exv10w2






Exhibit 10.2




 

 






LEASE AGREEMENT




by and between




SANDPOINT CENTER, LLC,

an Idaho limited liability company,

and SANDPOINT CENTER II, LLC,

an Idaho limited liability company




collectively, as “Landlord”




and




PANHANDLE STATE BANK, 
an Idaho state charted bank




as “Tenant”




 

 






 









 












TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page No.	 
	SECTION 1 — FUNDAMENTAL TERMS	 	 	1	 
	 	1.1	 	 	Building
	 	 	1	 
	 	1.2	 	 	Land
	 	 	1	 
	 	1.3	 	 	Premises
	 	 	1	 
	 	1.4	 	 	Commencement Date
	 	 	1	 
	 	1.5	 	 	Base Term
	 	 	1	 
	 	1.6	 	 	Extension Options
	 	 	1	 
	 	1.7	 	 	Minimum Rent
	 	 	1	 
	 	1.8	 	 	Use
	 	 	1	 
	 	1.9	 	 	Notice Addresses
	 	 	2	 
	 	1.10	 	 	Exhibits
	 	 	2	 
	SECTION 2 — PREMISES	 	 	2	 
	 	2.1	 	 	Lease to Tenant
	 	 	2	 
	 	2.2	 	 	Condition of Premises
	 	 	2	 
	SECTION 3 — TERM	 	 	2	 
	 	3.1	 	 	Lease Term
	 	 	2	 
	 	3.2	 	 	Extension Options
	 	 	3	 
	SECTION 4 — RENT	 	 	3	 
	 	4.1	 	 	Minimum Rent
	 	 	3	 
	 	4.2	 	 	Payment of Minimum Rent
	 	 	4	 
	 	4.3	 	 	Net Lease
	 	 	5	 
	SECTION 5 — TAXES AND UTILITIES; CAPITAL RESERVE ACCOUNT	 	 	5	 
	 	5.1	 	 	Real Property Taxes
	 	 	5	 
	 	5.2	 	 	Payment in Installments
	 	 	5	 
	 	5.3	 	 	Right to Contest
	 	 	6	 
	 	5.4	 	 	Personal Property Taxes
	 	 	6	 
	 	5.5	 	 	Utility Charges
	 	 	6	 
	 	5.6	 	 	Assessments
	 	 	6	 
	 	5.7	 	 	Capital Reserve Account
	 	 	6	 
	SECTION 6 — CONDUCT OF BUSINESS	 	 	7	 
	 	6.1	 	 	Use of Premises
	 	 	7	 
	 	6.2	 	 	Liens and Encumbrances
	 	 	7	 
	 	6.3	 	 	Hazardous Substances
	 	 	7	 
	 	6.4	 	 	Signs
	 	 	8	 
	SECTION 7 — LETTER OF CREDIT	 	 	8	 
	SECTION 8 — MAINTENANCE OF PREMISES	 	 	9	 
	SECTION 9 — ALTERATIONS	 	 	10	 
	SECTION 10 — SURRENDER OF PREMISES	 	 	10	 
	 	10.1	 	 	Condition of Premises
	 	 	10	 
	 	10.2	 	 	Removal at Termination
	 	 	10	 
	SECTION 11 — INSURANCE AND INDEMNITY	 	 	10	 
	 	11.1	 	 	Liability Insurance
	 	 	10	 
	 	11.2	 	 	Casualty Insurance
	 	 	11	 






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	 	 	 	 	 	 	Page No.	 
	 	11.3	 	 	Insurance Policy Requirements
	 	 	11	 
	 	11.4	 	 	Restoration of Damage
	 	 	12	 
	 	11.5	 	 	Form of Insurance
	 	 	12	 
	 	11.6	 	 	Indemnification
	 	 	12	 
	SECTION 12 — TRANSFER AND SUBLETTING	 	 	13	 
	 	12.1	 	 	Transfer
	 	 	13	 
	 	12.2	 	 	Subleasing
	 	 	13	 
	 	12.3	 	 	Sublease Recognition
	 	 	13	 
	 	12.4	 	 	Recognition Agreement
	 	 	15	 
	 	12.5	 	 	Landlord Put Right
	 	 	15	 
	SECTION 13 — EMINENT DOMAIN	 	 	15	 
	 	13.1	 	 	Substantial Taking
	 	 	15	 
	 	13.2	 	 	Partial Taking
	 	 	15	 
	 	13.3	 	 	Transfer in Lieu of Condemnation
	 	 	16	 
	SECTION 14 — DEFAULT	 	 	16	 
	 	14.1	 	 	Payment Default
	 	 	16	 
	 	14.2	 	 	Non-Monetary Default
	 	 	16	 
	 	14.3	 	 	Credit Default
	 	 	16	 
	SECTION 15 — REMEDIES	 	 	16	 
	 	15.1	 	 	Termination; Retake Possession
	 	 	16	 
	 	15.2	 	 	Draw Upon Letter of Credit
	 	 	17	 
	 	15.3	 	 	Damages for Default
	 	 	17	 
	 	15.4	 	 	Continuation of Lease
	 	 	17	 
	 	15.5	 	 	Receipt of Moneys
	 	 	17	 
	 	15.6	 	 	No Waiver
	 	 	18	 
	 	15.7	 	 	Tenant’s Late Payments; Late Charges
	 	 	18	 
	 	15.8	 	 	Mitigation
	 	 	18	 
	SECTION 16 — ACCESS BY LANDLORD	 	 	18	 
	SECTION 17 — SUBORDINATION; ESTOPPEL	 	 	19	 
	 	17.1	 	 	Subordination
	 	 	19	 
	 	17.2	 	 	Estoppel
	 	 	19	 
	SECTION 18 — QUIET ENJOYMENT	 	 	19	 
	SECTION 19 — TENANT FINANCING	 	 	19	 
	SECTION 20 — MISCELLANEOUS	 	 	19	 
	 	20.1	 	 	Notices
	 	 	19	 
	 	20.2	 	 	Successors or Assigns
	 	 	20	 
	 	20.3	 	 	Brokerage Commissions
	 	 	20	 
	 	20.4	 	 	Partial Invalidity
	 	 	20	 
	 	20.5	 	 	Recording
	 	 	20	 
	 	20.6	 	 	Holding Over
	 	 	20	 
	 	20.7	 	 	Legal Expenses
	 	 	20	 
	 	20.8	 	 	Force Majeure
	 	 	20	 
	 	20.9	 	 	Authority
	 	 	21	 
	 	20.10	 	 	Headings
	 	 	21	 
	 	20.11	 	 	Gender
	 	 	21	 
	 	20.12	 	 	Counterparts
	 	 	21	 






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	 	 	 	 	 	 	Page No.	 
	 	20.13	 	 	Entire Agreement; Amendments
	 	 	21	 
	 	20.14	 	 	Governing Law
	 	 	21	 
	SECTION 21 — PURCHASE OPTION	 	 	21	 
	 	21.1	 	 	Option to Purchase
	 	 	21	 
	 	21.2	 	 	Title Report
	 	 	21	 
	 	21.3	 	 	Purchase Price
	 	 	22	 
	 	21.4	 	 	Closing Procedure
	 	 	22	 






EXHIBITS




	 	 	 	 	 
	Exhibit A-1

	 	Legal Description — Sandpoint Center
	 	 
	Exhibit A-2

	 	Legal Description — Parking Lot	 	 
	Exhibit B

	 	Letter of Credit	 	 
	Exhibit C

	 	Memorandum of Lease	 	 







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LEASE AGREEMENT




     THIS LEASE AGREEMENT (“Lease”) is made as of the 28th day of August, 2009, by and between
SANDPOINT CENTER, LLC, an Idaho limited liability company, and SANDPOINT CENTER II, LLC, an Idaho
limited liability company, as tenants-in-common (collectively, “Landlord”), and PANHANDLE STATE
BANK, an Idaho state charted bank (“Tenant”). For and in consideration of the mutual promises,
covenants and conditions set forth in this Lease, Landlord and Tenant agree as follows:



SECTION 1 — FUNDAMENTAL TERMS




     The following definitions shall apply for purposes of this Lease, except as otherwise
specifically modified herein:



     1.1 Building. That certain three-story commercial office building with an agreed area
of 86,000 square feet commonly known as Sandpoint Center with the street address of 414 Church
Street, Sandpoint, Idaho.



     1.2 Land. The “Land’’ consists of the following: (a) that certain parcel of real
property upon which the Building is located which is more particularly described on the attached
Exhibit A-1, and (b) the parking lot located at the corner of 5th and Pine Street,
Sandpoint, Idaho, situated on the land more particularly described on the attached Exhibit
A-2.



     1.3 Premises. The “Premises” consist of the Building and the Land, collectively.



     1.4 Commencement Date. Means the date that Landlord acquires fee title to the
Premises.



     1.5 Base Term. Approximately twenty (20) years commencing on the Commencement Date and
terminating on the last day of the twentieth (20th) Lease Year. See Section 3.1.



     1.6 Extension Options. Tenant shall have three (3) ten (10) year extension options.
See Section 3.2.



     1.7 Minimum Rent. During the first five (5) Lease Years, Tenant shall pay annual
minimum Rent in the amount of One Million Six Hundred Thirty Five Thousand and No/100ths Dollars
($1,635,000.00). See Section 4.1(a). Upon commencement of each Option Term, Minimum Rent shall be
adjusted to current market rates. See Section 4.1(b). During the Term, Minimum Rent shall be
adjusted every five (5) Lease Years (excluding the first Lease Year of any Option Period). See
Sections 4.1(c) and (d).



