**Exhibit 10.1**

**EMPLOYMENT AGREEMENT**

**BY AND BETWEEN**

**FAVRILLE, INC.**

**AND**

**RICHARD G. GHALIE, M.D.**

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**TABLE OFCONTENTS**
| ** ** | ** ** | ** **                                               | ** ** | **PAGE**   |
|------------|------------|----------------------------------------------------------|------------|------------|
| ** ** | ** ** | ** **                                               | ** ** | ** ** |
| 1.         | ** ** | **EMPLOYMENT**                                           | ** ** | **1**      |
| ** ** | ** ** | ** **                                               | ** ** | ** ** |
| 2.         |       | LOYAL AND CONSCIENTIOUS PERFORMANCE; EXCLUSIVE  PROPERTY |       | 2          |
|       |       |                                                     |       |       |
| 3.         |       | COMPENSATION OF EXECUTIVE                                |       | 2          |
|       |       |                                                     |       |       |
| 4.         |       | TERMINATION                                              |       | 3          |
|       |       |                                                     |       |       |
| 5.         |       | CONFIDENTIAL AND PROPRIETARY INFORMATION                 |       | 6          |
|       |       |                                                     |       |       |
| 6.         |       | ASSIGNMENT AND BINDING EFFECT                            |       | 6          |
|       |       |                                                     |       |       |
| 7.         |       | SURVIVAL                                                 |       | 6          |
|       |       |                                                     |       |       |
| 8.         |       | NOTICES                                                  |       | 7          |
|       |       |                                                     |       |       |
| 9.         |       | CHOICE OF LAW                                            |       | 7          |
|       |       |                                                     |       |       |
| 10.        |       | INTEGRATION                                              |       | 7          |
|       |       |                                                     |       |       |
| 11.        |       | AMENDMENT                                                |       | 7          |
|       |       |                                                     |       |       |
| 12.        |       | WAIVER                                                   |       | 7          |
|       |       |                                                     |       |       |
| 13.        |       | SEVERABILITY                                             |       | 8          |
|       |       |                                                     |       |       |
| 14.        |       | INTERPRETATION; CONSTRUCTION                             |       | 8          |
|       |       |                                                     |       |       |
| 15.        |       | REPRESENTATIONS AND WARRANTIES                           |       | 8          |
|       |       |                                                     |       |       |
| 16.        |       | COUNTERPARTS                                             |       | 8          |
|       |       |                                                     |       |       |
| 17.        |       | REFERENCES                                               |       | 8          |
|       |       |                                                     |       |       |
| 18.        |       | ARBITRATION                                              |       | 8          |
|       |       |                                                     |       |       |
| 19.        |       | TRADE SECRETS OF OTHERS                                  |       | 8          |
|       |       |                                                     |       |       |
| 20.        |       | ADVERTISING; WAIVER                                      |       | 9          |

 

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**EMPLOYMENTAGREEMENT**

**THIS****EMPLOYMENTAGREEMENT** (the ***“Agreement”***) ismade and entered into effective as of May 14, 2007 (the ***“Effective Date”***) by and between **FAVRILLE, INC.**, aDelaware corporation (the ***“Company”***),and RICHARD GHALIE (***“Executive”***).  The Company and Executive are collectivelyreferred to herein as the ***“Parties****,**”*** and each is individually referred to herein as a ***“Party****.**”***

**RECITALS**

**A.           **The Company desires assurance of theassociation and services of Executive in order to retain Executive’s experience,skills, abilities, background and knowledge, and is willing to engage Executive’sservices on the terms and conditions set forth in this Agreement.

**B.           **Executive desires to be in the employ of theCompany and is willing to accept such employment on the terms and conditionsset forth in this Agreement.

**AGREEMENT**

In consideration of theforegoing recitals and the mutual promises and covenants herein contained, andfor other good and valuable consideration, the Parties, intending to be legallybound, agree as follows:

**1.     EMPLOYMENT.**

**1.1          Term.**  The Company hereby employs Executive, andExecutive hereby accepts employment by the Company, upon the terms andconditions set forth in this Agreement. The term of this Agreement shall begin on the Effective Date and shallcontinue until it is terminated pursuant to Section 4 (the ***“Term”***).  On the last day of the Term, Executive shallimmediately resign from all positions with the Company.  Notwithstanding anything herein to thecontrary, either Party may terminate Executive’s employment under thisAgreement at any time, with or without Cause (as defined in Subsection 4.5(b)),subject to the terms and conditions of Sections 4 and****5.

**1.2         ****Title.**  Executiveshall have the title of Chief Medical Officer of the Company and shall serve insuch other capacity or capacities as the Board of Directors of the Company (the***“Board”***)may prescribe from time to time. Executive shall report to the Chief Executive Officer of the Company(the ***“CEO”***)and the Board.

**1.3          Duties. **Executive shall do andperform all services, acts or things necessary or advisable to manage andconduct the business of the Company and that are normally associated with theposition of Chief Medical Officer, consistent with the bylaws of the Companyand as required by the CEO and the Board.

**1.4          Policies andPractices. **The employmentrelationship between the Parties shall be governed by the policies andpractices established by the Company and the Board.  Executive hereby acknowledges that Executivehas read the Company’s Employee Handbook, which, along with this Agreement,shall govern the terms and conditions of Executive’s

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employmentwith the Company.  In the event that theterms of this Agreement differ from or are in conflict with the Company’spolicies or practices or the Company’s Employee Handbook, the terms of thisAgreement shall control. Normal working hours are from 8:00 a.m. to5:00 p.m., Monday through Friday. As an exempt salaried employee, you willbe expected to work additional hours as required by the nature of your workassignments.

**1.5          Location**.  Unless the Parties otherwise agree inwriting, during the Term, Executive shall perform the services Executive isrequired to perform pursuant to this Agreement at the Company’s offices locatedin San Diego, California, or at any other place the Company maintains aprincipal office; *provided, however,*that the Company may from time to time require Executive to travel temporarilyto other locations in connection with the Company’s business.

