10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)

For the transition period from                        to                       .

Commission file number 0-25418

CENTRAL COAST BANCORP

(Exact name of registrant as specified in its charter)

California	77-0367061
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

301 Main Street, Salinas, California	93901
(Address of principal executive offices)	(Zip Code)

(831) 422-6642
(Registrant’s telephone number, including area code)

not applicable
(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

No par value Common Stock – 14,098,523 shares outstanding at November 3, 2005.

The Index to the Exhibits is located at page 31                                                               Page 1 of 200 Pages

PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

CENTRAL COAST BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)

In thousands (except share data)	September 30, 2005		December 31, 2004
Assets
Cash and due from banks	$      48,861		$      49,068
Federal funds sold	39,062		9,029
Total cash and equivalents	87,923		58,097
Available-for-sale securities at fair value (amortized cost of $212,666	212,528		169,151
at September 30, 2005 and $168,052 at December 31, 2004)
Commercial	251,875		261,408
Real estate-construction	37,339		61,366
Real estate-other	624,718		594,507
Consumer	13,586		15,463
Deferred loan fees, net	(1,212)		(1,228)
Total loans	926,306		931,516
Allowance for loan losses	(17,550	)	(16,270	)
Net Loans	908,756		915,246
Premises and equipment, net	3,523		3,944
Accrued interest receivable and other assets	20,597		18,223
Total assets	$ 1,233,327		$ 1,164,661
Liabilities and Shareholders’ Equity
Deposits:
Demand, noninterest bearing	$    295,220		$    344,244
Demand, interest bearing	151,564		141,190
Savings	256,616		259,319
Time	392,991		306,615
Total Deposits	1,096,391		1,051,368
Accrued interest payable and other liabilities	22,192		12,177
Total liabilities	1,118,583		1,063,545
Commitments and contingencies (Note 3)
Shareholders’Equity:
Preferred stock — no par value; authorized 1,000,000 shares; none outstanding
Common stock — no par value; authorized 39,062,500 shares;
issued and outstanding: 14,098,522 shares at September 30, 2005
and 13,716,168 shares at December 31, 2004	85,942		85,034
Shares held in deferred compensation trust (800,020 at September 30, 2005
and 600,899 as of December 31, 2004), net of deferred obligation	--		--
Retained earnings	28,882		15,439
Accumulated other comprehensive (loss) income - net of taxes
of ($58) at September 30, 2005 and $456 at December 31, 2004	(80)		643
Total shareholders’ equity	114,744		101,116
Total liabilities and shareholders’ equity	$ 1,233,327		$ 1,164,661

See notes to Consolidated Condensed Financial Statements

CENTRAL COAST BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)

	Three Months Ended September 30,		Nine Months Ended September 30,
In thousands (except per share data)	2005	2004	2005	2004
Interest Income
Loans (including fees)	$16,529	$12,180	$46,988	$34,864
Investment securities	2,080	1,699	5,673	4,951
Other	625	58	1,066	138
Total interest income	19,234	13,937	53,727	39,953
Interest Expense
Interest on deposits	4,374	2,780	11,914	8,032
Other	145	73	321	235
Total interest expense	4,519	2,853	12,235	8,267
Net Interest Income	14,715	11,084	41,492	31,686
Provision for Loan Losses	--	885	1,400	1,540
Net Interest Income after
Provision for Loan Losses	14,715	10,199	40,092	30,146
Noninterest Income
Service charges on deposits	814	799	2,327	2,346
Other	378	329	1,133	834
Total noninterest income	1,192	1,128	3,460	3,180
Noninterest Expenses
Salaries and benefits	4,392	3,709	13,059	10,891
Occupancy	841	704	2,401	2,027
Furniture and equipment	599	465	1,771	1,350
Other	1,548	1,457	4,645	4,200
Total noninterest expenses	7,380	6,335	21,876	18,468
Income Before Provision for
Income Taxes	8,527	4,992	21,676	14,858
Provision for Income Taxes	3,187	1,729	8,233	5,143
Net Income	$  5,340	$  3,263	$13,443	$  9,715
Basic Earnings per Share	$    0.37	$    0.25	$    0.95	$    0.72
Diluted Earnings per Share	$    0.36	$    0.23	$    0.92	$    0.68

See Notes to Consolidated Condensed Financial Statements

CENTRAL COAST BANCORP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

In thousands

Nine months ended September 30,	2005	2004
Cash Flows from Operations:
Net income	$ 13,443	$     9,715
Reconciliation of net income to net cash provided
by operating activities:
Provision for loan losses	1,400	1,540
(Gain) loss on sale of investments	(12)	116
Depreciation	1,052	837
Net gain on sale of fixed assets	(4)	(10)
Amortization and accretion	536	635
Increase in accrued interest receivable and other assets	(1,860)	(41)
Increase in accrued interest payable and other liabilities	3,075	2,399
(Decrease) increase in deferred loan fees	(16)	94
Net cash provided by operations	17,614	15,285
Cash Flows from Investing Activities:
Proceeds from maturities of available-for-sale securities	16,815	16,545
Purchases of available-for-sale securities	(66,700)	(59,473)
Proceeds from sale of available-for-sale securities	4,747	16,496
Net decrease (increase) in loans	5,106	(66,503)
Proceeds from sale of equipment	6	14
Purchases of equipment	(633)	(1,367)
Net cash used in investing activities	(40,659)	(94,288)
Cash Flows from Financing Activities:
Net increase in deposit accounts	45,023	16,049
Net increase in other borrowings	7,778	9,728
Cash received for stock options exercised	1,307	609
Cash paid for shares repurchased	(1,237)	(2,501)
Net cash provided by financing activities	52,871	23,885
Net increase (decrease) in cash and equivalents	29,826	(55,118)
Cash and equivalents, beginning of period	58,097	101,463
Cash and equivalents, end of period	$ 87,923	$   46,345
Noncash Investing and Financing Activities:
Increase in other real estate owned (OREO)	$        --	$     5,250
Stock exchanged for option exercise	1,267	--
Other Cash Flow Information:
Interest paid	$ 10,572	$     7,736
Income taxes paid	7,479	5,147

See Notes to Consolidated Condensed Financial Statements

CENTRAL COAST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 2005 (Unaudited)

NOTE 1. BASIS OF PRESENTATION

In the opinion of management, the unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly Central Coast Bancorp’s (the “Company’s”) consolidated financial position at September 30, 2005, the results of operations for the three and nine month periods ended September 30, 2005 and 2004 and cash flows for the nine month periods ended September 30, 2005 and 2004.

Certain disclosures normally presented in the notes to the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. The interim consolidated condensed financial statements included in this Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2004 Annual Report to Shareholders. The results of operations for the three and nine month periods ended September 30, 2005 and 2004 may not necessarily be indicative of the operating results for the full year.

In preparing such financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant changes in the near term relate to the determination of the allowance for loan losses.

Management has determined that since all of the commercial banking products and services offered by the Company are available in each branch of the Community Bank of Central California, its bank subsidiary (the “Bank”), all branches are located within the same economic environment and management does not allocate resources based on the performance of different lending or transaction activities, it is appropriate to aggregate the Bank branches and report them as a single operating segment.

Stock split — On January 31, 2005, the Board of Directors declared a five-for-four stock split, which was distributed to shareholders on February 28, 2005. All earnings per share data and share data related to the stock option information have been retroactively adjusted to reflect the stock split.

Subsequent event — On October 13, 2005, Central Coast Bancorp issued a press release and subsequently filed a Form 8-K with the Securities and Exchange Commission to announce the proposed acquisition of Central Coast Bancorp and its bank subsidiary, Community Bank of Central California, pursuant to a definitive agreement dated October 12, 2005, entered into by and between Central Coast Bancorp and VIB Corp, located in El Centro, California. Under the terms of the agreement, Central Coast Bancorp’s shareholders will be paid $25 per outstanding share in cash. The acquisition transaction is subject to approvals of applicable regulatory authorities and the favorable vote of the shareholders of Central Coast Bancorp. Subject to obtaining applicable regulatory and Central Coast Bancorp shareholder approvals, the transaction is expected to be completed in the first quarter of 2006.

NOTE 2. STOCK COMPENSATION

The Company accounts for its stock-based awards using the intrinsic value method in accordance with Accounting Principles Board No. 25, Accounting for Stock Issued to Employees and its related interpretations. No compensation expense has been recognized in the financial statements for employee stock arrangements, as the Company’s stock option plans provide for the issuance of options at a price of no less than the fair market value at the date of the grant. Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, requires the disclosure of pro forma net income and earnings per share had the Company adopted the fair value method of accounting for stock-based compensation. Under SFAS No. 123, the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company’s stock option awards. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The Company’s calculations were made using the Black-Scholes option pricing model with the following assumptions: expected life of five years; average stock volatility of 15.7% and 16.8% for 2005 and 2004; risk free interest rates ranging from 3.77% to 3.90% for 2005 and 3.08% to 4.35% for 2004; and no cash dividends during the expected term for options granted in 2005 and 2004. The Company’s calculations are based on a multiple option valuation approach and forfeitures are recognized as they occur.

A summary of the pro forma effects to reported net income and earnings per share as if the Company had elected to recognize compensation cost based on the fair value of the options granted at the grant date as prescribed by SFAS No. 123 is as follows.

	Three Months Ended September 30,				Nine Months Ended September 30,
In thousands (except per share data)	2005		2004		2005		2004
Net Income - As Reported	$      5,340		$      3,263		$      13,443		$      9,715
Compensation expense from amortization of
fair value of stock awards	(30)		(317)		(131)		(949)
Taxes on compensation expense	12		130		55		389
Pro Forma Net Income	$      5,323		$      3,076		$      13,367		$      8,794
Basic Earnings per Share - As Reported	$         0	.37	$         0	.24	$         0	.95	$         0	.72
Pro Forma Basic Earnings per Share	$         0	.37	$         0	.20	$         0	.95	$         0	.66
Diluted Earnings per Share - As Reported	$         0	.36	$         0	.22	$         0	.92	$         0	.68
Pro Forma Diluted Earnings per Share	$         0	.36	$         0	.19	$         0	.92	$         0	.63

NOTE 3. COMMITMENTS AND CONTINGENCIES

In the normal course of business there are outstanding various commitments to extend credit which are not reflected in the financial statements, including loan commitments of approximately $250,684,000 and standby letters of credit of approximately $7,295,000 at September 30, 2005. However, all such commitments will not necessarily culminate in actual extensions of credit by the Company.

Approximately $25,536,000 of loan commitments outstanding at September 30, 2005 relate to real estate construction loans that are expected to fund within the next twelve months. The remaining commitments primarily relate to commercial revolving lines of credit, other commercial loans and home equity lines of credit. Many of these commitments are expected to expire without being drawn upon. Each potential borrower and the necessary collateral are evaluated on an individual basis. Collateral varies, but may include real property, bank deposits, debt or equity securities or business assets.

Stand-by letters of credit are commitments written to guarantee the performance of a customer to a third party. These guarantees are issued primarily relating to contract performance or purchases of inventory by commercial customers and are typically short-term in nature. Credit risk is similar to that involved in extending loan commitments to customers and, accordingly, evaluation and collateral requirements similar to those for loan commitments are used. Virtually all such commitments are collateralized.

NOTE 4. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if options or other contracts to issue common stock were exercised and converted into common stock.

There was no difference in the numerator used in the calculation of basic earnings per share and diluted earnings per share. The denominator used in the calculation of basic earnings per share and diluted earnings per share for the three and nine-month periods ended September 30 is reconciled and basic and diluted earnings per share are calculated as follows:

	Three Months Ended September 30,		Nine Months Ended September 30,
In thousands (except per share data)	2005	2004	2005	2004
Basic Earnings Per Share
Net income	$  5,340	$  3,263	$13,443	$  9,715
Weighted average common shares outstanding	14,175	13,579	14,109	13,586
Basic earnings per share	$    0.37	$    0.24	$    0.95	$    0.72
Diluted Earnings Per Share
Net Income	$  5,340	$  3,263	$13,443	$  9,715
Weighted average common shares outstanding	14,175	13,579	14,109	13,586
Dilutive effect of outstanding options	505	679	483	674
Weighted average common shares outstanding - Diluted	14,680	14,258	14,592	14,260
Diluted earnings per share	$    0.36	$    0.22	$    0.92	$    0.68

NOTE 5. COMPREHENSIVE INCOME

	Three Months Ended September 30,		Nine Months Ended September 30,
In thousands	2005	2004	2005	2004
Net income	$ 5,340	$ 3,263	$ 13,443	$ 9,715
Other comprehensive (loss) income - Unrealized
(loss) gain on available-for-sale securities	(376)	3,869	(1,260)	(244)
Taxes on unrealized (loss) gain	158	(1,627)	530	102
Reclassification adjustment for gain (loss)
included in income	--	12	12	116
Taxes on reclassification adjustment	--	(5)	(5)	(48)
Total other comprehensive (loss) income	(218)	2,249	(723)	(74)
Total comprehensive income	$ 5,122	$ 5,512	$ 12,720	$ 9,641

NOTE 6. RECENT ACCOUNTING PRONOUNCEMENTS

Share-Based Payments

In December 2004, the FASB issued Statement Number 123 (revised 2004) (FAS 123 (R)), Share-Based Payments. FAS 123 (R) requires all entities to recognize compensation expense in an amount equal to the fair value of share-based payments such as stock options granted to employees. In April 2005, the Securities and Exchange Commission adopted a rule that defers the compliance of FAS 123(R) from the first reporting period beginning after June 15, 2005 to the first fiscal year beginning after June 15, 2005, January 1, 2006 for the Company. FAS 123 (R) allows for either a modified prospective recognition of compensation expense or a modified retrospective recognition. The Company currently intends to apply the modified prospective recognition method and implement the provisions of FAS 123 (R) beginning in the first quarter of 2006. Management has completed its evaluation of the effect that FAS 123 (R) will have and believes that the effect will be consistent with its pro forma disclosures, see Note 2.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition to the historical information contained herein, this report on Form 10-Q contains certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Changes to such risks and uncertainties, which could impact future financial performance, include, among others, (1) competitive pressures in the banking industry; (2) changes in the interest rate environment; (3) general economic conditions, nationally, regionally and in operating market areas, including a decline in real estate values in the Company’s market areas; (4) the effects of terrorism, the threat of terrorism or the impact of military conflicts; (5) changes in the regulatory environment; (6) changes in business conditions and inflation; (7) changes in securities markets; (8) data processing problems; (9) variances in the actual versus projected growth in assets; (10) return on assets; (11) loan losses; (12) expenses; (13) rates charged on loans and earned on securities investments; (14) rates paid on deposits; and (15) fee and other noninterest income earned, as well as other factors. This entire report should be read to put such forward-looking statements in context. To gain a more complete understanding of the uncertainties and risks involved in the Company’s business, this report should be read in conjunction with Central Coast Bancorp’s annual report on Form 10-K for the year ended December 31, 2004 and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K.

Critical Accounting Policies

General

Central Coast Bancorp’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The financial information contained within our statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. We use historical loss factors as one factor in determining the inherent loss that may be present in our loan portfolio. Actual losses could differ significantly from the historical factors that we use. Other estimates that we use are related to the expected useful lives of our depreciable assets. In addition GAAP itself may change from one previously acceptable method to another method. Although the economics of our transactions would be the same, the timing of events that would impact our transactions could change.

Allowance for Loan Losses

The allowance for loan losses is an estimate of the losses that may be sustained in our loan portfolio. The allowance is based on two basic principles of accounting: (1) Statement of Financial Accountings Standards (“SFAS”) No. 5 “Accounting for Contingencies,” which requires that losses be accrued when they are probable of occurring and estimable and (2) SFAS No. 114, “Accounting by Creditors for Impairment of a Loan,” which requires that losses be accrued based on the differences between the value of collateral, present value of future cash flows or values that are observable in the secondary market and the loan balance.

Our allowance for loan losses has three basic components: the formula allowance, the specific allowance and the unallocated allowance. Each of these components is determined based upon estimates that can and do change when actual events occur. The formula allowance uses a historical loss view as an indicator of future losses and as a result could differ from the loss incurred in the future. However, since this history is updated with the most recent loss information, the errors that might otherwise occur are mitigated. The specific allowance uses various techniques to arrive at an estimate of the expected loss. Historical loss information and fair market value of collateral are used to estimate those losses. The use of these values is inherently subjective and our actual losses could be greater or less than the estimates. The unallocated allowance addresses losses that are attributable to various factors including economic events and industry or geographic sectors whose impact on the portfolio have occurred, but have yet to be recognized in either the formula or specific allowances. For further information regarding our allowance for loan losses, see “Allowance for Loan Losses” discussion later in this Item 2.

Stock Based Awards

The Company accounts for its stock based awards using the intrinsic value method in accordance with Accounting Principles Board (“APB”) Opinion No. 25 and related interpretations. Since the Company’s stock option plan provides for the issuance of options at a price of no less than the fair market value at the date of the grant, no compensation expense has been recognized in the financial statements. See Note 2 to the consolidated condensed financial statements – STOCK COMPENSATION, for additional information.

Business Organization

Central Coast Bancorp (the “Company”) is a California corporation organized in 1994, and is the parent company for Community Bank of Central California, a state-chartered bank, headquartered in Salinas, California (the “Bank”). Its investment in the Bank comprises the major business activity of the Company. Upon prior notification to the Board of Governors of the Federal Reserve System (“Board of Governors”), the Company is authorized to engage in a variety of activities, which are deemed closely related to the business of banking. The Company is engaged in certain lending activities related to the purchase of certain tax advantaged loans from the Bank.

The Bank offers a full range of commercial banking services, including a diverse range of traditional banking products and services to individuals, merchants, small and medium-sized businesses, professionals and agribusiness enterprises. Its principal markets are located in the counties of Monterey, San Benito, Santa Clara and Santa Cruz, which are in the central coast area of California.

On October 13, 2005, Central Coast Bancorp issued a press release and subsequently filed a Form 8-K with the Securities and Exchange Commission to announce the proposed acquisition of Central Coast Bancorp and its bank subsidiary, Community Bank of Central California, pursuant to a definitive agreement dated October 12, 2005, entered into by and between Central Coast Bancorp and VIB Corp, located in El Centro, California. The acquisition transaction is subject to approvals of applicable regulatory authorities and the favorable vote of shareholders of Central Coast Bancorp.

Overview

Central Coast Bancorp reported record quarterly net income of $5,340,000 for the third quarter of 2005. Net income increased 63.7% over the $3,263,000 reported for the third quarter of 2004. Diluted earnings per share for the two quarters were $0.36 and $0.23, respectively. All earnings per share and applicable share data for the 2004 periods have been adjusted for the five-for-four stock split distributed on February 28, 2005. The annualized return on average equity (ROAE) and the return on average assets (ROAA) for the third quarter of 2005 were 18.9% and 1.69% up from 13.7% and 1.22% for the same period in 2004.

Net income for the nine months ended September 30, 2005 increased 38.4% to $13,443,000 from $9,715,000 for the nine months ended September 30, 2004. Diluted earnings per share increased to $0.92 from $0.68 for the comparative periods. For the first nine months of 2005, the annualized ROAE was 16.7% and the ROAA was 1.48% up from 14.0% and 1.25% for the same period in 2004.

The Company largely maintained the growth in its balance sheet in the first nine months of 2005. At September 30, 2005, total assets were $1,233,327,000, a slight decrease of $15,272,000 (-1.2%) from June 30, 2005 and an increase of $68,666,000 (5.9%) from year-end 2004. Most of the asset growth has been deployed into the investment portfolio and Fed Funds Sold as year-to-date loan growth has been relatively flat. Loans at September 30, 2005, totaled $926,306,000, a decrease of $7,117,000 (-0.7%) from June 30, 2005 and $5,210,000 (-0.6%) from year-end 2004. At September 30, 2005, deposits were slightly lower at $1,096,391,000, a decrease of $25,153,000 (-2.2%) from June 30, 2005 and an increase of $45,023,000 (4.3%) from year-end 2004. On a year-over-year basis, the Company’s focus on internal growth and de novo branch expansion has generated an increase in total assets of $159,193,000 (14.9%); an increase in loans of $85,757,000 (10.2%); and an increase in deposits of $142,232,000 (14.9%).

The Company provided $885,000 for loan losses in the third quarter of 2004. Based on changes in the loan portfolio and the estimated probable loss in the portfolio, no provision for loan losses was recorded in the third quarter of 2005. At September 30, 2005, nonperforming and restructured loans totaled $2,993,000 as compared to $835,000 at December 31, 2004 and $7,281,000 at September 30, 2004. The ratio of the allowance for loan losses to total loans was 1.89% at September 30, 2005, 1.75% at December 31, 2004 and 1.76% at September 30, 2004.

Central Coast Bancorp ended the third quarter of 2005 with a Tier 1 capital ratio of 11.4% and a total risk-based capital ratio of 12.7% compared to 10.5% and 11.7% at the end of the third quarter of 2004.

Within the Management’s Discussion and Analysis, interest income, net interest income, net interest margin and the efficiency ratio are presented on a fully taxable equivalent basis. These items have been adjusted to give effect to $369,000 and $287,000 in taxable equivalent interest income on tax-free investments for the three-month periods ending September 30, 2005 and 2004 and $976,000 and $841,000 for the nine-month periods ending September 30, 2005 and 2004.

The following table provides a summary of the major elements of income and expense for the periods indicated.

	Three Months Ended September 30,		Percentage Change Increase		Nine Months Ended September 30,		Percentage Change Increase
In thousands (except percentages)	2005	2004	(Decrease)		2005	2004	(Decrease)
Interest Income (1)	$19,603	$14,224	38	%	$54,703	$40,794	34	%
Interest Expense	4,519	2,853	58	%	12,235	8,267	48	%
Net interest income	15,084	11,371	33	%	42,468	32,527	31	%
Provision for Loan Losses	--	885	-100	%	1,400	1,540	-9	%
Net interest income after
provision for loan losses	15,084	10,486	44	%	41,068	30,987	33	%
Noninterest Income	1,192	1,128	6	%	3,460	3,180	9	%
Noninterest Expense	7,380	6,335	16	%	21,876	18,468	18	%
Income before income taxes	8,896	5,279	69	%	22,652	15,699	44	%
Income Taxes	3,187	1,729	84	%	8,233	5,143	60	%
Tax Equivalent Adjustment	369	287	29	%	976	841	16	%
Net income	$  5,340	$  3,263	64	%	$13,443	$  9,715	38	%

1) Interest on tax-free securities is reported on a tax equivalent basis.

Net interest income / net interest margin

Net interest income, the difference between interest earned on loans and investments and interest paid on deposits and other borrowings, is the principal component of the Bank’s earnings. Net interest margin is net interest income expressed as a percentage of average earning assets. The first two following tables provide a summary of the components of net interest income and the changes within the components for the periods indicated. The third table sets forth a summary of the changes in interest income and interest expense from changes in average asset and liability balances (volume) and changes in average interest rates for the periods indicated.

	Three months ended September 30,
(Taxable equivalent basis)	2005						2004
In thousands (except percentages)	Avg. Balance		Interest		Avg. Yield			Avg. Balance		Interest	Avg. Yield
Assets:
Earning Assets
Loans (1) (2)		$ 909,733		$16,529		7	.21%	$  802,659		$  12,180	6	.04%
Taxable investments		135,148		1,364		4	.00%	119,950		1,125	3	.73%
Tax-exempt securities (tax equiv. basis)		69,964		1,085		6	.15%	53,255		861	6	.43%
Federal funds sold		68,278		625		3	.63%	16,796		58	1	.37%
Total Earning Assets		1,183,123		19,603		6	.57%	992,660		14,224	5	.70%
Cash & due from banks		49,729						54,222
Other assets		24,412						17,053
		$1,257,264						$1,063,935
Liabilities & Shareholders' Equity:
Interest bearing liabilities
Demand deposits		$   166,620		230		0	.55%	$  143,870		212	0	.59%
Savings		269,500		1,139		1	.68%	261,444		830	1	.26%
Time deposits		386,350		3,006		3	.09%	287,973		1,738	2	.40%
Other borrowings		11,283		144		5	.06%	5,433		73	5	.35%
Total interest bearing liabilities		833,753		4,519		2	.15%	698,720		2,853	1	.62%
Demand deposits		294,259						267,033
Other Liabilities		17,118						3,139
Total Liabilities		1,145,130						968,892
Shareholders' Equity		112,134						95,043
		$1,257,264						$1,063,935
Net interest income & margin (3)				$15,084		5	.06%		$	11,371	4	.56%

(1) Loan interest income includes fee income of $675,000 and $416,000 for the three months ended September 30, 2005 and 2004, respectively.

(2) Includes the average allowance for loan losses of $17,516,000 and $17,510,000 and average deferred loan fees of $1,282,000 and $1,127,000 for the three months ended September 30, 2005 and 2004, respectively.

(3) Net interest margin is computed by dividing net interest income by the total average earning assets.

	Nine Months ended September 30,
(Taxable equivalent basis)	2005				2004
In thousands (except percentages)	Avg. Balance	Interest	Avg. Yield		Avg. Balance	Interest	Avg. Yield
Assets:
Earning Assets
Loans (1) (2)	$   912,258	$46,988	6	.86%	$776,315	$34,864	6	.00%
Taxable investments	125,465	3,742	3	.97%	120,249	3,269	3	.62%
Tax-exempt securities (tax equiv. basis)	61,220	2,907	6	.33%	51,542	2,523	6	.54%
Federal funds sold	44,140	1,066	3	.22%	16,446	138	1	.12%
Total Earning Assets	1,143,083	54,703	6	.37%	964,552	40,794	5	.64%
Cash & due from banks	47,169				52,939
Other assets	23,276				16,469
	$1,213,528				$1,033,960
Liabilities & Shareholders' Equity:
Interest bearing liabilities
Demand deposits	$   155,248	617	0	.53%	$140,011	612	0	.58%
Savings	281,319	3,358	1	.59%	254,899	2,419	1	.27%
Time deposits	362,152	7,928	2	.92%	279,114	5,001	2	.39%
Other borrowings	8,205	332	5	.39%	7,790	235	4	.03%
Total interest bearing liabilities	806,924	12,235	2	.02%	681,814	8,267	1	.62%
Demand deposits	283,604				255,992
Other Liabilities	15,231				3,406
Total Liabilities	1,105,759				941,212
Shareholders' Equity	107,769				92,748
	$1,213,528				$1,033,960
Net interest income & margin (3)		$42,468	4	.95%		$32,527	4	.50%

(1) Loan interest income includes fee income of $1,616,000 and $1,333,000 for the nine months ended September 30, 2005 and 2004, respectively.

(2) Includes the average allowance for loan losses of $17,175,000 and $16,971,000 and average deferred loan fees of $1,287,000 and $1,143,000 for the nine months ended September 30, 2005 and 2004, respectively.

(3) Net interest margin is computed by dividing net interest income by the total average earning assets.

Volume/Rate Analysis
(in thousands)

Three Months Ended September 30, 2005 over 2004
Increase (decrease) due to change in:

			Net
Interest-earning assets:	Volume	Rate (4)	Change
Net Loans (1)(2)	$1,630	$ 2,719	$4,349
Taxable investment securities	143	96	239
Tax exempt investment securities (3)	271	(47)	224
Federal funds sold	178	389	567
Total	2,222	3,157	5,379
Interest-bearing liabilities:
Demand deposits	34	(16)	18
Savings deposits	26	283	309
Time deposits	595	673	1,268
Other borrowings	79	(8)	71
Total	734	932	1,666
Interest differential	$1,488	$ 2,225	$3,713

Nine Months Ended September 30, 2005 over 2004
Increase (decrease) due to change in:

			Net
Interest-earning assets:	Volume	Rate (4)	Change
Net Loans (1)(2)	$6,123	$ 6,001	$12,124
Taxable investment securities	142	331	473
Tax exempt investment securities (3)	475	(91)	384
Federal funds sold	233	695	928
Total	6,973	6,936	13,909
Interest-bearing liabilities:
Demand deposits	66	(61)	5
Savings deposits	252	687	939
Time deposits	1,490	1,437	2,927
Other borrowings	13	84	97
Total	1,821	2,147	3,968
Interest differential	$5,152	$ 4,789	$  9,941

(1) The average balance of non-accruing loans is not significant as a percentage of total loans and, as such, has been included in net loans.

(2) Loan fees of $675,000 and $416,000 for the quarters ended September 30, 2005 and 2004, and loan fees of $1,616,000 and $1,333,000 for the nine months ended September 30, 2005 and 2004, respectively, have been included in the interest income computation.

(3) Includes taxable-equivalent adjustments that relate to income on certain securities that are exempt from Federal income taxes. The effective Federal statutory tax rate was 35% for 2005 and 2004.

(4) The rate / volume variance has been included in the rate variance.

Net interest income for the third quarter of 2005 was $15,084,000 for an increase of $3,713,000 (32.7%) from the $11,371,000 recorded in the third quarter of 2004. Both interest income and interest expense were higher than prior year levels. The interest income component increased $5,379,000 (37.8%) on a quarter-over-quarter basis as both the volume of earning assets and the rates on earning assets increased. Average loan balances were $107,074,000 (13.3%) higher in the third quarter of 2005 versus the same quarter in the previous year. This volume difference added $1,630,000 to interest income. The average yield earned on loans in the third quarter of 2005 was 7.21%, an increase of 117 basis points from the 6.04% yield earned in the third quarter of 2004. The higher loan yield increased interest income by $2,719,000. The average balance of Federal Funds Sold was $68,278,000 in the third quarter of 2005, an increase of $51,482,000 from the average balance in the third quarter of 2004. The increase in volume added $178,000 to interest income. In addition, due to the continuing increases in interest rates, the average yield on Fed Funds Sold in the third quarter of 2005 was 3.63% versus 1.37% in the year earlier period. The higher rates on Fed Funds Sold increased interest income $389,000 on a quarter-over-quarter basis.

Interest expense increased $1,666,000 (58.4%) to $4,519,000 in the third quarter of 2005 from $2,853,000 in the third quarter of 2004. The increase was attributable to both increases in the volume and higher rates on the interest-bearing deposit liabilities The year-long trend of the Federal Reserve Board through its Federal Open Market Committee (FOMC) to raise the short term interest rates has begun to impact the pricing on time deposit liabilities. The average rate paid on time deposits increased 53 basis points to 3.09% for the third quarter of 2005. The higher rates on time deposits increased interest expense $673,000. Higher rates on the other interest-bearing liabilities increased interest expense an additional $259,000 in 2005 over the year earlier period. Average balances of interest-bearing liabilities in the third quarter of 2005 increased by $135,033,000 (19.3%) over the prior year period. These higher balances added $734,000 to interest expense. The average rate paid on demand deposits decreased slightly in the third quarter of 2005 compared to that of 2004 due to changes in the composition of demand deposit balances.

The net interest margin for the third quarter of 2005 was 5.06% up 50 basis points from to 4.56% in the year earlier period. The net interest margin in the third quarter of 2005 increased 13 basis points from the 4.93% achieved in the second quarter of 2005. Both the average yield received on earning assets and the average rate paid on liabilities increased by 16 basis points from the second quarter 2005 yields and rates. The increase in net interest margin from the second quarter is attributable to a higher level of earning assets over the interest-bearing liabilities as well as to an increase in rates.

For the nine-month period ending September 30, 2005, net interest income increased $9,941,000 (30.6%) to $42,468,000 from $32,527,000 for the first nine months of 2004. The interest income component increased $13,909,000 to $54,703,000. Average balances of earning assets were $178,531,000 (18.5%) higher in the first nine months of 2005 than the same period in 2004. The average balance of loans was $135,943,000 higher, which contributed $6,123,000 to interest income. The average yield of 6.86% received on loans in the first nine months of 2005 was 86 basis points higher than the 6.00% received in the year earlier period. The higher yield on loans increased interest income by $6,001,000. Interest earned on Fed Funds Sold increased $928,000 in the first nine months of which $695,000 was attributable to higher rates.

Interest expense for the nine-month period ending September 30, 2005 increased $3,968,000 (48.0%) to $12,235,000 from $8,267,000 for the first nine months of 2004. Average interest bearing liability balances in the first nine-months of 2005 were $125,110,000 (18.3%) higher than in the year earlier period. The volume increases added $1,821,000 to interest expense. For the first nine months of 2005, average rates paid on interest bearing liabilities was 2.02% for an increase of 40 basis points from the rates paid in the first nine-months of 2004. The higher rates resulted in a $2,147,000 increase in interest expense in the first nine months of 2005 from the prior year period.

The impact of the above changes in volumes and rates for earning assets and interest bearing liabilities for the first nine months of 2005 had a positive effect on the net interest margin which increased 45 basis points to 4.95% from 4.50% in the year earlier period.

Provision for Loan Losses

The Company made no provision for loan losses in the third quarter of 2005 as compared to $885,000 in the third quarter of 2004. For the nine-month period ended September 30, 2005, the Company provided $1,400,000 compared to $1,540,000 in the year earlier period. The provision for loan losses that has been recorded is based on factors which consider the growth or decline in the level of loans, changes in the level of nonperforming and classified assets, changing portfolio mix and prevailing local and national economic conditions to establish the required level of loan loss reserves. At September 30, 2005, the ratio of the allowance for loan losses to total loans was 1.89% as compared to 1.75% at December 31, 2004 and 1.76% at September 30, 2004. Including the reserve for undisbursed loan commitments, included in other liabilities in the consolidated condensed balance sheet, the total allowance was 1.97% of total loans as of September 30, 2005 compared to 1.81% at December 31, 2004 (See the “Credit Risk” and “Allowance for Loan Losses” sections for additional discussion).

Noninterest Income

Noninterest income consists primarily of service charges on deposit accounts and fees for miscellaneous services. Noninterest income totaled $1,192,000 in the third quarter of 2005, which was up $64,000 (5.7%) from $1,128,000 in the same period in 2004. Service charges on deposit accounts were relatively unchanged compared to the same period in the prior year. Other fee income was up due to changes in types and levels of business activity.

For the first nine months of 2005, noninterest income increased $280,000 (8.8%) to $3,460,000 compared to $3,180,000 in the same period last year. Service charges on deposit accounts for the first nine months of 2005 were consistent with the comparative period in the prior year. Other income increased in part due to a $12,000 gain on the sale of securities in 2005 versus a loss of $116,000 in 2004.

Noninterest Expense

Noninterest expenses increased $1,045,000 (16.5%) to $7,380,000 in the third quarter of 2005 as compared to $6,335,000 in the third quarter 2004. Salary and benefit expenses increased $683,000 (18.4%) to $4,392,000 in the third quarter of 2005 as compared to $3,709,000 in the prior year quarter. Costs increased due to normal salary increases, higher staffing levels, the two new branches opened in the second half of 2004 and higher benefit costs. Health insurance costs increased $130,000 (58.1%). Other noninterest expenses were generally higher due to higher business volumes, the two new branches and normal cost increases. The efficiency ratio for the quarter ended September 30, 2005 improved to 45.5% as compared to 50.7%, in the year earlier period. The company employed an equivalent of 286 full time employees as of September 30, 2005.

Noninterest expenses for the nine-month period ending September 30, 2005 increased $3,408,000 (18.5%) to $21,876,000 compared to $18,468,000 for the same period in 2004. Salary and benefit expenses increased $2,168,000 (19.9%) to $13,059,000 in the first nine months of 2005 versus $10,891,000 in the first nine months of 2004. The increase was due to additional staffing, the two new branches, higher benefit costs and normal salary increases. Health insurance costs accounted for $571,000 of the increase. The Company changed its health insurance provider in the third quarter of 2005, and anticipates that this will have a positive impact on mitigating these cost increases. Other expenses were up due to business volumes, the two new branches, the cost of upgrading equipment and other cost increases. The efficiency ratio for the first nine months of 2005 improved to 47.6% from 51.7% for the same period of 2004 due to the growth in income outpacing growth in noninterest expenses.

Provision for Income Taxes

The Company recorded income tax expense of $3,187,000 and $8,233,000 for the quarter and nine-month periods ending September 30, 2005 as compared to $1,729,000 and $5,143,000 for the same periods in 2004. The effective tax rates, considering state and federal taxes, and tax exempt income for the third quarter and first nine months of 2005 were 37.4% and 38.0% compared to 34.6% for both periods in 2004. The effective tax rate was higher in both periods of 2005 as the fully taxable income grew at a faster rate than tax exempt income. Also, in 2004 the Company revised the calculation of deferred tax assets to consider the Company’s increased incremental tax rate, resulting in a lower net effective tax rate for the previous year period.

Securities

At September 30, 2005, available-for-sale securities had a market value of $212,528,000 with an amortized cost basis of $212,666,000. On an amortized cost basis, the investment portfolio increased by $20,870,000 from the balance at June 30, 2005 and increased $44,614,000 from the balance at December 31, 2004. The pretax unrealized loss of $138,000 at September 30, 2005 represented a decrease in market value of $366,000 from the unrealized gain of $228,000 at June 30, 2005 and a decrease of $1,237,000

Loans

The ending loan balance at September 30, 2005 was $926,306,000, which was a decrease of $7,117,000 (0.8%) from the June 30, 2005 balance, a decrease of $5,210,000 (0.6%) from the year-end 2004 balance and an increase of $85,757,000 (10.2%) from the September 30, 2004 balance. During the third quarter of 2005, real estate-other and consumer loans increased while commercial and construction loans decreased from June 30, 2005 balances. The most significant changes occurred in the real estate-other and construction categories. Several factors contributed to the increase in real estate loans–other in the third quarter, including the term-out of former construction loans and the addition of term fixed rate commercial real estate loans. The decrease in construction loans was due to the completion of several large construction projects. Within its primary market area, the Bank has diversified its risk both as to property type and location. See “Credit Risk” below for a discussion regarding real estate risk.

Credit Risk

The Bank assesses and manages credit risk on an ongoing basis through stringent credit review and approval policies, extensive internal monitoring and established formal lending policies. Additionally, the Bank contracts with an outside loan review consultant to periodically examine new loans and to review the existing loan portfolio. Management believes its ability to identify and assess risk and return characteristics of the Company’s loan portfolio is critical for profitability and growth. Management strives to continue the historically low level of loan losses by continuing its emphasis on credit quality in the loan approval process, active credit administration and regular monitoring. With this in mind, management has designed and implemented a comprehensive loan review and grading system that functions to continually assess the credit risk inherent in the loan portfolio.

Ultimately, the credit quality of the Bank’s loans may be influenced by underlying trends in the national and local economic and business cycles. The Bank’s business is mostly concentrated in Monterey County. The County’s economy is highly dependent on the agricultural and tourism industries. The agricultural industry is also a major driver of the economies of San Benito County and the southern portions of Santa Cruz and Santa Clara Counties, which represent the additional market areas for the Bank. As a result, the Bank lends money to individuals and companies dependent upon the agricultural and tourism industries. The concentration in tourism and agriculture under certain economic conditions could have an adverse effect on the credit quality of loans in the portfolio.

The Company has significant extensions of credit and commitments to extend credit which are secured by real estate, totaling approximately $765 million at September 30, 2005. Although management believes this real estate concentration has no more than the normal risk of collectibility, a substantial decline in the economy in general, or a decline in real estate values in the Bank’s primary market areas in particular, could have an adverse impact on the collectibility of these loans. The ultimate recovery of these loans is generally dependent on the successful operation, sale or refinancing of the real estate. The Bank monitors the effects of current and expected market conditions and other factors on the collectibility of real estate loans. When, in management’s judgment, these loans are impaired, an appropriate provision for losses is recorded. The more significant assumptions management considers involve estimates of the following: lease, absorption and sale rates; real estate values and rates of return; operating expenses; inflation; and sufficiency of collateral independent of the real estate including, in limited instances, personal guarantees. Notwithstanding the foregoing, abnormally high rates of impairment due to general or local economic conditions could adversely affect the Company’s future prospects and results of operations.

In extending credit and commitments to borrowers, the Bank generally requires collateral and/or guarantees as security. The repayment of such loans is expected to come from cash flow or from proceeds from the sale of selected assets of the borrowers. The Bank’s requirement for collateral and/or guarantees is determined on a case-by-case basis in connection with management’s evaluation of the creditworthiness of the borrower. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, income-producing properties, residences and other real property. The Bank secures its collateral by perfecting its interest in business assets, obtaining deeds of trust, or outright possession among other means. Loan losses from lending transactions related to real estate and agriculture compare favorably with the Bank’s loan losses on its loan portfolio as a whole. Therefore, the requirement of collateral and/or guarantees generally helps to mitigate credit risk.

Management believes that its lending policies and underwriting standards will tend to mitigate losses in an economic downturn; however, there is no assurance that losses will not occur under such circumstances. The Bank’s loan policies and underwriting standards include, but are not limited to, the following: 1) maintaining a thorough understanding of the Bank’s service area and limiting investments outside of this area, 2) maintaining a thorough understanding of borrowers’ knowledge and capacity in their field of expertise, 3) basing real estate construction loan approval not only on salability of the project, but also on the borrowers’ capacity to support the project financially in the event it does not sell within the original projected time period, and 4) maintaining conforming and prudent loan to value and loan to cost ratios based on independent outside appraisals and ongoing inspection and analysis by the Bank’s construction lending officers. In addition, the Bank strives to diversify the risk inherent in the construction portfolio by avoiding concentrations to individual borrowers and on any one project.

Nonaccrual, Past Due and Restructured Loans

Management generally places loans on nonaccrual status when they become 90 days past due, unless the loan is well secured and in the process of collection. When a loan is placed on nonaccrual status, the accrued and unpaid interest receivable is reversed and the loan is accounted for on the cash or cost recovery method thereafter, until qualifying for return to accrual status. Generally, a loan may be returned to accrual status when all delinquent interest and principal become current in accordance with the terms of the loan agreement and remaining principal is considered collectible or when the loan is both well secured and in the process of collection. Loans are charged off when, in the opinion of management, collection appears unlikely. The following table sets forth nonaccrual loans, loans past due 90 days or more and restructured loans performing in compliance with modified terms at September 30, 2005 and December 31, 2004:

In thousands (except percentages)	September 30, 2005		December 31, 2004
Past due 90 days or more and still accruing interest:
Commercial	$     --		$  --
Real estate	--		--
Consumer and other	--		--
	--		--
Nonaccrual:
Commercial	--		102
Real estate	--		--
Consumer and other	--		--
	--		102
Restructured (in compliance with modified terms) - Commercial	2,993		733
Total nonperforming and restructured loans	$2,993		$835
Allowance for loan losses as a percentage of     nonperforming and restructured loans	586	%	1949	%
Nonperforming and restructured loans to total loans	0.32	%	0.09	%
Nonperforming assets to total assets	0.24	%	0.07	%

Nonperforming assets, which includes nonperforming and restructured loans and other real estate owned (OREO), increased $2,158,000 from the December 31, 2004 balance. At September 30, 2005, nonperforming and restructured loans were 0.32% of total loans, which was up from 0.07% at June 30, 2005 and 0.09% at December 31, 2004. This increase is primarily due to the restructuring of one real estate loan. The ratio of nonperforming assets to total assets was 0.24% at September 30, 2005, 0.05% at June 30, 2005 and 0.07% at December 31, 2004. The Company did not have any OREO at September 30, 2005 or December 31, 2004.

A loan is impaired when, based on 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. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral-dependent.

At September 30, 2005, the recorded investment in loans that were considered impaired under SFAS No. 114 was $2,993,000. The total impaired loans consist solely of restructured loans. Impaired loans had valuation allowances totaling $445,000. At December 31, 2004, the recorded investment in loans considered impaired was $835,000 of which $102,000 was included in nonaccrual loans and $733,000 was included in restructured loans. Impaired loans had valuation allowances totaling $323,000. The increase of $2,158,000 in impaired loans from December 31, 2004 is primarily due to the restructuring of one real estate loan.

Other than for the impaired loans disclosed above, management is not aware of any other potential problem loans, which were accruing and current at September 30, 2005, where serious doubt exists as to the ability of the borrower to comply with the present repayment terms.

Allowance for Loan Losses

The Bank maintains an allowance for loan losses to absorb losses inherent in the loan portfolio. The allowance is based on our regular assessments of the probable estimated losses inherent in the loan portfolio and to a lesser extent, unused commitments to provide financing. Determining the adequacy of the allowance is a matter of careful judgment, which reflects consideration of all significant factors that affect the collectibility of the portfolio as of the evaluation date. Our methodology for measuring the appropriate level of the allowance relies on several key elements, which include the formula allowance, specific allowances for identified problem loans and the unallocated reserve. The unallocated allowance contains amounts that are based on management’s evaluation of conditions that are not directly measured in the determination of the formula and specific allowances.

The formula allowance is calculated by applying loss factors to outstanding loans and certain unused commitments, in each case based on the internal risk grade of such loans and commitments. Changes in risk grades of both performing and nonperforming loans affect the amount of the formula allowance. Loss factors are based on our historical loss experience and may be adjusted for significant factors that, in management’s judgment, affect the collectibility of the portfolio as of the evaluation date. At September 30, 2005, the formula allowance was $14,600,000 compared to $14,374,000 at June 30, 2005 and $11,620,000 at December 31, 2004. The increase in the formula allowance in the third quarter was primarily a result of fluctuations in the balances of various classified loan categories.

In addition to the formula allowance calculated by the application of the loss factors to the standard loan categories, certain specific allowances may also be calculated. Quarterly, all significant classified and criticized loans are analyzed individually based on the source and adequacy of repayment and specific type of collateral, and an assessment is made of the adequacy of the formula reserve relative to the individual loan. A specific allocation either higher or lower than the formula reserve will be calculated based on the higher/lower-than-normal probability of loss and the adequacy of the collateral. At September 30, 2005, the specific allowance was $1,138,000 compared to $1,041,000 at June 30, 2005 and $2,671,000 at December 31, 2004

The unallocated allowance contains amounts that are based on management’s evaluation of conditions that are not directly measured in the determination of the formula and specific allowances. The evaluation of the inherent loss with respect to these conditions is subject to a higher degree of uncertainty because they are not identified with specific problem loans or portfolio segments. At September 30, 2005, the unallocated allowance was $1,811,000 compared to $2,099,000 at June 30, 2005 and $1,979,000 at December 31, 2004. The conditions evaluated in connection with the unallocated allowance include the following at the balance sheet date:

• The current national and local economic and business conditions, trends and developments, including the condition of various market segments within our lending area;

• Changes in lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices;

• Changes in the nature, mix, concentrations and volume of the loan portfolio;

• The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Bank’s current portfolio.

There can be no assurance that the adverse impact of any of these conditions on the Bank will not be in excess of the unallocated allowance as determined by management at September 30, 2005 and set forth in the preceding paragraph.

The allowance for loan losses totaled $17,550,000 or 1.89% of total loans at September 30, 2005 compared to $17,514,000 or 1.88% at June 30, 2005 and $16,270,000 or 1.75% at December 31, 2004. At these dates, the allowance represented 586%, 2591% and 1949% of nonperforming loans.

It is the policy of management to maintain the allowance for loan losses at a level adequate for risks inherent in the loan portfolio. Based on information currently available to analyze loan loss potential, including economic factors, overall credit quality, historical delinquency and a history of actual charge-offs, management believes that the loan loss provision and allowance are adequate. However, no prediction of the ultimate level of loans charged off in future years can be made with any certainty.

The following table summarizes activity in the allowance for loan losses for the periods indicated:

	Three months ended September 30,				Nine months ended September 30,
In thousands (except percentages)	2005		2004		2005		2004
Beginning balance	$ 17,514		$ 17,232		$   16,270		$   16,590
Provision charged to expense	--		885		1,400		1,540
Loans charged off	(17	)	(3,394	)	(189	)	(3,495	)
Recoveries	53		56		69		144
Ending balance	$ 17,550		$ 14,779		$   17,550		$   14,779
Ending loan portfolio					$ 926,306		$ 840,549
Allowance for loan losses as percentage of ending loan portfolio					1.89	%	1.76	%

Liquidity

Liquidity management refers to the Company’s ability to provide funds on an ongoing basis to meet fluctuations in deposit levels as well as the credit needs and requirements of its clients. Both assets and liabilities contribute to the Company’s liquidity position. Federal Funds lines, short-term investments and securities, and loan repayments contribute to liquidity, along with deposit increases, while loan funding and deposit withdrawals decrease liquidity. The Bank assesses the likelihood of projected funding requirements by reviewing historical funding patterns, current and forecasted economic conditions and individual client funding needs. Commitments to fund loans and outstanding standby letters of credit at September 30, 2005 were approximately $250,684,000 and $7,295,000, respectively. Such loans relate primarily to revolving lines of credit and other commercial loans, and to real estate construction loans.

The Company’s sources of liquidity consist of overnight funds sold to correspondent banks, unpledged marketable investments, loans pledged to the Federal Home Loan Bank of San Francisco (“FHLB-SF”) and sellable SBA loans. On September 30, 2005, liquid assets totaled $209.0 million or 17.0% of total assets as compared to $158.6 million or 13.6% of total assets on December 31, 2004. In addition to liquid assets, the Bank maintains short-term lines of credit with correspondent banks. At September 30, 2005, the Bank had $90,000,000 available under these credit lines. Informal agreements are also in place with various other banks to purchase participations in loans, if necessary. The Company serves primarily a business and professional customer base and, as such, its deposit base is susceptible to economic fluctuations. Accordingly, management strives to maintain a balanced position of liquid assets to volatile and cyclical deposits.

Capital Resources

The Company’s total shareholders’ equity was $114,744,000 at September 30, 2005 compared to $101,116,000 at December 31, 2004. The increase in capital reflects the year-to-date earnings of approximately $13.4 million, exercise of stock options totaling approximately $2.1 million, approximately a $0.7 million decrease in the market value of available-for-sale investment securities and the effect of the stock repurchases of approximately $1.2 million in the first half of 2005.

The Company and the Bank are subject to regulations issued by the Board of Governors and the FDIC which require maintenance of a certain level of capital. Under the regulations, capital requirements are based upon the composition of an institution’s asset base and the risk factors assigned to those assets. The guidelines characterize an institution’s capital as being “Tier 1” capital (defined to be principally shareholders’ equity less intangible assets) and “Tier 2” capital (defined to be principally the allowance for loan losses, limited to one and one-fourth percent of gross risk weighted assets). The guidelines require the Company and the Bank to maintain a risk-based capital target ratio of 8%, one-half or more of which should be in the form of Tier 1 capital.

The following table shows the Company’s and the Bank’s actual capital amounts and ratios at September 30, 2005 and December 31, 2004 as well as the minimum capital ratios for capital adequacy under the regulatory framework:

	Actual:			Minimum Capital Requirement:			Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions:
In thousands (except percentages)	Amount	Ratio		Amount	Ratio		Amount	Ratio
Company
As of September 30, 2005:
Total Capital (to Risk Weighted Assets):	$127,472	12	.7%	$80,520	8	.0%	N/A
Tier 1 Capital (to Risk Weighted Assets):	114,824	11	.4%	40,245	4	.0%	N/A
Tier 1 Capital (to Average Assets):	114,824	9	.1%	50,291	4	.0%	N/A
As of December 31, 2004:
Total Capital (to Risk Weighted Assets):	$113,111	11	.2%	$80,589	8	.0%	N/A
Tier 1 Capital (to Risk Weighted Assets):	100,473	10	.0%	40,295	4	.0%	N/A
Tier 1 Capital (to Average Assets):	100,473	9	.1%	44,365	4	.0%	N/A
Community Bank
As of September 30, 2005:
Total Capital (to Risk Weighted Assets):	$114,499	11	.6%	$79,238	8	.0%	$99,048	10	.0%
Tier 1 Capital (to Risk Weighted Assets):	102,049	10	.3%	39,619	4	.0%	59,429	6	.0%
Tier 1 Capital (to Average Assets):	102,049	8	.2%	49,914	4	.0%	62,393	5	.0%
As of December 31, 2004:
Total Capital (to Risk Weighted Assets):	$105,234	10	.6%	$79,809	8	.0%	$99,762	10	.0%
Tier 1 Capital (to Risk Weighted Assets):	92,716	9	.3%	39,905	4	.0%	59,857	6	.0%
Tier 1 Capital (to Average Assets):	92,716	8	.4%	44,105	4	.0%	55,132	5	.0%

The Bank meets the “well capitalized” ratio measures at both September 30, 2005 and December 31, 2004.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Overview

The goal for managing the assets and liabilities of the Company is to maximize shareholder value and earnings while maintaining a high quality balance sheet without exposing the Company to undue interest rate risk. The Board of Directors has overall responsibility for the Company’s interest rate risk management policies. The Bank has an Asset and Liability Management Committee (ALCO), which establishes and monitors guidelines to control the sensitivity of earnings to changes in interest rates.

Asset/Liability Management

Activities involved in asset/liability management include but are not limited to lending, accepting and placing deposits, investing in securities and issuing debt. Interest rate risk is the primary market risk associated with asset/liability management. Sensitivity of earnings to interest rate changes arises when yields on assets change in a different time period or in a different amount from that of interest costs on liabilities. To mitigate interest rate risk, the structure of the balance sheet is managed with the goal that movements of interest rates on assets and liabilities are correlated and contribute to earnings even in periods of volatile interest rates. The asset/liability management policy sets limits on the acceptable amount of variance in net interest margin and market value of equity under changing interest rate environments. The Company uses simulation models to forecast earnings, net interest margin and market value of equity.

Simulation of earnings is one of the tools used to measure the sensitivity of earnings to interest rate changes. Using computer modeling techniques, the Company is able to estimate the potential impact of changing interest rates on earnings. A balance sheet forecast is prepared using inputs of actual loan and interest bearing liability (i.e. deposits/borrowings) positions as the beginning base.

The Company measures the interest rate risk embedded in its current portfolio based on interest rates evolving over time along four forecast paths. Net interest margin and net interest income are calculated as the forecast balance sheet is processed against these four interest rate scenarios. One scenario is a flat rate based on the current rate environment. One scenario is an economic forecast, based on underlying economic and financial sector modeling. The other two are a rising and declining scenario based on gradual rate ramps which embody rate relationships. The nature of the specified rate tests is a gradual but significant change in interest rates projected to evolve over 12 months. The interest rate risk modeling is a useful tool, but there are certain limits to the rate forecast estimates. Actual rate changes rarely follow any given forecast, asset-liability pricing and other model inputs usually do not remain constant in their historic relationships as new rate environments evolve. However, holding these assumptions constant through the modeling horizon helps to appropriately emphasize specific repricing/mismatch points and their performance implications.

A one year projection of net interest income, as forecast below, was modeled utilizing a forecast balance sheet projected from May 31, 2005 balances.

The following table summarizes the effect on net interest income of three rate scenarios as measured against a most likely rate scenario.

Interest Rate Risk Simulation of Net Interest Income

In thousands	Estimated Impact on One Year Projection of Net Interest Income
Variation from flat rate scenario
Most likely rates	$ 1,800
Declining rates	(4,204	)
Rising rates	2,979

The Company also estimates rate risk through the use of rate shock analysis. The model calculates both the percent and dollar changes in net interest income (NII) and market value of equity (MVE) projected to occur should the yield curve instantaneously shift up or down in a parallel fashion from its beginning position. MVE measures the impact on equity due to the changes in the market values of assets and liabilities as a result of a change in interest rates. In the rate shock analysis, the forecast balance sheet is processed against seven interest rate scenarios. These seven interest rate scenarios include the flat rate scenario described above, and six additional rate shock scenarios ranging from +300 to -300 basis points around the flat scenario in 100 basis point increments. These rate shock scenarios assume that interest rates increase or decrease immediately and remain at the new level in the future. The Company measures the volatility of these benchmarks using a twelve-month time horizon. Using the May 31, 2005 balance sheet as the base for the simulation, the following table summarizes the effect on net interest income of a +/-200 and +/-100 basis point change in interest rates. Due to the current low level of interest rates, the potential for interest bearing deposit accounts to respond to further changes in projected rates is limited, therefore calculations for rate decreases greater than 200 basis points are misleading and have not been presented.

Interest Rate Risk Simulation of NII

In thousands (except percentages)	% Change in NII from Current 12 Mo. Horizon		Change in NII from Current 12 Month Horizon
+ 300bp	17	.0%	$ 8,797
+ 200bp	11	.4%	5,887
+ 100bp	5	.7%	2,968
- 100bp	(7	.2%)	(3,717)
- 200bp	(14	.0%)	(7,224)

These results indicate that the balance sheet is asset sensitive since earnings increase when interest rates rise. The magnitude of the NII change is within the Company’s policy guidelines. The asset liability management policy limits aggregate market risk, as measured in this fashion, to an acceptable level within the context of risk-return trade-offs.

The simulations of earnings do not incorporate any management actions, which might moderate the negative consequences of interest rate deviations. Therefore, they do not reflect likely actual results, but serve as conservative estimates of interest rate risk. The risk profile of the Company has not changed materially from that at year-end 2004.

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures: An evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management as of the end of the Company’s fiscal quarter ended September 30, 2005. The Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as currently in effect are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure, and (ii) recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

(b) Internal Control Over Financial Reporting: An evaluation of any changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), that occurred during the Company’s fiscal quarter ended September 30, 2005, was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that no change identified in connection with such evaluation has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER MATTERS

Change of Accountants

On June 21, 2005, the Company filed a Form 8-K to announce a change in the accounting firm that audits the Company’s financial statements. The Company selected Perry-Smith LLP to be the successor accountant to Deloitte & Touche LLP. The change was effective as of June 16, 2005.

Terrorist Acts

The terrorist actions on September 11, 2001 and thereafter had significant adverse effects upon the United States economy. Whether the terrorist activities in the future and the actions of the United States and its allies in combating terrorism on a worldwide basis, including the current military action in Iraq, will adversely impact the Company and the extent of such impact is uncertain. However, such events have had and could in the future have an adverse effect on the economy in the Company’s market areas. Such adverse impact could affect the Company’s future results of operations by, among other matters, reducing the demand for loans and other products and services offered by the Company, increasing nonperforming loans and the amounts reserved for loan losses, and causing a decline in the Company’s stock price.

Off-Balance Sheet Items

The Company has certain ongoing commitments under operating leases. These commitments do not significantly impact operating results. As of September 30, 2005 and December 31, 2004, commitments to extend credit and letters of credit were the only financial instruments with off-balance sheet risk (See Note 3 to the consolidated condensed financial statements — Commitments and Contingencies). The Company has not entered into any contracts for financial derivative instruments such as futures, swaps, options or similar instruments.

Certain financial institutions have elected to use special purpose vehicles (“SPV”) to dispose of problem assets. A SPV is typically a subsidiary company with an asset and liability structure and legal status that makes it obligations secure even if the parent corporation goes bankrupt. Under such circumstances, these financial institutions may exclude the problem assets from their reported impaired and non-performing assets. The Company does not use SPV or other structures to dispose of problem assets.

Website Access

Information on the Company and its subsidiary Bank may be obtained from the Company’s website www.community-bnk.com. Copies of the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments thereto are available free of charge on the website as soon as they are filed with the SEC. To access these reports through a link to the Edgar reporting system simply select the “Central Coast Bancorp – Corporate Profile” menu item, then click on the “Central Coast Bancorp SEC Filings” link. Section 16 insider filings can also be accessed through the website. Follow the same instructions and select “Central Coast Bancorp SEC Section 16 Reports.”

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Court of Appeal for the Sixth Appellate District filed its decision on August 2, 2005, in the appeal filed by Registrant’s subsidiary, Community Bank of Central California, from the judgments issued by the trial court in favor of the City of King. The decision of the Court of Appeal reversed the trial court judgment on a writ of mandate in favor of the City of King, but granted the City of King the right to amend its complaint to pursue a civil action, subject to the Bank’s right to conduct discovery which had been denied in the earlier action by the trial court. The Court of Appeal also reversed the post-judgment order of the trial court awarding attorney fees to the City of King. It is not clear what course of action the City of King will pursue in light of the Court of Appeal decision, but the Bank intends to continue to vigorously assert its rights in respect to the certificate of deposit.

For further information, see Registrant’s disclosures regarding the City of King litigation in Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004, Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005, and other reports referenced therein, filed with the Commission pursuant to the Securities Exchange Act of 1934, as amended.

Except as disclosed above, there are no material pending legal proceedings, other than ordinary routine litigation incidental to the Company’s business, to which the Company or the Bank is a party or as to which any of their property is subject.

ITEM 2. UNREGISTERED SALES OF EQUITIY SECURITIES AND USE OF PROCEEDS

The Board of Directors has authorized a stock repurchase program under which repurchases will be made from time to time by the Company in the open market, or in block purchases, or in privately negotiated transactions, in compliance with Securities and Exchange Commission rules. Management reports monthly to the Board of Directors on the status of the repurchase plan. The Company did not repurchase shares under the program subsequent to its last purchase on June 10, 2005. Year-to-date, the Company repurchased 71,102 shares at a total cost of $1,237,000. The following table reflects the fact that there was no repurchase activity during the third quarter.

Purchases of Central Coast Bancorp Stock

Period	Total Number of Shares Purchased	Average Price Per Share	Shares Purchased as Part of Publicly Announced Plan	Shares Remaining to Purchase Under the Plan
July 1-31, 2005	--	$    --	--	176,262
August 1-31, 2005	--	--	--	176,262
September 1-30, 2005	--	--	--	176,262
Total	--	$    --	--

1) The Repurchase Plan ("Plan') was announced on February 28, 2001. There is no stated expiration date for the Plan.

2) The Plan approved repurchase of 365,000 (5%) of the outstanding shares as of February 28, 2001. The approved shares equate to 690,077 shares as adjusted for the subsequent stock splits and stock dividends.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(2.1) Agreement and Plan of Reorganization and Merger by and between Central Coast Bancorp, CCB Merger Company and Cypress Coast Bank dated as of December 5, 1995, incorporated by reference from Exhibit 99.1 to Form 8-K, filed with the Commission on December 7, 1995.

(2.2) Agreement and Plan of Reorganization by and between Central Coast Bancorp and VIB Corp dated as of October 12, 2005, incorporated by reference from Exhibit 2.1 to Form 8-K, filed with the Commission on October 17, 2005.

(3.1) Articles of Incorporation, as amended, incorporated by reference from Exhibit 3.1 to the Registrant’s 2004 Annual Report on Form 10-K filed with the Commission on March 14, 2005.

(3.2) Bylaws, as amended, incorporated by reference from Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 8, 2004.

(4.1) Specimen form of Central Coast Bancorp stock certificate, incorporated by reference from the Registrant’s 1994 Annual Report on Form 10-K filed with the Commission on March 31, 1995.

(10.1) Lease agreement dated December 12, 1994, related to 301 Main Street, Salinas, California incorporated by reference from the Registrant’s 1994 Annual Report on Form 10-K filed with the Commission on March 31, 1995.

(10.2) King City Branch Lease incorporated by reference from Exhibit 10.3 to Registration Statement on Form S-4, No. 333-76972, filed with the Commission on March 28, 1994.

(10.3) Amendment to King City Branch Lease, incorporated by reference from Exhibit 10.4 to Registration Statement on Form S-4, No. 333-76972, filed with the Commission on March 28, 1994.

*(10.4) 1994 Stock Option Plan, as amended and restated, incorporated by reference from Exhibit 99 to Registration Statement on Form S-8, No. 333-89948, filed with the Commission on November 15, 1996.

*(10.5) Form of Nonstatutory Stock Option Agreement under the 1994 Stock Option Plan incorporated by reference from Exhibit 99 to Registration Statement on Form S-8, No. 333-89948, filed with Commission on November 15, 1996.

*(10.6) Form of Incentive Stock Option Agreement under the 1994 Stock Option Plan incorporated by reference from Exhibit 99 to Registration Statement on Form S-8, No. 333-89948, filed with the Commission on November 15, 1996.

*(10.7) Form of Director Nonstatutory Stock Option Agreement under the 1994 Stock Option Plan incorporated by reference from Exhibit 99 to Registration Statement on Form S-8, No. 333-89948, filed with the Commission on November 15, 1996.

*(10.8) Form of Bank of Salinas Indemnification Agreement for directors and executive officers incorporated by reference from Exhibit 10.9 to Amendment No. 1 to Registration Statement on Form S-4, No. 333-76972, filed with the Commission on April 15, 1994.

*(10.9) 401(k)Pension and Profit Sharing Plan Summary Plan Description incorporated by reference from Exhibit 10.8 to Registration Statement on Form S-4, No. 333-76972, filed with the Commission on March 28, 1994.

*(10.10) Form of Executive Employment Agreement incorporated by reference from Exhibit 10.13 to the Company’s 1996 Annual Report on Form 10-K filed with the Commission on March 31, 1997.

*(10.11) Form of Executive Salary Continuation Agreement incorporated by reference from Exhibit 10.14 to the Company’s 1996 Annual Report on Form 10-K filed with the Commission on March 31, 1997.

*(10.12) Form of Indemnification Agreement incorporated by reference from Exhibit D to the Proxy Statement filed with the Commission on September 3, 1996, in connection with Registrant’s 1996 Annual Shareholders’ Meeting held on September 23, 1996.

(10.13) Purchase and Assumption Agreement for the Acquisition of Wells Fargo Bank Branches incorporated by reference from Exhibit 10.17 to the Registrant’s 1996 Annual Report on Form 10-K filed with the Commission on March 31, 1997.

(10.14) Lease agreement dated November 27, 2001 related to 491 Tres Pinos Road, Hollister, California incorporated by reference from Exhibit 10.17 to the Registrant’s 2001 Annual Report on Form 10-K filed with the Commission on March 26, 2002.

(10.15) Lease agreement dated February 11, 2002, related to 761 First Street, Gilroy, California incorporated by reference from Exhibit 10.18 to the Registrant’s 2001 Annual Report on Form 10-K filed with the Commission on March 26, 2002.

(10.16) Lease agreement dated November 18, 2002, related to 439 Alvarado Street, Monterey, California incorporated by reference from Exhibit 10.16 to the Registrant’s 2002 Annual Report on Form 10-K filed with the Commission on March 20, 2003.

*(10.17) 2004 Stock Option Plan and Forms of Incentive and Nonstatutory Stock Option Agreement incorporated by reference from Exhibit 99.1 to Registration Statement on Form S-8, No. 333-117043, filed with the Commission on September 30, 2004.

(10.18) Lease agreement dated November 1, 1989 and Amended Lease Agreement dated November 22, 1999, related to 1658 Fremont Boulevard, Seaside, California.

(10.19) Lease agreement dated March 1, 1998, related to 400 Alta Street, Gonzales, California.

(10.20) Lease agreement dated April 16, 1998, related to 228 Reservation Road, Marina, California.

(10.21) Lease agreement dated February 14, 1992, related to 1285 North Davis Road, Salinas, California.

(10.22) Lease agreement dated April 25, 2000, related to 1915 Main Street, Watsonville, California.

(10.23) Lease agreement dated March 1, 2002, related to Salinas, California.

(10.24) Lease agreement dated February 10, 2004, related to 3110 A Mission Drive, Santa Cruz, California.

(10.25) Lease agreement dated February 26, 2004, related to 2149 H. De La Rosa Sr. Street Soledad, California.

(10.26) Lease agreement dated December 30, 2004, related to 591 and 599 Lighthouse Avenue, Monterey, California.

(14.1) Code of Ethics, incorporated by reference from Exhibit 14.1 to the Registrant’s 2004 Annual Report on Form 10-K filed with the Commission on March 1, 2004.

(21.1) The Registrant's only subsidiary is its wholly owned subsidiary, Community Bank of Central California.

(31.1) Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(31.2) Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32.1) Certification of Central Coast Bancorp by its Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*Denotes management contracts, compensatory plans or arrangements.

SIGNATURES

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

November 4, 2005	CENTRAL COAST BANCORP
	By: /s/NICK VENTIMIGLIA
	Nick Ventimiglia
	(Chief Executive Officer)
	By: /s/ JAYME C. FIELDS
	Jayme C. Fields
	(Chief Financial Officer, Principal
	Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit Number	Description	Sequential Page Number
10.18	Lease agreement dated November 1, 1989 and Amended Lease Agreement dated November 22, 1999,related to 1658 Fremont Boulevard, Seaside, California.	32
10.19	Lease agreement dated March 1, 1998, related to 400 Alta Street, Gonzales, California.	41
10.20	Lease agreement dated April 16, 1998, related to 228 Reservation Road, Marina, California	50
10.21	Lease agreement dated February 14, 1992, related to 1285 North Davis Road, Salinas, California.	75
10.22	Lease agreement dated April 25, 2000, related to 1915 Main Street, Watsonville, California.	101
10.23	Lease agreement dated March 1, 2002, related to Salinas, California.	138
10.24	Lease agreement dated February 10, 2004, related to 3110 A Mission Drive, Santa Cruz, California.	148
10.25	Lease agreement dated February 26, 2004, related to 2149 H. De La Rosa Sr. Street Soledad, California.	160
10.26	Lease agreement dated December 30, 2004, related to 591 and 599 Lighthouse Avenue, Monterey, California.	175
31.1	Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	198
31.2	Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	199
32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	200

EX-31

CERTIFICATIONS UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

REGARDING THE QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2005

I, Nick Ventimiglia, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Central Coast Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 4, 2005                 /s/ NICK VENTIMIGLIA
                                                          Nick Ventimiglia, Chief Executive Officer

EX-31

CERTIFICATIONS UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

REGARDING THE QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2005

I, Jayme C. Fields, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Central Coast Bancorp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 4, 2005                 /s/ JAYME C. FIELDS
                                                          Jayme C. Fields, Chief Financial Officer

EX-32

Certification of

Central Coast Bancorp

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Regarding Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2005

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Central Coast Bancorp, a California corporation (the “Company”), does hereby certify that:

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. Information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 4, 2005                                                                                     /s/ NICK VENTIMIGLIA
                                                                                                                              Nick Ventimiglia
                                                                                                                              Chief Executive Officer

Date: November 4, 2005                                                                                     /s/ JAYME C. FIELDS
                                                                                                                              Jayme C. Fields
                                                                                                                              Senior Vice President and
                                                                                                                              Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Central Coast Bancorp and will be retained by Central Coast Bancorp and furnished to the Securities and Exchange Commission or its staff upon request.

EX-10

THIS LEASE, between Dean C. Rockwell and Jacqueline Rockwell, herein called the “Landlord” and Cypress Coast Bank (In Organization) herein called “Tenants, “is dated as of November 1, 1989. It is agreed as follows:

1. PREMISES. The Landlord hereby leases to Tenants, and Tenants hereby lease from Landlord, the premises as more particularly described in EXHIBIT A attached hereto, located in Seaside, California, in the building (the “Building”), the address of which is 1658 Fremont Boulevard, including all and singular the improvements, appurtenances, rights, privileges, easements, and common facilities, if any, including driveways, malls and other common and service areas, if any, all referred to hereafter as premises.

2. PARKING FACILITIES. The Landlord shall provide, during the entire term of this lease and all extensions thereof, at no additional cost to the Tenants, parking facilities for the non-exclusive use of the Tenants, its officers, employees, agents, customers, and invitees, adjacent to the Building of which the demised premises form a part.

3. TERM. The term of this Lease shall be for ten (10) years commencing on the date (the Commencement Date") of the issuance of a certificate of authority by the California State Banking Department authorizing Tenants to transact a commercial banking business, and expiring on the tenth anniversary after the Commencement Date, unless earlier terminated as provided for herein. This Lease is subject to Tenants obtaining all permits and entitlements for use and operation of the premises as a bank. Tenants shall have the right to terminate this Lease if Tenants are unable to obtain such permits and entitlements in a commercially reasonable time using commercially reasonable efforts.

4. RENT. The tenant shall pay rent (“Rent”) of FOUR THOUSAND DOLLARS ($4,000)_ payable on or before the first day of each month for the current calendar month, in lawful money of the United States. Rent for a part of the month shall be prorated based on the actual number of days in the month. Rent shall not commence until exclusive possession of the premises ready for occupancy has been delivered to the Tenants and all improvements or alterations which Landlord has agreed to perform have been completed. Should Landlord fail to deliver to the Tenants exclusive possession of the premises, ready for occupancy, within sixty days after the commencement date herein above specified, Tenants may cancel this lease. All payments of Rent are to made to the order of Dean C. Rockwell, P.O. Box 115, Seaside, CA 93955.

5. RENTAL ADJUSTMENT. The minimum monthly rent stated in paragraph 4 shall be subject to adjustment annually on the anniversary date of each year of the initial term and of any extended term, as follows:

The base for computing the adjustment is the Consumer Price Index for all Urban Consumers, San Francisco — Oakland Metropolitan Area, published by the United States Department of Labor, Bureau of Labor Statistics (“Index”), which is published most immediately preceding the date of the commencement of the Initial Term (“Beginning Index”). The monthly rent for each year beginning in 1990 shall be set by multiplying the monthly rent set forth in paragraph 4 by a fraction, the numerator of which is the Extension Index and the denominator of which is the Beginning Index; provided, however, that in no event shall the annual increase be more than five (5%) percent”over the monthly rent payable¹ during the previous year. On adjustment of the monthly rental as provided in this paragraph/ the parties immediately shall execute an’ amendment to this Lease stating the new monthly rental. If the Consumer Price Index is changed so that the base year differs from that used as the date in effect immediately preceding the Commencement Date, the Consumer Price Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Statistics. If the Consumer Price Index is discontinued or revised during the term, such other governmental index or computation with which it is replaced shall be used in order to obtain substantially the same result as would be obtained if the Consumer Price Index had not been discontinued or revised.

6. LATE CHARGE. Tenants acknowledge that late payment by Tenants to Landlord of rent will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impracticable to fix. Such costs include, without limitation, processing and accounting charges, and late charges that may be imposed on Landlord by the terms of any encumbrance and notes secured by any encumbrance covering the premises. Therefore, if any installment of rent due from, Tenants is not received by Landlord within Ten (10) days after the due date, Tenants shall pay to Landlord an additional sum of six percent (6%) of the overdue rent as a late charge. The parties agree that this late charge represents a fair and reasonable estimate of the cost that Landlord will incur by reason of late payment by Tenants. Acceptance of any late charge shall not constitute a waiver of Tenants’ default with respect to the overdue amount, nor prevent Landlord from exercising any of the other rights and remedies available to Landlord. Rent will be considered late if not received by Landlord within ten (10) days after due date.

7. OPTION TO EXTEND. Provided the Tenants are not in default of any of the terms and conditions herein, the Tenants may, by notice of sixty (60) or more days before the end of the term, extend the term (the “Option”) upon the same terms and conditions provided in this lease for a period of ten (10) years (the “Extension Period”).

Option. The terms of the Lease during the Extension Period shall be unchanged, except that the Rent payable on the date the Extension Period commences shall be the then prevailing fair market rental value (“FMRV”) and the provisions of Paragraph 5 of the Lease shall be of no further force or effect. FMRV shall be determined by written agreement between the parties and means the average per square foot rental rate per month for comparable space in the vicinity of the premises with reasonable adjustments for the quality of the premises and the location of the comparable space. If such comparable space is leased with incentives, such as tenant improvements, free rent or other economic incentives, Tenants shall have the right to rent which reflects such incentives. If the parties are unable to agree upon FMRV and the components thereof at least sixty (60) days prior to the commencement date of the Extension Period, then the FMRV of the premises shall be determined by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. Such determination shall be final and binding on the parties. If the FMRV is determined after the commencement date for the Extension Period, there shall be a retroactive adjustment of rent back to the commencement date of the Extension Period.

Tenants' Initials Landlord's Initials

8. ACCEPTANCE OF PREMISES. Tenants taking possession of the premises on the commencement date shall constitute Tenants' acknowledgement that the premises are in good condition.

9. UTILITIES AND SERVICES. The parties agree that Tenants shall pay for all utilities used by Tenants in the premises. Tenants shall make all arrangements for and pay for all utilities and services furnished to or used by them, including without limitation, gas, electricity, water, sewer, telephone service, landscaping, and janitorial services, and for all connection charges.

10. USE. The premises shall be used as a bank or any other business so long as the consent of the Landlord, in writing, is first obtained. Such consent shall not be unreasonably withheld. Tenants shall not knowingly use the premises for any purposes which would increase the cost of any insurance carried by the Landlord.

11. SIGNS. The Tenants may install such signs and window lettering as may reasonably be necessary to the Tenants' business provided they comply with all local ordinances and are reasonable in size and attractive in appearance.

12.  NOTICES. Notices to the Landlord shall be addressed to Dean Rockwell at P.O. Box 115, Seaside, CA 93955. All notices to the Tenants shall be addressed to the Tenants at 165,8 Fremont Boulevard, Seaside, CA 93955.

13.SURRENDER. Unless the term is extended pursuant to Paragraph 7 above, the Tenants, on the last day of the term, shall surrender the premises in as good condition as when the Tenants took possession, except for ordinary wear and tear, repairs and replacements required to be made by the Landlord, loss of fire, or elements, or loss by any cause beyond the Tenants’ control.

14. ASSIGNMENT. The Tenants may assign this Lease or sublet all or part of the premises provided the Landlord’s consent (which consent shall not be unreasonably withheld) in writing is first obtained. The Landlord agrees not to withhold its consent provided the assignee is financially responsible and will conduct a business not detrimental to the building or neighborhood. Provided, however, the Tenants shall have the absolute right to assign this Lease or sublet all or any part of the premises to any other corporation which is an affiliate, subsidiary or parent of the Tenants without the consent, either written or oral, of the Landlord. The Tenants shall remain responsible for their obligations under this Lease unless the Tenants receive a written release from the Landlord of any further responsibility.

15. TENANTS' DEFAULT.The occurrence of any of the following shall constitute a default by Tenant.

     1. Failure to pay rent when due, if the failure continues for ten (10) days after notice has been given to Tenants.

     2. Failure to perform any other provision of this Lease if the failure to perform is not cured within thirty (30) days after notice has been given to Tenants. If the default cannot reasonably be cured within thirty (30) days, Tenants shall not be in default of this Lease if Tenants commence to cure the default within the thirty (30) day period and diligently and in good faith continue to cure the default. Notices given under this paragraph shall specify the alleged default and the applicable lease provisions, and shall demand that Tenants perform the provisions of this Lease or pay the rent that is in arrears, as the case may be, within the applicable period of time, or quit the premises. No such notice shall be deemed a forfeiture or a termination of this Lease unless Landlord so elects in the notice. The purpose of the notice requirements set forth in this paragraph is to extend the notice requirements of the unlawful detainer statutes of California.

16. LANDLORD'S REMEDIES. The Landlord may terminate this Lease and take possession of the premises without waiving any rights which it may have at law, without further notice following either of these events:

     (a) That the Tenants fail to pay the rent due under this Lease within thirty (30) days following written notice of default.

     (b) That the Tenants fail to commence the correction of any other violation of its covenants within thirty (30) days after written notice or, having commenced to correct the same should fail to carry the same to conclusion with due diligence.

In the event Landlord is in default under this Lease and shall fail to remedy such default within thirty (30) days after receiving notice of such default from Tenants, Tenants may at their option terminate this lease by giving Landlord written notice and this Lease shall terminate and be void upon receipt by Landlord of such notice.

17. REPAIRS. The Tenants shall make all ordinary repairs to the interior walls, floors and ceilings, and inside doors, except such repairs as are made necessary by fire, the elements or causes beyond the Tenants’ control. The Landlord shall make all other repairs at its sole cost and expense and replacements (except repairs to or replacement of improvements or equipment installed by the Tenants) necessary to maintain the premises in a safe, dry/ tentable condition and in good repair, including but not limited to repairs to and replacements of exterior walls, roof, subfloors, heating, air conditioning, plumbing and electrical equipment, if any, foundation or other structural portions either exterior or interior; plate glass piping and wiring, electrical panels, and replacement of worn-out heating or plumbing equipment which cannot be restored to normal use by repair. The Tenants may make any repairs of any emergency nature to correct a dangerous situation on the premises without relieving the Landlord from any liability or waiving any of its rights. Tenants may deduct the cost of such repairs from the rent received hereunder commencing with the rental payment next due. Landlord will at its sole cost and expense, patch and reseal parking lot as needed.

18. RESTORATION. If the premises are damaged by fire, other casualty or the elements, or by any other cause, to the extent that the cost of repairs, or restoration exceeds fifty percent of the value of the premises, either the Landlord or the Tenants may within thirty (30) days after such damage, cancel this Lease by written notice mailed to the other party at least thirty (30) days prior to the effective date of such cancellation. If neither party terminates this Lease, or if the cost of repairs or restoration does not exceed fifty percent of the value of the premises, the Landlord shall promptly repair or restore the premises as nearly as possible to the condition existing just prior to such damage. Provided, however, during said period of restoration the Tenants shall only pay a reasonable rental for such part of the premises as shall be fit for occupancy by the Tenants.

19. ENTRY. Except for Tenants’ safes, vaults, cash drawers and safe deposit boxes, the Tenants agree to permit the Landlord and its authorized agent to enter the premises at any time during normal business hours, on reasonable notice, for inspecting, making such repairs or additions as the Landlord may desire or be required to make, and showing the building to any prospective purchaser. Insofar as Landlord may reasonably do so, Landlord shall effect such repairs under this paragraph, at such times and in such manner as will not unreasonably interfere with the use by Tenants of the premises or the conduct of Tenants’ business therein. Prospective tenants may be shown the premises within thirty (30) days prior to the expiration of the Lease.

20. HOLDOVER. Any holding over after the expiration of this Lease with the consent of the Landlord, shall be from month to month upon the terms and conditions of this Lease, and at the same monthly rental. In the event that the Tenants shall be delayed in moving to other quarters because of circumstances over which they have no control, the Landlord will consent to the holding over by Tenants for not more than sixty (60) additional days.

21. LAW REVISION. In the event of a change in the Federal, State, or local laws or any regulations issued pursuant thereto under which the Tenants engage in business or of judicial interpretations of such laws or regulations which the Tenants determine would make it impractical for the Tenants to continue their business within the State, the Tenants shall have the right to terminate this Lease sixty (60) days after written notice to the Landlord and the payment of three months rent, in addition to the rent due to the date of termination, unless Tenants are able to sublease the premises thus mitigating Landlord’s damages.

22. QUIET ENJOYMENT. Tenants shall peaceably and quietly hold and enjoy the premises free from interference including noise or other disturbances from other tenants in the same building. Landlord shall obtain for Tenant’s benefit non-disturbance agreements in commercially reasonable form and content from any ground lessor, mortgage holder or lien holder of Landlord now in existence, or who later comes into existence at any time during the term of the Lease or the Extension Period.

23. ALTERATIONS BY TENANTS. The Tenants may make improvements or repairs to the premises, provided that they make them in a good workmanlike manner and the written consent of the Landlord is obtained before any structural changes are made. The Tenants may install any electrical, heating, air conditioning, plumbing, telephonic and trade fixtures or equipment without the consent of the Landlord, and said fixtures or equipment shall, under no circumstances whatsoever, be construed to be a part of the realty, regard less of the manner in which they may be affixed thereto. The Tenants shall have the right, but not the obligation, to remove during the continuance of the term hereof or within a reasonable time thereafter any or all of the fixtures, equipment or improvements which the Tenants may have placed upon the premises, but the Tenants shall repair any damage caused by such removal but such obligation shall not extend to painting or redecorating. Landlord, guarantees the sufficiency of the Building to carry any improvement or repair, including any equipment placed on the premises by Tenants. Tenants shall pay all costs for construction done by them or costs to be done by them on the premises as permitted by this Lease. Tenants shall keep the premises free and clear of all mechanics’ liens resulting from construction done by or for Tenants.

24. TAXES. Tenants shall pay before delinquency any and all taxes, assessments, license fees and public charges levied, assessed, or imposed upon Tenants’ fixtures, furniture, appliances, or personal property located in, upon, or about the demised premises (collectively “Direct Taxes”). Tenants further covenant that during the term hereof Tenants shall pay to Landlord Tenants’ share of any and all real property taxes and assessments levied upon the whole parcel or parcels of real property upon which the demised premises are situated and all buildings and improvements thereof and a pro-rata share of all real property taxes and assessments levied upon the common areas in excess of those taxes and assessments existing at the time this lease is executed by the parties. Tenants’ said share shall be one hundred percent (100%) thereof. Any such taxes and assessments which are payable by Tenants shall be paid by the Tenants to Landlord within thirty (30) days after payment of such taxes and assessments by Landlord.

Tenants shall not be required to pay any municipal, county, state or federal income or franchise taxes of Landlord, or any municipal, county, state or federal estate, succession, inheritance, or transfer taxes of Landlord. If at any time during the term the laws concerning the methods of real property taxation prevailing at the commencement of the term are changed so that a tax or excise on rents or any other such tax, however described, is levied or assessed against Landlord as a direct substitution in whole or part for any real property taxes, Tenants shall pay before delinquency (but only to the extent that it can be ascertained that there has been a substitution and that as a result Tenants have been relieved from the payment of real property taxes they would have otherwise been obligated to pay) the tax or excise on rent shall be substantially the same as, and a substitute for the payment of such real property taxes as provided in this Lease.

