Document:

Exhibit 10.3

 

Confidential Treatment has been requested for
portions of this exhibit. The copy filed herewith omits the information subject
to the confidentiality request. Omissions are designated as “***”. A complete
version of this exhibit has been filed separately with the Securities and
Exchange Commission.

 

LICENSE AGREEMENT

 

 

between

 

 

BAYER CROPSCIENCE AG

 

 

and

 

 

SENESCO TECHNOLOGIES, INC.

 

	
  Initials LICENSEE:

  	
   

  	
  Initials SENESCO:

  

 

1

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  INTRODUCTION OF THE PARTIES

  	
   

  	
  2

  
	
  2.

  	
   

  	
  PREAMBLE

  	
   

  	
  2

  
	
  3.

  	
   

  	
  DEFINITIONS

  	
   

  	
  2

  
	
  4.

  	
   

  	
  LICENSE GRANT

  	
   

  	
  4

  
	
  5.

  	
   

  	
  IMPROVEMENT

  	
   

  	
  5

  
	
  6.

  	
   

  	
  SUBLICENSE GRANT

  	
   

  	
  5

  
	
  7.

  	
   

  	
  REPORTS

  	
   

  	
  6

  
	
  8.

  	
   

  	
  TRANSFER OF TANGIBLES AND INFORMATION

  	
   

  	
  6

  
	
  9.

  	
   

  	
  MAINTENANCE AND ENFORCEMENT OF PATENTS

  	
   

  	
  6

  
	
  10.

  	
   

  	
  BEST EFFORTS

  	
   

  	
  8

  
	
  11.

  	
   

  	
  CONSIDERATION

  	
   

  	
  8

  
	
  12.

  	
   

  	
  LIMITED WARRANTY. LIMITATION OF LIABILITY

  	
   

  	
  10

  
	
  13.

  	
   

  	
  CONFIDENTIALITY – PUBLICATIONS

  	
   

  	
  11

  
	
  14.

  	
   

  	
  GENERAL PROVISIONS

  	
   

  	
  12

  
	
  15.

  	
   

  	
  TERMINATION DURATION

  	
   

  	
  15

  

 

 

	
  ANNEX I:

  	
   

  	
  Licensed Patents

  
	
  ANNEX II:

  	
   

  	
  Licensed Know-How

  

 

2

 

LICENSE AGREEMENT

 

1.             INTRODUCTION OF THE PARTIES

 

This Agreement is made
effective the 17th day of September 2007, (the “Effective Date”), by and
between:

 

Bayer CropScience AG,

having its registered office at

Alfred-Nobel-Strasse 50,

40789 Monheim,

Germany

(hereinafter referred to as “LICENSEE”)

 

and

 

Senesco Technologies, Inc.,

having its registered office at

303 George Street, Suite 420

New Brunswick, NJ 08901

United States of America

(hereinafter referred to as “SENESCO”)

 

2.             PREAMBLE

 

WHEREAS SENESCO has
developed certain technology related to conferring useful traits, particularly
increased seed Yield, in plants based on modulating the gene expression of
eukaryotic translation initiation factor 5A (“eIF-5A”);

 

WHEREAS LICENSEE desires to
obtain an exclusive license under the Patents and Know-How as hereinafter
defined for research and development and for commercialization of certain
Products as hereinafter defined;

 

NOW THEREFORE, in consideration
of the mutual covenants and agreements set forth below, the Parties HEREBY
AGREE as follows:

 

3.             DEFINITIONS

 

In this Agreement the
following words and expressions shall have the following meaning:

 

3.1           “Agreement”: this agreement, which includes
the preamble and the ANNEXES.

 

3.2           “ANNEX”: the documents marked “ANNEX” and
which form part of this Agreement.

 

3.3           “Affiliate”: any company controlled by, or
under common control with, or controlling LICENSEE, “control” meaning in this
context the direct or indirect ownership of at least forty-nine per cent (49 %)
of the voting stock/shares of a company, or the power to nominate at least half
of the directors, or the power otherwise to determine the policy of a company.

 

3.4           “Effective Date”: the date first written
above.

 

3

 

3.5           “Genes”: the eIF-5A gene described in the
Licensed Patents filed by SENESCO, and its Orthologs in the form of a chimeric
gene to be introduced in Rice. “Ortholog” means any protein having *** or more
overall identity with the protein encoded by the selected base Gene.

 

3.6           “Hybrid”: a BAYER’s best considered hybrid
rice.

 

3.7           “Licensed Patents”: all Patents a) owned by
SENESCO and b) licensed-in, with the right to grant sublicenses, by SENESCO,
which relate to the Licensed Technology, including, without limitation, those
Patents listed in ANNEX I.

 

3.8           “Licensed Know-How”: all information,
sequences, data, results, knowledge, biological material, processes, protocols
and/or algorithms in the possession of SENESCO existing on or before the
Effective Date which a) is not generally available, b) that relates to the use
of Licensed Technology in Arabidopsis and RICE and c) is transferred to
LICENSEE identified as “Know How”. Licensed Know How will be listed in ANNEX
II and will be subject to the confidentiality obligations as set out in
Article 13.

 

3.9           “Licensed Technology”: methods and means to
modulate expression of eIF-5A.

 

3.10         “License Income”: the amounts of royalties
and/or lump sum fees effectively received by LICENSEE from a third party other
than an Affiliate as a remuneration for the grant of a sublicense, without
transfer of biological materials, under the Licensed Patents and/or the
Licensed Know-How.

 

3.11         “Net Sales”: the total amounts received by
LICENSEE for the sale of a Product to any third party (namely, not a LICENSEE
entity) ***.

 

3.12         “Parties”: the parties to this Agreement and “Party”
means one of them.

 

3.13         “Patent”: any pending patent application(s)
and unexpired patent(s) in any country, and any unexpired patent that
subsequently issues upon any patent application and including all patents that
issue on all divisions, continuations, continuations-in-part, reissues,
reexaminations, extensions, Supplementary Protection Certificates, which have
not been adjudicated to be invalid or unenforceable in an unappealable or
unappealed decision of the applicable patent office or court of competent
jurisdiction.

 

3.14         “Product”: any and all Hybrid RICE which
contains the Gene, and which would infringe at least one Valid Claim of the
Licensed Patents in the absence of a license under this Agreement.

 

3.15         “Product Launch”: first commercial sale to a
third party of the first Product to be commercialized.

 

3.16         “Proof of Phenotype”: ***.

 

3.17         “Regulatory Clearance”: ***.

 

3.18         “Rice”: Oryza sativa sp.

 

4

 

3.19         “Territory”: worldwide.

 

3.20         “Valid Claim”: any claim of an issued and
unexpired Patent that has not been finally rejected or declared invalid by a
patent office or court of competent jurisdiction by a decision which is
unappealable or unappealed, or which has not been revoked by an agency of
competent jurisdiction.

 

3.21         “Value Captured”: ***.

 

3.22         “Yield”: The grain quantity harvested from
the field per unit area.

 

3.23         “Yield Increase Percentage”: ***.

 

4.             LICENSE GRANT

 

4.1           SENESCO hereby grants to LICENSEE, an
exclusive worldwide license for RICE under the Licensed Patents and the
Licensed Know-How to use the Licensed Technology to make, have made, sell, have
sold, offer for sale, have offered for sale, import, and use Products in the
Territory and, to otherwise practice and use Licensed Technology.

 

4.2           For the avoidance of doubt, it is stated
expressly that the license granted in Article 4.1 includes the right for
LICENSEE and its Affiliates to subcontract the implementation of activities
covered by the license under responsibility of LICENSEE or its Affiliates,
provided that the subcontractor shall implement such activities for the sole
benefit and under the supervision of LICENSEE or its Affiliates.

 

5.             IMPROVEMENT

 

5.1           LICENSEE shall be the owner of the
proprietary rights in all results obtained and inventions made by LICENSEE or
any of its AFFILIATES by using the Licensed Technology, Licensed Know How,
Licensed Patents under the terms and during the course of this Agreement
(hereinafter “Licensee Improvement”), and has the right to protect these
Licensee Improvements by any means LICENSEE deems appropriate including filing patent
applications in relation thereto.

 

5.2           LICENSEE grants SENESCO a fully paid up
royalty free non-exclusive license on any Licensee Improvement to the Licensed
Technology developed by Licensee and/or its Affiliates through use in whole or
in part of the Licensed Patents, Licensed Know-How and/or Licensed Technology
for use outside RICE and outside the following crops: ***.

 

5.3           Without prejudice to the provisions regarding
improvement set forth in the license agreement dated November 8, 2006 regarding
brassica and the license agreement dated July 17, 2007 regarding cotton, for
purposes of this articles, a Licensee Improvement which is subject to this
Article 5 shall mean an invention, whether protected by Patents or not, that is
only directed to the improved or optimized expression of eIF-5Ain plants (such
as novel eIF-5A genes, novel chimeric genes involving eIF-5A) and shall
specifically not include an invention made by Licensee that is applicable to
the expression of a broader class of genes. In addition, any invention made by
Licensee by using the Licensed Technology to the extent that it is directed or
is applied in relation to RICE shall always be a Licensee Improvement.

 

5

 

6.             SUBLICENSE GRANT

 

From the Effective Date,
LICENSEE is entitled to grant written sublicenses under the Licensed Patents
and Licensed Know-How as licensed under this Agreement, solely in RICE, to its
Affiliates and any third party.

 

7.             REPORTS

 

Upon the first (1st)
anniversary date of this Agreement and every year thereafter LICENSEE shall
provide to SENESCO an annual written report with an overview of the annual
License Income for that respective year.

 

8.             TRANSFER OF TANGIBLES AND INFORMATION

 

Within eight (8) days from
the Effective Date, SENESCO shall provide at no cost materials and data
pertaining to the Licensed Patents and Licensed Know-How available to SENESCO
for LICENSEE’s use in development of Products.

 

With respect to Licensed
Patents SENESCO shall promptly inform LICENSEE of any new patent applications
that are filed related to Licensed Technology and shall provide status updates
on the Licensed Patents on an annual basis.

 

9.             MAINTENANCE AND ENFORCEMENT OF PATENTS

 

9.1           SENESCO shall have the right to file,
prosecute, maintain and defend, at its own discretion and at its own cost, any
and all Licensed Patents. However, SENESCO shall use its best efforts to have
patents granted with a scope covering the Licensed Technology and its use in
RICE at least in *** to the extent that securing patent protection for any part
of the Licensed Patents in these countries is still possible at the Effective
Date. If at any time and for whatever reason SENESCO decides to abandon or
withdraw any of the Licensed Patents pertaining to any of the above mentioned
countries without the remainder of the Licensed Patents in that country
providing such scope, SENESCO shall provide LICENSEE notice of its intent
hereof. If LICENSEE agrees that the Licensed Patents that would remain in such
country after such abandonment or withdrawal would not or could not
sufficiently cover the Licensed Technology and its use in RICE in such country,
LICENSEE may object to such abandonment or withdrawal in which case SENESCO
shall continue to prosecute, maintain and/or defend such Licensed Patent that
it intended to abandon or withdraw. In case such Licensed Patent is a pending
patent application or an issued patent that is challenged by a third party,
SENESCO may request LICENSEE to assist in the prosecution and/or defense of
such Licensed Patent after which, in the absence of a joint decision by the
Parties otherwise, LICENSEE will use its best efforts to provide such
assistance at its own cost. At least once a year SENESCO will provide to
LICENSEE a status update of the Licensed Patents in the abovementioned countries
with a copy of all the claims that are pending or issued in all Licensed
Patents in such country.

 

9.2           As soon as SENESCO has filed, or has obtained
rights on, a new Licensed Patent which contains information or data not
contained in a Licensed Patent which is already published or previously
communicated by SENESCO to LICENSEE, SENESCO shall provide LICENSEE with a copy
of such Licensed Patent (for instance a patent application on a new invention
related to the Licensed Technology). Such Licensed

 

6

 

Patent
and all information and data contained therein shall be subject to the
confidentiality obligations of Article 13.

 

9.3           SENESCO shall not have the right to
voluntarily terminate any license to a Patent of the Licensed Patent which it
has licensed from a third party and which is sublicensed to Licensee pursuant
to this Agreement. However, nothing in this paragraph shall interfere with
SENESCO’s rights to terminate such license under circumstances where this
Agreement is terminated under the provisions of Article 15.

 

9.4           Either Party shall notify the other Party
promptly in writing of any act of infringement of the Licensed Patents.

 

With regard to any acts of
infringement of the Licensed Patents involving the use of Licensed Technology
in RICE, LICENSEE will have the exclusive right and will be solely responsible
for taking any action or suit for patent infringement of the Licensed Patents
against such acts and to conduct such action or suit in accordance with its
best judgment and at its own cost. Such right shall include the right to enter
into settlements involving the Licensed Patents but only in so far as the terms
and conditions of such settlement have effect solely with regard to the use of
Licensed Technology in RICE. Upon LICENSEE’s request, SENESCO shall provide
reasonable assistance to LICENSEE in connection with such action or suit and
SENESCO shall sign such documents as may be required by applicable law in order
to allow LICENSEE to exercise its right to bring and/or conduct an action or
suit pursuant to this Article 9.4. LICENSEE will reimburse SENESCO for any
reasonable out of pocket expenses, which are documented in writing, incurred by
SENESCO for rendering such assistance. LICENSEE will keep SENESCO continuously
informed of any actions or suits pursuant to this subparagraph of this Article
9.4. SENESCO shall have the right to participate in all decisions and actions
concerning the validity of any Licensed Patent claim, including the right to
join as a party any such action for infringement brought by or against LICENSEE
where a defense or claim of patent invalidity or unenforceability has been or
will be raised. SENESCO shall have the right to retain to its own counsel for
the purpose of defending the validity or enforceability of any Licensed Patent
claim. Any costs incurred by SENESCO in relation to this involvement will be
born by SENESCO.

 

With regard to any acts of
infringement of the Licensed Patents involving the use of the Licensed
Technology in plants other than RICE, SENESCO shall have the exclusive right
and will be solely responsible for initiating and conducting any action or suit
for patent infringement of the Licensed Patents against such acts and to
conduct such action or suit in accordance with its best judgment and at its own
cost and LICENSEE will have no obligations with regard to such action or suit.

 

10.           BEST EFFORTS

 

LICENSEE shall use its best
efforts to develop and commercialize Products incorporating the Licensed
Technology.

 

7

 

11.           CONSIDERATION

 

11.1         Milestone payments

 

LICENSEE agrees to pay to SENESCO milestone fees in
the amount of:

a.     at signature: $***;

b.     at Proof of Phenotype in the field in an *** $ ***; and

c.     at Proof of Phenotype in the field in a *** $ ***; and

d.     at submission to the relevant authority of first regulatory package for
the first Product for which regulatory approval is sought for commercialization
in the first country: $***; and

e.     at Regulatory Clearance in the first country: $US ***.

 

The milestone payments
contemplated in this Article are due within thirty (30) days after the specific
milestone has been reached.

 

11.2         Royalties

 

11.2.1.     Upon Product Launch LICENSEE will pay to SENESCO a royalty based on
Yield increase attributable to Licensed Technology and Licensee Improvement in
that Product. Such *** shall consist of *** by LICENSEE. However, *** by
LICENSEE to growers for ***will be *** from ***.

 

11.2.2.     Performance Based Royalty. In consideration of the license under the Licensed
Patents granted herein and of the undertakings of SENESCO hereunder, LICENSEE
shall pay to SENESCO a royalty with respect to each Product sold equal to the
percentage set forth below of the *** by LICENSEE that is applicable to such
Product, such royalty rate to be determined in accordance with *** attributable
to the Product (determined as set forth in Article 11.6 below) as set forth
below.

 

Such
performance-based royalty fees will be as follows:

 

a.             Yield Increase Percentage ***;

b.             Yield Increase Percentage equal or greater
than *** : *** on the *** by LICENSEE;

c.             Yield Increase Percentage equal to or greater
than *** : *** on the *** by LICENSEE;

d.             Yield Increase Percentage equal to or greater
than *** : *** on the *** by LICENSEE.

e.             Yield Increase Percentage equal to or greater
than *** : *** on the *** by LICENSEE;

 

11.2.3.     The royalties due pursuant to this Article 11.2 shall be payable on a country
by country basis until the expiration of the last to expire of the Patents
within such Licensed Patents in such country.

 

11.2.4.     Each Party shall use reasonable and legal efforts to reduce tax on withholding
payments to be made to the other Party. If tax withholdings under the laws of
any country are required with respect to payments to the other Party, each
Party may

 

8

 

reduce such payment by the amount of such required
withholding and then transfer it to the appropriate government authority.

 

11.3         LICENSEE will pay to SENESCO *** of any
License Income.

 

11.4         Both Parties acknowledge that in case of
early termination by LICENSEE pursuant to Article 15.3, no more further
payments are due under this Article 11.

 

11.5         Payments shall be made by LICENSEE in US
Dollars (US$), to a bank account to be designated by SENESCO. If LICENSEE is
required by law to retain withholding taxes, the Parties shall co-operate to
complete the documents required by applicable laws or double tax treaties.

 

11.6         Determination of Yield Increase, Value
Captured and License Income.
The LICENSEE determines the values of Yield Increase Percentage, Value Captured
by LICENSEE and License Income. Yield Increase Percentage will be determined ***,
if relevant, prior to commercial launch. In the event that SENESCO does not
agree with any of the aforesaid values, it may require a process of
determination by expert opinion, in accordance with the procedure provided
below.

 

After notice of SENESCO is delivered to LICENSEE, the Parties will
agree on an acceptable independent expert. LICENSEE and SENESCO shall then each
present to the expert their proposed values for Yield Increase Percentage,
Value Captured by LICENSEE and/or License Income, as applicable, and the
rationales and data used for determining such value. Such submission will be
made no later than *** from the original requirement for determination.
LICENSEE will pay, with its submission, the remuneration amount resulting from
LICENSEE’s proposed values. In respect of each value on which determination was
requested, the expert will adopt, without any modification, the value proposed
by either LICENSEE or SENESCO which is closest to the expert’s assessment of
the correct value. The selection of the expert will be binding on the Parties
as if both of them have consented to it; where applicable, LICENSEE will pay
the excess within 15 days of the expert determination. SENESCO shall bear the
costs relating to the expert’s services unless the expert’s assessment of the
value differs from LICENSEE’s by more than 5%, in which case LICENSEE shall
reimburse SENESCO for all reasonable expert costs evidenced by invoices.
SENESCO shall bear the costs relating to the expert’s services unless the
expert’s assessment of the Value Captured and License Income value(s) differs
from LICENSEE’s by more than 10%, in which case LICENSEE shall reimburse
SENESCO for all reasonable expert costs evidenced by invoices.

 

12.           LIMITED WARRANTY. LIMITATION OF LIABILITY

 

12.1         SENESCO represents and warrants that:

 

12.1.1.     SENESCO has the power, authority and capacity to enter into this Agreement
and the right to grant the license herein granted;

 

12.1.2.     Nothing in this Agreement shall be construed as a warranty or representation
as to the validity of any Patent;

 

12.1.3.     Nothing in this Agreement shall be construed as a warranty or representation
that anything developed, made, used, imported, or sold under any license under
this

 

9

 

Agreement is or will be free from infringement of
domestic or foreign patents of third parties.

 

12.2         LICENSEE represents and warrants that
LICENSEE has the right to enter into this Agreement and perform its obligations
hereunder.

 

12.3         Nothing in this Agreement shall be deemed to
be or construed as conferring by implication or otherwise any license or rights
under any patents of SENESCO other than under the Licensed Patents, provided
however that SENESCO will not assert any patent rights owned or licensed in by
SENESCO 1) against LICENSEE’s legitimate use of the Licensed Technology and
Licensed Know-How in the framework of its research and development activities
under this Agreement and 2) against the commercial use of any product for which
remuneration is paid, or is expected to be paid pursuant to Article 11.2 of
this Agreement. For the avoidance of doubt, a Product incorporating a Licensee
Improvement will be subject to the payment of a Product Launch fee in
accordance with Article 11.2.

 

12.4         Neither Party shall be liable for any
indirect, special, incidental or consequential damages in connection with this
Agreement and its implementation.

 

12.5         LICENSEE does not guarantee that its
activities pursuant to this Agreement will lead to any specific result.

 

12.6         LICENSEE shall not be liable for the
consequences of its decisions or actions under Article 9 except for gross
negligence and willful misconduct.

