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Shutterfly to acquire Tiny Prints

Press release from the issuing company

Redwood City, Calif. - Shutterfly, Inc., a leading Internet-based social expression and personal publishing service, announced today that it has entered into an agreement to acquire Tiny Prints, Inc., a privately-held company based in Sunnyvale, CA. Tiny Prints operates tinyprints.com and weddingpaperdivas.com, two fast growing ecommerce brands offering stylish cards, invitations, personalized stationery and photo books. Upon the closing of this transaction, the three co-founders, together with the entire Tiny Prints team will join Shutterfly.

"Shutterfly and Tiny Prints share a common passion: providing customers with innovative, high quality premium products, stylish designs and exceptional customer service," said Jeffrey Housenbold, President and CEO of Shutterfly. "Together, we will build on our portfolio of iconic brands and combine our passionate, entrepreneurial employees to truly transform the cards and stationery market. We believe the integration of our businesses will create near-term and long-term opportunities for enhanced merchandising, accelerated product innovation and significant scale efficiencies in manufacturing, customer service and marketing. We are excited to welcome the entire Tiny Prints team to Shutterfly."

"Like Shutterfly, Tiny Prints has experienced rapid growth in recent years," said Ed Han, Tiny Prints co-founder and CEO. "By merging with Shutterfly, we will benefit from the many synergies and efficiencies between our organizations, enabling Tiny Prints to continue delighting our customers with a broader array of stylish and innovative products and services while growing our brands and maintaining our talented team."

Under the terms of the definitive agreement, Shutterfly will acquire all of the outstanding stock of Tiny Prints, Inc. in exchange for approximately $141 million in cash and approximately 3.9 million shares of Shutterfly common stock. In addition, Shutterfly will reserve approximately 1.4 million shares of common stock as consideration for the vested and unvested Tiny Prints employee equity awards assumed by Shutterfly.

The structure of the transaction includes a fixed exchange ratio for the equity component of the consideration and provides for certain adjustments, including for working capital and net cash and debt balances at closing. As a result of these closing date adjustments, the actual consideration amounts may differ from the amounts reported today.

Subject to the satisfaction of various closing conditions, Shutterfly currently anticipates that the transaction will close in approximately 30 to 60 days. Tiny Prints stockholders will own approximately 12% of the pro forma combined company. Tiny Prints outside investors will be subject to a six-month lock-up on the sale of Shutterfly shares received in the transaction and the Tiny Prints founders will be subject to a staggered 18-month lock-up. In addition, approximately 9% of the acquisition consideration will be held in escrow for 12 months.

Shutterfly Updated Financial Guidance for Q1-2011

For the quarter ending March 31, 2011, Shutterfly management confirmed that net revenues are now expected to range between $53-$55 million and that its Adjusted EBITDA, including approximately $1.1 million in transaction-related costs, is expected to range between a loss of $1 million and a loss of $2 million, as compared to management's previous quarterly guidance of $52 to $53 million in net revenues and a loss of $1 million to $2 million in Adjusted EBITDA.

President and CEO, Jeffrey Housenbold and CFO, Mark Rubash will hold a conference call to discuss the transaction, certain Tiny Prints financial information and Shutterfly updated financial guidance on Monday, March 21 at 2:30 PM PT. To access the conference call, please dial (970) 315-0490. A replay of the conference call will be available through Monday, March 28, 2011. To hear the replay, please dial (706) 645-9291, replay passcode 53819991.

Evercore Partners served as Shutterfly's exclusive financial advisor on the transaction and Morrison & Foerster LLP served as its legal counsel. Fenwick & West LLP served as Tiny Prints legal counsel.


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