Shutterfly 2008 Annual Report Download

Download and view the complete annual report

Please find the complete 2008 Shutterfly annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 132

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132

SHUTTERFLY INC
FORM 10-K
(Annual Report)
Filed 03/10/08 for the Period Ending 12/31/07
Address 2800 BRIDGE PARKWAY
STE 101
REDWOOD CITY, CA 94065
CIK 0001125920
Symbol SFLY
SIC Code 7384 - Photofinishing Laboratories
Industry Photography
Sector Technology
http://www.edgar-online.com
© Copyright 2008, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    ...10-K (Annual Report) Filed 03/10/08 for the Period Ending 12/31/07 Address CIK Symbol SIC Code Industry Sector 2800 BRIDGE PARKWAY STE 101 REDWOOD CITY, CA 94065 0001125920 SFLY 7384 - Photofinishing Laboratories Photography Technology http://www.edgar-online.com © Copyright 2008, EDGAR Online...

  • Page 2
    ..., the last business day of our most recently completed second fiscal quarter, the aggregate market value of our Common Stock held by non-affiliates based on the closing price or our Common Stock on June 29, 2007 as reported on the NASDAQ Global Market was $523,696,054. Indicate the number of shares...

  • Page 3
    ... 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 Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 4
    ... publishing company that produces customized children's books under the brand name Make It About Me . On January 4, 2008, for $10.0 million in cash, and stock consideration of approximately $4.0 million, we acquired Nexo Systems, a privately held on-line sharing and group services company based...

  • Page 5
    ... value for our customers is the basis for our success. Our tag line is "Tell Your Story," and we offer customers easy, convenient and fun ways to tell their stories by sharing and preserving memories for family, friends and themselves; organizing all of their photos in a safe and easily accessible...

  • Page 6
    ... is free and offers customers the ability to upload, edit, store and share an unlimited number of photos. Membership is not required to view shared pictures, which can be viewed with a simple click. We conveniently mail orders to our customers' homes or offices, or directly to a gift recipient...

  • Page 7
    ... Target for pick up at Target retail stores. There are only five navigational "tabs," which correspond to the primary 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...

  • Page 8
    ... greeting-cards and calendars; licensed content from Martha Stewart, Dora the Explorer, Go Diego Go, Sesame Street, Clifford the Big Red Dog, Thomas and Friends, and Angelina Ballerina; and digi-scrap capabilities which allow for customers to upload their digi-scrap designs onto photo book pages or...

  • Page 9
    ... activities 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...

  • Page 10
    ... as a photo printed on an enlargement or in a photo book, even if they are ordered at separate times. Production system. We operate our own production facilities in Hayward, California, and Charlotte, North Carolina. Our automated production system controls our production processes, including order...

  • Page 11
    ... service. None of our competitors offers a comparable value proposition, trusted brand or singular focus on customers. Many of our competitors promote their products on the basis of low prices or the convenience of same-day availability for digital photos printed in drugstores or other retail...

  • Page 12
    8

  • Page 13
    ... employmentrelated work stoppages and consider our employee relations to be good. Available Information Our Internet website is located at http://www.shutterfly.com. The information on our website is not a part of this annual report. We make available free of charge on our website our annual report...

  • Page 14
    ... picture taking; the timing of holidays; volatility in our stock price, which may lead to higher stock-based compensation expense; consumer preferences for digital photography services; and improvements to the quality, cost and convenience of desktop printing of digital pictures and products. Based...

  • Page 15
    10

  • Page 16
    ... the size of our customer base; maintain and enhance our brand; maintain and grow our 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...

  • Page 17
    we increase these offers to respond to actions taken by our competitors, our results of operations may be harmed. 11

  • Page 18
    ... in the future as current competitors improve their offerings and as new participants enter the market or as industry consolidation further develops. Competition may result in pricing pressures, reduced profit margins or loss of market share, any of which could substantially harm our business and...

  • Page 19
    12

  • Page 20
    ..., e-mail and 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...

  • Page 21
    ... as 4Ã-6 prints, and photo-based products, such as photo books and calendars, we intend to address, and demand may shift to, 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. We may...

  • Page 22
    14

  • Page 23
    .... Existing and future laws and regulations may impede the growth of the Internet or other online services. These regulations and laws may cover taxation, restrictions on imports and exports, customs, tariffs, user privacy, data protection, pricing, content, copyrights, distribution, electronic...

