exv10w55







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






 









 








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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