Document:

GUARANTEE AGREEMENT

 Exhibit 10.2 
  
 GUARANTEE AGREEMENT 
  
 Carolina Bank Holdings, Inc. 
  
 Dated as of December 29, 2004 

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page

	ARTICLE I
	DEFINITIONS AND INTERPRETATION
			
	SECTION 1.1.	  	Definitions and Interpretation	  	1
	
	ARTICLE II
	POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
			
	SECTION 2.1.	  	Powers and Duties of the Guarantee Trustee	  	4
			
	SECTION 2.2.	  	Certain Rights of the Guarantee Trustee	  	5
			
	SECTION 2.3.	  	Not Responsible for Recitals or Issuance of Guarantee	  	7
			
	SECTION 2.4.	  	Events of Default; Waiver	  	7
			
	SECTION 2.5.	  	Events of Default; Notice	  	8
	
	ARTICLE III
	THE GUARANTEE TRUSTEE
	SECTION 3.1.	  	The Guarantee Trustee; Eligibility	  	8
			
	SECTION 3.2.	  	Appointment, Removal and Resignation of the Guarantee Trustee	  	9
	
	ARTICLE IV
	GUARANTEE
			
	SECTION 4.1.	  	Guarantee	  	9
			
	SECTION 4.2.	  	Waiver of Notice and Demand	  	10
			
	SECTION 4.3.	  	Obligations Not Affected	  	10
			
	SECTION 4.4.	  	Rights of Holders	  	11
			
	SECTION 4.5.	  	Guarantee of Payment	  	11
			
	SECTION 4.6.	  	Subrogation	  	11
			
	SECTION 4.7.	  	Independent Obligations	  	12
			
	SECTION 4.8.	  	Enforcement	  	12

  

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 TABLE OF CONTENTS 
 (continued) 
  

					
	 	  	 	  	Page

	ARTICLE V
	LIMITATION OF TRANSACTIONS; SUBORDINATION
			
	SECTION 5.1.	  	Limitation of Transactions	  	12
			
	SECTION 5.2.	  	Ranking	  	13
	
	ARTICLE VI
	TERMINATION
			
	SECTION 6.1.	  	Termination	  	13
	
	ARTICLE VII
	INDEMNIFICATION
			
	SECTION 7.1.	  	Exculpation	  	14
			
	SECTION 7.2.	  	Indemnification	  	14
			
	SECTION 7.3.	  	Compensation; Reimbursement of Expenses	  	15
	
	ARTICLE VIII
	MISCELLANEOUS
			
	SECTION 8.1.	  	Successors and Assigns	  	16
			
	SECTION 8.2.	  	Amendments	  	16
			
	SECTION 8.3.	  	Notices	  	16
			
	SECTION 8.4.	  	Benefit	  	17
			
	SECTION 8.5.	  	Governing Law	  	17
			
	SECTION 8.6.	  	Counterparts	  	17

  

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 GUARANTEE AGREEMENT 
  
 This GUARANTEE AGREEMENT (the “Guarantee”), dated as of December 29, 2004, is executed and delivered by Carolina
Bank Holdings, Inc., incorporated in North Carolina (the “Guarantor”), and Wells Fargo Bank, National Association, a national banking association with its principal place of business in the State of Delaware, as trustee (the
“Guarantee Trustee”), for the benefit of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of Carolina Capital Trust, a Delaware statutory trust (the “Issuer”). 
  
 WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
“Declaration”), dated as of December 29, 2004, among the trustees named therein of the Issuer, Carolina Bank Holdings, Inc., as sponsor, and the Holders from time to time of undivided beneficial interests in the assets of the Issuer, the
Issuer is issuing on the date hereof securities, having an aggregate liquidation amount of up to $10,000,000, designated the Capital Securities (the “Capital Securities”); and 
  
 WHEREAS, as incentive for the Holders to purchase the Capital Securities, the Guarantor desires irrevocably and
unconditionally to agree, to the extent set forth in this Guarantee, to pay to the Holders of Capital Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. 

 
 NOW, THEREFORE, in consideration of the purchase by each Holder of the
Capital Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of the Holders. 
  
 ARTICLE I 
 DEFINITIONS AND INTERPRETATION 
  
 SECTION 1.1. Definitions and
Interpretation. 
  
 In this Guarantee, unless the context
otherwise requires: 
  
 (a) capitalized terms
used in this Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; 
  
 (b) a term defined anywhere in this Guarantee has the same meaning throughout; 
  
 (c) all references to “the Guarantee” or
“this Guarantee” are to this Guarantee as modified, supplemented or amended from time to time; 
  
 (d) all references in this Guarantee to Articles and Sections are to Articles and Sections of this Guarantee, unless otherwise specified;

  
 (e) terms defined in the Declaration as of
the date of execution of this Guarantee have the same meanings when used in this Guarantee, unless otherwise defined in this Guarantee or unless the context otherwise requires; and 

 (f) a reference to the singular includes the plural and vice versa. 
  
 “Beneficiaries” means any Person to whom the Issuer is or hereafter
becomes indebted or liable. 
  
 “Corporate Trust Office”
means the office of the Guarantee Trustee at which the corporate trust business of the Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Guarantee is located at 919 Market
Street, Suite 700, Wilmington, DE 19801. 
  
 “Covered
Person” means any Holder of Capital Securities. 
  
 “Debentures” means the junior subordinated debentures of Carolina Bank Holdings, Inc., designated the Junior Subordinated Debt Securities due 2035, held by the Institutional Trustee (as defined in the Declaration) of the Issuer.

  
 “Event of Default” has the meaning set forth in
Section 2.4. 
  
 “Guarantee Payments” means the
following payments or distributions, without duplication, with respect to the Capital Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the Declaration) which are required to be paid on
such Capital Securities to the extent the Issuer has funds available in the Property Account (as defined in the Declaration) therefor at such time, (ii) the Redemption Price (as defined in the Indenture) to the extent the Issuer has funds available
in the Property Account therefor at such time, with respect to any Capital Securities called for redemption by the Issuer, (iii) the Special Redemption Price (as defined in the Indenture) to the extent the Issuer has funds available in the Property
Account therefor at such time, with respect to Capital Securities called for redemption upon the occurrence of a Special Event (as defined in the Indenture), and (iv) upon a voluntary or involuntary liquidation, dissolution, winding-up or
termination of the Issuer (other than in connection with the distribution of Debentures to the Holders of the Capital Securities in exchange therefor as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid Distributions on the Capital Securities to the date of payment, to the extent the Issuer has funds available in the Property Account therefor at such time, and (b) the amount of assets of the Issuer remaining available for
distribution to Holders in liquidation of the Issuer after satisfaction of liabilities to creditors of the Issuer as required by applicable law (in either case, the “Liquidation Distribution”). 
  
 “Guarantee Trustee” means Wells Fargo Bank, National Association,
until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee and thereafter means each such Successor Guarantee Trustee. 
  
 “Holder” means any holder, as registered on the books and records
of the Issuer, of any Capital Securities; provided, however, that, in determining whether the holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, “Holder” shall not include
the Guarantor or any Affiliate of the Guarantor. 
  
 “Indemnified Person” means the Guarantee Trustee (including in its individual capacity), any Affiliate of the Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Guarantee Trustee. 
  

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 “Indenture” means the Indenture, dated as of December 29, 2004, between the Guarantor and Wells
Fargo Bank, National Association, not in its individual capacity but solely as trustee, and any indenture supplemental thereto pursuant to which the Debentures are to be issued to the Institutional Trustee of the Issuer. 
  
 “Liquidation Distribution” has the meaning set forth in the
definition of “Guarantee Payments” herein. 
  
 “Majority in liquidation amount of the Capital Securities” means Holder(s) of outstanding Capital Securities, voting together as a class, but separately from the holders of Common Securities, of more than 50% of the aggregate
liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to, but excluding, the date upon which the voting percentages are determined) of all Capital Securities
then outstanding. 
  
 “Obligations” means any costs,
expenses or liabilities (but not including liabilities related to taxes) of the Issuer, other than obligations of the Issuer to pay to holders of any Trust Securities the amounts due such holders pursuant to the terms of the Trust Securities.

  
 “Officer’s Certificate” means, with respect to
any Person, a certificate signed by one Authorized Officer of such Person. Any Officer’s Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee shall include: 
  
 (a) a statement that each officer signing the Officer’s
Certificate has read the covenant or condition and the definitions relating thereto; 
  
 (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the
Officer’s Certificate; 
  
 (c) a statement
that each such officer has made such examination or investigation as, in such officer’s opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and

  
 (d) a statement as to whether, in the opinion
of each such officer, such condition or covenant has been complied with. 
  
 “Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity of whatever nature. 
  
 “Responsible Officer” means, with respect to the Guarantee Trustee, any officer within the Corporate Trust Office of the Guarantee Trustee with
direct responsibility for the administration of any matters relating to this Guarantee, including any vice president, any 

  

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assistant vice president, any secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Corporate
Trust Office of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is
referred because of that officer’s knowledge of and familiarity with the particular subject. 
  
 “Successor Guarantee Trustee” means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 3.1.

  
 “Trust Securities” means the Common Securities and
the Capital Securities. 
  
 ARTICLE II 
 POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE 
  
 SECTION 2.1. Powers and Duties of the Guarantee Trustee. 
  
