Document:

Exhibit
4.1

Execution Copy

WARRANT

THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND SUCH OTHER SECURITIES LAWS. 
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR
OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION.

December
19, 2006

Warrant to Purchase up to
Two Hundred Fifty Thousand (250,000) shares of Common Stock of Favrille, Inc.
(the “Company”).

In consideration for
Kingsbridge Capital Limited, an entity organized and existing under the laws of
the British Virgin Islands, whose registered address is Palm Grove House, 2nd
Floor, Road Town, Tortola, British Virgin Islands (the “Investor”),
agreeing to enter into that certain Common Stock Purchase Agreement, dated as
of the date hereof, between the Investor and the Company (the “Agreement”),
the Company hereby agrees that the Investor or any other Warrant Holder (as
hereinafter defined) is entitled, on the terms and conditions set forth below,
to purchase from the Company at any time during the Exercise Period (as
hereinafter defined) up to two hundred fifty thousand (250,000) fully paid and
nonassessable shares of common stock, par value $0.001 per share, of the
Company (the “Common Stock”) at the Exercise Price (as hereinafter
defined), as the same may be adjusted from time to time pursuant to
Section 6 hereof.  The resale of the
shares of Common Stock or other securities issuable upon exercise or exchange
of this Warrant is subject to the provisions of the Registration Rights
Agreement.  Capitalized terms used herein
and not otherwise defined shall have the meanings given them in the Agreement.

Section 1.               Definitions.

“Affiliate” shall
mean any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under direct or indirect
common control with any other Person. 
For the purposes of this definition, “control,” when used with respect
to any Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the term “controls” and “controlled”
have meanings correlative to the foregoing.

“Closing Price” as of
any particular day shall mean the volume weighted average price (the aggregate
sales price of all trades of Common Stock during such Trading Day divided by
the total number of shares of Common Stock traded during such Trading Day) per
share of the Company’s Common Stock as reported by Bloomberg L.P. on such day
using the AQR function.

 

“Exercise Period”
shall mean that period beginning six months after the date of this Warrant and
continuing until (i) the expiration of the five-year period thereafter, or (ii)
a Funding Default, subject in each case to earlier termination in accordance
with Section 6 hereof.

“Exercise Price” as
of the date hereof shall mean three dollars and ninety-eight cents ($3.98),
representing 130% of the average Closing Price of the Common Stock during the
five (5) Trading Days immediately preceding the date of this Warrant.

“Funding Default”
shall mean a failure by the Investor to accept a Draw Down Notice made by the
Company and to acquire and pay for the Shares in accordance therewith within
three (3) Business Days following the delivery of such Shares to the Investor, provided,
that such Draw Down Notice was made in accordance with the terms and conditions
of the Agreement (including the satisfaction or waiver of the conditions to the
obligation of the Investor to accept a Draw Down set forth in Article VII
of the Agreement), provided, further, that such failure was
reasonably within the control of the Investor.

“Per Share Warrant Value”
shall mean the difference resulting from subtracting the Exercise Price from
the average of the Closing Prices on the ten Trading Days immediately preceding
the Exercise Date.

“Person” shall mean
an individual, a corporation, a partnership, a limited liability company, an
association, a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.

“Principal Market”
shall mean the NASDAQ Global Select Market, the NASDAQ Global Market, the
NASDAQ Capital Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.

“SEC” shall mean the
United States Securities and Exchange Commission.

“Trading Day” shall
mean any day other than a Saturday or a Sunday on which the Principal Market is
open for trading in equity securities.

“Warrant Holder”
shall mean the Investor or any permitted assignee or permitted transferee of
all or any portion of this Warrant.

“Warrant Shares”
shall mean those shares of Common Stock received or to be received upon
exercise of this Warrant.

Section 2.               Exercise.

(a)   Method of Exercise.  This Warrant may be exercised in whole or in
part (but not as to a fractional share of Common Stock), at any time and from
time to time during the Exercise Period, by the Warrant Holder by (i) surrender
of this Warrant, with the form of exercise attached hereto as Exhibit A
completed and duly executed by the Warrant Holder (the “Exercise Notice”),
to the Company at the address set forth in Section 10.04 of the Agreement,
accompanied by payment of the Exercise Price multiplied by the number of shares
of Common Stock for which this Warrant is being exercised (the “Aggregate
Exercise Price”) or (ii) telecopying an executed and completed Exercise
Notice to the Company and delivering to the Company within five (5) Business
Days thereafter the original Exercise Notice, this Warrant and the Aggregate
Exercise Price.  The later of the date on
which an Exercise Notice is received by the Company in accordance with clauses
(i) or (ii) above or the Company receives payment 

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of the Exercise Price
(unless the Warrant is exercised as provided in Section 2(c) below) shall be
deemed an “Exercise Date.”

(b)   Payment of Aggregate Exercise Price.  Subject to paragraph (c) below, payment
of the Aggregate Exercise Price shall be made by wire transfer of immediately
available funds to an account designated by the Company.  If the amount of the payment received by the
Company is less than the Aggregate Exercise Price, the Warrant Holder will be
notified of the deficiency and shall make payment in that amount within three
(3) Business Days.  In the event the
payment exceeds the Aggregate Exercise Price, the Company will refund the
excess to the Warrant Holder within five (5) Business Days of receipt.

(c)   Cashless Exercise.  In the event that the Warrant Shares to be
received by the Warrant Holder upon exercise of the Warrant may not be resold
pursuant to an effective registration statement or an exemption to the
registration requirements of the Securities Act of 1933, as amended (the “Securities
Act”), and applicable state laws, the Warrant Holder may, as an alternative
to payment of the Aggregate Exercise Price upon exercise in accordance with
paragraph (b) above, elect to effect a cashless exercise by so indicating
on the Exercise Notice and including a calculation of the number of shares of
Common Stock to be issued upon such exercise in accordance with the terms
hereof (a “Cashless Exercise”). 
If a registration statement on Form S-1 or Form S-3 under the Securities
Act, or such other form as deemed appropriate by counsel to the Company for the
registration for the resale by the Warrant Holder of (x) the shares of
Common Stock of the Company that may be purchased under the Agreement,
(y) the Warrant Shares, or (z) any securities issued or issuable with
respect to any of the foregoing by way of exchange, stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise, has been declared effective
by the SEC and remains effective, the Company may, in its sole discretion,
permit the Warrant Holder to elect to effect a Cashless Exercise or require the
Warrant Holder to pay the Exercise Price of the Warrant Shares being purchased
by the Warrant Holder under this Warrant. 
In the event of a Cashless Exercise, the Warrant Holder shall receive
that number of shares of Common Stock determined by (i) multiplying the number
of Warrant Shares for which this Warrant is being exercised by the Per Share
Warrant Value and (ii) dividing the product by the average of the Closing
Prices on the ten Trading Days immediately preceding the Exercise Date, rounded
to the nearest whole share.  The Company
shall cancel the total number of Warrant Shares equal to the excess of the
number of the Warrant Shares for which this Warrant is being exercised over the
number of Warrant Shares to be received by the Warrant Holder pursuant to such
Cashless Exercise.

