Document:

Exhibit 4.02

 

CALCULATION
AGENCY AGREEMENT

 

CALCULATION AGENCY AGREEMENT, dated as of March 7,
2006 (this “Agreement”), between Lehman Brothers Holdings Inc. (the “Company”)
and Lehman Brothers Inc., as Calculation Agent.

 

WHEREAS, the Company proposes to issue and sell its
Principal Protected USD-Asian Basket FX-Linked Notes (the “Notes”) from time to time;

 

WHEREAS, the terms of the Notes are described in a
pricing supplement dated February 28, 2006 (in connection with the
performance by the Calculation Agent of its services hereunder with respect to
the Notes, the pricing supplement relating to the Notes is referred to herein
as the “relevant Pricing Supplement”) to the prospectus supplement dated
May 18, 2005 and the prospectus dated May 18, 2005;

 

WHEREAS, the Notes will be issued under an Indenture,
dated as of September 1, 1987, between the Company and Citibank, N.A., as
Trustee (the “Trustee”), as supplemented and amended by supplemental
indentures dated as of November 25, 1987, November 27, 1990, September 13,
1991, October 4, 1993, October 1, 1995, and June 26, 1997, and
incorporating Standard Multiple Series Indenture Provisions dated July 30,
1987, as amended November 16, 1987 (collectively, the “Indenture”);
and

 

WHEREAS, the Company requests the Calculation Agent to
perform certain services described herein in connection with the Notes;

 

NOW THEREFORE, the Company and the Calculation Agent
agree as follows:

 

1.                                       Appointment
of Agent. The Company hereby appoints Lehman Brothers Inc. as Calculation Agent
and Lehman Brothers Inc. hereby accepts such appointment as the Company’s agent
for the purpose of performing the services hereinafter described upon the terms
and subject to the conditions hereinafter mentioned.

 

2.                                       Calculations
and Information Provided. In response to a request made by the Trustee for
a determination of the Redemption Amount with respect to any series of the
Notes, the Calculation Agent shall determine the Redemption Amount (as set
forth below) on the Valuation Date (as defined below) in accordance with the
terms of the Notes and this Agreement and notify the Trustee of its
determination. In addition, the Calculation Agent shall also be responsible for
determining each of the following items for the Notes, to the extent
applicable: 

 

(a)                                  whether
a Disruption Event (as defined below) has occurred;

 

(b)                                 whether
a Price Source Unavailability Event (as defined below) has occurred; and

 

(c)                                  any
other calculation, determination or adjustment specified as being made by the
Calculation Agent in this Agreement, the relevant Pricing Supplement or the
Notes. 

 

 

3.                                       Calculations.
Any calculation or determination by the Calculation Agent pursuant hereto shall
be made at the sole discretion of the Calculation Agent and shall (in the
absence of manifest error) be final and binding. Any calculation made by the
Calculation Agent hereunder shall, at the Trustee’s request, be made available
at the Corporate Trust Office. The procedures the Calculation Agent will use to
determine the information described herein with respect to the Notes is set
forth as follows: 

 

(a)                                  On the Valuation Date, the
Calculation Agent shall calculate the Redemption Amount for the Notes. The “Redemption
Amount”, for each $1 principal amount of the Notes, is the amount equal to
the sum of (a) $1 plus (b) the
Additional Amount.

 

(i)                                     The “Additional
Amount”, for each $1 principal amount of the Notes, equals (subject to the
occurrence of a Disruption Event) the greater of (i) zero and (ii) 140%
times the Basket Value. 

 

(ii)                                  The “Reference
Currencies” are the Australian Dollar (AUD), Chinese Renminbi (CNY),
Indonesian Rupiah (IDR), Japanese Yen (JPY), Korean Won (KRW), Singapore Dollar
(SGD), Thai Baht (THB), Taiwanese Dollar (TWD) and the U.S. Dollar (USD).

 

(iii)                               The “Basket Value”
equals the sum of:

 

a.               a quotient, the
numerator of which is 0.16826 and
the denominator of which is the Settlement Rate for AUD plus 

 

b.              a quotient, the
numerator of which is 1.00503 and
the denominator of which is the Settlement Rate for CNY plus 

 

c.               a quotient, the
numerator of which is 1147.81250
and the denominator of which is the Settlement Rate for IDR plus 

 

d.              a quotient, the
numerator of which is 14.47875
and the denominator of which is the Settlement Rate for JPY plus

 

e.               a quotient, the
numerator of which is 121.37500
and the denominator of which is the Settlement Rate for KRW plus

 

f.                 a quotient, the
numerator of which is 0.20265 and
the denominator of which is the Settlement Rate for SGD plus

 

g.              a quotient, the
numerator of which is 4.89475 and
the denominator of which is the Settlement Rate for THB plus

 

h.              a quotient, the
numerator of which is 4.05631 and
the denominator of which is the Settlement Rate for TWD plus

 

i.                  a quotient, the
numerator of which is -1.0000 and
the denominator of which is the Settlement Rate for USD.

 

2

 

(iv)                              The “Settlement Rate”
for each Reference Currency is the Reference Exchange Rate on the Valuation
Date, observed as per the Settlement Rate Option (subject to the occurrence of
a Price Source Unavailability Event).

 

a.               The “Reference Exchange
Rates” are the spot exchange rates for each of the Reference Currencies
quoted against the U.S. dollar expressed as number of currency units per USD 1.

 

b.              The “Settlement
Rate Option” for each Reference Currency is as follows:

 

	
  Reference Currency

  	
   

  	
  Settlement Rate Option

  
	
  AUD

  	
   

  	
  One divided by the spot rate in (A): 
  (A)  The U.S. Dollar/Australian Dollar official fixing rate,
  expressed as the amount of U.S. Dollars per one Australian Dollar, for
  settlement in two Business Days reported by the Federal Reserve Bank of New
  York which appears on Reuters Screen 1FEE to the right of the caption “AUD”
  at approximately 12.00 p.m. New York time, on the Valuation Date.

  
	
   

  	
   

  	
   

  
	
  CNY

  	
   

  	
  The Chinese Renminbi/U.S. Dollar official fixing rate, expressed as
  the amount of Chinese Renminbi per one U.S. Dollar, for settlement in two
  Business Days reported by The State Administration of Foreign Exchange of the
  People’s Republic of China, Beijing, which appears on the Reuters Screen SAEC
  Page opposite the symbol “USDCNY=“ at approximately 5:00 p.m.,
  Beijing time, on the Valuation Date.

  
	
   

  	
   

  	
   

  
	
  IDR

  	
   

  	
  The Indonesian Rupiah/U.S. Dollar spot rate at 11:00 a.m.,
  Singapore time, expressed as the amount of Indonesian Rupiah per one U.S.
  Dollar, for settlement in two Business Days, reported by the Association of
  Banks in Singapore which appears on the Telerate Page 50157 to the right
  of the caption “Spot” under the column “IDR” at approximately 11:30 a.m.,
  Singapore time, on the Valuation Date.

  
	
   

  	
   

  	
   

  
	
  JPY

  	
   

  	
  The Japanese Yen/U.S. Dollar official fixing rate, expressed as the
  amount of Japanese Yen per one U.S. Dollar, for settlement in two Business
  Days reported by the Federal Reserve Bank of New York which appears on
  Reuters Screen 1FED to the right of the caption “JPY” at approximately 10.00 a.m.
  New York time, on the Valuation Date.

  
	
   

  	
   

  	
   

  
	
  KRW

  	
   

  	
  The Korean Won/U.S. Dollar market average rate, expressed as the
  amount of Korean Won per one U.S. Dollar, for settlement in two Business Days
  reported by the Korea Financial Telecommunications and Clearing Corporation
  which appears on the Reuters Screen KFTC18 Page to the right of the
  caption “USD Today” that is available at approximately 5:30 p.m., Seoul
  time, on the Valuation Date or as soon thereafter as practicable, but in no
  event later than 9:00 a.m., Seoul time, on the first Business Day
  following the Valuation Date.

  
	
   

  	
   

  	
   

  
	
  SGD

  	
   

  	
  The Singapore Dollar/U.S. Dollar spot rate at 11:00 a.m.,
  Singapore time, expressed as the amount of Singapore Dollar per one U.S.
  Dollar, for settlement in two Business Days, reported by the Association of
  Banks in Singapore which appears on the Reuters Page ABSIRFIX01 to the
  right of the caption “Spot” under the column “SGD” at approximately 11:30 a.m.,
  Singapore time, on the Valuation Date.

  
	
   

  	
   

  	
   

  
	
  THB

  	
   

  	
  The Thai Baht/U.S. Dollar spot rate at 11:00 a.m., Singapore
  time, expressed as the amount of Thai Baht per one U.S. Dollar, for
  settlement in two Business Days, reported by the Association of Banks in
  Singapore which appears on the Reuters Page ABSIRFIX01 to the right of
  the caption “Spot” under the column “THB” at approximately 11:30 a.m.,
  Singapore time, on the Valuation Date.

  
	
   

  	
   

  	
   

  
	
  TWD

  	
   

  	
  The Taiwanese Dollar/U.S. Dollar spot rate, expressed as the amount
  of Taiwanese Dollars per one U.S. Dollar, for settlement in two Business
  Days, reported by the Taipei Forex Inc. which appears on the Reuters Screen
  TAIFX1 Page under the heading “Spot” as of 11:00 a.m. Taipei time,
  on that Valuation Date, or if no rate appears as of 11:00 a.m., Taipei
  time, the rate that first appears in any of the next succeeding 15 minute
  intervals after such time, up to and including 12:00 noon, Taipei time on the
  Valuation Date.

  

 

3

 

The screen or time of observation indicated in relation to any
Settlement Rate Option above shall be deemed to refer to such screen or time of
observation as modified or amended from time to time, or to any substitute
screen thereto. 

 

c.               The “Valuation
Date” is August 31, 2007 or, if such day is not a Valuation Business
Day, the next following Valuation Business day. 

 

d.              A “Business Day”,
notwithstanding any provision in the Indenture, is any day that is not is not a
Saturday or Sunday and that is not a day on which banking institutions in New
York City generally are authorized or obligated by law or executive order to be
closed.

 

(b)                                 Upon the occurrence of a
Disruption Event with respect to any Reference Currency on any day during the
term of the notes, the Calculation Agent shall determine the Additional Amount
payable on the Maturity Date in good faith and in a commercially reasonable
manner.

 

(i)                                     A “Disruption
Event” means any of the following events (other than a Price Source
Unavailability Event), as determined in good faith by the Calculation Agent:

 

a.               the occurrence
and/or existence of an event on any day that has the effect of preventing or
making impossible the delivery of USD from accounts inside the country for
which a Reference Currency is the lawful currency (such jurisdiction with
respect to such Reference Currency, the “Reference Currency Jurisdiction”) to
accounts outside that Reference Currency Jurisdiction; 

 

b.              the occurrence of
any event causing the Reference Exchange Rate for any Reference Currency to be
split into dual or multiple currency exchange rates; or

 

c.               the occurrence
and/or existence of any event (other than those set forth in (A) or (B) above
or those constituting a Price Source Unavailability Event) with respect to any
Reference Currency that prevents or makes impossible (x) the Calculation Agent’s
ability to calculate the Additional Amount, (y) the fulfilment of our
obligations under the notes, or (z) our ability or the ability of any of our
affiliates through which we hedge our position under the notes to hedge such
position or to unwind all or a material portion of such hedge.

 

(c)                                  Upon the occurrence of a Price
Source Unavailability Event with respect to a Reference Currency, the
Settlement Rate for the affected Reference Currency will be determined in
accordance with the Fallback Rate Observation Methodology.

 

(i)                                     A “Price Source Unavailability Event”
means, as determined in good faith by the Calculation Agent, the Settlement
Rate being unavailable for a

 

4

 

Reference Currency, or the occurrence of an event (other than an event
constituting a Disruption Event) that generally makes it impossible to obtain
the Settlement Rate for a Reference Currency, on the relevant Valuation Date.

 

(ii)                                  The “Fallback Rate Observation Methodology”
means that the Settlement Rate for a Reference Currency will be calculated on
the basis of the arithmetic mean of the applicable spot quotations received by
the Calculation Agent at approximately 10:00 a.m., New York City time, on
the Valuation Business Day next succeeding the Valuation Date for the purchase
or sale for deposits in the Reference Currency by the New York offices of three
leading banks engaged in the interbank market (selected in the sole discretion
of the Calculation Agent) (the “Reference Banks”). If fewer than three
Reference Banks provide spot quotations then the Settlement Rate for such
Reference Currency will be determined by the Calculation Agent in good faith
and in a commercially reasonable manner.

 

4.                                       Fees
and Expenses. The Calculation Agent shall be entitled to reasonable
compensation for all services rendered by it as agreed to between the
Calculation Agent and the Company.

 

5.                                       Terms
and Conditions. The Calculation Agent accepts its obligations herein set
out upon the terms and conditions hereof, including the following, to all of
which the Company agrees:

 

(a)                                  in
acting under this Agreement, the Calculation Agent is acting solely as an
independent expert and not as an agent of the Company and does not assume any
obligation toward, or any relationship of agency or trust for or with, any of
the holders of the Notes;

 

(b)                                 unless
otherwise specifically provided herein, any order, certificate, notice,
request, direction or other communication from the Company or the Trustee made
or given under any provision of this Agreement shall be sufficient if signed by
any person who the Calculation Agent reasonably believes to be a duly
authorized officer or attorney-in-fact of the Company or the Trustee, as the
case may be;

 

(c)                                  the
Calculation Agent shall be obliged to perform only such duties as are set
out specifically herein and any duties necessarily incidental thereto;

 

(d)                                 the
Calculation Agent, whether acting for itself or in any other capacity, may become
the owner or pledgee of Notes with the same rights as it would have had if it
were not acting hereunder as Calculation Agent; and

 

(e)                                  the
Calculation Agent shall incur no liability hereunder except for loss sustained
by reason of its gross negligence or wilful misconduct.

 

6.                                       Resignation;
Removal; Successor. (a)  The Calculation Agent may at any time
resign by giving written notice to the Company of such intention on its part,
specifying the date on which its desired resignation shall become effective,
subject to the appointment of a successor Calculation Agent and acceptance of
such appointment by such successor Calculation Agent, as hereinafter provided. The
Calculation Agent hereunder may be removed at any time

 

5

 

by the filing with it of an instrument in writing
signed by or on behalf of the Company and specifying such removal and the date
when it shall become effective. Such resignation or removal shall take effect
upon the appointment by the Company, as hereinafter provided, of a successor
Calculation Agent and the acceptance of such appointment by such successor
Calculation Agent. In the event a successor Calculation Agent has not been
appointed and has not accepted its duties within 90 days of the Calculation
Agent’s notice of resignation, the Calculation Agent may apply to any
court of competent jurisdiction for the designation of a successor Calculation
Agent.

 

(b)                                 In
case at any time the Calculation Agent shall resign, or shall be removed, or
shall become incapable of acting, or shall be adjudged bankrupt or insolvent,
or make an assignment for the benefit of its creditors or consent to the
appointment of a receiver or custodian of all or any substantial part of
its property, or shall admit in writing its inability to pay or meet its debts
as they mature, or if a receiver or custodian of it or all or any substantial part of
its property shall be appointed, or if any public officer shall have taken
charge or control of the Calculation Agent or of its property or affairs, for
the purpose of rehabilitation, conservation or liquidation, a successor
Calculation Agent shall be appointed by the Company by an instrument in
writing, filed with the successor Calculation Agent. Upon the appointment as
aforesaid of a successor Calculation Agent and acceptance by the latter of such
appointment, the Calculation Agent so superseded shall cease to be Calculation
Agent hereunder.

