SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
SCHEDULE
14A
(RULE
14a-101)
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
Filed by
the Registrant x
Filed by
a Party other than the Registrant o
Check the
appropriate box:
o Preliminary
proxy statement.
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for use of the Commission Only (as permitted by
Rule 14a-6(e)(2)).
x Definitive
Proxy Statement.
o Definitive
Additional Materials.
o Soliciting
Material Pursuant to §240.14a-12.
Shutterfly, Inc.
(Name of Registrant as Specified in its Charter)
______________________________________________________
(Name of
Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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of Filing Fee (Check the appropriate box):
x No fee
required.
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computed on table below per Exchange Act
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April 21,
2008
To Our
Stockholders:
You are
cordially invited to attend the 2008 Annual Meeting of Stockholders of
Shutterfly, Inc. to be held at 1300 Island Drive, Redwood City, California
94065, on May 22, 2008, at 11:00 a.m. local time.
The
matters expected to be acted upon at the meeting are described in detail in the
following Notice of Annual Meeting of Stockholders and Proxy
Statement.
It is
important that you use this opportunity to take part in the affairs of
Shutterfly, Inc. by voting on the business to come before this
meeting. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE VOTE
YOUR SHARES BY SUBMITTING YOUR INSTRUCTIONS BY INTERNET OR BY TELEPHONE, OR
COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE
MEETING. Returning the proxy does not deprive you of your right to
attend the meeting and to vote your shares in person.
We look
forward to seeing you at the meeting.
|
Sincerely,
|
|
 |
|
|
Jeffrey
T. Housenbold
|
|
|
Chief
Executive Officer and President
|
2800
Bridge Parkway
Redwood
City, California 94065
TO
BE HELD ON MAY 22, 2008
Dear
Stockholder:
You are
cordially invited to attend the 2008 Annual Meeting of Stockholders of
Shutterfly, Inc., a Delaware corporation. The meeting will be
held at 1300 Island Drive, Redwood City, CA 94065 on May 22, 2008, at
11:00 a.m. local time for the following purposes:
1. To elect
two Class II directors to hold office until our 2011 Annual Meeting of
Stockholders.
2. To ratify
the selection by the Audit Committee of our Board of Directors of
PricewaterhouseCoopers LLP as our independent registered public accounting firm
for the fiscal year ending December 31, 2008.
3. To
conduct any other business properly brought before the meeting.
These
items of business are more fully described in the proxy statement accompanying
this notice.
The
record date for the annual meeting is April 11, 2008. Only
stockholders of record at the close of business on that date may vote at the
meeting or any adjournment or postponement thereof.
|
By
Order of the Board of Directors
|
|
 |
|
|
Jeffrey
T. Housenbold
|
|
|
Chief
Executive Officer and President
|
|
|
Redwood
City, California
|
|
|
April 21,
2008
|
You
are cordially invited to attend the meeting in person. Whether or not
you expect to attend the meeting, please vote your shares by submitting your
instructions by Internet or by telephone, or complete, date, sign and return the
proxy accompanying this notice as promptly as possible in
order to ensure your representation at the meeting. A return envelope
(which is postage prepaid if mailed in the United States) is enclosed for your
convenience. Even if you have voted by proxy, you may still vote in
person if you attend the meeting. Please note, however, that if your
shares are held of record by a broker, bank or other agent and you wish to vote
at the meeting, you must request and obtain a proxy issued in your name from
that record holder.
SHUTTERFLY,
INC.
2800
Bridge Parkway
Redwood
City, California 94065
PROXY
STATEMENT
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD MAY 22, 2008
We sent
you this proxy statement and the accompanying proxy card because the Board of
Directors of Shutterfly, Inc. is soliciting your proxy to vote at its 2008
Annual Meeting of Stockholders. You are invited to attend the annual
meeting to vote on the proposals described in this proxy
statement. However, you do not need to attend the meeting to vote
your shares. Instead, you may simply complete, sign and return the
accompanying proxy card.
We mailed
this proxy statement, the accompanying proxy card and our annual report on or
about April 21, 2008 to all stockholders of record entitled to vote at the
annual meeting.
Only
stockholders of record at the close of business on April 11, 2008, the
record date for the annual meeting, will be entitled to vote at the annual
meeting. At the close of business on the record date, there were
25,014,775 shares of common stock outstanding and entitled to vote.
Stockholder
of Record: Shares Registered in Your Name
If at the
close of business on the record date, your shares were registered directly in
your name with our transfer agent, Mellon Investor Services, then you are a
stockholder of record. As a stockholder of record, you may vote in
person at the meeting or vote by proxy. Whether or not you plan to
attend the meeting, we urge you to fill out and return the accompanying proxy
card to ensure your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker, Bank or Other
Agent
If at the
close of business on the record date, your shares were held, not in your name,
but rather in an account at a brokerage firm, bank or other agent, then you are
the beneficial owner of shares held in “street name” and these proxy materials
are being forwarded to you by your broker, bank or other agent. The
broker, bank or other agent holding your account is considered to be the
stockholder of record for purposes of voting at the annual meeting.
As a
beneficial owner, you have the right to direct your broker, bank or other agent
on how to vote the shares in your account. You are also invited to
attend the annual meeting. However, since you are not the stockholder
of record, you may not vote your shares in person at the meeting unless you
request and obtain a valid proxy issued in your name from your broker, bank or
other agent.
There are
two matters scheduled for a vote at the annual meeting:
● the election of two Class II
directors to hold office until our 2011 Annual Meeting of Stockholders,
and
●
the
ratification of the selection by the Audit Committee of our Board of Directors
of PricewaterhouseCoopers LLP as our independent registered public accounting
firm for the fiscal year ending December 31, 2008.
For the
election of directors, you may either vote “For” the two nominees or you may
“Withhold” your vote for any nominee you specify. For any other
matter to be voted on, you may vote “For” or “Against” or abstain from
voting. The procedures for voting are as follows:
Stockholder
of Record: Shares Registered in Your Name
If you
are a stockholder of record, you may vote in person at the annual
meeting. Alternatively, you may vote by proxy by using the
accompanying proxy card, over the Internet or by telephone. Whether
or not you plan to attend the meeting, we urge you to vote by proxy to ensure
your vote is counted. You may still attend the meeting and vote in
person if you have already voted by proxy.
● To vote
in person, come to the annual meeting and we will give you a ballot when you
arrive.
●
To
vote using the proxy card, simply complete, sign and date the accompanying proxy
card and return it promptly in the envelope provided. If you return
your signed proxy card to us before the annual meeting, we will vote your shares
as you direct.
●
To
vote over the Internet, go to http://www.proxyvoting.com/sfly and follow the
instructions to obtain your records and to create an electronic voting
instruction form.
●
To
vote by telephone, dial 1-866-540-5760 using any touch-tone telephone and follow
the instructions to transmit your voting instructions.
Beneficial
Owner: Shares Registered in the Name of Broker, Bank or Other
Agent
If you
are a beneficial owner of shares registered in the name of your broker, bank or
other agent, you should have received a voting instruction card and voting
instructions with these proxy materials from that organization rather than from
us. Simply complete and mail the voting instruction card to ensure
that your vote is counted. To vote in person at the annual meeting,
you must obtain a valid proxy from your broker, bank or other
agent. Follow the instructions from your broker, bank or other agent
included with these proxy materials, or contact your broker, bank or other agent
to request a proxy form.
If you
wish to vote by Internet, go to http://www.proxyvoting.com/sfly and follow the
instructions to obtain your records and to create an electronic voting
instruction form. If you wish to vote by telephone, dial
1-866-540-5760 using any touch-tone telephone and follow the instructions to
transmit your voting instructions. Please have your proxy card in
hand when you vote over the Internet or by telephone. Please be aware
that if you vote over the Internet, you may incur costs such as telephone and
Internet access charges for which you will be responsible. The
Internet and telephone voting facilities for eligible stockholders of record
will close at 11:59 p.m. Eastern Time on May 21, 2008. Mellon
Investor Services will tabulate the votes.
How
many votes do I have?
On each
matter to be voted upon, you have one vote for each share of common stock you
owned as of the close of business on April 11, 2008, the record date for the
annual meeting.
If you
return a signed and dated proxy card without marking any voting selections, your
shares will be voted “For” the election of the two nominees for director, and
“For” the ratification of the selection of PricewaterhouseCoopers LLP as our
independent registered public accounting firm. If any other matter is
properly presented at the meeting, one of the individuals named on your proxy
card as your proxy will vote your shares using his best judgment.
We will
pay for the entire cost of soliciting proxies. In addition to these
mailed proxy materials, our directors, officers and employees may also solicit
proxies in person, by telephone, or by other means of
communication. Directors, officers and employees will not be paid any
additional compensation for soliciting proxies. We may also reimburse
brokerage firms, banks and other agents for the cost of forwarding proxy
materials to beneficial owners.
If you
receive more than one proxy card, your shares are registered in more than one
name or are registered in different accounts. Please vote your shares
listed on each proxy card.
Yes. You
can revoke your proxy at any time before the applicable vote at the
meeting. If you are the record holder of your shares, you may revoke
your proxy in any one of three ways:
● you may
submit another properly completed proxy with a later date;
●
you
may send a written notice that you are revoking your proxy to our Secretary at
2800 Bridge Parkway, Redwood City, California 94065; or
●
you
may attend the annual meeting and vote in person (however, simply attending the
meeting will not, by itself, revoke your proxy)
If your
shares are held by your broker, bank or other agent, you should follow the
instructions provided by them.
To be
considered for inclusion in next year’s proxy materials, a stockholder proposal
must be submitted in writing by December 22, 2008, to our Secretary at 2800
Bridge Parkway, Redwood City, California 94065. If you wish to submit
a proposal that is not to be included in next year’s proxy materials, your
proposal generally must be submitted in writing to the same address no later
than March 7, 2009 but no earlier than February 6, 2009. Please
review our bylaws, which contain additional requirements regarding advance
notice of stockholder proposals.
Votes
will be counted by Mellon Investor Services (“Mellon”). Mellon has
been appointed as the inspector of elections and is also Shutterfly’s transfer
agent. Mellon will separately count “For” and “Withhold” votes with
respect to the election of directors and, with respect to any proposals other
than the election of directors, “For” and “Against” votes, abstentions and
broker non-votes. A “broker non-vote” occurs when a nominee (such as
a broker) who holds shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power to do so
and has not received specific voting instructions for that proposal from the
beneficial owner. Broker non-votes will be counted for the purpose of
establishing whether a quorum is present, but will not be taken into account in
determining the outcome of any of the proposals. Abstentions will
have no effect and will not be counted towards the vote total for any
proposal.
If your
shares are held by your broker, bank or other agent as your nominee (that is, in
“street name”), you will need to obtain a proxy form from the institution that
holds your shares and follow the instructions included on that form regarding
how to instruct your broker, bank or other agent to vote your
shares. If you do not give instructions to your broker, bank or other
agent, they can vote your shares with respect to “discretionary” items, but not
with respect to “non-discretionary” items. Discretionary items
include a vote for directors and ratification of the appointment of accountants,
as well as other proposals considered routine under the rules of the New York
Stock Exchange. On these matters, your broker, bank or other agent
may vote shares held in street name even if you have not given them specific
voting instructions.
How
many votes are needed to approve each proposal?
● For the
election of directors, the two nominees receiving the most “For” votes (among
votes properly cast in person or by proxy) will be elected.
● To be
approved, the ratification of the selection of PricewaterhouseCoopers LLP as our
independent registered public accounting firm must receive a “For” vote from the
majority of shares present and entitled to vote either in person or by
proxy.
A quorum
of stockholders is necessary to hold a valid meeting. A quorum will
be present if at least a majority of the outstanding shares as of the close of
business on the record date are represented by stockholders present at the
meeting or by proxy. At the close of business on the record date,
there were 25,014,775 shares outstanding and entitled to
vote. Therefore, in order for a quorum to exist,
12,507,388 shares must be represented by stockholders present at the
meeting or by proxy.
Your
shares will be counted towards the quorum only if you submit a valid proxy (or
one is submitted on your behalf by your broker, bank or other agent) or if you
vote in person at the meeting. Abstentions and broker non-votes will
be counted towards the quorum requirement. If there is no quorum, a
majority of the votes present at the meeting may adjourn the meeting to another
date.
Preliminary
voting results will be announced at the annual meeting. Final voting
results will be published in our Quarterly Report on Form 10-Q for the
quarter ending June 30, 2008.
Our Board
of Directors consists of seven members and is divided into three classes, each
of which has a three-year term. The Class II directors are
standing for re-election at this annual meeting to serve until our 2011 Annual
Meeting of Stockholders and until their successors are duly elected and
qualified, or until their death, resignation or removal. The terms of
the directors in Classes III and I expire at our 2009 and 2010 Annual Meetings
of Stockholders, respectively.
The two
nominees for Class II directors are Philip A. Marineau and Patricia A.
