exv10w2



 








Exhibit 10.2




FIRST AMENDMENT TO LEASE





	I.	 	PARTIES AND DATE.





     This First Amendment to Lease (the “Amendment”) dated May 19, 2006, is by and between THE
IRVINE COMPANY LLC, a Delaware limited liability company, formerly The Irvine Company, a Delaware
corporation (“Landlord”), and ENDOCARE, INC., a Delaware corporation (“Tenant”).




	II.	 	RECITALS.





     On November 26, 2001, Landlord and Tenant entered into a lease (“Lease”) for space in a
building located at 201 Technology Drive, Irvine, California (“Premises”).



     Landlord and Tenant each desire to modify the Lease to extend the Lease Term, to adjust the
Basic Rent, and to make such other modifications as are set forth in “III. MODIFICATIONS” next
below.




	III.	 	MODIFICATIONS.





     A. Basic Lease Provisions. The Basic Lease Provisions are hereby amended as follows:




1. Item 5 is hereby deleted in its entirety and substituted therefor shall be the
following:




“5. Lease Term: The Term of this Lease shall expire at midnight on March
31, 2010.”




2. Item 6 is hereby amended by adding the following:




“Commencing April 1, 2007, the Basic Rent shall be Thirty Three Thousand
Seven Hundred Forty-Eight Dollars ($33,748.00) per month, based on $1.20 per
rentable square foot.




Commencing April 1, 2008, the Basic Rent shall be Thirty Five Thousand One
Hundred Fifty-Four Dollars ($35,154.00) per month, based on $1.25 per
rentable square foot.




Commencing April 1, 2009, the Basic Rent shall be Thirty Six Thousand Five
Hundred Sixty Dollars ($36,560.00) per month, based on $1.30 per rentable
square foot.”




3. Item 12 is hereby amended by deleting Landlord’s address for payments and notices
and substituted therefor shall be the following:




“LANDLORD




THE IRVINE COMPANY LLC

550 Newport Center Drive

Newport Beach, CA 92660

Attn: Senior Vice President, Operations

Irvine Office Properties



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with a copy of notices to:




THE IRVINE COMPANY LLC

550 Newport Center Drive

Newport Beach, CA 92660

Attn: Vice President, Operations

Irvine Office Properties, Technology Portfolio”



     B. Right to Extend the Lease. The provisions of Section 3.3 of the Lease entitled
“Right to Extend this Lease” shall remain in full force and effect, and exercisable by Tenant
during the Term of the Lease as extended by this Amendment.



     C. Security Deposit. Section 4.3 of the Lease is hereby amended to provide that,
upon an Event of Default by Tenant (as defined in Section 14.1 of the Lease), Landlord may, in its
sole and absolute discretion additionally retain, use or apply the whole or any part of the
Security Deposit to pay amounts estimated by Landlord as the amount due Landlord for prospective
rent and for damages pursuant to Section 14.2 (a)(i) of the Lease and/or California Civil Code
Section 1951.2.



     D. Utilities and Services. The following provisions are hereby added to the end of
the initial paragraph of Section 6.1 of the Lease entitled “Utilities and Services”:




“Tenant shall also pay as an item of additional rent, within ten (10) days after
receipt of Landlord’s statement or invoice therefor, Landlord’s “standard charge”,
as hereinafter defined (which shall be in addition to the electricity charge paid to
the utility provider) for Tenant’s “after hours” usage of each HVAC unit servicing
the Premises. If the HVAC unit(s) servicing the Premises also serve other leased
premises in the Building, “after hours” shall mean usage of said unit(s) before or
after the hours of 6:00 A.M. to 6:00 P.M. on Mondays through Fridays, and before
9:00 A.M. or after 1:00 P.M. on Saturdays, subject to reasonable adjustment of said
hours by Landlord. If the HVAC unit(s) serve only the Premises, “after hours” shall
mean more than two hundred eighty-three (283) hours of usage during any month during
the Term. “After hours” usage shall be determined based upon the operation of the
applicable HVAC unit during each of the foregoing periods on a “non-cumulative”
basis (that is, without regard to Tenant’s usage or nonusage of other unit(s)
serving the Premises, or of the applicable unit during other periods of the Term).
As used herein, “standard charge” shall mean the $1.00 per hour for each hour of
“after hours” of operation.”



