EMPLOYMENT AGREEMENT

 

TABLE OF CONTENTS

 

		PAGE
1.	EMPLOYMENT	1
2.	LOYAL AND CONSCIENTIOUS PERFORMANCE; EXCLUSIVE PROPERTY	2
3.	COMPENSATION OF EXECUTIVE	2
4.	TERMINATION	3
5.	CONFIDENTIAL AND PROPRIETARY INFORMATION	6
6.	ASSIGNMENT AND BINDING EFFECT	6
7.	SURVIVAL	6
8.	NOTICES	7
9.	CHOICE OF LAW	7
10.	INTEGRATION	7
11.	AMENDMENT	7
12.	WAIVER	7
13.	SEVERABILITY	8
14.	INTERPRETATION; CONSTRUCTION	8
15.	REPRESENTATIONS AND WARRANTIES	8
16.	COUNTERPARTS	8
17.	REFERENCES	8
18.	ARBITRATION	8
19.	TRADE SECRETS OF OTHERS	9
20.	ADVERTISING; WAIVER	9

 

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EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into effective as of December 1, 2005 (the “Effective Date”) by and between FAVRILLE, INC., a Delaware corporation (the “Company”), and DAVID GUY (“Executive”).  The Company and Executive are collectively referred to herein as the “Parties,” and each is individually referred to herein as a “Party.”

 

Recitals

 

A.            The Company desires assurance of the association and services of Executive in order to retain Executive’s experience, skills, abilities, background and knowledge, and is willing to engage Executive’s services on the terms and conditions set forth in this Agreement.

 

B.            Executive desires to be in the employ of the Company and is willing to accept such employment on the terms and conditions set forth in this Agreement.

 

Agreement

 

In consideration of the foregoing recitals and the mutual promises and covenants herein contained, and for other good and valuable consideration, the Parties, intending to be legally bound, agree as follows:

 

1.     Employment.

 

1.1          Term.  The Company hereby employs Executive, and Executive hereby accepts employment by the Company, upon the terms and conditions set forth in this Agreement.  The term of this Agreement shall begin on the Effective Date and shall continue until it is terminated pursuant to Section 4 (the “Term”).  On the last day of the Term, Executive shall immediately resign from all positions with the Company.  Notwithstanding anything herein to the contrary, either Party may terminate Executive’s employment under this Agreement at any time, with or without Cause (as defined in Subsection 4.6(b)), subject to the terms and conditions of Sections 4 and 5.

 

1.2          Title.  Executive shall have the title of Chief Commercial Officer of the Company and shall serve in such other capacity or capacities as the Board of Directors of the Company (the “Board”) may prescribe from time to time.  Executive shall report to the Chief Executive Officer of the Company (the “CEO”) and the Board.

 

1.3          Duties.  Executive shall do and perform all services, acts or things necessary or advisable to manage and conduct the business of the Company and that are normally associated with the position of Chief Commercial Officer, consistent with the bylaws of the Company and as required by the CEO and the Board.

 

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1.4          Policies and Practices.  The employment relationship between the Parties shall be governed by the policies and practices established by the Company and the Board.  Executive hereby acknowledges that Executive has read the Company’s Employee Handbook, which, along with this Agreement, shall govern the terms and conditions of Executive’s employment with the Company.  In the event that the terms of this Agreement differ from or are in conflict with the Company’s policies or practices or the Company’s Employee Handbook, the terms of this Agreement shall control. Normal working hours are from 8:00 a.m. to 5:00 p.m., Monday through Friday. As an exempt salaried employee, you will be expected to work additional hours as required by the nature of your work assignments.

 

1.5          Location.  Unless the Parties otherwise agree in writing, during the Term, Executive shall perform the services Executive is required to perform pursuant to this Agreement at the Company’s offices located in San Diego, California, or at any other place the Company maintains a principal office; provided, however, that the Company may from time to time require Executive to travel temporarily to other locations in connection with the Company’s business.