House. Each of the nominees is currently a director of Shutterfly and
Mr. Marineau serves as our chairman of the Board of Directors. None
of the nominees was elected by our stockholders, as Ms. House was previously
appointed by our Board of Directors prior to our initial public offering and Mr.
Marineau was appointed by our Board of Directors in February 2007.
Directors
are elected by a plurality of the votes present at the meeting or by proxy and
entitled to vote at the meeting. The two nominees receiving the most
“For” votes (among votes properly cast in person or by proxy) will be
elected. Unless a stockholder provides different voting instructions
to the proxy holders, shares represented by executed proxies will be voted “For”
the election of the two nominees named above or, if any nominee becomes
unavailable for election as a result of an unexpected occurrence, “For” the
election of a substitute nominee designated by our Board of
Directors. Each nominee has agreed to serve as a director if elected,
and we have no reason to believe that any nominee will be unable to
serve.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH
NOMINEE NAMED
ABOVE.
The
following is biographical information as of April 11, 2008 for each nominee for
Class II director and each person whose term of office as a Class III
or I director will continue after the annual meeting.
|
Name
|
Age
|
Position
|
||
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Jeffrey
T. Housenbold
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38
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President,
Chief Executive Officer and Director
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Philip
A. Marineau
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61
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Chairman
of the Board
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Patricia
A. House
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53
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Director
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||
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Eric
J. Keller
|
55
|
Director
|
||
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Stephen
J. Killeen
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45
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Director
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||
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Nancy
J. Schoendorf
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53
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Director
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||
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James
N. White
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46
|
Director
|
Nominees
for Election for a Three-year Term Expiring at the 2011 Annual
Meeting
Philip A.
Marineau has served on our Board of Directors since February 2007
and currently is the chairman of the Board. From 1999 to 2006, Mr.
Marineau served as the President and Chief Executive Officer of Levi Strauss,
& Co. From 1997 to 1999, he served as President and Chief Executive
Officer of Pepsi-Cola North America. He currently serves on the Board
of Directors of Kaiser Permanente, the Holy Family Day Home, the Golden Gate
National Parks Conservancy, Consumer Global Acquisition Corporation, the Fritz
Institute and Meredith Corporation where he serves as the chair of the Audit
Committee. Mr. Marineau holds a Bachelor of Arts degree from
Georgetown University and a Master of Business Administration degree from
Northwestern University.
Patricia A.
House has
served on our Board of Directors since January 2006. Ms. House
is a co-founder of Siebel Systems, Inc., a provider of enterprise applications
and now a wholly owned subsidiary of Oracle Corporation. From January
2001 to February 2006, Ms. House served as Siebel Systems, Inc.’s Vice
Chairman, Co-Founder and Vice President of Strategic Planning. From
February 1996 to January 2001, she served as its Co-Founder and Executive Vice
President and from July 1993 to February 1996 as its Co-Founder and Senior Vice
President of Marketing. She currently serves on the Board of
Directors of BDNA Corporation, a provider of business
software. Ms. House holds a Bachelor of Arts degree in Education
from Western Michigan University.
Directors
Continuing in Office Until the 2009 Annual Meeting
Jeffrey T.
Housenbold has served as our
President, Chief Executive Officer and a director since January
2005. Prior to joining Shutterfly, Mr. Housenbold served as Vice
President of Business Development and Internet Marketing at eBay Inc., an online
marketplace for the sale of goods and services, from January 2002 to January
2005. Previously, he was the Vice President & General
Manager, Business-to-Consumer Group at eBay from June 2001 to January 2002, and
served as Vice President, Mergers & Acquisitions of eBay from March
2001 to June 2001. Mr. Housenbold holds Bachelor of Science
degrees in Economics and Business Administration from Carnegie Mellon University
and a Master of Business Administration degree from the Harvard Graduate School
of Business Administration.
James N.
White has
served on our Board of Directors since November 2005. Mr. White
has been a managing director at Sutter Hill Ventures, a venture capital firm,
since October 2000. Mr. White previously held senior executive
positions at Macromedia, Inc., a software developer; Silicon Graphics, Inc., a
provider of graphical computing workstations; and Hewlett-Packard
Company. Mr. White serves on the Board of Directors of numerous
privately held companies. Mr. White holds a Bachelor of Science
degree in Industrial Engineering from Northwestern University and a Master of
Business Administration degree from the Harvard Graduate School of Business
Administration.
Stephen J.
Killeen has served on our Board of Directors since February
2007. Mr. Killeen has been the Chief Executive Officer of The
CarbonNeutral Company, a company that acts as a complete outsource solution
provider to assist corporations in reducing their Green House Gas Emissions,
since March 2007. From November 2002 to March 2006, Mr. Killeen
served as the President and Chief Executive Officer of WorldWinner, a casual
gaming company that he successfully sold to London-based Fun
Technologies. From 2001 to November 2002, he served as President of
TerraLycos, the world’s fourth-largest online media property. He has
served on the Board of Directors of Switchboard, Lycos Europe, Molecular and
Marketing Services Group, and Junior Achievement of New England Mr. Killeen
holds a Bachelor of Arts degree from Union College.
Directors
Continuing in Office Until the 2010 Annual Meeting
Nancy J.
Schoendorf has served on our Board
of Directors since February 2004. Ms. Schoendorf has been a
managing partner with Mohr, Davidow Ventures, a venture capital firm, since June
1993. Previously, she served as director of systems software
development at Sun Microsystems, Inc., a provider of network computing products
and services, from 1988 to 1989, as an officer and Vice President of Research
and Development and Product Development at Software Publishing Corporation, an
international supplier of business productivity software, from 1985 to 1988, and
as an engineering section manager at Hewlett-Packard Company, a global
technology company, from 1976 to 1985. She currently serves on the
Board of Directors of Agile Software Corporation, a provider of product
lifecycle management solutions, as well as several privately held
companies. Ms. Schoendorf holds a Bachelor of Science degree in
Computer Science and Mathematics from Iowa State University and a Master of
Business Administration degree from the University of
Santa Clara.
Eric J.
Keller has
served on our Board of Directors since March 2006. Mr. Keller
was the Chief Executive Officer of Movaris, Inc., a financial software company,
from March 2004 to February 2007. From September 2003 to February
2004 and from September 2001 to December 2001, Mr. Keller served as a
consultant to various technology companies. From January 2002 to
September 2002, Mr. Keller served as interim Chief Financial Officer to Cardica,
Inc., a medical device company. From October 2002 to August 2003, he
served as President and Chief Executive Officer of Endovasix, Inc., a medical
device company. From February 2000 to July 2001, Mr. Keller
served as Chief Financial Officer of Corio, Inc., an enterprise application
service provider. Mr. Keller holds a Bachelor of Science degree
in Industrial Relations from Cornell University and a Master of Business
Administration degree from the University of California, Berkeley.
There are
no family relationships among any of our directors and executive
officers.
The
following is biographical information as of April 11, 2008 for our executive
officers not discussed above.
|
Name
|
Age
|
Position
|
|
Mark
J. Rubash
|
50
|
Chief
Financial Officer
|
|
Stanford
S. Au
|
47
|
Senior
Vice President, Technology
|
|
Dwayne
A. Black
|
40
|
Senior
Vice President, Operations
|
|
T.
Bernie Blegen
|
50
|
Vice
President, Controller
|
|
Douglas
J. Galen
|
46
|
Senior
Vice President, Business and Corporate Development
|
|
John
A. Kaelle
|
39
|
Vice
President, Finance
|
|
Kathryn
E. Olson
|
49
|
Chief
Marketing Officer
|
Mark J.
Rubash has served as our Chief Financial Officer since November
2007. Prior to joining Shutterfly, Mr. Rubash was the Chief Financial
Officer of Rearden Commerce from August 2007 to November 2007 and previous to
that, Mr. Rubash was a Senior Vice President at Yahoo! Inc. from February 2007
to July 2007. Prior to joining Yahoo!, Mr. Rubash held various senior
positions at eBay Inc. from February 2001 to July 2005. From January
2000 to November 2000, Mr. Rubash was the Chief Financial Officer at Critical
Path, Inc. From October 1987 to January 2000, Mr. Rubash was an audit
partner at PriceWaterhouseCoopers, LLP, where he served as the Global Leader for
their Internet Industry Practice and Practice Leader for their Silicon Valley
Software Industry Practice. Mr. Rubash received his Bachelor of
Science degree in Accounting from California State University,
Sacramento. Mr. Rubash is currently a member of the Board of
Directors of Intuitive Surgical, Inc., a provider of advanced surgical systems,
and Line 6, Inc., a privately-held music products
manufacturer.
Stanford S.
Au has
served as our Senior Vice President, Technology since April
2006. Prior to joining Shutterfly, Mr. Au served as Vice
President of Engineering at WebEx Communications, Inc., a provider of online
meeting services, from October 2003 to November 2005. Previously, he
was the Senior Vice President of Engineering at Virage, Inc., a provider of
security and surveillance systems, from January 2002 to August 2003, and served
as Vice President of Engineering and General Manager of the Internet Bill
Presentment and Payment (IBPP) business at AOL Time Warner Inc., a media
and communications company, from July 1997 to September
2001. Mr. Au holds a Bachelor of Science degree in Electrical
Engineering and Computer Science from the University of California,
Berkeley.
Dwayne A.
Black has
served as our Senior Vice President, Operations since February 2007. Prior
to joining Shutterfly, Mr. Black held multiple positions at Banta Corporation, a
leading provider of printing and digital imaging solutions to publishers and
direct marketers owned by RR Donnelley, including Vice President of Operations,
from 1994 to 2006. Mr. Black attended the Engineering program at Purdue
University.
T. Bernie
Blegen has
served as our Controller since October, 2007. Prior to joining Shutterfly,
Mr. Blegen served as Vice President, Finance, Corporate Controller at Credence
Systems Corporation, a manufacturer of automatic test equipment that serves the
semiconductor industry, from February 2006 to September 2007. Previously,
he was the Senior Director of Finance at Xilinx, Inc., a supplier of CMOS
programmable logic and related development system software, from April 2002 to
January 2006. Mr. Blegen holds a Bachelor of Arts degree in Economics
from the University of California, Santa Barbara.
Douglas J.
Galen has
served as our Senior Vice President, Business and Corporate Development since
March 2005. Prior to joining Shutterfly, Mr. Galen served as
President of Fourth Fleet Financial Inc., an auto finance company, from March
2004 to March 2005, as Vice President of New Ventures for eBay from April 2001
to March 2004, and Vice President of Sales and Business Development for E-LOAN,
Inc., a provider of loans, lines of credit and credit card referrals, from June
1997 to December 2000. Mr. Galen serves on the Board of
Directors of Positive Coaching Alliance. He holds a Bachelor of Arts
degree in Economics and a Master of Business Administration degree in Real
Estate and Finance from the University of California,
Berkeley.
John A.
Kaelle has
served as our Vice President, Finance since October 2004. Prior to
joining Shutterfly, Mr. Kaelle was a Vice President in the Mergers and
Acquisitions group at Thomas Weisel Partners LLC, an investment banking firm,
from August 2000 to July 2004. Previously, he was the Assistant
Controller at TriNet Corporate Realty Trust, Inc., a real estate investment
trust, from April 1997 until July 1998. Mr. Kaelle holds a
Bachelor of Arts degree in Economics from the University of Michigan, a Masters
degree in Taxation from Golden Gate University and a Master of Business
Administration degree in Finance from The Wharton School at the University of
Pennsylvania. Mr. Kaelle is a certified public accountant in the
State of California.
Kathryn E. Olson
has served as our Chief Marketing Officer since May 2007. Prior to
joining Shutterfly, Ms. Olson served as Chief Marketing Officer at Leapfrog,
Inc., an educational toy company, from October 2004 to September 2006.
Previously, she was the Vice President of Consumer Marketing at The Wm.
Wrigley Jr. Company, a confectionery company, from September 2001 to September
2004. From September 1999 to February 2001 Ms. Olson served as
Executive Vice President of Marketing for Nordstrom.com, where she launched and
helped establish its Internet apparel site. From August 1997 to
August 1999 Ms. Olson served as the Vice President of Global Marketing for
Monsanto Life Sciences, from November 1986 to July 1997 where she held various
positions with The Quaker Oats Company including lead roles with the Gatorade
and Pet Foods brands. Ms. Olson holds a Bachelor of Science degree in
Marketing from the University of Illinois and a Masters of Business
Administration degree from the University of Chicago.
Independence
of the Board of Directors and its Committees
As
required under The NASDAQ Stock Market listing standards, a majority of the
members of a listed company’s Board of Directors must qualify as “independent,”
as affirmatively determined by the board. Our Board of Directors
consults with our counsel to ensure that the Board’s determinations are
consistent with all relevant securities and other laws and regulations regarding
the definition of “independent,” including those set forth in applicable NASDAQ
listing standards, as in effect from time to time.
