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 ”).
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:
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1.1
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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.
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1.2
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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.
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1.3
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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.
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1.4
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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.
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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:
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4.1
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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
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4.2
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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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2
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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.
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4.3
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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.
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5.
Partial Indemnification and
Contribution .
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5.1
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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.
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5.2
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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
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