Document:

exv10w01

 

Exhibit 10.01

FORM OF INDEMNITY AGREEMENT

     This Indemnity Agreement (this “Agreement”), dated as of ___, 2006, is made by and between
Shutterfly, Inc., a Delaware corporation (the “Company”), and [___], a director and/or officer of
the Company (the “Indemnitee”).

RECITALS

     A.      The Company is aware that competent and experienced persons are increasingly reluctant to
serve as directors or officers of corporations unless they are protected by comprehensive liability
insurance and/or indemnification, due to increased exposure to litigation costs and risks resulting
from their service to such corporations, and because the exposure frequently bears no reasonable
relationship to the compensation of such directors and officers;

     B.      Based on their experience as business managers, the Board of Directors of the Company (the
“Board”) has concluded that, to retain and attract talented and experienced individuals to serve as
officers and directors of the Company, and to encourage such individuals to take the business risks
necessary for the success of the Company, it is necessary for the Company contractually to
indemnify officers and directors and to assume for itself maximum liability for expenses and
damages in connection with claims against such officers and directors in connection with their
service to the Company;

     C.      Section 145 of the General Corporation Law of Delaware, under which the Company is
organized (the “Law”) empowers the Company to indemnify by agreement its officers, directors,
employees and agents, and persons who serve, at the request of the Company, as directors, officers,
employees or agents of other corporations or enterprises, and expressly provides that the
indemnification provided by the Law is not exclusive; and

     D.      The Company desires and has requested the Indemnitee to serve or continue to serve as a
director or officer of the Company free from undue concern for claims for damages arising out of or
related to such services to the Company.

     NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

     1.      Definitions.

	1.1	 	Agent. For the purposes of this Agreement, “agent” of the Company means any person
who is or was a director or officer of the Company or a subsidiary of the Company; or is or
was serving at the request of, for the convenience of, or to represent the interest of the
Company or a subsidiary of the Company as a director or officer of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or an affiliate of the
Company; or was a director or officer of a foreign or domestic corporation which was a
predecessor corporation of the Company, or was a director or officer of another enterprise or
affiliate of the Company at the request of, for the convenience of, or to represent the
interests of such predecessor corporation. The term “enterprise” includes any employee
benefit plan of the Company, its subsidiaries, affiliates and predecessor corporations.

 

 

	1.2	 	Expenses. For purposes of this Agreement, “expenses ” includes all direct and
indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’
fees and related disbursements and other out-of-pocket costs) actually and reasonably incurred
by the Indemnitee in connection with the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification or advancement of expenses under this
Agreement.

	1.3	 	Proceeding. For the purposes of this Agreement, “proceeding” means any threatened,
pending or completed action, suit or other proceeding, whether civil, criminal,
administrative, investigative or any other type whatsoever.

	1.4	 	Subsidiary. For purposes of this Agreement, “subsidiary” means any corporation of
which more than fifty percent (50%) of the outstanding voting securities is owned directly or
indirectly by the Company, by the Company and one or more of its subsidiaries or by one or
more of the Company’s subsidiaries.

     2.      Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an
agent of the Company, at the will of the Company (or under separate agreement, if such agreement
exists), in the capacity the Indemnitee currently serves as an agent of the Company, faithfully and
to the best of his ability, so long as he or she is duly appointed or elected and qualified in
accordance with the applicable provisions of the charter documents of the Company or any subsidiary
of the Company; provided, however, that the Indemnitee may at any time and for any
reason resign from such position (subject to any contractual obligation that the Indemnitee may
have assumed apart from this Agreement), and the Company or any subsidiary shall have no obligation
under this Agreement to continue the Indemnitee in any such position.

     3.      Directors’ and Officers’ Insurance. The Company shall, to the extent that the
Board determines it to be economically reasonable, maintain a policy of directors’ and officers’
liability insurance (“D&O Insurance”), on such terms and conditions as may be approved by the
Board.

     4.      Mandatory Indemnification. Subject to Section 9 below, the Company shall indemnify
the Indemnitee:

	4.1	 	Third Party Actions. If the Indemnitee is a person who was or is a party or is
threatened to be made a party to any proceeding (other than an action by or in the right of
the Company) by reason of the fact that he is or was an agent of the Company, or by reason of
anything done or not done by him in any such capacity, against any and all expenses and
liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) actually and reasonably incurred by
him in connection with the investigation, defense, settlement or appeal of such proceeding if
he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; and

	4.2	 	Derivative Actions. If the Indemnitee is a person who was or is a party or is
threatened to be made a party to any proceeding by or in the right of the Company to procure a
judgment in

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	 	 	its favor by reason of the fact that he is or was an agent of the Company, or by reason of
anything done or not done by him in any such capacity, against any amounts paid in settlement of
any such proceeding and all expenses actually and reasonably incurred by him in connection with
the investigation, defense, settlement or appeal of such proceeding if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best interests of the
Company; except that no indemnification under this subsection shall be made in respect of any
claim, issue or matter as to which such person shall have been finally adjudged to be liable to
the Company by a court of competent jurisdiction due to willful misconduct of a culpable nature
in the performance of his duty to the Company, unless and only to the extent that the Court of
Chancery or the court in which such proceeding was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such amounts which the Court of
Chancery or such other court shall deem proper.

	4.3	 	Exception for Amounts Covered by Insurance. Notwithstanding the foregoing, the
Company shall not be obligated to indemnify the Indemnitee for expenses or liabilities of any
type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) to the extent such have been paid directly to the
Indemnitee by D&O Insurance.

     5.      Partial Indemnification and Contribution.

	5.1	 	Partial Indemnification. If the Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of any expenses or
liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) incurred by him or her in the
investigation, defense, settlement or appeal of a proceeding but is not entitled, however, to
indemnification for all of the total amount thereof, then the Company shall nevertheless
indemnify the Indemnitee for such total amount except as to the portion thereof to which the
Indemnitee is not entitled to indemnification.

	5.2	 	Contribution. If the Indemnitee is not entitled to the indemnification provided in
Section 4 for any reason other than the statutory limitations set forth in the Law, then in
respect of any threatened, pending or completed proceeding in which the Company is jointly
liable with the Indemnitee (or would be if joined in such proceeding), the Company shall
contribute to the amount of expenses (including attorneys’ fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred and paid or payable by the Indemnitee in
such proportion as is appropriate to reflect (i) the relative benefits received by the Company
on the one hand and the Indemnitee on the other hand from the transaction from which such
proceeding arose and (ii) the relative fault of the Company on the one hand and of the
Indemnitee on the other hand in connection with the events which resulted in such expenses,
judgments, fines or settlement amounts, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the Indemnitee on
the other hand shall be determined by reference to, among other things, the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement amounts. The Company
agrees that it would not be just and equitable if contribution pursuant to this

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	 	 	Section 5.2 were determined by pro rata allocation or any other method of allocation that does
not take account of the foregoing equitable considerations.

     6.      Mandatory Advancement of Expenses.

	6.1	 	Advancement. Subject to Section 9.1 below and except as prohibited by law, the
Company shall advance all expenses incurred by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any proceeding to which the Indemnitee is a
party or is threatened to be made a party by reason of the fact that the Indemnitee is or was
an agent of the Company or by reason of anything done or not done by him in any such capacity.
The Indemnitee hereby undertakes to promptly repay such amounts advanced only if, and to the
extent that, it shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Company under the provisions of this Agreement, the Certificate of
Incorporation or Bylaws of the Company, the Law or otherwise. The advances to be made
hereunder shall be paid by the Company to the Indemnitee within thirty (30) days following
delivery of a written request therefor by the Indemnitee to the Company.

	6.2	 	Exception. Notwithstanding the foregoing provisions of this Section 6, the Company
shall not be obligated to advance any expenses to the Indemnitee arising from a lawsuit filed
directly by the Company against the Indemnitee if an absolute majority of the members of the
Board reasonably determines in good faith, within thirty (30) days of the Indemnitee’s request
to be advanced expenses, that the facts known to them at the time such determination is made
demonstrate clearly and convincingly that the Indemnitee acted in bad faith. If such a
determination is made, the Indemnitee may have such decision reviewed by another forum, in the
manner set forth in Sections 8.3, 8.4 and 8.5 hereof, with all references therein to
“indemnification” being deemed to refer to “advancement of expenses,” and the burden of proof
shall be on the Company to demonstrate clearly and convincingly that, based on the facts known
at the time, the Indemnitee acted in bad faith. The Company may not avail itself of this
Section 6.2 as to a given lawsuit if, at any time after the occurrence of the activities or
omissions that are the primary focus of the lawsuit, the Company has undergone a change in
control. For this purpose, a change in control shall mean a given person or group of
affiliated persons or groups increasing their beneficial ownership interest in the Company by
at least twenty (20) percentage points without advance Board approval.

     7.      Notice and Other Indemnification Procedures.

	7.1	 	Promptly after receipt by the Indemnitee of notice of the commencement of or the threat of
commencement of any proceeding, the Indemnitee shall, if the Indemnitee believes that
indemnification with respect thereto may be sought from the Company under this Agreement,
notify the Company of the commencement or threat of commencement thereof.

	7.2	 	If, at the time of the receipt of a notice of the commencement of a proceeding pursuant to
Section 7.1 hereof, the Company has D&O Insurance in effect, the Company shall give prompt
notice of the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all

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	 	 	amounts payable as a result of such proceeding in accordance with the terms of such D&O
Insurance policies.