Consistent
with these considerations, after review of all relevant transactions or
relationships between each director, or any of his or her family members, and
Shutterfly, Inc., our senior management and our independent registered public
accounting firm, our Board of Directors believes that six of our directors are
independent as required by the rules of The NASDAQ Stock Market: Philip A.
Marineau, Patricia A. House, Eric J. Keller, Stephen J. Killeen, Nancy J.
Schoendorf and James N. White.
Ms. Schoendorf
and Mr. White are affiliated with two of our principal stockholders, Mohr,
Davidow Ventures and Sutter Hill Ventures, respectively, and were appointed to
our Board of Directors under the provisions of a voting agreement between us and
certain of our stockholders prior to our initial public
offering. Upon the completion of our initial public offering, the
voting agreement was terminated.
As
required under applicable NASDAQ listing standards, our independent directors
meet in regularly scheduled executive sessions at which only independent
directors are present. All of the committees of our Board of
Directors are comprised entirely of directors determined by the Board to be
independent within the meaning of applicable NASDAQ listing
standards.
Information
Regarding the Board of Directors and its Committees
Our Board
of Directors has an Audit Committee, a Compensation Committee and a Governance
Committee. The following is membership and meeting information for
each of these committees during the fiscal year ended December 31, 2007, as
well as a description of each committee and its functions.
|
Name
|
Audit
Committee
|
Compensation
Committee
|
Governance
Committee
|
|||
|
Patricia
A. House
|
X | X | * | |||
|
Eric
J. Keller
|
X | * | ||||
|
Stephen
J. Killeen (1)
|
X | X | * | |||
|
Nancy
J. Schoendorf
|
X | X | ||||
|
James
N. White (2)
|
X | X | ||||
|
Total
meetings in fiscal year 2007
|
10 | 8 | 1 |
* Committee
Chairperson
(1) Mr.
Killeen joined the Board and the committees on which he serves on February 6,
2007.
(2) Mr.
White was replaced by Mr. Killeen as chair of the Governance Committee on
February 6, 2007.
Audit
Committee
The Audit
Committee operates pursuant to a written charter that is available on our
website at http://www.shutterfly.com. The
Audit Committee oversees the integrity of our accounting and financial reporting
process and the audits of our financial statements. Among other
matters, the Audit Committee is directly responsible for the selection,
compensation, retention and oversight of our independent registered public
accounting firm; reviewing our independent registered public accounting firm’s
continuing independence; approving the fees and other compensation to be paid to
our independent registered public accounting firm; pre-approving all audit and
non-audit related services provided by our independent registered public
accounting firm; reviewing and discussing with management and our independent
registered public accounting firm the results of the quarterly and annual
financial statements; reviewing and discussing with management and our
independent registered public accounting firm our selection, application and
disclosure of our critical accounting policies; discussing with our independent
registered public accounting firm both privately and with management the
adequacy of our accounting and financial reporting processes and systems of
internal control; reviewing any significant deficiencies and material weaknesses
in the design or operation of the internal control over financial reporting; and
annually reviewing and evaluating the composition and performance of the Audit
Committee, including the adequacy of the Audit Committee charter.
The
current members of our Audit Committee are Eric J. Keller, who is the chair of
the Audit Committee, James N. White and Patricia A. House. We believe
that each of Mr. Keller, Mr. White and Ms. House is (a) an “independent
director” under the applicable rules and regulations of The NASDAQ Stock Market,
(b) a “non-employee director” within the meaning of Rule 16b-3 of the
Securities Exchange Act of 1934, and (c) an “outside director,” as that term is
defined under Section 162(m) of the Internal Revenue Code of
1986. Mr. Keller is our Audit Committee financial expert, as
defined under applicable SEC rules. We believe that each member of
our Audit Committee meets the requirements for independence and financial
literacy under the applicable rules and regulations of the SEC and The NASDAQ
Stock Market.
Compensation
Committee
The
Compensation Committee operates pursuant to a written charter that is available
on our website at http://www.shutterfly.com. The
Compensation Committee evaluates, recommends and approves arrangements, plans,
policies and programs relating to compensation and benefits of our officers and
employees. Among other matters, the Compensation Committee is
responsible for annually reviewing and approving corporate goals and objectives
relevant to the compensation of our chief executive officer and other executive
officers; evaluating the performance of these officers in light of those goals
and objectives and setting the compensation of these officers based on such
evaluations; administering and interpreting our cash and equity-based
compensation plans; annually reviewing and making recommendations to the Board
of Directors with respect to all cash and equity-based incentive compensation
plans and arrangements; and annually reviewing and evaluating the composition
and performance of the Compensation Committee, including the adequacy of the
Compensation Committee charter. The Compensation Committee engages
outside consultants to provide compensation data and consulting
services. In 2007, such experts included Watson Wyatt Worldwide and
Towers Perrin. The committee has delegated authority to our Chief
Executive Officer to grant equity awards for up to 35,000 shares of common stock
to employees, who are not directors of the company or executive
officers.
The
agenda for meetings of the Compensation Committee is determined by its chairman
with the assistance of our Chief Executive Officer, Chief Financial Officer and
Vice President, Human Resources. Compensation Committee meetings are
regularly attended by the Chief Executive Officer, the Chief Financial Officer,
the Vice President, Human Resources and Vice President, Legal. The
Compensation Committee’s chairman reports the committee’s recommendations on
executive compensation to the Board. The Compensation Committee
reviews the total fees paid to outside consultants to ensure that the consultant
maintains its objectivity and independence when rendering advice to the
committee.
The
current members of our Compensation Committee are Patricia A. House, who is the
chair of the Compensation Committee, Nancy J. Schoendorf and Stephen J.
Killeen. We believe that each of Ms. House, Ms. Schoendorf and Mr.
Killeen is (a) an “independent director” under the applicable rules and
regulations of The NASDAQ Stock Market, (b) a “non-employee director” within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934, and (c) an
“outside director,” as that term is defined under Section 162(m) of the
Internal Revenue Code of 1986.
Governance
Committee
The
Governance Committee operates pursuant to a written charter that is available on
our website at
http://www.shutterfly.com. The Governance Committee is
responsible for making recommendations to the Board of Directors regarding
candidates for directorship and the structure and composition of our Board of
Directors and committees of the Board of Directors. Among other
things, the Governance Committee is responsible for identifying, evaluating and
nominating candidates for appointment or election as members of our Board of
Directors; developing, recommending and evaluating a code of conduct and ethics
applicable to all of our employees, officers and directors and a code applicable
to our chief executive officer and a senior finance department personnel;
recommending that our Board of Directors establish special committees as may be
necessary or desirable from time to time; recommending policies and procedures
for stockholder nomination of directors and annually reviewing and evaluating
the composition and performance of the Governance Committee, including the
adequacy of the Governance Committee charter.
The
current members of our Governance Committee are Stephen J. Killeen, who is the
chair of the Governance Committee, James N. White and Nancy J.
Schoendorf. We believe that each of Mr. Killeen, Mr. White and Ms.
Schoendorf is (a) an “independent director” under the applicable rules and
regulations of The NASDAQ Stock Market, (b) a “non-employee director” within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934, and (c) an
“outside director,” as that term is defined under Section 162(m) of the
Internal Revenue Code of 1986.
All
nominees for the Board should be committed to enhancing long-term stockholder
value and must possess a high level of personal and professional ethics, sound
business judgment and integrity. The Governance Committee’s goal is
to identify potential directors who can make significant contributions to our
ability to fulfill our vision and mission, uphold our company values and achieve
our corporate goals. The Governance Committee may from time to time
assess the appropriate skills and characteristics required of our Board of
Directors, including such factors as independence, diversity, integrity, skills,
financial and other expertise, breadth of experience, knowledge about our
business and industry, and willingness to devote adequate time and effort to
Board of Director responsibilities. In evaluating potential
candidates for the Board of Directors, the Governance Committee considers these
factors in the light of the specific needs of the Board of Directors at that
time. Each member of our Board of Directors is expected to thoroughly
prepare for, attend and actively participate in meetings of the Board of
Directors and committees on which they serve.
The
Governance Committee will consider director candidates recommended by
stockholders. The Governance Committee does not intend to alter the
manner in which it evaluates candidates, including the minimum criteria set
forth above, based on whether or not the candidate was recommended by a
stockholder. Stockholders who wish to recommend individuals for
consideration by the Governance Committee to become nominees for election to the
Board at an annual meeting of stockholders must do so in accordance with the
procedures set forth in “When are stockholder proposals due for next year’s
annual meeting?” in this proxy statement. Each submission must set
forth: the name and address of the stockholder on whose behalf the submission is
made; the class and number of our shares that are owned beneficially by such
stockholder as of the date of the submission; and the candidate’s written
consent to being named in such proxy statement as a nominee and to serving as a
director if elected. To date, the Governance Committee has not
received a director nominee from a stockholder or stockholders holding more than
five percent of our voting stock.
Meetings
of the Board of Directors, Board and Committee Member Attendance and Annual
Meeting Attendance
Our Board
of Directors met six (6) times during the last fiscal year. During
2007, each Board member attended 75% or more of the aggregate of the meetings of
the Board and of the committees on which he or she served.
We
encourage all of our directors and nominees for director to attend our annual
meeting of stockholders. This is the second year we will be having an
annual meeting as a public company. All of our directors and nominees
attended our 2007 Annual Meeting of the stockholders.
Should
stockholders wish to communicate with the Board, such correspondences should be
sent to the attention of the Company’s Secretary, at 2800 Bridge Parkway,
Redwood City, California 94065. The Company’s Secretary will forward
the communication to the Board members.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The
Compensation Committee is comprised entirely of independent
directors. None of the members of our Compensation Committee has at
any time been one of our officers or employees. None of our executive
officers serves or in the past has served as a member of the Board of Directors
or Compensation Committee of any entity that has one or more of its executive
officers serving on our Board of Directors or our Compensation
Committee.
We have
adopted a Code of Conduct and Ethics that applies to all of our officers,
directors and employees. We have also adopted an additional written
code of ethics, the Code of Conduct and Ethics for Chief Executive Officer and
Senior Finance Department Personnel, that applies to our principal executive
officer, principal financial officer, principal accounting officer, controller
and other employees of the finance department designated by our Chief Financial
Officer. These codes are available on our website at
http://www.shutterfly.com. If we make any substantive
amendments to the codes or grant any waiver from a provision of the codes to any
executive officer or director, we will promptly disclose the nature of the
amendment or waiver on our website, as well as via any other means then required
by NASDAQ listing standards or applicable law.
REGISTERED
PUBLIC ACCOUNTING FIRM
Neither
our bylaws nor other governing documents or law require stockholder ratification
of the selection of PricewaterhouseCoopers LLP as our independent registered
public accounting firm. However, the Audit Committee is submitting
the selection of PricewaterhouseCoopers LLP to our stockholders for ratification
as a matter of good corporate practice. If our stockholders fail to
ratify the selection, the Audit Committee will reconsider whether or not to
retain PricewaterhouseCoopers LLP. Even if the selection is ratified,
the Audit Committee in its discretion may direct the appointment of a different
independent registered public accounting firm at any time during the year if
they determine that such a change would be in the best interests of Shutterfly
and our stockholders.
To be
approved, the ratification of the selection of PricewaterhouseCoopers LLP as our
independent registered public accounting firm must receive a “For” vote from the
majority of shares present and entitled to vote either in person or by
proxy. Abstentions and broker non-votes will be counted towards a
quorum, but will not be counted for any purpose in determining whether this
matter has been approved.
The
following table provides information regarding the fees incurred by
PricewaterhouseCoopers LLP during the fiscal years ended December 31, 2007
and 2006. All fees described below were approved by the Audit
Committee.
|
Fiscal Year Ended
December 31,
|
||||||||
|
2007
|
2006
|
|||||||
|
Audit
Fees(1)
|
$ | 1,804,100 | $ | 1,593,100 | ||||
|
Audit-related
Fees
|
--- | --- | ||||||
|
Tax
Fees
|
17,700 | 25,500 | ||||||
|
All
Other Fees
|
1,500 | 1,500 | ||||||
|
Total
Fees
|
$ | 1,823,300 | $ | 1,620,100 | ||||
|
_______________________________________
|
|
(1)
|
Represents fees for
services rendered for the audit and/or reviews of our financial
statements. Also includes fees for services associated with SEC
registration statements, periodic reports and other documents filed with
the SEC or other documents issued in connection with securities offerings
(for example, comfort letters and consents), and assistance in responding
to SEC comment letters.
|
Audit
Fees
Audit
fees of PricewaterhouseCoopers LLP during the 2007 and 2006 fiscal years include
the aggregate fees incurred for the audits of the Company’s annual consolidated
financial statements and the reviews of each of the quarterly consolidated
financial statements included in the Company’s Forms 10-Q. In 2007,
the audit fees also included the audit of the effectiveness of our internal
controls pursuant to Section 404 of the Sarbanes-Oxley Act. In
addition, included in 2006 were fees and expenses of $642,750 for services
related to our initial public offering.
