Exhibit 10.22

 

LEASE AGREEMENT

BY AND BETWEEN

3915 SHOPTON ROAD, LLC
(AS LANDLORD)

AND

SHUTTERFLY, INC.
(AS TENANT)

 
 

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LEASE AGREEMENT

THIS LEASE AGREEMENT (the “Lease”) made and entered into as of the 22nd day of
December, 2006 (the “Lease Date”), by and between

3915 SHOPTON ROAD, LLC, a North Carolina limited liability company

hereinafter called “Landlord”; and

SHUTTERFLY, Inc., a Delaware corporation

hereinafter called “Tenant”:

W I T N E S S E T H:

In consideration of the mutual covenants and agreements contained herein, the
parties hereto agree for themselves, their successors and assigns, as follows:

1.           DESCRIPTION OF PREMISES.  Landlord hereby leases to Tenant, and
Tenant hereby accepts and rents from Landlord, that certain office/warehouse
space (the “Premises”) containing approximately 102,400 rentable square feet
located in the building known as 18-B (the “Building”) in Shopton Ridge Business
Park (the “Business Park”), Charlotte, North Carolina, said Building being
located on a parcel of real property more particularly described on Exhibit ”A”
attached hereto.  For purposes of this Lease, Tenant’s “proportionate share”
shall be one hundred percent (100%).

2.           TERM.  Unless otherwise adjusted as hereinbelow provided, the term
of this Lease shall commence on the later to occur of April 30, 2007 or upon
substantial completion of Landlord’s Work (the “Commencement Date”) and shall
end at midnight on the date (the “Expiration Date”) which is the last day of the
eighty-ninth (89th) month after the Commencement Date (as same may be adjusted
as hereinbelow provided).  As used herein, the term “Lease Year” shall mean each
consecutive twelve-month period of the Lease term, beginning with the
Commencement Date (as same may be adjusted as hereinbelow provided) or any
anniversary thereof.  Within five (5) days following the Commencement Date,
Tenant shall execute and deliver to Landlord duplicate originals of a written
agreement in the form attached to this Lease as Exhibit F.

3.           RENTAL.  During the full term of this Lease, Tenant shall pay to
Landlord, without notice, demand, reduction (except as may be applicable
pursuant to paragraph 13 or paragraph 19 herein or as otherwise provided in this
Lease), setoff or any defense, a total rental (the “Annual Rental”) consisting
of the sum total of the following:

(a)           Minimum Rental.  Commencing on the first day of the ninth (9th)
month following the Commencement Date (the “Rent Commencement Date”), as the
same may be adjusted pursuant to the last sentence of Section 4 hereof, and
continuing through the remainder of the initial eighty-nine (89) month term of
this Lease, Tenant shall pay an annual minimum rental (the “Minimum Rental”)
equal to Six and 48/100 Dollars ($6.48) per rentable square foot of space in the
Premises during Lease Year 1, increasing every year thereafter during the term
at a rate of three percent (3%),  based on 102,400 square feet, including the
“free Annual Rent”, as set forth below.  If the actual square footage of the
Premises, as determined by Landlord’s architect and certified to Landlord and
Tenant, shall be greater or lesser than 102,400 square feet based on the final
as-built square footage after completion of the Improvements described on
Exhibit ”C” to this Lease, then the Minimum Rental shall be adjusted based on
the actual square footage of the Premises.  The Minimum Rental shall be payable
in equal monthly installments, each in advance on or before the first day of
each month.  If the Rent Commencement Date is a date other than the first day of
a calendar month, the Minimum Rental shall be prorated daily from such date to
the first day of the next calendar month and paid on the Rent Commencement Date.

Period
80,000 SF Space
Annual Rent
22,400 SF Space
Annual Rent
Total Space
Annual Amount
Months 1-8
FREE
FREE
FREE
Months 9-13
$216,000.00
FREE
$216,000.00
Months 14-20
$302,400.00
$84,672.00
$387,072.00
Months 21-32
$533,600.00
$149,408.00
$683,008.00
Months 33-44
$549,600.00
$153,888.00
$703,488.00
Months 45-56
$565,600.00
$158,368.00
$723,968.00
Months 57-68
$582,400.00
$163,072.00
$745,472.00
Months 69-80
$599,200.00
$167,776.00
$766,976.00
Months 81-89
$462,600.00
129,528.00
$592,128.00

(b)           Tenant’s Share of Taxes.  Subject to the terms set forth in
Section 3(j) below, Tenant shall pay an amount equal to Tenant’s “proportionate
share” of ad valorem taxes (or any tax hereafter imposed in lieu thereof) with
respect to the Building and the Business Park.  Tenant’s share of taxes shall be
paid as provided in subparagraph (e) below.  Provided, any increase in ad
valorem taxes on the Premises as a result of alterations, additions or
improvements made by, for or on account of Tenant shall be reimbursed by Tenant
to Landlord as Additional Rent (as defined below) within thirty (30) days after
receipt of written demand therefor.

(c)           Tenant’s Share of Insurance Premiums.  Subject to the terms set
forth in Section 3(j) below, Tenant shall pay an amount equal to Tenant’s
“proportionate share” of premiums charged for fire and extended coverage and
liability insurance with all endorsements carried by Landlord on the Building
payable for any calendar year (including any applicable partial calendar
year).  Tenant’s proportionate share of premiums shall be paid as provided in
subparagraph (e) below.

(d)           Tenant’s Share of Common Area Operating and Maintenance
Costs.  Subject to the terms set forth in Section 3(j) below, Tenant shall pay
an amount equal to Tenant’s “proportionate share” of the reasonable costs for
operating and maintaining the Building’s common areas, including, but not
limited to, the cost of grass mowing, shrub care and general landscaping,
irrigation systems, maintenance and repair to parking and loading areas,
driveways, sidewalks, exterior lighting, garbage collection and disposal, common
water and sewer, common plumbing, common signs and other facilities shared by
the various tenants in the Building, the administrative costs associated
therewith including management fees, which shall be capped at 3% of the Minimal
Rental actually collected by Landlord from the Building during the initial term
and any subsequent renewal period(s), and of the Building’s share of the common
area operating and maintenance costs for the entire Business Park.  Landlord
shall use good faith efforts to keep the operating and maintenance costs in line
with costs for other similarly situated business centers.  Tenant’s
proportionate share shall be paid as provided in subparagraph (e)
below.  Notwithstanding any term, covenant or condition as set forth in this
Lease, costs for operating and maintaining the Building’s common areas and the
Business Park’s common areas (but only during such time as Landlord and/or its
affiliate own a majority of the Business Park and control the operation of the
Business Park) shall specifically exclude the following:

(i) replacement of capital items (unless amortized over the useful life of such
item according to normal accounting procedures (a) but only to the extent that
such replacements reduce other direct expenses and are made after the
Commencement Date or (b) for replacements that are required under any
governmental law or regulation that was not applicable to the Building as of the
Commencement Date).

(ii) financing and refinancing costs and principal and interest payments on
mortgages and deeds of trust,

(iii) costs and expenses covered by insurance,

(iv) Landlord's insurance deductible,

(v) depreciation,

(vi) above market payments made to affiliates of Landlord, inside or related
contractors and executives,

(vii) income, profit, franchise, rent, sales, gift, estate, succession,
inheritance, foreign ownership, foreign control, transfer, capital levy, and/or
personal property taxes payable by Landlord,

(viii) any and all costs of Landlord for any clean-up, remediation,
environmental surveys/assessments, compliance with environmental laws,
consulting fees, treatment and monitoring charges, transportation expenses and
disposal fees, etc., and

(ix) rent under any ground or underlying lease.

(e)           Payment of Proportionate Share.  Subject to the terms set forth in
Section 3(j) below, Tenant shall pay to Landlord each month, along with Tenant’s
installments of Minimum Rental a sum equal to one-twelfth (1/12) of the amount
estimated by Landlord (in its reasonable discretion) as Tenant’s proportionate
share of the taxes, insurance premiums and common area maintenance costs for
each calendar year during the Lease term (such amounts, together with any other
sums payable by Tenant to Landlord hereunder other than Minimum Rental being
referred to as “Additional Rent”).  Landlord will provide Tenant with Landlord’s
estimate of Tenant’s proportionate share of taxes, insurance premiums and common
area operating and maintenance expenses amount for the year this Lease commences
within sixty (60) days after the Rent Commencement Date and for each future
upcoming calendar year on or before December 31 of each calendar year during the
term hereof.  If Landlord fails to notify Tenant of Tenant’s revised
proportionate share amount by such date, Tenant shall continue to pay the
monthly installments of the proportionate share amount last payable by Tenant
until notified by Landlord of such new estimated amount.  No later than April 30
of each calendar year of the term, Landlord shall deliver to Tenant a written
statement setting forth the actual amount of Tenant’s proportionate share for
taxes, insurance premiums and all common area operating and maintenance costs
for the preceding calendar year.  Tenant shall pay the total amount of any
balance due shown on such statement within thirty (30) days after its
delivery.  In the event such annual costs and increases decrease for any such
year, Landlord shall, at its sole election, either reimburse Tenant for any
overage paid within ten (10) days after delivery of such statement, or apply the
overage against the monthly installment(s) of any Annual Rental next due from
Tenant until such overage has been recovered by Tenant.  For the calendar year
in which this Lease commences, Tenant’s proportionate share shall be prorated
from the Commencement Date through December 31 of such year.  Further, Tenant
shall be responsible for the payment of Tenant’s proportionate share of taxes,
insurance premiums and common area operating and maintenance costs for the
calendar year in which this Lease term expires, prorated from January 1 thereof
through the Expiration Date.  Upon the Expiration Date, Tenant shall pay any
unpaid estimated proportionate shares within thirty (30) days after the
Expiration Date, which estimate shall be made by Landlord based upon actual and
estimated costs for such year.

(f)           Tenant’s Share of Mechanical Maintenance and Inspection
Costs.  Pursuant to Paragraph 10 herein, Tenant shall be responsible, at its
sole cost, for routine mechanical maintenance and inspection services to the
heating, ventilation and air conditioning (“HVAC”) equipment supplying the
Premises.

(g)             Intentionally deleted.

(h)           Late Payment.  If any monthly installment of Minimum Rental,
Additional Rent (if any) or any other sum due and payable pursuant to this Lease
remains due and unpaid ten (10) days after said amount becomes due, Tenant shall
pay as Additional Rent hereunder a late payment charge of a sum equal to five
percent (5%) of the unpaid rent or other payment (“Late Charge”).  All unpaid
rent and other sums of whatever nature owed by Tenant to Landlord under this
Lease shall bear interest from the fifteenth (15th) day after the due date
thereof until paid at the lesser of fifteen percent (15%) per annum or the
maximum interest rate per annum allowed by law (“Interest Charge”).  Acceptance
by Landlord of any payment from Tenant hereunder in an amount less than that
which is currently due shall in no way affect Landlord’s rights under this Lease
and shall in no way constitute an accord and satisfaction.  Notwithstanding the
foregoing, for the first two late payments by Tenant in any Lease Year, Tenant
shall have five (5) days from receipt of written notice from Landlord to make
such late payment before such Late Charge and Interest Charge shall apply.

(i)           Audit.  Tenant shall have the right, from time to time, to audit
Landlord’s books and records as they relate to any costs and expenses for which
Tenant is responsible under this Lease during the previous calendar year of the
Lease term.  Any such audit shall be conducted during Landlord’s regular
business hours at the offices of Landlord where such records are kept utilizing
an independent third party (which shall be the same entity that Tenant uses for
similar auditing functions for other building(s) owned or leased by Tenant)
designated by Tenant, on a non-contingency basis.  In the event any such audit
reveals that the costs and expenses for which Tenant has paid Tenant’s
proportionate share of such costs relative to any audit period exceed actual
costs and expenses for which Tenant is responsible for paying its proportionate
share, either: (i) Landlord shall credit or refund any overpayment to Tenant
within thirty (30) days of such audit report; or (ii) Tenant shall pay to
Landlord any underpayment within thirty (30) days of such audit report, as
applicable.  All costs and expenses of any such audit shall be paid by Tenant,
unless such audit discloses a discrepancy in the amount of five percent (5%) or
more in which case Landlord shall pay for such audit, up to a maximum amount of
$5,000.  Tenant may perform such an audit no more than once each calendar year
during the Lease term and Tenant shall maintain all information reviewed during
such audit in a confidential manner, only disclosing such information to
Tenant’s accountants, legal counsel, officers and managers.  Tenant’s right to
audit shall in no way relieve Tenant’s obligations to pay Common Area Expenses
due to Landlord within thirty (30) days after receipt of an invoice therefor.

