-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ExR4dZHCObpo7zdb+Y4CO/3FrXbXJwI5nCtV92mlS7JlHH2XYmdmE0cQkq1Ul0Fx vavAX7Q09VS+tJcadeCxsQ== 0000790555-95-000006.txt : 19950823 0000790555-95-000006.hdr.sgml : 19950823 ACCESSION NUMBER: 0000790555-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIERRA TAHOE BANCORP CENTRAL INDEX KEY: 0000790555 STANDARD INDUSTRIAL CLASSIFICATION: 6022 IRS NUMBER: 680091859 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15450 FILM NUMBER: 95560924 BUSINESS ADDRESS: STREET 1: 10181 TRUCKEE TAHOE AIRPORT RD STREET 2: P O BOX 61000 CITY: TRUCKEE STATE: CA ZIP: 96161-9010 BUSINESS PHONE: 9165823000 MAIL ADDRESS: STREET 1: PO BOX 61000 CITY: TRUCKEE STATE: CA ZIP: 96160 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter ended June 30, 1995, Commission File No. 0-15450 SIERRA TAHOE BANCORP (Exact Name of Registrant as Specified in its Charter) California 68-0091859 (State or Other Jurisdiction) (I.R.S. Employer Identification No.) of Incorporation or Reorganization) 10181 Truckee-Tahoe Airport Rd., P.O. Box 61000, 96160-9010 Truckee, California (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (916) 582-3000 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 X No ____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of July 31, 1995: Common Stock - Authorized 10,000,000 shares of no par; issued and outstanding - 2,571,829. 10-Q Filing June 30, 1995 Part I. Financial Information Item 1. Financial Statements Following are condensed consolidated financial statements for Sierra Tahoe Bancorp ("Bancorp", or together with its subsidiaries, the "Company") for the reportable period ending June 30, 1995. These condensed consolidated financial statements are unaudited, however, in the opinion of management, all adjustments have been made for a fair presentation of the financial condition and earnings of the Company in conformity with generally accepted accounting principles. The accompanying notes are an integral part of these condensed consolidated financial statements. SIERRA TAHOE BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (Unaudited) June 30, 1995 and December 31, 1994 (Amounts in thousands of dollars) ASSETS 06/30/95 12/31/94 Cash and due from banks $ 16,802 $ 18,049 Federal funds sold 10,800 8,000 Investment securities and investments in mutual funds (Note 4) 27,206 32,817 Loans held for sale 23,626 2,067 Loans and leases, net of allowance for possible loan and lease losses of $3,522 in 1995 and $3,546 in 1994 (Notes 2 & 5) 173,600 167,326 Other assets 31,516 31,716 TOTAL ASSETS $283,550 $259,975 LIABILITIES Deposits $241,892 $218,876 Convertible debentures 10,000 10,000 Other liabilities 2,853 2,936 TOTAL LIABILITIES 254,745 231,812 SHAREHOLDERS' EQUITY Common stock 10,567 11,002 Retained earnings 18,489 17,839 Unrealized loss on investment securities available for sale (251) (678) TOTAL SHAREHOLDERS' EQUITY 28,805 28,163 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $283,550 $259,975
The accompanying notes are an integral part of these Condensed Consolidated Statements of Condition. SIERRA TAHOE BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) For the Three and Six Months Ended June 30, 1995 and 1994 (Amounts in thousands except per share amounts) Three Three Six Six Months Months Months Months Ended Ended Ended Ended 6/30/95 6/30/94 6/30/95 6/30/94 Interest Income: Interest and fees on loans and leases $ 5,647 $4,099 $10,730 $ 7,882 Interest on federal funds sold 98 72 173 172 Interest on investment securities and deposits 389 432 832 816 Total Interest Income 6,134 4,603 11,735 8,870 Less Interest Expense: Interest on deposits 1,717 1,160 3,113 2,307 Interest on convertible debentures 212 218 425 344 Other interest expense 1 13 17 23 Total Interest Expense 1,930 1,391 3,555 2,674 Net Interest Income 4,204 3,212 8,180 6,196 Provision for Possible Loan and Lease Losses 320 270 590 540 Net Interest Income After Provision for Possible Loan and Lease Losses 3,884 2,942 7,590 5,656 Other Operating Income 1,924 2,347 4,081 4,479 Other Operating Expenses 5,105 4,318 10,139 8,360 Income Before Provision for Income Taxes 703 971 1,532 1,775 Provision for Income Taxes 267 377 568 668 NET INCOME $ 436 $ 594 $ 964 $ 1,107 EARNINGS PER SHARE Primary $ 0.16 $ 0.22 $ 0.36 $ 0.42 Weighted Average Shares Outstanding 2,684 2,685 2,686 2,652 Fully diluted 0.15 0.19 0.33 0.37 Weighted Average Shares Outstanding 3,696 3,715 3,693 3,495 Cash Dividends Paid Per Share of Common Stock $ 0 $ 0 $ 0.12 $ 0
The accompanying notes are an integral part of these Condensed Consolidated Statements of Income. SIERRA TAHOE BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Six Months Ended June 30, 1995 and 1994 (Amounts in thousands of dollars) Six Six Months Months Ended Ended 06/30/95 06/30/94 Cash Flow From Operating Activities: Interest and fees received $ 11,297 $ 8,535 Service charges and commissions received 861 715 Servicing income received 3,237 3,194 Interest paid (3,527) ( 2,483) Cash paid to suppliers and employees (9,116) ( 7,624) Income taxes paid (935) ( 1,118) Mortgage loans originated for sale (16,290) (19,657) SBA loans originated for sale (16,892) (19,461) SBA loans sold 5,051 17,697 Mortgage loans sold 13,827 21,942 Other items 194 414 Net Cash (Used In) Provided By Operating Activities $(12,293) $ 2,154 Cash Flow From Investing Activities: Proceeds from sales of mutual funds - available for sale 225 6,516 Proceeds from maturities of investment securities - held to maturity 569 330 Proceeds from sales of investment securities - available for sale 8,484 4,986 Proceeds from sales of investment securities-held to maturity (Note 4) 999 0 Purchase of investment securities - held to maturity 0 ( 1,191) Purchase of investment securities - available for sale ( 3,955) (14,556) Loans made net of principal collections (13,930) ( 4,449) Capital expenditures ( 785) ( 264) Increase in other assets ( 28) ( 685) Net Cash Used In Investing Activities $( 8,421) $ ( 9,313) Cash Flow From Financing Activities: Net decrease in demand, interest bearing and savings accounts (14,312) ( 2,190) Net increase (decrease) in time deposits 37,328 ( 3,243) Dividend paid ( 314) 0 Proceeds from issuance of subordinated debentures 0 10,000 Proceeds from issuance of common stock 10 0 Repurchase of common stock ( 445) 0 Net Cash Provided by Financing Activities 22,267 4,567 Net Increase (Decrease) in Cash and Cash Equivalents 1,553 ( 2,592) Cash and Cash Equivalents at Start of Year 26,049 32,133 Cash and Cash Equivalents at June 30 $ 27,602 $ 29,541
The accompanying notes are an integral part of these Condensed Consolidated Statements of Cash Flows. SIERRA TAHOE BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For The Six Months Ended June 30, 1995 and 1994 (Continued) (Amounts in thousands of dollars) RECONCILIATION OF NET INCOME TO NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES Six Six Months Months Ended Ended 06/30/95 06/30/94 Net Income: $ 964 $ 1,107 Adjustment to Reconcile Net Income to Net Cash Provided: Depreciation and amortization 519 564 Provision for possible loan and lease losses 590 540 Provision for income taxes 568 668 Gain on sale of SBA loans under cash received 91 93 Amortization of excess servicing on SBA loans 669 1,086 Amortization of purchased mortgage servicing rights 86 86 Increase in interest payable 28 329 Increase (decrease) in accrued expenses 78 ( 541) Amortization of premiums/discounts on loans ( 225) ( 274) Decrease in taxes payable ( 935) ( 1,118) Decrease (increase) in loans originated for sale (14,304) 521 Decrease in prepaid expenses ( 107) ( 815) Other items ( 315) ( 92) Total Adjustments (13,257) 1,047 Net Cash (Used In) Provided By Operating Activities $(12,293) $ 2,154
_________________________________________________________________ SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES For the six months ended June 30, 1995 and 1994, $373,000 and $266,000 of loans were transferred to other real estate owned. In the 1995 period, $572,000 of assets formerly classified as in- substance foreclosures were reclassified as loans. In 1995, $20.0 million of unguaranteed SBA loans originated in earlier years were transferred to held for sale status. Concurrently, $21.4 million of guaranteed SBA loans were transferred to the Company's investment portfolio. The accompanying notes are an integral part of these Condensed Consolidated Statements of Cash Flows. Sierra Tahoe Bancorp Notes to Condensed Consolidated Financial Statements June 30, 1995 and December 31, 1994 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in a condensed format and, therefore, do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been reflected in the financial statements. The results of operations for the six months ended June 30, 1995, are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to prior period amounts to present them on a basis consistent with classifications for the six months ended June 30, 1995. 2. LOANS As of June 30, 1995, and December 31, 1994, the Bank's loan portfolio consisted of the following (in thousands): June 30 December31, 1995 1994 Commercial .......................... $127,449 $126,495 Real Estate - Mortgage............... 21,012 18,526 Real Estate - Construction........... 21,367 18,599 Individual and Other................. 7,218 7,367 Lease Receivables.................... 398 202 Total gross loans and leases......... 177,444 171,189 Net deferred loan fees............... 322 317 Allowance for possible loan and lease losses ....................... 3,522 3,546 Total loans and leases, net of deferred fees and allowance for possible loan and lease losses ..... $173,600 $167,326 Guaranteed portion of SBA loans held for sale....................... 0 636 Unguaranteed portion of SBA loans held for sale....................... 20,016 0 Mortgage loans held for sale......... 3,610 1,431 Total loans held for sale............ $ 23,626 $ 2,067
The guaranteed portion of completed SBA loans at June 30, 1995 was $8.4 million. Of total gross loans and leases at June 30, 1995, $2.8 million were considered to be impaired (see Note 5). The allowance for possible loan and lease losses included $771 thousand related to these loans. The average recorded investment in impaired loans during the six months ended June 30, 1995 was $3.1 million. Sierra Tahoe Bancorp Notes to Condensed Consolidated Financial Statements June 30, 1995 and December 31, 1994 3. COMMITMENTS & CONTINGENT LIABILITIES In the normal course of business, there are outstanding various commitments and contingent liabilities, such as commitments to extend credit and letters of credit, which are not reflected in the financial statements. Management does not anticipate any material loss as a result of these transactions. 4. INVESTMENT SECURITIES AND INVESTMENTS IN MUTUAL FUNDS Sales of investment securities classified as held to maturity consist of a single security which was sold within 90 days of the maturity date. The amortized cost at the date of sale was $998,203 and the loss realized was $1,172. 5. IMPAIRED LOANS Effective January 1, 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") 114, Accounting by Creditors for Impairment of a Loan, and 118, Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosure. SFAS No. 114 requires that an impaired loan be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, or at the loan's observable market price or the fair value of its collateral. SFAS No. 118 amends SFAS No. 114 to allow a creditor to use existing methods for recognizing interest income on impaired loans and requires certain disclosures. A loan is impaired when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans are measured for impairment as part of the Company's normal loan review process. Impairment losses are included in the allowance for possible loan and lease losses through a charge to provision for loan losses. The Company had previously calculated its allowance for possible loan and lease losses using methods approximating those prescribed by SFAS No. 114. The adoption of SFAS No. 114 did not have a material impact on the Company's financial condition or results of operations. Interest is recognized on impaired loans where cash is received and the future collection of principal is considered by management to be probable. The amount so recognized was not material to operations during the first six months of 1995. The principal effect on the Company of the adoption of SFAS No. 114 is the elimination of the category of loans classified as in- substance foreclosures, resulting in the reclassification of such amounts from other real estate owned to loans. The Company accordingly reclassified $572,000 of such loans at January 1, 1995. SIERRA TAHOE BANCORP AND SUBSIDIARIES Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. FINANCIAL CONDITION Effective February 8, 1994 the Bancorp issued $10 million of 8 1/2% Convertible Debenture Securities due February 1, 2004 ("Debenture Offering"). A portion of the net proceeds from this offering have been utilized to pay operating expenses of the holding company and to provide a $300 thousand equity infusion into Sierra Bank of Nevada ("SBN"). Of the $7.2 million remainder, $1.0 million is invested in a loan, and the balance has been used to reduce the Company's reliance on out-of-area time deposits. It is intended that the additional capital will be used to expand the Company's operations in Nevada and Northern California, and to expand the Company's SBA and other business operations. Total assets increased by $23.6 million from $260.0 million at December 31, 1994, to $283.6 million at June 30, 1995. This increase included increases of $2.8 million in federal funds sold and $27.8 million in loans, net of the allowance for possible loan and lease losses. These increases were offset by decreases of $1.2 million in cash and due from banks, $5.6 million in investment securities and investments in mutual funds, and $0.2 million in other assets. Mutual funds, federal funds sold and unpledged investment securities classified as available for sale (which consist primarily of short-term U.S. Treasury securities with a remaining maturity of less than two years) are all sources of short-term liquidity and can be used somewhat interchangeably to provide liquidity. Of the Company's total investment securities, $7.0 million were pledged at June 30, 1995. The increase in loans includes the effect of the Company's decision to retain the guaranteed portion of its SBA loans. This represents a new strategy whereby the Company intends to securitize and sell the unguaranteed portion of SBA loans. SBA loans increased $15.7 million from $95.6 million at December 31, 1994 to $111.3 million at June 30, 1995. Other loan increases were $4.6 million in commercial loans, $2.5 million in real estate loans, $2.8 million in construction loans, and $2.2 million in mortgage loans held for sale. Gross loans outstanding at SBN increased during 1995 from $41.1 million at December 31, 1994 to $43.2 million at June 30, 1995. The Company's first securitization of between $20 million and $40 million, depending upon SBA approval, is expected to be completed in late 1995 or early 1996. Deposits increased by $23.0 million from $218.9 million at December 31, 1994 to $241.9 million at June 30, 1995. A decrease of $7.8 million in interest-bearing transaction accounts and $6.1 million in non-interest bearing demand accounts were offset by a $37.3 million increase in time deposits. The Company attributes the decrease in transaction accounts primarily to two factors, the transfer of funds into higher yielding time certificates of deposit and the movement of funds into nonbank investment vehicles such as money market mutual funds. The increase in time deposits includes an increase in out-of-area certificates of deposit of $21.9 million. The unrealized loss on investment securities available for sale, net of the related tax effect, decreased $427 thousand from $678 thousand at December 31, 1994 to $251 thousand at June 30, 1995. Of this ending balance, $106 thousand represents unrealized loss on mutual funds and $145 thousand relates to other securities. Net unrealized losses on securities classified as available for sale, excluding the related tax effect, represent 1.6% of the amortized cost of the Company's available for sale securities at June 30, 1995. In June and July 1993, SBN entered into two Memoranda of Understanding ("MOU") with the Federal Reserve Bank ("FRB") and the Nevada Department of Commerce, Division of Financial Institutions (the "NDFI"). The June 1993 Memorandum was terminated by the FRB and the NDFI on May 12, 1995. The July 1993 Memorandum with its regulators includes provisions that it must establish satisfactory corrective actions to remedy and prevent certain compliance deficiencies and weaknesses by strengthening its policies and procedures related to its ongoing operations. Termination of the agreement is dependent on the FRB and NDFI agreeing to terminate the agreement which is in the sole discretion of the FRB and NDFI. The Company believes SBN is in substantial compliance with the terms of the agreement. On April 17, 1995, Truckee River Bank ("TRB") opened two new branches, one in Auburn and a second branch in Grass Valley, California. On July 17, 1995, TRB opened a regional facility in Sacramento, California. SBN has received approval for a branch in Carson City, Nevada. Start-up costs incurred for these branches will be funded from operating surpluses at the respective banks. SBN is constructing a new headquarters facility in Reno, with ground breaking planned for the third quarter of 1995. Total costs incurred through June 30, 1995 for the land and building were $1.0 million. In July 1995, the Company discontinued its mortgage banking operations which in recent years have not been a significant portion of the Company's business and were not currently profitable. A one time pre-tax charge of approximately $200,000 will be taken in the third quarter. The Bancorp paid a dividend of twelve cents per share during March 1995. During June 1995, the Company repurchased 50,000 shares of its common stock on the open market at a total cost of $445 thousand. RESULTS OF OPERATIONS (Six Months Ended June 30, 1995 and 1994) Net income for the six months ended June 30, 1995 decreased by 12.9% from $1,107 thousand for the six months ended June 30, 1994 to $964 thousand during the current six month period. Net interest income increased by $1,984 thousand and the provision for income taxes was reduced by $100 thousand. The positive effect of these items on net income was offset by a $50 thousand increase in the provision for possible loan and lease losses, a reduction of $398 thousand in other operating income and a $1,779 thousand increase in other operating expenses. Net Interest Income The yield on average interest earning assets for the six months ended June 30, 1995 was 7.50%. This compares to 5.88% for the first six months of 1994. The increase reflects the increase in the average prime rate during the comparison periods and an increase in the percentage of average loans to average interest earning assets from 77.5% in the first six months of 1994 to 83.1% in the current six months. Interest on debentures for the first six months of 1995 was $425 thousand compared to $344 thousand for 1994. Pending the ultimate use of the debenture proceeds as more fully described in the section "FINANCIAL CONDITION", these funds are being temporarily used to reduce the Company's reliance on out-of-area time deposits which are accruing interest at a lesser rate than the rate paid on the debentures. Yields and interest earned, including loan fees for the six months ended June 30, 1995 and 1994, were as follows (in thousands except percent amounts): Six Six Months Months Ended Ended 06/30/95 06/30/94 Average loans outstanding (1) $182,800 $164,636 Average yields 11.8% 9.7% Amount of interest and origination fees earned $ 10,730 $ 7,882
(1) Amounts outstanding are the average of daily balances for the periods. Excluding loan fees of $561 thousand and $495 thousand for the six months ended June 30, 1995 and 1994, yields on average loans outstanding were 11.2% and 9.1%, respectively. The prime rate (upon which a large portion of the Company's loan portfolio is based), averaged 8.9% for the 1995 period and 6.5% for the 1994 period. The Company has experienced an increase in its overall cost of deposits from 2.15% for the six months ended June 30, 1994 to 2.86% in the current period. This includes the effect of the overall increase in rates during the comparison period and an increase in the percentage of time deposits to total deposits. Rates and amounts paid on average deposits including non-interest bearing deposits for the six months ended June 30, 1995 and 1994 were as follows (in thousands except percent amount): Six Six Months Months Ended Ended 06/30/95 06/30/94 Average deposits outstanding (1) $219,347 $216,754 Average rates paid 2.9% 2.1% Amount of interest paid or accrued $ 3,113 $ 2,307
(1) Amount outstanding is the average of daily balances for the period. The effective interest rate paid on NOW accounts, Money Market accounts and Time Certificates of Deposits during the first six months of 1995 and 1994 were as follows: 1995 1994 MONEY MONEY NOW MARKET TIME NOW MARKET TIME Average Balance (in thousands) (1) $33,958 $52,608 $71,514 $31,395 $60,507 $64,058 Rate Paid 1.3% 2.8% 5.7% 1.3% 2.3% 3.9%
Provision for Possible Loan and Lease Losses In evaluating the Company's allowance for possible loan and lease losses, management considers the credit risk in the various loan categories in its portfolio. Historically, most of the Company's loan losses have been in its commercial lending portfolio, which includes SBA loans and local commercial loans. From inception of its SBA lending program in 1983 through 1990, the Company sustained a relatively low level of losses from these loans. Losses, net of recoveries from the unguaranteed portion of SBA loans retained in the Company's loan portfolio, increased from $232 thousand in 1991 to $648 thousand in 1992 and decreased to $377 thousand in 1993 and $373 thousand in 1994 and totaled $333 thousand for the six months ended June 30, 1995. The increase in 1992, 1993, 1994 and 1995 over 1991 includes the effect of the maturing of the SBA loan portfolio, the impact of the recession in California on borrowers and collateral values, and an increase in the size of the SBA loan portfolio. Most of the Company's other commercial loan losses have been for loans to businesses within the Tahoe Basin area and, during 1993, 1994 and 1995, at the Company's Sierra Bank of Nevada facility. The Company believes that it has taken steps to minimize its commercial loan losses, including centralization of lending approval and processing functions. It is important for the Company to maintain good relations with local business concerns and, to this end, it supports small local businesses with commercial loans. To offset the added risk these loans may represent, the Company typically charges a higher interest rate. It also attempts to mitigate this risk through the loan review and approval process. The provision for loan and lease losses was $590 thousand for the first six months of 1995 versus $540 thousand for the same period in 1994. The allowance for possible loan and lease losses as a percentage of loans was 1.75% at June 30, 1995, compared with 2.05% at December 31, 1994, and 2.30% at June 30, 1994. Net charge-offs for the six months were $614 thousand compared to $274 thousand for the first six months of 1994. Although the allowance as a percentage of loans has decreased, the allowance as a percentage of nonaccrual loans has increased as compared to December 31, 1994 levels when adjusted for the reclassification of assets formerly classified as in-substance foreclosures to loans. In addition, the percentage of portions of loans guaranteed by the U.S. Government has increased from 6.7% at December 31, 1994 and 8.8% at June 30, 1994 to 10.9% at June 30, 1995. The Company will monitor its exposure to loan losses each quarter and adjust its level of provision in the future to reflect changing circumstances. The Company expects that its existing allowance for possible loan and lease losses will be adequate to provide for any additional losses. The following table sets forth the ratio of nonaccrual loans to total loans, the allowance for possible loan and lease losses to nonaccrual loans and the ratio of the allowance for possible loan and lease losses to total loans, as of the dates indicated. June 30 December 31, 1995 1994 1994 1993 1992 Nonaccrual loans to total loans 1.4% 2.0% 1.4% 1.8% 2.4% Allowance for possible loan and lease losses to nonaccrual loans 123.7% 112.3% 142.9% 120.9% 72.5% Allowance for possible loan and lease losses to total loans 1.8% 2.3% 2.1% 2.2% 1.8%
Other Operating Income Other operating income declined from $4.5 million during the first six months of 1994 to $4.1 million during the current six month period. This reduction is primarily related to a decrease in net gain on sale of loans. The net gain on sale of SBA loans for the current six month period declined to $293 thousand from $1,136 thousand for the six months ended June 30, 1994. This decline resulted from a decrease in sales from $17.7 million for the six months ended June 30, 1994 to $5.1 million in 1995. The Company has altered its strategy with respect to the sale of SBA loans. Rather than continuing to sell the guaranteed portion of the SBA portfolio, the Company intends to retain the guaranteed portion and securitize and sell portions of unguaranteed SBA loans. The Company estimates that the decline in sales between the two periods would be reduced by up to $7.6 million if it had continued to sell the guaranteed portion of loans available for sale in 1995, resulting in an estimated decline in sales of approximately $5 million. This decline includes the effect of recent changes to the SBA program including a reduction in the maximum loan that may be made under the SBA 7(a) program to $500 thousand and, effective May 15, 1995, the temporary elimination of guarantees for refinanced debt, with limited exceptions. Net servicing income on SBA loans (the net of the servicing income generated on sold SBA loans less the amortization of the gain recorded on the sale of these same loans and the amortization of purchased SBA servicing rights) increased by $375 thousand from $2,004 thousand during the first six months of 1994 to $2,379 thousand for the six months ended June 30, 1995. This increase reflects a lower amortization resulting from a change in the estimates of prepayment speeds of SBA loans TRB services for investors. Other Operating Expense The following table compares the various elements of non-interest expense as an annualized percentage of total assets for the first six months of 1995 and 1994 (in thousands except percentage amounts): Six Months Salaries & Occupancy & Other Ended Average Related Equipment Operating June 30 Assets(1) Benefits(2) Expenses Expenses _________________________________________________________________ 1995 $ 261,032 3.9% 1.1% 2.7% 1994 $ 254,170 3.5% 1.0% 1.9%
(1) Based on average daily balances. (2) Excludes provision for payment of bonuses and contribution to KSOP plan. Including these items, percentages are 4.1% and 3.8% for 1995 and 1994, respectively. The following table summarizes the principal elements of operating expenses and discloses the increases (decreases) and percent of increases (decreases) for the six months ended June 30, 1995 and 1994 (amounts in thousands except percentage amounts): Six Months Ended Increase (Decrease) June 30, 1995 over 1994 1995 1994 Amount Percentage Salaries and related benefits.............. $ 5,263 $ 4,791 $ 472 9.9% Occupancy and equipment.............. 1,429 1,234 195 15.8 Insurance.............. 140 148 (8) (5.4) Postage................ 149 128 21 16.4 Stationery and supplies.............. 145 141 4 2.8 Telephone.............. 150 127 23 18.1 Advertising............ 352 171 181 105.8 Legal.................. 211 12 199 1,658.3 Consulting............. 191 73 118 161.6 Audit and accounting fees.................. 96 91 5 5.5 Directors' fees and expenses.............. 505 174 331 190.2 Debenture offering cost.................. 48 37 11 29.7 FDIC assessments....... 275 301 (26) (8.6) Sundry losses.......... 352 51 301 590.2 Other.................. 833 881 (48) 5.4 $ 10,139 $8,360 $ 1,779 21.3%
The increase in salaries and benefits is primarily attributable to the new branches and the addition of several management level employees, including a President and Senior Lending Officer at TRB and a Senior Lending Officer at SBN. Additionally, during 1994 the Company increased its staffing in its SBA operations and during the first quarter of 1995 opened a new equipment leasing department at SBN. A portion of the rise in occupancy and equipment expenses resulted from the opening of mortgage offices in Bellevue, Washington and Las Vegas, Nevada late in 1994. Operating results at the Bellevue, Washington office fell below expectations and during May 1995 the Company began the process required to close this office. The new TRB branches also contributed to the increase in occupancy and equipment. Advertising in 1995 includes an expanded budget for TRB and costs related to TRB's new branches. Legal expenses relate to general litigation matters and a voluntary internal investigation of the Company's investment in an entity known as Community Assets Management. Consulting costs in 1995 include costs related to a corporate identity study, a review of directors' compensation and assistance in strategic planning . Directors' expenses in 1995 include a $314 thousand pre-tax charge for the Director Emeritus Program, which provides retirement benefits to certain directors who choose to participate in the program. Sundry losses in 1995 include a $100 thousand business loss related to other real estate owned, $126 thousand related to two litigation matters, and $22 thousand related to the closing of the Bellevue mortgage office. Provision for Income Taxes Provision for income taxes have been made at the prevailing statutory rates and include the effect of items which are classified as permanent differences for federal and state income tax. The provision for income taxes was $568 thousand and $668 thousand for the six months ended June 30, 1995 and 1994, respectively, representing 37.1% and 37.6% of income before taxation for the respective periods. Results of Operations (Three months ended June 30, 1995 and 1994) Net income decreased by $158 thousand from $594 thousand for the three months ended June 30, 1994 to $436 thousand for the current quarter. The decrease included a $992 thousand increase in net interest income and a $110 thousand reduction in the provision for income taxes. These items were offset by a $50 thousand increase in the provision for possible loan and lease losses, a $423 thousand decrease in other operating income and a $787 thousand increase in other operating expenses. Net Interest Income The yield on net interest earning assets increased from 6.06% during the second quarter of 1994 to 7.52% during the three months ended June 30, 1995. As in the six month comparison, yield was positively affected by an increase in the percentage of average loans to average earning assets from 78.6% during the 1994 quarter to 84.2% in the 1995 quarter. Yields and interest earned, including loan fees for the three months ended June 30, 1995 and 1994 were as follows (in thousands except percent amounts): Three Months Three Months Ended 06/30/95 Ended 06/30/94 Average loans outstanding (1) $188,845 $167,169 Average yields 12.0% 9.8% Amount of interest and origination fees earned $ 5,647 $ 4,099
(1) Amounts outstanding are the average of daily balances for the periods. Excluding loan fees of $318 thousand and $270 thousand for the three months ended June 30, 1995 and 1994, respectively, yields on average loans outstanding were 11.3% and 9.2%. The prime rate (upon which a large portion of the Company's loan portfolio is based) was 9.0% for the 1995 quarter and averaged 6.9% for the 1994 quarter. This increase in prime is the major component of the increase in loan yields. Other earning assets averaged $35.4 million in the current quarter as compared to $45.4 million for the three months ended June 30, 1994. Rates and amounts paid on average deposits, including non-interest bearing deposits for the three months ended June 30, 1995 and 1994, were as follows (in thousands except percent amounts): Three Months Three Months Ended 06/30/95 Ended 06/30/94 Average deposits outstanding (1) $223,659 $215,224 Average rate paid 3.1% 2.2% Amount of interest paid or accrued $ 1,717 $ 1,160
(1) Amount outstanding is the average of daily balances for the periods. The effective interest rates paid on NOW accounts, Money Market accounts and Time Certificates of Deposits during the second quarter of 1995 and 1994 were as follows: (In thousands except percent amounts) 1995 1994 MONEY MONEY NOW MARKET TIME NOW MARKET TIME Average Balance $34,765 $50,175 $79,735 $32,366 $60,122 $62,880 Rate Paid 1.3% 2.9% 5.9% 1.3% 2.4% 4.0%
Provision for Possible Loan and Lease Losses The Company believes that an increase in the level of the provision for possible loan and lease losses is appropriate given the current level of losses and the Company's review of the exposure to loss in its loan portfolio. Other Operating Income The net gain on sale of SBA loans decreased by $724 thousand from $776 thousand during the 1994 quarter to $52 thousand during the three months ended June 30, 1995. This decrease resulted from a decrease in sales from $13.1 million during the second quarter of 1994 to $1.3 million in the current quarter. As discussed earlier, the Company has changed its strategy with respect to sales of SBA loans and has experienced a decline in its SBA loan production. Net servicing income on SBA loans increased from $982 thousand during the second quarter of 1994 to $1,180 thousand for the three months ended June 30, 1995. This increase results from the change in amortization of excess servicing discussed earlier. Other Operating Expense The following table compares the various elements of non-interest expense as an annualized percentage of total assets for the second quarter of 1995 and 1994 (in thousands except percentage amounts): Salaries & Occupancy & Other Three Months Average Related Equipment Operating Ended June 30, Assets(1) Benefits(2) Expenses Expenses 1995 $265,454 3.8% 1.1% 2.8% 1994 $254,314 3.6% 1.0% 2.0%
(1) Based on average daily balances. (2) Excludes provision for payment of bonuses and contribution to KSOP plan. Including these items, percentages are 3.8% for both 1995 and 1994. The following table summarizes the principal elements of operating expenses and discloses the increases (decreases) and percent of increases (decreases) for the three months ended June 30, 1995 and 1994 (amounts in thousands except percentage amounts): Three Months Ended Increase (Decrease) June 30 1995 over 1994 1995 1994 Amount Percentage Salaries and related benefits.............. $ 2,541 $2,439 $ 102 4.2% Occupancy and equipment.............. 719 613 106 17.3 Insurance.............. 65 74 (9) (12.2) Postage................ 84 56 28 50.0 Stationery and supplies.............. 81 66 15 22.7 Telephone.............. 78 70 8 11.4 Advertising............ 210 97 113 116.5 Legal.................. 112 12 100 833.3 Consulting............. 91 47 44 93.6 Audit and accounting fees.................. 40 56 (16) (28.6) Directors' fees and expenses.............. 408 85 323 380.0 Debenture offering cost.................. 24 10 14 140.0 FDIC assessments....... 138 158 (20) (12.7) Sundry losses.......... 69 47 22 46.8 Other.................. 445 488 (43) (8.8) $5,105 $4,318 $ 787 18.2%
