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Exhibit 10.3  


 
 

FAVRILLE, INC.    
    
    2004 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN    
    


ADOPTED APRIL 6, 2004

APPROVED BY STOCKHOLDERS APRIL     , 2004

EFFECTIVE DATE: APRIL     , 2004  


1.    PURPOSES.    



        (a)    Eligible Option Recipients.    The persons eligible to receive
Options are the Non-Employee Directors of the Company. 


        (b)    Available Options.    The purpose of the Plan is to provide a
means by which Non-Employee Directors may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Nonstatutory Stock Options. 



        (c)    General Purpose.    The Company, by means of the Plan, seeks to
retain the services of its current Non-Employee Directors, to secure and retain the services of new Non-Employee Directors and to provide incentives for such persons to exert maximum efforts for the
success of the Company and its Affiliates. 


2.    DEFINITIONS.    


        (a)   "Affiliate" means any parent corporation or subsidiary corporation of the
Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code. 


        (b)   "Annual Grant" means an Option granted annually to all Non-Employee
Directors who meet the specified criteria pursuant to Section 6(b). 


        (c)   "Annual Meeting" means the annual meeting of the stockholders of the
Company. 


        (d)   "Board" means the Board of Directors of the Company. 


        (e)   "Capitalization Adjustment" has the meaning ascribed to that term in
Section 11(a). 


        (f)    "Change in Control" means the occurrence, in a single transaction or in a
series of related transactions, of any one or more of the following events: 



          (i)  any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the Company's then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a
Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person from the Company in
a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities or (B) solely because the level of
Ownership held by any Exchange Act Person (the "Subject Person") exceeds the designated percentage threshold of the outstanding voting securities as a
result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of
this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that,
assuming the repurchase or other acquisition had not occurred, 



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increases
the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur; 


         (ii)  there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and,
immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A)
outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B)
more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the
same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction; 


       (iii)  the stockholders of the Company approve or the Board approves a plan of complete dissolution or liquidation of the
Company, or a complete dissolution or liquidation of the Company shall otherwise occur; 


        (iv)  there is consummated a sale, lease, license or other disposition of all or substantially all of the consolidated assets
of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity,
more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the
outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or 


         (v)  individuals who, on the date this Plan is adopted by the Board, are members of the Board (the  "Incumbent Board") cease for any reason to
constitute at least a majority of the members of the Board; provided,
however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board. 




Notwithstanding
the foregoing or any other provision of this Plan, the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate
and the Participant shall supersede the foregoing definition with respect to Stock Awards subject to such agreement (it being understood, however, that if no definition of Change in Control or any
analogous term is set forth in such an individual written agreement, the foregoing definition shall apply). 



        (g)   "Code" means the Internal Revenue Code of 1986, as amended. 


        (h)   "Committee" means a committee of one (1) or more members of the Board appointed by the Board in
accordance with Section 3(c). 


        (i)    "Common Stock" means the common stock of the Company. 



        (j)    "Company" means Favrille, Inc., a Delaware corporation. 


        (k)   "Consultant" means any person, including an advisor, who (i) is engaged by the Company or an
Affiliate to render consulting or advisory services and is compensated for such services or (ii) is serving as a member of the Board of Directors of an Affiliate and is compensated for such services.
However, service solely as a Director, or payment of a fee for such services, shall not cause a Director to be considered a "Consultant" for purposes of the Plan. 



        (l)    "Continuous Service" means that the Optionholder's service with the Company or an Affiliate,
whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Optionholder renders service to the Company or an Affiliate as an Employee, 


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Consultant
or Director or a change in the entity for which the Optionholder renders such service, provided that there is no interruption or termination of the Optionholder's service with the Company
or an Affiliate, shall not terminate a Participant's Continuous Service. For example, a change in status from a Non-Employee Director of the Company to a Consultant of an Affiliate or an Employee of
the Company will not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party's sole discretion, may determine whether Continuous
Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. Notwithstanding the foregoing, a
leave of absence shall be treated as Continuous Service for purposes of vesting in an Option only to such extent as may be provided in the Company's leave of absence policy or in the written terms of
the Optionholder's leave of absence. 


