Exhibit 10.55
FOURTH AMENDMENT TO LEASE
(EXPANSION & EXTENSION)
     This Fourth Amendment to Lease (the “Agreement”) is entered into as of
July 15, 2009, by and between MISSION RIDGE ASSOCIATES LLC, a Delaware limited
liability company (“Landlord”), and ENSIGN FACILITY SERVICES, INC., a Nevada
corporation (“Tenant”), with respect to the following facts and circumstances:
     A. Landlord and Tenant are parties to that certain Office Lease dated as of
August 28, 2003 (the “Original Office Lease”), as amended by a First Amendment
to Lease Agreement dated January 15, 2004, a Second Amendment to Lease dated as
of December 13, 2007, and a Third Amendment to Lease Agreement dated as of
February 21, 2008 (collectively, with the Original Office Lease, the “Original
Lease,” and together with this Agreement, the “Lease”) covering 20,719 rentable
square feet located on the fourth (4th) floor (the “Existing Premises”) within
the building commonly known as 27101 Puerta Real, Mission Viejo, California (the
“Building”), and more particularly described in the Original Lease. Capitalized
terms used and not otherwise defined herein shall have the meanings given those
terms in the Original Lease.
     B. Landlord and Tenant desire to amend the Original Lease to add additional
space to the Existing Premises, to extend the Lease Term and to make other
modifications on the terms and conditions provided herein.
     IT IS THEREFORE, agreed as follows:
     1. As used in this Agreement, the following terms have the following
meanings:
          “Expansion Space” means a portion of the fourth (4th) floor of the
Building, containing approximately 9,110 rentable square feet of area, and more
particularly shown on Exhibit “A-1” attached hereto.
          “Expansion Space Commencement Date” shall mean the date upon which
full execution and delivery of this Agreement occurs, which shall be evidenced
by the date below Landlord’s signature on this Agreement, but in no event later
than the date that is five (5) business days after Tenant delivers to Landlord a
fully executed counterpart of this Agreement.
          “Expansion Improvements” means the tenant improvements constructed in
the Expansion Space and the renovations of the Existing Premises.
     2. Effective on the Expansion Space Commencement Date, the Premises shall
be expanded to include the Expansion Space. Accordingly, effective on the
Expansion Space Commencement Date, the following terms of the Original Lease are
amended as follows:
          2.1 The Expansion Space is added to the Premises such that the
Premises shall be comprised of the Existing Premises and the Expansion Space,
and Exhibit “A-1” attached hereto is hereby added to Exhibit “A” to the Original
Office Lease. Upon the

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addition of the Expansion Space to the Premises, the total rentable area of the
Premises shall be 29,829 square feet calculated according to, and subject to
verification under, the measurement standards and procedures set forth in
Section 1.3 of the Original Office Lease.
          2.2 Tenant’s Share of Operating Expenses, Tax Expenses and Utility
Costs shall be 12.85%.
          2.3 During the Extension Term (as defined in Section 5, below), and
subject to the terms and conditions of the Lease, Tenant agrees to pay Landlord
Base Rent for the entire Premises, including Expansion Space in accordance with
the following schedule:

                  Months of           Amount of Monthly Extension Term   Monthly
Base Rent   Base Rent Abated
1 - 8
  $ 44,743.50     $ 44,743.50  
9 - 12
  $ 44,743.50     $ 6,000.00  
13 - 16
  $ 46,234.95     $ 46,234.95  
17 - 24
  $ 46,234.95     $ 6,200.00  
25 - 28
  $ 47,726.40     $ 47,726.40  
29 - 30
  $ 47,726.40     $ 6,400.00  
31 - 36
  $ 47,726.40       N/A  
37 - 48
  $ 49,217.85       N/A  
49 - 60
  $ 50,709.30       N/A  
61 - 72
  $ 52,200.75       N/A  
73 - 84
  $ 53,692.20       N/A  
85 - 96
  $ 55,183.65       N/A  
97 - 108
  $ 56,675.10       N/A  
109 - Expiration of Extension Term
  $ 58,166.55       N/A  

The Base Rent for certain periods of the Extension Term shall be abated as set
forth in the foregoing schedule and Section 2.6 below. Any Base Rent previously
paid to Landlord under the Original Lease which is attributable to periods which
fall on or after the Expansion Space Commencement Date shall be prorated and
credited to Tenant’s first actual Base Rent payment(s) falling due following the
Expansion Space Commencement Date. The Base Rent shall be payable in the manner
provided for in the Original Lease. For purposes of rent adjustments under the
Lease, the number of months shall be measured from the Expansion Space
Commencement Date if such date falls on the first day of the calendar month, or
the first day of the calendar month following the month in which the Expansion
Space Commencement Date falls, if such date does not fall on the first day of a
calendar month.
          2.4 The Lease Term with respect to the Expansion Space shall be
coterminous with the Existing Premises, as extended by this Agreement. In the
event that Tenant exercises an extension option or a termination right under the
Original Lease or this Agreement, such extension or termination shall apply to
the entire Premises then subject to the Lease (including the Expansion Space).

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          2.5 The second sentence of the first paragraph of Article 3 of the
Original Office Lease is hereby deleted and of no further force or effect. The
second paragraph of Article 3 of the Original Office Lease is deleted in its
entirety and is of no further force or effect.
          2.6 Landlord agrees that in consideration of Tenant entering into this
Agreement, Base Rent shall be abated as provided in the rent schedule in
Section 2.3. Landlord and Tenant agree for tax reporting purposes that none of
the Base Rent due in periods in which the Base Rent is not being abated shall be
allocated to any other period. During such abatement period, Tenant shall still
be responsible for the payment of all of its other monetary obligations under
the Lease. In the event of a default by Tenant under the terms of the Original
Lease, as amended hereby, that results in early termination pursuant to the
provisions of Article 19 of the Original Office Lease, and as part of the
recovery set forth in Article 19 of the Original Office Lease, Landlord shall be
entitled to the recovery of the monthly Base Rent that was abated under the
provisions of this Section 2.6 and Section 2.3 of this Agreement.
          2.7 Item 11 of the Summary of Basic Lease Information is deleted in
its entirety and replaced with the following: “Four (4) unreserved parking
spaces for every 1,000 usable square feet of the Premises.”
          2.8 Notwithstanding anything to the contrary in Article 23 of the
Original Office Lease, all of Tenant’s parking shall be unreserved. During the
Extension Term, Tenant shall pay for covered parking passes on a monthly basis
at the rates posted by onsite management at the Building from time to time as
being in effect for covered parking spaces; provided, however, that during the
Extension Term only (not including any Option Term, if applicable), the charge
shall be fixed at Forty-Five Dollars ($45.00) per month for each reserved,
covered parking pass, and at Twenty-Five Dollars ($25.00) per month for each
unreserved, covered parking pass. There shall be no direct charge for use of
in-common surface (i.e., uncovered) parking spaces other than Expenses and Tax
Expenses with respect to the parking areas.
          2.9 Landlord agrees to use commercially reasonable efforts to provide
Tenant with, and this Agreement is contingent upon Landlord’s acquisition for
Tenant’s benefit of, a subordination, nondisturbance and attornment agreement
from the beneficiary of the existing deed of trust of record on the Expansion
Space Commencement Date substantially in the form of Exhibit “A” attached hereto
(the “SNDA”); provided that if Tenant desires a subordination, nondisturbance
and attornment agreement other than the form provided by the Lender, Tenant
shall reimburse Landlord within ten (10) days after demand for the cost of
obtaining that modified form of document. Tenant agrees to execute, acknowledge
and deliver to Landlord an SNDA within three (3) business days after Landlord’s
request.
          2.10 Section 6.1.1 of the Original Office Lease is hereby modified to
change the Building Hours on Monday through Friday to 7:00 a.m. to 6:00 p.m. The
Building Hours on Saturday remain unchanged.

