Shutterfly 2007 Annual Report Download

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FORM 10-K
SHUTTERFLY INC
(Annual Report)
Filed 3/20/2007 For Period Ending 12/31/2006
Address 2800 BRIDGE PARKWAY STE 101
REDWOOD CITY, California 94065
CIK 0001125920
Industry Photography
Sector Consumer Cyclical

Table of contents

  • Page 1
    SHUTTERFLY INC FORM 10-K (Annual Report) Filed 3/20/2007 For Period Ending 12/31/2006 Address CIK Industry Sector 2800 BRIDGE PARKWAY STE 101 REDWOOD CITY, California 94065 0001125920 Photography Consumer Cyclical

  • Page 2

  • Page 3
    ... last business day of our most recently completed second fiscal quarter, the registrant's common stock was not listed on any exchange or over-the-counter market. The registrant's common stock began trading on the Nasdaq Global Market on September 29, 2006. Indicate the number of shares outstanding...

  • Page 4
    Portions of the documents listed below have been incorporated by reference into the indicated parts of this reports, as specified in the responses to the item numbers involved: Designated portions of the Proxy Statement relating to the 2007 Annual Meeting of the Stockholders (the "Proxy Statement"):...

  • Page 5
    ... Qualitative Disclosures about Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information PART III Directors, Executive Officers and Corporate Governance Executive Compensation...

  • Page 6
    ...-based products and merchandise. We currently generate revenues by producing and selling professionally-bound photo books, personalized calendars, greeting cards, other photo-based merchandise and high-quality prints (ranging in size from wallet to jumbo-sized 20Ã-30 enlargements). We manufacture...

  • Page 7
    ... memories. As our customers share these joyous memories, either digitally through our sharing service or physically through giving personalized photo-based gifts, they are enhancing their personal relationships, creating more joy in the world and making the world a better place. Industry Overview...

  • Page 8
    ...photo-based products and few or no personalization options, and require the consumer to handle shipping or delivery of the product to the final recipient, often with additional costs in time and money. In contrast, online photo services conveniently provide a wide variety of customized, high-quality...

  • Page 9
    ... limited to, greeting cards, calendars, photo books, mugs, mouse pads, frames, photo albums and scrapbooking accessories. In addition, we provide a number of valuable tools and services, such as the ability to upload and edit photos online, share photos with friends and family and store an unlimited...

  • Page 10
    ... consumer needs - by introducing consumers to new forms of communication and creative expression through our website features and functionality, photo prints, and personalized photo-based products and services. We also provide photo printing, storing and sharing. We believe that many people are...

  • Page 11
    ... Shutterfly Studio, our consumer software application that allows for uploading, organizing, printing, sharing and editing from the desktop; a redesigned and easier to use website; a new store that makes shopping easier and more accessible; and dozens of new borders that customers can use to enhance...

  • Page 12
    ... activities offered by the website - Add Pictures, View & Enhance, Share Online, Order Prints and Shutterfly Store. If consumers decide to either upload pictures or purchase products, they register on the website and begin the following process: Upload. Customers can upload digital photos from...

  • Page 13
    .... View and enhance. Once photos have been uploaded to Shutterfly, customers can choose to view their photos in a variety of ways, including photo slideshows. To improve picture quality, customers also have access to our free online editing and image enhancement tools. In addition to cropping and red...

  • Page 14
    ... contests that promote sharing of photos by our customers. To save our customers time, we offer an easy way to copy names, e-mail addresses and mailing addresses from various software such as Outlook, Outlook Express, Entourage, Palm and Eudora into their Shutterfly address book. Order and ship. We...

  • Page 15
    ... offered by the website - Add Pictures, View & Enhance, Share Online, Order Prints and Shutterfly Store, which includes personalized product creation. We have designed our website system to be highly available, secure and cost-effective. We can scale to increasing numbers of customers by adding...

  • Page 16
    ...products and services to their large user bases; • home printing service providers such as Hewlett-Packard, Epson and Canon, that are seeking to expand their printer and ink businesses by gaining market share in the emerging digital photography marketplace; and • photo-related software companies...