 

12.7         SENESCO makes no express or implied
warranties of merchantability or fitness for a particular purpose with respect
to the invention.

 

13.           CONFIDENTIALITY – PUBLICATIONS

 

13.1         Each Party (the “Receiving Party”) will keep
any information and material or part thereof received from the other Party (the
“Disclosing Party”) or accrued by the Receiving Party pursuant to this
Agreement (including development reports) strictly confidential and will not
disclose same to any other party, except to those employees or consultants of
the Receiving Party or its Affiliates (with respect to LICENSEE) to whom it
will be strictly necessary to grant access thereto for the purpose referred to
in this Agreement, and who have executed undertakings securing their compliance
with this Agreement.

 

However, the foregoing confidentiality obligations shall not apply to
information or material which:

 

•      was in the Receiving Party’s
and/or its Affiliates’ (with respect to LICENSEE) possession and at its free
disposal prior to disclosure by the Disclosing Party as evidenced by written
records then in the possession of the Receiving Party; or

•      was in the public domain at
the time of disclosure by the Disclosing Party; or

•      subsequently comes into the
public domain through no fault, action or omission of the Receiving Party; or

•      becomes available to
Receiving Party without any obligation of confidence from a third party having
the right to transmit same;

•      is required to be disclosed
in order to permit commercialization activities in accordance with the license
granted by SENESCO pursuant to Article 4.1.;

 

10

 

•      is developed independently
by the Receiving Party without reference to the Disclosing Party’s information
or material.

 

13.2         The foregoing shall not prevent LICENSEE from
making available information received from SENESCO to patent attorneys and
patent offices when filing, prosecuting, maintaining and defending patent
applications pursuant to this Agreement.

 

13.3         The foregoing shall not prevent SENESCO from
issuing press releases concerning the existence of this Agreement and progress
made under this Agreement. However, a draft of any such press release shall
first be made available to LICENSEE at least one (1) week prior to such
publication for LICENSEE’s approval as to its content, such approval not to be
unreasonably withheld. Both Parties acknowledge that no press release will be
issued before this Agreement is fully and duly executed by all Parties.

 

13.4         The foregoing shall not prevent either Party
to disclose information in order to comply with any applicable law or if
required to do so by order of any court or other judicial or administrative
body, including the SEC, provided that prior to making such disclosure the
receiving Party gives the disclosing Party notice of the requirement of
disclosure and the information to be disclosed and the opportunity if available
to seek a protective order.

 

14.           GENERAL PROVISIONS

 

14.1         Notices

 

14.1.1.     Any notice or other communication given under this Agreement must be in
writing in the English language and signed by or on behalf of the Party giving
it and must be served by one of the following methods:

 

a.             delivering it personally;

 

b.             sending it by pre-paid recorded delivery or
registered post or by registered airmail;

 

c.             sending it by fax;

 

d.             to the address and for the attention of the
relevant Party specified hereinafter (or as otherwise notified by that Party
for the purpose of this Agreement).

 

14.1.2.     A notice will be deemed to have been received:

 

a.             if delivered personally, at the time of
delivery;

 

b.             in the case of pre-paid recorded delivery or
registered post, 48 hours from the date of posting;

 

c.             in the case of fax at the time of
transmission;

 

provided that if deemed receipt occurs before 9am (local time) on a Business
Day the notice will be deemed to have been received at 9am (local time) on that
day, and if deemed receipt occurs after 5pm (local time) on a Business day, or
on a day which is not a Business Day, the notice will be deemed to have been
received

 

11

 

at 9am (local time) on the next Business Day. For the purpose of this
clause, “Business Day” means any day which is not a Saturday, a Sunday, or a
public holiday in the place at or to which the notice is left or sent.

 

14.1.3.     The addresses and fax numbers of the Parties for the purpose of this Article
14.1 are:

 

for LICENSEE:

Bayer CropScience AG

Alfred-Nobel-Strasse 50,

40789 Monheim

Germany

Attention: General Counsel

Fax number: ++ 49 2173/38 51 43

 

With a copy to:

Bayer BioScience N.V.

Technologiepark 38

9052 Gent

Belgium

Attention: Managing Director

Fax number: ++32 9/223 38 55

 

for SENESCO:

Senesco Technologies, Inc

303 George St., Suite 420

New Brunswick, NJ 08901

United States of America

Attention: Sascha Fedyszyn, Vice President Corporate Development

Fax number: ++ 1 (732) 296-9292

 

or such other address or facsimile number as may be notified from time to
time by the relevant Party to the other Party.

 

14.1.4.     To prove service it will be sufficient to prove that:

 

a.             the envelop containing the notice was
addressed to the address of the relevant Party set out in Article 14.1.3 or as
otherwise notified in writing by that Party for the purpose of this Agreement
and delivered either to that address or into the custody of the postal authorities
as a pre-paid recorded delivery, registered post or airmail letter; or

 

b.             the notice was transmitted by fax to the fax
number of the relevant Party set out in Article 14.1.3 or as otherwise notified
in writing by that Party.

 

14.1.5.     For the avoidance of doubt, notice given under this Agreement will not
be validly served if sent by e-mail.

 

12

 

14.2         Applicable law and Arbitration

 

The Agreement shall be
governed by and construed in accordance with the laws of the United States and
the State of New Jersey. All disputes arising in connection with the present
Agreement shall be resolved in the state and/or federal courts in New Jersey.

 

14.3         Entireness of Covenants

 

This Agreement including its
ANNEXES, when dated and signed by each of the Parties, form an indivisible
whole, comprising the entireness of what has been agreed between the Parties in
connection with the subject matter of this Agreement and replacing and
superseding all prior covenants between the Parties relating to the subject
matter of this Agreement.

 

14.4         Amendments

 

This Agreement may be
amended only by a written document signed by duly authorized representatives of
the Parties.

 

14.5         Number of Copies

 

This Agreement is being
executed in two (2) copies. Each of those copies shall be deemed to be an
original and each Party shall retain such a signed original.

 

14.6         Descriptive Headings

 

The descriptive headings in
this Agreement are for convenience only and shall not be interpreted so as to
limit or affect in any way the meaning of the language in the pertaining
Article, Section, Paragraph or Sub-paragraph.

 

14.7         Assignability

 

14.7.1.     Neither Party shall have the right to assign its rights and/or
obligations under this Agreement to any third party without the prior written
consent of the other Party, except as expressly stated in this Agreement.

 

14.7.2.     SENESCO shall have the right to assign its rights and obligations under
this Agreement to any entity that acquires all or substantially all of its
assets.

 

14.7.3.     LICENSEE shall have the right to assign its rights and obligations
under this Agreement to its Affiliates or successors, and SENESCO hereby consents
to such assignment.

 

14.8         Severability

 

Should any provision of this
Agreement be illegal, invalid or unenforceable under applicable law, the
remaining provisions of this Agreement shall be construed as if such illegal,
invalid or unenforceable provision had not been contained herein. The Parties
shall attempt to negotiate a provision replacing such provision and providing comparable
benefits to each Party, but in the event that such negotiations relating to any
such provision that is material do not result in agreement within ninety (90)  days, either Party shall have the right to
terminate this Agreement by ninety (90) days written notice to the other Party.

 

13

 

14.9         No Strict Construction

 

The language used in this
Agreement shall be deemed to be the language chosen by both Parties hereto to
express their mutual intent and no rule of strict construction against either
Party shall apply to any term or condition of this Agreement.

 

14.10       Relationship of Parties

 

Nothing contained in this
Agreement shall be construed as creating a partnership, joint venture, agency,
franchise or an association of any kind between the Parties or otherwise.

 

14.11       Authorities

 

The persons signing on
behalf of SENESCO and LICENSEE hereby warrant and represent that they have
authority to execute this Agreement on behalf of the party for whom they have
signed.

 

15.           TERMINATION DURATION

 

15.1         This Agreement shall enter into force on the
Effective Date and shall remain in full force and effect until the expiration
of the last to expire Licensed Patents or until all Licensed Know-How has
become part of the public domain whichever is later, except if terminated
prematurely as set forth hereinafter.

 

15.2         Notwithstanding the foregoing, each Party
shall have the right to terminate this Agreement upon giving not less than
thirty (30) days written notice to the other if the other Party commits a
material breach of this Agreement which in case of a breach capable of remedy
shall not have been remedied within sixty (60) days of the receipt by it of
such notice.

 

15.3         LICENSEE has the right to terminate this
Agreement at any time giving not less than thirty (30) days written notice to
SENESCO. At termination, the license granted to Licensee hereunder shall
immediately cease and LICENSEE shall immediately destroy, or at the request of
SENESCO return, all Licensed Know- How in its possession.

 

15.4         Articles 5.2, 12, 13, 14 and 15.4 shall
survive the expiration or early termination of this Agreement. Articles 12 and
13 shall survive the expiration or early termination of this Agreement for five
(5) years.

 

14

 

IN WITNESS WHEREOF, the
parties caused this Agreement to be executed in two (2) copies by their duly
authorized and empowered representatives.

 

	
  Senesco
  Technologies, Inc.

  	
  Bayer
  CropScience AG,

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Bruce C.
  Galton

  	
   

  	
  /s/ Dr. G.
  Merchand

  	
   

  
	
  Name: Bruce
  C. Galton

  	
  Name: Dr. G.
  Merchand

  
	
  Title:
  President & CEO

  	
  Title:
  General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Philippe
  Walker

  	
   

  
	
   

  	
  Name:
  Philippe Walker

  
	
   

  	
  Title: Head
  of Business Development

  
				

 

 

15

ANNEX I

to the

License Agreement

between

Bayer CropScience AG

and

Senesco Technologies, Inc.

 

Licensed Patents

 

Any Patent, in any country
of the world, claiming or having claimed priority of patent applications:

 

***

 

*** filed on *** which
includes:

Provisional *** filed ***

Provisional *** filed ***

Provisional *** filed ***

Provisional *** filed ***

 

*** filed on *** which
includes:

Provisional *** filed ***

Provisional *** filed ***

Provisional *** filed ***

Provisional *** filed ***

 

including, but not limited
to:

 

***

***

***

***

***

***

 

***

***

***

***

***

***

***

***

***

 

***

***

***

 

***

***

***

***

***

 

ANNEX I 1

 

***

***

***

***

***

***

 

***

***

***

***

***

***

***

***

***

***

***

 

***

***

***

***

***

***

***

***

***

***

***

***

 

***

***

***

***

***

***

***

***

***

***

***

***

 

ANNEX I 2

 

ANNEX II

to the

License Agreement

between

Bayer CropScience AG

and

 

Senesco Technologies, Inc.

 

Licensed Know-How

 

Intentionally
left blank:

Information will be
added later on by Senesco Technologies, Inc.

 

 

ANNEX II 1Exhibit 10.1

 

KAVENISH IVANHOE, LTD LP

7817 IVANHOE

LA JOLLA, CA 92037

 

STANDARD OFFICE LEASE

 

TABLE OF CONTENTS

 

	
  ARTICLE
  1

  	
   

  	
  BASIC
  TERMS

  
	
  ARTICLE
  2

  	
   

  	
  LEASE
  TERM

  
	
  ARTICLE
  3

  	
   

  	
  MINIMUM
  MONTHLY RENT

  
	
  ARTICLE
  4

  	
   

  	
  ADDITIONAL
  RENT

  
	
  ARTICLE
  5

  	
   

  	
  CONSTRUCTION
  OF PREMISES

  
	
  ARTICLE
  6

  	
   

  	
  USE
  OF PREMISES

  
	
  ARTICLE
  7

  	
   

  	
  HAZARDOUS
  MATERIALS

  
	
  ARTICLE
  8

  	
   

  	
  PARKING
  AND COMMON USE AREAS AND FACILITIES

  
	
  ARTICLE
  9

  	
   

  	
  SIGNS,
  FIXTURES, ALTERATIONS, IMPROVEMENTS

  
	
  ARTICLE
  10

  	
   

  	
  CONDITION
  OF PREMISES MAINTENANCE, REPAIRS AND ALTERATIONS

  
	
  ARTICLE
  11

  	
   

  	
  DAMAGE
  OR DESTRUCTION

  
	
  ARTICLE
  12

  	
   

  	
  CONDEMNATION

  
	
  ARTICLE
  13

  	
   

  	
  ASSIGNMENT
  AND SUBLETTING

  
	
  ARTICLE
  14

  	
   

  	
  DEFAULTS;
  REMEDIES

  
	
  ARTICLE
  15

  	
   

  	
  PROTECTION
  OF CREDITORS AND OTHERS

  
	
  ARTICLE
  16

  	
   

  	
  LEGAL
  COSTS

  
	
  ARTICLE
  17

  	
   

  	
  TENANT’S
  INSURANCE

  
	
  ARTICLE
  18

  	
   

  	
  MISCELLANEOUS
  PROVISIONS

  
	
  ARTICLE
  19

  	
   

  	
  CERTAIN
  RIGHTS RESERVED BY LANDLORD.

  
	
  ARTICLE
  20

  	
   

  	
  RULES
  AND REGULATIONS

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  “A”

  	
   

  	
  MAP
  OF SPACE

  
	
  EXHIBIT
  “B”

  	
   

  	
  TENANT’S
  WORK

  
	
  EXHIBIT
  “C”

  	
   

  	
  CONFIRMATION
  OF LEASE TERM

  
	
  EXHIBIT
  “D”

  	
   

  	
  MINIMUM
  MONTHLY RENT SCHEDULE

  
	
  EXHIBIT
  “E”

  	
   

  	
  [Intentionally
  Omitted.]

  
	
  EXHIBIT
  “F”

  	
   

  	
  RIDER
  OPTION

  
	
  EXHIBIT
  “G”

  	
   

  	
  SIGNAGE

  
	
  ADDENDUM

  	
   

  	
  LANDLORD
  & TENANT AGREEMENTS

  

 

	
  Landmark National Bank

  	
  Initials 

  	
  [ILLEGIBLE]

  
	
  Office Lease

  	
   

  	
  [ILLEGIBLE]

  
	
  30182-00001 / 1798316.8 [Word]

  	
   

  	
  1/7/03

  

 

 

 

STANDARD OFFICE LEASE

 

ARTICLE 1

 

BASIC TERMS

 

This
Article One contains the Basic Terms of this lease (“Lease”) between the
Landlord and Tenant named below and defines various terms used in the Lease.
Other Articles, Sections and Paragraph of the Lease referred to in this Article
1 explain and define the Basic Terms and are to be read in conjunction with the
Basic Terms.

 

	
  Section
  1.1

  	
   

  	
  Effective
  Date:  (See Section 19.20) January 9, 2003

  
	
   

  	
   

  	
   

  
	
  Section
  1.2

  	
   

  	
  Landlord:

  	
  KAVENISH
  IVANHOE, LTD. LP

  
	
   

  	
   

  	
   

  	
  c/o
  Ralston Real Estate

  
	
   

  	
   

  	
   

  	
  1125
  Loma Avenue PMB #142

  
	
   

  	
   

  	
   

  	
  Coronado,
  CA 92118

  
	
   

  	
   

  	
   

  	
  (619)
  237-5450

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section
  1.3

  	
   

  	
  Tenant:

  	
  LANDMARK
  NATIONAL BANK

  
	
   

  	
   

  	
   

  	
  Address
  Of Tenant Prior to

  
	
   

  	
   

  	
   

  	
  Commencement
  of Term:

  	
  937
  Lomas Santa Fe Drive

  
	
   

  	
   

  	
   

  	
   

  	
  Solana
  Beach, CA 92075

  
						

 

Section
1.4                                      Premises:   Suite 100 in the Project, having an area of
approximately 7008 rentable square feet and located on the ground floor of the
Project, as indicated by crosshatching on the site plan of the Project,
attached hereto as Exhibit “A” and made part hereof.

 

Section
1.5                                      Project:   The building of which the Premises are a part (the “Building”)
and any other buildings or improvements on the real property (the “Property”)
located at 7817 Ivanhoe, La Jolla, CA 92037 and further described as Exhibit “A”
(collectively, the “Project”).

 

Section
1.6                                      Lease Term:   (See Article 2) 15 (Fifteen) years and 0 (Zero)
months following the Commencement Date as defined in Section 1.7.

 

Section
1.7                                      Commencement Date:    (See Article 2) The later
to occur of:

 

(a)                                  Forty-eight (48) hours following the
termination of the existing lease of the Premises between Landlord and the
existing tenant, U.S. Bank (“U.S. Bank Lease”); provided, however, in the event
the U.S. Bank Lease has not terminated on or before February 1, 2003, Lessee
shall have the option to terminate this Lease on or before May 1, 2003, and
upon such termination neither party shall have any further obligation to the
other, except that each party shall be obligated to return to the other party
any funds delivered to that party before the date of such termination. Landlord
shall give Tenant notice of the termination of the U.S. Bank Lease, immediately
upon Landlord’s receipt thereof;

 

(b)                                 February 1, 2003, provided Landlord has
delivered possession of the Premises to Tenant; and

 

(c)                                  Following satisfaction of each of the
contingencies set forth in Section 1.18 below.

 

Section
1.8                                      Permitted Uses:   (See Article 6.) General
Office, financial services, and Bank Use, including but not limited to
Automated Teller Machines (“ATM”).

 

Section
1.9                                      Tenant’s Guarantor:   (If None, so state.) None.

 

Section
1.10                                Security Deposit:   (See Section 3.3)
$16,000.00.

 

Section
1.11                                Minimum Monthly Rent:   (See Section 3.1) Sixteen
Thousand and no/100 Dollars ($16,000.00) per month, subject to adjustment as
set forth in Section 3.2; provided, however, the Minimum Monthly Rent and any
Additional Rent shall be abated until the later of (i) the Commencement Date,
and (ii) February 1, 2003. No Minimum Monthly Rent shall be due or payable
until all of the contingencies in Sections 1.7 and 1.18 have been satisfied.

 

	
  Landmark National Bank

  	
  Initials 

  	
  [ILLEGIBLE]

  
	
  Office Lease

  	
   

  	
  [ILLEGIBLE]

  
	
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Section
1.12                                Tenant’s Pro Rata Share:   (See Article 4) 20.97%.

 

Section
1.13                                Tenant’s Estimated Additional Rent:   $5,256.00 per month,
initially, subject to change as provided in Article 4.

 

Section
1.14                                Insurance Limit:           (See Section 17.3) ($1,000,000.00).

 

Section
1.15                                Riders:           The following Exhibits are attached hereto
and incorporated into this Lease:

 

	
  EXHIBIT “A”

  	
   

  	
  MAP OF SPACE

  
	
  EXHIBIT “B”

  	
   

  	
  TENANT’S WORK

  
	
  EXHIBIT “C”

  	
   

  	
  CONFIRMATION OF LEASE TERM

  
	
  EXHIBIT “D”

  	
   

  	
  MINIMUM MONTHLY RENT SCHEDULE

  
	
  EXHIBIT “E”

  	
   

  	
  [intentionally omitted.]

  
	
  EXHIBIT “F”

  	
   

  	
  RIDER OPTION

  
	
  EXHIBIT “G”

  	
   

  	
  SIGNAGE

  
	
  ADDENDUM

  	
   

  	
  LANDLORD & TENANT AGREEMENTS

  

 

 

Section
1.16                                [Intentionally Omitted.]

 

Section
1.17                                Parking:     Tenant shall be permitted to park cars in the
area(s) designated by Landlord for parking pursuant to the attached Addendum.
Tenant shall abide by any and all reasonable parking regulations and rules
established from time to time by Landlord and Landlord’s parking operator. Except
as set forth on the Addendum, Landlord reserves the right to separately charge
Tenant’s guests and visitors for parking.

 

Section
1.18                                Contingencies.

 

(a)                                  Tenant’s obligations pursuant to this Lease
shall be contingent upon the full approval of the Federal Deposit Insurance
Corporation (“FDIC”) and the Comptroller of the Currency of Lessee’s opening
and operation of a banking office at the Premises. In the event Tenant does not
receive such approval on or before February 1, 2003, or Tenant receives a
disapproval, Tenant shall have the option to terminate this Lease on or before
May 1, 2003, and upon such termination neither party shall have any further
obligation to the other, except that each party shall be obligated to return to
the other party any funds that were delivered to that party before the date of
such termination.