 

(c)                                  Any
successor Calculation Agent appointed hereunder shall execute, acknowledge and
deliver to its predecessor, to the Company and to the Trustee an instrument
accepting such appointment hereunder and agreeing to be bound by the terms
hereof, and thereupon such successor Calculation Agent, without any further
act, deed or conveyance, shall become vested with all the authority, rights,
powers, trusts, immunities, duties and obligations of such predecessor with
like effect as if originally named as Calculation Agent hereunder, and such
predecessor, upon payment of its charges and disbursements then unpaid, shall
thereupon become obligated to transfer, deliver and pay over, and such
successor Calculation Agent shall be entitled to receive, all moneys,
securities and other property on deposit with or held by such predecessor, as
Calculation Agent hereunder.

 

(d)                                 Any
corporation into which the Calculation Agent hereunder may be merged or
converted or any corporation with which the Calculation Agent may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Calculation Agent shall be a party, or any
corporation to which the Calculation Agent shall sell or otherwise transfer all
or substantially all of the assets and business of the Calculation Agent shall
be the successor Calculation Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the
parties hereto.

 

7.                                       Certain
Definitions. Capitalized terms not otherwise defined herein are used herein
as defined in the Notes or, if not defined in the Notes, as defined in the
Indenture.

 

8.                                       Indemnification.
The Company will indemnify the Calculation Agent against any losses or
liability which it may incur or sustain in connection with its appointment
or the exercise of its powers and duties hereunder except such as may result
from the gross negligence or wilful misconduct of the Calculation Agent or any
of its agents or employees. The Calculation Agent shall incur no liability and
shall be indemnified and held harmless by the

 

6

 

Company for or in respect of any action taken or
suffered to be taken in good faith by the Calculation Agent in reliance upon
written instructions from the Company.

 

9.                                       Notices.
Any notice required to be given hereunder shall be delivered in person, sent
(unless otherwise specified in this Agreement) by letter, telex or facsimile
transmission or communicated by telephone (confirmed in a writing dispatched
within two Business Days), (a) in the case of the Company, to it at 745
Seventh Avenue, New York, New York 10019 (facsimile: (646) 758-3204)
(telephone: (212) 526-7000), Attention: Treasurer, with a copy to 399 Park
Avenue, New York, New York 10022 (facsimile: (212) 526-0357) (telephone: (212)
526-7000), Attention: Corporate Secretary, (b) in the case of the
Calculation Agent, to it at Lehman Brothers Inc., 745 Seventh Avenue, New York, NY 10019 (facsimile: (646) 758-3204)
(telephone: (212) 526-7000), Attention: Treasurer and (c) in the
case of the Trustee, to it at 111 Wall Street, 5th Floor, New York, New York
10043 (facsimile: (212) 657-3836) (telephone: 
(212) 657-7805), Attention: Corporate Trust Department or, in any case,
to any other address or number of which the party receiving notice shall have
notified the party giving such notice in writing. Any notice hereunder given by
telex, facsimile or letter shall be deemed to be served when in the ordinary
course of transmission or post, as the case may be, it would be received.

 

10.                                 GOVERNING
LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONTINUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

 

11.                                 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

 

12.                                 Benefit
of Agreement. This Agreement is solely for the benefit of the parties
hereto and their successors and assigns, and no other person shall acquire or
have any rights under or by virtue hereof.

 

7

 

IN WITNESS WHEREOF, this Agreement has been entered
into as of the day and year first above written.

 

 

	
   

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LEHMAN BROTHERS INC.

  
	
   

  	
  as Calculation Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

8Exhibit 4.4

 

FAVRILLE, INC.

 

SECURITIES PURCHASE AGREEMENT

 

MARCH 6, 2006

 

 

	
  ARTICLE 1

  	
   

  	
  AUTHORIZATION AND SALE OF COMMON
  SHARES AND WARRANTS

  	
  1

  
	
  1.1

  	
   

  	
  Authorization

  	
  1

  
	
  1.2

  	
   

  	
  Sale of Common Shares
  and Warrants

  	
  2

  
	
  ARTICLE 2

  	
   

  	
  CLOSING
  DATES; DELIVERY

  	
  2

  
	
  2.1

  	
   

  	
  Closing Date

  	
  2

  
	
  2.2

  	
   

  	
  Delivery

  	
  2

  
	
  ARTICLE 3

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES OF THE COMPANY

  	
  2

  
	
  3.1

  	
   

  	
  Organization and
  Standing

  	
  2

  
	
  3.2

  	
   

  	
  Corporate Power;
  Authorization

  	
  2

  
	
  3.3

  	
   

  	
  Issuance and Delivery
  of the Shares

  	
  3

  
	
  3.4

  	
   

  	
  SEC Documents;
  Financial Statements

  	
  3

  
	
  3.5

  	
   

  	
  Governmental Consents

  	
  3

  
	
  3.6

  	
   

  	
  No Material Adverse
  Change

  	
  4

  
	
  3.7

  	
   

  	
  Authorized Capital
  Stock

  	
  4

  
	
  3.8

  	
   

  	
  Litigation

  	
  4

  
	
  3.9

  	
   

  	
  Eligibility to Use
  Form S-3

  	
  4

  
	
  3.10

  	
   

  	
  Company not an
  “Investment Company.”

  	
  4

  
	
  3.11

  	
   

  	
  NASDAQ Compliance

  	
  4

  
	
  3.12

  	
   

  	
  Use of Proceeds

  	
  5

  
	
  3.13

  	
   

  	
  Brokers and Finders

  	
  5

  
	
  3.14

  	
   

  	
  No Directed Selling
  Efforts or General Solicitation

  	
  5

  
	
  3.15

  	
   

  	
  No Integrated Offering

  	
  5

  
	
  3.16

  	
   

  	
  Private Placement

  	
  5

  
	
  3.17

  	
   

  	
  Intellectual Property

  	
  5

  
	
  3.18

  	
   

  	
  Questionable Payments

  	
  6

  
	
  3.19

  	
   

  	
  Transactions with
  Affiliates

  	
  6

  
	
  3.20

  	
   

  	
  Disclosure

  	
  6

  
	
  ARTICLE 4

  	
   

  	
  REPRESENTATIONS,
  WARRANTIES AND COVENANTS OF THE PURCHASERS

  	
  6

  
	
  4.1

  	
   

  	
  Authorization

  	
  6

  
	
  4.2

  	
   

  	
  Investment Experience

  	
  7

  
	
  4.3

  	
   

  	
  Investment Intent

  	
  7

  
					

 

i

 

	
  4.4

  	
   

  	
  Registration or
  Exemption Requirements

  	
  7

  
	
  4.5

  	
   

  	
  No Legal, Tax or
  Investment Advice

  	
  7

  
	
  4.6

  	
   

  	
  Confidentiality

  	
  8

  
	
  4.7

  	
   

  	
  Residency

  	
  8

  
	
  4.8

  	
   

  	
  Governmental Review

  	
  8

  
	
  4.9

  	
   

  	
  Legend

  	
  8

  
	
  4.10

  	
   

  	
  Foreign Investors

  	
  9

  
	
  ARTICLE 5

  	
   

  	
  CONDITIONS
  TO CLOSING OBLIGATIONS OF PURCHASERS

  	
  9

  
	
  5.1

  	
   

  	
  Minimum Funding

  	
  9

  
	
  5.2

  	
   

  	
  Certificates

  	
  9

  
	
  5.3

  	
   

  	
  Legal Opinion

  	
  9

  
	
  5.4

  	
   

  	
  Listing

  	
  9

  
	
  5.5

  	
   

  	
  Judgments

  	
  9

  
	
  5.6

  	
   

  	
  Secretary’s Certificate

  	
  10

  
	
  5.7

  	
   

  	
  Stop Orders

  	
  10

  
	
  5.8

  	
   

  	
  Anti-Takeover Measures

  	
  10

  
	
  5.9

  	
   

  	
  No Governmental
  Prohibition

  	
  10

  
	
  ARTICLE 6

  	
   

  	
  CONDITIONS
  TO CLOSING OBLIGATIONS OF COMPANY

  	
  10

  
	
  6.1

  	
   

  	
  Receipt of Payment

  	
  10

  
	
  6.2

  	
   

  	
  Delivery of Purchaser
  Questionnaire

  	
  10

  
	
  ARTICLE 7

  	
   

  	
  COVENANTS

  	
  10

  
	
  7.1

  	
   

  	
  Definitions

  	
  10

  
	
  7.2

  	
   

  	
  Registration Procedures
  on Form S-3

  	
  11

  
	
  7.3

  	
   

  	
  Demand Registration

  	
  13

  
	
  7.4

  	
   

  	
  Expenses of
  Registration

  	
  15

  
	
  7.5

  	
   

  	
  Indemnification

  	
  15

  
	
  7.6

  	
   

  	
  Prospectus Delivery

  	
  18

  
	
  7.7

  	
   

  	
  Termination of
  Obligations

  	
  18

  
	
  7.8

  	
   

  	
  Reporting Requirements

  	
  18

  
	
  7.9

  	
   

  	
  Blue Sky

  	
  19

  
	
  7.10

  	
   

  	
  Board of Directors

  	
  19

  
	
  7.11

  	
   

  	
  Observation Rights

  	
  19

  
	
  7.12

  	
   

  	
  Expenses

  	
  19

  
					

 

ii

 

	
  ARTICLE 8

  	
   

  	
  RESTRICTIONS
  ON TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH SECURITIES ACT

  	
  19

  
	
  8.1

  	
   

  	
  Restrictions on
  Transferability

  	
  19

  
	
  8.2

  	
   

  	
  Instruction Sheet

  	
  20

  
	
  8.3

  	
   

  	
  Purchaser Information

  	
  20

  
	
  ARTICLE 9

  	
   

  	
  MISCELLANEOUS

  	
  20

  
	
  9.1

  	
   

  	
  Termination

  	
  20

  
	
  9.2

  	
   

  	
  Waivers and Amendments

  	
  20

  
	
  9.3

  	
   

  	
  Broker’s Fee

  	
  20

  
	
  9.4

  	
   

  	
  Governing Law

  	
  20

  
	
  9.5

  	
   

  	
  Survival

  	
  20

  
	
  9.6

  	
   

  	
  Successors and Assigns

  	
  21

  
	
  9.7

  	
   

  	
  Entire Agreement

  	
  21

  
	
  9.8

  	
   

  	
  Notices, etc

  	
  21

  
	
  9.9

  	
   

  	
  Severability of this
  Agreement

  	
  21

  
	
  9.10

  	
   

  	
  Counterparts; Facsimile

  	
  21

  
	
  9.11

  	
   

  	
  Further Assurances

  	
  21

  
	
  9.12

  	
   

  	
  Currency

  	
  21

  
	
  9.13

  	
   

  	
  Waiver of Conflicts

  	
  21

  
	
  9.14

  	
   

  	
  Independent Nature of
  Purchasers’ Obligations and Rights

  	
  22

  
					

 

Exhibit A – Schedule of Purchasers

Exhibit B – Form of Warrant

Exhibit C – Form of Purchaser’s Questionnaire

Exhibit D – Form of Company Counsel Opinion

Exhibit E – Instruction Sheet

Exhibit F – Form of Purchaser’s Certificate of Subsequent
Sale

 

iii

 

FAVRILLE, INC.

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT
(this “Agreement”) is made as of March 6,
2006, by and among FAVRILLE, INC., a Delaware corporation (the “Company”) with its principal office
at 10421 Pacific Center Court, Suite 150, San Diego, California 92121, and
the individuals and entities listed on the Schedule of Purchasers attached
hereto as Exhibit A (the “Purchasers”).

 

RECITALS

 

WHEREAS, the Company has
authorized the sale and issuance of the Common Shares and the Warrants (each as
defined herein);

 

WHEREAS, the Company and the
Purchasers are executing and delivering this Agreement in reliance upon the
exemption from securities registration afforded by the provisions of
Regulation D, as promulgated by the SEC (as defined herein) under the
Securities Act (as defined herein); and

 

WHEREAS, at the Closing (as
defined herein), the Company desires to sell, and each Purchaser listed on Exhibit A hereto desires severally, and not jointly, to
purchase, the Common Shares and the Warrants, upon the terms and conditions
stated in this Agreement.

 

NOW, THEREFORE, in consideration
of the foregoing recitals and the mutual promises, representations, warranties
and covenants hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

 

ARTICLE 1

AUTHORIZATION AND SALE OF COMMON SHARES AND WARRANTS

 

1.1          Authorization.
 The Company has
authorized (a) the sale and issuance of up to 8,555,133 shares (the “Common Shares”) of the Company’s
common stock, par value $0.001 per share (the “Common Stock”) and (b) the sale and issuance
of warrants, in the form attached hereto as Exhibit B
(the “Warrants”), to purchase up to
2,994,288 shares of the Common Stock, pursuant to this Agreement. The
shares of Common Stock issuable upon exercise of or otherwise pursuant to the
Warrants are referred to herein as the “Warrant Shares.”  The Common Shares and the Warrant Shares are
collectively referred to herein as the “Shares.”  The Shares and the Warrants are collectively
referred to herein as the “Securities.”  Each Purchaser shall receive a Warrant to
purchase the number of shares of Common Stock equal to 35% of the number of
Common Shares purchased by such Purchaser. 
Each Security shall consist of one Common Share and that portion of the
Warrant exercisable for 35% of a share of Common Stock.  The purchase price for each Security shall be
$5.30375 (the “Purchase Price”), consisting
of the sum of $5.26 for the Common Share comprising a portion of the Security
and $0.04375 for Warrant

 

1

 

comprising a portion of
the Security.  The Warrants shall bear an
initial exercise price per share equal to $5.26.

 

1.2          Sale
of Common Shares and Warrants.  At the Closing (as defined herein), subject to
the terms and conditions of this Agreement, including without limitation, the
conditions set forth in Article 5 and Article 6 of this Agreement,
the Company shall issue and sell to each Purchaser and each Purchaser shall
severally, and not jointly, purchase from the Company Common Shares in the
amount set forth opposite each Purchaser’s name on Exhibit A attached hereto and Warrants to purchase shares
of the Common Stock in the amount set forth opposite each Purchaser’s name on Exhibit A attached hereto, in exchange
for the Purchase Price opposite such Purchaser’s name on Exhibit A attached hereto.

 

ARTICLE 2

CLOSING DATES; DELIVERY

 

2.1          Closing
Date.  Subject
to the satisfaction (or waiver) of the conditions thereto set forth in Article 5
and Article 6 of this Agreement, the closing of the purchase and sale of
the Common Shares and Warrants hereunder (the “Closing”)
shall be held at the offices of Cooley Godward LLP (“Cooley Godward”),
4401 Eastgate Mall, San Diego, California 92121, at 10:00 a.m. California
time on March 7, 2006, or at such other time and place upon which the
Company and the Purchasers purchasing a majority of the Common Shares at the
Closing shall agree.  The date of the
Closing is hereinafter referred to as the “Closing Date.”

 

2.2          Delivery.
 At the Closing,
the Company will deliver or cause to be delivered to each Purchaser a duly
executed Warrant and a certificate representing the number of Common Shares
purchased by such Purchaser, registered in such Purchaser’s name as shown on Exhibit A.  Such
delivery shall be against payment of the purchase price therefor by each such
Purchaser as set forth as the “Purchase Price” opposite such Purchaser’s name
on Exhibit A attached hereto by wire
transfer of immediately available funds to the Company in accordance with the
Company’s written wiring instructions.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to the Purchasers
on and as of the date hereof:

 

3.1          Organization
and Standing.  The Company is a corporation duly organized and
validly existing under, and by virtue of, the laws of the State of Delaware and
is in good standing as a domestic corporation under the laws of said
state.  Except as disclosed in the SEC
Documents (as defined herein), the Company does not own or control any equity
security or other interest of any corporation, limited partnership or other
business entity.