  • Page 24
    ... customers' credit card accounts directly, orders are shipped to a customer's address, and customers log on using their e-mail address. We rely on encryption and authentication technology licensed from third parties to effect the secure transmission of confidential information, including credit card...

  • Page 25
    ..., our revenue growth would likely suffer. Moreover, we face significant risks that, if the market for digital photography evolves in ways that we are not able to address due to changing technologies or consumer behaviors, pricing pressures, or otherwise, our current products and services may become...

  • Page 26
    17

  • Page 27
    ...half of 2008, although we expect to require additional corporate facilities to handle future growth. We believe that suitable additional space will be available in the future on commercially reasonably terms as needed. ITEM 3. LEGAL PROCEEDINGS. On August 29, 2006, our former Chief Financial Officer...

  • Page 28
    ... name by brokers. We have not paid any cash dividends and do not currently have plans to do so in the foreseeable future. The following table sets forth the high and low sales price per share for Shutterfly's common stock for the periods indicated: Year Ended December 31, 2006 Third Quarter Fourth...

  • Page 29
    ...(2) Cumulative effect of change in accounting principle Net income (2) Net income per share: Basic Diluted Weighted Average Shares Basic Diluted _____ (1) Includes stock-based compensation as follows: 2007 Cost of net revenues Technology and development Sales and marketing General and administration...

  • Page 30
    ...a privately held on-line sharing and group services company based in Palo Alto, California. Basis of Presentation Net Revenues. We generate revenues primarily from the printing and shipping of photo-based products, such as photo books, cards and calendars, photo prints, photo-based merchandise, such...

  • Page 31
    ... increase average order value as a means of increasing net revenues. Average order value has increased on an annual basis for each year since 2000, and we anticipate that this trend will continue in the future. Total Number of Orders. We closely monitor total number of orders as a leading indicator...

  • Page 32
    ... of costs incurred for marketing programs and personnel and related 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...

  • Page 33
    ... regarding the length of time an employee will retain vested stock options before exercising them, the estimated volatility of our common stock price and the number of options that will be forfeited prior to vesting. The fair value is then amortized on a straight-line basis over the requisite...

  • Page 34
    ... in Redwood City. Payment processing fees paid to third parties increased by $1.5 million during 2007 due to increased order volumes. In 2006, we made a non-recourse, non-refundable contribution of 65,000 shares of common stock to Silicon Valley Community Foundation, a California non-profit public...

  • Page 35
    Interest Expense Other income, net Interest expense decreased by $0.1 million for 2007, due primarily to a decrease in interest expense on capitalized lease obligations. $(179) $5,515 $(266) $2,387 $ 87 $3,128 23

  • Page 36
    ...invest in our website infrastructure hardware to support our continued revenue growth, which resulted in increased depreciation expense of $1.8 million. Stock-based compensation expense was $0.7 million in 2006, compared to $0.8 million in 2005. Our sales and marketing expense increased $6.7 million...

  • Page 37
    ... to develop a charitable program dedicated to enhancing communities in the San Francisco Bay Area and around the world. We had no charitable contribution expense in 2005 and we do not expect to make further donations to the Silicon Valley Community Foundation for the foreseeable future. Stock-based...

  • Page 38
    ..., 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 public offering in September 2006, we raised approximately $80.9 million of proceeds, net of underwriters' discount, which we received on October...

  • Page 39

  • Page 40
    ... and production operations at our California and North Carolina facilities, and capitalized website development costs related to projects that were placed into service. Additional cash of $3.0 million and $2.9 million was used for purchases of shortterm investments and acquisition of "Make-it...

  • Page 41
    stock consideration of approximately $4.0 million. This transaction closed on January 4, 2008 and that amount was paid on that date. As part of our June 2007 acquisition of Make It About Me! ("MIAM"), we agreed to make additional earnout payments if certain milestones are achieved over the next 12 ...

  • Page 42
    ... 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 short-term investments and carried at cost, which approximates market value. We do not currently use or plan to use...

  • Page 43
    ... AND SUPPLEMENTARY DATA. SHUTTERFLY, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity...

  • Page 44
    ... for share-based compensation in 2006. In addition, as discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for freestanding warrants for redeemable convertible preferred stock in 2005. A company's internal control over financial reporting...