(d)   Replacement Warrant.  In the event that the Warrant is not
exercised in full, the number of Warrant Shares shall be reduced by the number
of such Warrant Shares for which this Warrant is exercised, and the Company, at
its expense, shall forthwith issue and deliver to or upon the order of the
Warrant Holder a new Warrant of like tenor in the name of the Warrant Holder,
reflecting such adjusted number of Warrant Shares.

Section
3.               Exercise Limitation.  The Warrant Holder may not exercise this
Warrant such that the number of Warrant Shares to be received pursuant to such
exercise aggregated with all other shares of Common Stock then owned by the
Warrant Holder beneficially or deemed beneficially owned by the Warrant Holder
would result in the Warrant Holder owning more than 9.9% of all of such Common
Stock as would be outstanding on such Exercise Date, as determined in
accordance with Section 13(d) of the Exchange Act of 1934 and the rules
and regulations promulgated thereunder.

Section 4.               Delivery
of Warrant Shares.

(a)   Subject to the terms and conditions of this
Warrant, as soon as practicable after the exercise of this Warrant in full or
in part, and in any event within ten (10) Business Days thereafter, the Company
at its expense (including, without limitation, the payment by it of any
applicable issue taxes) will cause to 

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be issued in the name of and delivered to the Warrant
Holder, or as the Warrant Holder may lawfully direct, a certificate or
certificates for, or make deposit with the Depositary Trust Company via
book-entry of, the number of validly issued, fully paid and non-assessable
Warrant Shares to which the Warrant Holder shall be entitled on such exercise,
together with any other stock or other securities or property (including cash,
where applicable) to which the Warrant Holder is entitled upon such exercise in
accordance with the provisions hereof.

(b)   This Warrant may not be exercised as to
fractional shares of Common Stock.  In
the event that the exercise of this Warrant, in full or in part, would result
in the issuance of any fractional share of Common Stock, then in such event the
Warrant Holder shall receive the number of shares rounded to the nearest whole
share.

Section 5.               Representations,
Warranties and Covenants of the Company.

(a)   The Warrant Shares, when issued in accordance
with the terms hereof, will be duly authorized and, when paid for or issued in
accordance with the terms hereof, shall be validly issued, fully paid and
non-assessable.

(b)   The Company shall take all commercially
reasonable actions and proceedings as may be required and permitted by
applicable law, rule and regulation for the legal and valid issuance of this
Warrant and the Warrant Shares to the Warrant Holder.

(c)   The Company has authorized and reserved for
issuance to the Warrant Holder the requisite number of shares of Common Stock
to be issued pursuant to this Warrant. 
The Company shall at all times reserve and keep available, solely for
issuance and delivery as Warrant Shares hereunder, such shares of Common Stock
as shall from time to time be issuable as Warrant Shares.

(d)   From the date hereof through the last date on
which this Warrant is exercisable, the Company shall take all commercially reasonable
actions to ensure that the Common Stock remains listed or quoted on the
Principal Market.

Section 6.               Adjustment of the Exercise
Price.  The Exercise Price and,
accordingly, the number of Warrant Shares issuable upon exercise of the
Warrant, shall be subject to adjustment from time to time upon the happening of
certain events as follows:

(a)   Reclassification,
Consolidation, Merger, Mandatory Share Exchange, Sale or Transfer.

(i)            Upon occurrence of any of the events
specified in subsection (a)(ii) below (the “Adjustment Events”)
while this Warrant is unexpired and not exercised in full, the Warrant Holder
may in its sole discretion require the Company, or any successor or purchasing
corporation, as the case may be, without payment of any additional consideration
therefor, to execute and deliver to the Warrant Holder a new Warrant providing
that the Warrant Holder shall have the right to exercise such new Warrant (upon
terms not less favorable to the Warrant Holder than those then applicable to
this Warrant) and to receive upon such exercise, in lieu of each share of
Common Stock theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money or property receivable upon
such Adjustment Event by the holder of one share of Common Stock issuable upon
exercise of this Warrant had this Warrant been exercised immediately prior to
such Adjustment Event.  Such new Warrant
shall provide for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 6.

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(ii)           The Adjustment Events shall be
(1) any reclassification or change of Common Stock (other than a change in
par value, as a result of a subdivision or combination of Common Stock or in
connection with an Excluded Merger or Sale), (2) any consolidation, merger
or mandatory share exchange of the Company with or into another corporation
(other than a merger or mandatory share exchange with another corporation in
which the Company is a continuing corporation and which does not result in any
reclassification or change other than a change in par value or as a result of a
subdivision or combination of Common Stock), other than (each of the following
referred to as an “Excluded Merger or Sale”) a transaction involving (A)
sale of all or substantially all of the assets of the Company, (B) any merger,
consolidation or similar transaction where the consideration payable to the
shareholders of the Company by the acquiring Person consists substantially of
cash or publicly traded securities, or a combination thereof, or where the
acquiring Person does not agree to assume the obligations of the Company under
outstanding warrants (including this Warrant). 
In the event of an Excluded Merger or Sale, the Company shall deliver a
notice to the Warrant Holder at least 10 days before the consummation of such
Excluded Merger or Sale, the Warrant Holder may exercise this Warrant at any
time before the consummation of such Excluded Merger or Sale (and such exercise
may be made contingent upon the consummation of such Excluded Merger or Sale),
and any portion of this Warrant that has not been exercised before consummation
of such Excluded Merger or Sale shall terminate and expire, and shall no longer
be outstanding.

(b)   Subdivision or Combination of Shares.  If the Company, at any time while this
Warrant is unexpired and not exercised in full, shall subdivide its Common
Stock, the Exercise Price shall be proportionately reduced as of the effective
date of such subdivision, or, if the Company shall take a record of holders of
its Common Stock for the purpose of so subdividing, as of such record date,
whichever is earlier.  If the Company, at
any time while this Warrant is unexpired and not exercised in full, shall
combine its Common Stock, the Exercise Price shall be proportionately increased
as of the effective date of such combination, or, if the Company shall take a
record of holders of its Common Stock for the purpose of so combining, as of
such record date, whichever is earlier.

(c)   Stock Dividends.  If the Company, at any time while this
Warrant is unexpired and not exercised in full, shall pay a dividend or other
distribution in shares of Common Stock to all holders of Common Stock, then the
Exercise Price shall be adjusted, as of the date the Company shall take a
record of the holders of its Common Stock for the purpose of receiving such
dividend or other distribution (or if no such record is taken, as at the date
of such payment or other distribution), to that price determined by multiplying
the Exercise Price in effect immediately prior to such payment or other
distribution by a fraction:  (i)  the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to such dividend
or distribution, and (ii) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such dividend or
distribution.  The provisions of this
subsection (c) shall not apply under any of the circumstances for which an
adjustment is provided in subsections (a) or (b).