     1.8 Use. Any lawful commercial or retail use, except as provided in Section 6.1.



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     1.9 Notice Addresses,




			
	          Landlord:	 	Sandpoint Center, LLC


	 
	          and to:	 	Sandpoint Center II, LLC


	 
	          Tenant:	 	Panhandle State Bank

414 Church Street

P.O. Box 967

Sandpoint, ID 83864





     1.10 Exhibits. The following exhibits are made a part of this Lease:



          Exhibit A-1           Legal Description — Sandpoint Center




          Exhibit A-2           Legal Description — Parking Lot




          Exhibit B              
 Letter of Credit




          Exhibit C              
 Memorandum of Lease




SECTION 2 — PREMISES




     2.1 Lease to Tenant. Landlord hereby leases the Premises to Tenant, and Tenant hereby
leases the Premises from Landlord, subject to and within the benefits of the terms and conditions
of this Lease.



     2.2 Condition of Premises. Landlord has acquired the Premises from Tenant’s
affiliate, Intermountain Community Bancorp, an Idaho corporation (“ICB”). Tenant has occupied the
Premises since March, 2008, and is fully familiar with all aspects of the Premises. Accordingly,
Tenant accepts the Premises in an “AS IS” condition, with all existing improvements suitable to
Tenant, and subject to all applicable laws, ordinances, regulations, covenants and restrictions.
Landlord will have no obligation to perform or pay for any repair or work within the Premises
during the Term.



SECTION 3 — TERM




     3.1 Lease Term. The Base Term shall commence on the Commencement Date and shall
terminate at midnight on the last day of the twentieth (20th) Lease Year (the “Expiration Date”).
For purposes of this Lease, a “Lease Year” shall mean, in the case of the first Lease Year, the
twelve (12) calendar months plus any partial month following the Commencement Date. Thereafter, a
“Lease Year” shall be each successive twelve (12) month period following the expiration of the
first Lease Year.



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     3.2 Extension Options. Provided Tenant has not been in material default beyond the
expiration of any applicable notice and cure period of a monetary covenant or a material
non-monetary covenant under this Lease more than five (5) times in any ten (10) year period,
Tenant shall have the option to extend the Expiration Date for three (3) periods of ten (10) years
each (each an “Option Period”). To exercise an available extension option Tenant must give
Landlord written notice thereof (the “Option Notice”) not less than three hundred sixty (360) days
prior to the Expiration Date (as the same may be extended). If Tenant timely exercises an
available extension option, this Lease shall continue in effect as written, except that Minimum
Rent payable upon commencement of the applicable Option Period shall be adjusted as provided for
in Section 4.1(b) below. As used herein “Term” shall mean the Base Term and any exercised Option
Periods.



SECTION 4 — RENT




     4.1 Minimum Rent.



          (a) Base Term. Tenant shall pay to Landlord at the address specified in Section 1.9,
or at such other address as may be specified by Landlord from time to time, without notice, setoff
or deduction whatsoever, as fixed annual minimum rent during the Base Term, the amounts set forth
in Section 1.7 (“Minimum Rent”).




          (b) Option Periods. Tenant’s issuance of an Option Notice and Landlord’s receipt
thereof shall be sufficient to make this Lease binding for the applicable Option Period without
further act of the parties, who shall then be bound to take the steps required in the determination
of the Minimum Rent as specified herein. The Minimum Rent for each Option Period shall be an amount
equal to the fair market rental value of the Premises. In determining fair market rental,
consideration shall be given to the then current market rate for similarly improved properties for
uses comparable to the Tenant’s permitted use in the general vicinity of the Premises. If the
parties do not agree upon the Minimum Rent by the date that is one hundred twenty (120) days prior
to the Expiration Date (as the same may be extended) (the “Trigger Date"), then Minimum Rent shall
be determined by arbitration. The parties shall select a mutually agreeable arbitrator within ten
(10) days after the Trigger Date. The arbitrator selected must be a member of the American
Institute of Real Estate Appraisers, or if it shall not then be in existence, a member of the most
nearly comparable organization, and have a minimum of five (5) years experience in the Sandpoint,
Idaho office leasing market, be licensed by the State of Idaho and not be affiliated with either
party or involved in an active transaction in which either party is also involved. If the parties
are unable to agree on an arbitrator within such 10-day period, then either party may seek
appointment of an arbitrator by the Chief Judge of the District Court of County in which the
Premises are located. Within thirty (30) days after the arbitrator’s appointment, each party shall
submit its estimate of the fair market rental value of the Premises along with any documentary
evidence that it may have supporting its estimate. Within fourteen (14) days after the arbitrator’s
receipt of each party’s estimate and evidence, if any, the arbitrator shall select the estimate
that he or she determines is closest to the actual fair market rental value of the Premises. The
cost of the arbitrator shall be shared equally by Landlord and Tenant. In no event shall the
Minimum Rent for the Option Period be less than the Minimum Rent payable prior to the Expiration
Date (as the same may be extended).




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          (c) Adjustment at Sixth and Sixteenth Lease Years of Base Term and Sixth Lease Year of
Option Periods. Effective as of the first day of the sixth (6th) and sixteenth (16th) Lease
Years, and as of the first day of the sixth (6th) Lease Year of any exercised Option Period (each,
an “Adjustment Date”) Minimum Rent will be determined by dividing the amount of Minimum Rent
payable prior to the applicable Adjustment Date by the index number of the United States
Department of Labor, Bureau of Labor Statistics U.S. Consumer Price Index, All Urban Consumers,
All Items, U.S. City Average (the “CPI”) published for the calendar month that is five (5) years
prior to the calendar month during which such Adjustment Date occurs, and then multiplying the
resulting amount by the index number for the CPI published for the calendar month during which the
Adjustment Date occurs. In the event that the CPI is not issued timely or is unavailable for any
reason, it is agreed that the Tenant shall pay the incremental difference retroactively when, as
and if, the CPI becomes available. If the CPI is no longer published, Landlord shall substitute a
mutually agreed upon inflation index which most closely follows the CPI or which has replaced the
CPI. No delay or failure by the Landlord to enforce this provision or any part thereof as to the
Tenant, shall be deemed to be a waiver hereof or prevent any subsequent or other enforcement
hereof. Notwithstanding anything herein to the contrary, (i) Minimum Rent following the first
(1st) Adjustment Date and any Adjustment Date occurring during an Option Period shall never be
less than one hundred and five percent (105%) or more than one hundred fifteen percent (115%) of
the amount of Minimum Rent payable immediately prior to such Adjustment Date, and (ii) Minimum
Rent following the second (2nd) Adjustment Date shall not be less than one hundred and five
percent (105%) or more than one hundred ten percent (110%) of the amount of Minimum Rent payable
immediately prior to such Adjustment Date.




          (d) Eleventh Lease Year Adjustment. Effective as of the first day of the eleventh
(11th) Lease Year Minimum Rent will be determined by multiplying the amount of Minimum Rent
payable in the tenth (10th) Lease Year by one hundred and fifteen percent (115%).




     4.2 Payment of Minimum Rent. Annual installments of Minimum Rent are due in advance on
or before the first day of each Lease Year. Tenant shall make its first payment of Minimum Rent for
the first Lease Year on the Commencement Date. Notwithstanding the foregoing, until the PSB Loan
has been paid in full, Tenant shall pay to Landlord on the Commencement Date and each anniversary
of the Commencement Date an amount equal to the amount of Minimum Rent payable for such Lease Year,
minus the Annual Loan Payments for such Lease Year. During the remainder of the applicable Lease
Year, Tenant shall pay, on behalf of Landlord, all regularly occurring principal, interest, and
reserve payments when due to the holder of the PSB Loan; provided, however, that Tenant shall not
be required to pay more than the amount of Minimum Rent due hereunder during any given Lease Year.
For purposes of this Section 4.2:



          (a) “Annual Loan Payments” means, with respect to any given Lease Year, all payments of
principal, interest, and other amounts (including, without limitation, reserve payments) which
shall become due and payable under the PSB Loan Documents during such Lease Year (excluding,
however, any amounts due at maturity or following acceleration of the PSB Loan).



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          (b) “PSB Loan” means that certain mortgage loan in the original principal amount of
$21,080,000 from Panhandle State Bank to Landlord secured by a deed of trust with respect to the
Property



          (c) “PSB Loan Documents” means, collectively, the promissory note, deed of trust, replacement
reserve agreement and any other documents evidencing the PSB Loan.



     4.3 Net Lease. In addition to Minimum Rent Tenant shall pay to Landlord (or provided
Tenant is not in default hereunder, directly to the appropriate third party, as applicable) all
other sums that this Lease requires Tenant to pay (the “Additional Rent”). It is the intent and
effect of this Lease that such rental paid by Tenant shall be an absolute net return to Landlord.
Landlord shall not be responsible for payment of any existing or future costs, expense, charge, or
premium under this Lease relative to the Premises leased to Tenant. As used herein the term “Rent”
refers to both Minimum Rent and Additional Rent.



