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 June 30, 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 þ No o

     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 June 30, 2005, there were 23,694,596 outstanding shares of the issuer’s Common Stock, $0.001 par value.

Table of Contents

		Page
PART I FINANCIAL INFORMATION
Item 1.	FINANCIAL STATEMENTS
	Forward Looking Information		3
	Condensed Consolidated Statements of Financial Condition - June 30, 2005 (unaudited) and December 31, 2004		4
	Condensed Consolidated Statements of Income - Three and Six Months Ended June 30, 2005 and 2004 (unaudited)		6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity - Six Months Ended June 30, 2005 and 2004 (unaudited)		7
	Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2005 and 2004 (unaudited)		8
	Notes to Condensed Consolidated Financial Statements (unaudited)		10
Item 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		18
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		42
Item 4.	CONTROLS AND PROCEDURES		45
PART II OTHER INFORMATION
Item 1.	Legal Proceeding		48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		48
Item 3.	Defaults Upon Senior Securities		48
Item 4.	Submission of Matters to a Vote of Securities Holders		48
Item 5.	Other Information		48
Item 6.	Exhibits		48
	Signature		49
	Index to Exhibits		50
	Certifications		51
Exhibit 10.1
Exhibit 10.2
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

2

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 as well as regulatory enforcement actions 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 and Item 2 of Part I in this report under the caption “Results of Operations — Factors That May Impact Our Business or the Value of Our Stock.”

3

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

NARA BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	(Unaudited)
	June 30,		December 31,
	2005		2004
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	32,672,417	$	27,712,221
Federal funds sold		77,400,000		47,500,000
Term federal funds sold		12,000,000		12,000,000
Total cash and cash equivalents		122,072,417		87,212,221
Interest bearing deposits with other financial institutions		95,000		—
Securities available for sale, at fair value		131,245,577		133,385,948
Securities held to maturity, at amortized cost (fair value:
June 30, 2005 - $2,051,865; December 31, 2004- $2,087,717)		2,000,861		2,001,071
Interest-only strips, at fair value		669,893		714,046
Interest rate swaps, at fair value		273,033		646,783
Loans held for sale, at the lower of cost or market		11,630,610		4,729,911
Loans receivable, net of allowance for loan losses (June 30, 2005 - $16,768,535; December 31, 2004 - $14,626,760)		1,370,510,912		1,207,107,713
Federal Reserve Bank stock , at cost		1,803,300		1,803,300
Federal Home Loan Bank (FHLB) Stock, at cost		6,325,900		4,801,800
Premises and equipment, net		6,836,512		6,869,553
Accrued interest receivable		6,164,323		5,124,017
Servicing assets		3,737,989		3,668,461
Deferred tax assets		14,019,201		13,635,602
Customers’ liabilities on acceptances		9,855,848		7,447,983
Cash surrender value of life insurance		14,432,923		14,226,314
Goodwill		2,347,150		2,347,150
Intangible assets, net		3,946,947		4,305,450
Other assets		9,413,040		8,284,227
Total assets	$	1,717,381,436	$	1,508,311,550

(Continued)

4

NARA BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

LIABILITIES AND STOCKHOLDERS’ EQUITY

	(Unaudited)
	June 30,			December 31,
	2005			2004
LIABILITIES:
Deposits:
Noninterest bearing	$	367,516,169		$	328,325,741
Interest bearing:
Money market and other		266,828,711			323,477,365
Savings deposits		99,623,611			118,856,820
Time deposits of $100,000 or more		662,393,746			407,100,231
Other time deposits		100,161,033			78,214,767
Total deposits		1,496,523,270			1,255,974,924
Borrowings from Federal Home Loan Bank		43,000,000			90,000,000
Accrued interest payable		4,518,184			3,411,609
Acceptances outstanding		9,855,848			7,447,983
Interest rate swaps, at fair value		936,492			796,132
Subordinated debentures		39,268,000			39,268,000
Other liabilities		10,312,504			10,158,345
Total liabilities		1,604,414,298			1,407,056,993
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value; authorized, 40,000,000 shares at June 30, 2005 and December 31, 2004 issued and outstanding, 23,694,596 and 23,333,338 shares at June 30, 2005 and December 31, 2004, respectively		23,695			23,333
Capital surplus		47,464,965			44,902,604
Deferred compensation		—			(2,556	)
Retained earnings		66,572,824			56,848,237
Accumulated other comprehensive loss, net:		(1,094,346	)		(517,061	)
Total stockholders’ equity		112,967,138			101,254,557
Total liabilities and stockholders’ equity	$	1,717,381,436		$	1,508,311,550

See accompanying notes to condensed consolidated financial statements (unaudited)

5

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three and six months ended June 30, 2005 and 2004
(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
				(Restated)						(Restated)
INTEREST INCOME:
Interest and fees on loans	$	25,559,134		$	15,930,131		$	47,597,458		$	30,810,147
Interest on securities		1,388,894			1,242,284			2,789,097			2,582,810
Interest on interest rate swaps		202,862			904,945			619,750			1,809,889
Interest on federal funds sold and other investments		345,543			148,103			584,048			268,650
Total interest income		27,496,433			18,225,463			51,590,353			35,471,496
INTEREST EXPENSE:
Interest on deposits		7,074,435			3,374,500			12,532,570			6,457,460
Interest on subordinated debentures		696,863			565,279			1,353,535			1,123,971
Interest on other borrowings		728,727			236,690			1,375,750			528,993
Total interest expense		8,500,025			4,176,469			15,261,855			8,110,424
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES		18,996,408			14,048,994			36,328,498			27,361,072
PROVISION FOR LOAN LOSSES		1,950,000			1,300,000			3,600,000			2,800,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		17,046,408			12,748,994			32,728,498			24,561,072
NON-INTEREST INCOME:
Service fees on deposit accounts		1,581,733			2,034,928			3,159,613			4,062,259
Other income and fees		2,243,314			2,083,833			4,121,944			4,009,883
Net gains on sales of SBA loans		1,093,617			1,549,754			1,842,714			2,390,633
Net gains on sales of securities available-for sale		127,503			103,247			142,661			408,223
Net gains (losses) on sales of premises and equipment		(491	)		2,660			(6,370	)		2,443
Net losses on interest rate swaps		(16,909	)		(1,025,756	)		(52,235	)		(306,021	)
Loan referral fees		—			478,038			—			478,038
Other than temporary impairment on securities		—			(123,418	)		—			(1,756,584	)
Total non-interest income		5,028,767			5,103,286			9,208,327			9,288,874
NON-INTEREST EXPENSE:
Salaries and employee benefits		6,152,646			5,668,859			11,415,311			11,487,186
Occupancy		1,691,904			1,510,837			3,288,137			2,971,306
Furniture and equipment		497,301			483,813			1,007,335			903,008
Advertising and marketing		464,229			490,775			854,347			797,315
Communications		182,124			162,672			368,372			324,092
Data processing		678,589			630,998			1,288,096			1,203,599
Professional fees		1,185,181			388,886			1,941,651			718,687
Office supplies and forms		109,756			120,220			207,178			218,847
Other		1,492,115			1,228,566			2,783,912			2,328,807
Total non-interest expense		12,453,845			10,685,626			23,154,339			20,952,847
INCOME BEFORE INCOME TAXES		9,621,330			7,166,654			18,782,486			12,897,099
INCOME TAXES		4,008,746			2,774,744			7,764,820			4,964,718
NET INCOME	$	5,612,584		$	4,391,910		$	11,017,666		$	7,932,381
EARNINGS PER SHARE
Basic	$	0.24		$	0.19		$	0.47		$	0.34
Diluted		0.23			0.18			0.45			0.32

See accompanying notes to condensed consolidated financial statements (unaudited)

6

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

SIX MONTHS ENDED June 30, 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, 2004 (restated)		23,120,178		$	23,120		$	43,046,200		$	(10,222	)	$	39,566,995		$	(54,571	)
Stock options exercised		80,660			81			344,085
Tax benefit from stock options exercised								200,176
Amortization of restricted stock											3,833
Cash dividends declared ($0.0525 per share)														(1,217,825	)
Comprehensive income:
Net income (restated)														7,932,381					$	7,932,381
Other comprehensive income:
Change in unrealized gain (loss) on securities available for sale and interest-only- strips, net of tax																	(1,034,062	)		(1,034,062	)
Change in unrealized gain (loss) on interest rate swaps — net of tax																	(1,466,614	)		(1,466,614	)
Total comprehensive income																			$	5,431,705
BALANCE, JUNE 30, 2004 (restated)		23,200,838		$	23,201		$	43,590,461		$	(6,389	)	$	46,281,551		$	(2,555,247	)
BALANCE, JANUARY 1, 2005		23,333,338		$	23,333		$	44,902,604		$	(2,556	)	$	56,848,237		$	(517,061	)
Stock options exercised		362,592			363			952,294
Tax benefit from stock options exercised								1,617,732
Amortization of restricted stock											639
Forfeiture of restricted stock		(1,334	)		(1	)		(7,665	)		1,917
Cash dividends declared ($0.055 per share)														(1,293,079	)
Comprehensive income:
Net income														11,017,666					$	11,017,666
Other comprehensive income (loss):
Change in unrealized gain (loss) on securities available for sale and interest-only-strips , net of tax																	(300,160	)		(300,160	)
Change in unrealized gain (loss) on interest rate swaps — net of tax																	(277,125	)		(277,125	)
Total comprehensive income																			$	10,440,381
BALANCE, JUNE 30, 2005		23,694,596		$	23,695		$	47,464,965		$	—		$	66,572,824		$	(1,094,346	)

See accompanying notes to condensed consolidated financial statements (unaudited)

7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(Unaudited)

	Six Months Ended
	June 30,
	2005			2004
				(Restated)
CASH FLOW FROM OPERATING ACTIVITIES
Net income	$	11,017,666		$	7,932,381
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation, amortization, and accretion		1,603,448			1,582,494
Provision for loan losses		3,600,000			2,800,000
Proceeds from sales of loans		34,550,157			32,826,366
Originations of loans held for sale		(39,608,142	)		(33,209,015	)
Net gains on sales of loans		(1,842,714	)		(2,390,633	)
Net gains on sales of securities available for sale		(142,661	)		(408,223	)
Net change in cash surrender value of life insurance		(206,609	)		(216,133	)
Net (gains) losses on sales of premises and equipment		6,370			(2,443	)
Net losses on interest rate swaps		52,235			306,021
Change in accrued interest receivable		(1,040,306	)		242,571
Deferred income taxes		—			(8,178	)
Other than temporary impairment on investment securities		—			1,756,584
FHLB stock dividends		(99,000	)		(48,500	)
Change in other assets		(1,509,916	)		(3,602,794	)
Change in accrued interest payable		1,106,575			(167,390	)
Change in interest-only strips		(16,106	)		(166,781	)
Change in other liabilities		1,763,020			406,248
Net cash from operating activities		9,234,017			7,632,575
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans receivable		(167,003,199	)		(102,303,177	)
Purchase of premises and equipment		(791,105	)		(1,478,201	)
Purchase of securities available for sale		(25,521,365	)		(32,401,049	)
Net change in interest-bearing deposits with other financial institutions		(95,000	)		—
Purchase of FHLB stock		(1,425,100	)		(1,050,900	)
Proceeds from sales of premises and equipment		—			3,191
Proceeds from sales of securities available for sale		13,900,895			11,946,715
Proceeds from matured or called securities available for sale		13,344,258			18,844,033
Purchase of Federal Reserve Stock					(240,000	)
Proceeds from redemption of FHLB stock		—			1,091,500
Net cash from investing activities		(167,590,616	)		(105,587,888	)

(Continued)

8

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(Unaudited)

	Six Months Ended
	June 30,
	2005			2004
				(Restated)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits		240,548,346			159,227,875
Payment of cash dividends		(1,284,208	)		(1,217,825	)
Repayment of FHLB borrowings		(106,500,000	)		(50,000,000	)
Proceeds from FHLB borrowings		59,500,000			22,000,000
Proceeds from exercise of stock options		952,657			344,166
Net cash from financing activities		193,216,795			130,354,216
NET CHANGE IN CASH AND CASH EQUIVALENTS		34,860,196			32,398,903
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		87,212,221			76,438,497
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	122,072,417		$	108,837,400
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	14,155,280		$	8,277,814
Income taxes paid	$	4,920,000		$	6,696,245

See accompanying notes to condensed consolidated financial statements (unaudited)

9

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Nara Bancorp, Inc.

     Nara Bancorp, Inc. (“Nara Bancorp”, on a parent-only basis, and “Company,” “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” or “the 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. 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 at June 30, 2005 and the results of our operations for the three and six months then ended. Certain reclassifications have been made to prior period amounts to conform to the current year 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 and six months ended June 30, 2004 is labeled “restated” as it has been revised from the information previously reported and filed for the three and six months ended June 30, 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. Recent Development

     On July 29, 2005, Nara Bank, a wholly-owned subsidiary of Nara Bancorp, Inc., entered into a Memorandum of Understanding (“MOU”) with the Federal Reserve Bank of San Francisco (“Reserve Bank”) and the California Department of Financial Institutions (“Department”). Under the terms of the MOU, the Bank cannot declare dividends, without the prior written approval of the Reserve Bank and the Department. Other material provisions of the MOU require the Company and the Bank to: (i) employ an independent consultant acceptable to the Reserve Bank and the Department to conduct a review of the composition, structure and effectiveness of Nara Bank’s current directors and executive officers, (ii) prepare and submit a written plan to the Reserve Bank and the Department to strengthen the Bank’s Board of Directors’ oversight of management and operations of the Bank, (iii) prepare and submit to the Reserve Bank and the Department acceptable policies, procedures and programs to strengthen the Bank’s internal controls, (iv) prepare and submit to the Reserve Bank and the Department a written plan to strengthen the oversight of the Bank’s internal audit function, (v) take such actions necessary to comply with Section 501 of the Gramm-Leach-

10

Bliley Act, (vi) prepare and submit to the Reserve Bank and the Department an acceptable written information security program and a comprehensive written business resumption plan, and conduct a formal test of the business resumption plan, (vii) prepare and submit a written contingency capital plan, (viii) prepare and submit to the Reserve Bank and Department financial projections for the years 2005-2007 and revise the Bank’s three-year strategic plan, (ix) prepare and submit during the term of the MOU, annual financial projections for each subsequent calendar year at least one month prior to the beginning of the calendar year, (x) notify the Reserve Bank and the Department of all revisions to the budget within 5 days of approval by the Bank’s Board of Directors, (xi) notify the Reserve Bank and the Department thirty (30) days prior to the appointment of any new director or senior executive officer or changing the responsibilities of any current senior officer, (xii) permit the Bank to make any indemnification and golden parachute or severance payments, or enter into any agreements to make such payments to institution-affiliated parties only with the prior written approval of the Board of Governors of the Federal Reserve System and concurrence of the Federal Deposit Insurance Corporation, and (xiii) prepare and submit progress reports to the Reserve Bank and the Department. The MOU will remain in effect until modified or terminated by the Reserve Bank and the Department.

     The Company has already taken preliminary steps to respond to certain of the concerns raised in the MOU. The Board of Directors has appointed a Compliance Committee consisting of independent directors to plan, coordinate and monitor compliance with the MOU. The Board of Directors has received and reviewed proposals from four independent consulting firms, and will shortly submit its selection to the regulators for approval. Although not a direct requirement of the MOU, the Board of Directors has reconstituted and renamed the Nominations Committee of the Board to the Nominations and Governance Committee, which shall oversee the selection of new directors as well as address governance matters. Further, the role of Corporate Governance and Ethics Officer has been assigned to the Company’s acting internal legal counsel. To strengthen the management team, the Bank has hired a new Chief Financial Officer, a new Chief Risk Officer, and promoted from within to fill the positions of Chief Operations Administrator and Chief Credit Officer. At the Board level, all members of our Board, except for one whose schedule did not permit him to attend, attended the Directors’ College, a program run by Stanford University Law School.

Additional Company Restrictions.

     The Company has agreed with the Reserve Bank and the Department to additional restrictions as well, and must take all necessary steps to ensure that the Bank complies with the MOU, and it also must report its progress to the Reserve Bank . In addition, the Company may not declare any dividends or make any payments on the outstanding trust preferred securities issued by the Company’s subsidiaries and may not receive any dividends or payments representing a reduction of capital from the Bank, without the prior written approval of the Reserve Bank. Without the consent of the Reserve Bank, the Company may not: (i) increase its borrowings, incur any debt or renew existing debt, (ii) issue any trust preferred securities, (iii) purchase any of its stock, (iv) appoint any new director or senior executive officer or change the responsibilities of any current senior executive officer, or (v) make any indemnification and golden parachute or severance payments, or enter into agreements to make such payments to institution-affiliated parties. Finally, the Company must affirmatively ensure that all regulatory reports filed, accurately reflect the Company’s condition, are filed on a timely basis, and all records, and supporting work papers are maintained.

Troubled Condition Designation.

     On July 8, 2005, the Reserve Bank notified the Company and Nara Bank that it had designated the Company and Nara Bank to be in a “troubled condition” for purposes of Section 914 of the Financial Institutions Reform, Recovery and Enforcement Act of 1989. As a result of that designation neither the Company nor Nara Bank may appoint any new director or senior executive officer or change the responsibilities of any current senior executive officers without providing the Reserve Bank thirty (30) days prior written notice. The Board of Governors of the Federal Reserve System may disapprove a notice in certain circumstances. In addition, neither the Company nor Nara Bank may make indemnification and severance payments or enter into agreements with institution-affiliated parties therefore without complying with certain statutory restrictions including prior written approval of the Board of Governors of the Federal Reserve System and concurrence from the Federal Deposit Insurance Corporation.

11

Capital

     While the Company continues to be well-capitalized under all regulatory guidelines, before the end of 2005, it may raise additional capital through a private placement transaction of its common stock. The common stock will not be registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

5. 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:

	For the three months ended						For the six months ended
	June 30,						June 30,
	2005			2004			2005			2004
				(Restated)						(Restated)
Net income—as reported	$	5,612,584		$	4,391,910		$	11,017,666		$	7,932,381
Deduct: Total stock-based employee compensation expense determined under the fair value-based method for all awards—net of related tax effects		(180,658	)		(243,036	)		(408,127	)		(488,224	)
Pro forma net income	$	5,431,926		$	4,148,874		$	10,609,539		$	7,444,157
EPS:
Basic—as reported	$	0.24		$	0.19		$	0.47		$	0.34
Basic—pro forma		0.23			0.18			0.45			0.32
Diluted—as reported	$	0.23		$	0.18		$	0.45		$	0.32
Diluted—pro forma		0.22			0.17			0.43			0.30

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.

	June 30,
	2005			2004
Risk-free interest rate		4.4	%		3.5	%
Expected option life (years)		3.5			6.0
Expected stock price volatility		35.4	%		38.5	%
Dividend yield		0.6	%		0.5	%
Weighted average fair value of options granted during the period	$	6.28		$	6.21

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6. Dividends

     On March 10, 2005, we declared a $0.0275 per share cash dividend which was 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 which was paid on July 17, 2005 to stockholders of record at the close of business on July 5, 2005. For so long as Nara Bancorp and Nara Bank are parties to the Memorandum of Understanding (described in note of “Recent Development”), Nara Bank may not declare or pay any cash dividends to Nara Bancorp, without the prior written approval of the Reserve Bank and the Department of Financial Institution. Also, under a Board resolution, Nara Bancorp may not declare or pay any cash dividends to its stockholders without the prior written approval of the Reserve Bank. No assurance can be given that the regulators would approve a request to pay cash dividends.

7. 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.

     The following table shows how we computed basic and diluted EPS for the three and six months ended June 30, 2005 and 2004.

	For the three months ended June 30,
	2005						2004 (Restated)
	Net Income		Shares		Per Share		Net Income		Shares		Per Share
	(Numerator)		(Denominator)		(Amount)		(Numerator)		(Denominator)		(Amount)
Basic EPS	$	5,612,584		23,653,365	$	0.24	$	4,391,910		23,181,561	$	0.19
Effect of Dilutive Securities:
Stock Options		—		884,816				—		1,279,512
Diluted EPS	$	5,612,584		24,538,181	$	0.23	$	4,391,910		24,461,073	$	0.18

	For the six months ended June 30,
	2005						2004 (Restated)
	Net Income		Shares		Per Share		Net Income		Shares		Per Share
	(Numerator)		(Denominator)		(Amount)		(Numerator)		(Denominator)		(Amount)
Basic EPS	$	11,017,666		23,504,411	$	0.47	$	7,932,381		23,168,883	$	0.34
Effect of Dilutive Securities:
Stock Options		—		1,130,438				—		1,278,433
Diluted EPS	$	11,017,666		24,634,849	$	0.45	$	7,932,381		24,447,316	$	0.32

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8. 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 as of 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.

9. Loans Receivable and Allowance For Loan Losses

     The following is a summary of loans receivable by major category:

	June 30, 2005			December 31, 2004
Commercial loans	$	481,226,089		$	441,940,400
Real estate loans		842,130,829			717,746,940
Consumer and other loans		67,010,066			64,844,647
		1,390,366,984			1,224,531,987
Unamortized deferred loan fees, net of cost		(3,087,537	)		(2,797,514	)
Allowance for loan losses		(16,768,535	)		(14,626,760	)
Loans receivable, net	$	1,370,510,912		$	1,207,107,713

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

	Six months ended June 30,
	2005			2004
Balance, beginning of period	$	14,626,760		$	12,470,735
Provision for loan losses		3,600,000			2,800,000
Loan charge-offs		(1,841,272	)		(1,431,699	)
Loan recoveries		383,047			456,749
Balance, end of period	$	16,768,535		$	14,295,785

At June 30, 2005, December 31, 2004 and June 30, 2004, the Company had classified $3.7 million, $2.8 million and $5.0 million, respectively, of its commercial and real estate loans as impaired, with specific loss allocations of $989 thousand, $797 thousand and $1.1 million, respectively. There were no impaired loans without specific loss allocations. At June 30, 2005, loans on non-accrual status totaled $2.8 million compared to $2.7 million at December 31, 2004 and $4.9 million at June 30, 2004. At June 30, 2005, there were loans totaled $86 thousand past due more than 90 days and still accruing interest, compared to $0 at December 31, 2004 and June 30, 2004.

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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 $120,000,000 of variable rate loans indexed to Prime. As of June 30, 2005, the amounts in accumulated other comprehensive income (loss) associated with these cash flow hedges totaled a loss of $450,881 (net of tax benefit of $300,587), of which $44,005 is expected to be reclassified as a reduction into interest income within the next 12 months. As of June 30, 2005, the maximum length of time over which the Company is hedging its exposure to the variability of future cash flows is approximately 7 years.

     Interest rate swap information at June 30, 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		7.59	%		4/30/2007		273,033			185,024
	20,000,000	H.15 Prime 1		6.09	%		10/09/2007		(335,214	)		(335,214	)
	20,000,000	H.15 Prime 1		6.58	%		10/09/2009		(287,933	)		(287,933	)
	20,000,000	H.15 Prime 1		7.03	%		10/09/2012		(35,322	)		(35,322	)
	20,000,000	H.15 Prime 1		5.60	%		12/17/2005		(98,364	)		(98,364	)
	10,000,000	H.15 Prime 1		6.32	%		12/17/2007		(129,205	)		(129,205	)
	10,000,000	H.15 Prime 1		6.83	%		12/17/2009		(50,454	)		(50,454	)
$	120,000,000							$	(663,459	)	$	(751,468	)

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

     The realized loss on interest rate swaps due to hedge ineffectiveness was $17 thousand and $1.0 million for the three months ended June 30, 2005 and 2004, respectively. The realized loss on interest swaps due to hedge ineffectiveness was $52 thousand and $306 thousand for the six months ended June 30, 2005 and 2004, respectively.

     During the second quarters of 2005 and 2004, interest income recorded on swap transactions totaled $203 thousand and $905 thousand, respectively. During the first six months of 2005 and 2004, interest income recorded on swap transactions totaled $620 thousand and $1.8 million. At June 30, 2005, we pledged as collateral to the interest rate swap counterparties agency securities with a book value of $1.0 million and real estate loans of $3.5 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.

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     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.

     The following tables present the operating results and other key financial measures for the individual operating segments for the three and six months ended June 30, 2005 and 2004.

Three Months Ended June 30,
(Dollars in thousands)

	Business Segment
	Banking
	Operations		TFS		SBA		Company
2005
Net interest income, before provision for loan losses	$	14,753	$	1,611	$	2,632	$	18,996
Less provision for loan losses		1,875		—		75		1,950
Non-interest income		2,216		881		1,932		5,029
Net revenue		15,094		2,492		4,489		22,075
Non-interest expense		9,943		906		1,604		12,453
Income before taxes	$	5,151	$	1,586	$	2,885	$	9,622
Goodwill	$	2,347	$	—	$	—	$	2,347
Total assets	$	1,343,617	$	136,900	$	236,864	$	1,717,381
2004 (restated)
Net interest income, before provision for loan losses	$	10,885	$	1,106	$	2,058	$	14,049
Less provision for loan losses		1,010		—		290		1,300
Non-interest income		1,803		783		2,518		5,104
Net revenue		11,678		1,889		4,286		17,853
Non-interest expense		8,765		842		1,079		10,686
Income before taxes	$	2,913	$	1,047	$	3,207	$	7,167
Goodwill	$	2,347	$	—	$	—	$	2,347
Total assets	$	1,090,541	$	110,485	$	197,698	$	1,398,724

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Six Months Ended June 30,
(Dollars in thousands)

	Business Segment
	Banking
	Operations		TFS		SBA		Company
2005
Net interest income, before provision for loan losses	$	28,371	$	3,015	$	4,942	$	36,328
Less provision for loan losses		3,485		20		95		3,600
Non-interest income		4,502		1,583		3,123		9,208
Net revenue		29,388		4,578		7,970		41,936
Non-interest expense		18,793		1,622		2,739		23,154
Income before taxes	$	10,595	$	2,956	$	5,231	$	18,782
Goodwill	$	2,347	$	—	$	—	$	2,347
Total assets	$	1,343,617	$	136,900	$	236,864	$	1,717,381
2004 (restated)
Net interest income, before provision for loan losses	$	19,368	$	4,127	$	3,866	$	27,361
Less provision for loan losses		1,820		430		550		2,800
Non-interest income		4,137		1,438		3,714		9,289
Net revenue		21,685		5,135		7,030		33,850
Non-interest expense		15,993		3,102		1,858		20,953
Income before taxes	$	5,692	$	2,033	$	5,172	$	12,897
Goodwill	$	2,347	$	—	$	—	$	2,347
Total assets	$	1,090,541	$	110,485	$	197,698	$	1,398,724

12. Other-Than-Temporary Impairment

     For the three and six months ended June 30, 2004, we recorded an impairment charge of $123 thousand and $1.8 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 June 30, 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.

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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 and six months ended June 30, 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

Restatement

     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 certain 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.

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     All financial information contained in this Quarterly Report on Form 10-Q as of and for the three and six months ended June 30, 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 and six months ended June 30, 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.

Selected Financial Data

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

	At or For The Three Months Ended				At or For The Six Months Ended
	June 30,				June 30,
	2005		2004		2005		2004
	(Dollars in thousands, except per share data)
			(Restated)				(Restated)
Income Statement data:
Interest income	$	27,496	$	18,225	$	51,590	$	35,471
Interest expense		8,500		4,176		15,262		8,110
Net interest income		18,996		14,049		36,328		27,361
Provision for loan losses		1,950		1,300		3,600		2,800
Net interest income after provision for loan losses		17,046		12,749		32,728		24,561
Non-interest income		5,029		5,103		9,208		9,289
Non-interest expense		12,454		10,686		23,154		20,953
Income before income tax provision		9,621		7,166		18,782		12,897
Income tax provision		4,009		2,774		7,764		4,965
Net income	$	5,612	$	4,392	$	11,018	$	7,932
Per Share Data: *
Earnings per share — basic	$	0.24	$	0.19	$	0.47	$	0.34
Earnings per share — diluted		0.23		0.18		0.45		0.32
Book value (period end)	$	4.77	$	3.76	$	4.77	$	3.76
Common shares outstanding		23,694,596		23,200,838		23,694,596		23,200,838
Weighted average shares — basic		23,653,365		23,181,561		23,504,411		23,168,883
Weighted average shares — diluted		24,538,181		24,461,073		24,634,849		24,447,316
Statement of Financial Condition Data — At Period End:
Assets	$	1,717,381	$	1,398,724	$	1,717,381	$	1,398,724
Securities available for sale and held to maturity		133,246		126,774		133,246		126,774
Gross loans, net of deferred loan fees and costs (excludes loans held for sale)		1,387,279		1,098,667		1,387,279		1,098,667
Deposits		1,496,523		1,220,643		1,496,523		1,220,643
Federal Home Loan Bank borrowings		43,000		32,000		43,000		32,000
Subordinated debentures		39,268		39,268		39,268		39,268
Stockholders’ equity		112,967		87,334		112,967		87,334

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

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	For The Three Months Ended						For The Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
	(Dollars in thousands, except per share data)
				(Restated)						(Restated)
Average Balance Sheet Data:
Assets	$	1,630,918		$	1,366,506		$	1,582,032		$	1,299,398
Securities available for sale and held to maturity		133,479			129,224			135,919			128,607
Gross loans, including loans held for sale		1,365,423			1,091,380			1,321,858			1,059,686
Deposits		1,373,493			1,132,362			1,325,807			1,097,365
Stockholders’ equity		109,120			91,379			107,051			88,597
Selected Performance Ratios:
Return on average assets (1)		1.38	%		1.29	%		1.39	%		1.22	%
Return on average stockholders’ equity (1)		20.57	%		19.22	%		20.58	%		17.91	%
Non-interest expense to average assets (1)		3.05	%		3.13	%		2.93	%		3.23	%
Efficiency ratio (2)		51.84	%		55.80	%		50.85	%		57.17	%
Net interest margin (3)		4.94	%		4.49	%		4.86	%		4.49	%
Regulatory Capital Ratios (4)
Leverage capital ratio (5)		8.84	%		8.13	%		8.84	%		8.13	%
Tier 1 risk-based capital ratio		9.69	%		9.38	%		9.69	%		9.38	%
Total risk-based capital ratio		11.05	%		11.58	%		11.05	%		11.58	%
Asset Quality Ratios:
Allowance for loan losses to gross loans		1.21	%		1.30	%		1.21	%		1.30	%
Allowance for loan losses to non-performing loans		586.74	%		294.34	%		586.74	%		294.34	%
Total non-performing assets to total assets (6)		0.22	%		0.37	%		0.22	%		0.37	%

(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 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 I 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.

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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 below.

Factors That May Impact Our Business or the Value of Our Stock

     Set forth below are certain factors that may affect our financial results and operations, which you should consider when evaluating our business and prospects.

We face risks related to our recent accounting restatements, including potential litigation and regulatory actions. On March 30, 2005 we announced that we had discovered accounting inaccuracies in previously reported financial statements and concluded that we would restate our consolidated financial statements for the year ended December 31, 2002. In the course of the re-audits of our consolidated financial statements for the fiscal years ended December 31, 2003 and 2002, certain additional accounting errors were also identified.

The restatement of our financial statements and the occurrence of the events caused us to incur substantial unanticipated legal and accounting expenses. In addition, the restatement may lead to litigation claims and/or regulatory proceedings against us. These claims and proceedings may include, without limitation, private securities lawsuits brought against us and regulatory investigations or proceedings initiated by the Securities and Exchange Commission, the Federal Reserve Bank of San Francisco and the California Department of Financial Institutions.

