Document:

Exhibit
10.17

EMPLOYMENT
AGREEMENT

This Employment Agreement (the “Agreement”),
effective as of January 1, 2006 (the “Effective Date”), is made and
entered into by and between Larry Prosi (“Executive”) and 1st Pacific Bank of
California, a California state-chartered bank (the “Bank”), with regard
to the following:

A.    The Bank desires to employ Executive, and Employee
desires to be employed by the Bank, as the Bank’s Chief Banking Officer and a
full-time employee of the Bank under the terms of this Agreement, and as such
is expected to make a major contribution to the profitability, growth and
financial strength of the Bank.

B.    The Bank considers the availability of Executive’s
services, managerial skills and business experience to be in the best interests
of the Bank and the shareholders of the Bank.

C.    Executive is willing to be employed by the Bank upon
the understanding that the Bank will provide him with income security and
benefits if his employment with the Bank is terminated, upon certain terms and
conditions.

NOW, THEREFORE, for valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:

1.             Definitions.

“Bank” means 1st Pacific Bank of California, a
California state-chartered bank, its successors and permitted assigns.

“Bank Board” means the Board of Directors of
the Bank.

“Beneficiary” means the person or entity to
receive rights or benefits under this Agreement, as set forth in this
Agreement, in the event of the death of Executive.  Unless otherwise specified in a written
notice to the Bank, the Beneficiary shall be the spouse of Executive, if any,
and if there is none, the estate of Executive (including any trust created by
the terms of Executive’s will) or, if Executive provides the Bank with written
notice thereof prior to his death, any trust as to which Executive was a
settlor with a power of revocation.

“Benefits” means the types and amounts of
benefits provided under Paragraph 3.6, provided that if at the date of
reference the terms of any Bank insurance plan prohibit the continuance or
recommencement of insurance benefits that Executive formerly held, the Bank
shall be obligated to pay to Executive in cash on a monthly basis an amount
equal to the Bank’s former premium payments (pro rated on a monthly basis) for
the benefit of Executive under such plan, except that if Executive is entitled
to COBRA health insurance benefits the amount shall be increased to the amount
payable by Executive for such benefits if higher than the Bank’s former premium
payments.

“Change of Control” means the occurrence of any
of the following events:

(i)            any “person” (as used in
Section 13(d) of the Securities Exchange Act of 1934 and the rules
promulgated thereunder) becomes the “beneficial owner” (as defined in Rule 13d-3)

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of securities
representing a majority of the voting power of the then outstanding securities
of the Bank; or

(ii)           a sale of assets involving all or
substantially all of the assets of the Bank, or a merger or consolidation of
the Bank in which the holders of securities of the Bank immediately prior to
such event hold in the aggregate less than a majority of the securities of the
Bank or any other surviving or resulting entity immediately after such event.

Notwithstanding the foregoing, a Change in Control
shall not be deemed to have occurred in the event the Bank forms a holding
company as a result of which the holders of the Bank’s outstanding voting
securities immediately prior to the transaction hold, in approximately the same
relative proportions as they held prior to the transaction, substantially all
of the outstanding voting securities of a holding company owning all of the
Bank’s outstanding voting securities after the completion of the transaction.

“Change of Control Severance Benefits” means
(i) an amount equal to the sum of (y) one (1) times Executive’s base
annual salary at the rate then in effect in accordance with Paragraph 3.1,
plus (z) the amount actually paid by the Bank to Executive under the Plan
for the immediately preceding year, if any; and (ii) continuation of
benefits provided under Paragraph 3.6 or substitute equivalent benefits in
the event that the particular benefits (for instance, insurance coverage) are
not carried by the Bank under its programs following the Change of Control
Termination, for a period of twelve (12) months.

“Change of Control Termination” means the
termination of employment of Executive within twelve (12) months after a Change
of Control (i) by the Bank under Paragraph 4.1.5; or (ii) by
Executive under Paragraph 4.2 for Good Cause.

“Code” means the Internal Revenue Code of 1986,
as amended.

“Disability” shall be deemed to occur on the
date the Executive is, by reason of any medically determinable physical or
mental impairment that can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months under an
accident and health plan covering employees of the Bank.

“Executive” means Larry Prosi.

“Expiration Date” means June 30, 2008.

“Good Cause” means:  (i) a reduction in Executive’s base
salary below the rate then in effect in accordance with Paragraph 3.1;
(ii) the Bank requiring that Executive be based at a location more than
fifty (50) miles from the Bank’s headquarters as of the Effective Date
(excluding travel for Bank business and other temporary relocations of no more
than thirty (30) days individually); (iii) a reduction in his title; or
(iv) the continuation after a Change of Control, or imposition within six
(6) months after a Change of Control, of a material reduction in the
duties or authority of Executive so that he is no longer performing
substantially all of the duties of a chief credit officer of a community bank.

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“Plan” means the 1st Pacific Bank of California
Incentive Compensation Plan for Senior Management, in substantially the form
attached hereto as Exhibit A, as the same may be amended from time
to time.

“Separation Agreement” means the Separation and
General Release of Claims, substantially in the form attached hereto as Exhibit B.

“Trade Secrets and Other Proprietary and
Confidential Information” means and consist of, for example, and not
intending to be inclusive, information concerning any matters relating to the
business of the Bank, any of its customers, governmental relations, customer
contacts, underwriting methodology, loan program configuration and
qualification strategies, marketing strategies and proposals, or any other
information concerning the business of the Bank, its subsidiaries and
affiliates, and the Bank’s good will; provided that “Trade Secrets and Other
Proprietary and Confidential Information” shall not be deemed to include
information that is or becomes, through no fault of Executive, in the public
domain.

2.             Rights and Duties of Executive.

2.1           Employment.  The Bank
hereby employs Executive as its Executive Vice President and Chief Credit
Officer, and Executive accepts the duties described herein, and agrees to
discharge the same faithfully and to the best of his ability.  Executive shall perform such other duties as
shall be from time to time prescribed by the Chief Executive Officer of the
Bank and shall report to and be subject to the direction of the Chief Executive
Officer of the Bank.  Executive shall
devote his full business time and attention to the business and affairs of the
Bank.

2.2           [Intentionally Omitted.]

2.3           At-Will Employment.  Executive’s
employment with the Bank is not for a fixed period of time and can be
terminated at the will of either Executive or the Bank at any time, with or
without notice, and with or without cause. 
There are no agreements between Executive and the Bank contrary to
Executive’s at-will status.  Neither a
Bank Board member nor a manager, supervisor, employee or agent of the Bank is
authorized to alter Executive’s at-will status, except for the Chairperson of
the Bank Board, and then only in a writing signed both by the Chairperson of
the Bank Board and Executive following adoption of a resolution by the Bank
Board authorizing the specific change reflected in such writing and authorizing
the Chairperson of the Bank Board to sign such writing.  Executive should neither assume nor imply any
promise of employment for any specified period of time except through such a
signed writing.  This Agreement shall
terminate immediately without further liability or obligation to Executive if
(i) the Bank is closed by any supervisory authority, or (ii) any
supervisory authority demands, by proposed consent agreement or by a Prompt
Corrective Action Directive, or pursuant to cease and desist powers, the
removal of Executive from his position as the Executive Vice President or Chief
Credit Officer of the Bank.  Should
Executive remain employed under this Agreement through the Expiration Date,
Executive’s employment with the Bank shall automatically terminate on that date
and this Agreement shall be of no force or effect on or after that date,
subject to Paragraphs 5.4 and 8.6.

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2.4           Outside Activities.  Executive
shall not have other employment, consulting, charitable or independent
contractor work that materially interferes with the fulfillment of Executive’s
duties to the Bank.  Executive shall not
undertake expanded commitments to business or charitable activities or engage
in new such activities before consulting with the President and Chief Executive
Officer of the Bank.  Executive will not
provide services to, hold or make any investment in or loan to, or participate
in the management or business of, any bank, savings and loan, credit union,
thrift and loan, industrial loan or other entity engaged in the business of
making loans or accepting deposits or both; provided that Executive may own
less than 5% of the voting stock of any company that files reports under the
Securities Exchange Act of 1934.

3.             Compensation and Benefits. 
In consideration for the services to be rendered by Executive to the
Bank, the Bank agrees to provide Executive with the following compensation and
benefits:

3.1           Salary.  The Bank
shall pay Executive a minimum annual salary at the rate of One Hundred Forty
Thousand Dollars ($140,000) for the period of January 1, 2006 through December
31, 2006, increasing to One Hundred Fifty Thousand Dollars ($150,000) for the
period of January 1, 2007 through December 31, 2007, due and payable biweekly,
or otherwise in accordance with the Bank’s policy for the scheduling of salary
payments to employees as in effect from time to time.  Executive’s minimum annual salary for the
period of January 1, 2008 through June 30, 2008, shall be such amount that is
determined by the Bank Board; provided, however, that in no event shall
Executive’s minimum annual salary for such period be below One Hundred Fifty
Thousand Dollars ($150,000).  Other
salary increases, if any, shall only be as approved by the Bank Board in its
sole discretion.

3.2           Withholding and Deductions. 
The Bank shall withhold and/or deduct from any and all salary or other
payments to Executive, all taxes which may be required to be deducted or
withheld under any provision of law (including, but not limited to, social
security payments and income tax withholding) now in effect or which may become
effective any time during Executive’s employment with the Bank.

3.3           Executive Incentive Compensation. 
In general, the Bank believes that superior performance of Executive
should be rewarded and encouraged by incentive compensation.  The Bank Board shall adopt the Plan pursuant
to which Executive may be entitled to incentive compensation provided that the
performance goals of the Bank as set forth in the Plan are achieved and the
terms and conditions of the Plan are satisfied. 
In addition, Executive shall be entitled to other incentive compensation
and bonuses as the Bank Board may determine in its sole discretion.  Notwithstanding the foregoing, Executive
shall not participate in the Bank’s Team Share Plan.

3.4           Automobile Allowance.  The Bank
shall pay the Executive an automobile allowance of Six Hundred and Fifty
Dollars ($650.00) per month, subject to withholding.  This is an allowance for all automobile costs
and expenses, including, but not limited to, fuel, license, maintenance,
insurance, repairs and purchase or lease payments.

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3.5           Expense Reimbursement.  The Bank
agrees to reimburse Executive for all ordinary and necessary expenses incurred
by Executive on behalf of the Bank in accordance with the Bank’s policies and
procedures as in effect from time to time, including entertainment, meal and
travel expenses.

3.6           Insurance.  The Bank
shall provide life insurance with a life insurance benefit equal to at least
one and one-half times the annual salary of Executive at the rate then in
effect under Paragraph 3.1, which shall be provided through any group life
insurance plan of the Bank at the Bank’s option.  The Bank shall provide to Executive the long
term disability insurance provided by the Bank to employees at the Effective
Date under the Bank’s group plan or shall replace it with similar coverage so
long as Executive is employed by the Bank. 
Executive shall be entitled to participate in such other insurance
benefits as are generally provided to the employees of the Bank from time to
time.

3.7           Vacation.  Executive
shall be entitled to five (5) weeks of vacation time and pay per annum, which
shall be scheduled in Executive’s discretion, subject to and taking into
account applicable banking laws and regulations.  Unused vacation may be accrued up to a
maximum of six (6) weeks of unused vacation in addition to the vacation to
which Executive may be entitled in the current year, and thereafter Executive
shall cease to accrue unused vacation until used.  Vacation
must be accrued before taken, and if not yet accrued, must have the prior
approval of the Chief Executive Officer of the Bank to be taken.  Vacation may be used only at the time or
times approved by the Chief Executive Officer of the Bank.

4.             Termination.

4.1           Employer Right to Terminate Employment. 
Nothing in this Agreement shall adversely affect the right of the Bank
Board to terminate Executive.  The Bank
Board has the right to terminate the employment of Executive with the Bank at
will, with or without cause, upon delivery of written notice to Executive
(except in the case of death of Executive, in which event termination shall
automatically occur at the date of death), and including, but not limited to,
for any of the following grounds:

4.1.1        Willful breach or habitual neglect or inability
(except where such inability is due to Disability or death) to perform
Executive’s duties hereunder, including without limitation failure to cooperate
with the Bank Board in the structuring, documentation or negotiation of a
transaction that might result in a Change of Control;

4.1.2        Malfeasance or misfeasance in the performance of
Executive’s duties hereunder, imposition of a regulatory order to remove
Executive, failure to comply with a direction by the Chief Executive Officer of the Bank, material breach of Bank
policy or procedure, or breach of this Agreement;

4.1.3        Immoral or illegal conduct, conviction of a felony,
conviction of a misdemeanor involving moral turpitude;

4.1.4        Disability or death;

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4.1.5        Determination in the complete discretion of the Bank
Board that the employment of Executive should be terminated prior to the
Expiration Date, without reference to the grounds set forth in
Paragraphs 4.1.1, 4.1.2, 4.1.3 or 4.1.4, and specification of the
termination date in the notice described in Paragraph 4.1.

4.2           Termination by Executive. 
Executive may terminate his employment with the Bank at will, for any
reason, and without advance notice. 
However, as a courtesy, Executive is requested to deliver written notice
to the Bank three (3) months in advance of the date such termination is to
take effect, except with respect to a termination for Good Cause.  Executive may terminate his employment with
the Bank prior to the Expiration Date for Good Cause upon thirty (30) days
notice to the Bank and the Bank’s failure to cure within that time.  To be effective, such notice must be given by
Executive within fifteen (15) days of the occurrence of the event that
constitutes Good Cause, provided that if Good Cause results from a material
reduction in the duties or authority of Executive so that he is no longer
performing substantially all of the duties of a chief credit officer of a
community bank and such reduction occurs before a Change of Control occurs and
continues after the Change of Control occurs, Executive shall be required to
give the thirty (30) day notice described above within fifteen (15) days of the
Change of Control.

4.3           Termination Upon Expiration. 
Should Executive remain employed under this Agreement through the date
five (5) months prior to the Expiration Date, Executive shall have the
right, while he is still employed, to provide written notice to the Bank of his
desire to remain employed after the Expiration Date on or before the date four
(4) months prior to the Expiration Date. 
If Executive and the Bank have not entered into an amendment of this
Agreement extending its term or another written agreement replacing this Agreement
on or prior to the date three (3) months prior to the Expiration Date, and
Executive’s employment is not otherwise terminated, Executive’s employment
shall automatically terminate on the Expiration Date.  If such an extension or replacement is not
entered into on or prior to three (3) months prior to the Expiration Date,
Executive shall be deemed to have been given advance notice by the Bank that
his employment with the Bank will terminate as of the Expiration Date.  Nothing in this Paragraph shall prejudice
the at-will status of Executive or require the Bank to negotiate with
Executive.

4.4           Post-Notice Activities of Executive. 
In the event termination is not effective immediately upon the delivery
of notice of termination by the Bank or Executive, the Bank shall have the
right to require that during the period between the giving of notice and the
effective date of termination, Executive’s activities and responsibilities be
curtailed as deemed appropriate by the Bank. 
Such curtailment shall include, without limitation, removing Executive
from corporate offices, requiring Executive to be physically absent from the
Bank’s facilities, and eliminating Executive’s access to computer systems,
e-mail and telephone systems.

4.5           Automatic Resignations.  Upon notice
of termination of employment Executive shall, automatically and without further
action by any party, be deemed to have resigned from all directorships with the
Bank and any of its subsidiaries and affiliates.  Upon termination of employment, Executive shall,
automatically and without further action by any party, be deemed to have
resigned from all offices and other capacities with the Bank and any of its
subsidiaries and affiliates.

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5.             Post-Termination Payments and Benefits. 
The following are the post-termination payments and benefits to which
Executive is entitled upon termination of employment with the Bank.

5.1           Termination Resulting from Breach. 
In the event the employment of Executive is terminated under
Paragraphs 4.1.1, 4.1.2 or 4.1.3, the Bank shall provide Executive only a
payout of all accrued but unused vacation as of the date of termination, the
base salary and Benefits, if any, then-provided, on the terms then-provided,
due him through the date of termination and shall not be obligated to provide
any other compensation or Benefits.

5.2           Other Terminations.

5.2.1        Payments – Disability.  In the event
the employment of Executive is terminated under Paragraphs 4.1.4 for
disability, the Bank shall provide Executive only the following:

(a)           the salary due Executive as of the date of
termination;

(b)           payment of certain incentive compensation due
Executive, if any, in compliance with the Plan;

(c)           a payout of all accrued but unused vacation as of the
date of termination; and

(d)           continuation of the group medical and other insurance
benefits, if any, then-provided under Paragraph 3.6, for a period of three
(3) months from the date of termination, subject to the limitations of and
to the extent permitted by the policy or policies under which such benefits are
provided.

5.2.2        Payments – Death.  In the event
the employment of Executive is terminated under Paragraphs 4.1.4 for
death, the Bank shall provide the Beneficiary only the following:

(a)           the salary due Executive as of the date of death plus
a lump sum payment equal to three (3) months of the base salary at the rate
then in effect in accordance with Paragraph 3.1;

(b)           payment of certain incentive compensation due
Executive, if any, in compliance with the Plan;

(c)           a payout of all accrued but unused vacation as of the
date of termination; and

(d)           continuation of the group medical and other insurance
benefits, if any, then-provided under Paragraph 3.6, for a period of three
(3) months from the date of termination, subject to the limitations of and
to the extent permitted by the policy or policies under which such benefits are
provided.

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5.2.3        Payments – Termination Under Paragraph 4.1.5. 
In the event the employment of Executive is terminated under
Paragraph 4.1.5 or under Paragraph 4.2 for Good Cause, subject to
Executive first entering into the Separation Agreement and such agreement being
fully effective, the Bank shall provide Executive only the following:

(a)           continued salary at the rate then in effect under
Paragraph 3.1 and the automobile allowance then provided under Paragraph 3.4
for a period of nine (9) months from the date notice of termination is
delivered to the Executive, or at the option of the Bank a lump sum payment of
such amount, all subject to withholding;

(b)           payment of certain incentive compensation due
Executive, if any, in compliance with the Plan, with Executive’s termination
under this Paragraph 5.2.3 being considered for the limited purpose of
interpreting the Plan in the context of this Agreement as being a termination “without
cause”;

(c)           a payout of all accrued but unused vacation as of the
date of termination; and

(d)           continuation of the group medical and other insurance
benefits, if any, then-provided under Paragraph 3.6, for a period of nine
(9) months from the date of termination, subject to the limitations of and
to the extent permitted by the policy or policies under which such benefits are
provided.

5.2.4        Executive’s Right to Waive Payments. 
Executive shall have the right to waive his rights to receive such
payments and Benefits otherwise due under this Paragraph 5.2 by giving
advance written notice of such waiver to the Bank.  After receipt of such notice, the Bank shall
have no further obligation to provide any payments or Benefits under this
Paragraph 5.2.

5.3           Change of Control.

5.3.1        Payment Following Certain Terminations Related to
Change of Control.  Subject to Executive first entering into the
Separation Agreement and such agreement being fully effective, in respect of
any Change of Control Termination the Bank shall pay to Executive the Change of
Control Severance Benefits in a lump sum (except for the benefits under
Paragraph 3.6, which shall be continued) within five (5) days following
the date the Separation Agreement is fully effective.

5.3.2        Executive’s Right to Waive Payments. 
Executive shall have the right to waive his rights to receive payments
and Benefits otherwise due under this Paragraph 5.3 by giving advance
written notice of such waiver to the Bank. 
After receipt of such notice, the Bank shall have no further obligation
to provide any payments or Benefits under this Paragraph 5.3.

5.3.3        Adjustments in Payments.  The terms of
this Paragraph 5.3.3 override and control any and all other terms of this
Agreement to the extent inconsistent with this Paragraph 5.3.3.  This Paragraph 5.3.3 shall apply to the
extent that the aggregate present value of any or all payments and benefits in
the nature of compensation to (or for the benefit of) 

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Executive provided under this Agreement or otherwise
provided to Executive by or on behalf of the Bank or any affiliate, parent or
controlling entity of the Bank, constitute a “parachute payment” under the
provisions of Section 280G of the Code, and the regulations thereunder
(the “Total Payments”).  In the
event that the Total Payments would exceed an amount equal to 299% of Executive’s
“base amount” as that term is defined in Section 280G of the Code, as
determined by the independent public accountants for the Bank, Executive and
the Bank agree that the payments or benefits provided to Executive under this
Agreement shall be reduced (or the parties shall agree to a reduction in other
payments or benefits included in the Total Payments to the extent legally and
contractually permissible) so that the present value of the total amount
received by Executive that would constitute a “parachute payment” will be one
dollar ($1.00) less than three (3) times Executive’s base amount (as defined in
Section 280G of the Code) and so that no portion of the payment or benefits
received by Executive would be subject to the excise tax imposed by Section
4999 of the Code.