  • Page 45
    SHUTTERFLY, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) December 31, 2007 ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Deferred tax asset, current portion Prepaid expenses and other current assets Total ...

  • Page 46
    ... change in accounting principle Cumulative effect of change in accounting principle, net of tax benefit Basic Diluted Weighted average shares: Basic Diluted _____ (1) Stock-based compensation is allocated as follows (Notes 2 and 7): Cost of net revenues Technology and development Sales and marketing...

  • Page 47
    ... 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 48
    ... shares Cancellation of common stock options and restricted shares Amortization of deferred stockbased compensation, net of cancellations Employees stock-based compensation expense recognized under SFAS No. 123R, net of estimated forfeiture Donation of common stock to a charitable foundation Change...

  • Page 49
    ...repurchases Cancellation of common stock options and restricted shares Amortization of deferred stock-based compensation, net of cancellations Employees stock-based compensation expense recognized under SFAS No. 123R, net of estimated forfeiture Tax benefit of stock options Change in unrealized loss...

  • Page 50
    ... expense for shares issued to charitable foundation Change in carrying value of preferred stock warrant liability Loss/(gain) on disposal of property and equipment Deferred income taxes Changes in operating assets and liabilities, net of effects of acquisition Accounts receivable, net Inventories...

  • Page 51
    ...and manufacturing processes. The Company provides customers a full range of products and 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...

  • Page 52
    ... 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 53
    37

  • Page 54
    ...weighted 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 available to common stockholders is calculated using the two class method as the net income less preferred stock dividends...

  • Page 55
    38

  • Page 56
    ... preferred stock under EITF Issue No. 96-18, Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services ("EITF 9618"). The Company adopted FSP 150-5 and accounted for the cumulative effect of the change in accounting...

  • Page 57
    Less: Accumulated depreciation and amortization Net property and equipment $ (41,226) 48,416 $ (26,003) 30,919 39

  • Page 58
    ... website development costs incurred in the application development phase and unamortized cost is included in property and equipment and totaled approximately $3,619,000 and $2,582,000 at December 31, 2007 and 2006, respectively. These amounts included $111,000 and $0 of stock based compensation...

  • Page 59
    ... CustomAbility, LLC, a publishing company that produces customized children's books under the brand name Make It About Me ("MIAM"). This acquisition augmented the Company's personal publishing platform. The transaction was accounted for as a purchase business combination. The total purchase price...

  • Page 60
    ... of these indemnification obligations. Contingencies From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues contingent liabilities when it is probable that future expenditures will be made and such...

  • Page 61
    ... of common stock in good faith based on the best information available to the Board and Company's management at the time of the grant. Following the IPO, the fair value of the Company's common stock is determined by the last sale price of such stock on the Nasdaq Global Market. Options issued under...

  • Page 62
    outstanding on the December 31 immediately prior to the date of increase or b) a lesser number as determined by the Board. 42

  • Page 63
    ... 2007, the Company granted stock options to purchase an aggregate of 2,216,694 shares of common stock with a weighted average grant-date fair value of $9.33 per share. Options granted in 2006 are grouped as follows: Options Granted Options with exercise price less than reassessed market price on the...

  • Page 64
    ...a price per share not less than fair market value of the shares of the Company's stock underlying those options on their respective dates of grant. The Board determined these fair market values in good faith based on the best information available to the Board and Company's management at the time of...

  • Page 65
    44

  • Page 66
    ... 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 67
    45

  • Page 68
    ... corresponding auction-rate securities until a future auction of these investments is successful or new buyers express interest in purchasing these securities in between reset dates. As a result of the current negative liquidity conditions in the global credit markets, in February 2008, auctions for...

  • Page 69
    ... registered public accounting firm that also audited our financial statements included in this Annual Report on Form 10-K, audited the effectiveness of internal control over financial reporting as of December 31, 2007, and issued their related attestation report which is included herein. Changes in...

  • Page 70
    ... and other employees of the finance department designated by the Company's Chief Financial Officer. This code of ethics, titled the "Code of Ethics for Chief Executive Officer and Senior Financial Department Personnel," can be found on our website at www.shutterfly.com . We intend to make all...

  • Page 71
    ... Consent of Independent Registered Public Accounting Firm 24.01 Power of Attorney. (See page 79 of this Form 10-K) 31.01 Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a) 31.02 Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule...

