**Exhibit 10.19**

 

**THIRD AMENDMENT TO LEASE**

**(Creekside)**

 

THIS THIRD AMENDMENT TO LEASE (“**ThirdAmendment**”) is made and entered into as of the 30thday of July, 2004, by and between SORRENTO VALLEY ROAD, LLC, a Delaware limitedliability company (“**Landlord**”) andWEBSENSE, INC., a Delaware corporation (“**Tenant**”).

 

RECITALS:

 

A.                  Legacy-RECPSorrento OPCO, LLC, a Delaware limited liability company (“**Original Landlord**”) and Tenant entered intothat certain Office Lease dated as of April 19, 2002  (the “**OriginalLease**”), as amended by (i) that certain First Amendment to Leasedated as of October 1, 2002 by and between Original Landlord and Tenant (the “**First Amendment**”), and (ii) that certain Second Amendment to Lease dated as ofApril 30, 2003 by and between Tenant and Landlord (as successor- in- interestin the Lease to Original Landlord) (“**SecondAmendment**”), wherebyLandlord leased to Tenant and Tenant leased from Landlord certain office spacelocated in (i) that certain building located and addressed at 10240 SorrentoValley Road, San Diego, California (the “**Building**”), and (ii) that certain buildinglocated and addressed at 10220 Sorrento Valley Road, San Diego, California  (the “**10220Building**”).  The Original Lease, as amended by the FirstAmendment and the Second Amendment, may be referenced to herein as the “**Lease**.”

 

B.                   By this ThirdAmendment, Landlord and Tenant desire to expand the Existing Premises toinclude the Expansion Space (as such terms are defined below) and to otherwisemodify the Lease as provided herein.

 

C.                   Unlessotherwise defined herein, capitalized terms as used herein shall have the samemeanings as given thereto in the Lease.

 

NOW, THEREFORE, in consideration of the foregoing recitals and themutual covenants contained herein, and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereto hereby agree as follows:

AGREEMENT:

 

1.                    TheExisting Premises.  Landlord andTenant hereby acknowledge that pursuant to the Lease, Landlord currently leasesto Tenant and Tenant currently leases from Landlord (A) all of the office spacein the Building containing 64,117 rentable square feet consisting of (i) 51,032rentable square feet located on the first (1st), second (2nd)and third (3rd) floors of the Building and known as Suites 125, 150,200 and 300 (the “**Initial Premises**”),as outlined on Exhibit “A” to the Original Lease, and (ii) 13,085 rentablesquare feet located on the first (1st) floor of the Building andknown as Suite 170 (the “**Must Take Space**”),as outlined on Exhibit “A-1” to the Original Lease; and (B) that certain spacelocated on the first (1st) floor of the 10220 Building located inthe Project known as Suite 175 and containing approximately 4,617 rentablesquare feet (the “**Prior Expansion Space**”), as outlined on Exhibit “A-2” tothe Original Lease.  The InitialPremises, the Must Take Space and the Prior Expansion Space are collectivelyreferred to herein as the “**Existing Premises**”,which Existing Premises contains a total of 68,734 rentable square feet.

 

2.                    Expansionof the Existing Premises.  All of thespace located in the 10260 Building located in the Project, as outlined on theplan attached hereto as Exhibit “A” and made a part hereof, may be referred toherein as the “**Expansion Space**.”  The Expansion Space contains approximately36,985 rentable square feet.  Subject tosatisfaction of the Contingency described in Section 13 below, effective as ofDecember 30, 2004 (“**Expansion SpaceCommencement Date**”), Tenant shall lease from Landlord and Land lordshall lease to Tenant the Expansion Space. Accordingly, effective upon the Expansion Space Commencement Date, theExisting Premises shall be increased to include the Expansion Space.  Landlord and Tenant hereby agree

 

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that suchaddition of the Expansion Space to the Existing Premises shall, effective as ofthe Expansion Space Commencement Date, increase the number of rentable squarefeet leased by Tenant in the Project to a total of 105,719 rentable square feet.  Effective as of the Expansion SpaceCommencement Date, except as otherwise described herein, all references to the “**Premises**” in this Third Amendment and inthe Lease shall mean and refer to the Existing Premises as expanded by theExpansion Space.

 

3.                    New Term.  The Lease Expiration Date of December 31,2007 shall be extended such that the Lease shall, unless sooner terminatedpursuant to the Lease or as may be extended pursuant to the Extension OptionRider attached to the Lease, terminate on December 31, 2008 (“**New Expiration Date**”).  The Term for Tenant’s lease of the ExpansionSpace (“**Expansion Space Term**”)shall commence on the Expansion Space Commencement Date and shall expireco-terminously with all other space leased by Tenant in the Project on the NewExpiration Date (unless sooner terminated pursuant to the Lease or as may beextended pursuant to the Extension Option Rider attached to the Lease).

 

4.                    MonthlyBase Rent for the Existing Premises and the Expansion Space.

 

4.1.               Monthly BaseRent for Existing Premises.  Duringthe period until December 31, 2007, Tenant shall continue to pay monthly BaseRent for the Existing Premises pursuant to the terms of the Lease.  Commencing as of January 1, 2008 andcontinuing until the New Expiration Date, Tenant shall pay, in accordance withthe provisions of this Section 4.1, monthly Base Rent for the Existing Premises(in addition to the monthly Base Rent due and payable by Tenant for theExpansion Space (as provided in Section 4.2 below) and in addition to all othercharges and Additional Rent payable by Tenant for the Existing Premises underthe Lease including, but not limited to, Tenant’s Share of Direct Expenses) asfollows:

 
| **Period**                | ** ** | **Monthly Base Rent** | ** ** | **Monthly Base Rent  per rentable square feet  of Existing Premises** | ** ** |
|---------------------------|------------|-----------------------|------------|-----------------------------------------------------------------------|------------|
|                      |       |                  |       |                                                                  |       |
| 01/01/08 –  12/31/08 |       | $                     | 115,473.12 |                                                                  | $          | 1.68 |   |
|                           |            |                       |            |                                                                       |            |  |  |

