**Exhibit 10.1**

 

**FAVRILLE, INC.2001 EQUITY INCENTIVE PLAN**

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**STOCK OPTION AGREEMENT(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)**

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Pursuant to your Stock OptionGrant Notice (***“GrantNotice”***) and this Stock Option Agreement, Favrille, Inc. (the ***“Company”***) hasgranted you an option under its 2001Equity Incentive Plan (the ***“Plan***”) to purchase the number of shares ofthe Company’s Common Stock indicated in your Grant Notice at the exercise priceindicated in your Grant Notice.  Capitalizedterms not explicitly defined in this Stock Option Agreement but defined in thePlan shall have the same definitions as in the Plan.

 

The details of your option areas follows:

 

**1.             VESTING.**  Subject to the limitations contained herein,your option will vest as provided in your Grant Notice, provided that vestingwill cease upon the termination of your Continuous Service.

 

**(a)           Special Acceleration Provisions.**  Notwithstanding any other provisions of thePlan to the contrary, in the event of a Change in Control (as such term isdefined below), then the vesting and exercisability of fifty percent (50%) ofthe then unvested shares of Common Stock subject to your option (and lastscheduled to vest thereunder) shall be accelerated in full (and anyreacquisition or repurchase rights held by the Company with respect to theshares of Common Stock subject to such acceleration shall lapse in full, asappropriate) thereby shortening the remaining vesting period by one half.  Any unvested shares of Common Stock subjectto your option after such acceleration shall continue to vest at the same rate(and in the same amounts) as prior to such acceleration.  For example, assume at the time immediatelyprior to a Change in Control (i) the number of unvested shares of CommonStock subject to your option is thirty-six (36) shares and (ii) suchshares are vesting monthly such that one (1) share is vesting eachmonth.  In such event, following both aChange in Control and the related 50% acceleration described herein, theremaining unvested shares of Common Stock subject to your option (i.e.,eighteen) shall continue to vest at the same rate (and in the same amounts) asprior to such acceleration (i.e., one share per month) over the remainingvesting period thereby shortening the vesting period provided in this exampleby eighteen months).  In addition,notwithstanding any other provisions of the Plan to the contrary, in the eventof a Change in Control (as such term is defined below) and if, within theperiod beginning as of the effective date of such Change in Control and endingtwenty-four (24) months after the effective date of such Change in Control yourContinuous Service terminates due to an involuntary termination thereof by theCompany (not including death or Disability) without Cause or due to aConstructive Termination, then the vesting and exercisability of the sharessubject to your option that remain unvested as of the date of such terminationof your Continuous Service shall be accelerated in full (and any reacquisitionor repurchase rights held by the Company with respect to Common Stock acquiredpursuant to the early exercise of your option shall lapse, as appropriate).

 

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For purposes of this subsection 1(a) only, Cause means theoccurrence of any of the following:  (i) yourconviction of any felony or any crime involving fraud or dishonesty which has amaterial adverse effect on the Company and/or its Affiliates; (ii) yourparticipation (whether by affirmative act or omission) in a fraud, act ofdishonesty or other act of misconduct against the Company and/or itsAffiliates; (iii) conduct by you which, based upon a good faith andreasonable factual investigation by the Board, demonstrates your grossunfitness to serve; (iv) your violation of any fiduciary duty or duty ofloyalty owed to the Company and/or its Affiliates; (v) your breach of anymaterial term of any material contract between you and the Company and/or itsAffiliates which has a material adverse effect on the Company and/or itsAffiliates; (vi) your repeated violation of any material Company policywhich has a material adverse effect on the Company and/or its Affiliates; and (vii) yourviolation of state or federal law in connection with the performance of yourjob which has a material adverse effect on the Company and/or itsAffiliates.  Notwithstanding theforegoing, your death or Disability shall not constitute Cause as set forthherein.  The determination that atermination is for Cause shall be by the Board in its sole and exclusivejudgment and discretion.

