--------------------------------------------------------------------------------

Exhibit 10.24

2006 Equity Incentive Plan, as amended

SHUTTERFLY, INC.

2006 Equity Incentive Plan

(adopted by the Board on June 20, 2006)
(amended and restated on May 20, 2010)

1.           PURPOSE.   The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, and any Parents and
Subsidiaries that exist now or in the future, by offering them an opportunity to
participate in the Company’s future performance through the grant of
Awards.  Capitalized terms not defined elsewhere in the text are defined in
Section 27.

2.           SHARES SUBJECT TO THE PLAN.

2.1           Number of Shares Available.   Subject to Sections 2.2 and 21.2,
the total number of Shares reserved and available for grant and issuance
pursuant to this Plan as of March 24, 2010 is Four Million Nine Hundred
Fifty-Five Thousand Seven Hundred Thirty-Five (4,955,735) Shares, which number
includes the Ninety-Three Thousand (93,000) authorized shares not issued or
subject to outstanding grants under the Company’s 1999 Stock Plan (the “1999
Plan”) on the date the 1999 Plan was terminated.  Subject to Sections 2.2 and
21.2 hereof, Shares subject to Awards, and Shares issued upon exercise of
Awards, will again be available for grant and issuance in connection with
subsequent Awards under this Plan to the extent such Shares:  (i) are subject to
issuance upon exercise of an Option or SAR granted under this Plan but which
cease to be subject to the Option or SAR for any reason other than exercise of
the Option or SAR; (ii) are subject to Awards granted under this Plan that are
forfeited or are repurchased by the Company at the original issue price; or
(iii) are subject to Awards granted under this Plan that otherwise terminate
without such Shares being issued.  Options and SARs to be settled in shares of
the Company’s Common Stock shall be counted in full against the number of Shares
available for award under the Plan, regardless of the number of Shares actually
issued upon exercise of the Option or upon settlement of the SAR.  In the event
that Participant tenders or the Company withholds Shares to pay either the
Exercise Price of an Award or the withholding taxes due upon the exercise of an
Award, (i) the full number of Shares exercised (including such number of Shares
used to pay the Exercise Price or withholding taxes) shall reduce the Number of
Shares available for issuance under the Plan and (ii) such number of Shares used
to pay the Exercise Price or withholding taxes shall not be added to the Shares
authorized for grant under the Plan.  The number of Shares available for grant
and issuance under the Plan shall be increased as follows: (i) on January 1,
2011 by three and one-half percent (3.5%) of the number of Shares issued and
outstanding on the December 31 immediately prior to the date of the increase;
(ii) on January 1, 2012 by three and three tenths percent (3.3%) of the number
of Shares issued and outstanding on the December 31 immediately prior to the
date of the increase and (iii) on January 1, 2013 by three and one tenth percent
(3.1%) of the number of Shares issued and outstanding on the December 31
immediately prior to the date of the increase.  No more than 7,000,000 Shares
shall be issued pursuant to the exercise of ISOs.  At all times the Company
shall reserve and keep available a sufficient number of Shares as shall be
required to satisfy the requirements of all outstanding Awards granted under
this Plan.

2.2           Adjustment of Shares.  In the event that the number or type of
outstanding shares of the Company’s Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then (a) the number and class of Shares reserved for
issuance under this Plan, (b) the Exercise Prices of outstanding Options and
SARs, (c) the number of Shares subject to outstanding Options and SARs and (d)
if any such occurrence is after the Effective Date, the maximum number of Shares
that may be granted pursuant to Section 3 shall be proportionately adjusted,
subject to any required action by the Board or the shareholders of the Company
and in compliance with applicable securities laws; provided, however, that
fractions of a Share will not be issued.

3.           ELIGIBILITY.  ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company.  All other Awards may
be granted to employees, officers, directors, consultants, independent
contractors and advisors of the Company or any Parent or Subsidiary of the
Company; provided such consultants, independent contractors and advisors render
bona fide services not in connection with the offer and sale of securities in a
capital-raising transaction.  No person will be eligible to receive more than
one million (1,000,000) Shares in any calendar year under this Plan pursuant to
the grant of Awards hereunder, other than new employees of the Company or of a
Parent or Subsidiary of the Company (including new employees who are also
officers and directors of the Company or any Parent or Subsidiary of the
Company), who are eligible to receive up to a maximum of two million (2,000,000)
Shares in the calendar year in which they commence their employment.  A person
may be granted more than one Award under this Plan.

 
 

--------------------------------------------------------------------------------

 
 
4.           ADMINISTRATION.

4.1           Committee Authority.  This Plan will be administered by the
Committee or by the Board acting as the Committee.  Except for Awards made to
Outside Directors pursuant to Section 6 hereof, and subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan.  Except
for Awards made to Outside Directors pursuant to Section 6 hereof, the Committee
will have the authority to:

(a)           construe and interpret this Plan, any Award Agreement and any
other agreement or document executed pursuant to this Plan;

(b)           prescribe, amend and rescind rules and regulations relating to
this Plan or any Award;

(c)           select persons to receive Awards;

(d)           determine the form and terms of Awards;

(e)           determine the number of Shares or other consideration subject to
Awards;

(f)           determine whether Awards will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to, other Awards
under this Plan or any other incentive or compensation plan of the Company or
any Parent or Subsidiary of the Company;

(g)           grant waivers of Plan or Award conditions;

(h)           determine the vesting, exercisability and payment of Awards;

(i)           correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;

(j)           determine whether an Award has been earned;

(k)           adjust performance goals based on Performance Factors to take into
account changes in law and accounting or tax rules and to make such adjustments
as the Committee deems necessary or appropriate to reflect the impact of
extraordinary or unusual items, events or circumstances to avoid windfalls or
hardships provided that such adjustments are consistent with the regulations
promulgated under Section 162(m) of the Code with respect to persons whose
compensation is subject to Section 162(m) of the Code; and

(l)           make all other determinations necessary or advisable for the
administration of this Plan.

4.2           Committee Discretion.  Except for Awards made to Outside Directors
pursuant to Section 6 hereof, any determination made by the Committee with
respect to any Award will be made in its sole discretion at the time of grant of
the Award or, unless in contravention of any express term of this Plan or the
Award, at any later time, and such determination will be final and binding on
the Company and on all persons having an interest in any Award under this
Plan.  The Committee may delegate to two or more directors of the Company the
authority to grant an Award under this Plan to Participants who are not Insiders
of the Company.  Notwithstanding any provision of the Plan to the contrary,
administration of the Plan shall at all times be limited by the requirement that
any administrative action or exercise of discretion shall be void (or suitably
modified when possible) if necessary to avoid the application to any Participant
of taxation under Section 409A of the Code.

 
 

--------------------------------------------------------------------------------

 
 
5.           OPTIONS.  The Committee may grant Options to eligible persons and
will determine whether such Options will be Incentive Stock Options within the
meaning of the Code (“ISOs”) or Nonqualified Stock Options (“NQSOs”), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:

5.1           Form of Option Grant.  Each Option granted under this Plan will be
evidenced by an Option Agreement which will expressly identify the Option as an
ISO or an NQSO (“Stock Option Agreement”), and will be in such form and contain
such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.

5.2           Date of Grant.  The date of grant of an Option will be the date on
which the Committee makes the determination to grant such Option, or a specified
future date.  The Stock Option Agreement and a copy of this Plan will be
delivered to the Participant within a reasonable time after the granting of the
Option.

5.3           Exercise Period.  Options may be exercisable within the times or
upon the conditions (including confirmation by the Committee of the attainment
during a Performance Period of performance goals based on Performance Factors)
as set forth in the Stock Option Agreement governing such Option; provided,
however, that no Option will be exercisable after the expiration of ten (10)
years from the date the Option is granted; and provided further that no ISO
granted to a person who directly or by attribution owns more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any Parent or Subsidiary of the Company (“Ten Percent Shareholder”) will
be exercisable after the expiration of five (5) years from the date the ISO is
granted.  The Committee also may provide for Options to become exercisable at
one time or from time to time, periodically or otherwise, in such number of
Shares or percentage of Shares as the Committee determines.

5.4           Exercise Price.  The Exercise Price of an Option will be
determined by the Committee when the Option is granted; provided that: (i) the
Exercise Price of an ISO will be not less than 100% of the Fair Market Value of
the Shares on the date of grant; (ii) the Exercise Price of any ISO granted to a
Ten Percent Shareholder will not be less than 110% of the Fair Market Value of
the Shares on the date of grant; and (iii) the Exercise Price of an NQSO will
not be less than 100% of the Fair Market Value of the Shares on the date of
grant.  Payment for the Shares purchased may be made in accordance with Section
12.

5.5           Method of Exercise.  Options may be exercised only by delivery to
the Company of a written stock option exercise agreement (the “Exercise
Agreement”) in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding the Participant’s
investment intent and access to information and other matters, if any, as may be
required by or desirable to the Company to comply with applicable securities
laws, together with payment in full of the Exercise Price for the number of
Shares being purchased.

5.6           Termination.  Notwithstanding the exercise periods set forth in
the Stock Option Agreement, the exercise of an Option will always be subject to
the following:

(a)           If the Participant is Terminated for any reason except the
Participant’s death or Disability, then the Participant may exercise such
Participant’s Options only to the extent that such Options would have been
exercisable by the Participant on the Termination Date no later than three (3)
months after the Termination Date (or such shorter time period not less than
thirty (30) days or longer time period not exceeding five (5) years as may be
determined by the Committee, with any exercise beyond three (3) months after the
Termination Date deemed to be an NQSO), but in any event no later than the
expiration date of the Options.

(b)           If the Participant is Terminated because of Participant’s death
(or the Participant dies within three (3) months after a Termination other than
for Cause or because of the Participant’s Disability), then the Participant’s
Options may be exercised only to the extent that such Options would have been
exercisable by the Participant on the Termination Date and must be exercised by
the Participant’s legal representative, or authorized assignee, no later than
twelve (12) months after the Termination Date (or such shorter time period not
less than six (6) months or longer time period not exceeding five (5) years as
may be determined by the Committee, with any exercise beyond (a) three (3)
months after the Termination Date when the Termination is for any reason other
than the Participant’s death, or (b) twelve (12) months after the Termination
Date when the Termination is for the Participant’s death, deemed to be an NQSO),
but in any event no later than the expiration date of the Options.

 
 

--------------------------------------------------------------------------------

 
 
(c)           If the Participant is Terminated because of Participant’s
Disability, then the Participant’s Options may be exercised only to the extent
that such Options would have been exercisable by the Participant on the
Termination Date and must be exercised by the Participant (or the Participant’s
legal representative or authorized assignee) no later than six (6) months after
the Termination Date, with any exercise beyond (a) three (3) months after the
Termination Date when the Termination is for any reason other than the
Participant’s Disability, or (b) twelve (12) months after the Termination Date
when the Termination is for the Participant’s Disability, deemed to be an NQSO),
but in any event no later than the expiration date of the Options.

(d)           If the Participant is terminated for Cause, then Participant’s
Options shall expire on such Participant’s Termination Date, or at such later
time and on such conditions as are determined by the Committee.