 

3.2          Corporate
Power; Authorization.  The Company has all requisite legal and
corporate power and has taken all requisite corporate action to execute and
deliver this Agreement, to sell and issue the Common Shares and Warrants, to
issue the Warrant Shares upon exercise of the Warrants in accordance with the
terms of such Warrants, and to carry out and

 

2

 

perform all of its
obligations under this Agreement. This Agreement constitutes, and upon
execution and delivery by the Company of the Warrants, the Warrants will
constitute, legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization or similar laws
relating to or affecting the enforcement of creditors’ rights generally and (b) as
limited by equitable principles generally. The execution and delivery of this
Agreement does not, the performance of this Agreement and the compliance with
the provisions hereof will not, and the issuance, sale and delivery of the
Common Shares and the Warrants by the Company will not, materially conflict
with, or result in a material breach or violation of the terms, conditions or
provisions of, or constitute a material default under, or result in the
creation or imposition of any material lien pursuant to the terms of, the
Company’s Amended and Restated Certificate of Incorporation, as amended (the “Restated Certificate”)
or the Company’s Amended and Restated Bylaws (the “Bylaws”)
or any statute, law, rule or regulation or any state or federal order,
judgment or decree or any indenture, mortgage, lease or other material
agreement or instrument to which the Company or any of its properties is
subject.

 

3.3          Issuance
and Delivery of the Shares.  When
issued in compliance with the provisions of this Agreement and the Restated
Certificate, the Common Shares will be validly issued, fully paid and
nonassessable.  Upon exercise of the
Warrants in accordance with the terms thereof, the Warrant Shares will be
validly issued, fully paid and nonassessable. 
The issuance and delivery of the Common Shares and the Warrants is not
subject to preemptive or any other similar rights of the stockholders of the
Company or to any liens or encumbrances imposed by the Company.

 

3.4          SEC
Documents; Financial Statements.  The Company has filed in a timely manner all
documents that the Company was required to file with the Securities and
Exchange Commission (the “SEC”)
under Sections 13, 14(a) and 15(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”),
during the 12 months preceding the date of this Agreement.  As of their respective filing dates, all
documents filed by the Company with the SEC (the “SEC
Documents”) complied in all material respects with the
requirements of the Exchange Act or the Securities Act of 1933, as amended (the
“Securities Act”), as
applicable.  None of the SEC Documents as
of their respective dates contained any untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they were made, not misleading.  The
financial statements of the Company included in the SEC Documents comply in all
material respects with applicable accounting requirements and rules and
regulations of the SEC with respect thereto as in effect at the time of
filing.  Such financial statements have
been prepared in accordance with United States generally accepted accounting
principles (“GAAP”) applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position of
the Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, year-end adjustments.

 

3.5          Governmental
Consents.

 

(a)           No
consent, approval, order or authorization of, or registration,

 

3

 

qualification,
designation, declaration or filing with, any federal, state, or local
governmental authority on the part of the Company is required in connection
with the consummation of the transactions contemplated by this Agreement except
for (i) compliance with the securities and blue sky laws in the states in
which the Common Shares and Warrants are offered and/or sold, which compliance
will be effected in accordance with such laws, (ii) the filing of the
Registration Statement or Demand Registration Statement (both as defined
herein) and any amendments thereto with the SEC as contemplated by
Sections 7.2 and 7.3 of this Agreement, (iii) the filing of the
Nasdaq National Market Notification Form with The Nasdaq Stock Market, Inc.
National Market (the “Nasdaq
National Market”) and (iv) the filing of a Form D with
the SEC.

 

(b)           The
Company has all franchises, permits, licenses, and any similar authority
necessary for the conduct of its business as now being conducted by it as
described in the SEC Documents, except for such franchise, permit, license or
similar authority, the lack of which would not reasonably be expected to have a
material adverse effect on the Company’s properties or assets or the business
of the Company as currently conducted (“Material Permits”).
The Company has not received any actual notice of any proceeding relating to
revocation or modification of any Material Permit.

 

3.6          No
Material Adverse Change.  Except as otherwise disclosed herein or in the
SEC Documents, since September 30, 2005, there have not been any changes
in the assets, liabilities, financial condition, business prospects or
operations of the Company from that reflected in the Financial Statements
except changes in the ordinary course of business which have not been, either
individually or in the aggregate, materially adverse.

 

3.7          Authorized
Capital Stock.  The authorized capital stock of the Company
consists of (a) 75,000,000 shares of Common Stock, $0.001 par value, of
which, as of March 1, 2006, 20,330,902 shares were outstanding, and (b) 5,000,000
shares of Preferred Stock, $0.001 par value, none of which shares are currently
outstanding.  Except as disclosed in the
SEC Documents and as contemplated by this Agreement, there are no outstanding
warrants, options, convertible securities or other rights, agreements or
arrangements of any character under which the Company is or may be obligated to
issue any equity securities of any kind.

 

3.8          Litigation.
 There are no
actions, suits, proceedings or investigations pending or, to the best of the
Company’s knowledge, threatened against the Company or any of its properties
before or by any court or arbitrator or any governmental body, agency or
official in which there is a reasonable likelihood (in the judgment of the
Company) of an adverse decision that (a) could have a material adverse
effect on the Company’s properties or assets or the business of the Company as
currently conducted or (b) could impair the ability of the Company to
perform in any material respect its obligations under this Agreement.

 

3.9          Eligibility
to Use Form S-3. 
The Company currently meets all of the requirements to be eligible to
use Form S-3 for the registration of its securities under the Securities
Act which are offered in transactions involving secondary offerings.

 

3.10        Company
not an “Investment Company.”  The Company has been advised of the rules and
requirements under the Investment Company Act of 1940, as amended (the

 

4

 

“Investment
Company Act”).  The
Company is not, and immediately after receipt of payment for the Shares will
not be, an “investment company” or an entity “controlled” by an “investment
company” within the meaning of the Investment Company Act and shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act.

 

3.11        NASDAQ
Compliance.  The
Common Stock is registered pursuant to Section 12(g) of the Exchange
Act and is listed on the Nasdaq National Market, and the Company has taken no
action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or de-listing the
Common Stock from the Nasdaq National Market, nor has the Company received any
notification that the SEC or the National Association of Securities Dealers, Inc.
is contemplating terminating such registration or listing.  The approval of the Company’s stockholders is
not required under the listing or maintenance requirements of the Nasdaq
National Market for the consummation of the transactions contemplated herein.

 

3.12        Use
of Proceeds. 
The proceeds of the sale of the Common Shares and the Warrants hereunder
shall be used by the Company for working capital and general corporate
purposes.

 

3.13        Brokers
and Finders.  No
person or entity will have, as a result of the transactions contemplated by
this Agreement, any valid right, interest or claim against or upon the Company
or a Purchaser for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the
Company.

 

3.14        No
Directed Selling Efforts or General Solicitation.  Neither the Company nor any person or entity
acting on its behalf has conducted any general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
in connection with the offer or sale of any of the Securities.

 

3.15        No
Integrated Offering. 
Neither the Company nor any of its affiliates, nor any person or entity
acting on its or their behalf has, directly or indirectly, made any offers or
sales of any Company security or solicited any offers to buy any security,
under circumstances that would adversely affect reliance by the Company on Section 4(2) of
the Securities Act for the exemption from registration for the transactions
contemplated hereby or would require registration of the Securities under the
Securities Act.

 

3.16        Private
Placement. 
Assuming the accuracy of the representations and warranties of the
Purchasers contained in Sections 4.2 and 4.3 hereof, the offer and sale of the
Securities to the Purchasers as contemplated hereby is exempt from the
registration requirements of the Securities Act.

 

3.17        Intellectual
Property.

 

(a)           “Intellectual Property”
shall mean patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information and other proprietary rights and processes.

 

5

 

(b)           Except
as disclosed in the SEC Documents and to the knowledge of the Company, the
Company owns or has the valid right to use all of the Intellectual Property
that is necessary for the conduct of the Company’s business as currently
conducted or as currently proposed to be conducted as described in the SEC
Documents, free and clear of all material liens and encumbrances.

 

(c)           Except
as disclosed in the SEC Documents, the conduct of the Company’s business as
currently conducted does not infringe or otherwise conflict with (collectively,
“Infringe”) any Intellectual Property
rights of any third party or any confidentiality obligation owed by the Company
to a third party, and, to the knowledge of the Company, the Intellectual
Property and confidential information of the Company are not being Infringed by
any third party.

 

(d)           Each
employee, consultant and contractor of the Company who has had access to
confidential information of the Company that is necessary for the conduct of
Company’s business as currently conducted or as currently proposed to be
conducted has executed an agreement to maintain the confidentiality of such
confidential information that is substantially consistent with the Company’s
standard forms thereof.

 

3.18        Questionable
Payments. 
Neither the Company nor, to the knowledge of the Company, any of its
current or former stockholders, directors, officers, employees, agents or other
persons acting on behalf of the Company, has on behalf of the Company or in
connection with its business: (a) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) made any direct or indirect unlawful payments to
any governmental officials or employees from corporate funds; (c) established
or maintained any unlawful or unrecorded fund of corporate monies or other
assets; (d) made any false or fictitious entries on the books and records
of the Company; or (e) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment of any nature.

 

3.19        Transactions
with Affiliates. 
Except as disclosed in the SEC Documents and as contemplated pursuant to
this Agreement, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or to a presently contemplated
transaction (other than for services as employees, officers and directors) that
would be required to be disclosed pursuant to Item 404 of Regulation S-K
promulgated under the Securities Act.

 

3.20        Disclosure.  The information contained in the Exchange Act
Documents as of the date hereof does not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. 
For purposes herein, “Exchange Act Documents” are the documents filed by
the Company under the Exchange Act during the last 12 months and its most
recent report on Form 10-K.  The
Company confirms that neither it nor any of its officers, directors or
affiliates (as defined in Rule 501(b) under the Securities Act (“Company
Affiliates”) has provided any of the Purchasers or their agents or counsel with
any information that constitutes material, nonpublic information (other than the
existence and terms of the issuance of the Securities as contemplated
herein).  The Company understands and
confirms that each of the Purchasers will rely on the foregoing representations
in effecting transactions in securities of the Company.

 

6

 

3.21        Sarbanes-Oxley
Act.  The
Company is in compliance with any and all requirements of the Sarbanes-Oxley
Act of 2002 that are effective as of the date hereof and are currently
applicable to the company, and any and all rules and regulations
promulgated by the SEC thereunder that are effective as of the date hereof and
are currently applicable to the Company, except where such noncompliance would
not reasonably be expected to have a material adverse effect on the Company’s
properties or assets or the business of the Company as currently conducted.

 

3.22        Insurance.  The Company is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as the Company believes are prudent and customary for a company (i) in
the business and stage of development and locations in which the Company is
engaged and (ii) with the resources of the Company.  The Company has not received any written
notice that the Company will not be able to renew its existing insurance
coverage as and when such coverage expires. All of such policies are in full
force and effect, and the Company has complied with all material terms and
conditions of such policies, including premium payments.

 

3.23        No
Registration Rights.  
No person has the right to (i) prohibit the Company from filing the
Registration Statement or (ii) other than as disclosed in the SEC
Documents, require the Company to register any securities for sale under the
Securities Act by reason of the filing of the Registration Statement.  The granting and performance of the
registration rights under this Agreement will not violate or conflict with, or
result in a breach of any provision of, or constitute a default under, any
agreement, indenture, or instrument to which the Company is a party.

 

ARTICLE 4

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS

 

Each Purchaser hereby severally, and not jointly,
represents and warrants to the Company on and as of the date hereof:

 

4.1          Authorization.
 (a) Purchaser
has all requisite legal and corporate or other power and capacity and has taken
all requisite corporate or other action to execute and deliver this Agreement,
to purchase the Common Shares and the Warrants to be purchased by it and to
carry out and perform all of its obligations under this Agreement; and (b) this
Agreement constitutes the legal, valid and binding obligation of such
Purchaser, enforceable against such Purchaser in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization
or similar laws relating to or affecting the enforcement of creditors’ rights
generally and (ii) as limited by equitable principles generally.

 

4.2          Investment
Experience.  Purchaser is an “accredited investor” as defined
in Rule 501(a) under the Securities Act.  Purchaser is aware of the Company’s business
affairs and financial condition and has had access to and has acquired
sufficient information about the Company to reach an informed and knowledgeable
decision to acquire the Common Shares and the Warrants.  Purchaser has such business and financial
experience as is required to give it the

 

7

 

capacity to protect its
own interests in connection with the purchase of the Common Shares and
Warrants.

 

4.3          Investment
Intent.  Purchaser is purchasing the Common Shares and
the Warrants for its own account as principal, for investment purposes only,
and not with a present view to, or for, resale, distribution or
fractionalization thereof, in whole or in part, within the meaning of the
Securities Act, other than as contemplated by Article 7; provided,
however, that by making the representations herein, such Purchaser is not
prohibited from selling or otherwise disposing of any of such Securities in
compliance with applicable federal and state securities laws and as otherwise
contemplated by this Agreement. Purchaser understands that its acquisition of
the Common Shares and the Warrants has not been registered under the Securities
Act or registered or qualified under any state securities law in reliance on
specific exemptions therefrom, which exemptions may depend upon, among other
things, the bona fide nature of Purchaser’s investment intent as expressed
herein. Purchaser has completed or caused to be completed the Purchaser
Questionnaire attached hereto as Exhibit C for
use in preparation of the Registration Statement, and the responses provided
therein shall be true and correct as of the Closing Date and will be true and
correct as of the effective date of the Registration Statement. Purchaser, in
connection with its decision to purchase the Common Shares and the Warrants,
has relied solely upon the SEC Documents and the representations and warranties
of the Company contained herein. Purchaser will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Securities
except in compliance with the Securities Act and the rules and regulations
promulgated thereunder.

 

4.4          Registration
or Exemption Requirements.  Purchaser further acknowledges and understands
that the Securities may not be resold or otherwise transferred except pursuant
to an effective registration statement under the Securities Act or unless an
exemption from such registration is available.

 

4.5          No
Legal, Tax or Investment Advice.  Purchaser understands that nothing in this
Agreement or any other materials presented to Purchaser in connection with the
purchase and sale of the Common Shares and the Warrants constitutes legal, tax
or investment advice.  Purchaser has
consulted such legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in connection with its purchase
of the Common Shares and the Warrants.

 

4.6          Confidentiality.  Purchaser will hold
in confidence all information concerning this Agreement and the placement of
the Securities hereunder until the earlier of such time as (a) the Company
has made a public announcement concerning the Agreement and the placement of
the Securities hereunder or (b) this Agreement is terminated.

 

4.7          Residency.  Purchaser’s
executive offices in which its investment decision was made are in the
jurisdiction set forth immediately below Purchaser’s name on the Schedule of
Purchasers attached hereto as Exhibit A.

 

8

 

4.8          Governmental
Review.  Purchaser
understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation or
endorsement of the Securities.

 

4.9          Legend.

 

(a)           Purchaser
understands that, until such time as the Registration Statement or the Demand
Registration Statement, as applicable, has been declared effective or the
Securities may be sold pursuant to Rule 144 under the Securities Act (“Rule 144”) without any
restriction as to the number of securities as of a particular date that can
then be immediately sold, the Securities may bear a restrictive legend in
substantially the following form (and a stop transfer order may be placed
against transfer of the certificates for the Shares):

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR IN ANY OTHER
JURISDICTION.  THE SECURITIES REPRESENTED
HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.”