 

4.2.               Monthly BaseRent for the Expansion Space.  Duringthe Expansion Space Term (i.e., the period commencing as of the Expansion SpaceCommencement Date and continuing until the New Expiration Date), Tenant shall,subject to Section 5 below, pay, in accordance with the provisions of thisSection 4.2, monthly Base Rent for the Expansion Space (in addition to themonthly Base Rent due and payable by Tenant for the Existing Premises (as providedin Section 4.1 above) and in addition to all other charges and Additional Rentpayable by Tenant for the Expansion Space under the Lease, including, but notlimited to, Tenant’s Share of Direct Expenses) as follows:

 
| **Months of Expansion  Space Term** | ** ** | **Monthly Base Rent** | ** ** | **Monthly Base Rent  per rentable square  feet of Expansion Space** | ** ** |
|-------------------------------------|------------|-----------------------|------------|---------------------------------------------------------------------|------------|
|                                |       |                  |       |                                                                |       |
| 1-12                                |       | $                     | 46,231.25  |                                                                | $          | 1.25 |   |
| 13-24                               |       | $                     | 47,710.65  |                                                                | $          | 1.29 |   |
| 25-36                               |       | $                     | 49,559.90  |                                                                | $          | 1.34 |   |
| 37-New  Expiration Date             |       | $                     | 51,409.15  |                                                                | $          | 1.39 |   |

 

5.                    Base RentAbatement for Expansion Space. Notwithstanding anything to the contrary contained herein and providedthat Tenant faithfully performs all of the terms and conditions of the Lease(as modified by this Third Amendment), Landlord hereby agrees to abate Tenant’sobligation to pay Tenant’s monthly Base Rent for the Expansion Space for thefirst (1st) and second (2nd) full months of the ExpansionSpace Term (for the Expansion Space only). During such abatement period, Tenant shall still be responsible for thepayment of all of its other monetary obligations under the Lease (as modifiedby this Third Amendment).  In the eventof a default by Tenant under the terms of the Lease (as modified by this ThirdAmendment) that results in early termination pursuant to the provisions ofArticle 19 of the Original Lease, then as a part of the recovery set forth inArticle 19 of the Original Lease, Landlord shall be entitled to the recovery ofthe monthly Base Rent that was abated under the provisions of this Section 5.

 

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6.                    Tenant’sShare of Direct Expenses. Notwithstanding anything to the contrary in the Lease, during theExpansion Space Term, Tenant’s Share of Direct Expenses for the Expansion Spaceonly (with respect to the Direct Expenses for the 10260 Building) shall be onehundred percent (100%).

 

7.                    Conditionof Premises and Expansion Space; New Refurbishment Allowance.

 

7.1.               Condition ofPremises and Expansion Space. Subject to Sections 7.3 and 7.4 below, Tenant hereby agrees to acceptthe Expansion Space in its “as- is” condition and Tenant hereby acknowledgesthat Landlord shall not, except as otherwise provided below, be obligated toprovide or pay for any improvement work or services related to the improvementof the Expansion Space; provided, however, that Landlord agrees to deliver theExpansion Space to Tenant clean of debris and with any Hazardous Materialsspills cleaned up and free and clear of all prior tenants and their personalproperty.  Except as otherwise providedherein, Tenant also acknowledges that Landlord has made no representation orwarranty regarding the condition of the Expansion Space.  Concurrent with the execution of this ThirdAmendment or promptly thereafter, Landlord shall, to the extent in Landlord’spossession as of the date hereof, provide Tenant with “as built” drawings forthe Expansion Space, which may include dimensioned Blue Line Drawings and/orCAD (.dwg) files of the base building floor plan, including mechanical,electrical, plumbing and fire life safety systems.

 

7.2.               NewRefurbishment Allowance.

 

7.2.1            Refurbishment ofPremises.  Notwithstanding anythingto the contrary contained herein, Tenant shall be entitled to renovate thethen-existing tenant improvements in the Premises (including the ExistingPremises, the Expansion Space and any additional space subsequently leased byTenant) and, subject to Landlord’s approval, the Common Areas, all inaccordance with this Section 7.2 and otherwise in accordance with the terms andprovisions of Article 8 of the Original Lease. In connection therewith, Tenant shall, commencing as of the ExpansionSpace Commencement Date (and regardless of whether the costs were actuallyincurred prior to or after the Expansion Space Commencement Date), be entitledfrom time to time to a tenant refurbishment allowance (the “**New Refurbishment Allowance**”) in an amount up to, but notexceeding, Four Hundred Eighty Thousand Eight Hundred Five Dollars($480,805.00) for the costs relating to the design and construction of certainrenovations to the then-existing tenant improvements in the Premises that are(except as otherwise provided below) to be permanently affixed to the Premises,including, but not limited to, voice and data cabling and security system(s)(collectively, the “**Refurbished Improvements**”), except that up to One HundredEighty-Four Thousand Nine Hundred Twenty-Five Dollars ($184,925.00)) shall bemade available to Tenant, at Tenant’s discretion, (A) to help Tenant pay forthe actual and documented costs incurred by Tenant for (i) for the purchase andinstallation in the Premises of any furniture, fixtures and equipment, (ii) tohelp Tenant pay for the actual and documented costs for the fabrication andinstallation of Tenant’s Exterior Signage (described in Section 17 below),(iii) to help Tenant pay for the actual and documented costs incurred by Tenantfor moving into the Expansion Space and (B) as a credit against the monthlyBase Rent due and payable by Tenant under the Lease, as modified by this ThirdAmendment (collectively, the “**Other Costs**”).  After the Expansion Space Commencement Date,Landlord shall disburse from the New Refurbishment Allowance the availableportion thereof to pay for the Other Costs actually incurred by Tenant, whetherincurred prior to or after the Expansion Space Commencement Date (or in thecase of Base Rent, to be incurred by Tenant) within thirty (30) days afterLandlord has received Tenant’s written request for disbursement together with(with respect to furniture, fixtures and equipment, signage and relocationcosts) copies of invoices from third parties evidencing the amount of suchOther Costs to be paid by Landlord, but Landlord shall have no obligation todisburse any portion of the New Refurbishment Allowance to pay for the OtherCosts until after (1) the Expansion Space Commencement Date has occurred, and(2) the Refurbished Improvements have been completed and the final coststhereof determined.  Notwithstandinganything in this Section 7 to the contrary, Landlord shall, subject to theprocedures set forth in Section 7.2.1.2 below, make disbursements from the NewRefurbishment Allowance pertaining to any New Refurbishment Allowance Itemsthat are scheduled to take longer than sixty (60) days to complete, on amonthly progress payment basis as costs are incurred by Tenant for each suchNew Refurbishment Allowance Item.  In noevent shall Landlord be obligated to make disbursements under this Section 7.2in a total amount which exceeds the New Refurbishment Allowance nor prior tothe Expansion Space Commencement Date. Notwithstanding anything to the contrary contained in this Section 7,the