	7.3	 	In the event the Company shall be obligated to advance the expenses for any proceeding
against the Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by the Indemnitee (which approval shall not be
unreasonably withheld), upon the delivery to the Indemnitee of written notice of its election
to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to the Indemnitee
under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with
respect to the same proceeding, provided that: (a) the Indemnitee shall have the right to
employ his or her own counsel in any such proceeding at the Indemnitee’s expense and (b) if
(i) the employment of counsel by the Indemnitee has been previously authorized by the Company,
(ii) the Indemnitee shall have reasonably concluded that there may be a conflict of interest
between the Company and the Indemnitee in the conduct of any such defense or (iii) the Company
shall not, in fact, have employed counsel to assume the defense of such proceeding, then the
fees and expenses of the Indemnitee’s counsel shall be at the expense of the Company.

     8.      Determination of Right to Indemnification.

	8.1	 	To the extent the Indemnitee has been successful on the merits or otherwise in defense of any
proceeding referred to in Section 4.1 or 4.2 of this Agreement or in the defense of any claim,
issue or matter described therein, the Company shall indemnify the Indemnitee against expenses
actually and reasonably incurred by him or her in connection with the investigation, defense
or appeal of such proceeding, or such claim, issue or matter, as the case may be.

	8.2	 	In the event that Section 8.1 is inapplicable, or does not apply to the entire proceeding,
the Company shall nonetheless indemnify the Indemnitee unless the Company shall prove by clear
and convincing evidence to a forum listed in Section 8.3 below that the Indemnitee has not met
the applicable standard of conduct required to entitle the Indemnitee to such indemnification.

	8.3	 	The Indemnitee shall be entitled to select the forum in which the validity of the Company’s
claim under Section 8.2 hereof that the Indemnitee is not entitled to indemnification will be
heard from among the following, except that the Indemnitee can select a forum
consisting of the stockholders of the Company only with the approval of the Company:

	(a)	 	A quorum of the Board consisting of directors who are not parties to the proceeding for which
indemnification is being sought;

(b) The stockholders of the Company;

	(c)	 	Legal counsel mutually agreed upon by the Indemnitee and the Board, which counsel shall make
such determination in a written opinion;

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	(d)	 	A panel of three arbitrators, one of whom is selected by the Company, another of whom is
selected by the Indemnitee and the last of whom is selected by the first two arbitrators so
selected; or

	(e)	 	The Court of Chancery of Delaware.

	8.4	 	As soon as practicable, and in no event later than thirty (30) days after the forum has been
selected pursuant to Section 8.3 above, the Company shall, at its own expense, submit to the
selected forum its claim that the Indemnitee is not entitled to indemnification, and the
Company shall act in the utmost good faith to assure the Indemnitee a complete opportunity to
defend against such claim.

	8.5	 	If the forum selected in accordance with Section 8.3 hereof is not a court, then after the
final decision of such forum is rendered, the Company or the Indemnitee shall have the right
to apply to the Court of Chancery of Delaware, for the purpose of appealing the decision of
such forum, provided that such right is executed within sixty (60) days after the
final decision of such forum is rendered. If the forum selected in accordance with Section
8.3 hereof is a court, then the rights of the Company or the Indemnitee to appeal any decision
of such court shall be governed by the applicable laws and rules governing appeals of the
decision of such court.

	8.6	 	Notwithstanding any other provision in this Agreement to the contrary, the Company shall
indemnify the Indemnitee against all expenses incurred by the Indemnitee in connection with
any hearing or proceeding under this Section 8 involving the Indemnitee and against all
expenses incurred by the Indemnitee in connection with any other proceeding between the
Company and the Indemnitee involving the interpretation or enforcement of the rights of the
Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of
the material claims and/or defenses of the Indemnitee in any such proceeding was frivolous or
not made in good faith.

     9.      Exceptions. Any other provision herein to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement:

	9.1	 	Claims Initiated by Indemnitee. To indemnify or advance expenses to the Indemnitee
with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee and
not by way of defense, except with respect to proceedings specifically authorized by
the Board or brought to establish or enforce a right to indemnification and/or advancement of
expenses arising under this Agreement, the charter documents of the Company or any subsidiary
or any statute or law or otherwise, but such indemnification or advancement of expenses may be
provided by the Company in specific cases if the Board finds it to be appropriate; or

	9.2	 	Unauthorized Settlements. To indemnify the Indemnitee hereunder for any amounts paid
in settlement of a proceeding unless the Company consents in advance in writing to such
settlement, which consent shall not be unreasonably withheld; or

	9.3	 	Securities Law Actions. To indemnify the Indemnitee on account of any suit in which
judgment is rendered against the Indemnitee for an accounting of profits made from the
purchase or sale by the Indemnitee of securities of the Company pursuant to the provisions of

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	 	 	Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any federal, state or local statutory law; or

	9.4	 	Unlawful Indemnification. To indemnify the Indemnitee if a final decision by a court
having jurisdiction in the matter shall determine that such indemnification is not lawful. In
this respect, the Company and the Indemnitee have been advised that the Securities and
Exchange Commission takes the position that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore, unenforceable and that
claims for indemnification should be submitted to appropriate courts for adjudication.

     10.      Non-Exclusivity. The provisions for indemnification and advancement of expenses
set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee
may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote
of the Company’s stockholders or disinterested directors, other agreements or otherwise, both as to
action in the Indemnitee’s official capacity and to action in another capacity while occupying his
position as an agent of the Company, and the Indemnitee’s rights hereunder shall continue after the
Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the
heirs, executors and administrators of the Indemnitee.

     11.      General Provisions.

	11.1	 	Interpretation of Agreement. It is understood that the parties hereto intend this
Agreement to be interpreted and enforced so as to provide indemnification and advancement of
expenses to the Indemnitee to the fullest extent now or hereafter permitted by law, except as
expressly limited herein.

	11.2	 	Severability. If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever, then: (a) the validity, legality
and enforceability of the remaining provisions of this Agreement (including, without
limitation, all portions of any paragraphs of this Agreement containing any such provision
held to be invalid, illegal or unenforceable that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest
extent possible, the provisions of this Agreement (including, without limitation, all portions
of any paragraphs of this Agreement containing any such provision held to be invalid, illegal
or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be
construed so as to give effect to the intent manifested by the provision held invalid, illegal
or unenforceable and to give effect to Section 11.1 hereof.

	11.3	 	Modification and Waiver. No supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by both of the parties hereto. No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver.

	11.4	 	Subrogation. In the event of full payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee,
who shall execute all documents required and shall do all acts that may be necessary or
desirable to secure such rights and to enable the Company effectively to bring suit to enforce
such rights.

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	11.5	 	Counterparts. This Agreement may be executed in one or more counterparts, which
shall together constitute one agreement.

	11.6	 	Successors and Assigns. The terms of this Agreement shall bind, and shall inure to
the benefit of, the successors and assigns of the parties hereto.

	11.7	 	Notice. All notices, requests, demands and other communications under this Agreement
shall be in writing and shall be deemed duly given: (a) if delivered by hand and signed for
by the party addressee; or (b) if mailed by certified or registered mail, with postage
prepaid, on the third business day after the mailing date. Addresses for notice to either
party are as shown on the signature page of this Agreement or as subsequently modified by
written notice.

	11.8	 	Governing Law. This Agreement shall be governed exclusively by and construed
according to the laws of the State of Delaware, without giving effect to that body of laws
pertaining to conflict of laws.

	11.9	 	Consent to Jurisdiction. The Company and the Indemnitee each hereby irrevocably
consent to the jurisdiction of the courts of the State of Delaware for all purposes in
connection with any action or proceeding that arises out of or relates to this Agreement.

	11.10	 	Attorneys’ Fees. In the event Indemnitee is required to bring any action to enforce
rights under this Agreement (including, without limitation, the expenses of any Proceeding
described in Section 1.3) the Indemnitee shall be entitled to all reasonable fees and expenses
in bringing and pursuing such action, unless a court of competent jurisdiction finds each of
the material claims of the Indemnitee in any such action was frivolous and not made in good
faith.

[Remainder of Page Left Blank]

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     IN WITNESS WHEREOF, the parties hereto have entered into this Indemnity Agreement effective as
of the date first written above.

	 	 	 	 	 	 	 
	 	 	COMPANY-SHUTTERFLY, INC.	 	 	 	INDEMNITEE:
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Address:

	 	 	 	 	 	Address:exv10w02

 

Exhibit 10.02

 

 

Shutterfly, Inc.