(d)   Liquidating Dividends, Etc.  If the Company, at any time while this
Warrant is unexpired and not exercised in full, makes a distribution of its
assets or evidences of indebtedness to the holders of its Common Stock as a
dividend in liquidation or by way of return of capital or other than as a
dividend payable out of earnings or surplus legally available for dividends
under applicable law or any distribution to such holders made in respect of the
sale of all or substantially all of the Company’s assets (other than under the
circumstances provided for in the foregoing subsections (a) through (c)),
then the Warrant Holder shall be entitled to receive upon exercise of this
Warrant in addition to the Warrant Shares receivable in connection therewith,
and without payment of any consideration other than the Exercise Price, the
kind and amount of such distribution per share of Common Stock multiplied by
the number of Warrant Shares that, on the record date for such distribution,
are issuable upon such exercise of the Warrant (with no further adjustment
being made following any such event which causes an adjustment in 

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the number of Warrant Shares issuable), and an
appropriate provision therefor shall be made a part of any such
distribution.  The value of a
distribution that is paid in other than cash shall be determined in good faith
by the Board of Directors of the Company. 
Notwithstanding the foregoing, in the event of a proposed dividend in
liquidation or distribution to the shareholders made in respect of the sale of
all or substantially all of the Company’s assets, the Company shall deliver a
notice to the Warrant Holder at least 10 days before the consummation of such
event, the Warrant Holder may exercise this Warrant at any time before the
consummation of such event (and such exercise may be made contingent upon the
consummation of such event), and any portion of this Warrant that has not been
exercised before consummation of such event shall terminate and expire, and shall
no longer be outstanding.

Section 7.               Notices.  Whenever the Exercise Price or number of
Warrant Shares shall be adjusted pursuant to Section 6 hereof, the Company
shall promptly prepare a certificate signed by its Chief Executive Officer or
Chief Financial Officer setting forth in reasonable detail the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Company’s Board of Directors made any determination hereunder), and the
Exercise Price and number of Warrant Shares purchasable at that Exercise Price
after giving effect to such adjustment, and shall promptly cause copies of such
certificate to be sent by overnight courier to the Warrant Holder.  In the event of any taking by the Company of
a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other similar right accruing to a
stockholder by virtue of ownership of shares of the Company’s capital stock,
the Company shall mail to the Warrant Holder, at least five (5) Business Days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.

Section 8.               No Impairment.  The Company will not, by amendment of its
Certificate or Bylaws or through any reorganization, transfer of assets,
consolidation, merger, dissolution or issue or sale of securities, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Warrant Holder against
impairment.  Without limiting the
generality of the foregoing, the Company (a) will not increase the par
value of any Warrant Shares above the amount payable therefor on such exercise,
and (b) will take all such action as may be reasonably necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares on the exercise of this Warrant.

Section 9.               Rights As Stockholder.  Except as set forth in Section 6 above, prior
to exercise of this Warrant, the Warrant Holder shall not be entitled to any
rights as a stockholder of the Company with respect to the Warrant Shares,
including (without limitation) the right to vote such shares, receive dividends
or other distributions thereon or be notified of stockholder meetings.

Section 10.             Replacement of Warrant.  Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
the Warrant and, in the case of any such loss, theft or destruction of the
Warrant, upon delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its expense
will execute and deliver, in lieu thereof, a new Warrant of like tenor.

Section 11.             Governing Law.  This Warrant shall be construed under the
laws of the State of New York.

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Section 12.             Entire Agreement; Amendments.  Except for any written instrument concurrent
or subsequent to the date hereof executed by the Company and the Investor, this
Warrant and the Agreement contain the entire understanding of the parties with
respect to the matters covered hereby and thereby.  No provision of this Warrant may be waived or
amended other than by a written instrument signed by the party against whom
enforcement of any such amendment or waiver is sought.

Section 13.             Restricted
Securities.

(a)   Registration or Exemption Required.  This Warrant has been issued in a transaction
exempt from the registration requirements of the Securities Act in reliance
upon the provisions of Section 4(2) thereof and Regulation D thereof, and/or
upon such other exemption from the registration requirements of the Securities
Act as may be available with respect to this Warrant.  This Warrant and the Warrant Shares issuable
upon exercise of this Warrant may not be resold except pursuant to an effective
registration statement or an exemption to the registration requirements of the
Securities Act and applicable state laws. 
The Company shall have no obligation to register the Warrant or the
Warrant Shares except as explicitly set forth in that certain Registration
Rights Agreement entered into by and between the Investor and the Company on
even date hereof.

(b)   Legend. Any replacement Warrants
issued pursuant to Section 2 and Section 10 hereof and, unless a
registration statement has been declared effective by the SEC and remains
effective in accordance with the Securities Act, with respect thereto, any
Warrant Shares issued upon exercise hereof, shall bear the following legend:

“THE SECURITIES EVIDENCED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER APPLICABLE SECURITIES
LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.  NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A
TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.”

(c)   No Other Legend or Stock Transfer
Restrictions.  No legend other than
the one specified in Section 13(b) has been or shall be placed on the
share certificates representing the Warrant Shares and no instructions or “stop
transfer orders” (so called “stock transfer restrictions”) or other
restrictions have been or shall be given to the Company’s transfer agent with
respect thereto other than as expressly set forth in this Section 13.

(d)   Assignment.  Assuming the conditions of Section 13(a)
above regarding registration or exemption have been satisfied, the Warrant
Holder may sell, transfer, assign, pledge or otherwise dispose of this Warrant
(each of the foregoing, a “Transfer”), in whole or in part, but only to
an Affiliate of the Warrant Holder.  The
Warrant Holder shall deliver a written notice to the Company, substantially in
the form of the Assignment attached hereto as Exhibit B, indicating the person
or persons to whom the Warrant shall be Transferred and the respective number
of Warrant Shares to be covered by the warrants to be Transferred to each
assignee.  The Company shall effect the
Transfer within ten (10) days, and shall deliver to the Transferee(s)
designated by the Warrant Holder a Warrant or Warrants of like tenor and 

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terms for the appropriate number of shares.  In connection with and as a condition of any
such proposed Transfer, the Company may require (i) the Warrant Holder to
provide an opinion of counsel to the Warrant Holder in form and substance
reasonably satisfactory to the Company to the effect that the proposed Transfer
complies with all applicable federal and state securities laws and (ii) the
proposed Transferee to make customary and reasonable representations to the
Company in connection with such Transfer attendant to the acquisition of unregistered
securities, including without limitation the Transferee’s investment intent and
status as an “accredited investor” as defined in Regulation D.

(e)   Investor’s Compliance.  Nothing in this Section 13 shall affect
in any way the Investor’s obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.