 

(b)                                 On or before January 15, 2003, Landlord shall
deliver to Tenant a copy of an HVAC inspection report by Jackson and Blanc, a
certified HVAC specialist, identifying the current state of repair of the HVAC
systems servicing the Premises and the repairs and non-routine maintenance
recommended by Jackson & Blanc. Upon receipt of such report, Landlord and Tenant
shall meet to agree upon those maintenance and repair items that Landlord shall
complete and which shall not be invoiced to Tenant directly and/or indirectly
as common area expenses. The agreed upon maintenance and repair to be completed
by Landlord shall be memorialized by a written amendment to this Lease executed
by both parties. In the event Landlord fails to timely deliver such report
and/or parties cannot agree on or before February 1, 2003, upon the HVAC
maintenance and repair items to be completed by Landlord, Tenant shall have the
option to terminate this Lease on or before May 1, 2003, and upon such
termination neither party shall have any further obligation to the other, except
that each party shall be obligated to return to the other party any funds that
were delivered to that party before the date of such termination.

 

(c)                                  Landlord acknowledges and agrees that, prior
to the Commencement Date, Tenant shall have the right, but not the obligation,
to enter onto the Project to conduct physical inspections of the Premises, the
Project and the utilities supporting the Premises, including investigation of
the existence of any mold and/or fungus on the Project and/or the Premises (the
“Inspection”). To the extent Tenant elects to exercise such inspection right,
Tenant shall contract for the Inspection within five (5) Business Days
following receipt of the approvals set forth in Section 1.18(a) above, using an
inspector selected by Tenant in Tenant’s sole and absolute discretion, and
Tenant shall deliver a copy of the inspector’s written report to Landlord. Upon
receipt of such report, Landlord and Tenant shall meet to agree upon those
maintenance and repair items contained in the report that Landlord shall
complete and which shall not be invoiced

 

	
  Landmark National Bank

  	
  Initials 

  	
  [ILLEGIBLE]

  
	
  Office Lease

  	
   

  	
  [ILLEGIBLE]

  
	
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2

 

to
Tenant directly and/or indirectly as common area expenses. The agreed upon
maintenance and repair to be completed by Landlord shall be memorialized by a
written amendment to this Lease executed by both parties. In the event the
parties cannot, on or before seven (7) Business Days following Tenant’s
delivery of the Inspection report to Landlord, agree upon the maintenance and
repair items to be completed by Landlord, and/or the inspection report is
unsatisfactory to Tenant in Tenant’s sole and absolute discretion, Tenant shall
have the option to terminate this Lease on or before May 1, 2003, and upon such
termination neither party shall have any further obligation to the other,
except that each party shall be obligated to return to the other party any
funds that were delivered to that party before the date of such termination.

 

Section
1.19                                Normal Business Hours.  The
term “Normal Business Hours” shall mean 9 a.m. through 5 p.m., Monday through
Thursday; and 9 a.m. through 6 p.m., Monday through Friday, except for any
holidays observed by the banking industry in the State of California; provided
however, in the event Tenant elects to remain open for business on Saturday,
Normal Business Hours shall include the hours designated by Tenant for Saturday
business.

 

Section
1.20                                Expiration of Offer.  Tenant’s
delivery of executed copies of this Lease shall be deemed revoked, and the
Lease shall have no force or effect, unless (i) the Lease is executed and initialed
by Seller in all places provided herein, and (ii) the fully executed copies of
the Lease are personally received on or before 5:00 p.m. on January 8, 2003, by
Tenant’s counsel, Luce, Forward, Hamilton & Scripps LLP, at 600 West
Broadway, Suite 2600, San Diego, California, 92101, Attn: Steven E. Otto, Esq.,
who is authorized to receive it.

 

ARTICLE 2

 

LEASE TERM

 

Section
2.1                                      Lease of Premises for Lease Term.  In
consideration of the rents, covenants and agreements contained herein, Landlord
leases the Premises to Tenant and Tenant leases the Premises from Landlord for
the Lease Term. The Lease Term shall commence at 8:00 a.m. on the Commencement
Date and extend for the period set forth in Section 1.6 as the Lease Term and
shall terminate at 5:00 P.M. on the last day of the Lease Term (“Expiration
Date”), unless sooner terminated under any provision hereof, except that if the
Expiration Date as so calculated does not fall on the last day of a calendar
month, the Lease Term shall be extended to the last day of the month in which
the Expiration Date would otherwise occur and such date shall become the
Expiration Date. When the Commencement Date and Expiration Date of the Lease
have been ascertained, the parties shall immediately execute a confirmation of
said dates and the Lease Term in the form and content as set forth in Exhibit “C”
attached hereto and made a part hereof, provided that failure to execute such
confirmation shall not affect the determination of such dates.

 

Section
2.2                                      [Intentionally Omitted.]

 

Section
2.3                                      Early Occupancy.  If
Tenant occupies the Premises prior to the Commencement Date, Tenant’s occupancy
of the Premises shall be subject to all of the provisions of this Lease,
provided, however, Tenant’s Minimum Monthly Rent and Additional Rent shall be
abated until the later of (i) the Commencement Date, and (ii) February 1, 2003.
Early occupancy of the Premises shall not advance the Expiration Date of this
Lease.

 

Section
2.4                                      Holding Over. Tenant shall vacate the Premises upon the
expiration or earlier termination of this Lease. If Tenant remains in
possession of all or any part of the Premises after the expiration of the Term
hereof with the express written consent of Landlord, then 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, Minimum Monthly Rent then in effect shall
continue to be in effect and other monetary sums due hereunder shall be payable
in the amount and at the time specified in this Lease, and such month-to-month
tenancy shall be subject to every other term, covenant and agreement contained
herein, except that the month-to-month tenancy will be terminable on thirty
(30) days notice given at any time by either party. If Tenant remains in
possession of all or any part of the Premises after the expiration of the Term
hereof without the express written consent of Landlord, then no extension of
the Lease Term shall be created thereby, and in such case the Minimum Monthly
Rent then in effect shall be increased by fifty percent (50%) and other
monetary sums due hereunder shall be payable in the amounts and at the times
specified in the Lease.

 

	
  Landmark National Bank

  	
  Initials 

  	
  [ILLEGIBLE]

  
	
  Office Lease

  	
   

  	
  [ILLEGIBLE]

  
	
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3

 

Section
2.5                                      Surrender of Premises. Upon the termination of this Lease, Tenant
shall surrender the Premises to Landlord in the condition specified in and
according to Section 10.5.

 

Section
2.6                                      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 the 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 or other transferee of Tenant unless
the transfer has been approved by Landlord in writing as provided in Section
13.1 hereof.

 

ARTICLE 3

 

MINIMUM MONTHLY RENT

 

Section
3.1                                      Time and Manner of Payment.   Upon
the first day of the first full calendar month of the Lease Term, Tenant shall
pay Landlord the Minimum Monthly Rent and the Tenant’s Estimated Additional
Rent in the amounts stated in Section 1.11 and Section 1.13 above for the first
calendar month of the Lease Term and thereafter the Minimum Monthly Rent and
Additional Rent shall be paid monthly on the first day of each and every month
in advance without offset, deduction, or prior demand. All such rents and
charges shall be payable at Landlord’s address or at such other place as
Landlord may designate in writing. (See Schedule D) All Lease expirations,
renewal dates, notices of options to renew, and any other provision hereof
relating to the Commencement Date shall be determined by reference to the
Commencement Date as herein defined.

 

Section
3.2                                      [Intentionally Omitted.]

 

Section
3.3                                      Security Deposit.

 

(a)                                  Upon the execution of this Lease, Tenant
shall deposit with Landlord a cash Security Deposit in the amount set forth in
Section 1.10 above. Landlord may, but shall not be obligated to apply all or
part of the Security Deposit to any unpaid rent or other charges due from
Tenant or to cure any other defaults of Tenant. If Landlord uses any part of
the Security Deposit, Tenant shall restore the Security Deposit to its full
amount within ten (10) days after Landlord’s written request. Tenant’s failure
to do so shall be a material default under this Lease. No interest shall be
paid on the Security Deposit. Landlord shall not be required to keep the
Security Deposit separate from its other accounts and no trust relationship is
created with respect to the Security Deposit.

 

(b)                                 [Intentionally Omitted.]

 

(c)                                  Landlord may deliver the funds deposited
hereunder by Tenant to a purchaser of Landlord’s interest in the Premises, in
the event that such interest be sold; and thereupon Landlord shall be
discharged from any further liability with respect to such Security Deposit,
except as may otherwise be agreed upon in writing.

 

Section
3.4                                      Termination; Advance Payments.   Upon
termination of this Lease under Article 11 (Damage or Destruction), Article 12
(Condemnation) or any other termination not resulting from Tenant’s default,
and after Tenant has vacated the Premises in the manner required by this Lease,
an equitable adjustment shall be made concerning advance rent, any other
advance payments made by Tenant to Landlord, and accrued real property taxes,
and, within thirty (30) days following such termination, Landlord shall refund
the unused portion of the Security Deposit to Tenant or Tenant’s successor.

 

Section
3.5                                      Late Charges.   Tenant
hereby acknowledges that late payment by Tenant to Landlord of rent and other
sums due hereunder will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult and costly to
ascertain. Such costs include, but are not limited to, processing,
administrative and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord or Landlord’s designee within ten (10) days after
such amount shall be due, Tenant shall pay to Landlord a late charge as
liquidated damages as

 

	
  Landmark National Bank

  	
  Initials 

  	
  [ILLEGIBLE]

  
	
  Office Lease

  	
   

  	
  [ILLEGIBLE]

  
	
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4

 

that
terms is used in Section 1671 of the California Civil Code, 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 Landlord will
incur as a consequence of late payment by Tenant. Acceptance of such late
charge 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 the other rights and remedies granted hereunder.

 

ARTICLE 4

 

ADDITIONAL RENT

 

Section
4.1                                      Additional Rent.   In
addition to paying the Minimum Monthly Rent specified in Section 1.11, Tenant
shall pay on a monthly basis as additional rent Tenant’s Pro Rata Share of the
Direct Expenses, hereinafter defined. That additional rent, together with other
amounts of any kind (other than Minimum Monthly Rent) payable by Tenant to
Landlord under the terms of this Lease, shall be collectively referred to in
this Lease as “Additional Rent.” All amounts due under Article 4 as Additional
Rent are payable for the same periods and in the same manner, time and place as
the Minimum Monthly Rent. Without limitation on other obligations of Tenant
that survive the expiration of the Lease Term, Tenant’s obligations to pay the
Additional Rent provided for in this Article survive the expiration of the
Lease Term.

 

Section
4.2                                      Definitions Particular to This Article.

 

(a)                                  “Base Year” means the period January 1, 2002
through December 31, 2002.

 

(b)                                 “Direct Expenses” means Operating Expenses
plus Tax Expenses, as defined hereinafter.

 

(c)                                  “Expense Year” means each calendar year in
which any portion of the Lease Term falls, through and including the calendar
year in which the Lease Term expires.

 

Section
4.3                                      Pro Rata Share.   Tenant’s
Pro Rata Share as used in this Lease is based upon the ratio of the rentable
square feet of the Premises to the total rentable square feet of the entire
Project. Tenant agrees that Tenant’s Pro Rata Share set forth in Section 1.12
is correct.

 

Section
4.4                                      Changes in Pro Rata Share.   The
percentage set forth in Section 1.12 is Tenant’s Pro Rata Share as of the
Commencement Date and is subject to change in the event of changes in the
rentable square footage of the Premises in the Project. Such changes occurring
during any monthly period shall be effective on the first day of the next
succeeding monthly period, and the amount of any rentable square footage in
effect for the whole of any quarterly period shall be the average of the total
amounts in effect on the first day of each calendar month in such quarterly
period.

 

Section
4.5                                      Operating Expenses.   Subject
to the exclusions of Section 4.8 below, “Operating Expenses” means all
expenses, costs, and amounts typically passed through as operating expenses to
tenants in San Diego County for buildings of comparable quality, size and
location, and that Landlord pays or incurs during any Expense Year because of
or in connection with the ownership, operation, management, maintenance,
repair, replacement of the Project. Operating Expenses include, but are not
limited to :

 

(a)                                  The cost of supplying any utilities to the
Common Areas of the Project.

 

(b)                                 The cost of operating, managing, maintaining
and repair the following systems: HVAC, security, utility, mechanical, sanitary,
storm drainage, escalator and elevator; specifically excluding, however, any
such Systems and/or utilities that solely serve other premises within the
Building.

 

(c)                                  The cost of supplies and tools and of
equipment, maintenance and service contracts in connection with those systems.

 

(d)                                 The cost of licenses, certificates, permits
and inspections.

 

	
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(e)                                  The cost of contesting the validity or
applicability of any government enactments that may affect the Operating
Expenses.

 

(f)                                    The costs incurred in connection with the
implementation and operation of a waste removal and recycling program,
including but not limited to, any recycling programs required by law.

 

(g)                                 The cost of insurance carried by Landlord, in
amounts reasonably determined by Landlord, but in no event less than the limits
set forth in Article 18 below, and expect as expressly excluded from Operating
Expenses as set forth in Section 4.8 below.

 

(h)                                 Fees, charges and other costs including
management fees (or amounts in lieu of such fees), consulting fees, legal fees
and accounting fees of all persons engaged by Landlord in connection with the
operation, management, maintenance and repair of the Project including janitorial
services; provided, however the monthly total of such fees, charges and other
costs shall not exceed five percent (5%) of the Minimum Monthly Rent.

 

(i)                                     The cost of parking area maintenance, repair
and restoration, including resurfacing, repainting, restriping and cleaning.

 

(j)                                     Reasonable wages, salaries and other
compensation and benefits of all persons engaged in the operation, maintenance
or security of the Building plus employer’s Social Security taxes, unemployment
taxes, insurance and any other taxes imposed on Landlord that may be levied on
those wages, salaries and other compensation and benefits. If any of Landlord’s
employees provide services for move than one building of Landlord, only the
prorated portion of those employees’ wages, salaries, other compensation and
benefits and taxes reflecting the percentage of their working time devoted to
the Project shall be included in Operating Expenses.

 

(k)                                  [Intentionally Omitted.]

 

(l)                                     Amortization (including interest on the
unamortized cost at a rate equal to the floating commercial loan rate announced
from time to time by Bank of America N.A. as its prime rate plus three (3)
percentage points per annum) of the cost of acquiring or renting personal
property used in the maintenance, repair and operation of the Project.

 

(m)                               The cost of capital improvements or other
costs incurred in connection with the Project that (1) are intended as a
labor-saving device or to effect other economies in the maintenance or
operation of, or stability of services to, all or substantially all of Project
or (2) are required under any government law or regulation but that were not
required in connection with the Project when permits for the construction of
the Project were obtained. All permitted capital expenditures shall be
amortized (including interest on the unamortized cost at the rate stated in
subparagraph (1)) over their useful life, as reasonably determined by Landlord.

 

Section
4.6                                      [Intentionally Omitted.]

 

Section
4.7                                      Tax Expenses.   “Tax
Expenses” means all federal, state, county or local government or municipal
taxes, fees, charges or other impositions of every kind (whether general,
special, ordinary, or extraordinary) that are paid or incurred by Landlord
during any expense year (without regard to any different fiscal year used by
any government or municipal authority) because of or in connection with the
ownership, leasing and operation of the Project. These expenses include taxes,
fees and charges such as real property taxes, general and special assessments,
transit taxes, leasehold taxes and taxes based upon the receipt of rent
(including gross receipts or sales taxes applicable to the receipt of rent,
unless required to be paid by Tenant); personal property taxes imposed on the
fixtures, machinery, equipment, apparatus, systems and equipment;
appurtenances; furniture; and other personal property used in connection with
the Project.

 

Section
4.8                                      Items Excluded From Operating Expenses.   Notwithstanding
the foregoing to the contrary, for purposes of this Lease “Operating Expenses”
will not include: (a) Landlord’s federal or state income, franchise,
inheritance or estate taxes or gross receipts tax; (b) any ground lease rental;
(c) attorneys’ fees, space planner’s fees, and other costs and expenses
incurred solely in connection with Landlord’s negotiations or disputes with
present or prospective tenants of the Building; (d) except for the
administrative/management fees and costs described in Paragraphs 4.5(h) and
4.5(j) above, costs of Landlord's general corporate overhead, (e) all items

 

6

 

and
services for which Tenant or any other tenant in the Building directly
reimburses Landlord in full (other than through operating expense pass-through
provisions); (f) electric power costs or any other extraordinary services for
which any tenant directly contracts with and pays directly the local public
service company; (g) Landlord’s charitable or political contributions, (h)
Landlord’s bad debt loss, rent loss or reserves or bad debt or rent loss , (i)
wages and salaries of employees who do not devote substantially all of his or
her employed time to the Building or Project unless such wages and benefits are
prorated to reflect time spent providing work or services in connection with
the Building or project as opposed to time spent on matters unrelated to the
Building or Project, (j) any compensation paid to Landlord’s clerks, attendants
or other persons in commercial concessions at the Building operated by
Landlord, (k) costs to remove Hazardous Materials, mold and/or mildew present
at the Building in violation of Hazardous Materials, mold and/or mildew laws
and/or regulations, to the limited extent either (i) the presence of such as
Hazardous Materials, mold and/or mildew was caused by the acts of Landlord
and/or other tenants of Landlord, or (ii) such Hazardous Materials, mold and/or
mildew were present at the Building prior to the date Tenant first takes
possessions of the Premises and such presence is not due to the gross negligence
or willful misconduct of Tenant and such presence was in violation of
applicable environmental, mold and/or mildew laws in effect as of the date
Tenant first takes possession of the premises, (I) amounts paid to Landlord’s
subsidiaries or affiliates for Building services to the extent that such
payments exceed the charges for comparable services rendered by an unaffiliated
third party of comparable skill, competence, stature and reputation, (m)
Landlord’s entertainment and dining expenses, (n) Landlord’s membership fees or
dues payable to trade associations, and industry associations or similar
associations; (o) tenant improvements or tenant alterations to tenant spaces in
the Building, (p) costs incurred by Landlord (including attorneys’ fees)
resulting solely from Landlord’s default in its lease obligations to a Building
tenant, (q) flowers, gifts, balloons or similar items provided to any entity,
including Tenant, or other tenants, employees, vendors, contractors,
prospective tenants or agents, (r) advertising and promotional expenditures
primarily directed towards leasing tenant space in the Building and the costs
of signs in or on the Building (except for Building directories) identifying
the owner of the Building, if there is any such sign, (s) costs incurred or
cash consideration paid in renovating or otherwise decorating, painting or
redecorating space for tenants or prospective tenants of the Building;
providing however that such exclusion does not remove from Operating Expenses
the costs of ordinary maintenance supplied to tenants of the Building or the
costs for renovating or otherwise improving, decorating, painting or
redecorating the Common Areas of the Building, (t) the costs of any “tenant
relations” parties, events or promotions, (u) tax penalties incurred solely as
a result of Landlord’s negligence or inability in timely paying taxes or
filling any tax or informational returns, when due, (v) job advertising costs
for the hiring of personnel within Landlord’s or Landlord’s managers staff, (w)
leasing brokerage commissions, (x) expenses in connections with the ground
floor, or other floor, in the Building to the extent devoted to retail
operations unless the square footage thereof is included in the rentable square
footage computation for the Building, (y) any recalculations of or additional
Operating Expenses actually incurred more than three (3) years prior to the
year in which the Landlord proposes that such costs be included, (z)
depreciation, interest and principal payments on mortgages or ground lease
payments, specifically excluding, however, any amortization of repair and/or
other items permitted pursuant to Section 4.5(m) above; (aa) costs, other than
those incurred in ordinary maintenance or repair, for sculpture, paintings or
other art objects in the Building, (bb) costs associated with the operation of
the business of the partnership or entity which constitutes Landlord, as the
same are distinguished from cost relating to the Building or Project, including
such costs not relating to the Building or Project for partnership or corporate
accounting and legal matters, defending lawsuits with mortgagees or for
selling, syndicating, financing, mortgaging or hypothecating Landlord’s
interest in the Building, (cc) management fees in excess of those authorized
pursuant to Section 4.5(h) above for the full range of management services
provided by Landlord (and any management companies whose services were engaged
by Landlord) to the Building for the applicable year in question at a level of
quality equal to the highest quality management services then being offered in
comparable office buildings; (dd) attorneys’ fees and costs incurred solely in
connection with disputes between Landlord and the other owners of Buildings in
the vicinity of the project, (ee) any cost and/or expenses incurred by Landlord
to improve the non-structural character of the building, including but not
limited to interior and exterior painting and/or surface treatments,
landscaping improvements, decorative items and/or fixtures, new replacements
doors to Premises and Building, restriping and painted designation of tenant
parking spaces, and any other related items, as part of the program of
renovation conducted by Landlord during the first eighteen (18) months of the
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insurance
endorsements providing insurance coverage for events of earthquakes and the
discovery, removal and/or abatement of mold and/or mildew at the Project; (gg)
the premiums for any policies of insurance and/or insurance endorsements for
rental interruption for the benefit of Landlord; (hh) any obligations of
Landlord to reimburse Tenant or any other tenant for maintenance of Landlord’s
insurance obligations for the Project, including but not limited to the manner
set forth in Section 18.1(c) below; (ii) any obligations of Landlord to indemnify
Tenant pursuant to Section 19.22 below; (jj) any maintenance and/or repair
obligations of Landlord identified pursuant to 1.18 above, and (kk) except as
included in Operating Expenses pursuant to Section 4.5(m) above, capital
improvements.