    A. Tenants shall not be liable for increases in Direct Taxes (whether the increases result from increased rate and/or valuation) attributable to additional improvements to the premises that are constructed after 1989, unless the additional improvements are constructed for Tenants’ benefit or at Tenants’ request. If any improvements are constructed after 1989, Direct Taxes attributable to those additional improvements for the fiscal tax year in which they are assessed as a fully completed unit shall be added to the Direct Taxes for 1989 for the purpose of computing Tenants’ liability for Direct Tax increases. After that time, Tenants’ liability for increases on Direct Taxes that Tenants would be liable for but for such additional improvements shall be reduced in the same ratio that the total amount of Direct Taxes for 1989 (including any Direct Taxes added to the taxes for 1989 (including any Direct Taxes added to the taxes for 1989) bears to the total amount of Direct Taxes attributable to additional improvements that were added to the Direct Taxes for 1989.

    B. Tenants shall not be liable increases in Direct Taxes that result from changes in ownership of the premises or of the land of which the premises are a part. For purposes of this Lease “change in ownership” has the same definition as that found in California Revenue and Taxation Code sections 60-62, or any amendments or successor statutes to those sections.

    C. Landlord shall use its best efforts to cause the premises to be separately assessed from other property owned by Landlord. If Landlord is unable to obtain a separate assessment, the assessor’s valuation placed on the premises shall be used in determining the Direct Taxes. If this valuation is not available, Landlord, in its good faith and on a reasonable basis shall equitably allocate Direct Taxes between the. premises and all buildings, other improvements, and land included in the tax bill, in making the allocation, Landlord shall reasonably evaluate the factors that determine the amount of Direct Taxes so that the allocation to the premises will not be less than the ratio that the total number of square feet in the building, other improvements, and land of which the premises are a part bears to the total number of square feet of all buildings, other improvements, and land included in the tax bill.

    D. Tenants’ liability to pay Direct Taxes shall be prorated on the basis of a 365-day year to account for any fractional portion of a fiscal tax year included in the Term at its commencement and expiration.

25. SUCCESSION.

    (a) This Lease shall benefit and be binding upon the Landlord and the Tenants and their respective heirs, legal representatives, successors, and assigns.

    (b) Should the Tenants choose to terminate this Lease at any time prior to its normal expiration date (except for any termination surrender or transfer permitted by paragraphs 3, 13, 14, 18 > 20, 21, 26, 27, 29, 32, and 46 of this Lease, or if Landlord is in default), the Tenants shall without negotiation be responsible to pay the Landlord the total cash value remaining in the Lease at the time the Lease is terminated except as Tenants or Landlord may negotiate damages in accordance with California law.

    (c) In the event litigation occurs to enforce any provision of this Lease, the prevailing party shall be entitled to reasonable attorneys’ fees from the other party.

26. HAZARDOUS MATERIALS/LANDLORD’5 LIABILITY. In the event of a disruption of or interference with Tenants⁷ business operation which continues for ninety (90) consecutive days, because of the presence of Hazardous Materials in or about the premises, and if the presence of such Hazardous Materials or the need for a cleanup results from Landlord’s or Landlord’s agents’ or representatives’ actions, then Tenants shall be entitled to give written notice to Landlord terminating the Lease effective on the date such notice is received by Landlord. Notwithstanding anything to the contrary contained herein, Tenants shall only have liability for the presence or disposal onto the premises, of Hazardous Materials left, stored, used, disposed of or released by Tenants, Tenants’ agents or representatives. Tenants shall not have any liability for actions of Landlord or other unascertained persons or entities, or for any required clean-up resulting from such actions.

27. FAILURE TO PROVIDE ACCESS. In the event that Tenants are prevented from using, and do not use, the premises or any portion thereof as a result of any negligent or willful failure of Landlord to provide access to the premises, then Tenants shall promptly give Landlord notice thereof (“Tenants’ Notice”). Landlord shall respond in writing to Tenants’ Notice within three (3) days of receipt of Tenants’ Notice explaining the circumstances for such use prevention or failure of Landlord to provide services or access. In the event that Tenants are prevented from using the premises or a portion thereof as a result of such events for a period of ten (10) consecutive business days or twenty (20) business days in any twelve (12) month period during the Lease term, all of Tenants’ Rent and the cost of utilities and Tenants’ share of Direct Taxes (collectively “Further Rent”), shall be abated or reduced, as the case may be, in the proportion that the rentable area of the portion of the premises that Tenants are prevented from using bears to the total rentable area of the premises, during the period Tenants are prevented from conducting their business from the premises or a portion of the premises. However, if through the negligent or willful failure of Landlord to provide access to the premises, Tenants are prevented from conducting their business in any portion of the premises, and the remaining portion of the premises is not sufficient to allow Tenants to effectively conduct their business therein, and if Tenants do not conduct their business from such remaining portion, then all of the Rent and the Further Rent for the entire premises shall be abated during said period; provided, however, if Tenants reoccupy and conduct their business from any portion of the premises during such period, the Rent and Further Rent allocable to such reoccupied portion, based upon the proportion which the rentable area of such reoccupied portion of the premises bears to the total rentable area of the premises, shall be payable by Tenants from the date such business operations commence.

28. RETURN OF PREMISES. Notwithstanding the provisions of the Lease to the contrary, Tenants shall maintain ownership of all of the following, and shall have the right, but not the obligation, to remove same upon termination of this Lease: (i) Tenants’ furniture, carpets, art works, teller counters, low partitions and gates, work counters and storage units, telephone system, computer system; and, (ii) Tenants⁷ vault doors, alarm and surveillance systems, night depository, A.T.M. machine(s) and safe deposit boxes. Tenants shall be responsible only for liens resulting from work performed by Tenants, Tenants’ agents or contractors hired by Tenants. Regardless whether the Lease terra has terminated or expired, and regardless of whether Tenants are in default hereunder, Tenants shall have the right to remove the contents of Tenants’ vault, safe deposit boxes, money, and papers and files at any time.

29. ADDITIONAL TERMINATION RIGHTS. Notwithstanding Paragraph 18 of the Lease to the contrary, Landlord or Tenants may terminate this Lease if Tenants are unable to use all or a substantial portion of the premises as a result of fire or other casualty, and: (a) Landlord fails to substantially complete such work within ninety (90) days after commencing the same, or such additional time as may be necessary due to strikes, lock-outs or other labor troubles, shortages of equipment or materials, governmental requirements, power shortages or outages or other causes beyond Landlord’s reasonable control, or (b) such work is reasonably estimated (which estimate Landlord shall provide within sixty (60) days following the casualty), to take more than ninety (90) days to substantially complete after being commenced. In order to exercise any of the foregoing termination rights, the party exercising such right must send the other party at sixty (60) days (but not more than one hundred eighty (180) days advance notice, specifying the basis for termination, and such notice must be given no later than thirty (30) days following the occurrence of the condition serving as the basis for the termination right invoked.

30. REMEDIES. The obligations of Tenants under this Lease do not constitute personal obligations of the directors, or shareholders, and the Landlord shall look solely to the assets of Tenants for satisfaction of any liability under this Lease and will not seek recourse against the individual directors, officers or shareholders nor against any of their personal assets for such satisfaction.

31. SELF-HELP. If Tenants provide written notice to Landlord of any event or circumstance which requires the action of Landlord, and Landlord fails to provide such action within a reasonable period of time, given the circumstances, after the receipt of such notice, then Tenants may reasonably proceed to take the required action upon delivery of any additional written notice to Landlord, given as much in advance of the proposed action as shall be reasonable under the circumstances, specifying, with particularity, that Tenants intend to take such required action, including the date and details of such action to be taken, the cost of such action, and the projected completion date.

32. EMINENT DOMAIN. In the event all of the premises, or such part thereof as shall substantially interfere with the Tenants’ use and occupancy thereof, shall be taken for any public or quasi-public purpose by any lawful power or authority by exercise of the right of appropriation, condemnation or eminent domain, or sold to prevent such taking, either party shall have the right to terminate the Lease effective as of the date possession is required to be surrendered to said authority. In the event of a partial taking and the amount of property or the type of estate taken shall not substantially interfere with the conduct of the Tenant’s business, Landlord shall be entitled to the entire amount of the award without deduction for any estate or interest of the Tenants. Landlord shall restore the premises to substantially their same condition prior to such partial taking, and a proportionate allowance shall be made to the Tenants for the Rent corresponding to the time during which, and to the part of the premises of which the Tenants shall be so deprived on account of such taking and restoration. Nothing contained in this Paragraph shall be deemed to give Landlord any interest in any award made to the Tenants for the taking of personal property and fixtures belonging to the Tenants.

33. INDEMNITY BY LANDLORD. Landlord agrees to indemnify Tenants against and save Tenants harmless from any and all loss, cost, liability, damage and expense, including, without limitation, fines and attorney’s fees incurred in connection with or arising from any failure of Landlord to perform its obligations hereunder or from any negligence or willful misconduct of Landlord including, without limiting the generality of the foregoing, (a) any- default by Landlord in the observance or performance of any of the terms, covenants or conditions of this Lease on Landlord’s part to be observed or performed, (b) the use or occupancy or manner of use or occupancy of the premises by Landlord or any person claiming through or under Landlord other than Tenants, or of the employees, suppliers, shippers, customers or invitees of Landlord or any such person, in, on or about the premises, whether prior to, during, or after the expiration of the term, including, without limitation, any act, omission or negligence in the making or performing of any alterations and (c) the breach of any representation or warranty of Landlord in this Lease.

34. LANDLORD’S INSURANCE. Landlord shall, at its sole cost and expense, maintain during the term, comprehensive (or commercial) general liability insurance, with limits of not less than $1,000,000 combined single limit for personal injury, bodily injury or death, or property damage or destruction (including loss of use thereof) for any one occurrence. Landlord shall also, at its sole cost and expense, maintain during the term worker’s compensation insurance as required by statute, and primary, non-contributory, extended coverage or “all-risk” damage insurance, in an amount equal to at least 90% of the full insurable replacement value of the premises exclusive of the cost of excavation, foundations and footings, and subject to reasonable deductible amounts, or such other amounts necessary to prevent Landlord from being a co-insured, and such other coverage as Landlord shall deem appropriate. Landlord shall provide Tenants with certificates evidencing such coverage and showing Tenants as additional insureds, prior to the Commencement Date, which shall state that such insurance coverage may not be changed or cancelled without at least twenty (20) days prior written notice to Tenants, and shall provide renewal certificates to Tenants at least twenty (20) days prior to expiration of such policies. All insurance required hereunder shall be provided by responsible insurers and Landlord’s insurers shall be reasonably acceptable to Tenants. Landlord intends that its property loss risk shall be borne by responsible insurance carriers and Landlord hereby agrees to look solely to and to seek recovery only from its insurance carriers in the event of a property loss to the extent that such coverage is agreed to be provided hereunder. Landlord hereby waives all rights and claims against Tenants for such losses, and waives all rights of subrogation of its insurers, provided such waiver of subrogation shall not effect the right of Landlord to recover thereunder. Landlord shall cause its insurance policies to be endorsed to provide for such a waiver of subrogation.

35. ESTOPPEL CERTIFICATES/LANDLORD. Landlord agrees that, from time to time, upon not less than twenty (20) days’ prior written request by Tenants, Landlord shall deliver to Tenants a statement in writing addressed to Tenants or, at Tenants’ request, to any Designated Addressee, as defined below, certifying (i) that this Lease is unmodified and is in full force and effect (or if there has been any modification, that the same is in full force and effect as modified and identified in the modification), (ii) the dates to which Rent and other charges have been paid, (iii) that so far as the person making the certification knows, Tenants are not in default under any of the provisions of the Lease, and (iv) any other information and certification which reasonably may be requested by Tenants or by and Designated Addressee, or both. As used herein, the term “Designated Addressee” means any person or entity designated by Tenants which- is or may be acquiring or merging “with Tenants, lending money to Tenants, insuring Tenants, their operations or their assets, performing accounting functions for Tenants or entering into an assignment or sublease with Tenants.

36.  RIGHT OF FIRST REFUSAL TO PURCHASE.

    A. Landlord hereby grants to Tenants a right of first refusal (the “Right of First Refusal”) to purchase all or part of the premises and the land upon which the premises are situated (collectively the “Property”), on the same terms that Landlord is willing to accept from a third party, net of any real estate commissions, except that Tenants shall be entitled to pay in cash the fair market value of any non-cash consideration to be paid by such third party. Tenants may exercise the Right of First Refusal during the term of this Lease, including the Extension Period, so long as Tenants are. not in default under this Lease at the time Tenants exercise such right. Before accepting a bona fide third party offer to sell all or any part of the Property, or any interest therein, Landlord shall notify Tenants of the name and address of the proposed purchaser and furnish a copy of the offer to purchase. If Tenants, within thirty (30) days after receipt of Landlord’s notice, notify Landlord of their election to exercise the right of First Refusal to purchase, Landlord shall sell and convey the Property, or such portion thereof as is subject to the offer to purchase, to Tenants on the terms and conditions stated in such offer. If Tenants do not notify Landlord within said thirty (30) day period of their election to exercise the Right of First Refusal, Landlord thereafter shall have the right to sell and convey the Property to the proposed purchaser on the same terms and conditions as stated in the offer to purchase. If Landlord and the proposed purchaser do not enter into such offer to purchase within ninety (90) days after the date of Landlord’s notice to Tenants, Landlord shall not sell and convey the Property or any part thereof until Tenants are again given an opportunity to exercise the Right of First Refusal in accordance with the provisions of this Section.

    B. If the Property is subdivided (including without limitation converted into a condominium) and Tenants purchase a portion of the Property pursuant to this Section which is legal parcel, but is less than all of the Property, and (i) the portion of the Property so purchased by Tenants includes- all of the premises, this Lease shall terminate on the date title vests in Tenants, and upon vesting of title in Tenants, Landlord shall remit to Tenants any and all prepaid and unearned rent and any other monies deposited with Landlord by Tenants (less any amounts to be applied to any default pursuant to the Lease or applicable law); and (ii) if the portion of the Property so purchased by the Tenants includes only a part of the premises, this Lease shall terminate as to the part purchased on the date title vests in Tenants, and Rent shall be reduced in the same ratio that the value of the premises before the purchase bears to the value of “the premises covered by the lease immediately after the purchase, and any prepaid and unearned rent and of the monies (less any amounts to be applied to any default pursuant to the Lease or applicable law) allocable to the portion of the premises so purchased shall be credited against Rent for the remaining portion of the premises as and when it becomes due.

37. SIGNAGE. Tenants shall have the right to display a sign on a monument reasonably acceptable to Landlord adjacent to the entrance of the Building and a free-standing sign at a second location near the Building reasonably acceptable to Landlord. All such signs shall comply with local signage regulations and be approved by local authorities having jurisdiction, and Landlord shall cooperate with and join in any applications necessary or desirable for such approval. Landlord acknowledges that a material inducement for Tenants’ entering into this Lease is the ability to erect and maintain a prominent sign adjacent to the Building entrance identifying the premises in order to attract customers, and Landlord shall cooperate fully and use its best efforts to assist Tenants in obtaining such a sign, and Tenants shall have the right to cancel this Lease if they do not obtain approval within sixty (60) days from the date of this Lease for a sign adjacent to the Building which in their reasonable opinion is suitable for their needs. Tenants shall use their best efforts to obtain such approvals and shall diligently pursue such measures as are reasonably necessary to obtain same. Any sign approved pursuant to this Paragraph 37 shall be erected and maintained at Tenants’ sole cost and expense.

38. ATTORNEYS' FEES. In the event of any claims or litigation between the parties with respect to this Lease, all costs and expenses, including reasonable attorneys7 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 judgment.

39. TERMS AND HEADINGS. The words "Landlord" and "Tenants" as used herein shall include the plural as well as the singular. Words used in any gender include other genders. The paragraph headings of this Lease are not a part of this Lease and shall have ho effect upon the construction or interpretation of any part hereof.

40. TIME. Time is of the essence with respect to the performance of every provision of this Lease in which time or performance is a factor.

41. PRIOR AGREEMENT: AMENDMENT. 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.

42. SEPARABILITY. Any provision of this Lease which shall prove to be invalid, void or illegal in no way affects, impairs or invalidates any other provision hereof, and such other provisions shall remain in full force and effect.

43. CONSENTS. Whenever the consent of either party is required hereunder such consent shall not be unreasonably withheld.

44. RIDERS. Clauses, plats, riders, addenda, if any, signed by the Landlord and the Tenants, and affixed to this Lease are a part hereof.

45. LANDLORD'S AUTHORITY. The individuals executing this Lease represent and warrant they have the authority to enter into this Lease and be bound by and fulfill all obligations, conditions and covenants contained in this Lease.

46. BANK CLOSED. Notwithstanding any other provisions contained in this Lease, in the event the Tenants are closed or taken over by the banking authority of the State of California, or other bank supervisory authority, the Landlord may terminate the Lease only with the concurrence of such banking authority or other bank supervisory authority, and any such authority shall in any event have the election either to continue or to terminate the Lease, provided, that in the event this Lease is terminated, the maximum claim of Landlord for damages or indemnity for injury resulting from the rejection or abandonment of the unexpired term of the Lease shall in no event be in an amount exceeding the rent reserved by the Lease, without acceleration, for three (3) months next succeeding the date of the surrender of the premises to the Landlord if at least three (3) months remain in the term of this Lease, otherwise for the time remaining in the Term, or the date of reentry of the Landlord, whichever first occurs, whether before or after the closing of the bank, plus an amount equal to the unpaid rent accrued, without acceleration up to such date,

TENANTS: CYPRESS COAST BANK (IN ORGANIZATION)

BY: /s/ PETER JOHNSON
ITS: PRESIDENT

LANDLORD:
BY: /s/ DEAN C. ROCKWELL
DEAN C. ROCKWELL

BY: /s/ JACQUELINE ROCKWELL
JACQUELINE ROCKWELL

LEASE AMENDMENT

THIS AGREEMENT is dated the 21^st day September 1999.
BETWEEN:  Dean C. Rockwell and Jacqueline Rockwell (the "Landlords")
       OF THE FIRST PART;
  -and-
Central Coast Bancorp (the "Tenant")
       OF THE SECOND PART;

WHEREAS:

A. Pursuant to a lease dated November 1,1989 (the "Lease") between the Landlord and the Tenant for the leased premises located at 1658 Fremont Blvd., Seaside, CA.

B. Whereas Tenant and Landlord are desirous of extending the lease for a ten (10) year term commencing November 1,1999 and expiring October 31,2009 (the “Renewal Term”) upon the same terms and conditions as are contained in the Lease except as amended by this Agreement.

NOW THEREFORE WITNESSETH that in consideration of the mutual covenants and agreements between the parties, and for good and valuable consideration, the Landlord and Tenant agree to amend the lease as follows:
1. The lease is hereby extended for the Renewal Term.
2. The Renewal Term shall be upon the same terms and conditions as are contained in the original lease except:

     a. Paragraph 4, RENT: The rent for the first five (5) years of me Renewal Term shall be fixed at $5,273.04 per month

     b. Paragraph 5, RENTAL ADJUSTMENT: The annual rent adjustment shall be waived for the first five- (5) years of this extension. The annual adjustment as set forth in this lease shall began on the sixth anniversary of the Renewal Term.

Whereas the parties confirm that in all other respects, the terms of the Lease will remain in foil force and effect, unmodified, except to the extent set forth in this agreement.

IN WITNESS WHEREOF the parties hereto have signed this agreement.


LANDLORD:

/s/ DEAN C. ROCKWELL    /s/ JACQUELINE ROCKWELL
By: Dean C. Rockwell            Jacqueline Rockwell

TENANT:

By: /s/ HARRY D. WARDWELL 10/22/99

EX-10

THIS LEASE, made and entered effective the 1st day of March, 1998, by and between FRANCIS H. RIANDA and LILLIAN I. RIANDA, Trustees of THE RIANDA LIVING TRUST, dated July 10, 1981 and DENNIS CAPRARA and JANICE L. CAPRARA, Trustees of THE CAPRARA REVOCABLE TRUST, dated March 17,1988, (hereinafter referred to as “Lessor”), and BANK OF SALINAS, a California corporation (hereinafter referred to as “Lessee”).

WITNESSETH

1. PREMISES: In consideration of the terms, covenants, conditions and obligations herein contained, to be kept, performed, and complied with by Lessee, and upon the condition that Lessee keeps, performs and complies with said terms, covenants, conditions and obligations, Lessor does hereby lease and demise unto Lessee, and Lessee does hereby rent from Lessor, that certain real property, together with appurtenances, hereinafter referred to as the “demised premises” situated in the City of Gonzales, County of Monterey, State of California, known as 400 Alta Street consisting of approximately 5,165 square feet of building space, adjacent parking lot and parking lot across the alley way and more particularly described in Exhibit “A” attached hereto and incorporated herein

2. USE: Said premises shall, during the term of this lease and any extensions thereof, be used for the purpose of operating and conducting thereon and therein a banking business and/or financial business, for uses normally incident to such purpose, and for no other purpose.

3. TERM: The initial term of this lease shall be for a period of five (5) years. The term of this lease, and Lessee's obligation to pay rent, shall commence on March 1, 1998 and terminate at noon on March 31,2003, unless sooner terminated as herein provided.

4. OPTION TO EXTEND TERM: Lessee shall have the option to extend the term of this Lease for three (3) additional periods ("Option Term(s)") of five (5) years each by giving written to Lessor ninety (90) days prior to the expirations of the Lease term or preceding Option Term. If Lessee fails to give written notice to Lessor of its exercise of the option to extend ninety (90) days prior to the expiration of the preceding term, then Lessor shall give written notice to Lessee that the Lessee has thirty (30) days to exercise the option to extend, during which period Lessee may by written notice to Lessor exercise its option. All of the terms, covenants, conditions, provisions and agreements applicable to the initial Lease Term shall be applicable to the Option Term, including without limitation, adjustment of the Base Monthly Rent on each anniversary of the Lease Term Commencement Date occurring during each Option Term, provided, however, that upon the commencement of an Option Term rent shall be adjusted to “Fair Market Rent” established as follows:

    (a)  Fair Market Rent to be applied to the beginning year of each Option Term shall mean the prevailing annual fair market rent for tenants of premises comparable to the subject Premises in the general vicinity of the Premises for periods comparable to the Option Term. Lessor and Lessee shall meet and endeavor in good faith to agree upon the Fair Market Rent for the upcoming Option Period prior to the commencement thereof and if Lessor and Lessee fail to reach agreement by the date which is six (6) months prior to the commencement of the applicable Option Term, then, within twenty (20) days thereafter, each party, at its own cost and by giving notice to the other party, shall appoint a licensed commercial real estate agent with at least seven (7) years full-time experience as a real estate agent active in leasing of commercial properties in the area of the Premises to appraise and set the Fair Market Rent for the Option Term. If a party does not appoint an agent within twenty (20) days after the other party has given notice of the name of its agent, the single agent appointed shall be the sole agent and shall set the Fair Market Rent for the Option Term. If there are two (2) agents appointed by the parties as stated above, the agents shall meet within ten (10) days after the second agent has been appointed and attempt to set Fair Market Rent for the Option Term. If the two (2) agents are unable to agree on such Fair Market Rent within thirty (30) days after the second agent has been appointed, they shall, within twenty(20) days after the last day the two (2) agents were to have set such Fair Market Rent, attempt to select a third agent who shall be a licensed commercial real estate agent meeting the qualifications stated above. If the two (2) agents are unable to agree on the third agent within such twenty (20) day period, Lessor and Lessee shall by mutual agreement select a third agent meeting the qualifications stated in this subsection. Each of the parties shall bear one-half (1/2) of the cost of appointing the third agent and of paying the third agent’s fee. No agent shall be employed by, or otherwise be engaged in business with or affiliated with, Lessor or Lessee, except as an independent contractor.

    (b)  Within thirty (30) days after the selection of the third agent, a majority of the agents shall set the Fair Market Rent for the Option Term. If a majority of the agents are unable to set such Fair Market Rent within the stipulated period of time, each agent shall make a separate determination of such Fair Market Rent and the three (3) appraisals shall be added together and the total shall be divided by three (3). The resulting quotient shall be the Fair Market Rent for the Premises for the Option Term. However, if the low appraisal is more than ten percent (10%) lower than the middle appraisal, the low appraisal shall be disregarded, and if the high appraisal is more than ten percent (10%) higher than the middle appraisal, the high appraisal shall be disregarded. If only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be added together and their total divided by two (2), and the resulting quotient shall be Fair Market Rent for the Option Term. If both the lowest appraisal and the highest appraisal are disregarded as stated in this Subsection, the middle appraisal shall be Fair Market Rent for the Option Term.

4. RENTAL: Lessee shall pay to Lessor during the term of this lease as monthly rental (Base Monthly Rent) for the demised premises the rate of eighty cents ($.80) per square foot, for a total of Four Thousand One Hundred Thirty Two Dollars and No/lOOths, which sum shall be paid in advance on the first day of each calendar month. All rent to be paid by Lessee to Lessor shall be in lawful money of the United States of America and shall be paid prior to notice or demand at the address designated in Paragraph 29. Any rent payments not paid within five (5) days of its due date shall be subject to a FIVE percent (5%) late charge. Rent as hereinabove set forth shall be subject to annual increases as set forth in Paragraph 27 of this Lease.

5. ANNUAL ADJUSTMENT TO RENT: The Base Monthly Rent described in Paragraph 4 of this lease shall be adjusted each year on the anniversary of the commencement date of this lease (referred to in this lease as the “adjustment dates” to reflect the average percentage increase in the Consumer Price Index, all items, using 1977 as a base year, as compiled by the Bureau of Labor Statistics of the United States Department of Labor for the San Francisco-Oakland metropolitan area for the reference month in the 12 calendar month period preceding each of the adjustment dates over the same Consumer Price Index, all items, for the base reference month the same being the month and year of the commencement of this lease. The basic guaranteed rental as so adjusted on each of the adjustment dates shall be the rent payable by Lessee to Lessor for the use and occupancy of the premises each year following the adjustment date, until adjusted again on the next subsequent adjustment date.

6. REAL ESTATE TAXES: A. Lessee agrees to pay all real estate taxes, levies and assessments and all other charges in the nature of taxes and assessments upon the demised premises, general and special, ordinary and extraordinary, of any kind and nature whatsoever heretofore or which during the term of the lease are laid, levied, assessed or imposed, or become a lien upon or become chargeable against or payable in connection with the demised premises or any part thereof. Lessee shall pay said taxes annually or semi-annually, at the option of Lessee, within 15 days from receipt from Lessor of a statement or tax bill delineating said taxes. Notwithstanding Hie foregoing supplemental taxes assessed as a result of new construction shall be paid as herein provided within fifteen (15) days of notification thereof by Lessor.

    B.  In the event that the application of federal, state or local status, ordinances, regulations, rules or policies require the payment of any assessment, fee or other charge relative to the operation or maintenance of the premises, parking or other common areas, Lessee shall pay same within fifteen (15) days after receipt of a statement from Lessor delineating the nature of the assessment, fee or other charge.

7. PERSONAL PROPERTY TAXES: During the term hereof Lessee shall pay prior to delinquency all taxes assessed against and levied upon fixtures, furnishings, equipment and all other personal property of Lessee contained in the demised premises, and when possible Lessee shall cause said fixtures, furnishings, equipment and other personal property to be assessed and billed separately from the real property of Lessor. In the event any or all of the Lessee’s fixtures, furnishings, equipment and other personal property shall be assessed and taxed with the Lessor’s real property, the Lessee shall pay to Lessor its share of such taxes within fifteen (15) days after delivery to Lessee by Lessor of a statement in writing setting forth the amount of such taxes applicable to the Lessee’s property, and the means by which said share has been computed.

8. CONSTRUCTION/IMPROVEMENT: The parties heretofore have agreed upon and Constructed various improvements to the demised premises, allocated responsibility for the payment thereof and both Lessor and Lessee agree that neither owes to the other any further construction and/or improvements, the costs have been paid by the party responsible therefore, and Lessee accepts the demised premises in their current “AS IS” condition.

9. PARKING LOTS AND COMMON FACILITIES: All parking, parking lots and parking facilities historically used by the demised premises and currently being used by Lessee shall be considered part of the demised premises and Lessee shall keep same in a neat and clean condition during the term of this Lease and any extensions. Notwithstanding anything herein contained to the contrary, Lessor shall maintain the parking, parking lots and parking facilities and all fences in, on and about the demised premises as hereinafter provided in Paragraph 12.

10. USES PROHIBITED: Lessee shall not use, or permit said premises, or any part thereof, to be used for any purpose or purposes other than the purpose or purposes for which said premises are hereby leased; and no use shall be made or permitted to be made of said premises, nor acts done, which will increase the existing rate of insurance upon the building in which said premises may be located (once said rate is established) or cause a cancellation of any insurance policy covering said building or any part thereof, nor shall Lessee sell or permit to be kept, used or sold in or about said premises any article which may be prohibited by standard form of life insurance policies. Lessee shall, at his sole cost, comply with any and all requirements, pertaining to the use of said premises, of any insurance organization or company necessary for the maintenance of reasonable fire and public liability insurance, covering said building and appurtenances.

11. ALTERATIONS: Lessee shall not make, or suffer to be made, any alterations of the demised premises, or any part thereof, without the prior written consent of Lessor, and any additions to, or alterations of, said premises, except movable furniture and trade fixtures shall become at once a part of the realty and belong to Lessor. Lessor acknowledges and understands Lessees business and intended use of the demised premises and shall not unreasonable withhold consent to alterations and improvements reasonably related thereto.

12. MAINTENANCE AND REPAIR: Lessee shall, subject to Lessor's obligations hereinafter provided, at all times during the term hereof, and at Lessee's sole cost and expense, keep, maintain and repair the building and other improvements upon the demised premises in good and sanitary order and condition (except as hereinafter provided) including without limitation, the maintenance and repair of any store front, doors, windows, window casements, glazing, interior components of all plumbing, pipes, electrical wiring and conduits.

Lessee agrees on the last day of said term or sooner termination of this lease to surrender the demised premises with appurtenances, in the same condition as when received, reasonable use and wear thereof and damage by fire, act of God or by the elements excepted.

Lessor shall, at his sole cost and expense, maintain in good condition and repair the exterior walls, exterior components of all heating, plumbing, pipes, electrical wire and conduits, and roof, provided, however, any repairs to the roof necessitated as a result of penetrations in the completed roof caused by Lessee shall be made by Lessee at Lessee’s expense. Lessor shall further, at his sole costs and expense maintain in good condition and repair the parking, parking lots and parking facilities and all fences in, on and about the demised premises. Such maintenance and repair shall include but not be limited to, black topping, slurry sealing, resurfacing, painting, lining, marking, and signing the parking spaces, direction of traffic flow and driveways of entrance and exit. Lessor shall not be required to make any repairs to the exterior walls, aforesaid components and roof unless and until Lessee has notified Lessor in writing of the need for such repairs and Lessor shall have a reasonable period of time thereafter to commence and complete said repairs.

Notwithstanding any other provision of this lease, the Lessor shall be solely responsible for the damage to the exterior of the leased premises which is the result of vandalism, burglary or other similar criminal activities.

13. COMPLIANCE WITH LAWS: Lessee shall, at his sole cost and expense, comply with all of the requirements of all municipal, state and federal authorities now in force or which may hereafter be in force pertaining to the use of said premises, and shall faithfully observe in said use all municipal ordinances and state and federal statutes now in force or which shall hereinafter be in force. 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 order or statute in said use, shall be conclusive of that fact as between the Lessor and Lessee.

Lessee shall not commit, or suffer to be committed, any waste upon the demised premises, or any nuisance or other act or things which may disturb the quite enjoyment of any other tenants in the building in which the demised premises may be located.

Lessee shall comply with all requirements imposed by Municipal, County, State and Federal authorities regarding water rationing, toxic waste, hazardous materials, chemicals and materials and shall hold Lessor harmless from any and all liability and damages to persons and property, including the property and premises of Lessor, resulting from Lessee’s use of toxic .materials, hazardous materials, chemicals and other materials.

14. INDEMNIFICATION OF LESSOR — LIABILITY INSURANCE BY LESSEE: Except for losses, claims and damages caused by Lessor’s failure to adequately perform its maintenance obligation as set forth herein, Lessee, as material part of the consideration to be rendered to Lessor under this lease, hereby waives all claims against Lessor for damage to goods, wares and merchandise, in, upon or about said premises and for injuries to persons in or about said premises, from any cause arising at any time; and Lessee will hold Lessor exempt and harmless from any damage or injury to any person, or the goods, wares and merchandise of any person, arising from the use of the premises by Lessee, or from the failure of Lessee to keep the premises in good condition and repair as herein provided.

At its sole cost and expense, Lessee shall maintain in full force and effect during the Lease Term and extensions, the following policies of insurance:

    (a)  Comprehensive General Liability Insurance or Commercial General Liability Insurance, insuring against liability for bodily injury or death to persons, property damage and personal injury, covering the Premises and the business of Lessee, with a comprehensive single limit of liability not less than $2,000,000.00, such coverage to be in a commercial general liability form with at least the following endorsements: (i) deleting any employee exclusion on personal injury coverage; (ii) including coverage for injuries to or caused by employees; (iii) providing for blanket contractual liability coverage (including Lessee’s indemnity obligations contained in this Lease), broad form property damage coverage, owner’s protective and personal injury coverage; and (iv) providing for coverage of employers automobile non-ownership liability. All such insurance: (1) shall be primary and non-contributory; (2) shall provide for severability of interests; (3) shall provide that an act or omission of one of the named insureds shall not reduce or avoid coverage to the other named insureds; and (4) shall afford coverage for all claims based on acts, omissions, injury or damage which occurred or arose (or the onset of which occurred or arose) in whole or in part during the policy period.

    (b)  Plate glass insurance, sufficient to pay for the replacement of, and any or all damage to, exterior plate glass and storefront supports in the Premises.

    (c) Fire insurance, with standard extended coverage, sprinkler leakage, vandalism and malicious mischief endorsements on all of Lessee’s fixtures and equipment in the Premises, in an amount not less than one hundred percent (100%) of their full insurable value, the proceeds of which shall, so long as this Lease is in effect, be used for the repair or replacement of the fixtures and equipment so insured.

    (d)  Workers’ Compensation Insurance in the manner and to the extent required by applicable law and with limits of liability not less than the minimum required under applicable law, covering all employees of Lessee having any duties or responsibilities in or about the Premises.

Lessee shall further, at all times from and after the lease term commencement date, maintain in effect during the Lease Term and extensions thereof a policy or policies of insurance covering the ’ building of which the Premises are a part (including boiler and machinery) in an amount not less than ninety percent (90%) of the full replacement cost (exclusive of the cost of excavations, foundations and footings) or the amount of insurance Lessors’s mortgagee(s) or beneficiary(ies) may require Lessor to maintain, whichever is the greater, providing protection against any peril generally included in the classification “Fire and Extended Coverage”, loss of rental income insurance and such other additional insurance as covered in an “all risks” standard insurance policy, with earthquake coverage insurance if deemed necessary by Lessee in Lessee’s sole judgment. Lessee’s obligation to carry this insurance may be brought within the coverage of any so-called blanket policy or policies of insurance carried and maintained by Lessor.

All insurance policies required to be carried under this Lease shall be issued by financially sound qualified insurers, licensed to do business in the State of California. All Lessee’s insurance (other than Workers’ Compensation) shall name Lessor as additional insureds. Lessee’s Workers’ Compensation Insurance shall contain an employer’s contingent liability endorsement. Lessee shall deliver to Lessor certificates of all insurance required to be carried by Lessee hereunder, showing that such policies are in full force and effect in accordance with this Article 10. Lessee shall obtain written undertakings from each insurer under policies maintained by Lessee hereunder to notify Lessor, and any other additional insured thereunder, at least thirty (30) days prior to cancellation, amendment or reduction in coverage under any such policy.

Any policy required to be maintained hereunder by either party may be maintained under a so-called “blanket policy”, insuring other parties and other locations, so long as the amount of insurance required to be provided hereunder is not thereby diminished.

Each policy of property insurance which either party obtains in connection with the Premises shall include a clause or endorsement denying the insurer any rights of subrogation against the other party to the extent rights have been waived by the insured prior to the occurrence of injury or loss. Lessor and Lessee hereby waive any rights against the other for injury or loss due to hazards covered by insurance required to be carried by this Lease, or actually carried, whether or not containing such a waiver of subrogation clause or endorsement, to the extent of the loss covered thereby, or if either party does not, for any reason, have valid enforceable insurance, then, this waiver shall apply to the extent of all property insurance which was required to be carried hereunder.

15. FREE FROM LIENS: Lessee shall keep the demised premises and the property in which the demised premises are situated free from any liens arising out of any work performed, material furnished or obligations incurred by Lessee.

16. ABANDONMENT: Lessee shall not vacate or abandon the demised premises at any time during the term of this lease; and if Lessee shall abandon, vacate or surrender the demised premises or be dispossessed by process of law, or otherwise, any personal property belonging to Lessee and left on the demised premises shall be deemed to be abandoned, at the option of Lessor, except such property as may be mortgaged to Lessor.

17. SIGNS; Lessee shall be permitted exterior signs, awnings, canopies, marquees and other exterior sign age and advertising, provided that the same are approved by the City of Gonzales and any other regulatory governmental authority with jurisdiction and Lessee has obtained Lessor’s written consent thereto, which consent Lessor shall not unreasonably withhold. Lessee shall further have the right to erect and maintain within the interior of the Premises all signs and advertising matter customary or appropriate in the conduct of Lessee's business. Upon the expiration or earlier termination of this Lease, all signage affixed to the exterior of the Premises shall be removed at Lessee's expense.

18. UTILITIES: Lessee shall pay before delinquency all charges for gas, heat, electricity, power, telephone service and all other services or utilities used in, upon, or about the demised premises by Lessee or any of its subtenants, licensees, or concessionaires during the term of this lease. If any utility is not separately metered, Lessee agrees to reimburse Lessor for the cost of said service. Lessor shall pay for water and garbage service.

19. DAMAGE AND DESTRUCTION OF PREMISES: In the event of (a) a total or partial destruction of said premises resulting from a casuality insured against, during the lease term or extensions which requires repairs to or the rebuilding of the demised premises, or (b) said premises being declared unsafe or unfit for occupancy by any authorized public authority for any reason other than Lessee’s act, use or occupation, which declaration requires repairs to either said premises or said building, Lessor shall forthwith make said repairs provided Lessee gives to Lessor thirty (30) days written notice of the necessity therefor. No partial destruction (including any destruction necessary in order to make repairs required by any declaration made by any public authority) shall in any wise annul or void this Lease except that Lessee shall be entitled to a proportionate reduction of the then existing rent while such repairs are being made, such proportionate reduction to be based upon the extent to which the making of such repairs shall interfere with the business carried on by Lessee in said premises. However, if during the last year of the term of this lease the building is damaged as a result of fire or any other insured casualty to an extent in excess of fifty percent (50%) of its then replacement cost, (including foundation(s), Lessor may within thirty (30) days following the date such damage occurs terminate this lease by written notice to Lessee. If Lessor, however, elects to make said repairs, and provided Lessor uses due diligence in making said repairs, this lease shall continue in full force and effect and the minimum guaranteed rental shall be proportionately reduced as hereinabove provided. If Lessor elects to terminate this lease all rentals shall be prorated between Lessor and Lessee as of the date of such destruction.

The foregoing to the contrary notwithstanding, if the building is damaged or destroyed at any time during the term hereof to an extent of more than fifty percent (50%) of its then replacement cost (excluding foundation(s) as a result of a casualty not insured against, Lessor may within thirty (30) days following the date of such destruction terminate this lease upon written notice to Lessee. If Lessor does not elect to so terminate because of said uninsured casualty, Lessor shall promptly rebuild and repair said premises and Lessee’s rental obligation shall be proportionately reduced as hereinabove provided.

20. ASSIGNMENT AND SUBLETTING: Lessee shall not assign this lease, or any interest therein, and shall not sublet the demised premises or any part thereof, or any right of privilege appurtenant thereto, or permit any other person (the agents and servants of Lessee excepted) to occupy or use the demised premises, or any portion thereof, without first obtaining the written consent of Lessor, which consent shall not unreasonably be withheld and provided, however, that Lessee shall be entitled to assign or sublet the premises to a subsidiary, or other banking/financial institution as hereinafter set forth. Consent by Lessor to one assignment, subletting, occupation or use by another person shall not be deemed to be a consent to any subsequent assignment, subletting, occupation or use by another person. Any assignment or subletting without the prior written consent of Lessor shall be void, and shall, at the option of Lessor terminate this lease. Neither this lease nor any interest therein shall be assignable, as to the interest of Lessee, by operation of law, without the prior written consent of Lessor. Lessor shall not unreasonably withhold consent to an assignment or sublease.

Lessee shall be entitled to sublet, assign, and/or transfer this Lease, without Lessor’s prior consent, to a parent corporation, subsidiary, affiliated firm or entity or the surviving corporation in the event of a merger, reorganization or sale of assets reorganization to which Lessee shall be a party; provided, however, that such parent corporation, subsidiary, affiliated firm or entity or the surviving corporation shall conduct the same business from the subject premises and shall in writing expressly assume all of the provisions, convenants, and conditions of this Lease on the part to be kept and performed.

21. DEFAULT: If Lessee shall fail to pay any monthly installment of rent as aforesaid (although no legal or formal demand has been made therefor), or shall violate or fail to perform any of the other conditions, covenants or agreements herein made by Lessee, and such failure to pay rent or such violation or failure shall continue for a period often (10) days (or for such longer period as is necessary to cure the default so long as Lessee is acting with due diligence) thereof to Lessee by Lessor, then and in any of said events this Lease shall, at the option of Lessor cease and terminate. Should this Lease be terminated before the expiration of the term of this Lease by reason of Lessee’s default as hereinabove provided, or if Lessee shall abandon or vacate the demised premises before the expiration or termination of the term of this Lease, the demised premises may be relet by Lessor for such rent and upon such terms as are not unreasonable under the circumstances and, if the full rental hereinabove provided shall not be realized by Lessor, Lessee shall be liable for all damages sustained by Lessor, including, without limitation, deficiency in rent, reasonable attorney’s fees, brokerage fees, and expenses of placing the demised premises in first-class rentable condition. Any damage or loss of rental sustained by Lessor may be recovered by Lessor, at Lessor’s option, at the time of the reletting, or in separate actions, from time to time, as said damage shall have been made more easily ascertainable by successive reletting. The provisions contained in this paragraph shall be in addition to and shall not prevent the enforcement of any claim Lessor may have against Lessee for anticipatory breach of the unexpired term of this Lease. In the event that Lessee continues to occupy the demised premises after the expiration of the term of this Lease, with the express or implied consent of Lessor, such tenancy shall be from month to month and shall not be a renewal of the term of the Lease or a tenancy from year to year, unless Lessee specifically exercises its renewal option as provided hereinafter. All rights and remedies of Lessor under this Lease shall be cumulative and shall not be exclusive of any other rights and remedies provided to Landlord under applicable law.

22. INSOLVENCY OF TENANT: Lessee agrees that in the event all of substantially all of its assets be placed in the hands of a receiver or trustee, and in the event such receivership or trusteeship continue for a period often (10) days, or should Lessee make an assignment for the benefit of creditors, or be adjudicated a bankrupt, or should Lessee institute any proceedings under any state or federal bankruptcy act wherein Lessee seeks to be adjudicated a bankrupt, or seeks to be discharged of its debts, or should any voluntary proceeding be filed against such Lessee under such bankruptcy laws and Lessee consents thereto or acquiesces therein by pleading or default, then this lease or any interest in and to the demised premises shall not become an asset if any of such proceedings and, in any such events and in addition to any and all rights or remedies of Lessor hereunder or as provided by law, it shall be lawful for Lessor at his option to declare the term hereof ended and to re-enter the demised premises and take possession thereof and remove all persons therefrom and Lessee shall have no further claim therein or hereunder.

23. SURRENDER OF LEASE: The voluntary or other surrender of this lease by Lessee, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Lessor, terminate all or any existing subleases or subtenancies, or may, at the option of Lessor, operate as an assignment to him of any or all of such subleases or subtenancies.

24. RIGHT OF FIRST REFUSAL TO PURCHASE LEASED PREMISES: If Lessor, during the lease term or any extension of the term, elects to sell all or any portion of the leased premises, Lessee shall have the right of first refusal to meet any bona fide offer of sale from a third party on the same terms and conditions of that offer, including but not limited to the price and date for close of escrow, provided Lessee is not then in default under this Lease. On receipt of a bona fide third party offer for purchase of the premises, Lessor shall notify Lessee in writing of the offer and its terms and conditions. Lessee, within forty-five (45) days after the date of Lessor’s notice to Lessee, shall notify Lessor in writing whether or not Lessee agrees to purchase the leased premises on the same terms and conditions as contained in the third party offer. A failure by Lessee to give Lessor any written notification within the prescribed time period shall be deemed notice to Lessor that Lessee does not elect to purchase the leased premises. If Lessee elects not to purchase the leased premises, Lessor shall be free to sell the premises or portion thereof to the third party in accordance with the terms and conditions of the third party offer.

25. SUBORDINATION. ATTORNMENT: This lease, at Lessor’s option, shall be subordinate to the lien of any first deed of trust or first mortgage subsequently placed upon the real property of which the demised premises are a part, and to any and all advances made on the security thereof, and to all renewals, modifications, consolidations, replacements and extensions thereof; provided, however, that as to the lien of any such deed of trust or mortgage Lessee’s right to quiet possession of the premises shall not be distributed if Lessee is not in default and so long as Lessee shall pay the rent and observe and perform all of the provisions of this lease, unless this lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee or ground lessor shall elect to have this lease prior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Lessee, this lease shall be deemed prior to such mortgage, deed of trust, or ground lease, whether this lease is dated prior or subsequent to the date of said mortgage, deed of trust or ground lease or the date of recording thereof.

In the event any proceedings are brought for foreclosure, or in the event of the exercise of the power of sale under any mortgage or deed of trust made by the Lessor covering the demised premises, the Lessee shall attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as the Lessor under this lease.

Within ten (10) days after request therefor by Lessor, or in the event that upon any sale, assignment or hypothecation of the demised premises or the land thereunder by the Lessor, an offset statement shall be required from Lessee, Lessee agrees to deliver in recordable form a certificate addressed to any such proposed mortgage or purchaser or to the Lessor certifying that this lease is in full force and effect (if such be the case) and that there are no differences or offsets thereto or stating those claimed by Lessee.

26. EMINENT DOMAIN:  A. In the event that the whole of the premises shall be taken under the power of eminent domain, this lease shall thereupon terminate as of the date possession shall be so taken.

    B.  In the event that a portion of the floor area of the premises shall be taken under the power of eminent domain and the portion not so taken will not be reasonably adequate for the operation of Lessee’s business notwithstanding Lessor’s performance of restoration as hereinafter in this paragraph B provided, this lease shall thereupon terminate as of the date possession of said portion is taken. In the event of any taking under the power of eminent domain which does not terminate this lease as aforesaid, any obligation of Lessee under this lease to pay rent and all of the other provisions of this lease shall remain in full force and effect, except that the minimum annual rent shall be reduced in the same proportion that the amount of floor area of the premises taken bears to the total floor area of the premises immediately prior to such taking, and Lessor shall, at Lessor’s own cost and expense, restore such part of the premises as is not taken to as near its former condition as the circumstances will permit and Lessee shall do likewise with respect to all exterior signs, trade fixtures, equipment, display cases, furniture, furnishings and other installations of tenant.

    C. All damages awarded for any such taking under the power of eminent domain, whether for the whole or a part of the premises, shall belong to and be the property of Lessor whether such damages shall be awarded as compensation for diminution in value of the leasehold or for the fee of the premises; provided, however, that Lessor shall not be entitled to any award made to Lessee for loss of or damage to Lessee’s trade fixtures and removable personal property or for damages for cessation or interruption of Lessee’s business.

    D.  If this lease is terminated, all rent shall be paid up to the date that possession is taken by public authority, and Lessor shall make an equitable refund of any rent paid by Lessee in advance and not yet earned.

    E.  A voluntary sale by Lessor to any public or quasi public body, agency or person, corporate or otherwise, having the power of eminent domain, either under threat or condemnation or while condemnation proceedings are pending, shall be deemed to be a taking by eminent domain for purposes of this lease.

27. ATTORNEY'S FEES: In the event the Lessor finds it necessary to retain an attorney in connection with the default by the Lessee in any of the agreements or covenants contained in this lease, Lessee shall pay reasonable attorney's fees to said attorney.

In the event of any litigation regarding this lease, the losing party shall pay to the prevailing party reasonable attorney’s fees.

28. HOLDING OVER: Any holding over after the expiration of the term of this lease, with the consent of Lessor, shall be construed to be a tenancy from month to month, cancelable upon thirty (30) days written notice, and at a rental and upon terms and conditions as existed during the last year of the term hereof.

29. NOTICES: Wherever in this lease it shall be required or permitted that notice and demand be given or served by either party to this lease to or on the other, such notice or demand shall be given or served and shall not be deemed to have been duly given or served unless in writing and forwarded by certified mail, addressed as follows:

TO: LESSOR

AT:

Dennis Caprara
26769 El Camino Real North
Gonzales, CA 93926

FROM: LESSEE
AT:

Bank of Salinas
ATTN:
Operations Administrator
301 Main Street
Salinas, CA 93901

Either party may change such address by written notice by certified mail to the other.

30. SUCCESSOR IN INTEREST: The covenants herein contained shall, subject to the provisions as to assignment, apply to and bind the heirs, successors, executors, administrators and assigns of all the parties hereto; and all of the parties hereto shall be jointly and severally liable hereunder.

31. LESSEE’S PERFORMANCE: In the event Lessee shall fail within any time limits which may be provided herein to complete any work or perform any other requirements provided to be performed by Lessee prior to the commencement of the term hereof, or in the event Lessee shall cause a delay in the completion of any work, Lessor may send Lessee written notice of said default and if said default is not corrected within ten (10) days thereafter, Lessor may by written notice prior to the curing of said default terminate this lease. Lessor shall be entitled to retain as liquidated damages all deposits made hereunder and such improvements as Lessee may have annexed to the realty that cannot be removed without damaged thereto.

32. FORCE MAJEURE: If either party hereto shall be delayed or prevented from the performance of construction or any other act required hereunder by reason of acts or God, strikes, lockouts, labor troubles, inability to procure materials, restrictive governmental laws of regulations or other cause without fault and beyond the control of the party obligated (financial inability excepted), performance of such act shall be excused for the period of delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay; provided, however, nothing in this Paragraph 37 contained shall excuse Lessee from the prompt payment of any rental or other charge required by Lessee hereunder except as may be expressly provided elsewhere in this lease.

33. INTEGRATION: This Lease along with any exhibits and attachments or other documents affixed hereto or referred to herein constitutes the entire and exclusive agreement between Lessor and Lessee relative to the Premises. All prior or contemporaneous oral agreements and understandings relative to the leasing of the Premises are superseded by this Lease.

34. AMENDMENT: This Lease may be altered, amended or revoked only by an instrument in writing signed by both Lessor and Lessee and making specific reference to this Lease.

35. SECTION HEADINGS AND REFERENCES: The headings included in this Lease are for convenience only, and shall not be used to interpret this Lease. References in this Lease to Articles, Paragraphs, Sections and Exhibits shall refer to the Articles, Paragraphs, Sections and Exhibits of this Lease.

36. LEASE DRAFTSMAN: This Lease was negotiated between the parties and their respective counsel and/or professional advisors, and the parties agree that the terms, conditions and provisions hereof shall be interpreted without reference to the draftsman of the Lease, because this Lease is a product of all their efforts and each party shall be considered as having contributed equally hereto.

37. TERM: The words "Term", "lease term" or "term of this Lease", when used herein, refer to the term of this Lease and any duly exercised extensions, "Option Term" and renewals thereof.

IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written.

LESSOR

By: /s/ DENNIS CAPRARA

LESSEE

By: /s/ JOHN MCCARTHY

EXHIBIT A

LEGAL DESCRIPTION THE LAND REFERRED TO IN THIS REPORT IS SITUATED IN THE STATE OF CALIFORNIA. COUNTY OF MONTEREY IN THE CITY OF GONZALES, AND IS DESCRIBED AS FOLLOWS:

PARCEL 1:

ALL OF LOT 1 AND A PORTION OF LOT 2 IN BLOCK 30 (XXX) MAP OF THE TOWN OF GONZALES IN MONTEREY COUNTY, FILED APRIL 27, 1874, IN THE OFFICE OF THE COUNTY RECORDER OF MOMTEREY COUNTY, CALIFORNIA, IN MAP BOOK 1, CITIES AND TOWN, AT PAGE 41, DESCRIBED AS FOLLOWS:

BEGINNING AT THE INTERSECTION OF THE WESTERLY SIDE OF FOURTH STREET WITH THE NORTHERLY SIDE OF ALTA STREET, THE SAME BEING THE MOST SOUTHERLY CORNER OF LOT 1, BLOCK 30 (XXX); THENCE NORTH 45 DEG. 41* EAST ALONG THE WESTERLY SIDE OF FOURTH STREET, 81 FEET AND 6 INCHES TO THE NORTHERLY SIDE OF A 9 INCH STRIP CONVEYED BY THE BACK OF GONZALES TO A. WIDEMANN COMPANY BY DEED DATED JUNE 26, 1906, RECORDED IN BOOK 90 OF DEEDS, PAGE 149, MONTEREY COUNTY RECORDS) THENCE LEAVING THE LINE OF FOURTH STREET, AND RUNNING NORTH 44 DEG. 19’ WEST ALONG THE NORTHERN LINE OF SAID 9 INCH STRIP, 100 FEET; THENCE NORTH 45 DEG. 41' EAST ALONG THE LINE OF THE PROPERTY FORMERLY OWNED BY THE BANK OF GONZALES, 12 FEET AND 3 INCHES TO THE MOST EASTERLY CORNER OF THE TRACT DESCRIBED IN THE DEED FROM F. L. WIDEMANN TO THE A. WIDEMANN COMPANY, A CORPORATION, DATED JANUARY 10, 190, RECORDED IN BOOK 127 PAGE 463 OF DEEDS, MONTEREY COUNTY RECORDS; THENCE NORTH 44 DEG. 19’ WEST ALONG THE BOUNDARY OF THE LAST MENTIONED TRACT, 40 FEET TO THE EASTERN SIDE OF A 20 FOOT ALLEY; THENCE SOUTH 45 DEG. 41’ WEST, ALONG THE SAID ALLEY, 93 FEET AND 9 INCHES TO THE NORTHERLY LINE OF ALTA STREET; THENCE SOUTH 44 DEG. 19’ EAST, ALONG THE SAID ALTA STREET, 140 FEET TO THE PLACE OF BEGINNING. A.P.N. 020-074-007

PARCEL 2:

ALL THAT PORTION OF LOTS 7, 8 AND 9 IN BLOCK 30 (XXX), MAP OF THE TOWN OF GONZALES IN MONTEREY COUNTY, FILED APRIL 27, 1874, IN THE OFFICE OF THE COUNTY RECORDER OF MONTEREY COUNTY, CALIFORNIA, IN MAP BOOK ONE CITIES AND TOWNS, AT PAGE 41, DESCRIBED AS FOLLOWS:

BEGINNING AT THE MOST SOUTHERLY CORNER OF SAID LOT 7 AT THE INTERSECTION OF THE NORTHEASTERLY LINE OF ALTA STREET WITH THE NORTHWESTERLY LINE OF THE ALLEY RUNNING THROUGH SAID BLOCK 30 (XXX); RUNNING THENCE NORTHEASTERLY ALONG SAID LINE OF SAID ALLEY AND THE SOUTHEASTERLY LINE OF SAID LOTS 7, 8 AND 9, 107 FEET TO A POINT; RUNNING THENCE IN A NORTHWESTERLY DIRECTION, PARALLEL WITH THE NORTHEASTERLY LINE OF SAID ALTA STREET, 71 FEET TO A POINT, RUNNING THENCE IN A NORTHWESTERLY DIRECTION, PARALLEL WITH SAID NORTHESTERLY LINE OF SAID ALLEY, 107 FEET TO A POINT IN THE SOUTHEASTERLY ALONG SAID ALTA STREET, RUNNING THENCE SOUTHEASTERLY ALONG SAID NORTHEASTERLY LINE OF SAID ALTA STREET 71 FEET TO THE PLACE OF BEGINNING..

PARCEL NO. : 020-074-008

EX-10

LEASE

BETWEEN

FRANKLIN STREET PROPERTIES, LLC, a California limited liability company,

as Landlord

and

CENTRAL COAST BANK CORP., a California corporation,

as Tenant

Marina, California

April 16, 1998

THIS LEASE (this "Lease") is made and entered into as of the date set forth in Section 1.1 by and between Landlord and Tenant.

ARTICLE 1 - BASIC LEASE PROVISIONS

1.1 Effective Date: April 16, 1998
1.2 Landlord: FRANKLIN STREET PROPERTIES, LLC, a California limited liability company.
1.3 Tenant: CENTRAL COAST BANK CORP., a California corporation
1.4 Tenant's Trade Name: Cypress Bank. (Article 10)
1.5 Project: Project on Reservation Road, Marina, California, including site of current Cypress Bank building at 228 Reservation Road, to be named “Cypress Bank Plaza”, subject to approval of applicable governmental authorities.
1.6 Premises: Approximately as depicted on the site plan attached hereto as Exhibit A. containing approximately three thousand (3,000) square feet of Floor Area. (Article 2)
1.7 Term: Six (60) months, with three (3) Option Terms of sixty (60) months each. (Article 3)
1.8 Minimum Annual Rent: Twelve Dollars ($12.00) per square foot of Floor Area in the Premises, subject to adjustment on each yearly anniversary of the Commencement Date occurring during the Term (as extended by the Option Term(s), as applicable, as set forth in Section 6.1 below. (Article 6)
1.9 Use of Premises: The Premises shall be used for the operation of retail branch bank and operations incidental thereto, and for no other use or purpose. (Article 10)
1.10 Security Deposit: None.
1.11 Broker(s): None. (Article 22)
1.12 Notices: (Article 22)

To Landlord:

Franklin Street Properties, LLC
204 Franklin Street
Redwood City, California 94063
Attn: Matthew H. Howarth

To Tenant:
Central Coast Bank Corp.
1658 Fremont Boulevard
Seaside, California 93955
Attn: John McCarthy

This Article 1 is intended to supplement and/or summarize the provisions set forth in the balance of this Lease. If there is any conflict between any provisions contained in this Article 1 and the balance of this Lease, the balance of this Lease shall control.

ARTICLE 2 - PREMISES

2.1 Premises. Landlord leases to Tenant and Tenant leases from Landlord, for the “Term” (as defined in Article 3) and upon the covenants and conditions set forth in this Lease, the premises described in Section 1.6 (“Premises”).

2.2 Reservation. Landlord reserves the right to use the exterior walls, floor, roof and plenum in, above and below the Premises for the repair, maintenance, use and replacement of pipes, ducts, utility lines and systems and structural elements serving the Project and for such other purposes as Landlord deems necessary. In exercising its rights reserved herein, Landlord shall not unreasonably interfere with the operation of Tenant’s business on the Premises.

2.3 Floor Area. The term “Floor Area”, as used in this Lease, shall mean all areas designated by Landlord for the exclusive use of a tenant (subject to the Landlord’s reservation set forth in Section 2.2 above) measured from the exterior surface of exterior walls (and extensions, in the case of openings) and from the center of interior demising walls, and shall include, but not be limited to, restrooms, mezzanines, warehouse or storage areas, clerical or office areas and employee areas. The Premises contain approximately the number of square feet of Floor Area specified in Section 1.6. Landlord and Tenant shall each have the right during the first ninety (90) days following the Commencement Date to cause the Floor Area of the Premises to be remeasured by a licensed architect. If an error is found in the measurement of the Floor Area, the measuring party shall cause its architect to certify the correct measurement to the other party for approval, which approval shall not be unreasonably withheld or delayed. In the event that the non-measuring party within ten (10) days of its receipt of such certification notifies the measuring party of its objection to the measuring party’s determination of the Floor Area, then Landlord and Tenant and their respective architects shall meet within ten (10) days of such notification of objection and resolve any disputes and come to agreement on the actual Floor Area of the Premises in a manner consistent with the definition and manner of determination of the Floor Area of the Premises contained in this Section 2.3. In the event that the non-measuring party fails to so notify the measuring party of its objection to such certification within such time period, then such determination of the Floor Area as so certified shall be deemed to be correct. Upon determination of the actual Floor Area of the Premises in the manner set forth herein, the Minimum Annual Rent and all other charges payable by Tenant under this Lease which are determined with reference to the Floor Area of the Premises shall be adjusted accordingly.

ARTICLE 3 — TERM

3.1 Term. This Lease shall be effective from and after the Effective Date specified in Section 1.1. The term of this Lease (“Term”) shall commence on the date (the “Commencement Date”) of the earlier of: (a) the date Tenant initially opens for business to the public in the Premises, or (b) sixty (60) days following the “Substantial Completion of the Premises” (as defined in Section 4.1 below). The Term shall continue, unless sooner terminated in accordance with the provisions of this Lease, for the number of months specified in Section 1.7 from the Commencement Date (except that if the Commencement Date is not the first day of a calendar month, then the Term shall be measured from the first day of the calendar month following the Commencement Date).

3.2 Extension Options. Tenant shall have the option to extend the Term of this Lease for three (3) additional periods of sixty (60) months each as set forth in Article 1 of this Lease (each such period being referred to herein as an “Option Term”’) only by giving Landlord written notice by the later to occur of (A) fifteen (15) days following Tenant’s receipt of written notice from Landlord reminding Tenant of the expiration date for Tenant’s exercise of such option (which notice from Landlord shall not be delivered earlier than fifteen (15) months prior to the expiration of the then applicable Term), or (B) at least one (1) year before the expiration of the then applicable Term. All of the terms, covenants, conditions, provisions and agreements applicable to the initial Term shall be applicable to the Option Terms, including, without limitation, adjustment of the Minimum Annual Rent on each anniversary of the Commencement Date occurring during each Option Term. Time is of the essence with respect to Tenant’s exercise of the options to extend the Term of this Lease provided herein. The option to extend the Term pursuant hereto by the Option Terms shall not be personal to the original Tenant signatory to this Lease and shall be exercisable by or for the benefit of any assignee or subtenant of Tenant (including, without limitation, an assignee in connection with a “Permitted Transfer” pursuant to Section 13.4 below); provided, however, that in the event of Tenant’s exercise of an option to extend pursuant hereto following any assignment of this Lease (other than to an assignee in connection with a Permitted Transfer pursuant to Section 13.4 below) or while any sublease remains in effect with respect to the Premises, Minimum Annual Rent shall be increased as of the commencement of the applicable Option Term to equal the greater of (1) the amount which would otherwise then be due based upon the adjustment provided for in Section 6.1 below, or (2) the “Fair Market Rent” (as hereinafter defined) for the Premises as of the commencement of such Option Term, and Minimum Annual Rent as so adjusted upon the commencement of such Option Term shall be further adjusted on each anniversary of the Commencement Date occurring during such Option Term in accordance with Section 6.1 below. All references in this Lease to the “Term” shall be deemed to mean the initial Term as extended by the Option Terms, as applicable. If applicable pursuant to the foregoing, the Fair Market Rent for each Option Term shall be determined as follows:

      (a) For purposes of this Lease, the "Fair Market Rent" shall mean the prevailing annual fair market rental rate as of the commencement of each Option Term for tenants of premises comparable to the Premises in comparable retail centers in the vicinity of the Premises for periods comparable to the Option Term. Following Tenant’s exercise of its option to extend the Term by the applicable Option Term, Landlord and Tenant shall meet and endeavor in good faith to agree upon the Fair Market Rent. If Landlord and Tenant fail to reach agreement by the date which is six (6) months prior to the commencement of the applicable Option Term, then, within twenty (20) days thereafter, each party, at its own cost and by giving notice to the other party, shall appoint a licensed commercial real estate agent with at least seven (7) years full-time experience as a real estate agent active in leasing of retail projects in the area of the Premises to appraise and set the Fair Market Rent for the Option Term. If a party does not appoint an agent within twenty (20) days after the other party has given notice of the name of its agent, the single agent appointed shall be the sole agent and shall set the Fair Market Rent for the Option Term. If there are two (2) agents appointed by the parties as stated above, the agents shall meet within ten (10) days after the second agent has been appointed and attempt to set Fair Market Rent for the Option Term. If the two (2) agents are unable to agree on such Fair Market Rent within thirty (30) days after the second agent has been appointed, they shall, within twenty (20) days after the last day the two (2) agents were to have set such Fair Market Rent, attempt to select a third agent who shall be a licensed commercial real estate agent meeting the qualifications stated above. If the two (2) agents are unable to agree on the third agent within such twenty (20) day period, either Landlord or Tenant may request the Chairman of the Program Committee for the Northern California Chapter of the International Council of Shopping Centers (ICSC) to select a third agent meeting the qualifications stated in this subsection. Each of the parties shall bear one-half (1/2) of the cost of appointing the third agent and of paying the third agent’s fee. No agent shall be employed by, or otherwise be engaged in business with or affiliated with, Landlord or Tenant, except as an independent contractor.

      (b) Within thirty (30) days after the selection of the third agent, a majority of the agents shall set the Fair Market Rent for the Option Term. If a majority of the agents are unable to set such Fair Market Rent within the stipulated period of time, each agent shall make a separate determination of such Fair Market Rent and the three (3) appraisals shall be added together and the total shall be divided by three (3). The resulting quotient shall be the Fair Market Rent for the Premises for the Option Term. However, if the low appraisal is more than ten percent (10%) lower than the middle appraisal, the low appraisal shall be disregarded, and if the high appraisal is more than ten percent (10%) higher than the middle appraisal, the high appraisal shall be disregarded. If only one (1) appraisal is disregarded, the remaining two (2) appraisals shall be added together and their total divided by two (2), and the resulting quotient shall be Fair Market Rent for the Option Term. If both the lowest appraisal and the highest appraisal are disregarded as stated in this subsection, the middle appraisal shall be the Fair Market Rent for the Option Term.

      (c) Each agent shall hear, receive and consider such information as Landlord and Tenant each care to present regarding the determination of Fair Market Rent for the Option Term and each agent shall have access to the information used by each other agent. Upon determination of the Fair Market Rent for the Option Term, the agents shall immediately notify the parties hereto in writing of such determination by certified mail, return receipt requested.

ARTICLE 4 — POSSESSION

4.1 Substantial Completion. The term "Substantial Completion of the Premises", as used in this Lease, shall mean the date Landlord notifies Tenant in writing that “Landlord’s Work” (as specified in Exhibit C) is substantially complete with the exception of customary punch-list items as do not materially interfere with Tenant’s performance of the Tenant’s Work (which punch-list items shall be promptly corrected by Landlord).

4.2 Delivery of Possession. Tenant shall accept possession of the Premises from Landlord upon Substantial Completion of the Premises. Tenant shall deliver each of the following to Landlord prior to Substantial Completion of the Premises: (a) executed copies of policies of insurance or certificates thereof (as required under Article 14); (b) “Final Plans” (as defined in Exhibit C); and (c) a copy of Tenant’s building permit, if issued by such date.

4.3 Termination of Existing Lease. The parties hereby acknowledge that Tenant is presently in occupancy of an existing building at 228 Reservation Road in a separate portion of the Project (the “Existing Premises”) pursuant to that certain Lease (the “Existing Lease”) dated November 1, 1993 by and between The Six-Pac, A Joint Venture, as landlord, and Cypress Coast Bank, as tenant. Tenant may continue in occupancy under the Existing Lease so long as the same is permitted by applicable governmental authorities during the performance of Landlord’s Work. In addition, the parties hereby agree that, in consideration of Tenant’s agreement to perform its obligations under this Lease (including, without limitation, Tenant’s obligations for performance of Tenant’s Work pursuant to Exhibit C attached hereto). Tenant shall be entitled to a conditional abatement of its obligation for payment of base rent under the Existing Lease (provided that nothing contained herein shall entitle Tenant to any abatement of Tenant’s obligations under the Existing Lease for payment of additional rent, amounts with respect to taxes, insurance, utilities, maintenance, other reimbursable costs or other charges, as applicable under the Existing Lease), accruing with respect to the period following Landlord’s acquisition of title to the Project until the Commencement Date not to exceed a maximum aggregate abatement of Fifty Thousand Dollars ($50,000.00) (after which maximum aggregate abatement, if applicable, Tenant shall resume payment of base rent under the Existing Lease); provided that if this Lease is hereafter terminated due to Tenant’s default hereunder, then, in addition to all other rights and remedies of Landlord as set forth in this Lease, the entire amount of rent so conditionally abated shall be immediately due and payable from Tenant to Landlord. Tenant shall have sixty (60) days following the Substantial Completion of the Premises within which to complete its relocation from the Existing Premises to the Premises (including, without limitation, the removal of all items of Tenant’s personal property from the Existing Premises) and within which to vacate and surrender the Existing Premises. Upon the expiration of such sixty (60) day period, the Existing Lease shall terminate and neither party thereto shall have any further liability or obligation thereunder (except for liabilities and obligations accruing under the Existing Lease through to such termination date and liabilities and obligations under the Existing Lease which survive the early termination of such Existing Lease). If Tenant fails to so vacate and surrender the Existing Premises on or before the expiration of such sixty (60) day period, Tenant’s continued occupancy of such Existing Premises shall constitute a material default by Tenant under the Existing Lease and this Lease which shall not be subject to any period for cure. Further, Tenant agrees, as a material consideration to Landlord’s agreement to enter into this Lease, that notwithstanding anything to the contrary contained in the Existing Lease, that any such occupancy of the Existing Premises following the expiration of such sixty (60) day period shall constitute a holding over creating a tenancy at sufferance, and during the period of such holding over, Tenant shall pay as base rent to Landlord under the Existing Lease an amount equal to five hundred percent (500%)‘of the base rent specified in the Existing Lease as being in effect under the Existing Lease prior to the early termination of the Existing Lease (meaning such base rent as would have been due under the Existing Lease prior to such early termination but for the conditional abatement provided for herein).

ARTICLE 5 — TENANT’S CONSTRUCTION

Tenant shall commence construction of Tenant’s Work upon Substantial Completion of the Premises and delivery of possession of the Premises to Tenant, and shall diligently prosecute same to completion. Tenant shall deliver to Landlord a copy of the certificate of occupancy for the Premises issued by the appropriate governmental agency upon completion of Tenant’s Work.

ARTICLE 6 — RENTAL

6.1 Minimum Annual Rent. Tenant shall pay as “Minimum Annual Rent” for the Premises the sum of Twelve Dollars ($12.00) per square foot of Floor Area within the Premises, provided that the Minimum Annual Rent shall be adjusted on each yearly anniversary of the Commencement Date occurring during the Term, as the Term may be extended by the Option Term(s) pursuant hereto, if applicable (each such yearly anniversary date is referred to herein as an “Adjustment Date”’), to equal the product obtained by multiplying the Minimum Annual Rent in effect immediately prior to the applicable Adjustment Date by a fraction, the numerator of which is the “Index” (as hereinafter defined) for the calendar month which is three (3) full calendar months prior to such Adjustment Date and the denominator of which is the Index which is fifteen (15) full calendar months prior to such Adjustment Date; provided, however, that in no event shall any such adjustment result in a decrease in Minimum Annual Rent or in an increase of Minimum Annual Rent in excess of three percent (3 %) per annum on a cumulative and compounding basis. For purposes of this Lease, the “Index” shall mean the Consumer Price Index published by the United States Department of Labor, Bureau of Labor Statistics (the “Bureau”) “All Items” for All Urban Consumers in the San Francisco-Oakland-San Jose metropolitan area, (1982-84=100). Should the Bureau discontinue the publication of the Index, publish the same less frequently or alter the same in some other manner, the most nearly comparable index or procedure as determined by Landlord shall be substituted therefor. The Minimum Annual Rent as adjusted shall be the Minimum Annual Rent until the next Adjustment Date. Minimum Annual Rent shall be payable in equal monthly installments, in advance, on or before the first (1st) day of each month, without prior demand and without offset or deduction (except as expressly and specifically provided in this Lease), commencing on the Commencement Date. Should the Commencement Date be a day other than the first (1st) day of a calendar month, then the monthly installment of Minimum Annual Rent for the first partial month shall be equal to one-thirtieth (l/30th) of the monthly installment of Minimum Annual Rent for each day from the Commencement Date to the end of the partial month.

6.2 Additional Rent. Tenant shall pay, as "Additional Rent", all sums required to be paid by Tenant to Landlord pursuant to this Lease in addition to Minimum Annual Rent. Landlord shall have the same rights and remedies for the nonpayment of Additional Rent as it has with respect to the nonpayment of Minimum Annual Rent. It is the intention of Landlord and Tenant that the Minimum Annual Rent and Additional Rent to be paid hereunder shall be paid to Landlord absolutely net without deduction of any amount of any nature whatsoever, except as otherwise expressly and specifically provided in this Lease.

6.3 Place of Payment. Tenant shall pay Minimum Annual Rent and Additional Rent to Landlord at the address specified in Section 1.12. or to such other address and/or person as Landlord may from time to time designate in writing to Tenant.

6.4Late Payments. Tenant acknowledges that late payment by Tenant to Landlord of Minimum Annual Rent or Additional Rent will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which are impracticable or extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Landlord by the terms of any mortgage or trust deed covering the Premises or any part of the Project. Accordingly, if any installment of Minimum Annual Rent or Additional Rent is not received by Landlord from Tenant within five (5) days after the date when due, Tenant shall immediately pay to Landlord, as Additional Rent, a late charge equal to five percent (5%) of the delinquent amount. Landlord and Tenant agree that this late charge represents a reasonable estimate of the costs and expenses Landlord will incur and is fair compensation to Landlord for its loss suffered by reason of late payment by Tenant. In addition, if Tenant fails to pay when the same is due any Minimum Annual Rent or Additional Rent, the unpaid amounts shall bear interest at the rate per annum (the “Interest Rate”) equal to the greater of (a) ten percent (10%) or (b) the “prime rate” charged by Wells Fargo Bank N.A. plus two (2) percentage points, but in no event to exceed the maximum lawful rate, from the date such amount was originally due to and including the date of payment. Payment of such interest shall not excuse or cure any default by Tenant. Acceptance of any late charges or interest by Landlord shall in no event constitute a waiver of Tenant’s default with respect to such overdue amount, nor prevent Landlord from exercising any of its other rights and remedies under this Lease.

ARTICLE 7 - INTENTIONALLY DELETED

ARTICLE 8 - TAXES

8.1 Real Property Taxes.

      (a)  As used in this Lease, the term “Taxes” shall include any form of tax or assessment, license fee, license tax, possessory interest tax, tax or excise on rental, or any other levy, charge, expense or imposition imposed by any Federal, state, county or city authority having jurisdiction, or any political subdivision thereof, or any school, agricultural, lighting, drainage or other improvement or special assessment district on any interest of Landlord or Tenant (including any legal or equitable interest of Landlord or its mortgagee, if any) in the Premises, the remainder of the Project or the underlying realty. The term “Taxes” shall not include Landlord’s general income taxes, inheritance, estate or gift taxes.

(b)  From and after the Rent Commencement Date, Tenant shall pay to Landlord, as Additional Rent, a share of the Taxes pursuant to Section 8.1(c) below. Taxes for any partial year shall be prorated. Landlord, at its option, may collect Tenant’s payment of its share of Taxes after the actual amount of Taxes are ascertained or in advance, monthly or quarterly, based upon estimated Taxes. If Landlord elects to collect Tenant’s share of Taxes based upon estimates, Tenant shall pay to Landlord from and after the Rent Commencement Date, and thereafter on the first (1st) day of each month or quarter during the Term (as determined by Landlord), an amount estimated by Landlord to be the monthly or quarterly Taxes payable by Tenant. Landlord may periodically adjust the estimated amount. If Landlord collects Taxes based upon estimated amounts, then following the end of each calendar year or, at Landlord’s option, its fiscal year, Landlord shall famish Tenant with a statement covering the year just expired showing the total Taxes for the Project for such year, the total Taxes payable by Tenant for such year, and the payments previously made by Tenant with respect to such year, as set forth above. If the actual Taxes payable for such year exceed Tenant’s prior payments, Tenant shall pay to Landlord the deficiency within ten (10) days after its receipt of the statement. If Tenant’s payments exceed the actual Taxes payable for that year, Tenant shall be entitled to offset the excess against the next payment(s) of Taxes and/or other Additional Rent that become due to Landlord; provided that Landlord shall refund to Tenant the amount of any overpayment for the last year of the Term. Landlord shall furnish to Tenant copies of the bills for the Taxes for the Project from which the Taxes payable by Tenant hereunder were computed upon Tenant’s written request.

      (c)  Tenant’s share of the Taxes shall be determined by multiplying all of the Taxes on the portion of the Project which is the tax parcel including the Premises, by a fraction, the numerator of which shall be the Floor Area of the Premises and the denominator of which shall be the Floor Area existing and for which a certificate of occupancy has been issued in such portion of the Project as of the commencement of the applicable calendar or fiscal year; provided, however, that for purposes of determining Tenant’s share of Taxes allocable to land within the tax parcel including the Premises (as opposed to Taxes on building improvements), it shall be deemed that Landlord has completed construction of both the Premises containing 3,000 square feet of Floor Area and the adjacent building shown on Exhibit A as containing 13,905 square feet of Floor Area.

8.2 Other Property Taxes. Tenant shall pay, prior to delinquency, all taxes, assessments, license fees and public charges levied, assessed or imposed upon its business operation, trade fixtures, merchandise and other personal property in, on or upon the Premises. If any such items of property are assessed with property of Landlord, then the assessment shall be equitably divided between Landlord and Tenant.

8.3Contesting Taxes. If Landlord contests any Taxes levied or assessed during the Term, Tenant shall not be required to pay any portion of the costs or expenses incurred by Landlord in connection with such contest; however, if Landlord is successful in such contest, Landlord may deduct from the portion of any refund received which is payable to Tenant, Tenant’s proportionate share of all such costs and expenses determined pursuant to the formula set forth in Section 8.1(c) for the allocation of Taxes. Landlord shall pay to Tenant that portion of the total refund remaining, if any, which is attributable to Tenant’s proportionate share of Taxes prorated in the same manner as set forth in Section 8.1(c).

ARTICLE 9 - UTILITIES

Tenant agrees to pay directly to the appropriate utility company all charges for utility services supplied to Tenant for which there is a separate meter and/or submeter to the Premises. Tenant agrees to pay to Landlord its share of all charges for utility services supplied to the Premises for which there is no separate meter or submeter upon billing by Landlord of Tenant’s share, as reasonably determined by Landlord based upon estimated actual usage.

ARTICLE 10 - TENANT'S CONDUCT OF BUSINESS

10.1 Permitted Trade Name and Use. Tenant shall use the Premises under the trade name specified in Section 1.4 or any other trade name as Tenant desires. Tenant shall use the Premises solely for the use specified in Section 1.9 and for no other use or purpose.

10.2 Covenant to Open and Operate. Tenant covenants to open for business to the public with the Premises fully fixturized promptly following (but in any event within sixty (60) days following) the Commencement Date and thereafter to operate continuously and uninterruptedly in the Premises throughout the Term the business described in Section 1.9. subject to temporary closures for casualty, condemnation, remodel, or force majeure (as defined in Section 22.7) which prevents Tenant from conducting its normal business operations in the Premises.

10.3Hours of Business. From and after the Rent Commencement Date, Tenant shall keep the entire Premises continuously open for business during those days and hours as are customary and usual for the type of business operated by Tenant. Tenant shall have its window displays, exterior signs and exterior advertising displays adequately illuminated continuously during those hours and days that the Premises are required to be open for business to the public.

10.4 Hours For Deliveries. Tenant shall use its reasonable efforts to require all deliveries, (exclusive of United Parcel Service and U.S. Postal Service), loading, unloading and services to the Premises to be completed between 7:00 a.m. and 10:00 a.m. each day. All deliveries, loading, unloading and services to the Premises shall be accomplished within the service areas of the Project.

10.5 Tenant's Signs.

      (a) Tenant shall be permitted to use the standard interior window signage used from time to time in its other stores in California without the need for Landlord’s prior approval so long as such signage is professionally prepared and maintained in a neat manner, complies with all applicable laws, ordinances and regulations, and does not, at any time, occupy more than twenty-five percent (25%) of the storefront windows or doors.

      (b) Tenant shall not affix upon the exterior of the Premises any sign, advertising placard, name, insignia, trademark, descriptive material or other like item (collectively, the “Exterior Signs”), except for one Exterior Sign over the entrance to the Premises subject to (i) compliance with all governmental requirements, and (ii) Landlord’s prior written approval of such sign, which approval shall not be unreasonably withheld. All of the Exterior Signs shall be erected by Tenant at its sole cost and expense, and Tenant shall maintain all of its Exterior Signs in good condition and repair during the Term.

10.6 Project Name. Tenant shall use the name of the Project in its advertising as the address reference for the Premises. Tenant shall not use the name of the Project for any other purpose.

10.7 Exclusive Use Right. So long as Tenant is continuously operating from the Premises for the permitted use specified in Section 1.9 (subject only to closures due to force majeure occurrences beyond Tenant’s reasonable control and/or repairs or restoration work being performed following casualty or condemnation), Landlord shall not lease any portion of the Project for use for the primary purpose of the operation of a retail branch bank.

ARTICLE 11 - MAINTENANCE, REPAIRS AND ALTERATIONS

11.1 Landlord's Maintenance Obligations. Landlord shall maintain in good condition and repair the structural components and foundations, roof structure (as opposed to the roof membrane, which shall be maintained and repaired by Tenant pursuant to Section 11.3 below) and exterior surfaces of the exterior walls of the building of which the Premises is a part (exclusive of doors, door frames, door checks, windows, window frames and, unless Landlord elects to include cleaning of the storefronts and storefront awnings of tenants of the Project as pan of Common Area maintenance pursuant to Section 12.2 below, storefronts and storefront awnings); provided, however, if any repairs or replacements are necessitated by the negligence or willful acts of Tenant or anyone claiming under Tenant or by reason of Tenant’s failure to observe or perform any conditions or agreements contained in this Lease, or caused by alterations, additions or improvements made by Tenant or anyone claiming under Tenant, the cost of same shall be the sole responsibility of Tenant. It is acknowledged by Tenant that the cost of some of Landlord’s maintenance obligations referenced in the preceding sentence shall be prorated and paid as Common Area Costs. Notwithstanding anything to the contrary contained in this Lease, Landlord shall not be liable for failure to make repairs required to be made by Landlord under the provisions of this Lease unless Tenant has previously notified Landlord in writing of the need for such repairs and Landlord has failed to commence and complete the repairs within a reasonable period of time following receipt of Tenant’s written notification.

11.2 Landlord's Right of Entry. Landlord, its agents, contractors, servants and employees may enter the Premises during normal business hours following reasonable notice to Tenant (except in a case of emergency): (a) to examine the Premises; (b) to show the Premises to existing or prospective lenders, purchasers and/or, during the final year of the Term, tenants; (c) to perform any obligation or exercise any right or remedy of Landlord under this Lease; (d) to perform work necessary to comply with laws, ordinances, rules or regulations of any public authority or of any insurance underwriter; and (e) to perform work that Landlord deems necessary to prevent waste or deterioration in connection with the Premises should Tenant fail to commence such work within ten (10) days after written notice from Landlord of the need for such work (or if more than ten (10) days shall be required because of the nature of the work, if Tenant shall fail to diligently proceed to commence to perform such work after written notice). If Landlord makes any repairs which Tenant is obligated to make pursuant to the terms of this Lease, Tenant shall pay the cost of such repairs to Landlord, as Additional Rent, promptly upon receipt of a bill from Landlord for same.

11.3 Tenant's Maintenance Obligations. Except for the portions and components of the Premises to be maintained by Landlord as set forth in Section 11.1. Tenant, at its expense, shall keep the Premises and all utility facilities and systems exclusively serving the Premises (“Tenant Utility Facilities”) in first-class order, condition and repair and shall make replacements necessary to keep the Premises and Tenant Utility Facilities in such condition. All replacements shall be of a quality equal to or exceeding that of the original. Tenant shall contract with a service company approved by Landlord for the regular (but not less frequently than quarterly) maintenance, repair and/or replacement (when necessary) of the heating, ventilating and air conditioning equipment serving the Premises (the “HVAC System”) and shall provide Landlord with a copy of any service contract within ten (10) days following its execution, provided that if Tenant fails to do so within ten (10) days following written notice thereof from Landlord, Landlord may contract with a service company of its own choosing (or provide such service itself) for the maintenance, repair and/or replacement of the HVAC System and bill Tenant periodically for the cost of same or based upon estimates in a manner similar to the way in which Common Area Costs are estimated and billed. Landlord shall be entitled to obtain an administration fee of fifteen percent (15%) on all of the HVAC System expense billed to Tenant.