5.4           Termination at Expiration Date.  If Executive’s employment is terminated as a
result of expiration of this Agreement at the Expiration Date, subject to
Executive first entering into the Separation Agreement and such agreement being
fully effective, the Bank shall provide Executive only the following:

5.4.1        continued salary at the rate then in effect under
Paragraph 3.1 for a period of six (6) months from the date of termination, or
at the option of the Bank a lump sum payment of such amount, all subject to
withholding;

5.4.2        continuation of the group medical and other insurance
benefits, if any, then-provided under Paragraph 3.6, for a period of six (6)
months from the date of termination, subject to the limitations of and to the
extent permitted by the policy or policies under which such benefits are
provided;

5.4.3        a payout of all accrued but unused vacation as of the
date of termination; and

5.4.4        payment of certain incentive compensation due
Executive, if any, in compliance with the Plan, with Executive’s termination as
a result of expiration being considered for the limited purpose of interpreting
the Plan in the context of this Agreement as being a termination “without
cause.”

5.5           Consideration for Payments and Remedies. 
Without limiting any other remedies available to the Bank, the payments
to be made under Paragraphs 5.2, 5.3 or 5.4 (subject to the exceptions
stated therein) after the date of termination of Executive’s employment shall
be subject to Executive’s execution of the Separation Agreement, and Executive’s
continued compliance with the Separation Agreement and the terms of this
Agreement that are effective after termination of Executive’s employment,
through the making of the last such payment.

5.6           Death Following Termination. 
In the event that Executive dies while receiving any payments under this
Paragraph 5, such payments shall be continued for the benefit of the
Beneficiary, as would otherwise be required under this Paragraph 5.

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5.7           Nonassignability.  Neither
Executive nor any other person or entity shall have any power or right to
transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or
otherwise encumber in advance any of the rights or benefits of Executive under
this Paragraph 5, nor shall any of said rights or benefits be subject to
seizure for the payment of any debts, judgments, alimony or separate
maintenance, owed by Executive or any other person or entity, or be
transferable by operation of law in the event of bankruptcy, insolvency or
otherwise.  The terms of this
Paragraph 5.7 shall not affect the interpretation of any provision of this
Agreement.

5.8           Claims Procedure.  The Bank
Board shall make all determinations as to rights to benefits under this
Paragraph 5.

5.9           Regulatory Restrictions.  The parties
understand and agree that at the time any payment would otherwise be made or
benefit provided under this Paragraph 5, depending on the facts and
circumstances existing at such time, the satisfaction of such obligations by
the Bank may be deemed by a regulatory authority to be illegal, an unsafe and
unsound practice, or for some other reason not properly due or payable by the
Bank.  Among other things, the
regulations at 12 C.F.R. Part 30, Appendix A promulgated pursuant to
Section 39(a) of the Federal Deposit Insurance Act, and at 12 C.F.R.
Part 359, or similar regulations or regulatory action following similar
principles may apply at such time.  The
Bank agrees that to the extent reasonably feasible, it will in good faith seek
to determine the position of the appropriate regulatory authority in advance of
each payment or benefit otherwise due under this Paragraph 5, including
seeking the approval or acquiescence of the appropriate regulatory authorities,
if required.  The parties understand,
acknowledge and agree that, notwithstanding any other provision of this
Agreement, the Bank shall not be obligated to make any payment or provide any
benefit under this Paragraph 5 where (i) an appropriate regulatory
authority does not approve or acquiesce as required or (ii) the Bank has
been informed either orally or in writing by a representative of the
appropriate regulatory authority that it is the position of such regulatory
authority that making such payment or providing such benefit would constitute
an unsafe and unsound practice, violate a written agreement with the regulatory
authority, violate an applicable rule, law or regulation, or would cause the
representative of the regulatory authority to recommend enforcement action
against the Bank.

5.10         Right of Offset. Any and all of the compensation and benefits that
would otherwise be provided under this Paragraph 5 are subject to the Bank’s
offset for any liability of Executive to the Bank to the extent the Bank Board
determines that such liability exists. 
In addition, without limiting the remedies of the Bank otherwise
available under this Agreement or otherwise, all compensation and benefits that
would otherwise be payable under this Paragraph 5 shall cease as of the
date Executive first violates any of the provisions included in
Paragraphs 6.4, 6.5 or 6.6.

5.11         Overlapping Benefits and Payments. 
In the event that Executive receives payments and/or benefits under one
of Paragraphs 5.1 through 5.4, inclusive, Executive may not receive
payments and/or benefits under one of the other of such Paragraphs, and the
first such applicable of those Paragraphs shall apply.

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5.12         Delayed Payments.  In the event
that Code Section 409A (“409A”)
applies to any compensation with respect to a separation from service, payment
of that compensation shall be delayed if Executive is a “specified employee,”
as defined in 409A(a)(2)(B)(i), and such delayed payment is required by
409A.  Such delay shall last six months
from the date of separation from service. 
On the day following the end of such six-month period, the Bank shall
make a catch-up payment to Executive equal to the total amount of such payments
that would have been made during the six-month period but for this Section
5.12, plus interest calculated at the prime rate as reported in The Wall Street
Journal.

6.             Additional Covenants.

6.1           Insurance.  The Bank
shall have the right to obtain and hold a “keyman” life insurance policy on the
life of Executive and disability insurance covering Executive, in each case,
with the Bank as beneficiary of such policy. 
Executive agrees to provide any information required for the issuance of
any such policy and submit himself to any physical examination required for any
such policy.

6.2           Unsecured General Creditor. 
Neither Executive nor any other person or entity shall have any legal
right or equitable rights interests or claims in or to any property or assets
of the Bank under the provisions of this Agreement.  No assets of the Bank shall be held under any
trust for the benefit of Executive or any other person or entity or held in any
way as security for the fulfilling of the obligations of the Bank under this
Agreement.  All of the Bank’s assets
shall be and remain the general, unpledged, unrestricted assets of the
Bank.  The Bank’s obligations under this
Agreement are unfunded and unsecured promises, and to the extent such promises
involve the payment of money, they are promises to pay money in the
future.  Executive and any person or
entity claiming through him shall be unsecured general creditors with respect
to any rights or benefits hereunder.

6.3           Dispute Resolution. 
Simultaneously with the execution of this Agreement, the parties have
entered into the Arbitration Agreement attached as Exhibit C, which the
parties agree shall govern the resolution of any and all disputes referenced
therein.

6.4           Return of Documents.  Executive
expressly agrees that upon termination of employment he will return to the Bank
all Bank manuals, document, files, reports, studies, customer lists, business
plans, loan and deposit program plans and outlines, customer solicitation and
follow-up techniques and plans, marketing plans, employee policies, incentive
compensation arrangements, instruments, software, and other materials used
and/or developed by Executive during his employment, whether in paper, computer
readable, computer coded, magnetic, compact disk or other tangible or
electronic form.

6.5           Confidentiality.

6.5.1        No Disclosure.  During the
term of employment with the Bank, Executive will have access to and become
acquainted with various Trade Secrets and Other Proprietary and Confidential
Information which are owned by the Bank and which are used in the operation of
the Bank’s business, the wrongful use or disclosure of which to the public or
competitors of the Bank would materially adversely affect the business and
prospects of the 

 11
 

Bank.  Executive
shall not disclose or use in any manner, directly or indirectly, any Trade
Secrets and Other Proprietary and Confidential Information either during his
employment with the Bank or at any time thereafter, except as required in the
course of employment with the Bank.

6.5.2        Nonsolicitation of Business. 
Without limiting Paragraph 6.5.1, Executive agrees that for a period of
twelve (12) months following the termination of his employment with the Bank,
Executive will not, directly or indirectly, solicit, attempt to solicit,
divert, or attempt to divert any customers of the Bank or any business the Bank
or a subsidiary or affiliate had enjoyed or solicited from its customers,
borrowers, depositors or investors by using any Trade Secrets and Other
Proprietary and Confidential Information.

6.6           Business Protection Covenants.

6.6.1        Covenant Not to Compete.  Executive
agrees that he will not, during the course of employment, voluntarily or
involuntarily, directly or indirectly, (i) engage in any banking or
financial products or service business, loan origination or deposit-taking
business or any other business competitive with that of the Bank, its
subsidiaries or affiliates (“Competitive Business”) within the County of
San Diego (the “Market Area”), (ii) own, manage, operate,
control, be employed by, or provide management or consulting services in any
capacity to any firm, corporation, or other entity (other than the Bank or its
subsidiaries or affiliates) engaged in any Competitive Business in the Market
Area, or (iii) solicit or otherwise intentionally cause any member of the
Bank Board or any employee or officer of the Bank or any of its subsidiaries or
affiliates to engage in any action prohibited under (i) or (ii) of
this Paragraph 6.6.1.

6.6.2        Inducing Employees To Leave The Bank; Employment of
Employees.  Any attempt on the part of Executive to
induce others to leave the Bank’s employ, or the employ of any of its
subsidiaries or affiliates, or any effort by Executive to interfere with the
Bank’s relationship with its other employees would be harmful and damaging to
the Bank.  Executive agrees that during
the term of employment and during any period following the termination of his
employment during which he is receiving compensation or benefits under
Paragraphs 5.2, 5.3 or 5.4, Executive will not in any way, directly or
indirectly (i) induce or attempt to induce any employee of the Bank or any
of its subsidiaries of affiliates to quit employment with the Bank or the
relevant subsidiary or affiliate; (ii) otherwise interfere with or disrupt
the relationships between the Bank and its subsidiaries and affiliates and their
respective employees; (iii) solicit, entice, or hire away any employee of
the Bank or any of its subsidiaries or affiliates; or (iv) hire or engage
any employee of the Bank or any subsidiary or affiliate or any former employee
of the Bank or any subsidiary or affiliate whose employment with the Bank or
the relevant subsidiary or affiliate ceased after the date of termination of
Executive’s employment with the Bank.

6.7           Equitable Relief.  Executive
acknowledges and agrees that irreparable injury will result to the Bank in the
event of a breach of any of the provisions of this Paragraph 6 (the “Designated
Provisions”) and that the Bank will have no adequate remedy at law with
respect thereto.  Accordingly, in the
event of a material breach of any Designated Provision, and in addition to any
other legal or equitable remedy the Bank or its subsidiaries or affiliates may 

 12
 

have, the Bank and any relevant subsidiary or
affiliate shall be entitled to the entry of a preliminary and permanent
injunction (including, without limitation, specific performance) to restrain
the violation or breach thereof by Executive or any affiliates, agents, or any
other persons acting for or with Executive in any capacity whatsoever, and
Executive submits to the jurisdiction of such court in any such action.  Any such remedy shall be granted pursuant to
the dispute resolution procedures applicable under Paragraph 6.3.

6.8           Severability.  It is the
desire and intent of the parties that the provisions of this Paragraph 6
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular provision of
this Paragraph 6 shall be adjudicated or found to be invalid or
unenforceable, such provisions shall be deemed amended to delete therefrom the
portion thus adjudicated or found to be invalid or unenforceable, such deletion
to apply only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication or finding is made.  In addition, should any court or arbitrator
determine that the provisions of this Paragraph 6 shall be unenforceable
with respect to scope, duration, or geographic area, such court or arbitrator
shall be empowered to substitute, to the extent enforceable, provisions similar
hereto or other provisions so as to provide to the Bank, to the fullest extent
permitted by applicable law, the benefits intended by this Paragraph 6.

6.9           Indemnification.  To the
fullest extent permitted by law and in accordance with the procedures and
substantive requirements imposed by law and applicable regulation (including 12
C.F.R. Part 359, or similar regulations or regulatory action following similar
principles), the Bank shall indemnify Executive in the event he was or is a
party or is threatened to be made a party in any action brought by a third
party against Executive (whether or not the Bank is joined as a party
defendant) against expenses, judgments, fines, settlement, and other amounts
actually and reasonably incurred in connection with said action, provided
Executive acted in good faith and in a manner Executive reasonably believed to
be in the best interests of the Bank, and provided the alleged conduct of
Executive arose out of and was within the course and scope of his employment as
an officer or employee of the Bank.  This
Paragraph 6.7 shall not limit any other rights to indemnification that
Executive may now or hereafter have by law or under the articles, bylaws or
resolutions of the Bank or otherwise.

7.             Other Agreements.

7.1           Bank Policies and Manuals. 
The parties further agree that to the extent of any inconsistency
between this Agreement and any employee manual or policy of the Bank, that the
terms of this Agreement shall supersede the terms of such employee manual or
policy.

8.             General Provisions.

8.1           Notices.  Unless
otherwise specifically permitted by this Agreement, all notices or other
communications required or permitted under this Agreement shall be in writing,
and shall be personally delivered or sent by registered or certified mail,
postage prepaid return receipt requested, or sent by facsimile, provided that
the facsimile cover sheet contain a notation of the date and time of
transmission, and shall be deemed received: (i) if personally delivered,
upon the date of delivery to the address of the person to receive such notice,
(ii) if mailed in 

 13
 

accordance with the provisions of this paragraph, two
(2) business days after the date placed in the United States mail,
(iii) if mailed other than in accordance with the provisions of this
paragraph or mailed from outside the United States, upon the date of
delivery to the address of the person to receive such notice, or (iv) if
given by facsimile, when sent.  Notices
shall be given at the following addresses:

If to Executive:

Larry Prosi

Fax:  

If to the Bank:

James G. Knight, M.D.

Chairman

1st Pacific Bank of California

c/o 6907 Camino Degrazia

San Diego, CA  92111

Fax:  619-222-8216

With a copy to:

Kurt L. Kicklighter, Esq.

Luce, Forward, Hamilton & Scripps LLP

601 West Broadway, Suite 2600

San Diego, CA  92101

Fax:  619-645-5339

The relevant party may change the address for delivery of notices by
giving notice of such change in accordance with this paragraph.

8.2           Complete Agreement; Modifications. 
This Agreement and written agreements, if any, entered into concurrently
herewith (i) constitute the parties’ entire agreement, including all
terms, conditions, definitions, warranties, representations, and covenants,
with respect to the subject matter hereof, (ii) merge all prior
discussions and negotiations between or among any or all of them as to the
subject matter hereof, and (iii) supersede and replace all terms,
conditions, definitions, warranties, representations, covenants, agreements,
promises and understandings, whether oral or written, with respect to the
subject matter hereof.  This Agreement
may not be amended, altered or modified except by a writing signed by the party
to be bound.  With respect to the Bank,
such amendment, alteration or modification may only be made on behalf of the
Bank by the Chairperson of the Personnel Committee of the Bank Board, the
Chairperson of the Bank Board or another person specifically designated by the
Bank Board.  With regard to such
amendments, alterations, or modifications, facsimile signatures shall be 

 14
 

effective as original signatures.  Any amendment, alteration, or modification
requiring the signature of more than one party may be signed in counterparts.

8.3           Further Actions.  Each party
agrees to perform any further acts and execute and deliver any further
documents reasonably necessary to carry out the provisions of this Agreement.

8.4           Assignment.  No party may
assign its rights under this Agreement without the prior written consent of the
other parties hereto.

8.5           Successors and Assigns.  Except as
explicitly provided herein to the contrary, this Agreement shall be binding
upon and inure to the benefit of the parties, their respective successors and
permitted assigns.

8.6           Termination and Survival. 
Upon the termination of the employment of Executive, the Bank may
terminate this Agreement upon notice to Executive, which may be provided at the
time notice of termination of employment is provided by either party.

8.6.1        The obligations of Executive and the rights of the
Bank under Paragraphs 4.5, 5.9, 5.10, 5.11 and 6.3 through and including
6.6 shall survive the termination of this Agreement, provided that if Executive
and the Bank have entered into the Separation Agreement, the dispute resolution
provisions of the Separation Agreement shall apply to and govern any and all
disputes related to this Agreement.

8.6.2        The obligations of the Bank to Executive which by
their terms are to continue after termination of employment under
Paragraph 5 shall survive such termination of employment and termination
of the Agreement.  The notice provisions
of Paragraph 8.1 and this Paragraph 8.6 shall survive termination of
employment and termination of the Agreement.

8.6.3        Notwithstanding any provision of this Agreement to the
contrary, this Agreement shall terminate and, therefore, among other things,
none of the provisions providing for compensation or benefits to Executive
shall be of any effect, in the event that the Bank is placed into a
conservatorship or receivership, it loses its Federal deposit insurance, or its
banking charter is revoked.

8.7           Severability.  If any
portion of this Agreement shall be held by a court of competent jurisdiction to
be invalid, void, or otherwise unenforceable, the remaining provisions shall
remain enforceable to the fullest extent permitted by law if enforcement would
not frustrate the overall intent of the parties (as such intent is manifested
by all provisions of the Agreement including such invalid, void, or otherwise
unenforceable portion).

8.8           Extension Not a Waiver.  No delay or
omission in the exercise of any power, remedy, or right herein provided or
otherwise available to any party shall impair or affect the right of such party
thereafter to exercise the same.  Any
extension of time or other indulgence granted to a party hereunder shall not
otherwise alter or affect any power, remedy or right of any other party, or the
obligations of the party to whom such extension or indulgence is granted except
as specifically waived.

 15
 

8.9           Time of Essence.  Time is of
the essence of each and every term, condition, obligation and provision hereof.

8.10         No Third Party Beneficiaries. 
This Agreement and each and every provision hereof is for the exclusive
benefit of the parties hereto and not for the benefit of any third party.

8.11         Headings.  The headings
in this Agreement are inserted only as a matter of convenience, and in no way
define, limit, or extend or interpret the scope of this Agreement or of any
particular provision hereof.

8.12         References.  A reference
to a particular paragraph of this Agreement shall be deemed to include
references to all subordinate paragraphs, if any.

8.13         Counterparts.  This
Agreement may be signed in multiple counterparts with the same force and effect
as if all original signatures appeared on one copy; and in the event this
Agreement is signed in counterparts, each counterpart shall be deemed an
original and all of the counterparts shall be deemed to be one agreement.

8.14         Applicable Law.  This
Agreement shall be construed in accordance with, and governed by, the laws of
the State of California.

8.15         Representation by Counsel. 
This Agreement has been negotiated by the parties with the assistance of
their respective counsel and at their own cost and expense.  For this reason the principal that an
agreement shall be interpreted against the party that drafted it shall not
apply to this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the dates set forth below.

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  Larry Prosi

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  1st PACIFIC BANK
  OF CALIFORNIA, a

  
	
   

  	
  California
  state-chartered bank

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
    A. Vincent Siciliano, President and CEO

  

 

 16

EXHIBIT A

1st PACIFIC BANK OF CALIFORNIA INCENTIVE
COMPENSATION PLAN FOR

SENIOR MANAGEMENT

EXHIBIT B

SEPARATION
AGREEMENT

AND

GENERAL RELEASE OF CLAIMS

This Separation Agreement and General Release of Claims (this “Agreement”)
is entered into by and between Larry Prosi (“Employee”) and 1st Pacific Bank of
California, a California state bank (the “Bank”).

RECITALS

A.    Employee commenced employment with Bank on or about                           .  Employee’s employment with the Bank
terminated on                     ,
        .

B.    Employee and the Bank desire to settle and compromise any and all
possible claims against the Bank by Employee arising out of their relationship
to date, including Employee’s employment with the Bank and the termination of
Employee’s employment, and to provide for a general release of any and all such
claims.

AGREEMENT

1.     Separation Pay/Consideration.  In consideration of the covenants and
releases set forth herein, the Bank agrees to pay Employee the amount payable
to him and the non-monetary consideration (if any) due him, pursuant to and in
accordance with, Paragraphs 5.2, 5.3 or 5.4, as the case may be, of the
Employment Agreement dated January 1, 2006, by and between the Bank and
Employee (the “Employment Agreement”), less all applicable state and
federal deductions (in each case, the “Payment”), $2,000 of which shall
be consideration for Employee’s release of ADEA claims as set forth in
Section 3, below; provided that no such Payment shall be made until at
least eight (8) days have past since Employee’s execution of this
Agreement.  The check representing the
Payment shall be mailed to Employee at his/her home address at                                 .

2.     Release of All Claims Except Age Discrimination in Employment
Act of 1967 (“ADEA”) Claims.

a.     In consideration of the payment and other benefits described in
Section 1, which Employee would otherwise not be entitled to except for
signing this Agreement, Employee does hereby unconditionally, irrevocably and
absolutely release and discharge the Bank and any related holding, parent,
sister or subsidiary entities and all of their respective boards of directors,
officers, employees, agents, volunteers, attorneys, insurers, divisions,
successors and assigns from any and all loss, liability, claims, demands,
causes of action or suits of any type, whether in law and/or in equity, related
directly or indirectly, or in any way connected with any transaction, affairs
or occurrences between them to date, including, but not limited to, Employee’s
employment with the Bank and the termination of said employment.  This Agreement specifically applies, without
limitation, to any and all contract or tort claims, claims for wrongful
termination, wage claims, and claims arising under Title VII of the Civil
Rights Act 

of 1991, the Americans
with Disabilities Act, the Equal Pay Act, the California Fair Employment and
Housing Act, the Fair Labor Standards Act, the Family and Medical Leave Act,
the California Family Rights Act, the California Labor Code, and any and all
federal or state statutes or provisions governing the employment relationship
or discrimination in employment except the federal statute specifically
excluded hereafter.  This release
specifically excludes any and all loss, liability, claims, demands, causes of
action or suits of any type arising under the ADEA.  Employee’s release of ADEA claims will be
addressed separately in Section 3 of this Agreement.

b.     Employee irrevocably and absolutely agrees that he/she will not
prosecute nor allow to be prosecuted on his/her behalf, in any administrative
agency, whether federal or state, or in any court, whether federal or state,
any claim or demand of any type related to the matters released above, it being
the intention of the parties that with the execution by Employee of this
release, the Bank and any related holding, parent, sister or subsidiary
corporations or entities and all of their respective boards of directors,
officers, employees, agents, volunteers, attorneys, insurers, divisions, successors
and assigns will be absolutely, unconditionally and forever discharged of and
from all obligations to or on behalf of Employee related in any way to the
matters discharged herein.

