right or remedy available to it under this Lease, at law or in equity.

     If either Landlord or Tenant commences or engages in, or threatens to commence or engage in, any action or litigation or arbitration against the other party arising out of or in connection with the Lease of the Premises, or the Building, including but not limited to, any action for recovery of any payment owed by either party under the Lease, or to recover possession of the Premises, or for damages for breach of the Lease, the prevailing party shall be entitled to have and recover from the losing party reasonable attorneys’ fees and other costs incurred in connection with and preparation for such action.

Section 19.

Miscellaneous Provisions

     Surrender of Possession: Tenant shall surrender possession of the Premises immediately upon the expiration or earlier termination of the Lease. If Tenant shall continue to occupy or possess the Premises after such expiration or termination without the consent of Landlord, then Tenant shall be a tenant at will, but if Landlord has consented to such holdover in writing, Tenant shall be a tenant from month-to-month.

     Inspection and Access. Landlord may enter the Premises at all reasonable hours for any reasonable purpose. Tenant, upon Landlord’s 24-hour advance notice, shall permit Landlord an entry into the Premises. In the event of an emergency, Landlord may enter the Premises without any advance notice if accompanied by a bank officer or a police or fire department officer. Tenants shall have access to the Premises seven (7) days per week and twenty-four (24) hours per day.

     Surrender of Lease. The voluntary or other surrender of the Lease by Tenant, or a mutual cancellation of the Lease, shall not work a merger, and shall, at the option of Landlord, terminate all or any existing subleases or subtenancies, or may, at the option of Landlord, operate as an assignment to it of Tenant’s interest in any or all such subleases or subtenancies.

     Waiver. The waiver by Landlord or Tenant of any term, covenant, agreement or condition contained in this Lease shall not be deemed to be a waiver of any subsequent breach of the same or of any other term, covenant, agreement, condition or provision of this Lease, nor shall any custom or practice which may develop between the parties in the administration of the Lease be construed to waive or lessen the right of Landlord or Tenant to insist upon the performance by the other in strict accordance with all of the terms, covenants, agreements, conditions, and provisions of the Lease. The subsequent acceptance by Landlord of any payment owed by Tenant to Landlord under the Lease, or the payment of Rent by Tenant, shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant, agreement, condition or provision of the Lease, other than the failure of Tenant to make the specific payment so accepted by Landlord, regardless of Landlord’s or Tenant’s knowledge of such preceding breach at the time of the making or acceptance of such payment.

     Sale by Landlord. In the event Landlord shall sell, assign, convey or transfer all or a part of his interest in the Building or any part thereof to a party other than Tenant, Tenant agrees to attorn to such transferee, assignee or new owner, and upon consummation of such sale, conveyance or transfer, Landlord shall automatically be freed and relieved from all liability and obligations accruing or to be performed from and after the date of such sale, transfer, or conveyance. In the event of such sale, assignment, transfer or conveyance, Landlord shall transfer to such transferee, assignee or new owner of the Building the balance of the Security Deposit, if any, remaining after lawful deductions and in accordance with Civil Code Section 1950.7, after notice to Tenant, and Landlord shall thereupon be relieved of all liability with respect to the Security Deposit.

13

     Force Majeure. One party shall not be chargeable with, liable for, or responsible to the other party for anything or in any amount for any failure to perform or delay caused by: fire; earthquake; explosion; flood; hurricane; the elements; acts of God or the public enemy; actions, restrictions, limitations or interference of governmental authorities or agents; war; invasion; insurrection; rebellion; riots; strikes or lockouts; inability to obtain necessary materials, goods, equipment, services, utilities or labor; or any other cause which is beyond the reasonable control of the party; and any such failure or delay due to said causes or any of them shall not be deemed a breach of default in the performance of the Lease by the party.

     Estoppel Certificates. Tenant shall, at any time and from time to time, upon request of Landlord, within thirty (30) days following notice of such request from Landlord, execute, acknowledge and deliver to Landlord in recordable form, a certificate (the “Estoppel Certificate”) in such other form as Landlord or any of its lenders, prospective purchasers, lienholders or assignees may deem appropriate, as long as such certificate is reasonable and customary. Failure by Tenant to deliver the Estoppel Certificate within such thirty (30) day period shall be deemed to conclusively establish that this Lease is in full force and effect and has not been modified except as may be represented by Landlord. Tenant irrevocably constitutes and appoints Landlord as its special attorney-in-fact to execute and deliver the Estoppel Certificate to any lender, purchaser, investor or lienholder if the Estoppel Certificate is not executed by Tenant and delivered to Landlord within the 7 day period.

     Notices. All notices, requests, consents, approvals, payments in connection with the Lease, or communications that either party desires or is required or permitted to give or make to the other party under the Lease must be in writing and shall only be deemed to have been given, made and delivered, when received, if personally served, or when mailed, if deposited in the U. S. mail, certified or registered mail, postage prepaid, and addressed to the parties as set forth in this Section or to such other address or addresses as either Landlord or Tenant may from time to time designate to the other by written notice in accordance herewith:

If to Landlord:	If to Tenant:
Ronald Toma	Nara Bank
16012 S Western Avenue Suite 303	Attn: J. Han Park
Gardena, CA 90247	3701 Wilshire Blvd., Suite 303
	Los Angeles, California 90010

     Option to Purchase. Landlord will offer the property upon which the Building and Premises are located first exclusively to Tenant in the event that Landlord decides to sell the property during the term of the Lease. In such event, Tenant must be current under all material terms and conditions of the Lease, and Tenant will be given thirty (30) calendar days, from the date that Landlord notifies Tenant of the election to sell the property, to deliver to Landlord in writing, the terms and conditions under which Tenant is willing to agree to purchase the property. Landlord shall then have fifteen (15) calendar days in which to accept or reject such terms. If Landlord accepts the offer in writing, Tenant will complete its purchase of and take title to the property within the period of time described in such offer. If Landlord does not accept Tenant’s offer within the time required, or should Tenant fail to complete its purchase of the property within the time required, Landlord shall be free to market and sell the property at any terms that are greater than those presented by Tenant in its prior offer as described above. If Landlord later wishes to sell the property on terms equal to or less than Tenant’s offer as described herein, Landlord shall first present the Tenant with another opportunity to purchase the property on said terms, and the Tenant shall have the right to accept such offer within 10 days after receipt of written notice thereof. It is also agreed that Landlord need not comply with the foregoing if a sale or transfer occurs amongst owners, if any sale or transfer involves 50% or less of the ownership interest, or any transfer of partnership interests between the owners of the Premises results in the incorporation or formation of some other form of legal entity owning the Premises, involving common ownership in the new entity by and among some or all of the previous owners. For the purposes of these exceptions, the definition of owners shall apply equally to the current owners of the Premises and their successors, heirs and/or any other individual who may inherit an interest in the Premises. It is also agreed that should Tenant initiate an offer to purchase

14

the property prior to a decision by Landlord to sell, then Landlord’s refusal of such offer shall not nullify its aforementioned obligation to first offer the property exclusively to the Lessee in the event that Landlord later offers the property for sale. It is further agree that should Tenant purchase the Premises as set forth in this Section, then Landlord shall pay BankSite 2% of the purchase price paid by Tenant through escrow.

     Entire Agreement. The Lease contains the entire agreement between the parties respecting the Premises and all other matters covered or mentioned in the Lease. The Lease may not be altered, changed or amended except by an instrument in writing signed by both parties hereto.

     Severability. The illegality, invalidity or unenforceability of any term, condition, or provision of the Lease shall in no way impair or invalidate any other term, condition or provision of the Lease, and all such other terms, conditions and provisions shall remain in full force and effect.

     Governing Law. The Lease shall be governed by and construed pursuant to the laws of the State of California. LANDLORD AND TENANT EACH AGREE TO AND THEY HEREBY DO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE THE RELATIONSHIP OF LANDLORD AND TENANT TENANT’S USE OR OCCUPANCY OF THIS PREMISES AND/OR ANY CLAIM OF INJURY OR DAMAGE, AND ANY STATUTORY REMEDY.

     Lease Exhibits. Exhibit A attached to this Lease, is hereby incorporated by this reference and made a part hereof.

     Time is of the Essence. Time shall be of the essence of the Lease and of each of the provisions hereof,

     Cumulative Remedies. No remedy or election provided, allowed or given by any provision of the Lease shall be deemed exclusive unless so indicated, but shall, whenever possible, be cumulative with all other remedies at law or in equity.

     Broker. BankSite is acting as the exclusive agent of Tenant for the Premises. Brokerage commission is to be paid exclusively by Landlord to BankSite in the amount of 3% of the Base Rent payable by Tenant during the initial five (5) year Term and 1.5% of the Base Rent payable by Tenant during any lease term in excess of the initial 5 year term. The commission is to be paid half upon the mutual execution of the Lease and receipt of the security deposit required in Section 7 of the Lease and the remainder upon Tenant’s opening for business.

     IN WITNESS WHEREOF, the parties have executed this Lease as of the date first above written, acknowledged that party has carefully read each and every provision of the Lease, that each party has freely entered into the Lease of its own free will and violation, and that the terms, conditions and provisions of the Lease are commercially reasonable as of the date first above written.

LANDLORD		TENANT
The 1890 Building		Nara Bank
By :	/s/ RONALD TOMA	By:	/s/ J. HAN PARK
Name : RONALD TOMA		Name : J. HAN PARK
Title: Partner		Title: SVP
Date: 1-27-05		Date: 1-27-05

15

EX-10.2

Exhibit 10.2

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE — NET
AIR COMMERCIAL REAL ESTATE ASSOCIATION

1. Basic Provisions (“Basic Provisions”).

     1.1 Parties: This Lease (“Lease”), dated for reference purposes only February 28, 2005, is made by and between Jae M. Choi and Henry C, Park (“Lessor”) and Nara Bank (“Lessee”), (collectively the “Parties”, or individually a “Party”)

     1.2(a) Premises: That certain portion of the Project (as defined below), including all improvements therein or to be provided by Lessor under the terms of this Lease, commonly known by the street address of 10055 Garden Grove Blvd. Unit A, located in the City of Garden Grove, County of Orange County, State of California, with zip code 92844, as outlined on Exhibit “A” attached hereto (“Premises”) and generally described as (describe briefly the nature of the Premises): Approximately 2,640 Square Feet of Retail Space. Portion of Larger Strip Center AKA Central Plaza Shopping Center.

In addition to Lessee’s rights to use and occupy the Premises as hereinafter specified, Lessee shall have non-exclusive rights to the Common Areas as defined in Paragraph 2.7 below) us hereinafter specified, but shall not have any rights to the roof, exterior walls or utility raceways of the building containing the Premises (“Building”) or to any other buildings in the Project. The Premises, the Building, the Common Areas, the land upon which they are located, along with all other buildings and improvements thereon, are herein collectively referred to as the “Project.” (See also Paragraph 2)

     1.2(b) Parking:                                          unreserved vehicle parking spaces (“Unreserved Parking Spaces”); and 10 (Ten) reserved vehicle parking spaces (“Reserved Parking Spaces”). (See also Paragraph 2.6)

     1.3 Term: 10 years and 0 months (“Original Term”) commencing March 1, 2005 (“Commencement Date”) and ending February 28, 2015 (“Expiration Date”). (See also Paragraph 3)

     1.4 Early Possession: N/A (“Early Possession Date”) (See also Paragraph 3.2 and 3.2)

     1.5 Base Rent: $3,300.00 per month (“Base Rent”), payable on the 1st day of each month commencing March 1, 2005. (See also Paragraph 4)

x if this box is checked, there are provisions in this Lease for the base Rent to be adjusted.

     1.6 Lessee’s Share of Common Area Operating Expenses: Fourteen and One Half percent (14.5%) (“Lessee’s Share”).

     1.7 Base Rent and Other Monies Paid Upon Execution:

          (a) Base Rent: $ 3,300.00 for the period March 1 — March 31, 2005

          (b) Common Area Operating Expenses: $ N/A for the period                                  

          (c) Security Deposit: $ 6,600,00 (“Security Deposit”). (See also Paragraph 5)

          (d) Other: $ N/A for                                                

          (e) Total Due Upon Execution of this Lease: $9,900.00.

     1.8 Agreed Use: Full Service Retail Bank end Related Business. (See also Paragraph 6)

     1.9 Insuring Party. Lessor is the “Insuring Party”. (See also Paragraph 8)

     1.10 Real Estate Broker: (See also Paragraph 15)

          (a) Representation: The following real estate brokers (the “Broker”) and brokerage relationships exist in this transaction (check applicable boxes):

o N/A represents Lessor exclusively (“Lessor’s Broker”);

o N/A represents Lessee exclusively (“Lessor Broker”); or

o N/A represents both Lessor and Lessee (“Dual Agency”).

          (b) Payment to Broken: Upon execution and delivery of this Lease by both Parties. Lessor shall pay to the Brokers the brokerage fees agreed to in a separate written agreement (or if there is no such agreement, the sum N/A or        % of the total Base Rent for the brokerage services rendered by the Brokers).

     1.11 Guarantor. The obligations of the Lessee under this Lease are to be guaranteed by N/A (“Guarantor”). (See also Paragraph 37)

     1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addends consisting of Paragraphs 50 through 61 and Exhibit                  through                  , all of which constitute a part of this Leese.

2. Premises.

     2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of size set forth in this Lease or that may have been used in calculating Rent, is an approximation which the Parties agree is reasonable and any payments based thereon are not subject to revision whether or not the actual size is more or less

     2.2 Condition. Lessor shall deliver that portion of the Premises contained within the Building (“Unit”) to Lessee broom clean and free of debris on the Commencement Date or the Early Possession Date, whichever first occurs (“Start Date”), and, so long as the required service contract described in Paragraph 7.1(b) below are obtained by Lessee and in effect within thirty days following the Start Date, warrants that the existing electrical, plumbing, fire sprinkler, lighting, heading ventilating and air conditioning systems (“HVAC”), loading doors. If any, and all other such elements in the Unit, other than those constructed by Lessee, shall be in good operating condition on said date and that the structural elements of the roof, heading wells and

	[ILLEGIBLE]
	[ILLEGIBLE]
Initials	Initials

©1999 - AIR Commercial Real Estate Association

Page 1 of 12

foundation of the Unit shall be from of material defects. If a non-compliance with such warranty exists as of the Start Date, or if one of such systems or elements should malfunction or fail within the appropriate warranty period, Lessor shall, as Lessor’s sole obligation with respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, malfunction or failure, rectify same at Lessor’s expense. The warranty periods shall be at follows; (i) 6 months as to the HVAC systems, and (ii) 30 days as to the remaining systems and other elements of the Unit. If Lessee does not give Lessor the required notice within the appropriate warranty period, correction of any such non-compliance, malfunction or failure shall be the obligation of Lessee at Lessee’s sole cost and expense (except for the repairs to the fire sprinkler systems, roof, foundations, and/or bearing walls — see Paragraph 7).

     2.3 Compliance. Lessor warrants that the improvements on the Premises and the Common Areas comply with the building codes that were in effect at the time that each such improvement, or portion thereof, was constructed, and also with all applicable laws, covenants or restrictions of record, regulations, and ordinances in effect on the Start Date (“Applicable Requirements”). Said warranty does not apply to the use to which Lessee will put the Premises or to any Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the Applicable Requirements, and especially the zoning, are appropriate for Lessee’s intended use, and acknowledges that past uses of the Premises may no longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify the same at Lessor’s expense. If Lessee does not give Lessor written notice of a non-compliance with this warranty within 6 months following the Start Date, correction of that non-compliance shall be the obligation of Lessee at Lessee’s sole cost and expense. If the Applicable Requirements are hereafter changed so as to require during the term of this Lease the construction of an addition to or an alteration of the Unit, Premises and/or Building, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the Unit, Promises and/or Building (“Capital Expenditure”), Lessor and Lessee shall allocate the cost of such work as follows:

               (a) Subject to Paragraph 2.3(c) below, it such Capital Expenditures are required as a result of the specific and unique use of the Premises by Lessee as compared with uses by tenants in general, Lessee shall be fully responsible for the cost thereof, provided, however that if such Capital Expenditure is required during the last 2 years to this Lease and the cost thereof exceeds 6 months’ Base Rent, Lessee may instead terminate the Lease unless Lessor notifies Lessee, in writing, within 10 days after receipt of Lessee’s termination notice that Lessor has elected to pay the difference between the actual cost thereof and the amount equal to 6 months’ Base Rent. If Lessee elects termination, Lessee shall immediately cease the use of the Premises which requires such Capital Expenditure and deliver to Lessor written notice specifying a termination date at least 90 days thereafter. Such termination date shall, however, in no event be earlier than the last day that Lessee could legally utilize the Premises without commencing such Capital Expenditure.

               (b) If such Capital Expenditure is not the result of the specific and unique use of the Premises by Lessee (such as governmentally mandated seismic modifications), then Lessor and Lessee shall allocate the obligation to pay for the portion of such costs reasonably attributable to the Premises pursuant to the formula set out in Paragraph 7.1(d); provided, however, that if such Capital Expenditure is required during the last 2 years of this Lease or if Lessor reasonably determines that it is not economically feasible to pay its share thereof, Lessor shall have the option to terminate this Lease upon 90 days prior written notice to Lessee unless Lessee notifies Lessor, in writing, within 10 days after receipt of Lessor’s termination notice that Lessee will pay for such Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any such Capital Expenditure, Lessee may advance such funds and deduct same, with interest, from Rent until Lessor’s share of such costs have been fully paid. If Lessee is unable to finance Lessor’s share, or if the balance of the Rent due and payable for the remainder of this Lease is not sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the right to terminate this Lease upon 30 days written notice to Lessor.

               (c) Notwithstanding the above, the provisions concerning Capital Expenditures are intended to apply only to non-voluntary, unexpected, and new Applicable Requirements. If the Capital Expenditures are instead triggered by Lessee as a result of an actual or proposed change in use, change in intensity of use, or modification to the Premises then, and in that event, Lessee shall be fully responsible for the cost thereof, and Lessee shall not have any right to terminate this Lease.

     2.4 Acknowledgements. Lessee acknowledges that (a) it has been advised by Lessor and/or Brokers to satisfy itself with respect to the condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with Applicable Requirements and the Americans with Disabilities Act), and their suitability for Lessee’s intended use, (b) Lessee has made such investigation as it deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises, and (c) neither Lessor, Lessor’s agents, nor Brokers have made any oral or written representations or warranties with respect to said matters other than as set forth in this Lease. In addition, Lessor acknowledges that: (i) Brokers have made no representations, promises or warranties concerning Lessee’s ability to honor the Lease or suitability to occupy the Premises, and (ii) it is Lessor’s sole responsibility to investigate the financial capability and/or suitability of all proposed tenants.

     2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in Paragraph 2 shall be of no force or effect if immediately prior to the Start Date Lessee was the owner or occupant of the Premises. In such event, Lessee shall be responsible for any necessary corrective work.

     2.6 Vehicle Parking. Lessee shall be entitled to use the number of Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph 1.2(b) on those portions of the Common Areas designated from time to time by Lessor for parking. Lessee shall not use more parking spaces than said number. Said parking spaces shall be used for parking by vehicles no larger than full-size passenger automobiles or pick-up trucks, herein called “Permitted Size Vehicles.” Lessor may regulate the loading and unloading of vehicles by adopting Rules and Regulations as provided in Paragraph 2.9. No vehicles other than Permitted Size Vehicles may be parked in the Common Area without the prior written permission of Lessor.

               (a) Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee’s employees, suppliers, shippers, customers, contractors or invitees to be loaded, unloaded, or parked in areas other than those designated by Lessor for such activities.

               (b) Lessee shall not service or store any vehicles in the Common Areas.

               (c) If Lessee permits or allows any of the prohibited activities described in this Paragraph 2.6, than Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away tho vehicle involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

     2.7 Common Areas — Definition. The term “Common Areas” is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Project and Interior utility raceways and Instalations within the Unit that are provided and designated by the Lessor from time to time for the general non-exclusive use of Lessor, Lessee and other tenants of the Project and their respective employees, suppliers, shippers, customers, contractors and invitees, including parking areas, loading and unloading areas, trash areas, roadways, walkways, driveways and landscaped areas.