**2.     LOYAL AND CONSCIENTIOUS PERFORMANCE; EXCLUSIVEPROPERTY.**

**2.1          Loyalty**.  During Executive’s employment by the Company,Executive shall devote Executive’s full business energies, interest, abilitiesand productive time to the proper and efficient performance of Executive’sduties under this Agreement.

**2.2         ****Exclusive Property.** Executive agrees that all business procured by Executive on behalf ofthe Company, and all Company-related business opportunities and plans madeknown to Executive, while employed by the Company are and shall remain theexclusive property of the Company.

**3.     COMPENSATIONOF EXECUTIVE.**

**3.1          Base Salary.**  The Company shall pay Executive a base salaryof $300,000 per year, less payroll deductions and all required withholdingspayable in regular periodic payments in accordance with Company policy.  Such base salary shall be subject to annualreview and prorated for any partial year of employment on the basis of a365-day fiscal year.

**3.2          Stock Options.**  Upon the commencement of Executive’semployment with the Company****and subject toapproval of the Board or the Compensation Committee and the terms of theCompany’s Amended and Restated 2001****EquityIncentive Plan, as may be amended from time to time (the ***“Plan”***), Executive will be granted a stockoption (the ***“Option”***)under the Plan to purchase shares of the Company’s common stock (the ***“Common Stock”***).  To the maximum extent possible, the Optionshall be an Incentive Stock Option as such term is defined in Section 422 (***“Section 422”***) of theInternal Revenue Code of 1986, as amended. The Option will be governed by and granted pursuant to the Plan and aseparate Grant Notice and Stock Option Agreement, in substantially the formattached hereto as **EXHIBIT A**,as may be amended from time to time upon the approval of the Board or theCompensation Committee.  The exerciseprice per share of the Option will be equal to the fair market value of theCommon Stock established on the date of grant subject to any limitations underSection 422 and approval by the Board or the Compensation Committee.  The Option will be subject to vesting overfour years so long as Executive provides Continuous Service (as defined in thePlan) to the Company or an Affiliate in accordance with the Plan, according tothe following schedule: 25% of the shares subject to the Option will vest onthe first anniversary of the date of grant and 1/48th of the sharessubject to the Option will vest monthly thereafter over the next three years.

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**3.3          Employment Taxes**.  All of Executive’s compensation shall be subjectto customary withholding taxes and any other employment taxes as are commonlyrequired to be collected or withheld by the Company.

**3.4         ****Benefits**.  Executive shall, in accordance with Companypolicy and the terms of the applicable plan documents, be eligible for thefollowing standard Company benefits: medical, dental and vision insurance, aswell as participation in the Company’s Section 125 flexible spending planand participation in the Company’s 401(k) plan, subject to the terms of thoseplans. Executive also shall, in accordance with Company policy and the terms ofthe applicable plan documents, be eligible to participate in benefits under anyexecutive benefit plan or arrangement which may be in effect from time to timeand made available to the Company’s executive or key management employees. TheCompany reserves the right to modify benefits from time to time as it deemsnecessary in its sole discretion. Executive will also be eligible for paid timeoff in accordance with the Company’s flexible “time-off” plan. Executive willaccrue flexible “time-off” at a rate of 25 days per year and will be entitledto 12 holidays per year. The Company reserves the right to modify its policiesfrom time to time as it deems necessary in its sole discretion.

**4.     TERMINATION.**

**4.1          Termination forComplete Disability**.  Executive’semployment with the Company shall terminate effective upon the date ofExecutive’s Complete Disability(as defined in Subsection****4.5(a)).

**4.2          Termination by theCompany**.  Executive’s employment withthe Company may be terminated by the Company as follows:

**(a)           For Cause**.  The Company may terminate Executive’semployment under this Agreement at any time for ***“Cause”*** (as defined in Subsection****4.5(b)) by delivery of written notice to Executive specifyingthe Cause or Causes relied upon for such termination.  Any notice of termination given pursuant tothis Subsection 4.2(a) shall effect termination as of the date specified insuch notice or, in the event no such date is specified, two business days afterwritten notice is given to Executive.

**(b)           Without Cause**.  The Company may terminate Executive’semployment under this Agreement at any time and for any reason by delivery ofwritten notice of such termination to Executive.  Any notice of termination given pursuant tothis Subsection****4.2(b) shall effect terminationas of the date specified in such notice or, in the event no such date isspecified, two weeks after written notice is given to Executive.

**4.3          Termination byExecutive**.  Executivemay terminate Executive’s employment with the Company at any time.

**4.4          Compensation uponTermination**.

**(a)           Death or CompleteDisability**.  IfExecutive’s employment by the Company is terminated by Executive’s death orComplete Disability, the Company shall pay to Executive’s heirs or Executive,as applicable, Executive’s base salary and accrued and unused

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vacationbenefits earned through the date of termination at the rate in effect at thetime of such termination, less standard deductions and withholdings, and the Companyshall thereafter have no further obligations to Executive and/or Executive’sheirs under this Agreement.

**(b)           With Cause. **If Executive’s employment isterminated by the Company for Cause, the Company shall pay Executive’s basesalary and accrued and unused vacation benefits earned through the date oftermination at the rate in effect at the time of such termination, lessstandard deductions and withholdings, and the Company shall thereafter have nofurther obligations to Executive under this Agreement.