1999 Stock Plan

Adopted on September 9, 1999

As Amended through March 16, 2006

 

 

	 	 	 	 	 
	SECTION 1. ESTABLISHMENT AND PURPOSE.
	 	 	1	 
	 
	 	 	 	 
	SECTION 2. ADMINISTRATION.
	 	 	1	 
	 
	 	 	 	 
	(a) Committees of the Board of Directors.
	 	 	1	 
	(b) Authority of the Board of Directors.
	 	 	1	 
	 
	 	 	 	 
	SECTION 3. ELIGIBILITY.
	 	 	1	 
	 
	 	 	 	 
	(a) General Rule.
	 	 	1	 
	(b) Ten-Percent Stockholders.
	 	 	1	 
	 
	 	 	 	 
	SECTION 4. STOCK SUBJECT TO PLAN.
	 	 	2	 
	 
	 	 	 	 
	(a) Basic Limitation.
	 	 	2	 
	(b) Additional Shares.
	 	 	2	 
	 
	 	 	 	 
	SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES.
	 	 	2	 
	 
	 	 	 	 
	(a) Stock Purchase Agreement.
	 	 	2	 
	(b) Duration of Offers and Nontransferability of Rights.
	 	 	2	 
	(c) Purchase Price.
	 	 	2	 
	(d) Withholding Taxes.
	 	 	2	 
	(e) Restrictions on Transfer of Shares and Minimum Vesting.
	 	 	3	 
	(f) Accelerated Vesting
	 	 	3	 
	 
	 	 	 	 
	SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
	 	 	3	 
	 
	 	 	 	 
	(a) Stock Option Agreement.
	 	 	3	 
	(b) Number of Shares.
	 	 	3	 
	(c) Exercise Price.
	 	 	3	 
	(d) Withholding Taxes.
	 	 	3	 
	(e) Exercisability.
	 	 	4	 
	(f) Accelerated Exercisability
	 	 	4	 
	(g) Basic Term.
	 	 	4	 
	(h) Nontransferability.
	 	 	4	 
	(i) Termination of Service (Except by Death).
	 	 	4	 
	(j) Leaves of Absence.
	 	 	5	 
	(k) Death of Optionee.
	 	 	5	 
	(l) No Rights as a Stockholder.
	 	 	5	 
	(m) Modification, Extension and Assumption of Options.
	 	 	5	 
	(n) Restrictions on Transfer of Shares and Minimum Vesting.
	 	 	5	 
	(o) Accelerated Vesting
	 	 	6	 

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	SECTION 7. PAYMENT FOR SHARES.
	 	 	6	 
	 
	 	 	 	 
	(a) General Rule.
	 	 	6	 
	(b) Surrender of Stock.
	 	 	6	 
	(c) Services Rendered.
	 	 	6	 
	(d) Promissory Note.
	 	 	6	 
	(e) Exercise/Sale.
	 	 	7	 
	(f) Exercise/Pledge.
	 	 	7	 
	 
	 	 	 	 
	SECTION 8. ADJUSTMENT OF SHARES.
	 	 	7	 
	 
	 	 	 	 
	(a) General.
	 	 	7	 
	(b) Mergers and Consolidations.
	 	 	7	 
	(c) Reservation of Rights.
	 	 	7	 
	 
	 	 	 	 
	SECTION 9. SECURITIES LAWS REQUIREMENTS.
	 	 	8	 
	 
	 	 	 	 
	(a) General
	 	 	8	 
	(b) Financial Reports.
	 	 	8	 
	 
	 	 	 	 
	SECTION 10. NO RETENTION RIGHTS.
	 	 	8	 
	 
	 	 	 	 
	SECTION 11. DURATION AND AMENDMENTS.
	 	 	8	 
	 
	 	 	 	 
	(a) Term of the Plan.
	 	 	8	 
	(b) Right to Amend or Terminate the Plan.
	 	 	8	 
	(c) Effect of Amendment or Termination.
	 	 	9	 
	 
	 	 	 	 
	SECTION 12. DEFINITIONS.
	 	 	9	 

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Shutterfly, Inc. 1999 Stock Plan

SECTION 1. ESTABLISHMENT AND PURPOSE.

     The purpose of the Plan is to offer selected individuals an opportunity to acquire a
proprietary interest in the success of the Company, or to increase such interest, by purchasing
Shares of the Company’s Stock. The Plan provides both for the direct award or sale of Shares and
for the grant of Options to purchase Shares. Options granted under the Plan may include
Nonstatutory Options as well as ISOs intended to qualify under Section 422 of the Code.

     Capitalized terms are defined in Section 12.

SECTION 2. ADMINISTRATION.

     (a) Committees of the Board of Directors. The Plan may be administered by one or more
Committees. Each Committee shall consist of one or more members of the Board of Directors who have
been appointed by the Board of Directors. Each Committee shall have such authority and be
responsible for such functions as the Board of Directors has assigned to it. If no Committee has
been appointed, the entire Board of Directors shall administer the Plan. Any reference to the
Board of Directors in the Plan shall be construed as a reference to the Committee (if any) to whom
the Board of Directors has assigned a particular function.

     (b) Authority of the Board of Directors. Subject to the provisions of the Plan, the Board of
Directors shall have full authority and discretion to take any actions it deems necessary or
advisable for the administration of the Plan. All decisions, interpretations and other actions of
the Board of Directors shall be final and binding on all Purchasers, all Optionees and all persons
deriving their rights from a Purchaser or Optionee.

SECTION 3. ELIGIBILITY.

     (a) General Rule. Only Employees, Outside Directors and Consultants shall be eligible for the
grant of Options or the direct award or sale of Shares. Only Employees shall be eligible for the
grant of ISOs.

     (b) Ten-Percent Stockholders. An individual who owns more than 10% of the total combined
voting power of all classes of outstanding stock of the Company, its Parent or any of its
Subsidiaries shall not be eligible for designation as an Optionee or Purchaser unless (i) the
Exercise Price is at least 110% of the Fair Market Value of a Share on the date of grant, (ii) the
Purchase Price (if any) is at least 100% of the Fair Market Value of a Share and (iii) in the case
of an ISO, such ISO by its terms is not exercisable after the expiration of five years from the
date of grant. For purposes of this Subsection (b), in determining stock ownership, the
attribution rules of Section 424(d) of the Code shall be applied.

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SECTION 4. STOCK SUBJECT TO PLAN.

     (a) Basic Limitation. Shares
offered under the Plan may be authorized but unissued Shares or
treasury Shares. The aggregate number of Shares that may be issued under the Plan (upon exercise
of Options or other rights to acquire Shares) shall not exceed 7,683,545 Shares, subject
to adjustment pursuant to Section 8. The number of Shares that are subject to Options or other
rights outstanding at any time under the Plan shall not exceed the number of Shares that then
remain available for issuance under the Plan. The Company, during the term of the Plan, shall at
all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan.

     (b) Additional Shares. In the event that any outstanding Option or other right for any reason
expires or is canceled or otherwise terminated, the Shares allocable to the unexercised portion of
such Option or other right shall again be available for the purposes of the Plan. In the event
that Shares issued under the Plan are reacquired by the Company pursuant to any forfeiture
provision, right of repurchase or right of first refusal, such Shares shall again be available for
the purposes of the Plan, except that the aggregate number of Shares which may be issued upon the
exercise of ISOs shall in no event exceed 7,683,545 Shares (subject to adjustment
pursuant to Section 8).

SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES.

     (a) Stock Purchase Agreement. Each award or sale of Shares under the Plan (other than upon
exercise of an Option) shall be evidenced by a Stock Purchase Agreement between the Purchaser and
the Company. Such award or sale shall be subject to all applicable terms and conditions of the
Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan
and which the Board of Directors deems appropriate for inclusion in a Stock Purchase Agreement.
The provisions of the various Stock Purchase Agreements entered into under the Plan need not be
identical.

     (b) Duration of Offers and Nontransferability of Rights. Any right to acquire Shares under
the Plan (other than an Option) shall automatically expire if not exercised by the Purchaser within
30 days after the grant of such right was communicated to the Purchaser by the Company. Such right
shall not be transferable and shall be exercisable only by the Purchaser to whom such right was
granted.

     (c) Purchase Price. The Purchase Price of Shares to be offered under the Plan shall not be
less than 85% of the Fair Market Value of such Shares, and a higher percentage may be required by
Section 3(b). Subject to the preceding sentence, the Purchase Price shall be determined by the
Board of Directors at its sole discretion. The Purchase Price shall be payable in a form described
in Section 7.

     (d) Withholding Taxes. As a condition to the purchase of Shares, the Purchaser shall make
such arrangements as the Board of Directors may require for the satisfaction of any federal, state,
local or foreign withholding tax obligations that may arise in connection with such purchase.

2

 

     (e) Restrictions on Transfer of Shares and Minimum Vesting. Any Shares awarded or sold under
the Plan shall be subject to such special forfeiture conditions, rights of repurchase, rights of
first refusal and other transfer restrictions as the Board of Directors may determine. Such
restrictions shall be set forth in the applicable Stock Purchase Agreement and shall apply in
addition to any restrictions that may apply to holders of Shares generally. In the case of a
Purchaser who is not an officer of the Company, an Outside Director or a Consultant, any right to
repurchase the Purchaser’s Shares at the original Purchase Price (if any) upon termination of the
Purchaser’s Service shall lapse at least as rapidly as 20% per year over the five-year period
commencing on the date of the award or sale of the Shares. Any such right may be exercised only
within 90 days after the termination of the Purchaser’s Service for cash or for cancellation of
indebtedness incurred in purchasing the Shares.

     (f) Accelerated Vesting. Unless the applicable Stock Purchase Agreement provides otherwise,
any right to repurchase a Purchaser’s Shares at the original Purchase Price (if any) upon
termination of the Purchaser’s Service shall lapse and all of such Shares shall become vested if
(i) the Company is subject to a Change in Control before the Purchaser’s Service terminates and
(ii) the repurchase right is not assigned to the entity that employs the Purchaser immediately
after the Change in Control or to its parent or subsidiary.

SECTION 6. TERMS AND CONDITIONS OF OPTIONS.

     (a) Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a
Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to all
applicable terms and conditions of the Plan and may be subject to any other terms and conditions
which are not inconsistent with the Plan and which the Board of Directors deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock Option Agreements
entered into under the Plan need not be identical.

     (b) Number of Shares. Each Stock Option Agreement shall specify the number of Shares that are
subject to the Option and shall provide for the adjustment of such number in accordance with
Section 8. The Stock Option Agreement shall also specify whether the Option is an ISO or a
Nonstatutory Option.