3.     Release of All ADEA Claims.

a.     This section of the Agreement exclusively addresses Employee’s
release of claims arising under federal law involving discrimination on the
basis of age in employment (age 40 and above). 
This section is provided separately, in compliance with federal law,
including but not limited to the Older Workers’ Benefit Protection Act of 1990,
to ensure that Employee clearly understands his/her rights so that any release
of age discrimination claims under federal law (the ADEA) is knowing and
voluntary on the part of Employee.

b.     Employee represents, acknowledges and agrees that the Bank has
advised him/her, in writing, to discuss this Agreement with an attorney, and to
the extent, if any, that Employee has desired, Employee has done so; that the
Bank has given Employee twenty-one (21) days from receipt of this Agreement to
review and consider this Agreement before signing it, and Employee understands
that he/she may use as much of this twenty-one (21) day period as he/she wishes
prior to signing; that no promise, representation, warranty or agreements not
contained herein have been made by or with anyone to cause him/her to sign this
Agreement; that he/she has read this Agreement in its entirety, and fully
understands and is aware of its meaning, intent, content and legal effect; and
that he/she is executing this release voluntarily and free of any duress or
coercion.

c.     The parties acknowledge that for a period of seven (7) days
following the execution of this Agreement, Employee may revoke the Agreement,
and the Agreement shall not become effective or enforceable until the
revocation period has expired.  This
Agreement shall become effective eight (8) days after it has been signed
by Employee and the Bank, and in the event the parties do not sign on the same date,
then this Agreement shall become effective eight (8) days after the date
it is signed by Employee.

d.     In consideration of the separation payment and other benefits
made to Employee described in Section 1 of this Agreement, which Employee
would otherwise not be entitled to except for signing this Agreement, Employee
does hereby unconditionally, irrevocably and absolutely release and discharge
the Bank and any related holding, parent, sister or subsidiary entities and all
of their respective boards of directors, officers, employees, agents, volunteers,
attorneys, insurers, divisions, successors and assigns from any and all loss,
liability, claims, demands, causes of action or suits of any type arising under
the ADEA and related directly or indirectly to Employee’s employment with the
Bank and the termination of said employment.

4.     Section 1542 Waiver. 
Employee does expressly waive all of the benefits and rights granted to
him/her pursuant to California Civil Code section 1542, which reads:

A GENERAL RELEASE DOES
NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OF OR SUSPECT TO EXIST IN
HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

Employee does certify
that he/she has read all of this Agreement, including the release provisions
contained herein and the quoted Civil Code section, above, and that he/she
fully understands all of the same. 
Employee hereby expressly agrees that this Agreement shall extend and
apply to all unknown, unsuspected and unanticipated injuries and damages
(including, without limitation, those arising under the ADEA), as well as those
injuries and damages that are now disclosed.

5.     Confidentiality. 
Employee agrees that all matters relative to this Agreement, including
the negotiations leading up to this Agreement and its terms, shall remain
confidential.  Accordingly, Employee
hereby agrees that, with the exception of his/her spouse, regulatory agencies
of the Bank and tax and legal advisors, he/she will not discuss, disclose or
reveal to any other persons, entities or organizations, whether within or
outside of the Bank, the terms and conditions of this Agreement.

6.     Non-Disparagement. 
Employee agrees that he/she will not disparage the Bank or any of its
directors, employees, agents or volunteers or otherwise interfere with the Bank’s
business, vendor or other relationships. 
Employee agrees not to make any derogatory or adverse statements,
written or verbal, to anyone regarding the Bank or any of its present or former
directors, employees, agents or volunteers. 
The Bank agrees that it will neither disparage Employee nor make any
derogatory or adverse statements, written or verbal, to anyone regarding
Employee.  If an arbitrator determines
that the Bank has breached its obligations under this Section 6, to the
extent the Payment has not been paid in full, the Bank shall be required to
make the Payment in full to Employee within five (5) days following such
arbitrator’s determination.  Nothing in
this Section 6 shall prohibit or relate to any statement by any person to any
bank regulatory agency.

7.     Entire Agreement. 
The parties further declare and represent that no promise, inducement or
agreement not herein expressed has been made to them and that this Agreement 

contains the full and
entire agreement between and among the parties, and that the terms of this
Agreement are contractual and not a mere recital.

8.     Future Employment. 
Employee agrees that the Bank will not be obligated to offer employment
to him/her or to hire him/her for any reason, regardless of the circumstances,
at any time on or after the date of this Agreement.  Employee agrees that he/she will not apply
for nor accept any such employment.

9.     Trade Secret/Proprietary Information.  Employee hereby reaffirms his/her obligations
under his/her Employment Agreement with the Bank to which this Agreement
relates, which shall remain in effect to the extent provided in the Employment
Agreement.  Employee further agrees that
he/she shall not disclose to any person(s) or entity(ies) at any time or
in any manner, directly or indirectly, any information relating to the
operations of the Bank which has not already been disclosed to the general
public.  Employee agrees that this
provision includes, but is not limited to, the following information:
proprietary information and/or trade secrets; secret formulae; customer lists
and/or names; product and service prices; customer charges; contracts; contract
negotiations and employee relations matters. 
Employee understands and agrees that this list is not all-inclusive.

10.   Return of Company Property.  Employee agrees to promptly return all
property or information belonging to the Bank, including all keys, computers,
cellular telephones, and any document or property Employee generated during
his/her employment at the Bank, and agrees that no such property will be in
his/her possession or control at the time he/she receives the consideration
specified in Section 1.  This
includes all property or information that may have come into his/her possession
as a result of his/her employment with the Bank.  Employee further acknowledges that he/she has
not retained any copies of any such information.

11.   Applicable Law.  The validity, interpretation, and performance
of this Agreement shall be construed and interpreted according to the laws of
the State of California.

12.   Dispute Resolution.  Any dispute arising out of or related to this
Agreement shall be resolved through binding arbitration through JAMS/Endispute
in San Diego, California, under the then current applicable rules of
JAMS/Endispute.  Each party shall be
responsible for its or his/her own costs and attorneys’ fees in connection with
the arbitration.

13.   Complete Defense.  This Agreement may be pleaded as a full and
complete defense against any action, suit or proceeding which may be
prosecuted, instituted or attempted by either party in breach thereof.

14.   Severability.  If any provision of this Agreement, or part
thereof, is held invalid, void or voidable as against public policy or
otherwise, the invalidity shall not affect other provisions, or parts thereof,
which may be given effect without the invalid provision or part.  To this extent, the provisions, and parts
thereof, of this Agreement are declared to be severable.

15.   No Admission of Liability.  It is understood that this Agreement is not
an admission of any liability by the Bank

16.   Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.

17.   Counterparts.  This Agreement may be signed in
counterparts.  A facsimile signature
shall have the same force and effect as an original signature.

Employee and the Bank have read the foregoing
Agreement and know its contents and fully understand it.  Employee and the Bank acknowledge that they
have fully discussed this Agreement with their respective attorneys to the
extent desired, or have had the opportunity to do so, and fully understand the
consequences of this Agreement.  No party
is being influenced by any statement made by or on behalf of any of the other
party to this Agreement.  Employee and
the Bank have relied and are relying solely upon his/her or its own judgment,
belief and knowledge of the nature, extent, effect and consequences relating to
this Agreement and/or upon the advice of their own legal counsel concerning the
consequences of this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this
Agreement on the dates shown below.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  Larry Prosi

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  1st Pacific Bank of California:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:

  	
   

  
								

 

EXHIBIT C

EXECUTIVE
ARBITRATION AGREEMENT

THIS EXECUTIVE ARBITRATION AGREEMENT (“Arbitration
Agreement”) is made by and between 1st Pacific Bank of California, a
California state-chartered bank (the “Bank”), and Larry Prosi (the “Executive”),
effective as of the date that the Employment Agreement between the Bank and
Executive executed contemporaneously herewith (the “Employment Agreement”),
becomes effective.

The purpose of this Arbitration Agreement is to
establish final and binding arbitration for disputes arising out of Executive’s
employment, the Employment Agreement or the termination of Executive’s
employment.  Executive and the Bank
desire to arbitrate their disputes on the terms and conditions set forth below,
in order to gain the benefits of a speedy, impartial dispute-resolution
procedure.  Executive and the Bank agree
to the following:

1.             Claims Covered By The Arbitration Agreement.  Executive and the Bank mutually consent to
the resolution by final and binding arbitration of all claims or controversies
(“claims”) that the Bank may have against Executive or that Executive
may have against the Bank or against its officers, directors, partners,
employees, agents, pension or benefit plans, administrators, or fiduciaries, or
any subsidiary or affiliated company or corporation (collectively referred to
as the “Bank”), relating to, resulting from, or in any way arising out
of Executive’s employment relationship with the Bank, the Employment Agreement
and/or the termination of Executive’s employment relationship with the Bank, to
the extent permitted by law.  The claims
covered by this Arbitration Agreement include, but are not limited to, claims
for wages or other compensation due; claims for breach of any contract or
covenant (express or implied); tort claims; claims for discrimination and
harassment (including, but not limited to, race, sex, religion, national
origin, age, marital status or medical condition, disability, sexual
orientation, or any other characteristic protected by federal, state or local law);
claims for benefits (except where an employee benefit or pension plan specifies
that its claims procedure shall culminate in an arbitration procedure different
from this one); and claims for violation of any public policy, federal, state
or other governmental law, statute, regulation or ordinance.

2.             Required Notice Of Claims And Statute Of Limitations.  Executive may initiate arbitration by serving
or mailing a written notice to the Board of Directors of the Bank at the Bank’s
administrative headquarters, care of the Corporate Secretary.  The Bank may initiate arbitration by serving
or mailing a written notice to Executive at his last known address.  The written notice must specify the claims
asserted against the other party.  Notice
of any claim sought to be arbitrated must be served within the limitations
period established by applicable federal or state law.

3.             Arbitration Procedures.  After demand for arbitration has been made by
serving written notice under the terms of Section 3 of this Arbitration
Agreement, the party demanding arbitration shall file a demand for arbitration
with the American Arbitration Association (“AAA”).  Except as otherwise provided in this
Arbitration Agreement, the arbitration will be 

 1
 

conducted according to the then applicable arbitration
rules of AAA for the arbitration of employment disputes.

4.             Discovery. 
Discovery shall be allowed and conducted pursuant to the then applicable
arbitration rules of AAA for the arbitration of employment disputes.

5.             Choice of Law. 
The arbitrator shall apply the substantive law (and the law of remedies,
if applicable) of the State of California, or federal law, or both, as
applicable to the claim(s) asserted. 
The arbitrator shall have authority to resolve any dispute relating to
the interpretation, applicability, enforceability or formation of this
Arbitration Agreement, including but not limited to any claim that all or any
part of this Arbitration Agreement is void or voidable.

6.             Summary Judgment. 
Either party may file a motion for summary judgment with the
arbitrator.  The arbitrator is entitled
to resolve some or all of the asserted claims through such a motion.  The standards to be applied by the arbitrator
in ruling on a motion for summary judgment shall be the applicable laws as specified
in Section 5 of this Arbitration Agreement.

7.             Application For Emergency Injunctive And/Or Other
Equitable Relief.  Claims by the Bank
or Executive for emergency injunctive and/or other equitable relief relating to
unfair competition and/or the use and/or unauthorized disclosure of trade
secrets or confidential information shall be subject to the then current
version of the AAA’s Optional Rules for Emergency Measures of Protection set
forth within the AAA’s Commercial Dispute Resolution Procedures.  The AAA shall appoint a single emergency
arbitrator to handle the claim(s) for emergency relief.  The emergency arbitrator selected by the AAA
shall be either a retired judge or an individual experienced in handling
matters involving claims for emergency injunctive and/or other equitable relief
relating to unfair competition and the use or unauthorized disclosure of trade
secrets and/or confidential information.

8.             Arbitration Decision.  The arbitrator’s decision will be final and
binding.  The arbitrator shall issue a
written arbitration decision revealing the essential findings and conclusions
upon which the decision and/or award is based. 
A party’s right to appeal the decision is limited to grounds provided
under applicable federal or state law.

9.             Place Of Arbitration.  The arbitration will be at a mutually
convenient location, which must be within 50 miles of Executive’s last
employment location with the Bank.  If
the parties cannot agree upon a location, then the arbitration will be held at
AAA’s office nearest to Executive’s last employment location with the Bank.

10.           Severability.  Should any portion of this Arbitration
Agreement be found to be unenforceable, such portion will be severed from this
Arbitration Agreement, and the remaining portions shall continue to be
enforceable.

11.           Section Headings.  The section headings of this Arbitration
Agreement are intended solely for the convenience of reference and shall not in
any manner amplify, limit, modify or otherwise be used in interpretation of any
provisions hereof.

 2
 

12.           Construction.  This Arbitration Agreement shall not be
interpreted for or against any party on the basis that such party or its legal
representative caused part or all of this Arbitration Agreement to be drafted.

13.           Consideration.  The Bank’s offer to employ Executive, and the
promises by the Bank and Executive to arbitrate differences, rather than
litigate them before courts or other bodies, provide consideration for each
other.

14.           Fees and Costs.  Each party may be represented by an attorney
or other representative selected by the party. 
Each party shall be responsible for its own attorneys’ or representative’s
fees.  However, if any party prevails on
a statutory claim which affords the prevailing party’s attorneys’ fees, or if there
is a written agreement providing for fees, the arbitrator may award reasonable
fees to the prevailing party.  In no
event shall Executive be required to pay administrative fees, including
arbitrator’s fees, beyond the fees which would have been incurred by Executive,
if any, had the dispute(s) arbitrated under this Arbitration Agreement
been litigated in state or federal court; the Bank shall be responsible for all
administrative fees exceeding such amount.

15.           Enforcement of Arbitration
Agreement.  Should either party file
a court action concerning or refuse to arbitrate a claim which is subject to
arbitration under this Arbitration Agreement, the other party shall be entitled
to recover its costs and reasonable attorneys’ fees incurred in enforcing this
Arbitration Agreement in court.

16.           Sole And Entire Agreement.  This Arbitration Agreement expresses the
entire agreement of the parties and there are no other agreements, oral or
written, concerning arbitration, except as provided herein, and except for the
Employment Agreement which incorporates this Arbitration Agreement by
reference.  By itself, this Arbitration
Agreement is not, and shall not be construed to create, any contract of
employment, express or implied.

17.           Requirements for Modification or
Revocation.  This Arbitration
Agreement shall survive the termination of Executive’s employment.  It can only be revoked or modified by a
writing signed by the Chairperson of the Personnel Committee of the Bank’s
Board of Directors, the Chairperson of the Bank’s Board of Directors or another
person specifically designated by the Board of Directors of the Bank and
Executive, that specifically states an intent to revoke or modify this
Arbitration Agreement.

18.           Waiver of Jury Trial/Exclusive
Remedy.  EXECUTIVE AND THE BANK WAIVE ANY CONSTITUTIONAL OR STATUTORY RIGHT TO
HAVE ANY DISPUTE BETWEEN THEM COVERED BY THE TERMS OF THIS ARBITRATION
AGREEMENT DECIDED BY A COURT OF LAW AND/OR BY A JURY IN A COURT.

19.           Voluntary Agreement.  EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS
CAREFULLY READ THIS ARBITRATION AGREEMENT, UNDERSTANDS ITS TERMS, AND AGREES
THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE BANK AND EXECUTIVE RELATING
TO THE SUBJECTS COVERED IN THE ARBITRATION AGREEMENT ARE CONTAINED IN IT.  EXECUTIVE HAS VOLUNTARILY ENTERED INTO THE
ARBITRATION AGREEMENT WITHOUT 

 3
 

RELIANCE ON ANY PROVISIONS OR REPRESENTATIONS BY THE
BANK, OTHER THAN THOSE CONTAINED IN THIS ARBITRATION AGREEMENT OR EMPLOYMENT
AGREEMENT INTO WHICH IT IS INCORPORATED BY REFERENCE.

EXECUTIVE FURTHER ACKNOWLEDGES THAT EXECUTIVE HAS BEEN GIVEN THE
OPPORTUNITY TO DISCUSS THIS ARBITRATION AGREEMENT AND THE EMPLOYMENT AGREEMENT
WITH EXECUTIVE’S PRIVATE LEGAL COUNSEL AND EXECUTIVE HAS UTILIZED THAT
OPPORTUNITY TO THE EXTENT DESIRED.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
  Larry Prosi,
  Executive

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  1st PACIFIC BANK OF CALIFORNIA,

  
	
   

  	
  a California
  state-chartered bank

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   A. Vincent
  Siciliano, President and CEO

  

 

 4Exhibit 10.18

STANDARD
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - NET

AIR
COMMERCIAL REAL ESTATE ASSOCIATION

1.             Basic Provisions (“Basic Provisions”).

1.1           Parties: This Lease (“Lease”),
dated for reference purposes only August 7, 2006, is made by and between AMJ Properties, LLC (“Lessor”) and 1st Pacific Bank of California (“Lessee”), (collectively the “Parties”, or individually a “Party”).

1.2(a)      Premises: That certain portion of the Project (as defined below), including all
improvements therein or to be provided by Lessor under the terms of this Lease, commonly known by the street address of 343
E. Main Street, located in the City of El Cajon, County of San Diego, State of California, with zip code 92020, as outlined on Exhibit A attached hereto (“Premises”) and
generally described as (describe briefly the nature of the Premises): The
entire ground floor, consisting of approximately 4,000 square feet. Exact
square footage shall be determined pursuant to the final space plan.  In
addition to Lessee’s rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the any utility raceways of the building containing the
Premises (“Building”) and to the
common Areas (as defined in Paragraph 2.7 below), but shall not have any rights to the roof or exterior walls of
the Building or to any other buildings in the Project. The Premises, the
Building, the Common Areas, the land upon which they are located, along with all other buildings and improvements
thereon, are herein collectively referred to as the “Project.” (See also Paragraph 2)

1.2(b)      Parking: * unreserved vehicle parking spaces.  * Lessee shall be entitled to the use of no less than fifty percent (50%)
of the total number of parking spaces, free for the term and any expansions or
extensions on an unreserved
basis except that five (5) reserved spaces as shown on Exhibit B shall be
specifically reserved for use by Lessee. (See also Paragraph 2.6)

1.3           Term: ten (10) years and zero (0) months (“Original
Term”) commencing Ninety
(90) days following substantial completion of the project (“Commencement Date”) and ending Ten (10) years
thereafter (“Expiration
Date”). (See also Paragraph
3)

1.4           Early Possession: N/A
(“Early Possession
Date”). (See also Paragraphs
3.2 and 3.3)

1.5           Base Rent: $ 2.30/sq.ft. per month (“Base Rent”),
payable on the 1st day of each
month commencing on the Commencement Date.  (See also Paragraph 4) x If this box is checked, there are provisions
in this Lease for the Base Rent to be adjusted.

1.6           Lessee’s Share of Common Area
Operating Expenses: Fifty percent
(50%) (“Lessee’s Share”). Lessee’s Share has been calculated by dividing the approximate square
footage of the Premises by the approximate square footage of the Project. In the event that the size of the Premises
and/or the Project are modified during the term of this Lease, Lessor shall
recalculate Lessee’s Share to reflect such modification.

1.7           Base Rent and Other Monies
Paid Upon Execution:

(a)           Base Rent: $9,200.00 for the period the first month.

(b)           Common Area Operating
Expenses: $N/A for the period N/A.

(c)           Security Deposit: $0.00 (“Security Deposit”). (See also Paragraph 5)

(d)           Other: $N/A for

(e)           Total Due Upon Execution of
this Lease: $9,200.00.

1.8           Agreed Use: Business
Banking services, inclusive of an ATM and general office uses.  (See
also Paragraph 6)

1.9           Insuring Party. Lessor is the “Insuring Party”. (See also Paragraph 8)

1.10         Real Estate Brokers: (See also Paragraph 15)

(a)           Representation: The following real estate brokers (the “Brokers”) and brokerage relationships
exist in this transaction (check applicable boxes):

x Burnham
Real Estate - Kyle Clark represents
Lessor exclusively ( “Lessor’s Broker”);
 x Irving Hughes - Shaun Burnett represents Lessee exclusively ( “Lessee’s Broker”); or
 o represents both Lessor and Lessee ( “Dual Agency”).