**(c)           Without Cause.  **If the Company terminatesExecutive’s employment without Cause, the Company shall pay Executive’s basesalary and accrued and unused vacation earned through the date of terminationat the rate in effect at the time of such termination, less standard deductionsand withholdings.  In addition, subjectto the limitations set forth in Subsection 4.4(d) and upon Executive’sfurnishing to the Company an effective release and waiver of claims, insubstantially the form attached hereto as **EXHIBIT B** (the ***“Release and Waiver”***), Executive alsoshall be entitled to:

**i.             **The equivalentof 1/12 of Executive’s annual base salary in effect at the time of termination,less standard deductions and withholdings, to be paid each month over a periodof nine months after the date of termination (the “Severance Period”), pursuant to theCompany’s standard payroll practices, with each such payment being treated as aseparate “payment” for purposes of Code Section 409A and Treasury RegulationSections 1.409A-1(b)(4) and 1.409A-2(b)(2)(iii). Notwithstanding the forgoing,such payments shall be made in a manner that complies with the requirements ofCode Section 409A, which may include, without limitation, deferring suchpayments for 6 months after Executive’s termination of employment;

**ii.           **In the eventExecutive elects continued coverage under the Consolidated Omnibus BudgetReconciliation Act of 1985, as amended (***“COBRA”***), the Company shall reimburseExecutive for the same portion of Executive’s COBRA health insurance premiumthat it paid during Executive’s employment up until the earlier of either(i) the last day of the Severance Period or (ii) the date on whichExecutive begins full-time employment with another company, organization orbusiness entity; and

**iii.          **The acceleratedvesting of the portion of any outstanding option to purchase Common Stock heldby Executive on the date of termination that would have otherwise vested duringthe Severance Period, so that each such portion is vested and exercisable as ofthe date of termination to the extent such portion would otherwise becomevested and exercisable as of the end of the Severance Period.

**(d)           Termination ofObligations**. Notwithstanding any provisions in this Agreement to the contrary,including any provisions contained in this Subsection****4.4,the Company’s obligations, and Executive’s rights, pursuant to Subsection****4.4(c) shall cease and be rendered a nullity immediatelyshould Executive violate any provision of Section 2 and Section 5, or shouldExecutive violate the terms and conditions of either Executive’s Proprietary

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Informationand Inventions Agreement or Nondisclosure Agreement with the Company (discussedin Subsection 5.1).

**4.5          Definitions**.  For purposes of this Agreement, the followingterms shall have the following meanings:

**(a)           Complete Disability**.  ***“CompleteDisability”***shall mean the inability of Executive to performExecutive’s duties under this Agreement because Executive has becomepermanently disabled within the meaning of any policy of disability incomeinsurance covering employees of the Company then in force.  In the event the Company has no policy ofdisability income insurance covering employees of the Company in force whenExecutive becomes disabled, the term ***“CompleteDisability”***shall mean the inability of Executive to performExecutive’s duties under this Agreement by reason of any incapacity, physicalor mental, that the Board, based upon medical advice or an opinion provided bya licensed physician acceptable to the Board, determines to have incapacitatedExecutive from satisfactorily performing all of Executive’s usual services forthe Company for a period of at least 120 days during any 12-month period(whether or not consecutive).  Based uponsuch medical advice or opinion, the determination of the Board shall be finaland binding and the date such determination is made shall be the date of suchComplete Disability for purposes of this Agreement.

**(b)           For Cause**.  ***“Cause”***for the Company to terminate Executive’s employment hereunder shall meanthe occurrence of any of the following events:

**(i)           **Executive’s conviction of any felony or any crime involving fraud ordishonesty;

**(ii)          **Executive’s participation (whether by affirmative act or omission) in afraud, act of dishonesty or other act of misconduct against the Company and/oran Affiliate;

**(iii)        **Conduct by Executive which, based upon a good faith and reasonablefactual investigation by the Board, demonstrates Executive’s gross unfitness toserve;

**(iv)         **Executive’s violation of any fiduciary duty or duty of loyalty owed tothe Company and/or an Affiliate;

**(v)           **Executive’s breach of any material term of any material contract betweenExecutive and the Company and/or an Affiliate;

**(vi)         **Executive’s violation of any material Company policy; and

**(vii)        **Executive’s violation of state or federal law in connection with theperformance of Executive’s job.

The determination that a termination is for Cause shallbe made by the Board in its sole and exclusive judgment and discretion.

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**5.     CONFIDENTIAL AND PROPRIETARY INFORMATION.**

**5.1         **As a conditionof employment, Executive agrees to execute and abide by the terms ofProprietary Information and Inventions Agreement, in substantially the formattached hereto as **EXHIBITC**, and a Nondisclosure Agreement, in substantially the form attached heretoas **EXHIBIT D**.

**5.2         **Executiverecognizes that Executive’s employment with the Company will involve contactwith information of substantial value to the Company that is not generallyknown in the trade and that gives the Company an advantage over its competitorswho do not know or use it, including but not limited to, techniques, designs,drawings, processes, inventions know how, strategies, marketing, and/oradvertising plans or arrangements, developments, equipment, prototypes, sales,supplier, service provider, vendor, distributor and customer information, andbusiness and financial information relating to the business, products,services, practices and techniques of the Company (hereinafter referred to as ***“Confidential and ProprietaryInformation”***).  Executivewill at all times regard and preserve as confidential such Confidential andProprietary Information obtained by Executive from whatever source and willnot, either during Executive’s employment with the Company or thereafter,publish or disclose any part of such Confidential and Proprietary Informationin any manner at any time, or use the same except on behalf of the Company,without the prior written consent of the Company.

**6.    ****ASSIGNMENTAND BINDING EFFECT.**  Neither thisAgreement nor any rights or obligations hereunder shall be assignable byExecutive.  This Agreement shall bebinding upon and inure to the benefit of the Company and its successors,assigns and legal representatives.

**7.    ****SURVIVAL. **Subsections 4.4(c) and4.4(d) and Sections 5, 6, 7, 8, 9, 18 and 19 shall survive the termination ofthis Agreement.

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**8.    ****NOTICES. **All notices or demands ofany kind required or permitted to be given by the Company or Executive underthis Agreement shall be given in writing and shall be personally delivered (andreceipted for) or faxed during normal business hours or mailed by certifiedmail, return receipt requested, postage prepaid, addressed as follows:

If to the Company:

Favrille, Inc.

