Exhibit 10.2


 


FAVRILLE, INC.

2001 EQUITY INCENTIVE PLAN


 


STOCK OPTION AGREEMENT

(INCENTIVE STOCK OPTION OR 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 2001
Equity Incentive 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.  Capitalized
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.


 


(a)           Special Acceleration Provisions.  Notwithstanding any other provisions of the
Plan to the contrary, if (i) a Change in Control occurs and (ii) within
the period beginning as of the effective date of such Change in Control and
ending twenty-four (24) months after the effective date of such Change in
Control, your Continuous Service terminates due to an involuntary termination
(not including death or Disability) without Cause or due to a Constructive
Termination, then, as of the date of termination of your Continuous Service,
the vesting and exercisability of your option shall be accelerated in full (and
any reacquisition or repurchase rights held by the Company with respect to such
option shall lapse in full, as appropriate).


 


For purposes of this subsection 1(a) only, Cause means the
occurrence of any of the following:  (i) your
conviction of any felony or any crime involving fraud or dishonesty which has a
material adverse effect on the Company and/or its Affiliates; (ii) your
participation (whether by affirmative act or omission) in a fraud, act of
dishonesty or other act of misconduct against the Company and/or its
Affiliates; (iii) conduct by you which, based upon a good faith and
reasonable factual investigation by the Board, demonstrates your gross
unfitness to serve; (iv) your violation of any fiduciary duty or duty of
loyalty owed to the Company and/or its Affiliates; (v) your breach of any
material term of any material contract between you and the Company and/or its
Affiliates which has a material adverse effect on the Company and/or its
Affiliates; (vi) your repeated violation of any material Company policy
which has a material adverse effect on the Company and/or its Affiliates; and (vii) your
violation of state or federal law in connection with the performance of your
job which has a material adverse effect on the Company and/or its
Affiliates.  Notwithstanding the
foregoing, your death or Disability shall not constitute Cause as set forth
herein.  The determination that a
termination is for Cause shall be by the Board in its sole and exclusive
judgment and discretion.


 


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For purposes of this subsection 1(a) only, Change in Control
means: (i) a sale of all or substantially all of the assets of the
Company; (ii) a merger or consolidation in which the Company is not the
surviving entity and in which the holders of the Company’s outstanding voting
stock immediately prior to such transaction own, immediately after such
transaction, securities representing less than fifty percent (50%) of the
voting power of the entity surviving such transaction or the surviving entity’s
parent; (iii) a reverse merger in which the Company is the surviving
entity but the shares of Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in
the form of securities of the surviving entity’s parent, cash or otherwise, and
in which the holders of the Company’s outstanding voting stock immediately
prior to such transaction own, immediately after such transaction, securities
representing less than fifty percent (50%) of the voting power of the Company
or the Company’s parent entity immediately after such transaction; or (iv) an
acquisition by any person, entity or group within the meaning of Section 13(d) or
14(d) of the Exchange Act, or any comparable successor provisions
(excluding any employee benefit plan, or related trust, sponsored or maintained
by the Company or subsidiary of the Company or other entity controlled by the
Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of Directors; provided, however, that
nothing in this Section 1(a) shall apply to a sale of assets, merger
or other transaction effected exclusively for the purpose of changing the
domicile of the Company.


 


For purposes of this subsection 1(a) only, Constructive
Termination means the occurrence of any of the following events, conditions or
actions taken by the Company without Cause and without your consent: (i) a
change in your employment responsibilities with the Company which represents a
material reduction in your level of responsibility other than a change in
title, (ii) a material reduction in your level of base salary, or (iii) a
relocation of your place of employment by more than fifty (50) miles.


 


Notwithstanding anything to the contrary in this subsection 1(a),
if your Continuous Service terminates due to an involuntary termination that is
for “Cause”, as such term is defined in the Plan, the vesting and
exercisability of your option shall not accelerate as would otherwise occur
pursuant to this subsection 1(a), and your option shall immediately
terminate as provided in subsection 6(d) below.


 


(b)           Parachute Payments.  If any payment or benefit you would receive
pursuant to a Change in Control (as defined in subsection 1(a) or the
Plan) 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 reduced 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


 


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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
unless the 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 the Company and you with an
opinion reasonably acceptable to you that no Excise Tax will be imposed with
respect to such Payment.  Any good faith
determinations of the accounting firm made hereunder shall be final, binding
and conclusive upon you and the Company.


 


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.


 


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


 


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Company’s reported earnings (generally six (6) 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 also must comply
with other applicable 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
Cause, Disability or death, provided that if during any part of such three- (3-)
month period you may not exercise your option 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)           immediately upon
the termination of your Continuous Service if for Cause (as defined in the
Plan);


 


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


 


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


 


If your option is an Incentive
Stock Option, note that to obtain the federal income tax advantages associated
with an Incentive Stock Option, the Code requires that at all times


 


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beginning on the date of grant
of your option and ending on the day three (3) months before the date of
your option’s exercise, you must be an employee of the Company or an Affiliate,
except in the event of your death or your permanent and total disability, as
defined in Section 22(e) of the Code. 
(The definition of disability in Section 22(e) of the Code is
different from the definition of the Disability under the Plan).  The Company has provided for extended
exercisability of your option under certain circumstances for your benefit but
cannot guarantee that your option will necessarily be treated as an Incentive
Stock Option if you continue to provide services to the Company or an Affiliate
as a Consultant or Director after your employment terminates or if you
otherwise exercise your option more than three (3) months after the date
your employment with the Company or an Affiliate terminates.


 


7.             EXERCISE.


 


(a)           You may exercise
the vested portion of your option 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, or (2) the disposition
of shares of Common Stock acquired upon such exercise.


 


(c)           If your option is
an Incentive Stock Option, by exercising your option you agree that you will
notify the Company in writing within fifteen (15) days after the date of any
disposition of any of the shares of the Common Stock issued upon exercise of
your option that occurs within two (2) years after the date of your option
grant or within one (1) year after such shares of Common Stock are
transferred upon exercise of your option.


 


8.             TRANSFERABILITY.


 


(a)           If your option is
an Incentive Stock Option, your option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you.  Notwithstanding the
foregoing, by delivering written notice to the Company, in a form satisfactory
to the Company, you may designate a third party who, in the event of your
death, shall thereafter be entitled to exercise your option.


 


(b)           If your option is a
Nonstatutory Stock Option, 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


 


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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
stockholders, 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
instructed by the Company (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 instructed 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 the
exercise of your option.


 


(b)           The Company may, in
its sole discretion, and in compliance with any applicable legal conditions or
restrictions, 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 (or such lower amount as may be necessary to avoid variable
award accounting).  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 unless such obligations are
satisfied.


 


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, except as expressly provided herein.


 


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