Document:

ex10.04

	
	
	 

Exhibit 10.04

SHUTTERFLY, INC.
NOTICE OF INDUCEMENT RESTRICTED STOCK UNIT AWARD 
“NOTICE OF GRANT”
(U.S. FORM)
GRANT NUMBER:  ________

		
	Name:
	__________________________________

    
		
	Address:
	__________________________________

You (“Participant”) have been granted an award of Restricted Stock Units (“RSUs”), subject to the terms and conditions of the attached Inducement Award Agreement (Restricted Stock Units) (hereinafter “RSU Agreement”) and your offer letter, as follows:

		
	Number of RSUs:
	__________________________________    

		
	Date of Grant:
	__________________________________            

Expiration Date:  The date on which settlement of all RSUs granted hereunder occurs, with earlier expiration upon the Termination Date

Vesting Schedule:  The RSUs will vest as follows: 25% on each of the first four (4) anniversaries of the Dare of Grant, subject to your continued service as an employee, director or consultant of the Company on each such vesting date.

Participant understands that his service relationship with the Company (and/or Parent or Subsidiary) is for an unspecified duration, can be terminated at any time with or without cause (i.e., is “at-will”), and that nothing in this Notice of Grant, the attached Inducement Award Agreement or Participant's offer letter changes the at-will nature of that relationship. Participant acknowledges that the vesting of the RSUs pursuant to this Notice of Grant ceases on the Termination Date.  Participant also understands that this Notice of Grant is subject to the terms and conditions of both the RSU Agreement and the offer letter, both of which are incorporated herein by reference.  Participant acknowledges that he has read both the RSU Agreement and the offer letter.

		
	PARTICIPANT
	SHUTTERFLY, INC.

		
	Signature:_____________________________
	By:_____________________________

Print Name:_____________________________        Its: _____________________________

 

19433/00003/DOCS/1471634.1 
SHUTTERFLY, INC.
INDUCEMENT AWARD AGREEMENT (RESTRICTED STOCK UNITS)
(U.S. FORM)

You have been granted Restricted Stock Units (“RSUs”) subject to the terms, restrictions and conditions of the your offer letter, the Notice of Restricted Stock Unit Grant (“Notice of Grant”) and this Agreement.
1.Settlement.  Settlement of RSUs shall be made within 30 days following the applicable date of vesting under the vesting schedule set forth in the Notice of Grant.  Settlement of RSUs shall be in Shares. 

2.No Stockholder Rights.  Unless and until such time as Shares are issued in settlement of vested RSUs, Participant shall have no ownership of the Shares allocated to the RSUs and shall have no right dividends or to vote such Shares.

3.Dividend Equivalents.   Dividends, if any (whether in cash or Shares), shall not be credited to Participant.

4.No Transfer.  The RSUs and any interest therein shall not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of.  

5.Termination.  If Participant's service Terminates for any reason, all unvested RSUs shall be forfeited to the Company forthwith, and all rights of Participant to such RSUs shall immediately terminate.  In case of any dispute as to whether Termination has occurred, the Committee shall have sole discretion to determine whether such Termination has occurred and the effective date of such Termination.

6.Acknowledgement.  The Company and Participant agree that the RSUs are granted under and governed by this Agreement and by the provisions of the Participant's offer letter (incorporated herein by reference).  Participant: (i) acknowledges receipt of a copy of the offer letter, (ii) represents that Participant has carefully read and is familiar with their provisions, and (iii) hereby accepts the RSUs subject to all of the terms and conditions set forth herein and those set forth in the offer letter and the Notice of Grant.  

7.U.S. Tax Consequences.  Participant acknowledges that there will be tax consequences upon settlement of the RSUs or disposition of the Shares, if any, received in connection therewith, and Participant should consult a tax adviser regarding Participant's tax obligations prior to such settlement or disposition.  Upon vesting of the RSU, Participant will include in income the fair market value of the Shares subject to the RSU.  The included amount will be treated as ordinary income by Participant and will be subject to withholding by the Company when required by applicable law (the “Tax Withholding Obligation”).  Upon vesting of the Shares in accordance with Vesting Schedule set forth in the Notice, such vested Shares, minus the number of Shares sold to offset the Tax Withholding Obligation (as defined herein) described in Section 4 of this Agreement, will be deposited directly into the Grantee's account with the brokerage firm so designated by the Company for this purpose (hereinafter, the “Designated Brokerage Firm”).  Participant's acceptance of this Award constitutes Participant's authorization to the Company to sell on Participant's behalf a whole number of Shares from those Shares issuable to Participant as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy the minimum applicable Tax Withholding Obligation.  Participant has entered into or will enter into an instruction under Rule 10b5-1 to authorize the sale described in this Section 4.  Participant shall also complete any one-time sale authorization form required by the Designated Brokerage Firm.  Such Shares shall be sold on the first trading day immediately following the day on which such Tax Withholding Obligation arises (e.g., a vesting date) with a market order at the opening of such trading day by the Designated Brokerage Firm.  The Participant shall be responsible for all broker's fees and other costs of sale, and the Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale.  To the extent the proceeds of such sale exceed Participant's minimum Tax Withholding Obligation, the excess will be placed in the Participant's 

