FIFTH AMENDED AND RESTATED
INVESTORS’ RIGHTS AGREEMENT
THIS FIFTH AMENDED
AND RESTATED INVESTORS’ RIGHTS AGREEMENT is made as of
November 11, 2005, by and among Shutterfly, Inc., a Delaware
corporation (the “Company”), and the investors listed
on Schedule A hereto, each of which is herein referred
to as an “Investor.”
WHEREAS, certain
of the Investors (the “Prior Investors”) possess
registration and other rights granted pursuant to that certain
Fourth Amended and Restated Investors’ Rights Agreement,
dated October 11, 2002, by and between the Company and the
persons listed on the Schedule of Investors attached thereto (the
“Prior Agreement”);
WHEREAS, certain
of the Investors (the “Series F Investors”) are
parties to the Series F Preferred Stock Purchase Agreement of
even date herewith as such agreement may be amended from time to
time (the “Series F Agreement”) among the Company
and the persons listed on the Schedule of Investors attached
thereto, pursuant to which the Series F Investors are
purchasing shares of Series F Preferred Stock of the Company
(the “Financing”); and
WHEREAS, in order
to induce the Company to approve the issuance of the Series F
Preferred Stock and to induce the Series F Investors to invest
funds in the Company pursuant to the Series F Agreement, the
Prior Investors, representing a majority of the Holders of
Registrable Securities (as defined hereinafter) outstanding prior
to the issuance of the Series F Preferred Stock, hereby agree
to waive their rights under the Prior Agreement including (without
limitation) any Right of First Offer with respect to the sale and
issuance of Series F Preferred Stock, and the Investors and
the Company hereby agree that this Agreement shall govern the
rights of the Investors to cause the Company to register shares of
Common Stock issued or issuable to them and certain other matters
as set forth herein;
NOW, THEREFORE,
THE PARTIES HEREBY AGREE AS FOLLOWS:
1.
Registration Rights . The Company covenants and agrees as
follows:
1.1
Definitions . For purposes of this
Section 1:
(a) The
term “Act” means the Securities Act of 1933, as
amended.
(b) The
term “Form S-3” means such form under the Act as
in effect on the date hereof and as may be amended from time to
time, or any similar successor registration form under the Act
subsequently adopted by the SEC that permits inclusion or
incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(c) The
term “Holder” means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.11 hereof.
(d) The
term “Initial Offering” means the Company’s first
firm commitment underwritten public offering of its Common Stock
under the Act.
(e) The
term “1934 Act” means the Securities Exchange Act of
1934, as amended.
(f) The
term “register,” “registered,” and
“registration” refer to a registration effected by
preparing and filing a registration statement or similar document
in compliance with the Act and applicable rules and regulations
thereunder, and the declaration or ordering of effectiveness of
such registration statement or document.
(g) The
term “Registrable Securities” means (i) the Common
Stock issuable or issued upon conversion of the Series A
Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock held by the
Holders and (ii) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or
other security that is issued as) a dividend or other distribution
with respect to, or in exchange for, or in replacement of, the
shares referenced in (i) above, excluding in all cases,
however, any Registrable Securities sold by a person in a
transaction in which his rights under this Section 1 are not
assigned in accordance with Section 1.11 hereof.
(h) The
number of shares of “Registrable Securities”
outstanding shall be determined by the number of shares of Common
Stock outstanding that are, and the number of shares of Common
Stock issuable pursuant to then exercisable or convertible
securities that are, Registrable Securities.
(i) The
term “SEC” shall mean the Securities and Exchange
Commission or any other federal agency at the time administering
the Act.
1.2
Request for Registration .
(a) Subject
to the conditions of this Section 1.2, if the Company shall
receive at any time after the earlier of (i) three
(3) years after the date of this Agreement or (ii) six
(6) months after the effective date of the Initial Offering, a
written request from any Holder or Holders who in the aggregate
hold forty percent (40%) or more of the Registrable Securities then
outstanding (the “Initiating Holders”) that the Company
file a registration statement under the Act covering the
registration of Registrable Securities with an anticipated
aggregate offering price of at least $7,500,000, then the Company
shall, within twenty (20) days of the receipt thereof, give
written notice of such request to all Holders, and subject to the
limitations of this Section 1.2, use its best efforts to
effect, as soon as practicable, the registration under the Act
(including, without limitation, filing post-effective amendments,
appropriate qualifications under applicable blue sky or other state
securities laws, and appropriate compliance with the Act) and as
would permit or facilitate the sale and distribution of all
Registrable Securities that the Holders request to be registered in
a written request received by the Company within twenty
(20) days of the mailing of the Company’s notice
pursuant to this Section 1.2(a).
