Document:

Exhibit 10.27

 

AMENDMENT NO. 3

 

THIS AMENDMENT NO. 3
(this “Amendment”) is made as of the 30th day of December 2005, between Oxford
Finance Corporation (“Secured Party”) and Favrille, Inc. (“Debtor”) in
connection with that certain Master Security Agreement, dated as of July 26,
2004, as amended by an Amendment dated as of December 29, 2004, as further
amended by an Amendment date as of June 16, 2005 (as so amended, the “Agreement”).
The terms of this Amendment are hereby incorporated into the Agreement as though
fully set forth therein. Secured Party and Debtor mutually desire
to amend the Agreement as set forth below. Section references below refer
to the section numbers of the Agreement.

 

1.             In connection with
this Amendment, Secured Party is making a One Million Four Hundred Ninety Eight
Thousand Six Hundred Seventy Seven Dollars and Twenty Seven Cents
($1,498,677.27) loan to Debtor on or before December 31, 2005 pursuant to
the terms of a Note of even date therewith 
(the “Oxford Loan”). Concurrently with such loan, General Electric
Capital Corporation (“GECC”) is also making a One Million Four Hundred Ninety
Eight Thousand Six Hundred Seventy Seven Dollars and Twenty  Six Cents ($1,498,677.26) loan to Debtor on or
before December 31, 2005 (the “GECC Loan”). The proceeds of the Oxford
Loan and the GECC Loan shall be used to pay all of Debtor’s remaining
indebtedness to Lighthouse Capital and GECC (other than the GECC Loan). Except
for the Oxford Loan and the GECC Loan, Debtor shall not be permitted to incur
any Additional Indebtedness to either Secured Party or GECC unless, among other
things: (i) Debtor receives at least Twenty Million Dollars ($20,000,000)
in gross cash proceeds from one or more sales of its capital stock after the
date hereof but on or before March 31, 2006, (ii) GECC consents to
such  Additional Indebtedness, (iii) Secured
Party consents to such  Additional
Indebtedness at its sole discretion made in good faith, (iv) no default under
the Agreement exists or would exist as a result of the incurrence of such
indebtedness. The preceding sentence does not constitute a commitment by
Secured Party to extend further loans to Debtor.

 

2.             Debtor hereby grants
a security interest in the Collateral (including the Additional Collateral) to
Secured Party to secure all of the Indebtedness to Secured Party now existing
or arising in the future.

 

2A.          Subsection 2(j) of
the Agreement is hereby amended in its entirety to read as follows:

 

(j) Intentionally deleted.

 

2B.          Subsection 2(k) of
the Agreement is hereby amended in its entirety to read as follows:

 

(k) Except for Permitted Liens and Permitted
Transfers (as defined below), Debtor is, and will remain the sole and lawful
owner, and in possession of, the Collateral, and has the sole right and lawful
authority to grant the security interest described in this Agreement for all
purposes of this Agreement. “Permitted Transfers” means (i) the disposal
of worn-out or obsolete Collateral, (ii) transfers to Secured Party, (iii) transfers
for maintenance and repair, (iv) the conveyance, sale, lease, transfer or
disposition of Inventory in the ordinary course of business, (v) non-exclusive
licenses of Debtor’s Intellectual Property in the ordinary course of business
and non-exclusive and exclusive licenses of Debtor’s Intellectual

 

 

Property in connection with joint ventures
and corporate collaborations in the ordinary course of business, and (vi) the
creation of Permitted Liens.

 

3.             Subsection 2(l)
of the Agreement is hereby amended in its entirety to read as follows:

 

(l) The Collateral is, and will remain, free
and clear of all liens, claims and encumbrances of any kind whatsoever, except
for: (i) liens in favor of Secured Party, (ii) liens in favor of
GECC, (iii) liens for taxes not yet due or for taxes being contested in
good faith and which do not involve, in the judgment of Secured Party, any risk
of the sale, forfeiture or loss of any of the Collateral, (iv) inchoate
material men’s, mechanic’s, repairmen’s and similar liens arising by operation
of law in the normal course of business for amounts which are not delinquent, (v) Liens
existing on the date hereof and which are listed in Schedule B, (vi) Liens
not to exceed $250,000 in the aggregate in any fiscal year (A) upon or in
any Equipment acquired or held by Debtor to secure the purchase price of such
Equipment or Additional Indebtedness incurred solely for the purpose of
financing the acquisition or lease of such Equipment, or (B) existing on
such Equipment at the time of its acquisition provided that the Lien is
confined solely to the Equipment so acquired and improvements thereon and the
proceeds of such Equipment, (vii) Liens arising from judgments, decrees or
attachments in circumstances not constituting a default under Section 7(a)(vi),
(viii)Liens in favor of financial institutions arising in connection with
Debtor’s deposit accounts or securities accounts held at such institutions to
secure payment of fees and similar costs and expenses subject to Debtor’s
compliance with Section 3(v) hereof, (ix) non-exclusive
licenses of Debtor’s Intellectual Property in the ordinary course of business
and non-exclusive and exclusive licenses of Debtor’s Intellectual Property in
connection with joint ventures and corporate collaborations in the ordinary
course of business, (x) leases or subleases of real property granted in the
ordinary course of Debtor’s business, including in connection with Debtor’s
leased real property or leased premises, (xi) banker’s liens, rights of setoff
and similar Liens incurred on deposits made in the ordinary course of business
subject to Debtor’s compliance with Section 3(v) hereof, (xii)
Liens to secure payment of worker’s compensation, employment insurance, old age
pensions or other social security obligations of Debtor in each case arising in
the ordinary course of business of Debtor provided, they have no priority over
any of Secured Party’s Lien, (xiii) easements, reservations, rights-of-way,
restrictions, minor defects or irregularities in title and similar charges or
encumbrances affecting real property not constituting a material adverse effect
on the business or condition (financial or otherwise) of Debtor or otherwise
materially impairing the conduct of Debtor’s business, (xiv) Deposit or pledges
to secure the performance of bids, tenders, contracts, public or statutory
obligations, surety, indemnity, performance or other similar binds or similar
obligations arising in the ordinary course of business, (xv) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
custom duties in connection with the importation of goods, (xvi) any interest
or title of a licensor or sublicensor to Debtor under any license of
Intellectual Property, and (xvii) Liens incurred in connection with the
extension, renewal or refinancing of the Additional Indebtedness secured by
Liens described above so long as it constitutes Permitted Indebtedness, but any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the then outstanding principal amount of

 

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the Additional Indebtedness may not
increase (all of such liens are called “Permitted Liens”).

 

 4.            The
following Subsections are hereby added to Section 2 of the Agreement:

 

(r)            Debtor shall not create, incur, assume or
permit to exist any Additional Indebtedness except Permitted Indebtedness;

 

(s)          Debtor will (i) protect, defend and
maintain the validity and enforceability of the Intellectual Property and
promptly advise Secured Party in writing of material infringements and (ii) not
allow any Intellectual Property material to Debtor’s business to be abandoned,
forfeited or dedicated to the public without Secured Party’s written consent;

 

(t)            Transactions with Affiliates. Debtor
shall not, without the prior written consent of Secured Party, directly or
indirectly enter into or permit to exist any material transaction with any
Affiliate of Debtor except for transactions that are in the ordinary course of
Debtor’s business, upon fair and reasonable terms that are no less favorable to
Debtor than would be obtained in an arm’s length transaction with a
nonaffiliated Person;

 

(u)         Primary Account and Wire Transfer
Instructions. Debtor maintains its primary operating account (the “Primary Operating Account”) with the
financial institution set forth below and the Wire Transfer Instructions for
the Primary Operating Account are as follows:

 