(j)           Controllable Operating Expenses Cap.  In no event shall Tenant’s
Controllable Operating Expenses, as defined in herein, for any calendar year
from and after 2008 exceed the Controllable Operating Expenses Cap.  As used
herein, the term “Controllable Operating Expenses Cap” shall mean: (i) relative
to the calendar year 2008, the amount obtained by multiplying the amount of
Controllable Operating Expenses for calendar year 2007 by 1.05; and (ii)
relative to each calendar year subsequent to calendar year 2008, the amount
obtained by multiplying the Controllable Operating Expenses Cap for the previous
calendar year by 1.05.  “Controllable Operating Expenses” shall mean all
operating and maintenance costs chargeable pursuant to this Lease other than:
(i) property taxes, including but not limited to, personal and ad valorem taxes;
(ii) cost of all insurance coverage for the Building and the common areas,
including, but not limited to, the cost of fire, casualty, rental abatement,
boiler and machinery, worker’s compensation and liability insurance applicable
to the Building and the common areas and Landlord’s personal property used in
connection therewith; (iii) all charges for gas, water, sewerage service,
electricity and other utilities furnished to the Building and the common areas;
(iv) ice and snow removal; and (v) the Building’s proportionate share of any and
all assessments and other charges payable by Landlord relative to the Business
Park under the terms of any applicable restrictive covenants, agreements or
similar documents.

4.           DELIVERY OF POSSESSION.  Landlord will deliver the Premises to
Tenant on the Commencement Date, with Landlord’s Work (as defined in Paragraph 1
of Exhibit ”C” attached hereto) substantially completed in accordance with the
Final Plans and Specifications (as defined in paragraph 1 of said Exhibit ”C”),
subject to revisions as mutually agreed to in writing by Landlord and Tenant, as
evidenced, if requested by Tenant, by the certification of Landlord’s architect
or other designated engineering  representative.  Tenant shall be given access
to the Premises upon written request to Landlord not more than sixty (60) days
prior to the Commencement Date, for the purposes of preparing the Premises for
Tenant’s use.  With the exception of any Annual Rental payments due, all terms
and conditions of this Lease shall apply to Tenant upon such occupancy.  Tenant
shall coordinate such occupancy with Landlord and shall not interfere with
Landlord’s completion of Landlord’s Work.  If Landlord for any reason whatsoever
cannot substantially complete Landlord’s Work and deliver possession of the
Premises to Tenant on the Commencement Date as above specified, this Lease shall
not be void or voidable nor shall Landlord be liable to Tenant for any loss or
damage resulting therefrom; but in that event  (except to the extent that any
such delay(s) has been caused by Tenant or its agent(s), employee(s),
contractor(s) or subcontractor(s) (collectively, “Tenant Delay Factors”), and
provided that in each such instance Landlord first gives Tenant written notice
that if Tenant does not so cure its act or omission within two (2) business days
the same will thereafter be considered a Tenant Delay Factor, the Commencement
Date shall be adjusted to be the date when Landlord does in fact substantially
complete Landlord’s Work and deliver possession of the Premises to
Tenant.  Notwithstanding anything herein to the contrary, in the event
Landlord’s Work is not complete by the date which is one hundred twenty (120)
days after the later to occur of: (i) waiver or expiration of the Contingency
(as defined in Section 7 of Exhibit “E” hereof); and (ii) approval by Landlord
and Tenant of space plans and construction drawings for the Premises (such date
referred to herein as the “Delivery Date”), except for reasons of Tenant Delay
Factors or force majeure, which force majeure delays shall only be extended by
up to 45 days, Tenant shall be granted three (3) days of free Minimal Rental for
every day beyond the Delivery Date until Landlord’s Work has been complete, and
the Rent Commencement Date shall be adjusted accordingly.  In the event Landlord
is unable to deliver the Premises by September 30, 2007, Tenant may terminate
this Lease with no further obligation by providing Landlord written notice on or
before October 10, 2007.

5.           ALTERATIONS AND IMPROVEMENTS BY TENANT.

(a)           Tenant shall make no structural changes respecting the Premises or
the Building and shall make no changes of any kind respecting the Premises or
the Building that are visible from the exterior of the Premises or the Building,
without Landlord’s approval, which shall not be unreasonably withheld.  Any
interior nonstructural changes or other alterations, additions, or improvements
to the Premises costing in excess of $20,000 in any single instance shall be
made by or on behalf of Tenant only with the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed. Prior to any such
consent by Landlord, Tenant shall submit to Landlord reasonably detailed plans
and specifications covering the proposed work.  If Landlord notifies Tenant of
any objections to the proposed alterations, Tenant must (i) revise the plans and
specifications to the extent reasonably necessary to secure the Landlord’s
approval and (ii) submit such revised plans and specifications for Landlord’s
approval.  Tenant shall thereafter have the alterations performed in accordance
with the approved plans and specifications.  After completion, Tenant shall
deliver to Landlord an “as-built” set of plans and specifications.

(b)           Tenant shall not permit any lien or claim of lien against the
Premises to exist or come into being as a result of any construction work
performed on behalf of or at the direction of Tenant at the Premises and Tenant
shall bond off or release of record any lien within thirty (30) days of being
filed against the Premises.  Tenant is not Landlord’s agent or nominee in
connection with any construction activities performed by or for Tenant on the
Premises and Landlord shall not be liable for the contracts or liabilities of
Tenant.  Tenant agrees that any damage to the Premises caused by Tenant’s
construction work shall be repaired at Tenant’s sole cost and expense.  No later
than thirty (30) days after completion of any work in the Premises by Tenant
(including, but not limited to, the addition of equipment, cables or any
material that must be inspected), Tenant shall provide to Landlord (i) an
affidavit from the general contractor performing the work that same has been
substantially completed in accordance with the approved plans and specifications
and that all mechanics and materialmen in connection therewith have been paid in
full; (ii) a waiver of lien with respect to such construction work executed by
the general contractor and each subcontractor, except as to any contractor for
which Tenant has obtained a bond to pay any claims by such persons; and (iii) a
certificate of occupancy from the applicable governmental authorities, if
required, evidencing completion of such work in accordance all applicable laws,
codes and ordinances.  In the event a certificate of occupancy cannot be
obtained for the Premises due to any action or inaction by Tenant, Tenant shall
be in default hereunder and must immediately comply with any and all
requirements to obtain a certificate of occupancy.

(c)           All alterations, additions or improvements (collectively,
“Alterations”), including without limitation all partitions, walls, railings,
carpeting, floor and wall coverings and other fixtures (excluding, however,
Tenant’s trade fixtures as described in the paragraph entitled “Trade Fixtures
and Equipment” below) made by, for, or at the direction of Tenant shall, at the
expiration or earlier termination of this Lease, become the property of
Landlord, , and shall remain upon the Premises at the expiration or earlier
termination of this Lease, provided, however, that Tenant shall have the right
(but not the obligation) to remove all Alterations and other items in the
Premises or the Building (such as chillers and generators), except that Tenant
shall be obligated to remove those Alterations which Landlord designates in
writing for removal at the time Landlord grants its consent to such
Alterations.   Tenant shall repair any damage caused to the Premises by said
removal of Alterations.

6.           USE OF PREMISES.

(a)           Tenant shall use the Premises only for manufacturing, warehousing
and distribution, general office, data center and ancillary uses, and for any
other legal purpose.  Tenant shall comply with all laws, ordinances, orders,
regulations or zoning classifications of any lawful governmental authority,
agency or other public or private regulatory authority (including insurance
underwriters or rating bureaus) having jurisdiction over the Premises
(collectively, “Legal Requirements”) to the extent made necessary by reason of
Tenant’s particular use or occupancy of the Premises.  Tenant shall not do any
act or follow any practice relating to the Premises which shall constitute a
nuisance or detract in any way from the reputation of the Building.  Tenant’s
duties in this regard shall include allowing no noxious or offensive odors,
fumes, gases, smoke, dust, steam or vapors, or any loud or disturbing noise or
vibrations to originate in or emit from the Premises in excess of  what is
commercially reasonable.

(b)           Without limiting the generality of (a) above, and excepting only
office supplies and cleaning materials used by Tenant in its ordinary day to day
business operations (but not held for sale, storage or distribution) customarily
used in facilities such as the Building, and then only to the extent same are
used, stored (but not any bulk storage), transported, and disposed of strictly
in accordance with all applicable laws, regulations and manufacturer’s
recommendations), the Premises shall not be used for the treatment, storage,
transportation to or from, use or disposal of toxic or hazardous wastes,
materials, or substances, or any other substance that is prohibited, limited or
regulated by any governmental or quasi-governmental authority or that, even if
not so regulated, could or does pose a hazard to health and safety of the
occupants of the Building or surrounding property except for chemicals and other
substances used in connection with Tenant’s photo-developing and merchandising
processes and services provided such chemicals and other substances are brought
into the Premises, used, stored and disposed of in accordance with all Legal
Requirements and Environmental Laws.

(c)           Landlord hereby represents and warrants to Tenant that as of the
Commencement Date, the Premises and Building shall be in compliance with all
applicable Legal Requirements, including without limitation, Environmental Laws
(as hereinafter defined).

(d)           Tenant has previously been furnished with a copy of any applicable
restrictive covenants relating to the Building and the Business Park, and Tenant
shall abide by these restrictions in connection with its use of the Premises.

(e)           Tenant shall exercise due care in its use and occupancy of the
Premises and shall not commit or allow waste to be committed on any portion of
the Premises; and at the expiration or earlier termination of this Lease, Tenant
shall deliver the Premises to Landlord in as good condition as same were on the
date of completion of the Improvements in the Premises or were thereafter placed
by Landlord or Tenant, ordinary wear and tear, condemnation, fire or other
casualty and acts of God and the elements alone excepted.

(f)           Tenant shall save Landlord harmless from any claims, liabilities,
penalties, fines, costs, expenses or damages resulting from the failure of
Tenant to comply with the provisions of this paragraph 6.  This indemnification
shall survive the termination or expiration of this Lease.

7.           TAXES.

(a)           Tenant shall pay any taxes, documentary stamps or assessments of
any nature imposed or assessed upon Tenant’s trade fixtures, equipment,
machinery, inventory, merchandise or other personal property located on the
Premises and owned by or in the custody of Tenant as promptly as all such taxes
or assessments may become due and payable without any delinquency.  Tenant shall
provide Landlord with copies of all paid receipts respecting such tax or charge
upon request by Landlord.

(b)           Landlord shall pay, subject to reimbursement from Tenant as
provided in paragraph 3 herein, all ad valorem property taxes which are now or
hereafter assessed upon the Building and the Premises, except as otherwise
expressly provided in this Lease.

8.           FIRE AND EXTENDED COVERAGE INSURANCE.  Landlord shall maintain and
pay for fire insurance, with extended coverage, covering the Building equal to
at least one hundred percent (100%) of the replacement cost thereof.  Tenant
shall not do or cause to be done or permit on the Premises or in the Building
anything deemed extrahazardous on account of fire and Tenant shall not use the
Premises or the Building in any manner which will cause an increase in the
premium rate for any insurance in effect on the Building or a part thereof.  If,
because of anything done, caused to be done, permitted or omitted by Tenant or
its agent(s), contractor(s), employee(s), invitee(s), licenses(s), servant(s)
subcontractor(s) or subtenant(s) the premium rate for any kind of insurance in
effect on the Building or any part thereof shall be raised, Tenant shall pay
Landlord on demand the amount of any such increase in premium which Landlord
shall pay for such insurance and if Landlord shall demand that Tenant remedy the
condition which caused any such increase in an insurance premium rate, Tenant
shall remedy such condition within five (5) days after receipt of such
demand.  Tenant shall maintain and pay for all fire and extended coverage
insurance on its contents in the Premises, including trade fixtures, equipment,
machinery, merchandise or other personal property belonging to or in the custody
of Tenant.

