<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT to SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1995. Commission File Number 0-11046
SC BANCORP
(Exact name of registrant as specified in its charter)
California 95-3585586
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3800 E. La Palma Ave., Anaheim, California 92807-1798
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 238-3110
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- -------------------
Common Stock American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
YES. [X] NO. [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K [x].
There were 7,472,805 shares of common stock for the registrant issued
and outstanding as of March 25, 1996. The aggregate market value of
the voting stock, based on the closing price of the stock on the
American Stock Exchange on March 25, 1996, held by nonaffiliates of the
registrant was approximately $44,451,062.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant's Definitive Proxy Statement for the Annual Meeting of
Stockholders, which will be filed within 120 days after the fiscal
year ended December 31, 1995, is incorporated by reference into
Part III of this Form 10-K.
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SC BANCORP
FORM 10-K
INDEX
PAGES
PART I
ITEM 1. Business 1
ITEM 2. Properties 24
ITEM 3. Legal Proceedings 25
ITEM 4. Submission of Matters to a Vote of Security Holders 25
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters 25
ITEM 6. Selected Financial Data 26
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 27
ITEM 8. Financial Statements and Supplementary Data 31
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 54
PART III
ITEM 10. Directors and Executive Officers of the Registrant 54
ITEM 11. Executive Compensation 54
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management 54
ITEM 13. Certain Relationships and Related Transactions 54
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 54
Signatures 57
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PART I.
ITEM 1. BUSINESS
SC Bancorp is a bank holding company incorporated in California on February 9,
1981, and registered under the Bank Holding Company Act of 1956, as amended
("BHCA"). SC Bancorp conducts operations through its sole subsidiary, Southern
California Bank, a California state-chartered commercial bank. The Company's
executive offices are located at 3800 East La Palma Avenue, Anaheim, California
92807-1798.
References herein to the "Company" are to SC Bancorp and Southern California
Bank on a consolidated basis. References to "SC Bancorp" are to SC Bancorp on
an unconsolidated basis; and references to the "Bank" are to Southern California
Bank.
Southern California Bank
Southern California Bank was formed in 1981 through the merger of the Bank of
Downey and the National Bank of Whittier, both founded in 1964. The Bank
provides general commercial banking services to individuals and to small to
medium-sized businesses in its local service areas through its branch network,
which as of December 31, 1995, consisted of 17 branches, 4 of which include
corporate banking centers. The Bank concentrates on marketing to and serving
the needs of individuals and businesses in southeastern Los Angeles County, and
in Orange and San Diego counties.
The Bank's primary credit focus is to serve professionals and middle-market
companies, including manufacturers and service providers with sales of up to $50
million. Current commercial lending activities consist primarily of medium-term
commercial real estate loans secured by commercial properties, working capital
loans, and accounts receivable financing. The Bank's consumer products are
tailored to serve the financing needs of its retail customers, and the
executives and employees of its business clients. Consumer loans consist
primarily of home equity lines of credit, personal lines of credit to high net
worth individuals, and vehicle loans.
The Bank accepts deposits mostly from small to medium-sized businesses and their
employees, high net worth individuals, and other consumers. The Bank's deposit
accounts are insured by the Federal Deposit Insurance Corporation ("FDIC") to
the extent permitted by law. The FDIC is the Bank's principal regulator.
In recent years, the Bank's service area has experienced adverse economic
conditions. Southern California was hit particularly hard by cutbacks in the
defense and aerospace industries, reductions in the growth of international
trade, employment losses due to corporate restructurings and declines in real
estate values. These circumstances have affected some borrowers' ability to
repay loans.
As part of the Company's strategic focus on growth in the Orange County market,
the Company acquired substantially all of the Corporate and Private Banking
Division of Independence One Bank of California, F.S.B. ("IOBC"), during the
second quarter of 1995. The Company also acquired two full-service branch
locations: one in southern Orange County and the other in northern San
Diego County. Later, during the third quarter of 1995, management implemented a
restructuring plan (the "1995 Restructuring") to improve the efficiency and
financial performance of the Bank. The Bank recorded approximately $1.7 million
of losses and other charges in conjunction with the 1995 Restructuring.
During the second and fourth quarters of 1993, the Company acquired certain cash
assets and deposits of American Commerce National Bank from the FDIC, and a
branch centrally located in Downey, California from Community Bank. In
conjunction with these acquisitions, management initiated a consolidation of the
branch network. In the third quarter of 1993, the Company recorded nonrecurring
expenses of approximately $944 thousand for severance expenses, lease
terminations and write-offs of other assets as part of a restructuring plan
(the "1993 Restructuring").
Competition
The banking and financial services business in California generally, and in the
Bank's market areas specifically, is highly competitive. The increasingly
competitive environment is a result primarily of changes in regulation, changes
in technology and product delivery systems, and the accelerating pace of
consolidation among financial services providers. The Bank competes for loans
and deposits and for financial services customers with other commercial banks,
savings and loan associations, securities and brokerage companies, mortgage
companies, insurance companies, finance companies, money market funds, credit
unions and other nonbank financial service providers. Many of these competitors
are much larger in total assets and capitalization, have greater access to
capital markets and offer a broader array of financial services than the Bank.
In order to compete with the other financial services providers, the Bank
principally relies upon local promotional activities and personal relationships
established by officers,
1
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Part I. Item 1 (continued)
directors and employees with its customers, and specialized services tailored to
meet its customers' needs. In those instances where the Bank is unable to
accommodate a customer's needs, the Bank will arrange for those services to be
provided by its correspondents.
Divestitures
During the fourth quarter of 1995, the Company signed agreements to sell its
Signal Hill and City of Industry branches to other financial institutions. The
Company also elected to consolidate its Yorba Linda branch into its Tustin/
La Palma office. These transactions were completed during the first quarter of
1996.
Employees
At December 31, 1995, the Company had 226 full-time equivalent employees, up
from 220 at year-end 1994. Management believes that its relations with its
employees are satisfactory.
Effect Of Governmental Policies And Recent Legislation
Banking is a business that depends on rate differentials. In general, the
difference between the interest rate paid by the company on its deposits and its
other borrowings and the interest rate received by the Company on loans extended
to its customers and securities held in the Company's portfolio, comprise the
major portion of the Company's earnings. These rates are highly sensitive to
many factors that are beyond the control of the Company. Accordingly, the
earnings and growth of the company are subject to the influence of local,
domestic and foreign economic conditions, including recession, unemployment and
inflation.
The commercial banking business is not only affected by general economic
conditions, but is also influenced by the monetary and fiscal policies of the
Federal government and the policies of regulatory agencies, particularly the
Federal Reserve Board. The Federal Reserve Board implements national monetary
policies (with objectives such as curbing inflation and combating recession) by
its open-market operations in United States Government securities, by adjusting
the required level of reserves for financial intermediaries subject to its
reserve requirements and by varying the discount rates applicable to borrowings
by depository institutions. The actions of the Federal Reserve Board in these
areas influence the growth of bank loans, investments and deposits and also
affect interest rates charged on loans and paid on deposits. The nature and
impact of any future changes in monetary policies cannot be predicted.
From time to time, legislation is enacted which has the effect of increasing the
cost of doing business, limiting or expanding permissible activities or
affecting the competitive balance between banks and other financial
institutions. Proposals to change the laws and regulations governing the
operations and taxation of banks, bank holding companies and other financial
institutions are frequently made in Congress, in the California legislature and
before various bank regulatory and other professional agencies. The Financial
Services Modernization Act recently proposed in the House of Representatives
would generally permit banks to expand activities further into the areas of
securities and insurance, and would reduce the regulatory and paperwork burden
that currently affects banks. Additionally, the proposed legislation would
force the conversion of savings and loan holding companies into bank holding
companies, although unitary savings and loan holding companies authorized to
engage in activities as of January 1, 1995 would be exempted. Similar
legislation has also been proposed in the Senate. In addition, legislation was
recently introduced in Congress that would merge the deposit insurance funds
applicable to commercial banks and savings associations and impose a one-time
assessment on savings associations to recapitalize the deposit insurance fund
applicable to savings associations. The likelihood of any major legislative
changes and the impact such changes might have on the Company are impossible to
predict. See Item 1, Supervision and Regulation, below.
Supervision And Regulation
Bank holding companies and banks are extensively regulated under both federal
and state law. Set forth below is a summary description of certain laws which
relate to the regulation of SC Bancorp and the Bank. The description does not
purport to be complete and is qualified in its entirety by reference to the
applicable laws and regulations.
SC Bancorp
SC Bancorp, as a registered bank holding company, is subject to regulation under
the BHCA. SC Bancorp is required to file with the Federal Reserve Board
quarterly and annual reports and such additional information as the Federal
Reserve Board may require pursuant to the BHCA. The Federal Reserve Board may
conduct examinations of SC Bancorp and its subsidiaries.
2
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Part I. Item 1 (continued)
The Federal Reserve Board may require that SC Bancorp terminate an activity or
terminate control of or liquidate or divest certain subsidiaries or affiliates
when the Federal Reserve Board believes the activity or the control of the
subsidiary or affiliate constitutes a significant risk to the financial safety,
soundness or stability of any of its banking subsidiaries. The Federal Reserve
Board also has the authority to regulate provisions of certain bank holding
company debt, including authority to impose interest ceilings and reserve
requirements on such debt. Under certain circumstances, SC Bancorp must file
written notice and obtain approval from the Federal Reserve Board prior to
purchasing or redeeming its equity securities.
Under the BHCA and regulations adopted by the Federal Reserve Board, a bank
holding company and its nonbanking subsidiaries are prohibited from requiring
certain tie-in arrangements in connection with any extension of credit, lease or
sale of property or furnishing of services. Further, SC Bancorp is required by
the Federal Reserve Board to maintain certain levels of capital. See Item 1,
Supervision and Regulation-Capital Standards, below.
SC Bancorp is required to obtain the prior approval of the Federal Reserve Board
for the acquisition of more than 5% of the outstanding shares of any class of
voting securities or substantially all of the assets of any bank or bank holding
company. Prior approval of the Federal Reserve Board is also required for the
merger or consolidation of SC Bancorp and another bank holding company.
SC Bancorp is prohibited by the BHCA, except in certain statutorily prescribed
instances, from acquiring direct or indirect ownership or control of more than
5% of the outstanding voting shares of any company that is not a bank or bank
holding company and from engaging directly or indirectly in activities other
than those of banking, managing or controlling banks or furnishing services to
its subsidiaries. However, SC Bancorp, subject to the prior approval of the
Federal Reserve Board, may engage in any, or acquire shares of companies engaged
in, activities that are deemed by the Federal Reserve Board to be so closely
related to banking or managing or controlling banks as to be a proper incident
thereto. In making any such determination, the Federal Reserve Board is
required to consider whether the performance of such activities by SC Bancorp or
an affiliate can reasonably be expected to produce benefits to the public, such
as greater convenience, increased competition or gains in efficiency, that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest or unsound banking
practices. The Federal Reserve Board is also empowered to differentiate between
activities commenced DE NOVO and activities commenced by acquisition, in whole
or in part, of a going concern.
Under Federal Reserve Board regulations, a bank holding company is required to
serve as a source of financial and managerial strength to its subsidiary banks
and may not conduct its operations in an unsafe or unsound manner. In addition,
it is the Federal Reserve Board's policy that in serving as a source of strength
to its subsidiary banks, a bank holding company should stand ready to use
available resources to provide adequate capital funds to its subsidiary banks
during periods of financial stress or adversity and should maintain the
financial flexibility and capital-raising capacity to obtain additional
resources for assisting its subsidiary banks. A bank holding company's failure
to meet its obligations to serve as a source of strength to its subsidiary banks
will generally be considered by the Federal Reserve Board to be an unsafe and
unsound banking practice or a violation of the Federal Reserve Board's
regulations or both. This doctrine has become known as the "source of strength"
doctrine. Although the United States Court of Appeals for the Fifth Circuit
found the Federal Reserve Board's source of strength doctrine invalid in 1990,
stating that the Federal Reserve Board had no authority to assert the doctrine
under the BHCA, the decision, which is not binding on federal courts outside the
Fifth Circuit, was recently reversed by the United States Supreme Court on
procedural grounds. The validity of the source of strength doctrine is likely
to continue to be the subject of litigation until definitively resolved by the
courts or by Congress.
SC Bancorp is also a bank holding company within the meaning of Section 3700 of
the California Financial Code. As such, SC Bancorp and its subsidiaries are
subject to examination by, and may be required to file reports with, the
California State Banking Department.
Finally, SC Bancorp is subject to the periodic reporting requirements of the
Securities Exchange Act of 1934, as amended, including but not limited to,
filing annual, quarterly and other current reports with the Securities and
Exchange Commission.
The Bank
The Bank, as a California state chartered bank, is subject to primary
supervision, periodic examination and regulation by the California
Superintendent of Banks ("Superintendent") and the FDIC. If, as a result of an
examination of a bank, the FDIC should determine that the financial condition,
capital resources, asset quality, earnings prospects, management, liquidity or
other aspects of the bank's operations are unsatisfactory or that the bank or
its management is violating or has violated any law or regulation,
3
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Part I. Item 1 (continued)
various remedies are available to the FDIC. Such remedies include the power to
enjoin "unsafe or unsound" practices, to require affirmative action to correct
any conditions resulting from any violation or practice, to issue an
administrative order that can be judicially enforced, to direct an increase in
capital, to restrict the growth of the bank, to assess civil monetary penalties,
to remove officers and directors and ultimately to terminate a bank's deposit
insurance, which for a California state-chartered bank would result in a
revocation of the bank's charter. The Superintendent has many of the same
remedial powers.
The deposits of the Bank are insured by the FDIC in the manner and to the extent
provided by law. For this protection, the Bank pays a semiannual statutory
assessment. See Item 1, Supervision and Regulation - Premiums for Deposit
Insurance, below. Although the Bank is not a member of the Federal Reserve
System, it is nevertheless subject to certain regulations of the Federal Reserve
Board.
Various requirements and restrictions under the laws of the State of California
and the United States affect the operations of the Bank. State and federal
statutes and regulations relate to many aspects of the Bank's operations,
including reserves against deposits, interest rates payable on deposits, loans,
investments, mergers and acquisitions, borrowings, dividends, locations of
branch offices and capital requirements. Further, the Bank is required to
maintain certain levels of capital. See Item 1, Supervision and
Regulation - Capital Standards, below.
Restrictions On Transfers Of Funds To SC Bancorp By The Bank
SC Bancorp is a legal entity separate and distinct from the Bank. SC Bancorp's
ability to pay cash dividends is limited by state law.
There are statutory and regulatory limitations on the amount of dividends which
may be paid to SC Bancorp by the Bank. California law restricts the amount
available for cash dividends by state chartered banks to the lesser of retained
earnings or the bank's net income for its last three fiscal years (less any
distributions to shareholders made during such period). Notwithstanding this
restriction, a bank may, with the prior approval of the Superintendent, pay a
cash dividend in an amount not exceeding the greater of the retained earnings of
the Bank, the net income for such bank's last preceding fiscal year, and the net
income of the bank for its current fiscal year.
The FDIC also has authority to prohibit the Bank from engaging in activities
that, in the FDIC's opinion, constitute unsafe or unsound practices in
conducting its business. It is possible, depending upon the financial condition
of the bank in question and other factors, that the FDIC could assert that the
payment of dividends or other payments might, under some circumstances, be such
an unsafe or unsound practice. Further, the FDIC and the Federal Reserve Board
have established guidelines with respect to the maintenance of appropriate
levels of capital by banks or bank holding companies under their jurisdiction.
Compliance with the standards set forth in such guidelines and the restrictions
that are or may be imposed under the prompt corrective action provisions of
federal law could limit the amount of dividends which the Bank or SC Bancorp may
pay. The Superintendent may impose similar limitations on the conduct of
California-chartered banks. See Item 1, Supervision and Regulation - Prompt
Corrective Regulatory Action and Other Enforcement Mechanisms and - Capital
Standards, below for a discussion of these additional restrictions on capital
distributions.
At present, substantially all of SC Bancorp's revenues, including funds
available for the payment of dividends and other operating expenses, are from
the proceeds of a stock rights offering conducted by the Company in 1994. At
December 31, 1995, the Bank had $8.6 million in retained earnings available for
the payment of cash dividends.
The Bank is subject to certain restrictions imposed by federal law on any
extensions of credit to, or the issuance of a guarantee or letter of credit on
behalf of, SC Bancorp or other affiliates, the purchase of or investments in
stock or other securities thereof, the taking of such securities as collateral
for loans and the purchase of assets of SC Bancorp or other affiliates. Such
restrictions prevent SC Bancorp and such other affiliates from borrowing from
the Bank unless the loans are secured by marketable obligations of designated
amounts. Further, such secured loans and investments by the Bank to or in SC
Bancorp or to or in any other affiliate is limited to 10% of the Bank's capital
and surplus (as defined by federal regulations) and such secured loans and
investments are limited, in the aggregate, to 20% of the Bank's capital and
surplus (as defined by federal regulations). California law also imposes
certain restrictions with respect to transactions involving SC Bancorp and other
controlling persons of the Bank. Additional restrictions on transactions with
affiliates may be imposed on the Bank under the prompt corrective action
provisions of federal law. See Item 1, Supervision and Regulation - Prompt
Corrective Action and Other Enforcement Mechanisms, below.
4
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Part I. Item 1 (continued)
Capital Standards
The Federal Reserve Board and the FDIC have adopted risk-based minimum capital
guidelines intended to provide a measure of capital that reflects the degree of
risk associated with a banking organization's operations for both transactions
reported on the balance sheet as assets and transactions, such as letters of
credit and recourse arrangements, which are recorded as off balance sheet items.
Under these guidelines, nominal dollar amounts of assets and credit equivalent
amounts of off balance sheet items are multiplied by one of several risk
adjustment percentages, which range from 0% for assets with low credit risk,
such as certain U.S. Treasury securities, to 100% for assets with relatively
high credit risk, such as business loans.
A banking organization's risk-based capital ratios are obtained by dividing its
qualifying capital by its total risk adjusted assets. The regulators measure
risk-adjusted assets, which includes off balance sheet items, against both total
qualifying capital (the sum of Tier 1 capital and limited amounts of Tier 2
capital) and Tier 1 capital. Tier 1 capital consists primarily of common stock,
retained earnings, noncumulative perpetual preferred stock (cumulative perpetual
preferred stock for bank holding companies) and minority interests in certain
subsidiaries, less most intangible assets. Tier 2 capital may consist of a
limited amount of the allowance for possible loan and lease losses, cumulative
preferred stock, long term preferred stock, eligible term subordinated debt and
certain other instruments with some characteristics of equity. The inclusion of
elements of Tier 2 capital is subject to certain other requirements and
limitations of the federal banking agencies. The federal banking agencies
require a minimum ratio of qualifying total capital to risk-adjusted assets of
8% and a minimum ratio of Tier 1 capital to risk-adjusted assets of 4%.
In addition to the risk-based guidelines, federal banking regulators require
banking organizations to maintain a minimum amount of Tier 1 capital to total
assets, referred to as the leverage ratio. For a banking organization rated in
the highest of the five categories used by regulators to rate banking
organizations, the minimum leverage ratio of Tier 1 capital to total assets is
3%. For all banking organizations not rated in the highest category, the
minimum leverage ratio must be at least 100 to 200 basis points above the 3%
minimum, or 4% to 5%. In addition to these uniform risk-based capital
guidelines and leverage ratios that apply across the industry, the regulators
have the discretion to set individual minimum capital requirements for specific
institutions at rates significantly above the minimum guidelines and ratios.
In August 1995, the federal banking agencies adopted final regulations
specifying that the agencies will include, in their evaluations of a bank's
capital adequacy, an assessment of the exposure to declines in the economic
value of the bank's capital due to changes in interest rates. The final
regulations, however, do not include a measurement framework for assessing the
level of a bank's exposure to interest rate risk, which is the subject of a
proposed policy statement issued by the federal banking agencies concurrently
with the final regulations. The proposal would measure interest rate risk in
relation to the effect of a 200 basis point change in market interest rates on
the economic value of a bank. Banks with high levels of measured exposure or
weak management systems generally will be required to hold additional capital
for interest rate risk. The specific amount of capital that may be needed would
be determined on a case-by-case basis by the examiner and the appropriate
federal banking agency. Because this proposal has only recently been issued,
the Bank currently is unable to predict the impact of the proposal on the Bank
if the policy statement is adopted as proposed.
In January 1995, the federal banking agencies issued a final rule relating to
capital standards and the risks arising from the concentration of credit and
nontraditional activities. Institutions which have significant amounts of their
assets concentrated in high risk loans or nontraditional banking activities and
who fail to adequately manage these risks, will be required to set aside capital
in excess of the regulatory minimums. The federal banking agencies have not
imposed any quantitative assessment for determining when these risks are
significant, but have identified these issues as important factors they will
review in assessing an individual bank's capital adequacy.
In December 1993, the federal banking agencies issued an interagency policy
statement on the allowance for loan and lease losses which, among other things,
establishes certain benchmark ratios of loan loss reserves to classified assets.
The benchmark set forth by such policy statement is the sum of (a) assets
classified loss; (b) 50 percent of assets classified doubtful; (c) 15 percent of
assets classified substandard; and (d) estimated credit losses on other assets
over the upcoming 12 months.
Federally supervised banks and savings associations are currently required to
report deferred tax assets in accordance with SFAS No. 109. See NOTE 1-
SIGNIFICANT ACCOUNTING POLICIES of the Company's consolidated financial
statements located in Part II, Item 8, of this Form 10-K. The federal banking
agencies recently issued final rules, effective April 1, 1995, which limit the
amount of deferred tax assets that are allowable in computing an institution's
regulatory capital. The standard has been in effect on an interim basis since
March 1993. Deferred tax assets that can be realized for taxes paid in prior
carryback years and from future reversals of
5
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Part I. Item 1 (continued)
existing taxable temporary differences are generally not limited. Deferred tax
assets that can only be realized through future taxable earnings are limited for
regulatory capital purposes to the lesser of (i) the amount that can be realized
within one year of the quarter-end report date, or (ii) 10% of Tier 1 Capital.
The amount of any deferred tax in excess of this limit would be excluded from
Tier 1 Capital and total assets and regulatory capital calculations.
Future changes in regulations or practices could further reduce the amount of
capital recognized for purposes of capital adequacy. Such a change could affect
the ability of the Bank to grow and could restrict the amount of profits, if
any, available for the payment of dividends.
Prompt Corrective Action And Other Enforcement Mechanisms
Federal law requires each federal banking agency to take prompt corrective
action to resolve the problems of insured depository institutions, including but
not limited to those that fall below one or more prescribed minimum capital
ratios. The law required each federal banking agency to promulgate regulations
defining the following five categories in which an insured depository
institution will be placed, based on the level of its capital ratios: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized.
In September 1992, the federal banking agencies issued uniform final regulations
implementing the prompt corrective action provisions of federal law. An insured
depository institution generally will be classified in the following categories
based on capital measures indicated below:
"WELL CAPITALIZED"
Total risk-based capital of 10%; Tier 1 risk-based capital of 6%; and
Leverage ratio of 5%.
"ADEQUATELY CAPITALIZED"
Total risk-based capital of 8%; Tier 1 risk-based capital of 4%; and
Leverage ratio of 4% (3% if the institution
receives the highest rating from its primary regulator).
"UNDERCAPITALIZED"
Total risk-based capital less than 8%; Tier 1 risk-based capital less
than 4%; or Leverage ratio less than 4% (3% if the
institution receives the highest rating from its primary regulator).
"SIGNIFICANTLY UNDERCAPITALIZED"
Total risk-based capital less than 6%; Tier 1 risk-based capital less
than 3%; or Tier 1 risk-based capital less than 3%.
"CRITICALLY UNDERCAPITALIZED"
Tangible equity to total assets less than 2%.
An institution that, based upon its capital levels, is classified as "well
capitalized," "adequately capitalized" or "undercapitalized" may be treated as
though it were in the next lower capital category if the appropriate federal
banking agency, after notice and opportunity for hearing, determines that an
unsafe or unsound condition or an unsafe or unsound practice warrants such
treatment. At each successive lower capital category, an insured depository
institution is subject to more restrictions. The federal banking agencies,
however, may not treat an institution as "critically undercapitalized" unless
its capital ratio actually warrants such treatment.
The law prohibits insured depository institutions from paying management fees to
any controlling persons or, with certain limited exceptions, making capital
distributions if after such transaction the institution would be
undercapitalized. If an insured depository institution is undercapitalized, it
will be closely monitored by the appropriate federal banking agency, subject to
asset growth restrictions and required to obtain prior regulatory approval for
acquisitions, branching and engaging in new lines of business. Any
undercapitalized depository institution must submit an acceptable capital
restoration plan to the appropriate federal banking agency 45 days after
becoming undercapitalized. The appropriate federal banking agency cannot accept
a capital plan unless, among other things, it determines that the plan
(i) specifies the steps the institution will take to become adequately
capitalized, (ii) is based on
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Part I. Item 1 (continued)
realistic assumptions and (iii) is likely to succeed in restoring the depository
institution's capital. In addition, each company controlling an
undercapitalized depository institution must guarantee that the institution will
comply with the capital plan until the depository institution has been
adequately capitalized on an average basis during each of four consecutive
calendar quarters and must otherwise provide adequate assurances of performance.
The aggregate liability of such guarantee is limited to the lesser of (a) an
amount equal to 5% of the depository institution's total assets at the time the
institution became undercapitalized or (b) the amount which is necessary to
bring the institution into compliance with all capital standards applicable to
such institution as of the time the institution fails to comply with its capital
restoration plan. Finally, the appropriate federal banking agency may impose
any of the additional restrictions or sanctions that it may impose on
significantly undercapitalized institutions if it determines that such action
will further the purpose of the prompt correction action provisions.
An insured depository institution that is significantly undercapitalized, or is
undercapitalized and fails to submit, or in a material respect to implement, an
acceptable capital restoration plan, is subject to additional restrictions and
sanctions. These include, among other things: (i) a forced sale of voting
shares to raise capital or, if grounds exist for appointment of a receiver or
conservator, a forced merger; (ii) restrictions on transactions with affiliates;
(iii) further limitations on interest rates paid on deposits; (iv) further
restrictions on growth or required shrinkage; (v) modification or termination of
specified activities; (vi) replacement of directors or senior executive
officers; (vii) prohibitions on the receipt of deposits from correspondent
institutions; (viii) restrictions on capital distributions by the holding
companies of such institutions; (ix) required divestiture of subsidiaries by the
institution; or (x) other restrictions as determined by the appropriate federal
banking agency. Although the appropriate federal banking agency has discretion
to determine which of the foregoing restrictions or sanctions it will seek to
impose, it is required to force a sale of voting shares or merger, impose
restrictions on affiliate transactions and impose restrictions on rates paid on
deposits unless it determines that such actions would not further the purpose of
the prompt corrective action provisions. In addition, without the prior written
approval of the appropriate federal banking agency, a significantly
undercapitalized institution may not pay any bonus to its senior executive
officers or provide compensation to any of them at a rate that exceeds such
officer's average rate of base compensation during the 12 calendar months
preceding the month in which the institution became undercapitalized.
Further restrictions and sanctions are required to be imposed on insured
depository institutions that are critically undercapitalized. For example, a
critically undercapitalized institution generally would be prohibited from
engaging in any material transaction other than in the ordinary course of
business without prior regulatory approval and could not, with certain
exceptions, make any payment of principal or interest on its subordinated debt
beginning 60 days after becoming critically undercapitalized. Most importantly,
however, except under limited circumstances, the appropriate federal banking
agency, not later than 90 days after an insured depository institution becomes
critically undercapitalized, is required to appoint a conservator or receiver
for the institution. The board of directors of an insured depository
institution would not be liable to the institution's shareholders or creditors
for consenting in good faith to the appointment of a receiver or conservator or
to an acquisition or merger as required by the regulator.
In addition to measures taken under the prompt corrective action provisions,
commercial banking organizations may be subject to potential enforcement actions
by the federal regulators for unsafe or unsound practices in conducting their
businesses or for violations of any law, rule, regulation or any condition
imposed in writing by the agency or any written agreement with the agency.
Enforcement actions may include the imposition of a conservator or receiver, the
issuance of a cease and desist order that can be judicially enforced, the
termination of insurance of deposits (in the case of a depository institution),
the imposition of civil money penalties, the issuance of directives to increase
capital, the issuance of formal and informal agreements, the issuance of removal
and prohibition orders against institution-affiliated parties and the
enforcement of such actions through injunctions or restraining orders based upon
a judicial determination that the agency would be harmed if such equitable
relief was not granted.
Safety And Soundness Standards
In July 1995, the federal banking agencies adopted final guidelines establishing
standards for safety and soundness, as required by the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"). The guidelines set forth
operational and managerial standards relating to internal controls, information
systems and internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth and compensation, fees and benefits.
Guidelines for asset quality and earnings standards will be adopted in the
future. The guidelines establish the safety and soundness standards that the
agencies will use to identify and address problems at insured depository
institutions before capital becomes impaired. If an institution fails to comply
with a safety and soundness standard, the appropriate federal banking agency may
require the institution to submit a compliance plan. Failure to submit a
compliance plan or to implement an accepted plan may result in enforcement
action.
7
<PAGE>
Part I. Item 1 (continued)
In December 1992, the federal banking agencies issued final regulations
prescribing uniform guidelines for real estate lending. The regulations, which
became effective on March 19, 1993, require insured depository institutions to
adopt written policies establishing standards, consistent with such guidelines,
for extensions of credit secured by real estate. The policies must address loan
portfolio management, underwriting standards and loan to value limits that do
not exceed the supervisory limits prescribed by the regulations.
Appraisals for "real estate related financial transactions" must be conducted by
either state certified or state licensed appraisers for transactions in excess
of certain amounts. State certified appraisers are required for all
transactions with a transaction value of $1,000,000 or more; for all
nonresidential transactions valued at $250,000 or more; and for "complex" 1-4
family residential properties of $250,000 or more. A state licensed appraiser
is required for all other appraisals. However, appraisals performed in
connection with "federally related transactions" must now comply with the
agencies' appraisal standards. Federally related transactions include the sale,
lease, purchase, investment in, or exchange of, real property or interests in
real property, the financing or refinancing of real property, and the use of
real property or interests in real property as security for a loan or
investment, including mortgage-backed securities.
Premiums For Deposit Insurance
Federal law has established several mechanisms to increase funds to protect
deposits insured by the Bank Insurance Fund ("BIF") administered by the FDIC.
The FDIC is authorized to borrow up to $30 billion from the United States
Treasury; up to 90% of the fair market value of assets of institutions acquired
by the FDIC as receiver from the Federal Financing Bank; and from depository
institutions that are members of the BIF. Any borrowings not repaid by asset
sales are to be repaid through insurance premiums assessed to member
institutions. Such premiums must be sufficient to repay any borrowed funds
within 15 years and provide insurance fund reserves of $1.25 for each $100 of
insured deposits. The result of these provisions is that the assessment rate on
deposits of BIF members could increase in the future. The FDIC also has
authority to impose special assessments against insured deposits.
The FDIC implemented a final risk-based assessment system, as required by
FDICIA, effective January 1, 1994, under which an institution's premium
assessment is based on the probability that the deposit insurance fund will
incur a loss with respect to the institution, the likely amount of any such
loss, and the revenue needs of the deposit insurance fund. As long as BIF's
reserve ratio is less than a specified "designated reserve ratio," 1.25%, the
total amount raised from BIF members by the risk-based assessment system may not
be less than the amount that would be raised if the assessment rate for all BIF
members were 0.23% of deposits. On August 8, 1995, the FDIC announced that the
designated reserve ratio had been achieved and, accordingly, issued final
regulations adopting an assessment rate schedule for BIF members of 4 to 31
basis points effective on June 1, 1995. On November 14, 1995, the FDIC further
reduced deposit insurance premiums to a range of 0 to 27 basis points effective
for the semi-annual period beginning January 1, 1996.
Under the risk-based assessment system, a BIF member institution such as the
Bank is categorized into one of three capital categories (well capitalized,
adequately capitalized, and undercapitalized) and one of three categories based
on supervisory evaluations by its primary federal regulator (in the Bank's case,
the FDIC). The three supervisory categories are: financially sound with only a
few minor weaknesses (Group A), demonstrates weaknesses that could result in
significant deterioration (Group B), and poses a substantial probability of loss
(Group C). The capital ratios used by the FDIC to define well capitalized,
adequately capitalized and undercapitalized are the same in the FDIC's prompt
corrective action regulations. The BIF assessment rates are summarized below;
assessment figures are expressed in terms of cents per $100 in deposits.
<TABLE>
<CAPTION>
Assessment Rates Effective Through the First Half of 1995
Group A Group B Group C
--------------------------------
<S> <C> <C> <C>
Well Capitalized ................. 23 26 29
Adequately Capitalized ........... 26 29 30
Undercapitalized ................. 29 30 31
</TABLE>
8
<PAGE>
Part I. Item 1 (continued)
<TABLE>
<CAPTION>
Assessment Rates Effective through the Second Half of 1995
Group A Group B Group C
--------------------------------
<S> <C> <C> <C>
Well Capitalized .................. 4 7 21
Adequately Capitalized ............ 7 14 28
Undercapitalized .................. 14 28 31
</TABLE>
<TABLE>
<CAPTION>
Assessment Rates Effective January 1, 1996
Group A Group B Group C
--------------------------------
<S> <C> <C> <C>
Well Capitalized ................ 0* 3 17
Adequately Capitalized ........... 3 10 24
Undercapitalized ................. 10 24 27
</TABLE>
*Subject to a statutory minimum assessment of $1,000 per semi-annual period
(which also applies to all other assessment risk classifications).
As a result of the recent acquisition of deposits from IOBC, the Bank maintains
some deposits insured by the Savings Association Insurance Fund ("SAIF")
administered by the FDIC. For these deposits, the assessment rate ranges from
0.23% of deposits for well-capitalized institutions in Subgroup A to 0.31% of
deposits for undercapitalized institutions in Subgroup C.
A number of proposals have recently been introduced in Congress to address the
disparity in bank and thrift deposit insurance premiums. On September 19, 1995,
legislation was introduced and referred to the House Banking Committee that
would, among other things: (i) impose a requirement on all SAIF member
institutions to fully recapitalize the SAIF by paying a one-time special
assessment of approximately 85 basis points on all assessable deposits as of
March 31, 1995, which assessment would be due as of January 1, 1996; (ii) spread
the responsibility for FICO interest payments across all FDIC-insured
institutions on a pro-rata basis, subject to certain exceptions; (iii) require
that deposit insurance premium assessment rates applicable to SAIF member
institutions be no less than deposit insurance premium assessment rates
applicable to BIF member institutions; (iv) provide for a merger of the BIF and
the SAIF as of January 1, 1998; (v) require savings associations to convert to
state or national bank charters by January 1, 1998; (vi) require savings
associations to divest any activities not permissible for commercial banks
within five years; (vii) eliminate the bad-debt reserve deduction for savings
associations, although savings associations would not be required to recapture
into income their accumulated bad-debt reserves; (viii) provide for the
conversion of savings and loan holding companies into bank holding companies as
of January 1, 1998, although unitary savings and loan holding companies
authorized to engage in activities as of September 13, 1995 would have such
authority grandfathered (subject to certain limitations); and (ix) abolish the
OTS and transfer the OTS' regulatory authority to the other federal banking
agencies. The legislation would also provide that any savings association that
would become undercapitalized under the prompt corrective action regulations as
a result of the special deposit premium assessment could be exempted from
payment of the assessment, provided that the institution would continue to be
subject to the payment of semiannual assessments under the current rate schedule
following the recapitalization of the SAIF. The legislation was considered and
passed by the House Banking Committee's Subcommittee on Financial Institutions
on September 27, 1995, and has not yet been acted on by the full House Banking
Committee.
On September 20, 1995, similar legislation was introduced in the Senate,
although the Senate bill does not include a comprehensive approach for merging
the savings association and commercial bank charters. The Senate bill remains
pending before the Senate Banking Committee.
The future of both these bills is linked with that of pending budget
reconciliation legislation since some of the major features of the bills are
included in the Seven-Year Balanced Budget Reconciliation Act. The budget bill,
which was passed by both the House and Senate on November 17, 1995 and vetoed by
the President on December 6, 1995, would: (i) recapitalize the SAIF through a
special assessment of between 70 and 80 basis points on deposits held by
institutions as of March 31, 1995; (ii) provide an exemption to this rule for
weak institutions, and a 20% reduction in the SAIF-assessable deposits of so-
called "Oakar banks;" (iii) expand the assessment base for FICO payments to
include all FDIC-insured institutions; (iv) merge the BIF and SAIF on January 1,
1998, only if no insured depository institution is a savings association on that
date; (v) establish a special reserve for the SAIF on January 1, 1998; and (vi)
prohibit the FDIC from setting semiannual assessments in excess of the amount
needed to maintain the reserve ratio
9
<PAGE>
Part I. Item 1 (continued)
of any fund at the designated reserve ratio. The bill does not include a
provision to merge the charters of savings associations and commercial banks.
The Bank acquired deposits from IOBC, a SAIF-insured institution, during the
year; however, the deposits were acquired after the March 31, 1995 special
assessment date contained in the House Banking Committee proposal.
In light of ongoing debate over the content and fate of the budget bill, the
different proposals currently under consideration and the uncertainty of the
Congressional budget and legislative processes in general, management cannot
predict whether any or all of the proposed legislation will be passed, or in
what form. Accordingly, the effect of any such legislation on the Bank cannot
be determined.
Interstate Banking And Branching
In September 1994, the Riegel-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "Interstate Act") became law. Under the Interstate Act,
beginning one year after the date of enactment, a bank holding company that is
adequately capitalized and managed may obtain approval under the BHCA to acquire
an existing bank located in another state without regard to state law. A bank
holding company would not be permitted to make such an acquisition if, upon
consummation, it would control (a) more than 10% of the total amount of deposits
of insured depository institutions in the United States or (b) 30% or more of
the deposits in the state in which the bank is located. A state may limit the
percentage of total deposits that may be held in that state by any one bank or
bank holding company if application of such limitation does not discriminate
against out-of-state banks. An out-of-state bank holding company may not
acquire a state bank in existence for less than a minimum length of time that
may be prescribed by state law except that a state may not impose more than a
five year existence requirement.
The Interstate Act also permits, beginning June 1, 1997, mergers of insured
banks located in different states and conversion of the branches of the acquired
bank into branches of the resulting bank. Each state may permit such
combinations earlier than June 1, 1997, and may adopt legislation to prohibit
interstate mergers after that date in that state or in other states by that
state's banks. The same concentration limits discussed in the preceding
paragraph apply. The Interstate Act also permits a national or state bank to
establish branches in a state other than its home state if permitted by the laws
of that state, subject to the same requirements and conditions as for a merger
transaction.
In October 1995, California adopted "opt in" legislation under the Interstate
Act that permits out-of-state banks to acquire California banks that satisfy a
five-year minimum age requirement (subject to exceptions for supervisory
transactions) by means of merger or purchases of assets, although entry through
acquisition of individual branches of California institutions and de novo
branching into California are not permitted. The Interstate Act and the
California branching statute will likely increase competition from out-of-state
banks in the markets in which the Company operates, although it is difficult to
assess the impact that such increased competition may have on the Company's
operations.
Community Reinvestment Act And Fair Lending Developments
The Bank is subject to certain fair lending requirements and reporting
obligations involving home mortgage lending operations and Community
Reinvestment Act ("CRA") activities. The CRA generally requires the federal
banking agencies to evaluate the record of a financial institution in meeting
the credit needs of their local communities, including low and moderate income
neighborhoods. In addition to substantial penalties and corrective measures
that may be required for a violation of certain fair lending laws, the federal
banking agencies may take compliance with such laws and CRA into account when
regulating and supervising other activities. The FDIC has rated the Bank
"satisfactory" in complying with its CRA obligations.
In May 1995, the federal banking agencies issued final regulations which change
the manner in which they measure a bank's compliance with its CRA obligations.
The final regulations adopt a performance-based evaluation system which bases
CRA ratings on an institution's actual lending service and investment
performance rather than the extent to which the institution conducts needs
assessments, documents community outreach or complies with other procedural
requirements. In March 1994, the Federal Interagency Task Force on Fair Lending
issued a policy statement on discrimination in lending. The policy statement
describes the three methods that federal agencies will use to prove
discrimination: overt evidence of discrimination, evidence of disparate
treatment and evidence of disparate impact.
10
<PAGE>
Part I. Item 1
Accounting Changes
Refer to NOTE 1-SIGNIFICANT ACCOUNTING POLICIES of the Company's consolidated
financial statements, located in Part II, Item 8, of this Form 10-K for
discussion of current accounting pronouncements.
Existing And Potential Enforcement Actions
Commercial banking organizations, such as the Bank, and their institution-
affiliated parties, which include SC Bancorp, may be subject to potential
enforcement actions by the Federal Reserve Board, the State Banking Department
and the FDIC for unsafe or unsound practices in conducting their businesses or
for violations of any law, rule, regulation or any condition imposed in writing
by the agency or any written agreement with the agency. Enforcement actions
may include the imposition of a conservator or receiver, the issuance of a
cease-and-desist order that can be judicially enforced, the termination of
insurance of deposits (in the case of a bank), the imposition of civil money
penalties, the issuance of directives to increase capital, the issuance of
formal and informal agreements, the issuance of removal and prohibition orders
against institution-affiliated parties and the imposition of restrictions and
sanctions under the prompt corrective action provisions of the FDIC Improvement
Act. Additionally, a holding company's inability to serve as a source of
strength to its subsidiary banking organizations could serve as an additional
basis for a regulatory action against the holding company.
In late 1993, the Bank was examined by the FDIC. As a result of that
examination, the Bank entered into a Memorandum of Understanding ("MOU") with
the FDIC and California State Banking Department. The MOU required the Bank to
reduce classified assets to specified levels, and to attain a minimum leverage
capital ratio of 7% by November 30, 1994. During 1994, the Company raised
approximately $14.2 million through a common stock rights offering and
substantially reduced problem assets, thereby fully complying with the MOU
requirements. The FDIC and California State Banking Department released the
Bank from the MOU effective February 15, 1995. At December 31, 1995, the
Company's and the Bank's capital ratios met the regulatory guidelines for a well
capitalized institution. See also Management's Discussion of Financial
Condition and Results of Operations ("MD&A") which is included in Part II, Item
7, of this Form 10-K.
The FDIC conducted its most recent examination of the Bank as of May 31, 1995.
The FDIC's report of examination dated October 11, 1995 contained no findings of
a material nature.
The Federal Reserve Bank of San Francisco (the "FRB") conducted its most
recent examination of the Company as of June 30, 1995. The FRB's report of
examination dated December 15, 1995 contained no findings of a material
nature.
Results Of Operations
The following table summarizes key performance indicators pertaining to the
Company's operating results. Certain figures have been adjusted for the
restructuring as indicated. Average balances are computed using daily
balances. Refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") in Part II, Item 7 of this Form
10-K for additional discussion of the Company's operating results.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) YEARS ENDED DECEMBER 31,
- -------------------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Return on average assets 0.19% 0.67% -0.59%
as adjusted for restructuring items (1) 0.41% - -0.47%
Return on average shareholders' equity 2.14% 6.59% -8.90%
as adjusted for restructuring items (1) 4.62% - -7.06%
Average shareholders' equity to average total assets 8.87% 10.15% 6.61%
Net income (loss) $ 869 $ 2,705 $ (2,733)
Earnings (loss) per share $ 0.12 $ 0.49 $ (0.79)
Total average assets $457,196 $404,504 $464,286
- -------------------------------------------------------------------------------------------
</TABLE>
(1) 1995 net income was adjusted to exclude 1995 Restructuring charges of
$1,006 thousand after tax. 1993 net income was adjusted to exclude 1993
Restructuring charges of $566 thousand after tax.
11
<PAGE>
Part I. Item 1 (continued)
Net Interest Income
Net interest income is the difference between interest earned on assets and
interest paid on liabilities. Net interest margin is net interest income
expressed as a percentage of average interest-earning assets. The following
table sets forth a comparison of net interest income and net interest margin for
the years indicated.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) YEARS ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------
Increase/ Increase/
1995 decrease 1994 decrease 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income $33,396 26.40% $26,420 -11.14% $29,732
Interest expense 12,015 91.35% 6,279 -34.72% 9,619
- ----------------------------------------------------------------------------------------------
Net interest income $21,381 6.16% $20,141 0.14% $20,113
- ----------------------------------------------------------------------------------------------
Net interest margin 5.30% 5.75% 4.82%
- ----------------------------------------------------------------------------------------------
</TABLE>
Interest income and expense are affected by changes in the volume and mix of
average interest-earning assets and interest-bearing deposits and other
liabilities, as well as fluctuations in interest rates. The following tables
set forth certain information concerning average interest-earning assets and
average interest-bearing liabilities and the yields and rates thereon. The
tables also set forth a summary of the changes in interest income and interest
expense resulting from changes in average interest rates (rate) and changes in
average assets and liability balances (volume) for the years indicated. Average
balances are average daily balances. Nonaccrual loans are included in total
average loans outstanding.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) YEARS ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
balance Expense Rate balance Expense Rate balance Expense Rate
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Loans, net of deferred fees (1) $261,631 $25,960 9.92% $203,507 $18,971 9.32% $235,414 $20,212 8.59%
Investment securities 122,498 6,299 5.14% 139,991 7,166 5.12% 165,283 9,048 5.47%
Federal funds sold and other 19,463 1,137 5.84% 6,480 283 4.37% 16,436 472 2.87%
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest earning assets/
interest income 403,593 33,396 8.27% 349,978 26,420 7.55% 417,133 29,732 7.13%
- ----------------------------------------------------------------------------------------------------------------------------------
Noninterest earning assets 53,604 54,526 47,153
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $457,196 $404,504 $464,286
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Deposits $282,574 10,998 3.89% $237,105 $ 5,956 2.51% $287,545 $ 8,200 2.85%
Other interest-bearing liabilities 8,059 1,017 12.62% 5,689 323 5.68% 38,554 1,419 3.68%
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities/
interest expense 290,633 12,015 4.13% 242,794 6,279 2.59% 326,100 9,619 2.95%
- ----------------------------------------------------------------------------------------------------------------------------------
Noninterest bearing liabilities 125,989 120,666 120,895
Shareholders' equity 40,575 41,043 30,710
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and equity $457,196 $404,504 $477,704
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income/net interest margin $21,381 5.30% $20,141 5.75% $20,113 4.82%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes loans on nonaccrual status of approximately $1.4 million,
$1.6 million, and $7.1 million at December 31, 1995, 1994, and 1993,
respectively. The amount of interest foregone on loans that were on
nonaccrual status were approximately $207 thousand, $93 thousand,
and $550 thousand for the years ended December 31, 1995, 1994, and 1993,
respectively. Interest income on loans includes amortization
of net loan fees of approximately $211 thousand, $629 thousand, and $575
thousand for the years ended December 31, 1995, 1994, and 1993,
respectively. Additionally, net interest (expense) income of ($929)
thousand, $141 thousand, and $251 thousand relating to the interest
rate swap agreements was included in interest income for the years ended
December 31, 1995, 1994, and 1993, respectively.
12
<PAGE>
Part I. Item 1 (continued)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1995 and 1994 1994 and 1993
Increase (decrease) Increase (decrease)
due to change in Net due to change in Net
Rate Volume Change Rate Volume Change
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans, net of deferred fees $ 1,614 $ 5,376 $ 6,990 $ 1,498 $ (2,740) $ (1,242)
Investment securities 28 (895) (868) (502) (1,385) (1,888)
Federal funds sold and other 286 568 854 100 (282) (183)
- --------------------------------------------------------------------------------------------------------------------------
Total interest earning assets/interest income 1,928 5,049 6,976 1,095 (4,407) (3,312)
- --------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits 2,952 2,090 $ 5,042 (506) (1,739) $ (2,244)
Other interest-bearing liabilities 716 (23) 693 20 (1,115) (1,096)
- --------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities/interest expense 3,678 2,058 5,736 (486) (2,854) (3,340)
- --------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME $ (1,750) $ 2,991 $ 1,240 $ 1,581 $ (1,554) $ 28
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Net interest income increased $1.2 million to $21.4 million for the year ended
December 31,1995, from $20.1 million a year ago. Most of the increase is due to
higher average loan balances, which increased $58.1 million over 1994 largely
due to the purchase of the IOBC and SBA loans. The average balance of Federal
funds sold increased by $13 million and the average balance of investment
securities decreased by $17.5 million compared to 1994. The decrease in
investment securities in 1995 reflects the sale of approximately $27 million of
available-for-sale securities, and the maturity of approximately $6.0 million
and $7.5 million of securities classified as available-for-sale and held-to-
maturity, respectively. Average yields on earning assets for 1995 increased by
72 basis points to 8.27% from 7.55% for 1994. The average yield on loans,
including the effect of the interest rate swaps, was 9.92% for the year ended
December 31,1995, up 60 basis points from 9.32% for 1994. The increase in the
average national prime rate to 8.80% for 1995 from 7.15% for 1994 contributed
to the increase in loan yields.
Net interest income increased slightly, by $28 thousand, in 1994 from $20.1
million in 1993, despite the $67.1 million decrease in average earning assets to
$350.0 million for 1994 from $417.1 million for 1993. The decrease in earning
assets comprises a $25.3 million decrease in investment securities and a $31.9
million decrease in loans. The decrease in investment securities reflects
maturities of $10.3 million.. The decrease in average loan balances in 1994
reflects the Company's efforts to reduce its concentrations in real estate loans
and to reduce the level of nonaccrual loans, which were reduced by $17.4 million
and $5.5 million, respectively. The increase in net interest income for the year
is largely due to higher yields on prime-based loans. The prime rate increased
by 2.5% during 1994, leading to a 73 basis point increase in the average yield
on loans and a 42 basis point increase in the overall yield on earning assets
from 1993.
The Company's net interest margin decreased 45 basis points to 5.30% from 5.75%
for the years ended December 31,1995 and 1994, respectively, despite the
increase in loan yields. The decrease in net interest margin is primarily due
to an increase in interest expense. The increase in interest expense can be
attributed to a $408 thousand nonrecurring interest adjustment during the first
quarter of 1995 relating to the Company's deferred compensation plans, and to
the increase in time certificate of deposit ("TCD") balances and rates compared
to the prior year. The increase in deposit rates can be attributed to the
increase in overall market rates from the prior year, and to the higher rates
offered through a deposit promotion in the first quarter of 1995. The average
balance of TCDs increased by $65.9 million to $145.6 million for 1995, from
$79.7 million for 1994. The increase in TCD balances is due to a promotional
TCD program run during the first quarter of 1995 to provide additional funding
for the IOBC acquisition. The average cost of funds on TCDs increased to 5.77%
in 1995 from 3.80% in 1994. The Company lowered the average rates on the
promotional TCDs to 5.89% from 7.20%, and retained approximately 70% of the TCDs
that matured in September 1995. The Company's net interest margin for 1994
increased 93 basis points to 5.75% for 1994 from 4.82% for 1993, largely due
to overall market rate increases during 1994. Interest expense decreased $3.3
million to $6.3 million for 1994 from $9.6 million. This decrease reflects
substantially lower average borrowings of $5.7 million for 1994 as compared to
$38.6 million for 1993.
13
<PAGE>
Part I. Item 1 (continued)
Provision For Possible Loan Losses
The Company recorded a provision for possible loan losses of $1.5 million for
1995, a net credit of $850 thousand to the provision for possible loan losses in
1994, and a $11.8 million provision in 1993. The $1.5 million of provisions
recorded in 1995 includes $900 thousand booked in the third quarter. The Company
performed an extensive review of its loan portfolio with regard to collateral
adequacy during the third quarter. The third quarter provision includes $600
thousand relating to two commercial real estate loans. Net loan charge-offs were
$1.7 million for the year. The allowance for possible loan losses was 1.81% of
gross loans outstanding, and 414.01% of nonaccrual loans outstanding at December
31, 1995, respectively.
The credit to the provision for possible loan losses recorded in 1994 was based
on management's determination that an excess existed in the allowance for
possible loan losses due to the following factors: substantial provisions had
been recorded during 1993, several previously classified loans had been
upgraded, and there had been a significant decrease in the level of net loan
charge-offs between 1994 and 1993. Accordingly, $850 thousand was reversed from
the allowance for possible loan losses in the second quarter of 1994, and no
provisions were recorded for the remainder of the year. Net loan charge-offs
were $4.6 million for 1994. The allowance for possible loan losses was 2.56% of
gross loans outstanding, and 329.88% of nonaccrual loans outstanding at December
31, 1994, respectively.
The substantial provision for loan losses in 1993 was necessitated by high
levels of nonperforming and classified loans and charge-offs. The charge-offs
were concentrated in commercial real estate mortgage loans and commercial loans
to borrowers secured by junior liens. Net loan charge-offs were $7.8 million for
1993. The allowance for possible loan losses was 5.08% of gross loans
outstanding, and 152.53% of nonaccrual loans outstanding at December 31, 1993,
respectively. Refer to NOTE 4-LOANS of the Company's consolidated financial
statements which are included in Part II, Item 8, of this Form 10-K.
Noninterest Income
The following table sets forth the major components of noninterest income, net
of restructuring activity, for the years indicated:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) YEARS ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1993
1995 Restructure 1995, Net 1994 1993 Restructure Net 1993
---- ----------- --------- ---- ---- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Service charges on deposit accounts $ 1,727 $ 1,727 $ 1,754 $ 1,779 $ 1,779
Other fees and charges 2,542 - 2,542 2,637 3,162 3,162
Merchant bankcard income 518 518 1,249 1,631 1,631
Net gain (loss) on sales of investment securities (620) (620) - 17 7,074 7,074 -
Net gains on sales of loans 145 - 145 215 - -
Net gain (loss) on sales of fixed assets (87) (109) 22 409 4 4
Life insurance income 510 - 510 58 49 49
Other income 278 - 278 361 244 244
- -----------------------------------------------------------------------------------------------------------------------------------
Total noninterest income $ 5,013 $ (729) $ 5,742 $ 6,700 $ 13,943 $ 7,074 $ 6,869
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Noninterest income, net of restructuring activity, decreased to $5.7 million for
1995, from $6.7 million for 1994, and $6.9 million for 1993. Current year
restructuring losses of $729 thousand include the previously-discussed $620
thousand loss on the sale of investment securities, and a $109 thousand loss on
the sale of fixed assets at the two branches being sold. The remaining
decrease in noninterest income resulted from lower merchant bankcard fee
revenues, partially offset by an increase in life insurance income which
included a benefit payment of $407 thousand.
Noninterest income in 1994 included gains on sales of loans and sale of the
Company's headquarters facility of approximately $215 thousand and $414
thousand, respectively.
Noninterest income in 1993 included approximately $7.1 million of gains on sales
of investment securities from the 1993 Restructuring of the Company's investment
securities portfolio.
Noninterest Expense
The following table provides a breakdown of the Company's noninterest expense by
category, net of restructuring charges:
14
<PAGE>
Part I. Item 1 (continued)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) YEARS ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------------------------------------------------------
1995 1993
1995 Restructure 1995, Net 1994 1993 Restructure 1993 Net
---- ----------- --------- ---- ---- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Salaries and employee benefits $ 10,723 $ 179 $ 10,544 $ 9,763 $ 10,743 $ 275 $ 10,468
Occupancy, furniture and equipment 5,273 256 5,017 4,666 5,129 555 4,574
Professional fees 1,740 86 1,654 1,882 1,583 - 1,583
Telecommunications 481 - 481 352 318 - 318
Office supplies 391 - 391 436 470 114 356
Data processing 502 - 502 449 448 - 448
Merchant card expense 475 - 475 1,013 1,424 - 1,424
FDIC assessment 498 - 498 1,006 888 - 888
Insurance 348 - 348 436 399 - 399
Goodwill amortization 821 427 394 211 167 - 167
Other real estate owned 219 - 219 1,832 2,897 - 2,897
Advertising and business development 772 - 772 613 576 - 576
Postage and delivery 586 - 586 543 415 - 415
Other operating expense 464 - 464 650 567 - 567
- -----------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense $ 23,293 $ 948 $ 22,343 $23,852 $ 26,024 $ 944 $ 25,080
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Noninterest expense as a %
of average total assets 4.89% 5.90% 5.40%
</TABLE>
The Company reported noninterest expense of $23.3 million, $23.9 million, and
$26.0 million for the years ended December 31, 1995, 1994 and 1993,
respectively. The current year's expense included $948 thousand of restructuring
charges for (1) staff reductions including branch sales - $179 thousand; (2)
closure of an administrative facility and write off of lease obligations on
branch sales - $256 thousand; (3) accruals for legal and professional fees
anticipated for the branch sale transactions - $86 thousand; and (4) write-off
of $427 thousand of goodwill associated with one of the branches being sold. As
adjusted for restructuring charges, noninterest expense for 1995 was $22.3
million as compared to approximately $23.9 for 1994. The net decrease reflects
decreases in the FDIC assessment, net expenses for other real estate owned
("OREO"), and merchant bankcard expenses offset by increases in salaries and
benefits, occupancy, and goodwill amortization due to the IOBC purchase.
Noninterest expense decreased $1.2 million to $23.9 million for 1994 from $25.1
million for 1993 which is net of $944 thousand of restructuring charges related
to branch closures and consolidations. Most of the decreases were reflected in
salaries and benefits, occupancy, furniture and equipment, net expenses for
OREO, and merchant bankcard expenses, offset by increases in professional fees
and FDIC assessment.
The Company has improved its operating efficiencies and achieved lower
noninterest expense, as adjusted for the expenses and losses of the
restructuring plan, and the branch consolidations, on a larger average earning
assets base. As adjusted, noninterest expense as a percentage of average total
assets has decreased to 4.89% in 1995 from 5.90% in 1994. Noninterest expense
as a percentage of average total assets increased to 5.90% in 1994 from 5.40% in
1993.
The increase in salaries and benefits after adjusting for restructuring charges,
for the year ended December 31,1995 compared to the previous year, is primarily
due to the addition of the IOBC corporate banking staff, partly offset by
reductions in staffing elsewhere in the organization. The Company had 230 and
220 full-time equivalent staff at December 31, 1995 and 1994, respectively.
Salaries and benefits decreased by approximately $705 thousand after adjusting
for $275 thousand related to branch consolidations in 1993 to $9.8 million for
the year ended December 31, 1994, from $10.5 million for the year ended December
31, 1993, largely as a result of staff reductions from branch consolidations. At
December 31, 1994, the Company had 220 full-time equivalent employees, down from
244 at year-end 1993.
15
<PAGE>
Part I. Item 1 (continued)
The following table sets forth the components of the Company's OREO expense for
the years indicated:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) YEARS ENDED DECEMBER 31,
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
1995 1994 1993
---- ---- ----
OREO income $ (95) $ - $ -
OREO holding expenses 316 655 151
Writedowns and provisions for losses 128 1,182 2,487
Net (gains)/losses from sales (130) (5) 259
- ---------------------------------------------------------------------------
OREO expense, net $ 219 $ 1,832 $ 2,897
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
OREO expense decreased by $1.6 million to $219 thousand for 1995, from $1.8
million in the previous year. Most of the decrease for the year is reflected in
lower charges for writedowns of OREO properties, and from lower holding costs.
Seven OREO properties were sold during the year, resulting in a net gain of $130
thousand. OREO expense for 1994 decreased approximately $1.1 million from $2.9
million for 1993 to $1.8 million for 1994. The decrease resulted from lower
OREO writedowns, offset by slightly higher OREO holding costs.
Financial Condition
Additional discussion of the Company's financial condition is provided in the
MD&A in Part II, Item 7, of this Form 10-K.
Cash And Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposits at correspondent
banks and overnight investment of excess cash balances as Federal funds sold.
The Company maintains balances at correspondent banks adequate to cover daily
inclearings and other charges. In accordance with Federal regulations, reserve
balances of $3.0 million were maintained in the form of deposits with the
Federal Reserve Bank at December 31,1995.
Investment Securities
The Company's securities portfolio includes U.S. Treasury securities and U.S.
federal agency securities, most of which are mortgage-backed securities. The
Company reclassified its entire held-to-maturity portfolio to the available-for-
sale category in December, 1995 under the special one-time exemption authorized
by the Financial Accounting Standards Board. The decrease in the balance of
investment securities due to sales and maturities is discussed in Item 1-Net
Interest Income above. Reference may also be made to NOTE 1-SIGNIFICANT
ACCOUNTING POLICIES AND NOTE 3-INVESTMENT SECURITIES of the Company's
consolidated financial statements located in Part II, Item 8, of this Form 10-K.
The following table sets forth the maturity distribution of the Company's
investment securities at December 31, 1995:
<TABLE>
<CAPTION>
Maturing in
- -------------------------------------------------------------------------------------------------------
Over one Over five
One year year through years through Over
or less five years ten years ten years Total
- -------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
U.S. Treasury securities $ - $ 5,085 $ - $ 74 $ 5,159
U.S. Agency securities - 36,876 - - 36,876
Mortgage-backed securities 7,872 41,907 2,216 - 51,995
- --------------------------------------------------------------------------------------------------------
Total $ 7,872 $ 83,868 $ 2,216 $ 74 $ 94,030
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
Part I. Item 1 (continued)
LOANS
The following table sets forth the amount of loans by type for the years
indicated:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 1995 % 1994 % 1993 % 1992 % 1991 %
- -----------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial $147,230 46.47% $79,369 38.22% $73,220 34.47% $88,761 34.37% $101,762 33.71%
Real estate, construction 4,416 1.39% 30 0.01% 1,991 0.94% 8,935 3.46% 21,777 7.21%
Real estate, mortgage 107,662 33.98% 83,712 40.31% 99,190 46.70% 117,280 45.41% 127,323 42.18%
Consumer 57,533 18.16% 44,577 21.46% 38,006 17.89% 43,271 16.76% 51,020 16.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Gross loans 316,841 100.00% 207,688 100.00% 212,407 100.00% 258,247 100.00% 301,882 100.00%
------- ------- ------- ------- --------
------- ------- ------- -------
Deferred fee income (531) (298) (274) (625) (918)
Allowance for possible loan losses (5,734) (5,318) (10,800) (6,859) (4,575)
- ----------------------------------------------- --------- --------- ---------- -----------
Loans. net $310,576 $202,072 $201,333 $250,763 $ 296,389
- ----------------------------------------------- --------- --------- ---------- ------------
- ----------------------------------------------- --------- --------- ---------- ------------
No industry constitutes a concentration in the Bank's loan portfolio
</TABLE>
The Company provides a full range of credit products designed to meet the credit
needs of borrowers in its service area. The Company engages in medium-term
commercial real estate loans secured by commercial properties, commercial loans,
term financing, SBA loans, and consumer loans principally in the form of home
equity lines of credit, vehicle loans, and personal lines of credit to high net
worth individuals. Additionally, the Company has added construction loan
products principally for entry level housing and owner-user commercial
industrial properties. Construction loans outstanding at December 31,1995, were
$4,416,000.
Please refer to NOTE 4-LOANS in the Company's consolidated financial statements
included in Part II, Item 8, of this Form 10-K as a basis for the following
discussion of changes in the Company's loan portfolio from December 31, 1994 to
December 31, 1995.
COMMERCIAL LOANS. Commercial loans totaled $147.2 million or 46.47% of total
loans and $79.4 million or 38.22% of total loans at December 31, 1995 and
December 31, 1994, respectively. Most of the increase of $67.8 million resulted
from the purchase of $37.4 million of commercial loans from IOBC in the second
quarter of 1995, and $29.2 million of loan purchases, principally SBA loans,
during the fourth quarter of 1995. As adjusted for the purchased loans,
commercial loans increased $38.7 million or 48.7% from year-end 1994. Most of
the Bank's commercial borrowers and customers are small to medium-sized
businesses and professionals. Most of the commercial loans are short term, are
reviewed and renewed annually, and bear a floating rate of interest.
Approximately 65% of the commercial loan portfolio is collateralized.
Collateral for these loans consists of accounts receivable, inventories,
equipment, and other business assets, including real estate. At December
31,1995, $29.5 million or 9.31% of total loans were secured by accounts
receivable as compared to $26.0 or 12.53% of loans at December 31, 1994.
Commercial loans secured by real estate were $18.9 million or 5.97% at December
31,1995, as compared to $13.7 million or 6.60% of loans at December 31, 1994.
In 1994, the Company began participating in government-insured lending programs,
including SBA loans. At December 31,1995, the Company reported $22.8 million of
SBA loans.
REAL ESTATE, CONSTRUCTION LOANS. Real estate construction loans comprised $4.4
million or 1.39% of outstanding loans at December 31, 1995. Construction loans
were not part of the Bank's previous market strategy. However, during the first
quarter of 1995, the Bank created a Real Estate Industries Department and
appointed an experienced real estate lender to manage the department. Going
forward, the Bank plans to conservatively enter the recovering real estate
market and to offer construction financing on quality projects.
REAL ESTATE, MORTGAGE LOANS. Real estate mortgage loans comprised $107.7
million or 33.98% of the total loan portfolio at December 31,1995, as compared
to $83.7 million or 40.31% of the total loans outstanding at year end 1994.
Approximately $16.8 million of real estate loans were purchased from IOBC.
Therefore, adjusted real estate loans have increased $7.2 million or 0.97% since
1994. This decrease resulted from deliberate actions by the Bank's management
to reduce the concentration of real estate loans in the Bank's loan portfolio.
During 1994, the Bank limited new real estate loans to existing borrowers who
were owner/users or to new borrowers who provided a new major banking
relationship, and demonstrated adequate cash flows. All new real estate
borrowers must provide financial reporting that meets FDICIA standards and the
loans must have conservative loan to value ratios. Approximately 80% of the
Bank's real estate loans are secured by first trust deeds; and approximately 50%
are to owner/users.
CONSUMER LOANS. Approximately $57.5 million or 18.16% of the loan portfolio was
made up of consumer loans at December 31,1995. At December 31,1995, $28.0
million or 8.85% of total loans were comprised of home equity loans and home
equity lines
17
<PAGE>
Part I. Item 1 (continued)
of credit. Vehicle loans comprised approximately $18.0 million of outstanding
consumer loans at December 31,1995. Approximately $4.8 million of consumer
loans outstanding at December 31,1995, consisted of a successful new loan
product designed for high net worth individuals which was acquired from IOBC and
has been integrated into the Bank's portfolio of products. The levels of
consumer loans at period ends may fluctuate and may not necessarily be
representative of average levels experienced during the respective periods due
to the timing of advances and payments made on such loans by borrowers.
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
The following table sets forth the maturity distribution of the Company's loan
portfolio (excluding consumer and nonaccrual loans) at December 31, 1995 based
on remaining scheduled principal repayments:
<TABLE>
<CAPTION>
Maturing in
- --------------------------------------------------------------------------------------
Over one
One year year through Over
or less five years five years Total
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(GROSS LOANS, IN THOUSANDS)
Commercial $ 82,784 $38,900 $24,775 $146,459
Real estate, construction 3,346 1,070 - 4,416
Real estate, mortgage 26,078 59,945 21,025 107,048
- --------------------------------------------------------------------------------------
Total $112,208 $99,915 $45,800 $257,923
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
The following table sets forth information on sensitivity to changes in
interest rates for the Company's loan portfolio (excluding consumer and
nonaccrual loans) at December 31, 1995:
<TABLE>
<CAPTION>
Repricing in
- --------------------------------------------------------------------------------------
Over one
One year year through Over
or less five years five years Total
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(GROSS LOANS, IN THOUSANDS)
Fixed interest rates $ 21,949 $ 42,728 $ 21,655 $ 86,332
Variable interest rates 171,591 - - 171,591
- --------------------------------------------------------------------------------------
Total $ 193,540 $ 42,728 $ 21,655 $ 257,923
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
The amounts reported in the categories in the tables do not reflect loan
prepayments or other factors which may cause the loans to react in different
degrees and at different times to changes in market interest rates.
Asset Quality
Nonaccrual, Past Due And Modified Loans
The Company recognizes income principally on the accrual basis of accounting.
In determining income from loans, the Company generally adheres to a policy of
not accruing interest on loans on which a default of principal or interest has
existed for a period of 90 days or more. The Company's policy is to assign
nonaccrual status to a loan if either (i) principal or interest payments are
past due in excess of 90 days, unless the loan is both well secured and in the
process of collection; or (ii) the full collection of interest or principal
becomes uncertain, regardless of the length of past due status. When a loan
reaches nonaccrual status, any interest accrued on such a loan is reversed and
charged against current income.
Nonaccrual loans decreased to $1.4 million at December 31, 1995 from $1.6
million at December 31, 1994. The percentage of nonaccrual loans to total
loans decreased to 0.44% from 0.78% during the same period. Interest income
that would have been collected on these loans had they performed in
accordance with their original terms, was approximately $207 thousand, $93
thousand and $550 thousand for the years ended December 31, 1995, 1994 and
1993, respectively.
18
<PAGE>
Part I. Item 1 (continued)
In the third quarter of 1994, the Company negotiated a bulk sale of assets which
totaled $6.8 million. This sale included $2.9 million in nonaccrual loans and
$630 thousand in OREO properties. The cash proceeds from the sale approximated
the book value of the loans after a charge-off of $2.8 million was taken against
the existing allowance for loan losses.
The following table provides the balance of the Company's nonaccrual loans as of
the dates indicated. The Company has no loans past due 90 days or more and
still accruing interest:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
December 31, 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Nonaccrual loans (1) $ 1,385 $ 1,612 $ 7,081 $ 7,426 $ 11,234
Nonaccrual loans as a percentage of
total gross loans 0.44% 0.78% 3.33% 2.88% 3.72%
- --------------------------------------
- --------------------------------------
</TABLE>
(1) Includes loans with modified terms of $125thousand, $100
thousand and $1.4 million as of the years ended December 31,
1995, 1994 and 1993, respectively.
Nonaccrual loans by category are summarized below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1995 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Commercial $ 620 $ 283 $ 1,269
Real estate, construction - - -
Real estate, mortgage 615 930 5,789
Consumer 150 399 23
- ---------------------------------------------------------------------
Total nonaccrual loans $ 1,385 $ 1,612 $ 7,081
- ---------------------------------------------------------------------
</TABLE>
Delinquent loans (past due 30 to 89 days) by category are summarized below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1995 1994 1993
- ---------------------------------------------------------------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Commercial $ 548 $ 998 $ 696
Real estate, construction - - -
Real estate, mortgage 503 2,089 1,239
Consumer 411 416 436
- ---------------------------------------------------------------------
Total delinquent loans $ 1,462 $ 3,503 $ 2,371
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
The levels of delinquent loans may fluctuate and may not necessarily be
representative of levels experienced during the respective periods due to the
variability of the timing of payments made on such loans by borrowers.
Management cannot predict the extent to which the changes in the current
economic environment may impact the Company's loan portfolio. Furthermore, the
Company's primary regulators review the loan portfolio as an integral component
of their regular examinations of the Company, and their assessment of specific
credits may affect the level of the Company's problem assets. Accordingly,
there can be no assurance that other loans will not become nonaccrual, potential
problem credits or delinquent loans in the future.
Allowance For Possible Loan Losses
A certain degree of risk is inherent in the extension of credit. Management has
adopted a policy to maintain the allowance for possible loan and lease losses at
a level considered by management to be adequate to absorb estimated known and
inherent risks in the existing portfolio.
19
<PAGE>
Part I. Item 1 (continued)
Management performs a comprehensive analysis of the loan portfolio and its
current allowance for loan losses on a regular basis to determine that loans are
currently protected according to financial and collateral standards deemed
acceptable. The allowance for possible loan losses represents management's
recognition of the assumed risks of extending credit and the quality of the loan
portfolio. The allowance is management's estimate, which is inherently
uncertain and depends on the outcome of future events. A sudden and sustained
increase in interest rates could have an adverse impact of borrowers' ability to
repay. The evaluation of the quality of the loan portfolio considers the
borrower's management, financial condition, cash flow and repayment program, as
well as the existence of collateral and guarantees. External business and
economic factors beyond the borrower's control, combined with the Company's
previous loan loss experience, are considered in management's evaluation of the
allowance for possible loan losses. In addition, the bank regulatory
authorities, as an integral part of their examination process, periodically
review the Company's allowance for possible loan losses and may recommend
additions to the allowance based on their assessment of information available to
them at the time of their examination.
When it is determined that additions are required, additions to the allowance
are made through charges to operations and are reflected in the statements of
operations as a provision for loan losses. Loans which are deemed to be
uncollectible are charged to the allowance. Subsequent recoveries, if any, are
credited back to the allowance. Reference may be made to NOTE 4-LOANS of the
Company's consolidated financial statements, which are located in Part II, Item
8, of this Form 10-K, for additional detail concerning activity in the allowance
for possible loan losses, including loan charge-offs and recoveries.
The following table provides a summary of net charge-offs for the years
indicated:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Net charge-offs $ 1,740 $ 4,632 $ 7,809 $ 6,788 $ 1,393
Ratio of net charge-offs to
average loans outstanding 0.67% 2.28% 3.32% 2.40% 0.46%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Net charged-off loans were $1.7 million or .67% of average outstanding loans
for 1995 compared to 2.28%, 3.32%, 2.40% and 0.46% of average loans for 1994,
1993,1992 and 1991, respectively. This trend represents a continuing
improvement in the Company's loan portfolio quality following the economic
recession of the early 1990s.
Of the $4.6 million in net charged-off loans for 1994, $2.8 million were related
to the $6.8 million bulk loan and OREO sales that occurred in the third quarter.
Exclusive of the bulk loan sale, net charged off loans for 1994 would have been
0.88% of outstanding loans.
The following table sets forth the allocation of the allowance for possible loan
losses by category as of the dates indicated:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
December 31, 1995 % 1994 % 1993 %
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Commercial $ 1,821 31.76% $ 1,406 38.20% $ 2,563 34.50%
Real estate, construction 43 0.75% to 0.00% 139 0.90%
Real estate, mortgage 2,172 37.87% 2,366 40.30% 4,415 46.70%
Consumer 660 11.52% 592 21.50% 381 17.90%
Unallocated 1,038 18.10% 944 - 3,302 -
- ----------------------------------------------------------------------------------------------------------------------------------
Total allowance for possible loan losses $ 5,734 100.00% $ 5,318 100.00% $ 10,800 100.00%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Management establishes specific reserves where necessary, according to the
criteria for loans deemed to be impaired under the guidance of SFAS No. 114 and
No. 118. These amounts are included in the allowance for loan losses shown
above. The remainder of the allowance is general in nature and is available for
the loan portfolio in its entirety.
20
<PAGE>
Part I. Item 1 (continued)
Other Real Estate Owned
OREO primarily includes properties acquired through foreclosure or through full
or partial satisfaction of loans. The difference between the fair value of the
real estate collateral and the loan balance at the time of transfer to OREO is
reflected in the allowance for possible loan losses as a charge-off. Any
subsequent declines in the fair value of the OREO property after the date of
transfer are recorded through a provision for writedowns on OREO. Routine
holding costs, net of any income and net gains and losses on disposal, are
reported as noninterest expense. Activity in OREO for the years indicated is as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance, January 1 $ 5,837 $ 6,133 $ 6,318
Additions 1,923 3,585 7,648
Sales (5,689) (2,699) (4,726)
Valuation and other adjustments 2 (1,182) (3,107)
- ---------------------------------------------------------------------
Balance, December 31 $ 2,073 $ 5,837 $ 6,133
- ---------------------------------------------------------------------
</TABLE>
The OREO portfolio at December 31, 1995, consisted of 4 properties totaling $2.1
million. The Bank is actively marketing these properties.
DEPOSITS
The following table sets forth the distribution of average deposits and the
rates paid thereon for the years indicated:
<TABLE>
<CAPTION>
For the years ended December 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
Average Average % Average Average % Average Average %
balance Rate of total balance Rate of total balance Rate of total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Demand deposits (1) $123,815 30.47% $118,044 33.24% $118,066 29.11%
NOW/MMDA 81,815 1.77% 20.13% 78,860 1.73% 22.20% 78,216 1.90% 19.28%
Savings 55,204 2.08% 13.58% 78,558 1.99% 22.12% 93,950 2.38% 23.16%
TCDs 145,555 5.77% 35.82% 79,687 3.80% 22.44% 115,379 3.88% 28.45%
- -----------------------------------------------------------------------------------------------------------------------------------
Total average deposits $406,389 100.00% $355,149 100.00% $405,611 100.00%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company purchased approximately $19.8 million of noninterest bearing
demand deposits from IOBC in the second quarter of 1995. Since the
purchase, IOBC demand deposits have decreased $7.4 million, primarily due
to a reduction in balances maintained by a large commercial customer. Most
of the IOBC customer base has been retained. Demand deposits, net of the
effects of the IOBC purchase, have remained flat since 1994.
NOW/MMDA and savings accounts have decreased $29.4 million or 20.0% since 1994,
after adjusting for the acquired IOBC deposits. Much of the decrease represents
a shift in the Company's deposit mix as customers have transferred lower
yielding savings and MMDA balances into higher rate certificates of deposit,
which have increased 92.8% since December 31, 1994, on an adjusted basis.
During the first quarter of 1995, the Company introduced a promotional TCD
program. This program proved to be highly successful, procuring in excess of
$70 million in 7 to 12 month TCDs. The majority of the TCDs, approximately
$52.6 million, matured during August and September, 1995. The Company retained
$36.2 million or about 70% of the maturing TCDs at an average rate of 5.89%,
with maturities ranging from 7 months to 15 months. Approximately another $20
million of promotional TCDs will mature by February 1996.
21
<PAGE>
Part I. Item 1 (continued)
The following table sets forth the maturities of the Company's time certificates
of deposit outstanding at the dates indicated:
<TABLE>
<CAPTION>
December 31, 1995 Maturing in
- ----------------------------------------------------------------------------------------------------------------------------------
Over three Over six
Three months months through months through Over
or less six months twelve months twelve months Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Under $ 100,000 $ 32,926 $ 28,532 $ 31,492 $ 7,034 $ 99,984
$100,000 and over 20,183 13,587 9,260 3,118 46,148
- ----------------------------------------------------------------------------------------------------------------------------------
Total time certificates of deposit $ 53,109 $ 42,119 $ 40,752 $ 10,152 $ 146,132
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
December 31, 1994 Maturing in
- ----------------------------------------------------------------------------------------------------------------------------------
Over three Over six
Three months months through months through Over
or less six months twelve months twelve months Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Under $ 100,000 $ 16,467 $ 9,541 $ 9,905 $ 9,497 $ 45,410
$100,000 and over 15,556 6,249 4,532 2,620 28,957
- ----------------------------------------------------------------------------------------------------------------------------------
Total time certificates of deposit $ 32,023 $ 15,790 $ 14,437 $ 12,117 $ 74,367
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other Borrowed Funds
Other borrowed funds consist of overnight federal funds purchased, Treasury tax
and loan notes ("TT&L"), obligations under securities repurchase agreements, and
the principal portions of capitalized lease obligations, obligations to senior
lienholders for certain OREO properties, and deferred compensation liabilities.
Other borrowed funds decreased by $7.4 million to $6.4 million at December 31,
1995 from $13.8 million at year end 1994. Other borrowed funds increased to
$13.8 at December 31, 1994 from $8.7 million at year end 1993 because of
overnight Federal funds purchased at year end. The borrowed money was used to
fund new loans at December 31, 1994. The maximum balance of Federal funds
purchased and TT&L borrowings outstanding during 1994 was $8.0 million and $6.4
million, respectively. The average balance of and average rate paid on Federal
funds purchased and TT&L borrowings for 1994 were $620 thousand and 4.49%, and
$3.4 million and 3.17%, respectively. Refer to NOTE 8-BORROWED FUNDS AND OTHER
INTEREST-BEARING LIABILITIES of the Company's consolidated financial statements
located in Part II, Item 8, of this Form 10-K.
Asset/Liability Management
The objective of asset/liability management is to manage and control the
Company's exposure to interest rate fluctuations while maintaining adequate
levels of liquidity and capital. The Company seeks to achieve this objective by
matching its interest sensitive assets and liabilities, and maintaining the
maturity and repricing of these assets and liabilities at appropriate levels
given the interest rate environment. Generally, if rate sensitive assets exceed
rate sensitive liabilities, the net interest income will be positively impacted
during a rising rate environment and negatively impacted during a declining rate
environment. When rate sensitive liabilities exceed rate sensitive assets, the
net interest income will generally be positively impacted during a declining
rate environment and negatively impacted during a rising rate environment.
However, because interest rates for different asset and liability products
offered by depository institutions respond differently to changes in the
interest rate environment, the gap between rate sensitive assets and rate
sensitive liabilities can only be used as a general indicator of interest rate
sensitivity.
The following gap repricing table sets forth information concerning the
Company's rate sensitive assets and rate sensitive liabilities, including the
off-balance sheet amounts for interest rate swaps, as of December 31,1995. Such
assets and liabilities are classified by the earlier of maturity or repricing
date in accordance with their contractual terms. Certain shortcomings are
inherent in the method of analysis presented in the following gap table. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees and at different times
to changes in market interest rates. Also, loan prepayments and changes in the
mix or level of deposits could cause the interest sensitivities to vary from
those which appear in the table.
22
<PAGE>
Part I. Item 1 (continued)
<TABLE>
<CAPTION>
Three months One year
Three months through through Over
or less twelve months five years five years Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS
Federal funds sold $ - $ - $ - $ - $ -
Investment securities 1,964 5,904 82,886 3,276 94,030
Loans(l) 202,904 25,351 58,063 29,138 315,456
Interest rate swaps - - 75,000 - 75,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets $ 204,868 $ 31,255 $ 215,949 $ 32,414 $ 484,486
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
INTEREST-BEARING LIABILITIES
Interest-bearing demand and
savings deposits $ 130,301 $ - $ - $ - $ 130,301
Time certificates of deposit 53,109 82,871 10,140 12 146,132
Other borrowings and interest-
bearing liabilities 4,883 - - 1,524 6,407
Interest rate swaps 75,000 - - - 75,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $ 263,293 $ 82,871 $ 10,140 $ 1,536 $ 357,840
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Interest rate sensitivity gap $ (58,425) $ (51,616) $ 205,809 $ 30,878
Cumulative interest rate sensitivity (58,425) (110,041) 95,768 126,646
Cumulative interest rate sensitivity gap
as a percentage of total interest-
earning assets -12.06% -22.71% 19.77% 26.14%
</TABLE>
- -------------------
(1) Loans exclude nonaccrual loans of $1,385
At December 31,1995, the Company's rate sensitive balance sheet was shown to be
in a negative gap position over a one year horizon. The cumulative gap between
assets and liabilities that reprice within 12 months was -$110.0 million or -
22.71% of assets. After one year, the gap turns positive. The table above
implies that the Company's earnings would be reduced in the short-term if
interest rates rise, or in other words that the Company is liability sensitive.
However, although the Company exhibits a negative cumulative interest rate
sensitivity gap as a percentage of total interest-earning assets in the one year
or less horizon, management believes that the Company is asset sensitive in such
period. This tendency is primarily due to the Company's core deposits, which are
capable of being repriced currently and are therefore classified in the "three
months or less" category, but which management believes respond similarly to
long-term deposits. By including these core deposits in the over one year
repricing categories in the gap table above, the Company would be asset
sensitive. This asset sensitivity also stems from the size of the Company's
variable rate loan portfolio. More than 70% of the entire loan portfolio
reprices within one year.
In addition to utilizing the repricing gap table above in managing its interest
rate risk, the company performs a quarterly income simulation analysis. This
simulation analysis provides a dynamic evaluation of the Company's balance sheet
and income statement under varying yield curve scenarios, providing an estimate
of both the dollar amount and percentage change in net interest income under
various changes in interest rates. The income simulation analysis conducted as
of December 31, 1995, indicates that the Company remains moderately asset-
sensitive. Thus, a rising rate environment would tend to lead to an increase in
net interest income, while a falling rate environment would tend to lead to a
decrease in net interest income.
In order to stabilize the Company's net interest income with respect to changing
rates, the Company entered into a $50 million 5-year interest rate swap
agreement in September 1993 ("Swap #1") and a $25 million 3-year interest rate
swap agreement in January 1994 ("Swap #2"). The terms of these swap agreements
require the Company to pay a floating rate of interest tied to three-month
LIBOR, and to receive fixed rates of interest of 4.87% and 5.04% for Swap #1 and
Swap #2, respectively. The Company's combined break-even point on both swap
agreements is approximately 4.92%. Since the fourth quarter of 1994, three-month
LIBOR has
23
<PAGE>
Part I. Item 1 (continued)
exceeded the Company's break-even point, so that interest expense on the swap
agreements has exceeded interest income. Net interest expense on the swaps for
the year ended December 31,1995, was $929 thousand, as compared to net interest
income of $141 thousand for the year ended December 31, 1994.
Liquidity
Refer to the MD&A in Part II, Item 7, of this Form 10-K for a discussion of the
Company's liquidity.
Capital Resources
Refer to the MD&A in Part II, Item 7, of this Form 10-K for detail on the
Company's and Bank's capital resources.
ITEM 2 PROPERTIES
The Company owns the following properties:
The Bellflower branch office, located at 17046 Bellflower Boulevard,
Bellflower, California. This 2,924 square foot facility houses the
Bank's Bellflower branch.
The Brea branch office, located at 275 West Central Avenue, Brea,
California. This 5,300 square foot facility houses the Bank's Brea
branch.
The Downey Main branch office, located at 10990 Downey Avenue, Downey,
California. This 8,795 square foot facility houses the Bank's Downey
branch and its Los Angeles County Business Banking group.
The Orange branch office, located at 303 West Katella Avenue, Orange,
California. This 20,966 square foot facility houses the Bank's Orange
branch.
The Santa Fe Springs branch office, located at 13372 East Telegraph
Road, Santa Fe Springs, California. This 7,300 square foot facility
houses the Bank's Santa Fe Springs branch.
The Uptown Whittier branch office, located at 12802 East Hadley
Street, Whittier, California. This 5,460 square foot facility houses
the Bank's Uptown Whittier branch.
The Whittier branch office, located at 13525 West Whittier Boulevard,
Whittier, California. This 9,000 square foot facility houses the
Bank's Whittier branch.
The Company leases the following properties:
The Company leases 44,259 square feet for its operations center
offices, located at 16420 Valley View Avenue, La Mirada, California.
The Company leases 4,000 square feet for the Bank's Yorba Linda branch
office, located at 17490 East Yorba Linda Boulevard, Yorba Linda,
California.
The Company leases 10,463 square feet for its executive offices,
located at 3800 East La Palma Avenue, Anaheim, California. This
location also houses the Bank's Tustin/La Palma branch.
The Company leases 6,000 square feet at 5799 E. La Palma Avenue, Anaheim
Hills, California.
The Company leases 441 square feet for its Anaheim Pavilions
Supermarket branch office, located at 8010 Santa Ana Canyon Road,
Anaheim Hills, California.
The Company leases 4,000 square feet for its Catalina branch office,
located at 303 Crescent Avenue, Avalon, California, on Santa Catalina
Island.
24
<PAGE>
Part I. Item 2 (continued)
The Company leases 6,500 square feet for its City of Industry branch
office, located at 18261 - 63 Gale Avenue, City of Industry, California.
The Company leases 6,980 square feet for its Huntington Beach branch
office, located at 9042 Garfield Avenue, Huntington Beach, California.
The Company leases 411 square feet for its La Habra branch office,
located at Smith's Food and Drug King Market, 2101 West Imperial
Highway, La Habra, California.
The Company leases 3,025 square feet for its Signal Hill branch office,
located at 2501 Cherry Avenue, Signal Hill, California.
The Company leases 9,495 square feet for its Laguna Hills branch office,
located at 24061 Calle de la Plata, Laguna Hills, California. This
location also houses its Orange County Corporate Banking Center.
The Company leases 3,471 square feet for its La Jolla branch office,
located at 4180 La Jolla Village Drive, Suite 125, La Jolla, California.
The Company leases 2,100 square feet for its San Diego Corporate Banking
Center, located at 4180 La Jolla Village Drive, Suite 430, La Jolla,
California.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation involving various aspects of its
business. As of the date of this Form 10-K, it is management's opinion after
consulting with legal counsel that none of the pending litigation will have a
material adverse impact on the consolidated financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to shareholders during the fourth quarter of 1995.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Common Stock is listed on the American Stock Exchange ("AMEX") under the
symbol, "SCK". The following table sets forth the high and low closing sale
prices on a per share basis for the Common Stock as reported by the AMEX for the
periods indicated:
The Company had approximately 610 shareholders of record of its common stock as
of March 1, 1996.
<TABLE>
<CAPTION>
High Low
-------------------------------------------------------------------
<S> <C> <C>
1994 First quarter $6 $4 3/4
Second quarter 5 3/8 4 1/4
Third quarter 5 1/8 4 5/8
Fourth quarter 5 3 3/4
1995 First quarter 5 1/4 4 5/16
Second quarter 5 1/4 4 5/8
Third quarter 6 5/8 4 3/4
Fourth quarter 6 1/8 5 7/16
1996 First quarter (through March 25, 1996) 6 3/4 6 1/16
</TABLE>
On March 25, 1996 the last reported sales price per share for the Company's
stock was $6 1/2.
25
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
As of or for the year ended December 31, 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Statement of Operations Data:
Interest income $ 33,396 $ 26,420 $ 29,732 $ 35,915 $ 39,440
Interest expense 12,015 6,279 9,619 13,665 17,678
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income 21,381 20,141 20,113 22,250 21,762
Provision for loan losses 1,539 (850) 11,750 9,072 2,888
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 19,842 20,991 8,363 13,178 18,874
- ------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on sales of securities (620) 17 7,074 2,395 40
Noninterest income 5,633 6,683 6,869 5,605 5,225
Noninterest expense 23,293 23,852 26,024 23,712 20,648
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 1,562 3,839 (3,718) (2,534) 3,491
Provision for income taxes (benefits) 693 1,134 (1,026) (1,131) 1,089
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of a change
in accounting principle 869 2,705 (2,692) (1,403) 2,402
- ------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting principle - - (41) - -
- ------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 869 $ 2,705 $ (2,733) $ (1,403) $ 2,402
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Earnings per Share and Stock Data:
Net income (loss) $ 0.12 $ 0.49 $ (0.79) $ (0.40) $ 0.69
Cash dividends declared - - - - 0.20
Book value (1) 6.09 5.60 8.21 8.99 9.40
Weighted average shares outstanding (2) 7,472,805 5,507,000 3,468,505 3,468,505 3,468,505
Balance Sheet Data (year end balances):
Investment securities $ 94,030 $ 71,858 $ 149,543 $ 164,546 $ 112,812
Loans, net 310,576 202,072 201,333 250,763 296,389
Total assets 461,683 398,555 407,889 464,229 460,886
Total deposits $ 406,811 $ 339,939 $ 368,388 $ 402,892 $ 410,756
Shareholders' equity 45,512 41,844 28,462 31,195 32,598
Asset Quality:
Nonaccrual loans (3) $ 1,385 $ 1,612 $ 7,081 $ 7,426 $ 11,234
OREO 2,073 5,837 6,133 6,318 258
Asset Quality Ratios:
Net charge-offs to average gross loans 0.67% 2.28% 3.32% 2.40% 0.46%
Nonaccrual loans to year-end gross loans 0.44% 0.78% 3.33% 2.88% 3.72%
Nonperforming assets to year-end assets (4) 0.75% 1.87% 3.24% 2.96% 2.49%
Allowance for possible loan losses to year-end
gross loans 1.81% 2.56% 5.08% 2.66% 1.52%
Allowance for possible loan losses to nonaccrual loans 414.01% 329.88% 152.53% 92.36% 40.72%
Selected Performance Ratios:
Return on average assets 0.19% 0.67% -0.59% -0.30% 0.55%
Return on average shareholders' equity 2.14% 6.59% -8.90% -4.42% 7.41%
Average shareholders' equity to average assets 8.87% 10.15% 6.61% 6.73% 7.42%
Dividend payout ratio 0.00% 0.00% 0.00% 0.00% 28.88%
Noninterest expense to average assets 5.09% 5.90% 5.61% 5.03% 4.79%
Net interest margin (5) 5.30% 5.75% 4.82% 5.27% 5.73%
Company Capital Ratios:
Leverage 9.08% 10.74% 6.09% 6.30% 6.60%
Tier 1 risk-based capital 10.75% 15.72% 8.89% 9.10% 8.40%
Total capital 12.01% 16.98% 10.18% 10.60% 9.70%
Bank Capital Ratios:
Leverage 8.59% 8.86% 6.09% 6.30% 6.60%
Tier 1 risk-based capital 10.14% 12.96% 8.89% 9.10% 8.40%
Total capital 11.39% 14.22% 10.18% 10.60% 9.70%
- --------------------------------------------------------------------------
</TABLE>
(1) All book value per share data are based on the number of shares outstanding
at year end
(2) Excludes the effect of stock options as common stock equivalents as such
effect was antidilutive for 1992 and 1993, and immaterial for 1991, 1994
and 1995.
(3) Includes loans with modified terms of $125 thousand in 1995, $100 thousand
in 1994, and $1.4 million in 1993. The Company has no loan 90 days past
due and still accruing interest.
(4) Includes nonaccrual loans, other real estate acquired by the Bank through
foreclosure or deed-in-lieu of foreclosure, and loans classified as
in-substance foreclosure.
(5) Computed on tax-equivalent basis for 1992 and 1991. The Company had no
investments in tax-exempt municipal securities for 1995, 1994 and 1993.
26
<PAGE>
PART II.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The following discussion presents information about the results of operations,
financial condition, liquidity and capital resources of SC Bancorp and its
subsidiary, Southern California Bank (together, the "Company"). This
information should be read in conjunction with the audited consolidated
financial statements of the Company and the notes thereto, and the accompanying
quarterly unaudited consolidated financial statements and notes thereto.
Reference is also made to Item 1 of the Company's annual report on Form 10-K,
which provides certain additional financial information regarding the Company.
Copies of the Form 10-K are available without charge on written request directed
to Southern California Bank, Finance Department, P.O. Box 588, La Mirada, CA
90637-0588.
Two significant events impacting operating results for 1995 were the acquisition
of the corporate and private banking loans and deposits of Independence One Bank
of California, F.S.B. ("IOBC") on April 30, 1995, and the 1995 Restructuring in
the third quarter discussed below. The Bank acquired $72.4 million in loans
and $34.7 million of deposits from IOBC. Funds for the acquisition were
generated through a $5.0 million capital infusion from SC Bancorp and the TCD
promotion held during the first quarter of 1995. Reference is made to the
registrant's Form 8-K/A, dated April 30, 1995, copies of which are available on
request as noted above, for additional discussion of the IOBC transaction. The
1995 Restructuring involved the sale of two branches, consolidation of selected
operations, reductions in staff and securities sales. The goal of the
restructuring was to improve operating efficiencies and to provide additional
liquidity for future loan growth.
Results Of Operations
The Company reported net income of $869 thousand for 1995 compared to net income
of $2.7 million for 1994, and a net loss of $2.7 million for 1993. Net income
for 1995 reflects approximately $1.7 million of restructuring charges and losses
before tax, a $600 thousand additional loan loss provision specific to the
collateral valuation on two commercial real estate loans also recorded in the
third quarter, and a $408 thousand nonrecurring adjustment to interest expense
in the first quarter for deferred compensation plans. These expenses and losses
are partially offset by a $407 thousand gain in the first quarter resulting from
a benefit payment received on corporate owned life insurance which is reflected
in noninterest income; a refund of FDIC insurance premiums of approximately $239
thousand which is reported in noninterest expense as an offset to insurance
premium expense; and a gain on sale of loans of approximately $145 thousand
which is also reported in noninterest income. The previous year's results
include a $448 thousand gain on the sale of the Company's headquarters building,
a $215 thousand gain on the sale of loans, and a $850 thousand reversal of
previously recorded allowance for possible loan losses. The net loss during
1993 was primarily attributable to large provisions for loan losses and
writedowns of OREO, reduced interest income due to a change in balance sheet
composition from higher-yielding loans to investment securities, and
approximately $960 thousand of nonrecurring expenses recorded for branch
consolidations in conjunction with the 1993 Restructuring.
Net interest income increased $1.2 million to $21.4 million for the year ended
December 31,1995, from $20.1 million a year ago. Most of the increase was due
to higher average loan balances, which increased $58.1 million over 1994 largely
due to the purchase of the IOBC loans as well as guaranteed portions of SBA
loans. Net interest income increased slightly, by $28 thousand, in 1994 from
$20.1 million in 1993, despite the $67.1 million decrease in average earning
assets to $350.0 million for 1994 from $417.1 million for 1993. Yields on prime-
based loans, however, increased as a result of increases in the national prime
rate of nearly 2.5% during 1994.
Although net interest income increased $1.2 million from 1994, the Company's
net interest margin decreased to 5.30% for the year ended December 31, 1995,
compared to 5.75% for the prior year and 4.82% for 1993. The decrease in the
net interest margin can be attributed to higher interest expense due to an
adjustment recorded on the Company's deferred compensation plans and increased
interest expense associated with the TCD program that provided funding for the
IOBC transaction. Most of these TCDs matured in September 1995, and many were
renewed at significantly lower rates. The increase in the net interest margin
for 1994 as compared to 1993 reflects the significant increases in market rates
during 1994.
27
<PAGE>
Part II. Item 7 (continued)
Noninterest income was $5.0 million, $6.7 million, and $13.9 million for the
years ended December 31, 1995, 1994, and 1993, respectively. As part of the
1995 Restructuring, the Company sold approximately $27.0 million of its
investment securities classified as available-for-sale and realized a loss of
approximately $620 thousand. Other fee income also declined compared to the
prior year due to reductions in merchant bankcard fee income. Noninterest
income for 1994 included nonrecurring gains on the sale of assets as discussed
above. Noninterest income in 1993 included approximately $7.1 million in gains
on sales of securities from the restructuring of the Company's investment
securities portfolio.
Operating expenses, excluding 1995 restructuring charges of $948 thousand,
decreased from $23.9 million for the year ended December 31, 1994, to $22.3
million for the year ended December 31, 1995. The decrease in operating expense
largely occurred in the OREO, FDIC assessment and merchant bankcard expense
categories. Operating expenses, excluding 1993 restructuring charges of $944
thousand for branch consolidations, decreased $1.2 million from $25.1 million
for the year ended December 31, 1993 to $23.9 million for the year ended
December 31, 1994. Most of the decreases were in salaries and benefits,
occupancy, furniture and equipment, OREO, and merchant bankcard expenses.
Total assets at December 31,1995, were $461.7 million, an increase of 15.8% from
$398.6 million at year-end 1994. Total deposits at December 31,1995, were
$406.8 million, an increase of 19.7% from $339.9 million at year-end 1994. The
increase in assets is primarily attributable to the IOBC loan purchase, and to
SBA loan purchases completed during the last quarter of 1995. Approximately half
of the increase in deposits resulted from the IOBC purchase, with the remaining
increase coming from the promotional TCD program in the first quarter of 1995.
The following table provides a summary comparison of assets and liabilities in
the Company's consolidated balance sheets and the percentage distribution of
these items for the dates indicated:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) Balance % Balance % Balance %
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 29,088 6.3% $ 31,118 7.8% $ 23,564 5.8%
Investment securities 94,030 20.4% 131,881 33.1% 149,543 36.7%
Loans, net 310,576 67.3% 202,072 50.7% 201,333 49.3%
Prentises and equipment, net 9,734 2.1% 10,254 2.6% 10,096 2.5%
Other real estate owned, net 2,073 0.4% 5,837 1.4% 6,133 1.5%
Accrued interest receivable 4,297 0.9% 4,330 1.1% 3,971 1.0%
Other assets 11,885 2.6% 13,063 3.3% 13,249 3.2%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 461,683 100.0% $ 398,555 100.0% $ 407,889 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing deposits $ 130,378 28.2% $ 118,020 29.6% $ 107,861 26.4%
Interest-bearing demand
& savings deposits 130,301 28.2% 147,552 37.0% 171,056 41.9%
Time certificates of deposit 146,132 31.7% 74,367 18.7% 89,471 22.0%
- ------------------------------------------------------------------------------------------------------------------------------
Total deposits 406,811 88.1% 339,939 85.3% 368,388 90.3%
- ------------------------------------------------------------------------------------------------------------------------------
Borrowed funds and other
interest-bearing liabilities 6,407 1.4% 13,771 3.5% 8,533 2.1%
Accrued interest payable
and other liabilities 2,953 0.6% 3,001 0.7% 2,506 0.6%
Total Shareholders' Equity 45,512 9.9% 41,844 10.5% 28,462 7.0%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 461,683 100.0% $ 398,555 100.0% $ 407,889 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
Part II. Item 7 (continued)
Liquidity
Liquidity management involves the Company's ability to meet the cash flow
requirements of its customers who may be depositors wanting to withdraw funds or
borrowers needing assurance that sufficient funds will be available to meet
their credit needs. The Company's liquid assets consist of cash and cash
equivalents, and investment securities, excluding those pledged as collateral.
It is the Company's policy to maintain a liquidity ratio (liquid assets to
liabilities) of between 20% and 40%, and to limit gross loans to no more than
85% of deposits. At December 31,1995, the Company's ratios were well within
these guidelines: the liquidity ratio was 25.3% and the loan to deposit ratio
was 77.9%.
The Company maintains short-term sources of funds to meet periodic planned and
unplanned increases in loan demand and deposit withdrawals and maturities. The
initial source of liquidity is the excess funds sold daily to other banks in the
form of Federal funds. Besides cash and cash equivalents, the Company maintains
a portion of its investment securities portfolio as available-for-sale.
Available-for-sale securities can be sold in response to liquidity needs or used
as collateral under reverse repurchase agreements. As part of its restructuring
plan, the Company liquidated a portion of its available-for-sale investment
securities portfolio during the year ended December 31, 1995. These securities
sales were undertaken to provide a funding source for loan growth, and to
strengthen the Bank's funding mix. The Company's liquid assets were $101.3
million at December 31,1995, compared to $125.3 million at December 31, 1994.
Secondary sources of liquidity include reverse repurchase agreements to borrow
cash for short to intermediate periods of time using the Company's available-
for-sale securities as collateral and Federal funds lines of credit that allow
the Company to temporarily borrow an aggregate of up to $25.0 million from three
commercial banks. At December 31,1995, the Company had approximately $81.7
million in unpledged securities that could be used for reverse repurchase
agreements. Federal funds arrangements with correspondent banks are subject to
the terms of the individual arrangements and may be terminated at the discretion
of the correspondent bank. Secondary sources of liquidity also include short-
term borrowings at the Federal Reserve Bank and the Federal Home Loan Bank.
Capital Resources
The Company and its bank subsidiary are subject to risk-based capital
regulations adopted by the federal banking regulators in January 1990. These
guidelines are used to evaluate capital adequacy, and are based on an
institution's asset risk profile and off balance sheet exposures, such as unused
loan commitments and standby letters of credit. The regulations require that a
portion of total capital be core, or Tier 1, capital consisting of common
shareholders' equity and perpetual preferred stock, less goodwill and certain
other deductions, with the remaining, or Tier 2, capital consisting of other
elements, primarily subordinated debt, mandatory convertible debt, and
grandfathered senior debt, plus the allowance for loan losses, subject to
certain limitations. As of December 1992, the risk-based capital rules were
further supplemented by a leverage ratio, defined as Tier 1 capital divided by
quarterly average assets after certain adjustments. The minimum leverage ratio
is 3 percent for banking organizations that do not anticipate significant growth
and have well-diversified risk (including no undue interest rate exposure),
excellent asset quality, high liquidity, and good earnings. Other banking
organizations not in this category are expected to have ratios of at least 4 to
5 percent, depending on their particular condition and growth plans. Higher
capital ratios can be mandated by the regulators if warranted by the particular
circumstances or risk profile of a banking organization. In the current
regulatory environment, banking companies must stay well capitalized, as defined
in the banking regulations, in order to receive favorable regulatory treatment
on acquisitions and favorable risk-based deposit insurance assessments.
Management seeks to maintain capital ratios in excess of the regulatory
minimums. Prior to December 1994, the Bank was required to attain a minimum
leverage ratio of 7.0% under the conditions of a Memorandum of Understanding
("MOU") the Bank entered into with the FDIC and the California State Banking
Department in November 1993. The FDIC and State Banking Department released the
Bank from the MOU effective February 15, 1995. As of December 31, 1995, the
capital ratios of the Company and the Bank exceeded the well capitalized
thresholds prescribed in the rules.