On July 29, 2005, we entered into a Memorandum of Understanding with the Federal Reserve Bank of San Francisco and the California Department of Financial Institutions, which imposes additional obligations on us and restricts our ability to take certain actions. On July 9, 2005, the Federal Reserve Bank of San Francisco notified us that it had designated the Company and Nara Bank to be in a “troubled condition” for purposes of Section 914 of the Financial Institutions Reform, Recovery and Enforcement Act of 1989. See Note 4 to Condensed Consolidated Financial Statements (unaudited) above for a more detailed discussion. The impact of the Memorandum of Understanding or the designation by the Federal Reserve Bank of San Francisco may have a material adverse effect on our business or financial condition. We may also be asked to enter into regulatory orders or consent decrees with other regulatory agencies. The defense and outcome of any such claims or proceedings against us and any agreement with regulators may divert management’s attention and resources, and we may be required to pay damages if such claims or proceedings are not resolved in our favor.

Any litigation or regulatory proceeding, even if resolved in our favor, could cause us to incur significant legal and other expenses. We also may have difficulty raising equity capital or obtaining other financing. We may not be able to effectuate our current business strategy and our future business activities may be limited. Moreover, we may be the subject of negative publicity focusing on the financial statement inaccuracies and resulting restatement and negative reactions from our stockholders, creditors or others with whom we do business. The occurrence of any of the foregoing could harm our business and reputation, require us to incur significant expenses to resolve any claims and cause the price of our securities to decline or remain at current levels.

If we fail to maintain an effective system of internal and disclosure controls, we may not be able to accurately report our financial results or prevent fraud. Effective internal and disclosure controls are necessary for us to provide reliable financial reports and effectively prevent fraud, and to operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. We have in the past discovered, and may in the future discover, areas of our disclosure and internal controls that need improvement. In connection with a review of our internal control over financial reporting with the recent restatement of our financial statements, we identified certain deficiencies in some of our disclosure and internal controls and procedures. We cannot be certain that our efforts to improve our internal and disclosure controls will be successful or

21

that we will be able to maintain adequate controls over our financial processes and reporting in the future. Any failure to develop or maintain effective controls or difficulties encountered in their implementation or other ineffective improvement of our internal and disclosure controls could harm our operating results or cause us to fail to meet our reporting obligations. If we are unable to adequately establish or improve our internal controls over financial reporting, our external auditors may not be able to issue an unqualified opinion on the effectiveness of our internal controls over financial reporting. Ineffective internal and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our securities.

Deterioration of economic conditions in California, New York or South Korea could adversely affect our loan portfolio and reduce the demand for our services. We focus our business primarily in Korean communities in California and in the greater New York City metropolitan area. Deterioration in economic conditions in our market areas could have a material adverse impact on the quality of our business. An economic slowdown in California, New York, or South Korea could have the following consequences, any of which could reduce our net income:

• loan delinquencies may increase;

• problem assets and foreclosures may increase;

• claims and lawsuits may increase;

• demand for our products and services may decline; and

• collateral for loans may decline in value below the principal amount owed by the borrower.

Our allowance for loan losses may not cover actual loan losses. If our actual loan losses exceed the amount we have allocated for probable losses, it will hurt our business. While we try to limit the risk that borrowers will fail to repay loans by carefully underwriting the loans, losses nevertheless occur. We create allowance allocations for estimated loan losses in our accounting records. We base these allowances on estimates of the following:

• historical experience with our loans;

• evaluation of current economic conditions;

• regular reviews of the quality, mix and size of the overall loan portfolio;

• regular reviews of delinquencies;

• the quality of the collateral underlying our loans.

If these allocations were inadequate, our results of financial condition could be materially and adversely affected.

A downturn in the real estate market could seriously impair our loan portfolio. As of June 30, 2005, approximately 60% of our loan portfolio consisted of loans secured by various types of real estate. If real estate values decline significantly, especially in California or New York, higher vacancies and other factors could harm the financial condition of our borrowers, the collateral for our loans will provide less security, and we would be more likely to suffer losses on defaulted loans.

Changes in interest rates affect our profitability. Changes in prevailing interest rates may hurt our business. We derive our income mainly from the difference or “spread” between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. In general, the wider the spread, the more we earn. When market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities will fluctuate. This can cause decreases in our spread and can greatly affect our income. In addition, interest rate fluctuations can affect how much money we may be able to lend. For example, when interest rates rise, loan originations tend to decrease.

22

If we lose key employees, our business may suffer. If we lose key employees temporarily or permanently, it could hurt our business. We could be particularly hurt if our key employees went to work for competitors. Our future success depends on the continued contributions of existing senior management personnel.

Environmental laws could force us to pay for environmental problems. The cost of cleaning up or paying damages and penalties associated with environmental problems could increase our operating expenses. When a borrower defaults on a loan secured by real property, we often purchase the property in foreclosure or accept a deed to the property surrendered by the borrower. We may also take over the management of commercial properties whose owners have defaulted on loans. We also lease premises where our branches and other facilities are located and where environmental problems may exist. Although we have lending, foreclosure and facilities guidelines intended to exclude properties with an unreasonable risk of contamination, hazardous substances may exist on some of the properties that we own, lease, manage or occupy. We may face the risk that environmental laws could force us to clean up the properties at our expense. It may cost much more to clean up a property than the property is worth. We could also be liable for pollution generated by a borrower’s operations if we take a role in managing those operations after a default. We may find it difficult or impossible to sell contaminated properties.

We are exposed to the risks of natural disasters. A significant portion of our operations is concentrated in Southern California. California is in an earthquake-prone region. A major earthquake could result in material loss to us. A significant percentage of our loans are and will be secured by real estate. Many of our borrowers could suffer uninsured property damage, experience interruption of their businesses or lose their jobs after an earthquake. Those borrowers might not be able to repay their loans, and the collateral for such loans could decline significantly in value. Unlike a bank with operations that are more geographically diversified, we are vulnerable to greater losses if an earthquake, fire, flood or other natural catastrophe occurs in Southern California.

An increase in non-performing assets would reduce our income and increase our expenses. If the level of non-performing assets rises in the future, it could adversely affect our operating results. Non-performing assets are mainly loans on which the borrowers are not making their required payments. Non-performing assets also include loans that have been restructured to permit the borrower to have smaller payments and real estate that has been acquired through foreclosure of unpaid loans. To the extent that assets are non-performing, we have less cash available for lending and other activities.

Changes in governmental regulation may impair our operations or restrict our growth. We are subject to significant governmental supervision and regulation. These regulations are intended primarily for the protection of depositors. Statutes and regulations affecting our business may be changed at any time, and the interpretation of these statutes and regulations by examining authorities may also change. Within the last several years Congress and the President have passed and enacted significant changes to these statutes and regulations. There can be no assurance that such changes to the statutes and regulations or in their interpretation will not adversely affect our business. Nara Bank is subject to regulation and examination by the DFI and the Federal Reserve Board. In addition to governmental supervision and regulation, Nara Bank is subject to changes in other federal and state laws, including changes in tax laws, which could materially affect the banking industry. Nara Bancorp is subject to the rules and regulations of the Federal Reserve Board. If we fail to comply with federal and state bank regulations, the regulators may limit our activities or growth, fine us or ultimately put us out of business. Banking laws and regulations change from time to time. Bank regulations can hinder our ability to compete with financial services companies that are not regulated or are less regulated.

Federal and state bank regulatory agencies regulate many aspects of our operations. These areas include:

• the capital that must be maintained;

• the kinds of activities that can be engaged in;

• the kinds and amounts of investments that can be made;

• the locations of offices;

• how much interest can be paid on demand deposits;

• insurance of deposits and the premiums that must be paid for this insurance; and

• how much cash must be set aside as reserves for deposits.

23

Our stock price may be volatile, which could result in substantial losses for our stockholders. The market price of our common stock could be subject to wide fluctuations in response to a number of factors, including:

• regulatory enforcement actions;

• issuing new equity securities;

• the amount of our common stock outstanding and the trading volume of our stock;

• actual or anticipated changes in our future financial performance;

• changes in financial performance estimates of us by securities analysts;

• competitive developments, including announcements by us or our competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;

• the operating and stock performance of our competitors;

• changes in interest rates; and

• additions or departures of key personnel.

Future offerings of debt securities, which would be senior to our common stock upon liquidation, or equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of dividend distributions, may adversely affect the market price of our common stock. In the future, we may attempt to increase our capital resources by making additional offerings of debt or equity securities, including commercial paper, medium-term notes, senior or subordinated notes and classes of preferred stock or common stock. Upon liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings by us may dilute the holdings of our existing stockholders or reduce the market price of our common stock, or both. If we issue preferred stock, we would have a preference on dividend payments that could limit our ability to make a dividend distribution to the holders of our common stock. Because a decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock or diluting their stock holdings in us.

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.

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     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 half of 2005, we continued to experience strong growth in our assets supported by to growth in our existing branches. Our total assets grew by 14% to $1.72 billion at June 30, 2005 from $1.51 billion 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. The loan growth during the first half of 2005 was predominantly in real estate and commercial loans and deposit growth was primarily in time deposits that are $100,000 or more.

     Our net income was $5.6 million for the three months ended June 30, 2005 and represents a 28% increase from $4.4 million for the three months ended June 30, 2004. The major contributor to the increase in net income for the three months ended June 30, 2005 was a 35% increase in net interest income compared to the same period of 2004 as a result of loan growth and an increase in our net interest margin. Our net income for the six months ended June 30, 2005 was $11.0 million and represents a 39% increase from $7.9 million for the six months ended June 30, 2004. This increase is also due to a 33% increase in net interest income during the first six months of 2005 compared to the same period of 2004. More detailed discussions are in the various sections below.

Net income

     Our net income for the three months ended June 30, 2005 was $5.6 million, or $0.23 per diluted share, compared to $4.4 million, or $0.18 per diluted share, for the same quarter of 2004, representing an increase of $1.2 million or 28%. The increase resulted primarily from an increase in net interest income offset by higher non-interest expense and a higher provision for taxes. As a result of the Restatement, our net income decreased $153 thousand or $0.01 per diluted share for the three months ended June 30, 2004, compared to amounts previously reported.

25

     The annualized return on average assets was 1.38% for the second quarter of 2005, compared to 1.29% for the same period of 2004. The annualized return on average equity was 20.57% for the second quarter of 2005, compared to 19.22% for the same period of 2004. The resulting efficiency ratio was 51.84% for the three months ended June 30, 2005 compared with 55.80% for the same period of 2004. Our improved efficiency ratio was primarily due the 35% increase in net interest income although the expense related to the Restatement of approximately $1.2 million adversely impacted the efficiency ratio.

     Our net income for the six months ended June 30, 2005 was $11.0 million, or $0.45 per diluted share, compared to $7.9 million, or $0.32 per diluted share, for the same period of 2004, representing an increase of $3.1 million or 39%. The increase also resulted from an increase in net interest income offset by higher non-interest expense and a higher provision for income taxes. As a result of the Restatement, our net income decreased $756 thousand or $0.04 per diluted share for the six months ended June 30, 2004, compared to amounts previously reported.

     The annualized return on average assets was 1.39% for the six months ended June 30,2005, compared to 1.22% for the same period of 2004. The annualized return on average equity was 20.58% for the six months ended June 30, 2005, compared to 17.91% for the same period of 2004. The resulting efficiency ratio was 50.85% for the six months ended June 30, 2005, compared with 57.17% for the same period of 2004. Our improved efficiency ratio was also primarily due to an increase in net interest income offset by increased non-interest expense due to the Restatement.

     The Restatement 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.

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, investments and interest rate swaps and the interest paid on deposits and borrowed funds. Net interest income expressed as a percentage of average interest-earning assets, is defined as net interest margin. The 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 $19.0 million for the second quarter ended June 30, 2005, an increase of $4.9 million, or 35% compared to net interest income of $14.0 million for the same quarter of 2004. This increase was primarily due to an increase in average interest earning assets, which increased $287.6 million or 23% to $1.54 billion for the second quarter of 2005 from $1.25 billion for the same quarter of 2004.

     Interest income for the second quarter of 2005 was $27.5 million, which represented an increase of $9.3 million or 51% over interest income of $18.2 million for the same quarter of 2004. The increase was the net result of a $4.8 million increase in interest income due to an increase in volume of average interest-earning assets (volume change) and a $4.5 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 second quarter of 2005 was $8.5 million, an increase of $4.3 million or 104% compared to interest expense of $4.2 million for the same quarter of 2004. The increase was primarily the result of a $1.3 million increase in interest expense due to an increase in volume of average interest-bearing liabilities (volume change) and a $3.0 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 growth in deposits following a bank-wide marketing campaign promoting new time deposit accounts with higher interest rates.

26

     Net interest income before provision for loan losses was $36.3 million for the six months ended June 30, 2005, an increase of $9.0 million, or 33%, compared to net interest income of $27.4 million for the same period of 2004. This increase was primarily due to an increase in average interest earning assets, which increased $276.4 million or 23% to $1.50 billion for the first half of 2005, compared to the same period in 2004.

     Interest income for the six months ended June 30, 2005 was $51.6 million, which represented an increase of $16.1 million or 45% over interest income of $35.5 million for the same period of 2004. The increase was the net result of a $9.1 million increase in interest income due to an increase in volume of average interest-earning assets (volume change) and a $7.0 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 six months ended June 30, 2005 was $15.3 million, an increase of $7.2 million or 89% over interest expense of $8.1 million for the same period of 2004. The increase was primarily the result of a $2.4 million increase in interest expense due to an increase in volume of average interest-bearing liabilities (volume change) and a $4.8 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 growth in deposits following a bank-wide marketing campaign promoting new time deposit accounts with higher interest rates.

     Net Interest Margin

     The average yield on average interest-earning assets increased to 7.15% for the second 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 in particular the prime interest rate, to which our loan portfolio is substantially tied. The weighted average prime rate for the second quarter of 2005 was 5.91% compared to 4.00% during the same quarter of 2004. The average cost of interest-bearing liabilities also increased to 2.99 % for the second quarter of 2005 from 1.85% for the same quarter of 2004.

     The resulting net interest margin was 4.94% for the second quarter of 2005 compared with 4.49% for the same quarter of 2004. Despite a 150 basis point increase in the prime rate between the two periods, the net interest margin only increased by 45 basis points primarily due to the increase in the cost of interest-bearing liabilities. The average cost of total deposits, including non-interest bearing deposits, for the second quarter of 2005 was 2.06% compared to 1.19% for the same quarter of 2004, an 87 basis point increase.

     The average yield on average interest-earning assets increased to 6.91% for the six months ended June 30, 2005 compared to 5.83% for the same period of 2004. The increase was also primarily due to an increase in market interest rates. The weighted average prime rate for first half of 2005 was 5.68% compared to 4.00% during the same period of 2004. The average cost of interest-bearing liabilities also increased to 2.77 % for the first half of 2005 from 1.86% for the same period of 2004, a 91 basis point increase.

     The net interest margin was 4.86% for the six months ended June 30, 2005 compared with 4.49% for the same period of 2004. Despite a 150 basis point increase in prime rate between the two periods, the net interest margin only increased by 37 basis points primarily due to the increase in the cost of interest-bearing liabilities. Due to robust competition for deposits among Korean-American banks, especially De Novo banks, the pricing of deposits increased more than we anticipated. The average cost of interest-bearing deposits increased to 2.56% for the first half of 2005 from 1.67% for the same period of 2004. The average cost of total deposits, including non-interest bearing deposits, for the first half of 2005 was 1.89% compared to 1.18% for the same period of 2004, a 72 basis point increase.

27

     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
	June 30, 2005							June 30, 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)	$	1,365,423	$	25,762		7.55	%	$	1,091,380	$	16,835		6.17	%
Other investments		7,968		97		4.87	%		6,139		77		5.02	%
Securities (3)		133,479		1,389		4.16	%		129,224		1,242		3.84	%
Federal funds sold		31,980		248		3.10	%		24,531		71		1.16	%
Total interest earning assets	$	1,538,850	$	27,496		7.15	%	$	1,251,274	$	18,225		5.83	%
INTEREST BEARING LIABILITIES:
Demand, interest-bearing	$	245,326	$	1,458		2.38	%	$	202,379	$	804		1.59	%
Savings		104,475		478		1.83	%		135,890		605		1.78	%
Time certificates of deposit		666,544		5,138		3.08	%		467,943		1,965		1.68	%
FHLB borrowings		84,585		729		3.45	%		57,334		237		1.65	%
Subordinated debentures		37,152		697		7.50	%		37,122		565		6.09	%
Total interest bearing liabilities	$	1,138,082	$	8,500		2.99	%	$	900,668	$	4,176		1.85	%
Net interest income			$	18,996						$	14,049
Net interest margin						4.94	%						4.49	%
Net interest spread						4.16	%						3.98	%
Average interest-earning assets to average interest-bearing liabilities						135.21	%						138.93	%

*	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.

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	Six months ended							Six months ended
	June 30, 2005							June 30, 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)	$	1,321,858	$	48,217		7.30	%	$	1,059,686	$	32,619		6.16	%
Other investments		7,373		171		4.64	%		5,732		133		4.64	%
Securities (3)		135,919		2,789		4.10	%		128,607		2,583		4.02	%
Federal funds sold		28,880		413		2.86	%		23,625		136		1.15	%
Total interest earning assets	$	1,494,030	$	51,590		6.91	%	$	1,217,650	$	35,471		5.83	%
INTEREST BEARING LIABILITIES:
Demand, interest-bearing	$	271,088	$	3,044		2.25	%	$	177,900	$	1,335		1.50	%
Savings		108,968		995		1.83	%		143,025		1,256		1.76	%
Time certificates of deposit		599,242		8,493		2.83	%		453,830		3,866		1.70	%
FHLB borrowings		87,467		1,376		3.15	%		58,343		529		1.81	%
Subordinated debentures		37,149		1,354		7.29	%		37,118		1,124		6.06	%
Total interest bearing liabilities	$	1,103,914	$	15,262		2.77	%	$	870,216	$	8,110		1.86	%
Net interest income			$	36,328						$	27,361
Net interest margin						4.86	%						4.49	%
Net interest spread						4.14	%						3.97	%
Average interest-earning assets to average interest-bearing liabilities						135.34	%						139.93	%

*	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 loans 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.

29

	Three months ended
	June 30, 2005 over June 30, 2004
	Net
	Increase			Change due to
	(Decrease)			Rate			Volume
	(Dollars in thousands)
INTEREST INCOME :
Interest and fees on loans and interest rate swaps	$	8,927		$	4,200		$	4,727
Interest on other investments		20			(2	)		22
Interest on securities		147			105			42
Interest on federal funds sold		177			150			27
Total interest income	$	9,271		$	4,453		$	4,818
INTEREST EXPENSE :
Interest on demand deposits	$	654		$	458		$	196
Interest on savings		(127	)		16			(143	)
Interest on time certificates of deposit		3,173			2,104			1,069
Interest on FHLB borrowings		492			342			150
Interest on subordinated debentures		132			132			—
Total interest expense	$	4,324		$	3,052		$	1,272
Net Interest Income	$	4,947		$	1,401		$	3,546

	Six months ended
	June 30, 2005 over June 30, 2004
	Net
	Increase			Change due to
	(Decrease)			Rate		Volume
	(Dollars in thousands)
INTEREST INCOME :
Interest and fees on loans and interest rate swaps	$	15,598		$	6,673	$	8,925
Interest on other investments		38			—		38
Interest on securities		206			57		149
Interest on federal funds sold		277			241		36
Total interest income	$	16,119		$	6,971	$	9,148
INTEREST EXPENSE :
Interest on demand deposits	$	1,709		$	831	$	878
Interest on savings		(261	)		48		(309	)
Interest on time certificates of deposit		4,627			3,121		1,506
Interest on FHLB borrowings		847			504		343
Interest on subordinated debentures		230			229		1
Total interest expense	$	7,152		$	4,733	$	2,419
Net Interest Income	$	8,967		$	2,238	$	6,729

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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 would have a material adverse effect on our financial condition.

     We recorded $2.0 million provision for loan losses during the second quarter of 2005 compared to $1.3 million in the same quarter of 2004. We recorded $3.6 million in provision for loan losses during the first half of 2005 compared to $2.8 million in the same period 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 June 30, 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 fees 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 second quarter of 2005 was $5.0 million compared to $5.1 million for the same quarter of 2004. Net gains on sales of SBA loans decreased due to an increase in the fees we paid to the brokers to generate those loans as well as a decrease in premiums received from the sales. During the second quarter of 2005 we originated $23.9 million in SBA loans and sold $20.4 million. During the second quarter of 2004, we originated $21.4 million in SBA loans and sold $21.6 million. Service fees on deposit accounts decreased primarily due to the 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 and six months ended June 30, 2004, we recorded an impairment charge of $123 thousand and $1.8 million, respectively on government sponsored enterprise preferred stocks as a result of other than temporary declines in their market values. All such securities were sold during the first quarter of 2005. During the second quarter of 2005, we recorded $128 thousand in net gains from the sale of $6.5 million in securities compared to net gains of $103 thousand from the sale of $5.7 million of securities available for sale during the same quarter of 2004. During the second quarter of 2005, we recognized a net loss of $17 thousand from our interest rate swaps compared to a net loss of $1.0 million for the same quarter of 2004. The net loss or gain from the interest rate swaps is dependent upon an increase or decrease in interest rates. During 2004, we entered into a loan referral program with GE capital and Zion Bancorp and during the second quarter of 2004, we recognized $478 thousand in loan referral income by referring $13.5 million in real estate loans. There was no such loan referral fee income during 2005.

     Non-interest income for the first half of 2005 was $9.2 million compared to $9.3 million for the same period of 2004. Service fees on deposit accounts decreased primarily due to our promotion for no-fee deposit accounts as well as the closing of accounts for check cashing businesses. Net gains on sale of SBA loans for the first half of 2005 decreased $548 thousand or 23% compared to the same period of 2004. During the first half of 2005, we originated $39.6 million in SBA loans and sold $34.6 million. During the same period of 2004, we originated $33.2 million in SBA loans and sold $32.8 million. Despite the increase in the origination and sale of SBA loans, the decrease in gains on sales of SBA loans is due to an increase in the fees we paid to brokers to generate those loans as well as decreased premiums received on the sales.

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     The breakdown of changes in our non-interest income by category is illustrated below:

	Three									Three
	Months									Months
	Ended			Increase (Decrease)						Ended
	June 30, 2005			Amount			Percent (%)			June 30, 2004
										(Restated)
	(Dollars in thousands)
Service fees on deposit accounts	$	1,582		$	(453	)		-22	%	$	2,035
International service fees		852			98			13	%		754
Wire transfer fees		368			14			4	%		354
Loan servicing fees, net		493			208			73	%		285
Earnings on cash surrender value of life insurance		160			12			8	%		148
Net gains on sales of SBA loans		1,094			(456	)		-29	%		1,550
Net gains on sales of securities available for sale		128			25			24	%		103
Net gains (losses) on interest rate swaps		(17	)		1,009			-98	%		(1,026	)
Loan referral income		—			(478	)		-100	%		478
Other than temporary impairment on securities		—			123			-100	%		(123	)
Other		369			(176	)		-32	%		545
Total non-interest income	$	5,029		$	(74	)		-1	%	$	5,103

	Six									Six
	Months									Months
	Ended			Increase (Decrease)						Ended
	June 30, 2005			Amount			Percent (%)			June 30, 2004
										(Restated)
	(Dollars in thousands)
Service fees on deposit accounts	$	3,160		$	(902	)		-22	%	$	4,062
International service fees		1,527			111			8	%		1,416
Wire transfer fees		709			56			9	%		653
Loan servicing fees, net		892			323			57	%		569
Earnings on cash surrender value of life insurance		305			(24	)		-7	%		329
Net gains on sales of SBA loans		1,843			(548	)		-23	%		2,391
Net gains on sales of securities available for sale		143			(265	)		-65	%		408
Net gains (losses) on interest rate swaps		(52	)		254			-83	%		(306	)
Loan referral income		—			(478	)		-100	%		478
Other than temporary impairment on securities		—			1,757			-100	%		(1,757	)
Other		681			(365	)		-35	%		1,046
Total non-interest income	$	9,208		$	(81	)		-1	%	$	9,289

Non-interest Expense

     Non-interest expense for the second quarter of 2005 was $12.5 million compared to $10.7 million for the same quarter of 2004, an increase of $1.8 million, or 17%. Salaries and employee benefits for the three months ended June 30, 2004 were restated to include additional bonuses of $148 thousand to be accrued for the period. Salaries and employee benefits increased to $6.2 million for the three months ended June 30, 2005 from $5.7 million for the same quarter of 2004. The increase was primarily due to an increase in bonuses accrued during the second quarter of 2005 compared to same quarter of 2004. Occupancy expense for the three months ended June 30, 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

32

correctly account for leasehold improvement amortization. The restatement of occupancy expenses related to such accounting was an increase of $192 thousand for the three months ended June 30, 2004. Professional fees for the second quarter of 2005 were $1.2 million compared to $389 thousand for the same quarter of 2004. This increase was primarily due to legal and accounting expenses incurred during the second quarter of 2005 related to the special Subcommittee investigation discussed above under “General.” Approximately $900 thousand was expensed during the second quarter of 2005.

     Non-interest expense for the first half of 2005 was $23.2 million compared to $21.0 million for the same period of 2004, an increase of $2.2 million or 11%. Salaries and employee benefits for the six months ended June 30, 2004 were restated to include additional bonuses of $1.1 million to be accrued for the period. Salaries and employee benefits were at $11.4 million for the six months ended June 30, 2005 compared to $11.5 million for the same period of 2004. Occupancy expense for the six months ended June 30, 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 $385 thousand for the six months ended June 30, 2004. Occupancy expense for the six months ended June 30, 2005 was $3.3 million compared to $3.0 million for the same period of 2004. This increase is primarily due to opening of our Rowland Heights branch in Southern California in June of 2004, new office space for our Dallas and Silicon Valley LPO sites, additional space for our downtown Los Angeles office expansion during the second half of 2004, and three new lease contracts entered into during the first quarter of 2005, for branch/loan production offices in Gardena and Garden Grove in California and Bayside in New York. Professional fees for the six months ended June 30, 2005 were $1.9 million compared to $719 thousand for the same period of 2004. This increase was primarily due to legal and accounting expenses incurred during the six months of 2005 related to the special Subcommittee investigation discussed above under “General.” We have incurred approximately $1.2 million of such professional expenses during the first six months of 2005. All expenses related to the investigation have been expensed as of June 30, 2005.

     The change in non-interest expense is illustrated below:

	Three								Three
	Months								Months
	Ended		Increase (Decrease)						Ended
	June 30, 2005		Amount			Percent (%)			June 30, 2004
									(Restated)
	(Dollars in thousands)
Salaries and employee benefits	$	6,153	$	484			9	%	$	5,669
Occupancy		1,692		181			12	%		1,511
Furniture and equipment		497		13			3	%		484
Advertising and marketing		464		(27	)		-5	%		491
Communications		182		19			12	%		163
Data processing		679		48			8	%		631
Professional fees		1,185		796			205	%		389
Office supplies and forms		110		(10	)		-8	%		120
Regulatory fees		217		13			6	%		204
Director fees		192		61			47	%		131
Credit related expenses		236		191			424	%		45
Amortization of intangible assets		172		(35	)		-17	%		207
Other		675		34			5	%		641
Total non-interest expense	$	12,454	$	1,768			17	%	$	10,686

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	Six								Six
	Months								Months
	Ended		Increase (Decrease)						Ended
	June 30, 2005		Amount			Percent (%)			June 30, 2004
									(Restated)
	(Dollars in thousands)
Salaries and employee benefits	$	11,415	$	(72	)		-1	%	$	11,487
Occupancy		3,288		317			11	%		2,971
Furniture and equipment		1,007		104			12	%		903
Advertising and marketing		854		57			7	%		797
Communications		368		44			14	%		324
Data processing		1,288		84			7	%		1,204
Professional fees		1,942		1,223			170	%		719
Office supplies and forms		207		(12	)		-5	%		219
Regulatory fees		469		87			23	%		382
Director fees		322		68			27	%		254
Credit related expenses		328		174			113	%		154
Amortization of intangible assets		359		(56	)		-13	%		415
Other		1,307		183			16	%		1,124
Total non-interest expense	$	23,154	$	2,201			11	%	$	20,953

Provision for Income Taxes

     Income taxes were $4.0 million and $2.8 million for the three months ended June 30, 2005 and 2004, respectively. The effective tax rate for the quarter ended June 30, 2005 was 42% compared with 39% for the quarter ended June 30, 2004. Income taxes were $7.8 million and $5.0 million for the six months ended June 30, 2005 and 2004, respectively. The effective tax rate for the six months ended June 30, 2005 was 41% compared with 38% for the same period of 2004. The increase in the effective tax rate during the three and six month periods ended June 30, 2005 was primarily due to lower non-taxable (municipal bond) income and lower state income taxes in 2004.

Financial Condition

     At June 30, 2005, our total assets were $1.72 billion, an increase of $209.4 million or 14% from $1.51 billion at December 31, 2004. The growth was primarily due to increases in our loan portfolio funded by growth in our deposits.

Loan Portfolio

     As of June 30, 2005, our gross loans (net of deferred loan fees and costs) increased by $165.5 million or 14% to $1.39 billion from $1.22 billion at December 31, 2004. Commercial loans, which include domestic commercial, international trade finance, SBA loans, and equipment leasing, at June 30, 2005 increased by $39.3 million or 9% to $481.2 million from $441.9 million at December 31, 2004. Real estate loans increased by $124.4 million or 17% to $842.1 million at June 30, 2005 from $717.7 million at December 31, 2004.

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

	June 30, 2005						December 31, 2004
	Amount			Percent			Amount			Percent
	(Dollars in thousands)
Loan Portfolio Composition:
Commercial loans	$	481,226			34.6	%	$	441,940			36.1	%
Real estate loans		842,131			60.6	%		717,747			58.6	%
Consumer and other loans		67,010			4.8	%		64,845			5.3	%
Total loans outstanding		1,390,367			100.0	%		1,224,532			100.0	%
Unamortized loan fees, net of costs		(3,087	)					(2,798	)
Allowance for loan losses		(16,769	)					(14,627	)
Loans Receivable, net	$	1,370,511					$	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:

	June 30, 2005		December 31, 2004
	(Dollars in thousands)
Loan commitments	$	155,911	$	151,726
Standby letters of credit		12,568		22,108
Other commercial letters of credit		35,908		29,035
	$	204,387	$	202,869

     At June 30, 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 $3.9 million, an increase of $1.0 million from $2.9 million at December 31, 2004. This $1.0 million increase is primarily due to four additional loans that were restructured. Non-performing assets to total assets was 0.23% and 0.19% at June 30, 2005 and December 31, 2004, respectively. At June 30, 2005, nonperforming loans were $2.9 million, an increase of $200 thousand from $2.7 million at December 31, 2004. Of the $2.9 million in nonperforming loans, $1.5 million are fully secured by real estate. At June 30, 2005, nonperforming loans to total gross loans was 0.21% compared to 0.22% at December 31, 2004.

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

	June 30, 2005			December 31, 2004
	(Dollars in thousands)
Nonaccrual loans	$	2,772		$	2,679
Loan past due 90 days or more, still accruing		86			—
Total Nonperforming Loans		2,858			2,679
Other real estate owned		—			—
Restructured loans		1,067			229
Total Nonperforming Assets	$	3,925		$	2,908
Nonperforming loans to total gross loans		0.21	%		0.22	%
Nonperforming assets to total assets		0.23	%		0.19	%

Allowance for Loan Losses

     The allowance for loan losses was $16.8 million at June 30, 2005, compared to $14.6 million at December 31, 2004 and $14.3 million at June 30, 2004. We recorded a provision for loan losses of $2.0 million during the second quarter of 2005 compared to $1.3 million for the same period of 2004. We recorded a provision for loan losses of $3.6 million during the six months ended June 30, 2005 compared to $2.8 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 including loans held for sale totaled $1.32 billion for the six months ending June 30, 2005 compared to $1.06 billion for the same period last year. During the six months ended June 30, 2005, we charged off $1.8 million and recovered $383 thousand for net charge-offs of $1.5 million compared to net charge-offs of $975 thousand for the same period of last year. The allowance for loan losses was 1.21% of gross loans at June 30, 2005, compared to 1.20% at December 31, 2004 and 1.30% at June 30, 2004. Total classified loans at June 30, 2005 were $8.7 million, compared to $6.5 million at December 31, 2004 and $9.2 million at June 30, 2004, respectively.

