Document:

exv10w1

 

Exhibit 10.1

SPLIT-DOLLAR AGREEMENT

     THIS AGREEMENT made and entered into as of this 21st day of June,
2006, by and between THE MENS WEARHOUSE, INC., a Texas corporation (hereinafter referred to
as the “Corporation”), and GEORGE ZIMMER, an individual residing in the State of California
(hereinafter referred to as the “Employee”),

     WITNESSETH THAT:

     WHEREAS, the Employee is employed by the Corporation; and

     WHEREAS, the Employee wishes to provide life insurance protection for his family in the event
of his death, under a Policy of life insurance insuring his life (hereinafter referred to as the
“Policy”), which is described in Exhibit A attached hereto and by this reference made a part
hereof, and which was issued by PRUDENTIAL (hereinafter referred to as the “Insurer”); and

     WHEREAS, the Corporation is willing to pay the premiums due on the Policy as an additional
employment benefit for the Employee, on the terms and conditions hereinafter set forth; and

     WHEREAS, the Corporation is the owner of the Policy and, as such, possesses all incidents of
ownership in and to the Policy; and

     WHEREAS, the Corporation wishes to retain such ownership rights, in order to secure the
repayment of the amount due it hereunder;

     NOW, THEREFORE, in consideration of the premises and of the mutual promises contained herein,
the parties hereto agree as follows:

1. Purchase of Policy. The Corporation has purchased the Policy from the Insurer in the
total face amount of $4,000,000 and a Level Death Benefit Option (as such term is defined in the
Policy). The parties hereto have taken all necessary action to cause the Insurer to issue the
Policy, and shall take any further action which may be necessary to cause the Policy to conform to
the provisions of this Agreement. The parties hereto agree that the Policy shall be subject to the
terms and conditions of this Agreement and of the endorsement to the Policy or beneficiary
designation filed with the Insurer.

2. Ownership of Policy. The Corporation shall be the sole and absolute owner of the
Policy, and may exercise all ownership rights granted to the owner thereof by the terms of the
Policy, including, but not limited to, the right to elect and to change the Death Benefit Option,
the Face Amount of Insurance Death Benefit, and the investment options of the Policy, except as may
otherwise be provided herein.

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3.
Election of Settlement Option and Beneficiary Designation By Employee. The Employee may select the settlement option for payment of the death benefit provided under the
Policy and the beneficiary or beneficiaries to receive the portion of policy proceeds to which the
Employee is entitled hereunder, by specifying the same in a written notice to the Corporation. Upon
receipt of such notice, the Corporation shall promptly execute and deliver to the Insurer the forms
necessary to elect the requested settlement option and to designate the requested person, persons
or entity as the beneficiary or beneficiaries to receive the death proceeds of the Policy in excess
of the amount to which the Corporation is entitled hereunder. The parties hereto agree to take all
action necessary to cause the beneficiary designation and settlement option provisions of the
Policy to conform to the provisions hereof. The Corporation shall not terminate, alter or amend
such designation or election without the express written consent of the Employee.

4. Payment of Premiums. On or before the due date of each Policy premium, or within the
grace period provided therein, the Corporation shall pay the full amount of any scheduled premium
required (as defined in the Policy) to the Insurer, and shall, upon request, promptly furnish the
Employee evidence of timely payment of such premium. Except with the consent of the Employee, the
Corporation shall not pay less than such scheduled premium required, if any, for any year, but may,
in its discretion, at anytime and from time to time, pay more than such premium. If the cash value
of the Policy is sufficient to fund a portion or all of the scheduled premiums, then such portion
or all of the scheduled premiums shall be paid from the cash value of Policy to the extent of such
cash value, and the Corporation shall not be not be required to pay such portion of the schedule
premiums. The Corporation shall annually furnish the Employee a statement of the amount of income
reportable by the Employee for federal and state income tax purposes as a result of the insurance
protection provided the Owner as the Policy beneficiary.

5. Limitations on Corporation’s Rights in Policy.

     (a) Except as otherwise provided herein, the Corporation shall not sell, assign, transfer,
surrender or cancel the Policy, change the beneficiary designation provision thereof, change the
Death Benefit Option provision, decrease the Face Amount of Insurance Death Benefit, make
withdrawals from, nor make or change the allocation of the Policy Account established pursuant to
the terms of the Policy among the various investment options under the Policy thereof without, in
any such case, the express written consent of the Employee.