     2.8 Common Areas — Lessee’s Rights. Lessor grants to Lessee, for the benefit of Lessee and its employees, suppliers, shippers, contractors, customers and invitees, during the term of this Lease, the non-exclusive right to use, in common with others entitled to such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions governing the use of the Project. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property, temporarily or permanently, in the Common Areas. Any such storage shall be permitted only by the prior written consent of Lessor or Lessor’s designated agent, which consent may be revoked at any time. In the event that any unauthorized storage shall occur then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove the property and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

     2.9 Common Areas — Rules and Regulations. Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to establish, modify, amend and enforce reasonable rules and regulations (“Rules and Regulations”) for the management, safety, care, and cleanliness of the grounds, the parking and unloading of vehicles and the preservation of good order, as well as for the convenience of other occupants or tenants of the Building and the Project and their invitees. Lessee agrees to abide by and conform to all such Rules and Regulations, and to cause its employees, suppliers, shippers, customers, contractors and invitees to abide and conform. Lessor shall not be responsible to Lessee for the non-compliance with said Rules and Regulations by other tenants of the Project.

     2.10 Common Areas — Changes. Lessor shall have the right, in Lessor’s sole discretion, from time to time:

               (a) To make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas, walkways and utility raceways;

               (b) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available;

               (c) To designate other land outside the boundaries of the Project to be a part of the Common Areas;

               (d) To add additional buildings and improvements to the Common Areas;

               (e) To use the Common Areas while engaged in making additional improvements, repairs, or alterations to the Project, or any portion thereof; and

               (f) To do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Project as Lessor may, in the exercise of sound business judgment, deem to be appropriate.

3. Term.

     3.1 Term. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3

     3.2 Early Possession. If Lessee totally or partially occupies the Premises prior to the Commencement Date, the obligation to pay Base Rent shall be abated for the period of such early possession. All other terms of this Lease (including but not limited to the obligations to pay Lessess’s share of Common Area Operating Expenses, Real Property Taxes and insurance premiums and to maintain the premises) shall, however, be in effect during, be in effect during such period. Any such early possession shall not effect the Expiration Date.

Initials [ILLIGEBLE]

FORM MTN-2-2/88E

Page 2 of 12

     3.3 Delay In Possession. Lessor agrees to use its best commercially reasonable efforts to deliver possession of the Premises to Lessee by the Commencement Date. If, despite said efforts, Lessor is unable to deliver possession as agreed, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease. Lessee shall not, however, be obligated to pay Rent or perform its other obligations until it receives possession of the Premises. If possession is not delivered within 60 days after the Commencement Date, Lessee may, at its option, by notice in writing within 10 days after the end of such 60 day period, cancel this Lease, in which event the Parties shall be discharged from all obligations hereunder. If such written notice is not received by Lessor within said 10 day period, Lessee’s right to cancel shall terminate. Except as otherwise provided, if possession is not tendered to Lessee by the Start Date and Lessee does not terminate this Lease, as aforesaid, any period of rent abatement that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to what Lessee would otherwise have enjoyed under the terms hereof, but minus any days of delay caused by the acts or omissions of Lessee. If possession of the Premises is not delivered within 4 months after the Commencement Date, this Lease shall terminate unless other agreements are reached between Lessor and Lessee, in writing.

     3.4 Lessee Compliance. Lessor shall not be required to tender possession of the Premises to Lessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee shall be required to perform all of its obligations under this Lease from and after the Start Date, including the payment of Rent, notwithstanding Lessor’s election to withhold possession pending receipt of such evidence of insurance. Further, if Lessee is required to perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied.

4. Rent.

     4.1. Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent (“Rent”).

     4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the term hereof, in addition to the Base Rent, Lessee’s Share (as specified in Paragraph 1.6) of all Common Area Operating Expenses, as hereinafter defined, during each calendar year of the term of this Lease, in accordance with the following provisions:

          (a) “Common Area Operating Expenses” are defined, for purposes of this Lease, as all costs incurred by Lessor relating to the ownership and operation of the Project, including, but not limited to, the following:

(i) The operation, repair and maintenance, in neat, clean, good order and condition of the following:

(aa) The Common Areas and Common Area improvements, including parking areas, loading and unloading areas, trash areas, roadways, parkways, walkways, driveways, landscaped areas, bumpers, irrigation systems, Common Area lighting facilities, fences and gates, elevators, roofs, and roof drainage systems.

(bb) Exterior signs and any tenant directories.

(cc) Any fire detection and/or sprinkler systems.

(ii)	The cost of water, gas, electricity and telephone to service the Common Areas and any utilities not separately metered.
(iii)	Trash disposal, pest control services, property management, security services, and the costs of any environmental inspections.
(iv)	Reserves set aside for maintenance and repair of Common Areas.
(v)	Real Property Taxes (as defined in Paragraph 10).
(vi)	The cost of the premiums for the insurance maintained by Lessor pursuant to Paragraph 8.
(vii)	Any deductible portion of an insured loss concerning the Building or the Common Areas.
(viii)	The cost of any Capital Expenditure to the Building or the Project not covered under the provisions of Paragraph 2.3 provided; however, that Lessor shall allocate the cost of any such Capital Expenditure over a 12 year period and Lessee shall not be required to pay more than Lessee’s Share of 1/144th of the cost of such Capital Expenditure in any given month.
(ix)	Any other services to be provided by Lessor that are stated elsewhere in this Lease to be a Common Area Operating Expense.

          (b) Any Common Area Operating Expenses and Real Property Taxes that are specifically attributable to the Unit, the Building or to any other building in the Project or to the operation, repair and maintenance thereof, shall be allocated entirely to such Unit, Building, or other building. However, any Common Area Operating Expenses and Real Property Taxes that are not specifically attributable to the Building or to any other building or to the operation, repair and maintenance thereof, shall be equitably allocated by Lessor to all buildings in the Project.

          (c) The inclusion of the improvements, facilities and services set forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor to either have said improvements or facilities or to provide those services unless the Project already has the same, Lessor already provides the services, or Lessor has agreed elsewhere in this Lease to provide the same or some of them.

           (d) Lessee’s Share of Common Area Operating Expenses shall be payable by Lessee within 10 days after a reasonably detailed statement of actual expenses is presented to Lessee. At Lessor’s option, however, an amount may be estimated by Lessor from time to time of Lessee’s Share of annual Common Area Operating Expenses and the same shall be payable monthly or quarterly, as Lessor shall designate, during each 12 month period of the Lease term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to Lessee within 60 days after the expiration of each calendar year a reasonably detailed statement showing Lessee’s Share of the actual Common Area Operating Expenses incurred during the preceding year. If Lessee’s payments under this Paragraph 4.2(d) during the preceding year exceed Lessee’s Share as indicated on such statement, Lessor shall credit the amount of such over-payment against Lessee’s Share of Common Area Operating Expenses next becoming due. If Lessee’s payments under this Paragraph 4.2(d) during the preceding year were less than Lessee’s Share as indicated on such statement. Lessee shall pay to Lessor the amount of the deficiency within 10 days after delivery by Lessor to Lessee of the statement.

     4.3 Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it is due. Rent for any period during the term hereof which is for less than one full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a waiver of Lessor’s rights to the balance of such Rent, regardless of Lessor’s endorsement of any check so stating. In the event that any check, draft, or other instrument of payment given by Lessee to Lessor is dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in addition to any late charges which may be due.

5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the Security Deposit as security for Lessee’s faithful performance of its obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of the Security Deposit, Lessee shall within 10 days after written request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. If the Base Rent increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional monies with Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial Security Deposit bore to the Initial Base Rent. Should the Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to increase the Security Deposit to the extent necessary, in Lessor’s reasonable judgment, to account for any increased wear and tear that the Premises may suffer as a result thereof. If a change in control of Lessee occurs during this Lease and following such change the financial condition of Lessee is, in Lessor’s reasonable judgment, significantly reduced, Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on such change in financial condition. Lessor shall not be required to keep the Security Deposit separate from its general accounts. Within 14 days after the expiration or termination of this Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent, and otherwise within 30 days after the Premises have been vacated pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit not used or applied by Lessor. No part of the Security Deposit shall be considered to be held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease.

6. Use.

     6.1 Use. Lessee shall use and occupy the Premises only for the Agreed Use, or any other legal use which is reasonably comparable thereto, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of or causes damage to neighboring premises or properties. Lessor shall not unreasonably withhold or delay its consent to any written request for a modification of the Agreed Use, so long as the same will not impair the structural integrity of the improvements on the Premises or the mechanical or electrical systems therein, and/or is not significantly more burdensome to the Premises. If Lessor elects to withhold consent, Lessor shall within 7 days after such request give written notification of same, which notice shall include an explanation of Lessor’s objections to the change in the Agreed Use.

     6.2 Hazardous Substances.

          (a) Reportable Uses Require Consent. The term “Hazardous Substance” as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii) regulated or monitored by any governmental authority, or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products or fractions thereof. Lessee shall not engage in any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the

		/s/ (ILLEGIBLE)
		/s/ (ILLEGIBLE)
Initials	Page 3 of 12	Initials

© 1999 - AIR Commercial Real Estate Association

express prior written consent of Lessor and timely compliance (at Lessee’s expense) with all Applicable Requirements “Reportable Use” shall mean(i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements requires that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably required to be used in the normal course of the Agreed Use, so long as such use is in compliance with all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the environment against damage, contamination, injury and/or liability. Including, but not limited to, the installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasements) and/or increasing the Security Deposit.

            (b) Duty to inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, other than as previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor, and provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance.

            (c) Lessee Remediation. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee’s expense, take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for Lessee, or any third party.

            (d) Lessee indemnification. Lessee shall indemnify, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless from and against any end all loss of rents and/or damages, liabilities, judgments, claims, expenses, penalties, and attorneys’ and consultants’ fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party (provided, however, that Lessee shall have no liability under this Lease with respect to underground migration of any Hazardous Substance under the Premises from areas outside of the Project), lessee’s obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement.

            (e) Lessor indemnification. Lessor and its successors and assigns shall indemnify, defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all environmental damages, including the cost of remediation, which existed as a result of Hazardous Substances on the Premises prior to the Start Date or which are caused by the gross negligence or willful misconduct of Lessor, its agents or employees. Lessor’s obligations, as and when required by the Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease.

            (f) Investigations and Remediations. Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entitles having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to the Start Date, unless such remediation measure is required as a result of Lessee’s use (including “Alterations”, as defined in paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and Lessor’s agents to have reasonable access to the ‘Premises at reasonable times in order to carry out Lessor’s investigative and remedial responsibilities.

            (g) Lessor Termination Option. If a Hazardous Substance Condition (see Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is legally responsible, therefor (in which case Lessee shall make the investigation and remediation thereof required by the Applicable Requirements and this Lease shall continue in full force and effect, but subject to Lessor’s rights under Paragraph 6.2(d) and Paragraph 13). Lessor may, at Lessor’s option, either (i) investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor’s expense, in which event this Lease shall continue in full force and effect, or (ii) if the estimated cost to remediate such condition exceeds 12 times the then monthly Base Rent or $100,000, whichever is greater, give written notice to Lessee, within 30 days after receipt by Lessor of knowledge of the occurrance of such Hazardous Substance Condition, of Lessor’s desire to terminate this Lease as of the date 60 days following the date of such notice. In the event Lessor elects to give a termination notice. Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee’s commitment to pay the amount by which the cost of the remediation of such Hazardous Substance Condition exceeds an amount equal to 12 times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days following such commitment. In such event, this Lease shall continue in full force and effect, and Lessor shall proceed to make such remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time provided, this Lease shall terminate as of the date specified in Lessor’s notice of termination.

      6.3 Lessee’s Compliance with Applicable Requirements. Except as otherwise provided in this Lease, Lessee shall, at Lessee’s sole expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the requirements of any applicable fire insurance underwriter or rating bureau, and the recommendations of Lessor’s engineers and/or consultants which relate in any manner to the Premises, without regard to whether said requirements are now in effect or become effective after the Start Date. Lessee shall, within 10 days after receipt of Lessor’s written request, provide Lessor with copies of all permits and other documents, and other information evidencing Lessee’s compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements.

      6.4 Inspection; Compliance. Lessor and Lessor’s “Lender” (as defined in Paragraph 30) and consultants shall have the right to enter into Premises at any time. In the case of an emergency, and otherwise at reasonable times, for the purpose of inspecting the condition of the Premises and for verifying compliance by lessee with this Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirement, or a contamination is found to exist or be imminent, or the inspection is requested or ordered by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspection, so long as such inspection is reasonably related to the violation or contamination.

7. Maintenance; Repairs, Utility Installations; Trade Fixtures and Alterations.

      7.1 Lessee’s Obligations.

            (a) In General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee’s Compliance with Applicable Requirements), 7.2 (Lessor’s Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee’s sole expense, keep the Premises, Utility installations (intended for lessee’s exclusive use, no matter where located), and Alterations in good order, condition and repair (whether or not the portion of the Premises requiring repairs, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee’s use, any prior use, the elements or the age of such portion of the Premises), including, but not limited to, all equipment or facilities, such as plumbing. HVAC equipment, electrical, lighting facilities, boilers, pressure vessels, fixtures, interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, and skylights but excluding any items which are the responsibility of Lessor pursuant to Paragraph 7.2. Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the service contracts required by Paragraph 7.1(b) below. Lessee’s obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair.

            (b) Service Contracts. Lessee shall, at Lessee’s sole expense, procure and maintain contracts, with copies to Lessor. In customary form and substance for, and with contractors specializing and experienced in the maintenance of the following equipment and improvements. If any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler and pressure vessels, (iii) clarifiers, and (iv) any other equipment, if reasonably required by Lessor. However, Lessor reserves the right, upon notice to Lessee, to procure and maintain any or all of such service contracts, and if Lessor so elects, Lessee shall reimburse Lessor, upon demand, for the cost thereof.

            (c) Failure to Perform. If Lessee fails to perform Lessee’s obligations under this Paragraph 7.1, Lessor may enter upon the Premises after 10 days' prior written notice to Lessee (except in the case of an emergency, in which case no notice shall be required), perform such obligations on Lessee’s behalf, and put the Premises in good order, condition and repair, and Lessee shall promptly reimburse Lessor for the cost thereof.

            (d) Replacement. Subject to Lessee’s indemnification of Lessor as set forth in Paragraph 8.7 below, and without relieving Lessee of liability resulting from Lessee’s failure to exercise and perform good maintenance practices, if an item described in Paragraph 7.1(b) cannot be repaired other than at a cost which is in excess of 50% of the cost of replacing such item, then such item shall be replaced by Lessor, and the cost thereof shall be prorated between the Parties and Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying the cost of such replacement by a fraction, the numerator of which is one, and the denominator of which is 144 (i.e 1/144th of the cost per month). Lessee shall pay interest on the unamortized balance at a rate that is commercially reasonable in the Judgment of Lessor’s accountants. Lessee may, however, prepay its obligation at any time.

      7.2 Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2 (condition), 2.3 (Compliance), 4.2 (4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to paragraph 4.2, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler system, Common Area fire alarm and/or smoke detection systems, fire hydrants, parking lots, walkways, parkways, driveways, landscaping, fences, signs and utility systems serving the Common Areas and all parts thereof, as well as providing the services for which there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior surfaces of exterior walls nor shall Lessor be obligated to maintain,

		[ILLEGIBLE]
Initials		Initials
© 1998 - - AIR Commercial Real Estate Association		FORM MTN-2-2/99E
	Page 4 of 12

repair or replace windows, doors or plate glass of the Premises. Lessee expressly waives the benefit of any statute now or hereafter in effect to the extent it is inconsistent with the terms of this Lease.

     7.3 Utility Installations; Trade Fixtures; Alterations.

          (a) Definitions. The term “Utility Installations” refers to all floor and window coverings, air lines, power panels, electrical distribution, security and fire protection systems, communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. The term “Trade Fixtures” shall mean Lessee’s machinery and equipment that can be removed without doing material damage to the Premises. The term “Alterations” shall mean any modification of the improvements, other than Utility Installations or Trade Fixtures, whether by addition or deletion. “Lessee owned Alterations and/or Utility Installations” are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).

          (b) Consent. Lessee shall not make any Alterations or Utility Installations to the Premises without Lessor’s prior written consent. Lessee may, however, make non-structural Utility Installations to the Interior of the Premises (excluding the roof) without such consent but upon notice to Lessor as long they are not visible from the outside, do not involve puncturing, relocating or removing the roof or any existing walls, and the cumulative cost thereof during this Lease as extended does not exceed a sum equal to 3 month’s Base Rent in the aggregate or a sum equal to one month’s Base Rent in any one year. Notwithstanding the foregoing, Lessee shall not make or permit any roof penetrations and/or install anything on the roof without the prior written approval of Lessor. Lessor may, as a precondition to granting such approval, require Lessee to utilize a contractor chosen and/or approved by Lessor. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee’s: (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility installations shall be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications. For work which costs an amount in excess of one month’s Base Rent, Lessor may condition its consent upon Lessee providing a lien and completion bond in an amount equal to 150% of the estimated cost of such Alteration or Utility Installation and/or upon Lessee’s posting an additional Security Deposit with Lessor.

          (c) Indemnification. Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic’s or materialman’s lien against the Premises or any interest therein. Lessee shall give Lessor not less than 10 days notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notices of non-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an amount equal to 150% of the amount of such contested lien, claim or demand, indemnifying Lessor against liability for the same. If Lessor elects to participate in any such action, Lessee shall pay Lessor’s attorneys’ fees and costs.

     7.4 Ownership; Removal; Surrender; and Restoration.

          (a) Ownership. Subject to Lessor’s right to require removal or elect ownership as hereinafter provided, all Alterations and Utility Installations made by Lessee shall be the property of Lessee, but considered a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration or termination of this Lease, become the property of Lessor and be surrendered by Lessee with the Premises.

          (b) Removal. By delivery to Lessee of written notice from Lessor not earlier than 90 and not later than 30 days prior to the end of the term of this Lease. Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or termination of this Lease. Lessor may require the removal at any time of all or any part of any Lessee Owned Alterations or Utility Installations made without the required consent.

          (c) Surrender; Restoration. Lessee shall surrender the Premises by the Expiration Date or any earlier termination date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. “Ordinary wear and tear” shall not include any damage or deterioration that would have been prevented by good maintenance practice. Notwithstanding the foregoing, if this Lease is for 12 months or less, then Lessee shall surrender the Premises in the same condition as delivered to Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair any damage occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee owned Alterations and/or Utility Installations, furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee. Lessee shall also completely remove from the Premises any and all Hazardous Substances brought onto the Premises by or for Lessee, or any third party (except Hazardous Substances which were deposited via underground migration from areas outside of the Project) even if such removal would require Lessee to perform or pay for work that exceeds statutory requirements. Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 26 below,

8. Insurance; Indemnity.

     8.1 Payment of Premiums. The cost of the premiums for the insurance policies required to be carried by Lessor, pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b), shall be a Common Area Operating Expense. Premiums for policy periods commencing prior to, or extending beyond, the term of this Lease shall be prorated to coincide with the corresponding Start Date or Expiration Date.

     8.2 Liability Insurance.

          (a) Carried by Lessee. Lessee shall obtain and keep in force a Commercial General Liability policy of insurance protecting Lessee and Lessor as an additional insured against claims for bodily injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an occurrence basis providing single limit coverage in an amount not less than $1,000,000 per occurrence with an annual aggregate of not less than $2,000,000, an “Additional Insured-Managers or Lessors of Premises Endorsement” and contain the “Amendment of the Pollution Exclusion Endorsement” for damage caused by heat, smoke or fumes from a hostile fire. The policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an “insured contract” for the performance of Lessee’s indemnity obligations under this Lease. The limits of said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. All insurance carried by Lessee shall be primary to and not contributory with any similar insurance carried by Lessor, whose insurance shall be considered excess insurance only.

          (b) Carried by Lessor. Lessor shall maintain liability insurance as described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional insured therein.