     (c) Exercise Price. Each Stock Option Agreement shall specify the Exercise Price. The
Exercise Price of an ISO shall not be less than 100% of the Fair Market Value of a Share on the
date of grant, and a higher percentage may be required by Section 3(b). The Exercise Price of a
Nonstatutory Option shall not be less than 85% of the Fair Market Value of a Share on the date of
grant, and a higher percentage may be required by Section 3(b). Subject to the preceding two
sentences, the Exercise Price under any Option shall be determined by the Board of Directors at its
sole discretion. The Exercise Price shall be payable in a form described in Section 7.

     (d) Withholding Taxes. As a condition to the exercise of an Option, the Optionee shall make
such arrangements as the Board of Directors may require for the satisfaction of any federal, state,
local or foreign withholding tax obligations that may arise in connection with such exercise. The
Optionee shall also make such arrangements as the Board of Directors may require

3

 

for the satisfaction of any federal, state, local or foreign withholding tax obligations that
may arise in connection with the disposition of Shares acquired by exercising an Option.

     (e) Exercisability. Each Stock Option Agreement shall specify the date when all or any
installment of the Option is to become exercisable. In the case of an Optionee who is not an
officer of the Company, an Outside Director or a Consultant, an Option shall become exercisable at
least as rapidly as 20% per year over the five-year period commencing on the date of grant.
Subject to the preceding sentence, the exercisability provisions of any Stock Option Agreement
shall be determined by the Board of Directors at its sole discretion.

     (f) Accelerated Exercisability. Unless the applicable Stock Option Agreement provides
otherwise, all of an Optionee’s Options shall become exercisable in full if (i) the Company is
subject to a Change in Control before the Optionee’s Service terminates, (ii) such Options do not
remain outstanding, (iii) such Options are not assumed by the surviving corporation or its parent
and (iv) the surviving corporation or its parent does not substitute options with substantially the
same terms for such Options.

     (g) Basic Term. The Stock Option Agreement shall specify the term of the Option. The term
shall not exceed 10 years from the date of grant, and a shorter term may be required by Section
3(b). Subject to the preceding sentence, the Board of Directors at its sole discretion shall
determine when an Option is to expire.

     (h) Nontransferability. No Option shall be transferable by the Optionee other than by
beneficiary designation, will or the laws of descent and distribution. An Option may be exercised
during the lifetime of the Optionee only by the Optionee or by the Optionee’s guardian or legal
representative. No Option or interest therein may be transferred, assigned, pledged or
hypothecated by the Optionee during the Optionee’s lifetime, whether by operation of law or
otherwise, or be made subject to execution, attachment or similar process.

     (i) Termination of Service (Except by Death). If an Optionee’s Service terminates for any
reason other than the Optionee’s death, then the Optionee’s Options shall expire on the earliest of
the following occasions:

     (i) The expiration date determined pursuant to Subsection (g) above;

     (ii) The date three months after the termination of the Optionee’s Service for
any reason other than Disability, or such later date as the Board of Directors may
determine; or

     (iii) The date six months after the termination of the Optionee’s Service by
reason of Disability, or such later date as the Board of Directors may determine.

The Optionee may exercise all or part of the Optionee’s Options at any time before the expiration
of such Options under the preceding sentence, but only to the extent that such Options had become
exercisable before the Optionee’s Service terminated (or became exercisable as a result of the
termination) and the underlying Shares had vested before the Optionee’s Service terminated (or
vested as a result of the termination). The balance of such Options shall lapse

4

 

when the Optionee’s Service terminates. In the event that the Optionee dies after the termination
of the Optionee’s Service but before the expiration of the Optionee’s Options, all or part of such
Options may be exercised (prior to expiration) by the executors or administrators of the Optionee’s
estate or by any person who has acquired such Options directly from the Optionee by beneficiary
designation, bequest or inheritance, but only to the extent that such Options had become
exercisable before the Optionee’s Service terminated (or became exercisable as a result of the
termination) and the underlying Shares had vested before the Optionee’s Service terminated (or
vested as a result of the termination).

     (j) Leaves of Absence. For purposes of Subsection (i) above, Service shall be deemed to
continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the
Company in writing and if continued crediting of Service for this purpose is expressly required by
the terms of such leave or by applicable law (as determined by the Company).

     (k) Death of Optionee. If an Optionee dies while the Optionee is in Service, then the
Optionee’s Options shall expire on the earlier of the following dates:

     (i) The expiration date determined pursuant to Subsection (g) above; or

     (ii) The date 12 months after the Optionee’s death.

All or part of the Optionee’s Options may be exercised at any time before the expiration of such
Options under the preceding sentence by the executors or administrators of the Optionee’s estate or
by any person who has acquired such Options directly from the Optionee by beneficiary designation,
bequest or inheritance, but only to the extent that such Options had become exercisable before the
Optionee’s death or became exercisable as a result of the death. The balance of such Options shall
lapse when the Optionee dies.

     (l) No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no
rights as a stockholder with respect to any Shares covered by the Optionee’s Option until such
person becomes entitled to receive such Shares by filing a notice of exercise and paying the
Exercise Price pursuant to the terms of such Option.

     (m) Modification, Extension and Assumption of Options. Within the limitations of the Plan,
the Board of Directors may modify, extend or assume outstanding Options or may accept the
cancellation of outstanding Options (whether granted by the Company or another issuer) in return
for the grant of new Options for the same or a different number of Shares and at the same or a
different Exercise Price. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, impair the Optionee’s rights or increase the Optionee’s
obligations under such Option.

     (n) Restrictions on Transfer of Shares and Minimum Vesting. Any Shares issued upon exercise
of an Option shall be subject to such special forfeiture conditions, rights of repurchase, rights
of first refusal and other transfer restrictions as the Board of Directors may determine. Such
restrictions shall be set forth in the applicable Stock Option Agreement and

5

 

shall apply in addition to any restrictions that may apply to holders of Shares generally. In
the case of an Optionee who is not an officer of the Company, an Outside Director or a Consultant:

     (i) Any right to repurchase the Optionee’s Shares at the original Exercise
Price upon termination of the Optionee’s Service shall lapse at least as rapidly as
20% per year over the five-year period commencing on the date of the option grant;

     (ii) Any such right may be exercised only for cash or for cancellation of
indebtedness incurred in purchasing the Shares; and

     (iii) Any such right may be exercised only within 90 days after the later of
(A) the termination of the Optionee’s Service or (B) the date of the option
exercise.

     (o) Accelerated Vesting. Unless the applicable Stock Option Agreement provides otherwise, any
right to repurchase an Optionee’s Shares at the original Exercise Price upon termination of the
Optionee’s Service shall lapse and all of such Shares shall become vested if (i) the Company is
subject to a Change in Control before the Optionee’s Service terminates and (ii) the repurchase
right is not assigned to the entity that employs the Optionee immediately after the Change in
Control or to its parent or subsidiary.

SECTION 7. PAYMENT FOR SHARES.

     (a) General Rule. The entire Purchase Price or Exercise Price of Shares issued under the Plan
shall be payable in cash or cash equivalents at the time when such Shares are purchased, except as
otherwise provided in this Section 7.

     (b) Surrender of Stock. To the extent that a Stock Option Agreement so provides, all or any
part of the Exercise Price may be paid by surrendering, or attesting to the ownership of, Shares
that are already owned by the Optionee. Such Shares shall be surrendered to the Company in good
form for transfer and shall be valued at their Fair Market Value on the date when the Option is
exercised. The Optionee shall not surrender, or attest to the ownership of, Shares in payment of
the Exercise Price if such action would cause the Company to recognize compensation expense (or
additional compensation expense) with respect to the Option for financial reporting purposes.

     (c) Services Rendered. At the discretion of the Board of Directors, Shares may be awarded
under the Plan in consideration of services rendered to the Company, a Parent or a Subsidiary prior
to the award.

     (d) Promissory Note. To the extent that a Stock Option Agreement or Stock Purchase Agreement
so provides, all or a portion of the Exercise Price or Purchase Price (as the case may be) of
Shares issued under the Plan may be paid with a full-recourse promissory note. However, the par
value of the Shares, if newly issued, shall be paid in cash or cash equivalents. The Shares shall
be pledged as security for payment of the principal amount of the promissory note and interest
thereon. The interest rate payable under the terms of the promissory note shall

6

 

not be less than the minimum rate (if any) required to avoid the imputation of additional
interest under the Code. Subject to the foregoing, the Board of Directors (at its sole discretion)
shall specify the term, interest rate, amortization requirements (if any) and other provisions of
such note.

     (e) Exercise/Sale. To the extent that a Stock Option Agreement so provides, and if Stock is
publicly traded, payment may be made all or in part by the delivery (on a form prescribed by the
Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares
and to deliver all or part of the sales proceeds to the Company in payment of all or part of the
Exercise Price and any withholding taxes.

     (f) Exercise/Pledge. To the extent that a Stock Option Agreement so provides, and if Stock is
publicly traded, payment may be made all or in part by the delivery (on a form prescribed by the
Company) of an irrevocable direction to pledge Shares to a securities broker or lender approved by
the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company
in payment of all or part of the Exercise Price and any withholding taxes.

SECTION 8. ADJUSTMENT OF SHARES.

     (a) General. In the event of a subdivision of the outstanding Stock, a declaration of a
dividend payable in Shares, a declaration of an extraordinary dividend payable in a form other than
Shares in an amount that has a material effect on the Fair Market Value of the Stock, a combination
or consolidation of the outstanding Stock into a lesser number of Shares, a recapitalization, a
spin-off, a reclassification or a similar occurrence, the Board of Directors shall make appropriate
adjustments in one or more of (i) the number of Shares available for future grants under Section 4,
(ii) the number of Shares covered by each outstanding Option or (iii) the Exercise Price under each
outstanding Option.