Of the 17.3% increase in occupancy and equipment, 6.5% relates to the new TRB branches. Consistent with the six month comparison, advertising in 1995 reflects an expanded budget for TRB and costs related to the new branches. The increase in legal primarily results from a voluntary internal investigation of the Company's investment in Community Assets Management. Directors' expenses include the minimum cost of the Director Emeritus Program. Provision for Income Taxes The provision for income taxes was $267 thousand and $377 thousand for the three months ended June 30, 1995 and 1994, respectively, representing 38.0% and 38.8%, of income before taxation for the respective periods. Sierra Tahoe Bancorp 10-Q Filing June 30, 1995 Part II. Item 1. Legal Proceedings. During 1987, the Company took title, through foreclosure, of a property located in Placer County which subsequent to TRB's sale of the property was determined to be contaminated with a form of hydrocarbons. At the time it owned the property, TRB became aware of and investigated the status of certain buried underground tanks that had existed on the property. TRB hired a consultant to study the tanks and properly seal them. Several years later, and after resale of the property, contamination was observed in the area of at least one of the buried tanks and along an adjoining riverbank of the Yuba River. TRB, at the time of resale of the property, was not aware of this contamination but was aware of the existence of the tanks and disclosed this to its purchaser. A formal plan of remediation has not been approved by the County of Placer or the State Regional Water Quality Board. As a result of the discovery of the contamination, two civil lawsuits have been very recently instituted against TRB by the current owner of the property, who is also TRB's borrower. TRB's counsel on this matter believes that TRB's share of the cost of remediation will not be material to TRB's or the Company's performance and will be within existing reserves established by TRB for this matter. The Company and its subsidiaries have been named in a suit filed in the U.S. District Court, Central District of California. The Plaintiffs are banks who lost portions of investments made through a fund managed by Community Assets Management ("CAM"), which is no longer in operation. Plaintiffs allege that the Company and its subsidiaries exited the fund prior to being exposed to loss based upon inside information. Also named in his capacity as director of CAM is Jerrold Henley who also serves the Company as a Director and Chairman of the Board. The Company has investigated the allegations in detail and has found no basis for the action and will defend the civil action. The Company believes this issue will not have a material adverse impact on its financial condition or results of operations. In addition, the Company is subject to some minor pending and threatened legal actions which arise out of the normal course of business and, in the opinion of Management, the disposition of these claims currently pending will not have a material adverse effect on the Company's financial position. Item 2. Change in Securities. No changes. Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Securities Holders. None. Item 5. Other Information. Not applicable. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 10.1 Lease Agreement between Truckee River Bank and Realty Advisors, Inc. 10.2 Lease Agreement between Truckee River Bank and Western Investment Real Estate Trust and Pinecreek Shopping Center Associates. 11. Statement regarding computation of per share earnings. (b) Reports on Form 8-K. The Bancorp filed a Form 8-K dated May 25, 1995, reporting authorization by its Board of Directors to repurchase up to 50,000 shares of its common stock. 10-Q Filing June 30, 1995 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 of the undersigned thereunto duly authorized. Date August 9, 1995 /s/ William T. Fike William T. Fike President/Chief Executive Officer Date August 9, 1995 /s/ David C. Broadley David C. Broadley Executive Vice President/ Chief Financial Officer EX-10 2 STANDARD FORM OFFICE LEASE (BASE YEAR) LANDLORD: Realty Advisors, Inc., A Delaware Corporation TENANT: Truckee River Bank, a California Corporation PROJECT: 1651 Response Road CITY, STATE: Sacramento, California 95815 DATE: June 15, 1995 STANDARD FORM OFFICE LEASE (BASE YEAR) TABLE OF CONTENTS Page 1. Basic Lease Terms. . . . . . . . . . . . . . 1 2. Premises . . . . . . . . . . . . . . . . . . 2 3. Lease Term . . . . . . . . . . . . . . . . . 4 4. Possession . . . . . . . . . . . . . . . . . 4 5. Rent . . . . . . . . . . . . . . . . . . . . 5 6. Additional Rent. . . . . . . . . . . . . . . 6 7. Prepaid Rent . . . . . . . . . . . . . . . . 7 8. Security Deposit . . . . . . . . . . . . . . 8 9. Use of Premises and Project Facilities . . . 8 10. Surrender of Premises; Holding Over. . . . . 9 11. Signage. . . . . . . . . . . . . . . . . . . 9 12. Personal Property Taxes. . . . . . . . . . .11 13. Parking. . . . . . . . . . . . . . . . . . .11 14. Utilities. . . . . . . . . . . . . . . . .12 15. Maintenance. . . . . . . . . . . . . . . . .12 16. Alterations. . . . . . . . . . . . . . . .12 17. Release and Indemnity. . . . . . . . . . . .13 18. Insurance. . . . . . . . . . . . . . . . . .14 19. Destruction. . . . . . . . . . . . . . . . .15 20. Condemnation . . . . . . . . . . . . . . . .15 21. Assignment or Sublease . . . . . . . . . . .16 22. Default. . . . . . . . . . . . . . . . . . .17 23. Landlord's Remedies. . . . . . . . . . . . .18 24. Default by Landlord. . . . . . . . . . . . .18 25. Entry of Premises and Performance by Tenant.19 26. Subordination. . . . . . . . . . . . . . . .19 27. Notice . . . . . . . . . . . . . . . . . . .20 28. Waiver . . . . . . . . . . . . . . . . . . .20 29. Limitation of Liability. . . . . . . . . . .20 30. Force Majeure. . . . . . . . . . . . . . . .21 31. Professional Fees. . . . . . . . . . . . . .21 32. Examination of Lease . . . . . . . . . . . .21 33. Estoppel Certificate . . . . . . . . . . . .22 34. Rules and Regulations. . . . . . . . . . . .22 35. Project Planning . . . . . . . . . . . . . .22 36. Liens. . . . . . . . . . . . . . . . . . . .22 37. Miscellaneous Provisions . . . . . . . . . .23 EXHIBITS A. Building Floor Plan Showing Premises . . . . . . . . . . A-1 B. Project Site Plan. . . . . . . . . . . . . . . . . . . . B-1 C. Work Letter Agreement. . . . . . . . . . . . . . . . . . C-1 D. Notice of Lease Term Dates . . . . . . . . . . . . . . . D-1 E. Tenant Estoppel Certificate. . . . . . . . . . . . . . . E-1 F. Rules and Regulations. . . . . . . . . . . . . . . . . . F-1 G. Project Signage Criteria . . . . . . . . . . . . . . . . G-1 H. Standard for Utilities and Services. . . . . . . . . . . H-1 I. Parking Rules and Regulations. . . . . . . . . . . . . . I-1 J. Early Entry Rider. . . . . . . . . . . . . . . . . . . . J-1 STANDARD FORM OFFICE LEASE (BASE YEAR) 1. BASIC LEASE TERMS. a. DATE OF LEASE EXECUTION: June 15, 1995 b. TENANT: Truckee River Bank , a California Corporation Trade Name: N/A Address (Leased Premises): 1651 Response Road, Sac.,CA Suite Number : Suite 100 Floor(s): 1st - c. LANDLORD: Realty Advisors, Inc., a Delaware Corp. Address (FOR RENT AND NOTICES): 501 "S" Street, Sacramento, CA 95814 Copy To: d. TENANT'S PERMITTED USE OF PREMISES: See Ref. #38 e. PREMISES: Those Certain Premises Defined in PARAGRAPH 2 Below. f. PREMISES AREA: Approximately 13,504 Rentable Sq. Feet g. PROJECT AREA: Approximately 47,146 Rentable Sq. Feet h. PREMISES PERCENT OF PROJECT: 28.64 % on a Rentable Sq. Feet Basis i. TERM AND COMMENCEMENT: Term: 120 Lease Months Commencement Date: July 1, 1995. Commencement Date: July 1, 1995 Expiration Date: June 30, 2005 j. MONTHLY BASIC RENT: See 1 (2) 1 (2) Dollars ($ ) k. ANNUAL BASIC RENT: Dollars ($ ) l. RENT ADJUSTMENT (Initial One): (1) Cost of Living. If this provision is initialed, the cost of living provisions of Subparagraph 5(c) apply using the Consumer Price Index, Urban Wage Earners and Clerical Workers ( ), all items, Base 1982 84 (Index). (2) Step Increase. If this provision is initialed, the step adjustment provisions of Subparagraph 5(d) apply as follows: Effective Date of New Base Rent Increase Monthly Rent July 1, 1995 $ 0.00 October 1, 1995 $14,900.00 July 1, 1996 $22,957.00 July 1, 1998 $25,388.00 July 1, 2000 $26,063.00 July 1, 2002 $26,738.00 July 1, 2004 $27,414.00 m. BASE YEAR: The twelve month period commencing January 1, 1996, and ending December 31 , 1996. n. PREPAID RENT (For Last Month of Term): None required Dollars ($ ) o. TOTAL SECURITY DEPOSIT: $None Required including $_____ non- refundable cleaning fee. p. BROKER(S): Bruce Hohenhaus-Colliers Iliff Thorn-Lessee Doug Barnett, CCIM, SIOR-Colliers Iliff Thorn-Lessor q. GUARANTOR(S): None Required r. TENANT IMPROVEMENTS: All work performed by Landlord to prepare the Premises for occupancy pursuant to the terms of the Work Letter Agreement attached hereto as Exhibit C. s. TENANT IMPROVEMENT ALLOWANCE: Landlord grants to Tenant a Tenant Improvement Allowance pursuant to Paragraph 39 of first Addendum. t. PARKING: See Paragraph 40 of first Addendum. u. ADDITIONAL SECTIONS: Additional sections of this Lease, contained in the "Addendum to the Lease" numbered 38 through _ 49 are attached hereto and made a part hereof. v. Riders numbered 1 through are attached hereto and made a part hereof. If none, so state in the following space . w. EXHIBITS: Exhibits lettered A through J are attached and made a part hereof. Exhibits C and G have purposely been omitted. This Paragraph 1 represents a summary of the basic terms of this Lease. In the event of any inconsistency between the terms contained in this Paragraph I and any specific provision of this Lease, the terms of the more specific provision shall prevail. 2. PREMISES. (a) Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, the Premises contained within the suite designated in Subparagraph l(b) and outlined on the Floor Plan attached hereto and marked Exhibit A and incorporated herein by this reference. The Premises are situated in that certain building which is located at the address designated in Subparagraph l(b) (the "Building"), on the parcel or parcels of real property (the"Site") outlined on the Site Plan attached hereto as Exhibit B and incorporated herein by this reference (the Building and the Site together with all other buildings, parking facilities and any and all other improvements situated on the Site are herein collectively referred to as the "Project"). The premises are improved or to be improved with certain tenant improvements (the Tenant Improvements) described in the Work Letter Agreement, a copy of which is attached hereto and marked Exhibit C and incorporated herein by this reference, said Premises being agreed, for purposes of this Lease, to have an area of approximately the number of Usable Square Feet designated in Subparagraph 1 (f) and being situated on the floors) designated in Subparagraph 1 (b). (b) The parties agree that the letting and hiring of the Premises is upon and subject to the terms, covenants and conditions herein set forth and Tenant covenants as a material part of the consideration for this Lease to keep and perform each and all of said terms, covenants and conditions by it to be kept and performed and that this Lease is made upon the condition of such performance. (c) The term "Usable Square Feet" as used in this Lease means the area of the Premises (or other area being measured) as determined by measuring the area within the bounds of the inside surface of the glass or other material in the outer wall of the Building and the surface facing the Premises of all partitions separating the Premises from the Building core, adjoining tenant space and public corridors and other Common Areas of the Project. No deductions shall be made for space occupied by structural or functional columns or other projections. For purposes of establishing the initial Tenant's Percentage, Tenant Annual Base year Expense Allowance and Annual Basic Rent as show in Paragraph 1 of this Lease, the number of Usable Square Feet of the Project is deemed to be as set forth in Subparagraph 1(g). (d) Tenant shall have the nonexclusive right to use in common with the Landlord and all persons, firms and corporations conducting business in the Project and their respective customers, guests, licensees, invitees, subtenants, employees and agents, subject to the terms of this Lease, the Rules and Regulations referred to in Paragraph 34 and all covenants, conditions and restrictions affecting the Project, the following areas ("Common Areas") appurtenant to the Premises: (i) the Project's common entrances, hallways, lobbies, restrooms not located within the premises of any tenant, elevators, stairways and access ways, drives and platforms and any passageways and service ways thereto, and the common pipes, conduits, wires and appurtenant equipment serving the Premises; and (ii) outside parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways and landscaped areas and similar areas and facilities within the Project which are for the common use of the owners, tenants and occupants of buildings within the Project and their respective employees, customers and invitees. (e) Landlord reserves the right from time to time without unreasonable interference with Tenant's use: (i) to install, use, maintain, repair and replace pipes, ducts, conduits, wires and appurtenant meters and equipment for service to other parts of the Building above the ceiling surfaces, below the floor surfaces, within the walls and in the central core areas, and to relocate any pipes, ducts, conduits, wires and appurtenant meters and equipment included in the Premises which are located in the Premises or located elsewhere outside the Premises, and to expand the Building;(ii) to make changes to the design of the Project including changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of buildings driveways, entrances, parking space, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscape areas and walkways; (iii) to close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available; (iv) to designate other land outside the boundaries of the Building or Project to be a part of the Common Areas; (v) to add additional buildings or improvements to the Common Areas; (vi) to use the Common Areas while engaged in making additional improvements, repairs or alterations to the Building or Project, or any portion thereof; and (vii) to do and perform such other acts and make such other changes in, to or with respect to the Common Areas, the Building or the Project as Landlord may, in the exercise of sound business judgement, deem to be appropriate. 3. LEASE TERM. The term of this Lease shall be for the period designated in Subparagraph l(i) commencing on the Commencement Date, and ending on the Expiration Date as set forth in said Subparagraph l (i), unless the term hereby demised shall be sooner terminated as herein provided ("Term"). Notwithstanding the foregoing, if the Commencement Date falls on any other day other than the first day of a calendar month then the Term of this Lease shall be measured from the first day of the month following the month in which the Commencement Date occurs. 4. POSSESSION. (a) Delivery of Possession. Except as provided in paragraph 39 of the first Addendum, Landlord agrees to deliver possession of Premises to Tenant is an "as is" condition in accordance with the terms of this Lease and attached hereto as Exhibit C. Notwithstanding the foregoing, Landlord shall not be obligated to deliver possession of the Premises to Tenant until Landlord has received from Tenant all of the following: (i) The first monthly installment of Annual Basic Rent; (ii) executed copies of policies of insurance or certificates thereof as required under Paragraph 18 of this Lease; and (iii) copies of all governmental permits and authorizations required in connection with Tenant's operation of its business upon the Premises. Should Tenant desire to enter the Premises early for purposes of installing trade fixtures and equipment and to commence construction of any improvements within the Premises which are to be constructed at Tenant's sole cost and expense, Tenant shall provide Landlord with no less than seven (7) days prior notice of such intended early entry and shall execute and deliver to Landlord concurrently with such notice the Early Entry Rider attached hereto as Exhibit J. (b) Late Delivery. Tenant agrees that if Landlord is unable to deliver possession of the Premises to Tenant on or prior to the Estimated Commencement Date specified in Subparagraph l(i), this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom, nor shall the Expiration Date of the Term be in any way extended, unless such late delivery shall be due solely to the gross negligence or willful misconduct of Landlord, in which event, as Tenant's sole remedy, the Commencement Date and the Expiration Date of the Term shall be extended one (1) day for each day Landlord delays in delivering possession of the Premises to Tenant due solely to Landlord's gross negligence or willful misconduct. (c) Condition of Premises. Except as provided in Paragraph 39 of the First Addendum, Tenant agrees to lease said Premises in an "as is" condition. Landlord grants no warranties to Tenant whatsoever as to the condition of said Premises. Tenant shall be responsible and pay for all repairs, improvements or remodeling, including any repair work or replacement required by wear and tear, obsolescence, building code, or other regulations affecting the use and occupancy of the Premises. Furthermore, any required and/or desired repairs, improvements and maintenance within the interior of the Premises shall be at the sole cost of Tenant and subject to the prior approval of Landlord. By taking possession of the Premises, Tenant will be deemed to have accepted the Premises and the Building in their condition on the date of delivery of possession. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises, the Building, the Project or any portions thereof or with respect to the suitability of same for the conduct of Tenant's business. Without limiting the foregoing, if the Building is newly constructed or recently renovated, Tenant's execution of the Notice attached hereto as Exhibit D shall constitute a specific knowledge and acceptance of the various start-up inconveniences that may be associated with the use of the Project and the Common Areas such as certain construction obstacles including scaffolding, uneven air conditioning services and other typical conditions incident to recently constructed or renovated buildings. 5. RENT. (a) Basic Rent. Tenant agrees to pay Landlord as Annual Basic Rent for the Premises, in equal monthly installments as designated in Subparagraph 1.1(2) each in advance on the first day of each and every calendar month during the Term, except that the first month's rent shall be paid upon the execution of this Lease. If the Term of this Lease commences on a day other than the first day of a calendar month or ends on a day other than the last day of a calendar month, then the rent for such periods shall be prorated in the proportion that the number of days this Lease is in effect during such periods bears to thirty (30), and such rent shall be paid at the commencement of such period. In addition to the Annual Basic Rent, Tenant agrees to pay additional rent as provided in Paragraph 6 and the amount of all rental adjustments as and when hereinafter provided in this Lease. The Annual Basic Rent, any additional rent payable pursuant to the provisions of this Lease, and any rental adjustments shall be paid to Landlord, without any prior demand therefore, and without any deduction or offset, whatsoever in lawful money of the United States of America, which shall be legal tender at the time of payment, at the address of Landlord designated in Subparagraph l(c) or to such other person or at such other place as Landlord may from time to time designate in writing. Further, all charges to be paid by Tenant hereunder, including, without limitation, payments for real property taxes, insurance, repairs and parking, if any, shall be considered additional rent for the purposes of this Lease, and the word "rent" in this Lease shall include such additional rent unless the context specifically or clearly implies that only the Annual Basic Rent is referenced. Annual Basic Rent shall be adjusted as provided in Subparagraph l(l). (b) Late Payment. Tenant acknowledges that late payment by Tenant to Landlord of any rent or other sums due under this Lease will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impracticable to ascertain. Such costs include, without limitation, processing and accounting charges and late charges that may be imposed on Landlord by the terms of any encumbrance or note secured by the Premises. Therefore, if any rent or other sum due from Tenant is not received within ten (10) days of the first of each month, Tenant shall pay to Landlord an additional sum equal to 10% of such overdue payment. Landlord and Tenant hereby agree that such late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of any such late payment. Additionally, all such delinquent rent or other sums, plus this late charge, shall bear interest at the then maximum lawful rate permitted to be charged by Landlord. Any payments of any kind returned for insufficient funds will be subject to an additional charge of $25.00 for years 1-5, $60 for years 6-10, and thereafter (c) Cost of living Rent Adjustment. If Subparagraph 1 (1) 1 is initialed, Annual Basic Rent, including all prior adjustments, shall be increased (but never decreased) annually effective each anniversary of the Commencement Date of this Lease or each anniversary of the first day of the month immediately following the month in which the Commencement Date occurs if the Commencement Date occurs other than on the first day of the month ("Adjustment Date"), in accordance with the percentage increase, if any, in the Index described in Subparagraph l(l) 1 as published by the United States Department of Labor, Bureau of Labor Statistics ( "Bureau"). The Index most recently published prior to the Adjustment Date shall be compared with the Index for the same month of the preceding year and the Annual Basic Rent shall be increased in accordance with the percentage increase, if any, between such Indices. Should the Bureau discontinue the publication of the Index, or publish the same less frequently, or alter the same in some other manner, Landlord, in its discretion, shall adopt a substitute index or procedure which reasonably reflects and monitors consumer prices. (d) Step Increase. If Subparagraph l(l) 2 is initialed, Annual Basic Rent shall be increased periodically to the amounts and at the times set forth in Subparagraph l(l) 2. 6. ADDITIONAL RENT. In addition to Annual Basic Rent, Tenant shall pay to Landlord additional rent in accordance with the terms of this Paragraph 6. The purpose of this Paragraph 6 is to ensure that Tenant bears a share of all Expenses related to the use, maintenance, management, ownership, repair or replacement, and insurance of the Project which are in excess of all such Expenses incurred during the Base Year. Accordingly, during each year of the Lease Term, commencing 1997, Tenant shall pay to Landlord on a monthly basis additional rent in accordance with that portion of Tenant's share of Expenses related to the Project which is in excess of Tenant's share of Expenses related to the Project established for the Base Year shown in Subparagraph 1(m) prorated on a monthly basis. (a) Expenses Defined. The term "Expenses" shall mean all direct costs and expenses of the ownership, operation, management, maintenance, repair or replacement, and insurance of the Project, as determined by standard accounting practices, calculated assuming the Project is fully occupied, including, without limitation, the following costs: 1. All supplies, materials, labor, equipment and, utilities used in or related to the operation and maintenance of the Project; 2. Except to the extent such costs are for the sole benefit of another Tenant (i.e. Eviction, special services required by another Tenant), all maintenance, management, janitorial, legal, accounting, insurance and service agreement costs related to the Project, including project management office rental costs and a management administration fee in an amount equal to ten percent (10%) of the Expenses; 3. All reasonable and necessary maintenance, replacement and repair costs relating to the areas within or around the Project including, without limitation, air conditioning systems, sidewalks, landscaping, service areas, driveways, parking areas (including resurfacing and restriping parking areas), walkways, building exteriors (including painting), signs and directories, repairing and replacing roof, walls, etc. These costs may be included either based on actual expenditures or the use of an accounting reserve based on past cost experience for the Project or based on Landlord's projected cost of replacement. 4. Amortization (along with reasonable financing charges) of capital improvements made to the Project which may be required by any government authority or which will improve the operating efficiency of the Project or which are required to keep the Project in good condition and repair provided such costs shall be amortized on a straight line basis together with interest on the unamortized balance of such costs at the prime rate over a period equal to the lesser of (i) the useful life of the capital improvements or (ii) ten years. The annual amortized amount shall be included in the Project operating expenses. 5. Real Property Taxes including all taxes, assessments (general and special) and other impositions or charges which may be taxed, charged, levied, assessed or imposed with respect to any calendar year or part thereof included within the term upon all or any portion of or in relation to the Project or any portion thereof, any leasehold estate in the Premises or measured by rent from the Premises, including any increase caused by the transfer, sale or encumbrance of the Project or any portion thereof. "Real Property Taxes" shall also include any form of assessment, levy, penalty, charge or tax (other than estate, inheritance, net income or franchise taxes) imposed by any authority having a direct or indirect power to tax or charge, including, without limitation, any city, county, state, federal or any improvement or other district, whether such tax is: (1) determined by the area of the Project or the rent or other sums payable under this Lease; (2) upon or with respect to any legal or equitable interest of Landlord in the Project or any part thereof; (3) upon this transaction or any document to which Tenant is a party creating a transfer in any interest in the Project; (4) in lieu of or as a direct substitute in whole or in part of or in addition to any real property taxes on the Project; (5) based on any parking spaces or parking facilities provided in the Project; or (6) in consideration for services, such as police protection, fire protection, street, sidewalk and roadway maintenance, refuse removal or other services that may be provided by any governmental or quasi-governmental agency from time to time which were formerly provided without charge or with less charge to property owners or occupants. (b) Annual Estimate of Expenses. At the commencement of each calendar year, Landlord shall estimate Tenant's share of Expenses for the coming year based on the Premises Percent of the Project set forth in Subparagraph 1(h). Within ninety (90) days following the expiration of the Base Year, Landlord shall endeavor to provide tenant with a written statement setting forth the actual Expenses for the Project for the Base Year and Tenant's share thereof based on the Premises Percent of Project set forth in Subparagraph 1(h). (c) Monthly Payment of Expenses. If Tenant's portion of said estimate of Expenses for the forthcoming calendar year is greater than Tenant's portion of the Expenses established for the Base Year shown in Subparagraph 1(m), Tenant shall pay to Landlord, as additional rent, such estimated excess in monthly installments of one-twelfth (1/12) of such total excess amount beginning on January 1 of the forthcoming calendar year, and one-twelfth (1/12) of such total excess amount on the first day of each succeeding calendar month. As soon as practical following each calendar year, Landlord shall prepare an accounting of actual Expenses incurred during the prior calendar year and such accounting shall reflect Tenant's share of Expenses. If the additional rent paid by Tenant under this Subparagraph 6 (c) during the preceding calendar year was less than the actual amount of Tenant's share of Expenses, Landlord shall so notify Tenant and Tenant shall pay such amount to Landlord within 30 days of receipt of such notice. Such amount shall be deemed to have accrued during the prior calendar year and shall be due and payable from Tenant even though the Term of this Lease has expired or this Lease has been terminated prior to Tenant's receipt of this notice. Tenant shall have ninety (90) days from receipt of such notice to contest the amount due; failure to so notify Landlord shall represent final determination of Tenant's share of Expenses. If Tenant's payments were greater than the actual amount, then such overpayment shall be credited by Landlord to all present rent due under this Lease. 7 PREPAID RENT. Upon execution of this Lease, Tenant shall pay to Landlord the Prepaid Rent set forth in Subparagraph 1 (n), and if Tenant is not in default of any provisions of this Lease, such Prepaid Rent shall be applied toward the rent due for the last month of the Term. Landlord's obligations with respect to the Prepaid Rent are those of a debtor and not of a trustee, and Landlord can commingle the Prepaid Rent. Landlord shall not be required to pay Tenant interest on the Prepaid Rent. Landlord shall be entitled to immediately endorse and cash Tenant's Prepaid Rent; however, such endorsement and cashing shall not constitute Landlord's acceptance of this Lease. In the event Landlord does not accept this lease, Landlord shall return said Prepaid Rent. If Landlord sells the Premises and deposits with the Purchaser the Prepaid Rent, Landlord shall be discharged from any further liability with respect to the Prepaid Rent. 8. SECURITY DEPOSIT Upon execution of this Lease, Tenant shall deposit the Security Deposit set forth in Subparagraph l(o) with Landlord, in part as security for the performance by Tenant of the provisions of this Lease and in part as a cleaning fee. If Tenant is in default, regardless if such default is monetary or non-monetary, Landlord can use the Security Deposit or any portion of it to cure the default or to compensate Land lord for any damages sustained by Landlord resulting from Tenant's default. Upon demand Tenant shall immediately pay to Landlord a sum equal to the portion of the Security Deposit expended or applied by Landlord to maintain the Security Deposit initially deposited with Landlord. If Tenant is not in default at the expiration or termination of this Lease, Landlord shall return the entire Security Deposit to Tenant, except for 10% of first month's rent or $125.00 whichever is greater, which Landlord shall retain as a non-refundable cleaning fee. Landlord's obligations with respect to the Security Deposit are those of a debtor and not of a trustee, and Landlord can commingle the Security Deposit with Landlord's general funds. Landlord shall not be required to pay Tenant interest on the Security Deposit. Landlord shall be entitled to immediately endorse and cash Tenant's Security Deposit; however, such endorsement and cashing shall not constitute Landlord's acceptance of this Lease. In the event Landlord does not accept this Lease, Landlord shall return said Security Deposit. If Landlord sells the Premises and deposits with the Purchaser the then amount of the Security Deposit, Landlord shall be discharged from any further liability with respect to the Security Deposit. 9. USE OF PREMISES AND PROJECT FACILITIES. (a) Tenant's Use of the Premises. Tenant shall use the Premises for the use or uses set forth in Subparagraph l(d) above, and Paragraph 38 of the first Addendum and shall not use or permit the Premises to be used for any other purpose without the prior written consent of Landlord, which consent Landlord may not unreasonably withhold. Except as agreed in Paragraph 42 of the first Addendum, nothing contained herein shall be deemed to give Tenant any exclusive right to such use in the Project. Compliance. At Tenant's sole cost and expense, Tenant shall procure, maintain and hold available for Landlord's inspection, all governmental licenses and permits required for the proper and lawful conduct of Tenant's business from the Premises. Tenant shall maintain the Premises in compliance with all laws, statutes, zoning restrictions, ordinances or governmental laws, rules, regulations or requirements of any duly constituted public authority having jurisdiction over the Premises now or hereafter in force, the requirements of the Board of Fire Underwriters or any other similar body now or hereafter constituted, or of the Certificate of occupancy issued for the Building. Tenant shall not use or occupy the Premises in violation of any of the foregoing. Tenant shall, upon written notice from Landlord, discontinue any use of the Premises which is declared by any authority having jurisdiction over the Premises, governmental or otherwise, to be a violation of law or of said Certificate of Occupancy. Tenant shall comply with all rules, orders, regulations and requirements of any insurance authority having jurisdiction over the Project or any present or future insurer relating to the Premises or the Project. Tenant shall promptly, upon demand, reimburse Landlord for any additional premium charged for any existing insurance policy or endorsement required by reason of Tenant's failure to comply with the provisions of this Paragraph 9. Tenant shall not do or permit anything to be done in or about the premises which will in any manner obstruct or interfere with the rights of other tenants or occupants of the Project, or injure or annoy them, or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises. Tenant shall comply with all restrictive covenants and obligations created by private contracts which affect the use and operation of the Premises, the Common Areas or the Project including, without limitation, the Rules and Regulations referred to in Paragraph 34 and attached hereto as Exhibit F. Tenant shall not commit or suffer to be committed any waste in or upon the Premises and shall keep the Premises in first class repair and appearance. Further, Tenant's business machines and mechanical equipment which cause vibration or noise that may be transmitted to the Building structure or to any other space in the Building shall be so installed, maintained and used by the Tenant as to eliminate or minimize such vibration or noise. Tenant shall be responsible for all structural engineering required to determine structural load, as well as the expense thereof. (c) Hazardous Materials. Tenant shall not cause or permit any Hazardous Materials to be brought upon, stored, used, generated, released into the environment or disposed of it, on, under or about the Premises, the Building, the Common Areas or any other portion of the Project by Tenant, its agents, employees, contractors or invitees, without the prior written consent of Landlord, which consent Landlord may withhold at its sole and absolute discretion. Landlord, in its sole and absolute discretion, may consent to Tenant's generation, storage or use of Hazardous Materials on or in the Premises provided Tenant demonstrates to Landlord, in its sole and absolute judgment, that such Hazardous Materials (in incidental quantities) are necessary to or required as part of Tenant's business and will be generated, used, kept, stored and/or disposed of in a manner that complies with all laws regulating any such Hazardous Materials and with good business practices, and provided that Tenant first obtains the written consent of Landlord, and provided further that Tenant indemnifies Landlord from any and all liability with respect to such Hazardous Materials as more particularly described below. Upon the expiration or sooner termination of this Lease, Tenant covenants to remove from the Premises, the Building and/or the Project, at its sole coast and expense, any and all Hazardous Materials, including any equipment or systems containing Hazardous Materials, which are brought upon, stored, used, generated or released into the environment by Tenant, its agents, employees, contractors or invitees. To the fullest extent permitted by law, Tenant hereby indemnifies Landlord and agrees to hold Landlord, the Premises, the Building and the Project free and harmless from and against any and all claims, judgments, damages, penalties, fines, costs, liabilities and losses (including, without limitation, diminution in the value of the Premises, the Building, the Common Areas or any other portion of the Project, damages for the loss or restriction of use of rentable or usable space or of any amenity of the Premises, the Building, the Common Areas or any other portion of the Project, and sums paid in settlement of claims, attorneys' fees, consultant fees and expert fees) which arise during or after the Lease Term directly or indirectly from the presence of Hazardous Materials on, in or about the Premises, the Building or any other portion of the Project, which is caused or permitted by Tenant, its agents, employees, contractors or invitees. This indemnification by Tenant of Landlord includes, without limitation, any and all costs incurred in connection with any investigation of site conditions or any clean up, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of the presence of such Hazardous Materials in, on or about the Premises, the Building, the Common Areas or the soil or ground water on or under the Project or any portion thereof. Tenant shall promptly notify Landlord of any release of Hazardous Materials in, on or about the Premises or any other portion of the Project which Tenant becomes aware of during the Term of this Lease, whether caused by Tenant or any other persons or entities. As used in this Lease, the term "Hazardous Materials" shall mean and include any hazardous or toxic materials, substances or wastes including (A) those materials identified in Sections 66680 through 66685 and Sections 66693 through 66740 of Title 22 of the California Administrative Code, Division 4, Chapter 30 as amended from time to time, (B) those materials defined in Section 2550 (j) of the California Health and Safety Code, (C) any materials, substances or wastes which are toxic, ignitable, corrosive or reactive and which are regulated by any local governmental authority, any agency of the State of California or any agency of the United States Government, (D) asbestos, (E) petroleum and petroleum based products, (F) urea formaldehyde foam insulation, (G) polychlorinated biphenyls ("PCBs"), and (H) Freon and other chlorofluorocarbons. (d) Survival. The provisions of this Paragraph 9 shall survive any termination of this Lease. 10. SURRENDER OF PREMISES; HOLDING OVER. Upon expiration of the Term of this Lease, Tenant shall surrender to Landlord the Premises and all Tenant Improvements and alterations in good condition, except for ordinary wear and tear and alterations Tenant has the right or is obligated to remove under the provisions of Paragraph 16 herein. Tenant shall remove all personal property installed by Tenant including, without limitation, decorative improvements or fixtures and shall perform all restoration made necessary by the removal of any alterations or Tenant's personal property before the expiration of the Term. Landlord can elect to retain or dispose of in any manner Tenant's personal property not removed from the Premises by Tenant prior to the expiration of the Term. Tenant waives all claims against Landlord for any damage to Tenant resulting from Landlord's retention or disposition of Tenant's personal property. Tenant shall be liable to Landlord for Landlord's costs for storage, removal or disposal of Tenant's personal property. If Tenant, with Landlord's consent, remains in possession of the Premises after expiration or termination of the Term, or after the date in any notice given by Landlord to Tenant terminating this Lease, such possession by Tenant shall be deemed to be a month-to- month tenancy terminable on written 30-day notice at any time, by either party. All provisions of this Lease, except those pertaining to Term and rent, shall apply to the month-to-month tenancy. Tenant shall pay monthly rent in an amount equal to 150% of Monthly Basic Rent, subject to increases as provided in Subparagraph 5(c), if applicable, for the last full calendar month during the regular Term plus 100% of said last month's estimate of Tenant's share of Expenses pursuant to Paragraph 6, subject to increase as provided therein. If Tenant fails to surrender the Premises after expiration or termination of the Term, Tenant shall indemnify, defend and hold harmless from all loss or liability, including, without limitation, any loss or liability resulting from any claim against Landlord made by any succeeding Tenant founded on or resulting from Tenant's failure to surrender and losses to Landlord due to lost opportunities to lease any portion of the Premises to succeeding tenants, together with, in each case, actual attorney's fees and costs. 11. SIGNAGE. Landlord shall designate the location at or adjacent to the Premises and within the Building lobby, if any, for one or more Tenant identification sign(s). Tenant shall install and maintain its identification sign(s) in such designated locations in accordance with this Paragraph 11. The size, design, color and other physical aspects of permitted sign(s) shall be subject to: (i) Landlord's written approval prior to installation, which approval shall not be unreasonably withheld, (ii) any covenants, conditions or restrictions encumbering the Premises, and (iii) any applicable municipal or governmental permits and approvals. The cost of the sign(s), including the installation, maintenance and removal thereof shall be at Tenant's sole cost and expense. If Tenant fails to install or maintain its sign(s), or if Tenant fails to remove same upon termination of this Lease and repair any damage caused by such removal including, without limitation, repainting the Building (if required by Landlord, in Landlord's sole but reasonable judgement), Landlord may do so at Tenant's expense. Tenant shall reimburse Landlord for all costs incurred by Landlord to effect such installation, maintenance or removal, which amount shall be deemed additional rent, and shall include, without limitation, all sums disbursed, incurred or deposited by Landlord including Landlord's costs, expenses and actual attorney's fees with interest thereon at the maximum interest rate permitted by law from the date of Landlord's demand until payment. Any sign rights granted to Tenant under this Lease are personal to Tenant and may not be assigned, transferred or otherwise conveyed to any assignee or subtenant of Tenant without Landlord's prior written consent, which consent Landlord may withhold in its sole and absolute discretion. See Paragraph 41 of the first Addendum. 12. PERSONAL PROPERTY TAXES. Tenant shall pay before delinquency all taxes, assessments, license fees and public charges levied, assessed or imposed upon its business operations as well as upon all trade fixtures, leasehold improvements, merchandise and other personal property in or about the Premises. 13. PARKING. (a) Unless Tenant is in default hereunder, Tenant shall be entitled to the number and type of parking spaces indicated in Paragraph 40 of the first Addendum subject to a monthly parking fee for such spaces with Landlord reserving the right to set and increase monthly rates for such spaces from time to time during the Term of this Lease. Tenant shall not use more parking spaces then said number. If at any time during the Term hereof Tenant does not choose to pay for the full number of parking spaces, at Landlord's option, Tenant shall not thereafter have the right to recommence the use of the spaces not paid for if Landlord has made commitments for those spaces in the interim. Such spaces shall be located in those portions of the Common Areas designated by Landlord for parking. Landlord may assign any unreserved and unassigned parking spaces and/or make all or a portion of such spaces reserved, if it determines in its sole discretion that it is necessary for orderly and efficient parking. In the event Landlord has not assigned specific spaces to Tenant, Tenant shall not use any spaces which have been so specifically assigned by Landlord to other tenants or for such other uses as visitor parking or which have been designated by governmental entities with competent jurisdiction as being restricted to certain uses. Parking within the Common Area shall be limited to striped parking stalls, and no parking shall be permitted in any driveways, accessways and/or in any area which would prohibit or impede the free flow of traffic within the Common Area. (b) The use by Tenant, and its employees and invitees, of the parking facilities of the Project shall be on the terms and conditions set forth herein, as well as in Exhibit I attached hereto and by this nondiscriminatory modifications thereof and additions thereto from time to time put into effect by Landlord. Landlord shall not be responsible to Tenant for the violation or non-performance by any other tenant or occupant of the Project of any of the established parking rules and procedures. Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant's employees, suppliers, shippers, customers or invitees to be loaded, unloaded or parked in areas other than those designated by Landlord for such activities. There shall be no overnight parking of any vehicles of any kind within the Project. If Tenant permits or allows any of the prohibited activities described herein or in Exhibit I, then Landlord shall have the right, without notice, in addition to other such rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Tenant, which cost shall be immediately payable upon demand by Landlord. (c) Landlord reserves the right at any time to substitute for the parking spaces allotted to Tenant pursuant to this Lease, if any, an equivalent number of parking spaces in a parking structure or subterranean parking facility or in a surface parking area within a reasonable distance of the Premises. 14. UTILITIES. Provided Tenant is not in default under this Lease, Landlord agrees to furnish or cause to be furnished to the Premises the utilities and services described in the Standards for Utilities and Services attached hereto as Exhibit H and incorporated herein by this reference, subject to the conditions and in accordance with the standards set forth therein. Landlord's failure to furnish any of such utilities and services when such failure is caused by (i) accident, breakage or repairs; (ii) strikes, lockouts or other labor disturbances or labor disputes of any such character; (iii) governmental regulation, moratorium or other governmental action; (iv) inability despite the exercise of reasonable diligence to obtain electricity, water or fuel; or (v) any other cause beyond Landlord's reasonable control, shall not result in any liability to Landlord. In addition, Tenant shall not be entitled to any abatement or reduction of rent, no eviction of Tenant shall result, and Tenant shall not be relieved from the performance of any covenant or agreement in this Lease because of any such failure. In the event of any stoppage or interruption of services or utilities, Landlord shall diligently attempt to resume such services or utilities promptly. If Tenant requires or utilizes more water or electrical power than is considered reasonable or normal by Landlord, Landlord may, at its option, require Tenant to pay, as additional rent, the cost, as fairly determined by Landlord, incurred by such extraordinary usage. in addition, Landlord may install separate meter(s) for the Premises, at Tenant's sole expense, and Tenant thereafter shall pay all charges of the utility providing services. See paragraph 49 of the first Addendum. 15. MAINTENANCE. By entry hereunder, Tenant accepts the Premises as being in good and sanitary order, condition and repair. Tenant shall, when and if needed or whenever requested by Landlord to do so, at Tenant's sole cost and expense, make all repairs to the interior of the Premises including the ATM, drive thru, and the area of the building immediately surrounding the ATM and drive-thru and every part thereof, including all windows and doors, to keep, maintain and preserve the Premises in first class condition and repair. Tenant shall, upon the expiration or sooner termination of the Term hereof, surrender the Premises to Landlord in the same condition as when received, ordinary wear and tear excepted. Landlord shall have no obligation to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof and the parties hereto affirm that Landlord has made no representations to Tenant respecting the condition of the Premises or the Building except as specifically herein set forth. Anything contained in this Paragraph 15 to the contrary notwithstanding, Landlord shall repair and maintain the structural portions of the Building, including the basic plumbing, heating, ventilating, air conditioning and electrical systems installed or furnished by Landlord; provided, however, the cost of all such maintenance shall be considered "Expenses" for the purposes of Subparagraph 6(a), unless such maintenance and repairs are caused in whole or in part by the act, neglect, fault of or omission of any duty by Tenant, its agents, servants, employees or invitees in which case Tenant shall pay to Landlord, as additional rent, the reasonable cost of such maintenance and repairs. Landlord shall not be liable for any failure to make any such repairs or any maintenance unless such failure shall persist for an unreasonable time after written notice of the need of such repairs or maintenance is given to Landlord by Tenant. Except as provided in Paragraph 19 hereof there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant's business arising from the making of any repairs, alterations or improvements in or to any portion of the Building or the Premises or in or to fixtures, appurtenances and equipment therein. Tenant waives the right to make repairs at Landlord's expense under Sections 1941 and 1942 of the California Civil Code or any similar law, statute or ordinance now or hereafter in effect. 16. ALTERATIONS. Tenant shall not make any alterations to the Premises, or to the Project, including any changes to the existing landscaping, without Landlord's prior written consent. If Landlord gives its consent to such alterations, Landlord may post notices in accordance with the laws of the state in which the Premises are located. Any alterations made shall remain on and be surrendered with the Premises upon expiration of the Term, except that Landlord may, within 30 days before or 30 days after expiration of the Term, elect to require Tenant to remove any alterations which Tenant may have made to the Premises. If Landlord so elects, Tenant shall, at its own cost, restore the Premises to the condition designated by Landlord at its election, before the last day of the Term or within 30 days after notice of its election is given, whichever is later. Should Landlord consent in writing to Tenant's alteration of the Premises, Tenant shall contract with a contractor approved by Landlord for the construction of such alterations, shall secure all appropriate governmental approvals and permits, and shall complete such alterations with due diligence in compliance with plans and specifications approved by Landlord, and in compliance with all applicable laws, statutes and regulations including ADA and Title 24. All such construction shall be performed in a manner which will not interfere with the quiet enjoyment of other tenants of the Project. Tenant shall pay all costs for such construction and shall keep the Premises and the Project free and clear of all mechanics' liens which may result from construction by Tenant. 17. RELEASE AND INDEMNITY. Except to the extent such claim for damages or liability is caused by the gross negligence of the Landlord or its agents or employees, as material consideration to Landlord, Tenant agrees that Landlord and its agents and employees shall not be liable to Tenant, its agents, employees, invitees, licensees and other persons claiming under Tenant for: (i) any damage to any property entrusted to employees of the Project, (ii) loss or damage to any property by theft or otherwise, (iii) consequential damages arising out of any loss of the use of the Premises or any equipment or facilities therein; or (iv) any injury or damage to person or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Project or from pipes, appliances or plumbing work therein or from the roof, street, sub-surface or from any other place or resulting from dampness or any other cause whatsoever. Landlord or its agents shall not be liable for interference with light or other incorporeal hereditaments, nor shall Landlord be liable for any latent defects in the Premises or the Project. Tenant shall give prompt notice to Landlord in case of fire or accidents in the Premises or in the Project, and of defects therein or in the fixtures or equipment located therein. Except to the extent such claim for damage or liability is caused by the gross negligence of Landlord or its agents or employees, to the fullest extent permitted by law, Tenant agrees to indemnify, defend (with counsel satisfactory to Landlord) and hold harmless Landlord, its agents, successors in interest with respect to the Building and their directors, officers, partners, employees, shareholders, agents and representatives and the directors, officers, partners, employees, shareholders, agents and representatives of the partners of Landlord from (i) all claims, actions, liabilities, and proceedings arising from Tenant's use of the Premises or the conduct of its business or from any activity, work or thing done, permitted or suffered by Tenant, its agents, contractors, employees or invitees, in or about the Premises, the Building, or the Project and any breach or default in the performance of any obligation to be performed by Tenant under the terms of this Lease, or arising from any act, neglect, fault or omission of Tenant, or of its agents, contractors, employees or invitees, and (ii) any and all costs, attorneys' fees, expenses and liabilities incurred with respect to any such claims, actions, liabilities, or proceedings, and in the event any actions or proceedings shall be brought against Landlord by reason of any such claims, Tenant, upon notice from Landlord, shall defend the same at Tenant's expense by counsel approved in writing by Landlord. Tenant hereby assumes all risk of damage to property or injury to person in, upon or about the Premises from any cause whatsoever except that which is caused by the failure of Landlord to observe any of the terms and conditions of this Lease. Where such failure has persisted for an unreasonable period of time after Landlord receives written notice of such, and Tenant hereby waives all its claims in respect thereof against Landlord. As used herein, the term "liabilities" shall include all suits, actions, claims and demands and all expenses (including attorneys' fees and costs of defense) incurred in or about any such liability and any action or proceeding brought thereon. If any claim shall be made or any action or proceeding brought against Landlord on the basis of any liability described in this Paragraph, Tenant shall, upon notice from Landlord defend the same at Tenant's expense by counsel reasonably satisfactory to Landlord. It is understood that payment shall not be a condition precedent to recovery upon the foregoing indemnity. 18. INSURANCE. Tenant, at its cost, shall pay for and keep in full force and effect: (a) COMPREHENSIVE GENERAL LIABILITY OR COMMERCIAL GENERAL LIABILITY insurance with respect to the Premises and the operations on or on behalf of Tenant, in, on or about the Premises, including, but not limited to, personal injury, product liability (if applicable), blanket contractual, owner's protective, broad form property damage liability, liquor liability (if applicable) and owned and non-owned automobile liability in an amount not less than $1,000,000 per occurrence. The insurance policy or policies shall contain the following provisions (1) severability of interest, (2) cross liability, (3) an endorsement naming Landlord, Landlord's Mortgagees and any other parties in interest designated by Landlord as additional insureds, (4) an endorsement stating "such insurance as is afforded by this policy for the benefit of the Landlord and any other additional insured shall be primary as respects any liability or claims arising out of the occupancy of the Premises by the Tenant, or Tenant's operations and any insurance carried by Landlord, or any other additional insured shall be non-contributory," (5) with respect to improvements or alterations permitted under this Lease, contingent liability and builder's risk insurance, (6) an endorsement allocating to the Premises the full amount of liability limits required by this Lease, and (7) coverage must be on an "occurrence basis", "Claims-Made" forms are not acceptable. (b) WORKERS COMPENSATION COVERAGE as required by law, together with Employers Liability coverage with a limit of not less than $1,000,000. (c) TENANT'S PROPERTY INSURANCE: Tenant shall at all times during the Term hereof and at its cost and expense, maintain in effect policies of insurance covering (1) all Tenant Improvements on the Premises installed by Tenant, (2) all personal property of Tenant located in or at the Premises including, but not limited to, fixtures, furnishing, equipment and furniture, in an amount not less than their full replacement value, and (3) loss of income or business interruption insurance. These policies shall provide protection against any peril included within the classification "All Risk" including, but not limited to, insurance against sprinkler leakage, vandalism and malicious mischief. The proceeds of such insurance shall be used to repair or replace the tenant improvements and personal property so insured. Tenant shall, at its cost, maintain rental abatement insurance assuring that the rental payable hereunder will be paid to Landlord for a period of not less than twelve (12) months if rent is to abate under any provision of this Lease or applicable law. Such coverage shall include a sixty-day extended period of indemnity endorsement. All policies of insurance required hereunder shall include a clause or endorsement denying the insurer of any rights of subrogation against the other party to the extent rights have been waived by the insured before the occurrence of injury or loss, if same are obtainable without unreasonable cost. Landlord and Tenant each hereby waive any rights of recovery against the other for injury or loss to such waiving party or to its property or the property of others under its control, arising from any cause insured against under any policy of insurance required to be carried by such waiving party under this Lease. The foregoing waiver shall be effective whether or not the waiving party shall actually obtain and maintain the insurance which such waiving party is obligated to obtain and maintain under this Lease. All insurance required to be provided by Tenant under this Lease: (a) shall be issued by insurance companies authorized to do business in the state in which the Premises are located and holding a General Policyholders rating of "A" and a Financial Rating of "X" or better, as set forth in the most recent edition of Best's Insurance Reports; (b) shall contain an endorsement requiring at least 30 days prior written notice to Landlord and Landlord's lender, before cancellation or change in coverage, scope or amount of any policy. Tenant shall deliver a certificate or copy of such policy together with evidence of payment of all current premiums to Landlord within 30 days of execution of this Lease and within fifteen (15) days of expiration of each policy. Tenant's failure to provide evidence of such coverage to Landlord may, in Landlord's sole discretion, constitute a default under this Lease. Landlord shall insure the Building (excluding all property which tenants of the Building are obligated to insure) against damage with "All Risk" insurance and public liability insurance, all in such amounts and with such deductibles as Landlord considers appropriate. The cost of any insurance required to be maintained by Landlord hereunder shall be included as part of "Expenses" under Subparagraph 6(a). Notwithstanding any contribution by Tenant to the cost of insurance premiums as provided herein, Tenant acknowledges that it has no right to receive any proceeds from any insurance policies carried by Landlord. 19. DESTRUCTION. If during the Term of this Lease, any portion of the Premises, access to the Premises or any part of the Building which is essential to the use of the Premises is damaged or destroyed and such damage or destruction can, in Landlord's reasonable estimation, be repaired within 180 days following such damage or destruction, this Lease shall remain in full force and effect and Landlord shall promptly commence to repair and restore the damage or destruction to substantially the same condition as existed prior to such damage and shall complete such repair and restoration with due diligence in compliance with all then existing laws. If (1) such damage or destruction cannot, in Landlord's reasonable estimation, be repaired within 180 days following such damage or destruction; or (2) more than forty percent (40%) of the Building is damaged or destroyed (regardless of its impact on the Premises); or (3) any mortgagee of the Building will not allow the application of insurance proceeds for repair and restoration; or (4) the damage or destruction is not covered in full by Landlord's insurance required by Paragraph 18, or (5) the damage or destruction occurs within the last twelve (12) months of the Term of this Lease or any extension hereof, then Landlord may, in its sole discretion, terminate this Lease by delivery of notice to Tenant within 30 days of the date Landlord learns of the damage. In the event of repair, reconstruction and restoration by Landlord as herein provided, the rent payable under this Lease shall be abated proportionately with the degree to which Tenant's use of the Premises is impaired during the period of such repair, reconstruction or restoration; provided that there shall be no abatement of rent if such damage is the result of Tenant's negligence or intentional wrongdoing. Tenant shall not be entitled to any compensation or damages for loss in the use of the whole or any part of the Premises, damage to Tenant's Personal Property and/or any inconvenience or annoyance occasioned by such damage, repair, reconstruction or restoration. If Landlord is obligated to or elects to repair or restore as herein provided, Landlord shall be obligated to make repair or restoration only to those portions of the Building and the Premises which were originally provided at Landlord's expense, and the repair and restoration of items not provided at Landlord's expense shall be the obligation of the Tenant. Tenant agrees to coordinate the restoration and repair of those items it is required to restore or repair with Landlord's repair and restoration work in coordination with a work schedule prepared by Landlord, or Landlord's contractor. Further, Tenant's work shall be performed in accordance with the terms, standards and conditions contained in Paragraph 16 above. The provisions of California Civil Code Section 1932, Subsection 2, and Section 1933, Subsection 4, and any other similarly enacted statute or court decision relating to the abatement or termination of a lease upon destruction of the leased premises, are hereby waived by Tenant; and the provisions of this Paragraph 19 shall govern in case of such destruction. 20. CONDEMNATION. (a) Definitions. The following definitions shall apply: (1) "Condemnation" means (a) the exercise of any governmental power of eminent domain, whether by legal proceedings or otherwise by condemnor and (b) the voluntary sale or transfer by Landlord to any condemnor either under threat of condemnation or while legal proceedings for condemnation are proceeding; (2) "Date of Taking" means the date the condemnor has the right to possession of the property being condemned; (3) "Award" means all compensation, sums or anything of value awarded, paid or received on a total or partial condemnation; and (4) "Condemnor" means any public or quasi-public authority, or private corporation or individual, having a power of condemnation. (b) Obligations to be Governed by Lease. If during the Term of this Lease there is any taking of all or any part of the Premises or the Project, the rights and obligations of the parties shall be determined pursuant to this Lease. (c) Total or Partial Taking. If the Premises are totally taken by condemnation, this Lease shall terminate on the date of taking. If any portion of the Premises is taken by condemnation, this Lease shall remain in effect, except that Tenant can elect to terminate this Lease if the remaining portion of the Premises is rendered unsuitable for Tenant's continued use of the Premises. If Tenant elects to terminate this Lease, Tenant must exercise its right to terminate by giving notice to Landlord within 30 days after the nature and extent of the taking have been finally determined. If Tenant elects to terminate this Lease, Tenant shall also notify Landlord of the date of termination, which date shall not be earlier than 30 days nor later than 90 days after Tenant has notified Landlord of its election to terminate; except that this Lease shall terminate on the date of taking if the date of taking falls on a date before the date of termination as designated by Tenant. If any portion of the Premises is taken by condemnation and this Lease remains in full force and effect, on the date of taking the rent shall be reduced by an amount in the same ratio as the total number of rentable square feet in the portion of the Premises taken bears to the total number of rentable square feet in the Premises immediately before the date of taking. In the case where a portion of the Premises is taken and the Lease remains in full force and effect, Landlord shall, at its own cost and expense, make all alterations or repairs to the Premises so as to make the portion of the Premises not taken a complete architectural unit. Such work shall not, however, exceed the scope of work done by Landlord in originally constructing the Premises. If any portion of the Building other than the Premises is taken and in Landlord's reasonable opinion the Building should be restored in a manner that materially alters the Premises, or if severance damages from the condemning authority are not available to Landlord in sufficient amounts to permit such restoration, Landlord may terminate this Lease upon written notice to Tenant. Monthly Basic Rent due and payable hereunder shall be temporarily abated during such restoration period in proportion to the degree to which there is substantial interference with Tenant's use of Premises, as reasonably determined by Landlord and Landlord's architect. Each party hereby waives the provisions of Section 1265.130 of the California Code of Civil Procedure and any present or future law allowing either party to petition the Superior Court to terminate this Lease in the event of a partial taking of the Building or Premises. If the Premises are totally or partially taken by condemnation, Tenant shall not assert any claim against Landlord or the taking authority for any compensation because of such taking, and Landlord shall be entitled to receive the entire amount of the award without any deduction for any estate or interest of Tenant. 21. ASSIGNMENT OR SUBLEASE. Tenant shall not assign or encumber its interest in this Lease or the Premises or sublease all or any part of the Premises or allow any other person or entity (except Tenant's authorized representatives, employees, invitees or guests) to occupy or use all or any part of the Premises without first obtaining Landlord's written consent which Landlord shall not unreasonably withhold. Landlord shall be deemed reasonable in withholding its consent if it determines in its sole discretion that: (i) the financial net worth of the proposed assignee or sublessee is not equal to or greater than Tenant's financial net worth as of the date of this Lease as increased by the increase in the Consumer Price Index, if any, between the date of this Lease and the date of the assignment or sublease; (ii) the intended use of the Premises by the proposed assignee or sublessee is inconsistent, incompatible or competes with other uses in the Project; @iii) the intended use of the Premises by the proposed assignee or sublessee will require more than insignificant alteration of the Premises; (iv) the intended use of the Premises by the proposed assignee or sublessee will constitute a violation of this Lease or any governmental law, rule, ordinance or regulation governing the Premises or would involve the storage, use or keeping of Hazardous Materials in, on or about the Premises, the Common Areas or any other portion of the Project; or if (v) the proposed rent for the proposed assignee or sublessee is less than the Rent than in effect under the Lease; or (vi) the proposed assignee or sublessee is a tenant in the Project or has negotiated to be a tenant in the Project any time in the three (3) month just preceding Tenant's request for Landlord's consent. Any assignment, encumbrance or sublease without Landlord's written consent shall be voidable and at Landlord's election, shall constitute a default. Landlord's waiver or consent to any assignment or subletting shall not relieve Tenant or any assignee or sublessee from any obligation under this Lease whether or not accrued. If Tenant is a partnership, a withdrawal or change, voluntary, involuntary or by operation of law of any partner, or the dissolution of the partnership, shall be deemed a voluntary assignment. If Tenant is a corporation, any dissolution, merger, consolidation or other reorganization of Tenant, or sale or other transfer of a controlling percentage of the capital stock of Tenant, or the sale of at lease 25% of the value of the assets of Tenant shall be deemed a voluntary assignment. The phrase "controlling percentage" means ownership of and right to vote stock possessing at least 25% of the total combined voting power of all classes of Tenant's capital stock issued, outstanding and entitled to vote for election of directors. The preceding two sentences of this paragraph shall not apply to corporations the stock of which is traded through a public exchange. If Landlord shall consent to any assignment or sublease of this Lease, three-quarters (3/4) of all sums and other consideration payable to or for the benefit of the Tenant from its assignees or subtenants in excess of the rent payable by Tenant to Landlord under this Lease shall be paid to Landlord, as and when such sums are due and payable. if Tenant requests Landlord to consent to a proposed assignment or subletting Tenant shall pay to Landlord, whether or not consent is ultimately given, $100 or Landlord's reasonable attorneys' fees incurred in connection with such request, whichever is greater. No interest of Tenant in this Lease shall be assignable by involuntary assignment through operation of law (including, without limitation, the transfer of this Lease by testacy or intestacy). Each of the following acts shall be considered an involuntary assignment: (a) If Tenant is or becomes bankrupt or insolvent, makes an assignment for the benefit of creditors, or institutes proceedings under the Bankruptcy Act in which Tenant is the bankrupt; or if Tenant is a partnership or consists of more than one person or entity, if any partner of the partnership or other person or entity is or becomes bankrupt or insolvent, or makes an assignment for the benefit of creditors; or (b) if a writ of attachment or execution is levied on this Lease; or (c) if any proceeding or action to which the Tenant is a party, a receiver is appointed with authority to take possession of the Premises. An involuntary assignment shall constitute a default by Tenant and Landlord shall have the right to elect to terminate this Lease, in which case this Lease shall not be treated as an asset of Tenant. 22. DEFAULT. The occurrence of any of the following shall constitute a default by Tenant: (a) A failure to pay rent or any other charge when due; (b) Abandonment of the Premises (failure to occupy and operate the Premises for ten consecutive days shall be deemed an abandonment); (c) The making by Tenant or any guarantor of this Lease ("Guarantor") of any general assignment for the benefit of creditors; the filing by or against Tenant or any Guarantor of a petition to have Tenant or such Guarantor adjudged a bankrupt or petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant or a Guarantor, the same is dismissed within thirty (30) days); the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, or of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, or of substantially all of Guarantor's assets, where possession is not restored to Tenant or such Guarantor, as the case may be, within thirty (30) days; the attachment, execution or other judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease where such seizure is not discharged within (30) days; or if this Lease shall, by operation of law or otherwise, pass to any person or persons other than Tenant except as provided in Paragraph 21 herein; (d) The failure of Tenant to timely comply with the provisions of Paragraph 26 or Paragraph 33 of this Lease regarding, respectively, Subordination and Estoppel Certificates; or (e) The failure of Tenant to perform any other provision of this Lease. 23. LANDLORD'S REMEDIES. Landlord shall have the remedies described in this Paragraph 23 if Tenant is in default. These remedies are not exclusive; they are cumulative and in addition to any remedies now or later allowed by law. The remedies available to Landlord in the event Tenant is in default are: Landlord may terminate Tenant's right to possession of the Premises at any time. No act by Landlord other than giving notice to Tenant shall terminate this Lease. Acts of maintenance, efforts to relet the Premises, or the appointment of a receiver on Landlord's initiative to protect Landlord's interest under this Lease shall not constitute a termination of Tenant's right to possession. Upon termination of Tenant's right to possession, Landlord has the right to recover from Tenant: (1) The worth at the time of award of any unpaid rent which had been earned at the time of termination of Tenant's right to possession; (2) The worth at the time of award of the amount by which the unpaid rent which would have been earned after the date of termination of Tenant's right of possession until the time of award exceeds the amount of such rental loss that Tenant proves could have reasonably been avoided; (3) The worth at the time of award of the amount by which the unpaid rent for the balance of the Term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; (4) Any other amount, including court, attorney and collection costs, necessary to compensate Landlord for all detriment proximately caused by Tenant's default. "The worth", as used for items (1) and (2) in this Paragraph 23 is to be computed by allowing interest at the lesser of 12% or the maximum rate an individual is permitted to charge by law. "The worth" as used for item (3) in this Paragraph 23 is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of termination plus one percent (1%). In the event of any default by Tenant, Landlord shall also have the right, with or without terminating this Lease, to re-enter the Premises and remove all persons and property from the Premises; such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant or disposed of in a reasonable manner by Landlord. No re-entry or taking possession of the Premises by Landlord pursuant to this Paragraph 23 shall be construed as an election to terminate this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction. 24. DEFAULT BY LANDLORD. Landlord shall not be in default hereunder unless Landlord fails to perform the obligations required of Landlord within a reasonable time, but in no event later than forty-five (45) days after written notice by Tenant to Landlord and to the holder of any first mortgage or deed of trust covering the Premises, in writing specifying wherein Landlord has failed o perform such obligation; provided, however, that if the nature of Landlord's obligation is such that more than forty-five (45) days is required for performance, then Landlord shall not be in default if Landlord commences performance within such forty-five (45) day period and thereafter diligently prosecutes the same to completion. In no event shall Tenant have the right to terminate this Lease as a result of Landlord's default; Tenant's remedies shall be limited to any other remedy available at law or in equity. Nothing herein contained shall be interpreted to mean that Tenant is excused from paying rent due hereunder as a result of any default by Landlord during the above notice period. 25. ENTRY OF PREMISES AND PERFORMANCE BY TENANT. Landlord and its authorized representatives shall have the right to enter the Premises only during regular business hours for any of the following purposes: (a) To determine whether the Premises are in good condition and whether Tenant is complying with its obligations under this Lease; (b) To do any necessary maintenance and to make any restoration to the Premises or the Project that Landlord has the right or obligation to perform; (c) To show the Premises to prospective brokers, agents, buyers, tenants or persons interested in an exchange, at any time during the Term; (d) To repair, maintain or improve the Project and to erect scaffolding and protective barricades around and about the Premises but not so as to prevent entry to the Premises and to do any other act or thing necessary for the safety or preservation of the Premises or the Project; or (e) To discharge Tenant's obligations hereunder when Tenant has failed to do so in accordance with the terms of this Lease. Landlord shall not be liable in any manner for any inconvenience, disturbance, loss of business, nuisance or other damage arising out of Landlord's entry onto the Premises as provided in this Paragraph 25. Tenant shall not be entitled to an abatement or reduction of rent if Landlord exercises any rights reserved in this Paragraph 25. Landlord shall reasonably attempt to conduct his activities on the Premises as provided herein in a manner that will cause the least inconvenience, annoyance or disturbance to Tenant. Tenant shall not alter any lock or install a new or additional lock or bolt any door of the Premises without the prior consent of Landlord. Landlord shall not retain a key to the premises and shall obtain Tenant's prior consent for entry other than regular business hours except emergencies requiring access by Landlord or emergency personnel. All covenants and agreements to be performed by Tenant under any of the terms of this Lease shall be performed by Tenant at Tenant's sole cost and expense without any abatement of rent. if Tenant shall fail to pay any sum of money, other than Monthly Basic Rent, required to be paid by it hereunder or shall fail to perform any other act on its part to be performed hereunder, and such failure shall continue for ten (10) days after notice thereof by Landlord (or such other period as specifically provided herein), Landlord may, without waiving or releasing Tenant from any obligations of Tenant, but shall not be obligated to, make any such payment or perform any such other act on Tenant's part to be made or performed in this Lease; provided, however, all sums so paid by Landlord and all necessary incidental costs together with interest thereon at the lesser of 12% or the maximum rate an individual is permitted to charge by law, from the date of such payment by Landlord, shall be payable to Landlord on demand. Tenant covenants to pay any such sums, and Landlord shall have (in addition to all other rights or remedies of Landlord) the same rights and remedies in the event of the nonpayment thereof by Tenant as in the case of default by Tenant in the payment of rent. 26. SUBORDINATION. Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, and unless otherwise elected by Landlord or any mortgagee or any beneficiary of a Deed of Trust with a lien on the Project this Lease shall be subject and subordinate at all times to (a) all ground leases or underlying leases which may now exist or hereafter be executed affecting the Project, or the land upon which the Project is situated, or both, and (b) the lien of any mortgage or deed of trust which may now exist or hereafter be executed in any amount for which the Project, ground leases or underlying leases, or Landlord's interest or estate in any of said items is specified as security. Notwithstanding the foregoing, Tenant acknowledges that Landlord shall have the right to subordinate or cause to be subordinated this Lease to any such ground leases or underlying leases or any such liens to this Lease. In the event that any ground lease or underlying lease terminates for any reason or any mortgage or Deed of Trust is foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant shall, notwithstanding any subordination, attorn to and become the tenant of the successor in interest to Landlord, at the option of such successor in interest. Tenant covenants and agrees to execute and deliver, upon demand by Landlord and in the form requested by Landlord any additional documents evidencing the priority or subordination of this Lease with respect to any such ground lease or underlying leases or the lien of any such mortgage or Deed of Trust. 27. NOTICE. Any notice, demand, request, consent, approval or communication desired by either party or required to be given, shall be in writing and served either personally or sent by prepaid certificate first class mail, return receipt requested, addressed as set forth in Subparagraph l(b) and l(c). Either party may change its address by notification of the other party. Notice shall be deemed to be communicated 48 hours from the time of mailing, or at the time of service as provided in this Paragraph 27. 28. WAIVER. No delay or omission in the exercise of any right or remedy by Landlord shall impair such right or remedy or be construed as a waiver. No act or conduct of Landlord, including, without limitation, acceptance of the keys to the Premises, shall constitute acceptance of the surrender of the Premises by Tenant before the expiration of the Term. Only written notice from Landlord to Tenant shall constitute acceptance of the surrender of the Premises and accomplish termination of this Lease. Landlord's consent to or approval of any act by Tenant requiring Landlord's consent or approval shall not be deemed to waive or render unnecessary Landlord's consent to or approval of any subsequent act by Tenant. Any waiver by Landlord of any default must be in writing and shall not be a waiver of any other default concerning the same or any other provision of this Lease. 29. LIMITATION OF LIABILITY. In consideration of the benefits accruing hereunder, Tenant and all successors and assigns of Tenant covenant and agree that, in the event of any actual or alleged failure, breach or default hereunder by Landlord: (as may be applicable) (a) The sole and exclusive remedy against Landlord shall be against Landlord's interest in the Building; (b) No partner of Landlord shall be sued or named as a party in any suit or action (except as may be necessary to secure jurisdiction of the partnership); (c) No service of process shall be made against any partner of Landlord (except as may be necessary to secure jurisdiction of the partnership); (d) No partner of Landlord shall be required to answer or otherwise plead to any service of process; (e) No judgment shall be taken against any partner of Landlord; (f) Any judgment taken against any partner of Landlord may be vacated and set aside at any time after the fact; (g) No writ of execution will ever be levied against the assets of any partner of Landlord; (h) The obligations under this Lease do not constitute personal obligations of the individual partners, directors, officers or shareholders of Landlord, or the partners, directors, officers or shareholders of the partners of Landlord, and Tenant shall not seek recourse against any such partners or entities of Landlord or any of their personal assets for satisfaction of any liability in respect to this Lease; and (i) These covenants and agreements are enforceable both by Landlord and also by any partner of Landlord. Tenant agrees that each of the foregoing provisions shall be applicable to any covenant or agreement either expressly contained in this Lease or imposed by statue or at common law. 30. FORCE MAJEURE. Landlord shall have no liability whatsoever to Tenant on account of (a) the inability or delay of Landlord in fulfilling any of Landlord's obligations under this Lease by reason of strike, other labor trouble, governmental controls in connection with a national or other public emergency, or shortages of fuel, supplies or labor resulting therefrom or from any other cause, whether similar or dissimilar to the above, beyond Landlord's reasonable control; or (b) any failure or defect in the supply, quantity or character of electricity or water furnished to the Premises, by reason of any requirement, act or omission of the public utility or others furnishing the Project with electricity or water, or for any reason, whether similar or dissimilar to the above, beyond Landlord's reasonable control. If this Lease specifies a time period for the performance of an obligation of Landlord, that time period shall be extended by the period of any delay in Landlord's performance caused by any of the events of force majeure described above. 