SECTION 5 — TAXES AND UTILITIES; CAPITAL RESERVE ACCOUNT




     5.1 Real Property Taxes. Commencing on the Commencement Date and continuing
throughout the Term, Tenant will pay or cause to be paid, prior to delinquency, all real property
taxes and assessments now or hereafter levied or assessed against the Premises (the “Taxes”).
Notwithstanding the foregoing, Taxes shall not include (a) any inheritance, estate, succession,
transfer, gift, franchise, or capital stock tax; (b) any gross or net income taxes of Landlord; or
(c) any excise taxes imposed upon Landlord based upon gross or net rentals or other income
received by it (collectively, the “Excluded Taxes”), unless the present method of assessment or
taxation is changed so that the whole or any part of the taxes, assessments, levies or charges now
levied, assessed or imposed on real estate and improvements thereon are changed or discontinued
and as a substitute therefore, taxes, assessments, levies or charges are levied, assessed and/or
imposed wholly or partially upon Landlord in the form of one or more of the Excluded Taxes, in
which event Taxes will include the Excluded Taxes to the extent so levied, assessed or imposed.
Taxes will be prorated between the parties for any partial year after the Commencement Date or at
the expiration or other termination of this Lease. Tenant shall pay Taxes assessed against the
Premises directly to the taxing authority prior to delinquency and shall provide Landlord with
copies of paid tax receipts or other evidence of payment within ten (10) business days following
such payment. If Tenant fails to pay any Taxes when required to be paid hereunder and that failure
continues for more than five (5) business days after written notice from Landlord, then, in
addition to any other remedies available to Landlord under this Lease, Landlord may pay such
Taxes, in which event Tenant must immediately reimburse Landlord for the amount thus advanced by
Landlord, together with the administrative charge and interest at the Default Rate on such sums as
provided in Section 15.7. Any refunds, rebates and discounts received by Landlord in connection
with such Taxes shall be credited against the next installment of Rent due hereunder.



     5.2 Payment in Installments. If the taxes or assessments are payable in installments,
only installments coming due during the Term will be the responsibility of Tenant under this Lease.
If either party’s consent is required to cause the bonding of any assessment or to contest any
taxes, the party will not unreasonably withhold or delay its consent upon request.



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     5.3 Right to Contest. Tenant will be permitted to contest any tax, assessment, lien
or other charge on the Premises claimed or asserted by any party if a good faith dispute exists as
to the amount or the obligation to pay. If the Premises are subjected to a lien as a result of
nonpayment, Tenant shall provide Landlord with adequate security or assurances reasonably
acceptable to Landlord that Tenant can and will satisfy the lien before enforcement against the
Premises. Any contest pursued by Tenant shall be completed at no cost or expense to Landlord.



     5.4 Personal Property Taxes. Tenant shall pay, before delinquency, all personal
property taxes assessed against its leasehold improvements, equipment, furniture, fixtures,
inventory and any of its personal property in, on or about the Premises.



     5.5 Utility Charges. Tenant is responsible for all utility charges from and after the
Commencement Date and agrees to pay, prior to delinquency, all charges for electricity, gas,
water, sewage and/or all other public and private service charges used in the Premises. Landlord
will not be liable for (and Tenant waives and releases Landlord from any claims arising in
connection with) any interruption, failure or unavailability of any utility services to the
Premises.



     5.6 Assessments. Tenant shall pay all assessments and other amounts required to be
paid with respect to the Premises under any documents of record as of the Effective Date or as to
which this Lease is otherwise subject. Such amounts will be paid and, as applicable, prorated in
the manner and at the times and otherwise as such amounts would be required to be paid under
Section 5.1 if such amounts were Taxes and will be subject to Landlord’s remedies as set forth in
such section or elsewhere in this Lease to the same extent as though such amounts were Taxes.



     5.7 Capital Reserve Account. Subject to Section 4.2 above, Commencing on the first day
of the eleventh (11th) Lease Year, and continuing on the first day of every Lease Year until the
twentieth (20th) Lease Year, Tenant shall remit the sum of Fifty Thousand Dollars ($50,000.00) to
Landlord to be held by Landlord as a capital reserve account (the “Capital Reserve Account”) for
the future payment of costs and expenses which may be incurred by Landlord following the Term for
the replacement of roofs, chimneys, gutters, downspouts, paving, curbs, ramps, driveways,
balconies, porches, patios, exterior walls, exterior doors and doorways, windows, elevators and
mechanical and HVAC equipment. Notwithstanding Tenant’s funding of the Capital Reserve Account,
Tenant shall not be relieved of its obligation to repair and maintain the Premises as provided
herein at its sole cost and expense throughout the Term without any use of the funds held in the
Capital Reserve Account, and Tenant shall at no time have any claim to or interest in the funds
held in the Capital Reserve Account to compensate or otherwise reimburse Tenant for making repairs
or replacements required of Tenant hereunder. Upon the expiration of the Term, Landlord shall
retain the Capital Reserve Account for purposes of making capital improvements or replacements on
the Property. Notwithstanding the forgoing, if Tenant exercises its first option to extend the
Lease Term under Section 3.2 above, then Tenant shall be entitled to disbursements from the Capital
Reserve Account to solely reimburse Tenant for the cost of replacement of capital items, which
shall be previously approved by Landlord in writing (not to be unreasonably withheld, conditioned,
or delayed), during the first Option Period. Funds shall be disbursed to Tenant upon presentation
to Landlord of (a) copies of paid invoices, (b) lien waivers from Tenant’s contractor, if any, and
(c) such other documentation as may be reasonably requested by Landlord. Landlord has no obligation
to deliver any additional funds to Tenant for any repair or work within the Premises



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during the Term except for the funds in the Capital Reserve Account as specifically provided in
this Section.




SECTION 6 — CONDUCT OF BUSINESS




     6.1 Use of Premises. Tenant may use the Premises for any lawful commercial or retail
purpose, provided however, that the Premises shall not be used for: (a) an off-track betting,
gaming or bingo establishment; (b) a flea market; (c) any use which produces fire, explosion or
other damaging or dangerous hazard, including the storage, display or sale of explosives or
fireworks; (d) an assembling, manufacturing, industrial, distilling, refining or smelting
facility; (e) an animal raising operation; (f) a massage parlor; (g) an adult type bookstore or
other establishment selling, renting, displaying or exhibiting pornographic or obscene materials
(including without limitation: magazines, books, movies, videos, photographs or so called “sexual
toys”) or providing adult type entertainment or activities (including, without limitation, any
displays of a variety involving, exhibiting or depicting sexual themes, nudity or lewd acts; (h) a
cemetery, crematorium, mausoleum, mortuary, funeral parlor or similar service establishment; (i)
any use which will materially impair or reduce the value of the Premises; or (j) any other use
prohibited by any document of record as of the Effective Date, or prohibited by any law or
regulation of the City of Sandpoint, State of Idaho, or any other governmental entity having
jurisdiction over the Premises. Tenant shall keep the Premises to be kept in good condition and
repair and shall not commit or allow waste of the Premises. Except as provided in this Section,
Tenant shall have sole rule making authority relative to the use of the Premises by Tenant, its
subtenants, and their respective agents, employees, contractors, licensees, and invitees.



     6.2 Liens and Encumbrances. Tenant must pay or cause to be paid all costs for work
done by it or caused to be done by it on, and for materials furnished to the Premises. Tenant shall
keep the Premises free and clear of all liens and encumbrances arising or growing out of its use
and occupancy of the Premises. Tenant agrees to and will indemnify, defend and save Landlord free
and harmless against all charges, fees, fines, expenses, liabilities, suits, causes of action,
costs, losses, damages and penalties of every kind and nature arising on account of claims of lien
of laborers or material suppliers or others for work performed or materials or supplies furnished
to the Premises. If any lien is filed against the Premises as a result of the action or inaction of
Tenant or its employees, agents or contractors, Tenant shall within thirty (30) days of Landlord’s
written demand therefor discharge such lien by payment or post a bond sufficient in amount to cause
the lien to be removed of record or insured over. If Tenant, after thirty (30) days from receipt of
Landlord’s written notice, fails to cause the lien to be discharged (by either payment or bonding),
Landlord, in addition to any other remedies available to Landlord under this Lease, may cause such
lien to be discharged (whether by payment, bonding or otherwise, at Landlord’s election), in which
event Tenant must immediately reimburse Landlord for the amount thus advanced by Landlord, together
with the administrative charge and interest at the Default Rate on such sums as provided in Section
15.7.



     6.3 Hazardous Substances. Tenant shall not keep any substances designated as, or
containing components designated as, hazardous, dangerous, toxic, or harmful, and/or subject to
regulation under any federal, state, or local law, regulation, or ordinance (“Hazardous
Substances”) on or about the Building, the Land, or the Premises, except for such Hazardous
Substances as may be used by Tenant in connection with its permitted use of the Premises and
approved in advance by



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Landlord, but only if Tenant shall use, store and dispose of such in accordance with
manufacturers’ and suppliers’ recommendations and all applicable laws, regulations and ordinances.
Tenant shall indemnify, defend and hold Landlord harmless with respect to, any and all cleanup
costs and any and all other charges, fees, fines, expenses, liabilities, suits, causes of action,
costs, losses, damages and penalties of every kind and nature relating to or growing out of
Tenant’s or its contractors, agents, employees, subtenants, guests or invitees use, storage,
disposal, transportation, generation, release or sale of Hazardous Substances in, on, under, about
or from the Premises. Tenant’s obligations under this Section 6.3 shall survive expiration or
termination of this Lease.