 

For purposes of this subsection 1(a) only, Change in Controlmeans: (i) a sale of all or substantially all of the assets of theCompany; (ii) a merger or consolidation in which the Company is not thesurviving entity and in which the holders of the Company’s outstanding votingstock immediately prior to such transaction own, immediately after suchtransaction, securities representing less than fifty percent (50%) of thevoting power of the entity surviving such transaction or the surviving entity’sparent; (iii) a reverse merger in which the Company is the survivingentity but the shares of Common Stock outstanding immediately preceding themerger are converted by virtue of the merger into other property, whether inthe form of securities of the surviving entity’s parent, cash or otherwise, andin which the holders of the Company’s outstanding voting stock immediatelyprior to such transaction own, immediately after such transaction, securitiesrepresenting less than fifty percent (50%) of the voting power of the Companyor the Company’s parent entity immediately after such transaction; or (iv) anacquisition by any person, entity or group within the meaning of Section 13(d) or14(d) of the Exchange Act, or any comparable successor provisions(excluding any employee benefit plan, or related trust, sponsored or maintainedby the Company or subsidiary of the Company or other entity controlled by theCompany) of the beneficial ownership (within the meaning of Rule 13d-3promulgated under the Exchange Act, or comparable successor rule) of securitiesof the Company representing at least fifty percent (50%) of the combined votingpower entitled to vote in the election of Directors; provided, however, thatnothing in this Section 1(a) shall apply to a sale of assets, mergeror other transaction effected exclusively for the purpose of changing thedomicile of the Company.

 

For purposes of this subsection 1(a) only, ConstructiveTermination means your voluntary resignation following (i) a materialreduction in the level of responsibility associated with your employment withthe Company or any surviving entity (other than a change in job title orofficer title), (ii) any reduction in your level of base salary, or (iii) arelocation of your principal place of employment by more than fifty (50) miles(other than reasonable business travel required as part of the job dutiesassociated with your position), provided, and only in the event that, suchchange, reduction or relocation is effected by the Company without Cause andwithout your consent.

 

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

 

**(b)           Parachute Payments.**If any payment or benefit you would receive pursuant to a Change in Control (asdefined in subsection 1(a) or in the Plan) from the Company orotherwise (“Payment”) would (i) constitute a “parachute payment” withinthe meaning of Section 280G of the Code, and (ii) but for thissentence, be subject to the excise tax imposed by Section 4999 of the Code(the “Excise Tax”), then such Payment shall be reduced to the ReducedAmount.  The “Reduced Amount” shall beeither (x) the largest portion of the Payment that would result in no portionof the Payment being subject to the Excise Tax or (y) the largest portion, upto and including the total, of the Payment, whichever amount, after taking intoaccount 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 thePayment notwithstanding that all or some portion of the Payment may be subjectto the Excise Tax.  If a reduction inpayments or benefits constituting “parachute payments” is necessary so that thePayment equals the Reduced Amount, reduction shall occur in the following orderunless you elect in writing a different order (provided, however, that suchelection shall be subject to Company approval if made on or after the effectivedate 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 ofStock Award compensation is to be reduced, such acceleration of vesting shallbe cancelled in the reverse order of the date of grant of your Stock Awardsunless you elect in writing a different order for cancellation.

 

The accountingfirm engaged by the Company for general audit purposes as of the day prior tothe effective date of the Change in Control shall perform the foregoingcalculations.  If the accounting firm soengaged by the Company is serving as accountant or auditor for the individual,entity or group effecting the Change in Control, the Company shall appoint anationally recognized accounting firm to make the determinations requiredhereunder.  The Company shall bear allexpenses with respect to the determinations by such accounting firm required tobe made hereunder.

 

The accountingfirm engaged to make the determinations hereunder shall provide itscalculations, together with detailed supporting documentation, to you and theCompany within fifteen (15) calendar days after the date on which your right toa Payment is triggered (if requested at that time by you or the Company) orsuch other time as requested by you or the Company.  If the accounting firm determines that noExcise Tax is payable with respect to a Payment, either before or after theapplication of the Reduced Amount, it shall furnish the Company and you with anopinion reasonably acceptable to you that no Excise Tax will be imposed withrespect to such Payment.  Any good faithdeterminations of the accounting firm made hereunder shall be final, bindingand conclusive upon you and the Company .