9.           LANDLORD’S COVENANT TO REPAIR AND REPLACE.

(a)           During the term of this Lease, Landlord shall be responsible only
for repairs or replacements, at its sole cost and expense, to the roof, exterior
walls, floor slab, structural members (including foundation and subflooring of
the Premises) and for the central plumbing and electrical systems serving the
entire Building up to the respective applicable points of entry of same into the
Premises.  Landlord’s repairs and replacements shall be made within a reasonable
time.  If the need for such repairs or replacements is the result of the
negligence, misconduct or intentional acts or omissions of Tenant, its agent(s),
contractor(s), employee(s), invitee(s), licensee(s), servant(s),
subcontractor(s) or subtenant(s) and the expense of such repairs or replacements
are not fully covered and paid by Landlord’s insurance, then Tenant shall pay
Landlord the full amount of expenses not covered.  Landlord’s duty to repair or
replace as prescribed in this paragraph shall be Tenant’s sole remedy and shall
be in lieu of all other warranties or guaranties of Landlord, express or
implied.

(b)           Landlord shall not be liable for any failure to make any repairs
or to perform any maintenance required of Landlord hereunder unless such failure
shall persist for thirty (30) days (except in case of emergency) after written
notice from Tenant setting forth the need for such repair(s) or replacement(s)
in reasonable detail has been received by Landlord.  Except as set forth in the
paragraph of this Lease, entitled “Damage or Destruction of Premises” or
elsewhere in this Lease, there shall be no abatement of rent.  There shall be no
liability of Landlord by reason of any injury to or interference with Tenant’s
business arising from the making of any repairs, replacements, alterations or
improvements to any portion of the Building or the Premises, or to fixtures,
appurtenances and equipment therein, provided that Landlord uses reasonable
efforts to minimize interference with Tenant’s use and occupancy of the
Premises.  In the event of any failure by Landlord to perform any of its
obligations hereunder, Tenant (except in the case of an emergency) shall take no
action without having first given Landlord thirty (30) days written notice of
any such default.  Following such notice and failure by Landlord to cure, Tenant
shall have the right to take the necessary actions to perform Landlord's uncured
obligations hereunder and invoice Landlord for the actual and reasonable costs
and expenses thereof, unless Landlord has diligently commenced to perform its
uncured obligations hereunder within said thirty (30) day period.  Landlord
shall remit payment to Tenant within thirty (30) days of receipt of a paid
invoice and applicable lien waivers from Tenant.  If Landlord fails to remit
payment to Tenant within the aforesaid thirty (30) day period, Tenant shall have
the right to offset and deduct such sum; such offset not to exceed twenty-five
percent (25%) of Minimum Rental for each month until Tenant is made whole.

10.           TENANT’S COVENANT TO REPAIR.  Tenant shall be responsible for the
repair, replacement and maintenance in good order and condition of all parts and
components of the Premises, other than those specified for repair, replacement
and maintenance by Landlord above, including without limitation the plumbing,
wiring, electrical systems, HVAC system (subject to the provisions below), glass
and plate glass, and the equipment and machinery constituting fixtures, unless
such repairs or replacements are required as a result of the negligence or
intentional misconduct of Landlord, its agent(s), contractor(s), employee(s),
invitee(s), or subcontractor(s) in which event Landlord shall be responsible for
such repairs.  Tenant’s duty to maintain the HVAC system shall specifically
include the duty to enter into and maintain at Tenant’s sole expense during the
entire term of this Lease a contract(s) for the routine and periodic maintenance
and regular inspection of such HVAC system, the replacement of filters as
recommended and the performance of other recommended periodic servicing in
accordance with applicable manufacturer’s standards and recommendations.  Such
contract (a) shall be with a reputable contractor reasonably satisfactory to
Landlord; (b) shall satisfy the requirements for routine and periodic
maintenance, if any, necessary to keep all applicable manufacturer’s warranties
in full force and effect; and (c) shall provide that in the event this Lease
expires or is earlier terminated for any reason whatsoever that said contract
shall be immediately terminable by Landlord or Tenant without any cost, expense
or other liability on the part of Landlord.   Notwithstanding, Landlord shall
pay up to $1,000 in each instance toward replacement of the HVAC system, any
major component of the HVAC system(s) and/or any operating system (unless the
same is caused by the negligence of Tenant, its employees, contractors or
agents).  In the event the costs for replacement of any HVAC system, any major
component of the HVAC system(s) and/or any operating system not caused by the
negligence of Tenant, its employees, contractors or agents is greater than
$1,000 in each instance, Landlord shall pay the same which shall be amortized
over the useful life of such replaced system (based upon standard accounting
principles) and charged to Tenant proportionately.  Tenant shall be obligated to
pay all such costs within thirty (30) days after notice from Landlord.

11.           TRADE FIXTURES AND EQUIPMENT.  Any trade fixtures installed in the
Premises at Tenant’s expense shall remain Tenant’s personal property and Tenant
shall have the right at any time during the term of this Lease to remove such
trade fixtures.  Upon removal of any trade fixtures, Tenant shall immediately
restore the portion of the Premises damaged by such removal to the condition
required by Section 6(e) of this Lease. Any trade fixtures not removed by Tenant
after the expiration or an earlier termination of the Lease shall become, at
Landlord’s sole election, either (i) the property of Landlord, in which event
Landlord shall be entitled to handle and dispose of same in any manner Landlord
deems fit without any liability or obligation to Tenant or any other third party
with respect thereto, or (ii) subject to Landlord’s removing such property from
the Premises and storing same, all at Tenant’s expense and without any recourse
against Landlord with respect thereto.  Without limiting the generality of the
foregoing, the following property shall in no event be deemed to be “trade
fixtures” and Tenant shall not remove any such property from the Premises under
any circumstances, regardless of whether installed by Landlord or Tenant:  (a)
any air conditioning, air ventilating or heating fixtures or equipment (with the
exception of a portable dehumidifier installed by Tenant in the Premises); (b)
any lighting fixtures or equipment; (c) any dock levelers; (d) any carpeting or
other permanent floor coverings; (e) any paneling or other wall coverings; or
(f) plumbing fixtures and equipment.

12.           UTILITIES.  Tenant shall pay for all utilities or services related
to its use of the Premises, including, without limitation, electricity, gas,
heat, water, sewer, telephone and janitorial services.  All utilities shall, as
of the Commencement Date, have separate meters at Landlord’s sole
expense.     Landlord shall not be responsible for the stoppage or interruption
of utilities services other than as required by its limited covenant to repair
and replace set forth above, nor shall Landlord be liable for any damages caused
by or from the plumbing and sewer systems, provided, however, that Annual Rental
shall abate if any utility service is not provided to the Premises for more than
five (5) continuous days due to Landlord’s negligence.  Tenant shall have the
right to place a generator and chiller outside the Premises in a location
approved by Landlord and Tenant.

13.           DAMAGE OR DESTRUCTION OF PREMISES.  If the Premises are damaged by
fire or other casualty, either in whole or in part, but no part of the Premises
is rendered untenantable for Tenant’s business, Landlord shall cause such damage
to be repaired (to the extent of the Base Building (as hereinafter defined) and
Landlord’s Work) without unreasonable delay and the Annual Rental shall not be
abated.  If by reason of such casualty the Premises are rendered untenantable in
Tenant’s business, either in whole or in part, Landlord shall cause the damage
to be repaired or replaced (to the extent of the Base Building and Landlord’s
Work) without unreasonable delay, and, in the interim, the Annual Rental shall
be proportionately reduced as to such portion of the Premises as is rendered
untenantable.  Any such abatement of rent shall not, however, create an
extension of the term of this Lease.  Provided, however, if by reason of such
casualty, the Premises are rendered untenantable in some material portion, and
the amount of time required to repair the damage using due diligence is in
excess of one hundred twenty (120) days, then either party shall have the right
to terminate this Lease by giving written notice of termination within sixty
(60) days after the date of casualty, and the Annual Rental shall abate as of
the date of such casualty in the event of such termination.  Notwithstanding the
other provisions of this paragraph, in the event there should be a casualty loss
to the Premises to the extent of fifty percent (50%) or more of their
replacement value or if the Premises are rendered untenantable for the conduct
of Tenant’s business operations during the last twelve (12) months of the
initial term or any extended term, either party may, at its option, terminate
this Lease by giving written notice within sixty (60) days after the date of the
casualty and Annual Rental  shall abate as of the date of such notice.  Except
as provided herein, Landlord shall have no obligation to rebuild or repair in
case of fire or other casualty, and no termination under this paragraph shall
affect any rights of Landlord or Tenant hereunder because of prior defaults of
the other party.  Tenant shall give Landlord immediate notice of any fire or
other casualty in the Premises.

14.           GOVERNMENTAL ORDERS.  Except as hereinbelow set forth regarding
compliance of the physical structure of the Premises with the applicable
requirements of the Americans with Disabilities Act and the implementing
regulations (the “ADA”) as of the Commencement Date, Tenant agrees, at its own
expense, to comply promptly with all requirements of any legally constituted
public authority that may be in effect from time to time made necessary by
reason of Tenant’s particular use or occupancy of the Premises.  Landlord agrees
to comply promptly with any such requirements if not made necessary by reason of
Tenant’s particular use or occupancy, at its sole cost and expense.  With regard
to the physical structure of the Premises, Landlord agrees to construct the
Premises in compliance with the applicable requirements of the ADA in effect as
of the Commencement Date (it being understood that under no circumstances shall
Tenant be responsible for any costs incurred to cause the Premises to comply
with the ADA, which may include, but is not limited to, restroom facilities,
emergency strobe lights and horns, and building access).  If it is determined
that for any reason Landlord shall have failed to cause the physical structure
of the Premises to be brought into compliance with the ADA as of the
Commencement Date (to at least the minimum extent required under applicable
regulations then in effect), then Landlord, as its sole obligation, will take
the action(s) necessary to cause the physical structure of the Premises to so
comply, and Tenant acknowledges and agrees that Landlord has and shall have no
other obligation or liability whatsoever to Tenant, or to anyone claiming by or
through Tenant, regarding any failure of the Premises or the activities therein
to comply with the applicable requirements of the ADA.  Landlord and Tenant
agree, however, that if any actions is necessary in order to comply with any of
the above requirements during the last two (2) years of the Lease and such
action to comply with any of the above requirements would cost Landlord in
excess of one (1) year’s rent, then Landlord may terminate this Lease by giving
written notice of termination to Tenant, which termination shall become
effective sixty (60) days after receipt of such notice, and which notice shall
eliminate the necessity of compliance with such requirement by Landlord, unless
Tenant shall elect, before termination becomes effective, to pay to Landlord all
costs for the necessary compliance.

15.           MUTUAL WAIVER OF SUBROGATION.  For the purpose of waiver of
subrogation, the parties mutually release and waive unto the other all rights to
claim damages, costs or expenses for any injury to property of Landlord or
Tenant caused by a casualty of any type whatsoever in, on or about the
Premises  All insurance policies carried with respect to this Lease, if
permitted under applicable law, shall contain a provision whereby the insurer
waives, prior to loss, all rights of subrogation against either Landlord or
Tenant.

