Exhibit 10.25


 


AMENDMENT NO. 1


 


THIS AMENDMENT NO. 1 (this “Amendment”)
is made as of the 30th day of December 2005, between General Electric
Capital Corporation (“Secured Party”) and Favrille, Inc. (“Debtor”) in
connection with that certain Master Security Agreement, dated as of December 30,
2005 (the “Agreement”). The terms of this Amendment are hereby incorporated
into the Agreement as though fully set forth therein. Secured
Party and Debtor mutually desire to amend the Agreement as set forth below. Section references
below refer to the section numbers of the Agreement.


 


1.                           In
connection with this Amendment, Secured Party is making a One Million Four
Hundred Ninety Eight Thousand Six Hundred Seventy Seven Dollars and Twenty Six
Cents ($1,498,677.26) loan to Debtor on or before December 31, 2005
pursuant to the terms of a Note of even date therewith  (the “GECC Loan”). Concurrently with such
loan, Oxford Finance Corporation (“Oxford”) is also making a One Million Four
Hundred Ninety Eight Thousand Six Hundred Seventy Seven Dollars and Twenty
Seven Cents ($1,498,677.27) loan to Debtor on or before December 31, 2005
(the “Oxford Loan”). The proceeds of the GECC Loan and the Oxford Loan shall be
used to pay all of Debtor’s remaining indebtedness to Lighthouse Capital and
Secured Party (other than the GECC Loan). Except for the GECC Loan and the
Oxford Loan, Debtor shall not be permitted to incur any Additional Indebtedness
to either Secured Party or Oxford unless, among other things: (i) Debtor
receives at least Twenty Million Dollars ($20,000,000) in gross cash proceeds
from one or more sales of its capital stock after the date hereof but on or
before March 31, 2006, (ii) Oxford consents to such Additional
Indebtedness, (iii) Secured Party consents to such Additional Indebtedness
at its sole discretion made in good faith, (iv) no default under the
Agreement exists or would exist as a result of the incurrence of such
indebtedness. The preceding sentence does not constitute a commitment by
Secured Party to extend further loans to Debtor.


 


2.                           Debtor
hereby grants a security interest in the Collateral (including the Additional
Collateral) to Secured Party to secure all of the Indebtedness to Secured Party
now existing or arising in the future.


 


2A.                 Subsection 2(j)
of the Agreement is hereby amended in its entirety to read as follows:


 


(j) Intentionally deleted.


 


2B.                   Subsection 2(k)
of the Agreement is hereby amended in its entirety to read as follows:


 


(k) Except for Permitted Liens and Permitted Transfers (as defined below),
Debtor is, and will remain the sole and lawful owner, and in possession of, the
Collateral, and has the sole right and lawful authority to grant the security
interest described in this Agreement for all purposes of this Agreement. “Permitted
Transfers” means (i) the disposal of worn-out or obsolete Collateral, (ii) transfers
to Secured Party, (iii) transfers for maintenance and repair, (iv) the
conveyance, sale, lease, transfer or disposition of Inventory in the ordinary
course of business, (v) non-exclusive licenses of Debtor’s Intellectual


 

















 


Property in the ordinary course of business and non-exclusive and
exclusive licenses of Debtor’s Intellectual Property in connection with joint
ventures and corporate collaborations in the ordinary course of business, and (vi) the
creation of Permitted Liens.


 


3.                           Subsection 2(l)
of the Agreement is hereby amended in its entirety to read as follows:


 


(l)       The
Collateral is, and will remain, free and clear of all liens, claims and
encumbrances of any kind whatsoever, except for: (i) liens in favor of
Secured Party, (ii) liens in favor of Oxford, (iii) liens for taxes
not yet due or for taxes being contested in good faith and which do not
involve, in the judgment of Secured Party, any risk of the sale, forfeiture or
loss of any of the Collateral, (iv) inchoate material men’s, mechanic’s,
repairmen’s and similar liens arising by operation of law in the normal course
of business for amounts which are not delinquent, (v) Liens existing on
the date hereof and which are listed in Schedule B, (vi) Liens not to
exceed $250,000 in the aggregate in any fiscal year (A) upon or in any
Equipment acquired or held by Debtor to secure the purchase price of such
Equipment or Additional Indebtedness incurred solely for the purpose of
financing the acquisition or lease of such Equipment, or (B) existing on
such Equipment at the time of its acquisition provided that the Lien is
confined solely to the Equipment so acquired and improvements thereon and the
proceeds of such Equipment, (vii) Liens arising from judgments, decrees or
attachments in circumstances not constituting a default under Section 7(a)(vi),
(viii)Liens in favor of financial institutions arising in connection with
Debtor’s deposit accounts or securities accounts held at such institutions to
secure payment of fees and similar costs and expenses subject to Debtor’s
compliance with Section 3(v) hereof, (ix) non-exclusive
licenses of Debtor’s Intellectual Property in the ordinary course of business
and non-exclusive and exclusive licenses of Debtor’s Intellectual Property in
connection with joint ventures and corporate collaborations in the ordinary
course of business, (x) leases or subleases of real property granted in the
ordinary course of Debtor’s business, including in connection with Debtor’s
leased real property or leased premises, (xi) banker’s liens, rights of setoff
and similar Liens incurred on deposits made in the ordinary course of business
subject to Debtor’s compliance with Section 3(v) hereof, (xii)
Liens to secure payment of worker’s compensation, employment insurance, old age
pensions or other social security obligations of Debtor in each case arising in
the ordinary course of business of Debtor provided, they have no priority over
any of Secured Party’s Lien, (xiii) easements, reservations, rights-of-way,
restrictions, minor defects or irregularities in title and similar charges or
encumbrances affecting real property not constituting a material adverse effect
on the business or condition (financial or otherwise) of Debtor or otherwise
materially impairing the conduct of Debtor’s business, (xiv) Deposit or pledges
to secure the performance of bids, tenders, contracts, public or statutory
obligations, surety, indemnity, performance or other similar binds or similar
obligations arising in the ordinary course of business, (xv) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
custom duties in connection with the importation of goods, (xvi) any interest
or title of a licensor or sublicensor to Debtor under any license of
Intellectual Property, and (xvii) Liens incurred in connection with the
extension, renewal or refinancing of the Additional Indebtedness secured by
Liens described above so long as it constitutes Permitted Indebtedness, but any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the then outstanding principal amount of


