**Exhibit 10.4**

 

**THIRD AMENDMENT TO LEASE**

 

This Third Amendment toLease (“**Third Amendment**”) is madeand entered into as of the 8th day of July, 2005 by and betweenKILROY REALTY, L.P., a Delaware limited partnership (“**Landlord**”),and FAVRILLE, INC., a Delaware corporation (“**Tenant**”).

 

RECITALS:

 

A.                                   Landlordand Tenant entered into that certain Office Lease dated January 31, 2003(the “**Office Lease**”), as amendedby that certain First Amendment to Lease dated July 7, 2004 (the “**First Amendment**”), and that certain SecondAmendment 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) thosecertain premises (the “**Original Premises**”)known as Suite 150 and consisting of a total of approximately 48,502 rentablesquare feet of space located on the first (1st) andsecond (2nd) floors of the building located at 10421 PacificCenter Court, San Diego, California (the “**Building**”),(ii) those certain premises (the “**FirstExpansion Premises**”) consisting of 13,987 rentable square feet ofspace located on the second (2nd) floor of the Building, and (iii)those certain premises (the “**Second ExpansionPremises**”) known as Suite 125 and consisting of approximately 7,000rentable square feet of warehouse space located on the first (1st)floor of the Building (the Original Premises, the First Expansion Premises andthe Second Expansion Premises are, collectively, the “**Existing Premises**”).

 

B.                                     Tenantdesires to terminate its month-to-month lease of the Second Expansion Premisesand further expand the Existing Premises to include a total of 17,287 rentablesquare feet of space consisting of the remainder of the first (1st)floor of the Building (which 17,287 rentable square feet of space includes theSecond 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 asare hereinafter provided.

 

AGREEMENT

 

NOW, THEREFORE, inconsideration of the foregoing Recitals and the mutual covenants containedherein, and for other good and valuable consideration, the receipt andsufficiency of which is hereby acknowledged, the parties hereby agree asfollows.

 

1.                                       **Terms**.  All undefined terms when used herein shallhave the same respective meanings as are given such terms in the Lease unlessexpressly 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 thisThird Amendment, Tenant’s month-to-month lease of the Second Expansion Premisesshall be terminated and the Second Amendment shall be of no further force andeffect.

 

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 isdefined in Section 5, below), which date is anticipated to be August 1,2005 (the “**Third Expansion PremisesCommencement Date**”), Tenant shall lease from Landlord and Landlordshall lease to Tenant the Third Expansion Premises.  Consequently, effective upon the ThirdExpansion Premises Commencement Date, the “Premises,” as that term is definedin the Lease, shall consist of the Original Premises, the First ExpansionPremises and the Third Expansion Premises. Landlord and Tenant hereby acknowledge and agree that the rentablesquare footage of the Third Expansion Premises shall be as set forth herein andshall not be subject to re-measurement or modification.

 

4.                                       **Third Expansion Term**.  Tenant shall lease the Third ExpansionPremises for a period of five (5) years (the “**ThirdExpansion Term**”).  The ThirdExpansion Term shall commence upon the Third Expansion Premises CommencementDate 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 thanthe first day of a calendar month, then the Third Expansion Term shall expireon the last day of the month in which the fifth (5th)anniversary of the Third Expansion Premises Commencement Date occurs (asapplicable, the “**Third Expansion TermExpiration Date**”).

 

5.                                       **Rent**.

 

4.1                                 **Base Rent**.  Commencing on the Third Expansion PremisesCommencement Date and continuing throughout the Third Expansion Term, Tenantshall 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 |   |

 

*                 Notwithstandinganything to the contrary set forth in this **Section4.1**, the Monthly

 

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Installment of Base Rent for Year 1 of the ThirdExpansion Term was agreed upon by Landlord and Tenant. In all subsequent yearsduring the Third Expansion Term, the Monthly Installment of Base Rent wascalculated using three and 1⁄2 percent (3.5%) annual increases over the previousyear’s Monthly Installment of Base Rent. For all periods during the ThirdExpansion Term, the Approximate Monthly Base Rental Rate Per Rentable SquareFoot of the Third Expansion Premises was calculated by dividing the MonthlyInstallment of Base Rent by the actual square footage of the Third ExpansionPremises (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 DirectExpenses for the Third Expansion Premises in accordance with the terms of Article4 of the Lease and this Third Amendment. Notwithstanding anything to the contrary set forth in the Lease, ashereby amended, for purposes of calculating the amount of Tenant’s Share ofDirect Expenses which Tenant shall pay in connection with the Third ExpansionPremises, Tenant’s Share shall equal 21.763%.

 

6.                                       **Improvements in the Third Expansion Premises**.  Except as provided herein, Landlord shall notbe obligated to provide or pay for any improvement work or services related tothe improvement of the Third Expansion Premises, and Tenant shall accept theThird Expansion Premises in its presently existing, “as-is” condition.  Notwithstanding the foregoing, Landlordshall, 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 (theforegoing items (i) and (ii) shall be known collectively as the “**Landlord Work**”).  All such Landlord Work shall be completed toLandlord’s “building standard.”  Landlordand Tenant hereby agree that, except for the Landlord Work, any Alterationsconstructed in the Third Expansion Premises shall be completed pursuant to theterms and conditions of Article 8 of the Office Lease.

 

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

 

8.                                       **Tenant’s Signage**.  Commencing on the Third Expansion PremisesCommencement Date, and continuing throughout the remainder of the ThirdExpansion Term, Tenant shall have the right, at Tenant’s sole cost, to installTenant’s name and/or logo on one (1) additional slot on the Building MonumentSign.  The rights granted to Tenant inthis Section 7 shall be subject to all of the terms and conditionof Article 23 of the Lease.

 

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

 

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terms, covenants and conditions of the Lease.  Concurrent with Tenant’s execution anddelivery of this Third Amendment to Landlord, Tenant shall deposit withLandlord 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 thisThird Amendment.

 

10.                                 **Brokers**.  Landlord and Tenant hereby warrant to eachother that they have had no dealings with any real estate broker or agent inconnection with the negotiation of this Third Amendment except CB RichardEllis, Inc. and Colliers International (the “**Brokers**”),and that they know of no other real estate broker or agent who is entitled to acommission in connection with this Third Amendment.  Each party agrees to indemnify and defend theother 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 anyleasing commission or equivalent compensation alleged to be owing on account ofthe indemnifying party’s dealings with any real estate broker or agent otherthan the Brokers.  The terms of this Section 9shall survive the expiration or earlier termination of this Third Amendment.

 

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

 

12.                                 **No Further Modification**.  Except as specifically set forth in thisThird Amendment, all of the terms and provisions of the Lease shall remainunmodified and in full force and effect. In the event of any conflict between the terms and conditions of theLease and the terms and conditions of this Third Amendment, the terms andconditions 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 dayand 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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