(b) If
the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made
pursuant to this Section 1.2 and the Company shall
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include such
information in the written notice referred to in
Section 1.2(a). In such event the right of any Holder to
include its Registrable Securities in such registration shall be
conditioned upon such Holder’s participation in such
underwriting and the inclusion of such Holder’s Registrable
Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder)
to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Initiating
Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of
this Section 1.2, if the underwriter advises the Company that
marketing factors require a limitation of the number of securities
underwritten (including Registrable Securities), then the Company
shall so advise all Holders of Registrable Securities that would
otherwise be underwritten pursuant hereto, and the number of shares
that may be included in the underwriting shall be allocated to the
Holders of such Registrable Securities on a pro rata basis based on
the number of Registrable Securities held by all such Holders
(including the Initiating Holders); provided, however, that the
number of shares of Registrable Securities to be included in such
underwriting and registration shall not be reduced unless all other
securities of the Company are first entirely excluded from the
underwriting and registration. Any Registrable Securities excluded
or withdrawn from such underwriting shall be withdrawn from the
registration.
(c) The
Company shall not be required to effect a registration pursuant to
this Section 1.2:
(i) in
any particular jurisdiction in which the Company would be required
to execute a general consent to service of process in effecting
such registration, unless the Company is already subject to service
in such jurisdiction and except as may be required under the Act;
or
(ii) after
the Company has effected three (3) registrations pursuant to
this Section 1.2, and such registrations have been declared or
ordered effective; or
(iii) during
the period starting with the date sixty (60) days prior to the
Company’s good faith estimate of the date of the filing of,
and ending on a date one hundred eighty (180) days following
the effective date of, a Company-initiated registration subject to
Section 1.3 below (other than a registration relating solely
to the sale of securities to participants in a Company stock plan,
a registration relating to a corporate reorganization or other
transaction under Rule 145 of the Act, or a registration on any
form that does not include substantially the same information as
would be required to be included in a registration statement
covering the sale of the Registrable Securities), provided that the
Company is actively employing in good faith its best efforts to
cause such registration statement to become effective;
or
(iv) if
the Initiating Holders propose to dispose of Registrable Securities
that may be immediately registered on Form S-3 pursuant to a
request made under Section 1.4 hereof; or
(v) if
the Company shall furnish to Holders requesting a registration
statement pursuant to this Section 1.2, a certificate signed
by the Company’s Chief Executive Officer or Chairman of the
Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the
Company and its
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stockholders
for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing
for a period of not more than one hundred twenty (120) days
after receipt of the request of the Initiating Holders, provided
that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12)-month
period.
1.3
Company Registration .
(a) If
(but without any obligation to do so) the Company proposes to
register (including for this purpose a registration effected by the
Company for stockholders other than the Holders) any of its stock
or other securities under the Act in connection with the public
offering of such securities (other than a registration relating
solely to the sale of securities to participants in a Company stock
plan, a registration relating to a corporate reorganization or
other transaction under Rule 145 of the Act, or a registration
on any form that does not include substantially the same
information as would be required to be included in a registration
statement covering the sale of the Registrable Securities), the
Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such
notice by the Company in accordance with Section 3.5, the
Company shall, subject to the provisions of Section 1.3(c),
use its best efforts to cause to be registered under the Act all of
the Registrable Securities that each such Holder has requested to
be registered. Such written request by each Holder may specify all
or a part of that Holder’s Registrable Securities.
(b)
Right to Terminate Registration . The Company shall have the
right to terminate or withdraw any registration initiated by it
under this Section 1.3 prior to the effectiveness of such
registration whether or not any Holder has elected to include
securities in such registration. The expenses of such withdrawn
registration shall be borne by the Company in accordance with
Section 1.7 hereof.