11.4 Alterations.

      (a) After initially opening the Premises for business, Tenant shall not make or cause to be made to the Premises or the Tenant Utility Facilities any addition, renovation, alteration, reconstruction or change (collectively, “Alterations”) (i) involving structural changes or additions, (ii) affecting the exterior storefront, fire sprinkler systems, exterior walls, floor slab, or roof of the Premises, (iii) requiring or resulting in any penetration of the roof, demising walls or floor slab of the Premises, without first obtaining the written consent of Landlord, which consent shall not be unreasonably withheld, or (iv) costing in excess of Five Thousand Dollars ($5,000.00) and not described in clauses (i), (ii) or (iii) above.

      (b) All Alterations shall be made under the supervision of a competent licensed architect or competent licensed structural engineer satisfactory to Landlord and shall be made in accordance with plans and specifications with respect thereto, approved in writing by Landlord before the commencement of work.

      (c) Tenant shall provide Landlord with not less than fifteen (15) days prior written notice of the commencement of any Alterations in the Premises and Landlord shall have the right to enter upon the Premises to post customary notices of non-responsibility with respect thereto. Tenant, at its cost, shall obtain all required governmental permits and approvals for all Alterations and all such Alterations shall be performed strictly in accordance with all applicable laws, ordinances, rules or regulations of any public authority, in a good and workmanlike manner and diligently prosecuted to completion to the end that the Premises shall at all times be a complete unit except during the period of work. Construction work in connection with any Alterations shall be performed in such manner as not to obstruct the access to the Premises or otherwise interfere with the operation of business by any other occupant of the Project. Such Alterations shall be considered as improvements and shall become an integral part of the Premises upon installation thereof and shall not be removed by Tenant; provided, however, if Landlord elects, Landlord shall have the right to cause Tenant to remove any or all such Alterations upon the expiration of the Lease Term or earlier termination of this Lease pursuant to Section 22.8 below, except, however, that Tenant shall not be required to remove any vault installed in the Premises by Tenant. All improvements to the Premises by Tenant including, but not limited to, light fixtures, floor coverings and partitions and other items comprising Tenant’s Work pursuant to Exhibit C, but excluding trade fixtures and signs, shall be deemed to be the property of Landlord upon installation thereof. Within thirty (30) days after the completion of any Alterations, Tenant shall deliver to Landlord a set of “as built” plans depicting the Alterations as actually constructed or installed. If Tenant shall make any permitted Alterations, Tenant shall carry “Builder’s All Risk” insurance in an amount determined by Landlord covering the construction of such Alterations and such other insurance as Landlord may reasonably require. All of such Alterations shall be insured by Tenant pursuant to Section 14.1(d) immediately upon completion thereof.

      (d) Tenant shall pay all costs for work performed by or on account of it and shall keep the Premises and the Project free and clear of mechanics’ liens or any other liens. Tenant shall give Landlord immediate notice of any lien filed against the Premises or the Project as a result of any work of improvement performed by or on behalf of Tenant. Tenant shall immediately cause any lien to be discharged or removed of record by either paying the amount thereof or recording a statutory lien release bond in an amount equal to one hundred fifty percent (150%) of the amount of said lien, or such other amount as may be adequate to cause the lien to be released as an encumbrance against the Premises and the Project. If Tenant fails to do so, Landlord shall have the right, but not the obligation, in addition to all other rights and remedies available to Landlord under this Lease, and after ten (10) days prior written notice to Tenant, to either pay and discharge such lien, without regard to the validity thereof, or procure and cause to be recorded a statutory lien release bond and to (i) collect from Tenant as Additional Rent; or (ii) deduct from any tenant improvement allowance or any other amount payable by Landlord to Tenant under this Lease (A) all costs incurred by Landlord in paying and discharging such lien, or in procuring such bond, and (B) all expenses incurred by Landlord in connection with such lien, including attorneys’ fees and costs, recording fees and administrative costs and expenses.

ARTICLE 12 - COMMON AREA

12.1 Definition of Common Area. The term “Common Area”, as used in this Lease, shall mean all areas within the exterior boundaries of the Project, now or later made available for the general use of Landlord and other persons entitled to occupy Floor Area in the Project.

12.2 Use of Common Area. The use and occupancy by Tenant of the Premises shall include the non exclusive use of the Common Area (except those portions of the Common Area on which have been constructed or placed permanent or temporary kiosks, displays, carts and stands and except areas used in the maintenance or operation of the Project) in common with Landlord and the other tenants of the Project and their customers and invitees.

12.3 Control of and Changes to Common Area. Subject to Section 22.10. Landlord shall have the sole and exclusive control of the Common Area, and the right to make changes to the Common Area. Landlord's rights shall include, but not be limited to, the right to (a) restrain the use of the Common Area by unauthorized persons; (b) utilize from time to time any portion of the Common Area for promotional, entertainment and related matters; (c) place permanent or temporary kiosks, displays, carts and stands in the Common Area and to lease same to tenants; provided, however, no such items will be placed in a manner which will materially interfere with Tenant’s ability to operate its business from the Premises, materially impair ingress, egress or other access to or from the Premises, or materially impair the visibility of the Premises; (d) temporarily close any portion of the Common Area for repairs, improvements or Alterations, to discourage noncustomer use, to prevent dedication or an easement by prescription or for any other reason deemed sufficient in Landlord’s reasonable judgment; and (e) renovate, upgrade or change the shape and size of the Common Area or add, eliminate or change the location of improvements to the Common Area including, without limitation, buildings, parking areas, roadways and curb cuts, and to construct buildings on the Common Area.

12.4 Common Area Costs. The term “Common Area Costs”, as used in this Lease, shall mean all costs and expenses incurred by Landlord in (a) operating, managing, policing, insuring, repairing and maintaining the Common Area (including, without limitation, any onsite management and/or security offices), (b) maintaining, repairing and replacing the exterior surface of exterior walls (and storefronts and storefront awnings if Landlord has elected to include the cleaning of same as part of Common Area maintenance) and maintaining, and (c) operating, insuring, repairing, replacing and maintaining all utility facilities and systems including, without limitation, sanitary sewer lines and systems, fire protection lines and systems, security lines and systems and storm drainage lines and systems not exclusively serving the premises of any tenant or store (“Common Utility Facilities”), mall furniture and equipment, seasonal and holiday decorations, Common Area lighting fixtures, Project sign monuments or pylons (but not the tenant identification signs thereon) and directional signage. Common Area Costs shall include, without limitation, the following: expenses for maintenance, landscaping, repaving, resurfacing, repairs, replacements, painting, lighting, cleaning, trash removal, security, fire protection and similar items; depreciation or rental on equipment; charges, surcharges and other levies related to the requirements of any federal, state or local governmental agency; expenses related to the Common Utility Facilities; comprehensive or commercial general liability insurance on the Common Area; standard “all risks” fire and extended coverage insurance with, at Landlord’s option, an earthquake damage endorsement covering the Common Areas; costs of management of the Project (whether such management services are provided by Landlord or a third party contractor); and a sum (the “Supervision Fee”) payable to Landlord for administration and overhead in an amount equal to ten percent (10%) of the Common Area Costs exclusive of insurance premiums paid in connection with the Common Areas.

12.5 Proration of Common Area Costs. The Common Area Costs shall be prorated in the following manner:

      (a) From and after the Rent Commencement Date, Tenant shall pay to Landlord, on the first (1st) day of each calendar month, an amount estimated by Landlord to be the monthly amount of Tenant’s share of the Common Area Costs. The estimated monthly charge may be adjusted periodically by Landlord on the basis of Landlord’s reasonably anticipated costs. (b) Following the end of each calendar year or, at Landlord’s option, its fiscal year, Landlord shall furnish to Tenant a statement covering the calendar or fiscal year (as the case may be) just expired, showing by cost category the actual Common Area Costs for that year, the total Floor Area of the Project, the amount of Tenant’s share of the Common Area Costs for that year, and the monthly payments made by Tenant during that year for the Common Area Costs. If Tenant’s share of the Common Area Costs exceeds Tenant’s prior payments, Tenant shall pay to Landlord the deficiency within ten (10) days after receipt of such annual statement. If Tenant’s payments for the calendar year exceed Tenant’s actual share of the Common Area Costs, and provided Tenant is not in arrears as to the payment of any Minimum Annual Rent or Additional Rent, Tenant may offset the excess against payments of Common Area Costs next due Landlord. An appropriate proration of Tenant’s share of the Common Area Costs as of the Rent Commencement Date and the expiration date of the Term shall be made.

      (c) Tenant’s share of the Common Area Costs shall be determined by multiplying the Common Area Costs by a fraction, the numerator of which is the number of square feet of Floor Area in the Premises and the denominator of which is the number of square feet of Floor Area in the Project existing and for which a certificate of occupancy has been issued as of the commencement of the applicable calendar or fiscal year (as the case may be); provided, however, that for purposes of determining Tenant’s share of Common Area Costs, it shall be deemed that Landlord has completed construction of both the Premises containing 3,000 square feet of Floor Area and the adjacent building shown on Exhibit A as containing 13,905 square feet of Floor Area. Notwithstanding the foregoing, if any one or more owner(s) or tenant(s) of a portion of the Project separately maintains its own Common Area, Common Area Costs shall not include costs relating to the Common Area so maintained by such owner or tenant, and the Floor Area on such owner’s or tenant’s parcel shall not be included in the denominator for purposes of calculation of Tenant’s share of Common Area Costs.

ARTICLE 13 — ASSIGNMENT AND SUBLETTING

13.1 Landlord’s Consent Required. Tenant shall not assign, sublet, enter into franchise, license or concession agreements, change ownership or voting control, mortgage, encumber, pledge hypothecate or otherwise transfer (including any transfer by operation of law) all or any part of this Lease or Tenant’s interest in the Premises (collectively, a “Transfer”) without first procuring the written consent of Landlord, which consent shall not be unreasonably withheld, subject to the terms, covenants and conditions contained in this Lease.

13.2Procedures. Should Tenant desire to enter into a Transfer, other than any Transfer which is expressly stated in this Article 13 not to require the prior written consent of Landlord, Tenant shall request, in writing, Landlord’s consent to the proposed Transfer at least sixty (60) days before the intended effective date of the proposed Transfer, which request shall include the following: (a) full particulars of the proposed Transfer including its nature, effective date, terms and conditions; (b) if the Transfer contemplates a change in the trade name of the Premises, the new proposed trade name of the proposed transferee; (c) a description of the identity, net worth and previous business experience of the proposed transferee;’ (d) a complete business plan prepared by the proposed transferee; and (e) any further information relevant to the proposed Transfer which Landlord shall reasonably request. Within thirty (30) days after receipt of Tenant’s request for consent to the proposed Transfer together with all of the above-required information, Landlord shall respond and shall have the right either to: (i) consent to the proposed Transfer; (ii) refuse to consent to the proposed Transfer; or (iii) terminate this Lease, such termination to be effective thirty (30) days after Tenant’s receipt of Landlord’s notice electing to so terminate; provided, however, that Tenant shall have the right to nullify such an election to terminate by agreeing (in written notice delivered to Landlord within fifteen (15) days following Tenant’s receipt of such notice from Landlord electing to terminate), to withdraw Tenant’s request for consent to such Transfer, in which event this Lease shall continue in full force and effect as if Tenant had never made such request for consent. Landlord’s consent to a proposed Transfer shall only be given if and when Landlord has notified Tenant in writing that Landlord consents to such proposed Transfer. If Landlord shall exercise its termination right hereunder, Landlord shall have the right to enter into a lease or other occupancy agreement directly with the proposed transferee, and Tenant shall have no right to any of the rents or other consideration payable by such proposed transferee under such other lease or occupancy agreement. If Landlord refuses to consent to the Transfer, Landlord shall state in its response the reason(s) for such refusal in reasonable detail.

13.3 Standard for Consent.

      (a) Tenant agrees that Landlord may refuse its consent to the proposed Transfer on any reasonable grounds, and (by way of example and without limitation) Tenant agrees that it shall be reasonable for Landlord to withhold its consent if any of the following situations exist or may exist: (i) the proposed transferee proposes to change the use of the Premises from the permitted use pursuant to Section 10.1; (ii) the proposed transferee’s financial condition is inadequate to support all of the financial and other obligations of Tenant under this Lease; (iii) the business reputation or character of the proposed transferee is not reasonably acceptable to Landlord; (iv) the proposed transferee is not likely to conduct on the Premises a business of a quality substantially equal to that conducted by Tenant; or (v) the nature of the proposed transferee’s proposed or likely use of the Premises would impose an increased burden on the Common Area, or involve any unreasonable risk of the presence, use, release or discharge of Hazardous Materials, as defined in Section 22.3.

      (b) Any purported Transfer without Landlord’s prior written consent shall be void and of no force or effect and shall not confer any estate or benefit on anyone. A consent to one (1) Transfer by Landlord shall not be deemed to be a consent to any subsequent Transfer to any other party.

13.4 Permitted Transfer. Tenant shall have the right without Landlord’s consent, but upon fifteen (15) days prior written notice to Landlord, to enter into a Transfer to any subsidiary corporation of Tenant, Tenant’s parent corporation or to any corporation succeeding to substantially all of the assets Tenant as a result of a consolidation or merger, or to a corporation acquiring all or substantially all of the stock or assets of Tenant (“Permitted Transfer’”), provided that the transferee under such Permitted Transfer has a net worth equal to or greater than the net worth of Tenant as of the execution of this Lease or the time of such proposed Permitted Transfer (whichever is greater), and prior to the effective date of any such Transfer the assignee or sublessee executes and delivers to Landlord an instrument reasonably acceptable to Landlord containing an express assumption of all of Tenant’s obligations under this Lease.

13.5 No Release; Form. No Transfer or Permitted Transfer, whether with or without Landlord's consent, shall relieve Tenant from its covenants and obligations under this Lease. Any Transfer shall be evidenced by an instrument in form and content satisfactory to Landlord and executed by Tenant and the transferee, assignee, sublessee, licensee or concessionaire, as the case may be.

13.6 Transfer Rent. If Tenant shall enter into a Transfer hereunder (other than a Permitted Transfer, as to which the provisions of this Section 13.6 shall not be applicable), Tenant shall pay to Landlord fifty percent (50%) of any "transfer premium" (as hereinafter defined). In the event of a subletting, “transfer premium” shall mean all rent, additional rent or other consideration payable by such subtenant to Tenant or on behalf of Tenant in connection with the subletting in excess of the rent, additional rent and other sums payable by Tenant under this Lease during the term of the sublease on a per square foot basis if less than all of the Premises is subleased, less the costs actually incurred by Tenant to secure the sublease, including, without limitation, attorneys’ fees and brokerage commissions. In the event of a Transfer other than a subletting, “transfer premium” shall mean key money, bonus money or other consideration paid by the assignee to Tenant in connection with such Transfer, and any payment in excess of fair market value for services rendered by Tenant to transferee or for assets, fixtures, inventory, equipment, or furniture transferred by Tenant to transferee in connection with such Transfer, less the costs actually incurred by Tenant to secure the Transfer, including, without limitation, attorneys’ fees and brokerage commissions. If part of the transfer premium shall be payable by the transferee other than in cash, then Landlord’s share of such non-cash consideration shall be in such form as is reasonably satisfactory to Landlord.

ARTICLE 14 — INSURANCE

14.1 Tenant's Insurance. Tenant, at its sole cost and expense, commencing on the earlier of the date of Substantial Completion of the Premises, or the date Tenant is given earlier access to the Premises, and continuing during the Term, shall procure, pay for and keep in full force and effect the following types of insurance, in at least the amounts and in the forms specified below:

      (a) Comprehensive or commercial general liability insurance with coverage limits of not less than Three Million Dollars ($3,000,000.00) combined single limit for bodily injury, personal injury, death and property damage liability per occurrence or the limit carried by Tenant, whichever is greater, insuring against any and all liability of the insureds with respect to the Premises or arising out of the maintenance, use or occupancy of the Premises or related to the exercise of any rights of Tenant pursuant to this Lease, subject to increases in amount as Landlord may reasonably require from time to time to insure that the insurance maintained by Tenant hereunder is in amounts consistent with prudent practice in the shopping center industry. All such liability insurance shall specifically insure the performance by Tenant of the indemnity agreement as to liability for injury to or death of persons and injury or damage to property set forth in Section 14.5. Further, all such liability insurance shall include, but not be limited to, personal injury, blanket contractual, cross-liability and severability of interest clauses, broad form property damage, independent contractors, owned, nonowned and hired vehicles and, if alcoholic beverages are served, sold, consumed or obtained in the Premises, liquor law liability.

      (b) Worker’s compensation coverage in an amount adequate to comply with law, and employer’s liability coverage with a limit of not less than One Million Dollars ($1,000,000.00).

      (c) Plate glass insurance covering all plate glass on the Premises at full replacement value. Tenant shall have the option either to insure this risk or to self-insure.

      (d) Insurance covering all of Tenant’s Work, Tenant’s leasehold improvements and Alterations permitted under Article 11. in an amount not less than their full replacement value from time to time, including replacement cost endorsement, providing protection against any peril included within the classification Fire and Extended Coverage, sprinkler damage, vandalism, malicious mischief and such other additional perils as covered in an “all risks” standard insurance policy. Any policy proceeds shall be used for the repair or replacement of the property damaged or destroyed unless this Lease shall cease and terminate under the provisions of Article 15.

14.2 Policy Form. All policies of insurance required of Tenant herein shall be issued by insurance companies with a general policy holder’s rating of not less than “A” and a financial rating of not less than Class “X”, as rated in the most current available “Best’s Key Rating Guide”, and which are qualified to do business in the State of California. All such policies, except for the Workers’ Compensation coverage, shall name and shall be for the mutual and joint benefit and protection of Landlord, Tenant and Landlord’s agents and mortgagee(s) or beneficiary(ies) as additional insureds. The policies described in clauses (c) and (e) of Section 14.1 shall also name Landlord and Landlord’s mortgagee(s) or beneficiary(ies) as loss payees, and Landlord shall furnish to Tenant the names and addresses of such mortgagee(s) and beneficiary (ies). Executed copies of the policies of insurance or certificates thereof shall be delivered to Landlord prior to Tenant, its agents or employees entering the Premises for any purpose. Thereafter, executed copies of renewal policies or certificates thereof shall be delivered to Landlord within thirty (30) days prior to the expiration of the term of each policy. All policies of insurance delivered to Landlord must contain a provision that the company writing the policy will give to Landlord thirty (30) days’ prior written notice of any cancellation or lapse or the effective date of any reduction in the amounts of insurance. All policies required of Tenant herein shall be endorsed to read that such policies are primary policies and any insurance carried by Landlord or Landlord’s property manager shall be noncontributing with such policies. No policy required to be maintained by Tenant shall have a deductible greater than Twenty-Five Thousand Dollars ($25,000.00) unless approved in writing by Landlord.

14.3 Blanket Policies. Notwithstanding anything to the contrary contained in this Article 14. Tenant's obligation to carry insurance may be satisfied by coverage under a so-called blanket policy or policies of insurance; provided, however, that the coverage afforded Landlord will not be reduced or diminished and the requirements set forth in this Lease are otherwise satisfied by such blanket policy or policies.

14.4 Reimbursement of Insurance Premiums by Tenant. Landlord, at all times from and after Substantial Completion of the Premises, shall maintain in effect during the Term a policy or policies of insurance covering the building of which the Premises are a part (including boiler and machinery) in an amount not less than ninety percent (90%) of the full replacement cost (exclusive of the cost of excavations, foundations and footings) or the amount of insurance Landlord’s mortgagee(s) or beneficiary(ies) may require Landlord to maintain, whichever is the greater, providing protection against any peril generally included in the classification “Fire and Extended Coverage”, loss of rental income insurance and such other additional insurance as covered in an “all risks” standard insurance policy, with earthquake coverage insurance if deemed necessary by Landlord in Landlord’s sole judgment or if required by Landlord’s mortgagee(s) or beneficiary(ies) or by any federal, state, county, city or local authority. Landlord’s obligation to carry this insurance may be brought within the coverage of any so-called blanket policy or policies of insurance carried and maintained by Landlord. From and after the Rent Commencement Date, Tenant agrees to pay to Landlord, as Additional Rent, its share of the cost to Landlord of this insurance. The cost of such insurance for any partial year of the Term shall be prorated. Payment shall be made in the same manner set forth for payment of Taxes in Section 8.1(b). Tenant’s share of the premiums for this insurance shall be a fractional portion of the premiums, the numerator of which shall be the Floor Area of the Premises and the denominator of which shall be the Floor Area of all areas existing within the Project and for which a certificate of occupancy has been issued which are covered by this insurance as of the commencement of the applicable calendar or fiscal year. Tenant acknowledges that Landlord shall have the right to maintain commercially reasonable deductibles and/or self-insured retentions in connection with any insurance carried by Landlord pursuant to this Lease, as determined by Landlord in its reasonable business judgment. In the event of an insurance loss covered by the insurance carried by Landlord pursuant to this Lease, Tenant shall be required to pay its share of such deductibles or self-insured retentions, as determined pursuant to this Section 14.4 or Section 12.5. as applicable.

14.5 Indemnity. “Landlord” for the purposes of this Section 14.5 shall mean and include Landlord and Landlord’s directors, officers, shareholders, agents and employees. To the fullest extent permitted by law, Tenant covenants with Landlord that Landlord shall not be liable for any damage or liability of any kind or for any injury to or death of persons or damage to property of Tenant or any other person occurring from and after Substantial Completion of the Premises (or such earlier date if Tenant is given earlier access to the Premises) from any cause whatsoever related to the use, occupancy or enjoyment of the Premises by Tenant or any person thereon or holding under Tenant including, but not limited to, damages resulting from any labor dispute. Tenant shall pay for, defend (with an attorney approved by Landlord), indemnify, and save Landlord harmless against and from any real or alleged damage or injury and from all claims, judgments, liabilities, costs and expenses, including attorney’s fees and costs, arising out of or connected with Tenant’s use of the Premises and its facilities, or any repairs, Alterations or improvements (including original improvements and fixtures specified as Tenant’s Work) which Tenant may make or cause to be made upon the Premises, any breach of this Lease by Tenant and any loss or interruption of business or loss of rental income resulting from any of the foregoing; provided, however (and though Tenant shall in all cases accept any tender of defense of any action or proceeding in which Landlord is named or made a party and shall, notwithstanding any allegations of negligence or misconduct on the part of Landlord, defend Landlord as provided herein), Tenant shall not be liable for such damage or injury to the extent and in the proportion that the same is ultimately determined to be attributable to the negligence or misconduct of Landlord, and Landlord shall pay for, defend, indemnify, and save Tenant harmless against and from any and all claims, judgments, liabilities, costs and expenses, including attorneys fees and costs, resulting from any such damage or injury. The obligations to indemnify set forth in this Section 14.5 shall include all attorneys* fees, litigation costs, investigation costs and court costs and all other costs, expenses and liabilities incurred by the indemnified party from the first notice that any claim or demand is to be made or may be made. All indemnity obligations under this Section 14.5 shall survive the expiration or termination of this Lease.

14.6 Waiver of Subrogation. Landlord and Tenant each waive any rights each may have against the other on account of any loss or damage occasioned to Landlord or Tenant, as the case may be, their respective property, the Premises or its contents, or to other portions of the Project arising from any liability, loss, damage or injury caused by fire or other casualty for which property insurance is carried or required to be carried pursuant to this Lease. The insurance policies obtained by Landlord and Tenant pursuant to this Lease shall contain endorsements waiving any right of subrogation which the insurer may otherwise have against the noninsuring party. If Landlord has contracted with a third party for the management of the Project, the waiver of subrogation by Tenant herein shall also run in favor of such third party.

14.7 Failure by Tenant to Maintain Insurance. If Tenant refuses or neglects to secure and maintain insurance policies complying with the provisions of this Article 14. or to provide copies of policies or certificates or copies of renewal policies or certificates within the time provided in Section 14.2. Landlord may, after providing written notice to Tenant of its intention to do so, secure the appropriate insurance policies and Tenant shall pay, upon thirty (30) days following demand, the cost of same to Landlord, as Additional Rent.

ARTICLE 15 - DAMAGE

15.1 Insured Casualty. In the case of damage by fire or other perils covered by the insurance specified in Section 14.4. the following provisions shall apply:

      (a) Within a period of sixty (60) days after all applicable permits have been obtained (which permits Landlord shall promptly apply for and diligently seek), Landlord shall commence such repair, reconstruction and restoration of the Premises as Landlord, in its reasonable business judgment, deems necessary, and shall diligently prosecute the same to completion; provided, however, that Tenant, at its cost, shall repair and restore all items of Tenant’s Work and replace its stock in trade, trade fixtures, furniture, furnishings and equipment. Tenant shall commence this work promptly upon delivery of possession of the Premises to Tenant and shall diligently prosecute same to completion.

      (b) Notwithstanding the foregoing, if the Premises is totally destroyed, or if the Project is destroyed to an extent of at least fifty percent (50%) of the then full replacement cost thereof as of the date of destruction, then Landlord shall have the right to terminate this Lease by written notice delivered to Tenant within ninety (90) days following the date of such casualty. In addition, if the Premises or a portion of the Project Common Areas which materially and adversely affects operation of Tenant’s business from the Premises is damaged or destroyed during the Term and it is reasonably estimated that repair or restoration after such casualty which Landlord is obligated under the Lease to undertake will take more than two hundred seventy (270) days after the issuance of the building permit for such work to complete, then Tenant shall have the right to terminate this Lease by written notice delivered to Landlord within twenty (20) days following Tenant’s receipt of written notice of such estimate. Further, if during the final year of the Term of this Lease, the Premises is damaged or destroyed by casualty materially affecting the operation of Tenant’s business from the Premises and requiring more than ninety (90) days (or such lesser time as is then remaining in the Term) to repair, then either party shall have the right to terminate this Lease by delivery of written notice to the other party delivered within forty-five (45) days following such casualty. If this Lease is terminated pursuant hereto, then Landlord shall be entitled to retain any insurance proceeds payable by reason of such destruction, except that portion of any award attributable to Tenant’s trade fixtures and equipment.

15.2 Uninsured Casualty. If the Premises or the Project are damaged as a result of any casualty not covered by the insurance specified in Section 14.4. Landlord, within ninety (90) days following the date of such damage, shall commence repair, reconstruction or restoration of the Premises to the extent provided herein and shall diligently prosecute the same to completion, or Landlord may elect within said ninety (90) days not to so repair, reconstruct or restore the damaged property, in which event, at Landlord’s option, this Lease shall cease and terminate upon the expiration of such ninety (90) day period. In the event Landlord elects to restore the Premises, Tenant shall have the same repair, restoration and replacement obligations it has pursuant to Section 15.1(a).

15.3 Distribution of Proceeds. In the event of the termination of this Lease pursuant to this Article 15, all proceeds from the Fire and Extended Coverage insurance carried pursuant to Article 14 and all insurance covering Tenant’s Work and Tenant’s leasehold improvements, but excluding proceeds for trade fixtures, merchandise, signs and other personal property, shall be disbursed and paid to Landlord.

15.4 Abatement. In the event of repair, reconstruction and restoration, as provided in this Article 15.4 the Minimum Annual Rent and Additional Rent payable hereunder shall be thereafter abated proportionately with the degree to which Tenant’s use of the Premises is impaired during the remainder of the period of repair, reconstruction and restoration; provided, however, the amount of Minimum Annual Rent and Additional Rent abated pursuant to this Section 15.4 shall in no event exceed the amount of loss of rental income insurance proceeds actually received by Landlord. Tenant shall continue the operation of its business on the Premises during any such period to the extent reasonably practicable from the standpoint of prudent business management. Tenant shall not be entitled to any compensation or damages from Landlord for loss of use of the whole or any part of the Premises or the building of which the Premises are a part. Tenant’s personal property or any inconvenience or annoyance occasioned by such damage, repair, reconstruction or restoration.

15.5 Waiver of Termination. Tenant waives any statutory rights of termination which may arise by reason of any partial or total destruction of the Premises.

ARTICLE 16 — EMINENT DOMAIN

16.1 Taking. The term “Taking”, as used in this Article 16, shall mean an appropriation or taking under the power of eminent domain by any public or quasi-public authority or a voluntary sale or conveyance in lieu of condemnation but under threat of condemnation.

16.2 Total Taking. In the event of a Taking of the entire Premises, this Lease shall terminate and expire as of the date possession is delivered to the condemning authority and Landlord and Tenant shall each be released from any liability accruing pursuant to this Lease after the date of such termination, but Minimum Annual Rent and Additional Rent for the last month of Tenant’s occupancy shall be prorated and Landlord shall refund to Tenant any Minimum Annual Rent and Additional Rent paid in advance.

16.3 Partial Taking. If (a) there is a Taking of a material portion of the Premises and, regardless of the amount taken, the remainder of the Premises is not, in Tenant's sole but reasonable business judgment, suitable for the continued operation of Tenant's business, Tenant may terminate this Lease; or (b) there is a Taking of a portion of the Premises and, regardless of the amount taken, the remainder of the Premises is not one (1) undivided parcel of property, either Landlord or Tenant may terminate this Lease, upon giving notice in writing of such election to the other party within thirty (30) days after receipt by Tenant from Landlord of written notice that a portion of the Premises has been so appropriated or taken. In each case, the termination of this Lease shall be effective as of the date Tenant is required to vacate the Premises, or the portion of the Premises taken.

16.4 Award. The entire award or compensation in any such condemnation proceeding, whether for a total or partial Taking, or for diminution in the value of the leasehold or for the fee, shall belong to and be the property of Landlord; and, in any event, the holder of any mortgage or deed of trust encumbering the Project shall have a first priority to the extent of the unpaid balance of principal and interest on its loan. Without derogating the rights of Landlord or said lender under the preceding sentence, Tenant shall be entitled to recover from the condemning authority such compensation as may be separately awarded by the condemning authority to Tenant or recoverable from the condemning authority by Tenant in its own right for the taking of trade fixtures and equipment owned by Tenant and for the expense of removing and relocating its trade fixtures and equipment, but only in the event that the compensation awarded to Tenant shall be in addition to and shall not diminish the compensation awarded to Landlord as provided above.

16.5 Continuation of Lease. In the event of a Taking, if Landlord and Tenant elect not to terminate this Lease as provided above (or have no right to so terminate), Landlord agrees, at Landlord’s cost and expense as soon as reasonably possible after the Taking, to restore the Premises (to the extent of the condemnation proceeds) on the land remaining to a complete unit of like quality and character as existed prior to the Taking and, thereafter, Minimum Annual Rent and Additional Rent payable by Tenant hereunder shall be reduced on an equitable basis, taking into account the relative value of the portion taken as compared to the portion remaining, and Landlord shall be entitled to receive the total award or compensation in such proceedings.

ARTICLE 17 — DEFAULTS BY TENANT

17.1 Events of Default. Should Tenant at any time be in default with respect to any payment of Minimum Annual Rent, Additional Rent or any other charge payable by Tenant pursuant to this Lease for a period of ten (10) days after written notice from Landlord to Tenant (provided, however, any notice shall be in lieu of, and not in addition to, any notice required under Section 1161 of the Code of Civil Procedure of California or any similar, superseding statute), or should Tenant be in default in the prompt and full performance of any other of its promises, covenants or agreements herein contained for more than thirty (30) days (provided, however, if the default cannot be rectified or cured within such thirty (30) day period, the default shall be deemed to be rectified or cured if Tenant, within such thirty (30) day period, shall have commenced to rectify or cure the default and shall thereafter diligently and continuously prosecute same to completion) after written notice thereof from Landlord to Tenant specifying the particulars of the default (provided, however, any notice shall be in lieu of, and not in addition to, any notice required under Section 1161 of the Code of Civil Procedure of California or any similar, superseding statute), then Landlord may treat the occurrence of any one (1) or more of the foregoing events as a breach of this Lease and, in addition to any or all other rights or remedies of Landlord by law provided, Landlord shall have the right, at Landlord’s option, without further notice or demand of any kind to Tenant or any other person, (a) to declare the Term ended and to re-enter and take possession of the Premises and remove all persons therefrom, or (b) without declaring this Lease terminated and without terminating Tenant’s right to possession, to re-enter the Premises and occupy the whole or any part for and on account of Tenant and to collect any unpaid rentals and other charges which have become payable or which may thereafter become payable, or (c) even though it may have re-entered the Premises as provided in clause (b) above, to thereafter elect to terminate this Lease and all of the rights of Tenant in or to the Premises. In any case in which Landlord shall re-enter and occupy the whole or any part of the Premises, by unlawful detainer proceedings or otherwise, Landlord, at its option, may repair, alter, subdivide or change the character of the Premises from time to time in such manner as Landlord deems best, may relet the Premises or any part thereof and receive the rents therefor, and none of such actions shall constitute a termination of this Lease, a release of Tenant from any liability hereunder, or result in the release or exoneration of any Guarantor, if any. Landlord shall not be deemed to have terminated this Lease or the liability of Tenant to pay any Minimum Annual Rent, Additional Rent or other charges later accruing by any re-entry of the Premises pursuant to Section 17.1(b) above, or by any action in unlawful detainer or otherwise to obtain possession of the Premises, unless Landlord shall have notified Tenant in writing that it has so elected to terminate this Lease. Tenant waives any and all rights of redemption granted under any present and future laws in the event Landlord obtains the right to possession of the Premises by reason of the violation by Tenant of any of the covenants and conditions of this Lease or otherwise.

17.2 Termination of Lease. Should Landlord elect to terminate this Lease pursuant to the provisions of clauses (a) or (c) of Section 17.1 above. Landlord may recover from Tenant, as damages, the following: (a) the worth at the time of award of any unpaid rental which had been earned at the time of the termination, plus (b) the worth at the time of award of the amount by which the unpaid rental which would have been earned after termination until the time of award exceeds the amount of rental loss Tenant proves could have been reasonably avoided, plus (c) the worth at the time of award of the amount by which the unpaid rental for the balance of the Term after the time of award exceeds the amount of rental loss that Tenant proves could be reasonably avoided, plus (d) any other amounts necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which, in the ordinary course of things, would be likely to result therefrom (specifically including, but not limited to, brokerage commissions applicable to the remaining Term of this Lease and advertising expenses incurred, reasonably necessary expenses of remodeling the Premises or any portion thereof for a new tenant, whether for the same or a different use, and any special concessions made to obtain a new tenant) plus, at Landlord’s election, any other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by the laws of the State of California. As used in clauses (a) and (b) above, the “worth at the time of award” is computed by allowing interest at the Interest Rate. As used in clause (c) above, the “worth at the time of award” is computed by discounting such amount at the discount rate of the Federal Reserve Bank situated nearest to the location of the Project at the time of award plus one percent (1 %).

17.3 Definition of Rental. For purposes of this Article 17 only, the term “rental” shall be deemed to be Minimum Annual Rent, Additional Rent and all other sums required to be paid by Tenant pursuant to the terms of this Lease. All sums, other than Minimum Annual Rent, shall, for the purpose of calculating any amount due under clause (c) of Section 17.2 above, be computed on the basis of the average monthly amount accruing during the immediately preceding sixty (60) month period, except that if it becomes necessary to compute these sums before the sixty (60) month period has occurred, then these sums shall be computed on the basis of the average monthly amount accruing during the shorter period.

ARTICLE 18 — DEFAULTS BY LANDLORD

18.1 Landlord’s Liability. If Landlord fails to perform any of the covenants, provisions or conditions contained in this Lease on its part to be performed within thirty (30) days after written notice of default (or if more than thirty (30) days shall be required because of the nature of the default, if Landlord shall fail to diligently proceed to commence to cure the default after written notice), then Landlord shall be liable to Tenant for all damages sustained by Tenant as a direct result of Landlord’s breach and Tenant shall not be entitled to terminate this Lease as a result thereof. Notwithstanding anything contained in this Lease to the contrary, it is expressly understood and agreed that any judgment against Landlord resulting from any default or other claim under this Lease shall be satisfied only out of the net rents, issues, profits and other income actually received from the operation of the Project, and Tenant shall have no claim against Landlord (as Landlord is defined in Section 14.5) or any of Landlord’s personal assets for satisfaction of any judgment with respect to this Lease. Notwithstanding the foregoing, in the case of a bona fide emergency, provided Tenant first makes a reasonable, good faith effort to notify Landlord or the manager of the Project, Tenant shall be entitled to make such repairs as are necessary to remove the emergency for Landlord’s account and Landlord will reimburse Tenant for the cost paid by Tenant in doing so within thirty (30) days after Tenant’s delivery to Landlord of an invoice, together with reasonable back up documentation, for same.

18.2 Cure by Lender. If any part of the Premises is at any time subject to a first mortgage or a first deed of trust, and this Lease or the rentals due from Tenant hereunder are assigned by Landlord to a mortgagee, trustee or beneficiary (“Lender” for purposes of this Article 18 only) and Tenant is given written notice of the assignment including the mailing address of Lender, then Tenant shall also give written notice of any default by Landlord to Lender, specifying the default in reasonable detail and affording Lender a reasonable opportunity to make performance for and on behalf of Landlord. If and when Lender has made performance on behalf of Landlord, the default shall be deemed cured.

ARTICLE 19 — SUBORDINATION, ATTORNMENT AND TENANT'S CERTIFICATE

19.1 Subordination. Upon written request of Landlord, Landlord’s mortgagee, the beneficiary of a deed of trust of Landlord or a lessor of Landlord, Tenant will subordinate its rights pursuant to this Lease in writing to the lien of any mortgage, deed of trust or the interest of any lease in which Landlord is the lessee (or, at Landlord’s option, cause the lien of said mortgage, deed of trust or the interest of any lease in which Landlord is the lessee to be subordinated to this Lease) and to all advances made or hereafter to be made upon the security thereof.

19.2 Attornment. In the event any proceedings are brought for foreclosure, or in the event of the exercise of the power of sale under any mortgage or deed of trust made by Landlord encumbering the Premises, or should a lease in which Landlord is the lessee be terminated, Tenant shall attorn to the purchaser or lessor under such lease upon any foreclosure, sale or lease termination and recognize the purchaser or lessor as Landlord under this Lease, provided that the purchaser or lessor shall acquire and accept the Premises subject to this Lease.

19.3 Estoppel Certificates. Tenant agrees, upon not less than ten (10) days following Tenant’s receipt of prior written notice from Landlord, to execute, acknowledge and deliver to Landlord, a statement in writing in such form as may reasonably be required by Landlord or Landlord’s beneficiary or transferee (“Tenant’s Certificate”), certifying: (a) the date of commencement of this Lease; (b) the fact that this Lease is unmodified and in full force and effect (or, if there have been modifications hereto, that this Lease is in full force and effect, as modified, and stating the date and nature of such modifications); (c) the date to which the Minimum Monthly Rent and other sums payable under this Lease have been paid; (d) that there are no current defaults under this Lease by either Landlord or Tenant except as specified in such statement; and (e) such other matters respecting this Lease or the Premises as are reasonably requested. Landlord and Tenant intend that any statement delivered pursuant to this Section 19.3 may be relied upon by any existing or prospective mortgagee, beneficiary, encumbrancer, transferee or purchaser of the interest of Landlord in the Project, Premises or this Lease.

ARTICLE 20 — QUIET ENJOYMENT

Upon Tenant’s payment of Minimum Annual Rent and Additional Rent and its observation and performance of all of the covenants, terms and conditions of this Lease to be observed and performed by Tenant, Tenant shall peaceably and quietly hold and enjoy the Premises from and after delivery thereof to Tenant; subject, however, to (a) the rights of the parties as set forth in this Lease, (b) any deed of trust or ground or underlying leases to which this Lease is subordinate, and (c) all matters of record to which this Lease is subject; provided that none of the items specified in clause (c) above shall materially diminish the rights or materially increase the obligations of Tenant under this Lease, or materially interfere with or prevent the use of the Premises for the use specified in Section 1.9.

ARTICLE 21 — TITLE OF LANDLORD

This Lease is made subject to all matters of record, now or hereafter existing as such documents have been heretofore or may hereafter be supplemented, implemented, modified, replaced or amended, it being understood that none of the aforementioned documents shall prevent Tenant from using the Premises for the purpose set found in Section 1.9. Tenant agrees that, as to its leasehold estate, it and all persons in possession or holding under it will conform to and not contravene the provisions of said matters and, within ten (10) days after request therefor, shall execute and return to Landlord documents in recordable form subordinating this Lease to any matter now or hereafter of record..

ARTICLE 22 — MISCELLANEOUS

22.1 Notices. Every notice, demand or request (collectively “Notice”) required hereunder or by law to be given by either party to the other shall be in writing. Every provision of this Lease which provides that either party shall notify the other of any particular matter shall be governed by this Section. Notices shall be given by personal service or by United States certified or registered mail, postage prepaid, return receipt requested, or by same-day or overnight private courier, addressed to the party to be served at the address indicated in Section 1.12 or such other address as the party to be served may from time to time designate in a Notice to the other party. Notice personally served shall be effective when delivered to the party upon whom such Notice is served. If served by registered or certified mail, Notice shall be conclusively deemed served on the date shown on the return receipt, but if delivery is refused or the Notice is unclaimed, Notice shall conclusively be deemed given forty eight (48)hours after mailing. If served by telegram, mailgram or private courier, Notice to the addressee shall be conclusively deemed given as confirmed by the telegraphic agency or private courier service making delivery. Copies of any Notice shall be sent to the addresses, if any, designated for service of copies of Notices in Section 1.12: but the inadvertent failure to serve a copy of a Notice, either to the address so designated or in the manner provided in this Section, shall not render service of Notice invalid if the original Notice is served in accordance with this Section.

22.2 Financial Statements. Within fifteen (15) days after Landlord’s written request, Tenant shall furnish Landlord with financial statements or other reasonable financial information reflecting Tenant’s current financial condition, certified by Tenant or its financial officer. If Tenant is a publicly-traded corporation, delivery of Tenant’s last published financial information shall be satisfactory for purposes of this Section 22.2. Any information obtained from Tenant’s financial statements shall be confidential and shall not be disclosed other than to carry out the purposes of this Lease; provided, however, Landlord shall incur no liability for the inadvertent disclosure of any such information. Landlord may divulge the contents of any financial statements in connection with any financing arrangement or sale of Landlord’s interest in the Premises or Project or in connection with any administrative or judicial proceedings.

22.3Hazardous Materials.

      (a) Tenant, at its sole cost and expense, shall comply with all laws relating to the storage, use, handling and disposal of hazardous, toxic or radioactive matter including, without limitation, those materials identified in Sections 66680 and 66685 of Title 22 of the California Administrative Code, Division 4, Chapter 30 (“Title 22”). as amended from time to time (collectively, “Hazardous Materials”). Tenant represents and warrants, except for materials falling within the definition of “Hazardous Materials” which are normally used and properly disposed of in the ordinary course of Tenant’s business, or which are sold in Tenant’s store in the ordinary course of Tenant’s business, neither Tenant, nor its agents, servants, employees, contractors, nor anyone else acting on Tenant’s behalf will store, dispose of, produce, use, transport or manufacture any Hazardous Materials on the Premises or any portion of the Project. Tenant shall notify Landlord and provide to Landlord a copy or copies of the following environmental entitlements or inquiries related to the Premises: Notices of violation, notices to comply, citations, inquiries, reports filed pursuant to self-reporting requirements and reports filed pursuant to any governmental law or regulation relating to underground tanks.

      (b) The clean-up and disposal of any Hazardous Materials located or released onto or about the Project by Tenant or its agents, contractors or employees shall be performed by Tenant at Tenant’s sole cost and expense and shall be performed in accordance with all applicable laws, rules, regulations and ordinances, pursuant to a site assessment and removal/remediation plan prepared by a licensed and qualified geotechnical engineer and submitted to and approved in writing by Landlord prior to the commencement of any work. The foregoing notwithstanding, Landlord in Landlord’s sole and absolute discretion may elect, by written notice to Tenant, to perform the clean-up and disposal of such Hazardous Materials from the Premises and/or the Project. In such event, Tenant shall pay to Landlord the actual cost of same upon receipt from Landlord of Landlord’s written invoice therefor.

      (c) Notwithstanding any other term or provision of this Lease, Tenant shall permit Landlord or Landlord’s agents or employees to enter the Premises at any time, upon reasonable notice, to inspect, monitor and/or take emergency or long-term remedial action with respect to Hazardous Materials on or affecting the Premises or to discharge Tenant’s obligations hereunder with respect to such Hazardous Materials when Tenant has failed, after demand by Landlord, to do so. All costs and expenses incurred by Landlord in connection with performing Tenant’s obligations hereunder shall be reimbursed by Tenant to Landlord within ten (10) days of Tenant’s receipt of written request therefor.

      (d) In the event that any Hazardous Materials are discharged in the Premises or the Project by Landlord or any of its agents, servants, employees, contractors or anyone else acting on behalf of Landlord, and such discharge is required to be remediated pursuant to applicable laws or the same has a material and adverse affect upon Tenant’s use of or operation of its business from the Premises, Landlord shall diligently perform or cause to be performed the necessary clean-up of such Hazardous Materials on or affecting the Premises at no expense to Tenant. Notwithstanding the foregoing, if it is reasonably estimated that the clean-up of such Hazardous Materials will cause the Premises to be untenantable or require Tenant to close its business therein for more than two hundred seventy (270) days, Tenant shall each have the right to terminate this Lease upon written notice to Landlord within thirty (30) days after the date of the completion of an assessment of the discharge.

      (e) The indemnification agreements set forth in this Section 22.3 shall survive the expiration of the Lease, or the earlier termination thereof.

22.4 Project Remodeling. At any time during the Term, Landlord may remodel or expand, in any manner, the existing Project, which work may include the addition of shops and/or the addition of new buildings to the Project (collectively, the “Remodeled Center”). Landlord’s work will not unreasonably interfere with the normal operations of Tenant’s business from the Premises.

22.5Failure to Substantially Complete Premises. The parties hereby acknowledge that Landlord does not own the Project or any portion thereof, but is presently negotiating for the purchase of all or a portion of the Project area. Accordingly, notwithstanding anything to the contrary contained herein, (a) if for any reason whatsoever Substantial Completion of the Premises has not occurred on or before the last day of the twenty-fourth (24th) month following the Effective Date, or (b) if Landlord should at any time postpone or abandon the acquisition, development or construction of the Project or that portion of the Project in which the Premises are located, then either party may elect to terminate this Lease by giving thirty (30) days’ notice of such election to the other party. If such notice is given, this Lease and the rights and obligations of the parties pursuant to this Lease shall cease and terminate. If this Lease is terminated pursuant to this Section 22.5. neither party shall have any further or additional rights, remedies, claims or liability arising out of this Lease or the termination of this Lease, and the Existing Lease shall not terminate as provided in Section 4.3 above, but instead shall continue in full force and effect in accordance with the terms and conditions of the Existing Lease.

22.6 Trade Fixtures, Personal Property, and Alterations. Upon the expiration or earlier termination of the Term, Tenant shall remove from the Premises all of Tenant’s trade fixtures, furniture, equipment, signs, improvements, additions and Alterations to the extent such items are not permanently affixed to the Premises, and immediately repair any damage occasioned to the Premises by reason of such removal so as to leave the Premises in a neat and clean condition. Tenant may encumber or finance its movable fixtures and equipment installed in the Premises, and no such encumbrance or financing shall be deemed a Transfer, provided such encumbrance or financing creates a security interest in such movable fixtures and equipment, only, and confers no interest in the Premises. All trade fixtures, signs and other personal property installed in or attached to the Premises by Tenant must be new or like new when so installed or attached.

22.7Force Majeure. Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain labor or materials or reasonable substitutes therefor, governmental restrictions, governmental regulations, governmental controls, judicial orders, enemy or hostile governmental action, civil commotion, fire or other casualty, and other causes (except financial) beyond the reasonable control of the party obligated to perform, shall excuse the performance by that party and extend the time for performance by that party for a period equal to the prevention, delay or stoppage, except the obligations imposed with regard to Minimum Annual Rent and Additional Rent to be paid by Tenant pursuant to this Lease; provided the party prevented, delayed or stopped shall have given the other party written notice thereof within thirty (30) days of such event causing the prevention, delay or stoppage.

22.8 Termination and Holding Over. This Lease shall terminate without further notice upon the expiration of the Term. Tenant shall have no right to extend or renew this Lease upon the expiration of the Term. Upon the expiration or earlier termination of the Term, Tenant shall peaceably and quietly surrender the Premises broom-clean and in the same condition (including, at Landlord’s option, the demolition and removal of any Alterations made by Tenant to the Premises, unless at the time Landlord gave its consent to such Alterations, Landlord agreed in writing that Tenant would not have to demolish and remove such Alterations upon the termination of this Lease) as the Premises were in upon delivery of possession of same to Tenant by Landlord, reasonable wear and tear and any damage to the Premises which Tenant is not required to repair pursuant to Article 15 or Article 16 excepted. Tenant shall remove from the Premises all of Tenant’s trade fixtures, furniture, equipment, signs, improvements, additions and Alterations to the extent such items are not permanently affixed to the Premises, and immediately repair any damage occasioned to the Premises by reason of such removal so as to leave the Premises in a neat and clean condition. Should Tenant hold over in the Premises beyond the expiration or earlier termination of this Lease, the holding over shall not constitute a renewal or extension of this Lease or give Tenant any rights under this Lease. In such event, Landlord may, in its sole discretion, treat Tenant as a tenant at will, subject to all of the terms and conditions in this Lease, except that Minimum Annual Rent shall be an amount equal to one hundred fifty percent (150%) of Minimum Annual Rent which was payable by Tenant for the twelve (12) month period immediately preceding the expiration or earlier termination of this Lease.

22.9 Miscellaneous Provisions.

      (a) Any waiver by either party of a breach by the other party of a covenant of this Lease shall not be construed as a waiver of a subsequent breach of the same covenant. The consent or approval by either party to anything requiring such party’s consent or approval shall not be deemed a waiver of such party’s right to withhold consent or approval of any subsequent similar act. No breach of a covenant of this Lease shall be deemed to have been waived by the other party unless the waiver is in writing and is signed by such party.

      (b) Except as provided herein to the contrary, and subject to the specific limitations contained in Article 18. the respective rights and remedies of the parties specified in this Lease shall be cumulative and in addition to any rights and remedies not specified in this Lease. It is understood that there are no oral or written agreements or representations between the parties hereto affecting this Lease and this Lease supersedes and cancels any and all previous negotiations, arrangements, representations, brochures, agreements and understandings, if any, between Landlord and Tenant. No provision of this Lease may be amended except by an agreement in writing signed by Landlord and Tenant. If any provision of this Lease or the application of such provision to any person, entity or circumstance is found invalid or unenforceable by a court of competent jurisdiction, such determination shall not affect the other provisions of this Lease and all other provisions of this Lease shall be deemed valid and enforceable.

      (c) This Lease shall be governed by and construed in accordance with the laws of the State of California without giving effect to the choice of law provisions thereof.

      (d) Subject to the terms of this Lease, all rights and obligations of Landlord and Tenant under this Lease shall extend to and bind the respective heirs, executors, administrators and the permitted concessionaires, successors, subtenants and assignees of the parties. If there is more than one (1) Tenant hereunder, each shall be bound jointly and severally by the terms, covenants and agreements contained in this Lease.

      (e) Except for the delivery of possession of the Premises to Tenant, time is of the essence of all provisions of this Lease of which time is an element. For purposes of this Lease, a “business day” shall mean any day other than a Saturday, Sunday or a holiday recognized by the United States Postal Service.

      (f) If Tenant or Landlord is a corporation, partnership or limited liability company, each individual executing this Lease on behalf of the corporation or partnership (in his/her representative capacity only) represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of the corporation or partnership and that this Lease is binding upon the corporation or partnership.

      (g) Tenant shall observe faithfully and comply with, and shall cause its employees and invitees to observe faithfully and comply with, reasonable and nondiscriminatory rules and regulations governing the Project as may from time to time be promulgated by Landlord, which rules and regulations currently include the provisions of Exhibit B.

      (h) Landlord and Tenant each represent and warrant that it has had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, and that it knows of no other real estate broker, agent or finder who is or might be entitled to a commission or fee in connection with this Lease. In the event of any claim for broker’s or finder’s fees or commissions in connection with this Lease, Landlord shall indemnify, hold harmless and defend Tenant from and against any and all liability, claims, demands, damages and costs (including, without limitation, reasonable attorneys’ fees and other litigation expenses) on account of such claim if it shall be based upon any statement, representation or agreement claimed to have been made by Landlord and Tenant shall indemnify, hold harmless and defend Landlord from and against any and all liability, claims, demands, damages and costs (including, without limitation, reasonable attorneys’ fees and other litigation expenses) on account of such claim if it shall be based upon any statement, representation or agreement claimed to have been made by Tenant.

      (i) Neither this Lease nor any memorandum hereof shall be recorded by either party hereto.

      (j) Should Landlord sell, exchange or assign this Lease (other than a conditional assignment as security for a loan), then Landlord, as transferor, shall be relieved of any and all obligations on the part of Landlord accruing under this Lease from and after the date of such transfer provided that Landlord’s successor in interest shall assume such obligations from and after such date. Written notice of any such transfer shall be given to Tenant.

      (k) Landlord and Tenant desire and intend that any disputes arising between them with respect to or in connection with this Lease be subject to expeditious resolution in a court trial without a jury. Therefore, landlord and Tenant each hereby waive the right to trial by jury of any cause of action, claim, counterclaim or cross-complaint in any action, proceeding or other hearing brought by either Landlord against Tenant or Tenant against Landlord on any matter whatsoever arising out of, or in any way connected with, this Lease, the relationship of Landlord and Tenant, Tenant’s use or occupancy of the Premises or any claim of injury or damage, or the enforcement of any remedy under any law, statute, or regulation, emergency or otherwise, now or hereafter in effect.

      (1) In the event either party shall institute any action or proceeding against the other party relating to this Lease, the unsuccessful party in such action or proceeding shall reimburse the successful party for its disbursements incurred in connection therewith and for its reasonable attorneys’ fees and costs as fixed by the court. In addition to the foregoing award of attorneys’ fees and costs to the successful party, the successful party in any lawsuit on this Lease shall be entitled to its attorneys’ fees and costs incurred in any post-judgment proceedings to collect or enforce the judgment. This provision is separate and several and shall survive the merger of this Lease into any judgment on this Lease.

22.10 Exhibits. The following Exhibits are attached to this Lease and, by this reference, made a part of this Lease.

Exhibit A — Site plan (the “Site Plan”) of the Project. Landlord, at any time, may change the shape, size, location, number and extent of the improvements shown on Exhibit A and eliminate, add or relocate any improvements to any portion of the Project, and may add land to and/or withdraw land from the Project. Notwithstanding the foregoing, Landlord agrees that no changes or additions to the buildings or Common Area immediately adjacent to the Premises shall, except temporarily and for periods of reasonable duration during the construction of any such changes or additions, do any of the following: (a) materially and adversely interfere with Tenant’s ability to operate its business from the Premises; or (b) materially and adversely impair ingress, egress or other access to or from the Premises. Landlord agrees that any such changes or additions shall be made in a manner consistent with first class Projects, and Landlord shall take reasonable steps to minimize the unreasonable adverse impact upon the Premises occasioned by any such changes or additions.

Exhibit B - Rules and Regulations.

Exhibit C - Construction Provisions.

IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease on the day and year first above written.

LANDLORD:	TENANT:
FRANKLIN STREET PROPERTIES, LLC	CENTRAL COAST BANK CORP.,
A California limited liability company	a California corporation
By: /s/ MATTHEW HOWARTH	By: /s/ HARRY D. WARDWELL
Print Name: Matt Howarth	Print Name: Harry D. Wardwell
Its: Partner	Its: President, Cypress Bank

EXHIBIT A
[GRAPHIC OMITTED]

EXHIBIT B
RULES AND REGULATIONS

      1. Tenant shall keep the Premises in a neat and clean condition, free from any objectionable noises, odors or nuisances, shall operate its business without unreasonable noise or vibration emanating from the Premises, and shall comply with all applicable health, safety and police laws, ordinances and regulations of any governmental authority having jurisdiction over the Premises or the Project; provided, however, the foregoing shall not be construed to require Tenant to perform any repairs which are the obligation of Landlord pursuant to this Lease. In addition, Tenant shall, at its sole cost and expense, keep Tenant’s installation and/or pick-up areas adjacent to the Building in a neat and clean condition, and shall be responsible for removing from the Project any litter or debris resulting from Tenant’s use of such installation and/or pick-up areas. Tenant shall not sell merchandise from vending machines or allow any coin or token operated vending machine on the Premises, except those provided for the convenience of Tenant’s employees and pay telephones provided for the convenience of its customers. Tenant shall deposit trash and rubbish only within receptacles approved by Landlord. Landlord shall cause trash receptacles to be emptied at Tenant’s cost and expense; provided, however, at Landlord’s option, Landlord may provide trash removal services, the cost of which shall be paid for by Tenant either (a) as a Common Area Expense, or (b) pursuant to an equitable proration of said costs by Landlord. Tenant shall not display or sell merchandise or allow cans, signs or any other object to be stored or to remain outside the Premises. Tenant shall not erect any aerial or antenna on the roof, exterior walls or any other portion of the Premises. Tenant shall not solicit or distribute materials in the Common Area. Landlord, from time to time, may establish further reasonable and non-discriminatory rules and regulations for the Project, and Tenant shall abide by same provided that they neither materially increase Tenant’s obligations nor materially diminish Tenant’s rights under this Lease. Tenant shall neither conduct on the Premises, nor advertise with respect to the Premises, any liquidation, “going out of business”, distress, “lost our lease” or similar sale.

      2. No advertising medium shall be utilized by Tenant which can be heard or seen outside the Premises including, without limitation, flashing lights, searchlights, loudspeakers, phonographs, radios or televisions; provided, however, Tenant shall be permitted to use music and video within the Premises as part of its merchandising so long as the volume of same is maintained at levels which do not cause disturbance of other tenants of the Project. Tenant shall not display, paint or place any handbill, bumper sticker or other advertising device on any vehicle parked in the Common Area. Tenant shall not distribute any handbills or other advertising matter in the Project.

      3. Tenant and its employees shall park their vehicles only in the parking areas from time to time designated for that purpose by Landlord (if such an employee parking area is designated). Without limiting the generality of the foregoing, if Landlord implements any program related to parking, parking facilities or transportation facilities including, but not limited to, any reasonable program of parking validation, employee shuttle transportation during peak traffic periods or other program to limit, control, enhance, regulate or assist parking by customers of the Project, Tenant agrees to participate in the program and to pay its proportionate share of the costs of the program under reasonable and nondiscriminatory rules and regulations from time to time established by Landlord, provided that a majority of the other retail tenants of the Project occupying premises with Floor Area equal to or less than that occupied by Tenant are also required by their leases to participate in and pay their proportionate shares of the costs of the program. Tenant shall furnish Landlord with a list of its and its employees’ vehicle license numbers at any time during the Term within fifteen (15) days after Landlord’s written request. Tenant acknowledges that Landlord shall have the right to cause to be towed any vehicle belonging to Tenant or Tenant’s employees parked in violation of these provisions and/or to attach violation stickers or notices to any such vehicle. Tenant agrees to assume responsibility for compliance by its employees with these parking provisions and to cooperate with Landlord and its agents in collecting all costs and expenses incurred by Landlord in connection with Landlord’s reasonable efforts to enforce such regulations from Tenant’s employees who violate same.

EXHIBIT C
CONSTRUCTION PROVISIONS

      1. Description of Landlord’s Work. Attached hereto as Schedule 1 and incorporated herein by this reference is a description of the improvements within the Premises which will be provided by Landlord at Landlord’s sole cost and expense (the “Landlord’s Work”). Following the Substantial Completion of the premises, Landlord shall not be liable for the condition of the Premises or for the performance of any work in the Premises except as specifically otherwise set forth in this Lease, provided that Landlord shall promptly correct any such punch-list items with respect to Landlord’s Work identified in written notice from Tenant to Landlord within sixty (60) days following the delivery of possession of the Premises to Tenant (or as soon thereafter as reasonably practicable). Landlord shall not be obligated to perform any work or provide any facilities in relation to the Premises or Project except as set forth in this Section 1. or as otherwise set forth in this Lease. Where two (2) types of materials or structures are indicated, Landlord will have the option of using either.

      2. Description of Tenant’s Work. The work to be done by Landlord in satisfying its obligation to construct the Premises under this Lease shall be limited to that described in Section 1 above. All other work to be done in the Premises shall be provided by Tenant at Tenant’s sole cost and expense (the “Tenant’s Work”). Tenant’s Work shall include, but shall not be limited to, the purchase and/or installation and/or performance of the following (including any and all applicable architectural and engineering fees therefor), except to the extent the same is included within Landlord’s Work, if applicable:

      A. Floors: Tenant shall provide all floor coverings and base in the Premises.
      B. Walls: Tenant shall construct all interior partition walls and shall provide all wall finishes.
      C. Plumbing: Tenant shall provide all additional plumbing beyond that provided for toilet room as Landlord's work.
      D. Gas Service: Tenant shall apply for and pay any fees associated with installation of a gas meter and shall pay for the extension of service lines to the Premises.
      E. Telephone: Tenant shall provide all telephone equipment and distribution systems and connections to main terminal backboard. All equipment required for Tenant's telephone will be located within Tenant's Premises.
      F. Fire Sprinklers: Tenant, at its sole cost and expense, shall modify the existing fire sprinkler system as required by building or fire officials.
      G. Signs: Tenant shall provide all storefront signs in conformance with the approved sign program for the Project. In addition to Landlord's approval, Tenant shall obtain the approval of all governmental entities having jurisdiction. The approval by Landlord is separate and in addition to local governmental approval. Tenant may maintain such professionally prepared interior signs as Tenant desires, subject to compliance with the requirements of all applicable governmental authorities.
      H. Utilities: Tenant shall apply for and pay all fees associated with all utility services and permits, any increase in the serving capacity of water, electrical, HVAC, sewer or gas services due to Tenant's requirements and any additional equipment necessitated thereby.

3. Provisions For Completion of Plans and Specifications and Construction of Premises,

(a) The procedure for approval of Tenant's plans and specifications is as follows:

      (i) Within thirty (30) days of receipt of a set of building plans, Tenant shall prepare and submit to Landlord four (4) sets of fully-dimensioned one-quarter inch (1/4”) or one-eighth inch (1/8”) scale drawings and specifications prepared by Tenant’s licensed architect at Tenant’s expense, which drawings shall indicate clearly and in detail all specific changes and alterations to the Premises including, but not limited to, the storefront, interior partitions, fixture plans, plumbing, lighting, electrical outlets and all of Tenant’s Work, as described above. Any and all such plans shall be subject to Landlord’s prior written approval, which approval shall not be unreasonably withheld or delayed. Landlord shall have ten (10) business days within which to approve or disapprove Tenant’s proposed plans. In the event Landlord shall disapprove Tenant’s plans, Landlord shall provide Tenant with written objections, and Tenant shall have ten (10) business days within which to amend its proposed plans and incorporate Landlord’s required changes. Landlord’s review of plans and specifications for Tenant’s Work as set forth herein, shall be for Landlord’s sole purpose and shall not imply Landlord’s review of the same, or obligate Landlord to review the same, for quality, design, compliance with laws or other like matters. Accordingly, notwithstanding that any plans and specifications for Tenant’s Work are reviewed by Landlord or its space planner, architect, engineers and/or consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord’s space planner, architect, engineers and/or consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the plans and specifications for Tenant’s Work, and Tenant’s waiver and indemnity set forth in Section 14.5 of this Lease shall specifically apply to the plans and specifications for Tenant’s Work.

      (ii) Upon Landlord's approval of Tenant's proposed plans. Tenant shall promptly submit such approved plans to the appropriate governmental authority for plan checking and the issuance of a building permit. In the event such governmental authority requires any changes to such approved plans prior to the issuance of a building permit, Tenant shall, at its sole cost and expense, promptly change such plans pursuant to such governmental request and submit such changed plans to Landlord for its approval, which approval shall not be unreasonably withheld or delayed. Landlord shall have five (5) business days within which to approve or disapprove such changed plans. In the event Landlord shall disapprove such changed plans, Landlord shall provide Tenant with written objections, and Tenant shall have five (5) business days within which to amend such plans and incorporate Landlord’s required changes. Upon Landlord’s approval of the changed plans, Tenant shall promptly resubmit such plans to the appropriate governmental authority for plan checking and the issuance of a building permit as previously set forth in this Subparagraph (b). Upon Tenant’s receipt of a building permit and any other necessary governmental approvals for Tenant’s Work based upon plans approved by Landlord (the “Final Approved Plans”), and delivery of possession of the Premises, Tenant shall promptly commence construction of Tenant’s Work and shall diligently pursue such construction to completion in accordance with the Final Approved Plans.

      (iii) No changes, modifications or alterations to the Final Approved Plans may be made without the prior written consent of Landlord, which approval shall not be unreasonably withheld or delayed. Any additional costs and expenses including, without limitation, increased fees which Landlord is required to pay for architectural, engineering and other similar services that are made necessary by reason of any change, modification or alteration to the Final Approved Plans, any additional construction costs including costs of change orders charged by Landlord’s contractor and any and all other costs, expenses and/or damages incurred or suffered by Landlord by reason of the changes, modifications or alterations to the Final Approved Plans and any delays to the extent caused by such changes, modifications or alterations to the Final Approved Plans shall be at the sole cost and expense of Tenant and shall be paid by Tenant to Landlord (based upon a reasonably detailed estimate of such cost and expense which shall be subject to Tenant’s written approval as a condition to Landlord’s obligation to consent to such proposed changes, modifications or alterations) before the performance of the work requested by Tenant.

      (b) Tenant shall not commence any work in the Premises unless and until the following conditions have been met: (i) Final Approved Plans shall have been achieved; (ii) Landlord shall have reasonably approved Tenant’s contractor; (iii) Tenant shall have obtained all permits and approvals from all appropriate governmental authorities for the Tenant’s Work and shall furnish Landlord with copies of all such permits; (iv) Tenant, its contractor and subcontractors (collectively, “Tenant’s Agents”) shall have procured all insurance required under the provisions of this Lease and shall have furnished Landlord with certificates of such insurance in accordance with the provisions of this Lease; and (v) Landlord shall have consented to the commencement of Tenant’s Work, which consent shall not be unreasonably withheld or delayed.

      (c)   (i) The Tenant’s Work shall be constructed in accordance with the Final Approved Plans in a good and workmanlike manner and in compliance with all applicable laws. Neither Tenant nor Tenant’s Agents shall interfere with, obstruct, or delay, any other work in the Premises or customary Common Area use or operations of other Project occupants. Tenant and Tenant’s Agents shall abide by all reasonable rules made by Landlord’s contractor and provided to Tenant or Tenant’s contractor in writing with respect to the storage of materials and coordination of work with other work being performed in the Project. Each of Tenant’s Agents shall guarantee to Tenant and for the benefit of Landlord that the portion of the Tenant’s Work for which it is responsible shall be free from any defects in workmanship and materials for a period of not less than one (1) year from the date of completion thereof. Each of Tenant’s Agents shall be responsible for the replacement or repair, without additional charge, of all work done or furnished in accordance with its contract that shall become defective within one (1) year after the later to occur of (i) completion of the work performed by such contractor or subcontractors and (ii) the Rent Commencement Date. The correction of such work shall include, without additional charge, all additional expenses and damages incurred in connection with such removal or replacement of all or any part of the Tenant’s Work, and/or the Premises and/or Common Areas that may be damaged or disturbed thereby. All such warranties or guarantees as to materials or workmanship of or with respect to the Tenant’s Work shall be written such that such guarantees or warranties shall inure to the benefit of Landlord and Tenant, as their respective interests may appear, and can be directly enforced by any of them. Tenant covenants to give to Landlord any assignment or other assurances which may be necessary to effect such right of direct enforcement.

      (ii) All of Tenant’s Agents shall carry worker’s compensation insurance covering all of their respective employees, and shall also carry commercial general liability insurance in an amount not less than One Million Dollars ($1,000,000.00) combined single limit for personal injury, bodily injury and property damage, naming Landlord, and at Landlord’s option, Landlord’s lender, each as an additional insured thereunder, with companies meeting the standards set forth in Section 14.2 of the Lease, and the policies therefor shall inure to the benefit of Tenant and Landlord, as their interests may appear. Certificates for all insurance carried pursuant hereto shall be delivered to Landlord before the commencement of construction of the Tenant’s Work and all such policies of insurance must contain a provision that the company writing said policy will give Landlord thirty (30) days prior written notice of any cancellation or lapse of the effective date or any reduction in the amounts of such insurance. In the event that the Tenant’s Work is damaged by any cause during the course of the construction thereof, Tenant shall diligently proceed to repair the same at Tenant’s sole cost and expense. Tenant and Tenant’s Agents shall maintain all of the foregoing insurance coverage in force until the Tenant’s Work is completed. All insurance required hereunder (except Workers’s Compensation) shall preclude subrogation claims by the insurer against anyone insured thereunder and shall provide that it is primary insurance as respects Landlord and that any other insurance maintained by Landlord is excess and noncontributing with the insurance required hereunder.

      (iii) Within ten (10) days after completion of construction of the Tenant’s Work, Tenant shall cause a Notice of Completion to be recorded in the office of the Recorder of the County in which the Project is located in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and shall furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do so within a reasonable period following written notice from Landlord, Landlord may execute and file the same on behalf of Tenant as Tenant’s agent for such purpose, at Tenant’s sole cost and expense. Within thirty (30) days following the completion of the Tenant’s Work, Tenant shall deliver to Landlord a set of as-built drawings for the Premises. Tenant shall obtain a certificate of occupancy for the Premises promptly following completion of the Tenant’s Work.

4. Allowance. Tenant shall be entitled to a one-time allowance (the “Allowance”) in an amount equal to Fifty Thousand Dollars ($50,000.00) less the aggregate sum of base rent under the Existing Lease abated pursuant to Section 4.3 of the Lease of which this Exhibit is a part, for the costs of construction of the Tenant’s Work. The Allowance shall be disbursed to Tenant within thirty (30) days following the last to occur of (i) Tenant’s delivery of properly executed mechanic’s lien releases in compliance with applicable laws with respect to Tenant’s Work, and (ii) substantial completion of Tenant’s Work and opening for business to the public from the Premises in accordance with the terms and conditions of this Lease.

5. Operation from Existing Premises During Construction. Tenant may continue in occupancy under the Existing Lease so long as the same is permitted by applicable governmental authorities during the performance of Landlord’s Work, and during such period, Landlord shall use reasonable efforts and diligence to provide Tenant with reasonable means of access to the Existing Premises and parking areas serving the Existing Premises, provided that the parties shall coordinate activities so as to allow for Landlord’s construction to be performed without increase in cost or delays in time for performance.

SCHEDULE 1
Description of Landlord’s Work

1. Landlord agrees to construct for the Tenant the area designated as Demised Premises on Exhibit “A”. Landlord shall prepare, at his sole cost and expense, plans and specifications for the site work at the Shopping Center, the improvements comprising the Shopping Center and Landlord’s Work. Landlord’s Work shall be completed in accordance with all applicable governing codes and in a good and workmanlike manner.

      A. Floors: Landlord shall provide a smooth finished concrete slab without floor covering or base. The floor shall be one (1) level without depressions.

      B. Storefront: Landlord shall provide and install a storefront per Landlord's architect's design with a glass entry door/doors as shown on Landlord's drawings, the color of which shall be selected by Landlord's architect.

      C. Demising Wall: Landlord shall provide 5/8" gypsum board on metal or wood stud wall, concrete masonry unit, and/or concrete walls ready for paint. No paint or other finish shall be provided.

      D. Electrical: Landlord shall provide electrical service consisting of a 200 amp 120/208V meter/main section in a designated electrical room or area, conduit and wire to a minimum 24 circuit electrical panel within Tenant's premises. Electrical meter is Tenant's responsibility.

      E. Heating, Ventilating, and Air Conditioning (“HVAC” herein): Landlord shall provide a fully operational packaged rooftop air conditioning and heating unit which will be installed by Landlord’s HVAC contractor. Such air conditioning unit to accommodate a minimum of one (1) ton per 400 square feet of leasable area. The HVAC system to include ducts, grilles and thermostat. The toilet room shall be ventilated as required by code.

      F. Telephone: Landlord shall supply one (1) telephone outlet at the rear of the Premises with conduit stubbed above Tenant's suspended ceiling. A one inch conduit shall extend from Tenant's Premises to a designated main telephone backboard.

      G. Fire Sprinklers: Landlord shall provide a fire sprinkler system to a density and head spacing conforming with NFP A and local fire jurisdiction for light hazard occupancies to Factory Mutual standards. (Note: Tenant shall make any modifications made necessary by Tenant's Work or Tenant's use of the Premises.)

      H. Gas Service: Landlord shall provide gas line and meter to a designated exterior location in accordance with Landlord' working drawings and specifications.

      I. Rear Door: Landlord shall provide a painted 3' x 7' hollow (or solid, if required) metal door with standard lockset only if indicated on plans.

      J. Lighting: Three rows of four (4) tube recessed fluorescent fixtures shall be provided with such fixtures 10' on center located 5' on center from demising wall.

      K. Electrical Outlets: Landlord shall provide 110 volt duplex wall and ceiling receptacles as required by code. A minimum often (10) wall receptacles shall be located in the sales area and one (1) receptacle in each toilet room.

      L. Toilet Room: Landlord shall provide two toilet rooms with the following in each: One (1) water closet, one (1) lavatory, one (1) exhaust fan, one (1) light fixture with switch, one (1) 110 volt duplex wall receptacle, 4’ high marlite wainscot as required by local code, and as shown on Landlord’s drawings. Sheet vinyl floor coverings with rubber base shall be provided. A dedicated circuit is provided for the purpose of future “insta-hot” type water heater by Tenant. Toilet room shall comply with Uniform Building Code handicap requirements.

      M. Ceiling: Landlord shall provide 24" x 48" x 5/8" acoustical tile in a 24" x 24" regular pattern finish and white metal "T" bar suspended grid. Ceiling height shall be ten (10) feet or as indicated on the drawings.

      N. Sign Lighting: Landlord shall provide sign lighting circuit and junction box on a common area "house" electrical meter. Junction box shall be located by Landlord and Tenant shall be responsible to connect thereto.

      O. Tenants Responsibility: All improvements other than those itemized above to be provided by Tenant at its sole cost and expense, including design and engineering fees.

AMENDMENT

Amendment to that certain lease agreement dated April 16, 1998 by and between J & E Esperanca Investments H, LLC, a California limited liability company, successor in interest to Joseph A. Esperanca, Sr.₅ an individual, Evelyn J. Esperanca, an individual, and Franklin Street Properties, LLC, a California limited liability company, (“Landlord”) and Central Coast Bank Corp., a California corporation, (“Tenant”) for the premises commonly known as 228 Reservation Road, Marina, CA 93933 consisting of ± 3,000 square feet of floor area (hereinafter referred to as the “Lease”).

RECITALS

A. WHEREAS, the primary leased term of the Lease expired on November 30, 2004; and

B. WHEREAS, the Lease contains in favor of Tenant three (3) separate and distinct renewal options, each of five (5) years duration; and

C. WHEREAS, Tenant is desirous of exercising its first renewal option; and

D. WHEREAS, Landlord and Tenant have reached agreement as to the Minimum Annual Rent to be payable by Tenant to Landlord during the first renewal option period;

NOW, THEREFORE, the Lease is hereby amended, modified and supplemented as hereinbelow set forth.

AGREEMENT

1. Landlord and Tenant do hereby re-affirm to each other the validity of the Lease, as amended by this Amendment, and agree to keep, honor and observe each and every provision contained therein.

2. Tenant does hereby irrevocably exercise its first renewal option on the same terms and conditions as contained within the Lease except that the Minimum Annual Rent payable during the first renewal option period shall be as provided for in this Amendment.

3. The first renewal option period shall commence on December 1, 2004 and expire on November 30, 2009, unless sooner terminated pursuant to the Lease. 4. The Minimum Annual Rent payable by Tenant to Landlord during the first renewal option period shall be as follows:

      (a) Sixty three thousand and 00/100—Dollars ($63,000.00) per annum during the period December 1, 2004 through November 30, 2005, payable in equal monthly installments due on the first (1^st) day of each month in the amount of five thousand two hundred fifty and 00/100—Dollars ($5,250.00); and then

      (b) Sixty four thousand nine hundred twenty and 00/100—Dollars ($64,920.00) per annum during the period December 1, 2005 through November 30, 2006, payable in equal monthly installments due on the first (1^st) day of each month in the amount of five thousand four hundred ten and 00/100—Dollars ($5,410.00); and then

      (c) Sixty six thousand eight hundred forty and 00/100—Dollars ($66,840.00) per annum during the period December 1, 2006 through November 30, 2007, payable in equal monthly installments due on the first (1^st) day of each month in the amount of five thousand five hundred seventy and 00/100—-Dollars ($5,570.00); and then

      (d) Sixty eight thousand eight hundred eighty and 00/100—Dollars ($68,880.00) per annum during the period December 1, 2007 through November 30, 2008, payable in equal monthly installments due on the first (1^st) day of each month in the amount of five thousand seven hundred forty and 00/100—Dollars ($5,740.00); and then

      (e) Seventy thousand nine hundred twenty and 00/100--Dollars ($70,920.00) per annum during the period December 1, 2008 through November 30, 2009, payable in equal monthly installments due on the first (1^st) day of each month in the amount of five thousand nine hundred ten and 00/100—Dollars ($5,910.00).

5. Within ten (10) days of mutual execution hereof, Tenant shall remit in cash to Landlord a lump sum of eleven thousand two hundred thirty eight and 00/100—Dollars ($11,238.00) representing additional minimum rent due Landlord for the December 1, 2004 through May 31, 2005 time period calculated as the product of five thousand two hundred fifty and 00/100—Dollars ($5,250.00) per month due less three thousand three hundred seventy seven and 00/100—Dollars ($3,377.00) per month received multiplied by six (6) months.

6. Landlord and Tenant do hereby agree that there remains in favor of Tenant two (2) additional renewal options, each of five (5) years duration, from and after November 30, 2009.

7. Landlord and Tenant do hereby agree that the Minimum Annual Rent to be payable by Tenant to Landlord during the second and/or third and final renewal option, if exercised, shall be at the then current fair market rental value to be determined in accordance with Sections 3.2 (a), (b) and (c) of the Lease.

8. In the event of conflicting provisions between the Lease and this Amendment, the provisions of this Amendment shall take precedence, control and apply.

In all other respects, the Lease shall remain in full force and effect without further amendment, modification or supplement.

Dated this 25th day of May, 2005

LANDLORD

J & E Esperanca Investments II, LLC,
a California limited liability company

By: /s/ CHARLES E. BELLIG
      Charles E. Bellig,
      authorized agent

TENANT

Central Coast Bancorp
A California coporation


By: /s/ HARRY D. WARDWELL       Harry D. Wardwell

Title: Senior Vice President, Branch Administrator


By: ___________________________________


Name Printed: _________________________


Title:_________________________________

EX-10

LEASE

BETWEEN

ANTHONY SAMMUT AND CHRISTINE SAMMUT,
TRUSTEES OF THE ANTHONY & CHRISTINE SAMMUT
REVOCABLE TRUST U/T/D FEBRUARY 14, 1992
AS LANDLORD

AND

CENTRAL COAST BANCORP
AS TENANT

WESTRIDGE CENTER

TABLE OF CONTENTS

ARTIC	LE	DESCRIPTION	PA	GE
1		FUNDAMENTAL LEASE PROVISIONS AND DEFINITIONS	1
1	.1	Tenant's Tradename	1
1	.2	Term	1
1	.3	Tenant's Proportionate Share of Common Area Operating Costs	1
1	.4	Use of Premises	1
1	.5	Addresses For Notices and Payment of Rent	1
1	.6	Broker(s)	1
1	.7	Certain. Definitions	1
2		PREMISES, COMMON AREAS, PARKING	2
2	.1	Premises	2
2	.2	Common Areas	3
3		TERM	3
3	.1	Term	3
3	.2	Landlord's Work	3
3	.3	Lease Year	3
3	.4	Options To Extend Term	3
4		FIXED RENT	4
4	.1	Payment	4
5		COMMON AREA MAINTENANCE	5
5	.1	Common Area Operating Costs; Definitions	5
5	.2	Payment of Tenant's Proportionate Share	6
5	.3	Landlord's Records	7
6		UTILITIES	7
7		USE OF PREMISES, COMPLIANCE WITH LAW	8
7	.1	Use	8
7	.2	Increased Risk	8
7	.3	Acceptance	8
7	.4	Use Restrictions	8
7	.5	* Exclusive Use	8
8		ALTERATIONS	8
8	.1	Alterations	8
8	.2	Other Tenant Changes	9
9		LIENS AND ENCUMBRANCES	9
10		TAXES ON THE PREMISES AND TENANT'S PROPERTY	10
10	.1	Personal Property Taxes	10
10	.2	Real Property Taxes	10
11		MAINTENANCE AND REPAIR	11
11	.1	Obligations of Landlord	11
11	.2	Tenant's Obligation to Maintain and Repair Premises	11
12		ENTRY AND INSPECTION	12
13		WAIVER AND INDEMNIFICATION	12
13	.1	Waiver	12
13	.2	Indemnification	13
14		INSURANCE	13
14	.1	Insurance to be Provided by Tenant	13
14	.2	Landlord's Insurance	14
14	.3	Policy Requirements	14
14	.4	Blanket Coverage	14
14	.5	Waiver of Subrogation	14
15		ASSIGNMENT AND SUBLETTING	15
15	.1	General Limitations	15
15	.2	No Unreasonable Withholding of Consent	15
15	.3	Reorganizations and Mergers	15
15	.4	Effect of Violation	16
16		TRANSFER OF LANDLORD'S INTEREST	16
17		DAMAGE OR DESTRUCTION	16
17	.1	Landlord to Rebuild	16
17	.2	Landlord's Options to Terminate	16
17	.3	Extent of Landlord's Repair and Rebuilding Obligations	17
17	.4	Tenant Waivers	17
18		EMINENT DOMAIN	17
18	.1	Entire or Substantial Taking	17
18	.2	Partial Taking	17
18	.3	Disposition of Award	18
18	.4	Further Assurance	18
18	.5	Tenant Waivers	18
19		SIGNS AND AUCTIONS	18
19	.1	Signage	18
19	.2	Auction or Sale	18
20		DEFAULTS AND REMEDIES	19
20	.1	Default Defined	19
20	.2	Remedies; Termination	19
20	.3	Remedies; Re-entry	20
20	.4	Remedies; Non-termination and Collection of Rent	20
20	.5	No Effect on Indemnification Obligation	20
20	.6	Landlord's Default	20
20	.7	Limitation on Recourse	20
20	.8	Notice to Mortgagees and Others	20
20	.9	Remedies; Interest and Late Charges	21
21		SURRENDER OF PREMISES; REMOVAL OF PROPERTY	21
21	.1	Condition Upon Surrender	21
21	.2	Removal of Property Upon Re-entry	21
22		ATTORNEYS’ FEES	22
22	.1	Litigation Between the Parties	22
23		WAIVER	22
24		HOLDING OVER	22
25		SUBORDINATION AND ATTORNMENT	23
26		HEIRS AND ASSIGNS; TIME OF ESSENCE	23
27		INTERPRETATION	24
27	.1	Severability	24
27	.2	Integration	24
27	.3	Amendment	24
27	.4	Section Headings and References	24
27	.5	Dependence of Covenants	24
27	.6	Lease Draftsman	24
27	.7	Landlord and Tenant	24
27	.8	Days, Months and Years	24
27	.9	Term	24
27	.10	Including	24
28		RIGHT OF LANDLORD TO PERFORM	25
29		NOTICES	25
30		QUIET ENJOYMENT	25
31		ESTOPPEL CERTIFICATE	26
32		BROKERS	26
33		MERGER	26
34		LANDLORD RESERVATIONS	26
35		HAZARDOUS OR INFECTIOUS SUBSTANCES	27
35	.1	Covenants of Tenant	27
35	.2	Indemnification	29
35	.3	Inspection	29
35	.4	Definition of Hazardous Substance	30
35	.5	Definition of Environmental, Health and Safety Requirement	30
35	.6	Survival

SCHEDULE OF EXHIBITS

Exhibit A Shopping Center Site Plan
Exhibit B Plot Plan of Premises
Exhibit C Work Letter

LEASE

(Pad2, Area l)

(Westridge Center)

THIS LEASE (this “Leased is dated and effective as of the____day of March, 1998, and is made by and between ANTHONY SAMMUT and CHRISTINE SAMMUT, Trustees of the Anthony & Christine Sammut Revocable Trust u/t/d February 14, 1992 (“‘Landlord”), and CENTRAL COAST BANCORP, dba Bank of Salinas (“Tenant”).

NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, LANDLORD AND TENANT HEREBY AGREE AS FOLLOWS:

ARTICLE 1
FUNDAMENTAL LEASE PROVISIONS AND DEFINITIONS

1.1 Tenant's Tradename (Par. 1.1): Bank of Salinas

1.2 Term (Art. 3): 10 years, with options to extend the Term.

1.3 Tenant's Proportionate Share of Common Area Operating Costs (Art. 5): one percent (1%). Tenant's Proportionate Share of Westridge Center Common Improvements: six/tenths of one percent (.6%).

1.4 Use of Premises (Art 7): The Premises shall be used solely for the operation of banking facilities.

1.5 Addresses For Notices and Payment of Rent (Art. 29):

(a) Landlord:

60 D Corral De Tierra Rd.
Salinas, CA 93908
Attention: Mr. Tony Sammut

(b)Tenant:

Central Coast Bancorp
Bank of Salinas

301 Main Street
Salinas, CA 93901
Attention: Mr. Nick Ventimiglia

1.6 Broker(s) (Art. 32):

None
(Landlord)
None
(Tenant)

1.7 Certain Definitions: Certain terms have the meaning given for them in other portions of this Lease. The following terms have the following meanings:

      (a) “Area I” or “Shopping Center” means those parcels of land located in Area I of Westridge Center as shown on the Site Plan.

      (b) “Building” means that building to be constructed by Landlord pursuant to the terms of Exhibit “C” attached hereto, and to contain approximately three thousand two hundred (3,200) square feet of floor area.

      (c) “Pad” means that real property which is commonly known as Pad 2 of the Shopping Center, depicted on Exhibit “A” attached hereto, and upon which Landlord shall construct the Building.

      (d) “Parent” means any Person who owns more than fifty percent (50%) of the equity or beneficial interest of any other Person.

      (e) “Person” means any one or more human beings, or legal entities or other artificial persons, including partnerships, corporations, trusts, estates, associations, joint ventures and any other combination of human beings and/or legal entities.

      (f) "Premises" means, collectively, the Pad and the Building, and all improvements which, from time to time, are located on the Pad.

      (g) "REA" means that Declaration of Reciprocal Easements, Covenants and Restrictions recorded January 31,1996, as Document No. 6170, First Amendment to Declaration of Reciprocal Easements, Covenants and Restrictions recorded July 31, 1996, as Document No. 45144, Second Amendment to Declaration of Reciprocal Easements, Covenants and Restrictions recorded September 19, 1996, as Document No. 55547, Declaration of Covenants and Restrictions Affecting Land, recorded April 24,1997, as Document No. 23045, Reciprocal Easement Agreement, recorded May 2, 1997, as Document No. 9725071, as same may be amended. Tenant acknowledges that the term "REA" shall include the proposed Third and Fourth Amendments to Declaration of Reciprocal Easements, Covenants and Agreements, copies of which have been delivered to Tenant.

      (h) "Rent Commencement Date" means the date which shall be the first to occur of the following:

(i) The date Landlord delivers possession of the Premises to Tenant as evidenced by Landlord delivering a key to the Building to Tenant; or

(ii) The date, Tenant actually commences to do business in, upon or from the Premises.

      (i) “Site Plan” means the Site Plan for the Shopping Center attached as Exhibit “A”.

      (j) “Westridge Center” means, collectively, the Premises, the Common Areas, and all the buildings and improvements located thereon in that certain Shopping Center located in Salinas, California. Exhibit “A” depicts the general layout of Westridge Center.

ARTICLE 2
PREMISES, COMMON AREAS, PARKING

2.1 Premises. In consideration of and subject to each and all of the covenants terms and conditions hereinafter set forth, Landlord hereby leases the Premises to Tenant and Tenant hereby hires the Premises from Landlord.

2.2 Common Areas. Tenant and its employees, customers and invitees shall have the non-exclusive license to use that portion of the Shopping Center designated under the REA as Common Area for the common use of tenants and occupants of Area I and any other persons permitted to use same (the “Common Areas”^) pursuant to the terms of the REA. The Common Areas on the Premises shall be subject to the rules and regulations governing use as promulgated from time to time by Landlord and are subject to the REA and any amendments to the REA which govern the use and enjoyment of the Common Areas by the parties to the REA.

ARTICLE 3
TERM

3.1 Term. Unless sooner terminated or extended as provided herein, the term of this Lease shall be for the period specified in Paragraph 1.2 and shall commence on the Rent Commencement Date (the “Commencement Date”).

3.2 Landlord's Work. Subject to the terms and conditions of Exhibit "C", Landlord will complete the work of the improvements required to be performed by Landlord in Exhibit "C".

3.3 Lease Year. The term "Lease Year" refers to each successive twelve (12) month period following the Rent Commencement Date.

3.4 Options To Extend Term.

(a) Subject to the terms and conditions of this Paragraph 3.4. Landlord hereby grants to Tenant the option(s) (the “Options”^ to extend the initial Term of this Lease for two (2) periods of five (5) years each (each, an “Option Period”’). All terms, provisions, obligations and rights set forth in this Lease shall apply to the Option Periods, except (i) this Paragraph 3.4(a) shall not apply to increase the number of Option Periods, and (ii) the “Fixed Rent” (as hereinafter defined) shall be adjusted upward at the commencement of each Option Period as set forth in subparagraph3A(c). After the exercise of the Option, all references in this Lease to the Term or the Term hereof shall be considered to mean the Term as so extended, and all references to the termination or end of the Term hereof shall be considered to mean the termination or end of the Term as so extended. Tenant’s right to exercise the Option is subject to:

(iii) The following conditions precedent:

(aa) This Lease shall be in full force and effect at the time notice of exercise is given, and on the last day of the Term hereof.

(bb) Tenant shall not be in default under any term or provision of .this Lease at the time notice of exercise is given, or on the last day of the term hereof.

(iv) Compliance with the following procedure for exercise:

(aa) Tenant shall, not less than one hundred eighty (18 0) days prior to the last day of the term hereof, give Landlord written notice irrevocably exercising the Option; provided, however that Tenant’s 180-day period shall not run until Landlord shall have delivered to Tenant a written notice stating that Tenant’s 180-day exercise period shall begin to run within thirty (30) days of the date of Landlord’s notice;

(bb) In lieu of executing a new Lease, each party shall, at the request of the other, execute a written memorandum hereof, acknowledging the fact that the Option has been exercised and otherwise complying with the requirements of law for an effective memorandum of this Lease.

(b) The Options may not be exercised or assigned involuntarily by or to any person or entity other than Tenant, nor shall the Options be assignable apart from this Lease, without Landlord’s prior written consent.

(c) The Fixed Rent for the Premises during each respective Option Period shall be increased by 15% over the Fixed Rent payable as of the last day of the Term immediately preceding such Option Period.

ARTICLE 4 FIXED RENT

4.1 Payment. From and after the Rent Commencement Date and continuing thereafter during the Term, Tenant shall pay to Landlord, at the address in Article 1 or such other address as Landlord designates hi writing, fixed rent as calculated pursuant to this Paragraph 4.1 (the “Fixed Rent”! on the first day of each month, in advance. As of the Rent Commencement Date, Fixed Rent shall be equal to the sum of (a) $36,000.00 per annum, and (b) (the numerical sum of the interest rate for the loan from Tenant which Landlord obtains in order to construct the Building in accordance with Exhibit “C” and three and one-half percent (3.5%)) times (the principal amount of the construction loan obtained by Landlord to construct the Building). For example, assuming that the cost of the Building is $500,000.00 and Tenant makes a loan to Landlord in the principal sum of $500,000.00 with interest payable at six percent (6%) per annum, then Fixed Rent for the first five (5) years would be calculated as follows: $36,000.00 + [(.035+.06) X $500,000.00] = $83,500.00 per annum. In the foregoing example, monthly Fixed Rent shall be $6,958.33. The foregoing is merely an illustration of the calculation of Fixed Rent and is not a representation by Tenant that Tenant would make a loan to Landlord in such principal sum or at an interest rate of 6% per annum. Fixed Rent shall be increased on the first day of the sixth Lease Year by 15% and shall be increased at the beginning of each Option Period as provided in Paragraph 3 A(c) above. If the Rent Commencement Date occurs on a day other than the first day of a month, then the Fixed Rent for the fraction of the month starting with the Rent Commencement Date shall be paid on the Rent Commencement Date, prorated on the basis of the actual number of days in such month. If the Term hereof ends on a day other than the last day of a month, then the Fixed Rent for the month during which the expiration occurs shall be prorated on the basis of the actual number of days in such month. In addition to the Fixed Rent commencing as of the Rent Commencement Date, Tenant shall pay Common Area Operating Costs (as those terms are described in Paragraph 5.1). The Fixed Rent, Common Area Operating Costs, and any other monetary obligations due Landlord under the Lease are hereinafter referred to collectively as the “Rent”. The Rent shall be payable to Landlord, in lawful money of the United States of America, in currently available funds at the address for Landlord set forth in Article 1 (or to such other place as Landlord may from time to time designate in writing), without notice, demand, offset, deduction or setoff.

ARTICLE 5
COMMON AREA MAINTENANCE

5.1 Common Area Operating Costs; Definitions.

(a) The term “Common Area Operating Costs” means the sum of all expenses paid or incurred by Landlord in connection with the operation, maintenance, repair, alteration and periodic replacement of any part or portion of the improvements maintained by Landlord in the Common Areas (that are not paid directly by, or separately metered or otherwise chargeable to, individual tenants), during the calendar year (the “Calendar Year”\ including, without limitation, the Common Area Operating Costs allocable to the Premises pursuant to the REA. Without limiting the generality of the foregoing, the Common Area Operating Costs shall include:

(i) electricity, water, gas, sewers, refuse collection and all other utilities and utility services;

(ii) all utility taxes, charges or similar impositions;

(iii) rental paid for leased machinery, tools, equipment and motor vehicles used in connection therewith;

(iv) maintenance and repair of electrical services and resurfacing and repainting of buildings and parking lots, restriping, repairs to parking lots, sidewalks and pedestrian passageways, cleaning, sweeping and janitorial, services, landscaping, light fixture and bulb replacement, trash and refuse receptacles, directional signs and markers, and car stops;

(v) insurance premiums and deductibles (for the policies referred to in Paragraph 14.3) and alterations or replacements of capital improvements in the Common Areas required by Landlord’s insurance carriers, or any of them, as a condition to the issuance or continuance of such insurance;

(vi) the services of independent contractors including the services of any person, firm or corporation selected by Landlord to maintain the Common Areas, on such terms and conditions and for such duration as Landlord shall, in its sole judgment, deem reasonable and appropriate;

(vii) compensation (including employment taxes, workers’ compensation premiums and fringe benefits) of all persons, whether or not directly employed by Landlord, performing duties in connection with the operation, maintenance, repair and periodic replacement of any part or portion of the improvements and/or Associated Personal Property in the Common Areas;

(viii) legal and accounting services engaged by Landlord for the Common Areas;

(ix) "Landlord's Taxes" (as hereinafter defined);

(x) the cost and expense associated with maintaining, repairing, and insuring Westridge Center retention ponds, Westridge Center identification signs, and the Westridge Center buffer wall and the cost and expense of Westridge Center security, if any (collectively, the “Westridge Center Common Improvements”); and

(xi) any other expenses or charges of whatsoever kind, whether or not hereinabove described, which, in accordance with generally accepted accounting or management principles, would be considered an expense of operating, maintaining, repairing and periodically replacing any part or portion of the Common Areas or the capital improvements and/or Associated Personal Property located or used in the Common Areas, plus ten percent (10%) of all Common Area Operating Costs to cover Landlord’s administrative and overhead costs, and to compensate Landlord for supervision of the operation, maintenance and repair and periodic replacement of any part or portion of the Common Areas.

Common Area Operating Costs shall not include

(i) the costs of special services rendered to individual tenants (including Tenant) for which a special charge is made to such tenants;

(ii) any costs borne directly by Tenant under this Lease;

(iii) Landlord’s ground rent, if any; and

(iv) interest or amortization paid by Landlord in connection with any loan or loans secured by the real property of which the Premises are a part, unless said loans are made to finance costs expressly included above in the definition of Common Area Operating Costs.

(b) The term "Estimated Common Area Operating Costs" means the monthly estimates of Tenant’s Proportionate Share of Common Area Operating Costs for each Lease Year to be given by Landlord to Tenant pursuant to the terms hereof.

(c) The term "Landlord's Taxes" means and includes all real and personal property taxes, charges and assessments, water and sewer rents, taxes on parking, and all other taxes, assessments, charges and fees of any description, general and special, which are levied, assessed upon or imposed by any governmental authority during any Calendar Year with respect to the Westridge Center Common Improvements, and any tax which shall be levied or assessed to or in lieu of such real or personal property taxes (including any value added tax or municipal income tax), and any license fees, commercial rental tax or other tax upon rents, the entering into of leases, or Landlord’s business of leasing or operating the Premises, including all costs and fees incurred by Landlord in contesting Landlord’s Taxes and/or negotiating with the public authorities as to same; provided, however, that the term “Landlord’s Taxes” shall not include any federal or state income tax, capital gains tax or any franchise, estate or inheritance taxes. The term “Landlord’s Taxes” shall also include any tax, fee, levy, assessment or charge (i) in substitution, partially or totally, of any tax previously included within the definition of Landlord’s Taxes, or (ii) which is imposed as a result of a transfer, either partial or total, of Landlord’s interest in the Premises or any part thereof or which is added to a tax or charge hereinbefore included within the definition of Landlord’s Taxes by reason of such transfer, or (iii) which is imposed by reason of this transaction, any modifications or changes hereto, any transfers hereof, or any modifications of the Common Areas on the Premises or any portion thereof.

5.2 Payment of Tenant’s Proportionate Share. Tenant shall pay Tenant’s Proportionate Share of the Common Area Operating Costs as described in this Article 5. Tenant shall pay to Landlord, in advance, on the first day of each calendar month commencing on the Rent Commencement Date, an amount estimated by Landlord, from time to time, as being one-twelfth (1/12) of Tenant’s Proportionate Share for such Calendar Year. Thereafter, within one hundred twenty (120) days after the end of each Calendar Year, Landlord shall deliver to Tenant a written statement setting forth the amount of Tenant’s Proportionate Share of the actual Common Area Operating Costs for such Calendar Year. If the aggregate payments made by Tenant for any such Calendar Year exceed the amount of Tenant’s Proportionate Share for such Calendar Year, such excess shall be applied as a credit against future payments to be made by Tenant under this paragraph. If the aggregate payments made by Tenant for any such Calendar Year are less than the amount of Tenant’s Proportionate Share for such Calendar Year, Tenant shall, immediately upon demand therefor, pay Landlord the amount of any such deficiency. Notwithstanding the foregoing, subsequent adjustments regarding a particular Calendar Year may be made by Landlord as a result of information not available or expenses not determined or determinable at the time Tenant was originally billed for such Common Area Operating Costs at any time during the two (2) year period immediately succeeding such Calendar Year. In the event that the Commencement Date is other than the first day of a full calendar month, the first monthly payment shall be a prorata amount of a full monthly contribution. In the event that this Lease should end on any date other than the last day of a Calendar Year, Tenant’s Proportionate Share shall be adjusted on the basis of the ratio which the number of days which have elapsed from the commencement of the said Calendar Year to the later of the date on which this Lease terminates or Tenant otherwise surrenders possession of the Premises bears to 365. Tenant’s obligation to pay Tenant’s Proportionate Share shall survive termination or earlier expiration of this Lease.

5.3 Landlord’s Records. Landlord shall keep and maintain customary records of all expenses incurred in connection with Common Area Operating Costs, and the same shall, upon at least ten (10) days’ written notice, be made available for inspection by Tenant during regular business hours at the offices of Landlord, provided that such inspection shall not occur more than once during any twelve (12) month period. If Tenant does not dispute the same in writing within one (1) year of receiving the annual written statement setting forth the amount of Tenant’s Proportionate Share of the actual Common Area Operating Costs for such Calendar Year, Tenant shall have irrevocably waived its right to dispute such determination or calculation.

ARTICLE 6
UTILITIES

Commencing on the Commencement Date and continuing throughout the Term hereof, Tenant, at Tenant’s sole cost and expense, shall pay directly, prior to delinquency, all charges, duties and rates of every description for water, gas, telephone and trash removal services, and all other services and utilities supplied to the Premises, together with any taxes or surcharges thereon. Landlord shall not be liable for, and Tenant shall not be entitled to, any abatement or reduction of Rent by reason of any interruption or reduction in the amount or level of any of the foregoing when such failure or reduction is caused or mandated by accident, breakage, repairs, strikes, lockouts or other labor disturbances or labor disputes of any character, or any law, regulation, rule, ordinance or court order limiting or restricting the availability, use or consumption of utility items, or by any other cause, similar or dissimilar. Landlord shall not be liable under any circumstances for any loss of or damage or injury (including death) to the person, property or business of Tenant, or any other person, however occurring, through or in connection with or incidental to the interruption or discontinuance of any of the utilities or services described in this Article 6.

ARTICLE 7
USE OF PREMISES, COMPLIANCE WITH LAW

7.1 Use. Tenant shall use and occupy the Premises, as and for the use specified in Paragraph 1.4. Tenant shall not use or occupy the Premises for any other purpose whatsoever absent Landlord’s prior written consent, which consent shall not be unreasonably withheld or delayed. Tenant shall not use or occupy the Premises or the Common Areas in violation of law, and shall immediately discontinue any use of the Premises or the Common Areas which is declared by any governmental authority having jurisdiction to be a violation of law. Landlord’s failure to object to such use shall not constitute a consent to a use which constitutes such a violation. Tenant, at its sole cost and. expense, shall promptly comply with any directive of any governmental authority having jurisdiction which shall impose any duty upon Tenant or Landlord with respect to the Premises, or the use or occupation thereof. In no event shall Tenant place a load upon any floor of the Premises exceeding the floor load per square foot area which such floor was designed to carry and which is allowed by law.

7.2 Increased Risk. Tenant shall not do anything in or upon the Premises which may be prohibited by any insurance policy in force carried by Landlord or Tenant, from time to time, covering the Shopping Center or any portion thereof, including the Premises. If Tenant’s occupancy or conduct of business in or upon the Premises (whether or not Landlord has consented to the same) results in any increase in premiums for (or calculation of) the insurance carried from time to time by Landlord with respect to the Shopping Center, Tenant shall, at Landlord’s option, either cease such use or conduct, immediately, or pay any resulting increase in premium upon demand therefor from Landlord. In determining whether increased premiums or cancellation are a result of Tenant’s occupancy of the Premises, the written determination of the insurer shall be conclusive. Tenant shall promptly comply with all reasonable requirements of the insurance authority or of any insurer now or hereafter in effect relating to the use and/or maintenance of the Premises.

7.3 Acceptance. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the Premises and/or the Shopping Center or any portion or aspect thereof, or with respect to the suitability or fitness thereof for the conduct of Tenant’s business or for any other purpose. There shall be a conclusive presumption that the Premises and the Shopping Center are in good and satisfactory condition on the Rent Commencement Date.

7.4 Use Restrictions. Tenant hereby acknowledges that it has read the REA and agrees to be bound by all of the terms and conditions set forth therein.

7.5 Exclusive Use. During the Exclusive Protection Period (as that term is defined below), Tenant shall have the exclusive right to operate a full service retail bank in Westridge Center. Tenant’s exclusive shall not apply to parcels in Westridge Center not owned by Landlord or to tenants of Landlord, whose leases predate this Lease. For a period of four (4) years from the Rent Commencement Date (the “Exclusive Protection Period”), Landlord shall not enter into any leases in Westridge Center which would permit the tenant thereunder to use its premises primarily as a full service retail bank.

ARTICLE 8
ALTERATIONS

8.1 Alterations. Except as hereinafter set forth, Tenant shall make no alterations, additions or improvements (collectively, “Tenant Changes”) to the Premises (including the Common Areas) or the Building affecting the outside appearance of the Premises or the Building, and/or structural alterations of any kind, and/or alterations affecting basic plumbing, air conditioning, electrical or rife safety systems shared with the Common Areas or other tenants’ premises, without Landlord’s prior written consent, which consent shall not unreasonably be withheld or delayed. Tenant Changes (including any air conditioning equipment or devices installed in or upon the Premises) shall become the property of Landlord and shall be surrendered with the Premises, as a part thereof, at the end of the term or earlier termination hereof; except that Tenant shall, at the request of Landlord, remove any vaults installed in the Premises. Tenant hereby covenants that, before commencing any Tenant Changes, Tenant shall give Landlord at least twenty (20) business days’ written notice of the proposed commencement of such work (to afford Landlord an opportunity to post appropriate notices of nonresponsibility). Tenant covenants and agrees that all alterations done by or pursuant to the direction of Tenant shall be performed expeditiously, in a good and workmanlike manner, in full compliance with all laws, rules, orders, ordinances, directions, regulations and requirements of all governmental agencies, offices, departments, bureaus and boards having jurisdiction, in full compliance with the rules, orders, directions, regulations, and requirements of the Insurance Service Office or any similar body, and in a manner so as to minimize interference with pedestrian and vehicular traffic and other businesses in the Shopping Center. The provisions of this Lease are intended fully to govern the rights and obligations of Landlord and Tenant as they relate to the need for repairs to the Premises. Accordingly, Tenant waives and releases its right to make repairs at Landlord’s expense or to quit the Premises under Sections 1941, 1942(a) and 1932(1) of the California Civil Code or any similar law, ordinance or regulation which may now exist or hereafter be enacted or enforced which confers upon Tenant the right to make any repairs to the Premises of the type allocated to Landlord by this paragraph, whether or not for the account of Landlord, or to terminate this Lease because of Landlord’s failure to keep the Premises or the Shopping Center in good order, condition and repair.

8.2 Other Tenant Changes. If any alteration, addition, replacement or change to the Premises shall be required by law or the requirements of any insurance company (as a condition to the issuance or continuation of insurance coverage without increase in Premium) for any reason including (i) Tenant’s failure to maintain the Premises in the manner required hereby, (ii) Tenant’s use of the Premises, a change in the manner or mode of Tenant’s use of the Premises, or the location of partitions, trade fixtures, merchandise or other contents of the Premises, or (iii) any requirement of law or ordinance or other requirement of any government or other authority, then such alterations, additions, replacements or changes shall be promptly made and paid for solely by Tenant in accordance with Paragraph 8.1.

ARTICLE9
LIENS AND ENCUMBRANCES

Tenant covenants and agrees to keep the Premises, the Building and the Shopping Center, and Tenant’s leasehold interest therein, free from any mechanics’ liens or other encumbrances arising out of work or materials claimed to have been furnished to Tenant. Tenant shall discharge any and all of such liens and encumbrances, by payment, bond or otherwise, within ten (10) days after filing thereof, at the cost and expense of Tenant, and Tenant further agrees to defend, indemnify and hold harmless Landlord from and against any such liens or claims or actions thereon, together with costs of suit and attorneys’ fees incurred by Landlord in connection with any such claims or actions. If any such liens are filed, Landlord may, without waiving its rights and remedies based on such breach of Tenant and without releasing Tenant from any of its obligations, cause such liens to be released by any means it shall deem proper, including payment in satisfaction of the claims giving rise to such liens. Tenant shall reimburse Landlord, within ten (10) days after demand therefor, for any sum paid or incurred by Landlord to remove such liens.

ARTICLE 10
TAXES ON THE PREMISES AND TENANT'S PROPERTY

10.1 Personal Property Taxes. Tenant shall be liable for, and shall pay prior to delinquency, all taxes levied against Tenant’s Property (as that term is defined below) and any other personal property of whatsoever kind and to whomsoever belonging, located or installed in or about the Premises, commencing on the date Tenant’s Property or such other personal property is placed in or about the Premises. Upon demand by Landlord, Tenant shall furnish Landlord with evidence satisfactory to Landlord of payment thereof. The term “Tenant’s Property” shall mean all interior signs, trade fixtures, furniture and equipment and other movable items installed or placed on the Premises by or at the direction or with the consent of Tenant, regardless of ownership. If any taxes on Tenant’s Property or other personal property are levied against Landlord or Landlord’s property and if Landlord pays the same (which Landlord shall have the right to do regardless of the validity of such levy, but only under proper protest if requested in writing by Tenant), or if the assessed value of Landlord’s property is increased by the inclusion therein of a value placed upon Tenant’s Property or such other personal property, and if Landlord pays the taxes based upon such increased assessment (which Landlord shall have the right to do regardless of the validity thereof, but only under proper protest in writing if requested by Tenant), Tenant shall repay to Landlord, within ten (10) days after demand therefor, the taxes so paid by Landlord and any expenses incurred by Landlord in connection therewith, together with interest thereon at the Lease Rate (as defined in Paragraph 20.9) In any such event Tenant shall have the right, in the name of Landlord and with Landlord’s full cooperation, but at no cost to Landlord, to bring suit in any court of competent jurisdiction to recover the amount of any such taxes so paid under protest, and any amount so recovered shall belong to Tenant.

10.2 Real Property Taxes. Tenant shall pay the real property taxes, as defined below, applicable to the Premises and the Building and improvements thereon during the entire term of this Lease, including all Option Periods. All such payments shall be made prior to the delinquency date. Tenant shall promptly furnish Landlord with satisfactory evidence that such taxes have been paid. If any such taxes paid by Tenant cover any period of time after the expiration of the Term, Tenant’s share of such taxes shall be equitably prorated to cover only the period of time within the tax fiscal year during which this Lease shall be in effect, and Landlord shall reimburse Tenant to the extent required. If Tenant shall fail to pay any such taxes, Landlord shall have the right to pay the same, in which case Tenant shall repay such amount to Landlord with Tenant’s monthly installment of Fixed Rent together with interest on such amounts at the Lease Rate (as defined in Paragraph 20.9). If the Premises are not separately assessed, Landlord shall pay all real property taxes on the Premises, and Tenant shall pay to Landlord, within thirty (30) days after written request therefor, the real property taxes imposed upon the Premises and the Building. In addition, Tenant shall pay to Landlord any payments required under any gross receipts, rental or excise tax on gross income derived by Landlord under this Lease, regardless of how designated, but excluding federal and state income taxes. As used herein, the term “real property taxes” includes any form of real estate tax or assessment, general or special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, and any other levee, tax or charge (other than inheritance, personal income or estate taxes) imposed on the Premises or the Building by any authority having the direct or indirect power to tax, including any city, state or federal government, or any school, agricultural, sanitary, hospital, fire, street, drainage or other improvement district thereof, as against any legal or equitable interest of Landlord in the Premises or in the real property of which the Premises are a part, as against Landlord’s right to rent or other income therefrom, or as against Landlord’s business of leasing the Premises. The term “real property taxes” shall also include any tax, fee, levee, assessment or charge, in substitution, partially or totally, of any tax, fee, levee, assessment or charge hereinabove included within the definition of “real property taxes”. The term “real property taxes” shall also include any and all assessments for services generally provided without charge to owners and/or occupants of real property prior to the adoption of Proposition 13 by the voters of the State of California in the June 1978 election. Without limiting the generality of the foregoing, Tenant shall be responsible for, and the term “real property taxes” shall include, any increase in real property taxes which is caused due to (i) any “change in ownership” of the Premises or any portion of the real property of which the Premises constitute a part (as defined in Section 60 et seq. of the California Revenue and Taxation Code, the regulations promulgated thereunder and any amendments or successor statutes or regulations thereto) or (ii) any construction or work of improvement in the Premises or the Shopping Center.

ARTICLE 11
MAINTENANCE AND REPAIR

11.1 Obligations of Landlord. Landlord shall keep in good order; condition and repair the structural portions, foundations, exterior walls, canopy, roof, downspouts and gutters of the Building (excluding all windows, doors, plate glass and storefronts, and except for damage caused by any act, negligence or omission of Tenant or its employees, agents, invitees, licensees, contractors or subtenants, damage or destruction caused by any casualty not required to be repaired under Article 17 and any condemnation or taking of the Premises or the Shopping Center governed by Article 18). Such maintenance and repair of the structural portions and foundations of the Building and the structural members of the roof of the Building shall be at Landlord’s sole cost and expense; all other maintenance and repair described above (including maintenance, repair and replacement of all portions of the roof of the Building other than the structural members) shall be included in Common Area Operating Costs and paid by Tenant pursuant to Article 5. Landlord shall have no obligation to make any repairs or replacements hereunder until the expiration often (10) days following written notice from Tenant to Landlord of the need therefor. Tenant waives any right now or hereafter granted by law to make any repairs under this Paragraph 11.1 upon Landlord’s failure to do so hereunder or otherwise. Landlord shall give Tenant at least 48 hours prior verbal notice before entering the Building to perform Landlord’s obligations hereunder. Tenant shall provide Landlord with an emergency contact number for Landlord’s use when 48 hours notice is not possible due to emergency circumstances.

11.2 Tenant’s Obligation to Maintain and Repair Premises. Except for those portions of the Premises and the Building for which Landlord is responsible under Paragraph 11.1, Tenant, at Tenant’s sole cost and expense, shall at all times keep all portions of the Premises in good order, condition and repair (including replacements, as and when necessary), including, without limitation, all plate glass, show cases, storefront parts and moldings, doors, door jams, door closers, door hardware, fixtures, equipment and appurtenances thereof, floors, partitions, all electrical, lighting, heating, plumbing and sprinkler systems, fixtures and equipment, and HVAC. Tenant shall also be responsible for the repair of any and all damage caused to the Building or any other portion of the Shopping Center by any act, neglect or omission of Tenant or its employees, agents, invitees, licensees, contractors or subtenants; the repair of any such damage shall be made by Tenant, at Tenant’s cost and expense, within thirty (30) days of demand by Landlord. If Tenant fails to make such repairs or commence such repairs and diligently pursue such repairs to completion during the thirty (30) day notice period, then Landlord shall make such repairs at Tenant’s cost and expense, and Tenant shall reimburse to Landlord all such costs and expenses, together with a management and administration fee of fifteen percent (15%) of the amount thereof, within ten (10) days after submission by Landlord to Tenant of a statement of the amount thereof. At Tenant’s expense, Tenant shall maintain in force a service and preventive maintenance contract with an authorized HVAC service company covering all heating, ventilation and air conditioning equipment serving the Premises, and shall provide Landlord with a copy thereof prior to commencement of the Term.

ARTICLE 12
ENTRY AND INSPECTION

Tenant shall permit Landlord, its employees, partners, directors, officers, representatives, agents and affiliates, at all reasonable times during normal business hours and at any time in case of emergency: (i) to enter into and upon the Premises for the purpose of inspecting the same, or for the purpose of protecting the interest therein of Landlord, or to post notices of nonresponsibiliry; and (ii) to take all required materials and equipment into the Premises, and perform all required work therein, including the erection of scaffolding, props or other mechanical devices, for the purpose of making alterations, repairs or additions to the Premises or to any portion of the Common Areas, or for maintaining any service provided by Landlord to Tenant hereunder, without any payment, rebate or abatement of Rent to Tenant (although Landlord is under no obligation to make such alterations, repairs or additions to the Premises or to maintain or provide any services to the Premises, except to the extent expressly provided elsewhere in this Lease), provided, that Landlord shall not unreasonably interfere with Tenant’s operation of its business on the Premises. Landlord shall give Tenant at least 48 hours prior verbal notice before entering the Building to perform Landlord’s obligations hereunder. Tenant shall provide Landlord with an emergency contact number for Landlord’s use when 48 hours notice is not possible due to emergency circumstances. Tenant shall also permit Landlord and its employees, partners, directors, officers, representatives, agents and affiliates, upon request, to enter and/or pass through the Premises or any part thereof, at reasonable times during normal business hours, to show the Premises to prospective purchasers, mortgagees, tenants or master or ground lessors of the Shopping Center or any portion thereof. Landlord and its employees, partners, directors, officers, representatives, agents and affiliates shall have no liability to Tenant for any disturbance to Tenant (and Tenant shall have no right to abate Rent) as a consequence of Landlord’s exercise of its rights hereunder. Tenant shall permit all tenants and occupants of the Shopping Center from time to time have signage on the Pylon Sign to enter the Premises for the purpose of installing, removing, maintaining or repairing such Pylon Sign, and Tenant shall not be entitled to any rebate or abatement of Rent in connection with such entry, and Landlord shall use its commercially reasonable effort to cause such tenants and occupants not to unreasonably interfere with Tenant’s operation of its business on the Premises.

ARTICLE 13
WAIVER AND INDEMNIFICATION

13.1 Waiver. Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to Tenant’s Property or injury to Tenant’s employees, agents, visitors, invitees and licensees anywhere in the Shopping Center, including the Premises, and Tenant hereby waives all claims in respect thereof from any cause whatsoever against Landlord, its agents or employees, except claims for personal injury or property damage not covered by the insurance required to be carried by Tenant pursuant to Paragraph 14.1 (and only to the extent covered by the liability insurance carried by Landlord pursuant to Paragraph 14.3) which are caused by the failure of Landlord to observe any of the terms and conditions of this Lease (and such failure persists for an unreasonable period of time after written notice of such failure) or which arise from any negligence or intentional misconduct of Landlord, or of its agents or employees. Landlord shall not be liable to Tenant for any unauthorized or criminal entry of third parties into the Premises or the Shopping Center, or for any damage to persons or property, or loss of property in or about the Premises or the Shopping Center, the parking lot and the approaches, loading docks, entrances, streets, sidewalks or corridors thereto, by or from any unauthorized or criminal acts of third parties, regardless of any breakdown, malfunction or insufficiency of any security measures, practices or equipment that may be provided by Landlord. Tenant shall immediately notify Landlord in writing of any breakdown or malfunction of any security measures, practices or equipment provided by Landlord as to which Tenant has or should have knowledge. Landlord shall not be liable to Tenant for interference with light or incorporeal hereditaments or for damage therefrom to Tenant or Tenant’s property from any cause. Tenant hereby agrees that in no event shall Landlord be liable for consequential damages, including injury to Tenant’s business or any loss of income therefrom, nor shall Landlord be liable to Tenant for any damages caused by the act or neglect of any other tenant or their invitees in the Shopping Center.

13.2 Indemnification. Throughout the Term of this Lease, Tenant hereby agrees to indemnify, defend, protect and hold Landlord harmless against and from any and all claims for damages or injury occurring on the Premises, or in connection with the conduct of its business on the Premises, or from any activity, work or other thing permitted or suffered by Tenant on the Premises, and shall further indemnify, defend, protect and hold Landlord harmless against and from any and all claims arising from any breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease, or arising from any act, neglect, fault or omission of Tenant, or of its agents, employees, visitors, invitees and licensees occurring on the Premises or any part or portion of the Shopping Center, and from and against all costs, attorneys’ fees, expenses and liabilities incurred in connection with any such claims or any actions or proceedings brought thereon; and in case any action or proceeding be brought against Landlord by reason of such claim, Tenant, upon notice from Landlord, shall defend the same at Tenant’s expense by counsel reasonably satisfactory to Landlord. Tenant agrees to advance to Landlord the costs of Landlord’s defense of any matter subject to or reasonably believed by Landlord to be subject to Tenant’s indemnity obligations hereunder, upon Landlord’s undertaking to repay such advances with interest at the Lease Rate in the event it is ultimately determined by appropriate judicial proceedings that such matter was not within Tenant’s indemnity obligations hereunder. The provisions of this paragraph shall survive the expiration or sooner termination of this Lease.

ARTICLE 14
INSURANCE

14.1 Insurance to be Provided by Tenant. At its sole cost and expense, Tenant shall maintain in full force and effect during the Term the following policies of insurance:

(a) Comprehensive General Liability Insurance or Commercial General Liability Insurance, insuring against liability for bodily injury or death to persons, property damage and personal injury, covering the Premises and the business of Tenant, with a comprehensive single limit of liability not less than $5,000,000.00, such coverage to be in a commercial general liability form with at least the following endorsements: (i) deleting any employee exclusion on personal injury coverage; (ii) including coverage for injuries to or caused by employees; (iii) providing for blanket contractual liability coverage (including Tenant’s indemnity obligations contained in this Lease), broad form property damage coverage and products completed operations, owner’s protective and personal injury coverage; (iv) providing for coverage of employers automobile non-ownership liability; and (v) if required by Landlord, providing liquor liability coverage. All such insurance: (1) shall be primary and non-contributory; (2) shall provide for severability of interests; (3) shall provide that an act or omission of one of the named insureds shall not reduce or avoid coverage to the other named insureds; and (4) shall afford coverage for all claims based on acts, omissions, injury or damage which occurred or arose (or the onset of which occurred or arose) in whole or in part during the policy period. If, in the opinion of Landlord’s insurance advisor, the amount or scope of such coverage is deemed inadequate at any time during the Term, Tenant shall increase such coverage to such reasonable amounts or scope as Landlord’s advisor deems adequate.

(b) Plate glass insurance, sufficient to pay for the replacement of, and any or all damage to, exterior plate glass and storefront supports in the Premises.

(c) Fire insurance, with standard extended coverage, sprinkler leakage, vandalism and malicious mischief endorsements on all of Tenant’s fixtures and equipment in the Premises, in an amount not less than one hundred percent (100%) of their full insurable value, the proceeds of which shall, so long as this Lease is in effect, be used for the repair or replacement of the fixtures and equipment so insured.

(d) Workers’ Compensation Insurance in the manner and to the extent required by applicable law and with limits of liability not less than the minimum required under applicable law, covering all employees of Tenant having any duties or responsibilities in or about the Premises.

14.2. Landlord’s Insurance. Landlord shall during the Term maintain in full force and effect a policy or policies of fire and extended coverage insurance covering the Building and the Common Area on the Premises, with earthquake and/or flood coverage if required by Landlord, and such other insurance in such amounts and covering such other liability or hazards as deemed appropriate by Landlord. The amount and scope of coverage of Landlord’s insurance hereunder shall be determined by Landlord from time to time in its sole discretion and shall be subject to such deductible amounts as Landlord may elect. Landlord shall have the right to reduce or terminate any insurance or coverage called for by this Paragraph 14.2 to the extent that any such coverage is not reasonably available in the commercial insurance industry from recognized carriers or not available at a cost which is in Landlord’s judgment economic or feasible under the circumstances. The cost of all insurance maintained by Landlord hereunder, or otherwise on all or any portion of the Shopping Center, shall be included in Common Area Operating Costs. All insurance proceeds payable under Landlord’s casualty insurance carried hereunder shall be payable solely to Landlord, and Tenant shall have no interest therein.

14.3. Policy Requirements. All insurance policies required to be carried under this Lease shall be issued by financially sound qualified insurers, licensed to do business in the State in which the Shopping Center is located. All Tenant’s insurance (other than Workers’ Compensation) shall name Landlord, and such other persons or entities as Landlord may from time to time designate, as additional insureds. Tenant’s Workers’ Compensation Insurance shall contain an employer’s contingent liability endorsement. Tenant shall deliver to Landlord certificates of all insurance required to be carried by Tenant hereunder, showing that such policies are in full force and effect in accordance with this Article 14. Tenant shall obtain written undertakings from each insurer under policies maintained by Tenant hereunder to notify Landlord, and any other additional insured thereunder, at least thirty (30) days prior to cancellation, amendment or reduction in coverage under any such policy.

14.4. Blanket Coverage. Any policy required to be maintained hereunder by either party may be maintained under a so-called “blanket policy”, insuring other parties and other locations, so long as the amount of insurance required to be provided hereunder is not thereby diminished.

14.5 Waiver of Subrogation. Each policy of property insurance which either party obtains in connection with the Premises shall include a clause or endorsement denying the insurer any rights of subrogation against the other party to the extent rights have been waived by the insured prior to the occurrence of injury or loss. Landlord and Tenant hereby waive any rights against the other for injury or loss due to hazards covered by insurance required to be carried by this Lease, or actually carried, whether or not containing such a waiver of subrogation clause or endorsement, to the extent of the loss covered thereby, or if either party does not, for any reason, have valid enforceable insurance, then, this waiver shall apply to the extent of all property insurance which was required to be carried hereunder.

ARTICLE 15
ASSIGNMENT AND SUBLETTING

15.1 General Limitations. Except as expressly provided in Paragraphs 15.3 and 15.4, without Landlord’s written consent first had and obtained, which consent Landlord shall not unreasonably withhold, Tenant shall not, either voluntarily or by operation of law, assign, mortgage, hypothecate or encumber this Lease, or any interest in this Lease, permit the use of the Premises by any person or persons, franchises, affiliated companies, licensees or concessionaires, other than Tenant, or sublet the Premises or any part of the Premises. Any transfer of this Lease from Tenant by merger, reorganization, liquidation, or the sale, conveyance, transfer by bequest or inheritance, or other transfer of a controlling interest in Tenant (whether by transfer of stock, partnership interest or otherwise) shall constitute an assignment for the purposes of this Lease. Notwithstanding the foregoing, if Tenant is a corporation whose stock is regularly traded on a national stock exchange,- or is regularly traded in the over-the-counter market and quoted on NASDAQ, the transfer of stock, regardless of quantity, shall not constitute an assignment for the purposes of this Lease. A consent to one assignment, subletting, occupation or use shall not constitute a waiver of the necessity of such consent to a subsequent assignment or subletting, whether by Tenant or any subsequent assignee or subtenant, an shall not be deemed a release of Tenant from liability for the full performance of all the terms, conditions and covenants of this Lease on Tenant’s part to be performed, whether occurring before or after such consent, assignment or subletting. Tenant shall reimburse Landlord its actual costs and expenses for attorneys’ fees incurred in connection with any proposed sublease or assignment.

15.2 No Unreasonable “Withholding of Consent. In determining whether or not to consent to the proposed assignment or subleasing, Landlord may consider, among other factors, whether the proposed sublessee or assignee will use the Premises for any use other than the use set forth in Paragraph 7.1. the experience of the proposed sublessee or assignee in operating a business for the use set forth in Paragraph 7.1, and whether the proposed sublessee or assignee has a net worth that is adequate in the circumstances and, in any event, not less than that of Tenant. If Tenant assigns or subleases all or any portion of the Premises on a basis such that the value of the consideration to be received by Tenant will exceed the Rent or prorated portion thereof, as the case may be, for such space reserved in this Lease, then Tenant shall pay to Landlord, upon Tenant’s receipt thereof, fifty percent (50%) of the excess of the Rent and all other consideration paid in connection with or pursuant to the assignment or sublease, over the rental then due as reserved in this Lease applicable to the assigned or subleased space. The acceptance of Rent by Landlord from any other person shall not be construed as a waiver by Landlord of any provision of this Lease, or as a waiver of the requirement of Landlord’s consent to any assignment, subletting or other transfer, or to be a release of Tenant from any obligation under this Lease. Each assignee or subtenant shall jointly assume all obligations of the Tenant under this Lease, and shall be and remain liable jointly and severally with Tenant for the payment of Rent, and for the due performance of all the terms, covenants and conditions and agreements herein contained on Tenant’s part to be performed during the Term; provided, however, that a subtenant shall be liable to Landlord for Rent only in the amount set forth in the sublease. Whether or not Landlord’s consent is required, no assignment shall be binding on Landlord unless such assignee or sublessee shall deliver to Landlord a counterpart of such assignment or sublease (and any related collateral agreements) and an instrument in recordable form which contains a covenant of assumption by the assignee or sublessee satisfactory in substance and form to Landlord, consistent with the above requirements. The failure or refusal of the assignee or sublessee to execute such an instrument of assumption shall not waiver release or discharge the assignee or sublessee from its liability.

15.3 Reorganizations and Mergers. Notwithstanding Section 15.1 to the contrary, Tenant shall be entitled to assign and transfer this Lease without Landlord’s prior consent to the surviving corporation in the event of a merger, reorganization or sale of assets reorganization to which Tenant shall be a party; provided, however, that such subsidiary, affiliated firm or surviving corporation shall conduct the same business from the Premises under the same trade name, shall in writing expressly assume all of the provisions, covenants and conditions of this Lease on the part of Tenant to be kept and performed, shall have a financial net worth no less than the financial net worm of Tenant as of the date hereof, adjusted for any increases in the Consumer Price Index — All Urban Consumers (San Francisco-Oakland-San Jose Area; Base: 1984 = 100) since the date hereof, and further provided (unless Tenant shall thereafter cease to exist) that no such assignment or transfer shall act as a release of Tenant from any of the provisions, covenants and conditions of this Lease on the part of Tenant to be kept and performed. In no event shall the Fixed Rent after such assignment or subletting be less than the Fixed Rent due prior, to the effective date of the assignment or sublease.

15.4 Effect of Violation. Any assignment, mortgage, pledge, hypothecation, encumbrance, subletting or license of this Lease, the leasehold estate hereby created, or the Premises or any portion thereof, either voluntarily or involuntarily, whether by operation of law or otherwise, or any other action by Tenant in violation of the restrictions set forth in this Article 15, without the prior written consent of Landlord first had and obtained therefor, shall be null and void and shall, at the option of Landlord, constitute a material default under this Lease.

ARTICLE 16
TRANSFER OF LANDLORD'S INTEREST

In the event of any transfer or transfers of Landlord’s interest in the Premises, other than a transfer for security purposes only, the transferor shall automatically be relieved of any and all obligations and liabilities on the part of the Landlord accruing from and after the date of such transfer.

ARTICLE 17
DAMAGE OR DESTRUCTION

17.1 Landlord to Rebuild!’ If the Premises are damaged or destroyed by fire or other casualty insured under Landlord’s casualty insurance carried under Paragraph 14.3. then Landlord shall repair the damaged or destroyed portions of the Premises, using reasonable diligence, unless Landlord elects not to repair as hereinafter provided. If such damage or destruction substantially interferes with the conduct of Tenant’s business in the Premises, then a just part of the Fixed Rent shall be abated, to the extent of such interference reasonably attributable to such damage or destruction, until substantial completion of such repairs. Fixed Rent shall abate in its entirety if the Building is so severely damaged that Tenant cannot, in Landlord’s and Tenant’s reasonable judgment, continue to operate its business in the Premises.

17.2 Landlord’s Options to Terminate. If (A) fifty percent (50%) or more of the Gross Leasable Area of the Building is damaged or destroyed by fire or other casualty insured under Landlord’s casualty insurance carried under Paragraph 14.2 (notwithstanding that the Premises may sustain no material damage), or (B) the Building is damaged or destroyed by casualty so insured and the cost of repair or replacement equals or exceeds thirty-three percent (33%) of the actual replacement cost thereof, or (C) the Premises, the Building and/or the Shopping Center, or’any portion thereof, are damaged or destroyed in whole or in part from any cause or casualty, and Landlord does not actually receive insurance proceeds sufficient to fund the cost of repair and restoration, then, in any such event, Landlord may elect, in its sole discretion, to (1) repair or rebuild the damaged or destroyed portion of the Premises, Building or Shopping Center or (2) terminate this Lease by giving written notice of such termination to Tenant. Landlord shall make its election within thirty (30) days after any such damage or destruction. If Landlord elects to repair or rebuild, then it shall proceed with reasonable diligence to make such repairs or rebuilding. Unless Landlord elects to terminate this Lease hereunder, any damage or destruction to the Premises, the Building and/or the Shopping Center shall have no effect on this Lease and this Lease shall remain in full force and effect, the parties waiving the provisions of any statute or law to the contrary.

17.3 Extent of Landlord’s Repair and Rebuilding Obligations. If Landlord elects to repair and rebuild hereunder, then its obligation for such repair and rebuilding shall be limited to a scope of work not exceeding the original scope of work for the portions of the Shopping Center repaired and reconstructed hereunder and Landlord’s Work as set forth in Exhibit “C”. Landlord shall have reasonable control over all design and construction decisions with respect to such repair and rebuilding; provided, however, that Landlord shall seek input from Tenant regarding such repair and rebuilding and shall incorporate Tenant’s reasonable input into such design and construction decisions. All costs and expenses for such repair and rebuilding shall be borne by Landlord. If Landlord elects to repair and rebuild hereunder, then Tenant shall forthwith replace or repair all of Tenant’s signs, trade fixtures, equipment display cases and all other installations made or installed by Tenant under this Lease, regardless of whether paid for by Landlord or Tenant. Tenant shall prosecute its work of repair and reconstruction hereunder with all due diligence and shall reopen for business in the Premises at the earliest possible time after the event of damage or destruction, so that Landlord will be deprived of the benefits of Tenant’s business operations in the Premises for as short a time as possible.

17.4 Tenant Waivers. Tenant hereby waives any right at law or in equity which it might have to terminate this Lease on account of any damage or destruction to the Premises, the Building and/or the Shopping Center, including all rights under California Civil Code Sections 1932(2) and 1933(4), and any similar or successor statutes. In the event of any such damage or destruction, the rights, duties and obligations of the parties shall be governed solely by the applicable provisions of this Lease with respect thereto.

ARTICLE 18
EMINENT DOMAIN

18.1 Entire or Substantial Taking. If the Premises or the Shopping Center, or any portion of or interest in either, is taken for any public or quasi-public use under any statute or by right of eminent domain, or by purchase in lieu thereof, so that in Landlord’s judgment a reasonable amount of reconstruction of the Premises and/or Shopping Center will not result in the Premises being reasonably suited for Tenant’s continued occupancy for the uses and purposes for which the Premises are leased, then this Lease shall terminate as of the date that possession of the Premises or Shopping Center, or part thereof, or interest therein is taken.

18.2 Partial Taking. If any part of or interest in the Premises or the Shopping Center is so taken and the remaining part thereof or interest therein is, in Landlord’s judgment, after reconstruction of the remaining Premises or Shopping Center, reasonably suitable for Tenant’s continued occupancy for the purposes and uses for which the Premises are leased, then this Lease shall, as to the part of the Premises so taken, terminate as of the date possession of such part is taken, and the Fixed Rent then in effect shall be reduced in the proportion that the Gross Leasable Area of the part taken (less any additions thereto by reason of any reconstruction) bears to the original Gross Leasable Area of the Premises. Landlord shall, at its own cost and expense, make necessary repairs or alterations to the remaining Premises and/or Shopping Center Common Area owned by Landlord, so as to constitute the remaining Premises (or the Building) a complete architectural unit, provided that (A) the cost of such work does not exceed the amount of the award available to Landlord as a result of the taking, and (B) the scope of such work shall not exceed that done by Landlord in originally constructing the Building and/or the Premises. A just part of the Fixed Rent shall be abated during such restoration to the “extent that such restoration substantially interferes with the conduct of Tenant’s business in the Premises.

18.3 Disposition of Award. All compensation or damages awarded or paid for any taking hereunder shall belong to and be the property of Landlord, whether such compensation or damages are awarded or paid as compensation for diminution in value of the leasehold, the fee or otherwise, except that Landlord shall not be entitled to any award made to Tenant for loss of business or the unamortized cost of Tenant’s stock, trade fixtures or leasehold improvements paid by Tenant. Tenant waives all right to any portion of the award belonging to Landlord hereunder, and grants to Landlord all of Tenant’s rights therein. 18.4 Further Assurance. Each party shall execute and deliver to the other all documents or instruments that may be necessary or appropriate to effectuate the provisions hereof.

18.5 Tenant Waivers. Tenant hereby waives any right at law or in equity which it might have to terminate this Lease on account of any taking by condemnation or power of eminent domain affecting the Premises, the Building and/or the Shopping Center, including all rights under California Code of Civil Procedure Sections 1265.120 and 1265.130, and any similar or successor statues. In the event of such a taking, the rights, duties and obligations of the parties shall be governed solely by the applicable provisions of this Lease with respect thereto.

ARTICLE 19
SIGNS AND AUCTIONS

19.1 Signage. Tenant shall not place or allow to be placed on the exterior of the Building or any other improvement on the Premises or any exterior door or wall or the exterior or interior of any window of the Building or any other improvement on the Premises or any sign, awning, canopy, marquee, advertising matter, decoration, lettering or other thing of any kind without the prior written consent of Landlord, which consent shall not be unreasonably withheld. Any exterior signage shall be installed, maintained and repaired at Tenant’s sole cost and expense. All exterior signage shall comply with all rules, regulations, ordinances and requirements of any and all governmental agencies having jurisdiction thereof and the terms and provisions of the REA. Except as otherwise herein provided, Tenant shall have the right, at its sole cost and expense, to erect and maintain within the interior of the Building all signs and advertising matter customary or appropriate in the conduct of Tenant’s business. Tenant shall at all times during the Term, at its sole cost and expense, keep its window displays, signs and advertising devices adequately illuminated continuously during such days and hours as Tenant is required to be open for business herein and during such additional hours as Landlord may request, from time to time. Upon the expiration or earlier termination of this Lease, all signage affixed to the exterior of the Building shall be removed, at Tenant’s expense, upon surrender of the Premises, and Tenant shall repair at Tenant’s cost any damage occasioned by such removal.

19.2 Auction or Sale. Tenant shall not conduct or permit to be conducted any sale by auction in, upon or about the Premises or the Common Areas, whether said auction be voluntary, involuntary or pursuant to any assignment for the benefit of creditors, or pursuant to any bankruptcy or other insolvency proceeding.

ARTICLE 20
DEFAULTS AND REMEDIES

20.1 Default Defined. The occurrence of any of the following shall constitute a material default and breach of this Lease by Tenant:

(a) The failure by Tenant to pay any Rent or make any other payment required to be made by Tenant hereunder within five (5) days of the date when due;

(b) The abandonment (which is deemed to include absence from the Premises for more than ten (10) days while in default of any material provision of this Lease);

(c) Tenant’s failure to adequately bond or cause to be released any mechanics’ liens filed against the Premises within ten (10) days after the date same shall have been filed; or

(d) The failure by Tenant to observe or perform any other provision of this Lease to be observed or performed by Tenant, other than those described in subparagraphs (a), (b) and (c) above, where such failure continues for thirty (30) days after written notice thereof by Landlord to Tenant; provided, however, that if the nature of such default is such that it cannot reasonably be cured within such 30-day period, Tenant shall not be deemed to. be in default if Tenant shall commence such cure within such period and thereafter diligently prosecute the same to completion. Such 30-day notice shall be in lieu of and not in addition to any notice required under Section 1161 of the California Code of Civil Procedure.

20.2 Remedies; Termination. In the event of any default by Tenant as set forth in Paragraph 20.1, then, in addition to any other remedies available to Landlord at law, in equity or elsewhere under this Lease, all of which rights and remedies shall be cumulative, with the exercise of one or more rights or remedies not to impair Landlord’s right to exercise any other right or remedy (and which may be exercised with or without legal process as then may be provided or permitted by the laws of the state in which the Premises are located), Landlord shall have the immediate option to terminate this Lease and all rights of Tenant hereunder by giving Tenant written notice of such election to terminate. If Landlord shall elect so to terminate this Lease, then Landlord may recover from Tenant:

(a) The worth at the time of award of any unpaid Rent and other charges which had been earned at the time of such termination; plus

(b) The worth at the time of award of the amount by which the unpaid Rent and other charges which would have been earned after termination until the time of award exceeds the amount of such rental loss Tenant proves could have been reasonably avoided; plus

(c) The worth at the time of award of the amount by which the unpaid Rent and other charges for the balance of the term after the time of award exceeds the amount of such rental loss that Tenant proves could reasonably be avoided; plus

d) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease, or which in the ordinary course of things would be likely to result therefrom, including attorneys’ fees and costs; and

(e) At Landlord’s election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law.

As used in subparagraphs (a) and (b) above, the “worth at the time of award” is computed by allowing interest at the Least Rate (as defined in Paragraph 20.91 As used in subparagraph (c) above, the “worth at the time of award” is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). The amount recoverable by Landlord pursuant to subparagraph (d) above shall include, but is not limited to, any costs or expenses incurred by Landlord in maintaining or preserving the Premises after such default, preparing the Premises for reletting to a new tenant, accomplishing any repairs or alterations to the Premises for the purpose of such reletting, repairing any damage thereto occasioned by the act or omission of Tenant, and any other costs reasonably necessary or appropriate to relet the Premises.

20.3 Remedies; Re-entry. In the event of any such default by Tenant and termination of this Lease by Landlord, upon thirty (30) days written notice to Tenant, Landlord shall also have the right to re-enter the Premises and remove all persons and property from the Premises as provided in Paragraph 21.3. Tenant hereby waives all claims for damages that may be caused by Landlord’s reentering and taking possession of the Premises or removing and storing the property of Tenant as provided in Paragraph 21.3.

20.4 Remedies; Non-termination and Collection of Rent. If Landlord elects not to terminate this Lease as provided in Paragraph 20.2. this Lease shall continue in full force and effect In that event, Landlord may enforce all of its rights and remedies hereunder and at law, including the remedies described in California Civil Code Section 1951.4 and the right to recover Rent and other charges as they come due. However, Tenant shall continue to have, the right to possession of the Premises, and Tenant shall have the right to sublet the same with Landlord’s written consent which consent (for the purposes of this Paragraph 20.4) shall not unreasonably be withheld. If Tenant abandons the Premises, no re-entry or taking possession of the Premises by Landlord shall be construed as an election to terminate this Lease, nor shall it cause a forfeiture of Rent or other charges remaining to be paid during the balance of the term herein, unless a written notice of such intention to terminate be given to Tenant by Landlord.

20.5 No Effect on Indemnification Obligation. Nothing in this Article 20 shall be deemed to affect or waive Landlord’s rights to indemnification for liability or liabilities arising prior to termination of this Lease for personal injury or property damage under Paragraph 13.2 or any other indemnification provision contained in this Lease.

20.6 Landlord’s Default. Landlord shall not be deemed in default hereunder unless Tenant shall have given Landlord written notice of such default specifying such default with particularity and Landlord shall thereupon have thirty (30) days in which to cure any default unless such default cannot reasonably be cured within such period, in which case Landlord shall not be in default if it commences to cure the default within the 30-day period and diligently pursues the completion of same. In the event of any default, Tenant agrees that its exclusive remedy shall be an action for damages, and shall not include a right to terminate this Lease.

20.7 Limitation on Recourse. If Landlord is in default of this Lease and, as a consequence, Tenant recovers a money judgment against Landlord, the judgment shall be satisfied only out of the proceeds of sale received on execution of the judgment and levy against the right, title and interest of Landlord in the Premises and out of rent or other income from the Premises receivable by Landlord, or out of the consideration received by Landlord from the sale or other disposition of all or any part of Landlord’s right, title and interest in the Premises and from no other assets or property of Landlord.

20.8 Notice to Mortgagees and Others. Should Landlord fail to observe or perform any of the covenants or conditions contained in this Lease, before taking any action asserting the right to terminate this Lease (whether or not Tenant actually has such a right under this Lease), Tenant shall give written notice to all ground lessors, mortgagees and/or beneficiaries of deeds of trust (collectively, “lenders”) under instruments recorded against the Premises, setting forth the nature of Landlord’s default. Such lenders shall have a reasonable period of time to cure the default and perform any act which may be necessary to prevent the forfeiture of this Lease. All payments made, and all acts performed by such lenders in order to cure, shall be effected to prevent a forfeiture of the rights of Landlord under this Lease and a termination of this Lease, as if the payments and acts were performed by Landlord instead of by the lenders. If the lenders cannot reasonably take the action required to cure Landlord’s default without terminating or foreclosing Landlord’s interest and acquiring possession of the Premises, the time within which the default must be cured to avoid a termination or forfeiture of the Lease shall be extended to include the period of time reasonably required for such lenders to obtain possession and to effect a cure with due diligence, provided such lenders give Tenant a written undertaking to cure the default. In the absence of the lenders’ express written consent, such an undertaking by the lenders shall not be considered an assumption by the lenders of Landlord’s other obligations under the Lease, and Landlord shall’remain solely liable for the performance of all terms, covenants and conditions of the Lease both prior and subsequent to the lenders’ exercise of any right to cure or related remedy. A lender’s exercise of any right to cure or related remedy shall not in any way constitute a cure or waiver of a breach or default under a ground lease, note, mortgage, deed of trust or any other instrument given as security.

20.9 Remedies; Interest and Late Charges. Any payment not made when due shall bear interest at a rate (the “Lease Rate”) equal to ten percent (10%) per annum, or the maximum amount allowed by law, whichever is less. Any payment of Rent not paid when due shall be subject to a late charge of Two Hundred Fifty Dollars ($250) or five percent (5%) of the Rent then due and payable, whichever is greater, to reimburse Landlord for its administrative costs and expenses in notating and processing such late payment. Such late charge will not limit Landlord’s right to recover its actual costs’ of collection or the exercise of its remedies under this Lease, at law or in equity, in the event of a default.

ARTICLE 21
SURRENDER OF PREMISES; REMOVAL OF PROPERTY

21.1 Condition Upon Surrender. Upon the expiration or earlier termination of this Lease, Tenant shall quit and surrender possession of the Premises, the Building(s) and all improvements located thereon to Landlord in broom-clean condition, free of all refuse, trash and garbage, and in as good order and condition as the same were in at the Commencement Date or as the same thereafter may have been improved by Landlord or Tenant, reasonable wear and tear excepted. Tenant shall fully repair all damage to the Premises resulting from removal of Tenant’s property. In the event of termination prior to the expiration of the term hereof, Tenant shall remove Tenant’s property from the Premises in the manner aforesaid within fifteen (15) days after receipt of written direction to do so from Landlord. If Tenant shall fail to remove any of Tenant’s property as provided herein, Landlord may, but is not obligated, at Tenant’s expense, to remove all of Tenant’s property as provided in Paragraph 21.2.

21.2 Removal of Property Upon Re-entry. Whenever Landlord shall re-enter the Premises as provided in this Lease, any Tenant’s property and any other personal property of Tenant (or any person claiming through or under Tenant) not removed by Tenant (or such person claiming through or under Tenant) upon the expiration of the term of this Lease (or within 48 hours after a termination by-reason of Tenant’s default) shall be considered abandoned. Landlord shall give Tenant whatever notice may legally be required of its right to reclaim any abandoned property (currently, California Civil Code Section 1980, et seq.) and, thereafter, Landlord may remove any or all of such items and dispose of the same in any manner or store the same in a public warehouse or elsewhere for the account and at the expense and risk of Tenant. If Tenant shall fail to pay the cost of storing any such property after it has been stored for a period of ninety (90) days or more, then Landlord may sell any or all of such property at public or private sale, in such manner and at such times and places as Landlord, in its sole discretion, may deem proper, without notice to or demand upon Tenant, for the payment of all or any part of such charges or the removal of any such property, and shall apply the proceeds of such sale: first, to the cost and expenses of such sale, including attorneys’ fees and costs actually incurred; second, to the payment of the cost or charges for storing any such property; third, to the payment of any such sums of money which may then or thereafter be due to Landlord from Tenant under any of the terms hereof plus interest at the Lease Rate; and fourth, the balance, if any, to Tenant.

ARTICLE 22
ATTORNEYS’ FEES

22.1 Litigation Between the Parties. In the event suit is brought to enforce or interpret any part of this Lease, the prevailing party shall be entitled to recover (as element of its costs of suit, and not as damages) reasonable attorneys’ fees and costs incurred therein, and in any appeal in connection therewith, to be fixed by the court. The* “prevailing .party” shall be entitled to recover its costs of suit (whether or not allowable under California Code of Civil Procedure Section 1033.5), whether or not the suit proceeds to final judgment. No sum for attorneys’ fees and costs shall be counted in calculating the amount of a judgment for purposes of determining whether a party is entitled to recover its costs or attorneys’ fees and costs. The prevailing party shall further be entitled to recover all costs and fees incurred in connection with the enforcement of any judgment or order issued in connection with such litigation (including attorneys’ fees, marshall fees, garnishment, third party examination, levy fees and costs, bankruptcy-related fees and costs, and postjudgment motions), and this provision shall not merge with such judgment and shall survive the entry thereof Any judgment entered in such action shall contain a specific provision providing for the recovery of such fees and costs incurred in enforcing such judgment.

ARTICLE 23
WAIVER

The waiver by Landlord or Tenant of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of such term, covenant or condition as to any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance or payment of Rent hereunder by Landlord or Tenant, as the case may be, shall not be deemed to be a waiver of any preceding breach by the other of any term, covenant or condition of this Lease (other than the failure of Tenant to pay the particular Rent so accepted) regardless of Landlord’s or Tenant’s knowledge of such preceding breach at the time of acceptance or payment of such Rent.

ARTICLE 24
HOLDING OVER

If Tenant holds over after the expiration of the term, with or without the express or implied consent of Landlord, such tenancy shall be from month-to-month only, and not a renewal hereof or an extension for any further term, and in such case Rent shall be payable in an amount equal to twice the amount payable by Tenant during the last month of the term hereof pursuant to and at the times specified in Articles 4 and 5, and such month-to-month tenancy shall be subject to every other term, covenant and agreement contained herein. Nothing contained in this Article 24 shall be construed as a consent by Landlord to any holding over by Tenant, or as relieving Tenant from liability for any damages which such holding over may cause Landlord, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises” to Landlord as provided in Article 22 forthwith upon the expiration or other termination of the Term.

ARTICLE 25
SUBORDINATION AND ATTORNMENT

This Lease is subject and subordinate to all ground or master leases, mortgages and deeds of trust which now affect the Premises and the Shopping Center, and to all renewals, modifications, consolidations, replacements and extensions thereof. If the lessor under any such lease or the holder or holders of any such mortgage or deed of trust shall advise Landlord that they desire or require this Lease to be prior and superior thereto, upon written request of Landlord to Tenant, Tenant shall promptly execute, acknowledge and deliver any and all documents or instruments which Landlord or such lessor, holder or holders deem necessary or desirable for purposes thereof. Landlord shall have the right to cause this Lease to be and become and remain subject and subordinate to any and all ground or master leases, mortgages or deeds of trust which may hereafter be executed covering the Premises or any renewals, modifications, consolidations, replacements or extensions thereof, for the full amount of all advances made or to be made thereunder and without regard to the time or character of such advances, together with interest thereon and subject to all the terms and provisions thereof. Within ten (10) business days after Landlord’s written request therefor, Tenant shall execute, acknowledge and deliver any and all documents or instruments requested by Landlord, or that are necessary or proper to assure the subordination of this Lease to any such mortgages, deeds of trust, or leasehold estates; provided, however, that the foregoing provisions with respect to such election of subordination by Landlord shall not be effective unless the owner or holder of any such mortgage or deed of trust, or the lessor under any such leasehold estate, shall execute with Tenant a nondisturbance agreement under which such owner, holder or lessor shall agree that, in the event of termination of such leasehold estate or upon the foreclosure of any such mortgage or deed of trust, Tenant’s quiet enjoyment of the Premises will not be disturbed so long as Tenant pays Rent and observes and performs all of the obligations under this Lease to be observed and performed by Tenant. Tenant’s failure to deliver such a document or instrument of subordination within such ten (10) business day period shall, at the option of Landlord, constitute a material breach or default under this Lease. Notwithstanding anything to the contrary set forth in this Article 25. Tenant hereby attorns and agrees to attorn to any Person purchasing or otherwise acquiring the or the Premises at any sale or other proceeding or pursuant to the exercise of any other rights, powers or remedies under such mortgages or deeds of trust, or ground or underlying leases, at their option, as if such Person had been named as Landlord herein, it being intended hereby that if this Lease is terminated or otherwise defeated by reason of any act or actions by the owner or holder of any such mortgage or deed of trust, or the lessor under any such leasehold estate, then, at the option of any such Person so purchasing or otherwise acquiring the Premises, this Lease shall continue in full force and effect.

ARTICLE 26
HEIRS AND ASSIGNS; TIME OF ESSENCE

Subject to the provisions of Article 15. this Lease is intended to and does bind and accrue to the benefit of the heirs, executors, administrators, successors and assigns of the parties hereto. Time is of the essence of this Lease.

ARTICLE 27
INTERPRETATION

27.1 Severability. If any term or provision of this Lease, the deletion of which would not adversely affect the receipt of any material benefit by either party hereunder, shall be held invalid or unenforceable to any extent, then 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.

27.2 Integration. This Lease along with any exhibits and attachments or other documents affixed hereto or referred to herein constitutes the entire and exclusive agreement between Landlord and Tenant relative to the Premises. All prior or contemporaneous oral agreements and understandings relative to the leasing of the Premises are superseded by this Lease.

27.3 Amendment. This Lease may be altered, amended or revoked only by an instrument in writing signed by both Landlord and Tenant and making specific reference to this lease.

27.4 Section Headings and References. The headings included in this Lease are for convenience only, and shall not be used to interpret this Lease. References in this Lease to Articles, Paragraphs, sections and Exhibits shall refer to the Articles, Paragraphs, sections and Exhibits of this Lease.

27.5 Dependence of Covenants. All obligations of Landlord are dependent upon the timely performance, without breach, by Tenant of Tenant’s material obligations under this Lease.

27.6 Lease Draftsman. This Lease was negotiated between the parties and their respective counsel and professional advisors, and the parties agree that such provisions shall be interpreted without reference to the draftsman of the lease or any portion thereof, because this Lease is a product of all their efforts.

27.7 Landlord and Tenant. The words “Landlord” and “Tenant”, as used herein, include the plural as well as the singular, whenever appropriate. Words used in the neuter include the masculine and feminine and words in the masculine or feminine gender include the neuter, whenever appropriate. If more than one person executes this Lease as Tenant, (i) each of them is jointly and severally liable for the keeping, observing and performing of each and all of the obligations hereunder imposed upon Tenant and (ii) the act or notice. from, or notice or refund to, or the signature of, any one or more of them with respect to the tenancy or this Lease shall be binding upon each and all of the persons executing this Lease as Tenant with the same force and effect as if each and all of them had so acted or so given or received such notice or refund or so signed.

27.8 Days, Months and Years. Unless otherwise specified, the terms “day(s)”, “month(s)” or “year(s)” when used herein, refer to calendar day(s), month(s) or year(s), as the case may be. Notwithstanding any provision of applicable law to the contrary, the term “business days” as used in this Lease shall not include Saturdays. 27.9 Term. The words “Term”, “lease term” or “term of this Lease”, when used herein, refer to the term of this Lease and any duly exercised extensions and renewals thereof.

27.10 Including. Use in this Lease of the words "including" or "such as", or words of similar import, when following any general term, statement or matter shall not be construed to limit such term, statement or matter to the specific items mentioned, whether or not language of non-limitation such as “without limitation” or “but not limited to”, or words of similar import, is used with reference thereto, but rather shall refer to all other items that could reasonably fall within the. broadest possible scope of such term, statement or matter.

ARTICLE 28
RIGHT OF LANDLORD TO PERFORM

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 and without any abatement of Rent. If Tenant shall fail to pay any sum of money, other than 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 beyond any applicable grace period set forth in Article 20, Landlord may, but shall not be obligated so to do, and without waiving or releasing Tenant from any obligations of Tenant, make any such payment or perform any such other act. All sums so paid by Landlord and all necessary incidental costs, together with interest thereon at the Lease Rate from the date of such payment by Landlord until the date paid in full by Tenant, shall be payable to Landlord within ten (10) days of demand. Tenant shall pay any such sums and Landlord shall have (in addition to any other right or remedy 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.

ARTICLE 29
NOTICES

Unless otherwise specified, all notices which Landlord or Tenant may be required or may desire to give to the other shall be in writing and shall be delivered by personal service, or by certified mail, return receipt requested, postage prepaid, or by overnight courier delivery service, in each case addressed to Landlord at the address for Landlord set forth in Article 1. and to Tenant at the address for Tenant set forth in Article 1 or, after the Rent Commencement Date, to Tenant at the Premises whether or not Tenant has departed from, abandoned or vacated the Premises, or addressed to such other address or addresses as either Landlord or Tenant may from time to time designate to the other in writing. Any such notice shall be deemed to have been given for purposes of this Lease on the date of delivery or, if mailed, on the third business day after the mailing thereof as hereinabove provided.

ARTICLE 30
QUIET ENJOYMENT

Landlord covenants and agrees that Tenant, upon paying the Rent and all other charges herein provided for and observing and keeping the covenants, agreements and conditions of this Lease on its part to be observed and kept, shall lawfully and quietly hold, occupy and enjoy the Premises during the Term without hindrance or molestation of anyone lawfully claiming by, through or under Landlord, subject, however, to the matters set forth in this Lease. Landlord shall not be liable for any acts of other tenants of the Shopping Center, their employees, invitees or customers or any other third party.

ARTICLE 31
ESTOPPEL CERTIFICATE

At any time and from time to time upon not less than ten (10) business days’ prior notice by Landlord, Tenant shall execute, acknowledge and deliver to Landlord a statement in writing certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same are in full force and effect as modified and stating the modifications), the dates to which the Fixed Rent and other charges have been paid in advance, if any, stating whether or not to the best knowledge of the signer of any such certificate, Landlord is in default in performance of any covenant, agreement or condition contained in this Lease and, if so, specifying each such default of which the signer may have knowledge, and setting forth such other information as Landlord may reasonably request, it being intended that any such statement delivered pursuant hereto may be relied upon by any prospective purchaser of the Premises or any interest of Landlord therein, or any prospective mortgagee thereof or any prospective assignee of any mortgagee thereof or any prospective master or ground lessor, If Tenant fails to return such estoppel certificate in accordance with the above, then the copy of the estoppel certificate as delivered to Tenant for execution shall be deemed to be correct and may be relied upon.

ARTICLE 32
BROKERS

Tenant hereby represents and warrants to Landlord that Tenant has had no dealings with any real estate broker, agent or finder in connection with this Lease other than as specified, in of Article 1. and knows of no real estate broker, agent or finder who is entitled to a commission or finder’s fee in connection with this Lease other than as specified in Article 1. Tenant shall indemnify, defend, protect and hold Landlord harmless from and against all losses, liabilities, damages, claims, causes of action and expenses (including attorneys’ fees) arising out of the falsity or Tenant’s breach of the foregoing representation and warranty.

ARTICLE 33
MERGER

The voluntary or other surrender of this Lease by Tenant to Landlord, or a mutual termination thereof, shall not work a merger, and shall at the option of Landlord operate as an assignment to it of any or all subleases or subtenancies affecting the Premises. Furthermore, no termination of any ground lease or master lease shall work a merger and shall, at the option of the ground lessor or master lessor, operate as an assignment of any subleases or subtenancies.

ARTICLE 34
LANDLORD RESERVATIONS

Landlord reserves the right from time to time in Landlord’s sole and absolute discretion:

(a) To make changes to the structure, location, size and configuration of the Common Areas, and to grant exclusive licenses and/or leases with respect to the use of and/or occupancy of any portions of the Common Areas; provided, however, in no event shall Landlord reduce the number of parking spaces on the Premises or make any changes to the Common Areas which would materially impact access to and from the Premises or visibility of the Premises without the prior written consent of Tenant;

(b) To close temporarily any of the Common Areas for maintenance purposes or to construct additional improvements in the Shopping Center (but not on the Premises) or to demolish existing improvements in the Shopping Center (but not on the Premises), so long as reasonable access to the Premises remains available in the Common Areas;

(c) To expand or contract the Shopping Center by adding buildings and improvements or demolishing buildings and improvements, even though such additions or deletions may vary the availability of parking spaces within the Common Areas;

(d) To use the Common Areas while engaged in making additional improvements, repairs or alterations to buildings in the Shopping Center, or any portion thereof;

(e) To establish, promulgate and enforce rules and regulations concerning the Common Areas for the proper and efficient management, operation, maintenance and use-thereof, or in order to comply with new or superseding governmental laws, rules or regulations. Such Rules and Regulations may be canceled, changed, modified and/or supplemented from time to time by Landlord. Upon dissemination of the same to Tenant, such Rules and Regulations shall be deemed fully incorporated herein, and a breach of the same by Tenant shall constitute a default hereunder. Landlord shall enforce the Rules and Regulations without discrimination and impartially among all tenants similarly affected. However, in the event of any disagreement or inconsistency between the Rules and Regulations and this Lease as interpreted without such incorporation, the Lease as so interpreted shall control.

ARTICLE 35
HAZARDOUS OR INFECTIOUS SUBSTANCES

35.1 Covenants of Tenant. .Tenant represents, warrants and covenants as follows:

(a) No Hazardous Substance (as defined below) may be brought upon, used, kept or stored in, on, about or under the Premises or anywhere else in the Shopping Center by Tenant, its agents, representatives, employees, contractors or invitees, without the prior written consent of Landlord (which consent Landlord shall not unreasonably withhold as long as Tenant demonstrates to Landlord’s satisfaction that such Hazardous Substance is necessary or useful to Tenant’s business and will be brought upon, used, kept and stored in a manner which complies with all Environmental, Health and Safety Requirements [as defined below] regulating such Hazardous Substance, and with the highest standards prevailing in the industry for such Hazardous Substance).

(b) If any Hazardous Substance is brought upon, used, kept or store in, on, about or under the Premises or the Shopping Center by Tenant, then Tenant shall do so in a manner which complies with all Environmental, Health and Safety Requirements regulating such Hazardous Substance and with the highest standards prevailing in the industry for such Hazardous Substance. Without limiting any of the other obligations of Tenant set forth in this Lease, Tenant shall, at its own cost and expense, procure, maintain in effect and comply with all conditions and requirements of any and all permits, licenses and other governmental and regulatory, approvals or authorizations required under any Environmental, Health or Safety Requirement in connection with the bringing, use, keeping and storage of such Hazardous Substance in, on, about or under the Premises or the Shopping Center. Tenant shall submit to Landlord copies of all such permits, licenses, or other governmental or regulatory approvals or authorizations within five (5) business days of its receipt thereof.

(c) Upon written demand by Landlord in any instance in which the presence of any Hazardous Substance on the Premises or in the Shopping Center was caused or permitted by Tenant without Landlord’s prior written consent, Tenant shall promptly remove and dispose of the same at Tenant’s sole cost and expense and in compliance with all applicable Environmental, Health and Safety Requirements. If the presence of any Hazardous Substance in, on, about or under the Premises or the Shopping Center caused or permitted by Tenant results in any contamination of the Premises or the Shopping Center or the surrounding environment, Tenant shall promptly take all actions at its sole cost and expense as are necessary to return the Premises or the Shopping Center or the surrounding environment to the condition existing prior to such contamination (“Remediation”’): provided, however, that Tenant shall not undertake any Remediation without first providing Landlord with -written notice thereof and obtaining Landlord’s approval thereof. Tenant shall carry out any Remediation in a manner which will minimize the impact on the businesses conducted by other tenants in the Shopping Center and in a manner which complies with all Environmental, Health and Safety Requirements. Further, Tenant shall not undertake any Remediation, nor enter into any settlement agreement, consent decree or other compromise with respect to any claims relating to any Hazardous Substance in any way connected with the Premises or the Shopping Center without first notifying Landlord of Tenant’s intention to do so and affording Landlord ample opportunity to appear, intervene or otherwise appropriately assert and protect Landlord’s interest with respect thereto.

(d) Upon the expiration or early termination of the Term, Tenant shall cause to be removed from the Premises or the Shopping Center, as appropriate, all Hazardous Substances brought upon, used, kept, or stored in, on, about or under the Premises or the Shopping Center by Tenant, as well as all receptacles or containers therefor, and shall cause such Hazardous Substances and such receptacles or containers to be stored, treated, transported and/or disposed of in compliance with all applicable Environmental, Health and Safety Requirements. Any Hazardous Substances or receptacles or containers therefor which Tenant causes to be removed from the Premises or the Shopping Center shall be removed solely by duly licensed haulers and transported to and disposed of at duly licensed facilities for the final disposal of such Hazardous Substances or receptacles or containers therefor reflecting the legal and proper removal, storage, treatment, transportation and/or disposal thereof. Tenant shall, at its sole cost and expense, repair any damage to the Premises or the Shopping Center resulting from Tenant’s removal of such Hazardous Substances and receptacles or containers therefor. Tenant’s obligation to pay Fixed Rent and all other charges shall continue until such removal by Tenant has been completed to Landlord’s satisfaction, notwithstanding the expiration or early termination of the term of this Lease.

(e) Tenant shall notify Landlord in writing immediately upon becoming aware of:

(i) any enforcement, cleanup, remediation or other action threatened, instituted or completed by any governmental or regulatory agency or private person with respect to the Premises or the Shopping Center relating to Hazardous Substances;

(ii) any claim threatened or made by any person against Tenant or the Premises or the Shopping Center for personal injury, property damage, other losses, contribution, cost recovery, compensation or any other matter with respect to the Premises or the (name of shopping complex) relating to •’ Hazardous Substances;

(iii) any reports made by or to any governmental or regulatory agency with respect to the Premises or the Shopping Center relating to Hazardous Substances, including any complaints, notices or asserted violations in connection therewith; and

(iv) any other information with respect to the Premises or the Shopping Center relating to Hazardous Substances.

Further, Tenant shall also supply to Landlord as promptly as possible, and in any event within five (5) business days after Tenant first receives or sends the same, copies of all claims, reports, complaints, notices, warnings, asserted violations or other documents relating in any way to the foregoing.

(f) Landlord and its agents and representatives shall have the right to communicate, verbally or in writing, with any governmental or regulatory agency or any environmental consultant on any matter with respect to the Premises or the Shopping Center relating to Hazardous Substances. Landlord shall be entitled to copies of any and all notices, inspection reports or other documents issued by or to any such governmental or regulatory agency or consultant with respect to the Premises or the Shopping Center relating to Hazardous Substances.

35.2 Indemnification. If Tenant breaches any of its covenants or obligations in this Article 35. or if the presence of Hazardous Substances on the Premises or the Shopping Center caused or permitted by Tenant results in contamination of the Premises or the Shopping Center, or if contamination of the Premises or the Shopping Center by Hazardous Substances otherwise occurs for which Tenant is legally liable to Landlord for damage resulting therefrom, or if any lender or governmental agency requires an investigation to determine whether there has been any contamination of the Premises or the Shopping Center, then Tenant shall indemnify, defend, protect and hold harmless” Landlord, any subsidiary or other affiliate of Landlord, and any director, officer, shareholder, employee, agent, attorney or partner of any of the foregoing, from and against any and all claims, damages, penalties, fines, costs, liabilities and losses (including diminution in value of the Premises or the Shopping Center, damages for the loss or restriction on use of rental or usable space or of any other amenity of the Premises or the Shopping Center, damages arising from any adverse impact on marketing of space in the Premises or the Shopping Center, other consequential damages and sums paid in settlement of claims, attorneys’ fees, consultants’ fees and experts’ fees) which arise during or after the Term as a result of such contamination. This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any governmental or regulatory agency or any private person due to the presence of Hazardous Substances at the Premises or the Shopping Center or in the soil or ground water in, on, about or under the Premises or the Shopping Center.

35.3 Inspection. If Tenant breaches its covenants or obligations in this Article 35. or if the presence of Hazardous Substances on the Premises or the Shopping Center caused or permitted by Tenant results in contamination of the Premises or the Shopping Center, or if contamination of the Premises or the Shopping Center by Hazardous Substances otherwise occurs for which Tenant is legally liable to Landlord for damage resulting therefrom, or if Landlord, any lender or governmental agency requires an investigation to determine whether there has been any violation of this Article 35, then Landlord and its agents and representatives shah1 have the right, at any reasonable time and from time to time during the term of this Lease, to enter upon the Premises to” perform monitoring, testing or other analyses, and to review any and all applicable documents, notices, correspondence or other materials which may be in the possession of Tenant. Further, Tenant shall be obligated to provide Landlord, within five (5) business days of Landlord’s request therefor, with copies of all such applicable documents which may be in Tenant’s possession but are not at the Premises. All costs and expenses reasonably incurred by Landlord in connection therewith shall become due and payable by Tenant upon Landlord’s presentation to Tenant of an invoice therefor.

35.4 Definition of Hazardous Substance. As used herein, the term “Hazardous Substance” shall mean any substance, material, waste, petroleum product, contaminant or pollutant determined by any local, regional, state or federal governmental agency, court, judicial or quasi-judicial body or legislative or quasi-legislative body pursuant to any Environmental, Health and Safety Requirement to be hazardous, toxic, infectious, radioactive, ignitable or flammable, corrosive, persistent or bioaccumulative, explosive, reactive or otherwise dangerous.

35.5 Definition of Environmental, Health and Safety Requirement. As used herein, the term “Environmental, Health and Safety Requirement” shall mean any law, statute, ordinance, rule, regulation, order, judgment or decree promulgated by any local, regional, state or federal governmental agency, court, judicial or quasi-judicial body or legislative or quasi-legislative body which relates to’matters of the environment, health, industrial hygiene or safety.

35.6 Survival. The representations, warranties, covenants, agreements and indemnities of Tenant set forth in this Article 35 shall survive the expiration or earlier termination of this Lease and shall not be affected by any investigation, or information obtained as a result of any investigation, by or on behalf of Landlord or any prospective lessee.

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the Execution Date.