     6.4 Signs. During the Term, Tenant may attach signage to the Building and erect signs
upon any portion of the Premises. All signs shall be installed in a good and workmanlike manner,
and in conformance with applicable laws in effect. Upon the expiration of the Term, Tenant shall
remove all signs installed by Tenant upon the Premises, and Tenant shall repair any damage caused
by such removal.



SECTION 7 — LETTER OF CREDIT




     Tenant shall deliver to Landlord concurrently with its execution of this Lease, as security
for the payment and performance of Tenant’s covenants and obligations under this Lease, an
original irrevocable standby letter of credit in the initial amount of Three Million Two Hundred
Thousand and No/100ths Dollars ($3,200,000.00) (the “Letter of Credit”). Thirty (30) days
following the commencement of the second (2nd) Lease Year and thirty (30) days following the
commencement each Lease Year thereafter the required amount of the Letter of Credit shall be
reduced as follows:



	 	 	 	 	 
	Lease Year:	 	Letter of Credit:
	Second
	 	$	2,634,000.00	 
	Third
	 	$	2,068,000.00	 
	Fourth
	 	$	1,502,000.00	 
	Fifth
	 	$	936,000.00	 
	Sixth
	 	$	511,000.00	 
	Seventh
	 	$	166,000.00	 
	Eighth
	 	$	0.00	 






     The Letter of Credit shall name Landlord as beneficiary, which Landlord may draw upon in
accordance with the terms and conditions provided in this Lease. The Letter of Credit shall (i) be
issued by the Federal Home Loan Bank of Seattle or such other commercial bank acceptable to
Landlord in its sole discretion, (ii) have a term of not less than one (1) year which expires not
less than thirty (30) days following the first day of each Lease Year, (iii) require that the
issuing bank give Landlord written notice of the issuing bank’s election not to renew the Letter of
Credit no later than thirty (30) days prior to the expiration thereof, and (iv) shall provide that
Landlord may make partial and multiple draws thereunder, up to the face amount thereof. The Letter
of Credit shall be in the form attached hereto as Exhibit B. and otherwise in form and
content reasonably satisfactory to Landlord in its discretion, and shall provide for payment to
Landlord upon the issuer’s receipt of a sight draft from Landlord together with a statement by
Landlord that the requested sum is due and payable from Tenant to Landlord in




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accordance with the provisions of this Lease and certifying to the issuer of the Letter of Credit
that Landlord has the right to draw on the Letter of Credit pursuant to this Lease.




     Until such time as the amount of the Letter of Credit is reduced to $0.00 in accordance with
the preceding schedule, Tenant shall provide evidence of renewal of the Letter of Credit to
Landlord at least thirty (30) days prior to the date the Letter of Credit expires. If Landlord
draws on the Letter of Credit pursuant to the terms hereof, Tenant shall, within three (3) business
days after such draw, replenish the Letter of Credit or provide Landlord with an additional letter
of credit conforming to the requirement of this Section 7 so that the amount available to Landlord
from the Letter of Credit(s) provided hereunder is the amount required under this Section for the
applicable period. Tenant’s failure to deliver any replacement, additional or extension of the
Letter of Credit within the time specified under this Lease shall entitle Landlord to draw upon the
Letter of Credit then in effect. If Landlord liquidates the Letter of Credit as provided in the
preceding sentence or for any other reason, unless an Event of Default by Tenant exists hereunder,
Landlord shall hold the funds received from the Letter of Credit as security for Tenant’s
performance under this Lease. Notwithstanding the foregoing, if an Event of Default exists at the
time Landlord draws upon the Letter of Credit, the funds received from the Letter of Credit shall
not be held as security for Tenant’s performance, and Landlord shall be entitled to those remedies
set forth in Section 15.2 of this Lease.



     In the event that the bank issuing the Letter of Credit shall become insolvent or shall cease
honoring letters of credit it has issued, then Tenant shall promptly obtain a Letter of Credit
from some other commercial bank acceptable to Landlord, in Landlord’s sole discretion.
Notwithstanding the foregoing, if Tenant fails to obtain a replacement Letter of Credit within
thirty (30) days, then Tenant shall, upon Landlord’s written demand, provide Landlord with either
a cash deposit or some other form of collateral acceptable to Landlord in its reasonable business
judgment of an amount equal to the required amount of the Letter of Credit.



SECTION 8 — MAINTENANCE OF PREMISES




     Tenant shall keep the Premises, the Building, and any other improvements located thereon from
time to time in a neat, clean, safe, sanitary condition, keep the glass of all windows and doors
within the Premises clean and presentable and in good repair, and keep and maintain the Buildings
in a good state of repair and in compliance with all applicable laws, consistent in all respects
with a first class office building. Tenant will maintain and repair (or cause to be maintained and
repaired) the walls, roof and all other structural components of the Building and will be
responsible for all repair and maintenance of the interior and exterior portion of the Building,
including but not limited to, all painting, electrical, plumbing and other utility systems, doors,
glass and all of Tenant’s personal property. Tenant shall also be responsible for the maintenance,
operation and repair of the landscaping, driveways, site improvements, curb cuts, parking lots,
lighting, fences, signs, sidewalks on the Premises and all utility systems within the Building,
including the cost of connection to the utility distribution systems. Tenant shall remove trash,
snow and debris from the Premises and adjoining sidewalks and maintain them in a clean condition
in a good state of repair and in compliance with all applicable laws.




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SECTION 9 — ALTERATIONS




     During the Term, signs, machinery and personal property may be installed and alterations and
improvements may be made to the Premises without Landlord’s approval; provided that any such
alterations and improvements shall be made in a good and workmanlike manner and in compliance with
applicable laws and ordinances, including the limitations imposed by local building laws and
governmental requirements. Landlord shall cooperate, at no cost to Landlord, if required to enable
Tenant or any subtenant to obtain any permit, license, variance or other governmental approval
required to make alterations or improvements to the Premises. Upon their construction or
installation, all alterations, additions and improvements will become a part of the Premises and,
unless replaced, will remain a part thereof and may not removed by Tenant upon the expiration or
earlier termination of this Lease.



SECTION 10 — SURRENDER OF PREMISES




     10.1 Condition of Premises. Upon expiration of the Term or earlier termination on
account of an Event of Default or other reason pursuant to this Lease: (a) Tenant shall deliver to
Landlord possession of the Premises, in the condition this Lease requires, subject to any loss that
this Lease does not require Tenant to restore or repair; (b) Tenant shall surrender any right,
title, or interest in and to the Premises and deliver such evidence and confirmation thereof as
Landlord reasonably requires; (c) Tenant shall deliver the Premises free and clear of all liens
except liens that Landlord or any of its agents caused; (d) Tenant shall assign to Landlord,
without recourse, and give Landlord copies or originals of, all assignable licenses, permits,
contracts, warranties, and guarantees then in effect for the Premises; (e)the parties shall
cooperate to achieve an orderly transition of operations from Tenant to Landlord without
interruption, including delivery of such books and records (or copies thereof) as Landlord
reasonably requires; (f) the parties shall adjust for Taxes and all other expenses and income of
the Premises and any prepaid rent and shall make such payments as shall be appropriate on account
of such adjustment in the same manner as in a sale of the Premises (but any sums otherwise payable
to Tenant shall first be applied to cure any Event of Default); (g) the parties shall terminate any
recorded Memorandum of Lease; and (h) Tenant shall assign to Landlord, and Landlord shall reimburse
Tenant for, all utility and other service provider deposits for the Premises, provided however,
that any deposits shall not be reimbursed and instead shall be assigned to Landlord in the event
the sums on deposit are necessary to cure any Event of Default.



     10.2 Removal at Termination . Upon expiration or other termination of this Lease,
Tenant shall remove, all of Tenant’s equipment, machinery, signs, fixtures, furnishings and other
personal property. Tenant shall repair any damage caused by such removal. Any personal property
left in, on or about the Premises by Tenant twenty (20) days after expiration or termination of
this Lease shall conclusively be considered abandoned and Landlord will be entitled to use or
dispose of it free of any interest of Tenant.



SECTION 11 — INSURANCE AND INDEMNITY




     11.1 Liability Insurance. During the Term, Tenant, at its cost, shall maintain
commercial general liability insurance (including contractual liability and products and completed
operations liability) with liability limits of not less than $2,000,000 per occurrence,




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and $3,000,000 annual aggregate, insuring against ail liability of Tenant and its authorized
representatives arising out of or in connection with Tenant’s use and occupancy of the Premises.
Landlord will be named as an additional insured, and the liability insurance will otherwise comply
with Section 11.3 below.




     11.2 Casualty Insurance. During the Term, Tenant shall continuously maintain at its
expense all risk property damage insurance against fire, windstorm, lightning, riot, civil
commotion, malicious mischief, vandalism and those perils included from time to time in the
standard extended coverage endorsement, on the Building, in an amount not less than the full
replacement cost, subject to reasonable deductibles.



     11.3 Insurance Policy Requirements. All insurance provided under this Lease shall
comply with the following:



          (a) Insurers. The policies shall be issued by insurance companies authorized to do
business in the state of Idaho and having a claims paying financial strength rating equal to or
better than “A” and financial size category of IX or better, based on the latest rating
publication of Property and Casualty Insurers by A.M. Best Company (or its equivalent if such
publication ceases to be published).