 

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parties heretoagree that Tenant may use all or any portion of the New Refurbishment Allowanceon all or any portion of the Premises leased, or subsequently leased by Tenant,and shall not be limited to any particular portion of the Premises.

 

7.2.1.1        New RefurbishmentAllowance Items.  The NewRefurbishment Allowance shall be disbursed by Landlord following completion ofthe Refurbished Improvements (except as otherwise provided in Section 7.2.1above) for the following items and costs only (collectively, the “**New Refurbishment Allowance Items**”):

 

(A)               Payment of the feesof the architect and engineer(s) retained by Tenant (if any) in connection withthe review of the plans and specifications prepared for the RefurbishedImprovements, including preliminary space plans, finish plans andspecifications, and architectural and engineering plans and specifications(including “as-built” drawings) (collectively, the “**Refurbishment Drawings**”);

 

(B)                The payment ofplan check, permit and license fees and other costs for governmental approvalrelating to construction of the Refurbished Improvements (including permits orfees required by the City of San Diego and other applicable jurisdictions);

 

(C)                The cost ofconstruction of the Refurbished Improvements, including, without limitation,testing and inspection costs, trash removal costs, and contractors’ fees, laborfees and general conditions;

 

(D)                The cost of anychanges in the base, shell and core of the Project when such changes arerequired by the Refurbishment Drawings, such cost to include all directarchitectural and/or engineering fees and expenses incurred in connectiontherewith;

 

(E)                 The cost of anychanges to the Refurbishment Drawings or Refurbished Improvements required byapplicable laws and building codes;

 

(F)                 Sales and usetaxes and Title 24 fees;

 

(G)                Landlord’sSupervision Fee (as defined below); and

 

(H)                Subject to thelimitations set forth in Section 7.2.1 above, the Other Costs.

 

7.2.1.2        Disbursement of NewRefurbishment Allowance.  Providedthat Tenant is not in default on any of its monetary or material non-monetaryobligations under the Lease (as modified by this Third Amendment) beyond theexpiration of all applicable notice and cure periods, upon completion of eachRefurbished Improvement (or when a progress payment is required pursuant toSection 7.2.1 above), Landlord shall make a disbursement of the NewRefurbishment Allowance for New Refurbishment Allowance Items for the benefitof Tenant and shall authorize the release of monies for the benefit of Tenantas follows:

 

(A)               Disbursement.  Tenant shall deliver to Landlord:  (i) if Tenant is utilizing a generalcontractor for the specific Refurbished Improvement, a request for payment ofTenant’s general contractor (“**Contractor**”),which Contractor shall be retained by Tenant and shall be subject to Landlord’sreasonable prior written approval, and which request shall be an Applicationfor Payment (AIA Form G702); (ii) invoices from all subcontractors, laborers,materialmen and suppliers used by Tenant in connection with the RefurbishedImprovements (such subcontractors, laborers, materialmen and suppliers, and theContractor, if any, may be known collectively as “**Tenant’s Agents**”), for labor rendered and materials deliveredto the Premises for the Refurbished Improvements; and (iii) executedunconditional mechanics’ lien releases from all of Tenant’s Agents which shallcomply with the appropriate provisions, as reasonably determined by Landlord,of California Civil Code Section 3262(d) and either Section 3262(d)(3) orSection 3262(d)(4).  Promptly thereafter,assuming Landlord receives all of the applicable information described in items(i) through (iii), above, Landlord shall, after the Expansion SpaceCommencement Date, and from time to time as each Refurbished Improvement iscompleted (or when a progress payment is required pursuant to Section 7.2.1above) deliver a check made payable to Tenant in payment of the amounts so

 

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requested byTenant (but in no event to exceed the amount of the New RefurbishmentAllowance).  Unless otherwise indicatedby Landlord in writing provided concurrently with or prior to Landlord’spayment (along with reasonable written detail describing such non-approval ornon-acceptance), Landlord’s payment of such amounts shall not be deemedLandlord’s approval or acceptance of the work furnished or materials suppliedas set forth in Tenant’s payment request; and

 