16.           SIGNS AND ADVERTISING.

(a)           Tenant may install one (1) tenant identification sign in
accordance with Building standards and subject to Landlord's prior written
approval (not to be unreasonably withheld, delayed or conditioned), such sign to
be located at or near the Tenant’s front entrance to the Premises within the
Building.  Tenant shall submit sign drawings to Landlord for approval prior to
fabrication and installation.  The following submission requirements, in
duplicate, constitute the minimum data required: (i) layout, size, location and
color of test; (ii) layout of additional symbols or logo; (iii) installation
details; and (iv) lighting details, if applicable. In the event Tenant desires
any changes to its initial sign, Tenant shall reimburse Landlord for its actual
legal fees for Landlord’s review and approval of a new sign.  If at any time
during the term of this Lease (as same may be extended) Landlord provides
signage on a monument to other tenants in the Building, Landlord shall at
Tenant’s cost provide Tenant with similar signage on such monument.

(b)           In order to provide architectural control for the Building, Tenant
shall, without Landlord’s prior written approval, install no other exterior
signs, marquees, billboards, outside lighting fixtures and/or other decorations
on the Premises or the Building.  Landlord shall have the right to remove any
such sign or other decoration and restore fully the Premises at the cost and
expense of Tenant if any such exterior work is done without Landlord’s prior
written approval, which approval Landlord shall be entitled to withhold or deny
in its reasonable discretion.  Tenant shall not permit, allow or cause to be
used in, on or about the Premises any sound production devices, mechanical or
moving display devices, bright lights, or other advertising media, the effect of
which would be visible or audible from the exterior of the Premises, unless
previously approved by the Landlord.

17.           INDEMNIFICATION AND LIABILITY INSURANCE.

(a)           Tenant shall indemnify and save Landlord harmless against any and
all claims, suits, demands, actions, fines, damages, and liabilities, and all
costs and expenses thereof (including without limitation reasonable attorneys’
fees) arising out of injury to persons (including death) or property occurring
in, on or about, or arising out of the Premises or other areas in the Building
if caused or occasioned wholly or in part by any act(s) or omission(s) of
Tenant, its agent(s), contractor(s), employee(s), invitee(s), licensee(s),
servant(s), subcontractor(s) or subtenant(s), except if caused by any act(s) or
omission(s) on the part of Landlord, its agent(s), contractor(s),  employee(s),
invitee(s), licensee(s), servant(s) or subcontractor(s).  Tenant shall give
Landlord immediate notice of any such happening causing injury to persons or
property.

(b)           Landlord shall indemnify and save Tenant harmless against any and
all claims, suits, demands, actions, fines, damages, and liabilities, and all
costs and expenses thereof (including without limitation reasonable attorneys’
fees) arising out of injury to persons (including death) or property occurring
in, on or about, or arising out of the Premises or other areas in the Building
if caused or occasioned wholly or in part by any act(s) or omission(s) of
Landlord, its agent(s), employee(s), contractor(s), invitee(s), licensee(s),
servant(s) or subcontractor(s), except if caused by any act(s) or omission(s) on
the part of Tenant, its agent(s), contractor(s), employee(s), invitee(s),
licensee(s), servant(s), subcontractor(s) or subtenant(s).  Provided, however,
Landlord shall not be liable for any damage caused or occasioned by or from
water, snow or ice being upon or coming through the roof, trapdoor, walls,
windows, doors, or otherwise in, upon or about the Premises or the Building or
from any damage arising from acts or omissions of tenants or other occupants of
the Building, unless due to negligence of Landlord, its agent(s), contractor(s),
or employee(s), invitee(s), licensee(s), servant(s) or subcontractor(s).

(c)           (i) At all times during the term of this Lease, Tenant shall at
its own expense keep in force adequate public liability insurance under the
terms of a commercial general liability policy (occurrence coverage) in the
amount of not less than $2,000,000.00 coverage and with such company(ies)
licensed to do business in the state in which the Premises is located as shall
from time to time be reasonably acceptable to Landlord (and to any lender having
a mortgage interest in the Premises) and naming Landlord as an additional
insured (and, if requested by Landlord from time to time, naming Landlord’s
mortgagee as an additional insured).  Such insurance shall include, without
limitation, personal injury and contractual liability coverage for the
performance by Tenant of the indemnity agreements set forth in this
Lease.  Tenant shall first furnish to Landlord copies of policies or
certificates of insurance evidencing the required coverage prior to the
Commencement Date and thereafter prior to each policy renewal date.  All
policies required of Tenant hereunder shall contain a provision whereby the
insurer is not allowed to cancel or change materially the coverage without first
giving thirty (30) days’ written notice to Landlord, and (ii) at all times
during the term of this Lease, Landlord shall at its own expense keep in force
adequate public liability insurance under the terms of a commercial general
liability policy (occurrence coverage) in the amount of not less than
$2,000,000.00 coverage and with such company(ies) licensed to do business in the
state in which the Premises is located.  Such insurance shall include, without
limitation, personal injury and contractual liability coverage for the
performance by Landlord of the indemnity agreements set forth in this
Lease.  Landlord shall first furnish to Tenant copies of policies or
certificates of insurance evidencing the required coverage upon request.
 
(d)           The non-prevailing party shall also pay all costs, expenses and
reasonable attorneys’ fees that may be incurred by the prevailing party in
enforcing the agreements of this Lease, whether incurred as a result of
litigation or otherwise.

18.           LANDLORD’S RIGHT OF ENTRY.  Provided that Landlord uses reasonable
efforts to minimize interference with Tenant’s use and occupancy of the
Premises, Landlord, and those persons authorized by it, shall have the right to
enter the Premises at all reasonable times and upon  24 hours prior notice
(except in the case of emergency) for the purposes of making repairs, making
connections, installing utilities, providing services to the Premises or for any
other tenant, making inspections or showing the same to prospective purchasers
and/or lenders, as well as at any time in the event of emergency involving
possible injury to property or persons in or around the Premises or the
Building.  Further, during the last three (3) months of the initial or of any
extended term, Landlord and those persons authorized by it shall have the right
at reasonable times and upon reasonable notice to show the Premises to
prospective tenants.

19.           EMINENT DOMAIN.  If any substantial portion of the Premises is
taken under the power of eminent domain (including any conveyance made in lieu
thereof) or if such taking shall materially impair the normal operation of
Tenant’s business, then either party shall have the right to terminate this
Lease by giving written notice of such termination within thirty (30) days after
such taking.  If neither party elects to terminate this Lease, Landlord shall
repair and restore the Premises (to the extent possible) to substantially the
same condition as the Premises existed immediately prior to such taking and the
Annual Rental shall be proportionately and equitably reduced.  All compensation
awarded for any taking (or the proceeds of a private sale in lieu thereof) shall
be the property of Landlord whether such award is for compensation for damages
to the Landlord’s or Tenant’s interest in the Premises, and Tenant hereby
assigns all of its interest in any such award to Landlord; provided, however,
Landlord shall not have any interest in any separate award made to Tenant for
Tenant’s Alterations, loss of business, moving expense or the taking of Tenant’s
trade fixtures or equipment if a separate award for such items is made to Tenant
and if such separate award does not reduce the award to Landlord.

20.           EVENTS OF DEFAULT AND REMEDIES.

(a)           Upon the occurrence of any one or more of the following events
(the “Events of Default,” any one an “Event of Default”), the party not in
default shall have the right to exercise any rights or remedies available in
this Lease, at law or in equity provided same are exercised in accordance with
applicable Legal Requirements.  Events of Default shall be:

(i)           Tenant’s failure to pay when due any rental or other sum of money
payable hereunder and such failure is not cured within ten (10) days after
written notice thereof;

(ii)           Failure by either party to perform any other of the terms,
covenants or conditions contained in this Lease if not remedied within thirty
(30) days after receipt of written notice thereof, or if such default cannot be
remedied within such period, such party does not within thirty (30) days after
written notice thereof commence such act or acts as shall be necessary to remedy
the default and shall not thereafter complete such act or acts within a
reasonable time;

(iii)          Tenant shall become bankrupt or insolvent, or file any debtor
proceedings, or file pursuant to any statute a petition in bankruptcy or
insolvency or for reorganization, or file a petition for the appointment of a
receiver or trustee for all or substantially all of Tenant’s assets and such
petition or appointment shall not have been set aside within ninety (90) days
from the date of such petition or appointment, or if Tenant makes an assignment
for the benefit of creditors, or petitions for or enters into an arrangement; or

(iv)         Tenant allows its leasehold estate to be taken under any writ of
execution and such writ is not vacated or set aside within ninety (90) days.

(b)           In addition to its other remedies, Landlord, upon an Event of
Default by Tenant, shall have the immediate right, after any applicable grace
period expressed herein (but in no event upon less than five (5) days prior
written notice), to terminate and cancel this Lease and/or to reenter and remove
all persons and properties from the Premises and dispose of such property as it
deems fit, all without being guilty of trespass or being liable for any damages
caused thereby.  If Landlord reenters the Premises, it may either terminate this
Lease or from time to time without terminating this Lease, Landlord shall make
such alterations and repairs as may be necessary or appropriate to relet the
Premises and relet the Premises upon such terms and conditions as Landlord deems
advisable without any responsibility on Landlord whatsoever to account to Tenant
for any surplus rents collected.  No retaking of possession of the Premises by
Landlord shall be deemed as an election to terminate this Lease unless a written
notice of such intention is given by Landlord to Tenant at the time of reentry;
but, notwithstanding any such reentry or reletting without termination, Landlord
may at any time thereafter elect to terminate for such previous default.  In the
event of an elected termination by Landlord, whether before or after reentry,
Landlord may recover from Tenant damages, including the costs of recovering the
Premises, and Tenant shall remain liable to Landlord for the total Annual Rental
as would have been payable by Tenant hereunder for the remainder of the term
(which may at Landlord’s election be accelerated to be due and payable in full
as of the Event of Default and recoverable as damages equal to the net present
value of future rent, discounted at the greater of (i) eight percent (8%) or
(ii) the then applicable “discount rate” of the Federal Reserve Bank of
Charlotte, North Carolina plus one percent (1.0%) per annum, less the Market
Rate (as defined in Exhibit “E” hereof) of the Premises for the remainder of the
Term) less the rents actually received from any reletting.  In determining the
Annual Rental which would be payable by Tenant subsequent to default, the Annual
Rental for the unexpired portion of the term shall be equal (on a monthly basis)
to the Annual Rental payable by Tenant immediately prior to the default.  If any
rent owing under this Lease is collected by or through an attorney, Tenant
agrees to pay Landlord’s reasonable attorneys’ fees to the extent allowed by
applicable law.

(c)           In the case of Tenant's default as contemplated herein, Landlord
shall have a duty to mitigate its damages.

21.           SUBORDINATION.  This Lease is subject and subordinate to any and
all mortgages or deeds of trust now or hereafter placed on the property of which
the Premises are a part, and this clause shall be self-operative without any
further instrument necessary to effect such subordination; however, if requested
by Landlord, Tenant shall promptly execute and deliver to Landlord any such
certificate(s) as Landlord may reasonably request evidencing subordination of
this Lease to or the assignment of this Lease as additional security for such
mortgages or deeds of trust.  Provided, however, in each case the holder of the
mortgage or deed of trust shall (which in the case of an existing holder of a
mortgage or deed of trust, prior to the Commencement Date) agree that this Lease
shall not be divested by foreclosure or other default proceedings thereunder so
long as Tenant shall not be in default under the terms of this Lease beyond any
applicable cure period set forth herein.  Tenant shall continue its obligations
under this Lease in full force and effect notwithstanding any such default
proceedings under a mortgage or deed of trust and shall attorn to the mortgagee,
trustee or beneficiary of such mortgage or deed of trust, and their successors
or assigns, and to the transferee under any foreclosure or default
proceedings.  Tenant will, upon request by Landlord, execute and deliver to
Landlord or to any other person designated by Landlord, any instrument or
instruments required to give effect to the provisions of this paragraph.
 