Tax
Fees
Tax fees
include the aggregate fees billed for services rendered for tax compliance, tax
advice, and tax planning.
All
Other Fees
Other fees include the aggregate fees
for access to online accounting and tax research software applications and
data.
Pre-Approval
Policies and Procedures
The Audit
Committee pre-approves all audit and non-audit services provided by its
independent registered public accounting firm. This policy is set
forth in the charter of the Audit Committee and available at www.shutterfly.com.
The Audit
Committee considered whether the non-audit services rendered by
PricewaterhouseCoopers LLP were compatible with maintaining
PricewaterhouseCoopers LLP’s independence as the independent registered public
accounting firm of the company’s consolidated financial statements and concluded
they were.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2008.
The
following table presents information as to the beneficial ownership of our
common stock as of April 11, 2008:
● each
stockholder known by us to be the beneficial owner of more than 5% of our common
stock;
●
each of
our directors;
●
each named executive officer as set forth in the summary compensation table
below; and
●
all
executive officers and directors as a group.
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Unless otherwise indicated below, to our
knowledge, the persons and entities named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable. Shares of our common stock
subject to options that are currently exercisable or exercisable within
60 days of April 11, 2008 are deemed to be outstanding and to be
beneficially owned by the person holding the options for the purpose of
computing the percentage ownership of that person, but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person.
Percentage
ownership of our common stock in the table is based on 25,014,775 shares of
our common stock outstanding on April 11, 2008. Unless otherwise
indicated, the address of each of the individuals and entities named below is
c/o Shutterfly, Inc., 2800 Bridge Parkway, Redwood City, California
94065.
|
Shares of Common
Stock Beneficially
Owned
|
|||||
|
Name of Beneficial Owner
|
Number
|
Approx.
Percentage
|
|||
|
5%
Stockholders:
|
|||||
|
Entities
affiliated with James H. Clark (1)
|
5,354,202
|
21
|
%
|
||
|
Wells
Fargo & Co and affiliated entities (2)
|
2,364,913
|
9
|
%
|
||
|
Delaware
Management Holdings Co., Inc. and affiliated entities (3)
|
1,808,882
|
7
|
%
|
||
|
Directors
and Executive Officers:
|
|||||
|
Nancy
J. Schoendorf (4)
|
60,548
|
*
|
|||
|
James
N. White (5)
|
326,026
|
1
|
%
|
||
|
Patricia
A. House (6)
|
54,806
|
*
|
|||
|
Eric
J. Keller (7)
|
67,373
|
*
|
|||
|
Philip
A. Marineau (8)
|
38,690
|
*
|
|||
|
Stephen
J. Killeen (9)
|
23,135
|
*
|
|||
|
Jeffrey
T. Housenbold (10)
|
1,306,896
|
5
|
%
|
||
|
Mark
J. Rubash (11)
|
---
|
*
|
|||
|
Stanford
S. Au (12)
|
195,000
|
*
|
|||
|
Dwayne
A. Black (13)
|
42,186
|
*
|
|||
|
Douglas
J. Galen (14)
|
215,000
|
*
|
|||
|
Stephen
E. Recht (15)
|
250,851
|
*
|
|||
|
All
15 directors and executive officers as a group (16)
|
2,427,160
|
9
|
%
|
||
______________________________________
* Represents
beneficial ownership of less than one percent of the outstanding shares of
common stock.
|
(1)
|
Entities
affiliated with James H. Clark stated in its Schedule 13G filed February
14, 2008 that, of the 5,354,202 shares beneficially owned, it has (a)
4,760,120 shares held by Monaco Partners, L.P., (b) 17,000 shares
held by JHC 2000 LLC, (c) 125,000 shares held by Woodside Ventures Limited
Partnership and (d) 452,082 shares held by JHC Investments,
LLC. James H. Clark is the owner of Clark Ventures, Inc., which
is the general partner of Monaco Partners, L.P. and is the managing member
of JHC 2000 LLC. Monaco Partners, L.P. is the general partner
of Woodside Ventures Limited Partnership and is the managing member of JHC
Investments, LLC. Mr. Clark has sole voting and investment
power over the shares held by Monaco Partners, L.P., JHC Investments LLC,
JHC Investments 2000, LLC and Woodside Ventures Limited
Partnership. The address of Mr. Clark is 1700 Seaport
Blvd., 4th Floor, Redwood City, CA 94063 and the address of the
entities listed above is 777 East William Street #201, Carson
City, NV 89701. Mr. Clark is a former member of our Board of
Directors.
|
|
(2)
|
Wells
Fargo & Company stated in its Schedule 13G filing with the SEC on
February 6, 2008 that, of the 2,364,913 shares beneficially owned, it has
(a) sole voting power with respect to 1,591,149 shares, (b) sole
dispositive power with respect to 2,361,228, and (c) shares with neither
voting nor dispositive power with respect to 3,685
shares. According to the 13G filing, the address of Wells Fargo
& Company is 420 Montgomery Street, San Francisco, CA
9416.
|
|
(3)
|
Delaware
Management Holdings Company, Inc. stated in its Schedule 13G filing with
the SEC on February 8, 2008 that, of the 1,808,882 shares beneficially
owned, it has (a) sole voting power with respect to 1,797,085 shares, (b)
shares voting power with respect to 1,066 and (c) sole dispositive power
with respect to 1,808,882, and (d) shares with neither voting nor
dispositive power with respect to any shares. According to the
13G filing, the address of Delaware Management Holdings Company, Inc. is
2500 Market Street, Philadelphia, PA
19103.
|
|
(4)
|
Based
solely on an Amended Schedule 13G filed February 8, 2008, Ms. Schoendorf
has sole voting power and dispositive power with respect to all 60,548
shares. The address of Ms. Schoendorf is 3000 Sand Hill Road,
Building 3, Suite 290, Menlo Park, CA
94025.
|
|
(5)
|
Based
solely on an Amended Schedule 13G filed February 13, 2008, consists of (a)
259,340 shares held by Sutter Hill Ventures, a California Limited
Partnership (“SHV”), (b) 1,684 shares held by SHV Profit Sharing Plan
for the benefit of James N. White, (c) 20,820 shares held by James N.
White and Patricia A. O’Brien as Trustees of The White Family Trust U/A/D
4/3/97, and (d) 25,555 shares subject to options that are exercisable
within 60 days of April 11, 2008. Mr. White has shared voting
and investment power with respect to the shares held by SHV, sole voting
and investment power with respect to the shares held by SHV Profit Sharing
Plan for the benefit of James N. White and shared voting and investment
power with respect to the shares held by The White Family
Trust. Mr. White disclaims beneficial ownership of shares held
by SHV and The White Family Trust except to the extent of his individual
pecuniary interest in SHV and The White Family Trust. The
address of SHV and Mr. White is 755 Page Mill Road, Suite A-200, Palo
Alto, CA 94304-1005. The number of shares beneficially owned
also consists of 25,555 shares subject to options that are exercisable
within 60 days of April 11, 2008.
|
|
(6)
|
Consists
of 54,806 shares subject to options that are exercisable within
60 days of April 11, 2008.
|
|
(7)
|
Consists
of 67,373 shares subject to options that are exercisable within
60 days of April 11, 2008.
|
|
(8)
|
Consists
of 38,690 shares subject to options that are exercisable within
60 days of April 11, 2008.
|
|
(9)
|
Consists
of 23,135 shares subject to options that are exercisable within
60 days of April 11, 2008.
|
|
(10)
|
Consists
of 1,306,896 shares subject to options that are exercisable within
60 days of April 11, 2008.
|
|
(11)
|
Mr.
Rubash’s shares will first vest as to 25% of the grant on November 29,
2008.
|
|
(12)
|
Consists
of 195,000 shares subject to options that are exercisable within
60 days of April 11, 2008.
|
|
(13)
|
Consists
of 42,186 shares subject to options that are exercisable within
60 days of April 11, 2008.
|
|
Consists
of 215,000 shares subject to options that are exercisable within
60 days of April 11, 2008.
|
|
(15)
|
Consists
of 250,851 shares which Mr. Recht exercised and held as of February 9,
2008. Mr. Recht resigned as our Chief Financial Officer
effective November 29, 2007.
|
|
(16)
|
Consists
of 2,427,160 shares which include shares subject to options that are
exercisable within 60 days ofApril 11, 2008. Total includes all
current directors and executive officers as a
group.
|
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of
the Securities Exchange Act of 1934 requires our directors and executive
officers, and persons who own more than ten percent of a registered class of our
equity securities, to file with the SEC initial reports of ownership and reports
of changes in ownership of our common stock and other equity
securities. Officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file.
To our
knowledge, based solely on a review of the copies of such reports furnished to
us and written representations that no other reports were required, during the
fiscal year ended December 31, 2007, all Section 16(a) filing
requirements applicable to our officers, directors and greater than ten percent
beneficial owners were complied with, except that the Form 3 for Philip Marineau
was filed twelve days late, and the Form 3 for Stephen Killeen was filed
thirteen days late.
EXECUTIVE
COMPENSATION
Compensation Discussion and
Analysis
This
Compensation Discussion and Analysis provides qualitative information and
context for the information presented in the Summary Compensation table and
other tables and narrative that follow. This section describes
(1) the objectives and philosophy underlying our executive compensation
policies and decisions; (2) the primary elements of our executive
compensation program; (3) the process by which we establish executive
compensation programs and awards; (4) our 2007 compensation programs and
awards earned in 2007 under those programs by our Chief Executive Officer, Chief
Financial Officer and other executive officers listed in the Summary
Compensation tables below; and (5) the reasons for our decisions regarding their
compensation. We refer to these executive officers as our named
executive officers elsewhere in this proxy statement. The
Compensation Committee of our Board of Directors (the “Committee”) plays an
active role in all aspects of executive compensation.
Our Vision, Mission and Compensation
Objectives
The
objective of our executive compensation program is to attract, motivate and
retain the exceptional leaders we need to fulfill our vision and mission, uphold
our company values and achieve our corporate goals. These elements
are described below.
Our Vision: Our vision is to
make the world a better place by helping people share life’s joy.
Our Mission: Our mission is to
build an unrivaled service that enables deeper, more personal relationships
between our customers and those who matter most in their lives.
Our Values: We passionately
pursue excellence in everything we do. We inspire customers and each
other to be creative and to achieve more than was thought
possible. We act as owners of Shutterfly, doing the right thing
proactively, decisively and based on facts. We are committed to
supporting each other and providing great service, quality and value to our
customers. We treat each other and our customers as we would want to
be treated.
Our Corporate Goals: We
establish specific corporate and financial goals each year. Our
executive compensation programs and decisions are designed to reward our
employees for achieving Shutterfly’s corporate and financial
goals. The specific goals, and their relationship to compensation,
are discussed more fully below.
More
specifically, our executive compensation programs are designed to:
|
●
Attract
executives who have the skills and experience necessary to achieve our
corporate goals.
|
|
● Reinforce
a sense of ownership, urgency and overall entrepreneurial spirit among
executives by rewarding them fairly over time, and by linking virtually
all of their compensation in excess of base salary to achievement of
measurable corporate and individual performance
objectives.
|
|
● Retain
those individuals who continue to perform at a high
level.
|
Compensation
Philosophy
Our
compensation philosophy provides the guiding principles for structuring a
compensation program that meets the objectives outlined above.
|
● Compensation Should
Reflect our Pay for Performance Culture. A core element of our
compensation philosophy is our firm belief that pay should be directly
linked to performance. Accordingly, a significant portion
of executive compensation is contingent on, and varies based on,
achievement of corporate and individual performance
goals.
|
|
● Compensation
Level and Mix Should Reflect Responsibility and Accountability.
Total compensation is higher for individuals with greater
responsibility, greater ability to influence our achievement of our
corporate goals, and greater accountability for those goals. As
responsibility increases, a greater portion of the executive’s total
compensation is performance-based pay, contingent on the achievement of
company and individual performance goals. Equity-based
compensation is accordingly higher for executives with higher levels of
responsibility and accountability for results. A significant
portion of their total compensation is dependent on long-term stock
appreciation.
|
|
● Compensation Should Enhance
Stockholder Value. Compensation should focus management
on achieving its short-term (annual) results in a manner that also
supports our long-term success and profitability. Annual
performance-based pay creates incentives for achieving results that
enhance stockholder value in the short term, while stock options serve to
align the interests of our executives with our stockholders over a longer
time frame.
|
|
● Compensation Should be
Reasonable and Responsible. Shutterfly’s overall
executive compensation levels must be sufficiently competitive to attract
and retain talented leaders and motivate those leaders to achieve company
goals. At the same time, we believe that compensation should be
set at reasonable and fiscally responsible
levels.
|
Compensation
Programs
Our
executive compensation currently has three primary components:
● Base
salary
● Annual
performance-based cash bonuses
●
Equity
awards
Executive
officers are also eligible to participate in all of our employee benefit plans,
such as medical, dental, vision, group life, employee assistance program,
short-term and long-term disability, accidental death and dismemberment
insurance and our 401(k) plan, in each case on the same basis as other
employees.