31. PROFESSIONAL FEES. (a) If Landlord should engage any professional including, without limitation, attorneys, appraisers, accountants or environmental or other consultants for the purpose of bringing suit for possession of the Premises, for the recovery of any sum due under this Lease, or because of the breach of any provisions of this Lease, or for any other relief against Tenant hereunder, or in the event of any other litigation between the parties with respect to this Lease, then all costs and expenses including, without limitation, actual professional fees such as appraisers, accountants', attorneys and other consultants' fees, incurred by the prevailing party therein shall be paid by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgement. If Landlord employs a collection agency to recover delinquent charges, Tenant agrees to pay all collection agency fees charged to Landlord in addition to rent, late charges, interest and other sums payable under this Lease. (b) Except as set forth in Paragraph 17, if Landlord is named as a defendant in any suit brought against Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant shall pay to Landlord its costs and expenses incurred in such suit including, without limitation, its actual professional fees such as appraisers, accountants' and attorneys' fees. 32. EXAMINATION OF LEASE. Submission of this instrument for examination or signature by Tenant shall not create a binding agreement between Landlord and Tenant nor shall it constitute a reservation or option to lease on the part of Tenant and this instrument shall not be effective as a lease and shall not create any obligations on the part of Landlord or Tenant until this Lease has been validly executed by, and delivered to, both Landlord and Tenant. 33. ESTOPPEL CERTIFICATE. (a) Within ten (10) days following any written request which Landlord may make from time to time, Tenant shall execute and deliver to Landlord a statement ("Estoppel Certificate"), in a form substantially similar to the form of Exhibit E attached hereto or in such other form as Landlord's lender or purchaser may require, certifying: (i) the date of commencement of this Lease; (ii) the fact that this Lease is unmodified and in full force and effect (or, if there have been modifications, stating the nature and date of such modifications), (iii) the date to which the rent and other sums payable under this Lease have been paid; (iv) that there are no current defaults under this Lease by either Landlord or Tenant except as specified in Tenant's statement; and (v) such other matters requested by Landlord. Landlord and Tenant intend that any statement delivered pursuant to this Paragraph 33 may be relied upon by any mortgagee, beneficiary, purchaser or prospective purchaser of the Project or any interest therein. (b) Tenant's failure to deliver such statement within such time shall be conclusive upon Tenant (i) that this Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) that there are no uncured defaults on Landlord's performance, and (iii) that not more than one (1) month's rent has been paid in advance. Tenant's failure to deliver said statement to Landlord within ten (10) days of receipt shall constitute a default under this Lease and Landlord may, at Landlord's option, terminate this lease. 34. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with the "Rules and Regulations", a copy of which is attached hereto and marked Exhibit F, and all reasonable and nondiscriminatory modifications thereof and additions thereto from time to time put into effect by Landlord. Landlord shall not be responsible to Tenant for the violation or non-performance by any other tenant or occupant of the Project of any of said Rules and Regulations. 35. PROJECT PLANNING. In the event Landlord requires the Premises for use in conjunction with another suite or for other reasons connected with Project planning, upon notifying Tenant in writing, Landlord shall have the right to move Tenant to another space in the Project of which the Premises forms a part, at Landlord's sole cost and expense, and the terms of the original Lease shall remain in full force and effect, save and excepting that a revised Exhibit A shall become part of this Lease and shall reflect the location of the new space and Paragraph 1 of this Lease shall be amended to include and state all correct data as to the new space. However, if the new space does not meet with Tenant's approval, Tenant shall have the right to cancel this lease upon giving Landlord thirty (30) days' prior written notice within ten (10) days of receipt of Landlord's notification. If Tenant cancels this Lease pursuant to this Paragraph 35, Tenant shall vacate the Building and the Premises within thirty (30) days of its delivery to Landlord of the notice of cancellation. 36. LIENS. Tenant shall, within ten (10) days after receiving notice of the filing of any mechanic's lien for material or work claimed to have been furnished to the Premises on Tenant's behalf or at Tenant's request, discharge the lien or post a bond equal to the amount of the disputed claim with a bonding company reasonably satisfactory to Landlord. if Tenant posts a bond, it shall contest the validity of the lien with all due diligence. Tenant shall indemnify, defend and hold Landlord harmless from any and all losses and costs incurred by Landlord as a result of any such liens attributable to Tenant. If Tenant does not discharge any lien or post a bond for such lien within such ten (10) day period, Landlord may discharge such lien at Tenant's expense and Tenant shall promptly reimburse Landlord for all costs incurred by Landlord in discharging such lien including, without limitation, attorney's fees and costs and interest on all sums expended at the maximum interest rate permitted by law. Tenant shall provide Landlord with not less than ten (10) days written notice of its intention to have work performed at or materials furnished to the Premises so that Landlord may post appropriate notices of non-responsibility. 37. MISCELLANEOUS PROVISIONS (a) Time of Essence. Time is of the essence of each provision of this Lease. (b) Successors. This Lease shall be binding on and inure to the benefit of the parties and their successors, except as provided in Paragraph 21 herein. (c) Landlord's Consent. Any consent required by Landlord under this Lease must be granted in writing and may be withheld by Landlord in its sole and absolute discretion, unless otherwise expressly provided herein. (d) Commissions. Each party represents that it has not had dealings with any real estate broker, finder or other person with respect to this Lease in any manner, except for the broker identified in Subparagraph l(p). If Tenant has dealt with any other person or real estate broker with respect to leasing or renting space in the Project, Tenant shall be solely responsible for the payment of any fees due said person or firm and Tenant shall hold Landlord free and harmless and indemnify and defend Landlord from any liabilities, damages or claims with respect thereto, including attorney's fees and costs. Landlord shall be responsible for the payment of commissions to the broker identified in l(p). (e) Landlord's Successors. In the event of a sale or conveyance by Landlord of the Building on the Project, the same shall operate to release Landlord from any liability under this Lease, and in such event Landlord's successor in interest shall be solely responsible for all obligations of Landlord under this Lease. (f) Prior Agreement or Amendments. This Lease contains all of the agreements of the parties hereto with respect to any matter covered or mentioned in this Lease, and no prior agreement or understanding pertaining to any such matter shall be effective for any purpose. No provisions of this Lease may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors-in-interest. (g) Recording. Tenant shall not record this Lease nor a short form memorandum thereof without the consent of Landlord. Landlord may record a short form memorandum of this Lease and Tenant shall execute and acknowledge such form if requested to do so by Landlord. (h) Separability. Any provision of this Lease which shall prove to be invalid, void or illegal shall in no way affect, impair or invalidate any other provision hereof, and all other provisions of this Lease shall remain in full force and effect. (i) No Partnership or Joint Venture. Nothing in this Lease shall be deemed to constitute Landlord and Tenant as partners or joint venturers. It is the express intent of the parties hereto that their relationship with regard to this Lease and the Premises be and remain that of lessor and lessee. (j) Interpretation. This Lease shall be construed and interpreted in accordance with the laws of the state in which the Premises are located. This Lease constitutes the entire agreement between the s with respect to the Premises and the Project, except for such guarantees or modifications as may be executed in writing by parties from time to time. When required by the context of this Lease, the singular shall include the plural and the masculine shall include the feminine and/or neuter. "Party" shall mean Landlord or Tenant. If more than one person or entity constitutes Landlord or Tenant, the obligations imposed upon that party shall be joint and several as to all persons or entities comprising such party. The enforceability invalidity or illegality of any provision shall not render the other provisions unenforceable, invalid or illegal. (k) No Light, Air or View Easement. Any diminution or blocking of light, air or view by any structure which may be erected on lands adjacent to the Building shall in no way affect this Lease or impose any liability on Landlord. (1) Governing Law. This Lease shall be governed by and construed pursuant to the laws of the State of California. (m) Mortgagee Protection. In the event of any default on the part of Landlord, Tenant will give notice by registered or certified mail to any beneficiary of a deed of trust, mortgagee, or ground lessor covering the Premises, and shall offer such beneficiary, mortgagee, or ground lessor, a reasonable opportunity to cure the default, including time to obtain possession of Premises by power of sale or a judicial foreclosure, or in the event of a ground lessor, by appropriate judicial action, if such should prove necessary to effect a cure. This Office Lease is subject to a First Addendum. IN WITNESS WHEREOF, the parties have executed this Lease as of the date first above written. TENANT: LANDLORD: TRUCKEE RIVER BANK, a REALTY ADVISORS, INC. California Corporation By:/s/ Martin Sorensen By: /s/ Title: President/CEO Title: Date: 6/28/95 Date: 6/29/95 ADDENDUM TO LEASE Addendum to that Lease dated June 15, 1995, by and between Realty Advisors, Inc., a Delaware Corporation, as "Landlord" and Truckee River Bank, a California Corporation, as "Tenant" for the premises located at 1651 Response Road, Sacramento, California. In the case of any inconsistencies between this Addendum and the basic lease, this Addendum shall prevail. 38. USE Landlord acknowledges and agrees to the acceptability of Tenant's use of the premises as a retail banking facility and third party investment services with typical banking floor operations as well as general and administrative office uses, loan services, bankcard services, and mortgage loans. 39. TENANT IMPROVEMENT ALLOWANCE - ADA Compliance, No Liens Landlord will provide Tenant a credit for tenant improvements of $120,000. Tenant may draw upon this credit by submitting to Landlord invoices and conditional lien releases from valid licensed contractors which have been approved by Tenant in writing for the tenant improvement work which has been completed. Within thirty (30) days of receipt, Landlord shall remit to Tenant the amount requested on the invoices. Any unused portion of the allowance shall be maintained by Landlord as a credit until the entire amount of the credit has been utilized. This allowance is given in lieu of any work to be performed by Landlord as the Tenant is taking the Premises in its "as is" condition. Tenant may select its own licensed contractor, subject to the Landlord's reasonable approval, to complete these improvements. All work shall be done in a workman like manner in accordance to building code, including Title 24 and ADA, and any permits or fees shall be the responsibility of Tenant. Tenant shall accept the Premises in an "as is" condition except that Landlord shall warrant that the HVAC, common area electrical and plumbing shall be in working order. 40. PARKING As indicated in Exhibit B, Landlord shall provide six parking spaces for the exclusive use of Truckee River Bank for visitor parking. Tenant has the sole responsibility to regulate use of its visitor parking spaces, but no vehicles shall be towed from such spaces without prior notice to Landlord. Additionally, Tenant shall have 12 secured underground parking stalls. The rent for the secured underground parking stalls shall be $45.00 per stall per month in the first year of this Lease. Tenant is entitled to a total of 54 total parking spaces comprised of 12 secured, 6 visitor and 36 unreserved. There will be an additional $10.00, one time charge for the security entry cards for each secured stall. Replacement cards shall cost $10.00 each. 41. SIGNAGE Subject to all necessary government approvals, Tenant shall have the right to install and maintain one sign on the building's upper most exterior surface, with the location of the sign to be selected by Tenant prior to July 31, 1995. The sign shall consist of the Tenant's name with the size, placement, color and style of lettering to be approved in advance by both parties. The size of the sign shall not be larger than 1/2 of the total amount of square footage allocated for the building Signage. Tenant shall also be entitled to utilize the existing monument sign with the location, lettering and size of this sign shall also be approved by both parties. After the second building sign is approved by the City of Sacramento, Landlord grants its approval to Tenant to submit an application for a variance to install a sign on the facia directly over the covered drive-thru area. If however, the City of Sacramento grants approval of this sign subject to the elimination of any other building identification, the Landlord shall not allow this sign to be placed on the building. Tenant shall obtain at its own cost any necessary governmental approvals or special permits for these signs; however, Landlord shall cooperate with Tenant's efforts in that regard. All costs of obtaining approval, installation and maintenance of the signs including electricity shall be paid by Tenant. If a sign is removed, Tenant is responsible for having the building surface restored to its original condition, ordinary wear and tear excepted. If a sign falls into disrepair, Tenant shall have thirty (30) days to effect repairs following Landlord's notice to Tenant to do so. If repairs are not completed within such period, Landlord has a right to have repairs made and charge Tenant for the same. Subject to Landlord's approval, Tenant shall be allowed a temporary sign until such time a permanent sign is installed for a period not to exceed six months. 42. RESTRICTION ON OTHER BANKS AND SIGNS So long as this lease remains in effect and Tenant is not in default hereunder, Landlord agrees that it will not lease any other space in the building for use as a retail bank doing full service banking business with the public. This restriction shall not apply to any bank not offering full service banking to the public at this location. Additionally, Landlord agrees it shall not allow any other bank tenant in the Project exterior building signage. 43. CONDITIONS TO THE LEASE Landlord acknowledges that Tenant cannot occupy and operate the Premises for banking, purposes without the prior approval of the Federal Deposit Insurance Corporation. Tenant, at its own cost has applied for and is diligently pursuing the necessary approvals. If Tenant is unable, prior to June 27, 1995, to obtain regulatory approvals, Tenant or Landlord may terminate this lease upon written notice to Tenant or Landlord to be received before 5:00 p.m., Tuesday, June 27, 1995. If Tenant has not given written notice to Owner's agent on or before such time, the condition stated herein is deemed to have been waived. If Landlord or Tenant does give notice of termination by the above referenced date, all further rights and liabilities of both parties hereunder shall terminate as of the date of the notice. This lease is also contingent upon Buyer closing escrow to purchase the building, which is anticipated to be June 25, 1995. 44. OPTION TO EXTEND In the event that Tenant has performed under the terms of this lease, and provided Tenant has not been in any material default under the terms of this Lease within the 24 months preceding Tenant's exercise of this option, the Tenant shall have and are hereby granted the right and option to renew the term of this Lease for two additional periods of five (5) years each. If Tenant is in default with respect to any covenant, condition or term of this Lease on the date of giving the option notice, the option notice shall be totally ineffective, or if Tenant is in material default with respect to any covenant, condition or term of this Lease on the date the extended term is to commence, the extended term shall not commence and this Lease shall expire at the end of the initial term. In order to exercise the five (5) year options, Tenant shall give Landlord written notice of its intention to exercise said option between eight (8) months and twelve (12) full calendar months prior to the expiration date of said Lease or expiration of said first option period as the case may be. All lease terms and conditions shall be subject to renegotiation for the renewed period and the rental shall be in the amount satisfactory to Landlord and in an amount equal to prevailing market rentals at said time. Within fifteen (I 5) days of Tenant's notification, Landlord shall provide Tenant the terms and conditions for the option period. Unless a fully executed lease or extension thereof including the rental rate is settled and finalized within sixty (60) days from the date written notice of intention to exercise is received by the Landlord, the Lease option shall terminate and become void and the Lease and all rights thereunder on the part of the Tenant shall expire at the initial term of the Lease or the first extended term of the Lease as the case may be. If Landlord has not delivered to Tenant the terms and conditions within the fifteen (I 5) day period, the aforementioned sixty (60) day period shall be extended by the equal number of days after the fifteen (15) days Landlord delivered the terms and conditions to Tenant. 45. TENANT IDENTIFICATION Landlord acknowledges that the Tenant may be considering a possible name change. So long as this name change does not adversely effect Tenant's balance sheet, Landlord shall grant approval. All costs involved in this possible name change shall be borne by Tenant. The foregoing shall apply if Tenant is purchased by another bank. 46. ATM AND DRIVE-THRU Subject to appropriate governmental approvals, Landlord consents to the installation and exclusive operation of a automatic teller machine and a night depository at the exterior of the building, in the location previously utilized by Sacramento Savings & Loan. Tenant shall also have exclusive use of the existing drive-thru facility for banking purposes. Tenant shall be responsible for all costs of maintenance, repair, improvements or alterations to the ATM, drive-thru facility and its related areas. 47. DUAL AGENCY Landlord and Tenant acknowledge that Bruce Hohenhaus of Colliers Iliff Thorn represents Tenant and Doug Barnett of Colliers Iliff Thorn represents Landlord. Although the individuals representing Landlord and Tenant are currently considered independent contractors and each are representing the needs of their respective client, California Real Estate Law currently recognizes Colliers Iliff Thorn as representing both parties in this transaction, commonly known as Dual Agency. With the execution this lease contract, Landlord and Tenant acknowledge and accept this Dual Agency. 48. CONFIDENTIALITY Except as required by law, no party hereto shall disclose to third parties any of the terms of the lease referenced above or of the lease in any form fully executed, or of related agreements which may eventually be consummated, unless such disclosure shall be specifically consented to by the other parties; provided, however, that each may disclose on a strictly confidential basis any such information to its attorney's accountants, lenders loaning on the leased property, property manager of the leaded property and brokers engaged to sell the leased property. 49. AFTER HOUR UTILITIES: It is acknowledged that Tenant will may, from time-to-time, be open for business on Saturdays from 9:00 a.m. to 3:00 p.m. Landlord shall provide the utilities as outlined in Paragraph 14 and Exhibit H, and the additional cost for such utilities shall be $270.00 per month and shall be increased by 5% annually in addition to the Basic Rent. Should Tenant discontinue Saturday operations, then Tenant shall provide written notice and there shall be no further charges. All other terms and conditions of this lease dated June 15, 1995 shall remain unchanged. LANDLORD: REALTY ADVISORS, INC. TENANT: TRUCKEE RIVER BANK a Delaware Corporation A California Corporation By: /s/ By: /s/ Martin Sorensen Dated: 6/29/95 Dated: 6/28/95 EXHIBIT A This Exhibit is a graphic of the floor plan for the first floor of the Project. EXHIBIT B This Exhibit is a graphic of the parking area for the Project. SAMPLE Exhibit D NOTICE OF LEASE TERM DATES To: ________________________ ________________________ ________________________ Date: _______________________ Re: Lease dated _____________________, 19___, by and between ______________, a Landlord, and_______________________________________, a ____________________ , Tenant, concerning Suite ___________Located at ______________________________ ________________________________________. Gentlemen: In accordance with the subject Lease, we wish to advise and/or confirm as follows: 1. That the Premises have been accepted herewith by the Tenant as being substantially complete in accordance with the subject Lease and that there is no deficiency in construction. 2. That the Tenant has possession of the subject Premises and acknowledges that under the provisions of the subject Lease the Term of the Lease shall commence as of ________________________for a term of___________________, ending on _____________________. 3. That in accordance with the subject Lease, rent commenced to accrue on ____________________. 4. If the Commencement Date of the subject Lease is other than the first day of the month, the first billing will contain a pro rata adjustment. Each billing thereafter shall be for the full amount of the monthly installment as provided for in said Lease. 5. Rent is due and payable in advance on the first day of each and every month during the term of said lease. Your rent checks should be made payable to __________________ at _______________________. 6. Tenant's obligation to pay monthly installments of Annual Basic Rent will be waived for a period of________________ ( ) months beginning on _______________________________ And ending on _________________________ In accordance with that certain Rent Waiver Agreement executed by Landlord and Tenant. 7. The number of Rentable Square Feet contained within the Premises for all purposes of this Lease is ____________ square feet. 8. Tenant's Percentage, based upon the number of Rentable Square Feet contained within the Premises and the Building, is _____%. AGREED AND ACCEPTED LANDLORD: ______________________________________, a _______________________________________ By: __________________________________ Print Name: ____________________________ Its: ___________________________________ TENANT: __________________________________________________,a __________________________________________________ By: ______________________________________________ Print Name: ____________________________ Its: ___________________________________ By: ______________________________________________ Print Name:______________________________ Its: ____________________________________ SAMPLE Exhibit E TENANT ESTOPPEL CERTIFICATE The undersigned, ____________________________________, a ("Landlord"), with a mailing address c/o ___________________________ ___________________________and______________________________________, a _______________________("Tenant"), hereby certify to ______________________, a ________________________________, as follows: 1. Attached hereto is a true, correct and complete copy of that certain lease dated ___________, 19__, between Landlord and Tenant (the "Lease"), which demises premises located ____________________ ______________(The "Premises"). The Lease is now in full force and effect and has not been amended, modified or supplemented, except as set forth in Paragraph 4 below. 2. The term of the Lease commenced on ____________________ __________, 19___. 3. The Term of the Lease shall expire on ___________________, 19___. 4. The Lease has: (Initial one) (_______) not been amended, modified, supplemented, extended, renewed or assigned. (_______) been amended, modified, supplemented, extended, renewed or assigned by the following described agreements, copies of which are attached hereto: __________________________________________________________ __________________________________________________________ 5. Tenant has accepted and is now in possession of the Premises. 6. Tenant and Landlord acknowledge that the Lease will be assigned to ___________________________________________________________ ______________________ And that no modification, adjustment, revision or cancellation of the Lease or amendments thereto shall be effective unless written consent of______________________ is obtained, and that until further notice, payments under the Lease may continue as heretofore. 7. The amount of fixed monthly rent is $________________. 8. The amount of security deposits (if any) is $______________________. No other security deposits have been made. 9. Tenant is paying the full lease rental which has been paid in full as of the date hereof. No rent or other charges under the Lease have been paid for more than thirty (30) days in advance of its due date. 10. All work required to be performed by Landlord under the Lease has been completed. 11. There are no defaults on the part of the Landlord or Tenant under the Lease. 12. Tenant has no defense as to its obligations under the Lease and claims no set-off or counterclaim against Landlord. 13. Tenant has no right to any concession (rental or otherwise) or similar compensation in connection with renting the space it occupies except as provided in the Lease. All provisions of the Lease and the amendments thereto (if any) referred to above are hereby ratified. The foregoing certification is made with the knowledge that _________________ ____________________________________is about to fund a loan to Landlord or is about to purchase the project (or part thereof) from Landlord and that _______________________________is relying upon the representations herein made in funding such loan or in purchasing the Project (or part thereof). IN WITNESS THEREOF, this certificate has been duly executed and delivered by the authorized officers of the undersigned as of _______________________, 19___. TENANT: ____________________________, a ____________________________ By:________________________ Print Name:________________ Its:_______________________ By:_______________________ Print Name:_______________ Its:______________________ Exhibit F RULES AND REGULATIONS 1. Except as specifically provided in the Lease to which these Rules and Regulations are attached, no sign, placard, picture, advertisement, name or notice shall be installed or displayed on any part of the outside or inside of the Building or Project without the prior written consent of Landlord, which consent Landlord may withhold in its sole and absolute discretion. Landlord shall have the right to remove, at Tenant's expense and without notice, any sign installed or displayed in violation of this rule. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant by a person approved by Landlord. 2. If Landlord objects In writing to any curtains, blinds, shades, screens or hanging plants or other similar objects attached to or used In connection with any window or door of the Premises, or placed on any windowsill, which is visible from the exterior of the Premises, Tenant shall immediately discontinue such use. Tenant shall not place anything against or near glass partitions or doors or windows which may appear unsightly from outside the Premises. 3. Tenant shall not obstruct any sidewalks, halls, passages, exits, entrances, stairways, elevators or escalators (if any) of the Project. The halls, passages, exits, entrances, shopping malls, elevators, escalators and stairways are not open to the general public, but are open, subject to reasonable regulations, to Tenant's business lnvitees. Landlord shall in all cases retain the right to control and prevent access thereto of all persons whose presence in the judgment of Landlord would be prejudicial to the safety, character, reputation and interest of the Project and its tenants; provided that nothing herein contained shall be construed to prevent such access to persons with whom any tenant normally deals in the ordinary course of its business, unless such persons are engaged in illegal or unlawful activities. No tenant and no employee or invitee of any tenant shall go upon the roof(s) of the Project. 4. The directory of the Building or Project will be provided exclusively for the display of the name and location of tenants only and Landlord reserves the right to exclude any other names therefrom. 5. All cleaning and janitorial services for the Project and the Premises Shall be provided exclusively through Landlord, and except with the written consent of Landlord, no person or persons other than those approved by Landlord shall be employed by Tenant or permitted to enter the Project for the purpose of cleaning the same. Tenant shall not cause any unnecessary labor by carelessness or indifference to the good order and cleanliness of the Premises. 6. Landlord will furnish Tenant, free of charge, with two keys to each door locking the Premises. Landlord may make a reasonable charge for any additional keys. Tenant shall not make or have made additional keys, and Tenant shall not alter existing locks or install any new additional locks or bolts on any door of the Premises. Tenant, upon the termination of its tenancy, shall deliver to Landlord the keys to all doors which have been furnished to Tenant, and in the event of any loss of any keys so furnished, shall pay Landlord therefor. 7. If Tenant requires telegraphic, telephonic, burglar alarm or similar services, it shall first obtain, and comply with Landlord's instructions in their Installation. 8. Freight elevator(s), if any, shall be available for use by all tenants in the Building, subject to such reasonable scheduling as Landlord, in its discretion, shall deem appropriate. No equipment, materials, furniture, packages, supplies, merchandise or other property will be received in the Building or carried in the elevators except between such hours and in such elevators as may be designated by Landlord. Tenant's initial move in and subsequent deliveries of bulky items, such as furniture, sales and similar items shall, unless otherwise agreed in writing by Landlord, be made during the hours of 6:00 p.m. to 6:00 a.m. or on Saturday or Sunday. Deliveries during normal office hours shall be limited to normal office supplies and other small items. No deliveries shall be made which impede or interfere with other tenants or the operation of the Building. 9. Tenant shall not place a load upon any floor of tho Premises which exceeds the load per square foot which such floor was designed lo carry and which is allowed by law. Landlord shall have the right lo prescribe the weight, size and position of all equipment, materials, furniture or other property brought into the Building. Heavy objects shall, if considered necessary by Landlord, stand on such platforms as determined by Landlord to be necessary to properly distribute the weight, which platforms shall be provided at Tenant's expense. Business machines and mechanical equipment belonging to Tenant, which cause noise or vibration that may be transmitted to the structure of the building or to any space therein to such a degree as to be objectionable to Landlord or to any tenants in the Building, shall be placed and maintained by Tenant, at Tenant's expense, on vibration eliminators or other devises sufficient to eliminate noise or vibration. The persons employed to move such equipment in or out of the Building must be acceptable to Landlord. Landlord will not be responsible for loss of, or damage to, any such equipment or other property from any cause, and all damage done to the Building by maintaining or moving such equipment or other property shall be repaired at the expense of Tenant. 10. Tenant shall not use or keep in the Premises any kerosene, gasoline or inflammable or combustible fluid or material other than those limited quantities necessary for the operation or maintenance of office equipment. Tenant shall not use or permit to be used in the Premises any foul or noxious gas or substance, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors or vibrations, nor shall Tenant bring into or keep in or about the Premises any birds or animals. 11. Tenant shall not use any method of heating or air conditioning other than that supplied by Landlord. 12. Tenant shall not waste electricity, water or air conditioning and agrees to cooperate fully with Landlord to assure the most effective operation of the Building's heating and air conditioning and to comply with any governmental energy-saving rules, laws or regulations of which Tenant has actual notice, and shall refrain from attempting to adjust controls. Tenant shall keep corridor doors closed, and shall close window coverings at the end of each business day. 13. Landlord reserves the right, exercisable without notice and without liability to Tenant, to change the name and street address of the Building. 14. Landlord reserves the right to exclude from the Building between the hours of 6 p.m. and 7 a.m. the following day, or such other hours as may be established from time to time by Landlord, and on Sundays and legal holidays, any person unless that person is known to the person or employee in charge of the Building or has a pass or is properly identified. Tenant shall be responsible for all persons for whom it request passes and shall be liable to Landlord for all acts of such persons. Landlord shall not be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. Landlord reserves the right to prevent access to the Building in case of invasion, mob, riot, public excitement or other commotion by closing the doors or by other appropriate action. 15. Tenant shall close and lock the doors of its Premises and entirely shut off all water faucets or other water apparatus, and electricity, gas or air outlets before Tenant and its employees leave the Premises. Tenant shall be responsible for any damage or injuries sustained by other tenants or occupants of the Building or by Landlord for noncompliance with this rule. 16. Tenant shall not obtain for use on the Premises ice, drinking water, food, beverage, towel or other similar services or accept barbering or bootblacking service upon the Premises, except at such hours and under such regulations as may be fixed by Landlord. 17. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or invitees, shall have caused it. 18. Tenant shall not sell, or permit the sale at retail of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise to the general public in or on the Premises. Tenant shall not make any room-to-room solicitation of business from other tenants in the Project. Tenant shall not use the Premises for any business or activity other than that specifically provided for in this Lease. 19. Tenant shall not install any radio or television antenna, loudspeaker or other devices on the roof(s) or exterior walls of the Building or Project. Tenant shall not interfere with radio or television broadcasting or reception from or in the Project or elsewhere. 20. Tenant shall not mark, drive nails, screw or drill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof, except in accordance with the provisions of the Lease pertaining to alterations. Landlord reserves the right to direct electricians as to where and how telephone and telegraph wires are to be introduced to the Premises. Tenant shall not cut or bore holes for wires. Tenant shall not affix any floor covering to the floor of the Premises in any manner except as approved by Landlord. Tenant shall repair any damage resulting from noncompliance with this rule. 21. Tenant shall not install, maintain or operate upon the Premises any vending machines without the written consent of Landlord. 22. Canvassing, soliciting and distribution of handbills or any other written material, and peddling in the Project are prohibited, and Tenant shall cooperate to prevent such activities. 23. Landlord reserves the right to exclude or expel from the Project any person who, in Landlord's judgment, is intoxicated or under the influence of liquor or drugs or who is in violation of any of the Rules and Regulations of the Building. 24. Tenant shall store all its trash and garbage within its Premises or in other facilities provided by Landlord. Tenant shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage and refuse disposal shall be made in accordance with directions issued from time t time by Landlord. 25. The Premises shall not be used for the storage of merchandise held for sale to the general public, or for lodging or for manufacturing of any king, nor shall the Premises be used for any improper, immoral or objectional purpose. No cooking shall be done or permitted on the Premises without Landlord's consent, except the use by Tenant of Underwriters' Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar beverages shall be permitted, and the use of a microwave oven for employees use shall be permitted, provided that such equipment and use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules and regulations. 26. Tenant shall not use in any space or in the public halls of the Project any hand truck except those equipped with rubber tires and side guards or such other material-handling equipment as Landlord may approve. Tenant shall not bring any other vehicles of any kind into the Building or Project. 27. Without the written consent to Landlord, Tenant shall not use the name of the Building or Project in connection with or in promoting or advertising the business of Tenant except as Tenant's address. 28. Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency. 29. Tenant assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed. 30. To the extent Landlord reasonably deems it necessary to exercise exclusive control over any portions of the Common Areas for the mutual benefit of the tenants in the Project, Landlord may do so subject to non-discriminatory additional Rules and Regulations. 31. Tenant's requirements will be attended to only upon appropriate application to the Project management office by an authorized individual. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord, and no employee of Landlord will admit any person (Tenant or otherwise) to any office without specific instructions from Landlord. 32. Landlord may waive any one or more of these Rules and Regulations for the benefit of Tenant or any other tenant, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of Tenant or any other tenant, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all of the tenants of the Project. 33. These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the terms, covenants, agreements and conditions of the Lease. 34. Landlord reserves the right to make such other and reasonable Rules and Regulations as, in its judgment, may from time to time be needed for safety and security, for care and cleanliness of the Project and for the preservation of good order therein. Upon written notice, Tenant agrees to abide by all such Rules and Regulations herein above stated and any additional rules and regulations which are adopted. 