 

(b)           If
Rule 144(k) is available to a Purchaser, the Company shall, upon a
Purchaser’s written request and delivery of appropriate documents reasonably
requested by the Company, promptly cause certificates evidencing the Securities
to be replaced with certificates which do not bear such restrictive legends,
and Warrant Shares subsequently issued upon due exercise of the Warrants shall
not bear such restrictive legends provided Rule 144(k) is available with
respect to such Warrant Shares.

 

(c)           Each
Purchaser, severally and not jointly with the other Purchasers, agrees that the
removal of the restrictive legend from certificates representing Securities as
set forth in this Section 4.9 is predicated upon the Company’s reliance
that the Purchaser will sell any Securities pursuant to either (i) the
registration requirements of the Securities Act and such Purchaser shall have
confirmed that a current prospectus is deemed to be delivered in connection
with such sale, pursuant to Rule 172 under the Securities Act (“Rule 172”), or (ii) an
exemption therefrom.

 

(d)           The
Company agrees that following the effective date the Registration Statement or
the Demand Registration Statement, as applicable, or at such time as such
legend is no longer required under Section 4.9(a), it will, within a
reasonable time after the delivery by a Purchaser to the Company or the Company’s
transfer agent of a certificate representing Shares issued with a restrictive
legend, deliver or cause to be delivered to such Purchaser a certificate
representing such Shares that is free from all restrictive and other legends.

 

9

 

4.10        Foreign
Investors.  If
Purchaser is not a United States person (as defined by Section 7701(a)(30)
of the Internal Revenue Code of 1986, as amended), Purchaser hereby represents
that it has satisfied itself as to the full observance of the laws of its
jurisdiction in connection with any invitation to subscribe for the Securities
or any use of this Agreement, including (a) the legal requirements within
its jurisdiction for the purchase of the Securities, (b) any foreign
exchange restrictions applicable to such purchase or acquisition, (c) any
government or other consents that may need to be obtained, and (d) the
income tax and other tax consequences, if any, that may be relevant to the
purchase, holding, redemption, sale or transfer of the Securities.  Purchaser’s subscription and payment for and
continued beneficial ownership of the Securities will not violate any
applicable securities or other laws of Purchaser’s jurisdiction.

 

ARTICLE 5

CONDITIONS TO CLOSING OBLIGATIONS OF PURCHASERS

 

Each Purchaser’s obligation to purchase the Common
Shares and the Warrants at the Closing is, at the option of such Purchaser,
subject to the fulfillment or waiver as of the Closing Date of the following
conditions:

 

5.1          Minimum
Funding.  The
Company shall have received commitments to purchase a minimum of
$45 million of Shares in the aggregate from all Purchasers.

 

5.2          Certificates.  The Company shall have delivered to the
Purchasers duly executed certificates for the Common Shares and the Warrants
(in such denominations as set forth opposite each Purchaser’s name on Exhibit A).

 

5.3          Legal
Opinion.  The
Purchasers shall have received on the Closing Date an opinion of Cooley
Godward, counsel for the Company, dated the Closing Date, in substantially the
form of Exhibit D.

 

5.4          Listing.  The Company shall have complied with all
requirements with respect to the listing of the Shares on the Nasdaq National
Market, except for such requirements not required until after the issuance of
the Shares, such requirements to be complied with promptly after the Closing.

 

5.5          Judgments.  No judgment, writ, order, injunction, award
or decree of or by any court, or judge, justice or magistrate, including any
bankruptcy court or judge, or any order of or by any governmental authority,
shall have been issued, and no action or proceeding shall have been instituted
by any governmental authority, enjoining or preventing the consummation of the
transactions contemplated hereby.

 

5.6          Secretary’s
Certificate. 
The Company shall have delivered a Certificate, executed on behalf of
the Company by its Secretary, dated as of the Closing Date, certifying the
resolutions adopted by the Board of Directors of the Company (or an authorized
committee thereof) approving the transactions contemplated by this Agreement
and the issuance of the Securities, certifying the current versions of the
Restated Certificate and the Bylaws and

 

10

 

certifying as to the
signatures and authority of persons signing this Agreement and related
documents on behalf of the Company.

 

5.7          Stop
Orders.  No stop
order or suspension of trading shall have been imposed by the Nasdaq National
Market, the SEC or any other governmental regulatory body with respect to
public trading in the Common Stock.

 

5.8          Anti-Takeover
Measures.  The
Company shall have waived all applicable anti-takeover measures under the
Delaware General Corporations Law and the Company’s Restated Certificate and
Bylaws, if any.

 

5.9          No
Governmental Prohibition.  The sale of the Securities by the Company
shall not be prohibited by any law or governmental order or regulation.

 

ARTICLE 6

CONDITIONS TO CLOSING OBLIGATIONS OF COMPANY

 

The Company’s obligation to sell and issue the Common
Shares and the Warrants at the Closing is, at the option of the Company,
subject to the fulfillment or waiver as of the Closing Date of the following
conditions:

 

6.1          Receipt
of Payment.  The
Purchasers shall have delivered payment of the purchase price to the Company
for the Common Shares and the Warrants being issued hereunder.

 

6.2          Delivery
of Purchaser Questionnaire.  The Company shall have received from each
Purchaser a fully completed Purchaser Questionnaire in the form attached hereto
as Exhibit C prior to the Closing for
the Company’s use in preparing the Registration Statement or Demand
Registration Statement, as applicable, pursuant to Article 7 below.

 

ARTICLE 7

COVENANTS

 

7.1          Definitions.
 For the purpose
of this Article 7 and this Agreement:

 

(a)           the
term “Demand Registration Statement” shall
mean any registration statement required to be filed by Section 7.3 below,
and shall include any preliminary prospectus, final prospectus, exhibit or
amendment included in or relating to such registration statements;

 

(b)           the
term “Initiating Holders” shall mean the
Registered Holders of at least 30% of the then outstanding Registrable Shares
that submit a request to the Company to file a Demand Registration Statement
pursuant to Section 7.3 of this Agreement;

 

11

 

(c)           the
term “Registration
Statement” shall
mean any registration statement required to be filed by Section 7.2 below,
and shall include any preliminary prospectus, final prospectus, exhibit or
amendment included in or relating to such registration statements;

 

(d)           the
term “Registrable
Shares” shall mean all of the Common Shares and the Warrant Shares;

 

(e)           the
term “Registration Expenses” shall mean
all expenses incurred by the Company in complying with Section 7.2 or 7.3
hereof, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company,
reasonable fees and disbursements not to exceed [seventy-five thousand dollars
($75,000)] of a single counsel for the Registered Holders and blue sky fees;

 

(f)            the
term “Registered Holder” shall mean any
person owning of record Registrable Shares that have not been sold to the
public;

 

(g)           the
term “Selling Expenses” shall mean all
underwriting discounts and selling commissions applicable to the sale of the
Registration Shares; and

 

(h)           the
term “Special Registration Statement”
shall mean (i) a registration statement relating to any employee benefit
plan or (ii) with respect to any corporate reorganization or transaction
under Rule 145 of the Securities Act, any registration statements related
to the issuance or resale of securities issued in such transaction or (iii) a
registration related to stock issued upon conversion of debt securities.

 

7.2          Registration
Procedures on Form S-3.  The Company shall:

 

(a)           use
its best efforts to file a Registration Statement with the SEC within 30 days
following the Closing Date (the “Filing Deadline Date”)
to register the Registrable Shares on Form S-3 under the Securities Act
(providing for shelf registration of such Registrable Shares under SEC Rule 415)
or on such other form which is appropriate to register such Registrable Shares
for resale from time to time by the Purchasers; provided,
however, that if a Registration Statement is not filed with the SEC
on or before the Filing Deadline Date, then for each one-week period following
the Filing Deadline Date (or any portion thereof), until but excluding the date
the Registration Statement is filed, the Company shall pay each Purchaser, as
liquidated damages and not as a penalty (in addition to the rights and remedies
available to each Purchaser under applicable law and this Agreement), an amount
equal to the Applicable Percentage (defined below) of the purchase price
attributable to the Common Shares purchased by such Purchaser hereunder, for
such one-week period (or prorated for any portion thereof).  Such liquidated damages shall be payable
monthly in cash within five (5) business days from the end of the month in
which such damages accrued.  The parties
hereto agree that, subject to Section 7.2(d) below, the liquidated
damages provided for in this Section 7.2(a) constitute a reasonable
estimate of the damages that may be incurred by the Purchasers by reason of the
failure of the Registration Statement to be filed in accordance with the
provisions hereof;

 

(b)           use
its best efforts, subject to receipt of necessary information from the
Purchasers, to cause any such Registration Statement filed pursuant to Section 7.2(a) above
to become effective as promptly after filing of such Registration Statement as
practicable but in any

 

12

 

event by the date (the “Effectiveness Deadline Date”) that
is 90 days following the Closing Date; provided, however,
that in the event that such Registration Statement is reviewed by the SEC, then
the Effectiveness Deadline Date shall mean, with respect to any Registration
Statement, the date that is 120 days following the Closing Date; provided, further, that if the Registration Statement is not
declared effective by the SEC on or prior to the Effectiveness Deadline Date,
then for each one-week period following the Effectiveness Deadline Date (or any
portion thereof), until but excluding the date the Registration Statement is
declared effective, the Company shall pay each Purchaser, as liquidated damages
and not as a penalty (in addition to the rights and remedies available to each
Purchaser under applicable law and this Agreement), an amount equal to Applicable
Percentage (defined below) of the purchase price attributable to the Common
Shares purchased by such Purchaser hereunder, for such one-week period (or
prorated for any portion thereof).  Such
liquidated damages shall be payable monthly in cash within five (5) business
days from the end of the month in which such damages accrued.  The parties hereto agree that, subject to Section 7.2(d) below,
the liquidated damages provided for in this Section 7.2(b) constitute
a reasonable estimate of the damages that may be incurred by the Purchasers by
reason of the failure of the Registration Statement to be declared effective in
accordance with the provisions hereof;

 

(c)           prepare
and file with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary
to keep such Registration Statement continuously effective until termination of
such obligation as provided in Section 7.7 below, subject to the Company’s
right to suspend pursuant to Section 7.6; provided,
however, that if the effectiveness of the Registration Statement
lapses prior to termination of the Company’s obligations under Section 7.7,
without such lapse being cured within twenty (20) business days (the “Cure Period”) by a post-effective
amendment to the Registration Statement, a supplement to the prospectus
included in the Registration Statement or a report filed with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
that cures such lapse, then for each one-week period following the expiration
of the Cure Period (or any portion thereof), until but excluding the earlier of
(i) the date on which such failure is cured and (ii) the date on
which the Company’s obligation to keep the Registration Statement effective
until termination of such obligation as provided in Section 7.7, the
Company shall pay each Purchaser, as liquidated damages and not as a penalty
(in addition to the rights and remedies available to each Purchaser under
applicable law and this Agreement), an amount equal to Applicable Percentage
(defined below) of the purchase price attributable to the Common Shares
purchased by such Purchaser hereunder, for such one-week period (or prorated
for any portion thereof).  Such
liquidated damages shall be payable monthly in cash within five (5) business
days from the end of the month in which such damages accrued.  The parties hereto agree that, subject to Section 7.2(d) below,
the liquidated damages provided for in this Section 7.2(c) constitute
a reasonable estimate of the damages that may be incurred by the Purchasers by
reason of the failure of the Registration Statement to be declared effective in
accordance with the provisions hereof;

 

(d)           For
purposes of this Section 7.2, the “Applicable Percentage”
shall mean the applicable percentage set forth below:

 

(i)            During
the three (3) months commencing on the first day upon which the Company first
becomes obligated to pay liquidated damages pursuant to

 

13

 

Section 7.2(a), Section 7.2(b) or
Section 7.2(c), as applicable, 0.25%;

 

(ii)           During
the three (3) months commencing the day after the expiration of the period
described in Section 7.2(d)(i) above, 0.5%; and

 

(iii)         For
the one-week period commencing the day after the expiration of the period
described in Section 7.2(d)(ii), 1.0%.

 

For the avoidance of
doubt, and notwithstanding any other provision of this Agreement to the
contrary, in no event shall the total amount of any and all liquidated damages
payable by the Company to any Purchaser pursuant to Section 7.2(a), Section 7.2(b) and
Section 7.2(c), in the aggregate, exceed 10% of the purchase price
attributable to the Common Shares purchased by such Purchaser hereunder.

 

(e)           furnish
to each Purchaser (and to each underwriter, if any, of such Registrable Shares)
such number of copies of prospectuses in conformity with the requirements of
the Securities Act and such other documents as the Purchasers may reasonably
request, in order to facilitate the public sale or other disposition of all or any
of the Registrable Shares by the Purchasers;

 

(f)            file
such documents as may be required of the Company for normal securities law
clearance for the resale of the Registrable Shares in such states of the United
States as may be reasonably requested by each Purchaser; provided,
however, that the Company shall not be required in connection with
this paragraph (e) to qualify as a foreign corporation or execute a
general consent to service of process in any jurisdiction;

 

(g)           advise
each Purchaser promptly:

 

(i)            of
the effectiveness of the Registration Statement or any post-effective
amendments thereto;

 

(ii)           of
any request by the SEC for amendments to the Registration Statement or
amendments to the prospectus or for additional information relating thereto;

 

(iii)         of
the issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement under the Securities Act or of the suspension by any
state securities commission of the qualification of the Registrable Shares for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any of the preceding purposes; and

 

(iv)          of
the existence of any fact and the happening of any event that makes any
statement of a material fact made in the Registration Statement, the prospectus
and amendment or supplement thereto, or any document incorporated by reference
therein, untrue, or that requires the making of any additions to or changes in
the Registration Statement or the prospectus in order to make the statements
therein not misleading;

 

(h)           use
its best efforts to cause all Registrable Shares to be listed on each
securities exchange, if any, on which equity securities by the Company are then
listed; and

 

14

 

(i)            otherwise
use commercially reasonable efforts to make available to the Purchasers holding
Shares as of the date thereof, no later than the Availability Date (as defined
below), an earnings statement covering a period of at least 12 months,
beginning after the effective date of each Registration Statement, which
earnings statement shall satisfy the provisions of Section 11(a) of
the Securities Act, including Rule 158 promulgated thereunder (for the
purpose of this subsection 7.2(i), “Availability Date” means the 45th day
following the end of the fourth fiscal quarter after the fiscal quarter that
includes the effective date of such Registration Statement, except that, if
such fourth fiscal quarter is the last quarter of the Company’s fiscal year, “Availability
Date” means the 90th day after the end of such fourth fiscal quarter).

 

7.3          Demand
Registration

 

(a)           If
the Registration Statement is not declared effective, if the effectiveness
lapses or if registration on a Form S-3 registration statement is not
available to the Company, then, subject to the conditions of this Section 7.3,
if the Company shall receive a written request from the Initiating Holders that
the Company file a Demand Registration Statement under the Securities Act
covering the registration of the Registrable Shares then outstanding, then the
Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Registered Holders of Registrable Shares, and
subject to the limitations of this Section 7.3, effect, as expeditiously as
reasonably possible, the registration under the Securities Act of all
Registrable Shares that all Registered Holders request to be registered.

 

(b)           If
the Initiating Holders intend to distribute the Registrable Shares covered by
their request by means of an underwriting, they shall so advise the Company as
a part of their request made pursuant to this Section 7.3 and the Company
shall include such information in the written notice referred to in Section 7.3(a).  In such event, the right of any Registered Holder
to include its Registrable Shares in such registration shall be conditioned
upon such Registered Holder’s participation in such underwriting and the
inclusion of such Registered Holder’s Registrable Shares in the underwriting to
the extent provided herein.  All
Registered Holders proposing to distribute their securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the
Registered Holders of a majority of the Registrable Shares held by all
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). 
Notwithstanding any other provision of this Section 7.3, if the
underwriter advises the Company that marketing factors require a limitation of
the number of securities to be underwritten (including Registrable Shares) then
the Company shall so advise all Registered Holders of Registrable Shares that
would otherwise be underwritten pursuant hereto, and the number of shares that
may be included in the underwriting shall be allocated to the Registered
Holders of such Registrable Shares on a pro rata basis
based on the number of Registrable Shares held by all such Registered Holders
(including the Initiating Holders).  Any Registrable Shares excluded or withdrawn
from such underwriting shall be withdrawn from the registration.