 

2.     Loyal and Conscientious Performance; Exclusive Property.

 

2.1          Loyalty.  During Executive’s employment by the Company, Executive shall devote Executive’s full business energies, interest, abilities and productive time to the proper and efficient performance of Executive’s duties under this Agreement.

 

2.2          Exclusive Property.  Executive agrees that all business procured by Executive on behalf of the Company, and all Company-related business opportunities and plans made known to Executive, while employed by the Company are and shall remain the exclusive property of the Company.

 

3.     Compensation of Executive.

 

3.1          Base Salary.  The Company shall pay Executive a base salary of $250,000 per year, less payroll deductions and all required withholdings payable in regular periodic payments in accordance with Company policy.  Such base salary shall be subject to annual review and prorated for any partial year of employment on the basis of a 365-day fiscal year.

 

3.2          Stock Options.  Upon the commencement of Executive’s employment with the Company and subject to approval of the Board or the Compensation Committee and the terms of the Company’s Amended and Restated 2001 Equity Incentive Plan, as may be amended from time to time (the “Plan”), Executive will be granted a stock option (the “Option”) under the Plan to purchase shares of the Company’s common stock (the “Common Stock”).  To the maximum extent possible, the Option shall be an Incentive Stock Option as such term is defined in Section 422 (“Section 422”) of the Internal Revenue Code of 1986, as amended.  The Option will be governed by and granted pursuant to the Plan and a separate Grant Notice and Stock Option Agreement, in substantially the form attached hereto as EXHIBIT A, as may be amended from time to time upon the approval of the Board or the Compensation Committee.  The exercise price per share of the Option will be equal to the fair market value of the Common Stock established on the date of grant subject to any limitations under Section 422 and approval by the

 

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Board or the Compensation Committee.  The Option will be subject to vesting over four years so long as Executive provides Continuous Service (as defined in the Plan) to the Company or an Affiliate in accordance with the Plan, according to the following schedule: 25% of the shares subject to the Option will vest on the first anniversary of the date of grant and 1/48^th of the shares subject to the Option will vest monthly thereafter over the next three years.

 

3.3          Employment Taxes.  All of Executive’s compensation shall be subject to customary withholding taxes and any other employment taxes as are commonly required to be collected or withheld by the Company.

 

3.4          Benefits.  Executive shall, in accordance with Company policy and the terms of the applicable plan documents, be eligible for the following standard Company benefits: medical, dental and vision insurance, as well as participation in the Company’s Section 125 flexible spending plan and participation in the Company’s 401(k) plan, subject to the terms of those plans. Executive also shall, in accordance with Company policy and the terms of the applicable plan documents, be eligible to participate in benefits under any executive benefit plan or arrangement which may be in effect from time to time and made available to the Company’s executive or key management employees. The Company reserves the right to modify benefits from time to time as it deems necessary in its sole discretion. Executive will also be eligible for paid time off in accordance with the Company’s flexible “time-off” plan. Executive will accrue flexible “time-off” at a rate of 25 days per year and will be entitled to 12 holidays per year. The Company reserves the right to modify its policies from time to time as it deems necessary in its sole discretion.

 

4.     Termination.

 

4.1          Termination for Complete Disability.  Executive’s employment with the Company shall terminate effective upon the date of Executive’s Complete Disability (as defined in Subsection 4.6(a)).

 

4.2          Termination by the Company.  Executive’s employment with the Company may be terminated by the Company as follows:

 

(a)           For Cause.  The Company may terminate Executive’s employment under this Agreement at any time for “Cause” (as defined in Subsection 4.6(b)) by delivery of written notice to Executive specifying the Cause or Causes relied upon for such termination.  Any notice of termination given pursuant to this Subsection 4.2(a) shall effect termination as of the date specified in such notice or, in the event no such date is specified, two business days after written notice is given to Executive.

 

(b)           Without Cause.  The Company may terminate Executive’s employment under this Agreement at any time and for any reason by delivery of written notice of such termination to Executive.  Any notice of termination given pursuant to this Subsection 4.2(b) shall effect termination as of the date specified in such notice or, in the event no such date is specified, two weeks after written notice is given to Executive.