     (b) Notwithstanding any provision hereof to the contrary, the Corporation shall have the sole
authority to direct the manner in which the Policy Account established pursuant to the terms of the
Policy shall be allocated among the various investment options from time to time available under
the Policy and to change such allocation from time to time, as provided for in the Policy.

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6. Policy Loans. The Corporation may pledge or assign the Policy, subject to the terms
and conditions of this Agreement, for the sole purpose of securing a loan from the Insurer or from
a third party. The amount of such loan, including accumulated interest thereon, shall not exceed
the lesser of (i) the amount of the premiums on the Policy paid by the Corporation hereunder, or
(ii) the cash surrender value of the Policy (as defined therein) as of the date to which premiums
have been paid. Interest charges on such loan shall be paid by the Corporation. If the
Corporation so encumbers the Policy, other than by a policy loan from the Insurer, then, upon the
death of the Employee or upon the election of the Employee hereunder to purchase the Policy from
the Corporation, the Corporation shall promptly take all action necessary to secure the release or
discharge of such encumbrance.

7. Collection of Death Proceeds.

     (a) Upon the death of the Employee, the Corporation shall cooperate with the beneficiary or
beneficiaries designated by the Corporation at the direction of the Employee to take whatever
action is necessary to collect the death benefit provided under the Policy; when such benefit has
been collected and paid as provided herein, this Agreement shall thereupon terminate.

     (b) Upon the death of the Employee, the Corporation shall have the unqualified right to
receive a portion of such death benefit equal to the greater of the total amount of the premiums
paid by it hereunder or the cash value of the Policy (excluding surrender charges or other similar
charges or reductions) immediately before the death of the Employee, reduced by any indebtedness
against the Policy existing at the death of the Employee, including any interest due on such
indebtedness. The balance of the death benefit provided under the Policy, if any, shall be paid
directly to the beneficiary or beneficiaries designated by the Corporation at the direction of the
Employee, in the manner and in the amount or amounts provided in the beneficiary designation
provision of the Policy. In no event shall the amount payable to the Corporation hereunder exceed
the death proceeds payable under the Policy at the death of the Employee. No amount shall be paid
from such death benefit to the beneficiary or beneficiaries designated by the Corporation at the
direction of the Employee, until the full amount due the Corporation hereunder has been paid. The
parties hereto agree that the beneficiary designation provision of the Policy shall conform to the
provisions hereof.

8. Termination of the Agreement During the Employee’s Lifetime.

     (a) This Agreement shall terminate, during the Employee’s lifetime, without notice, upon the
occurrence of any of the following events: (a) total cessation of the Corporation’s business; (b)
bankruptcy, receivership or dissolution of the Corporation; or (c) termination of Employee’s
employment by the Corporation (other than by reason of his death).

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     (b) In addition, the Employee may terminate this Agreement while no premium under the
Policy is overdue, by written notice to the Corporation. Such termination shall be effective as of
the date of such notice.

	9.	 	Disposition of the Policy on Termination of the Agreement During the Employee’s
Lifetime.

     (a) For sixty (60) days after the date of the termination of this Agreement during the
Employee’s lifetime, the Employee shall have the assignable option to purchase the Policy from the
Corporation. The purchase price for the Policy shall be the greater of the total amount of the
premium payments made by the Corporation hereunder or the then cash value of the Policy (excluding
surrender charges or other similar charges or reductions), less any indebtedness secured by the
Policy which remains outstanding as of the date of such termination, including any interest due on
such indebtedness. Upon receipt of such amount, the Corporation shall transfer all of its right,
title and interest in and to the Policy to the Employee or his assignee, by the execution and
delivery of an appropriate instrument of transfer.

     (b) If the Employee or his assignee fails to exercise such option within such sixty (60) day
period, then, the Corporation may enforce its right to be repaid the amount due it hereunder by
surrendering or canceling the Policy for its cash surrender value, or it may change the beneficiary
designation provisions of the Policy, naming itself or any other person or entity as revocable
beneficiary thereof, or exercise any other ownership rights in and to the Policy, without regard to
the provisions hereof. Thereafter, neither the Employee nor his respective heirs, assigns or
beneficiaries shall have any further interest in and to the Policy, either under the terms thereof
or under this Agreement.

10. Insurer Not a Party. The Insurer shall be fully discharged from its obligations under
the Policy by payment of the Policy death benefit to the beneficiary or beneficiaries named in the
Policy, subject to the terms and conditions of the Policy. In no event shall the Insurer be
considered a party to this Agreement, or any modification or amendment hereof. No provision of this
Agreement, nor of any modification or amendment hereof, shall in any way be construed as enlarging,
changing, varying, or in any other way affecting the obligations of the Insurer as expressly
provided in the Policy, except insofar as the provisions hereof are made a part of the Policy by
the beneficiary designation executed by the Corporation and filed with the Insurer in connection
herewith.