  • Page 72
    ... 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/ Mark J. Rubash Mark J. Rubash Sr. Vice President and Chief Financial Officer Dated: March 10, 2008 POWER...

  • Page 73
    ...(the "Company" or "Shutterfly") is pleased to offer you the opportunity to join Shutterfly. You are being offered a position as Senior Vice President and Chief Marketing Officer reporting to me. If you decide to join us, your start date will be May 31, 2007. Compensation Your annual base pay will be...

  • Page 74
    ... agreements herein, may not be modified or amended except by a written agreement signed by the Chief Executive Officer of the Company. If we do not hear from you by May 17, 2007 we will assume you have decided not to join Shutterfly. We look forward to your positive response and welcoming you to the...

  • Page 75
    ... 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 and to sublicense third parties with...

  • Page 76
    ...will not directly or indirectly solicit or take away suppliers or customers of the Company if the identity of the supplier or customer or information about the supplier or customer relationship is a trade secret or is otherwise deemed confidential information within the meaning of California law. 14...

  • Page 77
    ...employer shall not apply to an invention 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...

  • Page 78
    APPENDIX B PRIOR MATTER

  • Page 79
    ...") is pleased to offer you the opportunity to join Shutterfly. You are being offered a position as Senior Vice President, Chief Financial Officer reporting to me. If you decide to join us, then your anticipated start date will be November 29, 2007. Compensation Your annual base pay will be $280...

  • Page 80
    ... with you at any time, with or without Cause or advance notice. Acceptance of Offer To indicate your acceptance of the terms of this offer, please sign and date in the space provided below and return an executed copy to Shutterfly; 2800 Bridge Parkway; Redwood City, CA 94065; Attention: Human...

  • Page 81
    ... 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 and to sublicense third parties with...

  • Page 82
    ... the identity of the supplier or customer or information about the supplier or customer relationship is a trade secret or is otherwise deemed confidential information within the meaning of California law. 14. Name & Likeness Rights . I hereby authorize the Company to use, reuse, and to grant others...

  • Page 83
    ...employer shall not apply to an invention 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...

  • Page 84
    APPENDIX B PRIOR MATTER

  • Page 85
    ... employment services to the Company to transition his work to the new Chief Financial Officer for the Company, as requested by the Company (the "Transition Period"). (b) In the event Employee enters into a working relationship as an employee, independent contractor, consultant, or other type of...

  • Page 86
    ... in the future, make any critical or disparaging statements about the other (in the case of Employee, he shall not disparage the Company, its products, services, employees or other agents or representatives), unless such statements are made truthfully in response to a subpoena or other legal process...

  • Page 87
    Exhibit 10.22 LEASE AGREEMENT BY AND BETWEEN 3915 SHOPTON ROAD, LLC (AS LANDLORD) AND SHUTTERFLY, INC. (AS TENANT)

  • Page 88
    ...") made and entered into as of the 22nd day of December, 2006 (the "Lease Date"), by and between 3915 SHOPTON ROAD, LLC, a North Carolina limited liability company hereinafter called "Landlord"; and SHUTTERFLY, Inc., a Delaware corporation hereinafter called "Tenant": WITNESSETH: In consideration of...

  • Page 89
    ... right, from time to time, to audit Landlord's books and records as they relate to any costs and expenses for which Tenant is responsible under this Lease during the previous calendar year of the Lease term. Any such audit shall be conducted during Landlord's regular business hours at the offices of...

  • Page 90
    ... other substances used in connection with Tenant's photo-developing and merchandising processes and services provided such chemicals and other substances are brought into the Premises, used, stored and disposed of in accordance with all Legal Requirements and Environmental Laws. (c) Landlord hereby...

  • Page 91
    ... life of such replaced system (based upon standard accounting principles) and charged to Tenant proportionately. Tenant shall be obligated to pay all such costs within thirty (30) days after notice from Landlord. 11. TRADE FIXTURES AND EQUIPMENT . Any trade fixtures installed in the Premises at...

  • Page 92
    ... "discount rate" of the Federal Reserve Bank of Charlotte, North Carolina plus one percent (1.0%) per annum, less the Market Rate (as defined in Exhibit "E" hereof) of the Premises for the remainder of the Term) less the rents actually received from any reletting. In determining the Annual Rental...