     We believe the level of the allowance for loan losses as of June 30, 2005 is adequate to absorb probable incurred losses in the loan portfolio. However, no assurance can be given that actual losses will not exceed the estimated amounts.

The following table provides a breakdown of the allowance for loan losses by category of loans at June 30, 2005 and December 31, 2004:

	Allocation of Allowance for Loan Losses
(Dollars in thousands)	June 30, 2005					December 31,2004
			% of Loans in					% of Loans in
			Each Category to					Each Category to
Loan Type	Amount		Total Loans			Amount		Total Loans
Commercial	$	6,074		36	%	$	5,871		36	%
Real estate		9,783		59	%		7,961		59	%
Consumer		869		5	%		786		5	%
Unallocated		43		N/A			9		N/A
Total allowance	$	16,769		100	%	$	14,627		100	%

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     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:

	Six months ended June 30,
	2005			2004
	(Dollars in thousands)
LOANS:
Average gross loans, including loans held for sale	$	1,321,858		$	1,059,686
Gross loans, net of deferred loan fees and costs, at end of period		1,387,279			1,098,667
ALLOWANCE:
Balance-beginning of period	$	14,627		$	12,471
Less: Loan charge-offs:
Commercial		1,195			755
Real estate		—			—
Consumer		646			676
Total loan charge-offs		1,841			1,431
Plus: Loan Recoveries
Commercial		252			319
Real estate		—			3
Consumer		131			134
Total loan recoveries		383			456
Net loan charge-offs		1,458			975
Provision for loan losses		3,600			2,800
Balance-end of period	$	16,769		$	14,296
Net loan charge-offs to average gross loans *		0.22	%		0.18	%
Net loan charge-offs to gross loans at end of period *		0.21	%		0.18	%
Allowance for loan losses to average gross loans		1.27	%		1.35	%
Allowance for loan losses to total loans at end of period		1.21	%		1.30	%
Net loan charge-offs to beginning allowance *		19.94	%		15.64	%
Net loan charge-offs to provision for loan losses		40.50	%		34.82	%

* Annualized

Total loans are net of deferred loan fees and costs of $3,087,000 and $2,508,000 at June 30, 2005 and 2004, respectively.

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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 June 30, 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.

     As of June 30, 2005, we had $2.0 million in held-to-maturity securities and $131.2 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 June 30, 2005 was $1.2 million compared to net unrealized loss of $718 thousand at December 31, 2004. During the six months of 2005, a total of $25.5 million in securities available-for-sale were purchased, $13.9 million of securities available-for-sale were sold, and total gross gains of $143 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 June 30, 2005. Securities with a carrying value of $14.4 million and $87.1 million were pledged to the FHLB of San Francisco and the State of California Treasurer’s Office, respectively, at June 30, 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 June 30, 2005							At December 31, 2004
												Net
	Amortized		Estimated		Net Unrealized			Amortized		Estimated		Unrealized
	Cost		Fair Value		Gain (Loss)			Cost		Fair Value		Gain (Loss)
	(Dollars in thousands)
Available-for-sale:
U.S. Government agency	$	71,519	$	70,918	$	(601	)	$	62,657	$	62,512	$	(145	)
Collateralized mortgage obligations		20,294		19,761		(533	)		23,735		23,129		(606	)
Mortgage-backed securities		27,450		27,129		(321	)		26,751		26,575		(176	)
Asset-backed securities		2,000		2,000		—
Municipal Bonds		7,185		7,415		230			9,578		9,784		206
Corporate debt securities		—		—		—			3,980		3,983		3
Mutual funds		4,000		4,022		22
Government sponsored enterprise Preferred Stock		—		—		—			7,403		7,403		—
Total available-for-sale	$	132,448	$	131,245	$	(1,203	)	$	134,104	$	133,386	$	(718	)
Held to Maturity:
Corporate debt securities	$	2,001	$	2,052	$	51		$	2,001	$	2,088	$	87
Total held-to-maturity	$	2,001	$	2,052	$	51		$	2,001	$	2,088	$	87
Total investment portfolio	$	134,449	$	133,297	$	(1,152	)	$	136,105	$	135,474	$	(631	)

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     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 June 30, 2005.

	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	$	60,638	$	(459	)	$	8,839	$	(143	)	$	69,477	$	(602	)
Collateralized mortgage obligations		—		—			17,525		(534	)	$	17,525	$	(534	)
Mortgage-backed securities		10,048		(49	)		13,083		(305	)	$	23,131	$	(354	)
Municipal bonds		420		(2	)		—		—		$	420	$	(2	)
Total Temporarily Impaired Securities	$	71,106	$	(510	)	$	39,447	$	(982	)	$	110,553	$	(1,492	)

     The unrealized losses were due to temporary declines in market value, mainly attributable to fluctuations in interest rates, and do not reflect a deterioration of credit quality of the issuers. For the three months and six months ended June 30, 2005 and 2004, we did not have any sales of investment securities resulting in realized losses. For investments in an unrealized loss position at June 30, 2005, we have the intent and ability to hold these investments until full recovery. During the three and six months ended June 30, 2004, we recognized $123 thousand and $1.8 million, respectively, in impairment charges related to other than temporary declines in market values for government sponsored enterprise preferred stocks. We did not record any impairment charges related to other than temporary declines in market values during the three and six months ended June 30, 2005.

Deposits and Other Borrowings

     Deposits. Deposits are our primary source of funds used in our lending and investment activities. At June 30, 2005, our deposits increased by $240.5 million or 19% to $1.50 billion from $1.26 billion at December 31, 2004. Non-interest bearing demand deposits totaled $367.5 million at June 30, 2005, an increase of $39.2 million or 12% from $328.3 million at December 31, 2004. Time deposits of $100,000 or more totaled $662.4 million, an increase of $255.3 million or 63% from $407.1 million at December 31, 2004. Interest-bearing demand deposits, including money market and super now accounts, totaled $266.8 million, a decrease of $56.6 million or 18% 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 primarily in time deposits due to a deposit promotion campaign which highlighted our new time deposit products. We continue to experience robust competition, mostly from the Korean-American community banks. During 2005, we launched a bank-wide deposit campaign with the new “Prime CD” from February to May of 2005, which has a variable rate tied to the prime rate minus a spread ranging from 1.90% to 2.25%, adjusting quarterly. Approximately $81.0 million in Prime CDs were opened during the period. During the second quarter of 2005, we also developed a new “Promo CD”, which includes withdrawal and deposit features during the term of the deposit. Since the inception of this product, approximately $128.2 million of Promo CDs were opened during the second quarter of 2005.

     At June 30, 2005, 25% of total deposits were non-interest bearing demand deposits, 51% were time deposits, and 24% were interest bearing demand and saving 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 and saving deposits. The reason for the significant increase in time deposit as a percentage of total deposits as of June 30, 2005 was primarily due to the promotion of our new time deposit products during 2005.

39

     At June 30, 2005, we had a total of $135.4 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 six months of 2005, we had an increase of $90.3 million in brokered deposits. Due to competition and higher rates offered for retail deposits, brokered deposits have been a stable alternative and cost effective source of funds. The weighted average life of the brokered deposits is 1.5 years with a weighted average interest rate of 3.82%. The State deposits were primarily six month maturities with a weighted average interest rate of 3.05% collateralized with securities with a carrying value of $87.1 million at June 30, 2005. The State deposits are subject to withdrawal based on the State’s periodic evaluations.

     Other Borrowings. Advances from the Federal Home Loan Bank of San Francisco (“FHLB”) provide an alternative source of funds. Advances from the FHLB 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.

     At June 30, 2995 we had $43.0 million of fixed rate FHLB advances compared to $90.0 million at December 31, 2004 with maturities ranging from two months to three years. The weighted average rate was 4.04% at June 30, 2005.

     Although the Bank has no restrictions on borrowings as a result of the recent regulatory actions, the Company may not increase its borrowings, incur any debt or renew existing debt without the consent of the Reserve Bank.

     At June 30, 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. The weighted average cost of these trust was 7.50% and 7.29% for the three and six months ended June 30, 2005, respectively. Nara Bancorp may not issue any trust preferred securities or declare any dividends or make any payments on the existing trust preferred securities without the approval of the Reserve Bank. See Note 4 “Recent Development“ of the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

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”.

40

     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.

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 $113.0 million at June 30, 2005. This represented an increase of $11.7 million or 11.6% 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 I 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 June 30, 2005, our Tier I capital, defined as stockholders’ equity less intangible assets, plus proceeds from the Trust Preferred Securities (subject to limitations), was $143.7 million, compared to $126.4 million at December 31, 2004, representing an increase of $17.3 million or 14% over total Tier I. This increase was primarily due to net income of $11.0 million and additional $6.0 million of trust preferred qualified as tier I capital reduced by the payments of cash dividends. At June 30, 2005, we had a ratio of total capital to total risk-weighted assets of 11.1% and a ratio of Tier I capital to total risk- weighted assets of 9.7%. The Tier I leverage ratio was 8.9% at June 30, 2005.

     As of June 30, 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 June 30, 2005 and December 31, 2004.

     As a result of a recent regulatory examination, our regulatory agencies placed additional restrictions and requirements on our Company, including the requirement to obtain prior approval before payment of dividends or to issue trust preferred securities. See footnote 4 “Recent Development” of the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

	As of June 30, 2005
(Dollars in thousands)	Actual					Required					Excess
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Leverage ratio	$	143,690		8.8	%	$	64,985		4.0	%	$	78,705		4.8	%
Tier I risk-based capital ratio	$	143,690		9.7	%	$	59,291		4.0	%	$	84,399		5.7	%
Total risk-based capital ratio	$	163,804		11.1	%	$	118,581		8.0	%	$	45,223		3.1	%

	As of December 31, 2004
	Actual					Required					Excess
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Leverage ratio	$	126,387		8.9	%	$	56,979		4.0	%	$	69,408		4.9	%
Tier I risk-based capital ratio	$	126,387		9.7	%	$	52,339		4.0	%	$	74,048		5.7	%
Total risk-based capital ratio	$	148,685		11.4	%	$	104,678		8.0	%	$	44,007		3.4	%

41

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 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. In addition, 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 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.

     As a means of augmenting our liquidity, we have established federal funds lines with corresponding banks and advances from the Federal Home Loan Bank of San Francisco. At June 30, 2005, our borrowing capacity included $66 million in federal funds line facilities from correspondent banks and $291.6 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 $145.9 million at June 30, 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. At June 30, 2005, our gross loan to deposit ratio was 92.7% a decrease from 97.0% at December 31, 2004, generally indicating a higher level of liquidity at June 30, 2005.

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 to 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.

42

     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 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 June 30, 2005, the amounts in accumulated OCI associated with these cash flow hedges was a loss of $450,881 (net of tax of $300,587), of which $44,005 is expected to be reclassified as a reduction of interest income within the next 12 months. As of June 30, 2005, the maximum length of time over which we are hedging our exposure to the variability of future cash flows is approximately 7 years.

     During the second quarter of 2005 and 2004, interest income recorded from swap transactions totaled $203 thousand and $905 thousand, respectively. During the six months ended June 30, 2005 and June 30, 2004, interest income recorded from swap transactions totaled $620 thousand and $1.8 million. At June 30, 2005, we pledged as collateral to the interest rate swap counterparties, agency securities with a book value of $1.0 million and real estate loans of $3.5 million.

43

     Interest Rate Sensitivity

     We monitor interest rate risk through the use of a simulation model. The simulation model provides us with the ability to simulate our net interest income. In order to measure, at June 30, 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 June 30, 2005, the percentage changes from base case in our net interest income and market value of equity when exposed to immediate and parallel 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		17.95	%		6.74	%
+ 100 basis points		9.02	%		3.52	%
- 100 basis points		(9.67	)%		(2.87	)%
- 200 basis points		(19.32	)%		(6.08	)%

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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 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 June 30, 2005. Based upon that evaluation, our Chief Executive Officer and 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.

     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 filed on June 30, 2005 and in Item 4 of our quarterly report on Form 10-Q for the quarter ended March 31, 2005 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 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 reoccur. We have

• Amended 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.

45

• Amended 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 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 reoccur. We have

• Developed and implemented a detailed bonus accrual methodology.

• Required approval of the bonus accrual methodology by the Board of Directors and adopted of a procedure whereby the Board of Directors approves such bonus accrual methodology on an annual basis.

• Adopted 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.

• Adopted a procedure whereby the quarterly bonus accrual calculations are disclosed to the Company’s independent auditors.

3. Accounting for Lease Arrangements. 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 reoccur. We have

• Adopted a procedure requiring all new lease agreements be reviewed and approved by in-house counsel.

• Adopted a procedure whereby all lease agreements are reviewed and approved by the Chief Financial Officer for proper accounting implementation.

• Adopted a procedure whereby, on a quarterly basis, the Controller reviews all new additions to leasehold improvements to determine the proper amortization period.

• Adopted a procedure whereby, on a quarterly basis, the Controller updates the analysis of lease agreements, to determine that all leases are properly classified as operating or capital leases, and to determine that the impact of rent escalation clauses is accounted for on a straight line basis.

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

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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 reoccur. We have

• Amended 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.

• Updated 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 June 30, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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 Item 2 of Part I in this report under the caption “Results of Operations-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.”

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.

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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: August 9, 2005	/s/ Ho Yang
	Ho Yang
	President and Chief Executive Officer
	(Principal executive officer)
Date: August 9, 2005	/s/ Alvin D. Kang
	Alvin D. Kang
	Chief Financial Officer
	(Principal financial officer)

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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 this reference)
10.1	Lease for premise located at 16 West 32nd Street Suites 601, 602, 603, and 607 New York, NY
10.2	Lease for premise located at 1709 S. Nogales Street Suite 201, Rowland Heights, California
31.1	Certification of Chief Executive Officer pursuant to section 302 of Sarbanes-Oxley of 2002
31.2	Certification of 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 Chief Financial Officer pursuant to section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002

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EX-10.1

Exhibit 10.1

STANDARD FORM OF LOFT LEASE

The Real Estate Board of New York, Inc.

Agreement of Lease, made as of this day of March 19, 2005, between PDN, LLC, 217-220 Linden Blvd., Cambria Hts., NY 11411 party of the first part, hereinafter referred to as OWNER, and Nara Bank, 16 West 32nd Street, New York, NY 10001 party of the second part, hereinafter referred to as TENANT,

Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner Rooms 601, 602 and 603 in the building known as 16 West 32nd Street in the Borough of Manhattan, City of New York, for the term of Five years (or until such term shall sooner cease or expire as herein after provided) to commence on the 1st day of April two thousand five, and to end on the 31st day of March, two thousand ten and both dates inclusive, at an annual rental rate of See Clause 64.

which Tenant agrees to pay in lawful money of the United. States which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, in equal monthly installments in advance on the first day of each month during said term, at the office of Owner or such other place as Owner may designate, without any set off or deduction whatsoever, except that Tenant shall pay the first monthly installment(s) on the execution hereof (unless this lease be a renewal).

     In the event that, at the commencement of the term of this lease, or thereafter, Tenant shall be in default in the payment of rent to Owner pursuant to the terms of another lease with Owner or with Owner’s predecessor in interest, Owner may at Owner’s option and without notice to Tenant add the amount of such arrears to any monthly installment of rent payable hereunder and the same shall be payable to Owner as additional rent.

     The parties hereto, for themselves, their heirs, distributees, executors, administrators, legal representatives, successors and assigns, hereby covenant as follows:

Rent:	1. Tenant shall pay the rent as above and as hereinafter provided.
Occupancy:	2. Tenant shall use and occupy demised premises

     See Clause 79.

provided such use is in accordance with the certificate of occupancy for the building, if any, and for no other purpose.

Alterations:

3. Tenant shall make no changes in or to the demised premises of any nature without Owner’s prior written consent. Subject to the prior written consent or Owner, and to the provisions of this article, Tenant, at Tenant’s expense, may make alterations, installations, additions or improvements which are nonstructural and which do not affect Utility services or plumbing and electrical lines, in or to the interior of the demised premises using contractors or mechanics first approved in each instance by Owner. Tenant shall, at its expense, before making any alteration, addition, installations or improvements obtain all permits, approval and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval thereof and shall deliver promptly duplicates of all such permits, approvals and certificates to Owner. Tenant agrees to carry and will cause Tenant’s contractors and sub-contractors to carry such workman’s compensation, general liability, personal and property damage insurance as Owner may require. If any mechanic’s lien in filed against the demised premises, or the building of which the same forms a part, for work claimed to have been done for, or materials furnished to, Tenant, whether or not done pursuant to this article, the same shall be discharged by Tenant within thirty days thereafter, at Tenant’s expense, by payment or filing the bond required by Law or otherwise, All fixtures and all paneling, partitions, railings and like installations, installed in the premises at any time, either by Tenant or by Owner on Tenant’s behalf, shall, upon installation, become the property of Owner and shall remain upon and be surrendered with the demised premises unless Owner, by notice to Tenant no later than twenty days a prior to the date fixed as the termination of this lease, elects to relinquish Owner’s right thereto and to have them removed by Tenant, in which event the same shall be removed front the demised premises by Tenant prior to the expiration of the lease, at Tenant’s expense, Nothing in this Article shall be construed to give Owner title or to prevent Tenant’s removal of trade fixtures, moveable office furniture and equipment, but upon removal of any such from the premises or upon removal of other installations as may be required by Owner, Tenant shall immediately and at its expense, repair and restore the premises to the condition existing prior to installation and repair any damage to the demised premises or the building due to such removal. All property permitted or required to be removed by Tenant at the end of the term remaining in the premises after Tenant’s removal shall be deemed abandoned and may, at the election of Owner, either be retained as Owner’s property or removed from the premises by Owner, at Tenant’s expense.

Repairs:

4. Owner shall maintain and repair the exterior of and the public portion of the building. Tenant shall, throughout the term of this lease, take good care of the demised premises including the bathrooms and lavatory facilities (if the demised premises encompass the entire floor of the building) and the windows and window frames and, the fixtures and appurtenences therein and at Tenant’s sole cost and expense promptly make all repairs a thereto and to the building, whether structural or non-structural in nature, caused by or resulting from the carelessness, omission, neglect or improper conduct of Tenant, Tenant’s servants, employees, invitees or licensees, and whether or not arising from such Tenant conduct or omission, when required by other provisions of this lease, including Article 6, Tenant shall also repair all damage to the building and the demised premises caused by the moving of Tenant’s fixtures, furniture or equipment. All the aforesaid repairs shall be of quality or class equal to the original work or construction. It Tenant fails, after ten days notice, to proceed with due diligence to make repairs required to be made by Tenant, the same may be made by the Owner at the expense of Tenant, and the expenses thereof incurred by Owner shall be collectible, as additional rent, after rendition of a bill or statement therefore. If the demised premises be or become infested with vermin, Tenant shall, at its expense, cause the same to be exterminated. Tenant shall give Owner prompt notice of any defective condition in any plumbing, heating system or electrical lines located in the demised premises and following such notice, Owner shall remedy the condition with due diligence, but at the expense of Tenant, if repairs are necessitated by damage or injury attributable to Tenant, Tenant’s servants, agents, employees, invitees or licensees as aforesaid. Except as specifically provided in Article 9 or elsewhere in this lease, there shall be no allowance to the Tenant for a diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner, Tenant or others making or failing to make any repairs, alterations, additions or improvements in or to any portion of the building or the demised premises or in and to the fixtures, appurtenances or equipment thereof. It is specifically agreed that Tenant shall not be entitled to any set off or reduction of rent by reason of any failure of Owner to comply with the covenants of this or any other article of this lease. Tenant agrees that Tenant’s sole remedy at law in such instance will be by way of any action for damages for breach of contract. The provisions of this Article 4 with respect to the making of repairs shall not apply in the case of fire or other casualty with regard to which Article 9 hereof shall apply.

Window Cleaning:

5. Tenant will not clean nor require, permit, suffer or allow any window in the demised premises to be cleaned front the outside in, violation of Section 202 of the New York State Labor law or any other applicable law or of the Rules of the Board or Standards and Appeals, or of any other Board or body having or asserting jurisdiction.

Requirements of Law, Fire Insurance:

6. Prior to the commencement of the lease term, If Tenant is then in possession, and at all times thereafter Tenant shall, at Tenant’s sole cost and expense, promptly comply with all present and future laws, orders and regulations of all state, federal, municipal and local governments, departments, commissions and boards and any direction of any public officer pursuant to law, and all orders, rules and regulations of the New York Board of Fire underwriters, or the Insurance Services Office, or any similar body which shall impose any violation, order or duty upon Owner or Tenant with respect to the demised premises, whether or not arising out of Tenant’s use or manner of use thereof, or, with respect to the building, if arising out of Tenant’s use or manner of use of the demised premises of the building (including the use permitted under the lease). Except as provided in Article 30 hereof, nothing herein shall require Tenant to make structural repair or allocations unless Tenant has, by its manner of use of the demised premises or method of operation therein, violated any such laws, ordinances, orders, rules, regulations or requirements with respect thereto, Tenant shall not do or

permit any act or thing to be done in or to the demised premise which is contrary to law, or which will invalidate or be in conflict with public liability, fire or other policies of insurance at any time carried by or for the benefit of Owner. Tenant shall not keep anything in the demised premises except as now or hereafter permitted by the life Department, Board of Fire Underwriters, Fire Insurance Rating Organization and other authority hiving jurisdiction, and then only in such manner and such quantity so as not to increase the rate for fire insurance applicable to the building, nor use the premises in a manner which will increase the insurance rate for the building or any property located therein over that in effect prior to the commencement of Tenant’s occupancy. If by reason of failure to comply with the foregoing the fire insurance rate shall, at the beginning of this lease or at any time thereafter, be higher than it otherwise would be, then Tenant shall reimburse Owner, as additional rent hereunder for that portion of all fire insurance premiums thereafter paid by Owner which shall have been charged, because of such failure by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a schedule or “make-up” or rate for the building or demised premises issued by a body making fire insurance rates applicable to said premises shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rates then applicable to said premises. Tenant shall not place a load upon any floor of the demised premises exceeding the floor load per square foot area which if was designed to carry and which is allowed by law. Owner reserves the right to prescribe the weight and position of all safes, business machines and mechanical equipment. Such installations shall be placed and maintained by Tenant, at Tenant’s expense, in settings sufficient, in Owner’s judgement, to absorb and prevent vibration, noise and annoyance.

Subordination:

7. This lease is subject and subordinate to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the real property of which demised premises are a part and to all renewals, modifications, consolidations, replacement and extensions of any such underlying leases and mortgages. This clause shall be self-operative and no further instrument or subordination shall be required by any ground or underlying lessor or by any mortgagee, affecting any lease or the real property of which the demised premises are a part. In confirmation of such subordination, Tenant shall from time to time execute promptly any certificate that Owner may request.

Tenant’s Liability Insurance Property Lost, Damage, Indemnity:

8. Owner or its agents shall not be liable for any damage to property of Tenant or of others entrusted to employees of the building, nor for loss of or damage to any property of Tenant by theft or otherwise, not for any injury or damage to persons or property resulting from any cause of whatsoever nature, unless caused by or due to the negligence of Owner, its agents, servants or employees; Owner or its agents shall not be liable for any damage caused by other tenants or persons in, upon or about said building or caused by operations in connection of any private, public or quasi public work. If at any time any windows of the demised premises are temporarily closed, darkened or bricked up (or permanently closed, darkened or bricked up, if required by law) for any reason Whatsoever including, but not limited to Owner’s own acts, Owner shall not be liable for any damage Tenant may sustain thereby and Tenant shall not be entitled to any compensation therefor nor abatement or diminution of rent nor shall the same release Tenant from its obligations hereunder nor constitute an eviction. Tenant shall indemnify and save harmless Owner against and from all liabilities, obligations, damages, penalties, claims, costs and expenses for which Owner shall not be reimbursed by insurance, including reasonable attorney’s fees, paid, suffered or incurred as a result of any breach by Tenant, Tenant’s agents, contractors, employees, invitees, or licensees, of any covenant or condition of this lease, or the carelessness, negligence or improper conduct of the Tenant, Tenant’s agents, contractors, employees, invitees or licensees. Tenant’s liability under this lease extends to the acts and omissions of any sub-tenant, and any agent, contractor, employee, invitee or licensee of any sub-tenant. In case any action or proceeding is brought against Owner by reason of any such claim. Tenant, upon written notice from Owner, will, at Tenant’s expense, resist or defend such action or proceeding by counsel approved by Owner in writing, such approval not to be unreasonably withheld.

Destruction, Fire and Other Casualty:

9. (a) If the demised premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give immediate notice thereof to Owner and this lease shall continue in full force and effect except as hereinafter set forth, (b) If the demised premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by and at the expense of Owner and the rent and other items of additional rent, until such repair shall be substantially completed, shall be apportioned from the day following the casualty according to the part of the premises which is usable, (c) If the demised premises are totally damaged or rendered wholly unusable by fire or other casualty, then the rent, and other items of additional trail as hereinafter expressly provided shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the date when the premises shall have been repaired and restored by Owner (or sooner reoccupied in part by Tenant then rent shall be apportioned as provided in subsection (b) above), subject to Owner’s right to elect not to restore the same as hereinafter provided, (d) If the demised premises are rendered wholly unusable or (whether or not the demised premises are damaged in whole or in part) if the building shall be so damaged that Owner shall decide to demolish it or to rebuild it, then, in any of such events Owner may elect to terminate this lease by written notice to Tenant, given within 90 days, after such fire of casually, or 30 days after adjustment of the insurance claim for such fire or casualty, whichever is sooner, specifying a date for the expiration of the lease, which date shall not be more than 60 days after the giving of such notice, and upon the date specified in such notice the term of this lease shall expire as fully and completely as if such date were the date set forth above for the termination of this lease and Tenant shall forthwith quit, surrender and vacate the premises without prejudice however, to Owner’s rights and remedies against Tenant under the lease provisions in effect prior to such termination, and any rent owing shall be paid up to such date and any payments of rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenants Unless Owner shall serve a termination notice as provided for herein. Owner shall make the repairs and restorations under the conditions of (b) and (c) hereof, with all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Owner’s control. After any such casualty Tenant shall cooperate with Owner’s restoration by removing from the premises as promptly as reasonably possible, all of Tenant’s salvageable inventory and movable equipment, furniture, and other property. Tenant’s liability for rent shall resume five (5) days after written notice from Owner that the premises are substantially ready for Tenant’s occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, including Owner’s obligation to restore under subparagraph (b) above, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casually, and to the extent that such insurance is in force and collectible, and to the extent permitted by law, Owner and Tenant each hereby releases and waives all right of recovery with respect to subparagraphs (b), (d) and (e) above, against the other or any one claiming through or under each of them by way of subrogation or otherwise. The release and waiver herein referred to shall be deemed to include any loss or damage to the demised premises and/or to any personal property, equipment, trade fixtures, goods and merchandise located therein. The foregoing release and waiver shall be in force only if both releasors’ insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance. If, and to the extent, that such waiver can be obtained only by the payment of additional premiums, then the party benefiting from the waiver shall pay such premium within ten days after written demand or shall be deemed to have agreed that the party obtaining insurance coverage shall be free of any further obligation under the provisions hereof with respect to waiver of subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant’s furniture and or furnishings or any fixtures or equipment, improvements, or appurtenances removable by Tenant and agrees that Owner will not be obligated to repair any damage thereto or replace the same. (f) Tenant hereby waives the provisions of Section 277 of the Real Property Law and agrees that the provisions of this article shall govern and control in lieu thereof.

Eminent Domain:

10. If the whole or any part of the demised premises shall be acquired or condemned by Eminent Do main for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim for the value of any unexpired term of said lease. Tenant shall have the right to make an independent claim to the condemning authority for the value of Tenant’s moving expenses and personal property, trade fixtures and equipment, provided Tenant is entitled pursuant to the terms of the lease to remove such property, trade fixtures and equipment at the end of the term and provided further such claim does not reduce Owner’s award.

Assignment, Mortgage, Etc,:

11. Tenant, for itself, its heirs, distributees, executors, administrators, legal representatives, successors and assigns, expressly covenants that it shall not assign, mortgage or encumber this agreement, nor underlet, or suffer or permit the demised premises or any part thereof to be used by others, without the prior written consent of Owner in each instance. Transfer of the majority of the stock of a corporate Tenant or the majority partnership interest of a partnership Tenant shall be deemed an assignment. If this lease be assigned, or if the demised premises or any part thereof be underlet or occupied by anybody other than Tenant, Owner may, after default by Tenant, collect rent from the assignee, under-tenant or occupant, and apply the net amount collected to the rent herein reserved, but no such assignment, underletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, under-tenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. The consent by Owner to an assignment or underletting shall not in any wise be construed to relieve Tenant from obtaining the express consent in writing of Owner to any further assignment or underletting.

Electric Current:

12. Rates and conditions in respect to submetering or rent inclusion, as the case may be, to be added in RIDER attached hereto, Tenant covenants and agrees that at all times its use of electric current shall not exceed the capacity of existing feeders to the building or the risers or wiring installation and Tenant may not use any electrical equipment which, in Owner’s opinion, reasonably exercised, will overload such installations or interfere with the use thereof by other tenants of the building. The change at any time of the character of electric service shall in no wise make Owner liable or responsible to Tenant, for any loss, damages or expenses which Tenant may sustain.

Access to Premises:

13. Owner or Owner’s agents shall have the right (but shall not be obligated) to enter the demised premises in any emergency at any time, and, at other reasonable times, to examine the same and to make such repairs, replacements and improvements as Owner may deem necessary and reasonably desirable to any portion of the building or which Owner may elect to perform in the premises after Tenant’s failure to make repairs or perform any work which Tenant is obligated to perform under this lease, or for the purpose of complying with laws, regulations and other directions of governmental authorities. Tenant shall permit Owner to use and maintain and replace pipes and conduits in and through the demised premises and to erect new pipes and conduits therein provided, wherever possible, they are within walls or otherwise concealed. Owner may, during the progress of any work in the demised premises, like all necessary materials and equipment into said premises without the same constituting an eviction nor shall the Tenant be entitled to any abatement of rent while such work is in progress nor to any damages by reason of loss or interruption of business or otherwise. Throughout the term hereof Owner shall have the right to enter the demised premises at reasonable hours for the purpose of showing the same to prospective purchasers or mortgagees of the building, and during the last six months of the term for the purpose of showing the same to prospective tenants and may, during said six months period, place upon

Rider to be added if necessary.

the demised premises the usual notices “To Let” and “For Sale” which notices Tenant shall permit to remain thereon without molestation. If Tenant is not present to open and permit in entry into the demised premises, Owner or Owner’s agents may enter the same whenever such entry may be necessary or permissible by master key or forcibly and provided reasonable care is exercised to safeguard Tenant’s, property, such entry shall not render Owner or its agents liable therefor, nor in any event shall the obligations of Tenant hereunder be affected. If during the last month of the term Tenant shall have removed all or substantially all of Tenant’s property therefrom. Owner may immediately enter, alter, removable or redecorate the demised premises without limitation or abatement of rent or incurring liability to Tenant for any compensation and such act shall have no effect on this lease or Tenant’s obligation hereunder.

Vault, Vault Space, Area:

14. No Vaults, vault space or area, whether or not enclosed or covered, not within the property line of the building is leased hereunder anything contained in or indicated on any sketch, blue print or plan, or anything contained elsewhere in this lease to the contrary notwithstanding. Owner makes no representation as to the location of the property line of the building. All vaults and vault space and all such areas not within the property line of the building, which Tenant may be permitted to use and/ or occupy, is to be used and/or occupied under a revocable license, and if any such license be revoked, or if the amount of such space or area be diminished or required by any federal, state or municipal authority or public utility, Owner shall not be subject to any liability nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation, diminution or requisition be deemed constructive or actual eviction. Any tax, fee or charge of municipal authorities for such vault or area shall be paid by Tenant, if used by Tenant, whether or not specifically leased hereunder.