 


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the Additional Indebtedness may not increase (all of such liens
are called “Permitted Liens”).


 


4.                           The
following Subsections are hereby added to Section 2 of the Agreement:


 


(r)            Debtor shall not
create, incur, assume or permit to exist any Additional Indebtedness except
Permitted Indebtedness;


 


(s)          Debtor will (i) protect,
defend and maintain the validity and enforceability of the Intellectual
Property and promptly advise Secured Party in writing of material infringements
and (ii) not allow any Intellectual Property material to Debtor’s business
to be abandoned, forfeited or dedicated to the public without Secured Party’s
written consent;


 


(t)            Transactions with
Affiliates. Debtor shall not, without the prior written consent of Secured
Party, directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Debtor except for transactions that are in
the ordinary course of Debtor’s business, upon fair and reasonable terms that
are no less favorable to Debtor than would be obtained in an arm’s length
transaction with a nonaffiliated Person;


 


(u)         Primary Account and
Wire Transfer Instructions. Debtor maintains its primary operating account
(the “Primary Operating Account”)
with the financial institution set forth below and the Wire Transfer
Instructions for the Primary Operating Account are as follows:


 


Silicon Valley
Bank


ABA No.: XXXXXXXXX


Account No.: 
XXXXXXXXXX


Account Name: 
Checking Account


 


Debtor hereby agrees that Loans will be
advanced to the account specified above and regularly scheduled payments will
be automatically debited from the same account through an ACH structure
acceptable to Secured Party; provided, however, the GECC Loan shall be
disbursed directly to the account listed in the proceeds application form executed
by Debtor as of the date of this Amendment.  In addition to the Primary Operating Account
identified hereinabove, Debtor maintains the following other deposit and
investment accounts and the deposit and securities accounts pledged to Silicon
Valley Bank pursuant to that certain Security Agreement to Secure a Letter of
Credit dated as of March 17, 2003 (the “SVB Security Agreement”) between
Debtor and Silicon Valley Bank to secure Debtor’s reimbursement obligations in
connection with a standby letter of credit (the “SVB Letter of Credit”)issued
in favor of Kilroy Realty Corp. (the “SVB Accounts”):


 


1.                                       Morgan
Stanley


Acct#: XX-XXXXX


 


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Contact: Thomas Piliero


555 California St. #1400


San Francisco, CA 94104


Tel: 415-576-2016


Fax: 415-576-2060


Email:
Thomas.piliero@morganstanley.com


 


2.                                       State
Street (for Capital Advisors Group)


Acct#: XXXXXX


Contact: Glen Fuzy


389 Passaic Ave.


Fairfield, NJ 07004


Tel: 973-808-0869


Fax: 973-808-0783


Email: gfuzy@capitaladvisors.com


 


3.                                       Bear
Stearns


Acct#: XXX-XXXXX


Contact: Vlad Feygin


383 Madison Ave.


New York, NY 10179


Tel: 212-272-7562


Fax: 917-849-0809


Email: vfeygin@bear.com


 


4.                                      Silicon Valley Bank Accounts:


3003 Tasman Drive


Santa Clara, CA 95054


Contact: Marisa Matthews


Tel: 858-784-3355


1.                                       Checking
Account  Acct#: XXXXXXXXXX


2.                                       Flex
Spending  Acct#: XXXXXXXXXX


3.                                       Money
Market  Acct#: XXXXXXXXXX


4.                                       Payroll
Account  Acct#: XXXXXXXXXX


5.                                       Cash
Reserve Account  Acct#: XXXXXXXXXX


 


 


(v)         Secured Party’s
Expenses. Debtor shall pay to Secured Party the Secured Party’s Expenses as
and when due and payable. Secured Party acknowledges receipt from Debtor of a
facility fee in the amount of $50,000 (the “2005
Facility Fee”). Debtor agrees that
$25,000 of the 2005 Facility Fee is fully earned by Secured Party and nonrefundable.
Secured Party agrees to apply $25,000 of the 2005 Facility Fee toward its
Secured Party’s Expenses incurred in connection with the preparation,
negotiation and delivery of this Amendment and related documents; the remainder
of the $25,000 of the 2005 Facility Fee may be retained by Secured Party. Secured
Party agrees that it will apply the remaining $25,000 of the Facility Fee to
the partial 


 


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payment of the
first installment of principal and interest under the Note evidencing the GECC
Loan.