35. Tenant shall be responsible for the observance of all of the foregoing rules by Tenant's employees, agents, clients, customers, invitees and guests. Exhibit H STANDARDS FOR UTILITIES AND SERVICES The following standards for utilities and services are in effect. Landlord reserves the right to adopt nondiscriminatory modifications and additions hereto. As long as Tenant is not in default under any of the terms, conditions, provisions, or agreements of this Lease, Landlord shall: 1. On Monday through Friday, except holidays, from 8 a.m. to 8 p.m. and on Saturdays from 9 a.m. to 3 p.m. (and other times for a reasonable additional charge to be fixed by Landlord) ventilate the Premises and furnish air conditioning or heating on such days and hours, when in the reasonable judgment of Landlord. It may be required for the comfortable occupancy of the Premises. The air conditioning system achieves maximum cooling when the window coverings are closed. Landlord shall not be responsible for room temperatures if Tenant does not keep all window coverings in the Premises closed whenever the system is in operation. Tenant agrees to cooperate fully at all times with Landlord, and to abide by all reasonable regulations and requirements which Landlord may prescribe for the proper function and protection of said air conditioning system. Tenant agrees not to connect any apparatus, device, conduit or pipe to the Building chilled and hot water air conditioning supply lines. Tenant further agrees that neither Tenant nor his servants, employees, agents, visitors, licensees or contractors shall at any time enter mechanical installations or facilities of the Building or Project or adjust, tamper with, touch or otherwise in any manner affect said installations or facilities. The cost of maintenance and service calls to adjust and regulate the air conditioning system shall be charged to Tenant if the need for maintenance work results from either Tenant's adjustment of room thermostats or Tenant's failure to comply with its obligations under this Exhibit, including keeping window coverings closed as needed. Such work shall be charged at hourly rates equal to then current journeyman's wages for air conditioning mechanics. 2. Furnish to the Premises, during the usual business hours on business days, electric current as required by the Building standard office lighting and fractional horsepower office business machines in an amount not to exceed .025 KWH per square foot per normal business day. Tenant agrees, should its electrical installation or electrical consumption be in excess of the aforesaid quantity or extend beyond normal business hours, to reimburse Landlord monthly for the measured consumption at the average cost per kilowatt hour charged to the Building during the period. If a separate meter is not installed at Tenant's cost, such excess cost will be established by an estimate agreed upon by Landlord and Tenant, and if the parties fail to agree, such cost shall be established by an independent licensed engineer selected in Landlord's reasonable discretion. Tenant agrees not to use any apparatus or device in, upon or about the Premises which may in any way increase the amount of such services usually furnished or supplied to said Premises, and Tenant further agrees not to connect any apparatus or device with wires, conduits or pipes, or other means by which such services are supplied, for the purpose of using additional or unusual amounts of such services without the written consent of Landlord. Should Tenant use the same to excess, the refusal on the part of Tenant to pay upon demand of Landlord the amount established by Landlord for such excess charge shall constitute a breach of the obligation to pay rent under this Lease and shall entitle Landlord to the rights therein granted for such breach. Tenant's use of electric current shall never exceed the capacity of the feeders to the Building, or the risers or wiring installation and Tenants shall not install or use or permit the installation or use of any computer or electronic data processing equipment in the Premises without the prior written consent of Landlord. 3. Make water available in public areas for drinking and lavatory purposes only, but if Tenant requires, uses or consumes water for any purpose in addition to ordinary drinking and lavatory purposes, of which fact Tenant constitutes Landlord to be the sole judge, Landlord may install a water meter and thereby measure Tenant's water consumption for all purposes. Tenant shall pay Landlord 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 Landlord may cause such meter and equipment to be replaced or repaired and collect the cost thereof from Tenant. 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, Landlord may pay such charges and collect the same from Tenant. Any such costs or expenses incurred, or payments made by Landlord for any of the reasons or purposes hereinabove stated shall be deemed to be additional rent payable by Tenant, and collectible by Landlord as such. 4. Provide janitor service to the Premises, provided the same are used exclusively as offices, and are kept reasonably in order by Tenant, and unless otherwise agreed to by Landlord and Tenant no one other than persons approved by Landlord shall be permitted to enter the Premises for such purposes. If the Premises are not used exclusively as offices, they shall be kept clean and in order by Tenant, at Tenant's expense, and to the satisfaction of Landlord, and by persons approved by Landlord. Tenant shall pay to Landlord the cost of removal of any of Tenant's refuse and rubbish to the extent that the same exceeds the refuse and rubbish usually attendant upon the use of the Premises as offices. Landlord reserves the right to stop service of the elevator, if any, plumbing, ventilation, air conditioning and electrical systems, when necessary, by reason of accident or emergency or for repairs, alterations or improvements, when in the judgment of Landlord such actions are desirable or necessary to be made, until said repairs, alterations or improvements shall have been completed, and Landlord shall have no responsibility or liability for failure to supply elevator facilities, plumbing, ventilating, air conditioning or electric service, when prevented from so doing by strike or accident or by any cause beyond Landlord's reasonable control, or by laws, rules, orders, ordinances, directions, regulations or by reason of the requirements of any federal, state, county or municipal authority or failure of gas, oil or other suitable fuel supply or inability by exercise of reasonable diligence to obtain gas, oil or other suitable fuel supply. It is expressly understood and agreed that any covenants on Landlord's part to furnish any services pursuant to any of the terms, covenants, conditions, provisions or agreements of this Lease, or to perform any act or thing for the benefit of Tenant, shall not be deemed breached if Landlord is unstable to furnish or perform the same by virtue of a strike or labor trouble or any other cause whatsoever beyond Landlord's control. 30. To the extent Landlord reasonable deems it necessary to exercise exclusive control over any portions of the Common Areas for the mutual benefit of the tenants in the Project, Landlord may do so subject to non-discriminatory additional Rules and Regulations. 31. Tenant's requirements will be attended to only upon appropriate application to the Project management office by an authorized individual. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions form Landlord, and no employee of Landlord will admit any person (Tenant or otherwise) to any office without Instructions from Landlord. 32. Landlord may waive any one or more of these Rules and Regulations for the benefit of Tenant or any other tenant, but no such waiver by Landlord shall be construed as a wavier of such Rules and Regulations against any or all of the tenants of the Project. 33. These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the terms, covenants, agreements and conditions of the Lease. 34. Landlord reserves the right to make such other and reasonable Rules and Regulations as, in its judgment, may from time to time be needed for safety and security, for care and cleanliness of the Project and for the preservation of good order therein, provided Tenant receivers prior written notice. Tenant agrees to abide by all such Rules and Regulations herein above stated and any additional rules and regulations which are adopted. 35. Tenant shall be responsible for the observance of all of the foregoing rules by Tenant's employees, agents, clients, customers, invitees and guests. Exhibit I Subject to Paragraph 40 of the First Addendum, the following rules and regulations shall govern the use of the parking facilities which are appurtenant to the Project. 1. All claimed damage or loss must be reported, itemized in writing and delivered to the Management Office located within the Project within ten (10) business days after any claimed damage or loss occurs. Any claim not so made is waived. Landlord is not responsible for damage by water, fire, or defective brakes, or parts or for the act or omissions of others, or for articles left in vehicles. In any event, the total liability of Landlord, if any, is limited to Two Hundred Fifty Dollars ($250.00) for all damages or loss to any car. Landlord is not responsible for loss of use. 2. Tenant shall not park or permit its employees to park in any parking areas designated by Landlord as areas for parking by visitors to the Project. Tenant shall not leave vehicles in the parking areas overnight nor park any vehicles in the parking areas other than automobiles, motorcycles, motor driven or non-motor driven bicycles or for wheeled trucks. 3. Parking stickers or any other device or form of identification supplied by Landlord as a condition of use of the parking facilities shall remain the property of Landlord. Such parking identification device must be displayed as requested and may not be mutilated in any manner. The serial number of the parking identification may not be obliterated. Devices are not transferable and any device in the possession of an unauthorized holder will be void. 4. No overnight or extended term storage of vehicles shall be permitted. 5. Vehicles must be parked entirely within painted stall lines of a single parking stall. 6. All directional signs and arrows must be observed. 7. The speed limit within all parking areas shall be five (5) miles per hour. 8. Parking is prohibited: (a) in areas not striped for parking; (b) in aisles; (c) where "no parking" signs are posted; (d) on ramps; (e) in cross-hatched areas; and (f) in such other areas as may be designated by Landlord or Landlord's parking operator. 9. Every parker is required to park and lock his own vehicle. All responsibility for damage to vehicles is assumed by the parker. 10. Loss or theft of parking identification devices must be reported to the Management Office immediately, and a lost or stolen report must be filed by the Tenant or user of such parking identification device at the time. Landlord has the right to exclude any car from the parking facilities that does not have an identification device. 11. Any parking identification devices reported lost or stolen found on any unauthorized car will be confiscated and the illegal holder will be subject to prosecution. 12. Washing, waxing, cleaning or servicing any vehicle in any area not specifically reserved for such purposes is prohibited. 13. The parking operators, managers or attendants are not authorized to make or allow any exceptions to these rules and regulations. 14. Tenant's continued right to use any parking spaces in the parking facilities is conditioned upon Tenant abiding by these rules and regulations and those contained in this Lease. Further, if this Lease terminates for any reason whatsoever, Tenant's right to use the parking spaces in the parking facilities shall terminate concurrently therewith. 15. Tenant agrees to sign a parking agreement with Landlord or Landlord's parking operator within five (5) days of the request, which agreement shall provide the manner of payment or monthly parking fees and otherwise be consistent with this Lease and these rules and regulations. 16. Landlord reserves the right to refuse the sale of monthly stickers or other parking identification devices to any tenant or person and/or his agents or representatives who willfully refuse to comply with these rules and regulations and all unposted city, state or federal ordinances, laws or agreements. 17. Landlord reserves the right to establish and change parking fees and to modify and/or adopt such other reasonable and non- discriminatory rules and regulations for the parking facilities as it deems necessary to the operation of the parking facilities. Landlord may refuse to permit any person who violates these rules to park in the parking facilities, and any violation of the rules shall subject the car to removal, at such car owner's expense. EXHIBIT J EARLY ENTRY This Lease Rider is attached to and made a part of that certain lease dated June 15, 1995 (the "Lease") between Realty Advisors, Inc. ("Landlord") and Truckee River Bank ("Tenant"). Notwithstanding the fact that the Term of this Lease has not commenced, Landlord hereby agrees that from and after the date hereof and until the commencement of the Term of this Lease and prior to the completion of Landlord's work of construction, if any portion of the premises may be occupied by Tenant without interfering with Landlord's work or construction, upon written request by Tenant to Landlord, Tenant may elect to enter upon the premises following not less than seven (7) days proper written notice to Landlord in order to install trade fixtures and equipment and to commence construction of any improvements within the Premises which are to be constructed by Tenant at Tenant's sole cost and expense (collectively, "Tenant's Finishing Work"). Such entry by Tenant for the purposes of construction of Tenant's Fishing Work shall be subject to all of the conditions set forth in the Rider. (i) Landlord's Direction. Tenant, together with its employees, agents, independent contractors, suppliers and any other personnel under Tenant's control ("Tenants' Personnel") installing Tenant's Finishing Work on the Premises, shall be subject to and shall work under the direction of Landlord and Landlord's general contractor. If, in the sole judgment of Landlord, Tenant's Personnel and/or the work that is being performed by Tenant's Personnel shall interfere with Landlord's construction work or shall detrimentally affect Landlord's ability to comply with its commitments for completing its improvements on the Premises or cause labor difficulties, Landlord shall have the right to order Tenant's early entry to cease on twenty-four (24) hours written notice to Tenant, and if Landlord so requires in connection therewith because such items are interfering with Landlord's work of construction, Tenant shall have Tenant's Personnel remove all tools, equipment and materials form the Premises. (ii) Lease Terms Apply. Tenant agrees that any such early entry shall be subject to all of the terms and conditions of this Lease except for those relating to the payment of rent and other monetary obligations which have a specific commencement time, which provisions shall become applicable in accordance with the terms of this Lease. (iii) Utility Charges. Tenant agrees to pay to Landlord on request all utility charges reasonably allocated to Tenant by Landlord as a result of Tenant's early entry on the Premises. (iv) Rent. Notwithstanding Subparagraph (ii) above, if Tenant shall use a portion of the Premises for the operation of its regular business prior to the Commencement Date, then Tenant shall advise Landlord of such use and shall be charged rent of a pro rata basis for the portion(s) of the Premises so utilized. (v) No Possession. Tenant's only entry to carry out Tenant's Finishing Work shall not be deemed a taking of possession of the Premises by Tenant for the purposes of either setting the Commencement Date or signaling the substantial completion of the Tenant improvements which are to be constructed by Landlord. (vi) Laws. Tenant and Tenant's Personnel shall comply with all applicable laws, regulations, permits and other approvals required to perform Tenant's Finishing Work or by Tenant's early entry on the Premises. (vii) Indemnity. Except for claims arising from the gross negligence of Landlord, its employees or agents, Tenant shall indemnify and save Landlord and the Premises harmless from and against any and all liens, liabilities, losses, damages, costs, expenses, demands, actions, causes of action and claims (including without limitation attorney's fees and legal costs) arising out of the use, construction or occupancy of the Premises by Tenant or Tenant's Personnel arising form or relating to such early entry. EX-10 3 LEASE AGREEMENT TABLE OF CONTENTS SECTION NUMBER PAGE NUMBER BASIC LEASE PROVISIONS 1. Leased Premises and Use. . . . . . . . . . . . . . . . . . . . . . . 1 2. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 3. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4. Payment of Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 5. Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 6. Payment of Taxes and Assessments by Lessee . . . . . . . . . . . . . 7 7. Assignment and Subletting. . . . . . . . . . . . . . . . . . . . . ..7 8. Rights and obligations Under the Bankruptcy Code . . . . . . . . . . 9 9. Waste; Nuisance. . . . . . . . . . . . . . . . . . . . . . . . . . .10 10. Prohibited Uses. . . . . . . . . . . . . . . . . . . . . . . . . . .10 11. Alterations. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 12. Abandonment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 13. Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 14. Maintenance and Repair . . . . . . . . . . . . . . . . . . . . . . .11 15. Glass Breakage . . . . . . . . . . . . . . . . . . . . . . . . . . .13 16. Common Area. . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 17. Additional Rent. . . . . . . . . . . . . . . . . . . . . . . . . . .14 18. Lessor's Right to Relocate the Premises. . . . . . . . . . . . . . .15 19. Entry by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . .15 20. Compliance with governmental Regulations . . . . . . . . . . . . . .15 21. Insurance and Indemnification . . . . . . . . . . . . . . . . . . .15 22. Waiver of Subrogation. . . . . . . . . . . . . . . . . . . . . . . 17 23. Surrender. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 24. Subordination; Estoppel Certificate. . . . . . . . . . . . . . . . .17 25. Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . . . .18 26. Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 27. Sale by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . .18 28. Damage or Destruction. . . . . . . . . . . . . . . . . . . . . . . .19 29. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 30. Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 31. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 32. No Personal Liability of Lessor's Shareholders, et al. . . . . . . .21 33. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . .21 34. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 35. Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 36. Rent Control . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 37. Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . . .22 39. Signs, Auctions,Window . . . . . . . . . . . . . . . . . . . . . . .22 39. Covenant of Continuous Operation . . . . . . . . . . . . . . . . . .23 40. Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . .23 41. Late Charges:. . . . . . . . . . . . . . . . . . . . . . . . . . . .24 42. Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . .24 43. Merchants' Association/Marketing Fund. . . . . . . . . . . . . . . .26 44. Lessor and Lessee. . . . . . . . . . . . . . . . . . . . . . . . . .27 45. Relationship of the Parties. . . . . . . . . . . . . . . . . . . . .27 46. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 47. Quitclaim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 LEASE AGREEMENT TABLE OF CONTENTS SECTION NUMBER PAGE NUMBER 48. Other Payments to be Constructed as Rent . . . . . . . . . . . . . .27 49. Headings and Titles. . . . . . . . . . . . . . . . . . . . . . . . .27 50. Conditions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 51. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 52. Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 53. Corporate Authority. . . . . . . . . . . . . . . . . . . . . . . . .28 54. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .28 55. No Reservation of Premises . . . . . . . . . . . . . . . . . . . . .28 LEASE AGREEMENT BASIC LEASE PROVISIONS' The words in and figures set forth in paragraphs A to Q, both inclusive, are part of this "Lease" wherever appropriate reference is made thereto, unless they are expressly modified elsewhere in this lease. A. Date of Lease: April 17, 1995 B. Lessor: Western Investment Real Estate Trust, a California unincorporated association doing business as a real estate investment trust and Pinecreek Shopping Center Associates, a California limited partnership C. Lessee: Truckee River Bank, a California banking corporation D. Lessee's Trade Name: Truckee River Bank E. Leased Premises and address of Leased Premises: Pine Creek Shopping Center, the "Shopping Center", in the City of Grass Valley, County of Nevada, and the State of California, located at 736 Taylorville Road, Suite D, hereinafter referred to as the "Leased Premises", as shown on the "Site Plan" Exhibit A of approximately 2,760 square feet of gross leasable area. "Gross Leasable Area" shall be defined as the measurements from the exterior face of outside wall(s) to the center line of party wall(s). On the Exhibit A the Leased Premises shall be outlined in red and the Shopping Center shall be outlined in blue. F. Use of Leased Premises: Bank and savings and loan and for no other purpose. G. Term and Lease Commencement Date: This Lease shall commence on April 17, 1995, hereinafter referred to as the "Lease Commencement Date", and shall terminate five (5) years after the first day of the month next following the Lease Commencement Date, the "Lease Term". As a confirmation of said Lease Commencement Date, the parties shall execute an "Acknowledgment of Commencement" as set forth in the form attached as Exhibit C. H. Minimum Monthly Rent: Months 1 - 6 $3,312.00 Months 7 - 12 $3,450.00 Months 13 - 24 $3,726.00 Months 25 - 36 $4,002.00 Months 37 - 48 $4,278.00 Months 49 - 60 $4,554.00 I-1. Percentage Rent Rate: None I-2. Prepaid Rent: Three thousand three hundred twelve ($3,312.00) dollars J. Security Deposit: None K. Monthly Marketing Charge: Sixty-nine ($69.00) dollars per month L. Taxes, Insurance, and Common Area Maintenance: The Lessee shall pay a proportionate share, as defined in Paragraph 17 below, of taxes, insurance, and common area maintenance including property management fees plus fees for Lessor's administrative costs, which said administrative costs shall not exceed 10% of all taxes, insurance and common area maintenance charges, payable monthly. The "Common Area" for the Shopping Center is designated in Exhibit B attached hereto. Additional Rent, as defined in Paragraph 17 below, shall become due and payable April 17, 1995. M. Lessor's Address for payment of Rent including Additional Rent under Paragraph 17: Western Investment Real Estate Trust Dept #GB53 P.O. Box 45575 San Francisco, CA 94145-0575 N. Lessor's Address and Phone Number for Notices and all other correspondence: Western Investment Real Estate Trust 6861 Douglas Boulevard; P.O. Box 2695 Roseville, CA 95746 (800) 643-4770 or (916) 791-0600 and Pinecreek Shopping Center c/o Connolly Development Co. P.0. Box 348600 Sacramento .CA 95834 O. Lessee's Address and Phone Number for Notices: To the Leased Premises: 736 Taylorville Road, Suite D Grass Valley, CA 95949 and Truckee River Bank Attn: Director of Operations 10181 Truckee Tahoe Airport Road Truckee, CA 96160 P. Addendum(s): The following addendum(s) are attached hereto and made a part hereof: First Addendum - Option To Extend Term Second Addendum - Option To Extend Term Third Addendum - Option To Extend Term Fourth Addendum Q. Exhibits: The following exhibits are attached hereto and made a part hereof: Exhibit A: Site Plan Exhibit B: Common Area Exhibit C: Acknowledgment of Commencement Exhibit D: Sign Criteria 1. Leased Premises and Use. That Lessor hereby leases to Lessee hereby hires from Lessor, the Premises as described in Paragraph E of the Basic Lease Provision. (a) Use. The Premises, shall be solely for the purposes and under the trade name set forth in Paragraph D and F of the Basic Lease Provisions and for no other purpose and under no other trade name. (b) Leased Premises Under Construction. In the event that the are under construction, Lessor and Lessee recognize that final construction may result in a minor increase or in the decrease in the dimensions or the total square feet of the Gross Area of the total square feet of the Gross Leasable Area of the Premises is increased or by less than five (5%) percent, no change will be made in this Lease. If the final construction results in an increase or decrease in total square feet of the Gross Leasable Area of the Premises in excess of five (5%) percent, Lessor and Lessee shall enter into an amendment of this Lease confirming the correct square feet of the Gross Leasable Area of the Premises and adjusting the Minimum Monthly Rent on a prorata basis. (c) Suitability. Lessee acknowledges that neither Lessor nor any agent of Lessor has made any representation or warranty with respect to the Premises or with respect to the suitability of the Leased Premises or the Shopping Center for the conduct of Lessees business, nor has Lessor agreed to undertake any modification, alteration or improvement to the Leased Premises except as provided in this 2. Term. The Lease Term shall be as set forth in Paragraph G of the Basic Lease Provisions. 3. Rent. (a) Minimum Monthly Rent The "Minimum Monthly Rent shall be as set forth in Paragraph H of the Basic Lease Provisions. (1) Rental Payment Date. The Minimum Monthly Rent shall be payable in equal monthly installments without offset or reduction, in advance, on the first day of each and every month of the Lease Term beginning on the Lease commencement Date. Should the Lease Commencement Date fall on a date other than the first day of the month, the first month's Minimum Monthly Pent shall be paid in full and the second months Minimum Monthly Rent shall be prorated appropriately. (b) Percentage Rent. In addition to the lease Monthly Rent to be paid by Lessee pursuant to this Paragraph 3, Lessee pay to Lessor an amount equal to a percentage of "Gross Sales", as defined below, of the Lessee made in, upon or from the Premises during each lease year of the Lease Term, less the aggregate amount of the Minimum Monthly Rent paid by Lessee during such lease year. The percentage of Gross Sales herein referred to shall be the percent set forth in Paragraph I-1 of the Basic Lease Provisions specified as "Percentage Rent". Such Percentage Rent shall be computed on a monthly basis in each lease year and,. on or before the tenth (10th) day of the calendar month immediately following the close of such monthly period, Lessee shall pay to Lessor the amount by which the sum so computed as the percentage of Gross Sales of the Lessee during said period exceeds the installment of Minimum Monthly Rent payable during said period. At the close of each lease year and within thirty (30) days thereafter, there shall be determined the Gross Sales of during said lease year and the amounts paid to Lessor as Minimum Monthly Rent and as Percentage Rent for said lease year. Thereupon, an adjustment shall be made with respect to said Minimum Monthly Rent and Percentage Rent as follows: if Lessee shall have an amount of Percentage Rent greater than is in fact required to pay for the lease year under the terms hereof the excess so determined shall be applied against amounts due from Lessee p to the Lease, except that, if any unused excess exists at the expiration or termination of this Lease, such sum shall. be paid to within fifteen (15) days after Lease returns the Leased Premises in the condition required under this Lease. If has paid to Lessor an amount of Percentage Rent less than Lessee is required to pay, Lease shall immediately pay the difference to Lessor. For the purpose of computing Percentage Rent, sales in the period prior to the commencement of the first lease year shall be added to the sales for the first full month of the first lease yew, Percentage Rent due and payable (if any) for this entire period shall be the amount in excess of the monthly installments of Minimum Monthly Rent which shall be payable by during said period. (1) Definition of Gross Sales. Gross Sales of Lessee means that gross selling price of all merchandise or services sold, leased, licensed, or delivered in or from the Premises by Lessee, its permitted sublessee, licensees, or concessionaires, whether for cash or on credit, including the gross amount received by reason of orders taken on the Premises although filled elsewhere, and whether made by store personnel or vending machines (as allowed by this Lease). Any transaction on an installment basis, including, without limitation, any "lay-away" sale or like on, or otherwise involving the extension of credit, shall be treated as a sale for the first. price at the time of the transaction, of the time of payment or when title passes. Gross Sales shall also include any sums Lessee shall receive from pay telephones and stamp machines. Gross Sales shall not include, or if included there shall be deducted (but only to the extent they have been included), sales taxes, but only if such sales taxes are added to the selling price, separately stated, collected separately from the selling price of merchandise or services, and collected from customers. Within three (3) years after the receipt of any such statement, Lessor at any time shall be entitled to an audit of such Gross Sales either by Lessor or by a certified public accountant to be designated by Lessor. Such audit shall be limited to the determination of Gross Sales as defined herein; all records of business done in and about the Leased Premises by Lessee, its subleases, licensees and concessionaires, including but in no way limited to, all state and municipal sales tax and remits, reports to the State Board of Equalization., income and franchise tax returns daily detailed dated cash register strips, bank books, voucher bills and all records, documents and papers pertaining to the business done in the Leased Premises, shall be subject to the inspection of Lessor for such purpose; additionally, Lessor shall have the right to examine and check the total an said cash register, daily, weekly, or monthly at its election for the purpose of determining Gross Sales and Percentage Rent; all such inspection may be conducted during normal business hours at Lessee's principal place of business by Lessor, its accountants and/or Attorneys. If it shall be determined as a result of such audit that there has been a deficiency in the payment of Percentage Rent, then such deficiency shall become immediately due and payable with interest at the highest rate allowed by law. If Lessee's statements for the pertinent lease year shall be found to have understated Gross Sales by more than two percent (2%), then the reasonable cost of the audit shall be paid by Lessee to Lessor, if the understatement exceeds ten percent (10%), then in addition to the payment of said audit cost and all other legal remedies of Lessor, such understatement shall be deemed a breach of this Lease and shall entitle Lessor to cancel and terminate this Lease. Any information gained from such statements or inspection shall be confidential and shall not be disclosed other than to carry out the purposes hereof; provided; however, Lessor shall be permitted to divulge the contents of any such statements in connection with any financing arrangements or assignments of Lessor's interest in the Leased Premises or in connection with any administrative or judicial proceedings in which Lessor is involved and where Lessor may be required to divulge such information. Statement of Gross Sales. Lessee agrees to furnish or cause to be furnished to Lessor simultaneously with the payment of Percentage Rent (if any) a statement of Gross Sales of the within (10) days after the close of each calendar month, and an annual statement of Gross Sales within thirty, (30) days after the close of each lease year or within thirty (30) days after the expiration or termination of the Lease Term. Such statements shall be signed by Lessee if Lessee is composed of individuals or by a responsible officer if Lessee is a corporation. Lessee shall keep at the Leased Premises full and accurate books of account, records, cash receipts, and other pertinent data showing its Gross Sales and Lessee shall record therein every sale and other transaction made from the Leased Premises. Lessee shall also furnish to Lessor upon request, copies of its quarterly state sales and use tax returns filed with the state in which the Shopping Center is located. Such books of account, records, cash receipts, and other pertinent data shall be kept for a period of three (3) years after the end of each lease year. The receipt by Lessor of any statement or any payment of Percentage Rent for any period, shall not bind Lessor as to the correctness of the statement or the payment (c) Prepaid Rent Concurrently with Lessees execution of this Lease, Lessee shall pay to Lessor the sum as stated in Paragraph I-2 of the Basic Lease Provisions as "Prepaid Rent" for the months designated therein. (d) Definition of Rent All of the payments described in the foregoing subsections 3(a) through 3(c), are hereinafter collectively referred to as "Rent" 4. Payment of Rent. Lessee agrees to pay the Rent herein reserved at the time hereinabove set forth, without deduction or offset, prior notice or demand, in lawful money of the United States of America, to the Lessor as set forth in Paragraph M of the Basic Lease Provisions or to such other person and/or at such other place as Lessor may from time to time designate in writing. 5. Possession. Possession of the Leased Premises shall be tendered to the Lessee upon execution of the agreement or at such later date as the parties may agree in writing. If Lessor is unable to do possession of the Premises by the date specified for the commencement of the term as a result of causes beyond its reasonable control Lessor shall not be liable for any damage caused for to deliver possession, and this shall not be void or voidable. Lessor shall not be liable for rent until Lessor delivers possession of the Premises to but the term not be extended by the delay 6. Payment of Taxes and Assessments by Lessee. Lessee shall reimburse Lessor as more specifically provide in Paragraph 17, below, for Lessee's Proportionate Share, as defined in Paragraph 17 below, of all taxes and assessments assessed, levied, imposed or applicable to the Premises and/or the Shopping Center including without limitation, real property taxes, assessment. improvement bonds, and other governmental charges, commercial rental tax, business tax, license fees, or levies, general and special, regular and supplemental, ordinary and extraordinary, unforeseen as well as foreseen, of any kind or nature, hereinafter collectively referred to as "Impositions", which are assessed, levied, imposed or become a lien upon the Premises, the Shopping Center of which the Premises are a part or become payable during the term; excepting only inheritance taxes, or taxes levied on or computed by reference to Lessor's personal net income as a whole on all of Lessor's investments. The term Impositions shall also include any tax, fee, levy, assessment or charge imposed as the result of a transfer, either partial or total of Lessor's interest in the Leased Premises and/or the Shopping Center. If at any time subsequent to the date of this Lease, the methods of taxation prevailing as of the date of this Lease shall be altered so that in lieu of or as a supplement to or a substitute for the whole or any part of any taxes, charges or assessments now levied, assessed, or imposed on the Leased Premises and for the Shopping Center and appurtenances thereto and the facilities thereof, or the real property relating thereto, there shall be levied, assessed, or imposed (a) a tax, assessment, levy, imposition or charge wholly or partially as a net income, capital or franchise levy or otherwise on the rents, issues, profits or income derived therefrom or (b) the tax, assessment, levy (including but not limited to any municipal, state or federal levy), imposition or charge measured by or based in whole or in part upon the Leased Premises and appurtenances thereto and the facilities thereof or the real property relating thereto and unposed upon Lessor, or (c) a license fee measured by the Rent payable under this Lease, then all such taxes, assessments, levies, impositions or charges, or the part thereof so measured or based, shall be deemed to be included in the term Impositions. 