        (m)  "Corporate Transaction" means the occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following events: 



          (i)  a sale or other disposition of all or substantially all, as determined by the Board in its discretion, of the
consolidated assets of the Company and its Subsidiaries; 



         (ii)  a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company; 


       (iii)  a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or 


        (iv)  a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares
of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other
property, whether in the form of securities, cash or otherwise. 




        (n)   "Director" means a member of the Board. 


        (o)   "Disability" means the inability of a person, in the opinion of a qualified physician acceptable
to the Company, to perform the major duties of that person's position with the Company or an Affiliate of the Company because of the sickness or injury of the person. 


        (p)   "Employee" means any person employed by the Company or an Affiliate. However, service solely as a
Director, or payment of a fee for such services, shall not cause a Director to be considered an "Employee" for purposes of the Plan. 


        (q)   "Entity" means a corporation, partnership or other entity. 



        (r)   "Exchange Act" means the Securities Exchange Act of 1934, as amended. 


        (s)   "Exchange Act Person" means any natural person, Entity or "group" (within the meaning of Section
13(d) or 14(d) of the Exchange Act), except that "Exchange Act Person" shall not include (A) the Company or any Subsidiary of the Company, (B) any employee benefit plan of the Company or any
Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (C) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (D) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of
stock of the Company. 


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        (t)    "Fair Market Value" means, as of any date, the value of the Common Stock determined as follows: 



          (i)  If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq
SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market
(or the exchange or market with the greatest volume of trading in the Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable. 



         (ii)  In the absence of such markets for the Common Stock, the Fair Market Value shall be determined by the Board in good
faith. 




        (u)   "Initial Grant" means an Option granted to a Non-Employee Director who meets the specified
criteria pursuant to Section 6(a). 


        (v)   "IPO Date" means the effective date of the initial public offering of the Common Stock. 



        (w)  "Non-Employee Director" means a Director who is not an Employee. 


        (x)   "Nonstatutory Stock Option" means an Option not intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code and the regulations promulgated thereunder. 


        (y)   "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder. 


        (z)   "Option" means a Nonstatutory Stock Option granted pursuant to the Plan. 


        (aa) "Option Agreement" means a written agreement between the Company and an Optionholder evidencing the terms and
conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. 



        (bb) "Optionholder" means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other
person who holds an outstanding Option. 


        (cc) "Own," "Owned," "Owner," "Ownership" A person or Entity shall be deemed to "Own," to have "Owned," to be the
"Owner" of, or to have acquired "Ownership" of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares
voting power, which includes the power to vote or to direct the voting, with respect to such securities. 



        (dd) "Plan" means this Favrille, Inc. 2004 Non-Employee Directors' Stock Option Plan. 


        (ee) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect
from time to time. 


        (ff) "Securities Act" means the Securities Act of 1933, as amended. 



        (gg) "Subsidiary" means, with respect to the Company, (i) any corporation of which more than fifty percent (50%)
of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership
in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%). 


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3.    ADMINISTRATION.    


        (a)    Administration by Board.    The Board shall administer the Plan unless and until the Board delegates
administration of the Plan to a Committee, as provided in Section 3(c). 



        (b)    Powers of Board.    The Board shall have the power, subject to, and within the limitations of, the express
provisions of the Plan: 



          (i)  To determine the provisions of each Option to the extent not specified in the Plan. 


         (ii)  To construe and interpret the Plan and Options granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Option Agreement, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective. 


       (iii)  To effect, at any time and from time to time, with the consent of any adversely affected Optionholder, (1) the
reduction of the exercise price of any outstanding Option under the Plan, (2) the cancellation of any outstanding Option under the Plan and the grant in substitution therefor of (A) a new Option under
the Plan or another equity plan of the Company covering the same or a different number of shares of Common Stock, (B) cash and/or (C) other valuable consideration (as determined by the Board, in its
sole discretion), or (3) any other action that is treated as a repricing under generally accepted accounting principles. 


        (iv)  To amend the Plan or an Option as provided in Section 12. 


         (v)  To terminate or suspend the Plan as provided in Section 13. 


        (vi)  Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the
best interests of the Company and that are not in conflict with the provisions of the Plan. 




        (c)    Delegation to Committee.    The Board may delegate some or all of the administration of the Plan to a Committee
or Committees of one (1) or more members of the Board, and the term "Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been
delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board
may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated. 