LANDLORD:

ANTHONY SAMMUT and CHRISTINE SAMMUT,
Trustees of the Anthony & Christine Sammut
Revocable Trust u/t/d February 14, 1992,

By: /s/ ANTHONY SAMMUT
Anthony Sammut 3/2/98
Title: Trustee

By: /s/ CHRISTINE SAMMUT
Christine Sammut 3/2/98
Title: Trustee

TENANT:
CENTRAL COAST BANCORP

By: /s/ J. MCCARTHY
J. MCCARTHY
(typed or printed name)
Title: EVP, COO

EXHIBIT “A”
[GRAPHIC OMITTED]

EXHIBIT “B”
[GRAPHIC OMITTED]

EXHIBIT “C”
WORK LETTER

THIS WORK LETTER (this “Agreement”) is made and entered into by and between Landlord and Tenant as of the Execution Date. The purpose of this Agreement is to set forth the respective obligations of Landlord and Tenant with respect to the design and construction of the Building. This Agreement shall be deemed a part of the Lease to which it is attached. Accordingly, capitalized terms which are used herein and defined in the Lease shall have the meaning given in the Lease.

1. Approval of Plans for Tenant's Improvements.

1.1. Submittal of Plans.

1.1.1. Tenant's Preliminary Plans. As soon as reasonably possible after the execution of the Lease, Tenant and Landlord shall meet to review and approve “Tenant’s Preliminary Plans,” which shall include the following: (i) exterior and interior elevations; (ii) a floor plan; (iii) architectural finish schedule; (iv) reflected ceiling plans; (v) electrical, mechanical and plumbing plans; and (vi) outline specifications. If Landlord and Tenant do not mutually agree upon Tenant’s Preliminary Plans within ninety (90) days after the execution of the Lease, then Landlord may terminate the Lease upon written notice to Tenant.

1.1.2. Tenant's Final Plans. Within fifteen (15) days after approval of Tenant’s Preliminary Plans, Landlord shall cause Landlord’s architect to prepare complete plans, specifications and working drawings which incorporate and are consistent with Tenant’s Preliminary Plans, as previously approved by Landlord and Tenant, and which show in detail the intended design, construction and finishing of all portions of Tenant’s Improvements, in sufficient detail for construction (“Tenant’s Final Plans”). If Landlord and Tenant do not mutually agree upon Tenant’s Final Plans within thirty (30) days after the approval of Tenant’s Preliminary Plans, then Landlord shall have the right to terminate this Lease upon written notice to Tenant.

2. Standard of Construction. The construction of the Building shall comply with all applicable laws, codes, rules and regulations of all governmental and quasi- governmental authorities with jurisdiction. Landlord shall not change any portion of the Building from the description thereof contained in Tenant’s Final Plans, as approved by Landlord, unless Tenant first obtains Tenant’s written approval, which approval shall not be unreasonably withheld.

3. Commencement and Performance of Tenant’s Improvements. Landlord shall commence construction of Tenant’s Building promptly upon the approval of Tenant’s Final Plans. Landlord shall diligently proceed with construction and shall complete construction of Tenant’s Building as soon as is reasonably possible. Tenant shall accept possession of the Building when the Building is “substantially complete.” For the purposes of this Agreement, the Building shall be deemed substantially complete when it is complete for Tenant’s use and occupancy subject to the completion of standard punchlist items and a certificate of occupancy or a temporary certificate of occupancy is issued. Following the delivery of the Building to Tenant, Tenant shall install its fixtures and equipment as is necessary to commence operation in the Premises.

EX-10

EXHIBIT A
BASIC LEASE PROVISIONS

This Exhibit A contains a summary of the basic provisions of the Lease (the “Lease”) between the Owner and Tenant and concerning the Leased Premises hereinafter described. Reference is made to the main body of the Lease to which this Exhibit is attached for the complete terms and provisions thereof. References to Articles and Sections are to the Lease.

The words and figures set forth in paragraphs A to S, both inclusive, are part of the Lease wherever appropriate reference is made thereto, unless they are expressly modified elsewhere in the Lease. References to Section or Article numbers are to relevant portions of the Lease.

A. Date of Execution: April 25, 2000

B. Owner: RODERICK D. SEIGLE, Trustee of the SEIGLE FAMILY TRUST dated October 14,1988, dba WATSONVILLE CROSSROADS

C. Tenant's Legal Name: COMMUNITY BANK OF CENTRAL CALIFORNIA, a Calif. Corp.

D. Tenant's Trade Name: [same]

E. Shopping Center: The improved real property commonly known as WATSONVILLE CROSSROADS SHOPPING CENTER more particularly described and depicted on the Site Plan marked Exhibit B located at: Green Valley & Main Streets, Watsonville, California.

F. Leased Premises and Address: The Leased Premises consist of the area generally outlined in color on Exhibit B, containing the following approximate measurements (See Exhibit C for specific dimensions): Floor Area: 971 +/- square feet. See Section 1.02

Address of Leased Premises: 1915 Main Street, Watsonville, CA 95076

G. Use of Leased Premises: Commercial Banking.

H. Term: Three (3) years, commencing upon completion of Tenant Improvements and issuance of occupancy permit by City of Watsonville, but in any event no later than September 1, 2000, and ending three (3) years thereafter. The precise Commencement Date will be confirmed by a Commencement Addendum (Section 1.04) (form attached as Addendum One). Tenant may take possession of the Premises upon execution of this Lease and payment of required sums for purpose of constructing Tenant Improvements.

Option to Extend: Tenant shall have an option to extend the term for two additional three (3) year terms, as more particularly described in Addendum Two.

I. Rent: Tenant will pay monthly rent as provided in Article Two of the Lease, summarized below:

Fixed Monthly Rent: The following fixed monthly rent, triple net (NNN), shall be payable as provided in Article Two of the Lease.

First lease year $0.89 per square foot, NNN ($864.19/mo + NNN)
Second lease year $1.30 per square foot, NNN ($l,262.30/mo + NNN)
Third lease year $1.34 per square foot, NNN ($1,301.14/mo + NNN)

Additional Rent: Tenant’s prorata share of Shopping Center Operating Costs (NNN) (aka CAMs) as defined in Section 9.01 (currently estimated at 350 per square foot per month, not including promotional and advertising assessments paid to Merchants Association) commencing when Owner makes Premises available for occupancy and payable monthly, subject to adjustment quarterly to actual as provided in Section 9.01. Various additional charges may apply if incurred by Tenant (see Section 2.01).

Merchant's Association: The usual annual Merchant's Association dues are 50(pound) per square foot or a minimum of Five Hundred Dollars ($500.00) per year. Tenant will pay a prorated share to the Merchant's Association in the first lease year

J. Security Deposit: Tenant must pay a security deposit of ONE THOUSAND FIVE HUNDRED DOLLARS ($1,500). The Security Deposit will be held by Owner under the lease provisions of Article Seven.

K Late Charge: Six percent (6%) of unpaid amounts per Section 2.05.

L. Payment on Execution: Tenant will pay the following upon execution of this Lease:

First month's rent	$         864	.19
One month's CAMs (estimate)	339	.85
Security Deposit	1,500	.00
Prorated Merchant's Dues (July-Dec)	250	.00
Total due on execution	$     2,954	.04

M. Owner's Address for Rent and Notices:

     SEIGLE TRUST dba WATSONVILLE CROSSROADS
     155 Westridge Drive
     Watsonville, CA 95076
     Phone (831) 722-7609
     Fax (831) 722-4629

N. Tenants' Addresses and Phone Numbers for Notices (if different than premises):

     COMMUNITY BANK OF CENTRAL CALIFORNIA
     1915 Main Street
     Watsonville, CA 95076
     Phone (831)
     Fax (831)

O. Addenda: The following addenda are attached hereto and made a part hereof:

     Addendum One: Commencement Addendum
     Addendum Two: Option to Extend

P. Signage: Tenant agrees to have its signage prepared in compliance with Exhibit D installed no later than thirty (30) days after the Commencement Date. Prior to that date, Tenant may install signs both on the front and the side of the south side of the building, subject to the Owner’s approval and any requirements of the City of Watsonville. Owner will remove the striped awning currently in place over the entrance. Front signage must fit within the existing facia.

Q. Leasehold Improvements: Owner will make those improvements specified on Exhibit E; Tenant will be responsible for the remaining improvements required for Tenant's use of the Premises. Owner encourages Tenant to coordinate its improvements with Owner to expedite Tenant's move-in, e.g. any electrical changes needed by Tenant could be done while Owner's electrician is on-site.

R. Financial Statements: This Lease is conditioned upon Owner's approval of Tenant's financial statements. Tenant agrees to submit current financial statements for the last two tax years to Owner for review and approval on or before the execution of this Lease. In addition, Tenant corporation agrees to provide Owner with annual calendar year financial statements by April 1 of each year

S. Deleted Clauses in Lease. Sections 3.01, 3.02,3.03,4.01, 4.02, 6.03, and 8.04 shall be deemed deleted from the Lease.

OWNER:	TENANT:
SEIGLE FAMILY TRUST dated October 14,1988	COMMUNITY BANK OF CENTRAL CALIFORNIA
	a California Corporation
By: /s/ RODERICK D. SEIGLE	By: /s/ HARRY D. WARDWELL
Roderick D. Seigle, Trustee	Sr. VP, Branch Administrator
	[print name and title of authorized officer]
	Harry D. Wardwell

Exhibit B
[Graphic Omitted]

Exhibit C
[Graphic Omitted]

Exhibit D

SIGNS

INTRODUCTION

The following represents the criteria for an overall sign program for the Watsonville Crossroads Shopping Center. These criteria have been established for the purpose of assuring a coordinated sign program for the mutual benefit of all Tenants. Conformance will be strictly enforced. Any installed non-conforming or unapproved sign must be brought to conformance at the non-conforming Occupant’s expense.

Owner’s Property Manager is empowered to administer and interpret the criteria, but he is not authorized to approve any departure from the criteria without approval of the Owner and the City of Watsonville.

GENERAL CRITERIA

1. General Requirements:

a. All signs shall be in conformance with this Exhibit D.

b. Tenant shall submit or cause to be submitted to the Owner for approval, before fabrication, at least three (3) copies of detail drawings including all lettering and/or graphics. All face changes shall also require approval.

c. All permits for signs and their installation shall be obtained by the Occupant or his representative at this expense.

d. Tenant shall be responsible for the fulfillment of all requirements and specifications.

e. A walkway sign and the Building Fascia sign(s) shall meet the Design Requirements below.

2. Design Requirements:

Building Fascia Signs

a. Signs shall be permitted only within the areas as designated as shown on the building elevation included in Exhibit C.

b. The maximum length of the sign letters shall not exceed 50% of a store’s frontage or 12 feet, whichever is less. The height of the sign letters cannot exceed 18 inches.

c. All building sign letters will be back-lighted, single faces illuminated. The letter light box shall be 5 inches deep with a front metal retainer. The box and retainer color must be one color for all letters in the Tenant name.

d. The store name letters must be at least 75% of the space or letters with no more than 25% of the space allocated to the store’s logo.

e. Each store's building letter sign will have its own letter or type style and color.

Walkway Sign

Each store, which has an overhang over the walkway, will have a walkway sign (5 feet long and 12 inches high) with its own logo not to exceed 25% of the walkway sign and letter style, letter color to be terra cotta on a dried redwood carved sign, both sides with letters and trim band raised and background gouged. The border and trim will be stained terra cotta and the background will be painted the color ivory. The sign will be centered in the walkway and perpendicular to the store’s front door.

3. General Specifications:

a. Painted lettering will not be permitted.

b. Flashing, moving, neon or audible signs will not be permitted, except with Owner's prior written approval.

c. All electrical signs shall bear the UL Label, and their installation must comply with all local building and electrical codes.

d. No exposed conduit, tubing or raceways will be permitted except as shown on the attached exhibit.

e. No exposed neon lighting shall be used on signs, symbols or decorative elements.

f. All conductors, transformers and other equipment shall be concealed.

g. Electrical service to all signs shall be on landlord’s meters and shall be part of Common Area Maintenance construction and operation cost.

h. All bolts, fastening, clips etc. shall be painted out with sign can.

i. No signmaker’s label or other identification will be permitted on the exposed surface of sign, except those required by local ordinance which latter shall be placed in an inconspicuous location.

j. All penetrations of the building struction required or sign installation shall be neatly sealed in watertight condition.

k. 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 Occupant’s responsibility to correct.

1. Occupant shall be fully responsible for the operations of Occupant's sign contractor.

m. The maximum current for sign lamps shall not exceed 800 milliamps.

n. No signs of any sort shall be permitted on the building roof.

o. Wording of sign shall include and only include Occupant's trade name or insignia.

4. Window Signs

General Criteria

The placement of signs in a window are limited to size, frequency, of use, type of sign and subject matter as specified below.

Specifications.

a. The size of the total window signs at any time shall not exceed the Tenant’s window space by ten square feet for each 20 linear feet of store front; and, in no case shall the total window sign coverage exceed 20% of the Tenant’s window area. This paragraph includes the sign(s) for store operating hours, and open and closed signs.

b. Window signs, excepting Operating Hours Signage, are for a temporary purpose to inform customers about a sale or featured item. Therefore, all signs are limited in their window appearance for a period not to exceed seven (7) consecutive days or seven days in any 30 day period.

c. All window signs are to have a professional appearance.

d. The subject matter for the window signs are for sales, products and/or event which are limited in their promotional period. No promotional period can extend for more than seven (7) days without the expressed approval of the Owner.

EXHIBIT E
TENANT IMPROVEMENT SPECIFICATIONS

REQUIREMENTS FOR TENANTS MANAGING THEIR OWN CONSTRUCTION: These requirements must be met before the commencement of any improvements by Tenant:

Preparation of the plans and specifications shall meet local building official requirements. (City of Watsonville, Building Inspection Department (408) 728-6018).

Plans and specifications are to be reviewed and approved by the Owner before submittal to the City of Watsonville,

The City must issue a Building Permit which must be posted on site, and a copy must be delivered to the Owner, prior to any construction.

Tenant must hire a licensed general contractor to oversee the project. The general contractor and all subcontractors must submit the following to the Owner before their portion of work begins.

1. A letter from all unions to whom benefits will be owed by the contractor(s) on their payroll, stating that benefit payments are current, if applicable. If the contractor(s) has no affiliation with a Union, contractor must supply a written statement certifying the same.

2. Proof of Public liability Insurance:

$500,000 Bodily Injury

$100,000 Property Damage

Auto Liability: Owned, Hired, and Non-Owner Coverage.

The Owners, "Roderick D. Seigle, Trustee of the Seigle Family Trust, et al, dba Watsonville Crossroads Shopping Center" and Owners' Property Manager, "PacCom Management Services, Inc." are to be named as "Additional Insureds" by use of Form CG2010 (FORM B) or comparable.

3. Proof of Worker's Compensation Insurance.

4. Proof of City of Watsonville Business License.

5. A list of material suppliers and/or subcontractors to be used on the project.

6. Supply a copy of the contractor's California State Contractor's License.

In lieu of Owner filing a “Notice of Non-Responsibility” the project overseer must provide to the Owner a Conditional Waiver and Lien Release from the subcontractors/suppliers for the amount being paid. These releases are to be sent to Watsonville Crossroads, 155 Westridge Drive, Watsonville, CA 95076. A copy is available from Owner’s Property Manager upon request.

This is Exhibit E to the Lease (the”Lease”) between RODERICK D. SEIGLE, trustee of the SEIGLE FAMILY TRUST dated October 14,1988 (“Owner”) and the Tenant named in the Lease. Reference is made to the main body of the Lease to which this Exhibit is attached for additional terms and provisions thereof.

OWNER'S RESPONSIBILITIES: Owner will complete the following using due diligence.

1. General clean-up of the Premises.

2. Owner will deliver the Premises with all building systems in good working order and repair, including but not limited to HVAC, lighting, electrical, plumbing, ceiling tiles, roof, structural integrity of the building, fire sprinkler system, parking lot, etc.

TENANT'S RESPONSIBILITIES: Tenants will be responsible for the following:

1. All necessary permits to meet applicable governmental regulations and ordinances, except for Owner's work described above.

2. All City fees for permits, business licenses, and other City fees, except for Owner's work described above.

3. Tenant store sign and walkway sign, and City permit for same.

4. All other improvements necessary for Tenant’s occupancy of the Premises and to the conduct of Tenant’s business, including interior partition walls, wall and window coverings, additional floor coverings, cabinets, fixtures, and any special or additional electrical and lighting requirements, communications wiring (from utility room) and other requirements for Tenant’s use.

5. Tenant must submit to Owner for approval its proposed plans for the extensive facility improvements it contemplates prior to commencement of work or submittal of same to City for necessary permits.

BY-LAWS OF THE WATSONVILLE CROSSROADS MERCHANT'S ASSOCIATION

ARTICLE I - ORGANIZATION

SECTION 1.01. Name.

The name of this association shall be “Watsonville Crossroads Merchant’s Association”, a nonprofit, unincorporated association (“Association”) operating in the City of Watsonville under the laws of the State of California.

SECTION 1.02. Leases.

The Association is the association referred to in the leases between Watsonville Crossroads, a California Limited Partnership, as Owner and the tenants of the Watsonville Crossroads Shopping Center located on Main Street in the City of Watsonville, Santa Cruz County, California, which leases require the tenants to be members of a merchants association. These by-laws are intended to and shall implement and not supersede those lease provisions. Should there be any inconsistency between any by-law and the lease provision, the lease provisions shall prevail.

SECTION 1.03. Principal Office.

The principal office of the association shall be located in the City of Watsonville, Santa Cruz County, California, at such location as may be determined from time to time by the Owner of the Shopping Center.

SECTION 1.04. Definitions.

As used in these by-laws, the following terms of the following meanings:

“Association” means the “Watsonville Crossroads Merchant’s Association” a non-profit unincorporated association.

“Center” means the Shopping Center known as Watsonville Crossroads, located on Main Street in the City of Watsonville, Santa Cruz County, California, southwest of the intersection of Green Valley Road and Main Street.

“Owner” shall mean Roderick D. Seigle, Trustee, of the Seigle Family Trust- and the landlord under the leases by which each tenant occupies space in the Center.

"Tenant" shall mean any person or entity that has leased space in the Center for the operation of a commercial business or profession and is actually operating such a commercial business or profession in the Center.

ARTICLE II - PURPOSE

SECTION 2.01. General.

The Association is organized for the purpose of furthering the general business interest of the Watsonville Crossroads Shopping Center, and all the merchants in the Center, and, in the furtherance of such purpose, to engage in and conduct promotional programs to include a December Holiday promotional program, special events, decoration, and cooperative advertising; and to encourage high business standards and a spirit of cooperation among its members; and to compile and distribute business information to its members for their benefit.

SECTION 2.02. Nonpartisan/nonsectarian.

The Association shall be at all times conducted as a wholly and completely nonpartisan and nonsectarian entity. The Association shall not at any time or in any way act in behalf of, either directly or indirectly, or in any other way show any partiality to any religions, political, racial, national, ethnic, or gender group or individual of such group. Nor shall it in any way or at any time discriminate against any religions, political, racial, national, ethnic, or gender group or individual or any such group.

SECTION 2.03. Not for Profit.

The Association shall be conducted at all times as a non-profit organization which shall not engage in any function, plan, design, or any other activity intended for the profit of the Association, or for any officer or member(s) of the Association.

ARTICLE III - MEMBERSHIP

SECTION 3.01. Members.

Each tenant in the Center and the Center Owner, whether individuals, partnerships, or corporations shall be entitled to membership in the Association with all the rights and obligations herein provided. Membership in the Association shall continue so long as the respective members continue as tenants or owners in the center or as otherwise provided herein.

SECTION 3.02, Termination.

The resignation, withdrawal, or expulsion of a member shall result in termination of membership. The termination of membership shall constitute forfeiture of all interests of the member in and to the property of the Association, and the member shall thereafter have no right thereto or any part thereof.

ARTICLE IV - GENERAL MEMBERSHIP MEETING

SECTION 4.01. Annual Meeting.

Commencing with the calendar year 1989, the Association shall hold an annual meeting with the general membership on the third Wednesday of October of each year, or on such other date as may be fixed by the Promotion Committee. The annual meeting shall be for the purpose of election of Members to the Promotion Committee for the ensuing calendar year, and the transaction of any business within the powers of the Association. Any business of the Association may be transacted at an annual meeting without being specifically required by statute to be stated in such notice. Failure to hold an annual meeting shall not, however, invalidate the existence of the Association or affect otherwise valid acts of the Association.

SECTION 4.02. Regular or Special Meetings.

At any time in the interval between annual meetings, regular or special meetings of the members may be called by (1) the Chair of the Promotion Committee whenever it may considered necessary or desirable, (2) a majority of the Promotion Committee, (3) the written request of a majority of the general membership of the Association or (4) the Owner. This provision shall not affect any member’s other obligations pursuant to its respective lease with the Owner, its successors and assigns.

SECTION 4.03. Notice.

Not less than five (5) days before the date of any meeting of the general membership, the Secretary/Treasurer shall give to each member written notice. Said notice shall state the time and place of the meeting, and in the case of a special meeting, the purposes for which the meeting is called. Such notice shall be delivered, either personally or by mail to the latest address of the members recorded in the books of the Association. Any meeting of the general membership, annual or special, may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of such adjourned meeting other than by announcement.

SECTION 4.04. Quorum.

A quorum shall consist of a majority of the entire general membership present at the meeting, either by person or by proxy.

SECTION 4.05. Proxy,

Any member may vote either in person or by proxy or by representative designated in writing by such member. All proxies shall be in writing and submitted to the Secretary/Treasurer of the Association prior to any meeting of the general membership.

SECTION 4.06. Voting.

Each member of the Association shall be entitled to one vote for each five hundred dollars ($500) that such member contributes to the Association in dues. Each member shall have the right to attend and to participate in all meetings of the members.

ARTICLE V - PROMOTION COMMITTEE

SECTION 5.01. Powers.

The business and affairs of the Association’s promotion program shall be managed by its Promotion Committee, all of whom shall be members in good standing of the Association. The Promotion Committee may exercise all the powers of the Association, except such as are by statute or by-laws specifically reserved to the membership only.

SECTION 5.02. Promotion Committee Membership.

The number of Promotion Committee Members shall be five (5). One (1) member of the Promotion Committee will be the manager of the Center or other representative appointed by the Owner and will have three (3) votes. The remaining Committee Members shall be elected by the Association members for one-year terms, and will each have one vote.

SECTION 5.03. Election of Promotion Committee Members.

At each annual meeting the Association’s members (excluding Owner’s representative) shall elect the four (4) Association Members of the Promotion Committee to hold office until the next succeeding annual meeting or until their successors are elected and qualify. The Chair, not less than thirty (30) days prior to the annual meeting, shall appoint a Nominating Committee of three (3) or more members of the Association to nominate from the general membership the Promotion Committee Members to be elected. The Nominating Committee shall file a list of the nominees recommended with the Secretary/Treasurer not less then ten (10) days before the election. Other nominations than those recommended by the Nominating Committee may be made by any member by petition signed by not less than five (5) members of the Association and delivery of said petition to the Secretary not later than five (5) days before the date set for such election.

All voting for the election of the four (4) Association members of the Promotion Committee shall be by written ballot.’ Every member (except the Owner) shall have the right to cast its vote(s) in person or by proxy, or by representative, for as many members as there are positions to be elected, and votes may be cast cumulatively (i.e. the members vote for each of four (4) nominees may be all cast for one nominee). The number of nominees corresponding with the number of Promotion Committee Members to be elected who received the highest number of votes, shall be declared elected.

SECTION 5.04. Vacancy.

Any vacancy occurring on the Promotion Committee for any cause, will be filled by the Chair from the membership of the Association and that person will serve on the Promotion Committee until a successors is elected at the next annual election and qualified.

SECTION 5.05. Meetings.

Meetings of the Promotion Committee may be called at any time by the Chair or by the Promotion Committee by a vote at a meeting or by a majority of the Promotion Committee Members in writing with or without a meeting and shall be held on such dates and in such places as may be designed by the Promotion Committee. All meetings will be held at the Center or within the City of Watsonville. The Promotion Committee shall keep minutes of its meetings and distribute copies of same to the membership within thirty (30) days following any regular or special meeting of the Promotion Committee. The Promotion Committee may adopt such rules as may be necessary for the proper conduct of the business of the Association.

SECTION 5.06. Notice.

Not less than five (5) days before the date of any meeting of the Promotion Committee, the Secretary/Treasurer shall give to each Promotion Committee Member and to the Association’s membership written or personal notice stating the time and place of the meeting. Such notice shall be delivered or sent by mail to the latest address of the Members recorded on the books of the Association. Any meeting of the’Promotion Committee may adjourn from time to time to convene at the same or some other place, without further notice.

SECTION 5.07. Quorum.

At all meetings of the Promotion Committee, four (4) members of the entire Promotion Committee shall constitute a quorum for the transaction of business. Except in cases in which it is by statute, or the bylaws otherwise provided, four (4) votes at a duly constituted meeting shall be sufficient to elect and pass any measure.

SECTION 5.08. Removal.

Any elected Association Member of the Promotion Committee or the Association may be removed by two-thirds (2/3) of the general membership whenever, in their judgement, the best interests of the Association will be served thereby.

SECTION 5.09. Compensation.

In no event shall the Members of the Association receive compensation for their services to the Association.

ARTICLE VI - DUTIES OF PROMOTION COMMITTEE

SECTION 6.01. Responsibilities.

The Promotion Committee shall elect from among the members of the Promotion Committee a Chair, a Vice-Chair, and any Committee Heads as shall be deemed necessary to carry out the affairs and business of the Association. Each Member shall hold office until the first meeting of the Promotion Committee after the annual meeting of general members. The Owner’s representative to the Promotional Committee will be Secretary/ Treasurer to the Promotion Committee.

SECTION 6.02. The Chair.

The Chair shall preside at all meetings of the members and of the Promotion Committee at which the Chair shall be present. The Chair shall have general charge and supervision of the business of the Association. The Chair shall perform all duties as, from time to time, may be assigned by the Promotion Committee. The Chair shall be an ex officio member of all committees.

SECTION 6.03. Vice-Chair.

The Vice-Chair shall fill the duties of the Chair in his/her absence, and such other duties as delegated by the Committee from time to time.

SECTION 6.04. Secretary/Treasurer.

The Owner’s representative to the Promotion Committee shall be Secretary/Treasurer and shall have charge of and be responsible for all funds, receipts, and disbursements of the Association, and shall deposit or cause to be deposited, in the name of the Association, all monies or other valuable effects in such banks or other depositories as shall, from time to time, be selected by the Promotion Committee. The Secretary/ Treasurer shall render to the Chair and to the Promotion Committee, and to the membership whenever requested, an account of the financial condition of the Association, and in general, shall perform all duties incident to the office of a Treasurer. In addition, the Secretary/Treasurer shall keep the minutes of the meetings of the members and of the Promotion Committee in books provided for the purpose, and shall distribute same to the membership as required. The Secretary/Treasurer shall see that all notices are duly given in accordance with the provisions of the bylaws or as required by law and shall be custodian of the records of the Association and in general shall perform all duties incident to the office of a Secretary and such other duties as, from time to time, may be assigned by the Promotion Committee or the Chair.

ARTICLE VII — DUES AND ASSESSMENTS

SECTION 7.01. Dues.

Regular annual dues of five hundred dollars ($500) or $.50/ s.f. per year, whichever is greater shall be paid by each Association member to the Association, excluding the Owner. The Owner shall pay $.25/s.f. per year for the total square footage of the Shopping Center available for lease. The annual dues shall be payable in advance as billed. Dues shall be paid to the Manager of Watsonville Crossroads for the account of the Association, at 60 Penny Lane Watsonville, California 95076.

On the first day of the each calendar year beginning January 1, 1990, dues will be subject to a minimum increase equal to any increase in the Urban Wage Clerical Worker Index of the Consumer Price Index for the San Francisco — San Jose region (1982-84=100), not to exceed ten percent (10%) per year. The Association may impose a larger increase by majority vote of the general membership. In no case will Owner pay dues exceeding fifty percent (50%) of the rate payable by all of the other members of the Association.

SECTION 7.02. Assessments.

Assessments may be levied upon all members at any time by a majority vote of the membership, to be assessed against all members of the Association (except Owner) according to the square footage of the Center occupied by each, and to the Owner at the rate of fifty percent (50%) of the member’s assessment, based on the total leasable square footage in the Center.

SECTION 7.03. Delinquency.

Whenever any member shall be in arrears in payment of dues or assessments for a period of more than thirty (30) days, the member shall be notified in writing by the Chair or Secretary/Treasurer of the Association that if such dues or assessments or both are not paid within thirty (30) days, the member shall be deemed delinquent. Each Tenant’s lease provides that such delinquency is a default under the member’s lease with Owner.

SECTION 7.04. Suspension.

Upon certification by the Secretary/Treasurer to the Promotion Committee that a member is so delinquent, by a majority vote of the Promotion Committee, such member may be suspended from membership in the Association. Any member so suspended shall not be entitled to vote, participate in Association affairs or be a member of the Promotion Committee or pursuant to a budget approved by the Promotion Committee. Upon certification by the Secretary/Treasurer to the Promotion Committee that a suspended member has cured delinquency, the member shall be automatically reinstated to membership in the Association on the date of such certification. However, such reinstatement shall not entitle such member to regain previous membership on the Promotion Committee nor any previous office held prior to the suspension unless re-elected in accordance with the applicable provisions of these bylaws.

SECTION 7.05. Expulsion.

Members may be expelled by a majority vote of the entire Promotion Committee for cause or nonpayment of dues or assessments as provided herein. However, no member may be expelled without opportunity of a hearing before the Promotion Committee. An expelled member shall have the right to appeal within (30) days from the date of expulsion by the Promotion Committee to the entire general membership and, upon written request, must be allowed to make such an appeal at the next annual meeting or at a special meeting called for the purpose within thirty (30) days of such a request.

A member may be reinstated by a majority vote of the general membership. A member so expelled, may, at any time after the expiration of thirty (30) days from the date of expulsion, petition the Association for reinstatement. Said petition shall be in writing and submitted to the Promotion Committee. Within thirty (30) days of such a petition the Promotion Committee, by a majority vote of the entire Promotion Committee, shall act upon said petition, subject to ratification by a majority vote of the general membership.

In the event of reinstatement, the member shall not be entitled to regain previous membership on the Promotion Committee nor any previous office held prior to the expulsion unless re-elected in accordance with the applicable provisions of the bylaws.

ARTICLE VIII - FINANCE AND REPORTS SECTION

8.01. Contracts.

The Promotion Committee may authorize any Member, agent or employee of the Association to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Association, and such authority may be general or confined to specific instances.

SECTION 8.02. Borrowing.

The Association shall not make any loans to any member either individually or as a group.

SECTION 8.03. Deposits, Checks, Drafts.

All funds of the Association shall be deposited by the Secretary/ Treasurer from time to time to the credit of the Association into a special account to be designated by the Promotion Committee; and disbursements of said funds shall be made with the approval of the Promotion Committee or pursuant to a budget approved by the Promotion Committee. All disbursements shall be made by check, and all checks, drafts, and orders for the payment of money, notes and other evidences of indebtedness issued in the name of the Association shall, unless otherwise provided by resolution of the Promotion Committee, be signed by the Chair and countersigned by the Secretary/Treasurer.

SECTION 8.04. Bonds.

The Promotion Committee may require any Member, agent or employee of the Association to give a bond to the Association, conditioned upon the faithful discharge of duties, with one or more sureties and in such amount as may be satisfactory to the Promotion Committee.

SECTION 8.05. Budget.

The Promotion Committee shall prepare annually, with the commencement of each new fiscal year, an annual, promotional and advertising budget, which shall be presented to the general membership for their approval. Once approved, this budget shall govern the financial affairs of the Association for the fiscal year.

SECTION 8.06. Annual Financial Report.

There shall be prepared annually under direction of the Secretary/ Treasurer, a full and correct statement of the financial affairs of the Association, including a Balance Sheet and a Financial Statement of Operations for the preceding fiscal year, which shall be submitted to the general membership.

SECTION 8.07. Annual Association Report.

The Secretary/Treasurer shall cause to be prepared and filed annually any reports required by the laws of the State for not-for-profit Associations.

SECTION 8.08. Annual Tax Report.

The Secretary/Treasurer shall cause to be prepared and filed annually any Federal, State, or Municipal tax returns required of the Association.

SECTION 8.09. Fiscal Year.

The fiscal year of the Association shall be the calendar year.

ARTICLE IX — MISCELLANEOUS

SECTION 9.01. Committees.

The Promotion Committee shall authorize and define the powers and duties of all committees. All committees so authorized shall be appointed by the Chair, subject to confirmation by the Promotion Committee.

SECTION 9.02. Insurance.

The Association shall hold harmless and indemnify the Owner from all injury, loss, claims, or damage to any person or persons or property while within or upon the Center premises, occasioned by any act, omission, neglect or default by the Association or by any member or group or members while acting for on behalf of the Association. As a result, the Association shall effect and carry and pay for, and keep in full force and effect, insurance issued by reputable companies authorized and qualified to do business in the State of California, which companies are satisfactory to Owner, naming Owner and Owner’s Center Manager as additional insureds. In addition, the Association shall carry Workers’ Compensation insurance if Association has any employees. The Association shall provide Owner with a certificate of insurance providing evidence of such coverage.

SECTION 9.03. Incorporation.

If it determines such action to be in the best interest of the Association, the Promotion Committee may cause the Association to become incorporated as a non-profit, mutual benefit corporation, with substantially the same By-laws.

ARTICLE X — AMENDMENTS TO BYLAWS

Any and all provisions of these by-laws, excepting the Owner’s percentage share of dues or assessments, may be altered, amended, or repealed and new by-laws adopted by a two-thirds (2/3) vote of the membership at any annual meeting of the Association, without notice, or at any special meeting of the Association, provided that at least ten (10) days written notice is given of intention to alter and amend those by-laws at such special meeting. Further, any proposed amendments to these by-laws shall be submitted to the Promotion Committee thirty (30) days in advance of any meeting at which said amendments may be presented. The Promotion Committee shall make available to the membership the proposed changes in said bylaws fifteen (15) days prior to the meeting at which said by-laws will be considered.

These by-laws, if appended to any lease between Owner and any Tenant, will not be deemed a part of the lease and any amendment will not require the agreement of Owner and such Tenant but only the vote of members (including Owner) as provided in the by-laws.

WATSONVILLE CROSSROADS SHOPPING CENTER LEASE
WITH
COMMUNITY BANK OF CENTRAL CALIFORNIA

ARTICLE ONE
PARTIES, GRANT, AND TERM

SECTION 1.01. Parties.

This Lease is between Owner and Tenant as such parties are identified in Exhibit A, entitled “Basic Lease Provisions” attached hereto and incorporated herein.

SECTION 1.02. Leased Premises.

Owner hereby leases and demises to Tenant, and Tenant hereby leases and takes from Owner, space within Owner’s building in the Shopping Center (herein called the “Shopping Center”) described in Exhibits A and B, which premises consist of a floor area having an appropriate width and depth as set forth in Exhibits A and C, and are referred to herein as the “Leased Premises,” measured from the center of the demising walls to the outside of exterior walls.

SECTION 1.03. Use of Additional Areas.

The use and occupancy by the Tenant of the Leased Premises shall include the use with others of the common areas, employees’ parking areas, service roads, loading facilities, sidewalks and customer car parking areas, shown and depicted on Exhibit B, and other facilities as may be designated from time to time by the Owner, subject however to the terms and conditions of this agreement and to reasonable rules and regulations for the use thereof as prescribed from time to time by the Owner.

SECTION 1.04. Commencement of Term.

The term of this Lease and Tenant’s obligation to pay rent shall commence on the date set forth in Exhibit A or in the absence of such date, the term of this Lease, and Tenant’s obligation to pay rent, shall commence on the date which the Owner delivers possession to Tenant (the “Commencement Date”). Tenant agrees to execute a Commencement Addendum following the Commencement Date documenting same and the accurate measurement of the Leased Premises occupied.

SECTION 1.05. Length of Term.

The term of this Lease shall be for the period of years set forth in Exhibit A.

ARTICLE TWO
RENT

SECTION 2.01. Fixed Monthly Rent.

Tenant shall pay to Owner as fixed monthly rent, without deduction, set-off, prior notice, or demand, the sum set forth in Exhibit A as minimum monthly rent, which amount is subject to possible adjustment as provided in Exhibit A, payable monthly in advance on the first day of each month, commencing on the Rental Commencement Date which shall be the same day as the Commencement Date. Minimum monthly rent for any partial month shall be prorated to the first day of the calendar month following the Commencement Date on the basis of a thirty (30) day month. All rent shall be paid to the Owner at the address to which notices to Owner are given unless Tenant is otherwise notified in writing.

SECTION 2.02. Additional Rent.

The Tenant shall pay as additional rent any sums of money or charges required to be paid to Owner by Tenant under this Lease, whether or not the same be designated “additional rent,” including but not limited to such charges described in the following Sections:

Section 2.03	Real Property Taxes
Section 2.04	Dishonored Payment/Late Charges
Section 8.03	Parking Regulations
Section 9.01	Operating Expenses
Section 11.01	Maintenance by Tenant
Section 11.02	Maintenance by Owner
Section 12.02	Insurance
Section 13.01	Utilities
Section 15.01	Transfer Fee
Section 15.02	Bonus Value
Section 17.04	Marketing Fund

SECTION 2.03. Real Estate Taxes.

Tenant agrees to pay Tenant’s pro rata share of all real property taxes which may be levied or assessed by any lawful authority against the land, buildings and improvements of the Shopping Center. Owner shall have the right to collect and impound such real estate taxes from Tenant on a monthly or quarterly basis for Tenant’s account based upon Owner’s reasonable estimate of real estate taxes due next, and Tenant shall pay to Owner such real estate tax impounds upon the basis and at the time of the monthly minimum rent as stated in Section 2.01. Owner shall be required to segregate amounts impounded, and any interest shall accrue to the impound account. Tenant’s pro rata share shall be apportioned by Owner according to the gross floor area of the Leased Premises as it relates to the gross floor area of the building or buildings which comprise the Shopping Center. All taxes for the years in which this Lease commences and expires shall be apportioned and adjusted. If the monthly impounded amounts are not adequate for the real estate taxes due in April and December the additional amount will be paid by Tenant within fifteen (15) days of the Tenant’s receipt from Owner of a tax statement

SECTION 2.04. Dishonored Payment/Late Charge.

If any payments are made by Tenant by check which is returned by Tenant’s bank for insufficient funds or any other reason, or if any installment of rent or any additional rent or any other sum due from Tenant shall not be received by Owner within five days after such amount shall be due, then in either event Tenant shall pay to Owner a charge equal to the greater of (a) Twenty Dollars or (b) the late charge percentage (set forth in Exhibit A) of such overdue amount as liquidated damages. The parties hereby agree that such charges represent a fair and reasonable estimate of the costs Owner will incur by reason of late payment by Tenant. Acceptance of such late charge by Owner shall in no event constitute a waiver of Tenant’s default with respect to such overdue amount, nor prevent Owner from exercising any of the other rights and remedies granted under this Lease.

SECTION 2.05. Timing/Form of Payment.

If Tenant pays the rent due under this lease late two (2) or more times, Owner may, by thirty (30) written notice to Tenant, require that all future payments due under this lease be made quarterly in advance. If any payment by Tenant is dishonored by Tenant’s bank for any reason, Owner may thereafter require all payments due under this lease to be made by cashier’s check or money order.

ARTICLE THREE
GROSS RECEIPTS AND REQUIRED REPORTS

(Omitted)

ARTICLE FOUR AUDIT

(Omitted)

ARTICLE FIVE
CONSTRUCTION, ALTERATIONS, IMPROVEMENTS

SECTION 5.01. Owner's and Tenant's Obligations.

In the event Owner is to perform construction on the Tenant’s Leased Premises, an Exhibit E will be attached hereto setting forth Owner’s and Tenant’s obligations.

SECTION 5.02. Changes and Additions to Buildings.

Owner hereby reserves the right at any time to make alterations or additions to and to build additional stories on the building in which the Leased Premises are contained and to build other buildings adjoining the same. Owner also reserves the right to construct other buildings or improvements in the Shopping Center from time to time and to make alterations thereof or additions thereto and to build additional stories on any such building or buildings and to build adjoining same, provided Owner receives the necessary governmental approvals. Easements for light and air are not included in the leasing of the Leased Premises to Tenant. Owner further reserves the exclusive right to the roof except as provided in this lease agreement, and Tenant is not entitled to access to the roof without Owner’s consent. Owner will exercise best efforts while performing under this paragraph not to preclude Tenant from doing business.

SECTION 5.03. Right to Adjust.

The purpose of the site plan attached hereto as Exhibit B is to show the approximate location of the Leased Premises. Owner reserves the right at any time to vary and adjust the size and location of the various buildings, other tenants, parking areas, and other common areas as shown on Exhibit B; provided that any required governmental agency approvals are acquired. Owner will exercise best efforts while performing under this paragraph not to preclude Tenant from doing business.

SECTION 5.04. Excuse of Owner's Performance.

Anything in this agreement to the contrary notwithstanding, providing such cause is not due to the willful act or neglect of the Owner, the Owner shall not be deemed in default with respect to the performance of any of the terms, covenants and conditions of this Lease if same shall be due to any strike, lockout, civil commotion, war-like operation, invasion, rebellion, hostilities, military or usurped power, sabotage, governmental regulations or controls, inability to obtain any material, service or financing, rain or muddy conditions, through Act of God or other cause beyond the control of the Owner.

SECTION 5.05. Tenant Improvements.

All fixtures installed by Tenant shall be new or completely reconditioned. Tenant shall not make or cause to be made any alterations, additions or improvements or install or cause to be installed any trade fixtures, exterior signs, exterior machinery, floor coverings, interior or exterior lighting, plumbing fixtures, shades or awnings or make any changes to the store front without first obtaining Owner’s written approval and consent. Tenant shall present to Owner plans and specifications for such work at the time approval is sought.

a. During the term of this lease or any extensions thereof, Tenant will notify Owner of any installations of equipment or any other work that must be done on the roof of the Leased Premises and will instruct Tenant’s contractor to coordinate with Owner’s roofing contractor concerning any activity on the roof or any penetration and resealing of the roof cover. To keep the warranty in force, all roof cover penetration, repairs and resealing must be performed by Owner’s roofing contractor at Tenant’s expense.

b. During the term of this lease or any extensions thereof, Tenant agrees that any “Tenant Improvement” work on the fire sprinkler system (including drops and connections) must be done by Owner’s sprinkler contractor at Tenant’s expense in order to keep the warranty in force.

c. Tenant further agrees that all heating, ventilation, and air conditioning (HVAC) systems and ducts installed on the Leased Premises will be installed and maintained by Owner’s contractor.

d. Tenant agrees that all funds required to construct any “Tenant Improvements” upon the Leased Premises shall be placed by Tenant in cash into an escrow prior to Tenant’s contractor entering upon the Leased Premises to perform work under the contract. Tenant further agrees that work under the contract shall not be commenced without fifteen (15) days prior written notice to Owner.

e. Owner agrees that for those “Tenant Improvements” for which Tenant must use Owner’s contractor, Tenant’s liability will not exceed the cost of a competitive contractor’s bid based on the same specifications (including the same brand and quality of materials and equipment being installed) that Tenant can obtain in the form of a binding bid from a competitive, qualified, and bondable contractor. In such event the cost of the work charged to Tenant will not exceed the binding bid of Tenant’s contractor, obtained by and submitted by Tenant to Owner.

f. Any Tenant Improvements paid for by Owner or paid by Tenant but for which Tenant is reimbursed by Owner shall belong to and be the property of Owner. Any Tenant Improvements paid for by Tenant shall belong to and be the property of Tenant.

SECTION 5.06. Mechanic's Liens.

Tenant shall promptly pay all contractors and materialmen, so to minimize the possibility of a lien attaching to the Leased Premises and Tenant shall not suffer nor permit to be enforced against the Leased Premises, or any part thereof, or any improvements thereon, any mechanics, materialmens’, contractors’ or subcontractors’ liens arising from or by any claim or damage growing out of the work of any construction, repair, restoration, replacement or improvement, or any other claim or demand howsoever the same may arise. Tenant shall pay or cause to be paid all of such liens, claims or demands before any action is brought to enforce the same against the Leased Premises. Tenant agrees to indemnify and hold Owner and the Leased Premises free and harmless from all liability for any and all such liens, claims and demands, together with reasonable attorneys’ fees and all costs and expenses in connection therewith. Notwithstanding anything to the contrary herein above contained, if Tenant shall in good faith contest the validity of any such lien, claim or demand, then Tenant shall, at its sole expense, defend itself and Owner against the same and shall pay and satisfy any adverse judgment that may be rendered thereon for the enforcement thereof against Owner or the Leased Premises. In such event, if Owner shall so require, Tenant shall furnish to Owner a surety bond satisfactory to Owner in an amount equal to such contested lien, claim or demand indemnifying Owner against liability for the same, and holding the Leased Premises free from the effect of such lien or claim. If Owner shall so request, Tenant shall procure and record the bond provided for in California Civil Code Section 3113 (or any comparable statute hereinafter enacted providing for a bond freeing the Leased Premises from the effect of such lien or claim or action thereon).

SECTION 5.07. Removal by Tenant.

All alterations, decorations, additions and other leasehold improvements made by Tenant, or made by Owner on Tenant’s behalf and for which Tenant has paid Owner in accordance with this Lease, shall remain the property of Tenant for the term of this Lease, or any extension or renewal thereof. Prior to the expiration of this Lease, or any renewal or extension thereof, Tenant shall remove only those alterations, decorations, additions and other leasehold improvements as authorized and itemized in writing by Owner. At the expiration or earlier termination of this lease or any extensions or renewals thereof, all such alterations, decorations, additions and other leasehold improvements shall belong to Owner. Such improvements shall remain upon the Leased Premises or removed by Tenant, at Owner’s election. If Owner requires removal and Tenant fails to remove same, Owner may do so and Tenant shall reimburse Owner for the cost thereof. Tenant must restore the Leased Premises as provided in Section 11.03 hereof. These obligations shall survive any termination of this Lease..

SECTION 5.08. Relocation of Tenant.

Commencing three (3) years after the Commencement Date, Owner reserves the right to relocate Tenant to any other location within the Shopping Center provided (1) the new premises are approximately the same square footage as the premises from which Tenant is moved, (2) Owner gives Tenant written notice thirty days prior to relocation, (3) Owner pays the costs of moving Tenant’s inventory, fixtures, and equipment and the cost of reconstructing those leasehold improvements which Tenant had at its original location, and (4) Tenant’s rent is abated during the period in which Tenant is closed by reason of such relocation. Following such relocation, all references in this lease to tine “Leased Premises” will refer to the new location and a new address will be deemed substituted in Exhibit A and in all other places appearing in this lease. All other provisions of this lease will remain the same.

ARTICLE SIX
CONDUCT OF BUSINESS BY TENANT

SECTION 6.01. Use of Premises.

a. Tenant’s Use. Tenant shall use the Leased Premises solely for the purpose of conducting the business described in Exhibit A. Tenant shall occupy the Leased Premises within thirty (30) days after the Commencement Date, and shall conduct such business continuously in the Leased Premises. Tenant will not use or permit, or suffer the use of the Leased Premises for any other business or purpose.

b. Prohibited Uses. Without limiting generality of the foregoing, Tenant shall not perform any acts or carry on any practices which may injure the building or be a nuisance or menace to other tenants or customers in the Shopping Center, or which are prohibited by the Rules and Regulations established under Section 6.05. No auction, fire, going-out-of business or bankruptcy sales may be conducted in the Leased Premises without the previous written consent of Owner. Tenant shall not sell or allow any person to sell any drug-related paraphernalia or other illegal materials.

c. Exclusive Use. Owner agrees that during the term of this Lease, and any extensions thereof, Owner shall not lease any premises within the Shopping Center to another commercial bank, retail bank, or membership type credit union.

SECTION 6.02. Operation of Business.

a. General. Tenant shall operate one hundred percent (100%) of the Leased Premises during the entire term of this Lease with due diligence and efficiency so as to maximize gross sales, unless prevented from doing so by causes beyond Tenant’s control. This requirement applies even if Tenant is not paying Owner percentage rent based on gross sales, because an active and vigorous business is an important element of a shopping center in order to attract customers for all Owner’s tenants. Subject to inability by reason of strikes or labor disputes, Tenant shall carry at all times in said premises a stock of merchandise of such size, character and quality as shall be reasonably designed to maximize gross sales and thereby the maximum return to Owner and Tenant.

b. Hours. Tenant shall conduct business in the Leased Premises five (5) days per week, twelve (12) months per year, and will be open for business during such times as the majority of the Tenants in the Shopping Center are open for business, as determined by Owner. Tenant will maintain normal business hours for its customers of 9:00 a.m. through 5:00 p.m. Monday through Thursday and 9:00 a.m. through 6:00 p.m. on Friday. Saturday and Sunday, Tenant has the option to be open. In no case will business hours extend beyond 11:00 p.m. on any evening, or open before 6:00 a.m. without the approval of Owner.

c. Window Displays. Tenant may install and maintain at all times window displays of professional quality designed to attract customers to Tenant's place of business. Tenant shall keep the display windows in the Leased Premises well lighted during the hours from sundown to 10:00 p.m. unless prevented by causes beyond the control of the Tenant.

SECTION 6.03. Competition.

(Omitted)

SECTION 6.04. Storage, Office Space.

Tenant shall warehouse, store, or stock in the Leased Premises only such goods, wares and merchandise as Tenant intends to offer for sale at retail at, in, from or upon the Leased Premises. This shall not preclude occasional emergency transfers of merchandise to the other stores of Tenant, if any, not located in the Shopping Center. Tenant shall use for office, clerical or other non-selling purposes only such space in the Leased Premises as is reasonably required for Tenant’s business in the Leased Premises.

SECTION 6.05. Rules and Regulations.

a. Owner reserves the right from time to time for public welfare or benefit of all the tenants of the Shopping Center to amend or supplement the following rules and regulations and to adopt additional rules and regulations applicable to the Leased Premises. Reasonable notice of such rules and regulations and amendments and supplements thereto, if any, shall be given to Tenant.

b. Tenant agrees as follows:

(1) All loading and unloading of goods shall be done only at such times, in the areas, and through the entrances designated for such purposes by Owner, provided, however, armoured vehicle pick-up and delivery may be made through the front entrance.

(2) The delivery or shipping of merchandise, supplies and fixtures to and from the Leased Premises shall be subject to such rules and regulations as in the judgment of Owner are necessary for the proper operation of the Leased Premises or the Shopping Center.

(3) All garbage and refuse shall be kept in the kind of container specified by Owner, and shall be placed outside of the Leased Premises prepared for collection in the manner and at the times and places specified by Owner. Tenant shall pay the cost of removal of Tenant’s refuse or rubbish.

(4) No aerial shall be erected on the roof or exterior walls of the premises, or the grounds, without in each instance, the written consent of the Owner. Any aerial so installed without such written consent shall be subject to removal without notice at any time and Tenant shall pay with the next rent due the cost of removal and roof repair.

(5) No loudspeakers, televisions, phonographs, radios or other devices shall be used in a manner so as to be heard of or seen outside of the Leased Premises without prior written consent of Owner. Additionally, Tenant shall conduct its business in a quiet and orderly manner so as not to create unreasonable or unrelated noise.

(6) The outside areas immediately adjoining the premises shall be kept clean and free from dirt and rubbish by Tenant to the satisfaction of Owner and Tenant shall not place or permit any obstructions or merchandise in such areas except with Owner’s specific written approval.

(7) Tenant and Tenant’s employees shall park automobiles in Center areas specifically designated by Owner.

(8) The plumbing facilities shall not be used for any other purpose than that for which they are constructed, and no foreign substance of any kind shall be thrown therein. The expense of any break age, stoppage, or damage resulting from a violation of this provision shall be borne by Tenant, who caused same, or whose employees, agents or invitees caused same.

(9) Tenant shall use at Tenant’s cost such pest extermination contractor as Owner may direct and at such intervals as Owner may require.

(10) Tenant shall not burn any trash or garbage of any kind in or about the Leased Premises, or the Shopping Center.

(11) All public entrances and exits to the Leased Premises shall be kept unobstructed and open to the public at all times during normal business hours.

(12) Tenant shall not cause or permit any obnoxious or foul odors that disturb the public or other tenants. Should such odors be evident, Tenant shall be required to take immediate steps to remedy same upon written notice from Owner.

(13) No pets belonging to Tenant or Tenant’s employees will be permitted to wander or roam within the Common Areas or Facilities.

ARTICLE SEVEN
SECURITY DEPOSIT

SECTION 7.01. Amount of Deposit.

Upon the execution of this Lease, Tenant will deposit with Owner the security deposit set forth in Exhibit A. The security deposit shall be held by Owner, without interest, as security for the faithful performance by Tenant of all the terms, covenants, and conditions of this Lease by Tenant to be kept and performed during the term hereof.

SECTION 7.02. Use and Return of Deposit.

If Tenant defaults with respect to any provision of this Lease including but not limited to the payment of rent, Owner may, but shall not be obligated to use, apply or retain all or any part of this deposit for the payment of any rent or other amount which Owner may spend or become obligated to spend by reason of Tenant’s default or to compensate Owner for any other loss or damage which Owner may suffer by reason of Tenant’s default. If Owner does not elect to apply the security deposit as set forth above, the fact that Owner is holding such deposit shall not affect Owner’s remedies upon any breach of this Lease by Tenant.

If any portion of said deposit is so used or applied, Tenant shall within five (5) days after written demand deposit cash with Owner in an amount sufficient to restore the security deposit to its original amount and Tenant’s failure to do so shall be a breach of this Lease. If Tenant shall fully and faithfully perform every provision of this Lease to be performed by it, the security deposit or any balance thereof shall be returned to Tenant at Tenant’s address stated in Exhibit A in the manner required by Civil Code Section 1951.7.

SECTION 7.03. Transfer of Deposit.

Owner shall, at Owner’s election, (a) deliver the security deposit to the purchaser of Owner’s interest in the Leased Premises, in the event that such interest be sold, or (b) return such deposit to Tenant, and thereupon Owner shall be discharged from any further liability with respect of such deposit, except as may other wise be agreed upon in writing.

ARTICLE EIGHT
COMMON AREAS AND PARKING FACILITIES

SECTION 8.01. Definition of Common Area.

“Common Area” and “Common Facilities” refer to all areas, space, equipment and special services provided by Owner for the common or joint use and benefit of all tenants of the Shopping Center, their employees, agents, licensees, customers and other invitees, including without limitation parking areas, access roads, driveways, retaining walls, landscaped areas, truck serviceways, loading docks, pedestrian malls, courts, stairs, ramps and sidewalks and parcel pickup stations and any other portion of the Shopping Center not shown as a building on the site plan attached hereto as Exhibit B.

SECTION 8.02. Control of Common Areas by Owner.

All automobile parking areas, driveways, entrances and exits thereto, and other facilities furnished by Owner in or near the Shopping Center, including employee parking areas, the truck way or ways, loading docks, package pick-up stations, pedestrian sidewalks and ramps, landscaped areas, exterior stairways, and other areas and improvements provided by Owner for the general use, in common, of tenants, their officers, agents, employees and customers, shall at all times be subject to the exclusive control and management of Owner, and Owner shall have the right from time to time to establish, modify and enforce reasonable rules and regulations with respect to all facilities and areas mentioned in this Article. Owner shall have the right to construct, maintain and operate lighting facilities on all said areas and improvements; to police the same; from time to time to change the area, level, location and arrangement of parking areas and other facilities herein referred to; to restrict parking by tenants, their officers, agents and employees to employee parking areas; to close all or any portion of said areas or facilities to such extent as may, in the opinion of Owner’s counsel, be legally sufficient to prevent a dedication thereof or the accrual of any rights to any person or the public therein, to close temporarily all or any portion of the parking areas or facilities; to discharge noncustomer parking; and to do and perform such other acts in and to said areas and improvements as, in the use of good business judgment Owner shall determine to be advisable with a view to the improvement of the convenience and use thereof by all Owner’s tenants, their officers, agents, employees and customers. Owner will operate and maintain the common facilities referred to above in such manner as Owner, in its sole discretion, shall determine from time to time. Without limiting the scope of such discretion, Owner shall have the full right and authority to employ all personnel and to make all rules and regulations pertaining to and necessary for the proper operation and maintenance of the Common Areas and Facilities. In exercising its business judgment regarding its control over the Common Area and Common Facilities, Owner will use its best efforts not to preclude Tenant from doing business.

SECTION 8.03. Parking Regulations.

Immediately following execution of this Lease, and periodically during the term of this lease or when requested by Owner, Tenant shall supply Owner with lists of names of employees who will park automobiles in the parking areas and the license number of automobiles to be parked therein. Vehicles belonging to Tenant and Tenant’s employees will be parked in areas directed by Owner. Tenant agrees to pay as additional rent a fee of Twenty-Five Dollars ($25,00) per car per day for failure to comply with such parking restrictions.

SECTION 8.04. License.

(Omitted)

ARTICLE NINE
COMMON AREAS/OPERATING COSTS

SECTION 9.01. Tenant's Share of Operating Costs.

a. Operating Costs Defined. For the purpose of this Section 9.01 the "Shopping Center's Operating Costs" means the total cost and expense incurred in operating and maintaining the Shopping Center, including without limitation the following:

(1) Common Area Maintenance (CAM) costs incurred in maintaining the Common Area and Common Facilities for the benefit of all the Shopping Center’s tenants, including but not limited to gardening and landscaping (including irrigation); the cost of public liability, fire, casualty and property damage insurance; security; parking lot repairs and sealing, parking line painting; building touch-up painting and periodic repainting of the exterior; Common Area lighting, janitorial services and sanitary control including Common Area rubbish/garbage removal; the on-going maintenance, repair, and periodic replacement of canvas canopies and awnings; Tenant’s prorata share of general maintenance and repair of the Buildings as provided in Sections 11.01 and 11.02 including periodic replacement of the roofing membrane; the cost of personnel to implement such services, to direct parking and to police the Common Facilities; and ten percent (10%) of all such Operating Costs as a management and administration service fee.

(2) “Shopping Center’s Operating Costs” shall also include real property taxes and assessments (Section 2.03 Taxes), Tenant’s pro rata share or HVAC maintenance and repair (Section 11.01 b), Tenant’s pro rata share of building and fire and casualty insurance (Section 12.02), but such items will be excluded from the management fee calculations applicable to CAM costs.

b. Tenant’s Share. In each lease year, as defined in Section 1.03 hereof, Tenant will pay to Owner, in addition to the rentals specified in Article Two hereof, as further additional rent, a proportion of the Shopping Center’s Operating Costs based upon the ratio of the square feet of the floor area of the Leased Premises to the total square feet of the floor area of all the building space in the Shopping Center, The additional rent provided to be paid in this Section 9.01 shall be paid monthly based upon Owner’s estimate of Tenant’s proportion of the Shopping Center’s Operating Costs. Such additional rent shall be adjusted quarterly by Owner based on actual Operating Costs and any deficiency shall be paid by Tenant to Owner within ten (10) days of a statement therefor from Owner to Tenant; any excess shall be credited against Tenant’s next payment of such estimated Operating Costs.

ARTICLE TEN
SIGNS, AWNINGS, CANOPIES

SECTION 10.01. Signs, Awnings and Canopies.

a. Prohibited Signs. Tenant, will not place or suffer to be placed or maintained on any exterior door, wall or window of the Leased Premises any sign, awning or canopy, or advertising matter or other thing of any kind, and will not place or maintain any decoration, lettering or advertising matter on the glass of any window or door of the Leased Premises without first obtaining Owner’s written approval and the approval and consent, if applicable, of any governmental body having jurisdiction over signs in the Shopping Center. Tenant agrees to maintain its approved signs, decorations, lettering, advertising matter or other thing as may be approved in good condition and repair at all times.

b. Required Signs. Tenant agrees, at Tenant’s sole cost, to obtain an exterior sign on the building’s facia in front of the canopies and a walkway sign, in strict conformance with Owner’s sign criteria as to design, material, color, location, size and letter style. A detailed drawing of proposed sign(s) by a sign fabricator must be submitted to Owner for written approval prior to manufacture.

c. Modification of Signing Program. Owner reserves the right to modify its sign policies from time to time during the term of the Lease including the right to require Tenant to install a new sign provided the installation is part of a remodeling or new sign program applicable to all Owner’s tenants in the Shopping Center. Tenant shall not be required to pay for such a change more than once every five (5) years.

ARTICLE ELEVEN
MAINTENANCE, REPAIR, AND SURRENDER OF LEASED PREMISES

SECTION 11. 01. Tenant's Responsibility.

a. Maintenance and Repair Except for those items which are Owner’s responsibility itemized in Section 11.02, Tenant shall at all times keep, maintain and repair the Leased Premises, interior and exterior, in good order and condition. Tenant’s responsibility includes but is not limited to all entrances to the Leased Premises (including doors, door jambs, door closers, door hardware and associated door equipment), interior partitions, electrical lighting and plumbing systems (including portions thereof that protrude through the roof) within the Leased Premises or serving facilities outside the Leased Premises for Tenant’s use such as exterior signs and grease traps, all glass, show window, and associated mouldings, any damage to the Leased Premises whether caused by Tenant, Tenant’s employees, agents, contractors, invitees, trespassers or vandals, or damage by unavoidable casualty except to the extent covered by Owner’s policy of casualty insurance. Tenant shall repaint the interior of the premises when determined by Owner.

b. HVAC. Tenant agrees to pay Owner as additional rent the maintenance and repair (including an on-going maintenance service contract) of the heating and air conditioning units, and exhaust fans, if any, which service the Leased Premises, including motor replacement and replacement of other components not exceeding fifty (50) percent of the replacement value of the entire unit for any one occurrence. Said rent shall be paid in accordance with Section 9.01 above.

c. Glass. Owner shall replace, at the expense of Tenant, any and all plate and other glass damage or broken from any cause whatsoever (except Owner's act or the act of Owner's employees or contractors) in and about the Leased Premises.

d. Tenant’s Share. As used in this Section 11.01, “Tenant’s pro rata share” shall be determined by comparing the gross square feet of floor area of the Leased Premises with the gross square feet of floor area of the buildings within the Shopping Center at the time of such repair, maintenance or painting the building which contains the Leased Premises.

SECTION 11.02. Owner’s Responsibility.

a. Tenant’s Failure. If Tenant refuses or neglects to maintain or repair the Leased Premises as required hereunder and to the reasonable satisfaction of Owner as soon as reasonably possible after written demand, Owner may make such maintenance or repairs without liability to Tenant for any loss or damage that may accrue to Tenant’s merchandise, fixtures, or other property or to Tenant’s business by reason thereof, and upon completion, thereof, Tenant shall pay Owner’s costs for making such maintenance or repairs plus twenty percent (20%) for Owner’s overhead, upon presentation of bill thereafter, as additional rent.

b. Roof. Owner shall be responsible to maintain and keep weatherproof the roofing membrane. Owner shall not be responsible for any water damage to Tenant’s property from roof leaks until such leaks are reported in writing by Tenant to Owner and Owner fails to make repairs within a reasonable period of time. The cost of maintenance, repair, and periodic replacement of the roofing membrane is an Operating Cost payable as provided in Section 9.01.

c. Structural Elements. Owner shall be responsible for the cost of repair and maintenance of the structural components of the shell, bearing and exterior walls, and foundation of the building within which the Leased Premises are located and the plumbing, sewer and waste systems outside of the Leased Premises. If Owner is required to make repairs to such structural portions by reason of any act, omission, or negligence of Tenant, Tenant’s employees, agents, contractors, invitees, licensees, or any trespasser or vandal, Owner may add the cost of such repairs to Tenant’s rent which shall thereafter become immediately due and payable.

SECTION 11.03. Surrender of Premises.

a. Tenant’s Responsibility. At the expiration or earlier termination of the tenancy hereby created, Tenant shall surrender the Leased Premises in the same condition as the Leased Premises were in upon delivery of possession thereto under this Lease, reasonable wear and tear excepted, and damage by unavoidable casualty excepted to the extent that the same is covered by Owner’s fire insurance policy with extended coverage endorsement, and shall surrender all keys for the Leased Premises to Owner at the place than fixed for the payment of rent and shall inform Owner of all combination locks, safes and vaults, if any, in the Leased Premises. Tenant shall remove all its trade fixtures from the premises at the expiration or earlier termination of lease term. Also, any alterations or improvements to be removed as provided in Section 5.07 hereof shall be removed from the Leased Premises at the expiration or earlier termination of lease term. Before surrendering the Leased Premises, Tenant shall repair any damage caused by removal of such trade fixtures, alterations and improvements. Such repairs, to be performed in a manner satisfactory to Owner, shall include, but not be limited to the following: cap all plumbing, cap all electrical wiring, repair all holes in walls, re-store damaged floor and/or ceiling tiles, and clean premises thoroughly. Tenant’s obligation to observe or perform this covenant shall survive the expiration or other termination of the term of this Lease. If requested by Owner, Tenant shall execute, acknowledge and deliver to Owner an instrument in writing releasing and quitclaiming to Owner all right, title and interest of Tenant in the Leased Premises by reason of this Lease or otherwise.

b. Owner’s Options. If Tenant fails to remove any of its fixtures, or any alteration or improvements to be removed as provided in this Section, within ten (10) days after the expiration or earlier termination of this Lease Owner may, at its sole option, ( a) treat Tenant as a holdover, in which event the provision of Section 23.01 hereof shall apply; (b) deem any or all of such items abandoned and the sole property of Owner, or (c) remove any or all such items and dispose of the same in any manner or store the same for Tenant, in which case the expense of such disposition or storage shall be borne by Tenant and shall be immediately due and payable.

ARTICLE TWELVE
INSURANCE AND INDEMNITY

SECTION 12.01. Liability Insurance.

Tenant shall, during the entire term hereof, keep in full force and effect a policy of public liability and property damage insurance with respect to the Leased Premises, the sidewalks in front of the Leased Premises, and the business operated by Tenant and any sub-tenants of Tenant in the Leased Premises in single limits of public liability and property damage of not less than One Million Dollars ($1,000,000) per accident. The policy shall name Owner, Owner’s property manager, PACCOM Management Services, Inc. and Tenant as additional insureds, and shall contain a clause that the insurer will not cancel or change the insurance without first giving Owner twenty (20) days prior written notice. The insurance shall be in a form and with an insurance company approved by Owner and a copy of the policy or a certificate of such insurance shall be delivered to Owner. The limits of such insurance shall be increased every thirty-six (36) months during the term of this lease by the same proportion as any increases in the minimum rent (Section 2.01).

SECTION 12.02. Fire and Casualty Insurance.

Tenant agrees that it will not keep, use, sell or offer for sale, in or upon the Leased Premises, any article which may be prohibited by the Owner’s fire insurance policy then in effect covering the Leased Premises. Owner shall maintain a policy of extended coverage fire and casualty all risk, rental loss and other insurance as Owner deems appropriate, for all buildings in the Shopping Center. Tenant’s pro rata share of the annual premium for such policy will be included as a Shopping Center Operating Cost provided in Section 9.01. Should Owner’s policy be increased in fire and/or extended coverage due to activities of or caused by Tenant, Tenant will be responsible for the increased costs. “Tenant’s pro rata share” shall be defined as the ratio between the gross square footage of the floor area of the Leased Premises and the gross square footage of the floor area of the space within the buildings covered by such policy of insurance. Tenant’s pro rata share will not include any increase in premium caused by any other tenants’ activities. In addition, Tenant at its sole expense, shall maintain a fire and casualty policy for the contents of the Leased Premises as stated in Section 12.04.

SECTION 12.03. Hold Harmless and Waiver of Claims.

Tenant agrees that Owner shall not at any time or to any extent whatsoever be liable, responsible, or in any way accountable for any loss, injury, death, or damage to persons or property which at any time may be suffered or sustained by Tenant or by any persons whomsoever who may at any time be using or occupying or visiting the Leased Premises or be in, on or about the same, or who may be injured as a result of any act, omission, or negligence of Tenant, its agents, contractors, employees, invitees, lessees or concessionaires. This indemnity and waiver applies whether arising from the sale of alcoholic beverages or otherwise, whether or not such loss, injury, death or damage shall be caused by or in any manner result from or arise out of any act, omission, or negligence of Tenant or of any occupant, subtenant, visitor or user of any portion of the Leased Premises, or from the use or occupancy of the Lease Premises, or arising from any breach or default of Tenant hereunder. Tenant shall forever indemnify, defend, hold and save Owner and Owner’s property manager free and harmless of, from, and against any and all claims, liability, loss or damage whatsoever, including, but not by way of limitation, attorneys’ fees, at trial and appellate levels and through any further or other types of proceedings, on account of any loss, injury, death or damage occurring on the Leased Premises, or arising from the use of the Leased Premises. Tenant’s obligations under this Section 12.03 shall survive any termination of this Lease.

SECTION 12.04. Insurance of Improvements.

Tenant shall at all times maintain fire insurance with extended coverage in the name of Owner and Tenant, in an amount adequate to cover the cost of replacement of all alterations, decorations, additions or improvements made to the Leased Premises in the event of fire or extended coverage loss and shall deliver to Owner certificates of such fire policies which shall contain a clause requiring the insurer to give Owner twenty (20) days’ notice of cancellation of such policies.

SECTION 12.05. Waivers of Subrogation.

Each of the parties hereto waives any and all rights of recovery against the other or against any other tenant or occupant of the Shopping Center, or against the officers, employees, agents, representatives, customers and business visitors of such other party or of such other tenant or occupant of the Shopping Center for loss of or damage to such waiving party or its property or the property of others under its control, arising from any cause insured against under the standard form of fire insurance policy with all permissible extension endorsements covering additional perils or under any other policy of insurance carried by such waiving party in lieu thereof, to the extent such loss or damage is insured against by such policy. Such waiver shall not be binding on either party unless the same is permitted by each party’s insurance carrier without the payment of additional premium.

ARTICLE THIRTEEN
UTILITIES

Tenant shall be solely responsible for and promptly pay all charges for water, gas, electricity, sewer, trash and garbage removal, telephone, telecommunications, cable TV, or any other utility used or consumed in or upon the Leased Premises. Owner will provide separate meters for electricity and gas utilities to Lease Premises unless otherwise stated in Exhibit A. In no event shall Owner be liable for an interruption or failure in the supply of any such utilities to the Leased Premises.

ARTICLE FOURTEEN
ESTOPPEL CERTIFICATE, ATTORNMENT, SUBORDINATION

SECTION 14.01. Estoppel Certificate.

a. Scope of Certificate. Tenant shall at any time and from time to time upon not less than ten (10) days’ prior written notice from Owner execute, acknowledge and deliver to Owner a statement in writing certifying (i) that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect); and (ii) the dates to which the rental and other charges are paid in advance, if any; and that there are not, to Tenant’s knowledge, any uncured defaults on the part of Owner hereunder, or specifying such defaults if any are claimed; and (iii) that Tenant has paid to Owner the security deposit as set forth in Exhibit A. Any such statement may be relied upon by Owner, any prospective purchaser or encumbrancer of all or any portion of the Leased Premises.

b. Conclusive Presumption. Tenant’s failure to deliver such statement within thirty (30) days of Owner’s request shall be conclusive upon Tenant (1) that this Lease is in full force and effect, without modification except as may be represented by Owner; (2) that there are no uncured defaults in Owner’s performance, that Tenant has paid to Owner the security deposit set forth in Exhibit A; and (3) that not more than one month’s rental has been paid in advance.

SECTION 14.02. Attornment.

Tenant shall, in the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under any mortgage made by Owner covering the Leased Premises, attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as the Owner under this Lease.

SECTION 14.03. Subordination.

Tenant hereby agrees that its rights hereunder are subordinate to the lien of any mortgage or mortgages or the lien resulting from any other method of financing or refinancing, now or hereafter in force against the land and buildings of which the Leased Premises are a part, and to all advances made or hereafter to be made upon the security thereof; provided Owner obtains from the lender a written agreement that provides substantially the following:

“As long as Tenant performs its obligation under this lease, no foreclosure of, deed given in lieu of foreclosure of, or sale under the encumbrance, and no steps for procedures taken under the encumbrance, shall affect Tenant’s rights under this lease.

“Provisions in this lease concerning the disposition of insurance proceeds on destruction of the premises, and concerning the disposition of any condemnation award, shall prevail over any conflicting provisions in the encumbrance.”

This Section shall be self-operative and no further instrument of subordination shall be required by any mortgagee; however, Tenant agrees to sign written confirmation of this subordination if requested by Owner.

SECTION 14.04. Attorney in Fact.

Tenant, upon request of any party in interest, shall execute promptly such instruments or certificates to carry out the intent of Sections 14.01,14.02, and 14.03 above as requested by Owner. Tenant hereby irrevocably appoints Owner as attorney-in-fact for Tenant with full power and authority to execute and deliver in the name of Tenant any such instruments or certificates, effective thirty (30) days after the date of written request by Owner to execute such instruments, in the event of Tenant’s failure to execute same.

ARTICLE FIFTEEN
ASSIGNMENT AND SUBLETTING

SECTION 15.01. Transfers.

a. Consent Required. Tenant shall not transfer or assign this Lease, or any right or interest hereunder, or sublet the Leased Premises or any part thereof, or grant any license or concession (collectively “transfer”) without first obtaining the prior written consent of Owner, which consent shall not be unreasonably withheld. No transfer or assignment, whether voluntary or involuntary, by operation of law, under legal process or proceedings, by receivership, in bankruptcy, or otherwise, and no subletting shall be valid or effective without such prior written consent. Should any of Tenant’s rights under this Lease be transferred by or under court order or legal process or otherwise, or should Tenant be adjudged insolvent or bankrupt, then and in any of the foregoing events Owner may, at its option, terminate this Lease forthwith by written notice thereof to Tenant. Should Owner consent to any such transfer, such consent shall not constitute a waiver of any of the restrictions of this Section 15.01 and the same shall apply to each successive transfer hereunder, if any.

b. Reasonableness of Owner’s Consent. In exercising the right to consent, Owner may consider all commercially relevant factors involved in the leasing, subleasing, or assignment of retail shopping center space, including but not limited to: (1) the creditworthiness and financial stability of the proposed transferee, (2) the projected gross sales and percentage rent payable by the proposed transferee, (3) the compatibility of the proposed transferee with Owner, Owner’s property manager, and the other tenants in the Shopping Center, (4) references from prior landlords of the proposed transferee, (5) the business reputation of the proposed transferee, (6) the past history of the proposed transferee with respect to litigation or bankruptcy or other insolvency proceedings, (7) whether the proposed use of the Leased Premises by the proposed transferee is within the scope of use described ixi Exhibit A and Article Sixth, (8) whether the proposed use of the Leased Premises is consistent with the exclusive use provisions, if any, of any other tenant’s lease, (9) whether the proposed use is suitable and in keeping with the ambiance, character, tone, and other used in the Shopping Center, (10) the impact of the proposed transferee and the proposed use of the Leased Premises on pedestrian and vehicular traffic, parking facilities, and other Common Area Facilities in the Shopping Center and services provided by Owner, and (11) the likelihood that the proposed transferee’s anticipated use of the Leased Premises would likely involve the use of hazardous materials which, in Owner’s reasonable opinion would pose an unacceptable risk of contamination of the Leased Premises, the Shopping Center, or other property of potential liability. The presence of one negative factor among the items enumerated above shall be deemed reasonable justification for Owner’s withholding consent. Without limiting the generality of the foregoing, Owner shall expressly not be deemed unreasonable in rejecting any proposed transferee who is not equal to or better than Tenant under factors (1), (2), (5) or (6). Tenant express agrees that none of the foregoing factors constitutes an unreasonable standard or condition for purposes of California Civil Code Section 1951.4(b)(2).

c. Proposed Transfer. At any time that Tenant desires to effect any transfer, Tenant shall give Owner written notice identifying the terms and provisions of the proposed transfer and the proposed transferee, sufficient financial data to enable Owner to assess the creditworthiness and financial stability of the proposed transferee, and the nature of the business proposed to be carried on in the Leased Premises. In addition, Tenant shall provide Owner with such additional information reasonable requested by Owner to enable Owner to evaluate the proposed transferee and act on Tenant’s proposed transfer. Tenant shall pay Owner with the notice of proposed transfer a fee of Three Hundred Dollars ($300.00) as additional rent to cover Owner’s costs of processing the proposed transfer, which fee is nonrefundable even if the transfer is not approved.

SECTION 15.02. Transfer Requirements.

a. Bonus Value. Tenant agrees that any bonus value of this Lease is reserved by Owner. Accordingly, Tenant shall pay to Owner any economic consideration received by Tenant as a result of any transfer, however denominated or however or to whomever to be paid, which exceeds in the aggregate (1) the rent (including all additional rent) Tenant is obligated to pay Owner under this Lease (prorated in the case of a sublease), plus (2) an amount, if any, attributable to the recovery of the unrealized amortization of the cost of leasehold improvements (other than tenant improvements made at Owner’s cost under Exhibit E) made to the Leased Premises by Tenant, or by Owner at Tenant’s expense. Fifty percent (50%) of such bonus value shall be paid to Owner as additional rent under this Lease without affecting or reducing any other obligations of Tenant hereunder, and shall be paid to Owner on the same basis, whether periodic or in lump sum, that the same is paid to Tenant, In the event of periodic payments, any amounts excluded from the amount to be paid to Owner shall be recovered by Tenant on an amortized basis (without interest) over the entire anticipated term of the transfer. At the time any payment becomes due from Tenant under this paragraph, Tenant shall deliver an itemized statement of the method by which the amount was calculated, certified by Tenant to be true and correct. Owner shall have the right at reasonable intervals to inspect Tenant’s books and records relating to payments due pursuant to this paragraph. In addition, at Owner’s request, Tenant shall deliver to Owner copies of all bills, invoices, or other documents upon which its calculations are based. Owner may condition its approval of any transfer upon obtaining a certification from both Tenant and the proposed transferee of all economic consideration to be received by Tenant or others for Tenant’s benefit in connection with such transfer. Tenant’s failure to perform any of the obligations under this paragraph shall be a material default of this Lease.

b. Transfer Terms. No transfer shall be valid and no transferee shall take possession of the Leased Premises until an executed counterpart of any approved transfer document has been delivered to Owner. No transfer will include any options or rights of first refusal, e.g. any option to extend the term of the Lease, and any such options will not be available to any transferee. Tenant shall indemnify Owner and hold Owner harmless from any claims, damages, and expense (including attorney’s fees) arising out of any claims by brokers or others for commissions or finder’s fees with respect to any transfer.

c. Tenant’s Continuing Responsibility. No transfer shall release Tenant from any of Tenant’s obligations under this Lease or alter the primary liability of Tenant to pay rent and to perform all other obligations to be performed by Tenant under this Lease. In the event of default by any transferee of Tenant in the performance of any of the terms of this Lease, Owner may proceed directly against Tenant without the necessity of exhausting remedies against the transferee. The acceptance of rent by Owner from any other person shall not be deemed to be a waiver by Owner of any provision of mis Lease or be deemed a consent to any transfer by Tenant. Consent to one transfer shall not be deemed consent to any subsequent transfer, whether by Tenant or any transferee of Tenant.

SECTION 15.03. Transfer of Entities.

If Tenant hereunder is a corporation, an unincorporated association, or a partnership, the transfer of any stock or interest in such corporation, association or partnership in the cumulative aggregate in excess of forty-nine percent (49%) (whether voluntary, involuntary, or by operation of law) shall be deemed a transfer with the meaning and provisions of Section 15.01.

ARTICLE SIXTEEN
WASTE, GOVERNMENTAL REGULATION

SECTION 16.01. Waste.

Tenant shall not commit or suffer to be committed any waste upon the Leased Premises or any nuisance or other act or thing which may disturb the quiet enjoyment of any other tenant in the building in which the Leased Premises may be located, or in the Shopping Center, or which may disturb the quiet enjoyment of any person within five hundred feet (500’) of the boundaries of the Shopping Center.

SECTION 16.02. Governmental Regulations.

Tenant shall, at Tenant’s sole cost and expense, comply with all of the requirements of all city, county,‘municipal, state, federal and other applicable governmental authorities now in force, or which may hereafter be in force, pertaining to the said premises, including the installation of additional facilities as required for the conduct and continuance of Tenant’s business, and shall faithfully observe in the use of the premises all municipal and county ordinances and state and federal statutes now in force or which may hereinafter be in force.

SECTION 16.03. Hazardous Materials.

Tenant shall not permit or maintain hazardous materials upon the Leased Premises except in strict compliance with all governmental registration and reporting requirements and other laws, ordinances and regulations regarding the storage and handling of same. Any damage, pollution, or contamination resulting from such materials shall be Tenant’s sole responsibility and Tenant shall indemnify Owner from any claim or damage regarding same.

SECTION 16.04. Safety and Health.

Tenant covenants at all times during the term of this Lease to comply with the requirements of the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 et. seq. and any analogous legislation in California (collectively, the “Act”), to the extent that the Act applied to the Leased Premises and any activities thereon and without limiting the generality of the foregoing, Tenant covenants to maintain all working areas, all machinery, structures electrical facilities and the like upon the Leased Premises in any condition that fully complies with the requirements of the Act, including such requirements as would be applicable with respect to agents, employees or contractors of Owner who may from time to time be present upon the Leased Premises, and Tenant agrees to indemnify and hold harmless Owner from any liability, claims or damages arising as a result of breach of the foregoing covenant and from all costs, expenses and charges arising therefrom including, without limitations, attorney’s fees and court costs incurred by Owner in connection therewith which indemnity shall survive the expiration or termination of this Lease.

ARTICLE SEVENTEEN
ADVERTISING, PROMOTION

SECTION 17.01. Change of Name.

Tenant agrees to do business under the name set forth in Exhibit A and not to change said name of the business operated in the Leased Premises without the written permission of Owner, which permission will not be unreasonably withheld.

SECTION 17.02. Solicitation of Business.

Tenant and Tenant’s employees and agents shall not solicit business in the parking or other common areas, nor shall Tenant distribute any handbills or other advertising matter in or on automobiles parked in the parking area or in other common areas.

SECTION 17.03. Merchant's Association.

Subject to the use of the Marketing Fund alternate described in Section 17.04 below, Owner and Tenant will each be members of, participate fully in, and remain in good standing in the Watsonville Crossroads Shopping Center Merchants Association (as soon as the same has been formed) which will be limited to Owner and those tenants occupying premises in the Shopping Center. Each member shall have one vote in the operation of said Association, as provided in the by-laws of the Association. The purpose of such Association shall be to encourage its members to deal fairly and courteously with their customers, to follow ethical business practices and to assist the business of the tenants by sales promotions and center-wide advertising. The Tenant agrees to pay dues to the Association as approved by a majority vote of the members of the Association. Such dues will be a minimum of $.50 per square foot leased per calendar year for Tenant, and $.25 per square foot of total leasable space in the Center for Owner, subject to increases approved by the Association, which will be no less than an annual increase equal to any increase in the All Urban Consumers of the Consumer Price Index for the San Francisco — San Jose region (1982-84=100), not to exceed ten percent (10%) per year. Owner’s obligation to the Association will be limited to one half (1/2) of the rate per square foot paid by all Tenants of the Shopping Center. Delinquency in any dues or assessments or failure to become and remain a member of the Association shall be deemed a material default under this lease. Nothing in the By-Laws or regulations of the said Association shall be in conflict with the provisions of this Lease, including without limiting the generality of the foregoing any reasonable rules and regulations adopted pursuant to the provisions of Section 6.05 hereof.

SECTION 17.04. Marketing Fund Alternate.

Owner may, in Owner’s sole discretion, elect to establish a Marketing Fund in lieu of the Merchants’ Association described in Section 17.03, In such event, Tenant shall pay to Owner as additional rent the same amount as would have been contributed to the Merchants’ Association, as adjusted from time to time as provided in Section 17.03. Owner will contribute the sum specified in Section 17.03 to the fund and use the Marketing Fund to promote and advertise the Shopping Center in the manner Owner deems appropriate and for the best interest of the Shopping Center as a whole. Owner may elect to make all or part of its contribution in the form of the full time or part time services of a marketing director, promotion director, or marketing consultant, any of whom may also be employees, agents, or consultants of Owner, and all of whom will serve under the supervision and control of Owner who shall have the sole right to employ and discharge same.

SECTION 17.05. Use of Shopping Center Name.

Tenant shall use the name of the Shopping Center in which the Leased Premises are located in all of Tenant’s advertising in connection with Tenant’s business at the premises and for no other purpose except with Owner’s consent. Tenant shall not have or acquire any property right or interest in the name of the Shopping Center. Owner reserves the right to change the name, title, or address of the Shopping Center or the address of the premises at any time and Tenant waives all claims for damages caused by any such change.