7. Assignment and Subletting. (a) Lessor's Consent Required. Lessee shall not voluntarily, by operation of law or otherwise assign this Lease or enter into license or concession agreements, sublet all or any part of the Leased Premises, or otherwise transfer, mortgage, pledge, hypothecate, or encumber all or any part of Lessee's interest in this Lease or in the Leased Premises or any part thereof, or suffer or permit the Leased Premises or any part thereof, to be used by any third party other than Lessee, its authorized agents, employees, invitee, and visitors, without Lessor's prior written consent and any attempt to do so without such consent being first had and obtained shall be wholly void and shall constitute a breach of this Lease. (b) Reasonable Consent. If Lessee is in default under this Lease, it will not be unreasonable for Lessor to withhold consent regardless of the proposed assignee or sublessee. If Lessee is not in default and complies with the following conditions and Lessor is satisfied with the documentation submitted Lessor shall not unreasonably withhold its consent to the assignment of this Lease or the subletting of the Leased Premises or any portion thereof. Lessee shall submit in writing to Lessor for Lessor's review and approval sixty (60) days prior to the effective date of the proposed assignment (i) the name and legal composition of the proposed assignee or sublessee; (ii) the nature of the proposed assignee's or sublessee's business to be carried on in the Leased Premises; (iii) the terms and provisions of the proposed transfer; (iv) and information as Lessor may request concerning the proposed assignee or sublessee, including without limitation, financial history, credit rating, and business experience. Lessee acknowledges that Lessor has entered into this Lease in reliance on the particular skills, knowledge, and experience of Lessee and/or the principal officer of Lessee with respect to the conduct of business in the Leased Premises; Lessee recognizes that Lessor's substantial investment in the Leased Premises and the willingness of Lessor to put that investment at risk under the terms of this Lease is based upon Lessor's judgment. If in Lessor's sole judgment, the quality of professional services or business is or may be in any way adversely affected during the term of this Lease or the financial worth of the proposed new Lessee is less than that of Lessee executing this Lease or Lessee, and Lessee's Guarantor, if any, or if the investigation discloses other information unsatisfactory to Lessor, Lessor reserves the right to refuse such consent. Anything to the contrary notwithstanding contained herein or elsewhere in this Lease, Lessor, as additional consideration for approval of such assignment or subletting, shall be entitled; (i) to receive any and all consideration payable in connection therewith, including without limitation, any additional rent or other charges or any lump sum settlement; and/or (ii) to require increases in Minimum Monthly Rent and Percentage Rent payable to Lessor consistent with the then current Minimum Monthly Rent rate for a new lease for similar Leased Premises and to modify this Lease accordingly increasing the Minimum Monthly Rent, adding and/or amending a Percentage Rent clause; and/or (iii) to modify such other provisions of this Lease, as Lessor may require to bring this Lease into compliance with its current leasing practice, including without limitation cancellation of any options to extend the term granted hereunder, if any; and/or (iv) to assume the Lease, to sublease the Leased Premises or to consummate the proposed transfer on the same terms and conditions (excluding any differences in Rent or other financial terms) specified in any notice of a proposed assignment, sublease, or transfer, such option to be exercised within ten (10) days of receipt of a written notice thereof, and/or (v) to cancel or terminate this Lease upon thirty (30) days written notice to Lessee provided that in such event, Lessee, may elect by written notice to Lessor within ten (10) days of delivery of notice of the cancellation or termination to forego such assignment or subletting and to retain the Leased Premises for the balance of the term of this Lease on the terms and conditions herein set forth. (c) No Release of Lessee. No consent by Lessor to any assignment or subletting by Lessee shall relieve of any obligations to be performed by Lessee under this Lease, whether occurring before or after such consent assignment of the Lease, or subletting of the Premises. The consent by Lessor to any assignment or subletting shall not relieve Lessee from the obligation to obtain Lessor's express written consent to any other such assignment of the Lease or subletting of the Leased Premises. The acceptance of Rent by Lessor from any other person shall not be deemed to be a waiver by Lessor of any provision of this Lease or to be a consent to any assignment subletting, or other transfer. Consent to one assignment, subletting, or other transfer shall not be deemed to constitute consent to any subsequent assignment, subletting, or other transfer. Lessee hereby irrevocably assigns to Lessor all Rent and other sums from any such assignment or subletting of the Leased Premises, and agrees that Lessor, as assignor and as attorney-in-fact for Lessee, or a receiver for Lessee appointed upon Lessor's application, may collect such Rent other sums and apply the same as provided in Paragraph 30 upon Lessee's default. Until the occurrence of any act of default by Lessee, assignee, or sublessee, Lessee shall have the right to collect such sums, provided that all excess sums over the Minimum Monthly Rent called for in the Basic Lease Provisions which any assignee or sublessee covenants to pay shall belong solely and exclusively to Lessor. (d) Costs; Form of Consent. Lessee agrees to reimburse Lessor for Lessor's reasonable fees and costs, with a minimum of two hundred and fifty ($250) dollars, incurred in conjunction with the processing and documentation of any such requested transfer, assignment, subletting, licensing, or concession agreement, change of ownership, mortgage, or hypothecation of this Lease or Lessee's interest in and to the Leased Premises. Each transfer, assignment, subletting, licensing, concession agreement, mortgage, and hypothecation to which there has been consent shall be by an instrument in a writing in a form satisfactory to Lessor, and shall be executed by the transferor, assignor, sublessor, licensor, concessionaire, hypothecator, or mortgagor, and the transferee, assignee, sublessee, licensee, concessionaire, or mortgagee in each instance, as the case may be; and each transferee, assignee, sublessee, licensee, concessionaire, or mortgagee shall agree in writing for the benefit of Lessor herein to assume, to be bound by, and to perform the terms, covenants, and conditions of this Lease to be done, kept, and performed by Lessee including the payment of all amounts due or to become due under this Lease directly to Lessor. One executed copy of such written instrument shall be delivered to Lessor. Failure to first obtain in writing Lessor's consent or failure to comply with the provisions of this Paragraph shall operate to prevent any such transfer, assignment, subletting, licensing, concession agreement, change of ownership, mortgage, or hypothecation from becoming effective. (e) Transfer of Ownership. If Lessee hereunder is a corporation which under the then current laws of the state in which the Shopping Center is located is not deemed a public corporation, or is an unincorporated association or partnership, the transfer, assignment, or hypothecation of any stock or interest in such corporation, association, or partnership in the aggregate in excess of forty (40%) percent shall be deemed an assignment within the meaning and provisions of this Paragraph 7. Further, the dissolution, merger, consolidation or other reorganization of the corporation or the sale or other transfer of forty (40%) percent or more of the assets of the corporation shall be deemed an assignment within the meaning and provisions of this Paragraph 7. 8. Rights and Obligations Under the Bankruptcy Code. Upon the filing of a petition by or against Lessee under the United States Bankruptcy Code, Lessee, as debtor in possession, and any trustee who may be appointed by the Bankruptcy Court agree as follows: (i) to perform each and every obligation of Lessee under this Lease until such time as this Lease is either rejected or assumed by order of the United States Bankruptcy Court; and (ii) to pay monthly in advance on the first day of each month as reasonable, compensation for use and occupancy of the Leased Premises the sum set forth in the Basic Lease Provisions as Rent, and all other charges otherwise due to this Lease; and (iii) to reject or assume this Lease within sixty (60) days of the filing of such petition under Chapter 7 of the Bankruptcy Code or under any other Chapter; and (iv) to give Lessor at least forty-five (45) days prior written notice of any abandonment of the Leased Premises; any such abandonment is to be deemed a rejection of this Lease; and (v) to do all other things of benefit to Lessor otherwise required under the Bankruptcy Code; and (vi) to be deemed to have rejected this Lease in the event of the failure to comply with any of the above; and (vii) to have consented to the entry of an order by an appropriate United States Bankruptcy Court providing all of the above, waiving notice and hearing of the entry of same. Included within and in addition to any other conditions or obligations imposed upon Lessee or its successor in the event of assumption and/or are the following: (i) the cure of any monetary defaults and the reimbursement of any loss within not more than thirty (30) days of assumption and/or assignment; (ii) the deposit of an additional sum equal to three (3) months' Minimum Monthly Rent to be held as a security deposit; (iii) the use of the Leased Premises as set forth in Paragraph 1 of this Lease, (iv) the reorganized debtor or assignee of such debtor in possession or of its trustee demonstrates in writing that it has sufficient background including but not limited to, substantial business experience and financial ability to operate a business in the Leased Premises in the manner contemplated in this Lease and meet all other reasonable criteria of Lessor as did upon execution of this Lease; (v) the prior written consent of any mortgagee to which this Lease has been assigned as collateral security; and (vi) the Leased Premises, at all times, remains a single Leased Premises and business and no physical changes of any kind may be made to the Premises unless in compliance with the applicable provisions of this Lease. No default under this Lease by Lessee, either prior to or subsequent to filing of such a petition, shall be deemed to have been waived unless expressly done so in writing by Lessor. The provisions of this Paragraph 8 shall also apply to any guarantor of this Lease. 9. Waste; Nuisance. Lessee shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other lessee or occupants of the building of which the Leased Premises may be a part or any other building in the Shopping Center, or injure or annoy them use or maintain or permit any nuisance in, on or about the Leased Premises. Lessee shall not commit or suffer to be committed any waste in or upon the Premises. Lessee further covenants and agrees that it will not use or suffer or permit any person or persons to use the Leased Premises or any part thereof for conducting therein a second-hand store, auction, distress or fire sale, or bankruptcy or going-out-of-business sale. During said term, Lessee shall keep the Leased Premises and every part thereof in a clean and wholesome condition, free of any objectionable noises, odors, or nuisances; all health and police regulations shall in all respects and at all times be fully complied with by Lessee. Lessee shall not install any exterior lighting or plumbing fixtures, shades, or awnings, or make any exterior decoration or painting or similar devices on the roof of exterior walls of the Leased Premises, or make any changes to the store front, without Lessor's prior written consent. Use of the roof of the Leased Premises is reserved to Lessor. shall not do anything on the Leased Premises that will cause damage to the building in which the Leased Premises are located; the Leased Premises shall not be overloaded and no machinery, apparatus, or other appliance shall be used or operated in or on the Leased Premises that will in any manner injure, vibrate, or shake the Leased Premises or the premises of an adjacent lessee. Lessee shall not install, maintain, use, or allow in or upon the Leased Premises any pinball machine, coin-operated music machine, or other coin-operated amusement device of any kind or character. 10. Prohibited Use Lessee shall not use, or permit said Leased Premises or any part thereof, to be used for any purpose or purposes other than the purpose or purposes for which said Leased Premises are hereby leased; including but not limited to entertainment (other than as incidental to the use and for which no charge is made to customers) or recreational purposes. a bowling alley, skating rink, health studio or gym, billiard room, game arcade or amusement center, gambling establishment, movie theater, night club, dance hall, bar or tavern (except if incidental to the operation of a restaurant or delicatessen, if said Premises am hereby leased for such purpose or purposes), pawn shop or the sale of second hand property, an "adult" book store, a pornographic shop, house of prostitution or massage parlor, a "training or education facility", a beauty school or barber college, reading room, place of instruction or any other operation catering primarily to students or trainees rather than to customers or for an auction or for the sale or display of motor vehicles, boats, trailers, motor homes, and establishments. Lessee shall not use, or permit said Leased Premises or any part thereof for any use in direct conflict or competition with then granted or existing exclusives. No use shall be made or permitted to be made of said Leased Premises, no acts done, which will increase the existing rate of insurance upon the Leased Premises in which said Leased Premises may be located (once said rate is established), or cause the cancellation of any insurance policy covering said Leased Premises or any part thereof, nor shall Lessee permit to be kept, used or sold in or about said Leased Premises any article which may be prohibited by standard form of fire insurance policies. Lessee shall, at its sole cost comply with any and all requirements, pertaining to the use of said Lease Premises, of any organizations or company necessary for the maintenance of reasonable fire and public liability insurance, covering said Leased Premises and appurtenances. If applicable and if requested by Lessor, and if required by any insurance organization or governmental agency, Lessee agrees to install and maintain good order an Ansul system and such other adequate fire protection systems as Lessor may deem necessary. 11. Alterations. Lessee shall not make, or suffer to be made, any alterations of the Leased Premises, or any part thereof, without the written consent of Lessor having been first had and obtained, which consent shall not be unreasonably withheld. Lessee agrees that all additions or improvements of whatsoever kind or nature made to the Leased Premises, other than equipment, furniture and movable fixtures, shall belong to and become the property of the Lessor upon the expiration of the term of this Lease or sooner termination thereof. The right of the Lessee to remove such equipment, furniture or movable fixtures is conditioned, however, upon Lessee's agreement, and Lessee hereby agrees to repair any damages to the Leased Premises caused by such removal. 12. Abandonment. Lessee shall not vacate or abandon the Premises at any time during the term hereof,. and if Lessee shall abandon, vacate or surrender the Leased Premises, or be dispossessed by process of law or otherwise, it shall be a default under this Lease, and any personal property belonging to Lessee and left on said Leased Premises shall be deemed to be abandoned, at the option of Lessor, or the Lessor may store the same in the name and at the cost of the Lessee. The term "abandoned" as used herein means vacation of the Leased Premises by Lessee or any sublessee or assignee of Lessee for a period of more than six (6) consecutive normal business days. 13. Utilities Lessee agrees to pay, prior to delinquency, all charges and/or assessments for gas, electricity, water, sewage, air conditioning, and telephone service or other services which may be used in said Leased Premises if separately metered, and Lessee's Proportionate Share, as defined in Paragraph 17 below, of such utility charges if not separately metered, in the same manner as payments for the Common Area Maintenance, as set forth in Paragraph 17 below. 14. Maintenance and Repair. Lessee shall at all times-during the term hereof and, and at Lessee's sole cost and expense keep, maintain and repair the Leased Premises and other improvements upon and about the Leased Premises in good and sanitary order and condition including, without limitation, the maintenance, repair and replacement, of any store front, doors, signs, entrances and exits, interior walls, ceilings and floors, fire sprinklers, window casements, glazing and air conditioning system, including contracting with a service company for the monthly maintenance, with a copy of the service contract furnished to Lessor, security system, plumbing, pipes, and utility lines, electrical wiring and conduits. Lessee shall maintain the whole of said Leased Premises in a clean and sanitary condition, in accordance with all applicable state, city and county health and sanitation laws and ordinances and as directed by the proper public, officials during the term of this Lease, Lessee shall also at its sole cost and expense be responsible for any alterations or improvements to the Leased Premises necessitated as a result of the requirement of any municipal, state, or federal authority. If applicable, Lessee shall install and maintain in good working order at all times devices as necessary to ensure that the sewage and drainage system shall not have stoppages. In the event of stoppages created by Lessee's operations, Lessee shall pay or reimburse Lessor for the cost of clearing said stoppages. Lessee shall make any repair or replacement necessary, at its sole cost and expense, for any and all damages caused by a forced entry or attempted forced entry. By accepting possession of the Leased Premises, Lessee shall be deemed to have accepted the Leased Premises as being in good condition and repair. Lessee shall undertake all necessary repairs and maintenance to maintain the Leased Premises in a first class condition, and Lessee agrees on the last day of said term or sooner termination of this Lease to surrender the Leased Premises in a first class condition. Lessee shall not defer needed and reasonably necessary items of maintenance and repair in the final months of this Lease, but shall perform the same throughout and including the last day of the term of the Lease, so that when possession is returned to Lessor, Lessor will not have to perform repairs and maintenance that should have been taken care of by the Lessee under its duty to maintain and make repairs to the Leased Premises. Lessee covenants and agrees to pay promptly when due all claims for work and materials furnished in connection with its maintenance or alteration of the Leased Premises and shall not permit or suffer any liens or encumbrances to attach to the Leased Premises, and shall indemnify Lessor against loss therefrom; provided, however, that Lessee within five (5) days after any final judgment which may be recovered against Lessee or the Leased Premises in any action or litigation ensuing by reason of Lessee's contest of such lien or claim of lien, shall pay the same and fully discharge the Leased Premises and improvement from said lien and judgment, or in the event Lessee appeals any judgment rendered against it or the Leased Premises, provided shall forthwith upon the rendering of such judgment furnish an appeal bond or otherwise cause a stay of execution of such judgment, pending final determination of such appeal. Lessee further covenants and agrees that Lessor may go upon the Leased Premises and make any necessary repairs to the Leased Premises and perform any work therein (i) which may be necessary to comply with any laws, ordinances, rules or regulations of any public authority or of the Insurance Commissioner or Lessor's Insurance Carrier or of any similar body, if Lessee does not make or cause such repairs to be made or performed or cause such work to be performed promptly after receipt of written demand from Lessor, or (ii) which Lessor may deem necessary to prevent waste or deterioration in connection with the Leased Premises if Lessee does not make or cause such repairs to be made or performed or cause such work to be performed promptly after receipt of written demand from Lessor, or (iii) which Lessor may deem necessary to perform construction work incidental to any portion of the Shopping Center adjacent to, above or below the Leased Premises. Nothing herein contained shall imply any duty on the part of Lessor to do any such work which under any provision of the Lease Lessee may be required to do, nor shall it constitute a waiver of Lessee's default in failing to do the same. No exercise by Lessor of any rights herein reserved shall entitle Lessee to any damage for any injury or inconvenience occasioned thereby nor to any abatement of Rent. Except as provided below, Lessor shall not be called upon to make any improvements or repairs in or upon the Leased Premises during the term of this Lease, it being the intention that this Lease shall be what is commonly referred to as a "triple net lease", Lessee being responsible for all expenses of every kind and nature, including capital improvements as well as operating expenses. Subject to the Lessor's right to recoup Lessee's Proportionate Share, as defined in Paragraph 17 below, of such expenses as provided in Paragraph 17 below, Lessor, agrees to repair, maintain and replace as necessary the exterior buildings, foundation roof and structure of the Leased Premises and/or the Shopping Center. 15. Glass Breakage Lessee assumes all risks from breakage of glass on said Leased Premises and will promptly replace all such breakage at its own expense. 16. Common Area. All Common Area shall be subject to the exclusive control and management of Lessor or such other persons or nominees as Lessor may have delegated or assigned to excise such management or control, in whole or in part, in Lessor's place and stead. In no event shall have the right to sell or solicit in any manner in any of the Common Area. Lessor shall at all times have the right and privilege of determining the nature and extent of the Common Area, and of making such changes therein and thereto from time to time which in its opinion are deemed to be desirable and for the best interests of all persons using said Common Area, including the location and relocation of driveways, entrances, exits, automobile parking spaces, the direction and flow of traffic, installation of prohibited areas, landscaped areas, and all other facilities hereof. Lessor hereby grants to customers patrons, suppliers and employees and invitee of Lessee, sub-lessees and concessionaires of Lessee, a non- exclusive license to use parking areas in the Shopping Center for the use of parking motor vehicles during the term of this Lease, subject to rights reserved to Lessor as hereinafter contained. Lessor reserves the right at any time and from time to time to grant similar non-exclusive use to other lessees; to adopt reasonable rules and regulations relating to the use of common areas including parking and no parking areas, and any part thereof; to make changes in parking layout from time to time; to withdraw property from parking use provided adequate customer parking is maintained as reasonably determined by the Lessor; to close any portion of such parking area to such extent as, in the reasonable opinion of Lessor or Lessor's counsel, may be legally sufficient to prevent a dedication thereof or accrual of any right to any person or the public therein or to close temporarily any portion of the parking areas or facilities; and to do and perform any other acts in and to said areas and improvements thereon as Lessor in its reasonable judgement determines to be advisable. It is understood that the employees of Lessee and the other lessee of Lessor within the Shopping Center and the employees of other owners of the Shopping Center shall not be permitted to park their automobiles in the automobile parking areas of the common areas winch may from time to time be designated for patrons of the Shopping Center. Lessor may at its election furnish and/or cause to be furnished either within the Shopping Center parking area, or reasonably close thereto, space for employee parking. Lessor at all times shall have the right to designate the particular parking area to be used by any or all of such employees and any such designation may be changed from time to time. 17. Additional Rent. In addition to the maintenance and repair obligations set forth in Paragraph 14 above, and the Rent specified, Lessee shall pay to Lessor further "Additional Rent" as follows: (a). Lessee's proportionate share of the operating costs of the common areas in the Shopping Center. Lessee's "Proportionate Share" shall be defined, as the proportion that the total square feet of the Gross Leasable Area of the Leased Premises bears to the total square feet of Gross Leasable Area leased to and occupied by others in the Shopping Center, which is owned by Lessor (whether or not open for business). "Opening Costs" shall mean the total costs and expenses incurred in operating and maintaining the common areas including the parking lot, including, without limitation, re-paving and re-striping of the parking area, maintenance of on-site and off-site sewer and utility fines, maintenance of appurtenant easements, gardening and landscaping, exterior painting and maintenance, water and utility charges, alterations due to changes in the law, costs of public liability insurance (including umbrella insurance), rental income and property damage insurance to be obtained by Lessor, cleaning, sweeping, replacements, repairs, lighting, sanitary control and sewer charges, removal of snow, ice, trash, rubbish, garbage and other refuse, reasonable reserves for anticipated expenditures, the cost of personnel to implement such services, to direct parking, and to police the common areas. Operating costs shall also include Lessor's or third parties' expenses for management, accounting, bookkeeping, and collection services, such sums to be reasonably determined by Lessor at rates comparable to those charged for similar services in comparable projects in the same geographic area. "Common Areas" means all areas, space, equipment and special services for parking and ingress and egress, and/or for the common and joint use and benefit of the occupants of the Shopping Center as Lessor may in the future designate, and may change at any time during the term hereof including, without limitation, canopy, parking areas, access roads, on-site and off- site sewer and utility servicing the Shopping Center, driveways, retaining walls, landscaped areas, truck service ways or tunnels, loading docks, pedestrian walkways, courts, stairs, ramps, and sidewalks, storage areas, comfort and first aid stations, wash rooms and parcel pickup stations. (b) Lessee's Proportionate Share of the Lessor's costs as provided in the last paragraph of Paragraph 14. (c) Lessee's Proportionate Share of Impositions, as provided in Paragraph 6. (d) Lessee's Proportionate Share of costs as provided in-Paragraph 21(c). (e) Ten percent (10%) of all the foregoing costs listed in subparagraphs (a) to (d) inclusive to Lessor's administrative and overhead expenses. Upon commencement of Rent, Lessor shall submit to Lessee a statement of the anticipated monthly Additional Rent for the period between such commencement and the following January and shall pay this Additional Rent on a monthly basis concurrently with the payment of the Rent. Lessee shall continue to make such monthly payments until notified by Lessor of a change thereof. By April 1st of each year, Lessor shall endeavor to give Lessee a statement showing the Additional Rent for the prior calendar year and Lessee's allocable share thereof, prorated for the commencement of Rent. In the event the total of the total monthly payments which Lessee has made for the prior calendar year is less than Lessee's actual share of such Additional Rent, then shall pay the difference in a lump sum with the monthly Additional Rent next coming due. Any over payment by Lessee shall be credited towards the monthly Additional Rent next coming due. A budget estimating the anticipated expenditures, shall be prepared by Lessor, and shall be used for purposes of calculating the anticipated monthly. Additional Rent for the then current year with actual determination of such Additional Rent after each calendar year as above provided; excepting that in any year in which re-surfacing or re-roofing is contemplated, Lessor shall be permitted to include the anticipated cost of same as part of the budget. Even though the term has expired and Lessee has vacated the Leased Premises, when the final determination is made of Lessee's share of said Additional Rent for the year in which this Lease terminates, Lessee shall immediately pay any increase due over the estimated Additional Rent previously Paid and/or conversely, any overpayment made shall be immediately rebated by Lessor to Lessee. Failure of Lessor to submit statements as called for herein shall not be deemed a waiver of Lessee's obligation to pay the above amounts, however, the obligation to pay shall be postponed until Lessor has submitted the statement and Lessee shall have ten (10) days thereafter to tender payment to Lessor. 18. Lessor's Right to. Relocate the Leased Premises Lessor shall have the right to relocate the Leased Premises to another part of the Shopping Center in accordance with the following: (i) the new leased premises shall be substantially the same in size, dimensions, configuration, decor, and nature as the Leased Premises described in this Lease, and shall be placed in that condition by Lessor at its cost; (ii) the physical relocation of the Leased Premises shall be accomplished by Lessor at its cost; and (iii) Lessor shall give Lessee at least sixty (60) days notice of Lessor's intention to relocate the Leased Premises. 19. Entry by Lessor. Lessor reserves and shall at any and all reasonable times and with reasonable notice during business hours, have the right to enter the Leased Premises to inspect the same, and agrees to allow "for lease" signs of reasonable size to be placed and remain upon the exterior front of the Leased Premises during the last ninety (90) days of the term hereby created. 20. Compliance with Governmental Regulation Lessee agrees that it will comply with and conform to all laws and ordinances, municipal, state and federal, and any and all lawful requirements and orders of any property constituted municipal, state or federal Board or authority, present or future, in anyway relating to the condition, alteration, use or occupancy of the Leased Premises throughout the entire term of this Lease and to the perfect exoneration from liability of the Lessor doing such work as may be required at its sole expense including, but not limited to, any regulations regarding hazardous or dangerous substances. Without limiting the foregoing, Lease agrees that it will not at any time use or occupy the Leased Premises in violation of the certificate of occupancy issued with regard to the Leased Premises. The judgment of any court of competent jurisdiction or the admission of Lessee in any action or proceeding against Lessee, whether Lessor be a party thereto or not, that Lessee has violated any such law, ordinance, requirement or order in the use of the Leased Premises, shall be conclusive of that fact as between Lessor and Lessee. 21. Insurance and Indemnification. Lessee shall, at its sole cost and expense, cause to be placed in effect immediately prior to commencement of the term of this Lease, and shall maintain in full force and effect during said term of this Lease and any renewals thereof, the following insurance in companies satisfactory to the Lessor and licensed in the state in which the Leased Premises are located and in the joint names of Lessor and Lessee as insured (or as additional insured should Lessor so elect). The insurance carrier shall at all times during the term of this Lease have a policyholder's rating of not less than "A/7" in the most current edition of Bests Insurance Reports: (a) Comprehensive public liability insurance including, if applicable, but not limited thereto, boiler and machinery and any other similar insurance covering the Leased Premises in an amount normally carried by the Lessee in Lessee's normal "blanket" policy, but in any event not less than $1,000,000 combined single limit bodily injury and property damage for injury and/or death to any number of persons in any one accident. Any insurance required of Lessee under this Lease may be furnished by Lessee under a blanket policy carried by it. Such blanket policy shall contain an endorsement in joint names of Lessor and Lessee, reference the premises, and guarantee a minimum limit available for the Leased Premises equal to the insurance amounts required in this Lease. Annually the policy limits of said public liability insurance shall be reviewed and adjusted to a limit as recommended by the Lessor's insurance carrier. Said limit shall be set at an amount which is reasonable given the nature of Lessee's use. In no event shall said coverage be less than $ 1,000,000. (b) Lessee shall, during the entire term of this Lease, keep in full force and effect a policy of Use, Occupancy and Contents Insurance and insurance covering all glass and windows, and if liquor is to be sold on the Leased Premises, Dram Shop Insurance. (c) Lessor shall, during the Lease Term, subject to Lessor's right to recoup, Lessee's Proportionate Share of such costs, as more specifically set forth in Paragraph 17, keep the Leased Premises insured for the benefit of Lessor, for its full replacement value against loss or damage by fire, including a broad form endorsement. Lessee shall provide copies of the insurance policies, appropriately authenticated by the insurer, as set forth in subparagraphs (a) and (c) above (or insurance certificates should Lessor so elect). Such copies or certificates shall be furnished to Lessor upon execution of this Lease. The policies or certificates shall contain a provision that the insurer will not cancel or refuse to renew the policies, or change in any material way the nature or extent of the coverage provided by such policies without first giving the Lessor thirty (30) days prior written notice by certified or registered mail, return receipt requested. Thirty (30) days prior to expiration of any policies of insurance carried by Lessee, Lessee shall provide proof of continuing coverage. In the event Lessee fails to procure, maintain and/or pay for the insurance required by this Lease, at the times and for the duration specified in this Lease, Lessor shall have the right, but not the obligation, at any time and from time to time, and without notice, to procure such insurance and/or pay the premiums for such insurance, in which event shall repay Lessor, as additional rent, all sums so paid by Lessor together with interest thereon and any costs or expenses incurred by Lessor in connection therewith, without prejudice to any other rights and remedies of the Lessor under this Lease. Failure of the Lessee to take out or maintain the insurance policy hereinabove described or to pay the premiums thereon or reimburse the Lessor when due shall carry with it the same consequences as failure to pay any installment of Rent. Lessor shall not be liable for any damage done to said Leased Premises or any of the fixtures, merchandise, property or equipment therein contained, whether owned by Lessee or by any other person, due to the overflowing or breaking of steam or water pipes, drains, boilers, basins, toilets, lavatories or gutters or from smoke, fire, odor, earthquake, explosion, gas, electricity, lighting and wiring, or from any other cause and whether having its origin in the Leased Premises hereby leased or elsewhere. Lessee, as a material part of the consideration to be rendered to Lessor, hereby waives all against Lessor for injury to any person or for damages to goods, wares, and merchandise in, upon or about said Leased Premises from any cause arising at any time except the negligence or willful misconduct of Lessor, and Lessee will indemnify, protect, defend and hold Lessor harmless from any damages or injury to any person of to the goods, wares and merchandise of any person arising from the use of the Leased Premises by or under Lessee or from the failure of the Lessee to maintain the Leased Premises in the manner herein required 22. Waiver of Subrogation. Lessor and Lessee hereto do hereby waive its entire right of recovery against the other for any damages caused by an occurrence against by Lessor or Lessee, and the rights of any insurance carrier to be subrogated to the rights of the insured under the applicable policy to the extent allowed by the respective insurance carrier. Lessor and Lessee each covenant that at the Commencement Date of the term hereof, their respective insurance policies will contain waiver of subrogation endorsements, and that if such endorsements, for any reason whatsoever, are about to become unavailable, they will give the other party not less than thirty (30) days prior written notice of such impending unavailability. 23. Surrender. Upon the expiration of the term hereof to the leasehold interest created hereby and subject to Lessor's lien rights set forth herein, Lessee shall remove its interior and exterior signs and all of its movable trade fixtures, equipments, and personal property from the Leased Premises and fully repair and/or restore for all damage thereto resulting from such removal, and shall thereupon surrender the Leased Premises in the same condition as they were on the Lease Commencement Date, reasonable wear and tear excepted. Lessee shall upon surrender, furnish a certification by a qualified company that all mechanical equipment in the Leased Premises is in good working condition. All property of any kind not removed from the Leased Premises shall be deemed abandoned by Lessee. If the Leased Premises are not surrendered at the end of the Lease Term, Lessee shall indemnify Lessor against loss or liability resulting from delay by Lessee in surrendering the Leased Premises including but not limited to any loss arising from any claim made by any succeeding Lessee founded on such delay. Except as provided herein, no act or conduct of the Lessor, whether consisting of the acceptance of the keys to the Leased Premises, or otherwise, shall be deemed to be or constitute an acceptance of the surrender of the Leased Premises by the Lessee prior to the expiration of the term hereof, and such acceptance by the Lessor of the surrender by the Lessee shall only flow from and must be evidenced by a written acknowledgment of acceptance of surrender signed by the Lessor. 24. Subordination; Estoppel Certificate. At Lessor's option, this Lease shall be subordinated to any mortgage or deed of trust which is now or shall be placed upon the Leased Premises, and Lessee agrees to execute and deliver any instrument, without cost to it, which may be deemed necessary to further effect the subordination of this Lease to any such mortgage or deed of trust; provided, however, such mortgage or deed of trust shall provide, or the mortgage or beneficiary thereunder shall agree, in writing in recordable form delivered to Lessee, that so long as Lessee is not in default under this Lease, foreclosure of any such mortgage or deed of trust or sale pursuant to exercise of any power of sale thereunder shall not affect this Lease but such foreclosure or sale shall be made subject to this Lease which shall continue in full force and effect, binding on the Lessee and transferee. Lessee shall thereafter attorn to the transferee as if said transferee was the Lessor under this Lease. Lessee shall, at any time upon not less than ten (10) days prior request by Lessor, execute, acknowledge and deliver to Lessor an estoppel certificate, in writing in a form satisfactory to Lessor certifying that this Lease is unmodified and 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) and, if so, the dates to which the Rent and any other charges have been paid in advance, it being intended that any such statement delivered pursuant to this subparagraph may be relied upon by a prospective purchaser or encumbrancer (including assignees) of the Leased Premises. 25. Attorneys' Fees. In the event of the bringing of any action by either party hereto as against the other hereon or hereunder or by reason of the breach of any covenant or condition on the part of the other party or arising out of this Lease, then and in that event the party in whose favor final judgment shall be entered shall be entitled to have and recover of and from the other reasonable attorneys' fees which shall be fixed by the Court Should Lessor become a party defendant to any litigation concerning this Lease or any part of the Leased Premises by reason of any act or omission of the Lessee and not because of any act or omission of the Lessor, then Lessee shall indemnify, protect, defend and hold Lessor harmless from all liability by reason thereof and shall pay to Lessor all reasonable attorneys' fees and costs incurred by Lessor in such litigation. In addition, Lessee shall reimburse Lessor for any Attorneys' fees or costs reasonably incurred by Lessor, whether or not suit be instituted, with respect to any default of Lessee under the terms of this Lease 26. Holding Over. Should the Lessee hold over the term hereby created with or without consent of the Lessor, the term of this Lease shall be extended, at Lessor's option on a month to month basis, at twice the rent paid in the last year of the term, including Percentage Rent and adjustments, hereinabove provided, and otherwise upon the covenants and conditions in this Lease contained, until either party hereto serves upon the other thirty (30) days written notice of termination, reciting therein the effective date of cancellation. 27. Sale by Lessor. In the event of a sale or conveyance by the Lessor of the Leased Premises, upon the execution of a written assumption by the purchaser of Lessor's obligations under this Lease, the same shall operate to release the Lessor from any liability arising thereafter out of any of the covenants or conditions, expressed or implied, herein contained in favor of the Lessee, and in such event the agrees to look solely to the responsibility of the successor in interest of the Lessor in and to this Lease. If any security given by Lease to secure the faithful performance of all or any of the covenants of this Lease on part of the Lessee, Lessor may transfer and/or deliver the security, as such, to the purchaser, and upon proper written notice to the Lessee, as provided by law, Lessor shall be discharged from any liability arising thereafter in reference thereto. 