29
<PAGE>
Part II. Item 7 (continued)
The following table sets forth the Company's and the Bank's risk-based capital
and leverage ratios at December 31, 1995:
<TABLE>
<CAPTION>
Company Bank
- ----------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) Amount % Amount %
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leverage ratio $ 42,126 9.08% $ 39,727 8.59%
Regulatory minimum 18,552 4.00% 18,493 4.00%
Excess 23,574 5.08% 12,234 4.59%
Risk-based ratios
Tier 1 capital $ 42,126 (a) 10.75% (b) $ 39,727 (a) 10.14% (b)
Tier 1 minimum 15,671 4.00% (c) 15,671 4.00% (c)
Excess 26,455 6.75% 24,056 6.14%
Total capital $ 47,034 (d) 12.01% (b) $ 44,634 (d) 11.39% (b)
Total capital minimum 31,342 8.00% 31,342 8.00%
Excess 15,692 4.01% 13,292 3.39%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes common shareholders' equity (excluding unrealized losses on
available-for-sale securities) less goodwill. The Tier 1 capital ratio is
adjusted for the disallowed portion of deferred tax assets, if applicable.
(b) Risk-weighted assets of $391.7 million were used to compute these
percentages.
(c) Insured institutions, such as the Bank, must maintain a leverage ratio of
4% or 5%, a Tier 1 capital ratio of at least 4% or 6%, and a Total capital
ratio of at least 8% or 10% in order to be categorized adequately
capitalized or well-capitalized, respectively.
(d) Tier 1 capital plus the allowance for loan losses, limited to 1.25% of
total risk-weighted assets.
30
<PAGE>
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 29,088 $ 31,118
Federal funds sold- - -
- ---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 29,088 31,118
- ---------------------------------------------------------------------------------------------------------------
Securities held-to-maturity, at amortized cost:
fair value 1994 - $54,680 (Note 3) - 60,023
Securities available-for-sale, at fair value (Note 3) 94,030 71,858
Loans (Notes 4 and 16) 316,841 207,688
Less: Deferred fee income (531) (298)
Allowance for possible loan losses (5,734) (5,318)
- ---------------------------------------------------------------------------------------------------------------
Loans, net 310,576 202,072
- ---------------------------------------------------------------------------------------------------------------
Premises and equipment, net (Note 5) 9,734 10,254
Other real estate owned, net (Note 6) 2,073 5,837
Accrued interest receivable 4,297 4,330
Other assets 11,885 13,063
- ---------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 461,683 $ 398,555
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits: (Note 7)
Interest-bearing $ 276,433 $ 221,919
Noninterest-bearing 130,378 118,020
- ---------------------------------------------------------------------------------------------------------------
Total deposits 406,811 339,939
- ---------------------------------------------------------------------------------------------------------------
Borrowed funds and other interest-bearing liabilities (Note 8) 6,407 13,771
Accrued interest payable and other liabilities 2,953 3,001
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities 416,171 356,711
- ---------------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note I 1) - -
SHAREHOLDERS' EQUITY (NOTES 10 AND 15)
Preferred stock, no par or stated value: 10,000,000
shares authorized; no shares issued or outstanding
Common stock, no par or stated value: 20,000,000 shares
authorized; 7,471,505 shares issued and outstanding at
December 31, 1995, and 7,468,505 shares issued and
outstanding at December 31, 1994 37,658 37,643
Retained earnings 8,600 7,731
Unrealized loss on available-for-sale securities, net of taxes (746) (3,530)
- ---------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 45,512 41,844
- ---------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 461,683 $ 398,555
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
31
<PAGE>
Part II. Item 8 (continued)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 25,960 $ 18,971 $ 20,212
Interest on investment securities 6,299 7,166 9,054
Interest on Federal funds sold 1,137 283 466
- ------------------------------------------------------------------------------------------------------------------------------
Total interest income 33,396 26,420 29,732
- ------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits:
Interest-bearing demand 1,451 1,363 1,487
Savings 1,150 1,564 2,240
Time certificates of deposit 8,397 3,029 4,473
- ------------------------------------------------------------------------------------------------------------------------------
Total interest on deposits 10,998 5,956 8,200
- ------------------------------------------------------------------------------------------------------------------------------
Other interest expense 1,017 323 1,419
- ------------------------------------------------------------------------------------------------------------------------------
Total interest expense 12,015 6,279 9,619
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income 21,381 20,141 20,113
Provision for (recovery of) possible loan losses (Note 3) 1,539 (850) 11,750
- ------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 19,842 20,991 8,363
- ------------------------------------------------------------------------------------------------------------------------------
Noninterest income:
Service charges on deposit accounts 1,727 1,754 1,779
Other fees and charges 2,542 2,637 3,162
Merchant bankcard income 518 1,249 1,631
Net (loss) gain on sales of investment securities (620) 17 7,074
Other gains on sales of assets, net 58 624 4
Other income 788 419 293
- ------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 5,013 6,700 13,943
- ------------------------------------------------------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 10,723 9,763 10,743
Net occupancy, furniture and equipment 5,273 4,666 5,129
Professional fees 1,740 1,882 1,583
Telecommunications 481 352 318
Office supplies 391 436 470
Data processing 502 449 448
Merchant bankcard 475 1,013 1,424
FDIC assessment 498 1,006 888
Insurance 348 436 399
Goodwill amortization 821 211 167
Other real estate owned 219 1,832 2,897
Advertising and promotion 772 613 576
Postage and delivery 586 543 415
Other operating expense 464 650 567
- ------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 23,293 23,852 26,024
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) before provision for income taxes (benefits) 1,562 3,839 (3,718)
Provision for income taxes (benefits) 693 1,134 (1,026)
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) before cumulative effect of change in accounting principle 869 2,705 (2,692)
Cumulative effect of change in accounting principle, net of tax - - (41)
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 869 $ 2,705 $(2,733)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 7,469 5,507 3,469
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share $ 0.12 $ 0.49 $ (0.79)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
32
<PAGE>
Part II. Item 8 (continued)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS AND SHARES OUTSTANDING IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED LOSS
ON AVAILABLE-FOR
COMMON STOCK RETAINED SALE SECURITIES,
SHARES AMOUNT EARNINGS NET OF TAX TOTAL
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 3,469 $ 23,436 $ 7,759 $ - $ 31,195
Net loss (2,733) (2,733)
- --------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 3,469 23,436 5,026 - 28,462
Common stock issued 4,000 14,207 14,207
Unrealized loss on available-for-sale securities (3,530) (3,530)
Net income 2,705 2,705
- --------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 7,469 37,643 7,731 (3,530) 41,844
Common stock issued 3 15 15
Unrealized loss on available-for-sale securities 2,784 2,784
Net income 869 869
- --------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 7,472 $ 37,658 $ 8,600 $ (746) $ 45,512
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
33
<PAGE>
Part II. Item 8 (continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 869 $ 2,705 $ (2,733)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Loss (gain) on sale of available-for-sale investment securities 620 (17) (7,074)
Net amortization of premiums on investment securities 2,165 1,695 2,319
Provision for (recovery of) possible loan losses 1,539 (850) 11,750
Gain on sale of loans (145) (215) -
Net amortization of deferred fees and unearned income on loans 29 24 (351)
Depreciation and amortization 2,876 2,106 2,053
Gain on sale of fixed assets and other assets (1) (409) (4)
Provision for loss on other real estate owned 128 1,182 2,487
(Gain)/loss on sale of other real estate owned (130) (5) 258
(Benefit) provision for income taxes (541) 1,492 (1,344)
Increase in accrued interest receivable and other assets (404) (16) (4,479)
(Decrease)/increase in accrued interest payable and other liabilities (198) 645 (1,046)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 6,807 8,337 1,836
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of available-for-sale investment securities 26,860 5,245 310,669
Proceeds from sale of investment securities held-for-sale - - 57,535
Proceeds from maturities of available-for-sale investment securities 6,000 10,295 5,596
Proceeds from maturities of held-to-maturity investment securities 7,530 - -
Purchase of investment securities available-for-sale (1,206) (4,946) (282,445)
Purchase of investment securities held-to-maturity - - (71,597)
Proceeds from sale of loans 2,084 - -
Purchase of IOBOC loans (71,576) - -
Purchase of other loans (26,432) - -
Loans funded, net of payments received (15,823) (3,283) 30,474
Proceeds from sale of fixed assets and other assets 1 932 20
Purchase of Fixed assets (1,535) (2,576) (3,856)
Proceeds from sale of other real estate owned 5,689 2,704 4,581
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (68,408) 8,371 50,977
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Rights Offering - 14,207 -
Proceeds from exercise of stock options 15 - -
Purchase of IOBOC interest-bearing deposits 14,965 - -
Purchase of IOBOC noninterest-bearing deposits 19,762 - -
(Decrease)/increase in demand deposits, NOW and savings accounts (36,853) (13,344) 11,158
Increase/(decrease) in time certificates of deposit 68,998 (15,105) (46,666)
(Decrease)/increase in other borrowings (7,316) 5,088 (17,641)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 59,571 (9,154) (53,149)
- ---------------------------------------------------------------------------------------------------------------------------------
(Decrease)/increase in cash and cash equivalents (2,030) 7,554 (336)
Cash and cash equivalents, beginning of period 31,118 23,564 23,900
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 29,088 $ 31,118 $ 23,564
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
34
<PAGE>
Part II. Item 8 (continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Unrealized loss on investment securities available-for-sale, net of tax $ 2,784 $ 3,530 $ -
Transfer of loans to OREO 1,821 3,585 7,557
Assumption of senior liens on OREO 102 - 91
Transfer of held-to-maturity securities to available-for-sale 51,991 - -
Transfer of held-to-maturity securities to held-for-sale - - 11,227
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
35
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
SC Bancorp, a bank holding company (the "Company"), and its subsidiary, Southern
California Bank, a California state-chartered bank (the "Bank"), operates 17
branches in Southern California. The Company's primary source of revenue is
providing loans to customers, who are predominantly small and mid-sized
businesses. The accounting and reporting policies of the Company conform to
generally accepted accounting principles and general practices within the
banking industry. The following are descriptions of the more significant of
these policies:
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company and
the Bank. All material intercompany balances and transactions have been
eliminated in consolidation.
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS:
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amount of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS:
For cash flow reporting purposes, cash and due from banks and Federal funds sold
are considered cash and cash equivalents.
SECURITIES:
The Company's securities portfolio includes U.S. Treasury and U.S. federal
agency securities, most of which are mortgage-backed securities. The Company
has classified its investment securities as held-to-maturity or as available-
for-sale; the Company has no trading account assets.
Securities are classified as available-for-sale when the Company intends to hold
the securities for an indefinite period of time but not necessarily to maturity.
Any decision to sell a security classified as available-for-sale would be based
on various factors, including significant movements in interest rates, changes
in the maturity mix of the Company's assets and liabilities, liquidity demands,
regulatory capital considerations, and other similar factors. Securities
classified as available-for-sale are reported at their fair values. Unrealized
holding gains and losses on securities available-for-sale are reported, net of
tax, as a separate component of shareholders' equity. Realized gains and losses
from the sales of available-for-sale securities are reported separately in the
statements of operations. The cost basis of available-for-sale securities is
recorded using the specific identification method.
In January 1995, the FDIC issued a final rule excluding unrealized holding gains
and losses on available-for-sale debt securities from the calculation of Tier 1
capital. At December 31, 1995, the Company's available-for-sale portfolio had a
net unrealized loss of $1.3 million. The tax-effected reduction to
shareholders' equity at December 31, 1995, was $746 thousand.
Securities are classified as held-to-maturity when the Company has both the
intent and ability to hold the securities to maturity on a long-term basis.
Securities held-to-maturity are reported at cost, adjusted for amortization of
premiums and accretion of discounts to maturity or, in the case of mortgage-
backed securities, over the estimated life of the securities.
Ordinarily, transfers of securities from held-to-maturity to available-for-sale
are not permitted. However, under a special one-time exemption authorized by
the Financial Accounting Standards Board that allowed companies to reclassify
their investment securities portfolio categories, the Company reclassified its
entire held-to-maturity investment portfolio to the available-for-sale category
in December 1995. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 115, held-to-maturity investment securities were
transferred to available-for-sale at their fair market values. The net result
of the transfer was an aggregate unrealized net loss of $910 thousand at
December 31, 1995.
LOANS-ALLOWANCE FOR POSSIBLE LOAN LOSSES AND INCOME RECOGNITION:
A certain degree of risk is inherent in the extension of credit. Credit losses
arise primarily from the loan portfolio, but may also be derived from other
credit-related sources, including commitments to extend credit, guarantees, and
standby letters of credit.
36
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Actual credit losses and other charges, net of recoveries, are deducted from the
allowance for possible loan losses. Other charges to the allowance primarily
include amounts related to loan foreclosures at the time of transfer to other
real estate owned. A provision for possible loan losses, which is a charge
against earnings, is added to the allowance based on management's assessment of
certain factors including, but not necessarily limited to, estimated losses from
loans and other credit arrangements; general economic conditions; deterioration
in pledged collateral; historical loss experience; and trends in portfolio
volume, maturity, composition, delinquencies, and nonaccruals.
The Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan," and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan-
Income Recognition and Disclosures-An Amendment of FASB Statement No. 114,"
effective January 1, 1995. This statement prescribes that a loan is impaired
when it is probable that the creditor will be unable to collect all contractual
principal and interest payments under the terms of the loan agreement. This
statement generally requires impaired loans to be measured based on the present
value of expected future cash flows discounted at the loan's effective interest
rate, or as an expedient, at the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent. The Company has
determined that the combined effect of adoption of SFAS No. 114 and No. 118 was
immaterial to the consolidated financial statements due to the Company's pre-
existing methodology for calculating its allowance for possible loan losses,
which is based on the value of the underlying collateral of "impaired" loans, as
defined by SFAS No. 114.
Impaired loans include loans placed on nonaccrual status. Nonaccrual loans are
those which are past due 90 days as to either principal or interest, or earlier
when payment in full of principal or interest is not expected. When a loan is
placed on nonaccrual status, interest accrued but not received is reversed
against interest income. Thereafter, interest income is no longer recognized
and the full amount of all payments received, whether principal or interest, are
applied to the principal balance of the loan. A nonaccrual loan may be restored
to an accrual basis when principal and interest payments are current, and full
payment of principal and interest is expected.
Loans are generally carried at the principal amount outstanding, net of unearned
discounts and deferred fees. Purchased loans are generally carried at the
principal amount outstanding, net of any unamortized discounts or premiums.
Interest on loans, other than installment loans, is calculated using the simple
interest method. Interest income on discounted loans is generally recognized
over the estimated life of the loans based on methods that approximate the
interest method. Net deferred loan origination fees are amortized to interest
income over the contractual lives of the related loans using the interest
method.
PREMISES AND EQUIPMENT:
Premises and equipment are stated at cost, less accumulated depreciation and
amortization computed on a straight-line basis over the estimated useful lives
of the assets or the lease terms. Sublease rental income is reported in
noninterest expense. Net gains and losses on disposal or retirement of premises
and equipment are reported in net gains and losses on sales of assets.
OTHER REAL ESTATE OWNED:
Other real estate owned ("OREO") is recorded at fair value at the time of
foreclosure. Initial losses on properties acquired through foreclosure are
treated as credit losses at the time of transfer to OREO. Routine holding
costs, net of any income and net gains and losses on disposal, are reported in
the consolidated statements of operations as noninterest expense. Allowances
for OREO losses are recorded for any subsequent declines in fair values.
GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS:
Goodwill represents the excess of the purchase price over the estimated fair
value of identifiable net assets acquired. The Company amortizes goodwill over
its estimated useful life, not to exceed 15 years.
Core deposit intangibles are amortized using the straight-line method based on
the estimated runoff of the related deposits. Other identifiable intangible
assets are amortized using the interest method or on a straight-line basis over
their estimated periods of benefit. Goodwill and identifiable intangible assets
are reported as part of other assets.
37
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES:
The Company files a consolidated Federal income tax return and a combined
California state franchise tax return. Deferred income taxes, which are
reported with other assets, result from the recognition of income and expense
items in different periods for tax and financial reporting purposes.
SFAS No. 109, "Accounting for Income Taxes," requires an asset and liability
approach for determining the amount of income taxes for financial reporting. A
current or deferred tax liability or asset is measured based on the amount of
taxes calculated at the current effective tax rates or refundable currently or
in future years. If it is more likely than not that any of a deferred tax
asset will not be realized, the statement requires a valuation allowance to be
recorded.
The Company adopted SFAS No. 109 as of January 1, 1993. As a result of this
adoption, a cumulative effect adjustment of $41 thousand was recorded in 1993.
EARNINGS PER SHARE:
The computation of earnings per share is based on the weighted average number of
shares and common stock equivalents outstanding during the year. Outstanding
stock options were not considered common stock equivalents for 1995 or 1993
because they had an antidilutive effect; outstanding stock options were also not
included as common stock equivalents for 1994 because their effect was
immaterial.
STOCK-BASED COMPENSATION:
The Company maintains a stock option plan for the benefit of its executives. In
1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based Compensation,"
which encourages companies to account for stock-based compensation awards at
their fair values at the date the awards are granted. This statement does not
require the application of the fair value method and allows the continuance of
the current accounting method, which requires accounting for stock-based
compensation awards at their intrinsic value, if any, as of the grant date.
The accounting and disclosure requirements of this statement are effective for
financial statements at various dates beginning after December 15, 1995. The
Company has elected not to adopt the fair value provisions of this statement.
INTEREST RATE SWAP AGREEMENTS:
The Company has entered into two interest rate swap agreements in the management
of its interest rate exposure. Revenue or expense associated with these
agreements, which are intended to convert the interest-rate characteristics of
interest-bearing assets, are accounted for on an accrual basis and recognized as
an adjustment to interest income, based on the interest rates currently in
effect for such contracts.
RECLASSIFICATIONS:
Certain reclassifications have been made to prior year amounts to conform to the
current year presentation.
NOTE 2 - RESTRICTIONS ON CASH AND DUE FROM BANKS
Withdrawal and usage restrictions exist on a portion of the funds of the
Company, the majority of which arise from the requirements of the Federal
Reserve Board to maintain a certain average balance. Such restricted funds
amounted to approximately $3.0 million and $3.5 million at December 31, 1995 and
1994, respectively. These funds are included in Cash and Due from Banks in the
accompanying consolidated balance sheets.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 3 - INVESTMENT SECURITIES
The amortized cost and estimated fair values of investment securities as of
December 31, 1995, and 1994, are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE:
US Treasury securities and obligations
of US government agencies $ 42,036 $ - $ (363) $ 41,673
Mortgage-backed securities 52,062 - (910) 51,152
FHLB stock 1,205 - - 1,205
- -----------------------------------------------------------------------------------------------------------
Total $ 95,303 $ - $ (1,273) $ 94,030
===========================================================================================================
<CAPTION>
(DOLLARS IN THOUSANDS) DECEMBER 31, 1994
- -----------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
HELD-TO-MATURITY:
US Treasury securities and obligations
of US government agencies $ 59 $ - $ - $ 59
Mortgage-backed securities 59,964 $ - (5,343) 54,621
- -----------------------------------------------------------------------------------------------------------
Total $ 60,023 $ - $ (5,343) $ 54,680
===========================================================================================================
<CAPTION>
(DOLLARS DECEMBER 31, 1994
- -----------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE:
US Treasury securities and obligations
of US government agencies $ 77,249 $ 2 $ (5,393) $ 71,858
- -----------------------------------------------------------------------------------------------------------
Total $ 77,249 $ 2 $ (5,393) $ 71,858
===========================================================================================================
</TABLE>
Investment securities with a carrying value of $18.6 million and $22.3 million
were pledged to secure public deposits and as collateral for other borrowings as
required by law at December 31, 1995 and 1994, respectively.
The amortized cost and estimated fair value of debt securities at December 31,
1995 by contractual maturities are shown in the following table. Expected
maturities will differ from contractual maturities, particularly with respect to
mortgage-backed securities, because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
39
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 3 - INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
Maturing in
- ------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS) Over one Over five
One year year through years through Over
DECEMBER 31, 1995 or less five years ten years ten years Total
-------- ------------ ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Available-for-sale, amortized cost $ - $ 86,283 $ 7,815 $ 1,205 $ 95,303
Available-for-sale, estimated fair value $ - $ 85,233 $ 7,592 $ 1,205 $ 94,030
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of investments in securities during 1995, 1994 and 1993 were
$26.9 million, $5.2 million, and $368.2 million, respectively. Gross gains of
$17 thousand, and $7.1 million were realized on those sales in 1994 and 1993,
respectively. Gross losses of $620 thousand and $54.0 thousand were realized on
the sales in 1995 and 1993, respectively; no gross gains were realized from
sales in 1995, and no gross losses were realized from sales in 1994.
NOTE 4 - LOANS
Loans outstanding at December 31, 1995, and 1994, are summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
December 31. 1995 % 1994 %
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial $147,230 46.47% $ 79,369 38.22%
Real estate, construction 4,416 1.39% 30 0.01%
Real estate, mortgage 107,662 33.98% 83,712 40.31%
Consumer 57,533 18.16% 44,577 21.46%
- --------------------------------------------------------------------------------
Gross loans 316,841 100.00% 207,688 100.00%
------ ------
------ ------
Deferred fee income (531) (298)
Allowance for possible loan losses (5,734) (5,318)
- -------------------------------------------------- --------
Loans, net $310,576 $202,072
- -------------------------------------------------- --------
- -------------------------------------------------- --------
</TABLE>
No industry constitutes a concentration in the Bank's loan portfolio.
The Bank commonly accepts real estate as abundance of collateral in extending
credits for commercial purposes. Real estate mortgage loans generally comprise
medium-term loans secured by first or second deeds of trust on real estate
located in the state of California. The Bank's lending area formerly
experienced adverse economic conditions that have resulted in declines in real
estate values. These factors adversely affected some borrowers' ability to
repay loans. Although management believes the level of the allowance for
possible loan losses as of December 31, 1995, is adequate to absorb losses
inherent in the loan portfolio, additional declines in real estate values and
the general economy may result in increasing losses that cannot be reasonably
predicted at this date.
40
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 4 - LOANS (CONTINUED)
The changes in the allowance for possible loan losses are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Average balance of gross loans outstanding $261,631 $203,507 $ 235,414
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Gross loan balance at December 31. $316,841 $207,688 $ 212,402
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Allowance at January 1, $ 5,318 $ 10,800 $ 6,859
Charge-offs:
Commercial 834 2,004 3,704
Real estate 1,227 3,453 4,488
Consumer 587 362 381
- --------------------------------------------------------------------------------
Total charge-offs 2,648 5,819 8,573
Recoveries:
Commercial 587 915 607
Real estate 129 215 4
Consumer 192 57 153
- --------------------------------------------------------------------------------
Total recoveries 908 1,187 764
Net charge-offs 1,740 4,632 7,809
Provision (recovery) charged (credited)
to expense 1,539 (850) 11,750
Allowance on purchased loans 617 - -
- --------------------------------------------------------------------------------
Allowance at December 31 - $5,734 $5,318 $10,800
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Ratio of allowance for loan losses to loans
outstanding at December 3 1, 1.81% 2.56% 5.08%
Ratio of allowance for loan losses to
nonaccrual loans at December 3 1, 414.01% 329.88% 152.53%
Ratio of net charge-offs to average loans 0.67% 2.28% 3.32%
</TABLE>
Loans on nonaccrual status were approximately $1.4 million, $1.6 million and
$7.1 million at December 31, 1995, 1994 and 1993, respectively. Interest income
that would have been collected on these loans had they performed in accordance
with their original terms, was approximately $207 thousand, $93 thousand, and
$550 thousand for the years ended December 31, 1995, 1994 and 1993,
respectively. At December 31, 1995, the Bank had classified $1.5 million of its
loans as impaired with a specific reserve of $143 thousand determined in
accordance with SFAS No. 114. The average recorded investment in impaired loans
during the year ended December 31, 1995 was $3.2 million. The Bank collected
cash totaling $1.3 million on impaired loans during the same period.
41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 5 - PREMISES AND EQUIPMENT
The following schedule sets forth the cost and accumulated depreciation and
amortization of premises and equipment at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
(DOLLARS in thousands) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 2,122 $ 2,122
Buildings and improvements:
Owned 3,688 3,688
Capital leases 401 384
Furniture, fixtures, and equipment 11,810 10,689
Leasehold improvements 5,598 5,524
- --------------------------------------------------------------------------------
Total 23,619 22,407
Less: accumulated depreciation and
amortization (13,885) (12,153)
- --------------------------------------------------------------------------------
Premises and equipment, net $ 9,734 $ 10,254
- --------------------------------------------------------------------------------
</TABLE>
Depreciation was approximately $2.1 million, $1.9 million, and $1.9 million
for the years ended December 31, 1995, 1994 and 1993. The Bank's former head
office facility was sold in 1994, which resulted in a gain of $414 thousand.
NOTE 6 - OTHER REAL ESTATE OWNED
The components of other real estate owned (OREO) at December 31, 1995 and 1994
are as follows:
<TABLE>
<CAPTION>
(DOLLARS in THOUSANDS) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Other real estate owned - foreclosure $ 4,243 $ 6,003
Insubstance foreclosure (a) - 2,595
- --------------------------------------------------------------------------------
4,243 8,598
Less: allowance for losses and selling expenses (2,170) (2,761)
- --------------------------------------------------------------------------------
Other real estate owned - net $ 2,073 $ 5,837
- --------------------------------------------------------------------------------
</TABLE>
(a) Insubtance foreclosures are those in which the Bank controls the
collateral even though formal foreclosure proceedings have not been
instituted against the borrower.
The changes in the allowance for OREO losses and selling expenses for the years
ended December 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Balance at January 1, $2,761 $1,770
Provisions charged to expense 128 1,182
Sales, charge-offs (719) (191)
- --------------------------------------------------------------------------------
Balance, December 31, $2,170 $2,761
- --------------------------------------------------------------------------------
</TABLE>
NOTE 7 - DEPOSITS
Time certificates of deposit in denominations of $100,000 or more totaled $46.4
million and $29.2 million as of December 31, 1995 and 1994, respectively, of
which approximately $891 thousand represented brokered deposits at year end
1994. Interest paid on deposit accounts totaled $10.7 million, $6.2 million,
and $8.5 million in 1995, 1994, and 1993, respectively.
42
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 8 - BORROWED FUNDS AND OTHER INTEREST-BEARING LIABILITIES
Borrowed funds and other interest-bearing liabilities at December 31, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Federal funds purchased $ - $ 8,000
Treasury, tax and loan (TT&L) 4,883 4,584
Deferred compensation 1,165 1,037
Capital lease obligations 257 150
Other 102
- --------------------------------------------------------------------------------
$ 6,407 $ 13,771
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
TT&L balances fluctuate based on the amounts deposited by customers and the
amounts called for payment by the Federal Reserve Bank. The Bank's limit on its
TT&L at the Federal Reserve Bank is $6.0 million. Any amounts in excess of this
limit will generally be automatically withdrawn by the Federal Reserve Bank the
following day.
Interest paid on borrowed funds and other interest-bearing liabilities totaled
$400 thousand, $294 thousand, and $1.5 million for the years ended December 31,
1995, 1994 and 1993, respectively.
NOTE 9 - INCOME TAXES
The provision for income taxes (benefits) consists of the following:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current - State $ 189 $ 2 $ 1
Current - Federal 1,045 (360) 317
- --------------------------------------------------------------------------------
1,234 (358) 318
- --------------------------------------------------------------------------------
Deferred - State (221) (319) 219
Deferred - Federal (320) 1,811 (1,563)
- --------------------------------------------------------------------------------
$ (541) $1,492 $ (1,344)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Provision for income taxes (benefits) $ 693 $1,134 $ (1,026)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
A reconciliation of the provision for income taxes to the amounts computed by
applying the Federal statutory tax rate of 35% for 1995, 1994 and 1993 follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------------------------------------
1995 1994 1993
Amount % Amount % Amount %
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RATE RECONCILIATION
Federal tax, based on statutory rate $ 547 35.00% $1,305 35.00% $(1,301) 35.00%
Tax-exempt municipal interest (7) -0.45% (8) -0.21% (8) 0.22%
State franchise tax, net of federal
income tax benefits 125 8.00% (211) -5.66% 145 -3.90%
Officer life insurance (167) -10.71% (11) -0.29% (16) 0.43%
Goodwill 196 12.55% 54 1.45% - 0.00%
Other (1) -0.02% 5 0.13% 154 -4.14%
- --------------------------------------------------------------------------------------------------------------
Provision for income taxes (benefits)/effective tax rate $ 693 44.37% $1,134 30.42% $(1,026) 27.60%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Federal income and California state franchise taxes paid totaled $865 thousand,
$152 thousand and $1.4 million in 1995, 1994 and 1993, respectively.
43
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 9 - INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and (b) operating loss
and tax credit carryforwards. The components of the Company's net deferred tax
asset are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) DECEMBER 31,
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Asset
Allowances not currently deductible $ 1,347 $ 1,938
Deferred compensation 955 689
Unrealized loss on securities 528 1,860
Depreciation 582 568
Other 709 98
- --------------------------------------------------------------------------------
Gross deferred tax asset 4,121 5,153
- --------------------------------------------------------------------------------
Deferred Tax Liability
Deductible prepaid expense (301) (389)
Effect of state taxes on federal liability (209) (270)
Other (121) (219)
- --------------------------------------------------------------------------------
Gross deferred tax liability (631) (878)
- --------------------------------------------------------------------------------
Net deferred tax asset $ 3,490 $ 4,275
- --------------------------------------------------------------------------------
</TABLE>
No valuation allowance under SFAS No. 109 was required for federal or state
purposes as of December 31, 1995 or 1994, because management expects deferred
tax assets to be fully realized as an offset against reversing temporary
differences (which create net future tax liabilities), or through loss
carrybacks.
NOTE 10 - SHAREHOLDERS' EQUITY
COMMON STOCK
During the second quarter of 1994, the Company successfully completed a rights
offering which resulted in the issuance of an additional 4.0 million shares of
common stock at $4.00 per share. Net proceeds of $14.2 million were realized on
this offering after issuance costs of approximately $1.8 million.
STOCK OPTIONS
The total shares available under the Company's stock option plan are 650
thousand.
The following table summarizes the activity relating to the Company's stock
options for the years indicated.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(NUMBER of SHARES) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 379,650 235,250 125,500
Options granted 174,750 152,200 115,500
Options exercised (3,000) - -
Options expired (79,300) (7,800) (5,750)
- --------------------------------------------------------------------------------
Balance, December 31 472,100 379,650 235,250
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares exercisable 219,720 160,970 89,450
Exercise price $4.50-$11.87 $4.88-$11.87 $6.00-$11.87
</TABLE>
44
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 11 - COMMITMENTS AND CONTINGENCIES
CREDIT EXTENSION:
In the normal course of business, there are various outstanding commitments to
extend credit which are not reflected in the accompanying consolidated financial
statements. The Company does not anticipate losses as a result of these
transactions. However, the commitments are a component of the estimate of the
allowance for possible loan losses. Commercial and standby letters of credit
totaled approximately $4.3 million and $4.5 million at December 31, 1995 and
1994, respectively. In addition, the Company had unfunded loan commitments of
$85 million and $49.1 million at December 31, 1995 and 1994, respectively. All
of the commitments outstanding at December 31, 1995, represent unfunded loans
which bear a floating rate of interest.
The Company uses the same credit policies in making commitments and conditional
obligations as it does in extending loan facilities to customers. The Company
evaluates each customer's creditworthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the counterparty.
Collateral held varies, but may include accounts receivable, inventory,
property, plant and equipment, and income-producing commercial properties.
INTEREST RATE SWAPS:
The Company has entered into two interest rate swap agreements to reduce the
impact of changes in interest rates on its floating rate loan portfolio. At
December 31, 1995, the Company had outstanding one interest rate swap agreement
with a commercial bank having a total notional principal amount of $50 million
(Swap #1), and one interest rate swap agreement with a broker dealer having a
notional principal amount of $25 million (Swap #2). The agreements were
intended to reduce the Company's exposure to declines in prime lending rates by
artificially converting $75 million of the Company's prime-based loans to fixed
rates for the duration of the agreements. Swap #1 was entered into in September
1993. The terms of the first agreement require the Company to pay interest
quarterly based on three-month LIBOR and to receive interest semi-annually at a
fixed rate of 4.865%. The agreement matures in September 1998.
Swap #2 was entered into in January 1994. The terms of the second agreement
require the Company to pay interest quarterly based on three-month LIBOR in
arrears, and to receive interest semi-annually at a fixed rate of 5.04% through
the January 1997 maturity date. The Company accrues monthly interest income and
expense on the swaps, the net of which is included in income on loans. For the
years ended December 31, 1995, 1994, and 1993, net interest income or (expense)
of ($929 thousand), $141 thousand, and $251 thousand from the swap agreements is
included in interest income on loans in the consolidated statements of
operations. The Company is required to pledge collateral on the transactions.
US Agency notes having a fair value of approximately $7.4 million were pledged
as collateral for the agreements as of December 31, 1995. The Company is
exposed to credit loss in the event of nonperformance by the counterparties to
the agreements. However, the Company does not anticipate nonperformance by the
counterparties. The following table summarized the characteristics of the swap
agreements as of December 31, 1995:
Interest Rate Swaps:
<TABLE>
<CAPTION>
Notional Interest Rate Interest Rate Unrealized Maturity
(DOLLARS IN THOUSANDS) Amount Paid Received Loss Date
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Swap #1 $50,000 3-mo LIBOR 4.865% $700 September, 1998
Swap #2 $25,000 3-mo LIBOR 5.04% $370 January, 1997
(in arrears)
</TABLE>
LEASE COMMITMENTS:
At December 31, 1995, one building lease with an amortized cost of $122.5
thousand was recorded as a capital lease and included in Premises and Equipment
in the accompanying consolidated balance sheets. The Company also leases
parcels of land and buildings under operating leases, which require the Company
to pay all normal property taxes, insurance, and maintenance. Net rent expense
for the years ended 1995, 1994 and 1993 was approximately $1.2 million, $0.9
million, and $1.4 million, respectively. The amounts recorded in 1995 and 1993
45
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 11 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
included approximately $256 thousand and $400 thousand for restructuring
charges on facilities which were closed or consolidated.
Future minimum payments required under noncancellable leases with initial or
remaining terms of one year or more are as follows as of December 31, 1995:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CAPITAL OPERATING
YEARS ENDING DECEMBER 31, LEASES LEASES TOTAL
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
1996 $ 52 $ 836 $ 888
1997 52 762 814
1998 52 734 786
1999 52 892 944
2000 52 901 953
Thereafter 135 2,496 2,631
- --------------------------------------------------------------------------------
Total minimum payments $395 $6,621 $7,016
- --------------------------------------------------------------------------------
Less amount representing interest 141
- --------------------------------------------------------------------------------
Present value of minimum payments $254
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The capital lease obligation has been included in borrowed funds in the
accompanying consolidated balance sheets. The payments shown above for
operating leases take into consideration only one lease option that the Company
intends to exercise. The Company has options to extend several of its other
operating leases. However, because it is uncertain whether or not these other
options will be exercised, payments for those option periods have been excluded.
BORROWING ARRANGEMENTS:
In the event that the Company experiences a temporary liquidity shortage, it has
available other sources of liquidity, including reverse repurchase arrangements
to borrow cash for short to intermediate periods of time using the Company's
available-for-sale investment securities as collateral, Federal funds lines of
credit that allow the Company to temporarily borrow an aggregate of up to $25.0
million from three commercial banks, and short-term borrowing lines of credit at
the Federal Reserve Bank and Federal Home Loan Bank. Federal funds arrangements
with correspondent banks are subject to the terms of the individual arrangements
and may be terminated at the discretion of the correspondent bank.
LITIGATION:
The Company is party to routine litigation involving various aspects of its
business. In the opinion of management, none of the pending litigation at
December 31, 1995 would have a material adverse impact on the consolidated
financial condition or operations of the Company.
NOTE 12 - EMPLOYEE BENEFIT PLANS
The Company has a 401(k) plan that covers substantially all full-time employees.
It permits voluntary contributions by employees, a portion of which is matched
by the Company. The plan may acquire Company shares on the open market as part
of the Company's matching contribution. The Company's expenses relating to its
contributions to the 401(k) plan were $139 thousand, $108 thousand, and $80
thousand in 1995, 1994 and 1993, respectively.
The Company has established deferred compensation plans which permit certain
directors and management employees to defer portions of their compensation and
earn interest at a predetermined amount above a specified interest rate index on
the deferred amounts. Interest expense incurred on deferred balances was
approximately $648 thousand, $174 thousand, and $176 thousand
46
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 12 - EMPLOYEE BENEFIT PLANS (CONTINUED)
in 1995, 1994 and 1993, respectively. The deferred compensation liability at
December 31, 1995 and 1994 was approximately $2.1 million and $1.5 million,
respectively, of which $1.2 million and $1.0 million represented principal and
was classified with other interest-bearing liabilities in the accompanying
consolidated balance sheets. Approximately $946 thousand and $483 thousand
represented accrued interest payable at December 31, 1995 and 1994,
respectively, and was classified as accrued interest payable and other
liabilities in the accompanying consolidated balance sheets. In conjunction
with the plans, the Company has purchased life insurance policies on the
participants with the Company as beneficiary. The cash surrender values of
the life insurance policies were included in other assets in the accompanying
consolidated balance sheets totaling approximately $3.0 million and $2.7 million
at December 31, 1995 and 1994, respectively.
NOTE 13-PARENT COMPANY ONLY INFORMATION
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) DECEMBER 31,
- ---------------------------------------------------------------------------------------------------------
Assets: 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash $ 2,305 $ 7,481
Other assets - 43
Investment in Southern California Bank 43,113 34,320
- ---------------------------------------------------------------------------------------------------------
Total Assets $ 45,418 $ 41,844
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- ---------------------------------------------------------------------------------------------------------
Liabilities: $ (94) $ -
Shareholders' Equity
Common stock 37,658 37,643
Retained earnings 8,600 7,731
Unrealized loss on available-for-sale securities, net of tax (746) (3,530)
- ---------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 45,512 41,844
- ---------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 45,418 $ 41,844
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS) YEARS ENDED DECEMBER 31,
- ---------------------------------------------------------------------------------------------------------
Income: 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income from management fees $ - $ - $ 23
Other management income - - 152
Interest income 108 93 -
Dividend income from subsidiary - 163 140
- ---------------------------------------------------------------------------------------------------------
Total income 108 256 315
- ---------------------------------------------------------------------------------------------------------
Expense:
- ---------------------------------------------------------------------------------------------------------
Management fees 66 24 23
Other professional fees 281 26 134
Other expenses - 91 158
- ---------------------------------------------------------------------------------------------------------
Total expense 347 141 315
- ---------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and equity in undistributed
earnings (losses) of subsidiary (239) 115 -
Provision for income taxes (benefits) (99) -
Equity in undistributed earnings (losses) of subsidiary 1,009 2,590 (2,733)
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ 869 $ 2,705 $ (2,733)
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 13-PARENT COMPANY ONLY INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS) YEARS ENDED DECEMBER 31,
- ---------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities: 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) $ 869 $ 2,705 $ (2,733)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Decrease (increase) in other assets 43 (43) -
Undistributed (earnings) loss of subsidiary (1,009) (2,753) 2,593
Decrease in other liabilities (94) - -
- ---------------------------------------------------------------------------------------------------------
Net cash used in operating activities (191) (91) (140)
- ---------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Dividends received from subsidiary - 163 140
Additional investment in subsidiary (5,000) (6,810) -
- ---------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (5,000) (6,647) 140
- ---------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 15 14,207 -
- ---------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 15 14,207 -
- ---------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash (5,176) 7,469 -
Cash, January 1 7,481 12 12
- ---------------------------------------------------------------------------------------------------------
Cash, December 31 $ 2,305 $ 7,481 $ 12
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 14 - QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1995 Quarter Ended
31-Dec 30-Sep 30-Jun 31-Mar
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $ 8,819 $ 8,796 $ 8,544 $ 7,237
Interest expense 2,875 3,107 3,076 2,957
- ------------------------------------------------------------------------------------
Net interest income 5,944 5,689 5,468 4,280
- ------------------------------------------------------------------------------------
Provision for possible loan losses 314 900 200 124
Net gains (losses) on sales of
securities - (620) - -
Noninterest income 926 1,218 1,382 1,636
Noninterest expense 4,847 6,672 6,042 5,262
- ------------------------------------------------------------------------------------
Income (loss) before income
taxes 1,709 (1,285) 608 530
- ------------------------------------------------------------------------------------
Provision for income taxes (benefits) 707 (377) 178 185
- ------------------------------------------------------------------------------------
Net income (loss) $ 1,002 $ (908) $ 430 $ 345
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Net income (loss) per share $ 0.13 $ (0.12) $ 0.06 $ 0.05
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Stock Data
Common stock price range: (1)
High 6 1/8 6 5/8 5 1/4 5 1/4
Low 5 7/16 4 3/4 4 5/8 4 5/16
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1994 Quarter Ended
- -------------------------------------------------------------------------------------
31 -Dec 30-Sep 30-Jun 31-Mar
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $ 6,782 $ 6,774 $ 6,562 $ 6,302
Interest expense 1,585 1,584 1,492 1,618
- ------------------------------------------------------------------------------------
Net interest income 5,197 5,190 5,070 4,684
- ------------------------------------------------------------------------------------
Provision for possible loan losses - - (850) -
Net gains
on sales of securities - - - 17
Noninterest income 1,202 1,587 1,593 2,301
Noninterest expense 5,800 5,957 6,786 5,309
- ------------------------------------------------------------------------------------
Income before
income taxes 599 820 727 1,693
- ------------------------------------------------------------------------------------
Provision for income taxes (benefits) (220) 318 309 727
- ------------------------------------------------------------------------------------
Net income $ 819 $ 502 $ 418 $ 966
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Net income per share $ 0.11 $ 0.07 $ 0.12 $ 0.28
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Stock Data
Common stock price range: (1)
High 5 5 1/8 5 3/8 6
Low 3 3/4 4 5/8 4 1/4 4 3/4
</TABLE>
(1) The Common Stock is listed on the American Stock Exchange ("AMEX") under
the symbol, "SCK". The preceding table sets forth the high and low closing
prices on a per share basis for the Common as reported by the AMEX for the
periods indicated.
49
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 15 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary, actions by
the regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to risk-
weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1995, that the
Bank meets all capital adequacy requirements to which it is subject. As of
December 31, 1995, the most recent notification from the Federal Deposit
Insurance Corporation, the Bank's primary regulator, categorized the Bank as
well capitalized under the regulatory framework for prompt corrective action.
To be categorized as well capitalized, the Bank must maintain minimum total
risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the
table. There are no conditions or events since that notification that
management believes have changed the Bank's capital rating category.
The actual capital amount and ratios for the Company and the Bank are presented
in the table below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994
- ---------------------------------------------------------------------------------------
WELL CAPITALIZED
COMPANY BANK COMPANY BANK REQUIREMENT*
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Leverage capital ratio 9.08% 8.59% 10.74% 8.86% 5.00%
Tier I risk-based capital ratio 10.75% 10.14% 15.72% 12.96% 6.00%
Total risk-based capital ratio 12.01% 11.39% 16.98% 14.22% 10.00%
</TABLE>
*Requirements to be well capitalized under Prompt Corrective Action Provisions.
NOTE 16 - TRANSACTIONS WITH DIRECTORS & OFFICERS
The Company has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with its directors, principal
officers, their immediate families, and affiliated companies in which they are
principal shareholders. Any such transactions are on the same terms, including
interest rates and collateral requirements, as those prevailing at the time for
comparable transactions with others. These related parties were indebted to the
Company for loans totaling approximately $2.0 million, $2.5 million, and $4.3
million as of December 31, 1995, 1994, and 1993, respectively. New loans
granted in 1995, 1994 and 1993 were $714 thousand, $0.4 million, and $0.7
million, respectively; repayments were $1.1 million, $2.0 million, and $0.7
million, respectively.
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Management uses its best judgment in estimating the fair value of the Company's
financial instruments. However, there are inherent weaknesses in any estimation
technique. Therefore, for substantially all financial instruments, the fair
value estimates presented herein are not necessarily indicative of the amounts
the Company could have realized in a sales transactions at either December 31,
1995 or 1994. The estimated fair value amounts for 1995 and 1994 have been
measured as of their respective year ends, and have not been reevaluated or
updated for purposes of these consolidated financial statements subsequent to
those respective dates. As such, the estimated fair values of these financial
instruments subsequent to the respective reporting dates may be different than
the amounts reported at each year end.
50
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS(CONTINUED)
The following information should not be interpreted as an estimate of the fair
value of the entire company since a fair value calculation is only required for
a limited portion of the Company's assets.
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
- ------------------------------------------------------------------------------------
Estimated Estimated
Carrying Fair Carrying Fair
(Dollars in thousands) Amount Value Amount Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents $ 29,088 $ 29,088 $ 31,118 $ 31,118
Investments:
Securities held-to-maturity - - 60,023 54,680
Securities available-for-sale 94,030 94,030 71,858 71,858
Loans (excludes nonaccrual loans and
deferred fee income):
Commercial 146,609 147,595 77,028 74,109
Real estate, construction 4,416 4,451 30 30
Real estate 107,048 109,379 80,579 77,437
Consumer 57,383 58,427 43,511 42,171
Less: Allowance for possible loan
losses 5,734 5,734 5,318 5,318
- ------------------------------------------------------------------------------------
Total financial assets $432,840 $437,236 $358,829 $346,085
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
FINANCIAL LIABILITIES:
Deposits payable on demand $260,679 $260,679 $265,572 $265,572
Deposits with fixed maturities 146,132 146,663 74,367 74,047
- ------------------------------------------------------------------------------------
Total financial liabilities $406,811 $407,342 $339,939 $339,619
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
Interest rate swap agreements - (1,070) - (6,244)
</TABLE>
This disclosure of fair value amounts does not include the fair values of any
intangible assets, such as core deposit intangibles, or loan servicing rights.
The carrying values of certain financial instruments approximated their fair
values. These financial instruments include cash and due from banks, interest-
bearing deposits in banks, federal funds sold and purchased, customers'
acceptance liability, certain other assets, demand deposits, other short-term
borrowings, acceptances outstanding, and other liabilities that are considered
financial instruments. Carrying values were assumed to approximate fair values
for these financial instruments because they are short term in nature and their
recorded amounts approximate fair values or are receivable or payable on demand.
Fair value amounts of investment securities were based on quoted market prices.
For purposes of these fair value calculations, the aggregate fair value of the
loan portfolio, excluding nonaccrual loans, was adjusted by a related portion of
the allowance for possible loan losses. That portion of the allowance for
possible loan losses primarily represents the credit risk associated with loans
that reprice within relatively short time frames. The fair values of loans that
do not reprice within relatively short time frames were calculated using
discounted cash flow models based on the maturities of the loans. The discount
rates, which were based on market interest rates for similar types of loans,
incorporated adjustments for credit risk.
51
<PAGE>
Part II. Item 8 (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The fair values of nonaccrual loans with recorded book values of $1.4 million
and $1.6 million at December 31, 1995 and 1994, respectively, were not estimated
because it was not practical to reasonably estimate the amount or timing of
future cash flows for such loans. The fair market values of the interest rate
swap agreements are based on quoted market prices.
For deposits with defined maturities, the fair values were calculated using
discounted cash flow models based on market interest rates for different product
types and maturity dates for which the deposits were held.
The fair value of loan commitments is not material to the financial statements
taken as a whole.
52
<PAGE>
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of SC Bancorp and
its subsidiary as of December 31, 1995 and 1994, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of SC Bancorp and its subsidiary at
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
Los Angeles, California
January 24, 1996
/S/ Deloitte & Touche, LLP
53
<PAGE>
PART II.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors and executive officers is incorporated by
reference from the sections entitled "Nominees for Election as Directors: and
"Compliance with Section 16(a) of the Exchange Act" of the Company's definitive
Proxy Statement which will be filed within 120 days after the Company's fiscal
year ended December 31, 1995 (the "1996 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
Information concerning management remuneration and transactions is incorporated
by reference from the sections entitled "Executive Compensation", "Information
About the Board of Directors and Committees of the Board", and "Compensation
Committee Interlocks and Insider Participation" of the 1996 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is incorporated by reference form the section entitled "Certain
Relationships and Related Transactions" of the 1996 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Information concerning certain relationships and related party transactions is
incorporated by reference from the section entitled "Certain Relationships and
Related Transactions" of the 1996 Proxy Statement.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) The following consolidated financial statements of SC Bancorp and
subsidiary are filed as part of this Annual Report.
Consolidated Balance Sheets as of December 31, 1995 and 1994
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements
SC Bancorp (parent only) financial statements - Note 13
(a)(2) All other financial statement schedules are omitted because they are
not applicable, not material or because the information is included in
the consolidated financial statements or notes thereto.
54
<PAGE>
PART IV. ITEM 14 (CONTINUED)
(a)(3) Exhibits
2.1 Real Estate Purchase Agreement dated February 28, 1994, between
Southern California Bank and Downey Community Hospital Foundation (a)
2.2 Asset Purchase and Liability Assumption Agreement between Southern
California Bank and Independence One Bank of California, F.S.B., dated
January 18, 1995 (g)
2.3 Deposit Purchase Agreement between Southern California Bank and Home
Bank dated October 10, 1995
2.4 Deposit Purchase Agreement between Southern California Bank and
Preferred Bank dated November 14, 1995
3(i).1 SC Bancorp Articles of Incorporation dated February 5, 1981, as
amended (h)
3(i).2 Amendment to SC Bancorp Articles of Incorporation dated May 9, 1995
3(ii).1 Bylaws as amended through March 25, 1996
4.1 Specimen Common Stock Certificate
4.2 SC Bancorp 1989 Stock Option Plan (February 1990)*(f)
4.3.1 Amended and restated Southern California Bank Employee Retirement Plan
dated January 1, 1992*(d)
4.3.2 First amendment to the amended and restated Southern California Bank
Employee Retirement Plan*
4.3.3 Second amendment to the amended and restated Southern California Bank
Employee Retirement Plan*
4.3.4 Third amendment to the amended and restated Southern California Bank
Employee Retirement Plan*
4.3.5 Fourth amendment to the amended and restated Southern California Bank
Employee Retirement Plan*
4.4 SC Bancorp Executive Deferral Plan (IV) (February 1990)*(f)
4.5 Southern California Bank Executive Incentive Compensation Plans for
1994 (December 1993)*(b)
4.6 Southern California Bank Executive Incentive Compensation Plans for
1995*
10.1 Sublicense Agreement between Southern California Bank and National
Commerce Bank Services, Inc., dated October 22, 1992 for
supermarket space in La Habra, California (c)
10.2 Sublease between SC Bancorp and Denny's, dated December 24, 1992 for
office space in La Mirada, California (c)
10.3 Lease between Southern California Bank and Robert Stein, dated
September 1, 1981, amended June 19, 1990, for office space in Avalon,
California (d)
10.4 Lease between Southern California Bank and Commonwealth Equity Trust,
dated December 17, 1990 for office space in Signal Hill, California
(d)
10.5 Lease between SC Bancorp and Forest Lawn Company and Western Empire
Savings and Loan Association, dated August 18, 1983, amended January
3, 1991, for office space in Yorba Linda, California (d)
10.6 Assignment of lease between Southern California Bank and Garfield
Bank, dated December 27, 1985, amended January 1, 1987, for office
space in Huntington Beach, California (b)
10.7 Lease between Southern California Bank and Tustin-La Palma Business
Center, dated July 8, 1993, for office space in Anaheim, California
(b)
10.8 Lease between Southern California Bank and Dicker-Warmington
Properties, dated as of January 1, 1990 for office space in City of
Industry, California (b)
10.9 License Agreement between Southern California Bank and The Vons
Companies, Inc., dated December 18, 1992 for supermarket space in
Anaheim Hills, California (b)
10.10 Consent to assignment of sublease and sublease between Southern
California Bank, Bank of America, NTSA, and The Taj dated May 12, 1995
for office space in Laguna Hills, California
10.11 Sublease between Southern California Bank and Citicorp Savings, dated
November 30, 1995 for office space in La Jolla, California
10.12 Lease between Southern California Bank and Regents Park Financial
Centre, Ltd., dated October 25, 1995 for office space in La Jolla,
California.
10.13 Forward lease between Southern California Bank and Regents Park
Financial Centre, Ltd., dated October 25, 1995 for office space in La
Jolla, California.
10.14 Employment Security Agreement between SC Bancorp and Larry D.
Hartwig, dated January 1, 1995*(g)
10.15 Amendment to Employment Security Agreement between SC Bancorp and
Larry D. Hartwig dated July 18, 1995*(i)
10.16 Employment Security Agreement between SC Bancorp and David A. McCoy,
dated February 25, 1992*(c)
10.17 Amendment to Employment Security Agreement between SC Bancorp and
David A. McCoy dated November 21, 1995*
10.18 Employment Security Agreement between SC Bancorp and Bruce W. Roat,
dated March 17, 1995*(g)
10.19 Amendment to Employment Security Agreement between SC Bancorp and
Bruce W. Roat, dated November 21, 1995*
10.20 Employment Security Agreement between SC Bancorp and Mark B.
Metzinger, dated May 1, 1995*
55
<PAGE>
PART IV. ITEM 14 (CONTINUED)
10.21 Amendment to Employment Security Agreement between SC Bancorp and Mark
B. Metzinger dated November 21, 1995*
10.22 Employment Security Agreement between Southern California Bank and Ann
E. McPartlin, dated September 15, 1994*(g)
10.23 Amendment to Employment Security Agreement between SC Bancorp and Ann
E. McPartlin, dated November 21, 1995*
10.24 Employment Security Agreement between Southern California Bank and M.
V. Cummings, dated September 15, 1994*(g)
10.25 Amendment to Employment Security Agreement between SC Bancorp and M.
V. Cummings, dated November 21, 1995*
10.26 Form of Indemnification Agreement entered into with each Executive
Officer and Director of SC Bancorp(b)
10.27 Form of Indemnification Agreement entered into with each Executive
Officer and Director of Southern California Bank(b)
21.0 Subsidiaries of the Registrant(g)
23.1 Consent of the Company's independent auditor (Deloitte & Touche, LLP)
to the incorporation by reference in the Registration Statement of SC
Bancorp on Form S-8 (No. 33-38666) of their report dated January 24,
1996 appearing in the Annual Report on Form 10-K of SC Bancorp for the
year ended December 31, 1995.
27.1 Financial Data Schedule
(b) The Company filed the following reports on Form 8-K during the fourth
quarter of 1995:
None.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Management contracts or compensatory plans or arrangements required to
be filed as exhibits pursuant to Item 14(c) of Form 10-K.
(a) This exhibit is contained in SC Bancorp's Registration Statement on
Form S-2, Amendment No. 1, filed with the Commission on April 28,
1994, (Commission File No. 33-76274), and incorporated herein by
reference.
(b) This exhibit is contained in SC Bancorp's Registration Statement on
Form S-2, filed with the Commission on March 9, 1994, (Commission File
No. 33-76274), and incorporated herein by reference.
(c) This exhibit is contained in SC Bancorp's Annual Report on Form 10-K
for the year ended December 31, 1992, filed with the Commission on
March 30, 1993, (Commission File No. 0-11046) and incorporated herein
by reference.
(d) This exhibit is contained in SC Bancorp's Annual Report on Form 10-K
for the year ended December 31, 1991, filed with the Commission on
March 30, 1992, (Commission File No. 0-11046) and incorporated herein
by reference.
(e) This exhibit is contained in SC Bancorp's Annual Report on Form 10-K
for the year ended December 31, 1990, filed with the Commission on
April 1, 1991, (Commission File No. 0-11046) and incorporated herein
by reference.
(f) This exhibit is contained in SC Bancorp's Proxy Statement, filed with
the Commission on March 23, 1990, (Commission File No. 0-11046) and
incorporated herein by reference.
(g) This exhibit is contained in SC Bancorp's Annual Report on Form 10-K
for the year ended December 31, 1994, filed with the Commission on
March 30, 1995, (Commission File No. 0-11046) and incorporated herein
by reference.
(h) This exhibit is contained in SC Bancorp's Quarterly Report on Form
10-Q for the period ended March 31, 1995, filed with the Commission on
May 15, 1995, (Commission File No. 0-11046) and incorporated herein by
reference.
(i) This exhibit is contained in SC Bancorp's Quarterly Report on Form
10-Q for the period ended June 30, 1995, filed with the Commission on
August 15, 1995, (Commission File No. 0-11046) and incorporated herein
by reference.
56
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SC BANCORP
By: /s/LARRY D. HARTWIG
-------------------
Larry D. Hartwig
Chief Executive Officer and President
Date: March 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated:
SIGNATURE TITLE DATE
/S/LARRY D. HARTWIG Chief Executive Officer, March 25, 1996
- -------------------- President and Director
Larry D. Hartwig (Principal Executive Officer)
/S/BRUCE W. ROAT Executive Vice President, March 25, 1996
- -------------------- Chief Financial Officer
Bruce W. Roat (Principal Financial and
Accounting Officer)
/S/H.A. BEISSWENGER Chairman of the Board March 25, 1996
- -------------------
H.A. Beisswenger
/S/H. KEITH ABBOTT Director March 25, 1996
- ------------------
H. Keith Abbott
/S/ROBERT C. BALL Director March 25, 1996
- -------------------
Robert C. Ball
57
<PAGE>
/s/ James E. Cunningham Director March 25, 1996
- -------------------------
James E. Cunningham
/s/ William C. Greenbeck Director March 25, 1996
- -------------------------
William C. Greenbeck
/s/ Irving J. Pinsky Director March 25, 1996
- -------------------------
Irving J. Pinsky
/s/ Peer A. Swan Director March 25, 1996
- -------------------------
Peer A. Swan
/s/ Donald E. Wood Director March 25, 1996
- -------------------------
Donald E. Wood
<PAGE>
Exhibit Index
- ------------------------------------------------------------------------------
Exhibit Description Page
No. No.
- ------------------------------------------------------------------------------
2.1 Real Estate Purchase Agreement dated February 28, 1994,
between Southern California Bank and Downey Community
Hospital Foundation(a)
2.2 Asset Purchase and Liability Assumption Agreement between
Southern California Bank and Independence One Bank of
California, F.S.B., dated January 18, 1995(g)
2.3 Deposit Purchase Agreement between Southern California Bank
and Home Bank dated October 10, 1995
2.4 Deposit Purchase Agreement between Southern California Bank
and Preferred Bank dated November 14, 1995
3(i).1 SC Bancorp Articles of Incorporation as previously amended(h)
3(i).2 Amendment to SC Bancorp Articles of Incorporation dated
May 9, 1995
3(ii).1 Bylaws, as amended through March 25,1996
4.1 Specimen Common Stock Certificate(b)
4.2 SC Bancorp 1989 Stock Option Plan (February 1990)(f)
4.3.1 Amended and restated Southern California Bank Employee
Retirement Plan dated January 1, 1992(d)
4.3.2 First amendment to the amended and restated Southern
California Bank Employee Retirement Plan
4.3.3 Second amendment to the amended and restated Southern
California Bank Employee Retirement Plan
4.3.4 Third amendment to the amended and restated Southern
California Bank Employee Retirement Plan
4.3.5 Fourth amendment to the amended and restated Southern
California Bank Employee Retirement Plan
4.4 SC Bancorp Executive Deferral Plan (IV) (February 1990)(f)
4.5 Southern California Bank Executive Incentive Compensation
Plans for 1994 (December 1993)(b)
4.6 Southern California Bank Executive Incentive Compensation
Plans for 1995
10.1 Sublicense Agreement between Southern California Bank and
National Commerce Bank Services, Inc., dated October 22,
1992 for supermarket space in La Habra, California(c)
10.2 Sublease between SC Bancorp and Denny's, dated December 24,
1992 for office space in La Mirada, California(c)
10.3 Lease between Southern California Bank and Robert Stein,
dated September 1, 1981, amended June 19, 1990, for office
space in Avalon, California(d)
10.4 Lease between Southern California Bank and Commonwealth
Equity Trust, dated December 17, 1990 for office space in
Signal Hill, California(d)
10.5 Lease between SC Bancorp and Forest Lawn Company and Western
Empire Savings and Loan Association, dated August 18, 1983,
amended January 3, 1991, for office space in Yorba Linda,
California(d)
10.6 Assignment of lease between Southern California Bank and
Garfield Bank, dated December 27, 1985, amended January 1,
1987, for office space in Huntington Beach, California(b)
10.7 Lease between Southern California Bank and Tustin-La Palma
Business Center, dated July 8, 1993 for office space in
Anaheim, California(b)
10.8 Lease between Southern California Bank and Dicker-Warmington
Properties, dated as of January 1, 1990 for office space in
City of Industry, California(b)
10.9 License Agreement between Southern California Bank and
The Vons Companies, Inc., dated December 18, 1992 for
supermarket space in Anaheim Hills, California(b)
10.10 Consent to assignment of sublease and sublease between
Southern California Bank, Bank of America, NTSA, and
The Taj dated May 12, 1995 for office space in Laguna
Hills, California
10.11 Sublease between Southern California Bank and Citicorp
Savings, dated November 30, 1995 for office space in
La Jolla, California
10.12 Lease between Southern California Bank and Regents Park
Financial Centre, Ltd., dated October 25, 1995 for office
space in La Jolla, California
10.13 Forward lease between Southern California Bank and Regents
Park Financial Centre, Ltd., dated October 25,1995 for
office space in La Jolla, California
10.14 Employment Security Agreement between SC Bancorp and Larry D.
Hartwig, dated January 1, 1995(g)
10.15 Amendment to Employment Security Agreement between SC Bancorp
and Larry D. Hartwig, dated July 18, 1995(i)
10.16 Employment Security Agreement between SC Bancorp and David A.
McCoy, dated February 25, 1992(c)
10.17 Amendment to Employment Security Agreement between SC Bancorp
and David A. McCoy dated November 21, 1995
10.18 Employment Security Agreement between SC Bancorp and Bruce W.
Roat, dated March 17, 1995(g)
<PAGE>
Exhibit Index (continued)
10.19 Amendment to Employment Security Agreement between SC Bancorp
and Bruce W. Roat, dated November 21, 1995
10.20 Employment Security Agreement between SC Bancorp and Mark B.
Metzinger, dated May 1, 1995
10.21 Amendment to Employment Security Agreement between SC Bancorp
and Mark B. Metzinger dated November 21, 1995
10.22 Employment Security Agreement between Southern California Bank
and Ann E. McPartlin, dated September 15, 1994(g)
10.23 Amendment to Employment Security Agreement between SC Bancorp
and Ann E. McPartlin, dated November 21, 1995
10.24 Employment Security Agreement between Southern California Bank
and M. V. Cummings, dated September 15, 1994(g)
10.25 Amendment to Employment Security Agreement between SC Bancorp
and M. V. Cummings, dated November 21, 1995
10.26 Form of Indemnification Agreement entered into with each
Executive Officer and Director of SC Bancorp(b)
10.27 Form of Indemnification Agreement entered into with each
Executive Officer and Director of Southern California Bank(b)
21.0 Subsidiaries of the Registrant(g)
23.1 Consent of the Company's independent auditor (Deloitte & Touche,
LLP) to the incorporation by reference in the Registration
Statement of SC Bancorp on Form S-8 (No. 33-38666) of their
report dated January 24, 1996 appearing in the Annual Report
on Form 10-K of SC Bancorp for the year ended December 31, 1995
27.1 Financial Data Schedule
- ------------------------------------------------------------------------------
(a) This exhibit is contained in SC Bancorp's Registration
Statement on Form S-2, Amendment No. 1, filed with the
Commission on April 28, 1994, (Commission File No. 33-76274),
and incorporated herein by reference.
(b) This exhibit is contained in SC Bancorp's Registration
Statement on Form S-2, filed with the Commission on March 9,
1994, (Commission File No. 33-76274), and incorporated herein
by reference.
(c) This exhibit is contained in SC Bancorp's Annual Report on
Form 10-K for the year ended December 31, 1992, filed with
the Commission on March 30, 1993, (Commission File No. 0-11046)
and incorporated herein by reference.
(d) This exhibit is contained in SC Bancorp's Annual Report on
Form 10-K for the year ended December 31, 1991, filed with
the Commission on March 30, 1992, (Commission File No. 0-11046)
and incorporated herein by reference.
(e) This exhibit is contained in SC Bancorp's Annual Report on
Form 10-K for the year ended December 31, 1990, filed with
the Commission on April 1, 1991, (Commission File No. 0-11046)
and incorporated herein by reference.
(f) This exhibit is contained in SC Bancorp's Proxy Statement,
filed with the Commission on March 23, 1990, (Commission
File No. 0-11046) and incorporated herein by reference.
(g) This exhibit is contained in SC Bancorp's Annual Report on
Form 10-K for the year ended December 31, 1994, filed with
the Commission on March 30, 1995, (Commission File No. 0-11046)
and incorporated herein by reference.
(h) This exhibit is contained in SC Bancorp's Quarterly Report on
Form 10-Q for the period ended March 31, 1995, filed with the
Commission on May 15, 1995, (Commission File No. 0-11046)
and incorporated herein by reference.
(i) This exhibit is contained in SC Bancorp's Quarterly Report on
Form 10-Q for the period ended June 30, 1995, filed with the
Commission on August 15, 1995, (Commission File No. 0-11046)
and incorporated herein by reference.
<PAGE>
DEPOSIT PURCHASE AGREEMENT
BETWEEN
SOUTHERN CALIFORNIA BANK
AND
HOME BANK
<PAGE>
PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Assumed Obligations . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Branch Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Closing Statement . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.9 Overdraft Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Payment Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Premium Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Transfer of Assets and Assumption of Liability . . . . . . . . . . . . . 2
2.1 Transfer of Assets. . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Items in Transit. . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . 2
2.5 Pledged Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 Issuance of Account Statements. . . . . . . . . . . . . . . . . . . 3
2.7 Retention of Other Assets and Other Liabilities . . . . . . . . . . 3
3. Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Payment by Seller . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Adjustments in Payment Amount . . . . . . . . . . . . . . . . . . . 3
4. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Conditions Precedent to the Obligations of the Parties . . . . . . . . . 3
i
<PAGE>
Page
5.1 Conditions Precedent to the Obligations of the Buyer and Seller . . 3
5.1.1 Shareholder Approvals. . . . . . . . . . . . . . . . . . . . 4
5.1.2 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . 4
5.1.3 Absence of Litigation. . . . . . . . . . . . . . . . . . . . 4
5.2 Conditions Precedent to Obligations of Buyer. . . . . . . . . . . . 4
5.2.1 Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.2.2 Representations and Warranties . . . . . . . . . . . . . . . 4
5.2.3 Conduct of Business. . . . . . . . . . . . . . . . . . . . . 5
5.2.4 Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . 5
5.3 Conditions Precedent to Obligations of Seller . . . . . . . . . . . 5
5.3.1 Documents. . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.3.2 Representations and Warranties . . . . . . . . . . . . . . . 5
5.3.3 Covenants of Buyer . . . . . . . . . . . . . . . . . . . . . 5
5.3.4 Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . 5
6. Agreements of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.1 Access to Records and Information . . . . . . . . . . . . . . . . . 5
6.2 Assistance in Obtaining Regulatory Approvals. . . . . . . . . . . . 6
6.3 Further Assistance. . . . . . . . . . . . . . . . . . . . . . . . . 6
6.4 Corporate Consents. . . . . . . . . . . . . . . . . . . . . . . . . 6
7. Agreements of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.1 Efforts to Obtain Regulatory Approval . . . . . . . . . . . . . . . 6
7.2 Performance of Liabilities. . . . . . . . . . . . . . . . . . . . . 6
7.3 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 6
7.4 Corporate Consents and Documents. . . . . . . . . . . . . . . . . . 7
7.5 Selection of Overdraft Loans. . . . . . . . . . . . . . . . . . . . 7
8. Warranties and Representations of Seller . . . . . . . . . . . . . . . . 7
8.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8.3 Closing Statement . . . . . . . . . . . . . . . . . . . . . . . . . 7
ii
<PAGE>
Page
8.4 Finders or Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 7
8.5 Compliance with Instruments . . . . . . . . . . . . . . . . . . . . 8
8.6 The Overdraft Loans . . . . . . . . . . . . . . . . . . . . . . . . 8
8.7 The Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9. Warranties and Representations of Buyer. . . . . . . . . . . . . . . . . 8
9.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.3 Finders or Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 9
9.4 Governmental Notices. . . . . . . . . . . . . . . . . . . . . . . . 9
9.5 Compliance with Instruments . . . . . . . . . . . . . . . . . . . . 9
10. Disclaimers and other Special Provisions . . . . . . . . . . . . . . . . 9
10.1 Fiduciary Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 9
10.2 Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
10.3 Payment of Certain Interest . . . . . . . . . . . . . . . . . . . . 10
10.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.5 Tax Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.6 Interest Reporting. . . . . . . . . . . . . . . . . . . . . . . . . 11
10.7 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.8 Post-Closing Reconciliation . . . . . . . . . . . . . . . . . . . . 11
10.9 Requests for Documents after Closing. . . . . . . . . . . . . . . . 13
11. Survival of Representations and Warranties . . . . . . . . . . . . . . . 13
12. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.1 Termination Agreement . . . . . . . . . . . . . . . . . . . . . . . 13
12.2 Immaterial Breach . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . 14
12.4 Waiver of Right to Terminate. . . . . . . . . . . . . . . . . . . . 14
13. Effect on Third Parties. . . . . . . . . . . . . . . . . . . . . . . . . 14
14. Delayed Settlements. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.1 Final Settlement. . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.2 Payment and Interest. . . . . . . . . . . . . . . . . . . . . . . . 15
iii
<PAGE>
Page
15. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15.1 Confidentiality and Publicity . . . . . . . . . . . . . . . . . . . 15
15.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15.4 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 16
15.5 Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . 17
15.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.8 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.9 Attorneys Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.10 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 17
iv
<PAGE>
<TABLE>
<CAPTION>
Current or
# of Avg. Acct. Transfer Estimated
Description Accounts Balance Balance Runoff
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Personal DDA Non-Interest Bearing 25.00%
- ---------------------------------------------------------------------------------------------------------
Personal DDA Interest Bearing 25.00%
- ---------------------------------------------------------------------------------------------------------
Personal DDA - Non-IBA Seniors Account 25.00%
- ---------------------------------------------------------------------------------------------------------
Personal DDA - IBA Seniors Account 25.00%
- ---------------------------------------------------------------------------------------------------------
Business DDA Non-Interest Bearing 40.00%
- ---------------------------------------------------------------------------------------------------------
Business DDA Interest Bearing 40.00%
- ---------------------------------------------------------------------------------------------------------
Bancontrol Accounts 100.00%
- ---------------------------------------------------------------------------------------------------------
Credit Union Accounts 100.00%
- ---------------------------------------------------------------------------------------------------------
$
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Personal Savings 25.00%
- ---------------------------------------------------------------------------------------------------------
Business Savings 40.00%
- ---------------------------------------------------------------------------------------------------------
Individual Retirement Accounts 25.00%
- ---------------------------------------------------------------------------------------------------------
$
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
$
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
Net
Retainable Current Est. Premium Premium
Description Deposits Yld/Cost Rate Payable
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Personal DDA Non-Interest Bearing $ 2.00% $
- ---------------------------------------------------------------------------------------------------------
Personal DDA Interest Bearing $ 1.75% $
- ---------------------------------------------------------------------------------------------------------
Personal DDA - Non-IBA Seniors Account $ 2.00% $
- ---------------------------------------------------------------------------------------------------------
Personal DDA - IBA Seniors Account $ 2.00% $
- ---------------------------------------------------------------------------------------------------------
Business DDA Non-Interest Bearing $ 2.00% $
- ---------------------------------------------------------------------------------------------------------
Business DDA Interest Bearing $ 1.75% $
- ---------------------------------------------------------------------------------------------------------
Bancontrol Accounts $ 1.00% $
- ---------------------------------------------------------------------------------------------------------
Credit Union Accounts $ 2.00% $
- ---------------------------------------------------------------------------------------------------------
$ $
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Personal Savings $ 1.75% $
- ---------------------------------------------------------------------------------------------------------
Business Savings $ 1.75% $
- ---------------------------------------------------------------------------------------------------------
Individual Retirement Accounts $ 1.00% $
- ---------------------------------------------------------------------------------------------------------
$ $
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
$ $
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DEPOSIT PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 10th day of October, 1995, by and
between SOUTHERN CALIFORNIA BANK, a California banking corporation (hereinafter
referred to as "Seller"), and HOME BANK, a California banking corporation
(hereinafter called "Buyer").
1. DEFINITIONS:
1.1 AGREEMENT. "Agreement" means this Deposit Purchase
Agreement, as amended from time to time.
1.2 ASSUMED OBLIGATIONS. "Assumed Obligations" means any
obligations of the Branch Office specifically identified in writing by Buyer as
being assumed by Buyer on and after the Closing.
1.3 BRANCH OFFICE. "Branch" means the branch banking office of
Seller located at 2501 Cherry Avenue, Signal Hill, California 90806-2037.
1.4 CLOSING STATEMENT. "Closing Statement" means the Statement
of Condition for the Branch Office and is prepared from Seller's books and
records as of the end of the day prior to the Closing Date, provided, however,
that the Closing Statement shall contain only those overdraft loans as are
identified by Buyer as Overdraft Loans pursuant to Section 7.6. The information
on the Closing Statement relating to the Deposits shall be consistent with the
closing account statements prepared and issued pursuant to Section 2.6.
1.5 CLOSING DATE. "Closing Date" means 12.01 a.m. on the date
when the purchase and sale described in this Agreement is consummated. The
Closing Date shall be on a date mutually agreed upon by the parties hereto and
which occurs following receipt of the approvals required under Section 5.1, and
each of its applicable subparts, of this Agreement; PROVIDED, however, the
Closing Date shall not in any event occur prior to the lapse of all legally
required waiting or protest periods.
1
<PAGE>
1.6 DEPOSITS. "Deposits" means all liabilities of Seller
carried on the books of the Branch Office identified as deposits in the Closing
Statement.
1.7 OTHER ASSETS. "Other Assets" means all assets identified in
the Closing Statement other than Overdraft Loans.
1.8 OTHER LIABILITIES. "Other Liabilities" means all
liabilities and obligations of the Branch Office other than Deposits and Assumed
Liabilities.
1.9 OVERDRAFT LOANS. "Overdraft Loans" means those loans of the
Branch Office representing advances or commitments to advance to cover
overdrafts on a Deposit which are identified on the Closing Statement.
1.10 PAYMENT AMOUNT. "Payment Amount" means the aggregate book
value of the Deposits [plus accrued interest] less the par value of the
Overdraft Loans, less the Premium Amount (as defined below).
1.11 PREMIUM AMOUNT. "Premium Amount" means the dollar amount of
deposit premium as calculated by multiplying the premium rates by net retainable
deposits (actual deposits on Closing Statement, less Estimated Runoff), as
computed in accordance with Exhibit A hereto.
2. TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITY.
2.1 TRANSFER OF ASSETS. On the Closing Date, subject to the
terms and conditions set forth in this Agreement, Seller agrees to sell,
transfer, assign and deliver the Overdraft Loans and all documents and
instruments relating thereto to Buyer, Buyer agrees to purchase, acquire and
accept the same from Seller.
2.2 BOOKS AND RECORDS. On the Closing Date, Buyer shall receive
possession of, and right, title and interest in: (i) all books and records
relating to the Overdraft Loans and (ii) all books and records identified on
Exhibit B with respect to the Deposits and Assumed Obligations. All such books
and records shall be open for inspection by Seller and its authorized agents and
representatives during regular business hours after
2
<PAGE>
the Closing Date and Seller may, at its own expense, make such copies of and
excerpts from such books and records as it may deem desirable. All books and
records relating to the Overdraft Loans, Deposits and Assumed Obligations shall
be maintained for a period which is at least the longer of the period required
by law or the third anniversary of the Closing Date unless the parties shall,
applicable law permitting, agree upon a shorter period.
2.3 ITEMS IN TRANSIT. Buyer shall obtain the benefit of and
shall bear the risk of all items relating to the Deposits which are in the
original process of collection as of the end of the day prior to the Closing
Date provided that Seller shall reimburse Buyer for any such item where Buyer
suffers a loss due to Seller's failure to adhere to applicable law and its own
policies and procedures in collecting such item.
2.4 ASSUMPTION OF LIABILITIES. From and after the Closing Date,
Buyer shall assume, defend, pay, perform, and discharge the Deposits and the
Assumed Obligations.
2.5 PLEDGED DEPOSITS. No later than 60 days prior to the
Closing Date Seller shall identify in writing to Buyer any Deposits in which
Seller or a third party claims a security interest (a "Pledged Deposit"). At the
time the Buyer assumes the Liabilities, Seller shall deliver to Buyer copies of
any notices received by Seller pursuant to Section 9302(1)(g)(ii) of the Uniform
Commercial Code of California with respect to any Pledged Deposits. Buyer shall
then treat the Pledged Deposits so identified to it in accordance with its
obligations under the Uniform Commercial Code of California.
2.6 ISSUANCE OF ACCOUNT STATEMENTS. On and as of the Closing
Date, Seller shall prepare and issue to each customer with respect to each
Deposit a closing account statement setting forth the status of such Deposit and
all transactions related thereto occurring on or prior to the Closing Date.
2.7 RETENTION OF OTHER ASSETS AND OTHER LIABILITIES. On and
after the Closing, Seller shall retain and shall not transfer the Other Assets
and Other Liabilities.
3. CONSIDERATION
3
<PAGE>
3.1 PAYMENT BY SELLER. Seller shall pay to Buyer on the Closing
Date in immediately available funds an amount equal to the Payment Amount.
3.2 ADJUSTMENTS IN PAYMENT AMOUNT. Any prorations or adjustments
to the Payment Amount which are made from and after the Closing Date shall be
paid, subject to Section 14 of this Agreement, by the party obligated therefor
upon demand of the party entitled thereto in immediately available funds.
4. CLOSING.
The closing of the purchase and sale of the Assets and the assumption
of the Liabilities (the "Closing") described in this Agreement shall take place
as of the Closing Date. All responsibility and risk relating to the Overdraft
Loans, Deposits and Assumed Obligations and all business conducted at the Branch
Office from and after the Closing Date shall be for Buyer's account and risk.
5. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES.
5.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER AND
SELLER. The obligations of Buyer and Seller are subject to the fulfillment at
or prior to the Closing Date of each of the following conditions precedent:
5.1.1 SHAREHOLDER APPROVALS. The Agreement shall have beer
approved by the shareholder of Buyer for its approval, as provided under Section
2052 of the California Financial Code, which approval shall be in conformance
with all appropriate legal requirements.
5.1.2 REGULATORY APPROVALS. All required licenses,
approvals and consents of the California Superintendent of Banks, the Federal
Deposit Insurance Corporation, any other federal regulatory agencies and any
other relevant California agencies shall have been obtained and shall be in full
force and effect, all waiting periods prescribed by applicable law or regulation
shall have expired, and none of such authorizations, consents, orders, approvals
or licenses shall contain conditions which in the good faith and reasonable
judgment of Seller are
4
<PAGE>
materially burdensome to it, or which in the good faith and reasonable judgment
of Buyer are materially burdensome to it, and all necessary conditions of such
licenses, approvals and consents shall have been fully satisfied.
5.1.3 ABSENCE OF LITIGATION. No action or proceeding
instituted by a non-party to this Agreement to prevent the consummation of the
transactions covered and contemplated by this Agreement shall be pending as of
the end of the day prior to the Closing Date .
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The
obligations of Buyer are subject to fulfillment at or prior to the Closing Date
of each of the following conditions precedent but compliance with or occurrence
of any one or more of such conditions precedent may be waived in writing by
Buyer:
5.2.1 DOCUMENTS. Seller shall have delivered to Buyer:
(i) Copies, certified as of the date prior to the
Closing Date by the secretary of Seller, of resolutions of Seller's Board of
Directors authorizing execution and delivery of this Agreement and the other
documents contemplated hereby, certifying that such authorization and approval
remains unmodified and in full force and effect;
(ii) Such deeds, bills of sale, assignments, and other
instruments and documents as counsel for Buyer, if any, may reasonably require
as necessary for (A) conveying to Buyer pursuant to this Agreement good and
marketable title to the Overdraft Loans an (B) evidencing assumption of the
Deposits and Assumed Obligations.
5.2.2 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Seller set forth in Section 8 of this Agreement shall be
true and correct in alI material respects as of the end of the day prior to the
Closing Date.
5.2.3 CONDUCT OF BUSINESS. Seller shall have fully
performed the covenants contained in section 6 of this Agreement.
5
<PAGE>
5.2.4 LEGAL MATTERS. The validity of all transactions
specified herein to be performed by Seller, as well as the form and substance of
all documents to be delivered b, Seller hereunder shall be subject to the
approval, to be reasonably exercised, of counsel for Buyer .
5.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The
obligations of Seller are subject to fulfillment at or prior to the Closing Date
of each of the following conditions precedent but compliance with or occurrence
of any one or more of such conditions precedent may be waived in writing by
Seller:
5.3.1 DOCUMENTS. Buyer shall have delivered to the Seller:
(i) Copies, certified as of the date prior to the
Closing Date by the secretary of Buyer, of resolutions of Buyer's Board of
Directors authorizing execution and delivery of this Agreement and the other
documents contemplated hereby, and resolutions of Buyer's shareholder, approving
this Agreement, in each case certifying that such authorization and approval
remains unmodified and in full force and effect;
5.3.2 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Buyer set forth in Section 9 of this Agreement shall be true
and correct in all material respects as of the end of the day prior to the
Closing Date.
5.3.3 COVENANTS OF BUYER. Buyer shall have fully performed
the covenants contained in Section 7 of this Agreement.
5.3.4 LEGAL MATTERS. The validity of all transactions
herein contemplated to be performed by Buyer as well as the substance of all
documents to be delivered by Buyer hereunder shall be subject to the approval,
to be reasonably exercised, of counsel to Seller.
6. AGREEMENTS OF SELLER.
6.1 ACCESS TO RECORDS AND INFORMATION. Between the date of this
Agreement and the day prior to the Closing Date,
6
<PAGE>
Seller shall afford to Buyer and its authorized agents and representatives,
during times mutually agreed upon by the parties, reasonable access to records,
loan files and other information within Seller's possession relating to the
Branch Office and the assets to be purchased and liabilities to be assumed by
Buyer pursuant to the terms of this Agreement, and the opportunity to update any
such investigation at such intervals as the Buyer shall deem appropriate.
6.2 ASSISTANCE IN OBTAINING REGULATORY APPROVALS. Seller agrees
to us all reasonable efforts to assist Buyer in obtaining the regulatory
approvals referred to in Section 5.1.2 of this Agreement, and Seller will
provide to Buyer or to the appropriate regulatory authorities all information
required to be submitted by Seller in connection with such approvals.
6.3 FURTHER ASSISTANCE. On and after the Closing Date, Seller
shall (i) execute, acknowledge and deliver all such bills of sale, deeds,
acknowledgments and other instruments and take such further action as may be
necessary and appropriate to effectively vest in Buyer the full legal and
equitable title to the Overdraft Loans, and (ii) use its best efforts to assist
Buyer in the assumption by Buyer of the Deposits and Assumed Obligations.
6.4 CORPORATE CONSENTS. Seller shall use its best efforts to
obtain all necessary corporate consents. Subject to Sections 5.1.1 and 5.1.2,
Seller shall comply with all applicable laws, regulations and rulings in
connection with this Agreement and the consummation of the transactions
contemplated hereby and shall furnish to Buyer at the Closing the documents
described in Section 5.2.1 of this Agreement.
7. AGREEMENTS OF BUYER.
7.1 EFFORTS TO OBTAIN REGULATORY APPROVAL. Buyer agrees to use
all reasonable efforts to obtain as promptly as possible the regulatory
approvals referred to in Section 5.1.2 of this Agreement which must be obtained
by Buyer. Buyer shall specifically be responsible for making application to
obtain the requisite approvals from the California Superintendent of Banks and
the Federal Deposit Insurance Corporation.
7
<PAGE>
7.2 PERFORMANCE OF LIABILITIES. From and after the Closing
Date, Buyer shall fully perform, pay and discharge all of the Deposits and the
Assumed Obligations and shall protect the rights of depositors and creditors of
the Branch Office in the same manner and to the same extent as if Buyer had
itself incurred such liabilities.
7.3 FURTHER ASSURANCES. On and after the Closing Date, Buyer
shall give such further assurances to Seller and shall execute, acknowledge and
deliver all such acknowledgments and other instruments and take any further
action as may be necessary and appropriate to effectively relieve and discharge
Seller from any obligations remaining under the Liabilities assumed by Buyer.
7.4 CORPORATE CONSENTS AND DOCUMENTS. Buyer shall use its best
effort to obtain all necessary corporate consents. Subject to Sections 5.1.1 and
5.1.2, Buyer shall comply with all applicable laws, regulations and rulings in
connection with this Agreement and the consummation of the transactions
contemplated hereby and shall furnish to Seller at the Closing the documents
described in Section 5.3.1 of this Agreement.
7.5 SELECTION OF OVERDRAFT LOANS. Not less than 10 days prior
to the Closing Date, Buyer shall review the overdraft loans held by Seller at
the Branch Office and, based upon such review, shall select the Overdraft Loans
and shall provide to Buyer written notice of such selection. Seller shall
include only such Overdraft Loans as are selected by Seller on the Closing
Statement.
8. WARRANTIES AND REPRESENTATIONS OF SELLER.
Seller represents and warrants to Buyer as of the date hereof:
8.1 ORGANIZATION. Seller is a corporation duly organized and
validly existing under the laws of the state of California, with full power and
authority to exercise its corporate powers, rights and privileges and to conduct
a commercial banking business at the Branch Office as is now conducted by it.
8
<PAGE>
8.2 AUTHORITY. The execution and delivery of this Agreement by
Seller have been duly authorized by its Board of Directors and no further
corporate action will be or is necessary on the part of Seller to make this
Agreement valid, binding and enforceable in accordance with its terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency, or other laws
affecting the enforcement of creditor's rights generally.
8.3 CLOSING STATEMENT. The Closing Statement or any other
information based on the books and records of Seller used in making any
calculations hereunder or otherwise furnished to Buyer in connection with this
Agreement is and will be accurate and complete as of the dates thereof and will
be prepared in a consistent manner and in the ordinary course of Seller's
business.
8.4 FINDERS OR BROKERS. Seller has not in any manner whatsoever
paid or agreed to pay any fee or commission to any agent, broker, finder or
other person for or on account of services rendered as a broker or finder in
connection with this Agreement or the transactions contemplated hereby. All
negotiations relating to this Agreement have been conducted by Seller directly
and without the intervention of any person in such manner as to give rise to any
valid claim against Buyer for any brokerage commission or other like payment.
8.5 COMPLIANCE WITH INSTRUMENTS. The performance of this
Agreement by Seller will not violate or result in a breach of any of the terms
or conditions of, or constitute a default under, Seller's Articles of
Incorporation or its bylaws, or any law or any contract, agreement, note, bond,
license or other instrument or obligation to which Seller is a party or by which
any of its properties are bound or affected or violate any rule or regulation of
any administrative agency, or order, writ, injunction or decree of any court,
administrative agency or governmental body applicable to Seller.
8.6 THE OVERDRAFT LOANS. The instruments and documents relating
to the Overdraft Loans were obtained by Seller in the ordinary course of
business and relate to actual loan transactions. Seller's books and records
fairly reflect in all material aspects (subject to normal adjustments) the
payment
9
<PAGE>
history and present balance as to each such loan, and none of the borrowers on
such loans has notified Seller, nor is Seller aware, of an offset or defense to
his obligation under said loan and Seller is not aware of any material adverse
change in the financial condition or repayment ability of the borrowers under
such Loans. None of the Overdraft Loans, on and as of the Closing Date, shall be
in excess of 30 days delinquent. The obligor with respect to each Overdraft Loan
is a depositor with respect to a Deposit.
8.7 THE DEPOSITS. The books and records of Seller with respect
to deposit; fairly reflect (subject to normal adjustments) the Deposits and the
Deposits have been administered in all material respects in compliance with
applicable law and regulations.
9. WARRANTIES AND REPRESENTATIONS OF BUYER.
Buyer hereby represents and warrants to Seller as of the date hereof:
9.1 ORGANIZATION. Buyer is a banking corporation duly organized
and validly existing under the laws of the state of California with full power
and authority to exercise its corporate powers, rights and privileges and to
conduct a commercial banking business in the State of California.
9.2 AUTHORITY. The execution and delivery of this Agreement by
Buyer have been duly authorized by its Board of Directors and no further
corporate action (other than the approval of this Agreement and the transaction
contemplated herein by Buyer's shareholder) will be or is necessary to make this
Agreement valid, binding and enforceable in accordance with its terms except as
the enforcement thereof may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditor's rights generally.
9.3 FINDERS OR BROKERS. Buyer has not in any manner whatsoever
paid or agreed to pay any fee or commission to any agent, broker, finder or
other person for or on account of services rendered as a broker or finder in
connection with this Agreement or the transaction contemplated hereby. All
negotiations relating to this Agreement have been conducted by
10
<PAGE>
Buyer directly and without the intervention of any person in such manner as to
give rise to any valid claim against Seller for any brokerage commission or
other like payment.
9.4 GOVERNMENTAL NOTICES. Buyer has not received written notice
from any federal or California governmental agency indicating that it would
oppose or not grant or issue its consent or approval, if required, with respect
to the transactions contemplated by this Agreement.
9.5 COMPLIANCE WITH INSTRUMENTS. The performance of this
Agreement by Buyer will not violate or result in the breach of any of the terms
or conditions of, or constitute a default under, Buyer's Articles of
Incorporation, its bylaws, or any contract, agreement, note, bond license, or
other instrument or obligation to which Buyer is a party or by which any of its
properties or assets are bound or affected, or violate any law, or any rule or
regulation of any administrative agency or governmental body, or any order,
writ, injunction or decree of any court, administrative agency or governmental
body applicable to Buyer.
10. DISCLAIMERS AND OTHER SPECIAL PROVISIONS.
Buyer and Seller understand and agree as follows:
10.1 FIDUCIARY ACCOUNTS. No transfer of properties, assets,
investments, agreements, rights or assumption of obligations under trusts,
executorship, administrations, guardianships, agencies and other representative
capacities of Seller in existence as of the end of the day prior to the Closing
Date is contemplated or required by this Agreement, except for Individual
Retirement Accounts and other trust accounts which are serviced by Seller's
commercial banking business in the ordinary course of business.
10.2 DEPOSITS. All transfers to Buyer of the Deposits are
subject to the individual depositors' continuing rights to withdraw under
Section 2051 of the California Financial Code, and Seller makes no
representation, warranty or agreement concerning the continuing maintenance of
such deposits at the Branch office.
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10.3 PAYMENT OF CERTAIN INTEREST. From and after the Closing
Date, Buyer shall pay all interest on the Deposits in accordance with the terms
of the contracts applicable to such Deposits.
10.4 INDEMNIFICATION. Seller and Buyer (references in this
Section 10.4 to either party shall include its officers, directors,
representatives, agents, employees, successors or assigns) each agrees to
indemnify and hold the other harmless from and against any and all claims,
liabilities, suits, losses, damages, costs and expenses, including reasonable
attorneys' fees, whether accrued, absolute, contingent or otherwise, or whether
due or to become due (including, without limitation, liability for income taxes,
excise taxes, state or local taxes or any other direct or indirect taxes due or
to become due) ("Claim") which such other party may incur directly or indirectly
as consequence of (i) such indemnifying party's failure to pay and perform (x)
all liabilities and obligations incurred by it with respect to the Branch office
which are not expressly assumed by the other party and (y) all liabilities and
obligations incurred by the other party with respect to the Branch office which
are expressly assumed by the indemnifying party; (ii) any acts, omissions or
events occurring during the period in which the indemnifying party conducted the
business of the Branch Office; (iii) any breach of any of the conditions or
covenants made by either party hereto. Further, Seller shall indemnify Buyer
from any Claim relating to (i) the return of an item accepted for deposit on or
before the Closing Date to the extent that Seller would have otherwise been
liable therefor had Seller retained the applicable Deposit; (ii) U. S. Treasury
reclamation actions relating to items accepted for deposit on or before the
Closing Date to the extent that Seller would have otherwise been liable therefor
had Seller retained the applicable Deposit, and to the extent that there do not
exist sufficient customer funds to repay such claim and (iii) any failure to
report or misreporting of taxpayer identification numbers prior to the Closing
Date. The amounts recoverable by either party with respect to any such claims
against the other shall reflect, and such other party shall only be obligated to
pay, the net amount of damages suffered by the other party entitled to recovery
after giving effect to any insurance proceeds recoverable with respect to such
matters. Each party shall select its own counsel, if any, and shall pay for the
defense of the other party, including
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reasonable attorneys' fees and costs, with respect to any claim against which
such paying party is obligated to indemnify such other party as provided in this
Section 10.4. If such other party chooses to have counsel of its own choosing in
addition to that provided by the paying party, it may do so at its sole expense.
Each party shall provide to the other written notice of any claim to which such
other party's indemnity obligations hereunder do or may apply within sixty (60)
business days after becoming aware of the existence of such claim.
10.5 TAX REPORTING. Neither Buyer nor Seller will take a
position with any federal, state or local taxing authority contrary to any of
the terms or provisions of this Agreement.
10.6 INTEREST REPORTING. Seller shall report from January 1,
1995 through the Closing Date, and Buyer shall report from the Closing Date and
thereafter, all interest credited to, interest premiums paid on, interest
withheld from, and early withdrawal penalties charged to, the Deposits. Such
reports shall be made to the holders of the Deposit accounts and to the
applicable federal and state taxing agencies.
10.7 WITHHOLDING. Following the Closing Date, Seller shall
deliver to Buyer (i) "B" notices (TINs do not match) and "C" notices
(underreporting/IRS imposed withholding) received by it from the IRS regarding
any of the accounts included within the Deposits, and (ii) all notices received
from the IRS releasing withholding restrictions on any of the accounts included
within the Deposits. Any amounts required by any governmental agency to be
withheld from any of the accounts included within the Deposits (the "Withholding
Obligations") or an penalties imposed by any governmental agency will be handled
as follows:
(a) Any Withholding Obligations required to be
remitted to the appropriate governmental agency on or prior to the Closing Date
will be withheld and remitted by Seller, and any other sums withheld by Seller
pursuant to Withholding Obligations prior to the Closing Date shall also be
remitted by Seller to the appropriate governmental agency on or prior to the
time they are due;
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(b) Any Withholding Obligations required to be
remitted to the appropriate governmental agency after the Closing Date with
respect to Withholding Obligations after the Closing Date shall be withheld and
remitted by Buyer.
10.8 POST-CLOSING RECONCILIATION.
(a) For a period of sixty (60) days following the
Closing Date (the "Inclearing Period"), Seller shall continue to process checks
or drafts, drawn on deposit accounts which are not intercepted by the applicable
Federal Reserve Bank ("Federal Reserve"). During the Inclearing Period, Seller
shall by 3:00 p.m. Pacific Time on the date of presentment make all of such
checks or drafts available to Buyer's courier at Seller's data processing center
located at 16420 Valley View Street, La Mirada, California along with a cash
letter listing all such checks or drafts. By 3:00 p.m. Pacific Time [close of
business] on each day of presentment during the Inclearing Period, Buyer shall
credit Seller's due to correspondent account with the amount set forth in the
cash letter less adjustments for all items presented to Buyer on that day. Upon
expiration of the Inclearing Period, Seller shall cease honoring inclearing
items presented against the Deposits and such items shall be returned marked
"Refer to Maker".
(b) ACH TRANSACTIONS. Seller shall provide to Buyer
no later than 30 days prior to the Closing Date, the customer name, customer
account number, and the originator identification number for each automated
clearinghouse ("ACH") entry for the Deposit accounts, and shall further provide,
within two business days following the Closing Date, an updated list as of the
close of business on the Closing Date. Following closing, Seller shall transmit
to Buyer no later than 12:00 p.m. Pacific Time all information pertaining to ACH
items affecting Deposit during each business day including claim number, suffix,
if applicable, source name, trade identification, company identification, client
name and account number and effective date. Seller will credit such finds to
Buyer's due from account maintained with Seller. For a period of 60 days
following the Closing Date, Seller agrees to continue to accept and immediately
forward to Buyer all ACH entries and corresponding funds. Seller agrees to
include the originator identification number, and Buyer agrees to immediately
notify and instruct the originator of the
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ACH to reroute the entries directly to Buyer. Buyer shall be responsible for
processing and responding to any reclamation requests. Losses due to reclamation
requests related to Deposits that are closed or have insufficient funds to cover
a reclamation request will be absorbed by Seller if the reclamation is against a
credit received on or prior to the Closing and by Buyer if against a credit
received after closing. After the 60 day period, Seller may discontinue
accepting and forwarding ACH entries and return them to the originators.
(c) RETURNED ITEMS. For a period of 60 days following
the Closing Date, Seller shall make available no later than 3:00 p.m. Pacific
Time to Buyer's courier a cash letter containing all returned items received on
that business day. Buyer shall credit Seller's due to account maintained with
Buyer by the close of business that day an amount equal to the cash letter for
such returned items. Returned items are those items that are included within the
Deposits transferred to Buyer but that are returned unpaid to Seller after the
Closing Date. Buyer shall notify Seller by facsimile of any unacceptable
returned items and Seller shall reimburse Buyer's due from account upon receipt
of such unacceptable returned items.
10.9 REQUESTS FOR DOCUMENTS AFTER CLOSING. For so long as Seller
is required to maintain the books and records relating to the Deposits under
Section 2.2, Seller shall, at Buyer's request, provide research services
relating to documentation retained by Seller in connection with requests for
documents made on behalf of customers or by court order relating to litigation
involving customers. Fees for documents produced at the request of customers
shall be Seller's customary research fees in effect from time to time, provided
fees for document research relating to State or Federal litigation shall not
exceed those set forth in California Evidence Code Section 1563.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made under this Agreement by either
party shall survive the Closing; PROVIDED, however, that from and after the
Closing neither Buyer nor Seller shall have any liability for any
misrepresentation or breach of warranty unless all losses, costs and damages
which a party may incur by reason of misrepresentations or breaches of warranty
of
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the other party shall exceed an aggregate of $5,000 in which event the party
causing such losses, costs and damages shall be liable for the amount of the
claims in excess of $5,000.
12. TERMINATION.
12.1 TERMINATION AGREEMENT. Except as is otherwise provided in
Section 12.3, this Agreement shall terminate and shall be of no further force or
effect as between the parties hereto upon the occurrence of any of the
following:
(i) Immediately upon the expiration of fifteen (15)
days from the date that Seller has given notice to Buyer of a breach or default
by Buyer in the performance of any covenant, agreement, representation,
warranty, duty or obligation hereunder; PROVIDED, however, that no such
termination shall be effective if, within such fifteen (15) day period, Buyer
shall have substantially corrected and cured the grounds for termination as set
forth in such notice of termination;
(ii) Immediately upon the expiration of fifteen (15)
days from the date that Buyer has given notice to Seller of a breach or default
by Seller in the performance of any covenant, agreement, representation,
warranty, duty or obligation hereunder; PROVIDED, however, that no such
termination shall be effective if, within such fifteen (15) day period, Seller
shall have substantially corrected and cured the grounds for termination as set
forth in such notice of termination;
(iii) Upon mutual agreement of the parties, if it
appears unlikely that the regulatory approvals required in order to fulfill the
conditions set forth in Section 5.l.2 of this Agreement will be obtained, or if
the parties otherwise mutually agree to terminate this Agreement for any other
reason;
(iv) Upon written notice by either party to the other
party if the Closing has not occurred on or before December 31, 1995, unless
such date is extended by the mutual agreement of the parties hereto.
12.2 IMMATERIAL BREACH. Notwithstanding anything to the contrary
contained herein, no party hereto shall have the
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right to terminate this Agreement on account of its own breach or because of any
immaterial breach by any other party hereto of any covenant, agreement,
representation, warranty, duty or obligation hereunder.
12.3 EFFECT OF TERMINATION. No termination of this Agreement
under this Section 12 shall release, or be construed as so releasing, any party
hereto from any liability or damage to any other party hereto arising out of, in
connection with or otherwise relating to, directly or indirectly, such party's
material and bad faith breach, such party's default, breach or failure if
performance of any of its warranties, representations, covenants, agreements,
duties or obligations arising hereunder. No termination of this Agreement under
this Section 12 or for any other reason shall terminate or release any party
hereto from its obligations set forth in Sections 10.5, 15.1 or 15.2 of this
Agreement.
12.4 WAIVER OF RIGHT TO TERMINATE. Either Buyer or Seller may,
at its written election, waive any of their respective rights to terminate this
Agreement under the foregoing provisions of this Section 12, and the parties
shall be deemed to have waived such rights from and after the Closing Date even
though actual settlement may have been delayed pursuant to the
provisions of Section 14.
13. EFFECT ON THIRD PARTIES.
Except as otherwise provided by law, neither the rights of creditors
and depositors of Seller nor any liability or obligation for payment of money
nor any claim or cause of action against Seller shall be in any manner released
or impaired by this Agreement or by the transactions contemplated hereunder, and
the rights and obligations of all creditors and depositors and of all other
persons shall remain unimpaired; Buyer shall succeed to all such obligations and
liabilities only to the extent included among the Liabilities as of the day
prior to the Closing Date and shall be liable from then and thereafter to pay,
discharge and perform all such debts and obligations of Seller assumed pursuant
to this Agreement and in connection with the transaction contemplated hereunder
in the same manner as if Buyer had itself incurred the debts or obligations, and
Buyer shall succeed to all rights, offsets and defenses of Seller in connection
therewith.
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14. DELAYED SETTLEMENTS.
14.1 FINAL SETTLEMENT. All claims by either party to this
Agreement regarding the proper computation of the Payment Amount under this
Agreement shall be submitted in writing to the other party within 90 days
following the Closing Date, except for such claims a relate to Deposits which
are credit card merchant accounts, for which such period shall be 180 days. No
claim shall be valid and no Payment Amount adjustment shall be made with respect
to any claim which is not submitted within such 90- or 180-day period, as
applicable, whether or not such claims should or could have come to the
attention of the claiming party prior to the expiration of such period of time.
All claims submitted by the parties within the 90- or 180-day period shall be
resolved by the mutual agreement of the parties (or by such other means as the
parties may designate in writing at some future date) within nine months
following the Closing Date. The parties agree to use their best efforts to
resolve all claims by mutual agreement, and in this connection each party agrees
that its representatives will be available at reasonable times to discuss and
resolve any disputed matters. In the event such claim cannot be resolved within
nine months following the Closing Date, the claiming party may commence or
institute a legal action or proceeding to enforce such claim.
14.2 PAYMENT AND INTEREST. Any amounts payable by one party to
the other pursuant to Sections 14.1 and 14.2 shall be payable upon demand of the
party entitled thereto in immediately available funds and shall bear interest
(payable on demand in immediately available funds) from and after the Closing
Date to the day of payment at a rate per annum (calculated for actual days
elapsed on the basis of a 365-day year) equal to the rate for Fed Funds
published in the Wall Street Journal Western Edition from time to time, which
rate shall be adjusted from time to time as said Fed Funds' rate changes.
15. MISCELLANEOUS.
15.1 CONFIDENTIALITY AND PUBLICITY. Except as contemplated by
this Agreement or as is necessary to carry out the transaction contemplated
hereby, all information or documents furnished by either party to the other
party in connection with this Agreement, and not otherwise known to the other
party or
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already in the public domain, shall be kept confidential, except as disclosure
may be required to obtain the regulatory approvals contemplated herein. If for
any reason this transaction is not consummated, each party shall return to the
other all information and copies or originals of any documents or other
materials furnished pursuant to this Agreement. The parties shall coordinate
all publicity relating to this purchase and sale. No party shall issue any press
release or other written public notice or make any public statement in
connection with this Agreement or the transaction contemplated hereby without
the prior written consent of the other party, or unless in the sole opinion of
such party's legal counsel a press release or other written public notice or
statement is required by applicable law or regulation.
15.2 EXPENSES. Except as is otherwise provided in Sections 10.5
and 15.9 of this Agreement, whether the Closing takes place or whether this
Agreement is terminated, each party shall pay its own costs and expenses imposed
on or incurred by it in connection with this Agreement and the transactions
contemplated hereby, including, but not by way of limitation, all regulatory
fees, attorneys' fees, accounting fees, and other expenses.