 

Section
4.9                                      Included Tax Expenses.   Tax
Expenses shall include:

 

(a)                                  Any assessment, tax, fee, levy or charge in
addition to, or in partial or total substitution of, any assessment, tax, fee,
levy or charge previously included within the definition of “real property tax.”
Tenant and Landlord acknowledge that Proposition 13 was adopted by the voters
of the State of California in June 1978 and that assessments, taxes, fee,
levies and charges may be imposed by government agencies for services such as
fire protection; street, sidewalk and road maintenance; conservation; refuse
removal; and other government services formerly provided without charge to
property owners of occupants. In further recognition of the decrease in the
level and quality of government services and amenities as a result of
Proposition 13 (or as a result of any legislative or governmental assessing
body), Real Property Taxes shall also include any government cost-sharing
assessments (or the Building’s contribution toward a government cost-sharing agreement)
for the purpose of augmenting or improving the quality of services and
amenities normally provided by government agencies. Tenant and Landlord intend
that all new and increased assessments, taxes, fees, levies and charges and all
similar assessments, taxes, fees, levies and charges be included within the
definition of “Real Property Taxes” for purposes of this Lease.

 

(b)                                 Any assessment, tax, fee, levy or charge
allocable to, or measured by, the area of the premises or the rent payable
under this Lease, or on or relating to the possession, leasing, operating,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises or any portion of the Premises.

 

(c)                                  Any assessment, tax, fee, levy or charge on
this transaction or any document to which Tenant is a party, creating or
transferring an interest or an estate in the Premises.

 

(d)                                 Any possessory taxes charged or levied in
place of real property taxes.

 

Section
4.10                                Personal Property Taxes.

 

(a)                                  Tenant shall pay prior to delinquency all
taxes charged against trade fixtures, furnishings, equipment or any other
personal property belonging to Tenant. Tenant shall attempt to have such
personal property taxed separately from the Premises.

 

(b)                                 If any such taxes an Tenant’s personal
property are levied against Landlord or Landlord’s property, or if the assessed
value of the Premises is increased by the inclusion therein of a value placed
upon such personal property or trade fixtures of Tenant, then Landlord, after
written notice to Tenant, shall have the right to pay the taxes based upon such
increased assessments, regardless of the validity thereof, but only under
proper protest if requested by Tenant in writing. If Landlord shall do so, then
Tenant shall, upon demand, repay to Landlord the taxes levied against Landlord,
or the proportion of such taxes resulting from such increase in the assessment.
In any such event, however Tenant, at Tenant’s sole cost and expense, shall
have the right, in the name of Landlord and with Landlord’s full cooperation,
to bring suit in any court of competent jurisdiction to recover the amount of
any such taxes so paid under protest.

 

(c)                                  If any of Tenant’s personal property is taxed
with the Property, Tenant shall pay Landlord the taxes for the personal property
within fifteen (15) days after Tenant receives a written statement from
Landlord for such personal property taxes.

 

Section
4.11                                Contest Costs; Refunds. Any expenses incurred by Landlord in
attempting to protest, reduce or minimize Tax Expenses shall be included in Tax
Expenses in the Expense Year in which those expenses are paid. Except for tax
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reduction
, tax refunds shall be deducted from Tax Expenses. Such tax refunds shall be
deducted from Tax Expenses in the Expense Year in which they are received by
Landlord.

 

Section
4.12                                Utilities.   The premises are separately
metered for electricity, and may separately meter the Premises for any other
utilities. Tenant shall pay, directly to the appropriate supplier, the cost of
all natural gas, light, power, sewer services, telephone, water refuse disposal
and other utilities and services supplied to the Premises . If any services or
utilities are jointly metered with other portions of the Project, Landlord
shall determine and the Tenant shall pay, the Tenant’s pro rata share of the
costs of such utilities and services, either with five (5) days of written
request or monthly, based on Landlord’s estimate of such expenses, with each
payment of Monthly Minimum Rent. The Tenant’s pro rata share for purposes of this
Section shall be determined by the ratio of the rentable square footage of the
Premises as compared to the rentable square footage of all the property subject
to the common metering. In the event Tenant shall require such services or
utilities in excess of that usually furnished or supplied for use of the
Premises as general retail space, Tenant shall pay a reasonable proportion, to
be determined by Landlord, of all such jointly metered charges. The Tenant
shall pay such charges within five (5) days of notification of the amount by
the Landlord. Landlord reserves the right to require Tenant to install and
maintain, at Tenant’s sole expense, separate meters for any public utility
servicing the Premises for which a separate meter is not presently installed.

 

Section
4.13                                Collection of Project Costs.   Tenant shall pay Tenant’s Pro Rata Share of
the Project’s Direct Expenses as provided under this Article 4 on a monthly
basis. Such amounts shall be based upon Landlord’s reasonable estimate of the
Direct Expenses for the Project for the current Expense Year and shall be paid
as Additional Rent upon the basis described herein. Tenant shall pay to
Landlord with each installment of Minimum Monthly Rent an amount equal to
one-twelfth (1/12th) of the estimated amount due from Tenant as set forth in
the Estimate, as defined hereinafter. Such payments shall be paid to Landlord
and held in an impound account with no obligation to pay the Tenant interest
thereon.

 

Section
4.14                                Estimate Statement.   Landlord
shall provide to Tenant an expense estimate statement (“Estimate”) for each
calendar year which shall set forth Landlord’s reasonable estimate of the total
amount due from Tenant for the current or next ensuing Expense Year.

 

Section
4.15                                Changes to Estimate.   During
the first six (6) months of each calendar year, Landlord may provide a new
Estimate for that year to Tenant indicating any additional amount due from
Tenant and Tenant agrees to pay such amount to Landlord in the form of a
revised monthly payment divided equally over the balance of the calendar year.

 

Section
4.16                                Expense Statement.   Landlord
shall deliver to Tenant on or before the first day of April following the end
of each Expense Year a statement (“Statement”) stating the Direct Expenses
incurred or accrued for the preceding Expense Year and the amount paid by
Tenant relating thereto. If the amount paid by Tenant is less than the amount
due, Tenant agrees to pay such deficiency to Landlord within fifteen (15) days
after receipt of the Statement. If the amount paid by Tenant for the prior year
exceeds the amount due from Tenant, such overage shall be credited to amounts
due from Tenant for the current year or, if the Expense Year occurs at the end
of the Term, Landlord shall pay such amount directly to Tenant within fifteen
(15) days after Tenant’s receipt of the Statement. Landlord’s failure to
furnish the Statement for any Expense Year in a timely manner shall not
prejudice Landlord or Tenant from enforcing its rights under this Article 4.
The foregoing obligation shall survive the end of the Term for Direct Expenses accruing
before the end of the Term. If Tenant defaults under this Lease, Landlord may
apply any funds in the security deposit to any obligation then due under this
Lease without waiving any other remedy available under the Lease or applicable
law.

 

Section
4.17                                Failure to Pay Credit/Deficiency.   A
party’s failure to pay any deficiency required to be paid and/or credited to
the other party within such fifteen (15) day period shall constitute a breach
of this Lease and entitle the party entitled to such payment to any and all
remedies available under this Lease or applicable law; provided, however,
Tenant shall not have the remedy of offset against Minimum Monthly Rent or
Additional Rent .

 

Section
4.18                                Audit.   Within thirty six (36) months
after Tenant’s receipt of a Statement from Landlord (“Review Period”), Tenant
may deliver notice to Landlord stating that Tenant questions the calculation of
Tenant’s Pro Rata Share of Direct Expenses for the period represented by such
Statement. Within fifteen (15) business days following the date of

 

	
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Landlord’s
receipt of such notice, Landlord and Tenant will confer and discuss Tenant’s
questions and attempt to resolve any discrepancies in such calculation alleged
by Tenant. If, in connection with such discussions, landlord and Tenant review
any information in Landlord’s books or records, Tenant shall keep all such
information strictly confidential. If Landlord and Tenant fail to resolve such
alleged discrepancies within such fifteen (15) business day period, and Tenant
disputes Tenant’s Pro Rata Share of Direct Expenses calculated as set forth in
such Statement, then a certification as to the proper amount thereof
(calculated pursuant to the terms of this Lease) shall be made as provided
below at Tenant’s expense (except as provided below) by an independent
certified public accountant mutually selected by Landlord and Tenant. Such
accountant must be a member of a reputable accounting firm, and must not be
compensated on a contingency fee basis, and must not charge a fee based on the
amount of Direct Expenses or other rent or charges that such accountant is able
to save Tenant. Neither the accountant nor the accountant’s accounting firm
shall be providing primary accounting services to Landlord or Tenant, nor shall
the accountant nor the accountant’s firm have provided primary accounting
services to Tenant or Landlord within the three (3) year period immediately
preceding the proposed certification nor have any other conflicts of interest.
Landlord will reasonably cooperate with such accountant in providing the
information upon which the certification is to be based and Landlord shall
allow such accountant to inspect, during normal business hours in Landlord’s
offices, Landlord’s books and records relating to the Direct Expenses for the
period represented by the Statement in question. However, if Landlord requests,
such accountant shall, prior to inspection or review of any of Landlord’s books
and records, agree in a signed agreement that such accountant shall keep all
such information strictly confidential. Such confidentiality agreement shall be
in such commercially reasonable form and content as Landlord may require (“Confidentiality
Agreement”). If the accountant’s certification proves that actual Direct
Expenses, taken as a whole, set forth in such Statement were overstated by more
than four percent (4%) then, the reasonable cost of the accountant’s
certification shall be paid by Landlord up to a maximum amount of Ten Thousand
Dollars ($10,000), after which time Landlord and Tenant shall share equally
such costs. In all other events, the cost of such certification shall be borne
by Tenant. If, for any reason, Landlord and Tenant fail to mutually select the
independent certified public accountant as described above within twenty (20)
days following the expiration of the fifteen (15) business day discussion
period described above, then each party shall select an independent certified
public accountant (satisfying the foregoing criteria) at their separate costs
and expense, and the two selected independent certified public accountants
shall select, with fifteen (15) days thereafter, an independent certified
public account (“CPA”) meeting the same criteria as set forth above (for the
independent certified public accountant to have been mutually selected by
Landlord and Tenant) The CPA shall have a period of forty five (45) days
following its selection by the separately selected accountants to make the
certification described above that otherwise would have been made by the
independent certified public accountant to have been mutually selected by Landlord
and Tenant. During the CPA’s forty five (45) day review period, it shall have
the right, during normal business hours, to inspect in Landlord’s offices
Landlord’s books and records to the limited extent of those portion thereof
relating to the calculation of Tenant’s Pro Rata Share of Direct Expenses for
the period represented by the Statement in question. However, prior to the CPA’s
review of any such books and records, Landlord shall have the right to require
the CPA to agree in a signed Confidentiality Agreement that the CPA shall keep
all information contained in Landlord’s books and records strictly
confidential. The costs of the CPA’s certification shall be borne by Landlord
of Tenant, as applicable, pursuant to the same provisions above regarding the
outcome of certification if such certification had been made by an independent
certified public accountant mutually selected by Landlord and Tenant. Following
the party’s receipt of such certification from the mutually selected
independent certified public accountant or the CPA, as applicable, Landlord
shall reimburse to Tenant the Direct Expense amounts, if any, determined to
have been overpaid by Tenant for the calendar year reflected in the Statement.
Landlord shall maintain records of Direct Expenses for a given calendar year
for a minimum of thirty six (36) months following Landlord’s delivery to Tenant
of the Statement for such calendar year. Notwithstanding the pendency of the
above described process, Tenant shall continue to pay all rent (including,
without limitation, the estimates and actual amounts of Tenant’s Pro Rata Share
of Direct Expenses and no rent shall be tolled or abated during such pendency.

 

	
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ARTICLE 5

 

CONSTRUCTION OF PREMISES

 

Section
5.1                                      Tenant Improvements.   Tenant
hereby represents and warrants to Landlord that Tenant has inspected the
Premises and accepts such Premises in the condition existing as of the
Effective Date hereof. Tenant shall have the right to install fixtures,
equipment and shall perform any work set forth in the tenant improvement
drawings approved by Landlord, as set forth on Exhibit “B” attached hereto and
incorporated herein, and as set forth in Section 9.3 below (collectively, the “Tenant’s
Work”) upon delivery of the Premises to Tenant using contractors approved by
Landlord pursuant to Section 9.3 and shall diligently pursue such installation
and performance to completion. All Tenant’s Work will be performed by Tenant at
Tenant’s expense.

 

Within
the earlier of thirty (30) days of execution of this Lease by Landlord of
fifteen (15) days of Landlord’s written request to do so, Tenant shall deliver
plans and specifications with respect to the Tenant improvements to Landlord or
Landlord’s architect. Said plans and specifications shall conform in all
respects with the agreements of Landlord and Tenant as outlined in Exhibit “B”
hereto.

 

Section
5.2                                      Changes and Additions to Buildings.   Landlord
hereby reserves the right at any time to make alterations or additions to and
to build additional stories on the Project. Landlord also reserves the right to
construct other buildings or improvements in or about the Project 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. Easements for light and air are not included in the leasing of these
Premises to Tenant. Landlord further reserves the exclusive right to the roof
excepts as provided in this Lease.

 

Section
5.3                                      Right to Adjust, Relocate and Remodel.

 

(a)                                  Adjustments.   The purpose of the site plan
attached hereto as Exhibit “A” is to show the approximate location of the
Premises. Notwithstanding any other provision contained in this Lease, Landlord
reserves the right at any time to relocate, vary and adjust the size of the
various buildings, automobile parking areas, and other Common Areas as shown on
said site plan.

 

(b)                                 [Intentionally Omitted.]

 

(c)                                  Project Remodel.   Landlord
may in the future remodel or refurbish portions of the Project outside of the
Premises. The remodeling and/or refurbishing will be done in accordance with
the proper architect’s design specifications which will be reviewed and
approved by Landlord and copies of such drawings will be made available to
Tenant. Tenant agrees that Tenant will not, through any act or omission on the
part of Tenant, in any way hinder, impede, or frustrate the efforts of the
Landlord in completing such remodeling or refurbishing in a timely fashion.
Such remodeling and/or refurbishing shall not unreasonably interfere with the
use of the Premises by Tenant or Tenant’s customers.

 

ARTICLE 6

 

USE OF PREMISES

 

Section
6.1                                      Permitted Uses.   Tenant
shall use the Premises solely for the “Permitted Use” as defined in Section
1.8. Tenant shall not use or permit the Premises to be used for any other
purpose without Landlord’s prior written consent, which may be granted or
withheld in Landlord’s reasonable discretion.

 

Section
6.2                                      Manner of Use.

 

(a)                                  Interference with Use/Nuisance.   Tenant
shall not do or permit anything to be done in or about the Premises which will
in any way obstruct or interfere with or infringe on the rights of other
occupants or customers of the Project, or injure or annoy them, or use or allow
the Premises to be used for the improper, immoral, or objectionable purposes;
nor shall Tenant cause, maintain or permit any nuisance in, on or about the
Premise or commit or suffer to be

 

	
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committed
any waste in, on or about the Premises. Tenant shall not be liable to Landlord,
and Landlord shall not be liable to Tenant, for any other occupant’s failure so
to conduct itself.

 

(b)                                 Violation of Law/Insurance Provisions.   Tenant
shall not do or permit to be in or about the Premises, nor bring, keep or
permit to be brought or kept therein, anything which is prohibited by or 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, or
which is prohibited by any standard form of fire insurance policy or will in
any way increase the existing rate of or affect any fire or other insurance
upon the building or any part thereof or any of its contents, or cause a
cancellation of any insurance policy covering the building or any part thereof
or any of its contents. Tenant shall comply with all governmental laws,
ordinances and regulations applicable to the Premises, and the requirements of
any Board of Fire Underwriters or other similar body now or hereafter instituted,
with any order or, directive issued pursuant to any law, ordinance or
regulation by any public officer insofar as the same relates to or affects the
condition, use or occupancy of the Premises, including but not limited to,
requirements of structural changes related to or affected by Tenant’s acts,
occupancy or use of the Premises, all at Tenant’s sole expense. The judgment of
any court of competent jurisdiction or the admission of Tenant in any action
against Landlord, whether or not Tenant is a party to such action, shall be
conclusive in establishing such violations between Landlord and Tenant.

 

(c)                                  Permits. Tenant shall obtain and pay for all permits required for Tenant’s
occupancy of the Premises and shall promptly take all substantial and nonsubstantial
actions necessary to comply with all applicable statutes, ordinances, rules,
regulations, orders and requirements regulating the use by Tenant of the
Premises, including the Occupational Health and Safety Act, and the Americans
with Disabilities Act.

 

(d)                                 [Intentionally Omitted.]

 

(e)                                  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 automobiles parked in the parking area or in other Common
Areas.

 

ARTICLE 7

 

HAZARDOUS MATERIALS

 

Section
7.1                                      Prohibition.   Tenant shall not cause or
permit any Hazardous Material (as hereinafter defined) to be brought upon,
kept, manufactured, stored or used in or about or transported to or from the
Premises or Project by Tenant, its agents, employees, contractors or invitees
without the prior written consent of Landlord which may be withheld in Landlord’s
reasonable discretion. Tenant shall comply with all affirmative legal
requirements concerning any Hazardous Materials so permitted by Landlord. If
Tenant breaches the obligation stated in the preceding sentences, or if the
presence of Hazardous Materials on the Premises or Project caused or permitted
by Tenant (including Hazardous Materials specifically permitted and identified
below) results in a release of a hazardous substance or Hazardous Material, a
discharge of a pollutant or contaminant or any other contamination of the
Premises resulting in a potential violation of or incurrence of liability under
any law, regulation, rule or ordinance, or if contamination of the Premises by
a Hazardous Material otherwise occurs for which Tenant is legally liable to
Landlord for damage resulting therefrom, then Tenant shall indemnify, protect,
defend and hold Landlord, its agents, lenders, contractors and any ground
lessor harmless from any and all claims, judgments, damages, penalties, fines,
costs, liabilities, injunctive actions or orders, or losses including without
limitation diminution in value of the Premises or Project, damages for the loss
or restriction on use of rentable or usable space or of any amenity of the
Premises or Project, damages arising from any adverse impact on marketing of
space in the Premises or Project and sums paid in settlement of claims. “response
costs” as defined in the Comprehensive Environmental Response, Compensation and
Liability Act (“CERCLA”), attorney’s fees, consultant fees and expert fees,
which arise during or after the Lease Term as a result of such contamination.

 

Section
7.2                                      Clean-up.   The indemnification by Tenant
pursuant to Section 7.1. above includes, without limitation, costs incurred in
connection with any investigation of site conditions or any cleanup, remedial,
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local
governmental agency or political subdivision because of Hazardous Material
present in the soil or ground water on or under the Premises or Project or
emanating from the Premises or Project. Without limiting the foregoing, if the
presence of any Hazardous Material on the Premises or Project caused or
permitted by Tenant results in any contamination of the Premises or Project,
Tenant shall promptly take all actions at its sole expense as are necessary to
return the Premises or Project to the condition existing prior to the
introduction of any such Hazardous Material to the Premises or Project,
provided that Landlord’s approval of such action shall first be obtained, which
approval shall not be unreasonably withheld so long as such actions would not
potentially have any material adverse long-term or short-term effect on the
Premises or Project.