Silicon Valley
Bank

ABA No.: XXXXXXXXX

Account
No.:  XXXXXXXXXX

Account
Name:  Checking Account

 

Debtor hereby agrees that Loans will be advanced to the account
specified above and regularly scheduled payments will be automatically debited
from the same account through an ACH structure acceptable to Secured Party;
provided, however, the Oxford Loan shall be disbursed directly to the account
listed in the proceeds application form executed by Debtor as of the date
of this Amendment. In addition to the Primary Operating Account identified
hereinabove, Debtor maintains the following other deposit and investment
accounts and the deposit and securities accounts pledged to Silicon Valley Bank
pursuant to that certain Security Agreement to Secure a Letter of Credit dated
as of March 17, 2003 (the “SVB Security Agreement”) between Debtor and
Silicon Valley Bank to secure Debtor’s reimbursement obligations in connection
with a standby letter of credit (the “SVB Letter of Credit”)issued in favor of
Kilroy Realty Corp. (the “SVB Accounts”):

 

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1.                                       Morgan
Stanley

Acct#: XX-XXXXX

Contact: Thomas Piliero

555 California St. #1400

San Francisco, CA 94104

Tel: 415-576-2016

Fax: 415-576-2060

Email:
Thomas.piliero@morganstanley.com

 

2.             State
Street (for Capital Advisors Group)

Acct#: XXXXXX

Contact: Glen Fuzy

389 Passaic Ave.

Fairfield, NJ 07004

Tel: 973-808-0869

Fax: 973-808-0783

Email: gfuzy@capitaladvisors.com

 

3.             Bear
Stearns

Acct#: XXX-XXXXX

Contact: Vlad Feygin

383 Madison Ave.

New York, NY 10179

Tel: 212-272-7562

Fax: 917-849-0809

Email: vfeygin@bear.com

 

4.             Silicon Valley Bank Accounts:

3003 Tasman Drive

Santa Clara, CA 95054

Contact: Marisa Matthews

Tel: 858-784-3355

1.             Checking
Account  Acct#: XXXXXXXXXX

2.             Flex
Spending  Acct#: XXXXXXXXXX

3.             Money
Market  Acct#: XXXXXXXXXX

4.             Payroll
Account  Acct#: XXXXXXXXXX

5.             Cash
Reserve Account  Acct#: XXXXXXXXXX

 

(v)         Secured Party’s Expenses.   Debtor shall pay to Secured Party the Secured
Party’s Expenses as and when due and payable. Secured Party acknowledges
receipt from Debtor of a facility fee in the amount of $50,000 (the “2005  Facility
Fee”). Debtor agrees that $25,000 of the 2005 Facility Fee is
fully earned by Secured Party and nonrefundable. Secured Party agrees to apply
$25,000 of the 2005 Facility Fee toward its Secured Party’s Expenses incurred
in connection with the preparation, negotiation and delivery of this Amendment
and related documents; the remainder of the $25,000 of the 2005 Facility Fee may be
retained by Secured Party. Secured Party agrees that it will apply the
remaining $25,000 of the Facility Fee to the partial

 

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payment of the first installment of principal and interest under the
Note evidencing the Oxford Loan.

 

5.             The
following Subsections are hereby added to Section 3 of the Agreement:

 

(g)         Receivables.   As to each and every Receivable (a) it
is a bona fide existing obligation, valid and enforceable against the Account
Debtor for a sum certain for sales of goods shipped or delivered, or goods
leased, or services rendered in the ordinary course of business; (b) all
supporting documents, instruments, chattel paper and other evidence of
indebtedness, if any, delivered by Debtor to the Secured Party with respect to
each Receivable are complete and correct in all material respects and valid and
enforceable in accordance with their terms, and to the best of Debtor’s
knowledge all signatures and endorsements of the Account Debtor that appear
thereon are genuine, and to the best of Debtor’s knowledge all signatories and
endorsers of the Account Debtor have full capacity to contract; (c) to the
best of the Debtor’s knowledge, the Account Debtor is liable for and will make
payment of the amount expressed in such Receivable according to its terms; (d) to
the best of Debtor’s knowledge, it is not subject to any discount, deduction,
setoff, counterclaim, return, allowance or special terms of payment; (e) to
the best of Debtor’s knowledge, it is subject to no dispute, defense or offset,
real or claimed; (f) it is not subject to any prohibition or limitation
upon assignment; (g) it has not been redated or reissued in satisfaction
of prior Receivables; (h) the Debtor has full right and power to grant the
Secured Party a security interest therein and the security interest granted in
such Receivable to the Secured Party in this Agreement, when perfected, will be
a valid first security interest which will inure to the benefit of the Secured
Party without further action. The warranties set out herein shall be deemed to
have been made with respect to each and every Receivable now owned or hereafter
acquired by the Debtor.

 

(h)         Bailees.   Except as set forth in Schedule A, the
Inventory is not now and shall not at any time hereafter be stored with a
bailee, warehouseman, or similar party without the Secured Party’s prior written
consent. If any Inventory is so stored, the Debtor will, concurrent with
storing such Inventory, cause any such bailee, warehouseman, or similar party
to issue and deliver to the Secured Party, in a form acceptable to the
Secured Party, warehouse receipts in the Secured Party’s name evidencing the
storage of the Inventory. All such warehouse receipts do and will evidence
ownership of the Inventory stored by the issuers thereof, and the holder
thereof is and will continue to be the owner of good and marketable title of
same, free and clear of any Liens or encumbrances except for Permitted Liens. All
such warehouse receipts are and will be genuine, valid and enforceable by the
holder thereof in accordance with their terms and all statements thereon are
and will be true and accurate in all material respects.

 

(i)             Change of Address,
Name or Jurisdiction.   All of the Collateral is located in and will
in the future be in the possession of the Debtor at its address stated above or
at such other addresses as may be set forth on the attached Schedule A.
The Debtor has not at any time within the past four (4) months either
changed its name or changed the state of

 

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jurisdiction
in which it is organized and existing, as set forth above. The Debtor has not
maintained its chief executive office at any other location, or maintained
Inventory or Equipment or its records with respect to the Receivables at any
other location, other than as set forth above or on the attached Schedule A,
and shall not do so hereafter except upon prior written notice to the Secured
Party. The Secured Party shall be entitled to rely upon the foregoing unless it
receives 14 days’ advance written notice of a change in the Debtor’s name,
state of jurisdiction, address of the Debtor’s chief executive offices or
change of location of the Collateral or records with respect to the
Receivables.

 

(j)             Schedules of Receivables.   Upon the written request of Secured Party, Debtor
shall deliver to the Secured Party schedules of all outstanding Receivables. Such
schedules shall be in form reasonably satisfactory to the Secured Party
and shall show the age of such Receivables in intervals of not more than thirty
(30) days, and contain such other information and be accompanied by such
supporting documents as the Secured Party may from time to time reasonably
prescribe. The Debtor shall also deliver to the Secured Party copies of the
Debtor’s invoices, sales journals, evidences of shipment or delivery and such
other schedules and information as the Secured Party may reasonably
request. The items to be provided under this Section are to be prepared
and delivered to the Secured Party from time to time solely for its convenience
in maintaining records of the Collateral and the Debtor’s failure to give any
of such items to the Secured Party shall not affect, terminate, modify or
otherwise limit the Secured Party’s security interest granted herein.