          (b) Insureds. Tenant’s liability insurance policies shall name Landlord and
Landlord’s lender as an “additional insured”. Notwithstanding anything to the contrary in this
paragraph, all property insurance proceeds shall be paid and applied as this Lease provides.




          (c) Primary Coverage. All policies shall be written as primary policies not
contributing to or in excess of any coverage that Landlord may carry.




          (d) Contractual Liability. Tenant’s liability insurance policies shall contain
contractual liability coverage, for Tenant’s indemnity obligations under this Lease, to the extent
covered by customary contractual liability insurance coverage. Tenant’s failure to obtain such
contractual liability coverage shall not relieve Tenant from any indemnity obligation under this
Lease and will not be construed or interpreted in any way to restrict, limit or modify Tenant’s
waiver, indemnification or other obligations or to in any way limit Tenant’s obligations under
this Lease.




          (e) Notice to Landlord. All policies of insurance hereunder must contain a provision
that the company writing the policy will give Landlord thirty (30) days notice in writing in
advance of any cancellation or lapse or the effective date of any material change in the policy,
including any reduction in the amounts of insurance




          (f) Deliveries to Landlord. On or before the Commencement Date, and no later than
twenty (20) days before any such insurance expires or is cancelled, Tenant shall deliver to
Landlord evidence of Tenant’s maintenance of all insurance this Lease requires (which may include,
at Landlord’s direction, a certificate of insurance setting forth the coverage, the limits of
liability, the carrier, the policy number and the expiration date), including any endorsement
required to name Landlord and its lender as an additional insured pursuant to Section 11.3(b), and,
in each case, providing coverage for at least one year from the date delivered.




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          (g) No Representation. Neither party makes any representation that the limits, scope,
or forms of insurance coverage this Lease requires are adequate or sufficient. The amount of any
insurance coverage under this Section 11 shall be subject to increase (but never decreased from
the initial amounts set forth in this Section 11) at the commencement of each Option Period by
such reasonable amount as the Landlord may request in writing for the purpose of reflecting
increases in generally prevailing coverages for similar buildings, similarly situated, based upon
the written advice of an independent insurance broker.




          (h) Waiver of Subrogation. Neither party shall be liable to the other for any loss or
damage covered by any casualty insurance policy maintained by the other party or required to be
maintained by a party hereunder, and there shall be no subrogated claim by one party’s insurance
carrier against the other party arising out of any such loss or damage.




     11.4 Restoration of Damage. In the event of any casualty to the Building, Tenant
shall promptly, at its expense and using any available insurance proceeds (or, if no or
insufficient insurance proceeds are received by Tenant for any reason, using Tenant’s own funds),
repair and restore the Premises to as nearly as practical their condition immediately prior to the
damage or destruction, or such other condition as Landlord may approve in writing. Landlord may,
at its option, condition disbursement of the proceeds on Landlord’s approval of such plans and
specifications prepared by an architect satisfactory to Landlord, contractor’s cost estimates,
architect’s certificates, waivers of liens, sworn statements of mechanics and materialmen, and
such other evidence of costs, percentage of completion of construction, application of payments,
and satisfaction of liens as Landlord may reasonably require. Minimum Rent shall not be abated.



     11.5 Form of Insurance. All policies which Tenant is required to maintain hereunder
may be part of blanket coverage relating to various properties operated by Tenant.



     11.6 Indemnification.



          (a) To the fullest extent permitted by law, Tenant shall indemnity, defend and hold Landlord
harmless from all losses, damages, fines, penalties, liabilities and expenses (including attorneys’
fees and other costs incurred in connection with such claims, regardless of whether claims involve
litigation) resulting from (i) any actual or alleged injury to any person occurring in, on, or
about the Premises; (ii) from any actual or alleged loss of or damage to any property attributed to
Tenant’s operation or occupation of the Premises; (iii) or caused by or resulting from any act,
error, omission or negligence of Tenant or any licensee, assignee, or concessionaire, or of any
officer, agent, employee, guest or invitee of any such person in, on or about the Premises,
including, but not limited to Tenant’s breach of its obligations hereunder or under applicable law.




          (b) Landlord shall indemnify, defend and hold Tenant, its respective officers, agents,
employees and contractors, harmless from all losses, damages, fines, penalties, liabilities and
expenses (including Tenant’s personnel and overhead costs and attorneys’ fees and other costs
incurred in connection with such claims, regardless of whether claims involve litigation)
resulting from any actual or alleged injury to any person or from any actual or alleged loss of or
damage to any property attributed to the negligence or intentional misconduct of Landlord or any
agent or employees of Landlord.




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          (c) Notwithstanding any of the foregoing, if losses, liabilities, damages, liens, costs and
expenses so arising are caused by the concurrent negligence of both Landlord and Tenant, their
employees, agents, invitees and licensees, the indemnifying party shall indemnify the other party
only to the extent of the indemnifying party’s own negligence or that of its officers, agents,
employees, guests or invitees. The indemnifications provided for in this Section 11.6 with respect
to acts or omissions during the term of this Lease shall survive termination or expiration of this
Lease, including any termination pursuant to Section 15.2 hereof. Tenant shall promptly notify
Landlord of casualties or accidents occurring in or about the Premises. LANDLORD AND TENANT
ACKNOWLEDGE THAT THE INDEMNIFICATION PROVISIONS OF THIS SECTION 11.6 WERE SPECIFICALLY NEGOTIATED
AND AGREED UPON BY THEM.




SECTION 12 — TRANSFER AND SUBLETTING




     12.1 Transfer. Except as otherwise expressly provided in this Section 12.1 and in
Section 12.2 below, Tenant may not convey, transfer, sell, assign, gift, hypothecate, mortgage,
pledge, encumber or hypothecate (each, a “Transfer”) any interest in this Lease without the prior
consent of Landlord, which shall not be unreasonably withheld, conditioned or delayed.
Notwithstanding any other provisions of this Section 12.1, the following shall not be deemed a
Transfer and Tenant shall not be required to obtain Landlord’s consent: (a) assignment of this
Lease or sublease of the Premises to a corporation or entity that is: (i) a parent, subsidiary,
affiliate or franchisor of Tenant; (ii) wholly owned by Tenant or Tenant’s parent corporation;
(iii) a corporation or other entity with which Tenant merges; (iv) a result of a reorganization, or
the surviving corporation or entity following a consolidation, merger or other corporate or
business restructuring; (v) a purchaser of Tenant’s assets; or (b) a sale of less than fifty
percent (50%) of Tenant’s membership interests or stock (each a “Permitted Transfer”). Any
permitted transferee of all of Tenant’s interest hereunder shall expressly assume and agree to
fully pay and perform all of Tenant’s obligations under this Lease arising or accruing from and
after the date of such assignment. Tenant shall remain liable hereunder following any Transfer.
Tenant shall provide written notice to Landlord of any Transfer of this Lease.



     12.2 Subleasing. Tenant may sublet all or any portion of the Premises at any time
without Landlord’s consent, provided that such sublease is not entered into for the sole or
primary purpose of thwarting, impairing or diminishing Landlord’s approval rights arising under
Section 12.1. No sublease shall release Tenant from Tenant’s obligations under this Lease unless
Landlord expressly agrees to such a release.



     12.3 Sublease Recognition. If Landlord elects to terminate this Lease due to the
occurrence of an Event of Default, Landlord agrees to recognize any Material Sublease entered into
by Tenant during the Term as a direct contract between Landlord and the subtenant. Such
recognition shall be effective as of the date of the termination of this Lease (the “Recognition
Date”), and Landlord shall not disturb the subtenant’s possession and occupancy of the sublet
premises during the term of the Material Sublease. As used in this Lease the term “Material
Sublease” means a sublease between Tenant, as sublandlord, and a third party, as subtenant, for
all or a portion of the Premises which satisfies the following conditions:



          (a) The effective rent per square foot (based on rentable floor area) to be paid by the
subtenant under the Material Sublease (including all minimum rent and additional rent)




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for the portion of the Building included within the Material Sublease (the “Sublease NNN/SF Rent”)
on the Recognition Date equals or exceeds the applicable Master Lease NNN/SF Rent, and the
Sublease NNN/SF Rent to become due on the Material Sublease throughout the remaining term of such
Material Sublease will, at all times, equal or exceed the Master Lease NNN/SF Rent to become due
under this Lease for such term. As used in this Lease the term “Master Lease NNN/SF Rent” means
the amount of Minimum Rent payable hereunder during the proposed sublease term divided by the
Building area set forth in Section 1.1 above.




          (b) The subtenant under the Material Sublease shall not have been in material default beyond
the expiration of any applicable cure period of a monetary covenant or a material non-monetary
covenant under the Material Sublease more than three (3) times in any ten (10) year period.




          (c) The Material Sublease shall not have a term (including available options) that extends
beyond the Expiration Date.