5.7           Limitations on Exercise.  The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent any Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.

5.8           Limitations on ISOs.  The aggregate Fair Market Value (determined
as of the date of grant) of Shares with respect to which ISOs are exercisable
for the first time by a Participant during any calendar year (under this Plan or
under any other incentive stock option plan of the Company or any Parent or
Subsidiary of the Company) will not exceed $100,000.  If the Fair Market Value
of Shares on the date of grant with respect to which ISOs are exercisable for
the first time by a Participant during any calendar year exceeds $100,000, then
the Options for the first $100,000 worth of Shares to become exercisable in such
calendar year will be ISOs and the Options for the amount in excess of $100,000
that become exercisable in such calendar year will be NQSOs.  In the event that
the Code or the regulations promulgated thereunder are amended after the
Effective Date to provide for a different limit on the Fair Market Value of
Shares permitted to be subject to ISOs, such different limit will be
automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.

5.9           Modification, Extension or Renewal.  The Committee may modify,
extend or renew outstanding Options and, with prior shareholder approval,
authorize the grant of new Options in substitution therefor, provided that any
such action may not, without the written consent of a Participant, impair any of
such Participant’s rights under any Option previously granted.  Any outstanding
ISO that is modified, extended, renewed or otherwise altered will be treated in
accordance with Section 424(h) of the Code.  Subject to Section 18 of this Plan,
with prior shareholder approval and by written notice to affected Participants
the Committee may reduce the Exercise Price of outstanding Options without the
consent of such Participants; provided, however, that the Exercise Price may not
be reduced below the Fair Market Value on the date the action is taken to reduce
the Exercise Price.

5.10           No Disqualification.  Notwithstanding any other provision in this
Plan, no term of this Plan relating to ISOs will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.

6.           GRANTS TO OUTSIDE DIRECTORS.

6.1           Types of Awards.  Outside Directors are eligible to receive any
type of Award offered under this Plan, except ISOs.  Awards pursuant to this
Section 6 may be automatically made pursuant to policy adopted by the Board, or
made from time to time as determined in the discretion of the Board.

6.2           Eligibility.  Awards subject to this Section 6 shall be granted
only to Outside Directors.  An Outside Director who is elected or re-elected as
a member of the Board will be eligible to receive an Award under this Section 6.

6.3           Vesting and Exercisability.  Except as set forth in Section 21.3,
Awards shall vest and be exercisable as determined by the Board.

6.4           Exercise Price.  The exercise price of an Option or a SAR granted
to an Outside Director shall be not less than the Fair Market Value of the
Shares at the time that such Option or SAR is granted.

 
 

--------------------------------------------------------------------------------

 
 
7.           RESTRICTED STOCK AWARDS.

7.1           Awards of Restricted Stock.  A Restricted Stock Award is an offer
by the Company to sell to a Participant Shares that are subject to restrictions
(“Restricted Stock”).  The Committee will determine to whom an offer will be
made, the number of Shares the person may purchase, the Purchase Price, the
restrictions under which the Shares will be subject and all other terms and
conditions of the Restricted Stock Award, subject to the Plan.

7.2           Restricted Stock Purchase Agreement.  All purchases under a
Restricted Stock Award will be evidenced by a Restricted Stock Purchase
Agreement, which will be in substantially a form (which need not be the same for
each Participant) that the Committee has from time to time approved, and will
comply with and be subject to the terms and conditions of the Plan.  A
Participant accepts a Restricted Stock Award by signing and delivering to the
Company a Restricted Stock Purchase Agreement with full payment of the Purchase
Price, within thirty (30) days from the date the Restricted Stock Purchase
Agreement was delivered to the Participant.  If the Participant does not accept
the Restricted Stock Award within thirty (30) days, then the offer of the
Restricted Stock Award will terminate, unless the Committee determines
otherwise.  The Restricted Stock Award, Plan and other documents may be
delivered in any manner (including electronic distribution or posting) that
meets applicable legal requirements.

7.3           Purchase Price.  The Purchase Price for a Restricted Stock Award
will be determined by the Committee and, may be less than Fair Market Value (but
not less than the par value of the Shares when required by law) on the date the
Restricted Stock Award is granted.  Payment of the Purchase Price must be made
in accordance with Section 12 of the Plan and the Restricted Stock Purchase
Agreement, and in accordance with any procedures established by the Company, as
communicated and made available to Participants.

7.4           Terms of Restricted Stock Awards.  Restricted Stock Awards will be
subject to such restrictions as the Committee may impose or are required by law.
 These restrictions may be based on completion of a specified number of years of
service with the Company or upon completion of the performance goals based on
Performance Factors during any Performance Period as set out in advance in the
Participant’s Restricted Stock Purchase Agreement. Prior to the grant of a
Restricted Stock Award, the Committee shall: (a) determine the nature, length
and starting date of any Performance Period for the Restricted Stock Award;
(b) select from among the Performance Factors to be used to measure performance
goals, if any; and (c) determine the number of Shares that may be awarded to the
Participant.  Prior to the payment for Shares to be purchased under any
Restricted Stock Award, the Committee shall determine the extent to which such
Restricted Stock Award has been earned.  Performance Periods may overlap and a
Participant may participate simultaneously with respect to Restricted Stock
Awards that are subject to different Performance Periods and having different
performance goals and other criteria.

7.5           Termination During Performance Period.  Except as may be set forth
in the Participant’s Restricted Stock Purchase Agreement, vesting ceases on such
Participant’s Termination Date.

8.           STOCK BONUS AWARDS.

8.1           Awards of Stock Bonuses.  A Stock Bonus Award is an award to an
eligible person of Shares (which may consist of Restricted Stock or Restricted
Stock Units) for services to be rendered or for past services already rendered
to the Company or any Parent or Subsidiary.  All Stock Bonus Awards shall be
made pursuant to a Stock Bonus Agreement, which shall be in substantially a form
(which need not be the same for each Participant) that the Committee has from
time to time approved, and will comply with and be subject to the terms and
conditions of the Plan.  No payment will be required for Shares awarded pursuant
to a Stock Bonus Award.

8.2           Terms of Stock Bonus Awards.  The Committee will determine the
number of Shares to be awarded to the Participant under a Stock Bonus Award and
any restrictions thereon.  These restrictions may be based upon completion of a
specified number of years of service with the Company or upon satisfaction of
performance goals based on Performance Factors during any Performance Period as
set out in advance in the Participant’s Stock Bonus Agreement.  If the Stock
Bonus Award is to be earned upon the satisfaction of performance goals, the
Committee shall: (a) determine the nature, length and starting date of any
Performance Period for the Stock Bonus Award; (b) select from among the
Performance Factors to be used to measure performance goals; and (c) determine
the number of Shares that may be awarded to the Participant.  Prior to the
issuance of any Shares or other payment to a Participant pursuant to a Stock
Bonus Award, the Committee will determine the extent to which the Stock Bonus
Award has been earned.  Performance Periods may overlap and a Participant may
participate simultaneously with respect to Stock Bonus Awards that are subject
to different Performance Periods and different performance goals and other
criteria.  The number of Shares may be fixed or may vary in accordance with such
performance goals and criteria as may be determined by the Committee.

 
 

--------------------------------------------------------------------------------

 
 
8.3           Form of Payment to Participant.  The Stock Bonus Award will be
paid to the Participant currently.  Payment may be made in the form of cash,
whole Shares, or a combination thereof, based on the Fair Market Value of the
Shares earned under a Stock Bonus Award on the date of payment.

8.4           Termination of Participant.  In the event of a Participant’s
Termination during a Performance Period or vesting period, for any reason, then
such Participant will be entitled to payment (whether in Shares, cash or
otherwise) with respect to the Stock Bonus Award only to the extent earned as of
the date of Termination in accordance with the Stock Bonus Agreement, unless the
Committee determines otherwise.

9.           STOCK APPRECIATION RIGHTS.

9.1           Awards of SARs.  A Stock Appreciation Right (“SAR”) is an award to
an eligible person that may be settled in cash, or Shares (which may consist of
Restricted Stock), having a value equal to the value determined by multiplying
the difference between the Fair Market Value on the date of exercise over the
Exercise Price and the number of Shares with respect to which the SAR is being
settled (subject to any maximum number of Shares that may be issuable as
specified in a SAR Agreement).  The SAR may be granted for services to be
rendered or for past services already rendered to the Company, or any Parent or
Subsidiary.  All SARs shall be made pursuant to a SAR Agreement, which shall be
in substantially a form (which need not be the same for each Participant) that
the Committee has from time to time approved, and will comply with and be
subject to the terms and conditions of this Plan.

9.2           Terms of SARs.  The Committee will determine the terms of each SAR
including, without limitation: (a) the number of Shares deemed subject to the
SAR; (b) the Exercise Price and the time or times during which the SAR may be
settled; (c) the consideration to be distributed on settlement of the SAR; and
(d) the effect on each SAR of the Participant’s Termination.  The Exercise Price
of the SAR will be determined by the Committee when the SAR is granted but, may
not be less than Fair Market Value on the date of grant.  A SAR may be awarded
upon satisfaction of such performance goals based on Performance Factors during
any Performance Period as are set out in advance in the Participant’s individual
SAR Agreement.  If the SAR is being earned upon the satisfaction of performance
goals, then the Committee will: (x) determine the nature, length and starting
date of any Performance Period for each SAR; and (y) select from among the
Performance Factors to be used to measure the performance, if any.  Prior to
settlement of any SAR earned upon the satisfaction of performance goals pursuant
to a SAR Agreement, the Committee shall determine the extent to which such SAR
has been earned.  Performance Periods may overlap and Participants may
participate simultaneously with respect to SARs that are subject to different
performance goals and other criteria.

9.3           Exercise Period and Expiration Date.  A SAR will be exercisable
within the times or upon the occurrence of events determined by the Committee
and set forth in the SAR Agreement governing such SAR.  The SAR Agreement shall
set forth the expiration date; provided that no SAR will be exercisable after
the expiration of ten (10) years from the date the SAR is granted.  The
Committee may also provide for SARs to become exercisable at one time or from
time to time, periodically or otherwise (including, without limitation, upon the
attainment during a Performance Period of performance goals based on Performance
Factors), in such number of Shares or percentage of the Shares subject to the
SAR as the Committee determines.

9.4           Form and Timing of Settlement.  The portion of a SAR being settled
may be paid currently or on a deferred basis with such interest or dividend
equivalent, if any, as the Committee determines, provided that the terms of the
SAR and any deferral satisfy the requirements of Section 409A of the Code.

10.           RESTRICTED STOCK UNITS.

10.1           Awards of Restricted Stock Units.  A Restricted Stock Unit
(“RSU”) is an award to an eligible person covering a number of Shares that may
be settled in cash, or by issuance of those Shares (which may consist of
Restricted Stock) for services to be rendered or for past services already
rendered to the Company or any Parent or Subsidiary.  All RSUs shall be made
pursuant to a RSU Agreement, which shall be in substantially a form (which need
not be the same for each Participant) that the Committee has from time to time
approved, and will comply with and be subject to the terms and conditions of the
Plan.