Section 14.             Notices.  All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be
given in accordance with Section 10.04 of the Agreement.

Section 15.             Miscellaneous.  This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought.  The headings
in this Warrant are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof. 
The invalidity or unenforceability of any provision hereof shall in no
way affect the validity or enforceability of any other provision.

Section 16.             Company Call Right.

(a)   If a Funding Default occurs, the Company
shall have the right to demand the surrender of this Warrant or any remaining
portion thereof, Shares and/or cash from the Investor as follows (the “Call
Right”):

(i)            If the Investor has not previously
exercised this Warrant in full, then this Warrant shall automatically be deemed
to have been canceled and shall have no further force or effect.

(ii)           If, prior to receiving a Call Right Notice,
the Investor has previously exercised this Warrant with respect to some or all
of the Warrant Shares, and the Investor has not previously sold such Warrant
Shares, then Company shall have a right to purchase from the Investor that
number of shares of Common Stock equal to the number of shares of Common Stock
issued in connection with the exercise(s) of the Warrant, at a repurchase price
per share equal to the cash price per share paid by the Investor in connection
with such exercise(s).  For greater
certainty, (a) if Warrant Shares were exercised for cash, the purchase
price per share under the Call Right shall be equal to the Exercise Price,
(b) if Warrant Shares were exercised on a cashless exercise basis, the
purchase price per share for such Warrant Shares under the Call Right shall be
zero, and (c) if such Warrant Shares were exercised on both a cash and
cashless exercise basis, the purchase price per share under the Call Right
shall be equal to the total amount of cash paid in connection with such cash
exercise(s) divided by the total number of shares of Common Stock issued in
connection with all exercises of the Warrant (whether on a cash or cashless
basis).

(iii)          If, prior to receiving a Call Right
Notice, the Investor has previously exercised this Warrant with respect to some
or all of the Warrant Shares, and the Investor subsequently sold such Warrant
Shares, then the Investor shall remit to the Company the excess, if any, of (x)
the proceeds received by Investor through the sale of such Warrant Shares, over
(y) the aggregate Exercise Price for such Warrant Shares.  In the event that the Investor obtained such
Warrant Shares through a Cashless 

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Exercise, then the
Investor shall instead remit to the Company all proceeds received by the
Investor through the sale of such Warrant Shares.  For the avoidance of doubt, in the event that
the Investor has sold some or all of the Warrant Shares prior to receiving a
Call Right Notice, then the right set forth in this paragraph (iii) shall
constitute the sole Call Right of the Company with respect to such Warrant
Shares which have been sold.

(b)   The Company may exercise the Call Right by
delivering a notice (the “Call Right Notice”) to the Investor within
thirty (30) days after the occurrence of a Funding Default.  On the tenth (10th)
Business Day following delivery of the Call Right Notice to the Investor, the
Company shall tender the purchase price, if any, and the Investor shall tender
shares of Common Stock, if any, to be sold to the Company pursuant to the Call
Right Notice, immediately following which the Company and the Investor shall
consummate such purchase and sale.  The
Call Right shall survive both the assignment of the Warrant by the Investor and
the disposition of the Warrant Shares by the Investor following exercise of the
Warrant.

Section 17.             Absence of Presumption.  This Warrant shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.

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IN WITNESS WHEREOF, this
Warrant was duly executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.

	
  

  	
   

  	
  FAVRILLE, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ John P. Longenecker, Ph.D.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  John P. Longenecker, Ph.D.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  President and Chief Executive Officer

  	
   

  	
   

  

 

Investor acknowledges and
agrees to the terms and conditions of this Warrant.

 

	
  

  	
   

  	
  KINGSBRIDGE CAPITAL
  LIMITED

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Maria O’Donoghue

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Maria O’Donoghue

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Director

  	
   

  	
   

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SIGNATURE
PAGE - WARRANT

  
  
 

 

EXHIBIT
A TO THE WARRANT

EXERCISE
FORM

FAVRILLE,
INC.

The undersigned hereby
irrevocably exercises the right to purchase __________________ shares of Common
Stock of Favrille, Inc., a Delaware corporation (the “Company”), evidenced by
the attached Warrant, and (CIRCLE EITHER (i) or (ii)) (i) tenders herewith
payment of the Aggregate Exercise Price with respect to such shares in full, in
the amount of $________, in cash, by certified or official bank check or by
wire transfer for the account of the Company or (ii) elects, pursuant to
Section 2(c) of the Warrant, to convert such Warrant into shares of Common
Stock of the Company on a cashless exercise basis, all in accordance with the
conditions and provisions of said Warrant and in accordance with the
calculations attached hereto.

The undersigned requests
that stock certificates for such Warrant Shares be issued, and a Warrant
representing any unexercised portion hereof be issued, pursuant to this
Warrant, in the name of the registered Warrant Holder and delivered to the
undersigned at the address set forth below.

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature of Registered Holder

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name of Registered Holder (Print)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  

 

  
  
 

 

 

EXHIBIT
B TO THE WARRANT

ASSIGNMENT

(To be executed by the
registered Warrant Holder desiring to transfer the Warrant)

FOR VALUED RECEIVED, the
undersigned Warrant Holder of the attached Warrant hereby sells, assigns and
transfers unto the persons below named the right to purchase ______________
shares of Common Stock of Favrille, Inc. (the “Company”) evidenced by
the attached Warrant and does hereby irrevocably constitute and appoint
______________________ attorney to transfer the said Warrant on the books of
the Company, with full power of substitution in the premises.

Dated:

	
  

  	
   

  	
   

  
	
  Signature

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fill in for new Registration of Warrant:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Please print name and address of assignee

  	
   

  	
   

  
	
  (including zip code number)Exhibit
4.2

Executed Copy

REGISTRATION RIGHTS
AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”),
dated as of December 19, 2006, is by and between Favrille, Inc. (the “Company”)
and Kingsbridge Capital Limited, an entity organized and existing under the
laws of the British Virgin Islands, whose registered address is Palm Grove
House, 2nd Floor, Road Town, Tortola, British Virgin Islands (the “Investor”).

WHEREAS, the Company and the Investor have entered
into that certain Common Stock Purchase Agreement, dated as of the date hereof
(the “Purchase Agreement”), pursuant to which the Company may issue,
from time to time, to the Investor up to $40 million worth of shares of Common
Stock as provided for therein;

WHEREAS, pursuant to the terms of, and in partial
consideration for the Investor entering into, the Purchase Agreement, the
Company has issued to the Investor a warrant, exercisable from time to time, in
accordance with its terms, within five (5) years following the six-month
anniversary of the date of issuance (the “Warrant”) for the purchase of
an aggregate of up to 250,000 shares of Common Stock at a price specified in
such Warrant; and

WHEREAS, pursuant to the terms of, and in partial
consideration for, the Investor’s agreement to enter into the Purchase
Agreement, the Company has agreed to provide the Investor with certain
registration rights with respect to the Registrable Securities (as defined in
the Purchase Agreement) as set forth herein.