SECTION 17.06. Cooperation.

Tenant agrees to join and cooperate with Owner and other tenants in all joint promotions and advertising of the Shopping Center whenever funds of the Merchants’ Association or Marketing Fund (as applicable) are being used, including working with advertising layout specialists, coupon promotions, seminars, special promotional events, and other promotional or advertising activities.

ARTICLE EIGHTEEN
DESTRUCTION OF LEASED PREMISES

SECTION 18.01. Insured Destruction.

a. If, during the term, the Leased Premises or the building and other improvements in which the Leased Premises are located are totally or partially destroyed from a risk covered by the insurance described in Section 12.02, rendering the Leased Premises totally or partially inaccessible or unusable, Owner shall restore the Leased Premises or the building and other improvements in which the Leased Premises are located to substantially the same condition as they were immediately before destruction, in the manner provided in Section 18.03 below. Such destruction shall not terminate this lease. If the existing laws do not permit the restoration, either party can terminate this lease immediately by giving notice to the other party.

b. If the cost of the restoration exceeds the amount of proceeds received from the insurance required under Section 12.02, Owner can elect to terminate this lease by giving notice to Tenant within thirty (30) days after determining that the restoration cost will exceed the insurance proceeds. In the case of destruction to the Leased Premises only, if Owner elects to terminate this lease, Tenant within thirty (30) days after receiving Owner’s notice to terminate can elect to pay to Owner, at the time Tenant notifies Owner of its election, the difference between the amount insurance proceeds and the cost of restoration, in which case Owner shall restore the Leased Premises. Owner shall give Tenant satisfactory evidence that all sums contributed by Tenant as provided in this Section have been expended by Owner in paying for the cost of restoration.

c. If Owner elects to terminate this lease and Tenant does not elect to contribute toward the cost of restoration as provided in this Section this lease shall terminate.

SECTION 18.02. Uninsured Destruction.

a. If, during the term, the Leased Premises or the building and other improvements in which the Leased Premises are located are totally or partially destroyed from a risk not covered by the insurance described in Section 12.02, rendering the Leased Premises totally or partially inaccessible or unusable, Owner shall restore the Leased Premises and other improvements in which the Leased Premises are located to substantially the same condition as they were in immediately before the destruction, provided that the cost of restoration does not exceed 25% of the replacement value of the building in which the Leased Premises are located.

b. If the cost of restoration exceeds the 25% of the then replacement value of the building in which the Leased Premises are located, Owner can elect to terminate this lease by giving notice to Tenant within thirty (30) days after determining the restoration cost and replacement value.

c. In the case of destruction to the Leased Premises only, if Owner elects to terminate this lease, Tenant can within thirty (30) days after receiving Owner’s notice to terminate, elect to pay to Owner, at the time Tenant so notifies Owner of its election, the difference between 10% of the then replacement value of the Leased Premises and the actual cost of restoration, in which case Owner shall restore the Leased Premises. Owner shall give satisfactory evidence that all sums contributed by Tenant as provided in this Section have been expended by Owner in paying the actual cost of restoration.

d. If Owner elects to terminate this lease and Tenant does not elect to perform the restoration or contribute toward the cost of restorations provided in this Section, this lease shall terminate.

SECTION 18.03. Extent of Owner's Obligation to Restore.

a. If Owner is required or elects to restore the Leased Premises as provided in Sections 18.01 and 18.02, Owner shall diligently pursue such restoration to completion.

b. If Owner is required or elects to restore the Leased Premises as provided in Sections 18.01 or 18.02, Owner shall not be required to restore alterations made by Tenant, Tenant Improvements, Tenant’s trade fixtures, and Tenant’s personal property. Such excluded items are the sole responsibility of Tenant to restore.

SECTION 18.04. Abatement or Reduction of Rent

In the case of destruction, there shall be an abatement or reduction of rent, except any percentage rent, between the date of destruction and the date of completion of restoration, based upon the extent to which the destruction interferes with Tenant’s use of the Leased Premises.

SECTION 18.05. Termination Due to Destruction.

If Owner has been unable to restore the Leased Premises by twelve (12) months after the destruction, Tenant shall be entitled to terminate this lease without further obligation, effective thirty (30) days following written notice to Owner. Tenant waives the provisions of Civil Code Section 1932 (2) and 1933 (4) with respect to termination by reason of destruction of the premises. If the existing laws at the time of destruction do not permit restoration by Owner, either party can terminate this lease immediately by giving notice to the other party.

ARTICLE NINETEEN
EMINENT DOMAIN

SECTION 19.01. Total Condemnation.

If the whole of the Leased Premises shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, then the term of this Lease shall cease and terminate as of the date of title vesting in such proceeding and all rentals shall be paid up to that date and Tenant shall have no claim against Owner for the value of any unexpired term of this Lease.

SECTION 19.02. Partial Condemnation.

If any part of the Leased Premises shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, and in the event that such partial taking or condemnation shall render the Leased Premises unsuitable for the business of Tenant, then the term of this Lease shall cease and terminate as of the date of title vesting in such proceeding and Tenant shall have no claim against Owner for the value of any unexpired term of this Lease. In the event of a partial taking or condemnation which is not extensive enough to render the premises unsuitable for the business of Tenant, then Owner shall within reasonable time restore the Leased Premises to a condition comparable to its condition at the time of such condemnation less the portion lost in the taking, and this Lease shall continue in full force and effect. Each party waives the provision of the Code of Civil Procedures Section 1265.130 allowing either party to petition the Superior Court to terminate this lease in the event of a partial taking of the Leased Premises.

SECTION 19.03. Parking Area.

If more than 10% of the common parking areas in the Shopping Center shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, then the term of this Lease shall cease and terminate as of the date of title vesting in such proceeding unless Owner shall take reasonable steps to provide other parking facilities substantially equal to the original parking, and such parking facilities shall be provided by Owner at its own expense.

SECTION 19.04. Owner’s Damages.

In the event of any condemnation or taking as hereinbefore provided, whether whole or partial, Tenant shall not be entitled to any part of the award, as damages or otherwise, for such condemnation, except as provided in Section 19.05 below, and Owner is to receive the full amount of such award, Tenant hereby expressly waiving any right or claim to any part thereof.

SECTION 19.05. Tenant's Damages.

Although all damages in the event of any condemnation are to belong to Owner, whether such damages are awarded as compensation for diminution in the value of the leasehold or to the fee of the Leased Premises, Tenant shall have the right to claim and recover from the condemning authority, but not from Owner, such compensation as maybe separately awarded or recoverable by Tenant in Tenant’s own right on account of any and all damage to Tenant’s business by reason of the condemnation and also all damage on account of any cost or loss to Tenant for moving expenses and Tenant’s merchandise, furniture, fixtures, Tenant Improvements and equipment.

SECTION 19.06. Reduction or Abatement of Rent.

If any portion of the Leased Premises is taken by condemnation and this lease remains in full force and effect, on the date of taking the minimum monthly rent shall be reduced by an amount that is in the same ratio to minimum monthly rent as the total number of square feet in the Leased Premises taken bears to the total number of square feet in the Leased Premises immediately before the date of taking. If there is a partial taking which requires restoration, the minimum monthly rent shall be reduced during the period that Tenant’s use is impaired until a completion of restoration, but all other obligations of Tenant under this lease shall remain in full force and effect. The reduction shall be based on the extent to which the restoration interferes with Tenant’s use of the premises.

ARTICLE TWENTY
REMEDIES, DEFAULT, AND BANKRUPTCY - INSOLVENCY

SECTION 20.01. Default.

Tenant shall be in default in the event that (a) Tenant fails to pay Owner any rental installment on or before the 3rd day following Owner’s written notice to Tenant of Tenant’s failure to make such payment, (b) Tenant fails to pay Owner any other sum in the amount, manner, and at the time required, under this lease, provided that Tenant fails to make such payment within fifteen (15) days after Owner’s written notice to Tenant of Tenant’s failure to make such payment, (c) Tenant fails to implement directions from qualified consultants engaged by Owner intended to improve Tenant’s merchandising or (d) Tenant breaches this lease and fails to cure such breach as provided in this Article.

SECTION 20.02. Multiple Monetary Defaults.

The three (3) day written notice of default for a monetary default under Section 20.01 shall only be required to be given by Owner to Tenant three (3) times during the term of the Lease (including any extended term). After Owner has given Tenant notice of default for a monetary default three (3) times, an additional monetary default shall be non-curable and the Lease shall terminate on the 15th day after notice of such non-curable default being given by Owner to Tenant.

The three (3) time limit on the written notice of monetary default shall not apply to the 15 day notice of default required before termination of the Lease under Section 20.03.

SECTION 20.03. Notice of Non-Monetary Default.

Tenant shall not be in default under this Lease or in breach of this Lease for failure to perform any of the terms, conditions or covenants of this Lease to be observed or performed by Tenant (other than payment of rentals or other sums due) if Tenant commences performance or other cure of default within fifteen (15) days after receiving a written notice of default from Owner, and diligently and in good faith pursues completion of such performance or cure.

SECTION 20.04. Termination.

Unless Owner elects to continue this Lease under Section 20.07, it shall terminate: (a) three days following written notice of default in the payment of rent and failure of Tenant to cure such default as set forth above; (b) fifteen days after notice of a non-monetary default and Tenant’s failure to commence performance or cure of the default; (c) fifteen days after the third notice of a monetary default, whether or not cured, (d) upon the effective date of any assignment by Tenant for the benefit of creditors; (e) upon the effective date of the appointment of any receiver for Tenant’s property; or (f) upon the date any interest herein passes to any trustee appointed under the Bankruptcy Act (except a debtor in possession) or any trustee, assignee, or receiver for creditors.

SECTION 20.05. Damages.

On such termination, in addition to other remedies provided by law, Owner may recover from Tenant all damages specified in California Civil Code Section 1951.2, including 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 rental loss for the same period that Tenant proves could be reasonably avoided.

SECTION 20.06. Reletting.

Owner may mitigate damages caused by Tenant’s breach by reletting the property prior to the time of award or judgment. Any such reletting, unless proved by Tenant to be not in good faith, shall be conclusive upon all parties as to the rental loss for the balance of the term. Any efforts by Owner to mitigate damages by reletting shall not waive Owner’s right to recover any damages. Nor shall anything in this paragraph affect Owner’s right to indemnification for liability arising prior to the termination of this Lease for personal injuries or property damages as provided above.

SECTION 20.07. Continuation of Lease After Default.

Even though Tenant is in default, this Lease shall continue in effect for so long as Owner does not terminate Tenant’s right to possession, and Owner may enforce all Owner’s rights and remedies under this Lease, including the right to recover rent as it becomes due hereunder. Unless Tenant is otherwise notified, the following shall not constitute a termination of Tenant’s right to possession: (a) acts of maintenance or preservation or efforts to relet the property, (b) the appointment of a receiver on Owner’s initiative to protect Owner’s interest under this Lease.

SECTION 20.08. Re-Entry.

If Owner shall elect to re-enter the Leased Premises, Owner shall not be liable for damages by reason of such re-entry.

SECTION 20.09. Remedies.

All rights, options and remedies of Owner contained in this Lease shall be construed and held to be cumulative, and no one of them shall be exclusive of the other, and Owner shall have the right to pursue any one or all of such remedies or any other remedy or relief which may be provided by law, whether or not stated in this Lease. No waiver of any default of Tenant hereunder shall be implied from any acceptance by Owner of any rent or other payments due hereunder or any omission by Owner to take any action on account of such default if such default persists or is repeated, and no express waiver shall affect default other than as specified in said waiver. The consent or approval by Owner to or of any action by Tenant requiring Owner’s consent or approval shall not be deemed to waive or render unnecessary Owner’s consent or approval to or of any subsequent similar acts by Tenant.

SECTION 20.10. Legal Expenses.

In the event that any action shall be instituted by either of the parties hereto for the enforcement of any of its rights or remedies in or under this Lease, the prevailing party shall be entitled to recover from the other party all costs incurred by the prevailing party in such action, including reasonable attorney’s fees to be fixed by the court therein.

SECTION 20.1l. Interest.

In the event of any monetary default by Tenant, Owner shall be entitled to interest at the rate of TEN PERCENT (10%) per year on the amount in default commencing with the date same was due and payable (notwithstanding any grace period).

ARTICLE TWENTY-ONE
ACCESS BY OWNER

SECTION 21.01. Right of Entry.

After reasonable prior notice to Tenant and Tenant’s approval (which will not be unreasonably withheld), Owner or Owner’s agents shall have the right to enter the Leased Premises at all times to examine the same, and to show them to prospective purchasers or lessees of the building, and to make such repairs, alterations, improvements or additions as Owner may deem necessary or desirable. Owner shall be allowed to take material for repairs into and upon the Leased Premises that may be required therefor without the same constituting an eviction of Tenant in whole or in part and the rent reserved shall in no way abate while said repairs, alterations, improvements, or additions are being made, by reason of loss or interruption of business of Tenant, or otherwise. During the six (6) months prior to the expiration of the term of this Lease or any renewal term, Owner may exhibit the premises to prospective tenants or purchasers. If Tenant shall not be personally present to open and permit an entry into the Leased Premises, at any time, when for any reason an entry therein shall be necessary or permissible, Owner or Owner’s agents may enter the same without rendering Owner or such agents liable therefore, and without in any manner affecting the obligations and covenants of this Lease. Nothing herein contained, however, shall be deemed or construed to impose upon Owner any obligation, responsibility or liability whatsoever, for the care, maintenance or repair of the building of any part hereof, except as otherwise herein specifically provided.

SECTION 21.02. Excavation.

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

ARTICLE TWENTY-TWO
TENANT'S PROPERTY

SECTION 22.01. Taxes on Leasehold.

Tenant shall be responsible for and shall pay before delinquency all municipal, county or state taxes assessed during the term of this Lease against any leasehold interest or personal property of any kind owned by or placed in, upon or about the Leased Premises by Tenant.

SECTION 22.02. Loss and Damage.

Owner shall not be liable for any damage to property of Tenant or of others located on the Leased Premises, nor for the loss of or damage to any property of Tenant or of others by theft or otherwise. Owner shall not be liable for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water, rain or leaks from any part of the Leased Premises or from the pipes, appliances or plumbing works or from the roof, street or subsurface or from any other place or by dampness or by any other cause of whatsoever nature. Owner shall not be liable for any such damage caused by other tenants or persons in the Leased Premises, occupants of adjacent property, of the Shopping Center, or the public or caused by operations in construction of any private, public or quasi-public work. Owner shall not be liable for any latent defect in the Leased Premises or in the building of which they form a part. All property of Tenant kept or stored on the Leased Premises shall be so kept or stored at the risk of Tenant only and Tenant shall hold Owner harmless from any claims arising out of damage to the same, including subrogation claims by Tenant’s insurance carriers unless such damage shall be caused by the willful act or gross neglect of Owner, and through no fault of Tenant.

SECTION 22.03. Notice by Tenant.

Tenant shall give immediate notice to owner in case of fire or accidents in the Leased Premises or in the building of which the premises are a part or of defects therein or in any fixtures or equipment.

ARTICLE TWENTY-THREE
HOLDING OVER, SUCCESSORS

SECTION 23.01. Holding Over.

This Lease shall terminate and become null and void without further notice upon the expiration of the term herein specified and any holding over by Tenant after such expiration shall not constitute a renewal hereof or give Tenant any right under this Lease. If Tenant shall hold over for any period after the expiration of said term, Owner may, at its option, exercised by written notice to Tenant, treat Tenant as a Tenant from month to month commencing on the first day following the expiration of this Lease subject to the terms and conditions herein contained except that the minimum rent, which shall be payable in advance monthly, shall be one hundred fifty percent (150%) of said minimum annual rent applicable at the date of expiration. If Tenant fails to surrender the Leased Premises upon the expiration of this Lease despite demand to do so by Owner, Tenant shall indemnify and hold Owner harmless from all loss or liability, including without limitation, any claims made by any succeeding tenant founded on or resulting from such failure to surrender.

SECTION 23.02. Successors.

All rights and liabilities herein given to, or imposed upon, the respective parties hereto shall extend to and bind the several respective heirs, executors, administrators/ successors, and assigns of said parties; and if there shall be more than one tenant, they shall all be bound jointly and severally by the terms, covenants and agreements herein. No rights, however, shall inure to the benefit of any assignee of Tenant unless the assignment to such assignee has been approved by Owner in writing as provided in Section 15.01 hereof.

ARTICLE TWENTY-FOUR
QUIET ENJOYMENT

SECTION 24.01. Owner's Covenant.

Upon payment by Tenant of the rents herein provided, upon the observance and performance of all the covenants, terms and conditions on Tenant’s part to be observed and performed, Tenant shall peaceably and quietly hold and enjoy the Leased Premises for the term hereby leased without hindrance or interruption by Owner or any other person or persons lawfully equitably claiming, by, through or under the Owner, subject, nevertheless, to the terms and conditions of this Lease.

ARTICLE TWENTY-FIVE
MISCELLANEOUS

SECTION 25.01. Waiver.

The waiver of Owner of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of such term, covenant or condition or any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance of rent hereunder by Owner shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rental so accepted, regardless of Owner’s knowledge of such preceding breach at the time of acceptance of such rent. No covenant, term or condition of this Lease shall be deemed to have been waived by Owner, unless such waiver be in writing by Owner.

SECTION 25.02. Accord and Satisfaction.

No payment by Tenant or receipt by Owner of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed on accord and satisfaction, and Owner may accept such check or payment without prejudice to Owner’s right to recover the balance of such rent or pursue an other remedy in this Lease provided.

SECTION 25.03. Entire Agreement.

The Lease, Exhibits, and Addenda, if any, attached hereto and forming a part hereof, set forth all the covenants, promises, agreements, conditions and understandings between Owner and Tenant concerning the Leased Premises and there are no covenants, promises, agreements, conditions or understandings, either oral or written, between them other than are herein set forth. Except as herein otherwise provided, no subsequent alteration, amendment, change or addition to this Lease shall be binding upon Owner or Tenant unless reduced to writing and signed by the party to be charged with their performance.

SECTION 25.04. No Partnerships.

Owner does not in any way or for any purpose, become a partner of Tenant in the conduct of its business, or otherwise, or joint venturer or a member of a joint enterprise with Tenant. The provisions of this Lease relating to the percentage rent payable hereunder are included solely for the purpose of providing a method whereby the rent is to be measured and ascertained.

SECTION 25.05. Force Majeure.

If either party, except as otherwise herein specifically provided, shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of strikes, lockouts, labor troubles, inability to procure materials, failure of power, restrictive governmental laws or regulation, riots, insurrection, war or other reason of a like nature not the fault of the party delayed in performing work or doing acts required under the terms of this Lease, then performance of such act shall be excused for the period of delay the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. The provisions of this Section 25.05 shall not operate to excuse Tenant from the prompt payment of rent, percentage rent, additional rent or any other payments required by the terms of this Lease.

SECTION 25.06. Notices.

(a) Any notice by Tenant to Owner must be served by certified or registered mail, postage prepaid, return receipt requested, addressed to Owner at the address set forth in Exhibit A, or at such other address as owner may designate by written notice.

(b) Any notice by Owner to Tenant must be served by certified or registered mail, postage prepaid, return receipt requested, addressed to Tenant at the address set forth in Exhibit A, or at such other address as Tenant may designate by written notice.

SECTION 25.07. Captions and Section Numbers.

The captions, section numbers, article numbers, and index appearing in this Lease are inserted only as matter of convenience and in no way define, limit, construe, or describe the scope or intent of such sections or articles of this Lease nor in any way affect this Lease.

SECTION 25.08. Tenant Defined. Use of Pronoun.

The word “Tenant” shall be deemed and taken to mean each and every person or party mentioned as a Tenant herein, be the same one or more; and if there shall be more than one Tenant, any notice required or permitted by the terms of this Lease may be given by or to any one thereof, and shall have the same force and effect if as given by or to all thereof. The use of the neuter singular pronoun to refer to Owner or Tenant shall be deemed a proper reference even though Owner or Tenant may be an individual, a partnership, a corporation, or a group of two or more individuals or corporations. The necessary grammatical changes required to make the provisions of the Lease apply in the plural sense where there is more than one Owner or Tenant and to either corporations, associations, partnerships, or individuals, males or females, shall in all instance be assumed as though in each case fully expressed.

SECTION 25.09. Partial Invalidity.

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

SECTION 25.10. No Option.

The submission of this Lease by Owner to Tenant does not constitute a reservation of or option for the Leased Premises, and this Lease becomes effective as a Lease only upon execution hereof by Owner and Tenant, and delivery of the executed Lease by Owner to Tenant.

SECTION 25.11. Recording.

Tenant shall not record this Lease or any memorandum without the written consent of Owner. If any reference to this Lease inadvertently appears on the recording index in any way,

Tenant shall execute a quitclaim upon request by Owner and Tenant’s failure to do so shall render Tenant liable for all damages and expenses caused to Owner.

SECTION 25.12. Exhibits.

The following Exhibits are attached hereto and made a part hereof, plus any additional Exhibits described in Exhibit A.

Exhibit A	Basic Lease Provisions
Exhibit B	Site Plan
Exhibit C	Store Plan
Exhibit D	Sign Plan and Specifications
Exhibit E	Tenant Improvement Specification
Exhibit F	Copy Merchants' Association by-laws (subject to change)

SECTION 25.13. Addenda.

Addenda to this Lease, if any, are attached hereto and made a part hereof, if signed or initialed by Owner and Tenant.

EXECUTED at Watsonville, California on the date and year first set forth in the Basic Lease Provisions (Exhibit A).

OWNER:	TENANT:
SIEGLE FAMILY TRUST	COMMUNITY BANK OF CENTRAL CALIFORNIA
dated October 14, 1988	a California corporation
By:/s/ RODERICK D. SIEGLE	By:/s/ HARRY D. WARDWELL
Roderick D. Siegle, Trustee	Sr VP, Branch Administrator
	Harry D. Wardwell

ADDENDUM ONE

FORM OF COMMENCEMENT ADDENDUM

RODERICK D. SEIGLE, Trustee of the SEIGLE FAMILY TRUST dated October 14,1988, “Owner,” and COMMUNITY BANK OF CENTRAL CALIFORNIA, a California corporation, “Tenant,” agree as follows:

1. Lease. This Addendum One is incorporated into the lease between the parties concerning 1915 Main Street, in Watsonville, California, hereinafter referred to as the "Lease." This Commencement Addendum shall be signed upon Tenant's occupancy and when signed, shall be deemed a part of the Lease.

2. Area Leased. The area of Landlord's Building leased to Tenant and referred to in Exhibit A of the existing lease is 971 [adjust if necessary] +/- square feet which shall be deemed the area leased for all purposes, regardless of any subsequently discovered discrepancy.

3. Commencement/Expiration Date. The Lease provides that the parties will by this Commencement Addendum state the Commencement Date, which the parties hereby agree to be________, 2000 for all purposes in the Lease. The Lease will terminate on, 2003, subject to Tenant's Option to Extend which must be exercised (if at all) during the month beginning _______, 2002 and ending______________,2003.

4. Rent. The parties acknowledge that rent for the first month has been prepaid. The next rental payment is due on _________, 2000, and will consist of the following [adjust as necessary]:

____________Rent	$         864	.19
____________CAMs@35¢	339	.85
Total due	$     1,204	.04

5. Confirmation. In all other respects, the Lease is confirmed.

Executed at Watsonville, California on ___________, 2000.

OWNER:	TENANT:
SEIGLE FAMILY TRUST	COMMUNITY BANK OF CENTRAL CALIFORNIA
dated October 14,1988	a California corporation
By: DO NOT SIGN	By: DO NOT SIGN
Roderick D. Seigle, Trustee	[print name and title of authorized officer]

DO NOT SIGN UNTIL AFTER OCCUPANCY AND REQUESTED BY OWNER

ADDENDUM TWO
OPTION TO EXTEND

This Addendum Two is to that Lease between RODERICK D. SEIGLE, Trustee of the SEIGLE FAMILY TRUST dated October 14,1988 (Owner) and the undersigned Tenant concerning the Leased Premises described in the Lease to which this Addendum is incorporated by reference.

1. Option to Extend. Provided Tenant is not in default hereunder, Tenant shall have the option to extend the term of this Lease for the additional period(s) set forth in Exhibit A (Basic Lease Provisions). Any such extension shall be on all the same terms and conditions of this Lease except for this option and except for the rent which shall be renegotiated as provided in paragraph 3 of this Addendum below.

2. Exercise of Option. Each option to extend must be exercised (if at all) by delivery of a written notice to Owner at least nine (9) months but no more than twelve (12) months preceding the end of the term of this Lease as set forth in Section 1.04 of the Lease, or as such term may have been extended pursuant to the terms of the Lease, as appropriate. Tenant’s exercise of Option is subject to Tenant’s right to withdraw the exercise in the event that the Owner and Tenant cannot agree upon a rental and the rental is set by arbitration as provided in paragraph three (3) below. This right to withdraw the exercise of Option will expire thirty (30) days after service of the decision of the rental arbitrators following the procedures set forth in paragraph three (3) below. Tenant will have no such right if Owner and Tenant agree upon a rental.

3. Rental Arbitration. The rental for any extended term shall be the then current market rent for the Shopping Center as agreed between Owner and Tenant. If they cannot agree upon a rental, then Owner and Tenant shall each appoint an arbitrator/appraiser who shall be a licensed real estate broker or other person qualified by reason of professional or business experience to know the prevailing rentals for shopping centers in the Pajaro Valley and Aptos area. Either party may so appoint an arbitrator at any time after disagreement by notifying the other of the name and address of the arbitrator so appointed. Upon receipt of such notice, the other party shall appoint a separate arbitrator within fifteen (15) days after service of such notice. In the event either party fails to so designate a separate arbitrator within such fifteen (15) day period, the other party shall have the right to apply to the presiding judge of the Superior Court of Santa Cruz County, California for the appointment of the second arbitrator meeting the criteria set forth above. The two arbitrators thus appointed (in either matter) shall determine the fair market rental value of the leased property within twenty (20) business days of the appointment of the second arbitrator. If the two arbitrators agree upon a value, or if the higher of the two values is no greater than one hundred and ten percent (110%) of the value determined by the other arbitrator, then the fair market rent for the extended term shall be equal, to the average of the two values. In the event the higher of the two values determined by such arbitrators is greater than one hundred and ten percent (110%) of the value determined by the other arbitrators, then the two arbitrators shall mutually agree upon and appoint a third arbitrator within ten (10) business days after the last of the two appraisals is completed. The third arbitrator shall then proceed to determine and shall have the sole and complete authority to determine the rental value of the extended term; provided, however, that such rental value so determined shall be no greater then the higher of the two values, and no less than the lower of the two values determined by the first two arbitrators. In the event the first two arbitrators fail to appoint the third arbitrator within ten (10) business days after the last of the first two appraisals is completed, then either party may have the third arbitrator appointed by the presiding judge of the Superior Court of Santa Cruz County, California. The decision of the arbitrators as provided above shall be final, conclusive and binding on all parties. Each such appraisal shall be in writing and signed by the appropriate arbitrator with a signed copy delivered to each party. Each party shall pay the respective charges of their respective arbitrator and the expenses incurred by same. The charges for the services and expenses of the third arbitrator shall be borne by Owner and Tenant in equal shares. Each party shall bear its respective attorneys fees incurred in connection with the appraisal/arbitrator procedure.

Date: 4/27, 2000

OWNER:	TENANT:
SIEGLE FAMILY TRUST	COMMUNITY BANK OF CENTRAL CALIFORNIA
dated October 14, 1988	a California Corporation
By: /s/ RODERICK D. SEIGLE	By: /s/ HARRY D. WARDWELL
Roderick D. Seigle, Trustee	[print name and title of authorized officer]
	Sr. VP, Branch Administrator
	Harry D. Wardwell

ADDENDUM THREE
LEASE RENEWAL AND MODIFICATION TO THE LEASE

This Third Addendum is made between CROSSROADS SEAGULLS, LLC, (SUCCESSORS TO THE SEIGLE FAMILY TRUST) dba WATSONVILLE CROSSROADS SHOPPING CENTER (“Owner”), and COMMUNITY BANK OF CENTRAL CALIFORNIA, a California Corporation, (“Tenant”) who agree as follows:

RECITAL: Owner and Tenant are parties to an existing lease dated April 25, 2000, concerning the Premises known as 1915 Main Street, Watsonville, CA. in the Watsonville Crossroads Shopping Center. Owner, the Seigle Family Trust, purchased the Watsonville Crossroads Shopping Center from Watsonville Crossroads, LLC in 1998. In January 2003, the Seigle Family Trust was succeeded by Crossroads Seagulls LLC.

TERM: The term of the lease shall be extended to expire on May 31,2008

SIZE: The Premises will be increased in size from approximately 971 sf to approximately 1,676 sf effective June 1,2003. This expansion is further detailed in Exhibit AA to the Lease

RENT: The Minimum Rent for the extended term will be as follows:

Yr 4 June 1, 2003 — July 31, 2003	$l,310.85/mo + NNN costs
Yr 4 Aug. l, 2003 — May 31, 2004	$2,262.60/mo + NNN costs
Yr 5 June 1, 2004 — May 31, 2005	$2,330.48/mo + NNN costs
Yr 6 June 1, 2005 — May 31, 2006	$2,400.00/mo + NNN costs
Yr 7 June 1, 2006 — May 31, 2007	$2,472.40/mo + NNN costs
Yr 8 June 1, 2007 — May 31, 2008	$2,546.58/mo + NNN costs

The revised rent schedule reflecting the 1,676 sf Premises shall commence on June 1,2003.

Tenant shall pay rent and NNN costs on the original 971 square feet only during June and July 2003. Rent and NNN costs for the 705 square feet expansion area will be abated for June and July 2003.

CONSTRUCTION COSTS: Tenant shall pay for all construction costs associated with the expansion. Owner will deliver the space “as-is” with a demising wall separating the expansion space from the contiguous tenant American General Finance. This demising wall will be insulated and sheetrocked; but will not be taped nor textured. Any electrical outlets or telecommunication ports, and finish work to the wall will be at Tenant’s sole expense. All Tenant Improvements shall be subject to the general requirements under the Lease.

Owner shall contribute a total of Ten Thousand Five Hundred Seventy Five Dollars ($10,575.00) to Tenant for Tenant Improvements. This contribution will be in the form of rent reductions over the first two years of the renewal period (years four and five). From June 2003 though May 2005, each month, Tenant shall deduct Four Hundred Forty Dollars and Sixty Two Cents ($440.62) per month from the rent due.

For example, on June 1, 2003, the base rent due would be $1,310.85 less $440.62 for a total base rent due of $8 70.23 plus the NNN CAM reserve of $3 78.69 for a total rent due of $1,248.92.

OPTION TO RENEW: Tenant, if not in default, shall have the Option to Renew the Lease for one (1) five (5) year term; extending the lease through May 2013. Rent shall be determined as described in Addendum Two of the Lease.

Unless specifically modified in this Addendum Three, the Lease shall remain unchanged.

This Addendum Three is hereby confirmed:

Owner: Crossroads-Seagulls, LLC.

/s/ RODERICK SEIGLE 4/30/03
Roderick Seigle, Manager date

Tenant: Community Bank of Central California, Inc.
/s/ HARRY D. WARDWELL
By: 5-2-03 date
Title: Sr Vice President, Br Administrator

EX-10

STEINBECK PLAZA LEASE

1. PARTIES. This lease, dated for reference purposes only, March 1, 2002 is made between: STEINBECK PLAZA, a California General Partnership, (herein collectively called "Landlord"), and COMMUNITY BANK OF CENTRAL CALIFORNIA, (herein called "Tenant").

2. PREMISES. Landlord does hereby lease to Tenant and Tenant hereby leases from Landlord that certain office space (hereinafter called Premises) indicated on “Exhibit A” attached hereto made a part hereof, said Premises being agreed, for the purpose of this Lease, to have an area of approximately five thousand five hundred square feet (5,500 sq. ft.) and located at xxxxxxxx St. Salinas, California, 93901. Said lease is subject to the terms, covenants and conditions herein set forth, and the 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 conditions of said performance.

3. TERMS. The term of this Lease shall be for five (5) years, commencing June 1, 2002, (the Commencement Date) and ending on May 31, 2007.

4. POSSESSION. On June 1, 2002.

5. BASE RENT. Tenant agrees to pay to Landlord, without prior notice or demand, as Base Rent for the Premises the sum of: Five thousand seven hundred seventy five dollars ($5,775.00), which represents $1.05 per square foot, on or before the first day of the first full calendar month of the term hereof and a like sum on or before the first day of each successive month thereafter during the term hereof. Rent for any period during the term hereof which is for less than one (1) month shall be a pro-rated portion of the monthly installment herein, based upon a thirty (30) day month. Said rental shall be paid to Landlord, without deduction or offset in lawful money of the United States of America, which shall be legal tender at the time of payment at the address of the Landlord stated herein or such other place as Landlord may from time to time designate in writing.

6. RENT ADJUSTMENT. Monthly rent shall be increased five cents per square foot, per year, beginning June 1, 2003 and annually thereafter.

7. REAL ESTATE TAXES. Landlord shall pay the annual real estate taxes and assessments levied upon the property of which the premises are a part.

8. PARKING AND COMMON FACILITIES. Landlord covenants that the common and parking areas of the building of which the premises are a part shall be available for the nonexclusive use of Tenant during the full term of this lease or any extension of the term hereof, provided that the condemnation or other taking by any public authority, or sale in lieu of condemnation, of any or all of such common and parking areas shall not constitute a violation of this covenant. Landlord reserves the right to change the entrances, exits, traffic lanes and the boundaries and locations of such parking area or areas, provided that tenant’s rights hereunder are not adversely affected. This lease shall be subordinate to any agreement existing as of the date of this lease or subsequently placed upon the real property of which the premises are a part, which agreement provides for reciprocal easements and restrictions pertaining to the common and parking areas, and in the event of conflict between the provisions of such agreement and this lease, the provisions of said agreement shall prevail.

9. INSURANCE. Landlord shall maintain fire and extended coverage insurance throughout the term of this lease in an amount equal to at least ninety (90%) percent of the value of the building which includes the premises, together with such other insurance, including but not limited to, loss of rents, earthquake, flood insurance, all liability insurance, and such other insurance as Landlord deems necessary or that may be required by Landlord’s lender or by any governmental agency. Tenant hereby waives any right of recovery from Landlord, its officers and employees, and Landlord hereby waives any right of recovery from Tenant, its officers or employees, for any loss or damage (including consequential loss) resulting from any of the perils insured against it in the standard form fire insurance policy with extended coverage endorsement. Tenant shall maintain fire and extended coverage insurance on its personal property and Tenant improvements in an amount equal to at least 90% of the replacement value.

10. INDEMNIFICATION OF LANDLORD — LIABILITY INSURANCE BY TENANT. Tenant shall indemnify and hold harmless Landlord against and from any and all claims arising from Tenant’s use and occupancy of the Premises from the conduct of its business. Or from any activity, work, or other things done, permitted or suffered by the Tenant in or about the Building, and shall further indemnify and hold harmless Landlord against and from any and all claims arising from any breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease, or arising from any act or negligence of the Tenant, or of any officer, agent, employee, guest, or invitee of Tenant, and from all and against all costs, reasonable attorney’s fees, expenses and liabilities incurred in or about any such claim or any action or preceding brought thereon. If any case, action or proceeding be brought against Landlord by reason of any such claim, Tenant upon notice from Landlord shall defend the same at Tenant’s expense by counsel reasonably satisfactory to Landlord. Tenant as a material part of the consideration to Landlord hereby assumes all risk of damage to property or injury to persons, in, upon or about the Premises, from any other cause other than Landlord’s negligence, and Tenant hereby waives all claims in respect thereof against Landlord.

Landlord or its agent shall not be liable for any damage to property entrusted to employees of the Building, not for loss or damage to any property by theft or otherwise, not for any injury to or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water, or rain which may leak from any part of the Building or from any other place resulting from dampness or any cause whatsoever, unless caused by or due to the negligence of Landlord, its agents, servants or employees in which case Landlord shall indemnify and hold harmless Tenant for any loses arising therefrom. Landlord or its agents shall not be liable for interference with Tenant’s rights, other incorporeal hereditaments, or loss of business.

During the entire term of this lease, the Tenant shall, at the Tenant’s sole cost and expense, but for the mutual benefit of Landlord and Tenant, maintain general public liability and property damage insurance including contractual liability insurance against claims for personal injury, death, or property damage occurring in, upon or about the premises and the parking and common areas. The limitation of liability of such insurance shall be not less than One million dollars ($1,000,000.00) in respect to any one occurrence, and to the limit of not less than Five hundred thousand dollars ($500,000.00) in respect to Property Damage.

All such policies of fire and liability insurance shall be issued in the name of Tenant and Landlord and for the mutual and joint benefit and protection of the parties, and such policies of insurance shall include a provision requiring that the insurer give Landlord at least ten (10) days written notice before and cancellation, decrease in coverage or other material change is effective. Copies of the policy or a certificate of Insurance thereof shall be delivered to the Landlord within fifteen (15) days after the rent commencement date of this lease. If Tenant fails to deliver adequate proof that it has obtained and kept in force and effect the insurance required by the paragraph, Landlord shall have the right, at its option and after notice to Tenant, to effect such insurance and charge the cost of the premiums to Tenant’s account.

Notwithstanding, anything to the contrary herein contained, Tenant shall have the option to maintain self-insurance and/or provide or maintain such insurance under so-called blanket insurance policies provided the same does not hereby decrease the insurance coverage or limits set forth in this article.

11. SIGNS AND AUCTIONS. Tenant is entitled to place a sign on the premises in accordance with the Building’s sign plan at Tenant’s sole cost and expense. Except for the foregoing, Tenant shall not place or permit to be placed any sign upon the exterior or in the windows of the premises without Landlord’s prior written consent, not shall Tenant change the color or exterior appearance of the premises without Landlord’s prior written consent.

Tenant shall not without Landlord’s prior written consent display or sell merchandise outside the defined exterior walls and permanent doorways or the premises. Tenant shall not conduct or permit to be conducted any sale by auction in, upon or from the premises, whether said auction by voluntary, involuntary, pursuant to any assignment for the payment of creditors or pursuant to any bankruptcy or other solvency proceeding.

12. UTILITIES. Tenant shall pay before delinquency 100% of the janitorial, telephone, PG&E, sewer, garbage, HVAC, and other expenses for services used exclusively by Tenant or any of its subtenants, licensees, or concessionaires during the term of this lease.

Landlord has furnished tenant with an adequate electrical and water service generally found in a general office building. If tenant shall require water or electrical current in excess of that usually furnished or supplied for the use of the Premises as a general office space, Tenant shall bear the cost of such installation of service, and increased meter service, and pay for the maintenance of such. Written consent of the landlord is not necessary, but all utility work must be done by a licensed contractor.

13. USE. The premises are to be used for the bag processing general banking or general office purposes and for no other business of purpose without the written consent of Landlord, which consent will not be unreasonably withheld.

Tenant shall not permit anything to be done in or about the premises nor bring or keep anything therein which will in any way increase the existing rate of or affect any fire or any other insurance upon the Building or any of its contents, or increase the existing rate of or cause cancellation of any insurance policy covering said Building or any part thereof or any of its contents. Tenant 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 Tenants or occupants of the Building or adjacent properties or injure or annoy them or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purposes, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises. Tenant shall not commit or suffer to be committed any waste in or upon the Premises.

14. COMPLIANCE WITH LAW. Tenant shall not use the Premises or permit anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or governmental rule or regulation now in force or which may hereafter be enacted or promulgated. Tenant shall, at its sole cost and expense, promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements now in force or which may hereafter be in force, and with the requirements of any board of fire insurance underwriters or other similar bodies now or hereafter constituted, relating to, or affecting the condition, use or occupancy of the Premises, excluding structural changes not made for, not related to, altered or affected by Tenant. The judgment of any court of competent jurisdiction or the admission of Tenant in any action against Tenant whether Landlord is a party thereto or not, that Tenant has violated any law, statue, ordinance or governmental rule, regulation or requirement, shall be conclusive of the fact as between the Landlord and Tenant.

Landlord shall be solely responsible for ensuring that the shell or structure (including external doors, ramps and entryways to premises) of the building complies with all governmental regulations and codes during the term of this Lease and all extensions. Tenant shall be solely responsible for ensuring that any improvements, alterations or additions made by Tenant, or by Landlord on Tenant’s behalf, comply with all governmental regulations and codes during the terms of this Lease and all extension.

15. ALTERATIONS AND ADDITIONS. Except as stated herein, Tenant shall not make or suffer to be made any alternations, additions or improvements to or of the Premises or any part thereof without the written consent of the Landlord first had and obtained. Any alterations, additions or improvements to or of said Premises including but not limited to, wall covering, paneling, and built-in cabinets, but excepting movable furniture and trade fixtures, shall on the expiration of the term become a part of the realty and belong to the Landlord and shall be surrendered with the Premises. In the event Landlord consents to the making of any alterations, additions or improvements to the Premises by the Tenant, the same shall be made by Tenant at Tenant’s sole cost and expense by a licensed contractor selected by Tenant to make the same who must first be approved of in writing by the Landlord. Upon the expiration or sooner termination of the term hereof, Tenant shall, upon written demand by Landlord, given at least thirty (30) days prior to the end of the term, at Tenant’s sole cost and expense, forthwith and with all due diligence remove any alterations, additions, or improvements made by Tenant designated by Landlord to be removed, and Tenant shall forthwith and with all due diligence, at its sole cost and expense, repair any damage to the Premises caused by such removal. Landlord shall not unreasonably withhold its consent to the making of any alterations, additions or’ improvements to the Premises, or Tenant’s choice of licensed contractor to make same, which Tenant believes are necessary or desirable in the conduct of its operations. Tenant agrees that it will not, nor will it authorize any person to go onto the roof of the building of which the premises are a part without the prior written consent of Landlord.

Notwithstanding the foregoing Tenant may install and maintain its trade fixtures on the premises, provided that such fixtures, by reason of the manner in which they are affixed, do not become an integral part of the building or premises. Tenant, if not in default hereunder, may at any time or from time to time during the term hereof, or upon the expiration or termination of this lease, alter or remove any such trade fixtures so installed by Tenant. If not so removed by Tenant on or before the expiration or termination of this lease, Tenant, upon the request of Landlord, shall remove the same. Any material damage to the premises caused by any such installation, alteration or removal of such trade fixtures shall be promptly repaired at the expense of the Tenant. Landlord and Tenant agree that the Tenant may, at its sole option, decide not to remove its vault at the expiration of the term of the Lease.

Tenant shall also at its sole cost and expense be responsible for any alterations or improvements to the premises necessitated as a result of the requirement of any municipal, state or federal authority. Tenant hereby waives all right to make repairs at the expense of Landlord, and Tenant hereby waives all rights provided for by Section 1941 of the Civil Code of the State of California. By entering into the premises Tenant shall be deemed to have accepted the premises as being in good and sanitary order, condition and repair and Tenant agrees on the last day of said term of any extensions or sooner termination of this lease to surrender the premises with appurtenances, in the same condition as when received, reasonable use and wear thereof and damage by fire, act of God or by the elements excepted.

Not withstanding the foregoing, Tenant may make alterations, additions or improvements to the premises without Landlord’s written consent so long as said alterations, additions or improvements do not exceed $10,000 per project.

16. REPAIRS. Tenant shall, at Tenant’s sole cost and expense, keep the Premises and every part thereof in good condition and repair, ordinary wear and tear excepted. Tenant shall upon the expiration or sooner termination of this Lease hereof, surrender the Premises to the Landlord in good condition, ordinary wear and tear excepted. Except as specifically provided in this Lease, Landlord shall have no obligation whatsoever 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.

Notwithstanding the provisions of this Article, Landlord shall repair and maintain, at its own cost and expenses, the structural portions of the Building including the foundation, roof, and exterior walls. Landlord shall not be liable for any failure to make any such repairs or to perform any maintenance unless such failure shall persist for any unreasonable time after written notice of the need of such repairs or maintenance is given to Landlord by Tenant.

Except as otherwise provided in this Lease, 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.

17. LIENS. Tenant shall keep the Premises and the property in which the Premises are situated free from any liens arising out of any work performed, material furnished or obligations incurred by Tenant.

18. ASSIGNMENT AND SUBLETTING. Tenant shall not either voluntarily or by operation of law, assign, transfer, mortgage, pledge, hypothecate, or encumber this Lease or any interest therein, and shall not sublet the said premises or any part thereof, or any right or privilege appurtenant thereto, or suffer any other person (employee, agents, servants and invitees of Tenant excepted) to occupy or use the said Premises, or any portion thereof, without the written consent of Landlord first had and obtained, which consent shall not be unreasonably withheld. A change in ownership of 25% or more in interest of Tenant shall be treated as an assignment under this section. A consent to one assignment, subletting occupation or use by another person shall not be deemed to be a consent to any subsequent assignment, subletting, occupation or use by another person. Any such assignment or subletting without such consent shall be void, and shall, at the option of the Landlord, constitute a default under this lease. Landlord shall approve or disapprove of any requested assignment or sublease within 30 days after Tenant request consent, and any disapproval shall be accompanied by a written statement from Landlord giving all reasons for the disapproval. Landlord may charge Tenant a reasonable fee for any assignment or sublease and may charge Tenant any costs incurred by Landlord related to such assignment or sublease, not to exceed $250.

If Tenant proposes to assign the lease to any person or entity who shall have made a good faith offer to accept an assignment of this lease on terms acceptable to the Tenant, the notice of such proposed assignment, setting forth (a) the name and address of such person, (b) all the terms and conditions of such offer, and (c) the adequate assurance to be provided Landlord to assure such persons future performance under the lease, shall be given to Landlord by Tenant no later than ten (1Q) days after receipt by the Tenant Landlord shall then have the right and option, to be exercised by a notice to Tenant given at any time prior to the effective date of such proposed assignment to accept a different assignment of this lease on the same terms and conditions and for the same consideration, if and, as the offer made to the Tenant, less any brokerage commissions which may be payable out of the consideration to be paid to such person for the assignment of this lease.

Notwithstanding anything to the contrary constrained in this Lease, Tenant shall have the right to assign this Lease or any interest therein and/or to sublet the demised premises or any portion thereof, without the consent of Landlord, to:

(a) any subsidiary corporation or any parent corporation of Tenant

(b) any corporation with which Tenant may merge or consolidate; or

(c) any corporation acquiring all or substantially all of the assets and/or stock of Tenant.

As used herein, corporations are related as “parent” or “subsidiary” if s corporation owns fifty percent (50%) or more of the voting stock of another corporation.

19. PERSONAL PROPERTY TAXES. Tenant shall pay, or cause to be paid, before delinquency, any and all taxes levied or assessed and which become payable during the term hereof, upon all Tenant’s leasehold improvements, equipment, furniture, fixtures and personal property located in the Premises. In the event any or all of the Tenant’s leasehold improvements, equipment, furniture, fixtures and personal property shall be assessed and taxed with the Building, Tenant shall pay to Landlord its share of such taxes within ten (10) days after delivery to Tenant by Landlord of a statement in writing setting forth the amount of such taxes applicable to Tenant’s property.

20. HOLDING OVER. If Tenant remains in possession of the Premises or any part thereof after the expiration of the term hereof, with the express written consent of Landlord, such occupancy shall be a tenancy from month to month at a rental in the amount of the last monthly Base Rent plus 10%, plus all other charges payable hereunder, and upon all the terms hereof applicable to a month to month tenancy

21. ENTRY BY LANDLORD. In case of emergency Landlord reserves and shall at any and all times have the right to enter the Premises. By appointment, Landlord has the right to enter and inspect the Premises. To show said Premises to prospective purchasers or Tenants, to post notices of non-responsibility, and to alter, improve or repair the premises and any portion of the Building of which the Premises are a part that Landlord may deem necessary or desirable, without abatement of rent and may for that purpose_ erect scaffolding and other necessary structures where reasonably required by the character of the work to be performed, always provided that the entrance to the Premises shall not be blacked thereby, and further providing that the business of the Tenant shall not be interfered with unreasonably. Tenant hereby waives any claim far damages or for any injury or inconvenience to or interference with Tenant’s business, any loss of occupancy or quiet _enjoyment of the Premises, and any other loss occasioned thereby. Any entry to the Premises obtained by Landlord by any means, shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant from the Premises or any portion thereof, Should Tenant unreasonably refuse entry during regular business hours, all costs or premium time (overtime) shall be born by Tenant.

22. DESTRUCTION. If the premises or the building wherein the same are situated shall be destroyed by fire or other cause, or be so damaged thereby that they are untenantable and cannot be rendered tenantable within on hundred eighty (180) days from the date of such destruction or damage, this lease may be terminated by Landlord or by Tenant by written notice. Within forty-five (45) days from date of such destruction or damaged, Landlord shall give written notice to Tenant as to whether or not the premises will be rendered tenantable within one hundred eighty (180) days from the date of such destruction of damage. In case the damage or destruction be not such as to permit termination of the lease as above provided, Landlord shall with due diligence upon receipt of insurance proceeds render said premises tenantable, and a proportionate reduction shall be made in the rent herein reserved corresponding to the time during which and to the portion of thee premises of which Tenant shall be deprived of possession. The provision of Subdivision 2 of Section 1932 of the California Civil Code and of Subdivision 4 of Section 1933 of that code, shall no apply to this lease, and Tenant waives the benefits of such provisions.

Landlord shall not be required to repair any injury or damage by fire or other cause, or to make any repairs or replacements of any Tenant improvements, panels, decoration, office fixtures, railings, floor covering, partitions, or any other property installed in the Premises by Tenant or by the Landlord on Tenant’s behalf. Tenant shall not be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises, Tenant’s personal property or any inconvenience of annoyance occasioned by such damage, repair, reconstruction or restoration, unless the destruction was caused by the negligence of Landlord.

23. DEFAULT. The occurrence of any one or more of the following events shall constitute a default and breach of this lease by Tenant:

a) The failure by Tenant to make any payment of rent or any other payment required to be made by Tenant hereunder, within five (5) days after notice.

b) The failure by Tenant to observe or perform any of the covenants, conditions or provisions of this Lease to be observed or performed by the Tenant, other than the failure to pay rent, where such failure shall continue for a period of thirty (30) days after written notice thereof by Landlord to Tenant; provided, however, that the nature of Tenant’s default is such that more than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant commences such cure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion.

c) The making by Tenant of any general assignment of general arrangement for the benefit of creditors: or the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt, or a petition of reorganization or arrangement under any law relating to bankruptcy (unless, in the case of the petition filed against Tenant, the same is dismissed within sixty (60) days); or the appointment of a trustee or a receiver to take possession of substantially all of Tenant’s assets located at the Premises or of the Tenant’s interest in this Lease, where possession is not restored to Tenant within thirty (30) days; or the attachment, execution or other judicial seizure of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in the Lease, where such seizure is not discharged in thirty (30) days.

24. REMEDIES IN. DEFAULT. In the event of any such material default or breach by Tenant, Landlord may at any time, thereafter, upon written notice to Tenant and without limiting Landlord in the exercise of a right or remedy which Landlord may have by reason of such default or breach.

a) Terminate Tenant’s right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender possession of the Premises to Landlord. In such event Landlord shall be entitled to recover from Tenant all damages incurred by Landlord by reason of Tenants default including, but not limited to, the cost of recovering possession of the Premises; expenses of reletting, including necessary renovation and alteration of the premises, reasonable attorney’s fees, any real estate commission actually paid; the worth at the time of award by the court having jurisdiction thereof of the amount by which the unpaid rent for the balance of the term after the time of such award exceeds the amount of such rental loss for the same period that Tenant proves could be reasonably avoided; that portion of the leasing commission paid by the Landlord and applicable to the unexpired term of the Lease. Unpaid installments of rent or other sums shall bear interest from the date due at the rate of ten (10%) percent per annum.

b) Maintain Tenant’s right to possession, in which case this Lease shall continue in effect whether or not Tenant shall have abandoned the Premises. In such event Landlord shall be entitled to enforce all of Landlord’s rights and remedies under this Lease, including the right to recover the rent as it becomes due hereunder.

c) Pursue any other remedy now or hereafter available to Landlord under the laws or judicial decisions of the state in which the premises are located.

25. EMINENT DOMAIN. If more than twenty-five (25%) percent of the Premises shall be taken or appropriated by any public or quasi-public authority under the power of eminent domain, either party hereto shall have the right, at its option, to terminate this Lease, and Landlord shall be entitled to any and all income, rent award, or any interest therein whatsoever which may be paid or made in connection with such public or quasi-public appropriation, and Tenant shall have no claim against Landlord for the value of any unexpired term of this Lease. .If either less that twenty-five (25%) percent of the Premises is taken, or if neither party elects to terminate as herein provided, the rental thereafter to be paid shall be equitably reduced. If any part of the Building other that the Premises may be so taken or appropriated, Landlord shall have the right at its option to terminate this Lease and shall be entitled to the entire award as above provided. Except that Tenant shall receive from the proceeds the following:

(a) A sum attributable to Tenant’s improvements or alteration made to the premises by Tenant in accordance with this Lease, which Tenant’s improvements or alteration Tenant has the right to remove from the Premises pursuant to the provisions of this Lease;

(b) A sum attribution to relocation expenses of Tenant.

26. OFFSET STATEMENT. Tenant shall at any time and from time to time upon not less than twenty (20) days prior written notice from Landlord execute, acknowledge and deliver to Landlord a statement in writing, (a) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease as so modified, is in full force and effect), and the date to which the rental and other charges are paid in advance, if any, and (b) acknowledging that there are not, to Tenant’s knowledge, any uncured defaults on the part of the Landlord hereunder, or specifying such defaults if any are claimed. Any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion or the real property of which the Premises are a part.

27. AUTHORITY OF PARTIES. If Tenant is a corporation, partnership, limited partnership or other entity, each individual executing this Lease on behalf of said entity represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said entity, in accordance with a duly adopted resolution of the board of directors or partners of said entity or in accordance with the by-laws or agreement of said entity, and that this Lease is biding upon said entity in accordance with its terms.

28. GENERAL PROVISIONS.

28.1 Plats and Riders. Clauses, plats and riders, if any, signed by the Landlord and the Tenant and endorsed on or affixed to this Lease are a part hereof.

28.2 Waiver. The waiver by Landlord and/or Tenant of any term, covenant or condition herein contained shall not be deemed to be a waiver of such term, covenant or condition on any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure of the Tenant to pay the particular rental so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of the acceptance of such rent.

28.3 Notices. All notices and demands which may or are to be required or permitted to be given by either party to the other hereunder shall be in writing. All notices and demands by the Landlord to the Tenant shall be sent by United States Mail, postage pre-paid, addressed to the Tenant at the address shown at the end of this lease, or to such other place as Tenant may from time to time designate in a notice to the Landlord. All notices and demands by the Tenant to the Landlord shall be sent by United States Mail, postage prepaid, addressed to the Landlord at the Office of the Manager of the Building, or to such other person or place as the Landlord may from time to time designate in a notice to the Tenant.

28.4 Joint Obligation. If there is more than one Tenant the obligations hereunder imposed upon Tenant shall be joint and several.

28.5 Marginal Headings. The marginal headings and titles to the Articles of this Lease are not a part of this Lease and shall have no effect upon the construction or interpretation of any part hereof.

28.6 Time. Time is of the essence of this Lease and each and all of its provisions in which performance is a factor.

28.7 Successors and Assigns. The covenants and conditions herein contained, subject to the provisions as to assignment, apply to and bind their heirs, successors, executors, administrator and assigns of the parties hereto.

28.8 Recordation. Neither Landlord nor Tenant shall record this Lease or a short form memorandum hereof without the prior written consent of the other party.

28.9 Quiet Possession. Upon Tenant paying the rent reserved hereunder and observing and performing all of the covenants, conditions and provisions on Tenant’s part to be observed and performed hereunder, Tenant has quiet possession of the Premises for the entire term hereof, subject to all the provisions of this Lease.

28.10 Late Charges. Tenant hereby acknowledges that late payment by Tenant to Landlord of rent or other sums due hereunder will cause Landlord to incur cost not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Landlord by terms of any mortgage or trust deed covering the Premises. Accordingly, if any installments of rent or a sum due from Tenant shall not be received by Landlord or Landlord’s designee within five (5) days after notice to Tenant that the said amount is past due, then Tenant shall pay to Landlord a late charge equal to five (5%) percent of such overdue amount. The parties hereby agree that such late charges represent a fair and reasonable estimate of the cost that Landlord will incur by reason of the late payment by Tenant. Acceptance of such late charges by the Landlord shall in no event constitute a waiver of Tenant’s default with respect to such overdue amount, nor prevent Landlord from exercising any other rights and remedies granted hereunder.

28.11 Prior Agreements. 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 agreements or understanding pertaining to any such matter shall be effective far 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. This Lease shall not be effective or binding on any party until fully executed by both parties hereto.

28.12 Inability to Perform. This Lease and the obligation of the Tenant thereunder shall not be affected or impaired because the Landlord is unable to fulfill any of its obligations hereunder or is delayed in doing so, if such inability or delay is caused by reason of strike, labor troubles, acts of God, or any other cause beyond the reasonable control of the Landlord.

28.13 Attorney's Fees. In the event of any action or proceeding brought by either party against the other under this Lease, the prevailing party shall be entitled to recover all costs and expenses including the fees of its attorneys in such action or proceeding in such amount as the court may adjudge reasonable as attorney’s fees. In addition, Landlord shall be entitled to recover all attorney’s fees and costs of collection incurred by it due to Tenant’s default.

28.14 Sale of Premises by Landlord. In the event of any sale of the Building, Landlord shall be and is hereby entirely freed and relieved of all liability under any and all of its covenants and obligations contained in or derived from this Lease arising out of any act, occurrence or omission occurring after the consummation of such sale; and the purchaser, at such sale or any subsequent sale of the Premises shall be deemed, without further agreement between the parties or their successors in interest or between the parties and any such purchaser, to have assumed and agreed to carry out any and all of the covenants and obligations of the Landlord under this Lease. No sale of the Building by Landlord shall operate in any way to terminate this Lease, or Tenant’s right to extend same pursuant to the option set forth in this Lease or to otherwise alter or modify the terms and provisions hereof, and Landlord shall not enter into any sale of the Building without giving the Buyer notice of this provision.

28.15 Subordination, Attornment. In the event that, subsequent to the execution of this lease, a new mortgage, deed of trust or like encumbrance on the premises is created, or a ground lease or underlying lease to which this lease shall be subordinate is entered into, then this lease shall be subject and subordinate to such encumbrance or lease only if Landlord obtains from such mortgagor or lessor a written agreement in form acceptable to such mortgage or lessor, providing substantially that Tenant’s rights under this Lease shall not be affected by any foreclosure of deed in lieu of foreclosure of, or sale under such encumbrances for so long as Tenant performs its obligations under this lease (or, in the case of a ground lease or underlying lease, Tenant’s right shall not be affected by any termination of said lease for so long as Tenant performs its obligations under this lease).

In the event any proceedings are brought for foreclosure, as in the event of the exercise of the power of sale under any mortgage or deed of trust made by the Landlord covering the Premises, the Tenant shall attorn to the purchaser upon any foreclosure or sale and recognize such purchaser as the Landlord under this Lease. The provisions of this Article to the contrary notwithstanding, so long as the Tenant is not in default hereunder, this Lease shall remain in full force and effect for the full term hereof.

28.15 Name. Tenant shall not use the name of the Building or the development in which the Building is situated for any purpose other than as an address of the business to be conducted by the Tenant in the premises.

28.17 Separability. Any provision of this Lease which shall prove to invalid, void, or illegal shall in no way affect, impair, or invalidate any other part or provision hereof and such other provision shall remain in full force and effect.

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

28.19 Choice of Law. This Lease shall be governed by the laws of the State of California.

28. OPTION TO EXTEND. Provided Tenant is not in default of this Lease at time of renewal Tenant shall have the option to renew the Lease for one (1) five (5) year term. Tenant shall exercise its option to renew and extend the term by giving Landlord written notice at lease six (6) months before expiration of the current term. At the inception of each option period and annually thereafter, the base rent shall be adjusted to reflect the increase in the Consumer Price Index, All Urban Consumers (CPI) compiled by the Department of Labor of the West Urban area comparing the Index closest to the adjustment date with the Index for the same month of the previous year. The percentage increase so determined will be added to the monthly rent until it is again adjusted. In no event shall the rental rate be decreased from year to year. In no event shall the annual increase be less than 3% or be more than 6% of the previous year rent.

30. HAZARDOUS MATERIALS.

(a) Landlord is not aware of any asbestos or any other hazardous material on, in or under the Premises or Building.

(b) If Tenant knows or has reasonable cause to believe that any release of a hazardous substance has come or will come to be located on or beneath said Premises, Tenant shall, within a reasonable period of time, either prior to the release or following the discovery by the Tenant of the presence or believed presence of a hazardous substance release, give written notice of that condition to Landlord.

(c) If Tenant has knowledge of the presence of a release of a materiel amount of a hazardous substance, or of a hazardous substance release, that is required to be reported to a state or local agency pursuant to law, on or under the premises and knowingly and willfully fails to provide written notice to the Landlord, the failure is deemed to constitute a default, upon Landlord’s written notice to Tenant.

(d) Tenant may cure a default under this section by promptly commencing and completing the removal of, or taking other appropriate remedial action with respect to, the hazardous substance release. Tenant shall conduct removal or remedial action in accordance with all applicable laws and regulations and in a manner which is reasonably acceptable to, and which is approved in writing by, Landlord. A cure does not relieve Tenant of any liability for actual damages or for any civil penalty for a violation of this provision.

(e) “Hazardous waste” means a waste, or combination of wastes, which because of its quantity, concentration, or physical, chemical, or infectious characteristics may either cause, or significantly contribute to an increase in mortality or an increase in serious irreversible, or incapacitating reversible, illness or pose a substantial present or potential hazard to human health or environment when improperly treated, stored, transported, or disposed of, or otherwise managed. The term “hazardous waste” also includes “extremely hazardous waste” which means any hazardous or mixture of hazardous wastes which, if human exposure should occur, may likely result in death, disabling personal injury or serious illness because of its quantity, concentration, or chemical characteristics. The term hazardous waste” shall include infectious wastes.

(f) Tenant shall comply with all governmental regulations regarding the proper disposal of medical wastes, including but not limited to, blood and needles.

(g) Tenant agrees to indemnify, defend and hold the Landlord harmless from any and all claims related to hazardous waste release and disposal,

31. DISPUTE RESOLUTION. ANY CONTROVERSY OF CLAIM ARISING OUT OF OR RELATING TO THIS LEASE OR ANY AGREEMENTS OR INSTRUMENTS RELATING HERETO OR DELIVERED IN CONNECTION HEREWITH, INCLUDING, BUT NOT LIMITED TO A CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT WILL, AT THE REQUEST OF ANY PARTY AFTER THAT PARTY’S COMPLIANCE WITH THE MEDIATION PROCESS, BE DETERMINED BY ARBITRATION IN ACCORDANCE WITH THE .FEDERAL ARBITRATION ACT (9 U.S.C. SECTION 1 ET SEQ.) UNDER THE AUSPICES AND RULES OF THE AMERICAN ARBITRATION ASSOCIATION (“AAA”). THE AAA WILL BE INSTRUCTED BY EITHER OR BOTH PARTIES TO PREPARE A LIST OF THREE (3) JUDGES WHO HAVE RETIRED FROM THE SUPERIOR COURT OF THE STATE OF CALIFORNIA, A HIGHER CALIFORNIA COURT OF ANY FEDERAL COURT. WITHIN 10 DAYS FOLLOWING RECEIPT OF THE LIST, EACH PARTY MAY STRIKE 1 NAME FROM THE LIST. THE AAA WILL THEN APPOINT THE ARBITRATOR FROM THE NAME(S) REMAINING ON THE LIST. THE ARBITRATION WILL BE CONDUCTED IN SALINAS, CALIFORNIA. ANY CONTROVERSY IN INTERPRETATION OR ENFORCEMENT OF THIS PROVISION OR WHETHER A DISPUTE IS ARBITRABLE, WILL BE DETERMINED BY THE ARBITRATOR. JUDGEMENT UPON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. THE INSTITUTION AND MAINTENANCE OF AN ACTION FOR JUDICIAL RELIEF OR IN PURSUIT OF AN ANCILLARY REMEDY DOES NOT CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE PLAINTIFF, TO SUBMIT THE CONTROVERSY OF CLAIM TO ARBITRATION.

NOTICE BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUR OF THE MATTERS INCLUDED IN THE ‘ARBITRATION OF DISPUTES’ PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OF BY JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE ‘ARBITRATION OF DISPUTES’ PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY Be COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT O.F THE MATTERS INCLUDED IN THE ARBITRATION OF DISPUTES’ PROVISION TO NEUTRAL ARBITRATION.

THE PARTIES ACKNOWLEDGE THAT THE PROVISIONS OF THIS ARTICLE 24 DO NOT APPLY TO ANY SUMMARY PROCEEDING TO OBTAIN POSSESSION OF REAL PROPERTY PURSUANT TO APPLICABLE LAW.

Landlords Initials /s/ WT     Tenant's Initials /s/ CF

EXECUTED at Salinas, California on the dates set forth below.

TENANT:

COMMUNITY BANK OF CENTRAL CALIFORNIA

By:/s/ CAROLD FRANCHI Date: 2-26-02

Title: Senior Vice President

By: ____________________ Date:

ADDRESS FOR SERVICE:

301 Main Street
Salinas, CA 93901

LANDLORD:

STEINBECK PLAZA, a California General Partnership

By:/s/ WARREN V. TIBBS Date 2/26/02

Warren V. Tibbs
Managing General Partner

ADDRESS FOR SERVICE:

26455 Tierra Vista Lane
Salinas, CA 93908

EX-10

LEASE AGREEMENT
SPECIAL NET

1. Parties. This Lease, dated, for reference purposes only, February 10, 2004 is made by and between BEI-SCOTT COMPANY (herein called Lessor) and Community Bank (herein called Lessee).

2. Premises. Lessor hereby leases to Lessee and Lessee leases from Lessor for the term, at the rental, and upon all of the conditions set forth herein, that certain real property and improvements situated in the County of Santa Cruz, State of California commonly known as 3110 A Mission Dr. Santa Cruz, Ca. 95062 consisting of approximately 3617 sq.ft. APN# 025-082-26. Lessee by executing this lease agrees that he has had adequate time to measure and investigate the subject premises and have them inspected by experts of his choice. In deciding to enter into this Lease, Lessee is relying solely on the results of his experience and own investigations and is not relying on any representations or promises of Lessor or Broker excepting any which may be contained herein. Other than any improvements or repairs agreed herein to be performed by Lessor, Lessee hereby accepts the subject premises in their current condition.

Said real property, including the land and all improvements therein, shall herein be called the Premises.

3. Term.

3.1 Term. The term of this Lease shall be for two (2) years commencing on April 15, 2004 (the “Commencement Date”), and ending on April 14, 2006 unless sooner terminated pursuant to any provisions hereof.

3.2 Option to Renew. Provided that Lessee is not in default hereunder, either at the time of exercise or at the time the extended terra commences, Lessee shall have two (2) options to extend the initial Term of this Lease for two additional five (5) year terms under terms and conditions to be set by Lessor. Lessee shall exercise their option by giving Lessor written notice at least sixty (60) days but not more than one hundred eighty (180) days prior to the expiration of the initial term of this Lease. Lessor will send Lessee a reminder letter of his time to renew option within the sixty (60) day period.

3.3 Delay in Possession. Notwithstanding said commencement date, if for any reason Lessor cannot deliver possession of the Premises to Lessee on said date, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or the obligations of Lessee hereunder or extend the term hereof, but in such case, Lessee shall not be obligated to pay rent until possession of the Premises is tendered to Lessee; provided, however, that if Lessor shall not have delivered possession of the Premises within sixty (60) days from said commencement date, Lessee may, at Lessee’s option by notice in writing to Lessor within ten (10) days thereafter, cancel this Lease, in which event the parties shall be discharged from all obligations hereunder; provided further, however, that if such written notice of Lessee is not received by Lessor within said ten (10) day period, Lessee’s right to cancel this Lease hereunder shall terminate and be of no further force or effect.

3.4 Early Possession. If Lessee occupies the Premises prior to said commencement date, such occupancy shall be subject to all provisions hereof, such occupancy shall not advance the termination date, and Lessee shall pay rent for such period at the initial monthly rates set forth as follows:

4. Rent

4.1 Rent. Lessee shall pay to Lessor as base rent for the Premises, monthly payments, in advance, on the fifteenth (15th) day of each month of the term hereof in accordance with the following:

April 15, 2004 to April 14, 2005......$6200.00 per month

April 15, 2005 to increase by currant CPI not to exceed 6%.

Lessee to pay real property taxes as outlined in Paragraph 10. Lessee to pay water/sewer, garbage charges as outlined in Paragraph 11.

4.2 Special Net Lease. This Lease is what is commonly called a “Net, Net, Net Lease”, it being understood that the Lessor shall receive the rent set forth in Paragraph 4.1 free and clear of any and all other impositions, taxes and liens connected with the ownership and operation of the Premises. It is the intention of the parties hereto that this Lease shall not be terminable for any reason by the Lessee, and that Lessee shall in no event be entitled to any abatement of or reduction in rent payable under this Lease, except as herein expressly provided. Any present or future law to the contrary shall not alter this agreement of the parties.

5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof $10,000.00 as security for Lessee’s faithful performance of Lessee’s obligations hereunder. If lessee fails to pay rent or other charges due hereunder, or otherwise defaults with respect to any provision of this Lease, Lessor may use, apply or retain all or any portion of said deposit for the payment of any rent or other charge in default or for the payment of any other sum to which Lessor may become obligated by reason of Lessee’s default, or to compensate Lessor for any loss or damage which Lessor may suffer thereby. If Lessor so uses or applies all or any portion of said deposit, Lessee shall within ten (10) days after written demand therefor deposit cash with Lessor in an amount sufficient to restore said deposit to the full amount hereinafter stated and Lessee’s failure to do so shall be a material breach of this Lease. Lessor shall not be required to keep said deposit separate from its general accounts. If Lessee performs all of Lessee’s obligations hereunder, said deposit, or so much thereof as has not theretofore been applied by Lessor, shall be returned, without payment of interest or other increments for its use, to Lessee (or, at Lessor’s option, to the last assignee, if any, or Lessee’s interest hereunder) at the expiration of the term hereof, and after Lessee has vacated the Premises. No trust relationship is created herein between Lessor and Lessee with respect to said Security Deposit.

6. Use.

6.1 Use. The Premises shall be used and occupied only for use as a Bank and Savings & Loan Office and for no other purpose.

6.2 Compliance with Law.

(a) Lessee shall, at Lessee’s expense, comply promptly with all applicable statutes, ordinances, rules, regulations, orders, covenants arid restrictions of record, and requirements in effect during the term or any part of the term hereof, regulating the use by Lessee of the Premises. Lessee shall not use nor permit the use of the Premises in any manner that will tend to create waste or a nuisance of, if there shall be more than one tenant in the building containing the Premises, shall tend to disturb such other tenants.

6.3 Condition of Premises. Lessee hereby accepts the Premises in its condition existing as of the Lease commencement date or the date that Lessee takes possession of the Premises, whichever is earlier, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and any covenants or restrictions of record, and accepts this Lease subject thereto and to all matters disclosed thereby and by any exhibits attached hereto. Lessee acknowledges that neither the Lessor, the Broker nor Lessor’s agent has made any representation or warranty as to the present or future suitability of the Premises for the conduct of Lessee’ s business.

7. Maintenance, Repairs and Alterations.

7.1 Lessee’s Obligations. Lessee shall keep in good order the condition and repair by repairing any damage due to his usage and/or neglect of the Premises including, all plumbing, heating, air conditioning, ventilating, electrical, lighting facilities and equipment within the Premises, fixtures, walls (interior), ceilings, floors, windows, doors, plate glass, skylights, mirrors located within the Premises, and all signs located on the Premises. Lessee shall have any cracked and/or broken glass or mirrors replaced within five (5) days from occurrence of such at their sole cost and liability.

Lessee is not responsible for roof repairs/maintenance under the following conditions: 1) Lessee shall notify Lessor as soon as discovered of any leak in the roof. If Lessee fails to notify Lessor of any leak as outlined, then the repair shall be the responsibility of the Lessee. Lessor will make an attempt to repair the leak promptly. 2) Lessor shall be held harmless of any damage caused by roof leak/repairs to Premises or its contents.

7.2 Surrender. On the last day of the term hereof, or on any sooner termination, Lessee shall surrender the Premises to Lessor in at least the same condition as when possession was received, and clean and free of debris. Lessee shall repair any damage to the Premises occasioned by the installation or removal of Lessee’s trade fixtures, furnishings and equipment. Notwithstanding anything to the contrary otherwise stated in this Lease, Lessee shall leave the air lines, power panels, electrical distribution systems, lighting fixtures, space heaters, air conditioning, plumbing, and hot water heaters on the Premises in the same condition as when possession was received and keys returned to Lessor at 410 May Ave, #1, Santa Cruz, CA 95060. The surrendered premises shall be in the same condition as when received by Lessee.

7.3 Lessor’s Rights. If Lessee fails to perform Lessee’s obligations under this Paragraph 7, or under any other paragraph of this Lease, Lessor may at its option (but shall not be required to) enter upon the Premises after ten (10) days’ prior written notice to Lessee (except in the case of an emergency), in which case no notice shall be required), perform such obligations on Lessee’s behalf and put the same in good order, condition and repair, and the cost thereof together with interest thereon at the maximum rate than allowable by law shall become due and payable as additional rental to Lessor together with Lessee’ s next rental installment.

7.4 Lessor’s Obligations. Lessee expressly waives the benefit of any statute now or hereinafter in effect which would otherwise afford Lessee the right to make repairs at Lessor’s expense or to terminate this Lease because of Lessor’s failure to keep the Premises in good order, condition and repair.

7.5 Alterations and Additions.

(a) Lessee shall not, without Lessor’s prior written consent make any alterations, improvements, additions, or Utility Installations in, on or about the Premises, except for nonstructural alterations not exceeding $2,500.00 in cumulative costs during the term of this Lease. In any event, whether or not in excess of $2,500.00 in cumulative cost, Lessee shall make no change or alteration to the exterior of the Premises nor the exterior of the building (s) on the Premises without Lessor’s prior written consent. As used in this Paragraph 7.5 the term “Utility Installation” shall mean carpeting, window coverings, air lines, power panels, electrical distribution systems, lighting fixtures, space heaters, air conditioning, plumbing, and fencing.

Lessor may require that Lessee remove any or all of said alterations, improvements, additions or Utility Installations at the expiration of the term, and restore the Premises to their prior condition. Lessor may require Lessee to provide Lessor, at Lessee’s sole cost and expense, a lien and completion bond in an amount equal to one and one-half times the estimated cost of such improvements, to insure Lessor against any liability for mechanic’s and materialmen’s liens and to insure completion of the work. Should Lessee make any alterations, improvements, additions or Utility Installations without prior written approval of Lessor, Lessor may require that Lessee remove any or all of the same.

(b) Any alterations, improvements, additions or Utility Installations in, or about the Premises that Lessee shall desire to make and which requires the consent of the Lessor shall be presented to Lessor in written form, with proposed detailed plans. If Lessor shall give its consent, the consent shall be deemed conditioned upon Lessee acquiring a permit to do so from appropriate governmental agencies, the furnishing of a copy thereof to Lessor prior to the commencement of the work and the compliance by Lessee of all conditions of said permit in a prompt and expeditious manner.

(c) Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use in the Premises, which claims are or may be secured by any mechanics’ or materialmen’s lien against the Premises or any interest therein. Lessee shall give Lessor not less than ten (10) days’ notice prior to the commencement of any work in the Premises, and Lessor shall have the right to post notices of non-responsibility in or on the Premises as provided by law. If Lessee shall, in good faith, consent the validity of any such lien, claim or demand, then

Lessee shall, at its sole expense defend itself and Lessor against the same and shall pay and satisfy any such adverse judgement that may be rendered thereon before the enforcement thereof against the Lessor or the Premises, upon the condition that if Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to such contested lien claim or demand indemnifying Lessor against liability for the same and holding the Premises free from the effect of such lien or claim. In addition, Lessor may require Lessee to pay Lessor’s attorney’s fees and costs in participating in such action if Lessor shall decide it is to its best interest to do so.

(d) Unless Lessor requires their removal as set forth in Paragraph 7.5 (a), all alterations, improvements, additions and Utility Installations (whether or not such Utility Installations constitute trade fixtures of Lessee), which may be made on the Premises, shall become the property of Lessor and remain upon and be surrendered with the Premises at the expiration of the term. Notwithstanding the provisions of this Paragraph 7.5(d), Lessee’s machinery and equipment, other than that which is affixed to the Premises, shall remain the property of Lessee and may be removed by Lessee subject to the provisions of Paragraph 7.2.

8. Insurance and Indemnity.

8.1 Indemnity. Lessee covenants with Lessor that Lessor shall not be liable for any damage or liability of any kind or for any injury to or death of persons or damage to property of Lessee or any other person during the term of this Lease, from any cause whatsoever by reason of the use, occupancy and enjoyment of the Premises by the Lessee or any person thereon or holding under said Lessee and that Lessee will indemnify and save harmless the Lessor from all liability whatsoever, on account of any such real or claimed damage or injury and from all liens, claims and repairs or alterations which the lessee may make upon said Premises, but the Lessee shall not be liable for damage or injury occasioned by the negligence of the Lessor and/or its designated agents, servants or employees unless covered by insurance Lessee is required to provide.

This obligation to indemnify shall include reasonable attorney’s fees and investigation costs and all other reasonable costs, expenses and liabilities actually incurred by Lessor from the first notice that any claim or demand is to be made or may be made.

8.2 Subrogation. The Lessor and Lessee hereby waive any rights each may have against the other on account of any loss or damage occasioned to Lessor or Lessee, as the case may be, their respective property, the Premises, or its contents or to other portions of the multiple tenant building, arising from any risk generally covered by fire and extended coverage insurance, and the parties each, on behalf of their respective insurance companies insuring the property of either Lessor or Lessee against any such loss, waive any right of subrogation that it may have against Lessor or Lessee, as the case may be, if such waiver is permitted by, or obtainable from, the respective insurance company.

8.3 Lessee Insurance. Lessee further covenants and agrees from and after the delivery of the Premises from Lessor to Lessee, Lessee will carry and maintain, at its sole cost and expense, the following types of insurance, in the amounts specified and in the form hereinafter provided for:

(1) COMPREHENSIVE GENERAL LIABILITY INSURANCE: Public liability and property damage insurance with a combined single limit of not less than Two Million Dollars ($2,000,000.00) insuring against any and all bodily injury and not less than Two Million Dollars ($2,000,000.00) for property damage (not to be construed as Fire Insurance) with respect to said Premises or arising out of the maintenance, use or occupancy thereof. All such bodily injury liability insurance and property damage liability insurance shall specifically insure the performance by Lessee of the indemnity provisions as to liability for injury to or death of persons and injury or damage to property in this Article 8 contained.

(2) Fixture & Equipment: Lessee shall have insurance covering all leasehold improvements, trade fixtures, merchandise and personal property from time to time in, on or upon the Premises, and personal property of others in Lessee’s possession, in an amount not less than the full replacement cost without deduction for depreciation from time to time during the term of this Lease, providing protection against any peril included within the classification “Fire and Extended Coverage”, together with insurance against sprinkler damage, vandalism and malicious mischief. Any policy proceeds shall be used for the repair or replacement of the property damaged or destroyed in or about the leasehold premises.

(3) Policy Form: All policies of insurance provided for herein shall be issued by insurance companies with general policyholders’ rating of not less than A and a financial rating of AAA as rated in the most current available “Best’s Insurance Reports”, and qualified to do business in the State of California, and shall be issued in the names of Lessor, Lessee and such other persons or firms as Lessor specifies from time to time. Such policies shall be for the mutual and joint benefit and protection of Lessor, Lessee and others hereinabove mentioned, and executed copies of such policies of insurance or certificates thereof shall be delivered to the Lessor within ten (10) days after delivery of possession of the Premises to Lessor and thereafter within thirty (30) days prior to the expiration of the term of each such policy. All public liability and property damage policies shall contain a provision that the Lessor, although names as an insured, shall nevertheless be entitled to recovery under said policies for any loss occasioned to it, its servants, agents and employees by reason of the negligence of the Lessee. As often as any such policy shall expire or terminate, renewal or additional policies shall be procured and maintained by the Lessee in like manner and to like extent. All policies of insurance delivered to the Lessor must contain a provision that the company writing said policy will give to the Lessor twenty (20) days’ notice in writing in advance of any cancellation or lapse or the effective date of any reduction in the amounts of insurance. All public liability, property damage and other casualty policies shall be written as primary policies, not contributing with and not in excess of coverage which the Lessor may carry.

(4) Failure of Lessee to Obtain: In the event that Lessee fails to procure and/or maintain any insurance required by this Article, or fails to carry insurance required by law or governmental regulation. Lessor may (but without obligation to do so) at any time or from time to time, and without notice, procure such insurance and pay the premiums therefor, in which event Lessee shall repay the Lessor all sums so paid by Lessor, together with interest thereon as provided in Article 5 hereof, and any incidental costs or expenses incurred by Lessor in connection therewith including an Administrative charge of One Hundred Dollars ($100.00), within ten (10) days following Lessor’s written demand to Lessee for such payment.

8.4 Blanket Policy. Notwithstanding anything to the contrary contained within this Article 8, Lessee’s obligations to carry the insurance provided for herein may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Lessee; provided, however, that Lessor and others hereinabove mentioned shall be named as an additional assured thereunder as their interests may appear and that the coverage afforded the Lessor will not be reduced or diminished by reason of the use of such blanket policy of insurance, and provided further that the requirements set forth herein are otherwise satisfied. Lessee agrees to permit the Lessor at all reasonable times to inspect the policies of insurance of the Lessee covering risks upon the Premises for which policies or copies thereof are not required to be delivered to Lessor.

8.5 Fire Insurance.

(1) Fire Insurance: Lessor shall at Lessee’s expense during the term hereof, procure and maintain in force and effect a policy or policies of standard form of fire with extended coverage insurance covering, or which covers, the Premises and the improvements thereon (excepting, however, property to be insured by Lessee as herein provided). At Lessor’s option, Lessor may procure endorsements thereon for flood, earthquake, theft and collapse, may procure business interruption insurance. Lessor shall be the named assured (and at Lessor’s option, and any other persons, firms or corporations designated by Lessor shall be the additionally named assured) under each such policy or Lessor’s said insurance. Anything herein contained to the contrary notwithstanding, Lessor may, at its option bring its insurance requirements under this Paragraph 8.5 (1) within the coverage of any so-called blanket policy or policies of fire with extended coverage insurance, in amounts not less than are required hereunder, covering all or any property or properties wheresoever situated in which Lessor may have an insurable interest.

(2) Increased Insurance Risks: Lessee agrees that it will not at any time, during the term of this Lease, carry any stock or goods or do anything in or about the Premises which will in any way tend to increase the insurance rates upon the building of which the Premises are a part. Lessee agrees to pay to the Lessor forthwith upon demand the amount of any increase in premiums for insurance against loss by fire that may be charged during the term of this Lease on the amount of insurance to be carried by Lessor on the building of which the Premises are a part resulting from the foregoing or from Lessee doing any act in or about said Premises which does so increase the insurance rates, whether or not the Lessor shall have consented to such act on the part of the Lessee. If Lessee installs upon the Premises any electrical equipment which constitutes an overload on the electrical lines of the Premises, Lessee shall at its own expense make whatever changes are necessary to comply with the requirements of the insurance underwriters and any governmental authority having jurisdiction thereover, but nothing herein contained shall be deemed to constitute Lessor’s consent to such overloading.

9. Termination/Waiver.

9.1 Termination — Advance Payments. Upon termination of this Lease pursuant to the terms and conditions of this Lease, an equitable adjustment shall be made concerning advance rent and any advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee’s security deposit as has not theretofore been applied by Lessor.

9.2 Waiver. Lessee waives the provisions of any statutes which relate to termination of leases when the space leased is destroyed and agrees that such event shall be governed by the terms of this Lease.

10. Taxes. Lessee shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Lessee contained in the Premises or elsewhere (which may affect the Premises). When possible, Lessee shall cause said trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor.

If any of Lessee’s said personal property shall be assessed with Lessor’s real property, Lessee shall pay Lessor the taxes attributable to Lessee within 10 days after receipt of a written statement setting forth the taxes applicable to Lessee’s property.