 


5.                     The
following Subsections are hereby added to Section 3 of the Agreement:


 


(g)    Receivables. As to each
and every Receivable (a) it is a bona fide existing obligation, valid and
enforceable against the Account Debtor for a sum certain for sales of goods
shipped or delivered, or goods leased, or services rendered in the ordinary
course of business; (b) all supporting documents, instruments, chattel
paper and other evidence of indebtedness, if any, delivered by Debtor to the
Secured Party with respect to each Receivable are complete and correct in all
material respects and valid and enforceable in accordance with their terms, and
to the best of Debtor’s knowledge all signatures and endorsements of the
Account Debtor that appear thereon are genuine, and to the best of Debtor’s
knowledge all signatories and endorsers of the Account Debtor have full
capacity to contract; (c) to the best of the Debtor’s knowledge, the
Account Debtor is liable for and will make payment of the amount expressed in
such Receivable according to its terms; (d) to the best of Debtor’s
knowledge, it is not subject to any discount, deduction, setoff, counterclaim,
return, allowance or special terms of payment; (e) to the best of Debtor’s
knowledge, it is subject to no dispute, defense or offset, real or claimed; (f) it
is not subject to any prohibition or limitation upon assignment; (g) it
has not been redated or reissued in satisfaction of prior Receivables; (h) the
Debtor has full right and power to grant the Secured Party a security interest
therein and the security interest granted in such Receivable to the Secured
Party in this Agreement, when perfected, will be a valid first security
interest which will inure to the benefit of the Secured Party without further
action. The warranties set out herein shall be deemed to have been made with
respect to each and every Receivable now owned or hereafter acquired by the
Debtor.


 


(h)    Bailees. Except as set
forth in Schedule A, the Inventory is not now and shall not at any time
hereafter be stored with a bailee, warehouseman, or similar party without the
Secured Party’s prior written consent. If any Inventory is so stored, the
Debtor will, concurrent with storing such Inventory, cause any such bailee, warehouseman,
or similar party to issue and deliver to the Secured Party, in a form acceptable
to the Secured Party, warehouse receipts in the Secured Party’s name evidencing
the storage of the Inventory. All such warehouse receipts do and will evidence
ownership of the Inventory stored by the issuers thereof, and the holder
thereof is and will continue to be the owner of good and marketable title of
same, free and clear of any Liens or encumbrances except for Permitted Liens. All
such warehouse receipts are and will be genuine, valid and enforceable by the
holder thereof in accordance with their terms and all statements thereon are
and will be true and accurate in all material respects.


 


(i)             Change of Address,
Name or Jurisdiction. All of the Collateral is located in and will in the
future be in the possession of the Debtor at its address stated above or at
such other addresses as may be set forth on the attached Schedule A.
The Debtor has not at any time within the past four (4) months either
changed its name or changed the state of


 


5

















 


jurisdiction
in which it is organized and existing, as set forth above. The Debtor has not
maintained its chief executive office at any other location, or maintained
Inventory or Equipment or its records with respect to the Receivables at any
other location, other than as set forth above or on the attached Schedule A,
and shall not do so hereafter except upon prior written notice to the Secured
Party. The Secured Party shall be entitled to rely upon the foregoing unless it
receives 14 days’ advance written notice of a change in the Debtor’s name,
state of jurisdiction, address of the Debtor’s chief executive offices or
change of location of the Collateral or records with respect to the
Receivables.


 


(j)        Schedules of
Receivables. Upon the written request of Secured Party, Debtor shall
deliver to the Secured Party schedules of all outstanding Receivables. Such
schedules shall be in form reasonably satisfactory to the Secured Party and
shall show the age of such Receivables in intervals of not more than thirty
(30) days, and contain such other information and be accompanied by such
supporting documents as the Secured Party may from time to time reasonably
prescribe. The Debtor shall also deliver to the Secured Party copies of the
Debtor’s invoices, sales journals, evidences of shipment or delivery and such
other schedules and information as the Secured Party may reasonably
request. The items to be provided under this Section are to be prepared
and delivered to the Secured Party from time to time solely for its convenience
in maintaining records of the Collateral and the Debtor’s failure to give any
of such items to the Secured Party shall not affect, terminate, modify or
otherwise limit the Secured Party’s security interest granted herein.


 


(k)     Consignment. If at any
time any of the Inventory is placed by the Debtor on consignment with any
person or entity (“Consignee”), the Debtor
shall, prior to the delivery of such consigned Inventory:


 


a.               Provide
the Secured Party with all consignment agreements and other instruments and
documentation to be used in connection with such consignment, all of which
agreements, instruments, and documentation shall be reasonably acceptable in form and
substance to the Secured Party;


 


b.              Prepare
and file appropriate financing statements with respect to any consigned
Inventory showing the Consignee as debtor, the Debtor as secured party, and the
Secured Party as assignee of the Debtor;


 


c.               Prepare
and file appropriate financing statements with respect to any consigned
Inventory showing the Debtor as debtor, and the Secured Party as secured party;


 


d.              After
all financing statements referred to in the previous two subsections have been
filed, conduct a search of all filings made against the Consignee in the
jurisdiction in which the Consignee is located within the meaning of Section 9307
of the Code, and deliver to the Secured Party copies of the results of all such
searches; and


 


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e.               Notify,
in writing, all creditors of the Consignee that are or may be holders of
security interests in the Inventory to be consigned, that the Debtor expects to
deliver certain Inventory to the Consignee, all of which Inventory shall be
described in such notice by item or type.


 


(l)        Fixtures. Debtor
shall not permit any item of the Equipment to become a fixture to real estate
or an accession to other property without the prior written consent of the
Secured Party, and the Equipment is now and shall at all times remain personal
property except with the Secured Party’s prior written consent. If any of the
Collateral is or will be attached to real estate in such a manner as to become
a fixture under applicable state law and if such real estate is encumbered, the
Debtor will obtain from the holder of each Lien or encumbrance a written
consent and subordination to the security interest hereby granted, or a written
disclaimer of any interest in the Collateral, in a form acceptable to the
Secured Party.