NOW, THEREFORE, in consideration of the premises, the
representations, warranties, covenants and agreements contained herein, in the
Warrant and in the Purchase Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
intending to be legally bound hereby, the parties hereto agree as follows
(capitalized terms used herein and not defined herein shall have the respective
meanings ascribed to them in the Purchase Agreement):

ARTICLE I

REGISTRATION RIGHTS

Section 1.1.            Registration Statement.

(a)   Filing of the Registration Statement.  Upon the terms and subject to the conditions
set forth in this Agreement, the Company shall file with the Commission within
sixty (60) calendar days after the Closing Date a registration statement on
Form S-3 under the Securities Act or such other form as deemed appropriate by
counsel to the Company for the registration for the resale by the Investor of
the Registrable Securities (the “Registration Statement”).

(b)   Effectiveness of the Registration
Statement.  The Company shall use
commercially reasonable efforts (i) to have the Registration Statement declared
effective by the Commission as soon as reasonably practicable, but in any event
no later than one hundred eighty (180) calendar days after the Closing Date and
(ii) to ensure that the Registration Statement remains in effect throughout the
term of this Agreement as set forth in Section 4.2, subject to the terms and
conditions of this Agreement.

 

 

(c)   Regulatory Disapproval.  The contemplated effective date for the Registration
Statement as described in Section 1.1(b) shall be extended without default or
liquidated damages hereunder or under the Purchase Agreement in the event that
the Company’s failure to obtain the effectiveness of the Registration Statement
on a timely basis results from (i) the failure of the Investor to timely
provide the Company with information requested by the Company and necessary to
complete the Registration Statement in accordance with the requirements of the
Securities Act, or (ii) the Commission’s disapproval of the structure of the
transactions contemplated by the Purchase Agreement, or (iii) events or
circumstances that are not in any way attributable to the Company. In the event
of clause (ii) above, the parties agree to cooperate with one another in good
faith to arrive at a resolution acceptable to the Commission.

(d)   Failure to Maintain Effectiveness of
Registration Statement.  In the event
the Company fails to maintain the effectiveness of the Registration Statement
(or the Prospectus) throughout the period set forth in Section 4.2, other
than temporary suspensions as set forth in Section 1.1(e), and the
Investor holds any Registrable Securities at any time during the period of such
ineffectiveness (an “Ineffective Period”), the Company shall pay to the
Investor in immediately available funds into an account designated by the
Investor an amount equal to the product of (x) the total number of Registrable
Securities issued to the Investor under the Purchase Agreement (which, for the
avoidance of doubt, shall not include any Warrant Shares) and owned by the
Investor at any time during such Ineffective Period and (y) the result, if
greater than zero, obtained by subtracting the VWAP on the Trading Day
immediately following the last day of such Ineffective Period from the VWAP on
the Trading Day immediately preceding the day on which any such Ineffective
Period began; provided, however, (i) that the foregoing payments
shall not apply in respect of Registrable Securities that are otherwise freely
tradable by the Investor or if the Company offers to repurchase from the
Investor such Registrable Securities for a per share purchase price equal to
the VWAP on the Trading Day immediately preceding the day on which any such
Ineffective Period began and (ii) that the Company shall be under no obligation
to supplement the Prospectus to reflect the issuance of any Shares pursuant to
a Draw Down at any time prior to the day following the Settlement Date with
respect to such Shares and that the failure to supplement the Prospectus prior
to such time period shall not be deemed a failure to maintain the effectiveness
of the Registration Statement (or Prospectus) for purposes of this Agreement
(including this Section 1.1(d)).

(e)           Deferral
or Suspension During a Blackout Period. 
Notwithstanding the provisions of Section 1.1(d), if in the good faith
judgment of the Company, following consultation with legal counsel, it would be
detrimental to the Company or its stockholders for the Registration Statement
to be filed or for resales of Registrable Securities to be made pursuant to the
Registration Statement due to (i) the existence of a material development or
potential material development involving the Company that the Company would be
obligated to disclose or incorporate by reference in the Registration
Statement, which disclosure would be premature or otherwise inadvisable at such
time or would have a Material Adverse Effect on the Company or its
stockholders, or (ii) a filing of a Company-initiated registration of any class
of its equity securities, which, in the good faith judgment of the Company,
because such filing of the Registration Statement or continued resale would
adversely affect or require premature disclosure of the filing of such
Company-initiated registration (notice thereof, a “Blackout Notice”),
the Company shall have the right to (A) immediately defer such filing for a
period of not more than sixty (60) days beyond the date by which such
Registration Statement was otherwise required hereunder to be filed or (B)
suspend use of such Registration Statement for a period of not more than thirty
(30) days (any such deferral or suspension period, a “Blackout Period”).  The Investor acknowledges that it would be
seriously detrimental to the Company and its stockholders for such Registration
Statement to be filed (or remain in effect) during a Blackout Period and
therefore essential to defer such filing (or suspend the use thereof) during
such Blackout Period and agrees to cease any disposition of the Registrable
Securities during such Blackout Period. 
The Company may not utilize any of its rights under this Section 1.1(e)
to defer the filing of a Registration Statement (or suspend its effectiveness)
more than six (6) times in any twelve (12) month 

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period.  In the event that, within seventy-five (75)
days following any Settlement Date, the Company gives a Blackout Notice to the
Investor and the VWAP on the Trading Day immediately preceding such Blackout
Period (“Old VWAP”) is greater than the VWAP on the first Trading Day
following such Blackout Period that the Investor may sell its Registrable
Securities pursuant to an effective Registration Statement (“New VWAP”),
then the Company shall pay to the Investor, by wire transfer of immediately
available funds to an account designated by the Investor, the Blackout Amount
(as hereinafter defined).  For purposes
of this Agreement, “Blackout Amount” means the lesser of (x) the product
of (i) the total number of Registrable Securities issued to the Investor
pursuant to the Purchase Agreement and owned by the Investor immediately prior
to the Blackout Period and (ii) the result obtained by subtracting the New VWAP
from the Old VWAP, (y) 90% of the most recent Draw Down Amount and (z) $8
million; provided, however, that no Blackout Amount shall be
payable in respect of Registrable Securities (A) that are otherwise freely
tradable by the Investor, including under Rule 144, during the Blackout Period,
or (B) if the Company offers to repurchase from the Investor such Registrable
Securities for a per share purchase price equal to the VWAP on the Trading Day
immediately preceding the day on which any such Blackout Period began.  For any Blackout Period in respect of which a
Blackout Amount becomes due and payable, rather than paying the Blackout
Amount, the Company may at is sole discretion, issue to the Investor shares of
Common Stock with an aggregate market value determined as of the first Trading
Day following such Blackout Period equal to the Blackout Amount (“Blackout Shares”).