 

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4.3          Termination by Executive.  Executive may terminate Executive’s employment with the Company at any time.

 

4.4          Compensation upon Termination.

 

(a)           Death or Complete Disability.  If Executive’s employment by the Company is terminated by Executive’s death or Complete Disability, the Company shall pay to Executive’s heirs or Executive, as applicable, Executive’s base salary and accrued and unused vacation benefits earned through the date of termination at the rate in effect at the time of such termination, less standard deductions and withholdings, and the Company shall thereafter have no further obligations to Executive and/or Executive’s heirs under this Agreement.

 

(b)           With Cause.  If Executive’s employment is terminated by the Company for Cause, the Company shall pay Executive’s base salary and accrued and unused vacation benefits earned through the date of termination at the rate in effect at the time of such termination, less standard deductions and withholdings, and the Company shall thereafter have no further obligations to Executive under this Agreement.

 

(c)           Without Cause. If the Company terminates Executive’s employment without Cause, the Company shall pay Executive’s base salary and accrued and unused vacation earned through the date of termination at the rate in effect at the time of such termination, less standard deductions and withholdings.  In addition, subject to the limitations set forth in Subsection 4.5(d) and upon Executive’s furnishing to the Company an effective release and waiver of claims, in substantially the form attached hereto as EXHIBIT B (the “Release and Waiver”), Executive also shall be entitled to:

 

i.              The equivalent of Executive’s annual base salary in effect at the time of termination for a period of 9 months (the “Severance Period”), in each case, less standard deductions and withholdings, to be paid over a period of 9 months after the date of termination pursuant to the Company’s standard payroll practices;

 

ii.            In the event Executive elects continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall reimburse Executive for the same portion of Executive’s COBRA health insurance premium that it paid during Executive’s employment up until the earlier of either (i) the last day of the Severance Period or (ii) the date on which Executive begins full-time employment with another company, organization or business entity; and

 

iii.           The accelerated vesting of the portion of any outstanding option to purchase Common Stock held by Executive on the date of termination that would have otherwise vested during the Severance Period, so that each such portion is vested and exercisable as of the date of termination to the extent such portion would otherwise become vested and exercisable as of the end of the Severance Period.

 

(d)           Termination of Obligations.  Notwithstanding any provisions in this Agreement to the contrary, including any provisions contained in this Subsection 4.5, the

 

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Company’s obligations, and Executive’s rights, pursuant to Subsection 4.5(c) shall cease and be rendered a nullity immediately should Executive violate any provision of Section 2 and Section 5, or should Executive violate the terms and conditions of either Executive’s Proprietary Information and Inventions Agreement or Nondisclosure Agreement with the Company (discussed in Subsection 5.1).

 

4.5          Definitions.  For purposes of this Agreement, the following terms shall have the following meanings:

 

(a)           Complete Disability.  “Complete Disability” shall mean the inability of Executive to perform Executive’s duties under this Agreement because Executive has become permanently disabled within the meaning of any policy of disability income insurance covering employees of the Company then in force.  In the event the Company has no policy of disability income insurance covering employees of the Company in force when Executive becomes disabled, the term “Complete Disability” shall mean the inability of Executive to perform Executive’s duties under this Agreement by reason of any incapacity, physical or mental, that the Board, based upon medical advice or an opinion provided by a licensed physician acceptable to the Board, determines to have incapacitated Executive from satisfactorily performing all of Executive’s usual services for the Company for a period of at least 120 days during any 12-month period (whether or not consecutive).  Based upon such medical advice or opinion, the determination of the Board shall be final and binding and the date such determination is made shall be the date of such Complete Disability for purposes of this Agreement.