10.2           Terms of RSUs.  The Committee will determine the terms of a RSU
including, without limitation: (a) the number of Shares deemed subject to the
RSU; (b) the time or times during which the RSU may be exercised; (c) the
consideration to be distributed on settlement, and the effect on each RSU of the
Participant’s Termination.  A RSU may be awarded upon satisfaction of such
performance goals based on Performance Factors during any Performance Period as
are set out in advance in the Participant’s individual RSU Agreement.  If the
RSU is being earned upon satisfaction of performance goals, then the Committee
will: (x) determine the nature, length and starting date of any Performance
Period for the RSU; (y) select from among the Performance Factors to be used to
measure the performance, if any; and (z) determine the number of Shares deemed
subject to the RSU.  Prior to settlement of any RSU earned upon the satisfaction
of performance goals pursuant to a RSU Agreement, the Committee shall determine
the extent to which such RSU has been earned.  Performance Periods may overlap
and participants may participate simultaneously with respect to RSUs that are
subject to different Performance Periods and different performance goals and
other criteria.  The number of Shares may be fixed or may vary in accordance
with such performance goals and criteria as may be determined by the Committee.

 
 

--------------------------------------------------------------------------------

 
 
10.3           Form and Timing of Settlement.  The portion of a RSU being
settled shall be paid currently.  To the extent permissible under law, the
Committee may also permit a Participant to defer payment under a RSU to a date
or dates after the RSU is earned provided that the terms of the RSU and any
deferral satisfy the requirements of Section 409A of the Code.

11.           PERFORMANCE SHARES.

11.1           Awards of Performance Shares.  A Performance Share Award is an
award to an eligible person denominated in Shares that may be settled in cash,
or by issuance of those Shares (which may consist of Restricted Stock).  Grants
of Performance Shares shall be made pursuant to a Performance Share Agreement,
which shall be in substantially a form (which need not be the same for each
Participant) that the Committee has from time to time approved, and will comply
with and be subject to the terms and conditions of the Plan.

11.2           Terms of Performance Shares.  The Committee will determine, and
each Performance Share Agreement shall set forth, the terms of each award of
Performance Shares including, without limitation: (a) the number of Shares
deemed subject to such Award; (b) the Performance Factors and Performance Period
that shall determine the time and extent to which each award of Performance
Shares shall be settled; (c) the consideration to be distributed on settlement,
and the effect on each award of Performance Shares of the Participant’s
Termination.  In establishing Performance Factors and the Performance Period the
Committee will: (x) determine the nature, length and starting date of any
Performance Period; (y) select from among the Performance Factors to be used;
and (z) determine the number of Shares deemed subject to the award of
Performance Shares.  Prior to settlement the Committee shall determine the
extent to which Performance Shares have been earned.  Performance Periods may
overlap and Participants may participate simultaneously with respect to
Performance Shares that are subject to different Performance Periods and
different performance goals and other criteria.  The number of Shares may be
fixed or may vary in accordance with such performance goals and criteria as may
be determined by the Committee.

11.3           Form and Timing of Settlement.  The portion of an award of
Performance Shares being settled shall be paid currently.

12.           PAYMENT FOR SHARE PURCHASES.

12.1           Payment.  Payment for Shares purchased pursuant to this Plan may
be made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:

(a)           by cancellation of indebtedness of the Company to the Participant;

(b)           by surrender of shares of the Company held by the Participant that
have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Award will be exercised or
settled;

(c)           by waiver of compensation due or accrued to the Participant for
services rendered to the Company or a Parent or Subsidiary of the Company;

(d)           by consideration received by the Company pursuant to a
broker-assisted or other form of cashless exercise program implemented by the
Company in connection with the Plan;

(e)           by any combination of the foregoing; or

(f)           by any other method approved by the Board.

 
 

--------------------------------------------------------------------------------

 
 
13.           WITHHOLDING TAXES.

13.1           Withholding Generally.  Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares.  Whenever, under this Plan,
payments in satisfaction of Awards are to be made in cash, such payment will be
net of an amount sufficient to satisfy federal, state, and local withholding tax
requirements.

13.2           Stock Withholding.  When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined.  All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee.

14.           TRANSFERABILITY.

14.1           General Rule.  Except as otherwise provided in this Section 14,
no Award and no interest therein, shall be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent and distribution, and no Award may be made subject to
execution, attachment or similar process.

14.2           All Awards other than NQSOs.  All Awards other than NQSOs shall
be exercisable:  (i) during the Participant’s lifetime only by (A) the
Participant, or (B) the Participant’s guardian or legal representative; and (ii)
after the Participant’s death, by the legal representative of the Participant’s
heirs or legatees.

14.3           NQSOs.  Unless otherwise restricted by the Committee, an NQSO
shall be exercisable:  (i) during the Participant’s lifetime only by (A) the
Participant, (B) the Participant’s guardian or legal representative, (C) a
Family Member of the Participant who has acquired the NQSO by “permitted
transfer;” and (ii) after the Participant’s death, by the legal representative
of the Participant’s heirs or legatees.  “Permitted transfer” means, as
authorized by this Plan and the Committee in an NQSO, any transfer effected by
the Participant during the Participant’s lifetime of an interest in such NQSO
but only such transfers which are by gift or domestic relations order.  A
permitted transfer does not include any transfer for value and neither of the
following are transfers for value: (a) a transfer under a domestic relations
order in settlement of marital property rights or (b) a transfer to an entity in
which more than fifty percent of the voting interests are owned by Family
Members or the Participant in exchange for an interest in that entity.

15.           PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.

15.1           Voting and Dividends.  No Participant will have any of the rights
of a shareholder with respect to any Shares until the Shares are issued to the
Participant.  After Shares are issued to the Participant, the Participant will
be a shareholder and have all the rights of a shareholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are restricted stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
restricted stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant’s Exercise Price pursuant to Section 15.2.

15.2           Restrictions on Shares.  At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) a right to repurchase (a
“Right of Repurchase”) a portion of or all Unvested Shares held by a Participant
following such Participant’s Termination at any time within ninety (90) days
after the later of the Participant’s Termination Date and the date the
Participant purchases Shares under this Plan, for cash and/or cancellation of
purchase money indebtedness, at the Participant’s Exercise Price, as the case
may be.

 
 

--------------------------------------------------------------------------------

 
 
16.           CERTIFICATES.  All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.

17.           ESCROW; PLEDGE OF SHARES.  To enforce any restrictions on a
Participant’s Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates.  Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of the Participant’s obligation to
the Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant’s Shares or other collateral.  In connection with any pledge of
the Shares, the Participant will be required to execute and deliver a written
pledge agreement in such form as the Committee will from time to time
approve.  The Shares purchased with the promissory note may be released from the
pledge on a pro rata basis as the promissory note is paid.

18.           EXCHANGE AND BUYOUT OF AWARDS.  Except in connection with a (i)
Corporate Transaction or a (ii) stock dividend, recapitalization, stock split,
reverse stock split, subdivision, combination, reclassification or other similar
change in the capital structure of the Company, the terms of outstanding Awards
may not be amended to reduce the exercise price of outstanding Options or SARs
or cancel outstanding Options or SARs in exchange for cash or other Awards
(including Options or SARs) with an exercise price that is less than the
exercise price of the original Option or SAR without prior shareholder approval.

19.           SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.  An Award will not
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other
issuance.  Notwithstanding any other provision in this Plan, the Company will
have no obligation to issue or deliver certificates for Shares under this Plan
prior to: (a) obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable; and/or (b) completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable.  The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the registration, qualification
or listing requirements of any state securities laws, stock exchange or
automated quotation system, and the Company will have no liability for any
inability or failure to do so.

20.           NO OBLIGATION TO EMPLOY.  Nothing in this Plan or any Award
granted under this Plan will confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent or Subsidiary of the Company or limit in any way
the right of the Company or any Parent or Subsidiary of the Company to terminate
Participant’s employment or other relationship at any time, with or without
cause.

21.           CORPORATE TRANSACTIONS.

21.1           Assumption or Replacement of Awards by Successor.  In the event
of a Corporate Transaction any or all outstanding Awards may be assumed or
replaced by the successor corporation, which assumption or replacement shall be
binding on all Participants.  In the alternative, the successor corporation may
substitute equivalent Awards or provide substantially similar consideration to
Participants as was provided to stockholders (after taking into account the
existing provisions of the Awards).  The successor corporation may also issue,
in place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Participant.  In the event such successor
or acquiring corporation (if any) refuses to assume, convert, replace or
substitute Awards, as provided above, pursuant to a Corporate Transaction, then
notwithstanding any other provision in this Plan to the contrary, such Awards
will expire on such transaction at such time and on such conditions as the Board
will determine.

 
 

--------------------------------------------------------------------------------

 
 
21.2           Assumption of Awards by the Company.  The Company, from time to
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company’s award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan.  Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant.  In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such award will be adjusted appropriately pursuant to
Section 424(a) of the Code).  In the event the Company elects to grant a new
Award rather than assuming an award, such new Award may be granted with a
similarly adjusted Exercise Price.

21.3           Outside Directors’ Awards.  Notwithstanding any provision to the
contrary, in the event of a Corporate Transaction, the vesting of all Awards
granted to Outside Directors pursuant to Section 6 of this Plan will accelerate
and such Awards will become exercisable in full prior to the consummation of
such event at such times and on such conditions as the Committee determines.

22.           ADOPTION AND SHAREHOLDER APPROVAL.  This Plan shall be submitted
for the approval of the Company’s shareholders, consistent with applicable laws,
within twelve (12) months before or after the date this Plan is adopted by the
Board.

23.           TERM OF PLAN/GOVERNING LAW.  Unless earlier terminated as provided
herein, this Plan will become effective on the Effective Date and will terminate
ten (10) years from the date this Plan is adopted by the Board.  This Plan and
all agreements thereunder shall be governed by and construed in accordance with
the laws of the State of California.

24.           AMENDMENT OR TERMINATION OF PLAN.  The Board may at any time
terminate or amend this Plan in any respect, including, without limitation,
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
of the shareholders of the Company, amend this Plan in any manner that requires
such shareholder approval; provided further, that a Participant’s Award shall be
governed by the version of this Plan then in effect at the time such Award was
granted.

25.           NONEXCLUSIVITY OF THE PLAN .  Neither the adoption of this Plan by
the Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock awards and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.

26.           INSIDER TRADING POLICY.  Each Participant who receives an Award
shall comply with any policy adopted by the Company from time to time covering
transactions in the Company’s securities by employees, officers and/or directors
of the Company.

27.           DEFINITIONS.  As used in this Plan, the following terms will have
the following meanings:

“Award” means any award under the Plan, including any Option, Restricted Stock,
Stock Bonus, Stock Appreciation Right, Restricted Stock Unit or award of
Performance Shares.

“Award Agreement” means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Award.

“Board” means the Board of Directors of the Company.

“Cause” means (a) the commission of an act of theft, embezzlement, fraud,
dishonesty, (b) a breach of fiduciary duty to the Company or a Parent or
Subsidiary of the Company, or (c) a failure to materially perform the customary
duties of employee’s employment.