     8.3 Property Insurance — Building, Improvements and Rental Value.

          (a) Building and Improvements. Lessor shall obtain and keep in force a policy or policies of insurance in the name of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender insuring loss or damage to the Premises. The amount of such insurance shall be equal to the full replacement cost of the Premises, as the same shall exist from time to time, or the amount required by any Lender, but in no event more than the commercially reasonable and available insurable value thereof. Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee’s personal property shall be insured by Lessee under Paragraph 8.4. If the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood and/or earthquake unless required by a Lender), including coverage for debris removal and the enforcement of any Applicable Requirements requiring the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. If such insurance coverage has a deductible clause, the deductible amount shall not exceed $1,000 per occurrence.

          (b) Rental Value. Lessor shall also obtain and keep in force a policy or policies in the name of Lessor with loss payable to Lessor and any Lender, insuring the loss of the full Rent for one year with an extended period of indemnity for an additional 180 days (“Rental Value Insurance”). Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent otherwise payable by Lessee, for the next 12 month period.

          (c) Adjacent Premises. Lessee shall pay for any increase in the premiums for the property insurance of the Building and for the Common Areas or other buildings in the Project if said increase is caused by Lessee’s acts, omissions, use or occupancy of the Premises.

          (d) Lessee’s Improvements. Since Lessor is the Insuring Party, Lessor shall not be required to insure Lessee Owned Alterations and Utility Installations unless the item in question has become the property of lessor under the terms of this Lease.

     8.4 Lessee’s Property; Business Interruption Insurance.

          (a) Property Damage. Lessee shall obtain and maintain insurance coverage on all of Lessee’s personal property, Trade Fixtures, and Lessee Owned Alterations and Utility installations. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $1.000 per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall provide Lessor with written evidence that such insurance is in force.

          (b) Business Interruption. Lessee shall obtain and maintain loss of income and extra expense insurance in amounts as will reimburse Lessee for direct or indirect loss of earnings attributable to all perils commonly insured against by prudent lessees in the business of Lessee or attributable to prevention of access to the Premises as a result of such perils.

          (c) No Representation of Adequate Coverage. Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee’s property, business operations or obligations under this Lease.

		/s/ (ILLEGIBLE)
		/s/ (ILLEGIBLE)
Initials	Page 5 of 12	Initials

© 1999 - AIR Commercial Real Estate Association

     8.5 Insurance Policies. Insurance required herein shall be by companies duly licensed or admitted to transact business in the state where the Premises are located, and maintaining during the policy term a “General Policyholders Rating” of at least B+, V, as set forth in the most current issue of “Best’s Insurance Guide”, or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certified copies of policies of such insurance or certificates evidencing the existence and amounts of the required insurance. No such policy shall be cancelable or subject to modification except after 30 days prior written notice to Lessor. Lessee shall, at least 30 days prior to the expiration of such policies, furnish Lessor with evidence of renewals or “insurance binders” evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fail to procure and maintain the insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same.

     8.6 Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages against the other, for loss of or damage to its property arising out of or incident to the perils required to be insured against herein. The effect of such releases and waivers is not limited by the amount of insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby.

     8.7 Indemnity. Except for Lessor’s gross negligence or willful misconduct, Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor and its agents, Lessor’s master or ground lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, liens, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or liabilities arising out of, involving, or in connection with, the use and/or occupancy of the Premises by Lessee. If any action or proceeding is brought against Lessor by reason of any of the foregoing matters, Lessee shall upon notice defend the same at Lessee’s expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or indemnified.

     8.8 Exemption of Lessor from Liability. Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee’s employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Building, or from other sources or places. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of Lessor nor from the failure of Lessor to enforce the provisions of any other lease in the Project. Notwithstanding Lessor’s negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee’s business or for any loss of income or profit therefrom.

9. Damage or Destruction.

     9.1 Definitions.

          (a) “Premises Partial Damage” shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations, which can reasonably be repaired in 3 months or less from the date of the damage or destruction, and the cost thereof does not exceed a sum equal to 6 month’s Base Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total.

          (b) “Premises Total Destruction” shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot reasonably be repaired in 3 months or less from the date of the damage or destruction and/or the cost thereof exceeds a sum equal to 6 month’s Base Rent. Lessor shall notify Lessee in writing within 30 days from the date of the damage or destruction as to whether or not the damage is Partial or Total.

          (c) “Insured Loss” shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits involved.

          (d) “Replacement Cost” shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation.

          (e) “Hazardous Substance Condition” shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the Premises.

     9.2 Partial Damage — Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor’s election, make the repair of any damage or destruction the total cost to repair of which is $5,000 or less, and, in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute the shortage in proceeds as and when required to complete said repairs. In the event, however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within 10 days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said 10 day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10 days thereafter to: (i) make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and effect, or (ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party.

     9.3 Partial Damage — Uninsured Loss. If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee’s expense), Lessor may either: (i) repair such damage as soon as reasonably possible at Lessor’s expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this Lease by giving written notice to Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective 60 days following the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within 10 days after receipt of the termination notice to give written notice to Lessor of Lessee’s commitment to pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance thereof within 30 days after making such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not make the required commitment, this Lease shall terminate as of the date specified in the termination notice.

     9.4 Total Destruction. Notwithstanding any other provision hereof, if a Premises Total Destruction occurs, this Lease shall terminate 60 days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right to recover Lessor’s damages from Lessee, except as provided in Paragraph 8.6.

     9.5 Damage Near End of Term. If at any time during the last 6 months of this Lease there is damage for which the cost to repair exceeds one month’s Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective 60 days following the date of occurrence of such damage by giving a written termination notice to Lessee within 30 days after the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a) exercising such option and (b) providing Lessor with any shortage in insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the date which is 10 days after Lessee’s receipt of Lessor’s written notice purporting to terminate this Lease, or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor’s commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the termination notice and Lessee’s option shall be extinguished.

     9.6 Abatement of Rent; Lessee’s Remedies.

          (a) Abatement. In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required for the repair, remediation or restoration of such damage shall be abated in proportion to the degree to which Lessee’s use of the Premises is impaired, but not to exceed the proceeds received from the Rental Value insurance. All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided herein.

          (b) Remedies. If Lessor shall be obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within 90 days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee’s election to terminate this Lease on a date not less than 60 days following the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within 30 days thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or restoration is commenced within such 30 days, this Lease shall continue in full force and effect. “Commence” shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever first occurs.

     9.7 Termination; Advance Payments. Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable

		(ILLEGIBLE)
		(ILLEGIBLE)
Initials	Page 6 of 12	Initials

© 1999 - Air Commercial Real Estate Association

adjustment shall be made concerning advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee’s Security Deposit as has not been, or is not then required to be, used by Lessor.

     9.8 Waive Statutes. Lessor and lessee agree that the terms of this Lease shall govern the effect of any damage to or destruction of the Premises with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent inconsistent herewith.

10. Real Property Taxes.

     10.1 Definition. As used herein, the term “Real Property Taxes” shall include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal income or estate taxes); Improvement bond; and/or license fee imposed upon or levied against any legal or equitable interface of Lessor in the Project. Lessor’s right to other income therefrom, and/or Lessor’s business of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to the Project address and where the proceeds so generated are to be applied by the city. county or other local taxing authority of a jurisdiction within which the Project is located. The term “Real Property Taxes” shall also include any tax, fee, levy, assessment or charge, or any increase therein, imposed by reason of events occurring during the term of this Lease, including but not limited to a change in the ownership of the Project or any portion thereof or a change in the improvements thereon. In calculating Real Property Taxes for any calender year, the Real Property Taxes for any real estate tax year shall be included in the calculation of Real Property Taxes for such calender year based upon the number of days which such calender year and tax year have in common.

     10.2 Payment of Taxes. Lessor shall pay the Real Property Taxes applicable to the Project, and except as otherwise provided in Paragraph 10.3, any such amounts shall be included in that calculation of Common Area Operating Expenses in accordance with the provisions of Paragraph 4.2.

     10.3 Additional Improvements. Common Area Operating Expenses shall not include Real Property Taxes specified in the tax assessor’s records and work sheets as being caused by additional improvements placed upon the Project by other lessees or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at the time Common Area Operating Expenses are payable under Paragraph 4.2, the entirely of any increase in Real Property Taxes if assessed solely by reason of Alterations. Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee’s request. improvements

     10.4 Joint Assessment. If the Building is not separately assessed, Real Property Taxes allocated to the Building shall be an equitable proportion of the Real Property Times for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor’s work sheets or such other information as may be reasonably available. Lessor’s reasonable determination thereof, in good faith, shall be conclusive.

     10.5 Personal Property Taxes. Lessee shall pay prior to delinquency all taxes assessed against and levied upon Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee contained in the Premises. When possible, Lessee shall cause its Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee’s said property shall be assessed with Lessor’s real property, Lessee shall pay Lessor the taxes attributable to Lessee’s property within 10 days after receipt of a written statement setting forth the taxes applicable to Lessee’s property.

11. Utilities. Lessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and other utilities and services supplied to the Premises, together with any taxes thereon. Notwithstanding the provisions of Paragraph 4.2, if at any time in Lessor’s sole Judgment, Lessor determines that Lessee is using a disproportionate amount of water, electricity or other commonly metered utilities, or that Lessee is generating such a large volume of trash as to require an increase in the size of the dumpster and/or an increase in the number of times per month that the dumpster is emptied, then Lessor may Increase Lessee’s Base Rent by an amount equal to such increased costs.

12. Assignment and Subletting.

     12.1 Lessor’s Consent Required.

            (a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, “assign or assignment”) or sublet all or any part of Lessee’s interest in this Lease or in the Premises without Lessor’s prior written consent.

            (b) A change in the control of Lessee shall constitute an assignment requiring consent. The transfer, on a cumulative basic, of 25% or more of the voting control of Lessee shall constitute a change in control for this purpose.

            (c) The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee’s assets occurs, which results or will result in a reduction of the Net Worth of Lessee by an amount greater than 25% of such Net Worth as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or is greater, shall be considered an assignment of this Lease to which Lessor may withhold its consent. “Net Worth of Lessee” shall mean the net worth of Lessee (excluding any guarentors) established under generally accepted accounting principles.

            (d) An assignment or subletting without consent shall, at Lessor’s option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable Breach without the necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a noncurable Breach. Lessor may either, (i) terminate this Lease, or (ii) upon 30 days written notice, increase the monthly Base Rent to 110% of the Base Rent then in effect. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to 110% of the price previously In effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the remainder of the Lease term shall be increased to 110% of the scheduled adjusted rent.

            (e) Lessee’s remedy for any breach of Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief.

     12.2 Terms and Conditions Applicable to Assignment and Subletting.

          (a) Regardless of Lessor’s consent. no assignment or subletting shall: (i) be effective without the express written assumption by
such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be performed by Lessee.

          (b) Lessor may accept Rent or performance of Lessee’s obligations from any person other than Lessee pending approval or
disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor’s right to exercise its remedies for Lessee’s Default or Breach.

          (c) Lessor’s consent to any assignment or subletting shell not constitute a consent to any subsequent assignment or subletting.

          (d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee’s obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor’s remedies against any other person or entity responsible therefore to Lessor, or any security held by Lessor.

          (e) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor’s determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Promises, if any, together with a fee of $1,000 or 10% of the current monthly Base Rent applicable to the portion of the Premises which is the subject of the proposed assignment or sublease, whichever is greater, as consideration for Lessor’s considering and processing said request. Lessee agrees to provide Lessor with such other or additional information and/or documentation as may be reasonably requested.

          (f) Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment or entering into such sublease, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other then such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing.

          (g) Lessor’s consent to any assignment or subletting shall not transfer to the assignee or sublessee any Option granted to the original Lessee by this Lease unless such transfer is specifically consented to by Lessor in writing. (See Paragraph 39.2)

     12.3 Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein:

          (a) Lessee hereby assigns and transfers to Lessor all of Lessee’s interest in all Rent payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee’s obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee’s obligations. Lessee may collect said Rent Lessor shall not, by reason of the foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee’s obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee’s obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary.

          (b) In the event of a Breach by Lessee, Lessor may, at its option, require sublessee to inform to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any prior Defaults or Breaches of such sublessor.

          (c) Any matter requiring the consent of the sublessor under a sublease shall also require the consent of Lessor

          (d) No sublessee shall further assign or sublet all or any part of the Premises without Lessor’s prior written consent.

          (e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any, specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Default cured by the sublessee.

13 Default; Breach: Remedies.

     13.1 Default: Breach. A “Default” is defined as a failure by the Lessee to comply with or perform any of the terms, covenants, conditions or

		[ILLEGIBLE]
Initials		Initials
© 1998 - - AIR Commercial Real Estate Association		FORM MTN-2-2/99E
	Page 7 of 12

Rules and Regulations under this Lease. A “Breach” is defined as the occurrence of one or more of the following Defaults, and the failure of Lessee to euro such Default within any applicable grace period:

          (a) The abandonment of the Premises; or the vacating of the Premises without providing a commercially reasonable level of security, or where the coverage of the property insurance described in Paragraph 5.3 is jeopardized as a result thereof, or without providing reasonable assurances to minimize potential vandalism.

          (b) The failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Leasee hereunder, whether to Lessor or to a third party, when due to provide reasonable evidence of insurance or surety bond, or to fulfill any obligation under this Lease which endangers or threatons life or property, where such failure continues for a period of 3 business days following written notice to Leases.

          (c) The failure by Lessee to provide (i) reasonable written evidence of compliance with Applicable Requirements, (ii) the service contracts, (iii) the rescission of an unauthorized assignment or subletting, (iv) an Estoppel Certificate, (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any document requested under Paragraph 41 (easements), or (viii) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of 10 days following written notice to Lessee.

          (d) A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 2.8 hereof, other than those described in subparagraphs 13.1(a), (b) or (c) above, where such Default continues for a period of 30 days after written notice; provided, however, that if the nature of Lessee’s Default is such that more than 30 days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said 30 day period and thereafter diligently prosecutes such cure to completion.

          (e) The occurrence of any of the following events: (i) the making of any general arrangement or assignment for the benefit of creditors; (ii) becoming a “debtor” as defined in 11 U.S.C. § 101 or any successor statule thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days): (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where possession is not restored to Lessee within 30 days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where such seizure is not discharged within 30 days; provided, however, in the event that any provision of this subparagraph (e) is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions.

          (f) The discovery that any financial statement of Lessee or of any Guarantor given to Lessor was materially false.

          (g) If the performance of Lessee’s obligations under this Lease is guaranteed; (i) the death of a Guarantor, (ii) the termination of B Guarantor’s liability with respect to this Lease other than in accordance with the terms of such guaranty, (iii) a Guarantor’s becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’s refusal to honor the guaranty, or (v) a Guarantor’s breach of its guaranty obligation on an anticipatory basis, and Lessee’s failure, within 60 days following written notice of any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease.

     13.2 Remedies. If Lessee fails to perform any of its affirmative duties or obligations, within 10 days after written notice (or in case of an emergency, without notice). Lessor may, at its option, perform such duty or obligation on Lesses’s behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licensees, permits or approvals. The costs and expenses of any such performance by Lessor shall be due and payable by Lessee upon receipt of invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its option, may require all future payments to be made by Lessee to be by cashier’s check. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach:

          (a) Terminate Lessee’s right to possession of the Premises by any lawful means, in which case this Lease shall terminate end Lessee shall immediately surrender possession to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the time of termination: (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided. (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the decriment proximately caused by the Lessee’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom. Including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys’ fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent. Efforts by Lessor to mitigate damages caused by Lessee’s Breach of this Lease shall not waive Lessor’s right to recover damages under Paragraph 12. If termination of this Lease is obtained through the provisional remedy of unlawful detainer. Lessor shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and grace period required under Paragraph 13.1 was not previously given, a notice to pay rent or quit, or to perform or quit given to Lessee under the unlawful detainer statute shall also constitute the notice required by Paragraph 13.1. In such case, the applicable grace period required by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute.

          (b) Continue the Lease and Lessee’s right to possession and recover the Rent as it becomes due. In which event Lessee may sublet or assign, subject only to reasonable limitations. Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor’s interests, shall not constitute a termination of the Lessee’s right to possession.

          (c) Pursue any other remedy now or hereafter available under the laws or judicial decisions of the state wherein the Premises are located. The expiration or termination of this Lease and/or the termination of Lessee’s right to possession shall not relieve Lessee from liability under any Indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee’s occupancy of the Premises.

     13.3 Inducement Recapture. Any agreement for free or abated rent or other charges, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration for Lessee’s entering into this Lease, all of which concessions are hereinafter referred to as “Inducement Provisions”, shall be deemed conditioned upon Lessee’s full and faithful performance of all of the terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor under such an Inducement Provision shall be Immediately due and payable by Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this paragraph shall not be deemed a waiver by Lessor of the provisions of this paragraph unless specifically so stated in writing by Lessor at the time of such acceptance.

     13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs Include, but are not limited to, processing and accounting charges, and late charges which may be Imposed upon Lessor by any Lendor. Accordingly, If any Rent shall not be received by Lessor within 5 days after such amount shall be due. then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to 10% of each such overdue amount or 1100. whichever is greater. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of such late payment. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee’s Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for 3 consecutive Installments of Base Rent, then notwithstanding any provision of this Lease to the contrary Base Rent shall, at Lessor’s option, become due and payable quarterly in advance.

     13.5 Interest. Any monetary payment due Lessor hereunder other than late charges, not received by Lessor. When due as to scheduled payments (such as Base Rent) or within 30 days following the data on which it was due for non-scheduled payment, shall bear interest from the date when due as to scheduled payments, or the 31st day after it was due as to non-scheduled payments. The interest (“lnterest”) charged shall be equal to the prime rate reported in the Wall Street Journal as published closest prior to the date when due plus 4%, but shall not exceed the maximum rate allowed by law. Interest is payable in addition to the potential late charge provided for in Paragraph 13.4.

13.6 Breach by Lessor.

          (a) Notice of Breach. Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than 30 days after receipt by Lessor, and any Lender whose name and address shall have been furnished Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed, provided, however, that if the nature of Lessor’s obligation is such that more than 30 days are reasonably required for its performance, then Lessor shall not be in breach If performance is commenced within such 30 day period and thereafter diligently pursued to completion.

          (b) Performance by Lessee on Behalf of Lessor. In the event that neither Lessor nor Lender cures said breach within 30 days after receipt of said notice, or if having commenced said cure they do not diligently pursue if to completion, then Lessee may elect to cure said breach at Lessee’s expense and offset from Rent an amount equal to the greater of one month’s Base Rent or the Security Deposit, and to pay an excess of such expense under protest, reserving Lessee’s right to reimbursement from Lessor. Lessee shall document the cost of said cure and supply said documentation to lessor.

14. Condemnation. If the premises or any portion thereof are taken under the power of aminent domain or sold under the threal of the excercise of said power (Colloctively “Condemnation”) this lease shall terminate as to the part taken as of the date the authority takes title or possesion, whichever first occurs. If more than 10% of the floor area of the Unit, or more man 25% of Lessee’s Reserved Parking spaces, is taken by Condemnation

		[ILLEGIBLE]
Initials		Initials
© 1998 - - AIR Commercial Real Estate Association		FORM MTN-2-2/99E
	Page 8 of 12

Lessee may, at Lessee’s option, to be exercised in writing within 10 days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within 10 days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Condemnation awards and/or payments shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be entitled to any compensation for Lessee’s relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered the property of the Lessee and Lessee shall be entitled to any and all compensation which is payable therefor. In the event that this Lease is not terminated by reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such Condemnation.

15. Brokerage Fees.

     15.1 Additional Commission. In addition to the payments owed pursuant to Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in writing, Lessor agrees that: (a) if Lessee exercises any Option, (b) if Lessee acquires from Lessor any rights to the Premises or other premises owned by Lessor and located within the Project, (c) if Lessee remains in possession of the Premises, with the consent of Lessor, after the expiration of this Lease, or (d) if Base Rent is increased, whether by agreement or operation of an escalation clause herein, then, Lessor shall pay Brokers a fee in accordance with the schedule of the Brokers in effect at the time of the execution of this Lease.