 


(m)  Chattel Paper. Debtor
shall promptly, upon request by the Secured Party, deliver, assign, and endorse
to the Secured Party all chattel paper and all other documents held by the
Debtor in connection therewith.


 


(n)    Copies of Government
Contracts. Debtor shall make available to the Secured Party, at the request
of the Secured Party, a copy of each Government Contract in which the Secured
Party has a security interest and a copy of each amendment thereto or
modification thereof which changes the price of such contract or the amount
funded to pay for such contract, except to the extent that furnishing such
copies may be prohibited by government security regulations. Attached
hereto as Schedule B is a complete list of all Government Contracts
under which Receivables now exist or may hereafter arise, identified by
the names of the contracting parties thereto, the date thereof and the number
identifying the Government Contract or agreement and providing information in
the form specified by the Secured Party from time to time regarding the
contracting officer, the identity of any sureties and the disbursing officer,
whether progress payments are to be made and the rate thereof, whether the
Government Contract or agreement has been fully performed and such other
information as the Secured Party may reasonably request. A true, complete
and correct copy of each such Government Contract (including all modifications
thereto and notice of exercise of options thereunder) now existing has been
provided to the Secured Party by the Debtor, except to the extent that
furnishing such copies may be prohibited by government security
regulations. The Debtor shall as soon as practicable (but in no event later
than five days prior to the date of execution thereof) notify the Secured Party
of any additional Government Contracts, or any renewals or extensions of any
Government Contract or the exercise of any options thereunder or modifications
thereof, identified by the names of the contracting parties thereto, the date
thereof and the number identifying the Government Contract or agreement and
providing information in the form specified by the Secured Party from time
to time regarding the contracting officer, the identity of any sureties and the
disbursing officer, whether progress payments are to be made and the rate
thereof, and such other information as the Secured Party may reasonably
request, and a true, complete and correct copy of each such Government
Contract, amendment


 


7

















 


or modification or exercise of option shall
be provided to the Secured Party by the Debtor no later than the date of
execution thereof, except to the extent that furnishing such copies may be
prohibited by government security regulations.


 


(o)    Claims and Disputes. Immediately
upon learning thereof, Debtor shall report to the Secured Party any
reclamation, return or repossession of goods, any claim or dispute asserted by
any Account Debtor or other obligor, and any other matter affecting the value
and enforceability or collectability of any of the Collateral where the amount
in question exceeds $50,000. In addition, the Debtor shall, at its sole cost
and expense (including attorneys’ fees), settle any and all such claims and
disputes and indemnify and protect the Secured Party against any liability,
loss or expense arising therefrom or out of any such reclamation, return or
repossession of goods, provided, however, that the Secured Party, upon the
occurrence and during the continuance of a default hereunder, if it shall so
elect, shall have the right at all times to settle, compromise, adjust or
litigate all claims or disputes directly with the Account Debtor or other
obligor upon such terms and conditions as the Secured Party deems advisable and
charge all costs and expenses thereof (including reasonable attorneys’ fees) to
the Debtor’s account and add them to the principal amount of the Indebtedness.


 


(p)    Government Contracts Are
Binding, Etc. Debtor shall take the necessary or appropriate steps to
ensure that all Government Contracts have been, or if arising hereafter will
be, legally awarded and binding on the parties thereto; no payment has been or
will be made by the Debtor, any Affiliate of Debtor, or any person acting on
their behalf, to any person that was, is or will be contingent upon the award
of any Government Contract in violation of applicable procurement law or that
would otherwise be in violation of applicable procurement law (including, but
not limited to, the Federal Acquisition Regulations, the Defense Acquisition
Regulations, the Federal Procurement Regulations and the Armed Services
Procurement Regulations); to the best of Debtor’s knowledge, there is no claim
that has been asserted by any government agency or authority concerning the
award or performance of any Government Contract and immediately upon learning
thereof, the Debtor shall immediately notify the Secured Party of the assertion
of any such claim or the existence of any basis therefor; neither the Debtor
nor any director, employee or Affiliate of Debtor has been debarred or
suspended from participation in the award of contracts with the federal
government or any state or local government, or any agency or instrumentality
thereof, or is a party to or the subject of any pending or to the best of
Debtor’s knowledge threatened proceeding or investigation relating to debarment
or suspension, and immediately upon learning thereof the Debtor shall
immediately notify the Secured Party of the occurrence of any of the foregoing
or the existence of any basis therefor; and neither the Debtor nor any
Affiliate of Debtor, nor any officer, director or employee of any of them, is
permanently or temporarily enjoined or barred from engaging in or continuing
any conduct or practice relating to the conduct of their business, or enjoining
or requiring any of them to take any action of any kind relating thereto, and
immediately upon learning thereof ,the Debtor shall immediately notify the
Secured Party of the occurrence of any of the foregoing or the existence of any
basis therefor.


 


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(q)    No Provisions Prohibiting
Assignment of Government Contracts. Debtor shall take the necessary or
appropriate steps to ensure that each Government Contract (i) does not and
will not contain any provision prohibiting assignment thereof as provided
herein, (ii) contains a “no set-off” clause or does not permit any set-off
against or reduction of the obligation to make payments thereunder for
liability of the Debtor to the government because of re-negotiation, fine,
penalty (other than as specifically permitted by the federal Assignment of
Claims Act with respect to Government Contracts with the federal government),
taxes, social security contributions, or withholding or failing to withhold
taxes, social security contributions or similar amounts, whether arising from
or independent of the Government Contract. Immediately upon learning thereof,
the Debtor shall promptly notify the Secured Party of any claimed set-off or
reduction or the disallowance of progress payment requests.


