Shutterfly 2007 Annual Report Download - page 34

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Table of Contents
We believe that our existing facilities are adequate to meet our needs through the first half of 2007, 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.
On August 29, 2006, our former Chief Financial Officer, Virender Ahluwalia, sued Shutterfly in San Mateo
County Superior Court alleging causes of action for reformation of contract, breach of contract and breach of
fiduciary duty. The plaintiff claims that he is entitled to exercise stock options for an additional 15,535 shares of our
common stock because his vesting schedule should be deemed to have started one year earlier than the date stated in
Shutterfly’s corporate records. In addition, plaintiff claims that we initially advised him that withholding taxes were
not due at the time of exercise of his nonqualified stock options to purchase 277,139 shares of our common 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 upon his exercise in order to raise the funds
necessary to pay applicable withholding taxes. He also claims that our calculation of the fair market value of the
shares increased his tax liability. The plaintiff is seeking compensatory and punitive damages. In October 2006, we
filed a Petition to Compel Arbitration and to stay the litigation pending arbitration, and the plaintiff has now
stipulated to arbitration of the dispute. We dispute the plaintiff’s claims, believe that we have meritorious defenses
and intend to vigorously defend this action. At this time, we do not believe that the amount of potential loss, if any, is
reasonably estimable.
In addition, in the ordinary course of our business, we are subject to periodic lawsuits, investigations and claims.
Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted
against us, we do not believe that any other currently pending legal proceeding to which we are a party is likely to
harm our business, results of operations, cash flows or financial condition.
Not applicable.
PART II
Shutterfly’s common stock has been traded on the NASDAQ Global Market under the symbol “SFLY” since
September 29, 2006. As of March 9, 2007, there were approximately 316 stockholders of record, excluding
stockholders whose shares were held in nominee or street 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:
Purchases of Equity Securities of the Issuer and Affiliated Purchasers
Neither we nor any affiliated purchaser repurchased any of our equity securities in the fourth quarter of fiscal
year 2006.
29
ITEM 3.
LEGAL PROCEEDINGS.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 5.
MARKET FOR REGISTRANT
’
S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Year Ended December 31, 2006
High
Low
Third Quarter (September 29, 2006 only)
$
16.73
$
15.01
Fourth Quarter
$
16.29
$
12.05