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          2.11 The third sentence of Section 6.2 of the Original Office Lease is
hereby deleted and replaced with the following: “If Tenant desires to use HVAC
during hours other than the Building Hours, (i) Tenant shall give Landlord at
least twenty-four (24) hours prior written notice or such other notice as
Landlord shall from time to time reasonably establish as appropriate (which
other notice is anticipated to be accomplished through telephonic dial-up and/or
access via computer codes), of Tenant’s desired use, (ii) Landlord shall supply
such HVAC to Tenant at such hourly cost to Tenant as Landlord shall from time to
time establish; such hourly cost shall be equal to the lesser of (A) Forty-Five
Dollars ($45.00) per hour, or (B)(1) the actual cost incurred by Landlord to
supply such after-hours HVAC on an hourly basis (but based on a two (2) hour
minimum provision of such after-hours HVAC), (2) increased wear and tear and
depreciation of equipment to provide such after-hours HVAC, and (3) maintenance
costs, and (iii) Tenant shall pay such cost within ten (10) days after billing,
as Additional Rent.”
          2.12 A new Section 24.8.3 is hereby added to the Lease, as follows:
          “24.8.3 Monument Sign. Subject to the approval of all applicable
governmental and quasi-governmental entities, and subject to all applicable
governmental and quasi-governmental laws, rules, regulations and codes, Landlord
hereby grants Tenant the non-exclusive right to have one (1) identification sign
containing its name and/or logo on the upper one-third (1/3rd) of the existing
three-band monument sign located at the main entrance to the Building Complex on
Puerta Real (the “Monument Sign”). The design, size, specifications, graphics,
materials, manner of affixing, colors and lighting (if applicable) of Tenant’s
addition to the Monument Sign shall be (i) consistent with the quality and
appearance of the Real Property, and (ii) subject to the approval of all
applicable governmental authorities, and Landlord’s reasonable approval.
Landlord shall install Tenant’s identification on the Monument Sign at Tenant’s
cost. The signage right granted to Tenant under this Section 24.8.3 is personal
to the original Tenant executing this Lease (“Original Tenant”) and its
affiliates and may not be exercised or used by or assigned to any other person
or entity. Upon the expiration or sooner termination of this Lease, Landlord
shall have the right to permanently remove Tenant’s identification from the
Monument Sign and restore the affected area to its original condition, normal
wear and tear excepted, and Tenant shall reimburse Landlord for the reasonable
costs thereof.”
     3. The construction of the Expansion Improvements shall be governed by the
terms of Exhibit “B” to this Agreement (the “Work Letter”). Landlord shall
reimburse Tenant for an amount not to exceed $0.14 per rentable square foot to
complete a preliminary “test fit plan” floor plan for the entire Premises,
including without limitation the Expansion Space. Tenant may hire Robbie Frazier
of Jones Lang LaSalle as a project manager to represent Tenant’s interests in
the construction of the Tenant Improvements and the fees payable to Jones Lang
LaSalle may be paid out of the Tenant Improvement Allowance.
     4. Except as set forth in Section 7.2 of the Original Office Lease and the
further amendments thereto as set forth herein, Tenant agrees that Landlord has
no obligation and has made no promise to alter, remodel, improve, or repair the
Expansion Space, or any part thereof, or to repair, bring into compliance with
applicable laws, or improve any condition

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existing in the Expansion Space as of the Expansion Space Commencement Date,
other than the Expansion Improvements. The taking of possession of the Expansion
Space by Tenant shall be conclusive evidence that the Expansion Space and the
Building were in good and satisfactory condition at the time possession was
taken by Tenant. Neither Landlord nor Landlord’s agents have made any
representations or promises with respect to the condition of the Building, the
Expansion Space, the land upon which the Building is constructed, the present or
future suitability or fitness of the Expansion Space or the Building for the
conduct of Tenant’s particular business, or any other matter or thing affecting
or related to the Building or the Expansion Space, and no rights, easements or
licenses are acquired by Tenant by implication or otherwise except as expressly
set forth in the Original Lease. Any improvements or personal property located
in the Expansion Space are delivered without any representation or warranty from
Landlord, either express or implied, of any kind, including without limitation,
title, merchantability, or suitability for a particular purpose. Tenant shall
deliver to Landlord any modifications to Tenant’s insurance required under the
Original Lease to reflect the addition of the Expansion Space and Tenant’s entry
into the Expansion Space prior to the delivery of possession to Tenant.
Section 7.2 of the Original Office Lease is hereby supplemented and clarified to
include, as Landlord’s maintenance obligation, the maintenance and repair of the
roof over the Premises and the exterior skin system (including windows and
window seals) of the Building, and the repair and remediation of any damage to
the Premises or any component thereof affected by the leakage or other failure
of the roof or Building skin systems.
     5. The Extension Term shall be a period of 120 calendar months commencing
on the Expansion Space Commencement Date; provided however that if the Expansion
Space Commencement Date falls on a day which is not the first day of a calendar
month, then such partial first month shall be added to the first month of the
Extension Term and the first month and the Extension Term, with its prorata Base
Rent and corresponding Base Rent abatement, shall expanded by such partial
month. The Original Lease Expiration Date is hereby changed to the date (the
“New Expiration Date”) that is (i) if the Expansion Space Commencement Date
falls on the first day of a calendar month, the day prior to the tenth
anniversary of the Expansion Space Commencement Date, or (ii) if the Expansion
Space Commencement Date falls on a day other than the first day of a calendar
month, the day prior to the tenth anniversary of the first day of the first full
calendar month following the Expansion Space Commencement Date. The period from
the Expansion Space Commencement Date to the New Expiration Date is referred to
herein as the “Extension Term.”
     6. Notwithstanding anything contained in the Lease to the contrary, from
and after the end of the sixtieth (60th) month of the Extension Term Tenant
shall have the right and option (the “Early Termination Right”), at any time
upon not less than nine (9) months prior written notice to Landlord, to
terminate the Lease and surrender possession of the Premises to Landlord,
subject only to the payment at termination of an amount (the “Termination
Payment”) equal to the then-present value, using a six percent (6.0%) per annum
discount rate, of (i) the unearned percentage brokerage commission paid by
Landlord to Jones Lang LaSalle for periods after the end of the sixtieth (60th)
month, which is payable at the rate of two percent (2.0%) of the Base Rent due
for year six (6) through year ten (10) of the Extension Term, and (ii) the
unamortized cost of the Tenant Improvement Allowance actually drawn by Tenant
and/or applied to Base Rent. The amortizations shall be calculated

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on a straight-line basis over the Extension Term; provided that for purposes of
calculating the Termination Payment, fifty percent (50%) the Tenant Improvement
Allowance shall be deemed to have been amortized on a five-year schedule and
fifty percent (50%) shall be deemed to have been amortized on a ten-year
schedule.. Tenant shall not have the Early Termination right and shall not be
entitled to terminate the Lease under this Section 6 at any time in which a
monetary default on the part of Tenant exists uncured under the Lease.
     7. Tenant is in occupancy of the Existing Premises and, subject to
Landlord’s obligations under Section 7.2 of the Original Office Lease as amended
hereby, and the payment of the Tenant Improvement Allowance, Tenant hereby
accepts the Premises “AS IS”, without any obligation on Landlord’s part to alter
or improve such space or provide Tenant with any improvement allowance, except
as provided in the Work Letter.
     8. Effective as of the Expansion Space Commencement Date, the Expense Base
Year, the Tax Expense Base Year and the Utilities Base Year shall be calendar
year 2010. Amounts payable by Tenant for Expenses, Tax Expenses and Utilities
prior to the Expansion Space Commencement Date shall be determined by Landlord
based on the Expense Base Year, the Tax Expense Base Year and the Utilities Base
Year and provisions of Article 4 of the Original Lease in effect during that
prior period.
     9. The provisions of the Extension Option Rider attached to the Original
Lease shall continue to apply with the following modifications:
          (a) Each Option Term shall be for five (5) years and, accordingly, the
number “three (3)” in the second line of Paragraph 1 of the Extension Option
Rider is changed to “five (5);” and
          (b) Any reference to the expiration of the “initial Lease Term” shall
be a reference to the expiration of the Extension Term.
     10. Section 24.8.2 of the Original Lease is hereby deleted in its entirety
and is of no further force or effect.
     11. Except as otherwise provided herein, all of the terms and conditions of
the Original Lease shall continue to apply during the Extension Term; provided,
however, that there shall be no rent credit, and that there shall be no
improvement allowance, Landlord construction obligations or other initial
concessions with respect to the Extension Term, except as provided in Section 3
of this Agreement and the Work Letter, and Tenant shall have no further option
to extend the term, except as provided in Section 9 of this Agreement.
     12. Landlord hereby represents and warrants to Tenant that it has dealt
with no broker, finder or similar person in connection with this Agreement, and
Tenant hereby represents and warrants to Landlord that it has dealt with no
broker, finder or similar person in connection with this Agreement, other than
Grubb & Ellis Company (“Landlord’s Broker”) and Jones Lang LaSalle (“Tenant’s
Broker”). Landlord and Tenant shall each defend, indemnify and hold the other
harmless with respect to all claims, causes of action, liabilities, losses,
costs and expenses (including without limitation attorneys’ fees) arising from a
breach of the foregoing representation and warranty. The commission with respect
to this Agreement