     15.2 Assumption of Obligations. Any buyer or transferee of Lessor’s interest in this Lease shall be deemed to have assumed Lessor’s obligation hereunder. Brokers shall be third party beneficiaries of the provisions of Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to Brokers any amounts due as and for brokerage fees pertaining to this Lease when due, then such amounts shall accrue interest. In addition, if Lessor fails to pay any amounts to Lessee’s Broker when due, Lessee’s Broker may send written notice to Lessor and Lessee of such failure and if Lessor fails to pay such amounts within 10 days after said notice, Lessee shall pay said monies to its Broker and offset such amounts against Rent. In addition, Lessee’s Broker shall be deemed to be a third party beneficiary of any commission agreement entered into by and/or between Lessor and Lessor’s Broker for the limited purpose of collecting any brokerage fee owed.

     15.3 Representations and Indemnities of Broker Relationships. Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder (other than the Brokers, if any) in connection with this Lease, and that no one other than said named Brokers is entitled to any commission or finder’s fee in connection herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, attorneys’ fees reasonably incurred with respect thereto.

16. Estoppel Certificates.

          (a) Each Party (as “Responding Party”) shall within 10 days after written notice from the other Party (the “Requesting Party”) execute, acknowledge and deliver to the Requesting Party a statement in writing in form similar to the then most current “Estoppel Certificate” form published by the AIR Commercial Real Estate Association, plus such additional information, confirmation and/or statements as may be reasonably requested by the Requesting Party.

          (b) If the Responding Party shall fail to execute or deliver the Estoppel Certificate within such 10 day period, the Requesting Party may execute an Estoppel Certificate stating that: (i) the Lease is in full force and effect without modification except as may be represented by the Requesting Party, (ii) there are no uncured defaults in the Requesting Party’s performance, and (iii) if Lessor is the Requesting Party, not more than one month’s rent has been paid in advance. Prospective purchasers and encumbrancers may rely upon the Requesting Party’s Estoppel Certificate, and the Responding Party shall be estopped from denying the truth of the facts contained in said Certificate.

          (c) If Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee and all Guarantors shall deliver to any potential lender or purchaser designated by Lessor such financial statements as may be reasonably required by such lender or purchaser, including but not limited to Lessee’s financial statements for the past 3 years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth.

17. Definition of Lessor. The term “Lessor” as used herein shall mean the owner or owners at the time in question of the fee title to the Premises, or, if this is a sublease, of the Lessee’s interest in the prior lease. In the event of a transfer of Lessor’s title or interest in the Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. Notwithstanding the above, and subject to the provisions of Paragraph 20 below, the original Lessor under this Lease, and all subsequent holders of the Lessor's interest in this Lease shall remain liable and responsible with regard to the potential duties and liabilities of Lessor pertaining to Hazardous Substances as outlined in Paragraph 6.2 above.

18. Severability. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.

19. Days. Unless otherwise specifically indicated to the contrary, the word “days” as used in this Lease shall mean and refer to calendar days.

20. Limitation on Liability. Subject to the provisions of Paragraph 17 above, the obligations of Lessor under this Lease shall not constitute personal obligations of Lessor, the individual partners of Lessor or its or their individual partners, directors, officers or shareholders, and Lessee shall look to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against the individual partners of Lessor, or its or their individual partners, directors, officers or shareholders, or any of their personal assets for such satisfaction.

21. Time of Essence. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under
this Lease.

22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the use, nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. The liability (including court costs and attorneys’ fees), of any Broker with respect to negotiation, execution, delivery or performance by either Lessor or Lessee under this Lease or any amendment or modification hereto shall be limited to an amount up to the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker’s liability shall not be applicable to any gross negligence or willful misconduct of such Broker.

23. Notices.

     23.1 Notice Requirements. All notices required or permitted by this Lease or applicable law shall be in writing and may be delivered in person (by hand or by courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party’s signature on this Lease shall be that Party’s address for delivery or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee’s taking possession of the Premises, the Premises shall constitute Lessee’s address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate in writing.

     23.2 Date of Notice. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given 48 hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantee next day delivery shall be deemed given 24 hours after delivery of the same to the Postal Service or courier. Notices transmitted by facsimile transmission or similar means shall be deemed delivered upon telephone confirmation of receipt (confirmation report from fax machine is sufficient), provided a copy is also delivered via delivery or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.

24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or of any other term, covenant or condition hereof. Lessor’s consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor’s consent to, or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce the provision or provisions of this Lease requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment.

25. Disclosures Regarding The Nature of a Real Estate Agency Relationship.

          (a) When entering into a discussion with a real estate agent regarding a real estate transaction, a Lessor or Lessee should from the outset understand what type of agency relationship or representation it has with the agent or agents in the transaction. Lessor and Lessee acknowledge being advised by the Brokers in this transaction, as follows:

               (i) Lessor’s Agent. A Lessor’s agent under a listing agreement with the Lessor acts as the agent for the Lessor only. A Lessor’s agent or subagent has the following affirmative obligations: To the Lessor: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Lessor. To the Lessee and the Lessor: (a) Diligent exercise of reasonable skills and care in performance of the agent’s duties. (b) A duty of honest and fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above.

		/s/ (ILLEGIBLE)
		/s/ (ILLEGIBLE)
Initials	Page 9 of 12	Initials

© 1999 - AIR Commercial Real Estate Association

                    (ii) Lessee's Agent. An agent can agree to act as agent for the Lessee only. In these situations, the agent is not the Lessor’s agent, even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Lessor. An agent acting only for a Lessee has the following affirmative obligations. To the lessee: A fiduciary duty of utmost care, integrity, honesty and loyalty in dealings with the Lessee. To the Lessee and the Lessor: (a) Diligent exercise of reasonable skins and care in performance of the agent’s duties. (b) A duty of honest and fair dealing and good faith. (c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above.

                    (iii) Agent Representing Both Lessor and Lessee. A real estate agent, either acting directly or through one or more associates licenses, can legally be the agent of both the Lessor and the Lessee in a transaction, but only with the knowledge and consent of both the Lessor and the Lessee. In a dual agency station, the agent has the following affirmative obligations to both the Lessor and the Lessee: (a) A fiduciary duty of utmost care integrity, honesty and loyalty in the dealings with either Lessor or the Lessee, (b) Other duties to the Lessor and the Lessee as stated above in subparagraph (i) or (ii). In representing both Lessor and Lessee, the agent may not without the express permission of the respective Party disclose to the other Party that the lessor will accept rent in an amount less than that indicated in the listing or that the Lessee is willing to pay a higher rent than that offered. The above duties of the agent in a real estate transaction do not relieve a Lessor or Lessee from the responsibility to protect their own interests. Lessor and Lessee should carefully read all agreements to assure that they adequately express their understanding of the transaction. A real estate agent is a person qualified to advise about real estate, if legal or tax advice is desired, consult a competent professional.

                (b) Brokers have no responsibility with respect to any default or breech hereof by either Party. The liability (including court costs and attorneys’ fees), for the new Broker, of any broker with respect to any breach of duty, error or omission relating to this Lease shall not exceed the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker’s liability shall not be applicable to any gross negligence or willful misconduct of such Broker. (c) Buyer and Seller agree to identify to Brokers as ""Confidential'' any communication or information given Brokers that is considered by such Party to be confidential.

     26. No Right To Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or termination of this Lease. In the event that Lessee holds over, then the Base Rent shall be increased to 150% of the Base Rent applicable immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee.

     27. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.

     28. Covenant and Conditions: Construction of Agreement. All provisions of this Lease to be observed or performed by lessee are both covenants and conditions, in construing this Lease, all headings end titles are for the convenience of the Parties only and shall not be considered a part of this Lease. Whenever required by the context, the singular shall include the plural and vice versa. This Lease shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if both Parties had prepared it.

     29. Binding Effect; Choice of law. This Lease shall be binding upon the parties, their personal representatives, successors and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shell be initiated in the county in which the Premises are located.

     30. Subordination; Attornment; Non-Disturbance.

          30.1 Subordination. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, “Security Device”), now of hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, end extensions thereof. Lessee agrees that the holders of any such Security Devices (in this Lease together referred to as Lender”) shall have no liability or obligation to perform any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device by giving written notice thereof to Lessee, whereupon this Lease and such options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof.

          30.2 Attornment. In the event that Lessor transfers title to the Premises, or the Premises are acquired by another upon the foreclosure or termination of a Security Device to which this Lease is subordinated (i) Lessee shall, subject to the non-disturbance provisions of Paragraph 30.3. attorn to such new owner, and upon request, enter into a new lease, containing all of the terms and provisions of this Lease, with such new owner for the remainder of the term hereof, or, at the election of such new owner, this Lease shall automatically become a new Lease between Lessee and such new owner, upon all of the terms end conditions hereof, or the remainder of the term hereof, end (ii) Lessor shall thereafter be relieved of any further obligations hereunder and such new owner shall assume all of Lessor’s obligations hereunder, except that such new owner shall not (a) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership: (b) be subject to any offsets or defenses which Lessee might have against any prior lessor, (c) be bound by prepayment of more than one month’s rent, or (d) be liable for the return of any security deposit paid to any prior lessor.

          30.3 Non-Disturbance. With respect to Security Devices entered into by Lessor after the execution of this Lease, Lessee’s subordination of this Lessee shall be subject to receiving a commercially reasonable non-disturbance agreement (a) “Non-Disturbance Agreement”) from the Lender which Non-Disturbance Agreement provides that Lessee’s possession of the Premises, and this Lease, Including any options to extend the term hereof, will not be disturbed so long as Lessee is not in Breach hereof and attorns to the record owner of the Premises. Further, within 60 days after the execution of this Lease, Lessor shall use its commercially reasonable efforts to obtain a Non-Disturbance Agreement from the holder of any pre-existing Security Device which is secured by the Premises, in the event that Lessor is unable to provide the Non-Disturbance Agreement within said 60 days, then Lessee may. at Lessee’s option, directly contact Lender and attempt to negotiate for the execution and delivery of a Non-Disturbance Agreement.

          30.4 Sell-Executing. The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises, Lessee and Lessor shall execute such further witting as may be reasonably required to separately document any subordination, allotment and/or Non-Disturbance Agreement provided for herein.

31. Attorneys’ Fees. If any Party or Broker brings an action or proceeding involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys’ fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term, “Prevailing Party” shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys’ fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys’ fees reasonably incurred. In addition, Lessor shall be entitled to attorneys’ fees, costs and expenses incurred in the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a reasonable minimum per occurrence for such services and consultation).

32. Lessor’s Access; Showing Premises; Repairs. Lessor and Lessor’s agents shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times for the purpose of showing the same to prospective purchasers, lenders, or tenants, and making such alterations, repairs, improvements or additions to the Premises as Lessor may deem necessary. All such activities shall be without abatement of rent or liability to Lessee. Lessor may at any time place on the Premises any ordinary “For Sale” signs and Lessor may during the last 6 months of the term hereof place on the Premises any ordinary “For Lease” signs. Lessee may at any time place on the Premises any ordinary “For Sublease” sign.

33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without Lessor’s prior written consent.
Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction.

34. Signs. Except for ordinary “For Sublease” signs which may be placed only on the Premises, Lessee shall not place any sign upon the Project without Lessor’s prior written consent. All signs must comply with all Applicable Requirements.

35. Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, that Lessor may elect to continue any one or all existing subtenancies. Lessor’s failure within 10 days following any such event to elect to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor’s election to have such event constitute the termination of such interest.

36. Consents. Except as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed. Lessor’s actual reasonable costs and expenses (including but not limited to architects’, attorneys’, engineers’ and other consultants’ fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents to an assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefor. Lessor’s consent to any act, assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessor’s consent shall not preclude the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. In the event that either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such determination, the determining party shall furnish its reasons in writing and in reasonable detail within 10 business days following such request.

37. Guarantor.

     37.1 Execution. The Guarantors, if any, shall each execute a guaranty in the form most recently published by the AIR Commercial Real
Estate Association, and each such Guarantor shall have the same obligations as Lessee under this Lease.

     37.2 Default. It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon request to provide: (a) evidence of the

		/s/ (ILLEGIBLE)
		/s/ (ILLEGIBLE)
Initials	Page 10 of 12	Initials

©1999 - AIR Commercial Real Estate Association

execution of the guaranty. Including the authority of the party signing on Guarantor’s behalf to obligate Guarantor, and in the case of a corporate Guarantor, a certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b) current financial statements, (c) and Estoppel Certificate, or (d) written confirmation that the guaranty is still in effect.

38. Qulet Possession. Subject to payment by Lessee of the Rent and performance of all of the covenants, conditions and provisions of Lessee’s part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof.

39. Options. If Lessee is granted an option, as defined below than the following provisions shall apply.

     39.1 Definition. “Option” shall mean; (a) the right to extend the term of or renew this Lease or to extend or renew any lease that Lessee has on other properly of Lessor; (b) the right of first refusal of first offer to lease either the Premisses or other properly of Lessor; (c) the right to purchase or the right of first refusal to purchase the Premises or other property of Lessor.

     39.2 Options Personal to Original Lessee. Any Option granted to Lessee in this Lease is personal to the original Lessee and cannot be assigned or exercised by anyone other than said original Lessee and only while the original Lessee is in full possession of the Premises and, if requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning of subletting.

     39.3 Multiple Options. In the event that Lessee has any multiple Options to extend or renew this Lease, a later Option cannot be exercised unless the prior Option have been validly exercised.

     39.4 Effect of Default on Options.

          (a) Lessee shall have no right to exercise an Option: (i) during the period commencing with the giving of any notice of Default and continuing until said Default is cured, (ii) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has been given 3 or more notices of separate Default, whether or not the Defaults are cured, during the 12 month period immediately preceding the exercise of the Option.

          (b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee’s inability to exercise an Option because of the provisions of Paragraph 39.4(a).

          (c) An Option shall terminate and be of no further force of effect, notwithstanding Lessee’s due and timely exercise of the Option, If, after such exercise and prior to the commencement of the extended term, (i) Lessee fails to pay Rent for a period of 30 days after such Rent becomes due (without any necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee 3 or more notices of separate Default during any 12 month period, whether or not the Defaults are cured, or (iii) if Lessee commite a Breach of this Lease.

40. Security Measures. Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provides same. Lessee assumes all responsibility for the protection of the Premises, Lessee. Its agents and invitees and their property from the acts of third parties.

41. Reservations, Lessor reserves the right; (i) to grant, without the consent or joinder of Lessee, such easements, rights and dedications that Lessor deems necessary, (ii) to cause the recordation of parcel maps and restrictions, and (iii) to create and/or install new utility raceways, so long as such easements, rights, dedications maps, restrictions, and utility raceways do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate such rights.

42. Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment “under protest” and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay.

43. Authority. If either Party hereto is a corporation, trust, limited liability company, partnership, or similar entity, each individual executing this Leases on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each party shall, within 30 days after request, deliver to the other party satisfactory evidence of such authority.

44. Conflict. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions.

45. Offer. Preparation of this Lease by either party or their agent and submission of same to the other Party shall not be deemed an other to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto.

46. Amendments. This Lease may be modified only in writing, signed by the other Parties in interest at the time of the modification. As long as they do not materially change Lessee’s obligations hereunder. Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises.

47. Multiple Parties. If more than one person or entity is named herein as either Lessor or Lessee, such multiple Parties shall have joint and several responsibility to comply with the terms of this Lease.

48. Waiver of Jury Trial. The Parties hereby value their respective rights to trial by jury in any action or proceeding involving the Property or arising out of the Agreement.

49. Mediation and Arbitration of Disputes. An addendum requiring the Mediation and/or the Arbitration of all disputes between the Parties and/or Brokers arising out of this Lease o is o is not attached to this Lease.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.

ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES, THE PARTIES ARE URGED TO:

1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THE LEASE.

2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE’S INTENDED USE.

WARNING: IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES ARE LOCATED.

The parties hereto have executed this Lease at the place and on the dates specified above their respective signatures.

Executed at:	CITY OF GARDEN GROVE	Executed at:
on:	3/16/05	on:
By LESSOR:		By LESSEE:
		Nara Bank
By:	/s/ Jac M Choi	By:
Name Printed:	Jac M. Choi	Name Printed:
Title:		Title:
By:	/s/ Henry C. Park	By:
Name Printed:	Henry C. Park	Name Printed:
Title:		Title:
Address:		Address:

		[ILLEGIBLE]
Initials		Initials
© 1998 - - AIR Commercial Real Estate Association		FORM MTN-2-2/99E
	Page 11 of 12

Telephone:	(949) 337-2363	Telephone:	(       )
Facsimile:	(949) 537-2191	Facsimile:	(       )
Federal ID No.	###-##-####	Federal ID No.

These forms are often modified to meet changing requirements of law and needs of the Industry. Always write or call to make sure you are utilizing the most current form: AIR Commercial Real Estate Association, 700 South Flower Street, Suite 600, Los Angeles, CA 90017. (213) 887-8777.

©Copyright 1999 By AIR Commercial Real Estate Association,
All rights reserved,
No part of these works may be reproduced in any form without permission in writing.

SEND PAYMENT TO:

CENTRAL PLAZA SHOPPING CENTER
ATTN: JAE H. CHOI
27525 PUERTA REAL, # 100-224
MISSION VIEJO, CA 92691
TEL: 949-337-2363

	[ILLEGIBLE]
	[ILLEGIBLE]
Initials	Initials

©1999 - AIR Commercial Real Estate Association

Page 12 of 12

ADDENDUM TO LEASE

     This Addendum to Lease is made and executed concurrently with the Standard Industrial/Commercial Multi-Tenant Lease – Net between Jae Choi and Henry Park (“Lessor”) and Nara Bank (“Lessee”), dated March 16, 2005 (“Lease”). The parties intend the provisions set forth in this Addendum to supersede and replace those in the Lease. In the event these provisions contradict or conflict with those set forth in the Lease, the parties agree that the provisions below are controlling.

50. Condemnation. If more than 25 percent (25%) of the Premises shall be taken or appropriated by any public or quasi-public authority under the power of eminent domain, either party shall have the right, at its option, within sixty (60) days of the date of condemning authority takes title or possession, whichever occurs first, to terminate the Lease upon thirty (30) days written notice. If either less than 25% is taken, or more than 25% is taken but neither party terminates the Lease, the minimum rent will be equitably reduced. In the event of any taking or appropriation, Lessor shall be entitled to any and all awards or settlement for the real property taken, including any value for the unexpired lease term (bonus value). Lessee shall have no claims against Lessor arising out of the condemnation. This provision does not prohibit Lessee from making claims against the condemning authority for any claim for the cost of improvements to the Premises, any fixtures or equipment, lost business goodwill or relocation costs. Lessor shall promptly advise Lessee of any condemnation action commenced against the Premises.

51. Disclosures to Lessee. Lessee acknowledges that Lessor has disclosed, and that Lessee is informed and aware of the planned Brookhurst Triangle Project, the Garden Grove Agency for Community Development’s potential interest in the property and the Premises, and the potential impacts the Project and Agency’s interests may have on the property and the Premises. Lessee acknowledges that Lessor has met any and all obligations to provide Lessee with information on the activities of the Garden Grove Agency for Community Development or the status of the Brookhurst Triangle Project. Lessee assumes responsibility for keeping itself informed of any further activities involving any potential condemnation of the property or Premises.

52. No Representations by Lessor. Lessee acknowledges that Lessor is not making and has not at any time made any representations of any kind or character, expressed or implied, oral or written, concerning: (i) the Brookhurst Triangle Project, (ii) the activities of the Garden Grove Agency for Community Development, (iii) the likelihood of condemnation or impacts to the property or Premises as a result of condemnation activities by any public or quasi-public agency. Lessee has not relied and will not rely on, and Lessor is not liable for or bound by, any express or implied warranties, guarantees, statements, representations, or information pertaining to any potential condemnation activities involving the property or Premises made or furnished by Lessor, its property manager, broker or other agent representing Lessor.

53. Due Diligence. Lessee acknowledges and agrees that Lessor has afforded Lessee, and that Lessee has had a full opportunity to conduct and has conducted an investigation concerning: (i) the Brookhurst Triangle Project, (ii) the activities of the Garden Grove Agency for Community Development, (iii) the likelihood of condemnation impacts to the property or Premises as a result of condemnation activities by any public or quasi-public agency.