10445 Pacific Center Court

San Diego, CA  92121

Phone: (858) 526-8000

Fax: (858) 597-7040

Attn:  ChiefFinancial Officer

If to Executive:

Richard G. Ghalie, M.D.

4755 Natalie Drive

SanDiego, CA 92115

Any such written notice shall bedeemed given on the earlier of the date on which such notice is personallydelivered or three days after its deposit in the United States mail asspecified above.  Either Party may changeits address for notices by giving notice to the other Party in the mannerspecified in this Section 8.

**9.    ****CHOICE OFLAW. **This Agreement is made inSan Diego, California.  This Agreementshall be construed and interpreted in accordance with the internal laws of theState of California, excluding its conflicts of laws principles.

**10. ****INTEGRATION. **Except as provided inExecutive’s Proprietary Information and Inventions Agreement and NondisclosureAgreement with the Company, the Plan and the related Plan documents, thisAgreement, including **EXHIBITB** hereto, contains the complete, final and exclusive agreement ofthe Parties relating to the terms and conditions of Executive’s employment withthe Company and the termination of Executive’s employment, and supersedes allprior and contemporaneous oral and written employment agreements orarrangements between the Parties. To the extent this Agreement conflicts withthe Proprietary Information and Inventions Agreement or the NondisclosureAgreement, the terms of such Proprietary Information and Inventions Agreementor Nondisclosure Agreement, respectively, shall control.

**11. ****AMENDMENT.**  This Agreement cannot be amended or modifiedexcept by a written agreement signed by Executive and the Company.

**12. ****WAIVER.**  No term, covenant or condition of thisAgreement or any breach thereof shall be deemed waived, except with the writtenconsent of the Party against whom the wavier is claimed, and any waiver or anysuch term, covenant, condition or breach shall not be deemed to be a waiver ofany preceding or succeeding breach of the same or any other term, covenant,condition or breach.

**13. ****SEVERABILITY.**  The finding by a court of competentjurisdiction of the unenforceability, invalidity or illegality of any provisionof this Agreement shall not render any other provision of this Agreementunenforceable, invalid or illegal.  Suchcourt shall have the

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authority to modify or replace the invalid or unenforceable term orprovision with a valid and enforceable term or provision that most accuratelyrepresents the Parties’ intention withrespect to the invalid or unenforceable term or provision.

**14. ****INTERPRETATION;CONSTRUCTION.**  The headingsset forth in this Agreement are for convenience of reference only and shall notbe used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing theCompany, but Executive has been encouraged to consult with, and has had theopportunity to consult with, Executive’s own independent counsel and taxadvisors with respect to the terms of this Agreement.  The Parties acknowledge that each Party andits counsel have reviewed and revised, or had an opportunity to review andrevise, this Agreement, and the normal rule of construction to the effect thatany ambiguities are to be resolved against the drafting party shall not beemployed in the interpretation of this Agreement.

**15. ****REPRESENTATIONSAND WARRANTIES****.**  Executive represents and warrants thatExecutive is not restricted or prohibited, contractually or otherwise, fromentering into and performing each of the terms and covenants contained in thisAgreement, and that Executive’s execution and performance of this Agreementwill not violate or breach any other agreements between Executive and any otherperson or entity.

**16. ****COUNTERPARTS.**  This Agreement may be executed in twocounterparts, each of which shall be deemed an original, both of which togethershall constitute one and the same instrument.

**17. ****REFERENCES.**  References herein to a ***“Section”*** or a ***“Subsection”*** shall beto a Section or a Subsection, respectively, of this Agreement.

**18. ****ARBITRATION. **To ensure the rapid andeconomical resolution of disputes that may arise in connection with Executive’semployment with the Company, the Parties agree that any and all disputes,claims, or causes of action, in law or equity, arising from or relating toExecutive’s employment, or the termination of that employment, will beresolved, to the fullest extent permitted by law, by final, binding andconfidential arbitration in San Diego, California conducted by the JudicialArbitration and Mediation Services/Endispute, Inc. (***“JAMS”***), or its successors, under the thencurrent rules of JAMS for employment disputes; *providedthat* the arbitrator shall: (a) have the authority to compel adequate discovery for the resolutionof the dispute and to award such relief as would otherwise be permitted by law;and (b) issue a written arbitration decision including the arbitrator’sessential findings and conclusions and a statement of the award.  Each Party shall be entitled to all rightsand remedies that such Party would be entitled to pursue in a court of law.  The Company shall pay all arbitrationfees.  Nothing in this Agreement isintended to prevent either Party from obtaining injunctive relief in court toprevent irreparable harm pending the conclusion of any such arbitration.

**19. ****TRADESECRETS OF OTHERS.**  It is theunderstanding of the Parties that Executive shall not divulge to the Companyand/or an Affiliate any confidential information or trade secrets belonging toothers, including Executive’s former employers, nor shall the Company and/or anAffiliate seek to elicit from Executive any such information.  Consistent with the foregoing,

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Executive shall not provide to the Company and/or an Affiliate, and theCompany and/or an Affiliate shall not request, any documents or copies ofdocuments containing such information.

**20. ****ADVERTISING;WAIVER.**  Executiveagrees to permit the Company and/or an Affiliate, and persons or otherorganizations authorized by the Company and/or an Affiliate, to use, publishand distribute advertising or sales promotional literature concerning theproducts and/or services of the Company and/or an Affiliate, or the machineryand equipment used in the provision thereof, in which Executive’s name and/orpictures of Executive taken in the course of Executive’s provision of servicesto the Company and/or an Affiliate, appear. Executive hereby waives and releases any claim or right Executive mayotherwise have arising out of such use, publication or distribution.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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**IN WITNESS WHEREOF**,the Parties have executed this Agreement as of the date first above written.