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shall be paid to Landlord’s Broker by Landlord pursuant to a separate agreement.
Landlord’s Broker will pay Tenant’s Broker a commission pursuant to a separate
agreement. Nothing in this Agreement shall impose any obligation on Landlord to
pay a commission or fee to any party other than Landlord’s Broker, and nothing
in this Agreement shall impose any obligation on Tenant to pay a commission or
fee to any party.
     13. Time is of the essence of this Agreement and the provisions contained
herein.
     14. Certifications.
          14.1 As additional consideration for this Agreement, Tenant hereby
certifies that:
          (a) The Original Lease (as amended hereby) is in full force and
effect.
          (b) Tenant is in possession of the Premises.
          (c) Rent has been paid through July 31, 2009.
          (d) To Tenant’s knowledge, there are no uncured defaults on the part
of Landlord or Tenant under the Original Lease.
          (e) All of Landlord’s obligations with respect to construction of
tenant improvements in the Premises and payment of Tenant improvement allowances
have been satisfied, except those provided for in Paragraph 3 of this Agreement.
          (f) There are no existing claims, offsets or defenses which Tenant has
under or against the enforcement of the Original Lease (as amended hereby) by
Landlord.
          (g) All of the representations and warranties of Tenant in the
Original Lease are hereby remade.
          14.2 As additional consideration for this Agreement, Landlord hereby
certifies that:
          (a) The Original Lease (as amended hereby) is in full force and
effect.
          (b) Landlord possesses the full right and authority to enter into this
Agreement and to lease the Premises to Tenant.
          (c) Rent has been paid through July 31, 2009. (Base Rent is subject to
proration as provided in Section 2.3 of this Agreement.)

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          (d) To Landlord’s actual knowledge (without any investigation or
inquiry), there are no uncured defaults on the part of Landlord or Tenant under
the Original Lease.
          (e) All of Landlord’s obligations with respect to construction of
tenant improvements in the Premises and payment of Tenant improvement allowances
have been satisfied, except those provided for in Paragraph 3 of this Agreement
and in the Work Letter.
          (f) There are no existing claims, offsets or defenses which Landlord
has under or against the enforcement of the Original Lease (as amended hereby)
by Tenant.
     15. Except as specifically provided herein, the terms and conditions of the
Original Lease as amended hereby are confirmed and continue in full force and
effect. This Agreement shall be binding on the heirs, administrators, successors
and assigns (as the case may be) of the parties hereto. This Agreement and the
attached exhibits, which are hereby incorporated into and made a part of this
Agreement, set forth the entire agreement between the parties with respect to
the matters set forth herein. There have been no additional oral or written
representations or agreements. Under no circumstances shall Tenant be entitled
to any Rent abatement, improvement allowance, leasehold improvements, or other
work to the Premises, or any similar economic incentives that may have been
provided to Tenant in connection with entering into the Original Lease, unless
specifically set forth in this Agreement. Tenant agrees that neither Tenant nor
its agents or any other parties acting on behalf of Tenant shall disclose any
matters set forth in this Agreement or disseminate or distribute any information
concerning the terms, details or conditions hereof to any person, firm or entity
without obtaining the express written consent of Landlord. In the case of any
inconsistency between the provisions of the Original Lease and this Agreement,
the provisions of this Agreement shall govern and control. Submission of this
Agreement by Landlord is not an offer to enter into this Agreement but rather is
a solicitation for such an offer by Tenant. Landlord shall not be bound by this
Agreement until Landlord has executed and delivered the same to Tenant.
     16. Effective as of the date hereof, all references to the “Lease” shall
refer to the Original Lease, as amended by this Agreement.
     17. To satisfy compliance with the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”), Tenant represents and warrants to Landlord and
The Prudential Insurance Company of America, a New Jersey corporation
(“Prudential”), that: Tenant is not an “employee benefit plan” (as that term is
defined in Section 3(3) of ERISA);
          17.1 Tenant is not acquiring a leasehold interest in the Premises as a
plan asset subject to ERISA but for Tenant’s own investment account;
          17.2 Tenant is not an “affiliate” of Prudential as defined in
Section IV(b) or PTE 90-1;

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          17.3 Tenant is not a “party in interest” (as that term is defined in
Section 3(14) of ERISA) to the Virginia Retirement System; and
          17.4 Tenant agrees to keep the identity of the Virginia Retirement
System confidential, except to the extent that Tenant may be required to
disclose such information as a result of (i) legal process, or (ii) compliance
with ERISA or other laws governing Tenant’s operations.

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     IN WITNESS WHEREOF, this Agreement was executed as of the date first above
written.

                          Landlord:    
 
                        MISSION RIDGE ASSOCIATES LLC,
a Delaware limited liability company, Landlord    
 
                        By:   Legacy Partners Commercial, L.P.,
a California limited partnership, as
Manager and Agent for owner    
 
                            By:   Legacy Partners Commercial,
Inc., general partner    
 
                   
 
          By:   /s/ Debra Smith    
 
             
 
Debra Smith    
 
              Its: Executive Vice President    
 
                   
 
          Date:        
 
             
 
   

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  Tenant:        
 
                ENSIGN FACILITY SERVICES, INC.,
a Nevada corporation    
 
           
 
  By:   /s/ Christopher R. Christensen    
 
     
 
Christopher R. Christensen, President    
 
           
 
  By:   /s/ Beverly B. Wittekind    
 
     
 
Beverly B. Wittekind, Secretary    
 
                If Tenant is a corporation, this instrument must be executed by
the chairman of the board, the president or any vice president and the
secretary, any assistant secretary, the chief financial officer or any assistant
financial officer or any assistant treasurer of such corporation, unless the
bylaws or a resolution of the board of directors shall otherwise provide, in
which case the bylaws or a certified copy of the resolution, as the case may be,
must be attached to this instrument.    

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GUARANTOR’S CONSENT
          THE ENSIGN GROUP, INC., a Delaware corporation (“Guarantor”), as
Guarantor under that certain Guaranty of Lease dated as of August 29, 2003, in
favor of Landlord (the “Guaranty”) hereby ratifies the Guaranty and confirms and
agrees that the Guaranty shall apply to the Lease as amended by the foregoing
Agreement and that the Guaranty is unmodified and in full force and effect.

            THE ENSIGN GROUP, INC.,
a Delaware corporation
      By:   /s/ Gregory K. Stapley       Gregory K. Stapley, Vice President     
       

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EXHIBIT A-1
EXPANSION SPACE
(See Attached.)
Exhibit A-1

 

