**Exhibit 10.2**

** **

**LEASEAGREEMENT**

 

BY THIS LEASE dated October15, 2004, HAMON FAMILY TRUST, herein called “Lessor,” leases, to COAST NATIONALBANK, herein called “Lessee”, that certain real property, herein called “thePremises,” in the County of San Luis Obispo, State of California, commonlyknown as 2138 SPRING STREET, SUITE A PASO ROBLES, California.  The Premises are a part of the propertydescribed in Exhibit A, attached hereto, consisting of approximately 1446 squarefeet.

 

**ARTICLE1.  TERM OF LEASE**

 

Original Term

 

Section 1.01.  The Original Term of this lease shall be fora period of FIVE (5) years, commencing on the Commencement Date.  The “Commencement Date” shall be asfollows:  (a)  The day following the Completion Date ofVanilla Shell “ as specified in Section 5.03 below, evidenced by a “notice ofcompletion”.

 

If Lessor fails to deliverpossession of a completed or substantially completed suite by October 1, 2004,Lessee shall have the right to terminate said lease.  Should Lessee elect to terminate the lease,Lessor shall discharge Lessee from all obligations contained herein.

 

Extended Term

 

Section 1.02.  Should Lessee perform all the terms andconditions of this lease during the original term, Lessee may extend this leasefor one (1) additional term of FIVE (5) years, commencing on expiration of theoriginal term, by giving Lessor written notice of Lessee’s desire to extend theterm hereof not less than one hundred twenty (120) days but not more than onehundred eighty (180) days, prior to expiration of the original term.

 

Hold Over

 

Section 1.03.  Should Lessee hold over and continue inpossession of the Premises after expiration of the term of this lease or anyextension thereof, Lessee’s continued occupancy of the Premises shall beconsidered a month-to-month tenancy subject to all the terms and conditions ofthis lease, except that the base rent, which shall be payable as providedbelow, shall be one hundred fifteen percent (115%) of the base rent as of thedate of expiration.  If Lessee fails tosurrender the Premises upon the expiration of this Lease, Lessee shallindemnify and hold Lessor harmless from all loss or liability, includingwithout limitation, any claims made by any succeeding tenant founded on orresulting from such failure to surrender.

 

**ARTICLE2.  RENT**

 

Base Rent

 

Section 2.01.  For the initial year of the FIVE (5) yearterm hereof, Lessee agrees to pay to Lessor a fixed rental for the use andoccupancy of the Premises of One Dollar Sixty Five Cents ($ 1.65) per squarefoot.  It is hereby stipulated, andagreed that the Premises contains approximately 1446 square feet. The initialrent of TWO THOUSAND THREE HUNDRED EIGHTYFIVE DOLLARS and NINETY CENTS$2,385.90 shall be due and payable on the first day of each and every month commencingon or before the Commencement Date, payable to HAMON FAMILY TRUST at P.O. Box1085, Paso Robles, California, 93447, or at such other place or places asLessor may from time to time designate by written notice delivered to Lessee.  Such rent shall be pro-rated for any partialmonth at both the Commencement Date and the termination date.

 

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RentAdjustment

 

The minimum monthly rentshall be subject to adjustment at the commencement of the Second year of theoriginal term, and each year thereafter including any extended term of thislease, on the anniversary (“the adjustment date”) of the commencement of theinitial term as follows:

 

The base for computing thefirst adjustment is the consumer price index (all Items) for the LosAngeles-Long Beach Metropolitan Area, published by the United States Departmentof Labor Bureau of Labor Statistics, and referred to herein as (“The Index”),which is last published prior to the date of the commencement of the term (“BeginningIndex”). If the index published nearest, and prior to, the adjustment date (“ExtensionIndex”) has increased over the Beginning Index, the monthly rent set forth inparagraph 2.01 by a fraction, the numerator of which is the Extension Index andthe denominator of which is the Beginning Index.  In subsequent adjustments, includingadjustments during any extended term, the minimum monthly rent for thefollowing year (and until the next rent adjustment) shall be set by multiplyingthe minimum monthly rent set forth in paragraph 2.01, as adjusted on the prioradjustment date, by a fraction, the numerator of which is the Extension Indexand the denominator of which is the Index which is published for the datenearest the date of the preceding adjustment date.

 

Within 90 days after theadjustment date, the lessor shall prepare a statement stating the new minimummonthly rent is adjusted and deliver it to the Lessee.  The Lessee shall pay the difference betweenthe rent paid from the adjustment date and the new minimum monthly rent to thelessor within 15 days of receipt of the statement.

 

Base rent forthe first year of the extension term, if any, shall be the fair market rent forcomparable property in the Paso Robles area.

 

“Fair marketrent” as used herein shall mean the fair market rent per square foot forcomparable property in the Paso Robles area as agreed upon by the parties tothis lease.  If the parties are unable toagree on the fair market rent for the Premises for any extension term of this lease,the parties shall agree on one (1) qualified appraiser with not less than five(5) years experience in determining the rental value of commercial realproperty in the Paso Robles area.  Thefees and expenses shall be paid equally by the Lessor, and Lessee.

 

Lessee’sShare of Common Expenses

 

Section 2.04  Lessee shall pay to Lessor, as additionalrent, Lessee’s share of common expenses (as defined in this paragraph), on the1st day of each month following the month the term commences and continuing duringthe term hereof. Lessee’s proportionate share of common expenses shall beTHIRTY ONE percent (31%)  of the totalcommon expenses, which is approximately the ratio that the total number ofsquare feet in the Premises bears to the total number of leaseable square feeton the property on which the Premises are located.  Common expenses that cover a period notwithin the term of this Lease shall be prorated.  Lessor can adjust the monthly common expensescharge at the end of each accounting period on the basis of Lessor’s reasonablyanticipated costs for the following accounting period.  An accounting period is a calendar year,except that the first accounting period shall commence on the date the termcommences, and the last accounting period shall end on the date the termexpires or terminates.

 

“Common expenses” shall meanand include the cost of all commonly metered utilities such as water, trashremoval, common electricity, management fees, and all maintenance and othercosts and expenses incurred by Lessor in maintaining, repairing and/orreplacing any portion of the commonly used areas, including but not limited toany landscaping and parking areas.