“Code” means the Internal Revenue Code of 1986, as amended.

“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.

 
 

--------------------------------------------------------------------------------

 
 
“Company” means Shutterfly, Inc. or any successor corporation.

“Corporate Transaction” means (a) a merger or consolidation in which the Company
is not the surviving corporation (other than a merger or consolidation with a
wholly-owned subsidiary, a reincorporation of the Company in a different
jurisdiction, or other transaction in which there is no substantial change in
the stockholders of the Company and the Awards granted under the Plan are
assumed or replaced by the successor corporation, which assumption shall be
binding on all Participants), (b) a dissolution or liquidation of the Company,
(c) the sale of substantially all of the assets of the Company, (d) a merger in
which the Company is the surviving corporation but after which the stockholders
of the Company immediately prior to such merger (other than any stockholder that
merges, or which owns or controls another corporation that merges, with the
Company in such merger) cease to own their shares or other equity interest in
the Company; or (e) any other transaction which qualifies as a “corporate
transaction” under Section 424(a) of the Code wherein the stockholders of the
Company give up all of their equity interest in the Company (except for the
acquisition, sale or transfer of all or substantially all of the outstanding
shares of the Company).

“Disability” means a disability, whether temporary or permanent, partial or
total, as determined by the Committee.

“Effective Date” means the date of the underwritten initial public offering of
the Company’s Common Stock pursuant to a registration statement is declared
effective by the SEC.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exercise Price” means the price at which a holder of an Option may purchase the
Shares issuable upon exercise of the Option.

“Fair Market Value” means, as of any date, the value of a share of the Company’s
Common Stock determined as follows:
(a)           if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of determination on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading as reported in The Wall Street Journal;

(b)           if such Common Stock is publicly traded but is not listed or
admitted to trading on a national securities exchange, the average of the
closing bid and asked prices on the date of determination as reported in The
Wall Street Journal;

(c)           in the case of an Option made on the Effective Date, the price per
share at which shares of the Company’s Common Stock are initially offered for
sale to the public by the Company’s underwriters in the initial public offering
of the Company’s Common Stock pursuant to a registration statement filed with
the SEC under the Securities Act; or

(d)           if none of the foregoing is applicable, by the Committee in good
faith.

“Family Member” includes any of the following:

(e)           child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the
Participant, including any such person with such relationship to the Participant
by adoption;

(f)           any person (other than a tenant or employee) sharing the
Participant’s household;

(g)           a trust in which the persons in (a) and (b) have more than fifty
percent of the beneficial interest;

(h)           a foundation in which the persons in (a) and (b) or the
Participant control the management of assets; or

 
 

--------------------------------------------------------------------------------

 
 
(i)           any other entity in which the persons in (a) and (b) or the
Participant own more than fifty percent of the voting interest.

“Insider” means an officer or director of the Company or any other person whose
transactions in the Company’s Common Stock are subject to Section 16 of the
Exchange Act.

“Option” means an award of an option to purchase Shares pursuant to Section 5.

“Option Agreement” means, with respect to each Option, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Option.

“Outside Director” means a member of the Board who is not an employee of the
Company or any Parent or Subsidiary.

“Parent” means any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if each of such 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.

“Participant” means a person who receives an Award under this Plan.

“Performance Factors” means the factors selected by the Committee from among the
following measures (whether or not in comparison to other peer companies) to
determine whether the performance goals established by the Committee and
applicable to Awards have been satisfied:
 
 

 
·
Net revenue and/or net revenue growth;

 
·
Earnings per share and/or earnings per share growth;

 
·
Earnings before income taxes and amortization and/or earnings before income
taxes and amortization growth;

 
·
Operating income and/or operating income growth;

 
·
Net income and/or net income growth;

 
·
Total stockholder return and/or total stockholder return growth;

 
·
Return on equity;

 
·
Operating cash flow return on income;

 
·
Adjusted operating cash flow return on income;

 
·
Economic value added;

 
·
Individual business objectives; and

 
·
Company specific operational metrics.

“Performance Period” means the period of service determined by the Committee,
not to exceed five years, during which years of service or performance is to be
measured for the Award.

“Performance Share” means an Award granted pursuant to Section 11 of the Plan.

“Performance Share Agreement” means an agreement evidencing a Performance Share
Award granted pursuant to Section 11 of the Plan.

“Plan” means this Shutterfly, Inc. 2006 Equity Incentive Plan.

 
 

--------------------------------------------------------------------------------

 
 
“Purchase Price” means the price to be paid for Shares acquired under the Plan,
other than Shares acquired upon exercise of an Option.

“Restricted Stock Award” means an award of Shares pursuant to Section 7 of the
Plan.

“Restricted Stock Purchase Agreement” means an agreement evidencing a Restricted
Stock Award granted pursuant to Section 7 of the Plan.

“Restricted Stock Unit” means an Award granted pursuant to Section 10 of the
Plan.

“RSU Agreement” means an agreement evidencing a Restricted Stock Unit Award
granted pursuant to Section 10 of the Plan.

“SAR Agreement” means an agreement evidencing a Stock Appreciation Right granted
pursuant to Section 9 of the Plan.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Shares” means shares of the Company’s Common Stock reserved for issuance under
this Plan, as adjusted pursuant to Sections 2 and 21, and any successor
security.

“Stock Appreciation Right” means an Award granted pursuant to Section 9 of the
Plan.

“Stock Bonus” means an Award granted pursuant to Section 8 of the Plan.

“Stock Bonus Agreement” means an agreement evidencing a Stock Bonus Award
granted pursuant to Section 8 of the Plan.

 “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.

“Termination” or “Terminated” means, for purposes of this Plan with respect to a
Participant, that the Participant has for any reason ceased to provide services
as an employee, officer, director, consultant, independent contractor or advisor
to the Company or a Parent or Subsidiary of the Company.  An employee will not
be deemed to have ceased to provide services in the case of (i) sick leave, (ii)
military leave, or (iii) any other leave of absence approved by the Committee;
provided, that such leave is for a period of not more than 90 days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute or unless provided otherwise pursuant to formal policy adopted from time
to time by the Company and issued and promulgated to employees in writing.  In
the case of any employee on an approved leave of absence, the Committee may make
such provisions respecting suspension of vesting of the Award while on leave
from the employ of the Company or a Parent or Subsidiary of the Company as it
may deem appropriate, except that in no event may an Award be exercised after
the expiration of the term set forth in the applicable Award Agreement.  The
Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the “Termination Date”).

“Unvested Shares” means “Unvested Shares” as defined in the Award Agreement.

 
 

--------------------------------------------------------------------------------

 
 
SHUTTERFLY, INC.
2006 EQUITY INCENTIVE PLAN

NOTICE OF STOCK OPTION GRANT

Name:
             
Address:
                     

You (the “Participant”) have been granted an option to purchase Common Stock of
the Company, subject to the terms and conditions of this Notice of Stock Option
Grant (the “Notice”), the 2006 Equity Incentive Plan, as amended from time to
time (the “Plan”) and the Stock Option Award Agreement (the “Option Agreement”)
attached hereto, as follows.  The terms defined in the Plan shall have the same
meanings in this Notice.

Grant Number
         
Date of Grant
         
Vesting Commencement Date
         
Exercise Price per Share
         
Total Number of Shares
         
Total Exercise Price
         
Type of Option
_____ Non-Qualified Stock Option
         
_____ Incentive Stock Option
       
Expiration Date
   

Post-Termination Exercise Period:
 
Termination for Cause = None
   
Voluntary Termination = 3 Months
   
Termination without Cause = 3 Months
   
Disability = 6 Months
   
Death = 12 Months

Vesting Schedule:

Subject to the limitations set forth in this Notice, the Plan and the Option
Agreement, the Option will vest and may be exercised, in whole or in part, in
accordance with the following schedule:

1/4 of the Shares subject to the Option shall vest and become exercisable twelve
months after the Vesting Commencement Date, and 1/48 of the Shares subject to
the Option shall vest and become exerciseable monthly thereafter such that the
option shall become fully vested and exercisable on the fourth anniversary of
the Vesting Commencement Date.

 
 

--------------------------------------------------------------------------------

 
 
Participant acknowledges receipt of a copy of the Plan and the Option Agreement,
and represents that he or she is familiar with the terms and provisions thereof,
and hereby accepts the Option subject to all of the terms and provisions hereof
and thereof.  Participant  understands that Participant’s employment or
consulting relationship, or service as a director, with the Company 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, the Stock Option Award Agreement
or the Plan changes the at-will nature of that relationship.  Participant
acknowledges that the vesting of shares pursuant to this Notice is earned only
by Participant’s continuing service as an employee, director or consultant of
the Company.

PARTICIPANT:
   
SHUTTERFLY, INC.
               
Signature:
     
By:
                 
Print Name: 
     
Its:
                 
Date:  
     
Date:  
   

 
 

--------------------------------------------------------------------------------

 

SHUTTERFLY, INC.
STOCK OPTION AWARD AGREEMENT
2006 EQUITY INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in the Company’s 2006 Equity
Incentive Plan (the “Plan”) shall have the same defined meanings in this Award
Agreement (the “Agreement”).
 
You have been granted an option to purchase Shares (the “Option”), subject to
the terms and conditions of the Plan, the Notice of Stock Option Grant (“Notice
of Grant”) and this Agreement.

1.           Vesting Rights.  Subject to the applicable provisions of the Plan
and this Agreement, this Option may be exercised, in whole or in part, in
accordance with the schedule set forth in the Notice of Grant.

2.           Termination Period.

(a)           General Rule.  Except as provided below, and subject to the Plan,
this Option may be exercised for 3 months after termination of Participant's
employment with the Company.  In no event shall this Option be exercised later
than the Term/Expiration Date set forth in the Notice of Grant.

(b)           Death; Disability.  Upon the termination of Participant’s
employment with the Company by reason of his or her Disability or death, or if a
Participant dies within three months of the Termination Date, this Option may be
exercised for twelve months in the case of death, and six months in the case of
Disability, after the Termination Date, provided that in no event shall this
Option be exercised later than the Term/Expiration Date set forth in the Notice
of Grant.

(c)           Cause.  Upon the termination of Participant’s employment by the
Company for Cause, the Option shall expire on such date of Participant’s
Termination Date.

3.           Grant of Option.  The Participant named in the Notice of Grant has
been granted an Option for the number of Shares set forth in the Notice of Grant
at the exercise price per Share set forth in the Notice of Grant (the “Exercise
Price”).  In the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Agreement, the terms and conditions of
the Plan shall prevail.

If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this
Option is intended to qualify as an Incentive Stock Option under Section 422 of
the Code.  However, if this Option is intended to be an Incentive Stock Option,
to the extent that it exceeds the $100,000 rule of Code Section 422(d) it shall
be treated as a Nonstatutory Stock Option (“NSO”).

