Shutterfly, Inc. Reports Inducement Grants Under NASDAQ Listing Rule 5635(c)(4)

REDWOOD CITY, Calif.--(BUSINESS WIRE)--

Shutterfly, Inc. SFLY, the leading manufacturer and digital retailer of high-quality personalized products and services offered through a family of lifestyle brands, today disclosed that, in connection with the appointment of Chris North as its new President and CEO, on May 31, 2016, the Compensation Committee of the Board of Directors granted Mr. North inducement awards consisting of a stock option to purchase 850,000 shares of Shutterfly's common stock with an exercise price equal to the closing price of Shutterfly's common stock on the NASDAQ Global Select Market on May 31, 2016 (the "Option"), and a restricted stock unit award covering 150,000 shares of Shutterfly's common stock (the "RSU"). The Option will vest as follows: 25% of the total shares subject to the Option will vest on the first anniversary of Mr. North's first date of employment, which was May 31, 2016, and 1/48th of the total shares subject to the Option will vest monthly over the following 36 months, subject to Mr. North's continued employment as Shutterfly's CEO on the respective vesting dates. The RSU will vest as follows: (i) 40,000 shares on May 31, 2017, (ii) 50,000 shares on May 31, 2018, and (iii) 60,000 shares on May 31, 2019, subject to Mr. North's continued employment as Shutterfly's CEO on the respective vesting dates.

If Mr. North's employment with Shutterfly is terminated without Cause or he resigns his employment for Good Reason (as each term is defined in his offer letter of employment, dated March 15, 2016, and filed as Exhibit 99.1 to the Current Report on Form 8-K filed with the SEC on March 17, 2016 (the "Offer Letter")), not in connection with a Change in Control of Shutterfly (as defined in the Offer Letter), then Mr. North will be entitled to receive: (i) acceleration of all then-unvested shares subject to the RSU, and (ii) if the termination occurs after May 31, 2017, acceleration of the number of then-unvested shares subject to the Option that would have vested during the next 12 months. Receipt of these accelerated vesting benefits is conditioned on execution by Mr. North of a release of claims in favor of Shutterfly.

If Mr. North's employment with Shutterfly is terminated without Cause or he resigns his employment for Good Reason within 90 days before or 12 months after a Change in Control of Shutterfly, then Mr. North will be entitled to receive (i) acceleration of all then-unvested shares subject to the RSU, and if the termination occurs (ii) after May 31, 2017, acceleration of the number of then-unvested shares subject to the Option that would have vested during the next 12 months or (iii) after May 31, 2018, acceleration of all then-unvested shares subject to the Option. Receipt of these accelerated vesting benefits is conditioned on execution by Mr. North of a release of claims in favor of Shutterfly.

The Option and RSU were granted as inducements material to the new employee entering into employment with Shutterfly in accordance with NASDAQ Listing Rule 5635(c)(4).

About Shutterfly, Inc.

Shutterfly, Inc. is the leading manufacturer and digital retailer of high-quality personalized products and services offered through a family of lifestyle brands. Founded in 1999, the Shutterfly, Inc. family of brands includes Shutterfly®, where your photos come to life in photo books, cards and gifts; Tiny Prints®, premium cards and stationery for all life's occasions; Wedding Paper Divas®, wedding invitations and stationery for every step of the planning process; MyPublisher®, one of the pioneers in the photo book industry and creator of easy-to-use photo book-making software; BorrowLenses®, the premier online marketplace for photographic and video equipment rentals; and GrooveBook™, an iPhone and Android app and subscription service that prints up to 100 mobile phone photos in a GrooveBook and mails it to customers every month. For more information about Shutterfly, Inc. (SFLY), visit www.shutterflyinc.com.

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