 

Within thirty (30) daysafter the end of each accounting period, Lessor shall furnish to Lessee a statementshowing the total actual common expenses for the accounting period, Lessee’sshare of the total actual common expenses for the accounting period, and thepayments made by Lessee with respect

 

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to such accountingperiod.  If Lessee’s share of the totalactual common expenses for the accounting period exceed the payments made byLessee for such period, Lessee shall pay Lessor the deficiency within ten (10)days after receipt of the statement.  IfLessee’s payments made during the accounting period exceed Lessee’s share ofthe total actual common expenses, Lessor shall pay Lessee the excess at thetime Lessor furnishes the statement to Lessee.

 

Personal Property Taxes

 

Section 2.05.  Lessee shall pay before delinquency alltaxes, assessments, license fees, and other charges (taxes) that are levied andassessed against Lessee’s personal property and tenant improvements installedor located in or on the Premises, and that become payable during the term.  On demand by Lessor, Lessee shall furnishLessor with satisfactory evidence of these payments.  If any taxes on Lessee’s personal propertyare levied against Lessor or Lessor’s property, or if the assessed value of thePremises, or building and other improvements in which the Premises are located,is increased by the inclusion of a value placed on Lessee’s personal property,and if Lessor pays the taxes on any of these items or the taxes based on theincreased assessment of these items, Lessee, on demand, shall immediatelyreimburse Lessor for the sum of the taxes levied against Lessor, or theproportion of the taxes resulting from the increase in Lessor’s assessment.Lessor shall have the right to pay these taxes regardless of the validity ofthe levy.

 

RealProperty Taxes

 

Section 2.06.  Lessor shall pay all real property taxes andgeneral and special assessments (“real property taxes”) that may be levied orassessed against the land, buildings and improvements of which the Premises area part.

 

Security Deposit

 

Section 2.07.  (a)  Lessee shall, prior to taking possession of the Premises, deposit withLessor, upon execution hereof, a security deposit in the amount of ($2,500.)Twenty Five Hundred Dollars as security for the full and faithful performanceby Lessee of the terms, conditions and covenants of this lease.  Lessee shall not use any portion of thesecurity deposit for the last month’s rent without the prior written consent ofLessor.

 

(a)   If at any time during the term of this leaseLessee defaults in the payment of rent, or any portion or the rent, includingany additional rent herein described, Lessor may appropriate and apply anyportion of the security deposit reasonably necessary to remedy any suchdefault.

 

(b)   If at any time during the term of this leaseLessee, Lessee’s agents, patrons or employees damage the Premises or any partof the property on which the Premises is located through want of ordinary careor any greater degree of culpability, then Lessor may appropriate and apply anyportion of the security deposit reasonably necessary to fund the necessaryrepair.

 

(c)   If on termination of this tenancy, Lesseefails to surrender and deliver the Premises to Lessor in as good condition asthey are on at the date of possession, reasonable wear and tear excepted,Lessor may appropriate and apply any portion of the security deposit reasonablynecessary to put the Premises to a clean and sanitary condition.

 

(d)   Lessor’s obligations with regard to thesecurity deposit are those of a debtor and not a trustee.  Lessor may maintain the security depositseparate and apart from Lessor’s general funds or may commingle the securitydeposit with Lessor’s general funds or other funds.  Lessee shall not be entitled to any intereston any portion of the security deposit.

 

(e)   If Lessor transfers Lessor’s interest in thePremises in any manner, Lessor or Lessor’s agent shall do one of the followingacts, either of which shall relieve Lessor of further liability with respect tothe deposit.

 

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(i)  Transferthe portion of the security deposit remaining after any deductions authorizedby this section or otherwise authorized by law, if any, to Lessor’s successorin interest, and thereafter notify Lessee by certified mail, return receiptrequested, of that transfer and of the transferee’s name and mailing address.Upon receipt of the security deposit by Lessor’s successor in interest, thesuccessor in interest shall have all of the rights and obligations of Lessorwith respect to the security deposit.

 

(ii)  Returnthe remaining portion of the security deposit, if any, after any deductionsauthorized by this lease or otherwise authorized by law, to Lessee.

 

(f)   Lessor shall return to Lessee the portion ofthe security deposit remaining after deductions authorized by this section orby law, if any, in the following manner:

 

(i)            Ifa deduction has been made only for the nonpayment of rent, the remainingportion, if any, shall be returned not later than two (2) weeks and the dateLessor receives possession of the Premises.

 

(ii)           Ifa deduction has been made for any other reason, the remaining portion, if any,shall be returned not later than thirty (30) days after the date Lessee returnspossession of the Premises to Lessor, unless Lessor needs more time todetermine the cost of curing Lessee’s defaults under this lease, in which caseLessor shall return the remaining portion of the security deposit, if any,within two (2) weeks after completion of the work necessary to cure Lessee’sdefaults.

 

(g)   If during the term of this lease, Lessorapplies all or any portion of the security deposit for a purpose authorized bythis section or otherwise authorized by law, Lessee agrees to restore theamount of the security deposit so applied, plus such additional amountrequested by Lessor (not exceeding twice the amount of the Initial securitydeposit), with the next payment of rent due under this lease.  Lessee’s failure to restore said securitydeposit, plus any additional sum required by Lessor, shall be a material breachof this lease.

 

Late Charges

 

Section 2.04  If any installment of rent or other paymentrequired to be paid by Lessee to Lessor is not paid within five (5) days of thedate on which it is due, a late charge equal to six percent (6%) of the latepayment shall be due from Lessee to Lessor to compensate Lessor for theadditional administrative work caused by such default and to compensate Lessorfor the loss of use of such defaulted payment. The late charge herein shall be in addition to any other remedy whichLessor may have hereunder for such default.

 

Interest on Late Payments

 

Section 2.05  If any payment required to be paid by Lesseeto Lessor is not paid within five (5) days of the date on which it is due, suchpayment shall bear interest at the maximum rate permitted by law from the dateit became due until it is paid by Lessee to Lessor.

 

**ARTICLE3.  USE OF PREMISES**

 

Permitted Use

 

Section 3.01.  The Premises, during the term of this leaseand any extensions thereof shall be used for Financial Services which mayinclude a full service branch bank facility with automated teller and nightdrop services, and for other related activities and for no other purposewithout the prior written consent of Lessor, which consent shall not beunreasonably withheld or delayed.

 

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Lessor’s Control ofNon-leased Areas

 

Section 3.03.  Lessor will retain exclusive management andcontrol of all common areas, including landscaping and parking areas, exteriorsurfaces, partitions, and areas of the exterior perimeter surrounding thePremises.