4.           Exercise of Option.

(a)           Right to Exercise.  This Option is exercisable during its term in
accordance with the Vesting Schedule set forth in the Notice of Grant and the
applicable provisions of the Plan and this Agreement.  In the event of
Participant’s death, Disability, Termination for Cause or other Termination, the
exercisability of the Option is governed by the applicable provisions of the
Plan, the Notice of Stock Option Grant and this Agreement.

(b)           Method of Exercise.  This Option is exercisable by delivery of an
exercise notice (the “Exercise Notice”), which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised (the “Exercised Shares”), and such other representations and
agreements as may be required by the Company pursuant to the provisions of the
Plan.  The Exercise Notice shall be delivered in person, by mail, via electronic
mail or facsimile or by other authorized method to the Secretary of the Company
or other person designated by the Company.  The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares.  This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such aggregate Exercise
Price.

 
 

--------------------------------------------------------------------------------

 
 
(c)           No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed.  Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Participant on the date
the Option is exercised with respect to such Exercised Shares.

5.           Method of Payment.  Payment of the aggregate Exercise Price shall
be by any of the following, or a combination thereof, at the election of the
Participant:

(a)           cash; or

(b)           check; or

(c)           “same day sale” (as described in Section 12.1(d)(1) of the Plan);
or

(d)           other method authorized by the Company.

6.           Non-Transferability of Option.  This Option may not be transferred
in any manner other than by will or by the laws of descent or distribution or
court order and may be exercised during the lifetime of Participant only by the
Participant.  The terms of the Plan and this Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Participant.

7.           Term of Option.  This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Notice of Grant, the Plan and the terms of this Agreement.

8.           U.S. Tax Consequences.  For Participants subject to U.S. income
tax, some of the federal tax consequences relating to this Option, as of the
date of this Option, are set forth below.  All other Participants should consult
a tax advisor for tax consequences relating to this Option in their respective
jurisdiction.  THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE.  THE PARTICIPANT SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

(a)           Exercising the Option.

(i)           Nonstatutory Stock Option.  The Participant may incur regular
federal income tax liability upon exercise of a NSO.  The Participant will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price.  If the
Participant is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Participant and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

(ii)           Incentive Stock Option.  If this Option qualifies as an ISO, the
Participant will have no regular federal income tax liability upon its exercise,
although the excess, if any, of the aggregate Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Participant to alternative minimum tax in the year
of exercise.

(b)           Disposition of Shares.

(i)           NSO.  If the Participant holds NSO Shares for at least one year,
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.

 
 

--------------------------------------------------------------------------------

 
 
(ii)           ISO.  If the Participant holds ISO Shares for at least one year
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes.  If the Participant disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price.

(c)           Notice of Disqualifying Disposition of ISO Shares.  If the
Participant sells or otherwise disposes of any of the Shares acquired pursuant
to an ISO on or before the later of (i) two years after the grant date, or
(ii) one year after the exercise date, the Participant shall immediately notify
the Company in writing of such disposition.  The Participant agrees that he or
she may be subject to income tax withholding by the Company on the compensation
income recognized from such early disposition of ISO Shares by payment in cash
or out of the current earnings paid to the Participant.

(d)           Possible Effect of Section 409A of the Code.  Section 409A of the
Code applies to arrangements that provide for the deferral of
compensation.  Generally, a stock option granted with an exercise price per
share of not less than the “fair market value” (determined in a manner
consistent with Section 409A of the Code and the regulations and other guidance
promulgated thereunder) per share on the date of grant of the stock option and
with no other feature providing for the deferral of compensation will not be
subject to Section 409A of the Code.  However, if the exercise price of the
stock option is less than such “fair market value” or the stock option has
another feature for the deferral of compensation, then if the stock option is
not administered within the parameters established under Section 409A the
optionholder will be subject to additional taxes.  Also, the amount deemed to be
deferred compensation under Section 409A of the Code will be subject to ordinary
income and employment taxes (in this respect the IRS has not yet indicated how
it will calculate the amount of deferred compensation subject to tax and the
timing and frequency of taxation, but it seems likely that the income will be
measured and taxes imposed at least on the vesting dates of the stock
option).  If Section 409A of the Code does apply to this Option, then special
rules apply to the timing of making and effecting certain amendments of this
Option with respect to distribution of any deferred compensation.

9.           Entire Agreement; Governing Law.  The Plan is incorporated herein
by reference.  The Plan, 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, and may not be
modified adversely to the Participant's interest except by means of a writing
signed by the Company and Participant.  This agreement is governed by California
law except for that body of law pertaining to conflict of laws.

10.           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, you and the Company agree that this Option is granted under and
governed by the terms and conditions of the Plan, the Notice of Grant, and this
Agreement.  Participant has reviewed the Plan, the Notice of Grant, and this
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing the Notice of Grant, and fully understands all
provisions of the Plan, 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 Plan, the
Notice of Grant, and the Agreement.  Participant further agrees to notify the
Company upon any change in the residence address indicated on the Notice of
Grant.

 
 

--------------------------------------------------------------------------------

 
 
No.  _____  

SHUTTERFLY, INC.

2006 EQUITY INCENTIVE PLAN

STOCK OPTION EXERCISE AGREEMENT

This Stock Option Exercise Agreement (the "Exercise Agreement") is made and
entered into as of ____________________, _____ (the "Effective Date") by and
between Shutterfly, Inc., a Delaware corporation (the "Company"), and the
purchaser named below (the "Purchaser").  Capitalized terms not defined herein
shall have the meanings ascribed to them in the Company's 2006 Equity Incentive
Plan (the "Plan").

Purchaser:
             
Social Security Number:
     
Address:
             
Total Number of Shares:
     
Exercise Price Per Share:
     
Type of Stock Option
     
(Check one):
o Incentive Stock Option
 
o Nonqualified Stock Option

1.           EXERCISE OF OPTION.

1.1           Exercise.  Pursuant to exercise of that certain option (the
"Option") granted to Purchaser under the Plan and subject to the terms and
conditions of this Exercise Agreement, Purchaser hereby purchases from the
Company, and the Company hereby sells to Purchaser, the Total Number of Shares
set forth above (the "Shares") of the Company's Common Stock, at the Exercise
Price Per Share set forth above (the "Exercise Price").  As used in this
Exercise Agreement, the term "Shares" refers to the Shares purchased under this
Exercise Agreement and includes all securities received (i) in replacement of
the Shares, (ii) as a result of stock dividends or stock splits with respect to
the Shares, and (iii) all securities received in replacement of the Shares in a
merger, recapitalization, reorganization or similar corporate transaction.

1.2           Title to Shares.  The exact spelling of the name(s) under which
Purchaser will take title to the Shares is:
 

                       

 
Purchaser desires to take title to the Shares as follows:

 
¨
Individual, as separate property

 
 

--------------------------------------------------------------------------------

 
 
 
¨
Husband and wife, as community property

 
¨
Joint Tenants

 
¨
Other; please specify:
 

1.3           Payment.  Purchaser hereby delivers payment of the Exercise Price
in the manner permitted in the Stock Option Agreement as follows (check and
complete as appropriate):

 
¨
in cash (by check) in the amount of $____________, receipt of which is
acknowledged by the Company;

 
¨
by delivery of _________ fully-paid, nonassessable and vested shares of the
Common Stock of the Company owned by Purchaser which have been paid for within
the meaning of SEC Rule 144, (if purchased by use of a promissory note, such
note has been fully paid with respect to such vested shares), or obtained by
Purchaser in the open public market, and owned free and clear of all liens,
claims, encumbrances or security interests, valued at the current fair market
value of $___________ per share;

 
¨
through a “same day sale” commitment from the Purchaser or Authorized Transferee
and an NASD Dealer meeting the requirements of the Company’s “same day sale”
procedures and in accordance with law; or

 
¨
through a “margin” commitment from Purchaser or Authorized Transferee and an
NASD Dealer meeting the requirements of the Company’s “margin” procedures and in
accordance with law.

2.           DELIVERY.

2.1           Deliveries by Purchaser.  Purchaser hereby delivers to the Company
(i) this Exercise Agreement and (ii) the Exercise Price and payment or other
provision for any applicable tax obligations.

2.2           Deliveries by the Company.  Upon its receipt of the Exercise
Price, payment or other provision for any applicable tax obligations and all the
documents to be executed and delivered by Purchaser to the Company under Section
2.1, the Company will issue a duly executed stock certificate evidencing the
Shares in the name of Purchaser.

3.           REPRESENTATIONS AND WARRANTIES OF PURCHASER.  Purchaser represents
and warrants to the Company that:

3.1           Agrees to Terms of the Plan.  Purchaser has received a copy of the
Plan and the Stock Option Agreement, has read and understands the terms of the
Plan, the Stock Option Agreement and this Exercise Agreement, and agrees to be
bound by their terms and conditions.  Purchaser acknowledges that there may be
adverse tax consequences upon exercise of the Option or disposition of the
Shares, and that Purchaser should consult a tax adviser prior to such exercise
or disposition.

3.2           Access to Information.  Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.

3.3           Understanding of Risks.  Purchaser has received and reviewed the
Form S-8 prospectus for the Plan and Shares and is fully aware of:  (i) the
highly speculative nature of the investment in the Shares; (ii) the financial
hazards involved; (iii) the qualifications and backgrounds of the management of
the Company; and (iv) the tax consequences of investment in the
Shares.  Purchaser is capable of evaluating the merits and risks of this
investment, has the ability to protect Purchaser's own interests in this
transaction and is financially capable of bearing a total loss of this
investment.

 
 

--------------------------------------------------------------------------------

 
 
4.           COMPLIANCE WITH SECURITIES LAWS.  Purchaser understands and
acknowledges that the exercise of any rights to purchase any Shares is expressly
conditioned upon compliance with the Securities Act and all applicable state
securities laws.  Purchaser agrees to cooperate with the Company to ensure
compliance with such laws.

5.           RESTRICTED SECURITIES.

5.1           No Transfer Unless Registered or Exempt.  Purchaser understands
that Purchaser may not transfer any Shares except when such Shares are
registered under the Securities Act or qualified under applicable state
securities laws or unless, in the opinion of counsel to the Company, exemptions
from such registration and qualification requirements are available.  Purchaser
understands that only the Company may file a registration statement with the SEC
and that the Company is under no obligation to do so with respect to the Shares,
and may withdraw any such registration statement at any time after
filing.  Purchaser has also been advised that exemptions from registration and
qualification may not be available or may not permit Purchaser to transfer all
or any of the Shares in the amounts or at the times proposed by Purchaser.

5.2           SEC Rule 144.  If Purchaser is an “affiliate” for purposes of Rule
144 promulgated under the Securities Act, then in addition, Purchaser has been
advised that Rule 144 requires that the Shares be held for a minimum of one (1)
year, and in certain cases two (2) years, after they have been purchased and
paid for (within the meaning of Rule 144).  Purchaser understands that Rule 144
may indefinitely restrict transfer of the Shares so long as Purchaser remains an
"affiliate" of the Company or if "current public information" about the Company
(as defined in Rule 144) is not publicly available.