 

(k)          Consignment.   If at any time any of the Inventory is placed
by the Debtor on consignment with any person or entity (“Consignee”),
the Debtor shall, prior to the delivery of such consigned Inventory:

 

a.               Provide the Secured
Party with all consignment agreements and other instruments and documentation
to be used in connection with such consignment, all of which agreements,
instruments, and documentation shall be reasonably acceptable in form and
substance to the Secured Party;

 

b.              Prepare and file
appropriate financing statements with respect to any consigned Inventory
showing the Consignee as debtor, the Debtor as secured party, and the Secured
Party as assignee of the Debtor;

 

c.               Prepare and
file appropriate financing statements with respect to any consigned Inventory
showing the Debtor as debtor, and the Secured Party as secured party;

 

d.              After all financing
statements referred to in the previous two subsections have been filed, conduct
a search of all filings made against the Consignee in the jurisdiction in which
the Consignee is located within the meaning of Section 9307 of the Code, and
deliver to the Secured Party copies of the results of all such searches; and

 

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e.               Notify, in
writing, all creditors of the Consignee that are or may be holders of
security interests in the Inventory to be consigned, that the Debtor expects to
deliver certain Inventory to the Consignee, all of which Inventory shall be
described in such notice by item or type.

 

(l)             Fixtures.   Debtor
shall not permit any item of the Equipment to become a fixture to real estate
or an accession to other property without the prior written consent of the
Secured Party, and the Equipment is now and shall at all times remain personal
property except with the Secured Party’s prior written consent. If any of the
Collateral is or will be attached to real estate in such a manner as to become
a fixture under applicable state law and if such real estate is encumbered, the
Debtor will obtain from the holder of each Lien or encumbrance a written
consent and subordination to the security interest hereby granted, or a written
disclaimer of any interest in the Collateral, in a form acceptable to the
Secured Party.

 

(m)       Chattel Paper.   Debtor shall promptly, upon request by the
Secured Party, deliver, assign, and endorse to the Secured Party all chattel
paper and all other documents held by the Debtor in connection therewith.

 

(n)         Copies of Government Contracts.   Debtor
shall make available to the Secured Party, at the request of the Secured Party,
a copy of each Government Contract in which the Secured Party has a security
interest and a copy of each amendment thereto or modification thereof which
changes the price of such contract or the amount funded to pay for such
contract, except to the extent that furnishing such copies may be
prohibited by government security regulations. Attached hereto as Schedule B
is a complete list of all Government Contracts under which Receivables now
exist or may hereafter arise, identified by the names of the contracting
parties thereto, the date thereof and the number identifying the Government
Contract or agreement and providing information in the form specified by
the Secured Party from time to time regarding the contracting officer, the
identity of any sureties and the disbursing officer, whether progress payments
are to be made and the rate thereof, whether the Government Contract or
agreement has been fully performed and such other information as the Secured
Party may reasonably request. A true, complete and correct copy of each
such Government Contract (including all modifications thereto and notice of
exercise of options thereunder) now existing has been provided to the Secured
Party by the Debtor, except to the extent that furnishing such copies may be
prohibited by government security regulations. The Debtor shall as soon as
practicable (but in no event later than five days prior to the date of
execution thereof) notify the Secured Party of any additional Government
Contracts, or any renewals or extensions of any Government Contract or the exercise
of any options thereunder or modifications thereof, identified by the names of
the contracting parties thereto, the date thereof and the number identifying
the Government Contract or agreement and providing information in the form specified
by the Secured Party from time to time regarding the contracting officer, the
identity of any sureties and the disbursing officer, whether progress payments
are to be made and the rate thereof, and such other information as the Secured
Party may reasonably request, and a true, complete and correct copy of
each such Government Contract, amendment

 

7

 

or modification or exercise of option shall be provided to the Secured
Party by the Debtor no later than the date of execution thereof, except to the
extent that furnishing such copies may be prohibited by government
security regulations.

 

(o)         Claims and Disputes.   Immediately
upon learning thereof, Debtor shall report to the Secured Party any
reclamation, return or repossession of goods, any claim or dispute asserted by
any Account Debtor or other obligor, and any other matter affecting the value
and enforceability or collectability of any of the Collateral where the amount
in question exceeds $50,000. In addition, the Debtor shall, at its sole cost
and expense (including attorneys’ fees), settle any and all such claims and
disputes and indemnify and protect the Secured Party against any liability,
loss or expense arising therefrom or out of any such reclamation, return or repossession
of goods, provided, however, that the Secured Party, upon the occurrence and
during the continuance of a default hereunder, if it shall so elect, shall have
the right at all times to settle, compromise, adjust or litigate all claims or
disputes directly with the Account Debtor or other obligor upon such terms and
conditions as the Secured Party deems advisable and charge all costs and
expenses thereof (including reasonable attorneys’ fees) to the Debtor’s account
and add them to the principal amount of the Indebtedness.

 

(p)         Government Contracts Are Binding, Etc.   Debtor shall take the necessary or
appropriate steps to ensure that all Government Contracts have been, or if
arising hereafter will be, legally awarded and binding on the parties thereto;
no payment has been or will be made by the Debtor, any Affiliate of Debtor, or
any person acting on their behalf, to any person that was, is or will be
contingent upon the award of any Government Contract in violation of applicable
procurement law or that would otherwise be in violation of applicable
procurement law (including, but not limited to, the Federal Acquisition
Regulations, the Defense Acquisition Regulations, the Federal Procurement
Regulations and the Armed Services Procurement Regulations); to the best of
Debtor’s knowledge, there is no claim that has been asserted by any government
agency or authority concerning the award or performance of any Government
Contract and immediately upon learning thereof, the Debtor shall immediately
notify the Secured Party of the assertion of any such claim or the existence of
any basis therefor; neither the Debtor nor any director, employee or Affiliate
of Debtor has been debarred or suspended from participation in the award of
contracts with the federal government or any state or local government, or any
agency or instrumentality thereof, or is a party to or the subject of any
pending or to the best of Debtor’s knowledge threatened proceeding or
investigation relating to debarment or suspension, and immediately upon
learning thereof the Debtor shall immediately notify the Secured Party of the
occurrence of any of the foregoing or the existence of any basis therefor; and
neither the Debtor nor any Affiliate of Debtor, nor any officer, director or
employee of any of them, is permanently or temporarily enjoined or barred from
engaging in or continuing any conduct or practice relating to the conduct of
their business, or enjoining or requiring any of them to take any action of any
kind relating thereto, and immediately upon learning thereof ,the Debtor shall
immediately notify the Secured Party of the occurrence of any of the foregoing
or the existence of any basis therefor.

 

8

 

(q)         No Provisions Prohibiting Assignment of
Government Contracts.   Debtor shall
take the necessary or appropriate steps to ensure that each Government Contract
(i) does not and will not contain any provision prohibiting assignment
thereof as provided herein, (ii) contains a “no set-off” clause or does
not permit any set-off against or reduction of the obligation to make payments
thereunder for liability of the Debtor to the government because of
re-negotiation, fine, penalty (other than as specifically permitted by the
federal Assignment of Claims Act with respect to Government Contracts with the
federal government), taxes, social security contributions, or withholding or
failing to withhold taxes, social security contributions or similar amounts,
whether arising from or independent of the Government Contract. Immediately
upon learning thereof, the Debtor shall promptly notify the Secured Party of
any claimed set-off or reduction or the disallowance of progress payment
requests.

 

(r)            Cost Accounting and Procurement Systems.
  The Debtor’s cost accounting and
procurement systems are and at all times have been, and will continue to be, in
compliance with all applicable legal requirements except where the failure to
comply would not have a material adverse effect on Debtor’s financial
condition, business or operations.

 

(s)          Compliance with Assignment Requirements
for Government Contracts.   The
Debtor is now in compliance and hereby covenants and agrees that the Debtor
will in the future comply with any and all of the requirements of Title 31 Section 3727
and Title 31 Section 15 of the United States Code and any similar state or
local law and all rules and regulations relating thereto, as amended,
where such statutes, rules and regulations are applicable to a particular
Receivable, and shall at all times take all such other action as may be
necessary to facilitate and/or ensure perfection of the Secured Party’s
security interest in and the assignment to the Secured Party of any Government
Account and Government Contract.