account with the Designated Brokerage Firm.  Participant acknowledges that the Company or the Designated Brokerage Firm is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the Participant's minimum Tax Withholding Obligation.  Participant is responsible for payment of any additional amounts to satisfy Participant's minimum Tax Withholding Obligation.  In such event, the Company shall contact Participant regarding the manner in which such additional amount will be remitted to the Company.  Upon disposition of the Shares, any subsequent increase or decrease in value will be treated as short-term or long-term capital gain or loss, depending on whether the Shares are held for more than one year from the date of settlement.  Further, a RSU may be considered a deferral of compensation that is subject to Section 409A of the Code.  Section 409A of the Code imposes special rules to the timing of making and effecting certain amendments of this RSU with respect to distribution of any deferred compensation.  You should consult your personal tax advisor for more information on the actual and potential tax consequences of this RSU.

8.Compliance with Laws and Regulations.  The issuance of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state and federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company's Common Stock may be listed or quoted at the time of such issuance or transfer.

9.Successors and Assigns.  The Company may assign any of its rights under this Agreement.  This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon Participant and Participant's heirs, executors, administrators, legal representatives, successors and assigns.

10.Governing Law; Severability.  The Participant's offer letter and Notice of Grant are incorporated herein by reference.  The offer letter, the Notice of Grant and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.  This Agreement is governed by California law except for that body of law pertaining to conflict of laws.  If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.

12.    No Rights as Employee, Director or Consultant.  Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary of the Company, to terminate Participant's employment, for any reason, with or without cause.
By your signature and the signature of the Company's representative on the Notice of Grant, Participant and the Company agree that this RSU is granted under and governed by the terms and conditions of your offer letter, the Notice of Grant and this Agreement.  Participant has reviewed the offer letter, the Notice of Grant and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement, and fully understands all provisions of the offer letter, the Notice of Grant and this Agreement.  Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions relating to the offer letter, the Notice of Grant and this Agreement.  Participant further agrees to notify the Company upon any change in Participant's residence address.Exhibit43

Exhibit 4.3

Shutterfly, Inc. 2012 Israeli Restricted Stock Unit Inducement Plan
Under Section 102 of the Israeli Tax Ordinance 