15.3 NOTICES. All notices, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person or by United States mail, certified or registered, with
return receipt requested, or otherwise actually delivered, as follows:
(i) If to Seller, to:
Southern California Bank
P.O. Box 588
16420 Valley View
La Mirada, CA 90637
Attn: Mr. Bruce Roat
(ii) If to Buyer, to:
Home Bank
2633 Cherry Avenue
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<PAGE>
Signal Hill, California 90806
Attn: Mr. Keith W. Barnes
The persons or addresses to which mailings or deliveries shall be made may
change from time to time by notice given pursuant to the provisions of this
Section 15.3. Any notice, demand or other communication given pursuant to the
provisions of this Section 15.3 shall be deemed to have been given on the date
actually delivered or five (5) days following the date deposited in the United
State mail, properly addressed, postage prepaid, as the case may be.
15.4 SUCCESSORS AND ASSIGNS. All terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and permitted assigns;
PROVIDED, however, this Agreement and all rights, privileges, duties and
obligations of the parties hereto may not be assigned or delegated by any party
hereto without the prior written consent of the other party.
15.5 THIRD PARTY BENEFICIARIES. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
15.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one instrument.
15.7 GOVERNING LAW. This Agreement is made and entered into in
the Stat of California and the laws of that state shall govern the validity and
interpretation hereof and the performance of the parties hereto of their
respective duties and obligations hereunder.
15.8 CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
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15.9 ATTORNEYS FEES. In the event either party to this Agreement
brings an action or suit against the other party by reason of any breach of any
covenant, agreement, representation, warranty or any other provision hereof, or
any breach of any duty or obligation created hereunder by such other party, the
prevailing party in whose favor final judgment is entered shall be entitled to
have and recover of and from the losing party, all costs and expenses incurred
or sustained by such prevailing party in connection with such suit or action,
including without limitation, legal fees and court costs (whether or not taxable
as such).
15.10 ENTIRE AGREEMENT. The making, execution and delivery of
this Agreement by the parties hereto have been induced by no representations,
statements, warranties or agreements other than those herein expressed. This
Agreement embodies the entire understanding of the parties and there are no
further or other agreements or understandings, written or oral, in effect
between the parties relating to the subject matter hereof, unless expressly
referred to by reference herein.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day on this instrument and the agreements contained
herein may be amended or modified only by an instrument of equal formality
signed by the parties or their duly authorized agents. d year first above
written.
SELLER:
SOUTHERN CALIFORNIA BANK
By /s/
-----------------------------------------
Its EVP/COO
----------------------------------------
BUYER:
HOME BANK
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By /s/
-----------------------------------------
Its President
----------------------------------------
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<PAGE>
EXHIBIT B
Account Transfer Agreements
Automated Clearing House Debit Authorizations
Check File Dividers with Specimen Signatures
Credit Card Merchant Processing Agreements
Final Hold Report
Final Stop Payment Report
Final Trial Balance
Hold Orders
Individual Retirement Plan Account Documents
New Account Legal Documentation:
Articles of Incorporation
Court Orders
Fictitious Firm Name Filings
Partnership Agreements
Trust Agreements
Open Levies, Writs & Attachments
Pledged Account Agreements
Signature Cards
Stop Payment Orders
Telephone Transfer Authorizations
W-9 Taxpayer Identification Certification Forms
Wire Transfer Authorizations
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<PAGE>
PURCHASE AGREEMENT
FOR
BRANCH OFFICE
BETWEEN
SOUTHERN CALIFORNIA BANK
AND
PREFERRED BANK
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 ACCRUED INTEREST . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 BRANCH OFFICE. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 CLOSING STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 DEPOSITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 FIXED ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.9 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.10 LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.11 NONSTATEMENT LIABILITIES . . . . . . . . . . . . . . . . . . . . 2
1.12 OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 PREMIUM AMOUNT . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 STATEMENT LIABILITIES. . . . . . . . . . . . . . . . . . . . . . 2
2. TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 ITEMS IN TRANSIT . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . . . . . . 3
2.5 PLEDGED DEPOSITS . . . . . . . . . . . . . . . . . . . . . . . . 3
3. CONSIDERATION FOR ASSETS AND ASSUMPTION OF LIABILITY . . . . . . . . . 3
3.1 PAYMENT BY SELLER. . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . . . . . . 3
3.3 PRORATION AND ACCRUALS . . . . . . . . . . . . . . . . . . . . . 3
3.4 ADJUSTMENTS IN PAYMENT AMOUNT. . . . . . . . . . . . . . . . . . 4
3.5 IMMEDIATELY AVAILABLE FUNDS. . . . . . . . . . . . . . . . . . . 4
3.6 SALES AND TRANSFER TAXES . . . . . . . . . . . . . . . . . . . . 4
4. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES . . . . . . . . 4
5.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER AND SELLER 4
5.1.1 SHAREHOLDER APPROVALS. . . . . . . . . . . . . . . . . . . 4
5.1.2 REGULATORY APPROVALS . . . . . . . . . . . . . . . . . . . 5
5.1.3 ABSENCE OF LITIGATION. . . . . . . . . . . . . . . . . . . 5
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER . . . . . . . . . . 5
5.2.1 DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 5
5.2.2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 6
5.2.3 CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . . . 6
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5.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. . . . . . . . . . 6
5.3.1 DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 6
5.3.2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 6
5.3.3 COVENANTS OF BUYER . . . . . . . . . . . . . . . . . . . . 6
5.3.4 LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . 6
6. AGREEMENTS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 ACCESS TO RECORDS AND INFORMATION. . . . . . . . . . . . . . . . 7
6.2 CONDUCT OF BUSINESS PENDING CLOSING. . . . . . . . . . . . . . . 7
6.3 ASSISTANCE IN OBTAINING REGULATORY APPROVALS . . . . . . . . . . 7
6.4 FURTHER ASSISTANCE . . . . . . . . . . . . . . . . . . . . . . . 7
6.5 CORPORATE CONSENTS . . . . . . . . . . . . . . . . . . . . . . . 7
6.6 SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.7 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.8 GOOD FAITH AND FAIR DEALING. . . . . . . . . . . . . . . . . . . 8
6.9 SIGNAGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.10 NOTICE TO SELLER'S CUSTOMERS . . . . . . . . . . . . . . . . . . 8
7. AGREEMENTS OF BUYER. . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.1 EFFORTS TO OBTAIN REGULATORY APPROVAL. . . . . . . . . . . . . . 8
7.2 PERFORMANCE OF LIABILITIES . . . . . . . . . . . . . . . . . . . 9
7.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . 9
7.4 CORPORATE CONSENTS AND DOCUMENTS . . . . . . . . . . . . . . . . 9
7.5 CHANGE OF NAME . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.6 GOOD FAITH AND FAIR DEALING. . . . . . . . . . . . . . . . . . . 9
7.7 NOTICE BY BUYER. . . . . . . . . . . . . . . . . . . . . . . . . 9
7.8 EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8. WARRANTIES AND REPRESENTATIONS OF SELLER . . . . . . . . . . . . . . . 10
8.1 ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.2 AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.3 CLOSING STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . 10
8.4 FINDERS OR BROKERS . . . . . . . . . . . . . . . . . . . . . . . 10
8.5 SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.6 COMPLIANCE WITH INSTRUMENTS . . . . . . . . . . . . . . . . . . 11
8.7 TITLE TO PERSONAL PROPERTY AND LEASES. . . . . . . . . . . . . . 11
8.8 THE DEPOSITS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.9 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.10 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.11 COMPLIANCE WITH LICENSES AND PERMITS . . . . . . . . . . . . . . 12
8.12 MISSTATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.13 DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.14 CERTAIN LITIGATION . . . . . . . . . . . . . . . . . . . . . . . 12
8.15 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. WARRANTIES AND REPRESENTATIONS OF BUYER. . . . . . . . . . . . . . . . 12
9.1 ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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PAGE
9.2 AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.3 FINDERS OR BROKERS . . . . . . . . . . . . . . . . . . . . . . . 13
9.4 GOVERNMENTAL NOTICES . . . . . . . . . . . . . . . . . . . . . . 13
9.5 COMPLIANCE WITH INSTRUMENTS. . . . . . . . . . . . . . . . . . . 13
10. DISCLAIMERS AND OTHER SPECIAL PROVISIONS . . . . . . . . . . . . . . . 13
10.1 FIDUCIARY ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . 13
10.2 DEPOSITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.3 PAYMENT OF CERTAIN INTEREST. . . . . . . . . . . . . . . . . . . 14
10.4 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 14
10.5 POSSESSION . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.6 TAX REPORTING. . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.7 INTEREST REPORTING . . . . . . . . . . . . . . . . . . . . . . . 15
10.8 WITHHOLDING. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.9 POST-CLOSING RECONCILIATION. . . . . . . . . . . . . . . . . . . 15
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 16
11.1 CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 16
11.3 LIMITATION OF CLAIMS . . . . . . . . . . . . . . . . . . . . . . 16
12. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
12.1 TERMINATION AGREEMENT. . . . . . . . . . . . . . . . . . . . . . 17
12.2 IMMATERIAL BREACH. . . . . . . . . . . . . . . . . . . . . . . . 18
12.3 EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . 18
12.4 WAIVER OF RIGHT TO TERMINATE . . . . . . . . . . . . . . . . . . 18
13. EFFECT ON THIRD PARTIES. . . . . . . . . . . . . . . . . . . . . . . . 18
14. DELAYED SETTLEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 18
14.1 CLOSING AND FIRST ADJUSTMENT . . . . . . . . . . . . . . . . . . 18
14.2 FINAL SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . 19
14.3 PAYMENT AND INTEREST . . . . . . . . . . . . . . . . . . . . . . 19
15. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
15.1 CONFIDENTIALITY AND PUBLICITY. . . . . . . . . . . . . . . . . . 19
15.2 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
15.3 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
15.4 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . 21
15.5 THIRD PARTY BENEFICIARIES. . . . . . . . . . . . . . . . . . . . 21
15.6 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . 21
15.7 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . 21
15.8 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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PAGE
15.9 ATTORNEYS FEES . . . . . . . . . . . . . . . . . . . . . . . . . 21
15.10 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 21
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PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 14th day of November, 1995 by and
between SOUTHERN CALIFORNIA BANK, a California banking corporation
(hereinafter referred to as "Seller"), and PREFERRED BANK, a California
banking corporation (hereinafter referred to as "Buyer").
1. DEFINITIONS:
1.1 ACCRUED INTEREST. "Accrued Interest" means the amount of interest
accrued and unpaid on the Deposits at the end of the day prior to the Closing
Date.
1.2 AGREEMENT. "Agreement" means this Purchase Agreement, as amended
from time to time.
1.3 ASSETS. "Assets" means the Fixed Assets and the Other Assets.
1.4 BRANCH OFFICE. "Branch" means the branch banking office of Seller
located at 18261 Gale Avenue, City of Industry, California 91748.
1.5 CLOSING DATE. "Closing Date" means 12.01 a.m. on the date when
the purchase and sale described in this Agreement is consummated. The Closing
Date shall be on a date mutually agreed upon by the parties hereto and which
occurs following receipt of the approvals required under Section 5.1, and
each of its applicable subparts, of this Agreement; PROVIDED, however, the
Closing Date shall not in any event occur prior to the lapse of all legally
required waiting or protest periods.
1.6 CLOSING STATEMENT. "Closing Statement" means the Statement of
Condition for the Branch Office which is prepared from Seller's books and
records and as of the end of the day prior to the Closing Date.
1.7 DEPOSITS. "Deposits" means all liabilities of Seller carried on
the books of the Branch Office identified as deposits in the Closing
Statement.
1.8 FIXED ASSETS. "Fixed Assets" means all of the assets set forth on
the attached Schedule A.
1.9 LEASE. "Lease" means the lease between Seller and
DickerWarmington Properties as landlord ("Landlord") dated January 2, 1990
with respect to the real property, building and improvements thereon
comprising the Branch Office.
1.10 LIABILITIES. "Liabilities" means the Closing Statement
Liabilities and the Nonstatement Liabilities.
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1.11 NONSTATEMENT LIABILITIES. "Nonstatement Liabilities" means all
agreements existing as of the end of the day prior to the Closing Date made
by or with respect to the operations of the Branch Office in the normal
course of business of the Branch Office, including leases of personal
property, maintenance, service and janitorial agreements, agreements relating
to deposits, safe deposit boxes and safekeeping of property which are
included among the Assets or Liabilities, as the case may be, and such other
agreements as are disclosed by the business records of the Branch Office and
are included on the Schedule of Nonstatement Liabilities, to be delivered by
Seller to Buyer in accordance with Section 6.6 and which are expressly
assumed in writing by Buyer in a separate assumption agreement.
Notwithstanding the foregoing, Nonstatement Liabilities shall not include (i)
any loan commitments or agreements of any kind unless specifically assumed in
writing by Buyer; (ii) any guarantees, including letters of credit; (iii) any
obligations or litigation whether pending or threatened relating to assets or
liabilities which are not expressly transferred to or assumed by the Buyer
pursuant to this Agreement; (iv) repurchase obligations; (v) any obligation
or claims based on events, acts or omissions relating to the business of the
Branch Office, the Assets and Liabilities, occurring prior to the end of the
day prior to the Closing Date, including but not limited to liability related
to the operation of deposit accounts, violations of the Federal Reserve
Board's Regulation Z and violations of any other federal or state law or
regulation relating to the operation of the Branch Office; (vi) any contracts
of insurance; and (vii) and liabilities identified in the Closing Statement
which are not included among the Closing Statement Liabilities.
1.12 OTHER ASSETS. "Other Assets" means (i) Seller's interest as
lessee in all furniture and equipment leased by Seller as of the end of the
day prior to the Closing Date which is located in the Branch Office and which
is expressly assumed in writing by Buyer in a separate assumption agreement
or agreements; (ii) Seller's rights and title in and to all agreements which
are included among the Liabilities as assumed in a separate assumption
agreement or agreements, other than rights based upon events occurring prior
to the Closing Date; and (iii) all records relating to the Assets or
Liabilities, relationships, business, assembled work force, good will, those
intangible assets representing the benefit of aggregate Deposits being
assumed by the Buyer and other intangible assets associated with the Branch
Office.
1.13 PREMIUM AMOUNT. "Premium Amount" means $180,000.
1.14 STATEMENT LIABILITIES. "Statement Liabilities" means the
Deposits and all other liabilities identified in the Closing Statement as of
the end of the day prior to the Closing Date as adjusted pursuant to Section
3.3 of this Agreement.
2. TRANSFER OF ASSETS.
2.1 TRANSFER. On the Closing Date, subject to the terms and
conditions set forth in this Agreement, Seller agrees to sell, transfer,
assign and deliver the Assets and all documents and instruments relating
thereto to Buyer, Buyer agrees to
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purchase, acquire and accept the same from Seller, and Seller and Buyer agree
to execute the assignment and transfer of the Lease.
2.2 BOOKS AND RECORDS. On the Closing Date, Buyer shall receive
possession of, and right, title and interest in, all books and records which
are maintained by Seller at the Branch Office relating to the Assets and
Liabilities including, without limitation, IRS "B" and "C" notice and
withholding release notices. All such books and records shall be open for
inspection by Seller and its authorized agents and representatives during
regular business hours after the Closing Date and Seller may, at its own
expense, make such copies of and excerpts from such books and records as it
may deem desirable. All books and records relating to the Assets and
Liabilities shall be maintained for a period which is at least the longer of
the period required by law or the third anniversary of the Closing Date
unless the parties shall, applicable law permitting, agree upon shorter
period.
2.3 ITEMS IN TRANSIT. Buyer shall obtain the benefit of and shall
bear the risk of all items relating to the Liabilities which are in the
original process of collection as of the end of the day prior to the Closing
Date provided that Seller shall reimburse Buyer for any such item where Buyer
suffers a loss due to Seller's failure to adhere to applicable law and its
own policies and procedures in collecting such item.
2.4 ASSUMPTION OF LIABILITIES. From and after the Closing Date, Buyer
shall assume, defend, pay, perform, and discharge the Deposits and the
Liabilities.
2.5 PLEDGED DEPOSITS. No later than 60 days prior to the Closing
Date, Seller shall identify in writing to Buyer any Deposits in which Seller
or a third party claims a security interest (a "Pledged Deposit"). This
information shall be updated no later than the tenth business day prior to
Closing. At the time the Buyer assumes the Liabilities, Seller shall deliver
to Buyer copies of any notices received by Seller pursuant to Section
9302(1)(g)(ii) of the Uniform Commercial Code of California with respect to
any Pledged Deposits. Buyer shall then treat the Pledged Deposits so
identified to it in accordance with its obligations under the Uniform
Commercial Code of California.
3. CONSIDERATION FOR ASSETS AND ASSUMPTION OF LIABILITY.
3.1 PAYMENT BY SELLER. The payment for the Assets (subject to the
Liabilities) shall be an amount equal to the Premium Amount. Such amount
shall be netted against the amount paid to Buyer in connection with
assumption of the Deposits (such net amount, the "Payment Amount").
3.2 ASSUMPTION OF LIABILITIES. From and after the Closing Date,
Buyer shall assume, defend, pay, perform, and discharge the Liabilities.
3.3 PRORATION AND ACCRUALS. Except as otherwise provided in this
Section 3.3, items of income and expense, shall be prorated to reflect all
appropriate accruals
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of income and expense as of the end of the day prior to the Closing Date in
accordance with generally accepted accounting principles. All such items
shall be reflected on the Closing Statement whether or not such items are
normally reflected on branch financial statements and all such items shall be
adjusted to reflect all appropriate accruals of income and expense as of the
end of the day prior to the Closing Date, whether or not such adjustments
would normally be made as of such time. No accruals shall be made for
service charges on accounts included among the Deposits which Seller is
operationally unable to collect prior to the Closing Date.
3.4 ADJUSTMENTS IN PAYMENT AMOUNT. Any prorations or adjustments to
the Payment Amount which are made from and after the Closing Date shall be
paid, subject to Section 14 of this Agreement, by the party obligated
therefor upon demand of the party entitled thereto in immediately available
funds.
3.5 IMMEDIATELY AVAILABLE FUNDS. If the Closing Date falls on a
nonbusiness day of Seller or the Payment Amount cannot be delivered on the
Closing Date as provided in Section 3.4 or 3.5 of this Agreement, then the
Payment Amount shall be made in immediately available funds on the next
business day of Seller and shall accrue interest from and after the Closing
Date to the date of payment at the rate of interest set forth in Section 14.3
or as is otherwise mutually agreed to by the parties.
3.6 SALES AND TRANSFER TAXES. All excise, sales, use and transfer
taxes which are payable or arise as a result of this Agreement or the
consummation of the purchase and sale contemplated by this Agreement shall be
paid by Buyer and Seller on an equal basis, whether such taxes are imposed
upon Buyer or Seller. All other taxes with respect to the Branch Office
shall be prorated between Buyer and Seller as of the end of the day prior to
the Closing Date.
4. CLOSING.
The closing of the purchase and sale of the Assets and the assumption
of the Liabilities (the "Closing") described in this Agreement shall take
place as of the Closing Date at such place as mutually agreed to by the
parties. All responsibility and risk relating to the Assets and Liabilities
and all business conducted at the Branch Office from and after the Closing
Date shall be for Buyer's account and risk.
5. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES.
5.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER AND SELLER.
The obligations of Buyer and Seller are subject to the fulfillment at or
prior to the Closing Date of each of the following conditions precedent:
5.1.1 SHAREHOLDER APPROVALS. The Agreement will be submitted to
the shareholders of Buyer for their approval but only to the extent such
approval is
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required under Section 4879.04 of the California Financial Code, which
approval shall be in conformance with all appropriate legal requirements.
5.1.2 REGULATORY APPROVALS. All required licenses, approvals and
consents of the California Superintendent of Banks, the Federal Deposit
Insurance Corporation, any other federal regulatory agencies and any other
relevant California agencies shall have been obtained and shall be in full
force and effect, all waiting periods prescribed by applicable law or
regulation shall have expired, and none of such authorizations, consents,
orders, approvals or licenses shall contain conditions which in the good
faith and reasonable judgment of Seller are materially burdensome to it, or
which in the good faith and reasonable judgment of Buyer are materially
burdensome to it, and all necessary conditions of such licenses, approvals
and consents shall have been fully satisfied.
5.1.3 ABSENCE OF LITIGATION. No action or proceeding instituted
by a non-party to this Agreement to prevent the consummation of the
transactions covered and contemplated by this Agreement shall be pending as
of the end of the day prior to the Closing Date.
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligations of
Buyer are subject to fulfillment at or prior to the Closing Date of each of
the following conditions precedent but compliance with or occurrence of any
one or more of such conditions precedent may be waived in writing by Buyer:
5.2.1 DOCUMENTS. Seller shall have delivered to Buyer:
(i) Copies of the Articles of Incorporation of Seller,
together with all amendments, certified as of the date prior to the Closing
Date by the secretary of Seller;
(ii) Copies, certified as of the date prior to the Closing
Date by the secretary of Seller, of resolutions of Seller's Board of
Directors authorizing execution and delivery of this Agreement and the other
documents contemplated hereby, certifying that such authorization and
approval remains unmodified and in full force and effect;
(iii) Such deeds, bills of sale, assignments, and other
instruments and documents as counsel for Buyer may reasonably require as
necessary for conveying to Buyer pursuant to this Agreement good and
marketable title to the Assets;
(iv) The assignment of the Lease ("Assignment") in the form
attached hereto as Exhibit "B", executed by Seller;
(v) Copy of the Lease together with (a) the consent of the
landlord to the assignment and transfer of the Lease to Buyer, (b) the
certification of the
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landlord that Seller is not in default in the performance of the Lease, has
not committed any breach of the terms of the Lease and the Lease continues in
full force and effect and (c) the release of Seller from its obligations to
the Landlord under the Lease ("Consent"); and
5.2.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Seller set forth in Section 8 of this Agreement shall be
true and correct in all material respects as of the end of the day prior to
the Closing Date.
5.2.3 CONDUCT OF BUSINESS. Seller shall have fully performed the
covenants contained in section 6 of this Agreement.
5.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The obligations of
Seller are subject to fulfillment at or prior to the Closing Date of each of
the following conditions precedent but compliance with or occurrence of any
one or more of such conditions precedent may be waived in writing by Seller:
5.3.1 DOCUMENTS. Buyer shall have delivered to the Seller:
(i) Copies of the Articles of Incorporation of Buyer,
together with all amendments certified as of the date prior to the Closing
Date by the secretary of Buyer;
(ii) Copies, certified as of the date prior to the Closing
Date by the secretary of Buyer, of resolutions of Buyer's Board of Directors
authorizing execution and delivery of this Agreement and the other documents
contemplated hereby, and resolutions of Buyer's shareholder if applicable,
approving this Agreement, in each case certifying that such authorization and
approval remains unmodified and in full force and effect;
(iii) The Assignment and Consent, executed by Buyer.
(iv) Such other documents and instruments as counsel for
Seller may reasonably require.
5.3.2 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer set forth in Section 9 of this Agreement shall be true
and correct in all material respects as of the end of the day prior to the
Closing Date.
5.3.3 COVENANTS OF BUYER. Buyer shall have fully performed the
covenants contained in Section 7 of this Agreement.
5.3.4 LEGAL MATTERS. The validity of all transactions herein
contemplated to be performed by Buyer as well as the substance of all
documents to be
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delivered by Buyer hereunder shall be subject to the approval, to be
reasonably exercised, of counsel to Seller.
6. AGREEMENTS OF SELLER.
6.1 ACCESS TO RECORDS AND INFORMATION. Between the date of this
Agreement and the day prior to the Closing Date, Seller shall afford to Buyer
and its authorized agents and representatives, during times mutually agreed
upon by the parties, reasonable access to records, files and other
information within Seller's possession relating to the Branch Office and the
assets to be purchased and liabilities to be assumed by Buyer pursuant to the
terms of this Agreement, and the opportunity to update any such investigation
at such intervals as the Buyer shall deem appropriate. Seller shall cause
its personnel to provide to Buyer assistance in Buyer's investigation of
matters relating to the Branch office and to such assets and liabilities;
PROVIDED, however, Buyer's investigation shall be conducted in a manner which
does not unreasonably interfere with Seller's normal operations, customers
and employee relations.
6.2 CONDUCT OF BUSINESS PENDING CLOSING. Except as may be required to
obtain the regulatory approvals referred to in Section 5.1.2 of this
Agreement, between the date hereof and the Closing Date, and except as may be
otherwise required by applicable law or regulation, Seller shall not, without
the prior written consent of Buyer, which consent shall not be unreasonably
withheld; cause the Branch Office to carry on its business and activities
otherwise than diligently and in substantially the same manner as it
previously has been carried out with substantially the same staffing levels,
or make or institute any methods of operation that will vary materially from
those methods used by the Branch Office on or before the date hereof
(PROVIDED, however, that Seller shall not be required to continue any
activity which no longer is a prudent banking activity or as to which an
applicable regulatory agency has otherwise directed).
6.3 ASSISTANCE IN OBTAINING REGULATORY APPROVALS. Seller agrees to use
all reasonable efforts to assist Buyer in obtaining the regulatory approvals
referred to in Section 5.1.2 of this Agreement, and Seller will provide to
Buyer or to the appropriate regulatory authorities all information required
to be submitted by Seller in connection with such approvals.
6.4 FURTHER ASSISTANCE. On and after the Closing Date, Seller shall
(i) give such further Buyer and shall execute, acknowledge and deliver all
such bills of sale, deeds, acknowledgments and other instruments and take
such further action as may be necessary and appropriate to effectively vest
in Buyer the full legal and equitable title to the Assets, and (ii) use its
best efforts to assist Buyer in the orderly transition of the Branch Office
operations being acquired by Buyer.
6.5 CORPORATE CONSENTS. Seller shall use its best efforts to obtain
all necessary corporate consents. Subject to Sections 5.1.1 and 5.1.2,
Seller shall comply with
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all applicable laws, regulations and rulings in connection with this
Agreement and the consummation of the transactions contemplated hereby and
shall furnish to Buyer at the Closing the documents described in Section
5.2.1 of this Agreement.
6.6 SCHEDULES. Within thirty (30) days following execution of this
Agreement, Seller shall deliver to Buyer a schedule of then-existing
Nonstatement Liabilities. The schedule of Nonstatement Liabilities shall be
updated as of the tenth (1Oth) business day prior to the Closing Date and as
of the end of the day prior to the Closing Date.
6.7 CONSENTS. Seller shall use its best efforts to obtain and deliver
to Buyer on the Closing Date all required consents authorizing the transfer
and assignment to Buyer of, or the substitution of Buyer for Seller under,
all leases and other contracts constituting a portion of the Assets,
effective from and after the Closing Date, and the execution of the consent
to assignment of Lease by the landlord under the Lease and the certificates
from the landlord under the Lease required pursuant to Section 5.2.1 (v).
Notwithstanding the foregoing, this Agreement shall not constitute an
agreement to assign any lease or other contract if an attempted assignment
thereof would constitute a breach thereof, or would adversely affect the
rights of Seller thereunder.
6.8 GOOD FAITH AND FAIR DEALING. Seller expressly agrees that it is
entering into this Agreement with the intention of fully and completely
performing all of its duties and obligations as set forth herein, and
further, Seller shall, through and including the day before the Closing Date,
and, if applicable, from and after the Closing Date, diligently carry out in
good faith pursuant to the terms of this Agreement each of its obligations
and requirements set forth herein in order to consummate on the Closing Date
the transaction contemplated hereby.
6.9 SIGNAGE. Seller shall use commercially reasonable efforts to make
arrangements (such arrangement to be completed no later than ten days prior
to closing) with the lessor to permit Buyer to change the signage at the
Branch Office.
6.10 NOTICE TO SELLER'S CUSTOMERS. Seller shall send notice to
Seller's customers relating to the sale of the Branch Office in accordance
with applicable law and regulations. Such notice shall be mutually
satisfactory to Seller and Buyer.
7. AGREEMENTS OF BUYER.
7.1 EFFORTS TO OBTAIN REGULATORY APPROVAL. Buyer agrees to use all
reasonable efforts to obtain as promptly as possible the regulatory approvals
referred to in Section 5.1.2 of this Agreement which must be obtained by
Buyer. Buyer shall specifically be responsible for making application to
obtain the requisite approvals from the California Superintendent of Banks
and the Federal Deposit Insurance Corporation.
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7.2 PERFORMANCE OF LIABILITIES. From and after the Closing Date,
Buyer shall fully perform, pay and discharge all of the Liabilities and shall
protect the rights of depositors and creditors of the Branch Office in the
same manner and to the same extent as if Buyer had itself incurred the
Liabilities.
7.3 FURTHER ASSURANCES. On and after the Closing Date, Buyer shall
give such further assurances to Seller and shall execute, acknowledge and
deliver all such acknowledgements and other instruments and take any further
action as may be necessary and appropriate to effectively relieve and
discharge Seller from any obligations remaining under the Liabilities assumed
by Buyer.
7.4 CORPORATE CONSENTS AND DOCUMENTS. Buyer shall use its best
efforts to obtain all necessary corporate consents. Subject to Sections
5.1.1 and 5.1.2, Buyer shall comply with all applicable laws, regulations and
rulings in connection with this Agreement and the consummation of the
transactions contemplated hereby and shall furnish to Seller at the Closing
the documents described in Section 5.3.1 of this Agreement.
7.5 CHANGE OF NAME. From and after the Closing Date, Buyer (i) shall
immediately change the name on all documents and facilities relating to the
Branch Office from Seller's name to Buyer's name or to a name approved in
writing by Seller which is not in any way similar to Seller's name, and (ii)
shall promptly notify all persons who are Branch Office customers and
depositors as of the Closing Date of such change. It is understood that
Seller is not transferring to Buyer any right, title or interest in or to, or
any right or license to use, Seller's name in connection with the Branch
Office or otherwise. Nothing in this Section 7.5 shall require Buyer to
undertake or reissue deposits or other documents assumed by or assigned to
Buyer as of the Closing Date except in the ordinary course of business, it
being understood, however, that reasonable efforts will be used to change
names in accordance with the provisions of the first sentence of this Section
7.5.
7.6 GOOD FAITH AND FAIR DEALING. Buyer expressly agrees that it is
entering into this Agreement with the intention of fully and completely
performing all of its duties and obligations as set forth herein, and
further, Buyer shall, through and including the day before the Closing Date,
and, if applicable, from and after the Closing Date, diligently carry out in
good faith pursuant to the terms of this Agreement each of is obligations and
requirements set forth herein in order to consummate as of the Closing Date
the transaction contemplated hereby.
7.7 NOTICE BY BUYER. Buyer shall send notice of the purchase of the
Branch Office no sooner than 10 days before the Closing. Such notice shall
be mutually satisfactory to Seller and Buyer.
7.8 EMPLOYEES. Purchaser shall be given an opportunity to interview
for employment employees of Seller located at the Branch Office. Purchaser
shall utilize commercially reasonable efforts to commence such interviews no
later than 60 days
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prior to Closing and to complete interviews with such employees no later than
30 days prior to Closing. On the 30th day prior to Closing, Purchaser shall
notify Seller in writing as to the employees, if any, it wishes to extend
offers of employment at the Branch Office and, with respect to such
employees, shall take all appropriate steps to hire such employees, effective
on and after the Closing Date. Purchaser has been advised that employees of
the Branch Office will be allowed to seek other employment within the
Seller's organization until the Seller is notified by the Purchaser, in
writing, that employees selected by the Purchaser have accepted such offers
of employment with the Purchaser. Purchaser shall use commercially
reasonable efforts to provide such employees similar employee benefits as are
provided to like employees of Purchaser. Employees remaining in the Branch
Office on the Closing Date will be terminated by the Seller. The foregoing
is not intended to create an obligation in favor of any person not a party to
this Agreement.
8. WARRANTIES AND REPRESENTATIONS OF SELLER.
Seller represents and warrants to Buyer as of the date hereof:
8.1 ORGANIZATION. Seller is a state banking corporation duly
organized and validly existing under the laws of the state of California,
with full power and authority to exercise its corporate powers, rights and
privileges and to conduct a commercial banking business at the Branch Office
as is now conducted by it.
8.2 AUTHORITY. The execution and delivery of this Agreement by Seller
have been duly authorized by its Board of Directors and no further corporate
action will be or is necessary on the part of Seller to make this Agreement
valid, binding and enforceable in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, or other laws
affecting the enforcement of creditors' rights generally.
8.3 CLOSING STATEMENT. The Closing Statement or any other information
based on the books and records of Seller used in making any calculations
hereunder or otherwise furnished to Buyer in connection with this Agreement
is and will be accurate and complete as of the dates thereof and, except for
the adjustments required by Section 3.3 of this Agreement, have been and will
be prepared in a consistent manner and in the ordinary course of Seller's
business.
8.4 FINDERS OR BROKERS. Seller has not in any manner whatsoever paid
or agreed to pay any fee or commission to any agent, broker, finder or other
person for or on account of services rendered as a broker or finder in
connection with this Agreement or the transactions contemplated hereby, other
than a finder's fee payable to Guyot & Associates in the amount of $9,000 or
0.13% of Deposits, whichever is greater, which shall be split equally between
the parties. All negotiations relating to this Agreement have been conducted
by Seller directly and without the intervention of any person in such manner
as to
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give rise to any valid claim against Buyer for any brokerage commission or
other like payment.
8.5 SCHEDULES. The schedules to be delivered by Seller to Buyer
pursuant to Section 6.6 of this Agreement will be complete and accurate as of
the date thereof in all material respects.
8.6 COMPLIANCE WITH INSTRUMENTS. The performance of this Agreement by
Seller will not violate or result in a breach of any of the terms or
conditions of, or constitute default under, Seller's Articles of
Incorporation or its bylaws, or any law or any contract, agreement, note,
bond, license or other instrument or obligation to which Seller is a party or
by which any of its properties are bound or affected or violate any rule or
regulation of any administrative agency, or order, writ, injunction or decree
of any court, administrative agency or governmental body applicable to Seller.
8.7 TITLE TO PERSONAL PROPERTY AND LEASES. The Seller has, and as of
the Closing Date will have and will convey to Buyer, good and marketable
title to the machinery, equipment, trade fixtures, materials, supplies and
other property of every kind, which would be, or in the case of the Closing
Date is, included among the Fixed Assets, free and clear of all liens,
encumbrances and charges except those which are not in the aggregate material
and do not materially detract from the value of or interfere with the use of
the property subject thereto or affected thereby. The Seller has, and as of
the Closing Date will have, a valid Lease and leases under which it is
entitled to use in its business all real and personal property leased by it
located in the Branch Office.
8.8 THE DEPOSITS. The books and records of Seller with respect to
deposits will fairly reflect (subject to normal adjustments) the Deposits
held by Seller at the Branch Office.
8.9 TAXES. All taxes imposed by the United States or by any state
municipality, subdivision or instrumentality of the United States or by any
other taxing authority which are due or payable by Seller relating to the
Branch Office have been paid in full or adequately provided for by reserves
shown in the records and books of the Seller, and will be so paid or provided
for as of the Closing Date and Seller has no knowledge of any deficiencies
with respect thereto. Any claims for refund or refunds of such taxes shall
remain the property of Seller.
8.10 INSURANCE. Seller and the assets relating to the Branch Office
have been adequately insured with respect to risks normally insured against
by companies similarly situated. Seller will use its best efforts to
maintain such policies in full force and effect through and including the day
prior to the Closing Date. Thereafter, Buyer shall have and maintain its own
insurance.
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8.11 COMPLIANCE WITH LICENSES AND PERMITS. Seller has obtained and
kept in force all material governmental licenses and permits necessary to
conduct its banking business at the Branch Office as now conducted by it and
to own and operate the properties and assets utilized by it in such business.
No proceeding is pending nor, to the best of its knowledge, has Seller been
threatened with any proceeding wherein the remedy sought is the revocation or
limiting of any such governmental license or permit and Seller does not know
of any basis or grounds for any such revocation or limitation. Seller has
complied in all material respects with all laws rules, regulations,
ordinances, codes, orders, licenses and permits relating to the conduct of
its banking business at the Branch Office.
8.12 MISSTATEMENT. Nothing in this Agreement or in any other
certificate, statement, schedule or document furnished or to be furnished to
Buyer by or on behalf of the Seller as required by this Agreement contains or
will contain any misstatement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein not misleading.
8.13 DEFAULTS. As to the contracts to be assumed by Buyer hereunder,
Seller is not in material default thereunder and each party with whom each
such contract has been entered does not have a right to terminate such
contract as a result of Seller's default thereunder or to claim monetary
damages against Seller. Seller has not been notified that any other party
thereto claims that Seller is in default, and, to the best of Seller's
knowledge, no other party thereto is in default thereunder.
8.14 CERTAIN LITIGATION. There is no suit, action or claim, no
investigation or inquiry by any administrative agency or governmental body
and no legal, administrative or arbitration proceeding pending or, to the
best of Seller's knowledge, threatened against Seller wherein the relief
sought is the seizure or return of any of its tangible personal property
which would be included among the Assets.
8.15 LEASE. To the best of Seller's knowledge, the lessor under the
Lease has performed in all material respects its obligations under the Lease.
Seller has performed in all material respects its obligations under the
Lease.
9. WARRANTIES AND REPRESENTATIONS OF BUYER.
Buyer hereby represents and warrants to Seller as of the date hereof:
9.1 ORGANIZATION. Buyer is a state banking corporation duly organized
and validly existing under the laws of the State of California with full
power and authority to exercise its corporate powers, rights and privileges
and to conduct a commercial banking business in the State of California.
9.2 AUTHORITY. The execution and delivery of this Agreement by Buyer
have been duly authorized by its Board of Directors and no further corporate
action
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(other than the approval of this Agreement and the transaction
contemplated herein by Buyer's shareholders) will be or is necessary to make
this Agreement valid, binding and enforceable in accordance with its terms
except as the enforcement thereof may be limited by bankruptcy, insolvency or
other laws affecting the enforcement of creditor's rights generally.
9.3 FINDERS OR BROKERS. Buyer has not in any manner whatsoever paid
or agreed to pay any fee or commission to any agent, broker, finder or other
person for or on account of services rendered as a broker or finder in
connection with this Agreement or the transaction contemplated hereby, other
than a finder's fee payable to Guyot & Associates in the amount of $9,000 or
0.13% of Deposits, whichever is greater, which shall be split equally between
the parties. All negotiations relating to this Agreement have been conducted
by Buyer directly and without the intervention of any person in such manner
as to give rise to any valid claim against Seller for any brokerage
commission or other like payment.
9.4 GOVERNMENTAL NOTICES. Buyer has not received written notice from
any federal or California governmental agency indicating that it would oppose
or not grant or issue its consent or approval, if required, with respect to
the transactions contemplated by this Agreement.
9.5 COMPLIANCE WITH INSTRUMENTS. The performance of this Agreement by
Buyer will not violate or result in the breach of any of the terms or
conditions of, or constitute a default under, Buyer's Articles of
Incorporation, its bylaws, or any contract, agreement, note, bond, license,
or other instrument or obligation to which Buyer is a party or by which any
of its properties or assets are bound or affected, or violate any law, or any
rule or regulation of any administrative agency or governmental body, or any
order, writ, injunction or decree of any court, administrative agency or
governmental body applicable to Buyer.
10. DISCLAIMERS AND OTHER SPECIAL PROVISIONS.
Buyer and Seller understand and agree as follows:
10.1 FIDUCIARY ACCOUNTS. No transfer of properties, assets,
investments, agreements, rights or assumption of obligations under trusts,
executorship, administrations, guardianships, agencies and other
representative capacities of Seller in existence as of the end of the day
prior to the Closing Date is contemplated or required by this Agreement,
except for Individual Retirement Accounts and other trust accounts which are
serviced by Seller's commercial banking business in the ordinary course of
business. Without limiting the generality of the foregoing, Seller and Buyer
shall cooperate to appropriately address any account to the extent Buyer
determines that such account requires trust powers for the administration
thereof.
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10.2 DEPOSITS. All transfers to Buyer of the Deposits included among
the Liabilities are subject to the individual depositors' continuing rights
to withdraw under Section 4856 of the California Financial Code, and Seller
makes no representation, warranty or agreement concerning the continuing
maintenance of such deposits at the Branch Office.
10.3 PAYMENT OF CERTAIN INTEREST. From and after the Closing Date,
Buyer shall pay all interest on the Deposits included among the Liabilities
(including the Accrued Interest) in accordance with the terms of the
contracts applicable to such Deposits.
10.4 INDEMNIFICATION. Seller and Buyer (references in this Section
10.4 to either party shall include its officers, directors, representatives,
agents, employees, successors or assigns) each agrees to indemnify and hold
the other harmless from and against any and all claims, liabilities, suits,
losses, damages, costs and expenses, including reasonable attorneys' fees,
whether accrued, absolute, contingent or otherwise, or whether due or to
become due (including, without limitation, liability for income taxes, excise
taxes, state or local taxes or any other direct or indirect taxes due or to
become due) which such other party may incur directly or indirectly as a
consequence of (i) such indemnifying party's failure to pay and perform (x)
all liabilities and obligations incurred by it with respect to the Branch
Office which are not expressly assumed by the other party and (y) all
liabilities and obligations incurred by the other party with respect to the
Branch Office which are expressly assumed by the indemnifying party; (ii) any
acts, omissions or events occurring during the period in which the
indemnifying party conducted the business of the Branch Office; (iii) any
breach of any of the conditions or covenants made by either party hereto.
The amounts recoverable by either party with respect to any such claims
against the other shall reflect, and such other party shall only be obligated
to pay, the net amount of damages suffered by the other party entitled to
recovery after giving effect to any insurance proceeds recoverable with
respect to such matters. Each party shall select its own counsel and shall
pay for the defense of the other party, including reasonable attorneys' fees
and costs, with respect to any claim against which such paying party is
obligated to indemnify such other party as provided in this Section 10.4.
If such other party chooses to have counsel of its own choosing in addition
to that provided by the paying party, it may do so at its sole expense. Each
party shall provide to the other written notice of any claim to which such
other party's indemnity obligations hereunder do or may apply within sixty
(60) business days after becoming aware of the existence of such claim.
10.5 POSSESSION. Simultaneously with the consummation of the
transfer, Seller, through its officers, agents and employees, will put Buyer
into full possession and enjoyment of all properties and Assets conveyed and
transferred by this Agreement.
10.6 TAX REPORTING. Neither Buyer nor Seller will take a position
with any federal, state or local taxing authority contrary to any of the
terms or provisions of this Agreement.
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10.7 INTEREST REPORTING. Seller shall report from January 1, 1995
through the Closing Date, and Buyer shall report from the Closing Date and
thereafter, all interest credited to, interest premiums paid on, interest
withheld from, and early withdrawal penalties charged to, the Deposits. Such
reports shall be made to the holders of the Deposit accounts and to the
applicable federal and state taxing agencies.
10.8 WITHHOLDING. Following the Closing Date, Seller shall deliver to
Buyer (i) "B" notices (TINs do not match) and "C" notices (underreporting/IRS
imposed withholding) received by it from the IRS regarding any of the
accounts included within the Deposits, and (ii) all notices received from the
IRS releasing withholding restrictions on any of the accounts included within
the Deposits. Any amounts required by any governmental agency to be withheld
from any of the accounts included within the Deposits (the "Withholding
Obligations") or any penalties imposed by any governmental agency will be
handled as follows:
(a) Any Withholding Obligations required to be remitted to the
appropriate governmental agency on or prior to the Closing Date will be
withheld and remitted by Seller, and any other sums withheld by Seller
pursuant to Withholding Obligations prior to the Closing Date shall also be
remitted by Seller to the appropriate governmental agency on or prior to the
time they are due;
(b) Any Withholding Obligations required to be remitted to the
appropriate governmental agency after the Closing Date with respect to
Withholding Obligations after the Closing Date shall be withheld and remitted
by Buyer.
10.9 POST-CLOSING RECONCILIATION.
(a) For a period of sixty (60) days following the Closing Date
(the "Inclearing Period"), Seller shall continue to process checks or drafts,
drawn on Deposits which are not intercepted by the applicable Federal Reserve
Bank ("Federal Reserve"). During the Inclearing Period, Seller shall by 3:00
p.m. Pacific Time on the date of presentment make all of such checks or
drafts available to Buyer's courier at Seller's data processing center
located at 16420 Valley View, La Mirada, California along with a cash letter
listing all such checks or drafts. By 3:00 p.m. Pacific Time
[close of business] on each day of presentment during the Inclearing Period,
Buyer shall credit Seller's due to correspondent account with the amount set
forth in the cash letter for all items presented to Buyer on that day. Upon
expiration of the Inclearing Period, Seller shall cease honoring inclearing
items presented against the Deposits and such items shall be returned marked
"Refer to Maker".
(b) ACH TRANSACTIONS. Seller shall provide to Buyer no later than
30 days prior to the Closing Date, the customer name, customer account
number, and the originator identification number for each automated
clearinghouse ("ACH") entry for the Deposit accounts, and shall further
provide, within two business days following the
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Closing Date, an updated list as of the close of business on the Closing
Date. Following closing, Seller shall transmit to Buyer no later than 12:00
p.m. Pacific Time all information pertaining to ACH items affecting Deposits
during each business day including claim number, suffix, if applicable,
source name, trade identification, company identification, client name and
account number and effective date. Seller will credit such finds to Buyer's
due from account maintained with Seller. For a period of 60 days following
the Closing Date, Seller agrees to continue to accept and immediately forward
to Buyer all ACH entries and corresponding funds. Seller agrees to include
the originator identification number, and Buyer agrees to immediately notify
and instruct the originator of the ACH to reroute the entries directly to
Buyer. Buyer shall be responsible for processing and responding to any
reclamation requests. Losses due to reclamation requests related to Deposits
that are closed or have insufficient funds to cover a reclamation request
will be absorbed by Seller if the reclamation is against a credit received on
or prior to the Closing and by Buyer if against a credit received after
closing. After the 60 day period, Seller may discontinue accepting and
forwarding ACH entries and return them to the originators.
(c) RETURNED ITEMS. For a period of 60 days following the Closing
Date, Seller shall make available no later than 3:00 p.m. Pacific Time to
Buyer's courier a cash letter containing all returned items received on that
business day. Buyer shall credit Seller's due to account maintained with
Buyer by the close of business that day an amount equal to the cash letter
for such returned items. Returned items are those items that are included
within the Deposits transferred to Buyer but that are returned unpaid to
Seller after the Closing Date. Buyer shall notify Seller by facsimile of any
unacceptable returned items and Seller shall reimburse Buyer's due from
account upon receipt of such unacceptable returned items.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
11.1 CLAIMS. For the purpose of this Section 11 only, any party
seeking to enforce or claiming the benefit of any representation and warranty
hereunder is called a "Claimant" and any party or other person against which
such right is claimed is called a "Defendant."
11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made under this Agreement by either party shall survive the
Closing; PROVIDED, however, that from and after the Closing neither Buyer nor
Seller shall have any liability for any misrepresentation or breach of
warranty unless (i) all losses, costs and damages which a party may incur by
reason of misrepresentations or breaches of warranty of the other party shall
exceed an aggregate of $5,000 in which event the party causing such losses,
costs or damages shall be liable for the amount of the claims in excess of
$5,000 and (ii) the Claimant shall have complied with the provisions of
Section 11.3 of this Agreement.
11.3 LIMITATION OF CLAIMS. Notwithstanding anything to the contrary
contained in any other provision of this Section 11, all representations and
warranties
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of the parties hereto shall terminate and expire and shall be
without any further force or effect whatever from and after the expiration of
four (4) years following the Closing Date, unless the Claimant shall:
(i) on or prior to such date serve written notice on the
Defendant setting forth in reasonable detail any claims which the Claimant
may have under this Section 11; and
(ii) if legal action is required to enforce its rights hereunder,
commence legal action or actions against the Defendant within six (6) months
after the date on which such written notice is served.
12. TERMINATION.
12.1 TERMINATION AGREEMENT. Except as is otherwise provided in
Section 12.3, this Agreement shall terminate and shall be of no further force
or effect as between the parties hereto upon the occurrence of any of the
following:
(i) Immediately upon the expiration of fifteen (15) days from the
date that Seller has given notice to Buyer of a breach or default by Buyer in
the performance of any covenant, agreement, representation, warranty, duty or
obligation hereunder; PROVIDED, however, that no such termination shall be
effective if, within such fifteen (15) day period, Buyer shall have
substantially corrected and cured the grounds for termination as set forth in
such notice of termination;
(ii) Immediately upon the expiration of fifteen (15) days from
the date that Buyer has given notice to Seller of a breach or default by
Seller in the performance of any covenant, agreement, representation,
warranty, duty or obligation hereunder; PROVIDED, however, that no such
termination shall be effective if, within such fifteen (15) day period,
Seller shall have substantially corrected and cured the grounds for
termination as set forth in such notice of termination;
(iii) Upon mutual agreement of the parties, if it appears
unlikely that the regulatory approvals required in order to fulfill the
conditions set forth in Section 5.1.2 of this Agreement will be obtained, or
if the parties otherwise mutually agree to terminate this Agreement for any
other reason;
(iv) At the option of Buyer as set forth in Section 10.6 of this
Agreement; or
(v) Upon written notice by either party to the other party if the
Closing has not occurred on or before March 31, 1996, unless such date is
extended by the mutual agreement of the parties hereto.
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12.2 IMMATERIAL BREACH. Notwithstanding anything to the contrary
contained herein, no party hereto shall have the right to terminate this
Agreement on account of its own breach or because of any immaterial breach by
any other party hereto of any covenant, agreement, representation, warranty,
duty or obligation hereunder.
12.3 EFFECT OF TERMINATION. No termination of this Agreement under
this Section 12 shall release, or be construed as so releasing, any party
hereto from any liability or damage to any other party hereto arising out of,
in connection with or otherwise relating to, directly or indirectly, such
party's material and bad faith breach, or such party's default, breach or
failure in performance of any of its warranties, representations, covenants,
agreements, duties or obligations arising hereunder. No termination of this
Agreement under this Section 12 or for any other reason shall terminate or
release any party hereto from its obligations set forth in Sections 10.4,
15.1 or 15.2 of this Agreement.
12.4 WAIVER OF RIGHT TO TERMINATE. Either Buyer or Seller may, at
its written election, waive any of their respective rights to terminate this
Agreement under the foregoing provisions of this Section 12, and the parties
shall be deemed to have waived such rights from and after the Closing Date
even though actual settlement may have been delayed pursuant to the
provisions of Section 14.
13. EFFECT ON THIRD PARTIES.
Except as otherwise provided by law, neither the rights of creditors
and depositors of Seller nor any liability or obligation for payment of money
nor any claim or cause of action against Seller shall be in any manner
released or impaired by this Agreement or by the transactions contemplated
hereunder, and the rights and obligations of all creditors and depositors and
of all other persons shall remain unimpaired; Buyer shall succeed to all such
obligations and liabilities only to the extent included among the Liabilities
as of the day prior to the Closing Date and shall be liable from then and
thereafter to pay, discharge and perform all such debts and obligations of
Seller assumed pursuant to this Agreement and in connection with the
transaction contemplated hereunder in the same manner as if Buyer had itself
incurred the debts or obligations, and Buyer shall succeed to all rights,
offsets and defenses of Seller in connection therewith.
14. DELAYED SETTLEMENTS.
14.1 CLOSING AND FIRST ADJUSTMENT. In the event that the requisite
valuations of certain Assets or the amounts of certain Liabilities are not
determinable for the purposes of computing the Payment Amount as of the end
of the day prior to the day selected as the Closing Date as required under
Section 3 of this Agreement due to the unavailability of the Individual
Statement or other records reflecting the required values and amounts as of
such time, such valuation shall be made by using the Individual Statement and
other records reflecting these values as of the close of business on the
fifth (5th) business day immediately preceding the Closing Date. A
preliminary Payment Amount shall thereupon be determined
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pursuant to the provisions of this Agreement and based upon such preliminary
amount, a preliminary payment pursuant to either Section 3.4 or 3.5, as the
case may be, and Sections 3.6 and 3.7 shall be made. Within fifteen (15)
business days immediately following the Closing Date, when the Individual
Statement and other records as of the end of the day prior to the day
selected as the Closing Date shall be available, Buyer and Seller shall
compute the Payment Amount according to the provisions of this Agreement and
Buyer or Seller shall immediately pay such excess amount in immediately
available funds to the other party as appropriate.
14.2 FINAL SETTLEMENT. All claims by either party to this Agreement
regarding the proper computation of the Payment Amount under this Agreement
shall be submitted in writing to the other party within ninety (90) days
following the Closing Date. No claim shall be valid and no Payment Amount
adjustment shall be made with respect to any claim which is not submitted
within such ninety (90) day period, whether or not such claims should or
could have come to the attention of the claiming party prior to the
expiration of such period of time. All claims submitted by the parties
within the ninety (90) day period shall be resolved by the mutual agreement
of the parties (or by such other means as the parties may designate in
writing at some future date) within six (6) months following the Closing
Date. The parties agree to use their best efforts to resolve all claims by
mutual agreement, and in this connection each party agrees that its
representatives will be available at reasonable times to discuss and resolve
any disputed matters. In the event such claim cannot be resolved within six
(6) months following the Closing Date, the claiming party may commence or
institute a legal action or proceeding to enforce such claim.
14.3 PAYMENT AND INTEREST. Any amounts payable by one party to the
other pursuant to Sections 14.1 and 14.2 shall be payable upon demand of the
party entitled thereto in immediately available funds and shall bear interest
(payable on demand in immediately available funds) from and after the Closing
Date to the day of payment at a rate per annum (calculated for actual days
elapsed on the basis of a 365-day year) equal to the rate for federal funds
published in the Wall Street Journal Western Edition from time to time, which
rate shall be adjusted from time to time as said Fed Funds' rate changes.
15. MISCELLANEOUS.
15.1 CONFIDENTIALITY AND PUBLICITY. Except as contemplated by this
Agreement or as is necessary to carry out the transaction contemplated
hereby, all information or documents furnished by either party to the other
party in connection with this Agreement, and not otherwise known to the other
party or already in the public domain, shall be kept confidential, except as
disclosure may be required to obtain the regulatory approvals contemplated
herein. If for any reason this transaction is not consummated, each party
shall return to the other all information and copies or originals of any
documents or other materials furnished pursuant to this Agreement. The
parties shall coordinate all publicity relating to this purchase and sale.
No party shall issue any press release or other written public notice or make
any public statement in connection with this Agreement or the
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transaction contemplated hereby without the prior written consent of the
other party, or unless in the sole opinion of such party's legal counsel a
press release or other written public notice or statement is required by
applicable law or regulation.
15.2 EXPENSES. Except as is otherwise provided in Sections 10.5 and
15.9 of this Agreement and except for the fee payable to Guyot & Associates,
whether the Closing takes place or whether this Agreement is terminated, each
party shall pay its own costs and expenses imposed on or incurred by it in
connection with this Agreement and the transactions contemplated hereby,
including, but not by way of limitation, all regulatory fees, attorneys'
fees, accounting fees, and other expenses.
15.3 NOTICES. All notices, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in person or by United States mail, certified or registered, with
return receipt requested, or otherwise actually delivered, as follows:
(i) If to Seller, to:
Southern California Bank
P.O. Box 588
16420 Valley View
La Mirada, California 90637
Attn: Bruce W. Roat
With a copy to:
Andrew Erskine, Esq.
Manatt, Phelps & Phillips
11355 West Olympic Boulevard
Los Angeles, California 90064-1614
(ii) If to Buyer, to:
Preferred Bank
601 South Figueroa Street
20th Floor
Los Angeles, California 90017
Attn: Li Yu, Chairman of the Board
With a copy to:
Yu-Ching Lau
601 South Figueroa Street
20th Floor
Los Angeles, California 90017
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The persons or addresses to which mailings or deliveries shall be made may
change from time to time by notice given pursuant to the provisions of this
Section 15.3. Any notice, demand or other communication given pursuant to the
provisions of this Section 5.3 shall be deemed to have been given on the date
actually delivered or five (5) days following the date deposited in the United
States mail, properly addressed, postage prepaid, as the case may be.
15.4 SUCCESSORS AND ASSIGNS. All terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and permitted assigns;
PROVIDED, however, this Agreement and all rights, privileges, duties and
obligations of the parties hereto may not be assigned or delegated by any
party hereto without the prior written consent of the other party.
15.5 THIRD PARTY BENEFICIARIES. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or
on behalf of any person other than the parties hereto.
15.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
taken together shall constitute one instrument.
15.7 GOVERNING LAW. This Agreement is made and entered into in
the State of California and the laws of that state shall govern the validity
and interpretation hereof and the performance of the parties hereto of their
respective duties and obligations hereunder.
15.8 CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not form a part of this Agreement.
15.9 ATTORNEYS FEES. In the event either party to this Agreement
brings an action or suit against the other party by reason of any breach of
any covenant, agreement. representation, warranty or any other provision
hereof, or any breach of any duty or obligation created hereunder by such
other party, the prevailing party in whose favor final judgment is entered
shall be entitled to have and recover of and from the losing party, all costs
and expenses incurred or sustained by such prevailing party in connection
with such suit or action, including without limitation, reasonable legal fees
and court costs (whether or not taxable as such).
15.10 ENTIRE AGREEMENT. The making, execution and delivery of this
Agreement by the parties hereto have been induced by no representations,
statements, warranties or agreements other than those herein expressed. This
Agreement embodies the entire understanding of the parties and there are no
further or other agreements or
21
<PAGE>
understandings, written or oral, in effect between the parties relating to
the subject matter hereof, unless expressly referred to by reference herein.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
SELLER:
-------
SOUTHERN CALIFORNIA BANK
By /s/
-----------------------------
Its President/CEO
-----------------------------
BUYER:
------
PREFERRED BANK
By /s/
----------------------------
Its CHB/Pres/CEO
----------------------------
22
<PAGE>
SCHEDULE A
CITY OF INDUSTRY BRANCH
FURNITURE, FIXTURES & EQUIPMENT
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Preferred
Description Bank SCB Total
- ------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Leasehold improvements
Renovations 158,419 158,419
Signs 23,976 23,976
Teller lines 25,770 25,770
Vault 56,566 56,566
--------- --------- ---------
Leasehold subtotal 240,755 23,976 264,731
--------- --------- ---------
Computer and office equipment 227 11,744 11,971
ATM
Equipment 19,482 19,482
Drive up 8,053 8,053
--------- ---------
ATM Subtotal 27,535 27,535
Safe deposit boxes 2,687 2,687
Furniture 167 2,428 2,595
--------- --------- ---------
Total FF&E $271,371 $38,148 $309,519
--------- --------- ---------
--------- --------- ---------
</TABLE>
Note: A detail fixed asset listing is attached.
23
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
Larry D. Hartwig and William C. Greenbeck certify that:
1. They are the President and the Secretary, respectively, of SC
Bancorp, a California corporation.
2. Article Six of the Articles of Incorporation of this
corporation is amended to read in its entirety as follows:
No holder of any shares of any class of stock of this
corporation shall have preemptive rights to subscribe for
any shares of any class of stock of this corporation.
3. The foregoing amendment of Articles of Incorporation has
been duly approved by the board of directors.
4. The foregoing amendment of Articles of Incorporation has
been duly approved by the required vote of shareholders in
accordance with Section 902, Corporations Code. The total
number of outstanding shares of the corporation is
7,468,505. The number of shares voting in favor of the
amendment equaled or exceeded the vote required. The
percentage vote required was more than 50%.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this
certificate are true and correct of our own knowledge.
Date: May 9, 1995 /s/
------------------------------
Larry D. Hartwig
President
/s/
------------------------------
William C. Greenbeck
Secretary
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
SC BANCORP
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The Board of Directors shall fix the
location of the principal executive office of the corporation at any place
within or outside the State of California. If the principal executive office is
located outside the State of California, and the corporation has one or more
business offices in such state, the Board of Directors shall fix and designate a
principal business office in the State of California.
SECTION 2. OTHER OFFICES. Branch or other subordinate offices may at
any time be established by the Board of Directors at such other places as it
deems appropriate.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of shareholders shall be held
at any place within or outside the State of California designated by the Board
of Directors. In the absence of any such designation, shareholders' meetings
shall be held at the principal executive office of the corporation.
SECTION 2. ANNUAL MEETING. The annual meeting of shareholders shall
be held on the third Tuesday in May of each year at 1:30 p.m., or such other
date or such other time as may be fixed by the Board of Directors.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders
may be called at any time by the Board of Directors, the Chairman of the Board,
the President, or by the holders of shares entitled to cast not less than ten
percent (10%) of the votes at such meeting. If a special meeting is called by
any person or
<PAGE>
persons other than the Board of Directors, the request shall be in writing,
specifying the time of such meeting and the general nature of the business
proposed to be transacted, and shall be delivered personally or by registered
mail to the Chairman of the Board, the President, any Vice President or the
Secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote that a meeting
will be held at a time requested by the person or persons calling the meeting,
not less than 35 nor more than 60 days after receipt of the request. If the
notice is not given within 20 days after receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing in this paragraph
shall be construed as limiting, fixing or affecting the time when a meeting of
shareholders called by action of the Board of Directors may be held.
SECTION 4. NOTICE OF MEETINGS. Written notice, in accordance with
Section 5 of this Article II, of each annual or special meeting of shareholders
shall be given not less than 10 nor more than 60 days before the date of the
meeting to each shareholder entitled to vote thereat. Such notice shall state
the place, date, and hour of the meeting and (a) in the case of a special
meeting, the general nature of the business to be transacted, and no other
business may be transacted, or (b) in the case of the annual meeting, those
matters which the Board of Directors, at the time of the mailing of the notice,
intends to present for action by the shareholders, but, subject to the
provisions of applicable law, any proper matter may be presented at the meeting
for such action. The notice of any meeting at which Directors are to be elected
shall include the names of nominees intended at the time of the notice to be
presented by the Board of Directors for election.
If action is proposed to be taken at any meeting for approval of (a) a
contract or transaction in which a Director has a direct or indirect financial
interest, pursuant to Section 310 of the California General Corporation Law,
(b) an amendment of the Articles of Incorporation, pursuant to Section 902 of
that Law, (c) a reorganization of the corporation, pursuant to Section 1201 of
that Law, (d) a voluntary dissolution of the corporation, pursuant to
Section 1900 of that Law, or (e) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to
Section 2007 of that Law, the notice shall also state the general nature of that
proposal.
SECTION 5. MANNER OF GIVING NOTICE. Notice of a shareholders'
meeting may be given either personally or by first-class mail, or by third-class
mail if the corporation has outstanding shares held of record by 500 or more
persons (determined as provided in Section 605 of the California General
Corporation Law) on the record date for the shareholders' meeting, or by
telegraphic or other written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the books of the
corporation or given by the
2
<PAGE>
shareholder to the corporation for the purpose of notice. If no such address
appears on the corporation's books or is given, notice shall be deemed to have
been given if sent to that shareholder by mail or telegraphic or other written
communication to the corporation's principal office or if published at least
once in a newspaper of general circulation in the county in which that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication. An affidavit of mailing or other means of giving any
notice in accordance with the above provisions, executed by the Secretary,
Assistant Secretary or other transfer agent shall be prima facie evidence of the
giving of the notice.
If any notice addressed to the shareholder at the address of such
shareholder appearing on the books of the corporation is returned to the
corporation by the United States postal service marked to indicate that the
United States postal service is unable to deliver the notice to the shareholder
at such address, all future notices or reports shall be deemed to have been duly
given without further mailing if the same shall be available for the shareholder
upon written demand of the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the notice
to all other shareholders.
SECTION 6. QUORUM. The presence in person or by proxy of the holders
of a majority of the shares entitled to vote at any meeting shall constitute a
quorum for the transaction of business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
SECTION 7. ADJOURNED MEETING AND NOTICE THEREOF. Any shareholders'
meeting, whether or not a quorum is present, may be adjourned from time to time
by the vote of a majority of the shares, the holders of which are either present
in person or represented by proxy thereat, but in the absence of a quorum
(except as provided in Section 6 of this Article) no other business may be
transacted at such meeting.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, when any shareholders' meeting is adjourned for
more than 45 days from the date set for the original adjourned meeting, or, if
after adjournment a new record date is fixed for the adjourned meeting, notice
of the adjourned meeting shall be given as in the case of an original meeting.
At any
3
<PAGE>
adjourned meeting the corporation may transact any business which may have been
transacted at the original meeting.
SECTION 8. VOTING. The shareholders entitled to notice of any
meeting or to vote at any such meeting shall be only persons in whose name
shares stand on the stock records of the corporation on the record date
determined in accordance with Section 9 of this Article.
Voting shall in all cases be subject to the provisions of Sections 702
through 704, inclusive, of the California General Corporation Law (relating to
voting shares held by a fiduciary, in the name of a corporation, or in joint
ownership).
The shareholders' vote may be by voice or ballot; provided, however,
that any election for Directors must be by ballot if demanded by any shareholder
before the voting has begun. On any matter other than elections of Directors,
any shareholder may vote part of the shares in favor of the proposal and refrain
from voting the remaining shares or vote them against the proposal, but, if the
shareholder fails to specify the number of shares which the shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to all shares that the shareholder is entitled to
vote. If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on any matter (other than
the election of Directors) shall be the act of the shareholders, unless the vote
of a greater number or voting by classes is required by the California General
Corporation Law or by the Articles of Incorporation.
Pursuant to Section 301.5 of the California General Corporation Law,
this corporation shall not have cumulative voting as provided under Section 708
of such Law, provided that this corporation shall then be a listed corporation
as defined in Section 301.5 of such Law.
In any election of Directors, the candidates receiving the highest
number of votes of the shares entitled to be voted for them up to the number of
Directors to be elected, shall be elected.
SECTION 9. RECORD DATE. The Board of Directors may fix, in advance,
a record date for the determination of the shareholders entitled to notice of
any meeting or to vote or entitled to receive payment of any dividend or other
distribution, or any allotment of rights, or to exercise rights in respect of
any other lawful action. The record date so fixed shall be not more than 60
days nor less than 10 days prior to the date of the meeting nor more than 60
days prior to any other action. When a record date is so fixed, only
shareholders of record at the close of business on that date are entitled to
notice of and to vote at the meeting or
4
<PAGE>
to receive the dividend, distribution, or allotment of rights, or to exercise of
the rights, as the case may be, notwithstanding any transfer of shares on the
books of the corporation after the record date. A determination of shareholders
of record entitled to notice of or to vote at a meeting of shareholders shall
apply to any adjournment of the meeting unless the Board of Directors fixes a
new record date for the adjourned meeting. The Board of Directors shall fix a
new record date if the meeting is adjourned for more than 45 days from the date
set for the original meeting.
If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held. The record date for determining shareholders for any purpose other than
set forth in this Section 9 or Section 11 of this Article shall be at the close
of business on the day on which the Board of Directors adopts the resolution
relating thereto, or the sixtieth (60th) day prior to the date of such other
action, whichever is later.
SECTION 10. CONSENT OF ABSENTEES. The transactions of any meeting of
shareholders, however called and noticed, and wherever held, are as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a waiver of notice, or a consent to the holding of the meeting or
an approval of the minutes thereof. All such waivers, consents, and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting. Attendance of a person at a meeting shall constitute a waiver of
notice of and presence at such meeting, except when the person objects, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened and except that attendance at a meeting is
not a waiver of any right to object to the consideration of matters required by
Section 4 to be included in the notice but not so included, if such objection is
expressly made at the meeting. Neither the business to be transacted at nor the
purpose of any regular or special meeting of shareholders need be specified in
any written waiver of notice, except that if action is taken or proposed to be
taken for approval of any of those matters specified in the second paragraph of
Section 4 of this Article II, the waiver of notice or consent shall state the
general nature of the proposal.
SECTION 11. ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Subject to
Section 603 of the California General Corporation Law, any action which may be
taken at any annual or special meeting of shareholders may be taken without a
meeting and without prior notice if a consent in writing, setting forth the
action so
5
<PAGE>
taken, is signed by the holders of the outstanding shares having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted, or their proxies. All such consents shall be filed with the
Secretary of the corporation and shall be maintained in the corporate records;
provided, however, that (1) unless the consents of all shareholders entitled to
vote have been solicited in writing, notice of any shareholder approval without
a meeting by less than unanimous written consent shall be given, as provided by
Sections 603(b)(1) and (2) of the California General Corporation Law, and (2) in
the case of election of Directors, such a consent shall be effective only if
signed by the holders of all outstanding shares entitled to vote for the
election of Directors; provided, however, that subject to applicable law, a
Director may be elected by the shareholders at any time to fill a vacancy on the
Board of Directors that has not been filled by the Directors. Any such election
by written consent other than to fill a vacancy created by removal requires the
consent of the holders of a majority of the outstanding shares entitled to vote
for the election of Directors. Any written consent may be revoked by a writing
received by the Secretary of the corporation prior to the time that written
consents of the number of shares required to authorize the proposed action have
been filed with the Secretary.
Unless a record date for voting purposes be fixed as provided in
Section 9 of this Article, the record date for determining shareholders entitled
to give consent pursuant to this Section 11, when no prior action by the Board
of Directors has been taken, shall be the day on which the first written consent
is given.
SECTION 12. PROXIES. Every person entitled to vote shares or execute
written consents has the right to do so either in person or by one or more
persons authorized by a written proxy executed and dated by such shareholder and
filed with the Secretary of the corporation prior to the convening of any
meeting of the shareholders at which any such proxy is to be used or prior to
the use of such written consent. A validly executed proxy which does not state
that it is irrevocable continues in full force and effect unless (1) revoked by
the person executing it, before the vote pursuant thereto, by a writing
delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by, or by attendance at the meeting and voting in
person by, the person executing the proxy; or (2) written notice of the death or
incapacity of the maker of the proxy is received by the corporation before the
vote pursuant thereto is counted; provided, however, that no proxy shall be
valid after the expiration of 11 months from the date of its execution unless
otherwise provided in the proxy.
SECTION 13. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the Board of Directors may appoint any persons other than nominees
6
<PAGE>
for office as inspectors of election to act at such meeting and any adjournment
thereof. If no inspectors of election are so appointed, or if any persons so
appointed fail to appear or fail or refuse to act, the Chairman of any such
meeting may, and on the request of any shareholder or shareholder's proxy shall,
appoint inspectors of election at the meeting. The number of inspectors shall
be either one (1) or three (3). If inspectors are appointed at a meeting on the
request of one or more shareholders or proxies, the holders of a majority of
shares or their proxies present shall determine whether one (1) or three (3)
inspectors are to be appointed.
The duties of such inspectors shall be as prescribed by Section 707(b)
of the California General Corporation Law and shall include: determining (1)
the number of shares outstanding and the voting power of each, (2) the shares
represented at the meeting, (3) the existence of a quorum, (4) the authenticity,
validity and the effect of proxies; receiving votes, ballots or consents;
hearing and determining all challenges and questions in any way arising in
connection with the right to vote; counting and tabulating all votes or
consents; determining when the polls shall close; determining the result; and
doing such acts as may be proper to conduct the election or vote with fairness
to all shareholders. If there are three inspectors of election, the decision,
act, or certificate of a majority is effective in all respects as the decision,
act or certificate of all.
ARTICLE III
DIRECTORS
SECTION 1. POWERS. Subject to the provisions of the California
General Corporation Law and any limitations in the Articles of Incorporation and
these By-Laws relating to action required to be approved by the shareholders or
by the outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
the Board of Directors. The Board of Directors may delegate the management of
the day-to-day operation of the business of the corporation to a management
company or other person provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board of Directors. Without prejudice to such
general powers, but subject to the same limitations, it is hereby expressly
declared that the Board of Directors shall have the following powers in addition
to the other powers enumerated in these By-Laws:
(a) To select and remove all the other officers, agents, and
employees of the corporation, prescribe any powers and duties for them that are
7
<PAGE>
consistent with law, or with the Articles or these By-Laws, fix their
compensation, and require from them security for faithful service.
(b) To conduct, manage, and control the affairs and business of the
corporation and to make such rules and regulations therefor not inconsistent
with law, or with the Articles or these By-Laws, as they may deem best.
(c) To adopt, make, and use a corporate seal, and to prescribe the
forms of certificates of stock, and to alter the form of such seal and of such
certificates from time to time as in their judgment they may deem best.
(d) To authorize the issuance of shares of stock of the corporation
from time to time, upon such terms and for such consideration as may be lawful.
(e) To borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory and capital notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations, or other evidences of debt and securities
therefor and any agreements pertaining thereto.
(f) To prescribe the manner in which and the person or persons by
whom any or all of the checks, drafts, notes, contracts and other corporate
instruments shall be executed.
(g) To appoint and designate, by resolution adopted by a majority of
the authorized number of Directors, one or more committees, each consisting of
two or more Directors, including the appointment of alternate members of any
committee who may replace any absent member at any meeting of the committee; and
(h) Generally, to do and perform every act or thing whatever that may
pertain to or be authorized by the Board of Directors of a commercial bank under
the laws of this state.
SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS.
(a) The number of Directors shall be nine (9). Commencing with the
1993 annual meeting of shareholders, the Board of Directors shall be divided
into three classes, Class I, Class II and Class III, each having three
Directors. At the 1993 annual meeting of shareholders, Directors of the first
class (Class I) shall be elected to hold office for a term expiring at the 1994
annual meeting of shareholders; Directors of the second class (Class II) shall
be elected to hold office for a term expiring at the 1995 annual meeting of
shareholders; and Directors of
8
<PAGE>
the third class (Class III) shall be elected to hold office for a term expiring
at the 1996 annual meeting of shareholders. At each annual meeting of
shareholders after 1993, the successors to the class of Directors whose terms
then shall expire shall be identified as being of the same class as the
Directors they succeed and elected to hold office for a term expiring at the
third succeeding annual meeting of shareholders. Notwithstanding the foregoing,
whenever the holders of the preferred stock or preference stock issued by the
corporation shall have the right, voting separately by class, to elect Directors
at an annual or special meeting of shareholders, the election, term of office
and filling of vacancies of such Directors shall be governed by the terms of the
Articles of Incorporation applicable thereto, and such Directors so elected
shall not be divided into classes pursuant to this paragraph. Directors elected
by a vote of the holders of preferred stock or preference stock as provided in
the Articles of Incorporation shall hold office only so long as is required by
the Articles of Incorporation.
If at any meeting for the election of Directors, more than one
class of stock, voting separately as classes, shall be entitled to elect one or
more Directors and there shall be a quorum of only one such class of stock, that
class of stock shall be entitled to elect its quota of Directors notwithstanding
the absence of a quorum of the other class or classes of stock.
(b) Nominations for election of members of the Board of Directors may
be made by the Board of Directors, by a nominating committee or person appointed
by the Board of Directors or by any holder of any outstanding class of capital
stock of the corporation entitled to vote for the election of Directors. Notice
of intention to make any nominations (other than those made by or at the
direction of the Board of Directors) shall be made pursuant to a timely notice
in writing to the Secretary of the corporation, with a copy thereof to the
Chairman of the Board. To be timely, a shareholder's notice shall be delivered
to or mailed and received at the principal executive offices of the corporation
by the latter of: (i) the close of business 21 days prior to the meeting of
shareholders called for the election of Directors or (ii) 10 days after the date
of mailing of notice of the meeting to shareholders. Such shareholder's notice
to the Secretary shall set forth (a) as to each person whom the shareholder
proposes to nominate for election or reelection as a Director, (i) the name,
age, business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of shares of
capital stock of the corporation which are beneficially owned by the person,
(iv) the number of shares of any bank, bank holding company, savings and loan
association or other depositary institution owned beneficially by the person and
the identities and locations of any such institutions, (v) whether the person
has ever been convicted of or pleaded nolo contendere to any criminal offense
involving dishonesty or breach of trust, filed a petition in bankruptcy or been
adjudged bankrupt, and (vi) any other information relating to the person that is
9
<PAGE>
required to be disclosed in solicitations for proxies for election of Directors
pursuant to Schedule 14A under the Securities Exchange Act of 1934, as amended;
and (b) as to the shareholder giving the notice (i) the name and record address
of the shareholder, (ii) the class and number of shares of capital stock of the
corporation which are beneficially owned by the shareholder, and (iii) the
number of shares of capital stock of any bank, bank holding company, savings and
loan association or other depositary institution owned beneficially by the
shareholder and the identities and locations of any such institutions. The
notice shall be signed by the nominating shareholder and by each nominee, and
shall be accompanied by a written consent to be named as a nominee for election
as a Director from each proposed nominee. The corporation may require any
proposed nominee to furnish such other information as may reasonably be required
by the corporation to determine the eligibility of any such proposed nominee to
serve as a Director of the corporation. No person shall be eligible for
election as a Director of the corporation unless nominated in accordance with
the procedures set forth herein. Nominations not made in accordance with these
procedures shall be disregarded by the chairman of the meeting, and upon his
instructions, the inspectors of elections shall disregard all votes cast for
each such nominee. The foregoing requirements do not apply to the nomination of
a person to replace a proposed nominee who has become unable to serve as a
Director between the last day for giving notice in accordance with this
paragraph and the date of election of Directors if the procedure called for in
this paragraph was followed with respect to the nomination of the proposed
nominee.
SECTION 3. ELECTION AND TERM OF OFFICE. If any annual meeting is not
held or the Directors to then be elected are not elected thereat, the Directors
to then be elected may be elected at any special meeting of shareholders held
for that purpose. Each Director shall hold office until expiration of the term
for which such Director was elected and until a successor has been elected and
qualified pursuant to Section 2(a) of this Article III.
SECTION 4. VACANCIES. Any Director may resign effective upon giving
written notice to the Chairman of the Board, the President, Secretary, or the
Board of Directors, unless the notice specifies a later time for the
effectiveness of such resignation. If the resignation is effective at a future
time, a successor may be elected to take office when the resignation becomes
effective.
Except for a vacancy created by the removal of a Director, vacancies
on the Board of Directors may be filled by approval of a majority of the
remaining Directors, or, if the number of Directors then in office is less than
a quorum, by (1) the unanimous written consent of the Directors then in office,
(2) the affirmative vote of a majority of the Directors then in office at a
meeting held pursuant to notice or waivers of notice complying with Section 307
of the California General Corporation Law or (3) a sole remaining Director, and
each Director so elected shall
10
<PAGE>
hold office until such expiration of the term for which such Director was
elected and until such Director's successor has been elected and qualified
pursuant to Section 2(a) of this Article III. A vacancy on the Board of
Directors existing as the result of a removal of a Director may be filled only
by approval of the shareholders, unless the Articles of Incorporation or a by-
law adopted by the shareholders so provides.
A vacancy or vacancies in the Board of Directors shall be deemed to
exist in case of death, resignation, or removal of any Director, or if the
authorized number of Directors be increased, or if the shareholders fail, at any
annual or special meeting of shareholders at which any Director or Directors are
elected, to elect the full authorized number of Directors to be voted for at
that meeting.
The Board of Directors may declare vacant the office of a Director who
has been declared of unsound mind by an order of court or convicted of a felony.
The shareholders may elect a Director or Directors at any time to fill
any vacancy or vacancies not filled by the Directors. Any such election by
written consent other than to fill a vacancy created by removal requires the
consent of a majority of the outstanding shares entitled to vote. Any such
election by written consent to fill a vacancy created by removal requires the
unanimous consent of the outstanding shares entitled to vote. If the Board of
Directors accepts the resignation of a Director tendered to take effect at a
future time, the Board of Directors or the shareholders shall have power to
elect a successor to take office when the resignation is to become effective.
No reduction of the authorized number of Directors or amendment
reducing the number of classes of Directors shall have the effect of removing
any Director prior to the expiration of the Director's term of office.
SECTION 5. PLACE OF MEETING. Regular meetings of the Board of
Directors shall be held at any place within or without the State of California
which has been designated in the notice of meeting or if there is no notice, at
the principal office of the corporation, or at a place designated by resolution
of the Board of Directors or by the written consent of the Board of Directors.
Any regular or special meeting is valid wherever held if held upon written
consent of all members of the Board of Directors given either before or after
the meeting and filed with the Secretary of the corporation.
SECTION 6. REGULAR MEETINGS. Immediately following each annual
meeting of shareholders and at the same place, the Board of Directors shall hold
a regular meeting for the purpose of organization, any desired election of
officers, and the transaction of other business. Notice of this meeting shall
not be required.
11
<PAGE>
Other regular meetings of the Board of Directors shall be held without
notice either on the third Tuesday of each month at the hour of 4:00 p.m. or at
such different date and time as the Board of Directors may from time to time fix
by resolution; provided, however, should said day fall upon a legal holiday
observed by the corporation at its principal office, then said meeting shall be
held at the same time and place on the next succeeding full business day. Call
and notice of all regular meetings of the Board of Directors are hereby
dispensed with.
SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of
Directors for any purpose or purposes may be called at any time by the Chairman
of the Board, the President, or the Secretary or by any two Directors.
Special meetings of the Board of Directors shall be held upon no less
than four days' written notice by mail or 48 hours' notice delivered personally
or by telephone or telegraph. Any such written or telegraphic notice shall be
addressed or delivered to each Director at such Director's address as it is
shown upon the records of the corporation or as may have been given to the
corporation by the Director for purposes of notice or, if such address is not
shown on such records or is not readily ascertainable, at the place in which the
meetings of the Directors are regularly held. Such notice may, but need not,
specify the purpose of the meeting, nor the place if the meeting is to be held
at the principal office of the corporation. Notice of any meeting of the Board
of Directors need not be given to any Director who signs a waiver of notice or a
consent to holding the meeting, or who attends the meeting without protesting,
either prior thereto or at its commencement, the lack of notice to such
Director.
Notice by mail shall be deemed to have been given at the time a
written notice is deposited in the United States mails, postage prepaid. Any
other written notice shall be deemed to have been given at the time it is
personally delivered to the recipient or is delivered to a common carrier for
transmission, or actually transmitted by the person giving the notice by
electronic means, to the recipient. Oral notice shall be deemed to have been
given at the time it is communicated, in person or by telephone or wireless, to
the recipient or to a person at the office of the recipient who the person
giving the notice has reason to believe will promptly communicate it to the
recipient.
SECTION 8. QUORUM. A majority of the authorized number of Directors
constitutes a quorum of the Board of Directors for the transaction of business,
except to adjourn as hereinafter provided. Every act or decision done or made
by a majority of the Directors present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Board of Directors, unless a
greater number be required by the Articles and subject to the provisions of
Section 310 of the California General Corporation Law (as to approval of
contracts or transactions
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in which a Director has a direct or indirect material financial interest),
Section 311 (as to appointment of committees), and Section 317 (e) (as to
indemnification of Directors). A meeting at which a quorum is initially present
may continue to transact business notwithstanding the withdrawal of Directors,
if any action taken is approved by at least a majority of the required quorum
for such meeting.
SECTION 9. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board of Directors may participate in a meeting through use of a
conference telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another. Participation in a meeting
pursuant to this Section 9 constitutes "presence" in person at such meeting.
SECTION 10. WAIVER OF NOTICE. The transactions of any meeting of the
Board of Directors, however called and noticed or wherever held, are as valid as
though had at a meeting duly held after regular call and notice if a quorum is
present and if, either before or after the meeting, each of the Directors not
present signs a written waiver of notice, a consent to holding such meeting or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
SECTION 11. ADJOURNMENT. A majority of the Directors present,
whether or not a quorum is present, may adjourn any Directors' meeting to
another time and place. Notice of the time and place of holding an adjourned
meeting need not be given, unless the meeting is adjourned for more than twenty-
four hours, in which case notice of the time and place shall be given before the
time of the adjourned meeting, in the manner specified in Section 7 of this
Article III, to the Directors who were not present at the time of the
adjournment.
SECTION 12. ACTION WITHOUT MEETING. Any action required or permitted
to be taken by the Board of Directors may be taken without a meeting if all
members of the Board of Directors shall individually or collectively consent in
writing to such action. Such action by written consent shall have the same
effect as a unanimous vote of the Board of Directors. Such consent or consents
shall be filed with the minutes of the proceedings of the Board of Directors.
SECTION 13. FEES AND COMPENSATION. Directors and members of
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
Board of Directors. This Section shall not be construed to preclude any
Director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation for those services.
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SECTION 14. RIGHTS OF INSPECTION. Every Director of the corporation
shall have the absolute right at any reasonable time to inspect and copy all
books, records, and documents of every kind and to inspect the physical
properties of the corporation and also of its subsidiary corporations, domestic
or foreign. Such inspection by a Director may be made in person or by agent or
attorney and includes the right to copy and obtain extracts.
SECTION 15. COMMITTEES OF THE BOARD. The Board of Directors may
designate, by resolution adopted by a majority of the authorized number of
Directors, one or more committees, consisting of two or more Directors, to serve
at the pleasure of the Board of Directors. The Board of Directors may designate
one or more Directors as alternate members of any committee, and such alternate
members may replace any absent member at any meeting of the committee. The
appointment of members or alternate members of a committee requires the vote of
a majority of the authorized number of Directors. Any such committee, to the
extent provided in the resolution of the Board of Directors, shall have all the
authority of the Board except as otherwise provided by law.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a
President, one or more Vice Presidents, a Secretary, and a Chief Financial
Officer. The corporation may also have, at the discretion of the Board of
Directors, a Chairman of the Board, a Vice Chairman of the Board, one or more
Assistant Vice Presidents, one or more Assistant Financial Officers, one or more
Assistant Secretaries and such other officers as may be elected or appointed in
accordance with provisions of Section 3 of this Article. One person may hold
two or more offices, except those of President and Chief Financial Officer.
SECTION 2. ELECTION. The officers of the corporation, except such
officers as may be elected or appointed in accordance with the provisions of
Section 3 or Section 5 of this Article, shall be chosen by, and shall serve at
the pleasure of, the Board of Directors, and shall hold their respective offices
until their resignation, removal, or other disqualification from service, or
until their respective successors shall be elected, subject to the rights, if
any, of an officer under any contract of employment.
SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may elect,
and may empower the President to appoint, such other officers as the business of
the corporation may require, each of whom shall hold office for such period,
have
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such authority, and perform such duties as are provided in these By-Laws or as
the Board of Directors may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION. Subject to the rights, if any,
of an officer under any contract of employment, any officer may be removed,
either with or without cause, by the Board of Directors at any time, or, except
in the case of an officer chosen by the Board of Directors, by any officer upon
whom such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation, but without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these By-Laws for regular election or appointment to such
office.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
there shall be such an officer, shall, if present, preside at all meetings of
the Board of Directors and of the shareholders, and exercise and perform such
other powers and duties as may be from time to time assigned by the Board of
Directors.
SECTION 7. VICE CHAIRMAN. The Vice Chairman of the Board, if there
shall be such an officer, shall in the absence of the Chairman of the Board,
preside at all meetings of the Board of Directors and of the shareholders, and
exercise and perform such other powers and duties as may be from time to time
assigned by the Board of Directors.
SECTION 8. PRESIDENT. Subject to such powers, if any, as may be
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President is the General Manager and Chief Executive Officer of
the corporation and has, subject to the control of the Board of Directors,
general supervision, direction, and control of the business and officers of the
corporation. In the absence of both the Chairman of the Board and the Vice
Chairman, or if there be none, the President shall preside at all meetings of
the shareholders and at all meetings of the Board of Directors. The President
has the general powers and duties of management usually vested in the office of
President and General Manager of a corporation and such other powers and duties
as may be prescribed by the Board of Directors.
15
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SECTION 9. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors or, if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the By-Laws, and the President, or the Chairman of the
Board.
SECTION 10. SECRETARY. The Secretary shall keep or cause to be kept,
at the principal office and such other place as the Board of Directors may
order, a book of minutes of all meetings of shareholders, the Board of
Directors, and its committees, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice thereof given,
the names of those present or represented at shareholders' meetings, and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, a copy of the By-Laws
of the corporation at the principal office or business office in accordance with
Section 213 of the California General Corporation Law. The Secretary shall
keep, or cause to be kept, at the principal office or at the office of the
corporation's transfer agent or registrar, if one be appointed, a share
register, or a duplicate share register, showing the names of the shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders, of the Board of Directors and of any committees
thereof required by these By-Laws or by law to be given, shall keep the seal of
the corporation in safe custody, and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors.
SECTION 11. ASSISTANT SECRETARY. The Assistant Secretary or the
Assistant Secretaries, in the order of their seniority, shall, in the absence or
disability of the Secretary, or in the event of such officer's refusal to act,
perform the duties and exercise the powers and discharge such duties as may be
assigned from time to time by the President or by the Board of Directors.
SECTION 12. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares, and shall
send or cause to be sent to the
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shareholders of the corporation such financial statements and reports as are by
law or these By-Laws required to be sent to them. The books of account shall at
all times be open to inspection by any Director of the corporation.
The Chief Financial Officer shall deposit all monies and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the Board of Directors. The Chief
Financial Officer shall disburse the funds of the corporation as may be ordered
by the Board of Directors, shall render to the President and Directors, whenever
they request it, an account of all transactions as Treasurer and of the
financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors.
SECTION 13. ASSISTANT FINANCIAL OFFICER. The Assistant Financial
Officer or the Assistant Financial Officers, in the order of their seniority,
shall, in the absence or disability of the Chief Financial Officer, or in the
event of such officer's refusal to act, perform the duties and exercise the
powers of the Chief Financial Officer, and shall have such additional powers and
discharge such duties as may be assigned from time to time by the President or
by the Board of Directors.
SECTION 14. SALARIES. The salaries of the officers shall be fixed
from time to time by the Board of Directors and no officer shall be prevented
from receiving such salary by reason of the fact that such officer is also a
Director of the corporation.
SECTION 15. OFFICERS HOLDING MORE THAN ONE OFFICE. Any two or more
offices, except those of President and Chief Financial Officer, may be held by
the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity.
SECTION 16. INABILITY TO ACT. In the case of absence or inability to
act of any officer of the corporation and of any person herein authorized to act
in his place, the Board of Directors may from time to time delegate the powers
or duties of such officer to any other officer, or any Director or other person
whom it may select.
ARTICLE V
OTHER PROVISIONS
SECTION 1. INSPECTION OF CORPORATE RECORDS. The corporation shall
keep at its principal executive office a record of its shareholders, giving the
names
17
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and addresses of all shareholders and the number and class of shares held by
each shareholder. A shareholder or shareholders of the corporation holding at
least five percent (5%) in the aggregate of the outstanding voting shares of the
corporation may:
(a) Inspect and copy the record of shareholders' names and addresses
and shareholdings during usual business hours upon five business days' prior
written demand upon the corporation; or
(b) Obtain from the transfer agent, if any, for the corporation, upon
written demand and upon the tender of its usual charges for such a list (the
amount of which charges shall be stated to the shareholder by the transfer agent
upon request), a list of the shareholders' names and addresses who are entitled
to vote for the election of Directors and their shareholdings, as of the most
recent record date for which it has been compiled, or as of a date specified by
the shareholder subsequent to the date of demand. The list shall be made
available on or before the later of five business days after the demand is
received or the date specified therein as the date as of which the list is to be
compiled.
SECTION 2. INSPECTION OF BY-LAWS. The corporation shall keep in its
principal executive office the original or a copy of these By-Laws as amended to
date, which shall be open to inspection by shareholders at all reasonable times
during office hours.
SECTION 3. ENDORSEMENT OF DOCUMENTS; CONTRACTS. Subject to the
provisions of applicable law, any note, mortgage, evidence of indebtedness,
contract, share certificate, initial transaction statement or written statement,
conveyance, or other instrument in writing, and any assignment or endorsement
thereof executed or entered into between this corporation and any other person,
when signed by (i) the Chairman of the Board, the President or any Vice
President and (ii) the Secretary, any Assistant Secretary, the Chief Financial
Officer or any Assistant Treasurer of this corporation shall be valid and
binding upon this corporation in the absence of actual knowledge on the part of
the other person that the signing officers had not the authority to execute the
same. Any such instruments may be signed by any other persons or persons and in
such manner as from time to time shall be determined by the Board of Directors,
and unless so authorized by the Board of Directors, no officer, agent, or
employee shall have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or amount.
SECTION 4. CERTIFICATES OF STOCK. Every holder of shares of the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the President or a Vice President and by the Chief Financial
Officer
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or Assistant Financial Officer or by the Secretary or Assistant Secretary,
certifying the number of shares and the class or series of shares owned by the
shareholder. Signatures on the certificates may be facsimile. If any officer,
transfer agent or registrar who has signed a certificate or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if such person were an
officer, transfer agent or registrar at the date of issue.
The Board of Directors may, in case any certificate for shares is
alleged to have been lost, stolen, or destroyed, authorize the issuance of a new
certificate in lieu thereof, and the corporation may require that the
corporation be given a bond or other adequate security sufficient to indemnify
it against any claim that may be made against it (including any expense or
liability) on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of such new certificate.
Prior to the due presentment for registration of transfer in the stock
transfer book of the corporation, the registered owner shall be treated as the
person exclusively entitled to vote, to receive notifications and otherwise to
exercise all the rights and powers of an owner, except as expressly provided
otherwise by the laws of the State of California.
SECTION 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any other officer or officers authorized by the Board of Directors
or the President are each authorized to vote, represent, and exercise on behalf
of the corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of the corporation. The
authority herein granted may be exercised by any such officer in person or by
any other person authorized to do so by proxy or power of attorney duly executed
by said officer.
SECTION 6. ANNUAL REPORT TO SHAREHOLDERS. Not later than 120 days
after the close of the fiscal year, the Board of Directors shall cause an annual
report to be sent to shareholders of the corporation, complying with
Section 1501 of the California General Corporation Law.
SECTION 7. SEAL. The corporate seal of the corporation shall consist
of two concentric circles, between which shall be the name of the corporation,
and in the center shall be inscribed the word "Incorporated" and the date of its
incorporation.
SECTION 8. FISCAL YEAR. The fiscal year of this corporation shall
begin on the first day of January and end on the 31st day of December of each
year.
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SECTION 9. CONSTRUCTION AND DEFINITIONS. Unless the context
otherwise requires, the general provisions, rules of construction, and
definitions contained in the California General Corporation Law shall govern the
construction of these By-Laws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
SECTION 10. BY-LAW PROVISIONS CONTRARY TO OR INCONSISTENT WITH
PROVISIONS OF LAW. Any article, section, subsection, subdivision, sentence,
clause or phrase of these By-Laws which, upon being construed in the manner
provided in Section 9 of this Article, shall be contrary to or inconsistent with
any applicable provision of the Accountancy Corporation Board of the State of
California or other applicable law of the State of California or of the United
States shall not apply so long as said provisions of law shall remain in effect,
but such result shall not affect the validity or applicability of any other
portions of these By-Laws, it being hereby declared that these By-Laws would
have been adopted and each article, section, subsection, subdivision, sentence,
clause or phrase thereof, irrespective of the fact that any one or more
articles, sections, subsections, subdivisions, sentences, clauses or phrases is
or are illegal.
ARTICLE VI
INDEMNIFICATION
SECTION 1. DEFINITIONS. For the purposes of this Article, "agent",
includes any person who is or was a Director, officer, employee, or other agent
of the corporation, or is or was serving at the request of the corporation as a
Director, officer, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise, or was a
Director, officer, employee, or agent of a foreign or domestic corporation which
was a predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation; "proceeding" includes any threatened,
pending, or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes, without limitation,
attorneys' fees and expenses of establishing a right to indemnification pursuant
to law.
SECTION 2. EXTENT OF INDEMNIFICATION.
(a) The corporation shall, to the maximum extent permitted by the
California General Corporation Law, indemnify any person who was or is a party
or is threatened to be made a party to any proceeding (other than an action by
or in the right of the corporation to procure a judgment in its favor) by reason
of the fact
20
<PAGE>
that the person is or was an agent of the corporation, against expenses,
judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with the proceeding.
(b) The corporation shall, to the maximum extent permitted by the
California General Corporation Law, indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that the person is or was an agent of the corporation,
against expenses actually and reasonably incurred by that person in connection
with the defense or settlement of the action.
(c) The corporation shall, to the maximum extent permitted by the
California General Corporation Law, advance the expenses incurred by any agent
of the corporation in defending any proceeding prior to the final disposition of
the proceeding.
SECTION 3. INSURANCE. The corporation shall have power to purchase
and maintain insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in that capacity or arising
out of the agent's status as such whether or not the corporation would have the
power to indemnify the agent against that liability under the provisions of this
Article.
ARTICLE VII
AMENDMENTS
New By-Laws may be adopted or these By-Laws may be amended or repealed
by the approval of the outstanding shares or by the approval of the Board of
Directors; provided, however, that a by-law specifying or changing a fixed
number of Directors or the maximum or minimum number or changing from a fixed to
a variable Board of Directors or vice versa may only be adopted by approval of
the outstanding shares, complying, if applicable, with Section 212 of the
California General Corporation Law. If the Articles of Incorporation of the
corporation set forth the authorized number of Directors of the corporation, the
authorized number of Directors may be changed only by an amendment of the
Articles of Incorporation.
(as amended through March 25, 1996)
21
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101851.7
22
<PAGE>
FIRST AMENDMENT TO THE
SOUTHERN CALIFORNIA BANK EMPLOYEES' RETIREMENT PLAN
Southern California Bank (the "Employer"), hereby adopts the following
First Amendment to the Southern California Bank Employees' Retirement Plan and
Trust Agreement (the "Plan") with reference to the following facts:
A. Effective January 1, 1990, the Employer adopted the Plan.
B. The Plan reserves to the Employer the right to amend the Plan, and the
Employer has determined that it is necessary and appropriate to amend the Plan
as hereinafter set forth, by a meeting of the Board of Directors on October 20,
1992.
NOW, THEREFORE:
The Plan is hereby amended in the following particulars:
Section 1.01(i) is amended to read as follows:
(i) QUALIFIED NON-ELECTIVE CONTRIBUTIONS (Section 4.10(c))
Qualified Non-Elective Contributions shall be allocated to
the Qualified Non-Elective Contribution Accounts of:
(1) All Participants who meet the eligibility requirements
in the profit sharing contribution.
(2) In the following manner:
(A) In the ratio which each such Eligible
Participant's Compensation not in excess of $50,000 for the Plan Year bears to
the total Compensation of all such Eligible Participants not in excess of
$50,000 for such Plan Year. For the Plan Year beginning in 1992 only, the
maximum amount allocated to a participant under this paragraph (A) shall not
exceed 1% of Compensation.
(B) Any Qualified Non-Elective Contribution in excess
of the amount allocated under paragraph (A) shall be allocated in the same
manner as paragraph (A) except Eligible Participants shall not include any
Highly Compensated Employee.
(C) For Plan years beginning after 1992, Qualified
Non-Elective Contributions shall be allocated pursuant to paragraph (A) without
regard to the last sentence.
(D) Compensation shall have the same meanings as
defined in Section 1.01(g)(4).
<PAGE>
Exhibit I is amended to read as attached:
IN WITNESS WHEREOF, the undersigned has executed this Amendment this 30th day of
December, 1992.
s/Ann E. McPartlin/
----------------------------------------
Senior Vice President
----------------------------------------
Title
141478
<PAGE>
SECOND AMENDMENT TO THE
AMENDMENT AND RESTATEMENT OF THE
SOUTHERN CALIFORNIA BANK
EMPLOYEE RETIREMENT PLAN
Southern California Bank (the "Company") hereby amends the Amendment
and Restatement of the Southern California Bank Employee Retirement Plan (which
was initially effective January 1, 1990, and was amended and restated as of
January 1, 1992) (the "Plan"), as follows:
1. Section 5.02(d) is deleted in its entirety and a new Section
5.02(d) is added that reads as follows:
"(d) WHEN ALLOCATIONS MADE.
Allocations with respect to subsection (b) and
Qualified Non-Elective Contributions shall be deemed made as of
the Anniversary Date for the Plan Year to which they related.
Allocations with respect to Matching Contributions shall be
deemed made as of the earlier of (i) when Deferrals to which the
Matching Contributions relate are contributed to the Trustee (or,
if later, when the Matching Contributions are actually paid to
the Trustee), or (ii) the Anniversary Date for the Plan Year to
which such Matching Contributions relate. All other allocations
shall be deemed made as of the earlier of the date on which the
respective contributions are paid to the Trustee, or the
Anniversary Date for the Plan Year to which they relate."
2. Except as specifically provided herein, the remaining portions of
the Trust shall remain in full force and effect.
* * * * *
The Company has signed this Amendment on the date indicated below to
be effective as of March 1, 1994.
"Company"
SOUTHERN CALIFORNIA BANK
Date: 2/15/94 By: s/ W. C. Greenbeck/
---------------------------------------------------
<PAGE>
141467L.1
<PAGE>
RESOLUTIONS ADOPTING THE
THIRD AMENDMENT TO THE
AMENDMENT AND RESTATEMENT OF THE
SOUTHERN CALIFORNIA BANK
EMPLOYEE RETIREMENT PLAN
Southern California Bank (the "Company") is a Corporation, and the
following resolutions are hereby adopted by its Board of Directors at a meeting
held on October 18. 1994.
WHEREAS, the Board of Directors has previously adopted the Amendment
and Restatement of the Southern California Bank Employee Retirement Plan (the
"Plan") effective January 1, 1992 (the original effective date of the Plan was
January 1, 1990), and
WHEREAS, the Company believes it is in the best interest of the Plan
and its participants to make certain changes to the eligibility and vesting
provisions of the Plan, as listed below:
- Require that an employee complete one year of service, work 1000
hours during the prior 12-month period and attain age 21 for
eligibility to participate.
- Allow employees hired prior to 1995 the ability to join the Plan
on January 1, 1995, without regard to the above restriction.
- Improve the vesting schedule, so that a Participant is 25% vested
after two years of service, increasing by 25% each year, with
full vesting after five years of service.
NOW, THEREFORE, BE IT RESOLVED that the Plan be amended effective as
of January 1, 1995, and
FURTHER RESOLVED that the Company notify each Employee and the
Trustees of the Plan of the changes to the Plan, and
FURTHER RESOLVED that the officers of the Company are hereby directed
to take any and all action necessary to implement such amendment.
Dated: October 18, 1994 "Company"
Southern California Bank
<PAGE>
By: /s/
-----------------------------------------
Its: Secretary
----------------------------------------
141331L.1
<PAGE>
RESOLUTIONS ADOPTING THE
FOURTH AMENDMENT TO THE
AMENDMENT AND RESTATEMENT OF THE
SOUTHERN CALIFORNIA BANK
EMPLOYEE RETIREMENT PLAN
Southern California Bank (the "Company") is a Corporation, and the
following resolutions are hereby adopted by its Board of Directors at a meeting
held on August 15, 1995.
WHEREAS, The Southern California Bank Employee Retirement Plan 401(k)
was adopted on January 1, 1990 to allow employees to accumulate assets for
retirement and to receive Bank Matching contributions to assist them with their
accumulation; and
WHEREAS, The Board of Directors reserved the right to amend the Plan
in order to effect changes in the best interest of the Plan participants; and
WHEREAS, The Plan accepts rollover contributions from participants'
prior employers' qualified retirement program(s); and
WHEREAS, The Plan allows participants to withdraw from their accounts
under certain circumstances;
NOW, THEREFORE, BE IT RESOLVED, that the Plan be amended to allow
participants to withdraw any or all of their Rollover Contribution account
balances without reason. However, no participant will be allowed to withdraw
from their Rollover Contribution account unless the Rollover Contributions have
been credited to their account for at least twenty-four (24) months, or the
employee has been a Plan participant for at least five (5) years. These twenty-
four (24) month and five (5) year restrictions will not apply upon the approved
financial hardship of the participant;
FURTHER RESOLVED, that the Plan be amended to allow participants to
withdraw from their Rollover Contribution account to alleviate financial
hardship. All such hardships will be
<PAGE>
approved by the Employee Retirement Plan Committee based on a uniform
nondiscriminatory basis. The Employee Retirement Plan Committee will establish
a written policy which will be used to determine approval or disapproval of a
participant's request;
FURTHER RESOLVED, that the Officers of the Corporation be instructed
to prepare or have prepared said amendments and any additional paperwork
necessary to effect the amendment with the Internal Revenue Service, Department
of Labor, or any other federal or state agency as necessary to maintain the tax
exempt status of the Plan and Trust. The officers be further instructed to
prepare or have prepared a written policy governing Rollover Contribution
hardship withdrawals and any other items to ensure the continued smooth
administration of the Plan.
Dated: 8/15/95 SOUTHERN CALIFORNIA BANK
-------
By: /s/
-----------------------------------------
Its: Secretary
----------------------------------------
<PAGE>
SOUTHERN CALIFORNIA BANK
EXECUTIVE INCENTIVE
COMPENSATION PLAN
FOR 1995
CONFIDENTIAL
February 17, 1995
<PAGE>
BUSINESS STRATEGY
Southern California Bank believes our key responsibility is to provide high
quality, relationship-based financial services to businesses and consumers
within our market area. We work constantly to satisfy our customer needs and to
provide services that are convenient, reliable and fairly priced.