          (d) The subtenant agrees in the Material Sublease that as of the Recognition Date it shall:




               (i) Attorn to and accept Landlord as its direct landlord under the Material Sublease for the
remainder of the term under the Material Sublease; provided, however, subtenant shall agree that
Landlord shall not be (A) liable for any previous act or omission by Tenant under any such
sublease, (B) subject to any offset of rent that shall have accrued to any such subtenant against
Tenant, (C) bound by any previous prepayment of rent made by any such subtenant to Tenant for more
than the current month, or (D) liable to any such subtenant for any security deposit made by any
such subtenant to Tenant unless Tenant pays such security deposit over to Landlord;




               (ii) Comply with the applicable terms and conditions of this Lease and perform all
obligations of Tenant under this Lease with respect to the sublet premises; and comply with all
the terms and conditions of the Material Sublease, and perform all of its obligations thereunder;




               (iii) Pay directly to Landlord the rent and all other amounts payable under the Material
Sublease, when due thereunder;




          (e) As of the Recognition Date, the subtenant agrees in the Material Sublease that Landlord
may communicate directly with and proceed directly against the subtenant, with or without notice
to or the involvement of Tenant, to enforce all of the obligations of Tenant under this Lease or
the obligations of subtenant under the Material Sublease with respect to the sublet premises;




          (f) If this Lease terminates due to the occurrence of an Event of Default, Tenant remains
primarily liable for the performance of all of its agreements, covenants, obligations under this
Lease (including, without limitation, the obligations to pay the full amount of Rent, and pay other
sums, charges, and reimbursements set forth in this Lease), and any payment obligations that arise
in connection with any act or omission of any subtenant.




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     12.4 Recognition Agreement. Upon Tenant’s request, Landlord shall execute and deliver
an agreement in recordable form in favor of any subtenant under a Material Sublease which
incorporates the terms of and conditions in Section 12.3 above together with such other
commercially reasonable terms and conditions as may be requested by such subtenant and reasonably
approved by Landlord. Landlord will not be required to enter into or negotiate a non-disturbance
agreement with Tenant or any subtenant that is affiliated with Tenant. A copy of the signed or
proposed sublease shall be delivered to Landlord concurrently with any request for a
non-disturbance agreement.



     12.5 Landlord Put Right. In the event of any sale (or series of related sales or
similar transactions) which results in either (i) the transfer of more than fifty percent (50%) of
Tenant’s membership interests or stock or assets of Tenant or its parent, or (ii) the transfer of
control of Tenant’s banking operations (each, a “Majority Sale”) to a state or federally chartered
bank, bank holding company, financial holding company, credit union, or an affiliate of any of the
foregoing, having assets of greater value than that of Tenant as of the time of such sale, Tenant
hereby grants to Landlord the right to put the Premises to the Tenant (the “Put Right"). The parties
hereby acknowledge and agree that the Put Right is an integral and inseparable part of this Lease,
that the Put Right constitutes a substantial inducement for Landlord to enter into this Lease, and
without the Put Right, Landlord would not enter into this Lease. Landlord may exercise the Put
Right by giving written notice of Landlord’s election (the “Put Notice”) no later than the one
hundred eightieth (180th) day following the closing of the Majority Sale. Upon the exercise of the
Put Right, Tenant shall be obligated to purchase the Property from Landlord, and Landlord shall be
obligated to sell the Property for the sum of Twenty Four Million Eight Hundred Thousand Dollars
($24,800,000.00). In the event that Landlord exercises its Put Right, the closing of the sale of
the Premises shall take place on the same terms contained within Section 21.2 and Section 21.4,
except that references to the “Option Notice” in such sections shall be deemed substituted to refer
to the “Put Notice.” In the event Landlord fails to exercise its Put Right within the specified
timeframe, Landlord’s Put Right shall cease and be of no further force or effect.



SECTION 13 — EMINENT DOMAIN




     13.1 Substantial Taking. If the entire Premises are condemned, or if such a
substantial portion of the Premises, or means of access to an adjacent roadway or parking is taken
which renders the Premises unsuitable for Tenant’s use, then this Lease shall terminate as of the
date upon which possession is taken by the condemning authority. Tenant and Landlord will each be
entitled to separately pursue any and all condemnation awards to which they may be legally
entitled with respect to the Premises.



     13.2 Partial Taking. In the event of a partial taking by condemnation of the
Premises, or means of access to an adjacent roadway or parking such that Section 13.1 does not
apply, the net condemnation proceeds shall be made available to Tenant to make necessary repairs
and alterations to the Premises (as appropriate) so as to permit Tenant to continue its operations
and to restore the Premises or other property not so taken. Any net condemnation proceeds from the
taking which are not used to repair, alter and restore the Premises shall belong to Tenant.




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     13.3 Transfer in Lieu of Condemnation. Any sale of all or any portion of the Premises
to a purchaser with the power of eminent domain in the face of a threat or the probability of the
exercise of the power shall be treated as a taking by condemnation.



SECTION 14 — DEFAULT




     An “Event of Default” means the occurrence of any one or more of the following:



     14.1 Payment Default. There shall exist a “Payment Default” should Tenant fail to
make any Rent or other monetary payment due under this Lease (whether payable to Landlord or
directly to another party entitled thereto) within ten (10) days after receipt of written notice
of nonpayment.



     14.2 Non-Monetary Default. There shall exist a “Non-Monetary Default” should Tenant
fail to comply with any term or condition or fulfill any obligation (other than the obligation to
pay Rent) under this Lease within thirty (30) days after written notice by Landlord specifying the
nature of the default with reasonable particularity (provided, if the default is of such a nature
that it cannot be remedied fully within the 30-day period, Tenant shall be deemed to have cured the
default if Tenant shall (a) advise Landlord in writing of Tenant’s intention to take all reasonable
steps to cure such Non-Monetary Default, including explaining such steps and the reasonable time
required to complete such steps; (b) duly commence such cure within such period, and then
diligently prosecute such cure to completion; and (c) complete such cure within a reasonable time
under the circumstances).



     14.3 Credit Default. There shall exist a “Credit Default” should any of the foregoing
apply: (a) all of Tenant’s interest in the Premises is taken by execution or other process of law;
(b) Tenant becomes insolvent, or makes a transfer in fraud of creditors, or makes an assignment
for the benefit of Tenant’s creditors; (c) Tenant files a petition seeking relief under any
section or chapter of the United Stated Bankruptcy Code (11 U.S.C. Section 101 et seq.), or under
any similar law or statute of the United States or any state thereof (collectively, the
“Bankruptcy Laws”); (d) Tenant is adjudged bankrupt or insolvent by any court of the United States
or any state thereof; (e) a petition seeking an order for relief is filed against Tenant under any
of the Bankruptcy Laws; or (f) a receiver or trustee (including, but not limited to, the Federal
Deposit Insurance Corporation, or any agency thereof) is appointed for all or substantially all of
the assets of Tenant.



SECTION 15 — REMEDIES




     Upon the occurrence of any Event of Default, Landlord will have the right to pursue and
enforce any and all rights and remedies available to Landlord hereunder or at law or in equity,
including, without limitation, the following:



     15.1 Termination; Retake Possession. Following an Event of Default, Landlord may (a)
terminate Tenant’s right to possess the Premises by any lawful means, in which case this Lease and
the Term shall terminate and Tenant shall immediately surrender possession to Landlord or (b)
re-enter and retake possession of the Premises, with or without having terminated this Lease, and
without thereby being liable for damages or trespass. No re-entry by Landlord, whether taken by
summary proceedings or otherwise, shall absolve or discharge



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Tenant from liability under this Lease. Landlord may use the Premises for Landlord’s own purposes
or relet it upon any reasonable terms in Landlord’s discretion without prejudice to any other
remedies that Landlord may have by reason of Tenant’s default.




     15.2 Draw Upon Letter of Credit. Should an Event of Default occur, Landlord shall be
entitled to immediately and without further notice to Tenant draw upon the entire sum then
available under the Letter of Credit. All sums received by Landlord from the Letter of Credit shall
be deemed to be immediately earned by Landlord, with Tenant having no further right or claim
thereto. Such payment shall not be deemed a penalty, and unless specifically provided herein, shall
not be credited against Minimum Rent or any other obligation of Tenant hereunder or held as
security for Tenant’s obligations under this Lease. The parties hereby acknowledge and agree that
the ability of Landlord to draw on and utilize the sums from the Letter of Credit as stated in this
Section 15.2 is an integral and inseparable part of this Lease, that such terms have been
specifically negotiated by the parties, that such right constitutes a substantial inducement for
Landlord to enter into this Lease, and without such right, Landlord would not enter into this
Lease. Notwithstanding anything herein to the contrary, if Landlord draws upon the Letter of Credit
pursuant to this Section 15.2, the Letter of Credit proceeds shall be forfeited to Landlord as
liquidated damages as Landlord’s sole and exclusive remedy for Tenant’s breach of this Lease,
provided however, that the foregoing shall not limit Tenant’s indemnity obligations under this
Lease, and Tenant’s obligation to indemnify Landlord pursuant to this Lease shall survive any
termination of this Lease or acceptance of the sums received from the Letter of Credit as
liquidated damages. In the event Landlord draws upon the Letter of Credit pursuant to this Section
15.2, Tenant shall remain in possession of the Premises and Tenant’s obligation to pay Rent
hereunder shall be abated.



     15.3 Damages for Default. Whether or not Landlord retakes possession or relets the
Premises, Landlord may following an Event of Default, recover all reasonable damages caused by the
default (including, but not limited to unpaid Rent, and other costs and expenses to be borne by
Tenant under this Lease, and reasonable attorneys’ fees relating to the default and reasonable
costs of reletting, including real estate commissions). Landlord may sue periodically to recover
damages as they accrue through the Expiration Date without barring a later action for further
damages. Landlord may at any time bring an action for accrued damages plus damages for the
remaining Term through the Expiration Date equal to the difference between the Rent specified in
this Lease and the reasonable rental value of the Premises for the remainder of the Term,
discounted to the time of judgment at the Default Rate. Notwithstanding anything to the contrary
contained in this Lease. Rent shall not be accelerated except in case of a Payment Default.