 

Section
7.3                                      Business.   Landlord acknowledges that it is not the
intent of this Article to prohibit Tenant from operating its business as
described above. Tenant may operate its business so long as the use or presence
of Hazardous Material is (i) limited to types and amounts that would be
customary for an office the size of the Premises, and (ii) is strictly and
properly monitored according to all applicable governmental requirements.

 

Section
7.4                                      Termination of Lease.   Notwithstanding
the provisions of Section 7.1 above, Landlord shall have the right to terminate
the Lease in Landlord’s reasonable discretion if (i) any anticipated use of the
Premises by Tenant involves the generation of storage, use, treatment or
disposal of Hazardous Material; (ii) Tenant has been required by any lender or
governmental authority to undertake removal or remedial action in connection
with Hazardous Material on the Premises if the presence of Hazardous Materials
resulted from Tenant’s action or use of the Premises; or (iii) Tenant is
subject to an enforcement order issued by any governmental authority in
connection with the use, disposal or storage of a Hazardous Material on the
Premises.

 

Section
7.5                                      Assignment and Subletting.   Notwithstanding
the provisions of Section 7.1 above, if (i) any anticipated use of the Premises
by any proposed assignee or sublessee involves or reasonably could involve the
generation or storage, use, treatment or disposal of Hazardous Material in a
manner or for a purpose prohibited by any law, regulation, rule or ordinance;
(ii) the proposed assignee or sublessee has been required by any prior
landlord, lender or governmental authority to undertake removal or remedial
action in connection with any Hazardous Material on a property if the presence
of the Hazardous Material resulted from such party’s action or use of the
property in questions; or (iii) the proposed assignee or sublessee is subject
to an enforcement order issued by any governmental authority in connection with
the use, disposal or storage of a Hazardous Material, it shall not be
unreasonable for Landlord to withhold its consent to an assignment or
subletting to such proposed assignee or sublessee. This paragraph shall not
preclude other grounds for Landlord’s rejection of a sublease or assignment
pursuant to any other provisions of this Lease.

 

Section
7.6                                      Landlord’s Right to Perform Tests.   At
any time prior to the expiration of the Lease Term, Landlord shall have the
right to enter upon the Premises during Normal Business Hours in order to
conduct appropriate tests of water and soil and to deliver to Tenant the
results of such tests to demonstrate that levels of any Hazardous Materials in
excess of permissible levels has occurred as a result of Tenant’s use of the
Premises and which tests shall be at the expense of Tenant so long as Landlord
has a reasonable concern that such Hazardous Materials exist. Tenant shall
further be solely responsible for and shall defend, indemnify and hold the
Landlord, Landlord’s lenders, its agents and contractors harmless from and
against all claims, costs and liabilities including actual attorneys’ fees and
costs, arising out of or in connection with any removal, remediation, clean up,
restoration and materials required hereunder to return the Premises and any
other property of whatever nature to their condition existing prior to the
appearance of the Hazardous Materials.

 

Section
7.7                                      Tenant’s Obligations.   Tenant’s
obligations under this Article 7 shall survive the termination of the Lease.
During any period of time employed by Tenant after the termination of this
Lease to complete the removal from the Premises or remediation of any such
Hazardous Materials, Tenant shall continue to pay the full rental in accordance
with this Lease, which rental shall be prorated daily.

 

Section
7.8                                      Health and Safety Code Section 25359.7.   Tenant
recognizes its obligations under California Health and Safety Code Section
25359.7 to notify Landlord of any release of a Hazardous Material that Tenant
knows or has reason to believe has or will come to

 

	
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be
located on or beneath the Premises. Landlord recognizes its obligations under
California Health and Safety Code Section 25359.7, and hereby represents and
warrants to Tenant that Landlord has no knowledge, or reasonable cause to
believe, that any release of Hazardous Materials has come to be located on or
beneath the Premises and/or the Project on or before the Commencement Date.

 

Section
7.9                                      Definition of “Hazardous Materials”.   The
term “Hazardous Materials” shall mean any toxic or hazardous substance, material
or waste or any pollutant or contaminant or infectious or radioactive material,
including but not limited to those substances, materials or wastes regulated
now or in the future under any of the following statutes or regulations
promulgated thereunder: (1)any “hazardous substance” within the meaning of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended (“CERCLA”), 42 U.S.C. 9601 et seq. or the California Hazardous
Substance Account Act, Cal. Health & Safety Code, 25300 et seq. (2) any “hazardous
waste” within the meaning of the Resource Conservation and Recovery Act, 42
U.S.C. 6901 et seq. (3) any “hazardous waste” or “extremely hazardous waste”
within the meaning of the California Hazardous Waste Control Law, Cal. Health
& Safety Code 25100 et seq. (4) any “hazardous chemical substance or
mixture” or “imminently hazardous chemical substance or mixture” within the
meaning of the Toxic Substances Control Act, 15 U.S.C. 2601 et seq. (5) any “hazardous
air pollutant” within the meaning of the Federal Clean Air Act, 42 U.S.C 7400
et seq. (6) any “toxic pollutant” or “oil or hazardous substance” within the
meaning of the Federal Water Pollution Control Act, 33 U.S.C. 1250 et seq. (7)
any “contaminant” within the meaning of the Safe Drinking Water Act, 42 U.S.C.
300i; (8) any “chemical known to the state to cause cancer or reproductive
toxicity” within the meaning of the Safe Drinking Water and Toxic Enforcement
Act of 1986 (“Proposition 65”), Cal. Health & Safety Code, 25249.5 et seq.
(9) petroleum or any fraction thereof; (10) asbestos; or (11) any other
substance, chemical waste, toxicant, pollutant or contaminant regulated by any
federal, state or local law, statute, rule, regulation or ordinance for the
protection of health or the environment.

 

ARTICLE 8

 

PARKING AND COMMON USE AREAS AND FACILITIES

 

Section
8.1                                      Control of Common Areas by Landlord.   “Common
Areas” means all areas, space, equipment and special services provided or made
available by Landlord for the common or joint use and benefit of the occupants
of the Project, their employees, agents, servants, customers and other
invitees, including without limitation parking areas, driveways, retaining
walls, landscaped areas, loading docks, pedestrian malls, courts, stairs, ramps
and sidewalks, elevators, comfort and first aid stations, washrooms and parcel
pick-up stations. All Common Areas shall at all times be subject to the
exclusive control and management of Landlord, and Landlord shall have the right
from time to time to establish, modify and enforce reasonable rules and
regulations with respect to the Common Areas. Landlord 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 above
referred to; to close all or any portion of said areas or facilities to such
extent as may, in the opinion of Landlord’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 Common Areas of
facilities; and to do and perform such other acts in and to said areas and
improvements as, in the use of good business judgment, the Landlord shall
determine to be advisable with a view to the improvement of the convenience and
use thereof by tenants, their officers, agents, employees and customers.
Landlord will operate and maintain the Common Areas referred to above in such
manner as Landlord, in its reasonable discretion, shall determine from time to
time. Without limiting the scope of such discretion, Landlord shall have the
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. Except as limited above, Tenant
shall have a non-exclusive easement to use and occupy the Common Areas during
the term of this Lease.

 

Section
8.2                                      [Intentionally Omitted.]

 

	
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ARTICLE 9

 

SIGNS, FIXTURES, ALTERATIONS, IMPROVEMENTS

 

Section
9.1                                      Signs and Auctions.   No
auction, fire or bankruptcy sales may be conducted in the Premises, and no
signs advertising such shall be posted on the Premises or within or about the Project
without the prior written consent of Landlord.

 

Section
9.2                                      Installation by Tenant.   Except as otherwise set forth on Exhibit “B”
attached hereto and incorporated herein and Section 9.3 below, 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 covering, interior or exterior lighting, plumbing fixtures,
shades or awnings or make any changes to the Premises without the prior written
consent of Landlord. All fixtures installed by Tenant shall be new or
completely reconditioned. Tenant shall present to the Landlord plans and
specifications for such work at the time approval is sought. Notwithstanding
this Section 9.2 and Section 9.3 below, Tenant shall have the right to make such
additions, alterations, improvements fixturization, and other modifications
addressed by Sections 9.2 and 9.3 below without the approval of the Landlord so
long as they do not exceed Twenty-Five Thousand and No/100 Dollars ($25,000.00)
and do not alter the structural components of the Building.

 

Section
9.3                                      Improvements.   Except as set forth in Section 9.2 above,
Tenant shall not make any additions, alterations or improvements to the
Premises without obtaining the prior written consent of Landlord, which approval
shall not be unreasonably withheld. In the event Tenant should employ a
contractor other than Landlord’s, it is expressly understood and agreed that
Tenant shall first obtain the Landlord’s written approval of the Tenant’s
contractor and the terms of the contract, which approval shall not be
unreasonably withheld. As a condition to giving consent to Tenant improvements,
Landlord may, at the time of such installations, require that Tenant agree to
remove any such alterations, additions, improvements or utility installations
at the expiration of the Lease Term and to restore the Premises to their prior
condition, normal wear and tear excluded. Landlord acknowledges and agrees that
Tenant will be providing special security for the Premises while operating as a
commercial bank, and as part of Tenant’s Work, will be installing at Tenant’s
expense, dusk to dawn lighting and automated teller machine access in the
Common Areas (including but not limited to compliance with the requirements of
the Americans with Disabilities Act (“ADA”)), and night depository facilities,
with security lighting and cameras extending from the Premises, and safety
deposit boxes (collectively, the “Bank Improvements”). Landlord shall
reasonably cooperate with Tenant concerning the requirements of Division 4 of
the California Financial Code (Section 1300, et seq.),
including but not limited to the lighting requirements thereunder, which shall
be at Tenant’s sole cost and expense. In the event the requirements of the ADA
are amended following the initial installation by Tenant of the ATM access to the
ATM, Landlord shall not withhold Landlord’s approval of any modifications
and/or alterations of the ATM and/or access to the ATM in the common areas made
by Tenant to comply with such amendments to the ADA. All Improvements to the
Premises shall comply with all applicable laws, including but not limited to
applicable building codes and regulations.

 

Section
9.4                                      Non-Removal by Tenant.   All
alterations, additions, and improvements, including signs and sign cases, made
by Tenant, or made by the Landlord on the Tenant’s behalf and for which Tenant
has paid Landlord in accordance with this Lease, shall remain the property of
the Tenant for the term of the Lease, or any extension or renewal thereof.
Subject to the provisions of Section 10.5, such alterations, additions and
improvements shall not be removed from the Premises, and at the expiration or
termination of this Lease Term, or any extensions or renewals thereof, all such
alterations, additions and improvements become the property of the Landlord.
Notwithstanding the foregoing below, Landlord acknowledges and agrees that the
Bank Improvements shall remain the personal property of the Tenant and shall be
removed by the Tenant at the end of the term of the Lease.

 

Section
9.5                                      Removal and Restoration.   Landlord
may, in its reasonable discretion, require Tenant upon expiration or
termination of this Lease Term to return all or part of the Premises to their
condition as existed at the commencement of the Lease Term, removing any
alteration, addition or improvement made by Tenant, or made by Landlord on the
Tenant’s behalf. In removing any such alteration, addition or improvement as
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Landlord,
the Tenant shall repair any damage to the Premises caused by such removal and
will be repaired in a prompt and workmanlike manner.

 

Section
9.6                                      Liens.   Tenant shall keep the Premises and any building of
which the Premises are a part free from any liens arising out of work
performed, materials furnished or obligations incurred by Tenant and shall
indemnify, hold harmless and defend Landlord from any liens and encumbrances
arising out of any work performed or materials furnished by, or at the
direction of, Tenant. In the event that Tenant shall not, within twenty (20)
days following the imposition of any lien, cause such lien to be released of
record by payment or posting of a proper bond, Landlord shall have, in addition
to all other remedies provided herein and by law, the right, but not the
obligation, to cause the same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien. All such sums
paid by Landlord and all expenses incurred by it in connection therewith shall
bear interest at the rate of ten percent (10%) per annum from the date expended
until the date repaid. Landlord shall have the right at all times to post and
keep posted on the Premises any notices permitted or required by law, or which
Landlord shall deem proper, for the protection of Landlord and the Premises,
and any other party having an interest therein from mechanics’ and materialmen’s
liens, and Tenant shall give to Landlord at least fifteen (15) business days,
prior written notice of the expected date of commencement of any work relating
to alterations or additions to the Premises.

 

Section
9.7                                      Signs, Awnings and Canopies.   Except
as set forth on Exhibit “G” and the signage to be located on the backlit
surround of the ATM identifying Tenant and the ATM networks affiliated with the
ATM, Tenant will not place or suffer to be placed or maintained on any exterior
door, wall or window of the Premises or within or about the Project 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 Premises without first obtaining Landlord’s
written approval. Tenant further agrees to maintain such signs, awnings,
canopy, decoration, lettering or other advertising matter as may be approved,
in good condition and repair at all times. Tenant shall submit a detailed
drawing of any proposed signage to Landlord for approval, which shall not be
unreasonably withheld, and which shall be deemed approved if Landlord does not
respond within fifteen (15) days. All signs and sign cases are to be considered
the personal property of the Tenant and may be removed by Tenant upon
expiration or termination of this Lease.

 

ARTICLE 10

 

CONDITION OF PREMISES MAINTENANCE, REPAIRS AND ALTERATIONS

 

Section
10.1                                Existing Conditions.   Tenant
accepts the Premises in its condition as of the Effective Date, subject to all
recorded matters, laws, ordinances, and governmental regulations and orders.
Tenant acknowledges that neither Landlord nor any agent of Landlord has made
any representation as to the condition of the Premises or the suitability of
the Premises for Tenant’s intended use.

 

Section
10.2                                Exemption of Landlord from Liability; Waiver.   Except
to the extent of Landlord’s insurance coverage pursuant to Article 18 below and
except to the extent Landlord has breached its obligations pursuant to this
Lease and/or under applicable laws and/or regulations, Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant, Tenant’s
employees, invitees, customers or any other person in the Premises, whether
such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or
other defects, not caused by Landlord or Landlord’s failure to properly
maintain pipes, sprinklers, wires, appliances plumbing, air conditioning or
lighting fixtures; (c) conditions arising in or about the Premises that are not
caused by Landlord; or (d) any act or omission of any other tenant or occupant
of the Project or of any building of which the Premises is a part. Except as
expressly limited above, Tenant, as a material part of the consideration to be
rendered to Landlord, hereby waives all claims against Landlord for the
foregoing damages. The provisions of this Section 10.2 shall not, however,
exempt Landlord from liability for Landlord’s gross negligence, intentional
misconduct, and/or willful misconduct. Landlord represents and warrants that,
as of the Commencement Date, Landlord has no knowledge, or reasonable cause to
believe, that there is any condition in the Project that is likely to cause
such damages.

 

	
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Section 10.3                            Tenant’s Obligations.

 

(a)                                  Except for the preventative maintenance
contract which may be obtained as provided below, Tenant agrees at all times,
at its own cost and expense, to repair and maintain in good and tenantable
condition, as necessary, the Premises and every part thereof (except that
portion of the Premises to be maintained by Landlord under Section 10.4 and/or
that is not accessible to Tenant) including, without limitation, the following:
all meters, pipes, conduits, equipment, components and facilities within the
Premises that supply the Premises exclusively with utilities (except if the
appropriate utility company has assumed these duties), all fixtures and other
equipment installed in the Premises; all interior glass installed in the
Premises; all signs, locks and closing devices; all window sashes, casements
and frames; doors and door frames; and floor coverings; provided however,
Tenant shall not be obligated to repair, maintain, and/or replace any of the
foregoing where the need for such repair, maintenance, and/or replacement is a
result of damage or destruction to the Building and/or condemnation. It is the
intention of Landlord and Tenant that, at all times during the Lease Term,
Tenant shall maintain the Premises in an attractive, fully operative condition.
Tenant shall not have any obligation to remove and/or abate any mold and/or
mildew within the Premises and/or the Project, unless such mold is caused by
the gross negligence or willful misconduct of the Tenant during the Term of the
Lease.

 

(b)                                 All of Tenant’s obligations to maintain and
repair shall be accomplished at Tenant’s sole expenses. If Tenant refuses or
neglects to repair properly as required hereunder and to the reasonable
satisfaction of Landlord, Landlord may, on ten (10) days’ prior notice (except
that no notice shall be required in case of emergency) enter the Premises and
perform such repair and maintenance on behalf of Tenant 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 Landlord’s costs for making such repairs,
upon presentation of a bill therefore, as Additional Rent. Said bill shall
include interest at ten percent (10%) on said costs from the date of
presentation of the bill to Tenant.

 

Section
10.4                                Landlord’s Obligations.   Subject
to the provisions of Section 10.3 (Tenant’s Obligations) Article 11 (Damage or
Destruction), and Article 12 (Condemnation), Landlord shall repair, maintain in
good and tenantable condition and replace, and necessary, the Common Area,
unoccupied spaces within the Building, the exterior of the Building, the
parking area, the roof, exterior wells, structural parts of the Premises and/or
the Project and all risers, pipes, conduits, equipment, components and
facilities that supply the Premises with utilities (except if the appropriate
utility company has assumed these duties),including but not limited to mold
removal and/or abatement pursuant to Section 26143, et  seq. of
the California Health and Safety Code, provided, however, that Landlord shall
not be required to make repairs necessitated by reason of the gross negligence
of Tenant or anyone claiming under Tenant, or by reason of any improvements
made by Tenant or anyone claiming under Tenant which shall be the obligation of
Tenant. All such costs and expenses of Landlord shall be Operating Expenses
under this Lease.

 

Section
10.5                                Condition Upon Termination.   Upon
the termination of this Lease, Tenant shall surrender the Premises to Landlord,
broom clean and in the same condition as received except for ordinary wear and
tear which Tenant was not otherwise obligated to remedy under any provision of
this Lease. However, Tenant shall not be obligated to repair any damage which
Landlord is required to repair under Article 11 (Damage or Destruction). All
alterations, additions and improvements which Landlord has not required Tenant
to remove shall become Landlord’s property and shall be surrendered to Landlord
upon the termination of this Lease, except that Tenant may remove any of Tenant’s
machinery or equipment which can be removed without material damage to the
Premises. Tenant shall repair, at Tenant’s expense, any damage to the Premises
caused by the removal of any such machinery or equipment. In no event, however,
shall Tenant remove any of the following materials or equipment without
Landlord’s prior written consent: any power wiring or power panels; lighting or
lighting fixtures; wall coverings, drapes, blinds or other window coverings;
carpets or other floor coverings; heaters, air conditioners or any other
heating or air conditioning equipment, fencing or security gates; or other
similar building operating equipment and decorations.

 

	
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ARTICLE 11

 

DAMAGE OR DESTRUCTION

 

Section
11.1           Partial Damage to Leased Premises.   Tenant
shall notify Landlord in writing immediately upon the occurrence of any damage
to the Premises. If the Premises is only partially damaged (meaning the cost to
repair would not exceed ten percent of replacement value as reasonably
determined by Landlord) and if the proceeds received by Landlord from the
insurance policies described in Article 4 (together with the deductible, if
any) are sufficient to pay for the necessary repairs, this Lease shall remain
in effect and Landlord shall repair the damage as soon as reasonably possible.
Landlord shall repair any damage to Tenant’s fixtures, equipment, or
improvements. If the insurances proceeds received by Landlord (together with
the deductible, if any) are not sufficient to pay the entire cost of repair, or
if the cause of the damage is not covered by the insurance policies which
Landlord maintains under Article 4, Landlord may elect either to (a) repair the
damage as soon as reasonably possible, in which case this Lease shall remain in
full force and effect, or (b) terminate this Lease as of the date the damage
occurred. Landlord shall notify Tenant within thirty (30) days after receipt of
notice of the occurrence of the damage, whether Landlord elects to repair the
damage or terminate this Lease. If Landlord elects to repair the damage, Tenant
shall pay the full cost thereof in excess of any insurance proceeds paid to
Landlord if the damage was due to an act or omission of Tenant. If the damage
to the Premises occurs during the last six (6) months of the Lease Term,
Landlord may elect to terminate this Lease as of the date the damage occurred,
regardless of the sufficiency of any insurance proceeds and Landlord may retain
all such proceeds. Landlord shall notify Tenant of its election within thirty
(30) day after receipt of notice of the occurrence of the damage.