**FAVRILLE, INC.**
| By:            | /s/ John P.  Longenecker               |   |   |   |
|----------------|----------------------------------------|--------|--------|--------|
| Name:          | John P.  Longenecker, Ph.D.            |   |   |   |
| Its:           | President and  Chief Executive Officer |   |   |   |
|           |                                   |   |
| Dated:         | /s/April 30,  2007                     |   |   |   |
| ** **     |                                   |   |
| ** **     |                                   |   |
| **Executive:** |                                   |   |
| ** **     |                                   |   |
| /s/            | Richard G.  Ghalie, M.D.               |   |   |   |
| [EXECUTIVE]    |                                   |   |
|           |                                   |   |
|           |                                   |   |
| Dated:         | May 2, 2007                            |   |   |   |
|                |                                        |        |        |        |  |  |  |  |  |  |  |

 

[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]

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**EXHIBIT A**

**FORM OFSTOCK OPTION AGREEMENT**

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**EXHIBIT B**

**RELEASEAND WAIVER OF CLAIMS**

Inconsideration of the payments and other benefits set forth in Section 4 of theEmployment Agreement dated                       ,to which this form is attached, I, RICHARDG. GHALIE, M.D., hereby furnish **FAVRILLE, INC.**, a Delaware corporation (the ***“Company”***), withthe following release and waiver (***“Releaseand Waiver”***).

Inexchange for the consideration provided to me by the Employment Agreement thatI am not otherwise entitled to receive, I hereby generally and completelyrelease the Company and its directors, officers, employees, shareholders,partners, agents, attorneys, predecessors, successors, parent and subsidiaryentities, insurers, Affiliates, and assigns from any and all claims,liabilities and obligations, both known and unknown, that arise out of or arein any way related to events, acts, conduct, or omissions occurring prior to mysigning this Release and Waiver.  Thisgeneral release includes, but is not limited to: (1) all claims arising out ofor in any way related to my employment with the Company or the termination ofthat employment; (2) all claims related to my compensation or benefits from theCompany, including, but not limited to, salary, bonuses, commissions, vacationpay, expense reimbursements, severance pay, fringe benefits, stock, stockoptions, or any other ownership interests in the Company; (3) all claimsfor breach of contract, wrongful termination, and breach of the impliedcovenant of good faith and fair dealing; (4) all tort claims, including,but not limited to, claims for fraud, defamation, emotional distress, anddischarge in violation of public policy; and (5) all federal, state, and localstatutory claims, including, but not limited to, claims for discrimination,harassment, retaliation, attorneys’ fees, or other claims arising under thefederal Civil Rights Act of 1964 (as amended), the federal Americans withDisabilities Act of 1990, the federal Age Discrimination in Employment Act of1967 (as amended) (***“ADEA”***),and the California Fair Employment and Housing Act (as amended).

Ialso acknowledge that I have read and understand Section 1542 of the CaliforniaCivil Code which reads as follows:  “**A general release does not extend to claims which the creditor does notknow or suspect to exist in his favor at the time of executing the release,which if known by him must have materially affected his settlement with thedebtor.**”****I herebyexpressly waive and relinquish all rights and benefits under that section andany law of any jurisdiction of similar effect with respect to any claims I mayhave against the Company.

Iacknowledge that, among other rights, I am waiving and releasing any rights Imay have under ADEA, that this Release and Waiver is knowing and voluntary, andthat the consideration given for this Release and Waiver is in addition toanything of value to which I was already entitled as an executive of theCompany.  If I am 40 years of age orolder upon execution of this Release and Waiver, I further acknowledge that Ihave been advised, as required by the Older Workers Benefit Protection Act,that:  (a) the release and waiver grantedherein does not relate to claims under the ADEA which may arise after thisRelease and Waiver is executed; (b) I have the right to consult with anattorney prior to executing this Release and Waiver (although I may choosevoluntarily not to do so); and (c) I have twenty-one (21) days from the date oftermination of my employment with the Company in which to consider this Releaseand Waiver (although I may choose voluntarily to execute this Release andWaiver earlier); (d) I have seven (7) days following the execution of thisRelease and Waiver to revoke my consent to this Release and Waiver; and (e)this Release and Waiver shall not be effective until the seven (7) dayrevocation period has expired.

If Iam less than 40 years of age upon execution of this Release and Waiver, Iacknowledge that I have the right to consult with an attorney prior toexecuting this Release and Waiver (although I may choose voluntarily not to doso); and (c) I have five (5) days from the date of termination of my employmentwith the Company in which to consider this Release and Waiver (although I maychoose voluntarily to execute this Release and Waiver earlier).

I acknowledge my continuingobligations under my Proprietary Information and Inventions Agreement, a copyof which is attached hereto (the ***“Proprietary Agreement”***).  Pursuant to the Proprietary Information andInventions Agreement I understand that among other things, I must not use ordisclose any confidential or proprietary information of the Company and I mustimmediately return all Company property and documents (including allembodiments of proprietary information) and all copies thereof in my possessionor control.  I understand and agree thatmy right to the severance pay I am receiving in exchange for my agreement tothe terms of this Release and Waiver is contingent upon my continued compliancewith my Proprietary Information & Inventions Agreement.