  • Page 17
    ...certain processes under U.S. patents relating to uploading, storing, sharing, accessing, downloading and/or requesting or obtaining digital images or prints of digital images or merchandise to which such images are applied. Under the terms of the agreement, Shutterfly paid $2.0 million for a license...

  • Page 18
    ... of information to which we provide links or that may be posted online. Employees As of December 31, 2006, we had 275 full time employees. Approximately 79 employees were engaged in engineering, 101 in photo lab operations, 39 in sales and marketing, 16 in customer service and 40 in general and...

  • Page 19
    ... number of qualified seasonal employees. We believe that we must significantly grow our current production capability to meet our projected revenue targets and, to date, have not yet identified or built out locations for the additional production capacity we expect to need beginning in 2007...

  • Page 20
    ... Easter; • volatility in our stock price, which may lead to higher stock-based compensation expense under newly adopted accounting standards; • consumer preferences for digital photography services; and • improvements to the quality, cost and convenience of desktop printing of digital pictures...

  • Page 21
    ... website and customer operations; • enhance and expand our products and services; • successfully execute our business and marketing strategy; • continue to develop and upgrade our technology and information processing systems; • continue to enhance our service to meet the needs of a changing...

  • Page 22
    ...trends. Many online businesses, including Shutterfly, offer discounted or free shipping during promotional periods and usually based upon a minimum purchase requirement as a means of attracting or retaining customers. In the event that free shipping offers extend beyond a limited number of occasions...

  • Page 23
    ...products and services to their large user bases; • home printing service providers such as Hewlett-Packard, Epson and Canon, that are seeking to expand their printer and ink businesses by gaining market share in the emerging digital photography marketplace; and • photo-related software companies...

  • Page 24
    ... direct mail. We pay providers of online services, search engines, directories and other website and e-commerce businesses to provide content, advertising banners and other links that direct customers to our website. We also use e-mail and direct mail to offer free products and services as a means...

  • Page 25
    ... printing at home. Furthermore, we may have to incur significantly higher and more sustained advertising and promotional expenditures or reduce the prices of our products and services in order to attract additional online consumers to our website and convert them into purchasing customers. Specific...

  • Page 26
    ... faults may cause our website to fail and result in loss of, or delay in, market acceptance of our products and services. If we experience a delay in a website release that results in customer dissatisfaction during the period required to correct errors and design faults, we would lose revenue. In...

  • Page 27
    ... prints, and photo-based products, such as photo books and calendars, we intend to address, and demand may shift to, expanding into new products and services. In addition, we believe we may need to address additional markets and expand our customer demographic in order to further grow our business...

  • Page 28
    ... of our financial reports, leading to a decline in our stock price. Failure to adequately protect our intellectual property could substantially harm our business and results of operations. We rely on a combination of patent, trademark, trade secret and copyright law and contractual restrictions...

  • Page 29
    ... controlled also by trademark and other related laws. If we lose the ability to use our Shutterfly mark in a particular country or our domain name, we could be forced to either incur significant additional expenses to market our products within that country, including the development of a new brand...

  • Page 30
    ...impose complex and costly constraints on our business model. Because of our focus on automation and high volumes, our operations do not involve, for the vast majority of our sales, any human-based review of content. Although our website's terms of use specifically require customers to represent that...

  • Page 31
    ... security breaches could damage our reputation and brand and substantially harm our business and results of operations. For example, a majority of our sales are billed to our customers' credit card accounts directly, orders are shipped to a customer's address, and customers log on using their e-mail...

  • Page 32
    ... to initiate or maintain coverage of our stock; • ratings downgrades by any securities analysts who follow our company; • the public's response to our press releases or other public announcements, including our filings with the SEC; • announcements by us or our competitors of significant...

  • Page 33
    ... in Charlotte, North Carolina in leased facilities totaling approximately 102,400 square feet. The lease for the facility commences on the later of April 30, 2007 or substantial completion of certain landlord's work, and expires on last day of the eighty-ninth month thereafter. We have an option to...