11. Assignment by Employee. Notwithstanding any provision hereof to the contrary, the
Employee shall have the right to absolutely and irrevocably assign by gift all of his right, title
and interest in and to this Agreement and to the Policy to an assignee. This right shall be
exercisable by the execution and delivery to the Corporation of a written assignment, in
substantially the form attached hereto as Exhibit B, which by this reference is made a part hereof.
Upon receipt of

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such written assignment executed by the Employee and duly accepted by the assignee thereof, the
Corporation shall consent thereto in writing, and shall thereafter treat the Employee’s assignee
as the sole owner of all of the Employee’s right, title and interest in and to this Agreement and
in and to the Policy. Thereafter, the Employee shall have no right, title or interest in and to
this Agreement or the Policy, all such rights being vested in and exercisable only by such
assignee.

	12.	 	Named Fiduciary, Determination of Benefits, Claims Procedure and Administration.

     (a) Named Fiduciary. The Corporation is hereby designated as the named fiduciary under
this Agreement. The named fiduciary shall have authority to control and manage the operation and
administration of this Agreement, and it shall be responsible for establishing and carrying out a
funding policy and method consistent with the objectives of this Agreement.

     (b) Claim. A Participant, beneficiary or other person who believes that he or she is
being denied a benefit to which he or she is entitled (hereinafter referred to as “Claimant”), or
his or her duly authorized representative, may file a written request for such benefit with the
President of the Corporation (the “First Level Reviewer”) setting forth his or her claim. Such
claim must be addressed to the President of the Corporation, at its then principal place of
business.

     (c) Claim Decision. Upon receipt of a claim, the First Level Reviewer shall advise
the Claimant that a reply will be forthcoming within a reasonable period of time, but ordinarily
not later than ninety (90) days, and shall, in fact, deliver such reply within such period.
However, the First Level Reviewer may extend the reply period for an additional ninety (90) days
for reasonable cause. If the reply period will be extended, the First Level Reviewer shall advise
the Claimant in writing during the initial ninety (90) day period indicating the special
circumstances requiring an extension and the date by which the First Level Reviewer expects to
render the benefit determination.

     If the claim is denied in whole or in part, the First Level Reviewer will render a written
opinion, using language calculated to be understood by the Claimant, setting forth:

          (i) the specific reason or reasons for the denial;

          (ii) the specific references to pertinent Plan provisions on which the denial is based;

          (iii) a description of any additional material or information necessary for the Claimant to
perfect the claim and an explanation as to why such material or such information is necessary;

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          (iv) appropriate information as to the steps to be taken if the Claimant wishes to submit the
claim for review, including a statement of the Claimant’s right to bring a civil action under
Section 502(a) of ERISA following an adverse benefit determination on review; and

          (v) the time limits for requesting a review of the denial under Subsection C hereof and for
the actual review of the denial under Subsection D hereof.

     (d) Request for Review. Within sixty (60) days after the receipt by the Claimant of
the written opinion described above, the Claimant may request in writing that the Secretary of the
Corporation ( the “Second Level Reviewer”) review the First Level Reviewer’s prior
determination. Such request must be addressed to the Secretary of the Corporation, at its then
principal place of business. The Claimant or his or her duly authorized representative may submit
written comments, documents, records or other information relating to the denied claim, which such
information shall be considered in the review under this subsection without regard to whether such
information was submitted or considered in the initial benefit determination.

     The Claimant or his or her duly authorized representative shall be provided, upon request and
free of charge, reasonable access to, and copies of, all documents, records and other information
which (i) was relied upon by the First Level Reviewer in making its initial claims decision, (ii)
was submitted, considered or generated in the course of the First Level Reviewer making its
initial claims decision, without regard to whether such instrument was actually relied upon by the
First Level Reviewer in making its decision or (iii) demonstrates compliance by the First Level
Reviewer with its administrative processes and safeguards designed to ensure and to verify that
benefit claims determinations are made in accordance with this Agreement and that, where
appropriate, the provisions of this Agreement have been applied consistently with respect to
similarly situated claimants. If the Claimant does not request a review of the First Level
Reviewer’s determination within such sixty (60) day period, he or she shall be barred and estopped
from challenging such determination.