6.           RIGHTS AS A STOCKHOLDER.  Subject to the terms and conditions of
this Exercise Agreement, Purchaser will have all of the rights of a stockholder
of the Company with respect to the Shares from and after the date that Shares
are issued to Purchaser until such time as Purchaser disposes of the Shares.

7.           RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.

7.1           Legends.  Purchaser understands and agrees that the Company will
place any legends that may be required by state or U.S. Federal securities laws,
the Company's Certificate of Incorporation or Bylaws, any other agreement
between Purchaser and the Company or, subject to the assent of the Company, any
agreement between Purchaser and any third party.

7.2           Stop-Transfer Instructions.  Purchaser agrees that, to ensure
compliance with any restrictions imposed by this Exercise Agreement, the Company
may issue appropriate "stop-transfer" instructions to its transfer agent, if
any, and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

7.3           Refusal to Transfer.  The Company will not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Exercise Agreement or (ii) to treat
as owner of such Shares, or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares have been so transferred.

8.           TAX CONSEQUENCES.  PURCHASER UNDERSTANDS AND REPRESENTS:  (i) THAT
PURCHASER HAS REVIEWED THE PROSPECTUS PREPARED FOR THE PLAN AND CONSULTED
PURCHASER’S PERSONAL TAX ADVISER IN CONNECTION WITH THE PURCHASE OR DISPOSITION
OF THE SHARES AND (ii) THAT PURCHASER IS NOT RELYING ON THE COMPANY FOR ANY TAX
ADVICE.  SET FORTH BELOW IS A BRIEF SUMMARY AS OF THE DATE THE PLAN WAS ADOPTED
BY THE BOARD OF SOME OF THE U.S. FEDERAL TAX CONSEQUENCES OF EXERCISE OF THE
OPTION AND DISPOSITION OF THE SHARES.  THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.  PURCHASER SHOULD
CONSULT THE PROSPECTUS AND PURCHASER’S PERSONAL TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.

 
 

--------------------------------------------------------------------------------

 
 
8.1           Exercise of Incentive Stock Option.  If the Option qualifies as an
ISO, there will be no regular U.S. Federal income tax liability upon the
exercise of the Option, although the excess, if any, of the Fair Market Value of
the Shares on the date of exercise over the Exercise Price will be treated as a
tax preference item for U.S. Federal alternative minimum tax purposes and may
subject Purchaser to the alternative minimum tax in the year of exercise.

8.2           Exercise of Nonqualified Stock Option.  If the Option does not
qualify as an ISO, there may be a regular U.S. Federal income tax liability upon
the exercise of the Option.  Purchaser will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price.  If Purchaser is or was an employee of the Company, the Company
may be required to withhold from Purchaser's compensation or collect from
Purchaser and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.

8.3           Disposition of Shares. The following tax consequences may apply
upon disposition of the Shares.

(a)           Incentive Stock Options.  If the Shares are held for more than
twelve (12) months after the date of the transfer of the Shares pursuant to the
exercise of an ISO and are disposed of more than two (2) years after the Date of
Grant, any gain realized on disposition of the Shares will be treated as long
term capital gain for federal income tax purposes.  If Shares purchased under an
ISO are disposed of within the applicable one (1) year or two (2) year period,
any gain realized on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the Exercise Price.

(b)           Nonqualified Stock Options.  If the Shares are held for more than
twelve (12) months after the date of the transfer of the Shares pursuant to the
exercise of an NQSO, any gain realized on disposition of the Shares will be
treated as long-term capital gain.

(c)           Withholding.  The Company may be required to withhold from the
Purchaser’s compensation or collect from the Purchaser and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income.

9.           COMPLIANCE WITH LAWS AND REGULATIONS.  The issuance and transfer of
the Shares will be subject to and conditioned upon compliance by the Company and
Purchaser 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.

10.           SUCCESSORS AND ASSIGNS.  The Company may assign any of its rights
under this Exercise Agreement.  No other party to this Exercise Agreement may
assign, whether voluntarily or by operation of law, any of its rights and
obligations under this Exercise Agreement, except with the prior written consent
of the Company.  This Exercise Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company.  Subject to the
restrictions on transfer herein set forth, this Exercise Agreement will be
binding upon Purchaser and Purchaser's heirs, executors, administrators, legal
representatives, successors and assigns.

11.           GOVERNING LAW.  This Exercise Agreement shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to that body of laws pertaining to conflict of laws.

12.           NOTICES.  Any and all notices required or permitted to be given to
a party pursuant to the provisions of this Exercise Agreement will be in writing
and will be effective and deemed to provide such party sufficient notice under
this Exercise Agreement on the earliest of the following:  (i) at the time of
personal delivery, if delivery is in person; (ii) one (1) business day after
deposit with an express overnight courier for United States deliveries, or two
(2) business days after such deposit for deliveries outside of the United
States, with proof of delivery from the courier requested; or (iii) three (3)
business days after deposit in the United States mail by certified mail (return
receipt requested) for United States deliveries.  All notices for delivery
outside the United States will be sent by express courier.  All notices not
delivered personally will be sent with postage and/or other charges prepaid and
properly addressed to the party to be notified at the address set forth below
the signature lines of this Exercise Agreement, or at such other address as such
other party may designate by one of the indicated means of notice herein to the
other parties hereto.  Notices to the Company will be marked "Attention:  Stock
Plan Administration".

 
 

--------------------------------------------------------------------------------

 
 
13.           FURTHER ASSURANCES.  The parties agree to execute such further
documents and instruments and to take such further actions as may be reasonably
necessary to carry out the purposes and intent of this Exercise Agreement.

14.           TITLES AND HEADINGS.  The titles, captions and headings of this
Exercise Agreement are included for ease of reference only and will be
disregarded in interpreting or construing this Exercise Agreement.  Unless
otherwise specifically stated, all references herein to "sections" will mean
"sections" to this Exercise Agreement.

15.           ENTIRE AGREEMENT.  The Plan, the Stock Option Agreement and this
Exercise Agreement constitute the entire agreement and understanding of the
parties with respect to the subject matter of this Exercise Agreement, and
supersede all prior understandings and agreements, whether oral or written,
between or among the parties hereto with respect to the specific subject matter
hereof.

16.           COUNTERPARTS.  This Exercise Agreement may be executed in any
number of counterparts, each of which when so executed and delivered will be
deemed an original, and all of which together shall constitute one and the same
agreement.

17.           SEVERABILITY.  If any provision of this Exercise Agreement is
determined by any court or arbitrator of competent jurisdiction to be invalid,
illegal or unenforceable in any respect, such provision will be enforced to the
maximum extent possible given the intent of the parties hereto.  If such clause
or provision cannot be so enforced, such provision shall be stricken from this
Exercise Agreement and the remainder of this Exercise Agreement shall be
enforced as if such invalid, illegal or unenforceable clause or provision had
(to the extent not enforceable) never been contained in this Exercise
Agreement.  Notwithstanding the forgoing, if the value of this Exercise
Agreement based upon the substantial benefit of the bargain for any party is
materially impaired, which determination as made by the presiding court or
arbitrator of competent jurisdiction shall be binding, then both parties agree
to substitute such provision(s) through good faith negotiations.

[THIS AREA INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS]

 
 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Company has caused this Exercise Agreement to be
executed in triplicate by its duly authorized representative and Purchaser has
executed this Exercise Agreement as of the Effective Date, indicated above.

SHUTTERFLY, INC.
 
PURCHASER
             
By:  
               
(Signature)
                           
(Please print name)
 
(Please print name)
                         
(Please print title)
                   
Address:
 
Address:
                                                                               
     
Fax No.:
 
 
Fax No.
 
             
Phone No.: 
 
 
Phone No.: 
   

 
Signature page to Shutterfly, Inc. Stock Option Exercise Agreement No. ___
 
 
 

--------------------------------------------------------------------------------

 
 
SHUTTERFLY, INC.

2006 Equity Incentive Plan

NOTICE OF RESTRICTED STOCK AWARD
GRANT NUMBER:                                 

You have been granted an award of Restricted Shares of Common Stock of
Shutterfly, Inc. (the “Company”) under the Company’s 2006 Equity Incentive Plan
(the “Plan”) on the following terms:

1.      Name of Grantee:
         
2.      Total Number of Restricted Shares Awarded:   
         
3.      Fair Market Value per Restricted Share:
$
       
4.      Total Fair Market Value of Award:
$
       
5.      Purchase Price per Restricted Share:
$
       
6.      Total Purchase Price for all Restricted Shares:   
$
       
7.     Date of Grant:
         
8.      Vesting Commencement Date.
   

9.     Vesting Schedule:  [Subject to your continued service as an employee,
director or consultant of the Company, Vesting schedule to be provided here.]

By your signature and the signature of the Company’s representative below, you
and the Company agree that the Award of Restricted Shares is governed by the
terms and conditions of the Plan and the Restricted Share Agreement (together
with this notice the “Restricted Stock Purchase Agreement”), which is attached
hereto.  If the Restricted Stock Purchase Agreement is not executed by you
within thirty (30) days of the Date of Grant above, then this grant shall be
void.

SHUTTERFLY, INC.
 
RECIPIENT:
                         
By:  
   
Signature
                           
Its:
   
Please Print Name   
   

 
 

--------------------------------------------------------------------------------

 
 
SHUTTERFLY, INC.

2006 Equity Incentive Plan

RESTRICTED SHARE AGREEMENT

 
THIS RESTRICTED SHARE AGREEMENT (this “Agreement”) is made as of
__________________, 20__ by and between Shutterfly, Inc., a Delaware corporation
(the “Company”), and ___________________________________ (“Participant”)
pursuant to the Company’s 2006 Equity Incentive Plan (the “Plan”). To the extent
any capitalized terms used in this Agreement are not defined, they shall have
the meaning ascribed to them in the Plan.

1.           Sale of Stock.  Subject to the terms and conditions of this
Agreement, on the Purchase Date (as defined below) the Company will issue and
sell to Participant, and Participant agrees to purchase from the Company the
number of Shares shown on the Notice of Restricted Stock Award at a purchase
price of $________ per Share. The per Share purchase price of the Shares shall
be not less than the par value of the Shares as of the date of the offer of such
Shares to the Participant. The term “Shares” refers to the purchased Shares and
all securities received in replacement of or in connection with the Shares
pursuant to stock dividends or splits, all securities received in replacement of
the Shares in a recapitalization, merger, reorganization, exchange or the like,
and all new, substituted or additional securities or other properties to which
Participant is entitled by reason of Participant’s ownership of the Shares.

2.           Time and Place of Exercise.  The purchase and sale of the Shares
under this Agreement shall occur at the principal office of the Company
simultaneously with the execution of this Agreement by the parties, or on such
other date as the Company and Participant shall agree (the “Purchase Date”). On
the Purchase Date, the Company will issue in Participant’s name a stock
certificate representing the Shares to be purchased by Participant against
payment of the purchase price therefor by Participant by (a) check made payable
to the Company, (b) cancellation of indebtedness of the Company to Participant,
(c) Participant’s personal services that the Committee has determined have
already been rendered to the Company and have a value not less than aggregate
par value of the Shares to be issued Participant, or (d) a combination of the
foregoing.