(B)                Other Terms.  Landlord shall only be obligated to makedisbursements from the New Refurbishment Allowance to the extent costs areincurred by Tenant for New Refurbishment Allowance Items.  All New Refurbishment Allowance Items forwhich the New Refurbishment Allowance has been made available shall be deemedLandlord’s property (unless, as described below, Landlord elects to requireTenant to remove the same upon the expiration or sooner termination of theLease (in which case Tenant shall, at Tenant’s sole cost and expense, removethe same and repair any damage to the Premises and/or the Project caused bysuch removal)).  Except as otherwiseprovided in this Section 7, in no event shall Tenant be entitled to any creditfor any unused portion of the New Refurbishment Allowance.  All drafts of the Refurbishment Drawingsshall be subject to Landlord’s prior written approval, which approval shall notbe unreasonably withheld.  WhenRefurbishment Drawings are approved by Landlord, Landlord must inform Tenant inwriting if Landlord will require Tenant to remove all or any portion of the NewRefurbishment Allowance Items depicted therein upon the expiration or earliertermination of the Lease.  Landlordacknowledges that Tenant intends to custom design its space and may usematerials which are not Building standard; provided, however, that the use ofany such non-Building standard materials shall be subject to Landlord’s priorwritten approval, which approval shall not be unreasonably withheld.  In addition, all of Tenant’s Agents shall besubject to Landlord’s prior written approval (which approval shall not beunreasonably withheld).  At theconclusion of construction of the Refurbished Improvements, Tenant shalldeliver to Landlord two (2) sets of sepias of as-built drawings for theRefurbished Improvements.

 

7.2.1.3        No Rent Abatement.  Tenant acknowledges that the work to beperformed by Tenant pursuant to this Section 7.2 above shall be performedduring the Expansion Space Term, that Tenant shall be entitled to (but shallnot be obligated to) conduct business throughout the course of construction ofsuch renovations and that Tenant shall not be entitled to any abatement ofrent, nor shall Tenant be deemed to be constructively evicted from thePremises, as a result of the construction of such renovations.

 

7.2.1.4        Landlord SupervisionFee.  Tenant shall pay to Landlord aconstruction supervision and management fee (the “**Landlord’s Supervision Fee**”) in an amount equal to the productof (i) two percent (2%) and (ii) the costs incurred by Tenant to design andconstruct the Refurbished Improvements; provided, however, in no event shallLandlord’s Supervision Fee exceed Five Thousand Dollars ($5,000.00) in theaggregate for all Refurbished Improvements.

 

7.3.               Acceptance ofExpansion Space.  In the event thatas of the date of execution of this Third Amendment, (A) the Systems andEquipment of the Building located outside of the Expansion Space, or (B) thestructural components of the Building and the common areas of the Building(including the lobby and restrooms on the ground floor of the Building) or RealProperty located outside of the Expansion Space, each in their conditionexisting as of such applicable date, do not comply with applicable Laws(including Environmental Laws, as defined in Section 5.2 of the Lease) ineffect as of such date, as such noncompliance shall be determined on anunoccupied basis without regard to any improvements to be constructed in theExpansion Space or the Real Property or previously constructed by Tenant in theReal Property, or to Tenant’s use of the Expansion Space and/or the otherportions of the Premises, then Landlord shall be responsible, at its sole cost,which cost shall not be included in Direct Expenses, for correcting any suchnoncompliance.

 

7.4.               Landlord’sRepresentation Regarding Hazardous Materials.  Tenant acknowledges that Landlord has made norepresentation or warranty regarding the condition of the Expansion Space,except as specifically set forth herein. Notwithstanding the foregoing, Landlord hereby represents and warrantsto Tenant that to Landlord’s “actual knowledge” (as such term is defined belowin this Section 7.4), as of the date of execution of this Third Amendment, andbased upon the information contained in the Environmental Report (as such termis defined below in this Section 7.4), copies of which have been delivered byLandlord to

 

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Tenant, theReal Property does not contain any Hazardous Materials in violation ofapplicable Environmental Laws in existence as of the date of execution of thisThird Amendment, except as described in the Environmental Report.  Landlord shall, at its expense (which may beincluded in Operating Expenses to the extent permitted in Article 4 of theOriginal Lease), observe and comply with all applicable Environmental Laws inconnection with Landlord’s activities in or on the Real Property, and inconnection therewith, Landlord, shall not cause any Hazardous Materials to bebrought upon, kept or used in connection with the Real Property by Landlord,its agents, employees or contractors in a manner or for a purpose prohibited byany Environmental Laws in existence as of the date such Hazardous Material isbrought upon, kept or used.  As used inthis Section 7.4, the term “**EnvironmentalReport**” refers to the following report: Phase I EnvironmentalAssessment prepared by SCS Engineers, dated October 2002 and known as File No.01202147.  As used herein, the phrase “**actual knowledge**” shall mean the actual knowledge of Mike Nelson (“**Landlord’s Representative**”), without investigation or inquiryor duty of investigation or inquiry. Landlord’s Representative is making such representation and warranty onbehalf of Landlord and not in such person’s individual capacity and, as aresult, Landlord (and not such individual) shall be liable in the event of abreach of this representation.  Notwithstandinganything to the contrary contained in this Section 7.4, Landlord, at Landlord’ssole cost, shall, prior to the Expansion Space Commencement Date, beresponsible for the removal of Hazardous Materials in the Expansion Space thatare in violation of applicable Environmental Laws.

