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Exhibit 10.02

SHUTTERFLY EXECUTIVE STOCK OWNERSHIP GUIDELINES

(Effective April 18, 2012)

The Board of Directors of Shutterfly, Inc. (the “Company”) believes that its
Directors and the Chief Executive Officer should have a meaningful ownership
stake in the Company that will align their interests with those of our
stockholders and will promote a long-term perspective in managing our Company.
Therefore, the Board of Directors has adopted the following Executive Stock
Ownership Guidelines (the “Guidelines”), effective April 18, 2012.

1.   Participation

The Company’s Executive Stock Ownership Guidelines apply to each of the
Company’s Directors and the Chief Executive Officer (each a “Covered
Executive”):

2.  Qualifying Shares for Executive Stock Ownership Guidelines

Stock that counts toward satisfaction of these Guidelines includes:

 
·
shares purchased on the open market;

 
·
shares held in individual brokerage accounts;

 
·
shares obtained through stock option exercises (note that unexercised options,
whether or not vested, are not counted toward meeting the ownership guidelines);

 
·
vested restricted stock units;

 
·
earned and vested performance based restricted stock units; and

 
·
shares held in trust for the benefit of the Covered Executive or his or her
spouse and/or minor children

(“Qualifying Shares”).

Shares of stock that Covered Executives have the right to acquire through the
exercise of stock options (whether or not vested) are not included as Qualifying
Shares.

3.  Executive Stock Ownership Guidelines

Covered Executives are expected to accumulate shares of company stock toward
target ownership levels that are based on a multiple of salary or dollar amount
and a retention ratio for owned shares or shares acquired upon exercise or
owning restricted stock units.  Ownership status for the Covered Executives will
be reported to the Compensation Committee on an annual basis based on holdings
at fiscal year-end.
The market value of the Qualifying Shares each Covered Executive is required to
own or hold (the Covered Executive’s “Stock Ownership Requirement”) is as
follows:

 
 

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·
Chief Executive Officer:  four (4) times the executive’s base salary

 
·
Member of the Board of Directors. One Hundred Thousand Dollars ($100,000).

 
In the event that a Covered Executive also serves as a member of the Board of
Directors, the Covered Executive will be subject to the stock ownership
guidelines applicable to his role as a Company executive and not to stock
ownership guidelines applicable to members of the Board of Directors.   

The number of shares required to be held by the Chief Executive Officer is equal
to the Covered Executive’s base salary at previous year-end times a multiple of
four divided by share value.  For members of the Board of Directors, the number
of shares required to be held is equal to $100,000 divided by share
value.  Share value is equal to the closing share price on the last trading day
of the just-completed fiscal year. 

 
·
The retention ratio is 25% of "net profit shares."  Each time a Covered
Executive exercises an option, vests in restricted stock or has an RSU settled,
he or she is expected to retain 25% of the shares remaining after payment of the
option price and taxes owed upon exercise, 25% of newly vested shares of
restricted stock after the payment of applicable taxes and/or 25% of shares
received on settlement of RSUs after the payment of applicable taxes until the
Stock Ownership Requirement is met.

 
·
After the Covered Executive’s Stock Ownership Requirement is met, a Covered
Executive may sell shares, provided he/she retains the number of shares that
satisfied the Stock Ownership Requirement as of prior fiscal year end.  If the
Covered Executive is promoted into a position with a higher multiple, or the
value of the shares declines as a result of decrease in the market price of the
Company’s common stock or a reverse stock split, stock dividend or similar
change in the Company’s capital structure, he or she will be required to retain
additional shares applying the retention ratio to achieve the Stock Ownership
Requirement. In alignment with best practice guidance from organizations such as
the National Association of Corporate Directors, Covered Executives are expected
to balance the acquisition of meaningful amounts of company stock with partial
portfolio diversification.  While a Covered Executive is not discouraged from
increasing the absolute level of holdings of Company stock, the Company does not
want its stock to comprise a disproportionate percentage of the executive's net
worth.  

 
·
Prior to any sale of Company stock, Covered Executives are required to seek
clearance as specified in the Company’s Procedures and Guidelines Governing
Securities Trades by Company Personnel. Covered Executives are also expected to
comply with all relevant securities regulations at the time of any sale of
Company stock.

 
 

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The multiple of salary or dollar amount that represents a Covered Executive’s
Stock Ownership Requirement will not change as a result of any fluctuations in
the market price of the Company’s common stock or in the event of a stock split,
reverse stock split, stock dividend or similar change in the Company’s capital
structure.

Once a year, the Compensation Committee will review ownership levels of Covered
Executives against these Guidelines as of fiscal year-end.  Failure to meet or,
in unique circumstances, to show sustained progress toward meeting the above
ownership requirements may result in a reduction in future long-term incentive
equity grants, and/or payment of future annual and/or long-term cash incentive
payouts in the form of stock.

4.  Prohibited Transactions

Covered Executives are prohibited from speculating in the Company's stock,
including the use of short sales, "sales against the box" or any equivalent
transaction involving the Company's stock. In addition, Company Executives who
are subject to the Company's stock ownership requirements may not engage in any
other hedging transactions, such as "cashless" collars, forward sales, equity
swaps and other similar or related arrangements, with respect to the shares that
they hold in satisfaction of those ownership requirements.
  
5.  Exceptions

There may be instances where these Executive Stock Ownership Guidelines would
place a severe hardship on a Covered Executive.  In such instances, the
Governance Committee will make the final decision as to developing an
alternative stock ownership guideline for the Covered Executive that reflects
both the intention of these Executive Stock Ownership Guidelines and the
personal circumstances of the Covered Executive.

6.  Administration

The Compensation Committee will review stock ownership levels at least annually.
The Compensation Committee reserves the right to modify or amend these
guidelines at any time.

 

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