 

Section
11.2           Total or Substantial Destruction.   If
the Premises is totally or substantially destroyed (meaning the cost to repair
would exceed ten percent of replacement value as reasonably determined by
Landlord) by any cause whatsoever, this Lease shall, at the election of the
Landlord, terminate as of the date the destruction occurred regardless of
whether Landlord receives any insurance proceeds. However, if the Premises can
be rebuilt within nine (9) months after the date of destruction, Landlord may
elect to rebuild the Premises at Landlord’s own expense (with all insurance
proceeds being made available to the Landlord to apply against such costs), in
which case, this Lease shall remain in full force and effect. Landlord shall
notify Tenant of such election within thirty (30) days after the occurrence of
total or substantial destruction. If the destruction was caused by an act or
omission of Tenant, Tenant shall pay Landlord the difference between the actual
cost of rebuilding and any insurance proceeds received by Landlord.

 

Section
11.3           Partial Destruction of Project.   In
the event that ten percent or more of the rentable area of the Project shall be
damaged or destroyed by fire or other cause, notwithstanding that the Premises
may be unaffected by such fire or other cause, Landlord shall have the right,
to be exercised by notice in writing delivered to Tenant within sixty (60) days
from and after said occurrence, to elect to cancel and terminate this Lease.
Upon the giving of such notice to Tenant, the term of this Lease shall expire
by lapse of time upon the third day after such notice is given, and Tenant shall
vacate the Premises and surrender the same to Landlord. Nothing in this Section
nor any other Section hereof shall be construed as a limitation of Tenant’s
liability for such occurrence, should such liability otherwise exist.

 

Section
11.4           Landlord’s Obligations.   Landlord shall not be required to repair any
injury or damage by fire or other cause, or to make any restoration or
replacement of any paneling, decorations, partitions, railings, floor
coverings, office fixtures or any other improvements or property installed in
the Premises by Tenant or at the direct or indirect expense of Tenant which are
not part of the original Tenant improvements paid for by Landlord. Tenant shall
be required to restore or replace same in the event of damage except to the
extent caused by the Landlord’s gross negligence or intentional misconduct.
Tenant shall have no claim against Landlord for any damage suffered by reason
of any such damage, destruction, repair or restoration.

 

Section
11.5           Rent Abatement Due to Casualty.   Landlord
and Tenant agree that Tenant’s obligation to pay Minimum Monthly Rent and
Additional Rent shall be fully abated during the period beginning on the date
of any such casualty, destruction and/or damage and ending on the date of
substantial completion of Landlord’s restoration obligations as provided in
this Article 11 (“Abatement Period”). The abatement of rent shall occur only in
the event Tenant is unable to conduct business from its Premises and that,
other than the abatement of rent or as otherwise expressly provided in the
Lease, Tenant shall not be entitled to any compensation, reduction or
reimbursement from Landlord as a result of any damage, destruction, repair or
restoration of the leased Premises.

 

	
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Section
11.6           Waiver.   Since Landlord and Tenant
have agreed that the provisions of this Article 11 shall govern the rights and
obligations of Landlord and Tenant in the event of any damage or destruction of
the Premises, Tenant waives the provisions of California Civil Code Section
1932(2) which indicates that the hirer of a thing may terminate the hiring
before the end of the term “when the greater part of the thing hired, or that
part which was and which the letter had at the time of the hiring reason to
believe was the material inducement to the hirer to enter into the contract,
perishes from any other cause than the want of ordinary care of the hirer,” and
of California Civil Code Section 1933(4) which indicates that “the hiring of a
thing terminates by the destruction of the thing hired,” and of any similar
statute, code or judicial decision which grants a tenant the right to terminate
a lease in the event of damage or destruction of the Premises.

 

ARTICLE 12

 

CONDEMNATION

 

Section
12.1           Condemnation.   If all or part of the Premises or any part of
the Project shall be acquired or condemned by eminent domain for any public or
quasi-public use or purpose, or conveyed under threat of condemnation, then the
Term of this Lease shall cease and terminate as of the date of title vesting at
Landlord’s option and all rentals shall be paid up to that date and Tenant
shall have no claim against Landlord for the value of any unexpired Lease Term.

 

Section
12.2           Partial Condemnation.   If
any part of the Premises shall be acquired or condemned by eminent domain for
any public or quasi-public use or purpose, or conveyed under threat of condemnation,
and in the event that such partial taking or condemnation or conveyance under
threat of condemnation shall render the Premises unsuitable for the business of
the Tenant, then the Lease Term shall cease and terminate as of the date of
title vesting in such proceeding at Tenant’s option and Tenant shall have no
claim against Landlord for the value of any unexpired Lease Term. In the event
of a partial taking or condemnation of the Premises which is not extensive
enough to render the Premises unsuitable for the business of the Tenant, and
Landlord does not terminate the Lease pursuant to Section 12.1 then Landlord
shall within a reasonable time restore the Premises to a condition comparable
to its condition at the time of such condemnation less the portion lost in the
taking, this Lease shall continue in full force and effect, and the rent
payable hereunder shall be equitably adjusted to reflect the reduction in the
area of the Premises.

 

Section
12.3           Distribution of Condemnation Award.   Any
condemnation award or payment for the 
Building and the Property shall be paid to Landlord and Tenant shall
have no claim thereto; except that Tenant shall have the right to bring a
separate claim for an award specifically designated for loss of or damage to
Tenant’s trade fixtures or removable personal property, goodwill and relocation
costs and  the Tenant hereby assigns any
other rights which the Tenant may have now or in the future to any other award
to the Landlord. If this Lease is not terminated, Landlord shall repair any
damage to the Premises caused by the condemnation, except that Landlord shall
not be obligated to repair any damage for which Tenant has been reimbursed by
the condemning authority. If the severance damages received by Landlord are not
sufficient to pay for such repair, Landlord shall have the right to either
terminate this Lease or make such repair at Landlord’s expense.

 

ARTICLE 13

 

ASSIGNMENT AND SUBLETTING

 

Section
13.1           Landlord’s Consent Required.   Tenant
shall not either voluntarily or by operation of law, assign, mortgage, pledge,
hypothecate or encumber this Lease or the leasehold interest created hereby or
any interest herein, or sublet the Premises or any portion thereof, or license
the use of all or any portion of the Premises or permit any other person to
occupy or use the Premises or any portion thereof (collectively referred to
herein as a “Transfer”), without the written consent of Landlord first had and
obtained, which consent shall not be unreasonably withheld and which is subject
to the following conditions: (i) the proposed transferee’s use of the Premises
must be consistent with Articles 6 and 7 hereof; (ii) in Landlord’s reasonable
business judgment, the proposed transferee must have sufficient business
reputation and experience to operate a successful business of the type and
quality permitted under this Lease; (iii) in Landlord’s reasonable business
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Landlord would reasonably
anticipate receiving from the proposed transferee must not be less than the
percentage rent that Landlord has received from Tenant; (iv) the proposed
Transfer must not breach any covenant of Landlord respecting radius, business
location, use or exclusivity in any other lease, financing agreement or any
other agreement relating to the Project or, in Landlord’s reasonable business
judgment, create a tenant mix concern; (v) the net worth of the proposed
transferee must not be less than the lesser of (a) the current net worth of
Tenant, and (b) the amount equal to twice the remaining payments of Minimum
Monthly Rent for the balance of the then existing Term at the time of such
Transfer; (vi) seventy-five percent (75%) of any profit received by the
Tenant  from the proposed Transfer,
whether during or after the Lease Term, shall be paid to Landlord when received;
and (vii) the proposed transferee must not 
be an existing tenant in the Project.

 

Section 13.2           Transfers
of Interests in Tenant Requiring Landlord’s Consent.
  If Tenant hereunder is a corporation
which, under laws of California, is not 
deemed a public corporation, or is an unincorporated association or
partnership or limited liability company, then the transfer, assignment, or
hypothecation of any stock or interest in such corporation, association or
partnership or limited liability company in the aggregate in excess of  twenty-five percent (25%) shall be deemed a
Transfer under the meaning of this Article 13.

 

Section 13.3           Grant
of Concessions; Conditions to Grant.   The provision against subletting elsewhere
contained in this Lease shall not prohibit Tenant from granting  concessions 
for the operation  of one or more
departments of the business which Tenant is permitted by Section 1.8 to conduct
in or upon the Premises; provided, however, that each such concession may be
granted only upon receipt by Tenant of the written consent of the Landlord and
shall be subject to all the terms and provisions of this Lease.

 

Section 13.4           Transfer
Without Consent.   Any Transfer
without Landlord’s prior written consent shall, at the option of the Landlord,
constitute a non-curable breach of this Lease. In the absence of an express
agreement in writing to the contrary, no Transfer shall act as a release of
Tenant from any of the obligations and agreements on its part to be kept and
performed hereunder.

 

Section 13.5           No
Release of Tenant.   No transfer
permitted by this Article 13 shall release Tenant or change Tenant’s primary
liability to pay the rent and to perform all other obligations of Tenant under
this Lease. Landlord’s acceptance of rent from any other person is not a waiver
of any provision of this Article 13. Consent to one transfer is not a consent
to any subsequent transfer. If Tenant’s transferee defaults under this Lease,
Landlord may proceed directly against Tenant without pursuing remedies against
the transferee. Landlord may consent to subsequent assignments or modifications
of this Lease by Tenant’s transferee, without notifying Tenant or obtaining its
consent. Such action shall not relieve Tenant’s liability under this Lease.

 

Section 13.6           Landlord’s
Election.   Tenant’s
request for consent to any transfer described in Section 13.1 above shall be
accompanied by a written statement setting forth the details of the proposed
transfer, including the name, business and financial condition of the
prospective transferee, financial details of the proposed transfer (e.g., the
term of and rent and security deposit payable under any assignment or
sublease), and any other information requested by Landlord. Landlord shall have
the right (a) to withhold consent based upon the standards set forth in Section
13.1;(b) to grant consent; or (c) if the transfer is a sublease of the Premises
or an assignment of this Lease, to terminate this Lease as of the effective
date of such sublease or assignment, in which case Landlord may elect to enter
into a direct lease with the proposed assignee or subtenant.

 

Section 13.7           No
Merger.   No merger
shall result from Tenant’s sublease of the Premises under this Article 13,
Tenant’s surrender of this Lease or the termination of this Lease in any other
manner. In any such event, Landlord may terminate any or all subtenancies or
succeed to the interest of Tenant as sub-landlord thereunder.

 

Section 13.8           Assignment
Fees and Procedures.   In the
event Landlord shall be requested to consent to a sublease, assignment, pledge,
encumbrance, or any other transfer of all or any portion of Tenant’s rights
hereunder, as specified in Section 13.1 hereof, Tenant shall pay Landlord a fee
of Five Hundred Dollars ($500.00) which Landlord and Tenant agree is a
reasonable fee to compensate Landlord for costs and expenses, excluding
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shall be reimbursed pursuant
to Section 16.2 herein, incurred in connection with reviewing Tenant’s request
for consent. Tenant’s check for  such
assignment fee  shall be delievered to
Landlord concurrent with Tenant’s request for consent.

 

ARTICLE 14

 

DEFAULTS;REMEDIES

 

Section 14.1           Covenants
and Conditions.   Tenant’s
performance of each of Tenant’s obligations under this Lease is a condition as
well as a covenant. Tenant’s right to continue in possession of the Premises in
conditioned upon such performance. Time is of the essence in the performance of
all covenants and conditions.

 

Section 14.2           Defaults.
  Tenant shall be in material default
under this Lease:

 

(a)           If
Tenant abandons or vacates the Premises for a period longer than twelve (12)
consecutive months; provided Tenant continues to pay rent during such twelve
(12) month period.

 

(b)           If
Tenant fails to pay rent or any other charge required to be paid by Tenant, as
and when due, and such failure continues for more than ten(10) days following
notice from Landlord of such failure; provided, however, such notice shall not
be required if such failure occurs more than two(2) times in any twelve(12)
month period.

 

(c)           If
Tenant fails to perform any of Tenant’s non-monetary obligations under this
Lease for a period of fifteen (15) days after written notice from Landlord;
provided that if more time is required to complete such performance, Tenant
shall not be in default if Tenant commences such performance within the
fifteen(15) day period and thereafter diligently pursues the same to
completion, not to exceed ninety(90) days. However, Landlord shall not be
required to give such notice if Tenant’s failure to perform constitutes a
non-curable breach of this Lease. The notice required by this Paragraph is
intended to satisfy any and all notice requirements imposed by law on Landlord
prior to the commencement of an unlawful detainer action and is not in addition
to any such requirement;

 

(d)           (i)
If Tenant makes a general assignment or general arrangement for the benefit of
creditors; (ii) if a petition for adjudication of bankruptcy or for reorganization
or rearrangement is filed by or against Tenant and is not dismissed within
thirty(30) days; (iii) if a trustee or receiver is appointed to take possession
of substantially all of Tenant’s assets located at the Premises or of Tenant’s
interest in this Lease and possession is not restored to Tenant within thirty
(30) days; or (iv) if substantially all of Tenant’s assets located at the
Premises or of Tenant’s interest in this Lease is subjected to attachment,
execution or other judicial seizure which is not discharged within thirty (30)
days. If a court of competent jurisdiction determines that any of the acts
described in this subparagraph (d) is not a default under this Lease, and a
trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers Tenant’s interest hereunder,
then Landlord shall receive, as Additional Rent, the difference between the
rent (or any other consideration) paid in connection with such assignment or
sublease and the rent payable by Tenant hereunder.

 

Section 14.3           Default
by Landlord.   Landlord shall not be in
default unless Landlord fails to perform obligations required of Landlord
within a reasonable time, but in no event later than thirty (30) days after
written notice by Tenant to Landlord 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 Tenant in writing as provided in Section 15.6,
specifying wherein Landlord has failed to perform such obligation; provided,
however, that if the nature of Landlord’s obligation is such that more than
thirty (30) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such thirty (30) day period
and thereafter diligently prosecutes the same to completion. Anything in this
Lease to the contrary notwithstanding, providing such cause is not due to the
willful act or gross negligence of Landlord, Landlord 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
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Landlord,
as provided in Section 18.21. In addition, in no event shall Landlord be
responsible for any consequential damages incurred by Tenant as a result of any
default by Landlord.

 

Section
14.4           Remedies.   On the occurrence of any
material default by Tenant, Landlord may, at any time thereafter, with or
without notice or demand and without limiting Landlord in the exercise of any
right or remedy which Landlord may have:

 

(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,
upon satisfaction of the notice requirement under California law, have the
right to re-enter the Premises and remove all persons and property and such
property may be destroyed, kept by Landlord (in which case such property shall
become the property of Landlord) or removed and stored in a public warehouse or
elsewhere at the cost of, and for the account of Tenant, all without service of
notice or resort to legal process and without being deemed guilty of trespass,
or becoming liable for any loss or damage which may be occasioned thereby; and
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant’s default, including (i) the worth at the time of
the award of all Minimum Monthly Rent, Additional Rent and other charges which
were earned or were payable at the time of the termination; (ii) the worth at
the time of the award of the amount by which the unpaid Minimum Monthly Rent,
Additional Rent and other charges which would have been earned or were payable
after termination until the time of the award exceeds the amount of such rental
loss that Tenant proves could have been reasonably avoided; (iii) the worth at
the time of the award of the amount by which the unpaid Minimum Monthly Rent,
Additional Rent and other charges which would have been payable for the balance
of the term after the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; and (iv) 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 whether provided
by this Lease or allowed by applicable law, including, but not limited to, any
costs or expenses incurred by Landlord in maintaining or preserving the
Premises after such default, the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation or alteration of the
Premises, Landlord’s reasonable attorneys’ fees, and any real estate
commissions or other such fees paid or payable. As used in subparts (i) and
(ii) above, the “worth at the time of the award” is computed by allowing
interest on unpaid amounts at the rate of fifteen percent (15%) per annum, or
such lesser amount as may then be the maximum lawful rate. As used in subpart
(iii) above, the worth at the time of the award is computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of the award, plus one percent (1%). If Tenant shall have abandoned the
Premises, Landlord shall have the option of (i) retaking possession of the
Premises and recovering from Tenant the amount specified in this Section 14.4(a),
or (ii) proceeding under Section 14.4(b);

 

(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. Tenant acknowledges that Landlord has the remedy
described in California Civil Code Section 1951.4 in that Landlord may continue
the Lease in effect after Tenant’s breach and abandonment and recover rent as
it becomes due;

 

(c)           Pursue any other remedy now or hereafter available to Landlord under
the laws or judicial decisions of the state of California.

 

Section
14.5           The Right to Relet the Premises.   Should
Landlord elect to re-enter, as herein provided, or should it take possession
pursuant to legal proceedings or pursuant to any notice provided for by levy,
it may either terminate this Lease or it may from time to time without
terminating this Lease, relet said Premises or any part thereof for such term
or terms (which may be for a term extending beyond the Term of this Lease) and
at such rental or rentals and upon such other terms and conditions as Landlord
in its reasonable discretion may deem advisable; upon each such reletting all
rentals received by the Landlord from such reletting shall be applied, first,
to the repayment of any indebtedness other than rent due hereunder from Tenant
to Landlord; second, to the payment of brokerage fees and attorneys’ fees
directly associated with such reletting; third, to the payment of rent due
and  unpaid hereunder, and the residue,
if any, shall be held  by Landlord and
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payable
hereunder. If such rentals received from such reletting during any month are
less than that to be paid during that month by Tenant hereunder, Tenant shall
pay any such deficiency to Landlord. Such deficiency shall be calculated and
paid monthly. No such reentry or taking possession of said Premises by Landlord
shall be construed as an election on its part to terminate this Lease unless a
written notice of such intention be given to Tenant or unless the termination
thereof decreed by a court of competent jurisdiction.

 

Section
14.6           Cumulative Remedies.   Landlord’s
exercise of any right or remedy shall not prevent it from exercising any other
right or remedy.

 

ARTICLE 15

 

PROTECTION OF CREDITORS AND OTHERS

 

Section15.1            Subordination.   Landlord
shall have the right to require Tenant to subordinate this Lease to any ground
lease, deed of trust or mortgage encumbering the Premises, any advances made on
the security thereof and any renewals, modifications, consolidations,
replacements or extensions thereof, whenever made or recorded. If any ground
lessor, beneficiary or mortgagee (“Holder”) elects to have this Lease prior to
the lien of its ground lease, deed of trust or mortgage and gives written
notice thereof to Tenant, this Lease shall be deemed prior to such ground
lease, deed of trust or mortgage whether this Lease is dated prior or
subsequent to the date of said ground lease, deed of trust  or mortgage or the date of recording thereof.
The subordination provided for in this section is expressly conditioned upon
the Holder’s agreement that as long as Tenant is not in default in the payment
of Base Rent and the performance and observance of any convenant, condition,
provision, term or agreement to be performed and observed by Tenant under this
Lease, beyond any applicable grace or cure period this Lease provides Tenant,
the Holder will not disturb Tenant’s rights under this Lease, including but not
limited to Tenant’s possession of the Premises. The lien of any existing or
future holder will not cover Tenant’s moveable trade fixtures or other personal
property of Tenant located in or on the Property.

 

Section15.2            Attornment.   If Landlord’s interest in the
Premises is acquired by any ground lessor, beneficiary under a  deed of trust, mortgagee, or purchaser at a
foreclosure sale, Tenant shall attorn to the transferee of or successor to
Landlord’s interest in the Premises and recognize such transferee or successor
as Landlord under this Lease at the request of such transferee made either
prior to or following  such euquisition
and shall, at the request of such successor, enter into a new lease directly
with such successor on the same terms and conditions as this lease for the then
remaining term of this Lease. Tenant waives the protection of any statute or
rule of law which gives or purports to give Tenant any right to terminate this
Lease or surrender possession of the Premises upon the transfer of Landlord’s
interest.

 

Section15.3            Signing of Documents.   Tenant shall sign and deliver and instrument
or documents necessary or appropriate to effectuate or evidence any such
attornment or subordination or agreement to do so. If Tenant fails to do so
within ten (10) days after written request (i) Tenant hereby makes, constitutes
and irrevocably appoints Landlord, or any transferee or successor of Landlord,
the attorney-in-fact of Tenant to execute and deliver any such instrument or
document and (ii) such failure shall constitute a default under this Lease
entitling Landlord to terminate this Lease without further notice to Tenant.

 

Section15.4            Estoppel Certificates.