 

(c)           The
Company shall not be required to effect a registration pursuant to this Section 7.3:

 

15

 

(i)            after
the Company has effected three (3) registrations pursuant to this Section 7.3,
and such registrations have been declared or ordered effective;

 

(ii)           during
the period starting with the date of filing of, and ending on the date one
hundred eighty (180) days following the effective date of a registration
statement pertaining to a public offering, other than pursuant to a Special
Registration Statement; provided that
the Company makes reasonable good faith efforts to cause such registration statement
to become effective;

 

(iii)         if
within thirty (30) days of receipt of a written request from Initiating Holders
pursuant to Section 7.3(a), the Company gives notice to the Registered
Holders of the Company’s intention to file a registration statement for a
public offering, other than pursuant to a Special Registration Statement within
ninety (90) days;

 

(iv)          if
the Company shall furnish to Registered Holders requesting a Demand
Registration Statement pursuant to this Section 7.3 a certificate signed
by the Chairman of the Board stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such Demand Registration Statement to be
effected at such time, in which event the Company shall have the right to defer
such filing for a period of not more than one hundred twenty (120) days after
receipt of the request of the Initiating Holders; provided
that such right to delay a request shall be exercised by the Company not more
than twice in any twelve (12) month period; or

 

(v)            in
any particular jurisdiction in which the Company would be required to qualify
to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.

 

7.4          Expenses
of Registration.  Except
as specifically provided herein, all Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 7.2 or 7.3 herein shall be borne by the Company.  All Selling Expenses incurred in connection
with any registrations pursuant to Section 7.2 or 7.3, shall be borne by
the Registered Holders of the securities so registered pro rata
on the basis of the number of shares so registered.  The Company shall not, however, be required
to pay for expenses of any registration proceeding begun pursuant to Section 7.3,
the request of which has been subsequently withdrawn by the Initiating Holders
unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Registered Holders of a majority of
Registrable Shares agree to deem such registration to have been effected as of
the date of such withdrawal for purposes of determining the number of
registrations effected by the Company as required pursuant to Section 7.3(c),
to undertake any subsequent registration, in which event such right shall be
forfeited by all Registered Holders).  If
the Registered Holders are required to pay the Registration Expenses, such
expenses shall be borne by the Registered Holders of Registrable Shares
requesting such registration in proportion to the number of shares for which
registration was requested.  If the
Company is required to pay the Registration Expenses of a withdrawn offering
pursuant to clause (a) above, then such registration shall not be
deemed to have been effected for purposes of determining whether the Company
shall be obligated pursuant to Section 7.3(c), to undertake any subsequent
registration.

 

16

 

7.5          Indemnification.

 

(a)           The
Company agrees to indemnify and hold harmless each Purchaser, the partners,
members, officers and directors of each Purchaser and each person, if any, who
controls such Purchaser within the meaning of the Securities Act or the
Exchange Act, from and against any losses, claims, damages or liabilities to
which they may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (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 the Registration
Statement, or any Demand Registration Statement, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or arise out of any failure by the Company
to fulfill any undertaking included in the Registration Statement or any Demand
Registration Statement and the Company will, as incurred, reimburse such
Purchaser, partner, member, officer, director or controlling person for any
legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim; provided,
however, that the Company shall not be liable in any such case to
the extent that such loss, claim, damage or liability (collectively, “Loss”) arises out of,
or is based upon, an untrue statement or omission or alleged untrue statement
or omission made in such Registration Statement or Demand Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Purchaser, partner, member, officer,
director or controlling person specifically for use in preparation of the
Registration Statement or Demand Registration Statement or any breach of this
Agreement by such Purchaser; provided
further, however, that the Company shall not be liable to any
Purchaser of Registrable Shares (or any partner, member, officer, director or
controlling person of such Purchaser) to the extent that any such Loss is
caused by an untrue statement or omission or alleged untrue statement or
omission made in any preliminary prospectus if either (i)(A) such
Purchaser failed to confirm that a final prospectus was deemed to be delivered
pursuant to Rule 172 prior to the delivery of written confirmation of the
sale by such Purchaser to the person asserting the claim from which such Loss
resulted and (B) the final prospectus corrected such untrue statement or
omission, (ii) (X) such untrue statement or omission is corrected in an
amendment or supplement to the prospectus and (Y) having previously been
notified by the Company that such amended or supplemented prospectus has been
filed with the SEC, such Purchaser thereafter fails to confirm that the
prospectus as so amended or supplemented was deemed to be delivered prior to
the delivery of written confirmation of the sale of a Registrable Share to the
person asserting the claim from which such Loss resulted or (iii) such
Purchaser sold Registrable Shares in violation of such Purchaser’s covenant
contained in Section 7.6 of this Agreement.

 

(b)           Each
Purchaser, severally and not jointly, agrees to indemnify and hold harmless the
Company (and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange
Act, each officer of the Company who signs the Registration Statement or Demand
Registration Statement and each director of the Company), from and against any
losses, claims, damages or liabilities to which the Company (or any such
officer, director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any breach of this Agreement by such Purchaser or any untrue
statement or alleged untrue statement of a material fact contained

 

17

 

in the Registration
Statement or Demand Registration Statement or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading in each case, on the effective date thereof, if, and
to the extent, such untrue statement or omission or alleged untrue statement or
omission was made in reliance upon and in conformity with written information
furnished by or on behalf of such Purchaser specifically for use in preparation
of the Registration Statement or Demand Registration Statement, and such
Purchaser will reimburse the Company (and each of its officers, directors or
controlling persons) for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that in no event
shall any indemnity under this Section 7.5(b) be greater in amount
than the dollar amount of the net proceeds (net of the amount of any damages
such Purchaser has otherwise been required to pay by reason of such untrue
statement or omission or alleged untrue statement or omission) received by such
Purchaser upon the sale of the Registrable Shares included in the Registration
Statement or Demand Registration Statement giving rise to such indemnification
obligation.

 

(c)           Promptly
after receipt by any indemnified person of a notice of a claim or the beginning
of any action in respect of which indemnity is to be sought against an
indemnifying person pursuant to this Section 7.5, such indemnified person
shall notify the indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person and such
indemnifying person shall have been notified thereof, such indemnifying person
shall be entitled to participate therein, and, to the extent that it shall
wish, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified person. After notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person for any
legal expenses subsequently incurred by such indemnified person in connection
with the defense thereof; provided, however, that
if there exists or shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the indemnified person for the same
counsel to represent both the indemnified person and such indemnifying person
or any affiliate or associate thereof, the indemnified person shall be entitled
to retain its own counsel at the expense of such indemnifying person; provided, further, that no indemnifying person shall be
responsible for the fees and expense of more than one separate counsel for all
indemnified parties. The indemnifying party shall not settle an action without
the consent of the indemnified party, which consent shall not be unreasonably
withheld.

 

(d)           If
after proper notice of a claim or the commencement of any action against the
indemnified party, the indemnifying party does not choose to participate, then
the indemnified party shall assume the defense thereof and upon written notice
by the indemnified party requesting advance payment of a stated amount for its
reasonable defense costs and expenses, the indemnifying party shall advance
payment for such reasonable defense costs and expenses (the “Advance Indemnification Payment”) to
the indemnified party.  In the event that
the indemnified party’s actual defense costs and expenses exceed the amount of
the Advance Indemnification Payment, then upon written request by the
indemnified party, the indemnifying party shall reimburse the indemnified party
for such difference; in the event that the Advance Indemnification Payment
exceeds the indemnified party’s actual costs and expenses, the indemnified
party shall promptly remit payment of such difference to the indemnifying
party.

 

18

 

(e)           If
the indemnification provided for in this Section 7.5 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect
to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid
or payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the
other, as well as any other relevant equitable considerations; provided, that in no event shall any contribution by an
indemnifying party (other than the Company) hereunder be greater in amount than
the dollar amount of the net proceeds (net of the amount of any damages such
indemnifying party has otherwise been required to pay by reason of such untrue
statement or omission or alleged untrue statement or omission) received by such
indemnifying party upon the sale of the Registrable Shares included in the
Registration Statement or any Demand Registration Statement giving rise to such
indemnification obligation.

 

7.6          Prospectus
Delivery.  Each
Purchaser hereby covenants with the Company not to make any sale of the
Registrable Shares without complying with Section 8.3.  The Purchaser acknowledges that there may be
times when the Company must suspend the use of the prospectus forming a part of
the Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the SEC, or
until such time as the Company has filed an appropriate report with the SEC
pursuant to the Exchange Act.  The
Purchaser hereby covenants that it will not sell any Registrable Shares
pursuant to said prospectus during the period commencing at the time at which
the Company gives the Purchaser notice of the suspension of the use of said
prospectus and ending at the time the Company gives the Purchaser notice that
the Purchaser may thereafter effect sales pursuant to said prospectus; provided, that such suspension periods shall in no event
exceed 30 days in any 12 month period and that, in the good faith judgment of
the Company’s Board of Directors, the Company would, in the absence of such
delay or suspension hereunder, be required under state or federal securities
laws to disclose any corporate development, a potentially significant
transaction or event involving the Company, or any negotiations, discussions,
or proposals directly relating thereto, in either case the disclosure of which
would reasonably be expected to have a material adverse effect upon the Company
or its stockholders; provided further,
that the Company may suspend the use of the prospectus forming a part of the
Registration Statement to the extent necessary to file any post-effective
amendment to the Registration Statement in order to amend the table of selling
stockholders within the Registration Statement to reflect transfers of the
Securities.

 

7.7          Termination
of Obligations.  The obligations of the Company pursuant to
Sections 7.2 and 7.3 hereof shall cease and terminate upon the earlier to
occur of (a) such time as all of the Registrable Shares have been resold, (b) such
time as all of the Registrable Shares may be resold in a 90-day period pursuant
to Rule 144, or (c) the second anniversary of the date the
Registration Statement or Demand Registration Statement, as applicable, went
effective.

 

7.8          Reporting
Requirements.

 

(a)           With
a view to making available the benefits of certain rules and regulations
of the SEC that may at any time permit the sale of the Securities to the public
without

 

19

 

registration or pursuant
to a registration statement on Form S-3, the Company agrees to use its
best efforts to:

 

(i)            make
and keep public information available, as those terms are understood and
defined in Rule 144;

 

(ii)           file
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and

 

(iii)         so
long as any of the Purchasers own Registrable Shares, to furnish to such
Purchaser upon request (A) a written statement by the Company as to
whether it is in compliance with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, or whether it is qualified as a
registrant whose securities may be resold pursuant to SEC Form S-3 and (B) a
copy of the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company.

 

7.9          Blue
Sky.  The
Company shall obtain and maintain all necessary blue sky law permits and
qualifications, or secured exemptions therefrom, required by any state for the
offer and sale of Securities.

 

7.10        Board
of Directors.  Until
the earlier of (i) March 31, 2008 and (ii) such time as MPM
BioEquities Fund (“MPM”) holds a number of
shares of the Company’s Common Stock that is less than 50% of the number of
shares of Common Stock purchased by MPM at the Closing, as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like (the “Expiration Date”), MPM will have
the right to cause Kurt von Emster, or another representative or appointee of
MPM who is reasonably acceptable to the Company’s Board of Directors, to be
appointed to the Company’s Board of Directors. 
Any such representative of MPM shall be (A) a Class II
director if such representative is appointed to the Board during 2006; or (B) a
member of the class of directors whose term expires at the next annual meeting
of the Company’s stockholders following his or her appointment if such
representative is appointed after December 31, 2006.

 

7.11        Observation
Rights.  During
any period prior to the Expiration Date when either (A) no representative
of MPM is serving as a member of the Board or (B) a representative who is
not affiliated with MPM but is agreed to by MPM is serving on the Board, the
Company shall allow one representative designated by MPM to attend all meetings
of the Company’s Board of Directors in a nonvoting capacity, and in connection
therewith, the Company shall give such representative copies of all notices,
minutes, consents and other materials, financial or otherwise, which the
Company provides to its Board of Directors; provided, however,
that the Company reserves the right to exclude such representative from access
to any material or meeting or portion thereof if the Company believes upon
advice of counsel that such exclusion is reasonably necessary to preserve the
attorney-client privilege, to protect highly confidential information or for
other similar reasons.  The decision of
the Board with respect to the privileged or confidential nature of such
information shall be final and binding. 
The obligations of the Company pursuant to this Sections 7.11 shall
cease and terminate upon the Expiration Date.

 

20

 

7.12        Expenses.  The Company shall,
at the Closing, reimburse the Purchasers’ reasonable expenses in connection
with the transactions contemplated by this Agreement and the reasonable fees
and expenses of Purchasers’ counsel, not to exceed $75,000 in the aggregate, as follows:
first, the Company will reimburse MPM’s reasonable expenses in
connection herewith and the reasonable fees and expenses of counsel for MPM, up
to a maximum of $75,000; and, if such total fees and expenses are less than
$75,000, then the Company shall use the remaining amount to reimburse the other
Purchasers for the reasonable fees and expenses of such Purchasers’ counsel on
a pro rata basis, based on the respective dollar amounts invested in the Shares
by such other Purchasers.

 

ARTICLE 8

RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;

COMPLIANCE WITH SECURITIES ACT

 

8.1          Restrictions
on Transferability.  The Securities shall not be transferable in
the absence of a registration under the Securities Act or an exemption
therefrom. The Company shall be entitled to give stop transfer instructions to
its transfer agent with respect to the Securities in order to enforce the
foregoing restrictions.

 

8.2          Instruction
Sheet.  Each
certificate representing Registrable Shares shall bear the Instruction Sheet
attached hereto as Exhibit E
(in addition to any legends required under applicable securities laws).

 

8.3          Purchaser
Information.  Each Purchaser covenants that it will promptly
notify the Company of any changes in the information set forth in the
Registration Statement or Demand Registration Statement regarding such
Purchaser or such Purchaser’s “Plan of Distribution.”

 

ARTICLE 9

MISCELLANEOUS

 

9.1          Termination.

 

(a)           This
Agreement may be terminated and the sale and purchase of the Common Shares and
the Warrants abandoned at any time prior to the Closing, by written notice of
any individual Purchaser if the Closing has not occurred within five business
days of the date hereof (other than as a result of the failure on the part of
the party giving such notice of termination to perform its covenants and
obligations under this Agreement in all material respects); provided, however, that the abandonment of
the sale and purchase of the Common Shares and the Warrants shall be applicable
only to such Purchaser providing such written notice.

 

(b)           If
this Agreement is terminated pursuant to this Section 9.1 all further
obligations of the Company to such Purchaser and of such Purchaser shall
terminate; provided, however,
that (i) no party shall be relieved of any liability arising from any
breach by such party

 

21

 

of any provision of this
Agreement and (ii) the parties shall, in all events, remain bound by and
continue to be subject to the provisions set forth in this Article 9.

 

9.2          Waivers
and Amendments.  The terms of this Agreement may be waived or
amended with the written consent of the Company and each Purchaser.

 

9.3          Broker’s
Fee.  Each of
the parties to this Agreement represents that, on the basis of any actions and
agreements by it, there are no brokers or finders entitled to compensation in
connection with the sale of Securities to the Purchasers.

 

9.4          Governing
Law.  This
Agreement shall be governed in all respects by and construed in accordance with
the laws of the State of California without any regard to conflicts of laws
principles.