     (e) Review of Decision. Within a reasonable period of time, ordinarily not later than
sixty (60) days, after the Second Level Reviewer’s receipt of a request for review, it will review
the First Level Reviewer’s prior determination. If special circumstances require that the sixty
(60) day time period be extended, the Second Level Reviewer will so notify the Claimant within the
initial sixty (60) day period indicating the special circumstances requiring an extension and the
date by which the Second Level Reviewer expects to render its decision on review, which shall be as
soon as possible but not later than 120 days after receipt of the request for review. In the event
that the Second Level Reviewer extends the determination period on review due to a Claimant’s
failure to submit information necessary to decide a claim, the period for making the benefit
determination on review shall not take into account the period beginning on the date on which
notification of extension is sent to the Claimant and ending on the date on which the Claimant
responds to the request for additional information.

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     The Second Level Reviewer has discretionary authority to determine a Claimant’s eligibility
for benefits and to interpret the terms of this Agreement. Benefits under this Agreement will be
paid only if the Second Level Reviewer decides in its discretion that the Claimant is entitled to
such benefits. The decision of the Second Level Reviewer shall be final and non-reviewable, unless
found to be arbitrary and capricious by a court of competent review. Such decision will be binding
upon the Employer and the Claimant.

     If the Second Level Reviewer makes an adverse benefit determination on review, the Second
Level Reviewer will render a written opinion, using language calculated to be understood by the
Claimant, setting forth:

          (i) the specific reason or reasons for the denial;

          (ii) the specific references to pertinent Plan provisions on which the denial is based;

          (iii) a statement that the Claimant is entitled to receive, upon request and free of charge,
reasonable access to, and copies of, all documents, records and other information which (i) was
relied upon by the Second Level Reviewer in making its decision, (ii) was submitted, considered or
generated in the course of the Second Level Reviewer making its decision, without regard to
whether such instrument was actually relied upon by the Second Level Reviewer in making its
decision or (iii) demonstrates compliance by the Second Level Reviewer with its administrative
processes and safeguards designed to ensure and to verify that benefit claims determinations are
made in accordance with this Agreement, and that, where appropriate, the provisions of this
Agreement have been applied consistently with respect to similarly situated claimants; and

          (iv) a statement of the Claimant’s right to bring a civil action under Section 502(a) of
ERISA following the adverse benefit determination on such review.

13. Amendment. This Agreement may not be amended, altered or modified, except by a
written instrument signed by the parties hereto, or their respective successors or assigns, and may
not be otherwise terminated except as provided herein.

14. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the
Corporation and its successors and assigns, and the Employee, his successors, assigns, heirs,
executors, administrators and beneficiaries.

15. Notices. Any notice, consent or demand required or permitted to be given under the
provisions of this Agreement shall be in writing, and shall be signed by the party giving or making
the same. If such notice, consent or demand is mailed to a party hereto, it shall be sent

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by United States certified mail, postage prepaid, addressed to such party’s last known address as
shown on the records of the Corporation. The date of such mailing shall be deemed the date of
notice, consent or demand.

16. Governing Law. This Agreement, and the rights of the parties hereunder, shall be
governed by and construed in accordance with the laws of the State of California.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in duplicate, as of
the day and year first above written.

	 	 	 	 	 
	 

	 	THE MEN’S WEARHOUSE	 	 
	 
	 	 	 	 
	 

	 	/s/ Neill P. Davis	 	 
	 

	 	 	 	 
	 

	 	By: its Executive Vice President	 	 
	ATTEST:
	 	 	 	 
	 
	 	 	 	 
	/s/
Michael W. Conlon
	 	 	 	 
	 

Secretary

	 	 	 	 
	 
	 	 	 	 
	 

	 	/s/ GEORGE ZlMMER	 	 
	 

	 	 	 	 
	 

	 	GEORGE ZlMMER, Employee	 	 

8exv10w03

 

Exhibit 10.03

SHUTTERFLY, INC.

2006 Equity Incentive Plan

(adopted by the Board on June 20, 2006)

     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 the date of
adoption of the Plan by the Board, is one million three hundred fifty-eight thousand three hundred
fifty-two (1,358,352) Shares plus any 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 is 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. 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 issued upon
settlement of the SAR. 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 Options
granted under this Plan and all other outstanding but unvested Options granted under this Plan.
The number of Shares available for grant and issuance under the Plan shall be increased on January
1, of each of 2008 through 2010, by the lesser of: (i) four and sixty-two hundredths percent
(4.62%) of the number of Shares issued and outstanding on the December 31 immediately prior to the
date of increase and (ii) a lesser number of Shares determined by the Board, provided that no more
than seven million (7,000,000) shares shall be issued pursuant to the exercise of ISOs (as defined
in Section 5 below).