Occupancy:

15. Tenant will not at any time use or occupy the demised premises in violation of the certificate of occupancy issued for the building of which the demised premises are a part. Tenant has inspected the premises and accepts them as is, subject to the riders annexed hereto with respect to Owner’s work, if any, In any event, Owner makes no representation as to the condition of the premises and Tenant agrees to accept the same subject to violations, whether or not of record. If any governmental license, or permit shall be required for the proper and lawful conduct of Tenants’s business, Tenant shall be responsible for and shall procure and maintain such license or permit.

Bankruptcy:

16. (a) Anything elsewhere in this lease to the contrary notwithstanding, this lease may be cancelled by owner by sending of a written notice to Tenant within a reasonable time after the happening of any one or more of the following events: (1) the commencement of a case in bankruptcy or under the laws of any state naming Tenant as the debtor; or (2) the making by Tenant of an assignment or any other arrangement for the benefit of creditors under any state statute. Neither Tenant nor any person claiming through or under Tenant, or by reason of any statute or order of court, shall thereafter be entitled to possession of the premises demised but shall forthwith quit and surrender the premises. If this lease shall be assigned in accordance with its terms, the provisions of this Article 16 shall be applicable only to the party then owning Tenant’s interest in this lease.

       (b) It is stipulated and agreed that in the event of the termination of this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any other provisions of this lease to the contrary, be entitled to recover from Tenant as and for liquidated damages an amount equal to the difference between the rental reserved hereunder for the unexpired portion of the term demised and the fair and reasonable rental value of the demised premises for the same period. In the computation of such damages the difference between any installment of rent becoming due hereunder after the date of termination and the fair and reasonable rental value of the demised premises for the period for which such installment was payable shall be discounted to the date of termination at the rate of four percent (4 %) per annum. If such premises or any part thereof be relet by the Owner for the unexpired term of said lease, or any part thereof, before presentation of proof of such liquidated damages to any court, commission or tribunal, the amount of rent reserved upon such reletting shall be deemed to be the fair and reasonable rental value for the part or the whole of the premises so re-let during the term of the re-letting. Nothing herein contained shall limit or prejudice the right of the Owner to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amount of the difference referred to above.

Default:

17. (1) If Tenant defaults in fulfilling any of the covenants of this lease other than the covenants for the payment or rent or additional rent; or if the demised premises becomes vacant or deserted “or if this lease be rejected under § 235 of Title 11 of the U.S. Code (bankruptcy code);” or if any execution or attachment shall be issued against Tenant or any of Tenant’s property whereupon the demised premises shall be taken or occupied by someone other than Tenant; or if Tenant shall make default with respect to any other lease between Owner and Tenant; or if Tenant shall have failed, after five (5) days written notice, to redeposit with Owner any portion of the security deposited hereunder which Owner has applied to the payment of any rent and additional rent due and payable hereunder or failed to move into or take possession of the premises within thirty (30) days after the commencement of the term of this lease, of which fact Owner shall be the sole judge; then in any one or more of such events, upon Owner serving a written fifteen (15) days notice upon Tenant specifying the nature of said default and upon the expiration of said fifteen (15) days, if Tenant shall have failed to comply with or remedy such default, or if the said default or omission complained of shall be of a nature that the same cannot be completely cured or remedied within said fifteen (15) day period, and if Tenant shall not have diligently commenced during such default within such fifteen (15) day period, and shall not thereafter with reasonable diligence and in good faith, proceed to remedy or cure such default, then Owner may serve a written five (5) days’ notice of cancellation of this lease upon Tenant, and upon the expiration of said five (5) days this lease and the term thereunder shall end and expire as fully and Completely as if the expiration of such five (5) day period were the day herein definitely fixed for the end and expiration of this lease and the term thereof and Tenant shall then quit and surrender the demised premises to Owner but Tenant shall remain liable as hereinafter provided.

       (2) If the notice provided for in (1) hereof shall have been given, and the term shall expire as aforesaid; or if Tenant shall make default in the payment of the rent reserved herein or any item of additional rent herein mentioned or any part of either or in making any Other payment herein required; then and in any of such events Owner may without notice, re-enter the demised premises either by force or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the legal representative of Tenant or other occupant of demised premises and remove their effects and hold the premises as if this lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end. If Tenant shall make default hereunder prior to the date fixed as the commencement of any renewal or extension of this lease, Owner may cancel and terminate such renewal or extension agreement by written notice.

Remedies of Owner and Waiver of Redemption:

18. In case of any such default, re-entry, expiration and/or dispossess by summary proceedings or other wise, (a) the rent, and additional rent, shall become due thereupon and be paid up to the time of such re-entry, dispossess and/or expiration, (b) Owner may re-let the premises or any part or parts thereof, either in the name of Owner or otherwise, for a term or terms, which may at Owner’s option be less than or exceed due period which would Otherwise have constituted the balance of the term of this lease and may grant concessions or free rent or charge a higher rental than that in this lease, (c) Tenant or the legal representatives of Tenant shall also pay Owner as liquidated damages for the failure of Tenant to observe and perform said Tenant’s covenants herein contained any deficiency between the rent hereby reserved and or covenanted to be paid and the net amount, if any, of the rents collected on account of the subsequent lease or leases of the demised premises for each month of the period which would otherwise have constituted the balance of the term of this lease. The failure of Owner to re-let the premises or any part or parts thereof shall not release or affect Tenant’s liability for damages. In computing such liquidated damages there shall be added to the said deficiency such expenses as Owner may incur in connection with re-letting, such as legal expenses, reasonable attorneys’ fees, brokerage, advertising and for keeping the demised premises in good order or for preparing the same for re-letting. Any such liquidated damages shall be paid in monthly installments by Tenant on the rent day specified in this lease and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Owner to collect the deficiency for any subsequent month by a similar proceeding. Owner, in putting the demised premises in good order or preparing the same for re-rental may; at Owner’s option, make such alterations, repairs, replacements, and/or decorations in the demised premises as Owner, in Owner’s sole judgment, considers advisable and necessary for the purpose of re-letting the demised premises, and the making of such alterations, repairs, replacements, and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever for failure to re-let the demised premises, or in the event that the demised premises are re-let, for failure to collect the rent thereof under such re-letting, and in no event shall Tenant be entitled to receive any excess, if any, of such net rents collected over the sums payable by Tenant to Owner hereunder. In the event of a breach or threatened breach by Tenant of any of the covenants or provisions hereof, Owner shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not herein provided for. Mention in this lease of any particular remedy, shall not preclude Owner from any other remedy, in law or in equity. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws.

Fees and expenses:

19. If Tenant shall default in the observance or performance of any term or covenant on Tenant’s part to be observed or performed under or by virtue of any of the terms or provisions in any article of this lease, after notice if required and upon expiration of any applicable grace period if any, (except in an emergency), then, unless otherwise provided elsewhere in this lease, Owner may immediately or at any time thereafter and Without notice perform the obligation of Tenant thereunder. If Owner, in connection with the foregoing or in connection with any default by Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment of money, including but not limited to reasonable attorney’s fees, in instituting. prosecuting or defending any action or proceedings, and prevails in any such action or proceeding, then Tenant will reimburse Owner for such sums so paid or obligations incurred with interest and costs. The foregoing expenses incurred by reason of Tenant’s default shall be deemed to be additional rent hereunder and shall be paid by Tenant to Owner within ten (10) days of rendition of any bill or statement to Tenant therefor. If Tenant’s lease term shall have expired at the time of making of such expenditures or incurring of such obligations, such sums shall be recoverable by Owner as damages.

Building Alterations and Management:

20. Owner shall have the right at any time without the same constituting an eviction and without incurring liability to Tenant therefor to change the arrangement and or location of public entrances, passageways, doors, doorways, corridors, elevators, Stairs, toilets or other public parts of the building and to change the name, number or designation by which the building may be known. There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner or other Tenant making any repairs in the building or any such alterations, additions and improvements. Furthermore, Tenant shall not have any claim against Owner by reason of Owner’s imposition of any controls of the manner of access to the building by Tenant’s social or business visitors as the Owner may deem necessary for the security of the building and its occupants.

No Representations by Owner:

21. Neither Owner nor owner’s agents have made any representations or portions with respect to the physical condition of the building, the land upon which it is erected or the demised premises, the rents, leases, expenses of operation or any other matter or thing affecting or related to the demised premises or the building except as herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this lease. Tenant has inspected the building and the demised premises and is thoroughly acquainted with their condition and agrees to take the same “as is” on the date possession is tendered and acknowledges that the taking of possession of the demised premises by Tenant shall be conclusive evidence that the said premises and the building of which the same form a part were in good and satisfactory condition at the time such possession was so taken, except as to talent defects. All understandings and agreements heretofore made between the parties hereof are merged in this contract, which alone fully and completely expresses the agreement between Owner and Tenant and any executory agreement hereafter made shall be ineffective in change, modify discharge or effect an abandonment of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought.

End of Term:

22. Upon the expiration or other termination of the term of this lease, Tenant shall quit and surrender to Owner the demised premises, broom clean, in good order and condition, ordinary wear and damages which Tenant is not required to repair as provided elsewhere in this lease excepted, and Tenant shall remove all its property from the demised premises. Tenant’s obligation to observe or perform this covenant shall survive the expiration or other termination of this lease. If the last day of the term of this Lease or any renewal thereof, falls on Sunday, this lease shall expire at noon on the preceding Saturday unless it be a legal holiday in which case it shall expire at noon on the preceding business day.

Quiet Enjoyment:

23. Owner covenants and agrees which Tenant that upon Tenant paying the rent and additional rent and observing and preforming all the terms, covenants and conditions, on Tenant’s part to be observed and performed Tenant may peaceably and quietly enjoy the premises hereby demised, subject, nevertheless, to the terms and conditions of this lease including, but not limited to, Article 34 hereof and to the ground leases, underlying leases and mortgages hereinbefore mentioned.

Failure to Give Possession:

24. If Owner is unable to give possession of the demised premises on the date of the commencement of the term hereof, because of the holding-over or retention of possession of any tenant, undertenant or occupants or if the demised premises are located in a building being constructed, because such building has not been sufficiently completed to make the premises ready for occupancy or because of the fact that a certificate of occupancy has not been procured or if Owner has not reason, Owner shall not be subject to any liability for failure to give possession on said date and the validity of the lease shall not be impaired under such circumstances, nor shall the same be construed in any wise to extend the term of this lease, but the rent payable hereunder shall be abated (provided Tenant is not responsible for Owner’s inability to obtain possession or complete any work required) until after Owner shall have give Tenant notice that Owner is able to deliver possession in the condition required by this lease. If permission is given to Tenant to enter into the possession of the demised premises or to occupy premises other than the demised premises prior to the date specified as the commencement of the term of this lease, Tenant covenants and agrees that such possession and/or occupancy shall be deemed to be under all the terms, covenants, conditions and provisions of this lease, except the obligation to pay the fixed annual rent set forth in page one of this lease. The provisions of this article are intended to constitute “an express provision to the contrary” within the meaning of Section 223-a of the New York Real Property Law.

No Waiver:

25. The failure of Owner to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this lease or of any of the Rules or Regulations, set forth or hereafter adopted by Owner, shall not prevent a subsequent act which would have originally constituted a violation from having all the force and effect of an original violation. The receipt by Owner of rent with knowledge of the breach of any covenant of this lease shall not be deemed a waiver of such breach and no provision of this lease shall be deemed to have been waived by Owner unless such waiver be in writing signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Owner may accept such check or payment without prejudice to Owner’s right to recover the balance of such rent or pursue any other remedy in this lease provided. All checks lendered to Owner as and for the rent of the demised premises shall be deemed payments for the account of Tenant. Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to operate as an attornment to Owner by the payor of such rent or as a consent by Owner to an assignment or subletting by Tenant of the demised premises to such payor, or as a modification of the provisions of this lease. No act or thing done by Owner or Owner’s agents during the terms hereby demised shall be deemed an acceptance of a surrender of said premises and no agreement to accept such surrender shall be valid unless in writing signed by Owner. No employee of Owner, or Owner’s agent shall have any power to accept the keys of said premises prior to the termination of the lease and the delivery of keys to any such agent or employee shall not operate as a termination of the lease or a surrender of the premises.

Waiver of Trial by Jury:

26. It is mutually agreed by and between Owner and Tenant that the respective parties hereto shall and they hereby do waiver trial by jury in any action, proceeding or counterclaim [ILLEGIBLE] by either of the parties hereto against the other (except for person [ILLEGIBLE] or property damage) on any matters whatsoever arising out of or in any way connected with this lease, the relationship of Owner and Tenant, Tenant’s use of or occupancy of said premises, and any emergency statutory or any other statutory remedy. It is further mutually agreed that in the event Owner commences any proceeding or action for possession including a summary proceeding for possession of the premises, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding including a counterclaim under Article 4 except for statutory mandatory counterclaims.

Inability to perform:

27. This Lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no wise be affected, impaired or excused because Owner is unable to fulfill any of its obligations under this lease or to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repair, additions , alterations or decorations or is unable to supply or is delayed in supplying any equipment, fixtures or other materials if Owner is prevented or delayed from doing so by reason of strike or labor troubles or any cause whatsoever beyond Owner’s sole control including, but not limited to, government preemption or restrictions or by reason of any rule, order or regulation of any department or subdivison thereof of any government agency or by reason of the conditions which have been or are affected, either directly or indirectly, by war or other emergency.

Bills and Notices:

28. Except as otherwise in this lease provided, a bill statement, notice or communication which Owner may desire or be required to give to Tenant, shall be deemed sufficiently given or rendered if, in writing, delivered to Tenant personally or sent by registered or certified mail addressed to Tenant at the building of which the demised premises from a part or at the last known residence address or business address of Tenant or left at any of the aforesaid premises addressed to Tenant, and the time of the rendition of such bill or statement and of the giving of such notice or communication shall be deemed to be the time when the same is delivered to Tenant, mailed, or left at the premises as herein provided. Any notice by Tenant to Owner must be served by registered or certified mail addressed to Owner at the address first hereinabove given or at such other address as Owner shall designate by written notice.

Water Charges:

29. If Tenant requires, uses or consumes water for any purpose in addition to ordinary lavatory purposes (of which fact Tenant constitutes Owner to be the sole judge). Owner may install a water meter and thereby measure Tenant’s water consumption for all purposes. Tenant shall pay Owner for the cost of the meter and the cost of the installation, thereof and throughout the duration of Tenant’s occupancy. Tenant shall keep said meter and installation equipment in good working order and repair at Tenant’s own cost and expense in default of which Owner may cause such meter and equipment to be replaced or repaired and collect the cost thereof from Tenant, as additional rent. Tenant agrees to pay for water consumed, as shown on said meter as and when bills are rendered, and on default in making such payment Owner may pay such charges and collect the same from Tenant, as additional rent. Tenant covenants and agrees to pay, as additional rent, the sewer rent, charge or any other tax, rent, levy or charge which now or hereafter is assessed, imposed or a lien upon the demised premises or the realty of which they are part pursuant to law, order of regulation made or issued in connection with the use, consumption, maintenance or supply of water, water system or sewage or sewage connection or system. If the building or the demised premises or any part thereof is supplied with water through a meter through which water is also supplied to other premises Tenant shall pay to Owner, as additional rent, on the first day of each month,            % ($            ) of the total meter charges as Tenant’s portion. Independently of and in addition to any of the remedies reserved to Owner hereinabove or elsewhere in this lease, Owner may sue for and collect any monies to be paid by Tenant or paid by Owner for any of the reasons or purposes hereinabove set forth.

Sprinklers:

30. Anything elsewhere in this lease to the contrary notwithstanding, if the New York Board of Fire Underwriters or the New York Fire Insurance Exchange or any bureau, department or official of the federal, state or city government recommend or require the installation of a sprinkler system or that any changes, modifications, alterations, or additional sprinkler heads or other equipment be made or supplied in an existing sprinkler system by reason of Tenant’s business, or the location of partitions, trade fixtures, or other contents of the demised premises, or for any other reason, or if any such sprinkler system installations, modifications, alterations, additional sprinkler heads or other such equipment, become necessary to prevent the imposition of a penalty or charge against the full allowance for sprinkler system in the fire insurance rate set by any said Exchange or by any fire insurance company. Tenant shall, at Tenant’s expense, promptly make such sprinkler system installations, changes, modifications, alterations, and supply additional sprinkler heads or other equipment as required whether the work involved shall be structural or non-structural in nature. Tenant shall pay to Owner as additional rent the sum of $          , on the first day of each month during the term of this lease, as Tenant’s portion of the contract price for sprinkler supervisory service.

Elevators, Heat, Cleaning:

31. As long as Tenant is not is default under any the covenants of this lease beyond the applicable grace period provided in this lease for the curing of such defaults, Owner shall: (a) provide necessary passenger elevator facilities on business days from 8 a.m. to 6 a.m. and on Saturdays from 8 a.m. to 1 p.m.; (b) if freight elevator service is provided, same shall be provided only on regular business days Monday through Friday inclusive, and on those days only between the hours of 9 a.m. and 12 noon and between 1 p.m. and 5 p.m.; (c) furnish heat, water and other services supplied by owner to the demised premises, when and as required by law, on business days from 8 a.m. to 6 p.m. and on Saturdays from 8

Space to be filled in or deleted.

a.m. to 1 p.m.; (d) clean the public halls and public portions of the building which are used in common by all tenants, Tenant shall, at Tenant’s expense, keep the demised premises, including the windows, clean and in order, to the reasonable satisfaction of Owner, and for that purpose shall employ the person or persons, or corporation approved by Owner. Tenant shall pay to Owner the cost of removal of any of Tenant’s refuse and rubbish from the building. Bills for the same shall be rendered by Owner to Tenant at such time as Owner may elect and shall be due and payable hereunder, and the amount of such bills shall be deemed to be, and be paid as, additional rent. Tenant shall, however, have the option of independently contracting for the removal of such rubbish and refuse in the event that Tenant does not wish to have same done by employees of Owner. Under such circumstances, however, the removal of such refuse and rubbish by others shall be subject to such rules and regulations as, in the judgment of Owner, are necessary for the proper operation of the building. Owner reserves the right to stop service of the heating, elevator, plumbing and electric systems, when necessary, by reason of accident, or emergency, or for repairs, alterations, replacements, or improvements, in the judgment of Owner desirable or necessary to be made, until said repairs, alterations, replacements or improvements shall have been completed. If the building of which the demised premises are a part supplies manually operated elevator service, Owner may proceed diligently with alterations necessary to substitute automatic control elevator service without in any way affecting the obligations of Tenant hereunder.

Security:

32. Tenant has deposited with owner the sum of $ 17,577.00 as security for the faithful performance and observance by Tenant of the terms provisions and conditions of this lease; it is agreed that in the event Tenant defaults in respect of any of the terms, provisions and conditions of this lease, including, but not limited to, the payment of rent and additional rent, Owner may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent or any other sum as to which Tenant is in default or for any sum which Owner may expend or may be required to expend by reason of Tenants default in respect of any of the terms, covenants and conditions of this lease, including but not limited to, any damages or deficiency in the relating of the premises, whether such damages or deficiency accrued before or after summary proceedings or other re-entry by Owner. In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this lease, the security shall be returned to Tenant after the date fixed as the end of the Lease and after delivery of entire possession of the demised premises to Owner. In the event of a sale of the land and building or leasing of the building, of which the demised premises form a part, Owner shall have the right to transfer the security to the vendee or the Lease and Owner shall thereupon be released by Tenant from all liability for the return of such security, and Tenant agrees to look to the new Owner solely for the return of said security, and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new Owner. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the monies deposited herein as security and that neither Owner nor its successors or assigns shall be bound by any such assignments, encumbrance, attempted assignment or attempted encumbrance.

Caption:

33. The captions are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this lease nor the intent of any provision thereof.

Definition:

34. The term “Owner” as used in this lease means only the owner of the fee or of the leasehold of the building, or the mortgagee in possession, for the time being of the land and building (or the owner of a lease of the building or of the land and building) of which the demised premises form a part, so that in the event of any sale or sales of said land and building or of said lease, or in the event of a lease of said building, or of the land and building, the said Owner shall be and hereby is entirely freed and relieved of all covenants and obligations of Owner hereunder, and it shall be deemed and construed without further agreement between the parties or their successors in interest, or between the parties and the purchaser, at any such sale, or the said lessee of the building, or of the land and building, that the purchaser or the lessee of the building has assumed and agreed to carry out any and all covenants and obligations of Owner hereunder. The words “re-enter” and “re-entry” as used in this lease are not restricted to their technical legal meaning. The term “rent” includes the annual rental rate weather so expressed or expressed in monthly installments, and “additional rent” “Additional rent” means all sums which shall be due to Owner from Tenant under this lease, in addition to the annual rental rate. The term “business days” as used in this lease, shall exclude Saturdays, Sundays and all days observed by the State or Federal Government as legal holidays and those designated as holidays by the applicable building service union employees service contract or by the applicable Operating Engineers contract with respect to HVAC service wherever it is expressly provided in this lease that consent shall not be unreasonably withheld, such consent shall not be unreasonably delayed,

Adjacent Excavation Shoring:

35. If an excavation shall be made upon land adjacent to the demised premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause much excavation, license to enter upon the demised premises for the purpose of doing such work as said person shall deem necessary to preserve the wall or the building of which demised premises form a part from injury or damage and to support the same by proper foundations without any claim for damages or indemnity against Owner, or diminution or abatement of rent.

Rules and Regulations:

36. Tenant and Tenant’s servants employees, agents, visitors, and licensees shall observe faithfully, and comply strictly with, the Rules and Regulation annexed hereto and such other and further reasonable Rules and Regulations as Owner or Owner’s agents may from time to time adopt Notice of any additional rules or regulations shall be given in such manner as Owner may elect. In case Tenant disputes the reasonableness of any additional Rule or Regulation hereafter made or adopted by Owner or Owner’s agents, the parties hereto agree to submit the question of the reasonableness of such Rule or Regulation for decision to the New York office of the American Arbitration Association, whose determination shall be final and conclusive upon the parties hereto. The right to dispute the reasonableness of any additional Rule or Regulation upon Tenant’s part shall be deemed waived unless the same shall be asserted by service of a notice, in writing upon Owner within fifteen (15) days after the giving of notice thereof. Nothing in this lease contained shall be constructed to impose upon Owner any duty or obligation to enforce the Rules or Regulations or terms, covenants or conditions any other lease, as against any other tenant and Owner shall not be liable to Tenant for violation of the same by any other tenant, its servants, employees, agents, visitors or licensees.

Glass:

37. Owner shall replace, at the expense of the Tenant, any and all plate and other glass damaged or broken from any cause whatsoever in and about the demised premises. Owner may insure, and keep insured, at Tenant’s expense, all plate and other glass in the demised premises for and in the name of Owner. Bills for the premiums therefor shall be rendered by Owner to Tenant at such times as Owner may elect, and shall be due from, and payable by, Tenant when rendered, and the amount thereof shall be deemed to be, and be paid, as additional rent.

Estoppel certificate:

38. Tenant, at any time, and from time to time, upon at least 10 days’ prior notice by Owner, shall execute, acknowledge and deliver to Owner, and/or to any other person, firm or corporation specified by Owner, a statement certifying that this Lease is unmodified in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications), stating the dates to which the rent and additional rent have been paid, and stating whether or not there exists any default by Owner under this Lease, if so, specifying each such default .

Directory Board Listing:

39. If at the request of and as accommodation to Tenant, Owner shall place upon the directory board in the lobby of the building, one or more names of persons other then Tenant, such directory board listing shall not be construed as the consent by Owner to an assignment subletting by Tenant to such person or persons.

Successors and Assigns:

40. The covenants, conditions and agreements contained in this lease shall bind and inure to the benefit of Owner and Tenant and their respective heirs, distributees, executions, administrators’, administrators, successors and except as otherwise provided in this lease, their assigns. Tenant shall look only to Owner’s state and interest in the land and building for the satisfaction Tenant’s remedies for the collection of a judgement (or other judicial process) against Owner in the event of any default by Owner hereunder, and no other property or assets of such Owner (or any partner, member, officer or director thereof, disclosed or undisclosed), shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant’s remedies under or with respect to this lease, the relationship of Owner and Tenant hereunder, or Tenant’s use and occupancy of the demised premises,

Space to be filled in or deleted.

In Witness Whereof, Owner and Tenant have respectively signed and sealed this lease as of the day and year first above written.

Witness for Owner
	[L.S]
Witness for Tenant
	[L.S]

RIDER ATTACHED TO AND FORMING PART OF LEASE BETWEEN PND, LLC, A NEW YORK LIMITED LIABILITY COMPANY, AS LANDLORD AND NARA BANK, AS TENANT COVERING PREMISES LOCATED AT ROOMS 601, 602, 603 IN THE BUILDING KNOWN AS 16 WEST 32^ND STREET, NEW YORK, NEW YORK

41. TAX INCREASES

The Tenant agrees to pay as additional rent annually during the terms of this lease six percent (6%) of any increase in the Real Estate Tax (as such term is hereinafter defined) above those for the fiscal year 2004/2005. Such additional rent shall be paid when the Tax becomes fixed and within ten (10) days after demand there for by the Owner and shall be collectible as additional rent. For the final year of the lease term the Tenant shall be obligated to pay only a pro rata share of such percentage of any such increase in taxes. Tax bills (except as hereinafter provided) shall be conclusive evidence of the amount of such taxes and shall be used for the calculation of the amounts to be paid by Tenant.

The term “Real Estate Taxes” shall mean all the real estate taxes and assessments, special or otherwise, assessed or imposed by Federal, State or Local Governments against or upon the building of which the Premises form a part and the land upon which it is erected. If due to change in the method of taxation, any franchise, income, profit tax, or other payment, shall be levied against Landlord in whole or part in substitution for or in lieu of any tax which would otherwise constitute a Real Estate Tax, such franchise, income, profit or other tax or payment shall be deemed to be a Real Estate Tax for the purposes hereof. If Owner should incur expense in connection with Owner’s endeavor to reduce or prevent increase in assessed valuation, Tenant shall be obligated to pay as additional rent the amount computed by multiplying the percent set forth in line 2 hereof times such expense, and such amount shall be due and payable upon demand by Owner and collectible in the same manner as annual rent. The obligation to make any payments of additional rent pursuant to this Article shall survive the expiration or other termination of this lease.

42. EXCULPATORY CLAUSE

In any action brought to enforce the obligations of Owner under this lease, any Judgment or decree shall be enforceable against Owner only to the extent of Owner’s interest in the building of which the Premises form a part, and no such judgment shall be the basis of execution on, or be a lien on assets of Owner or any assets of any party being a partner or stockholder in Owner, other than the interest in said building.

43. DEPOSIT OF CHECKS

Owner’s deposit of any cheeks delivered by Tenant simultaneously with Tenant’s execution of this lease shall not constitute Owner’s execution and delivery of this lease.

44. PARTIAL PAYMENT

If Owner receives from Tenant any payment (partial payment) less than the sum of the fixed annual rent, additional rent and other charges then due and owing pursuant to the terms of this lease, Owner in its sole discretion, may allocate such Partial Payment in whole or in part to any fixed annual rent, any additional rent and or any other charges or to any combination thereof.

45. NOTICES

Whenever Owner is required or permitted to send any notice or demand to Tenant under or pursuant to this lease, it may be given by Owner’s agent, attorney, executor, trustee or personal representative with the same force and effect as if given by Owner. Owner hereby advises Tenant that Owner’s current agent is McGovern & Associates, 16 West 32^nd Street, Suite 407, New York, New York 10001. Owner shall notify Tenant of any change in its agent.

46. LEASE NOT BINDING UNLESS EXECUTED AND DELIVERED

It is specifically understood and agreed that this lease is offered to Tenant by the managing agent of the building, solely in its capacity as such agent and subject to Landlord’s acceptance and approval and that Tenant has hereunto affixed its signature with the understanding that the said lease shall not in any way bind Landlord or its agent until such time as the same has been approved and executed by Landlord and delivered to Tenant. The execution and delivery of this lease by Tenant shall constitute an irrevocable offer to enter into this lease on the part of Tenant and Tenant represents that the Other Broker, if any, shall not seek compensation from Landlord if Landlord and Tenant do not approve, execute and deliver this lease.

47. CONFLICT BETWEEN RIDER AND PRINTED LEASE

If and to the extent that any of the provisions of any rider to this lease conflict or are otherwise inconsistent with any of the printed provisions of this lease, whether or not such inconsistency is expressly noted in the rider, the provisions of the rider shall prevail. In the event the party of the first part is referred to in this lease as “Owner”, the term “Landlord”, as used herein, shall be deemed synonymous with the term “Owner”.

48. SPECIAL SERVICES

Upon Tenant’s request Landlord or its managing agent may, but, except as otherwise expressly provided in this lease, shall not be obligated to, perform or cause to be performed for Tenant from time to time various construction, repair and maintenance work, moving services and other types of work or services in or about the demised premises and the building. If such work or services shall be performed for Tenant, Tenant agrees to pay therefor either the standard charges of Landlord or its managing agent in effect from time to time, if any, or the amount agreed to be paid for such services. Tenant agrees to pay all such charges within ten (10) days after Landlord or Landlord’s managing agent has submitted a bill therefor and unless otherwise expressly provided in writing such charges shall be payable as additional rent under this lease and in the event of a default by Tenant in the payment thereof Landlord shall have all of the remedies hereunder that Landlord would have in the event of a default in the payment of annual rent.

49. AS IS

Wall to Wall Carpet to be installed before April 01, 05 Tenant acknowledges that it has inspected the building and the demised premises, agrees to accept the demised premises in its “AS IS” physical condition as of the date possession is tendered to Tenant and acknowledges that Landlord shall not be obligated to make any improvements or alterations to the demised premises whatsoever, except as may be provided on the Work letter annexed hereto as Exhibit “A”, if any.

50. ADDITIONAL ASSIGNMENT AND SUBLETTING PROVISIONS

The Article to this lease captioned “Assignment, Mortgage, Etc,” (Article 11) is hereby amended by adding to said Article the following sub-paragraphs:

(a) The consent by Landlord to any assignment, subletting, or occupancy shall not in anywise be construed to relieve Tenant from obtaining the express consent, in writing, of Landlord to any further assignment, subletting, sub-subletting, or occupancy. Landlord may withhold or delay its consent for any reason whatsoever.

(b) Tenant shall have no right to assign this lease or sublet the whole or any part of the demised premises to any party which is then a tenant, subtenant, licensee or occupant of any part of the building in which the demised premises are located.

(c) If Tenant hereunder shall be a corporation, the transfer of a majority of the stock of Tenant shall be deemed an assignment of this lease.

(d) Each sublease of the demised premises shall be deemed to contain the following provisions, whether or not specifically included therein:

(1) “In the event of a default under any underlying lease of all or any portion of the premises demised hereby which results in the termination of such lease, or if the lessor under any such underlying lease shall exercise any right to cancel or terminate such underlying lease, the subtenant hereunder shall, at the option of the lessor under any such lease, attorn to and recognize such lessor as Landlord hereunder and shall, promptly upon such lessor’s request, execute and deliver all instruments necessary or appropriate to confirm such attornment and recognition. The subtenant hereunder hereby waives all rights under present or future law to elect, by reason of the termination of such underlying lease, to terminate this sublease or surrender possession of the premises demised hereby. If the lessor under such underlying lease does not exercise the aforesaid option, the term of the sublease shall terminate simultaneously with the term of the underlying lease and subtenant hereby agrees to vacate the premises subleased on or before the effective date of termination of the underlying lease.”

“This sublease may not be assigned or the sublet premises further sublet, in whole or in part, without the prior written consent of the lessor under any underlying lease of all or any portion of the premises demised hereby.”