 

9.5          Survival.
 The
representations, warranties, covenants and agreements made in this Agreement
shall survive any investigation made by the Company or the Purchasers and the
Closing and any exercise of the Warrants.

 

9.6          Successors
and Assigns.  The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this Agreement.  Upon a permitted transfer of a Purchaser’s
Securities on the books of the Company, the Purchaser may assign this Agreement
to the permitted transferee upon prior written notice to the Company.  Except as set forth in the previous sentence,
no Purchaser shall assign this Agreement without the prior written consent of
the Company.

 

9.7          Entire
Agreement.  This
Agreement constitutes the full and entire understanding and agreement between
the parties with regard to the subjects thereof.

 

9.8          Notices,
etc.  All
notices and other communications required or permitted under this Agreement
shall be in writing and shall be deemed effectively given: (a) upon
personal delivery to the party to be notified, (b) when sent by confirmed
telex or facsimile if sent during normal business hours of the recipient, if
not, then on the next business day, (c) five days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (d) one
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt.  All communications shall be sent to the
Company or the Purchasers, as the case may be, at their respective addresses
set forth at the beginning of this Agreement or on Exhibit A,
as appropriate, or at such other address as the Company or the Purchasers may
designate by 10 days advance written notice to the other party.

 

9.9          Severability
of this Agreement.  If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

 

9.10        Counterparts;
Facsimile.  This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one instrument.  Facsimile signatures shall be treated the
same as original signatures.

 

22

 

9.11        Further
Assurances.  Each
party to this Agreement shall do and perform or cause to be done and performed
all such further acts and things and shall execute and deliver all such other
agreements, certificates, instruments and documents as the other party hereto
may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

 

9.12        Currency.
 All references
to “dollars” or “$” in this Agreement shall be deemed to refer to United States
dollars.

 

9.13        Waiver
of Conflicts. 
Each party to this Agreement acknowledges that legal counsel for the
Company, Cooley Godward, has in the past and may continue in the future to
perform legal services for one or more of the Purchasers or their affiliates in
matters unrelated to the transactions contemplated by this Agreement,
including, but not limited to, the representation of the Purchasers in matters
of a similar nature to the transactions contemplated herein.  Each party to this Agreement hereby: (a) acknowledges
that it has had an opportunity to ask for and have obtained information
relevant to such representation, including disclosure of the reasonably
foreseeable adverse consequences of such representation; (b) acknowledges
that with respect to the transactions contemplated herein, Cooley Godward has
represented the Company and not any individual Purchaser or any individual
stockholder, director or employee of the Company; and (c) gives its
informed consent to Cooley Godward’s representation of the Company in the
transactions contemplated by this Agreement.

 

9.14        Independent
Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under this
Agreement are several and not joint with the obligations of any other
Purchaser, and no Purchaser shall be responsible in any way for the performance
of the obligations of any other Purchaser under this Agreement.  Nothing contained herein and no action taken
by any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers
as a partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Purchasers are in any way acting in concert or
as a group with respect to such obligations or the transactions contemplated by
this Agreement.  Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 

23

 

The foregoing agreement is hereby executed as of the
date first above written.

 

	
   

  	
  FAVRILLE, INC. ,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

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

  	
   

  
	
   

  	
   

  	
  John P. Longenecker, Ph.D.

  
	
   

  	
   

  	
  President and Chief Executive Officer

  

 

 

[Signature Page to Securities
Purchase Agreement]

 

 

	
   

  	
  PURCHASERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Alloy Ventures 2005, LLC and Alloy Ventures 2005,

  	
   

  
	
   

  	
  L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Doug Kelly, MD

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Doug Kelly, MD

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Member of Alloy Ventures 2005,

  	
   

  
	
   

  	
  LLC

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  The general partner of Alloy Ventures 2005, L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Colette S. Carson

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Colette S. Carson

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
																			

 

 

[Signature Page to
Securities Purchase Agreement]

 

 

	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Federated Kaufmann Fund II, a portfolio of Federated

  	
   

  
	
   

  	
  Insurance Series

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Aash Shah

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Aash Shah

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President, Federated Global Investment

  	
   

  
	
   

  	
  Managemtn Corp, as attorney-in-fact for Federated

  	
   

  
	
   

  	
  Kaufmann Fund II, a portfolio of Federated Insurance

  	
   

  
	
   

  	
  Series

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Federated Kaufmann Fund, a portfolio of Federated

  	
   

  
	
   

  	
  Equity Funds

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Hans P. Utsch

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Hans P. Utsch

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President, Federated Global Investment

  	
   

  
	
   

  	
  Management Corp, as attorney-in-fact for Federated

  	
   

  
	
   

  	
  Kaufmann Fund, a portfolio of Federated Equity Funds

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
																				

 

 

[Signature Page to
Securities Purchase Agreement]

 

 

	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Forward Ventures IV, LP

  	
   

  
	
   

  	
   

  
	
   

  	
  Forward Ventures IV B, L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ivor Royston

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Ivor Royston

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Member Forward IV Associates,

  	
   

  
	
   

  	
  LLC its general partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Julia Hazzard Merck

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Julia Hazzard Merck

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
																

 

 

[Signature Page to
Securities Purchase Agreement]

 

 

	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  MPM BIOEQUITIES MASTER FUND, LP

  	
   

  
	
   

  	
   

  
	
   

  	
  MPM BioEquities, GP, L.P., its General Partner

  	
   

  
	
   

  	
   

  
	
   

  	
  MPM BioEquities, GP, LLC, its General Partner

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kurt von Emster

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Kurt von Emster

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Member

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  MPM BIOEQUITIES INVESTORS FUND, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kurt von Emster

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Kurt von Emster

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Member

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Oakwood Medical Management IV (QP), L.L.C.

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Raul E. Perez, M.D.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Raul E. Perez, M.D.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
																	

 

 

[Signature Page to
Securities Purchase Agreement]

 

 

	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Oakwood Medical Investors IV, L.L.C.

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Raul E.
  Perez, M.D.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Raul E. Perez, M.D.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  ProMed Partners, L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry
  Kurokawa

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Barry Kurokawa

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  ProMed Partners II, L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry
  Kurokawa

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Barry Kurokawa

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
																				

 

 

[Signature Page to Securities Purchase Agreement]

 

 

	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  ProMed Offshore Fund, Ltd.

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry
  Kurokawa

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Barry
  Kurokawa

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  ProMed Offshore Fund II, Ltd.

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry
  Kurokawa

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Barry Kurokawa

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Red Abbey Venture Partners (QP), LP

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Matt
  Zuga

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Matt Zuga,
  Red Abbey Venture Partners, LLC

  	
   

  
	
   

  	
   

  	
   

  	
  its General
  Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Member

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
																		

 

 

[Signature Page to Securities Purchase Agreement]

 

 

	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Red Abbey Venture Partners, LP

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Matt
  Zuga

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Matt Zuga,
  Red Abbey Venture Partners, LLC

  	
   

  
	
   

  	
   

  	
   

  	
  its General
  Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Member

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Red Abbey CEO’s Fund, LP

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Matt
  Zuga

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Matt Zuga,
  Red Abbey Venture Partners, LLC

  	
   

  
	
   

  	
   

  	
   

  	
  its General
  Partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Member

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Ivor Royston IRA Delaware Charter, TTEE

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ivor
  Royston

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Ivor Royston

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
																				

 

 

[Signature Page to Securities Purchase Agreement]

 

 

	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Sanderling Venture Partners V, L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Middleton,
  McNeil & Millis Associates V, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred A.
  Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Fred A. Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Sanderling V Biomedical, L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Middleton,
  McNeil & Millis Associates V, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred A.
  Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Fred A. Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Sanderling V Limited Partnership

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Middleton,
  McNeil & Millis Associates V, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred A.
  Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Fred A. Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
														

 

 

[Signature Page to Securities Purchase Agreement]

 

 

	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Sanderling V Beteilingungs GmbH &
  Co. KG

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Middleton,
  McNeil & Millis Associates V, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred A.
  Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Fred A. Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Sanderling Ventures Management V

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred A.
  Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Fred A.
  Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Owner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Sanderling Venture Partners VI
  Co-Investment Fund,

  	
   

  
	
   

  	
  L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Middleton,
  McNeil & Millis Associates VI, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred A.
  Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Fred A. Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
													

 

 

[Signature Page to Securities Purchase Agreement]

 

 

	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Sanderling Venture VI Limited Partnership

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Middleton,
  McNeil & Millis Associates VI, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred A.
  Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Fred A. Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Sanderling VI Beteiligungs GmbH &
  Co. KG

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Middleton,
  McNeil & Millis Associates VI, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred A.
  Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Fred A. Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
											

 

 

	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Sanderling Ventures Management VI

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Middleton,
  McNeil & Millis Associates VI, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred A.
  Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Fred A. Middleton

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Fred A.
  Middleton

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Fred A. Middleton

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Judith S. Sandler

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Judith S. Sandler

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
															

 

 

	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Smithfield Fiduciary LLC

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Adam J.
  Chill

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Adam J.
  Chill

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Authorized Signatory

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  T. Rowe Price Associates, Inc., as a
  Registered

  	
   

  
	
   

  	
  Investment Advisor to the Participating T.
  Rowe Price

  	
   

  
	
   

  	
  Accounts in Exhibit A –
  Schedule of Purchasers

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jay S.
  Markowitz, Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Jay S.
  Markowitz

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  Tang Capital
  Partners, LP

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kevin C.
  Tang

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Kevin C. Tang

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Member

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
																				

 

 

	
   

  	
  Entity Name:

  
	
   

  	
   

  
	
   

  	
  William Blair Capital Partners VII, QP, LP

  	
   

  
	
   

  	
   

  
	
   

  	
  William Blair Capital Partners VII, LP

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Arda M. Minocherhomjee

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Arda M. Minocherhomjee

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Managing Member

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Investment Amount:

  	
   

  
											

 

 

EXHIBIT A

 

SCHEDULE OF PURCHASERS

 

	
  PURCHASER

  	
   

  	
  COMMON

  SHARES

  	
   

  	
  PURCHASE PRICE

  FOR COMMON

  SHARES

  	
   

  	
  WARRANT

  SHARES

  	
   

  	
  PURCHASE

  PRICE FOR

  WARRANTS

  	
   

  
	
  Alloy
  Ventures 2005, L.P.

  400 Hamilton Avenue, Fourth Floor

  Palo Alto, CA 94301

  Phone: (650) 687-5000

  Fax: (650) 687-5010

  	
   

  	
  1,425,856

  	
   

  	
  $

  	
  7,500,002.56

  	
   

  	
  499,049

  	
   

  	
  $

  	
  62,381.13

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Forward
  Ventures IV, L.P.

  Attn.: Ivor Royston

  9393 Towne Centre Drive

  Suite 200

  San Diego, CA 92121

  Phone: (858) 677-6077

  Fax: (858) 452-8799

  	
   

  	
  1,051,540

  	
   

  	
  $

  	
  5,531,100.40

  	
   

  	
  368,039

  	
   

  	
  $

  	
  46,004.88

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Forward
  Ventures IV B, L.P.

  Attn: Ivor Royston

  9393 Towne Centre Drive

  Suite 200

  San Diego, CA 92121

  Phone: (858) 677-6077

  Fax: (858) 452-8799

  	
   

  	
  89,144

  	
   

  	
  $

  	
  468,897.44

  	
   

  	
  31,200

  	
   

  	
  $

  	
  3,900.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Federated
  Kaufmann Fund, a portfolio of Federated Equity Funds

  140 East 45th Street

  New York, NY 10017

  Fax: (212) 661-2266

  	
   

  	
  1,317,490

  	
   

  	
  $

  	
  6,929,997.51

  	
   

  	
  461,121

  	
   

  	
  $

  	
  57,640.13

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Federated
  Kaufmann Fund II, a portfolio of Federated Insurance Series
140 East 45th Street

  New York, NY 10017

  Fax: (212) 661-2266

  	
   

  	
  13,308

  	
   

  	
  $

  	
  69,999.97

  	
   

  	
  4,658

  	
   

  	
  $

  	
  582.25

  	
   

  

 

 

	
  PURCHASER

  	
   

  	
  COMMON

  SHARES

  	
   

  	
  PURCHASE PRICE

  FOR COMMON

  SHARES

  	
   

  	
  WARRANT

  SHARES

  	
   

  	
  PURCHASE

  PRICE FOR

  WARRANTS

  	
   

  
	
  Julia
  Hazzard Merck

  16 Legare Street

  Charleston, SC 29401

  	
   

  	
  190,114

  	
   

  	
  $

  	
  999,999.64

  	
   

  	
  66,539

  	
   

  	
  $

  	
  8,317.38

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MPM
  BioEquities Master Fund LP

  Goldman Sachs & Co. fbo MPM BioEquities Master Fund LP

  Attn.: Aleph Granados

  555 California Street,44th Floor

  San Francisco, CA 94104

  	
   

  	
  754,400

  	
   

  	
  $

  	
  3,968,144.00

  	
   

  	
  264,040

  	
   

  	
  $

  	
  33,005.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MPM
  BioEquities Investors Fund LLC

  Goldman Sachs & Co. fbo MPM BioEquities Master Fund LP

  Attn.: Aleph Granados

  555 California Street, 44th Floor

  San Francisco, CA 94104

  	
   

  	
  6,050

  	
   

  	
  $

  	
  31,823.00

  	
   

  	
  2,117

  	
   

  	
  $

  	
  264.63

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OAKWOOD
  MEDICAL INVESTORS IV (QP), L.L.C.

  Raul E. Perez, M.D., President

  Oakwood Medical Investors

  10411 Clayton Rd., Suite 302

  St. Louis, MO 63131

  Phone: (314) 991-7979

  Fax: (314) 991-7914

  	
   

  	
  166,355

  	
   

  	
  $

  	
  875,027.30

  	
   

  	
  58,224

  	
   

  	
  $

  	
  7,278.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OAKWOOD
  MEDICAL INVESTORS IV, L.L.C.

  Raul E. Perez, M.D., President

  Oakwood Medical Investors

  10411 Clayton Rd., Suite 302

  St. Louis, MO 63131

  Phone: (314) 991-7979

  Fax: (314) 991-7914

  	
   

  	
  23,759

  	
   

  	
  $

  	
  124,972.34

  	
   

  	
  8,315

  	
   

  	
  $

  	
  1,039.38

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Red
  Abbey Venture Partners (QP), LP

  Attn.: Matt Zuga / Skip Klein

  2330 West Joppa Road, Suite 330

  Lutherville, MD 21093

  Phone: (410) 494-4240

  Fax: (410) 494-4247

  	
   

  	
  142,680

  	
   

  	
  $

  	
  750,496.80

  	
   

  	
  49,938

  	
   

  	
  $

  	
  6,242.25

  	
   

  

 

 

	
  PURCHASER

  	
   

  	
  COMMON

  SHARES

  	
   

  	
  PURCHASE PRICE

  FOR COMMON

  SHARES

  	
   

  	
  WARRANT

  SHARES

  	
   

  	
  PURCHASE

  PRICE FOR

  WARRANTS

  	
   

  
	
  Red
  Abbey Venture Partners, LP

  Attn.: Matt Zuga / Skip Klein

  2330 West Joppa Road, Suite 330

  Lutherville, MD 21093

  Phone: (410) 494-4240

  Fax: (410) 494-4247

  	
   

  	
  39,696

  	
   

  	
  $

  	
  208,800.96

  	
   

  	
  13,893

  	
   

  	
  $

  	
  1,736.63

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Red
  Abbey CEO’s Fund, LP

  Attn.: Matt Zuga / Skip Klein

  2330 West Joppa Road, Suite 330

  Lutherville, MD 21093

  Phone: (410) 494-4240

  Fax: (410) 494-4247

  	
   

  	
  7,738

  	
   

  	
  $

  	
  40,701.88

  	
   

  	
  2,708

  	
   

  	
  $

  	
  338.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sanderling
  Venture Partners V, L.P.