(c)
Underwriting Requirements . In connection with any offering
involving an underwriting of shares of the Company’s capital
stock, the Company shall not be required under this
Section 1.3 to include any of the Holders’ securities in
such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters) and
enter into an underwriting agreement in customary form with an
underwriter or underwriters selected by the Company, and then only
in such quantity as the underwriters determine in their sole
discretion will not jeopardize the success of the offering by the
Company. If the total amount of securities, including Registrable
Securities, requested by stockholders to be included in such
offering exceeds the amount of securities sold other than by the
Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall
be required to include in the offering only that number of
Registrable Securities, that the underwriters determine in their
sole discretion will not jeopardize the success of the offering
(the Registrable Securities so included to be apportioned pro rata
among the selling Holders according to the total amount of
securities entitled to be included therein owned by each selling
Holder or in such other proportions as shall mutually be agreed to
by such selling Holders), but in no event shall (i) the amount
of securities of the selling Holders included in the offering be
reduced below thirty-five percent (35%) of the total amount of
securities included in such offering, unless such offering is the
Initial Offering of the Company’s securities, in which case
the selling Holders may be excluded if the underwriters make the
determination described
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above and no
other stockholder’s securities are included, or
(ii) notwithstanding (i) above, any shares being sold by
a Holder exercising a demand registration right granted in
Section 1.2 be excluded from such offering. In no event will
shares of any other selling stockholder be included in such
registration that would reduce the number of shares which may be
included by Holders without the written consent of Holders of not
less than a majority of the Registrable Securities proposed to be
sold in the offering. For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder that is a
Holder of Registrable Securities and that is a partnership or
corporation, the partners, retired partners and stockholders of
such Holder, or the estates and family members of any such partners
and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single “selling
Holder,” and any pro rata reduction with respect to such
“selling Holder” shall be based upon the aggregate
amount of Registrable Securities owned by all such related entities
and individuals.
1.4
Form S-3 Registration . In case the Company shall
receive from any Holder or Holders who in the aggregate hold at
least ten percent (10%) of the Registrable Securities then
outstanding a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company
shall:
(a) promptly
give written notice of the proposed registration, and any related
qualification or compliance, to all other Holders; and
(b) use
its best efforts to effect, as soon as practicable, such
registration and all such qualifications and compliances as may be
so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holders’
Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other
Holders joining in such request as are specified in a written
request given within fifteen (15) days after receipt of such
written notice from the Company, provided, however, that the
Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this section
1.4:
(i) if
Form S-3 is not available for such offering by the Holders;
provided, however, that after its Initial Offering the Company
shall use its best efforts to qualify for registration on Form S-3
in accordance with Section 1.10 below;
(ii) if
the Holders, together with the holders, of any other securities of
the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at
an aggregate price to the public (net of any underwriters’
discounts or commissions) of less than $1,000,000;
(iii) if
the Company shall furnish to the Holders a certificate signed by
the Chief Executive Officer or Chairman of the Board of the Company
stating that in the good faith judgment of the Board of Directors
of the Company, it would be seriously detrimental to the Company
and its stockholders for such Form S-3 Registration to be effected
at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 1.4; provided,
however, that the Company shall not utilize this right more than
once in any twelve month period;
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(iv) if
the Company has, within the twelve (12) month period preceding
the date of such request, already effected two registrations on
Form S-3 for the Holders pursuant to this Section 1.4;
or
(v) in
any particular jurisdiction in which the Company would be required
to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or
compliance.
(c) Subject
to the foregoing, the Company shall file a registration statement
covering the Registrable Securities and other securities so
requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. Registrations effected
pursuant to this Section 1.4 shall not be counted as requests
for registration effected pursuant to Sections 1.2.
1.5
Obligations of the Company . Whenever required under this
Section 1 to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably
possible:
(a) prepare
and file with the SEC a registration statement with respect to such
Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective
for a period of up to one hundred twenty (120) days or, if
earlier, until the distribution contemplated in the Registration
Statement has been completed; provided, however, that such 120-day
period shall be extended for a period of time equal to the period
the Holder refrains from selling any securities included in such
registration at the request of the Company or an
underwriter;
(b) prepare
and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all
securities covered by such registration statement;
(c) furnish
to the Holders such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in
order to facilitate the disposition of Registrable Securities owned
by them;
(d) use
its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any
such states or jurisdictions;
(e) in
the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such
offering;
(f) notify
each Holder of Registrable Securities covered by such registration
statement at any time when a prospectus relating thereto is
required to be delivered
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under the Act
or the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the
circumstances then existing;
(g) cause
all such Registrable Securities registered pursuant hereunder to be
listed on each securities exchange or market on which similar
securities issued by the Company are then listed; and
(h) provide
a transfer agent and registrar for all Registrable Securities
registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective
date of such registration.