  • Page 34
    ... stock in 2005, but that we later modified that tax advice, extended his option exercise date, and required that he make provision for the applicable withholding taxes at the time of exercise of such options. The plaintiff claims he was damaged by having to immediately sell a portion of those shares...

  • Page 35
    ... sole book-running manager for the offering and Piper Jaffray & Co. and Jefferies & Company, Inc. acted as co-managers of the offering. The securities registered were 5,800,000 shares of common stock, plus 870,000 additional shares to cover the underwriters' over-allotment option. The underwriters...

  • Page 36
    ... elsewhere in this annual report. 2006 Year Ended December 31, 2005 2004 2003 (In thousands, except per share amounts) 2002 Consolidated Statements of Operations Data: Net revenues Cost of revenues(1) Gross profit Operating expenses: Technology and development(1) Sales and marketing(1) General and...

  • Page 37
    Table of Contents (1) Includes stock-based compensation as follows: 2006 Year Ended December 31, 2005 2004 2003 (In thousands) 2002 Cost of revenues Technology and development Sales and marketing General and administration $ 96 736 521 947 $2,300 $ 28 826 239 2,217 $3,310 $ 21 263 117 1,790 ...

  • Page 38
    ... to upload, edit, enhance, organize, find, share, create, print and preserve their digital photos in a creative and thoughtful manner. We currently generate revenues by selling photo-based products such as greeting cards, personalized calendars and professionally-bound photo books, and high-quality...

  • Page 39
    ... as mugs, mouse pads and magnets, and ancillary products such as frames, photo albums and scrapbooking accessories. Revenues are recorded net of estimated returns, promotions redeemed by customers and other discounts. Customers place orders via our website and pay primarily using credit cards. Our...

  • Page 40
    ... expenses for our customer acquisition, product marketing, business development and public relations activities. Our marketing efforts consist of various online and offline media programs, such as e-mail and direct mail promotions, the purchase of keyword search terms and various strategic alliances...

  • Page 41
    ... Recognition. We generate revenues primarily from the printing and shipping of prints, photo-based products, such as photo books, cards and calendars, photo-based merchandise, such as mugs, mouse pads and magnets, and ancillary products such as frames, photo albums and scrapbooking accessories...

  • Page 42
    ... setting up an account and to encourage purchases. Such offers include free products and percentage discounts on current purchases. Discounts, when accepted by customers, are treated as a reduction to the purchase price of the related transaction and are presented in net revenues. Production costs...

  • Page 43
    ...2006. Personalized products and services revenues were positively affected by increased sales of photo books, calendars, folded greeting cards and photo-based merchandise, which caused personalized products and services revenues to increase to 51% of revenues in 2006 from 42% in 2005. Print revenues...

  • Page 44
    ... profit public benefit corporation, in order to establish the Shutterfly Foundation as a corporate-advised charitable fund within the Community Foundation, and recognized $0.9 million of charitable contribution expense for 2006. We intend to work with Silicon Valley Community Foundation to develop...

  • Page 45
    ... the 37% growth in print revenues and caused personalized products and services revenues to increase to 42% of revenues in 2005 from 35% in 2004. 2005 represented the first full year of photo book sales, and we also added photo-based merchandise to our product offering. Print revenues increased from...

  • Page 46
    ... benefit due to releasing our net deferred tax valuation allowance in the fourth quarter of 2005. We expect that our long-term future effective tax rate will be between 38% and 45%. Net income for 2005 also increased by $0.4 million for a cumulative effect of a change in accounting principle related...

  • Page 47
    ... us, or may not be in amounts or on terms acceptable to us. Historically we have financed our operations and capital expenditures through operations, private sales of preferred stock, our initial public offering, lease financing and the use of bank and related-party loans. As a result of our initial...

  • Page 48
    ... office space in Redwood City, California and production facilities in Hayward, California under various non-cancelable operating leases that expire between 2007 and 2010. In December 2005, we entered into a non-cancelable operating lease for a new production facility in Charlotte, North Carolina...