  • Page 93
    ...Redwood City, CA 94065 Attention: Chief Financial Officer with a copy to Vice President, Legal President with a copy to General Counsel The addresses of Landlord and Tenant and the party, if any, to whose attention a notice or copy of same shall be directed may be changed or added from time to time...

  • Page 94
    ... certificate), then the party making such request shall be responsible for paying the out-ofpocket costs and expenses, including without limitation, the attorneys fees, incurred by the requested party in connection with the review (and, if applicable, the negotiations) related to such document...

  • Page 95
    ... first above written. "LANDLORD" 3915 SHOPTON ROAD, LLC, a North Carolina limited liability company By: /s/ Paul L. Herndon Name: Paul L. Herndon Title: Vice President "TENANT" SHUTTERFLY, INC. , a Delaware corporation By: /s/ Stephen E. Recht Name: Stephen E. Recht Title : Chief Financial Officer

  • Page 96
    EXHIBIT "A" LEGAL DESCRIPTION OF BUILDING SITE 3915 Shopton Road, LLC Lot 4, Shopton Ridge Business Park, Phase 1 Map 2 6.3152 Acres Being a parcel or tract of land located in the City of Charlotte, Mecklenburg County, North Carolina, and being more particularly described as follows: BEGINNING at an...

  • Page 97
    EXHIBIT "B" INTENTIONALLY DELETED

  • Page 98
    ... work to all subcontractors and open-book all bids for Tenant and Landlord review and selection. DSS Corporation shall receive a "cost plus 5%" fee. Tenant shall have the opportunity to review and provide input concerning the subcontractor bids, which Tenant agrees to do in a timely and good faith...

  • Page 99
    ... that Tenant may be required to obtain (if any) in order for Tenant to operate for Tenant's permitted use as described in Article 6(a) of this Lease; (ii) construction permits (including costs associated with any "express review" process); (iii) space planning; (iv) construction documents; (v) upfit...

  • Page 100
    ... Park for uniformity and attractiveness, (ii) the size, shape, design, lighting, materials and location of all signs shall conform to the uniform signage plan for the Business Park, and (iii) Tenant shall not cause any sign, tag, label, picture, advertisement or notice to be displayed, distributed...

  • Page 101
    ... shall be returned. Improvements, Contractors and Service Maintenance . Subject to the provisions set forth in Article 5 of the Lease, (i) Tenant shall not make any improvements to the exterior of the Building or the Business Park and Tenant shall not make any structural changes or other material...

  • Page 102
    ... Charlotte, North Carolina. The "Market Rate" means the rental rate which Landlord and a third party tenant would agree upon for a new lease, as of the commencement date of such Renewal Term, taking into consideration the uses permitted under the Lease, the quality, size, design and location of the...

  • Page 103
    ... or agency which is in any way related to Hazardous Substances; (5) no person, party or private or governmental agency or entity has given any notice of or asserted any claim, cause of action, penalty, cost or demand for payment or compensation, directly or indirectly, resulting from or allegedly...

  • Page 104
    EXHIBIT "E-1" Parking [TO BE ATTACHED AFTER LEASE EXECUTION ONCE AGREED TO BY PARTIES]

  • Page 105
    ... expire on _____, 2_____, unless sooner terminated in accordance with the terms of the Lease. Very truly yours, TENANT: Shutterfly, Inc., a Delaware corporation By _____ Name: _____ Its: _____ AGREED TO THIS ___ DAY OF ___, 200_: LANDLORD: 3915 SHOPTON ROAD, LLC By: _____ Name: _____ Its: _____

  • Page 106
    ... is made and entered into as of this 26 th day of February 2007, by and between 3915 SHOPTON ROAD, LLC , a North Carolina limited liability company (hereinafter referred to as "Landlord"), and SHUTTERFLY, INC. , a Delaware corporation (hereinafter referred to as "Tenant"). RECITALS: A. Landlord and...

  • Page 107

  • Page 108
    ...as of the date set forth above. LANDLORD: 3915 SHOPTON ROAD, LLC , a North Carolina limited liability company By: /s/Paul Herndon Name: Paul Herndon Title: Vice President TENANT: SHUTTERFLY, INC., a Delaware corporation By: /s/Stephen E. Recht Name: Stephen E. Recht Title: Chief Financial Officer

  • Page 109
    ... work to all subcontractors and open-book all bids for Tenant and Landlord review and selection. DSS Corporation shall receive a "cost plus 5%" fee. Tenant shall have the opportunity to review and provide input concerning the subcontractor bids, which Tenant agrees to do in a timely and good faith...