 

(t)            Information Concerning Government
Contracts.   At the request of the Secured Party, Debtor
shall submit to the Secured Party for the Secured Party’s approval each
Government Contract which the Debtor desires to be included in determining
eligible Government Accounts, and provide such other information concerning
such Government Contract as the Secured Party may reasonably request.

 

(u)         Domain Name.   Debtor shall take the necessary or
appropriate steps to ensure that the identity and location of the servers used
in connection with the Debtor’s domain name and the identity of the party
having control over the domain name server and of the administrative contact
with the registry have been disclosed to the Secured Party promptly upon
request. The Debtor shall not change the domain name server without
notification to the Secured Party. The Debtor shall maintain the trademark of
the domain name by defending against any infringement suits and by policing the
trademark. The Debtor shall renew the domain name registration during the loan
term. The Debtor shall make all payments to the domain name registrar necessary
to maintain the domain name.

 

9

 

(v)         Account Control Agreements.   Debtor shall at all times maintain all Cash
Equivalents owned by Debtor on deposit in a Deposit Account or accounts holding
securities in Debtor’s name at the institutions identified in Section 2(u)
or at one or more other institutions disclosed to Secured Party (a “Third Party Institution”) and which
accounts are covered by an account control agreement in favor of Secured Party
(the terms of which shall be acceptable to Secured Party). At any time that the
Cash Equivalents or any portion thereof are held in an account or accounts in
one or more Third Party Institutions, the related account control agreement
shall provide that Secured Party is to receive a copy of the account statements
delivered to Debtor. With respect to each such Deposit Account, Debtor, Secured
Party, and each Third Party Institution with which a Deposit Account is
maintained, shall enter into a written agreement, granting Secured Party
control of the Deposit Account and providing that the Third Party Institution
will comply with instructions originated by the Secured Party directing
disposition of the funds in the Deposit Account without further consent by
Debtor. Such account control agreement may in accordance with the
provisions thereof provide terms under which Debtor may remove funds from
the Deposit Account prior to Secured Party’s exercise of control; provided all
funds in or transferred into the Deposit Account on or after the effectiveness
of this Agreement shall be subject to the security interest granted under this
Agreement. Notwithstanding the foregoing, an account control agreement shall not
be required for Debtor’s accounts maintained with Morgan Stanley so long as all
of the following apply: (i) all of Debtor’s accounts at Morgan Stanley do
not exceed in the aggregate at any time after December 21, 2005, Two
Million Five Hundred Thousand Dollars ($2,500,000), (ii) Debtor provides
evidence to Secured Party reasonably satisfactory to Secured Party on or before
May 1, 2006 that Debtor has closed all of its accounts maintained by
Morgan Stanley and transferred all such funds and securities to another of
Debtor’s accounts or account which are covered by an account control agreement
in favor of Secured Party, and (iii)  any of Debtor’s unrestricted cash
maintained by Morgan Stanley shall not be counted when determining the
$15,000,000 threshold requirement of Section 3(z).

 

Secured Party agrees that unless a default under the Agreement has
occurred and is continuing, (i) it will not send a notice of exclusive
control or any similar notice to any depository bank or any securities
intermediary with respect to any Deposit Account or account holding securities
of Debtor or (ii) exercise proxies with respect to any securities in an
account holding securities of Debtor (and will permit Debtor to exercise such
proxies).

 

The provisions of this Section 3(v) shall not apply to the
SVB Accounts so long as the SVB Security Agreement remains in effect.

 

(w)       Distributions.   Debtor
shall not (i) pay any dividends or make any distributions on its equity
securities; (ii) purchase, redeem, retire, defease or otherwise acquire
for value any of its equity securities (other than repurchases pursuant to the
terms of employee stock purchase plans, employee restricted stock agreements or
similar arrangements in an aggregate amount not to exceed One Hundred Thousand
Dollars ($100,000)); (iii) return any capital to any holder of its equity
securities as such; (iv) make any

 

10

 

distribution of assets, equity securities, obligations or securities to
any holder of its equity securities as such; or (v) set apart any sum
for any such purpose; provided, however, Debtor may pay
dividends payable solely in common stock.

 

(x)           Indebtedness Payments.   Debtor shall not (i) prepay, redeem,
purchase, defease or otherwise satisfy in any manner prior to the scheduled
repayment thereof any Additional Indebtedness for borrowed money or capital lease
obligations except for (x) Debtor’s remaining indebtedness to Lighthouse
Capital and GECC (other than the GECC Loan) (y) Additional Indebtedness owing
to Secured Party or GECC in accordance with the notes evidencing the same
(provided that any such prepayment shall be made pro rata as between Secured
Party and GECC based on the outstanding Additional Indebtedness owed to each),
and (z) prepayment or termination of the SVB Letter of Credit and the related
reimbursement obligations, (ii) amend, modify or otherwise change the
terms of any Additional Indebtedness for borrowed money or lease obligations so
as to accelerate the scheduled repayment thereof except as provided by (x), (y)
or (z) above, or (iii) repay any notes to officers, directors or
shareholders except as expressly provided for in a duly executed subordination
agreement in favor of, and approved by Secured Party.

 

(y)         Negative Pledge Regarding Intellectual
Property.   Debtor shall not sell,
transfer, assign, mortgage, pledge, lease, grant a security interest in, or
encumber any of its Intellectual Property, or enter into any agreement,
document, instrument or other arrangement (except with or in favor of Secured
Party) with any entity which directly or indirectly prohibits or has the effect
of prohibiting Debtor from selling, transferring, assigning, mortgaging,
pledging, leasing, granting a security interest in or upon, or encumbering any
of Debtor’s Intellectual Property; provided, however, that Debtor may grant
non-exclusive licenses of Debtor’s Intellectual Property in the ordinary course
of business and non-exclusive and exclusive licenses of Debtor’s Intellectual
Property in connection with joint ventures and corporate collaborations in the
ordinary course of business.

 

(z)           Minimum Cash Balances.   In the event Debtor’s aggregate unrestricted Cash
Equivalents in accounts covered by account control agreements in favor of
Secured Party fall below Fifteen Million Dollars ($15,000,000), then Debtor
shall, within three (3) business days, cause a standby letter of credit to
be issued to Secured Party in the amount of the outstanding principal amount of
the Indebtedness from a financial institution and in a form satisfactory
to Secured Party.

 

6.             The
following Subsections are hereby added to Section 7 of the Agreement:

 

(xix) Debtor breaches any of its obligations under Sections 3(v),
(w), (x), (y) or (z);

 

7.             The following Section 9 is hereby added
to the Agreement as follows and replaces Section 8(j) of the Agreement in
its entirety:

 

11

 

Section 9.  Definitions.

As used herein, the following terms, when initial capital letters are
used, shall have the respective meanings set forth below. In addition, all
terms defined in the Code shall have the meanings given therein unless
otherwise defined herein.

 

Defined Terms.   As used in this Agreement, the following
terms shall have the following meanings, unless the context otherwise requires:

 

“Account Debtor”
shall mean the account debtor or any customer of the Debtor who is obligated or
indebted to the Debtor with respect to any of the Receivables and/or the
prospective purchaser with respect to any contract right, and/or any party or
organization who enters into or proposes to enter into any contract or other
arrangement with the Debtor pursuant to which the Debtor is to deliver any
personal property or perform any service.

 

“Additional Collateral” shall have
the meaning as set forth in that Collateral Schedule No. 13 dated December 30,
2005 executed and delivered concurrently with the Amendment No. 3 dated December 30,
2005 to the Agreement.