 

8.                    Parking.  Effective as of the Expansion SpaceCommencement Date and continuing throughout the Expansion Space Term, Tenantshall have the right to use an additional one hundred seven (107) unreservedparking spaces for use in the Parking Facilities serving the 10260 Building(the “**Additional Parking Spaces**”).  Tenant’s use of such additional parkingspaces shall be in accordance with, and subject to, all of the provisions ofArticle 23 of the Original Lease. Notwithstanding anything to the contrary in the Lease, Landlordacknowledges and agrees that all of Tenant’s parking rights under the Lease maybe utilized by any Transferee (as defined in Article 14 of the Original Lease)approved by Landlord pursuant to the terms and provisions of Article 14 of theOriginal Lease; provided, however, that Tenant shall pay to Landlord fiftypercent (50%) of any parking rent (if any) received by Tenant from any suchTransferee.  For purposes hereof, parkingrent shall also be deemed to include any component of the rent payable by anysuch Transferee on account of such Transfer that is in lieu of parking rentthat would otherwise be payable by such Transferee to Tenant on account of suchTransferee’s utilization of Tenant’s parking rights under the Lease.  Landlord acknowledges and agrees that visitorand guest parking spaces shall be within designated short-term visitor parkingareas adjacent to the 10260 Building; provided, however, that the cost to designateany spaces as visitor parking shall be at Tenant’s sole cost and expense (andwhich cost may be deducted from the New Refurbishment Allowance provided toTenant pursuant to Section 7.2 above). Landlord further acknowledges and agrees that there shall be no parkingstalls in front of the main entrance to the 10260 Building designated for anytenant other than Tenant or as a visitor parking space.  All of Tenant’s parking rights under theLease (as modified by this Third Amendment) shall be at no additional cost toTenant.  Landlord acknowledges and agreesthat in the event that Tenant reasonably requires additional parking spaces forits employees and/or visitors that Tenant shall have the right, at Tenant’ssole cost and expense, to institute a parking service and/or operationspertaining to Tenant’s allotment of parking spaces under the Lease (such astandem or valet service) reasonably approved by Landlord; provided, however,that in no event shall any such parking service unreasonably interfere in anyway whatsoever with the parking rights of any other tenant of the Project orcause Landlord to be in default under any lease of space in the Project.

 

9.                    SecurityDeposit.  Tenant has previouslydeposited with Landlord One Hundred Four Thousand Three Hundred Eighty-Two and48/100 Dollars ($104,382.48) as a Security Deposit under the Lease.  Landlord shall continue to hold the SecurityDeposit in accordance with the terms and conditions of Article 20 of theOriginal Lease.

 

10.                 Brokers.  Each party represents and warrants to theother that, except for Legacy Partners Commercial, Inc. (“**Landlord’s Broker**”) and Orion PropertyPartners, Inc. (“**Tenant’s Broker**”),no broker, agent or finder negotiated or was instrumental in negotiating orconsummating this Third Amendment.  Eachparty further agrees to defend, indemnify and hold harmless the other partyfrom and against any claim for commission or finder’s fee by any entity (otherthan Landlord’s Broker and Tenant’s Broker) who claims or alleges that theywere retained

 

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or engaged bythe first party or at the request of such party in connection with this ThirdAmendment.

 

11.                 IntentionallyOmitted.

 

12.                 SigningAuthority.  Each individual executingthis Third Amendment on behalf of Tenant hereby represents and warrants thatTenant is a duly formed and existing entity qualified to do business in theState of California and that Tenant has full right and authority to execute anddeliver this Third Amendment and that each person signing on behalf of Tenantis authorized to do so.

 

13.                 Contingency.  Notwithstanding anything herein to thecontrary, Landlord and Tenant acknowledge and agree that the rights andobligations of Landlord and Tenant under this Third Amendment are expresslyconditioned upon the vacation, surrender and delivery of the Expansion Spaceleased by KLA-Tencor Corporation, a Delaware corporation (“**KLA-Tencor**”) (the existing tenant of the10260 Building) when and as required under the existing lease for the spaceleased by KLA-Tencor, which existing lease is scheduled to expire on December29, 2004 (collectively, the “**Contingency**”);provided, however, that (i) Landlord will use commercially reasonable effortsto enforce and exercise its rights under the existing lease with KLA-Tencorsuch that the existing lease terminates as of December 29, 2004, (ii) theExpansion Space Commencement Date shall be delayed by one (1) day for every dayof delay in satisfaction of the Contingency beyond December 29, 2004, and (iii)in the event that the Contingency is not satisfied by February 15, 2005, Tenantmay terminate this Third Amendment (but not the Lease) by giving written noticeto Landlord.  Upon such termination, thisThird Amendment shall be null and void and of no further force or effect.

 

14.                 Tenant’s EarlyCancellation Right.  Tenant shallhave a one (1) time right to terminate and cancel the Lease as it pertains tothe entire Premises effective as of the December 31, 2007 (“**Termination Date**”), which right iscontingent upon Tenant paying to Landlord the Termination Consideration (asdefined below) in a timely manner in accordance with the following provisionsof this Section 14.  To exercise suchtermination right, Tenant must deliver to Landlord, on or before December 31,2006, written notice of Tenant’s exercise of such termination right (the “**Termination Notice**”).  As used herein, the “**Termination Consideration**” shall mean anamount equal to Three Hundred Twenty-Five Thousand Dollars ($325,000.00), lessany unused portion of the New Refurbishment Allowance that has not beendisbursed by Landlord to Tenant.  TheTermination Consideration shall be payable by Tenant on or before that datewhich is thirty (30) days after the date Tenant delivers the Termination Noticeto Landlord.  If Tenant timely andproperly exercises its termination option in this Section 14, the Lease shallexpire at midnight on the Termination Date (except for those terms andprovisions of the Lease that, by their terms, expressly survive the expirationor sooner termination of the Lease), and Tenant shall be required to surrenderthe Premises to Landlord on or before the Termination Date in accordance withthe applicable provisions of the Lease. The termination right set forth in this Section 14 is personal to theoriginal Tenant executing this Third Amendment (“**Original Tenant**”) (and to any Affiliate to which OriginalTenant’s entire interest in the Lease has been assigned pursuant to Section14.7 of the Original Lease) and may only be exercised by the Original Tenant ifthe Original Tenant is not in monetary default in the payment of Base Rent ormaterial non-monetary default under the Lease (as modified by this ThirdAmendment) beyond the expiration of all applicable notice and cure periods asof the date Tenant delivers the Termination Notice or as of the TerminationDate.