 (a) This Guarantee shall be held by the Guarantee Trustee for the benefit of the Holders of the Capital Securities, and the Guarantee
Trustee shall not transfer this Guarantee to any Person except a Holder of Capital Securities exercising his or her rights pursuant to Section 4.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its
appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. 
  
 (b) If an Event of Default actually known to a Responsible Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee for the benefit of the Holders of the Capital Securities. 
  
 (c) The Guarantee Trustee, before the occurrence of any Event of Default and after the curing or waiving of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee, and no implied covenants shall be read into this Guarantee against the Guarantee Trustee. In case an Event of Default has occurred (that has
not been cured or waived pursuant to Section 2.4(b)) and is actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee, and use the same degree
of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. 
  
 (d) No provision of this Guarantee shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except that: 
  
 (i) prior to the occurrence of any Event of Default and after the curing or waiving of all Events of Default that may have occurred: 
  

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 (A) the duties and obligations of the Guarantee Trustee shall be determined solely by
the express provisions of this Guarantee, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee, and no implied covenants or obligations shall be read
into this Guarantee against the Guarantee Trustee; and 
  
 (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee; but in the case of any such certificates or opinions furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to
examine the same to determine whether or not on their face they conform to the requirements of this Guarantee; 
  
 (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that such Responsible Officer of the Guarantee Trustee or the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; 
  
 (iii) the Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in accordance with the written direction of the Holders of not less than a Majority in liquidation amount of the Capital Securities relating to the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee; and 
  
 (iv) no provision of this Guarantee shall require the Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds is not
reasonably assured to it under the terms of this Guarantee, or security and indemnity, reasonably satisfactory to the Guarantee Trustee, against such risk or liability is not reasonably assured to it. 
  
 SECTION 2.2. Certain Rights of the Guarantee Trustee. 
  
 (a) Subject to the provisions of Section 2.1: 
  
 (i) The Guarantee Trustee may conclusively rely, and shall
be fully protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. 
  

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 (ii) Any direction or act of the Guarantor contemplated by this Guarantee shall be
sufficiently evidenced by an Officer’s Certificate. 
  
 (iii) Whenever, in the administration of this Guarantee, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Guarantee
Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officer’s Certificate of the Guarantor which, upon receipt of such request, shall be promptly
delivered by the Guarantor. 
  
 (iv) The
Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument or other writing (or any rerecording, refiling or reregistration thereof). 
  
 (v) The Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such
counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be
counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee from any court of competent
jurisdiction. 
  
 (vi) The Guarantee Trustee
shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such security and indemnity, reasonably
satisfactory to the Guarantee Trustee, against the costs, expenses (including attorneys’ fees and expenses and the expenses of the Guarantee Trustee’s agents, nominees or custodians) and liabilities that might be incurred by it in
complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided, however, that nothing contained in this Section 2.2(a)(vi) shall be taken to relieve the Guarantee
Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee. 
  
 (vii) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit. 
  
 (viii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Guarantee Trustee
shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. 
  

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 (ix) Any action taken by the Guarantee Trustee or its agents hereunder shall bind the
Holders of the Capital Securities, and the signature of the Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Guarantee Trustee
to so act or as to its compliance with any of the terms and provisions of this Guarantee, both of which shall be conclusively evidenced by the Guarantee Trustee’s or its agent’s taking such action. 
  
 (x) Whenever in the administration of this Guarantee the
Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (A) may request instructions from the Holders of a Majority in liquidation
amount of the Capital Securities, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received and (C) shall be protected in conclusively relying on or acting in accordance with such
instructions. 
  
 (xi) The Guarantee Trustee
shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Guarantee. 
  
 (b) No provision of this Guarantee shall be deemed to impose
any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal or in which the Guarantee Trustee shall be
unqualified or incompetent in accordance with applicable law to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a
duty. 
  
 SECTION 2.3. Not Responsible for
Recitals or Issuance of Guarantee. 
  
 The recitals contained
in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this
Guarantee. 
  
 SECTION 2.4. Events of Default;
Waiver. 
  
 (a) An Event of Default under
this Guarantee will occur upon the failure of the Guarantor to perform any of its payment or other obligations hereunder. 
  
 (b) The Holders of a Majority in liquidation amount of the Capital Securities may, voting or consenting as a class, on behalf of the
Holders of all of the Capital Securities, waive any past Event of Default and its consequences. Upon such waiver, any 

  

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such Event of Default shall cease to exist, and shall be deemed to have been cured, for every purpose of this Guarantee, but no such waiver shall extend to
any subsequent or other default or Event of Default or impair any right consequent thereon. 
  
 SECTION 2.5. Events of Default; Notice. 
  

(a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Capital Securities, notices of all Events of Default actually known to a Responsible Officer of the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided,
however, that the Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders
of the Capital Securities. 
  
 (b) The Guarantee
Trustee shall not be charged with knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice thereof from the Guarantor or a Holder of the Capital Securities, or a Responsible Officer of the Guarantee Trustee
charged with the administration of this Guarantee shall have actual knowledge thereof. 
  
 ARTICLE III 
 THE GUARANTEE TRUSTEE 
  
 SECTION 3.1. The Guarantee Trustee; Eligibility. 
  
 (a) There shall at all times be a Guarantee Trustee which
shall: 
  
 (i) not be an Affiliate of the
Guarantor; and 
  
 (ii) be a corporation or
national association organized and doing business under the laws of the United States of America or any state or territory thereof or of the District of Columbia, or Person authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation or national association publishes reports
of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 3.1(a)(ii), the combined capital and surplus of such corporation or national
association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. 
  
 (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 3.1(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set forth in Section 3.2(c). 
  

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 (c) If the Guarantee Trustee has or shall acquire any “conflicting interest’
within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee shall either eliminate such interest or resign to the extent and in the manner provided by, and subject to, this Guarantee. 
  
 SECTION 3.2. Appointment, Removal and Resignation of the
Guarantee Trustee. 
  
 (a) Subject to Section
3.2(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default. 
  
 (b) The Guarantee Trustee shall not be removed in accordance with Section 3.2(a) until a Successor Guarantee Trustee has been appointed
and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. 
  
 (c) The Guarantee Trustee appointed to office shall hold office until a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take
effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by an instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. 

 
 (d) If no Successor Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 3.2 within 60 days after delivery of an instrument of removal or resignation, the Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for
appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. 
  
 (e) No Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Guarantee
Trustee. 
  
 (f) Upon termination of this
Guarantee or removal or resignation of the Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall pay to the Guarantee Trustee all amounts owing to the Guarantee Trustee under Sections 7.2 and 7.3 accrued to the date of such
termination, removal or resignation. 
  
 ARTICLE IV 
 GUARANTEE 
  
 SECTION 4.1. Guarantee. 
  
 (a) The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of
amounts theretofore paid by the Issuer), as and when due, regardless of any defense (except as defense of payment by the Issuer), right of set-off or counterclaim that the Issuer may have or assert. The 

  

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Guarantor’s obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by
causing the Issuer to pay such amounts to the Holders. 
  
 (b) The Guarantor hereby also agrees to assume any and all Obligations of the Issuer and in the event any such Obligation is not so assumed, subject to the terms and conditions hereof, the Guarantor hereby irrevocably and unconditionally
guarantees to each Beneficiary the full payment, when and as due, of any and all Obligations to such Beneficiaries. This Guarantee is intended to be for the Beneficiaries who have received notice hereof. 
  
 SECTION 4.2. Waiver of Notice and Demand. 

 
 The Guarantor hereby waives notice of acceptance of this Guarantee and of
any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands. 
  
 SECTION 4.3. Obligations Not Affected. 
  
 The obligations, covenants, agreements and duties of the Guarantor under this Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: 
  
 (a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer; 
  
 (b) the extension of time for the payment by the Issuer of
all or any portion of the Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Capital Securities (other than an extension of time for the payment of the Distributions, Redemption Price, Special Redemption Price, Liquidation Distribution or other sums payable that results from
the extension of any interest payment period on the Debentures or any extension of the maturity date of the Debentures permitted by the Indenture); 
  
 (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the terms of the Capital Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; 
  
 (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; 
  

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 (e) any invalidity of, or defect or deficiency in, the Capital Securities; 
  
 (f) the settlement or compromise of any obligation
guaranteed hereby or hereby incurred; or 
  
 (g)
any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 4.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional
under any and all circumstances. 
  
 There shall be no obligation
of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. 
  
 SECTION 4.4. Rights of Holders. 
  
 (a) The Holders of a Majority in liquidation amount of the Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee; provided, however, that
(subject to Sections 2.1 and 2.2) the Guarantee Trustee shall have the right to decline to follow any such direction if the Guarantee Trustee shall determine that the actions so directed would be unjustly prejudicial to the Holders not taking part
in such direction or if the Guarantee Trustee being advised by legal counsel determines that the action or proceeding so directed may not lawfully be taken or if the Guarantee Trustee in good faith by its board of directors or trustees, executive
committee or a trust committee of directors or trustees and/or Responsible Officers shall determine that the action or proceeding so directed would involve the Guarantee Trustee in personal liability. 
  