(e) Tenant agrees to pay to Landlord reasonable attorney’s fees incurred by Landlord in connection with any proposed assignment of Tenant’s interest in this lease or any proposed subletting of the demised premises or any part thereof.

51. HOLDING OVER

If Tenant holds over in possession after the expiration or sooner termination of the original term or of any extended term of this lease, such holding over shall not be deemed to extend the term or renew this lease, but such holding over thereafter shall continue upon the covenants and conditions herein set forth except that the charge for use and occupancy of such holding over for each calendar month or part thereof (even if such part shall be a small fraction of a calendar month) shall be the sum of:

(a) 1/12 of the highest annual rent rate set forth on page one of this lease, times 3, plus

(b) 1/12 of the net increase, if any, in annual fixed rental due solely to increases in the cost of the value of electric service furnished to the premises in effect on the last day of the term of this lease, plus

(c) 1/12 of all other items of annual additional rental, which annual additional rental would have been payable pursuant to this lease had this lease not expired, plus

(d) those other items of additional rent (not annual additional rent) which would have been payable monthly pursuant to this lease, had this lease not expired, which total sum Tenant agrees to pay to Landlord promptly upon demand, in full, without set-off or deduction. Neither the billing nor the collection of use and occupancy in the above amount shall be deemed a waiver of any right of Landlord to collect damages for Tenant’s failure to vacate the demised premises after the expiration or sooner termination of this lease. The aforesaid provisions of this Article shall survive the expiration or sooner termination of this lease.

52. LIMITATION ON RENT

If at the commencement of, or at any time during the term of this lease, the rent reserved in this lease is not fully collectible by reason of any Federal, State, County or City law, proclamation, order or regulation, or direction of a public officer or body pursuant to law, Tenant agrees to take such steps as Landlord may request to permit Landlord to collect the maximum rents which may be legally permissible from time to time during the continuance of such legal rent restriction (but not in excess of the amounts reserved therefor under this lease). Upon the termination of such legal rent reduction, Tenant shall pay to Landlord, to the extent permitted by law, an amount equal to (a) the rents which would have been paid pursuant to this lease but for such legal rent restriction less (b) the rents paid by Tenant to Landlord during the period such legal rent restriction was in effect.

53. BROKERAGE

Tenant warrants and represents to Landlord that has had no dealings with any broker or agent in connection with this lease and covenants and agrees to hold harmless and indemnify Landlord from and against any and all costs, expenses or liability for any compensation, commissions, fees and charges claimed by any other broker or agent with respect to this lease or the negotiation thereof. The obligation of Tenant contained in this Article shall survive the expiration or earlier termination of this lease.

54. GOVERNMENTAL REGULATIONS

If, at any time during the term of this lease, Landlord expends any sums for alterations or improvements to the building which are required to be made pursuant to any law, ordinance or governmental regulation, or any portion of such law, ordinance or governmental regulation, which becomes effective after the date hereof, Tenant shall pay to Landlord, as additional rent, the same percentage of such cost as is set forth in the provision of this lease which requires Tenant to pay increases in Real Estate Taxes, within ten (10) days after demand therefor. If, however, the cost of such alteration or improvement is one which is required to be amortized over a period of time pursuant to applicable governmental regulations, Tenant shall pay to Landlord, as additional rent, during each year in which occurs any part of this lease term, the above-stated percentage of the reasonable annual amortization of the cost of the alteration or improvements made. For the purposes of this Article, the cost of any alteration or improvement made shall be deemed to include the cost of preparing any necessary plans and the fees for filing such plans.

55. ADDITIONAL RENT

All payments other than the annual rent to be made by Tenant pursuant to this lease shall be deemed additional rent and, in the event of any nonpayment thereof, Landlord shall have all rights and remedies provided for herein or by law for nonpayment of rent. Tenant shall have fifteen (15) days from its receipt of any additional rent statement to notify Landlord, by certified mail, return receipt requested, that it disputes the correctness of such statement. After the expiration of such fifteen (15) day period, such statement shall be binding and conclusive upon Tenant. If Tenant disputes the correctness of such statement, Tenant shall, as a condition precedent to its right to contest such correctness, make payment of the additional rent billed, without prejudice to its position. If such dispute is finally determined in Tenant’s favor, Landlord shall refund to Tenant the amount overpaid (without interest).

56. SUBMISSION TO JURISDICTION, ETC.

This lease shall be deemed to have been made in New York County, New York, and shall be construed in accordance with the laws of the State of New York. All actions or proceedings relating, directly or indirectly, to this lease shall be litigated only in courts located within the County of New York. Tenant, any guarantor of the performance of its obligations here under (“Guarantor”) and their successors and assigns hereby subject themselves to the jurisdiction of any state or federal court located within such county, waive the personal service of any process upon them in any action or proceeding therein and consent that such process be served by certified or registered mail, return receipt request, directed to the Tenant and any successor at

Tenant’s address hereinabove set forth, to Guarantor and any successor at the address set forth in the instrument of guaranty and to any assignee at the address set forth in the instrument of assignment. Such service shall be deemed made two (2) days after such process is mailed. If (i) Landlord commences any action or proceeding against Tenant, or (ii) Landlord is required to defend any action or proceeding commenced by Tenant, in connection with this lease and such action or proceeding is disposed of, by settlement, judgment or otherwise, favorably to Landlord, Landlord shall be entitled to recover from Tenant in such action or proceeding, or a subsequently commenced action or proceeding, landlord’s reasonable attorneys’ fees and disbursements incurred in connection with such action or proceeding and all prior and subsequent discussions and negotiations and correspondence relating thereto.

If any monies owing by Tenant under this lease are paid more than fifteen (15) days after the date such monies are payable pursuant to the provisions of this lease, Tenant shall pay Landlord interest thereon, at the then maximum legal rate, for the period from the date such monies were payable to the date such monies are paid.

57. CONDITIONAL LIMITATION

If Tenant snail default in the payment of the rent reserved herein, or any item of additional rent herein mentioned, or any part of either, during any two months, whether or not consecutive, in any twelve (12) month period, and (i) such default continued for more than five (5) days after written notice of such default by Landlord to Tenant, and (ii) Landlord, after the expiration of such five (5) day grace period, served upon Tenant petition and notice of petition to dispossess Tenant by summary proceedings in each such instance, then, notwithstanding that such defaults may have been cured prior to the entry of a judgment against Tenant, any further default in the payment of any money due Landlord hereunder which shall continue for more than five (5) days after landlord shall give a written notice of such default shall be deemed to be deliberate and Landlord may thereafter serve a written three (3) days’ notice of cancellation of this lease and the term hereunder shall end and expire as fully and completely as if the expiration of such three (3) day period was the day herein definitely fixed for the end and expiration of this lease and the term thereof, and Tenant shall then quit and surrender the demised premises to Landlord, but Tenant shall remain liable as elsewhere provided in this lease.

In addition, if Tenant shall have defaulted in the performance of the same or a substantially similar covenant hereunder, other than a covenant for the payment of rent or additional rent, twice during any consecutive twelve (12) month period and Landlord, in each case, shall have given a default notice in respect of such default, then, regardless of whether Tenant shall have cured such defaults within any applicable grace period, if Tenant shall again default in respect of the same or a substantially similar covenant hereunder within a twelve (12) month period after Landlord gave the second such default notice, Landlord, at its option, and without further notice to Tenant or opportunity for Tenant to cure such default, may elect to cancel this lease by serving a written three (3) days’ notice of cancellation of this lease and the term hereunder shall end and expire as fully and completely as if the expiration of such three (3) day period were the day herein definitely fixed for the end and expiration of this lease and the term hereof, and Tenant shall then quit and surrender the demised premises to Landlord, but Tenant shall remain liable as elsewhere provided in this lease.

58. LANDLORD’S MANAGING AGENT

Tenant agrees that all of the representations, warranties, waivers and indemnities made in this lease by Tenant for the benefit of Landlord shall also be deemed to inure to and be for the benefit of Landlord’s managing agent, if any, its officers, directors, employees and independent contractors.

59. EXCULPATION

If Tenant shall request Landlord’s consent or approval and Landlord shall fail or refuse to give such consent or approval, Tenant shall not be entitled to any damages for any withholding by Landlord of its consent or approval, it being agreed that Tenant’s sole remedy shall be an action for specific performance or an injunction, and that such remedy shall be available only in those cases where landlord has expressly agreed in writing not to unreasonably withhold its consent or approval or where as a matter of law, Landlord may not unreasonably withhold its consent or approval.

Tenant acknowledges and agrees that if Landlord shall be an individual, joint venture, tenancy-in-common, firm or partnership, general or limited, there shall be no personal liability on such individual or on the members of such joint venture, tenancy-in-common, firm or partnership in respect of any of the covenants or conditions of this lease. In addition, notwithstanding anything to the contrary contained in this lease, it is agreed and understood that Tenant shall look solely to the estate and property of Landlord in the Building for the enforcement of any judgment (or other judicial decree) requiring the payment of money by Landlord to Tenant by reason of any default or breach by Landlord in the performance of its obligations under this lease, it being intended hereby that no other assets of Landlord or its principals shall be subject to levy, execution, attachment or other such legal process for the enforcement or satisfaction of the remedies pursued by Tenant in the event of such default or breach.

60. INSURANCE

During the term and at all other times (if any) that Tenant has possession of the demised premises, Tenant shall pay for and keep in force comprehensive general liability policies with broad form endorsements and water damage legal liability coverage against any and all liability occasioned by accident or occurrence, such policies to be written by recognized and well-rated insurance companies authorized to transact business in the State of New York, in the minimum amount of $2,000,000.00 combined single limit for personal injuries, death and loss of, and damage to property. Tenant shall obtain “All Risk” insurance having extended coverage for fire and other casualties for its personal property, fixtures and equipment for the full replacement value thereof and such insurance policies, and any other property damage policies of Tenant, shall have an appropriate clause or endorsement whereby the insurer waives subrogation or consents to a waiver of the right of recovery against Landlord and Landlord’s agent, and, to the extent permitted by law, Tenant hereby agrees not to make any claim against, or seek to recover from Landlord and Landlord’s agent for any loss of, or damage to property of the type covered by such insurance without regard to whether Tenant’s claims exceed the coverage limits of its insurance policies. If the waiver and release set forth in the previous sentence shall be prohibited by law, the liability of any party that would have been released shall be secondary to the other

insurance. If at any time during the term it appears that public liability or property damage limits in the City of New York for premises similarly situated, due regard being given to the use and occupancy thereof, are higher than the foregoing limits, then Tenant shall increase the foregoing limits accordingly. Landlord and its agent shall be named as additional insureds in the aforesaid general liability insurance policies. All policies shall provide that Landlord shall be afforded thirty (30) days prior notice of cancellation of such insurance. Tenant shall deliver certificates of insurance evidencing such policies upon renewal and upon demand. All premiums and charges for the aforesaid insurance shall be paid by Tenant and if Tenant shall fail to make such payment when due, Landlord may make it and the amount thereof may, at the option of Landlord be added to and become a part of the additional rent payable hereunder. Tenant shall not violate or permit to be violated any condition of any of said policies and Tenant shall perform and satisfy the requirements of the companies writing such policies.

61. GUARD SERVICE

The Landlord is not required to provide guard service. Landlord reserves the right to cancel or withhold such service at anytime for any reason whatsoever. In the event Landlord now employs or hereafter employs a security guard or guard service (hereinafter the “Guard”) in the building, Tenant shall pay to Landlord, as additional rent, in advance, together with each installment of the annual rent provided for herein, a percentage of the cost of employing the Guard, including, but not limited to, any employee benefits, social security taxes and other expenses which are incurred by Landlord therefor, which percentage shall be the same percentage as is now set forth in the provision of this lease which provides for the payment by Tenant of increases in Real Estate Taxes, Landlord reserves the right to (i) initially set the days and hours the Guard is employed, (ii) to change, at will, such hours and days, and (iii) to discontinue the employment of the Guard, all in its sole and absolute discretion. The furnishing of the Guard by Landlord shall not be deemed to impose any obligation on the part of the Landlord for the security of the building, the demised premises or the contents of the demised premises, and Tenant hereby unconditionally waives any rights or claims against Landlord and Landlord’s managing agent by reason of any acts or omissions of the Guard employed.

62. SIGNS & BILLBOARD

Tenant shall not display or cause anyone to display any signs or advertisement, or any other item on or about the public areas of the building within which the Premises are located without Landlord’s prior written consent. Landlord may withhold consent for any reason whatsoever or for no reason at all, and establish such terms and conditions for display. If Tenant should violate this provision in any manner whatsoever, the Landlord may remove any such display without notice at Tenant’s expense.

63. UTILITY COST PAYMENTS

Tenant will, at Tenant’s own cost and expense, install the electricity meters, and throughout the lease term maintain such meters so that all electricity used by the Tenant, (or its agents, employees, guests or invitees), for any purpose whatsoever will be separately metered and billed directly to the Tenant by the supplier. Payments due and owing the supplier of said utilities will

be deemed additional rent hereunder, and in the event Tenant fails to pay any such charge beyond any applicable grace periods, such failure will be considered a default hereunder. In the event that Tenant fails to pay such charge, and such failure results in the imposition of a lien on the demised premises or the building containing the demised premises, Tenant will post a bond in the amount necessary to remove such lien, and will remove, at Tenant’s expense, such lien as of record, within ten (10) days after notice of its imposition.

Landlord makes no representations or warranties with respect to the quality and suitability of the electrical system, water supply or gas supply for Tenant’s use. Tenant represents and warrants that it will not use the electrical system, water supply system or gas supply system in such a way as to damage or interrupt such services to the remaining portion of the building.

Landlord will in no event be liable or responsible to Tenant for any loss or damage or expense which Tenant may sustain or incur if either the quantity or character of said services are not suitable for Tenant’s requirements or upon the failure of the appropriate public utility company to deliver gas, water, or electrical service to the demised premises for any reason whatsoever.

64. That the Landlord hereby demises and leases unto the Tenant, and the Tenant hereby hires and takes from the Landlord as follows, situated in the Borough of Manhattan, County of New York and State of New York, the sixth floor, of the building known as 16 West 32^nd Street for the term of five (5) years (hereinafter referred to as the “Term”) beginning April 1, 2005 and ending March 31, 2010, at the following monthly rental rate: RENT. The fixed monthly rent shall be:

a)	from April 1, 2005 to March 31, 2006: $5,859.00/month;	3%
b)	from April 1, 2006 to March 31, 2007: $6,034.77/month;	3%
c)	from April 1, 2007 to March 31, 2008: $6,215.81/month;	3%
d)	from April 1, 2008 to March 31, 2009: $6,402.28/month;	3%
e)	from April 1, 2009 to March 31, 2010: $6,594.35/month;

Which Tenant agrees to pay in advance on the first day of each month during the Term, at the offices of the Landlord or such other place as Owner may designate, without any set off or reduction whatsoever.

65. ELEVATORS

As further amendment to Article 31 of this lease, Tenant agrees to strictly comply with Landlord’s requirements regarding operation and use of the elevators in the building. Landlord may promulgate reasonable regulations regarding operation of the elevators at any time. Tenant agrees that violation of these rules and regulations by Tenant will constitute a material breach of this lease.

66. SUBORDINATION

As further amendment to this lease, Tenant acknowledges that this lease is subordinate to the lien of any mortgage placed on the building and that the Tenant shall execute and deliver a subordination agreement to Landlord’s Lender upon that Lender’s request and that the Tenant

shall execute and deliver an estoppel certificate to Landlord’s Lender upon that Lender’s or Landlord’s request.

67. AIR CONDITIONING ROOM

Tenant shall provide access to Landlord’s agents at all times to the Air Conditioning Room.

68. INTENTIONALLY OMITTED

69. INDEMNIFICATION

Tenant covenants and agrees to indemnify and save harmless Landlord and any fee owner and any mortgagee and any lessor under any ground or underlying lease, and their respective contractors, agents and employees, licensees and invitees, from and against any all liability (statutory or otherwise), claims, suits, demands, damages, judgments, costs, interest and expenses (including but not limited to, reasonable counsel fees and disbursements incurred in the defense of any action or proceeding), to which they may be subject or which they may suffer by reason of any claim for, any injury to, or death of, any person or persons (including, without limitation, Landlord, its agents, contractors, employees, licensees, invitees) or damage to property (including any loss of use thereof) or otherwise arising from or in connection with the occupancy or use of or from any work, installation or thing whatsoever done in or at the Demised Premises during the Lease Term or resulting from any default by Tenant in the performance of Tenant’s obligations under the Lease.

70. Tenant covenants, warrants and agrees that in the event the fire and/or liability insurance rate for the Building will increase as a result of the use or occupation of the Demised Premises by Tenant, then, and in such event, Tenant shall pay to the Landlord the entire increased cost of insurance premium resulting from any rate increase. Such sums shall be due and payable on the first day of the month following rendition of Landlord’s billing or notification to Tenant and will be deemed as additional rent and collectable as such. A letter or certificate by the insurance company or broker with whom the insurance coverage is made will be conclusive evidence of the increased premium and rate.

71. LATE FEES

If the base rent or any additional rent is not paid on or before the tenth (10^th) day of the month for which said payment is due, there will be added, as additional rent, a late charge equal to five percent (5%) of the unpaid amount. The late charge shall increase by one percent (1%) of the unpaid amount for each and every day the payment is overdue. In addition thereto, all sums in arrears under the Lease will bear interest at the annual rate of twenty-four percent (24%) from their respective due dates until received by Landlord, but this in no way limits any claim for damages or any other rights or remedies available to Landlord for any breach or default by Tenant. Tenant’s obligations under the Lease will survive the expiration or sooner termination of the Lease. Acceptance by Landlord of payment from any party other than Tenant will not be deemed to operate as a consent by Landlord to any assignment or subletting to such party, nor constitute any acceptance of such party, as a tenant hereunder, nor vest any rights in such party

nor release Tenant from any of its obligations, nor be deemed a modification of any of the Lease provisions.

72. CLEANING AND GARBAGE DISPOSAL

Cleaning, garbage collection and disposal are the responsibility of Tenant. Tenant will maintain the Demised Premises in a clean and orderly fashion. In case of Tenant’s failure to do so, Landlord will have the right, after notice to Tenant, to take any necessary steps to cause the Demised Premises to be cleaned at Tenant’s expense, and the amount so expended will be assessed as Additional Rent with the next ensuing rent payment. No person except for persons employed in Tenant’s business, may perform any maintenance or cleaning work in the Demised Premises without Landlord’s prior written approval.

Tenant, at its expense, will cause such exterminating procedures as may be necessary, including all those requested by Landlord, including but not limited to exterminating vermin, rodents, rats, insects, termites and otherwise, to be effected within the Demised Premises. For security reasons, no person may engage in such procedures unless such person is duly licensed to do so and has received Landlord’s prior written approval.

73. ALTERATIONS

Tenant agrees that in the event it performs any work whatsoever in the Demised Premises, same will be done in accordance with all rules and regulations of the appropriate municipal departments of the City of New York having jurisdiction thereof and Tenant will obtain and submit to Landlord, prior to commencement of any such work, any and all permits and approvals required and, after completion of said work, documentary evidence of all appropriate municipal and departmental approvals, all at Tenant’s cost and expense. Landlord will cooperate with Tenant and sign all documents as may be reasonably required to carry out terms of this Article. Supplementing Article 3 of the Lease, if Tenant will make any alterations, additions, changes or installations (‘“Tenant’s Improvements”) in or about the Demised Premises (but none will be made without Landlord’s prior written consent and no structural changes whatsoever are permitted), Tenant agrees to make the same at Tenant’s sole cost, expense and risk, and Tenant hereby agrees that Tenant will comply with each and all of the following:

(A) The plans and specifications for Tenant’s Improvements will be subject to the prior written approval of Landlord and of the holder of any mortgage affecting the Demised Premises. Tenant will submit two copies of said plans and specifications to Landlord for such approval, one of which may be retained by Landlord. No work will begin until said plans and specifications have been approved as aforesaid. Landlord or the mortgagee will have sixty (60) days to approve or disapprove of such plans and specifications.

(B) Tenant’s Improvements will be made with all dispatch, in a first-class manner, with first-class materials and workmanship and in conformity and compliance with the plans and specifications therefor. Only new materials, fixtures and equipment will be utilized for and in connection with Tenant’s Improvements. Tenant’s Improvements will be performed in a safe and careful manner and without injury to any part of the Demised Premises or the building

containing the same. Tenant will take all proper steps to prevent damage to or destruction of any part of the Demised Premises or the building containing same.

(c) Prior to commencement of any work, Tenant will obtain all necessary permits, licenses and approvals required by any municipal department having jurisdiction thereof and provide copies of same to Landlord, and will obtain, workmen’s compensation insurance or cause contractor to obtain same.

(d) Any mechanic’s lien filed against the Premises, or the Real Property, for work claimed to have been done for, or materials claimed to have been furnished to. Tenant shall be discharged by Tenant within ten (10) days thereafter, at Tenant’s expense, by payment or filing the bond required by law. Tenant will not, at any time prior to or during the Term, directly or indirectly employ, or permit the employment of, any contractor, mechanic or laborer in the Premises, whether in connection with any Alteration or otherwise, if, in Landlord’s sole discretion, such employment will interfere or cause any conflict with other contractors, mechanics, or laborers engaged in the construction, maintenance or operation of the Building by Landlord, Tenant or others. In the event of any such interference or conflict, Tenant, upon demand of Landlord, will cause all contractors, mechanics, or laborers causing such interference or conflict to leave the Building immediately.

74. If, in connection with obtaining financing or refinancing for the Building of which the Demised Premises form a part, a banking, insurance company or other lender will request reasonable modifications to the Lease as a condition to such financing or refinancing, Tenant will not unreasonably withhold, delay, or defer its consent thereto. In no event will a requirement that the consent of any such lender be given for any lease modification or any assignment or sublease, be deemed to materially affect the leasehold interest hereby created.

75. No agreement to accept a surrender of the Lease will be valid unless it is in writing signed by Landlord or its duly authorized agent. No employee of Landlord or of Landlord’s agents will have any power to accept a surrender of the Lease. The delivery of keys to Landlord or any employee of Landlord or of Landlord’s agents will not operate as a termination of the Lease or a surrender of the Demised Premises. In the event of Tenant at any time desiring to have Landlord sublet the premises for Tenant’s account, Landlord or Landlord’s agents are authorized to receive said keys for such purpose without releasing Tenant from any of the obligations under the Lease. The failure of Landlord or Tenant to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of the Lease or any rules and regulations adopted by the Landlord, will not prevent a subsequent act, which would have originally constituted a violation. from having all the force and effect of an original violation. The receipt by Landlord of rent with knowledge of the breach of any lease covenant will not be deemed a waiver of such breach. No provision of the Lease will be deemed to have been waived by Landlord or Tenant, unless such waiver be in writing signed by the applicable party.

76. Supplementing Article 19 of the Lease, if Tenant shall default in the observance or performance of any term or covenant on Tenant’s part to be observed or performed under any terms or provisions of the Lease, (a) Landlord may remedy such default for the account of Tenant, immediately and without notice in case of emergency, or in any other case if Tenant

shall fail to remedy such default with all reasonable dispatch after Landlord shall have notified Tenant in writing of such default and the applicable grace period for curing such default shall have expired; and (b) if Landlord makes any expenditures or incurs any obligations for the payment of money in connection with such uncured default including but not limited to reasonable attorneys’ fees in instituting, prosecuting or defending any action or proceeding, such sums paid or obligations incurred, with interest at the maximum rate permitted by law, shall be deemed to be additional rent hereunder and shall be paid by Tenant to Landlord upon rendition of a bill to Tenant therefor. The obligations of Tenant to make such payment shall survive the expiration or other termination of the Lease.

77. Any and all notices which Landlord is or may be entitled to give to Tenant under any provision of the Lease or the law (including for non-payment of rent or for default of the Lease)may be executed and delivered by Landlord’s attorneys on behalf of the Landlord, and in such event shall have the same force and effect as if executed and given directly by the Landlord.

78. Landlord reserves the right without any liability whatsoever, or abatement of fixed annual rent, or additional rent, to stop the heating, plumbing, electric and other systems when necessary by reason of accident or emergency or for repairs, alterations, replacements or improvements, provided that except in case of emergency, Landlord will notify Tenant in advance, if possible, of such stoppage and, if ascertainable, its estimated duration, and will proceed diligently with the work necessary to resume such service as promptly as possible and in a manner so as to minimise the interference with the Tenant’s use and enjoyment of the Demised Premises, but Landlord shall not be obligated to employ overtime or premium labor or grant a rent abatement.

79. (a) It is understood that the Demised Premises will be used by Tenant solely as a retail and wholesale banking facility with related banking uses and executive office and for no other purpose. Tenant shall at its own sole cost and expense, comply with all rules, regulations, orders and violations of any and all departments, whether City, State or Federal having jurisdiction thereof. It is understood that the Demised Premises may not be used for residential purposes and that sleeping overnight in the Premises, cooking or other such housekeeping functions are not permitted. It is further understood that Tenant shall not bring construction equipment, construction materials, or anything not pertaining to general office use into the premises without prior written approval of the Landlord. Tenant will dispose of all waste (medical and otherwise) in accordance with all applicable laws and regulations. Failure to comply will constitute a material breach of this lease.

(b) A violation of any of the terms of this Article shall give to the Landlord the right to restrain the same by injunctive relief and/or cancel and terminate the Lease after notice and opportunity to cure as provided herein.

80. It is agreed between the parties hereto that Tenant or anyone claiming through Tenant, shall have no right whatsoever to assert or set up or plead as a counterclaim against Landlord, its heirs, successors and assigns. In any action or proceeding which Landlord may institute by reason of failure of Tenant to pay rent hereunder, Tenant does hereby waive the right to assert counterclaims of Tenant in any nonpayment proceeding. Any

claim or counterclaim of the Tenant shall be by an independent action and shall not be consolidated with any action or proceeding for nonpayment of rent.

81. In the event Tenant shall attempt to interpose a counterclaim, any summary proceeding brought by the Landlord and Tenant shall attempt to interpose a counterclaim and notwithstanding Landlord’s objection and the provisions of this Lease, the interposing of that counterclaim is permitted, Tenant agrees and confirms that it shall deposit with the Landlord’s attorney, in escrow and in crust the amount of rent and additional rent as demanded in the summary proceeding instituted by Landlord. Tenant grants jurisdiction to the Court in such proceeding to require such deposit to be made as a condition precedent to the determination of whether the interposing of the counterclaim should be permitted notwithstanding the provisions of this Lease to the contrary.

82. If Tenant shall be in default in the payment of any monthly installment of rent for a period often (10) days or more and by reason of such default Landlord shall institute a nonpayment summary proceeding, then and in such event Tenant shall reimburse Landlord for the expense and disbursements incurred by Landlord, which fee is hereby fixed to be the sum of $500.00 for each nonpayment proceeding plus attorney’s fees, and which sum may be included in the petition for nonpayment as additional rent.

83. No delay or delays in the payment of rent or additional rent on the dates agreed upon, and no failure of Landlord to enforce the provisions of this agreement upon any neglect, delay or default of Tenant in keeping and performance of the covenants and conditions by Tenant to be kept or to be performed, shall create a custom of deferred payment or modify in any way the provisions of this lease or the right of Landlord to otherwise enforce the provisions hereof. No receipt by Landlord of any rent or portion of rent shall be deemed a waiver of the right of Landlord to enforce the payment of rent or additional or augmented rent of any kind previously due or which may thereafter become due, or to exercise any rights or remedies reserved to Landlord hereunder, and also the failure of Landlord to enforce any covenant as to which Tenant may be guilty of a breach or be in default, shall not be deemed to void the right of Landlord to enforce the same or any other covenants or conditions on the occasion of any subsequent breach or default. If at any time during the term of this lease or any renewal thereof Landlord shall accept less than the regular herein-stated installment of rent due for any particular month or months of said term, or Tenant shall fail or refuse to make any payment for water rates, sewer charges, insurance or other payments required to be made by Tenant, then and in that event in addition to any other rights, remedies, proceedings or actions allowed to Landlord by the terms of this lease, the difference between the amount then payable and the rent actually paid and accepted by Landlord, and also any unpaid amount of water rates, sewer taxes, insurance or other payments required to be paid by Tenant, including cost of repair, may at the option of Landlord, be charged to and against Tenant and collected from Tenant’s Security Deposit, and Tenant shall continue to be liable therefor. Tenant shall refund to Landlord such portion of the security so used.

84. Tenant agrees to use its best efforts to maintain the demised premises free and clear of any and all violations that may be imposed upon Landlord by the Department of Buildings and/or any other governmental or municipal agency having jurisdiction over the demised

premises. Tenant understands and agrees to perform such work as may be required so that in the event the demised premises shall be inspected by the Department of Buildings or any other governmental or municipal agency having jurisdiction therein, such inspection shall reveal no violations in the demised premises. In the event such an inspection occurs and one or more violations are placed on the demised premises, Tenant hereby covenants to cure any and all of such violation(s), and indemnify Landlord for fees, fines or expenses incurred which Landlord shall send to Tenant by Certified Mail, Return Receipt Requested. In the event Tenant shall fail to cure any and all violations within the above-mentioned thirty (30) day period, Landlord shall have the right to exercise all of the remedies available under this Lease.

85. Tenant shall not place a load upon any floor of the demised premises exceeding the floor load per square foot area which such floor was designed to carry and which is allowed by law. Landlord reserves the absolute right to prescribe the weight and position of all safes which must be placed so as to distribute the weight. Business machines and mechanical equipment shall be placed and maintained by Tenant at its own expense in settings sufficient in Landlord’s judgment to absorb and prevent vibration, noise and annoyance. Tenant agrees that upon the written request of Landlord, Tenant will, within fifteen (15) days of the mailing of such request, provide rubber or other approved settings for absorbing, preventing and decreasing noise and/or vibration from any or all machines or machinery. Such insulation or other devices for the prevention, decrease or elimination of noise satisfactory to Landlord shall be made in such manner and of such material as Landlord may direct. In the event that Tenant fails to comply with the aforesaid request within the fifteen (15) days aforementioned, Landlord may, at its option, by notice in writing to Tenant, cause the terms of this lease to expire or liquidated damages will be assessed. Landlord in such event shall have the right to reenter the premises by summary proceedings or otherwise without liability. Landlord shall give not less than ten (10) days’ notice of its election to terminate the lease as above provided. Landlord shall have the right to enter the demised premises with workers and materials and to insulate the machinery as above provided, collecting from Tenant the cost of such work as additional rent in the event that Tenant fails to comply with the written request aforementioned after the expiration of fifteen (15) days from the receipt thereof.

86. In the event that on the date the Landlord repossesses the demised premises under any provision of this lease or upon the termination of this lease or upon the expiration of the demised term, whichever is earlier, there remains within the demised premises any property belonging to the Tenant, the Landlord may remove said property and dispose of same at public or private sale; or if said property is not able to be sold, the Landlord may dispose of it in any other manner, without any liability whatsoever.

87. It is understood and agreed that in the event Landlord shall receive any ‘“Recommendations” from any insurance carrier or carriers that provide insurance coverage for the building in which demised premises constitutes a part, the demised premises itself, or any portion thereof, recommending any additions, improvements, installations, repairs or deletions to the demised premises or the building in which the demise premises constitutes a part, which recommendations shall be attributable to Tenant’s use or occupancy of the demised premises, Tenant shall satisfactorily complete such “Recommendations” within thirty (30) days subsequent to Landlord’s notification to Tenant of such “Recommendations”. In the event

Tenant shall tail to complete or fail to satisfactorily complete the work required by any and all such “Recommendations” within the thirty (30) day period provided for hereinabove, Landlord shall have the right to all remedies provided for in this lease. In the event the insurance carrier who makes any “Recommendations”: shall notify Landlord in writing that a time period loner than the above mentioned thirty (30) days to cure or correct any condition resulting “Recommendation” is acceptable to said insurance carrier, Tenant shall not be deemed in default until the time period permitted by said insurance carrier has expired.