 

15.                 Amendment toLease.  Landlord may deliver toTenant an amendment confirming the Expansion Space Commencement Date in a formsubstantially similar to that attached hereto as Exhibit “B” and made a parthereof at any time after the Expansion Space Commencement Date.  Tenant agrees to execute and return toLandlord said amendment within ten (10) business days after Tenant’s receiptthereof.

 

16.                 CommonOwnership.  Landlord and Tenantacknowledge that it is Landlord’s current intention to cause the ownership ofthe Building (located at 10240 Sorrento Valley Road), the 10220 Building(located at 10220 Sorrento Valley Road) and the 10260 Building (located at10260 Sorrento Valley Road) to be held by the same entity.  If, however, at any time during the LeaseTerm (including the Option Term (if applicable)), Landlord determines toseparate ownership of the three (3) buildings or to separately finance thethree (3) buildings (where the lender requires separate documentation), Tenantagrees, at Landlord’s sole cost and

 

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expense, topromptly after request from Landlord, negotiate in good faith and thereafterexecute commercially reasonable documents in order to separate Tenant’s leaseof the Premises located at such buildings. Any such documentation shall be on the exact same terms as specified inthe Lease (as modified by this Third Amendment) but as applicable to therelevant portion of the Premises.

 

17.                                 ExteriorSignage.

 

17.1.            Tenant’s ExteriorSignage.  Subject to Tenant obtainingthe approval of all applicable governmental entities and Tenant’s compliancewith all applicable Laws and the terms of this Section 17, Tenant shall havethe right, at Tenant’s option, to install, at Tenant’s sole cost and expense,(i) one (1) sign displaying Tenant’s logo and Tenant’s name, “Websense, Inc.,”either in the location of the existing sign for KLA-Tencor or above themain entrance of the 10260 Building in the exact location as shall be mutuallyagreed upon by Landlord and Tenant (the “**Tenant’sNew Building Sign**”), and (ii) monument and directional signs in thegeneral locations of the existing monument/directional signs for KLA-Tencor andin the exact locations as shall be mutually agreed upon by Landlord and Tenant(“**Tenant’s Monument Sign**”).  Tenant’s New Building Sign and Tenant’sMonument Sign are collectively referred to herein as “**Tenant’s Exterior Signage**.”  The graphics, materials, color, design,lettering, lighting, size, specifications, manner of affixing and exactlocation of the Tenant’s Exterior Signage shall be subject to Landlord’sreasonable approval.  Subject to theterms and conditions of this Section 17, Tenant’s New Building Sign will be theonly identification sign on the exterior of the 10260 Building.

 

17.2.            Costs and Expenses.  Tenant shall pay for all costs and expensesrelated to the Tenant’s Exterior Signage, including, without limitation, costsof the design, construction, installation, maintenance, insurance, utilities,repair and replacement thereof.  Tenantshall install and maintain Tenant’s Exterior Signage in compliance with allLaws and subject to the applicable provisions of Articles 8 and 9 of theOriginal Lease.

 

17.3.            Transferability.  The rights to Tenant’s Exterior Signage arepersonal to the Original Tenant and any Affiliate to which Original Tenant’sentire interest in the Lease has been assigned pursuant to Section 14.7 of theLease (but any name change on Tenant’s Exterior Signage to reflect the identityof any such Affiliate assignee shall be subject to Landlord’s prior reasonableapproval), and may not be used by or assigned to anyone else, and shall only beavailable to Tenant when the Original Tenant or such Affiliate assignee, as thecase may be, is in physical occupancy and possession of not less than sixtypercent (60%) of the total rentable square feet of the 10260 Building.  During the period of time that all of Tenant’sExterior Signage is available to Tenant as provided hereinabove, Landlord shallnot place any other tenant identity sign on the exterior of the 10260 Building.

 

17.4.            Maintenance/Removal.  Tenant shall, at Tenant’s sole cost andexpense, keep, maintain and repair Tenant’s Exterior Signage, including theportion of the 10260 Building and/or the Project where Tenant’s ExteriorSignage is located, in good order, repair and first-class condition during theLease Term.  Should Tenant default(pursuant to Section 19.1.2 of the Original Lease) in the performance of suchmaintenance, repairs or replacement, Landlord shall have the right to causesuch work to be performed and to charge Tenant as Additional Rent for the costsof such work.  Upon the expiration orearlier termination of the Lease, or upon any earlier loss of Tenant’s rightsto Tenant’s Exterior Signage pursuant to this Section 17, Tenant shall, atTenant’s sole cost and expense, cause Tenant’s Exterior Signage to be removed,and Tenant shall repair all damage occasioned thereby and restore the affectedareas to their original condition prior to the installation of Tenant’sExterior Signage, normal wear and tear excepted.  If Tenant fails to timely remove Tenant’sExterior Signage and repair and restore the affected areas as provided in theimmediately preceding sentence, then Landlord may perform such work, and allcosts and expenses incurred by Landlord in so performing such work shall bereimbursed by Tenant to Landlord within twenty (20) days after Tenant’s receiptof invoice therefor.  The immediately precedingsentence shall survive the expiration or earlier termination of the Lease.  Tenant shall be responsible for maintaininginsurance on the Tenant’s Exterior Signage as part of the insurance required tobe carried by Tenant pursuant to Section 10.3 of the Original Lease.

 

18.                 Right of FirstOffer to Purchase.  Landlord herebygrants to the Original Tenant, throughout the Lease Term (including the OptionTerm), a one-time right (subject to the terms hereof) of first offer topurchase the buildings in the Project in the event Landlord desires to sell

 

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less than allof the buildings in the Project, together with land area surrounding suchbuildings that are being sold, as determined by Landlord in Landlord’s sole andabsolute discretion (collectively, the “**OfferProperty**”), which right of first offer shall be on the terms andconditions set forth in this Section 18. In no event shall Tenant’s right of first offer to purchase apply in theevent Landlord intends to sell its entire interest in the Project.