3.           Restrictions on Resale.  By signing this Agreement, Participant
agrees not to sell any Shares acquired pursuant to the Plan and this Agreement
at a time when applicable laws, regulations or Company or underwriter trading
policies prohibit exercise or sale. This restriction will apply as long as
Participant is providing Service to the Company or a Subsidiary of the Company.

3.1           Repurchase Right on Termination Other Than for Cause.  For the
purposes of this Agreement, a “Repurchase Event” shall mean an occurrence of one
of:

(i)           termination of Participant’s service, whether voluntary or
involuntary and with or without cause;

(ii)          resignation, retirement or death of Participant; or

(iii)        any attempted transfer by Participant of the Shares, or any
interest therein, in violation of this Agreement.

Upon the occurrence of a Repurchase Event, the Company shall have the right (but
not an obligation) to purchase the Shares of Participant at a price equal to the
Price (the “Repurchase Right”).  The Repurchase Right shall lapse in accordance
with the vesting schedule set forth in the Notice of Restricted Stock
Award.  For purposes of this Agreement, “Unvested Shares” means Stock pursuant
to which the Company’s Repurchase Right has not lapsed.

 
 

--------------------------------------------------------------------------------

 
 
3.2           Exercise of Repurchase Right.  Unless the Company provides written
notice to Participant within 90 days from the date of termination of
Participant’s employment or consulting relationship that the Company does not
intend to exercise its Repurchase Right with respect to some or all of the
Unvested Shares, the Repurchase Right shall be deemed automatically exercised by
the Company as of the 90th day following such termination, provided that the
Company may notify Participant that it is exercising its Repurchase Right as of
a date prior to such 90th day.  Unless Participant is otherwise notified by the
Company pursuant to the preceding sentence that the Company does not intend to
exercise its Repurchase Right as to some or all of the Unvested Shares,
execution of this Agreement by Participant constitutes written notice to
Participant of the Company’s intention to exercise its Repurchase Right with
respect to all Unvested Shares to which such Repurchase Right applies at the
time of Termination of Participant.    The Company, at its choice, may satisfy
its payment obligation to Participant with respect to exercise of the Repurchase
Right by either (A) delivering a check to Participant in the amount of the
purchase price for the Unvested Shares being repurchased, or (B) in the event
Participant is indebted to the Company, canceling an amount of such indebtedness
equal to the purchase price for the Unvested Shares being repurchased, or (C) by
a combination of (A) and (B) so that the combined payment and cancellation of
indebtedness equals such purchase price.  In the event of any deemed automatic
exercise of the Repurchase Right by canceling an amount of such indebtedness
equal to the purchase price for the Unvested Shares being repurchased, such
cancellation of indebtedness shall be deemed automatically to occur as of the
90th day following termination of Participant’s employment or consulting
relationship unless the Company otherwise satisfies its payment obligations.  As
a result of any repurchase of Unvested Shares pursuant to the Repurchase Right,
the Company shall become the legal and beneficial owner of the Unvested Shares
being repurchased and shall have all rights and interest therein or related
thereto, and the Company shall have the right to transfer to its own name the
number of Unvested Shares being repurchased by the Company, without further
action by Participant.

3.3           Acceptance of Restrictions.  Acceptance of the Shares shall
constitute Participant’s agreement to such restrictions and the legending of his
or her certificates with respect thereto.  Notwithstanding such restrictions,
however, so long as Participant is the holder of the Shares, or any portion
thereof, he or she shall be entitled to receive all dividends declared on and to
vote the Shares and to all other rights of a stockholder with respect thereto.

3.4           Non-Transferability of Unvested Shares.  In addition to any other
limitation on transfer created by applicable securities laws or any other
agreement between the Company and Participant, Participant may not transfer any
Unvested Shares, or any interest therein, unless consented to in writing by a
duly authorized representative of the Company.  Any purported transfer is void
and of no effect, and no purported transferee thereof will be recognized as a
holder of the Unvested Shares for any purpose whatsoever.  Should such a
transfer purport to occur, the Company may refuse to carry out the transfer on
its books, set aside the transfer, or exercise any other legal or equitable
remedy.  In the event the Company consents to a transfer of Unvested Shares, all
transferees of Shares or any interest therein will receive and hold such Shares
or interest subject to the provisions of this Agreement, including, insofar as
applicable, the Repurchase Right.  In the event of any purchase by the Company
hereunder where the Shares or interest are held by a transferee, the transferee
shall be obligated, if requested by the Company, to transfer the Shares or
interest to the Participant for consideration equal to the amount to be paid by
the Company hereunder.  In the event the Repurchase Right is deemed exercised by
the Company, the Company may deem any transferee to have transferred the Shares
or interest to Participant prior to their purchase by the Company, and payment
of the purchase price by the Company to such transferee shall be deemed to
satisfy Participant’s obligation to pay such transferee for such Shares or
interest, and also to satisfy the Company’s obligation to pay Participant for
such Shares or interest.

3.5           Assignment.  The Repurchase Right may be assigned by the Company
in whole or in part to any persons or organization.

4.           Restrictive Legends and Stop Transfer Orders.

4.1           Legends.  The certificate or certificates representing the Shares
shall bear the following legend (as well as any legends required by applicable
state and federal corporate and securities laws):

 
 

--------------------------------------------------------------------------------

 
 
THE SHARE REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE
WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

4.2           Stop-Transfer Notices.  Participant agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate “stop transfer” instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

4.3           Refusal to Transfer.  The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as the
owner or to accord the right to vote or pay dividends to any purchaser or other
transferee to whom such Shares shall have been so transferred.

5.           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.

6.           Miscellaneous.

6.1           Governing Law.  This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.

6.2           The Plan and Other Agreements; Enforcement of Rights.  The text of
the Plan and the Notice of Restricted Stock Award to which this Agreement is
attached are incorporated into this Agreement by reference. This Agreement, the
Plan and the Notice of Restricted Stock Award to which this Agreement is
attached constitute the entire agreement and understanding of the parties
relating to the subject matter herein and supersede all prior discussions
between them. Any prior agreements, commitments or negotiations concerning the
purchase of the Restricted Shares hereunder are superseded. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
Agreement, shall be effective unless in writing and signed by the parties to
this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.

6.3           Severability.  If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i)such
provision shall be excluded from this Agreement, (ii) the balance of this
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of this Agreement shall be enforceable in accordance with its terms.

6.4           Construction.  This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.

6.5           Notices.  Any notice to be given under the terms of the Plan shall
be addressed to the Company in care or its principal office, and any notice to
be given to the Participant shall be addressed to such Participant at the
address maintained by the Company for such person or at such other address as
the Participant may specify in writing to the Company.

6.6           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall he deemed an original and all of which
together shall constitute one instrument.

 
 

--------------------------------------------------------------------------------

 
 
6.7           Successors and Assigns.  The rights and benefits of this Agreement
shall inure to the benefit of., and be enforceable by, the Company’s successors
and assigns. The rights and obligations of Participant under this Agreement may
only be assigned with the prior written consent of the Company.

6.8           U.S. Tax Consequences.  Upon vesting of Shares, Participant will
include in taxable income the difference between the fair market value of the
vesting Shares, as determined on the date of their vesting, and the price paid
for the Shares.  This will be treated as ordinary income by Participant and will
be subject to withholding by the Company when required by applicable law.  In
the absence of an Election (defined below) the Company shall withhold a number
of vesting Shares with a fair market value (determined on the date of their
vesting) equal to the amount the Company is required to withhold for income and
employment taxes. If Participant makes an Election, then Participant must, prior
to making the Election, pay in cash (or check) to the Company an amount equal to
the amount the Company is required to withhold for income and employment taxes.

7.           Section 83(b) Election.  Participant hereby acknowledges that he or
she has been informed that, with respect to the purchase of the Shares, an
election may be filed by the Participant with the Internal Revenue Service,
within 30 days of the purchase of the Shares, electing pursuant to Section 83(b)
of the Code to be taxed currently on any difference between the purchase price
of the Shares and their Fair Market Value on the date of purchase (the
“Election”).  Making the Election will result in recognition of taxable income
to the Participant on the date of purchase, measured by the excess, if any, of
the Fair Market Value of the Shares over the purchase price for the
Shares.  Absent such an Election, taxable income will be measured and recognized
by Participant at the time or times on which the Company’s Repurchase Right
lapses.  Participant is strongly encouraged to seek the advice of his or her own
tax consultants in connection with the purchase of the Shares and the
advisability of filing of the Election.  PARTICIPANT ACKNOWLEDGES THAT IT IS
SOLELY PARTICIPANT’S RESPONSIBILITY, AND NOT THE COMPANY’S RESPONSIBILITY, TO
TIMELY FILE THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF PARTICIPANT
REQUESTS THE COMPANY, OR ITS REPRESENTATIVE, TO MAKE THIS FILING ON
PARTICIPANT’S BEHALF.

The parties have executed this Agreement as of the date first set forth above.
 

 
SHUTTERFLY, INC.
                 
By:
             
Its:
             
RECIPIENT:
           
Signature
           
Please Print Name 
 

 
 

--------------------------------------------------------------------------------

 

RECEIPT

Shutterfly, Inc. hereby acknowledges receipt of (check as applicable):

o  A check in the amount of $_______________

o  The cancellation of indebtedness in the amount of $_______________

given by _____________________ as consideration for Certificate No. -________
for ________________ shares of Common Stock of Shutterfly, Inc.

Dated:  
     

 
SHUTTERFLY, INC.
                   
By:  
             
Its:
   

 
 

--------------------------------------------------------------------------------

 

RECEIPT AND CONSENT

The undersigned Participant hereby acknowledges receipt of a photocopy of
Certificate No. -________ for ________________ shares of Common Stock of
Shutterfly, Inc. (the “Company”)

The undersigned further acknowledges that the Secretary of the Company, or his
or her designee, is acting as escrow holder pursuant to the Restricted Shares
Agreement that Participant has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned’s name.To
facilitate any transfer of Shares to the Company pursuant to the Restricted
Shares Agreement, Participant has executed the attached Assignment Separate from
Certificate.

Dated:
 
, 20
                 
Signature
                     
Please Print Name  
         

 
 

--------------------------------------------------------------------------------

 

STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE

FOR VALUE RECEIVED and pursuant to that certain Restricted Share Agreement dated
as of __________________, ____, [COMPLETE AT THE TIME OF PURCHASE] (the
“Agreement”), the undersigned Participant hereby sells, assigns and transfers
unto ___________________________, __________ shares of the Common Stock $0.001,
par value per share, of Shutterfly, Inc., a Delaware corporation (the
“Company”), standing in the undersigned's name on the books of the Company
represented by Certificate No(s).  ______ [COMPLETE AT THE TIME OF PURCHASE]
delivered herewith, and does hereby irrevocably constitute and appoint the
Secretary of the Company as the undersigned's attorney-in-fact, with full power
of substitution, to transfer said stock on the books of the Company.  THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS
THERETO.