This Release and Waiver and theProprietary Agreement constitute the complete, final and exclusive embodimentof the entire agreement between the Company and me with regard to the subjectmatter hereof.  I am not

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relying on any promise or representation by theCompany that is not expressly stated herein. This Release and Waiver may only be modified by a writing signed by bothme and a duly authorized officer of the Company.
| Date:      |       |                        | By: |   |
|------------|------------|-----------------------------|-----|--------|
| ** ** | ** ** | **RICHARD G. GHALIE, M.D.** |

 

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**EXHIBIT C**

**FAVRILLE,INC.**

**PROPRIETARY INFORMATION ANDINVENTIONS AGREEMENT**

In consideration of myemployment or continued employment by FAVRILLE,INC.**,**a Delaware corporation the **“Company”**), and the compensation now and hereafter paid tome, I, RICHARD G. GHALIE, M.D.,hereby agree as follows:

**1.             NONDISCLOSURE**

**1.1          Recognition ofCompany’s Rights; Nondisclosure**.  At all times during my employment andthereafter, I will hold in strictest confidence and will not disclose, use,lecture upon or publish any of the Company’s and/or its Affiliates’ ProprietaryInformation (defined below), except as such disclosure, use or publication maybe required in connection with my work for the Company, or unless an officer ofthe Company expressly authorizes such in writing.  I will obtain Company’s written approvalbefore publishing or submitting for publication any material (written, verbal,or otherwise) that relates to my work at Company and/or incorporates anyProprietary Information.  I hereby assignto the Company any rights I may have or acquire in such Proprietary Informationand recognize that all Proprietary Information shall be the sole property ofthe Company and its assigns.  Forpurposes of this Agreement,  **“*Affiliate*”** means, withrespect to any specific entity, any other entity that, directly or indirectly,through one or more intermediaries, controls, is controlled by or is undercommon control with such specified entity.

**1.2          ProprietaryInformation**.  The term “**Proprietary Information**” shall mean any and all confidentialand/or proprietary knowledge, data or information of the Company and/or itsAffiliates.  By way of illustration butnot limitation, “**Proprietary Information**” includes(a) trade secrets, inventions, mask works, ideas, processes, formulas,source and object codes, data, programs, other works of authorship, know-how,improvements, discoveries, developments, designs and techniques (hereinaftercollectively referred to as “**Inventions**”);and (b) information regarding plans for research, development, new products,marketing and selling, business plans, budgets and unpublished financialstatements, licenses, prices and costs, suppliers and customers; and (c)information regarding the skills and compensation of other employees of theCompany and/or its Affiliates. Notwithstanding the foregoing, it is understood that, at all such times,I am free to use information which is generally known in the trade or industry,which is not gained as result of a breach of this Agreement, and my own, skill,knowledge, know-how and experience to whatever extent and in whichever way Iwish.

**1.3          Third PartyInformation.**  Iunderstand, in addition, that the Company has received and in the future willreceive from third parties confidential or proprietary information (**“Third**Party**Information”**)subject to a duty on the Company’s part to maintain the confidentiality of suchinformation and to use it only for certain limited purposes.  During the term of my employment andthereafter, I will hold Third Party Information in the strictest confidence andwill not disclose to anyone (other than Company personnel who need to know suchinformation in connection with their work for the Company) or use, except inconnection with my work for the Company, Third Party Information unless expresslyauthorized by an officer of the Company in writing.

**1.4          No Improper Use ofInformation of Prior Employers and Others.**  During my employment by the Company I willnot improperly use or disclose any confidential information or trade secrets,if any, of any former employer or any other person to whom I have an obligationof confidentiality, and I will not bring onto the premises of the Company anyunpublished documents or any property belonging to any former employer or anyother person to whom I have an obligation of confidentiality unless consentedto in writing by that former employer or person.  I will use in the performance of my dutiesonly information which is generally known and used by persons with training andexperience comparable to my own, which is common knowledge in the industry orotherwise legally in the public domain, or which is otherwise provided ordeveloped by the Company.

**2.             ASSIGNMENT OF INVENTIONS.**

**2.1          Proprietary Rights.**  The term **“Proprietary Rights”**shallmean all trade secret, patent, copyright, mask work and other intellectualproperty rights throughout the world.

**2.2          Prior Inventions.**  Inventions, if any, patented or unpatented,which I made prior to the commencement of my employment with the Company areexcluded from the scope of this Agreement. To preclude any possible uncertainty, I have set forth on

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Exhibit C-2 (Previous Inventions) attached hereto a complete listof all Inventions that I have, alone or jointly with others, conceived,developed or reduced to practice or caused to be conceived, developed orreduced to practice prior to the commencement of my employment with theCompany, that I consider to be my property or the property of third parties andthat I wish to have excluded from the scope of this Agreement (collectivelyreferred to as **“Prior Inventions”**).  If disclosure of any such Prior Inventionwould cause me to violate any prior confidentiality agreement, I understandthat I am not to list such Prior Inventions in Exhibit C-2 but am only todisclose a cursory name for each such invention, a listing of the party(ies) towhom it belongs and the fact that full disclosure as to such inventions has notbeen made for that reason.  A space isprovided on Exhibit C-2 for such purpose. If no such disclosure is attached, I represent that there are no PriorInventions.  If, in the course of myemployment with the Company, I incorporate a Prior Invention into a Companyproduct, process or machine, the Company is hereby granted and shall have anonexclusive, royalty-free, irrevocable, perpetual, worldwide license (withrights to sublicense through multiple tiers of sublicensees) to make, havemade, modify, use and sell such Prior Invention.  Notwithstanding the foregoing, I agree that Iwill not incorporate, or permit to be incorporated, Prior Inventions in anyCompany Inventions without the Company’s prior written consent.

**2.3          Assignment ofInventions.**  Subject toSections****2.4 and 2.6, I hereby assign and agreeto assign in the future (when any such Inventions or Proprietary Rights arefirst reduced to practice or first fixed in a tangible medium, as applicable)to the Company all my right, title and interest in and to any and allInventions (and all Proprietary Rights with respect thereto) whether or notpatentable or registrable under copyright or similar statutes, made orconceived or reduced to practice or learned by me, either alone or jointly withothers, during the period of my employment with the Company.  Inventions assigned to the Company, or to athird party as directed by the Company pursuant to this Section** **2, are hereinafter referred to as **“Company**Inventions”**.

**2.4          NonassignableInventions.**  ThisAgreement does not apply to an Invention which qualifies fully as anonassignable Invention under Section** **2870 ofthe California Labor Code (hereinafter **“Section* *2870”**). I have reviewed the notification on Exhibit C-1 (Limited ExclusionNotification) and agree that my signature acknowledges receipt of thenotification.