 

“Additional Indebtedness”
means, with respect to Debtor or any of its subsidiaries, the aggregate amount
of, without duplication, (a) all obligations of such Person for borrowed
money, (b) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) all obligations of such Person to
pay the deferred purchase price of property or services (excluding trade
payables aged less than one hundred eighty (180) days), (d) all capital
lease obligations of such Person, (e) all obligations or liabilities of
others secured by a Lien on any asset of such Person, whether or not such
obligation or liability is assumed, (f) all obligations or liabilities of
others guaranteed by such Person, and (g) any other obligations or
liabilities which are required by GAAP to be shown as debt on the balance sheet
of such Person. Unless otherwise indicated, the term “Additional
Indebtedness” shall include all Indebtedness of Debtor and all
of its subsidiaries.

 

“Affiliate”
of a Person is a Person that owns or controls directly or indirectly the
Person, any Person that controls or is controlled by or is under common control
with the Person, and each of that Person’s senior executive officers,
directors, and partners and, for any Person that is a limited liability
company, that Person’s managers and members.

 

“Amendment”
means the Amendment No. 3 between Debtor and Secured Party and dated as of
December 30, 2005.

 

“Cash Equivalents”
means the sum outstanding, at any one time, of (i) all cash (in United
States dollars) owned by Debtor at such time plus (ii) the fair market
value of all cash equivalents and short term investments (as those terms are
defined by GAAP) owned by Debtor at such time.

 

12

 

“Code” means
the Virginia Uniform Commercial Code (including revised Article 9
thereof).

 

“Collateral” means
the Collateral as defined in the Agreement including the Additional Collateral.

 

“Consignee”
has the meaning given such capitalized term in Section 3(k).

 

“Debt Documents”
has the meaning given such capitalized term in Section 2(b).

 

“Default Rate”
is the lower of eighteen percent (18%) per annum or the maximum rate not
prohibited by applicable law.

 

“Deposit Account”
means a demand, time, savings, passbook, or similar account maintained with a
bank.

 

“Equipment”
shall mean (a) all goods and equipment of the Debtor of every type and
description, now owned and hereafter acquired and wherever located, including,
without limitation, all imbedded software, machinery, motor vehicles and other
rolling stock, furniture, furnishings, tools, dies, fittings, accessories, all
substitutions therefore, leasehold improvements, fixtures, and materials and
supplies relating to any of the foregoing; (b) all present and future
documents of title and trust receipts relating to any of the foregoing; (c) all
present and future rights, claims and causes of action of Debtor in connection
with purchases of (or contracts for the purchase of), or warranties relating
to, or damages to, goods held or to be held by the Debtor as equipment; (d) all
present and future warranties, manuals and other written materials (and
packaging thereof or relating thereto) relating to any of the foregoing; and (e) all
present and future general intangibles of the Debtor in any way relating to any
of the foregoing.

 

“Government Accounts”
shall mean all accounts arising out of any Government Contract.

 

“Government Contract”
shall mean any contract between the Debtor and the United States Government,
any state or local government or any agency thereof, and all amendments thereto.

 

“Indebtedness”
has the meaning given such capitalized term in Section 1.

 

“Intellectual Property”
shall mean (a) all of the Debtor’s right, title and interest, whether now
owned or existing or hereafter acquired or arising, in and to all domestic and
foreign copyrights, copyright registrations and copyright applications, whether
or not registered or filed with any governmental authority, together with (i) all
renewals thereof, (ii) all present and future rights of the Debtor under
all present and future license agreements relating thereto, whether the Debtor
is licensee or licensor thereunder, (iii) all income, royalties, damages
and payments now or

 

13

 

hereafter due and/or payable to the Debtor
thereunder or with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (iv) all of
the Debtor’s present and future claims, causes of action and rights to sue for
past, present or future infringements thereof, and (v) all rights
corresponding thereto throughout the world (collectively “Copyright
Rights”); (b) all of the Debtor’s right, title and interest,
whether now owned or existing or hereafter acquired or arising, in and to all
United States and foreign patents, and pending and abandoned United States and
foreign patent applications, including, without limitation, the inventions and
improvements described or claimed therein, together with(i) any reissues,
divisions, continuations, certificates of re-examination, extensions and
continuations-in-part thereof, (ii) all present and future rights of
the Debtor under all present and future license agreements relating thereto,
whether the Debtor is licensee or licensor thereunder, (iii) all income, royalties,
damages and payments now or hereafter due and/or payable to the Debtor
thereunder or with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (iv) all of
the Debtor’s present and future claims, causes of action and rights to sue for
past, present or future infringements thereof, and (v) all rights
corresponding thereto throughout the world (collectively “Patent
Rights”); (c) all of the Debtor’s right, title and interest,
whether now owned or existing or hereafter acquired or arising, in and to all
domestic and foreign trademarks, trademark registrations, trademark
applications and trade names, whether or not registered or filed with any
governmental authority, together with (i) all renewals thereof, (ii) all
present and future rights of the Debtor under all present and future license
agreements relating thereto, whether the Debtor is licensee or licensor
thereunder, (iii) all income, royalties, damages and payments now or
hereafter due and/or payable to the Debtor thereunder or with respect thereto,
including, without limitation, damages and payments for past, present or future
infringements thereof, (iv) all of the Debtor’s present and future claims,
causes of action and rights to sue for past, present or future infringements
thereof, and (v) all rights corresponding thereto throughout the world
(collectively “Trademark Rights”); (d) all
present and future licenses and license agreements of the Debtor, and all
rights of the Debtor under or in connection therewith, whether the Debtor is
licensee or licensor thereunder, including, without limitation, any present or
future franchise agreements under which the Debtor is franchisee or franchisor,
together with (i) all renewals thereof, (ii) all income, royalties,
damages and payments now or hereafter due and/or payable to the Debtor
thereunder or with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (iii) all
claims, causes of action and rights to sue for past, present or future
infringements thereof, and (iv) all rights corresponding thereto
throughout the world (collectively “License Rights”);
(e)  all present and future trade secrets of the Debtor; and (f) all
other present and future intellectual property of the Debtor.

 

“Inventory”
shall mean and include (a) all goods now owned or hereafter acquired by
the Debtor, which are held for sale or lease by the Debtor or are furnished or
to be furnished by the Debtor under contracts of service, (b) all raw
materials, work in

 

14

 

process, finished goods, packaging materials,
and other materials and supplies of every kind used or consumed in connection
with the manufacture, production, packing, shipping, advertising or sale of
such goods, (c) all proceeds and products from the sale or other
disposition of such goods, including all goods returned, repossessed, or
acquired by the Debtor by way of substitution or replacement, and all additions
and accessions thereto, and all documents and instruments (as those terms are
defined in the Code) covering such goods; (d) all the Debtor’s rights as
an unpaid seller, including stoppage in transit, detinue and reclamation;
and (e) all of the above owned by the Debtor or in which the Debtor now
has or in which the Debtor may hereafter acquire an interest, whether in
transit or in the Debtor’s constructive or actual possession or held by the
Debtor or others for the Debtor’s account (including any of the above held on
consignment), including, without limitation, all of the above which may be
located on the Debtor’s premises or upon the premises of any carriers,
forwarding agents, truckers, warehousemen, vendors, selling agents, finishers,
converters or other third parties who may have possession, temporary or
otherwise, thereof.

 

“Lien(s)” shall mean any voluntary or involuntary mortgage, pledge,
deed of trust, assignment, security interest, encumbrance, hypothecation, lien,
or charge of any kind (including any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction).

 

“Loan” means
an advance of credit by Secured Party to Debtor.

 

“Note” has
the meaning given such capitalized term in Section 1.