  • Page 49
    ... include commitments under non-cancelable marketing agreements, software patent license agreements and third-party hosting services. In March 2007, we entered into a five year non-cancelable agreement for high bandwidth fiber-optic connectivity between our data centers. The purchase obligations...

  • Page 50
    ... ABOUT MARKET RISK. Interest Rate and Credit Risk. We have exposure to interest rate risk that relates primarily to our investment portfolio. All of our current investments are classified as cash equivalents and carried at cost, which approximates market value. We do not currently use or plan to use...

  • Page 51
    Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. SHUTTERFLY, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Redeemable ...

  • Page 52
    .... Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit...

  • Page 53
    ... SHUTTERFLY, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) December 31, 2006 2005 ASSETS Current assets: Cash and cash equivalents Accounts receivable, net of allowance $- and $21 at December 31, 2006 and 2005 Inventories Deferred tax asset, current portion Prepaid...

  • Page 54
    ... revenues Cost of revenues(1) Gross profit Operating expenses(1): Technology and development Sales and marketing General and administrative Income from operations Interest expense Other income (expense), net Income before income taxes and cumulative effect of change in accounting principle Benefit...

  • Page 55
    ... agreement with a former employee Vested shares issued upon acquisition Restricted shares issued upon acquisition Vesting of restricted shares Deferred stock-based compensation, net of cancellations Tax benefit of stock options Amortization of deferred stock-based compensation, net of cancellations...

  • Page 56
    ... related to Series A preferred stock Reversal of unearned stock based compensation upon modification of options Vesting of restricted shares Cancellation of common stock options and restricted shares Amortization of deferred stock-based compensation, net of cancellations Employees stock-based...

  • Page 57
    ... of business Proceeds from sale of property and equipment Net cash used in investing activities Cash flows from financing activities: Proceeds from IPO shares issued, net of issuance costs Principal payments of capital lease obligations Repayment of loan from a related party Proceeds from term loan...

  • Page 58
    ... services to organize and archive digital images; share pictures; order prints and create an assortment of personalized items such as cards, calendars and photo books. The Company is headquartered in Redwood City, California. On September 29, 2006, the Company completed its initial public offering...

  • Page 59
    ... for Internal Use , and EITF 00-02, Accounting for Web Site Development Costs. Accordingly, the Company expenses all costs that relate to the planning and post implementation phases. Costs incurred in the development phase are capitalized and amortized over the product's estimated useful life. The...

  • Page 60
    ... dates of the patents-in-suit. The Company recorded amortization expense of $126 and $126, in 2006 and 2005, respectively. Intangible assets related to acquired workforce were amortized on a straight-line basis over the estimated useful life of one year (Note 5). Freestanding Preferred Stock...

  • Page 61
    ... personnel and related expenses for customer acquisition, product marketing, business development and public relations activities. The Company's marketing efforts consist of various online and offline media programs, such as e-mail and direct mail promotions, the purchase of keyword search terms and...

  • Page 62
    ... of compensation expense, using a fair-value based method, for costs related to all share-based payments including stock options. SFAS No. 123R requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The Company adopted SFAS No...

  • Page 63
    ... average number of common shares outstanding during the period as reduced by the weighted average unvested common shares subject to repurchase by the Company. Net income (loss) available to common stockholders is calculated using the two class method as the net income (loss) less preferred stock...

  • Page 64
    ...Officer reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company has one business activity and there are no segment managers who are held accountable for operations, operating results and plans for products...

  • Page 65
    ... for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services ("EITF 96-18"). The Company adopted FSP 150-5 and accounted for the cumulative effect of the change in accounting principle as of July 1, 2005. For the year ended...

  • Page 66
    Table of Contents SHUTTERFLY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) - (Continued) Note 4 -Balance Sheet Components Property and Equipment December 31, 2006 2005 Computer and other equipment Software Leasehold improvements Furniture and fixtures ...

  • Page 67
    ... merger. $671 of deferred stock-based compensation was recorded based on the intrinsic value of the shares at the time of the acquisition. The Company recognized $94 and $500 of stock-based compensation expense for the year ended December 31, 2006 and 2005, respectively, relating to the vesting of...