**2.5          Obligation to KeepCompany Informed.**  During theperiod of my employment and for six (6) months after termination of myemployment with the Company, I will promptly disclose to the Company fully andin writing all Inventions authored, conceived or reduced to practice by me,either alone or jointly with others.  Inaddition, I will promptly disclose to the Company all patent applications filedby me or on my behalf within a year after termination of employment.  At the time of each such disclosure, I willadvise the Company in writing of any Inventions that I believe fully qualifyfor protection under Section 2870; and I will at that time provide to theCompany in writing all evidence necessary to substantiate that belief.  The Company will keep in confidence and willnot use for any purpose or disclose to third parties without my consent anyconfidential information disclosed in writing to the Company pursuant to thisAgreement relating to Inventions that qualify fully for protection under theprovisions of Section 2870.  I willpreserve the confidentiality of any Invention that does not fully qualify forprotection under Section 2870.

**2.6          Government or ThirdParty.**  I also agree to assign all myright, title and interest in and to any particular Company Invention to a thirdparty, including without limitation the United States, as directed by theCompany.

**2.7          Works for Hire.**  I acknowledge that all original works ofauthorship which are made by me (solely or jointly with others) within thescope of my employment and which are protectable by copyright are **“works made for hire”**, pursuant to United States CopyrightAct (17 U.S.C., Section 101).

**2.8          Enforcement ofProprietary Rights.**  I willassist the Company in every proper way to obtain, and from time to timeenforce, United States and foreign Proprietary Rights relating to CompanyInventions in any and all countries.  Tothat end I will execute, verify and deliver such documents and perform suchother acts (including appearances as a witness) as the Company may reasonably requestfor use in applying for, obtaining, perfecting, evidencing, sustaining andenforcing such Proprietary Rights and the assignment thereof.  In addition, I will execute, verify anddeliver assignments of such Proprietary Rights to the Company or its designee.  My obligation to assist the Company withrespect to Proprietary Rights relating to such Company Inventions in any andall countries shall continue beyond the termination of my employment, but theCompany shall compensate me at a reasonable rate after my termination for thetime actually spent by me at the Company’s request on such assistance.

In the event theCompany is unable for any reason, after reasonable effort, to secure mysignature on any

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document needed inconnection with the actions specified in the preceding paragraph, I herebyirrevocably designate and appoint the Company and its duly authorized officersand agents as my agent and attorney in fact, which appointment is coupled withan interest, to act for and in my behalf to execute, verify and file any suchdocuments and to do all other lawfully permitted acts to further the purposesof the preceding paragraph with the same legal force and effect as if executedby me.  I hereby waive and quitclaim tothe Company any and all claims, of any nature whatsoever, which I now or mayhereafter have for infringement of any Proprietary Rights assigned hereunder tothe Company.

**3.             RECORDS.**  I agree to keep and maintain adequate andcurrent records (in the form of notes, sketches, drawings and in any other formthat may be required by the Company) of all Proprietary Information developedby me and all Inventions made by me during the period of my employment at theCompany, which records shall be available to and remain the sole property ofthe Company at all times.

**4.             ADDITIONAL ACTIVITIES.**  I agree that during the period of myemployment by the Company I will not, without the Company’s express writtenconsent, engage in any employment or business activity which is competitivewith, or would otherwise conflict with, my employment by the Company.  I agree further that for the period of myemployment by the Company and for one (l) year after the date of termination ofmy employment by the Company I will not induce any employee of the Company toleave the employ of the Company.

**5.             NO CONFLICTING OBLIGATION.**  I represent that my performance of all theterms of this Agreement and as an executive of the Company does not and willnot breach any agreement to keep in confidence information acquired by me inconfidence or in trust prior to my employment by the Company.  I have not entered into, and I agree I willnot enter into, any agreement either written or oral in conflict herewith.

**6.             RETURN OF COMPANY DOCUMENTS.**  When I leave the employ of the Company, Iwill deliver to the Company any and all drawings, notes, memoranda,specifications, devices, formulas, and documents, together with all copiesthereof, and any other material containing or disclosing any CompanyInventions, Third Party Information or Proprietary Information of the Company.  I further agree that any property situated onthe Company’s premises and owned by the Company, including disks and otherstorage media, filing cabinets or other work areas, is subject to inspection byCompany personnel at any time with or without notice.  Prior to leaving, I will cooperate with theCompany in completing and signing the Company’s termination statement.

**7.             LEGAL AND EQUITABLE REMEDIES.**  Because my services are personal and uniqueand because I may have access to and become acquainted with the ProprietaryInformation of the Company, the Company shall have the right to enforce thisAgreement and any of its provisions by injunction, specific performance orother equitable relief, without bond and without prejudice to any other rightsand remedies that the Company may have for a breach of this Agreement.

**8.             NOTICES.**  Any notices required or permitted hereundershall be given to the appropriate party at the address specified below or atsuch other address as the Party shall specify in writing.  Such notice shall be deemed given uponpersonal delivery to the appropriate address or if sent by certified orregistered mail, three (3) days after the date of mailing.

**9.             NOTIFICATION OF NEW EMPLOYER.**  In the event that I leave the employ of theCompany, I hereby consent to the notification of my new employer of my rightsand obligations under this Agreement.

**10.          GENERAL PROVISIONS.**

**10.1        Governing Law; Consentto Personal Jurisdiction.**  ThisAgreement will be governed by and construed according to the laws of the Stateof California, as such laws are applied to agreements entered into and to beperformed entirely within California between California residents.  I hereby expressly consent to the personaljurisdiction of the state and federal courts located in San Diego County,California for any lawsuit filed there against me by Company arising from orrelated to this Agreement.

**10.2        Severability.**  In case any one or more of the provisionscontained in this Agreement shall, for any reason, be held to be invalid,illegal or unenforceable in any respect, such invalidity, illegality orunenforceability shall not affect the other provisions of this Agreement, andthis Agreement shall be construed as if such invalid, illegal or unenforceableprovision had never been contained herein. If moreover, any one or more of the provisions contained in thisAgreement shall for any reason be held to be excessively broad as to duration,geographical scope, activity or subject, it shall be construed by limiting andreducing it, so as to be enforceable to the extent compatible with theapplicable law as it shall then appear.