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EXHIBIT B
EXPANSION WORK LETTER
     This Expansion Work Letter (“Expansion Work Letter”) sets forth the terms
and conditions relating to the construction of improvements for the Premises.
All references in this Expansion Work Letter to “the Lease” shall mean the
relevant portions of the Lease, as amended by the Fourth Amendment to Lease
which includes this Expansion Work Letter as Exhibit B. Capitalized terms used
herein shall have the meanings assigned to them in the Lease.
SECTION 1
BASE, SHELL AND CORE
     Landlord has previously constructed the base, shell, and core (i) of the
Premises and (ii) of the floor(s) of the Building on which the Premises are
located (collectively, the “Base, Shell, and Core”), and a prior tenant has
installed certain improvements (the “Existing TIs”) in the Expansion Space and
Tenant shall accept the Base, Shell, and Core and Existing TIs in their current
“As-Is” condition existing as of the Expansion Space Commencement Date. Subject
to Landlord’s approval, Tenant shall install in the Premises certain “Tenant
Improvements” (as defined below) pursuant to the provisions of this Expansion
Work Letter. Except for the Tenant Improvement work described in this Expansion
Work Letter and except for the Tenant Improvement Allowance set forth below,
Landlord shall not be obligated to make or pay for any alterations or
improvements to the Premises, the Building or the Real Property.
SECTION 2
TENANT IMPROVEMENTS
          2.1 Tenant Improvement Allowance. Tenant shall be entitled to a
one-time tenant improvement allowance (the “Tenant Improvement Allowance”) in
the amount of up to, but not exceeding Forty Five Dollars ($45.00) per rentable
square foot of the Expansion Space, and Fifteen Dollars ($15.00) per rentable
square foot of the Existing Premises (i.e., up to Seven Hundred Twenty Thousand
Seven Hundred Thirty-Five Dollars ($720,735.00), based on 20,719 rentable square
feet in the Existing Premises and 9,110 rentable square feet in the Expansion
Space), for the costs relating to the design and construction of Tenant’s
improvements more fully described in Section 2.2 below (the “Tenant
Improvements”). In no event shall Landlord be obligated to make disbursements
pursuant to this Expansion Work Letter in a total amount which exceeds the
Tenant Improvement Allowance. To the extent that the Tenant Improvement
Allowance has not been fully disbursed by Tenant and requested from Landlord on
or before February 28, 2010, and no monetary default or material non-monetary
default then exists under the Lease after the expiration of all applicable
notice and cure periods under the Lease, the remainder of the Tenant Improvement
Allowance, not to exceed $356,335.00, shall be applied by Landlord as a credit
against Base Rent next coming due.

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          2.2 Disbursement of the Tenant Improvement Allowance.
               2.2.1 Tenant Improvement Allowance Items. Except as otherwise set
forth in this Expansion Work Letter, the Tenant Improvement Allowance shall be
disbursed by Landlord only for the following items and costs (collectively, the
“Tenant Improvement Allowance Items”):
               2.2.1.1 Payment of the fees of the “Architect” and the
“Engineers,” as those terms are defined in Section 3.1 of this Expansion Work
Letter (provided, however, that only an amount not to exceed Three Dollars
($3.00) per rentable square foot of the Premises may be deducted from the Tenant
Improvement Allowance to pay for such fees), and payment of the fees incurred
by, and the cost of documents and materials supplied by, Landlord and Landlord’s
consultants in connection with the preparation and review of the “Construction
Drawings,” as that term is defined in Section 3.1 of this Expansion Work Letter;
               2.2.1.2 The payment of plan check, permit and license fees and
other “soft” costs relating to construction of the Tenant Improvements;
               2.2.1.3 The cost of construction of the Tenant Improvements,
including, without limitation, project management fees payable to Tenant’s
“Project Manager” (as defined below), contractors’ fees and general conditions,
testing and inspection costs, costs of cabling, MEP fees, costs of utilities,
trash removal, parking and hoists, and the costs of after-hours freight elevator
usage;
               2.2.1.4 The cost of any changes in the Base, Shell and Core work
when such changes are required by the Construction Drawings (including if such
changes are due to the fact that such work is prepared on an unoccupied basis),
such cost to include all direct architectural and/or engineering fees and
expenses incurred in connection therewith;
               2.2.1.5 The cost of any changes to the Construction Drawings or
Tenant Improvements required by applicable laws and building codes
(collectively, “Code”);
               2.2.1.6 Sales and use taxes and Title 24 fees;
               2.2.1.7 The “Coordination Fee,” as that term is defined in
Section 4.2.2.2 of this Expansion Work Letter;
               2.2.1.8 The costs of Tenant’s interior and exterior signs
(installed pursuant to Section 24.8 of the Lease as modified); and
               2.2.1.9 The cost of movable furnishings, fixtures and equipment
to be installed in the Premises, plus the cost of moving and reinstalling
existing furnishings, fixtures and equipment in the Premises to accommodate
repairs, renovations and recarpeting; provided the costs described in this
clause Section 2.2.1.9 shall not exceed $70,000 in the aggregate.

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               2.2.2 Disbursement of Tenant Improvement Allowance. Subject to
Section 2.1 above, during the construction of the Tenant Improvements, Landlord
shall make monthly disbursements of the Tenant Improvement Allowance for Tenant
Improvement Allowance Items for the benefit of Tenant and shall authorize the
release of monies for the benefit of Tenant as follows:
               2.2.2.1 Monthly Disbursements. On or before the twenty-eighth
(28th) day of each calendar month during the construction of the Tenant
Improvements (or such other date as Landlord may designate), Tenant shall
deliver to Landlord: (i) a request for payment of the “Contractor,” as that term
is defined in Section 4.1 below, approved by Tenant, in a form to be provided by
Landlord, showing the schedule, by trade, of percentage of completion of the
Tenant Improvements in the Premises, detailing the portion of the work completed
and the portion not completed, and demonstrating that the relationship between
the cost of the work completed and the cost of the work to be completed complies
with the terms of the “Construction Budget,” as that term is defined in
Section 4.2.1 below; (ii) invoices from all of “Tenant’s Agents,” as that term
is defined in Section 4.1.2 below, for labor rendered and materials delivered to
the Premises; (iii) executed mechanic’s lien releases from all of Tenant’s
Agents which shall comply with the appropriate provisions, as reasonably
determined by Landlord, of California Civil Code Section 3262(d); and (iv) all
other information reasonably requested by Landlord. Tenant’s request for payment
shall be deemed Tenant’s acceptance and approval of the work furnished and/or
the materials supplied as set forth in Tenant’s payment request. On or before
the twenty-eighth (28th) day of the following calendar month, Landlord shall
deliver a check to Tenant made jointly payable to Contractor and Tenant in
payment of the lesser of (A) the amounts so requested by Tenant, as set forth in
this Section 2.2.2.1, above, less a ten percent (10%) retention (the aggregate
amount of such retentions to be known as the “Final Retention”) and (B) the
balance of any remaining available portion of the Tenant Improvement Allowance
(not including the Final Retention), provided that Landlord does not dispute any
request for payment based on non-compliance of any work with the “Approved
Working Drawings”, as that term is defined in Section 3.4 below, or due to any
substandard work, or for any other reason. Landlord’s payment of such amounts
shall not be deemed Landlord’s approval or acceptance of the work furnished or
materials supplied as set forth in Tenant’s payment request.
               2.2.2.2 Final Retention. Subject to the provisions of this
Expansion Work Letter, a check for the Final Retention payable jointly to Tenant
and Contractor shall be delivered by Landlord to Tenant following the completion
of construction of the Premises, provided that (i) Tenant delivers to Landlord
properly executed mechanics lien releases in compliance with both California
Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or
Section 3262(d)(4), and (ii) Landlord has determined that no substandard work
exists which adversely affects the mechanical, electrical, plumbing, heating,
ventilating and air conditioning, life-safety or other systems of the Building,
the curtain wall of the Building, the structure or exterior appearance of the
Building, or any other tenant’s use of such other tenant’s leased premises in
the Building.