TOTAL COMPENSATION PHILOSOPHY
The cornerstone of any effective compensation program is the philosophy on which
it is based. Southern California Bank's compensation philosophy is to provide
its executives with a TOTAL COMPENSATION PROGRAM, including base salaries,
incentives, stock options and benefits that is:
- - Based on achievement of key results and performance.
- - True to our organization values and culture.
- - Highly competitive within the external marketplace.
To accomplish this, we have established base salary levels fully competitive
with market rates. Incentives enable you to increase your compensation
significantly based on the Bank's annual performance results. Stock options
provide the necessary link to increased shareholder value. Benefits consider
your needs as well as program costs and tax efficiency.
GOALS OF THE PROGRAM
The goals of our total compensation program are to:
- - Attract, motivate and retain high-caliber executives.
- - Make sure we are all working towards those objectives critical to our
growth and profitability.
- - Recognize and reward your contribution to that success.
- - Inspire teamwork.
- - Pay above competitive market levels in total compensation based on
results.
1
<PAGE>
TOTAL COMPENSATION PROGRAM
Four major elements make up our total compensation program:
- - Base salary
- - Incentive compensation
- - Executive benefits, including deferred compensation
- - Stock options.
1. BASE SALARY
In pricing our services/products, we consider market conditions and what our
competitors charge for similar services/products. Likewise, to determine
competitive compensation levels, we look outside to see what other banks Pay for
similar jobs.
Competitive compensation levels were obtained through a custom survey and proxy
review of banking institutions in Northern and Southern California with assets
primarily between $400 million and $1 billion. Based on that data, we have
developed base salaries for each executive position and ensured that these
salaries reflect competitive compensation levels within our industry peer group.
Your base salary is intended to reflect a compensation level for your individual
skills, experience and performance, as well as the competitive level paid for
your position within our industry peer group.
Base salaries will be reviewed annually to attempt to ensure that they remain
competitive.
2. INCENTIVE COMPENSATION
The 1995 Executive Incentive Compensation Plan is based on how well the Bank
performs and how well you, individually, perform.
- - Bank and individual performance are viewed as independent components of
the incentive award. For Managing Committee members, Bank performance is
weighted 75% and individual, 25%. For participants other than Managing
Committee, Bank performance represents 25% and individual, 75%.
- - Bank performance will be measured by 1995 average Return on Equity
(ROE), and receiving satisfactory regulatory examinations.
2
<PAGE>
- - Individual performance is measured on achievement of specific functional
area objectives and management performance.
- - Target for average ROE has been established for the incentive period,
January 1, 1995 to December 3 1, 1995.
INCENTIVE AWARD OPPORTUNITY
- - Target awards, defined as a percentage of base salary, are established
for each executive. This is the amount you will receive if the Bank
achieves target goals and objectives and your performance is rated at a
level of "Achieves Expectations" or greater.
- - These target awards increase when results exceed the goal and decrease
when results are less than the Goal.
- - Specifically, the elements to be evaluated in calculating executive
incentive awards are as follow:
- --------------------------------------------------------------------------------
PARTICIPANTS
---------------------------
PERFORMANCE MANAGING SVP/VP MEASUREMENT
COMMITTEE PARTICIPANTS
MEMBERS
- --------------------------------------------------------------------------------
BANK 75% 25% - Satisfaction regulatory examinations
- Achievement of average ROE results
INDIVIDUAL 25% 75% - "Achieves expectations" level or
greater
- Goal attainment
- Management/team performance
2. INCENTIVE COMPENSATION
INCENTIVE AWARD OPPORTUNITY (Continued):
- - The following pages present the incentive earnings schedule and examples
of award calculations.
- - Incentive awards will be paid in cash within 30 days after annual
performance figures have been verified by the Bank's external auditors
and the CEO and Board of Directors.
3
<PAGE>
PROPOSED 1995 INCENTIVE SCHEDULE
MANAGING COMMITTEE MEMBER
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ROE (75%) INDIVIDUAL
PERFORMANCE* (25%)
--------------------------------------------------------------
1995 Percentage Percentage Goal Achievment
Attained Attained Incentive Managerial
ROE Earned
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8.89 85% 0%
THRESHOLD 8.90 85% 50% "Achieves Expectations"
9.14 87% 60%
9.45 90% 70%
9.87 94% 80%
10.19 97% 90%
TARGET 10.50 100% 100% 100% of Target Award
10.92 104% 105%
11.34 108% 110%
11.76 112% 115%
12.18 116% 120%
12.50 119% 125%
12.92 123% 130%
13.34 127% 135%
13.76 131% 140%
14.18 135% 145%
14.60 139% 150%
15.02 143% 160%
15.65 149% 170%
16.38 156% 180%
17.01 162% 190%
MAXIMUM 17.75 169% 200% "Exceeds Expectations"
150% of Target Award
- --------------------------------------------------------------------------------
</TABLE>
* Individual performance for EVPs will be determined via assessment of
performance as done by the CEO and reviewed by the Board Compensation and
Benefits Committee; the rating for individual performance of the CEO will be
determined by the Chairman of the various Board Committees. Percentage of
incentive earned for individual performance component does not accelerate
beyond average ROE% attained until Bank achieves target level (100%) of
average ROE performance.
4
<PAGE>
EXAMPLE OF CALCULATION
MANAGING COMMITTEE MEMBER
- --------------------------------------------------------------------------------
(Scenario I - Bank Exceeds Average ROE Target)
- --------------------------------------------------------------------------------
ASSUMPTIONS PERFORMANCE RESULTS
- --------------------------------------------------------------------------------
- - Base Salary: $130,000 - Bank receives satisfactory regulatory
exams
- - Target Incentive (25%): $32,500 - ROE is 108% of goal
- - Target Annual Total Cash: $162,500 - Individual performance "Achieves
Expectations"
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TARGET INCENTIVE AWARD INCENTIVE AWARD CALCULATIONS
- --------------------------------------------------------------------------------
BANK ELEMENT AVERAGE ROE
(75% weighing)
- - Target ROE: $24,375 108% of Goal 110% x $24,375 = $26,813
INDIVIDUAL ELEMENT
(25% weighing)
- - Target: $ 8,125 100% (Achieves 100% x $8,125 = $ 8,125
------- Expectations) ------
TOTAL TARGET TOTAL EARNED
INCENTIVE $32,500 INCENTIVE $34,938
- --------------------------------------------------------------------------------
5
<PAGE>
EXAMPLE OF CALCULATION
MANAGING COMMITTEE MEMBER
- --------------------------------------------------------------------------------
(Scenario II - Bank Fails to Attain Average ROE Target)
- --------------------------------------------------------------------------------
ASSUMPTIONS PERFORMANCE RESULTS
- --------------------------------------------------------------------------------
- - Base Salary: $130,000 - Bank receives satisfactory regulatory
exams
- - Target Incentive (25%): $32,500 - ROE is 85% of goal
- - Target Annual Total Cash: $162,500 - Individual performance "Exceeds
Expectations"
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TARGET INCENTIVE AWARD INCENTIVE AWARD CALCULATIONS
- --------------------------------------------------------------------------------
BANK ELEMENT AVERAGE ROE
(75% weighing)
- - Target ROE: $24,375 85% of Goal 50% x $24,375 = $12,188
INDIVIDUAL ELEMENT
(25% weighing)
50% (Exceeds 50% x $8,125 = $ 4,063
- - Target: $ 8,125 Expectations)
-------
TOTAL TARGET TOTAL EARNED
INCENTIVE $32,500 INCENTIVE $16,251
- --------------------------------------------------------------------------------
* Percentage incentive earned for individual performance component does not
accelerate beyond average ROE % attained until Bank achieves target ROE
performance.
6
<PAGE>
PROPOSED 1995 INCENTIVE SCHEDULE
SENIOR VICE PRESIDENTS/VICE PRESIDENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ROE (25%) INDIVIDUAL
PERFORMANCES* (75%)
-----------------------------------------------------------------
1995 Percentage Percentage Goal Achievement
Attained Attained Incentive Managerial
ROE Earned
-----------------------------------------------------------------
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
8.89 85% 0%
- --------------------------------------------------------------------------------
THRESHOLD 8.90 85% 50% "Achieves Expectations"
- --------------------------------------------------------------------------------
9.14 87% 60%
9.45 90% 70%
9.87 94% 80%
10.19 97% 90%
- --------------------------------------------------------------------------------
TARGET 10.50 100% 100% 100% of Target Award
- --------------------------------------------------------------------------------
10.92 104% 105%
11.34 108% 110%
11.76 112% 115%
12.18 116% 120%
12.50 119% 125%
12.92 123% 130%
13.34 127% 135%
13.76 131% 140%
14.18 135% 145%
14.60 139% 150%
15.02 143% 160%
15.65 149% 170%
16.38 156% 180%
17.01 162% 190%
- --------------------------------------------------------------------------------
MAXIMUM 17.75 169% 200% "Exceeds Expectations"
150% of Target Award
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
* Individual performance for SVP/VPs will be determined via assessment of
performance as done by the appropriate Management Committee member and
reviewed by the entire Managing Committee. Percentage of incentive earned
for individual performance component does not accelerate beyond average
ROE% attained until Bank achieves target level (100%) of average ROE
performance.
7
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE OF CALCULATION
SVP/VP PARTICIPANTS
- ------------------------------------------------------------------------------------------------
(Scenario I - Bank Exceeds Average ROE Target)
- ------------------------------------------------------------------------------------------------
ASSUMPTIONS PERFORMANCE RESULTS
- ------------------------------------------------------------------------------------------------
<S> <C>
- - Base Salary: $ 75,000 - Bank receives satisfactory regulatory
exams
- - Target Incentive (20%): $ 15,000 - ROE is 116% of goal
- - Target Annual Total Cash: $ 90,000 - Individual performance "Achieves
Expectations"
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
TARGET INCENTIVE AWARD INCENTIVE AWARD CALCULATIONS
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
BANK ELEMENT AVERAGE ROE
(25% weighing)
- - Target ROE: $ 3,750 116% of Goal 120% x $ 3,750 = $ 4,500
INDIVIDUAL ELEMENT
(75% weighing)
- - Target: $11,250 100% (Achieves 100% x $11,250 = $11,250
------- Expectations) -------
Total Target Incentive $15,000 TOTAL EARNED INCENTIVE $15,750
- ------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE OF CALCULATION
SVP/VP PARTICIPANTS
- ------------------------------------------------------------------------------------------
(Scenario II - Bank Fails to Attain Average ROE Target)
ASSUMPTIONS PERFORMANCE RESULTS
- ------------------------------------------------------------------------------------------
<S> <C>
- - Base Salary: $ 75,000 - Bank receives satisfactory regulatory
exams
- - Target Incentive (25%): $ 15,000 - ROE is 87% of goal
- - Target Annual Total Cash: $ 90,000 - Individual performance "Exceeds
Expectations"
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TARGET INCENTIVE AWARD INCENTIVE AWARD CALCULATIONS
- ------------------------------------------------------------------------------------------
<S> <C> <C>
BANK ELEMENT AVERAGE ROE
(25% weighing)
- - Target ROE: $ 3,750 87% of Goal 60% x $ 3,750 = $ 2,250
INDIVIDUAL ELEMENT
(75% weighing)
- - Target: $11,250 60% * 60% x $11,250 = $ 6,750
------- (Exceeds -------
Expectations)
Total Target
Incentive: $15,000 TOTAL EARNED INCENTIVE: $ 9,000
- ------------------------------------------------------------------------------------------------
</TABLE>
* Percentage incentive earned for individual performance component does not
accelerate beyond average ROE % attained until Bank achieves target ROE
performance.
9
<PAGE>
3. EXECUTIVE BENEFIT PROGRAMS
The Bank recognizes that the well being of our executives and their families is
an important factor in your individual performance and, therefore, to our
overall success.
Our benefits and perquisites are designed to provide protection, savings,
security, and rest and relaxation. They are also designed to be flexible and
tax efficient. These plans are so much a part of our lives that we often take
them for granted and forget how valuable they are. Our programs are highly
competitive and comprehensive, adding approximately 40% to your annual pay,
including:
- - Deferred Compensation
- - Medical, dental and vision insurance
- - 401(k) savings plan
- - Long-term disability insurance
- - Life insurance
- - Automobile allowance or leased automobile
- - Vacations and holidays.
4. STOCK OPTIONS
Our executive stock option program is intended to reward your continued tenure
with Southern California Bank and to reward your contributions over time.
Holding options provides you with an excellent opportunity to achieve
considerable capital accumulation longer term, and to participate in the Bank's
success and growth along with our external shareholders.
Options are most frequently used at the executive level and optionee holdings
are reviewed on an annual basis at fiscal year-end when performance-based awards
can be made.
10
<PAGE>
SOUTHERN CALIFORNIA BANK
1995 EXECUTIVE INCENTIVE COMPENSATION PLAN
Terms and Conditions
- --------------------------------------------------------------------------------
1. PARTICIPATION
Executive positions that are eligible to participate for Plan Year 1995, their
targeted incentive award levels and the weighing between Bank and individual
performance are listed in EXHIBIT I. Executives must have been employed for at
least one full calendar quarter to be eligible for an award under the plan.
2. EFFECTIVE DATE
This program supersedes all previous incentive compensation or bonus plans. It
became effective January 1, 1995 and--subject to Southern California Bank's
rights as described below to amend, modify or discontinue the program at any
time during the specified period--the program will remain in effect until
December 31, 1995.
3. PROGRAM ADMINISTRATION
This program is authorized and administered annually by the Compensation and
Benefits Committee of the Board of Directors through the Chief Executive Officer
(CEO), with process and procedural assistance from the Executive Vice President,
Human Resources. The Board Compensation and Benefits Committee has final
authority to interpret the program and to make or nullify any rules and
procedures as necessary for proper program administration. Any determination of
the Committee about the program will be final and binding on all participants.
4. PROGRAM CHANGES OR DISCONTINUANCE
Southern California Bank has developed this program based on existing business,
market and economic conditions; current services; and personnel assignments.
If substantial changes occur at the Bank which affect these conditions,
services, assignments, or forecasts, the Compensation and Benefits Committee may
add to, amend, modify or discontinue any of the terms or conditions of the
program at any time during the program's specified period, provided that this
action does not reduce the amount of awards earned before the date of the
action. Any modifications to the Plan must be in writing; the Plan cannot be
modified orally.
11
<PAGE>
5. INCENTIVE COMPENSATION CALCULATION AND PAYMENT
All incentive awards will be based on a combination of Bank performance and
individual performance and the percentages of earned incentive will be
calculated using the Incentive Schedule chart for respective participants.
Incentive amounts will be calculated on the actual base salary of the executive
as of December 31, 1995, less any bonuses or incentives, car allowances, housing
allowances, relocation payments or other non-base compensation elements.
Incentive awards will be paid in cash after the end of the fiscal year and
within 30 days after annual performance figures have been verified by the Bank's
external auditors and the CEO and Board of Directors.
Any rights accruing to a participant or his/her beneficiary under the program
shall be solely those of an unsecured general creditor of Southern California
Bank. Nothing contained in the program and no action taken pursuant to the
provisions hereof will create or be construed to create a trust of any kind, or
a pledge, or a fiduciary relationship between Southern California Bank or the
CEO and the participant or any other person. Nothing herein will be construed
to require Southern California Bank or its CEO or Board of Directors to maintain
any fund or to segregate any amount for a participant's benefit.
Incentive payments will be included as compensation in the year paid for
determining compensation under benefit programs. Incentive compensation will be
considered taxable income to participants in the year paid and will be subject
to all legally required withholdings. Actual tax liability is the participant's
responsibility.
Participants must have attained an overall individual performance rating of
"Achieves Expectations" for their performance for the Plan Year period to be
eligible to receive an incentive award.
In all cases, the Bank's performance will serve as the threshold for any
payments made under this Executive Incentive Plan. If the Bank fails to attain
its Regulatory Performances threshold, or if it fails to attain the specified
minimum profitability level, no payments will be made to participants even if
individual and functional area performance goals have been met and/or
exceeded.
12
<PAGE>
6. TERMINATION OF EMPLOYMENT
A participant, to receive his or her award, must be an active full-time employee
of Southern California Bank on the last day of the incentive period for which an
award is earned (i.e., December 31, 1995).
Voluntary resignation, prior to the end of the incentive period, will serve as a
forfeiture of any award. A person being terminated involuntarily will not be
eligible for any awards under this plan.
7. NEW HIRES, PROMOTIONS, TRANSFERS, APPROVED LEAVES OF ABSENCE
Participants who are not employed by Southern California Bank at the beginning
of the Plan Year may receive a proration of their earned award based on their
length of employment, except that an executive hired, transferred or promoted
into an eligible position on or after October 1, 1995 will not be eligible for
any incentive award under this plan.
Participants who are on an approved Leave of Absence may be eligible for a
pro-rated payment of earned incentive awards provided that the leave does not
exceed 90 days in length.
8. DISABILITY, DEATH, OR RETIREMENT
If a participant is disabled by an accident or illness, and is disabled long
enough to be placed on long-term disability, his or her incentive award for the
incentive period shall be prorated so that no award shall be earned during the
period of long-term disability.
In the event of death, Southern California Bank will pay to the estate or the
beneficiary of the participant the pro rata portion of the earned award that the
participant would have received if he/she had lived to the end of the Plan Year.
Incentive award payments will be prorated in the event that a participant
retires before the end of the Plan Year.
9. MISCELLANEOUS
The Plan will not be deemed to give any participant the right to be retained in
the employ of Southern California Bank, which is an "at-will" employer, nor will
the Plan interfere with the right of the Bank to discharge any participant for
any reason, with or without notice, at any time.
The Plan will not be deemed to constitute a contract of employment with any
participant or to be a consideration for the employment of any participant;
rather, I understand that Southern California Bank and I have the right to
terminate my employment for any reason at any time, and that this policy may be
modified only in a written document signed by Southern California Bank's
President and CEO.
13
<PAGE>
Participation in the 1995 Executive Compensation Plan does not guarantee
participation in future incentive plans or other bonus or profit sharing
programs. Plan structures and participation will be determined on a year-to-year
basis.
14
<PAGE>
EXHIBIT I
SOUTHERN CALIFORNIA BANK
1995 EXECUTIVE INCENTIVE COMPENSATION PLAN
TERMS AND CONDITIONS
- --------------------------------------------------------------------------------
ELIGIBLE POSITIONS
- President and Chief Executive Officer
- EVP/Chief Operating Officer
- EVP/Chief Credit Officer
- EVP/Corporate Private Banking
- EVP/Chief Financial Officer
- EVP, Human Resources
- SVP, Senior Credit Administrators
- SVP, Business/Corporate Banking Managers
- VP, Director, Information Services
TARGET AWARD STRUCTURE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INCENTIVE CALCULATION INCENTIVE OPPORTUNITY
WEIGHING (0% OF BASE SALARY)
--------------------- ------------------------
POSITION TARGET MAX
AWARD BANK INDIVIDUAL MINIMUM* TARGET** ***
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Pres/CEO 40% 75% 25% 20% 40% 75%
EVP/COO 30% 75% 25% 15% 30% 56%
EVP/CCO 25% 75% 25% 12.5% 25% 47%
EVP/CPB 25% 75% 25% 12.5% 25% 47%
EVP/CFO 25% 75% 25% 12.5% 25% 47%
EVP-HR 20% 75% 25% 10% 20% 37.5%
All Others 20% 25% 75% 10% 20% 37.5%
- ---------------------------------------------------------------------------------
</TABLE>
* Minimum = minimum thresholds and performance rating of
"Achieves Expectations"
** Target = 100% average ROE and performance rating of
"Achieves Expectations"
*** Maximum = 200% of Bank average ROE and performance rating of
"Exceeds Expectations"
15
<PAGE>
SOUTHERN CALIFORNIA BANK
1995 EXECUTIVE INCENTIVE COMPENSATION PLAN
EFFECTIVE JANUARY 1, 1995 THROUGH DECEMBER 31, 1995
PARTICIPATION AGREEMENT
I have read and reviewed the 1995 Executive Incentive Compensation Plan,
including the Terms and Conditions, and understand their applicability.
- ------------------------------------ -------------------------
Participant's Signature Date
In the event of my death, any awards payable under this plan shall be payable to
the following beneficiary.
- ------------------------------------ -------------------------
Beneficiary Name Social Security #
If you are married and the beneficiary you have named is someone other than your
spouse, your spouse must sign below to indicate consent to the designated
beneficiary.
- ------------------------------------ -------------------------
Signature of Spouse Date
141343
16
<PAGE>
CONSENT TO ASSIGNMENT
The Taj, a California limited partnership, as Lessor, and the Bank of
America National Trust and Savings Association, as Lessee, are parties to a
Lease dated as of July 21, 1972, as amended (the "Lease"). The Lessor pursuant
to a Consent to Sublease dated May 4, 1994 previously consented to the Sublease
dated March 31, 1994, by and between the Lessee and Independence One Bank of
California, F.S.B., as Subtenant. The Subtenant desires to assign to Southern
California Bank ("Assignee") all of its rights, title and interest in the
Sublease. The Lessor hereby consents to the assignment of the Sublease to
Assignee on the following terms and conditions:
1. The Consent shall not be construed in any manner to modify, waive
or affect any of the terms, covenants, conditions or agreements
contained in the Lease;
2. This Consent shall not be construed as a consent by the Lessor
to, or as permitting, any other or further subletting or
assignment by Lessee, Subtenant or Assignee.
3. Lessee shall not be released from, and Lessee shall be and remain
liable for, the performance and observance of all the terms,
covenants, conditions, and agreements contained in the Lease.
4. Although a duplicate original of the Sublease and the Assignment
and Assumption of Sublease has been delivered to the Lessor for
its information, Lessor is not a party to these documents and is
not bound by the provisions of these documents, nor shall Lessor,
either by receipt thereof or by the making of this Consent, be
deemed to have approved any of such provisions contained in said
documents; however, any modification or amendment to the Sublease
or Assignment and Assumption of Sublease without the prior
written consent of Lessor in each instance, shall be deemed a
default under the Lease.
5. Prior to the Assignee making any alterations and improvements to
the Premises, Assignee shall provide to Lessor for Lessor's
approval, which approval shall not be unreasonably withheld the
following documents: (a) all construction plans for Assignee's
alterations and improvements to the Premises; (b) copy of all
building permits from the City of Laguna Hills; (c) copies of all
contractor's building contracts; (d) copies of all
1
<PAGE>
contractor's insurance certificates; (e) contractor's asbestos
disclaimer form in form reasonably acceptable to Lessor; (f)
copies of the contractor's schedule and work rules; (g) copies of
all demolition permits and trash removal permits and contracts;
(h) delivery at completion of the alterations or improvements "as
built" plans of the electrical, HVAC, and plumbing systems; and
(i) copies of the certificate of occupancy for the Premises and
building permit Inspections.
6. If any provisions of this Consent shall be at variance with
provisions of the Lease, Sublease or Assignment, the provisions
of this Consent shall prevail. This Consent shall not be changed
orally but only by an agreement in writing signed by the party
against whom the enforcement of such change is sought.
7. The Lessee represents and warrants that no other consents to the
assignment of the Sublease are required, including, without
limitation, the consent of any lender on the property.
8. Lessee, Subtenant and Assignee acknowledge and agree to the terms
of this Consent. Furthermore, Lessee, Subtenant and Assignee
acknowledge that certain areas in the Premises may have sprayed
on asbestos fire proofing on the structural steel and duct
insulation and that Lessor has retained independent consultants
to test the air quality of the Premises. Lessee, Subtenant and
Assignee acknowledge that the mere presence of asbestos-
containing materials does not necessarily constitute a health
hazard, however, Lessee, Subtenant and Assignee agree that during
the performance of any alterations or improvements no the Premises
by Lessee, Subtenant or Assignee that if asbestos is encountered
such asbestos must be controlled by Lessee, Subtenant and/or
Assignee and dealt with by Lessee, Subtenant and/or Assignee in
accordance with federal, state and local laws and regulations.
Lessee and Subtenant will notify Assignee and cause Assignee to
notify any contractor employed to work on the Premises of the
potential for encountering asbestos during the rendition of
alterations and improvements, so that such contractor will take
proper precautions to inform their employees so that if
encountered, such asbestos shall be dealt with as required by
2
<PAGE>
applicable laws by the Assignee and its contractor.
9. Lessee, Subtenant and Assignee agree to indemnify, hold harmless,
and defend Lessor from any and all claims or causes of action,
damages, personal injuries, death, or losses of any nature caused
by the exposure, disturbance, and/or removal of any and all
asbestos encountered by Lessee, Subtenant, Assignee or their
contractors during the rendition of alterations and improvements
to the Premises.
Dated this 12th day of May, 1995.
LESSOR: LESSEE:
THE TAJ, BANK OF AMERICA NATIONAL
a California limited partnership TRUST AND SAVINGS
ASSOCIATION
By: Fond du Lac Plaza No. 1, Inc. By: s/Mark Friedman/
General Partner ------------------------
Mark Friedman
By: s/Thomas C. Bernachi/ By: s/Steve Shisashi/
----------------------------- -------------------------
Thomas C. Bernachi Steve Shisashi
Vice President
ASSIGNEE: SUBTENANT
SOUTHERN CALIFORNIA BANK INDEPENDENCE ONE BANK OF
CALIFORNIA, F.S.B.
By: By: s/Debbie McNeilly/
-------------------------- -------------------------
Executive (Vice) President (Vice President)
3
<PAGE>
SUBLEASE
(LSN 715680)
This Sublease is made this 31st day of March, 1994 by and between Bank
of America National Trust and Savings Association, a national banking
association ("Sublandlord") and Independence One Bank of California, a federal
savings bank ("Subtenant").
WITNESSETH:
1. RECITALS. This Sublease is made with reference to the following facts:
1.1 Atlantic Company and the Estate of Rudy Bruner, a general partnership
("Atlantic"), as lessor and Sublandlord as lessee entered into a written lease
dated July 21, 1972, a copy of which is attached hereto as Exhibit A ("Master
Lease") covering premises described on page 1 of the Master Lease. The Master
Lease was amended by an Addendum to Lease dated September 1, 1978 between
Sublandlord and Ronda Valencia Company, a limited partnership, as successor in
interest to Atlantic. The Addendum to Lease is included in reference to the
lease.
1.2 Subtenant desires to sublet a portion of the premises described in the
Master Lease (the "Premises") from Sublandlord on the terms and conditions
contained in this Sublease.
2. BASIC SUBLEASE PROVISIONS.
2.1 Building: 24061 Calle de la Plata
Laguna Hills, California
Floor(s): Ground Floor, Basement
and Drive-up Kiosk
The Premises are more fully described on Exhibit B attached hereto.
2.2 Area of Premises: approximately 9,495 useable square feet.
2.3 Subtenant's Percentage Share: Subtenant will pay 59.2% of all operating
expenses and taxes and assessments payable by Sublandlord under Article 4
of the Master Lease ("Operating Expenses and Taxes"). In the event the
area of the Premises are measured and the result is greater or less than
the area indicated in Paragraph 2.2, Subtenant's Percentage Share
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shall be adjusted accordingly. Subtenant shall not be responsible for any
Operating Expenses and Taxes or common area charges for the basement area of
the premises.
2.4 Commencement Date: April l, 1994.
2.5 Expiration Date: August 31, 2002.
2.6 Basic Monthly Rent: $7,520, adjusted as set forth in Paragraph 2.10. All
rent shall be paid without demand, deduction, set-off or counter claim, in
advance, on the first day of each calendar month during the term of this
Sublease, and in the event of a partial rental month, rent shall be
prorated on the basis of a thirty (30) day month. Sublandlord agrees that
Basic Monthly Rent shall be abated through December 31, 1994, such
abatement to be conditioned upon the performance by Subtenant of all of its
obligations under this Sublease. In the event of any breach of this
Sublease by Subtenant at any time during the term hereof, all amounts
abated hereunder shall be due and payable together with all other amounts
payable to Sublandlord in the event of such breach by Subtenant. The
foregoing rental abatement shall apply only to Basic Monthly Rent and not
to Operating Expenses and Taxes and any other charges hereunder all of
which shall be payable commencing on the Commencement Date.
2.7 Permitted Use: General banking purposes and related financial businesses
permitted by law, but for no other business or purpose without the consent
of Sublandlord which consent shall not be unreasonably withheld.
2.8 Subtenant Improvement Allowance: $90,000. The Subtenant Improvement
Allowance will be used to construct certain tenant improvements in the
Premises ("Subtenant Improvements"). Construction of Subtenant
Improvements shall be performed by Subtenant at Subtenant's sole cost and
expense. Prior to commencing construction, Subtenant shall submit to
Sublandlord, and Sublandlord shall have the right to approve, which
approval shall not be unreasonably withheld the final plans for the
Subtenant Improvements. The Subtenant Improvement Allowance will be paid
to Subtenant following completion of the work as evidenced a certificate of
occupancy and upon submission to Sublandlord of invoices for the work and
final lien releases from all contractors involved in the construction of
Subtenant Improvements.
2.9 Late Charges: The parties agree that late payments by Subtenant to
Sublandlord of rent will cause Sublandlord to incur costs not contemplated
by this Sublease, the amount of which is extremely difficult to ascertain.
Therefore, the
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parties agree that if any installment of Basic Monthly Rent or Operating
Expenses and Taxes is not received by Sublandlord within 10 days after
due, Subtenant will pay to Sublandlord a late charge equal to five percent
(5%) of the late payment.
2.10 Rental Adjustments:
ADJUSTMENT DATE ADJUSTED BASIC MONTHLY RENT
--------------- ---------------------------
April 1, 1996 $7,820.80
April 1, 1997 $8,133.63
April 1, 1998 $8,458.98
April 1, 1999 $8,797.34
April 1, 2000 $9,149.23
April 1, 2001 $9,515.20
April 1, 2002 $9,895.81
2.11 Options to Extend: None, however, Sublandlord agrees not to exercise any
option to extend the lease term under the Master Lease.
2.12 Intentionally Omitted.
2.13 Acceptance of Premises: Subtenant agrees to accept the Premises in an "as
is" condition. Without limiting the foregoing, Subtenant's rights in the
Premises are subject to all local, state and federal laws, regulations and
ordinances governing and regulating the use and occupancy of the Premises
and subject to all matters now or hereafter of record. Subtenant
acknowledges that neither Sublandlord nor Sublandlord's agent has made any
representation or warranty as to:
(i) the present or future suitability of the Premises for the conduct
of Subtenant's business;
(ii) the physical condition of the Premises;
(iii) the expenses of operation of the Premises;
(iv) the safety of the Premises, whether for the use of Subtenant or
any other person, including Subtenant's employees, agents, invitees or
customers;
(v) the compliance of the Premises with any applicable laws,
regulations or ordinances; or
(vi) any other matter or thing affecting or related to the Premises.
Subtenant acknowledges that no rights, easements or licenses are acquired by
Subtenant by implication or otherwise except as
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expressly set forth herein. Subtenant shall, prior to delivery of possession of
the Premises, inspect the Premises and become thoroughly acquainted with their
condition. Subtenant acknowledges that the taking of possession of the Premises
by Subtenant shall be conclusive evidence that at the time such possession was
taken, the Premises were in good and satisfactory condition, except for any
defects incapable of detection through inspection. Subtenant further agrees
that, in the event Subtenant subleases all or any portion of the Premises,
Subtenant will indemnify and defend Sublandlord (in accordance with PARAGRAPH 9
hereof) for, from and against any matters which arise as a result of Subtenant's
failure to disclose any relevant information about the Building or the Premises
to any subtenant or assignee. Subtenant shall comply with all laws and
regulations relating to the use or occupancy of the Premises and to the common
areas, including, without limitation, making structural alterations or providing
auxiliary aids and services to the Premises as required by the Americans with
Disabilities Act of 1990, 42 U.S.C. Section 12101 ET SEQ. (the "ADA").
Subtenant further agrees that all telephone and other communication installation
and use requirements shall be compatible with the Building and that Subtenant
shall be solely responsible for all of its telephone and communication
installation and usage costs.
2.14 Intentionally omitted.
2.15 Intentionally omitted.
2.16 Address for payment of rent and notices:
Sublandlord: Subtenant:
For Notices:
Bank of America N&SA Independence One Bank of
20 N. Raymond Avenue California
Third Floor 26722 Plaza Drive, Suite 120
Pasadena, CA 91103-3931 Mission Viejo, CA 92691
Attn: Real Estate Attn: Debbie McNeilly
Manager Tel: (714) 348-8200
Tel: (818) 578-7700 Fax: (714) 367-4080
Fax: (818) 578-7779
For Payment of Rent:
Bank of America NT&SA
Corporate Accounting
File Box 6709
Post Office Box 60000
San Francisco, CA 94160
2.17 Security Deposit: None.
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2.18 Broker: Linda Crowley & Associates
3. INCORPORATION BY REFERENCE; ASSUMPTION. All of the Articles of the Master
Lease are incorporated into this Sublease as if fully set forth in this Sublease
except for the following Articles and Sections: Article 2, Section 3.1, Section
3.2, Article 5, Section 8.1, Section 8.4, Article 19, Article 20, Article 23.
Where applicable, references in the Master Lease to Lessor shall mean
Sublandlord and to Lessee shall mean Subtenant.
3.1 If any provisions of this Sublease conflict with any portion of the
Master Lease as incorporated herein, the terms of this Sublease shall govern.
3.2 Subtenant shall assume and perform to Sublandlord the Lessee's
obligations under the Master Lease provisions to the extent that the provisions
are applicable to the Premises. Subtenant shall pay to Sublandlord Subtenant's
Percentage Share of Operating Expenses and Taxes and any other sums payable by
Sublandlord under the Master Lease not later than ten (10) days prior to the
date any such amounts are due and payable by Sublandlord.
3.3 Sublandlord does not assume the obligations of the Master Landlord
under the Master Lease.
3.4 With respect to work, services, repairs, repainting, restoration, the
provision of utilities, elevator or HVAC services, or the performance of other
obligations required of Master Landlord under the Master Lease, Sublandlord's
sole obligation with respect thereto shall be to request the same, on request in
writing by Subtenant, and to use reasonable efforts to obtain the same from
Master Landlord; provided, however, Sublandlord shall have no obligation to
institute legal action against Master Landlord. Subtenant shall cooperate with
Sublandlord as may be required to obtain from Master Landlord any such work,
services, repairs, repainting restoration, the provision of utilities, elevator
or HVAC services, or the performance of any of Master Landlord's other
obligations under the Master Lease.
4. SUBTENANT'S PERFORMANCE UNDER MASTER LEASE. At any time and on reasonable
prior notice to Subtenant, Sublandlord can elect to require Subtenant to perform
Subtenant's obligations under this Sublease directly to Master Landlord, in
which event Subtenant shall send to Sublandlord from time to time copies of all
notices and other communications it shall send to and receive from Master
Landlord.
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5. COVENANT OF QUIET ENJOYMENT. "Actual Knowledge" of Sublandlord means the
actual knowledge of Patricia Morris without having conducted any independent
inquiry or inspection. Sublandlord represents that the Master Lease is in full
force and effect and that there are no defaults on Sublandlord's or, to
Sublandlord's Actual Knowledge, Master Landlord's part under it as of the
Commencement Date set forth in PARAGRAPH 2.4 above. Sublandlord has no Actual
Knowledge of any governmental violations, citations, claims, lawsuits or
investigations concerning the Premises. Subject to this Sublease terminating as
provided in Articles 12 and 13 of the Master Lease, Sublandlord represents that
if Subtenant performs all the provisions in this Sublease to be performed by
Subtenant, Subtenant shall have and enjoy throughout the term of this Sublease
the quiet and undisturbed possession of the Premises. Sublandlord shall have
the right to enter the Premises at any time, in the case of an emergency, and
otherwise at reasonable times, for the purpose of inspecting the condition of
the Premises and for verifying compliance by Subtenant with this Sublease and
the Master Lease and to permit Sublandlord to perform its obligations under this
Sublease and the Master Lease.
6. MASTER LEASE.
6.1 Subtenant shall not do or permit to be done anything which would
constitute a violation or breach of any of the terms, conditions or provisions
of the Master Lease or which would cause the Master Lease to be terminated or
forfeited by virtue of any rights of termination or forfeiture reserved by or
vested in Master Landlord.
6.2 If the Master Lease terminates, this Sublease shall terminate and the
parties shall be relieved from all liabilities and obligations under this
Sublease excepting obligations which have accrued as of the date of termination;
except that if this Sublease terminates as a result of a default of one of the
parties under this Sublease or the Master Lease, the defaulting party shall be
liable to the non-defaulting party for all damage suffered by the non-defaulting
party as a result of the termination.
7. HAZARDOUS SUBSTANCES. For the purposes of this Sublease, the following
terms have the following meanings:
(a) "Environmental Laws" means any and all laws, statutes, ordinances
or regulations pertaining to health, industrial hygiene or the environment
including, without limitation, CERCLA (Comprehensive Environmental Response
Compensation and Liability Act of 1980) and RCRA (Resources Conservation
and Recovery Act of 1976).
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(b) "Hazardous Substances" means asbestos or any substance, material
or waste which is or becomes designated, classified or regulated as being
"toxic" or "hazardous" or a "pollutant" or which is or becomes similarly
designated, classified or regulated under any federal, state or local law,
regulation or ordinance.
7.1 Sublandlord and Subtenant understand, acknowledge and agree that
various materials may have been used in the construction of the property of
which the Premises are a part, in the construction of any improvements to such
property; and which materials may have contained materials that may have been or
may in the future be determined to be toxic, hazardous or undesirable and may
need to be specially treated, specially handled and/or removed from the
property. (For example, some electrical transformers and other electrical
components contain PCB and asbestos has been used in a wide variety of building
components, such as fire-proofing, air duct insulation, acoustical tiling,
spray-on acoustical materials, linoleum, floor tiling and plaster.) Due to
current or prior uses, the property of which the Premises are a part, or the
improvements thereto, may contain materials such as metal, minerals, chemicals,
hydrocarbons, biological or radioactive materials and other substances which are
considered, or may in the future may be determined to be toxic waste, hazardous
materials or undesirable substances. Such substances may be in, above or below
ground containers on the property of which the Premises are a part, or may be
present on or in soils, water, building components or other portions of the
property, in areas that may or may not be accessible or noticeable.
Current and/or future federal, state and local regulations may require
the clean-up of such toxic, hazardous or undesirable materials at the expense of
those persons who in the past, present, or future have had an interest in the
property of which the Premises are a part, including, but limited to, current
past and future owners and users of an such property.
The Parties acknowledge that previous users or owners of the Premises,
or the property may have used, generated, manufactured, produced, transported,
stored or disposed of, on, under or above the property, or may have transported
to or from the property Hazardous Substances.
7.2 At its own expense, Subtenant will procure, maintain in effect and
comply with all conditions of any and all permits, licenses and other
governmental and regulatory approvals required for Subtenant's use of the
Premises, including, without limitation, discharge of appropriately treated
materials or wastes into or through any sanitary sewer serving the Premises.
Except as discharged into the sanitary sewer in strict accordance and conformity
with all applicable Environmental Laws, Subtenant
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will cause any and all Hazardous Substances to be removed from the Premises to
be removed and transported solely by duly licensed haulers to duly licensed
facilities for final disposal. Subtenant will, in all respects, handle, treat,
deal with and manage any and all Hazardous Substances in, on, under or about the
Premises in total conformity with all applicable Environmental Laws and prudent
industry practices regarding management of such Hazardous Substances. Upon
expiration or earlier termination of the term of this Sublease, Subtenant will
cause all Hazardous Substances placed on, under or about the Premises by
Subtenant or at Subtenant's direction to be removed and transported for use,
storage or disposal in accordance and compliance with all applicable
Environmental Laws. Subtenant will not take any remedial action in response to
the presence of any Hazardous Substances in or about the Premises or any
building, nor enter into any settlement agreement, consent decree or other
compromise in respect to any claims relating to any Hazardous Substances in any
way connected with the Premises without first notifying Master Landlord and
Sublandlord of Subtenant's intention to do so and affording Master Landlord and
Sublandlord ample opportunity to appear, intervene or otherwise appropriately
assert and protect Master Landlord's and Sublandlord's interests with respect
thereto.
8. ARTWORK. Subtenant will not install any artwork of any nature in the
Premises which cannot be removed without damage or destruction to the Artwork.
Subtenant may not alter or modify any piece of artwork within the Premises
without Sublandlord's express written consent, which Sublandlord may withhold in
its sole discretion.
9. INDEMNITY. Subtenant will indemnify, defend (by counsel reasonably
acceptable to Sublandlord), protect and hold Sublandlord harmless from and
against any and all liabilities, claims, demands, losses, damages, costs and
expenses (including attorneys' fees and the allocated costs of Sublandlord's
in-house attorneys) arising out of or relating to (i) the death of or injury to
any person, or damage to any property whatsoever, on or about the Premises; or
(ii) Subtenant's breach or default under this Sublease (including, without
limitation, Subtenant's breach of PARAGRAPH 7 above) or, to the extent
incorporated herein, the Master Lease. Sublandlord will indemnify, defend,
protect and hold Subtenant harmless from and against any and all claims,
demands, losses, damages, costs and expenses, (including attorneys' fees and the
allocated costs of Subtenant's in-house attorneys) arising out of or relating to
the death or injury to any person, or damage to any property on or about the
Premises, caused by the willful misconduct or gross negligence of Sublandlord.
10. ATTORNEYS' FEES. If there is any legal or arbitration action or proceeding
between Sublandlord and Subtenant to enforce
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or interpret any provision of this Sublease or to protect or establish any right
or remedy of either Sublandlord or Subtenant hereunder, the unsuccessful party
to such action or proceeding will pay to the prevailing party all costs and
expenses, including reasonable attorneys' fees (including allocated costs of the
parties' in-house attorneys) incurred by such prevailing party in such action or
proceeding and in any appearance in connection therewith, and if such prevailing
party recovers a judgment in any such action, proceeding or appeal, such costs,
expenses and attorney's fees will be determined by the court or arbitration
panel handling the proceeding and will be included in and as a part of such
judgment.
11. NO ENCUMBRANCE. Subtenant or Sublandlord shall not voluntarily,
involuntarily or by operation of law mortgage or otherwise encumber all or any
part of Subtenant's interest in the Sublease or the Premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 Subtenant shall not voluntarily, involuntarily or by operation of law
assign this Sublease or any interest therein and shall not sublet the Premises
or any part thereof, or any right or privilege appurtenant thereto, without
first obtaining the written consent of Sublandlord, which consent shall not be
unreasonably withheld. The transfer of more than a fifty percent partnership
interest in Subtenant, if Subtenant is a partnership, or more than fifty percent
of the stock of Subtenant, if Subtenant is a corporation, to any entity other
than a parent, sister company or subsidiary of Subtenant, shall be deemed to be
an assignment for purposes of this PARAGRAPH 12. Determining whether or not to
consent to the proposed assignment or subletting, Sublandlord may consider among
other factors:
(i) whether the proposed sublessee or assignee has a net worth equal
to or greater than Subtenant;
(ii) whether the proposed use of the Premises by the proposed
sublessee or assignee is consistent with PARAGRAPH 2.7;
(iii) whether the experience and business reputation of the proposed
sublessee or assignee is equal to or greater than Subtenant; and
(iv) whether Sublandlord's consent will result in a breach of the
Master Lease or any other lease or agreement to which Sublandlord is a
party affecting the Building or Premises.
12.2 Any attempted assignment or subletting, without Sublandlord's consent
shall be null and void and of no effect.
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No permitted assignment or subletting of Subtenant's interest in this Sublease,
shall relieve Subtenant of its obligations to pay the rent or other sum or
charge due hereunder and to perform all the other obligations to be performed by
Subtenant hereunder. The acceptance of rent by Sublandlord from any other
person shall not be deemed to be a waiver by Sublandlord of any provision of
this Sublease or to be a consent to any subletting or assignment. Consent to
one sublease or assignment shall not be deemed to constitute consent to any
subsequent attempted subletting or assignment.
12.3 Within ten (10) days following the date received by Subtenant from any
assignee or sublessee, Subtenant shall pay to Sublandlord as additional rent,
one hundred percent (100%) of the amount by which the rent payable by such
assignee or sublessee to Subtenant exceeds the rent payable by Subtenant to
Sublandlord under this Sublease until the rent paid by Subtenant to Sublandlord
equals the amount paid by Sublandlord to Master Landlord under the Master Lease
and thereafter, fifty percent (50%) of the amount by which the rent payable by
such assignee or sublessee to Subtenant throughout the term exceeds the rent
paid by Subtenant to Sublandlord under this Sublease. By way of example, if
during a year of the term the annual rent under the Master Lease is $12 per
square foot, the rent under the Sublease is $10 per square foot, and the rent
under such subsublease is $14 per square foot, of the $14 per square foot paid
to Subtenant by its subsublessee, $13 per square foot will be paid by Subtenant
to Sublandlord hereunder. If Subtenant receives a lump sum payment in
connection with an assignment, such amount shall be allocated between Subtenant
and Sublandlord, in the same manner taking into account the total rents payable
during the remaining terms of the Master Lease and Sublease.
The foregoing is a freely negotiated arrangement between Subtenant and
Sublandlord respecting the allocation of appreciated rents. This covenant shall
survive the expiration of the term of this Sublease. Notwithstanding the
foregoing, Subtenant shall not be obligated to pay Sublandlord any portion of
such appreciated rentals until Subtenant has recovered any costs it has
reasonably incurred in connection with the subletting of the Premises to any
third party broker or for improvements to the Premises. Any such costs to be
deducted from appreciated rents shall be submitted to Sublandlord and shall be
subject to Sublandlord's reasonable approval.
13. ALTERATIONS.
(a) ALTERATIONS AND IMPROVEMENTS BY SUBTENANT. Subtenant shall not make
any alterations, additions or improvements to the Premises ("Alterations")
without obtaining the prior written consent of Sublandlord thereto, which
consent shall not be unreasonably withheld. The term "Alterations" shall
include any
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alterations, additions or improvements made by Subtenant to comply with the ADA
as required by PARAGRAPH 2.14 above and any alterations paid for with the
Subtenant Improvement Allowance. All such Alterations shall be constructed only
after necessary permits, licenses and approvals have been obtained by Subtenant
from appropriate governmental agencies. All Alterations shall be constructed in
a good and workmanlike manner using materials of a quality comparable to those
on the Premises, and shall conform to all relevant codes, regulations and
ordinances. All such Alterations shall be made at Subtenant's sole cost and
expense and shall be diligently prosecuted to completion. Any contractor or
person making such Alterations shall first be approved in writing by
Sublandlord, which approval shall not be unreasonably withheld, and Sublandlord
may require that all work be performed under its supervision. Upon the
expiration or earlier termination of this Sublease, Sublandlord may elect to
have Subtenant either (i) surrender with the Premises any or all of such
Alterations as Sublandlord shall determine (except personal property as provided
in Subparagraph (b) below), in which case, such Alterations shall become the
property of Sublandlord, or (ii) promptly remove any or all of such Alterations
designated by Sublandlord to be removed, in which case Subtenant shall, at its
sole cost and expense, repair and restore the Premises to its original condition
as of the Commencement Date, reasonable wear and tear excepted. Subtenant shall
permit no mechanic's or other liens to be recorded against the Premises. Should
a lien be made or filed against the Premises or real property on which the
Premises are situated, Subtenant shall, at its sole cost, bond against or
discharge said lien within ten (10) days after Sublandlord's or Master
Landlord's request to do so.
(b) REMOVAL OF PERSONAL PROPERTY. All articles of personal property, and
all business and trade fixtures, machinery and equipment, cabinet work,
furniture and movable partitions, if any, owned or installed by Subtenant at its
expense, excluding, however, any such property paid for by Subtenant using the
Subtenant Improvement Allowance provided for in Paragraph 2.8, shall be and
remain the property of Subtenant and may be removed by Subtenant at any time,
provided that Subtenant, at its expense, shall repair any damage to the Premises
caused by such removal or by the original installation. Sublandlord may elect
to require Subtenant to remove all or any part of such personal, non-excluded
property at the expiration or sooner termination of this Sublease, in which
event such removal shall be done at Subtenant's expense, and Subtenant shall at
its own expense repair any damage to the Premises caused by such removal prior
to the termination of this Sublease.
14. HOLDING OVER. If Subtenant holds over after the expiration or earlier
termination of this Sublease, without the express consent of Sublandlord, then
at the option of Sublandlord, Subtenant shall become and be only a
month-to-month tenant at a
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rent equal to one hundred and fifty percent (150%) of the rent payable by
Subtenant immediately prior to such expiration or termination, and otherwise
upon the terms, covenants and conditions herein specified. Notwithstanding any
provision to the contrary contained herein, (i) Sublandlord expressly reserves
the right to require Subtenant to surrender possession of the Premises upon the
expiration of the term hereof or upon the earlier termination hereof and the
right to assert any remedy at law or in equity to evict Subtenant and/or collect
damages in connection with any such holding over, and (ii) Subtenant shall
indemnify, defend and hold Sublandlord harmless from and against any and all
liabilities, claims, demands, actions, losses, damages, obligations, costs and
expenses, including, without limitation, attorneys' fees (including the
allocated costs of Sublandlord's in-house attorneys) incurred or suffered by
Sublandlord by reason of Subtenant's failure to surrender the Premises on the
expiration or earlier termination of this Sublease in accordance with the
provisions of this Sublease.
15. LIENS. Subtenant will keep the Premises and the Building free from any
liens arising out of any work performed, materials furnished, or obligations
incurred by Subtenant. Sublandlord has the right to post and keep posted on the
Premises any notices that may be provided by law or which Sublandlord may deem
to be proper for the protection of Sublandlord, the Premises and the building
from such liens.
16. MAINTENANCE AND REPAIRS. Subtenant has inspected the Premises and
acknowledges that the Premises are in good order and repair except for any
defects incapable of detection through inspection. At all times during the term
of this Sublease, Subtenant, at its sole cost and expense, will maintain the
Premises and every part thereof and all equipment, fixtures and improvements
therein in good condition and repair. At the end of the term of this Sublease,
Subtenant will surrender the Premises in as good condition as received, normal
wear and tear excepted. Subtenant shall be responsible for all repairs required
to be performed by the Lessee under the Master Lease.
17. INSURANCE. At all times during the term of this Sublease, Subtenant shall,
at its sole expense, procure and maintain the following types and amounts of
insurance coverage (but in no event less than the types and amounts of amounts
of coverage required from time to time under the Master Lease):
17.1 Comprehensive general liability insurance against any and all damages
and liability, including attorneys' fees on account or arising out of injuries
to or the death of any person or damage to property, however occasioned, in, on
or about the Premises with at least a single combined liability and property
damage limit of $2,000,000.
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17.2 Insurance on all plate or tempered glass in or enclosing the Premises,
for the replacement cost of such glass.
17.3 Insurance adequate in amount to cover damage to the Premises
including, without limitation, leasehold improvements, trade fixtures,
furnishings, equipment, goods and inventory.
17.4 Rent insurance in an amount equal to all rent and other sums or
charges payable under this Lease for a period of at least twelve (12) months
commencing with the date of loss.
17.5 Employer's liability insurance and worker's compensation insurance as
required by applicable law.
17.6 All such insurance shall be in a form satisfactory to Sublandlord and
carried with companies reasonably acceptable to Sublandlord. Subtenant shall
provide Sublandlord with a certificate of insurance showing Sublandlord as
additional insured. The certificate shall provide for a thirty-day written
notice to Sublandlord in the event of cancellation or material adverse change of
coverage.
17.7 Sublandlord and Subtenant shall each obtain from their respective
insurers under all policies of fire, theft, public liability, workers'
compensation and other insurance maintained by either of them at any time during
the term hereof insuring or covering the Premises, a waiver of all rights of
subrogation which the insurer of one party might otherwise have, if at all,
against the other party.
18. EVENTS OF DEFAULT. If one or more of the following events ("Event of
Default") occurs, such occurrence constitutes a breach of this Sublease by
Subtenant:
18.1 Subtenant abandons or vacates the Premises; or
18.2 Subtenant fails to pay any monthly Basic Monthly Rent or Operating
Expenses and Taxes, if applicable, as and when the same become due and payable,
and such failure continues for more than ten (10) days after Sublandlord gives
written notice thereof to Subtenant; or
18.3 Subtenant fails to pay any other sum or charge payable by Subtenant
hereunder as and when the same becomes due and payable, and such failure
continues for more than thirty (30) days after Sublandlord gives written notice
thereof to Subtenant; or
18.4 Subtenant fails to perform or observe any other agreement, covenant,
condition or provision of this Sublease to be performed or observed by Subtenant
as and when performance or observance is due, and such failure continues for
more than
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thirty (30) days after Sublandlord gives written notice thereof to Subtenant, or
if the default cannot be cured within said thirty (30) day period and Subtenant
fails within said period to commence with due diligence and dispatch the curing
of such default or, having so commenced, thereafter fails to prosecute or
complete with due diligence and dispatch the curing of such default; or
18.5 Subtenant (a) files or consents by answer or otherwise to the filing
against it of a petition for relief or reorganization or arrangement or any
other petition in bankruptcy or liquidation or to take advantage of
any-bankruptcy or insolvency law of any jurisdiction; (b) makes an assignment
for the benefit of its creditors; (c) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers of itself or
of any substantial part of its property; or (d) takes action for the purpose of
any of the foregoing; or
18.6 A court or governmental authority of competent jurisdiction, without
consent by Subtenant, enters an order appointing a custodian, receiver, trustee
or other officer with similar powers with respect to it or with respect to any
substantial portion of its property, or constituting an order for relief or
approving a petition for relief or reorganization or any other petition in
bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution,
winding up or liquidation of Subtenant, or if any such petition is filed against
Subtenant and such petition is not dismissed within ninety (90) days; or
18.7 This Sublease or any estate of Subtenant hereunder is levied upon
under any attachment or execution and such attachment or execution is not
vacated within ninety (90) days.
19. REMEDIES OF SUBLANDLORD ON DEFAULT.
19.1 In the event of any breach of this Sublease by Subtenant, Sublandlord
may, at its option, terminate the Sublease and recover from Subtenant: (a) the
worth at the time of award of the unpaid rent which had been earned at the time
of termination; (b) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of the
award exceeds the amount of such rental loss that the Subtenant proves could
have been reasonably avoided; (c) the worth at the time of award of the amount
by which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that Subtenant proves could be reasonably
avoided; and (d) any other amount necessary to compensate Sublandlord for all
detriment proximately caused by Subtenant's failure to perform its obligations
under this Sublease or which in the ordinary course of things would be likely to
result therefrom.
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19.2 Sublandlord may, in the alternative, continue this Sublease in effect,
as long as Sublandlord does not terminate Subtenant's right to possession, and
Sublandlord may enforce all its rights and remedies under the Sublease,
including the right to recover the rent as it becomes due under the Sublease.
If said breach of the Sublease continues, Sublandlord may, at any time
thereafter, elect to terminate the Sublease. Sublandlord shall not be deemed to
have terminated this Sublease or the liability of Subtenant to pay rent or any
other amounts due hereunder by any reentry or by any action in unlawful
detainer, unless Sublandlord shall have specifically notified Subtenant in
writing that Sublandlord has elected to terminate this Sublease.
19.3 Sublandlord may pursue any other remedy now or hereafter available to
Sublandlord under the laws and judicial decisions of the State where the
Premises are located.
20. ESTOPPEL CERTIFICATES.
20.1 Subtenant shall at any time upon not less than ten (10) business days'
prior written notice from Sublandlord execute, acknowledge business and deliver
to Sublandlord a statement in writing (i) certifying that this Sublease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and certifying that this Sublease, as so modified, is in full
force and effect), the amount of any security deposit, and the date to which the
rent and other charges are paid in advance, if any, and (ii) acknowledging that
there are not, to Subtenant's knowledge, any uncured defaults on the part of
Sublandlord hereunder or of Master Landlord under the Master Lease, or
specifying such defaults if any are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer to the
Premises.
20.2 At Sublandlord's option, Subtenant's failure to deliver such statement
within such time shall be conclusive upon Subtenant (i) that this Sublease is in
full force and effect, without modification except as may be represented by
Sublandlord, (ii) that there are no uncured defaults in Sublandlord's
performance hereunder or in Master Landlord's performance under the Master
Lease, and (iii) that not more than one month's rent has been paid in advance,
or such failure may be considered by Sublandlord as a material default by
Subtenant under this Sublease.
20.3 If the Master Landlord desires to finance, refinance, or sell the
Premises, or any part thereof, Subtenant hereby agrees to deliver to any lender
or purchaser designated by Master Landlord such financial statements of
Subtenant as may be reasonably required by such lender or purchaser. Such
statements shall include the past three years' financial statements of
Subtenant.
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21. REAL ESTATE BROKERS. Each party warrants to the other that there are no
brokerage commissions or fees payable in connection with this Sublease except to
the broker set forth in Paragraph 2.19. Each party further agrees to indemnify
and hold the other party harmless, from any cost, liability and expense
(including attorney's fees and the allocated costs of the parties' in-house
attorneys) which the other party may incur as the result of any breach of this
PARAGRAPH 21.
22. ARBITRATION OF DISPUTES.
ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS SUBLEASE OR ANY
AGREEMENTS OR INSTRUMENTS RELATING HERETO OR DELIVERED IN CONNECTION HEREWITH,
INCLUDING BUT NOT LIMITED TO A CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT
WILL, AT THE REQUEST OF ANY PARTY, BE DETERMINED BY ARBITRATION IN ACCORDANCE
WITH THE FEDERAL ARBITRATION ACT (9 U.S.C. SECTION 1 ET SEQ.) UNDER THE AUSPICES
AND RULES OF THE AMERICAN ARBITRATION ASSOCIATION ("AAA"). THE AAA SHALL BE
INSTRUCTED BY EITHER OR BOTH OF THE PARTIES TO PREPARE A LIST OF THREE (3)
JUDGES WHO HAVE RETIRED FROM THE SUPERIOR COURT OF THE STATE OF CALIFORNIA, A
HIGHER CALIFORNIA COURT OR ANY FEDERAL COURT. WITHIN TEN (10) DAYS OF RECEIPT
OF THE LIST, EACH PARTY MAY STRIKE ONE (1) NAME FROM THE LIST. THE AAA WILL
THEN APPOINT THE ARBITRATOR FROM THE NAME(S) REMAINING ON THE LIST. THE
ARBITRATION WILL BE CONDUCTED IN SAN FRANCISCO, LOS ANGELES OR SAN DIEGO,
WHICHEVER IS THE CLOSEST CITY TO THE NEXUS OF THE DISPUTE. ANY CONTROVERSY IN
INTERPRETATION OR ENFORCEMENT OF THIS PROVISION, OR WHETHER A DISPUTE IS
ARBITRABLE, WILL BE DETERMINED BY THE ARBITRATOR. EITHER PARTY MAY CONDUCT
DISCOVERY IN THE SAME MANNER AND TO THE EXTENT PROVIDED IN THE FEDERAL RULES OF
CIVIL PROCEDURES AND THE LOCAL RULES OF THE U.S. DISTRICT COURT, CENTRAL
DISTRICT OF CALIFORNIA EXCEPT THAT SUCH DISCOVERY PERIOD SHALL NOT EXCEED 45
DAYS. JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY
COURT HAVING JURISDICTION. THE INSTITUTION AND MAINTENANCE OF AN ACTION FOR
JUDICIAL RELIEF OR IN PURSUIT OF A PROVISIONAL OR ANCILLARY REMEDY DOES NOT
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE PLAINTIFF, TO
SUBMIT THE CONTROVERSY OR CLAIM TO ARBITRATION. NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THE FOREGOING, THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THE
PROVISIONS OF THIS PARAGRAPH 22 WILL NOT APPLY TO ANY DEFAULT BY SUBTENANT OR TO
SUMMARY PROCEEDINGS TO OBTAIN POSSESSION OF REAL PROPERTY PURSUANT TO CHAPTER 4
OF HE CALIFORNIA CODE OF CIVIL PROCEDURE (SECTION 1159 ET SEQ.) AS AMENDED FROM
TIME TO TIME OR ANY SIMILAR LAW, STATUTE OR ORDINANCE NOW OR HEREAFTER IN
EFFECT.
NOTICE: BY INITIALLING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU
ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A
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COURT OR JURY TRIAL. BY INITIALLING IN THE SPACE BELOW YOU ARE GIVING UP YOUR
JUDICIAL RIGHTS TO DISCOVERY AND APPEAL UNLESS THOSE RIGHTS ARE SPECIFICALLY
INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE
UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT
TO THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION
TO NEUTRAL ARBITRATION.
s/RJW/ s/PM/
-------------- --------------
SUBTENANT'S SUBLANDLORD'S
INITIALS INITIALS
23. MASTER LANDLORD DEFAULT; CONSENTS. Notwithstanding any provision of this
Sublease to the contrary, (a) Sublandlord shall not be liable or responsible in
any way for any loss, damage, cost, expense, obligation or liability suffered by
Subtenant by reason or as the result of any breach, default or failure to
perform by the Master Landlord under the Master Lease, and (b) whenever the
consent or approval of Sublandlord and Master Landlord is required for a
particular act, event or transaction (i) any such consent or approval by
Sublandlord shall be subject to the consent or approval of Master Landlord, and
(ii) should Master Landlord refuse to grant such consent or approval, under all
circumstances, Sublandlord shall be released from any obligation to grant its
consent or approval.
24. NOTICES. All notices or other communications required or permitted
hereunder must be in writing, and be personally delivered (including by means of
professional messenger service) or sent by registered or certified mail, postage
prepaid, return receipt requested or by overnight courier that obtains the
signature of the receiving party, or by facsimile with machine confirmation to
the addresses set forth in PARAGRAPH 2.17. All notices will be deemed received
on the date sent.
25. MASTER LANDLORD'S CONSENT. This Sublease is expressly conditioned upon
receipt of the written consent of Master Landlord within ten (10) days from the
date of this Sublease. Sublandlord will use reasonable efforts to obtain Master
Landlord's consent; provided, however, Sublandlord shall not be liable to
Subtenant if Sublandlord is unable to obtain such consent or obligated to pay
money or incur additional liability in order to obtain such consent. In the
event Sublandlord fails to obtain the consent of Master Landlord within ten (10)
days of
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the date of this SubLease, then Subtenant may terminate this agreement, in which
case both parties shall be relieved of all obligations hereunder, and all rent
and other payments made by Subtenant prior to such termination shall be
refunded.
26. SIGNAGE. Subject to approval of Master Landlord and city and county
regulatory agencies, Subtenant shall have the right to use all sizes and types
of signs acceptable under city or county code or acceptable with applicable city
or county code variance and mutually agreed upon by Subtenant, Sublandlord and
Master Landlord and Subtenant shall have the right to incorporate its corporate
color, PMS #287 blue, into the sign design. Subtenant estimates that it will
need between approximately 550 and 650 aggregate square feet for signage,
including signage on top of the building. Sublandlord agrees to cooperate with
Subtenant and use its best efforts to secure the corporation and commitment of
Master Landlord in order to obtain any city or county approvals or applicable
variances relating to signage.
27. CONTINGENCIES. This Sublease is further expressly conditioned upon the
receipt of the approval of the Office of Thrift Supervision to permit Subtenant
to operate a bank branch at the premises within thirty (30) days of the
Commencement Date ("Contingency Period"). If during the Contingency Period,
Subtenant receives notice that such approval has been denied, or if at the end
of the Contingency Period Subtenant has received no notice that such approval
has been granted or denied, then either party may, at its option, terminate the
Sublease by written notice on or before the last day of the Contingency Period.
In the event either party elects to terminate the Sublease, both parties shall
be relieved of all obligations hereunder except for Subtenant's indemnity
obligations under PARAGRAPH 9. All rent and other payments made prior to such
termination shall be non-refundable.
(Signature page follows)
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<PAGE>
IN WITNESS WHEREOF, Sublandlord and Subtenant have executed this Sublease as of
the date first above written.
SUBLANDLORD
Bank of America National Trust and
Savings Association
By: s/Yvonne Tom/
-----------------------------
Title: Vice President
By: s/Patricia Morris/
-----------------------------
Title: Disposition Manager
SUBTENANT
Independence One Bank of California
a federal savings bank
By: s/Robert J. Webber/ 3/21/94
-----------------------------
Title: Vice President
By:
-----------------------------
Title:
-----------------------------
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<PAGE>
CONSENT TO SUBLEASE
The Taj, a California limited partnership, as Lessor, and the Bank of
America National Trust and Savings Association, as Lessee, are parties to a
Lease dated as of July 21, 1972 as amended (the "Lease"). The Lessor hereby
consents to the Sublease dated March 31 1994, by and between the Lessee and
Independence One Bank of California, as Subtenant on the following terms and
conditions:
1. This Consent shall not be construed in any manner to modify, waive or
affect any of the terms, covenants, conditions or agreements contained in
the Lease;
2. This Consent shall not be construed as a consent by the Lessor to, or as
permitting any other or further subletting or assignment by Lessee or
Subtenant.
3. Lessee shall not be released from, and Lessee shall be and remain liable
for, the performance and observance of all the terms, covenants,
conditions, and agreements contained in the Lease.
4. Although a duplicate original of the Sublease has been delivered to the
Lessor for its information, Lessor is not a party thereto and is not bound
by its provisions, nor shall Lessor, either by receipt thereof or by the
making of this Consent, be deemed to have approved any of such provisions;
however, any modification or amendment to the Sublease without the prior
written consent of Lessor in each instance, shall be deemed a default under
the Lease.
5. Prior to the Subtenant making any alterations and improvements to the
Premises Subtenant shall provide to Lessor for Lessor's approval, which
approval shall not be unreasonably withheld the following documents: (A)
all construction plans for Subtenant's alterations and improvements to the
Premises; (B) copy of all building permits from the City of Laguna Hills;
(C) copies of all contractor's building contracts ( D) copies of all
contractor's insurance certificates; (E) contractor's asbestos disclaimer
form in form reasonably acceptable to Lessor; (F) copies of the
contractor's schedule and work rules; (G) copies of all demolition permits
and trash removal permits and contracts; (H) delivery at completion of the
alterations or improvements "as built" plans of the electrical, HVAC, and
plumbing systems; and (I) copies of the certificate of occupancy for the
Premises and building permit inspections.
6. If any provisions of this Consent shall be at variance with provisions of
the Lease o Sublease, the provisions of this
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<PAGE>
Consent shall prevail. This Consent shall not be changed orally, but only
by an agreement in writing signed by the party against whom the enforcement
of such change is sought.
7. The Lessor represents and warrants that no other consents to the Sublease
are required, including, without limitation, the consent of any lender on
the property.
8. Lessee acknowledges and agrees to the terms of this Consent. Furthermore,
Lessee acknowledges that certain areas in the Premises may have sprayed on
asbestos fire proofing on the structural steel and duct insulation and that
Lessor has retained independent consultants to test the air quality of the
Premises. Lessee acknowledges that the mere presence of
asbestos-containing materials does not necessarily constitute a health
hazard, however, Lessee and Subtenant agree that during the performance of
any alterations or improvements on the Premises by Lessee or Subtenant that
if asbestos is encountered, such asbestos must be controlled by Lessee
and/or Subtenant and dealt with by Lessee and/or Subtenant in accordance
with federal, state, and local laws and regulations. Lessee will notify
Subtenant and cause Subtenant to notify any contractor employed to work on
the Premises of the potential for encountering asbestos during the
rendition of alterations and improvements, so that such contractor will
take proper precautions to inform their employees so that if encountered,
such asbestos shall be dealt with as required by applicable laws by the
Subtenant and its contractor.
9. Lessee and Subtenant agree to indemnify, hold harmless, and defend Lessor
from any and all claims or causes of action, damages, personal injuries,
death, or losses of any nature caused by the exposure, disturbance, and/or
removal of any and all asbestos encountered by Lessee, Subtenant or their
contractors during the rendition of alterations and improvements to the
Premises.
Dated this 4th day of May, 1994.
LESSOR:
THE TAJ, a California limited
partnership
By: Fond du Lac Plaza No. 1, Inc.,
General Partner
By: s/Thomas G. Berbacchi/
-----------------------------
Thomas G. Bernacchi
Vice President
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<PAGE>
LESSEE:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: s/Stephen R. Lew for Yvonne Tom/
--------------------------------
Finance & Compliance Office
Vice President
By: s/Patricia Morris/
--------------------------------
Disposition Manager
SUBTENANT:
INDEPENDENCE ONE BANK OF
CALIFORNIA
By: s/Robert J. Webber
--------------------------------
Vice President
25
<PAGE>
ADDENDUM TO LEASE
This Addendum To Lease is made as of this 1st day of September 1978 by and
between Ronda Valencia Co., a limited partnership, (herein called "Lessor") and
Bank of America National Trust And Savings Association, a national banking
association, (herein called "Lessee").
RECITALS
A. Lessee and Lessor's predecessor entered into a Lease dated July 21, 1972
for premises at 23521 Paseo de Valencia, Laguna Hills, California. Said lease
as amended to the date hereof is hereinafter referred to as the "Lease."
B. Lessee exercised its option under paragraph 20.1 of the Lease to lease
Suites 101, 102 and 103 of the building at 23521 Paseo de Valencia. In order to
resolve the dispute between Lessor and Lessee is to the fair market rental value
to be paid by Lessee for the option space and to resolve other aspects of the
transaction, Lessor and Lessee are entering into this Addendum To Lease in
accordance with the arbitration decision by Jerold L. Miles and Richard A.
Jampol dated December 12, 1979.
Now therefore in consideration of the mutual covenants and agreements herein
contained and for other good and valuable consideration receipt of which is
hereby acknowledged, the parties hereby amend the Lease, as amended, on the
following terms and conditions:
1. Suites 101, 102 and 103 of the building at 23521 Paseo de Valencia,
Laguna Hills, California, generally located as shown on the diagram attached
hereto as Exhibit A, are hereby added to the Premises under the Lease for a
lease term commencing September 1, 1978. Suites 101, 102 and 103 are
hereinafter referred to as the "Option Premises."
2. In addition to the rent and other payments required to be paid by the
Lessee under the Lease prior to this Addendum, Lessee hereby agrees to pay to
Lessor as base rental for the Option Premises $3,811.15 per month, net, net,
net, commencing as of September 1, 1978 and continuing on the first day of each
calendar month thereafter during the term and any renewal term. Rental shall be
paid to Lessor without deduction or offset in lawful money of the United States
of America at the office of the building or to such other person or at such
other place as Lessor may from time to time designate in writing.
3. The rental provided for in paragraph 2 above for the Option Premises
shall be increased proportionately every three
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<PAGE>
years by 75 percent of the excess of the cost of living index for August 1981
and by 75 percent of the excess of the cost of living index for each third
August thereafter (i.e. August 1984, August 1987, etc.) during the term and
renewal term of the Lease (herein called the "adjustment figure") over the cost
of living index for September 1978 (herein called the "base figure") as shown in
the Consumer Price Index for All Urban Consumers -Los Angeles-Long
Beach-Anaheim, Metropolitan Area ("all Items") compiled by the U.S. Department
of Labor, Bureau of Labor Statistics, based on 1967 as 100. Said excess shall
be computed every three years as a percentage of the base figure and then
multiplied by the monthly rent provided for in paragraph 2 above for the month
of September 1978, and the resulting product is hereinafter called the "adjusted
monthly rent." Upon completion of the computation Lessor shall give written
notice to Lessee of the adjusted monthly rent and it shall be due and payable by
Lessee as of the first day of September immediately following the August for
which the respective adjustment figure was taken (i.e. September 1, 1981,
September 1, 1984, etc.) and on the first of each of the 35 months thereafter.
In no event shall the monthly rental be less than the monthly rental specified
in paragraph 2 above. All adjusted monthly rent shall be payable in accordance
with the provisions of paragraph 2 above and Lessor shall have the same rights,
remedies as otherwise provided in the Lease for the failure of Lessee to pay
rent. The index for the base figure and adjustment figure shall be the one
reported in the U.S. Department of Labor's most comprehensive official index
then in use and most nearly answering the foregoing description of the index to
be used. If it is calculated from a base different from the period 1967 equal
100 used for the above-described index, the base index used for calculating the
adjustment figure shall first be converted under a formula supplied by the
Bureau. If the above-described index shall no longer be published, the index
substituted therefore by the Bureau of Labor Statistics shall be utilized. If
no such index shall be substituted, then another index generally recognized as
authoritative shall be substituted by agreement, and if the parties cannot
agree, Lessor or Lessee may apply to the appropriate court of Los Angeles
County, California by action, proceeding or as otherwise might be proper for
determination of an authoritative consumer price index as herein set forth.
Section 3.2 of Article 3 of the Lease shall not be applicable to the rent
hereinabove provided for the Option Premises.
4. In addition to the monthly rental of $3,811.15 as adjusted by
paragraphs 2 and 3 above, there shall be payable by Lessee to Lessor as
additional rent for the Option Premises during the term and renewal term of this
Lease an amount equal to 5.38 percent of all real property taxes, insurance and
public utility charges for each calendar year as described in Article 4 of the
Lease. The last paragraph of Section 1.5 of the Lease shall be applied
separately to the additional rent set forth in
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<PAGE>
the preceding sentence with "5.38%" substituted for "14.34%" in said last
paragraph of Section 4.5. Also, as additional rent for the Option Premises
during the term and renewal term of this Lease, Lessee shall pay to Lessor 5.38
percent of all costs incurred by Lessor in the operation and maintenance of the
common areas. The provisions of the paragraph entitled "Common Area" attached
hereto as Exhibit E and incorporated herein by this reference set forth Lessor's
standard and usual procedure for allocating such costs and shall be applicable
hereto. The first paragraph of Article 4.5 does not apply to the Option
Premises.
5. The Lessee's option to extend the term of the Lease as set forth in
Section 19.1 of the Lease shall include the Option Premises except that the base
rental payable for the Option Premises in the event that said option is
exercised shall be adjusted in the same manner as set forth in paragraph 2
above. Therefore, the portion of Section 19.1 of the Lease beginning with the
words "save and except that the" in the 16th line from the bottom of page 17 of
the Lease through the end of Section 19.1 shall not be applicable to the Option
Premises.
6. Except as herein modified the Lease shall continue in full force and effect
with respect to the Premises, including the Option Premises.
In Witness Whereof this Addendum To Lease is executed as of the day and year
first above written.
Bank of America National Ronda Valencia Co.
Trust and Savings Association
By: By:
-------------------------- --------------------------
--------------------- ---------------------
By: By:
-------------------------- --------------------------
--------------------- ---------------------
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EXHIBIT A
(First Floor Plan)
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<PAGE>
EXHIBIT B
COMMON AREA. Common areas as used herein shall include but not be limited
to the parking area, walkways and landscaping. Said costs shall include but
shall not be limited to costs of cleaning, landscaping, lighting and other
utilities, resurfacing, parking attendants, painting, policing, insurance,
property tax costs (as defined below) relating to the common areas, depreciation
of equipment, and reasonable management fees to lessor (which fee shall not
exceed five percent (5%) of the total of all other costs incurred in connection
with said areas). On or before the twentieth (20th day of the month next
succeeding each calendar quarter (April 20, July 20, October 20, January 29).
Lessor shall deliver to Lessee a written statement setting forth the total
common area costs incurred by Lessor during the immediately preceding calendar
quarter and Lessee's prorata share of such costs. Within ten (10) days after
delivery of such statements, Lessee shall pay to lessor its prorata share of
such costs as set forth in said statements. In the event this Lease shall
commence or terminate on any date other than the last day of a calendar quarter,
the amount of common area costs payable by Lessee for the calendar quarter in
which this Lease commences or terminates shall be prorated on the ration that
the number of days of the Lease term falling within said calendar quarter bears
to 91 days. No delay or failure by Lessor to enforce this paragraph, or any
part thereof, as to Lessee, or to enforce similar or dissimilar provisions in
other leases in use as to any other lessee in the building shall be deemed to be
a waiver hereof or prevent any subsequent or other enforcement hereof. The
failure of Lessor to deliver the quarterly written statement shall not
constitute a waiver by Lessor of its rights to collect Lessee's share of the
common area costs. All common area costs payable by lessee hereunder shall
constitute additional rent and upon Lessee's failure to pay any such amounts.
Lessor shall have the same rights and remedies as otherwise provided in this
Lease for the failure of Lessee to pay rent. "Property tax costs" shall be the
total of all real and personal property taxes, assessments, license fees,
commercial rental taxes, levies, penalties or taxes imposed by any authority
having the direct or indirect power to tax, including any city, county, state
and federal government, and any school, agricultural, lighting, drainage and
other improvement district thereof, as against any legal or equitable interest
of Lessor in the premises or in the property of which the premises are a part
(including land, building, improvements and personally) as against Lessor's
right to rent or other income therefrom, or as against Lessor's business of
leasing the premises.
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<PAGE>
Leisure World
VITAL FILE
#85-1107
LEASE
THIS LEASE, made this 21st day of July, 1972, between ATLANTIC COMPANY
and the Estate of RUDY BREINER, a general partnership, Lessor, and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association,
Lessee.
WITNESSETH:
Lessor does hereby lease to Lessee, and Lessee does hereby hire from
Lessor those certain premises (hereinafter called "Premises"), consisting of the
portions of a building (hereinafter called "Building") outlined in red on
Exhibit "A" attached hereto, and hereby made a part hereof, and the land
adjacent thereto outlined in green on said Exhibit "A", and space for two remote
TV driveup teller units, together with a non-exclusive right to use the
driveways to said units for ingress and egress, all as outlined in blue on said
Exhibit "A", together with that portion of the basement area of said building
outlined in red on Exhibit "AA" attached hereto, which Premises are a portion of
the real property described on Exhibit "B" attached hereto and hereby made a
part hereof.
Said letting and hiring is upon and subject to the terms, covenants
and conditions herein set forth.
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ARTICLE 1
PURPOSE
Section 1.1 The Premises are to be used for banking purposes and no
other purpose without the prior written consent of Lessor which consent shall
not be unreasonably withheld.
ARTICLE 2
TERM
Section 2.1 The term of this Lease shall commence September 1,
1972, and shall end unless sooner terminated on August 31, 2002.
ARTICLE 3
RENT
Section 3.1 Lessee shall pay to Lessor rent for the Premises for
the first fifteen (15) years of the term as follows:
(i) On or before September 1, 1972 and on or before the first day of
each month thereafter, to and including February 1, 1973, the sum of $2,850.00;
(ii) On or before March 1, 1973 and on or before the first day of each
month thereafter to and including August 1, 1987, the sum of $5,157.88,
provided, however, that during the first five (5) years when the monthly rent of
$5,157.88 is in effect it shall be reduced by the sum of $2,083.33 to compensate
Lessee for the sum of $125,000 expended by Lessee on the
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<PAGE>
alterations, remodeling and additions to the Premises hereinafter referred to in
Section 8.1 which Lessee will make, with the further understanding that Lessor
may at any time pay to Lessee in cash the balance remaining on the $125,000
whereupon the rent shall be $5,157.88 per month as aforesaid.
Section 3.2 After the fifteenth (15th) year of the term of this
Lease there shall be an adjustment in rent. The adjusted monthly rent shall be
the sum of $5,157.88 increased by the percentage of increase, if any, of the
assessed valuation by the County Tax Assessor for the real property described on
Exhibit "B" hereto for the fiscal year 1986-1987, over such assessed valuation
for the fiscal year 1972-1973; provided, however, if the present method and
formula for calculating real property tax assessed valuations by the County Tax
Assessor has been abolished or changed, then the adjusted rent shall be the fair
market rental value as of the beginning of the sixteenth (16th) year of the
lease term. In no event shall the adjusted rent be less than $5,157.88 per
month.
If the adjusted rent is to be determined on the basis of the fair
market rental value, six (6) months prior to September 1, 1987, the parties
shall endeavor to agree upon the adjusted rent. If the parties are not able to
determine the fair market rental value within the first sixty (60) days of the
six-month period, either party shall be entitled to submit the question of fair
market rental value to arbitration by giving
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<PAGE>
written notice to that effect to the other party as provided in Section 3.3
below.
Section 3.3 The party desiring any arbitration provided for in this
Lease, shall give written notice to that effect to the other party, specifying
in said notice the name and address of the person designated to act as
arbitrator on its behalf. Within fifteen (15) days after the service of such
notice, the other party shall give written notice to the first party specifying
the name and address of the person designated to act as arbitrator on its
behalf. If the second party fails to notify the first party of the appointment
of its arbitrator, as aforesaid, within or by the time above specified, then the
appointment of the second arbitrator shall be made in the same manner as
hereinafter provided for the appointment of a third arbitrator in a case where
the two arbitrators appointed hereunder and the parties are unable to agree upon
such appointment. The arbitrators so chosen shall meet within ten (10) days
after the second arbitrator is appointed. If the said two arbitrators shall not
agree upon the decision to be made in such dispute, they shall, themselves,
appoint a third arbitrator who shall be a competent and impartial person; and in
the event of their being unable to agree upon such appointment within ten (10)
days after the time aforesaid, the third arbitrator shall be selected by the
parties themselves if they can agree thereon within a further period of fifteen
(15) days.
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If the parties do not agree, then either party, on behalf of both, may
request the then presiding judge of the Superior Court of the State of
California for the County of Los Angeles to appoint such third arbitrator, and
the other party shall not raise any question as to the Court's full power and
Jurisdiction to entertain the application and make the appointment and the
person so appointed, shall be the third arbitrator. The decision of the
arbitrators so chosen shall be given within a period of thirty (30) days after
the appointment of such third arbitrator. The decision in which any two of the
arbitrators so appointed and acting hereunder concur shall in all cases be
binding and conclusive upon the parties. Each party shall pay the fees and
expenses of the one of the two original arbitrators appointed by such party, or
in whose stead as above provided, such arbitrator was appointed, and the fees
and expenses of the third arbitrator, if any, shall be borne equally by both
parties. Except as otherwise provided in this Lease, the said arbitration shall
be conducted in accordance with the rules then in effect of the American
Arbitration Association, and judgment upon any arbitration decision rendered may
be entered by any Court having jurisdiction thereof.
ARTICLE 4
ADDITIONAL RENT
Section 4.1 Lessee shall pay to Lessor during the term of this
Lease, as additional rent, 14.34% of all real
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property taxes, insurance and public utility charges relating to the real
property described on Exhibit "B" hereto.
Section 4.2 The term "real property taxes" as used herein shall
mean all taxes, assessments and similar charges of every kind, nature and
description, whether general or special, ordinary or extraordinary, which at any
time during the term of this Lease by or pursuant to any to any law or
governmental, legal, political or other authority may be directly or indirectly
taxed, levied, charged, assessed or imposed upon or against or which will or may
be or become a lien upon this Lease or any part of the real property described
on Exhibit "B" hereto, or upon any estate, right, title or interest of Lessor or
Lessee in and to same; provided, however, that in no event shall Lessee be
required to pay or discharge any of the following:
(a) Any estate, inheritance, succession, transfer, gift or poll tax
levied or assessed against Lessor or against the interest of Lessor in the real
property described on Exhibit "B" hereto;
(b) Any tax upon the income or profits of Lessor or upon any sale or
conveyance or encumbrance of the real property described on Exhibit "B" hereto
or any part thereof made by Lessor;
(c) Any tax that may be levied upon any personal property of Lessor
or any tax that may be levied on account of any real property of Lessor other
than real property described on Exhibit "B" hereto;
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(d) Any franchise, capital stock, excise, Social Security,
unemployment, sales, use or withholding tax levied or assessed against Lessor or
any other tax, assessment, imposition, levy or charge which has no direct
relation to the real property described on Exhibit "B" hereto, and which is
levied or assessed against Lessor and not against the said real property, which
would not become a lien against the said real property except for the failure of
Lessor to pay the same.
Any of the obligations enumerated in preceding sub-paragraphs (a),
(b), (c) and (d) which have become a lien upon Lessee's interest in the Premises
or any part thereof shall be discharged by Lessor, and in the event Lessor shall
fail to discharge any such obligation and the same has become a lien upon
Lessee's interest, or adversely affects Lessee's interest in the Premises or any
part thereof, then Lessee at its option may discharge the same and any amount
paid by Lessee to effect such discharge shall be repayable forthwith by Lessor
to Lessee. Notwithstanding the foregoing, Lessor, if it so desires, may at any
time contest the validity of any assessment, tax or levy referred to in the
preceding subparagraphs (a), (b), (c) and (d), and Lessee shall not have the
right to pay the same while such contest is being regularly conducted by Lessor.
In the event that such contest is determined adversely to Lessor, Lessor may pay
the same before the judgment becomes final, and Lessor shall, if required by
Lessee, furnish to Lessee reasonable indemnity against any loss by reason of
such contest.
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Real property taxes levied or assessed upon the real property
described in Exhibit "B" hereto with respect to the fiscal year in which the
term of this Lease commences and with respect to the fiscal year in which the
term of this Lease ends shall be prorated for the purpose of determining the
amount thereof payable by Lessee as of the date upon which this Lease commences
and as of the date of which the term of this Lease ends.
Benefit shall be taken by Lessor of the provisions of any statute or
ordinance permitting any such assessments to be paid over a period of time and
the percentage which Lessee shall be obligated to pay shall be calculated only
on the installments of such assessments which are attributable to the term of
this Lease.
Section 4.3 The term "insurance" as used herein shall mean (i) fire
and extended coverage insurance; (ii) public liability and property damage
insurance.
Section 4.4 The term "public utilities charges" as used herein
shall mean charges for water, electricity, heat air-conditioning, air
conditioning and water maintenance contracts.
Section 4.5 During the year 1972, Lessee shall pay to Lessor in
advance, on the first day of each calendar month after the commencement date of
this Lease the sum of $2,850.00 for application on Lessee's obligations under
Section 4.1 hereof and for ensuing years the monthly amounts hereinafter
provided.
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With reasonable promptness after the beginning of each calendar year,
Lessor shall furnish to Lessee a statement in reasonable detail setting forth
the foregoing costs for the previous calendar year and Lessee's share thereof
under the terms hereof, together with the opinion of the firm of Public
Accountants employed by Lessor that said statement was prepared in accordance
with the terms of this Lease. If the monthly amount paid during the past
calendar year is below the amount due hereunder (that is, 14.34% of such costs),
Lessee shall promptly pay in cash to Lessor the difference and the monthly
charge thereafter for the ensuing calendar year shall be increased accordingly.
If the total amount paid by Lessee is in excess of the amount due hereunder, the
monthly amount to be paid thereafter by Lessee shall be reduced accordingly and
the excess amount collected shall be credited on the monthly payments as they
thereafter become due during such ensuing year.
ARTICLE 5
LESSOR'S WARRANTY OF TITLE
Section 5.1 Lessor warrants and represents that the Premises are
owned by Lessor in fee, free and clear of all liens, restrictions, encumbrances,
and other exceptions other than those set forth in the Preliminary Title Report
dated June 10, 1970 issued by First American Title Insurance Company under its
Order No: 1083545, covering the Premises. In addition, Lessor agrees to deliver
the Premises to Lessee on or before September 1, 1972
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free and clear of all tenants, and warrants that Lessee shall peaceably and
quietly enjoy the premises so long as it pays the rent payable to it hereunder
and is not in default in performing the provisions of this Lease.
ARTICLE 6
ASSIGNMENT AND SUBLETTING
Section 6.1 Lessee may not assign or sublet the Premises without
the written consent of Lessor first obtained which consent shall not be
unreasonably withheld. Nothing herein shall be construed to prohibit a transfer
resulting from a merger or consolidation.
ARTICLE 7
INDEMNITY
Section 7.1 Except for any claim, demand, lien, loss, detriment or
liability caused by or arising from the negligence or willful act of the Lessor,
its agents, servants or employees, or caused by or arising from the failure on
the part of Lessor to perform any of the terms, covenants, or conditions herein
set forth on its part to be performed, (provided that Lessee shall give Lessor
prior written notice of such default, if any, and Lessor shall have a reasonable
time to correct such failure), Lessee covenants and agrees at all times to save
Lessor, as well as the demised premises, free and harmless of and from each and
every claim, demand, lien, loss, detriment and
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liability, of whatsoever kind or character, at any time made, asserted or
claimed, by or on behalf of any person or persons including Lessee against
Lessor, for or on account of any matter or thing including injury to or death of
any person or persons and damage to property, occurring from any cause upon or
about the Premises, or upon the sidewalk adjacent thereto, or resulting from,
arising out of, or in any wise connected with any condition of the Premises, or
resulting from, arising out of, or in any wise connected with the use and
occupancy thereof by Lessee, including all costs and attorneys' fees of Lessor
in defending against any one or more of the same.
ARTICLE 8
CHANGES AND ALTERATIONS
Section 8.1 During the term of this Lease and any renewal thereof,
Lessee at its own cost and expense may alter and remodel the portion or the
Building leased hereunder and may enlarge same by erecting an additional
structure on the land outlined in green on Exhibit "A" hereto, and in addition,
Lessee may erect two remote TV driveup teller units as also outlined on Exhibit
"A" hereto, provided that such improvements shall conform to the building laws
of the public authority having jurisdiction thereof, and provided that no such
improvements which will be constructed will impair the strength of the exterior
walls, foundations or other structural parts of the Building or will
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endanger the safety thereof, subject to Lessor's prior written approval which
Lessor agrees not to unreasonably withhold.
Section 8.2 Lessee expressly covenants and agrees to promptly pay
for any and all labor done or materials furnished for any work of demolition,
construction, repair, maintenance, improvement, alteration, addition or any
other matter pertaining to or in connection with the Premises, and agrees to
keep and hold the Premises and Lessor free, clear and harmless of and from any
mechanics' liens or liens of a similar nature which might or could arise by
reason of any such matter.
Section 8.3 Lessor shall at all reasonable times and from time to
time have the right to post and to keep posted on the Premises notices provided
for by Section 1183.1 of the Code of Civil Procedure of the State of California
or by any other law of said State for which Lessor may deem to be for the
protection of Lessor and said property from mechanics' liens or liens of a
similar nature.
Section 8.4 If Lessee is unable to secure a building permit or
otherwise is unable to proceed with the initial alterations, remodeling and
addition to the Building described in Section 8.1 above on or before December
31, 1972 it may cancel this Lease upon written notice to Lessor and thereupon it
will be released of all obligations hereunder.
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ARTICLE 9
MAINTENANCE
Section 9.1 Except as hereinafter provided, Lessee, at its sole
cost and expense, shall keep the Premises in good condition and repair,
including plate glass windows. Damage thereto by fire, act of God or the
elements excepted, Lessee hereby waiving all rights to make repairs at the
expense of Lessor as provided by any law, statute or ordinance now or hereafter
in effect. Lessee upon the expiration or sooner termination of the term hereof
shall surrender the Premises to Lessor in the same condition as received,
ordinary wear and tear, damage by fire, act of God, or the elements excepted.
Lessor, at its sole cost and expense shall repair any defects in the
structure of the Building and shall keep in good condition and repair the roof
and exterior thereof. Except, that portion constructed by Lessee which portion
shall be maintained and repaired at the sole cost and expense of Lessee.
ARTICLE 10
UTILITIES AND SERVICES
Section 10.1 Lessor agrees to furnish to the portion of the Premises
in the Building during reasonable hours of generally recognized business days,
water, electricity, sewer, heat and air-conditioning required for the
comfortable use and occupation of said portion of the Premises.
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Lessee shall furnish at its sole cost and expense janitorial services
for the portion of the Premises located in the Building, including the cleaning
of windows.
ARTICLE 11
PARKING
Section 11.1 Lessor shall assign twenty-eight (28) car spaces for
Lessee's employees and Lessor hereby grants to Lessee's agents, customers and
invitees, the right during the lease term or any extension or renewal thereof,
to use in common with others entitled to the use thereof, the parking areas as
delineated on Exhibit "A" hereto. The parking spaces crosshatched on Exhibit "A"
shall be reserved for exclusive twenty-minute parking for customers of Lessee
and Lessor shall use its best efforts to insure that there shall be no
interference by others in such exclusive use.
Lessor shall maintain the parking area in good and clean condition and
repair. The parking area crosshatched on Exhibit "A" shall not be relocated or
altered in any way, nor shall any structures be erected thereon other than the
two remote TV driveup teller units described in Section 8.1 above.
ARTICLE 12
CONDEMNATION
Section 12.1 In the event proceedings be taken by any lawful
authority to condemn or otherwise acquire in excess of 15%
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of the portion of the Premises located in the Building or in excess of 25% of
the parking area which Lessor is required to provide hereunder, Lessee shall
have the option at any time after such proceedings are instituted, and prior to
such taking or acquisition, to terminate this Lease upon giving fifteen (15)
days notice in writing to Lessor. Said termination shall be effective as of the
date possession of the Premises is taken by the condemning authority. In the
event of such termination, any unearned rent shall be refunded to Lessee.
Should Lessee not elect to terminate this Lease or should any such
taking not be sufficient to allow Lessee such option to terminate, this Lease
shall continue in full force and effect, and Lessor at its own cost and expense
shall restore, repair and remodel the Premises and the parking areas to the
extent necessary to provide same suitable for the business of Lessee. Lessee
shall be entitled to a reduction in rent thereafter required to be paid
hereunder in proportion to the ratio which the number of square feet in the
portion of the Premises in the Building taken bears to the total number of
square feet in the Premises in the Building originally demised. Lessee shall
also be entitled to a reasonable suspension or diminution of the rent required
to be paid hereunder during the time required for any restoration and repair
according to the portion of the Premises rendered untenantable taking into
consideration the time and extent of interference with Lessee's business
therein. Lessee shall receive no portion of the award
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payable to Lessor under a condemnation action except as herein provided.
Nothing herein contained shall be deemed or construed to prevent
Lessee from interposing or prosecuting in any condemnation proceeding a claim
for the value of any fixture or improvements installed in or made to the
Premises by Lessee (other than such as have been paid for by Lessor) and in the
case of a partial condemnation of the Premises, the cost, loss or damage
sustained by Lessee as a result of any alterations, modifications or repairs
which may be reasonably required of Lessee in order to place the remaining
portion of the Premises not so condemned in suitable condition for further use
and occupancy.
ARTICLE 13
DAMAGE BY FIRE, ETC.
Section 13.1 In the event the portion of the Premises in the
Building is damaged by fire or other casualty, Lessor shall forthwith repair the
same provided such repairs can be made within ninety (90) days under the laws
and regulations of the authorities having jurisdiction thereof, and this Lease
shall remain in full force and effect excepting that Lessee shall be entitled to
a proportionate reduction of rent from the date of occurrence until such date as
repairs are made, such proportionate reduction to be based upon the extent to
which the making of such repairs shall interfere with the business carried
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on by Lessee in the Premises. If such repairs cannot be made within ninety (90)
days, Lessor shall have the option either (1) to repair or restore such damage
provided this can be done within 180 days, this Lease to continue in full force
and effect but the rent to be proportionately reduced as above in this paragraph
provided, or, (2) give notice to Lessee at any time within thirty (30) days
after such damage terminating this Lease as of the date to be specified in such
notice, which date shall not be less than thirty (30), nor more than sixty (60)
days after the giving of such notice. In the event of the giving of such
notice, this Lease shall expire and all interest of Lessee in the Premises shall
terminate on such date so specified in such notice and the rent reduced by a
proportionate reduction based upon the extent, if any, to which such damage
interfered with the business carried on by Lessee, shall be paid to the date of
such termination, Lessor agreeing to refund to Lessee any rent theretofore paid
for any period of time subsequent to such date.
ARTICLE 14
DEFAULT PROVISION
Section 14.1 In the event of default on the part of Lessee in
payment of rent or other charges and payments to be made by Lessee under the
provisions of this Lease, and such default shall continue uncured for a period
of more than thirty (30) days after written notice of such default given as
provided in Article 16 of this Lease, or if such default is not curable by
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the payment of money and the Lessee fails for a period of thirty (30) days after
notice given as provided in Article 16 to commence to cure such default, and
thereafter diligently proceed to cure such default, or if Lessee shall be
adjudicated bankrupt or insolvent according to law, or if any assignment of
Lessee's property shall be made for the benefit of creditors, then in any of
said events Lessor without further notice or demand may:
(i) Declare said term ended and re-enter the Premises or any part
thereof, either with or without process of law and expel and remove therefrom
Lessee, or any and all parties occupying the same, using such force as may be
necessary so to do, and again repossess and enjoy the same.
(ii) Without declaring this Lessee ended, re-enter the Premises and
relet the whole or any part thereof in either Lessor's or Lessee's name, for the
account of the Lessee, for a term, which may extend beyond this Lease term, and
may collect said rent and apply it on the amount due from Lessee hereunder and
on any reasonable expense of such reletting and may then or at any time, or from
time to time, recover from Lessee the balance then due.
(iii) Terminate this Lease and thereupon be entitled to recover from
Lessee the damages provided for in Section 1951.2 of the California Civil Code,
which damages shall include the worth at the time of the award of the amount by
which the unpaid rent specified in this Lease exceeds the amount of the rental
loss for the same period that Lessee proves could be reasonably avoided.
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Lessor shall not by any re-entry, or other act, be deemed to have
terminated this Lease or the liability of Lessee for the rent and charges
equivalent to rent received hereunder, unless Lessor shall give Lessee notice in
writing that Lessor has elected to so terminate the Lease. The remedies of
Lessor specified hereinabove shall be cumulative as to each other and as to all
such others allowed by law, and the exercise of any such remedy by Lessor shall
be without prejudice to any remedies which might otherwise be used for arrears
of rent or preceding breach of covenant or condition.
ARTICLE 15
HOLDING OVER BY LESSEE
Section 15.1 If Lessee holds over or remains in the possession or
occupancy of the Premises after the expiration of the term of this Lease, or
after any sooner termination thereof, without any written lease of the Premises
being actually made and entered into between Lessee and Lessor, such holding
over or continued possession or occupancy, if rent is paid by Lessee and
accepted by Lessor for or during any period of time it so holds over or remains
in possession or occupancy shall create only a tenancy from month to month at
the last monthly rental and upon the terms (other than the length of term)
herein specified. Any such month to month tenancy may be terminated at any time
by either Lessor or Lessee upon giving to the other thirty (30) days notice of
intention to terminate the same.
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ARTICLE 16
NOTICES
Section 16.1 Any notices or demands which shall be required or
permitted by law or any provision of this Lease shall in writing; and if the
same is to be served upon Lessor, may be personally delivered to Lessor or may
be deposited in the United States mail, registered return receipt requested,
postage prepaid, addressed to Lessor as follows: __________________________
__________________________________________________________________________
or at such other address as Lessor may designate in writing.
If such notices or demands are to be served-upon Lessee, said notices
or demands shall be in writing and shall be made by deposit in the United States
mail, registered, return receipt requested, postage prepaid, addressed to the
Lessee at 555 South Flower Street, Los Angeles, California 90017, attention of
Area Administration-Premises, with a copy of said notice addressed to
Continental Service Company, 1335 South Grand Avenue, Los Angeles, California
90015, or such other address as Lessee may designate in writing.
In case of service by mall, service may be deemed complete upon
deposit in the United States mail in accordance with the provisions of this
Article.
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ARTICLE 17
TERMINATION
Section 17.1 Upon termination of this Lease for any reason
whatsoever, the Lessor shall require the Lessee to surrender to Lessor all
buildings, structures, improvements, and building equipment upon the Premises,
together with all alterations and replacements thereof, in good order, condition
and repair except for reasonable wear and use building equipment) which may be
made or installed by either the Lessor or Lessee upon the Premises shall upon
the making or installation thereof be and become a part of the Premises as a
part thereof at the termination of this Lease, subject, however, to the terms
and provisions of this Lease.
Trade fixtures, furniture and equipment (other than building
equipment) which may be installed on the Premises, shall not become a part of
the Premises and shall be removed by Lessee from the Premises; provided that no
trade fixtures, furniture or equipment shall be removed, except with the prior
written consent of Lessor, while Lessee is in default in the performance of any
of its obligations under this Lease and provided that Lessee shall at its own
cost and expense repair any and all physical damage to tho Premises resulting
from or caused by the removal of any trade fixtures, furniture or equipment
pursuant to this Section.
The term "building equipment" wherever used in this Lease shall
include all equipment primarily used or useful in the
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operation of any building or buildings as such upon the demised land as
distinguished from equipment used or useful in the operation of the business or
businesses conducted within such building or buildings. The term "trade
fixtures" as used herein shall include vault doors, night depositories and safe
deposit boxes.
ARTICLE 18
ATTORNEYS' FEES
Section 18.1 Should either party hereto institute any action or
proceeding in court to enforce any provision hereof or for damages by reason of
an alleged breach of any provision of this Lease, the prevailing party shall be
entitled to receive from the losing party such amount as the court may adjudge
to be reasonable attorneys' fees for the services rendered the prevailing party
in such action or proceedings.
ARTICLE 19
OPTIONS TO EXTEND LEASE TERM
Section 19.1 Provided Lessee is not in default under any of the
items and conditions of this Lease, Lessee shall have the following options to
extend the term of this Lease under the same terms, covenants and conditions
hereof:
(i) Lessee shall have an option to extend the lease term for ten (10)
years upon the expiration of the initial term.
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(ii) If Lessee exercises said first option, Lessee shall have a second
option to extend the lease term for an additional ten-year period after the
expiration of the first ten-year extension.
Each such option shall be exercised by Lessee giving Lessor a written
notice that it is exercising the same at least six (6) months prior to the date
upon which this Lease would otherwise terminate if such option were not
exercised. Any extended term hereof, pursuant to the exercise of said option or
options shall be subject to all of the terms, covenants and conditions of this
Lease, save and except that the monthly rental for the first extended ten-year
term shall be the sum of $5,157.88 increased by the percentage of increase, if
any, of the assessment by the County Assessor for the real property described on
Exhibit "B" hereto, for the fiscal year 2001-2002 over such assessment for the
fiscal year 1972-1973, and save and except that the monthly rental for the
second extended ten-year term shall be the sum of $5,157.88 increased by the
percentage of increase, if any, of the assessment by the County Assessor for the
real property described on Exhibit "B" hereto, for the fiscal year 2011-2012,
over such assessment for the fiscal year 1972-1973; provided, however, that if
the present method and formula for calculating real property assessments has
been abolished or changed at the time of exercising the particular option, then
the rent for the applicable extended term or terms shall be the fair market
rental value as of the time of
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commencement of the applicable extended term. In no event shall the adjusted
rent be less than $5,157.88 per month. The parties shall endeavor to agree upon
the fair market rental value. If the parties shall be unable to agree between
themselves as to the rent for the extended term or terms within the first sixty
(60) days of the six-month period, then either party shall be entitled to submit
this question to arbitration in accordance with Section 3.3 of this Lease.
ARTICLE 20
OPTION TO RENT ADDITIONAL SPACE
Section 20.1 Lessee shall have the option to lease the portions of
the Building known as Suites 101, 102 and 103 for a term beginning September 1,
1978 and expiring on the expiration of the term of this Lease or any extension
thereof. Such option shall be exercised by notice in writing to Lessor no later
than January 1, 1978. The rent for the additional space shall be the fair
market rental value as of the time of commencement of the term thereof. The
parties shall endeavor to agree upon the fair market value. If the parties
shall be unable to agree between themselves as to the rent for the additional
space by March 1, 1978, then either party shall be entitled to submit the
question for arbitration in accordance with Section 3.3 of this Lease.
ARTICLE 21
ESTOPPEL CERTIFICATE
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Section 21.1 Lessee and Lessor shall, at any time and from time to
time upon not less than ten (10) days' prior request by the other party,
execute, acknowledge and deliver to Lessor or Lessee, as the case may be, a
statement in writing certifying that this Lease is unmodified and in full force
and effect (or if there have been any modifications, that the same is in full
force and effect as modified and stating the modifications) and, if so, the
dates to which the fixed rent and any other charges have been paid in advance,
it being intended that any such statement delivered pursuant to this Section may
be relied upon by any prospective purchaser or encumbrancer (including
assignees) of the Premises.
ARTICLE 22
MEMORANDUM OF LEASE
Section 22.1 Each party agrees upon the request of the other to
enter upon a Memorandum of Lease suitable for recording containing a reference
of this Lease, description of the Premises and the term of this Lease.
ARTICLE 23
SIGNS
Section 23.1 Lessee may erect signs similar to those used in its
other branches in Southern California, provided they shall be in compliance with
all applicable laws and regulations.
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ARTICLE 24
SUCCESSORS
Section 24.1 This Lease shall be binding upon and shall inure to the
benefit of the parties hereto, their assigns, heirs, successors and personal
representatives.