 

Insurance Hazards

 

Section 3.04.  Lessee shall not commit or permit thecommission of any acts on the Premises nor use or permit the use of thePremises in any manner that will increase the existing rates for or cause thecancellation of any fire, liability, or other insurance policy insuring thePremises or the improvements on the Premises.

 

Waste or Nuisance

 

Section 3.05.  Lessee shall not commit or permit thecommission by others of any waste on the Premises; Lessee shall not maintain,commit, or permit the maintenance or commission of any nuisance as defined inSection 3479 of the California Civil Code on the Premises; and Lessee shall notuse or permit the use of the Premises for any unlawful purpose.

 

Hazardous Materials

 

Section 3.06.  Lessee warrants and represents that duringthe term hereof, and any extensions thereof, Lessee shall not use the Premisesin any manner that would be in violation of any federal, state or local law,ordinance or regulation relating to environmental conditions on, under or aboutthe Property, including but not limited to soil and groundwaterconditions.  Lessee shall not use,generate, manufacture, produce, store or dispose of on, under or about thePremises any hazardous materials, including without limitation, flammablematerials, explosives, asbestos, radioactive materials, hazardous wastes, toxicsubstances or related injurious materials, whether injurious by themselves orin combination with other materials, other than such materials as may benecessary for Lessee’s normal operations on the Premises. Lessee shall notdispose of or permit the disposal of any hazardous materials into the sewersystem serving the Premises.

 

Lessee agrees to indemnify,defend and hold Lessor, its officers, directors, principals, employees andagents, and any successors to Lessor, their directors, officers, principals,employees and agents, harmless from and against any and all liability,including without limitation (1) all foreseeable and unforeseeableconsequential damages, directly or indirectly arising from the use, generation,storage or disposal of hazardous materials by Lessee, its agents, contractors,patrons, subtenants or assignees on the Premises; and (2) the cost of anyrequired or necessary repair, cleanup or detoxification or remediation and thepreparation of any closure or other required plans, whether such action isrequired or necessary before or after the termination of the term hereof, tothe full extent that such liability is attributable, directly or indirectly, tothe presence or use, generation, storage, release, threatened release ordisposal of hazardous materials by Lessee, its agents, contractors, patrons,subtenants or assignees on the Premises during the term hereof. This indemnityshall survive the termination of the term hereof.

 

Compliance With Law

 

Section 3.07.  Lessee shall at Lessee’s own cost and expensecomply with all statutes, ordinances, regulations, existing use permits andrequirements of all governmental entities, both federal and state and county ormunicipal, relating to Lessee’s use and occupancy of the Premises whether suchstatutes, ordinances, regulations, and requirements be now in force orhereinafter enacted.  The judgment of anycourt of competent jurisdiction, or the admission by Lessee in a proceedingbrought against Lessee by any government entity, that Lessee has violated anysuch statute, ordinance, regulation, or requirement shall be conclusive asbetween Lessor and Lessee and shall be grounds for termination of this lease byLessor.  Lessor agrees that anyrequirements of the Municipal, State, or

 

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Federal authorities which requirealteration of Lessor’s building shall not be the responsibility of Lessee,unless required because of an act of Lessee or a use of the Premises by Lessee.

 

**ARTICLE 4.PARKING EASEMENT**

 

Parking Easement

 

Section 4.01.  Lessor hereby grants to Lessee for the termof this lease, including any extensions thereof, a nonexclusive easementappurtenant to the Premises, and/or off-site parking facilities, the right touse in common with other tenants of the property of which all are a part of theparking areas.  Said easement and the useof said easement by Lessee, shall be subject to the following terms andconditions:

 

(1)           All parking areas shall be used only forvehicular parking and for vehicular and pedestrian ingress and egress to thePremises by Lessee’ suppliers, customers, and invitees.

 

(2)           The use of the parking areas shall be subjectto such reasonable rules and regulations as may now exist or hereafter beadopted by Lessor from time to time, in Lessor’s sole discretion.

 

(3)           Lessor grants the non-exclusive use of theentire parking lot, AND Exclusive use of the first Three parking spacesdirectly in front of lessee’s suite. Lessee shall be responsible for the cost of marking these three spacesas exclusive to Lessee.  Markings shallbe limited to painted designations on asphalt within the parking bay or on thecurb directly in front of parking bay. No other signage shall be permitted for this purpose.

 

(4)           Lessee shall not store any vehicles in theparking easement area.  No vehicle shallremain in the parking easement area for more than forty-eight (48) hours.

 

(5)           All parking areas shall be maintained byLessor and the costs of such maintenance shall be shared as a common expense asprovided in Section 2.04 above.

 

(6)           Lessor shall have the sole discretion andright to make changes in said easement and the Common provided ingress to andegress from said Premises is not substantially impaired by such changes.

 

**ARTICLE5.  MAINTENANCE, ALTERATIONS AND REPAIRS**

 

Maintenance

 

Section 5.01.  (a) LESSOR:  Lessor shall, at Lessor’s sole cost andexpense, maintain in good condition and repair the exterior roof, exteriorwalls, structural supports, and the foundations of the Premises. Lessor shallalso, at Lessor’s sole cost and expense, maintain in good condition and repairthe driveways, parking areas, and landscaping. The costs of maintenance andrepair of the driveways, parking areas, landscaping serving the Premises shallbe a common expense as provided in Section 2.04 above.  Lessor shall not be liable for any damages toLessee or the property of Lessee resulting from Lessor’s failure to make anyrepairs required by this section unless written notice of the need for suchrepairs has been given to Lessor by Lessee and Lessor has failed for areasonable period, not exceeding 30 days after receipt of the notice, unlessprevented by causes not the fault of the Lessor, to make the needed repairs;provided, further, that Lessor shall promptly be reimbursed by Lessee for thefull cost of any repairs made pursuant to this section required because of thenegligence or other fault, other than normal and proper use by Lessee or hisguests, agents or sublessees, if any. Lessee shall notify Lessor by personal delivery or certified mail of anyunsafe conditions in or about the said premises.

 

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Lessor shall not be liableto Lessee for any liability relating to any unsafe conditions on the premisesof which Lessee is aware or reasonably should have been aware and for which noticewas not given to Lessor by Lessee.