(b)           Payment to Brokers: Upon execution and delivery of this Lease by
both Parties, Lessor shall pay to the Brokers the brokerage fee agreed to in a
separate written agreement (or if there is no such agreement, the sum of five
percent or 5% of the total Base Rent for the first sixty (60) months and two &
one half percent (2.5%) for the second sixty (60) months for the brokerage services rendered by the
Brokers).

1.11         Guarantor. The obligations of the Lessee under this
Lease are to be guaranteed by N/A (“Guarantor”). (See also Paragraph 37)

1.12         Attachments. Attached hereto are the following, all of
which constitute a part of this Lease:
 x an Addendum consisting of Paragraphs 50
through 61;

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þ a site plan depicting the Premises;

þ a site plan depicting the Project;

o a current set of the Rules and Regulations for
the Project;

o a current set of the Rules and Regulations
adopted by the owners’ association;

o a Work Letter;

o other (specify);                                                                                                                                 .

2.             Premises.

2.1           Letting. Lessor hereby leases to Lessee, and Lessee
hereby leases from Lessor, the Premises, for the term, at the rental, and upon
all of the terms, covenants and conditions set forth in this Lease. Unless
otherwise provided herein, any statement of size set forth in this Lease, or
that may have been used in calculating Rent, is an approximation which the
Parties agree is reasonable and any payments based thereon are not subject to
revision whether or not the actual size is more or less. NOTE: Lessee is advised to verify the actual size
prior to executing this Lease.

2.2           Condition. Lessor shall deliver that portion of the
Premises contained within the Building (‘Unit”)
to Lessee broom clean and free of debris on the Commencement Date or
the Early Possession Date, whichever first occurs (“Start Date”), and, so long as the required service contracts
described in Paragraph 7.1(b) below are obtained by Lessee and in effect within
thirty days following the Start Date, warrants that the existing electrical,
plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning
systems (“HVAC”), loading doors,
sump pumps, if any, and all other such elements in the Unit, other than those
constructed by Lessee, shall be in good operating condition on said date, that
the structural elements of the roof, bearing walls and foundation of the Unit
shall be free of material defects, and that the Unit does not contain hazardous
levels of any mold or fungi defined as toxic under applicable state or federal
law. If a non-compliance with such warranty exists as of the Start Date, or if
one of such systems or elements should malfunction or fail within the
appropriate warranty period, Lessor shall, as Lessor’s sole obligation with
respect to such matter, except as otherwise provided in this Lease, promptly
after receipt of written notice from Lessee setting forth with specificity the
nature and extent of such non-compliance, malfunction or failure, rectify same
at Lessor’s expense. The warranty periods shall be as follows: (i) 6 months as
to the HVAC systems, and (ii) 30 days as to the remaining systems and other
elements of the Unit. If Lessee does not give Lessor the required notice within
the appropriate warranty period, correction of any such non-compliance,
malfunction or failure shall be the obligation of Lessee at Lessee’s sole cost
and expense (except for the repairs to the fire sprinkler systems, roof,
foundations, and/or bearing walls - see Paragraph 7).

2.3           Compliance. Lessor warrants that to the best of its
knowledge the improvements on the Premises and the Common Areas comply with the
building codes that were in effect at the time that each such improvement, or
portion thereof, was constructed, and also with all applicable laws, covenants
or restrictions of record, regulations, and ordinances in effect on the Start
Date (“Applicable Requirements”).
Said warranty does not apply to the use to which Lessee will put the Premises,
modifications which may be required by the Americans with Disabilities Act or
any similar laws as a result of Lessee’s use (see Paragraph 49), or to any
Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or
to be made by Lessee. NOTE: Lessee is
responsible for determining whether or not the Applicable Requirements and
especially the zoning are appropriate for Lessee’s intended use, and
acknowledges that past uses of the Premises may no longer be allowed.
If the Premises do not comply with said warranty, Lessor shall, except as
otherwise provided, promptly after receipt of written notice from Lessee
setting forth with specificity the nature and extent of such non-compliance,
rectify the same at Lessor’s expense. If Lessee does not give Lessor written
notice of a non-compliance with this warranty within 6 months following the
Start Date, correction of that non-compliance shall be the obligation of Lessee
at Lessee’s sole cost and expense. If the Applicable Requirements are hereafter
changed so as to require during the term of this Lease the construction of an
addition to or an alteration of the Unit, Premises and/or Building, the
remediation of any Hazardous Substance, or the reinforcement or other physical
modification of the Unit, Premises and/or Building (“Capital Expenditure”), Lessor and Lessee shall allocate the
cost of such work as follows:

(a)           Subject to Paragraph 2.3(c) below, if such Capital Expenditures are
required as a result of the specific and unique use of the Premises by Lessee
as compared with uses by tenants in general, Lessee shall be fully responsible
for the cost thereof, provided, however that if such Capital Expenditure is
required during the last 2 years of this Lease and the cost thereof exceeds 6
months’ Base Rent, Lessee may instead terminate this Lease unless Lessor
notifies Lessee, in writing, within 10 days after receipt of Lessee’s
termination notice that Lessor has elected to pay the difference between the
actual cost thereof and the amount equal to 6 months’ Base Rent. If Lessee
elects termination, Lessee shall immediately cease the use of the Premises
which requires such Capital Expenditure and deliver to Lessor written notice
specifying a termination date at least 90 days thereafter. Such termination
date shall, however, in no event be earlier than the last day that Lessee could
legally utilize the Premises without commencing such Capital Expenditure.

(b)           If such Capital Expenditure is not the result of the specific and unique
use of the Premises by Lessee (such as, governmentally mandated seismic
modifications), then Lessor and Lessee shall allocate the obligation to pay for
the portion of such costs reasonably attributable to the Premises pursuant to
the formula set out in Paragraph 7.1(d); provided, however, that if such
Capital Expenditure is required during the last 2 years of this Lease or if
Lessor reasonably determines that it is not economically feasible to pay its
share thereof, Lessor shall have the option to terminate this Lease upon 90
days prior written notice to Lessee unless Lessee notifies Lessor, in writing,
within 10 days after receipt of Lessor’s termination notice that Lessee will
pay for such Capital Expenditure. If Lessor does not elect to terminate, and
fails to tender its share of any such Capital Expenditure, Lessee may advance
such funds and deduct same, with Interest, from Rent until Lessor’s share of
such costs have been fully paid. If Lessee is unable to finance Lessor’s share,
or if the balance of the Rent due and payable for the remainder of this Lease
is not sufficient to fully reimburse Lessee on an offset basis, Lessee shall
have the right to terminate this Lease upon 30 days written notice to Lessor.

(c)           Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall
either: (i) immediately cease such changed use or intensity of use and/or take
such other steps as may be necessary to eliminate the requirement for such
Capital Expenditure, or (ii) complete such Capital Expenditure at its own
expense. Lessee shall not have any right to terminate this Lease.

2.4           Acknowledgements. Lessee acknowledges that: (a) it has been
advised by Lessor and/or Brokers to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical, HVAC
and fire sprinkler systems, security, environmental aspects, and compliance
with Applicable Requirements and the Americans with Disabilities Act), and
their suitability for Lessee’s intended use, (b) Lessee has made such
investigation as it deems necessary with reference to such matters and assumes
all responsibility therefor as the same relate to its occupancy of the
Premises, and (c) neither Lessor, Lessor’s agents, nor Brokers have made any
oral or written representations or warranties with respect to said matters
other than as set forth in this Lease. In addition, Lessor acknowledges that:
(i) Brokers have made no representations, promises or warranties concerning
Lessee’s ability to honor the Lease or suitability to occupy the Premises, and
(ii) it is Lessor’s sole responsibility to investigate the financial capability
and/or suitability of all proposed tenants.

2.5           Lessee as Prior
Owner/Occupant. The
warranties made by Lessor in Paragraph 2 shall be of no force or effect if
immediately prior to the Start Date Lessee was the owner or occupant of the
Premises. In such event, Lessee shall be responsible for any necessary
corrective work.

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2.6           Vehicle Parking. Lessee shall be entitled to use the number
of parking spaces specified in Paragraph 1.2(b) on those portions of the Common
Areas designated from time to time by Lessor for parking. Lessee shall not use
more parking spaces than said number. Said parking spaces shall be used for
parking by vehicles no larger than full-size passenger automobiles or pick-up
trucks, herein called “Permitted Size
Vehicles.” Lessor may regulate the loading and unloading of vehicles
by adopting Rules and Regulations as provided in Paragraph 2.9. No vehicles
other than Permitted Size Vehicles may be parked in the Common Area without the
prior written permission of Lessor. In addition:

(a)           Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee’s employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.

(b)           Lessee shall not service or store any vehicles in the Common Areas.

(c)           If Lessee permits or allows any of the prohibited activities described
in this Paragraph 2.6, then Lessor shall have the right, without notice, in
addition to such other rights and remedies that it may have, to remove or tow
away the vehicle involved and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.

2.7           Common Areas - Definition. The term “Common
Areas” is defined as all areas and facilities outside the Premises
and within the exterior boundary line of the Project and interior utility raceways
and installations within the Unit that are provided and designated by the
Lessor from time to time for the general non-exclusive use of Lessor, Lessee
and other tenants of the Project and their respective employees, suppliers,
shippers, customers, contractors and invitees, including parking areas, loading
and unloading areas, trash areas, roadways, walkways, driveways and landscaped
areas.

2.8           Common Areas - Lessee’s
Rights. Lessor grants to
Lessee, for the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the terms of any rules and
regulations or restrictions governing the use of the Project. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessor’s designated agent, which consent may be revoked at
any time. In the event that any unauthorized storage shall occur then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove the property and charge the cost to
Lessee, which cost shall be immediately payable upon demand by Lessor.

2.9           Common Areas - Rules and
Regulations. Lessor or such
other person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
establish, modify, amend and enforce reasonable rules and regulations (“Rules and Regulations”) for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of the Building and the Project and
their invitees. Lessee agrees to abide by and conform to all such Rules and
Regulations, and shall use its best efforts to cause its employees, suppliers,
shippers, customers, contractors and invitees to so abide and conform. Lessor
shall not be responsible to Lessee for the non-compliance with said Rules and
Regulations by other tenants of the Project.

2.10         Common Areas - Changes. So long as changes do not materially affect access to Lessee’s business, Lessor shall have the right, in Lessor’s sole
discretion, from time to time:

(a)           To make changes to the Common Areas, including, without limitation,
changes in the location, size, shape and number of driveways, entrances,
parking spaces, parking areas, loading and unloading areas, ingress, egress,
direction of traffic, landscaped areas, walkways and utility raceways;

(b)           To close temporarily any of the Common Areas for maintenance purposes so
long as reasonable access to the Premises remains available;

(c)           To designate other land outside the boundaries of the Project to be a
part of the Common Areas;

(d)           To add additional buildings and improvements to the Common Areas;

(e)           To use the Common Areas while engaged in making additional improvements,
repairs or alterations to the Project, or any portion thereof; and

(f)            To do and perform such other acts and make
such other changes in, to or with respect to the Common Areas and Project as
Lessor may, in the exercise of sound business judgment, deem to be appropriate.

3.             Term.

3.1           Term. The Commencement Date, Expiration Date and
Original Term of this Lease are as specified in Paragraph 1.3.

3.2           Early Possession. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this
Lease (including but not limited to the obligations to pay Lessee’s Share of
Common Area Operating Expenses, Real Property Taxes and insurance premiums and
to maintain the Premises) shall be in effect during such period. Any such early
possession shall not affect the Expiration Date.

3.3           Delay In Possession. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease or change the
Expiration Date. Lessee shall not, however, be obligated to pay Rent or perform
its other obligations until Lessor delivers possession of the Premises and any
period of rent abatement that Lessee would otherwise have enjoyed shall run
from the date of the delivery of possession and continue for a period equal to
what Lessee would otherwise have enjoyed, but minus any days of delay caused by
the acts or omissions of Lessee. If possession is not delivered within 60 days
after the Commencement Date, Lessee may, at its option, by notice in writing
within 10 days after the end of such 60 day period, cancel this Lease, in which
event the Parties shall be discharged from all obligations hereunder. If such
written notice is not received by Lessor within said 10 day period, Lessee’s
right to cancel shall terminate. Except as otherwise provided, if possession is
not tendered to Lessee by the Start Date and Lessee does not terminate this
Lease, as aforesaid, any period of rent abatement that Lessee would otherwise
have enjoyed shall run from the date of delivery of possession and continue for
a period equal to what Lessee would otherwise have enjoyed under the terms
hereof, but minus any days of delay caused by the acts or omissions of Lessee.
If possession of the Premises is not delivered within 4 months after the
Commencement Date, this Lease shall terminate unless other agreements are
reached between Lessor and Lessee, in writing.

3.4           Lessee Compliance. Lessor shall not be required to tender
possession of the Premises to Lessee until Lessee complies with its obligation
to provide evidence of insurance (Paragraph 8.5). Pending delivery of such
evidence, Lessee shall be required to perform all of its obligations under this
Lease from and after the Start Date, including the payment of Rent,
notwithstanding Lessor’s election to withhold possession pending receipt of
such evidence of insurance. Further, if Lessee is required to perform any other
conditions prior to or concurrent with the Start Date, the Start Date shall
occur but Lessor may elect to withhold possession until such conditions are
satisfied.

4.             Rent.

4.1           Rent Defined. All monetary obligations of Lessee to Lessor
under the terms of this Lease (except for the Security Deposit) are deemed to
be rent (“Rent”).

 3
 

4.2           Common Area Operating
Expenses. Lessee shall pay to
Lessor during the term hereof, in addition to the Base Rent, Lessee’s Share (as
specified in Paragraph 1.6) of all Common Area Operating Expenses, as
hereinafter defined, during each calendar year of the term of this Lease, in
accordance with the following provisions:

(a)           “Common Area Operating
Expenses” are defined, for
purposes of this Lease, as all costs incurred by Lessor relating to the
ownership and operation of the Project, including, but not limited to, the
following:

(i)                                     The operation, repair and maintenance, in
neat, clean, good order and condition, and if necessary the replacement, of the
following:

(aa)         The Common Areas and Common Area improvements,
including parking areas, loading and unloading areas, trash areas, roadways,
parkways, walkways, driveways, landscaped areas, bumpers, irrigation systems,
Common Area lighting facilities, fences and gates, elevators, roofs, and roof
drainage systems.

(bb)         Exterior signs and any tenant directories.

(cc)         Any fire sprinkler systems.

(ii)                                  The cost of water, gas, electricity and
telephone to service the Common Areas and any utilities not separately metered.

(iii)                               Trash disposal, pest control services, property management, security
services, owners’ association dues and fees, the cost to repaint the exterior
of any structures and the cost of any environmental inspections.

(iv)                              Reserves set aside for maintenance, repair and/or replacement of Common
Area improvements and equipment.

(v)                                 Real Property Taxes (as defined in Paragraph
10).

(vi)                              The cost of the premiums for the insurance maintained by Lessor pursuant
to Paragraph 8.

(vii)                           Any deductible portion of an insured loss concerning the Building or the
Common Areas.

(viii)                        Auditors’, accountants’ and attorneys’ fees and costs related to the
operation, maintenance, repair and replacement of the Project said fees and costs shall not include those incurred
by Lessor as a result of a loan refinance, sale of the property or other
similar action.

(ix)                                The cost of any capital improvement to the Building or the Project not
covered under the provisions of Paragraph 2.3 provided; however, that Lessor
shall allocate the cost of any such capital improvement over a 12 year period
and Lessee shall not be required to pay more than Lessee’s Share of 1/144th of
the cost of such capital improvement in any given month.

(x)                                   Any other services to be provided by Lessor
that are stated elsewhere in this Lease to be a Common Area Operating Expense.

(b)           Any Common Area Operating Expenses and Real Property Taxes that are
specifically attributable to the Unit, the Building or to any other building in
the Project or to the operation, repair and maintenance thereof, shall be
allocated entirely to such Unit, Building, or other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not
specifically attributable to the Building or to any other building or to the
operation, repair and maintenance thereof, shall be equitably allocated by
Lessor to all buildings in the Project.

(c)           The inclusion of the improvements, facilities and services set forth in
Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor to
either have said improvements or facilities or to provide those services unless
the Project already has the same, Lessor already provides the services, or
Lessor has agreed elsewhere in this Lease to provide the same or some of them.

(d)           Lessee’s Share of Common Area Operating Expenses is payable monthly on
the same day as the Base Rent is due hereunder. The amount of such payments
shall be based on Lessor’s estimate of the annual Common Area Operating
Expenses. Within 60 days after written request (but not more than once each
year) Lessor shall deliver to Lessee a reasonably detailed statement showing
Lessee’s Share of the actual Common Area Operating Expenses incurred during the
preceding year. If Lessee’s payments during such year exceed Lessee’s Share,
Lessor shall credit the amount of such over-payment against Lessee’s future
payments. If Lessee’s payments during such year were less than Lessee’s Share, Lessee
shall pay to Lessor the amount of the deficiency within 10 days after delivery
by Lessor to Lessee of the statement.

(e)           Common Area Operating Expenses shall not include any expenses paid by
any tenant directly to third parties, or as to which Lessor is otherwise
reimbursed by any third party, other tenant, or insurance proceeds.

4.3           Payment. Lessee shall cause payment of Rent to be
received by Lessor in lawful money of the United States, without offset or deduction
(except as specifically permitted in this Lease), on or before the day on which
it is due. All monetary amounts shall be rounded to the nearest whole dollar.
In the event that any invoice prepared by Lessor is inaccurate such inaccuracy
shall not constitute a waiver and Lessee shall be obligated to pay the amount
set forth in this Lease. Rent for any period during the term hereof which is
for less than one full calendar month shall be prorated based upon the actual
number of days of said month. Payment of Rent shall be made to Lessor at its
address stated herein or to such other persons or place as Lessor may from time
to time designate in writing. Acceptance of a payment which is less than the
amount then due shall not be a waiver of Lessor’s rights to the balance of such
Rent, regardless of Lessor’s endorsement of any check so stating. In the event
that any check, draft, or other instrument of payment given by Lessee to Lessor
is dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in
addition to any Late Charge and Lessor, at its option, may require all future
Rent be paid by cashier’s check. Payments will be applied first to accrued late
charges and attorney’s fees, second to accrued interest, then to Base Rent and
Common Area Operating Expenses, and any remaining amount to any other outstanding
charges or costs.

5.             Security Deposit. Lessee shall deposit with Lessor upon execution hereof the Security
Deposit as security for Lessee’s faithful performance of its obligations under
this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this
Lease, Lessor may use, apply or retain all or any portion of said Security
Deposit for the payment of any amount due Lessor or to reimburse or compensate
Lessor for any liability, expense, loss or damage which Lessor may suffer or
incur by reason thereof. If Lessor uses or applies all or any portion of the
Security Deposit, Lessee shall within 10 days after written request therefor
deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. If the Base Rent increases during the term
of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor so that the total amount of the Security Deposit
shall at all times bear the same proportion to the increased Base Rent as the
initial Security Deposit bore to the initial Base Rent. Should the Agreed Use
be amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to increase
the Security Deposit to the extent necessary, in Lessor’s reasonable judgment,
to account for any increased wear and tear that the Premises may suffer as a
result thereof. If a change in control of Lessee occurs during this Lease and
following such change the financial condition of Lessee is, in Lessor’s
reasonable judgment, significantly reduced, Lessee shall deposit such
additional monies with Lessor as shall be sufficient to cause the Security
Deposit to be at a commercially reasonable level based on such change in
financial condition. Lessor shall not be required to keep the Security Deposit
separate from its general accounts. Within 14 days after the expiration or
termination of this Lease, if Lessor elects to apply the Security Deposit only
to unpaid Rent, and otherwise within 30 days after the Premises have been
vacated pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of
the Security Deposit not used or applied by Lessor. No part of the Security
Deposit shall

 4
 

be considered to be held in
trust, to bear interest or to be prepayment for any monies to be paid by Lessee
under this Lease.

6.             Use.

6.1           Use. Lessee shall use and occupy the Premises
only for the Agreed Use, or any other legal use which is reasonably comparable thereto,
and for no other purpose. Lessee shall not use or permit the use of the
Premises in a manner that is unlawful, creates damage, waste or a nuisance, or
that disturbs occupants of or causes damage to neighboring premises or
properties. Other than guide, signal and seeing eye dogs, Lessee shall not keep
or allow in the Premises any pets, animals, birds, fish, or reptiles. Lessor
shall not unreasonably withhold or delay its consent to any written request for
a modification of the Agreed Use, so long as the same will not impair the
structural integrity of the Building or the mechanical or electrical systems
therein, and/or is not significantly more burdensome to the Project. If Lessor
elects to withhold consent, Lessor shall within 7 days after such request give
written notification of same, which notice shall include an explanation of
Lessor’s objections to the change in the Agreed Use.