 

(b)           For Cause.  “Cause” for the Company to terminate Executive’s employment hereunder shall mean the occurrence of any of the following events:

 

(i)            Executive’s conviction of any felony or any crime involving fraud or dishonesty;

 

(ii)           Executive’s participation (whether by affirmative act or omission) in a fraud, act of dishonesty or other act of misconduct against the Company and/or an Affiliate;

 

(iii)         Conduct by Executive which, based upon a good faith and reasonable factual investigation by the Board, demonstrates Executive’s gross unfitness to serve;

 

(iv)          Executive’s violation of any fiduciary duty or duty of loyalty owed to the Company and/or an Affiliate;

 

(v)            Executive’s breach of any material term of any material contract between Executive and the Company and/or an Affiliate;

 

(vi)          Executive’s violation of any material Company policy; and

 

(vii)         Executive’s violation of state or federal law in connection with the performance of Executive’s job.

 

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The determination that a termination is for Cause shall be made by the Board in its sole and exclusive judgment and discretion.

 

5.     Confidential and Proprietary Information.

 

5.1          As a condition of employment, Executive agrees to execute and abide by the terms of Proprietary Information and Inventions Agreement, in substantially the form attached hereto as EXHIBIT C, and a Nondisclosure Agreement, in substantially the form attached hereto as EXHIBIT D.

 

5.2          Executive recognizes that Executive’s employment with the Company will involve contact with information of substantial value to the Company that is not generally known in the trade and that gives the Company an advantage over its competitors who do not know or use it, including but not limited to, techniques, designs, drawings, processes, inventions know how, strategies, marketing, and/or advertising plans or arrangements, developments, equipment, prototypes, sales, supplier, service provider, vendor, distributor and customer information, and business and financial information relating to the business, products, services, practices and techniques of the Company (hereinafter referred to as “Confidential and Proprietary Information”).  Executive will at all times regard and preserve as confidential such Confidential and Proprietary Information obtained by Executive from whatever source and will not, either during Executive’s employment with the Company or thereafter, publish or disclose any part of such Confidential and Proprietary Information in any manner at any time, or use the same except on behalf of the Company, without the prior written consent of the Company.

 

6.     Assignment and Binding Effect.  Neither this Agreement nor any rights or obligations hereunder shall be assignable by Executive.  This Agreement shall be binding upon and inure to the benefit of the Company and its successors, assigns and legal representatives.

 

7.     SURVIVAL.  Subsections 4.4(c) and 4.4(d) and Sections 5, 6, 7, 8, 9, 18 and 19 shall survive the termination of this Agreement.

 

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8.     NOTICES.  All notices or demands of any kind required or permitted to be given by the Company or Executive under this Agreement shall be given in writing and shall be personally delivered (and receipted for) or faxed during normal business hours or mailed by certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to the Company:

 

Favrille, Inc.

10421 Pacific Center Court

San Diego, CA  92121

Phone: (858) 526-8000

Fax: (858) 597-7040

Attn:  Chief Financial Officer

 

If to Executive:

 

Any such written notice shall be deemed given on the earlier of the date on which such notice is personally delivered or three days after its deposit in the United States mail as specified above.  Either Party may change its address for notices by giving notice to the other Party in the manner specified in this Section 8.

 

9.     CHOICE OF LAW.  This Agreement is made in San Diego, California.  This Agreement shall be construed and interpreted in accordance with the internal laws of the State of California, excluding its conflicts of laws principles.

 

10.  INTEGRATION.  Except as provided in Executive’s Proprietary Information and Inventions Agreement and Nondisclosure Agreement with the Company, the Plan and the related Plan documents, this Agreement, including EXHIBIT B hereto, contains the complete, final and exclusive agreement of the Parties relating to the terms and conditions of Executive’s employment with the Company and the termination of Executive’s employment, and supersedes all prior and contemporaneous oral and written employment agreements or arrangements between the Parties. To the extent this Agreement conflicts with the Proprietary Information and Inventions Agreement or the Nondisclosure Agreement, the terms of such Proprietary Information and Inventions Agreement or Nondisclosure Agreement, respectively, shall control.

 

11.  AMENDMENT.  This Agreement cannot be amended or modified except by a written agreement signed by Executive and the Company.

 

12.  WAIVER.  No term, covenant or condition of this Agreement or any breach thereof shall