 

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**2.             NUMBER OF SHARES AND EXERCISEPRICE.**  The number ofshares of Common Stock subject to your option and your exercise price per sharereferenced in your Grant Notice may be adjusted from time to time forCapitalization Adjustments.

 

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

 

**(a)          **In the Company’ssole discretion at the time your option is exercised and provided that at thetime of exercise the Common Stock is publicly traded and quoted regularly in *The Wall Street Journal*, pursuant to a program developedunder Regulation T as promulgated by the Federal Reserve Board that, prior tothe 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 aggregateexercise price to the Company from the sales proceeds.

 

**(b)          **Provided that atthe time of exercise the Common Stock is publicly traded and quoted regularlyin *The Wall Street Journal*, by delivery ofalready-owned shares of Common Stock either that you have held for the periodrequired to avoid a charge to the Company’s reported earnings (generally six (6) months)or that you did not acquire, directly or indirectly from the Company, that areowned 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 solediscretion of the Company at the time you exercise your option, shall includedelivery to the Company of your attestation of ownership of such shares ofCommon Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option bytender to the Company of Common Stock to the extent such tender would violatethe provisions of any law, regulation or agreement restricting the redemptionof the Company’s stock.

 

**4.             WHOLE SHARES.**  You may exercise your option only for wholeshares of Common Stock.

 

**5.             SECURITIES LAW COMPLIANCE.**  Notwithstanding anything to the contrarycontained herein, you may not exercise your option unless the shares of CommonStock issuable upon such exercise are then registered under the Securities Actor, if such shares of Common Stock are not then so registered, the Company hasdetermined that such exercise and issuance would be exempt from theregistration requirements of the Securities Act.  The exercise of your option also must complywith other applicable laws and regulations governing your option, and you maynot exercise your option if the Company determines that such exercise would notbe in material compliance with such laws and regulations.

 

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

 

**(a)          **three (3) monthsafter the termination of your Continuous Service for any reason other thanCause, Disability or death, provided that if during any part of such three- (3-)

 

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month period you may not exercise your option solelybecause of the condition set forth in the preceding paragraph relating to “SecuritiesLaw Compliance,” your option shall not expire until the earlier of theExpiration Date or until it shall have been exercisable for an aggregate periodof three (3) months after the termination of your Continuous Service;

 

**(b)          **twelve (12) monthsafter 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 orwithin three (3) months after your Continuous Service terminates;

 

**(d)          **immediately uponthe termination of your Continuous Service if for Cause (as such term isdefined in the Plan);

 

**(e)          **the Expiration Dateindicated in your Grant Notice; or

 

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

 

If your option is an IncentiveStock Option, note that to obtain the federal income tax advantages associatedwith an Incentive Stock Option, the Code requires that at all times beginningon the date of grant of your option and ending on the day three (3) monthsbefore the date of your option’s exercise, you must be an employee of theCompany or an Affiliate, except in the event of your death or your permanentand total disability, as defined in Section 22(e) of the Code.  (The definition of disability in Section 22(e) ofthe Code is different from the definition of the Disability under thePlan).  The Company has provided forextended exercisability of your option under certain circumstances for yourbenefit but cannot guarantee that your option will necessarily be treated as anIncentive Stock Option if you continue to provide services to the Company or anAffiliate as a Consultant or Director after your employment terminates or ifyou otherwise exercise your option more than three (3) months after thedate your employment with the Company or an Affiliate terminates.

 

**7.             EXERCISE.**

 

**(a)          **You may exercisethe vested portion of your option during its term by delivering a Notice ofExercise (in a form designated by the Company) together with the exercise priceto the Secretary of the Company, or to such other person as the Company maydesignate, during regular business hours, together with such additionaldocuments as the Company may then require.