        (d)    Effect of Board's Decision.    All determinations, interpretations and constructions made by the Board in good
faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons. 


4.    SHARES SUBJECT TO THE PLAN.    


        (a)    Share Reserve.    Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the shares
of Common Stock that may be issued pursuant to Options shall not exceed in the aggregate four hundred twenty thousand (420,000) shares of Common Stock plus an annual increase to be added on the first
day of each Company fiscal year, beginning in 2005 and ending in (and including) 2013, equal to the lesser of the following amounts: (i) ninety thousand (90,000) shares of Common Stock, or (ii) an
amount determined by the Board. 


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        (b)    Reversion of Shares to the Share Reserve.    If any Option shall for any reason expire or otherwise terminate,
in whole or in part, without having been exercised in full, the shares of Common Stock not acquired under such Option shall revert to and again become available for issuance under the Plan. If any
shares subject to an Option are not delivered to an Optionholder because such shares are withheld for the payment of taxes or the Option is exercised through a reduction of shares subject to the
Option (i.e., "net exercised"), the number of shares that are not delivered to the Optionholder as a result thereof shall remain available for issuance
under the Plan. If the exercise price of an Option is satisfied by tendering shares of Common Stock held by the Optionholder (either by actual delivery or attestation), then the number of shares so
tendered shall remain available for issuance under the Plan. 


        (c)    Source of Shares.    The shares of Common Stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise. 


5.    ELIGIBILITY.    


        The
Options, as set forth in Section 6, automatically shall be granted under the Plan to all Non-Employee Directors who meet the criteria specified in Section 6. 


6.    NON-DISCRETIONARY GRANTS.    



        (a)    Initial Grants.    Without any further action of the Board, each person who after the IPO Date is elected or
appointed for the first time to be a Non-Employee Director automatically shall, upon the date of his or her initial election or appointment to be a Non-Employee Director, be granted an Initial Grant
to purchase thirty-five thousand (35,000) shares of Common Stock on the terms and conditions set forth herein. 


        (b)    Annual Grants.    Without any further action of the Board, on the date of each Annual Meeting, commencing with
the Annual Meeting in 2005, each person who is then a Non-Employee Director automatically shall be granted an Annual Grant to purchase eight thousand (8,000) shares of Common Stock on the terms and
conditions set forth herein; provided, however, that if the person has not been serving as a Non-Employee Director for the entire period since the
preceding Annual Meeting, then the number of shares subject to such Annual Grant shall be reduced pro rata for each full quarter prior to the date of grant during such period for which such person did
not serve as a Non- Employee Director. 


7.    OPTION PROVISIONS.    



        Each
Option shall be in such form and shall contain such terms and conditions as required by the Plan. Each Option shall contain such additional terms and conditions, not inconsistent
with the Plan, as the Board shall deem appropriate. Each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the
following provisions: 



        (a)   Term.    No Option shall be exercisable after the expiration of ten (10) years from the date on which it was
granted. 


        (b)   Exercise Price.    The exercise price of each Option shall be one hundred percent (100%) of the Fair Market
Value of the Common Stock subject to the Option on the date the Option is granted. 


        (c)   Consideration.    The purchase price of Common Stock acquired pursuant to an Option shall be paid, to the
extent permitted by applicable law, either (i) in cash at the time the Option is exercised or (ii) at the discretion of the Board either at the time of the grant of the Option or subsequent thereto
(1) by delivery to the Company of other Common Stock at the time the Option is exercised, (2) by a "net exercise" of the Option (as further described below), (3) pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company 



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or
the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds or (4) in any other form of legal consideration that may be acceptable to the
Board. Unless otherwise specifically provided in the Option, the purchase price of Common Stock acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock acquired,
directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes). 


        In
the case of a "net exercise" of an Option, the Company will not require a payment of the exercise price of the Option from the Participant but will reduce the number of shares of
Common Stock issued upon the exercise by the largest number of whole shares that has a Fair Market Value that does not exceed the aggregate exercise price. With respect to any remaining balance of the
aggregate exercise price, the Company shall accept a cash payment from the Participant. Shares of Common Stock will no longer be outstanding under an Option (and will therefore not thereafter be
exercisable) following the exercise of such Option to the extent of (i) shares used to pay the exercise price of an Option under a "net exercise", (ii) shares actually delivered to the Participant as
a result of such exercise and (iii) shares withheld for purposes of tax withholding. 