 (b) Any Holder of Capital Securities may institute a legal
proceeding directly against the Guarantor to enforce the Guarantee Trustee’s rights under this Guarantee, without first instituting a legal proceeding against the Issuer, the Guarantee Trustee or any other Person. The Guarantor waives any right
or remedy to require that any such action be brought first against the Issuer, the Guarantee Trustee or any other Person before so proceeding directly against the Guarantor. 
  
 SECTION 4.5. Guarantee of Payment. 
  
 This Guarantee creates a guarantee of payment and not of collection. 
  
 SECTION 4.6. Subrogation. 
  
 The Guarantor shall be subrogated to all (if any) rights of the Holders of
Capital Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by applicable provisions of law)
be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if, after giving effect to any such payment, any

  

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amounts are due and unpaid under this Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to
hold such amount in trust for the Holders and to pay over such amount to the Holders. 
  
 SECTION 4.7. Independent Obligations. 
  
 The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Capital Securities and that
the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 4.3
hereof. 
  
 SECTION 4.8. Enforcement.

  
 A Beneficiary may enforce the Obligations of the Guarantor
contained in Section 4.1 (b) directly against the Guarantor, and the Guarantor waives any right or remedy to require that any action be brought against the Issuer or any other person or entity before proceeding against the Guarantor. 
  
 The Guarantor shall be subrogated to all rights (if any) of any Beneficiary
against the Issuer in respect of any amounts paid to the Beneficiaries by the Guarantor under this Guarantee; provided, however, that the Guarantor shall not (except to the extent required by applicable provisions of law) be entitled
to enforce or exercise any rights that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee, if, after giving effect to such payment, any amounts are due
and unpaid under this Guarantee. 
  
 ARTICLE V 
 LIMITATION OF TRANSACTIONS; SUBORDINATION 
  
 SECTION 5.1. Limitation of Transactions. 
  

So long as any Capital Securities remain outstanding, if (a) there shall have occurred and be continuing an Event of Default or (b) the Guarantor shall
have selected an Extension Period as provided in the Declaration and such period, or any extension thereof, shall have commenced and be continuing, then the Guarantor may not (x) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Guarantor’s capital stock or (y) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Guarantor that
rank pari passu in all respects with or junior in interest to the Debentures (other than (i) payments under this Guarantee, (ii) repurchases, redemptions or other acquisitions of shares of capital stock of the Guarantor (A) in connection with
any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors, or consultants, (B) in connection with a dividend reinvestment or stockholder stock purchase plan or (C) in
connection with the issuance of capital stock of the Guarantor (or securities convertible into or exercisable for such capital stock), as consideration in an acquisition transaction entered into prior to the occurrence of the Event of Default or the
applicable Extension Period, (iii) as a result of any exchange, reclassification, combination or 

  

 - 12 - 

 
conversion of any class or series of the Guarantor’s capital stock (or any capital stock of a subsidiary of the Guarantor) for any class or series of
the Guarantor’s capital stock or of any class or series of the Guarantor’s indebtedness for any class or series of the Guarantor’s capital stock, (iv) the purchase of fractional interests in shares of the Guarantor’s capital
stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (v) any declaration of a dividend in connection with any stockholder’s rights plan, or the issuance of rights, stock or
other property under any stockholder’s rights plan, or the redemption or repurchase of rights pursuant thereto, or (vi) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon
exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock). 
  
 SECTION 5.2. Ranking. 
  
 This Guarantee will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all present and future
Senior Indebtedness (as defined in the Indenture) of the Guarantor. By their acceptance thereof, each Holder of Capital Securities agrees to the foregoing provisions of this Guarantee and the other terms set forth herein. 
  
 The right of the Guarantor to participate in any distribution of assets of
any of its subsidiaries upon any such subsidiary’s liquidation or reorganization or otherwise is subject to the prior claims of creditors of that subsidiary, except to the extent the Guarantor may itself be recognized as a creditor of that
subsidiary. Accordingly, the Guarantor’s obligations under this Guarantee will be effectively subordinated to all existing and future liabilities of the Guarantor’s subsidiaries, and claimants should look only to the assets of the
Guarantor for payments thereunder. This Guarantee does not limit the incurrence or issuance of other secured or unsecured debt of the Guarantor, including Senior Indebtedness of the Guarantor, under any indenture or agreement that the Guarantor may
enter into in the future or otherwise. 
  
 ARTICLE VI 

TERMINATION 
  
 SECTION 6.1. Termination. 
  
 This Guarantee shall terminate as to the Capital Securities (i) upon full payment of the Redemption Price or the Special Redemption Price, as the case may
be, of all Capital Securities then outstanding, (ii) upon the distribution of all of the Debentures to the Holders of all of the Capital Securities or (iii) upon full payment of the amounts payable in accordance with the Declaration upon dissolution
of the Issuer. This Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder of Capital Securities must restore payment of any sums paid under the Capital Securities or under this Guarantee.

  

 - 13 - 

 ARTICLE VII 
 INDEMNIFICATION 
  
 SECTION 7.1. Exculpation. 
  
 (a)
No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission of such Indemnified Person in good faith in
accordance with this Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Guarantee or by law, except that an Indemnified Person shall be
liable for any such loss, damage or claim incurred by reason of such Indemnified Person’s negligence or willful misconduct with respect to such acts or omissions. 
  
 (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Issuer
or the Guarantor and upon such information, opinions, reports or statements presented to the Issuer or the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person’s professional or expert
competence and who, if selected by such Indemnified Person, has been selected with reasonable care by such Indemnified Person, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Capital Securities might properly be paid. 
  
 SECTION 7.2. Indemnification. 
  
 (a) The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence or willful misconduct on the part of the Indemnified Person, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including but not
limited to the costs and expenses (including reasonable legal fees and expenses) of the Indemnified Person defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of the Indemnified
Person’s powers or duties hereunder. The obligation to indemnify as set forth in this Section 7.2 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee. 
  
 (b) Promptly after receipt by an Indemnified Person under
this Section 7.2 of notice of the commencement of any action, such Indemnified Person will, if a claim in respect thereof is to be made against the Guarantor under this Section 7.2, notify the Guarantor in writing of the commencement thereof; but
the failure so to notify the Guarantor (i) will not relieve the Guarantor from liability under paragraph (a) above unless and to the extent that the Guarantor did not otherwise learn of such action and such failure results in the forfeiture by the
Guarantor of substantial rights and defenses and (ii) will not, in any event, relieve the Guarantor from any obligations to any Indemnified Person other than the indemnification obligation provided in paragraph (a) above. The Guarantor shall be
entitled to appoint counsel of the Guarantor’s choice at the Guarantor’s 

  

 - 14 - 

 
expense to represent the Indemnified Person in any action for which indemnification is sought (in which case the Guarantor shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by the Indemnified Person or Persons except as set forth below); provided, however, that such counsel shall be satisfactory to the Indemnified Person.
Notwithstanding the Guarantor’s election to appoint counsel to represent the Indemnified Person in any action, the Indemnified Person shall have the right to employ separate counsel (including local counsel), and the Guarantor shall bear the
reasonable fees, costs and expenses of such separate counsel (and local counsel), if (i) the use of counsel chosen by the Guarantor to represent the Indemnified Person would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the Indemnified Person and the Guarantor and the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it and/or other Indemnified
Persons which are different from or additional to those available to the Guarantor, (iii) the Guarantor shall not have employed counsel satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice
of the institution of such action or (iv) the Guarantor shall authorize the Indemnified Person to employ separate counsel at the expense of the Guarantor. The Guarantor will not, without the prior written consent of the Indemnified Persons, settle
or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Persons are
actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Person from all liability arising out of such claim, action, suit or proceeding. 
  
 SECTION 7.3. Compensation; Reimbursement of Expenses.

  
 The Guarantor agrees: 
  
 (a) to pay to the Guarantee Trustee from time to time such
compensation for all services rendered by it hereunder as the parties shall agree to from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); and 

 
 (b) except as otherwise expressly provided herein, to
reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by it in accordance with any provision of this Guarantee (including the reasonable compensation and the expenses and disbursements
of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct. 
  
 The provisions of this Section 7.3 shall survive the resignation or removal of the Guarantee Trustee and the termination of this Guarantee. 
  

 - 15 - 

 ARTICLE VIII 
 MISCELLANEOUS 
  
 SECTION 8.1. Successors and Assigns. 
  
 All
guarantees and agreements contained in this Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding. Except in
connection with any merger or consolidation of the Guarantor with or into another entity or any sale, transfer or lease of the Guarantor’s assets to another entity, in each case to the extent permitted under the Indenture, the Guarantor may not
assign its rights or delegate its obligations under this Guarantee without the prior approval of the Holders of not less than a Majority in liquidation amount of the Capital Securities. 
  
 SECTION 8.2. Amendments. 
  
 Except with respect to any changes that do not adversely affect the rights of Holders of the Capital Securities in any
material respect (in which case no consent of Holders will be required), this Guarantee may be amended only with the prior approval of the Holders of not less than a Majority in liquidation amount of the Capital Securities. The provisions of the
Declaration with respect to amendments thereof shall apply equally with respect to amendments of the Guarantee. 
  
 SECTION 8.3. Notices. 
  