      22.           ASSIGNING AND SUBLETTING.  Tenant shall not assign, sublet,
mortgage, pledge or encumber this Lease, the Premises, or any interest in the
whole or in any portion thereof, directly or indirectly, without the prior
written consent of Landlord, which consent shall not be unreasonably withheld,
delayed or conditioned.  If Tenant makes any such assignment, sublease,
mortgage, pledge or encumbrance with Landlord’s written consent, Tenant will
still remain primarily liable for the performance of all terms of this Lease and
one-half (1/2) of any rental or any net fees or charges received by Tenant
(after deduction by Tenant of  Tenant’s third-party brokerage fees, legal fees,
architectural fees, advertising costs and the reasonable costs of refitting or
improving the Premises for the proposed assignee or subtenant, and free rent and
improvement allowances granted, in connection with such transaction)  in excess
of the Annual Rental payable to Landlord hereunder shall be also paid to
Landlord as further rental under this Lease.  Landlord’s consent to one
assignment or sublease will not waive the requirement of its consent to any
subsequent assignment or sublease as required herein.  Notwithstanding the
foregoing, Tenant shall have the absolute right to assign this Lease and/or
sublet any part or all of the Premises, without the Landlord's consent, to any
of Tenant's subsidiary(s), joint venture partner(s), partnership(s), or other
affiliated or related entity(s), and/or to a successor(s) in interest to any
part and/or all of Tenant's business including, without limitation, a sale of
assets ("Permitted Transfer").  A Permitted Transfer shall include a merger or
consolidation with another entity and/or an assignment or subletting to another
entity which is controlled by Tenant or is under common control of Tenant and
other entity.  Regardless of Landlord's consent, no assignment or sublease shall
release Tenant of Tenant's obligations hereunder.

23.           TRANSFER OF LANDLORD’S INTEREST.  If Landlord shall sell, assign
or transfer all or any part of its interest in the Premises or in this Lease to
a successor in interest which expressly assumes the obligations of Landlord
hereunder, then Landlord shall thereupon be released or discharged from all
covenants and obligations hereunder which accrue after such sale, assignment or
transfer, and Tenant shall look solely to such successor in interest for
performance of all of Landlord’s obligations which accrue after such sale,
assignment or transfer.  Tenant’s obligations under this Lease shall in no
manner be affected by Landlord’s sale, assignment, or transfer of all or any
part of such interest(s) of Landlord, and Tenant shall thereafter attorn and
look solely to such successor in interest as the Landlord hereunder.

24.           COVENANT OF QUIET ENJOYMENT.  Landlord represents that it has full
right and authority to lease the Premises and Tenant shall peacefully and
quietly hold and enjoy the Premises for the full term hereof so long as Tenant
does not default in the performance of any of the terms hereof beyond the
expiration of any applicable cure period.

25.           ESTOPPEL CERTIFICATES.  Within ten (10) business days after a
request by Landlord, Tenant shall deliver a written estoppel certificate, in
form supplied by or acceptable to Landlord, certifying any facts that are then
true with respect to this Lease, including without limitation that this Lease is
in full force and effect, that no default exists on the part of Landlord or
Tenant (or listing such default in case any exists), that Tenant is in
possession, that Tenant has commenced the payment of rent, and that Tenant
claims no defenses or offsets (or listing such defenses or offsets in case any
exists) with respect to payment of rentals under this Lease.  Likewise, within
ten (10) business days after a request by Tenant, Landlord shall deliver to
Tenant a similar estoppel certificate covering such matters as are reasonably
required by Tenant.  Landlord and Tenant shall each agree not to make such
request more than 2 times per calendar year.

26.           LIENS.  
 
      (a) Tenant shall do all things necessary to prevent the filing of any
mechanics’, materialmen’s or other types of liens whatsoever, against all or any
part of the Premises by reason of any claims made by, against, through or under
Tenant.  If any such lien is filed against the Premises, Tenant shall either
cause the same to be discharged of record within thirty (30) days after filing
or, if Tenant in its discretion and in good faith determines that such lien
should be contested, it shall furnish such security as may be necessary to
prevent any foreclosure proceedings against the Premises during the pendency of
such contest.  If Tenant shall fail to discharge such lien within said time
period or fail to furnish such security, then Landlord may at its election, in
addition to any other right or remedy available to it, discharge the lien by
paying the amount claimed to be due or by procuring the discharge by giving
security or in such other manner as may be allowed by law.  If Landlord acts to
discharge or secure the lien then Tenant shall immediately reimburse Landlord
for all sums paid and all costs and expenses (including reasonable attorneys’
fees) incurred by Landlord involving such lien together with interest on the
total expenses and costs at the maximum lawful rate.  It is specifically agreed
to by the parties that Tenant is not acting as an agent for Landlord and that
Landlord shall not be liable for the contracts or liabilities of Tenant.

(b)           Landlord hereby waives any and all liens Landlord may otherwise be
entitled to against any and all of Tenant’s personal property, equipment and
other assets.

27.           MEMORANDUM OF LEASE.  If requested by Tenant, Landlord shall
execute a recordable Memorandum or Short Form Lease, prepared at Tenant’s
expense, specifying the exact term of this Lease and such other terms as the
parties shall mutually determine.

28.           FORCE MAJEURE.  In the event Landlord or Tenant shall be delayed,
hindered or prevented from the performance of any act required hereunder, by
reason of governmental restrictions, scarcity of labor or materials, strikes,
fire, or any other reasons beyond its reasonable control, the performance of
such act shall be excused for the period of delay, and the period for
performance of any such act shall be extended as necessary to complete
performance after the delay period, provided, however, that Landlord’s or
Tenant’s performance of its obligations  under this Lease shall not otherwise
be  affected or diminished .  However, the provisions of this paragraph shall in
no way be applicable to Tenant’s obligations to pay Annual Rental or Landlord’s
or Tenant’s obligations to pay any other sums, monies, costs, charges or
expenses required by this Lease.

29.           REMEDIES CUMULATIVE -- NONWAIVER.  Unless otherwise specified in
this Lease, no remedy of Landlord or Tenant shall be considered exclusive of any
other remedy, but each shall be distinct, separate and cumulative with other
available remedies.  Each remedy available under this Lease or at law or in
equity may be exercised by Landlord or Tenant from time to time as often as the
need may arise.  No course of dealing between Landlord and Tenant or any delay
or omission of Landlord or Tenant in exercising any right arising from the other
party’s default shall impair such right or be construed to be a waiver of a
default.

30.           HOLDING OVER.  Tenant shall have the right to holdover in
possession of the Premises for up to six (6) months under the same terms and
conditions of this Lease, with the exception that  Tenant shall be allowed to
vacate the Premises at any time during such six (6) month period after giving
Landlord 30 days prior written notice.  After such six (6) month period, if
Tenant continues to remain in possession of the Premises or any part thereof,
whether with or without Landlord’s acquiescence, (i) Tenant shall be deemed only
a tenant at will and there shall be no renewal of this Lease without a written
agreement signed by both parties specifying such renewal, (ii) the “monthly”
rental payable by Tenant during any such tenancy at will period shall be one
hundred twenty-five percent (125%) of the monthly installments of Annual Rental
payable during the final year immediately preceding such expiration, and
(iii)  Tenant shall also remain liable for any and all direct damages suffered
by Landlord as a result of any holdover without Landlord’s unequivocal written
acquiescence.

31.           NOTICES.  Any notice allowed or required by this Lease shall be
deemed to have been sufficiently served if the same shall be in writing and (i)
placed in the United States mail, via certified mail or registered mail, return
receipt requested, with proper postage prepaid or (ii) delivered to any
nationally recognized overnight courier, and addressed as follows:

 
AS TO LANDLORD:
Shopton Ridge Business Park Limited Partnership

c/o American Asset Corporation
3700 Arco Corporate Drive, Suite 350
Charlotte, North Carolina 28273

Attention:                           President with a copy to General Counsel

AS TO TENANT:                         Shutterfly, Inc.
2800 Bridge Parkway
Redwood City, CA 94065

Attention:                           Chief Financial Officer with a copy to Vice
President, Legal

The addresses of Landlord and Tenant and the party, if any, to whose attention a
notice or copy of same shall be directed may be changed or added from time to
time by either party giving notice to the other in the prescribed manner.

32.           LEASING COMMISSION.  Landlord and Tenant represent and warrant
each to the other that they have not dealt with any broker(s) or any other
person claiming any entitlement to any commission in connection with this
transaction except American Asset Corporation and Trammel Crow Services, Inc.
(the “Broker”).  Landlord and Tenant agree to indemnify and save each other
harmless from and against any and all claims, suits, liabilities, costs,
judgments and expenses, including reasonable attorneys’ fees, for any leasing
commissions or other commissions, fees, charges or payments resulting from or
arising out of their respective actions in connection with this Lease except as
to Broker.  Landlord agrees to be responsible for the leasing commission due
Broker pursuant to a separate written agreement between Landlord and Broker, and
to hold Tenant harmless respecting same.

33.           MISCELLANEOUS.

(a)           Rules and Regulations.  Landlord shall have the right from time to
time to prescribe reasonable rules and regulations  (the “Rules and
Regulations”) for Tenant’s use of the Premises and the Building, provided same
do not materially adversely affect Tenant’s use or occupancy of the Premises or
the operation of Tenant’s business.  A copy of Landlord’s current Rules and
Regulations respecting the Premises and the Building is attached hereto as
Exhibit ”D”.  Subject to paragraph 9 of Exhibit “D” and to paragraph 6 of
Exhibit “E” attached hereto, Tenant shall abide by and use reasonable efforts to
actively enforce on all its employees, agents, invitees and licensees such
regulations including without limitation rules governing parking of vehicles in
designated portions of the Building.

(b)           Evidence of Authority.  If requested by Landlord, Tenant shall
furnish appropriate legal documentation evidencing the valid existence and good
standing of Tenant and the authority of any parties signing this Lease to act
for Tenant.

(c)           Limitation of Landlord’s Liability.  If Landlord shall fail to
perform any covenant, term or condition of this Lease upon Landlord’s part to be
performed, and, as a consequence of such default, Tenant shall recover a money
judgment against Landlord, such judgment shall be satisfied solely out of the
proceeds of sale received upon execution of such judgment levied thereon against
the right, title and interest of Landlord in the Building as the same may then
be encumbered; and neither Landlord nor, if Landlord be a partnership, any of
the partners comprising Landlord shall have any personal liability for any
deficiency.  It is understood and agreed that in no event shall Tenant or any
person claiming by or through Tenant have the right to levy execution against
any property of Landlord other than its interest in the Building as hereinbefore
expressly provided.

(d)           Nature and Extent of Agreement.  This Lease, together with all
exhibits hereto, contains the complete agreement of the parties concerning the
subject matter, and there are no oral or written understandings,
representations, or agreements pertaining thereto which have not been
incorporated herein.  This Lease creates only the relationship of Landlord and
Tenant between the parties, and nothing herein shall impose upon either party
any powers, obligations or restrictions not expressed herein.  This Lease shall
be construed and governed by the laws of the state in which the Premises are
located.

(e)           Binding Effect.  This Lease shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, successors and
assigns.  This Lease shall not be binding on Landlord until executed by an
authorized representative of Landlord and delivered to Tenant.  No amendment or
modification to this Lease shall be binding upon Landlord unless same is in
writing and executed by an authorized representative of Landlord.

(f)           Captions and Headings.  The captions and headings in this Lease
are for convenience and reference only, and they shall in no way be held to
explain, modify, or construe the meaning of the terms of this Lease.

(g)           Intentionally Deleted.

(h)           Intentionally Deleted.

(i)           Lease Review.  The submission of this Lease to Tenant for review
does not constitute a reservation of or option for the Premises, and this Lease
shall become effective as a contract only upon execution and delivery by
Landlord and Tenant.

34.           SEVERABILITY.  If any term or provision of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Lease shall be valid and enforced to the fullest
extent permitted by law notwithstanding the invalidity of any other term or
provision hereof.