88. The Landlord or its agents shall have reasonable access to the demised premises for the maintenance of the rest of the building,

89. With respect to Paragraph 9 of the printed form of lease, the Landlord shall only be obligated to repair damages caused by a fire or other casualty to the demised premises only to the extent the demised premises existed on the date of the execution of this lease. The Landlord shall not be required to repair any damage to alterations, improvements or additions made by the Tenant.

90. If Tenant is in default under this Lease more then two (2) times within any twelve month period, irrespective of whether or not such default is cured, then, without limiting Landlord’s other rights and remedies provided for in this Lease or at law or in equity, the Security Deposit shall automatically be increased by an amount equal to three (3) times the then current Security Deposit.

91. Tenant will pay the first and last monthly installments of rent on the execution hereof. Such installments shall be paid by a bank check drawn on a bank with offices in New York, New York.

92. REMOVAL OF ELECTRICAL AND TELECOMMUNICATIONS WIRES

(a) Landlord May Elect to Either Remove or Keep Wires. Within 15 days after the expiration or sooner termination of the Lease. Landlord may elect (“Election Right”) by written notice to Tenant to:

(i) Retain any or all wiring, cables, risers, and similar installations appurtenant thereto installed by Tenant in the risers of the Building (“Wiring”);

(ii) Remove any or all such Wiring and restore the Premises and risers to their condition existing prior to the installation of the Wiring (“Wire Restoration Work”). Landlord shall perform such Wire Restoration Work at Tenant’s sole cost and expense; or

(iii) Require Tenant to perform the Wire Restoration Work at Tenant’s sole cost and expense.

(b) Survival. The provisions of this Clause shall survive the expiration or sooner termination of the Lease.

(c) Condition of Wiring. In the event Landlord elects to retain the Wiring (pursuant to Paragraph a(l) hereof), Tenant covenants that:

(i) Tenant shall be the sole owner of such Wiring, that Tenant shall have good right to surrender such Wiring, and that such Wiring shall be free of all liens and encumbrances; and

(ii) All wiring shall be left in good condition, working order, properly labeled at each end and in each telecommunications/electrical closet and junction box, and in safe condition.

(d) Landlord retains Security Deposit. Notwithstanding anything to the contrary, Landlord may retain Tenant’s Security Deposit after the expiration or sooner termination of the Lease until the earliest of the following events:

(i) Landlord elects to retain the Wiring pursuant to Paragraph a(I);

(ii) Landlord elects to perform the Wiring Restoration Work pursuant to Paragraph (a)(ii) and the Wiring Restoration Work is complete and Tenant has fully reimbursed Landlord for all costs related thereto; or

(iii) Landlord elects to require the Tenant to perform the Wiring Restoration Work pursuant to Paragraph (a)(iii) and the Wiring Restoration Work is complete and Tenant has paid for all costs related thereto;

(e) Landlord Can Apply Security Deposit. In the event Tenant fails or refuses to pay all costs of the Wiring Restoration Work within 10 days of Tenant’s receipt of Landlord’s notice requesting Tenant’s reimbursement for or payment of such costs, Landlord may apply all or any portion of Tenant’s security deposit towards the payment of such unpaid costs relative to the Wiring Restoration Work.

(F) No Limit on Right to Sue. The retention or application of such Security Deposit by Landlord pursuant to this Clause does not constitute a limitation on or waiver of Landlord’s right to seek future remedy under law or equity.

93. INTENTIONALLY OMITTED.

94. INTENTIONALLY OMITTED.

95. INTENTIONALLY OMITTED

96. With respect to Paragraph 23 of the printed form of lease, Tenant may peaceably and quietly enjoy the premises hereby demised, subject also to any rights of the prior tenant to the premises. Landlord will indemnify Tenant against the claims of the prior tenant provided Tenant has not defaulted under the Lease. Tenant waives any right to seek damages from Landlord in the event the prior tenant regains possession of the premises. Tenant’s sole remedy will be the cancellation of any obligation to pay rent or additional rent if the prior tenant regains legal possession of the premises.

97. Tenant shall, at its sole cost and expense, be liable and responsible for repairing and cleaning any and all waste drains and pipes in and from the Demised Premises which may become clogged or stopped from any waste or sewage emanating from Tenant’s premises.

98. Tenant’s security deposit of $17,577.00 will be held in a non interest bearing account. Tenant will deposit additional security on each annual anniversary of the lease to ensure that the security deposit equals three (3) months of the then current rent.

	/s/ Nani Thanawala
PND, LLC	NARA BANK
By: Robert An, Member	By: Nani Thanawala
	First Vice President

STANDARD FORM OF LOFT LEASE

The Real Estate Board of New York, Inc.

Agreement of Lease, made as of this day of June 19, 2005, between PDN, LLC, 217-220 Linden Blvd., Cambria Hts., NY party of the first part, hereinafter referred to as OWNER, and Nara Bank, 16 West 22nd Street, New York, NY 10001 party of the second part, hereinafter referred to as TENANT,

Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner Rooms 607 in the building known as 16 West 32nd Street in the Borough of Manhattan, City of New York, for the term of three (3) years (or until such term shall sooner cease or expire as herein after provided) to commence on the 1st day of July two thousand five, and to end on the 30th day of June, two thousand eight and both dates inclusive, at an annual rental rate of See Clause 64.

which Tenant agrees to pay in lawful money of the United States which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, in equal monthly installments in advance on the first day of each month during said term, at the office of Owner or such other place as Owner may designate, without any set off or deduction whatsoever, except that Tenant shall pay the first monthly installment(s) on the execution hereof (unless this lease be a renewal).

     In the event that, at the commencement of the term of this lease, or thereafter, Tenant shall be in default in the payment of rent to Owner pursuant to the terms of another lease with Owner or with Owner’s predecessor in interest, Owner may at Owner’s option and without notice to Tenant add the amount of such arrears to any monthly installment of rent payable hereunder and the same shall be payable to Owner as additional rent.

     The parties hereto, for themselves, their heirs, distributees, executors, administrators, legal representatives, successors and assigns, hereby covenant as follows:

Rent:	1. Tenant shall pay the rent as above and as hereinafter provided.
Occupancy:	2. Tenant shall use and occupy demised premises

See Clause-79

provided such use is in accordance with the certificate of occupancy for the building, if any, and for no other purpose.

Alterations:

3. Tenant shall make no changes in or to the demised premises of any nature without Owner’s prior written consent. Subject to the prior written consent of Owner, and to the provisions of this article, Tenant, at Tenant’s expense, may make alterations, installations, additions or improvements which are nonstructural and which do not affect utility services or plumbing and electrical lines, in or to the interior of the demised premises using contractors or mechanics first approved in each instance by Owner, Tenant shall, at its expense, before making any alterations, additions, installations or improvements obtain all permits, approval and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval thereof and shall deliver promptly duplicates of all such permits, approvals and certificates to Owner. Tenant agrees to carry and will cause Tenant’s contractors and sub-contractors to carry such workman’s compensation, general liability, personal and property damage insurance as Owner may require. If any mechanic’s lien is filed against the demised premises, or the building of which the lame forms part, for work claimed to have been done for, or materials furnished to, Tenant, whether or not done pursuant to this article, the same shall be discharged by Tenant within thirty days thereafter, at Tenant’s expense, by payment or filing the bond required by law or otherwise. All fixtures and all pancling, partitions, railings and like installation, installed in the premises at any time, either by Tenant or by Owner on Tenant’s behalf, shall, upon installation, become the property of Owner and shall remain upon and be surrendered with the demised premises Unless Owner, by notice, to Tenant no later than twenty days prior to the date fixed as the termination of this lease, elects to relinquish Owner’s right thereto and to have them removed by Tenant, in which event the same shall be removed from the demised premises by Tenant prior to the expiration of the lease, at Tenant’s expense. Nothing in this Article shall be construed to give Owner title to or to prevent Tenant’s removal of trade fixtures, moveable office furniture and equipment, but upon removal of any such from the premises or upon removal of other installations as may be required by Owner, Tenant shall immediately and at its expense, repair and restore the premises to the condition existing prior to installation and repair any damage to the demised premises or the building due to such removal. All property permitted or required to be removed by Tenant at the end of the term remaining in the premises after Tenant’s removal shall be deemed abandoned and may, at the election of Owner, either be retained as Owner’s property or removed from the premises by Owner, at Tenant’s expense.

Repairs:

4. Owner shall maintain and repair the exterior of and the public portions of the building. Tenant shall, throughout the term of this lease, take good care of the demised premises including the bathrooms and lavatory facilities (if the demised premises encompass the entire floor of the building) and the windows and window frames and, the fixtures and appurtenances therein and at Tenant’s sole cost and expense promptly make all repairs thereto and to the building, whether structural or non-structural in nature, caused by or resulting from the carelessness, omission, neglect or improper conduct of Tenant, Tenant’s servants, employees, invitees, or licensees, and whether or not arising from such Tenant conduct or omission, when required by other provisions of this lease, including Article 6. Tenant shall also repair all damage to the building and the demised premises caused by the moving of Tenant’s fixtures, furniture or equipment. All the aforesaid repairs shall be of quality or class equal to the original work or construction. If Tenant fails, after ten days notice, to proceed with due diligence to make repairs required to be made by Tenant, the same may be made by the Owner at the expense of Tenant, and the expenses thereof incurred, by Owner Shall be collectible, as additional rent, after rendition of a bill or statement therefor. If the demised premises be or become infested with vermin, Tenant shall, at its expense, cause the same to be exterminated. Tenant shall give Owner promote notice of any defective condition in any plumbing, heating system or electrical lines located in the demised premises and following such notice, Owner shall remedy the condition with due diligence, but at the expense of Tenant, if repairs are necessitated by damage or injury attributable to Tenant, Tenant’s servants, agents, employees, invitees or licensees as aforesaid. Except as specifically provided in Article 9 or elsewhere in this lease, there shall be no allowance to the Tenant for a diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner, Tenant or others making or failing to make any repairs, alterations, additions or improvements in or to any portion of the building or the demised premises or in and to the fixtures, appurtenances or equipment thereof. It is specifically agreed that Tenant shall not be entitled to-any set off or reduction of rent by reason of any failure of Owner to comply with the covenants of this or any other article of this lease. Tenant agrees that Tenant’s sole remedy at law in such instance will be by way of any action for damages for breach of contract. The provisions of this Article 4 with respect to the making of repairs shall not apply in the case of fire or other casualty with regard to which Article 9 hereof shall apply.

Window Cleaning:

5. Tenant will not clean nor require, permit, suffer or allow any window in the demised premises to be cleaned from the outside in violation of Section 202 of the New York State Labor Law or any other applicable law or of the Rules of the Board of Standards and Appeals, or of any other Board orbody having or asserting jurisdiction.

Requirements of Law, Fire Insurance:

6. Prior to the commencement of the lease term. If Tenant is then in possession, and at all times thereafter Tenant shall, at Tenant’s sole cost and expense, promptly Comply with all present and future laws, orders and regulations of all state, federal, municipal and local governments, departments, commission and boards and any direction of any public officer pursuant to law, and all orders, rules and regulations of the New York Board of Fire Underwriters, or the Insurance Services Office, or any similar body which Shall impose any violation, order or duty upon Owner or Tenant with respect to the demised premises, whether or not arising out of Tenant’s use or manner of use thereof, or, with respect to the building, if arising out of Tenant’s use or manner of use of the demised premises of the building (including the use permitted under the lease). Except as provided in Article 30 hereof, nothing herein shall require Tenant to make structural repairs or alterations unless Tenant has, by its manner of use of the demised premises or method of operation therein, violated any such laws, ordinances orders, rules, regulations or requirements with respect thereto. Tenant shall not do or

permit any act or thing to be done in or to the demised premises which is contrary to law, or which will invalidate or be in conflict with public liability, fire or other policies of insurance at any time carried by or for the benefit of Owner. Tenant shall not keep anything in the demised premises except as now or hereafter permitted by the Fire Department, Board of fire Underwriters, Fire Insurance Rating Organization and other authority having jurisdiction, and then only in such manner and such quantity so as not to increase the rate for fire insurance applicable to the building, nor use the premises in a manner which will increase the insurance rate for the commencement of Tenant’s occupancy. If by reason of failure to comply with the foregoing the fire insurance rate shall, at the beginning of this lease or at any time thereafter, be higher than it otherwise would be, then Tenant shall reimburse Owner, as additional rent hereunder, for that portion of all fire insurance premiums thereafter paid by Owner which shall have been charged because of such failure by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a schedule or “make-up” or rate for the building or demised premises issued by a body making fire insurance rates applicable to said premises shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rates then applicable to said premises. Tenant shall not place a load upon any floor of the demised premises exceeding the floor load per square foot area which it was designed to carry and which is allowed by law. Owner reserves the right to prescribe the weight and position of all sales, business machines and mechanical equipment. Such installations shall be placed and maintained by Tenant, at Tenant’s expense, in settings sufficient, in Owner’s judgement, to absorb and prevent vibration, noise and annoyance.

Subordination:

7. This lease is subject and subordinate to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the real property of which demised premises are a part and to all renewals, modifications, consolidations, replacements and extensions of any such underlying leases and mortgages. This clause shall be self-operative and no further instrument or subordination shall be required by any ground or underlying lessor or by any mortgagee, affecting any lease or the real property of which the demised premises are a part. In confirmation of such subordination, Tenant shall from time to time execute promptly any certificate that Owner may request.

Tenant’s Liability Insurance Property Loss, Damage, Indemnity:

8. Owner or its agents shall not be liable for any damage to property of Tenant or of others entrusted to employees of the building, nor for loss of or damage to any property of Tenant by theft or otherwise, nor for any injury or damage to persons or property resulting from any cause of whatsoever nature, unless caused by or due to the negligence of Owner, its agents, servants or employees; Owner or its agents shall not be liable for any damage caused by other tenants or persons in, upon or about said building or caused by operations in connection of any private, public or quasi public work. If at any time any windows of the demised premises are temporarily closed, darkened or bricked up (or permanently closed, darkened or bricked up, if required by law) for any reason whatsoever including, but not limited to Owner’s own acts, Owner shall not be liable for any damage Tenant may sustain thereby and Tenant shall not be entitled to any compensation therefor nor abatement or diminution of rent nor shall the same release Tenant from its obligations hereunder nor constitute an eviction. Tenant shall indemnify and save harmless Owner against and from all liabilities, obligations, damages, penalties, claims, costs and expenses for which Owner shall not be reimbursed by insurance, including reasonable attorney’s fees, paid, suffered or incurred as a result of any breach by Tenant, Tenant’s agents, contractors, employees, invitees, or licensees, of any covenant or condition of this lease, or the carelessness, negligence or improper conduct of the Tenant, Tenant’s agents, contractors, employees, invitees or licensees. Tenant’s liability under this lease extends to the acts and omissions of any sub-tenant, and any agent, contractor, employee, invitee or licensee of any sub-tenant. In case any action or proceeding is brought against Owner by reason of any such claim, Tenant, upon written notice from Owner, will, at Tenant’s expense, resist or defend such action or proceeding by counsel approved by Owner in writing, such approval not be unreasonably withheld.

Destruction, Fire and Other Casualty:

9. (a) If the demised premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give immediate notice thereof to Owner and this lease shall continue in full force and effect except as hereinafter set forth. (b) If the demised premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by and at the expense of Owner and the rent and other items of additional rent, until such repair shall be substantially completed, shall be apportioned from the day following the casualty according to the part of the premises which is usable. (c) If the demised premises are totally damaged or rendered wholly unusable by fire or other casualty, then the rent and other items of additional rent as hereinafter expressly provided shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the date when the premises shall have been repaired and restored by Owner (or sooner reoccupied in part by Tenant then rent shall be apportioned as provided in subsection (b) above), subject to Owner’s right to elect not to restore the same as hereinafter provided. (d) If the demised premises are rendered wholly unusable or (whether or not the demised premises are damaged in whole or in part) if the building shall be so damaged that Owner shall decide to demolish it or to rebuild it, then, in any of such events, Owner may elect to terminate this lease by written notice to Tenant, given within 90 days after such fire or casualty, or 30 days after adjustment of the insurance claim for such fire or casualty, whichever is sooner, specifying a date for the expiration of the lease, which date shall not be more than 60 days after the giving of such notice, and upon the date specified in such notice the term of this lease shall expire as fully and completely as if such date were the date set forth above for the termination of this lease and Tenant shall forthwith quit, surrender and vacate the premises without prejudice however, to Owner’s rights and remedies against Tenant under the lease provisions in effect prior to such termination, and any rent owing shall be paid up to such date and any payments of rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant. Unless Owner shall serve a termination notice as provided for herein, Owner shall make the repairs and restorations under the conditions of (b) and (c) hereof, with all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Owner’s control. After any such casualty, Tenant shall cooperate with Owner’s restoration by removing from the premises as promptly as reasonably possible, all of Tenant’s salvageable inventory and movable equipment, furniture, and other property. Tenant’s liability for rent shall resume five (5) days after written notice from Owner that the premises are substantially ready for Tenant’s occupancy. (e) Nothing contained herein-above shall relieve Tenant from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, including Owner’s obligation to restore under subparagraph (b) above, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible and to the extent permitted by law, Owner and Tenant each hereby releases and waives all right of recovery with respect to subparagraphs (b), (d) and (e) above, against the other or any one claiming through or under each of them by way of subrogation or otherwise. The release and waiver herein referred to shall be deemed to include any loss or damage to the demised premises and/or to any personal property, equipment, trade fixtures, goods and merchandise located therein. The foregoing release and waiver shall be in force only if both releasors’ insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance. If, and to the extent, that such waiver can be obtained only by the payment of additional premiums, then the party benefitting from the wavier shall pay such premium within ten days after written demand or shall be deemed to have agreed that the party obtaining insurance coverage shall be free of any further obligation under the provisions hereof with respect to wavier of subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant’s furniture and or furnishings or any fixtures or equipment, improvements, or appurtenances removable by Tenant and agrees that Owner will not be obligated to repair any damage thereto or replace the same. (f) Tenant here by waives the provisions of Section 227 of the Real Property Law and agrees that the provisions of this article shall govern and control in lieu thereof.

Eminent Domain:

10. If the whole or any part of the demised premises shall be acquired or condemned by Eminent Do main for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim for the value of any unexpired term of said lease. Tenant shall have the right to make an independent claim to the condemning authority for the value of Tenant’s moving expenses and personal property, trade fixtures and equipment, provided Tenant is entitled pursuant to the terms of the lease to remove such property, trade fixtures and equipment at the end of the term and provided further such claim does not reduce Owner’s ward.

Assignment, Mortgage, Etc.:

11. Tenant, for itself, its heirs, distributees, executors, administrators, legal representatives, successors and assigns, expressly covenants that it shall not assign, mortgage or encumber this agreement, nor underlet, or suffer or permit the demised premises or any part thereof to be used by others, without the prior written consent of Owner in each instance. Transfer of the majority of the stock of a corporate Tenant or the majority partnership interest of a partnership Tenant shall be deemed an assignment. If this lease be assigned, or if the demised premises or any part thereof be underlet or occupied by anybody other than Tenant, Owner may, after default by Tenant, collect rent from the assignee, under-tenant or occupant, and apply the net amount collected to the rent herein reserved, but no such assignment, underletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, under-tenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. The consent by Owner to an assignment or underletting shall not in any wise be construed to relieve Tenant from obtaining the express consent in writing of Owner to any further assignment or underletting.

Electric Current:

12. Rates and conditions in respect to submetering or rent inclusion, as the case may be, to be added in RIDER attached hereto. Tenant covenants and agrees that at all times its use of electric current shall not exceed the capacity of existing feeders to the building or the risers or wiring installation and Tenant may not use any electrical equipment which, in Owner’s opinion, reasonably exercised, will overload such installations or interfere with the use thereof by other tenants of the building. The change at any time of the character of electric service shall in no wise make Owner liable or responsible to Tenant, for any loss, damages or expenses which Tenant may sustain.

Access to Premises:

13. Owner or Owner’s agents shall have the right (but shall not be obligated) to enter the demised premises in any emergency at any time, and, at other reasonable times, to examine the same and to make such repairs, replacements and improvements as Owner may deem necessary and reasonably desirable to any portion of the building or which Owner may elect to perform in the premises after Tenant’s failure to make repairs or perform any work which Tenant is obligated to perform under this lease, or for the purpose of complying with laws, regulations and other directions of governmental authorities. Tenant shall permit Owner to use and maintain and replace pipes and conduits in and through the demised premises and to erect new pipes and conduits therein provided, wherever possible, they are within walls or otherwise concealed. Owner may, during the progress of any work in the demised premises, take all necessary materials and equipment into said premises without the same constituting an eviction nor shall the Tenant be entitled to any abatement of rent while such work is in progress nor to any damages by reason of loss or interruption of business or otherwise. Throughout the term hereof Owner shall have the right to enter the demised premises at reasonable hours for the purpose of showing the same to prospective purchasers or mortgagees of the building, and during the last six months of the term for the purpose of showing the same to prospective tenants and may, during said six months period, place upon

Rider to be added if necessary.

the demised premises the usual notices “To Let” and “For Sale” which notices Tenant shall permit to remain thereon without molestation. If Tenant is not present to open and permit an entry into the demised premises, Owner or Owner’s agents may enter the same whenever such entry may be necessary or permissible by master key or forcibly and provided reasonable care is exercised to safeguard Tenant’s property, such entry shall not render Owner or its agents liable therefor, nor in any event shall the obligations of “Tenant hereunder be affected. If during the last month of the term Tenant shall have removed all or substantially all of Tenant’s property therefrom. Owner may immediately enter, alter, renovate or redecorate the demised premises without limitation or abatement of rent, or incurring liability to Tenant for any compensation and such act shall have no effect on this lease or Tenant’s obligation hereunder.

Vault, Vault Space, Area:

14. No Vaults, vault space or area, whether or not enclosed or covered, not within the property line of the building is leased hereunder anything contained in or indicated on any sketch, blue print or plan, or anything contained elsewhere in this lease to the contrary notwithstanding. Owner makes no representation as to the location of the property line of the building. All vaults and vault space and all such areas not within the property line of the building, which Tenant may be permitted to use and/ or occupy, is to be used and/or occupied under a revocable, license, and if any such license be revoked, or if the amount of such space or area be diminished or required by any federal, state or municipal authority or public utility. Owner shall not be subject to any liability nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation, diminution or requisition be deemed constructive or actual eviction. Any tax, fee or charge of municipal authorities for such vault or area shall be paid by Tenant, if used by Tenant, whether or not specifically leased hereunder.

Occupancy:

15. Tenant will not at any time use or occupy the demised premises in violation of thecertificate of occupancy issued for the building of which the demised premises are a part. Tenant hasinspected the premises and accepts them as is, subject to the riders annexed hereto with respect to Owner’s work, if any. In any event, Owner makes no representation as to the condition of the premises and Tenant agrees to accept the same subject to violations, whether or not of record. If any governmental license or permit shall be required for the proper and lawful conduct of Tenant’s business, Tenant shall be responsible for and shall procure and maintain such license or permit.

Bankruptcy:

16.(a) Anything elsewhere in this lease to the contrary notwithstanding, this lease may be cancelled by Owner by sending of a written notice to Tenant within a reasonable time after the happening of any one or more of the following events: (1) the commencement of a case in bankruptcy or under the laws of any state naming Tenant as the debtor; or (2) the making by Tenant of an assignment or any other arrangement for the benefit of creditors under any state statute. Neither Tenant nor any person claiming through or under Tenant, or by reason of any statute or order of court, shall thereafter be entitled to possession of the premises demised but shall forthwith quit and surrender the premises. If this lease shall be assigned in accordance with its terms, the provision of this Article 16 shall be applicable only to the party then owning Tenant’s interest in this lease.

     (b) It is stipulated and agreed that in the event of the termination of this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any other provisions of this lease to the contrary, be entitled to recover from Tenant as and for liquidated damages an amount equal to the difference between the rental reserved hereunder for the unexpired portion of the term demised and the fair and reasonable rental value of the demised premised for the same period. In the computation of such damages the difference between any installment of rent becoming due hereunder after the date of termination and the fair and reasonable rental value of the demised premises for the period for which such installment was payable shall be discounted to the date of termination at the rate of four percent (4%) per annum. If such premises or any part thereof be relet by the Owner for the unexpired term of said lease, or any part thereof, before presentation of proof of such liquidated damages to any court, commission or tribunal, the amount of rent reserved upon such reletting shall be deemed to be the fair and reasonable rental value for the part or the whole of the premises so relet during the term of the re-letting. Nothing herein contained shall limit or prejudice the right of the Owner to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceeding in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amount of the difference referred to above.

Default

17.(1) If Tenant defaults in fulfilling any of the covenants of this lease other than the covenants for the payment of rent or additional rent; or if the demised premises becomes vacant or deserted “or if this lease be rejected under §235 of Title 11 of the U.S. Code (bankruptcy code);” or if any execution or attachment shall be issued against Tenant or any of Tenant’s property whereupon the demised premises shall be taken or occupied by someone other than Tenant; or if Tenant shall make default with respect to any other lease between Owner and Tenant; or if Tenant shall have failed, after (5) days written notice, to redeposit with Owner any portion of the security deposited hereunder which Owner has applied to the payment of any rent and additional rent due and payable hereunder or failed to move into or take possession of the premises within thirty (30) days after the commencement of the term of this lease, of which fact Owner shall be the sole judge; then in any one or more of such events, upon Owner serving a written fifteen(15) days notice upon Tenant specifying the nature of said default and upon the expiration of said fifteen (15) days, if Tenant shall have failed to comply with or remedy such default, or if the said default or omission complained of shall be of a nature that the same cannot be completely cured or remedied within said fifteen (15) day period, and if Tenant shall not have diligently commenced during such default within such fifteen (15) day period, and shall not thereafter with reasonable diligence and in good faith, proceed to remedy or cure such default, then Owner may serve a written five (5) days’ notice of cancellation of this lease upon Tenant, and upon the expiration of said five (5) days this lease and the term thereunder shall end and expire as fully and completely as if the expiration of such five (5) day period were the day herein definitely fixed for the end and expiration of this lease and the term thereof and Tenant shall then quit and surrender the demised premises to Owner but Tenant shall remain liable as hereinafter provided.

     (2) If the notice provided for in (1) hereof shall have been given, and the term shall expire as aforesaid; or if Tenant shall make default in the payment of the rent reserved herein or any item of additional rent herein mentioned or any part of either or in making any other payment herein required; then and in any of such events Owner may without notice, re-enter the demised premises either by force or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the legal representative of Tenant of other occupant of demised premises and remove their effects and hold the premises as if this lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end. If Tenant shall make default hereunder prior to the date fixed as the commencement of any renewal or extension of this lease, Owner may cancel and terminate such renewal or extension agreement by written notice.

Remedies of Owner and Waiver of Redemption:

18. In case of any such default, re-entry, expiration and/or dispossess by summary proceedings or other wise, (a) the rent, and additional rent, shall become due thereupon and be paid up to the time such re-entry, dispossess and/orexpiration, (b) Owner may re-let the premises or any part of parts thereof, either in the name of Owner or otherwise, for a term or terms, which may at Owner’s option be less than or exceed the period which would otherwise have constituted the balance of the term of this lease and may grant concessions or free rent or charge a higher rental that that in this lease, (c) Tenant or the legal representatives of Tenant shall also pay Owner as liquidated damages for the failure of Tenant to observe and perform said Tenant’s covenants herein contained, any deficiency between the rent hereby reserved and or covenanted to be paid and the net amount, if any, of the rents collected on account of the subsequent lease or leases of the demised premises for each month of the period which would otherwise have constituted the balance of the term of this lease. The failure of Owner to re-let the premises or any part or parts thereof shall not release or affect Tenant’s liability for damages. In computing such liquidated damages there shall be added to the said deficiency such expenses as Owner may incur in connection with re-letting, such a legal expenses, reasonable attorneys’ fees, brokerage, advertising and for keeping the demised premises in good order or for preparing the same for re-letting. Any such liquidated damages shall be paid in monthly installments by Tenant on the rent day specified in this lease and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Owner to collect the deficiency for any subsequent month by a similar proceeding. Owner, in putting the demised premises in good order or preparing the same for re-rental may, at Owner’s option, make such alterations, repairs, replacements, and/or decorations in the demised premises as Owner, in Owner’s sole judgment, considers advisable and necessary for the purpose of re-letting the demised premises, and the making of such alterations, repairs, replacements, and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever for failure to re-let the demised premises, or in the event that the demised premises are re-let, for failure to collect the rent thereof under such re-letting, and in no event shall Tenant be entitled to receive any excess, if any, of such net rents collected over the sums payable by Tenant to Owner hereunder. In the event of a breach of threatened breach by Tenant of any of the covenants or provisions hereof, Owner shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not herein provided for. Mention in this lease of any particular remedy, shall not preclude Owner from any other remedy, in law or in equity. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws.

Fees and Expenses:

19. If Tenant shall default in the observance or performance of any term or covenant on Tenant’s part to be observed or performed under or by virtue of any of the terms of provisions in any article of this lease, after notice if required and upon expiration of any applicable grace period if any, (except in an emergency), then, unless otherwise provided elsewhere in this lease, Owner may immediately or at any time thereafter and without notice perform the obligation of Tenant thereunder. If Owner, in connection with the foregoing or in connection with any default by Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment or money, including but not limited to reasonable attorney’s fees, in instituting, prosecuting or defending any action or proceedings, and prevails in any such action or proceeding, then Tenant will reimburse Owner for such sums so paid or obligations incurred with interest and costs. The foregoing expenses incurred by reason of Tenant’s default shall be deemed to be additional rent hereunder and shall be paid by Tenant to Owner within ten (10) days of rendition of any bill or statement to Tenant therefor. If Tenant’s lease term shall have expired at the time of making of such expenditures or incurring of such obligations, such sums shall be recoverable by Owner as damages.

Building Alterations and Management:

20. Owner shall have the right at any time without the same constituting and eviction and without incurring liability to Tenant therefor to change the arrangement and or location or public entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets or other public parts of the building and to change the name, number or designation by which the building may be known. There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner or other Tenant making any repairs in the building or any such alterations, additions and improvements. Furthermore, Tenant shall not have any claim against Owner by reason of Owner’s imposition of any controls of the manner of access to the building by Tenant’s social or business visitors as the Owner may decent necessary for the security of the building and its occupants.

No Representations by Owner:

21. Neither Ownernor Owner’s agents have made any representations or promises with respect to the physical condition of the building, the land upon which it is erected or the demised premises, the rents, leases, expenses of operation or any other matter or thing affecting or related to the demised premises or the building except as herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this lease. Tenant has inspected the building and the demised premises and is thoroughly acquainted with their condition and agrees to take the same “as is” on the date possession is tendered and acknowledges that the taking of possession of the demised premises by Tenant shall be conclusive evidence that the said premises and the building of which the same form a part were in good and satisfactory conditions at the time such possession was so taken, except as to latent defects. All understandings and agreements heretofore made between the parties hereto are merged in this contract, which alone fully and completely expresses the agreement between Owner and Tenant and any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect and abandonment of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought.

End of Term:

22. Upon the expiration or other termination of the term of this lease, Tenant shall quit and surrender to Owner the demised premises, broom clean, in good order and condition, ordinary wear and damages which Tenant is not required to repair as provided elsewhere in this lease excepted, and Tenant shall remove all its property from the demised premises. Tenant’s obligation to observe or perform this covenant shall survive the expiration or other termination of this lease. If the last day of the term of this Lease or any renewal thereof, falls on Sunday, this lease shall expire at noon on the preceding Saturday unless it be a legal holiday in which case it shall expire at noon on the preceding business day.