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               2.2.2.3 Other Terms. Landlord shall only be obligated to make
disbursements from the Tenant Improvement Allowance to the extent costs are
incurred by Tenant for Tenant Improvement Allowance Items.
               2.2.3 Specifications for Building Standard Components. Landlord
has established specifications (the “Specifications”) for the Building standard
components to be used in the construction of the Tenant Improvements in the
Premises which Specifications have been received by Tenant. Unless otherwise
agreed to by Landlord, the Tenant Improvements shall comply with the
Specifications. Landlord may make changes to the Specifications from time to
time.
SECTION 3
CONSTRUCTION DRAWINGS
          3.1 Selection of Architect/Construction Drawings. Tenant shall retain
the architect/space planner (the “Architect”) to prepare the Construction
Drawings. Tenant shall retain the engineering consultants (the “Engineers”) to
prepare all plans and engineering working drawings relating to the structural,
mechanical, electrical, plumbing, HVAC, lifesafety, and sprinkler work in the
Premises. Landlord shall have the right to approve the Architects and Engineers,
with such approval not to be unreasonably withheld or delayed, and provided
further that H. Hendy & Associates is hereby accepted and approved by Landlord.
Furthermore, Tenant shall be entitled to employ a project manager to oversee the
project (the “Project Manager”) selected by Tenant and approved by Landlord,
with such approval not to be unreasonably withheld or delayed, and provided
further that Robbie Frazier of Jones Lang LaSalle is hereby accepted and
approved by Landlord to serve as Project Manager. The plans and drawings to be
prepared by Architect and the Engineers hereunder shall be known collectively as
the “Construction Drawings.” All Construction Drawings shall comply with the
drawing format and specifications reasonably determined by Landlord, and shall
be subject to Landlord’s approval. Tenant and Architect shall verify, in the
field, the dimensions and conditions as shown on the relevant portions of the
base building plans, and Tenant and Architect shall be solely responsible for
the same, and Landlord shall have no responsibility in connection therewith.
Landlord’s review of the Construction Drawings as set forth in this Section 3,
shall be for its sole purpose and shall not imply Landlord’s review of the same,
or obligate Landlord to review the same, for quality, design, Code compliance or
other like matters. Accordingly, notwithstanding that any Construction Drawings
are reviewed by Landlord or its space planner, architect, engineers and
consultants, and notwithstanding any advice or assistance which may be rendered
to Tenant by Landlord or Landlord’s space planner, architect, engineers, and
consultants, Landlord shall have no liability whatsoever in connection therewith
and shall not be responsible for any omissions or errors contained in the
Construction Drawings.
          3.2 Final Space Plan. Tenant shall supply Landlord with four
(4) copies signed by Tenant of its final space plan for the Premises before any
architectural working drawings or engineering drawings have been commenced. The
final space plan (the “Final Space Plan”) shall include a layout and designation
of all offices, rooms and other partitioning, their intended use, and equipment
to be contained therein. Landlord may request clarification or more specific
drawings for special use items not included in the Final Space Plan. Landlord
shall

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advise Tenant within five (5) business days after Landlord’s receipt of the
Final Space Plan for the Premises if the same is unsatisfactory or incomplete in
any respect. If Tenant is so advised, Tenant shall promptly (i) cause the Final
Space Plan to be revised to correct any deficiencies or other matters Landlord
may reasonably require, and (ii) deliver such revised Final Space Plan to
Landlord. Unless Landlord provides comments or changes within 5 business days
after Landlord’s receipt of the Final Space Plan or any revised Final Space
Plan, the Final Space Plan as last submitted shall be deemed approved.
          3.3 Final Working Drawings. After the Final Space Plan has been
approved by Landlord and Tenant, Tenant shall promptly cause the Architect and
the Engineers to complete the architectural and engineering drawings for the
Premises, and cause the Architect to compile a fully coordinated set of
architectural, structural, mechanical, electrical and plumbing working drawings
in a form which is complete to allow subcontractors to bid on the work and to
obtain all applicable permits for the Tenant Improvements (collectively, the
“Final Working Drawings”), and shall submit the same to Landlord for Landlord’s
approval. Tenant shall supply Landlord with two (2) copies signed by Tenant of
such Final Working Drawings. Landlord shall advise Tenant within five (5)
business days after Landlord’s receipt of the Final Working Drawings for the
Premises if the same is unsatisfactory or incomplete in any respect. If Tenant
is so advised, Tenant shall promptly (i) revise the Final Working Drawings in
accordance with such review and any disapproval of Landlord in connection
therewith, and (ii) deliver such revised Final Working Drawings to Landlord.
Unless Landlord provides comments or changes within 5 business days after
Landlord’s receipt of the Final Working Drawings or any revised Final Working
Drawings, the Final Working Drawings as last submitted shall be deemed approved.
          3.4 Approved Working Drawings. The Final Working Drawings shall be
approved by Landlord (the “Approved Working Drawings”) prior to the commencement
of construction of the Premises by Tenant. Once approved, Landlord shall
promptly provide Tenant with one Landlord-signed set of the Approved Working
Drawings. After approval by Landlord of the Final Working Drawings, Tenant shall
promptly submit the same to the appropriate governmental authorities for all
applicable building permits. Tenant hereby agrees that neither Landlord nor
Landlord’s consultants shall be responsible for obtaining any building permit or
certificate of occupancy for the Premises and that obtaining the same shall be
Tenant’s responsibility; provided, however, that Landlord shall cooperate with
Tenant in executing permit applications and performing other ministerial acts
reasonably necessary to enable Tenant to obtain any such permit or certificate
of occupancy. No material changes, modifications or alterations in the Approved
Working Drawings may be made without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed.
SECTION 4
CONSTRUCTION OF THE TENANT IMPROVEMENTS
          4.1 Tenant’s Selection of Contractor and Tenant’s Agents.
               4.1.1 The Contractor. A general contractor shall be retained by
Tenant to construct the Tenant Improvements. Such general contractor
(“Contractor”) shall be subject to

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Landlord’s prior approval, which approval shall not be unreasonably withheld or
delayed, and Tenant shall deliver to Landlord notice of its selection of the
Contractor upon such selection.
               4.1.2 Tenant’s Agents. All subcontractors, laborers, materialmen,
and suppliers used by Tenant (such subcontractors, laborers, materialmen, and
suppliers, and the Contractor to be known collectively as “Tenant’s Agents”)
shall be reputable licensed contractors and shall supply Tenant and Landlord
with appropriate evidence of insurance and licensure. A list of Tenant’s Agents
shall be supplied to Landlord and updated periodically. Tenant shall invite
Landlord’s base building subcontractors to bid on any mechanical, electrical,
plumbing, life safety, structural, heating, ventilation, and air-conditioning
work in the Premises, but shall not be required to use or retain such
subcontractors unless, in Tenant’s reasonable judgment, the base building
subcontractor and their bid represents the most efficient and economical
alternative in the context of the entire project. Under no circumstances shall
Tenant’s Contractor or any subcontractor be required to use union labor or any
particular contractor or supplier regardless of any other agreements or
arrangements involving the Building, the Complex or a Landlord.
          4.2 Construction of Tenant Improvements by Tenant’s Agents.
               4.2.1 Construction Contract; Cost Budget. Prior to Tenant’s
execution of the construction contract and general conditions with Contractor
(the “Contract”), Tenant shall submit the Contract to Landlord for its approval,
which approval shall not be unreasonably withheld or delayed. Prior to the
commencement of the construction of the Tenant Improvements, and after Tenant
has accepted all bids for the Tenant Improvements, Tenant shall provide Landlord
with a written detailed cost breakdown (the “Final Costs Statement”), by trade,
of the final costs to be incurred, or which have been incurred, as set forth
more particularly in Section 2.2.1.1 through 2.2.1.9 above, in connection with
the design and construction of the Tenant Improvements to be performed by or at
the direction of Tenant or the Contractor which costs form a basis for the
amount of the Contract, if any (the “Final Costs”). Prior to the commencement of
construction of the Tenant Improvements, Tenant shall supply Landlord with
evidence that Tenant has cash-on-hand in an amount (the “Over-Allowance Amount”)
by which the Final Costs exceed the Tenant Improvement Allowance (less any
portion thereof already disbursed by Landlord, or in the process of being
disbursed by Landlord, on or before the commencement of construction of the
Tenant Improvements). Tenant shall pay all costs of constructing the Tenant
Improvements until the Over-Allowance Amount shall have been expended as a
condition precedent to the disbursement of any of the then remaining portion of
the Tenant Improvement Allowance. Tenant shall provide Landlord with reasonable
evidence that it has paid the Over-Allowance Amount with respect to the costs of
the Tenant Improvements, including without limitation, the documents described
in Sections 2.2.2.1(i), (ii), (iii) and (iv) above. In the event that, after the
Final Costs have been delivered by Landlord to Tenant, the costs relating to the
design and construction of the Tenant Improvements shall change, any additional
costs necessary to such design and construction in excess of the Final Costs
shall, to the extent they exceed the remaining balance of the Tenant Improvement
Allowance, be paid by Tenant immediately as an addition to the Over-Allowance
Amount out of its own funds, but Tenant shall continue to provide Landlord with
the documents described in Sections 2.2.2.1(i), (ii), (iii) and (iv) above, for
Landlord’s approval, prior to Tenant paying such costs. If after payment in full
of all of the costs described in Sections 2.2.1.1 through 2.2.1.9, above, and
satisfaction of all of the conditions to disbursement of the Final Retention
pursuant to