        (d)   Transferability.    An Option is transferable by will or by the laws of descent and distribution. An Option
also may be transferable upon written consent of the Company if, at the time of transfer, a Form S-8 registration statement under the Securities Act is available for the exercise of the Option and the
subsequent resale of the underlying securities. In addition, an Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company, designate
a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option. 


        (e)   Vesting.    The total number of shares of Common Stock subject to an Option may vest and therefore become
exercisable in periodic installments that may be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this Section 7(e) are subject to any Option provisions governing the minimum
number of shares of Common Stock as to which an Option may be exercised. 


        (f)    Termination of Continuous Service.    In the event that an Optionholder's Continuous Service terminates for any
reason, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination of Continuous Service) but only within
such period of time ending on the expiration of the term of the Option as set forth in the Option Agreement. If, after termination of Continuous Service, the Optionholder does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall terminate. 




8.    SECURITIES LAW COMPLIANCE.    


        The
Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Options and to issue and sell
shares of Common Stock upon exercise of the Options; provided, however, that this undertaking shall not require the Company to register under the
Securities Act the Plan, any Option or any Common Stock issued or issuable pursuant to any such Option. If, after reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell Common Stock upon exercise of such Options unless and until such authority is obtained. 


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   9.    USE OF PROCEEDS FROM STOCK.    


        Proceeds
from the sale of Common Stock pursuant to Options shall constitute general funds of the Company. 


10.    MISCELLANEOUS.    



        (a)    Acceleration of Exercisability and Vesting.    The Board shall have the power to accelerate the time at which
an Option may first be exercised or the time during which an Option or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Plan or the Option stating the time
at which it may first be exercised or the time during which it will vest. 


        (b)    Stockholder Rights.    No Optionholder shall be deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares of Common Stock subject to such Option unless and until such Optionholder has satisfied all requirements for exercise of the Option pursuant to its terms. 


        (c)    No Service Rights.    Nothing in the Plan, any Option Agreement
or other instrument executed thereunder or any Option granted pursuant thereto shall confer upon any Optionholder any right to continue to serve the Company as a Non-Employee Director or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may be. 


        (d)    Investment Assurances.    The Company may require an
Optionholder, as a condition of exercising or acquiring Common Stock under any Option, (i) to give written assurances satisfactory to the Company as to the Optionholder's knowledge and experience in
financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Option; and (ii) to give written assurances satisfactory to the Company
stating that the Optionholder is acquiring the Common Stock subject to the Option for the Optionholder's own account and not with any present intention of selling or otherwise distributing the Common
Stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the shares of Common Stock upon the exercise or acquisition of Common Stock under the Option has been
registered under a then currently effective registration statement under the Securities Act or (2) as to any particular requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the
Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock. 


        (e)    Withholding Obligations.    To the extent provided by the terms
of an Option Agreement, the Company may in its sole discretion, satisfy any federal, state or local tax withholding obligation relating to an Option by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) causing the Optionholder to tender a cash payment; (ii) withholding
shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Optionholder in connection with the Option; or (iii) via such other method as may be set forth in the Option
Agreement. 


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11.   ADJUSTMENTS UPON CHANGES IN COMMON STOCK.  



        (a)    Capitalization Adjustments.    If any change is made in, or
other event occurs with respect to, the Common Stock subject to the Plan, or subject to any Option, without the receipt of consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or
other transaction not involving the receipt of consideration by the Company (each a "Capitalization Adjustment")), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject both to the Plan pursuant to Section 4 and to the nondiscretionary Options specified in Section 6, and the outstanding Options will
be appropriately adjusted in the class(es) and number of securities and price per share of Common Stock subject to such outstanding Options. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (Notwithstanding the foregoing, the conversion of any convertible securities of the Company shall not be treated as a transaction "without receipt
of consideration" by the Company.) 


        (b)    Dissolution or Liquidation.    In the event of a dissolution or
liquidation of the Company, then all outstanding Options shall terminate immediately prior to the completion of such dissolution or liquidation. 