10.1 Real Property Taxes.

Payment of Taxes. Lessee shall pay the real property tax, as defined in Paragraph 10.2, applicable to the Premises during the term of this Lease. All such payments shall be made at least ten (10) days prior to the delinquency date of such payment. Lessee shall pay Lessor (Lessor will bill Lessee for payment of Real Property Taxes), and if the amount billed is not received by Lessor at least ten (10) days prior to the delinquency date, the Lessee shall pay a late charge of ten percent (10%). If the Lessee gives the Lessor a check that is dishonored by the bank, the Lessee will pay within three (3) days from receipt of notice by Lessor of the dishonored bank check the amount owed, a $20.00 dishonored bank check charge, and the ten percent (10%) late charge will be assessed if the Real Property Taxes are considered late due to the dishonored bank check. If Lessee shall fail to pay any such taxes, Lessor shall have the right to pay the same, in which case Lessee shall repay such amount to Lessor with Lessee’s next rent installment together with the interest at the maximum rate then allowable by law, plus the late charge(s).

Definition of “Real Property Tax”. As used herein, the term “Real property tax” shall include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax (other than inheritance, personal income or estate taxes) imposed on the Premises by any authority having the direct or indirect power to tax including any city, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement district thereof, as against any legal or equitable interest of Lessor in the Premises or in the real property of which the Premises are a part, as against Lessor’s right to rent or other income therefrom, and as against Lessor’s business of leasing the Premises. The term “real property tax” shall also include any tax, fee, levy, assessment or charge (i) in substitution of, partially or totally, any tax, fee, levy, assessment or charge hereinabove included within the definition of “real property tax or (ii) the nature of which was hereinbefore included within the definition of “real property tax” or (iii) which is imposed for a service or right not charged prior to June 1, 1978, or if previously charged, has been increased since June 1, 1978, or (iv) which is imposed as a result of a transfer, either partial or total, of Lessor’s interest in the Premises or which is added to a tax or charge hereinbefore included with the definition of real property tax by reason of such transfer, or (v) which is imposed by reason of this transaction, any modifications or changes hereto, or any transfers hereof. Notwithstanding anything to the contrary contained herein, special assessments shall be payable in the maximum legally permissible number of installments and amortized over the term of this Lease. Notwithstanding anything to the contrary contained herein, special assessments shall be payable in the maximum legally permissible number of installments and amortized over the term of this Lease.

10.2 Joint Assessment. If the Premises are not separately assessed, Lessee’s liability shall be an equitable proportion of real property taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor’ s work sheets or such other information as may be reasonably available. Lessor’s reasonable determination thereof, in good faith, shall be conclusive.

11. Utilities. Lessee shall pay for all water, gas, heat, light, power, telephone, and the removal and disposal of refuse and any other utilities and services supplied to the Premises, janitorial costs, together with any taxes thereon. If any such services are not separately metered to Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor of all charges jointly metered with other premises.

12. Assignment and Subletting.

12.1 Lessor’s Consent Required. (a) Lessee shall not assign this lease or any right under this lease, nor sublet the premises or any part of the premises, without Lessor’s prior written consent, which Lessor shall not unreasonably withhold. No consent to any assignment of this Lease or to any subletting of the premises shall constitute a waiver or discharge of the provisions of this paragraph or a consent to any other assignment of subletting, not shall any such consent, assignment, or subletting release Lessee from any of Lessee’s obligations under this Lease, whether or not performance is then due. None of Lessee’s rights or interests under this Lease shall be assignable by any action of law, including, without limitation, involuntary or voluntary bankruptcy, and no trustee, sheriff, creditor, purchaser at a judicial sale, officer of any court, or receiver (unless appointed at Lessor’s request) shall acquire any right or interest under this Lease or any right to the possession or use of the premises or any part thereof, without Lessor’s prior written consent. As with the other provisions of this Lease, any violation of the terms of this paragraph shall constitute a breach of this Lease.

(b) A request by Lessee for Lessor’s consent to any assignment of this Lease or a subletting of the premises shall be made in writing to Lessor at least 60 days before the proposed effective date of the proposed transfer and shall identify the proposed transfer as being an assignment or a subletting (also, in the latter case, describing exactly the premises to be sublet); specify the proposed effective date; identify each proposed transferee, including all principals of a corporate or partnership transferee; state all material terms of the proposed transfer; and specify in detail the kind of business operation that the proposed transferee intends to operate on the premises. This notice shall be accompanied by (1) a copy of the proposed document for effecting the transfer, which shall include, in the case of an assignment, each transferee’s express assumption of, and promise to Lessor to perform, all of the Lessee’s obligations under the Lease; (2) payment to Lessor of $500.00 as a deposit towards reimbursement of Lessor’s costs, including attorney’s fees, an Administrative fee of $50.00 incurred each time that Lessee requests a transfer, (3) such reasonable financial information as Lessor may request concerning the proposed subtenant or assignee. Lessee shall promptly furnish to Lessor any additional information reasonably requested by Lessor in connection with the proposed transfer. Lessee shall reimburse Lessor for all costs, including attorney’s fees, incurred by reason of the proposed transfer, and Lessor may withhold Lessor’s consent to the proposed transfer until such reimbursement has been made.

13. Defaults; remedies.

13.1 Defaults. The occurrence of any one or more of the following events shall constitute a material default and breach of this Lease by Lessee:

(a) The vacating or abandonment of the Premises by Lessee.

(b) The failure by Lessee to make any payment of rent or any other payment required to be made by Lessee hereunder, as and when due, where such failure shall continue for a period of three days after written notice thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes such Notice to Pay Rent or Quit shall also constitute the notice required by this subparagraph.

(c) The failure by Lessee to observe or perform any of the covenants, conditions or provisions of this Lease to be observed or performed by Lessee, other than described in Paragraph (b) above, where such failure shall continue for a period of 30 days after written notice thereof from Lessor to Lessee; provided, however, that if the nature of Lessee’s default is such that more than 30 days are reasonably required for its cure, then Lessee shall not be deemed to be in default if Lessee commenced such cure within said 30-day period and thereafter diligently prosecutes such cure to completion.

(d) (i) The making by Lessee of any general arrangement or assignment for the benefit of creditors; (ii) Lessee becomes a “debtor” as defined in 11 U.S.C. S101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within 60 days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where possession is not restored to Lessee within 3 0 days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where such seizure is not discharged within 3 0 days. Provided, however, in the event that any provision of this Paragraph 13.1(d) is contrary to any applicable law, such provision shall be of no force or effect.

(e) The discovery by Lessor that any financial statement given to Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any successor in interest of Lessee or any guarantor of Lessee’s obligation hereunder, and any of them, was materially false.

13.2 Remedies. In the event of any such material default or breach by Lessee, Lessor may at any time thereafter, with or without notice or demand and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such default or breach:

(a) Terminate Lessee’s right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession of the Premises to Lessor. In such event Lessor shall be entitled to recover from Lessee all damages incurred by Lessor by reason of Lessee’s default including, but not limited to, the cost of recovering possession of the Premises; expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorney’s fees, and any real estate commission actually paid; the worth at the time of award by the court having jurisdiction thereof of the amount by which the unpaid rent for the balance of the term after the time of such award exceeds the amount of such rental loss for the same period that Lessee proves could be reasonably avoided; that portion of the leasing commission paid by Lessor pursuant to Paragraph 15 applicable to the unexpired term of this Lease.

(b) Maintain Lessee's right to possession in which case this Lease shall continue in effect whether or not Lessee shall have abandoned the Premises. In such event Lessor shall be entitled to enforce all of Lessor’s rights and remedies under this Lease, including the right to recover the rent as it becomes due hereunder.

(c) Pursue any other remedy now or hereafter available to Lessor under the laws or judicial decisions of the state wherein the Premises are located. Unpaid installments of rent and other unpaid monetary obligations of Lessee under the terms of this Lease shall bear interest from the date due at the maximum rate then allowable by law.

13.3 Default by Lessor. Lessor shall not be in default unless Lessor fails to perform obligations required of Lessor within a reasonable time, but in no event later than thirty (3 0) days after written notice by Lessee to Lessor and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have theretofore been furnished to Lessee in writing, specifying wherein Lessor has failed to perform such obligation; provided, however, that if the nature of Lessor’s obligation is such that more than thirty (30) days are required for performance then Lessor shall not be in default if Lessor commences performance .within such 30-day period and thereafter diligently prosecutes the same to completion.

13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which may be imposed on Lessor by the terms of any mortgage or trust deed covering the Premises. Accordingly, if any installment of rent or any other sum due from Lessee shall not be received by Lessor or Lessor’s designee on the due date, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a late charge equal to ten percent (10%) of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of late payment by Lessee. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee’s default with respect to such overdue amount, nor prevent Lessor from exercising any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for three (3) installments of rent, then rent shall automatically become due and payable quarterly in advance, rather than monthly, notwithstanding Paragraph 4 or any other provision of this Lease to the contrary. If the Lessee gives the Lessor a check that is dishonored by the bank, the Lessee will pay within three (3 days) from receipt of notice by Lessor of the dishonored bank check the amount owed, a dishonored bank check charge of $20.00, and a ten percent (10%) late charge if the payment is considered late due to the dishonored bank check.

13.5 Impounds. In the event that a late charge is payable hereunder, whether or not collected, for three (3) installments of rent or any other monetary obligation of Lessee under the terms of this Lease, Lessee shall pay to Lessor, if Lessor shall so request, in addition to any other payments required under this Lease, a monthly advance installment, payable at the same time as the monthly rent, as estimated by Lessor, for insurance expenses on the Premises which are payable by Lessee under the terms of this Lease. Such fund shall be established to insure payment when due, before delinquency, of any or all such insurance premiums. If the amounts paid to Lessor by Lessee under the provisions of this paragraph are insufficient to discharge the obligations of Lessee to pay such insurance premiums as the same become due, Lessee shall pay to Lessor, upon Lessor’s demand, such additional sums necessary to pay such obligations. All moneys paid to Lessor under this paragraph may be intermingled with other moneys of Lessor and shall not bear interest. In the event of a default in the obligations of Lessee to perform under this Lease, then any balance remaining from funds paid to Lessor under the provisions of this paragraph may, at the option of Lessor, be applied to the payment of any monetary default of Lessee in lieu of being applied to the payment of insurance premiums.

14. Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain, or sold under the threat of the exercise of said power (all of which are herein called “condemnation”), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the floor area of the building on the Premises, or more than 25% of the land area of the Premises which is not occupied by any building, is taken by condemnation, Lessee may, at Lessee’s option, to be exercised in writing only within ten (10) days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the rent shall be reduced in the proportion that the floor area of the building taken bears to the total floor area of the building situated on the Premises. No reduction of rent shall occur if the only area taken is that which does not have a building located thereon. Any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold or made as compensation for diminution in value of the leasehold or for taking of the fee, or as severance damages; provided, however, that Lessee shall be entitled to any award for loss of or damage to Lessee’s trade fixtures and removable personal property. In the event that this Lease is not terminated by reason of such condemnation, Lessor shall to the extent of severance damages received by Lessor in connection with such condemnation, repair any damage to the Premises caused by such condemnation except to the extent that Lessee has been reimbursed therefor by the condemning authority.

15. Estoppel Certificate.

(a) Lessee shall at any time upon not less than ten (10) days’ prior written ‘notice from Lessor execute, acknowledge and deliver to Lessor a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the date to which the rent and other charges are paid in advance, if any, and (ii) acknowledging that there are not, to Lessee’s knowledge, any uncured defaults on the part of Lessor hereunder, or specifying such defaults if any are claimed. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises.

(b) At Lessor’s option, Lessee’s failure to deliver such statement within such time shall be a material breach of this Lease or shall be conclusive upon Lessee (i) that this Lease is in full force and effect, without modification except as may be represented by Lessor, (ii) that there are no uncured defaults in Lessor’s performance, and (iii) that not more than one month’s rent has been paid in advance or such failure may be considered by Lessor as a default by Lessee under this Lease.

16. Lessor's Liability. The term "Lessor" as used herein shall mean only the owner or owners at the time in question of the fee title or a Lessee's interest in a ground lease of the Premises, and except as expressly provided in Paragraph 15, in the event of any transfer of such title or interest, Lessor herein named (and in case of any subsequent transfers then the grantor) shall be relieved from and after the date of such transfer of all liability as respects Lessor's obligations thereafter to be performed, provided that any funds in the hands of Lessor or the then grantor at the time of such transfer, in which Lessee has an interest, at the time of such transfer, in which Lessee has an interest, shall be delivered to the grantee. The obligations contained in this Lease to be performed by Lessor shall, subject as aforesaid, be binding on Lessor's successors and assigns, only during their respective periods of ownership.

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

18. Interest on Past-due Obligations. Except as expressly herein provided, any amount due to Lessor not paid when due shall bear interest at the maximum rate then allowable by law from the due date. Payment of such interest shall not excuse or cure any default by Lessee under this Lease, provided, however, that interest shall not be payable on late charges incurred by Lessee nor on any amounts upon which late charges are paid by Lessee.

19. Time of Essence. Time is of the essence.

20. Additional Rent. Any monetary obligations of Lessee to Lessor under the terms of this Lease shall be deemed to be rent.

21. Incorporation of Prior Agreements; Amendments. This Lease contains all agreements of the parties with respect to any matter mentioned herein. No prior agreement or understanding pertaining to any such matter shall be effective. This Lease may be modified in writing only, signed by the parties in interest at the time of the modification. Except as otherwise stated in this Lease, Lessee hereby acknowledges that the Lessor or any employees or agents of any of said persons has made any oral or written warranties or representations to Lessee relative to the condition or use by Lessee of said Premises and Lessee acknowledges that Lessee assumes all responsibility regarding the Occupational Safety Health Act, the legal use and adaptability of the Premises and the compliance thereof with all applicable laws and regulations in effect during the term of this Lease except as otherwise specifically stated in the Lease.

22. Notices. Any notice required or permitted to be given hereunder shall be  in writing and may be given by personal delivery or by first-class mail, and if given personably or by mail, shall be deemed sufficiently given if addressed to Lessee or to Lessor at the address noted below the signature of the respective parties, as the case may be. Either party may by notice to the other specify a different address for notice purposes except that upon Lessee’ s taking possession of the Premises, the Premises shall constitute Lessee’s address for notice purposes.

23.  Waivers. No waiver by Lessor or any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by Lessee of the same or any other provision. Lessor’s consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor’s consent to or approval of any subsequent act by Lessee. The acceptance of rent hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of any provision hereof, other than the failure of Lessee to pay the particular rent so accepted, regardless of Lessor’s knowledge of such preceding breach at the time of acceptance of such rent.

24. Recording. Lessee shall not record this Lease.

25.  Holding Over. If Lessee, with Lessor’s consent, remains in possession of the Premises or any part thereof after the expiration of the term hereof, such occupancy shall be a tenancy from month to month upon all the provisions of this Lease pertaining to the obligations of Lessee, but all options and rights of first refusal, if any, granted under the terms of this Lease shall be deemed terminated and be of no further effect during said month to month tenancy.

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

27. Covenants and Conditions. Each provision of this Lease performable by Lessee shall be deemed both a covenant and a condition.

28. Binding Effect; Choice of Law. Subject to any provisions hereof restricting assignment or subletting by Lessee and subject to the provisions of Paragraph 17, this Lease shall bind the parties, their personal representatives, successors and assigns. This Lease shall be governed by the laws of the State wherein the Premises are located.

29. Subordination.

(a) This Lease, at Lessor’s option, shall be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation or security now or hereafter placed upon the real property of which the Premises are a part and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Lessee’s right to quiet possession of the Premises shall not be disturbed if Lessee is not in default and so long as Lessee shall pay the rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee or ground lessor shall elect to have this Lease prior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Lessee, this Lease shall be deemed prior to such mortgage, deed of trust, or ground lease, whether this Lease is dated prior or subsequent to the date of said mortgage, deed of trust, or ground lease, whether this Lease is dated prior or subsequent to the date of said mortgage, deed of trust or ground lease or the date of recording thereof.

(b) Lessee agrees to execute any documents required to effectuate an attornment, a subordination or to make this Lease prior to the lien of any mortgage, deed of trust or ground lease, as the case may be. Lessee’s failure to execute such documents within ten (10) days after written demand shall constitute a material default by Lessee hereunder, or, at Lessor’s option, Lessor shall execute such documents on behalf of Lessee as Lessee’s attorney-in-fact. Lessee does hereby make, constitute and irrevocably appoint Lessor as Lessee’s attorney-in-fact and in Lessee’s name, place and stead, to execute such documents in accordance with this Paragraph 29(b).

30. Attorney’s Fees. Should either party hereto institute any action or proceeding at law or in equity to enforce or to interpret any provision hereof or for damages or other relief by reason of an alleged breach of any provision hereof, the prevailing party shall be entitled to receive from the losing party, in addition to allowable court cost, such amount as the court may adjudge to be reasonable as attorney fees for the services rendered the prevailing party in such action or proceeding, and such amount may be made a part of the judgment against the losing party.

31. Lessor’s Access. Lessor and Lessor’s agents shall have the right to enter the Premises at reasonable times for the purposes of inspecting the same, showing the same to prospective purchasers, lender, or lessees, and making such alteration, repairs, improvements or additions to the Premises or to the building of which they are part as Lessor may deem necessary or desirable. Lessor may at any time place on or about the Premises any ordinary “For Sale” signs and Lessor may at any time during the last 60 days of the term hereof place on or about the Premises any ordinary “For Lease” signs, all without rebate of rent or liability to Lessee.

32. Auctions. Lessee shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises without first having obtained Lessor’s prior written consent. Notwithstanding anything to the contrary in this Lease, Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to grant such consent if the request is for an Auction(s) that is being held by some one else then the Lessee, or are to auction items for an unrelated type of business (example: automobile/vehicle auction, etc.).

33. Signs. Lessee shall not place any sign upon the Premises without Lessor's prior written consent except that Lessee shall have the right, without the prior permission of Lessor to place ordinary and usual for rent or sublet signs thereon.

34. Merger. The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, or a termination by Lessor, shall not work a merger, and shall, at the option of Lessor, terminate all or any existing subtenancies or may, at the option of Lessor, operate as an assignment to Lessor of any or all of such subtenancies.

35. Consents. Wherever in this Lease the consent of one party is required to an' act of the other party, such consent shall not be unreasonably withheld.

36. Guarantor. In the event that there is a guarantor of this Lease, said guarantor shall have the same obligations as Lessee under this Lease.

37. Quiet Possession. Upon Lessee paying the rent for the Premises and observing and performing all of the covenants, conditions and provisions on Lessee's part to be observed and performed hereunder, Lessee shall have quiet possession of the Premises for the entire term hereof subject to all of the provisions of this Lease. The individuals executing this Lease on behalf of Lessor represent and warrant to Lessee that they; are fully authorized and legally capable of executing this Lease on behalf of Lessor and that such execution is binding upon all parties holding an ownership interest in the Premises.

38. Multiple Tenant Building. In the event that the Premises are part of a larger building or group of buildings/land then Lessee agrees that it will abide by, keep and observe all reasonable rules and regulations which Lessor may make from time to time for the management, safety, care, and cleanliness of the building and grounds, the parking of vehicles and the preservation of good order therein as well as for the convenience of other occupants and tenants of the building. The violations of any such rules and regulations shall be deemed a material breach of this Lease by Lessee.

39. Security Measures. Lessee hereby acknowledges that the rental payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of Lessee, its agents and invites from acts of third parties.

40. Reservation of Rights. Lessor reserves the following rights:

(1) To use the driveways, walkways, and means of ingress and egress over the subject properties to the adjoining properties owned by Lessor.

(2) To install and maintain on the subject properties subsurface utilities to serve the adjoining properties owned by Lessor.

41. Easements. Lessor reserves to itself the right, from time to time, to grant such easements, rights and dedications that Lessor deems necessary or desirable, and to cause the recordation of Parcel Maps and restrictions, so long as such easements, rights, dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee shall sign any of the aforementioned documents upon request of Lessor and failure to do so shall constitute a material breach of this Lease.

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

43. Authority. If Lessee is a corporation, trust, or general or limited partnership, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of said entity. If Lessee is a corporation, trust or partnership. Lessee shall, within thirty (30) days after execution of this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.

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

45. Parking. Lessee and his employee’s/independent contractor’s cannot park any vehicle on/in the Premises that is not in working order, or that displays For Sale sign(s). No vehicle maintenance/repairs shall occur at any time on the Premises. The entire parking lot adjacent is for the exclusive use of the lessee.

46. Hazardous Materials Indemnification. Lessor agrees to indemnify, defend and hold Lessee and its officers, partners, directors, shareholders, employees and agents harmless from any claims, judgments, damages, fines penalties, costs (including attorney, consultant and expert fees), liabilities (including sums paid in settlement of claims) or loss which arise during or after the Primary Term or any extension term, in connection with the presence or suspected presence of Hazardous Materials in the soil, groundwater, or soil vapor on or under the Center cause to be present by Lessor, its agents, contractors, officers or employees.

Lessee agrees to indemnify, defend and hold Lessor and its officers, employees and agents (including Broker) harmless from any claims, judgments, damages, fines, penalties, costs, liabilities (including sums paid in settlement of claims) or loss including attorney’s fees, consultant’s fees, and expert fees which arise during or after the Primary Term or any Renewal Term, in connection with the presence of toxic or hazardous materials in the soil, groundwater, or soil vapor on or under the Shopping Center if and to the extent the presence of such Hazardous Materials is caused by Lessee, its officers, employees or agents.

47. Miscellaneous. The rent on the Premises includes a credit for telephone line insurance which Lessee understands is their responsibility to keep and pay all Premiums for during their tenancy, and Lessor shall not be held liable for repairs and/or maintenance or the cost of such.

If Lessee breaks or damages the locks or brackets on the curbstop to get water illegally, or cause any problems with damage to water utility agency facilities such as a stripped or broken curbstop, vandalized meter, broken meter box or other general damage, the Lessee will be legally and financially responsible.

Each party represents to the other that no Broker or Agent has been involved in the negotiation of this Lease and that no commissions are due to any Broker. Each party agrees to hold the other harmless from any claim for a Broker’s commission which may have resulted from the conduer on representations of the other.

Lessee shall adhere to all Fire Marshall’s requests and shall hang a fire extinguisher on the wall in plain sight and shall maintain it according to manufacturer’s directions.

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

The parties hereto have executed this Lease at the place on the dates specified immediately adjacent to their respective signatures.

Confirmation. The Existing Lease is confirmed.

Dated: 2/12/04

LESSOR:	LESSEE:
Bei-Scott Company	Community Bank
Address: 410 May Ave, #1
Santa Cruz, CA 95060
By: /s/ LISA DEWEY	By: /s/ HARRY D. WARDWELL
Lisa Dewey-Property Manager	Harry Wardwell-Senior Vice President

EX-10

SOLEDAD MISSION CENTER LEASE
COMMUNITY BANK

THIS LEASE, is made and entered into this 26th of February, 2004 by and between Soledad Mission Center, LP, (“Landlord”) and Community Bank, (“Tenant”).

WITNESSETH:

1. USE. Landlord hereby leases to Tenant and Tenant hereby hires from Landlord, the premises described below, for purposes of conducting thereon the following activities:

BANK AND LOAN OFFICE WITH AN ATM

Landlord and Tenant acknowledge and agree that the type of business activities to be conducted by Tenant and the quality of customers such activities attract are material to Landlord’s willingness to lease the demised premises to Tenant

2. PREMISES. Premises leased to Tenant, together with appurtenances, are hereinafter referred to as the “demised premises” situated in the City of Soledad, County of Monterey, State of California, and are the premises outlined in red on the plot of the shopping center, attached hereto as Exhibit “A”. Demised premises shall have a frontage of 30 feet (said measurement from center of partition to center of partition, with respect to interior storerooms, and from center of partition to outside wall, with respect to end locations), and a depth of 84 feet (outside dimensions), for a total of 2,268 square feet. Landlord and Tenant acknowledge and agree that this lease is a lease of real property in Soledad Mission Shopping Center, within the meaning of Section 11 U.S.C.365(b)(3).

3. TERM. Term of this lease shall be for a period of three (3) years. Term of this lease, and Tenant’s obligation to pay rent, shall commence on the earlier of the following dates: (a) date which is ninety (90) days after Landlord notifies Tenant in writing that improvements to be provided by Landlord, as set forth in Exhibit B attached, are substantially complete, or (b) date on which Tenant opens demised premises for business to the public. Should such earlier date not occur on the first day of a calendar month, the term hereunder shall begin on the first day of the next succeeding calendar month. In that event, however, Tenant shall pay rent for the fractional month on a per diem basis (calculated on the basis of a thirty-day month), until the first day of the month when term hereunder commences, and thereafter minimum rent shall be paid in equal monthly installments the first day of each and every month, in advance.

Landlord and Tenant hereby agree that in the event the demised premises are not substantially complete and possession delivered to Tenant on or before one year from the date of this lease, then and in that event, lease shall be deemed null and void, have no further force or effect, and any security deposit made herewith shall be promptly returned to Tenant, and the parties shall have no further obligations to each other.

4. RENTAL.
A. Guaranteed Minimum Monthly Rental. Tenant shall pay to Landlord during term of this lease a minimum monthly rental for the demised premises in the sum of $3,402 per month, on the 1st day of each month, which sum shall be paid in lawful money of the United States of America, and shall be paid without deduction or offset prior to notice or demand, at the address designated in Article 29. Any rent payment not paid within five (5) days of its due date shall be subject to a five (5%) percent late charge.

Tenant shall operate the business in a first-class manner and shall at all times maintain the business and premises in a neat and clean condition.

5. REAL ESTATE TAXES. In addition to all rentals herein reserved, -Tenant shall pay to Landlord as additional rent all annual real estate taxes and assessments levied upon demised premises together with a prorata share of taxes attributable to parking and common areas of shopping center. Such amount shall be payable within ten (10) days after receipt of a semi-annual statement to be sent by Landlord to Tenant setting forth the amount of such tax based upon actual tax bill received by Landlord; or Landlord at its option shall have the right to estimate the amount of taxes next due and to collect and impound from Tenant, on a monthly or quarterly basis, the amount of Tenant’s estimated tax obligation. Within thirty (30) days following receipt of the actual tax bill, Landlord shall provide to Tenant a reconciliation of Tenant’s impound account.

In the event the demised premises, together with a prorata share of parking and common area are not separately assessed, applicable taxes and assessments shall be determined by the ratio that the floor area of demised premises, including mezzanines, if any, bears to total floor area, including mezzanines, of the building or buildings which includes the demised premises for which an assessment is made. In the event such assessment does not reflect a prorata share of parking and common area, based upon the ratio of building to parking and common area shown on attached Exhibit A, an appropriate adjustment shall be made.

Any such tax for the year in which this lease commences or ends shall be apportioned and adjusted. With respect to any assessment which may be levied against or upon the demised premises and which, under the laws then in force, may be evidenced by improvement or other bonds, payable in annual installments, only the annual payments on said assessment shall be included in computing Tenant’s obligation for taxes and assessments.

Term “real, estate taxes” as used herein shall be deemed to mean all taxes imposed upon the real property and permanent improvements constituting the demised premises, and all assessments levied against said premises, but shall not include personal income taxes, personal property taxes, inheritance taxes, or franchise taxes levied against the Landlord, but not directly against said property, even though such taxes shall become a lien against said property.

6. PERSONAL PROPERTY TAXES. During the term hereof, Tenant shall pay, prior to delinquency, all taxes assessed against and levied upon fixtures, furnishings, equipment and all other personal property of tenant contained in the demised premises, and when possible Tenant shall cause said fixtures, furnishings, equipment and other personal property to be assessed and billed separately from the real property of Landlord. In the event any or all of Tenant’s fixtures, furnishings, equipment and other personal property shall be assessed as additional rent, and taxed with Landlord’s real property, Tenant shall pay to Landlord its share of such taxes within ten (10) days after delivery to Tenant by Landlord of a statement in writing setting forth the amount of the taxes applicable to Tenant’s property.

7. CONDITION OF PREMISES. Tenant leases the space, and Landlord constructs improvements, as outlined in Exhibit "B".

8. PARKING AND COMMON FACILITIES. Landlord covenants that common and parking areas of shopping center of which demised premises are a part shall be available for nonexclusive use of Tenant during the full term of this lease, or any extension of the term hereof, provided that the condemnation or other taking by any public authority, or sale in lieu of condemnation, of any or all of such common and parking areas shall not constitute a violation of this covenant. Landlord reserves the right to change entrances, exits, traffic lanes and boundaries and locations of such parking area or areas. This lease shall be subordinate to any agreement existing as of the date of this lease or subsequently placed upon the real property of which the demised premises are a part, which agreement provides for reciprocal easements and restrictions pertaining to common and parking areas, and in the event of conflict between the provisions of such agreement and this lease, the provisions of said agreement shall prevail. Provided, however, nothing therein shall cause the Tenant to pay a greater share of common area maintenance costs than herein provided. Provided further that there shall at all times be maintained common and parking areas of not less than two (2) square feet of common and parking area for each square foot of ground floor building area within the shopping center.

A. Prior to the date of Tenant's occupation of the demised premises, Landlord shall cause said common and parking area or areas to be graded, blacktopped, lighted and appropriately marked and landscaped at no expense to Tenant, and shall cause the same to be maintained in good condition and repair during the entire term hereof.

B. Landlord shall keep or cause to be kept said automobile parking and common areas in a neat, clean and orderly condition, properly lighted and landscaped, and shall repair any damage to facilities thereof, but all expenses in connection with said automobile parking and common areas shall be charged as additional rent and prorated in the manner hereinafter set forth. It is understood and agreed that the phrase “expense in connection with said automobile parking and common areas” as used herein shall be construed to include, but not be limited to, all sums expended by Landlord in connection with said automobile parking and common areas for all general maintenance and repair, resurfacing, painting, re-striping, cleaning, sweeping and janitorial services; planting and landscaping; lighting and other utilities; directional signs and other markers and bumpers; personnel to implement such services and to police with security guards, automobile parking and common areas; required fees or charges levied pursuant to any governmental requirements; public liability and property damage insurance on automobile parking and common areas, which shall be carried and maintained by Landlord and under which Tenant shall be named as an additional insured, with limits as determined by Landlord; and a fee equal to ten (10%) percent of said costs to Landlord for Landlord’s supervision of said automobile parking and common areas.

Landlord agrees to furnish to Tenant a statement itemized in reasonable detail setting forth total expenses for automobile parking and common areas for the previous three (3) calendar months, said statement to be furnished as soon as reasonably possible following expiration of said quarterly period (i.e. March 31, June 30, September 30, and December 31), or Landlord may, at its option, furnish such statement on a monthly basis, setting forth total expenses for the prior month. Tenant agrees to pay to Landlord as additional rent, Tenant’s prorata share of such expenses within five (5) days after receipt of said statement. Tenant’s prorata share of total expenses for the previous monthly period shall be that portion of all of such expenses which is equal to the proportion thereof which the number of square feet of gross leasable area in the demised premises bears to the total number of square feet of gross leasable area of the buildings in the shopping center with building measurements to be from outside exterior walls and from the center of interior partitions.

C. Tenant, for the use and benefit of Tenant, its agents, employees, customers, licensees and subtenants, shall have the non-exclusive right in common with Landlord, and other present and future owners, tenants and their agents, employees, customers, licensees and subtenants, to use said common and parking areas during entire term of this lease, or any extension thereof, for ingress and egress, roadway, sidewalk and automobile parking, provided however Tenant and Tenant’s employees shall park their automobiles in areas designated for employee parking, or at Landlord’s written request shall park their automobiles behind demised premises or in areas designated by Landlord for employee parking, or at Landlord’s written request shall park their automobiles outside of shopping center parking areas.

D. Tenant, in the use of said common and parking areas, agrees to comply with such reasonable rules and regulations as Landlord may adopt from time to time for the orderly and proper operation of said common and parking areas.

9. USES PROHIBITED. Tenant shall not use, or permit said premises, or any part thereof, to be used for any purpose or purposes other than the purpose or purposes for which said premises are hereby leased and no use shall be made or permitted to be made of said premises, nor acts done, which will increase the existing rate of insurance upon the building in which said premises may be located once said rate is established or cause a cancellation of any insurance policy covering said building or any part thereof, nor shall Tenant sell or permit to be kept, used or sold in or about said premises, any article which may be prohibited by a standard form of fire insurance policies. Tenant shall, ‘at his sole cost, comply with any and all requirements, pertaining to the use of said premises, of any insurance organization or company necessary for the maintenance of reasonable fire and public liability insurance, covering said building and appurtenances. In the event Tenant’s use of premises, as recited in Article 1 hereof, results in a rate increase for the building of which the demised premises are a part, Tenant shall pay annually on the anniversary date of this lease, as additional rent, a sum equal to that of the additional premium occasioned by said rate increase.

10. ALTERATIONS AND FIXTURES. Tenant shall not make, or suffer to be made, any alterations of the demised premises, or any part thereof, without the prior written consent of Landlord. Any additions to, or alterations of, said premises, except movable furniture, shall become at once a part of the realty and belong to Landlord. Any such alterations shall be in conformance with the requirements of all municipal, state and federal authorities.

Tenant agrees to promptly fixturize the bank in a manner comparable to a business of similar nature. All fixtures, including trade fixtures that are attached to premises shall become at once a part of the realty and belong to Landlord on expiration or sooner termination of this lease, except water machines.

11. MAINTENANCE AND REPAIR. Tenant shall, subject to Landlord’s obligations hereinafter provided, at all times during term hereof, and at Tenant’s sole cost and expense, keep, maintain and repair the building and other improvements upon demised premises in good and sanitary order and condition (except as hereinafter provided) including without limitation, maintenance and repair of any store front, doors, window casements, glazing, heating and air conditioning system (if any), plumbing, pipes, electrical wiring and conduits. Heating and air-conditioning units must be maintained by a licensed HVAC engineer on at least a quarterly basis at the expense of Tenant. Landlord may master contract this service and pro-rate the cost to Tenant. Tenant shall also at its sole cost and expense be responsible for any alterations or improvements to demised premises necessitated as a result of the requirement of any municipal, state or federal authority. Tenant hereby waives all right to make repairs at the expense of Landlord, and Tenant hereby waives all rights provided for by Section 1941 of the Civil Code of the State of California. By entering into the demised premises Tenant shall be deemed to have accepted the demised premises as being in good and sanitary order, condition and repair and Tenant agrees on the last day of said term or any extensions or sooner termination of this lease to surrender the demised premises with appurtenances, in the same condition as when received, reasonable use and wear thereof and damage by fire, act of God or by the elements excepted. Tenant shall periodically sweep and clean sidewalks adjacent to demised premises, as needed.

Landlord shall, subject to Tenant’s reimbursement as herein provided, maintain in good repair exterior walls, roof and sidewalks. Tenant agrees that it will not, nor will it authorize any person to, go onto the roof of the building of which demised premises are a part without prior written consent of Landlord. Said consent will be given only upon Landlord’s satisfaction that any repairs necessitated as a result of Tenant’s action will be made by Tenant at Tenant’s expense and will be made in such a manner so as not to invalidate any guarantee relating to said roof. Landlord shall not be required to make any repairs to exterior walls, roof and sidewalks unless and until Tenant has notified Landlord in writing of the need for such repairs and Landlord shall have had a reasonable period of time thereafter to commence and complete said repairs. Tenant shall reimburse Landlord for its prorata share of the cost of said repairs and maintenance incurred by Landlord, said prorata share to be determined according to the area of the demised premises as it relates to the total area of the building which contains the demised premises.

12. COMPLIANCE WITH LAWS. Tenant shall, at their sole cost and expense, comply with all of requirements of all municipal, state and federal authorities now in force or which may hereafter be in force pertaining to the use of said premises, and shall faithfully observe in said use all municipal ordinances and state and federal statutes now in force or which shall hereinafter be in force. The judgment of any court of competent jurisdiction, or admission of Tenant in any action or proceeding against Tenant, whether Landlord be a party thereto or not, that Tenant has violated any such order or statute in said use, shall be conclusive of that fact as between Landlord and Tenant.

Tenant shall not commit, or suffer to be committed, any waste upon demised premises, or any nuisance or other act or thing which may disturb the quiet enjoyment of any other tenant in the building in which the demised premises may be located.

13. INSURANCE. Landlord shall maintain fire and extended coverage insurance throughout the term of this lease in an amount equal to at least ninety (90%) percent of the value of the building which includes the demised premises, together with such other insurance, including but not limited to, loss of rents, earthquake, flood insurance, all liability insurance, and such other insurance as Landlord deems necessary or that may be required by Landlord’s lender or by any governmental agency. Tenant hereby waives any right of recovery from Landlord, its officers and employees, and Landlord hereby waives any right of recovery from Tenant, its officers or employees, for any loss or damage (including consequential loss) resulting from any of the perils insured against in the standard form fire insurance policy with extended coverage endorsement. Tenant agrees to pay to Landlord as additional rent its prorata share of the cost of said insurance to be determined by the relationship that the gross floor area of the demised premises bears to the total gross floor area of the building or buildings for which such policy relates, Tenant shall maintain plate glass insurance with a provision requiring insurer to give Landlord at least ten (10) days written notice before any decrease in coverage, cancellation, or other material change, is effective and naming Landlord as additional insured, and shall provide Landlord with a copy of the policy or a Certificate of Insurance within fifteen (15) days after rent commencement date stated in Article 3 of this lease. If Tenant fails to deliver adequate proof that it has obtained and kept in force and effect insurance required by this paragraph, Landlord shall have the right, at its option and after notice to Tenant, to effect such insurance and charge the cost of the premiums to Tenant’s account.

14. INDEMNIFICATION OF LANDLORD - LIABILITY INSURANCE BY TENANT. Tenant, as a material part of the consideration to be rendered to Landlord under this lease, hereby waives all claims against Landlord for damage to goods, wares and merchandise, in, upon or about said premises and for injuries to persons in or about said premises, from any cause resulting from Tenant’s use and occupation on the demised premises arising at any time; and Tenant will indemnify and hold Landlord and the property of Landlord exempt and harmless from any and all claims, liability, loss, expenses, damage or injury resulting from Tenant’s use and occupation of the demised premises, including, but not limited to, any claim, liability, loss, or damage arising by ’ reason of Hie death or injury of any person, the damage to or destruction of any property of any person, and any work performed on said premises or materials furnished to said premises at the instance or request of Tenant or its agents or employees.

During the entire term of this lease, Tenant shall, at Tenant’s sole cost and expense, but for mutual benefit of Landlord and Tenant, maintain general public liability and property damage insurance including contractual liability insurance against claims for personal injury, death, or property damage occurring in, upon or about the demised premises and on any sidewalks directly adjacent to demised premises. Limitation of liability of such insurance shall be not less than Two Million Dollars ($2,000,000.00) in respect to any one occurrence, and to the limit of not less than Fifty Thousand Dollars ($50,000.00) in respect to Property Damage.

Landlord is to be named additional insured. All such policies of insurance shall be issued in the name of Tenant and Landlord and for the mutual and joint benefit and protection of the parties, and such policies of insurance shall include a provision requiring that the insurer give Landlord at least ten (10) days written notice before any cancellation, decrease in coverage or other material change is effective. Copies of the policy or a certificate of Insurance thereof shall be delivered to the Landlord within fifteen (15) days after the rent commencement date stated in Article 3 of this lease. If Tenant fails to deliver adequate proof that it has obtained and kept in force and effect the insurance required by this paragraph, Landlord shall have the right, at its option and after notice to Tenant, to effect such insurance and charge the cost of the premiums to Tenant’s account. This shall be considered a breach of the lease as stated in paragraph 21.

15. ABANDONMENT OF PERSONAL PROPERTY. Tenant shall not vacate or abandon the demised premises at any time during the term of this lease; and if Tenant shall abandon, vacate or surrender Hie demised premises or be dispossessed by process of law, or otherwise, any personal property belonging to Tenant and left on the demised premises shall be deemed to be abandoned, at the option of Landlord, except such property as maybe mortgaged to Landlord.

16. SIGNS AND AUCTIONS. Tenant shall not place or permit to be placed any sign upon the exterior or in the windows of demised premises without Landlord’s prior written consent, nor shall Tenant change the color or exterior appearance of demised premises without Landlord’s prior written consent. Landlord will provide to Tenant a Master Sign Plan, approved by the City of Soledad, attached as Exhibit “D”. Tenant shall at its sole cost and expense prepare sign construction drawings, in accordance with said sign plan, which shall be submitted to Landlord for written approval. Tenant agrees to install sign(s) in accordance with approved sign plan within thirty (30) days after commencement of the term of this lease. Landlord’s approval of signage will not be unreasonably withheld. All signs affixed to premises shall on expiration or sooner termination of this lease belong to Landlord without compensation to Tenant.

Tenant shall not, without Landlord’s prior written consent, display or sell merchandise outside defined exterior walls and permanent doorways of demised premises. Tenant shall not conduct or permit to be conducted any sale by auction in, upon or from the demised premises, whether said auction be voluntary, involuntary, pursuant to any assignment for the payment of creditors or pursuant to any bankruptcy or other solvency proceeding.

17. UTILITIES. Tenant shall pay before delinquency all charges for water, gas, heat, electricity, power, telephone service and all other services or utilities used in, upon, or about demised premises by Tenant or any of its subtenants, licensees, or concessionaires during the term of this lease.

18. ENTRY AND INSPECTION. Tenant shall permit Landlord and his agents to enter into and upon demised premises at all reasonable times after notice, except in case of an emergency, for the purpose of inspecting the same or for the purpose of maintaining the building in which said premises are situated, or for the purpose of making repairs, alterations or additions to any other portion of said building, including the erection and maintenance of such scaffolding, canopy, fences and props as may be required, or for the purpose of posting notices of non-liability for alteration, additions or repairs, or for the purpose of placing upon the property in which the premises are located any usual or ordinary “For Sale” signs. Landlord shall be permitted to do any of the above without any rebate of rent and without any liability to Tenant for any loss of occupation or quiet enjoyment of the premises thereby occasioned. Tenant shall permit Landlord, at any time within thirty (30) days prior to the expiration of this lease, to place upon said premises any usual or ordinary “For Lease” signs and during such thirty (30) day period Landlord or his agents may, during normal business hours, enter upon said premises and exhibit same to prospective Tenants.

19. DAMAGE AND DESTRUCTION OF PREMISES. In the event of (a) partial destruction of said premises or the building containing same during the term of this lease or any extensions thereof, which requires repairs to either said premises or said building, or (b) said premises or said building being declared unsafe, or unfit for occupancy by any authorized public authority for any reason other than Tenant’s act, use or occupation, which declaration requires repairs to either said premises or said building, Landlord shall forthwith make said repairs provided Tenant gives to Landlord thirty (30) days written notice of the necessity therefor. No such partial destruction (including any destruction necessary in order to make repairs required by any declaration made by any public authority) shall in any way annul or void this lease except that Tenant shall be entitled to a proportionate reduction of minimum guaranteed rent while such repairs are being made, such proportionate reduction to be based upon the extent to which the making of such repairs shall interfere with the business carried on by Tenant in said premises. However, if during the last four years of the term of this lease the building is damaged as a result of fire or any other insured casualty to an extent in excess of twenty-five (25%) percent of its then replacement cost (excluding foundation(s)), Landlord may, within thirty (30) days following the date such damage occurs, terminate this lease by written notice to Tenant. If Landlord, however, elects to make said repairs, and provided Landlord uses due diligence in making said repairs, this lease shall continue in full force and effect and the minimum guaranteed rent shall be proportionately reduced as provided above. If Landlord elects to terminate this lease all rents shall be prorated between Landlord and Tenant as of the date of such destruction.

The foregoing to the contrary notwithstanding, if building is damaged or destroyed at any time during the term hereof to an extent of more, than twenty-five (25%) percent of its then replacement cost (excluding foundation(s)) as a result of a casualty not insured against, Landlord may within thirty (30) days following the date of such destruction terminate this lease upon written notice to Tenant. If Landlord does not elect to so terminate because of said uninsured casualty, Landlord shall promptly rebuild and repair said premises and Tenant’s rental obligation shall be proportionately reduced as provided above.

In respect to any partial destruction (including any destruction necessary in order to make repairs required by any authorized public authority) which Landlord is obligated to repair and may elect to repair under the terms of this Article, Tenant waives any statutory right it may have to cancel this lease as a result of such destruction.

20. ASSIGNMENT AND SUBLETTING. Tenant shall not assign this lease, or any interest therein, and shall not sublet the demised premises or any part thereof, or any right or privilege appurtenant thereto, or permit any other person (the agents and servants of Tenant excepted) to occupy or use the demised premises, or any portion thereof, without first obtaining written consent of Landlord, which consent shall not be unreasonably withheld. Consent by Landlord to one assignment, subletting, occupation or use by another person shall not be deemed to be a consent to any subsequent assignment, subletting, occupation or use by another person. Consent to an assignment shall not release the original named Tenant from liability for the continued performance of the terms and provisions on the part of Tenant to be kept and performed, unless Landlord specifically releases the original named Tenant from said liability. Any assignment or subletting without the prior written consent of Landlord shall be void, and shall, at the option of Landlord terminate this lease. Neither this lease nor any interest therein shall be assignable, as to the interest of Tenant, by operation of law, without the prior written consent of Landlord.

If Tenant proposes to assign the lease to any person or entity who shall have made a good faith offer to accept an assignment of this lease on terms acceptable to Tenant, the notice of such proposed assignment, setting forth (a) name and address of such person, (b) all the terms and conditions of such offer; and (c) adequate assurance to be provided Landlord to assure such persons future performance under the lease, shall be given to Landlord by Tenant no later than ten (10) days after receipt by Tenant, Landlord shall then have the right and option, to be exercised by a notice to Tenant given at any time prior to effective date of such proposed assignment, to accept a different assignment of this lease on the same terms and conditions and for the same consideration, if any, as offer made to Tenant, less any brokerage commissions which may be payable out of consideration to be paid to such person for assignment of this lease.

In the event any approved sublease provides for payment of rent or other consideration in excess of rent payable hereunder, Landlord shall receive all such excess, upon receipt by Tenant.

21. DEFAULT. If Tenant fails to make any payment required by the provisions of this lease, after ten (10) days of due date, or fails within fifteen (15) days after written notice thereof to correct any breach or default of other covenants, terms or conditions of this lease, or if Tenant breaches this lease and abandons the property before the end of the term, Landlord shall have the right at any time thereafter to elect to terminate said lease and Tenant’s right to possession thereunder. Upon such termination, Landlord shall have the right to recover against Tenant:

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 rental loss that the Tenant 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 exceeds the amount of such rental loss that the Tenant proves could be reasonably avoided; and

D. Any other amount necessary to compensate the Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under the lease or which in the ordinary course of things would be likely to result therefrom.

The “worth at the time of award” of the amounts referred to in subparagraphs A and B above shall be computed by allowing interest at ten (10%) percent per annum. The worth at the time of award of the amount referred to in subparagraph C shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one (1%) percent.

Such efforts as Landlord may make to mitigate damages caused by Tenant’s breach of this lease do not constitute a waiver of Landlord’s right to recover damages against Tenant hereunder, nor shall anything contained herein affect Landlord’s right to indemnification against Tenant for any liability arising prior to termination of this lease for personal injuries or property damage, and Tenant hereby agrees to indemnify and hold Landlord harmless from any such injuries and damages, including all attorney’s fees and costs incurred by Landlord in defending any action brought against Landlord for any recovery thereof, and in enforcing the terms and provisions of this indemnification provision against Tenant.

If Landlord elects to terminate this lease and gives Tenant notice of such termination, upon giving of such notice, the term of this lease and estate hereby granted shall expire and terminate on the effective date of the notice as fully and completely and with the same effect as if such date were the date herein fixed for expiration of the term of this lease and all rights of Tenant shall hereunder expire and terminate, but Tenant shall remain liable as here before provided.’.

In the event Tenant abandons demised premises, this lease shall terminate if Landlord gives written notice of his belief of abandonment pursuant to Civil Code Sections 1951.2 and 1951.3.

Notwithstanding any of the following, breach of this lease by Tenant, or abandonment of demised premises by Tenant, shall not constitute termination of this lease, or of Tenant’s right of possession hereunder, unless and until Landlord elects to do so, and until such time Landlord shall have the right to enforce all of its rights and remedies under this lease, including the right to recover rent, and all other payments to be made by Tenant hereunder, as it becomes due; provided, however, that until such time as Landlord elects to terminate this lease, and Tenant’s right of possession hereunder, Tenant shall have the right to sublet demised premises or to assign its interest in the lease, or both, subject to written consent of Landlord, which consent shall not be unreasonably withheld.

As security for the performance by Tenant of all of its duties and obligations hereunder, Tenant does hereby assign to Landlord the right, power and authority, during continuance of this lease,’ to collect rents, issues and profits of the demised premises, reserving unto Tenant the right, prior to any breach or default by it hereunder, to collect and retain said rents, issues and profits as they become due and payable. Upon any such breach or default, Landlord shall have the right at any time thereafter, without notice except as provided for above, either in person, by agent or by a receiver to be appointed by a court, to enter and take possession of said demised premises and collect such rents, issues and profits, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorney’s fees, upon any indebtedness secured hereby, and in such order as Landlord may determine.

The parties hereto agree that acts of maintenance or preservation or efforts to re-lease the premises, or the appointment of a receiver upon the initiative of Landlord to protect its interests under this lease shall not constitute a termination of Tenant’s right of possession for purposes of this Article unless accompanied by a written notice from Landlord to Tenant of Landlord’s election to so terminate. Nothing contained in this Article shall in any way diminish or be construed as waiving any of Landlord’s other remedies as provided elsewhere in this lease or by law or in equity.

22. INSOLVENCY OF TENANT. Tenant agrees that in the event all or substantially all of its assets be placed in the hands of a receiver or trustee, and in the event such receivership or trusteeship continues for a period often (10) days, or should Tenant make an assignment for the benefit of creditors, or be adjudicated a bankrupt, or should Tenant institute any proceedings under any state or federal bankruptcy act wherein Tenant seeks to be adjudicated a bankrupt, or seeks to be discharged of its debts, or should any involuntary proceeding be filed against such Tenant under such bankruptcy laws and Tenant consents thereto or acquiesces therein by pleading or default, then this lease or any interest in and to the demised premises shall not become an asset in any of such proceedings and, in any of such events and in addition to any and all rights or remedies of Landlord hereunder or as provided by law, it shall be lawful for Landlord at his option to declare the term hereof ended and to re-enter the demised premises and take possession thereof and remove all persons therefrom and Tenant shall have no further claim therein or hereunder.

23. SURRENDER OF LEASE. Voluntary or other surrender of this lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at option of Landlord, terminate all or any existing subleases or subtenancies, or may, at option of Landlord, operate as an assignment to him of any or all of such subleases or subtenancies.

24. SALE OF PREMISES BY LANDLORD. In the event of any sale of demised premises by Landlord, Landlord shall be and is hereby entirely freed and relieved of all liability under any and all of its covenants and obligations contained in or derived from this lease arising out of any act, occurrence or omission occurring after consummation of such sale; and purchaser, at such sale or any subsequent sale of demised premises shall be deemed, without any further agreement between the parties or their successors in interest or between parties and any such purchaser, to have assumed and agreed to carry out any and all covenants and obligations of Landlord under this lease.

25. HOURS OF BUSINESS. Subject to provisions of Article 19, Tenant shall continuously during entire term hereof conduct and carry on Tenant’s business in the demised premises and shall keep demised premises open for business and cause Tenant’s business to be conducted therein during normal banking business hours; provided, however, that this provision shall not apply if demised premises should be closed and the business of Tenant temporarily discontinued therein on account of strikes, lockouts or similar causes beyond the reasonable control of Tenant or closed for not more than three (3) days out of respect to the memory of any deceased officer or employee of Tenant, or relative of any such officer or employee. Tenant shall keep the demised premises adequately stocked with merchandise, and with sufficient sales personnel to care for the patronage, and to conduct said business in accordance with sound business practices.

In the event of breach by Tenant of any of the conditions in this Article, Landlord shall have, in addition to any and all remedies herein provided, the right at its option to collect not only the minimum rent herein provided, but additional rent at the rate of one-thirtieth (1/30) of the minimum monthly rent herein provided for each and every day that Tenant shall fail to conduct its business as herein provided, said additional rent shall be deemed to be in lieu of any percentage rent that might have been earned during such period of Tenant’s failure to conduct its business as herein provided.

26. ATTORNEY’S FEES. If Landlord is involuntarily made • a party defendant to any litigation concerning this lease or demised premises by reason of any act or omission of Tenant, then, Tenant shall hold harmless Landlord from all liabilities by reason thereof, including reasonable attorneys’ fees and all costs incurred by Landlord in such litigation.

Landlord shall be entitled to recover all collection costs including reasonable attorney’s fees incurred by it as a result of Tenant’s failure to pay rent as herein provided. If either Landlord or Tenant shall commence any legal proceedings against the other with respect to any of the terms and conditions of this lease, non-prevailing party therein shall pay to the other all expenses of said litigation, including a reasonable attorneys’ fee as may be fixed by the court having jurisdiction over the matter. Parties hereto agree that Monterey County, California is the proper jurisdiction and venue for litigation of any matters relating to this lease and service mailed to the address of tenants set forth herein shall be adequate service for such litigation.

27. SECURITY DEPOSIT. Tenant contemporaneously with the execution of this lease, deposits with Landlord the sum of five thousand ($5,000) Dollars, receipt of which is hereby acknowledged by Landlord, said deposit being given to secure the faithful performance by Tenant of all terms, covenants, and conditions of this lease by Tenant to be kept and performed during the term hereof. Tenant agrees that if Tenant shall fail to pay rent herein reserved promptly when due, said deposit may, at the option of Landlord (but Landlord shall not be required to) be applied to any rent due and unpaid, and if Tenant violates any of the other terms, covenants, and conditions of this lease, said deposit shall be applied to any damages suffered by Landlord as a result of Tenant’s default to the extent of the amount of damages suffered. Landlord shall not be required to keep such deposit separate from its general accounts.

Nothing contained in this Article shall in any way diminish or be construed as waiving any of Landlord’s other remedies as provided herein, or by law or in equity. Should entire security deposit, or any portion thereof, be appropriated and applied by Landlord for payment of overdue rent or other sums due and payable to Landlord by Tenant hereunder, then Tenant shall, on written demand of Landlord, forthwith remit to Landlord a sufficient amount in cash to restore said security deposit to its original amount, and Tenant’s failure to do so within fifteen (15) days after receipt of such demand, shall constitute a breach of this lease. Should Tenant comply with all terms, covenants, and conditions of this lease and promptly pay all rental herein provided for as it falls due, and all other sums payable by Tenant to Landlord hereunder, said security deposit shall be returned in full to Tenant at the end of the term of this lease, or upon earlier termination of this lease pursuant to the provisions of Article 19 hereof, except in the event demised premises are sold as a result of the exercise of any power of sale under any mortgage or deed of trust, in which event this lease shall be automatically amended to delete any reference to this Article, and Tenant shall be entitled to immediate reimbursement of its security deposit from the party then holding said deposit. This lease does not create a trust relationship between Landlord and Tenant with respect to such security deposit, and Landlord shall be entitled to treat such security deposit as Landlord’s own property, subject only to Tenant’s right to receive repayment of it as provided in this Article.

28. HOLDING OVER Any holding over after expiration of the term of this lease, with consent of Landlord, shall be construed to be a tenancy from month to month, cancelable upon thirty (30) days written notice, and at a rental and upon terms and conditions as existed during the last year of the term hereof.

29. NOTICES. Wherever in this lease it shall be required or permitted that notice and demand be given or served by either party to this lease to or on the other, such notice or demand shall be given or served and shall not be deemed to have been duly given or served unless in writing and forwarded by certified mail, addressed as follows:

Landlord, Soledad Shopping Center, LP
c/o Shaw Development
3 Quail Run Circle, Suite 103
Salinas, CA 93907
(831) 772-8100 ext. 20
(831) 772-8103 Fax
(831) 484-7948 Home
(831) 262-8747 Cell
e-mail address: shawre@aol.com

Harry Wardwell
Community Bank
301 Main Street
Salinas, CA 93901
(831) 757-2274 ext 446
(831) 757-8597 Fax

Either party may change such address by written notice by certified mail to the other.

30. SUCCESSORS IN INTEREST. The covenants herein contained shall, subject to the provisions as to assignment, apply to and bind the heirs, successors, executors, administrators and assigns of all parties hereto; and all of parties hereto shall be jointly and severally liable hereunder.

31. TENANT’S PERFORMANCE. In the event Tenant shall fail within any time limits which may be provided herein to complete any work or perform any other requirements provided to be performed by Tenant prior to the commencement of the term hereof, or in the event Tenant shall cause a delay in the completion of any work, Landlord may send Tenant written notice of said default and if said default is not corrected within ten (10) days thereafter, Landlord may by written notice prior to curing of said default terminate’ this lease. Landlord shall be entitled to retain as liquidated damages all deposits made hereunder and such improvements as Tenant may have annexed to the realty that cannot be removed without damage thereto.

32. FORCE MAJEURE. If either party hereto shall be delayed or prevented from the performance of any act required hereunder by reason of acts of God, strikes, lockouts, labor troubles, inability to procure materials, restrictive governmental laws or regulations or other cause without fault and beyond the control of the party obligated (financial inability excepted), performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay; provided, however, nothing contained in this Article shall excuse Tenant from the prompt payment of any rental or other charge required of Tenant hereunder except as may be expressly provided elsewhere in this lease.

33. PARTIAL INVALIDITY. If any term, covenant, condition or provision of this lease is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions hereof shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereof.

34. MARGINAL CAPTIONS. The various headings and numbers herein and the grouping of the provisions of this lease into separate articles and paragraphs are for the purpose of convenience only and shall not be considered a part hereof.

35. TIME. Time is of the essence of this lease.

36. SUBORDINATION, ATTORNMENT. This lease, at Landlord’s option, shall be subordinate to the lien of any deed of trust or mortgage subsequently placed upon the real property of which demised premises are apart, and to any and all advances made on the security thereof, and to all renewals, modifications, consolidations, replacements and extensions thereof; provided, however, that as to the hen of any such deed of trust or mortgage Tenant’s right to quiet possession of the premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the rent and observe and perform all of the provisions of this lease, unless this lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee or ground lessor shall elect to have this lease prior to the lien of its mortgage, deed of trust, or ground lease, and shall give written notice thereof to Tenant, this lease shall be deemed prior to such mortgage, deed of trust, or ground lease, whether this lease is dated prior or subsequent to the date of said mortgage, deed of trust or ground lease or the date of recording thereof.

In the event any proceedings are brought for foreclosure, or in the event of the exercise of the power of sale under any mortgage or deed of trust made by Landlord covering the demised premises, Tenant shall attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as the Landlord under this lease.

If upon any sale, assignment, or hypothecation of the demised premises or land thereunder by Landlord, or at any other time, an estoppel certificate shall be requested of Tenant in writing, Tenant agrees, within ten (10) days thereafter, to execute and deliver the estoppel certificate provided by Landlord in recordable form addressed to any such proposed mortgagee or purchaser or Landlord certifying requested information, including among other things, dates of commencement and termination of this lease, amounts of security deposits, and that lease is in foil force and effect (if such be the case) and that there are no differences, offsets or defaults of Landlord, or noting such differences, offsets or defaults as actually exist. Tenant shall be liable for any loss or liability resulting from any incorrect information certified, and mortgagee and purchaser shall have the right to rely on such estoppel certificate. Tenant shall in the same manner acknowledge and execute any assignment of rights to receive rents as required by any mortgagee of Landlord.

37. REVISION OF EXHIBIT A. It is understood and agreed that the plot plan attached hereto as “Exhibit” A is preliminary, and that prior to commencement of the term hereof, Landlord may revise said plot plan and change the location of Tenant’s demised premises; provided however, relocation of Tenant’s demised premises shall be subject to Tenant’s approval. In the event Tenant does not approve said relocation Tenant may cancel this lease, in which event any security deposit or prepaid rent paid by Tenant shall be refunded to Tenant, and neither party shall thereafter have any further obligations to each other respecting this lease. Landlord’s rights pursuant to this section shall cease upon commencement of the term hereunder.

38. COST OF LIVING ADJUSTMENT. After the first year of the commencement of this lease, the rent will be adjusted annually by the CPI. Upon each anniversary date of the commencement of the term of this lease, Guaranteed Minimum Monthly Rental shall be changed to an amount that bears the same relationship to the guaranteed minimum monthly rental in effect immediately proceeding such adjustment which the Consumer Price Index for the month in which said adjustment occurs bears to the index for the month proceeding the prior year’s anniversary date. However, in no event shall the rent be reduced below that guaranteed minimum monthly rental in effect immediately proceeding such adjustment period. The Consumer Price Index to be used in the Consumer Price Index (CPI-U) for all urban customers for all items, U.S. City average for the San Francisco/Oakland area, published monthly by the United States Department of Labor, in which 1967 equals 100. If said Consumer Price Index is no longer published at the adjustment date, it shall be constructed by conversion tables included in such new index. Notwithstanding the above, the guaranteed minimum monthly rental shall be increased by a minimum of two and one half (2.5%) percent per year, not to exceed a maximum of four (4%) percent, adjusted yearly.

39. RENTAL TAX. Tenant shall pay to Landlord as additional rent, all excise, privilege and other taxes, other than net income and estate taxes levied or assessed by any federal, state or local authority upon rent received by Landlord hereunder, and Tenant shall bear any business tax imposed upon Landlord by any governmental authority which is based or measured in whole or in part by amounts charged or received by Landlord from Tenant under this lease.

40. CONDEMNATION. If by condemnation, or a transfer in lieu thereof, twenty (20%) percent or more of the demised premises is taken, or in the event that twenty (20%) percent or more of the parking areas referred to in Article 8 hereof are taken and Landlord is unable to provide adequate substitute parking, Landlord or Tenant may, upon written notice given within thirty (30) days after such taking, or transfer in lieu thereof, terminate this lease. Tenant shall not be entitled to share in any portion of the award and Tenant hereby expressly waives any right or claim to any part thereof. Tenant shall, however, have the right to claim and recover, only from the condemning authority (but not from Landlord) any amounts necessary to reimburse Tenant for the cost of removing stock and fixtures.

41. NO ORAL AGREEMENTS. This lease covers in full each, and every agreement of every kind or nature whatsoever between the parties hereto concerning this lease, and all preliminary negotiations and agreements of whatsoever kind or nature are merged herein, and there are no oral agreements or implied covenants.

42. STATEMENT OF TENANT. Tenant shall fill out and sign "Exhibit C" attached for Landlord's Lender within three (3) days of written request and return promptly to Landlord.

43. SIGNS. Tenant's signs to be uniform in color, size, type, style, and manufacture and be similar to other signs used in the center. All signs to be approved by Landlord, paid for by Tenant. Tenant to pay prorata share of materials, installation and maintenance of freeway pylon sign and monument sign(s), if they choose to be represented on those signs.

44. SIGN REPAIRS. If Landlord has notified Tenant in writing that Tenant's sign(s) needs repair and maintenance, then after thirty (30) days Landlord may have the sign(s) repaired and charge Tenant for the cost.

45. OPTION TO RENEW. Should Tenant fully and faithfully perform all the terms and conditions of this lease for the full term specified in Article 3 of this lease, Tenant shall have the option to renew this lease for two (2) consecutive five year terms after the expiration of the full term specified in Article.3. Tenant may extend this lease for each five (5) year term by giving Landlord written notice of Tenant’s desire to do so at least 120 days prior to the expiration of the term then in effect. The rent payable during each renewal term shall be adjusted annually by the rental adjustment in Article 38 of this lease. Except for the rent and option provisions, all other terms and conditions of this lease shall continue in effect during each renewal term.

46. TENANT'S PLAN. Tenant is to prepare a plan for the interior of the store within thirty (30) days of signing lease, which is subject to the approval of Landlord.

47. PROMOTION FUND. Tenant shall pay to Center Promotion Fund dues of $600 per year, payable quarterly, in advance, and participate with advertising in four Center promotions a year with at least an $100 ad. If Tenant does not advertise as provided herein, Landlord may charge Tenant for the space and collect funds to pay for advertising required under this Article. All dollar amounts above will be adjusted annually according to Consumer Price Index in the manner described in Paragraph 38.

48. HAZARDOUS SUBSTANCES. Tenant shall not use or store any Hazardous Substances in the Premises or Shopping Center except in the ordinary course of Tenant’s business and in compliance with applicable Environmental Laws. Tenant further agrees to defend, indemnify and hold harmless Landlord, or any partner, officer or director of Landlord, against any and all claims, demands, liabilities, costs and expense (including without limitation reasonable attorney’s fees, and expenses and expert witness fees) which Landlord may sustain at any time as a result of, arising out, of, or in any way connected with Tenant’s use or storage of such Hazardous Substances in the Premises or Shopping Center. Additionally, Tenant agrees to cease its use and storage of such items immediately upon receipt of written notice from any regulatory or governmental agency that such storage or use is in violation of any Environmental Laws.

49. BROKER COMMISSIONS. Tenant represents to Landlord and Landlord represents to Tenant that no broker or agent other than Shaw Real Estate, Inc. was instrumental in procuring or negotiation or consummating this lease. The fees and commissions of Shaw Real Estate, Inc. will be paid by Landlord. Each party (the “Indemnitor”) agrees to defend and indemnify the other (the “Indemnitee”) against any loss, expense or liability incurred by Indemnitee as a result of a claim by any other broker or finder claiming representation of the Indemnitor in connection with this Lease or its negotiation.

51. RECIPROCAL EASEMENT AGREEMENT. Lease is subject to all terms and conditions of the recorded Operating and Reciprocal Easement Agreement.

52. DATE OF LEASE. For all purposes of this lease, including all time requirements, any reference to the date of the lease shall be the date which the lease has been executed and initialed by Landlord and Tenant. In the event Landlord and Tenant have executed and/or initialed the lease each on a different date, the later of the dates shall apply.

EXECUTED in Monterey County, California.
Dated: 2/26/04
LANDLORD
Soledad Shopping Center, LP
By it’s General Partner
Soledad Shopping Center, LLC

/s/ WILLIAM G. SHAW
By: William G. Shaw, President


Dated: 2/26/04
TENANT
Community Bank

/s/ HARRY D. WARDWELL
By:

EXHIBIT “A”
[Graphic Omitted]

EXHIBIT "B"
LANDLORD'S WORK AND TENANT'S WORK
BANK

1. Tenant's Plans.

1.1 Preparation and Delivery of Tenant’s Plans. Tenant’s at its sole cost and expense, shall prepare, or cause to be prepared, and deliver simultaneously to Landlord and Landlord’s architect, within thirty (30) days after date Lease is fully executed, one (1) set of fully dimensioned one quarter inch (1/4”) scale drawings (“Tenant’s Plans”), showing a complete floor plan and reflected ceiling plan for premises, including “Tenant’s Work” (as defined in Section 3.2 below) and the location of all utilities, lighting and electrical outlets, partitions, signage store fronts, trade fixture plans and any other specifications which would affect construction or design of Premises.

1.2. Landlord’s Approval of Tenant’s Plans. Landlord shall have thirty (30) days after receipt of Tenant’s Plans to approve or disapprove Tenant’s Plans and to bid out the cost of Tenant’s Plan. If Landlord disapproves Tenant’s Plans, then Tenant shall make such changes to Tenant’s Plans as Landlord reasonably requires and shall again submit Tenant’s Plans to Landlord and Landlord’s architect for approval. Landlord shall review of Tenant’s Improvement Plans for lease approval. Landlord shall in no event be responsible for any defects, deficiencies or inaccuracies or code compliance in Tenant’s Plans. Tenant shall cause Tenant’s Plans to be prepared and signed by a licensed design professional, if applicable law so requires.

2. Landlord's Work.

2.1. Scope. Landlord shall be responsible only for the performance of the work described in Section 2.2 ("Landlord's Work"), or give Tenant allowances for items completed by Tenant's contractor. All other work, whether or not designated as part of "Tenant's Work" under Section 3. shall be performed by Tenant at Tenant's sole cost and expense.

2.2. Description of Landlord's Work. Landlord shall construct, a tenant space which shall include the following:
A. Walls: Demising walls, break room ATM room, and vault room walls provided. All walls 2 x 4 or 2 x 6 studs with Vz" or 5/8" gypboard, taped and textured, ready to paint. OR allowance of $1.35 per square foot.
B. Doors; Set of glass doors with cylinder lock in accordance with Tenant design. Side or rear doors are steel with metal frame.
C. Ceiling: T-Bar ceiling. OR allowance of $1.75 per square foot.
D. Electrical:

(i) Service and metering facilities with ample main electrical service. Power is 120/208 volts, three-phase.

(ii) Basic lighting consisting of 2’ x 4’ fluorescent lights, recessed drop-in type, OR allowance of $100 per fixture.

(iii) Sign outlet in front canopy.

(iv) Wall receptacles are 110 volt grounded duplex outlets with cover plates in demising walls, per Tenant plans. OR an allowance of one (1) outlet per 200 SF at $35 per outlet.

(v) Telephone outlets (conduit in wall; phone wire or installation not included), OR allowance of $20 per outlet.

E. Rough plumbing, per Tenant plan.

F. Heating, Ventilation & Air Conditioning System (HVAC) with one (1) main duct to which Tenant’s HVAC work, pursuant to Section 3.2E, can be connected by Tenant for distribution of heating, cooling and ventilation to Tenant space, or distributed to center and front and rear by Landlord.

F. Sprinkling: Each space sprinkled to meet fire code. Sprinkler system designed on the basis of an open floor plan uninterrupted by any tenant interior partitions or changes in ceiling height. Sprinkler drop and relocation of sprinklers heads after this installation to accommodate tenant spaces will be the responsibility of Tenant.

G. Restrooms: Two ADA compliant restrooms, as required by local code, and exhaust unit. Walls shall be painted, vinyl tile floors provided. OR allowance of $4,000 per restroom.

H. Utilities: Each Tenant space, as indicated on shell plan, shall be self contained and separately metered for gas, electric service, and water.

I. Quality; Structure and tenant improvements (exterior and interior) as approximately described herein will be constructed of good quality new materials in a workmanlike manner to a standard found in the industry for buildings in this price range.

2.3. No Responsibility for Additional Work. Except for foregoing work, Landlord shall not be responsible for, nor shall Landlord construct any, additional improvements in Premises, unless agreed by Landlord in writing.

2.4. Acceptance of Landlord’s Work. Tenant agrees that, upon completion of Landlord’s Work, Tenant shall conclusively be deemed to have accepted Premises in the condition in which they may then exist. Tenant hereby waives any right or claim arising out of the condition of the Premises, or the improvements or appurtenances thereto, and Landlord shall not be liable for any latent or patent defects therein. However, nothing contained in this Section 2.5 shall be deemed to limit Landlord’s obligation to repair the premises wherever such obligation is expressly set forth in Lease.

2.5. Changes to Landlord’s Work. If Tenant requests any changes to Landlord’s Work, and Landlord agrees in writing to make such changes, then any additional charges, expenses or costs attributable to such changes (including any delays impacting tenants occupancy) shall be at the sole cost and expense of Tenant.

3. Tenant's Work.

3.1.Commencement and Performance of Tenant's Work. Upon Landlord's delivery of Premises to Tenant with Landlord's Work substantially complete, Tenant, at its sole cost and expense, shall immediately proceed to perform "Tenant's Work" (defined in Section 3.2 below) and install Tenant’s personal property, trade fixtures and equipment (“Tenant’s Property”) in Premises, all without interference with any other work being done in the Building. Tenant’s Work, and installation of Tenant’s Property, shall be performed in compliance with all reasonable rules established by Landlord or Landlord’s architect or contractors. Upon final completion of Tenant’s Work, Tenant shall furnish Landlord with all certificates, permits and approvals relating to any work or installations done by Tenant that may be required by any governmental authority or insurance company. Landlord shall have no responsibility for any loss of or damage to any of Tenant’s property so installed or left on the Premises. Tenant’s entry shall be subject to all provisions of Lease, and at all times after such entry, Tenant shall maintain or cause to be maintained in effect insurance complying with the Lease.

3.2 Description of Tenant’s Work. “Tenant’s Work” includes all work, of any kind or nature whatsoever (other than Landlord’s Work), required to complete construction of, and improvements in Premises, and to permit Tenant to open for business and use Premises for purpose set forth in Lease, including, without limitation, purchase, installation and/or performance, as appropriate, of the following:

A. All hook-ups of Tenant's equipment, all electrical and phone work, except as provided in Section 2.2.

B. Internal communications systems and alarm systems.

C. Plumbing fixtures, except as provided in Section 2.2.

D. Heating, cooling and ventilating, distribution ducts and added zones for Tenant spaces.

E. Special lighting fixtures.

F. Tenant's signs, both interior and exterior.

G. Finish of all floors, walls, ceilings and columns on the inside of the building, except as provided in Section 2.2.

H. All work other than that which specifically designated in Section 2.2

I. All Tenant improvement permit fees, sewer hook-up fees, utility assessments, and any other governmental fees charged.

J. All Tenant construction related debris to be removed by Tenant.

K. All gas lines required by Tenant, except as provided in Section 2.2.

L. Any required changes to the basic fire sprinkler system provided by Landlord and described in Section 2.2K above. 

3.3 Standards of Construction. Tenant shall not be allowed to make any roof penetrations without the prior written consent of Landlord. Unless otherwise agreed in writing by Landlord, any roof penetrations shall be made by Landlord’s roofing contractor, and be reimbursed by Tenant. Any roof penetrations made by Tenant or its contractors must be made with roof jacks approved by Landlord and shall be patched by Landlord’s roofing contractor, and Tenant shall reimburse Landlord the cost thereof. All of Tenant’s Work shall be designed, by a qualified, licensed architect and shall be performed under the supervision of such architect by financially sound and bondable contractors of good reputation, in accordance with Tenant’s Plans as approved in writing by Landlord prior to commencement of Tenant’s Work. All contractors performing Tenant’s Work shall be subject to Landlord’s prior approval, Tenant shall not use any contractor not approved in writing by Landlord. In connection with giving its consent, Landlord may require that any contractor, or. major subcontractor, provide payment and completion bonds in such amount and sureties acceptable to Landlord. All work shall be performed in a good and workmanlike manner, diligently prosecuted to completion, using new material of good quality. Tenant shall notify Landlord at least twenty (20) days prior to the commencement of any portion of Tenant’s Work, so that the Landlord may post, file and/or record a notice of non-responsibility or other notice required under applicable mechanics’ lien law. Upon completion of Tenant’s Work, Tenant shall record in the office of the County Recorder of the County in which building is located a notice of completion or any other notice required or permitted by applicable mechanics’ lien laws to commence the running of, or terminate, any period for the filing of liens or claims, and shall deliver to Landlord any certificate of occupancy or their equivalent evidence of completion of Tenant’s Work in accordance with the requirements of applicable law. Tenant’s Work shall be performed in compliance with all applicable laws, codes, rules and regulations of all governmental and quasi-governmental authorities with jurisdiction. All contractors performing any portion of Tenant’s Work shall maintain insurance, which meets requirements of Lease.

3.4 Cost of Tenant’s Work. Tenant shall pay all cost and expenses (including permit fees and other governmental fees and exactions) due for, or purporting to be due for, all work, labor, services, materials, supplies or equipment furnished, or claimed to be furnished, to or for Tenant in connection With performance of Tenant’s Work, and Tenant shall keep the Premises free of all mechanics’, materialmen’s and other liens arising therefrom. Tenant shall pay and fully discharge any contested claim or lien within five (5) days after entry of final judgment adverse to Tenant in any action to enforce or foreclose such hen. Tenant shall indemnify, defend, protect and hold Landlord harmless of and from any and all loss, cost, liability, damage, injury or expense (including attorneys’ fees) arising out of or in connection with claims or liens for work, labor, services, material, supplies or equipment furnished or claimed to be burnished, to or for Tenant in, upon or about Premises or Shopping Center.

LANDLORD:
Soledad Shopping Center, LP

By:/s/ WILLIAM G. SHAW
William G. Shaw, Manager
Date: 2/26/04


TENANT:
Community Bank

By:/s/ HARRY D. WARDWELL
Date: 2/26/04

EXHIBIT C

TENANT ESTOPPEL CERTIFICATE

TO: _______________________________________

THIS IS TO CERTIFY: 1. That the undersigned is the Lessee (Tenant) under that certain Lease dated ____________, 20____, between______________, as Lessor (Landlord), and___________________________________________, as Lessee (Tenant), covering those certain premises commonly known and designated as:

___________________________________________________________

___________________________________________________________

2. That said Lease has not been modified, changed, altered, or amended in any respect (except as indicated following this sentence)and is the only Lease between the undersigned and the Lessor affecting said premises;

3. That the undersigned has accepted and now occupied the premises that the Lease term began__________ and that there has been no prepayment of rent other than that provided for in the Lease. The fixed minimum rent being paid as above is $_______ per month;

4. That the Lease is not in default and is in full force and effect and that as of the date hereof the undersigned is entitled to no credit, offset or deduction in rent;

5. That there are no actions, whether voluntary or otherwise pending against the undersigned under the bankruptcy laws of the United States or any state thereof;

6. That notices to the undersigned Lessee should be sent to:

__________________________________

__________________________________

__________________________________

Tenant:

__________________________________

__________________________________

__________________________________

EX-10

LEASE AGREEMENT

Lease Summary

591 and 599 Lighthouse Avenue
Monterey, California 93940

Lease Date: December 30, 2004

Lessor: JULIET B. HOOKER, KATHERINE B. CONGDON and WILLIAM C. BURKETT, Co-Trustees of the William Andrew Burkett Trust dated March 13, 1985, as to an undivided one-half interest, and JULIET. B. HOOKER, KATHERINE B. CONGDON and WILLIAM C. BURKETT, Co-Trustees of the Juliet J. Burkett Testamentary Trust dated March 13, 1981, as to an undivided one-half interest (collectively doing business as Burkett Land Company).

Address of Lessor: Burkett Land Company, 101 Laurel Street, San Francisco, California 94118

Lessee: CENTRAL COAST BANCORP, a California corporation

Address of Lessee: Community Bank of Central California, 301 Main Street Salinas, California 93901

Premises: 591 and 599 Lighthouse Avenue, Monterey, California

Floor Area of the Premises: Approximately 3,296 square feet

Property: Refer to Exhibit B-1 and Exhibit B-2

Initial Term: Sixty (60) months

Initial Term Commencement Date: January 1, 2005

Option Terms: Two (2) sixty (60) month options to extend (see Paragraph 3[a])

Fixed Minimum Rent During Initial Term: $5,438.40 per month for the period January 1, 2005 through December 31, 2005. Fixed Minimum Rent will be adjusted by the increase in CPI annually pursuant to Paragraph 4(b) of the Lease.

Fixed Minimum Rent During Option Terms: At the commencement of each Option Term, the Fixed Minimum Rent shall be increased by the increase in the CPI or increased to the Fair Market Rent, whichever is greater, pursuant to Paragraph 4(c) of the Lease, and thereafter will be adjusted by the increase in CPI annually.

Estimated Additional Rent: $1,121.00 per month, which amount is subject to adjustment pursuant to Paragraph 4(d).

Security Deposit: $5,438.40.

Permitted Use: Commercial or retail bank, financial services and operations incidental to such uses.

The foregoing Lease Summary is incorporated into and made a part of this Lease. Each reference in this Lease to the Lease Summary shall mean the respective information set out above and shall be construed to incorporate ail of the terms contained in the particular Lease paragraph pertaining to such information. In the event of any conflict between the provisions of the Lease Summary and the provisions of the Lease, the latter shall control.

Table of Contents

Lease Summary	i
Table of Contents
1. Definitions	1
2. Demise of Premises	2
3. Term	2
4. Rent	3
5. Security Deposit	8
6. Use of the Premises	8
7. Insurance	10
8. Taxes	13
9. Common Areas	13
10. Condition of the Premises and Property	16
11. Repairs and Maintenance	16
12. Alterations and Compliance with Governmental Requirements	17
13. Utilities	19
14. Advertising and Signs	20
15. Assignment and Subletting	20
16. Access to the Premises	22
17. Eminent Domain	23
18. Damage or Destruction	24
19. Hold Harmless	25
20. Default and Remedies	26
21. Bankruptcy	28
22. Waivers	29
23. No Accord and Satisfaction	29
24. Subordination and Attornment	29
25. Estoppel Certificates	30
26. Surrender and Holding Over	30
27. Sale of the Premises by Lessor	31
28. Notices	31
29. Brokers	31
30. Limitation of Lessor's Liability	32
31. Lessor Right to Perform	32
32. General Provisions	32

Attachments

Lease Summary

Exhibit A     Diagram of Premises.

Exhibit B-1   Diagram of the Property

Exhibit B-2   Legal Description of the Property

LEASE AGREEMENT

THIS LEASE AGREEMENT (this “Lease”), dated for reference purposes only as of December 30, 2004, is made and entered into by and between JULIET B. HOOKER, KATHERINE B. CONGDON and WILLIAM C. BURKETT, Co-Trustees of the William Andrew Burkett Trust dated March 13, 1985, as to an undivided one-half interest, and JULIET B. HOOKER, KATHERINE B. CONGDON and WILLIAM C. BURKETT, Co-Trustees of Juliet J. Burkett Testamentary Trust dated March 13, 1981, as to an undivided one-half interest (collectively doing business as Burkett Land Company) (collectively, “Lessor”) and CENTRAL COAST BANCORP, a California corporation (“Lessee”).

In consideration of the mutual covenants and agreements contained in this Lease, and other valuable consideration, the receipt and adequacy of which is hereby acknowledged, Lessor and Lessee agree as follows:

1. DEFINITIONS. As used in this Lease:

(a)  Building The term “Building” refers to the “building improvements” located on the Property of which the Premises are a portion and commonly known as 585, 591 and 599 Lighthouse Avenue, Monterey, California. The Building is shown on Exhibit B-1. The Building contains approximately 4,856 gross square feet of floor area.

(b)  Common Area. The term “Common Area” refers to that portion of the Property designated from time to time by Lessor for the ingress and egress of pedestrians and motor vehicles to and from the public streets adjoining the Property and the parking of motor vehicles, including areas devoted to sidewalks, landscaping and service delivery facilities. Without limiting the generality of the foregoing, such term shall include traffic lanes, the vehicle parking spaces, and areas between such parking spaces (including landscaped areas), walkways, and except as specifically set forth in this Lease, any other areas of the Property provided for the common use of the tenants and occupants of the Property and their customers.

(c)  Floor Area of the Premises. The term “Floor Area of the Premises” refers to the number of gross square feet shown in the Lease Summary. Lessor and Lessee agree that for purposes of this Lease, the Floor Area of the Premises shall be the number of gross square feet shown in the Lease Summary notwithstanding that the Premises may contain a greater or lesser number of square feet of floor area.

(d) Initial Term Commencement Date. The term "Initial Term Commencement Date" refers to the date of commencement of the Term of this Lease as set forth in the Lease Summary.

(e) Initial Term Expiration Date. The term "Initial Term Expiration Date" refers to the date of expiration of the Term of this Lease as set forth in the Lease Summary.

(f) Lessee's Proportionate Share. The term "Lessee's Proportionate Share" refers to the Floor Area of the Premises divided by the gross floor area of the Building. Lessee's Proportionate Share is 67.87%.

(g) Premises. The term “Premises” refers to that commercial space located substantially as outlined in green on Exhibit A attached to this Lease, together with those appurtenances specifically granted to Lessee in this Lease; reserving and excepting to Lessor the exclusive use of the exterior walls (other than storefront), the roof, and the areas beneath and above the Premises, together with the right to install, maintain, use, and replace utility ducts, wires, conduits, and pipes leading through the Premises in locations which will not materially interfere with Lessee’s use of the Premises.

(h) Property. The term “Property” refers to the real property owned by Lessor located at (i) 585 Lighthouse Avenue, Monterey, California (referred to as Assessor’s Parcel 001-065-016-000), (ii) 591 and 599 Lighthouse Avenue, Monterey, California (referred to as Assessor’s Parcel 001-065-016-000), and (iii) 584 Hawthorne Street, Monterey, California (referred to as Assessor’s Parcel 00.1 -065-017-000); The Property is; outlined in orange on Exhibit B-1 and described in Exhibit B-2.

2.  DEMISE OF PREMISES. Lessor hereby leases the Premises to Lessee, and Lessee hires and leases the Premises from Lessor, for the term, at the rental, and upon the covenants and conditions contained in this Lease. This Lease and the rights of Lessee under this Lease are subject and subordinate to ail easements, rights-of-way, covenants, conditions, restrictions, deeds of trust, mortgages, and other matters shown in the public records affecting the Property.

3. TERM. ----

(a) Initial Term. The initial term of this Lease shall be for the period commencing on the Initial Term Commencement Date and expiring, unless sooner terminated as provided in this Lease or extended pursuant to Paragraph 3(b) below, at midnight on the Initial Term Expiration Date.