 

“Payment” or
“Payments” shall mean any check,
draft, cash or any other remittance or credit in payment or on account of any
or all of the Receivables and the cash proceeds of any returned, rejected or
repossessed goods, the sale or lease of which gave rise to a Receivable.

 

“Permitted Indebtedness”
means and includes: (i) Indebtedness of Debtor to Secured Party; (ii) Additional
Indebtedness of Debtor to GECC under the GECC Loan and future Additional
Indebtedness of Debtor to GECC as to which Secured Party gives its prior
consent at its sole discretion made in good faith; (iii) Additional Indebtedness
arising from the endorsement of instruments in the ordinary course of business;
(iv) Additional Indebtedness existing on the date hereof and set forth in Schedule B;
(v) Subordinated Indebtedness; (vi) Additional Indebtedness not to
exceed $250,000 in the aggregate in any fiscal year of Debtor secured by Liens
described in clause (vi) of the definition of Permitted Liens in Section 2(l)
and provided such Additional Indebtedness does not exceed the lesser of cost or
fair market value of the Equipment financed with such Additional Indebtedness; (vii) other
Additional Indebtedness not otherwise permitted by Section 2(r) not
exceeding $100,000 in the aggregate at any time;  (viii) Additional Indebtedness with
respect to

 

15

 

surety bonds and like obligations with
respect to performance contracts in the ordinary course of business; (ix) Additional
Indebtedness of Debtor to any subsidiary of Debtor so long as the terms thereof
do not require Debtor to pay more than $100,000 in aggregate amount in any
fiscal year to its subsidiaries; and (x) the extension, renewal or refinancing
of the Additional Indebtedness described above so long as it constitutes
Permitted Indebtedness, but the then outstanding principal amount of the
Additional Indebtedness may not increase or the terms modified to impose
more burdensome terms upon the Debtor.

 

“Permitted Liens”
has the meaning given such capitalized term in Section 2(l).

 

“Person”
is any individual, sole proprietorship, partnership, limited liability company,
joint venture, company association, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

 

“Primary Operating Account”
has the meaning given such capitalized term in Section 2(u).

 

“Receivables”
shall mean “account” as defined in the Code.

 

“Secured Party’s Expenses”
means all reasonable costs or expenses (including reasonable attorneys’ fees
and expenses) incurred in connection with the preparation, negotiation,
documentation, administration and funding of the Debt Documents; and Secured
Party’s reasonable attorneys’ fees, costs and expenses incurred in amending,
modifying, enforcing or defending the Debt Documents (including fees and
expenses of appeal or review), including the exercise of any rights or remedies
afforded hereunder or under applicable law, whether or not suit is brought,
whether before or after bankruptcy or insolvency, including without limitation
all fees and costs incurred by Secured Party in connection with Secured Party’s
enforcement of its rights in a bankruptcy or insolvency proceeding filed by or
against Debtor or its property.

 

“Subordinated Indebtedness”
means Additional Indebtedness subordinated to the Indebtedness of Debtor to
Secured Party on terms and conditions acceptable to Secured Party in its sole
discretion made in good faith.

 

8.             Each of the Notes
issued prior to the date of this Amendment is hereby amended as follows:

 

(a)           The
words “5 days” that appear in the first and third lines of the fifth full
paragraph of the Notes (commencing with the words “Time is of the essence
hereof”) are hereby amended to read “7 days”.

 

(b)           The
words “all accrued and unpaid interest on the principal and the outstanding
principal balance of this Note on the date of prepayment” that appear in clause
(i) of the sixth full

 

16

 

paragraph of the Notes (commencing with the words “Maker may prepay
in full....”) are hereby amended to read “all accrued and unpaid interest on the
outstanding principal balance of this Note on the date of prepayment”.

 

Schedule A
– Collateral Locations

 

Schedule B – Listing of Additional Indebtedness and
Existing Permitted Liens

 

TERMS USED, BUT NOT OTHERWISE
DEFINED HEREIN SHALL HAVE THE MEANINGS GIVEN TO THEM IN THE AGREEMENT. ON AND
AFTER THE DATE HEREOF, EACH REFERENCE TO THE AGREEMENT IN THE AGREEMENT OR IN
ANY OTHER DOCUMENT SHALL MEAN THE AGREEMENT AS AMENDED BY THIS AMENDMENT.
EXCEPT AS EXPRESSLY AMENDED HEREBY, THE AGREEMENT SHALL REMAIN IN FULL FORCE
AND EFFECT. IF THERE IS ANY CONFLICT BETWEEN THE PROVISIONS OF THE AGREEMENT
AND THIS AMENDMENT, THEN THIS AMENDMENT SHALL CONTROL. THIS AMENDMENT MAY BE
EXECUTED IN ANY NUMBER OF COUNTERPARTS, INCLUDING BY ELECTRONIC OR FACSIMILE
TRANSMISSION, EACH OF WHICH WHEN SO DELIVERED SHALL BE DEEMED AN ORIGINAL, BUT
ALL SUCH COUNTERPARTS TAKEN TOGETHER SHALL CONSTITUTE BUT ONE AND THE SAME
INSTRUMENT. THIS AMENDMENT, THE AGREEMENT, ANY NOTE AND THE COLLATERAL
SCHEDULES CONSTITUTE AND CONTAIN THE ENTIRE AGREEMENT OF DEBTOR AND SECURED
PARTY WITH RESPECT TO THEIR RESPECTIVE SUBJECT MATTERS, AND SUPERSEDE ANY AND
ALL PRIOR AGREEMENTS, CORRESPONDENCE AND COMMUNICATIONS.

 

[Remainder
of page left blank; signature page follows]

 

17

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 3
by signature of their respective authorized representative set forth below.

 

	
  Oxford Finance Corporation

  	
  Favrille, Inc.

  	 

	
   

  	
   

  	 

	
  By:

  	
  /s/ Michael J. Altenburger

  	
   

  	
  By:

  	
  /s/ Tamara A. Seymour

  	
   

  
	
   

  	
   

  	 

	
  Name: 

  	
  Michael J. Altenburger

  	
   

  	
  Name:

  	
  Tamara A. Seymour

  	
   

  	 

	
   

  	
   

  	 

	
  Title:

  	
  Chief Financial Officer

  	
   

  	
  Title:

  	
  CFO

  	
   

  	 

															

 

18

 

SCHEDULES
TO AMENDMENT NO. 3

FAVRILLE, INC.

 

Schedule A

 

(1) Certain Inventory is
and has been stored with NuFactor/FFF Enterprises, Inc., 41093 County
Center Drive, Temecula, CA  92591.

 

(2) Debtor  has previously maintained the following
locations or places of business:

 

10865 Altman Row # 150, San
Diego, CA  92121

3366 N. Torrey Pines Ct. # 220, La Jolla, CA  92037

 

Schedule B

 

Existing Liens:

 

(1) The security interest granted to Silicon Valley Bank pursuant
to the SVB Security Agreement.

 

(2) The financing statements set forth in the table below:

 

UCC Filing Report

 

	
  Jurisdiction

  	
   

  	
  Debtor

  	
   

  	
  Secured Party

  	
   

  	
  Date of

  Filing

  	
   

  	
  Instrument No.

  
	
  CA

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Silicon
  Valley Bank

  	
   

  	
  04/27/2001

  	
   

  	
  01-12160764

  
	
  CA

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Silicon
  Valley Bank

  	
   

  	
  12/12/2005

  	
   

  	
  05-70516216-continuation
  of initial financing statement #01-12160764

  
	
  CA

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Wells
  Fargo Financial Leasing, Inc.