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Section 2.2.2.2, above, the Tenant Improvement Allowance has not been fully
disbursed, then to the extent (a) there is any Tenant Improvement Allowance
undisbursed after the rent credit in Section 2.1 has been given (“Unfunded
Allowance”) and (b) Tenant paid any Over-Allowance Amount towards the payment of
the cost in Sections 2.2.2.1 through 2.2.2.9 (the “Paid Over-Allowance Amount”),
Landlord shall disburse the Unfunded Allowance to Tenant in an amount not to
exceed the Paid Over-Allowance Amount.
               4.2.2 Tenant’s Agents.
               4.2.2.1 Landlord’s General Conditions for Tenant’s Agents and
Tenant Improvement Work. Tenant’s and Tenant’s Agents’ construction of the
Tenant Improvements shall comply with the following: (i) the Tenant Improvements
shall be constructed in substantial compliance with the Approved Working
Drawings; (ii) Tenant and Tenant’s Agents shall not, in any way, interfere with,
obstruct, or delay, any other work in the Building; (iii) Tenant’s Agents shall
submit schedules of all work relating to the Tenant’s Improvements to Contractor
and Contractor shall, within five (5) business days of receipt thereof, inform
Tenant’s Agents of any changes which are necessary thereto, and Tenant’s Agents
shall adhere to such corrected schedule; and (iv) Tenant shall abide by all
rules made by Landlord’s Building contractor or Landlord’s Building manager with
respect to the use of freight, loading dock and service elevators, storage of
materials, coordination of work with the contractors of other tenants, and any
other matter in connection with this Expansion Work Letter, including, without
limitation, the construction of the Tenant Improvements.
               4.2.2.2 Coordination Fee. Landlord shall be entitled to be paid,
from the Tenant Improvement Allowance, a logistical coordination fee (the
“Coordination Fee”) to Landlord in an amount equal to the product of (i) two
percent (2%), and (ii) the portion of the Tenant Improvement Allowance actually
used for Tenant Improvements (but not any portion applied to Base Rent, if any),
as such amount may be increased or decreased hereunder, which Coordination Fee
shall be for services relating to the coordination of the construction of the
Tenant Improvements.
               4.2.2.3 Indemnity. Tenant’s indemnity of Landlord as set forth in
the Lease shall also apply with respect to any and all costs, losses, damages,
injuries and liabilities related in any way to any act or omission of Tenant or
Tenant’s Agents, or anyone directly or indirectly employed by any of them, or in
connection with Tenant’s non-payment of any amount arising out of the Tenant
Improvements and/or Tenant’s disapproval of all or any portion of any request
for payment.
               4.2.2.4 Insurance Requirements.
               4.2.2.4.1 General Coverages. All of Tenant’s Agents shall carry
worker’s compensation insurance covering all of their respective employees, and
shall also carry public liability insurance, including property damage, all with
limits, in form and with companies as are required to be carried by Tenant as
set forth in the Lease.

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               4.2.2.4.2 Special Coverages. Tenant shall carry (or cause
Contractor to carry) “Builder’s All Risk” insurance in an amount equal to the
estimated cost of the Tenant Improvements covering the construction of the
Tenant Improvements, and such other insurance as may be required under the
Lease, it being understood and agreed that the Tenant Improvements shall be
insured by Tenant pursuant to the Lease immediately upon completion thereof.
Such insurance shall be in amounts and shall include such customary extended
coverage endorsements as may be reasonably required by Landlord, and in form and
with companies as are required to be carried by Tenant as set forth in the
Lease.
               4.2.2.4.3 General Terms. Certificates for all insurance carried
pursuant to this Section 4.2.2.4 shall be delivered to Landlord before the
commencement of construction of the Tenant Improvements and before the
Contractor’s equipment is moved onto the site. All such policies of insurance
must contain a provision that the company writing said policy will give Landlord
thirty (30) days prior written notice of any cancellation or lapse of the
effective date or any reduction in the amounts of such insurance. In the event
that the Tenant Improvements are damaged by any cause during the course of the
construction thereof, Tenant shall immediately repair the same at Tenant’s sole
cost and expense as and to the extent such damages are required to be covered by
Tenant’s insurance under the Lease. All policies carried under this
Section 4.2.2.4 shall insure Landlord and Tenant, as their interests may appear,
as well as Contractor and Tenant’s Agents, and shall name as additional insureds
Landlord’s Property Manager, Landlord’s Asset Manager, and all mortgagees and
ground lessors of the Building whose identities, addresses and interests have
been supplied to Tenant by Landlord in writing. All insurance, except Workers’
Compensation, maintained by Tenant’s Agents shall preclude subrogation claims by
the insurer against anyone insured thereunder. Such insurance shall provide that
it is primary insurance as respects the owner and that any other insurance
maintained by owner is excess and noncontributing with the insurance required
hereunder. The requirements for the foregoing insurance shall not derogate from
the provisions for indemnification of Landlord by Tenant under Section 4.2.2.3
of this Expansion Work Letter.
               4.2.3 Governmental Compliance. The Tenant Improvements shall
comply in all material respects with the following: (i) the Code and other
state, federal, city or quasi-governmental laws, codes, ordinances and
regulations, as each may apply according to the rulings of the controlling
public official, agent or other person; (ii) applicable standards of the
American Insurance Association (formerly, the National Board of Fire
Underwriters) and the National Electrical Code; and (iii) building material
manufacturer’s specifications.
               4.2.4 Inspection by Landlord. Landlord shall have the right to
inspect the Tenant Improvements at all times, provided however, that Landlord’s
failure to inspect the Tenant Improvements shall in no event constitute a waiver
of any of Landlord’s rights hereunder nor shall Landlord’s inspection of the
Tenant Improvements constitute Landlord’s approval of the same. Should Landlord
reasonably disapprove any portion of the Tenant Improvements,

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Landlord shall notify Tenant in writing of such disapproval and shall specify
the items disapproved. Any defects or deviations in, and/or disapproval by
Landlord of, the Tenant Improvements shall be rectified by Tenant at no expense
to Landlord, provided however, that in the event Landlord reasonably determines
that a defect or deviation exists or disapproves of any matter in connection
with any portion of the Tenant Improvements and such defect, deviation or matter
might adversely affect the mechanical, electrical, plumbing, heating,
ventilating and air conditioning or life-safety systems of the Building, the
structure or exterior appearance of the Building or any other tenant’s use of
such other tenant’s leased premises, Landlord may, take such action as Landlord
deems necessary, at Tenant’s expense and without incurring any liability on
Landlord’s part, to correct any such defect, deviation and/or matter, including,
without limitation, causing the cessation of performance of the construction of
the Tenant Improvements until such time as the defect, deviation and/or matter
is corrected to Landlord’s satisfaction.
               4.2.5 Meetings. Commencing upon the execution of the Lease,
Tenant shall hold twice-monthly meetings at a reasonable time, with the
Architect and the Contractor regarding the progress of the preparation of
Construction Drawings and the construction of the Tenant Improvements, which
meetings shall be held at the Premises, and Landlord and/or its agents shall
receive prior notice of, and shall have the right to attend, all such meetings,
and, upon Landlord’s request, certain of Tenant’s Agents shall attend such
meetings. In addition, minutes shall be taken at all such meetings, a copy of
which minutes shall be promptly delivered to Landlord.
          4.3 Notice of Completion; Copy of “As Built” Plans. Within ten
(10) days after completion of construction of the Tenant Improvements, Tenant
shall cause a Notice of Completion to be recorded in the office of the Recorder
of the County in which the Building is located in accordance with Section 3093
of the Civil Code of the State of California or any successor statute, and shall
furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do
so, Landlord may execute and file the same on behalf of Tenant as Tenant’s agent
for such purpose, at Tenant’s sole cost and expense. At the conclusion of
construction, (i) Tenant shall cause the Architect and Contractor (A) to update
the Approved Working Drawings as necessary to reflect all changes made to the
Approved Working Drawings during the course of construction, (B) to certify to
the best of their knowledge that the “record-set” of as-built drawings are true
and correct, which certification shall survive the expiration or termination of
the Lease, (C) to deliver to Landlord one (1) set of sepias of such as-built
drawings within ninety (90) days following issuance of a certificate of
occupancy for the Premises, and (D) to deliver to Landlord a computer disk
containing the Approved Working Drawings in AutoCAD format, and (ii) Tenant
shall deliver to Landlord a copy of all warranties, guaranties, and operating
manuals and information relating to the improvements, equipment, and systems in
the Premises.
          4.4 Coordination by Tenant’s Agents with Landlord. Upon Tenant’s
delivery of the Contract to Landlord under Section 4.2.1 of this Expansion Work
Letter, Tenant shall furnish Landlord with a schedule setting forth the
projected date of the completion of the Tenant Improvements and showing the
critical time deadlines for each phase, item or trade relating to the
construction of the Tenant Improvements.