(f)    Liquidated Damages.  The Company and the Investor hereto
acknowledge and agree that the amounts payable under Sections 1.1(d) and
1.1(e) and the Blackout Shares deliverable under Section 1.1(e) above (i)
shall constitute the Investor’s sole remedy with respect to the Company’s
failure to maintain the effectiveness, or for any deferral or suspension, of
the Registration Statement, and (ii) shall constitute liquidated damages
and not penalties.  The parties further
acknowledge that (i) the amount of loss or damages likely to be incurred
by the Investor is incapable or is difficult to precisely estimate,
(ii) the amounts specified in such subsections bear a reasonable
proportion and are not plainly or grossly disproportionate to the probable loss
likely to be incurred in connection with any failure by the Company to obtain
or maintain the effectiveness of the Registration Statement, (iii) one of
the reasons for the Company and the Investor reaching an agreement as to such
amounts was the uncertainty and cost of litigation regarding the question of
actual damages, and (iv) the Company and the Investor are sophisticated
business parties and have been represented by sophisticated and able legal and
financial counsel and negotiated this Agreement at arm’s length.   The Investor further agrees that, if the
Company makes the payments provided for in Section 1.1(e), the Company’s
deferral or suspension of the Registration Statement pursuant to Section 1.1(e)
shall not constitute a material breach or default of any obligation of the
Company to the Investor.

(g)   Additional Registration Statements.  In the event and to the extent that the
Registration Statement fails to register a sufficient amount of Common Stock
necessary for the Company to issue and sell to the Investor and the Investor to
purchase from the Company all of the Registrable Securities to be issued, sold
and purchased under the Purchase Agreement and the Warrant, the Company shall,
upon a timetable mutually agreeable to both the Company and the Investor,
prepare and file with the Commission an additional registration statement or
statements in order to effectuate the purpose of this Agreement, the Purchase
Agreement and the Warrant.

ARTICLE II

REGISTRATION PROCEDURES

Section 2.1.            Filings; Information.  The Company shall effect the registration
with respect to the sale of the Registrable Securities by the Investor in
accordance with the intended methods of disposition thereof.  Without limiting the foregoing, the Company
in each such case will do the following 

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as expeditiously
as possible, but in no event later than the deadline, if any, prescribed
therefor in this Agreement:

(a)   Subject to Section 1.1(e), the Company
shall (i) prepare and file with the Commission the Registration Statement;
(ii) use commercially reasonable efforts to cause such filed Registration
Statement to become and to remain effective (pursuant to Rule 415 under the
Securities Act or otherwise); (iii) prepare and file with the Commission
such amendments and supplements to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective for the time period prescribed by
Section 4.2 and in order to effectuate the purpose of this Agreement, the
Purchase Agreement and the Warrant and (iv) comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement during such period in accordance with the intended
methods of disposition by the Investor set forth in such Registration
Statement; provided, however, that the Company shall be under no
obligation to supplement the Prospectus to reflect the issuance of any Shares
pursuant to a Draw Down at any time prior to the Trading Day following the Settlement
Date with respect to such Shares and, provided  further, that the
Investor shall be responsible for the delivery of the Prospectus to the Persons
to whom the Investor sells the Shares and the Warrant Shares, and the Investor
agrees to dispose of Registrable Securities in compliance with the plan of
distribution described in the Registration Statement and otherwise in
compliance with applicable federal and state securities laws.

(b)   Three (3) Trading Days prior to filing the
Registration Statement or Prospectus, or any amendment or supplement thereto
(excluding amendments deemed to result from the filing of documents
incorporated by reference therein, supplements to the Prospectus required in
respect of any particular Settlement Date, and supplements to the Registration
Statement for which consent of or notice to the Investor is not required
pursuant to Section 6.12 of the Purchase Agreement), the Company shall deliver
to the Investor and to counsel representing the Investor, in accordance with
the notice provisions of Section 4.8, copies of the Registration
Statement, Prospectus and/or any amendments or supplements thereto as proposed
to be filed, together with exhibits thereto, which documents will be subject to
review by the Investor and such counsel, and thereafter deliver to the Investor
and such counsel, in accordance with the notice provisions of Section 4.8,
such number of copies of the Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the
Prospectus (including each preliminary prospectus) and such other documents or
information as the Investor or counsel may reasonably request in order to
facilitate the disposition of the Registrable Securities, provided, however,
that to the extent reasonably practicable, such delivery may be accomplished
via electronic means.

(c)   After the filing of the Registration
Statement, the Company shall promptly notify the Investor of any stop order
issued or threatened by the Commission in connection therewith and take
commercially reasonable actions required to prevent the entry of such stop
order or to have such stop order lifted, as the case may be.

(d)   The Company shall use commercially reasonable
efforts to (i) register or qualify the Registrable Securities under such other
securities or blue sky laws of each jurisdiction in the United States as the
Investor may reasonably (in light of its intended plan of distribution)
request, and (ii) cause the Registrable Securities to be registered with or
approved by such other governmental agencies or authorities in the United
States as may be necessary by virtue of the business and operations of the
Company and do any and all other customary acts and things that may be
reasonably necessary or advisable to enable the Investor to consummate the
disposition of the Registrable Securities; provided, however,
that the Company will not be required to qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 2.1(d), subject itself to taxation in any such jurisdiction,
consent or subject itself to general service of process in any such
jurisdiction, 

 4
 

 

 

change any
existing business practices, benefit plans or outstanding securities or amend
or otherwise modify the Charter or Bylaws.

(e)   The Company shall make available to the
Investor (and will deliver to Investor’s counsel), (A) subject to
restrictions imposed by the United States federal government or any agency or
instrumentality thereof, copies of all public correspondence between the
Commission and the Company concerning the Registration Statement and will also
make available for inspection by the Investor and any attorney, accountant or
other professional retained by the Investor (collectively, the “Inspectors”),
(B) upon reasonable advance notice during normal business hours all financial
and other records and pertinent corporate documents of the Company
(collectively, the “Records”) as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the Company’s
officers and employees to supply all information reasonably requested by any
Inspectors in connection with the Registration Statement; provided, however,
that (i) the Company shall not be obligated to disclose any portion of the
Records consisting of either (A) material non-public information or (B)
confidential information of a third party and (ii) any such Inspectors must
agree in writing for the benefit of the Company not to use or disclose any such
Records except as provided in this Section 2.1(e).  Records disclosed hereunder that the Company
determines, in good faith, to be confidential and that it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless the
disclosure or release of such Records is requested or required pursuant to oral
questions, interrogatories, requests for information or documents or a subpoena
or other order from a court of competent jurisdiction or other judicial or
governmental process; provided, however, that prior to any
disclosure or release pursuant to the immediately preceding clause, the
Inspectors shall provide the Company with prompt notice of any such request or
requirement so that the Company may seek an appropriate protective order or
waive such Inspectors’ obligation not to disclose such Records; and, provided,
further, that if failing the entry of a protective order or the waiver
by the Company permitting the disclosure or release of such Records, the
Inspectors, upon advice of counsel, are compelled to disclose such Records, the
Inspectors may disclose that portion of the Records that counsel has advised
the Inspectors that the Inspectors are compelled to disclose; provided, however,
that upon any such required disclosure, such Inspector shall use his or her
best efforts to obtain reasonable assurances that confidential treatment will
be afforded such information.  The
Investor agrees that information obtained by it solely as a result of such
inspections (not including any information obtained from a third party who,
insofar as is known to the Investor after reasonable inquiry, is not prohibited
from providing such information by a contractual, legal or fiduciary obligation
to the Company) shall be deemed confidential and shall not be used for any
purposes other than as indicated above or by it as the basis for any market
transactions in the securities of the Company or its affiliates unless and
until such information is made generally available to the public.  The Investor further agrees that it will,
upon learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of the Records deemed
confidential.