     15.4 Continuation of Lease. Landlord may, at Landlord’s option, elect not to
terminate this Lease, in which case this Lease shall continue in effect whether or not Tenant
shall have abandoned the Premises. In such event, Landlord shall be entitled to enforce all of
Landlord’s rights and remedies under this Lease, including the right to terminate the Lease,
retake possession and/or recover the rent and any other charges as they may become due under this
Lease.



     15.5 Receipt of Moneys. No receipt of money by Landlord from Tenant after termination
of this Lease, shall reinstate, continue, or extend this Lease or affect any notice



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theretofore given to Tenant, or waive Landlord’s right to enforce payment of any Rent payable or
later falling due, or Landlord’s right to recover possession by proper remedy, except as this
Lease expressly states otherwise, it being agreed that after service of notice to terminate this
Lease or the commencement of suit or summary proceedings, or after final order or judgment for
possession, Landlord may demand, receive, and collect any moneys due or thereafter falling due
without in any manner affecting such notice, proceeding, order, suit or judgment, all such moneys
collected being deemed payments on account of use and occupation or, at Landlord’s election, on
account of Tenant’s liability.




     15.6 No Waiver. No failure by Landlord to insist upon strict performance of any
covenant, agreement, term, or condition of this Lease or to exercise any right or remedy upon an
Event of Default, and no acceptance of full or partial rent during continuance of any such Event
of Default, shall waive any such Event of Default or such covenant, agreement, term, or condition.
No covenant, agreement, term, or condition of this Lease to be performed or complied with by
Tenant, and no Event of Default, shall be modified except by a written instrument executed by
Landlord. No waiver of any Event of Default shall modify this Lease. Each and every covenant,
agreement, term, and condition of this Lease shall continue in full force and effect with respect
to any other then-existing or subsequent Event of Default of such covenant, agreement, term or
condition of this Lease.



     15.7 Tenant’s Late Payments; Late Charges. If Tenant fails to make any payment to
Landlord required under this Lease within ten (10) days after such payment is first due and
payable, then in addition to any other remedies of Landlord, and without reducing or adversely
affecting any of Landlord’s other rights and remedies, Tenant shall pay Landlord within ten (10)
days after demand interest at the Default Rate on such late payment, beginning on the date such
payment was first due and payable and continuing until the date when Tenant actually makes such
payment. In addition, and without limiting any other rights or remedies of Landlord, Tenant shall
pay Landlord, as additional rent, an administrative charge equal to the lesser of either Three
Thousand Dollars ($3,000) or three percent (3%) of any payment that Tenant fails to pay within ten
(10) days after such payment is first due and payable. Such administrative charge is intended to
compensate Landlord for the inconvenience and staff time incurred by Landlord to handle the late or
missed payment, shall not be deemed a penalty or compensation for use of funds, and shall not be
credited against any other obligations of Tenant under this Lease.



     15.8 Mitigation. Following any Event of Default by Tenant under this Lease, Landlord
shall, in each case, use reasonable efforts to relet the Premises upon commercially reasonable
terms.



SECTION 16 — ACCESS BY LANDLORD




     Provided Landlord takes all reasonable measures to avoid interfering with Tenant’s (or any
subtenant’s) use of the Premises, Landlord and its agents shall have the right to enter the
Premises at any time upon reasonable prior notice to Tenant, to examine the same (including
conducting an environmental audit and performing any testing or sampling as may be required by
Landlord in its discretion), to show them to prospective purchasers, lenders or tenants.



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SECTION 17 — SUBORDINATION; ESTOPPEL




     17.1 Subordination. Unless otherwise designated by Landlord, this Lease shall be
subordinate to all existing or future mortgages and deeds of trust on the Premises, and to any
extensions, renewals or replacements thereof. As to any secured loan, Landlord agrees to deliver
to Tenant, and Tenant agrees to sign and return within fifteen (15) business days of receipt, a
commercially reasonable subordination, non-disturbance and attornment agreement in a form
reasonably acceptable to Tenant and such Lender, which provides that so long as Tenant is not in
default under this Lease beyond any applicable notice and cure period, Tenant’s occupancy of the
Premises under this Lease will not be disturbed and Tenant will not be joined by the holder of any
mortgage or deed of trust in any action or proceeding to foreclose thereunder, except for joinder
where such is necessary for jurisdictional reasons. Tenant agrees to attorn to Landlord’s
successor following any foreclosure sale or transfer in lieu thereof.



     17.2 Estoppel. Within fifteen (15) business days of Landlord’s request therefor,
Tenant shall promptly execute and deliver to third parties designated by Landlord an estoppel
certificate or letter in the form requested by Landlord or its Lender that correctly recites the
facts with respect to this Lease and its existence, terms and status.



SECTION 18 — QUIET ENJOYMENT




     Tenant, upon fully complying with and promptly performing all of the terms, covenants and
conditions of this Lease on its part to be performed, shall have and quietly enjoy the Premises
free from claims arising by, through or under Landlord, but not otherwise, for the Term, if
Tenant’s performance of such terms, covenants and conditions continues for such period, subject,
however, to matters of record on the date hereof and to those matters to which this Lease may be
subsequently subordinated in accordance with the terms hereof.



SECTION 19 — TENANT FINANCING




     Tenant shall have the right from time to time to grant and assign a mortgage or other
security interest in all of Tenant’s personal property located within the Premises to its lenders
in connection with Tenant’s financing arrangements, and any lien of Landlord against Tenant’s
personal property (whether by statute or under the terms of this Lease) shall be subject and
subordinate to such security interest. Landlord shall execute such documents as Tenant’s lenders
may reasonably request in connection with any such financing



SECTION 20 — MISCELLANEOUS




     20.1 Notices. Any notices required in accordance with any of the provisions herein
shall be in writing and delivered, sent by fax, overnight courier or mailed by registered or
certified mail to Landlord and Tenant at the addresses set forth in Section 1.9, or to such other
address as a party shall from time to time advise the other party by a written notice given in
accordance with this Section 20.1. If Tenant is a partnership or joint enterprise, any notice
required or permitted hereunder may be given by or to any one partner thereof with the same force
and effect as if given by or to all thereof. If mailed, a notice shall be deemed received five (5)
business days after the postmark affixed on the envelope by the United States Post Office.



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     20.2 Successors or Assigns. All of the terms, conditions, covenants and agreements of
this Lease shall extend to and be binding upon Landlord, Tenant and their respective heirs,
administrators, executors, successors and permitted assigns, and upon any person or persons
coming into ownership or possession of any interest in the Premises by operation of law or otherwise,
and shall be construed as covenants running with the land.



     20.3 Brokerage Commissions. Landlord represents and warrants to Tenant, that there
are no claims for brokerage commissions or finder’s fees in connection with this Lease as a result
of the contracts, contacts or actions of Landlord and Landlord agrees to indemnify Tenant and hold
it harmless from all liabilities arising from an alleged agreement or act by Landlord (including,
without limitation, the cost of counsel fees in connection therewith); such agreement to survive
the termination of this Lease. Tenant represents and warrants to Landlord that there are no claims
for brokerage commissions or finder’s fees in connection with this Lease as a result of the
contracts, contacts or actions of Tenant, and Tenant agrees to indemnify Landlord and hold it
harmless from all liabilities arising from any such claim arising from an alleged agreement or act
by Tenant (including, without limitation, the cost of counsel fees in connection therewith); such
agreement to survive the termination of this Lease.



     20.4 Partial Invalidity. If any term, covenant or condition of this Lease or the
application thereof to any person or circumstance is, to any extent, invalid or unenforceable, the
remainder of this Lease, or the application of such term, covenant or condition to persons or
circumstances other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Lease shall be valid and be enforced
to the fullest extent permitted by law.



     20.5 Recording. This Lease shall not be recorded, but the parties shall execute a
memorandum of this Lease in the form attached as Exhibit C to this Lease which shall be
recorded.



     20.6 Holding Over. If Tenant holds over after the end of the Term with Landlord’s
prior written consent, such shall be as a tenancy from month to month on the terms and conditions
set forth herein, which tenancy may be terminated by either party upon thirty (30) days written
notice to the other party. Any holding over by Tenant after the expiration of the term hereof
without Landlord’s prior written consent shall be deemed to be a tenancy at will, terminable at
any time by Landlord at a rental rate equal to one hundred twenty-five percent (125%) of the
rental rate in effect on the date of expiration of the Lease term, prorated on a daily basis, and
otherwise on the terms, covenants and conditions of this Lease to the extent applicable.



     20.7 Legal Expenses. If either party consults an attorney in order to enforce this
Lease or if any litigation arises in connection with the Lease, the prevailing party shall be
entitled to reimbursement from the non-prevailing party for the prevailing party’s reasonable
costs and attorneys’ fee, whether such costs and attorneys’ fees are incurred with or without
litigation, in a bankruptcy court or on appeal.