35.           REVIEW OF DOCUMENTS.  If, following the execution of this Lease,
either party hereto requests that the other party execute any document or
instrument that is other than (i) a document or instrument the form of which is
attached hereto as an exhibit, or (ii) a document that solely sets forth facts
or circumstances that are then existing and reasonably ascertainable by the
requested party with respect to this Lease (e.g., an estoppel certificate), then
the party making such request shall be responsible for paying the out-of-pocket
costs and expenses, including without limitation, the attorneys fees, incurred
by the requested party in connection with the review (and, if applicable, the
negotiations) related to such document(s) or instrument(s), regardless of
whether such document(s) or instrument(s) is (are) ever executed by the
requested party.  In the event the requesting party is Tenant, all such costs
and expenses incurred by Landlord in connection with its review and negotiation
of any such document(s) or instrument(s) shall be deemed to be Additional Rental
due hereunder and shall be payable by Tenant promptly upon demand.

36.           SPECIAL STIPULATIONS.  (Special stipulations shall control if in
conflict with any of the foregoing provisions of this Lease.)  See Exhibit ”E”
attached hereto and made a part hereof by this reference.

 
 

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IN WITNESS WHEREOF, the parties have caused this Lease to be duly executed and
sealed pursuant to authority duly given as of the day and year first above
written.

“LANDLORD”

 
3915 SHOPTON ROAD, LLC,

 
a North Carolina limited liability company

 
By:
 /s/ Paul L. Herndon

Name: Paul L. Herndon
Title: Vice President

“TENANT”

SHUTTERFLY, INC., a Delaware corporation

 
By:
/s/Stephen E. Recht

Name:  Stephen E. Recht
Title: Chief Financial Officer

 
 

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EXHIBIT “A”

LEGAL DESCRIPTION OF BUILDING SITE

3915 Shopton Road, LLC
 Lot 4, Shopton Ridge Business Park, Phase 1 Map 2
6.3152 Acres

Being a parcel or tract of land located in the City of Charlotte, Mecklenburg
County, North Carolina, and being more particularly described as follows:

BEGINNING at an existing iron rod in the center of a 60’ ingress and egress
easement and at the southwestern corner of Lot 3 Shopton Ridge, LLC property as
recorded in DB. 17877, Pg. 944 at the Mecklenburg County Register of Deeds said
iron being furthermore located South 80° 34' 16" East 4,696.40 feet (ground
distance) from North Carolina Geodetic Survey control monument “Shopton” (State
Plane Grid Coordinates: N: 523,015.0629, E: 1,413,721.9954) thence from said
POINT OF BEGINNING and with the northern line of Lots 6 and 7 Shopton Ridge
Business Park, Phase 1, Map 2 as recorded in MB. 42, Pg. 915 at the Mecklenburg
County Register of Deeds; Thence, N 88° 53' 05" W for a distance of 674.08 feet
to an existing iron pin at the southeastern corner of  Lot 5 Shopton Ridge
Business Park, Phase 1, Map 2 as recorded in MB. 42, Pg. 915 at the Mecklenburg
County Register of Deeds, thence with the eastern line of the aforesaid property
N 01° 06' 55" E for a distance of 408.27 feet to an existing iron pin on the
southern right of way line of Shopton Road (variable public right of way),
thence with the aforesaid right of way line the following five (5) courses: 1) S
89° 04' 13" E for a distance of 100.97 feet to a point, 2) S 88° 36' 45" E for a
distance of 196.31 feet to a point, 3) S 89° 01' 10" E for a distance of 196.85
feet to a point, 4)S 88° 49' 27" E for a distance of 107.74 feet to a point, 5)
S 88° 55' 16" E for a distance of 72.22 feet to an existing iron rod at the
northwestern corner of  Lot 3 Shopton Ridge, LLC property as recorded in DB.
17877, Pg. 944 at the Mecklenburg County Register of Deeds, thence with the
western line of the aforesaid property S 01° 06' 55" W a distance of 408.07 feet
to the POINT OF BEGINNING; containing 275,090 square feet or 6.3152 acres as
shown on a survey by R. B. Pharr & Associates, P.A., dated May 3, 2006 (Map File
W-3325).

 
 

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EXHIBIT “B”

INTENTIONALLY DELETED

 
 

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EXHIBIT “C”

UPFIT OF PREMISES

1.           LANDLORD’S WORK

Landlord, at Tenant’s sole cost and expense (except as provided in paragraph 2
of this Exhibit ”C”) shall construct all improvements to the Premises which
constitute a part of Landlord’s Work (collectively, the “Improvements”) in a
good and workmanlike manner and in accordance with the Final Plans and
Specifications (as hereinafter defined) and all applicable Legal
Requirements.  “Landlord’s Work” shall mean that certain work related to
Tenant’s occupancy of the Premises which shall be mutually agreed upon by
Landlord and Tenant.   Tenant shall submit to Landlord the proposed floor plan
(including description of Landlord’s Work) on or before December 26,
2006.   Landlord shall within five (5) business days from receipt deliver to
Tenant, in writing, either approval of the floor plan or detailed comments on
any changes reasonably necessary.   If Landlord responds within such five (5)
business day period, Tenant shall be responsible for obtaining such changes to
the floor plan  as may be agreed upon by the parties and resubmitting for
written approval.    If Landlord fails to respond during such five (5) business
day period (the “Initial Floor Plan Response Period”), Landlord shall
automatically be deemed to have approved the initial floor plan.   The final
floor plan, as approved (or deemed approved) by both Landlord and Tenant, is
herein referred to as the “Initial Floor Plan”.   If Landlord and Tenant cannot
mutually agree upon the Initial Floor Plan on or before January 15, 2007 (the
“Initial Floor Plan Approval Deadline Date”), Landlord or Tenant shall have the
option, to terminate the Lease.

For purposes of this Lease, Landlord’s Work shall be deemed “substantially
complete” when (i) Landlord has completed Landlord’s Work except for punchlist
items which do not prevent or materially impair Tenant’s use or occupancy of the
Premises, (ii) Tenant can occupy the Premises for the purpose of carrying on its
intended business therein,  and (iii) Landlord has procured a temporary or
permanent certificate of occupancy for the Premises, which shall allow Tenant to
operate its business within the Premises.  Landlord represents and warrants that
the Building has been constructed in (i) a good and workmanlike manner, (ii) in
accordance with applicable Legal Requirements, and (iii) in accordance with
Landlord’s base building shell specifications per the architectural drawings
dated February 21, 2006 prepared by Merriman Schmitt which have been approved by
both Tenant and Landlord (the “Base Building”).

Notwithstanding anything contained herein to the contrary, Tenant (and not
Landlord) shall be solely responsible for any increases in the cost of
Landlord’s Work which are attributable to (i) any change orders requested by
Tenant to the Final Plans and Specifications which are agreed to between
Landlord and Tenant and/or (ii) any Tenant Delay Factors (as described in
Paragraph 4 of the Lease).  Such cost increases (subject to application of the
Improvements Allowance and Additional Tenant Improvement Allowance, each as
hereinafter defined)  shall be payable by Tenant to Landlord  within 30 days of
Landlord’s written demand therefor.

Landlord shall have the final plans and specifications (the “Final Plans and
Specifications”) for Landlord’s Work prepared, based upon the Initial Floor
Plan, and delivered to Tenant for its review and approval (which approval shall
not be unreasonably withheld) on or before January 22, 2007.  Such review and
approval by Tenant of the Final Plans and Specifications shall be limited solely
to those specific items that do not materially conform to the Initial Floor
Plan.  Tenant, acting reasonably and in good faith, shall have seven (7) days
from Landlord’s delivery of the Final Plans and Specifications to advise
Landlord, in writing, as to whether or not Tenant desires any changes to the
Final Plans and Specifications.  If Tenant fails to respond during such seven
(7) day period (the “Response Period”), Tenant shall automatically be deemed to
have approved the Final Plans and Specifications.  If Landlord and Tenant cannot
mutually agree upon the Final Plans and Specifications on or before January 30,
2007 (the “Final Plans Approval Deadline Date”), Landlord or Tenant shall have
the option, to terminate the Lease.

Within seven (7) business days after the Final Plans and Specifications have
been finally approved (or deemed approved) by Tenant, Landlord shall submit the
Final Plans and Specifications to the contractors for bidding purposes in
accordance with the provisions set forth below.  In the essence of time,
Landlord shall hire DSS Corporation as the general contract for Landlord
Work.  DSS Corporation agrees to competitively bid the work to all
subcontractors and open-book all bids for Tenant and Landlord review and
selection.  DSS Corporation shall receive a “cost plus 5%” fee.  Tenant shall
have the opportunity to review and provide input concerning the subcontractor
bids, which Tenant agrees to do in a timely and good faith manner.

Tenant acknowledges and agrees that Tenant Delay Factors, as defined in
paragraph 4 of the Lease, shall include, without limitation, any delays
resulting from (i) change orders to the Final Plans and Specifications requested
by Tenant or by those acting for or under the direction of Tenant; (ii) the
performance or completion by Tenant, or any entity or person employed by Tenant,
of any work in or about the Premises or (iii) the failure of Landlord and Tenant
to agree on the Final Plans and Specifications on or before the Final Plans
Approval Deadline Date, provided that in each such instance Landlord first gives
Tenant two (2) business days notice that if Tenant does not  so cure its act or
omission  the same will thereafter be considered a Tenant Delay Factor.
.
Except to the extent expressly provided in the Lease, Landlord shall have no
liability or obligation whatsoever to remedy, replace or correct any alleged
defects and deficiencies in Landlord’s Work; provided, however, that Landlord
specifically warrants that  (i) all loading doors will be properly operational
for three (3) months after the Commencement Date, absent any negligence of
Tenant, and (ii) Landlord shall throughout the term of this Lease (as same may
be extended) be responsible for repairing any latent defects in the Improvements
at Landlord’s sole cost.  Landlord shall, to the extent permitted by law, assign
all warranties associated with the Premises to, and cooperate with, Tenant in
the enforcement of any express warranties or guarantees of workmanship or
materials given by any contractors, subcontractors, architects, draftsmen, or
materialmen relative to Landlord’s Work, the roof or any relevant Building
systems.  Notwithstanding anything to the contrary contained herein or in the
Lease, Landlord shall not be responsible, to any extent whatsoever, for the
repair, remediation or correction of any alleged deficiencies or defects in any
materials and workmanship in and concerning Landlord’s Work to the extent that
the existence or occurrence of such defects or deficiencies are the result of,
or due to, any negligent, willful or intentional or other acts or omissions of
Tenant, its agents, employees, contractors, subcontractors, representatives or
invitees.  Tenant may not conduct any activities on the Premises that would have
the effect of rendering any relevant warranties related to the performance of
Landlord’s Work void (unless previously approved by the Landlord), and if Tenant
does conduct any such activities and renders any relevant warranty void,
Landlord will no longer have any obligations under the terms of the Lease with
respect to the component, element or feature of the Improvements that the
warranty voided by Tenant’s activities had previously covered.  Except as
otherwise provided in this Lease, at no time during the Lease term (as same may
be extended pursuant to any renewal option, if any) shall Tenant have any right,
of any nature whatsoever, to withhold the timely payment of any rental due under
the Lease as a result of, or due to, or because of, any alleged breaches by
Landlord under the Lease or the alleged existence of any defects or deficiencies
in the Improvements.

Landlord shall obtain all applicable licenses, permits and approvals to complete
the Tenant Improvements in accordance with all applicable laws.

Landlord shall give Tenant estimates of the schedule for completion of the
Improvements and thirty (30) days prior written notice of the anticipated date
the Premises will be ready for occupancy.  Within thirty (30) days following the
Commencement Date, Landlord and Tenant shall mutually conduct a walk-through of
the Premises and compile a punch list which sets forth any corrective work to be
performed by Landlord with respect to the Improvements which Landlord, upon
receipt, shall diligently pursue to correct.

Landlord represents and warrants to Tenant that as of the Commencement Date:

(i)           the Premises, including the HVAC, electrical, mechanical,
plumbing, sewer and other systems serving the Premises, shall be in good working
order;

(ii)          the Improvements and the Building shall not violate any covenants
or restrictions of record (if any), or any applicable Legal Requirements having
jurisdiction over the Project, and

(iii)         Landlord shall deliver the Premises to Tenant clean and free of
debris.