 All notices provided for in this Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed
by first class mail, as follows: 
  
 (a) If given
to the Guarantee Trustee, at the Guarantee Trustee’s mailing address set forth below (or such other address as the Guarantee Trustee may give notice of to the Holders of the Capital Securities): 
  
 Wells Fargo Bank, National Association 
 919 Market Street 
 Suite 700 
 Wilmington, DE 19801 
 Attention: Corporate Trust Division 
 Telecopy: 302-575-2006 
 Telephone: 302-575-2005 
  

 - 16 - 

 (b) If given to the Guarantor, at the Guarantor’s mailing address set forth below
(or such other address as the Guarantor may give notice of to the Holders of the Capital Securities and to the Guarantee Trustee): 
  
 Carolina Bank Holdings, Inc. 
 2604 Lawndale Drive 
 Greensboro, North Carolina 27408 
 Attention: Allen Liles 
 Telecopy: (336) 286-8758 
 Telephone: (336) 286-8746 
  
 (c) If given to any Holder of the Capital Securities, at the
address set forth on the books and records of the Issuer. 
  
 All
such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because
of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. 
  
 SECTION 8.4. Benefit. 
  
 This Guarantee is solely for the benefit of the Holders of the Capital Securities and, subject to Section 2.1(a), is not
separately transferable from the Capital Securities. 
  
 SECTION 8.5. Governing Law. 
  
 THIS GUARANTEE
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. 
  
 SECTION 8.6. Counterparts. 
  
 This Guarantee may contain more than one counterpart of the signature page and this Guarantee may be executed by the affixing of the signature of the
Guarantor and the Guarantee Trustee to any of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single
signature page. 
  

 - 17 - 

 THIS GUARANTEE is executed as of the day and year first above written. 
  

			
	Carolina Bank Holdings, Inc.,
	as Guarantor
		
	By:	 	 /s/ Robert T. Braswell

	Name:	 	Robert T. Braswell
	Title:	 	President & CEO
	
	WELLS FARGO BANK, NATIONAL
	ASSOCIATION, as Guarantee Trustee
		
	By:	 	 /s/ Edward L. Truitt, Jr.

	Name:	 	Edward L. Truitt, Jr.
	Title:	 	Vice President

  

 - 18 -Commercial Lease

 COMMERCIAL LEASE 
  
 110 South Ferrall, Spokane, Washington 
  
 LESSOR: PORTOLESE & SAMPLE INVESTMENTS, a Washington general partnership 
  
 LESSEE: AMBASSADORS GROUP, INC. a Delaware corporation 

 TABLE OF CONTENTS 
  

					
	 ARTICLE I.
	  	1
			
	 	  	         1. Demised Premises
	  	1
			
	 	  	         2. Lease Term
	  	2
			
	 	  	         3. Recording
	  	2
		
	 ARTICLE II.
	  	2
			
	 	  	         1. Granting Clause
	  	2
			
	 	  	         2. Amount of Rent
	  	2
			
	 	  	         3. Time of Payment
	  	3
			
	 	  	         4. Late Rental
	  	3
		
	 ARTICLE III.
	  	3
			
	 	  	         1. Holding Over
	  	3
			
	 	  	         2. Commercial Use
	  	3
			
	 	  	         3. Quiet Enjoyment
	  	3
			
	 	  	         4. Laws and Ordinances
	  	3
			
	 	  	         5. Environmental Regulations
	  	4
			
	 	  	         6. Utility Services
	  	5
			
	 	  	         7. Taxes and License Fees on Building Activity
	  	5
			
	 	  	         8. Building Employees and Janitorial Services
	  	5
			
	 	  	         9. Personal Property
	  	5
		
	 ARTICLE IV.
	  	5
			
	 	  	         1. Liability Insurance
	  	5

					
			
	 	  	         2. Fire and Extended Coverage
	  	5
			
	 	  	         3. Acts of Invalidation
	  	6
			
	 	  	         4. Lessor’s Negligence
	  	6
			
	 	  	         5. Losses Covered by Insurance
	  	6
			
	 	  	         6. Liability for Damage
	  	6
			
	 	  	         7. Notice of Damage
	  	6
			
	 	  	         8. Rebuilding and Repair
	  	7
			
	 	  	         9. Operation During Repair
	  	7
		
	 ARTICLE V.
	  	7
			
	 	  	         1. Eminent Domain Greater Than 20% Taken
	  	7
			
	 	  	         2. Eminent Domain Less Than 20% Taken
	  	7
			
	 	  	         3. Assignment of Compensation
	  	8
		
	 ARTICLE VI.
	  	8
			
	 	  	         Option to Renew
	  	8
		
	 ARTICLE VII.
	  	8
			
	 	  	         1. Future Remodeling
	  	8
			
	 	  	         2. Ownership of Improvements
	  	8
			
	 	  	         3. Consent of Lessor Required
	  	9
			
	 	  	         4. Governmental Approval
	  	9
			
	 	  	         5. Insurance Premium Increases
	  	9
			
	 	  	         6. Waiver of Lien Required
	  	9
			
	 	  	 ARTICLE VIII.
	  	9
			
	 	  	         Repairs
	  	9
		
	 ARTICLE IX.
	  	10

					
			
	 	  	         Access
	  	10
		
	 ARTICLE X.
	  	10
			
	 	  	         Assignment and Subletting
	  	10
		
	 ARTICLE XI.
	  	10
			
	 	  	         1. Property Taxes
	  	10
			
	 	  	         2. Future Taxes on Rentals
	  	11
		
	 ARTICLE XII.
	  	11
			
	 	  	         1. Events of Default
	  	11
			
	 	  	 (a) Failure to Pay Rent
	  	11
			
	 	  	 (b) Failure to Comply With Terms of Lease
	  	11
			
	 	  	 (c) Insolvency of Lessee
	  	11
			
	 	  	 (d) Bankruptcy of Lessee
	  	11
			
	 	  	 (e) Appointment of Receiver
	  	11
			
	 	  	 (f) Abandonment
	  	11
			
	 	  	 (g) Creation of Lien
	  	12
			
	 	  	         2. Remedies for Default
	  	12
			
	 	  	 (a) Termination of Lease and Surrender
	  	12
			
	 	  	 (b) Retaking Possession and Reletting Without Termination of Lease
	  	12
			
	 	  	         3. Attorney’s Fees
	  	12
			
	 	  	         4. Lessor Default
	  	12
		
	 ARTICLE XIII.
	  	12
			
	 	  	             Building Antenna/Satellite Dish(es)
	  	12

					
		
	 ARTICLE XIV.
	  	13
			
	 	  	             Building Signage
	  	13
		
	 ARTICLE XV.
	  	13
			
	 	  	             Notices to Lessee and Lessor
	  	13
		
	 ARTICLE XVI.
	  	13
			
	 	  	         1. Legal Relationship of Lessor and Lessee
	  	13
			
	 	  	         2. Captions and Construction of Language
	  	13
			
	 	  	         3. Waiver of Covenants
	  	14
			
	 	  	         4. Computation of Time
	  	14
			
	 	  	         5. Estoppel Certificate or Tenancy Statement
	  	14
			
	 	  	         6. Consent
	  	14
			
	 	  	         7. Entire Agreement
	  	14
			
	 	  	         8. Applicable Laws
	  	14
			
	 	  	         9. Binding Effect
	  	14

 Exhibit 10.1 
  
 COMMERCIAL LEASE 
  
 THIS LEASE is made effective as of the 1st day of January, 2005, between PORTOLESE & SAMPLE INVESTMENTS, a Washington General Partnership, with its
principal office in Spokane, Washington, the “LESSOR;” and AMBASSADORS GROUP, INC., a Delaware corporation, with its principal office in Spokane, Washington, the “LESSEE.” 
  
 ARTICLE I. 
  
 1. Demised Premises. The Demised Premises is all the property located
at South 110 Ferrall, Spokane, Washington, more particularly described as: 
  
 Lots 1, 2, 3, 7, 8, 9, 10, 11 & 12, Block 11; Lots 4, 5 and 6 of Block 2; that portion of Lots 11 & 12, lying north of Thor Place, Block 12, KAUFMAN’S SECOND ADDITION, as per plat thereof recorded in
Volume “B” of Plats, page 4, records of Spokane County; and 
  
 TOGETHER WITH the West Half of vacated Ferrall Street, lying East of and adjacent to Lots 1, 2, 3, Block 11; EXCEPT that portion deeded to the City of Spokane; 
  
 AND TOGETHER WITH the East Half of vacated Ferrall Street, lying North of Thor Place, adjacent to Lots 11 and 12, Block 12;

  
 AND TOGETHER WITH the South One Half of Vacated 1st Avenue,
which lies East of the East line extended of Block 11, KAUFMAN’S SECOND ADDITION and West of Thor Place in Block 12. 
  