[ILLEGIBLE]

54. Use. The Premises may be used for or as General offices, including, without limitation, to offer banking services and marketing of any other financial services or investment products, including insurance products, or for any other legal purpose.

55. Option to Extend. Provided that (i) Lessee is not then in material default under the Lease and (ii) Lessee, or an assignee or sub lessee, is then occupying the Premises, Lessee shall have two (2) separate and consecutive options to extend the Term for a period of five (5) years each. Upon the proper and timely exercise of the option to extend (as hereinafter provided), and provided that Lessee is not in default under this Lease as of the end of the initial Term as it applies to the Premises, shall be extended for five (5) years. The option shall be exercised by Lessee upon receipt of prior written notice by Landlord not less than ninety (90) days prior to the expiration of the initial Term stating that Tenant is exercising its option.

56. Annual Rent Adjustment. Base Rent shall increase annually in the amount of 3% throughout the initial term of the lease and any exercised option periods, thereafter.

57. Tenant Improvements. Lessor shall deliver the Premises to Lessee in a demised “broom clean” “as is” condition. All electrical, plumbing, HVAC, and other related systems shall be in good repair to support the Premises, and Lessor hereby agrees to maintain, at its sole cost and expense, all of the aforementioned systems in good repair during the first two years of the Lease Term. Lessee, within ninety (90) days following its possession of the Premises, shall provide a written notice to Lessor describing, in detail, any and all alleged defects. If written notice is not timely given, Lessee shall be deemed to have been satisfied with, and accepted, the Premises. If a written notice is given, Lessor will use its best efforts to promptly correct such defects within a reasonable time period. Lessee, at its sole option, may demolish existing tenant improvements and install teller counters, a vault, a night depository and up to two through-the-wall ATMS in the Premises. All tenant improvements constructed by Lessee shall be approved in writing by Lessor prior to commencement; such approval not to be unreasonably withheld, delayed, or conditioned. Should Lessee install a vault, it will be Lessee’s sole option whether to remove the vault.

58. Signage. Lessee, at its sole expense, shall have the right to place its signs on the Premises and be permitted to erect signage subject to reasonable approval by Lessor and the appropriate governmental bodies. Lessee’s ATMs shall have signage consistent with its overall ATM sign program. In addition, Lessee shall have the right to place a sign for any approved monument or pylon signs, if such monument or pylon signs are legally allowed. Lessee shall also be entitled to place its signs on or about the Premises at any locations which Lessee reasonably believes are likely to be the most beneficial for its business and marketing objectives.

59. Exclusivity. During the initial term and the term of any exercised options, Lessee is to be granted the exclusive privilege to operate a bank and a through-the-wall ATM at Central Plaza Shopping Center.

60. Assignment & Subletting. Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber or sublet all or any part of Lessee’s interest in this Lease or in the Premises without Lessor’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Lessee may assign or sublet the Premises, or any portion thereof, without Lessor’s consent, to any corporation which controls, is controlled by or is under common control with Lessee, or to any corporation resulting from the merger or consolidation with Lessee, or to any person or entity which acquires all the

[ILLEGIBLE]

assets of Lessee as a going concern of the business that is being conducted on the Premises provided that before such assignment shall be effective, (a) said assignee shall assume, in full, the obligations of Lessee under this Lease and (b) Lessor shall be given written notice of such assignment and assumption.

61. Exemption of Lessor from Liability. Except for Lessor’s gross negligence or willful misconduct, Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee’s employees, contractor, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Building, or from other sources or places. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of Lessor nor from the failure of Lessor to enforce the provisions of any other lease in the Project. Notwithstanding Lessor’s negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee’s business or for any loss of income or profit therefrom.

Agreed, Accepted and Acknowledged this 16th day of March 2005.

NARA BANK

By:

Name:

Title:

By:

Name:

Title:

LESSOR
 

/s/ Jae Moon Choi  

Jae Moon Choi 

/s/ Henry Park  

Henry Park 

EX-10.3

EXHIBIT 10.3

SHOPPING CENTER LEASE

Name of Shopping Center: Bayside Plaza

Location of Shopping Center: Store Nos. 3 & 4, 209-01 Northern Blvd. Bayside, NY

Landlord: Gaseung Realty Corp.

Tenant: Nara Bank

Execution Date: January 25, 2005

i

TABLE OF CONTENTS

ARTICLE 1 PREMISES

1.01 Premises

ARTICLE 2 TERM OF LEASE

2.01 Commencement of Term and Commencement of Payment

2.02 Term of Lease

2.03 Surrender of Demised Premises

ARTICLE 3 RENT

3.01 Minimum Annual Rent

3.02 Delinquent Payments

3.03 Additional Rent

3.04 Place for Payments

ARTICLE 4 TAXES

4.01 Real Property Taxes

4.02 Tenant’s Taxes

ARTICLE 5 LANDLORD’S WORK AND TENANT’S WORK

5.01 Landlord’s Work

5.02 Tenant’s Work

ARTICLE 6 USE AND CONDUCT OF BUSINESS BY TENANT

6.01 Use of Premises

6.02 Tenant’s Operating Covenant

6.03 Other Business Practices

ARTICLE 7 COMMON AREAS AND OPERATING COSTS

7.01 Definition

ii

7.02 Intentionally Deleted

7.03 Use of Common Areas

7.04 Common Area Maintenance Charges

7.05 Intentionally Deleted

ARTICLE 8 UTILITIES CHARGES

8.01 Utility Charges

8.02 Miscellaneous Utility Provisions

ARTICLE 9 ALTERATIONS

9.01 Alterations by Tenant

9.02 Removal and Restoration by Tenant

ARTICLE 10 REPAIRS AND MAINTENANCE

10.01 Landlord’s Obligation to Repair

10.02 Tenant’s Obligation to Repair

10.03 Article Not Applicable to Fire or Condemnation

ARTICLE 11 INDEMNITY

11.01 Indemnity

ARTICLE 12 INSURANCE

12.01 Insurance

12.02 Waiver of Subrogation

12.03 Increase in Insurance Premiums

ARTICLE 13 DAMAGE BY FIRE OR OTHER HAZARD

13.01 Restoration of Premises

13.02 Restoration During Last 3 Years of Term

13.03 Tenant’s Obligation Upon Restoration

ARTICLE 14 EMINENT DOMAIN

iii

14.01 Eminent Domain

14.02 Landlord Entitled to Award

ARTICLE 15 EVENTS OF DEFAULT

15.01 Events of Default and Conditional Limitation

15.02 Landlord’s Remedies

ARTICLE 16 MECHANICS’ LIENS

16.01 Mechanics’ Liens

ARTICLE 17 ASSIGNMENTS AND SUBLETTING

17.01 Limitations on Tenant’s Rights

17.02 Effect of Landlord’s Consent

ARTICLE 18 COMPLIANCE WITH GOVERNMENTAL ORDERS

18.01 Tenant to Comply

18.02 Failure to Comply

18.03 Hazardous Material

18.04 Americans With Disabilities Act

ARTICLE 19 SUBORDINATION

19.01 Subordination

ARTICLE 20 ENTRY TO PREMISES

20.01 Entry to Demised Premises by Landlord

ARTICLE 21 NOTICES AND CERTIFICATES

21.01 Notices

21.02 Intentionally Deleted

21.03 Estoppel Certificate

ARTICLE 22 COVENANT OF QUIET ENJOYMENT

22.01 Covenant of Quiet Enjoyment

iv

ARTICLE 23 HOLDOVER

ARTICLE 24 LIMITATION ON LANDLORD’S PERSONAL LIABILITY

ARTICLE 25 TENANT’S ALLOCABLE SHARE

ARTICLE 26 FORCE MAJEURE

ARTICLE 27 RELOCATION OF TENANT

ARTICLE 28 CHANGES AND ADDITIONS

ARTICLE 29 ATTORNMENT BY TENANT

ARTICLE 30 INTENTIONALLY DELETED

ARTICLE 31 SURVIVAL OF TENANT’S OBLIGATIONS

ARTICLE 32 EFFECT OF LANDLORD’S NOTICE TO TERMINATE

ARTICLE 33 EFFECT OF CAPTIONS

ARTICLE 34 TENANT AUTHORIZED TO DO BUSINESS

ARTICLE 35 EXECUTION IN COUNTERPARTS

ARTICLE 36 SIGNS

ARTICLE 37 INTENTIONALLY DELETED

ARTICLE 38 ENTIRE AGREEMENT

ARTICLE 39 BROKERS

ARTICLE 40 INTENTIONALLY DELETED

ARTICLE 41 INTENTIONALLY DELETED

ARTICLE 42 INVALIDITY OF PARTICULAR PROVISIONS

ARTICLE 43 EXECUTION OF LEASE BY LANDLORD

ARTICLE 44 RELATIONSHIP OF THE PARTIES

ARTICLE 45 WATER CHARGES

ARTICLE 46 SECURITY DEPOSIT

ARTICLE 47 OPTION TO EXTEND

v

ARTICLE 48 ATTORNEY’S FEES

ARTICLE 49 WAIVER

vi

LEASE (“Lease”) made as of the 25^th day of January, 2005, by and between the following parties (the “Parties”):

LANDLORD: Gaseung Realty Corp., a corporation organized and existing under the laws of the State of New York (“Landlord”) with its mailing address for notices at 68-39 Ingram Street, Forest Hills, NY 11375, and

TENANT; Nara Bank, a California banking corporation authorized to do business in the State of New York (“Tenant”), with its mailing address for notices and a principal office and place of business at: 3701 Wilshire Boulevard, Los Angeles, California.

THE HEADINGS SET FORTH IN THIS LEASE ARE FOR ORGANIZATIONAL PURPOSES ONLY AND SHALL NOT AFFECT ANY LEGAL RIGHTS OR OBLIGATIONS.

ARTICLE 1 Premises

1.01 Premises

Landlord demises and leases to Tenant and Tenant leases from Landlord:

Store Nos. 3 & 4, 209-01 Northern Blvd., Bayside, NY (the “Demised Premises”)

The Demised Premises shall not be deemed to include the land lying under the Demised Premises location, or the exterior walls or roof of the building in which the Demised Premises are located, or any area beyond the lease line of any interior demising wall. Landlord reserves the use of said land, walls and roof of the building, together with the right to install, maintain, use, repair and replace pipes, ducts, conduits, wires and structural elements leading through the demised premises in locations which will not adversely interfere with Tenant’s use of the demised premises in a material way.

ARTICLE 2 Term of the Lease

2.01 Commencement Of Term and Commencement of Payment

(a) The term of this Lease shall commence on the first day of the first month following the later of (i) the date Demised Premises is delivered to Tenant; or (ii) the date Tenant has received all regulatory approvals necessary for Tenant to conduct its banking business in the Demised Premises and operate an automated teller machine in the Demised Premises (the “Term Commencement Date”).

(b) Tenant’s obligation to pay minimum annual rent shall commence ninety (90) days after the later of (i) the date a fully executed counterpart of this Lease is returned to Tenant; or (ii) the date the Demised Premises are delivered to Tenant. Anything to the contrary contained herein notwithstanding, Tenant may occupy the Demised Premises from the date a fully executed counterpart of this Lease is returned to Tenant.

1

2.02 Term of Lease

The term of this Lease (the “Term”) shall expire on the last day of the month in which the fifth (5^th) anniversary of the Term Commencement Date (the “Expiration Date”), unless earlier terminated pursuant to the provisions of this Lease or applicable law. Each twelve month period following the Term Commencement Date shall be herein defined as a “Lease Year”.

2.03 Surrender of Demised Premises

On the expiration or earlier termination of this Lease, Tenant agrees, without necessity of any notices from Landlord (statutory or otherwise), to surrender the Demised Premises in accordance with Articles 9 and 13 hereof, in broom clean condition and in good order and repair, subject to reasonable wear and tear.

ARTICLE 3 Rent

3.01 Minimum Annual Rent

Tenant agrees to pay Landlord throughout the Term, without diminution, abatement, deduction or set-off whatsoever and without prior notice or demand, minimum annual rent (“Base Rent”) in equal monthly installment on the first day of each calendar month through the Term, as follows:

Lease Year	Annual		Monthly
1st	$	84,000.00	$	7,000.00
2nd		86,520.00		7,210.00
3rd		89,115.60		7,426.30
4th		91,788.96		7,649.08
5th		94,542.72		7,878.56

3.02 Delinquent Payments

(a) If during the Term Tenant fails to pay the full amount of the monthly Base Rent or Additional Rent (as hereinafter defined) within ten (10) business days from the due date, then five percent (5%) late charge shall accrue on the unpaid portion, and same shall be paid to Landlord at the time of payment of the delinquent sum. Landlord shall have the right to apply any payments made by Tenant first to any deficiency in the payment of the interest and administrative charges due.

(b) Lease shall be deemed to have been paid upon the date that it is received by Landlord.

3.03 Additional Rent

All charges, costs, expenses, reimbursements, fees, interest and other payments to be made by Tenant to Landlord under this Lease, including Tenant’s Allocable Share (as

2

hereinafter defined) of Real Property Taxes (as hereinafter defined) and Common Charge Maintenance Charges (as hereinafter defined) shall be deemed to be Additional Rent.

3.04 Place for Payments

(a) Tenant shall deliver to Landlord all payments of Base Rent and Additional Rent at the office of Landlord set forth above, or such other place as may be designated in writing by Landlord.

ARTICLE 4 Taxes

4.01 Real Property Taxes

(a) Landlord shall pay, before delinquency, to the appropriate taxing authority, on behalf of Tenant, throughout the Term (beginning with the Term Commencement Date), all Real Property Taxes, which shall be defined to include real property tax assessments, sewer assessments, parking and environmental surcharges, and any other governmental charges and assessments, general and special, ordinary and extraordinary) which may be levied or assessed against land or improvements located in the Shopping Center in which the Demised Premises are located (the “Center”) by any lawful authority but shall specifically exclude therefrom any income or other taxes based upon the rental receipts or profits of Landlord. For each Lease Year and partial Lease Year through the Term, Tenant shall reimburse and pay to Landlord an amount equal to the product of Real Property Taxes paid or payable by Landlord during such Lease Year or partial Lease Year, multiplied by Tenant’s Allocable Share (as hereinafter defined). The amount, charges or assessments required to be paid by Landlord, pursuant to any Payment in Lieu of Tax Agreement or any other agreement which Landlord makes, to such taxing authorities, municipal agencies or other governmental bodies in lieu of taxes, (“PILOT”) entered into in connection with the Center shall be considered for the purposes of this Lease to be included within the definition of Real Property Taxes. Tenant shall pay to Landlord, as Additional Rent, all sums due pursuant to this Article 4, in monthly installment, in advance, on or before the first day of each month during the Term in an amount estimated by Landlord, such that Landlord will have received the full amount of Tenant’s Allocable Share of Real Property Taxes in time for payment to the applicable taxing authority when due. In the event Landlord chooses or is required to escrow Real Property Taxes with a third party, Landlord may, but shall not be obligated to, use the amount required to be placed in an escrow account as a basis for its estimate of the monthly installments due from Tenant hereunder. Landlord shall furnish Tenant with a written statement of the actual amount of Tenant’s Allocable Share of Real Property Taxes based upon the tax bills or assessments for each tax fiscal year. If the total amount paid by Tenant under this Section for any tax fiscal year during the term is less than the actual amount due from Tenant for such year as shown on such statement, Tenant shall pay to Landlord the deficiency within thirty (30) days after demand by Landlord therefor. If the total amount paid by Tenant for any year exceeds the amount due from Tenant for such year, Tenant shall be refunded within thirty (30) days. With respect to the tax fiscal year in which this Lease expires, Tenant’s liability for Tenant’s Allocable Share of Real Property Taxes for such year shall be subject to a pro rata adjustment based on the appropriate number of days of said fiscal tax year. A copy of a tax bill or assessment submitted by Landlord to Tenant shall at all time be sufficient evidence of the amount of Real Property Taxes to which such bill relates.

3

(b) If the Demised Premises are separately assessed, Tenant agrees to pay to Landlord, as Additional Rent, the amount of the Real Property Taxes separately assessed against the Demised Premises and the land lying thereunder, plus Tenant’s Allocable Share of Real Property Taxes assessed against the Common Areas (as hereinafter defined) of the Center. Such amount shall be calculated on the basis of the number of days (from the Term Commencement Date) remaining in each tax fiscal year.

(c) Landlord may seek a reduction in the assessed valuation (for Real Property Tax purposes) of all or any part of the Center by administrative or legal proceeding. Landlord shall reimburse Tenant for Tenant’s Allocable Share of any refund of Real Property Taxes (after deducting any unpaid portion of Tenant’s Allocable Share of Landlord’s costs of obtaining same) resulting from any proceeding for which Tenant has paid Tenant’s Allocable Share of Real Property Taxes.

(d) Intentionally omitted.

(e) Should any governmental taxing authority acting under any present or future law, ordinance or regulation, levy, assess or impose a tax, excise, surcharge or assessment upon or against the rents payable by Tenant to Landlord, or upon or against the Common Areas, whether by way of substitution for in addition to any existing Real Property Tax or otherwise, Tenant shall be responsible for and shall pay annually, Tenant’s Allocable Share of such tax in the manner provided in Section 4.01 (a).

(f) Landlord represents that Real Property Taxes for the fiscal tax year 2004/2005 equal $                    .

4.02 Tenant’s Taxes

Tenant shall, at all times, be responsible for and pay, before delinquency, all municipal, county, state or federal taxes charged against Tenant’s, fixtures, furnishings, equipment, stock-in-trade or other personal property of any kind owned, installed or used in or on the Demised Premises, and any tax now or hereafter charged against Tenant on any other basis.

ARTICLE 5 Landlord’s Work and Tenant’s Work

5.01 Landlord’s Work

(a) Landlord shall have no obligation to perform any work at the Demised Premises prior to the Commencement Date. Tenant accepts the Demised Premises in their “as is” condition.

5.02 Tenant’s Work

(a) Prior to the Term Commencement Date, Tenant shall at its sole cost and expense perform “Tenant’s Work” (as hereinafter defined) in compliance with all Government Orders. Tenant represents and warrants to and for the benefit of Landlord that Tenant has the ability (financial and otherwise) to perform Tenant’s Work and that no delay in its performance shall cause, nor shall Landlord’s undertaking of any portion of Tenant’s Work be deemed to cause, any delay or postponement in the Term Commencement Date.

(b) Tenant shall perform and complete Tenant’s Work (as hereinafter defined) at Tenant’s sole expense and in accordance with the plans and specifications hereinafter referred to in this Section to be prepared by Tenant’s architect. Tenant agrees, at its own cost and expense, to prepare and submit to Landlord for approval, which approval shall not be unreasonably withheld, delayed or conditioned within thirty (30) days from

4

the earlier of the execution or Term Commencement Date of this Lease, four (4) sets of proposed plans and specifications covering the work to be done by Tenant (“Tenant’s Work”). Landlord may either: (a) evidence its approval by endorsement to that effect by signature or initials on one (1) set of said plans and specifications and the return of such signed or initialed set to Tenant whereupon such approved preliminary plans and specifications shall then constitute the finals plans and specifications; or (b) refuse such approval if Landlord shall determine that the same (i) do not conform to the standards of design, motif and decor established or adopted by Landlord; and/or (ii) would subject landlord to any additional cost, expense or liability or the Premises to any violation, fine, penalty or forfeiture; and/or (iii) would in any way adversely affect the reputation, character and/or nature of the Building and/or (iv) would provide for or require any installation or work which is or might be unlawful or create an unsound or dangerous condition or adversely affect the structural soundness of the premises and/or the Building of the adjoining space in the Building in which the Premises are located. If landlord refuses approval, landlord shall advise Tenant of those revisions or corrections which landlord requires and Tenant shall, within ten (10) days thereafter, submit four (4) sets of proposed plans and specifications, as so revised or corrected, to landlord for its approval in accordance with this Section. Landlord agrees not to unreasonably withhold or delay approval of the plans for Tenant’s Work.

(c) Landlord hereby consents to the modification or alteration of the Demised Premises into a retail bank branch.

ARTICLE 6. Use and Conduct of Business by Tenant

6.01 Use of Premises

Throughout the Term, Tenant shall use all of the demised premises solely for the purpose(s) of conducting the business of a retail banking, financial and insurance services including the use of an ATM machine and other legal uses, and for no other purpose whatsoever.