Except as provided in Section 5(c) of the Lease, Tenant shall have no obligation
to restore the Premises to their original condition as of the Commencement Date
upon lease termination or expiration of the Lease.

Landlord agrees that there shall be no construction management fee payable by
Tenant to Landlord to oversee the construction of the Improvements.

2.           IMPROVEMENTS ALLOWANCE

Notwithstanding anything to the contrary herein, Landlord shall contribute an
amount (such amount being the “Improvements Allowance”) not to exceed $16.00 per
rentable square foot of the Premises ($1,638,400.00 based on the rentable square
footage of 102,400) towards the costs incurred by Landlord and/or Tenant in
designing, planning and constructing the Improvements.  In the event the costs
incurred in connection with designing, planning and constructing the
Improvements exceed the Improvements Allowance (subject to application of the
Additional Tenant Improvement Allowance, as hereinafter defined), Tenant shall
be solely responsible for bearing and paying any such excess costs within thirty
(30) days of Landlord’s written demand therefor.  In the event the costs
incurred by Landlord and/or Tenant in connection with designing, planning and
constructing the Improvements are less than the Improvements Allowance, Tenant
shall provide Landlord with written notice prior to August 31, 2007 which may
direct Landlord to pay such excess amounts directly to Tenant’s
contractor/vendors for additional improvements to the Premises conducted by or
for Tenant, or apply such excess amounts against the Minimum Rental payment(s)
next due from Tenant until such excess amounts have been exhausted.  Without
limiting the foregoing, Landlord acknowledges that “the costs incurred by
Landlord and/or Tenant in designing, planning and construction the Improvements”
shall be deemed to include the cost to obtain any and all (i) operating
permit(s) that Tenant may be required to obtain (if any) in order for Tenant to
operate for Tenant’s permitted use as described in Article 6(a) of this Lease;
(ii) construction permits (including costs associated with any “express review”
process); (iii) space planning; (iv) construction documents; (v) upfit costs;
and (vi) any additional costs associated with the upfit.

3.           ADDITIONAL TENANT IMPROVEMENT ALLOWANCE

Upon written request to Landlord, Landlord agrees to provide Tenant with an
additional improvement allowance up to a maximum of $250,000.00 (the “Additional
Tenant Improvement Allowance”) to be used by Tenant for additional improvements
to the Premises, and/or furniture, fixtures or equipment for the Premises.  Any
such elected Additional Tenant Improvement Allowance shall be amortized over the
entire eighty-nine (89) month term at an annual interest rate of ten percent
(10%) and paid by Tenant as part of the Minimum Rent due under the
Lease.  Landlord and Tenant shall amend this Lease as necessary to reflect such
increased rent obligation.

 
 

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EXHIBIT “D”

RULES AND REGULATIONS

1.
Restricted Uses.  Neither the Premises nor any part of the common areas of the
Building or the Business Park shall be used by Tenant for any one or more of the
following uses:

 
(a)
Agriculture or any related use, including any roadside stand for the display and
sale of agricultural products and any use which involves the raising, breeding,
or keeping of any animals or poultry;

 
(b)
Processing or slaughter of livestock, swine, poultry or other animals;

 
(c)
Manufacture of leather goods;

 
(d)
Manufacture of explosives or explosive agents;

 
(e)
Manufacture, sale, rental, repair or storage of heavy equipment, buses, trucks,
trailers, automobiles, recreational vehicles and mobile or trailer homes;

 
(f)
Unscreened outdoor storage, outdoor fabrication or outdoor handling of any
machinery, parts, material, supplies or products;

 
(g)
Residential uses;

 
(h)
Overnight parking of campers, mobile homes, boats, trailers or motor homes;

 
(i)
Erecting and maintaining structures of a temporary nature, except that during
the period of construction of improvements to the Premises, Tenant’s contractors
or subcontractors may be permitted to erect or maintain such temporary
structures upon Landlord’s prior written approval;

 
(j)
Jails, prisons, labor camps, penal, detention or correction facilities or farms;

 
(k)
Cemeteries or mausoleums;

(l)           Mining, including the extraction, processing and removal of sand,
gravel, stone, minerals or clay, except for substances used in connection with
Tenant’s photo-developing and merchandising processes and services provided such
chemicals and other substances are brought into the Premises, used, stored and
disposed of in accordance with all Legal Requirements and Environmental Laws;

       (m)
Any land fills, any hazardous waste disposal or storage facilities and any
incinerators;

 
(n)
Racetracks, raceways and drag strips; and

 
(o)
Massage parlors, topless night clubs or similar business operations.

 
(p)
Fast food restaurants;

 
(q)
Airports, heliports or helistops, bus or train terminals;

 
(r)
Hotels or motels;

 
(s)
Rest stops, rest stations or service stations;

 
(t)
Flea markets;

 
(u)
Stadiums;

 
(v)
Adult care centers;

 
(x)
Cinemas or movie theaters;

 
(y)
Night Clubs or bars; and

 
(z)
Amusement parks, amusement galleries, arcades or turkey shoots.

2.
Nuisances.  Tenant shall not cause any unclean, unhealthy, unsightly or unkempt
condition to exist in the Premises or in the common areas of the Building or the
Business Park.  Tenant shall not use the Premises or any portion of the common
areas of the Building or the Business Park, in whole or in part, for the
deposit, storage or burial of any property or thing that will cause the
above-mentioned areas to appear to be in an unclean or untidy condition or that
will be obnoxious to the eye; nor shall Tenant allow any substance, thing, or
material to be kept, utilized or carried out in the Premises or the common areas
of the Building or the Business Park that will emit foul or obnoxious odors,
fumes, smoke or dust or that will cause any vibration or noise or other
condition that will or might disturb the peace, quiet, safety, comfort, or
serenity of the occupants of the Building or the Business Park in excess of what
is commercially reasonable .  No noxious, offensive or illegal trade or activity
shall be carried out in the Premises or in the common areas of the Building or
the Business Park.

3.
Restricted Actions on Common Areas of the Building and the Business
Park.  Tenant shall not cause or allow any cutting of vegetation, dumping,
digging, filling, destruction or other waste to be committed on the common areas
of the Building or the Business Park. Tenant shall not cause any obstruction of,
or allow or cause anything to be kept or stored on, altered, constructed or
planted in, or removed from the common areas of the Building or the Business
Park, without Landlord’s prior written consent.

4.
Sign Display.  Subject to the provisions set forth in Article 16 of the Lease,
(i) all signage will be coordinated by Landlord throughout the Business Park for
uniformity and attractiveness, (ii) the size, shape, design, lighting, materials
and location of all signs shall conform to the uniform signage plan for the
Business Park, and (iii)  Tenant shall not cause any sign, tag, label, picture,
advertisement or notice to be displayed, distributed, inscribed, painted or
affixed by Tenant on any part of the Building, the Business Park or the Premises
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, delayed or conditioned.

5.
Drives and Parking Areas.  Subject to the provisions set forth in paragraph 6 of
Exhibit E to this Lease, (i) all parking shall be within marked parking spaces,
(ii)  there shall be no on-street parking and at no time shall Tenant obstruct
drives and loading areas intended for the joint use of all tenants of the
Building, (iii) the drives and parking areas in the Business Park are for the
joint use of all tenants of the Business Park unless specifically marked, (iv)
Truck traffic and parking will be restricted to areas designated by Landlord,
(v)  Tenant, its employees, agents and invitees shall comply with reasonable
parking rules and regulations as they may be posed and distributed from time to
time, and (vi)  Tenant is responsible for controlling all of its truck traffic
in accordance with the restrictions and regulations imposed by Landlord.

6.
Storage and Trash Disposal.  No materials, supplies or equipment belonging to
Tenant shall be stored in any area of the Building or the Business Park, except
inside the Premises.  Trash disposal is confined to the receptacles provided by
Tenant in a location approved by Landlord and no trash receptacles may be placed
in any other location in the Premises, in the Building or in the Business Park

7.
Locks.  No additional locks shall be placed on the doors of the Premises by
Tenant.  If Tenant changes any existing locks, Tenant shall immediately furnish
Landlord with two keys to such new locks.  Landlord will, without charge,
furnish Tenant with two keys for each lock existing upon the entrance door when
Tenant assumes possession of the Premises, with the understanding that, at the
termination of the Lease, the keys shall be returned.

8.
Improvements, Contractors and Service Maintenance.  Subject to the provisions
set forth in Article 5 of the Lease, (i) Tenant shall not make any improvements
to the exterior of the Building or the Business Park and Tenant shall not make
any structural changes or other material alterations, additions or improvements
to the Premises without the prior written consent of Landlord, which such
approval shall not be unreasonably withheld, (ii)   Tenant will refer all of
Tenant’s contractors, contractors’ representatives and installation technicians
rendering any service on or to the Premises to Landlord for Landlord’s approval
and supervision before performance of any service, and (iii) this provision
shall apply to all work performed in the Premises, including installation of
electrical devices and attachments and installations of any nature affecting
floors, walls, woodwork, trim, windows, ceilings, equipment or any other
physical portion of the Premises, the Building or the Business Park

9.
Regulations for Operation and Use.  Except as permitted in this Lease, Tenant
shall not place, install or operate in the Premises or in any part of the
Building or the Business Park any engine, stove or machinery, nor shall Tenant
conduct any mechanical or cooking operations therein, nor place or use in or
about the Premises or any part of the Building or the Business Park any
explosives, gasoline, kerosene, oil, acids, caustics or any other flammable,
explosive or hazardous material, without the prior written consent of Landlord.

10.
Window Coverings.  Windows facing the Building exterior shall at all times be
wholly clear and uncovered (except for such blinds or curtains or other window
coverings as Landlord may provide or approve) so that a full unobstructed view
of the interior of the Premises may be had from the exterior of the Building.

11.
No Violations of Fire Laws or Health Code.  Tenant shall not do or permit
anything to be done in the Premises, or bring or keep anything therein, which
will obstruct or interfere with the rights of other tenants in the Building or
the Business Park or in any other way injure them or conflict with any laws
relating to fires, or with any regulations of the Fire Department or with any
insurance policy upon the Building or the Business Park, or any part thereof, or
conflict with any of the rules and ordinances of the Board of Health.

12.
No Violations of Laws.  Tenant shall promptly and at its expense execute and
comply with all laws, rules, orders, ordinances, including all applicable zoning
ordinances, and regulations of the City, County, State or Federal Government,
and of any department or bureau of any of them and of any other governmental
authority having jurisdiction over the Premises,  to the extent necessary by
reason of Tenant’s particular  use or occupancy of the Premises or Tenant’s
business conducted therein.    Landlord hereby represents and warrants that
Tenant’s intended use of the Premises (as set forth in  Section 6(a) of the
Lease) is permitted as of right under the applicable zoning code.

13.
No Use of Roof.  Neither Tenant, nor Tenant’s servants, employees or agents
shall go upon the roof of the Building without the written consent of Landlord
unless necessary for Tenant to exercise any of its rights under Section 9(b) of
the Lease.

14.
No Canvassing.  Canvassing, soliciting and peddling in and about the Building
and the Business Park is prohibited.

15.
No Loud Musical Devices.  Tenant shall not operate or permit to be operated any
musical or sound producing instrument or device inside or outside the Premises
which may be heard outside the Premises or by other tenants in the Building or
the Business Park in excess of what is commercially reasonable.

16.
Use of Washrooms.  Tenant shall not use the washrooms, restrooms, and plumbing
fixtures of the Premises or the Building, and appurtenances thereto, for any
purposes other than the purposes for which they were constructed, and Tenant
shall not deposit any sweepings, rubbish, rags, or other improper substances
therein.  If Tenant or Tenant’s servants, employees, agents, contractors,
jobbers, licensees, invitees, guests or visitors cause any damage to such
washrooms, restrooms, plumbing fixtures or appurtenances, such damage shall be
repaired, at Tenant’s expense, and Landlord shall not be responsible therefor.