6.2           Hazardous Substances. (See Paragraph 60)

(a)           Reportable Uses Require
Consent. The term “Hazardous Substance” as used in this Lease
shall mean any product, substance, or waste whose presence, use, manufacture,
disposal, transportation, or release, either by itself or in combination with
other materials expected to be on the Premises, is either: (i) potentially
injurious to the public health, safety or welfare, the environment or the
Premises, (ii) regulated or monitored by any governmental authority, or (iii) a
basis for potential liability of Lessor to any governmental agency or third
party under any applicable statute or common law theory. Hazardous Substances
shall include, but not be limited to, hydrocarbons, petroleum, gasoline, and/or
crude oil or any products, by-products or fractions thereof. Lessee shall not
engage in any activity in or on the Premises which constitutes a Reportable Use
of Hazardous Substances without the express prior written consent of Lessor and
timely compliance (at Lessee’s expense) with all Applicable Requirements. “Reportable Use” shall mean (i) the
installation or use of any above or below ground storage tank, (ii) the
generation, possession, storage, use, transportation, or disposal of a
Hazardous Substance that requires a permit from, or with respect to which a
report, notice, registration or business plan is required to be filed with, any
governmental authority, and/or (iii) the presence at the Premises of a
Hazardous Substance with respect to which any Applicable Requirements requires
that a notice be given to persons entering or occupying the Premises or
neighboring properties. Notwithstanding the foregoing, Lessee may use any
ordinary and customary materials reasonably required to be used in the normal
course of the Agreed Use, ordinary office supplies (copier toner, liquid paper,
glue, etc.) and common household cleaning materials, so long as such use is in compliance
with all Applicable Requirements, is not a Reportable Use, and does not expose
the Premises or neighboring property to any meaningful risk of contamination or
damage or expose Lessor to any liability therefor. In addition, Lessor may
condition its consent to any Reportable Use upon receiving such additional
assurances as Lessor reasonably deems necessary to protect itself, the public,
the Premises and/or the environment against damage, contamination, injury
and/or liability, including, but not limited to, the installation (and removal
on or before Lease expiration or termination) of protective modifications (such
as concrete encasements) and/or increasing the Security Deposit.

(b)           Duty to Inform Lessor. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises, other than as previously consented to by Lessor, Lessee
shall immediately give written notice of such fact to Lessor, and provide
Lessor with a copy of any report, notice, claim or other documentation which it
has concerning the presence of such Hazardous Substance.

(c)           Lessee Remediation. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee’s expense, comply with all Applicable Requirements and take
all investigatory and/or remedial action reasonably recommended, whether or not
formally ordered or required, for the cleanup of any contamination of, and for
the maintenance, security and/or monitoring of the Premises or neighboring
properties, that was caused or materially contributed to by Lessee, or
pertaining to or involving any Hazardous Substance brought onto the Premises
during the term of this Lease, by or for Lessee, or any third party.

(d)           Lessee Indemnification. Lessee shall indemnify, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, harmless from
and against any and all loss of rents and/or damages, liabilities, judgments,
claims, expenses, penalties, and attorneys’ and consultants’ fees arising out
of or involving any Hazardous Substance brought onto the Premises by or for
Lessee, or any third party (provided, however, that Lessee shall have no
liability under this Lease with respect to underground migration of any
Hazardous Substance under the Premises from areas outside of the Project not
caused or contributed to by Lessee). Lessee’s obligations shall include, but
not be limited to, the effects of any contamination or injury to person,
property or the environment created or suffered by Lessee, and the cost of
investigation, removal, remediation, restoration and/or abatement, and shall
survive the expiration or termination of this Lease. No termination,
cancellation or release agreement entered into by Lessor and Lessee shall
release Lessee from its obligations under this Lease with respect to Hazardous
Substances, unless specifically so agreed by Lessor in writing at the time of
such agreement.

(e)           Lessor Indemnification. Lessor and its successors and assigns shall
indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages, including the cost
of remediation, which are suffered as a direct result of Hazardous Substances
on the Premises prior to Lessee taking possession or which are caused by the
gross negligence or willful misconduct of Lessor, its agents or employees.
Lessor’s obligations, as and when required by the Applicable Requirements,
shall include, but not be limited to, the cost of investigation, removal,
remediation, restoration and/or abatement, and shall survive the expiration or
termination of this Lease.

(f)            Investigations and
Remediations. Lessor shall
retain the responsibility and pay for any investigations or remediation measures
required by governmental entities having jurisdiction with respect to the
existence of Hazardous Substances on the Premises prior to the Lessee taking
possession, unless such remediation measure is required as a result of Lessee’s
use (including “Alterations”, as defined in paragraph 7.3(a) below) of the
Premises, in which event Lessee shall be responsible for such payment. Lessee
shall cooperate fully in any such activities at the request of Lessor,
including allowing Lessor and Lessor’s agents to have reasonable access to the
Premises at reasonable times in order to carry out Lessor’s investigative and
remedial responsibilities.

(g)           Lessor Termination Option. If a Hazardous Substance Condition (see
Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is
legally responsible therefor (in which case Lessee shall make the investigation
and remediation thereof required by the Applicable Requirements and this Lease
shall continue in full force and effect, but subject to Lessor’s rights under
Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor’s option, either (i)
investigate and remediate such Hazardous Substance Condition, if required, as
soon as reasonably possible at Lessor’s expense, in which event this Lease
shall continue in full force and effect, or (ii) if the estimated cost to
remediate such condition exceeds 12 times the then monthly Base Rent or
$100,000, whichever is greater, give written notice to Lessee, within 30 days
after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition, of Lessor’s desire to terminate this Lease as of the date
60 days following the date of such notice. In the event Lessor elects to give a
termination notice, Lessee may, within 10 days thereafter, give written notice
to Lessor of Lessee’s commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to 12
times the then monthly Base Rent or $100,000, whichever is greater. Lessee
shall provide Lessor with said funds or satisfactory assurance thereof within
30 days following such commitment. In such event, this Lease shall continue in
full force and effect, and Lessor shall proceed to make such remediation as
soon as reasonably possible after the required funds are available. If Lessee
does not give such notice and provide the required funds or assurance thereof
within the time provided, this Lease shall terminate as of the date specified
in Lessor’s notice of termination.

6.3           Lessee’s Compliance with
Applicable Requirements.
Except as otherwise provided in this Lease, Lessee shall, at Lessee’s

 5
 

sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor’s engineers and/or consultants
which relate in any manner to such Requirements, without regard to whether said
Requirements are now in effect or become effective after the Start Date. Lessee
shall, within 10 days after receipt of Lessor’s written request, provide Lessor
with copies of all permits and other documents, and other information evidencing
Lessee’s compliance with any Applicable Requirements specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any documents
involved) of any threatened or actual claim, notice, citation, warning,
complaint or report pertaining to or involving the failure of Lessee or the Premises
to comply with any Applicable Requirements. Likewise, Lessee shall immediately
give written notice to Lessor of: (i) any water damage to the Premises and any
suspected seepage, pooling, dampness or other condition conducive to the
production of mold; or (ii) any mustiness or other odors that might indicate
the presence of mold in the Premises.

6.4           Inspection; Compliance. Lessor and Lessor’s “Lender” (as defined in Paragraph
30) and consultants shall have the right to enter into Premises at any time, in
the case of an emergency, and otherwise at reasonable times after reasonable
notice, for the purpose of inspecting the condition of the Premises and for
verifying compliance by Lessee with this Lease. The cost of any such
inspections shall be paid by Lessor, unless a violation of Applicable
Requirements, or a Hazardous Substance condition (see Paragraph 9.1) is found
to exist or be imminent, or the inspection is requested or ordered by a governmental
authority. In such case, Lessee shall upon request reimburse Lessor for the
cost of such inspection, so long as such inspection is reasonably related to
the violation or contamination. In addition, Lessee shall provide copies of all
relevant material safety data sheets (MSDS)
to Lessor within 10 days of the receipt of written request therefor.

7.             Maintenance; Repairs, Utility Installations; Trade Fixtures
and Alterations.

7.1           Lessee’s Obligations.

(a)           In General. Subject to the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance), 6.3 (Lessee’s Compliance with Applicable
Requirements), 7.2 (Lessor’s Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee’s sole expense, keep the Premises,
Utility Installations (intended for Lessee’s exclusive use, no matter where
located), and Alterations in good order, condition and repair (whether or not
the portion of the Premises requiring repairs, or the means of repairing the
same, are reasonably or readily accessible to Lessee, and whether or not the
need for such repairs occurs as a result of Lessee’s use, any prior use, the
elements or the age of such portion of the Premises), including, but not
limited to, all equipment or facilities, such as plumbing, HVAC equipment,
electrical, lighting facilities, boilers, pressure vessels, fixtures, interior
walls, interior surfaces of exterior walls, ceilings, floors, windows, doors,
plate glass, and skylights but excluding any items which are the responsibility
of Lessor pursuant to Paragraph 7.2. Lessee, in keeping the Premises in good
order, condition and repair, shall exercise and perform good maintenance
practices, specifically including the procurement and maintenance of the
service contracts required by Paragraph 7.1(b) below. Lessee’s obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order,
condition and state of repair.

(b)           Service Contracts. Lessee shall, at Lessee’s sole expense,
procure and maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in the
maintenance of the following equipment and improvements, if any, if and when
installed on the Premises: (i) HVAC equipment, (ii) boiler and pressure
vessels, (iii) clarifiers, and (iv) any other equipment, if reasonably required
by Lessor. However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain any or all of such service contracts, and Lessee shall
reimburse Lessor, upon demand, for the cost thereof.

(c)           Failure to Perform. If Lessee fails to perform Lessee’s
obligations under this Paragraph 7.1, Lessor may enter upon the Premises after
10 days’ prior written notice to Lessee (except in the case of an emergency, in
which case no notice shall be required), perform such obligations on Lessee’s
behalf, and put the Premises in good order, condition and repair, and Lessee
shall promptly pay to Lessor a sum equal to 115% of the cost thereof.

(d)           Replacement. Subject to Lessee’s indemnification of
Lessor as set forth in Paragraph 8.7 below, and without relieving Lessee of
liability resulting from Lessee’s failure to exercise and perform good
maintenance practices, if an item described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of 50% of the cost of
replacing such item, then such item shall be replaced by Lessor, and the cost thereof
shall be prorated between the Parties and Lessee shall only be obligated to
pay, each month during the remainder of the term of this Lease, on the date on
which Base Rent is due, an amount equal to the product of multiplying the cost
of such replacement by a fraction, the numerator of which is one, and the
denominator of which is 144 (ie. 1/144th of the cost per month). Lessee shall
pay Interest on the unamortized balance but may prepay its obligation at any
time.

7.2           Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use),
7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14 (Condemnation),
Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good
order, condition and repair the foundations, exterior walls, structural
condition of interior bearing walls, exterior roof, fire sprinkler system,
Common Area fire alarm and/or smoke detection systems, fire hydrants, parking
lots, walkways, parkways, driveways, landscaping, fences, signs and utility
systems serving the Common Areas and all parts thereof, as well as providing
the services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease. (See Paragraph 58)

7.3           Utility Installations; Trade
Fixtures; Alterations.

(a)           Definitions. The term “Utility
Installations” refers to all floor and window coverings, air and/or
vacuum lines, power panels, electrical distribution, security and fire
protection systems, communication cabling, lighting fixtures, HVAC equipment,
plumbing, and fencing in or on the Premises. The term “Trade Fixtures” shall mean Lessee’s
machinery and equipment that can be removed without doing material damage to the
Premises. The term “Alterations” shall mean any
modification of the improvements, other than Utility Installations or Trade
Fixtures, whether by addition or deletion. “Lessee Owned Alterations and/or Utility
Installations” are defined as Alterations and/or Utility
Installations made by Lessee that are not yet owned by Lessor pursuant to
Paragraph 7.4(a).

(b)           Consent. Lessee shall not make any Alterations or
Utility Installations to the Premises without Lessor’s prior written consent.
Lessee may, however, make non-structural Utility Installations to the interior
of the Premises (excluding the roof) without such consent but upon notice to
Lessor, as long as they are not visible from the outside, do not involve
puncturing, relocating or removing the roof or any existing walls, will not
affect the electrical, plumbing, HVAC, and/or life safety systems, and the
cumulative cost thereof during this Lease as extended does not exceed a sum
equal to 3 month’s Base Rent in the aggregate or a sum equal to one month’s
Base Rent in any one year. Notwithstanding the foregoing, Lessee shall not make
or permit any roof penetrations and/or install anything on the roof without the
prior written approval of Lessor. Lessor may, as a precondition to granting
such approval, require Lessee to utilize a contractor chosen and/or approved by
Lessor. Any Alterations or Utility Installations that Lessee shall desire to
make and which require the consent of the Lessor shall be presented to Lessor
in written form with detailed plans. Consent shall be deemed conditioned upon
Lessee’s: (i) acquiring all applicable governmental permits, (ii) furnishing
Lessor with copies of both the permits and the plans and specifications prior
to commencement of the work, and (iii) compliance with all conditions of said
permits and other Applicable Requirements in a prompt and expeditious manner.
Any Alterations or Utility Installations shall be performed in a workmanlike
manner with good and sufficient materials. Lessee shall promptly upon
completion furnish Lessor with as-built plans and specifications. For work
which costs an

 6
 

amount in excess of one month’s
Base Rent, Lessor may condition its consent upon Lessee providing a lien and
completion bond in an amount equal to 150% of the estimated cost of such
Alteration or Utility Installation and/or upon Lessee’s posting an additional
Security Deposit with Lessor.

(c)           Liens; Bonds. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanic’s or materialman’s lien against the Premises or any interest therein.
Lessee shall give Lessor not less than 10 days notice prior to the commencement
of any work in, on or about the Premises, and Lessor shall have the right to
post notices of non-responsibility. If Lessee shall contest the validity of any
such lien, claim or demand, then Lessee shall, at its sole expense defend and
protect itself, Lessor and the Premises against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof. If Lessor shall require, Lessee shall furnish a surety
bond in an amount equal to 150% of the amount of such contested lien, claim or
demand, indemnifying Lessor against liability for the same. If Lessor elects to
participate in any such action, Lessee shall pay Lessor’s attorneys’ fees and
costs.

7.4           Ownership; Removal;
Surrender; and Restoration.

(a)           Ownership. Subject to Lessor’s right to require removal
or elect ownership as hereinafter provided, all Alterations and Utility
Installations made by Lessee shall be the property of Lessee, but considered a
part of the Premises. Lessor may, at any time, elect in writing to be the owner
of all or any specified part of the Lessee Owned Alterations and Utility
Installations. Unless otherwise instructed per paragraph 7.4(b) hereof, all
Lessee Owned Alterations and Utility Installations shall, at the expiration or
termination of this Lease, become the property of Lessor and be surrendered by
Lessee with the Premises.

(b)           Removal. By delivery to Lessee of written notice from
Lessor not earlier than 90 and not later than 30 days prior to the end of the
term of this Lease, Lessor may require that any or all Lessee Owned Alterations
or Utility Installations be removed by the expiration or termination of this
Lease. Lessor may require the removal at any time of all or any part of any
Lessee Owned Alterations or Utility Installations made without the required
consent.

(c)           Surrender; Restoration. Lessee shall surrender the Premises by the
Expiration Date or any earlier termination date, with all of the improvements,
parts and surfaces thereof broom clean and free of debris, and in good
operating order, condition and state of repair, ordinary wear and tear
excepted. “Ordinary wear and tear” shall not include any damage or
deterioration that would have been prevented by good maintenance practice.
Notwithstanding the foregoing, if this Lease is for 12 months or less, then
Lessee shall surrender the Premises in the same condition as delivered to
Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee
shall repair any damage occasioned by the installation, maintenance or removal
of Trade Fixtures, Lessee owned Alterations and/or Utility Installations,
furnishings, and equipment as well as the removal of any storage tank installed
by or for Lessee. Lessee shall also completely remove from the Premises any and
all Hazardous Substances brought onto the Premises by or for Lessee, or any third
party (except Hazardous Substances which were deposited via underground
migration from areas outside of the Project) even if such removal would require
Lessee to perform or pay for work that exceeds statutory requirements. Trade
Fixtures shall remain the property of Lessee and shall be removed by Lessee.
Any personal property of Lessee not removed on or before the Expiration Date or
any earlier termination date shall be deemed to have been abandoned by Lessee
and may be disposed of or retained by Lessor as Lessor may desire. The failure
by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c)
without the express written consent of Lessor shall constitute a holdover under
the provisions of Paragraph 26 below.

8.             Insurance; Indemnity.

8.1           Payment of Premiums. The cost of the premiums for the insurance
policies required to be carried by Lessor, pursuant to Paragraphs 8.2(b),
8.3(a) and 8.3(b), shall be a Common Area Operating Expense. Premiums for
policy periods commencing prior to, or extending beyond, the term of this Lease
shall be prorated to coincide with the corresponding Start Date or Expiration
Date.

8.2           Liability Insurance.

(a)           Carried by Lessee. Lessee shall obtain and keep in force a
Commercial General Liability policy of insurance protecting Lessee and Lessor
as an additional insured against claims for bodily injury, personal injury and
property damage based upon or arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such insurance
shall be on an occurrence basis providing single limit coverage in an amount
not less than $1,000,000 per occurrence with an annual aggregate of not less
than $2,000,000. Lessee shall add Lessor as an additional insured by means of
an endorsement at least as broad as the Insurance Service Organization’s “Additional
Insured-Managers or Lessors of Premises” Endorsement and coverage shall also be
extended to include damage caused by heat, smoke or fumes from a hostile fire.
The policy shall not contain any intra-insured exclusions as between insured
persons or organizations, but shall include coverage for liability assumed
under this Lease as an “insured contract”
for the performance of Lessee’s indemnity obligations under this Lease. The
limits of said insurance shall not, however, limit the liability of Lessee nor
relieve Lessee of any obligation hereunder. Lessee shall provide an endorsement
on its liability policy(ies) which provides that its insurance shall be primary
to and not contributory with any similar insurance carried by Lessor, whose insurance
shall be considered excess insurance only.

(b)           Carried by Lessor. Lessor shall maintain liability insurance as
described in Paragraph 8.2(a), in addition to, and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein.

8.3           Property Insurance -
Building, Improvements and Rental Value.

(a)           Building and Improvements. Lessor shall obtain and keep in force a
policy or policies of insurance in the name of Lessor, with loss payable to
Lessor, any ground-lessor, and to any Lender insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full insurable
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by any Lender, but in no event more than the commercially
reasonable and available insurable value thereof. Lessee Owned Alterations and
Utility Installations, Trade Fixtures, and Lessee’s personal property shall be
insured by Lessee under Paragraph 8.4. If the coverage is available and
commercially appropriate, such policy or policies shall insure against all
risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender), including coverage for debris removal
and the enforcement of any Applicable Requirements requiring the upgrading,
demolition, reconstruction or replacement of any portion of the Premises as the
result of a covered loss. Said policy or policies shall also contain an agreed
valuation provision in lieu of any coinsurance clause, waiver of subrogation,
and inflation guard protection causing an increase in the annual property
insurance coverage amount by a factor of not less than the adjusted U.S. Department
of Labor Consumer Price Index for All Urban Consumers for the city nearest to
where the Premises are located. If such insurance coverage has a deductible
clause, the deductible amount shall not exceed $1,000 per occurrence.

(b)           Rental Value. Lessor shall also obtain and keep in force a
policy or policies in the name of Lessor with loss payable to Lessor and any
Lender, insuring the loss of the full Rent for one year with an extended period
of indemnity for an additional 180 days (“Rental Value insurance”). Said
insurance shall contain an agreed valuation provision in lieu of any
coinsurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected Rent otherwise payable by Lessee, for the next 12 month
period.

(c)           Adjacent Premises. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or
other buildings in the Project if said increase is caused by Lessee’s acts,
omissions, use or occupancy of the Premises.

(d)           Lessee’s Improvements. Since Lessor is the Insuring Party, Lessor
shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.

 7
 

8.4           Lessee’s Property; Business
Interruption Insurance.

(a)           Property Damage. Lessee shall obtain and maintain insurance
coverage on all of Lessee’s personal property, Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such insurance shall be full replacement
cost coverage with a deductible of not to exceed $1,000 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.

(b)           Business Interruption. Lessee shall obtain and maintain loss of
income and extra expense insurance in amounts as will reimburse Lessee for
direct or indirect loss of earnings attributable to all perils commonly insured
against by prudent lessees in the business of Lessee or attributable to
prevention of access to the Premises as a result of such perils.

(c)           No Representation of Adequate
Coverage. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee’s property, business operations or
obligations under this Lease.

8.5           Insurance Policies. Insurance required herein shall be by
companies duly licensed or admitted to transact business in the state where the
Premises are located, and maintaining during the policy term a “General
Policyholders Rating” of at least A-, VI, as set forth in the most current
issue of “Best’s Insurance Guide”, or such other rating as may be required by a
Lender. Lessee shall not do or permit to be done anything which invalidates the
required insurance policies. Lessee shall, prior to the Start Date, deliver to
Lessor certified copies of policies of such insurance or certificates evidencing
the existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after 30 days prior written notice
to Lessor. Lessee shall, at least 10 days prior to the expiration of such
policies, furnish Lessor with evidence of renewals or “insurance binders”
evidencing renewal thereof, or Lessor may order such insurance and charge the
cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon
demand. Such policies shall be for a term of at least one year, or the length
of the remaining term of this Lease, whichever is less. If either Party shall
fail to procure and maintain the insurance required to be carried by it, the
other Party may, but shall not be required to, procure and maintain the same.