     20.8 Force Majeure. Landlord and Tenant shall not be deemed in default hereof nor
liable for damages arising from its failure to perform its duties or obligations hereunder if
such is due to causes beyond its reasonable control, including, but not limited to, acts of God, acts
of civil



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or military authorities, acts of terrorism, embargoes, fires, floods, windstorms, earthquakes,
strikes, lockouts, boycotts or other labor disturbances, civil disturbances or commotion or war.




     20.9 Authority. Landlord and Tenant each represent and warrant to the other that it
has the power and authority to enter into this Lease and that the person(s) signing this Lease on
its behalf were duly authorized to do so.



     20.10 Headings. The headings in this Lease are for convenience only and do not in any
way limit or affect the terms and provisions hereof.



     20.11 Gender. Wherever appropriate in this Lease, the singular shall be deemed to
refer to the plural and the plural to the singular, and pronouns of certain genders shall be
deemed to include either or both of the other genders.



     20.12 Counterparts. This Lease may be executed in counterparts, each of which shall
be deemed an original, but which when taken together shall constitute one and the same instrument.



     20.13 Entire Agreement; Amendments. This Lease and the Exhibits attached hereto, and
by this reference incorporated herein, set forth the entire agreement of Landlord and Tenant
concerning the Premises, and there are no other agreements or understanding, oral or written,
between Landlord and Tenant concerning the Premises. Any subsequent modification or amendment of
this Lease shall be binding upon Landlord and Tenant only if reduced to writing and signed by
them.



     20.14 Governing Law. This Lease shall be governed by, and construed in accordance
with the laws of the State of Idaho.



SECTION 21 — PURCHASE OPTION




     21.1 Option to Purchase. Landlord hereby grants to Tenant the sole and exclusive
option to purchase the Property on the terms and conditions set forth in this Section 21 (the
“Option”). The parties hereby acknowledge and agree that this Option is an integral and
inseparable part of this Lease, that the Option constitutes a substantial inducement for Tenant to
enter into this Lease, and without the Option, Tenant would not enter into this Lease. Tenant may
exercise the Option by giving written notice of Tenant’s election (the “Option Notice”) no earlier
than the last day of the tenth (10th) Lease Year, and no later than one hundred eighty (180) days
after the last day of the tenth (10th) Lease Year. Upon the exercise of the Option, Tenant shall
be obligated to purchase the Property from Landlord, and Landlord shall be obligated to sell the
Property for the price and in the manner set forth in this Section 21. In the event Tenant fails
to timely exercise its Option, Tenant’s Option shall cease and be of no further force or effect.



     21.2 Title Report. Within fourteen (14) days after Tenant’s issuance of the Option
Notice, Tenant shall obtain an ALTA Title Commitment from Sandpoint Title Insurance Company, Inc.,
or such other title insurance company designated by Tenant (the “Title Company^) showing no
interest, encumbrance, lien or claim against the fee title to the Property (other than matters to
be satisfied with the proceeds of sale), except for this Lease, any




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exceptions existing as of the Commencement Date, and such other exceptions approved or created by
Tenant.




     21.3 Purchase Price. If Tenant exercises the Option, the “Purchase Price” for the
Property shall be Twenty-Five Million Nine Hundred Sixteen Thousand and No/100ths Dollars
($25,916,000.00), which sum is to be paid in cash at Closing.



     21.4 Closing Procedure.



          (a) Closing Date. The closing of the sale of the Property shall occur on a date
selected by Landlord and reasonably acceptable to Tenant, but in no event later than the date that
is ninety (90) days after the date Tenant issues the Option Notice (the “Closing Date”); provided,
however, that Landlord may elect to extend the Closing Date for sixty (60) days by giving Tenant
written notice of Landlord’s election no later than fifteen (15) days prior to the then-scheduled
Closing Date.



          (b) Prorations. At Closing, Rent shall be prorated as of the Closing Date.



          (c) Manner and Place of Closing. This transaction shall be closed in escrow by Title
Company at its offices in Sandpoint, Idaho. Closing shall take place in the manner specified
herein.



          (d) Closing. On the Closing Date the transaction will be closed as follows:



               (i) The prorations described above will be made and the parties shall be charged and credited
accordingly.



               (ii) Landlord will convey the Property to Tenant by Warranty Deed in the same form as ICB
conveyed the Property to Landlord (the “Deed”), free and clear of all liens and encumbrances
except only those relating to this Lease or shown on the title report provided pursuant to Section
21.2 above (but not including any lien, deed of trust or mortgage created by or through Landlord
or any affiliate of Landlord). Landlord will also execute and deliver a FIRPTA affidavit in form
satisfactory to Tenant and Title Company. In no event shall Tenant’s cooperation with any lender
of Landlord or Tenant’s execution of a Subordination and Nondisturbance Agreement, Estoppel or
other instrument for any lender, lienholder or third party claiming through or under Landlord or
any third person be deemed approval by Tenant of any such lien or matter to survive closing of the
acquisition of the Property by Tenant.



               (iii) Landlord shall cause all secured parties with any UCC security interest and all other
parties with any lien, claim, right, title or interest in or to all or any of the Property claiming
through or under Landlord and not created by Tenant to release such security interest, lien, claim,
right, title or other interest of record in a manner satisfactory to Tenant and Title Company.



               (iv) Tenant shall pay to Landlord the total Purchase Price for the Property in cash, adjusted
for the charges and credits set forth above, with credit for any amounts owed Tenant.



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               (v) If Tenant so elects, Landlord shall cooperate with Title Company to issue to Tenant an
ALTA owner’s title insurance policy insuring Tenant as the sole fee owner of the Property. Tenant
shall pay any premium required by the Title Company for the issuance of an owner’s policy, or for
any endorsement requested by Tenant in connection with Tenant’s acquisition of the Property.



               (vi) Any escrow fee shall be divided equally between the parties.



               (vii) Tenant shall pay any excise, stamp or transfer tax. No broker’s or finder’s fees shall
be payable in connection with the sale transaction, and each party shall hold the other harmless
for, from and against any claim of a broker’s or finder’s fee or commission arising out of the
sale of the Property pursuant to this Lease through such party.



          (e) Like-Kind Exchange. Landlord may, at its option, elect to sell the Property as
part of a tax deferred exchange under Section 1031 of the Internal Revenue Code and may assign its
rights under this Section 21 to one or more third party exchange intermediaries for the purpose of
effecting the exchange. Tenant agrees to cooperate with Landlord in effecting such exchange
provided that Tenant shall not be required to incur any cost or liability as a result of such
cooperation. The failure of the exchange to qualify as an exchange under Section 1031 shall not
constitute grounds for rescission by either party and shall not be deemed to be a failure of
consideration.



          (f) Extension of Time. If the date for any performance under this Section 21 falls on
a weekend or holiday, the time shall be extended to the next business day.



[Signatures on following page]




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     DATED as of the day and year first written above.



LANDLORD:




SANDPOINT CENTER LLC, an Idaho limited 

liability company




	 	 	 	 	 
	 	 	 
	
 	 	 
	 	 	 
	 	 	 
	 



	 	 	 
	STATE OF ___________

	 	)
	 

	 	) ss.
	COUNTY OF _________


	 	)






     On this _________ day of August, 2009, before me, the undersigned, a Notary Public in and
for the State of ____________, duly commissioned and sworn personally appeared,
known to me to be the Manager of SANDPOINT CENTER, LLC, the limited liability company that
executed the foregoing instrument, and acknowledged the said instrument to be the free and
voluntary act and deed of said limited liability company, for the purposes therein mentioned, and
on oath stated that he was authorized to execute said instrument.



     I certify that I know or have satisfactory evidence that the person appearing before me and
making this acknowledgment is the person whose true signature appears on this document.



     WITNESS my hand and official seal hereto affixed the day and year in the certificate above
written.



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Signature 	 



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Print Name 	 
	 	NOTARY PUBLIC in and for the State of

_______, residing at __________.

My commission expires __________. 	 
	 




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LANDLORD:




SANDPOINT CENTER II, LLC, an Idaho limited

liability company




	 	 	 	 	 
	 	 	 
	
 	 	 
	 	 	 
	 	 	 
	 



[Acknowledgement on following page]





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[ATTACH CALIFORNIA ACKNOWLEDGEMENT]




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TENANT:




PANHANDLE STATE BANK, an Idaho state

chartered bank




	 	 	 	 	 
	 	 	 
	
 	 	 
	Curt Hecker, Chief Executive Officer 	 	 
	 	 	 
	 



	 	 	 
	STATE OF IDAHO

	 	)
	 

	 	) ss.
	COUNTY OF BONNER

	 	)






     On this _________ day of August, 2009, before me, a Notary Public in and for the State of
Idaho, duly commissioned and sworn, personally appeared Curt Hecker, to me known to be the Chief
Executive Officer of PANHANDLE STATE BANK, the state chartered bank named in and which executed
the foregoing instrument; and he acknowledged to me that he signed the same as the free and
voluntary act and deed of said state chartered bank for the uses and purposes therein mentioned.



     I certify that I know or have satisfactory evidence that the person appearing before me and
making this acknowledgment is the person whose true signature appears on this document.



     WITNESS my hand and official seal the day and year in this certificate above written,



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Signature 	 



	 	 	 	 	 
	 	 	 
	 	
 	 
	 	Print Name 	 
	 	NOTARY PUBLIC in and for the State of

Idaho, residing at _______________.

My commission expires  ___________. 	 
	 




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