 

(b) LESSEE:  Except as expressly provided in Section 5.01above, Lessee shall at his own cost and expense keep and maintain all otherportions of the Premises as well as all improvements on the Premises and allfacilities appurtenant to the Premises, including but not limited toelectrical, plumbing, heating and air conditioning in good order and repair andin as safe and clean a condition as they were when received by Lessee fromLessor, reasonable wear and tear excepted.

 

Should Lessee fail tomaintain the Premises as set forth above, Lessor may, at Lessor’s option,perform or contract for the performance of such maintenance for and on behalfof Lessee.  In such event, Lessee shallpromptly on written demand of Lessor reimburse Lessor for all cost and expenseincurred by Lessor in performing Lessee’s obligations hereunder plus interestat the maximum rate permitted by law from the date expended by Lessor to thedate of repayment by Lessee.

 

Alterations and Liens

 

Section 5.02.  Other than permitted Tenant Improvements,Lessee shall not make or permit any other person to make any alterations to thePremises or to any improvement thereon or facility appurtenant thereto withoutthe written consent of Lessor first had and obtained, which consent shall notbe unreasonably withheld. Lessee shall submit detailed plans and specificationsfor any proposed alterations or improvements to the Premises for Lessor’sreview.  Any and all approved alterationsor improvements to the Premises shall be at Lessee’s sole cost andexpense.  Lessee shall keep the Premisesfree and clear from any and all liens, claims, and demands for work performed,materials furnished, or operations conducted on the Premises at the instance orrequest of Lessee. Lessee shall give Lessor not less than ten (10) days priorwritten notice of the commencement of construction of any alterations orimprovement exceeding $3,000.00 so that Lessor may post and maintain on thePremises, and to record as required by law, any notice or notices ofnonresponsiblity provided for under the mechanics lien laws of the State ofCalifornia.  Furthermore, any and allalterations, additions, improvements, and fixtures, except furniture and tradefixtures, made or placed in or on the Premises by Lessee or any other personshall on expiration or sooner termination of this lease become the property ofLessor and remain on the Premises; provided, however, that Lessor shall havethe option on expiration or sooner termination of this lease of requiringLessee, at Lessee’s sole cost and expense, to remove any or all suchalterations, additions, improvements, or fixtures from the Premises.

 

Tenant Improvements

 

Section 5.03. Lessor shallprovide a vanilla shell drywalled, textured and painted, floor covering, dropceilings and (1) bathroom, finished utility services, lighting, and heating andair conditioning, wiring for phone and cable to outer walls.

 

Inspection by Lessor

 

Section 5.04.  Lessee shall permit Lessor or his agents toenter into and upon the Premises during business hours for the purpose ofinspecting the same, or for the purpose of posting notices ofnon-responsibility for alterations, additions or repairs or for the purpose ofplacing upon the property in which the Premises are located any usual orordinary “for sale” signs, without any rebate of rent and without any liabilityto Lessee for any loss of occupation or quiet enjoyment of the Premises therebyoccasioned. Lessee shall permit Lessor, at any time within one hundred twenty(120) days prior to the expiration of this lease, to place upon the Premisesany usual or ordinary “to let” or “to lease” signs, provided that such entriesmade by Lessor hereunder shall not unreasonably interfere with the conduct ofLessee’s business.

 

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Surrender of Premises

 

Section 5.05.  On expiration or sooner termination of thislease, or any extensions or renewals of this lease, Lessee shall promptlysurrender and deliver the Premises to Lessor in as good condition as they areon at the date of possession, reasonable wear and tear excepted.

 

**ARTICLE 6.SIGNS AND TRADE FIXTURES**

 

Signs

 

Section 6.01. Lessee shallprovide signs at lessee’s expense. Signage shall be limited to Monument sign, Building sign, Directorysign, and suite Entrance, provided Lessee agrees to the following:

 

(1)           Comply with the signage ordinances and lawsof the city of Paso Robles:

 

(2)           Upon initial placement of signage, Lesseeshall at lessee’s sole expense maintain signage.

 

(3)           Changes and/or modifications of signage shallbe done by Lessee at Lessee’s sole expense only after Lessor’s written approvaland consent has first been obtained, which consent shall not be unreasonablywithheld or detained;

 

(4)           No signs are attached to, painted upon orplaced in any fashion on the awnings or roof of the building, and

 

(5)           Lessee does not place any decoration,lettering, or advertising matter on the glass of any exterior show window ofthe Premises.

 

Installation and Removal ofTrade Fixtures

 

Section 6.02. Lessee shallhave the right at any time and from time to time during the term of this leaseand any renewal or extension of such term, at Lessee’s sole cost and expense,to install and affix in, to, or on the Premises such items, herein called “tradefixtures”, for use in Lessee’s trade or business as Lessee may, in its solediscretion, deem advisable. Any and all such trade fixtures that can be removedwithout structural damage to the Premises or any building or improvement on thePremises shall remain the property of the Lessee and may be removed by Lesseeat any time or times prior to the expiration or sooner termination of thislease.

 

Unremoved Trade Fixtures

 

Section 6.03. Any tradefixtures described in this Article that are not removed from the Premises byLessee within ten (10) days after the expiration or sooner termination of thislease, regardless of cause, shall be deemed abandoned by Lessee and shallautomatically become the property of Lessor as owner of the real property towhich they are affixed, unless Lessor notifies Lessee, in writing, of Lessor’selection to have Lessee remove such trade fixtures and to repair any damagecaused thereby. Upon such election by Lessor to require Lessee to remove suchtrade fixtures, Lessee shall have fifteen (15) days from the date of suchnotice in which to remove such trade fixtures and repair any damage caused bysuch removal. If Lessee fails to remove such trade fixtures and repair any suchdamage, Lessor may do so at Lessee’s sole cost and expense, including any costsof storing such property.  Such costs andexpenses, if incurred by Lessor for Lessee’s benefit, shall be promptly, uponwritten demand thereof, be reimbursed to Lessor by Lessee, together withinterest at the maximum rate permitted by law from the date expended by Lessorto the date of reimbursement by Lessee.