(f)    The Company shall otherwise comply in all
material respects with all applicable rules and regulations of the Commission,
including, without limitation, compliance with applicable reporting
requirements under the Exchange Act.

(g)   The Company shall appoint (or shall have
appointed) a transfer agent and registrar for all of the Registrable Securities
covered by such Registration Statement not later than the effective date of
such Registration Statement.

(h)   The Investor shall cooperate with the
Company, as reasonably requested by the Company, in connection with the
preparation and filing of any Registration Statement hereunder.  The Company may require the Investor to
promptly furnish in writing to the Company such information as may be required
in connection with such registration including, without limitation, all such
information as may be 

 5
 

 

 

requested by the
Commission or the NASD or any state securities commission and all such
information regarding the Investor, the Registrable Securities held by the Investor
and the intended method of disposition of the Registrable Securities.  The Investor agrees to provide such
information requested in connection with such registration within five (5)
Business Days after receiving such written request and the Company shall not be
responsible for any delays in obtaining or maintaining the effectiveness of the
Registration Statement caused by the Investor’s failure to timely provide such
information.

(i)    Upon receipt of a Blackout Notice from the
Company, the Investor shall immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until (i) the Company advises the Investor that the Blackout
Period has terminated and (ii) the Investor receives copies of a
supplemented or amended prospectus, if necessary.  If so directed by the Company, the Investor
will deliver to the Company (at the expense of the Company) or destroy (and
deliver to the Company a certificate of destruction) all copies in the Investor’s
possession (other than a limited number of file copies) of the prospectus
covering such Registrable Securities that is current at the time of receipt of
such notice.

Section 2.2.            Registration Expenses.  Except as set forth in Section 10.01 of the Purchase
Agreement, the Company shall pay all registration expenses incurred in
connection with the Registration Statement (the “Registration Expenses”),
including, without limitation: 
(i) all registration, filing, securities exchange listing and fees
required by the National Association of Securities Dealers, (ii) all
registration, filing, qualification and other fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Securities), (iii) all word processing, duplicating, printing, messenger
and delivery expenses, (iv) the Company’s internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), (v) the fees and expenses incurred
by the Company in connection with the listing of the Registrable Securities,
(vi) reasonable fees and disbursements of counsel for the Company and
customary fees and expenses for independent certified public accountants
retained by the Company (including the expenses of any special audits or
comfort letters or costs associated with the delivery by independent certified
public accountants of such special audit(s) or comfort letter(s),  (vii) the fees
and expenses of any special experts retained by the Company in connection with
such registration and amendments and supplements to the Registration Statement
and Prospectus, and (viii) premiums and other costs of the Company for policies
of insurance against liabilities of the Company arising out of any public
offering of the Registrable Securities being registered to the extent the
Company in its discretion elects to obtain and maintain insurance.  Any fees and disbursements of underwriters,
broker-dealers or investment bankers, including without limitation underwriting
fees, discounts, transfer taxes or commissions, and any other fees or expenses
(including legal fees and expenses) if any, attributable to the sale of
Registrable Securities, shall be payable by each holder of Registrable
Securities pro rata on the basis of the number of
Registrable Securities of each such holder that are included in a registration
under this Agreement.

ARTICLE III

INDEMNIFICATION

Section 3.1.            Indemnification.  The Company agrees to indemnify and hold
harmless the Investor, its partners, affiliates, officers, directors, employees
and duly authorized agents, and each Person or entity, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, together with the partners, affiliates,
officers, directors, employees and duly authorized agents of such controlling
Person or entity (collectively, the “Controlling Persons”), from and
against any loss, claim, damage, liability, costs and expenses (including,
without limitation, reasonable attorneys’ fees and disbursements and costs and
expenses of investigating and defending any such claim) (collectively, “Damages”),
joint or several, and any action or proceeding in respect thereof to 

 6
 

 

 

which the
Investor, its partners, affiliates, officers, directors, employees and duly
authorized agents, and any Controlling Person, may become subject under the
Securities Act or otherwise, as incurred, insofar as such Damages (or actions
or proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement, or in any preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement relating to the Registrable
Securities or arises out of, or are based upon, any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein under the circumstances not
misleading, and shall reimburse the Investor, its partners, affiliates,
officers, directors, employees and duly authorized agents, and each such
Controlling Person, for any legal and other expenses reasonably incurred by the
Investor, its partners, affiliates, officers, directors, employees and duly
authorized agents, or any such Controlling Person, as incurred, in
investigating or defending or preparing to defend against any such Damages or
actions or proceedings; provided, however, that the Company shall
not be liable to the extent that any such Damages arise out of the Investor’s
(or any other indemnified Person’s) (i) failure to send or give a copy of the
final prospectus or supplement (as then amended or supplemented) to the persons
asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such person if such statement or omission was
corrected in such final prospectus or supplement or (ii) written confirmation
of the sale of Registrable Securities purchased in any specific Draw Down prior
to the filing of a supplement to the Prospectus to reflect such Draw Down (provided,
that the Company is in compliance with its covenants with respect to the filing
of such supplement); provided, further, that the Company shall
not be liable to the extent that any such Damages arise out of or are based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such Registration Statement, or any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Investor or any other person who participates as
an underwriter in the offering or sale of such securities, in either case,
specifically stating that it is for use in the preparation thereof.  In connection with any Registration Statement
with respect to which the Investor is participating, such Investor will
indemnify and hold harmless, to the same extent and in the same manner as set
forth in the preceding paragraph, the Company, each of its partners,
affiliates, officers, directors, employees and duly authorized agents of such
controlling Person (each a “Company Indemnified Person”) against any
Damages to which any Company Indemnified Person may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Damages arise
out of or are based upon (a) any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement, or in any
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement relating to the Registrable Securities or arise out of, or are based
upon, any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein under
the circumstances not misleading to the extent that such violation occurs in reliance
upon and in conformity with written information furnished to the Company by the
Investor or on behalf of the Investor expressly for use in connection with such
Registration Statement, (b) any failure by the Investor to comply with
prospectus delivery requirements of the Securities Act, the Exchange Act or any
other law or legal requirement applicable to sales under the Registration
Statement, or (c) a written confirmation of the sale of Registrable Securities
purchased by such Investor in any specific Draw Down prior to the filing of a
supplement to the Prospectus to reflect such Draw Down (provided, that
the Company is in compliance with its covenants with respect to the filing of
such supplement).