 

18.1.            Procedure.  Landlord shall notify Tenant in writing (the “**First Offer Notice**”) when Landlord desiresto sell all or any portion of the Offer Property; provided, however, thatTenant shall not have a right of first offer to the extent Landlord desires tosell any portion of the Offer Property as part of the sale of any otherproperties owned by Landlord.  The FirstOffer Notice shall describe the Offer Property (or portion thereof) thatLandlord intends to sell, together with Landlord’s proposed economic terms andconditions applicable to Tenant’s purchase of the Offer Property (collectively,the “**Purchase Economic Terms**”). Except as otherwise provided in the First Offer Notice, the purchase ofthe Offer Property shall be (i) on an “as- is” basis, with absolutely norepresentations or warranties, express or implied, regarding the condition ornature of the Offer Property and any improvements thereon, (ii) consummatedusing Landlord’s form of purchase and sale agreement (subject, however, tocommercially reasonable changes required by Tenant’s counsel), and (iii)subject to any and all matters of record and conditions affecting title causedby Tenant.  Notwithstanding theforegoing, Tenant’s right of first offer shall not apply in the event Landlorddesires to sell the Offer Property to any existing or future affiliate ofLandlord (which shall mean any entity which controls, is controlled by, or isunder common control with Landlord or any entity resulting from areorganization of or a merger or consolidation with Landlord or any entitywhich acquires, or will acquire (prior to the closing date of the sale of theOffer Property) all or substantially all of the assets of Landlord’s business).

 

18.2.            Procedure forAcceptance.  If Tenant wishes topurchase the Offer Property pursuant to the Purchase Economic Terms describedin the First Offer Notice, then within fifteen (15) days after delivery of theFirst Offer Notice to Tenant (the “**ElectionDate**”), Tenant shall deliver written notice to Landlord (“**Tenant’s Election Notice**”) pursuant towhich Tenant shall elect either to (i) purchase the Offer Property pursuant tothe Purchase Economic Terms set forth in the First Offer Notice; (ii) refuse topurchase the Offer Property, in which event Tenant’s right of first offer setforth herein shall thereupon terminate and be of no further force or effect andLandlord may sell the Offer Property (or any portion thereof) to any entity onany terms Landlord desires; provided, however, that if Landlord intends toenter into a purchase and sale agreement upon Purchase Economic Terms whichare, in the aggregate, materially more favorable to a third (3rd)party buyer than those Purchase Economic Terms proposed by Landlord in the FirstOffer Notice to Tenant, then Landlord shall first deliver written notice toTenant (“**Second Chance Notice**”) providing Tenant with theopportunity to purchase the Offer Property on such more favorable PurchaseEconomic Terms.  For purposes hereof,Purchase Economic Terms shall be materially more favorable to a third party ifsuch Purchase Economic Terms reflect a purchase price less than ninety- fivepercent (95%) of the purchase price for such Offer Property as proposed byLandlord in the First Offer Notice to Tenant. Tenant’s failure to elect to purchase the Offer Property upon such morefavorable Purchase Economic Terms by written notice to Landlord within seven(7) business days after Tenant’s receipt of such Second Chance Notice fromLandlord shall be deemed to constitute Tenant’s election not to purchase suchOffer Property upon such more favorable Purchase Economic Terms, in which casefor a period of twelve (12) months after the date Landlord delivered suchSecond Chance Notice to Tenant, Landlord shall be entitled to sell such OfferProperty to any third (3rd) party on terms no more favorable to the third (3rd)party than those set forth in the Second Chance Notice.  If Landlord does not enter into a purchaseand sale agreement and sell the Offer Property within twelve (12) months afterthat date Landlord delivers such Second Chance Notice to Tenant, then Landlordshall, subject to the limitations set forth above, submit to Tenant a new FirstOffer Notice with respect to any such unsold Offer Property prior to sellingsuch property, in which event the foregoing procedures shall again applyfollowing Tenant’s receipt of such new First Offer Notice.  If Tenant does not so respond in writing toLandlord’s First Offer Notice by the Election Date, Tenant shall be deemed tohave elected the option described in clause (ii) above.  Notwithstanding anything above to thecontrary contained herein, Tenant must elect to exercise its right of firstoffer herein within said fifteen (15) day period with respect to the entireOffer Property identified in the First Offer Notice and may not elect topurchase only a portion thereof.

 

18.3.            ConditionsPrecedent to Effectiveness of Right of First Offer.  Notwithstanding anything to the contrarycontained in this Section 18, Tenant’s exercise of Tenant’s right of firstoffer (and Tenant’s right to thereafter purchase the Offer Property) shall be

 

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effective onlyif all of the conditions precedent set forth hereinbelow are true and correctduring the period commencing upon the date Tenant delivers Tenant’s ElectionNotice to Landlord and continuing until the closing date of such sale of theOffer Property to Tenant, unless Landlord, in Landlord’s sole discretion,elects to waive any such condition precedent in writing:

 

18.3.1  The Lease is in fullforce and effect and Tenant shall not then be in monetary or material non-monetary default under the Lease (as modified by this Third Amendment) afterthe expiration of any applicable notice and cure period; and

 

18.3.2  Tenant shall not haveassigned its interest in the Lease or in the right of first offer (except toany Affiliate to which Original Tenant’s entire interest in the Lease has beenassigned pursuant to Section 14.7 of the Original Lease), it being acknowledgedand agreed that the right of first offer is personal to the Original Tenant andmay not be voluntarily or involuntarily assigned to, or exercised by, any otherperson or entity other than Original Tenant (or any Affiliate to which OriginalTenant’s entire interest in the Lease has been assigned pursuant to Section14.7 of the Original Lease) and only so long as the Original Tenant (or suchAffiliate assignee, as the case may be) is in physical possession and occupancyof no less than eighty- five percent (85%) of the Premises.