6.02 Tenant’s Operating Covenant

Tenant shall occupy and be open for business during customary banking hours in New York State.

6.03 Other Business Practices

(a) Tenant shall keep the Demised Premises, and all other areas designated for Tenant’s sole use, in good, safe, neat and clean condition. Tenant shall keep the Demised Premises and any sidewalk or service area contiguous to or part of the demised premises free of debris, water, substances, rubbish, garbage, pests, rodents and vermin, and, upon two (2) days notice by Landlord to Tenant of Tenant’s failure to do so, Landlord may remove such debris, water, substances, rubbish, garbage, pests, rodents and vermin and charge Tenant the actual cost of such removal plus eighteen percent (18%) for administration expenses.

(b) Tenant shall not commit nor permit any act or practice which may tend to injure the building occupied by Tenant, nor permit its equipment to be a nuisance to other tenants, nor keep goods, foods, rubbish, inventory, merchandise on or obstruct the mall area or sidewalks or other areas outside the demised premises, not conduct or permit any fire, bankruptcy, auction or going-out-of-business sale, nor erect or retain any sign, light,

5

lettering, inscription, symbol or mark which is not approved by Landlord, nor install any antenna, fixture, or improvement outside of the Demised Premises, nor permit any loudspeaker, radio or television broadcast to be heard outside the Demised Premises. Landlord consents and agrees that Tenant shall have the right to install signage in and on the exterior of the Demised Premises utilizing Tenant’s logotype.

(c) With respect to the collection and removal of rubbish produced in the Demised Premises and in the court of the operation of Tenant’s business, Tenant agrees to contract with a third party rubbish removal contractor designated by Landlord and pay directly to such contractor, when due, all charges at the rate established therefor from time to time. Tenant may, however, contract with an entity other than that designated by Landlord in the event that Landlord’s designated contractor’s rates are not competitive with alternative services available to Tenant. Notwithstanding the foregoing, Tenant covenants to properly dispose of all rubbish, trash and refuse produced in the Demised Premises in accordance with applicable Governmental Orders relating to the sorting or recycling of trash or refuse.

(d) Tenant shall comply with additional reasonable rules and regulations for the use and occupancy of the Center as Landlord, from time to time, may impose or amend in the best interests of the Center.

ARTICLE 7 Common Areas and Operating Costs

7.01 Definition

The term “Common Areas” shall mean the interior and exterior areas and facilities within and around the Center which are not leased to a tenant, or by nature not leasable to a tenant for the purpose of the sale of merchandise or the rendition of services to the general public. Common Areas shall include, but shall not be limited to, all parking areas and facilities, roadways, driveways, entrances and exits, truck service ways and tunnels, utilities, water filtration and treatment facilities, retention ponds or basins located within or outside the Center, retaining and exterior walls, sidewalks, open and enclosed malls, outside courts, landscaped and planted areas, escalators, stairways, elevators, service corridors, service areas loading docks, hallways, public restrooms, community rooms or areas, roofs, equipment, signs and any special areas provided by Landlord for the common or joint use and benefit of all tenants in the Center, their employees, customers and invitees.

7.02 Intentionally Deleted

7.03 Use of Common Areas

(a) Tenant and its officers, employees, agents, customers and invitees shall have the nonexclusive right, in common with Landlord and all others to whom Landlord has or may hereafter grant rights, to use the Common Areas designated by Landlord from time to time, subject to such regulations as Landlord may from time to time impose.

(b) Each of Store Nos. 1 through 8 shall have one reserved parking space in the parking lot on 209^th Street side (Westside) of the building.

(c) Tenant shall keep the hallway adjacent to the Demised Premises in good, safe, neat, and clean condition.

(d) Landlord may at any time: (i) close temporarily the Common Areas or any portion thereof provided the same does not unreasonably interfere with Tenant, its customers and employees access to the Demised Premises; (ii) make repairs or changes to

6

prevent the acquisition of public rights therein; (iii) discourage noncustomer parking; and (iv) do such other acts in and to the Common Areas as in its judgment may be desirable to improve the convenience thereof. Tenant shall not at any time interfere with the rights of Landlord and other tenants, its and their permitted officers, employees, agents, customers, and invitees, to use any part of the parking areas and other Common Areas. Landlord shall have the sole and exclusive right to use the Common Areas for advertising purposes, promotions, exhibits, shows, displays, kiosks and other similar uses, which shall in no event unreasonably limit access to and egress from the Demised Premises.

7.04 Common Area Maintenance Charges

(a) Tenant shall pay Tenant’s Allocable Share of Common Area Maintenance (“CAM”) charges. Common Area Maintenance Charges shall mean the total costs and expenses incurred in operating, heating, ventilating, cooling, security, insurance, sprinklering, compactor expenses, managing, and maintaining the Common Areas, including without limitation, such maintenance, repair, and remodeling as shall be required in Landlord’s sole and absolute judgment to preserve the utility thereof as existed at the time of completion of the original construction and installation.

(b) Within ninety (90) days after the end of each calendar year, Landlord shall provide Tenant with a statement of all CAM charges setting forth in reasonable detail the CAM charges for the preceding year. In the event Tenant’s proportionate share of CAM charges exceeds the amount paid by Tenant during the preceding year, Tenant shall pay any such shortfall within thirty (30) days. In the event Tenant’s proportionate share of CAM charges is less than the amount paid by Tenant during the preceding year, the overpayment shall be refunded to Tenant within thirty (30) days. Landlord agrees to make all records relating to CAM charges available to Tenant for review and inspection for a period of three (3) years.

7.05 Intentionally Deleted

ARTICLE 8 Utilities Charges

8.01 Utility Charges

(a) Prior to entering into possession of the Demised Premises, Tenant shall either directly or through Landlord, make application to the appropriate local authority, municipality or other governmental agency or other utilities companies to obtain service for Tenant’s electric, and any other utility requirements. The Demised Premises are currently separately metered for electricity. Tenant shall be solely responsible for the cost of obtaining such services and the cost of maintaining, repairing and replacing any required meters.

8.02 Miscellaneous Utility Provisions

(a) Tenant shall not install within the Demised Premises any equipment, fixtures or appliances which exceed the capacity of the utility facilities within or serving the Demised Premises. If any such equipment, fixtures, or appliances installed by Tenant requires additional utility facilities, the same shall be installed by Tenant at Tenant’s sole cost and expense. Tenant agrees to use all reasonable precautions to guard against the

7

waste of energy.

(b) Tenant shall operate the heating, ventilating and cooling systems serving the Demised Premises such that the temperature in the demised premises will be the same as that in the Common Areas, and Tenant shall set Tenant’s thermostat at the same temperature as exists in the Common Areas. Tenant shall operate ventilation equipment such that the relative air pressure in the Demised Premises will be the same as or more than that in the Common Areas.

(c) Landlord shall not be liable for any damages resulting from or arising out of any discontinuance by the energy provider for Tenant’s nonpayment of energy or utility charges and the same shall not constitute a termination of this Lease or an actual or constructive eviction of Tenant.

(d) Tenant agrees that Landlord shall not be responsible for any interruption of business or damage to the demised premises resulting from an interruption of utility service caused by the energy provider, any utility company or governmental regulatory agency.

ARTICLE 9 Alterations

9.01 Alterations By Tenant

Tenant shall not make or cause to be made any alterations, additions or improvements in or to the Demised Premises without first obtaining Landlord’s written approval which consent shall not be unreasonably withheld or delayed; provided; however, Tenant shall not be required to obtain Landlord’s consent to nonstructural modifications not exceeding $25,000.00 per annum. Tenant shall present to Landlord plans and specifications for any such work at the time approval is sought. All permitted alterations, additions or improvements shall be done in a good and workerlike manner in compliance with all Governmental Orders and shall not interfere with or interrupt the conduct of any tenants’ normal business. Tenant hereby warrants that such fixtures will be free from defects in material and workmanship and designed, constructed and installed so as not to be hazardous to the Center or any persons who may enter the Demised Premises.

9.02 Removal and Restoration by Tenant

All alterations, additions, improvements or installations made by Tenant, or made by Landlord on Tenant’s behalf and at Tenant’s expense, shall remain the property of Tenant for the Term. Such alterations, additions, improvements, trade fixtures and equipment shall not be removed from the Demised Premises prior to the end of the Term without Landlord’s prior written consent, other than Tenant’s vault which may be removed by Tenant. Upon expiration of the Term, or upon Tenant’s vacating the demised premises or upon Tenant’s eviction from or surrender of the Demised Premises prior to expiration of the Term, all permanent leasehold improvements and fixtures or equipment permanently attached to the real estate shall become the property of Landlord, other than Tenant’s vault which may be removed by Tenant. Tenant shall surrender all keys for the Demised Premises to Landlord and shall inform Landlord of all combinations on locks, safes and vaults, if any, in the demised premises. Upon the expiration or earlier termination of this Lease, Tenant shall remove furnishings, equipment, and personal property, failing which Landlord shall have the option of retaining or removing such property at Tenant’s expense. Tenant shall repair or cause to be repaired any damage to the Demised Premises caused by such removal.

8

ARTICLE 10 Repairs and Maintenance

10.01 Landlord’s Obligation to Repair

Subject to Article 13, Landlord agrees to repair and maintain in good order and serviceable condition, the outside walls, roof, structure and foundation of the center containing the Demised Premises, including structural and building wide services, which shall be billed and included in Common Area Maintenance Charges. Landlord shall not be required to commence any such repair until a reasonable time after Landlord’s receipt of written notice from Tenant that a repair is necessary. If repair of damage is caused by the act or omission of Tenant, its employees, agents, contractors, customers, invitees or licensees, cost for such repair shall be billed to the Tenant.

10.02 Tenant’s Obligation to Repair

(a) Tenant agrees, at its sole cost and expense, to repair and maintain the non-structural portions of the Demised Premises in good order and condition, including, but not limited to, Tenant’s storefront, loading areas, show windows, doors, windows, plate and window glass, ceilings, floor coverings, facilities, appliances, lighting fixtures and other systems and improvements located in and serving the Demised Premises. Tenant shall, at its sole cost and expense, obtain any and all permits and approvals necessary to effect such repairs and submit to Landlord a copy of such permits or approvals prior to the commencement of any repair work. In addition, Tenant shall be responsible , at its sole cost and expense, for the repair and maintenance of its HVAC equipment, in whatever form, including roof top units or other supply mechanisms and unit(s) (if any) and any other equipment or improvement located outside the Demised Premises which is constructed or installed by Tenant or at Tenant’s request. Tenant shall obtain Landlord’s prior consent before making any repair or performing any maintenance which may adversely affect any aspect of the Center’s operation.

(b) During the entire Term, Tenant agrees to maintain, at Tenant’s sole cost, a maintenance contract with an independent HVAC contractor approved by Landlord covering at least the routine items of maintenance for Tenant’s HVAC systems that are recommended by the manufacturer of such systems.

(c) If repairs are required to be made by Tenant pursuant to the terms of this Lease, Landlord may demand (but shall not be required to do so) that Tenant make the same forthwith, and if Tenant refuses or neglects to commence such repairs and complete the same with reasonable dispatch after such demand (and, in all events, within thirty (30) days after such demand), Landlord may make or cause such repairs to be made and shall not be responsible to Tenant for any loss or damage that may accrue to its stock or business by reason thereof. If Landlord makes or causes such repairs to be made, Tenant agrees that it will, on demand, pay as Additional Rent to Landlord, the cost of the repairs, and an eighteen percent (18%) administration fee, and if Tenant defaults in such payment, Landlord shall have the remedies provided in Article 15.

10.03 Article Not Applicable to Fire or Condemnation

The provisions of this Article shall not apply to the repair of damage caused by fire or other casualty, which matter is covered under Article 13, nor shall these provisions apply to a taking under the power of Eminent Domain, which matter is covered under Article 14.

9

ARTICLE 11 Indemnity

11.01 Indemnity

Tenant small indemnify, hold harmless and defend the other Landlord’s managing agent, if any, from and against any and all claims, actions, suits, cross-claims, counterclaims, third party actions, damages, liabilities and expenses in connection with loss of life, personal injury, bodily injury or damage to property arising from or out of any occurrence in, upon or at the Demised Premises, from or out of the occupancy or use by Tenant of the Demised Premises or the Center or any part thereof, or occasioned wholly or in party by any act or omission of Tenant, its agents, contractors, employees, invitees or concessionaires. In case Landlord, Landlord’s managing agent or such other persons who are in privity of estate with Landlord, or to whom Landlord is legally responsible, shall be made a party to any action or proceeding commenced by or against Tenant, Tenant agrees to protect and hold such parties harmless and to pay all costs, expenses and reasonable attorneys’ fees incurred or paid by such parties in connection with such action or proceeding. Tenant shall pay to such parties all costs, expenses and reasonable attorneys’ fees that may be incurred or paid by Landlord in enforcing the terms, conditions, covenants and agreements in this Lease.

11.02 Landlord shall indemnify, hold harmless and defend Tenant from and against any and all claims, actions, suits, cross-claims, counterclaims, third party actions, damages, liabilities or expenses in connection with loss of life, personal injury, bodily injury, or damage to property arising out of any act or occurrence of Landlord, its agents, contractors, employees, lessees, invitees or concessionaire. If Tenant shall be made privy to any action or proceeding commenced by or against Landlord, Landlord agrees to protect and hold Tenant harmless and to pay all costs, expenses and reasonable attorney fees incurred by Tenant with such action or proceeding.

ARTICLE 12 Insurance

12.01 Insurance

At all times during the Term, the Tenant shall, at its sole cost and expense, procure and maintain in full force and effect, for the benefit of the Landlord, naming Landlord as an additional insured thereunder, (i) public liability insurance with aggregate limits of $2,000,000.00, and property damage to the extent of $500,000; and (ii) fire insurance for interior, trade fixtures and other contents of the Demised Premises. In the event that Tenant fails to provide the certificate as set forth herein or fails to provide evidence of such coverage at least thirty (30) days prior to the expiration date of each expiring Insurance Policy, Landlord may obtain such insurance at Tenant’s sole cost and expense and upon demand of Landlord, Tenant shall reimburse Landlord for the cost of procuring such insurance coverage together with eighteen percent (18%) for administration costs. Tenant may maintain such insurance on a “blanket policy” covering the Demised Premises and other properties owned or leased by Tenant.

12.02 Waiver of Subrogation

To the extent commercially practicable, Tenant’s insurance policy shall include a waiver

10

by the insurer of all rights of subrogation against the landlord, which arises or might arise by reason of any payment under such policy or by reason of any act or omission of landlord.

12.03 Increase in Insurance Premiums

Tenant shall pay on demand any increase in premiums for Landlord’s insurance that are attributable solely to Tenant’s use and occupancy, failure to occupy or abandonment of the demised premises, whether or not Landlord has consented to the same.

ARTICLE 13 Damage by Fire or other Hazard

13.01 Restoration of Premises

(a) The Parties mutually agree that if the Demised Premises are partially or totally destroyed or damaged by fire or otherwise, Landlord (subject to being able to obtain all necessary permits and approvals) shall repair and restore the Demised Premises and Common Areas as soon as is reasonably practicable to substantially the same condition in which the Demised Premises existed before such damage. If, however, the Demised Premises are totally destroyed or so damaged that Landlord cannot reasonably restore or rebuild to substantially the same condition in which the Demised Premises were before such damage within 120 days following the date of loss, Landlord shall not be required to rebuild or restore, and this Lease shall be terminable by Landlord or Tenant serving written notice to the other. In any event, if repairs have not been completed within 120 days following the date of loss, the Lease may be terminated by Tenant serving notice upon Landlord not less than thirty (30) days advance written notice of such election, but in no event may Tenant terminate this Lease after such repairs have been commenced by Landlord.

(b) In the event the Demised Premises are completely or partially destroyed or so damaged by fire or other hazard that the Demised Premises cannot be reasonably used by Tenant, this Lease shall be deemed terminated.

ARTICLE 14 Eminent Domain

14.01 Eminent Domain

If the Demised Premises, or any portion of the Demised Premises or Common Areas so as to render the balance wholly unsuitable for the purpose of Tenant’s occupancy, is taken by condemnation or the right of eminent domain, or by agreement between Landlord and those authorized to exercise such rights (collectively, the “Condemnation Proceedings”), either Party upon written notice to the other shall be entitled to terminate this Lease, provided that such notice is given not later than thirty (30) days after Tenant has been deprived of possession or use by such taking. Should any part of the Demised Premises be so taken and should this Lease not be terminated in accordance with the foregoing provisions, Landlord covenants and agrees promptly after such taking to expend so much as may be necessary of the net amount which may be awarded to and received by it in such condemnation proceedings (the “Condemnation Proceedings Award”), in restoring the Demised Premises to an architectural unit as nearly like its condition prior to such taking as shall in the sole and absolute judgment of Landlord be

11

practicable, with an appropriate abatement to be made in Rent, and a corresponding reduction in the Breakpoint. Should the net amount so awarded to and received by Landlord be insufficient to cover the cost of restoring the demised premises as estimated by Landlord’s architect, Landlord may at its election, supply the amount of such insufficiency and restore the Demised Premises, as above provided, or terminate this Lease. When Tenant has not already exercised any right of termination accorded to it under this Section, Landlord shall notify Tenant of Landlord’s election within ninety (90) days after the final determination of the amount of the Condemnation Proceedings Award.

14.02 Landlord Entitled to Award

Out of any award for any taking of the demised premises or any part thereof, Landlord shall be entitled to receive and retain the amounts awarded for the demised premises out of any Condemnation Proceedings Award, except that Tenant shall be entitled to receive and retain only those amounts which may be specifically awarded to it in any Condemnation Proceedings because of the taking of its trade fixtures and its leasehold improvements which have not become a part of the realty, and such business loss as Tenant shall specifically and separately establish, but not otherwise. It is understood in the event of the termination of this Lease as provided herein, Tenant shall have no claim against Landlord or the condemning authority for the value of any unexpired portion of the Term and no right or claim to any part of the Condemnation Proceedings Award. Tenant waives each such claim or right and assigns any such claim or right to any part of all of the Condemnation Proceedings Award to Landlord. Nothing herein shall be deemed to preclude Tenant from making and prosecuting a claim for its leasehold improvement and the value of the unexpired Term of this Lease

ARTICLE 15 Events of Default

15.01 Events of Default and Conditional Limitation

(a) If at any time prior to or during the Term any one or more of the following events occurs, each such event shall constitute an “Event of Default”:

(i) Tenant makes an assignment for the benefit of its creditors;

(ii) Tenant becomes insolvent as determined by a court of competent jurisdiction;

(iii) The leasehold estate of Tenant in this Lease is taken by execution or by other process of law;

(iv) Any petition is filed against Tenant in any court, whether or not pursuant to any bankruptcy, reorganization, composition extension, arrangement or insolvency proceedings, and Tenant is thereafter adjudicated bankrupt, or such petition is approved by the Court; or the Court assumes jurisdiction of the subject matter and such proceedings are not dismissed within ninety (90) days after their institution; or any such petition is so filed by Tenant;

(v) In any proceedings, a receiver or trustee is appointed for Tenant’s property and such receivership or trusteeship is not vacated or set aside within ninety (90) days after the appointment of such receiver or trustee;

(vi) There is a transfer or an attempted transfer of this Lease or of Tenant’s interest in this Lease in violation of the restrictions set forth below in Article 17;

(vii) Tenant ceases operation in or vacates or abandons the demised premises or otherwise fails to fully perform the obligations contained in Sections 6.01 and 6.02;

12

(viii) Tenant fails to comply with any local, state or federal law, rule or regulation governing the use, handling and disposal of Hazardous Materials (as hereinafter defined) or is otherwise in violation of the obligations contained in Section 18.03; provided the same is not cured within ten (10) days after written notice;

(ix) Tenant fails to comply with the obligations contained in Section 21.03;

(x) Tenant fails to pay all or any portion of any installment of the Rent, Percentage Rent or Additional Rent, when all or any portion of such is due and payable, and such failure continues for ten (10) days after receipt of written notice from Landlord to Tenant;

(xi) Tenant fails to perform or observe any other requirement of this Lease on the part of Tenant to be performed or observed and such failure continues for thirty (30) days after receipt of written notice from Landlord to Tenant; or

(xii) Tenant fails to comply with the obligations contained in Section 6.01, and such failure continues for ten (10) days after receipt of written notice from Landlord to Tenant; or where any such event shall occur on two or more occasions in any Lease Year or Partial Lease Year.