Quiet Enjoyment:

23. Owner covenants and agrees with Tenant that upon Tenant paying the rent and additional rent and observing and performing all the terms, covenants and conditions, on Tenant’s part to be observed and performed, Tenant may peaceably and quietly enjoy the premises hereby demised, Tenant may peaceably and quietly enjoy the premises hereby demised, subject, nevertheless, to the terms and conditions of this lease including, but not limited to, Article 34 hereof and to the ground leases, underlying leases and mortgages hereinbefore mentioned.

Failure to Give Possession:

24. If Owner is unable to give possession of the demised premises on the date of the commencement of the term hereof, because of the holding-over or retention of possession of any tenant, undertenant or occupants or if the demised premises are located in a building being constructed, because such building has not been sufficiently completed to make the premises ready for occupancy or because of the fact that a certificate of occupancy has not been procured or if Owner has not completed any work required to be performed by Owner, or for any other reason, Owner shall not be subject to any liability for failure to give possession on said date and the validity of the lease shall not be impaired under such circumstances, nor shall the same be construed in any wise to extend the term of this lease, but the rent payable hereunder shall be abated (provided Tenant is not responsible for Owner’s inability to obtain possession or complete any work required) until after Owner shall have given Tenant notice that Owner is able to deliver possession in the condition required by this lease. If permission is given to Tenant to enter into the possession of the demised premises or to occupy premises other than the term of this lease, Tenant covenants and agrees that such possession and/ or occupancy shall be deemed to be under all the terms, covenants, conditions and provisions of this lease, except the obligation to pay the fixed annual rent set forth in page one of this lease. The provisions of this article are intended to constitute “an express provision to the contrary” within the meaning of Section 223-a of the New York Real Property Law.

No Waiver:

25. The failure of Owner to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this lease or of any of the Rules or Regulations, set forth or hereafter adopted by Owner, shall not prevent a subsequent act which would have originally constituted a violation from having all the force and effect of an original violation. The receipt by Owner of rent with knowledge of the breach of any covenant of this lease shall not be deemed a waiver of such breach and no provision of this lease shall be deemed to have been waived by Owner unless such waiver be in writing signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Owner may accept such check or payment without prejudice to Owner’s right to recover the balance of such rent or pursue any other remedy in this lease provided. All checks tendered to Owners as and for the rent of the demised premises shall be deemed payments for the account of Tenant. Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to operate as an attornment to Owner by the payor of such rent or as a consent by Owner to an assignment or subletting by Tenant of the demised premises to such payor, or as a modification of the provisions of this lease. No act or thing done by Owner or Owner’s agents during the term hereby demised shall be deemed an acceptance of a surrender of said premises and no agreement to accept such surrender shall be valid unless in writing signed by Owner. No employee of Owner or Owner’s agent shall have any power to accept the keys of said premises prior to the termination of the lease and the delivery of keys to any such agent or employee shall not operate as a termination of the lease or a surrender of the premises.

Waiver of Trial by Jury:

26. It is mutually agreed by and between Owner and Tenant that the respective parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this lease, the relationship of Owner and Tenant, Tenant’s use of or occupancy of said premises, and any emergency statutory or any other statutory remedy. It is further mutually agreed that in the event Owner commences any proceeding or action for possession including a summary proceeding for possession of the premises, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding including a counterclaim under Article 4 except for statutory mandatory counterclaims.

Inability to Perform:

27. This Lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no wise be affected, impaired or excused because Owner is unable to fulfill any of its obligations under this lease or to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repair, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment, fixtures or other materials if Owner is prevented or delayed from doing so by reason of strike or labor trouble or any cause whatsoever beyond Owner’s sole control including, but not limited to, government preemption or restrictions or by reason of any rule, order or regulation of any department or subdivision thereof of any government agency or by reason of the conditions which have been or are affected, either directly or indirectly, by war or other emergency.

Bills and Notices:

28. Except as otherwise in this lease provided, a bill statement, notice or communication which Owner may desire or be required to give to Tenant, shall be deemed sufficiently given or rendered if, in writing, delivered to Tenant personally or sent by registered or certified mail addressed to Tenant at the building of which the demised premises form a part or at the last known residence address or business address of Tenant or left at any of the aforesaid premises addressed to Tenant, and the time of the rendition of such bill or statement and of the giving of such notice or communication shall be deemed to be the time when the same is delivered to Tenant, mailed, or left at the premises as herein provided. Any notice by Tenant to Owner must be served by registered or certified mail addressed to Owner at the address first hereinabove given or at such other address as Owner shall designate by written notice.

Water Charges:

29. If Tenant requires, uses or consumes water for any purpose in addition to ordinary lavatory purposes (of which fact Tenant constitutes Owner to be the sole judge) Owner may install a water meter and thereby measure Tenant’s water consumption for all purposes. Tenant shall pay Owner for the cost of the meter and the cost of the installation, thereof and throughout the duration of Tenant’s occupancy Tenant shall keep said meter and installation equipment in good working order and repair at Tenant’s own cost and expense in default of which Owner may cause such meter and equipment to be replaced or repaired and collect the cost thereof from Tenant, as additional rent. Tenant agrees to pay for water consumed, as shown on said meter as and when bills are rendered, and on default in making such payment Owner may pay such charges and collect the same from Tenant, as additional rent. Tenant covenants and agrees to pay, as additional rent, the sewer rent, charge or any other tax, rent, levy or charge which now or hereafter is assessed, imposed or a lien upon the demised premises or the realty of which they are part pursuant to law, order or regulation made or issued in connection with the use, consumption, maintenance or supply of water, water system or sewage or sewage connection or system. If the building or the demised premises or any part thereof is supplied with water through a meter through which water is also supplied to other premises Tenant shall pay to Owner, as additional rent, on the first day of each month,     % ($     ) of the total meter charges as Tenant’s portion. Independently of and in addition to any of the remedies reserved to Owner hereinabove or elsewhere in this lease, Owner may sue for and collect any monies to be paid by Tenant or paid by Owner for any of the reasons or purposes hereinabove set forth.

Sprinklers:

30. Anything elsewhere in this lease to the contrary notwithstanding, if the New York Board of Fire Underwriters or the New York Fire Insurance Exchange or any bureau, department or official of the federal, state or city government recommend or require the installation of a sprinkler system or that any changes, modifications, alterations, or additional sprinkler heads or other equipment be made or supplied in an existing sprinkler system by reason of Tenant’s business, or the location of partitions, trade fixtures, or other contents of the demised premises, or for any other reason, or if any such sprinkler system installations, modifications, alterations, additional sprinkler heads or other such equipment, become necessary to prevent the imposition of a penalty or charge against the full allowance for a sprinkler system in the fire insurance rate set by any said Exchange or by any fire insurance company, Tenant shall, at Tenant’s expense, promptly make such sprinkler system installations, changes, modifications, alterations, and supply additional sprinkler heads or other equipment as required whether the work involved shall be structural or non-structural in nature. Tenant shall pay to Owner as additional rent the sum of $     , on the first day of each month during the term of this lease, as Tenant’s portion of the contract price for sprinkler supervisory service.

Elevators, Heat, Cleaning:

31. As long as Tenant is not in default under any the covenants of this lease beyond the applicable grace period provided in this lease for the curing of such defaults, Owner shall:(a) provide necessary passenger elevator facilities on business days from 8 a.m. to 6 p.m. and on Saturday’s from 8 a.m to 1 p.m.; (b) if freight elevator service is provided, same shall be provided only on regular business days Monday through Friday inclusive, and on those days only between the hours of 9 a.m. and 12 noon and between 1 p.m. and 5 p.m.; (c) furnish heat, water and other services supplied by Owner to the demised premises, when and as required by law, on business days from 8 a.m. to 6 p.m. and on Saturdays from 8

Space to be filled in or deleted.

a.m: to 1 p.m; (d) clean the public halls and public portions of the building which are used in common by all tenants. Tenant shall, at Tenant’s expense, keep the demised premises, including the windows, clean and in order, to the reasonable satisfaction of Owner, and for that purpose shall employ the person or persons, or corporation approved by Owner. Tenant shall pay to Owner the cost of removal of any of Tenant’s refuse and rubbish from the building. Bills for the same shall be rendered by Owner to Tenant at such time as Owner may elect and shall be due and payable hereunder, and the amount of such bills shall be deemed to be, and be paid as, additional rent. Tenant shall, however, have the option of independently contracting for the removal of such rubbish and refuse in the event that Tenant does not wish to have same done by employees of Owner. Under such circumstances, however, the removal of such refuse and rubbish by others shall be subject to such rules and regulations as, in the judgment of Owner, are necessary for the proper operation of the building. Owner reserves the right to stop service of the heating, elevator, plumbing and electric systems, when necessary, by reason of accident, or emergency, or for repairs, alterations, replacements or improvements, in the judgment of Owner desirable or necessary to be made, until said repairs, alterations, replacements or improvements shall have been completed. If the building of which the demised premises are a part supplies manually operated elevator service, Owner may proceed diligently with alterations necessary to substitute automatic control elevator service without in any way affecting the obligations of Tenant hereunder.

Security:

32. Tenant has deposited with Owner the sum of $ 7,800.00 as security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this lease; it is agreed that in the event Tenant defaults in respect of any of the terms, provisions and conditions of this lease, including, But not limited to, the payment of rent and additional rent, Owner may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent or any other sum as to which Tenant is in default of for any sum which owner any expend or may be required to expend by reason of Tenant’s default in respect of any of the terms, covenants and conditions of this lease, including but not limited to, any damages or deficiency in the reletting of the premises, whether such damages or deficiency accrued before or after summary proceedings or other re-entry by owner. In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this lease, the security shall be returned to Tenant after the date fixed as the end of the Lease and after delivery of entire possession of the demised premises to Owner. In the event of a sale of the land and building or leasing of the building, of which the demised premises form a part, Owner shall have the right to transfer the security to the vendee or lessee and owner shall thereupon be released by Tenant from all liability for the return of such security; and Tenant agrees to look to the new owner solely for the return of said security, and it is agreed that the provisions hereof shall apply to every transfer of assignment made of the security to a new owner. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the monies deposited herein as security and that neither owner nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance.

Captions:

33. The Captions are inserted only as a matter of convenience and for reference and in no way define, limit of describe the scope of this lease nor the intent of any provision thereof.

Definitions:

34. The term “Owner” as used in this lease means only the owner of the fee or of the leasehold of the building, or the mortgagee in possession, for the time being of the land and building, (or the Owner of a lease of the building or of the land and building) of which the demised premises form a part, so that in the event of any sale or sales of said land and building or of said lease, or in the event of a lease of said building, or of the land and building, the said Owner shall be and hereby is entirely freed and relieved of all covenants and obligations of Owner hereunder, and it shall be deemed and construed without further agreement between the parties of their successors in interest, or between the parties and the purchaser, at any such sale, or the said lessee of the building, or of the land and building, that the purchaser or the lessee of the building has assumed and agreed to carry out any and all covenants and obligations of Owner hereunder. The words “re-enter” and “re-entry” as used in this lease are not restricted to their technical legal meaning. The term “rent” includes the annual rental rate whether so expressed or expressed in monthly installments, and “additional rent”. “Additional rent” means all sums which shall be due to Owner from Tenant under this lease, in addition to the annual rental rate. The term “business days” as used in this lease, shall exclude Saturdays, Sundays and all days observed by the State of Federal Government as legal holidays and those designated as holidays by the applicable building service union employees service contract or by the applicable Operating Engineers contract with respect to HVAC service. Wherever it is expressly provided this lease that consent shall not be unreasonably withheld, such consent shall not be unreasonably delayed.

Adjacent Excavation Shoring:

35. If an excavation shall be made upon land adjacent to the demised premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the demised premises for the purpose of doing such work as said person shall deem necessary to preserve the wall or the building of which demised premises form a part from injury or damage and to support the same by proper foundations without any claim for damages or indemnity against Owner, or diminution or abatement of rent.

Rules and Regulations:

36. Tenant and Tenant’s servants, employees, agents, visitors, and licenses shall observe faithfully, and comply strictly with, the Rules and Regulations annexed hereto and such other and further reasonable Rules and Regulations as Owner or Owner’s agents may from time to time adopt. Notice of any additional rules or regulations shall be given in such manner as Owner may elect. In case Tenant disputes the reasonableness of any additional Rule or Regulation hereafter made or adopted by Owner or Owner’s agents, the parties hereto agree to submit the question of the reasonableness of such Rule or Regulation for decision to the New York office of the American Arbitration Association, whose determination shall be final and conclusive upon the parties hereto. The right to dispute the reasonableness of any additional Rule or Regulations upon Tenant’s part shall be deemed waived unless the same shall be asserted by service of a notice, in writing upon Owner within fifteen (15) days after the giving of notice thereof. Nothing in this lease contained shall be construed to impose upon Owner any duty or obligation to enforce the Rules and Regulations or terms, covenants or conditions in any other lease, as against any other tenant and Owner shall not be liable to Tenant for violation of the same by any other tenant, its servants, employees, agents, visitors or licenses.

Glass:

37. Owner shall replace, at the expense of the Tenant, any and all plate and other glass damaged or broken from any cause whatsoever in and about the demised premises. Owner may insure, and keep insured, at Tenant’s expense, all plate and other glass in the demised premises for and in the name of Owner. Bills for the premiums therefore shall be rendered by Owner the Tenant at such times as Owner may elect, and shall be due from, and payable by, Tenant when rendered, and the amount thereof shall be deemed to be, and be paid, as additional rent.

Estoppel Certificate:

38. Tenant, at any time, and from time to time upon at least 10 days, prior notice by Owner, shall execute, acknowledge and deliver to Owner, and/or to any other person, firm or corporation specified by Owner, a statement certifying that this Lease is unmodified in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications), stating the dates to which the rent and additional rent have been paid, and stating whether or not there exists any default by Owner under the Lease, and, if so, specifying each such default.

Directory Board Listing:

39. If, at the request of and as accommodation to Tenant, Owner shall place upon the directory board in the lobby of the building, one or more names of persons other than Tenant, such directory board listing shall not be construed as the consent by Owner to an assignment or subletting by Tenant to such person or persons.

Successors and Assigns:

40. The covenants, conditions and agreements contained in this lease shall bind and inure to the benefit of Owner and Tenant and their respective heirs, distributes, executors, administrators, successors, and except as otherwise provided in this lease, their assign. Tenant shall look only to Owner’s estate and interest in the land and building for the satisfaction of Tenant’s remedies for the collection of a judgment (or other judicial process) against Owner in the event of any default by Owner hereunder, and no other property or assets of such Owner(or any partner, member, officer or director thereof, disclosed or undisclosed), shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant’s remedies under or with respect to this lease, the relationship of Owner and Tenant hereunder, or Tenant’s use and occupancy of the demised premises.

Space to be filled in or deleted.

In Witness Thereof, Owner and Tenant have respectively signed and sealed this lease as of day and year first above written.

Witness for Owner:	PND, LLC
	By: Robert An
		[L.S]
	Nani Thanawala
Witness for Owner:	Nani Thanawala
	By:
	/s/ Nani Thanawala	[L.S]
	First Vice President/ Controller

RIDER ATTACHED TO AND FORMING PART OF LEASE BETWEEN PND, LLC, A NEW YORK LIMITED LIABILITY COMPANY, AS LANDLORD AND NARA BANK, AS TENANT COVERING PREMISES LOCATED AT ROOM 607 IN THE BUILDING KNOWN AS 16 WEST 32^ND STREET, NEW YORK, NEW YORK

41. TAX INCREASES

The Tenant agrees to pay as additional rent annually during the terms of this lease two percent (2%) of any increase in the Real Estate Tax (as such term is hereinafter defined) above those for the fiscal year 2004/2005. Such additional rent shall be paid when the Tax becomes fixed and within ten (10) days after demand therefor by the Owner and shall be collectible as additional rent. For the final year of the lease term the Tenant shall be obligated to pay only a pro rata share of such percentage of any such increase in taxes. Tax bills (except as hereinafter provided) shall be conclusive evidence of the amount of such taxes and shall be used for the calculation of the amounts to be paid by Tenant.

The term “Real Estate Taxes” shall mean all the real estate taxes and assessments, special or otherwise, assessed or imposed by Federal, State or Local Governments against or upon the building of which the Premises form a part and the land upon which it is erected. If due to change in the method of taxation, any franchise, income, profit tax, or other payment, shall be levied against Landlord in whole or part in substitution for or in lieu of any tax which would otherwise constitute a Real Estate Tax, such franchise, income, profit or other tax or payment shall be deemed to be a Real Estate Tax for the purposes hereof. If Owner should incur expense in connection with Owner’s endeavor to reduce or prevent increase in assessed valuation. Tenant shall be obligated to pay as additional rent the amount computed by multiplying the percent set forth in line 2 hereof times such expense, and such amount shall be due and payable upon demand by Owner and collectible in the same manner as annual rent. The obligation to make any payments of additional rent pursuant to this Article shall survive the expiration or other termination of this lease.

42. EXCULPATORY CLAUSE

In any action brought to enforce the obligations of Owner under this lease, any Judgment or decree shall be enforceable against Owner only to the extent of Owner’s interest in the building of which the Premises form a part, and no such judgment shall be the basis of execution on, or be a lien on assets of Owner or any assets of any party being a partner or stockholder in Owner, other than the interest in said building.

43. DEPOSIT OF CHECKS

Owner’s deposit of any checks delivered by Tenant simultaneously with Tenant’s execution of this lease shall not constitute Owner’s execution and delivery of this lease.

44. PARTIAL PAYMENT

If Owner receives from Tenant any payment (partial payment) less than the sum of the fixed annual rent, additional rent and other charges then due and owing pursuant to the terms of this lease, Owner in its sole discretion, may allocate such Partial Payment in whole or in part to any
fixed annual rent, any additional rent and or any other charges or to any combination thereof.

45. NOTICES

Whenever Owner is required or permitted to send any notice or demand to Tenant under or pursuant to this lease, it may be given by Owner’s agent, attorney, executor, trustee or personal representative with the same force and effect as if given by Owner. Owner hereby advises Tenant that Owner’s current agent us McGovern & Associates, 16 West 32^nd Street, Suite 407, New York, New York 10001. Owner shall notify Tenant of any change in its agent.

46. LEASE NOT BINDING UNLESS EXECUTED AND DELIVERED

It is specifically understood and agreed that this lease is offered to Tenant by the managing agent of the building, solely in its capacity as such agent and subject to Landlord’s acceptance and approval and that Tenant has hereunto affixed its signature with the understanding that the said lease shall not in any way bind Landlord or its agent until such time as the same has been approved and executed by Landlord and delivered to Tenant. The execution and delivery of this lease by Tenant shall constitute an irrevocable offer to enter into this lease on the part of Tenant and Tenant represents that the Other Broker, if any, shall not seek compensation from Landlord if Landlord and Tenant do not approve, execute and deliver this lease.

47. CONFLICT BETWEEN RIDER AND PRINTED LEASE

If and to the extent that any of the provisions of any rider to this lease conflict or are. otherwise inconsistent with any of the printed provisions of this lease, whether or not such inconsistency is expressly noted in the rider, the provisions of the rider shall prevail. In the event the party of the first part is referred to in this lease as “Owner”, the term “Landlord”, as used herein, shall be deemed synonymous with the term “Owner”.

48. SPECIAL SERVICES

Upon Tenant’s request Landlord or its managing agent may, but, except as otherwise expressly provided in this lease, shall not be obligated to, perform or cause to be performed for Tenant from time to time various construction, repair and maintenance work, moving services and other types of work or services in or about the demised premises and the building. If such work or services shall be performed for Tenant, Tenant agrees to pay therefor either the standard charges of Landlord or its managing agent in effect from time to time, if any, or the amount agreed to be paid for such services. Tenant agrees to pay all such charges within ten (10) days after Landlord or Landlord’s managing agent has submitted a bill therefor and unless otherwise expressly provided in writing such charges shall be payable as additional rent under this lease and in the event of a default by Tenant in the payment thereof Landlord shall have all of the remedies hereunder that Landlord would have in the event of a default in the payment of annual rent.

49. AS IS

Tenant acknowledges that it has inspected the building and the demised premises, agrees to accept the demised premises in its “AS IS” physical condition as of the date possession is tendered to Tenant and acknowledges that Landlord shall not be obligated to make any improvements or alterations to the demised premises whatsoever, except as may be provided on the Work letter annexed hereto as Exhibit “A”, if any.

50. ADDITIONAL ASSIGNMENT AND SUBLETTING PROVISIONS

The Article to this lease captioned “Assignment, Mortgage, Etc.” (Article 11) is hereby amended by adding to said Article the following sub-paragraphs:

(a)	The consent by Landlord to any assignment, subletting, or occupancy shall not in any wise be construed to relieve Tenant from obtaining the express consent, in writing, of Landlord to any further assignment, subletting, sub-subletting, or occupancy. Landlord may withhold or delay its consent for any reason whatsoever.
(b)	Tenant shall have no right to assign this lease or sublet the whole or any part of the demised premises to any party which is then a tenant, subtenant, licensee or occupant of any part of the building in which the demised premises are located.
(c)	If Tenant hereunder shall be a corporation, the transfer of a majority of the stock of Tenant shall be deemed an assignment of this lease.
(d)	Each sublease of the demised premises shall be deemed to contain the following provisions, whether or not specifically included therein:

(1) “In the event of a default under any underlying lease of all or any portion of the premises demised hereby which results in the termination of such lease, or if the lessor under any such underlying lease shall exercise any right to cancel or terminate such underlying lease, the subtenant hereunder shall, at the option of the lessor under any such lease, attorn to and recognize such lessor as Landlord hereunder and shall, promptly upon such lessor’s request, execute and deliver all instruments necessary or appropriate to confirm such attornment and recognition. The subtenant hereunder hereby waives all rights under present or future law to elect, by reason of the termination of such underlying lease, to terminate this sublease or surrender possession of the premises demised hereby. If the lessor under such underlying lease does not exercise the aforesaid option, the term of the sublease shall terminate simultaneously with the term of the underlying lease and subtenant hereby agrees to vacate the premises subleased on or before the effective date of termination of the underlying lease.”

“This sublease may not be assigned or the sublet premises further sublet, in whole or in part, without the prior written consent of the lessor under any underlying lease of all or any portion of the premises demised hereby.”

(e) Tenant agrees to pay to Landlord reasonable attorney’s fees incurred by Landlord in connection with any proposed assignment of Tenant’s interest in this lease or any proposed subletting of the demised premises or any part thereof.

51. HOLDING OVER

If Tenant holds over in possession after the expiration or sooner termination of the original term or of any extended term of this lease, such holding over shall not be deemed to extend the term or renew this lease, but such holding over thereafter shall continue upon the covenants and conditions herein set forth except that the charge for use and occupancy of such holding over for each calendar month or part thereof (even if such part shall be a small fraction of a calendar month) shall be the sum of:

(a) 1/12 of the highest annual rent rate set forth on page one of this lease, times 3, plus

(b) 1/12 of the net increase, if any, in annual fixed rental due solely to increases in the cost of the value of electric service furnished to the premises in effect on the last day of the term of this lease, plus

(c) 1/12 of all other items of annual additional rental, which annual additional rental would have been payable pursuant to this lease had this lease not expired, plus

(d) those other items of additional rent (not annual additional rent) which would have been payable monthly pursuant to this lease, had this lease not expired, which total sum Tenant agrees to pay to Landlord promptly upon demand, in full, without set-off or deduction. Neither the billing nor the collection of use and occupancy in the above amount shall be deemed a waiver of any right of Landlord to collect damages for Tenant’s failure to vacate the demised premises after the expiration or sooner termination of this lease. The aforesaid provisions of this Article shall survive the expiration or sooner termination of this lease.

52. LIMITATION ON RENT

If at the commencement of, or at any time during the term of this lease, the rent reserved in this lease is not fully collectible by reason of any Federal, State, County or City law, proclamation, order or regulation, or direction of a public officer or body pursuant to law, Tenant agrees to take such steps as Landlord may request to permit Landlord to collect the maximum rents which may be legally permissible from time to time during the continuance of such legal rent restriction (but not in excess of the amounts reserved therefor under this lease). Upon the termination of such legal rent reduction, Tenant shall pay to Landlord, to the extent permitted by law, an amount equal to (a) the rents which would have been paid pursuant to this lease but for such legal rent restriction less (b) the rents paid by Tenant to Landlord during the period such legal rent restriction was in effect.

53. BROKERAGE

Tenant warrants and represents to Landlord that it has had no dealings with any broker or agent in connection with this lease and covenants and agrees to hold harmless and indemnify Landlord from and against any and all costs, expenses or liability for any compensation, commissions, fees and charges claimed by any other broker or agent with respect to this lease or the negotiation thereof. The obligation of Tenant contained in this Article shall survive the expiration or earlier termination of this lease.

54. GOVERNMENTAL REGULATIONS

If, at any time during the term of this lease, Landlord expends any sums for alterations or improvements to the building which are required to be made pursuant to any law, ordinance or governmental regulation, or any portion of such law, ordinance or governmental regulation, which becomes effective after the date hereof, Tenant shall pay to Landlord, as additional rent, the same percentage of such cost as is set forth in the provision of this lease which requires Tenant to pay increases in Real Estate Taxes, within ten (10) days after demand therefor. If, however, the cost of such alteration or improvement is one which is required to be amortized over a period of time pursuant to applicable governmental regulations, Tenant shall pay to Landlord, as additional rent, during each year in which occurs any part of this lease term, the above-stated percentage of the reasonable annual amortization of the cost of the alteration or improvements made. For the purposes of this Article, the cost of any alteration or improvement made shall be deemed to include the cost of preparing any necessary plans and the fees for filing such plans.

55. ADDITIONAL RENT

All payments other than the annual rent to be made by Tenant pursuant to this lease shall be deemed additional rent and, in the event of any nonpayment thereof, Landlord shall have all rights and remedies provided for herein or by law for nonpayment of rent. Tenant shall have fifteen (15) days from its receipt of any additional rent statement to notify Landlord, by certified mail, return receipt requested, that it disputes the correctness of such statement. After the expiration of such fifteen (15) day period, such statement shall be binding and conclusive upon Tenant. If Tenant disputes the correctness of such statement, Tenant shall, as a condition precedent to its right to contest such correctness, make payment of the additional rent billed, without prejudice to its position. If such dispute is finally determined in Tenant’s favor, Landlord shall refund to Tenant the amount overpaid (without interest).

56. SUBMISSION TO JURISDICTION, ETC.

This lease shall be deemed to have been made in New York County, New York, and shall be construed in accordance with the laws of the State of New York. All actions or proceedings relating, directly or indirectly, to this lease shall be litigated only in courts located within the County of New York. Tenant, any guarantor of the performance of its obligations hereunder (“Guarantor”) and their successors and assigns hereby subject themselves to the jurisdiction of any state or federal court located within such county, waive the personal service of any process upon them in any action or proceeding therein and consent that such process be served by certified or registered mail, return receipt request, directed to the Tenant and any successor at

Tenant’s address hereinabove set forth, to Guarantor and any successor at the address set forth in the instrument of guaranty and to any assignee at the address set forth in the instrument of assignment. Such service shall be deemed made two (2) days after such process is mailed. If (i) Landlord commences any action or proceeding against Tenant, or (ii) Landlord is required to defend any action or proceeding commenced by Tenant, in connection with this lease and such action or proceeding is disposed of, by settlement, judgment or otherwise, favorably to Landlord, Landlord shall be entitled to recover from Tenant in such action or proceeding, or a subsequently commenced action or proceeding, landlord’s reasonable attorneys’ fees and disbursements incurred in connection with such action or proceeding and all prior and subsequent discussions and negotiations and correspondence relating thereto.

If any monies owing by Tenant under this lease are paid more than fifteen (15) days after the date such monies are payable pursuant to the provisions of tins lease, Tenant shall pay Landlord interest thereon, at the then maximum legal rate, for the period from the date such monies were payable to the date such monies are paid.

57. CONDITIONAL LIMITATION

If Tenant shall default in the payment of the rent reserved herein, or any item of additional rent herein mentioned, or any part of either, during any two months, whether or not consecutive, in any twelve (12) month period, and (i) such default continued for more than five (5) days after written notice of such default by Landlord to Tenant, and (ii) Landlord, after the expiration of such five (5) day grace period, served upon Tenant petition and notice of petition to dispossess Tenant by summary proceedings in each such instance, then, notwithstanding that such defaults may have been cured prior to the entry of a judgment against Tenant, any further default in the payment of any money due Landlord hereunder which shall continue for more than five (5) days after landlord shall give a written notice of such default shall be deemed to be deliberate and Landlord may thereafter serve a written three (3) days’ notice of cancellation of this lease and the term hereunder shall end and expire as fully and completely as if the expiration of such three (3) day period was the day herein definitely fixed for the end and expiration of this lease and the term thereof, and Tenant shall then quit and surrender the demised premises to Landlord, but Tenant shall remain liable as elsewhere provided in this lease.

In addition, if Tenant shall have defaulted in the performance of the same or a substantially similar covenant hereunder, other than a covenant for the payment of rent or additional rent, twice during any consecutive twelve (12) month period and Landlord, in each case, shall have given a default notice in respect of such default, then, regardless of whether Tenant shall have cured such defaults within any applicable grace period, if Tenant shall again default in respect of the same or a substantially similar covenant hereunder within a twelve (12) month period after Landlord gave the second such default notice, Landlord, at its option, and without further notice to Tenant or opportunity for Tenant to cure such default, may elect to cancel this lease by serving a written three (3) days’ notice of cancellation of this lease and the term hereunder shall end and expire as fully and completely as if the expiration of such three (3) day period were the day herein definitely fixed for the end and expiration of this lease and the term hereof, and Tenant shall then quit and surrender the demised premises to Landlord, but Tenant shall remain liable as elsewhere provided in this lease.

58. LANDLORD’S MANAGING AGENT

Tenant agrees that all of the representations, warranties, waivers and indemnities made in this lease by Tenant for the benefit of Landlord shall also be deemed to inure to and be for the benefit of Landlord’s managing agent, if any, its officers, directors, employees and independent contractors.

59. EXCULPATION

If Tenant shall request Landlord’s consent or approval and Landlord shall fail or refuse to give such consent or approval, Tenant shall not be entitled to any damages for any withholding by Landlord of its consent or approval, it being agreed that Tenant’s sole remedy shall be an action for specific performance or an injunction, and that such remedy shall be available only in those cases where landlord has expressly agreed in writing not to unreasonably withhold its consent or approval or where as a matter of law, Landlord may not unreasonably withhold its consent or approval.

Tenant acknowledges and agrees that if Landlord shall be an individual, joint venture, tenancy-in-common, firm or partnership, general or limited, there shall be no personal liability on such individual or on the members of such joint venture, tenancy-in-common, firm or partnership in respect of any of the covenants or conditions of this lease, In addition, notwithstanding anything to the contrary contained in this lease, it is agreed and understood that Tenant shall look solely to the estate and property of Landlord in the Building for the enforcement of any judgment (or other judicial decree) requiring the payment of money by Landlord to Tenant by reason of any default or breach by Landlord in the performance of its obligations under this lease, it being intended hereby that no other assets of Landlord or its principals shall be subject to levy, execution, attachment or other such legal process for the enforcement or satisfaction of the remedies pursued by Tenant in the event of such default or breach.