8.6           Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and
waive their entire right to recover damages against the other, for loss of or
damage to its property arising out of or incident to the perils required to be
insured against herein. The effect of such releases and waivers is not limited
by the amount of insurance carried or required, or by any deductibles
applicable hereto. The Parties agree to have their respective property damage
insurance carriers waive any right to subrogation that such companies may have
against Lessor or Lessee, as the case may be, so long as the insurance is not
invalidated thereby.

8.7           Indemnity. Except for Lessor’s gross negligence or
willful misconduct, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor’s master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
liens, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or
liabilities arising out of, involving, or in connection with, the use and/or
occupancy of the Premises by Lessee. If any action or proceeding is brought
against Lessor by reason of any of the foregoing matters, Lessee shall upon
notice defend the same at Lessee’s expense by counsel reasonably satisfactory
to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need
not have first paid any such claim in order to be defended or indemnified.

8.8           Exemption of Lessor from
Liability. Other than if a result of gross negligence or
willful misconduct of Lessor. Lessor
shall not be liable for injury or damage to the person or goods, wares,
merchandise or other property of Lessee, Lessee’s employees, contractors, invitees,
customers, or any other person in or about the Premises, whether such damage or
injury is caused by or results from fire, steam, electricity, gas, water or
rain, indoor air quality, the presence of mold or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wires, appliances,
plumbing, HVAC or lighting fixtures, or from any other cause, whether the said
injury or damage results from conditions arising upon the Premises or upon
other portions of the Building, or from other sources or places. Lessor shall
not be liable for any damages arising from any act or neglect of any other
tenant of Lessor nor from the failure of Lessor to enforce the provisions of
any other lease in the Project. Notwithstanding Lessor’s negligence or breach
of this Lease, Lessor shall under no circumstances be liable for injury to
Lessee’s business or for any loss of income or profit therefrom.

8.9           Failure to Provide Insurance. Lessee acknowledges that any failure on its part
to obtain or maintain the insurance required herein will expose Lessor to risks
and potentially cause Lessor to incur costs not contemplated by this Lease, the
extent of which will be extremely difficult to ascertain. Accordingly, for any
month or portion thereof that Lessee does not maintain the required insurance
and/or does not provide Lessor with the required binders or certificates
evidencing the existence of the required insurance, the Base Rent shall be
automatically increased, without any requirement for notice to Lessee, by an
amount equal to 10% of the then existing Base Rent or $100, whichever is
greater. The parties agree that such increase in Base Rent represents fair and
reasonable compensation for the additional risk/costs that Lessor will incur by
reason of Lessee’s failure to maintain the required insurance. Such increase in
Base Rent shall in no event constitute a waiver of Lessee’s Default or Breach
with respect to the failure to maintain such insurance, prevent the exercise of
any of the other rights and remedies granted hereunder, nor relieve Lessee of
its obligation to maintain the insurance specified in this Lease.

9.             Damage or Destruction.

9.1           Definitions.

(a)           “Premises Partial Damage” shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which can reasonably be repaired in 3 months or less from the
date of the damage or destruction, and the cost thereof does not exceed a sum
equal to 6 month’s Base Rent. Lessor shall notify Lessee in writing within 30
days from the date of the damage or destruction as to whether or not the damage
is Partial or Total. Notwithstanding the foregoing, Premises Partial Damage
shall not include damage to windows, doors, and/or other similar items which
Lessee has the responsibility to repair or replace pursuant to the provisions
of Paragraph 7.1.

(b)           “Premises Total Destruction” shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which cannot reasonably be repaired in 3
months or less from the date of the damage or destruction and/or the cost
thereof exceeds a sum equal to 6 month’s Base Rent. Lessor shall notify Lessee
in writing within 30 days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.

(c)           “Insured Loss” shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which was caused by an event required to be
covered by the insurance described in Paragraph 8.3(a), irrespective of any
deductible amounts or coverage limits involved.

(d)           “Replacement Cost” shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of Applicable Requirements, and without
deduction for depreciation.

(e)           “Hazardous Substance
Condition” shall mean the
occurrence or discovery of a condition involving the presence of, or a
contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on,
or under the Premises which requires repair, remediation, or restoration.

9.2           Partial Damage - Insured Loss. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor’s expense, repair such damage
(but not Lessee’s Trade Fixtures or Lessee Owned Alterations and Utility Installations)
as soon as reasonably possible and this Lease shall continue in full force and
effect; provided, however, that Lessee shall, at Lessor’s election, make the
repair of any damage or

 8
 

destruction the total cost to
repair of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for
that purpose. Notwithstanding the foregoing, if the required insurance was not
in force or the insurance proceeds are not sufficient to effect such repair,
the Insuring Party shall promptly contribute the shortage in proceeds as and
when required to complete said repairs. In the event, however, such shortage
was due to the fact that, by reason of the unique nature of the improvements,
full replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within 10 days following receipt of written notice of such shortage and request
therefor. If Lessor receives said funds or adequate assurance thereof within
said 10 day period, the party responsible for making the repairs shall complete
them as soon as reasonably possible and this Lease shall remain in full force
and effect. If such funds or assurance are not received, Lessor may
nevertheless elect by written notice to Lessee within 10 days thereafter to: (i)
make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full force
and effect, or (ii) have this Lease terminate 30 days thereafter. Lessee shall
not be entitled to reimbursement of any funds contributed by Lessee to repair
any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be
some insurance coverage, but the net proceeds of any such insurance shall be
made available for the repairs if made by either Party.

9.3           Partial Damage - Uninsured
Loss. If a Premises Partial
Damage that is not an Insured Loss occurs, unless caused by a negligent or
willful act of Lessee (in which event Lessee shall make the repairs at Lessee’s
expense), Lessor may either: (i) repair such damage as soon as reasonably
possible at Lessor’s expense, in which event this Lease shall continue in full
force and effect, or (ii) terminate this Lease by giving written notice to
Lessee within 30 days after receipt by Lessor of knowledge of the occurrence of
such damage. Such termination shall be effective 60 days following the date of
such notice. In the event Lessor elects to terminate this Lease, Lessee shall
have the right within 10 days after receipt of the termination notice to give
written notice to Lessor of Lessee’s commitment to pay for the repair of such
damage without reimbursement from Lessor. Lessee shall provide Lessor with said
funds or satisfactory assurance thereof within 30 days after making such
commitment. In such event this Lease shall continue in full force and effect,
and Lessor shall proceed to make such repairs as soon as reasonably possible
after the required funds are available. If Lessee does not make the required
commitment, this Lease shall terminate as of the date specified in the
termination notice.

9.4           Total Destruction. Notwithstanding any other provision hereof,
if a Premises Total Destruction occurs, this Lease shall terminate 60 days
following such Destruction. If the damage or destruction was caused by the
gross negligence or willful misconduct of Lessee, Lessor shall have the right
to recover Lessor’s damages from Lessee, except as provided in Paragraph 8.6. If a Premises total destruction was caused by
the gross negligence or willful misconduct of Lessor, Lessee shall have the
right to recover Lessee’s damages from Lessor.

9.5           Damage Near End of Term. If at any time during the last 6 months of
this Lease there is damage for which the cost to repair exceeds one month’s
Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease
effective 60 days following the date of occurrence of such damage by giving a
written termination notice to Lessee within 30 days after the date of
occurrence of such damage. Notwithstanding the foregoing, if Lessee at that
time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option
and (b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is 10 days after Lessee’s receipt of Lessor’s written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon
which such option expires. If Lessee duly exercises such option during such
period and provides Lessor with funds (or adequate assurance thereof) to cover
any shortage in insurance proceeds, Lessor shall, at Lessor’s commercially
reasonable expense, repair such damage as soon as reasonably possible and this
Lease shall continue in full force and effect. If Lessee fails to exercise such
option and provide such funds or assurance during such period, then this Lease
shall terminate on the date specified in the termination notice and Lessee’s
option shall be extinguished.

9.6           Abatement of Rent; Lessee’s
Remedies.

(a)           Abatement. In the event of Premises Partial Damage or
Premises Total Destruction or a Hazardous Substance Condition for which Lessee
is not responsible under this Lease, the Rent payable by Lessee for the period
required for the repair, remediation or restoration of such damage shall be
abated in proportion to the degree to which Lessee’s use of the Premises is
impaired, but not to exceed the proceeds received from the Rental Value
insurance. All other obligations of Lessee hereunder shall be performed by
Lessee, and Lessor shall have no liability for any such damage, destruction,
remediation, repair or restoration except as provided herein.

(b)           Remedies. If Lessor shall be obligated to repair or
restore the Premises and does not commence, in a substantial and meaningful
way, such repair or restoration within 90 days after such obligation shall
accrue, Lessee may, at any time prior to the commencement of such repair or
restoration, give written notice to Lessor and to any Lenders of which Lessee
has actual notice, of Lessee’s election to terminate this Lease on a date not
less than 60 days following the giving of such notice. If Lessee gives such
notice and such repair or restoration is not commenced within 30 days
thereafter, this Lease shall terminate as of the date specified in said notice.
If the repair or restoration is commenced within such 30 days, this Lease shall
continue in full force and effect. “Commence” shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.

9.7           Termination; Advance Payments. Upon termination of this Lease pursuant to
Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made
concerning advance Base Rent and any other advance payments made by Lessee to
Lessor. Lessor shall, in addition, return to Lessee so much of Lessee’s
Security Deposit as has not been, or is not then required to be, used by
Lessor.

9.8           Waive Statutes. Lessor and Lessee agree that the terms of
this Lease shall govern the effect of any damage to or destruction of the
Premises with respect to the termination of this Lease and hereby waive the
provisions of any present or future statute to the extent inconsistent herewith.

10.           Real Property Taxes.

10.1         Definition. As used herein, the term “Real Property Taxes”
shall include any form of assessment; real estate, general, special, ordinary
or extraordinary, or rental levy or tax (other than inheritance, personal
income or estate taxes); improvement bond; and/or license fee imposed upon or
levied against any legal or equitable interest of Lessor in the Project, Lessor’s
right to other income therefrom, and/or Lessor’s business of leasing, by any
authority having the direct or indirect power to tax and where the funds are
generated with reference to the Project address and where the proceeds so
generated are to be applied by the city, county or other local taxing authority
of a jurisdiction within which the Project is located. The term “Real Property
Taxes” shall also include any tax, fee, levy, assessment or charge, or any
increase therein: (i) imposed by reason of events occurring during the term of
this Lease, including but not limited to the second a change in the
ownership of the Project, (any
tax increase resulting from the 1st sale by original Lessor, shall not be
passed on to Lessee,  (ii) a change in the improvements thereon,
and/or (iii) levied or assessed on machinery or equipment provided by Lessor to
Lessee pursuant to this Lease. In calculating Real Property Taxes for any
calendar year, the Real Property Taxes for any real estate tax year shall be
included in the calculation of Real Property Taxes for such calendar year based
upon the number of days which such calendar year and tax year have in common.

10.2         Payment of Taxes. Except as otherwise provided in Paragraph
10.3, Lessor shall pay the Real Property Taxes applicable to the Project, and
said payments shall be included in the calculation of Common Area Operating
Expenses in accordance with the provisions of Paragraph 4.2.

10.3         Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax

 9
 

assessor’s records and work
sheets as being caused by additional improvements placed upon the Project by
other lessees or by Lessor for the exclusive enjoyment of such other lessees.
Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at
the time Common Area Operating Expenses are payable under Paragraph 4.2, the
entirety of any increase in Real Property Taxes if assessed solely by reason of
Alterations, Trade Fixtures or Utility Installations placed upon the Premises
by Lessee or at Lessee’s request or by reason of any alterations or
improvements to the Premises made by Lessor subsequent to the execution of this
Lease by the Parties.

10.4         Joint Assessment. If the Building is not separately assessed,
Real Property Taxes allocated to the Building shall be an equitable proportion
of the Real Property Taxes for all of the land and improvements included within
the tax parcel assessed, such proportion to be determined by Lessor from the
respective valuations assigned in the assessor’s work sheets or such other
information as may be reasonably available. Lessor’s reasonable determination
thereof, in good faith, shall be conclusive.

10.5         Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises. When possible, Lessee shall cause its
Lessee Owned Alterations and Utility Installations, Trade Fixtures,
furnishings, equipment and all other personal property to be assessed and
billed separately from the real property of Lessor. If any of Lessee’s said
property shall be assessed with Lessor’s real property, Lessee shall pay Lessor
the taxes attributable to Lessee’s property within 10 days after receipt of a
written statement setting forth the taxes applicable to Lessee’s property.

11.           Utilities and Services. Lessee shall pay for all water, gas, heat,
light, power, telephone, trash disposal and other utilities and services supplied
to the Premises, together with any taxes thereon. Notwithstanding the
provisions of Paragraph 4.2, if at any time in Lessor’s sole judgment, Lessor
determines that Lessee is using a disproportionate amount of water, electricity
or other commonly metered utilities, or that Lessee is generating such a large
volume of trash as to require an increase in the size of the trash receptacle
and/or an increase in the number of times per month that it is emptied, then
Lessor may increase Lessee’s Base Rent by an amount equal to such increased
costs. There shall be no abatement of Rent and Lessor shall not be liable in
any respect whatsoever for the inadequacy, stoppage, interruption or
discontinuance of any utility or service due to riot, strike, labor dispute,
breakdown, accident, repair or other cause beyond Lessor’s reasonable control
or in cooperation with governmental request or directions.

12.           Assignment and Subletting.

12.1         Lessor’s Consent Required. (See Paragraph 57)

(a)           Lessee shall not voluntarily or by operation of law assign, transfer,
mortgage or encumber (collectively, “assign
or assignment”) or sublet all or any part of Lessee’s interest in
this Lease or in the Premises without Lessor’s prior written consent. 

(b)           Unless Lessee is a corporation and its stock is publicly traded on a
national stock exchange, a change in the control of Lessee shall constitute an
assignment requiring consent. The transfer, on a cumulative basis, of 25% or
more of the voting control of Lessee shall constitute a change in control for
this purpose.

(c)           The involvement of Lessee or its assets in any transaction, or series of
transactions (by way of merger, sale, acquisition, financing, transfer,
leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee’s assets occurs, which results or will
result in a reduction of the Net Worth of Lessee by an amount greater than 25%
of such Net Worth as it was represented at the time of the execution of this
Lease or at the time of the most recent assignment to which Lessor has
consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, whichever was or is greater, shall be
considered an assignment of this Lease to which Lessor may withhold its
consent. “Net Worth of Lessee” shall
mean the net worth of Lessee (excluding any guarantors) established under
generally accepted accounting principles.

(d)           An assignment or subletting without consent shall, at Lessor’s option,
be a Default curable after notice per Paragraph 13.1(c), or a noncurable Breach
without the necessity of any notice and grace period. If Lessor elects to treat
such unapproved assignment or subletting as a noncurable Breach, Lessor may
either: (i) terminate this Lease, or (ii) upon 30 days written notice, increase
the monthly Base Rent to 110% of the Base Rent then in effect. Further, in the
event of such Breach and rental adjustment, (i) the purchase price of any
option to purchase the Premises held by Lessee shall be subject to similar
adjustment to 110% of the price previously in effect, and (ii) all fixed and
non-fixed rental adjustments scheduled during the remainder of the Lease term
shall be increased to 110% of the scheduled adjusted rent.

(e)           Lessee’s remedy for any breach of Paragraph 12.1 by Lessor shall be
limited to compensatory damages and/or injunctive relief.

(f)            Lessor may reasonably withhold consent to a
proposed assignment or subletting if Lessee is in Default at the time consent
is requested.

(g)           Notwithstanding the foregoing, allowing a diminimus portion of the
Premises, ie. 20 square feet or less, to be used by a third party vendor in
connection with the installation of a vending machine or payphone shall not
constitute a subletting.

12.2         Terms and Conditions
Applicable to Assignment and Subletting.

(a)           Regardless of Lessor’s consent, no assignment or subletting shall: (i)
be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, or (iii) alter the primary liability of Lessee for
the payment of Rent or for the performance of any other obligations to be
performed by Lessee.

(b)           Lessor may accept Rent or performance of Lessee’s obligations from any
person other than Lessee pending approval or disapproval of an assignment.
Neither a delay in the approval or disapproval of such assignment nor the
acceptance of Rent or performance shall constitute a waiver or estoppel of
Lessor’s right to exercise its remedies for Lessee’s Default or Breach.

(c)           Lessor’s consent to any assignment or subletting shall not constitute
consent to any subsequent assignment or subletting.

(d)           In the event of any Default or Breach by Lessee, Lessor may proceed
directly against Lessee, any Guarantors or anyone else responsible for the
performance of Lessee’s obligations under this Lease, including any assignee or
sublessee, without first exhausting Lessor’s remedies against any other person
or entity responsible therefore to Lessor, or any security held by Lessor.

(e)           Each request for consent to an assignment or subletting shall be in
writing, accompanied by information relevant to Lessor’s determination as to
the financial and operational responsibility and appropriateness of the
proposed assignee or sublessee, including but not limited to the intended use
and/or required modification of the Premises, if any, together with a fee of
$500 as consideration for Lessor’s considering and processing said request.
Lessee agrees to provide Lessor with such other or additional information
and/or documentation as may be reasonably requested. (See also Paragraph 36)

(f)            Any assignee of, or sublessee under, this
Lease shall, by reason of accepting such assignment, entering into such sublease,
or entering into possession of the Premises or any portion thereof, be deemed
to have assumed and agreed to conform and comply with each and every term,
covenant, condition and obligation herein to be observed or performed by Lessee
during the term of said assignment or sublease, other than such obligations as
are contrary to or inconsistent with provisions of an assignment or sublease to
which Lessor has specifically consented to in writing.

(g)           Lessor’s consent to any assignment or subletting shall not transfer to
the assignee or sublessee any Option granted to the original Lessee by this
Lease unless such transfer is specifically consented to by Lessor in writing.
(See Paragraph 39.2)

 10
 

12.3         Additional Terms and
Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee
of all or any part of the Premises and shall be deemed included in all
subleases under this Lease whether or not expressly incorporated therein:

(a)           Lessee hereby assigns and transfers to Lessor all of Lessee’s interest
in all Rent payable on any sublease, and Lessor may collect such Rent and apply
same toward Lessee’s obligations under this Lease; provided, however, that
until a Breach shall occur in the performance of Lessee’s obligations, Lessee
may collect said Rent. In the event that the amount collected by Lessor exceeds
Lessee’s then outstanding obligations any such excess shall be refunded to
Lessee. Lessor shall not, by reason of the foregoing or any assignment of such
sublease, nor by reason of the collection of Rent, be deemed liable to the
sublessee for any failure of Lessee to perform and comply with any of Lessee’s obligations
to such sublessee. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee’s obligations under this Lease, to pay to
Lessor all Rent due and to become due under the sublease. Sublessee shall rely
upon any such notice from Lessor and shall pay all Rents to Lessor without any
obligation or right to inquire as to whether such Breach exists,
notwithstanding any claim from Lessee to the contrary.

(b)           In the event of a Breach by Lessee, Lessor may, at its option, require
sublessee to attorn to Lessor, in which event Lessor shall undertake the
obligations of the sublessor under such sublease from the time of the exercise
of said option to the expiration of such sublease; provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or Breaches of such
sublessor.

(c)           Any matter requiring the consent of the sublessor under a sublease shall
also require the consent of Lessor.

(d)           No sublessee shall further assign or sublet all or any part of the
Premises without Lessor’s prior written consent.

(e)           Lessor shall deliver a copy of any notice of Default or Breach by Lessee
to the sublessee, who shall have the right to cure the Default of Lessee within
the grace period, if any, specified in such notice. The sublessee shall have a
right of reimbursement and offset from and against Lessee for any such Defaults
cured by the sublessee.

13.           Default; Breach; Remedies.

13.1         Default; Breach. A “Default”
is defined as a failure by the Lessee to comply with or perform any
of the terms, covenants, conditions or Rules and Regulations under this Lease.
A “Breach” is defined as the
occurrence of one or more of the following Defaults, and the failure of Lessee
to cure such Default within any applicable grace period:

(a)           The abandonment of the Premises; or the vacating of the Premises without
providing a commercially reasonable level of security, or where the coverage of
the property insurance described in Paragraph 8.3 is jeopardized as a result
thereof, or without providing reasonable assurances to minimize potential
vandalism.

(b)           The failure of Lessee to make any payment of Rent or any Security
Deposit required to be made by Lessee hereunder, whether to Lessor or to a
third party, when due, to provide reasonable evidence of insurance or surety
bond, or to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of 3
business days following written notice to Lessee.

(c)           The commission of waste, act or acts constituting public or private
nuisance, and/or an illegal activity on the Premises by Lessee, where such
actions continue for a period of 3 business days following written notice to
Lessee.