     (b) Mergers and Consolidations. In the event that the Company is a party to a merger or
consolidation, outstanding Options shall be subject to the agreement of merger or consolidation.
Such agreement, without the Optionees’ consent, may provide for:

     (i) The continuation of such outstanding Options by the Company (if the Company
is the surviving corporation);

     (ii) The assumption of the Plan and such outstanding Options by the surviving
corporation or its parent;

     (iii) The substitution by the surviving corporation or its parent of options
with substantially the same terms for such outstanding Options; or

     (iv) The cancellation of such outstanding Options without payment of any
consideration.

     (c) Reservation of Rights. Except as provided in this Section 8, an Optionee or Purchaser
shall have no rights by reason of (i) any subdivision or consolidation of shares of stock

7

 

of any class, (ii) the payment of any dividend or (iii) any other increase or decrease in the
number of shares of stock of any class. Any issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares
subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.

SECTION 9. SECURITIES LAW REQUIREMENTS.

     (a) General. Shares shall not be issued under the Plan unless the issuance and delivery of
such Shares comply with (or are exempt from) all applicable requirements of law, including (without
limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, state securities laws and regulations, and the regulations of any stock exchange or
other securities market on which the Company’s securities may then be traded.

     (b) Financial Reports. The Company each year shall furnish to Optionees, Purchasers and
stockholders who have received Stock under the Plan its balance sheet and income statement, unless
such Optionees, Purchasers or stockholders are key Employees whose duties with the Company assure
them access to equivalent information. Such balance sheet and income statement need not be
audited.

SECTION 10. NO RETENTION RIGHTS.

     Nothing in the Plan or in any right or Option granted under the Plan shall confer upon the
Purchaser or Optionee any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Company (or any Parent or
Subsidiary employing or retaining the Purchaser or Optionee) or of the Purchaser or Optionee, which
rights are hereby expressly reserved by each, to terminate his or her Service at any time and for
any reason, with or without cause.

SECTION 11. DURATION AND AMENDMENTS.

     (a) Term of the Plan. The Plan, as set forth herein, shall become effective on the date of
its adoption by the Board of Directors, subject to the approval of the Company’s stockholders. In
the event that the stockholders fail to approve the Plan within 12 months after its adoption by the
Board of Directors, any grants of Options or sales or awards of Shares that have already occurred
shall be rescinded, and no additional grants, sales or awards shall be made thereafter under the
Plan. The Plan shall terminate automatically 10 years after its adoption by the Board of Directors
and may be terminated on any earlier date pursuant to Subsection (b) below.

     (b) Right to Amend or Terminate the Plan. The Board of Directors may amend, suspend or
terminate the Plan at any time and for any reason; provided, however, that any amendment of the
Plan which increases the number of Shares available for issuance under the

8

 

Plan (except as provided in Section 8), or which materially changes the class of persons who
are eligible for the grant of ISOs, shall be subject to the approval of the Company’s stockholders.
Stockholder approval shall not be required for any other amendment of the Plan.

     (c) Effect of Amendment or Termination. No Shares shall be issued or sold under the Plan
after the termination thereof, except upon exercise of an Option granted prior to such termination.
The termination of the Plan, or any amendment thereof, shall not affect any Share previously
issued or any Option previously granted under the Plan.

SECTION 12. DEFINITIONS.

     (a) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from
time to time.

     (b) “Change in Control” shall mean:

     (i) The consummation of a merger or consolidation of the Company with or into
another entity or any other corporate reorganization, if persons who were not
stockholders of the Company immediately prior to such merger, consolidation or other
reorganization own immediately after such merger, consolidation or other
reorganization 50% or more of the voting power of the outstanding securities of each
of (A) the continuing or surviving entity and (B) any direct or indirect parent
corporation of such continuing or surviving entity; or

     (ii) The sale, transfer or other disposition of all or substantially all of the
Company’s assets.

A transaction shall not constitute a Change in Control if its sole purpose is to change the state
of the Company’s incorporation or to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company’s securities immediately before such
transaction.

     (c) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (d) “Committee” shall mean a committee of the Board of Directors, as described in Section
2(a).

     (e) “Company” shall mean Shutterfly, Inc., a Delaware corporation.

     (f) “Consultant” shall mean a person who performs bona fide services for the Company, a Parent
or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.

     (g) “Disability” shall mean that the Optionee is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment.

9

 

     (h) “Employee” shall mean any individual who is a common-law employee of the Company, a Parent
or a Subsidiary.

     (i) “Exercise Price” shall mean the amount for which one Share may be purchased upon exercise
of an Option, as specified by the Board of Directors in the applicable Stock Option Agreement.

     (j) “Fair Market Value” shall mean the fair market value of a Share, as determined by the
Board of Directors in good faith. Such determination shall be conclusive and binding on all
persons.

     (k) “ISO” shall mean an employee incentive stock option described in Section 422(b) of the
Code.

     (l) “Nonstatutory Option” shall mean a stock option not described in Sections 422(b) or 423(b)
of the Code.

     (m) “Option” shall mean an ISO or Nonstatutory Option granted under the Plan and entitling the
holder to purchase Shares.

     (n) “Optionee” shall mean an individual who holds an Option.

     (o) “Outside Director” shall mean a member of the Board of Directors who is not an Employee.

     (p) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the status of a Parent on a date
after the adoption of the Plan shall be considered a Parent commencing as of such date.

     (q) “Plan” shall mean this Shutterfly, Inc. 1999 Stock Plan.

     (r) “Purchase Price” shall mean the consideration for which one Share may be acquired under
the Plan (other than upon exercise of an Option), as specified by the Board of Directors.

     (s) “Purchaser” shall mean an individual to whom the Board of Directors has offered the right
to acquire Shares under the Plan (other than upon exercise of an Option).

     (t) “Service” shall mean service as an Employee, Outside Director or Consultant.

     (u) “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 (if
applicable).

     (v) “Stock” shall mean the Common Stock of the Company, with a par value of $0.0001 per Share.

10

 

     (w) “Stock Option Agreement” shall mean the agreement between the Company and an Optionee
which contains the terms, conditions and restrictions pertaining to the Optionee’s Option.

     (x) “Stock Purchase Agreement” shall mean the agreement between the Company and a Purchaser
who acquires Shares under the Plan which contains the terms, conditions and restrictions pertaining
to the acquisition of such Shares.

     (y) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain. A corporation that
attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a
Subsidiary commencing as of such date.

11

 

	 	 	 	 	 
	

	 	Shutterfly, Inc.

ID: 94-3330068

2800 Bridge Parkway #101

Redwood City, CA 94065

	 	Notice of Stock Option Grant

	 	 	 	 	 
	[ Optionee name and address]

	 	Option Number:

Plan:

ID:
	 	0000XXX

1999

000XXX

Effective [Grant Date], you have been granted a(n) [Incentive] [Nonstatutory] Stock Option to buy
[#Shares] of shares of
Shutterfly, Inc. (the “Company”) stock at $[PricePerShare] per share.

The total exercise price for the shares granted is $[TotalExercisePrice].

Company’s Right of Repurchase for the shares shall lapse in accordance with the Full Vest Date
shown below:

	 	 	 	 	 	 	 	 
	 

	Shares
	 	Vest Type
	 	Full Vest
	 	Expiration
	 
	 	 	 	 	 	 	 
	 

	[#Shares]

[#Shares]
	 	On Vest Date

Monthly
	 	[FullVestDate]

[FullVestDate]
	 	[ExpirationDate]

[Expiration Date]

By your signature and the Company’s signature below, you and the Company agree that the option is
granted under and governed by the terms and conditions of the Company’s 1999 Stock Option Plan and
the Option Agreement, both of which are attached to and made a part of this document.

	 	 	 
	 

	 	 
	Stephen E. Recht, CFO

	 	Date
	 
	 	 
	 

	 	 
	[Optionee name]

	 	Date

 

 

THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.

Shutterfly, Inc. 1999 Stock Plan:

Stock Option Agreement

SECTION 1. GRANT OF OPTION.

     (a) Option. On the terms and conditions set forth in the Notice of Stock
Option Grant and this Agreement, the Company grants to the Optionee on the Date of Grant the option
to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option
Grant. The Exercise Price is agreed to be at least 100% of the Fair Market Value per Share on the
Date of Grant (110% of Fair Market Value if Section 3(b) of the Plan applies). This option is
intended to be an ISO or a Nonstatutory Option, as provided in the Notice of Stock Option Grant.

     (b) Stock Plan and Defined Terms. This option is granted pursuant to the Plan, a copy of
which the Optionee acknowledges having received. The provisions of the Plan are incorporated into
this Agreement by this reference. Capitalized terms are defined in Section 14 of this Agreement.

SECTION 2. RIGHT TO EXERCISE.

      (a) Exercisability. Subject to Subsections (b) and (c) below and the other conditions set
forth in this Agreement, all or part of this option may be exercised prior to its expiration at the
time or times set forth in the Notice of Stock Option Grant. Shares purchased by exercising this
option may be subject to the Right of Repurchase under Section 7.