 

(a)           Upon a party’s written request, the other party (“Estopped Party”)
shall execute, acknowledge and deliver to the requesting party a written
statement certifying: (i) that none of the terms or provisions of this Lease
have been changed (or if they have been changed, stating how they have been
changed); (ii) that this Lease has not been canceled or terminated; (iii) the
last date and amount of payment of the Minimum Monthly Rent, Additional Rent
and other charges and the time period covered by such payment: (iv) that the
requesting party is not in default under this Lease (or, if the requesting
party is claimed to be in default, stating why) and (v)such other statements as
reasonably required by the requesting party, or any lender or prospective
lender, investor or purchaser. The Estopped party shall deliver such statement
to the requesting party within ten (10) days after the requesting party’s
request. Any such statement by the Estopped Party may be given by the
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sublessee,
transferee or encumbrancer of the Premises. Such purchaser, lessee, sublessee,
transferee, or encumbrancer may rely conclusively upon such statement as true
and correct.

 

(b)           If the Esotpped party does not deliver such statement to the requesting
party within such ten (10) day period, (i) the Estopped Party irrevocably
constitutes and appoints the requesting party as its special attorney-in-fact
to execute and deliver the certificate to any third party and (ii) such failure
shall consitute a default under this Lease without further notice to the
Estopped Party entitling the requesting party to terminate this Lease. Further,
the requesting party, and any prospective purchaser, lessee, sublessee,
transferee or encumbrancer, may conclusively presume and rely upon the
following facts: (i) that the terms and provisions of this Lease have not been
changed except as otherwise represented by the requesting party; (ii) that this
Lease has not been canceled or terminated except as otherwise represented by
the requesting party; (iii) in the case of the Landlord as the requesting
party, that not more than one month’s Minimum Monthly Rent or other charges
have been paid in advance; and (iv) that the requesting party is not default
under this Lease. In such event, the Estopped Party shall be estopped from
denying the truth of such facts.

 

Section
15.5           Tenant’s Financial Condition.   Within
ten (10) days after written request from Landlord, Tenant shall deliver to
Landlord such financial statements as Tenant normally maintains. In addition,
Tenant shall deliver to any lender or proposed purchaser of the Premises or the
Project or any interest therein dsignated by Landlord any financial statements
as Tenant normally maintains to facilitate the sale, financing or refinancing
of such interest in the Premises or Project. Tenant represents and warrants to
Landlord that (a) each such financial statement is a true and accurate
statement as of the date of such statement; and (b) at all times after the date
of any such statement during the Lease Term or any extension thereof, Tenant’s
net worth, as stated therein, shall not be reduced. All financial statements
shall be confidential and shall be used only for the purposes set forth herein.

 

Section15.6            Mortgage Protection Clause.   Tenant
agrees to give any mortgagees and/or trust holders, by registered mail, a copy
of any notice of default, served upon the Landlord, provided that prior or such
notice Tenant has been notified in writing of the addresses of such mortgagees
and/or trust deed holders. Tenant further agrees that if Landlord shall have failed
to cure such default within the time provided for in this Lease, then the
mortgagees and/or trust deed holders shall have an additional thirty days (30)
within which to cure such default, or if such default cannot be cured within
that time, then such additional time as may be necessary if within such thirty
days (30) any mortgagee and/or trust deed holder has commenced and is
diligently pursuing the remedies necessary to cure such default (including but
not limited to commencement of foreclosure proceedings if necessary to affect
such cure), in which event this Lease shall not be terminated while such
remedies are being so diligently pursued.

 

ARTICLE 16

 

LEGAL COSTS

 

Section16.1            Legal Proceedings.   Tenant
shall reimburse Landlord, upon demand, for any costs or expenses incurred by
Landlord in connection with any breach or default of Tenant under this Lease,
whether or not suit is commenced or judgment entered. Such costs shall include
legal fees and costs incurred for the negotiation of a settlement, enforcement
of rights or otherwise. Furthermore, if any action for breach of or to enforce
the provisions of this Lease is commenced, the court in such action shall award
to the party in whose favor a judgment is entered, a reasonable sum as
attorneys’ fees and costs. Such attorneys’ fees and costs shall be paid by the
losing party in such action. Tenant shall also indemnify Landlord against and
hold Landlord harmless from all costs, expenses, demands and liability incurred
by Landlord if Landlord becomes or is made a party to any claim or action (a)
instituted by Tenant, or by any third party against Tenant, or by or against
any person holding any interest under or using the Premises by license of or
agreement with Tenant; (b) for foreclosure of any lien for labor or material
furnished to or for Tenant or such other person; 

(c) otherwise arising out of or resulting from any act or transaction of Tenant
or such other person; or (d) necessary in Landlord’s judgment to protect
landlord’s interest under this Lease in a bankruptcy proceeding, or other
proceeding under Title 11 of the United States Code, as amended. Tenant shall
defend Landlord against any such claim or action at Tenant’s expense with
counsel reasonably acceptable to Landlord or, at Landlord’s election, Tenant
shall reimburse Landlord for any Legal fees or costs incurred by Landlord  in any such claim or action.

 

	
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Section 16.2           Landlord’s
Consent.   Tenant shall pay Landlord’s reasonable
attorneys fees incurred in connection with Tenant’s request for Landlord’s
consent under Article 13 Assignment and Subletting, or in connection with any
other act which Tenant proposes to do and which requires Landlord’s consent.

 

ARTICLE 17

 

TENANT’S INSURANCE

 

Section 17.1           Insurance.   All
insurance required to be carried by Tenant hereunder shall be issued by
responsible insurance companies acceptable to Landlord and Landlord’s lender
and qualified to do business in the State of California. Each policy shall name
Landlord, and at Landlord’s request any mortgage of Landlord, as an additional
insured, as their respective interest may appear. Each policy shall contain (i)
a cross-liability endorsement, (ii) a provision that such policy and the
coverage evidenced thereby shall be primary and non-contributing with respect
to any policies carried by Landlord and that any coverage carried by Landlord
shall be excess insurance, and (iii) a waiver by the insurer of any right of
subrogation against Landlord, its agents, employees and representatives, which
arises or might arise by reason of any payment under such policy or by reason
of any act or omission of Landlord, its agents, employees or representatives. A
copy of each paid up policy (authenticated by the insurer) or certificate of
the insurer evidencing the existence and amount of each insurance policy
required hereunder and that Landlord is named as an additional insured shall be
delivered to Landlord before the date Tenant is first given the right of
possession of the Premises, and thereafter within thirty (30) days after any
demand by Landlord therefore. Landlord may, at any time and from time to time
inspect and/or copy any insurance policies required to be maintained by Tenant
hereunder. No such policy shall be cancelable except after thirty (30) days
written notice to Landlord and Landlord’s lender by Tenant and/or the insurer.
Tenant shall furnish Landlord with renewals or “binders” of any such policy at
least ten (10) days prior to the expiration thereof. Tenant agrees that if
Tenant does not take out and maintain such insurance, Landlord may (but shall
not be required to) procure said insurance on Tenant’s behalf and charge the
Tenant the premiums together with a twenty-five percent (25%) handling charge,
payable upon demand. Tenant shall have the right to provide such insurance
coverage pursuant to blanket policies obtained by the Tenant, provided such
blanket policies expressly afford coverage to the Premises, Landlord,
Landlord’s mortgagee and Tenant as required by this Lease.

 

Section 17.2           Scope
of Coverage.   Beginning on the date Tenant is given
access to the Premises for any purpose and continuing until expiration of the
Term, Tenant shall procure, pay for and maintain in effect policies of casualty
insurance covering (i) all Tenant improvements (including any alterations,
additions or improvements as may be made by Tenant pursuant to the provisions
of Articles 5 and 10 hereof), and (ii) trade fixtures, merchandise and other
personal property from time to time in, on or about the Premises, in an amount
not less than one hundred percent (100%) of their actual replacement cost from
time to time, providing protection against any peril included within the classification
“Fire and Extended Coverage” together with 
insurance against sprinkler damage, vandalism and malicious mischief.
The proceeds of such insurance shall be used for the repair or replacement of
the property so insured. Upon termination of this Lease following a casualty as
set forth herein, the proceeds under (i) shall be paid to Landlord, and the
proceeds under (ii) above shall be paid to Tenant.

 

Section 17.3           Minimum
Coverage.   Beginning on the date Tenant is given
access to the Premises for any purpose and continuing until expiration of the
Term, Tenant shall procure, pay for and maintain in effect workers’
compensation insurance as required by law and commercial general liability
insurance with respect to the Premises and Tenant’s activities in the Premises
and upon and about the Property, on an “occurrence” basis, with minimum limits
of One Million Dollars ($1,000,000) each occurrence and Two Million Dollars
($2,000,000) general aggregate. If Tenant provides such liability insurance
under a blanket policy, the insurance must be made specifically applicable to
the Premises and this Lease on a “per location” basis.

 

Section 17.4           [Intentionally Omitted.]

 

Section 17.5           Waiver
of Subrogation.   Landlord and Tenant each hereby waive
all rights of recovery against the other and against the officers, employees,
agents and representatives of the other, on account of loss by or damage to the
waiving party of its property or the property of other under its control, to
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and extended coverage insurance
policy which either may have in force at the time of the loss or damage. Each
party shall, upon obtaining the policies of insurance required under this
Lease, give notice to its insurance carrier or carriers that the foregoing
mutual waiver of subrogation is contained in this Lease.

 

ARTICLE 18

 

LANDLORD’S INSURANCE

 

Section 18.1           Landlord’s Insurance. Landlord will at all times during the
Term maintain the insurance this Section 18.1 requires.

 

(a)           Property Insurance. Landlord will maintain insurance on the Property
providing coverage comparable to that provided by a standard ISO special causes
of loss form property insurance policy in an amount not less than the full
replacement cost of the Building (including but not limited to the vault on the
Premises, less foundation, grading and excavation costs). Landlord may, at its
option, obtain such additional coverages or endorsements as Landlord deems
appropriate or necessary, including, without limitation, insurance covering
foundation, grading, excavation and debris removal costs; business income and
rent loss insurance; boiler and machinery insurance; ordinance or laws
coverage. Such insurance will not cover or be applicable to any trade fixtures
(other than the vault) or other personal property owned by or in the care,
custody or control of Tenant.

 

(b)           Liability Insurance. Landlord will maintain commercial
general liability insurance for bodily injury, personal injury, and property
damage occurring at the Property in such amounts as Landlord reasonably deems
necessary or appropriate, but in no event will such liability insurance be less
than Five Million Dollars ($5,000,000). Such liability insurance will protect
Landlord, Tenant as an additional insured, and, at Landlord’s option,
Landlord’s lender and some or all of the Landlord Parties.

 

(c)           Evidence of Insurance and Payment. A copy of each paid up
policy (authenticated by the insurer) or certificate of the insurer evidencing
the existence and amount of each insurance policy required hereunder and that
Tenant is named as an additional insured shall be delivered to Tenant before
the date Tenant is first given the right of possession of the Premises, and
thereafter within thirty (30) days after any demand by Tenant therefore. Tenant
may, at any time and from time to time inspect and/or copy any insurance
policies required to be maintained by Landlord hereunder. No such policy shall
be cancelable except after thirty (30) days written notice to Tenant by
Landlord and/or the insurer. Landlord shall furnish Tenant with renewals or
“binders” of any such policy at least ten (10) days prior to the expiration
thereof. Landlord agrees that if Landlord does not take out and maintain such
insurance, Tenant may (but shall not be required to) procure said insurance on
Landlord’s behalf and Landlord shall be obligated to reimburse Tenant the
premiums together with a twenty-five percent (25%) handling charge, payable
upon demand.

 

ARTICLE 19

 

MISCELLANEOUS PROVISIONS

 

Section 19.1           Non-Discrimination.
  Tenant promises, and it is a condition
to the continuance of this Lease, that there will be no discrimination against,
or segregation of, any person or group of persons on the basis of race, color,
sex, creed, national origin or ancestry in the leasing, subleasing,
transferring, occupancy, tenure or use of the Premises or any portion thereof.

 

Section 19.2           Landlord’s
Transfer of Title.   As used in this Lease, the term
“Landlord” means only the current owner or owners of the fee title to the
Premises or a leasehold estate in the Premises under a ground lease of the
Premises at the time in question. Each Landlord is obligated to perform the
obligations of Landlord under this Lease only during the time such Landlord
owns such interest or title. Any Landlord who transfers its title or interest
is relieved of all liability with respect to the obligations of Landlord under
this Lease to be performed on or after the date of transfer. However, each
Landlord shall deliver to its transferee all funds previously paid by Tenant if
such funds have not yet been applied under the terms of this Lease.

 

	
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Section 19.3           Severability.
  A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.

 

Section 19.4           Interpretation.
  The captions of the Articles or
Sections of this Lease are to assist the parties in reading this Lease and are
not a part of the terms or provisions of this Lease. Whenever required by the
context of this Lease, the singular shall include the plural and the plural
shall include the singular. The masculine, feminine and neuter genders shall
each include the other. In any provision relating to the conduct, acts or
omissions of Tenant, the term “Tenant” shall include Tenant’s agents,
employees, contractors, invitees, successors or others using the Premises with
Tenant’s expressed or implied permission.

 

Section 19.5           Other
Tenancies.   Landlord reserves the absolute right to effect
such other tenancies in the Project as Landlord, in the exercise of its reasonable
business judgment, shall determine to best promote the interest of the Project.
Tenant does not rely on the fact, nor does Landlord represent, that any
specific tenant or type or number of tenants shall, during the term of this
Lease, either (i) enter into a lease for any space in the Project or (ii)
continue to lease any space in the Project under any lease which is in effect
as of the date of this Lease, or that any tenant under any lease in effect as
of the date of this Lease will not assign or transfer its interest under its
lease or change the use of the premises under such lease. By executing this
Lease, Tenant acknowledges that Landlord has not made any representations,
warranties or statements as to any of the foregoing and agrees that the occurrence
of any of the foregoing or any similar event shall not affect Tenant’s obligations
under this Lease.

 

Section 19. 6          Entire
Agreement.   This Lease and the Exhibits, and
Rider, if any, attached hereto and forming a part hereof, set forth all the
covenants, promises, agreements, conditions and understandings, either oral or
written, between Landlord and Tenant concerning the 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 Landlord or Tenant unless reduced to writing
and signed by the party to be charged with their performance.

 

Section 19.7           Notices.
  All notices required or permitted
under this Lease shall be in writing and shall be personally delivered, sent by
overnight delivery service or sent by certified mail, return receipt requested,
postage prepaid. Notices to Tenant shall be delivered to the address specified
in Section 1.3 above, except that upon Tenant’s taking possession of the
Premises, the Premises shall be Tenant’s address for notice purposes. Notices
to Landlord shall be delivered to the address specified in Section 1.2 above.
All notices shall be effective upon receipt if sent by certified mail as set
forth above or upon delivery to the address specified if delivered personally
or by overnight delivery service. Either party may change its notice address upon
written notice to the other party.

 

Section 19.8           Waivers.
  All waivers must be in writing and
signed by the waiving party. Landlord’s failure to enforce and provision of
this Lease or its acceptance of rent shall not be a waiver and shall not
prevent Landlord from enforcing that provision or any other provision of this
Lease in the future.

 

Section 19.9           No
Recordation.   Tenant shall not record this Lease
without prior written consent from Landlord. However, Landlord may require that
a “Short Form” memorandum of this Lease be executed by both parties and
recorded.

 

Section 19.10         Binding
Effect:   Choice of Law. This Lease binds
any party who legally acquires any rights or interest in this Lease from
Landlord or Tenant. However, Landlord shall have no obligation to Tenant’s
successor unless the rights or interests of Tenant’s successor are acquired in
accordance with the terms of this Lease. The laws of the state of California
shall apply to the enforcement and interpretation of this Lease.

 

Section 19.11         Corporate
Authority; Partnership Authority.   If Tenant is a corporation, each
person signing this Lease on behalf of Tenant represents and warrants that he
has full authority to do so and that this Lease binds the corporation. Within
five (5) days after this Lease is signed, Tenant shall deliver to Landlord a
certified copy of a resolution of Tenant’s Board of

 

	
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Directors authorizing the execution of this Lease or other evidence of
such authority reasonably acceptable to Landlord. If Tenant is a partnership,
each person signing this Lease for Tenant represents and warrants that he is a
general partner of the partnership, that he has full authority to sign for the
partnership and that this Lease binds the partnership and all general partners
of the partnership. Tenant shall give written notice to Landlord of any general
partner’s withdrawal or addition. Within five (5) days after this Lease is
signed, Tenant shall deliver to Landlord a copy of Tenant’s recorded statement
of partnership or certificate of limited partnership.

 

Section 19.12         No
Partnership.   Landlord shall not by virtue of this
Lease, in any way or for any purpose, be deemed to have become a partner of
Tenant in the conduct of its business, or otherwise, or joint venturer or a
merger of a joint enterprise with Tenant, nor is Tenant an agent of Landlord
for any reason whatsoever. 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 19.13         Joint
and Several Liability.   All parties signing this Lease as
Tenant shall be jointly and severally liable for all obligations of Tenant.

 

Section 19.14         No
Option.   The submission of this Lease for
examination does not constitute a reservation of or option to lease the
Premises and this Lease becomes effective only upon execution and delivery
thereof by Landlord and Tenant.

 

Section 19.15         Accord
and Satisfaction.   No payment by Tenant or receipt by
Landlord 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 an accord and satisfaction, and Landlord may
accept such check or payments without prejudice to Landlord’s right to recover
the balance of such rent or pursue any other remedy provided in this Lease.

 

Section 19.16         Provisions
are Covenants and Conditions.   All provisions, whether covenants or
conditions, on the part of the Landlord, or on the part of Tenant, shall be
deemed to be both covenants and conditions.

 

Section 19.17         Waiver
of Right to Jury Trial.   Landlord and Tenant hereby waive their
respective right to trial by jury of any cause of action, claim, counterclaim
or cross-complaint in any action, proceeding and/or 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.

 

Section 19.18         Limitation
of Actions.   Any claim, demand, right or defense of
any kind by Tenant which is based upon or arises in connection with this Lease
or the negotiations prior to its execution, shall be barred unless Tenant
commences an action thereon, or interposes in a legal proceeding a defense by
reason thereof, within the later of, one year after the end of the Term of this
Lease or Lessee’s discovery of such claim, demand, right to defense.

 

Section 19.19         Confidentiality
of Lease Terms.   Landlord and Tenant have agreed upon
certain terms in this Lease including but not limited to the rental obligation
of Tenant as provided herein. Tenant understands and acknowledges that Landlord
has agreed to the terms set forth in this Lease based upon negotiations with
Tenant and that the agreements of Landlord as provided herein are for the benefit
of Tenant. Tenant further understands and agrees that (i) the terms of this
Lease may be different from the terms of other lease in the Project, (ii) that
the terms of this Lease may be more favorable to Tenant than the terms of other
leases in the Project, (iii) Landlord may be materially damaged in the event
Tenant discloses the terms of this Lease to other tenants in the Project or any
other parties except as permitted in this Section and (iv) if Tenant breaches
the agreement as to confidentiality set forth herein, such breach shall be a
material noncurable default under this Lease and entitle Landlord to
immediately pursue its remedies under Section 14.4 or this Lease.

 

Notwithstanding the foregoing, Landlord agrees that Tenant may provide
a copy of this Lease on a confidential basis only to any of Tenant’s partners,
directors, shareholders, employees, accountants or attorneys, or to a third
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by
law to provide a copy to such party. A condition to the delivery by Tenant
shall be that Tenant require any such party to agree in writing to not disclose
the terms or provide a copy of the Lease to any other party.

 

Section
19.20         Effective Date.   Landlord
and Tenant have signed this Lease at the place and on the dates specified
adjacent to their signatures below and have initialed all Riders which are
attached to or incorporated by reference in this Lease. The date on which
Landlord delivers this Lease to Tenant shall be inserted by Landlord in Section
1.1 as the Effective Date.

 

Section
19.21         Indemnification of Landlord.   Tenant
shall indemnify and defend Landlord and save it harmless from and against any and
all claims, actions, damages, liability and expense in connection with the
occupancy or use by Tenant of the Premises or any part thereof, or occasioned
wholly or in part by any act or omission of Tenant, its agents, contractors,
employees, servants, tenants or concessionaires, including without limitation
loss of life, personal injury and/or damage to property. Tenant shall further
indemnify, protect and hold Landlord harmless from and against any and all
claims arising from any breach or default in 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 its agents, contractors,
employees, servants, tenants or concessionaires, and from and against all
costs, attorneys’ fees, expenses and liabilities incurred in connection with
such claim or any action or proceeding brought thereon. In case any action or
proceeding shall be brought against Landlord by reason of any such claim,
Tenant upon notice from Landlord shall defend the same at Tenant’s reasonable
expense by counsel reasonably approved in writing by Landlord.