 

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**ARTICLE7.  INDEMNITY AND INSURANCE**

 

Hold-Harmless Clause

 

Section 7.01.  Lessee agrees to indemnify and hold Lessorand the property of Lessor, including the Premises, free and harmless from anyand all claims, liability, loss, damage, or expenses resulting from Lessee’soccupation and use of the Premises, specifically including, without limitation,any claim, liability, loss, or damage arising by reason of:

 

(a)           The death or injury of any person or persons,including Lessee or any person who is an employee or agent of Lessee, or byreason of the damage to or destruction of any property, including propertyowned by Lessee or any person who is an employee or agent of Lessee, and causedor allegedly caused by either the condition of the Premises, or some act oromission of Lessee or of some agent, contractor, employee, servant, sublessee,or concessionaire of Lessee on the Premises;

 

(b)           Any work performed on the Premises ormaterials furnished to the Premises at the instance or request of Lessee or anyagent or employee of Lessee;

 

(c)           Lessee’s failure to perform any provision ofthis lease or to comply with any requirement imposed on Lessee or the leasedPremises by any duly authorized governmental agency or political subdivision.

 

Liability Insurance

 

Section 7.02.  Lessee shall, prior to the date Lessee takespossession of the Premises and at its own cost and expense,, obtain andmaintain during the entire term of this lease and any renewals or extensionsthereof, a broad form comprehensive coverage policy of public liabilityinsurance issued by an insurance company acceptable to Lessor and authorized toconduct insurance business in the State of California and insuring Lessee andLessor against loss or liability caused by or connected with Lessee’soccupation and use of the Premises under this lease in amounts not less than:

 

(a)           $1,000,000.00 combined single limit forinjury to or death as a result of any accident or incident.

 

(b)           $500,000.00 for damage to or destruction ofany property of others.

 

Such public liabilityinsurance, and property damage insurance shall insure performance by Lessee ofthe indemnity provisions of Section 7.01 above. Both parties shall be named as co-insured, and the policy shall containcross liability endorsements, if available.

 

Every three (3) years,Lessor may increase the amount of public liability and property damageinsurance coverage required hereunder, if at that time the existing coverage isnot adequate in the opinion of Lessor’s insurance broker or lender(s).

 

Fire and Casualty Insurance

 

Section 7.03.  Lessor shall, at Lessor’s sole cost andexpense, at all times during the term hereof, and any extensions thereof, keepall buildings, improvements and other structures on the Premises insured fortheir full replacement cost against loss or destruction by fire and the perils,including vandalism and malicious mischief, commonly covered under standardextended coverage endorsements in San Luis Obispo County, California.  Any loss payable under such policy(s) shallbe paid by the insurance company issuing to Lessor and shall be used to fund therepair or replacement of the damaged building or improvements.

 

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“Full replacement cost” asused herein shall mean the actual cost of replacement for the buildings andother improvements on the Premises, as determined from time to time by Lessor.

 

Business InterruptionInsurance

 

Section 7.04.  Lessee shall, at all times during the term ofthis lease and any extensions thereof, maintain at Lessee’s sole cost andexpense a policy of business interruption insurance, ensuring the rent providedfor in this lease will be paid to Lessor for a period not less than one (1)year in the event the Premises are destroyed or damaged so as to renderoperation of Lessee’s business impossible or impractical by any casualtyinsured against by standard fire and extended coverage insurance.

 

Lessee’s Personal Property

 

Section 7.05.  Lessee shall, at all times during the term ofthis lease and any extensions thereof, maintain at Lessee’s sole cost andexpense an insurance policy issued by a company acceptable to Lessor insuringfor their full insurable value all furniture, fixtures, equipment andalterations or improvements made to the Premises by Lessee against loss ordestruction by fire and the perils commonly covered under the standard extendedcoverage endorsement to fire insurance policies in San Luis Obispo County.  Any loss payable under such insurance shallbe payable to Lessor and Lessee and shall be used to repair or replace suchfurniture, fixtures, equipment and alterations and improvements.

 

Cancellation Clause

 

Section 7.06.  Any policy of insurance required to beobtained and maintained by Lessee under this Article shall be written byinsurance companies authorized to do business in the State of California.  Each such policy of insurance shall expresslyprovide that it cannot be cancelled for any reason or altered in any mannerunless at least thirty (30) days prior written notice has been given to Lessorby the insurance company.

 

Deposit of Insurance withLessor

 

Section 7.07.  Lessee shall, prior to taking possession ofthe Premises and promptly thereafter when any such policy is replaced,rewritten, or renewed, deliver to Lessor a true and correct copy of eachinsurance policy required by this Article of this lease or a certificateexecuted by the insurance company or companies or their authorized agentevidencing such policy or policies.

 

Lessor’s Right to ProcureInsurance

 

Section 7.08. If at any timeLessee fails to procure or maintain the insurance required by this Article,Lessor may obtain that insurance and pay the premiums on it for the benefit ofLessee. Any amounts paid by Lessor to procure or maintain insurance pursuant tothis section shall be immediately due and repayable to Lessor by Lessee withthe next then due installment of rent under this lease. Failure to repay atthat time any amount expended by Lessor shall be considered the same as afailure to pay rent and a default by Lessee under this lease.

 

**ARTICLE8.  DAMAGE, DESTRUCTION OR CONDEMNATION**

 

Duty to Repair or Restore

 

Section 8.01.  If any improvements, including the buildingsand other structures, located on the Premises are damaged or destroyed duringthe term of this lease or any extension thereof, the damage shall be repairedas follows:

 

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(a)  If the damage or destruction is caused by aperil against which fire and extended coverage insurance is required to becarried under this lease, Lessor shall repair that damage as soon as reasonablypossible and restore the Premises and improvements to substantially the samecondition as existed before the damage or destruction, regardless of whetherthe insurance proceeds are sufficient to cover the actual cost of repair orrestoration.

 

(b)  If the damage or destruction is caused by aperil against which insurance is not required to be carried by this lease,Lessor, subject to Lessor’s right to terminate this lease described in Section8.02, shall repair that damage as soon as reasonably possible and restore thePremises to substantially the same condition as existed before the damage ordestruction.

 

(c) Whether the damage ofdestruction is caused either by a peril against which fire and extendedcoverage insurance is required by this lease to be carried or by a perilagainst which insurance is not required to be carried by this lease, Lesseeexpressly waives any right under Civil Code Sections 1931-1933 to terminatethis lease for damage or destruction to the Premises.

 

Termination of Lease forCertain Losses

 

Section 8.02.  (a) Notwithstanding any other provision of this lease, if any improvementslocated on the Premises are damaged or destroyed to such extent it will costmore than $100,000.00 to repair or replace them, and the damage or destructionis caused by a peril against which insurance is not required to be carried bythis lease, Lessor may terminate this lease by giving Lessee written notice ofthe termination. The notice must be given within sixty (60) days after theoccurrence of the damage or destruction.