 


(r)       Cost Accounting and
Procurement Systems. The Debtor’s cost accounting and procurement systems
are and at all times have been, and will continue to be, in compliance with all
applicable legal requirements except where the failure to comply would not have
a material adverse effect on Debtor’s financial condition, business or
operations.


 


(s)     Compliance with Assignment
Requirements for Government Contracts. The Debtor is now in compliance and
hereby covenants and agrees that the Debtor will in the future comply with any
and all of the requirements of Title 31 Section 3727 and Title 31 Section 15
of the United States Code and any similar state or local law and all rules and
regulations relating thereto, as amended, where such statutes, rules and
regulations are applicable to a particular Receivable, and shall at all times
take all such other action as may be necessary to facilitate and/or ensure
perfection of the Secured Party’s security interest in and the assignment to
the Secured Party of any Government Account and Government Contract.


 


(t)       Information Concerning
Government Contracts. At the request of the Secured Party, Debtor shall
submit to the Secured Party for the Secured Party’s approval each Government
Contract which the Debtor desires to be included in determining eligible
Government Accounts, and provide such other information concerning such
Government Contract as the Secured Party may reasonably request.


 


(u)    Domain Name. Debtor
shall take the necessary or appropriate steps to ensure that the identity and
location of the servers used in connection with the Debtor’s domain name and
the identity of the party having control over the domain name server and of the
administrative contact with the registry have been disclosed to the Secured
Party promptly upon request. The Debtor shall not change the domain name server
without notification to the Secured Party. The Debtor shall maintain the
trademark of the domain name by defending against any infringement suits and by
policing the trademark. The Debtor shall renew the domain name registration
during the loan term. The Debtor shall make all payments to the domain name
registrar necessary to maintain the domain name.


 


 


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(v)    Account Control Agreements.
Debtor shall at all times maintain all Cash Equivalents owned by Debtor on
deposit in a Deposit Account or accounts holding securities in Debtor’s name at
the institutions identified in Section 2(u) or at one or more other
institutions disclosed to Secured Party (a “Third
Party Institution”) and which accounts are covered by an account
control agreement in favor of Secured Party (the terms of which shall be
acceptable to Secured Party). At any time that the Cash Equivalents or any
portion thereof are held in an account or accounts in one or more Third Party
Institutions, the related account control agreement shall provide that Secured
Party is to receive a copy of the account statements delivered to Debtor. With
respect to each such Deposit Account, Debtor, Secured Party, and each Third
Party Institution with which a Deposit Account is maintained, shall enter into
a written agreement, granting Secured Party control of the Deposit Account and
providing that the Third Party Institution will comply with instructions
originated by the Secured Party directing disposition of the funds in the
Deposit Account without further consent by Debtor. Such account control
agreement may in accordance with the provisions thereof provide terms
under which Debtor may remove funds from the Deposit Account prior to
Secured Party’s exercise of control; provided all funds in or transferred into
the Deposit Account on or after the effectiveness of this Agreement shall be
subject to the security interest granted under this Agreement. Notwithstanding
the foregoing, an account control agreement shall not be required for Debtor’s
accounts maintained with Morgan Stanley so long as all of the following apply: (i) all
of Debtor’s accounts at Morgan Stanley do not exceed in the aggregate at any
time after December 21, 2005, Two Million Five Hundred Thousand Dollars
($2,500,000), (ii) Debtor provides evidence to Secured Party reasonably
satisfactory to Secured Party on or before May 1, 2006 that Debtor has
closed all of its accounts maintained by Morgan Stanley and transferred all
such funds and securities to another of Debtor’s accounts or account which are
covered by an account control agreement in favor of Secured Party, and (iii) 
any of Debtor’s unrestricted cash maintained by Morgan Stanley shall not be
counted when determining the $15,000,000 threshold requirement of Section 3(z).


 


Secured Party agrees that unless a default
under the Agreement has occurred and is continuing, (i) it will not send a
notice of exclusive control or any similar notice to any depository bank or any
securities intermediary with respect to any Deposit Account or account holding
securities of Debtor or (ii) exercise proxies with respect to any
securities in an account holding securities of Debtor (and will permit Debtor
to exercise such proxies).


 


The provisions of this Section 3(v) shall
not apply to the SVB Accounts so long as the SVB Security Agreement remains in
effect.


 


(w) Distributions. Debtor shall not (i) pay
any dividends or make any distributions on its equity securities; (ii) purchase,
redeem, retire, defease or otherwise acquire for value any of its equity
securities (other than repurchases pursuant to the terms of employee stock
purchase plans, employee restricted stock agreements or similar arrangements in
an aggregate amount not to exceed One Hundred Thousand Dollars ($100,000)); (iii) return
any capital to any holder of its equity securities as such; (iv) make any


 


10

















 


distribution of assets, equity securities,
obligations or securities to any holder of its equity securities as such; or (v) set
apart any sum for any such purpose; provided, however,
Debtor may pay dividends payable solely in common stock.