  • Page 68
    ... as deferred rent. The Company leases certain equipment, software and colocation services under non-cancelable capital leases, operating leases or long-term agreements that expire at various dates through the year 2010. The leased equipment is subject to a security interest. The total outstanding...

  • Page 69
    ... of the Company's common stock in 2005. Plaintiff claims that, because the Company required that he make provision for the applicable withholding taxes at the time of exercise of such options, he was damaged by having to immediately sell a portion of those shares upon his exercise in order to raise...

  • Page 70
    ... render bona-fide services not in connection with the offer and sale of securities in a capital-raising transaction. Other types of awards under the 2006 Plan include NSO restricted stock awards, stock bonus awards, restricted stock units, and performance shares. Options issued under the 2006...

  • Page 71
    ... of the Company's common stock is determined by the last sale price of such stock on the Nasdaq Global Market. Options issued under the 2006 Plan typically vest with respect to 25% of the shares one year after the options' vesting commencement date, and the remainder ratably on a monthly basis over...

  • Page 72
    ...SHUTTERFLY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) - (Continued) Weighted Average Fair Value Weighted Average Exercise Price Options Granted Options with exercise price less than reassessed market price on the grant date Options with exercise price...

  • Page 73
    ... options. The agreement also provided for an extension of the time to exercise any vested options, from 90 days to 270 days from the date of the officer's termination. In February 2005, this executive officer resigned and 17 shares that would have been forfeited under the original option terms...

  • Page 74
    ... time of grant. The assumptions used to value options granted during the twelve months ended December 31, 2006 were as follows: Year Ended December 31, 2006 Dividend yield Annual risk free rate of return Expected volatility Expected term (years) - 5.0% 45.8% 4.6 Employee stock-based compensation...

  • Page 75
    ... use of net operating loss and tax credit carryforwards in the case of an "ownership change" of a corporation or separate return loss year limitations. Any ownership changes, as defined, may restrict utilization of carryforwards. The Company also had federal and state research and development credit...

  • Page 76
    ... deferred tax assets Note 10 - Employee Benefit Plan $ 17,028 2,111 1,800 32 19 20,990 - (107) (107) - $ 20,883 $ 22,646 1,408 823 - - 24,877 (632) (182) (814) - $ 24,063 In 2000, the Company established a 401(k) plan under the provisions of which eligible employees may contribute an amount up to...

  • Page 77
    ... of Contents SHUTTERFLY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) - (Continued) Note 12 - Quarterly Financial Data (Unaudited) First Quarter Year Ended December 31, 2006 Second Third Quarter Quarter Fourth Quarter Net Revenues Gross Profit Net income...

  • Page 78
    ... revenue and deferred revenue to prevent our personnel from reinstating expired prepaid print plans. Under our prepaid print plans, we offer customers the opportunity to purchase in advance larger quantities of prints at a discounted price from our current list price for prints. Our lack of controls...

  • Page 79
    ... of any control system is based, in part, upon the benefits of the control system relative to its costs. Control systems can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. In addition, over time, controls may...

  • Page 80
    ... filed as part of this annual report: 1. Financial Statements. The consolidated financial statements of Shutterfly, Inc. are incorporated by reference to Part II, Item 8 of this annual report. 2. Financial Statement Schedules. Valuation and Qualifying Accounts Report of Independent Registered Public...

  • Page 81
    ...and a stock option exercise agreement.* 2006 Equity Incentive Plan and forms of stock option agreement, stock option exercise agreement, restricted stock agreement, restricted stock unit agreement, stock appreciation right agreement and stock bonus agreement.* Lease Agreement, as amended, dated July...

  • Page 82
    ...Separation Agreement and General Release of Claims, dated January 19, 2007, by and between the Registrant and Andrew F. Young.* Code of Ethics for Chief Executive Officer and Senior Financial Department Personnel Subsidiaries of the Registrant Consent of Independent Registered Public Accounting Firm...