          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 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;

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               (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; and

               (k) 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 

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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)

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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 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, 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 minimum
Exercise Price that would be permitted under Section 5.4 for Options granted 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.

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     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

6

 

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. The Committee may adjust the performance goals
applicable to a Stock Bonus Award 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.

7

 

          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 and, may be
less than Fair Market Value (but not less than the par value of the Shares). 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

8

 

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 SAR 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. The Committee may adjust the
performance goals applicable to the RSUs to take into account changes in law and accounting 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.

          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.

9

 

     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. The Committee may adjust the
applicable performance goals to take into account changes in law and accounting 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.

          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;

               (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) with respect only to purchases upon exercise of an Option, and provided that a public
market for the Company’s Common Stock exists:

10

 

                    (i) through a “same day sale” commitment from the Participant and a broker-dealer that is a
member of the National Association of Securities Dealers (an “NASD Dealer”) whereby the Participant
irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay
for the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares
to forward the Exercise Price directly to the Company; or

                    (ii) through a “margin” commitment from the Participant and an NASD Dealer whereby the
Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the
NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the
Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company;

               (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.

11

 

          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

12

 

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. The repricing of Options or SARs is not permitted
without prior stockholder approval. The Committee may, at any time or from time to time authorize
the Company, in the case of an Option or SAR exchange with stockholder approval, and with the
consent of the respective Participants (unless not required pursuant to Section 5.9 of the Plan),
to pay cash or issue new Awards in exchange for the surrender and cancellation of any, or all,
outstanding Awards.

     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

13

 

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.

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     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).

15

 

     “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

16

 

               (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

17

 

	 	•	 	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,

18

 

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.

19

 

SHUTTERFLY, INC.

2006 EQUITY INCENTIVE PLAN

NOTICE OF STOCK OPTION GRANT

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

	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Address:	 	 	 	 
	 

	 	 	 	 

	 	 

     You have been granted an option to purchase Common Stock of the Company, subject to the terms
and conditions of the Plan (available in hard copy by request) and the attached Stock Option
Agreement, as follows:

	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Grant Number
	 	 
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Date of Grant
	 	 
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Vesting Commencement Date
	 	 
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Exercise Price per Share
	 	 
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Total Number of Shares
	 	 
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Total Exercise Price
	 	 
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Type of Option	 	[Nonstatutory Stock Option/Incentive Stock
	 	 	 	 	 	 	 	 	Option]
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Expiration Date
	 	 
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	2.	 	 	Vesting Schedule.	 	[Insert vesting schedule.]

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 Option Award Agreement or the Plan changes the at-will nature of that relationship.
I acknowledge that the vesting of 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 Option Agreement and
the Plan, both of which are incorporated herein by reference. I have read both the attached Stock
Option Agreement and the Plan.

	 	 	 	 	 	 	 	 	 	 	 
	PARTICIPANT:	 	 	 	SHUTTERFLY, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Signature:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Print Name:

	 	 	 	 	 	Its:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 

 

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;

1

 

               (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

2

 

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.

3

 

     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

4

 

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	 
	 

	 	 	 	 	 	 	 	 

5

 

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.

12.      No Rights as Employee, Director or Consultant. Nothing in this Agreement shall affect
in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary of the
Company, to terminate 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:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 

1

 

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.

1

 

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.

12. No Rights as Employee, Director or Consultant. Nothing in this Agreement shall affect
in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary of the
Company, to terminate 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.

2

 

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:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	First Vesting Date:
	 	[                                                                     ]	 	 

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,
                                                                                .
]

I,                                         , (“Participant”) understand that my 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. I acknowledge that the
vesting of the RSUs pursuant to this Notice of Grant ceases on the Termination Date. I also
understand 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. I have 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. Before any Shares subject to this Agreement are issued the Company
shall withhold a number of Shares with a fair market value (determined on the date the Shares are
issued) equal to the amount the Company is required to withhold for income and employment taxes.
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 is 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.

12.      No Rights as Employee, Director or Consultant. Nothing in this Agreement shall affect
in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary of the
Company, to terminate Participant’s employment, for any reason, with or without cause.

          By your signature and the signature of the Company’s representative on the Notice of Grant,
Participant and the Company agree that this RSU is granted under and governed by the terms and
conditions of 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.

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