 


(x)      Indebtedness Payments.
Debtor shall not (i) prepay, redeem, purchase, defease or otherwise
satisfy in any manner prior to the scheduled repayment thereof any Additional
Indebtedness for borrowed money or capital lease obligations except for (x)
Debtor’s remaining indebtedness to Lighthouse Capital and GECC (other than the
GECC Loan) (y) Additional Indebtedness owing to Secured Party or Oxford in
accordance with the notes evidencing the same (provided that any such
prepayment shall be made pro rata as between Secured Party and Oxford based on
the outstanding Additional Indebtedness owed to each), and (z) prepayment or
termination of the SVB Letter of Credit and the related reimbursement
obligations, (ii) amend, modify or otherwise change the terms of any
Additional Indebtedness for borrowed money or lease obligations so as to
accelerate the scheduled repayment thereof except as provided by (x), (y) or
(z) above, or (iii) repay any notes to officers, directors or shareholders
except as expressly provided for in a duly executed subordination agreement in
favor of, and approved by Secured Party.


 


(y)    Negative Pledge Regarding
Intellectual Property. Debtor shall not sell, transfer, assign, mortgage,
pledge, lease, grant a security interest in, or encumber any of its Intellectual
Property, or enter into any agreement, document, instrument or other
arrangement (except with or in favor of Secured Party) with any entity which
directly or indirectly prohibits or has the effect of prohibiting Debtor from
selling, transferring, assigning, mortgaging, pledging, leasing, granting a
security interest in or upon, or encumbering any of Debtor’s Intellectual
Property; provided, however, that Debtor may grant non-exclusive licenses
of Debtor’s Intellectual Property in the ordinary course of business and
non-exclusive and exclusive licenses of Debtor’s Intellectual Property in
connection with joint ventures and corporate collaborations in the ordinary
course of business.


 


(z)      Minimum Cash Balances.
In the event Debtor’s aggregate unrestricted Cash Equivalents in accounts
covered by account control agreements in favor of Secured Party fall below
Fifteen Million Dollars ($15,000,000), then Debtor shall, within three (3) business
days, cause a standby letter of credit to be issued to Secured Party in the
amount of the outstanding principal amount of the Indebtedness from a financial
institution and in a form satisfactory to Secured Party.


 


 


6.                     The
following Subsections are hereby added to Section 7 of the Agreement:


 


(xix) Debtor breaches any of its obligations
under Sections 3(v), (w), (x), (y) or (z);


 


7.                     The following Section 9 is hereby added
to the Agreement as follows:


 


 


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Section 9. Definitions.


 


As used herein, the following terms, when initial
capital letters are used, shall have the respective meanings set forth below. In
addition, all terms defined in the Code shall have the meanings given therein
unless otherwise defined herein.


 


Defined Terms. As
used in this Agreement, the following terms shall have the following meanings,
unless the context otherwise requires:


 


“Account Debtor”
shall mean the account debtor or any customer of the Debtor who is obligated or
indebted to the Debtor with respect to any of the Receivables and/or the prospective
purchaser with respect to any contract right, and/or any party or organization
who enters into or proposes to enter into any contract or other arrangement
with the Debtor pursuant to which the Debtor is to deliver any personal
property or perform any service.


 


“Additional Collateral” shall have the meaning as set forth in that Collateral Schedule No. 001
dated December 30, 2005 executed and delivered concurrently with the
Amendment No. 1 dated December 30, 2005 to the Agreement.


 


“Additional Indebtedness”
means, with respect to Debtor or any of its subsidiaries, the aggregate amount
of, without duplication, (a) all obligations of such Person for borrowed
money, (b) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) all obligations of such Person to
pay the deferred purchase price of property or services (excluding trade
payables aged less than one hundred eighty (180) days), (d) all capital
lease obligations of such Person, (e) all obligations or liabilities of
others secured by a Lien on any asset of such Person, whether or not such
obligation or liability is assumed, (f) all obligations or liabilities of
others guaranteed by such Person, and (g) any other obligations or
liabilities which are required by GAAP to be shown as debt on the balance sheet
of such Person. Unless otherwise indicated, the term “Additional
Indebtedness” shall include all Indebtedness of Debtor and all
of its subsidiaries.


 


“Affiliate”
of a Person is a Person that owns or controls directly or indirectly the
Person, any Person that controls or is controlled by or is under common control
with the Person, and each of that Person’s senior executive officers,
directors, and partners and, for any Person that is a limited liability company,
that Person’s managers and members.


 


“Amendment”
means the Amendment No. 1 between Debtor and Secured Party and dated as of
December 30, 2005.


 


“Cash Equivalents”
means the sum outstanding, at any one time, of (i) all cash (in United
States dollars) owned by Debtor at such time plus (ii) the fair market
value of all cash equivalents and short term investments (as those terms are
defined by GAAP) owned by Debtor at such time.


 


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“Code” means
the Connecticut Uniform Commercial Code (including revised Article 9
thereof).


 


“Collateral” means
the Collateral as defined in the Agreement including the Additional Collateral.


 


“Consignee”
has the meaning given such capitalized term in Section 3(k).


 


“Debt Documents”
has the meaning given such capitalized term in Section 2(b).


 


“Default Rate”
is the lower of eighteen percent (18%) per annum or the maximum rate not
prohibited by applicable law.


 


“Deposit Account” means a demand,
time, savings, passbook, or similar account maintained with a bank.