  • Page 83
    ... Description Form File No. Date of First Filing Exhibit Number Provided Herewith 32.02 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*** X * Represents a management contract or compensatory plan. ** Confidential treatment...

  • Page 84
    ... 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SHUTTERFLY, INC. (Registrant) By: /s/ Stephen E. Recht Stephen E. Recht, Chief Financial Officer Dated: March 20, 2007 POWER OF ATTORNEY...

  • Page 85

  • Page 86
    ...base pay based upon you and the Company reaching certain goals. Your regular location will be determined no later than January 31, 2007. You will be required to travel to Hayward, CA and Charlotte, NC for the first 6 months. Shutterfly may change your position, compensation, duties and work location...

  • Page 87
    ... option agreements. Your eligibility for the foregoing Change of Control Benefits is conditioned on you having first signed a release of claims in a form provided by the Company and returning all Company property. If the Company is subject to a Corporate Transaction Change and you continue to report...

  • Page 88
    ... with you at any time, with or without cause or advance notice. Acceptance of Offer To indicate your acceptance of this the terms of the offer, please sign and date in the space provided below and return it to Shutterfly, 2800 Bridge Parkway, Redwood City, CA 94065 attention Human Resources...

  • Page 89
    ... welcoming you to the Shutterfly team. Sincerely, /s/ Jeff Housenbold Jeff Housenbold CEO & President Enclosures Acceptance I agree to and accept employment with Shutterfly on the terms and conditions set forth in this agreement. I understand and agree that my employment with the Company is at-will...

  • Page 90
    ... my employment, or include them in any product or service of the Company, I hereby grant to the Company a perpetual, irrevocable, nonexclusive, world-wide, royalty-free license to use, disclose, make, sell, copy, distribute, modify and create works based on, perform or display such Prior Inventions...

  • Page 91
    ...THAT THE EMPLOYEE DEVELOPED ENTIRELY ON HIS OR HER OWN TIME WITHOUT USING THE EMPLOYER'S EQUIPMENT, SUPPLIES, FACILITIES, OR TRADE SECRET INFORMATION EXCEPT FOR THOSE INVENTIONS THAT EITHER: (1) RELATE AT THE TIME OF CONCEPTION OR REDUCTION TO PRACTICE OF THE INVENTION TO THE EMPLOYER'S BUSINESS, OR...

  • Page 92
    ... Proprietary Information includes, but is not limited to, Assigned Inventions, marketing plans, product plans, business strategies, financial information, forecasts, personnel information, customer lists and data, and domain names. • Confidentiality . At all times, both during my employment and...

  • Page 93
    ... that my employment with the Company requires my undivided attention and effort during normal business hours. While I am employed by the Company, I will not, without the Company's express prior written consent, provide services to, or assist in any manner, any business or third party if such...

  • Page 94
    ... are ineffective, unless put into a writing signed by the Company. I further acknowledge that my participation in any stock option or benefit program is not to be construed as any assurance of continuing employment for any particular period of time. This Agreement shall be effective as of the first...

  • Page 95
    SHUTTERFLY, INC.: By: /s/ Jeff Housenbold Employee: /s/ Dwayne Black Signature Name: Jeff Housenbold Dwayne Black Title: CEO & President Signature Page to Employee Invention Assignment and Confidentiality Agreement

  • Page 96
    ...that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either: (a) Relate at the time of conception or reduction to practice of the invention to the employer's business, or...

  • Page 97
    APPENDIX B PRIOR MATTER None.

  • Page 98

  • Page 99
    ...to the Company as requested by the Company. Such services will generally be provided on-site at the Company and on a regular, full-time basis pursuant to a transition plan established by the Company. However, Employee may provide such services from home with the prior approval of the Company. In the...

  • Page 100
    ... for the compensation and benefits described in this Agreement, Employee agrees that she will affirm and extend this Release of Claims for the Transition Period by re-signing this Agreement in the space at the end of the Agreement on or shortly before the Termination Date. 4. No Assignment or...

  • Page 101
    ... Date, Employee will return to the Company, in good working condition, all Company property and equipment that is in Employee's possession or control, including, but not limited to, any files, records, computers, computer equipment, cell phones, credit cards, keys, programs, manuals, business plans...