 EXCEPT that portion of Lot 3, Block 11, deeded to the City of Spokane for street purposes described as follows: BEGINNING at a point on the East line of
said Lot 3, 10 foot South of the Northeast corner; thence Southwesterly to a point on the South line, 90 feet West of the Southeast corner; thence East along the South line to the Southeast corner; thence North along the East line to the point of
beginning; 
  
 AND EXCEPTING THEREFROM that portion of Lots 7 and
8, Block 11, contained within the following described property: BEGINNING at the Southeast corner of said Lot 7; thence West along the South line of said Lot 7 to the Southwest corner thereof; thence North along the West line of said Lot 7 a
distance of 23 feet to a point; thence Southeasterly along a straight line to a point 34 feet East of the West line of said Lot 7 and 17 feet North of the South line of said Lot; thence Northeasterly along a straight line to a point on the South
line of said Lot 8 a distance of 68 feet West of the Southeast corner thereof; thence Northeasterly along a straight line to a point on the South line of Lot 9, in said Block 11, a distance of 15 feet West of the Southeast corner of said Lot 9;
thence Northeasterly along a straight line to a point on the East line of said Lot 9 a distance of 13 feet North of the Southeast corner thereof; thence South along the East line of said Lots 9, 8 and 7 to the True Point of Beginning; 
  

 - 1 - 

 AND EXCEPT that portion of Lot 9, Block 11, for street purposes described as follows: BEGINNING at the
Southeast corner of said Lot 9; thence North along the East line, 13 feet; thence Southwesterly to a point on the South line, 15 feet West from the Southeast corner; thence East along the South line to the point of beginning; 
  
 Situate in the City of Spokane, County of Spokane, State of Washington.

  
 SUBJECT TO restrictions, easements and reservations of
record. 
  
 TOGETHER WITH all buildings, structures, equipment,
parking lots, and other improvements and facilities, now or hereafter located on and all easements and other appurtenances now or hereafter benefiting the foregoing-described land. 
  
 2. Lease Term. Subject to extension by Lessee as provided in Article VI, below, the term of this Lease shall be for
five (5) years commencing on January 1, 2005, and ending on December 31, 2009. 
  
 3. Recording. Upon the request of either LESSOR and LESSEE, a short form or memorandum of this Lease shall be recorded, at the expense of the requesting party. 
  
 ARTICLE II. 
  
 1. Granting Clause. In consideration of the obligation of the LESSEE
to pay rent provided below, and in consideration of the other terms hereof, LESSOR leases to LESSEE, and LESSEE hereby takes from the LESSOR, the Demised Premises, TO HAVE AND TO HOLD said premises for the Lease Term specified above. The LESSEE,
having leased the Demised Premises for the prior nine (9) years, has examined same and accepts the buildings, improvements, and any equipment on or in the Demised Premises in their existing condition, without any further responsibility of the LESSOR
for any construction, repairs, alterations, or additions thereto, except as provided herein. No representation, statement, or warranty, express or implied, has been made by or on behalf of the LESSOR as to such condition, or as to the use that may
be made of such property. In no event shall the LESSOR be liable for any defect in such property or for any limitation on its use. 
  
 2. Amount of Rent. 
  
 (a) The LESSEE shall pay to the LESSOR as rental for the Demised Premises THIRTY-SIX THOUSAND NINE HUNDRED NINETY-TWO DOLLARS ($36,992) per month.

  
 (b) The rent specified in this Lease shall be net to LESSOR in
each year during the Lease term. Accordingly, LESSEE shall pay all expenses and obligations relating to the Demised Premises (except as otherwise specifically provided herein) which may arise or become due during the Lease term, and LESSEE shall
indemnify and hold LESSOR harmless against such expenses and obligations. 
  

 - 2 - 

 3. Time of Payment. The rental payment shall be payable on the 1st day of each calendar month of
the lease term. 
  
 4. Late Rental. In the event any rental
payment or any other payment required to be made by LESSEE to LESSOR under the terms of this Lease is not made within fifteen (15) days of its due date, the LESSEE shall pay to the LESSOR an additional rental and as a service charge One and one-half
Percent (1.5%) per month of the amount of said late rental payment, which is $555; and, if applicable, One and one-half Percent (1.5%) per month of the amount of any other late payments required to be made under the terms of this Lease. 

 
 ARTICLE III. 
  
 1. Holding Over. In the event LESSEE remains in possession of the
demised premises after the expiration of this Lease and without the execution of a new lease, LESSEE shall be deemed to be occupying said premises as a tenant from month to month at a rental equal to the rental herein provided plus Twenty Percent
(20%) of such amount and otherwise subject to all the conditions, provisions, and obligations of this Lease. 
  
 2. Commercial Use. The Demised Premises may be used for any lawful purpose. 
  
 3. Quiet Enjoyment. LESSOR shall furnish LESSEE with the quiet and peaceful possession and enjoyment of said Demised
Premises during the term of this Lease, so long as the LESSEE shall comply herewith, without any manner of hindrance from the LESSOR. 
  
 4. Laws and Ordinances. The LESSEE shall comply with any law, ordinance, and regulation, federal, state, county, or municipal, now or hereafter in
force, applicable to the Demised Premises, relating to use or occupancy thereof or to the making of repairs, changes, alterations or improvements, ordinary or extraordinary, seen or unforeseen, for which LESSEE is responsible under the terms of this
Lease; provided, however, that LESSEE shall not be required to comply with any law, ordinance or regulation which (a) requires structural changes or modifications to the Demised Premises, or (b) involves the clean-up, removal or remediation of
Hazardous Substances in, on, under, or about the Demised Premises, unless caused by LESSEE. As used herein, “Hazardous Substances” means any product, substance, chemical, material, or waste whose presence, nature, quantity, and/or
intensity of existence, use, manufacture, disposal, transportation, spill, release, or effect, either by itself or in combination with other materials expected to be on the Demised Premises, is either: (i) potentially injurious to the public health,
safety or welfare, the environment, or the Demised Premises, (ii) regulated or monitored by any governmental authority, or (iii) a basis for liability of LESSOR to any governmental agency or third party under any applicable statute or common law
theory. Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any products, by-products or fractions thereof, and asbestos. 
  
 The LESSEE shall comply with any and all rules and regulations applicable to the Demised Premises issued by the Board of
Fire Underwriters, or by any other body hereinafter constituted exercising similar functions, and by insurance companies writing policies covering 

  

 - 3 - 

 
the Demised Premises which now or hereafter may become applicable to the Demised Premises. The LESSEE shall pay all costs, expenses, claims, fines,
penalties, and damages that may be imposed because of the failure of the LESSEE to comply with this paragraph, and shall indemnify the LESSOR from all liability arising from each noncompliance. The LESSOR and the LESSEE shall each promptly give
notice to the other of any notice of violation received by them. Without diminishing the obligation of the LESSEE, if the LESSEE shall at any time fail to comply as expeditiously as reasonably feasible with any law, ordinance, rule, or regulation
concerning or affecting the Demised Premises, or the use and occupation thereof; and, if a stay is necessary with respect to such compliance, and the LESSEE shall have failed to obtain such stay, the LESSOR after ten (10) days’ prior written
notice to the LESSEE may so comply, and the reasonable costs and expenses of the LESSOR in such compliance shall be paid by the LESSEE. Upon the LESSEE’s failure so to pay, any such payments made by the LESSOR, together with the interest
thereon to be computed at the rate of twelve percent (12%) per annum from the date of payment, shall be considered as additional rent to be added to the installment of net rental next accruing, and shall entitle the LESSOR to enforce any of the
terms herein contained that may be applicable to such rent. The LESSEE shall have the right to contest by appropriate legal proceedings in the name of the LESSEE or the LESSOR, or both, without cost or expense to the LESSOR, the validity or
application of any such law, ordinance, rule or requirement and the LESSOR shall cooperate with the LESSEE and will execute and deliver any appropriate papers which may be necessary to permit the LESSEE to contest the validity or application
thereof. 
  
 5. Environmental Regulations. LESSEE shall not
create or permit any condition on the Demised Premises that could present a threat to human health or to the environment. LESSEE shall indemnify and hold harmless LESSOR from any suit or claim growing out of any damages alleged to have been caused,
in whole or in part, by an unhealthful, hazardous or dangerous condition caused by LESSEE’s violation of any laws, ordinances, regulations or requirements pertaining to solid or other wastes, chemicals, oil and gas, toxic, corrosive, or
hazardous materials, air, water (surface or groundwater) or noise pollution, and the storage, handling, use or disposal of any such material. LESSEE shall bear the expense of all practices or work, preventative or remedial, which may be required
because of the condition or use of the Demised Premises, by LESSEE or those claiming by, through or under LESSEE, during LESSEE’s period of occupancy. LESSEE expressly agrees that the indemnification and hold harmless obligations it hereby
assumes shall survive termination of this Lease. 
  
 LESSOR and
LESSEE warrant to each other that neither LESSOR nor LESSEE, to their knowledge, has allowed any third party to use, generate, manage, treat or dispose of any Hazardous Substance in violation of applicable law on, under or about the Demised Premises
or allowed to be transported any Hazardous Substance in violation of applicable law to or from the Demised Premises. The parties further warrant that they have no knowledge of the presence of any regulated or environmentally hazardous substances in,
on or within reasonable proximity to the Demised Premises. Nor of any existing violations of any laws, rules, regulations, or ordinances, including without limitation, any environmental laws against or upon the Demised Premises. Should LESSOR or
LESSEE, during the term of the Lease, or any extension(s) thereof become aware of the existence of any Hazardous Substance in violation of applicable law being present on the Demised Premises, such Hazardous Substance shall promptly be removed.

  

 - 4 - 

 6. Utility Services. The LESSOR shall not be required to provide any service to the Demised
Premises, including but not limited to heat, water, and power. The LESSOR shall not be liable for any failure of water supply or electric current or of any service by any utility; for injury to person (including death) or damage to property
resulting from steam, gas, electricity, water, rain, or snow which may flow or leak from any part of the Demised Premises, including the basement area, or from any pipes, appliances, or plumbing works, from the street or subsurface, or from any
other place; or for interference with light or other easements, however caused. The LESSEE shall contract directly in its own name with suppliers and shall pay all charges for steam, gas, electricity, water, light, heat, power, refuse, and other
services used in or about or supplied to the Demised Premises, and shall indemnify the LESSOR against any liability on such account. 
  
 7. Taxes and License Fees on Building Activity. LESSEE shall pay all occupational, business, personal property, or other taxes or license fees or
charges against the business conducted in said premises and against any property or persons maintained in connection therewith, and will not permit any lien to be filed against the real estate because or on account of any such fee, license, tax or
other charge. 
  
 8. Building Employees and Janitorial
Services. LESSEE shall employ and pay all personnel required in the building operations including but not limited to maintenance, janitor and watchmen. LESSEE shall furnish its own janitor and shall keep said Demised Premises in a neat, clean
and orderly condition. 
  
 9. Personal Property. All
personal property in and upon the said premises shall be at the sole risk of the LESSEE, and the LESSOR shall not be liable for any damage to said property sustained by the LESSEE or any other person, unless such accident shall have been occasioned
by the negligence of the LESSOR or its agents or employees. 
  
 ARTICLE IV. 
  
 1. Liability Insurance.
LESSEE shall procure and maintain throughout the term of this Lease a policy or policies of insurance, at its sole cost and expense, insuring LESSEE as a named insured and LESSOR as an additional named insured against all claims, demands or actions
arising out of or in connection with LESSEE’s use or occupancy of the Demised Premises, or by the condition of the Demised Premises, the limits of such policy or policies to be in an amount not less than $3,000,000 combined single limit for
bodily injury, including personal injury, and property damage, and to be written by insurance companies licensed to do business in the State of Washington. LESSEE shall use its best efforts to obtain a written obligation on the part of each
insurance company to notify LESSOR at least thirty (30) days prior to cancellation or modification of such insurance. Such policies or duly executed certificates of insurance shall be promptly delivered to LESSOR. Renewals thereof as required shall
be delivered to LESSOR at most thirty (30) days after the expiration of the respective policy terms. 
  
 2. Fire and Extended Coverage. LESSEE shall obtain and keep in force during the term of this Lease a fire and all other perils insurance policy,
insuring the Demised Premises against destruction by fire or otherwise to the full replacement value thereof with loss payable 

  

 - 5 - 

 
made first to the LESSOR to the extent of its interest in the real property and buildings of the Demised Premises. In addition, from time to time, the LESSOR
and LESSEE shall review the replacement value and upon LESSOR’s request, the coverage shall be reasonably increased to cover any increase in replacement costs. Provided, however, that such increase shall not take place more than once for each
Lease year. 
  
 3. Acts of Invalidation. LESSEE shall not,
without LESSOR’s prior written consent, keep or do anything within the Demised Premises for any purpose which invalidates any insurance policy carried on the Demised Premises. 
  
 4. Lessor’s Negligence. LESSOR shall not be liable to LESSEE or to LESSEE’s employees, agents or visitors,
or to any other person whomsoever, for any injury to person or damage to or loss of property on or about the Demised Premises caused by the act, negligence or misconduct of LESSEE, its employees, subtenants, or licensees, or of any other person
entering the Demised Premises under express or implied invitation of LESSEE, or arising out of the use of the premises by LESSEE and the conduct of its business therein, or arising out of any breach or default by LESSEE in the performance of its
obligations hereunder; and LESSEE hereby agrees to indemnify LESSOR and hold them harmless from any loss, expense or claims arising out of such damage or injury. LESSEE shall pay, as additional rental hereunder, on demand, all expenses incurred by
LESSOR, including costs and attorneys’ fees, with respect to any litigation or proceeding commenced or maintained as a result of LESSEE’s activities on or in connection with the Demised Premises, provided LESSOR is the prevailing party in
such litigation or proceeding. 
  
 5. Losses Covered by
Insurance. LESSOR and LESSEE agree and covenant that neither shall be liable to the other for loss arising out of damage to or destruction of the Demised Premises or contents thereof when such loss is caused by any perils included within the
State of Washington fire and all other perils insurance policy. This Agreement shall be binding whether or not such damage or destruction be caused by negligence of either party, or their agents, employees or visitors. 
  
 6. Liability for Damage. Except if caused by the negligence of Lessor
or its agents or employees, LESSOR and LESSOR’s agents and employees shall not be liable to LESSEE for any injury to person or damage to property caused by the Demised Premises or other portions of the building becoming out of repair or by
defect in or failure of equipment, pipes or wiring, or broken glass, or by the backing up of drains, or by gas, water, steam, electricity, or oil leaking, escaping or flowing into the Demised Premises, nor shall LESSOR be liable to LESSEE for any
loss or damage that may be occasioned by or through the acts or omissions of other tenants of the building or of any other persons whomsoever. 
  
 7. Notice of Damage. LESSEE shall give immediate written notice to LESSOR of any damage caused to the Demised Premises by fire or other casualty.
In the event that the Demised Premises shall be damaged or destroyed by fire or other peril covered under the insurance herein required to be carried by LESSEE and LESSOR does not elect to terminate this Lease as hereinafter provided, LESSOR shall
proceed with reasonable diligence at their sole cost and expense to rebuild and repair the Demised Premises. If the building in which the Demised 

  

 - 6 - 

 
Premises are located shall be destroyed or rendered untenantable to an extent in excess of twenty-five percent (25%) of the area of the Demised Premises then
leased to LESSEE by a peril covered by LESSEE’s insurance, then LESSOR may elect either to terminate this Lease or to proceed to rebuild and repair the Demised Premises. LESSOR shall give written notice to LESSEE of such election within sixty
(60) days after the occurrence of such casualty and if LESSOR elects to rebuild and repair, shall proceed to do so with reasonable diligence and at their sole cost and expense. In the event the building is destroyed or rendered untenantable to an
extent in excess of twenty-five percent (25%) as set forth above in this paragraph, LESSEE may elect to terminate the lease. LESSEE shall give LESSOR written notice of such election within sixty (60) days after the occurrence of such casualty.

  
 8. Rebuilding and Repair. LESSOR’s obligation to
rebuild and repair under this Article shall in any event be limited to restoring the Demised Premises to substantially the condition in which the same existed prior to the casualty, and shall be further limited to the extent of the net insurance
proceeds available to LESSOR for such restoration, plus the amount of any applicable deductible, and LESSEE agrees that, promptly after completion of such work by LESSOR, it will proceed with reasonable diligence and at its sole cost and expense to
rebuild, repair and restore its signs, fixtures, equipment and other items. 
  
 9. Operation During Repair. LESSEE agrees during any period of reconstruction or repairs of the Demised Premises it will continue to operate its business within the Demised Premises to the extent practicable.
The LESSOR agrees that the LESSEE may obtain business interruption insurance at its own cost and expense to protect against loss by reason of business interruption. Following an occurrence in which the Demised Premises has been destroyed or rendered
untenantable to an extent in excess of twenty-five percent (25%), if LESSEE does not elect to terminate the Lease, LESSEE’s monthly rental hereunder shall be abated in the same proportion as the damaged and destroyed portion bears to the entire
Demised Premises, which abatement shall continue until rebuilding or repairs are substantially completed. The payment of taxes and insurance premiums shall not be abated. 
  
 ARTICLE V. 
  
 1. Eminent Domain Greater Than 20% Taken. If more than twenty percent (20%) of the area of the Demised Premises should be taken for any public or
quasi-public use under any governmental law, ordinance or regulation or by right of eminent domain or by private purchase in lieu thereof, upon the written notice of LESSOR or LESSEE given within sixty (60) days of such taking, this Lease shall
terminate and be of no further force or effect; and LESSOR and LESSEE shall be relieved of their respective obligations under this Lease, except those obligations set forth in this Lease which specifically survive the expiration or sooner
termination of this Lease. 
  
 2. Eminent Domain Less Than 20%
Taken. If less than twenty percent (20%) of the area of the Demised Premises should be taken as aforesaid, this Lease shall not terminate. Following such partial taking, LESSOR shall make all necessary repairs or alterations to make the Demised
Premises an architectural whole; provided, however, that LESSOR’s obligation to repair and rebuild under this Article V shall in any event be limited to the extent of the net condemnation award available to LESSOR for such purposes. 

 

 - 7 - 

 3. Assignment of Compensation; Abatement. All compensation awarded for any taking (or the proceeds
of private sale in lieu thereof) of the Demised Premises shall be the property of LESSOR, and LESSEE hereby assigns its interest in any such award to LESSOR; provided, however, LESSOR shall have no interest in any award made to LESSEE for loss of
business or for the taking of LESSEE’s fixtures and other property if a separate award for such items is made to LESSEE. If at any time during the Lease Term any portion of the Demised Premises shall be taken as aforesaid, then all rental
payments hereunder shall be immediately and automatically abated in the same proportion that the square footage taken bears to the square footage of the Demised Premises immediately prior to such taking. 
  
 ARTICLE VI. 
  