 

(b)  Lessee or Lessor shall have the right toterminate this lease under either of the following circumstances:

 

(i) If the Premises aredamaged or destroyed from any cause whatsoever, insured or uninsured, and thelaws then in effect do not permit the repair or restoration of the Premisesprovided for in this Article; or

 

(ii) If the Premises aredamaged or destroyed from any cause whatsoever, insured or uninsured, duringthe last year of the term of this lease or any extension thereof (providedLessee has not elected before the date of damage or destruction to extend theterm of this lease in accordance with Section 1.02).

 

(c)  Either party may terminate this lease bygiving written notice of termination to the other party not later than fourteen(14) days after the occurrence of the event giving rise to the right toterminate under subsection (b) above, and such termination shall be effectiveas of the date of the notice of termination. In the event of a termination under subsection (b), Lessee shall not beentitled to collect any insurance proceeds attributable to insurance policiescovering the Premises or improvements except those proceeds attributable toLessee’s personal property and trade fixtures.

 

(d)  If this lease is terminated pursuant toeither subsection (a) or (b) above, the rent and other sums payable by Lesseeto Lessor under this lease shall be prorated as of the termination date. If anysuch sums have been paid in advance by Lessee, Lessor shall refund them toLessee for the unexpired period for which the payment has been made.

 

Time for Construction ofRepairs

 

Section 8.03.  Any and all repairs and restorations ofimprovements required by this Article shall be commenced by Lessor or Lessee,as the case may be, within a reasonable time after the occurrence of the damageor destruction requiring the repairs or restoration; shall be diligentlypursued after being commenced; and shall be completed within a reasonable timeafter the loss. If Lessor is required under

 

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this lease to perform therepairs and restoration, Lessor shall cause the repairs and restoration to becompleted within 180 days after the occurrence of the event causing destructionor Lessee shall have the right to terminate this lease, unless the delays arecaused by events outside the control of Lessor.

 

Total Condemnation

 

Section 8.04.  Should, during the term of this lease or anyrenewal or extension thereof, title and possession of all of the Premises betaken under the power of eminent domain by any public or quasi-public agency orentity, this lease shall terminate as of 12:01 A.M. on the date actual physicalpossession of the Premises is taken by the agency or entity exercising thepower of eminent domain and both Lessor and Lessee shall thereafter be releasedfrom all obligations, except those specified in Section 8.08 of this lease,under this lease.

 

Termination Option forPartial Condemnation

 

Section 8.05.  Should, during the term of this lease or anyextension thereof, title and possession of only a portion of the Premises betaken under the power of eminent domain by any public or quasi-public agency orentity, Lessee may, at Lessee’s option, terminate this lease if more than 35percent of the floor space or more than 55 percent in value of the Premises istaken under the power of eminent domain. Lessee shall exercise its option by giving written notice to Lessorwithin 30 days after actual physical possession of the portion subject to the eminentdomain power is taken by the agency or entity exercising that power. This leaseshall terminate as of 12:01 A.M. on the date the notice is deemed given toLessor but the rent specified in Article 2 of this lease shall be reduced inthe manner specified in Section 8.06 below from the date of taking to the dateof termination of the lease.

 

Partial Condemnation WithoutTermination

 

Section 8.06.  Should Lessee fail to exercise the optiondescribed in Section 7.06 of this lease or should the portion of the Premisestaken under the power of eminent domain be insufficient to give rise to theoption described in Section 8.05 of this lease, then, in that event:

 

(a)           This lease shall terminate as to the portionof the Premises taken by eminent domain as of 12:01 A.M. on the day, hereincalled the “date of taking,” actual physical possession of that portion of thePremises is taken by the agency or entity exercising the power of eminentdomain;

 

(b)           The rent specified in Article 2 of this leaseshall, after the date of taking, be reduced by an amount that bears the sameratio to the rent specified in Article 2 of this lease as the square footagefloor space of the portion of said premise taken under the power of eminentdomain bears to the total square footage floor space of the Premises as of thedate of this lease; and

 

(c)           Lessor, at Lessor’s own cost and expense,will remodel and reconstruct the building remaining on the portion of thePremises not taken by eminent domain into a single efficient architectural unitas soon after the date of taking, or before, as can be reasonably done;provided, however, that the rent specified in this lease shall not be abated orreduced, except as provided in subparagraph (b) of this section, during suchremodeling and reconstruction.

 

Condemnation Award

 

Section 8.07.  Should, during the term of this lease or anyrenewal or extension thereof, title and possession of all or any portion of thePremises to taken under the power of eminent domain by any public orquasi-public agency or entity, the portion of the compensation or damages forthe taking awarded to each of the parties to this lease, Lessor and Lessee,shall belong to and be the sole property of the party Lessor or Lessee, to whomit is awarded.  Lessee shall be entitledto that portion of the compensation or damages awarded for the eminent domaintaking that represents (1) reasonable value of Lessee’s rights under this leasefor the unexpired term of this lease and (2) the cost or loss sustained

 

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by Lessee because of theremoval of Lessee’s trade fixtures, equipment and furnishings from the portionof the Premises taken by eminent domain.

 

Arbitration of CondemnationAward

 

Section 8.08.  Should separate awards not be made to Lessorand Lessee for the taking by eminent domain of all or any portion of thePremises, and should Lessor and Lessee be unable to agree on the manner thetotal award is to be divided between them pursuant to Section 7.08 of thislease, the proper division of the award between Lessor and Lessee shall besettled by arbitration.  Each party shallappoint an arbitrator and the two arbitrators so appointed shall, within amonth after both have been appointed, select a third arbitrator.  The decision of any two of the threearbitrators in writing shall be binding on both Lessor and Lessee.  Should no two arbitrators be able to agreewithin one month after appointment of the third arbitrator, the report of thearbitrator most favorable to Lessor and the report of the arbitrator mostfavorable to Lessee shall both be disregarded and the report of the remainingarbitrator shall be binding on both Lessor and Lessee.  Should either Lessor or Lessee fail toappoint an arbitrator within 15 days after receiving written notice from theother to do so, the arbitrator selected by the other party shall act for bothand his decision in writing shall be binding on both Lessor and Lessee.