  Attn.: Fred A. Middleton

  400 South El Camino Real

  Suite 1200

  San Mateo, CA 94402

  Fax: (650) 375-7077

  	
   

  	
  13,141

  	
   

  	
  $

  	
  69,121.66

  	
   

  	
  4,599

  	
   

  	
  $

  	
  574.88

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sanderling V Beteiligungs GmbH & Co KG
400 South El Camino Real

  Suite 1200

  San Mateo, CA 94402

  Fax: (650) 375-7077

  	
   

  	
  1,159

  	
   

  	
  $

  	
  6,096.34

  	
   

  	
  406

  	
   

  	
  $

  	
  50.75

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sanderling
  V Limited Partnership

  400 South El Camino Real

  Suite 1200

  San Mateo, CA 94402

  Fax: (650) 375-7077

  	
   

  	
  1,302

  	
   

  	
  $

  	
  6,848.52

  	
   

  	
  455

  	
   

  	
  $

  	
  56.88

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sanderling
  V Biomedical, L.P.

  400 South El Camino Real

  Suite 1200

  San Mateo, CA 94402

  Fax: (650) 375-7077

  	
   

  	
  3,219

  	
   

  	
  $

  	
  16,931.94

  	
   

  	
  1,127

  	
   

  	
  $

  	
  140.88

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sanderling
  Ventures Management V

  400 South El Camino Real

  Suite 1200

  San Mateo, CA 94402

  Fax: (650) 375-7077

  	
   

  	
  190

  	
   

  	
  $

  	
  999.40

  	
   

  	
  66

  	
   

  	
  $

  	
  8.25

  	
   

  

 

 

	
  PURCHASER

  	
   

  	
  COMMON

  SHARES

  	
   

  	
  PURCHASE PRICE

  FOR COMMON

  SHARES

  	
   

  	
  WARRANT

  SHARES

  	
   

  	
  PURCHASE

  PRICE FOR

  WARRANTS

  	
   

  
	
  Sanderling
  Venture Partners VI Co-Investment Fund, L.P.

  400 South El Camino Real

  Suite 1200

  San Mateo, CA 94402

  Fax: (650) 375-7077

  	
   

  	
  839,456

  	
   

  	
  $

  	
  4,415,538.56

  	
   

  	
  293,810

  	
   

  	
  $

  	
  36,726.25

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sanderling
  VI Limited Partnership

  400 South El Camino Real

  Suite 1200

  San Mateo, CA 94402

  Fax: (650) 375-7077

  	
   

  	
  19,357

  	
   

  	
  $

  	
  101,817.82

  	
   

  	
  6,775

  	
   

  	
  $

  	
  846.88

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sanderling
  VI Beteiligungs GmbH & Co., KG

  400 South El Camino Real

  Suite 1200

  San Mateo, CA 94402

  Fax: (650) 375-7077

  	
   

  	
  16,377

  	
   

  	
  $

  	
  86,143.02

  	
   

  	
  5,732

  	
   

  	
  $

  	
  716.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sanderling
  Ventures Management VI

  400 South El Camino Real

  Suite 1200

  San Mateo, CA 94402

  Fax: (650) 375-7077

  	
   

  	
  8,841

  	
   

  	
  $

  	
  46,503.66

  	
   

  	
  3,094

  	
   

  	
  $

  	
  386.75

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fred A.
  Middleton

  400 South El Camino Real

  Suite 1200

  San Mateo, CA 94402

  Fax: (650) 375-7077

  	
   

  	
  47,529

  	
   

  	
  $

  	
  250,002.54

  	
   

  	
  16,635

  	
   

  	
  $

  	
  2,079.38

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tang
  Capital Partners, LP

  4401 Eastgate Mall

  San Diego, CA 92121

  Phone: (858) 200-3831

  Fax: (858) 200-3837

  	
   

  	
  475,285

  	
   

  	
  $

  	
  2,499,999.10

  	
   

  	
  166,349

  	
   

  	
  $

  	
  20,793.63

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Smithfield
  Fiduciary LLC

  c/o Highbridge Capital Management, LLC

  9 West 57th Street, 27th Floor

  New York, NY 10019

  Attn: Ari J. Storch/Adam J. Chill

  	
   

  	
  190,114

  	
   

  	
  $

  	
  999,999.64

  	
   

  	
  66,539

  	
   

  	
  $

  	
  8,317.38

  	
   

  

 

 

	
  PURCHASER

  	
   

  	
  COMMON

  SHARES

  	
   

  	
  PURCHASE PRICE

  FOR COMMON

  SHARES

  	
   

  	
  WARRANT

  SHARES

  	
   

  	
  PURCHASE

  PRICE FOR

  WARRANTS

  	
   

  
	
  T. Rowe
  Price Health Sciences Portfolio, Inc.

  c/o T. Rowe Price Associates, Inc.

  100 E. Pratt Street Baltimore, MD 21202

  Attn: Darrell N. Braman, Vice President and Associate Legal Counsel

  Fax: (410) 345-6575

  	
   

  	
  2,900

  	
   

  	
  $

  	
  15,254.00

  	
   

  	
  1,015

  	
   

  	
  $

  	
  126.88

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  T. Rowe
  Price Health Sciences Fund, Inc.

  c/o T. Rowe Price Associates, Inc.

  100 E. Pratt Street Baltimore, MD 21202

  Attn: Darrell N. Braman, Vice President and Associate Legal Counsel

  Fax: (410) 345-6575

  	
   

  	
  370,000

  	
   

  	
  $

  	
  1,946,200.00

  	
   

  	
  129,500

  	
   

  	
  $

  	
  16,187.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  John
  Hancock Trust – Health Sciences Trust

  c/o T. Rowe Price Associates, Inc.

  100 E. Pratt Street Baltimore, MD 21202

  Attn: Darrell N. Braman, Vice President and Associate Legal Counsel

  Fax: (410) 345-6575

  	
   

  	
  58,319

  	
   

  	
  $

  	
  306,757.94

  	
   

  	
  20,411

  	
   

  	
  $

  	
  2,551.38

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Valic
  Company I – Health Sciences Fund

  c/o T. Rowe Price Associates, Inc.

  100 E. Pratt Street Baltimore, MD 21202

  Attn: Darrell N. Braman, Vice President and Associate Legal Counsel

  Fax: (410) 345-6575

  	
   

  	
  44,100

  	
   

  	
  $

  	
  231,966.00

  	
   

  	
  15,435

  	
   

  	
  $

  	
  1,929.38

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Raytheon
  Company Combined DB/DC Master Trust – Health Sciences

  c/o T. Rowe Price Associates, Inc.

  100 E. Pratt Street Baltimore, MD 21202

  Attn: Darrell N. Braman, Vice President and Associate Legal Counsel

  Fax: (410) 345-6575

  	
   

  	
  7,000

  	
   

  	
  $

  	
  36,820.00

  	
   

  	
  2,450

  	
   

  	
  $

  	
  306.25

  	
   

  

 

 

	
  PURCHASER

  	
   

  	
  COMMON

  SHARES

  	
   

  	
  PURCHASE PRICE

  FOR COMMON

  SHARES

  	
   

  	
  WARRANT

  SHARES

  	
   

  	
  PURCHASE

  PRICE FOR

  WARRANTS

  	
   

  
	
  TD
  Mutual Funds – TD Health Sciences Fund

  c/o T. Rowe Price Associates, Inc.

  100 E. Pratt Street Baltimore, MD 21202

  Attn: Darrell N. Braman, Vice President and Associate Legal Counsel

  Fax: (410) 345-6575

  	
   

  	
  50,000

  	
   

  	
  $

  	
  263,000.00

  	
   

  	
  17,500

  	
   

  	
  $

  	
  2,187.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ProMed
  Partners, L.P.

  Attn.: Joshua Golomb

  237 Park Avenue

  9th Floor

  New York, NY 10017

  Phone: (212) 692-3626

  Fax: (212)

  	
   

  	
  47,018

  	
   

  	
  $

  	
  247,314.68

  	
   

  	
  16,456

  	
   

  	
  $

  	
  2,057.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ProMed
  Partners II L.P.

  Attn.: Joshua Golomb 

  237 Park Avenue

  9th Floor

  New York, NY 10017

  Phone: (212) 692-3626

  Fax: (212)

  	
   

  	
  2,133

  	
   

  	
  $

  	
  11,219.58

  	
   

  	
  747

  	
   

  	
  $

  	
  93.38

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ProMed
  Offshore Fund, Ltd.

  Attn.: Joshua Golomb 

  237 Park Avenue

  9th Floor

  New York, NY 10017

  Phone: (212) 692-3626

  Fax: (212)

  	
   

  	
  7,880

  	
   

  	
  $

  	
  41,448.80

  	
   

  	
  2,758

  	
   

  	
  $

  	
  344.75

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ProMed
  Offshore Fund II, Ltd.

  Attn.: Joshua Golomb 

  237 Park Avenue

  9th Floor

  New York, NY 10017

  Phone: (212) 692-3626

  Fax: (212)

  	
   

  	
  199,629

  	
   

  	
  $

  	
  1,050,048.54

  	
   

  	
  69,870

  	
   

  	
  $

  	
  8,733.75

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ivor
  Royston IRA

  c/o Delaware Charter

  7514 Girard Avenue, #1 PMB 243

  La Jolla, CA 92037

  	
   

  	
  9,506

  	
   

  	
  $

  	
  50,001.56

  	
   

  	
  3,327

  	
   

  	
  $

  	
  415.88

  	
   

  

 

 

	
  PURCHASER

  	
   

  	
  COMMON

  SHARES

  	
   

  	
  PURCHASE PRICE

  FOR COMMON

  SHARES

  	
   

  	
  WARRANT

  SHARES

  	
   

  	
  PURCHASE

  PRICE FOR

  WARRANTS

  	
   

  
	
  Collette
  S. Carson

  7514 Girard Avenue, #1PMB 243

  La Jolla, CA 92037

  Phone:

  Fax:

  	
   

  	
  9,506

  	
   

  	
  $

  	
  50,001.56

  	
   

  	
  3,327

  	
   

  	
  $

  	
  415.88

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Judith
  S. Sandler

  1729 Hillside Road

  Stevenson, MD

  Phone:

  Fax:

  	
   

  	
  9,506

  	
   

  	
  $

  	
  50,001.56

  	
   

  	
  3,327

  	
   

  	
  $

  	
  415.88

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  William
  Blair Capital Partners VII, QP, LP

  Attn.: Arda M. Minocherhomjee

  303 W. Madison Street, Suite 2500

  Chicago, IL 60606

  Phone: (312) 698-6300

  Fax: (312) 201-0703

  	
   

  	
  860,377

  	
   

  	
  $

  	
  4,525,583.02

  	
   

  	
  301,132

  	
   

  	
  $

  	
  37,641.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  William
  Blair Capital Partners VII, LP

  Attn.: Arda M. Minocherhomjee

  303 W. Madison Street, Suite 2500

  Chicago, IL 60606

  Phone: (312) 698-6300

  Fax: (312) 201-0703

  	
   

  	
  33,159

  	
   

  	
  174,416.34

  	
   

  	
  11,605

  	
   

  	
  $

  	
  1,450.63

  	
   

  
	
  Totals:

  	
   

  	
  8,555,133

  	
   

  	
  $

  	
  44,999,999.58

  	
   

  	
  2,994,288

  	
   

  	
  $

  	
  374,286.11

  	
   

  

 

 

EXHIBIT B

 

FORM OF WARRANT

 

 

EXHIBIT C

 

INSTRUCTION SHEET FOR PURCHASER

(to be read in conjunction with
the entire

Securities Purchase Agreement)

 

A.                                    Complete
the following items in the Securities Purchase Agreement:

 

1.                                      Provide
the information regarding the Purchaser requested on the signature page. The
Securities Purchase Agreement must be executed by an individual authorized to
bind the Purchaser.

 

2.                                      Exhibit C-1
– Stock Certificate Questionnaire:

 

Provide the information requested by the Stock
Certificate Questionnaire.

 

3.                                      Exhibit C-2
– Registration Statement Questionnaire:

 

Provide the information requested by the Registration
Statement Questionnaire.

 

4.                                      Exhibit C-3
– Purchaser Certificate:

 

Provide the information requested by the Certificate
for Individual Purchasers or the Certificate for Corporate, Partnership, Trust,
Foundation and Joint Purchasers, as applicable.

 

5.                                      Return
the signed Securities Purchase Agreement to:

 

Christian V. Kuhlen, Esq.

Cooley Godward LLP

4401 Eastgate Mall

San Diego, California 92121

Fax: 858.550.6420

 

B.                                    Instructions
regarding the transfer of funds for the purchase of Securities will be
telecopied to the Purchaser at a later date.

 

C.                                    Upon
the resale of the Registrable Shares by the Purchaser after the Registration
Statement or Demand Registration Statement, as applicable, covering the
Registrable Shares is effective, as described in the Securities Purchase
Agreement, the Purchaser:

 

(i)                                    must
confirm with a current prospectus is deemed to be delivered to such buyer
pursuant to Rule 172; and

 

(ii)                                must
send a certificate in the form of Exhibit F
to the Securities Purchase Agreement to the Company so that the Registrable
Shares may be properly transferred.

 

C-1

 

EXHIBIT C-1

 

FAVRILLE, INC.

STOCK CERTIFICATE QUESTIONNAIRE

 

Pursuant to Section 4.3
of the Agreement, please provide us with the following information:

 

	
  1.     The
  exact name that the Securities are to be registered in (this is the name that
  will appear on the stock certificate(s)). You may use a nominee name if
  appropriate:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  2.     The
  relationship between the Purchaser of the Securities and the Registered
  Holder listed in response to item 1 above:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  3.     The
  mailing address of the Registered 

  	
   

  	
   

  
	
  Holder listed in response to item 1 above:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  4.     The
  Tax Identification Number of the Registered Holder listed in response to item
  1 above:

  	
   

  	
   

  

 

C-2

 

EXHIBIT C-2

 

FAVRILLE, INC.

 

REGISTRATION STATEMENT
QUESTIONNAIRE

 

In connection with the preparation of the Registration
Statement, please provide us with the following information regarding the
Purchaser.

 

D.                                    General
Information

 

	
  1.

  	
   

  	
  Please state
  your organization’s name exactly as it should appear in the Registration
  Statement:
                                                  

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Have you or your
  organization had any position, office or other material relationship within
  the past three years with the Company or its affiliates other than as
  disclosed in the Prospectus included in the Registration Statement?

  
	
   

  	
   

  	
   

  
	
  o  Yes     ̈  No

  

 

If yes, please indicate the nature of any such
relationships below:

 

 

 

E.                                      Securities
Holdings

 

Please fill in all blanks in the following questions
related to your beneficial ownership  of the
Company’s capital stock.  Generally, the
term “beneficial ownership” refers
to any direct or indirect interest in the securities which entitles you to any
of the rights or benefits of ownership, even though you may not be the holder
of record of the securities.  For
example, securities held in “street name” over which you exercise voting or
investment power would be considered beneficially owned
by you.  Other examples of indirect
ownership include ownership by a partnership in which you are a partner or by
an estate or trust of which you or any member of your immediate
family is a beneficiary. 
Ownership of securities held in the names of your spouse, minor children
or other relatives who live in the same household may be attributed to you.