We
view the three primary components of executive compensation as related but
distinct. We do not believe that total compensation should be derived
from one component, or that significant compensation from one component should
negate or reduce compensation from other components.
The
Committee determines the appropriate level for each compensation component based
primarily on (1) competitive benchmarking consistent with our recruiting
and retention goals; (2) internal consistency; and (3) other relevant
considerations such as rewarding extraordinary
performance. Compensation (salary, bonus and equity) is set at
competitive levels. In addition, equity compensation is established
at a level that will provide the opportunity for an executive to be well
rewarded if our stockholders’ investments also perform well. The
Committee believes it is important to achieve an appropriate balance between
current compensation (salary and bonus) and long-term compensation (equity), as
well as between cash and non-cash compensation. The Committee
believes that the more senior an executive is, the more of his or her
compensation should be “at risk,” and subject to performance. “At
risk” means the executive will not realize full value unless performance goals,
the majority of which are directly tied to Company performance, are achieved
(for bonuses) or our stock price appreciates (for stock options).
Base
Pay
The Committee sets executive base
compensation at a level it believes will enable us to hire and retain
individuals in a competitive environment and to reward individual performance
and contribution to our overall corporate goals. In determining base
salaries, the Committee considers the executive’s qualifications and experience,
scope of responsibilities and future potential, the goals established for the
executive, the executive’s past job performance, and competitive salary
practices at companies with whom we compete for executives.
Annual Performance-Based Cash
Bonuses
Our executive bonuses reward executives
for achieving key corporate and financial objectives and individual
goals. We use cash bonuses to reward performance and achievements
with a time horizon of one year. Generally, the Committee establishes
both target financial objectives and individual objectives each year so that the
relative difficulty of achieving the objectives is roughly consistent from year
to year. Over the past several years, the Company’s performance has
ranged from exceeding the target level corporate objectives, to meeting the
objectives and failing to achieve the objectives. The level of
achievement of individual performance objectives has also varied by individual
in any given year, as well as by the named executive officers as a group from
year to year.
On February 6, 2007, the Board approved
a formal performance-based bonus plan for fiscal 2007 (the “2007 Bonus Plan”),
in which all employees, including the named executive officers, were eligible to
participate. The target bonus pool for all employees, including the
named executive officers, was $1 million for 2007, which, at the discretion
of the Committee, could be adjusted upward if our financial performance exceeded
2007 targets, up to a total bonus pool not to exceed
$2.76 million. Based on 2007 Company performance, the Committee
increased the bonus pool to $1.39 million, including bonuses for named executive
officers.
Bonus target levels for the named
executive officers under the 2007 Bonus Plan were determined based on
contractual commitments, the executive’s job level and salary grade, survey data
purchased from the Radford Executive Survey, and other industry data provided by
Towers Perrin, a global leader in all aspects of executive and nonemployee
director compensation programs. We participate in the Radford
Executive Survey annual compensation survey and in exchange receive peer group
executive compensation analysis and access to market data for all non-executive
employees.
In the
Committee’s discretion, the amounts of actual bonus awards under the 2007 Bonus
Plan could be higher or lower than the target levels, based on achievement of
Company and individual goals. Actual bonuses for the named executive
officers were paid in March 2008, based on (1) our achievement of specified
revenue and earnings before interest, taxes, depreciation and amortization
(including amortization of stock based compensation) (“Adjusted EBITDA”)
targets, as may be adjusted by the Board of Directors in its discretion, and (2)
on each executive’s achievement of his or her individual
objectives. The Committee selected these measures because the
Company, its investors and the financial community believe they are among the
most important factors in evaluating the growth and profitability of our
business.
Stock Options
We use
stock options as a long-term incentive vehicle for several reasons:
|
●
In
the technology sector, equity awards are a major factor in attracting and
retaining executive officers. Salary and bonus levels are
secondary considerations to most executives.
|
|
●
Stock
options foster employee stock ownership and focus executives on increasing
long-term value for the stockholders. Thus, options reflect our
compensation philosophy of aligning the interests of executives with those
of our stockholders.
|
|
● Stock
options are performance-based. Their intrinsic value depends
entirely on an increase in the stock price above the option exercise
price. All of our options are granted with an exercise price no
less than the fair market value of the stock on the grant
date.
|
|
●
The
vesting period for all employees including executives is four years, which
encourages executive retention. The options vest at a rate of
25% on the one-year anniversary of the vesting start date, and then
monthly for an additional three years, so that each option is fully vested
no later than four years into the ten-year option
term.
|
Our 2006
Equity Incentive Plan (the “2006 Plan”) was approved by our stockholders in
conjunction with our initial public offering in September 2006. It is
the successor plan to our 1999 Stock Plan (the “1999 Plan”), which was
terminated on September 29, 2006. The 1999 Plan will continue to
govern all awards granted through September 29, 2006, even if they have not
yet been exercised. The 2006 Plan gives the Committee more latitude
to design stock-based incentive compensation by granting restricted stock
awards, stock bonuses, stock appreciation rights and restricted stock units in
order to promote high performance and achievement of corporate goals, and to
encourage the growth of stockholder value.
In
determining the number of options to be granted to executive officers, the
Committee takes into account the individual’s position and scope of
responsibility, the vesting period (and thus, retention value) remaining on the
executive’s existing options, the executive’s ability to affect profitability
and stockholder value, the individual’s historic and recent job performance;
equity compensation for similar positions at comparable companies, and the value
of stock options in relation to other elements of total
compensation. In making equity decisions, the Committee evaluates
these factors and takes them into consideration to maximize retention and
performance, and to further align our executives with stockholder
interests.
In order for executives to participate
in our 2007 annual stock option program, he or she must meet individual
performance objectives, which are set by the chief executive officer and
presented to the Committee for review and discussion.
Tax and Accounting
Considerations
We record
cash compensation as services are performed and the compensation is
earned. Historically, all cash compensation we have paid has been tax
deductible for us. Under Section 162(m) of the Internal Revenue
Code, compensation in excess of $1,000,000 per year to named executive
officers that is not performance-based is not tax deductible to
us. The deductibility of compensation to the named executive officers
in 2007 was not affected by the limitations of Section 162(m), and we
expect the same for 2008. However, since corporate objectives may not
always be consistent with the requirements for full deductibility, it is
conceivable that, in the future, we may enter into compensation arrangements
under which payments are not deductible under Section 162(m).
We account for equity
compensation paid to our executives and employees in accordance with
SFAS No. 123R, which requires us to estimate and record a non-cash
expense over the term of the equity compensation award. The amounts
appearing in the “Option Awards” column of the Summary Compensation Table in
this proxy are calculated in accordance with SFAS No. 123R. Any gain
recognized by employees from the exercise of nonqualified stock options is
tax-deductible for us. However, gain recognized by an employee with
respect to an incentive stock option will not be deductible unless there is a
“disqualifying disposition” of the shares by the
employee. A disqualifying disposition occurs when an employee sells
or disposes of incentive stock option shares within two years after the grant
date or within one year after the exercise date. The employee is
taxed on the gain at ordinary income tax rates. In addition, if in
the future we grant awards of restricted stock or restricted stock units that
are not subject to performance vesting, they may not be fully deductible by us
at the time the award is otherwise taxable to the employee.
Overview of the Executive
Compensation Process
Role of the Compensation
Committee
The Committee makes all decisions
regarding compensation (including salary and bonus levels and specific bonus and
equity awards) for all of our executive officers, including our named executive
officers. The Committee meets on a regular basis and at other times
as needed. At the Committee’s request, Committee meetings typically
have included, for all or a portion of each meeting, our Chief Executive
Officer, our Chief Financial Officer, our Vice President, Human Resources, our
Vice President, Legal and/or our outside corporate legal counsel.
The
Committee generally conducts an annual review of our executive officers’
compensation to assess whether compensation programs and decisions (1) are
aligned with our vision, mission, values and corporate goals; (2) provide
appropriate short-term and long-term incentives and motivation to our executive
officers; and (3) are competitive with compensation for comparable officers
in companies with which we compete for executives. In its review, the
Committee examines benchmarking and survey data (see “Our Peer Group and Benchmarking of
Executive Compensation” as well as information developed
internally. The Chief Executive Officer annually evaluates the
performance of each member of the senior executive team other than
himself. He makes recommendations to the Committee regarding salary
adjustments for the current year, as well as performance bonus payments and
equity awards based on performance of the Company and individual performance of
each executive during the preceding year. The conclusions reached and
recommendations based on these evaluations are presented to the
Committee. The Committee, in its sole discretion, determines whether
to accept, modify or reject any recommended adjustments or awards to the senior
executives. The Committee evaluates the performance of the Chief
Executive Officer each year and makes all decisions regarding salary
adjustments, bonus payments and equity awards.
Our Peer Group and Benchmarking of
Executive Compensation
In the first quarter of 2006,
Shutterfly engaged Watson Wyatt Worldwide to identify a peer group of companies
for purposes of benchmarking executive
compensation. Watson Wyatt’s role was mainly to provide competitive
data from approved peer group and Radford data. In the fourth quarter
of 2006, Watson Wyatt provided data to the Committee on companies to be included
in the peer group to reflect changes in Shutterfly’s situation — most
importantly, its status as a public company with a readily ascertainable market
capitalization. Based on information provided by Watson Wyatt, the
Committee considered and approved a new peer group of companies (the “2007 Peer
Group”) of publicly-traded Software, Internet, and E-commerce companies and
companies that financial analysts use to value Shutterfly. The
specific companies were selected primarily based on similar annual revenues
(average of $150M) and market capitalization (average of $455M). We
used this criteria because these are companies in similar industries, with
similar complexities and growth attributes, and with primary sales channels via
the Internet.
The
2007 Peer Group consisted of the following companies:
|
Red
Envelope Inc.
|
|
|
Audible,
Inc.
|
Stamps.Com,
Inc.
|
|
Blue
Nile, Inc.
|
TheStreet.com,
Inc.
|
|
Drugstore.com,
Inc
|
TravelZoo,
Inc.
|
|
InnerWorkings,
Inc.
|
VistaPrint,
Ltd.
|
|
The
Knot, Inc.
|
Websidestory,
Inc.
|
|
Loopnet,
Inc
|
When
determining the composition of the 2007 Peer Group, the Committee considered
companies with comparable e-commerce business models, similar operating history
and similar market capitalization. The following companies were added
to the 2007 Peer Group: 1800 Flowers.com, Inc., Drugstore.com, Inc.,
InnerWorkings, Inc., The Knot, Inc. and Loopnet, Inc., while Celebrate Express,
iVillage, Jamdat Mobile, NetRatings, WebMD Health Holdings and ZipRealty were
removed from consideration. The reasons for removing these companies
from the 2007 Peer Group include acquisition or change in business model or the
company no longer fit the criteria outlined above.
At its February 2007 meeting, the
Committee reviewed the executive compensation information that Watson Wyatt
gathered from 2007 Peer Company proxy statements and Statements of Beneficial
Ownership filings with the SEC, as well as data obtained as a result of our
participation in the Radford/AON 2006 Total Compensation
Survey. After the review, the Committee (a) set 2007 executive
officer base salaries at approximately the 75th percentile for the 2007 Peer
Group for executives, (b) set 2007 annual bonus target levels at the 50th
percentile of the 2007 Peer Group for executives, and (c) set stock option
grants as a percentage of outstanding shares at or near the 75th percentile for
executives in similar positions as our 2007 Peer Group.
The Committee
believes that these percentile levels represent appropriate compensation levels
because it will allow us to attract and retain the exceptional leaders we need
to fulfill our vision and mission, uphold our company values and achieve our
corporate goals. In addition, the Committee believes these
percentiles are consistent with our philosophy of ensuring
that compensation decisions promote both the short-term and long-term interests
of stockholders. In instances where an executive officer is uniquely
critical to our success, the Committee may establish compensation levels in
excess of these percentiles. The Committee realizes that using a
single benchmark may not always be appropriate, but it believes that
benchmarking data from a variety of sources is an important factor in ensuring
that we maintain executive compensation at a competitive level.