     E. Maintenance and Repair. Sections 7.1 and 7.2 of the Lease are hereby amended to
provide that Landlord’s obligation to provide service, maintenance and repair to air conditioning,
heating and ventilating equipment servicing the Premises shall not apply to supplemental HVAC
system(s), if any, installed by Tenant and servicing only the Premises, and that Landlord shall
maintain in good repair, as a “Project Cost,” all Building exterior glass.



     F. Late Payments. The reference to “Two Hundred Fifty Dollars ($250.00)” in Section
14.3(a) of the Lease is hereby amended to “One Hundred Dollars ($100.00).”



     G. Waiver of Jury Trial. Section 14.7 of the Lease is hereby deleted in its entirety
and substituted therefor shall be the following:



     SECTION 14.7. WAIVER OF JURY TRIAL/JUDICIAL REFERENCE.




     (a) LANDLORD AND TENANT EACH ACKNOWLEDGES THAT IT IS AWARE OF AND HAS HAD THE ADVICE OF
COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY, AND, TO THE EXTENT ENFORCEABLE
UNDER CALIFORNIA LAW, EACH PARTY DOES HEREBY EXPRESSLY AND KNOWINGLY WAIVE AND RELEASE ALL SUCH
RIGHTS TO TRIAL BY JURY IN ANY ACTION,



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PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO
AGAINST THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR SUBSIDIARY OR
AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS
LEASE, TENANT’S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM OF INJURY OR DAMAGE.
FURTHERMORE, THIS WAIVER AND RELEASE OF ALL RIGHTS TO A JURY TRIAL IS DEEMED TO BE INDEPENDENT OF
EACH AND EVERY OTHER PROVISION, COVENANT, AND/OR CONDITION SET FORTH IN THIS LEASE.