(d)           The failure by Lessee to provide (i) reasonable written evidence of
compliance with Applicable Requirements, (ii) the service contracts, (iii) the
rescission of an unauthorized assignment or subletting, (iv) an Estoppel
Certificate, (v) a reasonably requested subordination, (vi) evidence
concerning any guaranty and/or Guarantor, (vii) any document requested under
Paragraph 41, (viii) material data safety sheets (MSDS), or (ix) any other
documentation or information which Lessor may reasonably require of Lessee
under the terms of this Lease, where any such failure continues for a period of
10 days following written notice to Lessee.

(e)           A Default by Lessee as to the terms, covenants, conditions or provisions
of this Lease, or of the rules adopted under Paragraph 2.9 hereof, other than
those described in subparagraphs 13.1(a), (b), (c) or (d), above, where such
Default continues for a period of 30 days after written notice; provided,
however, that if the nature of Lessee’s Default is such that more than 30 days
are reasonably required for its cure, then it shall not be deemed to be a
Breach if Lessee commences such cure within said 30 day period and thereafter
diligently prosecutes such cure to completion.

(f)            The occurrence of any of the following events:
(i) the making of any general arrangement or assignment for the benefit of creditors;
(ii) becoming a “debtor” as
defined in 11 U.S.C. § 101 or any
successor statute thereto (unless, in the case of a petition filed against Lessee,
the same is dismissed within 60 days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee’s assets located at
the Premises or of Lessee’s interest in this Lease, where possession is not
restored to Lessee within 30 days; or (iv) the attachment, execution or other
judicial seizure of substantially all of Lessee’s assets located at the
Premises or of Lessee’s interest in this Lease, where such seizure is not
discharged within 30 days; provided, however, in the event that any provision
of this subparagraph is contrary to any applicable law, such provision shall be
of no force or effect, and not affect the validity of the remaining provisions.

(g)           The discovery that any financial statement of Lessee or of any Guarantor
given to Lessor was materially false.

(h)           If the performance of Lessee’s obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor’s
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor’s becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor’s refusal to honor the guaranty, or (v) a
Guarantor’s breach of its guaranty obligation on an anticipatory basis, and
Lessee’s failure, within 60 days following written notice of any such event, to
provide written alternative assurance or security, which, when coupled with the
then existing resources of Lessee, equals or exceeds the combined financial
resources of Lessee and the Guarantors that existed at the time of execution of
this Lease.

13.2         Remedies. If Lessee fails to perform any of its
affirmative duties or obligations, within 10 days after written notice (or in
case of an emergency, without notice), Lessor may, at its option, perform such
duty or obligation on Lessee’s behalf, including but not limited to the
obtaining of reasonably required bonds, insurance policies, or governmental
licenses, permits or approvals. Lessee shall pay to Lessor an amount equal to
115% of the costs and expenses incurred by Lessor in such performance upon
receipt of an invoice therefor. In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:

(a)           Terminate Lessee’s right to possession of the Premises by any lawful
means, in which case this Lease shall terminate and Lessee shall immediately
surrender possession to Lessor. In such event Lessor shall be entitled to
recover from Lessee: (i) the unpaid Rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor
for all the detriment proximately caused by the Lessee’s failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys’ fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time

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of award plus one percent.
Efforts by Lessor to mitigate damages caused by Lessee’s Breach of this Lease
shall not waive Lessor’s right to recover damages under Paragraph 12. If
termination of this Lease is obtained through the provisional remedy of
unlawful detainer, Lessor shall have the right to recover in such proceeding
any unpaid Rent and damages as are recoverable therein, or Lessor may reserve
the right to recover all or any part thereof in a separate suit. If a notice
and grace period required under Paragraph 13.1 was not previously given, a
notice to pay rent or quit, or to perform or quit given to Lessee under the
unlawful detainer statute shall also constitute the notice required by
Paragraph 13.1. In such case, the applicable grace period required by Paragraph
13.1 and the unlawful detainer statute shall run concurrently, and the failure
of Lessee to cure the Default within the greater of the two such grace periods
shall constitute both an unlawful detainer and a Breach of this Lease entitling
Lessor to the remedies provided for in this Lease and/or by said statute.

(b)           Continue the Lease and Lessee’s right to possession and recover the Rent
as it becomes due, in which event Lessee may sublet or assign, subject only to
reasonable limitations. Acts of maintenance, efforts to relet, and/or the
appointment of a receiver to protect the Lessor’s interests, shall not
constitute a termination of the Lessee’s right to possession.

(c)           Pursue any other remedy now or hereafter available under the laws or
judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee’s
right to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee’s occupancy of the Premises.

13.3         Inducement Recapture. Any agreement for free or abated rent or
other charges, or for the giving or paying by Lessor to or for Lessee of any
cash or other bonus, inducement or consideration for Lessee’s entering into
this Lease, all of which concessions are hereinafter referred to as “Inducement Provisions”, shall be deemed
conditioned upon Lessee’s full and faithful performance of all of the terms,
covenants and conditions of this Lease. Upon Breach of this Lease by Lessee,
any such Inducement Provision shall automatically be deemed deleted from this
Lease and of no further force or effect, and any rent, other charge, bonus,
inducement or consideration theretofore abated, given or paid by Lessor under
such an Inducement Provision shall be immediately due and payable by Lessee to Lessor,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
paragraph shall not be deemed a waiver by Lessor of the provisions of this
paragraph unless specifically so stated in writing by Lessor at the time of
such acceptance.

13.4         Late Charges. Lessee hereby acknowledges that late payment
by Lessee of Rent will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain. Such
costs include, but are not limited to, processing and accounting charges, and
late charges which may be imposed upon Lessor by any Lender. Accordingly, if
any Rent shall not be received by Lessor within 5 days after such amount shall
be due, then, without any requirement for notice to Lessee, Lessee shall
immediately pay to Lessor a one-time late charge equal to 10% of each such
overdue amount or $100, whichever is greater. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs Lessor
will incur by reason of such late payment. Acceptance of such late charge by
Lessor shall in no event constitute a waiver of Lessee’s Default or Breach with
respect to such overdue amount, nor prevent the exercise of any of the other
rights and remedies granted hereunder. In the event that a late charge is
payable hereunder, whether or not collected, for 3 consecutive installments of
Base Rent, then notwithstanding any provision of this Lease to the contrary,
Base Rent shall, at Lessor’s option, become due and payable quarterly in
advance.

13.5         Interest. Any monetary payment due Lessor hereunder,
other than late charges, not received by Lessor, when due as to scheduled
payments (such as Base Rent) or within 30 days following the date on which it
was due for non-scheduled payment, shall bear interest from the date when due,
as to scheduled payments, or the 31st day after it was due as to non-scheduled
payments. The interest (“Interest”)
charged shall be computed at the rate of 10% per annum but shall not exceed the
maximum rate allowed by law. Interest is payable in addition to the potential
late charge provided for in Paragraph 13.4.

13.6         Breach by Lessor.

(a)           Notice of Breach. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a
reasonable time shall in no event be less than 30 days after receipt by Lessor,
and any Lender whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor’s obligation is such that more than 30 days are reasonably required for
its performance, then Lessor shall not be in breach if performance is commenced
within such 30 day period and thereafter diligently pursued to completion.

(b)           Performance by Lessee on
Behalf of Lessor. In the
event that neither Lessor nor Lender cures said breach within 30 days after
receipt of said notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at Lessee’s
expense and offset from Rent the actual and reasonable cost to perform such
cure, provided however, that such offset shall not exceed an amount equal to
the greater of one month’s Base Rent or the Security Deposit, reserving Lessee’s
right to reimbursement from Lessor for any such expense in excess of such
offset. Lessee shall document the cost of said cure and supply said
documentation to Lessor.

14.           Condemnation. If the Premises or any portion thereof are
taken under the power of eminent domain or sold under the threat of the
exercise of said power (collectively “Condemnation”),
this Lease shall terminate as to the part taken as of the date the condemning
authority takes title or possession, whichever first occurs. If more than 10%
of the floor area of the Unit, or more than 25% of Lessee’s Reserved Parking
Spaces, is taken by Condemnation, Lessee may, at Lessee’s option, to be
exercised in writing within 10 days after Lessor shall have given Lessee
written notice of such taking (or in the absence of such notice, within 10 days
after the condemning authority shall have taken possession) terminate this
Lease as of the date the condemning authority takes such possession. If Lessee
does not terminate this Lease in accordance with the foregoing, this Lease
shall remain in full force and effect as to the portion of the Premises
remaining, except that the Base Rent shall be reduced in proportion to the
reduction in utility of the Premises caused by such Condemnation. Condemnation
awards and/or payments shall be the property of Lessor, whether such award
shall be made as compensation for diminution in value of the leasehold, the
value of the part taken, or for severance damages; provided, however, that
Lessee shall be entitled to any compensation for Lessee’s relocation expenses,
loss of business goodwill and/or Trade Fixtures, without regard to whether or
not this Lease is terminated pursuant to the provisions of this Paragraph. All
Alterations and Utility Installations made to the Premises by Lessee, for
purposes of Condemnation only, shall be considered the property of the Lessee
and Lessee shall be entitled to any and all compensation which is payable therefor.
In the event that this Lease is not terminated by reason of the Condemnation,
Lessor shall repair any damage to the Premises caused by such Condemnation.

15.           Brokerage Fees.

15.1         Additional Commission. In addition to the payments owed pursuant to
Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in
writing, Lessor agrees that: (a) if Lessee exercises any Option, (b) if Lessee
acquires from Lessor any rights to the Premises or other premises owned by
Lessor and located within the Project, (c) if Lessee remains in possession of
the Premises, with the consent of Lessor, after the expiration of this Lease,
or (d) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then, Lessor shall pay Brokers a fee in accordance
with the schedule of the Brokers in effect at the time of the execution of this
Lease.

15.2         Assumption of Obligations. Any buyer or transferee of Lessor’s interest
in this Lease shall be deemed to have assumed Lessor’s obligation hereunder.
Brokers shall be third party beneficiaries of the provisions of Paragraphs
1.10, 15, 22 and 31. If Lessor fails to pay to Brokers any amounts due as and
for brokerage fees pertaining to this Lease when due, then such amounts shall
accrue Interest. In addition, if Lessor fails to

 12
 

pay any amounts to Lessee’s
Broker when due, Lessee’s Broker may send written notice to Lessor and Lessee
of such failure and if Lessor fails to pay such amounts within 10 days after
said notice, Lessee shall pay said monies to its Broker and offset such amounts
against Rent. In addition, Lessee’s Broker shall be deemed to be a third party
beneficiary of any commission agreement entered into by and/or between Lessor
and Lessor’s Broker for the limited purpose of collecting any brokerage fee
owed.

15.3         Representations and
Indemnities of Broker Relationships. Lessee and Lessor each represent and warrant to the other that it has
had no dealings with any person, firm, broker or finder (other than the
Brokers, if any) in connection with this Lease, and that no one other than said
named Brokers is entitled to any commission or finder’s fee in connection herewith.
Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold
the other harmless from and against liability for compensation or charges which
may be claimed by any such unnamed broker, finder or other similar party by
reason of any dealings or actions of the indemnifying Party, including any
costs, expenses, attorneys’ fees reasonably incurred with respect thereto.

16.           Estoppel Certificates.

(a)           Each Party (as “Responding Party”)
shall within 20 days after written notice from the other Party
(the “Requesting Party”) execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current “Estoppel
Certificate” form published by the AIR Commercial Real Estate
Association, plus such additional information, confirmation and/or statements
as may be reasonably requested by the Requesting Party.

(b)           If the Responding Party shall fail to execute or deliver the Estoppel
Certificate within such 10 day period, the Requesting Party may execute an
Estoppel Certificate stating that: (i) the Lease is in full force and effect
without modification except as may be represented by the Requesting Party, (ii)
there are no uncured defaults in the Requesting Party’s performance, and (iii)
if Lessor is the Requesting Party, not more than one month’s rent has been paid
in advance. Prospective purchasers and encumbrancers may rely upon the
Requesting Party’s Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.

(c)           If Lessor desires to finance, refinance, or sell the Premises, or any
part thereof, Lessee and all Guarantors shall deliver to any potential lender
or purchaser designated by Lessor such financial statements as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee’s financial statements for the past 3 years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.

17.           Definition of Lessor. The term “Lessor”
as used herein shall mean the owner or owners at the time in
question of the fee title to the Premises, or, if this is a sublease, of the
Lessee’s interest in the prior lease. In the event of a transfer of Lessor’s
title or interest in the Premises or this Lease, Lessor shall deliver to the
transferee or assignee (in cash or by credit) any unused Security Deposit held
by Lessor. Except as provided in Paragraph 15, upon such transfer or assignment
and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants
under this Lease thereafter to be performed by the Lessor. Subject to the
foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove defined.

18.           Severability. The invalidity of any provision of this
Lease, as determined by a court of competent jurisdiction, shall in no way
affect the validity of any other provision hereof.

19.           Days. Unless otherwise specifically indicated to
the contrary, the word “days” as
used in this Lease shall mean and refer to calendar days.

20.           Limitation on Liability. The obligations of Lessor under this Lease
shall not constitute personal obligations of Lessor, or its partners, members,
directors, officers or shareholders, and Lessee shall look to the Premises, and
to no other assets of Lessor, for the satisfaction of any liability of Lessor
with respect to this Lease, and shall not seek recourse against Lessor’s
partners, members, directors, officers or shareholders, or any of their personal
assets for such satisfaction.

21.           Time of Essence. Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties under
this Lease.

22.           No Prior or Other Agreements;
Broker Disclaimer. This Lease
contains all agreements between the Parties with respect to any matter mentioned
herein, and no other prior or contemporaneous agreement or understanding shall
be effective. Lessor and Lessee each represents and warrants to the Brokers
that it has made, and is relying solely upon, its own investigation as to the
nature, quality, character and financial responsibility of the other Party to
this Lease and as to the use, nature, quality and character of the Premises.
Brokers have no responsibility with respect thereto or with respect to any
default or breach hereof by either Party. The liability (including court costs
and attorneys’ fees), of any Broker with respect to negotiation, execution,
delivery or performance by either Lessor or Lessee under this Lease or any
amendment or modification hereto shall be limited to an amount up to the fee
received by such Broker pursuant to this Lease; provided, however, that the
foregoing limitation on each Broker’s liability shall not be applicable to any
gross negligence or willful misconduct of such Broker.

23.           Notices.

23.1         Notice Requirements. All notices required or permitted by this
Lease or applicable law shall be in writing and may be delivered in person (by
hand or by courier) or may be sent by regular, certified or registered mail or
U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission, and shall be deemed sufficiently given if served in a manner
specified in this Paragraph 23. The addresses noted adjacent to a Party’s
signature on this Lease shall be that Party’s address for delivery or mailing
of notices. Either Party may by written notice to the other specify a different
address for notice, except that upon Lessee’s taking possession of the
Premises, the Premises shall constitute Lessee’s address for notice. A copy of
all notices to Lessor shall be concurrently transmitted to such party or parties
at such addresses as Lessor may from time to time hereafter designate in
writing.

23.2         Date of Notice. Any notice sent by registered or certified
mail, return receipt requested, shall be deemed given on the date of delivery shown
on the receipt card, or if no delivery date is shown, the postmark thereon. If
sent by regular mail the notice shall be deemed given 72 hours after the same
is addressed as required herein and mailed with postage prepaid. Notices
delivered by United States Express Mail or overnight courier that guarantee
next day delivery shall be deemed given 24 hours after delivery of the same to
the Postal Service or courier. Notices transmitted by facsimile transmission or
similar means shall be deemed delivered upon telephone confirmation of receipt
(confirmation report from fax machine is sufficient), provided a copy is also
delivered via delivery or mail. If notice is received on a Saturday, Sunday or
legal holiday, it shall be deemed received on the next business day.

24.           Waivers. No waiver by Lessor of the Default or Breach
of any term, covenant or condition hereof by Lessee, shall be deemed a waiver
of any other term, covenant or condition hereof, or of any subsequent Default
or Breach by Lessee of the same or of any other term, covenant or condition hereof.
Lessor’s consent to, or approval of, any act shall not be deemed to render
unnecessary the obtaining of Lessor’s consent to, or approval of, any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to enforce
the provision or provisions of this Lease requiring such consent. The
acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by
Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or
damages due Lessor, notwithstanding any qualifying statements or conditions
made by Lessee in connection therewith, which such statements and/or conditions
shall be of no force or effect whatsoever unless specifically agreed to in
writing by Lessor at or before the time of deposit of such payment.

25.           Disclosures Regarding The
Nature of a Real Estate Agency Relationship.

(a)           When entering into a discussion with a real estate agent regarding a
real estate transaction, a Lessor or Lessee should from the

 13
 

outset understand what type of
agency relationship or representation it has with the agent or agents in the
transaction. Lessor and Lessee acknowledge being advised by the Brokers in this
transaction, as follows:

(i)            Lessor’s Agent. A Lessor’s agent under a listing agreement
with the Lessor acts as the agent for the Lessor only. A Lessor’s agent or
subagent has the following affirmative obligations: To the Lessor: A
fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with
the Lessor. To the Lessee and the Lessor : (a) Diligent exercise of
reasonable skills and care in performance of the agent’s duties. (b) A duty of
honest and fair dealing and good faith. (c) A duty to disclose all facts known
to the agent materially affecting the value or desirability of the property
that are not known to, or within the diligent attention and observation of, the
Parties. An agent is not obligated to reveal to either Party any confidential
information obtained from the other Party which does not involve the
affirmative duties set forth above.

(ii)           Lessee’s Agent. An agent can agree to act as agent for the
Lessee only. In these situations, the agent is not the Lessor’s agent, even if
by agreement the agent may receive compensation for services rendered, either
in full or in part from the Lessor. An agent acting only for a Lessee has the
following affirmative obligations. To the Lessee: A fiduciary duty of
utmost care, integrity, honesty, and loyalty in dealings with the Lessee. To
the Lessee and the Lessor : (a) Diligent exercise of reasonable skills and
care in performance of the agent’s duties. (b) A duty of honest and fair
dealing and good faith. (c) A duty to disclose all facts known to the agent
materially affecting the value or desirability of the property that are not
known to, or within the diligent attention and observation of, the Parties. An
agent is not obligated to reveal to either Party any confidential information
obtained from the other Party which does not involve the affirmative duties set
forth above.

(iii)          Agent Representing Both
Lessor and Lessee. A real
estate agent, either acting directly or through one or more associate licenses,
can legally be the agent of both the Lessor and the Lessee in a transaction,
but only with the knowledge and consent of both the Lessor and the Lessee. In a
dual agency situation, the agent has the following affirmative obligations to
both the Lessor and the Lessee: (a) A fiduciary duty of utmost care, integrity,
honesty and loyalty in the dealings with either Lessor or the Lessee. (b) Other
duties to the Lessor and the Lessee as stated above in subparagraphs (i) or
(ii). In representing both Lessor and Lessee, the agent may not without the
express permission of the respective Party, disclose to the other Party that
the Lessor will accept rent in an amount less than that indicated in the
listing or that the Lessee is willing to pay a higher rent than that offered.
The above duties of the agent in a real estate transaction do not relieve a
Lessor or Lessee from the responsibility to protect their own interests. Lessor
and Lessee should carefully read all agreements to assure that they adequately
express their understanding of the transaction. A real estate agent is a person
qualified to advise about real estate. If legal or tax advice is desired,
consult a competent professional.

(b)           Brokers have no responsibility with respect to any Default or Breach
hereof by either Party. The Parties agree that no lawsuit or other legal
proceeding involving any breach of duty, error or omission relating to this
Lease may be brought against Broker more than one year after the Start Date and
that the liability (including court costs and attorneys’ fees), of any Broker
with respect to any such lawsuit and/or legal proceeding shall not exceed the
fee received by such Broker pursuant to this Lease; provided, however, that the
foregoing limitation on each Broker’s liability shall not be applicable to any
gross negligence or willful misconduct of such Broker.

(c)           Buyer and Seller agree to identify to Brokers as “Confidential” any
communication or information given Brokers that is considered by such Party to
be confidential.

26.           No Right To Holdover. Lessee has no right to retain possession of
the Premises or any part thereof beyond the expiration or termination of this
Lease. In the event that Lessee holds over, then the Base Rent shall be
increased to 150% of the Base Rent applicable immediately preceding the expiration
or termination. Nothing contained herein shall be construed as consent by
Lessor to any holding over by Lessee.

27.           Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.

28.           Covenants and Conditions;
Construction of Agreement.
All provisions of this Lease to be observed or performed by Lessee are both covenants
and conditions. In construing this Lease, all headings and titles are for the
convenience of the Parties only and shall not be considered a part of this
Lease. Whenever required by the context, the singular shall include the plural
and vice versa. This Lease shall not be construed as if prepared by one of the
Parties, but rather according to its fair meaning as a whole, as if both
Parties had prepared it.

29.           Binding Effect; Choice of Law. This Lease shall be binding upon the parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.