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SECTION 5
MISCELLANEOUS
          5.1 Tenant’s Representative. Tenant has designated Greg Stapley as its
sole representative with respect to the matters set forth in this Expansion Work
Letter, who shall have full authority and responsibility to act on behalf of the
Tenant as required in this Expansion Work Letter.
          5.2 Landlord’s Representative. Landlord has designated Beth Calder as
its sole representative with respect to the matters set forth in this Expansion
Work Letter, who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Expansion
Work Letter.
          5.3 Time of the Essence in This Expansion Work Letter. Unless
otherwise indicated, all references herein to a “number of days” shall mean and
refer to calendar days. If any item requiring approval is timely disapproved by
Landlord, the procedure for preparation of the document and approval thereof
shall be repeated until the document is approved by Landlord.
          5.4 Tenant’s Lease Default. Notwithstanding any provision to the
contrary contained in the Lease, if an event of default by Tenant of this
Expansion Work Letter or the Lease has occurred at any time on or before the
substantial completion of the Premises and remains uncured following all
applicable notice and cure periods under the Lease, then (i) in addition to all
other rights and remedies granted to Landlord pursuant to the Lease, at law
and/or in equity, Landlord shall have the right to withhold payment of all or
any portion of the Tenant Improvement Allowance and/or Landlord may cause
Contractor to cease the construction of the Premises, and (ii) all other
obligations of Landlord under the terms of this Expansion Work Letter shall be
forgiven until such time as such uncured default is cured pursuant to the terms
of the Lease.

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EXHIBIT C
FORM OF SNDA
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
          THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this
“Agreement”), is made this ___day of July, 2009 between ENSIGN FACILITY
SERVICES, INC., a Nevada corporation (“Tenant”) and NATIONWIDE LIFE INSURANCE
COMPANY, an Ohio corporation (“Lender”) and MISSION RIDGE ASSOCIATES, LLC, a
Delaware limited liability company (“Landlord”).
BACKGROUND

A.   Lender is the owner and holder of that certain deed of trust, or mortgage
or other similar security instrument (either, the “Mortgage”), dated June 5,
2003, in the original amount of $20,100,000, and recorded on June 1, 2003 in the
Official Records of Orange County, California, Instrument No. 2003000682926, on
the real estate more particularly described in the Mortgage and commonly known
as Mission Ridge Office Buildings located in Mission Viejo, California (the
“Property”).   B.   Landlord and Tenant are parties to that certain Office Lease
dated as of August 28, 2003 (the “Original Office Lease”), as amended by a First
Amendment to Lease Agreement dated January 15, 2004, a Second Amendment to Lease
dated as of December 13, 2007, and a Third Amendment to Lease Agreement dated as
of February 21, 2008 (collectively, with the Original Office Lease, the
“Original Lease,”) covering 20,719 rentable square feet located on the fourth
(4th) floor (the “Existing Premises”) within the Property.   C.   Tenant is
negotiating (or has executed on or about the date hereof) a Fourth Amendment to
Lease with Landlord which, among other things, expands the space leased by an
additional 9,110 rentable square feet. The Existing Premises as so expanded is
referred to herein as the (“Premises”). The Original Lease as amended by the
Fourth Amendment to Lease is referred to herein as the “Lease.”   D.   Tenant,
Landlord and Lender desire to confirm their understanding with respect to the
Mortgage and the Lease.

     NOW THEREFORE, in consideration of the mutual promises of this Agreement,
and intending to be legally bound hereby, the parties hereto agree and covenant
as follows:
     1. Subordination. The Lease and the rights of Tenant thereunder (including
purchase options, rights of first refusal or similar rights, if any) are hereby
subordinated and made subject to the Mortgage, and any amendment, renewal,
substitution, extension or replacement thereof and each advance made thereunder
as though the Mortgage, and each such amendment, renewal, substitution,
extension or replacement were executed and recorded, and the advance made, prior
to the execution of the Lease.
     2. Non-Disturbance. Provided Tenant is in possession of the Premises and is
not in default in the payment of rent or in the performance of any of the terms,
covenants or conditions of the Lease beyond any applicable notice and cure
periods, Lender agrees that no foreclosure (whether judicial or nonjudicial),
deed in lieu of foreclosure, or other sale of the Property in connection with
the enforcement

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of the Mortgage or otherwise in satisfaction of the underlying loan shall
terminate the Lease or Tenant’s rights thereunder to possess and use the leased
space.
     3. Attornment. If Lender succeeds to the interest of Landlord as landlord
under the Lease, or if the Property or the Premises are sold pursuant to
Lender’s rights under the Mortgage, Tenant shall attorn to Lender, its
successors and assigns, or a purchaser upon any such foreclosure sale, and shall
recognize Lender, or such purchaser, thereafter as landlord under the Lease and
agrees to be bound under all the terms, covenants and conditions of the Lease.
Such attornment shall be effective and self-operative without the execution of
any further instruments. Tenant agrees, however, to execute and deliver at any
time and from time to time, upon the request of any holder(s) of any of the
indebtedness or other obligations secured by the Mortgage, or upon request of
any such purchaser, (a) any instrument or certificate which, in the reasonable
judgment of such holder(s), or such purchaser, may be necessary or appropriate
in any such foreclosure proceeding or otherwise to evidence such attornment and
(b) an instrument or certificate regarding the status of the Lease, consisting
of statements, if true (and if not true, specifying in what respect) reasonably
requested by such purchaser, including, without limitation: (i) that the Lease
is in full force and effect, (ii) the date through which rentals have been paid,
(iii) the duration and date of the commencement of the term of the Lease,
(iv) the nature of any amendments or modifications to the Lease, (v) that no
default, or state of facts, which with the passage of time or notice, or both,
would constitute a default, exists on the part of either party to the Lease, and
(vi) the dates on which payments of additional rent, if any, are due under the
Lease.
     4. Special Rights of Lender. If Lender exercises any of its rights under
the Assignment or the Mortgage, or if Lender shall succeed to the interest of
Landlord under the Lease, or if any purchaser acquires the Property, or the
Premises, upon or after any foreclosure of the Mortgage, or any deed in lieu
thereof, Lender or such purchaser, as the case may be, shall have the same
remedies by entry, action or otherwise in the event of any default by Tenant
(beyond any applicable notice and cure period) in the payment of rent or in the
performance or observance of any of the terms, covenants and conditions of the
Lease on Tenant’s part to be paid, performed or observed that Landlord had or
would have had if Lender or such purchaser had not succeeded to the interest of
the present Landlord. Lender or purchaser shall be bound to Tenant under all
terms, covenants and conditions under the Lease. Provided, however, that Lender
or such purchaser shall only be bound during the period of its ownership, and
that in the case of the exercise by Lender of its rights under the Mortgage, or
the Assignment, or any combination thereof, or a foreclosure, or deed in lieu of
foreclosure, all Tenant claims shall be satisfied only out of the interest, if
any, of Lender, or such purchaser, in the Property, and Lender and such
purchaser shall not be: (a) liable for any act or omission of any prior landlord
(including the Landlord); (b) liable to refund to Tenant any security deposit
which Tenant shall have paid to any prior landlord (including the Landlord)
unless such security deposit has been delivered to Lender; or (c) bound by any
rent or additional rent which Tenant might have paid for more than the current
month to any prior landlord (including Landlord); or (d) bound by any amendment
or modification of the Lease made without Lender’s prior written consent, which
consent shall not be unreasonably withheld or delayed; provided, however, Lender
shall have the right to withhold its consent with respect to any amendment or
modification which would materially adversely affect Lender’s rights in the
Premises (including, but not limited to those modifications that affects the
economics of the property); or (e) subject to any offsets or defenses which
Tenant might have against any prior landlord (including Landlord); or (f) liable
for or incur any obligation with respect to the construction of the Property or
any improvements of the Premises or the Property; or (g) liable for any
obligation with respect to any breach of warranties or representations of any
nature under the Lease or otherwise, including without limitation, any
warranties