ARTICLE 25
DESCRIPTIVE HEADINGS
Section 25.1 The descriptive headings of this Lease are inserted for
convenience in reference only and do not in any way limit or amplify the terms
and provisions of this Lease.
IN WITNESS WHEREOF, Lessor and Lessee have executed and delivered this
Lease the day and year first above written.
BANK OF AMERICAN NATIONAL ATLANTIC CONTINENTAL COMPANY
TRUST & SAVINGS ASSOCIATION
s/M.T. Barker/ s/Jerome J. Hoffman/
- ---------------------------- ----------------------------
M.T. Barker, Assistant Vice Jerome J. Hoffman
President
s/ E. Sutherland/
- ---------------------------- ESTATE OF RUDY BRUNER, DEC'D
E. Sutherland, Assistant
Secretary
s/Martin C. Barell/
----------------------------
Martin C. Barell
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EXHIBIT "B"
All that certain land situated in the State of California, County of Orange,
described as follows:
Parcel 1:
Lot 4, Tract No. 6106 in the County of Orange, State of California, as per map
recorded in book 232, pages 6 through 10 of Miscellaneous Maps, in the office of
the County Recorder of said County.
Except therefrom that portion thereof following described as follows:
Beginning at the intersection of the centerline of said El Toro Road and the
centerline of said Paseo de Valencia; thence South 02DEG. 25' 25" East, 511.89
feet along the centerline of said Paseo de Valencia; thence South 87DEG. 34'
35" East, leaving said centerline 207.00 feet to the true point of beginning;
thence North 87DEG. 34' 35" West 100.00 feet to the Easterly line of Ronda Del
Rossmoor, as shown on the map of Tract No. 6106, recorded in book 232, pages 6
to 10, inclusive of Miscellaneous Maps, records of said County, thence along
said Easterly line North 02DEG. 25' 25" East 205.78 feet to a tangent curve
concave Southeasterly having a radius of 47.00 feet; thence Northeasterly and
Easterly along said curve through a central angle of 87DEG. 34' 35" a distance
of 71.84 feet to a tangent line; thence East along said tangent line, 223.49
feet to a tangent curve concave Southwesterly having a radius of 104.00 feet;
thence Southeasterly along said curve through a central angle of 17DEG. 52' 34"
an arc distance of 30.00 feet; thence South to a line that bears South 45DEG.
00' 00" West and passes through the true point of beginning; thence
Southwesterly along said last mentioned line to the true point of beginning.
Except any portion of Lots B and C of said Tract No. 6106 adjoining said Lot 4.
Parcel 2:
A non-exclusive easement for ingress and egress over and across the following
described land: That portion of Lot C of Tract No. 6106 in the County of
Orange, State of California, as per map recorded in book 232, pages 6 to 10
inclusive of Miscellaneous Maps, in the office of the County Recorder of said
County, lying Southwesterly of the Southeasterly prolongation of the tangent
portion of the Southwesterly line of Lot 3 in said Tract No. 6106 together with
that portion of Lot B of said Tract No. 6106, included within a strip of land
44.00 feet wide, the Southwesterly, Southerly, Easterly, and Northeasterly line
of
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which is coincidental with the lot line of Lot 4 in said tract No. 6106.
58
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EXHIBIT "A"
Plot Plan
Basement Floor Plan
59
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SUBLEASE
AGREEMENT OF SUBLEASE (this "Sublease"), is made as of the 30th
day of November 1995, by and between CITIBANK, F.S.B., A FEDERAL SAVINGS BANK,
("SUBLANDLORD"), and SOUTHERN CALIFORNIA BANK, a California Corporation
("SUBTENANT").
W I T N E S S E T H:
A. WHEREAS, by that certain Lease, dated as of April 30, 1987,
between Lomas Santa Fe, Incorporated predecessor in interest to Regents Park
Financial Centre Ltd., a California Limited Partnership ("Landlord"), as lessor,
and Citicorp Savings, a Federal Savings and Loan Association, (now known as
CITIBANK F.S.B. a Federal Savings Bank), Sublandlord, as lessee, Landlord leased
to Sublandlord approximately three thousand four hundred seventy-one (3,471 )
square feet of space, as more particularly described in the Lease, and located
on the ground floor in Suite 125 of the building (the "Building") located at
4180 La Jolla Village Drive, La Jolla, California;
B. WHEREAS, by that certain First Amendment To Lease, dated as of
November 4, 1987, between Landlord and Citicorp Savings, a Federal Savings and
Loan Association, Citicorp Savings leased from Landlord additional space within
the Building for the purpose of operating Automated Teller Machines ("ATMs"), as
more particularly described in the First Amendment To Lease. Such additional
space and the 3,471 square feet of space described in Recitals A, above, are
collectively herein referred to as the "Premises";
C. WHEREAS, by that certain Assignment of Lease and Assumption of
Liability Agreement, dated as of August 15, 1989, Lomas Santa Fe, Incorporated
assigned its interest under the Lease to Regents Park Financial Centre Limited,
California Limited Partnership;
D. WHEREAS, by that certain Second Amendment To Lease, dated as of
March 13, 1990, between Landlord and Citicorp Savings, a Federal Savings and
Loan Association, Landlord and Citicorp Savings amended Exhibit G of the Lease,
as more particularly described in the Second Amendment To Lease;
E. WHEREAS, the Lease, First Amendment To Lease and the Second
Amendment To Lease, as described in Recitals A, B and D, above, are collectively
herein referred to as the "Lease"; and,
F. WHEREAS, Sublandlord desires to sublease to Subtenant the entire
Premises as indicated on Exhibit A attached hereto and Subtenant desires to hire
the Premises from Sublandlord on the terms, covenants and conditions contained
herein.
NOW, THEREFORE, in consideration of the mutual covenants,
conditions and terms herein contained, it is mutually agreed as follows:
<PAGE>
1. SUBLEASING OF PREMISES. Sublandlord hereby subleases to Subtenant, and
Subtenant hereby hires from Sublandlord, the Premises, upon and subject to the
terms and conditions hereinafter set forth.
2. TERM.
2.1 The term (the "Term") of this Sublease shall be for a two
(2) year and two (2) month period, which shall commence on November 1,1995 (the
"Commencement Date") and shall terminate on December 31, 1997 (the "Expiration
Date"), or on such earlier date upon which the Term shall expire or be canceled
or terminated pursuant to any of the conditions or covenants of this Sublease or
pursuant to law. Subtenant shall have absolutely no option to extend the Term
of this Sublease, and Sublandlord hereby agrees that Sublandlord shall have
absolutely no option to extend the term of the Lease. Sublandlord and Subtenant
hereby agree that the provisions of Addendum To Lease (Option Provision) of the
Lease are hereby deleted in their entirety and are null, void and no longer of
any force or effect.
2.2 If Sublandlord is unable or fails to deliver possession of
the Premises on the Commencement Date (i) Sublandlord shall not be subject to
any liability for failure to give possession, (ii) Subtenant waives the right to
recover any damages which may result from such failure to give possession, and
(iii) the Commencement Date shall be postponed until three (3) days after the
date of notice given by Sublandlord to Subtenant stating that the Premises are
ready for delivery to Subtenant. If the Commencement Date shall be postponed as
provided in this Section 2.2, then promptly following the Commencement Date,
Sublandlord and Subtenant shall execute an agreement confirming the Commencement
Date and Rental (as hereinafter defined) shall be abated for the period between
November 1, 1995 and the Commencement Date, and Subtenant's payment of Rental
for the month of November, 1995 only shall be proportionately reduced. If
Sublandlord does not deliver the Premises to Subtenant on or before November 30,
1995, Subtenant shall have the right, by delivering notice to Sublandlord and
Landlord on or before December 31, 1995, to terminate this Sublease and all
rights and obligations of Sublandlord and Subtenant under this Sublease. If
Subtenant does not so deliver such notice on or before December 31, 1995,
Subtenant shall have no such right thereafter to terminate this Sublease due to
Sublandlord not delivering the Premises to Subtenant on or before November 30,
1995.
3. BASE RENT AND ADDITIONAL RENT.
3.1 Subtenant shall pay to Sublandlord, commencing on the
Commencement Date, in currency which at the time of payment is legal tender for
public and private debts in the United States of America, as base rent ("Base
Rent") during the Term, on or
2
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before the first (1st) day of each month during the Term, in the following
amounts for the following periods:
(a) for the one (1) year period commencing on the Commencement Date
and ending on October 31, 1996 in equal monthly installments of Five Thousand
Five Hundred Fifty-Three and 60/100 Dollars ($5,553.60) per month;
(b) for the one (1) year period commencing on November 1, 1996 and
ending on October 31, 1997 in equal monthly installments of Five Thousand Seven
Hundred Seventy-Five and 74/100 Dollars ($5,775.74) per month; and,
(c) for the two (2) month period commencing on November 1, 1997 and
ending on the Expiration Date in equal monthly installments of Six Thousand Six
and 77/100 Dollars ($6,006.77).
The installment of Base Rent for the first full calendar month of the Term
following the Commencement Date ($5,553.60) shall be due and payable on the
execution of this Sublease. Provided that the delay is not caused by Subtenant,
the payment of Base Rent shall be deferred by the same number of days after the
Commencement Date that delivery of possession of the Premises may be delayed, if
any. If the Commencement Date shall occur on a date other than the first day of
any calendar month, the Base Rent payable hereunder for such month shall be
prorated on a per-diem basis and shall be paid on or before the first day of the
first full month following the Commencement Date.
3.2 In addition to the Base Rent herein reserved, Subtenant
agrees to pay to Sublandlord additional rental calculated as follows:
(a) one hundred percent (100%) of the amounts payable by
Sublandlord pursuant to Lease Article 1.10 (b)(i) (for triple net Operating
Expenses), Article 5.04 (for Personal Property Taxes), Article 5.05 (for
Utilities), Article 5.06 (for Impounds for Insurance Premiums and Property
Taxes), Article 9 (for Maintenance, Repairs and Alterations) and Exhibit G of
the Lease to the extent that such amounts exceed Sublandlord's costs for such
amounts under the Lease for the first one (1) year period of the Term (the "Base
Year") of the Sublease (from November 1, 1995 to October 31, 1996). Effective
commencing on November 1, 1996, such increases in such amounts above the Base
Year shall be payable by Subtenant to Sublandlord in the same manner (within
thirty days of Sublandlord mailing an invoice for such additional rent to
Subtenant) as corresponding payments are payable by Sublandlord to Landlord
under the Lease.
(b) all other payments for which Sublandlord shall become
responsible to Landlord under the Lease in respect of the Premises, or
Subtenant's use or occupancy thereof or by reason of any act or omission of
Subtenant, including, without being limited to, any payments accruing as a
result of (i) any increases in insurance premiums as provided in Article 13
3
<PAGE>
(Insurance) of the Lease, resulting from any act or omission of Subtenant, (ii)
any additional rent payable on account of Subtenant's use of extra heating,
ventilation or air conditioning (iii) any additional rent payable on account of
any services provided to Subtenant. Any restoration or repair of the Premises
or removal of Subtenant's furniture, fixtures, equipment and personal property
required upon the expiration of the Term hereof as a result of Subtenant's
Alterations, as that term is hereinafter defined, shall be performed by
Subtenant at Subtenant's sole risk, cost and expense, and shall be completed by
Subtenant on or before the Expiration Date.
3.3 If Subtenant shall fail to pay within five (5) days after
any installment of Base Rent is due hereunder, or, if Subtenant shall fail to
pay within thirty (30) days after Sublandlord delivers to Subtenant any invoice
for any installment of additional rental or other costs, charges and sums
payable by Subtenant hereunder (such additional rental or other costs, charges
and sums, together with Base Rent, hereinafter collectively referred to as the
"Rental"), Subtenant shall pay to Sublandlord, in addition to such installment
of Rental, as a late charge equal to ten percent (10%) of any such unpaid Rental
amount.
3.4 All Base Rent and other Rental shall constitute rent under
this Sublease, and shall be payable to Sublandlord at its address as set forth
in Article 14 hereof, unless Sublandlord shall otherwise direct in writing.
However, if Sublandlord is adjudged to be in default of the Lease beyond any
applicable notice and cure period, and Landlord notifies Subtenant and
Sublandlord that Sublandlord is in default of the Lease, Subtenant shall pay all
Rental due under this Sublease (commencing after Subtenant and Sublandlord
receive such notice) to Landlord and not to Sublandlord.
3.5 Subtenant shall promptly pay the Rental as and when the same
shall become due and payable without set-off, offset or deduction of any kind
whatsoever, except as expressly set forth herein, and, in the event of
Subtenant's failure to pay the same when due (subject to grace periods provided
herein), Sublandlord shall have all of the rights and remedies provided for
herein or at law or in equity, in the case of non-payment of Rental.
3.6 Sublandlord's failure during the Term to prepare and deliver
any statements or bills required to be delivered to Subtenant hereunder, or
Sublandlord's failure to make a demand under this Sublease shall not in any way
be deemed to be a waiver of, or cause Sublandlord to forfeit or surrender its
rights to collect any Rental which may have become due pursuant to this Sublease
during the Term. However, Sublandlord's failure to so prepare and deliver
statements and bills to Subtenant or make such a demand under this Sublease
shall preclude Sublandlord from collecting any late fees or charges from
Subtenant until Sublandlord does so prepare and deliver such statements, bills
or
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<PAGE>
demands to Subtenant and the time periods have elapsed under paragraph 3.6 of
this Sublease. Subtenant's liability for Rental due under this Sublease
accruing during the Term, and Sublandlord's obligation to refund overpayments of
or adjustments to Rental paid to it by Subtenant, shall survive the expiration
or sooner termination of this Sublease.
3.7 Sublandlord shall promptly furnish to Subtenant a copy of
each notice or statement from Landlord affecting the Premises. If Sublandlord
disputes the correctness of any such notice or statement and if such dispute is
resolved in Sublandlord's favor, or if Sublandlord shall receive any refund of
additional rent without a dispute, Sublandlord shall promptly pay to Subtenant
any refund (after deducting from the amount of any such refund all expenses,
including court costs and reasonable attorneys' fees, incurred by Sublandlord in
resolving such dispute) received by Sublandlord in respect (but only to the
extent) of any related payments of additional rent made by Subtenant less any
amounts theretofore received by Subtenant directly from Landlord and relating to
such refund, provided that, pending the determination of any such dispute (by
agreement or otherwise), Subtenant shall pay the full amount of Rental in
accordance with this Sublease and the applicable statement or notice of
Landlord.
4. SUBORDINATION TO AND INCORPORATION OF THE LEASE.
4.1 This Sublease is in all respects subject and subordinate to
the terms and conditions of the Lease and to all matters to which the Lease is
subject and subordinate. Sublandlord represents that a true and complete copy
of the Lease has been furnished by Sublandlord to Subtenant. Subtenant shall
indemnify Sublandlord for, and shall hold it harmless from and defend it
against, any and all losses, damages, penalties, liabilities, costs and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, which may be sustained or incurred by Sublandlord by reason of
Subtenant's failure to keep, observe or perform any of the terms, provisions,
covenants, conditions and obligations on Sublandlord's part to be kept, observed
or performed under the Lease to the extent same shall have been incorporated
herein, or otherwise arising out of or with respect to Subtenant's use and
occupancy of the Premises from and after the Commencement Date. Sublandlord
shall indemnify Subtenant for, and shall hold it harmless from and defend it
against, any and all losses, damages, penalties, liabilities, costs and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, which may be sustained or incurred by Subtenant by reason of
Sublandlord's failure to comply (after any applicable period under this Sublease
or the Lease has elapsed for Sublandlord to receive notice of and cure the
non-compliance) with any term of this Sublease or obligation under the Lease.
4.2 Except as otherwise expressly provided in, or otherwise
inconsistent with this Sublease, or to the extent not
5
<PAGE>
applicable to the Premises, the terms, provisions, covenants, stipulations,
conditions, rights, obligations, remedies and agreements contained in the Lease
are incorporated in this Sublease by reference, and are made a part hereof as if
herein set forth at length, Sublandlord being substituted for the "Lessor" under
the Lease, and Subtenant being substituted for the "Lessee" under the Lease,
except that the following provisions of the Lease shall be deemed deleted
therefrom and shall have no force and effect as between Sublandlord and
Subtenant:
i. Articles 1.05 and 2.01 (Term).
ii. Article 2.04 (Holding Over), it being understood that Subtenant
shall have absolutely no right to hold over in the Premises after
the Expiration Date.
iii. Article 3 (Rent).
iv. Article 19.05 (Lessee's Financial Condition), however; Landlord
shall retain the right to request information of Subtenant under
Article 19.05 of the Lease.
v. Article 36 (Notices).
vi. Article 46 (Brokers).
vii. Exhibit C (Description of Demised Premises Shell).
viii. Exhibit E (Lessee's Improvements, Alterations or Additions).
ix. The following specific Sections of Exhibit G (Addendum To
Lease)(with all other sections of Exhibit G not listed below
continuing in full force and effect:):
(1) Section 1.05.
(2) Section 3.02(d).
(3) Section 9.02 (the first paragraph).
(4) Section 9.03 (the second paragraph). However, Subtenant
shall provide Landlord with "as built" plans relating to
Subtenant's alterations to the Premises, if Landlord so
requests.
(5) Section 13.01 (c).
(6) Section 16.03 (the second paragraph).
(7) All of the provisions of Article 47 (Additional Provisions).
(8) Article 48 (Sign Removal).
(9) Addendum To Lease - Option Provision.
x. Exhibit H (Signage).
xi. Addendum To Lease (Free Rent Provision).
xii. Paragraphs 3, 5 and 6 of the Second Amendment To Lease (except
that, Subtenant may use the additional space within the Premises,
as described in the Second Amendment To Lease, for the purposes
of installing, operating and maintaining two ATMs for Subtenant's
business in the Premises).
xiii. The Second Amendment To Lease.
5. ADDITIONAL PROVISIONS.
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The following provisions of the Lease shall be modified as
hereinafter provided:
5.1 Article 5 (Additional Rent) is changed such that
Subtenant shall pay all Rental to Sublandlord (not
Landlord) under this Sublease.
5.2 Article 6.03 (Lessee Advertising and Vending Machines)
shall have the following words added thereto:
"All such signs of Lessee shall be subject to and comply with all
applicable laws, codes and statutes, and shall be subject to the prior written
approval of Landlord."
5.3 The second subparagraph of Article 25 (Indemnification
of Lessor) shall be modified such that Subtenant hereby acknowledges that
Subtenant is subleasing the Premises from Sublandlord and is not leasing the
Premises from Regents Park Financial Centre Ltd.
6. USE. Subtenant shall use and occupy the Premises for
financial services and for office use and for no other purposes.
7. COVENANTS WITH RESPECT TO THE LEASE.
7.1 Subtenant shall not do anything that would constitute a
default under the Lease or omit to do anything that Subtenant is obligated to do
under the terms of this Sublease so as to cause there to be a default under the
Lease. Throughout the Term of this Sublease (but subject to the provisions of
this Sublease and the Lease), Sublandlord shall continue to pay all rent to
Landlord due under the Lease, provided that the Lease is not terminated pursuant
to the provisions of this Sublease or the Lease.
7.2 The time limits set forth in the Lease for the giving of
notices, making demands, performance of any act, condition or covenant, or the
exercise of any right, remedy or option, are changed for the purpose of this
Sublease, by lengthening or shortening the same in each instance, as
appropriate, so that notices may be given, demands made, or any act, condition
or covenant performed, or any right, remedy or option hereunder exercised, by
Sublandlord or Subtenant, as the case may be (and each party covenants that it
will do so) within three (3) days prior to the expiration of the time limit,
taking into account the maximum grace period, if any, relating thereto contained
in the Lease. Each party shall promptly deliver to the other party copies of
all notices requests or demands which relate to the Premises or the use or
occupancy thereof after receipt of same from Landlord. Each party shall also
promptly deliver to Landlord copies of all notices, requests or demands that
such party delivers to the other party hereunder.
7
<PAGE>
8. SERVICES, REPAIRS, AND ALTERATIONS.
8.1 Notwithstanding anything to the contrary contained in this
Sublease or in the Lease, Sublandlord shall not be required to provide any of
the services that Landlord has agreed to provide pursuant to the Lease (or
required by law), or furnish the electricity to the Premises that Landlord has
agreed to furnish pursuant to the Lease (or required by law), or make any of the
repairs or restorations that Landlord has agreed to make pursuant to the Lease
(or required by law), or comply with any laws or requirements of any
governmental authorities, or take any other action that Landlord has agreed to
provide, furnish, make, comply with, or take, or cause to be provided,
furnished, made, complied with or taken under the Lease, but Sublandlord agrees
to use and exercise reasonable efforts, at Subtenant's sole cost and expense, to
obtain the same from Landlord and to cause Landlord to perform its obligations
under the Lease for the benefit of Subtenant (provided, however, that
Sublandlord shall not be obligated to use such efforts or take any action which
might give rise to a default under the Lease), and, subject to Sublandlord using
and exercising reasonable efforts as set forth in this paragraph, Subtenant
shall rely upon, and look solely to, Landlord for the provision, furnishing or
making thereof or compliance therewith. If Landlord shall default in the
performance of any of its obligations under the Lease, Sublandlord shall, upon
reasonable request and at the sole cost and expense of Subtenant (including but
not limited to, Subtenant paying all of Sublandlord's attorney's fees and court
costs, provided that such Landlord's default is not solely and proximately
caused by a default of Sublandlord under the Lease), timely institute and
diligently prosecute any action or proceeding which both Sublandlord and
Subtenant deem appropriate in both Sublandlord's and Subtenant's reasonable
judgment, in order to have Landlord make such repairs, furnish such electricity,
provide such services or comply with any other obligation of Landlord under the
Lease or as required by law. However, notwithstanding the foregoing,
Sublandlord shall have no obligation to institute or diligently prosecute any
action or proceeding which Subtenant could bring directly against Landlord
without Sublandlord being a party to any such action or proceeding. Subtenant
shall defend, indemnify and hold harmless Sublandlord from and against any and
all such claims arising from or in connection with such request, action or
proceeding, provided that, Landlord's failure to so comply with Landlord's
obligations under the Lease is not solely and proximately caused by a default of
Sublandlord under the Lease. This indemnity and hold harmless agreement shall
include indemnity from and against any and all liability, fines, suits, demands,
costs and expenses of any kind or nature, including, without limitation,
reasonable attorneys' fees and disbursements, incurred in connection with any
such claim, action or proceeding brought thereon. Subtenant shall not make any
claim against Sublandlord for any damage which may arise, nor shall Subtenant's
obligations hereunder be diminished, by reason of (i) the failure of Landlord to
keep, observe or perform any of its obligations pursuant to the Lease
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or (ii) the acts or omissions of Landlord, its agents, contractors, servants,
employees, invitees or licensees. If the Lease is terminated by Landlord as a
result of a default or breach by Sublandlord or Subtenant under this Sublease or
the Lease, the defaulting party shall be liable to the non-defaulting party for
any damages suffered as a result of such termination. The provisions of this
Section 7.1 shall survive the expiration or earlier termination of the Term
hereof.
8.2 Subtenant shall not make or allow to be made any
alterations, changes, additions or improvements (collectively, "Alterations") to
the Premises or any part thereof without the prior written consent of Landlord
and Sublandlord. If Landlord and Sublandlord shall consent to any Alterations
to the Premises, such Alterations shall be subject to any terms, covenants,
conditions and agreements which Landlord and Sublandlord may prescribe from time
to time, which shall include a requirement that, prior to the commencement of
any Alterations to the Premises, Subtenant deliver to Landlord and Sublandlord
written acknowledgments from all materialmen, contractors, artisans, mechanics,
laborers and any other persons furnishing any labor, services, materials,
supplies or equipment to Subtenant with respect to the Premises that they will
look exclusively to Subtenant for payment of any sums due in connection
therewith and that Landlord and Sublandlord shall have no liability for such
costs. All Alterations to the Premises made or requested by Subtenant shall be
at Subtenant's sole risk, cost and expense. Upon the expiration or sooner
termination of the Term, any Alterations to the Premises, excepting movable
furniture and trade fixtures, shall become the property of Landlord and shall be
surrendered with the Premises, unless Landlord or Sublandlord shall direct
Subtenant to remove any such Alterations, in which event, Subtenant shall remove
same at its sole cost and expense and repair in a good and workmanlike manner or
any damage to the Premises or Building occasioned by such removal and, after
complying with the foregoing, on or before the Expiration Date, restore the
Premises and Building to the condition existing prior to such Alterations,
normal wear and tear accepted.
9. CONSENTS.
9.1 Sublandlord agrees that whenever its consent or approval is
required hereunder, or where something must be done to Sublandlord's
satisfaction, Sublandlord shall not unreasonably withhold or delay such consent
or approval, unless otherwise stated in this Sublease; provided, however, that
whenever the consent or approval of Landlord, the lessor under a superior lease,
or the mortgagee under a mortgage, as the case may be, is also required pursuant
to the terms of the Lease, and in connection therewith, if Landlord, the lessor
under a superior lease, or the mortgagee under a mortgage shall withhold its
consent or approval for any reason whatsoever, Sublandlord shall not be deemed
to be acting unreasonably if it shall also withhold its consent or approval. If
Landlord shall withhold its consent or approval in connection with this Sublease
or the Premises in
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any instance where, under the Lease, the consent or approval of Landlord may not
be unreasonably withheld, and if Subtenant shall reasonably contend that
Landlord has unreasonably withheld such consent, Sublandlord may, upon the
request and at the expense of Subtenant, but Sublandlord shall have absolutely
no obligation to do so under any circumstances, either (i) timely institute and
diligently prosecute any action or proceeding which Sublandlord, in its sole and
absolute discretion, deems meritorious, in order to dispute such action by
Landlord, or (ii) permit Subtenant, to the extent allowable under the Lease, to
institute and prosecute such action or proceeding in the name of Sublandlord,
provided that Subtenant shall keep Sublandlord informed of its actions and shall
not take any action which might give rise to a default under the Lease.
Subtenant shall indemnify Sublandlord and hold it harmless from and against all
losses, damages, claims, liabilities, fines, penalties, suits, demands, costs
and expenses, of any nature, arising from or in connection with any action or
proceeding instituted under this Section 8.1.
9.2 If Subtenant shall request Sublandlord's consent and
Sublandlord has agreed, under the terms of this Sublease, that neither its
consent nor its approval shall be unreasonably withheld, and Sublandlord shall
fail or refuse to give such consent or approval, and Subtenant shall dispute the
reasonableness of Sublandlord's refusal to give its consent or approval, such
dispute shall be finally determined by a court of competent jurisdiction. If
the determination shall be adverse to Sublandlord, Sublandlord nevertheless,
shall not be liable to Subtenant for a breach of Sublandlord's covenant not to
unreasonably withhold such consent or approval, and Subtenant's sole remedy in
such event shall be the granting of consent or approval by Sublandlord with
respect to such request under this Sublease.
10. TERMINATION OF LEASE. In the event of a default under the Lease
which results in the termination of the Lease, Subtenant shall attorn to and
recognize Landlord as Sublandlord hereunder and shall, promptly upon Landlord's
request, execute and deliver all instruments reasonably necessary or appropriate
to confirm such attornment and recognition. Provided Subtenant is not in
default under the terms of this Sublease, Landlord shall not disturb Subtenant's
right to possession as provided under this Sublease. Sublandlord shall not be
liable to Subtenant by reason of such termination of the Lease by either
Landlord or Sublandlord pursuant to the Lease, provided the termination is not
the result of the Sublandlord's default of the terms of the Lease or this
Sublease.
11. SUBLEASE. NOT ASSIGNMENT. Notwithstanding anything contained
herein, this Sublease shall be deemed to be a sublease of the Premises and not
an assignment, in whole or in part, of Sublandlord's interest in the Lease.
12. DAMAGE, DESTRUCTION, FIRE AND OTHER CASUALTY: CONDEMNATION.
Notwithstanding any contrary provision of this
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Sublease or the provisions of the Lease herein incorporated by reference,
Subtenant shall not have the right to terminate this Sublease as to all or any
part of the Premises, or be entitled to an abatement of Base Rent or any other
item of Rental, by reason of a casualty or condemnation affecting the Premises
unless Sublandlord is entitled to terminate the Lease or Sublandlord is entitled
to a corresponding abatement with respect to its corresponding obligation under
the Lease. If Sublandlord is entitled to terminate the Lease for all or any
portion of the Premises by reason of casualty or condemnation, Sublandlord may
terminate this Sublease as to any corresponding part of the Premises by written
notice to Subtenant given at least five (5) days prior to the date(s)
Sublandlord is required to give notice to Landlord of such termination under the
terms of the Lease.
13. NO WAIVERS. Failure by Sublandlord in any instance to insist
upon the strict performance of any one or more of the obligations of Subtenant
under this Sublease, or to exercise any election herein contained, shall in no
manner be or be deemed to be a waiver by Sublandlord of any of Subtenant's
defaults or breaches hereunder or of any of Sublandlord's rights and remedies by
reason of such defaults or breaches, or a waiver or relinquishment for the
future of the requirement of strict performance of any and all of Subtenant's
obligations hereunder. Further, no payment by Subtenant or receipt by
Sublandlord of a lesser amount than the correct amount or manner of payment of
Rental due hereunder shall be deemed to be other than a payment on account, nor
shall any endorsement or statement on any check or any letter accompanying any
check or payment be deemed to effect or evidence an accord and satisfaction, and
Sublandlord may accept any checks or payments as made without prejudice to
Sublandlord's right to recover the balance or pursue any other remedy in this
Sublease or otherwise provided at law or equity.
14. NOTICES. Any notice, statement, demand, consent, approval,
advice or other communication required or permitted to be given, rendered or
made by either party to the other, pursuant to this Sublease or pursuant to any
applicable law or requirement of public authority (collectively, "Notices")
shall be in writing and shall be deemed to have been properly given, rendered or
made only if sent by personal delivery, receipted by the party to whom
addressed, or registered or certified mail, return receipt requested, posted in
a United States post office station in the continental United States, addressed
(i) to Subtenant, at its address as set forth below or at the Premises, (ii) to
Sublandlord, at its addresses as set forth below, and (iii) to Landlord, at its
address set forth below. All such Notices shall be deemed to have been given,
rendered or made when delivered and receipted by the party to whom addressed, in
the case of personal delivery, or three (3) days after the day so mailed.
Either party may, by Notice in the manner set forth herein, designate a
different address or addresses for communications intended for it.
Sublandlord's addresses:
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<PAGE>
Citibank F.S.B.
Citicorp Corporate Realty Services Western region
725 South Figueroa, 2nd Floor
Los Angeles, CA 90017
Attn: Lease Administrator
copies of any Notices commencing or relating to any action, suit or proceeding
against Sublandlord arising under this Sublease shall also be sent to the
following:
Citicorp/Citibank Real Estate Legal Department
599 Lexington Avenue
24th Floor/Zone 9
New York, NY 10043
Attn: General Counsel
Subtenant's address:
Southern California Bank
P.O. Box 588
La Mirada, CA 90637-0588
Attn: Premises Manager
Landlord's Address:
Regents Park Financial Centre Ltd.
c/o Asset Management Group
11750 Sorrento Valley Road
San Diego, CA 92121
15. BROKER. Each party hereto covenants, warrants and represents to
the other party that it has had no dealings, conversations or negotiations with
any broker other than Robert M. Irish, Inc. and CB Commercial Real Estate Group,
Inc. (collectively, the "Broker") concerning the execution and delivery of this
Sublease. Each party hereto agrees to defend, indemnify and hold harmless the
other party against and from any claims for any brokerage commissions and all
costs, expenses and liabilities in connection therewith, including, without
limitation, reasonable attorneys' fees and disbursements, arising out of its
respective representations and warranties contained in this Article 15 being
untrue. Sublandlord shall pay any brokerage commissions due to the Broker
pursuant to a separate agreement between Sublandlord and the Broker. The
provisions of this Article 15 shall survive the expiration or earlier
termination of this Sublease.
16. CONDITION OF THE PREMISES. Subtenant represents that it has made
or caused to be made a thorough examination of the Premises and is familiar with
the condition of every part thereof. Subtenant agrees to accept the Premises in
its "as is" condition on the date hereof, reasonable wear and tear between the
date hereof and the Commencement Date excepted. Sublandlord has not made and
does not make any representations or warranties as to the physical condition of
the Premises, the use to which
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<PAGE>
the Premises may be put, or any other matter or thing affecting or relating to
the Premises, except as specifically set forth in this Sublease. Sublandlord
shall have no obligation whatsoever to alter, remodel, improve, decorate,
repair, paint or otherwise prepare the Premises nor replace any part thereof,
for Subtenant's occupancy.
17. CONSENT OF LANDLORD TO THIS SUBLEASE. Sublandlord and Subtenant
each hereby acknowledge and agree that this Sublease is subject to and
conditioned upon Sublandlord obtaining the written consent (the "Consent") of
Landlord as to: (i) the subleasing of the Premises by Sublandlord to Subtenant
under this Sublease; (ii) Subtenant's proposed use of the Premises; (iii)
Subtenant's proposed signage (if any is proposed by Subtenant as of the date of
this Sublease); (iv) Subtenant's proposed Alterations (if any are proposed by
Subtenant as of the date of this Sublease) and, (v) the transfer to Subtenant of
Sublandlord's parking rights under the Lease. Promptly following the execution
and delivery hereof, Sublandlord shall submit this Sublease to Landlord for
approval. Subtenant hereby agrees that it shall cooperate in good faith with
Sublandlord and shall comply with any reasonable requests made of Subtenant by
Sublandlord or Landlord in the procurement of the Consent. Sublandlord shall
pay to Landlord a tenant improvement allowance within thirty (30) days after
Sublandlord receives a written invoice from Landlord, which invoice shall be
accompanied by written evidence that Landlord paid a tenant improvement
allowance to Subtenant and such allowance was totally utilized to make
improvements or alterations to the Premises by Subtenant, which amount must be
at least four (4) times the amount for which Landlord has invoiced Sublandlord.
However, in no event shall the tenant improvement allowance that is to paid by
Sublandlord to Landlord hereunder exceed Five Thousand Dollars ($5,000.00). In
no event shall Sublandlord or Subtenant be obligated to make any other payment
to Landlord in order to obtain the Consent or the consent to any provision
hereof, other than as expressly set forth in the Lease (and any such fees which
may be payable pursuant to the Lease shall be payable by Subtenant and
Sublandlord shall have no responsibility for the payment of same).
18. ASSIGNMENT, SUBLETTING AND MORTGAGING.
18.1 Subtenant shall not assign, sell, transfer (whether by
operation or law or otherwise), pledge, mortgage or otherwise encumber this
Sublease or any portion of its interest in the Premises, nor sublet all or any
portion of the Premises or permit any other person or entity to use or occupy
all or any portion of the Premises, without the prior written consents of
Sublandlord (except as set forth below) and Landlord. Sublandlord shall not
unreasonably withhold or delay its consent, and Landlord's consent shall be
subject to the provisions of Article 16 (Assignment and Sublease) of the Lease.
In connection with any subletting or assignment permitted,
Subtenant shall pay to Sublandlord, in addition to all
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<PAGE>
such Rental payable by Subtenant to Sublandlord hereunder, all rent, additional
rent or other payments and consideration received by Subtenant in excess of
Rental payable by Subtenant to Sublandlord.
18.2 For the purposes of this Article 18, an assignment or
subletting shall be deemed to have occurred upon: (i) the subletting or
assignment to a subsidiary or affiliate of Subtenant or occupancy by Subtenant's
subsidiaries or affiliates [such an assignment or subletting under this subpart
18.2(i) shall not require Sublandlord's prior written consent, but shall remain
subject to Landlord's consent pursuant to the provisions of Article 16 of the
Lease]; (ii) the sale or transfer, whether pursuant to a single transaction or
in a series of related or unrelated transactions, including without limitation
by consolidation, merger or reorganization, of a majority of the voting stock of
Subtenant or any beneficial interest therein, if Subtenant is a corporation, or
any sale or other transfer, whether pursuant to one or more successive
transactions, of a majority of the general partnership interests in Subtenant or
any beneficial interest therein, if Subtenant is a partnership; and (iii) the
sale or other transfer, whether pursuant to one or more successive transactions,
of more than fifty (50%) percent, by value, of the assets of Subtenant used in
conducting its business in the Premises (in the event of such a sale or
transfer, Sublandlord shall have no right to terminate this Sublease, but any
such sale or transfer shall be subject to Landlord's rights, if any, to
terminate this Sublease under the provisions of the Lease).
18.3 If this Sublease be assigned, or if the Premises of any part
thereof be sublet (whether or not Sublandlord and Landlord shall have consented
thereto), Sublandlord, after default by Subtenant in its obligations hereunder,
may collect rent from the assignee or subtenant and apply the net amount
collected to the Rental herein reserved, but no such assignment or subletting
shall be deemed a waiver of the covenant set forth in this Article 18, or the
acceptance of the assignee or subtenant as a tenant, or a release of Subtenant
from the further performance and observance by Subtenant of the covenants,
obligations and agreements on the part of Subtenant to be performed or observed
herein. The consent by Sublandlord or Landlord to an assignment, sale, pledge,
transfer, mortgage or subletting shall not in any way be construed to relieve
Subtenant from obtaining the express consent in writing, to the extent required
by this Sublease or the Lease, of Sublandlord and Landlord to any further
assignment, sale, pledge, transfer, mortgage or subletting.
19. SECURITY. Subtenant has deposited with Sublandlord the sum of
Six Thousand Six Hundred Six and 77/100 Dollars ($6,006.77) as security (the
"Security") for the faithful performance and observance by Subtenant of the
terms, provisions and conditions of this Sublease, including, but not limited
to, the payment of Base Rent and all other items of Rental and the
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<PAGE>
surrender of the Premises to Sublandlord as herein provided. If Subtenant
defaults in respect of any of the terms, provisions and conditions of this
Sublease, Sublandlord may apply or retain the whole or any part of the Security
so deposited, as the case may be, to the extent required for the payment of any
Base Rent or any other item of Rental as to which Subtenant is in default or for
any sum which Sublandlord may expend or be required to expend by reason of
Subtenant's default in respect of any of the terms, covenants and conditions of
this Sublease, including, but not limited to, any damages or deficiency in the
reletting of the Premises, whether such damages or deficiency accrue or accrues
before or after summary proceedings or other re-entry by Sublandlord. If
Sublandlord applies or retains any part of the Security so deposited, Subtenant,
upon demand, shall deposit with Sublandlord the amount so applied or retained so
that Sublandlord shall have the full deposit on hand at all times during the
Term. If Subtenant fully and faithfully complies with all the terms,
provisions, covenants and conditions of this Sublease, the Security Deposit,
exclusive of any earned interest thereon, shall be returned to the Subtenant
within ten (10) days following the Expiration Date. Subtenant shall not assign
or encumber or attempt to assign or encumber the monies deposited herein as
Security and neither Sublandlord nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
20. Intentionally deleted.
21. Regulatory Approval: Sublandlord and Subtenant specifically
acknowledge and agree that, notwithstanding anything to the contrary in this
Sublease, the effectiveness of this Sublease is expressly contingent upon the
following: No later than February 29, 1996, Subtenant shall have received all
regulatory approvals from the banking department of the California Department of
Corporations and the FDIC necessary for Subtenant to operate the Premises as a
branch banking facility (hereinafter "Regulatory Approvals").
If the foregoing condition fails to occur on or before the date specified above
for the satisfaction of the applicable condition, then Subtenant may at its
option, terminate this Sublease by written notice to the Sublandlord given no
later than five (5) days after the date specified for the satisfaction of such
condition, in which case, this Sublease shall thereupon terminate and be of no
further force or effect except for the obligations, if any, which have been
incurred prior to the date of such termination or which expressly survive the
expiration or earlier termination of this Sublease. If the foregoing condition
is not satisfied by the date specified above for satisfaction of such condition
and Subtenant does not give a notice to terminate to the Sublandlord by the
following five (5) day period, then this condition shall be deemed satisfied.
In the event Subtenant terminates this Sublease as a result of Subtenant's
failure to obtain the Regulatory Approvals on or
15
<PAGE>
before the date specified above, Subtenant (i) shall satisfy all monetary and
non-monetary obligations under this Sublease through the effective date of such
termination and (ii) shall deliver to Sublandlord no later than thirty (30) days
after the effective date of such termination a check in the amount equal to (a)
all tenant improvement expenses up to five thousand dollars ($25,000.00) and (b)
brokers' commissions up to a maximum of twenty-five thousand dollars
($25,000.00) cumulative for Sublandlord and Landlord. In addition to the
foregoing, upon such termination, Subtenant shall at Landlord's and/or
Sublandlord's option return and restore the Premises to the condition which
existed prior to the Commencement Date of this Sublease at Subtenant's sole cost
and expense. The obligations of Subtenant as set forth herein shall survive the
termination of this Sublease.
22. Protection of Subtenant: Landlord and Sublandlord shall use their
commercially reasonable best efforts to obtain and deliver to Subtenant an
agreement in writing from each existing mortgagee with a lien encumbering the
Premises and/or the lessor of any ground lease affecting the Premises, which
provides that, so long as Subtenant is not in default under any of the terms,
conditions, covenants, or agreements of this Sublease, Subtenant's possession of
the Premises shall not be disturbed by reason of foreclosure of any such
mortgage or the termination of any such ground lease.
Landlord or Sublandlord shall have until December 31,1995 to obtain such an
agreement for Subtenant. In the event that such an agreement is not obtained by
that date, Subtenant shall have the option to terminate this Sublease by giving
written notice thereof to both Sublandlord and Landlord on or before January 15,
1996. In the event of such termination, Subtenant shall only have the
obligation to pay Rental for the period of time it occupied the Premises. In
the event of such termination, this Sublease shall thereafter be of no further
force and effect, except for the obligations, if any, which have been incurred
prior to the date of such termination or which expressly survive the Expiration
Date or earlier termination of this Sublease. If the foregoing agreement is not
obtained by the date specified above and Subtenant does not give notice to
terminate to Sublandlord and Landlord on or before January 15,1996, then this
condition shall be deemed satisfied.
23. MISCELLANEOUS.
23.1 This Sublease contains the entire agreement between the
parties and all prior negotiations and agreements are merged in this Sublease.
Any agreement hereafter made shall be ineffective to change, modify or discharge
this Sublease in whole or in part unless such agreement is in writing and signed
by the parties hereto. No provision of this Sublease shall be deemed to have
been waived by Sublandlord or Subtenant unless such waiver be in writing and
signed by Sublandlord or Subtenant, as the case may be. The covenants and
agreement contained in this Sublease
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<PAGE>
shall bind and inure to the benefit of Sublandlord and Subtenant and their
respective permitted succession and assigns.
23.2 In the event that any provision of this Sublease shall be
held to be invalid or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions of this Sublease shall be unaffected
thereby.
23.3 The paragraph headings appearing herein are for purpose of
convenience only and are not deemed to be a part of this Sublease.
23.4 Capitalized terms used herein shall have the same meanings
as are ascribed to them in the Lease, unless otherwise expressly defined herein.
23.5 This Sublease is offered to Subtenant for signature with the
express understanding and agreement that this Sublease shall not be binding upon
Sublandlord or Subtenant unless and until Sublandlord and Subtenant both shall
have executed and delivered a fully executed copy of this Sublease to the other.
23.6 All insurance policies required to be obtained by Subtenant
under this Sublease or the Lease shall name Landlord and Sublandlord as
additional insureds as their interests may appear.
23.7 This Sublease shall be governed by, and construed in
accordance with, the laws of the State of California. 23.8 In the event
of a conflict ar inconsistency between the provisions of this Sublease and the
Lease, the provisions of this Sublease shall supersede and control. However,
nothing contained in this paragraph shall affect Landlord's rights under the
Lease.
23.8 In the event either party commences any action against the
other party hereto because of a breach of or default under this Sublease, or to
enforce, interpret or determine the validity of any term, covenant, condition or
agreement of this Sublease, the prevailing party shall be entitled to reasonable
attorney's fees and court costs.
23.9 Subject to the provisions hereof relating to assignment and
subletting, this Sublease shall bind and inure to the benefit of the heirs,
executors successors and assigns of the parties hereto.
23.10 Sublandlord hereby warrants that the Lease is in full force
and effect and there are no breaches or defaults thereunder on the part of
Sublandlord, nor does any condition exist that, with the passage of time, or the
giving of notice, or both, would constitute such a breach or default on the part
of Sublandlord.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement of Sublease as of the day and year first above written.
SUBLANDLORD:
By CITICORP NORTH AMERICA, Inc.
Authorized agent for:
CITIBANK, F.S.B., a Federal Savings Bank
By:
----------------------------
Its:
---------------------------
SUBTENANT:
SOUTHERN CALIFORNIA BANK,
a California corporation
By:
----------------------------
Its:
---------------------------
18
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LANDLORD'S CONSENT TO SUBLEASE
Landlord: Regents Park Financial Centre, Ltd., a California
corporation
Tenant: Citicorp Savings, a Federal Savings and Loan
Association, (now known as Citibank F.S.B., a
Federal Savings Bank)
Sublessee: Southern California Bank, a California corporation
Premises: 4180 La Jolla Village Drive, Suite 125, La Jolla,
California consisting of approximately 3,471
square feet of office and bank space
Lease and Amendments: Lease dated April 30, 1987; First Amendment to
Lease dated November 4, 1987; Second Amendment to
Lease dated March 13, 1990 (collectively the
"Lease")
Date/Title of Sublease
Document: Sublease dated November 30, 1995 (the "Sublease")
Regents Park Financial Centre, Ltd., a California corporation, as Landlord
under the Lease, subject to and specifically conditioned upon the following
terms and conditions hereby grants its consent to the Sublease made by and
between Tenant, as sublessor, and Sublessee, a copy of which is attached hereto
as EXHIBIT A, covering the Premises as more particularly described in the
Sublease, in the building known as Regents Park Financial Centre.
The capitalized terms used herein and not otherwise defined shall have the
meanings ascribed thereto in the Lease. This Consent to Sublease and the
acknowledgments and acceptance of the conditions hereof may be executed in
counterparts, each of which shall be considered an original but constituting one
and the same documents.
As conditions to the consent of Landlord to the Sublease, it is understood
and agreed as follows:
(a) NO RELEASE. This Consent to Sublease ("Consent") shall in
no way release the Tenant or any person or entity claiming by, through or under
Tenant, including Sublessee, from any of its covenants, agreements, liabilities
and duties under the Lease (including, without limitation, all duties to cause
and keep Landlord and others named or referred to in the Lease fully
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insured and indemnified with respect to any acts or omissions of Sublessee or
its agents, employees or invitees or other matters arising by reason of the
Sublease or Sublessee's use or occupancy of the Premises), as the same may be
amended from time to time, without respect to any provision to the contrary in
the Sublease.
(b) SPECIFIC PROVISIONS OF LEASE AND SUBLEASE. This Consent
does not constitute approval by Landlord of any of the provisions of the
Sublease or agreement thereto or therewith; nor shall the same be construed to
amend the Lease in any respect, any purported modifications being solely for the
purpose of setting forth the rights and obligations as between Tenant and
Sublessee, but not binding Landlord.
(c) AMENDMENT OF SUBLEASE. Tenant and Sublessee shall not amend
in any respect the Sublease without the prior written approval of Landlord. In
no event shall any such amendment affect or modify or be deemed to affect or
modify the Lease in any respect.
(d) LIMITED CONSENT. This Consent is limited solely to the
Sublease, and Landlord reserves the right to consent or to withhold consent and
all other rights under the Lease with respect to any other matters including,
without limitation, any proposed alterations and with respect to any further or
additional subleases, assignments or transfers of the Lease or any interest
therein or thereto including, without limitation, a sublease or any assignment
of this Sublease. Neither the execution of this Consent by Landlord, nor the
acceptance of Rent by Landlord from any other person, including Sublessee, shall
constitute a consent to any subsequent transfer or a waiver of any of Landlord's
rights hereunder or under the Lease.
(e) TENANT'S CONTINUING LIABILITY. Tenant shall remain
primarily liable to pay the Rent and all other amounts payable by Tenant under
the Lease and to perform all other obligations of Tenant under the Lease. If
Sublessee or any of its successors or assigns defaults under the Lease, Landlord
may proceed directly against Tenant without pursuing any remedies whatsoever
against Sublessee or any other person. Landlord may consent to subsequent
transfers of the Lease by Sublessee or any other person without notifying Tenant
or obtaining its consent, and no such action shall relieve Tenant of its primary
liability and obligations under the Lease and this Consent. Tenant shall be
liable to Landlord for any default under the Lease, whether such default is
caused by Tenant or Sublessee or anyone claiming by or through either Tenant or
Sublessee, but the foregoing shall not be deemed to restrict or diminish any
right which Landlord may have against Sublessee pursuant to the Lease, in law or
in equity for violation of the Lease or otherwise, including, without
limitation, the right to enjoin or otherwise restrain any violation of the Lease
by Sublessee.
(f) ACCEPTANCE BY TENANT AND SUBTENANT. Tenant and Sublessee
understand and acknowledge that Landlord has agreed
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<PAGE>
to execute this Consent to Sublease based upon Tenant's and Sublessee's
acknowledgement and acceptance of the terms and conditions hereof.
(g) SUBORDINATION. The Sublease is, in all respects, subject
and subordinate to the Lease, as the same may be amended. Furthermore, in the
case of any conflict between the provisions of this Consent or the Lease and the
provisions of the Sublease, the provisions of this Consent or the Lease, as the
case may be, shall prevail unaffected by the Sublease.
(h) TERMINATION OF LEASE/ATTORNMENT. The earlier termination of
the term of the Lease or the surrender of the Lease by Tenant to Landlord,
shall, provided there is no continuing and uncured event of default by Sublessee
under the Sublease in the payment of rent or in the performance of any of the
terms, covenants or conditions of the Sublease on Sublessee's part to be
performed, operate as an assignment to Landlord of the Sublease, in which event
Sublessee shall attorn to and recognize Landlord as Sublessee's landlord under
the Sublease. Notwithstanding the foregoing, Landlord shall not be liable to
Sublessee for the Security Deposit referenced in Section 19 of the Sublease in
the event this Sublease is assigned to Landlord hereunder. The foregoing
provisions of this paragraph shall apply notwithstanding that, as a matter of
law, the Sublease may otherwise terminate upon the termination of the Lease and
shall be self-operative upon such written demand of the Landlord, and no further
instrument shall be required to give effect to documents in confirmation of the
foregoing provisions of this paragraph satisfactory to Landlord in which
Sublessee shall acknowledge such attornment and shall set forth the terms and
conditions of its tenancy. Nothing contained in this paragraph shall be
construed to impair or modify any right otherwise exercisable by the Landlord,
whether under the Lease, any other agreement or in law.
(i) LEASE STATUS. Tenant and Sublessee agree that the Lease, as
the same may have been amended, is in full force and effect and that there are
no breaches or defaults thereunder on the part of Landlord, nor does any
condition exists that, with the passage of time or the giving of notice or both,
would constitute such a breach or default on the part of Landlord under the
Lease.
(j) NO WAIVER; NO PRIVITY. Nothing herein contained shall be
deemed a waiver of any of the Landlord's rights under the Lease. Except as
specifically provided in paragraph 8 of this Consent with regard to the
assignment of the Lease to Landlord upon the early termination of the term of
the Lease or the surrender of the Lease by Tenant to Landlord, in no event shall
Landlord be deemed to be in privity of contract with Sublessee or owe any
obligation or duty to Sublessee under the Lease or otherwise, any duties of
Landlord under the Lease being in favor of, for the benefit of and enforceable
solely by Tenant.
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(k) NOTICES. Sublessee agrees to promptly deliver a copy to
Landlord of all notices of default and all other notices sent to Tenant under
the Sublease, and Tenant agrees to promptly deliver a copy to Landlord of all
such notices sent to Sublessee under the Sublease.
(l) TENANT REIMBURSEMENT OF TENANT IMPROVEMENT COSTS. In
consideration of Landlord's agreement to execute this Consent, Tenant agrees to
reimburse Landlord the amount of Five Thousand and 00/100 Dollars ($5,000.00)
for the cost of tenant improvements being made to the Premises by Landlord in
connection with the Sublease. Such amount shall be reimbursed by Tenant to
Landlord within thirty (30) days of written request for such reimbursement by
Landlord which written request shall include copies of paid invoices evidencing
expenditures by Landlord for tenant improvements to the Premises in an amount
equal to or greater than Twenty Thousand and 00/100 Dollars ($20,000.00).
(m) CONDITION UPON TERMINATION. Despite the provisions of
Section 9.02 of the Lease to the contrary, provided there is no continuing and
uncured event of default by Sublessee under the Sublease and Sublessee is in
possession of the Premises upon the expiration of the term of the Lease (which
is coterminous with the term of the Sublease, it being understood by the parties
hereto that it is the intention of Sublessee to remain in possession of the
Premises following the expiration of the term of the Lease/Sublease pursuant to
a new lease to be entered into directly between Landlord and Sublessee),
Landlord shall not require Tenant to remove its fixtures, equipment and/or
personal property from the Premises upon the expiration of the term of the
Lease.
(n) WAIVER OF DOCUMENTATION COSTS. Landlord hereby waives its
right to seek reimbursement from Tenant for its attorneys' fees and costs
incurred in connection with the review and preparation of documents in
connection with the Sublease as provided in Section 16.01(f) of the Lease.
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<PAGE>
(o) TENANTS AND SUBTENANT BOUND. By executing this Consent,
Tenant and Sublessee acknowledge and agree to be bound by all of the terms and
conditions of Landlord's consent to the Sublease as set forth herein.
DATED: 11/30/95 LANDLORD:
Regents Park Financial Centre, Ltd.,a
California limited partnership
The Lomas Santa Fe Group, a California
corporation (General Partner)
By: /S/-------------------
-----------------------
Name: RICHARD E. KELLER
-----------------------
Title: PRESIDENT
----------------------
By: /S/
-----------------------
Name: MATTHEW J. ROOT
-----------------------
Title: DIRECTOR OF LEASING
----------------------
23
<PAGE>
TENANT'S ACKNOWLEDGMENT AND ACCEPTANCE
Tenant hereby acknowledges all of the terms and conditions of the Consent
to Sublease set forth above, accepts each and every term and provision thereof,
and agrees to be bound thereby.
DATED: 11/30/95 TENANT:
Citicorp Savings, a Federal Savings and
Loan Association, (now known as Citibank
F.S.B., a Federal Savings Bank)
By: /S/
-----------------------
Name: DAVID C. CUMMING
-----------------------
Title: VICE PRESIDENT
----------------------
By:
-----------------------
Name:
-----------------------
Title:
----------------------
24
<PAGE>
SUBLESSEE'S ACKNOWLEDGMENT AND ACCEPTANCE
Sublessee acknowledges all of the terms and conditions of the Consent to
Sublease set forth above, accepts each and every term and provision thereof, and
agrees to be bound thereby.
DATED: 11/9/95 SUBLESSEE:
Southern California Bank, a California
corporation
By: /S/
-----------------------
Name: DAVID A. MCCOY
-----------------------
Title: EXECUTIVE VP/COO
----------------------
By:
-----------------------
Name:
-----------------------
Title:
----------------------
25
<PAGE>
REGENTS PARK FINANCIAL CENTRE OFFICE LEASE
This Lease is subject to the terms, covenants and conditions herein set
forth, and Tenant (as defined below) covenants as a material part of the
consideration for this Lease to keep and perform each and all of those terms,
covenants and conditions by Tenant to be kept and performed, and that this Lease
is made upon the condition of such performance.
ARTICLE 1 - FUNDAMENTAL LEASE PROVISIONS
Each of the Fundamental Lease Provisions set forth below is a summary of
the terms contained elsewhere in this Lease which relate to each such
Fundamental Lease Provision. If there is any conflict between any Fundamental
Lease Provision and any specific clause of the Lease, the more specific clause
of the Lease shall control.
1.1 Date of Lease: For reference purposes only October 25, 1995
LEASE EXECUTION DATE: The date upon which the last of the signatories
executes this Lease.
1.2 Landlord: Regents Park Financial Centre. Ltd. a CALIFORNIA LIMITED
PARTNERSHIP
1.3 TENANT: SOUTHERN CALIFORNIA BANK A CALIFORNIA CORPORATION
1.4 BUILDING: General site plan of the Building and/or the Project in
which the Premises are located (See Exhibit A).
1.5 PREMISES: (See EXHIBIT B)
SUITE NO.: 430
APPROXIMATE SQUARE FEET OF RENTABLE AND USABLE FLOOR AREA WITHIN PREMISES:
2,100 rentable square feet and 1,860 usable square feet which area has been
determined by Landlord's representative by using the standard method for floor
measurement of office buildings, as determined by BOMA [Building Owners and
Managers Association International], which determination is conclusive and
binding upon Tenant.
TENANT'S PERCENTAGE OF DIRECT EXPENSES: Tenant's percentage of expenses to
be paid by the tenants in the Building shall be established by Landlord based
upon Tenant's pro rata share of expenses described under Articles 4, 8 and 12 of
this Lease, which are shared in common with other tenants in the Building
("Tenant's Percentage Share"). Tenant's Percentage Share shall be a fraction,
the numerator of which is the rentable floor area of the Premises, and the
denominator of which shall be the rentable floor area of the Building occupied
by Tenant and occupied by and/or available for occupancy by other tenants in the
Building who share such
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expenses in common with Tenant. The Tenant's Percentage Share is subject to
change with changes in the size of the Premises and/or the Building. Tenant's
Percentage Share on the Commencement Date is 2.38%. For purposes of computing
Tenant's Percentage Share, the "Base Year" will be calendar year 1996. *SEE
ADDENDUM
1.6 TERM: Should the Commencement Date not occur on the first day of a
calendar month, the Term shall begin on the first day of the next succeeding
calendar month. In t hat event, however, Tenant shall pay Rent for the
fractional month on a per diem basis (calculated on the basis of a thirty day
month) until the first day of the month when the Term commences. The date which
corresponds to the Commencement Date shall be known as the "Anniversary Date" of
this Lease, unless the Commencement Date does not occur on the first day of a
calendar month in which event the Anniversary Date shall be the date which
corresponds to the first day of the next succeeding calendar month following the
Commencement Date. Any provisions of this Lease to the contrary
notwithstanding, the effective date of this Lease, and the commencement of both
parties' rights and obligations hereunder, shall be the date upon which this
Lease is executed by Landlord. Following the Commencement Date, Landlord and
Tenant shall execute a letter agreement confirming the Commencement Date, the
rentable and usable square footage of the Premises, and Tenant's acceptance of
the Premises. *SEE ADDENDUM
The anticipated Commencement Date is November 1, 1995
1.7 PERMITTED USES: (See Section 5.1) COMMERCIAL AND RETAIL BANKING
OFFICES and for no other use or purpose.
1.8 TENANT'S GUARANTOR: (See EXHIBIT D) (If none, so state) NONE
1.9 Address for Notices:
To Landlord: REGENTS PARK FINANCIAL CENTRE, LTD.
C/O ASSET MANAGEMENT GROUP
11750 SORRENTO VALLEY ROAD
SAN DIEGO, CA 92121
To Tenant: SOUTHERN CALIFORNIA BANK
4180 LA JOLLA VILLAGE DRIVE, SUITE 125
LA JOLLA, CA 92037
ATTENTION: BRANCH MANAGER
1.10 Security Deposit: (See Section 3.3) $4.242.00
1.11 RENT AND OTHER CHARGES PAYABLE BY TENANT:
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1.11.1 MINIMUM MONTHLY RENT. Minimum Monthly Rent shall begin on the
Commencement Date.
1.11.2 INITIAL MINIMUM MONTHLY RENT: (See Article 3) *SEE ADDENDUM
1.11.3 OTHER CHARGES PAYABLE BY TENANT ("ADDITIONAL RENT"): (i)
Increases in Direct Expenses (See Section 4.2); (ii) Taxes on Tenant's property
(See Section 4.4); (iii) Building Services and Utilities (See Section 4.5); (iv)
Insurance premiums required to be paid by Tenant (See Article 12); and (v)
Maintenance, Repair and Alterations (See Article 8).
1.12 EXHIBITS: The exhibits referenced in the Table of Contents are each
attached to this Lease~ and are made a part of this Lease by this reference.
1.13 BROKERS: The brokers who negotiated this Lease are Rancon Real,
representing Landlord, and None representing Tenant.
1.14 VEHICLE PARKING PRIVILEGES ALLOCATED TO TENANT: seven (7) reserved
parking spaces subject to the terms and conditions set forth in Section 19.3 of
this Lease.
ARTICLE 2 - LEASE
2.1 LEASE OF PROPERTY FOR TERM. Landlord hereby leases the Premises to
Tenant and Tenant hereby leases the Premises from Landlord for the Term. The
Term is for the period stated in Section 1.6 above and shall begin on the
Commencement Date.
2.2 DELAY IN COMMENCEMENT. Landlord shall not be liable to Tenant if, for
reasons beyond the reasonable control of Landlord, Landlord is delayed in
delivery of possession of the Premises to Tenant. Landlord's delay in delivery
of the Premises to Tenant shall not affect this Lease or the obligations of
Tenant under this Lease, except in the determination of the Commencement Date.
*SEE ADDENDUM
2.3 EARLY OCCUPANCY. Tenant shall have no right to occupy the Premises
prior to the Commencement Date without the prior written consent of Landlord. If
Tenant occupies the Premises prior to the Commencement Date with the prior
written consent of Landlord, Tenant's occupancy of the Premises shall be subject
to all of the provisions of this Lease. Early occupancy of the Premises shall
not advance the expiration date of this Lease. Unless otherwise provided for in
this Lease, Tenant shall pay Minimum Monthly Rent and all other charges
specified in this Lease for the early occupancy period.
2.4 HOLDING OVER. Tenant shall vacate the Premises upon the expiration of
the Term or earlier termination of this Lease. If Tenant does not vacate the
Premises upon the expiration of the Term or earlier termination of this Lease,
and Landlord thereafter accepts Rent from Tenant, Tenant's occupancy of the
Premises shall be a "month-to-month" tenancy, subject to all of the terms of
this Lease applicable to a month-to-month tenancy, terminable on thirty (30)
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days' written notice given at any time by either party. In no event shall
Landlord's acceptance of Rent after such expiration or earlier termination be
construed or result in a renewal of this Lease. During any such month-to-month
tenancy, Tenant shall pay all Rent and other charges required by this Lease,
except that the Minimum Monthly Rent then in effect under the provisions of
Section 3.1 and 3.2 hereof shall be increased by one hundred percent (100%). If
Tenant fails to surrender the Premises upon the expiration of the Term or
earlier termination of this Lease, despite demand to do so by Landlord, Tenant
shall indemnify, defend and hold Landlord harmless from all of Landlord's
damages or liability, including, but not limited to, any claim made by any
succeeding tenant founded on or resulting from such failure to surrender, and
any attorneys' fees and costs. During such holdover period, all options, if any,
granted under this Lease, shall be deemed terminated and be of no further
effect. The provisions of this Section 2.4 are in addition to and do not affect
Landlord's right of reentry or any rights of Landlord hereunder, or as otherwise
provided by law. It is acknowledged by Tenant that this Section 2.4 shall confer
upon Tenant no occupancy rights beyond the expiration of the Term or earlier
termination of this Lease.
2.5 FAILURE TO TAKE POSSESSION. Tenant's inability or failure to take
possession of the Premises on the Commencement Date shall not delay the
Commencement Date or Tenant's obligation to pay Rent. Tenant acknowledges that
even if Tenant never takes possession of the Premises, Landlord shall incur
significant expenses in reliance upon Tenant's execution of this Lease,
including, without limitation, brokerage commissions and fees, legal and other
professional fees, the costs of space planning, financing costs, lost income
from not seeking other tenants, and the cost of construction of tenant
improvements in the Premises. Tenant acknowledges that all of said expenses
shall be included in measuring Landlord's damages should Tenant fail to comply
with its obligations under this Section 2.5.
*SEE ADDENDUM Section 2.6
ARTICLE 3 - RENT
3.1 MINIMUM MONTHLY RENT. The Minimum Monthly Rent shall be payable
beginning on the Commencement Date. Tenant shall pay Minimum Monthly Rent to
Landlord, at the address set forth in Section 1.9 above, or such other place as
Landlord shall designate. Minimum Monthly Rent shall be paid in advance on the
first day of each month, without deduction, offset, prior notice or demand, in
the sum specified in Section 1.11 of the Fundamental Lease Provisions and shall
be subject to upward adjustment as herein stated. Tenant shall pay the first
installment of Minimum Monthly Rent to Landlord concurrently with Tenant's
execution of this Lease. Rent for any period during the Term hereof which is for
less than one month shall be a pro rata portion of the monthly installment
determined on the basis of a thirty (30) day month. Rent shall be paid in lawful
money of the United States of America.
3.2 ADJUSTMENT TO MINIMUM MONTHLY RENT. *SEE ADDENDUM
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3.3 SECURITY DEPOSIT. Landlord hereby acknowledges receipt of the Security
Deposit from Tenant in the amount identified in Section 1.10 to secure the
faithful performance of the Tenant of all of the terms, covenants and conditions
of this Lease by the Tenant to be kept and performed. Tenant agrees that if the
Tenant shall fail to make any payments required under this Lease when due, the
Security Deposit may, at the option of the Landlord, be applied to any Rent due
and unpaid, and if the Tenant violates any of the other terms, covenants and
condition of this Lease, the Security Deposit may be applied to any damages
suffered by Landlord as a result of Tenant's default. Under no circumstances
shall Tenant have the right to apply the Security Deposit against all or a
portion of Tenant's payment obligations under any of the provisions of this
Lease.
3.3.1 Nothing contained in this Section shall in any way diminish or
be construed as waiving any of Landlord's other remedies provided in Article 17
hereof, or at law or in equity. Should the entire Security Deposit, or any
portion thereof be appropriated and applied by Landlord for the payment of
overdue Rent or other sums due and payable to Landlord by Tenant hereunder, then
Tenant shall, on the written demand of Landlord, remit to Landlord a sufficient
amount in cash to restore the Security Deposit to its original amount, and
Tenant's failure to do so within five (5) days after receipt of such demand
shall constitute an Event of Default. Should Tenant comply with all of the
terms, covenants and conditions of this Lease and promptly pay all of the Rent
and other sums payable by Tenant to Landlord when due hereunder, the Security
Deposit (or any remaining portion thereof) shall be returned to Tenant at the
end of the Term or sooner termination of this Lease. Landlord shall have the
right to commingle the Security Deposit with other funds of Landlord. Landlord
shall not be required to pay Tenant interest on the Security Deposit.
ARTICLE 4 - OTHER CHARGES PAYABLE BY TENANT (ADDITIONAL RENT
4.1 DEFINITIONS. For the purposes of this Section, the following terms are
defined as follows:
4.1.1 BASE YEAR: Shall mean the calendar year specified in Section 1.5
of the Fundamental Lease Provisions.
4.1.2 COMPARISON YEAR: Shall mean each calendar year following the
Base Year.
4.1.3 DIRECT EXPENSES: All costs of operation and maintenance of the
Building, or the Project, determined by (i) the average percent of actual
occupancy of the Building for the entire calendar year if such average is
greater than ninety percent (90%), or (ii) as if the Building were not less than
ninety-five percent (95%) occupied for an entire calendar year if the average
percent of actual occupancy of the Building for the entire calendar year is less
than ninety percent (90%). Direct Expenses shall include, but not be limited to,
the following:
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4.1.3.1 Real property taxes and assessments (collectively "Real
Property Taxes") upon the improvements to the Building, the Building, the Common
Areas serving the Building (as "Common Areas" are defined in Article 19 hereof),
and the land upon which they are located, imposed by any governmental authority
or agency. "Real Property Taxes" means and shall include without limitation any
form of real estate tax, assessment, special assessment, license fee, license
tax, special tax, business license fee, commercial rental tax, levy, charge,
penalty (not resulting from failure of the Landlord to pay any Real Property
Tax), tax or similar imposition, now or hereafter imposed, or imposed in
substitution or addition, partial or total, to or regarding any such tax,
assessment, special assessment license fee, license tax, special tax, business
license fee, commercial rental tax, levy, charge or penalty previously included
or not included within the definition of Real Property Taxes, by any authority
having the power to tax, including any city, county, state or federal
government, or any school, agricultural, lighting, drainage or other improvement
assessment or special district thereof, as against the Premises, the Building or
the Common Areas or any portion thereof or against any legal or equitable
interest of Landlord in the Premises, the Building or the Common Areas and any
reasonable costs incurred by Landlord in any proceeding for abatement or
reduction thereof, such as attorneys' and consultants' fees. Real Property Taxes
shall also include any increase in Real Property Taxes due to a "change in
ownership" (as that phrase is defined from time-to-time in the California
Revenue and Taxation Code or any successor statute) of the Premises.
Notwithstanding any provision of this Section 4.1.3.1, express or implied to the
contrary, "Real Property Taxes" shall NOT include Landlord's federal or state
income, franchise, inheritance or estate taxes.
4.1.3.2 All expenses incurred in connection with the operation,
repair, cleaning, maintenance and insuring of the Building and the Common Areas
(collectively "Building Costs"). Building Costs include, without limitation, all
sums expended in connection with the Building and Common Areas for: general
maintenance and repairs; resurfacing; painting; restriping; cleaning; trash
removal (including trash deposited in common receptacles by the individual
tenants); sweeping and janitorial services; lighting and operation and
maintenance of air conditioning and heating equipment and other utility
expenses; maintenance, repair, cleaning and replacement of public toilets, music
program equipment and loudspeakers, sidewalks, curbs and Building signs,
sprinkler systems, planting and landscaping, floors, ceilings, skylights,
windows, directional signs, markers and bumpers, any fire protection systems
(including fire sprinklers), lighting systems and fixtures (including
replacement of tubes and bulbs), storm drainage systems and other utility
systems, all mechanical equipment, automatic door openers, escalators,
elevators, roofs, exterior walls, air conditioning and heating equipment and
security alarm systems; personnel to implement the foregoing services,
including, if Landlord deems necessary, the cost of security guards; all on-site
costs and personnel expenses of Landlord incurred in connection with the
maintenance of the Building and the Common Areas; all personal property taxes
assessed against any personalty (not belonging to any tenant of the Building) in
use in the Building or the Common Areas; any governmental imposition or
surcharge imposed upon Landlord or assessed against any portion of the Building
or the Common Areas; depreciation on maintenance and operating machinery and
equipment (if owned) and rental paid for such machinery and equipment (if
rented); premiums for all insurance carried by Landlord pursuant to this Lease,
including without limitation, adequate comprehensive public liability and
property damage insurance covering Landlord's ownership and operation of the
Building and the Common Areas, fire and extended
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coverage insurance on the Building and the Common Areas (which may include
earthquake and flood damage endorsements), vandalism and plate glass insurance
covering the Building and the Common Areas and rent loss insurance; and the
costs of all capital improvements and replacements to the Building or the Common
Areas, its contents or any portion thereof which are made to (i) comply with any
present or future law, ordinance, rule or regulation including without
limitation the Americans With Disabilities Act of 1990 and similar laws,
ordinances, rules or regulations; or (ii) improve or add Building life-safety or
security systems; or (iii) reduce other Building Costs, such costs to be
amortized over the applicable recovery period for federal tax purposes or the
estimated useful life as determined by Landlord and utilized by Landlord in its
financial and tax reporting, and to include a return on capital at such rate as
Landlord pays on funds borrowed for the purpose of constructing such
improvements or replacements. In addition, Building Costs shall include a sum to
be payable to Landlord for supervision of the Building and the Common Areas and
for accounting, bookkeeping and collection of the Building Costs, in an amount
equal to fifteen percent (15%) of the total of all of the foregoing Building
Costs incurred in each calendar year. Landlord may have any or all services
performed in connection with such Building and Common Area maintenance provided
by an independent contractor(s). If Landlord acquires, constructs or makes
available for Common Area purposes land or improvements not shown as pant of
Exhibit A, then Building Costs shall also include all of the expenses itemized
above incurred and paid in connection with such additional land or improvements.
4.1.3.3 Direct Expenses shall NOT include (i) mortgage and debt
service on any debt instrument which encumbers the Building; (ii) ground lease
payments; (iii) Landlord's general overhead and general administrative expenses
not related to management or operation of the Building; (iv) depreciation
(except as described above); (v) any and all costs of selling, exchanging or
refinancing the Building including any escrow charges, transfer taxes, loan fees
and points; (vi) extraordinary real estate taxes or insurance premiums related
to the tenant improvements of other tenants in the Building which are in excess
of building standard as may be defined by Landlord from time to time; (vii)
costs incurred by Landlord for the repair of damage to the Building or the
Common Areas to the extent Landlord is reimbursed by insurance proceeds from
policies paid for in total or in part by Tenant; (viii) capital expenditures
required by Landlord's failure to comply with laws enacted on or before the date
of issuance of a certificate of occupancy or an equivalent governmental permit
for the initial occupancy of the Building; (ix) costs incurred with respect to
the installation of tenant improvements made for tenants in the Building or
incurred in renovating or otherwise decorating, painting or redecorating vacant
space for tenants of the Building; (x) leasing commissions, attorneys' fees, and
other costs and expenses incurred in connection with negotiations or disputes
with present or prospective tenants or other occupants of the Building, (xi)
costs incurred by Landlord to enforce the provisions of any lease of space in
the Building due to the violation by any tenant of the Building of the terms and
conditions of any lease; (xii) cost of services paid to Landlord or to
subsidiaries or affiliates of Landlord for services in the Building to the
extent the same exceeds the cost of such services rendered by unaffiliated
qualified third parties on a comparable competitive basis; (xiii) any
compensation (including wages and fringe benefits) paid to clerks, attendants or
other persons in commercial concessions operated by Landlord in the Building
lobby; (xiv) all items and services for which Tenant or any other tenant of the
Building reimburses Landlord (other than the pass-through of Building Costs) and
which Landlord
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provides selectively to one or more tenants (other than Tenant) without
reimbursement; (xv) the cost of purchase and installation of signs in or on the
Building which identify the owner of the Building or any tenant of the Building;
(xvi) tax penalties incurred as a result of Landlord's negligence or inability
or unwillingness to make payments when due; (xvii) electrical power costs for
which Tenant or any other tenant directly contracts with the public utility.
*See Addendum
4.2 INCREASES IN DIRECT EXPENSES/ADDITIONAL RENT. If the Direct Expenses
paid or incurred by the Landlord for the Comparison Year are in excess of the
Direct Expenses paid or incurred for the Base Year, then Tenant shall pay
Tenant's Percentage Share of the increase as Additional Rent. Notwithstanding
the preceding sentence, Tenant shall not be required to pay any Direct Expenses
in excess of Direct Expenses paid or incurred for the Base Year, until after the
first Anniversary Date of this Lease. Landlord shall endeavor to give to Tenant,
on or before the first day of March of each year following the respective
Comparison Year, a statement of the increase in Direct Expenses payable by
Tenant hereunder, but failure by Landlord to give such statement by March 1
shall not constitute a waiver by Landlord of its right to require payment of the
increase in Direct Expense. Upon receipt of the statement for the first
Comparison Year, Tenant shall pay in full the total amount of increase due for
the first Comparison Year. In addition for the then current year, the amount
which Landlord estimates, at Landlord's sole determination, for the increase in
Direct Expenses between the Base Year and the said current year, shall be
divided into twelve (12) equal monthly installments, and Tenant shall pay to
Landlord, concurrently with the Minimum Monthly Rent payment next due following
the receipt of such statement, an amount equal to one (1) monthly installment
multiplied by the number of months from January in the calendar year in which
said statement is submitted to the month of such payment, both months inclusive.
Subsequent installments shall be payable concurrently with the Minimum Monthly
Rent payments for the balance of that calendar year. If the next or any
succeeding Comparison Year results in a greater increase in Direct Expenses than
that previously estimated by the Landlord, then, not later than twenty (20)
days following receipt of a statement from Landlord, Tenant shall pay a lump sum
equal to such total increase in Direct Expenses over the Comparison Year, less
the total of the monthly installments of estimated increases paid in the
previous year for which comparison is then being made; and the estimated monthly
installments to be paid for the next year, following said Comparison Year, shall
be adjusted to reflect Landlord's estimate of such increase in Direct Expenses
for that current year. If, in any Comparison Year, the Tenant's share of Direct
Expenses is less than the preceding year, then upon receipt of Landlord's
statement, any overpayment made by Tenant on the monthly installment basis
provided above shall be credited towards the next installment of Minimum Monthly
Rent falling due.
4.2.1 Not more frequently than once per calendar year, within days
after receipt of Landlord's statement comparing Tenant's payment of Direct
Expenses during that calendar year against Tenant's Percentage Share of such
expenses, Tenant may request in writing to audit Landlord's books and records
pertaining to such expenses. Tenant shall have no right to request to audit
Landlord's books and records pertaining to such expenses, except during such
period. If no such written request is made within the period, Tenant stipulates
and agrees that said figures are for all purposes correct and accurate, and the
amount of the billing is proper. In the event Tenant requests copies of any
portion
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of Landlord's books and records pertaining to such expenses, such copies shall
be provided by Landlord to Tenant at Tenant's expense. *SEE ADDENDUM
4.3 FINAL DETERMINATION OF TENANT'S SHARE OF DIRECT EXPENSES. Even though
the Term has expired and Tenant has vacated the Premises, when the final
determination is made of Tenant's Percentage Share for the year in which this
Lease terminates, Tenant shall immediately pay any increase due over the
estimated Direct Expenses paid, and conversely, any overpayment made by Tenant
in the event Direct Expenses decrease shall be rebated by Landlord to Tenant.
4.4 TAXES ON TENANT'S PROPERTY. Tenant shall pay, before delinquency, all
taxes, assessments, license fees and public charges levied, assessed or imposed
upon or measured by the value of its business operation, including but not
limited to the furniture, trade and other fixtures, equipment and other property
of Tenant any time situated on or installed in the Premises by Tenant. If at any
time during the Term any of the foregoing are assessed as a part of the real
property of which the Premises are a part, Tenant shall pay to Landlord upon
demand the amount of such additional taxes as may be levied against said real
property by reason thereof. For the purpose of determining said amount, figures
supplied by the County Assessor as to the amount so assessed shall be
conclusive.
4.5 BUILDING SERVICES AND UTILITIES. Landlord shall also furnish to the
Premises (i) sewer and domestic water service and (ii) facilities for the
delivery and distribution within the Premises of electricity and telephone (the
foregoing utility facilities and the HVAC Service are hereinafter collectively
referred to as "Utilities"). Tenant shall pay for all Utilities used by Tenant
within the Premises. If a separate meter is required by Tenant for any
Utilities, such meter shall be installed and maintained at Tenant's expense.
*See Addendum
4.5.1 If Tenant's electrical consumption is separately metered, Tenant
shall pay for such costs directly to the public utility company or to Landlord
as Landlord directs (and if such payment is made to Landlord, Landlord shall be
responsible for payment to the public utility). If Tenant's electrical
consumption is NOT separately metered, Tenant shall pay Tenant's Percentage
Share of the electrical consumption of the Building as a part of Direct
Expenses; provided however, if Tenant's electrical consumption was not initially
separately metered and if a separate meter is subsequently installed to monitor
Tenant's electrical consumption, Landlord shall make an appropriate adjustment
to Minimum Monthly Rent and Direct Expenses to account for the fact that Tenant
is directly paying such separately metered charges to the public utility (or to
Landlord as the case may be) and not as a part of Tenant's Minimum Monthly Rent
or Tenant's Percentage Share of Direct Expenses. If Tenant's electrical
consumption is NOT separately metered and is in excess of the quantity provided
by Landlord or extends beyond Business Hours, Landlord may install a separate
switch, meter or metering system to be installed at Tenant's expense to measure
the amount of electrical consumption by Tenant and charge Tenant for such excess
consumption at the rates charged by the local public utility providing the same
plus any additional expense incurred in keeping account of the electricity so
consumed.
4.5.2 Landlord shall provide customary and routine cleaning and
janitorial service for the Premises not less than five (5) days per week, during
non Business Hours; provided however, if Tenant is a health care provider,
Tenant shall, at Tenant's sole cost and expense, (i) make
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arrangements for such cleaning and janitorial services for the Premises with a
contractor which shall be subject to the reasonable prior approval of Landlord
and (ii) satisfy all laws and regulations governing the disposal of medical
waste and to arrange for the proper disposal of such waste. The disposal of
medical waste is not part of the ordinary services provided by Landlord, and
Landlord is not required to provide such services pursuant to this Lease. Tenant
agrees to indemnify, def end and hold Landlord harmless from and against any and
all claims, costs, loss or liability arising out of or in any connected to
Tenant's disposal of such waste.
4.5.3 Tenant shall not install or use machinery or equipment that use
excess water, lighting or power, nor shall Tenant permit any act that causes
extra burden upon the Utilities, or Building services. Tenant agrees to pay to
Landlord within ten (10) working days after Tenant's receipt of an invoice from
Landlord, all reasonable charges imposed by Landlord from time to time for all
such excess Utilities and/or additional services consumed by Tenant or used in
the Premises.
4.5.4 Landlord reserves the right to interrupt, curtail, stop or
suspend Utilities when necessary, in Landlord's reasonable discretion by reason
of accident or emergency, or for repairs, alterations, replacements or
improvements or because of difficulty or inability in securing supplies or
labor, or because of strikes, or for any other cause beyond the reasonable
control of Landlord, whether such cause be similar or dissimilar lo those
hereinabove specifically mentioned, until such cause has been removed. Except as
specifically provided in Section 4.7 below, there shall be no diminution or
abatement of Rent or other charges due under this Lease as a result of said
interruption, curtailment or suspension of Utilities and/or other Building
services, nor shall this Lease be affected or any of the Tenant's obligations
hereunder be reduced. Landlord shall have no responsibility or liability for
any such interruption, curtailment, stoppage or suspension of services or
systems as provided for in this Section 4.5, except that Landlord shall exercise
reasonable diligence to eliminate the cause of same.
4.5.5 Landlord reserves the right to install new or additional utility
facilities throughout the Building and the Common Areas for the benefit of the
Landlord or Tenant, or any other tenants of the Building including, but not by
way of limitation, such Utilities as plumbing, electrical systems, HVAC systems,
communication systems and fire protection and detection systems, including entry
into the Premises for such purposes, so long as such installations do not
unreasonably interfere with Tenant's use of the Premises.
4.6 ADDITIONAL RENT. All charges payable by Tenant other than Minimum
Monthly Rent are called "Additional Rents. Unless this Lease provides otherwise,
all Additional Rent shall be paid with the next monthly installment of Minimum
Monthly Rent. The term "Rent" shall mean Minimum Monthly Rent and Additional
Rent. Tenant's failure to pay any Additional Rent due hereunder shall constitute
an Event of Default under this Lease.
4.7 ABATEMENT OF RENT WHEN TENANT IS PREVENTED FROM USING PREMISES.
Notwithstanding any provision in this Lease to the contrary, in the event that
Tenant is prevented from using, and does not use, the Premises or any portion
thereof, for ten (10) consecutive business days (the "Eligibility Period") as a
result of any damage or destruction to the Premises or any repair, maintenance
or
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alteration performed by Landlord at any time after Tenant commences business
from any portion of the Premises, which interferes with Tenant's use of the
Premises, or any failure to provide utilities, services or access to the
Premises or because of an eminent domain proceeding, then Tenant's Rent shall be
abated or reduced, as the case may be, after expiration of the Eligibility
Period for such time that Tenant continues to be so prevented from using, and
does not use, the Premises or a portion thereof in the proportion that the
rentable area of the portion of the Premises that Tenant is prevented from
using, and does not use, bears to the total rentable area of the Premises.
However, in the event that Tenant is prevented from conducting, and does not
conduct, its business in any portion of the Premises for a period of time in
excess; of the Eligibility Period, and the remaining portion of the Premises is
not sufficient to allow Tenant to effectively conduct its business therein, and
if Tenant does not conduct its business from such remaining portion, then for
such time after expiration of the Eligibility Period during which Tenant is so
prevented from effectively conducting its business therein, the Rent for the
entire Premises shall be abated; provided, however, if Tenant reoccupies and
conducts its business from any portion of the Premises during such period, the
Rent allocable to such reoccupied portion, based on the proportion that the
rentable area of such reoccupied portion of the Premises bears to the total
rentable area of the Premises, shall be payable by Tenant from the date such
business operations commence. If Tenant s right to abatement occurs because of
damage or destruction to the Premises or Tenant's property, Tenant's abatement
period shall continue until Tenant has been given sufficient time, and
sufficient access to the Premises. to rebuild the portion of the Premises it is
required to rebuild, to install its property, furniture, fixtures, and equipment
and to move in over one (1) weekend. To the extent Tenant is entitled to
abatement because of an event covered by Article 10 (Damage or Destruction) or
Article 11 (Eminent Domain) of this Lease, then the Eligibility Period shall not
be applicable.
ARTICLE S - USE OF PREMISES
5.1 USE. Tenant acknowledges that Tenant's use of the Premises shall be
subject to any matters or documents of record, including the effect of any
covenants, conditions, restrictions, easements, mortgages or deeds of trust,
ground leases, rights-of-way, or any construction, operation and reciprocal
easement agreement, ,and the effect of any zoning laws of the city, county and
state where the Building is located. Tenant shall use the Premises only for the
Permitted Uses identified in Section 1.7 above and shall not use or permit the
Premises to be used for any other purpose without the prior written consent of
Landlord. In determining whether to grant consent to Tenant for any proposed use
other than the Permitted Use, Landlord may consider factors including, but not
limited to, tenant mi~c, Building image, need for alteration of the Premises
and/or the Building, the impact upon the Common Areas of the Building or the
parking facilities, the impact upon Utilities and services, effect on fire or
other insurance covering the Building, avoidance of nuisance to other tenants,
and violation of Landlord's third-party agreements, including loan documents and
non-competition covenants with other tenants. Tenant shall not use or permit
anything to be done in or about the Premises, nor bring or keep anything therein
which will in any way increase the existing rate of or affect any fire or other
insurance upon the Building or any of its contents, or cause cancellation of any
insurance policy covering the Building or any part thereof or any of its
contents. Tenant shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of other
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tenants or occupants of the Buildings or injure or annoy them or use or allow
the Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises. Tenant shall not commit or suffer to be committed any waste in or
upon the Premises, and Tenant shall conduct itself and cause its employees,
agents and invites to conduct themselves, with full regard to the rights,
convenience and welfare of all other tenants in the Building. Tenant, its agents
and employees, shall at all times comply with the rules and regulations set
forth in Exhibit E.
5.2 COMPLIANCE WITH LAW. Tenant shall not use the Premises or permit its
employees, agents c r invites to do anything in or about the Premises which will
in any way conflict with any law, statute, ordinance or governmental rule or
regulation now in force or which may hereafter be enacted or promulgated. Tenant
shall, at its sole cost and expense, promptly comply with all laws, statutes,
ordinances and governmental rules, regulations or requirements of any board of
fire insurance underwriters or other similar bodies now or hereafter
constituted, relating to, or affecting the condition, use or occupancy of the
Premises, excluding structural changes nor related to or affected by Tenant's
use and occupancy of the Premises and/or Tenant's improvements or acts. The
judgment of any court of competent jurisdiction or the admission of Tenant in
any action against Tenant, whether Landlord be a party thereto or not, that
Tenant has violated any law, statute, ordinance or governmental rule, regulation
or requirement, shall be conclusive of that fact as between the Landlord and
Tenant.
5.3 HAZARDOUS SUBSTANCES. Tenant shall not (either with or without
negligence) cause or permit the escape, disposal, or release of any biologically
or chemically active or other hazardous substances or materials (collectively
"Hazardous Substances). Tenant shall not allow the storage or use of such
Hazardous Substances in any manner not sanctioned by law or by the highest
standards prevailing in the industry for the storage an i use of such Hazardous
Substances, nor allow any Hazardous Substances to be brought into the Project
and such Hazardous Substances, except to use in the ordinary course of Tenant's
business, and then only after written notice is given to Landlord of the
identity of such Hazardous Substances. Without limitation, "Hazardous
Substances" shall include those substances and materials described in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq., and applicable state or local laws and
the regulations adopted under these acts. If any lender or governmental agency
shall ever require testing to ascertain whether or not there has been any
release of Hazardous Substances, then the reasonable costs thereof shall be
reimbursed by Tenant to Landlord upon demand as Additional Rent. In addition,
Tenant shall execute affidavits, representations and the like from time to time
at Landlord's request concerning Tenant's best knowledge and belief regarding
the presence of Hazardous Substances on the Premises. In all events, Tenant
shall indemnify Landlord in the manner elsewhere provided in this Lease from any
release of Hazardous Substances on the Premises or Project, if caused by Tenant
or persons acting under Tenant, and Tenant shall be fully and completely liable
to Landlord for my and all cleanup costs and any and all other charges, fees or
penalties relating to the use, disposal, transportation, generation or sale of
hazardous substances on the Premises or Project which were brought onto the
Premises or Project by Tenant, or Tenant's agents, employees, invites,
contractors or subcontractors. The obligations of Tenant pursuant to this
Section 5.3 shall survive the expiration or earlier termination of this Lease.
Notwithstanding the foregoing, Tenant shall be permitted to use and
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store within the Premises, reasonable quantities of those substances and
materials which are typically found in general office use (i.e. copy toner and
cleaning fluids) despite the fact that such substances and materials may be
classified as Hazardous Substances. *SEE ADDENDUM
ARTICLE 6 - ACCEPTANCE OF PREMISES
Tenant acknowledges that its acceptance of possession of the Premises
constitutes a conclusive admission that Tenant has inspected the Premises and
has found them to be in good condition and repair and in all respects in
accordance with the obligations of Landlord under this Lease. Tenant's
acceptance of possession shall also constitute its acknowledgment of and
agreement to be bound by all recorded matters, laws, ordinances and governmental
regulations and orders in effect at the time of such possession. Tenant
acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the condition of the Premises or the
suitability of the Premises for Tenant's intended use.
ARTICLE 7 - INDEMNIFICATION
7.1 TENANT'S INDEMNITY. Tenant shall defend, indemnify and hold Landlord
harmless against and from any and all liabilities and claims arising from
Tenant's use of the Premises for the conduct of its business or from any
activity, work or other thing done, permitted or suffered by the Tenant, its
agents or employees, in or about the Building or the Common Areas and shall
further indemnify and hold harmless Landlord against and from any and all
liabilities and claims arising from any breach or default in the performance of
any obligation on Tenant's part to be performed under the terms of this Lease,
or arising from any act or negligence of the Tenant, or any officer, agent,
employee, guest or invitee of Tenant, and from and against all costs, attorneys'
fees, expenses and liabilities incurred in or about any such claim or any action
or proceeding brought thereon, and, if any cast, action, claim or proceeding be
brought or asserted against Landlord by reason of any such claim, Tenant, upon
no ice from Landlord, shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons in, upon or about the Premises from any cause other than the
negligence of Landlord, or its designated agents, servants or employees, unless
covered by insurance which Tenant is required to provide, and Tenant hereby
waives all claims in respect thereof against Landlord. Tenant's obligation to
indemnify Landlord shall include reasonable attorneys' fees and investigation
costs, and all other reasonable costs, expenses and liabilities from the first
notice that any claim or demand is to be made or may be made.
7.2 LANDLORD'S INDEMNITY. Notwithstanding the provisions of Section 7.1
above, Tenant shall not be required to indemnify, defend, and hold Landlord
harmless from any such loss, cost, liability, damage and expense resulting from
the negligent acts or omissions or the willful misconduct of Landlord or those
of its agents, contractors, servants, employees or licensees, in connection with
Landlord's activities on the Premises or the Building or the Project, and
Landlord hereby agrees to indemnify, defend, and hold Tenant harmless from any
such loss, costs, liability, damage and expense arising directly out of such
negligent acts or omissions or such willful misconduct. Further, Tenant's
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agreement to indemnify and hold Landlord harmless pursuant to Section 7.1 and
the exclusion from Tenant's indemnity and the agreement by Landlord to indemnify
and hold Tenant harmless pursuant to this Section 7.2 are not intended to and
shall not relieve any insurance carrier of its obligations under polices
required to be carried by Landlord or Tenant, respectively, pursuant to the
provisions of this Lease to the extent that such policies cover the results of
such negligence or omissions or such willful misconduct. If either party
breaches this Lease by its failure to carry required insurance, such failure
shall automatically be deemed to be the covenant and agreement by Landlord or
Tenant, respectively, to self-insure such required coverage, with full waiver of
subrogation.
7.3 DAMAGE TO TENANT'S PROPERTY. Landlord, its employees and its agents,
shall not be liable for any damage to property entrusted by Tenant to employees
of the Building, nor for loss or damage to any property by theft or otherwise,
nor for any injury to or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water or rain which may
leak from any part of the Premises or the Building, or from the pipes,
appliances or plumbing works therein or from the roof, street or subsurface or
from any other place resulting from dampness or any other cause whatsoever, or
by the entry of Landlord or its agents or employees into the Premises as
permitted under this Lease, unless, and to the extent, caused by or due to the
negligence of Landlord, or its agents, servants or employees, unless and to the
e~tent such damage is covered by insurance required to be carried by Tenant
pursuant to this Lease. Landlord, or its agent, shall not be liable for
interference with or loss of business by Tenant. Tenant shall give prompt notice
to Landlord in case of fire or accidents in the Premises or in the Building, or
of defects therein, or in the fixtures or equipment. Neither party shall be
liable to the other for any unauthorized or criminal entry of third parties
into the Premises, Building, or Common Areas, or for any damage to person or
property, or loss of property, in and about the Premises, Building, or Common
Areas, and the approaches, entrances, streets, sidewalks or corridors thereto,
by or from any unauthorized or criminal acts of third parties, regardless of any
breakdown, malfunction or insufficiency of any security measures, practices or
equipment provided by Landlord or Tenant. Tenant shall immediately notify
Landlord in writing of any breakdown or malfunction of any security measures,
practices or equipment provided by Landlord which are known to Tenant. *See
Addendum
ARTICLE 8 - MAINTENANCE. REPAIRS AND ALTERATIONS
8.1 LANDLORD'S OBLIGATIONS. Subject to Tenant's obligations under Section
8.2, Landlord shall repair and maintain in good and tenantable condition the
Common Areas, the roof, exterior walls, structural part~ of the Premises
(including the structural floor), utility meters, pipes and conduits outside the
Premises used to Furnish utilities to the Premises on a nonexclusive basis
(except for repairs assumed by the appropriate public utility company), and
those portions of any variable air volume or central HVAC system serving the
Building which is located outside the Premises. In addition, Landlord shall keep
the foundations, exterior walls and exterior roof of the Building in good order,
condition and repair. Landlord's costs of meeting its obligations under this
Section 8.1 shall be chargeable to Tenant as a part of Building Costs. Tenant
shall not have the right to make repairs at Landlord's expense or to terminate
this Lease due to Landlord's failure to keep the Common Areas, or the Building
in good order, condition and repair. Tenant agrees that the under no
circumstances will Tenant use the roof
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areas for any purpose. Except as specifically provided in Section 4.7 above,
there shall be no abatement of Rent and no liability of Landlord by reason of
any injury to or interference with Tenant's business arising from the making of
any repairs, alterations or improvements in or to any portion of the Building,
Common Areas or the Premises or in or to fixtures, appurtenances and equipment
therein. If any part of the Premises, Common Areas or the Building is damaged by
any act or omission of Tenant, its customers, invitees or employees, Tenant
shall pay Landlord the cost of repairing or replacing such damaged property,
whether or not Landlord would otherwise be obligated to pay the cost of
maintaining or repairing such property, except and to the extent the cost of
such repairs or replacements are covered by insurance carried by Landlord and
paid for by Tenant as part of Building Costs. Tenant acknowledges that neither
Landlord nor any agent of Landlord has made any representation that Landlord
shall undertake any modification, alteration or improvement to the Premises,
except as may be specifically provided for in this Lease. *SEE ADDENDUM
8.2 TENANT'S OBLIGATIONS.
Subject to Landlord's maintenance obligations pursuant to Section 8.1,
Tenant shall keep the Premises in an attractive, first-class and fully operative
condition. Landlord shall not be obligated to make repairs, replacements or
improvements of any kind upon or in the Premises, or upon or to any equipment,
Utility Installation (as defined in Section 8.4), fixtures or furnishings
therein contained during the Term. Tenant, at Tenant's sole expense, shall keep
and maintain the Premises and every part thereof, and any and all appurtenances
thereto wherever located, in first-class condition and in good order and repair,
in accordance with all applicable laws, ordinances and regulations of any
governmental authority having jurisdiction, including replacement of parts and
equipment, if necessary, including, but without limitation, all utility
facilities, including plumbing, heating, electrical ventilation, heating and air
conditioning systems (except Landlord shall maintain the HVAC System serving the
Premises, with the cost of such maintenance chargeable to the tenants of the
Building), sprinkler systems, walls, floors and ceilings, and all other repairs,
replacements, renewals and restorations, ordinary and extraordinary, foreseen
and unforeseen, and all other work or leasehold improvements, subject to
reasonable wear and tear. In addition, Tenant, at its sole cost and expense,
shall install and maintain fire extinguishers and other fire protection devices
as may be required from time to time by any agency having jurisdiction thereof
and/or by the insurance underwriters insuring the Building or Project in which
the Premises are located. In no event shall Tenant make or cause to be made any
penetration into or through the roof or floor of the Premises without the prior
written approval of Landlord. Tenant shall be directly responsible for any and
all damages resulting from any violation of the provisions of this Section 8.2.
Any contractors retained by Tenant for the purpose of complying with Tenant's
obligations under this Section 8.2 shall have received the prior written
approval of Landlord.
8.2.1 If Tenant refuses or neglects to commence repairs within ten
(10) days after Landlord's written demand, or adequately to complete such
repairs within a reasonable time thereafter, Landlord may make the repairs
without liability to Tenant for any loss or damage that may occur to Tenant's
personal property or business by reason thereof, and if Landlord makes such
repairs, Tenant
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shall pay to Landlord on demand, as Additional Rent, the cost thereof, with
interest at the Interest Rate (as defined in Article 29) from the date of
payment by Landlord until repaid by Tenant.
8.2.2 Without any liability for failure to do so, Tenant shall
promptly notify Landlord in writing if Tenant observes that any part of the
Premises, or of the Building, including the fixtures and facilities, is or
appears to be defective, damaged or in a state of disrepair, regardless of the
nature of the cause or of the identity of he party responsible for the repair
thereof.
8.3 CONDITION UPON TERMINATION. Upon termination of this Lease, Tenant
shall remove all of Tenant's personal property, trade fixtures and equipment
from the Premises and shall surrender the Premises to Landlord, broom clean and
in the same condition as received except for ordinary wear and tear which Tenant
was not otherwise obligated to remedy under any provision of this Lease.
Landlord may require Tenant to remove any alterations, additions or improvements
other than the initial Tenant Improvements to be constructed by Landlord
pursuant to the Tenant Improvement Agreement attached hereto as EXHIBIT C
(whether or not made with Landlord's consent) by no later than the termination
of the Lease and to restore the Premises to the condition specified by Landlord
including, without limitation, sign removal and repair and all patching and
plastering required by Landlord, all at Tenant's e~pense. All alterations,
additions and improvements which Landlord has not required Tenant to remove
shall become Landlord's property and shall be surrendered to Landlord upon the
termination of the Lease. Tenant shall repair, at Tenant's expense, any damage
to the Premises caused by the removal of such improvements and trade fixtures.
In no event, however, shall Tenant remove any of the following without
Landlord's prior written consent: any power wiring or power panels; wall
coverings; drapes, blinds or other window coverings; carpets or other floor
coverings; heaters, air conditioners or any heating or air conditioning
equipment; fencing or security gates, or other similar Building operating
equipment and decorations.
8.4 ALTERATIONS, ADDITIONS AND IMPROVEMENTS. Tenant shall not make any
alterations, additions, improvements, structural changes or Utility
Installations in or to the Premises (collectively "Alterations") without
Landlord's prior written consent. Tenant shall submit to Landlord, at the time
of seeking such prior written consent, detailed copies of all plans and
specifications for all Alterations to the Premises. As used in this Section 8,
the term "Utility Installation" shall mean power panels, electrical distribution
systems, security systems, lighting fixtures, air conditioning, plumbing and
telephone and telecommunication wiring and equipment. No Alterations shall be
undertaken without first providing Landlord with a copy of the signed permit(s)
issued by the appropriate governmental agency or agencies, if a permit(s) is
required. All Alterations made by Tenant, except light fixtures, cases, counters
and other removable trade fixtures shall, upon installation, be deemed to have
become part of the freehold and the property of Landlord. Landlord may require
Tenant to provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any Alterations
constructed in violation of this Section 8.4 upon Landlord's written request.
All Alterations shall be accomplished in a good and workmanlike manner, in
conformity with all applicable laws and regulations, and diligently completed by
a licensed contractor approved by Landlord. Upon completion of any Alterations,
Tenant shall provide Landlord with copies of all construction contracts, and
proof of payment (including unconditional lien waivers) for all labor and
materials. Tenant shall
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reimburse Landlord for all costs incurred by Landlord (including architects'
and/or engineers' fees) in approving Tenant's plans for Alterations.
8.4.1 In connection with the construction of any Alterations by
Tenant, Tenant shall provide its own trash containers for construction debris
and use service entrances to the Premises, if any. In addition, Tenant shall
conduct such construction activities during such hours and in such a manner as
to not interfere with the quiet enjoyment or business operations of other
tenants in the Building. Tenant shall not conduct any core drilling during
business hours.
8.4.2 Tenant shall pay when due all claims for labor and material
furnished to the Premises. Tenant shall give Landlord at least ten (10) days'
prior written notice of the commencement of any Alterations on the Premises.
Before commencing any Alterations, Tenant shall permit Landlord to post and
maintain notices of non-responsibility and other notices that are provided for
under the Mechanics' Lien Law of California and other applicable laws. Tenant
shall keep the Premises free and clear of all mechanics' liens resulting from
Alterations done by or for Tenant. Tenant shall have the right to contest the
correctness or the validity of any such lien immediately on demand by Landlord,
Tenant procures and records a lien release bond issued by a corporation
authorized to issue surety bonds in California in an amount equal to one and
one-half (1-1/2) times the amount of the claim of lien. The bond shall meet the
requirements of Civil Code Section 3143 and shall provide for the payment of any
sum that the claimant may recover on the claim (together with costs of suit, if
it recovers in the action). Furthermore, at all times when Tenant or its agents,
contractors or employees are performing Alterations, Tenant or Tenant's
contractor shall maintain public liability and property damage insurance on such
activities with a single combined limit of One Million Dollars ($1,000,000),
naming the Landlord as an additional insured. Furthermore, Tenant or Tenant's
contractor shall procure workmen's compensation insurance to cover the
activities of all persons engaged in such Alterations.
Tenant shall pay all taxes and license fees imposed by reason of any
Alterations made by Tenant to the Premises, or imposed upon any personal
property of Tenant located within the Premises. Tenant agrees that its interior
decorating, including color scheme, shall be subject to the prior approval of
Landlord and Landlord's architect which approval shall not be unreasonably
withheld. Tenant shall make no changes to any entry locks or locks installed on
any other doors located in the Premises without first obtaining Landlord's prior
written approval. It is acknowledged by Tenant that a master key system has been
employed by Landlord, and that any such lock change could hinder access to the
Premises for such purposes as security and fire fighting. In the event that
during the Term hereof any Alteration is mandated by law, regulation, rule or
the requirement of any insurance company (as a condition to the issuance or
continuation of insurance coverage) to be made to the Premises, or any portion
thereof, because of Tenant's use of the Premises, then, and in that event, such
Alteration shall be made and paid for by Tenant.
8.5 INSTALLATION OF FIXTURES. Landlord may, but shall not be obligated to,
grant Tenant written permission to enter upon the Premises prior to the
Commencement Date for the purpose of installing trade fixtures and furnishings
upon the furnishing to Landlord of written evidence satisfactory to
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Landlord that Tenant has obtained and put into effect the insurance coverage
described in Article 12. Landlord shall not be liable to Tenant for damage to or
loss of such fixtures, equipment or furnishings, Tenant accepting the full risk
for such damage or loss if any. Tenant shall pay for all utilities consumed by
Tenant or its contractors in preparing the Premises for opening of Tenant's
business.