28. Damage or Destruction. In the event of damage or destruction of the Leased Premises from an insured casualty, Lessor shall forthwith and with all due diligence repair the same and restore the Lease Premises to substantially the same condition in which they existed prior to such damage or destruction, at Lessor's cost and expense, and such damage or destruction shall in no way annul or void this Lease. Anything in this Paragraph to the contrary notwithstanding, if any such damage or destruction to the Leased Premises is not covered by insurance or cannot be repaired and the Leased Premises restored in the manner hereinabove set forth within one hundred eighty (180) days after the permits to repair such damage or destruction have been obtained, then this Lease may be terminated by the Lessor by notice in writing to the Lessee within sixty (60) days after such damage and destruction, and following such notice this Lease shall be null and void and of no force and effect and the parties shall be relieved of all further liability hereunder. If this Lease is not thereby terminated, Lessor shall repair such damage and destruction and restore the Leased Premises in the manner hereinabove set forth. If the damage or destruction is caused by a casualty covered by insurance, the proceeds of the insurance provided in Paragraph 21 shall be used and paid to Lessor for such repair or reconstruction and both parties shall execute such documents as may be necessary to effect such payment. Rent payments shall continue while the Leased Premises are being replaced or restored for resumption of business operations. In the event that destruction occurs and the destruction amounts to more than one-third of the then replacement value of the Shopping Center, then either party by written notice given to the other within fifteen (15) days after the destruction occurs may elect to terminate this Lease forthwith. In the event that this Lease is terminated under provisions of the above Paragraph the entire proceeds of the insurance but not including any awards attributable to the loss of any trade fixtures or personal property of Lessee, shall belong to Lessor. Both parties shall execute such documents as the insurance company may require. 29. Condemnation. If title to all of the Premises is taken for any public or quasi-pubic use under any statue, or by right of eminent domain, or by private purchase in lieu of eminent domain, or if title to so much of the Leased Premises is so taken that a reasonable amount of reconstruction of the Leased Premises will not result in the Leased Premises being a practical improvement and reasonably suitable for Lesse's continued occupancy for the uses and purposes for which the Leased Premises are leased, then, in either event, this Lease shall terminate on the date that possession of the Leased Premises, or part of the Leased Premises, is taken. If any part of the Leased Premises shall be so taken and the remaining part of the Leased Premises. (after reconstruction of the then existing building in which the Leased Premises are located) is reasonably suitable for Lessee's continued occupancy for the purposes and uses for which the Leased Premises are leased, this Lease shall, as to the part so taken, terminate as of the date that possession of such part is taken, and the Minimum Monthly Rent shall be reduced in the same proportion that the Gross Leasable Area of the portion of the Leased Premises so taken (less any additions to Leased Premises by reconstruction) bears to the original Gross Leasable Area of the Leased Premises. Lessor shall, at its own cost and expense, make all necessary repairs or alterations to the building in which the Leased Premises are located so as to constitute the portion of the Leased Premises a complete merchandising unit. There shall be no abatement of Rent during such restoration except to the extent otherwise provided in this Paragraph. All compensation awarded or paid upon a total or partial taking of the fee title of the Leased Premises shall belong to the Lessor, whether such compensation be awarded or paid as compensation for diminution in value of the leasehold or of the fee, Lessee not being entitled to any award for the value of this Lease; provided, however, that Lessor shall not be entitled to any award made to Lessee for depreciation to and cost of removal of stock and fixtures, from the entire award, Lessee shall be entitled to the value of the appropriation of its trade fixture and any amount included therein with respect to Lessee's removal or relocation costs or damages to Lessee's personal property. 30. Default. In the event of any default under this Lease by Lessee, and such default, if it be in the payment of Rent or any other default which can be cured by the payment of money, continues uncured for a period of three (3) days after written notice thereof from Lessor, or if it be a default in any of the other provisions of this Lease, and such default continues uncured for a period of (30) days after written notice thereof from Lessor, then besides any other rights and remedies of Lessor at law or equity, Lessor shall have the right either to terminate this Lease or to have this Lease continue in full force and effect with Lessee at all times having the right to possession of the Leased Premises. Lessor shall recover from Lessee an award of damages equal to the sum of (A) the Worth at the Time of Award of the unpaid Rent which had been earned at the time of termination, (B) the Worth at the Time of Award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such Rent loss that Lessee affirmatively proves could have been reasonably avoided, (C) the Worth at the Time of Award of the amount by which the unpaid Rent for the balance of the Term after the time of award the amount of such Rent loss that Lessee affirmatively proves could be reasonably avoided, (D) any other amount necessary to compensate Lessor for all the detriment either proximately caused by Lessee's failure to perform Lessee's obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, and (E) all such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time under applicable law. For purposes of this Section, "Worth at the Time Award" shall be computed by allowing interest at the highest contract rate permissible under the laws of California or at such other rate as may be specifically prescribed by statue and by using as the annual Rent reserved hereunder the annual Rent plus the aggregate amount of any other Rent, charges and payments paid or payable by Lessee hereunder for the twelve (12) month period prior to the Lessee's default including, without limitation, all amounts payable for taxes, insurance, and other common area and Operating Costs. Should Lessor, following any breach or default of this Lease by Lessee, elect to keep this Lease in full force and effect with Lessee retaining the right to on possession of the Leased Premises (notwithstanding the fact that Lessee may have abandoned the Leased Premises), then besides all other rights and remedies Lessor may have at law or equity, Lessor shall have the right to enforce all of Lessor's rights and remedies under this Lease, including, but not limited to, Lessor's right to recover the Rent as it becomes due under this Lease. Nothing herein shall prevent Lessor from pursuing any and all other remedies it may have upon Lessee's default including but not limited to its statutory unlawful detainer remedy. Lessor shall have the right, in addition to its other remedies and means of redress provided by this Lease and by law, to obtain specific performance of any and all covenants or obligations of Lessee to be kept and performed under this Lease. Lessee hereby waiver any and all rights conferred by Section 3275 of the Civil Code of California and by Sections 1174(c) and 1179 of the Code of Civil Procedure of California and any and all other laws and rules of law from time to time in effect during the Lease Term providing that Lessee shall have any right to redeem, reinstate this Lease following its termination by reason of Lessee's breach. Lessor hereby Lessee hereto waive trial by jury in any action or proceeding arising out of or relating to this Lease and the right to file therein any cross-complaints, counterclaims against the other, other than those which may be compulsory. All remedies herein conferred shall be deemed cumulative and no one exclusive of the other or of any other remedy conferred by law. 31. Waiver. No covenant or condition of this Lease can be waived except by the written consent of the Lessor or Lessee as appropriate, and forbearance or indulgence by Lessor or Lessee in any regard whatsoever shall not constitute a waiver of the covenant or condition to be performed by the Lessee or Lessor to which the same may apply, and, until complete performance by the Lessee or Lessor of said covenant or condition, the Lessor or Lessee shall be entitled to any invoke any remedy available unto it under this Lease or by law, despite said forbearance or indulgence. The subsequent acceptance of Rent hereunder by Lessor shall not be deemed to be a waiver of any preceding breach by Lessee of any term, covenant or condition of this Lease, other than the failure of Lessee to pay the particular Rent so accepted, regardless of Lessor's knowledge of such proceeding breach at the time of acceptance of such Rent. 32. No Personal Liability of Lessor's Shareholders, et al. Lessor, is a California unincorporated association doing business as a real-estate investment trust. The trustees, officers, agents and employees of Lessor have no power to bind its shareholders personally, and no obligation of Lessor shall be binding personally upon its shareholders, trustees, officers, agents, or employees. All persons dealing with Lessor, its trustees, officers, agents, employees or representatives shall look solely to Lessor's property for satisfaction of claims of any nature arising in connection with the affairs of Lessor. 33. Successors and Assigns. This Lease shall inure to the benefit of and be binding upon the heirs, executors, administrators, successors and assigns of the respective parties hereto, always providing that nothing in this Paragraph contained shall impair any of the provisions hereinabove set forth inhibiting assignment without the written consent of the Lessor. 34. Notice Any notice, statement, demand, request, consent, approval, authorization or designation required hereunder to be served upon either of the parties hereto shall be sufficiently served upon the other party by personal delivery or forty eight (48) hours after mailing the same, registered or certified mail, return receipt requested, postage prepaid, or Federal Express, addressed as set forth in Paragraph M, of the Basic Lease Provisions, in the instance of Lessor, and to the Leased Premises in the instance of the Lessee, or to such other address as may from time to time be furnished in writing by Lessor to Lessee or by Lessee to Lessor or which may be set forth in the Basic Lease Provisions. 35. Competition. Lessee, or any individual, firm or corporation that controls Lessee or is controlled by Lessee, shall not own, operate, or become financially interested in a business similar to the one conducted on the Leased Premises within five (5) miles in any direction from the Leased Premises, the mileage measured on a straight-line basis on a map, not following contours of the land and streets. If Lessee defaults in performance under this Paragraph, Lessor can elect to include the gross sales from such other business in the gross sales made from or upon the Leased Premises for the purpose of computing any Percentage Rent payable under this Lease. 36. Rent Control The Rent and other terms of this Lease are the result of extensive negotiations between Lessor and Lessee, both of whom have professional real estate advice, and represent what both Lessor and Lessee have agreed are fair and reasonable for similar properties in the area. In the event any governmental body or agency should enact any regulation, ordinance or law which would reduce the Rent herein provided and the Lessee upon the enactment or at any time thereafter seeks to avail itself of the benefits of such regulation, ordinance or law, then the Lessor may upon thirty (30) days written notice to Lessee terminate this Lease and take possession of the Leased Premises for Lessor's use or such other use as Lessor may wish to make of the property. Nothing herein however shall require Lessee to violate any statute or regulation which will subject Lessee to a fine or penalty. 37. Quiet Enjoyment. Lessor covenants and warrants that upon Lessee's paying the Rent and observing and performing all of the terms, covenants and conditions to be observed and performed by hereunder, Lessee may peaceably and quietly enjoy the Leased Premises. 38. Signs, Auctions, Window. Lessor covenants not place, construct or maintain on the glass panes or supports of the windows of the Leased Premises, the doors, or the exterior walls or roof of the building in which the Leased Premises are located or any portion of the common and parking areas or any improvements located thereon, or on any other area of the Shopping Center or on any interior portion of the Leased Premises that may be visible from the exterior of the Leased Premises, any signs, (including, but not limited to, going out of business signs), advertisements, name, insignias, trademarks, descriptive material or any other similar item, which does not otherwise comply with Exhibit D, without Lessor's prior written consent issued subjected to Lessor's sole discretion. All exterior signs installed by or at the of expense of the Lessee shall be subject to Lessor's prior written approval and shall comply with Exhibit D attached hereto. Lessee shall not, without Lessor's prior written consent, place, construct or maintain on the Leased Premises any advertising media including, but not limited to, search lights, flashing lights, loud speakers, phonographs or other similar visual or audio media. Lessee shall not without Lessor's prior written consent solicit business in, on or about the common and parking areas or display or sell merchandise outside the Leased Premises or permit to be conducted any sale by auction in, on or about the Leased Premises, whether said action be voluntary or involuntary, pursuant to any assignment, for the benefit of creditors or pursuant to any bankruptcy other insolvency proceedings. Lessee shall not place, construct, install or maintain any covering on the inside or outside of the windows of the Leased Premises, without Lessor's prior written consent. 39. Covenant of Continuous Operation. Lessee shall continuously and uninterruptedly use the Leased Premises for the uses specified in this Lease at least eight (8) hours per day every day excepting Federal holidays. Further the Lessee shall maintain adequate inventory and have an adequate number of personnel operating the Leased Premises at all times to service and supply the requirements of Lessee's customers and keep its Leased Premises in a neat, clean and orderly condition. Lessee shall not lower the quality of its merchandise or change the quality of its operations without Lessor's written consent. Lessee shall employ its best efforts to operate its business on the Leased Premises so as to produce maximum Gross Sales. For the purpose of computing Percentage Rent, the Gross Sales for any period during which does not conduct its business as required by this Paragraph and/or any other provision in this Lease shall be deemed to be the greater of the Gross Sales generated on the Leased Premises during that period, or the Gross Sales generate during the corresponding period of the lease year in which Lessee's highest Gross Sales were generated. If the Leased Premises are destroyed or partially condemned and this Lease remains in full force and effect, Lessee shall continue operation of its business at the Leased Premises to the extent reasonably practical from the standpoint of good business judgment during any period of reconstruction. Lessee shall not use all or any portion of the Leased Premises for office, clerical, and other non-selling purposes. 40. Security Deposit As set forth in Paragraph J of the Basic Lease Provision, Lessee shall pay a "Security Deposit" which will be held by the lessor to secure performance under this Lease. The Security Deposit shall not be mortgage, assigned, transferred or encumbered by Lessee and any such act on the part of Lessee shall be without force and effect and shall not be binding upon Lessor. If any Rent or other sums due hereunder shall be overdue and unpaid or should Lessor make payments on behalf of the Lessee or should Lessee fail to perform any of the terms of this Lease, then Lessor may at its option and without prejudice to any other remedy which Lessor may have, on account thereof, appropriate and apply said Security Deposit or so much thereof as may be necessary to compensate Lessor toward the payment of Rent or other sums due Lessor or for the loss or damage sustained by Lessor due to such breach on the part of Lease; Lessee shall within ten (10) days of demand therefore restore said Security Deposit to the original sum deposited. In the event Lessee fails to occupy the Leased Premises in accordance with the terms of this Lease, Lessor's remedies shall include, without limitation thereto, retention of all sums deposited herewith or otherwise paid pursuant to this Lease. Further, the Lessor may apply the Security Deposit to repair damages to the Leased Premises caused by the Lessee or to clean the Leased Premises upon termination of this Lease. The Security Deposit shall not bear interest nor shall Lessor be required to keep such sum separate from its general funds. Should Lessee comply with all of said terms and promptly pay all Rent and all other sums payable by Lessee when due to Lessor, said Security Deposit shall be returned in full to Lessee, (or, at Lessor's option, to the last assignee of Lessee's interest hereunder) at the expiration of the term of this Lease. In the event of bankruptcy or other debtor-creditor proceedings against Lessee, such Security Deposit shall be deemed to be applied first to the payment of Rent and other sums due Lessor for all periods prior to the filing of such proceedings. 41. Late Charges. Lessee hereby acknowledges that late payment by Lessee to Lessor of Rent or other sums due hereunder shall cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges. Accordingly, if any installment of Rent or any other sums due from Lessee shall not be received by Lessor or Lessor's assignee within six (6) days after the date due, then Lessee shall pay to Lessor a late charge equal to ten (10%) percent of such overdue amount plus any attorney's fees incurred by Lessor by reason of Lessee's failure to pay Rent and/or other sums when due hereunder. Any payment postmarked by the 5th of the month shall be presumed to be mailed in a timely manner. The parties hereby agree that such late charge represents a fair and reasonable estimate of the cost that Lessor will incur by reason of the late payment by Lessee. Acceptance of such late charges by the Lessor shall in no event constitute a waiver of Lessee's default with respect to such overdue amounts, nor prevent Lessor from exercising any of the other rights and remedies granted hereunder. 42. Environmental Matters (a) Lessee's Covenants Regarding Hazardous Materials. (1) Compliance with Environmental Laws. Lessee shall at its sole cost and expense, at all times and in all comply with all federal, state, local or regional laws, regulations ordinances or guidelines, "Hazardous Materials Laws" concerning the management, use, handling, generation, storage, transportation, presence, discharge or disposal of any oil, petroleum products, carcinogens, reproductive toxins, flammable or explosive materials, asbestos, pollutants, contaminants, urea formaldehyde, Freon, or other radioactive, hazardous, toxic, or infectious wastes, materials or substances, "Hazardous Materials". Lessee agrees not to treat, dispose, release, handle, store, generate or install any Hazardous Materials in or about the Leased Premises without Lessor's prior written consent, issued subject to Lessor's sole discretion. Lessor may withdraw its consent to such activities or the presence of any Hazardous Materials at any time for any reason. Upon Lessor's withdrawal of consent to such activities, Lessee shall remove those Hazardous Materials from and/or cease those activities on the Leased Premises as are no longer permitted. Lessor's refusal to consent or withdrawal of consent to activities involving Hazardous shall not limit or affect any of Lessee's obligations under this Lease. Lessee shall provide to Lessor upon execution of this Lease a list of any Hazardous Materials which will be present at the Leased Premises and copies of any and all Material Safety Data Sheets associated therewith. Lessee shall update said list on a regular basis if any changes occur in the types or amounts of such Hazardous Materials. Lessor shall have the right to enter the Leased Premises from time to time to conduct tests, inspections and surveys concerning Hazardous Materials and to monitor Lessee's compliance with its obligations concerning Hazardous Materials and Hazardous Materials Laws. Lessee is hereby advised that there are certain notice requirements under Proposition 65, which may be applicable to Lessee and Lessee should consult its counsel with respect to its responsibilities therefor. (2) Hazardous Materials Handling. Lessee shall at its own expense procure, maintain in effect and comply with all conditions of any and all permits, licenses and other governmental and regulatory approvals required for Lessee's use of the Leased Premises. Lessee shall cause any and all Hazardous Materials to be taken away or removed from the Leased Premises and to be removed and transported solely by duly licensed haulers to duly licensed facilities for final disposal of such materials and wastes, and shall deliver to Lessor copies of any Uniform Hazardous Waste Manifests associated with such disposal. Prior to expiration or earlier termination of this Lease, Lessee shall cause all Hazardous Materials to be removed from the Leased Premises and transported for use, storage or disposal in accordance and in compliance with all applicable Hazardous Materials Laws. Lessee shall not take any remedial action in response to the presence of any Hazardous Materials in or about the Leased Premises, nor enter into any settlement agreement; consent decree or other compromise in respect to any claims relating to any Hazardous Materials or Hazardous Materials Laws in any way connect with the Leased Premises, without first notifying Lessor of Lessee's intention to do so and affording Lessor ample opportunity to appear, intervene or otherwise appropriately assert and protect Lessor's interest with respect thereto. (3) Notices. Lessee shall immediately notify Lessor in writing of: (i) any release or suspected release of Hazardous materials on, in, under, about, from or around the Leased Premises, whether caused by Lessee or any other person; (ii) any remedial or mitigation action Lessee institutes or proposes with respect to any Hazardous Materials in any Hazardous Materials in any way connected with the Leased Premises; (iii) any enforcement, cleanup, removal, remedial or other governmental or regulatory action instituted, completed or threatened pursuant to any Hazardous Materials Laws; (iv) any claims made or threatened by any person against Lessee, of the Leased Premises relating to damage, contribution, cost recovery compensation, loss or injury resulting from or claimed to result from any Hazardous Materials; and (v) any reports made to or by any governmental agency or any lender arising out of or in connection with any Hazardous Materials in or removed from the Leased Premises, including any citizen's or agency complaints, notices, warnings or asserted violations in connection therewith and any reports made by any environmental consultants which pertain to the Leased Premises or the Property on which it is located. Lessee shall also supply to Lessor as promptly as possible, and in any event within five (5) business days after Lessee first receives or sends the same, copies of all claims, reports, complaints, notices, warnings or asserted violations relating in any way to the use or presence of Hazardous Material on the Leased Premises. (b) Indemnification of Lessor. Lessee shall indemnify, defend (by counsel reasonably acceptable to Lessor), protect and hold Lessor, and each of Lessor's trustee, shareholders, officers, employees, agents, attorneys, successors and assigns, free and harmless from and against any and all claims, liabilities, penalties, forfeitures, losses or expenses (including attorneys' fees) for death of or injury to any person or damage to any property whatsoever, arising from or caused in whole or in part, directly or indirectly, by Lessee or its employees, agents, assignees, contractors, subcontractors or others acting for or on behalf of Lessee (whether or not their acts or omissions are negligent, intentional willful or unlawful) and related to (A) the presence in, on, or, under, around or about the Leased Premises or the discharge or release in or from the Leased Premises of any Hazardous Materials due to the use, analysis, storage, transportation, disposal, release, threatened release, discharge or generation of Hazardous Materials to, in, on, under, around, about or from the Leased Premises, or (ii) Lessee's failure to comply with any Hazardous Materials Laws. Lessee's obligations hereunder shall include, without limitation, and whether foreseeable or unforeseeable, all costs of any required or necessary repair, cleanup or detoxification or decontamination of the Leased Premises, and the preparation and implementation of any closure remedial action or other required plans in connection therewith. Said obligations shall survive the expiration or earlier termination of the term of this Lease. (c) Additional Insurance or Financial Capacity. If at any time it reasonably appears to Lessor that Lessee is not maintaining sufficient insurance or other means of financial capacity to enable Lessee to fulfill its obligations to Lessor hereunder, regarding environmental matters, whether or not then accrued, liquidated, conditional or contingent, Lessee shall procure and thereafter maintain in full force and effect such insurance or other form of financial assurance, with or from companies or persons and in forms reasonably acceptable to Lessor, as Lessor may from time to time reasonably request. 43. Merchants Association/Marketing Fund. Lessee shall join and thereafter maintain, until the termination of this Lease, membership in a nonprofit "Merchants Association" composed of a majority of the occupants of the Shopping Center Bylaws of the Merchants' Association shall be originally adopted by a majority vote of the members of the Merchants' Association. Each member of the Merchants' Association and Lessor shall have one (1) vote. Such membership shall include the obligation of Lessee to pay assessments, as determined by said Merchants' Association, and subject to annual increases as determined by a majority vote of the Merchants' Association, to cover the expense of all advertising and other activities carried on by such Merchants' Association for the mutual benefit of its members. Lessee shall also pay to the Association on demand an initial assessment, such sum shall be used for the purpose of defraying the promotional expenses to be incurred by the Merchants' Association in connection with Lessee's initial opening in the Shopping Center. Any portion of such initial assessment not actually expended in connection with such initial opening shall be retained by the Merchants' Association. The provisions of this Lease shall prevail over any conflicting provisions which may be contained in the articles, bylaws or regulations of the Merchants' Association, and shall be deemed to be covenants for the benefit of Lessor and said Merchants' Association and shall be enforceable by each of them. Should Lessor so elect, these provisions regarding a Merchants' Association shall be replaced with the following provisions establishing a "Marketing Fund" which will provide for monthly payments to the Lessor to maintain a fund for promotion and marketing of the Shopping Center. Lessor may establish a Marketing Fund for the Shopping Center. Concurrently with each payment of Minimum Monthly Rent, as set forth in Paragraph H of the Basic Lease Provisions, Lessee shall pay to Lessor a "Monthly Marketing Charge", as set forth in Paragraph K of the Basic Lease Provisions, prorated for any partial month of the term of this Lease. Lessee hereby acknowledges that Lessor may not send monthly statements as a condition to Lessee paying Monthly Marketing Charge due under this Lease. Such Monthly Marketing Charge shall serve as Lessee's contribution towards the Shopping Center's advertising, promotion and public relations, including the administrative costs related thereto. The Monthly Marketing Charge shall be increased by ten (10%) percent every three (3) years. Lessee hereby agrees to pay such increase upon notice from Lessor Lessee further agrees to advertise Lessee's business operated from the Leased Premises in any special publications sponsored by Lessor for advertising by the Shopping Center Lessees at least twice during each lease year. Lessor shall maintain books and records of all contributions to and expenditures from the Marketing Fund. Lessor may elect to contribute special advertising or promotional items as well as all or part of the services of a marketing director and staff and their respective offices, compensation and expenses as a part of Lessor's contribution. Lessor shall have the sole right and exclusive authority to hire, control, supervise and discharge the marketing director and staff. 44. Lessor and Lessee. The words "Lessor" and "Lessee" as used herein shall include the plural as well as the singular, and the neuter shall include the masculine and feminine genders, and if there be more than one lessee, the obligations hereunder imposed upon the Lessee shall be joint and several. 45. Relationship of the Parties. The relationship of the parties hereto is that of Lessor and Lessee, and it is expressly understood and agreed that Lessor does not in any way nor for any purpose become a partner of Lessee or joint venturer with Lessee in the conduct of Lessee's business or otherwise, and that the provisions of any agreement Lessor and Lessee, relating to Rent, are made solely for the purpose of providing a method whereby the Rent payments are to be measured and ascertained. 46. Severability. If any term or provision of this Lease shall, to any extent, be determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Lease shall not be affected thereby, and each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law; it is the intention of Lessor and Lessee hereto that if any provision of this Lease is capable of two constructions, one of which would render the provision void and the other of which would render the provision valid, then the provision shall have the meaning which renders it valid. 47. Quitclaim. Where requested by the Lessor, at the expiration or earlier termination of this Lease, Lessee shall execute acknowledge and deliver to Lessor, within five (5) days after written request from Lessor to Lessee, any quitclaim deed or other document required by any reputable title company to remove the cloud of this Lease from the real property subject to this Lease. 48. Other Payments to be Construed as Rent. Failure of Lessee to pay taxes, insurance premiums, or any other obligations of the Lessee under the terms of this Lease which can be satisfied by the payment of money by the Lessee shall be deemed to be Rent and shall carry the same consequences as failure to pay any installment of Rent. 49. Headings and Utilities. The marginal headings or titles to the paragraphs of this Lease are not part of this Lease and shall have no effect upon the construction or interpretation of any part of this Lease, but are intended for the convenience of the parties only. 50. Conditions. It is agreed between the parties hereto that all the agreements herein contained on the part of the Lessee, whether technically covenants or conditions, shall be deemed to be conditions at the option of the Lessor, conferring upon the Lessor, in the event of breach of any of said agreements, the right to terminate this Lease. 51. Jurisdiction. Lessee hereby consents and agrees that the courts of the City, County and State as set forth Paragraph E, of the Basic Lease Provisions, shall have jurisdiction over its person in actions arising under or relating to this Lessee, and Lessee agrees that any action brought by it arising out of or relating to this Lease shall be filed in said County. Lessor and Lessee agree that said City and County shall for all purposes be considered the place in which this Lease was entered into, notwithstanding the order in which, or the location or locations at which, it may have been executed or delivered. 52. Time Time is of the essence of this Lease and each and all of its provisions. 53. Corporate Authority. If Lessee is a corporation, Lessee shall deliver to Lessor on execution of this Lease a certified copy of a resolution of its board of directors authorizing the execution of this Lease and naming the officers that are authorized to execute this Lease on behalf of the corporation. 54. Entire Agreement. This instrument along with any exhibits and attachments hereto constitutes the entire agreement between Lessor and Lessee relative to the Leased Premises. Except as contained herein, no person purporting to hold the authority to bind Lessor to any statement, covenant, warranty, or representation shall be deemed to have such authority and Lessee agrees that it is not reasonable for Lessee to have assumed that any person had or has such authority. This agreement and the exhibits and attachments may be altered amended, or revoked only by an instrument in writing signed by both Lessor and Lessee. Lessor and Lessee agree hereby that all prior or contemporaneous oral agreements between and among themselves and their agents, including any leasing agent or lender, and representatives relative to the leasing of the Premises are merged in or revoked by this agreement 55. No Reservation of Premises. Submission of this Lease shall not be deemed to be a reservation of the Leased Premises. This Lease is subject to the review and mutual acceptance of the final terms, conditions and related documents by Lessor. Lessor shall not be bound hereby until Lessor delivers to Lessee an executed copy of this Lease for the Leased Premises signed by Lessor, having already been signed by Lessee. Lessor reserves the right to exhibit and lease the Leased Premises to other prospective Lessees until such time as the delivery to of this executed Lease. IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written. LESSOR: Western Investment Real Estate Trust, a California unincorporated association doing business as a real estate investment trust Date: June 6, 1995 By: /s/ Its: Vice President, Legal By: /s/ Its: Pinecreek Shopping Center Associates, a California limited partnership By: Connolly Development Inc., General Partner By: /s/ Its: President LESSEE: Truckee River Bank, a California corporation, doing business as Truckee River Bank Date: 5/16/95 By: /s/ Martin Sorensen Its: Pres/CEO By: Its: FIRST ADDENDUM TO LEASE THIS FIRST ADDENDUM TO LEASE, is made and entered into this 17th day of April 1995, by and between Western Investment Real Estate Trust, a California unincorporated association doing business as a real estate investment trust, and Pinecreek Shopping Center Association, a California limited partnership, as "Lessor", and Truckee River Bank, a California corporation, as "Lessee", collectively referred to as the "Parties". WHEREAS, the Parties are bound by a lease agreement dated April 17, 1995, for those certain premises at the Pine Creek Shopping Center, the "Shopping Center", located at 736 Taylorville Road, Suite D, in the City of Grass Valley, County of Nevada., and State of California, the "Leased Premises". NOW THEREFORE, Lessee and Lessor hereby agree to the addition of certain paragraph(s) to the Lease and the amendment and modification of certain paragraphs of the Lease as follows: FIRST OPTION TO EXTEND TERM 1. Lessee shall have the right to extend the initial term of this Lease for a period of five (5) years upon the same terms and conditions as stated in this Lease, except for Minimum Monthly Rent and except as set forth in this First Option to Extend Term, the "First Option". Lessee may exercise this right by written notification to Lessor not less than one hundred and eighty (180) days prior to the expiration of the initial term of this Lease provided that Lessee is not in default under the Lease at the time of the exercise of the First Option or commencement of the First Option. a. Lessee has not been in default beyond any cure period of any of the provisions of this Lease during the initial term of this Lease; and b. The First Option granted in this First Option to Extend Term is personal to the original Lessee executing this Lease, and notwithstanding anything to the contrary contained in this Lease, the First Option and the rights contained in this First Option to Extend Term are not assignable or transferable by such original Lessee; and c. Lessee's net worth at the time of exercising this First Option, as determined in accordance with generally accepted accounting principles, is no less than Lessee's net worth at the Lease Commencement Date; and d. Lessee is operating in the Leased Premises in a manner consistent with the Shopping Center. e. During the last twelve (12) months of the Lease Term immediately preceding the date on which Lessee notifies Lessor of its intent to exercise this First Option, Lessee shall have been obligated to pay and shall have paid Lessor Percentage Rent in accordance with subsection (b) of Paragraph 3 Rent. 2. Lessor grants the rights contained herein to Lessee in consideration of Lessee's strict compliance with the provisions hereof, including, without limitation, the manner of exercise of this First Option. 3. The Minimum Monthly Rent and escalations thereto during this First Option, if exercised, shall be mutually agreed upon between Lessee and Lessor prior to the thirtieth (30) day following the exercise of this First Option, as hereinabove stated, at fair market rate which shall be the then comparable rental rate for similar quality and location premises as determined by Lessor. However, in no event shall the Minimum Monthly Rent, payable during the term of this First Option, be less than the Minimum Monthly Rent payable during the last year of the initial term of this Lease, and the escalations shall in no event be less than five (5%) percent annually. Upon failure of the parties to mutually agree upon a Minimum Monthly Rent for the First Option within such period, each party shall appoint an appraiser to determine the Minimum Monthly Rent. If either party fails to select an appraiser, the one appraiser appointed shall set the Minimum Monthly Rent within sixty (60) days. If the two appointed appraisers cannot agree on the Minimum Monthly Rent, the two appraisers shall appoint a third appraiser and the three appraisers shall set the Minimum Monthly Rent within sixty (60) days. Agreement by any two appraisers shall bind the parties as to the agreed fair market Minimum Monthly Rent. If no two appraisers agree, the Minimum Monthly Rent shall then be the average of the three appraisers' rent figures. Lessor and Lessee shall each bear the cost of the appraiser they selected and one-half of the cost of the third appraiser. 