 


“Equipment” shall mean (a) all
goods and equipment of the Debtor of every type and description, now owned and
hereafter acquired and wherever located, including, without limitation, all
imbedded software, machinery, motor vehicles and other rolling stock,
furniture, furnishings, tools, dies, fittings, accessories, all substitutions
therefore, leasehold improvements, fixtures, and materials and supplies
relating to any of the foregoing; (b) all present and future documents of
title and trust receipts relating to any of the foregoing; (c) all present
and future rights, claims and causes of action of Debtor in connection with
purchases of (or contracts for the purchase of), or warranties relating to, or
damages to, goods held or to be held by the Debtor as equipment; (d) all
present and future warranties, manuals and other written materials (and
packaging thereof or relating thereto) relating to any of the foregoing; and (e) all
present and future general intangibles of the Debtor in any way relating to any
of the foregoing.


 


“Government Accounts” shall mean all
accounts arising out of any Government Contract.


 


“Government Contract”
shall mean any contract between the Debtor and the United States Government,
any state or local government or any agency thereof, and all amendments
thereto.


 


“Indebtedness”
has the meaning given such capitalized term in Section 1.


 


“Intellectual Property”
shall mean (a) all of the Debtor’s right, title and interest, whether now
owned or existing or hereafter acquired or arising, in and to all domestic and
foreign copyrights, copyright registrations and copyright applications, whether
or not registered or filed with any governmental authority, together with (i) all
renewals thereof, (ii) all present and future rights of the Debtor under
all present and future license agreements relating thereto, whether the Debtor
is licensee or licensor thereunder, (iii) all income, royalties, damages
and payments now or


 


13

















 


hereafter due and/or payable to the Debtor
thereunder or with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (iv) all of
the Debtor’s present and future claims, causes of action and rights to sue for
past, present or future infringements thereof, and (v) all rights
corresponding thereto throughout the world (collectively “Copyright
Rights”); (b) all of the Debtor’s right, title and interest,
whether now owned or existing or hereafter acquired or arising, in and to all
United States and foreign patents, and pending and abandoned United States and
foreign patent applications, including, without limitation, the inventions and
improvements described or claimed therein, together with(i) any reissues,
divisions, continuations, certificates of re-examination, extensions and
continuations-in-part thereof, (ii) all present and future rights of
the Debtor under all present and future license agreements relating thereto,
whether the Debtor is licensee or licensor thereunder, (iii) all income,
royalties, damages and payments now or hereafter due and/or payable to the
Debtor thereunder or with respect thereto, including, without limitation,
damages and payments for past, present or future infringements thereof, (iv) all
of the Debtor’s present and future claims, causes of action and rights to sue
for past, present or future infringements thereof, and (v) all rights
corresponding thereto throughout the world (collectively “Patent
Rights”); (c) all of the Debtor’s right, title and interest,
whether now owned or existing or hereafter acquired or arising, in and to all
domestic and foreign trademarks, trademark registrations, trademark
applications and trade names, whether or not registered or filed with any
governmental authority, together with (i) all renewals thereof, (ii) all
present and future rights of the Debtor under all present and future license
agreements relating thereto, whether the Debtor is licensee or licensor
thereunder, (iii) all income, royalties, damages and payments now or
hereafter due and/or payable to the Debtor thereunder or with respect thereto,
including, without limitation, damages and payments for past, present or future
infringements thereof, (iv) all of the Debtor’s present and future claims,
causes of action and rights to sue for past, present or future infringements
thereof, and (v) all rights corresponding thereto throughout the world
(collectively “Trademark Rights”); (d) all
present and future licenses and license agreements of the Debtor, and all
rights of the Debtor under or in connection therewith, whether the Debtor is
licensee or licensor thereunder, including, without limitation, any present or
future franchise agreements under which the Debtor is franchisee or franchisor,
together with (i) all renewals thereof, (ii) all income, royalties,
damages and payments now or hereafter due and/or payable to the Debtor
thereunder or with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (iii) all
claims, causes of action and rights to sue for past, present or future
infringements thereof, and (iv) all rights corresponding thereto
throughout the world (collectively “License Rights”);
(e)  all present and future trade secrets of the Debtor; and (f) all
other present and future intellectual property of the Debtor.


 


“Inventory” shall mean and include (a) all
goods now owned or hereafter acquired by the Debtor, which are held for sale or
lease by the Debtor or are furnished or to be furnished by the Debtor under
contracts of service, (b) all raw materials, work in


 


14

















 


process,
finished goods, packaging materials, and other materials and supplies of every
kind used or consumed in connection with the manufacture, production, packing,
shipping, advertising or sale of such goods, (c) all proceeds and products
from the sale or other disposition of such goods, including all goods returned,
repossessed, or acquired by the Debtor by way of substitution or replacement,
and all additions and accessions thereto, and all documents and instruments (as
those terms are defined in the Code) covering such goods; (d) all the
Debtor’s rights as an unpaid seller, including stoppage in transit,
detinue and reclamation; and (e) all of the above owned by the Debtor or
in which the Debtor now has or in which the Debtor may hereafter acquire
an interest, whether in transit or in the Debtor’s constructive or actual
possession or held by the Debtor or others for the Debtor’s account (including
any of the above held on consignment), including, without limitation, all of
the above which may be located on the Debtor’s premises or upon the
premises of any carriers, forwarding agents, truckers, warehousemen, vendors,
selling agents, finishers, converters or other third parties who may have
possession, temporary or otherwise, thereof.


 


“Lien(s)” shall mean any voluntary or involuntary mortgage, pledge,
deed of trust, assignment, security interest, encumbrance, hypothecation, lien,
or charge of any kind (including any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction).


 


“Loan” means
an advance of credit by Secured Party to Debtor.


 


“Note” has
the meaning given such capitalized term in Section 1.