        (c)    Corporate Transaction.    In the event of a Corporate
Transaction, any surviving corporation or acquiring corporation may assume or continue any or all Options outstanding under the Plan or may substitute similar stock options for Options outstanding
under the Plan (including options to acquire the same consideration paid to the stockholders of the Company, as the case may be, pursuant to the Corporate Transaction). In the event that any surviving
corporation or acquiring corporation does not assume or continue all such outstanding Options or substitute similar stock options for all such outstanding Options, then with respect to Options that
have been not assumed, continued or substituted and that are held by Optionholders whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction, the vesting of
such Options (and, if applicable, the time at which such Options may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a date prior to the
effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effective time of the
Corporate Transaction), and such Options shall terminate on the effective time of the Corporate Transaction if not exercised (if applicable) at or prior to such effective time. With respect to any
other Options outstanding under the Plan that have not been assumed, continued or substituted, the vesting of such Options (and, if applicable, the time at which such Options may be exercised) shall
not be accelerated, unless otherwise provided in a written agreement between the Company or any Affiliate and the Optionholder, and such Options shall terminate if not exercised (if applicable) prior
to the effective time of the Corporate Transaction. 


        (d)    Change in Control.    An Option may be subject to additional
acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Option Agreement for such Option or as may be provided in any other written agreement between the
Company or any Affiliate and the Optionholder, but in the absence of such provision, no such acceleration shall occur. 


12.   AMENDMENT OF THE PLAN AND OPTIONS.  


        (a)    Amendment of Plan.    Subject to the limitations, if any, of
applicable law, the Board, at any time and from time to time, may amend the Plan. However, except as provided in Section 11(a) relating to Capitalization Adjustments, no amendment shall be effective
unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy applicable law. 


        (b)    Stockholder Approval.    The Board, in its sole discretion, may
submit any other amendment to the Plan for stockholder approval. 


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        (c)    No Impairment of Rights.    Rights under any Option granted
before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Optionholder and (ii) the Optionholder consents in writing. 


        (d)    Amendment of Options.    The Board, at any time, and from time
to time, may amend the terms of any one or more Options, including, but not limited to, amendments to provide terms more favorable than previously provided in the agreement evidencing an Option,
subject to any specified limits in the Plan that are not subject to Board discretion; provided, however, that the rights under any Option shall not be
impaired by any such amendment unless (i) the Company requests the consent of the Optionholder and (ii) the Optionholder consents in writing. 


13.   TERMINATION OR SUSPENSION OF THE PLAN.  


        (a)    Plan Term.    The Board may suspend or terminate the Plan at
any time. No Options may be granted under the Plan while the Plan is suspended or after it is terminated. 


        (b)    No Impairment of Rights.    Suspension or termination of the
Plan shall not impair rights and obligations under any Option granted while the Plan is in effect except with the written consent of the Optionholder. 



14.   EFFECTIVE DATE OF PLAN.  


        The Plan shall become effective on the IPO Date, but no Option shall be exercised unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board. 


15.   CHOICE OF LAW.  


        The law of the state of California shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such
state's conflict of laws rules. 


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FAVRILLE, INC.
  2004 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN    
    


STOCK OPTION AGREEMENT

(NONSTATUTORY STOCK OPTION)  


        Pursuant to your Stock Option Grant Notice ("Grant Notice") and this Stock Option Agreement, Favrille, Inc. (the  "Company") has granted you an option under its 2004 Non-Employee Directors' Stock Option Plan (the  "Plan") to purchase the number of shares of the
Company's Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant
Notice. Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan. 


        The
details of your option are as follows: 


        1.    VESTING.    Subject to the limitations contained herein, your
option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service. In addition, if the Company is subject to a Change in Control
before your Continuous Service terminates, then all of the unvested shares subject to this option shall become fully vested and exercisable immediately prior to the effective date of such Change in
Control. 


        2.    NUMBER OF SHARES AND EXERCISE PRICE.    The number of shares of
Common Stock subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan. 


        3.    METHOD OF PAYMENT.    Payment of the exercise price is due in
full upon exercise of all or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by
your Grant Notice, which may include one or more of the following: 



        (a)   In the Company's sole discretion at the time your option is exercised and provided that at the time of exercise the
Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds. 


