Exhibit 10.2


FAVRILLE, INC.

2005 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN



STOCK OPTION AGREEMENT

(NONSTATUTORY STOCK OPTION)


 


Pursuant to your Stock Option Grant Notice (“Grant Notice”) and
this Stock Option Agreement, Favrille, Inc. (the “Company”) has granted you an option
under its 2005 Non-Employee Directors’ Stock Option Plan (the “Plan”) to purchase
the number of shares of the Company’s Common Stock indicated in your Grant
Notice at the exercise price indicated in your Grant Notice.  Defined terms not explicitly defined in this
Stock Option Agreement but defined in the Plan shall have the same definitions
as in the Plan.


 


The details of your option are as follows:


 


1.             VESTING.  Subject to the limitations contained herein,
your option will vest as provided in your Grant Notice, provided that vesting
will cease upon the termination of your Continuous Service.  In addition, notwithstanding any other provisions of the Plan to
the contrary, in the event of a Change in Control (as such term is defined
below), then the vesting and exercisability of fifty percent (50%) of the then
unvested shares of Common Stock subject to your option (and last scheduled to
vest thereunder) shall be accelerated in full (and any reacquisition or
repurchase rights held by the Company with respect to the shares of Common
Stock subject to such acceleration shall lapse in full, as appropriate) thereby
shortening the remaining vesting period by one half.  Any unvested shares of Common Stock subject
to 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 immediately
prior to a Change in Control (i) the number of unvested shares of Common Stock
subject to your option is thirty-six (36) shares and (ii) such shares are
vesting monthly such that one (1) share is vesting each month.  In such event, following both a Change in
Control and the related 50% acceleration described herein, the remaining
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) as prior to such
acceleration (i.e., one share per month) over the remaining vesting period
thereby shortening the vesting period provided in this example by eighteen
months).  In addition, notwithstanding
any other provisions of the Plan to the contrary, in the event of a Change in
Control (as such term is defined below) and if, 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 thereof by the Company
(not including death or Disability) without Cause, then the vesting and exercisability
of the shares subject to your option that remain unvested as of the date of
such termination of your Continuous Service shall be accelerated in full (and
any reacquisition or repurchase rights held by the Company with respect to
Common Stock acquired pursuant to the early exercise of your option shall
lapse, as appropriate).


 


1





















 


                “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.


 


                For purposes of this Section 1 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 shall apply to a sale of assets, merger or other transaction effected
exclusively for the purpose of changing the domicile of 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, as
provided in the Plan.


 


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


 


2





















 


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


 


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


 


(c)           Provided that at the time of
exercise the Company has adopted FAS 123, as revised, by a “net exercise”
arrangement pursuant to which the Company will reduce the number of shares of
Common Stock issued upon exercise of your option by the largest whole number of
shares with a Fair Market Value that does not exceed the aggregate exercise
price; provided, however, the Company shall accept a cash or other payment from
you to the extent of any remaining balance of the aggregate exercise price not
satisfied by such holding back of whole shares; provided, however, shares of
Common Stock will no longer be outstanding under your option and will not be
exercisable thereafter to the extent that (1) shares are used to pay the
exercise price pursuant to the “net exercise,” (2) shares are delivered
to you as a result of such exercise, and (3) shares are withheld to satisfy tax
withholding obligations.


 


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


 


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


 


3





















 


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


 


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


 


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


 


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


 


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


 


7.             EXERCISE.


 


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


 


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


 


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


 


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


 


10.          WITHHOLDING
OBLIGATIONS.


 


4





















 


(a)           At the time you exercise your
option, in whole or in part, or at any time thereafter as requested by the
Company, you hereby authorize withholding from payroll and any other amounts
payable to you, and otherwise agree to make adequate provision as directed by
the Company (including by means of a “cashless exercise” pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board to the
extent directed by the Company), for any sums required to satisfy the federal,
state, local and foreign tax withholding obligations of the Company or an
Affiliate, if any, which arise in connection with your option.


 


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


 


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


 


(d)           If any payment or benefit you would receive pursuant to a Change in
Control (as defined in Section 1 of this Agreement or in 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 equal to the Reduced Amount.  The “Reduced Amount” shall be either (x) the
largest portion of the Payment that would result in no portion of the Payment
being subject to the Excise Tax or (y) the largest portion, up to and including
the total, of the Payment, whichever amount, after taking into account all
applicable federal, state and local employment taxes, income taxes, and the
Excise Tax (all computed at the highest applicable marginal rate), results in
your receipt, on an after-tax basis, of the greater amount of the Payment
notwithstanding that all or some portion of the Payment may be subject to the
Excise Tax. If a reduction in payments or benefits constituting “parachute
payments” is necessary so that the Payment equals the Reduced Amount, reduction
shall occur in the following order unless you elect in writing a different
order (provided, however, that such election
shall be subject to Company approval if made on or after the effective date of
the event that triggers the Payment): reduction of cash payments; cancellation
of accelerated vesting of Stock Awards; reduction of employee benefits.  In the event that acceleration of vesting of
Stock Award compensation is to be reduced, such acceleration of vesting shall
be cancelled in the reverse order of the date of grant of your Stock Awards
(i.e., earliest granted Stock Award cancelled last) unless you elect in writing
a different order for cancellation.


 


                The accounting
firm engaged by the Company for general audit purposes as of the day prior to
the effective date of the Change in Control shall perform the foregoing
calculations.  If the accounting firm so
engaged by the Company is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Company shall appoint a 


 


5





















 


nationally recognized accounting firm to make the determinations
required hereunder.  The Company shall
bear all expenses with respect to the determinations by such accounting firm
required to be made hereunder.


 


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


 


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


 


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


 


6