      (b) $100,000 Limitation. If this option is designated as an ISO in the Notice of Stock Option
Grant, then the Optionee’s right to exercise this option shall be deferred to the extent (and only
to the extent) that this option otherwise would not be treated as an ISO by reason of the $100,000
annual limitation under Section 422(d) of the Code, except that:

      (i) The Optionee’s right to exercise this option shall in any event become
exercisable at least as rapidly as 20% per year over the five-year period commencing
on the Date of Grant, unless the Optionee is an officer of the Company, an Outside
Director or a Consultant; and

      (ii) The Optionee’s right to exercise this option shall no longer be deferred
if (A) the Company is subject to a Change in Control before the

 

 

Optionee’s Service
terminates, (B) this option does not remain outstanding, (C) this option is not
assumed by the surviving corporation or its parent and (D) the surviving corporation
or its parent does not substitute an option with substantially the same terms for
this option.

     (c) Stockholder Approval. Any other provision of this Agreement notwithstanding, no portion
of this option shall be exercisable at any time prior to the approval of the Plan by the Company’s
stockholders.

SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.

          Except as otherwise provided in this Agreement, this option and the rights and privileges
conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law
or otherwise) and shall not be subject to sale under execution, attachment, levy or similar
process.

SECTION 4. EXERCISE PROCEDURES.

     (a) Notice of Exercise. The Optionee or the Optionee’s representative may exercise this
option by giving written notice to the Company pursuant to Section 13(c). The notice shall specify
the election to exercise this option, the number of Shares for which it is being exercised and the
form of payment. The notice shall be signed by the person exercising this option. In the event
that this option is being exercised by the representative of the Optionee, the notice shall be
accompanied by proof (satisfactory to the Company) of the representative’s right to exercise this
option. The Optionee or the Optionee’s representative shall deliver to the Company, at the time of
giving the notice, payment in a form permissible under Section 5 for the full amount of the
Purchase Price.

     (b) Issuance of Shares. After receiving a proper notice of exercise, the Company shall cause
to be issued a certificate or certificates for the Shares as to which this option has been
exercised, registered in the name of the person exercising this option (or in the names of such
person and his or her spouse as community property or as joint tenants with right of survivorship).
The Company shall cause such certificate or certificates to be deposited in escrow or delivered to
or upon the order of the person exercising this option.

     (c) Withholding Taxes. In the event that the Company determines that it is required to
withhold any tax as a result of the exercise of this option, the Optionee, as a condition to the
exercise of this option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements satisfactory to
the Company to enable it to satisfy any withholding requirements that may arise in connection with
the vesting or disposition of Shares purchased by exercising this option.

SECTION 5. PAYMENT FOR STOCK.

     (a) Cash. All or part of the Purchase Price may be paid in cash or cash equivalents.

2

 

     (b) Surrender of Stock. All or any part of the Purchase Price may be paid by surrendering, or
attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be
surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value
on the date when this option is exercised. The Optionee shall not surrender, or attest to the
ownership of, Shares in payment of the Purchase Price if such action would cause the Company to
recognize compensation expense (or additional compensation expense) with respect to this option for
financial reporting purposes.

     (c) Exercise/Sale. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver
all or part of the sales proceeds to the Company.

     (d) Exercise/Pledge. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as
security for a loan, and to deliver all or part of the loan proceeds to the Company.

SECTION 6. TERM AND EXPIRATION.

     (a) Basic Term. This option shall in any event expire on the expiration date set forth in the
Notice of Stock Option Grant, which date is 10 years after the Date of Grant (five years after the
Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and
Section 3(b) of the Plan applies).

     (b) Termination of Service (Except by Death). If the Optionee’s Service terminates for any
reason other than death, then this option shall expire on the earliest of the following occasions:

      (i) The expiration date determined pursuant to Subsection (a) above;

      (ii) The date three months after the termination of the Optionee’s Service for
any reason other than Disability; or

      (iii) The date six months after the termination of the Optionee’s Service by
reason of Disability.

The Optionee may exercise all or part of this option at any time before its expiration under the
preceding sentence, but only to the extent that this option had become exercisable for vested
shares before the Optionee’s Service terminated. When the Optionee’s Service terminates, this
option shall expire immediately with respect to the number of Shares for which this option is not
yet exercisable and with respect to any Restricted Shares. In the event that the Optionee dies
after termination of Service but before the expiration of this option, all or part of this option
may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate
or by any person who has acquired this option directly from the Optionee by beneficiary
designation, bequest or inheritance, but only to the extent that this option had become exercisable
before the Optionee’s Service terminated.

3

 

     (c) Death of the Optionee. If the Optionee dies while in Service, then this option shall
expire on the earlier of the following dates:

      (i) The expiration date determined pursuant to Subsection (a) above; or

      (ii) The date 12 months after the Optionee’s death.

All or part of this option may be exercised at any time before its expiration under the preceding
sentence by the executors or administrators of the Optionee’s estate or by any person who has
acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance,
but only to the extent that this option had become exercisable before the Optionee’s death. When
the Optionee dies, this option shall expire immediately with respect to the number of Shares for
which this option is not yet exercisable and with respect to any Restricted Shares.

     (d) Leaves of Absence. For any purpose under this Agreement, Service shall be deemed to
continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the
Company in writing and if continued crediting of Service for such purpose is
expressly required by the terms of such leave or by applicable law (as determined by the
Company).

     (e) Notice Concerning ISO Treatment. If this option is designated as an ISO in the Notice of
Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the extent it is
exercised (i) more than three months after the date the Optionee ceases to be an Employee for any
reason other than death or permanent and total disability (as defined in Section 22(e)(3) of the
Code), (ii) more than 12 months after the date the Optionee ceases to be an Employee by reason of
such permanent and total disability or (iii) after the Optionee has been on a leave of absence for
more than 90 days, unless the Optionee’s reemployment rights are guaranteed by statute or by
contract.

SECTION 7. RIGHT OF REPURCHASE.

     (a) Scope of Repurchase Right. Unless they have become vested in accordance with the Notice
of Stock Option Grant and Subsection (c) below, the Shares acquired under this Agreement initially
shall be Restricted Shares and shall be subject to a right (but not an obligation) of repurchase by
the Company. The Optionee shall not transfer, assign, encumber or otherwise dispose of any
Restricted Shares, except as provided in the following sentence. The Optionee may transfer
Restricted Shares (i) by beneficiary designation, will or intestate succession or (ii) to the
Optionee’s spouse, children or grandchildren or to a trust established by the Optionee for the
benefit of the Optionee or the Optionee’s spouse, children or grandchildren, provided in either
case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all
provisions of this Agreement. If the Optionee transfers any Restricted Shares, then this Section 7
shall apply to the Transferee to the same extent as to the Optionee.

     (b) Condition Precedent to Exercise. The Right of Repurchase shall be exercisable with
respect to any Restricted Shares only during the 60-day period next following the later of:

4

 

      (i) The date when the Optionee’s Service terminates for any reason, with or
without cause, including (without limitation) death or disability; or

      (ii) The date when such Restricted Shares were purchased by the Optionee, the
executors or administrators of the Optionee’s estate or any person who has acquired
this option directly from the Optionee by bequest, inheritance or beneficiary
designation.

     (c) Lapse of Repurchase Right. The Right of Repurchase shall lapse with respect to the Shares
subject to this option in accordance with the vesting schedule set forth in the Notice of Stock
Option Grant. In addition, the Right of Repurchase shall lapse and all of the remaining Restricted
Shares shall become vested if (i) the Company is subject to a Change in Control before the
Optionee’s Service terminates and (ii) the Right of Repurchase is not assigned to the entity that
employs the Optionee immediately after the Change in Control or to its parent or subsidiary.

     (d) Repurchase Cost. If the Company exercises the Right of Repurchase, it shall pay the
Optionee an amount equal to the Exercise Price for each of the Restricted Shares being repurchased.

     (e) Exercise of Repurchase Right. The Right of Repurchase shall be exercisable only by written
notice delivered to the Optionee prior to the expiration of the 60-day period specified in
Subsection (b) above. The notice shall set forth the date on which the repurchase is to be
effected. Such date shall not be more than 30 days after the date of the
notice. The certificate(s) representing the Restricted Shares to be repurchased shall, prior
to the close of business on the date specified for the repurchase, be delivered to the Company
properly endorsed for transfer. The Company shall, concurrently with the receipt of such
certificate(s), pay to the Optionee the purchase price determined according to Subsection (d)
above. Payment shall be made in cash or cash equivalents or by canceling indebtedness to the
Company incurred by the Optionee in the purchase of the Restricted Shares. The Right of Repurchase
shall terminate with respect to any Restricted Shares for which it has not been timely exercised
pursuant to this Subsection (e).

     (f) Additional Shares or Substituted Securities. In the event of the declaration of a stock
dividend, the declaration of an extraordinary dividend payable in a form other than stock, a
spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar
transaction affecting the Company’s outstanding securities without receipt of consideration, any
new, substituted or additional securities or other property (including money paid other than as an
ordinary cash dividend) which are by reason of such transaction distributed with respect to any
Restricted Shares or into which such Restricted Shares thereby become convertible shall immediately
be subject to the Right of Repurchase. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the Restricted Shares.
Appropriate adjustments shall also, after each such transaction, be made to the price per share to
be paid upon the exercise of the Right of Repurchase in order to reflect any change in the
Company’s outstanding securities effected without receipt of consideration therefor; provided,
however, that the aggregate purchase price payable for the Restricted Shares shall remain the same.

5

 

     (g) Termination of Rights as Stockholder. If the Company makes available, at the time and
place and in the amount and form provided in this Agreement, the consideration for the Restricted
Shares to be repurchased in accordance with this Section 7, then after such time the person from
whom such Restricted Shares are to be repurchased shall no longer have any rights as a holder of
such Restricted Shares (other than the right to receive payment of such consideration in accordance
with this Agreement). Such Restricted Shares shall be deemed to have been repurchased in
accordance with the applicable provisions hereof, whether or not the certificate(s) therefor have
been delivered as required by this Agreement.