(b) Option Terms. Lessor grants to Lessee the option to extend the Initial Term of this Lease for two (2) successive periods of sixty (60) months each (each an “Option Term” and together the “Option Terms”). Lessee shall exercise the first Option Term, if at all, by giving Lessor written notice exercising the first Option Term not earlier than January 1, 2008 or later than January 1, 2009. If Lessee has validly exercised the first Option Term, then Lessee shall exercise the second Option Term, if at all, by giving Lessor written notice exercising the second Option Term not earlier than January 1, 2013 or later than January 1, 2014. In no event shall any purported exercise of either of the Option Terms by Lessee be effective if any default by Lessee (after the giving of any required notice and the lapse of any period of cure provided in Paragraph 20(a) below) shall exist under this Lease at the time of giving of such notice or on the date of commencement of the applicable Option Term, and in any such case Lessee’s exercise of the applicable Option Term shall be null and void and the Term of this Lease shall end and expire at the end of the Initial Term without regard to the Option Terms, or if the first Option Term has been validly exercised by Lessee, the Term of this Lease shall end and expire at the end of the first Option Term without regard to the second Option Term. Each of the Option Terms shall be upon all of the provisions and conditions of this Lease, except that the Fixed Minimum Rent for each of the Option Terms shall be as set forth in Paragraph 4(c). below. As used in this Lease, the term “Term” shall mean the Initial Term and, if validly exercised by Lessee pursuant to the provisions of this Paragraph 3(b), each of the Option Terms.

4. RENT.

(a)  Fixed Minimum Rent During Initial Term. Commencing on the Commencement Date and, subject to adjustment as provided in Paragraph 4(b), continuing throughout the Initial Term, Lessee shall pay to Lessor Fixed Minimum Rent in the amount set forth in the Lease Summary. If the Commencement Date should occur on a date other than the first day of a month, or if the Expiration Date should occur on a day other than the last day of a month, then Fixed Minimum Rent for such fractional month shali be prorated on a daily basis based upon a thirty (30) day month. Lessee shall pay the first month’s Fixed Minimum Rent (as set forth in the Lease Summary) to Lessor upon execution of this Lease by Lessee.

(b)  Annual Adjustment of Fixed Minimum Rent. The Fixed Minimum Rent shall be adjusted annually on each anniversary of the Commencement Date during the Term (each, an “Adjustment Date”) in the manner provided in this Paragraph 4(b),. except that the adjustment of Fixed Minimum Rent occurring on any Adjustment Date that is also the date of commencement of an Option Term shall be determined in the manner provided in Paragraph 4(c) below.

(i) Calculation of Adjustment. On the first Adjustment Date (i.e., January 1, 2006) and on each Adjustment Date thereafter the Fixed Minimum Rent shall be increased to an amount determined by multiplying the Fixed Minimum Rent payable under this Lease for the month immediately preceding the applicable Adjustment Date by a fraction the denominator of which is the Index (as defined below) for the month which is thirteen (13) months prior to the month during which the applicable Adjustment Date occurs and the numerator of which is the Index for the month immediately preceding the month during which the applicable Adjustment Date occurs. The Fixed Minimum Rent so determined shall be the Fixed Minimum Rent payable under this Lease for the twelve (12) month period commencing on the applicable Adjustment Date. By way of illustration only, on the first Adjustment Date (i.e., January 1, 2006) the Fixed Minimum Rent payable for December 2005 will be multiplied by a fraction the denominator of which is the Index for December 2004 and the numerator of which is the Index for December 2005; if the Fixed Minimum Rent for December 2005 is $5,438.40, the Index for December 2004 is 206 and the Index for December 2005 is 214, the adjusted Fixed Minimum Rent starting January 1, 2006 would be $5,649.60 (i.e., $5,438.40 x 214/206 = $5,649.60). Notwithstanding the foregoing to the contrary, in no event shall the Fixed Minimum Rent as so adjusted be less than the Fixed Minimum Rent payable for the month immediately preceding the applicable Adjustment Date.

(ii) Index. The Index for computing the adjustment in the Fixed Minimum Rent shall be the Consumer Price Index (All Items) for all Urban Consumers for the San Francisco/Oakland/San Jose area published by the United States Department of Labor, Bureau of Labor Statistics, 1982-84 = 100 (the “Index”). If the Index is changed so that a base period other than 1982-84 shall equal 100, then the Index shall be converted in accordance with the conversion factor published by the United States Bureau of Labor Statistics. If the Index is discontinued or revised, the index designated as the successor or substitute to the Index by the government of the United States shall be substituted. If no successor or substitute index is so designated, Lessor shall designate an index prepared by an appropriate government entity, corporation or other entity which reasonably approximates the Index to be used in the replacement of the Index.

(iii) Notice of Adjustment. Lessor shall compute each adjustment in the Fixed Minimum Rent as soon as practicable following each Adjustment Date and shall deliver to Lessee a written statement showing the adjusted Fixed Minimum Rent and the method used to compute the adjusted Fixed Minimum Rent. Lessee shall continue to pay the same amount of Fixed Minimum Rent as is payable immediately prior to the Adjustment Date until receipt of Lessor’s statement. Within ten (10) days following receipt of such statement, Lessee shall pay to Lessor any difference between the Fixed Minimum Rent paid by Lessee and the adjusted Fixed Minimum Rent for the period from the applicable Adjustment Date to the date of Lessor’s statement, and thereafter shall pay the adjusted Fixed Minimum Rent shown in Lessor’s statement. Any delay in the delivery of any statement showing the adjusted Fixed Minimum Rent shall not affect the obligation or liability of Lessee to pay the adjusted Fixed Minimum Rent as provided in this Paragraph 4(b).

(c) Fixed Minimum Rent During Option Terms. At the commencement of the each of the Option Terms, the Fixed Minimum Rent shall be increased to an amount equal to the greater of (i) the amount determined pursuant to Paragraph 4(b), or (c)*** the Fair Market Rent (as defined below) for the Premises, which greater amount shall be the Fixed Minimum Rent payable under this Lease for the first twelve (12) month period of the applicable Option Term. Thereafter, the Fixed Minimum Rent so determined shall be adjusted annually on each Adjustment Date during each of the Option Terms in the manner provided in Paragraph 4(b) above. As used in this Paragraph 4(c), the term “Fair Market Rent” shall mean the monthly amount, projected for the date of commencement of the applicable Option Term, that a willing tenant would pay, and a willing landlord would accept (what Lessor is accepting in then current transactions for the Building shall be considered), for space comparable to the Premises in a comparable quality commercial or office building located in the vicinity of the Building, taking into account the age, quality and layout of the existing improvements in the Premises, for a term of sixty (60) months and otherwise on the terms set forth in this Lease. In no event shall the Fair Market Rent be less than the monthly Fixed Minimum Rent for the Premises payable for the month immediately preceding the date of commencement of the Option Term.

Lessor and Lessee shall have sixty (60) days following the date of receipt by Lessor of Lessee’s notice of exercise of the applicable Option Term to agree upon the Fixed Minimum Rent payable for the first twelve (12) month period of the applicable Option Term. If Lessor and Lessee are unable to agree upon the Fixed Minimum Rent during such sixty (60) day period, then either Lessor or Lessee may elect to obtain a determination of the Fair Market Rent by appraisal in the manner provided below in this Paragraph 4(c) by written notice given to the other party within thirty (30) days following expiration of the aforesaid sixty (60) day period.

If either Lessor or Lessee elects to obtain a determination of the Fair Market Rent by the requisite notice, then, Lessor and Lessee each shall, within fifteen (15) days following receipt of such notice of election, appoint a real estate appraiser who shall be a member of the American Institute of Real Estate Appraisers (“AIREA”) and shall have at least five (5) years experience in appraising the rent for commercial and office properties in the Monterey, California area and who shall not be directly affiliated with Lessor or Lessee, and such appraisers shall each determine the Fair Market Rent based upon prevailing comparable rentals in the Monterey, California area.. Such appraisers shall, within forty-five (45) days after their appointment, complete their appraisals and submit their written appraisal reports to Lessor and Lessee. If the appraisers were unable to agree upon the amount of the Fair Market Rent and if the higher appraised Fair Market Rent is not more than one hundred five percent (105%) of the lower appraised Fair Market Rent, then the two (2) appraised Fair Market Rent amounts shall be added together and divided by two (2), and the result shall be used in determining the Fixed Minimum Rent for the first twelve (12) months of the applicable Option Term pursuant to this Paragraph 4(c).

If the higher appraised Fair Market Rent is more than one hundred five percent (105%) of the lower appraised Fair Market Rent, then the appraisers, within fifteen (15) days after submission of the last appraisal report, shall appoint a third appraiser who shall be a member of the AIREA meeting the qualifications set forth in this Paragraph 4(c). Such third appraiser shall, within forty-five (45) days after his or her appointment, determine by appraisal the Fair Market Rent and submit his or her written appraisal report to Lessor and Lessee. If a third appraiser is appointed to determine the Fair Market Rent, then the Fair Market Rent determined by the third appraiser shall be controlling, unless (i) the Fair Market Rent determined by the third appraiser is less than that the lower appraised Fair Market Rent set forth in the appraisal reports previously obtained, in which case the lower appraised Fair Market Rent set forth in the appraisal reports previously obtained shall be controlling, or (ii) the Fair Market Rent determined by the third appraiser is greater than the higher appraised Fair Market Rent set forth in the appraisal reports previously obtained, in which case the higher appraised Fair Market Rent set forth in the appraisal reports previously obtained shall be controlling.

If either Lessor or Lessee fails to appoint an appraiser, or if an appraiser appointed by either of them fails, after his or her appointment, to submit his or her appraisal report within the period required in this Paragraph 4(c), the appraisal report submitted by the appraiser properly appointed and timely submitting his or her appraisal report shall be controlling. If the two appraisers appointed by Lessor and Lessee are unable to agree upon the appointment of a third appraiser within the required period in accordance with this Paragraph 4(c), then within fifteen (15) days thereafter either Lessor or Lessee may make application to the office of the AIREA in or nearest to Monterey, California, which shall appoint a member of said institute meeting the qualifications set forth in this Paragraph 4(c) willing to serve as an appraiser. Each party shall pay the fees and costs of the appraiser appointed by such party and the parties shall each pay fifty percent (50%) of the fees and costs of the third appraiser.

Upon the determination of the Fixed Minimum Rent for the first twelve (12) month period of the applicable Option Term, Lessor shall prepare and Lessor and Lessee shall execute and deliver an amendment to this Lease extending the term of this Lease for the applicable Option Term and setting forth the Fixed Minimum Rent payable during the first twelve (12) months of the applicable Option Term.

(d) Additional Rent. Beginning on the Commencement Date and thereafter throughout the Term, Lessee shall pay to Lessor as additional rent (“Additional Rent”) equal monthly installments on account of (i) all of “Lessor’s Insurance Premiums” (as defined in Paragraph 7[b]) for insurance on the Premises and the 591-599 Lighthouse Avenue property, (ii) Lessee’s Proportionate Share of the “Lessor’s Insurance Premises” for the 584 Hawthorne Street property, (iii) all of the “Real Property Taxes” (as defined in Paragraph 8[a]) assessed against the Premises and the 591-599 Lighthouse Avenue property, and (iv) Lessee’s Proportionate Share of the “Real Property Taxes” assessed against the 584 Hawthorne Street property, together with an administrative fee equal to ten percent (10%) of the total of such items. The amount of the Additional Rent shall be reasonably estimated by Lessor annually in a written statement given to Lessee by Lessor, and may be revised by Lessor from time to time by written notice given to Lessee. Additional Rent shall be payable monthly in advance at the time and at the place where Fixed Minimum Rent is payable. Lessee shall pay the first month’s estimated Additional Rent (in the amount set forth in the Lease Summary) to Lessor upon execution of this Lease by Lessee. Notwithstanding the foregoing to the contrary, any amount paid by Lessor (i) to cover the deductibles on the insurance to be maintained by Lessor pursuant to Paragraph 7(b), and (ii) because the insurance to be maintained by Lessor pursuant to Paragraph 7(b) does not cover one hundred percent (100%) of the loss, shall, for the purposes of this Paragraph 4(d), be amortized, together with interest at the Interest Rate (as defined in Paragraph 4[g] below), over the useful life of the items paid for from such amounts, and only that portion of such amortization that is allocable to each year of the Term of this Lease shall be included in Additional Rent for that year.

Within ninety (90) days after the end of each calendar year during the Term, or as soon thereafter as practicable, Lessor shall provide Lessee with a written reconciliation of the amount of Additional Rent paid by Lessee and the Additional Rent actually incurred by Lessor during the preceding calendar year. Within ten (10) days after receipt of such statement, Lessee shall pay to Lessor any deficiency in the amount of Additional Rent paid by Lessee as shown in such statement. If such statement shows that Lessee paid more in Additional Rent than the Additional Rent actually incurred by Lessor, then Lessor shall apply the surplus payment to the next installment of Additional Rent payable by Lessee.

(e) Additional Charges. Lessee shall pay all charges, fees and expenses and other amounts as provided in or due under the provisions of this Lease (“Additional Charges”). Lessor shall have the same remedies for Lessee’s failure to pay any item of Additional Rent or Additional Charges when due as for failure to pay any installment of Fixed Minimum Rent when due. As used in this Lease, the term “Rent” shall mean all Fixed Minimum Rent, Additional Rent, Additional Charges and all other amounts, payable to Lessor by Lessee under the provisions of this Lease.

(f) Late Payment Charge. Lessee acknowledges that late payment by Lessee of any Rent under this Lease will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which is extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by the terms of any ground lease, mortgage or deed of trust covering the Property. Accordingly, if any Rent is not received by Lessor within five days after the due date, Lessee shall pay to Lessor as a late charge an additional sum equal to five percent (5%) of the amount overdue. Lessor and Lessee agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of late payment by Lessee. Acceptance of a late charge by Lessor shall in no event constitute a waiver of the failure of Lessee to pay the overdue amount.

(g) Interest on Past-Due Rent. Any Rent which is not received by Lessor when due shall bear interest at the rate of twelve percent (12%) per annum, but not exceeding the maximum rate permitted by law (the “Interest Rate”), from the date due until payment in full is received by Lessor.

(h) Manner of Payment. All payments of Rent shall be made without prior notice or demand and without abatement, offset, deduction or counterclaim, to Burkett Land Company at the address of Lessor set forth in the Lease Summary, or at such other place as Lessor shall designate in writing from time to time, in lawful money of the United States of America. All payments of Fixed Minimum Rent and Additional Rent are payable in advance and are due on the first day of each month. If Lessee has not paid two (2) or more installments of Fixed Minimum Rent or Additional Rent when due during any twelve (12) month period of the Term, Lessor may, in its sole and absolute discretion, require Lessee to prepay Rent quarterly in advance by cashier’s or certified check.

(i) Net Lease. This Lease shall be an absolute net Lease and Fixed Minimum Rent shall be paid to Lessor absolutely net of all costs and expenses of the Premises, Building and Property. The provisions for payment of Additional Rent are intended to pass onto Lessee and reimburse Lessor for all costs and expenses incurred in connection with the ownership, maintenance and operation of the Premises, Building and Property by Lessor and such additional facility as may be determined by Lessor to be necessary to the Premises, Building and/or the Property.

5. SECURITY DEPOSIT. Lessee shall pay to Lessor the amount set out in the Lease Summary as the amount of the Security Deposit as security for the timely, full and faithful performance by Lessee of each and every term, provision, covenant and condition of this Lease (the “Security Deposit”). Lessee shall pay the Security Deposit to Lessor in cash upon execution of this Lease by Lessee. In the event Lessee fails to timely and fully perform any of the terms, provisions, covenants or conditions of this Lease, including but not limited to the payment of Rent, Lessor may use, apply or retain the whole or any part of the Security Deposit for the payment of any Rent not so paid; for the repair of damage to the Premises, the Building or the Common Area for which Lessee is responsible; for the performance of the obligations of Lessee; for the cleaning and repair of the Premises upon the expiration or termination of the Term; or for any other purpose required or necessitated in Lessor’s discretion by reason of Lessee’s failure to timely and fully perform the obligations of Lessee under this Lease, but such Security Deposit shall in no event be construed as liquidated damages. Should Lessee faithfully and fully perform and comply with all the terms, provisions, covenants and conditions of this Lease, the Security Deposit or any balance thereof, shall be returned to Lessee or, at the option of Lessor, to the last assignee of Lessee’s interest in this Lease within thirty (30) days following the expiration of the Term. Lessor shall not be required to segregate the Security Deposit from Lessor’s general accounts and Lessee shall not be entitled to any interest on the Security Deposit.

In the event that the Security Deposit, or any portion thereof, is appropriated and applied by Lessor for the payment of overdue Rent or otherwise used or applied by Lessor as provided in this Paragraph 5, Lessee shall, within five (5) days after written demand by Lessor, remit to Lessor a sufficient cash amount to restore the Security Deposit to its full original amount.

In the event that Lessor conveys or transfers the Property, and as a part of such conveyance or transfer, Lessor assigns its interest in this Lease, the Security Deposit (or so much of the Security Deposit that has not been applied as provided in this Paragraph 5) shall be transferred to Lessor’s grantee, transferee, assignee, or successor, and upon such transfer Lessor shall be released and discharged from any further liability to Lessee with respect to the Security Deposit.

6. USE OF THE PREMISES.

(a) Permitted Use. Lessee shall use the Premises solely for the purpose set out in the Lease Summary. Lessee shall not use or permit the Premises to be used for any other purpose or purposes whatsoever without the prior written consent of Lessor, which consent Lessor may grant or withhold in Lessor’s reasonable discretion.

Lessee shall obtain and keep in force and effect during the Term all permits, licenses and approvals required for the lawful operation of Lessee’s business in the Premises. Upon written request by Lessor, Lessee shall provide Lessor with copies of all such required permits, licenses and approvals.

(b) Impermissible Uses.

(i) No Nuisance. Lessee shall not allow, suffer or permit the Premises or any use thereof to constitute a nuisance or to interfere with the safety, comfort or enjoyment of the Property by Lessor, other lessees of the Property or other persons lawfully entitled to the use or enjoyment of the Property or any portion of the Property, or the safety, comfort or enjoyment of lessees, occupants, or owners of property adjoining the Property. Lessee shall confine to the Premises music and other sounds and/or visual effects (e.g., unusually bright or flashing lights, spot lights or similar devices) generated in, on or about the Premises so as not to permit such sounds and/or visual effects to be seen or heard outside of the Premises. Lessee shall not commit or allow the commission of any waste upon the Premises or the Property.

(ii) Insurance Requirements. Lessee shall not do or permit anything to be done in or about the Premises or bring or keep anything therein, which will in any way increase the rate of fire or other insurance upon the Premises, the Building or the Property. Lessee shall, at its sole cost and expense, comply with any and all requirements pertaining to the Premises or the operations of Lessee on the Property of any insurance company or rating bureau necessary or appropriate for the maintenance of Lessor’s insurance covering the Building and the Property and its appurtenances.

(iii) No Auction, Fire or Bankruptcy Sales. No auction, fire, bankruptcy or "going out of business" sale may be conducted on or about the Premises. Lessee shall not use or permit the use of any portion of the Premises as sleeping apartments, lodging rooms or for any unlawful or immoral use or purpose.

(iv) Disposal of Rubbish. Lessee shall keep the Premises, walkways adjacent to the Premises, any loading platform and service areas allocated for the use of Lessee, and the Property clean and free from rubbish and dirt at all times, and shall store all trash and garbage within the Premises and arrange for the regular pick-up and proper disposal of such trash and garbage at Lessee’s expense. Lessee shall not burn any trash or garbage of any kind in or about the Property.

(c) Hazardous Materials. Lessee shall not store or use in, on or about the Premises any hazardous, toxic, flammable, carcinogenic, reactive or dangerous material, substance or waste (collectively, “Hazardous Materials”), except in compliance with all manufacturer and supplier guidelines and all governmental requirements including, but not limited to, the obtaining of any required permits or approvals and/or the posting of any required notices or warnings. Lessee shall maintain all required governmental permits and approvals for the transportation, generation, storage or use of Hazardous Materials in or about the Premises. Lessee shall, upon demand, provide Lessor with current a list of all such substances stored or kept upon the Premises including the name and quantity of each such substance. Lessee shall not cause or permit the disposal or release of any Hazardous Materials in, on or about the Premises, the Building or the Property. Lessee shall not place any Hazardous Materials in the plumbing or drains of the Premises, Building or the Property.

(d). • Plumbing. The plumbing facilities, fixtures and apparatus located on the Premises or the Property shall not be used for any purpose other than that for which they are constructed, and no foreign, bulky or non-rapidly degradable substance of any kind (including, but not limited to, grease, hair, caustic or reactive materials and unaerated foods) shall be put into the drains, and the expense of any breakage, stoppage or damage resulting from a violation of this provision, whether on or off the Premises, by Lessee or Lessee’s employees, agents, invitees, licensees or contractors shall be borne by Lessee. Without limiting the foregoing, Lessee shall, at its own expense, if reasonably required by Lessor, install devices in the plumbing to prevent damage thereto from foreign substances.

(e)  Defacement of Surfaces. Lessee, its employees or agents, shall not mark, hail, paint, drill into, or in any way deface any part of the Premises or the Building, except to affix standard pictures or other wall hangings on the interior walls of the Premises so long as they are not visible from the exterior of the Building. Lessee shall not lay linoleum, tile, carpet or other similar floor covering so that the same shall be affixed to the floor of the Premises in any manner, except as approved by Lessor in writing. The. expense of repairing any damage resulting from a violation of this provision or removal of any floor covering shall be borne by Lessee.

(f)  No Representation by Lessor. Lessee acknowledges and agrees that Lessor has made no representation or warranty (and no such representation or warranty shall be implied from anything contained in this Lease) concerning the nature, quality or suitability of the Premises, the Building or the Property for the conduct of Lessee’s business.

7. INSURANCE.

(a) Lessee’s Insurance. Lessee shall, at all times during the Term, maintain in full force and effect at Lessee’s sole cost and expense: (i) Workers’ Compensation insurance with limits of liability and coverage as required by California law; (ii) Employer’s Liability insurance with a limit of liability of not less than Two Million Dollars ($2,000,000.00) per occurrence; (iii) Commercial Public Liability insurance, including property damage coverage, covering the Premises and the operations of Lessee, with a combined single limit of liability of not less than Two Million Dollars ($2,000,000.00) per occurrence; (iv) Automobile Liability Insurance, including non-owned automobile liability coverage, with a limit of liability of not less than Two Million Dollars ($2,000,000.00); (v) plate glass insurance coverage on all exterior plate glass in the Premises; and (vi) so called “All-Risk” hazard insurance (including vandalism, malicious mischief and sprinkler leakage coverage) covering all of Lessee’s leasehold improvements, furniture, fixtures, equipment and personal property located in, on or about the Premises, the Building or the Property in an amount equal to the full amount of the replacement cost of such leasehold improvements, furniture, fixtures, equipment and personal property.

All such insurance shall be written by one or more insurance companies rated A+/X or better in “Best’s Insurance Guide,” or such other rating as may be required by any lender holding a lien on the Property, and licensed to do business and to issue insurance in California. Lessee’s Commercial Public Liability insurance shall name Lessor, and such other persons, firms, or corporations as may be designated from time to time by Lessor, as additional insureds, shall be written as primary insurance and not contributing with any insurance that Lessor may carry and shall include a contractual liability endorsement covering the indemnity obligations of Lessee set forth in this Lease. The insurance required by this Paragraph 7(a) may be covered by general or blanket policies covering all of Lessee’s locations, provided that the coverage afforded the Premises or Lessor is not diminished thereby. All insurance to be maintained by Lessee shall be endorsed to require the insurance company issuing each policy of insurance to give Lessor at least thirty(30) days’ prior written notice of any change, cancellation or lapse of coverage or the effective date of any reduction in the amount of coverage under such policy. Any deductibles on the insurance to be maintained by Lessee pursuant to this Paragraph 7(a) shall be subject to the approval of Lessor.

The limits of liability on any of the insurance policies required to be maintained by Lessee are not intended to, and shall not, limit Lessee’s liability under this Lease. If, in the opinion of Lessor’s insurance advisor, the amount of any such coverage is deemed inadequate at any time during the Term, Lessee agrees to increase said coverage to such amounts as Lessor’s insurance advisor shall deem appropriate.

Upon the Commencement Date and thereafter not less than thirty (30) days prior to the expiration of any policy of such insurance, Lessee shall provide Lessor, and all persons designated by Lessor, with certificates of insurance or copies of insurance policies (as requested by Lessor) evidencing the effectiveness of the insurance required to be maintained by Lessee, together with evidence that the premiums for such insurance have been paid in advance for a period of not less than twelve (12) months. Lessee shall not borrow against any of such prepaid insurance premiums.

If Lessee fails to maintain any such insurance or to provide evidence of the effectiveness of such insurance as required in this Paragraph 7(a), Lessor shall have the right, but not the obligation, to obtain any such insurance and to pay the premiums therefor, and in such event the entire amount of such premiums paid by Lessor, together with an administrative fee of ten percent(10%) and interest on such premiums and administrative fee at the Interest Rate, shall be immediately due and payable by Lessee to Lessor as Additional Charges.

Any proceeds from Lessee’s “All-Risk” hazard insurance shall be used by Lessee solely for the repair or replacement of the leasehold improvements, furniture, fixtures, equipment, and personal property so insured so long as this Lease is in effect. It is understood that Lessor shall have no interest in the proceeds of the “All-Risk” hazard insurance upon Lessee’s leasehold improvements, furniture, fixtures, equipment, and personal property, provided that such proceeds are applied in accordance with the requirements of this Paragraph 7(a).

(b) Lessor’s Insurance. Lessor shall, at all times during the Term, maintain in effect a policy or policies of insurance covering the Building providing protection against any peril included within the classification “fire and extended coverage”, together with insurance against sprinkler damage, vandalism, and malicious mischief, in an amount equal to not less than ninety percent (90%) of the full replacement cost of the Building and public liability insurance coverage for the Property, both with such deductibles as Lessor shall determine. Lessor may, but shall not be required to, obtain and maintain such other insurance (including, but not limited to, earthquake insurance and rental loss insurance) covering the Building and the Property as Lessor may deem necessary or appropriate, or as may be required by any lender holding a lien on the Property. The premiums for all such insurance maintained by Lessor, together with the amount of any deductibles on such insurance paid by Lessor and any amount paid by .Lessor because such insurance does not cover one hundred percent (100%) of the loss are defined and referred to in this Lease as “Lessor’s Insurance Premiums” and Lessee shall pay the same as Additional Rent as provided in Paragraph 4(d).

Lessor may, but shall not be required to, obtain and maintain such other insurance (including, but not limited to, earthquake insurance and flood insurance) covering the Premises, the Building and/or the Property as Lessor may desire, and shall maintain such other insurance as any mortgagee of Lessor may require. The premiums for such other insurance shall be added to and shall become a part of “Lessor’s Insurance Premiums” and Lessee shall pay the same as Additional Rent as provided in Paragraph 4(d).

If Lessee’s activities in or about the Premises result in any increase in the Lessor’s Insurance Premiums, such increased premium shall be immediately payable by Lessee to Lessor, together with interest at the Interest Rate, upon demand as Additional Charges.

(c) Waiver of Subrogation. With respect to all insurance required to be maintained by Lessor and Lessee pursuant to this Paragraph 7, and with respect to all insurance which either party may obtain with respect to the Premises, the Building or the Property independent of its obligations under this Paragraph 7, Lessor and Lessee each hereby waives any right of recovery against the other for any loss to person or property to the extent such loss is covered by insurance proceeds received. Lessor and Lessee shall each obtain for the benefit of the other party a waiver of any right of subrogation that the insurer of such party may acquire against the other party by virtue of the payment of any loss covered by such insurance.

8. TAXES.

(a) Real Property Taxes. As used in this Lease, the term “Real Property Taxes” is defined as: (i) all real estate taxes and assessments, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levies, taxes, assessments or charges (other than inheritance, personal income or estate taxes) imposed, levied or assessed upon the Premises, the Building, the Property and/or any improvements thereon, and/or upon any legal or equitable interest of Lessor or Lessee in or to the Premises, the Building and/or the Property, and/or the right of Lessor to rent or other income from the Premises, the Building and/or the Property, and/or the business of Lessor of owning and/or leasing the Premises, Building and/or the Property, by any authority having the direct or indirect power to tax, including, but not limited to, any city, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement or betterment district; (ii) any tax, fee, levy, assessment or charge, or any increase therein, imposed by reason of events occurring, or changes in applicable law taking effect, prior to or during the Term, including, but not limited to, a change in the ownership of the Premises, the Building and/or the Property or the improvements thereon, the execution of this Lease, or modification or amendment of, or the transfer of any interest in, this Lease, whether or not contemplated by the parties; (iii) any tax, fee, levy, assessment or charge which may be levied in substitution or in lieu (whether in whole or in part) of any other item which is included in the definition of Real Property Taxes; and (iv) any tax, fee, levy, assessment or charge relating to environmental protection, hazardous materials, substances or wastes, groundwater or air quality protection, traffic congestion or control, the use or parking of motor vehicles or any other matter relating to the environment.

With respect to any future assessments which may be levied against or upon the Premises, the Building or the Property and which may be paid pursuant to applicable law in a lump sum or in installments, only the amount of such installments (with appropriate proration for any partial year) and statutory interest shall be included with the computation of Real Property Taxes for the purposes of Paragraph 4(d).

Lessee shall pay as Additional Rent Lessee’s Proportionate Share of all Real Property Taxes that are imposed or become payable during the Term as provided in Paragraph 4(d).

(b) Personal Property Taxes. In addition to all other amounts which Lessee is required to pay under this Lease, Lessee shall pay before delinquency any and all taxes, assessments, license fees and public charges levied, assessed, imposed or payable during the Term upon (i) the leasehold improvements located in, on or about the Premises; (ii) any furniture, fixtures, equipment, inventory and other items of personal property, from time to time located in, on or about the Premises; and (iii) the operations of Lessee in the Premises or in, on or about the Building and/or the Property. Lessee and Lessor shall cooperate in attempting to have the taxing authorities assess and bill personal property taxes separately from the Real Property Taxes. Within ten (10) days after payment of such personal property taxes, Lessee shall delivery to Lessor copies of the tax bills and evidence of Lessee’s payment of the same. If any such personal property taxes are billed with the Real Property Taxes, Lessee shall pay the same to Lessor within twenty (20) days after receipt of written notice from Lessor, which notice shall be accompanied by the tax bill and other documentation showing that such personal property taxes have been included in the billing of Real Property Taxes.

(c) Real Property Taxes Prorated. The Real Property Taxes to be paid by Lessee pursuant to Paragraph 4(e) shall be prorated at the beginning and end of the Term so that Lessee shall pay only that portion of such taxes as the number of days within the tax year at the beginning, and the tax year at the end, of the Term which are within the Term each bears to the total number of days within such tax year.

9. COMMON AREA.

(a) Lessee’s Rights. Lessor hereby grants to Lessee, for the benefit of Lessee and the employees, customers and invitees of Lessee, during the Term, (i) the nonexclusive right to use the Common Area, as it exists from time to time, in common with Lessor and the other tenants of the Building and the Property and their respective employees, customers and invitees for the ingress and egress of automobiles and pedestrians, (ii) exclusive right to use the twelve (12) parking spaced located in the Common Area and denominated on Exhibit B-1 as numbers 1, 2, 3, 4, 5, 6, 13, 14, 15, 24, 25 and 26, and (iii) the non-exclusive right to use sixty percent (60%) of the total number of legal and complying parking spaces located in the Common Area remaining after deduction of the twelve (12) parking spaces allocated for Lessee’s exclusive use and the four (4) parking spaced allocated for the use of the tenant of 585 Lighthouse Avenue, such rights being subject to any rights, powers and privileges reserved to Lessor under the terms of this Lease or under the terms of any rules and regulations or restrictions governing the use of the Common Area as promulgated and amended by Lessor from time to time. Lessee and its employees, customers and invitees shall have the right to use the Common Area only during the normal business hours on the days that Lessee conducts its business in the Premises.

The Common Area shall be used only for the ingress and egress of pedestrians and automobiles to and from the Property and the public streets adjoining the Property and for the parking of motor vehicles. Under no circumstances shall the right herein granted to use the Common Area be deemed to include the right to store any property, temporarily or permanently, in the Common Area. In the event that any unauthorized storage shall occur, then Lessor shall have the right, without notice, in addition to such other rights and remedies that Lessor may have, to remove the property and charge the cost of such removal to Lessee, which cost shall be immediately payable by Lessee to Lessor, together with interest at the Interest Rate, upon demand as an Additional Charge. If Lessor or any other permitted user of the Common Area believes that Lessee is not conforming to the limitations on Lessee’s use of the parking spaces located in the Common Area set forth in this Paragraph 9(a), then Lessor may retain parking control personnel and restrict Lessee’s use of the parking spaces located in the Common Area as provided in this Paragraph 9(a), and the cost of such parking control personnel shall be allocated among the permitted users of the Common Area as Lessor deems appropriate, and Lessee shall pay Lessee’s share of such cost as Additional Charges upon demand.

(b) Maintenance. Lessee shall maintain or cause to be maintained the Common Area in a neat, clean and safe condition during the Term of this Lease as if the Common Area comprised a part of the Premises and all of the provisions of this Lease shall apply to the Common Area including, but not limited to, Paragraphs 7(a) (insurance), 12(b) (compliance with governmental requirements), 13(b) (utilities), 19(a) (hold harmless), and 19(b) assumption of risk). The such maintenance and operation shall include, but shall not be limited to, the cost of sweeping the Common Area; repairing and replacing the paving covering the paved areas of the Common Area; striping the automobile parking stalls; maintenance and replacement of landscaping; utilities supplied to the Common Area; and compliance with all governmental requirements relating to the Common Area. Lessee shall have the right to collect from the lessee’ of the 585 Lighthouse Avenue premises such lessee’s proportionate share of the cost of maintaining the Common Area, which lessee’s proportionate share is 32.13% as provided in the lease of such lessee. .Lesser shall not be liable to Lessee for the refusal or failure of the Lessee of the 585 Lighthouse Avenue premises to pay such lessee’s proportionate share Lessee shall maintain on the Premise complete books and records of the costs incurred by Lessee in the maintenance and operation of the Common Area. Such books and records shall be available to Lessor for review and copying at the Premises upon not less than twenty-four (24) hours’ prior written notice.

Notwithstanding any provision of this Paragraph 9 to the contrary, Lessor shall have the right to assume the maintenance and operation of the Common Area at any time upon not less than thirty (30) days’ prior written notice to Lessee. (c) Deliveries. Lessee agrees that all removal of garbage and refuse shall be made only by way of Lessee’s rear service door. Lessee may receive and deliver goods and merchandise through the front door of the Premises.

(d) Lessor’s Reserved Rights. Lessor expressly reserves the right to (i) make such changes to the Common Area as Lessor deems appropriate or desirable including, but not limited to, changing the direction of driveways and accessways; changing the configuration, size, orientation or location of vehicle parking stalls; limiting ingress or egress through curb cuts; or requiring one-way traffic flow, (ii) to construct a building on that portion of the Common Area designated on Exhibit B-1 as “Future Building” and to use reasonable, limited portions of the Common Area for the staging of construction trailer, materials and equipment in connection with such construction, provided, however, that such construction related use of the Common Area by Lessor shall be conducted in a manner which will not substantially interfere with Lessee’s right to use the Common Area as set forth in Paragraph 9(a); and (iii) to close the Common Area from time to time to prevent the creation of any public right or easement to any portion of the Common Area. Lessee’s right to use the Common Area as set out in Paragraph 9(a) is expressly subject and subordinate to the rights of Lessor set out in this Paragraph 9(d).

10. CONDITION OF THE PREMISES AND PROPERTY.

Prior to the Commencement Date, Lessee has occupied the Premises as the “Sublessee” under a Sublease between Lessee and Wells Fargo Bank, N.A. Lessee acknowledges that Lessor has not agreed to make any improvements to the Premises, the Building, the Property or the improvements located thereon. By execution of this Lease, Lessee accepts the Premises, the Building, the Property and the improvements located thereon in their existing “AS-IS” condition and acknowledges and agrees that the Premises, the Building, the Property and the improvements located thereon are in the condition required by the provisions of this Lease.

Lessor expressly disclaims all warranties, express or implied, as to the fitness, condition or suitability of the Premises, the Building, the Property or any improvements located thereon. Lessee hereby waives and releases Lessor from any deficiencies in the Premises, the Building, the Property and the improvements located thereon.

11. REPAIRS. MAINTENANCE AND REPLACEMENTS.

(a) By Lessee. Lessee shall, at all times, at Lessee’s expense, keep and maintain the Building, and every part thereof, in good order, condition and repair, and shall maintain, repair and replace as necessary all portions of the Building including, without limitation, (i) the foundations, structural elements of the Building; (ii) the roof membrane and roof drains, gutters and downspouts of the Building; (iii) the main water, sewer and electrical utility lines and facilities serving the Building; and (iv) the interior and exterior walls of the Building. The obligations of Lessee under this Paragraph 11(a) shall include, but shall not be limited to: (A) exterior entrances; (B) all glass and plate glass and window frames and moldings; (C) all permitted signs; (D) partitions, doors, door jams, door closures and door hardware; (E) all fixtures, equipment and appurtenances (including all electrical, lighting, heating, and plumbing fixtures, equipment lines and systems); (F) all mechanical systems (including any heating, ventilating and/or air conditioning system serving the Building, including leaks around ducts, pipes, vents or other parts of the heating, ventilating, air conditioning or plumbing systems which protrude through the roof); (G) all ceilings; (H) all interior walls and interior surfaces of exterior walls; (I) the exterior surface of the exterior walls of the Building (Lessee shall keep the exterior walls of the Building in a neat and clean condition, free of graffiti; Lessee shall paint the exterior walls in a color or colors selected by Lessor not less frequently than once every five [5] years); and (J) compliance with all current and future governmental requirements relating to the Building or the use and occupancy of the Building. Lessee shall maintain in force during the Term, at Lessee’s expense, a service and preventative maintenance contract with an authorized heating, ventilating and air conditioning service company providing for quarterly inspection and maintenance of all heating, ventilating and. air conditioning equipment serving the Building. Lessee shall provide Lessor with a copy of such contract.

Lessee shall perform such maintenance, repairs and replacements in a prompt and timely manner so as to preserve the Building and its contents and occupants from damage and injury. In the case of emergency threatening property or life Lessee shall make such maintenance, repairs or replacements as soon as practicable. If the nature of the required non-emergency maintenance, repairs or replacements reasonably requires more than ten (10) days to complete, then Lessee shall not be in default of its obligation under this Paragraph 11 (a) if Lessee commences the required maintenance, repairs or replacements within such ten (10) day period and thereafter pursues and completes such maintenance, repairs or replacements with diligence..

Lessee hereby waives all right to make repairs at the expense of Lessor as provided in California Civil Code Sections 1941 and 1942, or by any similar ordinance, statute or regulation now or hereafter in effect.

Lessee shall have the right to collect from the lessee of the 585 Lighthouse Avenue premises such lessee’s proportionate share of the cost of maintaining the Building, which lessee’s proportionate share is 32.13% as provided in the lease of such lessee. Lessor shall not be liable to Lessee for the refusal or failure of the Lessee of the 585 Lighthouse Avenue premises to pay such lessee’s proportionate share. Lessee shall maintain on the Premise complete books and records of the maintenance, repairs and replacements performed by Lessee puliuMf’to this” P¥ragrapKTi7a)/‘Such books and records shall be available to Lessor for review and copying at the Premises upon not less than twenty-four (24) hours’ prior written notice.

(b) No Lessor Obligation. Lessee agrees that Lessor has no obligation or responsibility under this Lease to perform any maintenance, repairs or replacements with respect to the Building and that Lessee shall have sole responsibility for the performance of all maintenance, repairs and replacements with respect to the Building.

Lessor shall not be liable for damages or loss, of any kind or nature by reason of Lessee’s failure to comply with and perform he duties and obligations imposed under Paragraph 11 (a). Lessee hereby indemnifies and agrees to protect, defend and hold Lessor harmless from and against any and all claims, damages, losses, liabilities, actions, causes of action, judgments, settlements, costs and expenses (including reasonable attorneys’ fees and court costs) that may be incurred by Lessor as the result of, or as the alleged result of, the failure of Lessee to comply with and perform the duties and obligations imposed under Paragraph 11(a).

12. ALTERATIONS AND COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS.

(a) Alterations by Lessee. Lessee shall not have the right to make any alterations, additions or improvements (collectively, “Alterations”) in or about the Premises without first obtaining Lessor’s written consent, which consent shall not be unreasonably withheld. As a condition to granting such consent, Lessor may require Lessee to provide Lessor, at Lessee’s sole cost and expense, with a lien and completion bond in an amount equal to one and one-half times the estimated cost of such Alterations to insure Lessor against any liability for mechanic’s and materialmen’s liens and to insure completion of the Alterations.

Any Alterations that Lessee shall desire to make shall be presented to Lessor in written form, with proposed detailed plans, specifications and working drawings and the names and resumes of the proposed contractor or contractors. If Lessor shall give its consent, such consent shall be deemed conditioned upon Lessee acquiring all required permits and approvals from all appropriate governmental authorities, the furnishing of copies of such permits and approvals to Lessor prior to the commencement of the work and the compliance by Lessee with all conditions of said permits and approvals in a timely manner. All alterations, improvements, or additions shall be made in conformance with all legal requirements including, but not limited to, all building and fire and life safety codes and the Americans With Disabilities Act, and shall be performed by licensed contractors approved by Lessor.

Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for the benefit of Lessee at or for use in the Premises, and shall keep the Premises and the Property free of any and all mechanic’s or materialmen’s liens related to any such claims. Lessee shall give Lessor not less than ten (10) days’ written notice prior to the commencement of any work in or about the Premises, and Lessor shall have the right to post and maintain notices of non-responsibility in or on the Premises or the Property as provided by law. If any mechanic’s or materialmen’s lien is filed against the Premises or the Property during the Term as the result of any claim for labor or materials furnished or alleged to have been furnished to or for Lessee or the Premises, then Lessee shall immediately remove the same by statutory bond or payment. If Lessee shall fail to remove any such mechanic’s or materialmen’s lien within ten (10) days after the filing of the same, Lessor may, at the cost and expense of Lessee, bond or pay such lien, and the costs incurred by Lessor in bonding or paying any such lien shall be immediately payable by Lessee to Lessor, together with an administrative fee of ten percent (10%) of such costs and interest at the Interest Rate, upon demand as Additional Charges.

If Lessee shall, in good faith, contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend itself and Lessor against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof against Lessor or the Premises or the Property. Lessee hereby indemnifies and agrees to protect, defend and hold Lessor harmless from and against any and all claims, demands and liens which may be assessed or filed against the Premises or the Property for labor or materials furnished or alleged to have been furnished to or for the benefit of Lessee at or for use in the Premises or on the Property.

If Lessee makes any Alterations without the prior written approval of Lessor, Lessor may, at any time during the Term, require that Lessee remove any or all of such Alterations at Lessee’s sole expense. All Alterations made by Lessee (excepting only the furniture, trade fixtures and equipment of Lessee which are not so attached to the Premises that the removal thereof will damage the Premises) which may be made on the Premises, shall be the property of Lessor and shall remain upon and be surrendered with the Premises at the expiration or sooner termination of the Term; provided, however, that Lessor shall have the right to require Lessee to remove, at Lessee’s sole cost and expense, any or all Alterations by written notice given to Lessee not later than thirty (30) days prior to the expiration of the Term or within thirty (30) days after the earlier termination of the Term.

(b) Compliance With Governmental Requirements by Lessee. Lessee shall, at the sole cost and expense of Lessee, promptly and properly observe and comply with all present and future orders, regulations, directives, rules, requirements, laws, statutes or ordinances (including, but not limited to, the Americans with Disabilities Act) and requirements of all governmental authorities (including, but not limited to, federal, regional, state, county and municipal governments and their departments, bureaus, boards and officials), and the Board of Fire Underwriters, and any other board or organization exercising similar functions, arising from or related to the use or occupancy of the Building, or which apply to the Building or to any improvements thereon. Subject to the approval of Lessor, Lessee shall have the right to contest or review, by administrative or legal action, at Lessee’s sole cost and expense, any such order, regulation, directive, rule, requirement, law, statute, or ordinance and to have the same canceled, removed, revoked or modified, provided that such contest shall not subject Lessor or the Property to any possible civil or criminal liability as a result of such contest, that the title of Lessor in and to the Premises, the Building and the Property is not subjected to lien or possible forfeiture as a result of any such contest, and that any insurance on the Premises, the Building or Property is not adversely effected by such contest. Lessor may require Lessee to post a bond or other security with Lessor to assure payment and performance on the part of Lessee in the event the contest is determined adversely to the position of Lessee. Lessee hereby indemnifies and agrees to protect, defend arid hold Lessor, the Premises, Building and Property harmless from and against any liability as a result of any such contest by Lessee. Such proceedings shall be conducted promptly, and shall include, if Lessee so decides, appropriate appeals. Whenever any such requirements become absolute after a contest, Lessee shall timely comply with the same or so much thereof as shall have become absolute.

13. UTILITIES.

(a)  Lessee to Contract and Pay for Utilities. Lessee shall contract directly with the utility suppliers and pay all bills for all water, gas, electricity, heat, power, telephone, cable communications, refuse pick-up and disposal, sewer service, and any other utilities, materials, and services, together with any taxes and surcharges thereon, furnished to or used by Lessee on or about the Premises.

(b) Interruption or Curtailment of Service. Lessor shall not be liable for the interruption or failure to provide, or any curtailment, of any utility service to the Premises or the Property.

(c) Compliance With Utility Reduction Requests. Lessee shall comply with all utility supplier and governmental requests and requirements for the reduction, curtailment or limitation of utilities or services provided to or consumed on the Premises, whether voluntary or mandated. Lessee hereby indemnifies and agrees to protect, defend and hold Lessor, the Premises, Building and Property harmless from and against any liability as a result of any failure by Lessee to comply with such requests.

14. ADVERTISING AND SIGNS.

(a) Signs and Other Advertising Media. Lessee shall not erect, install or affix to any part of the outside or inside of the Premises, or to any exterior or interior window or door, signs or advertising media or window or door lettering, pictures or placards, without Lessor’s prior written consent, which consent shall not be unreasonably withheld. All signs and other advertising media must comply with all governmental requirements. Lessor shall have the right to remove any non-approved or non-complying sign, placard, picture, advertisement, name or notice without notice to Lessee and the cost of such removal shall be immediately payable by Lessee to Lessor, together with interest at the Interest Rate, upon demand as Additional Charges. Lessee shall maintain its permitted signs and other advertising media in good and attractive condition and repair. Lessee agrees not to use any advertising or other media (including loudspeakers, phonographs or radio broadcasts) that may be heard or experienced outside the Premises. Lessee shall maintain all show windows of the Premises in a heat and clean condition.

(b) Exterior Displays. Lessee shall not keep or display any merchandise on or otherwise obstruct the sidewalks or walkways adjacent to the Premises. Lessee shall not install any exterior lighting or plumbing fixtures, shades or awnings or any exterior decorations or painting without Lessor’s prior written consent, which consent may be granted or withheld in the sole discretion of Lessor.

15. ASSIGNMENT AND SUBLETTING.

(a)  Consent Required. Lessee shall not assign this Lease, or any interest in this Lease, voluntarily or involuntarily, and shall not sublet the Premises or any part thereof, or any right or privilege appurtenant to the Premises, or allow or suffer any person other than the employees of Lessee to occupy or use the Premises or any portion thereof, without obtaining in each instance the prior written consent of Lessor pursuant to the terms and conditions set forth in this Paragraph 15, which consent shall not be unreasonably withheld.

(b)  Documentation. Prior to any assignment, sublease or occupancy agreement which Lessee desires to make, Lessee shall provide to Lessor: (i) the name, address and telephone number of the proposed assignee, sublessee or occupant; (ii) true and complete copies of all documents relating to the prospective agreement to assign, sublease or allow, occupancy; (iii) a current business resume of the proposed assignee, sublessee or occupant; (iv) a current financial statement for the proposed assignee, sublessee or occupant; (v) current financial references for the proposed assignee, sublessee or occupant; (vi) copies of the tax returns of the proposed assignee, sublessee or occupant for the preceding two (2) tax years; and (vii) a written description of all compensation to be received by Lessee in connection with such proposed assignment, sublease or occupancy. Within thirty (30) days after the receipt of such information, and such other information as Lessor shall be reasonably requested, Lessor shall either consent in writing to such proposed assignment, sublease or occupancy subject to the terms and conditions hereinafter set forth, or notify Lessee in writing that Lessor refuses such consent, specifying reasonable grounds for such refusal.

(c) Partnership or Limited Liability Company. If Lessee is a partnership or limited liability company, a transfer, voluntary or involuntary, of all or any part of an interest in the partnership or limited liability company, the interest of any partner in the partnership or the interest of any member of the limited liability company or the dissolution of the partnership or limited liability company, shall be deemed as assignment requiring the prior written consent of Lessor.

(d) Corporation. If Lessee is a corporation, any dissolution, merger, consolidation, or other reorganization of Lessee, or the transfer, either in single or a series of transfers, of ten percent (10%) or more of the capital stock of Lessee, or the sale, or series of sales within any twelve (12) month period, of all or substantially all of the assets of Lessee located in, on, or about the Premises, shall be deemed an assignment requiring the prior written consent of Lessor.

(e) Basis for Approval or Rejection. Lessor and Lessee agree that it shall be reasonable for Lessor to reject any proposed assignment or sublease on the following grounds:

(i) Lack of Financial Capacity. The proposed assignee, sublessee or occupant does not have the financial capacity to fulfill the monetary obligations under the assignment, sublease or occupancy arrangement.

(ii) Inappropriate Use. The use proposed by the assignee, sublessee or occupant is not permitted under the provisions of Paragraph 6, or would expose Lessor or the Property to additional liability, or involves the use of additional Hazardous Materials or greater quantities of Hazardous Materials.

(iii) Lack of Experience. The proposed assignee, sublessee or occupant has less than ten (10) years’ active full-time experience in the operation of the business proposed to be operated by the assignee, sublessee or occupant on the Premises.

(iv) Nearby Location. The proposed assignee, sublessee or occupant has a direct or indirect interest in a business similar to that to be conducted on the Premises which is located within five (5) miles of the Premises.

(v)Business Reputation. The proposed assignee, sublessee or occupant has defaulted on any material obligation or filed for protection, or has been declared a bankrupt, under the Bankruptcy Code within the ten (10) years preceding the proposed effective date of the proposed assignment, sublease or occupancy arrangement.

(f) Bonus Rent. If Lessor shall consent to any assignment, sublease or occupancy agreement by Lessee, such consent shall be conditioned upon Lessee paying to Lessor all consideration received by Lessor in connection with such assignment, sublease or occupancy arrangement as and when received by Lessee.

(g) No Effect on Obligations of Lessee. No consent by Lessor to any assignment, sublease or occupancy arrangement shall release Lessee from any obligations under this Lease or alter the primary liability of Lessee for the payment of the Rent and performance of the obligations to be performed by Lessee under this Lease.

(h) Lessor’s Remedies. Any assignment, sublease or occupancy arrangement made by Lessee without the prior written consent of Lessor shall at Lessor’s election be void, and, at the option of Lessor, shall constitute a material default under this Lease. The consent by Lessor to any assignment, sublease or occupancy arrangement by Lessee shall not constitute a waiver of the provisions of this Paragraph 15, including the requirement that the prior written consent of Lessor be obtained with respect to any subsequent proposed assignment, sublease or occupancy arrangement. If Lessee shall purport to assign this Lease, or sublease all or any portion of the Premises, or permit any person or persons other than Lessee to occupy the Premises, without Lessor’s prior written consent, Lessor may collect rent from the person or persons then or thereafter occupying the Premises and apply the amount collected less the costs of collection to the Rent to be paid under this Lease, but no such collection shall be deemed a waiver of Lessor’s rights and remedies under this Paragraph 15, or the acceptance of any such purported assignee, sublessee or occupant, or a release of Lessee from the obligation to timely perform all of the covenants to be performed by Lessee contained in this Lease.

16. ACCESS TO THE PREMISES.

(a) Access to the Premises. Lessor and its designees shall have the right to enter upon the Premises upon reasonable notice to Lessee (except in the case of emergency, in which case no notice shall be required) and at all reasonable hours (and in case of emergency, at any time) without diminution or abatement of Rent and without liability to Lessee (i) to inspect the Premises and the Building; (ii) to make repairs, additions or alterations to the Premises, the Building or the Property (and for such purposes erect and install scaffolding, pipes, conduits and other necessary structures in and through the Premises or the Building where reasonably required by the character of the work to be performed, always providing that reasonable access to the Premises shall be provided); (iii) to show the Premises to prospective purchasers and lenders; (iv) to determine whether Lessee is complying with its obligations under this Lease; (v) to serve or post any notice required or permitted under the provisions of this Lease, and (vi) for any other lawful purpose. Any entry upon the Premises or Building or portions thereof obtained by Lessor in accordance with this Paragraph 16 shall not be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Premises or the Building or an eviction, actual or constructive, of Lessee from the Premises or the Property or any portion thereof.

(b) Access for Prospective Lessees. For a period commencing one hundred eighty (180) days prior to the date scheduled for expiration of the Term, Lessor shall have reasonable access to the Premises for the purpose of exhibiting the same to prospective lessees and to post any customary “To Let” or “To Lease” signs upon the Premises.

17. EMINENT DOMAIN.

(a)  Entire or Substantial Taking. If during the Term title to all of the Premises, or so much of the Premises that the Premises will not be reasonably suited for Lessee’s continued occupancy for the uses and purposes permitted under this Lease as reasonably determined by Lessor, shall be taken for any public or quasi-public use under any statute or by right of eminent domain, or by private purchase in lieu thereof, or by deed in threat of any such taking by eminent domain, then this Lease shall terminate as of the date that possession of the Premises, or part thereof, is taken.

(b)  Partial Taking. If during the Term title to any part of the Premises shall be so taken and the remaining part of the Premises would be reasonably suitable for Lessee’s continued occupancy for the purposes and uses permitted under this Lease as reasonably determined by Lessor, then this Lease shall, only as to the part so taken, terminate as of the date that possession of such part of the Premises is so taken and the Fixed Minimum Rent shall be reduced in the same proportion that the floor area of the portion of the Premises so taken bears to the original Floor Area of the Premises, and Lessor shall, to the extent of any award received by Lessor for the part of the Premises so taken, make all necessary repairs or alterations to the Premises so as to constitute the remaining portion of the Premises as a complete architectural unit; provided that such repairs shall not include any furniture, trade fixtures, equipment or personal property of Lessee, all of which shall be repaired or replaced at the sole cost and expenses of Lessee. A just and proportionate part of the Fixed Minimum Rent shall be abated during such restoration if such restoration shall substantially interference with the continued conduct of the business of Lessee on the Premises.

(c)  Disposition of Proceeds. All compensation awarded or paid upon any total, substantial or partial taking shall belong to and be the sole property of Lessor, whether such compensation be awarded or paid as compensation for diminution in value of the leasehold or to the fee or for the value of any improvements located on the Premises or otherwise; provided, however, that Lessee shall be entitled to seek and receive a separate award for any taking of Lessee’s furniture, trade fixtures, equipment and other personal property, for disruption and loss of business and for relocation expenses, provided that the seeking and receipt of any such separate award shall not diminish the award or compensation otherwise payable to Lessor for the taking. Lessee shall not have any claim against Lessor with respect to any taking or any award received by Lessor as compensation for any taking.

(d) Temporary Taking. If all or any portion of the Premises is taken for a limited period of time during the Term, this Lease shall remain in full force and effect, Lessee shall continue to perform all of the terms, conditions and covenants of this Lease and Lessee shall be entitled to receive the entire award made in connection with any such temporary taking. Any temporary taking the duration of which exceeds twelve (12) consecutive calendar months shall be deemed a substantial taking and shall be governed by the provisions of Paragraph 17(a).

(e) Taking Near End of Term. Notwithstanding any provision of this Paragraph 17 to the contrary, any taking which occurs during the last twenty-four (24) months of the Term shall be treated as a substantial taking and shall be governed by the provisions of Paragraph 17(a); provided, however, if the period for exercise of the Option pursuant to Paragraph 3(b) has not expired and Lessee validly exercises the Option within thirty (30) days after Lessor gives Lessee written notice of the proposed taking, then such taking shall not be subject to the provisions of this Paragraph 17(e).

(f) Further Assurances. Lessor and Lessee each agrees to execute and deliver to the other all instruments that may be required or appropriate to effectuate the provisions of this Paragraph 17.

(g) Waiver of Statutory Rights. Lessor and Lessee agree that the provisions of this Paragraph 17 shall control the rights and obligations of Lessor and Lessee with respect to any taking of the Premises by eminent domain, and Lessor and Lessee each hereby waives the provisions of California Code of Civil Procedure Sections 1265.110, et seq. and any other ordinance, law or statute now or hereafter in effect which would grant to Lessor or Lessee the right to terminate this Lease in the event of a taking of the Premises by eminent domain. ‘

18. DAMAGE OR DESTRUCTION.

(a)  Lessor to Rebuild. In the event the Premises shall be partially or totally destroyed by fire or other casualty insured under the fire and extended coverage insurance to be maintained by Lessor pursuant to Paragraph 7(b), then the Premises shall be repaired by Lessor as soon as practicable as provided in Paragraph 18(c), unless Lessor shall elect not to repair as provided in Paragraph 18(b). Should such damage or destruction substantially interfere with the business of Lessee conducted in the Premises, then a just and proportionate part of the Fixed Minimum Rent shall be abated until such interference ceases.

(b) Lessor Option to Terminate.

(i) Substantial, Uninsured Damage or Building Damage. If (i) more than fifty percent (50%) of the Floor Area of the Premises are destroyed or damaged by fire or other casualty insured under Lessor’s fire and extended coverage insurance; (ii) the Premises are destroyed or damaged to the extent of hot less than thirty-three and one-third percent (331/3%) of the replacement cost thereof; (iii) the Premises are partially or totally destroyed by a cause or casualty not covered the fire and extended coverage insurance to be maintained by Lessor pursuant to Paragraph 7(b); or (iv) the Building is destroyed or damaged to the extent of not less than thirty-three and one-third percent (331/3%) of the replacement cost of the Building, then upon the occurrence of any such event Lessor may elect to terminate this Lease by written notice given to Lessee not later than ninety (90) days after the occurrence of any such damage or destruction, such termination to be effective as of the date of such notice. If Lessor does not elect to so terminate this Lease, Lessor shall repair or rebuild the Premises in accordance with the provisions of Paragraph 18(c).

(ii) Premises Damage Near End of Term, If the Premises are damaged or destroyed by any cause during the last twenty-four (24) months of the Term, then Lessor may elect to terminate this Lease by written notice given to Lessee not later than ninety (90) days after the occurrence of any such damage or destruction, such termination to be effective as of the date of such notice.

(iii) Building Damage Near End of Term. If any portion of the Building is damaged or destroyed by any cause during the last twenty-four (24) months of the Term whether or not the Premises are damaged or destroyed, then Lessor may elect to terminate this Lease by written notice given to Lessee not later than ninety (90) days after the occurrence of any such damage or destruction, such termination to be effective as of the date of such notice.

(c) Portions to be Rebuilt by Lessor and Lessee. The obligation of Lessor should Lessor elect or be obligated to repair or rebuild shall be limited to the basic shell of the Premises, and Lessee shall forthwith, at Lessee’s sole cost and expense, replace or fully repair or replace all leasehold improvements and Alterations, exterior signs, trade fixtures, equipment, display cases and other installations made by Lessee. All insurance proceeds payable under the fire and extended coverage insurance to be maintained by Lessor pursuant to Paragraph 7(b) shall be payable solely to Lessor, and Lessee shall have no interest in such proceeds. Notwithstanding any provision of this Paragraph 18 to the contrary, Lessor’s obligation to rebuild shall be limited to the insurance proceeds actually received and retained by Lessor and shall not include any insurance proceeds paid and retained by any lender holding a security interest in the Property.

(d)  Waiver of Statutory Rights. Lessor and Lessee each agree that the provisions of this Paragraph 18 shall control the rights and obligations of Lessor and Lessee with respect to any damage or destruction of the Premises, and Lessor and Lessee each hereby waives the provisions of California Civil Code Sections 1932 and 1933(4) and any other ordinance, law or statute now or hereafter in effect which would grant to Lessor or Lessee the right to terminate this Lease in the event of damage or destruction of the Premises.

19. HOLD HARMLESS.

(a) Hold Harmless. Lessee hereby indemnifies and agrees to protect, defend and hold Lessor, and its officers, directors, agents, contractors, employees and invitees, and any lender holding a security interest in the Property (collectively, “Lessor Parties”) harmless from and against any and all claims, damages, losses, liabilities, actions, causes of action, judgments, settlements, costs and expenses (including reasonable attorneys’ fees and court costs) (collectively, “Claims”) arising from, related to or connected with the (j) use or occupancy of the Premises; (ii) any activity conducted on the Premises or the Property by Lessee or its officers, directors, agents, contractors, employees, invitees, licensees or contractors (collectively, “Lessee Parties”); (iii) the conduct of Lessee’s business in the Premises; (iv) the failure of Lessee to abide by the provisions of this Lease; (v) any breach or default by Lessee under this Lease; and (vi) any activity, work or thing done, permitted or suffered by Lessee or any Lessee Parties, and any act or omission by Lessee or any Lessee Parties in, on or about the Premises, the Property or elsewhere, except to the extent such Claims are proven to be the result of the sole active gross negligence or willful misconduct of Lessor. In case any claim, action or proceeding is brought against Lessor and/or any Lessor Party by reason of any such Claim, Lessee shall, upon notice from Lessor, defend such Claim, Lessor and/or any Lessor Party at Lessee’s expense by counsel reasonably satisfactory to Lessor and any Lessor Party, and Lessor and any Lessor Party shall cooperate with Lessee in such defense but without cost or liability to Lessor or any Lessor Party.

(b) Assumption of Risk. As a material part of the consideration to Lessor for the execution of this Lease, Lessee hereby assumes all risk of damage to all property of Lessee and others in, on or about the Premises or the Property, and for injury to or death of persons, in, upon or about the Premises or Property, arising from any cause whatsoever, and Lessee hereby waives and releases all claims with respect to any such loss, injury or death against Lessor and the Lessor Parties.

20. DEFAULT AND REMEDIES.

(a)  Default. Lessee shall be in default of this Lease if: (i) Lessee fails to pay any Rent or other sum within five (5) days after the date such payment is due under this Lease; (ii) Lessee fails to timely perform any other obligation of Lessee to be performed under this Lease within ten (10) days after receipt of written notice from Lessor; (iii) Lessee vacates or abandons the Premises; (iv) Lessee’s interest in this Lease or in the Premises, or any part thereof, is assigned or transferred; either voluntarily or by operation of law without the prior written consent of Lessor; (v) a petition under the Bankruptcy Code or any other insolvency, bankruptcy or debtor protection law is filed by or against Lessee or any Guarantor named in the Lease Summary; (vi) Lessee or any of Guarantor named in the Lease Summary makes an assignment for the benefit of its, his or her creditors; or (vii) any of Guarantor named in the Lease Summary shall attempt to revoke its, his or her guaranty of this Lease or shall claim exoneration under such guaranty of this Lease. .

(b) Remedies. In the event of any default by Lessee under this Lease, Lessor shall have the following rights and remedies:

(i) Continuation of Lease. Lessor shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations). Lessor may re-enter the Premises by summary proceedings or otherwise, remove all persons and property from the Premises without liability to Lessee or any other person for damage sustained by reason of such removal, and relet the Premises at such rental and upon such terms and conditions as Lessor in its sole discretion may deem advisable. Lessor may store any property of Lessee in a public warehouse or elsewhere, at Lessee’s expense, or otherwise dispose of such property in any manner provided by law. In the event Lessor re-enters the Premises, Lessee shall remain liable for the Rent and all other sums payable under this Lease, plus the reasonable cost of obtaining possession of and reletting the Premises, including, without limitation, any repairs and alterations necessary to prepare the Premises for reletting, the cost of marketing the Premises for reletting and any brokerage commission due on the reletting, less the rents received from such reletting. Lessee shall pay to Lessor the difference between the rent received by Lessor from the reletting and the Rent and other sums due under this Lease monthly on the date herein provided for the payment of Fixed Minimum Rent. No such re-entry, taking of possession or reletting of the Premises by Lessor shall be construed as an election on the part of Lessor to terminate this Lease unless specific written of such termination is given to Lessee. Notwithstanding any such re-entry, Lessor may at any time thereafter elect to terminate this Lease for such previous default by written notice given to Lessee.

(ii) Termination of Lease. Lessor shall have the remedy described in California Civil Code Section 1951.2. Lessor may terminate this Lease by written notice given at any time to Lessee following any default by Lessee. Should Lessor so elect to terminate this Lease, Lessor shall recover from Lessee:

(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 rental loss that Lessee 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 exceeds the amount of such rental loss that Lessee proves could be reasonably avoided; and

(D) Any other amount necessary to compensate Lessor for all the detriment proximately caused by the failure of Lessee to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to, the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys’ fees, and that portion of the leasing commission paid by Lessor applicable to the unexpired Term of this Lease.

The worth at the time of award of the amounts referred to in Paragraphs 20(b)(ii)(A), (B) and (D) is to be computed by allowing interest at ten percent (10%) per annum, or the maximum lawful rate. The worth at the time of award of the amount referred to in Paragraph 20(b)(ii)(C) is to be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1 %).

(iii) Right to Perform. Following any default by Lessee, Lessor shall have the right, but not the obligation, to perform any obligation of Lessee under this Lease which Lessee has failed to perform, and all costs incurred by Lessor in such performance shall be immediately payable by Lessee to Lessor, together with interest at the Interest Rate, upon demand as Additional Charges.

(iv) Other Remedies. Lessor shall have all other remedies now or hereafter provided by law or in equity for the default by Lessee. The rights and remedies of Lessor under this Lease and provided by law or in equity are cumulative and not exclusive, and Lessor may exercise such rights and remedies in such order as Lessor may determine.

(c)  Receiver. Should a receiver be appointed in any action by Lessor against Lessee, the receiver may take possession of any and all personal property belonging to Lessee that is used in the business being conducted on the Premises, and Lessee agrees that the entry and/or possession by such a receiver shall not constitute an eviction of Lessee from the Premises or any portion thereof. Lessee agrees to indemnify and hold Lessor harmless from and against any and all liability arising out of any such entry and taking of possession by such receiver. Neither the application for the appointment of such receiver, nor the appointment itself, shall constitute an election on Lessor’s part to terminate this Lease, unless Lessor gives a written notice of such termination to Lessee.

(d)  Additional Rent. All sums payable by Lessee to Lessor or to third parties under this Lease shall be payable as and included within the term “Rent”. For purposes of any unlawful detainer action by Lessor against Lessee pursuant to California Code of Civil Procedure Sections 1161-1174, or any similar or successor statutes, Lessor shall be entitled to recover as Rent not only the Fixed Minimum Rent, Additional Rent and Additional Charges, but all other sums specified in this Lease as may then be payable.

21. BANKRUPTCY. Lessee agrees that if (i) all or substantially all of the Lessee’s assets shall be placed in the hands of a receiver or trustee; (ii) Lessee makes an assignment for the benefit of creditors; (iii) Lessee is finally adjudicated a bankrupt; (iv) Lessee institutes any proceeding under the Bankruptcy Code (as the same now exists or under any amendment thereof which may hereafter be enacted) or under any other law or statute relating to the subject of bankruptcy, insolvency or debtor relief, wherein Lessee seeks to be adjudicated a bankrupt, or to be discharged of its debts, or to effect a plan of arrangement, liquidation, composition or reorganization; or (v) any involuntary proceeding is filed against Lessee under the Bankruptcy Code or any such bankruptcy, insolvency or debt or relief laws or statutes, then upon the occurrence of any such event this Lease and any interest of Lessee in and to the Premises shall not become an asset in any of such proceedings and, in any such event and in addition to any and all rights or remedies of Lessor under this Lease or provided by law, it shall be lawful for Lessor to re-enter the Premises and take possession thereof and remove all persons therefrom and immediately to terminate this Lease by written notice to Lessee, and following such termination by Lessor, Lessee shall have no further rights or claims under this Lease.

22. WAIVERS. Any waiver by Lessor of any covenant or condition contained in this Lease, or of any breach or default by Lessee, shall not be construed as a subsequent waiver of the same or any other covenant or condition, or a waiver of any subsequent breach or default, and any consent or approval by Lessor to or of any act by Lessee requiring the consent or approval of Lessor shall not be deemed to waive or render unnecessary Lessor’s consent or approval to or of any subsequent similar act by Lessee. The acceptance by Lessor of Rent or Additional Charges or any other payment due under this Lease shall not constitute a waiver of any concurrent or preceding breach or default by Lessee of any term, covenant or condition of this Lease, other, than the failure of Lessee to pay the particular rental or payment so accepted, regardless of Lessor’s knowledge of such concurrent or proceeding breach or default at the time of acceptance of such rent or payment. No waiver by Lessor shall be effective unless it is made in writing and signed by Lessor.

23. NO ACCORD AND SATISFACTION. No payment by Lessee or receipt by Lessor of a lesser amount than the Rent or other sums required to be paid under this Lease shall be deemed to be other than on account of the earliest Rent or other sums due and payable hereunder, nor shall any endorsement or statement on any check or any writing accompanying any check or payment as Rent be deemed an accord and satisfaction, and Lessor may accept any such check or payment without prejudice to the right of Lessor to recover the balance of such Rent or other sums or pursue any other remedy provided in this Lease.

24. SUBORDINATION AND ATTORNMENT.

(a)  Subordination. Lessee agrees that this Lease is and shall be and remain subordinate to all mortgages, trust deeds and security devices that are now or may hereafter be placed upon the Premises or the Property and to any and all advances made or to be made thereunder, and to all renewals, replacements and extensions thereof. If any mortgagee, beneficiary or secured party elects to have this Lease superior to its mortgage, trust deed or security device by notice to Lessee, then this Lease shall be deemed superior to the lien of any such mortgage, trust deed or security device.

(b)  Attornment by Lessee. If any proceedings are brought for foreclosure of any mortgage, trust deed or other security device placed upon the Premises or Property, or if the Premises or Property are sold under such mortgage, trust deed or security device by the exercise of the power of sale, or if a deed in lieu of any such foreclosure is issued by Lessor, then Lessee shall, at the election of the mortgagee, beneficiary, secured party or purchaser, attorn to the mortgagee, beneficiary, secured party or purchaser upon any such foreclosure, sale or deed in lieu and recognize such mortgagee, beneficiary, secured party or purchaser as Lessor under this Lease. Any successor in interest to Lessor following foreclosure or conveyance in lieu thereof shall not be (i) liable for any act or omission of Lessor or any prior lessor or with respect to events occurring prior to acquisition of ownership; (ii) subject to any offsets or defenses which Lessee might have against any Lessor or any prior lessor; (iii) bound by prepayment by Lessee of more than one(1) month’s Fixed Minimum Rent; or (iv) bound to return the Security Deposit unless the same is received by such successor in interest.

(c) Additional Documents. The provisions of this Paragraph 24 shall be self-operative and shall not require the execution of any additional documents to be effective. However, Lessee agrees to execute (and acknowledge if required by Lessor or any mortgagee, beneficiary or secured party) and deliver, within ten (10) days after receipt of any written request and in the form requested by Lessor or such mortgagee, beneficiary or secured party, any additional documents evidencing the subordination or priority of this Lease with respect to the lien of any such mortgage or deed of trust, or security device.

25. ESTOPPEL CERTIFICATES. Lessee agrees at any time, and within ten (10) days after written request by Lessor, to execute, acknowledge and deliver to Lessor a statement in writing certifying (i) that this Lease is unmodified and in full force and effect (or if there have been modifications, that this Lease is in full force and effect as modified and stating the modifications); (ii) the dates to which the Rent and Additional Charges have been paid in advance, if any; (iii) acknowledging Lessee’s acceptance of the Premises; (iv) confirming the Commencement Date and the Expiration Date; (iv) confirming the current amount of the Fixed Minimum Rent and Additional Rent; and (v) such other matters as Lessor may request. Any such statement delivered pursuant to this Paragraph 25 may be relied upon by any prospective purchaser, mortgagee, or assignee of any mortgagee of the Premises or the Property.

26. SURRENDER AND HOLDING OVER.

(a) Surrender of the Premises. Upon the Expiration Date or sooner termination of the Term, Lessee shall (i) quit and surrender the Premises, broom clean, in good condition and repair (reasonable wear and tear and damage by acts of God or fire excepted), together with all Alterations which may have been made in, to or on the Premises, except any Alterations that Lessee shall be required to remove in accordance to Paragraph 12(a); (ii) remove all its movable furniture, trade fixtures and personal property from the Premises and all movable furniture, trade fixtures and personal property not so removed shall be deemed abandoned by Lessee; and (iii) remove all Hazardous Materials from the Premises and clean-up or remediate, to the satisfaction of Lessor, any Hazardous Materials that have been released in, on or about the Premises or the Property by Lessee or Lessee Parties. Lessee shall indemnify, protect, defend and hold harmless Lessor from and against all loss or liability resulting from any delay by Lessee in so surrendering the Premises including, without limitation, any claims made by any succeeding lessee.

(b) Holding Over. If Lessee should remain in possession of the Premises after the Expiration Date or the earlier termination of the Term, or if Lessee shall fail to surrender the Premises to Lessor in the condition required in Paragraph 26(a), without the express written consent of Lessor, Lessee shall be a tenant at sufferance, shall be guilty of trespass and shall be liable to Lessor for all damage resulting to Lessor from such holding over, including, but not limited to, the claims of any succeeding lessee or the damage suffered by Lessor in losing the opportunity to lease the Premises to another lessee, and Lessee shall pay to Lessor as Rent during the period of such hold over two hundred percent (200%) of the Rent payable by Lessee for the final month of the Term, such hold over rent to be paid monthly in advance.

27. SALE OF THE PREMISES BY LESSOR. In the event of any sale, exchange, transfer or change in ownership of the Premises or the Property by Lessor and assignment by Lessor of this Lease, the Lessor shall be and is hereby entirely free and relieved of all liability under any and all of its covenants an obligations contained in or derived from this Lease occurring after the date of consummation of any such transaction. Lessee agrees to look solely to the successor to Lessor for the performance of the obligations of Lessor under this Lease from and after the date of consummation of any such transaction.

28.  NOTICES. All notices, statements, demands, requests, consents, approvals, authorizations, offers, agreements, appointments or designations under this Lease by either party to the other shall be in writing and shall be sufficiently given if delivered in person or sent by United States Postal Service certified mail, return receipt requested, postage prepaid. Any notice to Lessee shall be addressed to the address of Lessee shown in. the Lease Summary or to the Premises. Any notice to Lessee may be served upon any individual occupying the Premises. If there is more than one person or entity comprises Lessee, any notice required or permitted by the terms of this Lease may be given by or to any one such person or entity, and shall have the same force and effect as if given by or to all such persons or entities. Any notice to Lessor shall be addressed to Lessor at Lessor’s address shown in the Lease Summary or at such other place as Lessor may from time to time designate by written notice to Lessee. Notices shall be effective upon the date of personal service, or the date of delivery or attempted delivery as shown on the United States Postal Service return receipt. Each party may change its address for notices by notice given in the manner provided in this Paragraph 28; provided, however, that notice may always be given to Lessee addressed to the Premises.

29.BROKERS. Lessee warrants that Lessee has not had any dealings with any realtor, broker or agent in connection with the Premises or the negotiation of this Lease. Lessee agrees to indemnify, protect, defend and hold Lessor harmless from and against any cost, expense or liability for any compensation, commission, fee or charge claimed by any realtor, broker, agent or person with respect to the leasing of the Premises by Lessee and/or the negotiation of this Lease.

30. LIMITATION OF LESSOR’S LIABILITY. In the event Lessee makes any claim or asserts any cause of action against Lessor as a result of Lessor’s default or alleged default under this Lease, then (a) Lessee’s sole and exclusive remedy shall be against current rents, issues, profits and other income that Lessor receives from its. operation of the Property, net of all then current operating expenses, liabilities and debt service associated with said operation (the “Property Assets”); (b) no other real, personal or mixed property or other assets of Lessor, wherever located, shall be subject to any levy on any judgment obtained by Lessee against Lessor; (c) none of the trustees of Lessor shall be personally liable to Lessee and none of the real, personal or mixed property or other assets of any of such trustees shall be subject to levy on any judgment obtained by Lessee against Lessor; (d) if such Property Assets are insufficient to satisfy any judgment obtained by Lessee, then Lessee will not institute any further action, suit, claim or demand, at law or in equity, against Lessor for or on account of such deficiency; and (e) Lessee shall not have the right to perform the obligations of Lessor or to deduct the costs of such performance from the Rent or other sums due under this Lease. The limitations set forth in this Paragraph 30 shall be applicable to, and enforced by, Lessor and/or any partner, trustee, officer, employee, agent or property manager of Lessor.

31.LESSOR RIGHT TO PERFORM. In the event Lessee shall fail to timely perform any obligation of Lessee to be performed under this Lease, Lessor may, but shall not be obligated, after giving written notice to Lessee, to perform such obligation. The cost incurred by Lessor in performing any such obligation shall be immediately payable by Lessee to Lessor, together with an administrative fee of ten percent (10%) of such cost and interest at the Interest Rate, upon demand as Additional Charges.

32. GENERAL PROVISIONS.

(a)  Relationship. Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third person to create the relationship of principal and agent or any partnership, joint venture or other association between Lessor and Lessee, and neither the method of computation of rent nor any. other provision contained in this Lease, nor any acts of Lessor and/or Lessee, shall be deemed to create any relationship between Lessor and Lessee, other than the relationship of lessor and lessee.

(b)  Binding on Successors. Each and all of the provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto, and except as otherwise provided elsewhere in this Lease, their respective heirs, executors, administrators, successors and assigns, subject at all times to all agreements and restrictions contained elsewhere in this Lease with respect to the assignment, transfer, encumbering or subletting of all or any part of the interest of Lessee in this Lease.

(c)Captions. The captions of the Paragraphs of this Lease are for convenience only and shall not be considered or referred to in resolving questions of interpretation or construction.

(d) Joint and Several Liability. If more than one person or entity executes this Lease as Lessee, each of them is jointly and severally liable for the keeping, observing and performing of all of the terms, covenants, conditions, provisions and agreements of this Lease to be kept, observed and performed by Lessee.

(e) Entire Agreement. This Lease is and shall be considered to be the only agreement between the parties hereto and their representatives and agents relating to the leasing of the Premises. All prior negotiations, written and oral agreements between Lessor and Lessee have been merged into, included in and are superseded by this Lease. There are no other agreements, representations or warranties between the Lessor and Lessee relating to the leasing of the Premises which are not set out in this Lease. In entering into this Lease, neither Lessor nor Lessee is relying upon any agreement, representation or warranty that is not set forth in this Lease.

(f)Governing Law. The laws of the State of California applicable to residents of the State of California shall govern the validity, performance, and enforcement of this Lease. This Lease shall not be construed presumptively either for or against Lessor or Lessee.

(g)Time of Essence. Time is of the essence with respect to the performance of each of the covenants and agreements contained in this Lease.

(h) Severability. Any provision or provisions of this Lease which are finally adjudicated by a court of competent jurisdiction to be invalid, void or illegal shall in no way affect, impair, or invalidate any other provision of this Lease, and the remaining provisions of this Lease shall nevertheless remain in full force and effect.

(i) Attorney’s Fees and Costs. In the event any action is brought by either party hereto against the other with respect to this Lease, or by reason of the breach of any covenant of 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 from the other party the actual court costs incurred and reasonable attorney’s fees and reasonable expert witness fees incurred by the prevailing party as fixed by the court wherein such judgment shall be entered.

(j) No Recording. Neither this Lease nor any abstract or short form of this Lease shall be recorded.

(k) Amendment. This Lease may be amended only by a subsequent writing executed by Lessor and Lessee. No course of conduct or dealing between Lessor and Lessee shall amend any of the provisions of this Lease, or constitute a waiver of the performance of or compliance with any of the provisions of this Lease.

(l) Financial Information, Lessee shall deliver to Lessor copies of Lessee’s balance sheet and profit and loss statement and any other financial information prepared by or for Lessee within thirty (30) days of such preparation, but not less than annually during the Term. Such financial information shall be certified as accurate by an independent certified public accountant. Lessor shall not disclose such financial information to. third parties, except for disclosure to Lessor’s accountants and attorneys’, prospective lenders and purchasers of the Property and as required by court order or law.

(m) Waiver of Jury Trial. Lessor and Lessee hereby waive any and all rights to a trial by jury in any action, proceeding or counterclaim (any claim for injury or damage and any emergency or statutory remedy, in respect thereof) brought by either party against the other party on any matter arising out of or in any way connected with this Lease, the relationship of Lessor and Lessee, and/or Lessee’s use or occupancy of the Premises. Lessor and Lessee agree that this Paragraph 32(m) constitutes a written consent to waiver of trial by jury within the meaning of Section 631(a)(2) of the California Code of Civil Procedure, and Lessor and Lessee hereby authorize and empower the each other to file this Paragraph 32(m) and/or this Lease, as-required, with the clerk or judge of any court of competent jurisdiction as a written consent to waiver of jury trial.

(n) Attachments. The following items are attached to and incorporated into this Lease and form a part of this Lease:

Lease Summary

Exhibit A     Diagram of Premises

Exhibit B-1     Diagram of the Property

Exhibit B-2     Legal Description of the Property

THE SUBMISSION OF THIS LEASE TO LESSEE SHALL BE FOR EXAMINATION PURPOSES ONLY, AND DOES NOT AND SHALL NOT CONSTITUTE A RESERVATION OF OR OPTION FOR LESSEE TO LEASE, OR OTHERWISE CREATE ANY INTEREST OF LESSEE IN THE PREMISES.

IN WITNESS WHEREOF, the Lessor and Lessee have duly executed this Lease on the day and year first above written.

"LESSOR"	"LESSEE"
JULIET B. HOOKER, KATHERINE B	CENTRAL COAST BANKCORP,
CONGDON AND WILLIAM C. BURKETT,	a California corporation
Co-Trustees of the William Andrew Burkett
Trust dated March 13, 1985, as to an
undivided one half interest, and JULIET B	By: /s/ HARRY D. WARDWELL
HOOKER, KATHERINE B. CONGDON and	Name: Harry Wardwell
WILLIAM C. BURKETT, Co-trustees
of the Juliet J. Burkett Testamentary Trust
dated March 13, 1981, as to an undivided	Title: Senior Vice President
one-half interest (collectively doing
Business as Burkett Land Company)
/s/ JULIET B. HOOKER	By____________________________
Juliet B. Hooker, Co-Trustee	Name__________________________
	Title___________________________
/s/ KATHERINE B. COGDON
Katherine B. Congdon, Co-Trustee
/s/ WILLIAM C. BURKETT
William C. Burkett, Co-Trustee

Exhibit A — Diagram of the Premises

[Graphic Omitted]

Exhibit B-1 — Diagram of the Property

[Graphic Omitted]

Exhibit B-2 - - Legal Description of the Property

That certain real property located in the City of Monterey, County of Monterey, State of California described as follows:

Lot two (2) in Block four (4), as shown and so designed on the “Map of Littles Survey of New Monterey, Monterey, California, as surveyed by W. C. Little, September 1886” filed December 1, 1886, in the office of the County Recorder of the County of Monterey, State of California, and now on file and of record in said office in Map Book One, Cities and Towns, at Page 12 therein.

A portion of Block 4, as shown and so designated on Map entitled, “Map of Littles Survey of New Monterey, Monterey, California”, as surveyed by W. C. Little, September 1886 filed in the office of the County Recorder of the County of Monterey, State of California, December 1, 1886 in Volume 1, Cities and Towns, at page 12 therein; more particularly described as follows:

Beginning at the most Southerly comer of Hoffman Avenue and Lighthouse Avenue as shown on said map and running thence Southwesterly along the Southeastern line of Hoffman Avenue a distance of 120 feet to the most Northerly corner of Lot 1, in said Block; thence Southeasterly along the Northeasterly line of said Lot 1, 50 feet to the most Northerly corner of Lot 2 in said Block; thence at right angles Northeasterly and parallel with Hoffman Avenue a distance of 120 feet to the Southwesterly line of Lighthouse Avenue; thence at right angles Northwesterly following the said line of Lighthouse Avenue 50 feet to the point of beginning.