1.6
Information from Holder . It shall be a condition precedent
to the obligations of the Company to take any action pursuant to
this Section 1 with respect to the Registrable Securities of
any selling Holder that such Holder shall furnish to the Company
such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as
shall be required to effect the registration of such Holder’s
Registrable Securities.
1.7
Expenses of Registration . All expenses, other than
underwriting discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to
Sections 1.2, 1.3 and 1.4, including (without limitation) all
registration, filing and qualification fees, printers’ and
accounting fees, fees and disbursements of counsel for the Company
and the reasonable fees and disbursements of one special counsel
for the selling Holders, shall be borne by the Company.
Notwithstanding the foregoing, the Company shall not be required to
pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 or Section 1.4 if the registration request
is subsequently withdrawn at the request of the Holders of a
majority of the Registrable Securities to be registered (in which
case all participating Holders shall bear such expenses pro rata
based upon the number of Registrable Securities that were to be
requested in the withdrawn registration); provided, however, that
if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their
request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse
change, then the Holders shall not be required to pay any of such
expenses.
1.8
Delay of Registration . No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any
such registration as the result of any controversy that might arise
with respect to the interpretation or implementation of this
Section 1.
1.9
Indemnification . In the event any Registrable Securities
are included in a registration statement under this
Section 1:
(a) To
the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the partners, members or officers, directors
and stockholders of each Holder, legal counsel and accountants for
each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the 1934 Act (each an
“Indemnified Party” and collectively the
“Indemnified Parties”), against any expenses, losses,
claims, damages or liabilities (joint or
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several) (or
actions, proceedings, or settlements in respect thereof) to which
they may become subject under the Act, the 1934 Act or any state
securities laws, insofar as such losses, claims, damages, or
liabilities (or actions, proceedings, or settlements in respect
thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a
“Violation”): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission therein of a material
fact required to be stated therein, or necessary to make the
statements therein not misleading, or (iii) any violation or
alleged violation by the Company of the Act, the 1934 Act, any
state securities laws or any rule or regulation promulgated under
the Act, the 1934 Act or any state securities laws; and the Company
will reimburse each such Indemnified Party for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending or settling any such loss, claim,
damage, liability or action; provided, however, that the indemnity
agreement contained in this subsection 1.9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any
such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation that occurs in reliance
upon and in conformity with written information furnished expressly
for use in connection with such registration by any such
Indemnified Party; provided further, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus
shall not inure to the benefit of any Holder or underwriter, or any
person controlling such Holder or underwriter, from whom the person
asserting any such losses, claims, damages or liabilities purchased
shares in the offering, if a copy of the prospectus (as then
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on
behalf of such Holder or underwriter to such person, if required by
law so to have been delivered, at or prior to the written
confirmation of the sale of the shares to such person, and if the
prospectus (as so amended or supplemented) would have cured the
defect giving rise to such loss, claim, damage or
liability.
(b) To
the extent permitted by law, each selling Holder will indemnify and
hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the Act, legal
counsel and accountants for the Company, any underwriter, any other
Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against
any expenses, losses, claims, damages or liabilities (joint or
several) (or actions, proceedings, or settlements in respect
thereof) to which any of the foregoing persons may become subject,
under the Act, the 1934 Act or any state securities laws, insofar
as such expenses, losses, claims, damages or liabilities (or
actions, proceedings, or settlements in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by
such Holder expressly for use in connection with such registration;
and each such Holder will reimburse any person intended to be
indemnified pursuant to this subsection 1.9(b), for any legal or
other expenses reasonably incurred by such person in connection
with investigating or defending or settling any such loss, claim,
damage, liability or action; provided, however, that the indemnity
agreement contained in this subsection 1.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Holder (which consent shall not be
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unreasonably
withheld), provided that in no event shall any indemnity under this
subsection 1.9(b) exceed the net proceeds from the offering
received by such Holder.
(c) Promptly
after receipt by an indemnified party under this Section 1.9
of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in
respect thereof is
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