**10.3        Successors andAssigns.**  ThisAgreement will be binding upon my heirs, executors, administrators and otherlegal representatives and will

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be for the benefit of the Company, its successors, and its assigns.

**10.4        Survival.**  The provisions of this Agreement shallsurvive the termination of my employment and the assignment of this Agreementby the Company to any successor in interest or other assignee.

**10.5        Employment.**  I agree and understand that nothing in thisAgreement shall confer any right with respect to continuation of employment bythe Company, nor shall it interfere in any way with my right or the Company’sright to terminate my employment at any time, with or without Cause.

**10.6        Waiver.**  No waiver by the Company of any breach ofthis Agreement shall be a waiver of any preceding or succeeding breach.  No waiver by the Company of any right underthis Agreement shall be construed as a waiver of any other right.  The Company shall not be required to givenotice to enforce strict adherence to all terms of this Agreement.

**10.7        Entire Agreement.**  The obligations pursuant to Sections****1 and 2 of this Agreement shall apply to any time duringwhich I was previously employed, or am in the future employed, by the Companyas a consultant if no other agreement governs nondisclosure and assignment ofinventions during such period.  ThisAgreement is the final, complete and exclusive agreement of the Parties withrespect to the subject matter hereof and supersedes and merges all priordiscussions between us.  No modificationof or amendment to this Agreement, nor any waiver of any rights under thisAgreement, will be effective unless in writing and signed by the Party to becharged.  Any subsequent change orchanges in my duties, salary or compensation will not affect the validity orscope of this Agreement.

This Agreementshall be effective as of the first day of my employment with the Company,namely:  

**I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS.  I HAVE COMPLETELY FILLED OUT EXHIBIT C-1TO THIS AGREEMENT.**
| Dated:                       |   |   |   |
|------------------------------|--------|--------|--------|
| ** **                   |   |   |
| ** **                   |   |   |
| **(Signature)**              |   |   |
| ** **                   |   |   |
| ** **                   |   |   |
| **Richard  G. Ghalie, M.D.** |   |   |
| ** **                   |   |   |
| **ACCEPTED  AND AGREED TO:** |   |   |
| ** **                   |   |   |
| **FAVRILLE,  INC.**          |   |   |
| 10445 Pacific  Center Court  |   |   |
| San Diego, CA  92121         |   |   |
|                         |   |   |
| By:                          |   |   |   |
|                         |   |   |
| Title:                       |   |   |   |
|                         |   |   |
| Dated:                       |   |   |   |
|                              |        |        |        |  |  |

 

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**EXHIBIT C-1**

**LIMITED EXCLUSION NOTIFICATION**

**THIS IS TO NOTIFY EXECUTIVE**in accordance withSection 2872 of the California Labor Code that the foregoing Agreement betweenExecutive and the Company does not require Executive to assign or offer toassign to the Company any invention that Executive developed entirely on yourown time without using the Company’s equipment, supplies, facilities or tradesecret information except for those inventions that either:

**1.**                                       Relate at the time of conception or reductionto practice of the invention to the Company’s business, or actual ordemonstrably anticipated research or development of the Company;

**2.**             Result from any work performed by Executive for theCompany.

To the extent aprovision in the foregoing Agreement purports to require Executive to assign aninvention otherwise excluded from the preceding paragraph, the provision isagainst the public policy of this state and is unenforceable.

This limitedexclusion does not apply to any patent or invention covered by a contractbetween the Company and the United States or any of its agencies requiring fulltitle to such patent or invention to be in the United States.

**I ACKNOWLEDGE RECEIPT**of a copy of this notification.
|                                      |        |
|--------------------------------------|-------------|
|                                      | [EXECUTIVE] |
|                                 |        |
|                                 | Date:       |   |
|                                 |        |
| **WITNESSED BY:**                    |        |
|                                 |        |
|                                 |        |   |
| **(PRINTED NAME OF REPRESENTATIVE)** |
|                                      |             |  |  |

 

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**EXHIBITC-2**
| **TO:**    | FAVRILLE, INC. |   |
|------------|----------------|--------|
| ** ** |           |   |
| **FROM:**  | [EXECUTIVE]    |   |
| ** ** |           |   |
| **DATE:**  |           | , 2007 |   |
|            |                |        |  |

 

**SUBJECT:      Previous Inventions**

1.             Except as listed in Section** **2 below, the following is a complete list of allinventions or improvements relevant to the subject matter of my employment by FAVRILLE, INC. (the **“Company”**)that have been made or conceived or first reduced to practice by me alone orjointly with others prior to my engagement by the Company:
|        | o      |   | No inventions or improvements. |
|--------|--------|--------|--------------------------------|
|   |   |   |                           |
|   | o      |   | See below:                     |
|   |   |   |                           |
|   |   |   |                           |
|   | o      |   | Additional sheets attached.    |

 

2.             Due to a prior confidentiality agreement, I cannotcomplete the disclosure under Section 1 above with respect to inventionsor improvements generally listed below, the proprietary rights and duty ofconfidentiality with respect to which I owe to the following party(ies):
| Invention or Improvement | ** ** | **Party(ies)** | ** ** | **Relationship** |
|--------------------------|------------|----------------|------------|------------------|
| ** **               |       |           |       |             |
| **1.**                   |       |           |       |             |
| ** **               |       |           |       |             |
| **2.**                   |       |           |       |             |
| ** **               |       |           |       |             |
| **3.**                   |       |           |       |             |

 
|  | o |   | Additional sheets attached. |
|--|---|--------|-----------------------------|

 

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**EXHIBIT D**

**FAVRILLE,INC.**

**NONDISCLOSURE AGREEMENT**

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