        (b)   Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in  The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period required to avoid a charge to the
Company's reported earnings (generally six months) or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise. "Delivery" for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include
delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to
the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company's stock. 




        4.    WHOLE SHARES.    You may exercise your option only for whole
shares of Common Stock. 


        5.    SECURITIES LAW COMPLIANCE.    Notwithstanding anything to the
contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common
Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option must
also comply with other applicable 


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laws
and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations. 


        6.    TERM.    You may not exercise your option before the
commencement of its term or after its term expires. The term of your option commences on the Date of Grant and expires upon the earliest of the following: 



        (a)   three (3) months after the termination of your Continuous Service for any reason other than your Disability or death,
provided that if during any part of such three- (3-) month period your option is not exercisable solely because of the condition set forth in the preceding paragraph relating to "Securities Law
Compliance," your option shall not expire until the earlier of the Expiration Date or until it shall
have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service; 


        (b)   twelve (12) months after the termination of your Continuous Service due to your Disability; 


        (c)   eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after
your Continuous Service terminates; 


        (d)   the Expiration Date indicated in your Grant Notice; or 


        (e)   the day before the tenth (10th) anniversary of the Date of Grant. 




        7.    EXERCISE.    



        (a)   You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so
permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together with such additional documents as the Company may then require. 


        (b)   By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to
enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the lapse of any
substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise. 




        8.    TRANSFERABILITY.    Your option is not transferable, except (i) by will or by the laws
of descent and distribution, (ii) with the prior written approval of the Company, by instrument to an inter vivos or testamentary trust, in a form accepted by the Company, in which the option is to be
passed to beneficiaries upon the death of the trustor (settlor) and (iii) with the prior written approval of the Company, by gift, in a form accepted by the Company, to a permitted transferee under
Rule 701 of the Securities Act. 


        9.    OPTION NOT A SERVICE CONTRACT.    Your option is not an employment or service contract,
and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to
continue your
employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective shareholders, Boards of Directors, Officers or Employees to continue any relationship that
you might have as a Director or Consultant for the Company or an Affiliate. 


        10.    WITHHOLDING OBLIGATIONS.    



        (a)   At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you
hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision as directed by the Company 



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(including
by means of a "cashless exercise" pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent directed by the Company), for any sums
required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with your option. 



        (b)   The Company may, in its sole discretion, and in compliance with any applicable conditions or restrictions of law,
withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the
Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law. Any adverse consequences to you arising in connection with such share withholding
procedure shall be your sole responsibility. 


        (c)   You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are
satisfied. Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of
Common Stock or release such shares of Common Stock from any escrow provided for herein. 


        (d)   If any payment or benefit you would receive pursuant to a Change in Control from the Company or otherwise ("Payment")
would (i) constitute a "parachute payment" within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the "Excise
Tax"), then such Payment shall be equal to the Reduced Amount. The "Reduced Amount" shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject
to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes,
income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in your receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all
or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting "parachute payments" is necessary so that the Payment equals the Reduced Amount,
reduction shall occur in the following order unless you elect in writing a different order (provided, however,that such election shall be subject to
Company approval if made on
or after the effective date of the event that triggers the Payment): reduction of cash payments; cancellation of accelerated vesting of Stock Awards; reduction of employee benefits. In the event that
acceleration of vesting of Stock Award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of your Stock Awards (i.e., earliest
granted Stock Award cancelled last) unless you elect in writing a different order for cancellation. 




        The
accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations. If the
accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. 


The
accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to you and the Company within fifteen (15) calendar
days after the date on which your right to a Payment is triggered (if requested at that time by you or the Company) or such other time as requested by you or the Company. If the accounting firm
determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish you and the Company with an opinion reasonably
acceptable to you that no Excise Tax will be imposed with respect to such Payment. Any good faith 


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determinations
of the accounting firm made hereunder shall be final, binding and conclusive upon you and the Company. 


        11.    NOTICES.    Any notices provided for in your option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail,
postage prepaid, addressed to you at the last address you provided to the Company. 


        12.    GOVERNING PLAN DOCUMENT.    Your option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be
promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control. 


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