     (b) IN THE EVENT THAT THE JURY WAIVER PROVISIONS OF SECTION 14.7(a) ARE NOT ENFORCEABLE UNDER
CALIFORNIA LAW, THEN THE PROVISIONS OF THIS SECTION 14.7(b) SHALL APPLY. IT IS THE DESIRE AND
INTENTION OF THE PARTIES TO AGREE UPON A MECHANISM AND PROCEDURE UNDER WHICH CONTROVERSIES AND
DISPUTES ARISING OUT OF THIS LEASE OR RELATED TO THE PREMISES WILL BE RESOLVED IN A PROMPT AND
EXPEDITIOUS MANNER. ACCORDINGLY, EXCEPT WITH RESPECT TO ACTIONS FOR UNLAWFUL OR FORCIBLE DETAINER
OR WITH RESPECT TO THE PREJUDGMENT REMEDY OF ATTACHMENT, ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS OR SUBSIDIARY OR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR
IN ANY WAY CONNECTED WITH THIS LEASE, TENANT’S USE OR OCCUPANCY OF THE PREMISES AND/OR ANY CLAIM OF
INJURY OR DAMAGE, SHALL BE HEARD AND RESOLVED BY A REFEREE UNDER THE PROVISIONS OF THE CALIFORNIA
CODE OF CIVIL PROCEDURE, SECTIONS 638 — 645.1, INCLUSIVE (AS SAME MAY BE AMENDED, OR ANY SUCCESSOR
STATUTE(S) THERETO) (THE “REFEREE SECTIONS”). ANY FEE TO INITIATE THE JUDICIAL REFERENCE
PROCEEDINGS SHALL BE PAID BY THE PARTY INITIATING SUCH PROCEDURE; PROVIDED HOWEVER, THAT THE COSTS
AND FEES, INCLUDING ANY INITIATION FEE, OF SUCH PROCEEDING SHALL ULTIMATELY BE BORNE IN ACCORDANCE
WITH SECTION 14.6 ABOVE. THE VENUE OF THE PROCEEDINGS SHALL BE IN THE COUNTY IN WHICH THE PREMISES
ARE LOCATED. WITHIN TEN (10) DAYS OF RECEIPT BY ANY PARTY OF A WRITTEN REQUEST TO RESOLVE ANY
DISPUTE OR CONTROVERSY PURSUANT TO THIS SECTION 14.7(b), THE PARTIES SHALL AGREE UPON A SINGLE
REFEREE WHO SHALL TRY ALL ISSUES, WHETHER OF FACT OR LAW, AND REPORT A FINDING AND JUDGMENT ON SUCH
ISSUES AS REQUIRED BY THE REFEREE SECTIONS. IF THE PARTIES ARE UNABLE TO AGREE UPON A REFEREE
WITHIN SUCH TEN (10) DAY PERIOD, THEN ANY PARTY MAY THEREAFTER FILE A LAWSUIT IN THE COUNTY IN
WHICH THE PREMISES ARE LOCATED FOR THE PURPOSE OF APPOINTMENT OF A REFEREE UNDER CALIFORNIA CODE OF
CIVIL PROCEDURE SECTIONS 638 AND 640, AS SAME MAY BE AMENDED OF ANY SUCCESSOR STATUTE(S) THERETO.
IF THE REFEREE IS APPOINTED BY THE COURT, THE REFEREE SHALL BE A NEUTRAL AND IMPARTIAL RETIRED
JUDGE WITH SUBSTANTIAL EXPERIENCE IN THE RELEVANT MATTERS TO BE DETERMINED, FROM JAMS/ENDISPUTE,
INC., THE AMERICAN ARBITRATION ASSOCIATION OR SIMILAR MEDIATION/ARBITRATION ENTITY. THE PROPOSED
REFEREE MAY BE CHALLENGED BY ANY PARTY FOR ANY OF THE GROUNDS LISTED IN SECTION 641 OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE, AS SAME MAY BE AMENDED OR ANY SUCCESSOR STATUTE(S) THERETO.
THE REFEREE SHALL HAVE THE POWER TO DECIDE ALL ISSUES OF FACT AND LAW AND REPORT HIS OR HER
DECISION ON SUCH ISSUES, AND TO ISSUE ALL RECOGNIZED REMEDIES AVAILABLE AT LAW OR IN EQUITY FOR ANY
CAUSE OF ACTION THAT IS BEFORE THE REFEREE, INCLUDING AN AWARD OF ATTORNEYS’ FEES AND COSTS IN
ACCORDANCE WITH CALIFORNIA LAW. THE REFEREE SHALL NOT, HOWEVER, HAVE THE POWER TO AWARD PUNITIVE
DAMAGES, NOR ANY OTHER DAMAGES WHICH ARE NOT PERMITTED
BY THE EXPRESS PROVISIONS OF THIS LEASE, AND THE PARTIES HEREBY WAIVE ANY RIGHT TO RECOVER ANY
SUCH DAMAGES. THE PARTIES SHALL BE ENTITLED TO CONDUCT ALL DISCOVERY AS PROVIDED IN THE CALIFORNIA
CODE OF