 

**ARTICLE9.  DEFAULT, ASSIGNMENT, AND TERMINATION**

 

Subleasing or Assigning asBreach

 

Section 9.01.  Lessee shall not encumber, assign, orotherwise transfer this lease, any right or interest in this lease, or anyright or interest in the Premises or any of the improvements that may now orhereafter be constructed or installed on the Premises without the expresswritten consent of Lessor first had and obtained.  Neither shall Lessee sublet the Premises orany part thereof or allow any other person, other than Lessee’s patrons,agents, servants, and employees, to occupy the Premises or any part thereofwithout the prior written consent of Lessor. A consent by Lessor to one assignment, one subletting, or one occupationof the Premises by another person shall not be deemed to be a consent to anysubsequent assignment, subletting, or occupation of the Premises by anotherperson.  Any encumbrance, assignment,transfer, or subletting without the prior written consent of Lessor, whether itbe voluntary or involuntary, by operation of law or otherwise, is void andshall, at the option of Lessor, terminate this lease.  The consent of Lessor to any assignment ofLessee’s interest in this lease or the subletting by Lessee of the Premises orparts of the Premises shall not be unreasonably withheld.  Any such permitted assignment shall notrelieve Lessee or any person who has personally guaranteed Lessee’s performanceof this lease from any liability under this lease or any such guarantee.

 

Abandonment by Lessee

 

Section 9.02.  Should Lessee breach this lease and abandonthe Premises prior to the natural expiration of the term of this lease, Lessormay:

 

(a)           Continue this lease in effect by notterminating Lessee’s right to possession of the Premises, in which event Lessorshall be entitled to enforce all his rights and remedies under this lease,including the right to recover the rent specified in this lease as it becomesdue under this lease; or

 

(b)           Terminate this lease and recover from Lessee:

 

(i)            The worth at the time of award of the unpaidrent which had been earned at the time of termination of the lease;

 

(ii)           The worth at the time of award of the amountby which the unpaid rent which would have been earned after termination of thelease until the time of award exceeds the amount of rental loss that Lesseeproves could have been reasonable avoided;

 

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(iii)          The worth at the time of award of the amountby which the unpaid rent for the balance of the term of this lease after thetime of award exceeds the amount of rental loss that Lessee proves could bereasonably avoided; and

 

(iv)          Any other amount necessary to compensateLessor for all detriment proximately caused by Lessee’s failure to performLessee’s obligations under this lease.

 

The term “rent” as used inthis section shall mean the base rent, as adjusted to the date of default,additional rent as defined above and any other sums required to be paid byLessee pursuant to the terms of this lease. As used in subsection (i) and (ii) above, the “worth at the time of theaward” shall be computed by allowing interest at the rate of ten percent (10%)per annum.  As used in subsection (iii)above, the “worth at the time of the award” shall be computed by discountingthat amount at the discount rate of the Federal Reserve Bank of San Franciscoat the time of the award plus one percent (1%).

 

# Defaultby Lessee

 

Section 9.03.  Should Lessee default in the payment of anyrent, additional rent or other sum to be paid by Lessee hereunder, and if suchdefault shall continue for a period of five (5) days after written notice thereoffrom Lessor to Lessee, or if Lessee shall default in the performance orobservance of any other term, covenant, obligation, or agreement to beperformed or observed by Lessee, and if such default shall continue for aperiod of ten (10) days after written notice thereof from Lessor to Lessee, orif more than two (2) of any of the foregoing defaults, or any combinationthereof shall occur in any single twelve (12) month period during the termhereof, whether or not the same shall be cured, Lessor shall have, in additionto any other remedies provided for herein or by law, the option to terminatethis lease, re-enter the Premises by process of law and shall have the right torecover from Lessee all of the sums described in Section 8.02(b) above.

 

Insolvency of Lessee

 

Section 9.04.  The insolvency of Lessee as evidenced by areceiver being appointed to take possession of all or substantially all of theproperty of Lessee, or the making of a general assignment for the benefit ofcreditors by Lessee or the filing by or against Lessee of a petition inbankruptcy, shall terminate this lease and entitle Lessor to reenter and regainpossession of the Premises.

 

Right of Entry on Default

 

Section 9.05.  Without limitation of Lessor’s rightscontained elsewhere in this lease or at law, in the event of Lessee’s default,all of Lessee’s fixtures and personal property shall remain on the Premisesand, continuing during the length of said default, Lessor shall have the rightto take exclusive possession of same and shall be entitled to obtain a writ ofattachment of same, with or without notice to Lessee.  Alternatively, Lessor may remove all or anyportion thereof and to place such property in storage for the account of Lesseeand at the expense of Lessee.  Lessorshall have no duty to pay rent or other costs of storage and shall have noliability to Lessee if the property is sold at auction or otherwise.  Upon such entry, Lessor may, at Lessor’soption, relet the Premises or any part thereof to a third party or thirdparties for any term, at any rental, and on any other terms and conditions thatLessor, in its sole discretion may deem advisable, and shall have the right tomake alterations and repairs to the Premises. Lessee shall be liable for all ofLessor’s costs of reletting, including but not limited to remodeling costsrequired for the reletting.  In the eventLessor relets the Premises, Lessee shall pay all rent due under this lease atthe times specified herein, less any amount or amounts actually received byLessor from the reletting.

 

Cumulative Remedies

 

Section 9.06.  The remedies given to Lessor in this Articleshall not be exclusive but shall be cumulative and in addition to all remediesnow or hereafter allowed by law or elsewhere provided in this lease.

 

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Waiver of Breach

 

Section 9.07.  The waiver by Lessor of any breach by Lesseeof any of the provisions of this lease shall not constitute a continuing waiveror a waiver of any subsequent breach by Lessee whether of the same or anotherprovision of this lease.

 

**ARTICLE10  MISCELLANEOUS**

 

Force Majeure - UnavoidableDelays

 

Section 10.01.  Should the performance of any act required bythis lease to be performed by either Lessor or Lessee be prevented or delayedby reason of an act of God, strike, lockout, labor troubles, inability tosecure materials, restrictive governmental laws or regulations, or any othercause except financial inability, not the fault of the party required toperform the act, the time for performance of the act will be extended for aperiod equivalent to the period of delay and performance of the act during theperiod of delay will be excused; provided, however, that nothing contained inthis section shall excuse the prompt payment of rent or other sums by Lessee asrequired by this lease or the performance of any act rendered difficult solelybecause of the financial condition of the party, Lessor or Lessee, required toperform the act.