Fiscal 2007 Compensation
2007 Salaries
At its February 2007 meeting, the
Committee approved 2007 salary increases for all of the named executive officers
who were with the company in 2006. Salaries for our named executive
officers (except for Mr. Au) had not been increased in 2005 or 2006, so
increases were necessary to bring salaries more in line with the Committee’s
target of approximately the 75th
percentile for the 2007 Peer Group. Within that general guideline,
the Committee determined specific increases for each named executive officer by
considering the executive’s qualifications and experience, scope of
responsibilities, future potential, achievement of specific goals established
for the executive, and the executive’s past job performance. The
specific increases were as follows: Mr. Housenbold from $275,000 to
$300,000 (an increase of 9%); Mr. Recht from $235,000 to $250,000 (an
increase of 6%); and Mr. Galen from $225,000 to $240,000 (an increase of
7%). Mr. Au was hired in 2006 with a salary that was competitive
with the Compensation Peer Group at the time, so his increase was smaller than
the increases for the other named executive officers. Mr. Au’s
salary was increased from $235,000 to $244,000, an increase of
4%. Mr. Black, Ms. Olson and Mr. Rubash joined the Company in
February 2007, May 2007 and November 2007, respectively, and therefore their
salaries reflected the 75th
percentile for the 2007 Peer Group.
2007
Cash Bonuses
Under the 2007 Bonus Plan, the
target bonus pool for all employees, including the named executive officers, was
$1 million for 2007, which, at the discretion of the Committee, could be
adjusted upward if our financial performance exceeded 2007
targets. The minimum revenue and Adjusted EBITDA against which
partial bonuses were payable were $168 million and $30.4 million,
respectively. Our actual revenue and Adjusted EBITDA were $186.7
million and $32.9 million, respectively. Based on fiscal 2007 Company
performance, the Committee increased the bonus pool to $1.39 million, including
named executive officers. The 2007 bonuses were accrued in 2007 and
paid in March 2008.
At the Company’s January 2008 meeting, the Committee discussed and approved the cash bonus to be awarded to the Chief Executive Officer, Jeffrey Housenbold, with respect to fiscal 2007 performance. In doing so, the Committee considered (1) achievement of corporate and financial goals in accordance with the 2007 Bonus Plan; (2) achievement of individual performance objectives; and (3) the terms in his employment contract. Under the terms of his employment agreement, Mr. Housenbold is entitled to receive a minimum bonus of 50% of his base salary.
At the Company’s February 2008
meeting, the Committee discussed and approved the cash bonuses to be awarded to
the named executive officers (other than the Chief Executive Officer) with
respect to fiscal 2007 performance. In doing so, the Committee
considered (1) achievement of corporate and financial goals in accordance with
the 2007 Bonus Plan, and (2) achievement of individual performance
objectives. The Committee also took into account each executive
officer’s individual accomplishments against their pre-established objectives,
which generally focused on strategic initiatives such as (a) increasing new
customers; (b) increasing the lifetime value of a customer; (c) increasing free
cash flow; (d) differentiating the Company from its competitors; and (e)
creating a great place to work. For executives who report directly to
our Chief Executive Officer, the target bonus as a percentage of base salary is
30%. For other named executives who do not report directly to our
Chief Executive Officer, the target bonus as a percentage of base salary is
25%.
Based on Company and
individual performance, including an executive’s contribution to the
accomplishment of the Company’s strategic and functional initiatives set forth
above, the Committee made discretionary adjustments to the 2007 bonus payment
amounts as it deemed appropriate and awarded bonuses to the named executive
officers in the amounts set forth in the Summary Compensation
Table.
2007
Equity Awards
At its February 2007 meeting, the
Committee approved additional stock option grants for the Chief Executive
Officer commensurate with our compensation philosophy outlined
above. The stock option grant was made in conjunction with the chief
executive officer’s anniversary of his hire date. At its November
2007 meeting, the Committee approved additional stock option grants for the
eligible named executive officers commensurate with our compensation philosophy
outlined above. The amounts and other details of the grants for the
named executive officers are shown in the table entitled “Grants of Plan-Based
Awards.” The amounts granted to the named executive officers were
determined by the Committee to be the appropriate amount necessary for long-term
retention of those individuals.
Stock Option Practices –
Grants
Prior
to December 2006, we did not have any formal policies regarding timing of equity
grants. Because we were not a public company, we did not make equity
grants in connection with the release or withholding of material non-public
information. After our initial public offering, in December 2006, the
Committee adopted practices for awarding equity grants on specific,
pre-designated dates, in order to prevent equity grants from being made in
connection with the release or withholding of material non-public
information.
Since our initial public offering, the
exercise price for all equity awards has been and will continue to be the
closing price of our common stock on the NASDAQ Global Market on the grant
date. If the NASDAQ is closed for trading on that date, the exercise
price shall be the closing price on the next trading day.
Severance
and Change of Control Payments
We have entered into employment,
termination of employment and change-in-control arrangements with certain
executive officers. Our Board of Directors decided to provide these
employment, severance and change of control arrangements to enable us to induce
these executives to work at a small, dynamic and rapidly growing company where
their long-term compensation would largely depend on future stock
appreciation. The arrangements mitigate a potential disincentive for
executives when they are evaluating a potential acquisition of the Company,
particularly when the services of the executive officers may not be required by the acquiring company. In such a
situation, acceleration of vesting is necessary to encourage retention of the
executive through the conclusion of the acquisition, in order to allow for a
smooth transition of management which will provide greater stockholder
value. For a detailed description of these severance and change of
control benefits, please see the discussion under “— Executive
Compensation — Potential Payments upon Termination or Change of Control”
below.
The
following table presents compensation information for the years ended
December 31, 2006 and 2007 awarded to, earned by or paid to our Chief
Executive Officer, our Chief Financial Officer, our former Chief Financial
Officer and each of our three other most highly compensated executive
officers. We refer to these executive officers as our named executive
officers elsewhere in this proxy statement.
|
Name
and Principal
Position
|
|
Year
|
|
Salary ($)
|
Bonus ($)(1)
|
|
Stock Awards
($)
|
|
Option
Awards
($)(2)
|
|
Non-Equity
Incentive
Plan
Compensation
($)(3)
|
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
|
Jeffrey
T. Housenbold
President
and
Chief Executive
Officer
|
|
2007
2006
|
|
$297,917
$263,366
|
-
$12,500
|
-
-
|
$916,744
$328,946
|
$150,000
$137,500
|
-
-
|
-
-
|
$1,364,661
$742,312
|
|||||||
|
Stephen
E. Recht (5)
Chief
Financial
Officer
|
|
2007
2006
|
|
$248,750
$225,058
|
$41,446
$50,000
|
-
-
|
$850,864
$182,880
|
-
-
|
-
-
|
$125,000
$963
|
(8)
(4)
|
$1,266,060
$458,901
|
||||||
|
Mark
J. Rubash (6)
Chief
Financial Officer
|
|
2007
2006
|
|
$25,487
-
|
$37,500
-
|
-
-
|
$71,653
-
|
-
-
|
-
-
|
-
-
|
$134,640
-
|
|||||||
|
Stanford
S. Au
Senior
Vice President, Technology
|
|
2007
2006
|
|
$243,250
$172,635
|
$44,000
$55,000
|
-
-
|
$431,967
$162,021
|
-
-
|
-
-
|
-
-
|
$719,217
$389,655
|
|||||||
|
Douglas
J. Galen
Senior
Vice President,
Business
and Corporate Development
|
|
2007
2006
|
|
$238,750
$220,349
|
$58,000
$68,000
|
-
-
|
$123,478
$80,705
|
-
-
|
-
-
|
-
$1,024
|
(4)
|
$420,228
$370,078
|
||||||
|
Dwayne
A. Black (7)
Senior
Vice President,
Operations
|
|
2007
2006
|
|
$195,885
-
|
$35,000
-
|
-
-
|
$197,802
-
|
-
-
|
-
-
|
$16,987
-
|
(9)
|
$445,674
-
|
||||||
|
_______________________________________________
|
|
(1)
|
These
amounts represent discretionary bonuses determined by the Compensation
Committee of the Board of Directors with respect to Shutterfly’s 2007
financial performance and, with respect to Mr. Rubash, includes a new hire
bonus of $37,500.
|
|
(2)
|
These
amounts reflect the dollar amount recognized for financial statement
reporting purposes for the years ended December 31, 2006 and 2007 in
accordance with FAS 123(R), with the exception that estimated forfeitures
related to service-based vesting were disregarded in these
amounts. Assumptions used in the calculation of this amount for
years ended December 31, 2005, 2006 and 2007 are included in footnote 8 to
our audited financial statements for the year ended December 31, 2007
included in our annual report on Form 10-K filed with the Securities and
Exchange Commission on March 10,
2008.
|
|
(3)
|
Represents
amounts earned under the incentive bonus plan described in the section
above entitled “Compensation Discussion and Analysis – Fiscal 2007
Compensation – 2007 Cash Bonuses”.
|
|
(4)
|
The
amounts represent our discretionary contributions to the employee’s 401(k)
account in 2006.
|
|
(5)
|
Mr.
Recht’s capacity as chief financial officer ended as of November 29, 2007
and he remained an employee with the company until February 9,
2008.
|
|
(6)
|
Mr.
Rubash joined Shutterfly as its Chief Financial Officer on November 29,
2007. His bonus amount of $37,500 represents a new hire
bonus.
|
|
(7)
|
Mr.
Black joined Shutterfly as its Senior Vice President, Operations on
February 12, 2007.
|
|
(8)
|
After
the end of the 2007 Fiscal Year, upon Mr. Recht’s termination with the
Company on February 9, 2008, Mr. Recht received Other Compensation which
included i) $250,000 for severance payment; ii) $24,000 in accrued paid
time off.
|
|
(9)
|
The
amount represents reimbursement of expenses related to relocation as per
Mr. Black’s offer letter dated January 17,
2007.
|
The
following table provides information with regard to (a) cash bonuses for 2007
under our performance-based, non-equity incentive plan, and (b) each stock
option granted to each named executive officer during 2007.
|
All
Other Option Awards:
|
||||||||||||||||||||||||||||
|
Number
of Shares |
Exercise
|
Grant
Date
|
||||||||||||||||||||||||||
|
Estimated
Future Payouts Under Non-Equity
|
Underlying
|
Price
of
|
Fair
Value of
|
|||||||||||||||||||||||||
|
Grant
|
Incentive
Plan Awards
|
Option
|
Option
|
Option
|
||||||||||||||||||||||||
|
Name
|
Date
|
Threshold
|
Target(1)
|
Maximum
|
Awards(2)
|
Awards(3)
|
Awards
|
|||||||||||||||||||||
|
Jeffrey
T. Housenbold
|
N/A
|
- | $ | 150,000 | - | - | - | - | ||||||||||||||||||||
|
2/28/2007
|
- | - | - | 300,000 | $ | 16.51 | $ | 2,001,780 | ||||||||||||||||||||
|
Stephen
E. Recht
|
- | - | - | - | - | - | - | |||||||||||||||||||||
|
Mark
J. Rubash
|
11/30/2007
|
- | - | - | 270,000 | $ | 28.49 | $ | 3,374,622 | |||||||||||||||||||
|
Stanford
S. Au
|
11/15/2007
|
- | - | - | 52,500 | $ | 26.70 | $ | 614,948 | |||||||||||||||||||
|
Douglas
J. Galen
|
11/15/2007
|
- | - | - | 75,000 | $ | 26.70 | $ | 878,497 | |||||||||||||||||||
|
Dwayne
A. Black
|
2/28/2007
|
- | - | - | 135,000 | $ | 16.51 | $ | 900,801 | |||||||||||||||||||
|
__________________________________________
|
|
(1) In
2007 the Compensation Committee put in place a bonus plan under which Mr.