     (h) Escrow. Upon issuance, the certificates for Restricted Shares shall be deposited in
escrow with the Company to be held in accordance with the provisions of this Agreement. Any new,
substituted or additional securities or other property described in Subsection (f) above shall
immediately be delivered to the Company to be held in escrow, but only to the extent the Shares are
at the time Restricted Shares. All regular cash dividends on Restricted Shares (or other
securities at the time held in escrow) shall be paid directly to the Optionee and shall not be held
in escrow. Restricted Shares, together with any other assets or securities held in escrow
hereunder, shall be (i) surrendered to the Company for repurchase and cancellation upon the
Company’s exercise of its Right of Repurchase or Right of First Refusal or (ii) released to the
Optionee upon the Optionee’s request to the extent the Shares are no longer Restricted Shares (but
not more frequently than once every six months). In any event, all Shares which have vested (and
any other vested assets and securities attributable thereto) shall be released within 60 days after
the earlier of (i) the Optionee’s cessation of Service or (ii) the lapse of the Right of First
Refusal.

SECTION 8. RIGHT OF FIRST REFUSAL.

     (a) Right of First Refusal. In the event that the Optionee proposes to sell, pledge or
otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in
such Shares, the Company shall have the Right of First Refusal with respect to all (and not less
than all) of such Shares. If the Optionee desires to transfer Shares acquired under this
Agreement, the Optionee shall give a written Transfer Notice to the Company describing fully
the proposed transfer, including the number of Shares proposed to be transferred, the proposed
transfer price, the name and address of the proposed Transferee and proof satisfactory to the
Company that the proposed sale or transfer will not violate any applicable federal or state
securities laws. The Transfer Notice shall be signed both by the Optionee and by the proposed
Transferee and must constitute a binding commitment of both parties to the transfer of the Shares.
The Company shall have the right to purchase all, and not less than all, of the Shares on the terms
of the proposal described in the Transfer Notice (subject, however, to any change in such terms
permitted under Subsection (b) below) by delivery of a notice of exercise of the Right of First
Refusal within 30 days after the date when the Transfer Notice was received by the Company. The
Company’s rights under this Subsection (a) shall be freely assignable, in whole or in part.

     (b) Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30
days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days
following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject
to the Transfer Notice on the terms and conditions described in the Transfer Notice, provided that
any such sale is made in compliance with applicable federal and state

6

 

securities laws and not in
violation of any other contractual restrictions to which the Optionee is bound. Any proposed
transfer on terms and conditions different from those described in the Transfer Notice, as well as
any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First
Refusal and shall require compliance with the procedure described in Subsection (a) above. If the
Company exercises its Right of First Refusal, the parties shall consummate the sale of the Shares
on the terms set forth in the Transfer Notice within 60 days after the date when the Company
received the Transfer Notice (or within such longer period as may have been specified in the
Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment
for the Shares was to be made in a form other than cash or cash equivalents paid at the time of
transfer, the Company shall have the option of paying for the Shares with cash or cash equivalents
equal to the present value of the consideration described in the Transfer Notice.

     (c) Additional Shares or Substituted Securities. In the event of the declaration of a stock
dividend, the declaration of an extraordinary dividend payable in a form other than stock, a
spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar
transaction affecting the Company’s outstanding securities without receipt of consideration, any
new, substituted or additional securities or other property (including money paid other than as an
ordinary cash dividend) which are by reason of such transaction distributed with respect to any
Shares subject to this Section 8 or into which such Shares thereby become convertible shall
immediately be subject to this Section 8. Appropriate adjustments to reflect the distribution of
such securities or property shall be made to the number and/or class of the Shares subject to this
Section 8.

     (d) Termination of Right of First Refusal. Any other provision of this Section 8
notwithstanding, in the event that the Stock is readily tradable on an established securities
market when the Optionee desires to transfer Shares, the Company shall have no Right of First
Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by
Subsections (a) and (b) above.

     (e) Permitted Transfers. This Section 8 shall not apply to (i) a transfer by beneficiary
designation, will or intestate succession or (ii) a transfer to the Optionee’s spouse, children or
grandchildren or to a trust established by the Optionee for the benefit of the Optionee or the
Optionee’s spouse, children or grandchildren, provided in either case that the Transferee agrees in
writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If
the Optionee transfers any Shares acquired under this Agreement, either under
this Subsection (e) or after the Company has failed to exercise the Right of First Refusal,
then this Section 8 shall apply to the Transferee to the same extent as to the Optionee.

     (f) Termination of Rights as Stockholder. If the Company makes available, at the time and
place and in the amount and form provided in this Agreement, the consideration for the Shares to be
purchased in accordance with this Section 8, then after such time the person from whom such Shares
are to be purchased shall no longer have any rights as a holder of such Shares (other than the
right to receive payment of such consideration in accordance with this Agreement). Such Shares
shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether
or not the certificate(s) therefor have been delivered as required by this Agreement.

7

 

SECTION 9. LEGALITY OF INITIAL ISSUANCE.

          No Shares shall be issued upon the exercise of this option unless and until the Company has
determined that:

     (a) It and the Optionee have taken any actions required to register the Shares under the
Securities Act or to perfect an exemption from the registration requirements thereof;

     (b) Any applicable listing requirement of any stock exchange or other securities market on
which Stock is listed has been satisfied; and

     (c) Any other applicable provision of state or federal law has been satisfied.

SECTION 10. NO REGISTRATION RIGHTS.

          The Company may, but shall not be obligated to, register or qualify the sale of Shares under
the Securities Act or any other applicable law. The Company shall not be obligated to take any
affirmative action in order to cause the sale of Shares under this Agreement to comply with any
law.

SECTION 11. RESTRICTIONS ON TRANSFER.

     (a) Securities Law Restrictions. Regardless of whether the offering and sale of Shares under
the Plan have been registered under the Securities Act or have been registered or qualified under
the securities laws of any state, the Company at its discretion may impose restrictions upon the
sale, pledge or other transfer of such Shares (including the placement of appropriate legends on
stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the
Company, such restrictions are necessary or desirable in order to achieve compliance with the
Securities Act, the securities laws of any state or any other law.

     (b) Market Stand-Off. In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed under the Securities
Act, including the Company’s initial public offering, the Optionee shall not directly or indirectly
sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other
contract for the purchase of, purchase any option or other contract for the sale of, or otherwise
dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to,
any Shares acquired under this Agreement without the prior written consent of the Company or its
underwriters. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time
following the date of the final prospectus for the offering as may be requested by the Company or
such underwriters. In no event, however, shall such period exceed 180 days. The Market Stand-Off
shall in any event terminate two years after the date of the Company’s initial public offering. In
the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction
affecting the Company’s outstanding securities without receipt of consideration, any new,
substituted or additional securities which are by reason of such transaction distributed with
respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become
convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market
Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares

8

 

acquired
under this Agreement until the end of the applicable stand-off period. The Company’s underwriters
shall be beneficiaries of the agreement set forth in this Subsection (b). This Subsection (b)
shall not apply to Shares registered in the public offering under the Securities Act, and the
Optionee shall be subject to this Subsection (b) only if the directors and officers of the Company
are subject to similar arrangements.

     (c) Investment Intent at Grant. The Optionee represents and agrees that the Shares to be
acquired upon exercising this option will be acquired for investment, and not with a view to the
sale or distribution thereof.

     (d) Investment Intent at Exercise. In the event that the sale of Shares under the Plan is not
registered under the Securities Act but an exemption is available which requires an investment
representation or other representation, the Optionee shall represent and agree at the time of
exercise that the Shares being acquired upon exercising this option are being acquired for
investment, and not with a view to the sale or distribution thereof, and shall make such other
representations as are deemed necessary or appropriate by the Company and its counsel.

     (e) Legends. All certificates evidencing Shares purchased under this Agreement shall bear the
following legend:

“THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR
IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN
AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE
PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY
CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN
REPURCHASE RIGHTS UPON TERMINATION OF SERVICE WITH THE COMPANY. THE SECRETARY OF
THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER
HEREOF WITHOUT CHARGE.”

All certificates evidencing Shares purchased under this Agreement in an unregistered transaction
shall bear the following legend (and such other restrictive legends as are required or deemed
advisable under the provisions of any applicable law):

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

     (f) Removal of Legends. If, in the opinion of the Company and its counsel, any legend placed
on a stock certificate representing Shares sold under this Agreement is no longer

9

 

required, the
holder of such certificate shall be entitled to exchange such certificate for a certificate
representing the same number of Shares but without such legend.

     (g) Administration. Any determination by the Company and its counsel in connection with any
of the matters set forth in this Section 11 shall be conclusive and binding on the Optionee and all
other persons.

SECTION 12. ADJUSTMENT OF SHARES.

          In the event of any transaction described in Section 8(a) of the Plan, the terms of this
option (including, without limitation, the number and kind of Shares subject to this option and the
Exercise Price) shall be adjusted as set forth in Section 8(a) of the Plan. In the event that the
Company is a party to a merger or consolidation, this option shall be subject to the agreement of
merger or consolidation, as provided in Section 8(b) of the Plan.

SECTION 13. MISCELLANEOUS PROVISIONS.

     (a) Rights as a Stockholder. Neither the Optionee nor the Optionee’s representative shall
have any rights as a stockholder with respect to any Shares subject to this option until the
Optionee or the Optionee’s representative becomes entitled to receive such Shares by filing a
notice of exercise and paying the Purchase Price pursuant to Sections 4 and 5.