 

**(b)          **By exercising youroption you agree that, as a condition to any exercise of your option, theCompany may require you to enter into an arrangement providing for the paymentby you to the Company of any tax withholding obligation of the Company arisingby reason of (1) the exercise of your option, or (2) the dispositionof shares of Common Stock acquired upon such exercise.

 

**(c)          **If your option isan Incentive Stock Option, by exercising your option you agree that you willnotify the Company in writing within fifteen (15) days after the date of anydisposition of any of the shares of the Common Stock issued upon exercise ofyour option that

 

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occurs within two (2) years after the date ofyour option grant or within one (1) year after such shares of Common Stockare transferred upon exercise of your option.

 

**8.             TRANSFERABILITY.**

 

**(a)          **If your option isan Incentive Stock Option, your option is not transferable, except by will orby the laws of descent and distribution, and is exercisable during your lifeonly by you.  Notwithstanding theforegoing, by delivering written notice to the Company, in a form satisfactoryto the Company, you may designate a third party who, in the event of yourdeath, shall thereafter be entitled to exercise your option.

 

**(b)          **If your option is aNonstatutory Stock Option, your option is not transferable, except (i) bywill or by the laws of descent and distribution, (ii) with the priorwritten approval of the Company, by instrument to an inter vivos ortestamentary trust, in a form accepted by the Company, in which the option isto be passed to beneficiaries upon the death of the trustor (settlor) and (iii) withthe prior written approval of the Company, by gift, in a form accepted by theCompany, to a permitted transferee under Rule 701 of the Securities Act.

 

**9.             OPTION NOT A SERVICE CONTRACT.**  Your option is not an employment or servicecontract, and nothing in your option shall be deemed to create in any waywhatsoever any obligation on your part to continue in the employ of the Companyor an Affiliate, or of the Company or an Affiliate to continue youremployment.  In addition, nothing in youroption shall obligate the Company or an Affiliate, their respectivestockholders, Boards of Directors, Officers or Employees to continue anyrelationship that you might have as a Director or Consultant for the Company oran Affiliate.

 

**10.          WITHHOLDING OBLIGATIONS.**

 

**(a)          **At the time youexercise your option, in whole or in part, or at any time thereafter asrequested by the Company, you hereby authorize withholding from payroll and anyother amounts payable to you, and otherwise agree to make adequate provision asinstructed by the Company (including by means of a “cashless exercise” pursuantto a program developed under Regulation T as promulgated by the Federal ReserveBoard to the extent instructed by the Company), for any sums required tosatisfy the federal, state, local and foreign tax withholding obligations ofthe Company or an Affiliate, if any, which arise in connection with theexercise of your option.

 

**(b)          **The Company may, inits sole discretion, and in compliance with any applicable legal conditions orrestrictions, withhold from fully vested shares of Common Stock otherwiseissuable to you upon the exercise of your option a number of whole shares ofCommon Stock having a Fair Market Value, determined by the Company as of thedate of exercise, not in excess of the minimum amount of tax required to bewithheld by law (or such lower amount as may be necessary to avoid variableaward accounting).  Any adverseconsequences to you arising in connection with such share withholding procedureshall be your sole responsibility.

 

**(c)          **You may notexercise your option unless the tax withholding obligations of the Companyand/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when desiredeven though your option is vested, and the Company shall have no

 

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obligation to issue a certificate for such shares ofCommon Stock or release such shares of Common Stock from any escrow providedfor herein unless such obligations are satisfied.

 

**11.          NOTICES.**  Any notices provided for in your option orthe Plan shall be given in writing and shall be deemed effectively given uponreceipt 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 provisionsof the Plan, the provisions of which are hereby made a part of your option, andis further subject to all interpretations, amendments, rules andregulations, which may from time to time be promulgated and adopted pursuant tothe Plan.  In the event of any conflictbetween the provisions of your option and those of the Plan, the provisions ofthe Plan shall control, except as expressly provided herein.

 

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