(b) This Lease and the Term are expressly subject to the conditional limitation that upon the happening of any one or more of the aforementioned events of default, Landlord, in addition to the other rights and remedies it may have, shall have the right (to the extent permitted by applicable law) to immediately declare this Lease terminated and the Term ended, in which event all of the right, title and interest of Tenant hereunder shall wholly cease and expire upon receipt by Tenant of a notice of termination. Tenant shall then quit and surrender the Demised Premises to Landlord in the manner and under the conditions specified in this Lease, but Tenant shall remain liable as hereinafter provided.

15.02 Landlord’s Remedies

(a) If this Lease shall be terminated as provided in Section 15.01 (b), Landlord’s agents or employees may in accordance with applicable law re-enter the Demised Premises and remove Tenant, its agents, employees, licenses, and any subtenants and other persons, firms or corporations, and all or any of its or their property from the Demised Premises, either by summary dispossess proceedings or by any suitable action or proceedings at law, without being liable to indictment or prosecution of damages therefor, and repossess and enjoy the Demised Premises, together with all alterations, additions and improvements to the Demised Premises. In the event of such re-entry and repossession, Landlord may store Tenant’s Personal Property in a public warehouse or elsewhere at the cost of and for the account of Tenant.

(b) In case of any termination, re-entry or dispossession by summary proceedings or otherwise, the rents and all other charges required to be paid up to the time of such termination, re-entry or dispossession, shall be paid by Tenant, and Tenant also shall pay to Landlord all reasonable expenses which Landlord may then or thereafter incur for legal expenses, reasonable attorneys’ fees, brokerage commissions and all other costs paid or incurred by Landlord as the result of such termination, re-entry or dispossession as determined by a final order of a court of competent jurisdiction. Landlord may, at any time and from time to time, relet the Demised Premises, in whole or in part, for any rental then obtainable either in its own name or as agent of Tenant, for a term which, at Landlord’s option, may be for the remainder of the then current term of this Lease or for any longer or shorter period.

(c) If this Lease is terminated by Landlord and Landlord has not relet the Demised Premises, Tenant nevertheless covenants and agrees notwithstanding any entry or re entry by Landlord, whether by summary proceedings, termination or otherwise, to pay and be liable for, on the days originally fixed by this Lease or payment, amounts equal

13

to the several installments of Rent, Percentage Rent and Additional Rent as would under the terms of this Lease become due if this Lease had not been terminated. In the event the Demised Premises are relet by Landlord, Tenant shall be entitled to a credit (but not in excess of the Rent and Additional Rent reserved under the terms of this Lease) in the net amount of rent received by Landlord in reletting the Demised Premises, after deduction of all reasonable expenses and costs incurred or paid as aforesaid in reletting the Demised Premises and in collecting the rent in connection with reletting.

(d) Tenant expressly waives, so far as permitted by law, the service of any notice of intention to re-enter provided for in any statute, or of the institution of legal proceedings to that end, and Tenant for and on behalf of itself and all persons claiming through or under Tenant, also waives any and all right of redemption or re-entry or repossession under present or future laws, including any amendments hereafter, or to restore the operation of this Lease.

(e) Landlord and Tenant, so far as permitted by law, waive, and will waive trial by jury in any action, proceeding or counterclaim brought by either of the Parties against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant’s use or occupancy of the demised premises, or any claim or injury or damage.

(f) The terms “enter,” “re-enter,” or “re-entry” as used in this Lease are not restricted to their technical legal meaning.

(g) In the event Landlord commences any proceedings for the recovery of possession of the Demised Premises or to recover for nonpayment of Base Rent or Additional Rent, Tenant shall not interpose any noncompulsory counterclaim in any such proceeding. This may not, however, be construed as a waiver of Tenant’s rights to assert such claim in any separate action or actions initiated by Tenant.

(h) No failure by either party to insist upon the strict performance of any covenant, agreement, term or condition of this Lease or to exercise any right or remedy consequent upon a breach thereof, and no acceptance of full or partial Rent during the continuance of any such breach shall be deemed an accord and satisfaction. Landlord may accept any check or payment without prejudice to Landlord’s rights to recover the balance due. Landlord’s acceptance of any check or payment shall not constitute a waiver of any breach by Tenant of any provision hereof or of any covenant, agreement, term and condition to be performed by Tenant, and this Lease shall continue in full force and effect with respect to any existing or subsequent breach thereof.

(i) In the event of any breach or threatened breach by Tenant of any of the covenants, agreements, terms or conditions contained in this Lease, Landlord shall be entitled to enjoin by appropriate legal proceeding, such breach or threatened breach and shall have the right to invoke any right or remedy allowed at law or in equity, by statute or otherwise.

(j) Each right and remedy of the parties provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease or now or hereinafter existing at law or in equity, by statute or otherwise.

ARTICLE 16 Mechanics’ Liens

16.01 Mechanics’ Liens

(a) If any mechanics’ liens are filed against the Demised Premises or any portion of the Center based upon any act of Tenant or anyone claiming through Tenant, Tenant shall hold Landlord harmless from all damages, claims and expenses arising therefrom, and

14

Tenant, after notice from Landlord shall forthwith remove or satisfy such lien by bonding, deposit, payment or otherwise. In the event Tenant does not remove or satisfy any lien within thirty (30) days after Tenant receives notice thereof, Landlord shall have the right to do so by posting a bond or undertaking, and Tenant agrees to reimburse Landlord for any and all expenses incurred by Landlord in connection therewith, including Tenant’s providing a replacement bond or posting cash or securities satisfactory to Landlord’s bonding company to provide sufficient independent security for Landlord’s bond within ten (10) days after receipt by Tenant of Landlord’s invoice therefor. Expenses shall include, but are not limited to, filing fees, legal fees and disbursements, bond premiums and bond rating premium increases.

(b) Nothing in this Article shall be deemed or construed as; (i) Landlord’s consent to any person, firm or corporation for the performance of any work or services or the supply of any materials to the demised premises or any improvement thereon; or (ii) giving Tenant or any other person, firm or corporation any right to contract for or to perform or supply any work, services or materials that would permit or give rise to a lien against the demised premises or any part thereof.

ARTICLE 17 Assignments and Subletting

17.01 Limitations on Tenant Rights

(a) Neither this Lease, nor the interest of Tenant in this Lease, shall be sold, assigned, transferred, mortgaged, pledged, hypothecated or otherwise disposed of, whether by operation of law or otherwise, nor shall the Demised Premises or any part of the Demised Premises be sublet or subject to any license or concession, without the express, prior written consent of Landlord in each instance, which consent shall not be unreasonably withheld or delayed. For the purpose of this Lease, the sale or transfer of stock or other interests constituting a controlling interest in Tenant shall be considered an assignment, and likewise shall require Landlord’s prior written consent, except when Tenant or its parent is a corporation having its shares traded on the New York, American, NASDAQ or Over-The-Counter stock exchange or market. Tenant shall make available to Landlord the stock record books of Tenant and shall produce the same on request of Landlord. Similarly, if Tenant is a partnership, the interest of any partner shall not be transferred without Landlord’s prior written consent. For the purposes of this Lease, the entering into of any managing agreement or any similar agreement which transfers control of the business operations of Tenant in the demised premises shall be treated as an assignment of this Lease and shall require Landlord’s prior written consent. Any attempted transfer, assignment, subletting, license or concession agreement, hypothecation or other transfer that is prohibited without Landlord’s prior written consent shall be void, and confer no rights upon any third party.

(b) No permitted assignment made shall be effective until Landlord receives: an agreement, in recordable form, executed by Tenant and the proposed assignee, in which such assignee assumes the due performance of all of the obligations on Tenant’s part to be performed under this Lease.

(c) Any assignment of this Lease or any sublease affecting the demised premises or any other permitted transfer under this Lease shall be subject to the terms and conditions of this Lease. Regardless of the assumption by any assignee of the due performance of Tenant’s obligations hereunder or Landlord’s acceptance of Rent or other charges from any assignee or subtenant, Tenant shall not be released by any assignment, license or sublease but shall continue to be fully responsible for the due

15

performance of Tenant’s obligations hereunder in the same manner and to the same extent as if no such assignment, license or sublease had been made.

(d) Any transfer made in violation of the provisions of this Section shall constitute an Event of Default under Article 15 and give rise to Landlord’s right to re-enter the Demised Premises.

(e) The Tenant may without Landlord’s consent, but upon notice to Landlord, assign this Lease to any bank or financial institution which acquires the assets or stock of Tenant or is merged with Tenant, without Landlord’s consent.

17.02 Effect of Landlord’s Consent

(a) Any consent by Landlord to a sublease or license of all or any part of the Demised Premises or to a sale, assignment, mortgage, pledge, hypothecation or transfer of this Lease, shall apply only to the specific transaction thereby authorized and shall not relieve Tenant from the requirement of obtaining prior written consent of Landlord to any further sublease or license of the Demised Premises or any further sale, assignment, mortgage, pledge hypothecation or transfer of this Lease. When the consent of Landlord is required to any proposed assignment, sublease, mortgaging, pledging, licensing or hypothecation, Tenant shall submit in writing with its request for consent, information reasonably sufficient to enable Landlord to make a decision with respect thereto.

(b) With respect to any of the consents requested by Tenant, whether or not Landlord has granted same, Tenant shall pay to Landlord its attorney’s fee in the amount of $750.00.

ARTICLE 18 Compliance with Governmental Orders

18.01 Tenant to Comply

Tenant, at is sole cost and expense, shall promptly execute and comply with all statutes, ordinances, rules, orders, regulations and requirements of the federal, state and local governments and of any and all other agencies, departments and bureaus applicable to the demised premises or to the business conducted by Tenant at the demised premises, whether ordinary, extraordinary, foreseen or unforeseen (collectively, “Governmental Orders”). In addition, Tenant, at its own expense, shall comply with and execute all rules, orders, regulations and recommendations of the Board of Fire Underwriters, Rating Board and Landlord and Tenant’s insurance companies with respect to the prevention of fires and the exposure of liability risks (collectively, “Insurance Matters”). Tenant, at its sole cost and expense, shall furnish and main in good order an adequate number and type of fire extinguishers on the Demised Premises at all times. Anything to the contrary contained herein notwithstanding, Tenant shall have the right to contest any such statutes, ordinances, rules, orders or regulations.

18.02 Failure to Comply

In case Tenant fails or neglects to comply with any Governmental Orders, Insurance Matters or the ADA (as hereinafter defined), with respect to the Demised Premises only, Landlord or its agent may enter the Demised Premises and perform such work as may be necessary to comply therewith at the sole cost and expense of Tenant plus eighteen percent (18%) for administration costs, which shall be added to Tenant’s next monthly installment of Rent and be due and payable as such, or Landlord may deduct the same from any balance remaining in Landlord’s hands. This provision is in addition to the right

16

of Landlord to terminate this Lease by reason of a default on the part of Tenant.

18.03 Hazardous Material

(a) Tenant shall, at all times, comply with all local, state and federal laws, rules and regulations governing the use, handling and disposal of Hazardous Material in the demised premises including, but not limited to Section 1004 of the Federal Reserve Conservation and Recovery Act, 42 USCA § 690 et seq. and any additions, amendments or modifications thereto. As used herein, the term “Hazardous Material” shall mean any hazardous or toxic substance, material or waste which is, or becomes, regulated by any local or state government authority in which the demised premises is located or by the United States Government. Landlord and its agents shall have the right, but not the duty, to inspect the demised premises at any time to determine whether Tenant is complying with the terms of this Section. If Tenant is not in compliance with this Section, Landlord shall have the right to immediately enter upon the demised premises and take whatever actions are reasonably necessary to comply with the terms set forth in this Section, including, but not limited to. the removal from the demised premises of any Hazardous Material and the restoration of the demised premises to a clean, neat, attractive, healthy and sanitary condition and Tenant shall pay all costs so incurred by Landlord within ten (10) days after receipt of a bill therefor plus eighteen percent (18%) for administration. The covenants in this Section shall survive the expiration or earlier termination of this Lease.

(b) Anything to the contrary contained herein notwithstanding, Tenant shall not be responsible for any actions of Landlord other than tenants of the Building with respect to hazardous materials.

18.04 Americans With Disabilities Act

Tenant, at its sole cost and expense, shall at all times comply with and shall cause the demised premises to be in compliance with the requirements of the Americans With Disabilities Act of 1990, and any additions, amendments or modifications thereto and all related regulations (the “ADA”).

ARTICLE 19 Subordination

19.01 Subordination

(a) The rights and interests of Tenant under this Lease shall be subject and subordinate to any ground lease mortgage now or hereafter placed upon any portion of the Center, and to any advances made under any mortgage, as well) as to all renewals, modifications, consolidations, replacements, extensions and re-financings thereof. Tenant agrees that any ground lesser or mortgage may elect to give the rights and interest of Tenant under this Lease priority over the lien of its ground lease or mortgage. In the event of such election, the rights and interest of Tenant under this Lease automatically shall have priority in whole or in part, over the lien of said ground lease or mortgage and no additional consent or instrument shall be necessary or required therefor. Tenant agrees to execute and deliver such instruments as may be requested by mortgagee for any of the foregoing purposes. If Tenant fails to do so within ten (10) days after demand in writing, Tenant does hereby make, constitute and irrevocably appoint Landlord as its attorney-in-fact (which shall be deemed to be coupled with an interest) in its name, place and stead so to do. Landlord agrees to use its reasonable

17

efforts to obtain a Subordination, Non-Disturbance and Attainment Agreement from any current or future mortgagee of the Center.

ARTICLE 20 Entry to Premises

20.01 Entry to Demised Premises by Landlord

(a) Landlord shall have the right to enter the Demised Premises upon one (1) day prior notice at all reasonable times and in a manner not to unreasonably interfere with Tenant’s business operations for the purposes of: (i) inspecting the Demised Premises; (ii) making any repairs to the Demised Premises and performing any work that may be necessary or desirable; (iii) exhibiting the demised premises for the purpose of sale, ground lease, mortgage or other financing; and (iv) exhibiting the Demised Premises during the one year prior to the expiration of the Term or at any time following delivery of a notice by Tenant pursuant to Section 17.01 to prospective tenants.

(b) Nothing in this Lease shall imply any duty on the part of Landlord to do work or perform obligations which, under any of the provisions of this Lease, Tenant may be required to perform, and any such performance by Landlord shall not constitute a constructive eviction, nor a waiver of Tenant’s default.

ARTICLE 21 Notices and Certificates

21.01 Notices

(a) Any notice, statement, certificate, request or demand required or permitted to be given or delivered by or in this Lease (a “Notice”) shall be in writing, and sent either by a nationally recognized overnight courier service, registered or certified mail, postage prepaid, return receipt requested, with simultaneous first class mailing, and in either case addressed, as the case may be, to Landlord and Tenant at the address shown at the beginning of this Lease, or to such other addresses as Landlord or Tenant shall designate in the manner provided in this Section. Landlord’s representative, as designated from time to time, is authorized to give or deliver to Tenant any Notice under this Lease. Any Notice, shall, in the case of registered or certified mailing, be deemed to have been given on the date mailed in any post office or branch post office regularly maintained by the United Stated Postal Service, and in the case of delivery by a nationally recognized overnight courier service, shall be deemed to have been given upon the date of delivery to an authorized agent of such courier service, except in each case for Notice of change of address or revocation of a prior Notice, which shall only be effective upon receipt,

(b) At any time or times when Tenant’s interest is vested in more than one person, firm or corporation, jointly, in common or severally, a Notice given by Landlord to any one such person, firm or corporation shall be conclusively deemed to have been given to all such persons, firms or corporations. Any Notices by Tenant to Landlord pursuant to the provisions of this Lease shall be void and ineffective unless signed by all persons, firms and corporations comprising the tenant hereunder unless all such persons, firms and corporations have previously given Notice to Landlord, signed by each of them and designating and authorizing one or more of them to give the Notice referred to, and such authorization shall then be unrevoked by any Notice to Landlord.

18

21.02 Intentionally Deleted

21.03 Estoppel Certificate

Within fifteen (15) days after request by Landlord or Holder, Tenant, from time to time and without charge, shall deliver to Landlord or the requesting party, or to a person, firm or corporation, specified by Landlord or Holder, a duly executed and acknowledged instrument (“Tenant’s Estoppel Certificate”) in recordable form and/or in such form as the landlord or its mortgagee may reasonably require. Such certification shall not estop Tenant from thereafter asserting any existing default of which Tenant did not have actual knowledge on the date of execution thereof.

ARTICLE 22 Covenant of Quiet Enjoyment

22.01 Covenant of Quiet Enjoyment

(a) Subject to the terms and provisions of this Lease and Tenant’s payment of the Rent and Additional Rent, and observing, keeping and performing all of the terms and provisions of this Lease on its part to be observed, kept and performed, Tenant shall lawfully, peaceably and quietly have, hold and enjoy the Demised Premises during the Term without hindrance or ejection by any persons lawfully claiming under Landlord; but it is understood and agreed that this covenant, and any and all other covenants of Landlord contained in this Lease shall be binding upon Landlord and its successors only with respect to breaches occurring during its and their respective ownership of Landlord’s interest in the Demised Premises.

(b) With respect to any services to be furnished by Landlord to Tenant, Landlord shall in no event be liable for failure to furnish the same when prevented from doing so by strike, lockout, breakdown, accident, order or regulation of or by any governmental authority, failure of supply, inability by the exercise of reasonable diligence to obtain supplies, parts or employees necessary to furnish such services, because of war or other emergency, or for any cause beyond Landlord’s control. In no event shall Landlord ever be liable to Tenant for any indirect or consequential damages by reason of Landlord’s breach or default of the terms of this Lease.

ARTICLE 23 Holdover

(a) It is expressly understood by Tenant that Tenant’s right to possession of the Demised Premises under this Lease shall terminate at the expiration or earlier termination of the Term, and should Tenant continue thereafter to remain in possession, Landlord, should it so elect, shall be entitled to the benefits of all provisions of law with respect to summary recovery of possession from a holdover tenant. Tenant shall indemnify, save harmless and defend Landlord from and against any claim, damage, expense, cost or loss which Landlord may incur by reason of such holding over, including without limitation, any claim of a succeeding tenant, or any loss by Landlord with respect to a lost opportunity to re-let the Demised Premises.

(b) Should Tenant continue to occupy the Demised Premises after the expiration or earlier termination of the Term with the consent of the Landlord, such tenancy shall be

19

from month-to-month, and such month-to-month tenancy shall be under the same terms, covenants and conditions as are set forth in this Lease, except that Tenant shall pay holdover rent (“Holdover Rent”) equal to (i) 125% of the monthly Base Rent for the last Lease Year of the Term for the first month following the expiration of this Lease; (ii) 150% of the monthly Base Rent for the last Lease Year of the Term for the second month following the expiration of this Lease; and (iii) 200% of the monthly Base Rent for the last Lease Year of the Term.

ARTICLE 24 Limitation on Landlord’s Personal Liability

(a) The term “Landlord” as used in this Section and throughout this Lease, shall be limited to mean and include only the owner or owners at the time in question of Landlord’s interest in this Lease. Further, in the event of any transfer by Landlord of Landlord’s interest in this Lease, the landlord named herein (and in case of any subsequent transfers or conveyances, the then assignor), including each of its partners, trustees, beneficiaries, shareholders, affiliates, co-tenants and principals shall be automatically freed and relieved, from and after the date of such transfer or conveyance, of all liability for the performance of any covenants and agreements on the part of Landlord.

(b) Tenant, its partners, trustees, beneficiaries, shareholders, affiliates, alter egos, successors and assigns are limited solely to the estate, interest and property of Landlord in the real property upon which the Center is situated and improvements to the real property, for the satisfaction of any of Tenant’s remedies, or for the satisfaction of any liens, rights or the collection of any damages, judgment or other judicial process with respect to any of the terms and conditions of this Lease, or any other obligations created by, under or related to this Lease.

