Shutterfly 2011 Annual Report Download - page 94

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(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.