Section 3.2.            Conduct of Indemnification
Proceedings.  All claims for
indemnification under Section 3.1 shall be asserted and resolved in
accordance with the provisions of Section 9.02 of the Purchase Agreement.

Section 3.3.            Additional Indemnification.  Indemnification similar to that specified in
the preceding paragraphs of this Article III (with appropriate modifications)
shall be given by the Company 

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and the Investor
with respect to any required registration or other qualification of securities
under any federal or state law or regulation of any governmental authority
other than the Securities Act.  The
provisions of this Article III shall be in addition to any other rights to
indemnification, contribution or other remedies which an Indemnified Party or a
Company Indemnified Person may have pursuant to law, equity, contract or
otherwise.

To the extent that any indemnification provided for
herein is prohibited or limited by law, the indemnifying party will make the
maximum contribution with respect to any amounts for which it would otherwise
be liable under this Article III to the fullest extent permitted by
law.  However, (a) no contribution
will be made under circumstances where maker of such contribution would not
have been required to indemnify the indemnified party under the fault standards
set forth in this Article III, (b) if the Investor is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
the Investor will not be entitled to contribution from any Person who is not
guilty of such fraudulent misrepresentation, and (c) contribution (together
with any indemnification obligations under this Agreement) by the Investor will
be limited in amount to the proceeds received by the Investor from sales of
Registrable Securities.

ARTICLE IV

MISCELLANEOUS

Section 4.1.            No Outstanding Registration
Rights.  Except as otherwise
disclosed in accordance with the Purchase Agreement or in the Commission
Documents, the Company represents and warrants to the Investor that there is
not in effect on the date hereof any agreement by the Company pursuant to which
any holders of securities of the Company have a right to cause the Company to
register or qualify such securities under the Securities Act or any securities
or blue sky laws of any jurisdiction.

Section 4.2.            Term.  The registration rights provided to the
holders of Registrable Securities hereunder, and the Company’s obligation to
keep the Registration Statement effective, shall terminate at the earlier of
(i) such time that is two years following the termination of the Purchase
Agreement, (ii) such time as all Registrable Securities have been issued
and have ceased to be Registrable Securities, or (iii) upon the
consummation of an “Excluded Merger or Sale” as defined in the Warrant.  Notwithstanding the foregoing,
paragraph (d) of Section 1.1, Article III, Section 4.7,
Section 4.8, Section 4.9, Section 4.10 and Section 4.13
shall survive the termination of this Agreement.

Section 4.3.            Rule 144.  The Company will, at its expense, promptly
take such action as holders of Registrable Securities may reasonably request to
enable such holders of Registrable Securities to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act (“Rule
144”), as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission.  If at any time the Company is not required to
file such reports, it will, at its expense, forthwith upon the written request
of any holder of Registrable Securities, make available adequate current public
information with respect to the Company within the meaning of
paragraph (c)(2) of Rule 144 or such other information as necessary
to permit sales pursuant to Rule 144. 
Upon the request of the Investor, the Company will deliver to the
Investor a written statement, signed by the Company’s principal financial
officer, as to whether it has complied with such requirements.

Section 4.4.            Certificate.  The Company will, at its expense, forthwith
upon the request of any holder of Registrable Securities, deliver to such
holder a certificate, signed by the Company’s principal financial officer,
stating (a) the Company’s name, address and telephone number (including
area code), (b) the Company’s Internal Revenue Service identification
number, (c) the Company’s Commission file number, (d) the number of shares
of each class of Stock outstanding as shown by the most recent report or 

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statement
published by the Company, and (e) whether the Company has filed the
reports required to be filed under the Exchange Act for a period of at least
ninety (90) days prior to the date of such certificate and in addition has
filed the most recent annual report required to be filed thereunder.

Section 4.5.            Amendment And Modification.  Any provision of this Agreement may be
waived, provided that such waiver is set forth in a writing executed by
both parties to this Agreement.  The
provisions of this Agreement, including the provisions of this sentence, may be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may be given, only with the written consent of the
Investor and the Company.  No course of
dealing between or among any Person having any interest in this Agreement will
be deemed effective to modify, amend or discharge any part of this Agreement or
any rights or obligations of any person under or by reason of this Agreement.

Section 4.6.            Successors and Assigns; Entire
Agreement.  This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.  The Company may assign this Agreement at any
time in connection with a sale or acquisition of the Company, whether by
merger, consolidation, sale of all or substantially all of the Company’s
assets, or similar transaction, without the consent of the Investor, provided
that the successor or acquiring Person or entity agrees in writing to assume
all of the Company’s rights and obligations under this Agreement.  The Investor may assign its rights and
obligations under this Agreement only to (i) an affiliate that meets all
applicable requirements of federal and state securities laws, or (ii) with the
prior written consent of the Company, and any purported assignment by the
Investor other than as set forth above shall be null and void.  This Agreement, together with the Purchase
Agreement and the Warrant sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges and supersedes
all prior discussions, agreements and understandings of any and every nature
among them.

Section 4.7.            Severability.  If any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement shall continue in full force and effect without said
provision; provided that if the severance of such provision materially
changes the economic benefits of this Agreement to either party as such
benefits are anticipated as of the date hereof, then such party may terminate
this Agreement on five (5) Business Days prior written notice to the other
party.  In such event, the Purchase
Agreement will terminate simultaneously with the termination of this Agreement.

Section 4.8.            Notices.  All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be
given in accordance with Section 10.04 of the Purchase Agreement.

Section 4.9.            Governing Law.  This Agreement shall be construed under the
laws of the State of New York.

Section 4.10.          Headings.  The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this
Agreement, nor shall they affect their meaning, construction or effect.

Section 4.11.          Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and
all of which together shall constitute one and the same instrument.

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Section 4.12.          Further Assurances.  Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out
the provisions and purposes of this Agreement and the transactions contemplated
hereby.

Section 4.13.          Absence of Presumption.  This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.

[Remainder of this
page intentionally left blank]

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IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by the undersigned, thereunto duly authorized, as
of the date first set forth above.

	
  

  	
  FAVRILLE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John P. Longenecker, Ph.D.

  
	
   

  	
   

  	
  John P. Longenecker, Ph.D.

  
	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KINGSBRIDGE CAPITAL LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Maria O’Donoghue

  
	
   

  	
   

  	
  Maria O’Donoghue

  
	
   

  	
   

  	
  Director

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