  	
   

  	
  03/12/2004

  	
   

  	
  04-08260370

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Silicon
  Valley Bank

  	
   

  	
  08/07/2001

  	
   

  	
  10786413

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Silicon
  Valley Bank

  	
   

  	
  10/12/2001

  	
   

  	
  11377881-amendment
  to initial financing statement #10786413 to add collateral

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Silicon
  Valley Bank

  	
   

  	
  05/25/2004

  	
   

  	
  41452749-amendment
  to initial financing statement #10786413 to delete collateral

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Silicon
  Valley Bank

  	
   

  	
  09/28/2001

  	
   

  	
  11258305

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Silicon
  Valley Bank

  	
   

  	
  05/25/2004

  	
   

  	
  41452756-amendment
  to initial financing statement #11258305 to delete collateral

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Heller
  Financial Leasing, Inc.

  	
   

  	
  10/21/2002

  	
   

  	
  22637001

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Heller
  Financial Leasing, Inc.

  	
   

  	
  03/19/2003

  	
   

  	
  30689318-amendment
  to initial financing statement #22637001 to restate collateral description

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Heller
  Financial Leasing, Inc. as Lender and as Agent for Lighthouse Capital
  Partners, IV, L.P.

  	
   

  	
  03/19/2003

  	
   

  	
  30689839-amendment
  to initial financing statement #22637001 to change secured party’s name

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Silicon
  Valley Bank

  	
   

  	
  03/18/2003

  	
   

  	
  30668171

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  US
  Bancorp

  	
   

  	
  05/15/2003

  	
   

  	
  31249906

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Oxford
  Finance Corporation

  	
   

  	
  09/03/2004

  	
   

  	
  42497719

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Oxford
  Finance Corporation

  	
   

  	
  11/04/2004

  	
   

  	
  43153071

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Oxford
  Finance Corporation

  	
   

  	
  12/30/2004

  	
   

  	
  43688191

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Oxford
  Finance Corporation

  	
   

  	
  06/09/2005

  	
   

  	
  51800656-amendment
  to initial financing statement #43688191 to restate collateral description

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Oxford
  Finance Corporation

  	
   

  	
  04/28/2005

  	
   

  	
  51439638

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Oxford
  Finance Corporation

  	
   

  	
  06/28/2005

  	
   

  	
  51992107

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Oxford
  Finance Corporation

  	
   

  	
  11/01/2005

  	
   

  	
  53469344

  
	
  DE

  	
   

  	
  Favrille, Inc.

  	
   

  	
  Oxford
  Finance Corporation

  	
   

  	
  11/30/2005

  	
   

  	
  53769750-amendment
  to initial financing statement #53469344 to restate collateral description

  

 

1

 

Note:  All the financing statements in favor of
Silicon Valley Bank are in the process of being terminated, with the exception
of the financing statement filed on 03/18/2003 (# 30668171).

 

Government Contracts:

 

None.

 

Additional Indebtedness:

 

Reimbursement obligations to
Silicon Valley Bank in connection with the SVB Letter of Credit.

 

2Exhibit
10.28

 

	
  Promissory
  Note

  	
  Collateral
  Schedule 13

  

 

 

PROMISSORY NOTE

To Master Security
Agreement No. 4081063

December 30,
2005

(Date)

 

FOR VALUE
RECEIVED, Favrille, Inc., a  Delaware
corporation, located at the address stated below (“Maker”)
promises, jointly and severally if more than one, to pay to the order of Oxford Finance Corporation or any subsequent holder hereof
(each, a “Payee”) at its office located at 133 N. Fairfax Street, Alexandria, VA 22314 or at such other
place as Payee or the holder hereof may designate, the principal sum of One
Million Four Hundred Ninety Eight Thousand Six Hundred Seventy Seven Dollars
and Twenty Seven Cents($1,498,677.27), with interest on the unpaid principal
balance, from the date hereof through and including the dates of payment, at a
fixed interest rate of ten and eighty-nine hundredths percent (10.89%) per
annum, in twenty-four (24) consecutive monthly installments of principal and
interest as follows:

 

	
  Periodic

  Installment

  	
   

  	
  Amount

  	
   

  
	
  1-24

  	
   

  	
  $

  	
  69,773.59

  	
   

  
					

 

each (“Periodic Installment”) and a
final installment which shall be in the amount of the total outstanding
principal and interest.  The first
Periodic Installment shall be due and payable on or before  February 1, 2006 and the following Periodic
Installments shall be due and payable on the first day of each succeeding month
(each, a “Payment Date”) beginning March 1, 2006.  Such installments have been calculated on the
basis of a 360-day year of twelve 30-day months.  Each payment may, at the option of the Payee,
be calculated and applied on an assumption that such payment would be made on
its due date. Maker agrees to pay any initial partial month interest payment
from the date of this Note to the first day of the following month (“Interim
Interest”).

 

The acceptance by
Payee of any payment which is less than payment in full of all amounts due and
owing at such time shall not constitute a waiver of Payee’s right to receive
payment in full at such time or at any prior or subsequent time.

 

The Maker hereby expressly authorizes the Payee to
insert the date value is actually given in the blank space on the face hereof
and on all related documents pertaining hereto.

 

This Note may be
secured by a security agreement, chattel mortgage, pledge agreement or like
instrument (each of which is hereinafter called a “Security
Agreement” and any Security Agreement, this Note and any other document
evidencing or securing this loan is hereinafter called a “Debt Document”).

 

Time is of the essence hereof.  If any installment or any other sum due under
this Note or any Security Agreement is not received within 7 days of when due,
the Maker agrees to pay, in addition to the amount of each such installment or
other sum, a late payment charge of five percent (5%) of the amount of said installment
or other sum, but not exceeding any lawful maximum.  If (i) Maker fails to make payment of any
amount due hereunder within 7 days after the same becomes due and payable;
or  (ii) Maker is in default under, or
fails to perform under any term or condition contained in any Security
Agreement and such default or failure to perform is not cured within the
applicable cure period, if any, then the entire principal sum remaining unpaid,
together with all accrued interest thereon and any other sum payable under this
Note or any Security Agreement, at the election of Payee, shall immediately
become due and payable, with interest thereon at the lesser of eighteen percent
(18%) per annum or the highest rate not prohibited by applicable law from the
date of such accelerated maturity until paid (both before and after any
judgment).

 

Maker may prepay in full any indebtedness hereunder upon five (5) days’
notice to the Payee. The prepayment shall be accompanied by payment of (i) all
accrued and unpaid interest on the outstanding principal balance of this Note
on the date of prepayment and (ii) a premium of 6% of the principal prepaid if
such prepayment shall occur in Year 1, a premium of 4% of the principal prepaid
if such prepayment shall occur in Year 2 and a premium of 2% of the principal
prepaid if such prepayment shall occur in Year 3 and thereafter. Year 1 will
mean the period consisting of the 1st through the 12th installments under this
Note and subsequent years will refer to the subsequent twelve monthly payment
periods.

 

The Maker and all sureties, endorsers, guarantors or
any others (each such person, other than the Maker, an “Obligor”)
who may at any time become liable for the payment hereof jointly and severally
consent hereby to any and all extensions of time, renewals, waivers or
modifications of, and all substitutions or releases of, security or of any
party primarily or secondarily liable on this Note or any Security Agreement or
any term and provision of either, which may be made, granted or consented to by
Payee, and agree that suit may be brought and maintained against any one or
more of them, at the election of Payee without joinder of any other as a party
thereto, and that Payee shall not be required first to foreclose, proceed
against, or exhaust any security hereof in order to enforce payment of this
Note.  The Maker and each Obligor hereby
waives presentment, demand for payment, notice of nonpayment, protest, notice
of protest, notice of dishonor,

 

1

 

and all other notices in connection herewith, as well
as filing of suit (if permitted by law) and diligence in collecting this Note
or enforcing any of the security hereof, and agrees to pay (if and to the
extent permitted by law) all expenses incurred in collection, including Payee’s
reasonable attorneys’ fees.