60. INSURANCE

During the term and at all other times (if any) that Tenant has possession of the demised premises. Tenant shall pay for and keep in force comprehensive general liability policies with broad form endorsements and water damage legal liability coverage against any and all liability occasioned by accident or occurrence, such policies to be written by recognized and well-rated insurance companies authorized to transact business in the State of New York, in the minimum amount of $2,000,000,00 combined single limit for personal injuries, death and loss of, and damage to property. Tenant shall obtain “All Risk” insurance having extended coverage for fire and other casualties for its personal property, fixtures and equipment for the full replacement value thereof and such insurance policies, and any other property damage policies of Tenant, shall have an appropriate clause or endorsement whereby the insurer waives subrogation or consents to a waiver of the right of recovery against Landlord and Landlord’s agent, and, to the extent permitted by law, Tenant hereby agrees not to make any claim against, or seek to recover from Landlord and Landlord’s agent for any loss of, or damage to property of the type covered by such insurance without regard to whether Tenant’s claims exceed the coverage limits of its insurance policies. If the waiver and release set forth in the previous sentence shall be prohibited by law, the liability of any party that would have been released shall be secondary to the other

insurance. If at any time during the term it appears that public liability or property damage limits in the City of New York for premises similarly situated, due regard being given to the use and occupancy thereof, are higher than the foregoing limits, then Tenant shall increase the foregoing limits accordingly. Landlord and its agent shall be named as additional insureds in the aforesaid general liability insurance policies. All policies shall provide that Landlord shall be afforded thirty (30) days prior notice of cancellation of such insurance. Tenant shall deliver certificates of insurance evidencing such policies upon renewal and upon demand. All premiums and charges for the aforesaid insurance shall be paid by Tenant and if Tenant shall fail to make such payment when due, Landlord may make it and the amount thereof may, at the option of Landlord be added to and become a part of the additional rent payable hereunder. Tenant shall not violate or permit to be violated any condition of any of said policies and Tenant shall perform and satisfy the requirements of the companies writing such policies.

61. GUARD SERVICE

The Landlord is not required to provide guard service. Landlord reserves the right to cancel or withhold such service at anytime for any reason whatsoever. In the event Landlord now employs or hereafter employs a security guard or guard service (hereinafter the “Guard”) in the building, Tenant shall pay to Landlord, as additional rent, in advance, together with each installment of the annual rent provided for herein, a percentage of the cost of employing the Guard, including, but not limited to, any employee benefits, social security taxes and other expenses which are incurred by Landlord therefor, which percentage shall be the same percentage as is now set forth in the provision of this lease which provides for the payment by Tenant of increases in Real Estate Taxes. Landlord reserves the right to (i) initially set the days and hours the Guard is employed, (ii) to change, at will, such hours and days, and (iii) to discontinue the employment of the Guard, all in its sole and absolute discretion. The furnishing of the Guard by Landlord shall not be deemed to impose any obligation on the part of the Landlord for the security of the building, the demised premises or the contents of the demised premises, and Tenant hereby unconditionally waives any rights or claims against Landlord and Landlord’s managing agent by reason of any acts or omissions of the Guard employed.

62. SIGNS & BILLBOARD

Tenant shall not display or cause anyone to display any signs or advertisement, or any other item on or about the public areas of the building within which the Premises are located without Landlord’s prior written consent. Landlord may withhold consent for any reason whatsoever or for no reason at all, and establish such terms and conditions for display. If Tenant should violate this provision in any manner whatsoever, the Landlord may remove any such display without notice at Tenant’s expense.

63. UTILITY COST PAYMENTS

Tenant will, at Tenant’s own cost and expense, install the electricity meters, and throughout the lease term maintain such meters so that all electricity used by the Tenant, (or its agents, employees, guests or invitees), for any purpose whatsoever will be separately metered and billed directly to the Tenant by the supplier. Payments due and owing the supplier of said utilities will

be deemed additional rent hereunder, and in the event Tenant fails to pay any such charge beyond any applicable grace periods, such failure will be considered a default hereunder. In the event that Tenant fails to pay such charge, and such failure results in the imposition of a lien on the demised premises or the building containing the demised premises, Tenant will post a bond in the amount necessary to remove such lien, and will remove, at Tenant’s expense, such lien as of record, within ten (10) days after notice of its imposition.

Landlord makes no representations or warranties with respect to the quality and suitability of the electrical system, water supply or gas supply for Tenant’s use. Tenant represents and warrants that it will not use the electrical system, water supply system or gas supply system in such a way as to damage or interrupt such services to the remaining portion of the building.

Landlord will in no event be liable or responsible to Tenant for any loss or damage or expense which Tenant may sustain or incur if either the quantity or character of said services are not suitable for Tenant’s requirements or upon the failure of the appropriate public utility company to deliver gas, water, or electrical service to the demised premises for any reason whatsoever.

64. That the Landlord hereby demises and leases unto the Tenant, and the Tenant hereby hires and takes from the Landlord as follows, situated in the Borough of Manhattan, County of New York and State of New York, Room 607, of the building known as 16 West 32^nd Street for the term of three (3) years (hereinafter referred to as the “Term”) beginning July 1, 2005 and ending June 30, 2008, at the following monthly rental rate: RENT. The fixed monthly rent shall be:

a) from July 1, 2005 to June 30, 2006: $2,600,00.’month;

b) from July 1, 2006 to June 30, 2007: $2,678.00/month;

c) from July 1, 2007 to June 30, 2008: $2,758,34/month;

Which Tenant agrees to pay in advance on the first day of each month during the Term, at the offices of the Landlord or such other place as Owner may designate, without any set off or reduction whatsoever.

65. ELEVATORS

As further amendment to Article 31 of this lease, Tenant agrees to strictly comply with Landlord’s requirements regarding operation and use of the elevators in the building. Landlord may promulgate reasonable regulations regarding operation of the elevators at any time. Tenant agrees that violation of these rules and regulations by Tenant will constitute a material breach of this lease.

66. SUBORDINATION

As further amendment to this lease, Tenant acknowledges that this lease is subordinate to the lien of any mortgage placed on the building and that the Tenant shall execute and deliver a subordination agreement to Landlord’s Lender upon that Lender’s request and that the Tenant shall execute and deliver an estoppel certificate to Landlord’s Lender upon that Lender’s or Landlord’s request.

67.	INTENTIONALLY OMITTED.
68.	INTENTIONALLY OMITTED.
69.	INDEMNIFICATION

Tenant covenants and agrees to indemnify and save harmless Landlord and any fee owner and any mortgagee and any lessor under any ground or underlying lease, and their respective contractors, agents and employees, licensees and invitees, from and against any all liability (statutory or otherwise), claims, suits, demands, damages Judgments, costs, interest and expenses (including but not limited to, reasonable counsel fees and disbursements incurred in the defense of any action or proceeding), to which they may be subject or which they may suffer by reason of any claim for, any injury to, or death of, any person or persons (including, without limitation, Landlord, its agents, contractors, employees, licensees, invitees) or damage to property (including any loss of use thereof) or otherwise arising from or in connection with the occupancy or use of or from any work, installation or thing whatsoever done in or at the Demised Premises during the Lease Term or resulting from any default by Tenant in the performance of Tenant’s obligations under the Lease.

70. Tenant covenants, warrants and agrees that in the event the fire and/or liability insurance rate for the Building will increase as a result of the use or occupation of the Demised Premises by Tenant, then, and in such event, Tenant shall pay to the Landlord the entire increased cost of insurance premium resulting from any rate increase. Such sums shall be due and payable on the first day of the month following rendition of Landlord’s billing or notification to Tenant and will be deemed as additional rent and collectable as such. A letter or certificate by the insurance company or broker with whom the insurance coverage is made will be conclusive evidence of the increased premium and rate.

71. LATE FEES

If the base rent or any additional rent is not paid on or before the tenth (10^th ) day of the month for which said payment is due, there will be added, as additional rent, a late charge equal to five percent (5%) of the unpaid amount. The late charge shall increase by one percent (1%) of the unpaid amount for each and every day the payment is overdue. In addition thereto, all sums in arrears under the Lease will bear interest at the annual rate of twenty-four percent (24%) from their respective due dates until received by Landlord, but this in no way limits any claim for damages or any other rights or remedies available to Landlord for any breach or default by Tenant, Tenant’s obligations under the Lease will survive the expiration or sooner termination of the Lease, Acceptance by Landlord of payment from any party other than Tenant will not be deemed to operate as a consent by Landlord to any assignment or subletting to such party, nor constitute any acceptance of such party, as a tenant hereunder, nor vest any rights in such party nor release Tenant from any of its obligations, nor be deemed a modification of any of the Lease provisions.

72. CLEANING AND GARBAGE DISPOSAL

nor release Tenant from any of its obligations, nor be deemed a modification of any of the Lease provisions.

72. CLEANING AND GARBAGE DISPOSAL

Cleaning, garbage collection and disposal are the responsibility of Tenant. Tenant will maintain the Demised Premises in a clean and orderly fashion. In case of Tenant’s failure to do so, Landlord will have the right, after notice to Tenant, to take any necessary steps to cause the Demised Premises to be cleaned at Tenant’s expense, and the amount so expended will be assessed as Additional Rent with the next ensuing rent payment. No person except for persons employed in Tenant’s business, may perform any maintenance or cleaning work in the Demised Premises without Landlord’s prior written approval.

Tenant, at its expense, will cause such exterminating procedures as may be necessary, including all those requested by Landlord, including but not limited to exterminating vermin, rodents, rats, insects, termites and otherwise, to be effected within the Demised Premises. For security reasons, no person may engage in such procedures unless such person is duly licensed to do so and has received Landlord’s prior written approval.

73. ALTERATIONS

Tenant agrees that in the event it performs any work whatsoever in the Demised Premises, same will be done in accordance with all rules and regulations of the appropriate municipal departments of the City of New York having jurisdiction thereof and Tenant will obtain and submit to Landlord, prior to commencement of any such work, any and all permits and approvals required and, after completion of said work, documentary evidence of all appropriate municipal and departmental approvals, all at Tenant’s cost and expense. Landlord will cooperate with Tenant and sign all documents as may be reasonably required to carry out terms of this Article. Supplementing Article 3 of the Lease, if Tenant will make any alterations, additions, changes or installations (“Tenant’s Improvements”) in or about the Demised Premises (but none will be made without Landlord’s prior written consent and no structural changes whatsoever are permitted), Tenant agrees to make the same at Tenant’s sole cost, expense and risk, and Tenant hereby agrees that Tenant will comply with each and all of the following:

(A) The plans and specifications for Tenant’s Improvements will be subject to the prior written approval of Landlord and of the holder of any mortgage affecting the Demised Premises. Tenant will submit two copies of said plans and specifications to Landlord for such approval, one of which may be retained by Landlord. No work will begin until said plans and specifications have been approved as aforesaid. Landlord or the mortgagee will have sixty (60) days to approve or disapprove of such plans and specifications.

(B) Tenant’s Improvements will be made with all dispatch, in a first-class manner, with first- class materials and workmanship and in conformity and compliance with the plans and specifications therefor. Only new materials, fixtures and equipment will be utilized for and in connection with Tenant’s Improvements. Tenant’s Improvements will be performed in a safe and careful manner and without injury to any part of the Demised Premises or the building

containing the same. Tenant will take all proper steps to prevent damage to or destruction of any part of the Demised Premises or the building containing same.

(c) Prior to commencement of any work, Tenant will obtain all necessary permits, licenses and approvals required by any municipal department having jurisdiction thereof and provide copies of same to Landlord, and will obtain workmen’s compensation insurance or cause contractor to obtain same.

(d) Any mechanic’s lien filed against the Premises, or the Real Property, for work claimed to have been done for, or materials claimed to have been furnished to, Tenant shall be discharged by Tenant within ten (10) days thereafter, at Tenant’s expense, by payment or filing the bond required by law. Tenant will not, at any time prior to or during the Term, directly or indirectly employ, or permit the employment of, any contractor, mechanic or laborer in the Premises, whether in connection with any Alteration or otherwise, if, in Landlord’s sole discretion, such employment will interfere or cause any conflict with other contractors, mechanics, or laborers engaged in the construction, maintenance or operation of the Building by Landlord, Tenant or others. In the event of any such interference or conflict. Tenant, upon demand of Landlord, will cause all contractors, mechanics, or laborers causing such interference or conflict to leave the Building immediately.

74. If, in connection with obtaining financing or refinancing for the Building of which the Demised Premises form a part, a banking, insurance company or other lender will request reasonable modifications to the Lease as a condition to such financing or refinancing, Tenant will not unreasonably withhold, delay, or defer its consent thereto. In no event will a requirement that the consent of any such lender be given for any lease modification or any assignment or sublease, be deemed to materially affect the leasehold interest hereby created.

75. No agreement to accept a surrender of the Lease will be valid unless it is in writing signed by Landlord or its duly authorized agent. No employee of Landlord or of Landlord’s agents will have any power to accept a surrender of the Lease. The delivery of keys to Landlord or any employee of Landlord or of Landlord’s agents will not operate as a termination of the Lease or a surrender of the Demised Premises. In the event of Tenant at any time desiring to have Landlord sublet the premises for Tenant’s account, Landlord or Landlord’s agents are authorized to receive said keys for such purpose without releasing Tenant from any of the obligations under the Lease. The failure of Landlord or Tenant to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of the Lease or any rules and regulations adopted by the Landlord, will not prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. The receipt by Landlord of rent with knowledge of the breach of any lease covenant will not be deemed a waiver of such breach. No provision of the Lease will be deemed to have been waived by Landlord or Tenant, unless such waiver be in writing signed by the applicable party.

76. Supplementing Article 19 of the Lease, if Tenant shall default in the observance or performance of any term or covenant on Tenant’s part to be observed or performed under any terms or provisions of the Lease, (a) Landlord may remedy such default for the account of Tenant, immediately and without notice in case of emergency, or in any other case if Tenant

shall fail to remedy such default with all reasonable dispatch after Landlord shall have notified Tenant in writing of such default and the applicable grace period for curing such default shall have expired; and (b) if Landlord makes any expenditures or incurs any obligations for the payment of money in connection with such uncured default including but not limited to reasonable attorneys’ fees in instituting, prosecuting or defending any action or proceeding, such sums paid or obligations incurred, with interest at the maximum rate permitted by law, shall be deemed to be additional rent hereunder and shall be paid by Tenant to Landlord upon rendition of a bill to Tenant therefor. The obligations of Tenant to make such payment shall survive the expiration or other termination of the Lease.

77. Any and all notices which Landlord is or may be entitled to give to Tenant under any provision of the Lease or the law (including for non-payment of rent or for default of the Lease) may be executed and delivered by Landlord’s attorneys on behalf of the Landlord, and in such event shall have the same force and effect as if executed and given directly by the Landlord.

78. Landlord reserves the right without any liability whatsoever, or abatement of fixed annual rent, or additional rent, to stop the heating, plumbing, electric and other systems when necessary by reason of accident or emergency or for repairs, alterations, replacements or improvements, provided that except in case of emergency, Landlord will notify Tenant in advance, if possible, of such stoppage and, if ascertainable, its estimated duration, and will proceed diligently with the work necessary to resume such service as promptly as possible and in a manner so as to minimize the interference with the Tenant’s use and enjoyment of the Demised Premises, but Landlord shall not be obligated to employ overtime or premium labor or grant a rent abatement.

79. (a) It is understood that the Demised Premises will be used by Tenant solely as a retail and wholesale banking facility with related banking uses and executive office and for no other purpose. Tenant shall at its own sole cost and expense, comply with all rules, regulations, orders and violations of any and all departments, whether City, State or Federal having jurisdiction thereof. It is understood that the Demised Premises may not be used for residential purposes and that sleeping overnight in the Premises, cooking or other such housekeeping functions are not permitted. It is further understood that Tenant shall not bring construction equipment, construction materials, or anything not pertaining to general office use into the premises without prior written approval of the Landlord. Tenant will dispose of all waste (medical and otherwise) in accordance with all applicable laws and regulations. Failure to comply will constitute a material breach of this lease.

(b) A violation of any of the terms of this Article shall give to the Landlord the right to restrain the same by injunctive relief and/or cancel and terminate the Lease after notice and opportunity to cure as provided herein.

80. It is agreed between the parties hereto that Tenant or anyone claiming through Tenant, shall have no right whatsoever to assert or set up or plead as a counterclaim against Landlord, its heirs, successors and assigns. In any action or proceeding which Landlord may institute by reason of failure of Tenant to pay rent hereunder, Tenant does hereby waive the right to assert counterclaims of Tenant in any nonpayment proceeding. Any

claim or counterclaim of the Tenant shall be by an independent action and shall not be consolidated with any action or proceeding for nonpayment of rent.

81. In the event Tenant shall attempt to interpose a counterclaim, any summary proceeding brought by the Landlord and Tenant shall attempt to interpose a counterclaim and notwithstanding Landlord’s objection and the provisions of this Lease, the interposing of that counterclaim is permitted, Tenant agrees and confirms that it shall deposit with the Landlord’s attorney, in escrow and in trust the amount of rent and additional rent as demanded in the summary proceeding instituted by Landlord, Tenant grants jurisdiction to the Court in such proceeding to require such deposit to be made as a condition precedent to the determination of whether the interposing of the counterclaim should be permitted notwithstanding the provisions of this Lease to the contrary.

82. If Tenant shall be in default in the payment of any monthly installment of rent for a period of ten (10) days or more and by reason of such default Landlord shall institute a nonpayment summary proceeding, then and in such event Tenant shall reimburse Landlord for the expense and disbursements incurred by Landlord, which fee is hereby fixed to be the sum of $500,00 for each nonpayment proceeding plus attorney’s fees, and which sum may be included in the petition for nonpayment as additional rent.

83. No delay or delays in the payment of rent or additional rent on the dates agreed upon, and no failure of Landlord to enforce the provisions of this agreement upon any neglect, delay or default of Tenant in keeping and performance of the covenants and conditions by Tenant to be kept or to be performed, shall create a custom of deferred payment or modify in any way the provisions of this lease or the right of Landlord to otherwise enforce the provisions hereof. No receipt by Landlord of any rent or portion of rent shall be deemed a waiver of the right of Landlord to enforce the payment of rent or additional or augmented rent of any kind previously due or which may thereafter become due, or to exercise any rights or remedies reserved to Landlord hereunder, and also the failure of Landlord to enforce any covenant as to which Tenant may be guilty of a breach or be in default, shall not be deemed to void the right of Landlord to enforce the same or any other covenants or conditions on the occasion of any subsequent breach or default. If at any time during the term of this lease or any renewal thereof Landlord shall accept less than the regular herein-stated installment of rent due for any particular month or months of said term, or Tenant shall fail or refuse to make any payment for water rates, sewer charges, insurance or other payments required to be made by Tenant, then and in that event in addition to any other rights, remedies, proceedings or actions allowed to Landlord by the terms of this lease, the difference between the amount then payable and the rent actually paid and accepted by Landlord, and also any unpaid amount of water rates, sewer taxes, insurance or other payments required to be paid by Tenant, including cost of repair, may at the option of Landlord, be charged to and against Tenant and collected from Tenant’s Security Deposit, and Tenant shall continue to be liable therefor. Tenant shall refund to Landlord such portion of the security so used.

84. Tenant agrees to use its best efforts to maintain the demised premises free and clear of any and all violations that may be imposed upon Landlord by the Department of Buildings and/or any other governmental or municipal agency having jurisdiction over the demised

premises. Tenant understands and agrees to perform such work as may be required so that in the event the demised premises shall be inspected by the Department of Buildings or any other governmental or municipal agency having jurisdiction therein, such inspection shall reveal no violations in the demised premises, In the event such an inspection occurs and one or more violations are placed on the demised premises, Tenant hereby covenants to cure any and all of such violation(s), and indemnify Landlord for fees, fines or expenses incurred which Landlord shall send to Tenant by Certified Mail, Return Receipt Requested. In the event Tenant shall fail to cure any and all violations within the above-mentioned thirty (30) day period, Landlord shall have the right to exercise all of the remedies available under this Lease.

85. Tenant shall not place a load upon any floor of the demised premises exceeding the floor load per square foot area which such floor was designed to carry and which is allowed by law. Landlord reserves the absolute right to prescribe the weight and position of all safes which must be placed so as to distribute the weight. Business machines and mechanical equipment shall be placed and maintained by Tenant at its own expense in settings sufficient in Landlord’s judgment to absorb and prevent vibration, noise and annoyance. Tenant agrees that upon the written request of Landlord, Tenant will, within fifteen (15) days of the mailing of such request, provide rubber or other approved settings for absorbing, preventing and decreasing noise and/or vibration from any or all machines or machinery. Such insulation or other devices for the prevention, decrease or elimination of noise satisfactory to Landlord shall be made in such manner and of such material as Landlord may direct. In the event that Tenant fails to comply with the aforesaid request within the fifteen (15) days aforementioned, Landlord may, at its option, by notice in writing to Tenant, cause the terms of this lease to expire or liquidated damages will be assessed. Landlord in such event shall have the right to reenter the premises by summary proceedings or otherwise without liability. Landlord shall give not less than ten (10) days’ notice of its election to terminate the lease as above provided. Landlord shall have the right to enter the demised premises with workers and materials and to insulate the machinery as above provided, collecting from Tenant the cost of such work as additional rent in the event that Tenant fails to comply with the written request aforementioned after the expiration of fifteen (15) days from the receipt thereof.

86. In the event that on the date the Landlord repossesses the demised premises under any provision of this lease or upon the termination of this lease or upon the expiration of the demised term, whichever is earlier, there remains within the demised premises any property belonging to the Tenant, the Landlord may remove said property and dispose of same at public or private sale; or if said property is not able to be sold, the Landlord may dispose of it in any other manner, without any liability whatsoever.

87. It is understood and agreed that in the event Landlord shall receive any “Recommendations” from any insurance carrier or carriers that provide insurance coverage for the building in which demised premises constitutes a part, the demised premises itself, or any portion thereof, recommending any additions, improvements, installations, repairs or deletions to the demised premises or the building in which the demise premises constitutes a part, which recommendations shall be attributable to Tenant’s use or occupancy of the demised premises, Tenant shall satisfactorily complete such “Recommendations” within thirty (30) days subsequent to Landlord’s notification to Tenant of such “Recommendations”. In the event

Tenant shall fail to complete or fail to satisfactorily complete the work required by any and all Such “Recommendations” within the thirty (30) day period provided for hereinabove, Landlord shall have the right to all remedies provided for in this lease. In the event the insurance carrier who makes any “Recommendations”: shall notify Landlord in writing that a time period loner than the above mentioned thirty (30) days to cure or correct any condition resulting “Recommendation” is acceptable to said insurance carrier, Tenant shall not be deemed in default until the time period permitted by said insurance carrier has expired.

88. The Landlord or its agents shall have reasonable access to the demised premises for the maintenance of the rest of the building.

89. With respect to Paragraph 9 of the printed form of lease, the Landlord shall only be obligated to repair damages caused by a fire or other casualty to the demised premises only to the extent the demised premises existed on the date of the execution of this lease. The Landlord shall not be required to repair any damage to alterations, improvements or additions made by the Tenant.

90. If Tenant is in default under this Lease more then two (2) times within any twelve month period, irrespective of whether or not such default is cured, then, without limiting Landlord’s other rights and remedies provided for in this Lease or at law or in equity, the Security Deposit shall automatically be increased by an amount equal to three (3) times the then current Security Deposit.

91. Tenant will pay the first and last monthly installments of rent on the execution hereof. Such installments shall be paid by a bank check drawn on a bank with offices in New York, New York.

92. REMOVAL OF ELECTRICAL AND TELECOMMUNICATIONS WIRES

(a) Landlord May Elect to Either Remove or Keep Wires, Within 15 days after the expiration or sooner termination of the Lease. Landlord may elect (“Election Right”) by written notice to Tenant to:

(i) Retain any or all wiring, cables, risers, and similar installations appurtenant thereto installed by Tenant in the risers of the Building (“Wiring”);

(ii) Remove any or all such Wiring and restore the Premises and risers to their condition existing prior to the installation of the Wiring (“Wire Restoration Work”). Landlord shall perform such Wire Restoration Work at Tenant’s sole cost and expense; or

(iii) Require Tenant to perform the Wire Restoration Work at Tenant’s sole cost and expense.

(b) Survival. The provisions of this Clause shall survive the expiration or sooner termination of the Lease.

(c) Condition of Wiring, In the event Landlord elects to retain the Wiring (pursuant to Paragraph a(I) hereof), Tenant covenants that:

(i) Tenant shall be the sole owner of such Wiring, that Tenant shall have good right to surrender such Wiring, and that such Wiring shall be free of all liens and encumbrances; and

(ii) All wiring shall be left in good condition, working order, properly labeled at each end and in each telecommunications/electrical closet and junction box, and in safe condition.

(d) Landlord retains Security Deposit. Notwithstanding anything to the contrary, Landlord may retain Tenant’s Security Deposit after the expiration or sooner termination of the Lease until the earliest of the following events:

(i) Landlord elects to retain the Wiring pursuant to Paragraph a(I);

(ii) Landlord elects to perform the Wiring Restoration Work pursuant to Paragraph (a)(ii) and the Wiring Restoration Work is complete and Tenant has fully reimbursed Landlord for all costs related thereto; or

(iii) Landlord elects to require the Tenant to perform the Wiring Restoration Work pursuant to Paragraph (a)(iii) and the Wiring Restoration Work is complete and Tenant has paid for all costs related thereto;

(e) Landlord Can Apply Security Deposit. In the event Tenant fails or refuses to pay all costs of the Wiring Restoration Work within 10 days of Tenant’s receipt of Landlord’s notice requesting Tenant’s reimbursement for or payment of such costs, Landlord may apply all or any portion of Tenant’s security deposit towards the payment of such unpaid costs relative to the Wiring Restoration Work.

(F) No Limit on Right to Sue, The retention or application of such Security Deposit by Landlord pursuant to this Clause does not constitute a limitation on or waiver of Landlord’s right to seek future remedy under law or equity.

93. INTENTIONALLY OMITTED.

94. INTENTIONALLY OMITTED.

95. INTENTIONALLY OMITTED

96. With respect to Paragraph 23 of the printed form of lease. Tenant may peaceably and quietly enjoy the premises hereby demised, subject also to any rights of the prior tenant to the premises. Landlord will indemnify Tenant against the claims of the prior tenant provided Tenant has not defaulted under the Lease. Tenant waives any right to seek damages from Landlord in the event the prior tenant regains possession of the premises. Tenant’s sole remedy will be the cancellation of any obligation to pay rent or additional rent if the prior tenant regains legal possession of the premises.

97. Tenant shall, at its sole cost and expense, be liable and responsible for repairing and cleaning any and all waste drains and pipes in and from the Demised Premises which may become clogged or stopped from any waste or sewage emanating from Tenant’s premises.

98. Tenant’s security deposit of $7,800.00 will be held in a non interest bearing account. Tenant will deposit additional security on each annual anniversary of the lease to ensure that the security deposit equals three (3) months of the then current rent.

	/s/ Nani Thanawala
PND, LLC	NARA BANK
By: Robert An, Member	By:	Nani Thanawala FVP & Controller

EX-10.2

EXHIBIT 10.2

Standard Proposal to Lease

Location:	Rowland Heights, California
Date:	May 12, 2005

1	Lessee.          Nara Bank
	Lessor.          Young Oho
2.	Premises. The Premises which are the subject of this proposal are located in the County of Los Angeles, State of California, commonly known as 1709 S. Nogales Street, Rowland Heights #201, and described as approximately 1,036.5 square feet on the 2nd floor (Gross rentable area of the building is approximately 12,343.5 square feet).
3.	Broker. N/A
4.	Term. The term of the lease shall be thirty-six (36) months and shall begin on May 15, 2005 and shall end on May 14, 2008. Lessee shall be granted two options of three (3) years each. In order to exercise the options, tenant shall notify the lessor in writing at least ninety (90) days prior to the end of the current lease.
5.	Rent.

6.1	Monthly rent during the initial lease term shall be $2,383.95 + NNN payable, in advance, on the fifteenth (15th) day of each month of the term hereof. Rent shall be raised by the Consumer Price Index (“C.P.I.”) every year with a minimum of 2% and a maximum of 4% (e.g., if C.P.I. is 3%, then rent shall by $2,455.47 after one year).
6.2	During option period, rental rate shall be equivalent to the last month of the prior term and adjusted annually by CPI with a minimum of 2% and a maximum of 4%.
6.3	On execution of lease, Lessee shall pay to Lessor $3,500.00 representing rent for last month of term.
6.4	if the rent is not paid within 10 days of due date (fifteenth of each month), five percent (5%) late charge, shall be assessed.

6. Security Deposit. None.

Total monies due upon execution of Lease (first and last month rent):
$3,039.71 + $3,500.00 = $6,539.71

7.	Agreed Use. The Premises shall be used for office space.
8.	Possession and Condition of Premises. Lessor warrants that the Premises, without regard to the purpose for which Lessee will use them, do not violate any covenant or restriction of record or any applicable governmental requirement. If Lessee is not already in possession, Lessor shall deliver the Premises on May 15, 2005 broom clean and free of debris with the plumbing, lighting, heating, ventilating and air conditioning, and loading doors in good operating condition, Subject to the preceding two sentences,, Lessee accepts the Premises in an “AS IS” condition and in its present condition.
9.	Maintenance and Repairs. The foundations, exterior walls, and exterior roof shall be maintained by Landlord and Premises shall be maintained by Lessee. Lessee shall repair and maintain all other parts of the Premises.
10.	Insurance.

11.1	Property Insurance (i.e., all perils included within the classification of fire and extended coverage, vandalism, and malicious mischief — see paragraph 11.3 for a more detailed description) shall be paid for by Lessor.
11.2	Liability insurance naming Lessee and Lessor as co-insured or “additional insured” shall be paid by Lessee.
11.3	Property insurance — Building and improvements.

(a)

Building and Improvements. Lessor shall obtain and keep in force a policy or policies of insurance in the name of Lessor, with toss 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. 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)

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.

11.	Proportion and Share of Expenses. Lessee shall pay its proportionate share of 8.40% of the operating expenses, including, real property taxes, insurance, maintenance, and security costs.
12.	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 written consent, which consent shall not be reasonably withheld. Lessee may assign or sublet the Premises, or any portion thereof, without Lessor’s consent, or 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 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 Leases and (b) Lessor shall be given written notice of such assignment and assumption.
13.	No Broker Representations. Lessor and Lessee acknowledge that Broker has made no representations or warranties regarding the physical condition of the Premises, or its suitability for Lessee’s intended, use, and that neither Party has made any representations or warranties to the other (except as expressly set forth in this proposal) and that Lessor and Lessee are relying upon their own independent investigations in making or accepting this offer.
14.	Attorneys’ Fees. Should litigation arise between Lessor and Lessee, the prevailing party shall be entitled to reasonable attorneys’ fees.
15.	Addendum. Any Addendum attached hereto is hereby incorporated in this proposal by this reference.

Addendum attached:	o Yes (Paragraphs                    through                    )
	o No

LESSEE HAS READ, AND FULLY UNDERSTANDS THE FOREGOING AND ACKNOWLEDGES RECEIPT OF A COPY HEREOF.

2

THIS PROPOSAL IS NOT BINDING ON EITHER PARTY. IT IS INSTEAD INTENDED TO FACILITATE NEGOTIATIONS BETWEEN THE PARTIES. THE PARTIES SHALL NOT BE OBLIGATED TO LEASE THE PREMISES UNTIL BOTH HAVE SIGNED A MUTUALLY AGREEABLE LEASE AGREEMENT.

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

		LESSEE:
DATED:	6/22/05	Timothy Chang
		By /s/ Timothy Chang
		Street Address
		City, State, Zip
		Telephone

16. Lessor’s Acceptance. Lessor accepts the foregoing proposal to Lease the Premises and authorizes Broker to communicate to Lessee Lessor’s acceptance hereof and to deliver an executed copy of this Agreement to Lessee.

	LESSOR:
DATED:	Young H. Cho
	By /s/ Young H. Cho
	Street Address
	City, State, Zip
	Telephone

3

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 known 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.

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: August 9, 2005	/s/ Ho Yang
	Ho Yang
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Alvin D. Kang, 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 known 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.

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: August 9, 2005	/s/ Alvin D. Kang
	Alvin D. Kang
	Executive Vice President and
	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 June 30, 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: August 9, 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 June 30, 2005, as filed with the Securities and Exchange Commission (the “Report”), I, Alvin D, Kang, Chief Financial 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: August 9, 2005
	/s/ Alvin D. Kang
	Chief Financial Officer