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or representations respecting use, compliance with zoning, Landlord’s title,
Landlord’s authority, habitability and/or fitness for any purpose, or
possession; or (h) liable for consequential damages.
     5. Payment of Rent to Lender. After written notice is given to Tenant by
Lender that Landlord is in default under the Mortgage and that the rentals under
the Lease should be paid to Lender (the “Rent Notice”) pursuant to the
assignment of leases and rents granted by Landlord to Lender in connection
therewith, Tenant shall thereafter pay to Lender all rent and other amounts due
or to become due (the “Rent”) to Landlord under the Lease. Landlord hereby
expressly authorizes Tenant to make such payments to Lender upon reliance on
Lender’s written notice (without any inquiry into the factual basis for such
notice or any prior notice to or consent from Landlord) and hereby releases
Tenant from all liability, excepting Tenant fraud, to Landlord in connection
with Tenant’s compliance with Lender’s written instructions. Provided that no
Rent has been paid more than thirty (30) days in advance of its due date, Tenant
shall not be liable to Lender for Rent paid to Landlord prior to receipt of the
Rent Notice.
     6. Notice and Right to Cure. Tenant agrees, until the Mortgage is released
by Lender, to provide Lender with a copy of each notice of default given to
Landlord under the Lease at the same time such notice of default is given to
Landlord. In the event of any default by Landlord under the Lease, Tenant shall
not seek to terminate the Lease or to exercise any rights to setoff or abate
Rent or any other remedies, until Lender has received such notice and has been
given the opportunity, but without undertaking Landlord’s other obligations
under the Lease, to cure the default within sixty (60) days from receipt of
notice. In the event Lender has begun action to cure the default, but not
completed the same during the sixty (60) day period, Tenant agrees that Lender
shall have a reasonable period of time thereafter to do so. If the default is
such that it cannot practically be cured by Lender without taking possession of
the Premises, Tenant agrees that any right it may have to terminate the Lease or
to setoff or abate any Rent, shall be suspended for a reasonable period of time
so long as Lender is diligently proceeding to acquire possession of the
Premises, by foreclosure or is otherwise undertaking to cure the default of
Landlord. Notwithstanding the foregoing, Lender shall have no obligation to cure
any default under the Lease.
     7. Tenant Representations and Warranties. Tenant hereby warrants and
represents, covenants and agrees with Lender so long as the Mortgage has not
been released: (a) not to amend, alter, modify, cancel or terminate the Lease in
any respect without the prior written consent of Lender, which consent will not
be unreasonably withheld, conditioned or delayed; (b) not to subordinate the
Lease to any other mortgage, without Lender’s prior written consent in each
instance; and (c) that Tenant is now (or will be) the sole owner of the
leasehold estate created by the Lease and shall not hereafter assign the Lease
except as permitted by the terms hereof, and that notwithstanding any such
assignment or any sublease, Tenant shall remain primarily liable for the
observance and performance of its agreements under the Lease.
     8. Limitation of Liability. Anything herein or in the Lease to the contrary
notwithstanding, in the event that Lender shall acquire title to the Property,
Lender shall have no obligation, nor incur any liability, beyond Lender’s then
interest in the Property, and Tenant shall look exclusively to such interest of
Lender in the Property for the payment and discharge of any obligations imposed
upon Lender hereunder or under the Lease, or otherwise, subject to the
limitation of Lender’s obligations provided for in Section 4 above. For purposes
hereof, “interest in the Property”, shall include rents due from tenants,
insurance proceeds, profits from sale and proceeds from condemnation or eminent
domain proceedings.

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     9. Notices. All notices or communications required or permitted hereunder
(collectively “Notices”) shall be in writing, and shall be deemed properly
given, on the date of actual delivery, or on the date that the recipient refuses
delivery. Delivery shall be made by United States mail, registered or certified,
return receipted requested, or by a nationally recognized overnight courier
service; and sent to the addresses set forth below:

         
 
  LENDER:   Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
Attn: Real Estate Investment 01-34-02
 
       
 
  TENANT:   Ensign Facility Services, Inc.
27101 Puerta Real, Suite 450
Mission Viejo, California 92691
Attn: General Counsel
 
       
 
  LANDLORD:   MISSION RIDGE ASSOCIATES LLC
c/o Legacy Partners Commercial, Inc.
27201 Puerta Real, Suite 250
Mission Viejo, California 92691
Attention: Property Manager
 
       
 
      with copy to:
 
       
 
      Legacy Partners Commercial, Inc.
4000 East Third Avenue, Suite 600
Foster City, CA 94404
Attention: Executive Vice President, Operations

     A party may, by notice to the other parties, designate a new address to
which notices shall thereafter be delivered.
     10. Parties Bound. The provisions of this Agreement shall be binding upon
and inure to the benefit of Tenant, Lender and Landlord and their respective
successors and/or assigns. Any party may record this Agreement at any time.
     11. Options. With respect to any options for additional space provided to
Tenant under the Lease, Lender agrees to recognize the same if Tenant is
entitled thereto under the Lease after the date on which Lender succeeds as
landlord under the Lease by virtue of foreclosure or deed in lieu of foreclosure
or Lender takes possession of the Premises; provided, however, Lender shall not
be responsible for any acts of any prior landlord (including Landlord) under the
Lease, or the act of any tenant, subtenant or other party which prevents Lender
from complying with the provisions hereof and Tenant shall have no right to
cancel the Lease or to make any claims against Lender on account thereof.
     12. Captions. Captions and headings of sections are not parts of this
Agreement and shall not be deemed to affect the meaning or construction of any
of the provisions of this Agreement.
     13. Counterparts. This Agreement may be executed in several counterparts
each of which when executed and delivered is an original, but all of which
together shall constitute one instrument.

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     14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the state where the Property is located.
     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

                  TENANT:    
 
                ENSIGN FACILITY SERVICES, INC.,
a Nevada corporation    
 
           
 
  By:   /s/ Christopher R. Christensen    
 
     
 
Christopher R. Christensen, President    
 
           
 
  By:   /s/ Beverly B. Wittekind    
 
     
 
Beverly B. Wittekind, Secretary    
 
                If Tenant is a corporation, this instrument must be executed by
the chairman of the board, the president or any vice president and the
secretary, any assistant secretary, the chief financial officer or any assistant
financial officer or any assistant treasurer of such corporation, unless the
bylaws or a resolution of the board of directors shall otherwise provide, in
which case the bylaws or a certified copy of the resolution, as the case may be,
must be attached to this instrument.    

                          LANDLORD:    
 
                        MISSION RIDGE ASSOCIATES LLC,
a Delaware limited liability company, Landlord    
 
                        By:   Legacy Partners Commercial, L.P.,
a California limited partnership, as
Manager and Agent for owner    
 
                            By:   Legacy Partners Commercial,
Inc., general partner    
 
                   
 
          By:   /s/ Debra Smith    
 
             
 
Debra Smith    
 
              Its: Executive Vice President    

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                  LENDER:    
 
                NATIONWIDE LIFE INSURANCE COMPANY    
 
           
 
  By:        
 
     
 
   
 
  Its:        
 
     
 
   

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STATE OF
        )
 
 
 
    )
COUNTY OF
        )
 
 
 
   

On                     , 2009, before me,                     , a Notary Public,
personally appeared                      who proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the
within instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California
that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.

         
Signature
       
 
 
 
   

         
STATE OF
        )
 
 
 
    )
COUNTY OF
        )
 
 
 
   

On                     , 2009, before me,                     , a Notary Public,
personally appeared                      who proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the
within instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California
that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.

         
Signature
       
 
 
 
   

         
STATE OF
        )
 
 
 
    )
COUNTY OF
        )
 
 
 
   

     The foregoing instrument was acknowledged before me this ___ day of ___,
20___, by                      of Nationwide Life Insurance Company, an Ohio
corporation, on behalf of the corporation.

         
 
 
 
Notary Public    

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