 

Maker and Payee intend to strictly comply with all
applicable federal and Virginia laws, including applicable usury laws (or the
usury laws of any jurisdiction whose usury laws are deemed to apply to the Note
or any other Debt Document despite the intention and desire of the parties to
apply the usury laws of the Commonwealth of Virginia).  Accordingly, the provisions of this paragraph
shall govern and control over every other provision of this Note or any other
Debt Document which conflicts or is inconsistent with this Section, even if
such provision declares that it controls. 
As used in this paragraph, the term “interest”
includes the aggregate of all charges, fees, benefits or other compensation
which constitute interest under applicable law, provided that, to the
maximum extent permitted by applicable law, (a) any non-principal payment shall
be characterized as an expense or as compensation for something other than the
use, forbearance or detention of money and not as interest, and (b) all
interest at any time contracted for, reserved, charged or received shall be
amortized, prorated, allocated and spread, in equal parts during the full term
of the obligations.  In no event shall
Maker or any other person be obligated to pay, or Payee have any right or
privilege to reserve, receive or retain, (a) any interest in excess of the
maximum amount of non-usurious interest permitted under the laws of the
Commonwealth of Virginia or the applicable laws (if any) of the United States
or of any other state, or (b) total interest in excess of the amount which
Payee could lawfully have contracted for, reserved, received, retained or
charged had the interest been calculated for the full term of the obligations.  On each day, if any, that the interest rate
(the “Stated Rate”) called for under this Note or any other Debt
Document exceeds the maximum non-usurious rate, the rate at which interest
shall accrue shall automatically be fixed by operation of this sentence at the
maximum non-usurious rate for that day. 
Thereafter, interest shall accrue at the Stated Rate unless and until
the Stated Rate again exceeds the maximum non-usurious rate, in which case, the
provisions of the immediately preceding sentence shall again automatically
operate to limit the interest accrual rate to the maximum non-usurious
rate.  The daily interest rates to be
used in calculating interest at the maximum non-usurious rate shall be
determined by dividing the applicable maximum non-usurious rate by the number
of days in the calendar year for which such calculation is being made.  None of the terms and provisions contained in
this Note or in any other Debt Document which directly or indirectly relate to
interest shall ever be construed without reference to this paragraph, or be
construed to create a contract to pay for the use, forbearance or detention of
money at an interest rate in excess of the maximum non-usurious rate.  If the term of any obligation is shortened by
reason of acceleration of maturity as a result of any  default or by any other cause, or by reason
of any required or permitted prepayment, and if for that (or any other) reason
Payee at any time, including but not limited to, the stated maturity, is owed
or receives (and/or has received) interest in excess of interest calculated at
the maximum non-usurious rate, then and in any such event all of any such
excess interest shall be canceled automatically as of the date of such
acceleration, prepayment or other event which produces the excess, and, if such
excess interest has been paid to Payee, it shall be credited pro tanto
against the then-outstanding principal balance of Maker’s obligations to Payee,
effective as of the date or dates when the event occurs which causes it to be excess
interest, until such excess is exhausted or all of such principal has been
fully paid and satisfied, whichever occurs first, and any remaining balance of
such excess shall be promptly refunded to its payor.

 

THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF,
DIRECTLY OR INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS
BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR
ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED
BETWEEN MAKER AND PAYEE.  THE SCOPE OF
THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY
BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS.)  THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION.  IN THE EVENT OF LITIGATION, THIS NOTE MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

This Note and any Security Agreement constitute the
entire agreement of the Maker and Payee with respect to the subject matter
hereof and supersedes all prior understandings, agreements and representations,
express or implied.

 

No variation or modification of this Note, or any
waiver of any of its provisions or conditions, shall be valid unless in writing
and signed by an authorized representative of Maker and Payee.  Any such waiver, consent, modification or
change shall be effective only in the specific instance and for the specific
purpose given.

 

Any provision in this Note or any Security Agreement
which is in conflict with any statute, law or applicable rule shall be deemed
omitted, modified or altered to conform thereto.

 

Upon receipt of an
affidavit of an officer of Payee as to the loss, theft, destruction or
mutilation of this Note or any Debt Document which is not of public record,
and, in the case of any such loss, theft, destruction or mutilation, upon
surrender and cancellation of such Note or other Debt Document, Maker will
issue, in lieu thereof, a replacement Note or other Debt Document in the same
principal amount thereof and otherwise of like tenor.

 

2

 

It is understood
and agreed that this Note and all of the Debt Documents were negotiated and
have been or will be delivered to Payee in the Commonwealth of Virginia, which
State the parties agree has a substantial relationship to the parties and to
the underlying transactions embodied by this Note and the Debt Documents. Maker
agrees to furnish to Payee at Payee’s office in Alexandria, VA, all further
instruments, certifications and documents to be furnished hereunder.    The parties also agree that if collateral
is pledged to secure the debt evidenced by this Note, that the state or states
in which such collateral is located each have a substantial relationship to the
parties and to the underlying transaction embodied by this Note and the Debt
Documents.

 

MAKER AGREES THAT THE PAYEE OF THIS NOTE SHALL HAVE
THE OPTION BY WHICH STATE LAWS THIS NOTE SHALL BE GOVERNED AND CONSTRUED: (A)
THE LAWS OF THE COMMONWEALTH OF VIRGINIA; OR (B) IF COLLATERAL HAS BEEN PLEDGED
TO SECURE THE DEBT EVIDENCED BY THIS NOTE, THEN BY THE LAWS OF THE STATE OR
STATES WHERE THE COLLATERAL IS LOCATED, AT PAYEE’S OPTION.  THIS CHOICE OF STATE LAWS IS EXCLUSIVE TO THE
PAYEE OF THIS NOTE.  MAKER SHALL NOT HAVE
ANY OPTION TO CHOOSE THE LAWS BY WHICH THIS NOTE SHALL BE GOVERNED.  MAKER AND GUARANTORS HEREBY CONSENT TO THE
EXERCISE OF JURISDICTION OVER IT BY ANY FEDERAL COURT SITTING IN VIRGINIA OR
ANY VIRGINIA COURT SELECTED BY PAYEE, FOR THE PURPOSES OF ANY AND ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THE NOTE, THE LOAN AGREEMENT AND ALL
OTHER DOCUMENTS.  MAKER AND GUARANTORS IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING BROUGHT IN ANY
SUCH COURT, ANY CLAIM BASED ON THE CONSOLIDATION OF PROCEEDINGS IN SUCH COURTS
IN WHICH PROPER VENUE MAY LIE IN DIVERGENT JURISDICTIONS, AND ANY CLAIM THAT
ANY SUCH PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.  MAKER AND GUARANTORS
HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
NOTE, THE OTHER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.

 

	
   

  
	
   

  	
  Favrille, Inc.

  
	
   

  	
   

  
	
  /s/ Michele Owen

  	
   

  	
  By:

  	
  /s/ Tamara A. Seymour

  	
   

  
	
  (Witness)

  	
   

  
	
  Michele Owen

  	
   

  	
  Name:

  	
  Tamara A. Seymour

  	
   

  
	
  (Print name)

  	
   

  
	
  10421 Pacific Center Court San Diego, CA 92121

  	
   

  	
  Title:

  	
  CFO

  	
   

  
	
  (Address)

  	
   

  
	
   

  	
  Federal Tax ID
  #:

  	
  33-0892797

  	
   

  
	
   

  	
   

  
	
   

  	
  Address: 10421 Pacific
  Center Court

  
	
   

  	
   

  	
  San Diego, CA 92121

  
	
   

  	
   

  
													

 

3

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