Dated: 
 
,
   

 
PARTICIPANT
               
(Signature)
               
(Please Print Name)
 

 

Instructions to Participant:  Please do not fill in any blanks other than the
signature line.  The purpose of this document is to enable the Company and/or
its assignee(s) to acquire the shares upon exercise of its “Repurchase Right”
set forth in the Agreement without requiring additional action by the
Participant.

 
 

--------------------------------------------------------------------------------

 

SHUTTERFLY, INC.
2006 EQUITY INCENTIVE PLAN
NOTICE OF STOCK BONUS AWARD
GRANT NUMBER:  _____________ 

The terms defined in the Company’s 2006 Equity Incentive Plan (the “Plan”) shall
have the same meanings in this Notice of Stock Bonus Award (“Notice of Grant”).

Name:
                 
Address:
       

You (“Participant”) have been granted an award of Shares, subject to the terms
and conditions of the Plan and the attached Stock Bonus Award Agreement to the
Plan (available in hard copy by request), as follows:

Number of Shares:
                 
Date of Grant:
                 
First Vesting Date:
[
   ]            
Expiration Date:
The date on which all the Shares granted hereunder become vested, with earlier
expiration upon the Termination Date
   

[Vesting Schedule:  The Shares will vest as follows:  Subject to your continued
service as an employee, director or consultant of the Company, on
________________________________.]

I, __________________, (“Participant”) understand that my employment or
consulting relationship, or service as a director, with the Company 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 Stock
Bonus Agreement or the Plan changes the at-will nature of that relationship.  I
acknowledge that the vesting of the Shares pursuant to this Notice of Grant is
earned only by my continuing service as an employee, director or consultant of
the Company.  I also understand that this Notice of Grant is subject to the
terms and conditions of both the Stock Bonus Agreement and the Plan, both of
which are incorporated herein by reference.  I have read both the Stock Bonus
Agreement and the Plan.

PARTICIPANT
 
SHUTTERFLY, INC.
             
Signature:
   
By: 
               
Print Name: 
   
Its:
   

 
 
 

--------------------------------------------------------------------------------

 

SHUTTERFLY, INC.
STOCK BONUS AGREEMENT TO THE
SHUTTERFLY, INC. 2006 EQUITY INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in the Company’s 2006 Equity
Incentive Plan (the “Plan”) shall have the same defined meanings in this Stock
Bonus Agreement (the “Agreement”).
 
You have been granted a Stock Bonus Award (“Stock Bonus Award”) subject to the
terms, restrictions and conditions of the Plan, the Notice of Stock Bonus Award
(“Notice of Grant”) and this Agreement.
 
1.           Settlement.  Stock Bonus Awards shall be settled in Shares and the
Company’s transfer agent shall record ownership of such Shares in Participant’s
name as soon as reasonably practicable.

2.           Stockholder Rights.  Participant shall have no right to dividends
or to vote such Shares other than as provided under Section 15 of the Plan and
applicable law.

3.           Non-Transferable.  Unvested Shares, and unvested Stock Bonus
Awards, and any interest in either shall not be sold, assigned, transferred,
pledged, hypothecated, or otherwise disposed of by Participant or any person
whose interest derives from Participant’s interest.  “Unvested Shares” are
Shares that have not yet vested pursuant to the terms of the vesting schedule
set forth in the Notice of Grant.

4.           Termination.  If Participant’s continuous employment with the
Company or any of its subsidiaries shall terminate for any reason, all Unvested
Shares shall be forfeited to the Company forthwith, and all rights of
Participant to such Unvested Shares 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.

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

6.           Tax Consequences.  Participant acknowledges that there will be tax
consequences upon vesting of the Stock Bonus Awards 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 vesting or
disposition.    The included amount will be treated as ordinary income by
Participant and will be subject to withholding by the Company.  Before any
shares subject to this Agreement are issued, the Participant must provide funds
to the Company equal to the amount of the Company’s tax withholding
obligations(s).  Information on possible arrangements can be obtained from 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.

7.           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.

8.           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.

9.           Governing Law; Severability.  The Plan and Notice of Grant are
incorporated herein by reference.  The Plan, 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.

 
 

--------------------------------------------------------------------------------

 
 
10.           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 Purchaser’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 Stock Bonus Award
is granted under and governed by the terms and conditions of the Plan, the
Notice of Grant and this Agreement.  Participant has reviewed the Plan, 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 Plan, 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 Plan, the Notice of Grant and this Agreement.  Participant further agrees to
notify the Company upon any change in Participant’s residence address.

 
 

--------------------------------------------------------------------------------

 
 
SHUTTERFLY, INC.
2006 EQUITY INCENTIVE PLAN
NOTICE OF STOCK APPRECIATION RIGHT AWARD
GRANT NUMBER:    ____________________

The terms defined in the Company’s 2006 Equity Incentive Plan (the “Plan”) shall
have the same meanings in this Notice of Stock Appreciation Right Award (“Notice
of Grant”).
 
Name:
                 
Address:
       

 
You (“Participant”) have been granted an award of Stock Appreciation Rights
(“SARs”), subject to the terms and conditions of the Plan and the attached Stock
Appreciation Right Award Agreement (hereinafter “SAR Agreement”) to the Plan
(available in hard copy by request), as follows:

Number of SARs:
                         
Maximum Number of Shares Issuable:
                         
Date of Grant:
                         
Fair Market Value of a Share on Date of Grant:
                         
First Vesting Date:
  [      
]
             

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

 
[Vesting Schedule:  The SARs will vest as
follows:  ________________________________, subject to your continued service as
an employee, director or consultant of the Company.]

I, __________________, (“Participant”) understand that my employment or
consulting relationship, or service as a director, with the Company 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 or the Plan changes the
at-will nature of that relationship.  I acknowledge that the vesting of the SARs
pursuant to this Notice of Grant is earned only by my continuing service as an
employee, director or consultant of the Company.  I also understand that this
Notice of Grant is subject to the terms and conditions of both the SAR Agreement
and the Plan, both of which are incorporated herein by reference.  I have read
both the SAR Agreement and the Plan.
 
PARTICIPANT
 
SHUTTERFLY, INC.
             
Signature:
   
By: 
               
Print Name: 
   
Its:
   

 
 
 

--------------------------------------------------------------------------------

 

SHUTTERFLY, INC.
STOCK APPRECIATION RIGHT AWARD AGREEMENT TO THE
SHUTTERFLY, INC. 2006 EQUITY INCENTIVE PLAN

Unless otherwise defined herein, the terms defined in the Company’s 2006 Equity
Incentive Plan (the “Plan”) shall have the same defined meanings in this Stock
Appreciation Right Award Agreement (the “Agreement”).
You have been granted Stock Appreciation Rights (“SARs”) subject to the terms
and conditions of the Plan, the Notice of Stock Appreciation Rights Award
(“Notice of Grant”) and this Agreement.

1.           Settlement.  Settlement of SARs 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 SARs shall be in Shares, except no
fractional shares will be issued in settlement of SARs.  Any amounts
attributable to a fractional share will be settled in cash.

2.           No Stockholder Rights.  Unless and until such time as Shares are
issued in settlement of SARs, Participant shall have no ownership of the Shares
allocated to the SARs and shall have no right to vote such Shares, subject to
the terms, conditions and restrictions described in the Plan and herein.

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

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

5.           Termination.  If Participant’s continuous employment with the
Company or any of its subsidiaries shall terminate for any reason, all unvested
SARs shall be forfeited to the Company forthwith, and all rights of Participant
to such SARs 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 SARs
are granted under and governed by this Agreement and by the provisions of the
Plan (incorporated herein by reference).  Participant: (i) acknowledges receipt
of a copy of the Plan and the Plan prospectus, (ii) represents that Participant
has carefully read and is familiar with their provisions, and (iii) hereby
accepts the SARs subject to all of the terms and conditions set forth herein and
those set forth in the Plan and the Notice of Grant.

7.           Tax Consequences.  Participant acknowledges that there will be tax
consequences upon settlement of the SARs or disposition of the Shares, if any,
received in connection therewith, and Participant should consult a tax adviser
prior to such settlement or disposition.  Applicable withholding taxes shall be
satisfied by the Company by withholding the applicable number of Shares
otherwise deliverable upon settlement of the SAR in accordance with rules and
procedures established by the Committee.   There is no tax event upon granting
of an SAR.  Upon settlement of the SAR, Participant will include in income the
fair market value of the Shares subject to the Shares payable in accordance with
settlement of the SAR.  The included amount will be treated as ordinary income
by Participant and will be subject to withholding by 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 greater than one year from the date of settlement.

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 Plan and Notice of Grant are
incorporated herein by reference.  The Plan, 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.

11.           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 Purchaser’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 SAR is granted
under and governed by the terms and conditions of the Plan, the Notice of Grant
and this Agreement.  Participant has reviewed the Plan, 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 Plan, 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 Plan, the Notice of Grant and
this Agreement.  Participant further agrees to notify the Company upon any
change in Participant’s residence address.

 
 

--------------------------------------------------------------------------------

 
 
SHUTTERFLY, INC.
2006 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD (U.S. FORM)
GRANT NUMBER:  ________

The terms defined in Shutterfly, Inc.’s 2006 Equity Incentive Plan (the “Plan”)
shall have the same meanings in this Notice of Restricted Stock Unit Award
(“Notice of Grant”).
 
Name:
                 
Address:
       

 
You (“Participant”) have been granted an award of Restricted Stock Units
(“RSUs”), subject to the terms and conditions of the Plan and the attached Award
Agreement (Restricted Stock Units) (hereinafter “RSU Agreement”) to the Plan
(available in hard copy by request), 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: [Subject to your continued
service as an employee, director or consultant of the Company
___________________________________.]

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 Award Agreement or the Plan 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 Plan, both of which are incorporated herein by reference.  Participant
acknowledges that he has read both the RSU Agreement and the Plan.
 
 
PARTICIPANT
 
SHUTTERFLY, INC.
             
Signature:
   
By: 
               
Print Name: 
   
Its:
   

 
 
 

--------------------------------------------------------------------------------

 

SHUTTERFLY, INC.
AWARD AGREEMENT (RESTRICTED STOCK UNITS) TO THE
SHUTTERFLY, INC. 2006 EQUITY INCENTIVE PLAN
(U.S. FORM)

Unless otherwise defined herein, the terms defined in Shutterfly, Inc.’s 2006
Equity Incentive Plan (the “Plan”) shall have the same defined meanings in this
Award Agreement (Restricted Stock Units) (the “Agreement”).
 
You have been granted Restricted Stock Units (“RSUs”) subject to the terms,
restrictions and conditions of the Plan, 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
Plan (incorporated herein by reference).  Participant: (i) acknowledges receipt
of a copy of the Plan and the Plan prospectus, (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 Plan 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 Plan and Notice of Grant are
incorporated herein by reference.  The Plan, 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.

11.           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 the Plan, the Notice of Grant
and this Agreement.  Participant has reviewed the Plan, 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 Plan, 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 Plan, the Notice of Grant and
this Agreement.  Participant further agrees to notify the Company upon any
change in Participant’s residence address.
 
 

--------------------------------------------------------------------------------