Housenbold could earn $150,000 if Shutterfly achieved certain revenue and
EBITDA targets. The $150,000 bonus was earned and is reflected
in the Summary Compensation Table
above.
|
|
(2) All
option awards granted in 2007 were made under our 2006
Plan. Each of these options vest over four years, with 25%
vesting after one year and an additional 1/48th of the total number
of shares vesting each month thereafter. Options expire ten
years from the date of grant. None of the grants made under the
2006 Plan are immediately
exercisable.
|
|
(3) Represents
the fair market value of a share of our common stock in accordance with
FAS 123(R).
|
The
following table provides information regarding stock options held by our named
executive officers as of December 31, 2007. No named executive
officer has any other outstanding form of equity award.
|
Number
of
Securities
Underlying
Unexercised
Options (#)
|
||||||||||||
|
Grant
Date
|
Option
Exercise
Price ($)(8)
|
Option
Expiration
Date
|
||||||||||
|
Name
|
Exercisable
|
Unexercisable
|
||||||||||
|
Jeffrey
T. Housenbold
|
1/17/05
5/9/06
2/28/07
|
(1)(6)
(2)(6)
(1)(7)
|
681,981
109,374
-
|
281,165
140,626
300,000
|
5.50
10.39
16.51
|
1/16/15
5/9/16
2/27/17
|
||||||
|
Stephen
E. Recht (9)
|
6/22/04
8/18/05
5/9/06
|
(3)(6)
(1)(6)
(1)(6)
|
99,225
13,533
18,920
|
28,750
9,667
28,880
|
0.30
6.00
10.39
|
6/21/14
8/17/15
5/9/16
|
||||||
|
Mark
J. Rubash
|
11/30/07
|
(1)(7)
|
-
|
270,000
|
28.49
|
11/29/17
|
||||||
|
Stanford
S. Au
|
5/9/06
11/15/07
|
(4)(6)
(1)(7)
|
77,500
-
|
122,500
52,500
|
10.39
26.70
|
5/9/16
11/14/17
|
||||||
|
Douglas
J. Galen
|
3/16/05
5/9/06
11/15/07
|
(5)(6)
(1)(6)
(1)(7)
|
102,499
19,791
-
|
62,501
30,209
75,000
|
5.50
10.39
26.70
|
3/18/15
5/9/16
11/14/17
|
||||||
|
Dwayne
A. Black
|
2/28/07
|
(1)(7)
|
-
|
135,000
|
16.51
|
2/27/17
|
||||||
|
(1)
|
Each of
these options vest over four years, with 25% vesting after one year from
the date of grant and an additional 1/48th of the total number of
shares vesting each month
thereafter.
|
|
(2)
|
Each of
these options vest over four years, with 25% vesting on March 16, 2007 and
an additional 1/48th of the total number of shares vesting
each month thereafter.
|
|
(3)
|
Each of
these options vest over four years, with 25% vesting on June 25, 2005 and
an additional 1/48th of the total number of shares vesting
each month thereafter.
|
|
(4)
|
Each of
these options vest over four years, with 25% vesting on April 3, 2007 and
an additional 1/48th of the total number of shares vesting
each month thereafter.
|
|
(5)
|
Each of
these options vest over four years, with 25% vesting on March 31, 2006 and
an additional 1/48th of the total number of shares vesting
each month thereafter.
|
|
(6)
|
In
connection with the 1999 Plan, all of these options are immediately
exercisable.
|
|
(7)
|
In
connection with the 2006 Plan, none of these options are immediately
exercisable.
|
|
(8)
|
|
(9)
|
At the
time of Mr. Recht’s separation from the Company on February 9, 2008, Mr.
Recht’s options were subject to 12 month acceleration. As of
February 9, 2008, Mr. Recht had 250,851 of exercisable options and 73,349
cancelled options.
|
Fiscal 2007 Option Exercises and Stock
Vested
The
following table provides information regarding stock option exercises by our
named executive officers as of December 31, 2007. Value realized is
calculated by subtracting the aggregate exercise price of the options exercised
from the aggregate market value of the shares of common stock acquired on the
date of exercise. None of our named executive officers held
restricted stock of Shutterfly.
|
Option Awards
|
||||||
|
Name
|
Number
of Shares
Acquired
on Exercise (#)
|
Value
Realized
on
Exercise ($)
|
||||
|
Jeffrey
T. Housenbold
|
20,000
30,000
25,000
|
491,400
814,800
663,250
|
||||
|
Stephen
E. Recht
|
-
|
-
|
||||
|
Mark
J. Rubash
|
-
|
-
|
||||
|
Stanford
S. Au
|
5,000
5,000
|
93,412
112,800
|
||||
|
Douglas
J. Galen
|
10,000
3,750
10,000
3,750
3,750
3,750
|
245,700
91,988
297,300
101,663
82,913
80,738
|
||||
|
Dwayne
A. Black
|
-
|
-
|
||||
Potential
Payments upon Termination or Change of Control
We have
entered into employment, termination of employment and change-in-control
arrangements with our named executive officers as summarized below:
Jeffrey T.
Housenbold. Mr. Housenbold’s offer letter provides
that if within 12 months following a change of control of Shutterfly we
terminate his employment without cause or if Mr. Housenbold terminates his
employment for good reason (including an adverse change in title, responsibility
or authority, a relocation of employment location more than 60 miles from
our current headquarters or a material reduction in base salary),
Mr. Housenbold will receive severance equal to 15 months of salary
plus 125% of the maximum target bonus for the year in which the termination
occurred, and all unvested shares of our common stock subject to options granted
to Mr. Housenbold will fully vest on his termination date.
We have
also agreed that in the event we terminate Mr. Housenbold’s employment
without cause, or if Mr. Housenbold terminates his employment for good
reason, Mr. Housenbold will receive 12 months salary plus the maximum
target bonus for the year in which the termination occurred as severance, and
12 months of unvested shares of our common stock subject to options granted
to Mr. Housenbold will fully vest. Our obligation to make any
severance payments is expressly conditioned upon Mr. Housenbold’s execution
and delivery of a general release and waiver of all claims.
In the
event that a portion of the severance and other benefits provided to
Mr. Housenbold under the offer letter or any other agreement, benefit, plan
or policy of Shutterfly are subject to a specified federal excise tax in
connection with a change of control, such severance and other benefits will be
adjusted on a pre-tax basis if necessary to provide Mr. Housenbold with a
greater amount of severance and other benefits on an after-tax
basis.
For
purposes of Mr. Housenbold’s employment offer letter, a change of control
includes (1) an acquisition of 50% or more of our outstanding voting stock
by any person or entity; (2) a merger or consolidation of Shutterfly after
which our then-current stockholders own less than a majority of the voting power
of the surviving entity; (3) a sale of all or substantially all of our
assets; or (4) a liquidation or dissolution of Shutterfly.
The
following table summarizes the potential payments and benefits payable to Mr.
Housenbold upon termination of employment or a change in our control under each
situation listed below, modeling, in each situation, that Mr. Housenbold was
terminated on December 31, 2007. Mr. Housenbold’s employment
contract requires that the severance payment be in a lump sum.
|
Following
a
Change
of Control(1)
|
|||||||
|
Executive
Benefits and Payments
Upon Termination:
|
Voluntary
Termination
or
Termination
For
Cause
|
Involuntary
Termination
Not
For Cause
|
Termination
For
Good Reason
|
Involuntary
Termination
Not
For Cause
|
Termination
For
Good Reason
|
||
|
Base
salary
|
-
|
$300,000
|
$300,000 |
$375,000
|
$375,000
|
||
|
Bonus
|
-
|
$150,000
|
$150,000
|
$187,500
|
$187,500
|
||
|
Health
Benefits
|
-
|
$19,652
|
(2) |
$19,652
|
(2) |
-
|
-
|
|
Value
of accelerated stock options
|
-
|
$10,064,935
|
$10,064,935
|
$12,362,085
|
$12,362,085
|
||
(1) In
the event of a change in control, the 1999 Stock Plan provides that options held
by employees, directors and consultants that are not assumed will immediately
vest in full prior to such change in control and all options will expire on the
consummation of the change in control.
(2) This
amount reflects our maximum 12 month obligation. If Mr. Housenbold
becomes covered by another employer’s health plan during such 12 month period,
then our obligation to pay Mr. Housenbold’s health plan coverage shall
cease.
Mark J.
Rubash. Mr. Rubash’s offer letter provides that in the
event of a change of control, merger or acquisition of Shutterfly, and in
connection with the change of control, merger or acquisition, Mr. Rubash is
no longer our Chief Financial Officer, Mr. Rubash will receive six months
of salary as severance, and 12 months of unvested shares of our common
stock subject to options granted to Mr. Rubash will fully
vest. However, in the event of a change of control, merger or
acquisition of Shutterfly where Mr. Rubash continues to report to
Shutterfly (or its acquirer), Mr. Rubash will not receive such severance
and acceleration.
We have
also agreed that in the event we terminate Mr. Rubash’s employment without
cause, he will receive six months of salary as severance. Our
obligation to make any severance payments is expressly conditioned upon
Mr. Rubash’s execution and delivery of a general release and waiver of all
claims and return of all Company property.
For
purposes of Mr. Rubash’s employment offer letter, a change of control
includes (1) a merger or consolidation of Shutterfly after which our
then-current stockholders own less than a majority of the voting power of the
surviving entity or (2) a sale or transfer of all or substantially all of
our assets.
The
following table summarizes the potential payments and benefits payable to Mr.
Rubash upon termination of employment or a change in our control under each
situation listed below, modeling, in each situation, that Mr. Rubash was
terminated on December 31, 2007. There is no requirement that
the severance payment be in a lump sum and can be paid in accordance with normal
payroll procedures.
|
Following
a
Change
of Control
|
|||||
|
Executive
Benefits and Payments
Upon Termination:
|
Voluntary
Termination
or
Termination
For
Cause
|
Involuntary
Termination
Not
For Cause
|
Termination
For
Good Reason
|
Involuntary
Termination
Not
For Cause
|
Termination
for
Good
Reason
|
|
Base
salary
|
-
|
$140,000
|
-
|
$140,000
|
$140,000
|
|
Value
of accelerated stock options
|
-
|
-
|
-
|
$2,083,331
|
$2,083,331
|
Stanford S.
Au. Mr. Au’s offer letter provides that in the
event of a change of control, merger or acquisition of Shutterfly and in
connection with the change of control, merger or acquisition,
(1) Mr. Au is no longer our Senior Vice President of Technology,
(2) he experiences a diminishment in responsibility or authority or
(3) there is a relocation of employment more than 50 miles from our
current headquarters and Mr. Au chooses not to relocate, Mr. Au will
receive six months of salary as severance and 12 months of unvested shares
of our common stock subject to options granted to Mr. Au will fully
vest. However, in the event of a change of control, merger or
acquisition of Shutterfly where Mr. Au continues to report to the President
of Shutterfly (or its acquirer), Mr. Au will not receive such severance and
acceleration.
For
purposes of Mr. Au’s employment offer letter, a change of control includes
(1) a merger or consolidation of Shutterfly after which our then-current
stockholders own less than a majority of the voting power of the surviving
entity or (2) a sale or transfer of all or substantially all of our
assets.
The
following table summarizes the potential payments and benefits payable to
Mr. Au upon termination of employment or a change in our control under each
situation listed below, modeling, in each situation, that Mr. Au was
terminated on December 31, 2007. There is no requirement that
the severance payment be in a lump sum and can be paid in accordance with normal
payroll procedures.
|
Following
a
Change
of Control(1)
|
|||||
|
Executive
Benefits and Payments
Upon Termination:
|
Voluntary
Termination
or
Termination
For
Cause
|
Involuntary
Termination
Not
For Cause
|
Termination
For
Good Reason
|
Involuntary
Termination
Not
For Cause
|
Termination
for Good
Reason
|
|
Base
salary
|
-
|
-
|
- |
$122,000
|
$122,000
|
|
Value
of accelerated stock options
|
-
|
-
|
- |
$1,614,992
|
$1,614,992
|
(1) In the
event of a change in control, the 1999 Plan provides that options held by
employees, directors and consultants that are not assumed will immediately vest
in full prior to such change in control and all options will expire on the
consummation of the change in control.
Douglas J.
Galen. Mr. Galen’s offer letter provides that in the
event of a change of control, merger or acquisition of Shutterfly and in
connection with the change of control, merger or acquisition,
(1) Mr. Galen is no longer our Senior Vice President of Corporate and
Business Development, (2) Mr. Galen’s role is materially diminished or
(3) our corporate office are relocated from our current headquarters and
Mr. Galen chooses not to relocate, Mr. Galen will receive six months
of salary as severance and 12 months of unvested shares of our common stock
subject to options granted to Mr. Galen will fully
vest. However, in the event of a change of control, merger or
acquisition of Shutterfly where Mr. Galen continues to report to the
President of Shutterfly (or its acquirer), Mr. Galen will not receive such
severance and acceleration.
We
have also agreed that in the event we terminate Mr. Galen’s employment
without cause, Mr. Galen will receive six months’ salary as severance and
six months of unvested shares of our common stock subject to options granted to
Mr. Galen will fully vest. Our obligation to make any severance
payments is expressly conditioned upon Mr. Galen’s execution and delivery
of a general release and waiver of all claims.
For
purposes of Mr. Galen’s employment offer letter, a change of control
includes (1) a merger or consolidation of Shutterfly after which our
then-current stockholders own less than a majority of the voting power of the
surviving entity or (2) a sale or transfer of all or substantially all of
our assets.
The
following table summarizes the potential payments and benefits payable to
Mr. Galen upon termination of employment or a change in our control under
each situation listed below, modeling, in each situation, that Mr. Galen
was terminated on December 31, 2007. There is no requirement
that the severance payment be in a lump sum and can be paid in accordance with
normal payroll procedures.
|
Following
a
Change
of Control(1)
|
||||
|
Executive
Benefits and Payments
Upon Termination:
|
Voluntary
Termination
or
Termination
For
Cause
|
Involuntary
Termination
Not
For Cause
|
Involuntary
Termination
Not
For Cause
|
Termination
for Good
Reason
|
|
Base
salary
|
-
|
$120,000
|
$120,000
|
$120,000
|
|
Value
of accelerated stock options
|
-
|
$701,250
|
$1,763,080
|
$1,614,992
|
(1) In
the event of a change in control, the 1999 Plan provides that options held by
employees, directors and consultants that are not assumed will immediately vest
in full prior to such change in control and all options will expire on the
consummation of the change in control.
Dwayne A.