     (b) No Retention Rights. Nothing in this option or in the Plan shall confer upon the Optionee
any right to continue in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining
the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate
his or her Service at any time and for any reason, with or without cause.

     (c) Notice. Any notice required by the terms of this Agreement shall be given in writing and
shall be deemed effective upon personal delivery or upon deposit with the United States Postal
Service, by registered or certified mail, with postage and fees prepaid. Notice shall be addressed
to the Company at its principal executive office and to the Optionee at the address that he or she
most recently provided to the Company.

     (d) Entire Agreement. The Notice of Stock Option Grant, this Agreement and the Plan
constitute the entire contract between the parties hereto with regard to the subject matter hereof.
They supersede any other agreements, representations or understandings (whether oral or written
and whether express or implied) which relate to the subject matter hereof.

     (e) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California, as such laws are applied to contracts entered into and performed
in such State.

SECTION 14. DEFINITIONS.

     (a) “Agreement” shall mean this Stock Option Agreement.

10

 

     (b) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from
time to time or, if a Committee has been appointed, such Committee.

     (c) “Change in Control” shall mean:

      (i) The consummation of a merger or consolidation of the Company with or into
another entity or any other corporate reorganization, if persons who were not
stockholders of the Company immediately prior to such merger, consolidation or other
reorganization own immediately after such merger, consolidation or other
reorganization 50% or more of the voting power of the
outstanding securities of each of (A) the continuing or surviving entity and
(B) any direct or indirect parent corporation of such continuing or surviving
entity; or

      (ii) The sale, transfer or other disposition of all or substantially all of the
Company’s assets.

A transaction shall not constitute a Change in Control if its sole purpose is to change the state
of the Company’s incorporation or to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company’s securities immediately before such
transaction.

     (d) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (e) “Committee” shall mean a committee of the Board of Directors, as described in Section 2 of
the Plan.

     (f) “Company” shall mean Shutterfly, Inc., a Delaware corporation.

     (g) “Consultant” shall mean a person who performs bona fide services for the Company, a Parent
or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.

     (h) “Date of Grant” shall mean the date specified in the Notice of Stock Option Grant, which
date shall be the later of (i) the date on which the Board of Directors resolved to grant this
option or (ii) the first day of the Optionee’s Service.

     (i) “Disability” shall mean that the Optionee is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment.

     (j) “Employee” shall mean any individual who is a common-law employee of the Company, a Parent
or a Subsidiary.

     (k) “Exercise Price” shall mean the amount for which one Share may be purchased upon exercise
of this option, as specified in the Notice of Stock Option Grant.

11

 

     (l) “Fair Market Value” shall mean the fair market value of a Share, as determined by the
Board of Directors in good faith. Such determination shall be conclusive and binding on all
persons.

     (m) “ISO” shall mean an employee incentive stock option described in Section 422(b) of the
Code.

     (n) “Nonstatutory Option” shall mean a stock option not described in Sections 422(b) or 423(b)
of the Code.

     (o) “Notice of Stock Option Grant” shall mean the document so entitled to which this Agreement
is attached.

     (p) “Optionee” shall mean the individual named in the Notice of Stock Option Grant.

     (q) “Outside Director” shall mean a member of the Board of Directors who is not an Employee.

     (r) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

     (s) “Plan” shall mean the Shutterfly, Inc. 1999 Stock Plan, as in effect on the Date of Grant.

     (t) “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with
respect to which this option is being exercised.

     (u) “Restricted Share” shall mean a Share that is subject to the Right of Repurchase.

     (v) “Right of First Refusal” shall mean the Company’s right of first refusal described in
Section 8.

     (w) “Right of Repurchase” shall mean the Company’s right of repurchase described in Section 7.

     (x) “Securities Act” shall mean the Securities Act of 1933, as amended.

     (y) “Service” shall mean service as an Employee, Outside Director or Consultant.

     (z) “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 of the
Plan (if applicable).

12

 

     (aa) “Stock” shall mean the Common Stock of the Company, with a par value of $0.0001 per
Share.

     (bb) “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

     (cc) “Transferee” shall mean any person to whom the Optionee has directly or indirectly
transferred any Share acquired under this Agreement.

     (dd) “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in
Section 8.

13

 

Shutterfly, Inc. 1999 Stock Plan

Notice of Stock Option Exercise

Optionee Information:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Social Security Number:
	 	 	 	-
	 	 	 	-	 	 
	 

	 	 
	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Address:

	 	 	 	 	 	Employee Number:	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

Option Information:

	 	 	 	 	 	 	 	 	 	 	 
	Date of Grant:

	 	                     
                              ,
	 	 	 	Type of Option:
	 	o
	 	Nonstatutory (NSO) or
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	                   Month             
 Day         Year

	 	 	 	 	 	o
	 	Incentive (ISO)

	 	 	 	 	 	 	 	 	 
	Exercise Price per share:

	 	$                     	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Total number of shares of Common Stock of Shutterfly, Inc. (the “Company”) covered by option:	 	 	 	shares
	 

	 	 	 	 	 	 	 	 

Exercise Information:

Number of shares of Common Stock of the Company for which
option is being exercised now:                     . (These
shares are referred to below as the “Purchased Shares.”)

Total Exercise Price for the Purchased Shares: $                     

Form of payment enclosed [check all that apply]:

	 	 	 	 	 	 	 	 	 
	o

	 	Check for
$                     , made
payable to
“Shutterfly, Inc.”
	 	 	 	o
	 	Certificate(s) for
                     shares of Common
Stock of the Company
that I have owned for at
least six months.
(These shares will be
valued as of the date
this notice is received
by the Company.)
	 

	 	 	 	 	 	o
	 	Attestation Form
covering                      shares
of Common Stock of the
Company. (These shares
will be valued as of the
date this notice is
received by the
Company.)

Names in which the Purchased Shares should be registered [you must check one]:

	 	 	 	 	 	 	 
	o

	 	In my name only	 	 	 	 
	o

	 	In the names of my spouse and myself as community property
	 	 	 	My spouse’s name (if applicable):
	o

	 	In the names of my spouse and myself as
joint tenants with the right of
survivorship	 	 	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 
	The certificate for the Purchased
Shares should be sent to the
following address:

	 	  
  
  

	 	 

You must sign this Notice on the second page before submitting it to the Company.

 

 

Representations and Acknowledgments of the Optionee:

	1.	 	I represent and warrant to the Company that I am acquiring and will hold the Purchased
Shares for investment for my account only, and not with a view to, or for resale in connection
with, any “distribution” of the Purchased Shares within the meaning of the Securities Act of
1933, as amended (the “Securities Act”).
	 
	2.	 	I understand that the Purchased Shares have not been registered under the Securities Act by
reason of a specific exemption therefrom and that the Purchased Shares must be held
indefinitely, unless they are subsequently registered under the Securities Act or I obtain an
opinion of counsel (in form and substance satisfactory to the Company and its counsel) that
registration is not required.
	 
	3.	 	I acknowledge that the Company is under no obligation to register the Purchased Shares.
	 
	4.	 	I am aware of the adoption of Rule 144 by the Securities and Exchange Commission under the
Securities Act, which permits limited public resales of securities acquired in a non-public
offering, subject to the satisfaction of certain conditions. These conditions include
(without limitation) that certain current public information about the issuer is available,
that the resale occurs only after the holding period required by Rule 144 has been satisfied,
that the sale occurs through an unsolicited “broker’s transaction” and that the amount of
securities being sold during any three-month period does not exceed specified limitations. I
understand that the conditions for resale set forth in Rule 144 have not been satisfied and
that the Company has no plans to satisfy these conditions in the foreseeable future.
	 
	5.	 	I will not sell, transfer or otherwise dispose of the Purchased Shares in violation of the
Securities Act, the Securities Exchange Act of 1934, or the rules promulgated thereunder,
including Rule 144 under the Securities Act.
	 
	6.	 	I acknowledge that I have received and had access to such information as I consider necessary
or appropriate for deciding whether to invest in the Purchased Shares and that I had an
opportunity to ask questions and receive answers from the Company regarding the terms and
conditions of the issuance of the Purchased Shares.
	 
	7.	 	I am aware that my investment in the Company is a speculative investment which has limited
liquidity and is subject to the risk of complete loss. I am able, without impairing my
financial condition, to hold the Purchased Shares for an indefinite period and to suffer a
complete loss of my investment in the Purchased Shares.
	 
	8.	 	I acknowledge that the Purchased Shares remain subject to the Company’s right of first
refusal and may remain subject to the Company’s right of repurchase at the exercise price, all
in accordance with the applicable Notice of Stock Option Grant and Stock Option Agreement.
	 
	9.	 	I acknowledge that I am acquiring the Purchased Shares subject to all other terms of the
Notice of Stock Option Grant and Stock Option Agreement.
	 
	10.	 	I acknowledge that I have received a copy of the Company’s memorandum regarding the federal
income tax consequences of an option exercise and the tax election under section 83(b) of the
Internal Revenue Code. In the event that I choose to make a section 83(b) election, I
acknowledge that it is my responsibility—and not the Company’s responsibility—to file the
election in a timely manner, even if I ask the Company or its agents to make the filing on my
behalf. I acknowledge that the Company has encouraged me to consult my own adviser to
determine the tax consequences of acquiring the Purchased Shares at this time.
	 
	11.	 	I agree to seek the consent of my spouse to the extent required by the Company to enforce the
foregoing.

	 	 	 	 	 
	Signature:

	 	Date:	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 

	 	 

2

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