 

Section
19.22         Landlord’s Indemnification of Tenant.   Because Landlord is required to maintain
insurance on the Project and Tenant compensates Landlord for such insurance as
part of Tenant’s Pro Rata Share and because of the waivers of subrogation in
Section 17.5. Landlord shall, with counsel reasonably acceptable to Tenant,
indemnify defend, and hold harmless Tenant from and against all claims,
judgments, damages, penalties, fines, costs, liabilities, injunctive actions,
orders or losses (“Claims”) for damage to property outside the Premises to the
extent that such Claims are covered by such insurance (or would have been
covered and Landlord carried the insurance required under this Lease), even if
resulting from the negligent acts, omissions, or willful misconduct of Tenant.
In addition, Landlord shall, with counsel reasonably acceptable to Tenant,
indemnify defend, and hold harmless Tenant from and against all third party
Claims resulting from the negligent acts, omissions, or willful misconduct of
Landlord in connection with Landlord’s activities in ,on, or about the Project
or Building, except to the extent that such claim is for damage to the tenant
improvements and Tenant’s personal property, fixtures, furniture, and equipment
in the Premises and is covered by insurance that Tenant is required to obtain
under this Lease (or would have been covered had Tenant carried the insurance
required under this Lease.

 

Section
19.23         Excavation.   If an excavation shall be
made upon land adjacent to or under the 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 Premises for the purpose of doing such
work as Landlord shall deem necessary to preserve the wall or the building of
which the Premises form a part from injury or damage and to support the some by
proper foundations, without any claim for damages or indemnification against
Landlord or diminution or abatement of rent.

 

Section
19.24         Quiet Possession.   If
Tenant pays the rent and complies with all other terms of this Lease, Tenant
may occupy and enjoy the Premises for the full Lease Term, subject to the
provisions of this Lease and to any mortgages or deeds of trust presently
encumbering or which may in the future encumber the Project.

 

Section
19.25         Window Coverings.   Landlord
may select a standard window covering and color for use throughout the Project
and Tenant shall use this standard window covering for any windows Tenant shall
cover. Tenant shall be required to provide, at its expense, prescribed
coverings in front of windows in which the space is utilized for other than
retail or sales office use.

 

Section
19.26         Choice of Law.   This Lease shall be construed and enforced in
accordance with the law of the State of California.

 

	
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Section
19.27         Consent.   Notwithstanding anything
contained in this Lease to the contrary. Tenant shall have no claim, and hereby
waives the right to any claim against Landlord for money damages by reason of
any refusal, withholding or delaying by Landlord of any consent, approval or
statement of satisfaction, and in such event, Tenant’s only remedies therefore
shall be an action for specific performance, injunction or declaratory judgment
to enforce any right to such consent, etc.

 

Section
19.28         Counterparts.   This
Lease may be executed in multiple counterparts, all of which shall constitute
one and the same Lease.

 

Section
19.29         Business Records and Personal Property.   Notwithstanding
any other provision of this Lease, Lessor shall not have the right to take
possession of any of Lessee’s business records or the records or personal
property located on the Premises of any customer of Lessee or of any third
party. Furthermore, any rights and remedies of the Lessor under this Lease are
subject to the powers of the Commissioner of Financial Institutions and other
bank regulatory agencies to enter upon and assume control of the premises and
of any personal property thereon.

 

ARTICLE 20

 

CERTAIN RIGHTS RESERVED BY LANDLORD

 

Section
20.1           Landlord’s Rights.   Landlord reserves the following rights,
exercisable without liability to Tenant for (a) damage or injury to property,
person or business, (b) causing an actual or constructive eviction from the
Premises, or (c) disturbing Tenant’s use or possession of the Premises:

 

1.                                       To name the Building and Project and to
change the name or street address of the Building or Project; See Addendum:
Provided, however, Landlord shall reimburse Tenant for any and all costs
related to such change, including but not limited to replacement stationary,
replacement business cards, costs of replacement advertising, directory
listings, and notices.

 

2.                                       To install and maintain all signs on the
exterior and interior of the Building and Project; See Addendum.

 

3.                                       To have pass keys to the Premises and all
doors within the Premises, excluding Tenant’s vaults and safes;

 

4.                                       At any time during the Term, and on
reasonable prior notice to Tenant, to inspect the Premises, and to show the
Premises to any prospective purchaser or mortgagee of the project, or to any
assignee of any mortgage on the Project, or to others having an interest in the
Project or Landlord, and during the last six months of the Term, to show the
Premises to prospective tenants thereof; and

 

5.                                       To enter the Premises during Normal Business
Hours for the purpose of making inspections, repairs, alterations, additions or
improvements to the Premises or the Building (including, without limitation,
checking, calibrating, adjusting or balancing controls and other parts of the
HVAC system), and to take all steps as may be necessary or desirable for the
safety, protection, maintenance or preservation of the Premises or the Building
or Landlord’s interest therein, or as may be necessary or desirable for the
operation or improvement of the Building or in order to comply with laws,
orders or requirements of governmental or other authority. Landlord agrees to
use its best efforts (except in an emergency) or minimize interference with
Tenant’s business in the Premises in the course of any such entry.

 

ARTICLE 21

 

RULES AND REGULATIONS

 

Section
21.1           Rules and Regulations.

 

(a)           The Tenant agrees as follows:

 

	
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(1)           All garbage and refuse shall be kept in the kind of container specified
by Landlord, and shall be placed outside of the Premises in specified trash
containers prepared for collection in the manner and at the times and places
specified by Landlord. If Landlord shall provide or designate a service for
picking up refuse and garbage, Tenant shall use same at Tenant’s cost. Tenant
shall pay the cost of removal of any of Tenant’s refuse or rubbish.

 

(2)           No aerial shall be erected on the roof or exterior walls of the
Premises, or on the grounds, without in each instance, the written consent of
the Landlord. Any aerial so installed without such written consent shall be
subject to removal without notice at any time.

 

(3)           Except as may be associated with the ATM, no loudspeakers, televisions,
phonographs, radios, or other devices shall be used in a manner so as to be
heard or seen outside of the Premises without the prior written consent of
Landlord.

 

(4)           The outside areas immediately adjoining the building shall be kept
clean and free from dirt and rubbish by the Tenant to the Satisfaciton of the
Landlord and Tenant shall not place or permit any obstruction or materials in
such areas. No exterior storage shall be allowed without permission in writing
from Landlord.

 

(5)           Tenant and Tenant’s employees shall park only the number of cars
approved and only in those portions of any available parking area which may be
designated for that purpose by Landlord.

 

(6)           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, and the expense of any breakage, stoppage or damage
resulting from a violation of this provision shall be borne by Tenant, who
shall, or whose employees, agents or invitees shall have caused it.

 

(7)           Tenant shall use at Tenant’s cost such pest extermination contractor as
Landlord may direct and at such intervals as Landlord may require.

 

(8)           Tenant shall not burn any trash or garbage of any kind in or about the
Premises, or the building.

 

(9)           Tenants in the retail sale business shall warehouse, store and/or stock
in the Premises only such goods, wares and merchandise as Tenant intends to
offer for sale at retail at, in, from or upon the Premises. This shall not
preclude occasional emergency transfers of merchandise to the other stores of
Tenant, if any, not located in the Project. Tenant shall use for office,
clerical, or other non-selling purposes only such space in the Premises as is
from time to time reasonably required for Tenant’s business in the Premises.

 

	
  Landmark National Bank

  	
  Initials 

  	
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31

 

(b)           Landlord reserves the right from time to time to amend or supplement
the foregoing rules and regulations, and to adopt and promulgate additional
rules and regulations applicable to the Premises and the Project. Notice of
such rules and regulations and amendments and supplements thereto, if any,
shall be given to the Tenant and Tenant agrees to comply with all such rules
and regulations upon receipt of notice. Landlord shall not be liable in any way
to Tenant for any damage or inconvenience caused by any other tenant’s
non-compliance with these rules and regulations.

 

	
  Date:

  	
  January
  8, 2003

  	
   

  	
  Date:            

  	
  January
  7, 2003

  	
   

  
	
  Landlord:
  KAVENUISH IVANHOE, LTD LP

  	
  Tenant:

  	
  LANDMARK
  NATIONAL BANK

  
	
  BY:

  	
   

  	
   

  
	
  SEESEEANOH
  INC.,

  	
   

  	
   

  
	
  a
  California corporation, General Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Sharon C. Considine

  	
   

  	
  BY:

  	
  /s/ Ronald J. Carlson

  	
   

  
	
   

  	
  Sharon
  C. Considine

  	
   

  	
  Name:
  Ronald J. Carlson

  
	
   

  	
  President

  	
   

  	
  Title:
  PRES/CEO

  
	
   

  	
   

  	
   

  	
  Address:
  937 Lomas Santa FE Dr

  
	
   

  	
   

  	
   

  	
  Address:
  Solana Beach, CA 92075

  
	
   

  	
   

  	
   

  	
  Phone:858-947-2329

  
									

 

 

CONSULT
YOUR ADVISORS – This document has been prepared for approval by your attorney.
No representation or recommendation is made a to the legal sufficiency or tax
consequences of this document or the transaction to which it relates. These are
questions for your attorney.

 

In
any real estate transaction, it is recommended that you consult with a
professional, such as a civil engineer, industrial hygienist or other person, with
experience in evaluating the condition of the property, including the possible
presence of asbestos, hazardous materials and underground storage tanks.

 

	
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32

 

EXHIBIT “B”

 

TENANT’S WORK

 

[To Be Attached]

 

	
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  Initials 

  	
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EXHIBIT “C”

 

CONFIRMATION OF LEASE TERM

 

This
Confirmation of Lease is made as of February 11, 2003 between KAVENISH IVANHOE,
LTD LP (“Landlord”) and LANDMARK NATIONAL BANK (“Tenant”), who agree as
follows:

 

1.             Landlord and Tenant entered into a Lease with
an Effective Date of February 11, 2003 in which Landlord leased to Tenant and
Tenant leased from Landlord the premises described in Paragraph 1.4 of the
Lease(the “Premises”).

 

2.             Pursuant to Paragraph 1.6 of the Lease,
Landlord and Tenant agree to confirm the commencement and expiration dates of
the Lease Term, as follows:

 

February
11, 2003 is the Commencement Date of the Lease Term;

 

January
31, 2018 is the Expiration Date of the Lease Term.

 

3.             Tenant confirms that:

 

a.             It has accepted possession of the Premises as
provided in the Lease;

 

b.             The improvements and space required to be
furnished by Landlord under the Lease, have been furnished;

 

c.             Landlord has fulfilled all its duties of an
inducement nature;

 

d.             The Lease has not been modified, altered or
amended, except as follows;

 

 

e.             There are no setoffs or credits against rent,
and no security deposit has been paid except as provided by the Lease;

 

f.              Tenant has no notice of a prior assignment,
hypothecation, or pledge of rent, or of the Leases; and

 

g.             The Lease is in full force and effect.

 

4.             The provisions of this Confirmation of Lease
shall inure to the benefit, or bind, as the case may require, the parties and
their respectives successors subject to the restrictions on assignment and
subleasing contained in the Lease.

 

 

	
   

  	
   

  	
   

  	
  LANDMARK
  NATIONAL BANK

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Landlord  [Illegible]

  	
   

  	
  Tenant

  

 

	
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  [ILLEGIBLE]

  
	
  Office Lease

  	
   

  	
  [ILLEGIBLE]

  
	
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EXHIBT “D”

 

MINIMUM MONTHLY RENT

 

The
rent for the fifteen – year term is the following monthly amounts per year:

 

	
  Year
  1

  	
   

  	
  $16,000.00

  
	
  Year
  2

  	
   

  	
  $17,250.00

  
	
  Year
  3

  	
   

  	
  $18,500.00

  
	
  Year
  4

  	
   

  	
  $19,750.00

  
	
  Year
  5

  	
   

  	
  $21,000.00

  
	
  Year
  6

  	
   

  	
  $22,250.00

  
	
  Year
  7

  	
   

  	
  $23,500.00

  
	
  Year
  8

  	
   

  	
  $24,750.00

  
	
  Year
  9

  	
   

  	
  $26,000.00

  
	
  Year
  10

  	
   

  	
  $27,250.00

  
	
  Year
  11

  	
   

  	
  $28,500.00

  
	
  Year
  12

  	
   

  	
  $29,750.00

  
	
  Year
  13

  	
   

  	
  $31,000.00

  
	
  Year
  14

  	
   

  	
  $32,250.00

  
	
  Year
  15

  	
   

  	
  $33,500.00

  

 

	
  Landmark National Bank

  	
  Initials 

  	
  [ILLEGIBLE]

  
	
  Office Lease

  	
   

  	
  [ILLEGIBLE]

  
	
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EXHIBIT “E”

 

[Intentionally Omitted.]

 

	
  Landmark National Bank

  	
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  [ILLEGIBLE]

  
	
  Office Lease

  	
   

  	
  [ILLEGIBLE]

  
	
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EXHIBIT “F”

 

RIDER OPTION

 

1.             Option.   Provided Tenant is not in default of the
Lease either on the date of exercise or on the Expiration Date of the Lease
Term, Tenant shall have the right to extend the Lease Term for Two (2)
additional period(s) of Sixty (60) months each (each referred to as an “Option
term”) on the same terms, conditions and provisions as are contained in this
Lease, except that the Minimum Monthly Rent shall be adjusted to the Fair
Market Base Rent and (b) the Minimum Monthly Rent shall be subject to three
percent (3%) annual increases at the commencement of each subsequent year of
the Option Term. In order to exercise any such option, Tenant must give written
notice to Landlord of its intention to exercise such option no earlier than ten
(10) months prior to the then existing Expiration Date and no later than four
(4) months prior to the existing Expiration Date. Time is of the essence in
such exercise and any attempt to so exercise other than within the period set
forth above shall be of no force and effect. Upon such exercise, the Lease Term
shall be extended to the end of the Option Term for which Tenant exercised and
the new Expiration Date shall be the end of such Option Term. Landlord will
reasonably determine such Fair Market Base Rent and deliver Landlord’s
determination to Tenant within fifteen (15) days following Tenant’s delivery to
Landlord of Tenant’s notice of exercise of the then applicable Option.

 

2.             Selection of Fair Market Base Rent.   If Tenant disputes Landlord’s
determination of Fair Market Basic Rent for an extension of the Term, Tenant
will deliver notice of such dispute, together with Tenant’s proposed Fair
Market Base Rent, to Landlord within five days of Tenant’s receipt of Landlord’s
determination. The parties will then attempt in good faith to agree upon the
Fair Market Base Rent. If they fail to agree within 15 days, they will within
seven days thereafter mutually appoint an appraiser who will select (in the
manner set forth below) the Fair Market Base Rent (the “Deciding
Appraiser”). The Deciding Appraiser must have at least five (5)
years of full-time commercial appraisal experience with projects comparable to
the Property and be a member of the American Institute of Real Estate
Appraisers or a similar appraisal association, and may not have any material
financial or business interest in common with either of the parties. If Landlord
and Tenant are unable to agree upon the Deciding Appraiser within such seven
days, each party will within five (5) days thereafter separately select an
appraiser meeting the criteria set forth above, which two (2) appraisers will,
within seven (7) days of their selection, mutually appoint a third appraiser
meeting the criteria set forth above to be the Deciding Appraiser. Within seven
(7) days of the appointment (by either method) of the Deciding Appraiser,
Landlord and Tenant will submit to the Deciding Appraiser their respective
determinations of Fair Market Base Rent and any related information. Within
twenty-one (21) days of such appointment of the Deciding Appraiser, the
Deciding Appraiser will review each party’s submittal (and such other information
as the Deciding Appraiser deems necessary) and will select one party’s
submittal as the Fair Market Base Rent; provided, however, that in no event
will Fair Market Base Rent for an extension of the Term be less than the Basic
Rent (exclusive of temporary abatements) payable by Tenant immediately prior to
commencement of the applicable extension period. Subject to the previous
sentence, if the Deciding Appraiser timely receives one party’s submittal, but
not both, the Deciding Appraiser must designate the submitted rate as the Fair
Market Base Rent for the applicable extension of the Term, Landlord and Tenant
will each pay, directly to the Deciding Appraiser, one-half (1/2) of all fees,
costs, and expenses of the Deciding Appraiser. Landlord and Tenant will each
separately pay all costs, fees and expenses of their respective additional
appraiser (if any) used to determine the Deciding Appraiser.

 

3.             Definition of Fair Market Base Rent.   Fair Market Base Rent means
the fair market base rental rate for the Premises for the applicable extension
period in relation to comparable (in quality, location and size) space located
in the Building and/or the City of La Jolla coastal area in the City of San
Diego, with due consideration given to the following factors regarding the
Premises and Tenant, on the one hand, and the comparable space(s) and
tenant(s), on the other hand: (a) the financial condition of the tenant; (b)
the location, quality and age of the building(s); (c) the extent and quality of
leasehold improvements (existing or to be provided) in the premises; (d) rent
abatements, if any; (e) the location of the premises within the building; (f)
the length of the term; (g) the nature and extent of services provided by the
landlord; (h) expense stops, if any; (i) any other concessions given; and (j)
other pertinent factors.

 

	
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4.             Appurtenant to Lease.
  This option to renew and extend shall
be deemed appurtenant to this Lease and shall not be separately assigned,
pledged or otherwise transferred.

 

5.             Agreement.   The parties shall initial below to indicate
their agreement to and acceptance of this Option to Extend.

 

 

	
  Initials
  of Landlord

  	
   

  	
  Initials
  of Tenant

  

 

	
  Landmark National Bank

  	
  Initials 

  	
  [ILLEGIBLE]

  
	
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  [ILLEGIBLE]

  
	
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EXHIBIT “G”

 

SIGNAGE

 

[Attached Hereto]

 

	
  Landmark National Bank

  	
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  Office Lease

  	
   

  	
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  30182-00001 / 1798316.8 [Word]

  	
   

  	
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“ADDENDUM”

 

1.                    The Tenant has the irrevocable right, but not
obligation, to lease 15 parking spaces, plus the irrevocable option lease 5
additional parking spaces, for Tenant’s exclusive use at the going rate each
month (currently $85.00 per month). Ten of the spaces shall be located near the
entrance of the Building and plainly marked for the benefit of the Bank’s
customers. To the extent Landlord restricts access to such parking spaces,
Landlord shall provide Tenant the means by which to bypass such restrictions in
order to access the parking spaces. Furthermore, in the event such control is
implemented and a validation system is created, Landlord shall provide Tenant a
method of validiting the use of the foregoing parking spaces so their neither
Tenant and/or its customers shall pay to park beyond the rates set forth above.

 

2.                    Landlord shall deliver to Tenant a tenant
improvement allowance in the amount of One Hundred Forty-Five Thousand Dollars
($145,000.00) to be used in any manner elected by Tenant, in Tenant’s sole and
absolute discretion, including but not limited to constructing Tenant
Improvements, acquisition of personal property, and payment of Tenant’s Broker
Commission. Landlord shall deliver to Tenant, (i) upon execution of this Lease,
payment in the amount of Seventy Two Thousand Five Hundred Dollars
($72,500.00), and (ii) upon Commencement of the Lease, an additional payment in
the amount of Seventy Two Thousand Five Hundred Dollars ($72,500.00). In the
event of any early termination of the Lease by Tenant pursuant to Sections
1.7(a), 1.19(a) or 1.19(b), Tenant shall be obligated to return to the Landlord
the amount of the tenant improvement allowance received by Tenant from Landlord
on or before the date of such termination

 

3.                    Upon Commencement of the Lease, Landlord
grants to Tenant the right to Building signage intended to identify the
Building with the Bank in substantially the locations, sizes, manner of
construction as set forth on Exhibit “G” attached hereto and incorporated
herein. The cost the signage and the installation will be borne by the Tenant.
Tenant shall use Tenant’s contractor for the construction of the Signage.

 

 

	
  Initials
  of Landlord

  	
   

  	
  Initials
  of Tenant.

  

 

	
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  Initials 

  	
  [ILLEGIBLE]

  
	
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  [ILLEGIBLE]

  
	
  30182-00001 / 1798316.8 [Word]

  	
   

  	
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