 Option to Renew. The LESSEE, but not any sub-lessee or assignee of the
LESSEE, shall have the right to extend this Lease for two (2) consecutive five (5) year periods. LESSEE shall be required to give LESSOR no less than six (6) months prior written notice of LESSEE’s election to exercise an Option to Extend. Such
extension shall be upon the same terms and conditions as this Lease except that the rental rate for the first option period shall be One Hundred Five Percent (105%) of the rental rate of the initial Lease, and the rental rate for the second option
period shall be One Hundred Ten Percent (110%) of the rental rate of the initial Lease. 
  
 ARTICLE VII. 
  
 1.
Future Remodeling. In the event the LESSEE wishes to remodel in the future, all such remodeling shall be the responsibility of the LESSEE. LESSEE may make cosmetic or other nonstructural alterations or improvements to the Demised Premises
costing less than Fifty Thousand Dollars ($50,000) over the term of the Lease. If the LESSEE shall remodel or make leasehold improvements to the premises in excess of Fifty Thousand Dollars ($50,000) over the term of the Lease, such remodeling or
leasehold improvements shall not be done without first securing the consent of the LESSOR, which consent shall not be unreasonably withheld. No work on the building, repairing, altering or improving the Demised Premises by the LESSEE shall in any
way constitute or be made a lien upon the Demised Premises. Such right of lien shall not exist, and this Lease and the recording of this Lease or any summary of this Lease is intended as a notice to any and all persons doing work or labor thereon or
furnishing materials thereto, that they or none of them shall have the right to a lien of any kind whatsoever upon the Demised Premises. 
  
 2. Ownership of Improvements. All alterations, decorations, additions, and improvements, except LESSEE’s Property, shall become the property
of the LESSOR upon termination of this Lease. “LESSEE’s Property” shall mean and refer to all movable personal property and all business and trade fixtures, machinery and equipment, owned by LESSEE or installed by LESSEE in the
Demised Premises. Upon the expiration or earlier termination of the Lease Term, LESSEE shall have the right, but not the obligation, to remove LESSEE’s Property, provided that LESSEE, at its expense, repairs any material non-cosmetic damage
caused by such removal. 
  

 - 8 - 

 3. Consent of Lessor Required. If written consent of the LESSOR to any proposed alterations by the
LESSEE shall have been obtained, the LESSEE agrees to advise LESSOR in writing of the date upon which such alterations will commence in order to permit the LESSOR, if it so desires, to post notice of nonresponsibility. 
  
 4. Governmental Approval. Before the commencement of such work such
plans and specifications shall be filed with and approved by all governmental departments or authorities having jurisdiction, and any public utility company having an interest therein, and all such work shall be done subject to and in accordance
with the requirements of law and local regulations of all governmental departments or authorities having jurisdiction and of each public utility company. 
  
 5. Insurance Premium Increases. Before the commencement of any remodeling work the LESSEE shall pay the amount of any increase in premiums on
insurance policies provided for hereunder on account of endorsements to be made thereon covering the risk during the course of such work. 
  
 6. Waiver of Lien Required. Any contract or agreement for labor, services, materials, or supplies in connection with any alteration, rebuilding,
replacement, change, addition, or improvement, shall provide that no lien or claim shall thereby be created, or arise, or be filed by anyone thereunder upon or against the Demised Premises, or the buildings or improvements thereon, or to be erected
on the Demised Premises or any of the equipment thereof. Before the commencement of any such work, the LESSEE shall deliver to the LESSOR either a duplicate original of such contract or a written waiver by the architect, engineer, contractor,
materialman, mechanic, person, or corporation named in such contract of all right of lien which he or it might otherwise have upon or against the Demised Premises, or the buildings or improvements to be altered, repaired, improved, or constructed,
or the interest of the LESSOR therein. 
  
 ARTICLE VIII.

  
 Repairs. Subject to the provisions of this Lease
dealing with damage and destruction and condemnation, LESSOR and LESSEE shall be responsible for maintenance and repairs as follows: 
  
 1. LESSOR shall be responsible for the maintenance and repair of the structural portions of the Demised Premises. If any repairs required to be made by
LESSOR hereunder are not made within thirty (30) days after written notice delivered to LESSOR by LESSEE, except repairs of an emergency nature which shall be promptly made, LESSEE shall have the right (but not the obligation) to fulfill
LESSOR’s obligations for such repairs. LESSEE shall have the right to deduct its actual cost so incurred from the next monthly rental payments coming due until reimbursed in full. 
  
 2. LESSEE shall maintain and repair the balance of the Demised Premises, including but not limited to the parking lot, roof,
all interior walls, paint, and signs in good, clean condition and shall at its sole cost and expense, make all needed repairs and replacements, including the roof and replacement of cracked or broken glass and window casings and of the pavement, any

  

 - 9 - 

 
fences and all other portions of the Demised Premises. Provided, however, LESSEE’s responsibility to maintain and repair the balance of the Demised
Premises (including the roof) is limited with respect to any item which costs more than Ten Thousand Dollars ($10,000) to repair or replace such that LESSEE shall only be liable for a portion of the cost thereof computed by dividing the number of
years remaining in the term of the Lease (excluding unexercised options) by five (5). For example, if an air conditioning unit requires replacement at the cost of $50,000 with four years remaining in the initial term of the Lease, then LESSEE’s
responsibility will be 4/5 of such cost, or $40,000. If any repairs required to be made by LESSEE hereunder are not made within thirty (30) days after written notice delivered to LESSEE by LESSOR, except repairs of an emergency nature which shall be
promptly made, LESSOR may at its option make such repairs without liability to LESSEE for any loss or damage which may result to its business by reason of such repairs, and LESSEE shall pay to LESSOR upon demand as additional rental hereunder the
cost of such repairs. In the event of termination of this Lease, LESSEE shall surrender the Demised Premises in good condition, reasonable wear and tear and loss by fire or other casualty excepted and shall surrender all keys for the Demised
Premises to LESSOR and shall inform LESSOR of all combinations, locks, safes and vaults, if any, in the Demised Premises. 
  
 ARTICLE IX. 
  
 Access. LESSOR shall have the right to enter upon the Demised Premises at any reasonable time for the purpose of inspecting the same. 

 
 ARTICLE X. 
  
 Assignment and Subletting. LESSEE shall not assign or in any manner
transfer this Lease or any estate of interest therein, or sublet the Demised Premises or any part thereof, or grant any license, concession or other right of occupancy of any portion of the Demised Premises without the prior written consent of
LESSOR, which consent shall not be unreasonably withheld. PROVIDED, HOWEVER that LESSEE shall have the right at any time to sublease, assign, or otherwise permit occupancy of all or any portion of its space, without LESSOR’s approval or
consent, to any related entity, subsidiary, parent company, or affiliate of LESSEE. LESSEE may retain any revenues derived from the Sublease. No assignment or subletting shall operate as a waiver of LESSOR’s rights of consent as to any
subsequent assignments and subletting. Notwithstanding, any assignment or subletting, LESSEE shall at all times remain fully responsible and liable for the payment of rent herein specified and for compliance with all of its other obligations under
this Lease. Any merger, dissolution, reorganization, or other corporate change modifying the control of a corporate LESSEE shall be deemed an “assignment” which cannot be accomplished without the prior written consent of LESSOR, which
shall not be unreasonably withheld. 
  
 ARTICLE XI.

  
 1. Property Taxes. The LESSEE agrees to pay
directly on their due dates as additional rental the amount of all property taxes assessed and levied against the Demised Premises and both the principal and interest portions of any and all assessments levied by any local 
  

 - 10 - 

 
improvement districts on the premises including all property taxes levied by the City of Spokane, County of Spokane or the State of Washington, which taxes
shall be prorated for the first and last month of the Lease term including any extensions thereto; provided, however, should real property taxes which are assessed against the Demised Premises increase as a result of the sale, transfer or other
alienation or encumbering thereof by LESSOR, then LESSOR and not LESSEE shall be liable for such tax increases. 
  
 2. Future Taxes on Rentals. Should there presently be in effect or should there be enacted during the term of this Lease, or any extension thereof,
any law, statute or ordinance levying any tax (other than Federal or State income taxes) upon rents or the income from real estate or rental property, or increasing any such tax, LESSEE shall reimburse LESSOR at the same time as rental payments are
due hereunder, for the actual amount of all such taxes paid, as additional consideration for the execution of this Lease, provided, however, LESSEE may contest in good faith any such tax and providing further LESSEE indemnifies LESSOR for any taxes
and costs, including reasonable attorney’s fees relating such contest. 
  
 ARTICLE XII. 
  
 1.
Events of Default. The following events shall be deemed to be events of default by LESSEE under this Lease: 
  
 (a) Failure to Pay Rent. LESSEE shall fail to pay any installment of rental or additional rental hereunder and such failure shall continue for a
period of ten (10) days after written notice from LESSOR. 
  
 (b) Failure to Comply With Terms of Lease. LESSEE shall fail to comply with any term, provisions or covenants of this Lease, other than the payment of rent, and shall not cure such failure within twenty (20) days after written notice
thereof by LESSOR; provided, however, that if the nature of the default is such that it is reasonably expected to take more than twenty (20) days to cure, then an event of default will not exist if LESSEE commences the cure within the twenty (20)
day time period and thereafter diligently pursues the cure to completion. 
  
 (c) Insolvency of Lessee. LESSEE shall become insolvent, or shall make a transfer in fraud of creditors, or shall make an assignment for the benefit of creditors. 
  