  • Page 110
    ... that Tenant may be required to obtain (if any) in order for Tenant to operate for Tenant's permitted use as described in Article 6(a) of this Lease; (ii) construction permits (including costs associated with any "express review" process); (iii) space planning; (iv) construction documents; (v) upfit...

  • Page 111
    EXHIBIT "E-1" Parking

  • Page 112
    EXHIBIT "E-2" Enclosed Walkway

  • Page 113
    ... st day of October, 2007, by and between 3915 SHOPTON ROAD, LLC , a North Carolina limited liability company (hereinafter referred to as "Landlord"), 4015 SHOPTON ROAD, LLC , a North Carolina limited liability company ("Temporary Landlord") and SHUTTERFLY, INC. , a Delaware corporation (hereinafter...

  • Page 114
    ... set forth above. LANDLORD: 3915 SHOPTON ROAD, LLC , a North Carolina limited liability company By: /s/ Paul Herndon Name: Paul Herndon Title: Vice President TENANT: SHUTTERFLY, INC., a Delaware corporation By: /s/ Stephen E. Recht Name: Stephen E. Recht Title: Chief Financial Officer TEMPORARY...

  • Page 115
    EXHIBIT "A" Tenant's Signage Proposal

  • Page 116
    EXHIBIT "B" Temporary Premises Floor Plan

  • Page 117

  • Page 118

  • Page 119
    ...3 rd day of January, 2008, by and between 3915 SHOPTON ROAD, LLC , a North Carolina limited liability company (hereinafter referred to as "Landlord"), 4015 SHOPTON ROAD, LLC , a North Carolina limited liability company ("Temporary Landlord") and SHUTTERFLY, INC. , a Delaware corporation (hereinafter...

  • Page 120
    ...executed this Addendum as of the date set forth above. LANDLORD: 3915 SHOPTON ROAD, LLC , a North Carolina limited liability company By: /s/Paul Herndon Name: Paul Herndon Title: Vice President TENANT: SHUTTERFLY, INC., a Delaware corporation By: /s/Douglas Appleton Name: Douglas S. Appleton Title...

  • Page 121

  • Page 122
    .... IT IS THEREFORE, agreed as follows: 1. As used in this Agreement, the following terms have the following meanings: "3000 Bridge Building" means the commercial office building located at 3000 Bridge Parkway, Redwood City, California. "Expansion Space" means a portion of the 3000 Bridge Building...

  • Page 123
    ... and requirements for such work. 7. The following new Paragraph 54 is added to the Lease: 54. TENANT'S RIGHT OF FIRST OFFER 54.1 As used herein, "Offer Space" means any space in the 3000 Bridge Building. Landlord shall give Tenant a written notice (the "Availability Notice") identifying the...

  • Page 124
    .... Landlord: WESTPORT OFFICE PARK LLC a California limited liability company By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, its member /s/ JoLynn Chow Miller Director & Second Vice President By: Tenant: SHUTTERFLY, INC., a Delaware corporation By: Its: /s/ Stephen...

  • Page 125

  • Page 126
    EXHIBIT A-1 EXPANSION SPACE

  • Page 127
    Exhibit 21.01 SUBSIDIARIES OF SHUTTERFLY, INC. None.

  • Page 128
    ... 23.01 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statement on Form No. Sâˆ'8 (Nos. 333-148487, 333âˆ'137676) of Shutterfly Inc. of our report dated March 6, 2008 relating to the consolidated financial statements...

  • Page 129
    ...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... and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including...

  • Page 130
    ... Chief Financial 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 ... and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including...

  • Page 131
    ... Chief Executive Officer of Shutterfly, Inc. (the "Company"), pursuant to 18 U.S.C. §1350, hereby certifies that: (i) the Annual Report on Form 10-K for the period ended December 31, 2007 of the Company (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities...

  • Page 132
    ..., Chief 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, 2007 of the Company (the "Report") fully complies with the requirements of Section 13(a) and 15 (d) of the Securities...