8.6 LANDLORD'S RIGHT TO REMODEL BUILDING. Landlord shall have the right,
at any time, to remodel, expand, change or refurbish all or any part of the
Building, Common Areas or the surrounding property, including the right (but not
the obligation) to enclose or otherwise cover all or part of the Common Areas,
to landscape or re-landscape portions of the Building or Common Areas, to
reconstruct, remodel or refurbish any portion of the exterior of the Building,
and/or to change, modify or alter parking, access or other traffic matters. In
connection with the exercise of Landlord's rights as set forth in this Section
8.6, Landlord, its agents and employees, shall have the right of reasonable
entry and to conduct work within the Premises. Tenant hereby releases Landlord
for any and all liability arising from (i) any interference or diminution in
access to the Premises; (ii) noise or dust resulting from Landlord's work; and
(iii) reduction or limitation of available parking spaces for Tenant's employees
and invitees, so long as such activity does not unreasonably interfere with the
operation of Tenant's business. This Lease is not intended to nor shall it
confer upon Tenant any view corridors. The obstruction of Tenant's view, air or
light by any structure erected in the vicinity of the Building, whether by
Landlord or third parties, shall not in any way affect this Lease or impose any
liability upon Landlord, nor shall Landlord be liable for interference with any
other incorporeal hereditament.
ARTICLE 9 - PERFORMANCE BY TENANT
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of Rent except as specifically provided in
Section 4.7 above. If Tenant shall fail to pay any sum of money owed to any
party other than Landlord, or perform any act for any party other than Landlord,
for which Tenant is liable hereunder, and such failure or violation shall
continue for fifteen (15) days after written notice thereof by Landlord, and a
reasonable additional period of time thereafter to perform any such act if such
additional time is required, Landlord may, without waiving or releasing Tenant
from its obligations, make any such payment or perform any such other act to be
made or performed by Tenant. All sums so paid by Landlord and all necessary
incidental costs, together with interest hereon at the Interest Rate from the
date of such payment by Landlord, shall be payable to Landlord on demand, and
shall be deemed Additional Rent.
ARTICLE 10 - DAMAGE OR DESTRUCTION OF LEASEHOLD
10.1 DESTRUCTION COVERED BY INSURANCE. In the event the Premises or the
Building are damaged by fire or other perils which are fully covered by fire and
extended coverage insurance, Landlord agrees to forthwith repair the same, and
this Lease shall remain in full force and effect. Landlord may elect, by written
notice to Tenant within sixty (60) days after such casualty, to terminate this
Lease in lieu of restoring the Premises if either (i) the Building or Premises
are damaged or destroyed to the extent of more than twenty-five percent (25%) of
their replacement cost, or (ii) the damage is such
18
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that the Building or the Premises cannot be repaired and restored within one
hundred eighty (180) days after the casualty.
10.2 DESTRUCTION NOT COVERED BY INSURANCE. In the event the Premises or
the Building are damaged as a result of any cause other than the perils covered
by fire and e~tended coverage insurance, Landlord shall have the option to: (i)
repair or restore such damage, this Lease continuing in full force and effect;
or (ii) give notice to Tenant at any time within sixty (60) days after such
damage, terminating this Lease as of the date specified in such notice, which
date shall be no less than thirty (30) days and no more than sixty (60) days
after the giving of such notice. In the event Landlord gives notice of its
election to terminate this Lease, as is provided for n this Section 10.2, the
Lease shall terminate, and all interest of the Tenant in the Premises shall
terminate on the date so specified in such notice and the Rent shall be paid up
to date of termination.
10.3 REPAIR COSTS EXCEEDING INSURANCE COVERAGE. If the cost of the
restoration of the Premises or the Building exceeds the amount of proceeds
received from insurance, Landlord may elect to terminate this Lease by giving
notice to Tenant within thirty (30) days after determining that the restoration
cost will exceed the insurance proceeds. If Landlord elects to terminate this
Lease and Tenant does not elect to contribute toward the cost of restoration as
provided in this Section 10.3, this Lease shall terminate, and all interest of
the Tenant in the Premises shall terminate on the date so specified in such
notice and the Rent shall be paid up to date of termination. If the destruction
was caused by an act or omission of Tenant, or its agents or employees, Tenant
shall immediately pay Landlord, upon Landlord's demand, the difference between
the actual cost of restoration and any insurance proceeds received by Landlord.
10.4 REPAIRS THAT CANNOT BE COMPLETED WITHIN ONE HUNDRED EIGHTY DAYS.
Within sixty (60) days after the date of Tenant's notice to Landlord of such
damage or destruction ("Damage Notice Date"), Landlord shall give Tenant notice
of Landlord's good faith determination of whether or not the damage or
destruction can be repaired under applicable laws, within one hundred eighty
(180) days after the Damage Notice Date. In the event Landlord determines that
such repairs to the Building and/or the Premises and/or the Common Areas cannot,
in Landlord's good faith judgment, be substantially completed under applicable
laws within one hundred and eighty (180) days after the Damage Notice Date, then
Landlord shall notify Tenant of such determination. In such notice Landlord
shall either agree to undertake such repairs (in which event the notice shall
include Landlord's estimate of the time required to complete the same) or elect
to terminate this Lease. If Landlord agrees to undertake the repairs, but states
that the required repairs will not be substantially completed within one hundred
and eighty (180) days of the Damage Notice Date, Tenant shall have an option,
exercisable by written notice thereof delivered to Landlord not later than the
thirtieth (30th) day after Landlord's delivery of Landlord's notice that the
repairs will not be completed within such one hundred and eighty (180) day
period, to terminate this Lease. If neither Landlord nor Tenant exercise a right
of termination following Landlord's determination that the repairs will take
more than one hundred and eighty (180) days, then Landlord shall diligently
undertake to repair such damage or destruction.
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10.5 ABATEMENT OF RENT. In the event of reconstruction of the Premises
under this Article 10, the Rent otherwise payable under this Lease shall be
abated proportionately with the degree to which Tenant's use of the Premises is
impaired. Such abatement shall commence on the date of such damage or
destruction and continue during the period while Landlord is completing the
repairs required of it under this Article 10. Tenant shall continue to operate
its business on the Premises during any such abatement period to the extent
reasonably practicable from the standpoint of prudent business management.
Tenant shall not be entitled to any compensation or damage, from Landlord for
loss of the use of the whole or any part of the Premises, Building or Tenant's
personal property, or for any inconvenience or annoyance suffered by reason of
damage or destruction thereto, or the reconstruction or replacement thereof.
10.6 RESTRICTIONS ON RESTORATION. If the existing laws do not permit the
restoration of the Premises to substantially the condition existing at the time
of such damage or destruction, either party may terminate this Lease immediately
following receipt of notice that restoration is forbidden, by giving written
notice to the other party.
10.7 DESTRUCTION WITHIN LAST YEAR OF TERM. Notwithstanding anything to the
contrary contained in this Article, Landlord shall have no obligation whatsoever
to repair, reconstruct or restore any portion of the Premises or any portion of
the Building the damage occurs during the last twelve (12) months of the Term or
any extension thereof. In the event Landlord elects not to repair, reconstruct
or restore the Premises during the last twelve (12) months of the Term, or any
extension thereof, Landlord shall give Tenant written notice of Landlord's
election to terminate the Lease within thirty (30) days after the date of
occurrence of such damage.
10.8 DESTRUCTION OF TENANT'S PERSONAL PROPERTY, TENANT IMPROVEMENTS OR
PROPERTY OF TENANT'S EMPLOYEES. It is hereby expressly agreed that Landlord will
not be obligated to carry insurance of any kind on Tenant's furniture,
furnishings, fixtures, equipment or other personal property (collectively
"Personal Property") and in the event of damage or destruction to the Premises
or the Building, under no circumstances shall Landlord be required to repair any
injury or damage by fire or other cause, or to make any repairs to, or
replacements of, Tenant's Personal Property. However, as a part of Direct
Expenses, Landlord shall cause to be insured the Tenant Improvements and
Alterations which do not constitute Tenant's Personal Property and shall cause
such Tenant Improvements and Alterations to be repaired and restored at
Landlord's sole cost and expense except that Tenant shall pay for such portion
which is covered by the deductible. Landlord shall have no responsibility for
any contents placed or kept in or on the Premises or the Building by Tenant or
Tenant's employees.
10.9 EXCLUSIVE REMEDIES. Notwithstanding any destruction or damage to the
Premises, the Building, and/or the Common Areas, Tenant shall not be released
from any of its obligations under this Lease, except to the extent and upon the
conditions expressly stated in this Article 10. Tenant hereby expressly waives
the provisions of California Civil Code Sections 1932(2) and 1933(4) with
respect to any damage or destruction to the Building and/or the Premises and
agrees that its rights shall be exclusively governed by the provisions of this
Article 10.
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10.10 TERMINATION - ADVANCE PAYMENTS AND INSURANCE PROCEEDS. Upon
termination of this Lease pursuant to this Article 10, an equitable adjustment
shall be made concerning advance Rent and any advance payments made by Tenant to
Landlord. Landlord shall, in addition, return to Tenant so much of Tenant's
Security Deposit as has not been applied by Landlord, as provided for under the
terms of this Lease. In the event of termination of this Lease, all proceeds
from Tenant's fire and extended coverage insurance under Section 12.1.2 covering
the Tenant's Personal Property shall be paid to Tenant.
10.11 TERMINATION. Upon any termination of this Lease under any of the
provisions of this Article, the parties shall be released thereby, without
further obligation to the other, from the date possession of the Premises is
surrendered to the Landlord, except for items which have theretofore accrued and
are then unpaid, and those obligations, if any, which by the terms of this
Lease, survive such termination.
ARTICLE 11 - CONDEMNATION
11.1 DEFINITIONS. (i) ~Condemnation" or ~Taking" means (a) the exercise of
any governmental power, whether by legal proceedings or otherwise, by a
condemnor, and (b) a voluntary sale or transfer by Landlord to any condemnor,
either under the threat of condemnation or while legal proceedings for
condemnation are pending; (ii) ~Date of Taking~ means the date the Condemnor has
the right to the possession of the property being condemned; (iii) "Award" means
all compensation, sums or anything of value awarded, paid or received on a total
or partial Condemnation; and (iv) ~Condemnor~ means any public or quasi-public
authority, or private corpora:ion or individual, having the power of
condemnation.
11.2 PARTIES' RIGHTS AND OBLIGATIONS TO BE GOVERNED BY LEASE. If, during
the period between the execution of this Lease and Commencement Date, there is
any Taking of all or any part of the Building or Common Areas, or any interest
in this Lease by Condemnation, the rights and obligations of the parties shall
be determined pursuant to this Article.
11.3 TOTAL TAKING . If the Premises are totally taken by Condemnation
during the Term, the Lease shall terminate on the Date of Taking.
11.4 PARTIAL TAKING.
11.4.1 PARTIAL TAKING OF PREMISES. If any portion of the Premises is
taken by Condemnation, this Lease shall remain in effect, except that Landlord
or Tenant may elect to terminate this Lease if twenty-five percent (25%) or more
of the total number of square feet of the floor area in the Premises is taken,
and the remainder of the Premises is rendered economically unusable by Tenant.
If either party elects to terminate this Lease, that party must exercise its
right to terminate pursuant to this Section by giving notice to the other party
within thirty (30) days after the nature and the extent of the Taking have been
fully determined. If either party elects to terminate this Lease, they shall
notify the other party of the date of termination, which date shall not be
earlier than thirty (30) days nor later
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than ninety (90) days after the other party has been notified of the terminating
party's election to terminate; except that this Lease shall terminate on the
Date of Taking if the Date of Taking falls on a date before the date of
termination as designated by the terminating party. If neither party terminates
this Lease within the thirty (30) day period, this Lease shall continue in full
force and effect, except that Rent shall be reduced as provided below.
Furthermore, at Landlord's cost and expense, and as soon as reasonably possible,
Landlord will restore the remaining portion of the Premises to a complete unit
of like quality and character as existed prior to such Taking.
11.4.2 PARTIAL TAKING OF BUILDING. If more than twenty percent (20%)
of the floor area of the Building in which the Premises is located is taken,
Landlord may terminate this Lease, at Landlord's option, as of the date the
condemning authority takes title or possession by delivering written notice to
Tenant within thirty (30) days after receipt of written notice of such Taking
(or in the absence of such notice, within thirty (30) days after the Condemnor
takes possession).
11.4.3 PARTIAL TAKING OF COMMON AREAS. If any portion of the Common
Areas is taken by Condemnation, this Lease shall remain in full force and effect
so long as there is no material interference will access to the Premises and/or
Tenant's parking facilities. If such a Taking materially interferes with access
to the Premises and/or Tenant's rights to parking within the parking facilities
within the Project, and comparable substitute parking is not made available to
Tenant, then either party shall have the election to terminate this Lease
pursuant to this Article 11. For purposes of this Section 11.4.3, such a partial
Taking of the Common Areas shall be deemed to materially interfere with access
to the Premises and/or Tenant's rights to parking within the parking facilities
within the Project only if twenty five percent (25%) or more of the Common Areas
is taken and comparable substitute parking or access to the Premises is not made
available to Tenant.
11.4.4 EFFECT ON RENT. If any portion of the Premises is taken by
Condemnation and this Lease remains in full force and effect, on the Date of
Taking, the Minimum Monthly Rent shall be reduced by an amount which is in the
same ratio to Minimum Monthly Rent as the total number of square feet in the
Premises taken bears to the total number of square feet in the Premises
immediately before the Date of Taking.
11.5 RESTORATION. If there is a partial Taking of the Premises and this
Lease shall remain in full force and effect pursuant to this Article 11,
Landlord, at its cost, shall accomplish all necessary restoration so that the
Premises are returned as near as practical to their condition immediately prior
to the Date of Taking.
11.6 CONDEMNATION AWARD - DISTRIBUTION. Any Awards paid on account of any
Condemnation or Taking of the Building or the Common Area, or any portion or
portions thereof, shall belong to and shall be he sole property of Landlord,
except that Tenant shall be entitled to receive any Award or portion thereof
attributable to the taking of personal property, good will, relocation expenses
and/or interests in other than the real property taken, provided the same does
not in any way diminish the Award to Landlord.
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11.7 EFFECT OF TERMINATION. In the event this Lease is cancelled or
terminated pursuant to any of the provisions of this Article 11, all Rent and
other charges payable on the part of Tenant to Landlord hereunder shall be paid
either as of the date upon which actual physical possession shall be taken by
the Condemnor, or as of the date upon which Tenant ceases doing business in,
upon or from the Premises, whichever last occurs; and the parties shall
thereupon be released from all further liability hereunder, except that Landlord
shall make an equitable refund to Tenant of any unearned, unused or
unappropriated advance Rent or Security Deposit theretofore paid by Tenant to
Landlord and except for items which have heretofore accrued and are then unpaid,
and those obligations, if any, which by the terms of this Lease, survive such
termination.
11.8 RIGHT TO TERMINATE THIS LEASE FOR TAKING. Neither party shall have
the right to terminate this Lease in the event of a partial Taking of the
Premises, other than as is specifically provided for in this Article 11. Both
parties agree that the provisions of this Article 11 shall govern the rights and
obligations of the parties in the event of any condemnation of the Premises or
the Building, and specifically waive the provisions of California Code of Civil
Procedure Section 1265.130 (and any successor provision).
ARTICLE 12 - INSURANCE
12.1 INSURANCE MAINTAINED AND PAID BY TENANT. Tenant covenants and agrees
that from and after the date of delivery of the Premises from Landlord to
Tenant, Tenant will carry and maintain, at its sole cost and expense, in the
amounts specified and in the form hereinafter provided for, each of the
following types of insurance:
12.1.1 LIABILITY INSURANCE. A Commercial General Liability insurance
policy (with coverage which shall be as least as broad as the most recent
edition of Insurance Services Office Commercial General liability coverage
[~Occurrence form CG 0001] or Insurance Services Office form number GL 0002
covering Comprehensive General Liability and Insurance Offices Form number GL
0404 covering Broad Form Comprehensive General Liability) with a combined single
limit of not less than Two Million Dollars ($2,000,000) insuring Tenant on an
occurrence basis against all liability of Tenant and Landlord and their
authorized representatives, agents and employees arising out of and in
connection with Tenant's use or occupancy of the Premises. All such bodily
injury liability insurance and property damage liability insurance shall
specifically insure the performance by Tenant of the indemnity agreement as to
liability for injury to or death of persons and injury or damage to property
contained in Section 7.1 of this Lease; however, the limits of said insurance
shall not limit the liability of Tenant hereunder. Not more frequently than each
two (2) years, if, in the opinion of Landlord's lender or of the insurance
broker retained by Landlord, the amount of Commercial General Liability
insurance coverage at that time is not adequate, Tenant shall increase the
insurance coverage as required by either Landlord's lender or Landlord's
insurance broker.
12.1.2 TENANT'S PROPERTY INSURANCE. "All Risk" insurance covering
Tenant's personal property, fixtures and equipment from time to time in, on or
upon the Premises, in an amount not less than one hundred percent (100%) of
their full replacement cost from time to time during the Term, together with
insurance against sprinkler damage. Any policy proceeds shall be used for the
repair or
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replacement of the property damaged or destroyed unless this Lease shall cease
and terminate under the provisions of Article 10.
12.1.3 WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY INSURANCE.
Workers' Compensation Insurance in such amounts as required by applicable
California law and Employer's Liability insurance wi h limits of One Million
Dollars ($1,000,000.00) per accident.
12.1.4 BUSINESS INTERRUPTION/EXTRA EXPENSE INSURANCE. Loss of income,
business interruption and extra expense insurance in such amounts as will
reimburse Tenant for direct and indirect loss of earnings and incurred costs
attributable to the perils commonly covered by Tenant's property insurance
described above for a period of not less than one (1) year. Such insurance shall
be carried with the same insurer that issues the insurance for the personal
property.
12.1.5 POLICY FORM. All policies of insurance required to be
maintained by Tenant under the terms of this Section 12.1 shall be issued by
insurance companies, with general policyholder's rating of not less than A and a
financial rating of VII rated in the most current available "Best's" Insurance
Reports, and admitted to do business in the State of California, and shall (with
the exception of Workers' Compensation Insurance) name Landlord, its officers,
employees, partners and agents and such other parties (including lenders) as
Landlord may reasonably require as additional insured, which policies shall be
for the mutual and joint benefit and protection of Landlord, Tenant and such
other parties designated by Landlord. Any deductibles or self-insured retentions
must be declared to and approved by Landlord. If Landlord disapproves of the
amount of any such deductible or self-insured retention, Landlord may either (i)
require Tenant's insurer to reduce or eliminate such deductibles or self-insured
retentions with respect to Landlord, its officers, employees, partners and
agents or (ii) require Tenant to procure a bond guaranteeing payment of losses
and related investigations, claim administration and defense expenses to the
e~tent of any such deductible or self-insured retention. Copies of such policies
of insurance or certificates thereof together with original endorsements showing
the coverage required herein shall be delivered to Landlord prior to the
delivery of possession of the Premises to Tenant and thereafter prior to the
expiration of that term of each such policy. All liability policies shall
contain a provision that Landlord, although named an additional insured, shall
nevertheless be entitled to recover under said policies for any loss occasioned
to it, its servants, agents and employees by reason of the negligence of Tenant.
As often as any such policy shall expire or terminate, renewal or additional
policies shall be procured and maintained by Tenant in like manner and to like
extent. All policies of insurance delivered to Landlord must contain a provision
that the company writing said policy will give Landlord thirty (30) days notice
in writing (by certified mail, return receipt requested) in advance of any
cancellation or lapse or the effective date of any reduction in the amounts of
insurance. All liability policies to be maintained by Tenant shall be written as
primary policies, not contributing with and in e~cess of coverage which Landlord
may carry. In addition, such policies shall include a waiver by the insurer of
any right of subrogation against Landlord, its agents, employees and
representatives, which arises or might arise by reason of any payment under such
Policy or by reason of any act or omission of Landlord, its agents, employees or
representatives. No later than ten ( 0,1 days prior to the Commencement Date,
Tenant shall deliver to
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Landlord, copies of all policies or certificates (together with any required
endorsements) evidencing the existence of the amounts and forms of coverage
satisfactory to Landlord.
12.1.6 BLANKET POLICIES. Notwithstanding anything to the contrary
contained within this Section, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so called blanket
policy or policies of property insurance carried and maintained by Tenant,
provided, however, that Landlord, its officers, employees, partners and agents,
and Landlord's mortgagee(s) or beneficiary(ies) shall be named as an additional
insured thereunder as their interest may appear, and that the coverage afforded
Landlord and Landlord's mortgagee(s) or beneficiary(ies) will not be reduced or
diminished by reason of the use of such blanket policy of insurance, and
provided further that the requirements set forth herein are otherwise satisfied.
Tenant agrees ta permit Landlord at all reasonable times to inspect the policies
of insurance of Tenant covering risks upon the Premises for which policies or
copies thereof are not delivered to Landlord.
12.1.7 TENANT'S FAILURE TO PROCURE INSURANCE. Tenant agrees that if
Tenant does not carry and maintain any such insurance required to be carried
pursuant to this Lease, Landlord may (but shall not be required to) procure such
insurance on Tenant's behalf and charge Tenant the premiums, together with a ten
percent (10%) handling charge, payable upon demand as Additional Rent.
12.2 INSURANCE MAINTAINED BY LANDLORD AND PAID BY BUILDING TENANTS.
12.2.1 LIABILITY INSURANCE. Landlord shall obtain and keep in force
during the Term, a policy of combined single limit bodily injury and broad form
property damage insurance, plus coverage against such other risks Landlord deems
advisable from time to time, insuring Landlord, but not Tenant, against
liability arising out of the ownership, use, occupancy or maintenance of the
Building or the Project, if any, in an amount not less than Two Million Dollars
($2,000,000) per occurrence.
12.2.2 PROPERTY INSURANCE. Landlord shall obtain and keep in force,
during the Term, a policy or policies of property insurance covering loss or
damage to the Building, the Project, the Tenant Improvements and the Alterations
but not Tenant's Personal Property, in an amount determined by Landlord or as
required by Landlord's lenders. Such policy or policies of insurance shall
provide protection against any and all perils generally included in the "All
Risk" classification with earthquake coverage insurance, if required by the
first mortgagee deed of trust trustee or deed of trust beneficiary of Landlord,
or by any federal, state, county, city or local authority, together with
insurance against sprinkler damage, vandalism, malicious mischief, plate glass,
and such other perils as Landlord deems advisable or may be required by a lender
having a lien on the Building or the Project, if any. In addition, Landlord
shall obtain and keep in force, during the Term, a policy of loss of rents
insurance, covering Tenant's tenancy, providing for insurance proceeds for a
period of one (1) year of Tenant's tenancy, with loss payable to Landlord, which
insurance shall also cover all Direct Expenses for said period. Tenant shall not
be named in any such policies carried by Landlord and shall have no right to any
proceeds therefrom.
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12.2.3 COSTS/DEDUCTIBLES. The policies required by Sections 12.2.1 and
12.2.2 shall contain such deductibles as Landlord or Landlord's lenders may
determine. The cost of all such policies shall be chargeable to Tenant as a
Building Cost. In the event that the Premises shall suffer an insured loss, as
defined in Article 10, the deductible amounts under the applicable insurance
policies shall also be deemed Building Costs. Tenant shall not do or permit to
be done anything which shall invalidate the insurance policies carried by
Landlord. Tenant shall pay the entirety of any increase in the property
insurance premium for the Building or the Project, if any, over what it was
immediately prior to the Commencement Date, if the increase is specified by
Landlord's insurance carrier as being caused by the nature of Tenant's occupancy
or any act or omission of Tenant. Landlord's obligation to carry the insurance
provided for herein may be brought within the coverage of any so-called blanket
policy or policies of property insurance carried and maintained by Landlord,
provided that the coverage afforded will not be reduced or diminished by reason
of the use of such blanket policy of property insurance.
12.3 WAIVER OF SUBROGATION. Tenant and Landlord (for themselves and their
insurers) each hereby releases and relieves the other, and waives its right of
recovery against the other, and against the officers, partners, employees,
agents and representatives of the other, and against other tenants of the
Building (provided such parties and other tenants have waived such rights
against Landlord and Tenant), for direct or consequential loss 03 damage arising
out of or incident to the perils covered by property insurance carried by such
party, whether due to the negligence of Landlord or Tenant, or their agents,
employees, contractors and/or invitees, to the item of such insurance coverage.
If necessary, all property insurance policies required under this Lease shall be
endorsed to contain this waiver of subrogation provision.
12.4 NO REPRESENTATIONS OF ADEQUATE COVERAGE. Landlord makes no
representation that the limits or forms of coverage of insurance specified in
this Article 12 are adequate to cover Tenant's property or obligations under
this Lease.
ARTICLE 13 - LANDLORD'S ENTRY ON PREMISES
13.1 ENTRY BY LANDLORD. Landlord and its authorized representatives shall
have the right to enter the Premises at all reasonable times for any of the
following purposes: (i) to determine whether the Premises are in good condition
and whether Tenant is complying with its obligations under this Lease; (ii) in
case of emergency or to do any necessary maintenance, restoration, repairs or
improvements to the Premises, the Building, Common Areas, the Project, or other
leasehold premises in the Building that Landlord has the right or obligation to
perform; (iii) to serve, post or keep posted any notices required or allowed
under the provisions of this Lease; (iv) to post "for rent" or "for lease"
signs during the last four (4) months of the Term, or during any period while
Tenant is in default; (v) with prior reasonable notice to Tenant, to show the
Premises to prospective brokers, agents, buyers, tenants or persons interested
in an exchange, mortgagees, workmen or contractors, at any time during the Term;
(vi) to shore the foundations, footings and walls of the Premises or the
Building in which the Premises are located and to erect scaffolding and
protective barricades around and about the Premises, but not so as to prevent
entry to the Premises, and to do any other act or thing necessary for the safety
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or preservation of the Premises or the Building and other improvements in which
the Premises are located; and (vii) to remodel the Building. *SEE ADDENDUM
13.1.1 Landlord shall have the right to use any and all means which
Landlord may deem proper to open said doors in an emergency, in order to obtain
entry to the Premises, without liability to Tenant. Any entry to the Premises
obtained by Landlord by any of said means, or otherwise, shall not, under any
circumstances, be construed or deemed to be a forcible or unlawful entry to, or
a detainer of, the Premises, or an eviction of Tenant from the Premiss or any
portion thereof. Landlord shall conduct its activities on the Premises as
allowed in this Section in a manner that will cause the least possible
inconvenience, annoyance or disturbance to Tenant. Except in cases of
emergency, when the Tenant has abandoned or surrendered the Premises, or if it
is impracticable to do so, the Landlord shall give the Tenant reasonable notice
and enter only during normal business hours. Tenant hereby grants to Landlord
such licenses or easements in and over the Premises or any portion thereof as
shall be reasonably required for the installation or maintenance of mains,
conduits, pipes or other facilities to serve the Building or any part thereof,
including, but not by way of limitation, the Premises of any occupant; provided,
however, that Landlord shall pay for any alteration required on the Premiss as a
result of any such exercise, occupancy under, or enjoyment of any such license
or easement. *SEE ADDENDUM
13.2 NO ABATEMENT OF RENT. Except as specifically provided in Section 4.7
above, Landlord shall not be liable in any manner for any inconvenience,
disturbance, loss of business, nuisance or other damage arising out of
Landlord's entry on the Premises as provided in this Section, except damage
resulting from the negligence or willful misconduct of Landlord or its
authorized representatives, but only to the extent such damage is not covered by
insurance required to be carried by Tenant pursuant to this Lease. Tenant shall
not be entitled to an abatement or reduction of Rent if Landlord exercises any
rights reserved in this Section, so long as such activity does not unreasonably
interfere with the operation of Tenant's business in the Premises.
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ARTICLE 14 - RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the "Rules and
Regulations," attached hereto as EXHIBIT E and all reasonable and
nondiscriminatory modifications and additions thereto. However, Landlord shall
not be responsible to Tenant for the violation or nonperformance by any other
tenant or occupant of the Building of any of the Rules and Regulations, but
shall use commercially reasonable efforts to enforce the Rules and Regulations
in a nondiscriminatory manner. The Rules and Regulations are in addition to, and
shall not be construed to in any way modify or amend, in whole or in part, the
terms, covenants, agreements and conditions of this Lease. Tenant shall be
responsible for the observance of all of the Rules and Regulations by Tenant's
employees, agents, clients, customers, invitees and guests.
ARTICLE 15 - RESTRICTIONS ON TRANSFER
15.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not, voluntarily or
involuntarily, because of death, divorce, disability, or by operation of law or
otherwise, assign, pledge, hypothecate or encumber its interest in th s Lease or
the Premises or sublease all or any portion of the Premises, or allow any other
person or entity to occupy or use all or any part of the Premises (collectively
"Transfer"), without first obtaining Landlord's prior written consent. Any
Transfer without such consent, shall be void and, at the option of Landlord,
shall terminate this LeasE. Any consent to any Transfer which may be given by
Landlord shall not constitute a waiver by Landlord of the provisions of this
Article 15 or a release of Tenant from the full performance by it of the
covenants herein contained. Il Tenant is a partnership, a transfer of any
interest of a general partner, a withdrawal of any general partner from the
partnership, or the merger or dissolution of the partnership, shall be deemed to
be a Transfer. If Tenant is a corporation, unless Tenant is a public corporation
whose stock is regularly traded or a national stock exchange, or is regularly
traded in the over-the-counter market and quoted on NASDAQ, any dissolution,
merger, consolidation or other reorganization of Tenant or sale or other
transfer of a percentage of capital stock of Tenant which results in a change of
controlling persons, or the sale or other transfer of all or substantially all
of the assets of Tenant, shall be deemed to be a Transfer. For purposes of this
Article 15, the term "Transferee" includes without limitation, assignees,
subtenants, or any other party who acquires an interest in the Premises or this
Lease by way of pledge, hypothecation or encumbrance. *See Addendum
15.2 TRANSFER NOTICE. Tenant shall give Landlord at least sixty (60) days
advance written notice ("Transfer Notice"), of its desire to proceed with a
Transfer and shall submit in writing to Landlord (i) the name of the proposed
transferee, (ii) in detail, the nature of the proposed transferee's business to
be carried on in the Premises, (iii) whether Tenant proposes to assign the
Lease, sublet the Premises or change ownership, (iv) the proposed effective date
of the Transfer, (v) all the material terms and conditions of the Transfer, (vi)
financial statements, income statements and balance sheets for the two (2) most
recent completed fiscal or calendar years of the proposed transferee, and (vii)
a bank reference. The Transfer Notice shall be accompanied by a copy of the
proposed agreement documenting the Transfer, or if none, a copy of any offers,
draft agreements, letters of commitment
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or intent, and other documents pertaining to the proposed Transfer. Thereafter,
Tenant shall furnish such supplemental information as Landlord may reasonably
request concerning the proposed transferee.
15.3 LANDLORD'S ELECTION. At any time within fifteen (15) working days
after Landlord's receipt of the information specified above, Landlord may, by
written notice to Tenant, elect to (i) consent to the Transfer, or (ii)
reasonably disapprove of the Transfer, setting forth in writing Landlord's
grounds for doing so. Such grounds for disapproval may include, without
limitation, nonsuitability of the proposed use for the Premises and/or the
Building, violation of Landlord's third-party agreements, including loan
documents and non-competition covenants of Landlord respecting radius,
locations, use or exclusivity in any other lease, financing agreement or other
agreement relating to the Building or Landlord's other buildings in the
immediate area, need for alteration of the Premises, an inappropriate use in
light of the Building's existing tenant mix, a material increase in the impact
upon the Common Areas or the parking facilities, a material increase in the
demands upon utilities and services, the proposed use of the Premises conflicts
with Tenant's use clause, a possible material adverse effect upon the reputation
of the Premises or the Building from the nature of the business to be conducted,
or a reputation for financial reliability on the part of the proposed transferee
which is unsatisfactory in the reasonable judgment of Landlord, that Tenant is
in default of its obligations under this Lease or that Landlord has not received
assurances acceptable to Landlord that all past due amounts owing from Tenant to
Landlord will be paid and all other defaults by Tenant will be cured prior to
the effective date of the proposed Transfer. If Landlord consents to the
Transfer within the fifteen (15) day period, Tenant may thereafter enter into
such transfer agreement upon the terms and conditions and as of the effective
date set forth in the information furnished by Tenant to Landlord. If Landlord
consents to the Transfer and Tenant does not consummate the Transfer within
fifteen (15) days after receipt of Landlord's decision, the provisions of this
Article 15 shall once again apply. *See Addendum
15.4 ASSUMPTION OF LEASE OBLIGATIONS. Each permitted transferee, other
than Landlord, shall assume and be deemed to have assumed this Lease and shall
be and remain liable jointly and severally with Tenant for the payment of Rent
and for the due performance or satisfaction of all of the provisions, covenants,
conditions and agreements herein contained on Tenant's part to be performed or
satisfied. No Transfer shall be binding on Landlord unless such transferee or
Tenant shall deliver to Landlord a counterpart original of the instrument
evidencing such Transfer which contains a covenant of assumption by the
transferee, but the failure or refusal of the transferee to execute such
instrument of assumption shall not release or discharge the transferee or the
Tenant from its liability as set forth herein. Any permitted Transfer shall not,
in any way, affect or limit the liability of Tenant under the terms of this
Lease, even if after such Transfer the terms of this Lease are materially
changed or altered without the consent of Tenant, the consent of whom shall not
be necessary.
15.5 ADDITIONAL PROVISIONS REGARDING TRANSFERS. Landlord may accept Rent
from any person other than Tenant, pending approval or disapproval of a
Transfer. Neither a delay in the approval or disapproval of such Transfer, nor
the acceptance of Rent, shall constitute a waiver or estoppel of Landlord's
right to exercise its remedies for the breach of any of the terms or conditions
of this Article 15 or this Lease. If Tenant's obligations under this Lease have
been guaranteed by third parties, then any Transfer, and Landlord's consent
thereto, shall not be effective unless said guarantors give their
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written consent to such Transfer. Furthermore, Landlord may consent to
subsequent Transfers or any amendments or modifications thereto without
notifying Tenant or anyone else liable on the Lease, and without obtaining their
consent, and such action shall not release such persons from liability under
this Lease; however, such persons shall not be responsible to the extent any
such amendment or modification enlarges or increases the obligations of the
Tenant or transferee under this Lease. Upon the occurrence of any Event of
Default under this Lease, Landlord may proceed directly against Tenant, any
guarantors or anyone else responsible for the performance of this Lease,
including the transferee, without first exhausting Landlord's remedies against
any other person or entity responsible therefor to Landlord, or any security
held by Landlord or Tenant. Landlord's written consent to any Transfer by Tenant
shall not constitute an acknowledgment that no Event of Default then exists
under this Lease, nor shall such consent be deemed a waiver of any then existing
Event of Default, except as may be otherwise acknowledged by Landlord at that
time. The discovery of the fact that any financial statement relied upon by
Landlord in giving its consent to a Transfer was materially false shall, at
Landlord's election, render Landlord's consent null and void. Any sums or other
economic consideration received by Tenant as a result of a transfer, however
denominated, which exceed, in the aggregate, (i) the total sums which Tenant is
obligated to pay Landlord under this Lease (prorated to reflect obligations
allocable to any portion of the Premises subleased), plus (ii) the unamortized
value of leasehold improvements to the Premises paid for by Tenant, depreciated
on a straight-line basis over the Term, shall be paid to Landlord as Additional
Rent under this Lease without affecting or reducing ,my other obligations of
Tenant hereunder. In the event of any approved Transfer of this Lease in
connection with the sale of all or substantially all of the assets of Tenant
used in connection with the conduct of Tenant's business on the Premises, the
amount of consideration attributable to the Transfer of the Lease shall be
reasonably determined by Landlord.
15.5.1 Tenant shall only use such form of assignment as is provided by
Landlord, and once the completed assignment form has been approved by Landlord,
such assignment shall not be changed or modified without Landlord's prior
written consent.
15.6 SPECIAL PROVISIONS REGARDING SUBLETTING. Regardless of Landlord's
consent, the following terms and conditions shall apply to any subletting by
Tenant 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:
15.6.1 Tenant immediately and irrevocably assigns to Landlord, as
security for Tenant's obligations under this Lease, all Rent from any subletting
of all or a part of the Premises as permitted by this Lease, and Landlord, as
assignee and as attorney-in-fact for Tenant, or a receiver for Tenant appointed
on Landlord's application, may collect such Rent and apply it toward Tenant's
obligations under this Lease; except that, until the occurrence of an Event of
Default by Tenant, Tenant shall have the right to collect such Rent. Tenant
hereby irrevocably authorizes and directs any such sublessee, upon receipt of
written notice from Landlord stating that an Event of Default exists, to pay to
Landlord the Rents due and to become due under the sublease. Tenant agrees that
such sublessee shall have the right to rely upon any such statement and request
from Landlord, and that such sublessee shall pay such Rents to Landlord without
any obligation or right to inquire as to whether such default exists, and
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notwithstanding any notice from or claim from Tenant to the contrary. Tenant
shall have no right or claim against said sublessee or Landlord for any such
Rents so paid by said sublessee to Landlord.
15.6.2 Tenant shall use only such form of sublease as is provided by
Landlord, and once the completed sublease form has been approved by Landlord,
the sublease shall not be changed or modified without Landlord's prior written
consent.
15.6.3 Upon the occurrence of an Event of Default by Tenant under this
Lease, Landlord, at its option and without any obligation to do so, may require
any sublessee to attorn to Landlord, in which event Landlord shall undertake the
obligations of Tenant under such sublease from the time of the exercise of said
option to the termination of such sublease; provided, however, Landlord shall
not be liable for any prepaid Rent or Security Deposit paid by such sublessee to
Tenant, or for any other prior defaults of Tenant under such sublease.
15.6.4 With respect to any subletting to which Landlord has consented,
Landlord agrees to deliver a copy of any notice of default by Tenant to the
sublessee.
15.7 NO MERGER. No merger shall result from Tenant's sublease of the
Premises under this Article 15, Tenant's surrender of this Lease, or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord thereunder.
15.8 CONDITIONS DEEMED REASONABLE. Tenant acknowledges and agrees that
each of the rights of Landlord set forth in this Article 15 above in the event
of a proposed Transfer is a reasonable restriction on transfer for purposes of
California Civil Code Section 1951.4.
15.9 TENANT'S REMEDY. *SEE ADDENDUM
ARTICLE 16 - DEFAULT
16.1 COVENANTS AND CONDITIONS. Tenant's performance of each of Tenant's
obligations under this Lease is a condition as well as a covenant. Tenant's
right to continue in possession of the Premises is conditioned upon such
performance. Time is of the essence in the performance of all covenants and
conditions.
16.2 DEFAULTS. The occurrence of any one or more of the following events
(~Event of Default") shall constitute a default and breach of this Lease by
Tenant: (i) use of the Premises for any purpose other than the Permitted Use;
(ii) the failure by Tenant to make any payment of Minimum Monthly Rent,
Additional Rent or any other payment required to be made by Tenant hereunder, as
and when due, where such failure shall continue for a period of ________ after
written notice thereof from Landlord to Tenant; provided, however, that any such
notice shall be in lieu of, and not in addition to, any notice required under
California Code of Civil Procedure Section 1161; (iii) Tenant's abandonment of
the Premises as defined in California Civil Code Section 1951.3; (iv) Transfer
of the Lease by
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Tenant, either voluntarily or by operation of law, whether by judgment,
execution, death or other means, without the prior written consent of Landlord;
(v) either (a) the making by Tenant of any general arrangement or general
assignment for the benefit of creditors; (b) the filing by or against Tenant of
a petition to have Tenant adjudged a bankrupt or a petition for reorganization
or arrangement under any law relating to bankruptcy unless, in the case of a
petition filed against Tenant, the same is dismissed within thirty (30) days);
(c) the appointment of a trustee or receiver to take possession of substantially
all of Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where possession is not restored to Tenant within thirty (30) days; or
(d) the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease
where such seizure is not discharged within thirty (30) days. In the event that
any provisions of this subparagraph (v) is contrary to any applicable law, such
provision shall be of no force or effect; (vi) the failure by Tenant to observe
or perform any of the express or implied covenants or provisions of this Lease
to be observed or performed by Tenant, where such failure shall continue for a
period of three (3) days after written notice thereof from Landlord to Tenant;
provided, however, that any such notice shall be in lieu of, and not in addition
to, any notice required under California Code of Civil Procedure Section 1161;
provided, further, that if the nature of Tenant's default is such that more than
three (3) days are reasonably required for its cure, then Tenant shall not be
deemed to be in default if Tenant shall commence such cure within said s.b~
period and thereafter diligently prosecute such cure to completion, which
completion shall occur not later than thirty (30) days from the date of such
notice from Landlord; or (vii) the discovery by Landlord that any financial
statement given to Landlord by Tenant, or its successors in interest, or by any
guarantor of Tenant's obligation hereunder, was materially false. *SEE ADDENDUM
ARTICLE 17 - REMEDIES UPON DEFAULT
17.1 Landlord Remedies. Landlord shall have the following remedies upon
the occurrence of an r Event of Default. These remedies are not exclusive; they
are cumulative in addition to any remedies now or later allowed by law. Upon the
occurrence of an Event of Default, Landlord may at any time thereafter, with or
without notice or demand (except for any notice required by Article 16 above)
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have by reason of such Event of Default, do any of the following
17.1.1 Continue this Lease in effect so long as Landlord does not
terminate Tenant's right to possession and Landlord may enforce all of its
rights and remedies hereunder, including, at the option of Landlord: (i) the
right to declare the Term ended and with process of law to re-enter the Premises
and take possession thereof and remove all persons therefrom, and Tenant shall
have no further claim thereon or thereunder; or (ii) the right, without
declaring this Lease ended and with or without process of law, to re-enter the
Premises, take posession thereof, remove all persons therefrom and occupy or
lease the whole or any part thereof for and on account of Tenant and upon such
terms and conditions and for such Rent as Landlord may deem proper and to
collect said Rent or any other Rent that may thereafter become payable and apply
the same toward the amount due or thereafter to become due from Tenant and on
account of such expenses of such subletting and any other damages sustained by
Landlord; and should such Rent be less than that herein agreed to be paid by
Tenant,
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Tenant agrees to pay such deficiency to Landlord in advance on the day of each
month hereinabove specified for payment of Rent and to pay to Landlord forthwith
upon such reletting the costs and expenses Landlord may incur by reason thereof;
or (iii) the right, even though it may have relet said Premises or brought an
action to collect Rent and other charges without terminating this Lease, to
thereafter elect to terminate this Lease and all of the rights of Tenant in or
to the Premises or (iv) the right, without terminating this Lease, to bring an
action or actions to collect Rent and other charges hereunder which are from
time to time past due and unpaid; it being understood that the bringing of such
an action or actions shall not terminate this Lease unless notice of termination
is given.
17.1.2 Should Landlord relet the Premises under the provisions of
paragraph 17.1.1 (ii) above, it may execute any such Lease in its own name or in
the name of Tenant, but Tenant hereunder shall have no right or authority
whatever to collect any Rent from such tenant. The proceeds of any such
reletting shall be first applied to the payment of the costs and expenses of
reletting the Premises, including alterations and repairs which Landlord, in its
sole discretion, deems reasonably necessary and advisable and reasonable
attorneys' fees incurred by Landlord in connection with the retaking of said
Premises and such reletting and, second, to the payment of any indebtedness,
other than Rent, due hereunder, including, without limitation, storage charges
or brokerage commissions Owing from Tenant to Landlord. When such costs and
expenses of reletting have been paid, Tenant shall be entitled to a credit for
the net amount of Rent received from such reletting each month during such
unexpired balance of the Term and Tenant shall pay Landlord such sums as may be
required to make up the Rent provided for in this Lease. Landlord shall not be
deemed to have terminated this Lease, the Tenant's right to possession of the
leasehold or the liability of Tenant to pay Rent thereafter to accrue or its
liability for damages under any of the provisions hereof by a~y such reentry or
by any action in unlawful detainer or otherwise to obtain possession of the
Premises, unless Landlord shall have notified Tenant in writing that it has so
elected to terminate this Lease. Tenant covenants that the service by Landlord
of any notice pursuant to the unlawful detainer statutes of the State of
California and the surrender of possession pursuant to such notice shall not
(unless Landlord elects to the contrary at the time of or at any time subsequent
to the service of such notice and such election be evidenced by a written notice
to Tenant) be deemed to be a termination of this Lease or of Tenant's right to
possession thereof. Nothing herein contained ;hall be construed as obligating
Landlord to relet the whole or any part of the Premises.
17.1.3 Landlord can terminate Tenant's right to possession of the
Premises at any time. Acts of maintenance, efforts to relet the Premises, or the
appointment of a receiver on Landlord's initiative to protect Landlord's
interest under this Lease shall not constitute a termination of Tenant's right
to possession. On termination, Landlord has the right to recover from Tenant:
(i) the worth, at the time of the award, of the unpaid Rent that had been earned
at the time of termination of this Lease; (ii) the worth, at the time of the
award, of the amount by which the unpaid Rent that would have been earned after
the date of termination of this Lease until the time of award exceeds the amount
of the loss of Rent that Tenant proves could have been reasonably avoid d; (iii)
the worth, at the time of the award, of the amount by which the unpaid Rent for
the balance of the Term after the time of award exceeds the amount of the loss
of Rent that Tenant proves could have been reasonably avoided; and (iv) any
other amount, including court costs and attorney's fees, necessary to compensate
Landlord for all
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detriment proximately caused by Tenant's default or defaults, or which in the
ordinary course of things would be likely lo result therefrom, including, but
not limited to, any costs or expenses incurred by Landlord in (a) retaking
possession of the Premises, including reasonable attorneys' fees therefore, (b)
maintaining or preserving the Premises after such default, (c) preparing the
Premises for reletting to a new tenant, including repairs or alterations to the
Premises for such reletting, (d) leasing commissions, or (e) any other costs
necessary or appropriate to relet the Premises.
"The worth, at the time of award," as used in (i) and (ii) of this Section,
is to be computed by allowing interest at the maximum legal rate. "The worth, at
the time of the award," as referred to in (iii) of this Section, is to be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of the award, plus 1%.
17.1.4 Whenever Landlord shall re-enter the Premises as provided in
this Article, Landlord may remove any property of Tenant from the Premises and
store same elsewhere at the e~pense and for the account of Tenant, and if Tenant
shall fail to pay the cost of storing of such property after it has been stored
for a period of ninety (90) days or more, Landlord may sell any or all of such
property, in any lawful manner. In addition, upon the occurrence of an Event of
Default, all of Tenant's fixtures, furniture, equipment, improvements,
additions, alterations and other personal property shall remain on the Premises,
and in that event, and continuing during the length of said default, Landlord
shall have the right to take the exclusive possession of said and to use same,
Rent or charge fee, until all defaults are cured or, at its option, at any time
during the Term, to require Tenant to forthwith remove same.
17.1.5 Upon the occurrence of an Event of Default, Landlord shall have
the right to have a receiver appointed to collect Rent and conduct Tenant's
business. Tenant also hereby agrees that Landlord shall have a lien for payment
for all Rent and Additional Rent called for under the terms of this Lease upon
all the furniture, furnishings, fixtures, supplies and all other personal
property of Tenant which may be in or upon the Premises, Tenant hereby
specifically waiving any and all exemptions allowed by law. Such lien may be
enforced in any lawful manner, at the option of Landlord. Neither the filing of
a petition for the appointment of a receiver nor the appointment itself shall
constitute an election by Landlord to terminate this Lease.
17.1.6 Landlord, at any time after the occurrence of an Event of
Default, can cure the default at Tenant's cost. If Landlord at any time, by
reason of an Event of Default, pays any sum or does any act that requires the
payment of any sum, the sum paid by Landlord shall be due immediately from
Tenant to Landlord at the time the sum is paid, and if paid at a later date
shall bear interest at the Interest Rate from the date the sum is paid by
Landlord until Landlord is reimbursed by Tenant.
17.1.7 Nothing in this Article 17 affects the right of the Landlord
under this Lease to indemnification for liability arising prior to the
termination of the Lease for personal injuries or property damage, as set forth
under Article 7 hereof.
17.2 JURY TRIAL WAIVER. *SEE ADDENDUM
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ARTICLE 18 - PROTECTION OF LENDERS AND TRANSFEREES
18.1 SUBORDINATION. Landlord shall have the right to subordinate this
Lease, and Tenant shall, at Landlord's request, subordinate its rights under
this Lease, to any existing or future ground lease, co-Tenants, conditions and
restrictions, easements, rights of way or any construction, operation and
reciprocal easement agreements, deeds of trust or mortgages encumbering the
Premises, any advances made on the security thereof and any renewals,
modifications, consolidations, replacements or extensions thereof, whenever made
or recorded. However, Tenant's right to quiet possession of the Premises during
the Term shall not be disturbed if Tenant pays the Rent and performs all of
Tenant's obligations under this Lease and is not otherwise in default. If any
ground lessor, beneficiary or mortgagee elects to have this Lease prior to the
lien of its ground lease, deed of rust or mortgage, and gives written notice
thereof to Tenant, then this Lease shall be deemed prior to such ground lease,
deed of trust or mortgage, whether this Lease is dated prior or subsequent to
the date of said ground lease, deed of trust or mortgage or the date of
recording thereof. *SEE ADDENDUM
18.2 ATTORNMENT. If Landlord's interest in the Premises is acquired by any
ground lessor, beneficiary under a deed of trust, mortgagee or purchaser at a
foreclosure sale, Tenant shall attorn to the transferee of or successor to
Landlord's interest in the Premises and recognize such transferee of or
successor as Landlord under this Lease, provided that the purchaser or lessor
shall acquire and accept the Premises subject to this Lease Tenant waives the
protection of any statute or rule of law which gives or purports to give Tenant
any right to terminate this Lease or surrender possession of the Premises upon
the transfer of Landlord's interest.
18.3 SIGNING OF DOCUMENTS. Tenant shall sign and deliver any instrument or
documents necessary or appropriate to evidence any such attornment or
subordination or agreement to do so provided that such int rests or documents
recognize that Tenant's right to quiet possession of the Premises shall not be
disturbed so long as Tenant is not in default of its obligations pursuant to
this Lease beyond any applicable notice and cure period. If Tenant fails to do
so within ten (10) days after written request, Tenant hereby makes, constitutes
and irrevocably appoints Landlord, or any transferee or successor of Landlord,
the attorney-in-fact of Tenant to execute and deliver my such instrument or
document.
18.4 ESTOPPEL CERTIFICATES. Upon Landlord's written request, Tenant shall
execute, acknowledge and deliver to Landlord a written statement certifying: (i)
that none of the terms or provisions of this Lease have been changed (or if they
have been changed, stating how they have been changed); (ii) that this Lease has
not been cancelled or terminated; (iii) the last date of payment of the Minimum
Monthly Rent and other charges and the time period covered by such payment; (iv)
the amount of any Minimum Monthly Rent or other charges which have been paid in
advance; (v) the commencement and termination dates of the Term; (vi) that there
has been no Transfer by Tenant of this Lease, or any interest therein; and (vii)
that there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord hereunder and that Tenant has no right of offset, counterclaim or
deduction against Rent, or specifying such defaults, if any are claimed,
together with the amount of any offset, counterclaim or deduction alleged by
Tenant. Tenant shall deliver such statement to Landlord within ten (10) days
after
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Landlord" written request. Any such statement by Tenant may be given by Landlord
to any prospective purchaser or encumbrancer of the Premises. Such purchaser or
encumbrancer may rely conclusively upon such statement as true and correct.
If Tenant does not deliver such statement to Landlord within such ten (10)
day period, Landlord, and any prospective purchaser or encumbrancer, may
conclusively presume and rely upon the following acts: (i) that the terms and
provisions of this Lease have not been changed except as otherwise represented
by Landlord; (ii) that this Lease has not been cancelled or terminated except as
otherwise represented by Landlord; (iii) Landlord's statement of the last date
of payment of the Minimum Monthly Rent and other charges and the time period
covered by such payment or payments; (iv) that not more than one month's Minimum
Monthly Rent or other charges have been paid in advance; (v) the commencement
and termination dates of the Term are as represented by Landlord; (vi) that
there is no Transfer by Tenant of this Lease or any interest therein; and (vii)
that Landlord is not in default under the Lease. In such event, Tenant shall be
estopped from denying the truth of such facts.
18.5 TENANT'S FINANCIAL CONDITION. Within ten (10) days after written
request from Landlord, Tenant shall deliver to Landlord such financial
statements as are reasonably required by Landlord to verify the net worth of
Tenant, or any assignee, subtenant, or guarantor of Tenant. In addition, Tenant
shall deliver to any lender designated by Landlord any financial statements
required by such lender to facilitate the financing or refinancing of the
Premises. Tenant represents and warrants to Landlord that each such financial
statement is a true and accurate statement as of the date of such statement. All
financial statements shall be confidential and shall be used only for the
purposes set forth herein.
ARTICLE 19 - COMMON AREAS
19.1 COMMON AREAS. "Common Areas" shall mean all areas within and around
the Building, and the Project, if any, which are available for the common use of
tenants of the Building and which are not leased or held for the exclusive use
of Tenant or other tenants, including, but not limited to, parking areas,
driveways, sidewalks, loading areas, access roads, corridors, landscaping and
planted areas, stairways, arcades, elevators, escalators, directory equipment,
restrooms, common entrances, lobbies, passageways and serviceways therefor, and
the common pipes, conduits, wires and appurtenant equipment serving the
Building. Landlord may from time to time change the size, location, nature and
use of any of the Common Areas, including, but not limited to, the relocation of
driveways, entrances, exits, automobile parking spaces, the direction and flow
of traffic, installation of prohibited areas, landscaped areas, converting
Common Areas into leasable areas, constructing additional parking facilities
(including parking structures) in the Common Areas, and increasing or decreasing
Common Area land and/or facilities. Tenant acknowledges that such activities may
result in decreasing Common Area land and/or facilities, and that such
activities may result in occasional inconvenience to Tenant. Landlord shall be
responsible for keeping the Common Areas in a neat, clean and orderly condition,
properly lighted and landscaped, and shall repair any damage to Common Area
facilities. Notwithstanding Landlord's responsibility for such Common Area
maintenance, all expenses incurred
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in connection with the operation, repair, cleaning and maintenance of the Common
Areas shall be included in Direct Expenses and charged and prorated in the
manner set forth in Article 4 of this Lease.
19.2 USE OF COMMON AREAS. Landlord or such other person(s) as Landlord
may appoint shall have the exclusive control and management of the Common
Areas. Tenant, and its employees and invites, shall have the nonexclusive
right (in common with other tenants and all others to whom Landlord has
granted or may grant such rights) to use the Common Areas for the purposes
intended, subject to such reasonable rules and regulations as Landlord may
establish from time to time. Tenant shall abide by such rules and regulations
and shall use its best efforts to cause others who use the Common Areas with
Tenant's express or implied permission to abide by Landlord's rules and
regulations. Notice of such rules and regulations will be posted or given to
Tenant. Tenant shall pay for any increase in the property insurance premiums
for the Common Areas caused by Tenant's acts, omissions, use or occupancy of
the Premises. Tenant shall not, at any time, interfere with the rights of
Landlord, other tenants or any other person entitled to use the Common Areas.
Landlord shall not be responsible to Tenant or Tenant's employees, agents or
invites, for the noncompliance of other tenants with Landlord's rules and
regulations or the interference with the rights of Tenant by other tenants,
their agents, employees or invites. Landlord reserves the right from time to
time without unreasonable interference with Tenant's use: (i) to install,
use, maintain, repair and replace pipes, ducts, conduits, wires and
appurtenant meters and equipment for service to other par:s of the Building
or Common Areas above the ceiling surfaces, below the floor surfaces, within
the walls and in th central core areas, and to relocate any pipes, ducts,
conduits, wires and appurtenant meters and equipment included in the Premises
which are located in the Premises or located elsewhere outside the Premises,
and to expand the Building; 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 and walkways;
provided, however, Landlord shall at all times provide the parking facilities
required by applicable law. Landlord also reserves the right to modify the
lobbies, windows, stairways, air shafts, elevators and restrooms; (ii) to
close temporarily any of the Common Areas for maintenance purposes so long as
reasonable access to the Premises remains available; (iii) to designate other
land and improvements outside the boundaries of the Building or the Project,
if any, to be part of the Common Areas, provided that such other land and
improvements have a reasonable and functional relationship to the Building or
the Project; (iv) to use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Building, or any portion thereof;
and (v) to do and perform such other acts and make such other changes in, to
or with respect to the Common Areas and Building as Landlord may, in the
exercise of sound business judgment, deem to be appropriate.
19.3 VEHICLE PARKING. Tenant, its employees and concessionaires shall not
park in the areas which the Landlord may designate or redesignate as parking for
patrons of the Building. Landlord shall provide either within the Building
parking area or reasonably close thereto, space for employee parking, if such
parking space is available, as reasonably determined by Landlord. Landlord
shall have the right, but not the obligation, to designate parking areas for use
by Tenant's employees and concessionaires and such designation may be changed
from time to time. Tenant, its employees and concessionaires shall park their
cars only in such designated areas, if any are so designated. Said
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parking spaces shall be used only for parking by vehicles no larger than normal
size passenger automobiles or pick=up trucks, or if so designated, for smaller
vehicles. There shall be no overnight parking in parking areas provided by
Landlord without Landlord's prior written consent. If Tenant permits or allows
any of the prohibited activities described in Section 19.3 of this Lease, then
Landlord 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 Tenant, which cost shall be immediately payable upon demand
by Landlord. Landlord reserves the right at any time to substitute an
equivalent number of parking spaces in a parking structure or subterranean
parking facility or in a surface parking area within a reasonable distance of
the Premises.~
19.3.1 If the parking facilities provide for automated card key
access, Landlord shall have the right to charge Tenant a security deposit in the
amount of $25.00 for each parking card key requested by Tenant. Landlord may
assign any unreserved and unassigned parking spaces and/or make all or a portion
of such spaces reserved, if it determines in its sole discretion that is
necessary for orderly and efficient parking. Tenant shall not use more parking
spaces than the number set forth in the Fundamental Lease Provisions. Tenant
shall not permit or allow any vehicles that belong to or are controlled by
Tenant or Tenant's employees, suppliers, shippers, customers or invites to be
loaded, unloaded or parked in areas other than those designated by Landlord 'or
such activities. Tenant agrees that Landlord assumes no responsibility of any
kind whatsoever in reference to said automobile parking facilities or the use
thereof by Tenant, its employees, agents or invites, or by anyone else.
Landlord may, at its sole discretion, determine whether parking facilities shall
be surface, underground, multideck, and where they shall be located. Landlord
may, at any time, and from time to time, limit access to the parking facilities
by means of attendants and/or other devices, and make other changes in the
layout and operation of the parking facilities, including, without limiting the
generality of the foregoing, changes in locations of entrances, exits and
parking spaces. No delay or failure by Landlord to enforce its parking rules and
regulations or its or]her rights hereunder, and no waiver by Landlord
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of any breach thereof, shall be deemed to be a waiver of any succeeding breach,
or prevent any subsequent or other enforcement thereof by Landlord. *SEE
ADDENDUM
ARTICLE 20 - PROFESSIONAL COSTS; CONSENTS
20.1 LEGAL COSTS. If either party incurs any costs or expenses in
connection with any action instituted by either party by reason of any dispute
pursuant to this Lease or for the recovery of any sum due under this Lease, or
because of the breach of any provisions of this Lease by either party, or for
any other relief pursuant to this Lease, or in the event of any other litigation
between the parties with respect to this Lease, then all costs and expenses,
including without limitation, its actual professional fees such as appraisers',
accountants, and attorneys' fees, incurred by the prevailing party therein shall
be paid by the other party, which obligation on the part of the other party
shall be deemed to have accrued on the date of the commencement of such action
or dispute and shall be enforceable whether or not the action is prosecuted to
judgment. The provisions contained in this Section 20.1 shall survive the
expiration or earlier termination of this Lease, and in the event any action or
proceeding is instituted to recover possession of the Premises following the
expiration or earlier termination of this Lease, the provisions contained in
this Section 20.1 shall be applicable. *SEE ADDENDUM
20.2 LANDLORD'S CONSENT. Tenant shall pay all attorneys' fees incurred by
Landlord in connection with Tenant's request for Landlord's consent under
Article 15 (Restrictions On Transfer), or in connection with any other act which
Tenant proposes to do and which requires Landlord's consent, whether or not such
consent is granted. Tenant shall also reimburse Landlord for all costs,
including, without limitation, engineering and architect fees it incurs in
reviewing any remodeling, tenant improvement plans or other requests submitted
by Tenant, whether or not consent or approval is granted.
ARTICLE 21- SIGNS
Tenant shall not place, erect or maintain any sign in or upon the Premises
which is visible from the exterior thereof or in or upon the Building or the
Project without Landlord's prior written consent and without compliance with the
provisions of Exhibit F. *SEE ADDENDUM
ARTICLE 22 - LANDLORD'S BREACH - NOTICE
If Landlord fails to perform any covenant, condition or agreement contained
in this Lease within thirty (30) days after receipt of written notice from
Tenant specifying such failure (or if such failure cannot reasonably be cured
within 30 days, if Landlord does not commence to cure the failure within that
30-day period), then such failure shall constitute a default hereunder and
Landlord shall be liable to Tenant for any damages sustained by Tenant as a
result of Landlord's default; provided, however, it is expressly understood and
agreed that if Tenant obtains a money judgment against Landlord resulting from
any default or other claim arising under this Lease, judgment shall be satisfied
only out of the rents, issues, profits and other income actually received on
account of Landlord's right, title and interest in the Premises or Building, and
no other real, personal or mixed property of Landlord
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(or of the officers, shareholders, directors, partners or principals of
Landlord, if any) wherever situated, shall be subject to levy, attachment or
execution, or otherwise used to satisfy any such judgment. Tenant hereby waives
any right to satisfy a judgment against Landlord except from the rents, issues,
profits and other income actually received on account of Landlord's right, title
and interest in the Premises or Building. Tenant shall not have the right to
terminate this Lease or to withhold, reduce or offset any amount against any
payments of Rent or any other charges due and payable under this Lease, except
as otherwise specifically provided herein.
Tenant agrees to send, by certified or registered mail to any mortgagee or
deed of trust beneficiary of the Building whose address has been furnished to
Tenant, a copy of any notice of default served by Tenant on Landlord. If
Landlord fails to cure such default within the time provided for in this Lease,
such mortgagee or beneficiary shall have an additional thirty (30) days to cure
such default; provided that if such default cannot reasonably cured within
that thirty (30) day period, then such mortgagee or beneficiary shall have such
additional time to cure the default as is reasonably necessary under the
circumstances.
ARTICLE 23 - LATE CHARGES
Tenant's failure to pay Rent promptly may cause Landlord to incur
unanticipated costs, the exact amount of which are impractical or extremely
difficult to ascertain. Such costs may include, but are not limited to,
processing and accounting charges and late charges which may be imposed on
Landlord by any ground lease, mortgage or trust deed encumbering the property.
Therefore, if Landlord does not receive any Rent payment, Tenant shall pay
Landlord a late charge equal to the greater of One Hundred Dollars ($100), or
ten percent (10%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate at the date of this Lease of the
administrative costs Landlord shall incur by reason of such late payment. In
addition, Tenant shall pay to Landlord upon written notice thereof, all costs
incurred by Landlord for attorneys' fees in connection with the collection of
such Minimum Monthly Rent or Additional Rent. *See Addendum
Anything to the contrary in this Lease notwithstanding, Tenant hereby
agrees that if it fails to pay Minimum Monthly Rent, Additional Rent or any
other monetary obligation which Tenant is required to pay under this Lease when
due, for any two (2) consecutive months, or for any three (3) months in a
calendar year, Minimum Monthly Rent for the remaining Term shall automatically
be adjusted to be quarterly Rent, payable in advance, by cashier's check,
commencing upon the first day of the month following such consecutive late
month, or the third late month in a calendar year, and continuing thereafter for
the remaining Term. Time is strictly of the essence with respect to the
provisions of this paragraph.
ARTICLE 24 - INTEREST ON PAST-DUE OBLIGATIONS
Any and all amounts owed by Tenant to Landlord which are not paid when due
shall bear interest at the rate of ten percent (10%) per annum from the due date
of such amount ("Interest Rate"). However, interest shall not be payable on late
charges incurred by Tenant. The payment
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of interest on such amounts shall not excuse or cure any default by Tenant under
this Lease. If the Interest Rate is higher than the rate permitted by law, the
Interest Rate is hereby decreased to the maximum legal interest rate an
individual is permitted to charge by law.
ARTICLE 25 - BUILDING PLANNING
Landlord reserves to itself the right, from time to time, to grant such
easements, rights and dedications that Landlord deems necessary or desirable,
and to cause the recordation of parcel maps and restrictions, so long as such
easements, rights, dedications, maps and restrictions do not unreasonably
interfere with the use of the Premises by the Tenant. Tenant shall sign any of
the aforementioned documents upon request of Landlord. If Tenant fails to do so
within ten ( 10) days after written request, Tenant hereby makes, constitutes
and irrevocably appoints Landlord, or any transferee or successor of Landlord,
the attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
ARTICLE 26 - NOTICES
All notices required or permitted under this L,ease shall be in writing and
shall be personally delivered or sent by certified mail, return receipt
requested, postage prepaid, by nationally or locally recognized overnight or
same day delivery service which provides for acknowledgement of delivery (i.e.,
Federal Express) or by telefacsimile ("FAX") machine capable of confirming
transmission and receipt. Notices to Landlord and Tenant shall be delivered to
the address set forth in Section 1.9 above. Either party may change its notice
address upon written notice to the other party, except that Landlord may in any
event use the Premises as Tenant's address for notice purposes after the
Commencement Date. A copy of all notices required or permitted to be given to
Landlord hereunder shall be concurrently transmitted to such party or parties at
such addresses as Landlord may, from time to time, hereafter designate by notice
to Tenant.
ARTICLE 27 - MODIFICATION FOR LENDER
If, in connection with obtaining construction, interim or permanent
financing or refinancing for the Building, Landlord's lender shall request
reasonable modifications in this Lease as a condition to such financing, Tenant
will not unreasonably withhold, delay or defer its consent thereto, provided
that such modifications do not increase the obligations of Tenant hereunder or
materially and adversely affect the leasehold interest hereby created or
Tenant's rights hereunder.
ARTICLE 28 - CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY
If Tenant is a corporation, each person signing this Lease on behalf of
Tenant represents and warrants that he has full authority to do so and that this
Lease binds the corporation. Concurrently with the signature of th is Lease by
Tenant, Tenant shall deliver to Landlord a certified copy of a resolution of
Tenant's Board of Directors authorizing the execution of this Lease or other
evidence of such authority reasonably acceptable to Landlord. If Tenant is a
partnership, each person signing this
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Lease for Tenant represents and warrants that he is a general partner of the
partnership, that he has full authority to sign for the partnership and that
this Lease binds the partnership. Concurrently with Tenant's signature of this
Lease, Tenant shall deliver to Landlord a copy of Tenant's recorded statement of
partnership or certificate of limited partnership.
ARTICLE 29 - FORCE MAJEURE
The period for performance of any obligation by either party shall be
extended (except for Tenant's obligations to pay Minimum Monthly Rent,
Additional Rent and other charges due pursuant to this Lease, which obligations
shall not be extended) by the period of any delay in performance caused by an
act of God, labor strike, adverse weather conditions, shortage of materials,
war, invasion, acts of a public enemy, governmental preemption in connection
with a national emergency, riot, laws, rules, regulations or order of
governmental or military authorities, or failure or defect in the supply,
quantity or character of utilities furnished to the Building or Premises
(collectively "Force Majeure Event"), excluding from all the foregoing,
financial inability.
ARTICLE 30 - BROKERS
The parties recognize that the brokers who negotiated this Lease are the
brokers whose names are stated in Section 1.13 of the Fundamental Lease
Provisions, and agree that Landlord shall be solely responsible for the payment
of brokerage commissions to said brokers, and that Tenant shall have no
responsibility therefor. Tenant represents and warrants to Landlord that to
Tenant's knowledge no other broker, agent or finder negotiated or was
instrumental in negotiating or consummating this Lease, and that Tenant knows of
no other real estate broker, agent or finder who is, or might be, entitled to a
commission or compensation in connection with this Lease. Any broker, agent or
finder of Tenant whom Tenant has failed to disclose herein shall be paid by
Tenant. Tenant shall hold Landlord harmless from all damages and indemnify
Landlord for all said damages paid or incurred by Landlord resulting from any
claims that may be asserted against Landlord by any broker, agent or finder
undisclosed by Tenant herein. *SEE Addendum
ARTICLE 31 - SECURITY MEASURES
Tenant hereby acknowledges that Landlord shall have no obligation
whatsoever to provide guard service or other security measures for the benefit
of the Premises, Building, Common Areas or the Project. Tenant assumes all
responsibility for the protection of Tenant, its agents, employees and invitees,
and the property of Tenant, of the Tenant's agents, employees and invitees from
the acts of third parties. However, nothing herein contained shall prevent
Landlord, at Landlord's option, from providing security protection for the
Building or the Project, or any part thereof, in which event the cost thereof
shall be included within the definition of Direct Expenses.
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ARTICLE 32 - LANDLORD'S RESERVATIONS
Landlord shall have the following rights: (i) to change the name, address
or title of the Building or the Project; (ii) to permit any tenant the exclusive
right to conduct any business, as long as such exclusive right does not conflict
with any rights expressly given to Tenant herein; and (iii) to place such signs,
notices or displays as Landlord reasonably deems necessary or advisable upon the
roof, exterior of the Building or the Project, if any, or on pole signs in the
Common Areas. Landlord further reserves the absolute right to effect such other
tenancies in the Building as Landlord, in its sole business judgment, determines
best promotes the interests of the Building. Landlord does not represent, and
Tenant does not rely on the possibility, that any specific tenant or number of
tenants will occupy space in the Building during the Term.
ARTICLE 33 - MISCELLANEOUS PROVISIONS
33.1 WAIVER. No delay or omission in the exercise of any right or remedy
of Landlord or Tenant shall impair such a right or remedy or be construed as a
waiver. The receipt and acceptance by Landlord of delinquent Rent shall not
constitute a waiver of any other default. No act or conduct of Landlord,
including, without limitation, the acceptance of the keys to the Premises, shall
constitute an acceptance of the surrender of the Premises by Tenant before the
expiration of the Term. Only a written notice from Landlord to Tenant shall
constitute acceptance of the surrender of the Premises and accomplish a
termination of the Lease. Landlord's consent to or approval of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to waive or render
unnecessary
Landlord's consent to or approval of any subsequent act by Tenant. Any
waiver by Landlord of any default must be in writing and shall not be a waiver
of any other default concerning the same or any other provision of the Lease.
33.2 IDENTIFICATION OF TENANT. If more than one person executes this Lease
as Tenant, (a) each of them is jointly and severally liable for the keeping,
observing and performing of all of the terms, covenants, conditions, provisions
and agreements of this Lease to be kept, observed and performed by Tenant, and
(b) the term 'Tenant~ as used in this Lease shall mean and include each of them
jointly and severally and the act of or notice From, or notice or refund to, or
the signature of, any one or more of them, with respect to the tenancy of this
Lease, including, but not limited to, any renewal, extension, expiration,
termination or modification of this Lease, shall be binding upon each and all of
the persons executing this Lease as Tenant with the same force and effect as if
each and all of them had so acted or so given or received such notice or refund
or so signed. The term "Tenant~ shall include legal representatives, successors
and assigns.
33.3 IDENTIFICATION OF LANDLORD. The term "Landlord" as used in this Lease,
so far as covenants or obligations on the part of Landlord are concerned, shall
be limited to mean and include only the owner o owners at the time in question
of the fee of the Premises, and in the event of any transfer, assignment or
other conveyance or transfers of any such title or leasehold, the Landlord
hereunder named (and in case of any subsequent transfer or conveyances, the then
grantor) shall be
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automatically freed and relieved from and after the date of such Transfer,
assignment or conveyance of all liability as respect the performance of any
covenants or obligations on the part of Landlord contained in this Lease
thereafter to be performed and, without further agreement, the transferee of
such title shall be deemed to have assumed and agreed to observe and perform any
and all obligations of the Landlord hereunder, during its ownership of the
Premises. Landlord may transfer its interest in the Premises without the consent
of Tenant, and such transfer or subsequent transfer shall not be deemed a
violation on Landlord'; part of any of the terms and conditions of this Lease.
33.4 BINDING EFFECT. Each and all of the covenants, conditions and
restrictions in this Lease shall inure to the benefit of and shall be binding
upon the successors in interest of Landlord, and subject to the provisions of
Article 15, authorized encumbrancers, assignees, transferees, subtenants,
licensees, and other successors in interest of Tenant.
33.5 NON-DISCRIMINATION. Tenant covenants and agrees, and it is a
condition to the continuance of this Lease, that there will be no discrimination
against, or segregation of, any person or group of persons on the basis of race,
color, sex, creed, national origin or ancestry, in the leasing, subleasing,
transferring, occupancy, tenure or use of the Premises or any portion thereof.
33.6 CONFLICT OF LAWS AND CHOICE OF JURISDICTION. This Lease shall be
governed by and construed pursuant to the laws of the State of California. Any
litigation concerning this Lease between the parties hereto shall be initiated
in the California court having jurisdiction over the area where the Building is
located.
33.7 SEVERABILITY. A determination by a court of competent jurisdiction
that any provision of this Lease or any part thereof is illegal or unenforceable
shall not cancel or invalidate the remainder of such provision or this Lease,
which shall remain in full force and effect. It is the intention of the parties
hereto that if any provision of this Lease is capable of two constructions, one
of which would render the provision void and the other of which would render the
provision valid, then the provision shall have the meaning which renders it
valid.
33.8 INTERPRETATION. The captions of the articles and sections of this
Lease are to assist the parties in reading this Lease and are not a part of the
terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural, and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. The word "person" shall include corporations, firms, partnerships or
associations. In any provision relating to the conduct, acts or omissions of
Tenant, the term "Tenant" shall include Tenant's agents, employees, contractors,
invites, successors or others using the Premises with Tenant's expressed or
implied permission. It is also agreed that no specific words, phrases, or
clauses herein used shall be taken or construed to control, limit or cut down
the scope or meaning of any general words, phrases or clauses used in connection
therewith. Although the printed provisions of this Lease were drawn by Landlord,
this Lease shall not be construed either for or against Landlord or Tenant, as
this Lease has been prepared with the participation of both parties and both
parties have either been represented by attorneys or have had the opportunity
for such representation in the negotiation of its contents.
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33.9 INCORPORATION OF PRIOR AGREEMENTS: MODIFICATIONS. This Lease contains
all agreements of take parties with respect to any matter mentioned herein. No
prior or contemporaneous agreement or understanding pertaining to any such
matter shall be effective. This Lease may be modified in writing only, signed by
the parties in interest at the time of the modification. Except as otherwise
stated in this Lease, Tenant hereby acknowledges that neither the real estate
brokers identified in Section 1.13 of the Fundamental Lease Provisions, nor any
cooperating broker on this transaction, nor the Landlord, or any employee or
agents of any of said persons, has made any oral o written warranties or
representations to Tenant relative to the condition or use by Tenant of the
Premises or the Building, and Tenant acknowledges that Tenant assumes all
responsibility regarding the legal use and adaptability of the Premises and the
compliance thereof with all applicable laws and regulations in effect during the
Term.
33.10 EXAMINATION OF LEASE. Submission of this Lease for examination or
signature by Tenant does not constitute a reservation of or option for Lease,
and it is not effective as a Lease or otherwise until signature by and delivery
to both Landlord and Tenant.
33.11 TIME. Time is of the essence with respect to the performance of
every provision of this Lease in which time or performance is a factor.
33.12 ACCORD AND SATISFACTION. No payment by Tenant or receipt by Landlord
of a lesser amount than the Rent payment herein stipulated shall be deemed to be
other than on account of the earliest stipulated Rent, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment as
Rent be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
Rent or pursue any other remedy provided in this Lease.
33.13 NONRECORDATION OF LEASE. Tenant shall not record this Lease or a
short form memorandum thereof.
33.14 COVENANTS AND CONDITIONS. All of the provisions of this Lease shall
be deemed as running with the land, and construed to be "conditions,~ as well as
"covenants," as though the words specifically expressing or imparting covenants
and conditions were used in each separate provision.
33.15 NEGATION OF PARTNERSHIP. Landlord shall not become or be deemed a
partner or joint venturer with Tenant by reason of the provisions of this Lease.
33.16 CONSENT OF LANDLORD AND TENANT. Wherever in this Lease consent or
approval is required from either party to any action by the other, such consent
or approval shall be given in writing and shall not be unreasonably withheld,
unless expressly provided otherwise in this Lease. Landlord shall not be deemed
to have withheld its consent unreasonably where Landlord's right to give its
consent is conditioned on Landlord obtaining the consent of any other person,
agency or authority having the right to withhold its consent pursuant to any
agreement or law, and such person, agency or authority does withhold its
consent. If Landlord or Tenant unreasonably fails to give any such consent, the
other party
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shall be entitled to specific performance in equity and shall have such other
remedies as are reserved to it under this Lease, but in no event shall Landlord
or Tenant be responsible in monetary damages for failure to give such consent.
[Balance of Page Intentionally Left Blank
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33.17 LEASE EXECUTION DATE. This Lease shall become effective and binding
upon both parties upon the last date set forth below signifying execution by the
parties to this Lease. *SEE ADDENDUM
LANDLORD
Regents Park Financial Center, Ltd.
a California limited partnership
By: The Lomas Santa Fe Group, a California corporation
(General Partner
DATE: 11/30/95 By: /s/ RICHARD E. KELLER
______________________ ____________________________________
Name: Richard E. Keller
__________________________________
Title: President
_________________________________
Date: 11/30/95 By: /s/ MATTHEW J. ROOT
______________________ _____________________________________
Name: Matthew J. Root
___________________________________
Title: Director of Leasing
__________________________________
TENANT
Southern California Bank
a California corporation
Date: 11/9/95 By: /s/ DAVID A. MCCOY
_______________________ _____________________________________
Name: David A. McCoy
___________________________________
Title: EVP/COO
__________________________________
Date: ________________ By: _________________________________________
Name: ___________________________________
Title: __________________________________
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REGENTS PARR FINANCIAL CENTRE
ADDENDUM TO LEASE
This Addendum to Lease ("Addendum") is entered into by and between REGENTS
PARK FINANCIAL CENTRE, LTD., A CALIFORNIA LIMITED PARTNERSHIP ("Landlord") and
SOUTHERN CALIFORNIA BANK, A CALIFORNIA CORPORATION ("Tenant"), and is made to
the Regents Park Financial Centre Office Lease dated for reference purposes only
as of October 25, 1995 ("Lease").
Landlord and Tenant hereby agree that notwithstanding anything contained in
the Lease to the contrary, the provisions set forth below shall be deemed to be
a part of the Lease and shall supersede, to the extent appropriate, any contrary
provision in the Lease. All references in the Lease and in this Addendum to
"Lease" shall be construed to mean the Lease, as amended and supplemented by
this Addendum. Unless specifically defined in this Addendum, all capitalized
terms used in this Addendum shall have the same meaning as the terms used in the
Lease.
ARTICLE 1 - FUNDAMENTAL LEASE PROVISIONS
1.5 PREMISES. The following is deemed added to Section 1.5 of the
Fundamental Lease Provisions:
Landlord and Tenant acknowledge that concurrently with the execution of
this Lease, Tenant and Citicorp Savings, a Federal Savings and Loan Association
("Citicorp") are entering into a sublease (the "Citicorp Sublease") for those
certain premises consisting of approximately 3,471 rentable square feet located
on the ground floor of the Building and designated as Suite 125 ("Suite 125").
In addition, concurrently with the execution of this Lease, Landlord and Tenant
are entering into a separate lease for Suite 125 (the "Suite 125 Continuation
Lease") which will permit Tenant to remain in possession of Suite 125 following
the expiration of the term of the Citicorp Sublease on the terms and conditions
set forth therein.
1.6 TERM. The first sentence of Section 1.6 of the Fundamental Lease
Provisions is deemed deleted and replaced with the following:
The Term shall be eighty four (84) months commencing on the first to
occur of (i) of November 1, 1995; or (ii) the date commences business
in the Premises (such date hereinafter referred to as the
"Commencement Date").
1.11.2 MINIMUM MONTHLY RENT. Section 1.11.2 of the Fundamental
Lease Provisions is deemed deleted and replaced wi h the following:
Minimum Monthly Rent for the Term shall be payable in accordance with the
following schedule:
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Months 1 through 12 $1.60 per rentable square foot
full service ($3,360.00/month)
Months 13 through 24 $1.66 per rentable square foot
full service ($3,486.00/month)
Months 25 through 36 $1.73 per rentable square foot
full service ($3,633.00/month
Months 37 through 48 $1.80 per rentable square foot
full service ($3,780.00/month)
Months 49 through 60 $1.87 per rentable square foot
full service ($3,927.00/month)
Months 61 through 72 $1.95 per rentable square foot
full service ($4,095.00/month)
Months 73 through 84 $2.02 per rentable square foot
full service ($4,242.00/month)
ARTICLE 2 - LEASE
2.2 DELAY IN COMMENCEMENT. The following is deemed added l:o the end of
Section 2.2 of the Lease:
Despite anything in this Lease to the contrary, if Landlord has not
delivered possession of the Premises to Tenant by December 1, 1995 (the "Outside
Delivery Date"), then Tenant may, by written notice delivered to Landlord no
later than ten (10) days after the Outside Delivery Date (but prior to
Landlord's actual delivery of possession of the Premises), elect to terminate
this Lease and upon such termination the parties shall be released from all
obligations to the other pursuant to this Lease.
2.6 OPTION TO EXTEND TERM. The following provision is deemed added to the
Lease as Section 2.6:
OPTION TO EXTEND TERM. Landlord hereby grants to Tenant one(1) option
("Option") to extend the Term of this Lease for one (1) additional
period of sixty (60) months ("Option Term"). The Option must be
exercised, if at all, by written notice ("Option Notice") delivered by
Tenant to Landlord no earlier than twelve (12) months and no later
than nine (9) months prior to the end of the initial eighty four (84)
month Term. Further, the Option shall not be deemed to be properly
exercised if, as of the date of the Option Notice or at the end of the
initial Term, Tenant (i) is in default under th s Lease or the Suite
125 Continuation Lease beyond an applicable cure period, (ii) has
assigned all or
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any portion of this Lease or the Suite 125 Continuation Lease or its interest
therein; or (iii) has sublet all or any portion of the Premises or Suite 125.
Provided (a) Tenant has proper]y and timely exercised the Option, (b) Tenant has
also proper]y and timely exercised its option to extend the term of the Suite
125 Continuation Lease as provided therein (which exercise may be concurrent
with Tenant's exercise of the Option provided for herein), and (c) Landlord and
Tenant reach agreement on the Minimum Monthly Rent payable for the Option Term
as provided below, the initial Term shall be extended by the Option Term, and
all terms, covenants and conditions of the Lease shall remain unmodified and in
full force an effect, except that there shall be no further extension of the
Term following the Option Term and the Minimum Monthly Rent for the Option Term
shall be the then prevailing market rent then being charged by Landlord to new
tenants for comparable space in the Building, or, if insufficient comparable
transactions exist in the Building, then the rate being charged to new tenants
for comparable space by landlords of similar office premises in the same general
market area of the Building, with similar amenities, taking into consideration
the size and location of the premises, the proposed term of the Option Term, the
time the particular rental under consideration was agreed upon and became or is
to become effective, the extent of improvements and services to be provided and
any other relevant terms and conditions.
Landlord shall use its best efforts to provide Tenant with its determination of
the Minimum Monthly Rent for the Option Term within thirty (30) days of its
receipt of a timely Option Notice from Tenant ("Landlord's Determination").
Tenant shall have fifteen (15) days ("Tenant's Review Period") after receipt of
Landlord's Determination within which to accept Landlord's Determination or to
reasonably object thereto in writing. In the event Tenant fails to object to
Landlord's Determination in writing within such fifteen (15) day period,
Landlord's Determination shall be deemed accepted. If Tenant reasonably objects
to Landlord's Determination, the parties shall then have thirty (30) days (the
"Negotiating Period") after the expiration of Tenant's Review Period within
which to agree on new Minimum Monthly Rent for the Option Term. If the parties
agree on the Minimum Monthly Rent for the Option Term within the Negotiating
Period, they shall immediately execute an amendment to this Lease setting forth
the new Minimum Monthly Rent. If the parties are unable to agree on the Minimum
Monthly Rent for the Option Term within the Negotiating Period then each party
shall place in a separate sealed envelope their final proposal as to Minimum
Monthly Rent for the Option Term and such determination shall be submitted to
arbitration as set forth below.
Landlord and Tenant shall meet with each other within five (5) business days of
the expiration of the Negotiating Period, exchange the sealed envelopes, and
then open such envelopes in each other's presence. If Landlord and Tenant do not
mutually agree upon the Minimum Monthly Rent for the Option Term within five (5)
business days of the exchange and opening of envelopes, then, within ten (10)
business days of the exchange and opening of envelopes Landlord and Tenant shall
agree upon and jointly appoint a single arbitrator who shall by profession be a
real estate broker who shall have been
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active over the five (5) year period ending on the date of such appointment in
the leasing of comparable office buildings. Neither Landlord nor Tenant shall
consult with such broker as to his or her opinion as to the Minimum Monthly Rent
for the Option Term prior to the appointment. The determination of the
arbitrator shall be limited solely to the issue of whether Landlord's or
Tenant's submitted Minimum Monthly Rent for the Premises is the closer to the
actual prevailing market rent for the Premises as determined by the arbitrator,
taking into account the requirements of this Section. Such arbitrator may hold
such hearings and require such briefs as the arbitrator, in his or her sole
discretion, determines is necessary. In addition, Landlord or Tenant may submit
to the arbitrator with a copy to the other party within five (5) business days
after the appointment of the arbitrator any market data and additional
information that such party deems relevant to the determination of Minimum
Monthly Rent for the Option Term ("Market Rent Data") and the other party may
submit a reply in writing within five (5) business days after receipt of such
Market Rent Data.
If Landlord and Tenant fail to agree upon and appoint an arbitrator, then the
appointment of the arbitrator shall be made by the Presiding Judge of the San
Diego County Superior Court, or, if he or she refuses to act, by any judge
having jurisdiction over the parties.
The arbitrator shall, within thirty (30) days of his or her appointment, reach a
decision as to whether the parties shall use Landlord's or Tenant's submitted
Minimum Monthly Rent, and shall notify Landlord and Tenant of such
determination; provided, however, notwithstanding anything in this Section to
the contrary, under no circumstances shall the Minimum Monthly for the initial
year of the Option Term be less then the amount of the Minimum Monthly Rent
payable by Tenant for the calendar month immediately preceding the commencement
of the Option Term.
The decision of the arbitrator shall be binding upon Landlord and Tenant. The
cost of arbitration shall be paid by Landlord and Tenant equally.
If the Minimum Monthly Rent for the Option Term shall not have been determined
by the commencement of the Option Term, Tenant shall continue to pay the Minimum
Monthly Rent payable as of the month immediately preceding such commencement
until the Minimum Monthly Rent is established so that the Minimum Monthly Rent
established for the Option Term shall be retroactive to the commencement of the
Option Term.
ARTICLE 3 - RENT
3.2 ADJUSTMENTS TO MINIMUM MONTHLY RENT. Section 3.2 is deemed deleted in
its entirety.
ARTICLE 4 - OTHER CHARGES PAYABLE BY TENANT (ADDITIONAL RENT)
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4.1.3.3 DIRECT EXPENSE EXCLUSIONS. The following items shall be deemed
added to the list of items excluded from Direct Expenses set forth in Section
4.1.3.3 of the Lease:
(xviii) Costs associated with the operation of the business of
the ownership or entity which constitutes "Landlord", as distinguished from the
costs of Building operations:
(xix) Costs incurred in connection with the original construction
of the Building;
(xx) Costs of correcting defects in the original design or
construction of the Building;
(xxi) Costs for which Landlord is reimbursed by insurance carried
by Landlord or Tenant pursuant to this Lease;
(xxii) Bad debt losses, rent losses, or reserves for the same;
(xxiii) Fines and penalties;
(xxiv) Except for rent and related expenses incurred by Landlord
while making repairs or keeping permanent systems in operation, rent and related
expenses incurred in leasing air conditioning systems, elevators or other
similar equipment considered to be of a capital nature.
It is understood that Direct Expenses shall be reduced by all cash
discounts, trade discounts or quantity discounts actually received by
Landlord or Landlord's managing agent in the purchase of any goods, utilities
or services in connection with the operation of the Building. In the
calculation of any Direct Expenses pursuant to this Lease, it is understood
that no expenses shall be charged more than once. Landlord shall use
commercially reasonable best efforts to effect an equitable proration of
bills and services rendered to the Building and to any other property owned
by Landlord. Landlord agrees to maintain its books and records showing
Direct Expenses in accordance with Landlord's standard accounting practices
consistently maintained on a year-to-year basis.
4.2.1 INCREASES IN DIRECT EXPENSES/ADDITIONAL RENT. The references in
Section 4.2.1 to "sixty (60) days" are deemed changed to "one hundred and twenty
(120) days").
4.5 BUILDING SERVICES AND UTILITIES. The first sentence of Section 4.5 is
deemed deleted and replaced with the following:
Landlord shall furnish to the Premises during the normal business hours of
Tenant, which are 8:00 a.m. to 7:00 p.m. Monday through Friday and 9:00 a.m. to
1:00 p.m on Saturdays ("Business Hours"), except for those holidays designated
annually by Landlord, heating, ventilating and air conditioning ("HVAC Service")
as required for the comfortable occupancy of the Premises as reasonably
determined by Landlord.
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ARTICLE 5 - USE OF PREMISES
5.3 HAZARDOUS SUBSTANCES. The following provisions are deemed added to the
end of Section 5.3 of the Lease:
Landlord represents and warrants that except for materials and substances
typically used in offices such as cleaning fluids and copy toner, Landlord has
no actual knowledge of the existence of any Hazardous Substances in, on or under
the Building or the real property on which the Building is located. Landlord
hereby agrees to indemnify and hold harmless Tenant, its directors, officers,
employees, and agents, and any successors, from and against any and all
liability, directly or indirectly arising out the use, generation, construction,
manufacturing, storage, or dispose of Hazardous Substances in, on or under the
Building and/or the Premises, the Landlord, its agent, employees or contractors
to the extent that such action is attributable, directly or indirectly, to the
presence or Use, generation, storage, release, threatened release, or disposal
of Hazardous Substances by any such person at the Building or on the Premises
(or real property on which the Building is located . The representations,
warranties and indemnities of Landlord contained in this paragraph shall not be
binding upon Teachers Insurance and Annuity ASSOCIATION as the holder of the
first lien against the Building or as a successor-in-interest.
ARTICLE 7 - INDEMNIFICATION
7.3 DAMAGE TO TENANT'S PROPERTY. The last sentence of Section 7.3 is
deemed deleted and is replaced with the following:
Tenant hereby agrees that in no event shall Landlord or its agents or
employees be liable for consequential damages, including injury to
Tenant's business OR ANY loss of income therefrom, nor shall Landlord
NOR Tenant nor their respective agents or employees be liable to
Landlord or Tenant, as applicable, for any damages caused by the act
or neglect of any other tenant in the Building.
ARTICLE 8 - MAINTENANCE, REPAIRS AND ALTERATIONS
8.1 LANDLORD'S OBLIGATIONS. The following is deemed added to the end of
Section 8.1 of the Lease: Landlord agrees that in carrying out its obligation~
pursuant to this Section 8.1, Landlord will not unreasonably interfere with the
conduct of Tenant's business in the Premises, and if possible on a commercially
reasonable basis, with respect to any maintenance or repairs to be performed
within the Premises, Landlord will endeavor to perform such maintenance or
repairs after the regular business hours of Tenant.
ARTICLE 13 - LANDLORD'S ENTRY ON PREMISES
13.1 ENTRY BY LANDLORD. The following is deemed added to the end of
Section 13.1: Despite the foregoing, in recognition of Tenant's security
concerns, Landlord agrees that prior to any entry into the Premises for the
purposes set forth above, Landlord agrees to provide Tenant with reasonable
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advance written notice, except if such entry is required as a result of an
emergency, in which case no such notice shall be required.
13.1.1 The first two lines of Section 13.1.1 are deemed
ARTICLE 15 - RESTRICTIONS ON TRANSFER
15.1 LANDLORD'S CONSENT REQUIRED. The following is deemed added to the end
of Section 15.1 of the Lease:
Despite anything in this Article 15 to the contrary, Tenant shall have
the right, without Landlord's consent, to assign this Lease or to
sublet all or any portion of the Premises to (i) any subsidiary
corporation or parent corporation of Tenant, or (ii) any corporation
which Tenant may merge or consolidate, or (iii) any corporation
acquiring substantial:.y all of the assets and/or stock of Tenant. As
used in this Lease, corporations are related as "parent" or
"subsidiary":of such corporation owns fifty percent (50%) or more of
the voting stock of another corporation. Even though Landlord s
consent to the preceding Transfers is not required, Tenant agrees that
Tenant will provide Landlord with written notice of any such Transfer
no later than ten (10) days after the effective date of any such
Transfer.
15.3 LANDLORD' 8 ELECTION. Landlord's right to recapture the Premises as
set forth in subparagraph 15.3 (i) is deemed deleted.
15.9 TENANT'S REMEDY. Section 15.9 is deemed deleted in it's entirety.
ARTICLE 16 - DEFAULT
16.2 DEFAULTS. All references to "three (3) days" in Section 16.2 are
deemed changed to "five (5) days". In addition, the following is deemed added to
the end of Section 16.2: In addition to all of the foregoing, any event of
default by Tenant under either the Citicorp Sublease or the Suite 125
Continuation Lease, as applicable, shall also constitute an "Event of Default"
for purposes of this Lease.
ARTICLE 17 - REMEDIES UPON DEFAULT
17.2 JURY TRIAL WAIVER. Section 17.2 is deemed deleted in its entirety.
ARTICLE 18 - PROTECTION OF LENDERS AND TRANSFEREES
18.1 SUBORDINATION. The following is deemed added to the end of Section
18.1 of the Lease:
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Landlord shall use its commercially reasonable best efforts to obtain and
deliver to Tenant an agreement in writing from each existing mortgagee with a
lien encumbering the Premises and/or the lessor of any existing ground lease
affecting the Premises which provides that, so long as Tenant is not in default
of any of the terms, covenants, conditions, provisions or agreements of this
Lease, Tenant's possession of the Premises shall not be disturbed by reason of
the foreclosure of any such mortgage or the termination of any such ground
lease, but Landlord shall have absolutely no liability whatsoever to Tenant if
Landlord is not successful in obtaining any such agreement for Tenant nor shall
Tenant have any right to terminate this Lease because of Landlord's failure to
obtain such an agreement.
ARTICLE 19 - COMMON AREAS
19.3 VEHICLE PARKING~. The first and second sentences of subsection 19.3.1
shall be deemed deleted and the following shaLl be deemed inserted in place
thereof:
During the Term, Tenant shall be entitled to use the number of vehicle
parking spaces set forth in Section 1.14 of the Fundamental Lease Provisions at
no additional charge.
ARTICLE 20 - PROFESSIONAL COSTS: CONSENTS
20.1 LEGAL COSTS. The jury trial waiver set forth in the second sentence
of Section 20.1 is deemed deleted in its entirety.
ARTICLE 21 - SIGNS
The following provisions are deemed added to Article 21 of the Lease:
Notwithstanding the foregoing, Landlord and Tenant specifically
acknowledge and agree that so long as Tenant is occupying and is in
possession of the Premises and Suite 125 (pursuant to the Citicorp
Sublease or the Suite 125 Continuation Lease), Tenant shall have the
right during the Term, at Tenant's sole cost and expense, and be
permitted l:o install two (2) signs identifying Tenant on the exterior
of the Building ("Building Signs"). The Building Signs shall be on the
Building facade, above the window line, and in a locations mutually
approved by Landlord and Tenant. :n addition to the Building Sign,
Tenant shall, provided space:s available, be permitted, at Tenant~s
expense, to install an additional sign identifying Tenant on one (1)
of the Building's monument signs ("Monument Signs"). The Building
Signs and the Monument Sign are hereinafter collectively referred to
as the "Tenant Signs". Tenant acknowledges and agrees that the Tenant
Signs must conform to Landlord's sign criteria and any restrictive
encumbering the Building and are subject to further approval by the
City of San Diego. The Tenant Signs shall be constructed and installed
by a sign contractor approved by Landlord and shall be performed in a
lien free manner in accordance with the provisions of this Lease.
Tenant shall, at Tenant's sole cost and expense, maintain the Tenant
Signs pursuant to a maintenance program reasonably approved by
Landlord. Upon (i) the expiration or earlier termination of this
Lease, and/or (ii) if Tenant is no longer
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occupying and in possession of the Premises and Suite 125 pursuant to
the Citicorp Sublease or the Suite 1-5 Continuation Lease, Tenant
shall, at Tenant's sole cost and expense, and subject to Landlord's
supervision, cause the Tenant Signs to be removed and the Building and
the monuments to be restored to the condition existing prior to the
installation of Tenant's Signs. If Tenant fails to maintain the Tenant
Signs and/or remove such signs and restore the Building or monuments
as required herein within thirty (30) days after Landlord's written
request therefor, then without further notice, Landlord may perform
such work, and all costs and expenses incurred by Landlord in
performing such work shall be reimbursed by Tenant to Landlord within
ten (10) days after Landlord's delivery of an invoice therefor to
Tenant. Tenant further specifically acknowledges and agrees that the
Building Sign and Monument Sign rights granted to Tenant herein are
personal to Southern California Bank and may not be assigned or
transferred to, or utilized by, any other person or entity.
ARTICLE 23 - LATE CHARGES
The words "when due" in the fourth and fifth lines of Article 23 are deemed
deleted and replaced with the following: "within five (5) days of the date due".
ARTICLE 25 - BUILDING PLANNING
The first paragraph of Article 25 is deemed deleted.
ARTICLE 30 - BROKERS
The following provisions are deemed added to the end of Article 30 of the
Lease:
Landlord agrees to pay Landlord's broker a commission in accordance with a
separate agreement between Landlord and such broker. Landlord shall hold
Tenant harmless from all damages and indemnify Tenant for all said damages
paid or incurred by Tenant resulting from any claims that may be asserted
against Tenant by the brokers identified in Section 1.13 of the Fundamental
Lease provisions or any broker, agent or finder undisclosed by Landlord
herein.
ARTICLE 33 - MISCELLANEOUS
The following is deemed added to Article 33 as Section 33.113:
33.18 CONTINGENCY. Landlord and Tenant specifically acknowledge and agrees
that notwithstanding anything to the contrary in this Lease, the continuing
effectiveness of this Lease is expressly contingent upon the following: No later
than February 29, 1996, Tenant shall have received the regulatory approvals from
the California Department of Corporations and the FDIC necessary for Tenant to
operate the Premises as a branch banking facility (hereinafter the "Regulatory
Approvals". If Tenant has not obtained the Regulatory Approvals on or before the
date specified above, then Tenant
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shall have a one-time right, at its option, to terminate this Lease by written
notice to Landlord given no later than March 5, 1996, in which case this Lease
shall terminate on the date specified in Tenant's notice (which date shall be at
least thirty (30) from the date of Tenant s notice) and on the effective date of
such termination, this Lease shall be of no further force or effect except for
obligations, if any, which have accrued prior to the date of such termination or
which expressly survive the expiration or earlier termination of this Lease. If
Tenant has not obtained the Regulatory Approvals by the February 29, 1996, and
Tenant does not give Landlord a notice to terminate this Lease on or before
March 5, 1996, then this condition shall be deemed satisfied and Tenant shall
have no further right to terminate this Lease.
If Tenant terminates this Lease as a result of Tenants failure to obtain
the Regulatory Approvals on or before the date specified above, Tenant shall (i)
satisfy all monetary and non-monetary obligations under the Lease through the
effective date of such termination and (ii) no later than thirty (30) days after
the effective date of such termination Tenant shall deliver to Landlord cash or
a certified check in an amount equal to (a) the full amount of the Tenant
Improvement Allowance provided to Tenant under this Lease, PLUS (b) the full
amount of brokerage commissions paid by Landlord in connection with this Lease
and the Suite 125 Continuation Lease, PLUS (c) all attorneys' fees and cost:s
incurred by Landlord in connection with this Lease, the Suite 125 Continuation
Lease and the Citicorp Sublease; provided however, Landlord agrees that the
amount of such reimbursement from Tenant for the items identified in
subparagraphs (b) and (c) shall in no event exceed $25,000.00 on a cumulative
basis, inclusive of any such similar sums Tenant may be required to pay pursuant
to the Citicorp Sublease. In addition to the forgoing, as a further condition to
such termination, Tenant shall, at Landlord's sole option, return the Premises
to the condition which existed prior to the Commencement Date or deliver to
Landlord cash or a certified check in an amount reasonably determined by
Landlord to be required for Landlord to return the Premises to such condition.
The obligations of Tenant set forth herein shall survive the termination of this
Lease.
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Except as and to the extent modified by this Addendum, all provisions of
the Lease shall remain in full force and effect.
LANDLORD
Regents Park Financial Centre, Ltd
a California limited partnership
By: The Lomas Santa Fe Group,
a California corporation
(General Partner)
DATE: __________________ By: __________________________
Name: _________________________
Title: ________________________
DATE: __________________ By: __________________________
Name: _________________________
Title: ________________________
TENANT
Southern California Bank
a California corporation
DATE: __________________ By: __________________________
Name: _________________________
Title: ________________________
DATE: __________________ By: __________________________
Name: _________________________
Title: ________________________
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Exhibit C
TENANT IMPROVEMENT AGREEMENT
(Tenant to Construct)
Landlord and Tenant are executing simultaneously with this Tenant
Improvement Agreement ("Agreement"), a written lease ("Lease") covering those
certain premises more particularly described in EXHIBIT B to the Lease
("Premises"), in the Building more particularly described in the Lease. Landlord
and Tenant agree that Tenant shall improve and prepare the Premises for Tenant's
occupancy, on the terms and conditions set forth in this Agreement. To induce
Landlord and Tenant to enter into the Lease and in consideration of the mutual
covenants hereinafter contained, Landlord and Tenant mutually agree as follows:
1. GENERAL. The purpose of this Agreement is to set forth how the interior
improvements in the Premises as set forth in the Construction Documents, as
defined below in Section 2.3 ("Tenant Improvements"), are to be constructed, who
will be responsible for the construction of the Tenant Improvements, and the
time schedule for the construction and completion of the Tenant Improvements.
1.1 DEFINED TERMS. Except as defined in this Agreement to the
contrary, all terms utilized in this Agreement shall have the same meaning as
the defined terms in the Lease.
1.2 INCORPORATION OF LEASE. The provisions of the Lease, except where
clearly inconsistent or inapplicable to this Agreement, are hereby incorporated
into this Agreement.
2. TENANT IMPROVEMENT PLANS. Tenant shall retain a space planner ("Space
Planner") to prepare preliminary space plans ("Space Plan") to be utilized in
the preparation of final working drawings and specifications for the Tenant
Improvements as more particularly described below. Tenant's selection of Space
Planner shall be subject to the prior written approval of Landlord, which
approval shall not be unreasonably withheld or delayed.
2.1 SPACE PLAN. If Tenant has not previously delivered a Space Plan
to Landlord prior to the date of this Agreement, Tenant shall, within ten (10)
business days after the date of this Agreement, deliver the Space Plan to
Landlord. The Space Plan shall show the configuration of the proposed Tenant
Improvements and contain a ~finish schedule~ and all information necessary for
Tenant to have the mechanical, electric~l and engineering drawings (collectively
~Engineering Plans") prepared at Tenant's expense, the cost of which will be
deducted from the Tenant Improvement Allowance. Such information submitted as
part of the Space Plan shall be in sufficient detail to show locations, types
and requirements for all heat loads, people loads, floor loads, power and
plumbing, regular and special HVAC needs, telephone communications, telephone
and electrical outlets, lighting, light fixtures and related power, and
electrical and telephone switches. Landlord shall approve, or disapprove for
reasonable reasons, the Space Plan within five (5) business days after Landlord
receives the completed Space Plan and, if disapproved, Landlord shall return the
Space Plan to Tenant, who shall make all
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necessary revisions within five (5) business days after Tenant's receipt
thereof. This procedure shall be repeated until Landlord ultimately approves the
Space Plan. When approved, the Space Plan, as modified, shall be deemed the
"Final Preliminary Plans".
2.2 ENGINEERING PLANS. If required by applicable building
regulations, Tenant shall select as the mechanical and electrical engineer a
qualified and licensed company, experienced in tenant improvements in San Diego
County, California,("Engineer") to prepare Engineering Plans based on the Final
Preliminary Plans. Tenant's selection of the Engineer shall be subject to the
prior written approval of Landlord, which approval will not be unreasonably
withheld or delayed. For purposes of the preparation of the Engineering Plans,
the Engineer may assume that the Final Preliminary Plans are precise, correct
and in compliance with applicable laws and codes. Upon completion of the
Engineering Plans, they will be submitted to Landlord and Space Planner for
approval. Landlord shall approve, or disapprove for reasonable reasons, the
Engineering Plans within five (5) business days after Landlord receives the
Engineering Plans and, if disapproved, return the Engineering Plans to Tenant
who shall cause the Engineer to make all necessary revisions within five (5)
business days after Landlord's receipt thereof. This procedure shall be
repeated until Landlord ultimately approves the Engineering Plans. When
approved, the Engineering Plans, as modified, shall be deemed the "Final
Engineering Plans".
3. CONSTRUCTION DOCUMENTS. Within ten (10) business days following
Landlord's approval of the Final Preliminary Plans and the Final Engineering
Plans (if any), Tenant shall cause Space Planner to prepare final plans and
specifications ("Final Tenant Plans") for completion of the Tenant Improvements.
Tenant shall then deliver the Final Tenant Plans to Landlord. Landlord shall
approve, or disapprove for reasonable reasons, the Final Tenant Plans within
five (5) business days after Landlord receives the Final Tenant Plans and, if
disapproved, Landlord shall return the Final Tenant Plans to Tenant who shall
cause Space Planner to make all necessary revisions within five (6) business
days after Tenant's receipt thereof. This procedure shall be repeated until
Landlord ultimately approves the Final Tenant Plans. When approved, the Final
Tenant Plans, as modified, shall be deemed the "Construction Documents". Any
and all costs incurred by Tenant in the preparation of the Construction
Documents shall be deducted from the Tenant Improvement Allowance set forth
below in Section 6. All deliveries of the Space Plan, Final Preliminary Plans,
and Final Tenant Plans shall be delivered by messenger service, by personal hand
delivery or by overnight parcel service.
3.1 LANDLORD'S APPROVAL OF PLANS. Tenant specifically acknowledges
that although Landlord has the right to approve the Space Plan, Final
Preliminary Plans, Final Engineering Plans, and Final Tenant Plans, Landlord's
sole interest in doing so is to protect the Building and Landlord's interests.
Accordingly, Tenant shall not rely upon Landlord's approvals and Landlord shall
not be the guarantor of, nor responsible for, the correctness or accuracy of any
such Space Plan, Final Preliminary Plans, Final Engineering Plans or Final
Tenant Plans, or the compliance thereof with applicable laws, and Landlord shall
incur no liability of any kind by reason of granting such approvals.
4. PERMITS/FEES. Tenant shall be responsible, at Tenant's sole cost and
expense, for obtaining all governmental approvals of the Construction Documents
to the full extent necessary for the issuance
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of a building permit for the Tenant Improvements. Thereafter, Tenant shall also
cause to be obtained all other necessary approvals and permits from all
governmental agencies having authority over the construction and installation of
the Tenant Improvements in accordance with the approved Construction Documents
and shall undertake all steps necessary to insure that the construction of the
Tenant Improvements is accomplished in strict compliance with all state or local
laws, ordinances, rules and regulating applicable to such construction and the
requirements and standards of any insurance underwriting board, inspecting
bureau or insurance carrier insuring the Premises pursuant to the Lease. In
addition, Tenant shall, at Tenant's sole cost and expense, be responsible for
the payment of (i) all "impact fees" or exactions which may be imposed or
assessed as a condition to the issuance of the building permit or other
approvals necessary for the construction of the Tenant Improvements; and (ii)
all utility hook-up fees and meter setting fees for water, sewer, gas, electric,
telephone and any other utility facilities necessary for Tenant's use of the
Premises; provided however, Tenant may, upon written notice to Landlord, request
that all of the foregoing expenses be deducted from the Tenant Improvement
Allowance. Tenant acknowledges that Tenant shall be solely responsible for
investigation of all requirements necessary for obtaining a building permit for
the Tenant Improvements, including, without limitation, all requirements for the
payment of impact fees and exactions and utility fees and hook-up charges.
5. CONSTRUCTION. Tenant shall employ an outside contractor or contractors
of Tenant's choice ("Contractor") to construct the Tenant Improvements in
substantial conformance with the Construction Documents; provided, however, that
the Contractor and construction contracts between Tenant and Contractor and
Tenant's subcontractors shall be subject to Landlord's prior written approval
(which approval shall not be unreasonably withheld or delayed), and provided
further, that the Contractor and the performance of the work shall be subject to
the following conditions:
5.1 LICENSING REQUIREMENTS/EXPERIENCE. Contractor shall be duly
licensed and experienced in the construction of tenant improvements in similar
office premises.
5.1 LANDLORD'S INSPECTION RIGHTS. Landlord or Landlord's agents
shall have the right to inspect the construction work to be conducted by Tenant
during the progress thereof, it being the intent of the parties hereto that
Landlord shall be reasonable in its inspection of the construction work
conducted by Tenant and that Landlord shall recognize, to the extent
commercially reasonable and practicable, the necessity of field changes based on
field conditions. If Landlord shall give notice to Tenant of faulty
construction or any other deviation from the Construction Documents, Tenant
shall cause Contractor to promptly make corrections. However, neither the
privilege herein granted to Landlord to make such inspections, nor the making of
such inspections by Landlord, shall operate as wa waiver of any rights of
Landlord to require good and workmanlike construction and improvements erected
in accordance with the Construction Documents.
6. TENANT IMPROVEMENT ALLOWANCE. Landlord will provide Tenant with an
allowance in amount not to exceed $25,000.00 ("Tenant Improvement Allowance').
The Tenant Improvement Allowance shall include, without limitation, any and all
costs of construction, materials, permits, space planning, engineering and the
cost of Landlord's overhead. The Tenant Improvement Allowance shall be
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disbursed to Tenant only after receipt by Landlord of unconditional mechanics'
lien releases and receipted bills marked "paid" (which mechanics' lien releases
shall, at Landlord's option, be executed by subcontractors, labor suppliers and
materialmen, as reasonably determined by Landlord, in addition to Contractor).
Upon completion of the Tenant Improvements, Tenant shall provide Landlord with a
copy of a Notice Of Completion, which shall have been timely recorded in the
Official Records of the San Diego County Recorder. All costs in excess of the
Tenant Improvement Allowance shall be the sole responsibility of Tenant. As of
the date of this Agreement it is anticipated that the Tenant Improvement
Allowance shall be used by Tenant for the following improvements to the
Premises: (i) painting of the Premiss with building standard paint;
(ii) installation of new building standard carpeting in the Premises; and (iii)
installation of new standard wall coverings in the Premises as approved by
Landlord and Tenant.
6.1 ENGINEERING. The cost of all electrical, mechanical, and
structural engineering, including all permits, licenses, and fees relative to
the construction of the Tenant Improvements, if any, (including, without
limitation, the fees identified in Section 4 above) shall be paid by Tenant, but
may be deducted from the Tenant Improvement Allowance.
6.2 CHANGE ORDERS. In the event that Tenant requests (in writing)
any changes to the Construction Documents (each being a "Change Order"),
Landlord shall not unreasonably withhold its consent to any such Change Order,
provided the Change Order does not affect the structure, systems, equipment or
appearance of the Premises or the Building. If such Change Orders, as approved
by Landlord, increase the cost of constructing the Tenant Improvements in excess
of the Tenant Improvement Allowance, Tenant shall pay such increased costs at
the time of Landlord's approval of such Change Order.
6.3 CONSTRUCTION MATERIALS. Tenant will utilize, for the
construction of the Tenant Improvements, the items and materials specified in
the Construction Documents. however, whenever Tenant determines in its
reasonable judgment that it is not practical or efficient to use such materials,
Tenant shall have the right, upon receipt of prior written approval of Landlord,
which approval will not be unreasonably withheld or delayed, to substitute
comparable items and materials.
6.4 PROMPT CONSTRUCTION/GENERAL RESPONSIBILITY FOR COSTS. Tenant
shall instruct Contractor to build the Tenant Improvements as soon as reasonably
possible.
7. DEFAULT. Any default by Tenant under the terms of this Agreement shall
constitute an Event of Default under the Lease and shall entitle Landlord to
exercise all remedies set forth in the Lease. Tenant shall have any and all
rights to remedy such default pursuant to the provisions of the Lease.
8. REASONABLE DILIGENCE. Both Landlord and Tenant agree to use reasonable
diligence in performing all of their respective obligations and duties under
this Agreement and in proceeding with the construction and completion of the
Tenant Improvements.
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9. SUITE 125 IMPROVEMENTS. Concurrently with the execution of this Lease,
Tenant and Citicorp Savings, a Federal Savings and Loan Association ("Citicorp")
are entering into a separate sublease (the "Citicorp Sublease") for those
certain premises consisting of approximately 3,471 rentable square feet located
on the ground floor of the Building and designated as Suite 125 ("Suite 125").
Despite anything in this Agreement to the contrary, Landlord and Tenant agree
that the Tenant Improvement Allowance may be used by Tenant for improvements to
Suite 125; provided however, the construction and installation of any such
improvements in Suite 125 shall be subject to all of the terms and conditions of
this Agreement and, to the extent not in conflict herewith, all of the terms and
conditions of the Citicorp Sublease applicable to alterations and improvements
to Suite 125.
10. CONFLICTS. In the event of any conflict between the terms of this
Agreement and the Lease, the terms of this Agreement shall controls.
LANDLORD
Regents Park Financial Centre, Ltd.
a California limited partnership
By: The Lomas Santa Fe Group,
a California corporation
(General Partner)
Date: _________________ By: ___________________________
Name: __________________________
Title: _________________________
Date: _________________ By: ___________________________
Name: __________________________
Title: _________________________
TENANT
Southern California Bank
a California corporation
Date: _________________ By: ___________________________
Name: __________________________
Title: _________________________
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Date: _________________ By: ___________________________
Name: __________________________
Title: _________________________
EXHIBIT D
GUARANTY OF LEASE
Intentionally Omitted
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EXHIBIT E
RULES AND REGULATIONS
1. Except as specifically provided in Article 21 of the Lease to which
these Rules and Regulations are attached, no sign, placard, picture,
advertisement, name or notice shall be installed or displayed on any part of
Premises without the prior written consent of Landlord if visible from outside
the Premises. Landlord shall have the right to remove,a t Tenant's expense and
without notice, any sign installed or displayed in violation of this rule. All
approved signs or lettering on doors and walls shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved by Landlord.
If Landlord objects in writing to any curtains, blinds, shades, screens or
hanging plants or other similar objects attached to or used in connection with
any window or door of the Premises, or placed on any windowsill, which is
visible from the exterior of the Premises, Tenant shall immediately discontinue
such use. Tenant shall not install or permit to be installed in the Premises
any food vending or similar machines for the dispensing of food or beverages
without Landlord's prior written consent. Tenant shall not use a representation
(photographic or otherwise) of the Building or the Project, if any, or their
name(s) in connection with Tenant's business, without Landlord's prior consent.
2. All cleaning and janitorial services for the Building and the Premiss
shall be provided exclusively through Landlord,and except with the prior written
consent of Landlord, no person or persons other than those approved by Landlord
shall be employed by Tenant or permitted to enter the Building for the purpose
of cleaning the same.
3. Landlord will furnish Tenant, free of charge, with two keys to each
door lock int he Premises. Landlord may impose a reasonable charge for any
additional keys. tenant shall not make or have made additional keys, and Tenant
shall not alter any lock or install a new additional lock or bolt on any door of
its Premises. Tenant, upon the termination of its tenancy, shall deliver to
Landlord the keys of all doors which have been furnished to Tenant, and in the
event of loss of any keys so furnished, shall pay Landlord therefor.
4. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instruction in
their installation.
5. The Building freight elevator(s) (if any) shall be available for use
by all tenant sin the Building, subject to such reasonable scheduling as
Landlord, in its discretion, shall deem appropriate. No equipment,
materials, furniture, packages, supplies, merchandise or other property
will be received in the Building or carried in the elevators except between
such hours and in such elevators as may be designated by Landlord.
Tenant's initial move in and subsequent deliveries of bulky items, such as
furniture, safes and similar items shall, unless otherwise agreed in
writing by Landlord, be made during the hours of 6:00 P.M. and 6:00 A.M. or
on Saturday or Sunday. Deliveries during normal office hours shall be
limited to
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<PAGE>
normal office supplies and other small items. No deliveries shall be made
which impede or interfere with other tenants or the operation of the
Building.
6. Tenant shall not place a load upon any floor of the Building or
Premises which exceeds the load per square foot which such floor was designed to
carry and which is allowed by law. Heavy objects shall, if considered necessary
by Landlord, stand on such platforms as determined by Landlord to be necessary
to properly distribute the weight, which platforms shall be provided at Tenant's
expense. The persons employed to move such equipment in or out of the Project
must be acceptable to Landlord. Landlord will not be responsible for loss of,
or damage to, any such equipment or other property from any cause, and all
damage done to the Project by maintaining or moving such equipment or other
property shall be repaired at the expense of Tenant.
7. Tenant agrees to cooperate fully with Landlord to assure the most
effective operation of the Building's heating and air-conditioning and to comply
with any governmental energy-saving rules, laws or regulations of which Tenant
has actual notice.
8. Landlord reserves the right to exclude from the Building between the
hours of 6 P.M. and 7 A.M. or such other hours as may be established from time
to time by Landlord, and on Sundays and Legal Holidays, any person unless that
person is known to the person or employee in charge of the Building and has a
pass or is properly identified. Tenant shall be responsible for all persons for
whom it requests passes and shall be liable to Landlord for all acts of such
persons. Landlord shall not be liable for damages for any error with regard to
the admission to or exclusion from the Building of any person.
9. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein. The expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose employees or
invitees, shall have caused it.
10. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise to the
general public in or on the Premises. Tenant shall not make any room-to-room
solicitation of business from other tenants in th Project. Canvassing,
soliciting and distribution of handbills or any other written material, and
peddling in the Project are prohibited, and Tenant shall cooperate to prevent
such activities.
11. Tenant shall not install any radio or television antenna, loudspeaker
or other devices on the roof or exterior walls of the Project nor shall Tenant
install any exterior lighting, amplifiers or similar devices or use in or about
the Premises any advertising medium which may be heard or seen outside the
Premises, such as flashing lights, searchlights, loudspeakers, phonographs or
radio broadcasts. Tenant shall not interfere with radio or television
broadcasting or reception from or in the Project or elsewhere.
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12. Tenant shall not mark, drive nails, screw or drill into the
partitions, woodwork or plaster or in any way deface the Premises or any part
thereof, except in accordance with normal decorating practices. Landlord
reserves the right to direct electricians as to where and how telephone and
telegraph wires are to be introduced to the Premises. Tenant shall not cut or
bore holes for wires. Tenant shall not affix any floor covering to the floor of
the Premises in any manner except as approved by Landlord. Tenant shall repair
any damage resulting from noncompliance with this rule.
13. Tenant shall store all its trash and garbage within its Premises or in
other facilities provided by Landlord. Tenant shall not place in any trash box
or receptacle any material which cannot be disposed of in the ordinary and
customary manner of trash and garbage disposal. All garbage and refuse disposal
shall be made in accordance with directions issued from time to time by
Landlord.
14. The Premises shall not be used for the storage of merchandise held for
sale to the general public, or for lodging or for manufacturing of any kind, nor
shall the Premises be used for any improper, immoral or objectionable purpose.
No cooking shall be permitted on the Premises without Landlord's consent, except
that use by Tenant of Underwriters' Laboratory approved equipment for brewing
coffee, tea, hot chocolate and similar beverages or use of microwave ovens for
employee use shall be permitted,d provided that such equipment and use is in
accordance with all applicable federal, state, county and city laws, codes,
ordinances, rules and regulations.
15. Requests by Tenant relating to the performance of Landlord's
maintenance obligations under this Lease will be attended to only upon
appropriate application to the Building or Project management office (as
appropriate) by an authorized representative of Tenant whose identity shall be
designated to Landlord in writing. Employees of Landlord shall not perform any
work or do anything outside of their regular duties unless under special
instructions from Landlord, and no employee of Landlord will admit any person
(Tenant or otherwise) to any office without specific instructions from Landlord.
16. Landlord may waive any or more of these Rules and Regulations for the
benefit of Tenant or any other tenant, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of Tenant or any
other tenant, nor prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the tenants of the Building or Project.
Landlord reserves the right to make such other an reasonable and
nondiscriminatory Rules and Regulations as, in its judgment, may from time to
time be needed for safety and security, for care and cleanliness of the Project
and for the preservation of good order therein.
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<PAGE>
EXHIBIT F
SIGN CRITERIA
(See Attached)
68
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REGENTS PARK FINANCIAL CENTRE OFFICE LEASE
between
Regents Park Financial Centre, Ltd.,
a California limited partnership
(LANDLORD)
and
Southern California Bank,
a California corporation
(TENANT)
Date: October 25, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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<PAGE>
- --------------------------------------------------------------------------------
REGENTS PARK FINANCIAL CENTRE OFFICE LEASE
between
REGENTS PARK FINANCIAL CENTRE, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
(LANDLORD)
and
SOUTHERN CALIFORNIA BANK,
A CALIFORNIA CORPORATION
(TENANT)
Date: October 25, 1995
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 - FUNDAMENTAL LEASE PROVISIONS . . . . . . . . . . . . . . . . . . 1
1.6 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Permitted Uses . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Tenant's Guarantor . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Address for Notices. . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Rent and Other Charges Payable by Tenant . . . . . . . . . . . . . 3
1.12 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14 Vehicle Parking Privileges Allocated To Tenant . . . . . . . . . . 3
ARTICLE 2 - LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Lease of Property for Term . . . . . . . . . . . . . . . . . . . . 3
2.2 Delay in Commencement. . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Early Occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Failure to Take Possession . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 3 - RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Minimum Monthly Rent . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Adjustment to Minimum Monthly Rent . . . . . . . . . . . . . . . . 4
3.3 Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 4 - OTHER CHARGES PAYABLE BY TENANT (ADDITIONAL RENT). . . . . . . . 5
4.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Increases in Direct Expenses/Additional Rent . . . . . . . . . . . 8
4.3 Final Determination of Tenant's Share of Direct Expenses . . . . . 9
4.4 Taxes on Tenant's Property . . . . . . . . . . . . . . . . . . . . 10
4.5 Building Services and Utilities. . . . . . . . . . . . . . . . . . 10
4.6 Additional Rent. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.7 Abatement of Rent When Tenant is Prevented From Using Premises . . 12
ARTICLE 5 - USE OF PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 6 - ACCEPTANCE OF PREMISES . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 7 - INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 15
7.1 Tenant's Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Landlord's Indemnity . . . . . . . . . . . . . . . . . . . . . . . 15
7.3 Damage To Tenant's Property. . . . . . . . . . . . . . . . . . . . 16
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ARTICLE 8 - MAINTENANCE, REPAIRS AND ALTERATIONS . . . . . . . . . . . . . . 17
8.1 Landlord's Obligations . . . . . . . . . . . . . . . . . . . . . . 17
8.2 Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . 17
8.3 Condition upon Termination . . . . . . . . . . . . . . . . . . . . 18
8.4 Alterations, Additions and Improvements. . . . . . . . . . . . . . 19
8.5 Installation of Fixtures . . . . . . . . . . . . . . . . . . . . . 21
8.6 Landlord's Right to Remodel Building . . . . . . . . . . . . . . . 21
ARTICLE 9 - PERFORMANCE BY TENANT. . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 10 - DAMAGE OR DESTRUCTION OF LEASEHOLD. . . . . . . . . . . . . . . 22
10.1 Destruction Covered by Insurance. . . . . . . . . . . . . . . . . 22
10.2 Destruction Not Covered by Insurance. . . . . . . . . . . . . . . 22
10.3 Repair Costs Exceeding Insurance Coverage . . . . . . . . . . . . 22
10.4 Repairs That Cannot Be Completed Within One Hundred Eighty Days . 23
10.5 Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . . 23
10.6 Restrictions on Restoration . . . . . . . . . . . . . . . . . . . 23
10.7 Destruction Within Last Year of Term. . . . . . . . . . . . . . . 24
10.8 Destruction of Tenant's Personal Property, Tenant Improvements
or Property of Tenant's Employees . . . . . . . . . . . . . . . . 24
10.9 Exclusive Remedies. . . . . . . . . . . . . . . . . . . . . . . . 24
10.10 Termination - Advance Payments and Insurance Proceeds . . . . . . 24
10.11 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 11 - CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.2 Parties' Rights and Obligations to be Governed by Lease . . . . . 25
11.3 Total Taking. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.4 Partial Taking. . . . . . . . . . . . . . . . . . . . . . . . . . 25
12.1 Insurance Maintained and Paid by Tenant . . . . . . . . . . . . . 27
12.2 Insurance Maintained by Landlord and Paid by Building Tenants . . 30
12.3 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . 31
12.4 No Representations of Adequate Coverage . . . . . . . . . . . . . 31
13.1 Entry by Landlord . . . . . . . . . . . . . . . . . . . . . . . . 31
13.2 No Abatement of Rent. . . . . . . . . . . . . . . . . . . . . . . 32
15.1 Landlord's Consent Required . . . . . . . . . . . . . . . . . . . 33
15.2 Transfer Notice . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.3 Landlord's Election . . . . . . . . . . . . . . . . . . . . . . . 34
15.4 Assumption of Lease Obligations . . . . . . . . . . . . . . . . . 34
15.5 Additional Provisions Regarding Transfers . . . . . . . . . . . . 35
15.6 Special Provisions Regarding Subletting . . . . . . . . . . . . . 36
15.7 No Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.8 Conditions Deemed Reasonable. . . . . . . . . . . . . . . . . . . 37
15.9 Tenant's Remedy . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 16 - DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
16.1 Covenants and Conditions. . . . . . . . . . . . . . . . . . . . . 37
16.2 Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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<PAGE>
ARTICLE 17 - REMEDIES UPON DEFAULT . . . . . . . . . . . . . . . . . . . . . 38
17.1 Landlord Remedies . . . . . . . . . . . . . . . . . . . . . . . . 38
17.2 Jury Trial Waiver . . . . . . . . . . . . . . . . . . . . . . . . 41
18.1 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . 41
18.2 Attornment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
18.3 Signing of Documents. . . . . . . . . . . . . . . . . . . . . . . 42
18.4 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . 42
18.5 Tenant's Financial Condition. . . . . . . . . . . . . . . . . . . 43
ARTICLE 19 - COMMON AREAS. . . . . . . . . . . . . . . . . . . . . . . . . . 43
19.1 Common Areas. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
19.2 Use of Common Areas . . . . . . . . . . . . . . . . . . . . . . . 44
19.3 Vehicle Parking . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 20 - PROFESSIONAL COSTS; CONSENTS. . . . . . . . . . . . . . . . . . 46
20.1 Legal Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
20.2 Landlord's Consent. . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 21 - SIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 22 - LANDLORD'S BREACH - NOTICE. . . . . . . . . . . . . . . . . . . 47
ARTICLE 23 - LATE CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 24 - INTEREST ON PAST-DUE OBLIGATIONS. . . . . . . . . . . . . . . . 48
ARTICLE 25 - BUILDING PLANNING . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 26 - NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 27 - MODIFICATION FOR LENDER . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 28 - CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY. . . . . . . . . . . 49
ARTICLE 29 - FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 30 - BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 31 - SECURITY MEASURES . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 32 - LANDLORD'S RESERVATIONS . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 33 - MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . 51
33.2 Identification of Tenant. . . . . . . . . . . . . . . . . . . . . 51
33.3 Identification of Landlord. . . . . . . . . . . . . . . . . . . . 52
33.4 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . 52
33.5 Non-Discrimination. . . . . . . . . . . . . . . . . . . . . . . . 52
33.6 Conflict of Laws and Choice of Jurisdiction . . . . . . . . . . . 52
33.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
33.8 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . 53
33.9 Incorporation of Prior Agreements; Modifications. . . . . . . . . 53
33.10 Examination of Lease. . . . . . . . . . . . . . . . . . . . . . . 53
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33.11 Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
33.12 Accord and Satisfaction . . . . . . . . . . . . . . . . . . . 54
33.13 Nonrecordation of Lease . . . . . . . . . . . . . . . . . . . 54
33.14 Covenants and Conditions. . . . . . . . . . . . . . . . . . . 54
33.15 Negation of Partnership . . . . . . . . . . . . . . . . . . . 54
33.16 Consent of Landlord and Tenant. . . . . . . . . . . . . . . . 54
33.17 Lease Execution Date. . . . . . . . . . . . . . . . . . . . . 54
iv
<PAGE>
REGENTS PARK FINANCIAL CENTRE OFFICE LEASE
This Lease is subject to the terms, covenants and conditions herein set
forth, and Tenant (as defined below) covenants as a material part of the
consideration for this Lease to keep and perform each and all of the terms,
covenants and conditions by Tenant to be kept and performed, and that this Lease
is made upon the condition of such performance.
ARTICLE 1 - FUNDAMENTAL LEASE PROVISIONS
Each of the Fundamental Lease Provisions set forth below is a summary of
the terms contained elsewhere in this Lease which relate to each such
Fundamental Lease Provision. If there is any conflict between any Fundamental
Lease Provision and any specific clause of the Lease, the more specific clause
of the Lease shall control.
1.1 DATE OF LEASE: For reference purposes only OCTOBER 25, 1995
LEASE EXECUTION DATE: The date upon which the last of the signatories
executes this Lease.
1.2 Landlord: Regents Park Financial Centre, Ltd., a California limited
partnership
1.3 Tenant: Southern California Bank, a California corporation
1.4 BUILDING: General site plan of the Building and/or the Project in
which the Premises are located (See Exhibit A).
1.5 PREMISES: (See EXHIBIT B)
SUITE NO.: 125
APPROXIMATE SQUARE FEET OF RENTABLE AND USABLE FLOOR AREA WITHIN
PREMISES: 3,471 rentable square feet and 3,074 usable square feet which area has
been determined by Landlord's representative by using the standard method for
floor measurement of office buildings, as determined by BOMA [Building Owners
and Managers Association International], which determination is conclusive and
binding upon Tenant.
TENANT'S PERCENTAGE OF DIRECT EXPENSES: Tenant's percentage of
expenses to be paid by the tenants in the Building shall be established by
Landlord based upon Tenant's pro rata share of expenses described under Articles
4, 8 and 12 of this Lease, which are shared in common with other tenants in the
Building ("Tenant's Percentage Share"). Tenant's Percentage
1
<PAGE>
Share shall be a fraction, the numerator of which is the rentable floor area of
the Premises, and the denominator of which shall be the rentable floor area of
the Building occupied by Tenant and occupied by and/or available for occupancy
by other tenants in the Building who share such expenses in common with tenant.
The Tenant's Percentage Share is subject to change with changes in the size of
the Premise, and/or the Building. Tenant's Percentage Share on the Commencement
Date is 3.63%. For purposes of computing Tenant's Percentage Share, the "Base
Year" will be calendar year 1998. *See Addendum
1.6 TERM. Should the Commencement Date not occur on the first day of a
calendar month, the Term shall begin on the first day of the next succeeding
calendar month. In that event, however, Tenant shall pay Rent for the
fractional month on a per diem basis (calculated on the basis of a thirty day
month) until the first day of the month when the Term commences. The date which
corresponds to the Commencement Date shall be known as the "Anniversary Date" of
this Lease, unless the Commencement Date does not occur on the first day of a
calendar month in which event the Anniversary Date shall be the date which
corresponds to the first day of the next succeeding calendar month following the
Commencement Date. Any provisions of this Lease to the contrary
notwithstanding, the effective date of this Lease, and the commencement of both
parties' rights and obligations hereunder, shall be the date upon which this
Lease is executed by Landlord. Following the Commencement Date, Landlord and
Tenant shall execute a letter agreement confirming the Commencement Date, the
rentable and usable square footage of the Premises, and Tenant's acceptance of
the Premises. *See Addendum
The anticipated Commencement Date is JANUARY 1, 1998
1.7 PERMITTED USES: (See Section 5.1) Commercial and retail banking
offices and for no other use or purpose.
1.8 TENANT'S GUARANTOR: (See EXHIBIT D) (If none, so state) None.
1.9 ADDRESS FOR NOTICES:
To Landlord: Regents Park Financial Centre, Ltd.
c/o Asset Management Group
11750 Sorrento Valley Road
San Diego, CA 92121
To Tenant: Southern California Bank
4180 La Jolla Village Drive, Suite 125
La Jolla, CA 92037
Attention: Branch Manager
1.10 SECURITY DEPOSIT: (See Section 3.3) $7.011.42
2
<PAGE>
1.11 RENT AND OTHER CHARGES PAYABLE BY TENANT:
1.11.1 MINIMUM MONTHLY RENT. Minimum Monthly Rent shall begin on
the Commencement Date.
1.11.2 INITIAL MINIMUM MONTHLY RENT: (See Article 3) *See Addendum
1.11.3 OTHER CHARGES PAYABLE BY TENANT ("ADDITIONAL RENT"): (i)
Increases in Direct Expenses (See Section 4.2); (ii) Taxes on Tenant's property
(See Section 4.4); (iii) Building Services and Utilities (See Section 4.5); (iv)
Insurance premiums required to be paid by Tenant (See Article 12); and (v)
Maintenance, Repair and Alterations (See Article 8).
1.12 EXHIBITS: The exhibits referenced in the Table of Contents are each
attached to this Lease and are made a part of this Lease by this reference.
1.13 BROKERS: The brokers who negotiated this Lease are Rancon Real Estate,
representing Landlord, and None representing Tenant.
1.14 VEHICLE PARKING PRIVILEGES ALLOCATED TO TENANT: THIRTEEN (13)
unreserved parking spaces subject to the terms and conditions set forth in
Section 19.3 of this Lease.
ARTICLE 2 - LEASE
2.1 LEASE OF PROPERTY FOR TERM. Landlord hereby leases the Premises to
Tenant and Tenant hereby leases the Premises from Landlord for the Term. The
Term is for the period stated in Section 1.6 above and shall begin on the
Commencement Date.
2.2 DELAY IN COMMENCEMENT. *See Addendum
2.3 EARLY OCCUPANCY. *See Addendum
2.4 HOLDING OVER. Tenant shall vacate the Premises upon the expiration of
the Term or earlier termination of this Lease. If Tenant does not vacate the
Premises upon the expiration of the Term or earlier termination of this Lease,
and Landlord thereafter accepts Rent from Tenant, Tenant's occupancy of the
Premises shall be a "month-to-month" tenancy, subject to all of the terms of
this Lease applicable to a month-to-month tenancy, terminable on thirty (30)
days' written notice given at any time by either party. In no event shall
Landlord's acceptance of Rent after such expiration or earlier termination be
construed or result in a renewal of this Lease. During any such month-to-month
tenancy, Tenant shall pay all Rent and other charges required by this Lease,
except that the Minimum Monthly
3
<PAGE>
Rent then in effect under the provisions of Section 3.1 and 3.2 hereof shall be
increased by one hundred percent (100%). If Tenant fails to surrender the
Premises upon the expiration of the Term or earlier termination of this Lease,
despite demand to do so by Landlord, Tenant shall indemnify, defend and hold
Landlord harmless from all of Landlord's damages or liability, including, but
not limited to, any claim made by any succeeding tenant founded on or resulting
from such failure to surrender, and any attorneys' fees and costs. During such
holdover period, all options, if any, granted under this Lease, shall be deemed
terminated and be of no further effect. The provisions of this Section 2.4 are
in addition to and do not affect Landlord's right of reentry or any rights of
Landlord hereunder, or as otherwise provided by law. It is acknowledged by
Tenant that this Section 2.4 shall confer upon Tenant no occupancy rights beyond
the expiration of the Term or earlier termination of this Lease.
2.5 FAILURE TO TAKE POSSESSION. *See Addendum PARAGRAPH 2.6
ARTICLE 3 - RENT
3.1 MINIMUM MONTHLY RENT. The Minimum Monthly Rent shall be payable
beginning on the Commencement Date. Tenant shall pay Minimum Monthly Rent to
Landlord, at the address set forth in Section 1.9 above, or such other place as
Landlord shall designate. Minimum Monthly Rent shall be paid in advance on the
first day of each month, without deduction, offset, prior notice or demand, in
the sum specified in Section 1.11 of the Fundamental Lease Provisions and shall
be subject to upward adjustment as herein stated. Tenant shall pay the first
installment of Minimum Monthly Rent to Landlord concurrently with Tenant's
execution of this Lease. Rent for any period during the Term hereof which is
for less than one month shall be a pro rata portion of the monthly installment
determined on the basis of a thirty (30) day month. Rent shall be paid in
lawful money of the United States of America.
3.2 ADJUSTMENT TO MINIMUM MONTHLY RENT. *See Addendum
3.3 SECURITY DEPOSIT. Landlord hereby acknowledges receipt of the
Security Deposit from Tenant in the amount identified in Section 1.10 to secure
the faithful performance of the Tenant of all of the terms, covenants and
conditions of this Lease by the Tenant to be kept and performed. Tenant agrees
that if the Tenant shall fail to make any payments required under this Lease
when due, the Security Deposit may, at the option of the Landlord, be applied to
any Rent due and unpaid, and if the Tenant violates any of the other terms,
covenants and conditions of this Lease, the Security Deposit may be applied to
any damages suffered by Landlord as a result of Tenant's default. Under no
circumstances shall Tenant have the right to apply the Security
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Deposit against all or a portion of Tenant's payment obligations under any of
the provisions of this Lease.
3.3.1 Nothing contained in this Section shall in any way diminish or
be construed as waiving any of Landlord's other remedies provided in Article 17
hereof, or at law or in equity. Should the entire Security Deposit, or any
portion thereof be appropriated and applied by Landlord for the payment of
overdue Rent or other sums due and payable to Landlord by Tenant hereunder, then
Tenant shall, on the written demand of Landlord, remit to Landlord a sufficient
amount in cash to restore the Security Deposit to its original amount, and
Tenant's failure to do so within five (5) days after receipt of such demand
shall constitute an Event of Default. Should Tenant comply with all of the
terms, covenants and conditions of this Lease and promptly pay all of the Rent
and other sums payable by Tenant to Landlord when due hereunder, the Security
Deposit (or any remaining portion thereof) shall be returned to Tenant at the
end of the Term or sooner termination of this Lease. Landlord shall have the
right to commingle the Security Deposit with other funds of Landlord. Landlord
shall not be required to pay Tenant interest on the Security Deposit.
ARTICLE 4 - OTHER CHARGES PAYABLE BY TENANT (ADDITIONAL RENT)
4.1 DEFINITIONS. For the purposes of this Section, the following terms
are defined as follows:
4.1.1 BASE YEAR: Shall mean the calendar year specified in Section
1.5 of the Fundamental Lease Provisions.
4.1.2 COMPARISON YEAR: Shall mean each calendar year following the
Base Year.
4.1.3 DIRECT EXPENSES: All costs of operation and maintenance of
the Building, or the Project, determined by (i) the average percent of actual
occupancy of the Building for the entire calendar year if such average is
greater than ninety percent (90%), or (ii) as if the Building were not less than
ninety-five percent (95%) occupied for an entire calendar year if the average
percent of actual occupancy of the Building for the entire calendar year is less
than ninety percent (90%). Direct Expenses shall include, but not be limited
to, the following:
4.1.3.1 Real property taxes and assessments (collectively "Real
Property Taxes") upon the improvements to the Building, the Building, the Common
Areas serving the Building (as "Common Areas" are defined in Article 19 hereof),
and the land upon which they are located, imposed by any governmental authority
or agency. "Real Property Taxes" means and shall include without limitation any
form of real estate tax,
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assessment, special assessment, license fee, license tax, special tax, business
license fee, commercial rental tax, levy, charge, penalty (not resulting from
failure of the Landlord to pay any Real Property Tax), tax or similar
imposition, now or hereafter imposed, or imposed in substitution or addition,
partial or total, to or regarding any such tax, assessment, special assessment
license fee, license tax, special tax, business license fee, commercial rental
tax, levy, charge or penalty previously included or not included within the
definition of Real Property Taxes, by any authority having the power to tax,
including any city, county, state or federal government, or any school,
agricultural, lighting, drainage or other improvement assessment or special
district thereof, as against the Premises, the Building or the Common Areas or
any portion thereof or against any legal or equitable interest of Landlord in
the Premises, the Building or the Common Areas and any reasonable costs incurred
by Landlord in any proceeding for abatement or reduction thereof, such as
attorneys' and consultants' fees. Real Property Taxes shall also include any
increase in Real Property Taxes due to a "change in ownership" (as that phrase
is defined from time-to-time in the California Revenue and Taxation Code or any
successor statute) of the Premises. Notwithstanding any provision of this
Section 4.1.3.1, express or implied to the contrary, "Real Property Taxes" shall
NOT include Landlord's federal or state income, franchise, inheritance or estate
taxes.
4.1.3.2 All expenses incurred in connection with the operation,
repair, cleaning, maintenance and insuring of the Building and the Common Areas
(collectively "Building Costs"). Building Costs include, without limitation,
all sums expended in connection with the Building and Common Areas for: general
maintenance and repairs; resurfacing; painting; restripping; cleaning; trash
removal (including trash deposited in common receptacles by the individual
tenants); sweeping and janitorial services; lighting and operation and
maintenance of air conditioning and heating equipment and other utility
expenses; maintenance, repair, ceiling and replacement of public toilets, music
program equipment and loudspeakers, sidewalks, curbs and building signs,
sprinkler systems, planting and landscaping, floors, ceilings, skylights,
windows, directional signs, markers and bumpers, any fire protection systems
(including fire sprinklers), lighting systems and fixtures (including
replacement of tubes and bulbs), storm drainage systems and other utility
systems, all mechanical equipment, automatic door openers, escalators,
elevators, roofs, exterior walls, air conditioning and heating equipment and
security alarm systems; personnel to implement the foregoing services,
including, if Landlord deems necessary, the cost of security guards; all on-site
costs and personnel expenses of Landlord incurred in connection with the
maintenance of the Building and the Common Areas; all personal property taxes
assessed against any personalty (not belonging to any tenant of the Building) in
use in the Building or the Common
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Areas; any governmental imposition of surcharge imposed upon Landlord or
assessed against any portion of the Building or the Common Areas; depreciation
on maintenance and operating machinery and equipment (if owned) and rental paid
for such machinery and equipment (if rented); premiums for all insurance carried
by Landlord pursuant to this Lease, including without limitation, adequate
comprehensive public liability and property damage insurance covering Landlord's
ownership an i operation of the Building and the Common Areas, fire and extended
coverage insurance on the Building and the Common Areas (which may include
earthquake and flood damage endorsements), vandalism and plate glass insurance
covering the Building and the Common Areas and rent loss insurance; and the
costs of all capital improvements and replacements to the Building or the Common
Areas, its contents or any portion thereof which are made to (i) comply with any
present or future law, ordinance, rule or regulation including without
limitation the Americans With Disabilities Act of 1990 and similar laws,
ordinances, rules or regulations; or (ii) improve or add Building life-safety or
security systems; or (iii) reduce other Building Costs, such costs to be
amortized over the applicable recovery period for federal tax purposes or the
estimated useful life as determined by Landlord and utilized by Landlord in is
financial and tax reporting, and to include a return on capital at such rate as
Landlord pays on funds borrowed for the purpose of constructing such
improvements or replacements. In addition, Building Costs shall include a sum
to be payable to Landlord for supervision of the Building and the Common Areas
and for accounting, bookkeeping and collection of the Building Costs, in an
amount equal to fifteen percent (15%) of the total of all of the foregoing
Building Costs incurred in each calendar year. Landlord may have any or all
services performed in connection with such Building and Common Area maintenance
provided by an independent contractor(s). If Landlord acquires, constructs or
makes available for Common Area purposes land or improvements not shown as part
of EXHIBIT A, then Building Costs shall also include all of the expenses
itemized above incurred and paid in connection with such additional land or
improvements.
4.1.3.3 Direct Expenses shall NOT include (i) mortgage and
debt service on any debt instrument which encumbers the Building; (ii) ground
lease payments; (iii) Landlord's general overhead and general administrative
expenses not related to management or operation of the Building; (iv)
depreciation (except as described above); (v) any and all costs of selling,
exchanging or refinancing the Building including any escrow charges, transfer
taxes, loan fees and points; (vi) extraordinary real estate taxes or insurance
premiums related to the tenant improvements of other tenants in the Building
which are in excess of building standard as may be defined by Landlord from time
to time; (vii) costs incurred by Landlord for the repair of damage to the
Building or the Common Areas to the extent Landlord is
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reimbursed by insurance proceeds from policies paid for in total or in part by
Tenant; (viii) capital expenditures required by Landlord's failure to comply
with laws enacted on or before date of issuance of a certificate of occupancy or
an equivalent governmental permit for the initial occupancy of the Building;
(ix) costs incurred with respect to the installation of tenant improvements made
for tenants in the Building or incurred in renovating or otherwise decorating,
painting or redecorating vacant space for tenants of the Building; (x) leasing
commissions, attorneys' fees, and other costs and expenses incurred in
connection with negotiations or disputes with present or prospective tenants or
other occupants of the Building, (xi) costs incurred by Landlord to enforce the
provisions of any lease of space in the Building due to the violation by any
tenant of the Building of the terms and conditions of any lease; (xii) cost of
services paid to Landlord or to subsidiaries or affiliates of Landlord for
services in the Building to the extent the same exceeds the cost of such
services rendered by unaffiliated qualified third parties on a comparable
competitive basis; (xiii) any compensation (including wages and fringe benefits)
paid to clerks, attendants or other persons in commercial concessions operated
by Landlord in the Building lobby; (xiv) all items and services for which Tenant
or any other tenant of the Building reimburses Landlord (other than the
pass-through of Building Costs) and which Landlord provides selectively to one
or more tenants (other than Tenant without reimbursement; (xv) the cost of
purchase and installation of signs in or on the Building which identify the
owner of the Building or any tenant of the Building; (xvi) tax penalties
incurred as a result of Landlord's negligence or inability or unwillingness to
make payments when due; (xvii) electrical power costs for which Tenant or my
other tenant directly contracts with the public utility. *See Addendum
4.2 INCREASES IN DIRECT EXPENSES/ADDITIONAL RENT. If the Direct Expenses
paid or incurred by the Landlord for the Comparison Year are in excess of the
Direct Expenses paid or incurred for the Base Year, then Tenant shall pay
Tenant's Percentage Share of the increase as Additional Rent. Notwithstanding
the preceding sentence, Tenant shall not be required to pay any Direct Expenses
in excess of Direct Expenses paid or incurred for the Base Year, until after the
first Anniversary Date of this Lease. Landlord shall endeavor to give to
Tenant, on or before the first day of March of each year following the
respective Comparison Year, a statement of the increase in Direct Expenses
payable by Tenant hereunder, but failure by Landlord to give such statement by
March 1 shall not constitute a waiver by Landlord of its right to require
payment of the increase in Direct Expenses. Upon receipt of the statement for
the first Comparison Year, Tenant shall pay in full the total amount of increase
due for the first Comparison Year. In addition for the then current year, the
amount which Landlord estimates, at Landlord's sole determination, for the
increase in
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Direct Expenses between the Base Year and the said current year shall be divided
into twelve (12) equal monthly installments, and Tenant shall pay to Landlord,
concurrently with the Minimum Monthly Rent payment next due following the
receipt of such statement, an amount equal to one (1) monthly installment
multiplied by the number of months from January in the calendar year in which
said statement is submitted to the month of such payment, both months inclusive.
Subsequent installments shall be payable concurrently with the Minimum Monthly
Rent payments for the balance of that calendar year. If the ne ct or any
succeeding Comparison Year results in a greater increase in Direct Expenses than
that previously estimated by the Landlord, then, not later than twenty (20) days
following receipt of a statement from Landlord, Tenant shall pay a lump sum
equal to such total increase in Direct Expenses over the Comparison Year, less
the total of the monthly installments of estimated increases paid in the
previous year for which comparison is then being made and the estimated monthly
installments to be paid for the next year, following said Comparison Year, shall
be adjusted to reflect Landlord's estimate of such increase in Direct Expenses
for that current year. If, in any Comparison Year, the Tenant's share of Direct
Expenses is less than the preceding year, then upon receipt of Landlord's
statement, any overpayment made by Tenant on the monthly installment basis
provided above shall be credited towards the next installment of Minimum
Monthly Rent falling due.
4.2.1 Not more frequently than once per calendar year, after receipt
of Landlord's statement comparing Tenant's payment of Direct Expenses during
that calendar year against Tenant's Percentage Share of such expenses, Tenant
may request in writing to audit Landlord's books and records pertaining to such
expenses. Tenant shall have no right to request to audit Landlord's books and
records pertaining to such expenses, except during such period. If no such
written request is made within the period, Tenant stipulates and agrees that
said figures are for all purposes correct and accurate, and the amount of the
billing is proper. In the event Tenant requests copies of any portion of
Landlord's books and records pertaining to such expenses, such copies shall be
provided by Landlord to Tenant at Tenant's expense. *See Addendum
4.3 FINAL DETERMINATION OF TENANT'S SHARE OF DIRECT EXPENSES. Even though
the Term has expired and Tenant has vacated the Premises, when the final
determination is made of Tenant's Percentage Share for the year in which this
Lease terminates, Tenant shall immediately pay any increase due over the
estimated Direct Expenses paid, and conversely, any overpayment made by Tenant
in the event Direct Expenses decrease shall be rebated by Landlord to Tenant.
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4.4 TAXES ON TENANT'S PROPERTY. Tenant shall pay, before delinquency, all
taxes, assessments, license fees and public charges levied, assessed or imposed
upon or measured by the value of its business operation, including but not
limited to the furniture, trade and other fixtures, equipment and other property
of Tenant at any time situated on or installed in the Premises by Tenant. If at
any time during the Term any of the foregoing are assessed as a part of the real
property of which the Premises are a part, Tenant shall pay to Landlord upon
demand the amount of such additional taxes as may be levied against said real
property by reason thereof. For the purpose of determining said amount, figures
supplied by the County Assessor as to the amount so assessed shall be
conclusive.
4.5 BUILDING SERVICES AND UTILITIES. Landlord shall also furnish to the
Premises (i) sewer and domestic water service and (ii) facilities for the
delivery and distribution within the Premises of electricity and telephone (the
foregoing utility facilities and the HVAC Service are hereinafter collectively
referred to as "Utilities"). Tenant shall pay for all Utilities used by Tenant
within the Premises. If a separate meter is required by Tenant for any
Utilities, such meter shall be installed and maintained at Tenant's expense.
*See Addendum
4.5.1 If Tenant's electrical consumption is separately metered,
Tenant shall pay for such costs directly to the public utility company or to
Landlord as Landlord directs (and if such payment is made to Landlord, Landlord
shall be responsible for payment to the public utility). If Tenant's electrical
consumption is NOT separately metered, Tenant shall pay Tenant's Percentage
Share of the electrical consumption of the Building as a part of Direct
Expenses; provided however, if Tenant's electrical consumption was not initially
separately metered and if a separate meter is subsequently installed to monitor
Tenant's electrical consumption, Landlord shall make an appropriate adjustment
to Minimum Monthly Rent and Direct Expenses to account for the fact that Tenant
is directly paying such separately metered charges to the public utility (or to
Landlord as the case may be) and not as a part of Tenant's Minimum Monthly Rent
or Tenant's Percentage Share of Direct Expenses. If Tenant's electrical
consumption is NOT separately metered and is in excess of the quantity provided
by Landlord or extends beyond Business Hours, Landlord may install a separate
switch, meter or metering system to be installed at Tenant's expense to measure
the amount of electrical consumption by Tenant and charge Tenant for such excess
consumption at the rates charged by the local public utility providing the same
plus any additional expense incurred in keeping account of the electricity so
consumed.
4.5.2 Landlord shall provide customary and routine cleaning and
janitorial service for the Premises not less than five (5) days per week, during
non Business Hours; provided
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however, if Tenant is a health care provider, Tenant shall, at Tenant's sole
cost and expense, (i) make arrangements for such cleaning and janitorial
services for the Premises with a contractor which shall be subject to the
reasonable prior approval of Landlord and (ii) satisfy all laws and regulations
governing the disposal of medical waste and to arrange for the proper disposal
of such waste. The disposal of medical waste is not part of the ordinary
services provided by Landlord, and Landlord is not required to provide such
services pursuant to this Lease. Tenant agrees to indemnify, defend and hold
Landlord harmless from and against any and all claims, costs, loss or liability
arising out of or in any connected to Tenant's disposal of such waste.
4.5.3 Tenant shall not install or use machinery or equipment that use
excess water, lighting or power, nor shall Tenant permit any act that causes
extra burden upon the Utilities, or Building services. Tenant agrees to pay to
Landlord within ten (10) working days after Tenant's receipt of an invoice from
Landlord, all reasonable charges imposed by Landlord from time to time for all
such excess Utilities and/or additional, services consumed by Tenant or used in
the Premises.
4.5.4 Landlord reserves the right to interrupt, curtail, stop or
suspend Utilities when necessary, in Landlord's reasonable discretion by reason
of accident or emergency, or for repairs, alterations, replacements or
improvements or because of difficulty or inability in securing supplies or
labor, or because of strikes, or for any other cause beyond the reasonable
control of Landlord, whether such cause be similar or dissimilar to those
hereinabove specifically mentioned, until such cause has been removed. Except
as specifically provided in Section 4.7 below, there shall be no diminution or
abatement of Rent or other charges due under this Lease as a result of said
interruption, curtailment or suspension of Utilities and/or other Building
services, nor shall this Lease be affected or any of the Tenant's obligations
hereunder be reduced. Landlord shall have no responsibility or liability for
any such interruption, curtailment, stoppage or suspension of services or
systems as provided for in this Section 4.5, except that Landlord shall exercise
reasonable diligence to eliminate the cause of same.
4.5.5 Landlord reserves the right to install new or additional
utility facilities throughout the Building and the Common Areas for the benefit
of the Landlord or Tenant, or any other tenants of the Building, including, but
not by way of limitation, such Utilities as plumbing, electrical systems, HVAC
systems, communication systems and fire protection and detection systems,
including entry into the Premises for such purposes, so long as such
installations do not unreasonably interfere with Tenant's use of the Premises
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4.6 ADDITIONAL RENT. All charges payable by Tenant other than Minimum
Monthly Rent are called "Additional Rent". Unless this Lease provides
otherwise, all Additional Rent shall be paid with the next monthly installment
of Minimum Monthly Rent. The term "Rent" shall mean Minimum Monthly Rent and
Additional Rent. Tenant's failure to pay any Additional Rent due hereunder
shall constitute an Event of Default under this Lease.
4.7 ABATEMENT OF RENT WHEN TENANT IS PREVENTED FROM USING PREMISES.
Notwithstanding any provision in this Lease to the contrary, in the event that
Tenant is prevented from using, and does not use, the Premises or any portion
thereof, for ten (10) consecutive business days (the "Eligibility Period") as a
result of any damage or destruction to the Premises or any repair, maintenance
or alteration performed by Landlord at any time after Tenant commences business
from any portion of the Premises, which interferes with Tenant's use of the
Premises, or any failure to provide utilities, services or access to the
Premises or because of an eminent domain proceeding, then Tenant's Rent shall be
abated or reduced, as the case may be, after expiration of the Eligibility
Period for such time that Tenant continues to be so prevented from using, and
does not use, the Premises or a portion thereof, in the proportion that the
rentable area of the portion of the Premises that Tenant is prevented from
using, and does not use, bears to the total rentable area of the Premises.
However, in the event that Tenant is prevented from conducting, and does not
conduct, its business in any portion of the Premises for a period of time in
excess of the Eligibility Period, and the remaining portion of the Premises is
not sufficient to allow Tenant to effectively conduct its business therein, and
if Tenant does not conduct its business from such remaining portion, then for
such time after expiration of the Eligibility Period during which Tenant is so
prevented from effectively conducting its business therein, the Rent for the
entire Premises shall be abated; provided, however, if Tenant reoccupies and
conducts its business from any portion of the Premises during such period, the
Rent allocable to such reoccupied portion, based on the proportion that the
rentable area of such reoccupied portion of the Premises bears to the total
rentable area of the Premises, shall be payable by Tenant from the date such
business operations commence. If Tenant's right to abatement occurs because of
damage or destruction to the Premises or Tenant's property, Tenant's abatement
period shall continue until Tenant has been given sufficient time, and
sufficient access to the Premises. :o rebuild the portion of the Premises it is
required to rebuild, to install its property, furniture, fixtures, and equipment
and to move in over one (1) weekend. To the extent Tenant is entitled to
abatement because of an event covered by Article 10 (Damage or Destruction) or
Article 11 (Eminent Domain) of this Lease, then the Eligibility Period shall not
be applicable.
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ARTICLE 5 - USE OF PREMISES
5.1 USE. Tenant acknowledges that Tenant's use of the Premises shall be
subject to any matters or documents of record, including the effect of any
covenants, conditions, restrictions, easements, mortgage s or deeds of trust,
ground leases, rights-of-way, or any construction, operation and reciprocal
easement agreement, and the effect of any zoning laws of the city, county and
state where the Building is located. Tenant shall use the Premises only for the
Permitted Uses identified in Section 1.7 above and shall not use or permit the
Premises to be used for any other purpose without the prior written consent of
Landlord. In determining whether to grant consent to Tenant for any proposed
use other than the Permitted Use, Landlord may consider factors including, but
not limited to, tenant mix, Building image, need for alteration of the Premises
and/or the Building, the impact upon the Common Areas of the Building or the
parking facilities, the impact upon Utilities and services, effect on fire or
other insurance covering the Building, avoidance of nuisance to other tenants,
and violation of Landlord's third-party agreements, including loan documents and
non-competition covenants with other tenants. Tenant shall not use or permit
anything to be done in or about the Premises, nor bring or keep anything therein
which will in any way increase the existing rate of or affect any fire or other
insurance upon the Building or any of its contents, or cause cancellation of any
insurance policy covering the Building or any part thereof or any of its
contents. Tenant shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the right; of other
tenants or occupants of the Building or injure or annoy them or use or allow the
Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises. Tenant shall not commit or suffer to be committed any waste in or
upon the Premises, and Tenant shall conduct itself and cause its employees,
agents and invites to conduct themselves, with full regard to the rights,
convenience and welfare of all other tenants in the Building. Tenant, its
agents and employees, shall at all times comply with the rules and regulations
set forth in Exhibit E.
5.2 COMPLIANCE WITH LAW. Tenant shall not use the Premises or permit its
employees, agents or invites to do anything in or about the Premises which will
in any way conflict with any law, statute, ordinance or governmental rule or
regulation now in force or which may hereafter be enacted or promulgated.
Tenant shall, at its sole cost and expense, promptly comply with all laws,
statutes, ordinances and governmental rules, regulations or requirements of any
board of fire insurance underwriters or other similar bodies now or hereafter
constituted, relating to, or affecting the condition, use or occupancy of the
Premises, excluding structural changes
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are not related to or affected by Tenant's use and occupancy of the Premises
and/or Tenant's improvements or acts. The judgment of any court of competent
jurisdiction or the admission of Tenant in any action against Tenant, whether
Landlord be a party thereto or not, that Tenant has violated any law, statute,
ordinance or governmental rule, regulation or requirement, shall be conclusive
of that fact as between the Landlord and Tenant.
5.3 HAZARDOUS SUBSTANCES. Tenant shall not (either with or without
negligence) cause or permit the escape, disposal, or release of any biologically
or chemically active or other hazardous substances or materials (collectively
"Hazardous Substances"). Tenant shall not allow the storage or use of such
Hazardous Substances in any manner not sanctioned by law or by the highest
standards prevailing in the industry for the storage and use of such Hazardous
Substances, nor allow any Hazardous Substances to be brought into the Project
and such Hazardous Substances, except to use in the ordinary course of Tenant's
business, and then only after written notice is given to Landlord of the
identity of such Hazardous Substances. Without limitation, "Hazardous
Substances" shall include those substances and materials described in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq., and applicable state or local laws
and the regulations adopted under these acts. If any lender or governmental
agency shall ever require testing to ascertain whether or not there has been any
release of Hazardous Substances, then the reasonable costs thereof shall be
reimbursed by Tenant to Landlord upon demand as Additional Rent. In addition,
Tenant shall execute affidavits, representations and the like from time to time
at Landlord's request concerning Tenant's best knowledge and belief regarding
the presence of Hazardous Substances on the Premises. In all events, Tenant
shall indemnify Landlord in the manner elsewhere provided in this Lease from any
release of Hazardous Substances on the Premises or Project, if caused by Tenant
or persons acting under Tenant, and Tenant shall be fully and completely liable
to Landlord for any and all cleanup costs and any and all other charges, fees or
penalties relating to the use, disposal, transportation, generation or sale of
hazardous substances on the Premises or Project which were brought onto the
Premises or Project by Tenant, or Tenant's agents, employees, invitees,
contractors or subcontractors. The obligations of Tenant pursuant to this
Section 5.4 shall survive the expiration or earlier termination of this Lease.
Notwithstanding the foregoing, Tenant shall be permitted to use and store within
the Premises, reasonable quantities of those substances and materials which are
typically found in general office use (i.e. copy toner and cleaning fluids)
despite the fact that such substances and materials may be classified as
Hazardous Substances. *See Addendum
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ARTICLE 6 - ACCEPTANCE OF PREMISES
Tenant acknowledges that its acceptance of possession of the Premises
constitutes a conclusive admission that Tenant has inspected the Premises and
has found them to be in good condition and repair and in all respects in
accordance with the obligations of Landlord under this Lease. Tenant's
acceptance of possession shall also constitute its acknowledgment of and
agreement to be bound by all recorded matters, laws, ordinances and governmental
regulations and orders in effect at the time of such possession. Tenant
acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the condition of the Premises or the
suitability of the Premises for Tenant's intended use.
ARTICLE 7 - INDEMNIFICATION
7.1 TENANT'S INDEMNITY. Tenant shall defend, indemnify and hold Landlord
harmless against and from any and all liabilities and claims arising from
Tenant's use of the Premises for the conduct of its business or from any
activity, work or other thing done, permitted or suffered by the Tenant, its
agents or employees, in or about the Building or the Common Areas and shall
further indemnify and hold harmless Landlord against and from any and all
liabilities and claims arising from any breach or default in the performance of
any obligation on Tenant's part to be performed under the terms of this Lease,
or arising from any act or negligence of the Tenant, or any officer, agent,
employee, guest or invitee of Tenant, and from and against all costs, attorneys'
fees, expenses and liabilities incurred in or about any such claim or any action
or proceeding brought thereon, and, if any case, action, claim or proceeding be
brought or asserted against Landlord by reason of any such claim, Tenant, upon
notice from Landlord, shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons in, upon or about the Premises from any cause other than the
negligence of Landlord, or its designated agents, servants or employees, unless
covered by insurance which Tenant is required to provide, and Tenant hereby
waives all claims in respect thereof against Landlord. Tenant's obligation to
indemnify Landlord shall include reasonable attorneys' fees and investigation
costs, and all other reasonable costs, expenses and liabilities from the first
notice that any claim or demand is to be made or may be made.
7.2 LANDLORD'S INDEMNITY. Notwithstanding the provisions of Section 7.1
above, Tenant shall not be required to indemnify, defend, and hold Landlord
harmless from any such loss, cost, liability, damage and expense resulting from
the negligent acts or omissions or the willful misconduct of Landlord or those
of its agents, contractors, servants, employees or licensees, in connection with
Landlord's activities on the Premises or the
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Building or the Project, and Landlord hereby agrees to indemnify, defend, and
hold Tenant harmless from any such loss, costs, liability, damage and expense
arising directly out of such negligent acts or omissions or such willful
misconduct. Further, Tenant's agreement to indemnify and hold Landlord harmless
pursuant to Section 7.1 and the exclusion from Tenant's indemnity and the
agreement by Landlord to indemnify and hold Tenant harmless pursuant to this
Section 7.2 are not intended to and shall not relieve any insurance carrier of
its obligations under polices required to be carried by Landlord or Tenant,
respectively, pursuant to the provisions of this Lease to the extent that such
policies cover the results of such negligence or omissions or such willful
misconduct. If either party breaches this Lease by its failure to carry
required insurance, such failure shall automatically be deemed to be the
covenant and agreement by Landlord or Tenant, respectively, to self-insure such
required coverage, with full waiver of subrogation.
7.3 DAMAGE TO TENANT'S PROPERTY. Landlord, its employees and its agents,
shall not be liable for any damage to property entrusted by Tenant to employees
of the Building, nor for loss or damage to any property by theft or otherwise,
nor for any injury to or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water or rain which may
leak from any part of the Premises or the Building, or from the pipes,
appliances or plumbing works therein or from the roof, street or subsurface or
from any other place resulting from dampness or any other cause whatsoever, or
by the entry of Landlord or its agents or employees into the Premises as
permitted under this Lease, unless, and to the extent, caused by or due to the
negligence of Landlord, or its agents, servants or employees, unless and to the
extent such damage is covered by insurance required to be carried by Tenant
pursuant to this Lease. Landlord, or its agent, shall not be liable for
interference with or loss of business by Tenant. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the Premises or in the
Building, or of defects therein, or in the fixtures or equipment. Neither party
shall be liable to the other for any unauthorized or criminal entry of third
parties into the Premises, Building, or Common Areas, or for any damage to
person or property, or loss of property, in and about the Premises, Building, or
Common Areas, and the approaches, entrances, streets, sidewalks or corridors
thereto, by or from any unauthorized or criminal acts of third parties,
regardless of any breakdown, malfunction or insufficiency of any security
measures, practices or equipment provided by Landlord or Tenant. Tenant shall
immediately notify Landlord in writing of any breakdown or malfunction of any
security measures, practices or equipment provided by Landlord which are known
to Tenant.
*See Addendum.
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ARTICLE 8 - MAINTENANCE, REPAIRS AND ALTERATIONS
8.1 LANDLORD'S OBLIGATIONS. Subject to Tenant's obligations under Section
8.2, Landlord shall repair and maintain in good and tenantable condition the
Common Areas, the roof, exterior walls, structural parts of the Premises
(including the structural floor), utility meters, pipes and conduits outside the
Premises used to furnish utilities to the Premises on a nonexclusive basis
(except for repairs assumed by the appropriate public utility company), and
those portions of any variable air volume or central HVAC system serving the
Building which is located outside the Premises. In addition, Landlord shall
keep the foundations, exterior walls and exterior roof of the Building in good
order, condition and repair. Landlord's costs of meeting its obligations under
this Section 8.1 shall be chargeable to Tenant as a part of Building Costs.
Tenant shall not have the right to make repairs at Landlord's expense or to
terminate this Lease due to Landlord's failure to keep the Common Areas, or the
Building in good order, condition and repair. Tenant agrees that the under no
circumstances will Tenant use the roof areas for any purpose. Except as
specifically provided in Section 4.7 above, there shall be no abatement of Rent
and no liability of Landlord by reason of any injury to or interference with
Tenant's business arising from the making of any repairs, alterations or
improvements in or to any portion of the Building, Common Areas or the Premises
or in or to fixtures, appurtenances and equipment therein. If any part of the
Premises, Common Areas or the Building is damaged by any act or omission of
Tenant, its customers, invites or employees, Tenant shall pay Landlord the cost
of repairing or replacing such damaged property, whether or not Landlord would
otherwise be obligated to pay the cost of maintaining or repairing such
property, except and to the extent the cost of such repairs or replacements are
covered by insurance carried by Landlord and paid for by Tenant as part of
Building Costs. Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation that Landlord shall undertake any
modification, alteration or improvement to the Premises, except as may be
specifically provided for in this Lease. *See Addendum.
8.2 TENANT'S OBLIGATIONS. Subject to Landlord's maintenance obligations
pursuant to Section 8.1, Tenant shall keep the Premises in an attractive,
first-class and fully operative condition. Landlord shall not be obligated to
make repairs, replacements or improvements of any kind upon or in the Premises,
or upon or to any equipment, Utility Installation (as defined in Section 8.4),
fixtures or furnishings therein contained during the Term. Tenant, at Tenant's
sole expense, shall keep and maintain the Premises and every part thereof, and
any and all appurtenances thereto wherever located, in first-class condition and
in good order and repair, in accordance with all applicable laws, ordinances and
regulations of any
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governmental authority having jurisdiction, including replacement of parts and
equipment, if necessary, including, but without limitation, all utility
facilities, including plumbing, heating, electrical ventilation, heating and air
conditioning systems (except Landlord shall maintain the HVAC System serving the
Premises, with the cost of such maintenance chargeable to the tenants of the
Building), sprinkler systems, walls, floors and ceilings, and all other repairs,
replacements, renewals and restorations, ordinary and extraordinary, foreseen
and unforeseen, and all other work or leasehold improvements, subject to
reasonable wear and tear. In addition, Tenant, at its sole cost and expense,
shall install and maintain fire extinguishers and other fire protection devices
as may be required from time to time by any agency having jurisdiction thereof
and/or by the insurance underwriters insuring the Building or Project in which
the Premises are located. In no event shall Tenant make or cause to be made any
penetration into or through the roof or floor of the Premises without the prior
written approval of Landlord. Tenant shall be directly responsible for any and
all damages resulting from any violation of the provisions of this Section 8.2.
Any contractors retained by Tenant for the purpose of complying with Tenant's
obligations under this Section 8.2 shall have received the prior written
approval of Landlord.
8.2.1 If Tenant refuses or neglects to commence repairs within ten
(10) days after Landlord's written demand, or adequately to complete such
repairs within a reasonable time thereafter, Landlord may make the repairs
without liability to Tenant for any loss or damage that may occur to Tenant's
personal property or business by reason thereof, and if Landlord makes such
repairs, Tenant shall pay to Landlord on demand, as Additional Rent, the cost
thereof, with interest at the Interest Rate (as defined in Article 29) from the
date of payment by Landlord until repaid by Tenant.
8.2.2 Without any liability for failure to do so, Tenant shall
promptly notify Landlord in writing if Tenant observes that any part of the
Premises, or of the Building, including the fixtures and facilities, is or
appears to be defective, damaged or in a state of disrepair, regardless of the
nature of the cause or of the identity of the party responsible for the repair
thereof.
8.3 CONDITION UPON TERMINATION. Upon termination of this Lease, Tenant
shall remove all of Tenant's personal property, trade fixtures and equipment
from the Premises and shall surrender the Premises to Landlord, broom clean and
in the same condition as received except for ordinary wear and tear which Tenant
was not otherwise obligated to remedy under any provision of this Lease.
Landlord may require Tenant to remove any alterations, additions or improvements
other than the initial Tenant Improvements to be constructed by Landlord
pursuant to the
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Tenant Improvement Agreement attached hereto as EXHIBIT C (whether or not made
with Landlord's consent) by no later than the termination of the Lease and to
restore the Premises to the condition specified by Landlord including, without
limitation, sign removal and repair and all patching and plastering required by
Landlord, all at Tenant's expense. All alterations, additions and improvements
which Landlord has not required Tenant to remove shall become Landlord's
property and shall be surrendered to Landlord upon the termination of the Lease.
Tenant shall repair, at Tenant's expense, any damage to the Premises caused by
the removal of such improvements and trade fixtures. In no event, however,
shall Tenant remove any of the following without Landlord's prior written
consent: any power wiring or power panels; wall coverings; drapes, blinds or
other window coverings; carpets or other floor coverings; heaters, air
conditioners or any heating or air conditioning equipment; fencing or security
gates; or other similar Building operating equipment and decorations. *See
Addendum
8.4 ALTERATIONS, ADDITIONS AND IMPROVEMENTS. Tenant shall not make any
alterations, additions, improvements, structural changes or Utility
Installations in or to the Premises (collectively "Alterations") without
Landlord's prior written consent. Tenant shall submit to Landlord, at the time
of seeking such prior written consent, detailed copies of all plans and
specifications for all Alterations to the Premises. As used in this Section
8.4, the term "Utility Installation" shall mean power panels, electrical
distribution systems, security systems, lighting fixtures, air conditioning,
plumbing and telephone and telecommunication wiring and equipment. No
Alterations shall be undertaken without first providing Landlord with a copy of
the signed permit(s) issued by the appropriate governmental agency or agencies,
if a permit(s) is required. All Alterations made by Tenant, except light
fixtures, cases, counters and other removable trade fixtures shall, upon
installation, be deemed to have become part of the freehold and the property of
Landlord. Landlord may require Tenant to provide demolition and/or lien and
completion bonds in form and amount satisfactory to Landlord. Tenant shall
promptly remove any Alterations constructed in violation of this Section 8.4
upon Landlord's written request. All Alterations shall be accomplished in a
good and workmanlike manner, in conformity with all applicable laws and
regulations, and diligently completed by a licensed contractor approved by
Landlord. Upon completion of any Alterations, Tenant shall provide Landlord
with copies of all construction contracts, and proof of payment (including
unconditional lien waivers) for all labor and materials. Tenant shall reimburse
Landlord for all costs incurred by Landlord (including architects' and/or
engineers' fees) in approving Tenant's plans for Alterations.
8.4.1 In connection with the construction of any Alterations by
Tenant, Tenant shall provide its own trash
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containers for construction debris and use service entrances to the Premises, if
any. In addition, Tenant shall conduct such construction activities during such
hours and in such a manner as to not interfere with the quiet enjoyment or
business operations of other tenants in the Building. Tenant shall not conduct
any core drilling during business hours.
8.4.2 Tenant shall pay when due all claims for labor and material
furnished to the Premises. Tenant shall give Landlord at least ten (10) days'
prior written notice of the commencement of any Alterations on the Premises.
Before commencing any Alterations, Tenant shall permit Landlord to post and
maintain notices of non-responsibility and other notices that are provided for
under the Mechanics' Lien Law of California and other applicable laws. Tenant
shall keep the Premises free and clear of all mechanics' liens resulting from
Alterations done by or for Tenant. Tenant shall have the right to contest the
correctness or the validity of any such lien if, immediately on demand by
Landlord, Tenant procures and records a lien release bond issued by a
corporation authorized to issue surety bonds in California in an amount equal to
one and one-half (1-1/2) times the amount of the claim of lien. The bond shall
meet the requirements of Civil Code Section 3143 and shall provide for the
payment of any sum that the claimant may recover on the claim (together with
costs of suit, if it recovers in the action). Furthermore, at all times when
Tenant or its agents, contractors or employees are performing Alterations,
Tenant or Tenant's contractor shall maintain public liability and property
damage insurance on such activities with a single combined limit of One Million
Dollars ($1,000,000), naming the Landlord as an additional insured.
Furthermore, Tenant or Tenant's contractor shall procure workmen's compensation
insurance to cover the activities of all persons engaged in such Alterations.
Tenant shall pay all taxes and license fees imposed by reason of any
Alterations made by Tenant to the Premises, or imposed upon any personal
property of Tenant located within the Premises. Tenant agrees that its interior
decorating, including color scheme, shall be subject to the prior approval of
Landlord and Landlord's architect which approval shall not be unreasonably
withheld. Tenant shall make no changes to any entry locks or locks installed on
any other doors located in the Premises without first obtaining Landlord's prior
written approval. It is acknowledged by Tenant that a master key system has
been employed by Landlord, and that any such lock change could hinder access to
the Premises for such purposes as security and fire fighting. In the event that
during the Term hereof any Alteration is mandated by law, regulation, rule or
the requirement of any insurance company (as a condition to the issuance or
continuation of insurance coverage) to be made to the Premises, or any portion
thereof, because of Tenant's use of the Premises, then, and in that event, such
Alteration shall be made and paid for by Tenant.
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8.5 INSTALLATION OF FIXTURES. Landlord may, but shall not be obligated to,
grant Tenant written permission to enter upon the Premises prior to the
Commencement Date for the purpose of installing trade fixtures and furnishings
upon the furnishing to Landlord of written evidence satisfactory to Landlord
that Tenant has obtained and put into effect the insurance coverage described in
Article 12. Landlord shall not be liable to Tenant for damage to or loss of
such fixtures, equipment or furnishings, Tenant accepting the full risk for such
damage or loss, if any. Tenant shall pay for all utilities consumed by Tenant
or its contractors in preparing the Premises for opening of Tenant's business.
8.6 LANDLORD'S RIGHT TO REMODEL BUILDING. Landlord shall have the right,
at any time, to remodel, expand, change or refurbish all or any part of the
Building, Common Areas or the surrounding property, including the right (but not
the obligation) to enclose or otherwise cover all or part of the Common Areas,
to landscape or re-landscape portions of the Building or Common Areas, to
reconstruct, remodel or refurbish any portion of the exterior of the Building,
and/or to change, modify or alter parking, access or other traffic matters. In
connection with the exercise of Landlord's rights as set forth in this Section
8.6, Landlord, its agents and employees, shall have the right of reasonable
entry and to conduct work within the Premises. Tenant hereby releases Landlord
from any and all liability arising from (i) any interference or diminution in
access to the Premises; (ii) noise or dust resulting from Landlord's work; and
(iii) reduction or limitation of available parking spaces for Tenant's employees
and invitees, so long as such activity does not unreasonably interfere with the
operation of Tenant's business. This Lease is not intended to nor shall it
confer upon Tenant any view corridors. The obstruction of Tenant's view, ail or
light by any structure erected in the vicinity of the Building, whether by
Landlord or third parties, shall not in any way affect this Lease or impose any
liability upon Landlord, nor shall Landlord be liable for interference with any
other incorporeal hereditament.
ARTICLE 9 - PERFORMANCE BY TENANT
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of Rent except as specifically provided in
Section 4.7 above. If Tenant shall fail to pay any sum of money owed to any
party other than Landlord, or perform any act for any party other than Landlord,
for which Tenant is liable hereunder, and such failure or violation shall
continue for fifteen (15) days after written notice thereof by Landlord, and a
reasonable additional period of time thereafter to perform any such act if such
additional time is required, Landlord may, without waiving or releasing Tenant
from its obligations, make any such payment or perform any such
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other act to be made or performed by Tenant. All sums so paid by Landlord and
all necessary incidental costs, together with interest thereon at the Interest
Rate from the date of such payment by Landlord, shall be payable to Landlord on
demand, and shall be deemed Additional Rent.
ARTICLE 10 - DAMAGE OR DESTRUCTION OF LEASEHOLD
10.1 DESTRUCTION COVERED BY INSURANCE. In the event the Premises or the
Building are damaged by fire or other perils which are fully covered by fire and
extended coverage insurance, Landlord agrees to forthwith repair the same, and
this Lease shall remain in full force and effect. Landlord may elect, by
written notice to Tenant within sixty (60) days after such casualty, to
terminate this Lease in lieu of restoring the Premises if either (i) the
Building or Premises are damaged or destroyed to the extent of more than
twenty-five percent (25%) of their replacement cost, or (ii) the damage is such
that the Building or the Premises cannot be repaired and restored within one
hundred eighty (180) days after the casualty.
10.2 DESTRUCTION NOT COVERED BY INSURANCE. In the event the Premises or
the Building are damaged as a result of any cause other than the perils covered
by fire and extended coverage insurance, Landlord shall have the option to: (i)
repair or restore such damage, this Lease continuing in full force and effect;
or (ii) give notice to Tenant at any time within sixty (60) days after such
damage, terminating this Lease as of the date specified in such notice, which
date shall be no less than thirty (30) days and no more than sixty (60) days
after the giving of such notice. In the event Landlord gives notice of its
election to terminate this Lease, as is provided for in this Section 10.2, the
Lease shall terminate, and all interest of the Tenant in the Premises shall
terminate on the date so specified in such notice and the Rent shall be paid up
to date of termination.
10.3 REPAIR COSTS EXCEEDING INSURANCE COVERAGE. If the cost of the
restoration of the Premises or the Building exceeds the amount of proceeds
received from insurance, Landlord may elect to terminate this Lease by giving
notice to Tenant within thirty (30) days after determining that the restoration
cost will exceed the insurance proceeds. If Landlord elects to terminate this
Lease and Tenant does not elect to contribute toward the cost of restoration as
provided in this Section 10.3, this Lease shall terminate, and all interest of
the Tenant in the Premises shall terminate on the date so specified in such
notice and the Rent shall be paid up to date of termination. If the destruction
was caused by an act or omission of Tenant, or its agents or employees, Tenant
shall immediately pay Landlord, upon Landlord's demand, the difference between
the actual cost of restoration and any insurance proceeds received by Landlord.
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10.4 REPAIRS THAT CANNOT BE COMPLETED WITHIN ONE HUNDRED EIGHTY DAYS.
Within sixty (60) days after the date of Tenant's notice to Landlord of such
damage or destruction ("Damage Notice Date"), Landlord shall give Tenant notice
of Landlord's good faith determination of whether or not the damage or
destruction can be repaired under applicable laws, within one hundred eighty
(180) days after the Damage Notice Date. In the event Landlord determines that
such repairs to the Building and/or the Premises and/or the Common Areas cannot,
in Landlord's good faith judgment, be substantially completed under applicable
laws within one hundred and eighty (180) days after the Damage Notice Date, then
Landlord shall notify Tenant of such determination. In such notice Landlord
shall either agree to undertake such repairs (in which event the notice shall
include Landlord's estimate of the time required to complete the same) or elect
to terminate this Lease. If Landlord agrees to undertake the repairs, but
states that the required repairs will not be substantially completed within one
hundred and eighty (180) days of the Damage Notice Date, Tenant shall have an
option, exercisable by written notice thereof delivered to Landlord not later
than the thirtieth (30th) day after Landlord's delivery of Landlord's notice
that the repairs will not be completed within such one hundred and eighty (180)
day period, to terminate this Lease. If neither Landlord nor Tenant exercise a
right of termination following Landlord's determination that the repairs will
take more than one hundred and eighty (180) days, then Landlord shall diligently
undertake to repair such damage or destruction.
10.5 ABATEMENT OF RENT. In the event of reconstruction of the Premises
under this Article 10, the Rent otherwise payable under this Lease shall be
abated proportionately with the degree to which Tenant's use of the Premises is
impaired. Such abatement shall commence on the date of such damage or
destruction and continue during the period while Landlord is completing the
repairs required of it under this Article 10. Tenant shall continue to operate
its business on the Premises during any such abatement period to the extent
reasonably practicable from the standpoint of prudent business management.
Tenant shall not be entitled to any compensation or damages from Landlord for
loss of the use of the whole or any part of the Premises, Building or Tenant's
personal property, or for any inconvenience or annoyance suffered by reason of
damage or destruction thereto, or the reconstruction or replacement thereof.
10.6 RESTRICTIONS ON RESTORATION. If the existing laws do not permit the
restoration of the Premises to substantially the condition existing at the time
of such damage or destruction, either party may terminate this Lease immediately
following receipt of notice that restoration is forbidden, by giving written
notice to the other party.
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10.7 DESTRUCTION WITHIN LAST YEAR OF TERM. Notwithstanding anything to the
contrary contained in this Article, Landlord shall have no obligation whatsoever
to repair, reconstruct or restore any portion of the Premises or any portion of
the Building the damage occurs during the last twelve (12) months of the Term or
any extension thereof. In the event Landlord elects not to repair, reconstruct
or restore the Premises during the last twelve (12) months of the Term, or any
extension thereof, Landlord shall give Tenant written notice of Landlord's
election to terminate the Lease within thirty (30) days after the date of
occurrence of such damage.
10.8 DESTRUCTION OF TENANT'S PERSONAL PROPERTY, TENANT IMPROVEMENTS OR
PROPERTY OF TENANT'S EMPLOYEES. It is hereby expressly agreed that Landlord
will not be obligated to carry insurance of any kind on Tenant's furniture,
furnishings, fixtures, equipment or other personal property (collectively
"Personal Property") and in the event of damage or destruction to the Premises
or the Building, under no circumstances shall Landlord be required to repair any
injury or damage by fire or other cause, or to make any repairs to, or
replacements of, Tenant's Personal Property. However, as a part of Direct
Expenses, Landlord shall cause to be insured the Tenant Improvements and
Alterations which do not constitute Tenant's Personal Property and shall cause
such Tenant Improvements and Alterations to be repaired and restored at
Landlord's sole cost and expense except that Tenant shall pay for such portion
which is covered by the deductible. Landlord shall have no responsibility for
any contents placed or kept in or on the Premises or the Building by Tenant or
Tenant's emploYees.
10.9 EXCLUSIVE REMEDIES. Notwithstanding any destruction or damage to the
Premises, the Building, and/or the Common Areas, Tenant shall not be released
from any of its obligations under this Lease, except to the extent and upon the
conditions expressly stated in this Article 10. Tenant hereby expressly waives
the provisions of California Civil Code Sections 1932(2) and 1933(4) with
respect to any damage or destruction to the Building and/or the Premises and
agrees that its rights shall be exclusively governed by the provisions of this
Article 10.
10.10 TERMINATION - ADVANCE PAYMENTS AND INSURANCE PROCEEDS. Upon
termination of this Lease pursuant to this Article 10, an equitable adjustment
shall be made concerning advance Rent and any advance payments made by Tenant to
Landlord. Landlord shall, in addition, return to Tenant so much of Tenant's
Security Deposit as has not been applied by Landlord, as provided for under the
terms of this Lease. In the event of termination of this Lease, all proceeds
from Tenant's fire and extended coverage insurance under Section 12.1.2 covering
the Tenant's Personal Property shall be paid to Tenant.
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10.11 TERMINATION. Upon any termination of this Lease under any of the
provisions of this Article, the parties shall be released thereby, without
further obligation to the other, from the date possession of the Premises is
surrendered to the Landlord, except for items which have theretofore accrued and
are then unpaid, and those obligations, if any, which by the terms of this
Lease, survive such termination.
ARTICLE 11 - CONDEMNATION
11.1 DEFINITIONS. (i) "Condemnation" or "Taking" means (a) the exercise of
any governmental power, whether by legal proceedings or otherwise, by a
condemnor, and (b) a voluntary sale or transfer by Landlord to any condemnor,
either under the threat of condemnation or while legal proceedings for
condemnation are pending; (ii) "Date of Taking" means the date the Condemnor has
the right to the possession of the property being condemned; (iii) "Award" means
all compensation, sums or anything of value awarded, paid or received on a total
or partial Condemnation; and (iv) "Condemnor" means any public or quasi-public
authority, or private corporation or individual, having the power of
condemnation.
11.2 PARTIES' RIGHTS AND OBLIGATIONS TO BE GOVERNED BY LEASE. If, during
the period between the execution of this Lease and Commencement Date, there is
any Taking of all or any part of the Building or Common Areas, or any interest
in this Lease by Condemnation, the rights and obligations of the parties shall
be determined pursuant to this Article.
11.3 TOTAL TAKING. If the Premises are totally taken by Condemnation
during the Term, the Lease shall terminate on the Date of Taking.
11.4 PARTIAL TAKING.
11.4.1 PARTIAL TAKING OF PREMISES. If any portion of the Premises
is taken by Condemnation, this Lease shall remain in effect, except that
Landlord or Tenant may elect to terminate this Lease if twenty-five percent
(25%) or more of the total number of square feet of the floor area in the
Premises is taken, and the remainder of the Premises is rendered economically
unusable by Tenant. If either party elects to terminate this Lease, that party
must exercise its right to terminate pursuant to this Section by giving notice
to the other party within thirty (30) days after the nature and the extent of
the Taking have been fully determined. If either party elects to terminate this
Lease, they shall notify the other party of the date of termination, which date
shall not be earlier than thirty (30) days nor later than ninety (90) days after
the other party has been notified of the terminating party's election to
terminate; except that this Lease shall terminate on the Date of Taking if
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the Date of Taking falls on a date before the date of termination as designated
by the terminating party. If neither party terminates this Lease within the
thirty (30) day period, this Lease shall continue in full force and effect,
except that Rent shall be reduced as provided below. Furthermore, at Landlord's
cost and expense, and as soon as reasonably possible, Landlord will restore the
remaining portion of the Premises to a complete unit of like quality and
character as existed prior to such Taking.
11.4.2 PARTIAL TAKING OF BUILDING. If more than twenty percent (20%)
of the floor area of the Building in which the Premises is located is taken,
Landlord may terminate this Lease, at Landlord's option, as of the date the
condemning authority takes title or possession by delivering written notice to
Tenant within thirty (30) days after receipt of written notice of such Taking
(or in the absence of such notice, within thirty (30) days after the Condemnor
takes possession).
11.4.3 PARTIAL TAKING OF COMMON AREAS. If any portion of the Common
Areas is taken by Condemnation, this Lease shall remain in full force and effect
so long as there is no material interference with access to the Premises and/or
Tenant's parking facilities. If such a Taking materially interferes with access
to the premises and/or Tenant's rights to parking within the parking facilities
within the Project, and comparable substitute parking is not made available to
Tenant, then either party shall have the election to terminate this Lease
pursuant to this Article 11. For purposes of this Section 11.4.3, such a
partial Taking of the Common Areas shall be deemed to materially interfere with
access to the Premises and/or Tenant's rights to parking within the parking
facilities within the project only if twenty five percent (25%) or more of the
Common Areas is taken and comparable substitute parking or access to the
Premises is not made available to Tenant.
11.4.4 EFFECT ON RENT. If any portion of the Premises is taken by
Condemnation and this Lease remains in full force and effect, on the Date of
Taking, the Minimum Monthly Rent shall be reduced by an amount which is in the
same ratio to Minimum Monthly Rent as the total number of square feet in the
Premises taken bears to the total number of square feet in the Premises
immediately before the Date of Taking.
11.5 RESTORATION. If there is a partial Taking of the Premises and
this Lease shall remain in full force and effect pursuant to this Article 11,
Landlord, at its cost, shall accomplish all necessary restoration so that the
Premises are returned as near as practical to their condition immediately prior
to the Date of Taking.
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11.6 CONDEMNATION AWARD - DISTRIBUTION. Any Awards paid on account of
any Condemnation or Taking of the Building or the Common Area, or any portion or
portions thereof, shall belong to and shall be the sole property of Landlord,
except that Tenant shall be entitled to receive any Award or portion thereof
attributable to the taking of personal property, good will, relocation expenses
and/or interests in other than the real properly taken, provided the same does
not in any way diminish the Award to Landlord.
11.7 EFFECT OF TERMINATION. In the event this Lease is cancelled or
terminated pursuant to any of the provisions of this Article 11, all Rent and
other charges payable on the part of Tenant to Landlord hereunder shall be paid
either as of the date upon which actual physical possession shall be taken by
the Condemnor, or as of the date upon which Tenant ceases doing business in,
upon or from the Premises, whichever last occurs; and the parties shall
thereupon be released from all further liability hereunder, except that Landlord
shall make an equitable refund to Tenant of any unearned, unused or
unappropriated advance Rent or Security Deposit theretofore paid by Tenant to
Landlord and except for items which have heretofore accrued and are then unpaid,
and those obligations, if any, which by the terms of this Lease, survive such
termination.
11.8 RIGHT TO TERMINATE THIS LEASE FOR TAKING. Neither party shall
have the right to terminate this Lease in the event of a partial Taking of the
Premises, other than as is specifically provided for in this Article 11. Both
parties agree that the provisions of this Article 11 shall govern the rights and
obligations of the parties in the event of any condemnation of the Premises or
the Building, and specifically waive the provisions of California Code of Civil
Procedure Section 1265.130 (and any successor provision).
ARTICLE 12 - INSURANCE
12.1 INSURANCE MAINTAINED AND PAID BY TENANT. Tenant covenants and agrees
that from and after the date of delivery of the Premises from Landlord to
Tenant, Tenant will carry and maintain, at its sole cost and expense, in the
amounts specified and in the form hereinafter provided for, each of the
following types of insurance:
12.1.1 LIABILITY INSURANCE. A Commercial General Liability insurance
policy (with coverage which shall be as least as broad as the most recent
edition of Insurance Services Office Commercial General Liability coverage
["Occurrence form CG 0001] or Insurance Services Office form number GL 0002
covering Comprehensive General Liability and Insurance Offices Form number GL
0404 covering Broad Form Comprehensive General Liability) with a combined single
limit of not less than Two Million Dollars
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($2,000,000) insuring Tenant on an occurrence basis against all liability of
Tenant and Landlord and their authorized representatives, agents and employees
arising out of and in connection with Tenant's use or occupancy of the Premises.
All such bodily injury liability insurance and property damage liability
insurance shall specifically insure the performance by Tenant of the indemnity
agreement as to liability for injury to or death of persons and injury or damage
to property contained in Section 7.1 of this Lease; however, the limits of said
insurance shall not limit the liability of Tenant hereunder. Not more
frequently than each two (2) years, if, in the opinion of Landlord's lender or
of the insurance broker retained by Landlord, the amount of Commercial General
Liability insurance coverage at that time is not adequate, Tenant shall increase
the insurance coverage as required by either Landlord's lender or Landlord's
insurance broker.
12.1.2 TENANT'S PROPERTY INSURANCE. "All Risk" insurance covering
Tenant's personal property, fixtures and equipment from time to time in, on or
upon the Premises, in an amount not less than one hundred percent (100%) of
their full replacement cost from time to time during the Term, together with
insurance against sprinkler damage. Any policy proceeds shall be used for the
repair or replacement of the property damaged or destroyed unless this Lease
shall cease and terminate under the provisions of Article 10.
12.1.3 WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY INSURANCE.
Workers' Compensation Insurance in such amounts as required by applicable
California law and Employer's Liability insurance with limits of One Million
Dollars ($1,000,000.00) per accident.
12.1.4 BUSINESS INTERRUPTION/EXTRA EXPENSE INSURANCE. Loss of income,
business interruption and extra expense insurance in such amounts as will
reimburse Tenant for direct and indirect loss of earnings and incurred costs
attributable to the perils commonly covered by Tenant's property insurance
described above for a period of not less than one (1) year. Such insurance
shall be carried with the same insurer that issues the insurance for the
personal property.
12.1.5 POLICY FORM. All policies of insurance required to be
maintained by Tenant under the terms of this Section 12.1 shall be issued by
insurance companies, with general policyholder's rating of not less than A and a
financial rating of VII rated in the most current available "Best's" Insurance
Reports, and admitted to do business in the State of California, and shall (with
the exception of Workers' Compensation Insurance) name Landlord, its officers,
employees, partners and agents and such other parties (including lenders) as
Landlord may reasonably require as additional insured, which policies shall be
for the
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mutual and joint benefit and protection of Landlord, Tenant and such other
parties designated by Landlord. Any deductibles or self-insured retentions must
be declared to and approved by Landlord. If Landlord disapproves of the amount
of any such deductible or self-insured retention, Landlord may either (i)
require Tenant's insurer to reduce or eliminate such deductibles or self-insured
retentions with respect to Landlord, its officers, employees, partners and
agents or (ii) require Tenant to procure a bond guaranteeing payment of losses
and related investigations, claim administration and defense expenses to the
extent of any such deductible or self-insured retention. Copies of such
policies of insurance or certificates thereof together with original
endorsements showing the coverage required herein shall be delivered to Landlord
prior to the delivery of possession of the Premises to Tenant and thereafter
prior to the expiration of the term of each such policy. All liability policies
shall contain a provision that Landlord, although named an additional insured,
shall nevertheless be entitled to recover under said policies for any loss
occasioned to it, its servants, agents and employees by reason of the negligence
of Tenant. As often as any such policy shall expire or terminate renewal or
additional policies shall be procured and maintained by Tenant in like manner
and to like extent. All policies of insurance delivered to Landlord must
contain a provision that the company writing said policy will give Landlord
thirty (30) days notice in writing (by certified mail, return receipt requested)
in advance of any cancellation or lapse or the effective date of any reduction
in the amounts of insurance. All liability policies to be maintained by Tenant
shall be written as primary policies, not contributing with and in excess of
coverage which Landlord may carry. In addition, such policies shall include a
waiver by the insurer of any right of subrogation against Landlord, its agents,
employees and representatives, which arises or might arise by reason of any
payment under such policy or by reason of any act or omission of Landlord, its
agents, employees or representatives. No later than ten (10) days prior to the
Commencement Date, Tenant shall deliver to Landlord, copies of all policies or
certificates (together with any required endorsements) evidencing the existence
of the amounts and forms of coverage satisfactory to Landlord.
12.1.6 BLANKET POLICIES. Notwithstanding anything to the contrary
contained within this Section, Tenant's obligations to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy or policies of property insurance carried and maintained by Tenant,
provided, however, that Landlord, its officers, employees, partners and agents,
and Landlord's mortgagee(s) or beneficiary(ies) shall be named as an additional
insured thereunder as their interest may appear, and that the coverage afforded
Landlord and Landlord's mortgagee(s) or beneficiary(ies) will not be reduced or
diminished by reason of the use of such blanket policy of
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insurance, and provided further that the requirements set forth herein are
otherwise satisfied. Tenant agrees to permit Landlord at all reasonable times
to inspect the policies of insurance of Tenant covering risks upon the Premises
for which policies or copies thereof are not delivered to Landlord.
12.1.7 TENANT'S FAILURE TO PROCURE INSURANCE. Tenant agrees that if
Tenant does not carry and maintain any such insurance required to be carried
pursuant to this Lease, Landlord may (but shall not be required to) procure such
insurance on Tenant's behalf and charge Tenant the premiums, together with a ten
percent (10%) handling charge, payable upon demand as Additional Rent.
12.2 INSURANCE MAINTAINED BY LANDLORD AND PAID BY BUILDING TENANTS.
12.2.1 LIABILITY INSURANCE. Landlord shall obtain and keep in force
during the Term, a policy of combined single limit bodily injury and broad form
property damage insurance, plus coverage against such other risks Landlord deems
advisable from time to time, insuring Landlord, but not Tenant, against
liability arising out of the ownership, use, occupancy or maintenance of the
Building or the Project, if any, in an amount not less than Two Million Dollars
($2,000,000) per occurrence.
12.2.2 PROPERTY INSURANCE. Landlord shall obtain and keep in force,
during the Term, a policy or policies of property insurance covering loss or
damage to the Building, the Project, the Tenant Improvements and the Alterations
but not Tenant's Personal Property, in an amount determined by Landlord or as
required by Landlord's lenders. Such policy or policies of insurance shall
provide protection against any and all perils generally included in the "All
Risk" classification with earthquake coverage insurance, if required by the
first mortgagee, deed of trust trustee or deed of trust beneficiary of Landlord,
or by any federal, state, county, city or local authority, together with
insurance against sprinkler damage, vandalism, malicious mischief, plate glass,
and such other perils as Landlord deems advisable or may be required by a lender
having a lien on the Building or the Project, if any. In addition, Landlord
shall obtain and keep in force, during the Term, a policy of loss of rents
insurance, covering Tenant's tenancy, providing for insurance proceeds for a
period of one (1) year of Tenant's tenancy, with loss payable to Landlord, which
insurance shall also cover all Direct Expenses for said period. Tenant shall
not be named in any such policies carried by Landlord and shall have no right to
any proceeds therefrom.
12.2.3 COSTS/DEDUCTIBLES. The policies required by Sections 12.2.1
and 12.2.2 shall contain such deductibles as Landlord or Landlord's lenders may
determine. The cost of all
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such policies shall be chargeable to Tenant as a Building Cost. In the event
that the Premises shall suffer an insured loss, as defined in Article 10, the
deductible amounts under the applicable insurance policies shall also be deemed
Building Costs. Tenant shall not do or permit to be done anything which shall
invalidate the insurance policies carried by Landlord. Tenant shall pay the
entirety of any increase in the property insurance premium for the Building or
the Project, if any, over what it was immediately prior to the Commencement
Date, if the increase is specified by Landlord's insurance carrier as being
caused by the nature of Tenant's occupancy or any act or omission of Tenant.
Landlord's obligation to carry the insurance provided for herein may be brought
within the coverage of any so-called blanket policy or policies of property
insurance carried and maintained by Landlord, provided that the coverage
afforded will not be reduced or diminished by reason of the use of such blanket
policy of property insurance.
12.3 WAIVER OF SUBROGATION. Tenant and Landlord (for themselves and their
insurers) each hereby releases and relieves the other, and waives its right of
recovery against the other, and against the officers, partners, employees,
agents and representatives of the other, and against other tenants of the
Building (provided such parties and other tenants have waived such rights
against Landlord and Tenant), for direct or consequential loss or damage arising
out of or incident to the perils covered by property insurance carried by such
party, whether due to the negligence of Landlord or Tenant, or their agents,
employees, contractors and/or invitees, to the extent of such insurance
coverage. If necessary, all property insurance policies required under this
Lease shall be endorsed to contain this waiver of subrogation provision.
12.4 NO REPRESENTATIONS OF ADEQUATE COVERAGE. Landlord makes no
representation that the limits or forms of coverage of insurance specified in
this Article 12 are adequate to cover Tenant's property or obligations under
this Lease.
ARTICLE 13 - LANDLORD'S ENTRY ON PREMISES
13.1 ENTRY BY LANDLORD. Landlord and its authorized representatives shall
have the right to enter the Premises at all reasonable times for any of the
following purposes: (i) to determine whether the Premises are in good condition
and whether Tenant is complying with its obligations under this Lease; (ii) in
case of emergency or to do any necessary maintenance, restoration, repairs or
improvements to the Premises, the Building, Common Areas, the Project, or other
leasehold premises in the Building that Landlord has the right or obligation to
perform; (iii) to serve, post or keep posted any notices required or allowed
under the provisions of this Lease; (iv) to post "for rent" or "for lease" signs
during the last four (4) months of the
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Term, or during any period while Tenant is in default; (v) with prior reasonable
notice to Tenant, to show the Premises to prospective brokers, agents, buyers,
tenants or persons interested in an exchange, mortgagees, workmen or
contractors, at any time during the Term; (vi) to shore the foundations,
footings and walls of the Premises or the Building in which the Premises are
located and to erect scaffolding and protective barricades around and about the
Premises, but not so as to prevent entry to the Premises, and to do any other
act or thing necessary for the safety or preservation of the Premises or the
Building and other improvements in which the Premises are located; and (vii) to
remodel the Building. *See Addendum
13.1.1 Landlord shall have the right to use any and all means which
Landlord may deem proper to open said doors in an emergency, in order to obtain
entry to the Premises, without liability to Tenant. Any entry to the Premises
obtained by Landlord by any of said means, or otherwise, shall not, under any
circumstances, be construed or deemed to be a forcible or unlawful entry to, or
a detainer of, the Premises, or an eviction of Tenant from the Premises or any
portion thereof. Landlord shall conduct its activities on the Premises as
allowed in this Section in a manner that will cause the least possible
inconvenience, annoyance or disturbance to Tenant. Except in cases of
emergency, when the Tenant has abandoned or surrendered the Premises, or if it
is impracticable to do so, the Landlord shall give the Tenant reasonable notice
and enter only during normal business hours. Tenant hereby grants to Landlord
such licenses or easements in and over the Premises or any portion thereof as
shall be reasonably required for the installation or maintenance of mains,
conduits, pipes or other facilities to serve the Building or any part thereof,
including, but not by way of limitation, the Premises of any occupant; provided,
however, that Landlord shall pay for any alteration required on the Premises as
a result of any such exercise, occupancy under, or enjoyment of any such license
or easement. *See Addendum
13.2 NO ABATEMENT OF RENT. Except as specifically provided in Section 4.7
above, Landlord shall not be liable in any manner for any inconvenience,
disturbance, loss of business, nuisance or other damage arising out of
Landlord's entry on the Premises as provided in this Section, except damage
resulting from the negligence or willful misconduct of Landlord or its
authorized representatives, but only to the extent such damage is not covered by
insurance required to be carried by Tenant pursuant to this Lease. Tenant shall
not be entitled to an abatement or reduction of Rent if Landlord exercises any
rights reserved in this Section, so long as such activity does not unreasonably
interfere with the operation of Tenant's business in the Premises.
ARTICLE 14 - RULES AND REGULATIONS
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Tenant shall faithfully observe and comply with the "Rules and
Regulations," attached hereto as EXHIBIT E and all reasonable and
nondiscriminatory modifications and additions thereto. However, Landlord shall
not be responsible to Tenant for the violation or nonperformance by any other
tenant or occupant of the Building of any of the Rules and Regulations, but
shall use commercially reasonable efforts to enforce the Rules and Regulations
in a nondiscriminatory manner. The Rules and Regulations are in addition to,
and shall not be construed to in any way modify or amend, in whole or in part,
the terms, covenants, agreements and conditions of this Lease. Tenant shall be
responsible for the observance of all of the Rules and Regulations by Tenant's
employees, agents, clients, customers, invitees and guests.
ARTICLE 15 - RESTRICTIONS ON TRANSFER
15.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not, voluntarily or
involuntarily, because of death, divorce, disability, or by operation of law or
otherwise, assign, pledge, hypothecate or encumber its interest in this Lease or
the Premises or sublease all or any portion of the Premises, or allow any other
person or entity to occupy or use all or any part of the Premises (collectively
"Transfer"), without first obtaining Landlord's prior written consent. Any
Transfer without such consent, shall be void and, at the option of Landlord,
shall terminate this Lease. Any consent to any Transfer which may be given by
Landlord shall not constitute a waiver by Landlord of the provisions of this
Article 15 or a release of Tenant from the full performance by it of the
covenants herein contained. If Tenant is a partnership, a transfer of any
interest of a general partner, a withdrawal of any general partner from the
partnership, or the merger or dissolution of the partnership, shall be deemed to
be a Transfer. If Tenant is a corporation, unless Tenant is a public
corporation whose stock is regularly traded on a national stock exchange, or is
regularly traded in the over-the-counter market and quoted on NASDAQ, any
dissolution, merger, consolidation or other reorganization of Tenant or sale or
other transfer of a percentage of capital stock of Tenant which results in a
change of controlling persons, or the sale or other transfer of all or
substantially all of the assets of Tenant, shall be deemed to be a Transfer.
For purposes of this Article 15, the term "Transferee" includes without
limitation, assignees, subtenants, or any other party who acquires an interest
in the Premises or this Lease by way of pledge, hypothecation or encumbrance.
*See Addendum
15.2 TRANSFER NOTICE. Tenant shall give Landlord at least sixty (60) days
advance written notice ("Transfer Notice"), of its desire to proceed with a
Transfer and shall submit in writing to Landlord (i) the name of the proposed
transferee, (ii) in detail, the nature of the proposed transferee's business to
be
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carried on in the Premises, (iii) whether Tenant proposes to assign the Lease,
sublet the Premises or change ownership, (iv) the proposed effective date of the
Transfer, (v) all the material terms and conditions of the Transfer, (vi)
financial statements, income statements and balance sheets for the two (2) most
recent completed fiscal or calendar years of the proposed transferee, and (vii)
a bank reference. The Transfer Notice shall be accompanied by a copy of the
proposed agreement documenting the Transfer, or if none, a copy of any offers,
draft agreements, letters of commitment or intent, and other documents
pertaining to the proposed Transfer. Thereafter, Tenant shall furnish such
supplemental information as Landlord may reasonably request concerning the
proposed transferee.
15.3 LANDLORD'S ELECTION. At any time within fifteen (15) working days
after Landlord's receipt of the information specified above, Landlord may, by
written notice to Tenant, elect to (i) consent to the Transfer, or (ii)
reasonably disapprove of the Transfer, setting forth in writing Landlord's
grounds for doing so. Such grounds for disapproval may include, without
limitation, nonsuitability of the proposed use for the Premises and/or the
Building, violation of landlord's third-party agreements, including loan
documents and non-competition covenants of Landlord respecting radius,
locations, use or exclusivity in any other lease, financing agreement or other
agreement relating to the Building or Landlord's other buildings in the
immediate area, need for alteration of the Premises, an inappropriate use in
light of the Building's existing tenant mix, a material increase in the impact
upon the Common Areas or the parking facilities, a material increase in the
demands upon utilities and services, the proposed use of the Premises conflicts
with Tenant's use clause, a possible material adverse effect upon the reputation
of the Premises or the Building from the nature of the business to be conducted,
or a reputation for financial reliability on the part of the proposed transferee
which is unsatisfactory in the reasonable judgment of Landlord, that Tenant is
in default of its obligations under this Lease or that Landlord has not received
assurances acceptable to Landlord that all past due amounts owing from Tenant to
Landlord will be paid and all other defaults by Tenant will be cured prior to
the effective date of the proposed Transfer. If Landlord consents to the
Transfer within the fifteen (15) day period, Tenant may thereafter enter into
such Transfer agreement upon the terms and conditions and as of the effective
date set forth in the information furnished by Tenant to Landlord. If Landlord
consents to the Transfer and Tenant does not consummate the Transfer within
fifteen (15) days after receipt of Landlord's decision, the provisions of this
Article 15 shall once again apply. *See Addendum
15.4 ASSUMPTION OF LEASE OBLIGATIONS. Each permitted transferee, other
than Landlord, shall assume and be deemed to
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have assumed this Lease and shall be and remain liable jointly and severally
with Tenant for the payment of Rent and for the due performance or satisfaction
of all of the provisions, covenants, conditions and agreements herein contained
on Tenant's part to be performed or satisfied. No Transfer shall be binding on
Landlord unless such transferee or Tenant shall deliver to Landlord a
counterpart original of the instrument evidencing such Transfer which contains a
covenant of assumption by the transferee, but the failure or refusal of the
transferee to execute such instrument of assumption shall not release or
discharge the transferee or the Tenant from its liability as set forth herein.