 


“Payment” or
“Payments” shall mean any check,
draft, cash or any other remittance or credit in payment or on account of any
or all of the Receivables and the cash proceeds of any returned, rejected or
repossessed goods, the sale or lease of which gave rise to a Receivable.


 


“Permitted Indebtedness”
means and includes: (i) Indebtedness of Debtor to Secured Party; (ii) Additional
Indebtedness of Debtor to Oxford under the Oxford Loan and future Additional
Indebtedness of Debtor to Oxford as to which Secured Party gives its prior
consent at its sole discretion made in good faith; (iii) Additional
Indebtedness arising from the endorsement of instruments in the ordinary course
of business; (iv) Additional Indebtedness existing on the date hereof and
set forth in Schedule B; (v) Subordinated Indebtedness; (vi) Additional
Indebtedness not to exceed $250,000 in the aggregate in any fiscal year of
Debtor secured by Liens described in clause (vi) of the definition of
Permitted Liens in Section 2(l) and provided such Additional
Indebtedness does not exceed the lesser of cost or fair market value of the
Equipment financed with such Additional Indebtedness; (vii) other
Additional Indebtedness not otherwise permitted by Section 2(r) not
exceeding $100,000 in the aggregate at any time;  (viii) Additional Indebtedness with
respect to


 


15

















 


surety bonds and like obligations with
respect to performance contracts in the ordinary course of business; (ix) Additional
Indebtedness of Debtor to any subsidiary of Debtor so long as the terms thereof
do not require Debtor to pay more than $100,000 in aggregate amount in any
fiscal year to its subsidiaries; and (x) the extension, renewal or refinancing
of the Additional Indebtedness described above so long as it constitutes Permitted
Indebtedness, but the then outstanding principal amount of the Additional
Indebtedness may not increase or the terms modified to impose more
burdensome terms upon the Debtor.


 


“Permitted Liens”
has the meaning given such capitalized term in Section 2(l).


 


“Person” is any individual, sole
proprietorship, partnership, limited liability company, joint venture, company
association, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, firm, joint stock company, estate,
entity or government agency.


 


“Primary Operating Account”
has the meaning given such capitalized term in Section 2(u).


 


“Receivables” shall mean “account” as
defined in the Code.


 


“Secured Party’s Expenses”
means all reasonable costs or expenses (including reasonable attorneys’ fees
and expenses) incurred in connection with the preparation, negotiation,
documentation, administration and funding of the Debt Documents; and Secured
Party’s reasonable attorneys’ fees, costs and expenses incurred in amending,
modifying, enforcing or defending the Debt Documents (including fees and
expenses of appeal or review), including the exercise of any rights or remedies
afforded hereunder or under applicable law, whether or not suit is brought,
whether before or after bankruptcy or insolvency, including without limitation
all fees and costs incurred by Secured Party in connection with Secured Party’s
enforcement of its rights in a bankruptcy or insolvency proceeding filed by or
against Debtor or its property.


 


“Subordinated Indebtedness”
means Additional Indebtedness subordinated to the Indebtedness of Debtor to
Secured Party on terms and conditions acceptable to Secured Party in its sole
discretion made in good faith.


 


 


Schedule A — Collateral
Locations


 


 


Schedule B
— Listing of Additional Indebtedness and
Existing Permitted Liens


 


16

















 


TERMS USED, BUT NOT OTHERWISE
DEFINED HEREIN SHALL HAVE THE MEANINGS GIVEN TO THEM IN THE AGREEMENT. ON AND
AFTER THE DATE HEREOF, EACH REFERENCE TO THE AGREEMENT IN THE AGREEMENT OR IN
ANY OTHER DOCUMENT SHALL MEAN THE AGREEMENT AS AMENDED BY THIS AMENDMENT.
EXCEPT AS EXPRESSLY AMENDED HEREBY, THE AGREEMENT SHALL REMAIN IN FULL FORCE
AND EFFECT.  IF THERE IS ANY CONFLICT
BETWEEN THE PROVISIONS OF THE AGREEMENT AND THIS AMENDMENT, THEN THIS AMENDMENT
SHALL CONTROL. THIS AMENDMENT MAY BE EXECUTED IN ANY NUMBER OF
COUNTERPARTS, INCLUDING BY ELECTRONIC OR FACSIMILE TRANSMISSION, EACH OF WHICH
WHEN SO DELIVERED SHALL BE DEEMED AN ORIGINAL, BUT ALL SUCH COUNTERPARTS TAKEN
TOGETHER SHALL CONSTITUTE BUT ONE AND THE SAME INSTRUMENT. THIS AMENDMENT, THE
AGREEMENT, ANY NOTE AND THE COLLATERAL SCHEDULES CONSTITUTE AND CONTAIN THE
ENTIRE AGREEMENT OF DEBTOR AND SECURED PARTY WITH RESPECT TO THEIR RESPECTIVE
SUBJECT MATTERS, AND SUPERSEDE ANY AND ALL PRIOR AGREEMENTS, CORRESPONDENCE AND
COMMUNICATIONS.


 


[Remainder
of page left blank; signature page follows]


 


 


17

















 


IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
by signature of their respective authorized representative set forth below.


 


	
  General Electric Capital
  Corporation

  	
  Favrille, Inc.

  
	
   

  	
   

  
	
  By: 

  	
  /s/ John Edel

  	
   

  	
  By:

  	
  /s/ Tamara A. Seymour

  	
   

  
	
   

  	
   

  
	
  Name: 

  	
  John Edel

  	
   

  	
  Name:

  	
  Tamara A. Seymour

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  SVP

  	
   

  	
  Title:

  	
  CFO

  	
   

  
														



 


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