(c) Tenant shall not have any recourse to or against any other property or assets of Landlord or its partners, trustees, beneficiaries, shareholders, affiliates, alter egos, successors, assigns, co-tenants or principals, nor shall Landlord or its agents, employees, partners, trustees, beneficiaries, stockholders, affiliates, representatives, insurers, nor shall any of Landlord’s banking institutions or trusts be subject to levy, execution or other prejudgment or judgment enforcement or attachment, for the satisfaction of Tenant’s remedies arising from or relating to this Lease.

(d) Landlord’s partners, trustees, beneficiaries and affiliates, shareholders, alter egos, of this Lease.

ARTICLE 25 Definition of Tenant’s Allocable Share

Tenant’s Allocable Share for this Lease is 7%. The term “Tenant’s Allocable Share” shall mean a fraction, the numerator of which is the number of square feet in the Demised Premises, and the denominator of which is the total number of square feet of all rentable space, excluding common areas. Except for gross errors on the part of Landlord.

ARTICLE 26 Force Majeure

The period of time during which either Party is prevented or delayed in any performance or the making of any improvements or repairs or fulfilling any obligation under this Lease, other than the payment of Rent, Percentage Rent and Additional Rent, due to unavoidable delays caused by fire, catastrophe, strikes or labor trouble, civil commotion,

20

Acts of God, the public enemy, governmental prohibitions or regulations or inability to obtain materials by reason thereof, or any other causes beyond such Party’s reasonable control (excluding lack of funds), shall be added to such Party’s time for performance, and such party shall have no liability by reason of such delay, except that as a condition to Tenant’s right to avail itself of force majeure, Tenant must give Landlord written Notice of such claimed force majeure not later than three (3) business days following the first occurrence of delay attributable to such force majeure.

ARTIFCLE 27 Intentionally omitted.

ARTICLE 28 Changes and Additions

Landlord reserves the right at any time, and from time to time, to make alterations or additions to, and to build additional stories on, under, above and adjoining the building in which the Demised Premises are located. Landlord also reserves the right at any time, and from time to time, to construct other buildings and improvements in or on the Center, to enlarge or otherwise modify the Center, provided the same does not interfere with Tenant’s use of the Demised Premises to make alterations or additions thereto, to build additional stories on any building or buildings within the Center, to build adjacent thereto, to construct decks or elevated parking facilities, to install, maintain, use, repair and replace ducts, wires, pipes and conduits passing through or under the Demised Premises serving other parts (now existing or hereafter added) of Center, and to sell or lease any part of the Center. Landlord reserves the right at any time to relocate the various buildings, parking areas and other Common Areas; provided, however, that there shall not be any unreasonable obstruction of Tenant’s right of access to the Demised Premises or any unreasonable interference with Tenant’s use of the Demised Premises for the purpose expressly contemplated hereby. Tenant hereby expressly waives any right to make claims including set-off arising out of landlord’s acts pursuant to this Article except for landlord’s willful act or gross negligence.

ARTICLE 29 Attornment by Tenant

If at any time during the Term Landlord shall be the holder of a leasehold estate covering premises which include the Demised Premises, and if such leasehold estate shall be canceled or otherwise terminated prior to the expiration date of the leasehold and prior to the expiration of the Term, or in the event of the surrender thereof whether voluntary, involuntary or by operation of law, Tenant shall make full and complete attornment to the lessor of such leasehold estate for the balance of the Term upon the same covenants and conditions as are contained in this Lease, so as to establish direct privity between such lessor and Tenant and with the same force and effect as though this Lease was made directly from such lessor to Tenant. Tenant shall then make all rent payments thereafter directly to such lessor. In the event any proceedings are brought for the foreclosure of, or in the event of conveyance by deed in lieu of foreclosure of, or in the event of the exercise of the power of sale under, any mortgage made by Landlord covering the Demised Premises, or in the event Landlord sells, conveys or otherwise transfers its interest in the Center or any portion thereof containing the Demised Premises, Tenant shall attorn to and hereby covenants and agrees to execute an instrument in writing reasonably satisfactory to the new owner whereby Tenant attorns to such successor in interest and recognizes such successor as the landlord under the lease.

21

ARTICLE 30 Intentionally Deleted

ARTICLE 31 Survival of Tenant’s Obligations

Any sums due Landlord from Tenant that by the terms herein would be payable, or are incapable of calculation, until after the expiration or earlier termination of this Lease shall survive and remain a continuing obligation until paid.

ARTICLE 32 Intentionally omitted

ARTICLE 33 Effect of Captions

The captions, bold-faced type, underlining, notational references, or legends in this Lease are inserted only for convenient reference or identification of the particular paragraphs and are in no way intended to describe, interpret, define or limit the scope, extent or interest of this Lease, or any paragraph or provision thereof.

ARTICLE 34 Tenant Authorized to Do Business

Tenant represents, warrants and covenants upon the date of execution, and throughout the Term, Tenant is authorized to do business and is in good standing in the State of New York. Tenant, if a partnership, limited liability company, corporation or other entity, agrees to furnish to Landlord, upon request, evidence of authority to enter into this Lease.

ARTICLE 35 Execution in Counterparts

This Lease may be executed in one or more counterparts, any one or all of which shall constitute but one agreement.

ARTICLE 36 Signs

(a) Tenant shall not place, maintain or suffer to be placed or maintained on or in exterior door, wall or window of the Demised Premises any sign, awning or canopy, decoration, lettering or advertising matter or other thing of any kind without first obtaining Landlord’s written approval. Tenant shall use the sign company designated by landlord. Tenant further agrees to maintain such sigh, awning, canopy, decoration, lettering, advertising matter or other thing as may be approved in good condition and repair at all times. Provided Tenant shall comply with all applicable laws and regulations, it shall have the right to install a sign post on the place approved by Landlord. Anything to the contrary contained herein notwithstanding, Tenant may erect and maintain signage in and outside the Demised Premises bearing Tenant’s logotype.

(b) Tenant shall have the right to erect a pylon sign in the parking lot of the Shopping Center. Tenant shall be responsible for all costs and expenses in connection with such signage and shall indemnify and hold Landlord harmless from and against any and all costs, losses and expenses incurred in connection with such signage including any municipal or building department violators.

22

ARTICLE 37 Intentionally Deleted

ARTICLE 38 Entire Agreement

This Lease contains and embraces the entire agreement between the Parties with respect to the matters contained in this Lease, and it or any part of it may not be changed, altered, modified, limited, terminated or extended orally or by any agreement between the Parties unless such agreement is in writing and signed by the Parties, their legal representatives, successors or assigns. Tenant acknowledges and agrees that neither Landlord nor any representative of Landlord nor any broker has made any representation to or agreement with Tenant relating to the Demised Premises, this Lease or the Center which is not contained in the express terms of this Lease. Tenant acknowledges and agrees that Tenant’s execution and delivery of this Lease is based upon Tenant’s independent investigation and analysis of the business potential and expenses represented by this Lease, and Tenant expressly waives any and all claims or defenses by Tenant against the enforcement of this Lease which are based upon allegations of representations, projections, estimates, understanding or agreements by Landlord or Landlord’s representative that are not contained in the express terms of this Lease. With respect to this Lease, Tenant hereby represents to Landlord that the transaction contemplated hereby does not violate Tenant’s formation documents or constitute a breach or violation or any provision of any indenture, mortgage, Lease, agreement, judgment, statute, rule or regulation to which Tenant is a party or by which Tenant is bound or by which Tenant is subject.

ARTICLE 39 Brokers

Landlord and Tenant each represent and warrant to the other that neither of them has employed any realtors or brokers in connection with the negotiation of this Lease, other than My Realty Co. (the “Broker”). Landlord and Tenant shall each indemnify, defend and hold harmless the other from any cost, expense or claim for brokerage or other commission arising from or out of any breach of the foregoing representation and warranty by the indemnitor. Landlord agrees that it shall be responsible tor payment of any commission due the Broker; provided, however, Tenant shall reimburse Landlord the amount of $10,000.00 on the Rent Commencement Date on account of any commissions which may be due the Broker.

ARTICLE 40 Intentionally Deleted

ARTICLE 41 Intentionally Deleted

ARTICLE 42 Invalidity of Particular Provisions

If any term or provision of this Lease or the application thereof to any person or circumstance is, to any extent, invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.

23

ARTICLE 43 Execution of Lease by Landlord

The submission of this document for examination and negotiation does not constitute an offer to lease, or a reservation of, or option for, the Demised Premises, and this document shall be effective and binding only upon the execution and delivery hereof by both Landlord and Tenant.

ARTICLE 44 Relationship of the Parties

Nothing contained herein shall be deemed or construed by the parties hereto nor by any third party as creating the relationship of principal and agent, or of partnership or of joint venture between the Parties, it being understood and agreed that neither the method of computation of rent nor any other provision contained in this Lease, nor any acts of the Parties, shall be deemed to create any relationship between the Parties other than Landlord and Tenant.

ARTICLE 45 Water Charges

There shall be no separate water meters. Tenant shall be responsible for payment for its own usage of water and sewer. Tenant shall reimburse landlord monthly an amount equal to the water and sewer bills paid or payable by landlord. Unless otherwise agreed, tenant agrees to accept water usage allocation determined by a professional water reading company.

ARTICLE 46 Intentionally omitted.

ARTICLE 47 Option to Extend

Tenant shall have one time option to extend this Lease for a period of five (5) years, provided that Tenant shall not be in default under the terms and conditions of the lease. Said option must be exercised during the period not earlier than 12 months and not later than 6 months prior to the expiration of this Lease by tenants notifying landlord in writing of tenant’s intent to exercise the option. Rent for such extended period shall be the greater of fair market rent or 105% of the previous year, to increase by 5% annually thereafter. In the event the parties are unable to agree upon a fair market rent, the same shall be determined by arbitration to be conducted before the American Arbitration Association under its commercial arbitration rules.

ARTICLE 48 Attorney’s Fees

In the event that landlord shall bring any proceeding against tenant for recovery of money damages, or for possession of the Demised Premises by reason of nonpayment of minimum annual rent or additional rent or for nonperformance by tenant of the terms and conditions of this Lease or for breach of lease, and landlord shall incur costs and expenses by reason of such default, such charges, including reasonable attorney’s fees, shall be due and payable from tenant as additional rent and shall become immediately due and payable upon the incurrence of same.

ARTICLE 49 Waiver

One or more waivers of any covenant or condition by landlord shall not be construed as a waiver of a subsequent breach of the same or any other covenant or condition, and the consent or approval by landlord to or of any act by tenant requiring landlord’s consent or

24

approval shall not be construed to waive or render unnecessary landlord’s consent or approval to or of any subsequent similar act by tenant.

Article 50 Regulatory Approvals.
The Tenant’s obligations hereunder are contingent upon receipt of approval of all regulatory agencies having jurisdiction over Tenant to the occupancy of the Demised Premises by Tenant. In the event Tenant is unable to secure such regulatory approvals within 60 days of the date a fully executed counterpart of this Lease is returned to Tenant, Tenant may terminate this Agreement on written notice in which event the parties shall be relieved of all obligations one to the other and any monies paid to Landlord by Tenant shall be immediately returned. In the event Tenant is unable to obtain regulatory approvals and terminates this Lease, it shall remit to Landlord an amount equal to one and one half month’s rent as and for liquidated damages in which event this Lease shall terminate and be of no further force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first above written.

LANDLORD:		TENANT:
GASEUNG REALTY CORP.		NARA BANK, N.A.
By:	/s/ Kyong in Park	By:
	Name:		Name: Nani Thanawala
	Title:		Title: First Vice President

25

FIRST RIDER TO LEASE

LANDLORD	:	GASEUNG REALTY CORP.
TENANT	:	NARA BANK
PREMISES	:	Store No. 3 and Store No. 4
		209-07 and 209-09 NORTHERN BLVD., BAYSIDE, NY
DATE	:	JANUARY                     , 2005

A. In the event of any conflict between this First Rider to Lease and the Main Text of Shopping Center Lease, this First Rider will prevail and control.

B. Address of the premises shall be: 209-07 & 209-09 Northern Blvd., Bayside, NY 11361. 209-07 is Store No. 3 and 209-09 is Store No. 4.

C. On Page 1, Landlord’s address For notices shall be: P.O. Box 750427, Forest Hills, NY 11375.

D. Article 2 of the Lease is deleted in its entirety and shall be replaced by the following:

     ARTICLE 2 TERM OF THE LEASE

2.01 Lease Commencement Date
The term of this lease shall commence on the date landlord delivers to tenant Temporary Certificate of Occupancy for general commercial use. (“Lease Commencement Date”). The month in which Lease Commencement Date occurs, whether full month or not, shall be the first month of this lease.

However, Tenant’s obligations hereunder are contingent upon receipt of approval of all regulatory agencies having jurisdiction over Tenant for the occupancy of the Demised Premises by Tenant, pursuant to Article 50 hereof.

2.02 Free Rent
Tenant’s obligation to pay base monthly rent shall be waived for second, third and four months of the first year.

2.03 Expiration Date
The term of this lease shall expire on the last day of 60^th month.

2.04 Surrender of Demised Premises
On the expiration or earlier termination of this lease, Tenant agrees, without necessity of any notices from Landlord (statutory or otherwise), to surrender the demised premises in accordance with Articles 9 and 13, in broom clean condition and in good order and repair, subject only to reasonable wear and tear.

E. Article 3 of the Lease is deleted in its entirety and shall be replaced by the following:

ARTICLE 3 RENT

3.01 Minimum Annual Rent

(a) Tenant agrees to pay Landlord throughout the Term, without diminution, abatement, deduction or set-off whatsoever and without prior notice or demand, minimum annual rent in equal monthly installment on the first day of each calendar month through the Term, as follows:

Year		Monthly	Annual
1st	1st Month	Prorated on per diem basis
	2nd Month	Waived
	3rd Month	Waived
	4th Month	Waived
	5th to 12th Months	$7,000.00
2nd	13th through 24th Months	$7,210.00	$	86,520.00
3rd	25th through 36th Months	$7,426.30	$	89,115.60
4th	37th through 48th Months	$7,649.08	$	91,788.96
5th	49th through 60th Months	$7,878.56	$	94,542.72

(b) If the Term shall commence upon a day other than the first day of a calendar month or if the Term shall expire upon a day other than the last day of a calendar month, the Monthly Rent For such partial month shall be prorated on a per diem basis.

3.02 Delinquent Payments
(a) If during the Term Tenant fails to pay the full amount of the Monthly Rent or Additional Rent within ten (10) days from the due date, then five percent (5%) late charge shall accrue on the unpaid portion, and same shall be paid to Landlord at the time of payment of the delinquent sum. Landlord shall have the right to apply any payments made by Tenant first to any deficiency in the payment of the interest and administrative charges due.
(b) Any payment to be made by Tenant under this lease shall be deemed to have been paid upon the date that it is received by Landlord.

3.03 Additional Rent
All charges, costs, expenses, reimbursements, fees, interest and other payments to be made by Tenant to Landlord under this lease, including Tenant’s Allocable Share of real property taxes and common area maintenance charges shall be deemed to be Additional Rent.

3.04 Place for Payments
(a) Tenant shall deliver to Landlord all payments of Rent and Additional Rent at the

The term “Common Areas” shall mean the interior and exterior areas and facilities within and around the Center which are not leased to a tenant, or by nature not leasable to a tenant for the purpose of the sale of merchandise or the rendition of services to the general public. Common Areas shall include, but shall not be limited to, all parking areas and facilities, roadways, driveways, entrances and exits, truck service ways and tunnels, utilities, water filtration and treatment facilities, retention ponds or basins located within or outside the Center, retaining and exterior walls, sidewalks, open and enclosed malls, outside courts, landscaped and planted areas, escalators, stairways, elevators, service corridors, service areas loading docks, hallways, public restrooms, community rooms or areas, roofs, equipment, signs and any special areas provided by Landlord for the common or joint use and benefit of all tenants in the Center, their employees, customers and invitees.

7.02 Use of Common Areas
(a) Tenant and its officers, employees, agents, customers and invitees shall have the nonexclusive right, in common with Landlord and all others to whom Landlord has or may hereafter grant rights, to use the Common Areas designated by Landlord from time to time, subject to such regulations as Landlord may from time to time impose.
(b) Each of Store Nos. 1 through 8 shall have one reserved parking space in the parking lot on 209^th Street side (Westside of the building). Store No. 9, if occupied by one tenant, shall have all four spaces adjacent to the Store No. 9 on the eastside of the building. The rest of space in the parking lots shall be used non-exclusive basis. Landlord reserves right to modify this section for the benefit of the entire Center or otherwise commercially reasonable.
(c) Each tenant shall keep the hallway and sidewalk adjacent to the demised premises In good, safe, neat, and clean condition.
(d) Landlord may at any time: (i) close temporarily the Common Areas or any portion thereof; (ii) make repairs or changes to prevent the acquisition of public rights therein; (iii) discourage noncustomer parking; and (iv) do such other acts in and to the Common Areas as in its judgment may be desirable to improve the convenience thereof. Tenant shall not at any time interfere with the rights of Landlord and other tenants, its and their permitted officers, employees, agents, customers, and invitees, to use any part of the parking areas and other Common Areas. Landlord shall have the sole and exclusive right to use the Common Areas for advertising purposes, promotions, exhibits, shows, displays, kiosks and other similar uses.

7.03 Common Area Maintenance (CAM) Charges

Tenant shall pay Tenant’s Allocable Share of CAM charges. Common Area Maintenance Charges shall mean the total costs and expenses incurred in operating, heating, ventilating, cooling, security, insurance, sprinklers, compactor expenses, managing, food court maintenance and maintaining the Common Areas, including without limitation, such maintenance, repair, replacement and remodeling as shall be required in Landlord’s sole and absolute judgment to preserve the utility thereof as existed at the time of completion of the original construction and installation.

G. Article 25 of the Lease is deleted in its entirety and shall be replaced by the following:

ARTICLE 25 TENANT’S ALLOCABLE SHARE

Tenant’s Allocable Share for this lease is Fourteen (14%) Percent. The term “Tenant’s Allocable Share” shall mean a fraction, the numerator of which is the number of square feet in the demised premises, and the denominator of which is the total number of square feet of all rentable space, excluding common areas. Except for gross errors on the part of Landlord, Tenant waives right to assert accuracy of the Tenant’s Allocable Share described in this lease.

H. To Article 36 Signs, the following shall be added:

Tenant agrees to reimburse Landlord in the amount of $2,000.00 in payment of cost for sign design/installation.

I. Article 46 Security Deposit is inserted as follows:

ARTICLE 46 SECURITY DEPOSIT

Upon execution of this lease, Tenant agrees to deposit with landlord the sum of $21,000.00, representing the current three (3) months rent, as security for the faithful performance and observance by tenant of the terms and conditions of this lease. Tenant shall pay additional security deposit to keep the total amount of security deposit equal to the then current three (3) months rent. Security deposit will not be maintained in an interest bearing account. Tenant agrees that landlord shall have the right to apply security deposit for expenses incurred as a result of default including non payment of rent and legal fees.

LANDLORD:		TENANT:
GASEUNG REALTY CORP.		NARA BANK, N.A.
By:	/s/ Kyong in Park	By:
	Kyong in Park		Nani Thanawala
	President		First Vice President

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Ho Yang, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Nara Bancorp, Inc. (“the Company”);
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made know to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation and
d)	Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting

Dated: June 30, 2005	/s/ Ho Yang
	Ho Yang
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Christine Oh, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Nara Bancorp, Inc. (“the Company”);
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made know to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation and
d)	Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting

Date: June 30, 2005	/s/ Christine Oh
	Christine Oh
	Senior Vice President and Acting Chief Financial Officer

EX-32.1

EXHIBIT 32.1

In connection with the periodic report of Nara Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2005 as filed with the Securities and Exchange Commission (the “Report”), I, Ho Yang, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

     (1) the Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Dated: June 30, 2005
	/s/ Ho Yang
	Chief Executive Officer

EX-32.2

EXHIBIT 32.2

In connection with the periodic report of Nara Bancorp, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2005 as filed with the Securities and Exchange Commission (the “Report”), I, Ho Yang, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

     (1) the Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

     (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Dated: June 30, 2005
	/s/ Christine Oh
	Acting Chief Financial Officer