 

PLEASE NOTE: IF
YOU HAVE ANY REASON TO BELIEVE THAT ANY INTEREST IN SECURITIES OF THE COMPANY
WHICH YOU MAY HAVE, HOWEVER REMOTE, IS A BENEFICIAL INTEREST, PLEASE
DESCRIBE SUCH INTEREST.  FOR PURPOSES OF
RESPONDING TO THIS QUESTIONNAIRE, IT IS PREFERABLE TO ERR ON THE SIDE OF
INCLUSION RATHER THAN EXCLUSION.  WHERE
THE SEC’S INTERPRETATION OF BENEFICIAL
OWNERSHIP WOULD REQUIRE DISCLOSURE OF YOUR INTEREST OR
POSSIBLE INTEREST IN CERTAIN SECURITIES OF THE COMPANY, AND YOU BELIEVE THAT
YOU DO NOT ACTUALLY POSSESS THE ATTRIBUTES OF BENEFICIAL OWNERSHIP, AN
APPROPRIATE RESPONSE IS TO DISCLOSE THE INTEREST AND AT THE SAME TIME DISCLAIM
BENEFICIAL OWNERSHIP OF THE SECURITIES.

 

C-3

 

1.                                      As
of MARCH 6, 2006, I owned outright
(including shares registered in my name individually or jointly with others,
shares held in the name of a bank, broker, nominee, depository or in “street
name” for my account), the following number of shares of the Company’s capital
stock:                                       .

 

2.                                      In
addition to the number of shares I own outright as indicated by my answer to
question B(1), as of MARCH 6, 2006, I had or shared voting power or
investment power, directly or indirectly, through a contract, arrangement,
understanding, relationship or otherwise, over the following number of shares
of the Company’s capital stock:                                                .

 

If the answer to this question B(2) was not “zero,”
please complete the following:  with whom
shared; and the nature of the relationship and any underlying voting trust
agreement, investment arrangement or the like:

 

SHARED VOTING POWER:

 

	
  Number of Shares

  	
   

  	
  With Whom Shared

  	
   

  	
  Nature of Relationship

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

SHARED INVESTMENT POWER:

 

	
  Number of Shares

  	
   

  	
  With Whom Shared

  	
   

  	
  Nature of Relationship

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

3.                                      As
of MARCH 6, 2006, I will have the
right to acquire             
shares of the Company’s capital stock pursuant to outstanding stock options
issued under the Company’s stock option plans and             
shares pursuant to the exercise of outstanding warrants (none, indicated by “0”
above).

 

Options
and Warrants

 

	
  Class

  	
   

  	
  Number of Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

C-4

 

 

4.                                      Please
identify the natural person or persons who have voting and/or investment
control over the Company’s securities that you own, and state whether such
person(s) disclaims beneficial ownership of the securities.  For example, if you are a general
partnership, please identify the general partners in the partnership.

 

 

 

 

 

C-5

 

F.                                      NASD
Questions

 

1.             Are
you (i) a “member”(1) of the National Association of Securities Dealers, Inc.
(the “NASD”), (ii) an “affiliate”(2)  of a member of the NASD, (iii) a “person
associated with a member” or an “associated person of a member”(3) of the NASD
or (iv) an immediate family member(1) of any of the foregoing
persons?  If yes,
please identify the member and describe such relationship (whether direct or
indirect), and please respond to Question Number 2 below; if no,
please proceed directly to Question Number 3.

 

Yes  o    No  o

 

Description:

 

 

 

(1)           NASD defines a “member” as any broker or dealer admitted
to membership in the NASD, or any officer or partner or branch manager of such
a member, or any person occupying a similar status or performing a similar
function for such a member.

(2)           The term “affiliate” means a person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is in common control with, the person specified.  Persons who have acted or are acting on
behalf of or for the benefit of a person include, but are not necessarily limited
to, directors, officers, employees, agents, consultants and sales
representatives.  The following should
apply for purposes of the foregoing:

(i)            a person should be presumed to
control a Member if the person beneficially owns 10 percent or more the outstanding
voting securities of a Member which is a corporation, or beneficially owns a
partnership interest in 10 percent or more of the distributable profits or
losses of a Member which is a partnership;

(ii)           a Member should be presumed to
control a person if the Member and Persons Associated With a Member
beneficially own 10 percent or more of the outstanding voting securities of a
person which is a corporation, or beneficially own a partnership interest in 10
percent or more of the distributable profits or losses of a person which is a
partnership;

(iii)          a person should be presumed to be
under common control with a Member if:

(1)           the same person
controls both the Member and another person by beneficially owning 10 percent
or more of the outstanding voting securities of a Member or person which is a
corporation, or by beneficially owning a partnership interest in 10 percent or
more of the distributable profits or losses of a Member or person which is a
partnership; or

(2)           a person having the
power to direct or cause the direction of the management or policies of the
Member or such person also has the power to direct or cause the direction of
the management or policies of the other entity in question.

(3)           The NASD defines a “person associated with a member” or  an “associated person of a member” as being
every sole proprietor, partner, equity owner, officer, director or branch
manager of any member, or any natural person occupying a similar status or
performing similar functions, or any natural person engaged in the investment
banking or securities business who directly or indirectly controls or is
controlled by such member (for example, any employee), whether or not any such
person is registered or exempt from registration with the NASD.

(4)           Immediate family includes parents, mother-in-law,
father-in-law, husband or wife, brother or sister, brother-in-law or
sister-in-law, son-in-law or daughter-in-law, and children, or any other person
who is supported, directly or indirectly, to a material extent, by a person
associated with a member of the NASD or any other broker/dealer.

 

C-6

 

2.                             If you answered “yes”
to Question Number 1, please furnish any information as to whether any such
member intends to participate in any capacity in the public offering, including
the details of such participation:

 

Description:

 

 

3.             Are you or have you been an “underwriter
or related person”(5) or a person associated with an underwriter or related
person, including, without limitation, with respect to the proposed public
offering?  If yes, please identify the
underwriter or related person and describe such relationship (whether direct or
indirect).

 

Yes  o    No  o

 

Description:

 

 

4.             If known, please describe in detail
any underwriting compensations, arrangements or dealings entered into during
the previous twelve months, or proposed to be consummated in the next twelve
months, between (i) any underwriter or related person, member of the NASD,
affiliate of a member of the NASD, person associated with a member or
associated person of a member of the NASD or any immediate family member
thereof, on the one hand, and (ii) the Company, or any director, officer
or stockholder thereof, on the other hand, which provides for the receipt of
any item of value and/or the transfer of any warrants, options or other
securities from the Company to any such person (other than the information
relating to the arrangements with any investment firm or underwriting
organization which may participate in the proposed public offering).

 

Description:

 

 

5.             Have you purchased the securities
in the ordinary course of business?

 

Yes  o    No  o

 

 

(5)  The term “underwriter or related person”
includes underwriters, underwriters’ counsel, financial consultants and advisors,
finders, members of the selling or distribution group, and any and all other
persons associated with or related to any of such persons, including members of
the immediate family of such persons.

 

C-7

 

The answers to the foregoing questions are correctly stated to the best
of my information and belief.  I shall
advise Christian V. Kuhlen at 858.550.6036, the Company’s outside counsel,
promptly of any changes in the foregoing information prior to the effectiveness
of the Registration Statement or Demand Registration Statement, as applicable.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  (Print name of Selling Security Holder)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  (Name and title of signatory, if
  stockholder is an entity)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Date)

  	
   

  
				

 

C-8

 

EXHIBIT C-3

 

FAVRILLE, INC.

CERTIFICATE FOR INDIVIDUAL
PURCHASERS

 

If the investor is an individual Purchaser (or married
couple) the Purchaser must complete, date and sign this Certificate.

 

CERTIFICATE

 

I certify that the representations and responses below
are true and accurate:

 

In order for the Company to offer and sell the
Securities in conformance with state and federal securities laws, the following
information must be obtained regarding your investor status.  Please initial each category
applicable to you as an investor in the Company.

 

o
(1)      A
natural person whose net worth(1), either individually or jointly with such
person’s spouse exceeds $1,000,000;

 

o
(2)      A
natural person who had an income(2) in excess of $200,000, or joint income with
the person’s spouse in excess of $300,000, in 2003 and 2004, and reasonably
expects to have individual income reaching the same level in 2005;

 

o
(3)      An
executive officer or director of the Company.

 

	
  Date:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name(s) of Purchaser

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  

 

(1)        For purposes of this Certificate, “net
worth” means the excess of total assets at fair market value over total
liabilities, except that the principal residence owned by a natural person
shall be valued either (a) at cost, including the cost of improvements,
net of current encumbrances upon the property, or (b) at the appraised
value of the residence as determined upon a written appraisal used by an
institutional lender making a loan to the individual secured by the property,
including the cost of subsequent improvements, net of current encumbrances upon
the property.  As used in the preceding
sentence, “institutional lender” means a bank, savings and loan company,
industrial loan company, credit union or personal property broker or a company
whose principal business is as a lender of loans secured by real property and
which has such loans receivable in the amount of $2,000,000 or more.

 

(2)           For purposes of this Certificate,
“income” means adjusted gross income, as reported for federal income tax
purposes, increased by the following amounts: 
(a) the amount of any tax exempt interest income received,
(b) the amount of losses claimed as a limited partner in a limited
partnership, (c) any deduction claimed for depletion, (d) amounts
contributed to an IRA or Keogh retirement plan, (e) alimony paid, and
(f) any amounts by which income from long-term capital gains has been
reduced in arriving at adjusted gross income pursuant to the provisions of
Section 1202 of the Internal Revenue Code.

 

C-9

 

EXHIBIT C-3

 

FAVRILLE, INC.

CERTIFICATE FOR CORPORATE,
PARTNERSHIP,

TRUST, FOUNDATION, AND JOINT PURCHASERS

 

If the investor is a corporation, partnership, trust,
pension plan, foundation, joint purchaser (other than a married couple) or
other entity, an authorized officer, partner, or trustee must complete, date
and sign this Certificate.

 

CERTIFICATE

 

The undersigned certifies that the representations and
responses below are true and accurate:

 

(a)           The
investor has been duly formed and is validly existing and has full power and
authority to invest in the Company. The person signing on behalf of the
undersigned has the authority to execute and deliver the Securities Purchase
Agreement on behalf of the Purchaser and to take other actions with respect
thereto.

 

(b)           Indicate
the form of entity of the undersigned:

 

o                                    Limited
Partnership

 

 ̈                                    General
Partnership

 

 ̈                                    Corporation

 

 ̈                                    Revocable
Trust (identify each grantor and indicate under what circumstances the trust is
revocable by the grantor:

 

 

 

 

(Continue on a separate piece of paper, if necessary.)

 

 ̈                                    Other
Type of Trust (indicate type of trust and, for trusts other than pension
trusts, name the grantors and beneficiaries:

 

 

 

 

(Continue on a separate piece of paper, if necessary.)

 

 ̈                                    Other
form of organization (indicate form of organization (                   ).

 

(c)           Indicate
the approximate date the undersigned entity was formed:                        .

 

C-10

 

(d)           In
order for the Company to offer and sell the Securities in conformance with
state and federal securities laws, the following information must be obtained
regarding your investor status. Please initial each category applicable
to you as an investor in the Company.

 

o
(1)      A
bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in Section 3(a)(5)(A) of
the Securities Act whether acting in its individual or fiduciary capacity;

 

o
(2)      A
broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934;

 

o
(3)      An
insurance company as defined in Section 2(13) of the Securities Act;

 

o
(4)      An
investment company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of that Act;

 

o
(5)      A
Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;

 

o
(6)      A
plan established and maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political subdivisions, for the
benefit of its employees, if such plan has total assets in excess of $5,000,000;

 

o
(7)      An
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974, if the investment decision is made by a plan fiduciary,
as defined in Section 3(21) of such act, which is either a bank, savings
and loan association, insurance company, or registered investment adviser, or
if the employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that are
accredited investors;

 

o
(8)      A
private business development company as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940;

 

o
(9)      An
organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, Massachusetts or similar business trust, or partnership,
not formed for the specific purpose of acquiring the Securities, with total
assets in excess of $5,000,000;

 

o
(10)    A
trust, with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the Securities, whose purchase is directed by a
sophisticated person who has such knowledge and experience in financial and
business matters that such person is capable of evaluating the merits and risks
of investing in the Company;

 

C-11

 

o
(11)    An
entity in which all of the equity owners qualify under any of the above
subparagraphs. If the undersigned belongs to this investor category only, list
the equity owners of the undersigned, and the investor category which each such
equity owner satisfies:

 

 

 

 

(Continue on a separate piece of paper, if necessary.)

 

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name of investor

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature and title of
  authorized

  officer, partner or trustee

  	
   

  

 

C-12

 

EXHIBIT D

 

OPINION OF COMPANY COUNSEL

 

 

EXHIBIT E

 

FAVRILLE, INC.

 

IMPORTANT - DO NOT REMOVE
THIS INSTRUCTION SHEET FROM THE ATTACHED SHARE CERTIFICATE UNLESS AND UNTIL THE
SHARES ARE SOLD AS FOLLOWS:

 

(1)           THE SHARES ARE RESOLD PURSUANT TO A
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (FILE
NO. [                             ]),
AND, IN CONNECTION WITH SUCH RESALE, THE HOLDER HAS DELIVERED TO THE PURCHASER
OF THE SHARES A CURRENT PROSPECTUS AND HAS PROVIDED TO THE COMPANY OR TO THE
TRANSFER AGENT FOR THE COMPANY’S STOCK A PURCHASER’S CERTIFICATE OF SUBSEQUENT
SALE AND THE HOLDER HAS
CONFIRMED THAT A CURRENT PROSPECTUS IS DEEMED TO BE DELIVERED IN CONNECTION
WITH SUCH RESALE; OR

 

(2)           THE SHARES ARE RESOLD IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933, AS AMENDED, PROVIDED THAT, PRIOR TO SUCH RESALE, THE HOLDER HAS NOTIFIED
THE COMPANY OF SUCH DISPOSITION AND PROVIDED THE COMPANY WITH WRITTEN
ASSURANCES, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY OF COMPLIANCE
WITH THE REQUIREMENTS OF SUCH EXEMPTION.

 

 

DO NOT REMOVE THIS
INSTRUCTION SHEET FROM

THE ATTACHED SHARE CERTIFICATE

EXCEPT IN ACCORDANCE WITH

THE INSTRUCTIONS SET FORTH ABOVE.

 

 

EXHIBIT F

 

PURCHASER’S CERTIFICATE OF
SUBSEQUENT SALE

 

To:          Cooley Godward LLP

 

Attention:  Christian V. Kuhlen, Esq.

 

	
  The undersigned, the
  selling securityholder or an officer of, or other duly authorized person,
  hereby certifies that
                                                                                                                                                                
  represents that it has sold

  
	
  [fill in name of selling
  securityholder]

  	
   

  
	
  shares of the Common
  Stock of Favrille, Inc. and that such shares were sold on
                             
  either (i) in accordance with the 

  
	
   

  	
  [date]

  
	
  registration statement
  filed with the

  
			

Securities and Exchange
Commission with file number [                       ],
in which case the selling securityholder certifies that such selling
securityholder has confirmed that a current prospectus is deemed to be
delivered, pursuant to Rule 172 under the Securities Act of 1933, as
amended (the “Securities Act”), or (ii) in
accordance with Rule 144 under the Securities Act (“Rule 144”),
in which case the selling securityholder certifies that it has complied with
the requirements of Rule 144.

 

Print or type:

 

	
  Number
  of shares sold (if sold on multiple dates, please provide a
  breakdown by date):

  	
   

  
	
   

  	
   

  
	
  Name
  of selling securityholder:

  	
   

  
	
   

  	
   

  
	
  Name
  of individual representing selling securityholder (if an
  institution):

  	
   

  
	
   

  	
   

  
	
  Title
  of individual representing selling securityholder (if an
  institution):

  	
   

  

 

Signature by:

 

	
  Selling
  securityholder or individual representative:

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