1.This Shutterfly, Inc. 2012 Israeli Restricted Stock Unit Inducement Plan (the “Plan”) was approved by the board of directors (the “Board”) of Shutterfly, Inc. (the “Company”) on May 21, 2012, and was filed with the Israel Tax Authority (the “ITA”) on June 16, 2012.  Capitalized terms used herein and not defined in the text of the Plan are defined in Section 11 below.
2.This Plan shall be adminstrated by the Committee or by the Board acting as the Committee. As such, the Committee shall have full authority in its discretion to determine eligible Participants and the terms and conditions applying to Awards under the Plan and any other matter which is necessary or desirable for, or incidental to, the administration of the Plan and the granting of Awards, including any independent director approval requirements in accordance with Rule 5635(c)(4) of the Marketplace Rules of the Nasdaq Stock Market, Inc.
3.To be eligible to receive an Award under this Plan, a Participant must be a resident of the State of Israel and a person to whom the Company may issue securities without stockholder approval in accordance with Rule 5635(c)(4) of the Marketplace Rules of the Nasdaq Stock Market, Inc. as are selected from time to time by the Committee in its sole discretion.
4.No member of the Board shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted hereunder.  Subject to the Company’s decision and to all approvals legally required, each member of the Board shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by him or her, or any liability arising out of any act or omission to act in connection with the Plan unless arising out of such member's own willful misconduct or bad faith, to the fullest extent permitted by applicable law.
5.The term of this Plan is 10 years from the effective date, which shall be the closing of the Share Purchase Agreement, made as of May 22, 2012, by and among Shutterfly, Inc., a Delaware corporation, Photoccino Ltd, an Israeli company, the shareholders that are signatories thereto, and Mr. Liav Even-Chen solely in his capacity as the representative of the selling parties (the “Share Purchase Agreement”). 
6.The maximum number of shares of the Company’s Common Stock, par value $0.0001 per share (the “Shares”) issuable under Awards made under the Plan shall be as determined in accordance with the terms of Section 7.11 of the Share Purchase Agreement.
7.All Awards made pursuant to this Plan shall be governed by and subject to Section 102 of the Israeli Income Tax Ordinance [New Version], 5721-1961 (as now in effect or as hereafter amended, the “Ordinance”) and the rules and regulations promgulated thereunder, including specifically the Income Tax Rules (Tax Benefits in Stock Issuances to Employees) 5763-2003 (the “Rules”). The terms of Section 102 of the Ordinance (“Section 102”) and the Ordinance shall be deemed an integral part of any Trustee 102 Award made hereunder and shall prevail over any term contained in the Plan or any Award Agreement that is not consistent therewith.
8.The Company has elected that all Awards under this Plan shall be made pursuant to Section 102(b)(2) of the Ordinance as Trustee 102 Awards under the Capital Gains Track. The Company’s election to grant Trustee 102 Awards under the Capital Gains Track shall be filed with the ITA. 
9.Any provisions of the Ordinance and any certificates or rulings of the ITA, even if not expressly specified in this Plan, or any documents which are necessary to receive or maintain any tax benefit pursuant to Section 102 shall be binding on the Participant. The Trustee and the Participant shall comply with the Ordinance and the Rules, and the terms and conditions of the Trust Agreement entered into between the Company and the Trustee. Further, the Participant agrees to execute any and all documents which the Company or the Trustee may reasonably determine to be necessary in order to comply with the provision of any applicable law, and, particularly, Section 102. To the extent that the Shares are listed on any established stock exchange or a national market system, the provisions of Section 102(b)(3) of the Ordinance will apply with respect to the Israeli tax rate applicable to such Awards.
10.The Awards as well as any Shares allocated or issued upon exercise or settlement of such Award and/or bonus shares and/or share dividend and/or any rights granted with respect to such Award, shall be held by the Trustee for the benefit of the Participant for the requisite Holding Period. After termination of the Holding Period, the Trustee may release such Awards and any such Shares, provided that: (i) the Trustee received an acknowledgment from the 

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Exhibit 4.3

ITA that the Participant has paid any applicable tax due pursuant to the Ordinance, or (ii) the Company and/or an Affiliate and/or the Trustee have made other arrangements for the deduction of tax at source acceptable to the Trustee. 
11.Subject to the provisions of Section 102, a Participant shall not be entitled to sell or release from trust any Award, any Shares received upon the settlement of any such Award and/or bonus shares and/or share dividend granted with respect to such Award, until the lapse of the Holding Period and in accordance with Section 102, unless entitled to do so under applicable law. Notwithstanding the foregoing, the Trustee may, pursuant to a written request and subject to applicable law, release and transfer such Shares to a designated third party, provided that both of the following conditions have been fulfilled prior to such transfer: (i) all taxes required to be paid upon the release and transfer of the shares have been withheld for transfer to the tax authorities and (ii) the Trustee has received written confirmation from the Company that all requirements for such release and transfer have been fulfilled according to the terms of the Company’s corporate documents, this Agreement and any applicable law.  To avoid doubt, if any such sale or release occurs during the Holding Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedures promulgated thereunder, including the different tax ramifications, shall apply to and shall be borne by the Participant.
12.All other terms and conditions of the awards granted pursuant to this Plan, shall be set forth in the Award Agreements under the Plan. 
13.The Board may at any time terminate or amend this Plan in any respect, including, without limitation, amendment of any form of Award; provided, however, that a Participant’s Award shall be governed by the version of this Plan then in effect at the time such Award was granted.
14.Certain definitions: 
a.“Affiliate” means any “employing company” within the meaning of Section 102(a) of the Ordinance.  
b.“Award” means awards of Restricted Stock Units to Participants under this Plan.
c.“Capital Gains Track” means the tax alternative set forth in Section 102(b)(2) of the Ordinance pursuant to which income resulting from the sale of Shares derived from Awards is taxed as a capital gain.
d.“Committee” means the Compensation Committee of the Board or those persons to whom administration of the Plan, or part of the Plan, has been delegated as permitted by law.
e.“Holding Period” means the requisite period prescribed by the Ordinance and the Rules, or such other period as may be required by the ITA, with respect to Trustee 102 Awards, during which Trustee 102 Awards awarded by the Company must be held by the Trustee for the benefit of the person to whom it was granted
f.“Participant” means any eligible employee, director or Nosei Misra - Officer Holder (as such term is defined in the Israeli Companies’ Law, 5759-1999) of the Company or its Affiliate, but excluding any Controlling Shareholder, as defined in the Ordinance.
g.“Trustee” means any individual or entity appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance and the regulations thereof.
h.“Trustee 102 Award” means an Award granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of a Participant.

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