4. The Security Deposit, if any; shall be adjusted to the amount which is the next higher five hundred ($500.00) dollar increment above one month's Minimum Monthly Rent for the last year of the initial term of this Lease. This amount shall be paid concurrently with the first Minimum Monthly Rent payment of this First Option. SECOND ADDENDUM TO LEASE THIS SECOND ADDENDUM TO LEASE, is made and entered into this 17th day of April 1995, by and between Western Investment Real Estate Trust, a California unincorporated association doing business as a real estate investment trust, and Pinecreek Shopping Center Association, a California limited partnership, as "Lessor", and Truckee River Bank, a California corporation, as "Lessee", collectively referred to as the "Parties" WHEREAS, the Parties are bound by a lease agreement and dated April 17, 1995, for those certain premises at the Pine Creek Shopping Center, the "Shopping Center", located at 736 Taylorville Road, Suite D, in the City of Grass Valley, County of Nevada, and State of California, the "Leased Premises". NOW THEREFORE, Lessee and Lessor hereby agree to the addition of certain paragraph(s) to the Lease and the amendment and modification of certain paragraphs of the Lease as follows: SECOND OPTION TO EXTEND TERM 1. Lessee shall have the right to extend the term of this Lease for an additional period of five (5) upon the same terms and conditions as stated in this Lease, except for Minimum Monthly Rent and except as set forth in this Second Option to Extend Term, the "Second Option". Lessee may exercise this right by written notification to Lessor not less than one hundred and eighty (180) days prior to the expiration of the term of the First Option to Extend Term as set forth in the First Addendum to Lease, of this Lease provided that: a. Lessee has not been in default beyond any cure period of any of the provisions of this Lease during the initial term and the term of the First Option; and b. The Second Option granted in this Second Option to Extend Term is personal to the original Lessee executing this Lease, and notwithstanding anything to the contrary contained in this Lease, the Second Option and the rights contained in this Second Option to Extend Term are not assignable or transferable by such original Lessee; and c. Lessee's net worth at the time of exercising this Second Option, as determined in accordance with generally accepted accounting principles, is no less than Lessee's net worth at the commencement of the First Option hereof; and d. Lessee is operating in the Leased Premises in a manner consistent with the Shopping Center. e. During the last twelve (12) months of the Lease Term immediately preceding the date on which Lessee notifies Lessor of its intent to exercise this First Option, Lessee shall have been obligated to pay and shall have paid Lessor Percentage Rent in accordance with subsection (b) of Paragraph 3 Rent. 2. Lessor grants the rights contained herein to Lessee in consideration of Lessee's strict compliance with the provisions hereof, including, without limitation, the manner of exercise of this Second Option. 3. The Minimum Monthly Rent and escalations thereto during this Second Option, if exercised, shall be mutually agreed upon between Lessee and Lessor prior to the thirtieth (30th) day following the exercise of this Second Option, as hereinabove stated, at fair market rate which shall be the then comparable rental rate for similar quality and location premises as determined by Lessor. However, in no event shall the Minimum Monthly Rent, payable during the term of this Second Option, be less than the Minimum Monthly Rent payable during the last year of the term of the First Option, and the escalations shall in no event be less than five (5%) percent annually. Upon failure of the parties to mutual agree upon a Minimum Monthly Rent for the Second Option within such period, each party shall appoint an appraiser to determine the Minimum Monthly Rent. If either party fails to select an appraiser, the one appraiser appointed shall set the Minimum Monthly Rent within sixty (60) days. If the two appointed appraisers cannot agree on the Minimum Monthly Rent, the two appraisers shall appoint a third appraiser and the three appraisers shall set the Minimum Monthly Rent within sixty (60) days. Agreement by any two appraisers shall bind the parties as to the agreed fair market Minimum Monthly Rent. If no two appraisers agree, the Minimum Monthly Rent shall then be the average of the three appraisers' rent figures. Lessor and Lessee shall each bear the cost of the appraiser they selected and one-half of the cost of the third appraiser. 4. The Security Deposit, if any, shall be adjusted to the amount which is the next higher five hundred dollars and zero cents ($500.00) increment above one month's Minimum Monthly Rent for the last year of the term of this Second Option. This amount shall be paid concurrently with the first rental payment of this Second Option. THIRD ADDENDUM TO LEASE THIS THIRD ADDENDUM TO LEASE, is made and entered into this 17th day of April 1995, by and between Western Investment Real Estate Trust, A California unincorporated association doing business as a real estate investment trust, and Pinecreek Shopping Center Association, a California limited partnership as "Lessor" and Truckee River Bank, a California corporation, as "Lessee", collectively referred to as the "Parties". WHEREAS, the Parties are bound by a lease agreement and addendums dated April 17, 1995, for those certain premises at the Pine Creek Shopping Center, the "Shopping Center", located at 736 Taylorville Road, Suite D, in the City of Grass Valley, County of Nevada, and State of California, the "Leased Premises." NOW THEREFORE, Lessee and Lessor hereby agree to the addition of certain paragraph(s) to the Lease and the amendment and modification of certain paragraphs of the Lease as follows: THIRD OPTION TO EXTEND TERM 1. Lessee shall have the right to extend the term of this Lease for an additional period of five (5) years upon the same terms and conditions as stated in this Lease, except for Minimum Monthly Rent and except as set forth in this Third Option to Extend Term, the "Third Option". Lessee may exercise this right by written notification to Lessor not less than one hundred and eighty (180) days prior to the expiration of the term of the Second Option to Extend Term as set forth in the Second Addendum to Lease, of this Lease provided that: a. Lessee has not been in default beyond any cure period of any of the provisions of this Lease during the initial term, the term of the First Option and the term of the Second Option; and b. The Third Option granted in this Third Option to Extend Term is personal to the original Lessee executing this Lease, and notwithstanding anything to the contrary contained in this Lease, the Third Option and the rights contained in this Third Option to Extend Term are not assignable or transferable by such original Lessee; and c. Lessee's net worth at the time of exercising this Third Option, as determined in accordance with generally accepted accounting principles, is no less than Lessee's net worth at the commencement of the First Option hereof, and d. Lessee is operating in the Leased Premises in a manner consistent with the Shopping Center. e. During the last twelve (12) months of the Lease Term immediately preceding the date on which Lessee notifies Lessor of its intent to exercise this First Option, Lessee shall have been obligated to pay and shall have paid Lessor Percentage Rent in accordance with subsection (b) of Paragraph 3 Rent. 2. Lessor grants the rights contained herein to Lessee in consideration of Lessee's strict compliance with the provisions hereof, including, without limitation, the manner of exercise of this Third Option. 3. The Minimum Monthly Rent and escalations thereto during this Third Option, if exercised, shall be mutually agreed upon between Lessee and Lessor prior to the thirtieth (30th) day following the exercise of this Third Option, as hereinabove stated, at fair market rate which shall be the then comparable rental rate for similar quality and location premises as determined by Lessor. However, in no event shall the less than the Minimum Monthly Rent, payable during the term of this Third Option, be less than the Minimum Monthly Rent payable during the last year of the term of the First Option, and the escalations shall in no event be less than five (5%) percent annually. Upon failure of the parties mutually agree upon a Minimum Monthly Rent for the Third Option within such period, each party shall appoint an appraiser to determine the Minimum Monthly Rent. If either party fails to select an appraiser, the one appraiser appointed shall set the Minimum Monthly Rent within sixty (60) days. If the two appointed appraisers cannot agree on the Minimum Monthly Rent, the two appraisers shall appoint a third appraiser and the three appraisers shall set the Minimum Monthly Rent within sixty (60) days. Agreement by any two appraisers shall bind the parties as to the agreed fair market Minimum Monthly Rent. If no two appraisers agree, the Minimum Monthly Rent shall then be the average of the three appraisers' rent figures. Lessor and Lessee shall each bear the cost of the appraiser they selected and one-half of the cost of the third appraiser. 4. The Security Deposit, if any, shall be adjusted to the amount which is the next higher five hundred dollars and zero cents ($500.00) increment above one month's Minimum Monthly Rent for the last year of the term of this Third Option. This amount shall be paid concurrently with the first rental payment of this Third Option. 5. Lessee shall have no other right to extend the Lease Term beyond this Third Option. FOURTH ADDENDUM TO LEASE THIS FOURTH ADDENDUM TO LEASE is made and entered into this 17th day of April, 1995 by and between Western Investment Real Estate Trust a California unincorporated association doing business as a real estate investment trust, and Pinecreek Shopping Center Associates, a California limited partnership, as "Lessor", and Truckee River Bank, a California banking corporation, doing business as Truckee River Bank, as "Lessee", collectively referred to as the "Parties". WHEREAS, the Parties are bound by a lease agreement, first addendum to lease and second addendum to lease and third addendum to lease dated April 17, 1995 , for those certain premises at the Pine Creek Shopping Center, the "Shopping Center", located at 736 Taylorville Road, Suite D, in the City of Grass Valley, County of Nevada, and State of California, the "Leased Premises". NOW THEREFORE, Lessee and Lessor hereby agree to the addition of certain paragraph(s) to the Lease and modifications of certain paragraphs of the Lease as follows: C. Lessee: The following is added as the last sentence of Paragraph C Lessee: Truckee River Bank may amend its name and the Lease shall be deemed so amended upon notice by Lessee of its new corporate/bank name. D. Lessee's Trade Name: The following is added as the last sentence of Paragraph D. Lessee's Trade Name: Truckee River Bank may amend its name and the Lease shall be deemed so amended upon notice by Lessee of its new corporate/bank name. L. Taxes, Insurance, and Common Area Maintenance: The following sentence is hereby added as the last sentence of Paragraph L. Taxes, Insurance, and Common Area Maintenance., of Basic Lease Provisions.: Initial Taxes, Insurance and Common Area Maintenance expense for the most current period available is represented by Lessor to be the aggregate sum of $0.28 per square foot of space leased. Any increase in said amount shall be based upon proven increases in taxes, insurance and common area maintenance. 1. Leased Premises and Use. The words, "and under no other trade name" in the last sentence of section (a) of Paragraph 1. Leased Premises and Use, located on the second and third lines are deleted in their entirety: 3. Rent. Subsections (b) Percentage Rent., is hereby deleted in its entirety. The words "through 3 (c)," in the first sentence of subsection (d) Definition of Rent., of Paragraph 3. Rent., are hereby changed to "and 3 (c)" 5. Possession The following paragraph is hereby added as the third paragraph of Paragraph 5. Possession: Lessee hereby acknowledges and agrees to accept possession of the Leased Premises in its "As-Is" condition. Lessor acknowledges that the term "as-is" includes, in good condition, of the following items of personal property/fixtures: teller line, vault, vault door, all cabinetry and existing bank equipment. Lessee shall be responsible for returning said personal property/fixtures at the conclusion of the Lease, subject to reasonable wear and tear. 7. Assignment and Subletting. The second paragraph of subsection (b) Reasonable Consent., of Paragraph 7. Assignment and Subletting, is hereby deleted in its entirety, and the following inserted in lieu thereof: Lessor hereby acknowledges and agrees that Lessee may assign to any financial institution that intends to merge with Lessee or acquire substantially all of Lessee's assets, Truckee River Bank's interest as Lessee in the lease so long as the merging or acquiring adheres to all the provisions of the Lease, as modified by this Amendment. Still further, Lessee is granted express authority to sublet a portion of the Leased Premises for use by any subsidiary, division or affiliate of Lessee for purposes related to the sale, lease or purchase of products or services legally offered by a financial institution to business or consumer customers. Subsection (e) Transfer of Ownership., of Paragraph 7. Assignment and Subletting, is hereby deleted in its entirety. 10. Prohibited Uses. The second sentence of Paragraph 10 Prohibited Uses., starting with the words, "Lessee shall not use" and ending with the words, "with then granted or existing exclusives" located on lines eleven through thirteen is hereby deleted in its entirety. The last sentence of Paragraph 10 Prohibited Uses., starting with the words, "If applicable and if requested by Lessor" and ending with the words, "as Lessor may deem necessary" located on lines page eleven on lines six through nine is hereby deleted in its entirety. The following paragraph is hereby added as the second paragraph of Paragraph 10. Prohibited Uses: Without limiting nor broadening the foregoing, Lessor hereby acknowledges and agrees that Lessee's use of the Leased Premises in accordance with Paragraph F of the Basic Lease Provisions, shall not be a violation, as set forth in this Paragraph 10, Prohibited Uses. 11. Alterations. The last sentence of Paragraph 11. Alterations., starting with the words, "The right of the Lessee to remove such equipment" and ending with the words, "repair any damages to the Leased Premises caused by such removal" is hereby deleted in its entirety and the following inserted in lieu thereof: From time to time Lessee may repair, replace, substitute and remove its Lessee's furniture, equipment, fixtures, and machinery so long as Lessee repairs any and all damage caused by said removal to the Leased Premises. 14. Maintenance and Repair. The word "replacement" in the first sentence of the first paragraph of Paragraph 14. Maintenance and Repair., located on the fourth line is hereby deleted in its entirety. The word "replacement" in the sixth sentence of the first paragraph of Paragraph 14. Maintenance and Repair., located on the fifteenth line is hereby deleted in its entirety. The word "replace" in the first sentence of the last paragraph of Paragraph 14. Maintenance and Repair., located on the second line is hereby deleted in its entirety. The following paragraph is hereby added as the last paragraphs of Paragraph 14. Maintenance and Repair: Lessor warrants the condition of all items described in this paragraph for a period of six (6) months from the effective date of the Lease to be in a clean and sanitary condition and in proper repair and current maintenance. Should any system or item not be in such condition during that six (6) month period, Lessor shall repair same at Lessor's sole cost and expense. Except for reasonable costs of maintenance and repair, Lessor does not deem Lessee to be responsible for the cost arising from the failure of major structural system(s), including but not limited to, floors, walls, ceilings, the roof, water distribution or sewer systems, electrical systems or natural gas systems. 18. Lessor's Right to Relocate the Leased Premises. Paragraph 18. Lessor's Right to Relocate the Leased Premises., is hereby deleted in its entirety. 19. Entry by Lessor. The following is hereby added after the words "during the last ninety (90) days of the term hereby created" in the first sentence of Paragraph 19. Entry by Lessor., located on the last line: including options to renew. The following is hereby added as the second sentence of Paragraph 19. Entry by Lessor: Lessor shall notify Lessee before entry into the leased Premises so that Lessee may take reasonable steps to deactivate or disable internal alarms and security measures. Lessor understands that inspection of certain areas of the Leased Premises may have to be in the presence of an officer of Lessee due to security reasons and the nature of Lessee's business operations on the Leased Premises. 25. Attorneys' Fees. The following paragraph is hereby added as the fourth and fifth paragraphs of Paragraph 25 Attorney's Fees: Should Lessee become a party defendant to any litigation concerning this Lease or any part of the Leased Premises by reason of any act or omission of the Lessor and not because of any act or omission of the Lessee, then Lessor shall indemnify, protect, defend and hold Lessee harmless from all liability by reason thereof and shall pay to Lessee all reasonable attorneys' fees and costs incurred by Lessee in such litigation. In addition, Lessor shall reimburse Lessee for any attorney's fees or costs reasonably incurred by Lessee, whether or not suit be instituted, with respect to any default of Lessor under the terms of this Lease. 26. Holding Over. The word "at twice the rent paid" in the first sentence of Paragraph 26. Holding Over., located in line 3 is hereby deleted in its entirety and the following inserted in lieu thereof: at one hundred ten (110%) percent the rent paid 33. Successors and Assigns. Paragraph 33. Successors and Assigns is hereby deleted in its entirety and the following inserted in lieu thereof: amended as follows: The words "nothing in this Paragraph contained" in the first sentence of Paragraph 33. Successors and Assigns, located on the second and third lines shall be deleted and the words, nothing contained in this Paragraph" shall be inserted in their place. 35. Competition. Paragraph 35. Competition., is hereby deleted in its entirety. 39. Covenant Of Continuous Operation. Paragraph 39. Covenant Of Continuous Operation., is hereby deleted in its entirety and the following inserted in lieu thereof: Lessee agrees, in compliance with applicable banking or other laws, to remain open on each bank business day and to maintain a fully operational branch during those hours of operations. Lessee further agrees that the presence of an automatic teller machine in the Leased Premises, in and of itself, shall not be construed as the equivalent of continuous branch operations. 40. Security Deposit. Paragraph 40. Security Deposit., is hereby deleted in its entirety. 56. Exclusive Use. The following paragraph is hereby added as Paragraph 56. Exclusive Use: 56. Exclusive Use. As long as Lessee is not in default of this Lease and is operating in accordance with the Use of Leased Premises, as set forth in Paragraph F of the Basic Lease Provisions, Lessor agrees not to lease space in the Shopping Center to any new lessees whose primary business use would be a bank, savings and loan institution, credit union or similar financial institution. Lessee hereby acknowledges and agrees that the term bank and savings and loan as used herein shall not be deemed to include Household Finance, Beneficial, Commercial Credit, stock brokerages, credit unions, mortgage companies, or any other uses which are financially related. This exclusive does not apply to any existing lessee prior to the execution of this Lease or any future assignees thereof. First Addendum to Lease - First Option to Extend Term The words "one hundred and eighty (180) days" located on the fourth line of Paragraph 1 of the First Addendum to Lease, First Option to Extend Term, are hereby changed to "ninety (90) days". Subsection (b) of Paragraph 1 of the First Addendum to Lease, First Option to Extend Term, is hereby deleted in its entirety. Subsection (e) of Paragraph 1 of the First Addendum to Lease, First Option to Extend Term, is hereby deleted in its entirety. Paragraph 4 of the First Addendum to lease, First Option to Extend Term, is hereby deleted in its entirety. Second Addendum to Lease - Second Option to Extend Term The words " one hundred and eighty (180) days" located on the fourth line of Paragraph 1 of the Second Addendum to Lease, First Option to Extend Term, are hereby changed to "ninety (90) days". Subsection (b) of Paragraph 1 of the Second Addendum to Lease, Second Option to Extend Term, is hereby deleted in its entirety. Subsection (e) of Paragraph 1 of the Second Addendum to Lease, Second Option to Extend Term, is hereby deleted in its entirety. Paragraph 4 of the Second Addendum to Lease, Second Option to Extend Term, is hereby deleted in its entirety. Third Addendum to Lease - Third Option to Extend Term The words "one hundred and eighty (180) days" located on the fourth line of Paragraph 1 of the Third Addendum to Lease, First Option to Extend Term, are hereby changed to "ninety (90) days" Subsection (b) of Paragraph 1 of the Third Addendum to Lease, Third Option to Extend Term, is hereby deleted in its entirety. Subsection (e) of Paragraph 1 of the Third Addendum to Lease, Third Option to Extend Term, is hereby deleted in its entirety. Paragraph 4 of the Third Addendum to Lease, Third Option to Extend Term, is hereby deleted in its entirety. EXHIBIT "A" SITE PLAN This Exhibit is a graphic of the shopping center wherein Leased Premises are located. EXHIBIT "B" COMMON AREA This Exhibit is a graphic of the common areas related to the shopping center wherein Leased Premises are located. EXHIBIT "C" ACKNOWLEDGMENT OF COMMENCEMENT ESTOPPEL AGREEMENT LESSOR: Western Investment Real Estate Trust, a California unincorporated association doing business as a real estate investment trust, and Pine Creek Shopping Center Associates, a California limited partnership LESSEE: Truckee River Bank, a California corporation, doing business as Truckee River Bank SHOPPING CENTER: Pine Creek Shopping Center, Grass Valley, California LOCATION OF PREMISES: 736 Taylorville Road LEASE DATED: February 28, 1995 This is to certify: 1. That the undersigned Lessee occupies the Leased Premises commonly known as 736 Taylorville Road, at Pine Creek Shopping Center, City of Grass Valley, County of Nevada, State of California. 2. That the Lease term will commence on April 1, 1995. 3. That rent has been prepaid in the amount of $3,312.00 by Lessee to Lessor. 4. That a Security Deposit has been paid in the amount of $0.00 by Lessee to Lessor, 5. That as of this date hereof, the undersigned Lessee is entitled to NO credit, offset of deduction in rent. 6. That all construction to be performed by Lessor is complete and has been approved by Lessee. 7. That the undersigned Lessee claims no right, title or interest in the above-described Leased Premises, or right to the possession of said Leased Premises other than under the terms of said Lease, and that there are no written or oral agreements affecting tenancy other than the Lease. LESSOR: Western Investment Real Estate Trust, a California unincorporated association doing business as a real estate investment trust Date: 7/19/95 By: /s/ Its: CFO By: /s/ Its: Pinecreek Shopping Center Associates, a California limited partnership By: Connolly Development Inc., General Partner By: /s/ Its: Vice Pres LESSEE: Truckee River Bank, a California corporation, doing business as Truckee River Bank Date: 6/28/95 By: /s/Martin Sorensen Its: Pres/CEO By: Its: EXHIBIT "D" SIGN CRITERIA PINE CREEK SHOPPING CENTER GRASS VALLEY, CALIFORNIA . February 1, 1988 These criteria have been established for the purpose of maintaining a continuity of quality and aesthetics throughout the Shopping Center for the mutual benefit of all tenants and to comply with the regulations of the City of Grass Valley. Conformance will be strictly enforced and any installed non conforming or unapproved signs must be brought into conformance at the expense of the Lessee. I. GENERAL REQUIREMENTS - ALL SIGNS A. Each Lessee shall submit or cause to be submitted to the Lessor for approval, prior to fabrication, four (4) copies of detailed drawings indicating the location, size, layout, design, dimensions, colors, illumination, materials and method of attachment of all signage. B. All permits for signs and their installation shall be obtained and paid to the City of Grass Valley by the Lessee or his representative prior to fabrication and installation. C. All signs shall be constructed and installed at the Lessee's expense. D. Lessee shall be responsible for the fulfillment of all requirements and specifications, including those of the City of Grass Valley. E. All signs shall be reviewed for conformance with these criteria and overall design quality. Approval or disapproval of sign submittal based on aesthetics of design shall remain the right of the Lessor or his authorized representative and the City of Grass Valley. F. Lessee shall be responsible for the installation and maintenance of his sign. Should Lessee's sign require maintenance or repair, Lessor shall give Lessee thirty (30) days written notice to perform said maintenance or repair. Should Lessee fail to do same, Lessor shall undertake repairs and Lessee shall reimburse Lessor within ten (10) days from receipt of invoice. II. SPECIFICATIONS - ALL SIGNS All companies bidding to manufacture these signs are advised that no substitutes will be accepted be Lessee whatsoever, unless so indicated in the specifications and approved by the Lessor and Lessee. Any deviation from these specifications may result in purchaser's refusal to accept same. All manufactures are advised that prior to acceptance and final payment, each unit will be inspected for conformance by an authorized representative of Lessor. Any signs found not in conformance will be rejected and removed at Lessee's expense. Lessee is required to have signs as shown on attached Exhibits D-1, D- 2, D-3, and D-4, installed and operable upon lease commencement date. A. General Specifications 1. No animated, flashing or audible signs will be permitted. 2. No exposed lamps or tubing will be permitted. 3. All signs and their installation shall comply with all local building codes, electrical codes and the City of Grass Valley Sign Ordinance. 4. No portable signs will be permitted. 5. Grand opening or promotional sign shall comply with the City of Grass Valley Sign Ordinance and be approved by Lessor prior to installation. 6. No exposed raceways, crossovers or conduit will be permitted. 7. All cabinets, conductors, transformers and other equipment shall be concealed. 8. Painted lettering will not be permitted. B. Location of Signs 1. All signs or devices advertising an individual use, business or building shall be attached to the building at the location directed by Lessor and in accordance with the sign criteria. III. DESIGN REQUIREMENTS A. Canopy Sign (In-Line Shops) Pertains to: Buildings 1, 3 (Spaces 1 and 2), 5, 6 (Spaces 2 and 3), 8 and Pad B 1. Individual Letter Sign a. All Lessee signs shall be of individual letter construction, mounted structurally, electrically, and individually on the raceway as shown on Exhibit D-1 attached hereto. Sign cabinets will not be permitted. b. Each letter or numeral will be internally illuminated and will be faced with plexiglass or similar material. c. Maximum width shall be equal to eighty percent (80%) of the lineal leased frontage except as noted in criteria A.l.d. In any case, no sign shall be greater than fifty (50) lineal feet wide. d. Maximum sign width for Building 3, Space 1, shall not exceed twenty (20) feet Further, the maximum width of signage for Building 6, Spaces 2 and 3, and Building 8, Space 1, shall not exceed twelve (12) feet for each named space. e. Letter height shall be twenty-four (24") inches except for Building 3, Space 1, where letter height shall be thirty-six (36") inches. If Lessee's name cannot accommodate in that size, smaller letters may be approved. Minimum acceptable letter size shall be eighteen (18") inches. f. Logos shall not exceed ten (10%) percent of sign area and will be included in the allowable signage subject to criteria A. l.c. and A. l.d. The maximum height of logos shall be twenty-four (24") inches except for Building 3, Space 1, where logos shall not exceed thirty-six (36") inches. g. Sign copy shall include minimal information only. The name of the store shall be depicted on the sign. h. Letter faces shall be 3/16" acrylic with 3/4" trimcap retainers used at the perimeter. Trimcap color shall be gold. Returns of individual letters shall be five (5") inches. Colors shall be considered on a case by case basis and may not duplicate the sign color used by adjacent stores except at Lessor's discretion. Exterior color shall be Dupont Duranodic #313 Dark Bronze. i. Neon tubing shall be fifteen (15mm) millimeters. B. Undercanopy Signs 1. Lessee shall install a non-illuminated Undercanopy sign in accordance with Exhibit D-1 attached hereto. Said sign shall be located as depicted on Exhibit D-1. 2. One (1) Undercanopy sign shall be allowed per Lessee. C. Arcade Signs Pertains to: Buildings 2, 3 (Space 3), 4, 6 (Space 1), 7 and Future Major Tenants. 1. Individual Letter Sign a. All signs shall be of individual letter construction, mounted structurally, electrically and individually on the raceway as shown on Exhibit D-2 attached hereto. Sign cabinets will not be permitted. b. Each letter or numeral will be in internally illuminated and will be faced with plexiglass or similar material. c. Sign width shall not exceed the following: Building 2 Thirty (30) feet Building 3, Space 3 Twenty six (26) feet Building 4 Twenty eight and one-half (28.5) feet Building 6, Space 1 Twenty (20) feet Building 7 Forty one (41) feet d. Letter height shall not exceed the following: Building 2 Forty eight (48) inches Building 3, Space 3 Twenty four (24) inches Building 4 Sixty (60) inches Building 6, Space 1 Thirty six (36) inches Building 7 Twenty eight (28) inches e. Logos shall not exceed ten (10%) percent of sign area and will be included in the allowable signage subject to criteria C.1.c. and C. 1.d. The maximum height of logos shall not exceed that of sign letters as specified in C. l.d. f. Sign copy shall include minimal information only. The name of the store shall be depicted on the sign. g. Letter faces shall be 3/16" acrylic with 3/4' trimcap retainers used at the perimeter. Trimcap color shall be gold. Returns of individual letters shall be five (5") inches. Colors shall be considered on a case by case basis and may not duplicate the sign color used by adjacent stores except at Lessor's discretion. Exterior color shall be Dupont Duranodic #313 Dark Bronze. h. Neon tubing shall be fifteen (15mm) millimeters. i. Signing for major tenants (5,000 square feet minimum with five or more locations) will be considered on an individual basis subject to Lessor's criteria and City of Grass Valley ordinances. D. Pad Signs - Walls Pertains to: All pads except Pad B 1. Individual Letter Sign a. All Lessee signs shall be of individual letter construction, mounted structurally, electrically and individually on the raceway as shown on Exhibit D-3 attached hereto. Sign cabinets will not be permitted. b. Each letter or numeral will be internally illuminated and will be faced with plexiglass or similar material. c. Sign size will be proportionate to the building or development involved. The aggregate area of all signs on the building shall not exceed two (2) square feet for each lineal foot of frontage. Frontage shall be determined at the entry and that portion of the establishment that abuts on the street. d. Letter height shall not exceed forty eight (48") inches. If Lessee's name cannot be accommodated in that size, smaller letters may be approved. Minimum acceptable letter size shall be eighteen (18") inches. e. Logos shall not exceed ten (10%) percent of the sign area and will be included in the allowable signage subject to the criteria D.1.c. and D.l.d. The maximum height of logos shall be forty eight (48") inches. f. Sign copy shall include minimal information only. The name of the store shall be depicted on the sign. g. Letter faces shall be 3/16" acrylic with 3/4" trimcap retainers used at the perimeter. Trimcap color shall be gold. Returns of individual letters shall be five (5") inches. Colors shall be considered on a case by case basis and may not duplicate the sign color used by adjacent stores except at Lessor's discretion. Exterior colors shall be Dupont Duranodic #313 Dark Bronze. h. Neon tubing shall be fifteen (15mm) millimeters. E. Pad Signs - Monument Pertains to: All Pads except Pad B 1. Number is limited to one (1) per pad building. 2. Size may not exceed six (36) square feet for a single face. Height shall be six (6) feet including the sign base which shall be two (2) feet in height. 3. Construction shall be as shown on Exhibit D-4. 4. Minor variations to the specifications contained herein will be considered on a case-by-case basis by the Lessor when it is determined such consideration is in the best interests of the Shopping center. IV. CONSTRUCTION REQUIREMENT'S A. All exterior signs shall be installed per the Exhibits attached. Signs shall bear the UL label and comply with all required codes. Exterior signs shall be secured by concealed fasteners, stainless steel or nickel or cadmium plated. B. Sign outlet will be provided by Lessor. Fluorescent lights, tubes and time clocks shall be provided and installed by Lessee. C. All exterior signs exposed to the weather shall be mounted at least 3/4" from the building to permit proper direct and water drainage. D. All penetrations of the building structure required for sign installation shall be neatly sealed and watertight. E. No labels will be permitted on the exposed surface of signs except those required by local ordinance and those shall be placed in an inconspicuous location. F. Sign contractor shall repair any damage to any work caused by his work. Damage to structure that is not repaired by the sign contractor shall become the Lessee's responsibility to correct. G. Lessee shall be fully responsible for the operations of its sign contractor. V. GUARANTEE A. Entire display shall be guaranteed for one (1) year from date of instillation against defects in materials and workmanship. Defective parts shall be replaced without charge. VI. INSURANCE A. Sign contractor shall carry workers' compensation and public liability insurance against all damage suffered or done to any and all persons and/or property while engaged in the construction or erection to signs in tire amount of Five Hundred Thousand Dollars ($500,000.00) combined single limit. VII. INSTALLATION A. Lessor reserves the right to hire an independent electrical engineer (at Lessee's sole expense) to inspect the installation of all Lessee signs and to require the Lessee to have any discrepancies and/or code violations corrected at the Lessee's expense. VIII. HOURS OF OPERATION A. Sign lighting will be operated by time clocks to be provided by Lessee, Hours of illumination shall be mandated by Lessee's Lease. IX. MISCELLANEOUS REQUIREMENTS A. Each Lessee shall be permitted to place upon each entrance of its demised Premises not more than one hundred forty four (144) square inches of vinyl, Scothcal #365A gold lettering not to exceed two (2") inches in height, indicating hours of business, emergency telephone numbers, etc. B. Except as provided herein, no advertising placards, banners, pennants, names, insignia, trademarks or other descriptive material shall be affixed or maintained upon either the interior or exterior of the glass panes and supports of the show windows and doors, or upon the exterior wall of the building. C. If Lessee has a non-customer door for receiving merchandise, Lessee may have its name and address uniformly applied to said door in such location directed by the Project Manager. Application shall consist of black block letters which are two (2") inches high. If more than one Lessee uses the same non- customer door, each Lessee's name and address shall be applied to said door. D. At the expiration or sooner termination of Lessee's Lease term, Lessee shall be required to remove his signs and patch the canopy and fascia and paint the patched area to match the surrounding areas. X. COLORS A. The following Plexiglass Brand colors are approved for use in all Lessee signs. Additional colors are subject to Lessor's approval. White #7328 Yellow #2325 Ivory #2146 Red #2793 Yellow #2037 Green #2108 Orange #2119 Black #2025 Blue #2114 Brown #2418 XI.. REMOVAL OF SIGN A. If the fascia sign is removed for replacement or because of termination of Lease, Lessee shall leave the reader board or fascia in good condition, normal wear and tear excepted. Without limitation, shall be specifically required to fill in, in a professional manner, any holes in the fascia panel caused by removal of the sign and conduit, and, if necessary, shall pay for any painting and/or waterproofing that is necessary to repair said work and to remove sign or "shadows". EXHIBIT "D-1" In-Line Shops Sign Criteria This Exhibit is a graphic which includes specifications as to the height and width of acceptable signs. This Exhibit also sets forth the materials from which the sign is to be made. EXHIBIT "D-2" Major Tenant and Arcade Sign Criteria This Exhibit is a graphic which includes specifications as to the height and width of acceptable signs for Buildings 2, 3 (space 3), 4, Building 4 (space 1) and 7. EXHIBIT "D-3" Pad Bldg. Tenant Sign Criteria This Exhibit is a graphic which includes specifications as to the height and width of acceptable signs for a "Pad Building". EXHIBIT "D-4" Monument Sign Criteria; Pad Buildings This Exhibit is a graphic which includes specifications as to the height and width of acceptable signs for a monument sign (one per Pad Building). EXHIBIT "C" ACKNOWLEDGMENT OF COMMENCEMENT ESTOPPEL AGREEMENT LESSOR: Western Investment Real Estate Trust, a California unincorporated association doing business as a real estate investment trust, and Pine Creek Shopping Center Associates, a California limited partnership LESSEE: Truckee River Bank, a California corporation, doing business as Truckee River Bank SHOPPING CENTER: Pine Creek Shopping Center, Grass Valley, California LOCATION OF PREMISES: 736 Taylorville Road LEASE DATED: April 17, 1995 This is to certify: 1. That the undersigned Lessee occupies the Leased Premises commonly known as 736 Taylorville Road, Suite D, at Pine Creek Shopping Center, City of Grass Valley, County of Nevada, State of California. 2. That the Lease term will commence on April 17, 1995. 3. That rent has been prepaid in the amount of $3,312.00 by Lessee to Lessor. 4. That a Security Deposit has been paid in the amount of $0.00 by Lessee to Lessor. 5. That as of this date hereof, the undersigned Lessee is entitled to NO credit, offset of deduction in rent. 6. That all construction to be performed by Lessor is complete and has been approved by Lessee. 7. That the undersigned Lessee claims no right, title or interest in the above-described Leased Premises, or right to the possession of said Leased Premises other than under the terms of said Lease, and that there are no written or oral agreements affecting tenancy other than the Lease. LESSOR: Western Investment Real Estate Trust, a California unincorporated association doing business as a real estate investment trust Date: By: Its: By: Its: Pinecreek Shopping Center Associates, a California limited partnership Date: By: Connoly Development Inc., General Partner By: Its: LESSEE: Truckee River Bank, a California corporation, doing business as Truckee River Bank Date: By: Its: By: Its: EX-11 4 Exhibit 11 Sierra Tahoe Bancorp and Subsidiaries Computation of Earnings Per Common Share (Amounts in thousands except per share amounts) Three Three Six Six Months Months Months Months Ended Ended Ended Ended 6/30/95 6/30/94 6/30/95 6/30/94 Primary Net income $ 436 $ 594 $ 964 $ 1,107 Shares Weighted average number of common shares outstanding 2,610 2,591 2,615 2,591 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options 74 67 71 61 Weighted average number of common shares outstanding as adjusted 2,684 2,658 2,686 2,652 Net income per share $ 0.16 $ 0.22 $ 0.36 $ 0.42 Assuming full dilution Earnings $ 436 $ 594 $ 964 $ 1,107 Add after tax interest expense applicable to convertible debentures 125 128 250 202 Net income $ 561 $ 722 $ 1,214 $ 1,309 Shares Weighted average number of common shares outstanding 2,610 2,591 2,615 2,591 Assuming conversion of convertible debentures 1,000 1,041 1,000 830 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options 86 83 78 74 Weighted average number of common shares outstanding as adjusted 3,696 3,715 3,693 3,495 Net income per share assuming full dilution $ 0.15 $ 0.19 $ 0.33 $ 0.37
EX-27 5
9 1000 6-MOS DEC-31-1995 JUN-30-1995 16802 198 10800 0 23622 3584 3562 200748 3522 283550 241892 0 2853 10000 10567 0 0 18238 283550 10730 832 173 11735 3113 3555 8180 590 (41) 10139 1532 964 0 0 964 .36 .33 7.50 2847 1917 0 0 3546 657 43 3522 3522 0 0
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