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CIVIL PROCEDURE, AND THE REFEREE SHALL OVERSEE DISCOVERY AND MAY ENFORCE ALL DISCOVERY
ORDERS IN THE SAME MANNER AS ANY TRIAL COURT JUDGE, WITH RIGHTS TO REGULATE DISCOVERY AND TO ISSUE
AND ENFORCE SUBPOENAS, PROTECTIVE ORDERS AND OTHER LIMITATIONS ON DISCOVERY AVAILABLE UNDER
CALIFORNIA LAW. THE REFERENCE PROCEEDING SHALL BE CONDUCTED IN ACCORDANCE WITH CALIFORNIA LAW
(INCLUDING THE RULES OF EVIDENCE), AND IN ALL REGARDS, THE REFEREE SHALL FOLLOW CALIFORNIA LAW
APPLICABLE AT THE TIME OF THE REFERENCE PROCEEDING. IN ACCORDANCE WITH SECTION 644 OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE, THE DECISION OF THE REFEREE UPON THE WHOLE ISSUE MUST STAND AS
THE DECISION OF THE COURT, AND UPON THE FILING OF THE STATEMENT OF DECISION WITH THE CLERK OF THE
COURT, OR WITH THE JUDGE IF THERE IS NO CLERK, JUDGMENT MAY BE ENTERED THEREON IN THE SAME MANNER
AS IF THE ACTION HAD BEEN TRIED BY THE COURT. THE PARTIES SHALL PROMPTLY AND DILIGENTLY COOPERATE
WITH ONE ANOTHER AND THE REFEREE, AND SHALL PERFORM SUCH ACTS AS MAY BE NECESSARY TO OBTAIN A
PROMPT AND EXPEDITIOUS RESOLUTION OF THE DISPUTE OR CONTROVERSY IN ACCORDANCE WITH THE TERMS OF
THIS SECTION 14.7(b). TO THE EXTENT THAT NO PENDING LAWSUIT HAS BEEN FILED TO OBTAIN THE
APPOINTMENT OF A REFEREE, ANY PARTY, AFTER THE ISSUANCE OF THE DECISION OF THE REFEREE, MAY APPLY
TO THE COURT OF THE COUNTY IN WHICH THE PREMISES ARE LOCATED FOR CONFIRMATION BY THE COURT OF THE
DECISION OF THE REFEREE IN THE SAME MANNER AS A PETITION FOR CONFIRMATION OF AN ARBITRATION AWARD
PURSUANT TO CODE OF CIVIL PROCEDURE SECTION 1285 ET SEQ. (AS SAME MAY BE AMENDED OR ANY SUCCESSOR
STATUTE(S) THERETO).



     I. Tenant Improvements. Landlord hereby agrees to complete the Tenant Improvements
for the Premises in accordance with the provisions of Exhibit X, Work Letter, attached
hereto.



IV. GENERAL.




     A. Effect of Amendments. The Lease shall remain in full force and effect except to
the extent that it is modified by this Amendment.



     B. Entire Agreement. This Amendment embodies the entire understanding between
Landlord and Tenant with respect to the modifications set forth in “III. MODIFICATIONS” above and
can be changed only by a writing signed by Landlord and Tenant.



     C. Counterparts. If this Amendment is executed in counterparts, each is hereby
declared to be an original; all, however, shall constitute but one and the same amendment. In any
action or proceeding, any photographic, photostatic, or other copy of this Amendment may be
introduced into evidence without foundation.



     D. Defined Terms. All words commencing with initial capital letters in this
Amendment and defined in the Lease shall have the same meaning in this Amendment as in the Lease,
unless they are otherwise defined in this Amendment.



     E. Corporate and Partnership Authority. If Tenant is a corporation or partnership,
or is comprised of either or both of them, each individual executing this Amendment for the
corporation or partnership represents that he or she is duly authorized to execute and deliver this
Amendment on behalf of the corporation or partnership and that this Amendment is binding upon the
corporation or partnership in accordance with its terms.



     F. Attorneys’ Fees. The provisions of the Lease respecting payment of attorneys’
fees shall also apply to this Amendment.



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V. EXECUTION.




     Landlord and Tenant executed this Amendment on the date as set forth in “I. PARTIES AND DATE.”
above.



	 	 	 	 	 	 	 
	LANDLORD:	 	TENANT:
	 
	 	 	 	 	 	 
	THE IRVINE COMPANY LLC,	 	ENDOCARE, INC.,
	a Delaware limited liability company	 	a Delaware corporation
	 
	 	 	 	 	 	 
	By

	 	/s/ Steven M. Case
	 	By
	 	/s/ Craig T. Davenport
	 

	 	 
	 	 	 	 
	 

	 	Steven M. Case, Senior Vice President
	 	Name
	 	Craig T. Davenport
	 

	 	Leasing, Office Properties
	 	Title
	 	CEO and Chairman
	 
	 	 	 	 	 	 
	By

	 	/s/ Christopher J. Popma
	 	By
	 	/s/ Michael R. Rodriguez
	 

	 	 
	 	 	 	 
	 

	 	Christopher J. Popma, Vice President
	 	Name
	 	Michael R. Rodriguez
	 

	 	Operations, Office Properties
	 	Title
	 	SVP, Finance and CFO






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EXHIBIT X




INDUSTRIAL WORK LETTER




DOLLAR ALLOWANCE



The tenant improvement work to be contracted for by Landlord hereunder (“Tenant Improvement Work”)
shall consist of the design and construction of all tenant improvements (“Tenant Improvements”),
including work in place as of the date hereof, required for the Premises pursuant to the approved
final Working Drawings and Specifications (as hereinafter defined). All of the Tenant Improvement
Work shall be performed by a contractor selected by Landlord and in accordance with the procedures
and requirements set forth below.





	I.	 	ARCHITECTURAL AND CONSTRUCTION PROCEDURES.






	 	A.	 	Tenant and Landlord have approved, or shall approve both (i) a detailed space
plan for the Tenant Improvement Work, prepared by Landlord’s architect, which includes,
if applicable, interior partitions, ceilings, interior finishes, interior doors, suite
entrance, floor coverings, window coverings, lighting, electrical and telephone
outlets, plumbing connections, heavy floor loads and other special requirements of
Tenant (“Preliminary Plan”), and (ii) an estimate of the cost to complete the Tenant
Improvement Work in accordance with the Preliminary Plan
(“Preliminary Cost Estimate”),
which Preliminary Cost Estimate will be based upon estimated costs provided by
Landlord’s contractor. The Preliminary Plan shall include Landlord’s building standard
tenant improvements, materials and specifications for the Project (“Building Standard
Improvements”), except for changes and additions specifically requested by Tenant and
approved by Landlord in its sole and absolute discretion in writing (any such addition
or variation from the Standard Improvements shall be referred to herein as a
(“Non-Standard Improvement”). All Tenant requests for Non-Standard Improvements must
be in writing and shall provide sufficient specifications and details for Landlord to
reasonably evaluate impacts upon the Preliminary Plan and Preliminary Cost Estimate.
If Non-Standard Improvement(s) are approved by Landlord as herein provided, the
Preliminary Plan, the Preliminary Cost Estimate shall include estimated costs for such
Non-Standard Improvements for inclusion as part of Tenant’s Contribution. Tenant shall
approve or provide suggested revisions to the Preliminary Plan and the Preliminary Cost
Estimate by signing copies of each or specifying in reasonable detail any suggested
revisions thereto as hereinabove provided, and delivering each to Landlord within five
(5) days of receipt thereof by Tenant. Landlord shall attempt in good faith to modify
the Preliminary Plan and the Preliminary Cost Estimate to incorporate Tenant’s
suggested revisions in a mutually satisfactory manner, provided, however, in no event
shall Tenant have the right to require any Non-Standard Improvements or to make any
changes or additions to the Preliminary Plan for the purpose of utilizing unused
“Maximum Landlord Contribution” (as defined in Section II.B. below).
	 
	 	B.	 	Tenant shall provide in writing to Landlord or Landlord’s architect all
specifications and information requested by Landlord for the preparation of final
construction documents and costing, including without limitation Tenant’s final
selection of paint and floor finishes, complete specifications and locations (including
electrical, load and HVAC requirements) of Tenant’s equipment, and details of all
Non-Standard Improvements (as defined above) which have been approved by Landlord as
part of the Preliminary Plan (collectively, “Programming
Information”). Tenant
understands that final construction documents for the Tenant Improvements shall be
predicated on the Programming Information, and accordingly that such information must
be accurate and complete and that any defects or problems due to incomplete or
inaccurate Programming Information shall be the responsibility of the Tenant and that
the Landlord shall have no obligation or liability for such defects or problems arising
from any incomplete or inaccurate Programming Information.




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	 	C.	 	Upon Tenant’s approval of the Preliminary Plan and Preliminary Cost Estimate
and delivery of the complete Programming Information, Landlord’s architect and
engineers shall prepare and deliver to Tenant working drawings and specifications
(“Working Drawings and Specifications”), and Landlord’s contractor shall prepare a
final construction cost estimate (“Final Cost Estimate”) for the Tenant Improvements in
conformity with the Working Drawings and Specifications. A copy of the Final Cost
Estimate shall be delivered to Tenant for its approval unless there are no Non-Standard
Tenant Improvements and Tenant is not responsible for any Tenant’s Contribution.
Tenant shall have five (5) days from the receipt thereof to approve or disapprove the
Working Drawings and Specifications and (if delivered to Tenant) the Final Cost
Estimate. Tenant shall not unreasonably withhold or delay its approval, and any
disapproval or requested modification shall be limited to items not consistent with the
approved Preliminary Plan or Preliminary Cost Estimate. Should Tenant disapprove the
Working Drawings and Specifications or the Final Cost Estimate, such disapproval shall
be accompanied by specific reasons for disapproval and a detailed list of requested
revisions. Any revision requested by Tenant and accepted by Landlord, in its sole and
absolute discretion, shall be incorporated into a revised set of Working Drawings and
Specifications and the Final Cost Estimate, and Tenant shall approve same in writing
within five (5) days of receipt without further revision.
	 
	 	D.	 	In the event that Tenant requests in writing a revision to the Working Drawings
and Specifications (“Change”), and Landlord so approves such Change as provided in
Section I.E. herein, Landlord shall advise Tenant by written change order as soon as is
practical of any increase in the Completion Cost such Change would cause. Tenant shall
approve or disapprove such change order, if any, in writing within two (2) days
following Tenant’s receipt of such change order. If Tenant approves any such change
order, Landlord, at its election, may either (i) require as a condition to the
effectiveness of such change order that Tenant pay the increase in the Completion Cost
attributable to such change order concurrently with delivery of Tenant’s approval of
the change order, or (ii) defer Tenant’s payment of such increase until the date ten
(10) days after delivery of invoices for same, provided however, that the Tenant
Contribution must in any event be paid in full prior to Tenant’s commencing occupancy
of the Premises. If Tenant disapproves any such change order, Tenant shall nonetheless
be responsible for the reasonable architectural and/or planning fees incurred in
preparing such change order. Landlord shall have no obligation to interrupt or modify
the Tenant Improvement Work pending Tenant’s approval of a change order, but if Tenant
fails to timely approve a change order, Landlord may (but shall not be required to)
suspend the applicable Tenant Improvement Work.
	 
	 	E.	 	Landlord may consent in writing, in its sole and absolute discretion, to
Tenant’s request for a Change, including any modification of a Standard Improvement to
a Non-Standard Improvement in the Preliminary Plan or any other modification of the
Working Drawings and Specifications, if requested in writing by Tenant. In addition,
Landlord agrees that it shall not unreasonably withhold its consent to Tenant’s
requested Changes to previously approved Non-Standard Improvements, unless Landlord
determines, in its sole and absolute discretion, that such requested Change to the
Non-Standard Improvements (i) is of a lesser quality than the Non-Standard Improvements
previously approved by Landlord, (ii) fails to conform to applicable governmental
requirements, (iii) would result in the Premises requiring building services beyond the
level normally provided to other tenants, (iv) would delay construction of the Tenant
Improvements, (v) interferes in any manner with the proper functioning of, or
Landlord’s access to, any mechanical, electrical, plumbing or HVAC systems, facilities
or equipment in or serving the Building, or (vi) would have an adverse aesthetic
impact to the Premises or cause additional expenses to Landlord in reletting the
Premises. The cost of any Non-Standard Improvements shall be part of Tenant’s
Contribution (as hereinafter defined). All Standard Tenant Improvements and
Non-Standard Improvements shall become the property of Landlord and shall be
surrendered with the Premises at the end of the Term; except that Landlord may, by
notice to Tenant given either prior to or following the expiration or termination of
the Lease, require Tenant either to remove all or any of the Non-Standard Improvements,
to repair any damage to the Premises or the Common Area arising from such 




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	 	 	 	removal, and
to replace such Non-Standard Improvements with the applicable Building Standard, or to
reimburse Landlord for the reasonable cost of such removal, repair and replacement
upon demand. Any such removals, repairs and replacements by Tenant shall be
completed by the Expiration Date, or sooner termination of this Lease, or within ten
(10) days following notice to Tenant if such notice is given following the
Expiration Date or sooner termination.






	 	F.	 	It is understood that all or a portion of the Tenant Improvements may be done
during Tenant’s occupancy of the Premises. In this regard, Tenant agrees to assume any
risk of injury, loss or damage to Tenant to the extent not the result of Landlord’s
negligence or willful misconduct. While Landlord agrees to employ construction
practices reasonably intended to minimize disruptions to the operation of Tenant’s
business in the Premises, Tenant acknowledges and agrees that some disruptions may
occur during the course of construction of the Tenant Improvements, and in no event
shall rent abate as the result of the construction of the Tenant Improvements. Tenant
shall pay for and cause Tenant’s furniture and other equipment (including computers) to
be moved as necessary so as to facilitate the Tenant Improvement Work.
	 
	 	G.	 	Tenant hereby designates Mike Rodriguez (“Tenant’s Construction
Representative”), Telephone No. (949) 450-5422, as its representative, agent and
attorney-in-fact for all matters related to the Tenant Improvement Work, including but
not by way of limitation, for purposes of receiving notices, approving submittals and
issuing requests for Changes, and Landlord shall be entitled to rely upon
authorizations and directives of such person(s) as if given directly by Tenant. The
foregoing authorization is intended to provide assurance to Landlord that it may rely
upon the directives and decision making of the Tenant’s Construction Representative
with respect to the Tenant Improvement Work and is not intended to limit or
reduce Landlord’s right to reasonably rely upon any decisions or directives given by
other officers or representatives of Tenant. Tenant may amend the designation of its
Tenant’s Construction Representative(s) at any time upon delivery of written notice to
Landlord.






	II.	 	COST OF TENANT IMPROVEMENTS






	 	A.	 	Landlord shall complete, or cause to be completed, the Tenant Improvements, at
the construction cost shown in the Final Cost Estimate (subject to increases for
Landlord approved Changes and as otherwise provided in this Work Letter), in accordance
with final Working Drawings and Specifications approved by both Landlord and Tenant.
	 
	 	B.	 	Landlord shall pay up to One Hundred Twelve Thousand Four Hundred Ninety-Two
Dollars ($112,492.00), based on $4.00 per usable square foot of the Premises
(“Landlord’s Maximum Contribution”), of the final “Completion Cost” (as defined below).
Tenant acknowledges that the Landlord’s Maximum Contribution is intended only as the
maximum amount Landlord will pay toward Building Standard Improvements, and not by way
of limitation, any partitions, modular office stations, fixtures, cabling, furniture
and equipment requested by Tenant are not included in Building Standards and
are in no event subject to payment as part of Landlord’s Contribution. In the event
the sum of the cost of the Building Standard Improvements for the Tenant Improvements
is less than the Landlord’s Maximum Contribution, Landlord’s actual contribution toward
the Completion Cost (“Landlord’s Contribution”) shall equal such lesser amount, and
Tenant shall have no right to receive any credit, refund or allowance of any kind for
any unused portion of the Landlord’s Maximum Contribution nor shall Tenant be allowed
to make revisions to an approved Preliminary Plan, Working Drawings and Specifications
or request a Change in an effort to apply any unused portion of Landlord’s Maximum
Contribution. It is further understood and agreed that the Tenant Improvements shall
be scheduled and shall be substantially completed not later than December 31, 2006 to
be eligible for funding by Landlord, and that Landlord shall not be obligated to fund
any Tenant Improvements completed after such date.
	 
	 	C	 	Tenant shall pay all Completion Costs attributable to Non-Standard Improvements




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	 	 	 	(“Non-Standard Improvement Costs”), including, but not by way of limitation: (i) costs
for each variance or upgrade which increases the cost of a Building Standard
Improvement, and (ii) the entire cost of any improvements or work which are additions
(as opposed to variances or upgrades) to the Standard Improvements (e.g., supplemental
or back-up power or HVAC, extra finishes or millwork or partitions). In addition,
Tenant shall pay all Completion Costs attributable to any Changes requested by the
Tenant, any costs due to inaccurate or incomplete Programming Information and the
amount, if any, by which aggregate costs for the Building Standard Improvements exceeds
the Maximum Landlord Contribution. The amounts to be paid by Tenant for the Tenant
Improvements pursuant to this Section II.C. are sometimes cumulatively referred to
herein as the “Tenant’s Contribution”.






	 	D.	 	The “Completion Cost” shall mean all costs of Landlord in completing the Tenant
Improvements in accordance with the approved Working Drawings and Specifications,
including but not limited to the following: (i) payments made to architects,
engineers, contractors, subcontractors and other third party consultants in the
performance of the work, (ii) salaries and fringe benefits of persons, if any, in the
direct employ of Landlord performing any part of the construction work, (iii) permit
fees and other sums paid to governmental agencies, and (iv) costs of all materials
incorporated into the work or used in connection with the work. The Completion Cost
shall also include an administrative/supervision fee to be paid to Landlord or to
Landlord’s management agent in the amount of five percent (5%) of the Completion Cost.
Unless expressly authorized in writing by Landlord, the Completion Cost shall not
include (and no portion of the Landlord Contribution shall be paid for) any costs
incurred by Tenant, including without limitation, any costs for space planners,
managers, advisors or consultants retained by Tenant in connection with the Tenant
Improvements.
	 
	 	E.	 	Prior to start of construction of the Tenant Improvements, Tenant shall pay to
Landlord in full the amount of the Tenant’s Contribution set forth in the approved
Preliminary Cost Estimate or in the Final Cost Estimate (once approved by Tenant). If
the actual Completion Cost of the Tenant Improvements is greater than the Final Cost
Estimate because of Changes, modifications or extras not reflected on the approved
Working Drawings and Specifications, then Tenant shall pay all such additional costs
within ten (10) days after written demand for same. The balance of any sums not
otherwise paid by Tenant shall be due and payable on or before the Commencement Date of
this Lease. If Tenant defaults in the payment of any sums due under this Work Letter,
Landlord shall (in addition to all other remedies) have the same rights as in the case
of Tenant’s failure to pay rent under the Lease, including, without limitation, the
right to terminate this Lease and recover damages from Tenant and/or to charge a late
payment fee and to collect interest on delinquent payments, and Landlord may (but shall
not be required to) suspend the Tenant Improvement Work following such default.






	III.	 	DISPUTE RESOLUTION






	 	A.	 	All claims or disputes between Landlord and Tenant arising out of, or relating
to, this Work Letter shall be decided by the JAMS/ENDISPUTE (“JAMS”), or its successor,
with such arbitration to be held in Orange County, California, unless the parties
mutually agree otherwise. Within ten (10) business days following submission to JAMS,
JAMS shall designate three arbitrators and each party may, within five (5) business
days thereafter, veto one of the three persons so designated. If two different
designated arbitrators have been vetoed, the third arbitrator shall hear and decide the
matter. If less than two (2) arbitrators are timely vetoed, JAMS shall select a single
arbitrator from the non-vetoed arbitrators originally designated by JAMS, who shall
hear and decide the matter. Any arbitration pursuant to this section shall be decided
within thirty (30) days of submission to JAMS. The decision of the arbitrator shall be
final and binding on the parties. In no event shall the arbitrator be empowered or
authorized to award consequential or punitive damages (including any award for lost
profit or opportunity costs or loss or interruption of business or income). All costs
associated with the arbitration shall be awarded to the prevailing party as determined
by the arbitrator.
	 
	 	B.	 	Notice of the demand for arbitration by either party to the Work Letter shall
be filed in 




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	 	 	 	writing with the other party to the Work Letter and with JAMS and shall be
made within a reasonable time after the dispute has arisen. The award rendered by the
arbitrator shall be final, and judgment may be entered upon it in accordance with
applicable law in any court having jurisdiction thereof. Except by written consent of
the person or entity sought to be joined, no arbitration arising out of or relating to
this Work Letter shall include, by consolidation, joinder or in any other manner, any
person or entity not a party to the Work Letter unless (1) such person or entity is
substantially involved in a common question of fact or law, (2) the presence of such
person or entity is required if complete relief is to be accorded in the arbitration,
or (3) the interest or responsibility of such person or entity in the matter is not
insubstantial.






	 	C.	 	The agreement herein among the parties to arbitrate shall be specifically
enforceable under prevailing law. The agreement to arbitrate hereunder shall apply
only to disputes arising out of, or relating to, this Work Letter, and shall not apply
to other matters of dispute under the Lease except as may be expressly provided in the
Lease.






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