 

19.                 Non-Disturbance.  Within sixty (60) days of the full executionand delivery of this Third Amendment by Landlord and Tenant, Landlord shall usegood faith efforts to provide Tenant with a commercially reasonableSubordination, Non-Disturbance and Attornment Agreement from any groundlessors, mortgage holders or lien holders relating to the Expansion Space onthe standard forms utilized by any such ground lessor, mortgage holder or lienholder.

 

20.                 No FurtherModification.  Except as set forth inthis Third Amendment, all of the terms and provisions of the Lease shall remainunmodified and in full force and effect.

 

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IN WITNESS WHEREOF, this Third Amendment has been executed as of theday and year first above written.

 
|   | “Landlord”:                                              |
|--------|--------------------------------------------------------------------|
|   |                                                               |
|   | SORRENTO  VALLEY ROAD, LLC.,  a Delaware limited liability company |
|   |                                                               |   |
|   | By:                                                                | Principal  Life Insurance Company, an Iowa  Corporation, its sole member |
|   |                                                               |   |
|   |                                                               | By: | Principal  Real Estate Investors, LLC, a  Delaware limited liability company, its  authorized signatory |
|   |                                                               |   |   |
|   |                                                               |   | By: | /s/ Troy A.  Koerselman |   |
|   |                                                               |   |   |
|   |                                                               |   | Title: | Investment  Director |   |
|   |                                                               |   |   |
|   |                                                               |   | By: | /s/ Douglas  A. Kintzle |   |
|   |                                                               |   |   |
|   |                                                               |   | Title: | Director-Asset  Management |   |
|   |                                                               |   |
|   | “Tenant”:                                                |
|   |                                                               |   |
|   | WEBSENSE,  INC.,  a Delaware corporation                           |
|   |                                                               |   |
|   | By:                                                                | /s/ Douglas  C. Wride |   |
|   |                                                               | Name: |  Douglas C. Wride |   |
|   |                                                               | Its: | CFO |   |
|   |                                                               |   |
|   | By:                                                                | /s/ John B.  Carrington |   |
|   |                                                               | Name: | John B.  Carrington |   |
|   |                                                               | Its: | Chairman and  CEO |   |
|        |                                                                    |  |  |  |  |  |  |  |  |

 

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**EXHIBIT “A”**

 

**OUTLINE OF EXPANSION SPACE**

 

 

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**EXHIBIT B**

 

**FOURTH AMENDMENT TO LEASE**

 

This FOURTH AMENDMENT TO LEASE (“**FourthAmendment**”) is madeand entered into effective as of                                   ,20    , by and between SORRENTO VALLEY ROAD, LLC, aDelaware limited liability company (“**Landlord**”),and WEBSENSE, INC., a Delaware corporation (“**Tenant**”)

 

RECITALS :

 

A.                  Legacy-RECPSorrento OPCO, LLC, a Delaware limited liability company (“**Original Landlord**”) and Tenant entered intothat certain Office Lease dated as of April 19, 2002  (the “**OriginalLease**”), as amended by (i) that certain First Amendment to Leasedated as of October 1, 2002, by and between Original Landlord and Tenant (the “**First Amendment**”), and (ii) that certain Second Amendment to Lease dated as ofApril 30, 2003, by and between Landlord and Tenant (the “**Second Amendment**”), and (iii) that certainThird Amendment to Lease dated as of July     , 2004 by andbetween Landlord and Tenant (the “**ThirdAmendment**”), wherebyLandlord leased to Tenant and Tenant leased from Landlord certain office spacelocated in those certain buildings located and addressed at 10220, 10240 and10260 Sorrento Valley Road, San Diego, California (collectively, the “**Buildings**”).  The Original Lease, asamended by the First Amendment, the Second Amendment, and the Third Amendment,may be referenced to herein as the “**Lease**”.  Landlord is the successor-in- interest in theLease to Original Landlord.

 

B.                   Except asotherwise set forth herein, all capitalized terms used in this Fourth Amendmentshall have the same meaning as such terms have in the Lease.

 

C.                   Landlord andTenant desire to amend the Lease to confirm the Expansion Space CommencementDate, as hereinafter provided.

 

NOW, THEREFORE, in consideration of the foregoing Recitals and themutual covenants contained herein, and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereto agree as follows:

 

1.                    Confirmationof Expansion Space Commencement Date. The parties hereby confirm that the commencement date for the ExpansionSpace occurred on                            (the “**Expansion Space Commencement Date**”).

 

2.                    No FurtherModification.  Except as set forth inthis Fourth Amendment, all of the terms and provisions of the Lease shallremain unmodified and in full force and effect.

 

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IN WITNESS WHEREOF, this Fourth Amendment to Lease has been executed asof the day and year first above written.

 
|   | “Landlord”:                                              |
|--------|--------------------------------------------------------------------|
|   |                                                               |
|   | SORRENTO  VALLEY ROAD, LLC.,  a Delaware limited liability company |
|   |                                                               |   |
|   | By:                                                                | Principal  Life Insurance Company, an Iowa  Corporation, its sole member |
|   |                                                               |   |
|   |                                                               | By: | Principal  Real Estate Investors, LLC, a  Delaware limited liability company, its  authorized signatory |
|   |                                                               |   |   |
|   |                                                               |   | By: |   |   |
|   |                                                               |   |   |
|   |                                                               |   | Title: |   |   |
|   |                                                               |   |
|   | “Tenant”:                                                |
|   |                                                               |   |
|   | WEBSENSE,  INC.,  a Delaware corporation                           |
|   |                                                               |
|   | By:                                                                |   |   |
|   | Name:                                                              |   |   |
|   | Its:                                                               |   |   |
|   |                                                               |
|   | By:                                                                |   |   |
|   | Name:                                                              |   |   |
|   | Its:                                                               |   |   |
|        |                                                                    |  |  |  |  |  |  |  |  |  |  |

 

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