Any permitted Transfer shall not, in any way, affect or limit the liability of
Tenant under the terms of this Lease, even if after such Transfer the terms of
this Lease are materially changed or altered without the consent of Tenant, the
consent of whom shall not be necessary.
15.5 ADDITIONAL PROVISIONS REGARDING TRANSFERS. Landlord may accept Rent
from any person other than Tenant, pending approval or disapproval of a
Transfer. Neither a delay in the approval or disapproval of such Transfer, nor
the acceptance of Rent, shall constitute a waiver or estoppel of Landlord's
right to exercise its remedies for the breach of any of the terms or conditions
of this Article 15 or this Lease. If Tenant's obligations under this Lease have
been guaranteed by third parties, then any Transfer, and Landlord's consent
thereto, shall not be effective unless said guarantors give their written
consent to such Transfer. Furthermore, Landlord may consent to subsequent
Transfers or any amendments or modifications thereto without notifying Tenant or
anyone else liable on the Lease, and without obtaining their consent, and such
action shall not release such persons from liability under this Lease; however,
such persons shall not be responsible to the extent any such amendment or
modification enlarges or increases the obligations of the Tenant or transferee
under this Lease. Upon the occurrence of any Event of Default under this Lease,
Landlord may proceed directly against Tenant, any guarantors or anyone else
responsible for the performance of this Lease, including the transferee, without
first exhausting Landlord's remedies against any other person or entity
responsible therefor to Landlord, or any security held by Landlord or Tenant.
Landlord's written consent to any Transfer by Tenant shall not constitute an
acknowledgment that no Event of Default then exists under this Lease, nor shall
such consent be deemed a waiver of any then existing Event of Default, except as
may be otherwise acknowledged by Landlord at that time. The discovery of the
fact that any financial statement relied upon by Landlord in giving its consent
to a Transfer was materially false shall, at Landlord's election, render
Landlord's consent null and void. Any sums or other economic consideration
received by Tenant as a result of a Transfer, however denominated, which exceed,
in the aggregate, (i) the total sums which Tenant is obligated to pay
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Landlord under this Lease (prorated to reflect obligations allocable to any
portion of the Premises subleased), plus (ii) the unamortized value of leasehold
improvements to the Premises paid for by Tenant, depreciated on a straight-line
basis over the Term, shall be paid to Landlord as Additional Rent under this
Lease without affecting or reducing any other obligations of Tenant hereunder.
In the event of any approved Transfer of this Lease in connection with the sale
of all or substantially all of the assets of Tenant used in connection with the
conduct of Tenant's business on the Premises, the amount of consideration
attributable to the Transfer of the Lease shall be reasonably determined by
Landlord.
15.5.1 Tenant shall only use such form of assignment as is provided by
landlord, and once the completed assignment form has been approved by Landlord,
such assignment shall not be changed or modified without Landlord's prior
written consent.
15.6 SPECIAL PROVISIONS REGARDING SUBLETTING. Regardless of Landlord's
consent, the following terms and conditions shall apply to any subletting by
Tenant 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:
15.6.1 Tenant immediately and irrevocably assigns to Landlord, as
security for Tenant's obligations under this Lease, all Rent from any subletting
of all or a part of the Premises as permitted by this Lease, and Landlord, as
assignee and as attorney-in-fact for Tenant, or a receiver for Tenant appointed
on Landlord's application, may collect such Rent and apply it toward Tenant's
obligations under this Lease; except that, until the occurrence of an Event of
Default by Tenant, Tenant shall have the right to collect such Rent. Tenant
hereby irrevocably authorizes and directs any such sublessee, upon receipt of
written notice from Landlord stating that an Event of Default exists, to pay to
Landlord the Rents due and to become due under the sublease. Tenant agrees that
such sublessee shall have the right to rely upon any such statement and request
from Landlord, and that such sublessee shall pay such Rents to Landlord without
any obligation or right to inquire as to whether such default exists, and
notwithstanding any notice from or claim from Tenant to the contrary. Tenant
shall have no right or claim against said sublessee or Landlord for any such
Rents so paid by said sublessee to Landlord.
15.6.2 Tenant shall use only such form of sublease as is provided by
Landlord, and once the completed sublease form has been approved by Landlord,
the sublease shall not be changed or modified without Landlord's prior written
consent.
15.6.3 Upon the occurrence of an Event of Default by Tenant under this
Lease, Landlord, at its option and without any
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obligation to do so, may require any sublessee to attorn to Landlord, in which
event Landlord shall undertake the obligations of Tenant under such sublease
from the time of the exercise of said option to the termination of such
sublease; provided, however, Landlord shall not be liable for any prepaid Rent
or Security Deposit paid by such sublessee to Tenant, or for any other prior
defaults of Tenant under such sublease.
15.6.4 With respect to any subletting to which Landlord has consented,
Landlord agrees to deliver a copy of any notice of default by Tenant to the
sublessee.
15.7 NO MERGER. No merger shall result from Tenant's sublease of the
Premises under this Article 15, Tenant's surrender of this Lease, or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord thereunder.
15.8 CONDITIONS DEEMED REASONABLE. Tenant acknowledges and agrees that
each of the rights of Landlord set forth in this Article 15 above in the event
of a proposed Transfer is a reasonable restriction on Transfer for purposes of
California Civil Code Section 1951.4.
15.9 TENANT'S REMEDY. *See Addendum
15.10 CONTINUING LIABILITY OF TENANT. If Tenant's transferee defaults
pursuant to this Lease, Landlord may proceed directly against Tenant without
pursuing remedies against the transferee. Tenant agrees to defend, indemnify
and hold Landlord harmless with respect to all costs (including reasonable
attorneys' fees expended by Landlord in connection therewith) and liability for
compensation claimed by any broker or agent in connection therewith any Transfer
of Tenant's interest pursuant to this Lease.
ARTICLE 16 - DEFAULT
16.1 COVENANTS AND CONDITIONS. Tenant's performance of each of Tenant's
obligations under this Lease is a condition as well as a covenant. Tenant's
right to continue in possession of the Premises is conditioned upon such
performance. Time is of the essence in the Performance of all covenants and
conditions.
16.2 DEFAULTS. The occurrence of any one or more of the following events
("Event of Default") shall constitute a default and breach of this Lease by
Tenant: (i) use of the Premises for any purpose other than the Permitted Use;
(ii) the failure by Tenant to make any payment of Minimum Monthly Rent,
Additional Rent, or any other payment required to be made by Tenant hereunder,
as and when due, where such failure shall continue for
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a period of * after written notice thereof from Landlord to Tenant; provided,
however, that any such notice shall be in lieu of, and not in addition to, any
notice required under California Code of Civil Procedure Section 1161; (iii)
Tenant's abandonment of the Premises as defined in California Civil Code Section
1951.3; (iv) transfer of the Lease by Tenant, either voluntarily or by operation
of law, whether by judgment, execution, death or other means, without the prior
written consent of Landlord; (v) either (a) the making by Tenant of any general
arrangement or general assignment for the benefit of creditors; (b) the filing
by or against Tenant of a petition to have Tenant adjudged a bankrupt or a
petition for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is dismissed
within thirty (30) days); (c) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the Premises or c
f Tenant's interest in this Lease, where possession is not restored to Tenant
within thirty (30) days; or (d) the attachment, execution or other judicial
seizure of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease where such seizure is not discharged within
thirty (30) days. In the event that any provisions of this subparagraph (v) is
contrary to any applicable law, such provision shall be of no force or effect;
(vi) the failure by Tenant to observe or perform any of the express or implied
covenants or provisions of this Lease to be observed or performed by Tenant,
where such failure shall continue for a period of * after written notice thereof
from Landlord to Tenant; provided, however, that any such notice shall be in
lieu of, and not in addition to, any notice required under California Code of
Civil Procedure Section 1161; provided, further, that if the nature of Tenant's
default is such that more than * are reasonably required for its cure, then
Tenant shall not be deemed to be in default if Tenant shall commence such cure
within said * day period and thereafter diligently prosecute such cure to
completion, which completion shall occur not later than thirty (30) days from
the date of such notice from Landlord; or (vii) the discovery by Landlord that
any financial statement given to Landlord by Tenant, or its successors in
interest, or by any guarantor of Tenant's obligation hereunder, was materially
false. *See Addendum
ARTICLE 17 - REMEDIES UPON DEFAULT
17.1 LANDLORD REMEDIES. Landlord shall have the following remedies upon
the occurrence of any Event of Default. These remedies are not exclusive; they
are cumulative in addition to any remedies now or later allowed by law. Upon
the occurrence of an Event of Default, Landlord may at any time thereafter, with
or without notice or demand (except for any notice required by Article 16 above)
and without limiting Landlord in the exercise
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of any right or remedy which Landlord may have by reason of such Event of
Default, do any of the following:
17.1.1 Continue this Lease in effect so long as Landlord does not
terminate Tenant's right to possession and Landlord may enforce all of its
rights and remedies hereunder, including, at the option of Landlord: (i) the
right to declare the Term ended and with process of law to re-enter the Premises
and take possession thereof and remove all persons therefrom, and Tenant shall
have no further claim thereon or thereunder; or (ii) the right, without
declaring this Lease ended and with or without process of law, to re-enter the
Premises, take possession thereof, remove all persons therefrom and occupy or
lease the whole or any part thereof for and on account of Tenant and upon such
terms and conditions and for such Rent as Landlord may deem proper and to
collect said Rent or any other Rent that may thereafter become payable and apply
the same toward the amount due or thereafter to become due from Tenant and on
account of such expenses of such subletting and any other damages sustained by
Landlord; and should such Rent be less than that herein agreed to be paid by
Tenant, Tenant agrees to pay such deficiency to Landlord in advance on the day
of each month hereinabove specified for payment of Rent and to pay to Landlord
forthwith upon such reletting the costs and expenses Landlord may incur by
reason thereof; or (iii) the right, even though it may have relet said Premises
or brought an action to collect Rent and other charges without terminating this
Lease, to thereafter elect to terminate this Lease and all of the rights of
Tenant in or to the Premises; or (iv) the right, without terminating this Lease,
to bring an action or actions to collect Rent and other charges hereunder which
are from time to time past due and unpaid; it being understood that the bringing
of such an action or actions shall not terminate this Lease unless notice of
termination is given.
17.1.2 Should Landlord relet the Premises under the provisions of
paragraph 17.1.1.(ii) above, it may execute any such Lease in its own name or in
the name of Tenant, but Tenant hereunder shall have no right or authority
whatever to collect any Rent from such tenant. The proceeds of any such
reletting shall be first applied to the payment of the costs and expenses of
reletting the Premises, including alterations and repairs which Landlord, in its
sole discretion, deems reasonably necessary and advisable and reasonable
attorneys' fees incurred by Landlord in connection with the retaking of said
Premises and such reletting and, second, to the payment of any indebtedness,
other than Rent, due hereunder, including, without limitation, storage charges
or brokerage commissions owing from Tenant to Landlord. When such costs and
expenses of reletting have been paid, Tenant shall be entitled to a credit for
the net amount of Rent received from such reletting each month during such
unexpired balance of the Term and Tenant shall pay Landlord such
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sums as may be required to make up the Rent provided for in this Lease.
Landlord shall not be deemed to have terminated this Lease, the Tenant's right
to possession of the leasehold or the liability of Tenant to pay Rent thereafter
to accrue or its liability for damages under any of the provisions hereof by any
such reentry or by any action in unlawful detainer or otherwise to obtain
possession of the Premises, unless Landlord shall have notified Tenant in
writing that it has so elected to terminate this Lease. Tenant covenants that
the service by Landlord of any notice pursuant to the unlawful detainer statutes
of the State of California and the surrender of possession pursuant to such
notice shall not (unless Landlord elects to the contrary at the time of or at
any time subsequent to the service of such notice and such election be evidenced
by a written notice to Tenant) be deemed to be a termination of this Lease or of
Tenant's right to possession thereof. Nothing herein contained shall be
construed as obligating Landlord to relet the whole or any part of the Premises.
17.1.3 Landlord can terminate Tenant's right to possession of the
Premises at any time. Acts of maintenance, efforts to relet the Premises, or
the appointment of a receiver on Landlord's initiative to protect Landlord's
interest under this Lease shall not constitute a termination of Tenant's right
to possession. On termination, Landlord has the right to recover from Tenant:
(i) the worth, at the time of the award, of the unpaid Rent that had been earned
at the time of termination of this Lease; (ii) the worth, at the time of the
award, of the amount by which the unpaid Rent that would have been earned after
the date of termination of this Lease until the time of award exceeds the amount
of the loss of Rent that Tenant proves could have been reasonably avoided; (iii)
the worth, at the time of the award, of the amount by which the unpaid Rent for
the balance of the Term after the time of award exceeds the amount of the loss
of Rent that Tenant proves could have been reasonably avoided; and (iv) any
other amount, including court costs and attorney's fees, necessary to compensate
Landlord for all detriment proximately caused by Tenant's default or defaults,
or which in the ordinary course of things would be likely to result therefrom,
including, but not limited to, any costs or expenses incurred by Landlord in (a)
retaking possession of the Premises, including reasonable attorneys' fees
therefore, (b) maintaining or preserving the Premises after such default, (c)
preparing the Premises for reletting to a new tenant, including repairs or
alterations to the Premises for such reletting, (d) leasing commissions, or (e)
any other costs necessary or appropriate to relet the Premises.
"The worth, at the time of award," as used in (i) and (ii) of this
Section, is to be computed by allowing interest at the maximum legal rate. "The
worth, at the time of the award," as referred to in (iii) of this Section, is to
be computed by
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discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award, plus 1%.
17.1.4 Whenever Landlord shall re-enter the Premises as provided in
this Article, Landlord may remove any property of Tenant from the Premises and
store same elsewhere at the expense and for the account of Tenant, and if Tenant
shall fail to pay the cost of storing of such property after it has been stored
for a period of ninety (90) days or more, Landlord may sell any or all of such
property, in any lawful manner. In addition, upon the occurrence of an Event of
Default, all of Tenant's fixtures, furniture, equipment, improvements,
additions, alterations and other personal property shall remain on the Premises,
and in that event, and continuing during the length of said default, Landlord
shall have the right to take the exclusive possession of said and to use same,
Rent or charge free, until all defaults are cured or, at its option, at any time
during the Term, to require Tenant to forthwith remove same.
17.1.5 Upon the occurrence of an Event of Default, Landlord shall have
the right to have a receiver appointed to collect Rent and conduct Tenant's
business. Tenant also hereby agrees that Landlord shall have a lien for payment
for all Rent and Additional Rent called for under the terms of this Lease upon
all the furniture, furnishings, fixtures, supplies and all other personal
property of Tenant which may be in or upon the Premises, Tenant hereby
specifically waiving any and all exemptions allowed by law. Such lien may be
enforced in any lawful manner, at the option of Landlord. Neither the filing of
a petition for the appointment of a receiver nor the appointment itself shall
constitute an election by Landlord to terminate this Lease.
17.1.6 Landlord, at any time after the occurrence of an Event of
Default, can cure the default at Tenant's cost. If Landlord at any time, by
reason of an Event of Default, pays any sum or does any act that requires the
payment of any sum, the sum paid by Landlord shall be due immediately from
Tenant to Landlord at the time the sum is paid, and if paid at a later date
shall bear interest at the Interest Rate from the date the sum is paid by
Landlord until Landlord is reimbursed by Tenant.
17.1.7 Nothing in this Article 17 affects the right of the Landlord
under this Lease to indemnification for liability arising prior to the
termination of the Lease for personal injuries or property damage, as set forth
under Article 7 hereof.
17.2 JURY TRIAL WAIVER. *See Addendum
ARTICLE 18 - PROTECTION OF LENDERS AND TRANSFEREES
18.1 SUBORDINATION. Landlord shall have the right to subordinate this
Lease, and Tenant shall, at Landlord's request,
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subordinate its rights under this Lease, to any existing or future ground lease,
covenants, conditions and restrictions, easements, rights of way or any
construction, operation and reciprocal easement agreements, deeds of trust or
mortgages encumbering the Premises, any advances made on the security thereof
and any renewals, modifications, consolidations, replacements or extensions
thereof, whenever made or recorded. However, Tenant's right to quiet possession
of the Premises during the Term shall not be disturbed if Tenant pays the Rent
and performs all of Tenant's obligations under this Lease and is not otherwise
in default. If any ground lessor, beneficiary or mortgagee elects to have this
Lease prior to the lien of its ground lease, deed of trust or mortgage, and
gives written notice thereof to Tenant, then this Lease shall be deemed prior to
such ground lease, deed of trust or mortgage, whether this Lease is dated prior
or subsequent to the date of said ground lease, deed of trust or mortgage or the
date of recording thereof. *See Addendum
18.2 ATTORNMENT. If Landlord's interest in the Premises is acquired by any
ground lessor, beneficiary under a deed of trust, mortgagee or purchaser at a
foreclosure sale, Tenant shall attorn to the transferee of or successor to
Landlord's interest in the Premises and recognize such transferee of or
successor as Landlord under this Lease, provided that the purchaser or lessor
shall acquire and accept the Premises subject to this Lease. Tenant waives the
protection of any statute or rule of law which gives or purports to give Tenant
any right to terminate this Lease or surrender possession of the Premises upon
the transfer of Landlord's interest.
18.3 SIGNING OF DOCUMENTS. Tenant shall sign and deliver any instrument or
documents necessary or appropriate to evidence any such attornment or
subordination or agreement to do so provided that such interests or documents
recognize that Tenant's right to quiet possession of the Premises shall not be
disturbed so long as Tenant is not in default of its obligations pursuant to
this Lease beyond any applicable notice and cure period. If Tenant fails to do
so within ten (10) days after written request, Tenant hereby makes, constitutes
and irrevocable appoints Landlord, or any transferee or successor of Landlord,
the attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
18.4 ESTOPPEL CERTIFICATES. Upon Landlord's written request, Tenant shall
execute, acknowledge and deliver to Landlord a written statement certifying: (i)
that none of the terms or provisions of this Lease have been changed (or if they
have been changed, stating how they have been changed); (ii) that this Lease has
not been cancelled or terminated; (iii) the last date of payment of the Minimum
Monthly Rent and other charges and the time period covered by such payment; (iv)
the amount of any
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Minimum Monthly Rent or other charges which have been paid in advance; (v) the
commencement and termination dates of the Term; (vi) that there has been no
Transfer by Tenant of this Lease, or any interest therein; and (vii) that there
are not, to Tenant's knowledge, any uncured defaults on the part of Landlord
hereunder and that Tenant has no right of offset, counterclaim or deduction
against Rent, or specifying such defaults, if any are claimed, together with the
amount of any offset, counterclaim or deduction alleged by Tenant. Tenant shall
deliver such statement to Landlord within ten (10) days after Landlord's written
request. Any such statement by Tenant may be given by Landlord to any
prospective purchaser or encumbrancer of the Premises. Such purchaser or
encumbrancer may rely conclusively upon such statement as true and correct.
If Tenant does not deliver such statement to Landlord within such ten (10)
day period, Landlord, and any prospective purchaser or encumbrancer, may
conclusively presume and rely upon the following facts: (i) that the terms and
provisions of this Lease have not been changed except as otherwise represented
by Landlord; (ii) that this Lease has not been cancelled or terminated except as
otherwise represented by Landlord; (iii) Landlord's statement of the last date
of payment of the Minimum Monthly Rent and other charges and the time period
covered by such payment or payments; (iv) that not more than one month's Minimum
Monthly Rent or other charges have been paid in advance; (v) the commencement
and termination dates of the Term are as represented by Landlord; (vi) that
there is no Transfer by Tenant of this Lease or any interest therein; and (vii)
that Landlord is not in default under the Lease. In such event, Tenant shall be
estopped from denying the truth of such facts.
18.5 TENANT'S FINANCIAL CONDITION. Within ten (10) days after written
request from Landlord, Tenant shall deliver to Landlord such financial
statements as are reasonably required by Landlord to verify the net worth of
Tenant, or any assignee, subtenant, or guarantor of Tenant. In addition, Tenant
shall deliver to any lender designated by Landlord any financial statements
required by such lender to facilitate the financing or refinancing of the
Premises. Tenant represents and warrants to Landlord that each such financial
statement is a true and accurate statement as of the date of such statement.
All financial statements shall be confidential and shall be used only for the
purposes set forth herein.
ARTICLE 19 - COMMON AREAS
19.1 COMMON AREAS. "Common Areas" shall mean all areas within and around
the Building, and the Project, if any, which are available for the common use of
tenants of the Building and which are not leased or held for the exclusive use
of Tenant or other tenants, including, but not limited to, parking areas,
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driveways, sidewalks, loading areas, access roads, corridors, landscaping and
planted areas, stairways, arcades, elevators, escalators, directory equipment,
restrooms, common entrances, lobbies, passageways and serviceways therefor, and
the common pipes, conduits, wires and appurtenant equipment serving the
Building. Landlord may from time to time change the size, location, nature and
use of any of the Common Areas, including, but not limited to, the relocation of
driveways, entrances, exits, automobile parking spaces, the direction and flow
of traffic, installation of Prohibited areas, landscaped areas, converting
Common Areas into leasable areas, constructing additional parking facilities
(including parking structures) in the Common Areas, and increasing or decreasing
Common Area land and/or facilities. Tenant acknowledges that such activities
may result in decreasing Common Area land and/or facilities, and that such
activities may result in occasional inconvenience to Tenant. Landlord shall be
responsible for keeping the Common Areas in a neat, clean and orderly condition,
properly lighted and landscaped, and shall repair any damage to Common Area
facilities. Notwithstanding Landlord's responsibility for such Common Area
maintenance, all expenses incurred in connection with the operation, repair,
cleaning and maintenance of the Common Areas shall be included in Direct
Expenses and charged and prorated in the manner set forth in Article 4 of this
Lease.
19.2 USE OF COMMON AREAS. Landlord or such other person(s) as Landlord may
appoint shall have the exclusive control and management of the Common Areas.
Tenant, and its employees and invites, shall have the nonexclusive right (in
common with other tenants and all others to whom Landlord has granted or may
grant such rights) to use the Common Areas for the purposes intended, subject to
such reasonable rules and regulations as Landlord may establish from time to
time. Tenant shall abide by such rules and regulations and shall use its best
efforts to cause others who use the Common Areas with Tenant's express or
implied permission to abide by Landlord's rules and regulations. Notice of such
rules and regulations will be posted or given to Tenant. Tenant shall pay for
any increase in the property insurance premiums for the Common Areas caused by
Tenant's acts, omissions, use or occupancy of the Premises. Tenant shall not,
at any time, interfere with the rights of Landlord, other tenants or any other
person entitled to use the Common Areas. Landlord shall not be responsible to
Tenant or Tenant's employees, agents or invites, for the noncompliance of other
tenants with Landlord's rules and regulations or the interference with the
rights of Tenant by other tenants, their agents, employees or invites. Landlord
reserves the right from time to time without unreasonable interference with
Tenant's use: (i) to install, use, maintain, repair and replace pipes, ducts,
conduits, wires and appurtenant meters and equipment for service to other parts
of the Building or Common Areas above the ceiling surfaces, below the floor
surfaces, within the walls and in the central core areas, and to
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relocate any pipes, ducts, conduits, wires and appurtenant meters and equipment
included in the Premises which are located in the Premises or located elsewhere
outside the Premises, and to expand the Building; 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 and
walkways; provided, however, Landlord shall at all times provide the parking
facilities required by applicable law. Landlord also reserves the right to
modify the lobbies, windows, stairways, air shafts, elevators and restrooms;
(ii) to close temporarily any of the Common Areas for maintenance purposes so
long as reasonable access to the Premises remains available; (iii) to designate
other land and improvements outside the boundaries of the Building or the
Project, if any, to be part of the Common Areas, provided that such other land
and improvements have a reasonable and functional relationship to the Building
or the Project; (iv) to use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Building, or any portion thereof;
and (v) to do and perform such other acts and make such other changes in, to or
with respect to the Common Areas and Building as Landlord may, in the exercise
of sound business judgment, deem to be appropriate.
19.3 VEHICLE PARKING. Tenant, its employees and concessionaires shall not
park in the areas which the Landlord may designate or redesignate as parking for
patrons of the Building. Landlord shall provide either within the Building
parking area or reasonably close thereto, space for employee parking, if such
parking space is available, as reasonably determined by Landlord. Landlord
shall have the right, but not the obligation, to designate parking areas for use
by Tenant's employees and concessionaires and such designation may be changed
from time to time. Tenant, its employees and concessionaires shall park their
cars only in such designated areas, if any are so designated. Said parking
spaces shall be used only for parking by vehicles no larger than normal size
passenger automobiles or pick-up trucks, or if so designated, for smaller
vehicles. There shall be no overnight parking in parking areas provided by
Landlord without Landlord's prior written consent. If Tenant permits or allows
any of the prohibited activities described in Section 19.3 of this Lease, then
Landlord 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 Tenant, which cost shall be immediately payable upon demand
by Landlord. Landlord reserves the right at any time to substitute an
equivalent number of parking spaces in a parking structure or subterranean
parking facility or in a surface parking area within a reasonable distance of
the Premises.
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19.3.1 If the parking facilities provide for automated card key
access, Landlord shall have the right to charge Tenant a security deposit in the
amount of $25.00 for each parking card key requested by Tenant. Landlord may
assign any unreserved and unassigned parking spaces and/or make all or a portion
of such spaces reserved, if it determines in its sole discretion that is
necessary for orderly and efficient parking. Tenant shall not use more parking
spaces than the number set forth in the Fundamental Lease Provisions. Tenant
shall not permit or allow any vehicles that belong to or are controlled by
Tenant or Tenant's employees, suppliers, shippers, customers or invites to be
loaded, unloaded or parked in areas other than those designated by Landlord for
such activities. Tenant agrees that Landlord assumes no responsibility of any
kind whatsoever in reference to said automobile parking facilities or the use
thereof by Tenant, its employees, agents or invites, or by anyone else.
Landlord may, at its sole discretion, determine whether parking facilities shall
be surface, underground, multideck, and where they shall be located. Landlord
may, at any time, and from time to time, limit access to the parking facilities
by means of attendants and/or other devices, and make other changes in the
layout and operation of the parking facilities, including, without limiting the
generality of the foregoing, changes in locations of entrances, exits and
parking spaces. No delay or failure by Landlord to enforce its parking rules
and regulations or its o her rights hereunder, and no waiver by Landlord of any
breach thereof, shall be deemed to be a waiver of any succeeding breach, or
prevent any subsequent or other enforcement thereof by T Landlord. *See
Addendum
ARTICLE 20 - PROFESSIONAL COSTS; CONSENTS
20.1 LEGAL COSTS. If either party incurs any costs or expenses in
connection with any action instituted by either party by reason of any dispute
pursuant to this Lease or for the recovery of any sum due under this Lease, or
because of the breach of any provisions of this Lease by either party, or for
any other relief pursuant to this Lease, or in the event of any other litigation
between the parties with respect to this Lease, then all costs and expenses,
including without limitation, its actual professional fees such as appraisers',
accountants, and attorneys' fees, incurred by the prevailing party therein shall
be paid by the other party, which obligation on the part of the other party
shall be deemed to have accrued on the date of the commencement of such action
or dispute and shall be enforceable whether or not the action is prosecuted to
judgment. The provisions contained in this Section 20.1 shall survive the
expiration or earlier termination of this Lease, and in the event any action or
proceeding is instituted to recover possession of the Premises following the
expiration or earlier termination of this Lease, the provisions contained in
this Section 20.1 shall be applicable. *See Addendum
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20.2 LANDLORD'S CONSENT. Tenant shall pay all attorneys' fees incurred by
Landlord in connection with Tenant's request for Landlord's consent under
Article 15 (Restrictions On Transfer), or in connection with any other act which
Tenant proposes to do and which requires Landlord's consent, whether or not such
consent i, granted. Tenant shall also reimburse Landlord for all costs,
including, without limitation, engineering and architect fees it incurs in
reviewing any remodeling, tenant improvement plans or other requests submitted
by Tenant, whether or not consent or approval is granted.
ARTICLE 21 - SIGNS
Tenant shall not place, erect or maintain any sign in or upon the Premises
which is visible from the exterior thereof or in or upon the Building or the
Project without Landlord's prior written consent and without compliance with the
provisions of Exhibit F.
ARTICLE 22 - LANDLORD'S BREACH - NOTICE
If Landlord fails to perform any covenant, condition or agreement
contained in this Lease within thirty (30) days after receipt of written notice
from Tenant specifying such failure (or if such failure cannot reasonably be
cured within 30 days, if Landlord does not commence to cure the failure within
that 30-day period), then such failure shall constitute a default hereunder and
Landlord shall be liable to Tenant for any damages sustained by Tenant as a
result of Landlord's default; provided, however, it is expressly understood and
agreed that if Tenant obtains a money judgment against Landlord resulting from
any default or other claim arising under this Lease, judgment shall be satisfied
only out of the rents, issues, profits and other income actually received on
account of Landlord's right, title and interest in the Premises or Building, and
no other real, personal or mixed property of Landlord (or of the officers,
shareholders, directors, partners or principals of Landlord, if any) wherever
situated, shall be subject to levy, attachment or execution, or otherwise used
to satisfy any such judgment. Tenant hereby waives any right to satisfy a
judgment against Landlord except from the rents, issues, profits and other
income actually received on account of Landlord's right, title and interest in
the Premises or Building. Tenant shall not have the right to terminate this
Lease or to withhold, reduce or offset any amount against any payments of Rent
or any other charges due and payable under this Lease, except as otherwise
specifically provided herein.
Tenant agrees to send, by certified or registered mail to any mortgagee or
deed of trust beneficiary of the Building whose address has been furnished to
Tenant, a copy of any notice of default served by Tenant on Landlord. If
Landlord fails to cure
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such default within the time provided for in this Lease, such mortgagee or
beneficiary shall have an additional thirty (30) days to cure such default;
provided that if such default cannot reasonably be cured within that thirty (30)
day period, then such mortgagee or beneficiary shall have such additional time
to cure the default as is reasonably necessary under the circumstances.
ARTICLE 23 - LATE CHARGES
Tenant's failure to pay Rent promptly may cause Landlord to incur
unanticipated costs, the exact amount of which are impractical or extremely
difficult to ascertain. Such costs may include, but are not limited to,
processing and accounting charges and late charges which may be imposed on
Landlord by any ground lease, mortgage or trust deed encumbering the property.
Therefore, if Landlord does not receive any Rent payment, Tenant shall pay
Landlord a late charge equal to the greater of One Hundred Dollars ($100), or
ten percent (10%) of the overdue amount. The parties agree that such late
charge represents a fair and reasonable estimate at the date of this Lease of
the administrative costs Landlord shall incur by reason of such late payment.
In addition, Tenant shall pay to Landlord, upon written notice thereof, all
costs incurred by Landlord for attorneys' fees in connection with the collection
of such Minimum Monthly Rent or Additional Rent. *See Addendum.
Anything to the contrary in this Lease notwithstanding, Tenant hereby
agrees that if it fails to pay Minimum Monthly Rent, Additional Rent or any
other monetary obligation which Tenant is required to pay under this Lease when
due, for any two (2) consecutive months, or for any three (3) months in a
calendar year, Minimum Monthly Rent for the remaining Term shall automatically
be adjusted to be quarterly Rent, payable in advance, by cashier's check,
commencing upon the first day of the month following such consecutive late
month, or the third late month in a calendar year, and continuing thereafter for
the remaining Term. Time is strictly of the essence with respect to the
provisions of this paragraph.
ARTICLE 24 - INTEREST ON PAST-DUE OBLIGATIONS
Any and all amounts owed by Tenant to Landlord which are not paid when
due shall bear interest at the rate of ten percent (10%) per annum from the due
date of such amount ("Interest Rate"). However, interest shall not be payable
on late charges incurred by Tenant. The payment of interest on such amounts
shall not excuse or cure any default by Tenant under this Lease. If the
Interest Rate is higher than the rate permitted by law, the Interest Rate is
hereby decreased to the maximum legal interest rate an individual is permitted
to charge by law.
ARTICLE 25- BUILDING PLANNING
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*See Addendum
Landlord reserves to itself the right, from time to time, to grant such
easements, rights and dedications that Landlord deems necessary or desirable,
and to cause the recordation of parcel maps and restrictions, so long as such
easements, rights, dedications, maps and restrictions do not unreasonably
interfere with the use of the Premises by the Tenant. Tenant shall sign any of
the aforementioned documents upon request of Landlord. If Tenant fails to do so
within ten (10) days after written request, Tenant hereby makes, constitutes and
irrevocably appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
ARTICLE 26- NOTICES
All notices required or permitted under this Lease shall be in writing and
shall be personally delivered or sent by certified mail, return receipt
requested, postage prepaid, by nationally or locally recognized overnight or
same day delivery service which provides for acknowledgement of delivery (i.e.,
Federal Express) or by telefacsimile ("FAX") machine capable of confirming
transmission and receipt. Notices to Landlord and Tenant shall be delivered to
the address set forth in Section 1.9 above. Either party may change its notice
address upon written notice to the other party, except that Landlord may in any
event use the Premises as Tenant's address for notice purposes after the
Commencement Date. A copy of all notices required or permitted to be given to
Landlord hereunder shall be concurrently transmitted to such party or parties at
such addresses as Landlord may, from time to time, hereafter designate by notice
to Tenant.
ARTICLE 27- MODIFICATION FOR LENDER
If, in connection with obtaining construction, interim or permanent
financing or refinancing for the Building, Landlord's lender shall request
reasonable modifications in this Lease as a condition to such financing, Tenant
will not unreasonably withhold, delay or defer its consent thereto, provided
that such modifications do not increase the obligations of Tenant hereunder or
materially and adversely affect the leasehold interest hereby created or
Tenant's rights hereunder.
ARTICLE 28- CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY
If Tenant is a corporation, each person signing this Lease on behalf
of Tenant represents and warrants that he has full authority to do so and that
this Lease binds the corporation. Concurrently with the signature of this Lease
by Tenant, Tenant shall deliver to Landlord a certified copy of a
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resolution of Tenant's Board of Directors authorizing the execution of this
Lease or other evidence of such authority reasonably acceptable to Landlord. If
Tenant is a partnership, each person signing this Lease for Tenant represents
and warrants that he is a general partner of the partnership, that he has full
authority to sign for the partnership and that this Lease binds the partnership.
Concurrently with Tenant's signature of this Lease, Tenant shall deliver to
Landlord a copy of Tenant's recorded statement of partnership or certificate of
limited partnership.
ARTICLE 29 - FORCE MAJEURE
The period for performance of any obligation by either party shall be
extended (except for Tenant's obligations to pay Minimum Monthly Rent,
Additional Rent and other charges due pursuant to this Lease, which obligations
shall NOT be extended) by the period of any delay in performance caused by an
act of God, labor strike, adverse weather conditions, shortage of materials,
war, invasion, acts of a public enemy, governmental preemption in connection
with a national emergency, riot, laws, rules, regulations or order of
governmental or military authorities, or failure or defect in the supply,
quantity or character of utilities furnished to the Building or Premises
(collectively "Force Majeure Event"), excluding from all the foregoing,
financial inability.
ARTICLE 30 - BROKERS
The parties recognize that the brokers who negotiated this Lease are
the brokers whose names are stated in Section 1.13 of the Fundamental Lease
Provisions, and agree that Landlord shall be solely responsible for the payment
of brokerage commissions to said brokers, and that Tenant shall have no
responsibility therefor. Tenant represents and warrants to Landlord that to
Tenant's knowledge no other broker, agent or finder negotiated or was
instrumental in negotiating or consummating this Lease, and that Tenant knows of
no other real estate broker, agent or finder who is, or might be, entitled to a
commission or compensation in connection with this Lease. Any broker, agent or
finder of Tenant whom Tenant has failed to disclose herein shall be paid by
Tenant. Tenant shall hold Landlord harmless from all damages and indemnify
Landlord for all said damages paid or incurred by Landlord resulting from any
claims that may be asserted against Landlord by any broker, agent or finder
undisclosed by Tenant herein. *See Addendum
ARTICLE 31 - SECURITY MEASURES
Tenant hereby acknowledges that Landlord shall have no obligation
whatsoever to provide guard service or other security measures for the benefit
of the Premises, Building, Common Areas
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or the Project. Tenant assumes all responsibility for the protection of Tenant,
its agents, employees and invitees, and the property of Tenant, of the Tenant's
agents, employees and invitees from the acts of third parties. However, nothing
herein contained shall prevent Landlord, at Landlord's option, from providing
security protection for the Building or the Project, or any part thereof, in
which event the cost thereof shall be included within the definition of Direct
Expenses.
ARTICLE 32 - LANDLORD'S RESERVATIONS
Landlord shall have the following rights: (i) to change the name, address
or title of the Building or the Project; (ii) to permit any tenant the exclusive
right to conduct any business, as long as such exclusive right does not conflict
with any rights expressly given to Tenant herein; and (iii) to place such signs,
notices or displays as Landlord reasonably deems necessary or advisable upon the
roof, exterior of the Building or the Project, if any, or on pole signs in the
Common Areas. Landlord further reserves the absolute right to effect such other
tenancies in the Building as Landlord, in its sole business judgment, determines
best promotes the interests of the Building. Landlord does not represent, and
Tenant does not rely on the possibility, that any specific tenant or number of
tenants will occupy space in the Building during the Term.
ARTICLE 33 - MISCELLANEOUS PROVISIONS
33.1 WAIVER. No delay or omission in the exercise of any right or
remedy of Landlord or Tenant shall impair such a right or remedy or be construed
as a waiver. The receipt and acceptance by Landlord of delinquent Rent shall
not constitute a waiver of any other default. No act or conduct of Landlord,
including, without limitation, the acceptance of the keys to the Premises, shall
constitute an acceptance of the surrender of the Premises by Tenant before the
expiration of the Term. Only a written notice from Landlord to Tenant shall
constitute acceptance of the surrender of the Premises and accomplish a
termination of the Lease. Landlord's consent to or approval of any act by
Tenant requiring Landlord's consent or approval shall not be deemed to waive or
render unnecessary Landlord's consent to or approval of any subsequent act by
Tenant. Any waiver by Landlord of any default must be in writing and shall not
be a waiver of any other default concerning the same or any other provision of
the Lease.
33.2 IDENTIFICATION OF TENANT. If more than one person executes this Lease
as Tenant, (a) each of them is jointly and severally liable for the keeping,
observing and performing of all of the terms, covenants, conditions, provisions
and agreements of this Lease to be kept, observed and performed by Tenant, and
(b) the term "Tenant" as used in this Lease shall mean and include
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each of them jointly and severally and the act of or notice from, or notice or
refund to, or the signature of, any one or more of them, with respect to the
tenancy of this Lease, including, but not limited to, any renewal, extension,
expiration, termination or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same force
and effect as if each and all of them had so acted or so given or received such
notice or refund or so signed. The term "Tenant" shall include legal
representatives, successors and assigns.
33.3 IDENTIFICATION OF LANDLORD. The term "Landlord" as used in this
Lease, so far as covenants or obligations on the part of Landlord are concerned,
shall be limited to mean and include only the owner or owners at the time in
question of the fee of the Premises, and in the event of any transfer,
assignment or other conveyance or transfers of any such title or leasehold, the
Landlord hereunder named (and in case of any subsequent transfer or conveyances,
the then grantor) shall be automatically freed and relieved from and after the
date of such transfer, assignment or conveyance of all liability as respect the
performance of any covenants or obligations on the part of Landlord contained in
this Lease thereafter to be performed and, without further agreement, the
transferee of such title shall be deemed to have assumed and agreed to observe
and perform any and all obligations of the Landlord hereunder, during its
ownership of the Premises. Landlord may transfer its interest in the Premises
without the consent of Tenant, and such transfer or subsequent transfer shall
not be deemed a violation on Landlord's part of any of the terms and conditions
of this Lease.
33.4 BINDING EFFECT. Each and all of the covenants, conditions and
restrictions in this Lease shall inure to the benefit of and shall be binding
upon the successors in interest of Landlord, and subject to the provisions of
Article 15, authorized encumbrances, assignees, transferees, subtenants,
licensees, and other successors in interest of Tenant.
33.5 NON-DISCRIMINATION. Tenant covenants and agrees, and it is a
condition to the continuance of this Lease, that there will be no discrimination
against, or segregation of, any person or group of persons on the basis of race,
color, sex, creed, national origin or ancestry, in the leasing, subleasing,
transferring, occupancy, tenure or use of the Premises or any portion thereof.
33.6 CONFLICT OF LAWS AND CHOICE OF JURISDICTION. This Lease shall be
governed by and construed pursuant to the laws of the State of California. Any
litigation concerning this Lease between the parties hereto shall be initiated
in the California court having jurisdiction over the area where the Building is
located.
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33.7 SEVERABILITY. A determination by a court of competent jurisdiction
that any provision of this Lease or any part thereof is illegal or unenforceable
shall not cancel or invalidate the remainder of such provision or this Lease,
which shall remain in full force and effect. It is the intention of the parties
hereto that if any provision of this Lease is capable of two constructions, one
of which would render the provision void and the other of which would render the
provision valid, then the provision shall have the meaning which renders it
valid.
33.8 INTERPRETATION. The captions of the articles and sections of this
Lease are to assist the parties in reading this Lease and are not a part of the
terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural, and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. The word "person" shall include corporations, firms, partnerships or
associations. In any provision relating to the conduct, acts or omissions of
Tenant, the term "Tenant" shall include Tenant's agents, employees, contractors,
invites, successors or others using the Premises with Tenant's expressed or
implied permission. It is also agreed that no specific words, phrases, or
clauses herein used shall be taken or construed to control, limit or cut down
the scope or meaning of any general words, phrases or clauses used in connection
therewith. Although the printed provisions of this Lease were drawn by
Landlord, this Lease shall not be construed either for or against Landlord or
Tenant, as this Lease has been prepared with the participation of both parties
and both parties have either been represented by attorneys or have had the
opportunity for such representation in the negotiation of its contents.
33.9 INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This Lease contains
all agreements of the parties with respect to any matter mentioned herein. No
prior or contemporaneous agreement or understanding pertaining to any such
matter shall be effective. This Lease may be modified in writing only, signed
by the parties in interest at the time of the modification. Except as otherwise
stated in this Lease, Tenant hereby acknowledges that neither the real estate
brokers identified in Section 1.13 of the Fundamental Lease Provisions, nor any
cooperating broker on this transaction, nor the Landlord, or any employee or
agents of any of said persons, has made any oral or written warranties or
representations to Tenant relative to the condition or use by Tenant of the
Premises or the Building, and Tenant acknowledges that Tenant assumes all
responsibility regarding the legal use and adaptability of the Premises and the
compliance thereof with all applicable laws and regulations in effect during the
Term.
33.10 EXAMINATION OF LEASE. Submission of this Lease for examination
or signature by Tenant does not constitute a
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reservation of or option for Lease, and it is not effective as a Lease or
otherwise until signature by and delivery to both Landlord and Tenant.
33.11 TIME. Time is of the essence with respect to the performance of
every provision of this Lease in which time or performance is a factor.
33.12 ACCORD AND SATISFACTION. No payment by Tenant or receipt by
Landlord of a lesser amount than the Rent payment herein stipulated shall be
deemed to be other than on account of the earliest stipulated Rent, nor shall
any endorsement or statement on any check or any letter accompanying any check
or payment as Rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such Rent or pursue any other remedy provided in this Lease.
33.13 NONRECORDATION OF LEASE. Tenant shall not record this Lease or a
short form memorandum thereof.
33.14 COVENANTS AND CONDITIONS. All of the provisions of this Lease
shall be deemed as running with the land, and construed to be "conditions," as
well as "covenants, " as though the words specifically expressing or imparting
covenants and conditions were used in each separate provision.
33.15 NEGATION OF PARTNERSHIP. Landlord shall not become or be deemed
a partner or joint venturer with Tenant by reason of the provisions of this
Lease.
33.16 CONSENT OF LANDLORD AND TENANT. Wherever in this Lease consent
or approval is required from either party to any action by the other, such
consent or approval shall be given in writing and shall not be unreasonably
withheld, unless expressly provided otherwise in this Lease. Landlord shall not
be deemed to have withheld its consent unreasonably where Landlord's right to
give its consent is conditioned on Landlord obtaining the consent of any other
person, agency or authority having the right to withhold its consent pursuant to
any agreement or law, and such person, agency or authority does withhold its
consent. If Landlord or Tenant unreasonably fails to give any such consent, the
other party shall be entitled to specific performance in equity and shall have
such other remedies as are reserved to it under this Lease, but in no event
shall Landlord or Tenant be responsible in monetary damages for failure to give
such consent.
[Balance of Page Intentionally Left Blank]
33.17 LEASE EXECUTION DATE. This Lease shall become effective and
binding upon both parties upon the last date set
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forth below signifying execution by the parties to this Lease. *See Addendum
LANDLORD
Regents Park Financial Centre, Ltd.
a California limited partnership
By: The Lomas Santa Fe Group,
a California corporation
(General Partner)
DATE: 11/30/95 By: s/Richard E. Keller/
---------- ----------------------------------------------
Name: Richard E. Keller
Title: President
DATE: 11/30/95 By: s/Matthew J. Root/
---------- ----------------------------------------------
Name: Matthew J. Root
Title: Director of Leasing
TENANT
Southern California Bank,
a California corporation
DATE: 11/9/95 By: s/David A. McCoy/
---------- ----------------------------------------------
Name: David A. McCoy
Title: EVP/COO
DATE: By:
---------- ----------------------------------------------
Name:
Title:
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REGENTS PARK FINANCIAL CENTRE
ADDENDUM TO LEASE
This Addendum to Lease ("Addendum") is entered into by and between Regents
Park Financial Centre, Ltd., a California limited partnership ("Landlord") and
Southern California Bank, a California corporation ("Tenant"), and is made to
the Regents Park Financial Centre Office Lease dated for reference purposes only
as of October 25, 1995 ("Lease").
Landlord and Tenant hereby agree that notwithstanding anything contained in
the Lease to the contrary, the provisions set forth below shall be deemed to be
a part of the Lease and shaLl supersede, to the extent appropriate, any contrary
provision in the Lease. All references in the Lease and in this Addendum to
"Lease" shall be construed to mean the Lease, as amended and supplemented by
this Addendum. Unless specifically defined in this Addendum, all capitalized
terms used in this Addendum shall have the same meaning as the terms used in the
Lease.
ARTICLE 1 - FUNDAMENTAL LEASE PROVISIONS
1.5 PREMISES. The following is deemed added to Section 1.5 of the
Fundamental Lease Provisions:
Landlord and Tenant acknowledge that concurrently with the execution of
this Lease, Tenant and Citicorp Savings, a Federal Savings and Loan Association
("Citicorp") are entering into a sublease (the "Citicorp Sublease") for the
Premises and that the term of the Citicorp Sublease will expire on the
Commencement Date of this Lease. In addition, concurrently with the execution
of this Lease, Landlord and Tenant are entering into a separate lease for those
certain premises located on the fourth floor of the Building consisting of 2,100
rentable square feet and designated as Suite 430 (the "Suite 430 Lease"). The
term of the Suite 430 Lease is for eighty four (84) months and is coterminous
with the Term of this Lease.
1.6 TERM. The first sentence of Section 1.6 of the Fundamental Lease
Provisions is deemed deleted and replaced with the following:
The Term shall be fifty seven (57) months commencing on January 1, 1998
(the "Commencement Date").
1.11.2 MINIMUM MONTHLY RENT. Section 1.11.2 of the Fundamental Lease
Provisions is deemed deleted and replaced with the following:
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Minimum Monthly Rent for the Term shall be payable in accordance with the
following schedule:
Months 1 through 9 $1.73 per rentable square foot full service
($6,004.83/month)
Months 10 through 21 $1.80 per rentable square foot
full service ($6,247.80/month)
Months 22 through 33 $1.87 per rentable square foot
full service ($6,490.77/month)
Months 34 through 45 $1.95 per rentable square foot
full service ($6,768.45/month)
Months 46 through 57 $2.02 per rentable square foot
full service ($7,011.42/month)
ARTICLE 2 - LEASE
2.2 DELAY IN COMMENCEMENT. Section 2.2 is deemed deleted in its entirety
in recognition of the fact that Tenant will be in possession of the Premises
prior to the Commencement Date pursuant to the Citicorp Sublease.
2.3 EARLY OCCUPANCY. Section 2.3 is deemed deleted in its entirety in
recognition of the fact that Tenant will be in possession of the Premises prior
to the Commencement Date pursuant to the Citicorp Sublease.
2.5 FAILURE TO TAKE POSSESSION. Section 2.5 is deemed deleted in its
entirety in recognition of the fact that Tenant will be in possession of the
Premises prior to the Commencement Date pursuant to the Citicorp Sublease.
2.6 OPTION TO EXTEND TERM. The following provision is deemed added to the
Lease as Section 2.6:
OPTION TO EXTEND TERM. Landlord hereby grants to Tenant one (1)
option ("Option") to extend the Term of this Lease for one (1) additional period
of sixty (60) months ("Option Term"). The Option must be exercised, if at all,
by written notice ("Option Notice") delivered by Tenant to Landlord no earlier
than twelve (12) months and no later than nine (9) months prior to the end of
the initial fifty seven (57) month Term. Further, the Option shall not be
deemed to be properly exercised if, as of the date of the Option Notice or at
the end of the initial Term, Tenant (i) is in default under this Lease or the
Suite 430 Lease beyond any applicable cure period, (ii) has assigned all or any
portion of this Lease or the Suite 430 Lease or its interest therein; (iii) has
sublet all or any portion of the Premises or Suite 430. Provided (a) Tenant has
properly and
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timely exercised the Option, (b) Tenant has also properly and timely exercised
its option to extend the term of the Suite 430 Lease as provided therein (which
exercise may be concurrent with Tenant's exercise of the Option provided for
herein), and (c) Landlord and Tenant reach agreement on the Minimum Monthly Rent
payable for the Option Term as provided below, the initial Term shall be
extended by the Option Term, and all terms, covenants and conditions of the
Lease shall remain unmodified and in full force and effect, except that there
shall be no further extension of the Term following the Option Term and the
Minimum Monthly Rent for the Option Term shall be the then prevailing market
rent then being charged by Landlord to new tenants for comparable space in the
Building, or, if insufficient comparable transactions exist in the Building,
then the rate being charged to new tenants for comparable space by landlords of
similar office premises in the same general market area of the Building, with
similar amenities taking into consideration the size and location of the
premises, the proposed term of the Option Term, the time the particular rental
under consideration was agreed upon and became or is to become effective, the
extent of improvements and services to be provided and any other relevant terms
and conditions.
Landlord shall use its best efforts to provide Tenant with its
determination of the Minimum Monthly Rent for the Option Term within thirty (30)
days of its receipt of a timely Option Notice from Tenant ("Landlord's
Determination"). Tenant shall have fifteen (15) days ("Tenant's Review Period")
after receipt of Landlord's Determination within which to accept Landlord's
Determination or to reasonably object thereto in writing. In the event Tenant
fails to object to Landlord's Determination in writing within such fifteen (15)
day period, Landlord's Determination shall be deemed accepted. If Tenant
reasonably objects to Landlord's Determination, the parties shall then have
thirty (30) days (the "Negotiating Period") after the expiration of Tenant's
Review Period within which to agree on new Minimum Monthly Rent for the Option
Term. If the parties agree on the Minimum Monthly Rent for the Option Term
within the Negotiating Period, they shall immediately execute an amendment to
this Lease setting forth the new Minimum Monthly Rent. If the parties are
unable to agree on the Minimum Monthly Rent for the Option Term within the
Negotiating Period then each party shall place in a separate sealed envelope
their final proposal as to Minimum Monthly Rent for the Option Term and such
determination shall be submitted to arbitration as set forth below.
Landlord and Tenant shall meet with each other within five (5) business
days of the expiration of the Negotiating Period, exchange the sealed envelopes,
and then open such envelopes in each other's presence. If Landlord and Tenant
do not mutually agree upon the Minimum Monthly Rent for the Option Term within
five (5) business days of the exchange and opening of envelopes,
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then, within ten (10) business days of the exchange and opening of envelopes
Landlord and Tenant shall agree upon and jointly appoint a single arbitrator who
shall by profession be a real estate broker who shall have been active over the
five (5) year period ending on the date of such appointment in the leasing of
comparable office buildings. Neither Landlord nor Tenant shall consult with
such broker as to his or her opinion as to the Minimum Monthly Rent for the
Option Term prior to the appointment. The determination of the arbitrator shall
be limited solely to the issue of whether Landlord's or Tenant's submitted
Minimum Monthly Rent for the Premises is the closer to the actual prevailing
market rent for the Premises as determined by the arbitrator, taking into
account the requirements of this Section. Such arbitrator may hold such
hearings and require such briefs as the arbitrator, in his or her sole
discretion, determines is necessary. In addition, Landlord or Tenant may submit
to the arbitrator with a copy to the other party within five (5) business days
after the appointment of the arbitrator any market data and additional
information that such party deems relevant to the determination of Minimum
Monthly Rent for the Option Term ("Market Rent Data") and the other party may
submit a reply in writing within five (5) business days after receipt of such
Market Rent Data.
If Landlord and Tenant fail to agree upon and appoint an arbitrator, then
the appointment of the arbitrator shall be made by the Presiding Judge of the
San Diego County Superior Court, or, if he or she refuses to act, by any judge
having jurisdiction over the parties.
The arbitrator shall, within thirty (30) days of his or her appointment,
reach a decision as to whether the parties shall use Landlord's or Tenant's
submitted Minimum Monthly Rent, and shall notify Landlord and Tenant of such
determination; provided, however, notwithstanding anything in this Section to
the contrary, under no circumstances shall the Minimum Monthly for the initial
year of the Option Term be less then the amount of the Minimum Monthly Rent
payable by Tenant for the calendar month immediately preceding the commencement
of the Option Term.
The decision of the arbitrator shall be binding upon Landlord and Tenant.
The cost of arbitration shall be paid by Landlord and Tenant equally.
If the Minimum Monthly Rent for the Option Term shall not have been
determined by the commencement of the Option Term, Tenant shall continue to pay
the Minimum Monthly Rent payable as of the month immediately preceding such
commencement until the Minimum Monthly Rent is established so that the Minimum
Monthly Rent established for the Option Term shall be retroactive to the
commencement of the Option Term.
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ARTICLE 3 - RENT
3.2 ADJUSTMENTS TO MINIMUM MONTHLY RENT. Section 3.2 is deemed deleted in
its entirety.
ARTICLE 4 - OTHER CHARGES PAYABLE BY TENANT (ADDITIONAL RENT)
4.1.3.3 DIRECT EXPENSE EXCLUSIONS. The following items shall be
deemed added to the list of items excluded from Direct Expenses set forth in
Section 4.1.3.3 of the Lease:
(xviii) Costs associated with the operation of the business of
the ownership or entity which constitutes "Landlord", as distinguished from the
costs of Building operations:
(xix) Costs incurred in connection with the original construction
of the Building;
(xx) Costs of correcting defects in the original design or
construction of the Building;
(xxi) Costs for which Landlord is reimbursed by insurance carried
by Landlord or Tenant pursuant to this Lease;
(xxii) Bad debt losses, rent losses, or reserves for the same;
(xxiii) Fines and penalties;
(xxiv) Except for rent and related expenses incurred by Landlord
while making repairs or keeping permanent systems in operation, rent and related
expenses incurred in leasing air conditioning systems, elevators or other
similar equipment considered to be of a capital nature.
It is understood that Direct Expenses shall be reduced by all
cash discounts, trade discounts or quantity discounts actually received by
Landlord or Landlord's managing agent in the purchase of any goods, utilities or
services in connection with the operation of the Building. In the calculation
of any Direct Expenses pursuant to this Lease, it is understood that no expenses
shall be charged more than once. Landlord shall use commercially reasonable
best efforts to effect an equitable proration of bills and services rendered to
the Building and to any other property owned by Landlord. Landlord agrees to
maintain its books and records show any Direct Expenses in accordance with
Landlord's standard accounting practices consistently maintained on a
year-to-year basis.
4.2.1 INCREASES IN DIRECT EXPENSES/ADDITIONAL RENT. The references in
Section 4.2.1 to "sixty (60) days" are deemed changed to "one hundred and twenty
(120) days").
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4.5 BUILDING SERVICES AND UTILITIES. The first sentence of Section 4.5 is
deemed deleted and replaced with the following:
Landlord shall furnish to the Premises during the normal business hours of
Tenant, which are 8:00 a.m. to 7:00 p.m. Monday through Friday and 9:00 a.m. to
1:00 p.m on Saturdays ("Business Hours"), except for those holidays designated
annually by Landlord, heating, ventilating and air conditioning ("HVAC Service")
as required for the comfortable occupancy of the Premises as reasonably
determined by Landlord.
ARTICLE 5 - USE OF PREMISES
5.3 HAZARDOUS SUBSTANCES. The following provisions are deemed added to the
end of Section 5.3 of the Lease:
Landlord represents and warrants that except for materials and substances
typically used in offices such as cleaning fluids and copy toner, Landlord has
no actual knowledge of the existence of any Hazardous Substances in, on or under
the Building or the real property on which the Building is located. Landlord
hereby agrees to indemnify and hold harmless Tenant, its directors, officers,
employees, and agents, and any successors, from and against any and all
liability, directly or indirectly arising out the use, generation, construction,
manufacturing, storage, or disposal of Hazardous Substances in, on or under the
Building and/or the Premises, by Landlord, its agents, employees, or contractors
to the extent that such action is attributable, directly or indirectly, to the
presence or use, generation, storage, release, threatened release, or disposal
of Hazardous Substances by any such person at the Building or on the Premises
(or real property on which the Building is located). The representations,
warranties and indemnities of Landlord contained in this paragraph shall not be
binding upon Teachers Insurance and Annuity Association as the holder of the
first lien against the building or as a successor-in-interest.
ARTICLE 7 - INDEMNIFICATION
7.3 DAMAGE TO TENANT'S PROPERTY. The last sentence of Section 7.3 is
deemed deleted and is replaced with the following: Tenant hereby agrees that in
no event shall Landlord or its agents or employees be liable for consequential
damages, including injury to Tenant's business or any loss of income therefrom,
nor shall Landlord nor Tenant nor their respective agents or employees be liable
to Landlord or Tenant, as applicable, for any damages caused by the act or
neglect of any other tenant in the Building.
ARTICLE 8 - MAINTENANCE,REPAIRS AND ALTERATIONS
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8.1 LANDLORD'S OBLIGATIONS. The following is deemed added to the end of
Section 8.1 of the Lease: Landlord agrees that in carrying out its obligations
pursuant to this Section 8.1, Landlord will not unreasonably interfere with the
conduct of Tenant's business in the Premises, and if possible on a commercially
reasonable basis, with respect to any maintenance or repairs to be performed
within the Premises, Landlord will endeavor to perform such maintenance or
repairs after the regular business hours of Tenant.
8.3 CONDITION UPON TERMINATION. The following shall be deemed added to
the end of Section 8.3 of the Lease: Despite anything in this Lease to the
contrary, unless Tenant receives written notice from Landlord to the contrary,
Tenant shall, upon the expiration or earlier termination of the Term, at
Tenant's sole cost and expense, remove the night deposit box, the ATM and
appurtenant facilities installed by Tenant pursuant to Suite 430 Lease, all
cashier's stations and teller lines, the vault and all other similar financial
institution trade fixtures. Tenant shall repair, at Tenant's sole cost and
expense, any damage to the Premises caused by the removal of the foregoing
items.
ARTICLE 13 - LANDLORD'S ENTRY ON PREMISES
13.1 ENTRY BY LANDLORD. The following is deemed added to the end of
section 13.1: Despite the foregoing, in recognition of Tenant's security
concerns, Landlord agrees that prior to any entry into the Premises for the
purposes set forth above, Landlord agrees to provide Tenant with reasonable
advance written notice, except if such entry is required as a result of an
emergency, in which case no such notice shall be required.
13.1.1 The first two lines of Section 13.1.1 are deemed deleted in
their entirety.
ARTICLE 15 - RESTRICTIONS ON TRANSFER
15.1 LANDLORD'S CONSENT REQUIRED. The following is deemed added to the end
of Section 15.1 of the Lease:
Despite anything in this Article 15 to the contrary, Tenant shall have the
right, without Landlord's consent, to assign this Lease or to sublet all or any
portion of the Premises to (i) any subsidiary corporation or parent corporation
of Tenant, or (ii) any corporation which Tenant may merge or consolidate, or
(iii) any corporation acquiring substantially all of the assets and/or stock of
Tenant. As used in this Lease, corporations are related as "parent" or
"subsidiary" if such corporation owns fifty percent (50%) or more of the voting
stock of another corporation. Even though Landlord's consent to the preceding
Transfers is not required, Tenant agrees that Tenant will provide Landlord with
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written notice of any such Transfer no later than ten (10) days after the
effective date of any such Transfer.
15.3 LANDLORD'S ELECTION. Landlord's right to recapture the Premises as
set forth in subparagraph 15.3 (i) is deemed deleted.
15.9 TENANT' 8 REMEDY. Section 15.9 is deemed deleted in its entirety.
ARTICLE 16 - DEFAULT
16.2 DEFAULTS. All references to "three (3) days" in Section 16.2 are
deemed changed to five (5) days". In addition, the following is deemed added to
the end of Section 16.2: In addition to all of the foregoing, any event of
default by Tenant under the Suite 430 Lease, shall also constitute an "Event of
Default" for purposes of this Lease.
ARTICLE 17 - REMEDIES UPON DEFAULT
17.2 JURY TRIAL WAIVER. Section 17.2 is deemed deleted in its entirety.
ARTICLE 18 - PROTECTION OF LENDERS AND TRANSFEREES
18.1 SUBORDINATION. The following is deemed added to the end of Section
18.1 of the Lease:
Landlord shall use its commercially reasonable best efforts to obtain and
deliver to Tenant an agreement in writing from each existing mortgagee with a
lien encumbering the Premises and/or the lessor of any existing ground lease
affecting the Premises which provides that, so long as Tenant is not in default
of any of the terms, covenants, conditions, provisions or agreements of this
Lease, Tenant's possession of the Premises shall not be disturbed by reason of
the foreclosure of any such mortgage or the termination of any such ground
lease, but Landlord shall have absolutely no liability whatsoever to Tenant if
Landlord is not successful in obtaining any such agreement for Tenant nor shall
Tenant have any right to terminate this Lease because of Landlord's failure to
obtain such an agreement.
ARTICLE 19 - COMMON AREAS
19.3 VEHICLE PARKING. The first and second sentences of subsection 19.3.1
shall be deemed deleted and the following shall be deemed inserted in place
thereof:
During the Term, Tenant shall be entitled to use the number of vehicle
parking spaces set forth in Section 1.14 of the Fundamental Lease Provisions at
no additional charge.
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ARTICLE 20 - PROFESSIONAL COSTS; CONSENTS
20.1 LEGAL COSTS. The jury trial waiver set forth in the second sentence
of Section 20.1 is deemed deleted in its entirety.
ARTICLE 23 - LATE CHARGES
The words "when due" in the fourth and fifth lines of Article 23 are deemed
deleted and replaced with the following: "within five (5) days of the date due".
ARTICLE 25 - BUILDING PLANNING
The first paragraph of Article 25 is deemed deleted.
ARTICLE 30 - BROKERS
The following provisions are deemed added to the end of Article 30 of the
Lease:
Landlord agrees to pay Landlord's broker a commission in accordance with a
separate agreement between Landlord and such broker. Landlord shall hold Tenant
harmless from all damages and indemnify Tenant for all said damages paid or
incurred by Tenant resulting from any claims that may be asserted against Tenant
by the brokers identified in Section 1.13 of the Fundamental Lease provisions or
any broker, agent or finder undisclosed by Landlord herein.
ARTICLE 33 - MISCELLANEOUS
The following is deemed added to Article 33 as Section 33.18:
33.18 CONTINGENCIES. Tenant specifically acknowledges and agrees that
notwithstanding anything to the contrary in this Lease, the continuing
effectiveness of this Lease is expressly contingent upon each of the following:
(i) prior to or concurrently with the execution of this Lease, Tenant shall have
executed the (a) Citicorp Sublease; AND (b) the Suite 430 Lease; and (ii) no
later than February 29, 1996, Tenant shall have received all regulatory
approvals from the California Department of Corporations and the FDIC necessary
for Tenant to operate the Premises as a branch banking facility (hereinafter the
"Regulatory Approvals").
If Tenant has not obtained the Regulatory Approvals on or before the date
specified above, then Tenant shall have a one-time right, at its option, to
terminate this Lease by written notice to Landlord given no later than March 5,
1996, in which case this Lease shall terminate on the date specified in Tenant's
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notice (which date shall be at least thirty (30) from the date of Tenant's
notice) and on the effective date of such termination, this Lease shall be of no
further force or effect except for obligations, if any, which have accrued prior
to the date of such termination or which expressly survive the expiration or
earlier termination of this Lease. If Tenant has not obtained the Regulatory
Approvals by the February 29, 1996, and Tenant does not give Landlord a notice
to terminate this Lease on or before March 5, 1996, then this condition shall be
deemed satisfied and Tenant shall have no further right to terminate this Lease.
If Tenant terminates this Lease as a result of Tenant's failure to obtain
the Regulatory Approvals on or before the date specified above, Tenant shall (i)
satisfy all monetary and non-monetary obligations under the Lease through the
effective date of such termination and (ii) no later than thirty (30) days after
the effective date of such termination Tenant shall deliver to Landlord cash or
a certified check in an amount equal to (a) the full amount of the Tenant
Improvement Allowance provided to Tenant under the Suite 430 Lease, PLUS (b) the
full amount of brokerage commissions paid by Landlord in connection with this
Lease and the Suite 430 Lease, PLUS (c) all attorneys' fees and costs incurred
by Landlord in connection with this Lease, the Suite 430 Lease and the Citicorp
Sublease; provided however, Landlord agrees that the amount of such
reimbursement from Tenant for the items identified in subparagraphs (b) and (c)
shall in no event exceed $25,000.00 on a cumulative basis, inclusive of any such
similar sums Tenant may be required to pay pursuant to the Citicorp Sublease.
In addition to the forgoing, as a further condition to such termination, Tenant
shall, at Landlord's sole option, return the Premises to the condition which
existed prior to the Commencement Date or deliver to Landlord cash or a
certified check in an amount reasonably determined by Landlord to be required
for Landlord to return the Premises to such condition. The obligations of
Tenant set forth herein shall survive the termination of this Lease.
The following is deemed added to Article 33 as Section 33.19:
33.19 USE OF ATM KIOSK. Provided (i) there is no continuing and
uncured event of default by Tenant under this Lease and/or the Suite 430 Lease,
and (ii) Tenant is in possession of Suite 430 pursuant to the Suite 430 Lease,
then subject to the terms and conditions set forth below, Tenant shall have a
nonexclusive license (the "License") to use the existing ATM Kiosk located where
shown on the Site Plan attached to this Lease as EXHIBIT A (the "Licensed Area")
for the installation, maintenance and use of an automated teller machine
("ATM"). Landlord shall provide Tenant with reasonable access to the Licensed
Area for the purpose of installing, maintaining and repairing the ATM. The
type, size, style, design and proposed
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installation of the ATM is subject to the prior written approval of Landlord,
which approval shall not be unreasonably withheld.
33.19.1 TERM OF LICENSE. The term of this License shall be
coterminous with the Term of this Lease, unless earlier terminated pursuant to
the terms hereof. Despite the foregoing, Landlord and Tenant acknowledge that
prior to the commencement of the term of this License, Tenant has certain rights
to use and operate the ATM on the terms and conditions set forth in the First
Amendment to the Citicorp Sublease dated November 4, 1987, it being acknowledged
by the parties hereto, that this License shall become effective upon the
expiration of the Citicorp Sublease.
33.19.2 LICENSE FEE. [Intentionally Omitted]
33.19.3 UTILITIES. Tenant shall pay for all utility service
furnished in connection with Tenant's use of the ATM. If requested by Landlord,
Tenant shall install, at Tenant's sole expense, a separate metering device to
enable Landlord to measure the among of electric current consumed in connection
with Tenant's use of the ATM. Tenant agrees to pay Landlord promptly upon
demand by Landlord, for all such electric current at the rates charged for such
services by the local public utility furnishing the same, plus any reasonable
additional expenses incurred by Landlord in keeping account of the electric
current so consumed.
33.19.4 INSTALLATION, MAINTENANCE AND REPAIRS. Landlord shall not
be required to make any changes, improvements, alterations or repairs to the
Licensed Area or the ATM. Tenant shall, at Tenant's sole expense, install the
ATM and related utility services (if necessary) and maintain the Licensed Area
and the ATM in good order and repair throughout the term of this License.
Without limitation of the foregoing, Tenant further specifically acknowledges
and agrees that Tenant shall, at its sole cost and expense, be responsible for
the cost of all improvements, if any, required to be made to the parking and
walkway areas adjacent to the Licensed Area necessary to comply with any State
and/or Federal regulations governing the lighting of ATM facilities.
33.19.5 NON-INTERFERENCE OF ATM. Tenant warrants and represents
that the ATM shall not unreasonably interfere with Landlord's or Landlord's
tenants' use and enjoyment of: (i) the Building's electrical system, air
conditioning system, television system, emergency power generation, elevators
and other Building equipment and (ii) any computer, data processing, word
processing or other electrical device located in the Building. Any such
interference shall be prompt]y corrected by Tenant. Tenant's failure to
promptly correct any such interference shall
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constitute a breach of this License Agreement and shall entitle Landlord to
terminate the License granted hereunder.
33.19.6 DAMAGE OR INJURY; INDEMNIFICATION. Tenant hereby assumes
all risk of loss, damage or injury to the person or property of Tenant or
Landlord occurring upon or about the Licensed Area for any cause whatsoever,
arising from, or relating to, the use of the Licensed Area, the ATM or access
thereto by any person other than any loss, damage or injury resulting directly
from the negligence or willful misconduct of Landlord, and Tenant hereby waives
all claims in respect thereof against Landlord against and from any and all
loss, cost, damage or expense incurred or suffered by Landlord, and any and all
claims of damage or injury asserted against Landlord and arising from, or
relating to, the use of the Licensed Area, the ATM or access thereto. Tenant
further indemnifies and holds harmless Landlord against and from any and all
claims arising from any breach or default in the performance of any obligation
of Tenant hereunder, or arising from any act or omission of Tenant or its
employees or agents, and from all costs, attorney's fees, expenses and
liabilities incurred in connection with any such claim or any action or
proceedings brought thereon. The indemnity obligations set forth herein shall
survive the expiration or early termination of this License and the Lease.
33.19.7 INSURANCE. Tenant shall, at Tenant's sole expense, obtain
and keep in force throughout the term of this License Agreement a policy or
policies of general liability insurance in such amount and form required by
Article 12 of the Lease, insuring against personal injury or property damage
which may be caused by the installation of, maintenance of, alteration to, or
removal of the ATM. Tenant further agrees, at Tenant's own expense, to maintain
in full force and effect throughout the term of this Agreement general fire and
extended coverage insurance in a face amount not less than one hundred percent
(100%) of the full replacement cost of the ATM and the kiosk in which the same
is to be located. Upon t:he request of Landlord, Tenant shall provide to
Landlord copies of certificates of all such insurance policies. All such
policies shall comply with the requirements of Section 12.1.5 of the Lease
(Policy Form).
33.19.8 ALTERATIONS. Tenant shall not make any alterations or
additions to the ATM or the Licensed Area without the prior written approval of
Landlord.
33.19.9 ATM PARKING. Landlord shall, at no charge, make one (1)
additional parking space available for use by customers of Tenant who desire to
use the ATM, which parking space shall appropriately marked for use by ATM
customers and shall be in a location approved by Landlord and Tenant.
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33.19.10 TERMINATION OF LICENSE. Notwithstanding anything herein to
the contrary, Landlord may terminate the License upon the occurrence of any of
the following events: (i) Tenant's failure or omission to pay any sum payable
hereunder on or before the same is due; (ii) Tenant's failure or omission to
observe, keep or perform the other terms, covenants or conditions to be
performed by Tenant under this license, this Lease or the Suite 430 Lease, as
applicable; (iii) Tenant's failure or omission to observe, keep or perform any
of Tenant's obligations as a Tenant in the Building. Upon any termination of
the License, this Lease and/or the Suite 430 Lease, as applicable, including,
but not limited to, termination upon the occurrence of the above described
events, upon the request of Landlord, Tenant shall remove the ATM, provided such
removal can be accomplished without material damage to the Building or the
Licensed Area. In any event, the Tenant shall be responsible for restoring the
Licensed Area to its original condition existing prior to the installation of
the ATM and shall surrender the Licensed Area to Landlord in good order and
repair.
33.19.11 ASSIGNMENT. Tenant shall not voluntarily, by operation of
law or otherwise hypothecate or otherwise transfer its interest in this License
without the prior written consent of Landlord, which consent may be withheld in
Landlord's sole and absolute discretion. Any such attempted assignment,
hypothecation or transfer of this License, without Landlord's prior written
consent, shall constitute a default hereunder and at Landlord's election shall
be void so as not to confer any rights upon any third person. Subject to the
foregoing, the covenants and agreements contained in this License shall inure to
the benefit of, and shall be binding upon, the successors and assigns of the
parties hereto.
33.19.12 COMPLIANCE WITH LICENSE. Tenant shall, at its sole cost and
expense, take all actions necessary to ensure that the Licensed Area, the ATM,
and access thereto are in full compliance with the terms of this License, and
such reasonable rules and regulations as may be adopted form time to time by
Landlord.
33.19.13 COMPLIANCE WITH LAWS. The installation and maintenance of
the ATM shall be in compliance with all laws, rules and regulations of the City
of San Diego and all other governmental entities and regulatory agencies having
jurisdiction over such matters, including, without limitation, any and all State
and/or Federal regulations governing the lighting of ATM facilities and adjacent
walkway and parking areas. Tenant shall pay all fees or taxes resulting from
such compliance and the installation, alteration, maintenance or removal of the
ATM.
Balance of Page Intentionally Left Blank
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Except as and to the extent modified by this Addendum, all provisions of
the Lease shall remain in full force and effect.
LANDLORD Regents Park Financial Centre, Ltd ,
a California limited partnership
By: The Lomas Santa Fe Group, a California
corporation (General Partner)
Date: 11/30/95 BY: s/Richard E. Keller/
Name: Richard E. Keller
Title: President
TENANT
Southern California Bank, a California
Corporation
Date 11/29/95 By: s/David A. McCoy/
Name: David A. McCoy
Title: EVP/COO
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Exhibit A
Site Plan
70
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Exhibit B
Floor Plan of the Premises
71
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Exhibit C
TENANT IMPROVEMENT AGREEMENT
(Tenant to Construct)
INTENTIONALLY OMITTED
72
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Exhibit D
GUARANTY OF LEASE
INTENTIONALLY OMITTED
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Exhibit E
RULES AND REGULATIONS
1. Except as specifically provided in Article 21 of the Lease to which these
Rules and Regulations are attached, no sign, placard, picture, advertisement,
name or notice shall be installed or displayed on any part of Premises without
the prior written consent of Landlord if visible from outside the Premises.
Landlord shall have the right to remove, at Tenant's expense and without notice,
any sign installed or displayed in violation of this rule. All approved signs
or lettering on doors and walls shall be printed, painted, affixed or inscribed
at the expense of Tenant by a person approved by Landlord. If Landlord objects
in writing to any curtains, blinds, shades, screens or hanging plants or other
similar objects attached to or used in connection with any window or door of the
Premises, or placed on any windowsill, which is visible from the exterior of the
Premises, Tenant shall immediately discontinue such use. Tenant shall not
install or permit to be installed in the Premises any food vending or similar
machines for the dispensing of food or beverages without Landlord's prior
written consent. Tenant shall not use a representation (photographic or
otherwise) of the Building or the Project, if any, or their name(s) in
connection with Tenant's business, without Landlord's prior consent.
2. All cleaning and janitorial services for the Building and the Premises shall
be provided exclusively through Landlord, and except with the prior written
consent of Landlord, no person or persons other than those approved by Landlord
shall be employed by Tenant or permitted to enter the Building for the purpose
of cleaning the same.
3. Landlord will furnish Tenant, free of charge, with two keys to each door
lock in the Premises. Landlord may impose a reasonable charge for any
additional keys. Tenant shall not make or have made additional keys, and Tenant
shall not alter any lock or install a new additional lock or bolt on any door of
its Premises. Tenant, upon the termination of its tenancy, shall deliver to
Landlord the keys of all doors which have been furnished to Tenant, and in the
event of loss of any keys so furnished, shall pay Landlord therefor.
4. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instruction in
their installation.
5. The Building freight elevator(s) (if any) shall be available for use by all
tenants in the Building, subject to such reasonable scheduling as Landlord, in
its discretion, shall deem appropriate. No equipment, materials, furniture,
packages, supplies, merchandise or other property will be received in the
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Building or carried in the elevators except between such hours and in such
elevators as may be designated by Landlord. Tenant's initial move in and
subsequent deliveries of bulky items, such as furniture, safes and similar items
shall, unless otherwise agreed in writing by Landlord, be made during the hours
of 6:00 P.M. and 6:00 A.M. or on Saturday or Sunday. Deliveries during normal
office hours shall be limited to normal office supplies and other small items.
No deliveries shall be made which impede or interfere with other tenants or the
operation of the Building.
6. Tenant shall not place a load upon any floor of the Building or Premises
which exceeds the load per square foot which such floor was designed to carry
and which is allowed by law. Heavy objects shall, if considered necessary by
Landlord, stand on such platforms as determined by Landlord to be necessary to
properly distribute the weight, which platforms shall be provided at Tenant's
expense. The persons employed to move such equipment in or out of the Project
must be acceptable to Landlord. Landlord will not be responsible for loss of,
or damage to, any such equipment or other property from any cause, and all
damage done to the Project by maintaining or moving such equipment or other
property shall be repaired at the expense of Tenant.
7. Tenant agrees to cooperate fully with Landlord to assure the most effective
operation of the Building's heating and air-conditioning and to comply with any
governmental energy-saving rules, laws or regulations of which Tenant has actual
notice.
8. Landlord reserves the right to exclude from the Building between the hours
of 6 P.M. and 7 A.M. or such other hours as may be established from time to
time by Landlord, and on Sundays and Legal Holidays, any person unless that
person is known to the person or employee in charge of the Building and has a
pass or is properly identified. Tenant shall be responsible for all persons for
whom it requests passes and shall be liable to Landlord for all acts of such
persons. Landlord shall not be liable for damages for any error with regard to
the admission to or exclusion from the Building of any person.
9. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall by thrown therein. The expense
of any breakage, stoppage or damage resulting from the violation of this rule
shall be borne by the Tenant who, or whose employees or invitees, shall have
caused it.
10. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise to the
general public in or on the Premises. Tenant shall not make any room-to-room
solicitation of business
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from other tenants in the Project. Canvassing, soliciting and distribution of
handbills or any other written material, and peddling in the Project are
prohibited, and Tenant shall cooperate to prevent such activities.
11. Tenant shall not install any radio or television antenna, loudspeaker or
other devices on the roof or exterior walls of the Project nor shall Tenant
install any exterior lighting, amplifiers or similar devices or use in or about
the Premises any advertising medium which may be heard or seen outside the
Premises, such as flashing lights, searchlights, loudspeakers, phonographs or
radio broadcasts. Tenant shall not interfere with radio or television
broadcasting or reception from or in the Project or elsewhere.
12. Tenant shall not mark, drive nails, screw or drill into the partitions,
woodwork or plaster or in any way deface the Premises or any part thereof,
except in accordance with normal decorating practices. Landlord reserves the
right to direct electricians as to where and how telephone and telegraph wires
are to be introduced to the Premises. Tenant shall not cut or bore holes for
wires. Tenant shall not affix any floor covering to the floor of the Premises
in any manner except as approved by Landlord. Tenant shall repair any damage
resulting from noncompliance with this rule.
13. Tenant shall store all its trash and garbage within its Premises or in
other facilities provided by Landlord. Tenant shall not place in any trash box
or receptacle any material which cannot be disposed of in the ordinary and
customary manner of trash and garbage disposal. All garbage and refuse disposal
shall be made in accordance with directions issued from time to time by
Landlord.
14. The Premises shall not be used for the storage of merchandise held for sale
to the general public, or for lodging or for manufacturing of any kind, nor
shall the Premises be used for any improper, immoral or objectionable purpose.
No cooking shall be permitted on the Premises without Landlord's consent, except
that use by Tenant of Underwriters' Laboratory approved equipment for brewing
coffee, tea, hot chocolate and similar beverages or use of microwave ovens for
employee use shall be permitted, provided that such equipment and use is in
accordance with all applicable federal, state, county and city laws, codes,
ordinances, rules and regulations.
15. Requests by Tenant relating to the performance of Landlord's maintenance
obligations under this Lease will be attended to only upon appropriate
application to the Building or Project management office (as appropriate) by an
authorized representative of Tenant whose identity shall be designated to
Landlord in writing. Employees of Landlord shall not perform any
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work or do anything outside of their regular duties unless under special
instructions from Landlord, and no employee of Landlord will admit any person
(Tenant or otherwise) to any office without specific instructions from Landlord.
16. Landlord may waive any one or more of these Rules and Regulations for the
benefit of Tenant or any other tenant, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of Tenant or any
other tenant, nor prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the tenants of the Building or Project.
Landlord reserves the right to make such other and reasonable and
nondiscriminatory Rules and Regulations as, in its judgment, may from time to
time be needed for safety and security, for care and cleanliness of the Project
and for the preservation of good order therein.
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Exhibit F
78
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AMENDMENT TO EMPLOYMENT SECURITY AGREEMENT
This Amendment to Employment Security Agreement (this "Amendment")
dated as of November 21, 1995 is made between SC Bancorp ("Bancorp") and
Southern California Bank ("Bank") (collectively referred to as "Employers") and
David McCoy ("Executive"), with reference to the following facts:
A. Employers and Executive are parties to that certain Employment
Security Agreement dated as of September 15, 1994 (the "Employment Security
Agreement").
B. Employers and Executive desire to amend the Employment Security
Agreement as hereinafter provided.
NOW, THEREFORE, for good and valuable consideration, it is agreed as
follows:
1. AMENDMENTS.
Section 3, Subparagraph B.(iv) of the Employment Security Agreement
shall be amended to read in full as follows:
(iv) there is a relocation of the Executive's principal business
office by more than ten (10) miles, and (a) the Executive's
new commute is more than fifty (50) miles from the
Executive's current primary residence or (b) the Executive's
new commute is more than the Executive's current commute
which is at least 50 miles.
Section 7, Subparagraph C shall be deleted in its entirety and amended
to read in full as follows:
Intentionally Omitted.
2. EFFECT OF AMENDMENTS.
All references in the Employment Security Agreement to this
"Agreement" shall be references to the Employment Security Agreement as amended
by this Amendment. Except as amended by
<PAGE>
this Amendment, each of the provisions of the Employment Security Agreement
shall remain in full force and effect.
3. COUNTERPARTS.
This Amendment may be executed by the parties hereto in counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
SC BANCORP
By:
- -------------------- --------------------------
David McCoy Larry Hartwig
President and Chief Executive
Officer
SOUTHERN CALIFORNIA BANK
By:
-------------------------
Larry Hartwig
President and Chief Executive
Officer
<PAGE>
AMENDMENT TO EMPLOYMENT SECURITY AGREEMENT
This Amendment to Employment Security Agreement (this "Amendment")
dated as of November 21, 1995 is made between SC Bancorp ("Bancorp") and
Southern California Bank ("Bank") (collectively referred to as "Employers") and
Bruce Roat ("Executive"), with reference to the following facts:
A. Employers and Executive are parties to that certain Employment
Security Agreement dated as of March 17, 1995 (the "Employment Security
Agreement").
B. Employers and Executive desire to amend the Employment Security
Agreement as hereinafter provided.
NOW, THEREFORE, for good and valuable consideration, it is agreed as
follows:
1. AMENDMENTS.
Section 3, Subparagraph B.(iv) of the Employment Security Agreement
shall be amended to read in full as follows:
(iv) there is a relocation of the Executive's principal business
office by more than ten (10) miles, and (a) the Executive's
new commute is more than fifty (50) miles from the
Executive's current primary residence or (b) the Executive's
new commute is more than the Executive's current commute
which is at least 50 miles.
Section 7, Subparagraph C shall be deleted in its entirety and amended
to read in full as follows:
Intentionally Omitted.
2. EFFECT OF AMENDMENTS.
All references in the Employment Security Agreement to this
"Agreement" shall be references to the Employment Security Agreement as amended
by this Amendment. Except as amended by
<PAGE>
this Amendment, each of the provisions of the Employment Security Agreement
shall remain in full force and effect.
3. COUNTERPARTS.
This Amendment may be executed by the parties hereto in counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
SC BANCORP
By:
- ------------------ --------------------------
Bruce Roat Larry Hartwig
President and Chief Executive
Officer
SOUTHERN CALIFORNIA BANK
By:
--------------------------
Larry Hartwig
President and Chief Executive
Officer
<PAGE>
EMPLOYMENT SECURITY AGREEMENT
This EMPLOYMENT SECURITY AGREEMENT (the "Agreement") by and among SC
BANCORP, a California corporation (the "Company"), SOUTHERN CALIFORNIA BANK, a
California corporation and a wholly owned subsidiary of the Company (the
"Bank"), and Mark B. Metzinger (the "Executive"), is entered into as of May 1,
1995 (the "Agreement Date").
W I T N E S S E T H
WHEREAS, the Company and the Bank wish to assure themselves and the
Executive of continuity of senior management during the term of this Agreement
and to provide the Executive with certain termination benefits in the event the
Executive's employment is terminated under certain circumstances; and
WHEREAS, should the possibility of a change in control of the Company
arise, the Board of Directors believes it imperative that the Company, the Bank
and the Board be able to rely upon the Executive to continue in his position,
and that the Company and the Bank be able to receive and rely upon the
Executive's advice,
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<PAGE>
if it requests such advice, as to the best interests of the Company, without
concern that he might be distracted by the personal uncertainties and risks
created by the possibility of a change in control; and
WHEREAS, should the possibility of a change in control arise, in addition
to the Executive's regular duties, the Executive may be called upon to assist in
the assessment of such possible change in control, to advise management and the
Board as to whether such change in control would be in the best interests of the
Company and to take such other actions as the Board might determine to be
appropriate;
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties do hereby agree as follows:
SECTION 1. TERM OF AGREEMENT
This Agreement shall be effective as of the Agreement Date and shall
continue in effect until the Expiration Date (as defined below). The
"Expiration Date" shall initially be July 31, 1996, but commencing on August 1,
1995 and each August 1 thereafter, the Expiration Date shall automatically be
extended
2
<PAGE>
by one additional year unless, not later than April 30 of such year, the
Company shall have given notice to the Executive that it does not wish to
extend the Expiration Date; PROVIDED, HOWEVER, that if a Change in Control (as
defined in Section 2, below) shall have occurred prior to the original or
extended Expiration Date, the Expiration Date shall automatically become the
second anniversary of the last day of the month in which the Change in Control
occurred. Notwithstanding the foregoing, the Expiration Date shall be any
earlier date on which the Executive's employment with the Company or the Bank
terminates, in the event such termination occurs prior to a Change in Control.
SECTION 2. DEFINITION OF "CHANGE IN CONTROL"
For purposes of the Agreement, a "Change in Control" shall be deemed to
have occurred if and when:
(a) the Company shall consummate a merger or consolidation (a
"Transaction") with another corporation; PROVIDED, HOWEVER, that
a Change of Control shall not be deemed to have occurred with
respect to a Transaction if the beneficial owners of the
outstanding shares entitled to vote in the election of directors
immediately prior to such Transaction will beneficially own more
than fifty percent (50%) of the outstanding shares entitled to
vote in the election of directors of the
3
<PAGE>
corporation resulting from the consummation of the Transaction;
or
(b) thirty percent (30%) of the Company's securities then entitled to
vote in the election of directors shall be acquired by any
"person" (as such term is used in Sections 13(d) of the
Securities Exchange Act of 1934, as amended); or
(c) during any period of twenty-four (24) consecutive months,
individuals who at the beginning of such period were members of
the Board of Directors of the Company (the "Incumbent Board")
shall cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company, provided that any
person becoming a director subsequent to the beginning of such
period whose election or nomination for election was approved by
a vote of at least seventy-five percent (75%) of the directors
comprising the Incumbent Board shall be, for purposes hereof,
considered as though such person were a member of the Incumbent
Board; or
(d) the Company shall sell substantially all of its assets to another
corporation.
SECTION 3. COVERED TERMINATION
The termination benefits described in Section 4 hereof shall be provided to
the Executive in the event that his employment with the Company or the Bank is
terminated following a Change of Control on account of a "Covered Termination".
"Covered Termination" shall mean (i) termination of employment by the
Company or the Bank other than for "Cause" as
4
<PAGE>
described below or (ii) termination of employment by the Executive for "Good
Reason" as described below.
A. TERMINATION BY COMPANY OR BANK FOR CAUSE.
For purposes hereof, the Company and the Bank shall have "Cause" to
terminate the Executive's employment if:
(i) the Executive is grossly negligent or engages in willful
misconduct in the performance of his material duties; or
(ii) the Executive commits an act or acts of dishonesty resulting or
intended to result directly or indirectly in gain or personal
enrichment at the expense of the Company or the Bank; or
(iii) the Executive discloses to a third party information that is of a
confidential or proprietary nature to the Company or the Bank,
other than as appropriate in the normal course of the performance
of his duties; or
(iv) the Executive suffers from an illness, injury or other incapacity
that prevents him from performing his material duties for a total
of six (6) months, whether or not consecutive, within a twelve
(12) month period; or
(v) the Executive's death occurs.
B. TERMINATION BY EXECUTIVE FOR GOOD REASON.
For purposes hereof, following a Change in Control the Executive may
terminate his employment for Good Reason if:
5
<PAGE>
(i) the Executive's then-current level of annual base salary (whether
payable by the Company or the Bank) is reduced; or
(ii) there is any reduction in the employee benefit coverage provided to
the Executive (including pension, profit sharing and welfare
benefits and perquisites, but not including incentive bonuses) from
the coverage levels in effect immediately prior to the Change in
Control, unless, however, the Company or the Bank provides
substantially equivalent employee benefits to the Executive; or
(iii) the Executive suffers a material diminution in his title, position,
reporting relationship, responsibilities, authority or offices; or
(iv) there is a relocation of the Executive's principal business office
by more than fifty (50) miles from its existing location; or
(v) the Company fails to obtain assumption of this agreement by any
successor or assign of the Company;
PROVIDED, HOWEVER, that any termination by the Executive for Good Reason must be
made in good faith.
C. NOTICE.
Notwithstanding the foregoing provisions of this Section 3, no such
termination of the Executive's employment for Good Reason under paragraph B
above shall be treated as a Covered Termination unless (i) the Executive shall
give written notice to the Company, not later than thirty (30) days prior to the
effective date of any such termination for Good Reason and within six (6) months
after the date the Executive first becomes entitled to
6
<PAGE>
terminate for Good Reason on account of the event(s) forming the basis for such
termination, setting forth in specific detail the basis for such termination for
Good Reason, and (ii) the Company or the Bank shall not, within thirty (30) days
after receipt of such notice, take actions reasonably acceptable to the
Executive to remedy the circumstances leading to the termination for Good
Reason.
SECTION 4. CONSEQUENCES OF COVERED TERMINATION
In the event that the employment of the Executive shall have been terminated
after a Change in Control in a manner that shall constitute a Covered
Termination under Section 3 above, the Company shall make payments to, and
provide benefit coverage for, the Executive as described below in this Section
4.
A. BASE SALARY.
The Executive shall receive an initial installment (the "Initial"
Installment") equal to one-half of the highest annual base salary amount paid
(by either the Company or the Bank) to the Executive within the three years
preceding the Covered Termination. The Initial Installment shall be paid to the
Executive within fifteen (15) business days following the Covered Termination.
In addition, the Executive shall receive four (4)
7
<PAGE>
subsequent installments, each equal to one-fourth of the highest annual base
salary amount paid to the Executive within the three years preceding the Covered
Termination (each such installment a "Quarterly Installment", and in the
aggregate, the "Quarterly Installments"). The first Quarterly Installment shall
be paid to the Executive within one hundred and eighty days (180) following the
payment of the Initial Installment. The remaining three Quarterly Installments
shall be paid to the Executive within one hundred and twenty (120) days of the
payment of the prior Quarterly Installment. The highest annual base salary
amount shall not include any bonuses awarded to the Executive.
B. STOCK OPTIONS.
Immediately upon a Covered Termination, any stock options granted to the
Executive under any Company incentive plan that were not fully vested and
exercisable shall become fully vested and immediately exercisable. Such options
will be exercisable for a period of 90 days from the date of the Covered
Termination (or such greater period as may be provided in the related plan).
Any restrictions on payment or transfer of previously granted incentive awards
shall immediately lapse.
C. WELFARE BENEFITS.
8
<PAGE>
The Company and the Bank shall continue to maintain, in full force and
effect, any "Welfare Benefits," such as life insurance coverage and health and
disability benefits, which were being provided to the Executive at the time of
the Covered Termination during the "Continuation Period." The Continuation
Period shall mean the eighteen (18) month period following the date of a Covered
Termination.
Notwithstanding the above, the Company or the Bank may provide coverage and
benefits under separate insured arrangements that provide benefits substantially
identical to those being provided to the Executive at the time of the Covered
Termination.
In addition, the Executive's right to any particular type of Welfare Benefit
shall be subject to cancellation by the Company or the Bank if the Executive
obtains alternative coverage of a similar type during the Continuation Period
that is at least as favorable to the Executive as the corresponding Welfare
Benefit. The Executive shall be obligated to notify the Company of any such
alternative coverage within thirty (30) days of it first becoming applicable to
him.
D. WITHHOLDING FOR TAXES.
All payments required to be made by the Company to the Executive under this
Agreement shall be subject to the
9
<PAGE>
withholding of such amounts, if any, relating to tax, excise tax and other
payroll deductions as the Company may reasonably determine it should withhold
pursuant to any applicable law or regulation.
SECTION 5. ARBITRATION
Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration, conducted before a panel of three
arbitrators in the State of California, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. If the Company or the Bank
is found to have breached this Agreement, the Company shall bear the expense of
the arbitration proceeding and shall reimburse the Executive for all of his
reasonable costs and expenses relating to such arbitration proceeding,
including, without limitation, reasonable attorneys' fees and expenses. In no
event shall the Executive be required to reimburse the Company or the Bank for
any of the costs or expenses relating to such arbitration proceeding.
10
<PAGE>
SECTION 6. NOTICES
All notices, requests, demands and other communications provided for by this
Agreement shall be in writing and shall be sufficiently given if and when mailed
in the continental United States by registered or certified mail or personally
delivered to the party entitled thereto at the address stated below or to such
changed address as the addressee may have given by a similar notice:
TO THE COMPANY:
SC Bancorp
3800 East LaPalma Avenue
Anaheim, California 92807
TO THE EXECUTIVE:
Mark B. Metzinger
33935 Faeroe Bay
Dana Point, California 92629
SECTION 7. GENERAL PROVISIONS
A. ENTIRETY OF AGREEMENT.
This Agreement constitutes the entire agreement between the Company, the Bank
and the Executive relating to the subject matter hereof and shall supersede any
right under any other agreement relating to the subject matter hereof between
the Company or the Bank and the Executive existing as of the
11
<PAGE>
Agreement Date. Any compensation or benefits to which the Executive is entitled
under this Agreement shall be provided based solely upon its terms, without
regard to any materials used in the preparation or consideration of this
Agreement, including any summary of terms or estimate of amounts relating to
this Agreement.
B. ENFORCEABILITY.
If any provision of this Agreement shall be determined by a court of
competent jurisdiction to be, in whole or in part, unenforceable or contrary to
any statute, law, order, rule, regulation, directive or other action of any
federal or state regulatory agency having jurisdiction over the Company or its
subsidiary, then the remaining provisions of this Agreement shall remain in full
force and effect to the fullest extent permitted by law. The validity,
interpretation, performance and enforcement of this Agreement shall be governed
by the laws of the State of California, without giving effect to the principles
of conflict of laws thereof.
C. MITIGATION.
The Executive shall not be obligated to seek other employment in mitigation
of the amounts payable and benefits to be provided under this Agreement.
Executive shall be obligated, however, to
12
<PAGE>
disclose to the Company his earned income (within the meaning of Internal
Revenue Code Section 911(d)(2)(A)) during the period ending eighteen (18) months
following the Covered Termination (the "Repayment Period"), and to remit to the
Company such earned income up to the amount of the Quarterly Installments. The
Company shall have the right to request Executive to produce reasonable evidence
substantiating the amount of Executive's earned income during the Repayment
Period.
D. ASSIGNMENT OF INTEREST.
No right to or interest in any payments shall be assignable by the Executive;
PROVIDED, HOWEVER, that this Agreement shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, heirs, distributees, devisees and legatees after the Executive's
death to the extent of any payments due in respect of the Executive hereunder.
E. COMPANY, BANK AND SUCCESSORS.
This Agreement shall be binding upon and inure to the benefit of the Company,
the Bank and any successor thereof including, without limitation, any
corporation or corporations acquiring directly or indirectly all or
substantially all of the assets of the Company, whether by merger,
consolidation, sale or otherwise
13
<PAGE>
(and such successor shall thereafter be deemed "the Company" for the purposes of
this Agreement), but shall not otherwise be assignable by the Company.
F. AMENDMENT, MODIFICATION AND WAIVER.
No provision of this Agreement may be amended, modified or waived unless such
amendment, modification or waiver shall be agreed to in a written agreement
signed by the Executive and by a duly authorized Company officer.
G. NO GUARANTEE OF EMPLOYMENT.
The parties hereto explicitly acknowledge that notwithstanding any provision
to the contrary contained herein, this Agreement shall not, in any way, be
interpreted to provide the Executive with any fixed or minimum term of
employment with the Company or the Bank.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SC BANCORP
BY
------------------------
Name:
Title:
SOUTHERN CALIFORNIA BANK
14
<PAGE>
BY
------------------------
Name:
Title:
------------------------
Mark B. Metzinger
15
<PAGE>
AMENDMENT TO EMPLOYMENT SECURITY AGREEMENT
This Amendment to Employment Security Agreement (this "Amendment")
dated as of November 21, 1995 is made between SC Bancorp ("Bancorp") and
Southern California Bank ("Bank") (collectively referred to as "Employers") and
Mark B. Metzinger ("Executive"), with reference to the following facts:
A. Employers and Executive are parties to that certain Employment
Security Agreement dated as of May 1, 1995 (the "Employment Security
Agreement").
B. Employers and Executive desire to amend the Employment Security
Agreement as hereinafter provided.
NOW, THEREFORE, for good and valuable consideration, it is agreed as
follows:
1. AMENDMENTS.
Section 3, Subparagraph B.(iv) of the Employment Security Agreement
shall be amended to read in full as follows:
(iv) there is a relocation of the Executive's principal business
office by more than ten (10) miles, and (a) the Executive's
new commute is more than fifty (50) miles from the
Executive's current primary residence or (b) the Executive's
new commute is more than the Executive's current commute
which is at least 50 miles.
Section 7, Subparagraph C shall be deleted in its entirety and amended
to read in full as follows:
Intentionally Omitted.
2. EFFECT OF AMENDMENTS.
All references in the Employment Security Agreement to this
"Agreement" shall be references to the Employment Security Agreement as amended
by this Amendment. Except as amended by
-1-
<PAGE>
this Amendment, each of the provisions of the Employment Security Agreement
shall remain in full force and effect.
3. COUNTERPARTS.
This Amendment may be executed by the parties hereto in counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
SC BANCORP
By:
- ------------------ -------------------------
Mark B. Metzinger Larry Hartwig
President and Chief Executive
Officer
SOUTHERN CALIFORNIA BANK
By:
---------------------------
Larry Hartwig
President and Chief Executive
Officer
-2-
128569
<PAGE>
AMENDMENT TO EMPLOYMENT SECURITY AGREEMENT
This Amendment to Employment Security Agreement (this "Amendment")
dated as of November 21, 1995 is made between SC Bancorp ("Bancorp") and
Southern California Bank ("Bank") (collectively referred to as "Employers") and
Ann McPartlin ("Executive"), with reference to the following facts:
A. Employers and Executive are parties to that certain Employment
Security Agreement dated as of September 15, 1994 (the "Employment Security
Agreement").
B. Employers and Executive desire to amend the Employment Security
Agreement as hereinafter provided.
NOW, THEREFORE, for good and valuable consideration, it is agreed as
follows:
1. AMENDMENTS.
Section 3, Subparagraph B.(iv) of the Employment Security Agreement
shall be amended to read in full as follows:
(iv) there is a relocation of the Executive's principal business
office by more than ten (10) miles, and (a) the Executive's
new commute is more than fifty (50) miles from the
Executive's current primary residence or (b) the Executive's
new commute is more than the Executive's current commute
which is at least 50 miles.
Section 7, Subparagraph C shall be deleted in its entirety and amended
to read in full as follows:
Intentionally Omitted.
2. EFFECT OF AMENDMENTS.
All references in the Employment Security Agreement to this
"Agreement" shall be references to the Employment Security Agreement as amended
by this Amendment. Except as amended by
-1-
<PAGE>
this Amendment, each of the provisions of the Employment Security Agreement
shall remain in full force and effect.
3. COUNTERPARTS.
This Amendment may be executed by the parties hereto in counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
SC BANCORP
By:
- ------------------------ -------------------------
Ann McPartlin Larry Hartwig
President and Chief Executive
Officer
SOUTHERN CALIFORNIA BANK
By:
--------------------------
Larry Hartwig
President and Chief Executive
Officer
-2-
<PAGE>
AMENDMENT TO EMPLOYMENT SECURITY AGREEMENT
This Amendment to Employment Security Agreement (this "Amendment")
dated as of November 21, 1995 is made between SC Bancorp ("Bancorp") and
Southern California Bank ("Bank") (collectively referred to as "Employers") and
Michael V. Cummings ("Executive"), with reference to the following facts:
A. Employers and Executive are parties to that certain Employment
Security Agreement dated as of September 15, 1994 (the "Employment Security
Agreement").
B. Employers and Executive desire to amend the Employment Security
Agreement as hereinafter provided.
NOW, THEREFORE, for good and valuable consideration, it is agreed as
follows:
1. AMENDMENTS.
Section 3, Subparagraph B.(iv) of the Employment Security Agreement
shall be amended to read in full as follows:
(iv) there is a relocation of the Executive's principal business
office by more than ten (10) miles, and (a) the Executive's
new commute is more than fifty (50) miles from the
Executive's current primary residence or (b) the Executive's
new commute is more than the Executive's current commute
which is at least 50 miles.
Section 7, Subparagraph C shall be deleted in its entirety and amended
to read in full as follows:
Intentionally Omitted.
2. EFFECT OF AMENDMENTS.
All references in the Employment Security Agreement to this
"Agreement" shall be references to the Employment Security Agreement as amended
by this Amendment. Except as amended by
-1-
<PAGE>
this Amendment, each of the provisions of the Employment Security Agreement
shall remain in full force and effect.
3. COUNTERPARTS.
This Amendment may be executed by the parties hereto in counterparts,
each of which when so executed and delivered shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first above written.
SC BANCORP
By:
- --------------------- --------------------------
Michael V. Cummings Larry Hartwig
President and Chief Executive
Officer
SOUTHERN CALIFORNIA BANK
By:
--------------------------
Larry Hartwig
President and Chief Executive
Officer
-2-
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement of SC
Bancorp on Form S-8 (No. 33-38666) of our report dated January 24, 1996,
appearing in the Annual Report on Form 10-K of SC Bancorp for the year ended
December 31, 1995.
/s/ DELOITTE & TOUCHE LLP
Los Angeles, California
March 25, 1996
<TABLE> <S> <C>
<PAGE>
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<PERIOD-START> JAN-01-1995
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0
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