 (d) Bankruptcy of Lessee. LESSEE shall file a petition under any
section or chapter of the National Bankruptcy Act, as amended, or under any similar law or statute of the United States or any state thereof, or LESSEE shall be adjudged bankrupt or insolvent in proceedings filed against LESSEE. 
  
 (e) Appointment of Receiver. A Receiver or Trustee shall be appointed
for the Demised Premises or for all or substantially all of the assets of LESSEE, which Receiver or Trustee is not removed or discharged within thirty (30) days. 
  
 (f) Abandonment. LESSEE shall desert or vacate the Demised Premises. 
  

 - 11 - 

 (g) Creation of Lien. LESSEE shall do or permit to be done anything which creates a lien upon the
Demised Premises, which lien is not removed or bonded against within thirty (30) days after notice thereof from LESSOR. 
  
 2. Remedies for Default. Upon the occurrence of any such events of default, LESSOR shall have the option to pursue any one or more of the following
remedies: 
  
 (a) Termination of Lease and Surrender.
Terminate this Lease in which event LESSEE shall immediately surrender the Demised Premises to LESSOR, and if LESSEE fails to do so, LESSOR may, without prejudice to any other remedy which they may have for the possession or arrearage in rent, enter
upon and take possession of the Demised Premises and expel or remove LESSEE and any other person who may be occupying said premises or any part thereof, without being liable for prosecution for any claim or damages therefor; and LESSEE agrees to pay
to LESSOR on demand the amount of all loss and damage which LESSOR may suffer by reason of such termination, whether through inability to relet the Demised Premises on satisfactory terms or otherwise. 
  
 (b) Retaking Possession and Reletting Without Termination of Lease.
Enter upon and take possession of the Demised Premises and expel and remove LESSEE and any other person who may be occupying said premises or any part thereof, without being liable for prosecution or any claims for damages therefor, and, if LESSOR
so elects, relet the premises on such terms as LESSOR may deem advisable and receive the rent therefor; and LESSEE agrees to pay to LESSOR on demand any deficiency that may arise by reason of such reletting. 
  
 3. Attorney’s Fees. If on account of any breach of default by
LESSEE in its obligations hereunder, LESSOR shall employ an attorney to enforce or defend any of LESSOR’s rights or remedies hereunder, LESSEE agrees to pay any reasonable attorney’s fees and all court costs incurred by LESSOR in such
connection. If LESSEE is the prevailing party in any legal action commenced to interpret or enforce the Lease, whether commenced by LESSEE or LESSOR, LESSEE shall be entitled to recover from LESSOR its reasonable attorneys’ fees and court
costs. 
  
 4. LESSOR Default. The following shall
constitute a “LESSOR Default” under this Lease; if LESSOR shall fail to comply with any term, provision, or covenant of this Lease and shall not cure such failure within thirty (30) days after written notice thereof by LESSEE; provided,
however, that if the nature of the failure to comply is such that it is reasonably required to take more than thirty (30) days to cure, then a LESSOR Default will not exist if LESSOR commences the cure within the thirty (30) days time period and
thereafter diligently pursues the cure to completion. If a LESSOR Default occurs, LESSEE may, at LESSEE’s option, perform any such term, provision, covenant, or condition, or make any such payment, on LESSOR’s behalf, and the full cost and
expenses incurred, shall immediately be owing by LESSOR to LESSEE, and LESSEE shall have the right to deduct the amount thereof from rent coming due until reimbursed in full. 
  
 ARTICLE XIII. 
  
 Building Antenna/Satellite Dish(es). LESSEE shall have the right, without rental or 

  

 - 12 - 

 
other charge, to use a portion of the roof to install, operate, and maintain telecommunications antennas, microwave dishes, and other communications
equipment. Such use shall be subject to receipt of all required governmental approvals. LESSEE will pay for any abnormal wear and tear to the roof area to which said equipment is installed or utilized as access to the area of installation.

  
 ARTICLE XIV. 
  
 Building Signage. LESSEE shall have the right to install building
signage, and shall have sole discretion in determining the location of such signage. 
  
 ARTICLE XV. 
  
 Notices
to Lessee and Lessor. Wherever any notice is required or permitted hereunder such notice shall be in writing. Any notice or document required or permitted to be delivered hereunder shall be addressed to the LESSEE or the LESSOR at the addresses
set forth below or at such other addresses as they may have hereafter specified by written notice: 
  

			
	 To Lessor:
	  	 PORTOLESE & SAMPLE INVESTMENTS

	 	  	 16615 Mount Spokane Park Drive

	 	  	 Mead, Washington 99021

		
	 To Lessee:
	  	 AMBASSADORS GROUP, INC.

	 	  	 110 South Ferrall

	 	  	 Spokane, Washington 99202

  
 Such notice may either be (1)
deposited in the United States mail, postage prepaid, certified or registered mail, return receipt requested, which shall be deemed received on the earlier of the date of delivery shown on the return-receipt or the second (2nd) business day after
mailing, whether or not actually received; or (2) sent via an overnight delivery service, such as Federal Express, which shall be deemed received on the date of delivery. 
  
 ARTICLE XVI. 
  
 1. Legal Relationship of Lessor and Lessee. Nothing herein contained shall be deemed or construed by the parties hereto, nor by any third party, as
creating the relationship of principal and agent or of partnership or of joint venture between parties hereto, it being understood and agreed that neither the method of computation of rent, nor any other provisions contained herein, nor any acts of
the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of LESSOR and LESSEE. 
  
 2. Captions and Construction of Language. The captions used herein are for convenience only and do not limit or amplify the provisions hereof.
Whenever herein the singular number is used, the same shall include the plural, and words of any gender shall include each other gender. 
  

 - 13 - 

 3. Waiver of Covenants. One or more waivers of any covenant, term or condition of this Lease by
either party shall not be construed as a waiver of a subsequent breach of the same covenant, term or condition. The consent or approval by either party to or of any act by the other party requiring such consent or approval shall not be deemed to
waiver or render unnecessary consent to or approval of any subsequent similar act. 
  
 4. Computation of Time. Whenever a period of time is herein prescribed for action to be taken by LESSOR, LESSOR shall not be liable or responsible for, and there shall be excluded form the computation of any
such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions or any other causes of any kind whatsoever which are beyond the reasonable control of LESSOR.

  
 5. Estoppel Certificate or Tenancy Statement. Either
LESSOR or LESSEE shall, within fifteen (15) days after written notice from the other party, execute, acknowledge, and deliver to the requesting party a customary estoppel certificate or tenancy statement. 
  
 6. Consent. Whenever in this Lease the consent of a party is required
to an act by or for the other party, such consent shall not be unreasonably withheld or delayed. 
  
 7. Entire Agreement. This Lease contains the entire agreement between the parties, and no agreement shall be effective to change, modify or
terminate this Lease in whole or in part unless such agreement is in writing and duly signed by the party against whom enforcement of such change, modification or termination is sought. 
  
 8. Applicable Laws. The laws of the State of Washington shall govern the interpretation, validity, performance and
enforcement of this Lease. If any provision of this Lease shall be held to be invalid or unenforceable, the validity and enforceability of the remaining provisions of this Lease shall not be affected thereby. 
  
 9. Binding Effect. The terms, provisions and covenants contained in
this Lease shall apply to, inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors in interest and legal representatives except as otherwise herein expressly provided. 
  
 EXECUTED by the parties this 28th day of December, 2005. 
  
  

							
	 PORTOLESE & SAMPLE INVESTMENTS
	  	 AMBASSADORS GROUP, INC.

				
	 By:
	 	 /s/ Joe M. Sample

	  	By:	 	 /s/    Ralph Baard

	 	 	 Joe M. Sample, Managing Partner
	  	 	 	 Vice President

	 	 	 	  	 	 	 
	 By:
	 	 /s/ Emanuele F. Portolese

	  	Attest:	 	 /s/    Jody M. Gentemann

	 	 	 Emanuele F. Portolese, Partner
	  	 	 	 Assistant Secretary

	 	 	Lessor	  	 	 	Lessee

  

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	STATE OF WASHINGTON	 	)
	 	 	:   ss.
	County of Spokane	 	)

  
 I certify that I know
or have satisfactory evidence that JOE M. SAMPLE and EMANUELE F. PORTOLESE are the persons who appeared before me, and said persons acknowledged that they signed this instrument, on oath stated that they were authorized to execute the instrument and
acknowledged it as the Partners of PORTOLESE & SAMPLE INVESTMENTS, to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. 
  
 DATED: December 28, 2004. 
  

	
	 /s/    LYNDA F. SMITH

	NOTARY PUBLIC for Washington State
	My appointment expires: 11-9-06

  

 - 15 - 

			
	STATE OF WASHINGTON	 	)
	 	 	:   ss.
	County of Spokane	 	)

  
 I certify that I know
or have satisfactory evidence that Jody M. Gentemann and Ralph Baard are the persons who appeared before me, and said persons acknowledged that they signed this instrument, on oath stated that they were authorized to execute the
instrument and acknowledged it as the Assistant Secretary and Vice President of AMBASSADORS GROUP, INC., to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument. 
  
 DATED: December 28, 2004. 
  

	
	 /s/ Linda Smith Clevenger

	NOTARY PUBLIC for Washington State
	My appointment expires: 5-28-08

  

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