Black. Mr. Black’s offer letter provides that in
the event of a change of control, merger or acquisition of Shutterfly and in
connection with the change of control, merger or acquisition,
(1) Mr. Black is no longer our Senior Vice President of Operations, or
(2) he experiences a diminishment in responsibility or authority,
Mr. Black will receive six months of salary as severance and 12 months
of unvested shares of our common stock subject to options granted to
Mr. Black will fully vest. However, in the event of a change of
control, merger or acquisition of Shutterfly where Mr. Black continues to
report to the President of Shutterfly (or its acquirer), Mr. Black will not
receive such severance and acceleration.
For
purposes of Mr. Black’s employment offer letter, a change of control
includes (1) a merger or consolidation of Shutterfly after which our
then-current stockholders own less than a majority of the voting power of the
surviving entity or (2) a sale or transfer of all or substantially all of
our assets.
The
following table summarizes the potential payments and benefits payable to
Mr. Black upon termination of employment or a change in our control under
each situation listed below, modeling, in each situation, that Mr. Black
was terminated on December 31, 2007.
|
Following
a
Change
of Control
|
|||||
|
Executive
Benefits and Payments
Upon Termination:
|
Voluntary
Termination
or
Termination
For
Cause
|
Involuntary
Termination
Not
For Cause
|
Termination
For
Good Reason
|
Involuntary
Termination
Not
For Cause
|
Termination
for Good
Reason
|
|
Base
salary
|
-
|
-
|
- |
$110,000
|
$110,000
|
|
Value
of accelerated stock options
|
-
|
-
|
- |
$1,021,556
|
$1,021,556
|
COMPENSATION
OF DIRECTORS
The
following table provides information for 2007 regarding all compensation awarded
to, earned by or paid to each person who served as a director for some portion
or all of 2007. Other than as set forth in the table and the
narrative that follows it, to date we have not paid any fees to or reimbursed
any expenses of our directors, made any equity or non-equity awards to
directors, or paid any other compensation to directors.
|
2007
|
|||||
|
Name
|
Fees
Earned or
Paid
in Cash
|
Option
Awards(1)
|
Non-Equity
Incentive
Plan Compensation
|
All
Other Compensation
|
Total
|
|
Philip
A. Marineau
|
$17,500 | $165,603 | -- | - | $183,103 |
|
Patricia
A. House
|
$10,000 | $164,367 | - | - | $174,367 |
|
Eric
J. Keller
|
$15,000 | $217,744 | - | - | $232,744 |
|
Stephen
J. Killeen
|
$10,000 | $99,063 | - | - | $109,063 |
|
Nancy
J. Schoendorf
|
- | - | - | - | - |
|
James
N. White
|
- | $109,679 | - | - | $109,679 |
|
Jeffrey
T. Housenbold(2)
|
- | - | - | ||
|
__________________________________________
|
|||||
|
(1) These
amounts reflect the dollar amount recognized for financial statement
reporting purposes for the year ended December 31, 2007 in accordance with
FAS 123(R), with the exception that estimated forfeitures related to
service-based vesting were disregarded in these amounts, for awards
pursuant to our 1999 Plan. Assumptions used in the calculation
of this amount for years ended December 31, 2005, 2006 and 2007 are
included in footnote 8 to our audited financial statements for the year
ended December 31, 2007 included in our annual report on Form 10-K filed
with the Securities and Exchange Commission on March 10,
2008. As of December 31, 2007, the aggregate number of shares
underlying outstanding option awards for each non-employee director was as
follows: Mr. Marineau – 87,740 stock options; Ms. House – 63,315 stock
options; Mr. Keller – 75,182 stock options; Mr. Killeen – 52,740 stock
options; Mr. White – 60,000 stock options. Each of these
options vest monthly over three years except that the grant for 8,333 to
Mr. Keller vests monthly over a one year period. Ms. Schoendorf
declined her stock option grant. Options expire ten years from
the date of grant.
|
|
(2) Mr.
Housenbold receives no compensation as a
director.
|
Cash Compensation Paid to
Directors. Each of our independent directors who is not
affiliated with one of our major stockholders who serves as a chairperson of a
board committee receives the following annual cash retainer, paid in quarterly
installments, for each year of such service: for service as the chairperson of
the Audit Committee, $15,000; for chairperson of the Compensation Committee,
$10,000; for chairperson of the Governance Committee, $10,000. For
2008, the chair of the Audit Committee is Eric J. Keller; the chair of the
Compensation Committee is Patricia A. House; and the chair of the Governance
Committee is Stephen J. Killeen. The Chairman of the Board of
Directors receives an annual cash retainer of $17,500. For 2008, the
Chairman of the Board is Philip A. Marineau.
Stock Options Granted to
Directors. Each of our independent directors who is not affiliated with
one of our major stockholders receives an initial stock option grant of
50,000 shares of our common stock upon joining our Board of
Directors. In addition, the Chairman of the Board is entitled to an
initial stock option grant of 35,000 shares. The shares subject to
the option vest monthly over a three-year period from the date of
grant.
On the
date of our annual meeting, each independent, non-major stockholder affiliated
director will receive an additional stock option grant of 10,000 shares of our
common stock that will vest monthly over a three-year period from the date of
grant. Each director who received an initial grant or annual refresh
grant within twelve (12) months prior to the date of the annual meeting of
stockholders shall be granted a pro-rated refresh grant. At the 2008
annual stockholder meeting, our directors will be granted the following stock
options: Eric J. Keller – 10,000 stock options; James N. White –
10,000 stock options; Patricia A. House – 10,000 stock options; Stephen J.
Killeen – 10,000 stock options; and Philip A. Marineau, our Chairman – 20,000
stock options. Nancy J. Schoendorf declined her stock option
grant. Such grants are based on a formula established by the Board of
Directors on February 6, 2007. The shares subject to the option vest
monthly over a three-year period from the date of grant, with the exception of
10,000 options granted to Mr. Marineau for serving as Chairman, which vest
monthly over a one-year period.
In
addition, Mr. Keller, as chairman of the Audit Committee, will receive a stock
option grant of 8,333 shares of our common stock that will vest monthly over a
12-month period from the date of grant.
On
February 28, 2007, we granted each of Stephen J. Killeen and James N. White an
option to purchase 50,000 shares of our common stock with an exercise price of
$16.51 per share, which amount represented their initial stock option grant for
their service as directors of the Company. On February 28, 2007, we
granted Philip A. Marineau an option to purchase 85,000 shares of our common
stock with an exercise price of $16.51 per share, which amount represented his
initial stock option grant for his service as a director and Chairman of the
Company. On February 28, 2007, we granted Patricia A. House an option
to purchase 3,315 shares of our common stock with an exercise price of $16.51
per share, which amount represented her pro rata annual stock option grant for
her service as director of the Company. On May 17, 2007, we granted
each of Eric J. Keller, James N. White and Patricia A. House an option to
purchase 10,000 shares of our common stock with an exercise price of $17.75 per
share, which amount represented their annual stock option grant for their
service as directors of the Company. On May 17, 2007, we granted each
of Philip A. Marineau and Stephen J. Killeen an option to purchase 2,740 shares
of our common stock with an exercise price of $17.75 per share, which amount
represented their pro rata annual stock option grant for their service as
directors of the Company. On August 31, 2007, we granted Eric J.
Keller an option to purchase 6,849 shares of our common stock with an exercise
price of $27.96 per share, which amount represented his pro rata annual stock
option grant for his service as audit committee chairman. In each
case, the above stock option grants were pursuant to the terms and conditions of
our 2006 Plan.
EQUITY
COMPENSATION PLAN INFORMATION
The
following table provides certain information as of December 31, 2007, with
respect to all of our equity compensation plans in effect on that
date.
|
Plan Category
|
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
(a)
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
|
Number of Securities
Remaining Available for Future Issuance Under
Equity Compensation Plans
(Excluding Securities Reflected
in Column (a))
(c)
|
|||||||
|
Equity
Compensation Plans Approved by Stockholders(1).….
|
5,262,264 | $12.30 | 101,418 | |||||||
|
Equity
Compensation Plans Not Approved by Stockholders(2)….
|
380,000 | $28.49 | N/A | |||||||
|
Total
|
5,642,264 | N/A | 101,418 | |||||||
|
(1)
|
Includes
the 1999 Plan and the 2006 Plan.
|
|
(2)
|
As
of December 31, 2007, we granted a total of 380,000 non-statutory
stock options to employees with exercise prices equal to the fair market
value of Shutterfly common stock on the date of grant. Two
executive officers (Mark A. Rubash and T. Bernie Blegen) each received an
employment inducement stock option grant award not under a shareholder
approved plan but pursuant to a Nasdaq approved exception. Such
stock options have the same material terms as stock options granted under
the 2006 Plan; namely, the shares subject to the options vest over a four
year period at the rate of 25% of the shares on the first anniversary of
the date of grant and 1/48 of the shares monthly thereafter, the options
have 10-year terms and terminate three months after the termination of
service, and the options do not automatically accelerate upon a change in
control.
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ON
EXECUTIVE COMPENSATION
The
material in this report is not “soliciting material,” is not deemed “filed” with
the Securities and Exchange Commission, and is not to be incorporated by
reference into any filing of Shutterfly under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.
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Compensation
Committee
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Patricia
A. House, Chairperson
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Stephen
J. Killeen
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Nancy
J. Schoendorf
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REPORT
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The
material in this report is not “soliciting material,” is not deemed “filed” with
the Securities and Exchange Commission, and is not to be incorporated by
reference into any filing of Shutterfly under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended.
The
primary purpose of the Audit Committee is to oversee our financial reporting
processes on behalf of our Board of Directors. The Audit Committee’s
functions are more fully described in its charter, which is available on our
website at
http://www.shutterfly.com. Management has the primary
responsibility for our financial statements and reporting processes, including
our systems of internal controls. In fulfilling its oversight
responsibilities, the Audit Committee reviewed and discussed with management
Shutterfly’s audited financial statements as of and for the fiscal year ended
December 31, 2007.
The Audit
Committee reviewed with PricewaterhouseCoopers LLP such matters as are required
to be discussed with the Audit Committee under generally accepted auditing
standards, including the matters required to be discussed by Statement on
Auditing Standards No. 61. In addition, the Audit Committee
discussed with PricewaterhouseCoopers LLP their independence, and received from
PricewaterhouseCoopers LLP the written disclosures and the letter required by
Independence Standards Board Standard No. 1. Finally, the Audit
Committee discussed with PricewaterhouseCoopers LLP, with and without management
present, the scope and results of PricewaterhouseCoopers LLP’s audit of such
financial statements.
Based on
these reviews and discussions, the Audit Committee has recommended to our Board
of Directors that such audited financial statements be included in our annual
report on Form 10-K for the year ended December 31, 2007 for filing
with the Securities and Exchange Commission. The Audit Committee also
has engaged PricewaterhouseCoopers LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2008 and is seeking
ratification of such selection by the stockholders.
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Audit
Committee
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Eric
J. Keller, Chairman
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James
N. White
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Patricia
A. House
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From
January 1, 2007 to the present, there have been no (and there are no
currently proposed) transactions in which the amount involved exceeded $120,000
to which the company was (or is to be) a party and in which any executive
officer, director, 5% beneficial owner of our common stock or member of the
immediate family of any of the foregoing persons had (or will have) a direct or
indirect material interest.
Our Audit Committee reviews the
fairness and approval of any proposed transaction between management and other
related parties of the company (other than transactions that are subject to
review by the Compensation Committee) that are brought to the attention of the
Audit Committee. In addition, our Code of Conduct and Ethics sets
forth factors that should be considered in determining whether there may be a
direct or indirect material interest, such as the size and nature of the
person’s interest; the nature of the company’s relationship with the other
entity; whether the person has access to confidential company information; and
whether the person has an ability to influence company decisions that would
affect the other entity.
Our Board
of Directors knows of no other matters that will be presented for consideration
at the annual meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best
judgment.
A copy of
our annual report to stockholders, which includes financial statements, is being
mailed with this proxy statement.
We
have filed our annual report on Form 10-K for the fiscal year ended
December 31, 2007 with the SEC. It is available free of charge
at the SEC’s web site at www.sec.gov. Upon written request by a
Shutterfly stockholder, we will mail without charge a copy of our
Form 10-K, including the financial statements and financial statement
schedules, but excluding exhibits to the Form 10-K. Exhibits to
the Form 10-K are available upon payment of a reasonable fee, which is
limited to our expenses in furnishing the requested exhibit. All
requests should be directed to Investor Relations, Shutterfly, Inc., 2800
Bridge Parkway, Redwood City, California 94065.
Requests
for copies of our annual report to stockholders or our annual report on
Form 10-K should be directed to Investor Relations, Shutterfly, Inc.,
2800 Bridge Parkway, Redwood City, California 94065.
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By
Order of the Board of Directors
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Jeffrey
T. Housenbold
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Chief
Executive Officer
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and
President
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Redwood
City, California
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April 21,
2008
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