 

Attorney’s Fees

 

Section 10.03.  (a)  Should any litigation be commenced between the parties to this leaseconcerning the Premises, this lease, or the rights and duties of either inrelation thereto, the party, Lessor or Lessee, prevailing in such litigationshall be entitled, in addition to such other relief as may be granted in thelitigation, to a reasonable sum as and for his attorney’s fees in suchlitigation which shall be determined by the court in such litigation or in aseparate action brought for that purpose.

 

(b)           If Lessor is made a party defendant to anylitigation concerning this lease or the leased Premises or the occupancythereof by Lessee, then Lessee shall hold Lessor harmless from all liability byreason of said litigation, including reasonable attorney’s fees and expensesincurred by Lessor in any such litigation, whether or not any such litigationis prosecuted to judgment, provided however, it is agreed between Lessor andLessee that if the litigation referred to in said Paragraph arises out of no act,fault, or negligence of the Lessee, there shall be no obligation on the part ofLessee to hold harmless the Lessor from said litigation.

 

(c)           If Lessee breaches any term of this lease,Lessor may employ an attorney or attorneys to protect Lessor’s rightshereunder, and in the event of such employment following any breach by Lessee,Lessee shall pay Lessor reasonable attorney’s fees and expenses incurred byLessor, whether or not an action is actually commenced against Lessee by reasonof said breach.

 

Notices

 

Section 10.04.  All notices to be given to Lessee shall begiven in writing personally or by depositing the same in the United Statesmail, postage prepaid, and addressed to Lessee at the Premises, whether or notLessee has departed from, abandoned or vacated the Premises.  All notices to be given to Lessor shall begiven in writing personally or by depositing the same in the United Statesmail, postage prepaid, and addressed to Lessor’s agent, Turn-Key PropertyManagement at P.O. Box 1715, Paso Robles, California, 93447, or at such otherplace or places as Lessor may from time to time designate by written noticedelivered to Lessee.

 

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No Merger

 

Section 10.05.  The voluntary or other surrender of thislease by Lessee, or a mutual cancellation thereof, shall not work a merger, andshall, at the option of Lessor, terminate any existing subleases orsubtenancies or may, at the option of Lessor, operate as an assignment to it ofany of such subleases or subtenancies.

 

Binding on Heirs andSuccessors

 

Section 10.06.  This lease shall be binding on and shallinure to the benefit of the heirs, executors, administrators, successors, andassigns of the parties hereto, Lessor and Lessee, but nothing in this sectioncontained shall be construed as a consent by Lessor to any assignment of thislease or any interest therein by Lessee except as provided in Article 8 of thislease.

 

Partial Invalidity

 

Section 10.07.  Should any provision of this lease be held bya court of competent jurisdiction to be either invalid, void, or unenforceable,the remaining provisions of this lease shall remain in full force and effectunimpaired by the holding.

 

Sole and Only Agreement

 

Section 10.08.  This instrument constitutes the sole and onlyagreement between Lessor and Lessee respecting the Premises, the leasing of thePremises to Lessee, or the lease term herein specified, and correctly sets forthe obligations of Lessor and Lessee to each other as of its date.  Any agreements or representations respectingthe Premises or their leasing by Lessor to Lessee not expressly set forth inthis instrument are null and void.

 

Waiver

 

Section 10.09.  The waiver by Lessor of any breach of anyterm, covenant or condition herein contained shall not be deemed to be a waiverof such term, covenant or condition or any subsequent breach of the same or anyother term, covenant or condition herein contained.

 

Subordination andNon-Disturbance

 

Section 10.10.  (a) This lease is subject and subordinate to all mortgages and deeds oftrust which may hereafter be placed and recorded on the property of which thePremises are a part. and to all renewals, modifications, replacements, andextensions thereof.

 

(b)           The subordination provided for above isconditioned on and subject to the following:

 

(i)            For each mortgage or deed of trust, Lessorshall obtain from the mortgagee or beneficiary a non-disturbance agreement inwriting that, in the event of foreclosure, or any sale thereunder, this leaseshall not be terminated and Lessee’s right to possession under this lease shallnot be disturbed, provided Lessee is not then in default under this lease;

 

(ii)           In consideration of the mortgagee’s orbeneficiary’s agreement not to disturb Lessee’s possession as above provided,Lessee hereby agrees to attorn to the purchaser at any foreclosure, sale orother action or proceeding.

 

(iii)          The subordination described in this sectionshall be effective without the necessity of having any further instrumentsexecuted by Lessee, but Lessee agrees to execute on demand any such furtherinstruments evidencing

 

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subordination that Lessor orany mortgagee or beneficiary may reasonably request.

 

Time of Essence

 

Section 10.11.  Time is expressly declared to be the essenceof this lease.

 

Accord and Satisfaction

 

Section 10.12.  No payment by Lessee or receipt by Lessor ofa lesser amount than the monthly rent stipulated herein or any other sum duehereunder from Lessee to Lessor shall be deemed to be anything other than a paymenton account of the earliest sum then due and owing to Lessor.  No endorsement or statement on any check ofany letter accompanying any check or payment or payment of any sum(s) due fromLessee to Lessor hereunder shall be deemed to be an accord and satisfaction,and Lessor may accept and negotiate any such payment without prejudice toLessor’s right to recover the balance of such rent or other sum or to pursueany other remedy provided for in this lease or by law.

 

Signature Authority

 

Section 10.13.  Each individual executing this Agreement onbehalf of a corporation, partnership or other entity represents or warrantsthat he/she is duly authorized to execute and deliver this Agreement on behalfof said entity, and that this Agreement is binding upon said entity in accordancewith its terms and in no way stands in contravention of any prior agreement towhich said entity is a party.  Onrequest, each party shall furnish the other with evidence of authority.

 

Executed on the day and datefirst above written at Paso Robles, California.

 

 
| **LESSEE**:         |
|---------------------|
|                |
| COAST NATIONAL BANK |
|                |
|                |
| by:                 | /s/ Ricky  Fleischer |   |
|                | RICKY FLEISCHER |
|                | SENIOR VICE PRESIDENT,  CREDIT ADMINISTRATION |
|                |
|                |
| **LESSOR**:         |
| ** **          |
|                |
| HAMON FAMILY TRUST  |
|                |
|                |
| by:                 | /s/ John  Hamon |   |
|                | JOHN HAMON, TRUSTEE |   |

 

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