  • Page 102
    .... EMPLOYEE ACKNOWLEDGES THAT SHE IS SIGNING THIS AGREEMENT KNOWINGLY, WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE BENEFITS DESCRIBED HEREIN. Dated: January 23, 2007 /s/ Jeannine Smith Jeannine Smith SHUTTERFLY, INC. By: Dated: January , 2007 /s/ Jeff Housenbold Jeff Housenbold President & CEO 4

  • Page 103
    By re-signing this Agreement on or shortly before the Termination Date, Employee hereby extends the Release of Claims set forth in paragraph 3 above to include any claims arising through and including the Termination Date. Dated: , 2007 Jeannine Smith 5

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  • Page 105
    ... notice 2. Payment; Benefits . The Company shall provide Employee with the following benefits after this Agreement becomes effective: (a) A severance payment in the amount of $110,000 which is equal to six (6) months' pay at Employee's final base pay rate, and less applicable withholding taxes and...

  • Page 106
    ...If Employee is covered under the Company's group health plan as of the Termination Date and he timely elects to continue his group coverage pursuant to federal/state law (COBRA), the Company will pay six (6) months of the applicable COBRA premiums as COBRA is provided in accordance with the terms of...

  • Page 107
    ...words, Employee may revoke Employee's acceptance of this Agreement within seven (7) days after the date Employee signs it. Employee's revocation must be in writing and received by Patricia School, Vice President, Human Resources at the Company by 5:00 p.m. Pacific Time on the seventh day in order to...

  • Page 108
    ... Date, Employee will return to the Company, in good working condition, all Company property and equipment that is in Employee's possession or control, including, but not limited to, any files, records, computers, computer equipment, cell phones, credit cards, keys, programs, manuals, business plans...

  • Page 109
    .... EMPLOYEE ACKNOWLEDGES THAT HE IS SIGNING THIS AGREEMENT KNOWINGLY, WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE BENEFITS DESCRIBED IN PARAGRAPH 2. Dated: January 19, 2007 /s/ Andrew Young Andrew Young SHUTTERFLY, INC. Dated: January , 2007 By: /s/ Jeff Housenbold Jeff Housenbold President & CEO 5

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    By re-signing this Agreement on or shortly before the Termination Date, Employee hereby extends the Release of Claims set forth in paragraph 3 above to include any claims arising through and including the Termination Date. Dated: , 2007 Andrew Young 6

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    ...for the sake of avoiding an implication of impropriety, Reporting Employees will not: • • accept any material gift or other gratuitous benefit from a supplier or vendor of products or services, including professional services, to the Company (this prohibition is not intended to preclude ordinary...

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    ... obligated to disclose such information. Achieve responsible use of and control over all assets and resources entrusted to each Reporting Employee. Work cooperatively with the Company's independent auditors in their review of the Company's financial statements and disclosure documents. Promptly...

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    Exhibit 21.01 SUBSIDIARIES OF SHUTTERFLY, INC. None.

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    EXHIBIT 23.01 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statement on Form No. S-8 (No. 333-137676) of Shutterfly Inc. of our reports dated March 16, 2007 relating to the consolidated financial statements and ...

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    ... OF THE SARBANES-OXLEY ACT OF 2002 I, Jeffrey T. Housenbold, President and Chief Executive Officer of Shutterfly, Inc., certify that: 1. I have reviewed this annual report on Form 10-K of Shutterfly, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact...

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    ... and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. By: /s/ Stephen E. Recht Stephen E. Recht Chief Financial Officer Date: March 20, 2007

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    ... Securities Exchange Act of 1934; and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Jeffrey T. Housenbold Jeffrey T. Housenbold President and Chief Executive Officer Date: March 20, 2007

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    ... Financial Officer of Shutterfly, Inc. (the "Company"), pursuant to 18 U.S.C. §1350, hereby certifies: (i) the Annual Report on Form 10-K for the period ended December 31, 2006 of the Company (the "Report") fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange...