Exhibit 10.4

 

THIRD AMENDMENT TO LEASE

 

This Third Amendment to Lease (“Third Amendment”) is made and entered into as of
the 8th day of July, 2005 by and between KILROY REALTY, L.P., a Delaware limited
partnership (“Landlord”), and FAVRILLE, INC., a Delaware corporation (“Tenant”).

 

R E C I T A L S:

 

A.                                   Landlord and Tenant entered into that
certain Office Lease dated January 31, 2003 (the “Office Lease”), as amended by
that certain First Amendment to Lease dated July 7, 2004 (the “First
Amendment”), and that certain Second Amendment to Lease dated October 11, 2004
(the “Second Amendment”) (the Office Lease, the First Amendment and the Second
Amendment are, collectively, the “Lease”), whereby Landlord leased to Tenant and
Tenant leased from Landlord (i) those certain premises (the “Original Premises”)
known as Suite 150 and consisting of a total of approximately 48,502 rentable
square feet of space located on the first (1st) and second (2nd) floors of the
building located at 10421 Pacific Center Court, San Diego, California (the
“Building”), (ii) those certain premises (the “First Expansion Premises”)
consisting of 13,987 rentable square feet of space located on the second (2nd)
floor of the Building, and (iii) those certain premises (the “Second Expansion
Premises”) known as Suite 125 and consisting of approximately 7,000 rentable
square feet of warehouse space located on the first (1st) floor of the Building
(the Original Premises, the First Expansion Premises and the Second Expansion
Premises are, collectively, the “Existing Premises”).

 

B.                                     Tenant desires to terminate its
month-to-month lease of the Second Expansion Premises and further expand the
Existing Premises to include a total of 17,287 rentable square feet of space
consisting of the remainder of the first (1st) floor of the Building (which
17,287 rentable square feet of space includes the Second Expansion Premises and
shall hereinafter be referred to, collectively, as the “Third Expansion
Premises”), and to make other modifications to the Lease, and in connection
therewith, Landlord and Tenant desire to amend the Lease on such terms and
conditions as are hereinafter provided.

 

A G R E E M E N T

 

NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows.

 

1.                                       Terms.  All undefined terms when used
herein shall have the same respective meanings as are given such terms in the
Lease unless expressly provided otherwise in this Third Amendment.

 

KILROY REALTY

Pacific Corporate Center

[Third Amendment - Favrille, Inc.]

 

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2.                                       Termination of Second Amendment.  Upon
the full execution and delivery of this Third Amendment, Tenant’s month-to-month
lease of the Second Expansion Premises shall be terminated and the Second
Amendment shall be of no further force and effect.

 

3.                                       Third Expansion Premises.  Effective as
of  the date which is the earlier to occur of (i) the date Tenant commences
business in the Third Expansion Premises, and (ii) the date of substantial
completion of the “Landlord Work” (as that term is defined in Section 5, below),
which date is anticipated to be August 1, 2005 (the “Third Expansion Premises
Commencement Date”), Tenant shall lease from Landlord and Landlord shall lease
to Tenant the Third Expansion Premises.  Consequently, effective upon the Third
Expansion Premises Commencement Date, the “Premises,” as that term is defined in
the Lease, shall consist of the Original Premises, the First Expansion Premises
and the Third Expansion Premises.  Landlord and Tenant hereby acknowledge and
agree that the rentable square footage of the Third Expansion Premises shall be
as set forth herein and shall not be subject to re-measurement or modification.

 

4.                                       Third Expansion Term.  Tenant shall
lease the Third Expansion Premises for a period of five (5) years (the “Third
Expansion Term”).  The Third Expansion Term shall commence upon the Third
Expansion Premises Commencement Date and shall expire on the day immediately
preceding the fifth (5th) anniversary of the Third Expansion Premises
Commencement Date; provided, however, if the Third Expansion Premises
Commencement Date shall be other than the first day of a calendar month, then
the Third Expansion Term shall expire on the last day of the month in which the
fifth (5th) anniversary of the Third Expansion Premises Commencement Date occurs
(as applicable, the “Third Expansion Term Expiration Date”).

 

5.                                       Rent.

 

4.1                                 Base Rent.  Commencing on the Third
Expansion Premises Commencement Date and continuing throughout the Third
Expansion Term, Tenant shall pay Annual Base Rent for the Third Expansion
Premises as set forth below:

 

Period During Third
Expansion Term

 

Annual
Base Rent

 

Monthly
Installment
of Base Rent

 

Approximate Monthly Base
Rental Rate Per Rentable
Square Foot of the Third
Expansion Premises

 

Year 1

 

$

162,000.00

 

$

13,500.00

* 

$

0.781

 

 

 

 

 

 

 

 

 

 

 

 

Year 2

 

$

167,670.00

 

$

13,972.50

 

$

0.808

 

 

 

 

 

 

 

 

 

 

 

 

Year 3

 

$

173,538.48

 

$

14,461.54

 

$

0.837

 

 

 

 

 

 

 

 

 

 

 

 

Year 4

 

$

179,612.28

 

$

14,967.69

 

$

0.866

 

 

 

 

 

 

 

 

 

 

 

 

Year 5

 

$

185,898.73

 

$

15,491.56

 

$

0.896

 

 

*                 Notwithstanding anything to the contrary set forth in this
Section 4.1, the Monthly

 

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Installment of Base Rent for Year 1 of the Third Expansion Term was agreed upon
by Landlord and Tenant. In all subsequent years during the Third Expansion Term,
the Monthly Installment of Base Rent was calculated using three and ½ percent
(3.5%) annual increases over the previous year’s Monthly Installment of Base
Rent. For all periods during the Third Expansion Term, the Approximate Monthly
Base Rental Rate Per Rentable Square Foot of the Third Expansion Premises was
calculated by dividing the Monthly Installment of Base Rent by the actual square
footage of the Third Expansion Premises (i.e., 17,287 rentable square feet).

 

4.2                                 Additional Rent.  Except as specifically set
forth in this Section 4.2, during the Third Expansion Term, Tenant shall pay
Tenant’s Share of Direct Expenses for the Third Expansion Premises in accordance
with the terms of Article 4 of the Lease and this Third Amendment. 
Notwithstanding anything to the contrary set forth in the Lease, as hereby
amended, for purposes of calculating the amount of Tenant’s Share of Direct
Expenses which Tenant shall pay in connection with the Third Expansion Premises,
Tenant’s Share shall equal 21.763%.

 

6.                                       Improvements in the Third Expansion
Premises.  Except as provided herein, Landlord shall not be obligated to provide
or pay for any improvement work or services related to the improvement of the
Third Expansion Premises, and Tenant shall accept the Third Expansion Premises
in its presently existing, “as-is” condition.  Notwithstanding the foregoing,
Landlord shall, at Landlord’s sole cost and expense:  (i) re-carpet the carpeted
areas of the Third Expansion Premises , and (ii) re-paint the interior painted
walls of the Third Expansion Premises (the foregoing items (i) and (ii) shall be
known collectively as the “Landlord Work”).  All such Landlord Work shall be
completed to Landlord’s “building standard.”  Landlord and Tenant hereby agree
that, except for the Landlord Work, any Alterations constructed in the Third
Expansion Premises shall be completed pursuant to the terms and conditions of
Article 8 of the Office Lease.

 

7.                                       Parking.  Commencing on the Third
Expansion Premises Commencement Date, and continuing throughout the remainder of
the Third Expansion Term, Tenant shall be entitled to use, without charge, three
(3) unreserved parking spaces per 1,000 rentable square feet of the Third
Expansion Premises.  Tenant’s use of such additional parking spaces shall be
subject to all of the terms and condition of Article 28 of the Lease.

 

8.                                       Tenant’s Signage.  Commencing on the
Third Expansion Premises Commencement Date, and continuing throughout the
remainder of the Third Expansion Term, Tenant shall have the right, at Tenant’s
sole cost, to install Tenant’s name and/or logo on one (1) additional slot on
the Building Monument Sign.  The rights granted to Tenant in this Section 7
shall be subject to all of the terms and condition of Article 23 of the Lease.

 

9.                                       Security Deposit.  Notwithstanding any
contrary provision of the Lease, as of the Third Expansion Premises Commencement
Date, the Security Deposit held by Landlord shall be increased to equal One
Hundred Sixty-Six Thousand Eighteen and 27/100 Dollars ($166,018.27).  Landlord
and Tenant acknowledge that Tenant has previously delivered to Landlord and
Landlord currently holds the sum of One Hundred Fifty-Two Thousand Five Hundred
Eighteen and 27/100 Dollars ($152,518.27) as security for the faithful
performance by Tenant of the

 

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terms, covenants and conditions of the Lease.  Concurrent with Tenant’s
execution and delivery of this Third Amendment to Landlord, Tenant shall deposit
with Landlord an amount equal to Thirteen Thousand Five Hundred and No/100
Dollars ($13,500.00) to be held by Landlord as part of the Security Deposit. 
The L-C Amount shall not be affected by this Third Amendment.

 

10.                                 Brokers.  Landlord and Tenant hereby warrant
to each other that they have had no dealings with any real estate broker or
agent in connection with the negotiation of this Third Amendment except CB
Richard Ellis, Inc. and Colliers International (the “Brokers”), and that they
know of no other real estate broker or agent who is entitled to a commission in
connection with this Third Amendment.  Each party agrees to indemnify and defend
the other party against and hold the other party harmless from any and all
claims, demands, losses, liabilities, lawsuits, judgments, and costs and
expenses (including, without limitation, reasonable attorneys’ fees) with
respect to any leasing commission or equivalent compensation alleged to be owing
on account of the indemnifying party’s dealings with any real estate broker or
agent other than the Brokers.  The terms of this Section 9 shall survive the
expiration or earlier termination of this Third Amendment.

 

11.                                 Tenant’s Right of First Refusal.  Landlord
and Tenant hereby acknowledge and agree that, commencing on the Third Expansion
Premises Commencement Date, and continuing thereafter for the remainder of the
Lease Term, the terms of Section 1.3 of the Lease (Right of First Refusal) shall
not be applicable to the Third Expansion Premises and, therefore, Section 1.3 of
the Lease shall be null and void and of no force or effect with respect to the
Third Expansion Premises.

 

12.                                 No Further Modification.  Except as
specifically set forth in this Third Amendment, all of the terms and provisions
of the Lease shall remain unmodified and in full force and effect.  In the event
of any conflict between the terms and conditions of the Lease and the terms and
conditions of this Third Amendment, the terms and conditions of this Third
Amendment shall prevail.

 

[signature page to follow]

 

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Third Amendment to be
executed on the day and date first above written.

 

 

“LANDLORD”:

 

 

 

 

 

KILROY REALTY, L.P.,

 

 

a Delaware limited partnership

 

 

 

 

 

By:

Kilroy Realty Corporation,

 

 

 

a Maryland corporation,

 

 

 

General Partner

 

 

 

 

 

By:

/s/ Jeffrey C. Hawken

 

 

 

 

 

 

 

 

 

Its:

Executive Vice President & COO

 

 

 

 

 

 

By:

/s/ Nadine K. Kirk

 

 

 

 

 

 

 

 

 

Its:

VP – Legal Administration

 

 

 

 

 

 

 

 

 

 

 

“TENANT”:

 

 

 

FAVRILLE, INC.,

 

a Delaware corporation

 

 

 

By:

/s/ Tamara A. Seymour

 

 

 

 

 

 

 

Its:

Chief Financial Officer

 

 

 

 

 

By:

/s/ John P. Longenecker

 

 

 

 

 

 

 

Its:

President & CEO

 

 

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