30.           Subordination; Attornment;
Non-Disturbance.

30.1         Subordination. This Lease and any Option granted hereby
shall be subject and subordinate to any ground lease, mortgage, deed of trust,
or other hypothecation or security device (collectively, “Security Device”), now or hereafter placed
upon the Premises, to any and all advances made on the security thereof, and to
all renewals, modifications, and extensions thereof. Lessee agrees that the
holders of any such Security Devices (in this Lease together referred to as “Lender”) shall have no liability or
obligation to perform any of the obligations of Lessor under this Lease. Any Lender
may elect to have this Lease and/or any Option granted hereby superior to the
lien of its Security Device by giving written notice thereof to Lessee,
whereupon this Lease and such Options shall be deemed prior to such Security
Device, notwithstanding the relative dates of the documentation or recordation
thereof.

30.2         Attornment. In the event that Lessor transfers title to
the Premises, or the Premises are acquired by another upon the foreclosure or
termination of a Security Device to which this Lease is subordinated (i) Lessee
shall, subject to the non-disturbance provisions of Paragraph 30.3, attorn to
such new owner, and upon request, enter into a new lease, containing all of the
terms and provisions of this Lease, with such new owner for the remainder of
the term hereof, or, at the election of the new owner, this Lease will
automatically become a new lease between Lessee and such new owner, and (ii)
Lessor shall thereafter be relieved of any further obligations hereunder and
such new owner shall assume all of Lessor’s obligations, except that such new
owner shall not: (a) be liable for any act or omission of any prior lessor or
with respect to events occurring prior to acquisition of ownership; (b) be
subject to any offsets or defenses which Lessee might have against any prior
lessor, (c) be bound by prepayment of more than one month’s rent, or (d) be
liable for the return of any security deposit paid to any prior lessor.

30.3         Non-Disturbance. With respect to Security Devices entered
into by Lessor after the execution of this Lease, Lessee’s subordination of
this Lease shall be subject to receiving a commercially reasonable
non-disturbance agreement (a “Non-Disturbance
Agreement” ) from the Lender which Non-Disturbance Agreement
provides that Lessee’s possession of the Premises, and this Lease, including
any options to extend the term hereof, will not be disturbed so long as Lessee
is not in Breach hereof and attorns to the record owner of the Premises.
Further, within 60 days after the execution of this Lease, Lessor shall use its
commercially reasonable efforts to obtain a Non-Disturbance Agreement from the
holder of any pre-existing or future Security Device which is secured by the
Premises. In the event that Lessor is unable to provide the Non-Disturbance Agreement
within said 60 days, then Lessee may, at Lessee’s option, directly contact
Lender and attempt to negotiate for the execution and delivery of a
Non-Disturbance Agreement.

30.4         Self-Executing. The agreements contained in this Paragraph
30 shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with
a sale, financing or refinancing of the Premises, Lessee and Lessor shall
execute such further writings as may be reasonably required to separately
document any subordination, attornment and/or Non-Disturbance Agreement
provided for herein.

31.           Attorneys’ Fees. If any Party or Broker brings an action or
proceeding involving the Premises whether founded in tort, contract or equity,
or

 14
 

to declare rights hereunder,
the Prevailing Party (as hereafter defined) in any such proceeding, action, or
appeal thereon, shall be entitled to reasonable attorneys’ fees. Such fees may
be awarded in the same suit or recovered in a separate suit, whether or not
such action or proceeding is pursued to decision or judgment. The term, “Prevailing Party” shall include, without
limitation, a Party or Broker who substantially obtains or defeats the relief sought,
as the case may be, whether by compromise, settlement, judgment, or the
abandonment by the other Party or Broker of its claim or defense. The attorneys’
fees award shall not be computed in accordance with any court fee schedule, but
shall be such as to fully reimburse all attorneys’ fees reasonably incurred. In
addition, Lessor shall be entitled to attorneys’ fees, costs and expenses
incurred in the preparation and service of notices of Default and consultations
in connection therewith, whether or not a legal action is subsequently
commenced in connection with such Default or resulting Breach ($200 is a
reasonable minimum per occurrence for such services and consultation).

32.           Lessor’s Access; Showing
Premises; Repairs. Except for non-Bank hours,  Lessor and Lessor’s agents shall have the right to enter the Premises at
any time, in the case of an emergency, and otherwise at reasonable times after
reasonable prior notice for the purpose of showing the same to prospective
purchasers, lenders, or tenants, and making such alterations, repairs,
improvements or additions to the Premises as Lessor may deem necessary or
desirable and the erecting, using and maintaining of utilities, services, pipes
and conduits through the Premises and/or other premises as long as there is no
material adverse effect on Lessee’s use of the Premises. All such activities
shall be without abatement of rent or liability to Lessee.

33.           Auctions. Lessee shall not conduct, nor permit to be
conducted, any auction upon the Premises without Lessor’s prior written
consent. Lessor shall not be obligated to exercise any standard of reasonableness
in determining whether to permit an auction.

34.           Signs. Lessor may place on the Premises ordinary “For
Sale” signs at any time and ordinary “For Lease” signs during the last 6 months
of the term hereof. Except for ordinary “For Sublease” signs which may be
placed only on the Premises, Lessee shall not place any sign upon the Project without
Lessor’s prior written consent. All signs must comply with all Applicable
Requirements. (See Paragraph 54)

35.           Termination; Merger. Unless specifically stated otherwise in
writing by Lessor, the voluntary or other surrender of this Lease by Lessee,
the mutual termination or cancellation hereof, or a termination hereof by
Lessor for Breach by Lessee, shall automatically terminate any sublease or
lesser estate in the Premises; provided, however, that Lessor may elect to
continue any one or all existing subtenancies. Lessor’s failure within 10 days following
any such event to elect to the contrary by written notice to the holder of any
such lesser interest, shall constitute Lessor’s election to have such event
constitute the termination of such interest.

36.           Consents. Except as otherwise provided herein,
wherever in this Lease the consent of a Party is required to an act by or for
the other Party, such consent shall not be unreasonably withheld or delayed.
Lessor’s actual reasonable costs and expenses (including but not limited to
architects’, attorneys’, engineers’ and other consultants’ fees) incurred in
the consideration of, or response to, a request by Lessee for any Lessor
consent, including but not limited to consents to an assignment, a subletting
or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefor. Lessor’s consent to any
act, assignment or subletting shall not constitute an acknowledgment that no
Default or Breach by Lessee of this Lease exists, nor shall such consent be
deemed a waiver of any then existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such consent.
The failure to specify herein any particular condition to Lessor’s consent
shall not preclude the imposition by Lessor at the time of consent of such
further or other conditions as are then reasonable with reference to the
particular matter for which consent is being given. In the event that either
Party disagrees with any determination made by the other hereunder and
reasonably requests the reasons for such determination, the determining party
shall furnish its reasons in writing and in reasonable detail within 10
business days following such request.

37.           Guarantor.

37.1         Execution. The Guarantors, if any, shall each execute a
guaranty in the form most recently published by the AIR Commercial Real Estate
Association.

37.2         Default. It shall constitute a Default of the Lessee
if any Guarantor fails or refuses, upon request to provide: (a) evidence of the
execution of the guaranty, including the authority of the party signing on
Guarantor’s behalf to obligate Guarantor, and in the case of a corporate Guarantor,
a certified copy of a resolution of its board of directors authorizing the
making of such guaranty, (b) current financial statements, (c) an Estoppel
Certificate, or (d) written confirmation that the guaranty is still in effect.

38.           Quiet Possession. Subject to payment by Lessee of the Rent and
performance of all of the covenants, conditions and provisions on Lessee’s part
to be observed and performed under this Lease, Lessee shall have quiet
possession and quiet enjoyment of the Premises during the term hereof.

39.           Options. If Lessee is granted an option, as defined
below, then the following provisions shall apply.

39.1         Definition. “Option” shall
mean: (a) the right to extend the term of or renew this Lease or to extend or
renew any lease that Lessee has on other property of Lessor; (b) the right of
first refusal or first offer to lease either the Premises or other property of
Lessor; (c) the right to purchase or the right of first refusal to purchase the
Premises or other property of Lessor.

39.2         Options Personal To Original
Lessee. Any Option granted to
Lessee in this Lease is personal to the original Lessee, and cannot be assigned
or exercised by anyone other than said original Lessee unless the new Lessee is a financial/securities
institution, and only while the
original Lessee is in full possession of the Premises and, if requested by
Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning
or subletting.

39.3         Multiple Options. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later Option cannot be exercised
unless the prior Options have been validly exercised.

39.4         Effect of Default on Options.

(a)           Lessee shall have no right to exercise an Option: (i) during the period
commencing with the giving of any notice of Default and continuing until said
Default is cured, (ii) during the period of time any Rent is unpaid (without
regard to whether notice thereof is given Lessee), (iii) during the time Lessee
is in Breach of this Lease, or (iv) in the event that Lessee has been given 3
or more notices of separate Default, whether or not the Defaults are cured,
during the 12 month period immediately preceding the exercise of the Option.

(b)           The period of time within which an Option may be exercised shall not be
extended or enlarged by reason of Lessee’s inability to exercise an Option
because of the provisions of Paragraph 39.4(a).

(c)           An Option shall terminate and be of no further force or effect,
notwithstanding Lessee’s due and timely exercise of the Option, if, after such
exercise and prior to the commencement of the extended term or completion of
the purchase, (i) Lessee fails to pay Rent for a period of 30 days after such
Rent becomes due (without any necessity of Lessor to give notice thereof), or
(ii) if Lessee commits a Breach of this Lease.

40.           Security Measures. Lessee hereby acknowledges that the Rent
payable to Lessor hereunder does not include the cost of guard service or other
security measures, and that Lessor shall have no obligation whatsoever to
provide same. Lessee assumes all responsibility for the protection of the
Premises, Lessee, its agents and invitees and their property from the acts of
third parties.

41.           Reservations. So long as any such action does not materially affect access to Lessee’s
business  Lessor reserves the right: (i) to grant,
without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, (ii) to cause the recordation of parcel
maps and restrictions, and (iii) to create and/or install new utility raceways,
so long as such easements, rights, dedications, maps, restrictions, and utility
raceways do not unreasonably interfere with the use of the Premises by Lessee.
Lessee agrees to sign any documents reasonably

 15
 

requested by Lessor to
effectuate such rights.

42.           Performance Under Protest.. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment “under protest” and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay. A Party who
does not initiate suit for the recovery of sums paid “under protest” within 6
months shall be deemed to have waived its right to protest such payment.

43.           Authority; Multiple Parties;
Execution.

(a)           If either Party hereto is a corporation, trust, limited liability
company, partnership, or similar entity, each individual executing this Lease
on behalf of such entity represents and warrants that he or she is duly
authorized to execute and deliver this Lease on its behalf. Each Party shall,
within 30 days after request, deliver to the other Party satisfactory evidence
of such authority.

(b)           If this Lease is executed by more than one person or entity as “Lessee”,
each such person or entity shall be jointly and severally liable hereunder. It
is agreed that any one of the named Lessees shall be empowered to execute any
amendment to this Lease, or other document ancillary thereto and bind all of
the named Lessees, and Lessor may rely on the same as if all of the named
Lessees had executed such document.

(c)           This Lease may be executed by the Parties in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.

44.           Conflict. Any conflict between the printed provisions
of this Lease and the typewritten or handwritten provisions shall be controlled
by the typewritten or handwritten provisions.

45.           Offer. Preparation of this Lease by either party or
their agent and submission of same to the other Party shall not be deemed an
offer to lease to the other Party. This Lease is not intended to be binding
until executed and delivered by all Parties hereto.

46.           Amendments. This Lease may be modified only in writing,
signed by the Parties in interest at the time of the modification. As long as
they do not materially change Lessee’s obligations hereunder, Lessee agrees to
make such reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.

47.           Waiver of Jury Trial. THE
PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
INVOLVING THE PROPERTY OR ARISING OUT OF THIS AGREEMENT.

48.           Mediation and Arbitration of
Disputes. An Addendum
requiring the Mediation and/or the Arbitration of all disputes between the
Parties and/or Brokers arising out of this Lease x is o is
not attached to this Lease.

49.           Americans with Disabilities
Act. Since compliance with
the Americans with Disabilities Act (ADA) is dependent upon Lessee’s specific
use of the Premises, Lessor makes no warranty or representation as to whether
or not the Premises comply with ADA or any similar legislation. In the event
that Lessee’s use of the Premises requires modifications or additions to the
Premises in order to be in ADA compliance, Lessee agrees to make any such
necessary modifications and/or additions at Lessee’s expense.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH
TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW
THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT
THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES. 

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

1.             SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX
CONSEQUENCES OF THIS LEASE.

2.             RETAIN
APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE
PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE
PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL
INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE
AMERICANS WITH DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE’S
INTENDED USE.

WARNING: IF THE PREMISES ARE
LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY
NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES
ARE LOCATED.

The parties hereto have
executed this Lease at the place and on the dates specified above their
respective signatures.

	
  Executed at:

  	
   

  	
   

  	
  Executed at:

  	
   

  
	
  On:

  	
   

  	
   

  	
  On:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By LESSOR:

  	
   

  	
  By LESSEE:

  	
   

  
	
  AMJ PROPERTIES, LLC

  	
   

  	
  1ST PACIFIC BANK OF CALIFORNIA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
  /s/ Larry A. Prosi

  
	
  Name Printed:

  	
   

  	
   

  	
  Name Printed:

  	
  Larry A. Prosi

  
	
  Title:

  	
   

  	
   

  	
  Title: 

  	
  Exec. Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name Printed:

  	
   

  	
   

  	
  Name Printed:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Telephone:

  	
  (       )

  	
   

  	
   

  	
  Telephone:

  	
  (       )

  	
   

  
	
  Facsimile:

  	
  (       )

  	
   

  	
   

  	
  Facsimile:

  	
  (       )

  	
   

  
	
  Federal ID No.

  	
   

  	
   

  	
  Federal ID No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BROKER:

  	
   

  	
   

  	
  BROKER:

  	
   

  
	
  JOHN BURNHAM REAL ESTATE SERVICES, INC. A

  	
   

  	
  IRVING HUGHES

  
	
  Delaware corporation AKA Burnham Real Estate

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Attn:

  	
  Kyle Clark

  	
   

  	
  Attn:

  	
  Shaun Burnett

  
	
  Title:

  	
  Vice President

  	
   

  	
  Title:

  	
  Sr. Vice President

  
																														

 

 16
 

 

	
  Address:

  	
  110 West A St.,
  Suite 900

  	
   

  	
  Address:

  	
  550 West C St., Suite 2000

  
	
  San Diego, CA
  92101

  	
   

  	
  San Diego, CA 92101

  
	
  Telephone:

  	
  (619) 525-2751

  	
   

  	
  Telephone:

  	
  (619) 238-4393

  
	
  Facsimile:

  	
  (858) 334-6855

  	
   

  	
  Facsimile:

  	
  (619) 238-1025

  
	
  Email:

  	
  clark@burnhamrealestate.com

  	
   

  	
  Email:

  	
  shaunb@irvinghughes.com

  
	
  Federal ID No.

  	
   

  	
   

  	
  Federal ID No.

  	
   

  
													

 

These forms
are often modified to meet changing requirements of law and needs of the
industry. Always write or call to make sure you are utilizing the most current
form: AIR COMMERCIAL REAL ESTATE ASSOCIATION, 700 South Flower Street, Suite
600, Los Angeles, CA 90017. (213) 687-8777.

©Copyright
1999 By AIR Commercial Real Estate Association.

All rights
reserved.

No part of these works may be reproduced in any form without
permission in writing.

 17

ADDENDUM

	
  Date:

  	
  August 7, 2006

  
	
   

  	
   

  
	
  By and Between

  	
  (Lessor)

  	
  AMJ PROPERTIES, LLC

  
	
   

  	
  (Lessee)

  	
  1ST PACIFIC BANK OF CALIFORNIA

  
	
   

  	
   

  
	
  Address of Premises:

  	
  343 E MAIN STREET

  
	
   

  	
  EL CAJON, CA 92020

  
					

 

50. Base Rent: The
Base Rent shall be adjusted upward on each anniversary date by three percent
(3%) per annum.

51. Tenant Improvements: Lessee
shall, at its sole and expense fund all monies necessary to complete its Tenant
Improvements over and above Lessor’s allowance of ten dollars ($10) per
rentable square foot.

52. Construction: Lessee
shall competitively bid the Tenant Improvement construction with mutually
approved contractors, including Lessor’s company and select the contractor with
Lessor’s reasonable consent. Lessor shall not impose any charge for profit,
overhead or supervision in connection with the construction of the Tenant
Improvements.

53. Architect: Lessee
shall have the right to engage its own architect/space planner (and engineers/consultants),
subject to Lessor’s reasonable approval.

54. Signage: Lessee
shall have the right to install building top signage on the face of building on
Main Street and eyebrow signage on the Avocado side of the building. Lessor and
Lessee shall mutually agree to the design and location of such signage. Lessee
shall also have the right to install monument signage on the top portion of the
monument, building standard lobby directory, and suite identification signage.

55. Expansion Option: Lessee
shall have the right of first refusal to expand into up to an additional one thousand
(1,000) rentable square feet within the building during its first forty-eight
months of initial tenancy. Lessor shall give Lessee written notice of available
space and Lessee shall give Lessor a written notice of interest within ten (10)
business days of receipt of Lessor intent to lease.

56. Renewal Option: Lessee
shall have three (3) five (5) year Renewal Options at Fair Market Rent by providing
at least six (6) months prior written notice before the effective date of each
Renewal Option Term. Fair Market Rent shall be defined to include the terms and
conditions that would be offered to a non-renewing lessee for comparable office
space in the El Cajon area to include typical tenant improvements, rental
rates, operation expense base year, rent increases and commissions. The Fair
Market Rent shall also consider the credit of Lessee and size of Premises.

57. Subleasing: Lessee
shall have the right to sublease or assign any portion of the Premises to any
related entity, subsidiary or successor, including without limitation any
surviving entity resulting from a merger, acquisition or other similar
transaction (“Affiliate”) without Lessor’s consent, but by providing notice to Lessor.
Such sublease or assignment to an Affiliate shall not relieve Lessee from
liability under the Lease. An assignment or subletting to any entity other than
an Affiliate shall require Lessor’s consent, which shall not be unreasonably
withheld, conditioned or delayed.

58. Building Maintenance: During
the Lease Term and any Renewal Option periods, Lessor shall maintain and replace
all structural walls, foundations, concrete sub flooring, structural elements
of the roof and underground utilities (“Structural Elements”) of the building
and site structures at Lessor’s sole cost, which cost shall not be included in
the Operating Expenses. Any capital replacement cost for any non-structural

 1
 

component shall be paid by Lessor and amortized over
the useful life of such replacement and included as an Operating Expense.

59. Building Condition: Lessor
shall warrant that the roof, existing, windows and seals, structural components,
and all electrical and plumbing systems of the building and Premises are in
good working condition before Lessee’s funds and its Tenant Improvement
Allowance are spent. Lessor shall also deliver the building and Premises
(including the parking areas) in a condition that meets all current codes and
conditions including fire and life safety, Americans With Disabilities Act and
Title 24 requirements before Lessee’s funds and its Tenant Improvement
Allowance are spent.

60. Monitoring Wells. Lessor
has informed Lessee that the site was used previously as a service station, and
that site remediation work will incorporate the use of multiple monitoring
wells that will be installed and monitored by the remediation contractor during
the Lease Term. All costs relating to the monitoring wells shall be borne
solely by Lessor.

61. Mediation. Except
as provided herein, no civil action with respect to any dispute, claim or
controversy arising out of or relating to this Agreement may be commenced until
the matter has been submitted to JAMS for mediation. Either party may commence
mediation by providing to JAMS and the other party a written request for
mediation, setting forth the subject of the dispute and the relief requested.
The parties will cooperate with JAMS and with one another in selecting a
mediator from JAMS panel of neutrals, and in scheduling the mediation
proceedings. The parties covenant that they will participate in the mediation
in good faith, and that they will share equally in its costs. All offers,
promises, conduct and statements, whether oral or written, made in the course
of the mediation by any of the parties, their agents, employees, experts and attorneys,
and by the mediator and any JAMS employees, are confidential, privileged and
inadmissible for any purpose, including impeachment, in any litigation or other
proceeding involving the parties, provided that evidence that is otherwise
admissible or discoverable shall not be rendered inadmissible or
non-discoverable as a result of its use in the mediation. Either party may seek
equitable relief prior to the mediation to preserve the status quo pending the
completion of that process. Except for such an action to obtain equitable
relief, neither party may commence a civil action with respect to the matters
submitted to mediation until after the completion of the initial mediation
session, or 45 days after the date of filing the written request for mediation,
whichever occurs first. Mediation may continue after the commencement of a
civil action, if the parties so desire. The provisions of this Clause may be
enforced by any Court of competent jurisdiction, and the party seeking
enforcement shall be entitled to an award of all costs, fees and expenses,
including attorneys’ fees, to be paid by the party against whom enforcement is
ordered.

 2

EXHIBIT A

FLOOR
PLAN

EXHIBIT B

SITE
PLAN

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