17.
No Unpleasant Odors.  Tenant shall not cause or permit any unpleasant odors to
emanate from the Premises, or otherwise interfere, injure or annoy in any way
other tenants in the Building or the Business Park, or persons conducting
business with them in excess of what is commercially reasonable.

18.
Disposal of Crates.  When conditions are such that Tenant must dispose of
crates, boxes, etc. on the sidewalk or parking areas on the Land, it will be the
responsibility of Tenant to dispose of same only between the hours of 5:45 p.m.
until 7:15 a.m unless other times are approved by the Landlord.

19.
No Food Distribution.  No prepared food and/or beverages shall be distributed
from the Premises, but, notwithstanding the provisions of Paragraph 9 hereof or
this Paragraph 19, Tenant may prepare coffee and similar beverages and warm
typical luncheon items for the consumption of Tenant’s employees and invitees.

20.
Location of Improvements.  Tenant will not locate furnishings or cabinets
adjacent to mechanical or electrical access panels or over air conditioning
outlets in the Premises so as to prevent operating personnel from servicing such
units as routine or emergency access may require.  Tenant shall be responsible
for any cost associated with moving such furnishings for Landlord’s access to
such mechanical or electrical access panels or air conditioning outlets.

21.
Modifications.  Landlord shall have the right from time to time to make any and
all such reasonable modifications and additions to these Rules and Regulations
as may be necessary for the safety, care, quiet enjoyment and cleanliness of the
Building and the Business Park.  Tenant agrees to abide by these Rules and
Regulations and any reasonable modifications and additions as are hereafter
adopted by Landlord, including, but not limited to, modifications made by
Landlord as a result of any changes in the city zoning ordinance, provided same
do not materially adversely affect Tenant’s use or occupancy of the Premises or
operation of Tenant’s business

 
 

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EXHIBIT “E”

SPECIAL PROVISIONS

1.           Moving Allowance.  Landlord agrees to provide Tenant with a moving
allowance of $0.50 per rentable square foot (“Moving Allowance”) to be paid to
Tenant upon receipt of paid moving expenses in connection with Tenant moving its
personal property from its existing leased space to the Premises.  This Moving
Allowance may also be used for the Improvements, cabling and furnishing the
Premises.  Any unused Moving Allowance shall be credited to Tenant’s  monthly
Minimum Rental payments next due until such unused Moving Allowance has been
exhausted.

2.           Renewal Option.  So long as Tenant is not in default under this
Lease beyond any applicable cure period, Tenant is hereby granted the option to
renew the term of the Lease as to the entire Premises for three (3) additional
periods (“Renewal Term”) of either three (3) or five (5) years in length, as
Tenant may elect, to commence at the expiration of the initial Term or each then
current Renewal Term.  Any such renewal of this Lease shall be upon the same
terms and conditions of this Lease, except there shall be one less renewal
option  in each Term and the annual Minimum Rental during the Renewal Term shall
be at the then prevailing Market  Rate (as defined below) for comparable
buildings in Charlotte, North Carolina.

The “Market Rate” means the rental rate which Landlord and a third party tenant
would agree upon for a new lease, as of the commencement date of such Renewal
Term, taking into consideration the uses permitted under the Lease, the quality,
size, design and location of the Premises, which shall exclude any specialized
improvements added by the Tenant, and the rental for a new lease for comparable
space located in the vicinity.  The Market Rate shall include any tenant
improvements, moving allowances, tenant improvement allowances, abatement of
rentals, leasing commissions or other concessions that are then being offered by
Landlord or other property owners for space comparable to the Premises.

Tenant shall notify Landlord of its intent to renew by delivering written notice
to Landlord at least ten (10) months prior to the expiration of the initial
Term, or then current Renewal Term, with Tenant’s election of the length of each
such Renewal Term.  Landlord and Tenant shall then mutually determine the
applicable Minimum Rental which will apply to such Renewal Term within thirty
(30) days after Tenant’s intent notification or such additional time as
necessary.  Tenant shall then exercise its option to renew, if at all, by
delivering written notice to Landlord six (6) months prior to the expiration of
the initial Term, or then current Renewal Term (provided, however, that in no
event shall Tenant be given less than thirty (30) days after the Minimum Rental
has been agreed upon in which to exercise said option), which such renewal shall
be for the length time stated in Tenant’s intent notice and for the Minimum
Rental mutually determined by Landlord and Tenant during the preceding month.

3.           Termination Option.  Tenant shall have the right to terminate this
lease (“Termination Right”) with at least six (6) months’ prior written notice
to Landlord at the end of the fifth (5th) year of the term.  Tenant must
exercise this Termination Right, if at all, within thirty (30) days after the
last day of the fifth lease year.  Prior to the effective date of such
termination, Tenant shall pay to Landlord an amount equal to Landlord’s
unamortized costs for this transaction (including, but not limited to, Tenant
Improvement Allowance, Additional Tenant Improvement Allowance, moving
allowance, brokers fees, and attorney’s fee) plus all amounts needed to cure
then existing monetary defaults, if any.

4.           Rights of First Refusal.  So long as Tenant is not in default of
this Lease beyond applicable cure periods and Tenant has not exercised its
option set forth in paragraph 5 of this Exhibit  “E”, and subject to any and all
prior rights of first refusal granted for space in the Building as of the date
of this Lease, in the event  any premises in the  to-be-built adjacent Shopton
18-C building (“Building 18-C”) which is owned by an affiliate of Landlord
becomes available for rent, Landlord shall so notify Tenant.  Thereupon, Tenant
shall, for a period of ten (10) business days following receipt of such notice,
have a right and option to lease such premises at Market Rent and terms for the
intended use for the remainder of the term of this Lease (as may be
extended).  Upon addition of space to the Premises pursuant to the exercise by
Tenant of its option hereunder, Landlord and Tenant shall execute and deliver an
amendment to this Lease confirming the same (or, at Tenant’s option, enter into
a separate lease for such premises).  Notwithstanding anything in this Lease to
the contrary, the right of first refusal granted to Tenant pursuant to this
paragraph (i) is not applicable during the final twelve (12) months of the
initial Term or any Renewal Term, unless Tenant has exercised its next Renewal
Term, if any, in accordance with this Lease, and (ii) shall have no impact on
Tenant’s right to exercise its Termination Right for the Premises in accordance
with paragraph 3 of this Exhibit “E” (it being understood and agreed that Tenant
shall also terminate the lease for Building 18-C at the same time as the
Premises, if at all, by reimbursing Landlord for all unamortized costs for the
Building 18-C transaction (as described in paragraph 3 of this Exhibit “E”).

5.           Right of First Refusal on Building 18-C (50,000 square feet
minimum).  So long as Tenant is not in default of this Lease beyond applicable
cure periods, Tenant shall have the option of leasing a minimum of 50,000 square
feet in Building 18-C from its owner, which is an affiliate of Landlord.  Tenant
must exercise such right, if at all, by providing written notice to Landlord on
or before the date which is three (3) months from the date that Tenant receives
notice from Landlord of the completion of the Building 18-C shell.  The terms
and conditions of any lease in Building18-C shall be on the same terms and
conditions as this Lease (including, without limitation, eight (8) months free
Annual Rental), as may be adjusted based on the actual square footage leased
(i.e. the rental rate and improvement allowance shall be the same per square
foot, but will be adjusted if the lease for Building 18-C is not for 102,400
square feet).  In the event any such lease is executed for space in Building
18-C (the “18-C Lease”), the Term of this Lease shall be amended to be a full
eighty-nine (89) months from the commencement date of the new 18-C Lease (at the
same 3% annual increases in Minimum Rent) such that both leases are coterminous.
Notwithstanding anything in this Lease to the contrary, the right of first
refusal granted to Tenant pursuant to this paragraph (i) is not applicable
during the final twelve (12) months of the initial Term or any Renewal Term,
unless Tenant has exercised its next Renewal Term, if any, in accordance with
this Lease, and (ii) shall have no impact on Tenant’s right to exercise its
Termination Right for the Premises in accordance with paragraph 3 of this
Exhibit “E” (it being understood and agreed that Tenant shall also have the
right to terminate the lease for Building 18-C at the same time as the Premises
by reimbursing Landlord for all unamortized costs for the Building 18-C
transaction (as described in paragraph 3 of this Exhibit “E”).

6.           Right of First Refusal on Building 18-D (25,000 square feet
minimum).  So long as Tenant is not in default of this Lease beyond applicable
cure periods and subject to any and all prior rights of first refusal granted
for space in the Building as of the date of this Lease, in the event any
premises containing at least 25,000 square feet in the to-be-built Shopton 18-D
building (“Building 18-D”) which is owned by an affiliate of Landlord becomes
available for rent, Landlord shall so notify Tenant.  Thereupon, Tenant shall,
for a period of ten (10) business days following receipt of such notice, have a
right and option to lease such premises at Market Rent and terms for the
intended use for the remainder of the term of this Lease (as may be
extended).  Upon addition of space to the Premises pursuant to the exercise by
Tenant of its option hereunder, Landlord and Tenant shall execute and deliver an
amendment to this Lease confirming the same (or,  at  Tenant’s option, enter
into a separate lease for such premises) .  Notwithstanding anything in this
Lease to the contrary, the right of first refusal granted to Tenant pursuant to
this paragraph (i) is applicable at all times during the initial Term (and any
Renewal Term), but is not applicable during the final twelve (12) months of the
initial Term or any Renewal Term unless Tenant has exercised its next Renewal
Term, if any, in accordance with this Lease, and (ii) shall have no impact on
Tenant’s right to exercise its Termination Right for the Premises in accordance
with paragraph 3 of this Exhibit “E” (it being understood and agreed that Tenant
shall also have the right to terminate the lease for Building 18-D at the same
time as the Premises by reimbursing Landlord for all unamortized costs for the
Building 18-D transaction (as described in paragraph 3 of this Exhibit “E”).

7.           Parking.   During the term of this Lease (as same may be extended),
Tenant shall have the right to park vehicles in a minimum of 390 unreserved
parking stalls on the property known as Shopton 18B, as reflected on Exhibit
“E-1”, which Exhibit “E-1” shall subsequently be attached hereto after agreed to
by Landlord and Tenant.  Landlord acknowledges that it will work with Tenant to
provide extra parking areas in the rear of the Premises, or work with Tenant to
find a suitable solution such as cross-parking with the adjacent buildings, in
the event there are any parking problems during the term of the Lease to ensure
that Tenant has a minimum of 390 parking stalls in the event Tenant uses some of
the above referenced 390 parking spaces as a truck court.

8.           Contingency.  Tenant’s obligations under this Lease are contingent
upon Tenant  obtaining a Charlotte-Mecklenburg Business Investment Grant (the
“Grant”) from the City of Charlotte and County of Mecklenburg in an amount of at
least $450,000 within thirty (30) days from the date of this Lease (the
“Contingency”).  If Tenant does not receive the Grant within such thirty (30)
day period, Tenant shall have the right to terminate this Lease by written
notice to Landlord, in which event this Lease shall be null and void, and
neither party shall have any further rights or obligations to the other.

9.           Access.  Tenant shall have access to the Premises and Building 24
hours per day, 7 days per week, 365 days per year.

10.           Street Name.  Upon written request from Tenant, and subject to all
necessary approvals from the City of Charlotte and County of Mecklenburg,
Landlord agrees to promptly (re)name the interior street immediately abutting
the Building to be “Shutterfly Road”, “Shutterfly Street” or other similar name
(containing the word “Shutterfly”) to be agreed upon by Landlord and Tenant.

11.           Environmental Matters.

(a)  Definitions.  For purposes of this Lease:

 
(1)  The term "Environmental Law" shall mean and refer to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), 42
U.S.C. §9601, et seq.; the Federal Resource Conservation and Recovery Act of
1976 ("RCRA"), 42 U.S.C. §6901, et seq.; the Federal Water Pollution Control
Act, 33 U.S.C. §1251, et seq.; the Clean Air Act, 42 U.S.C. §7401, et seq.; all
as the same may be from time to time amended, and any other federal, state,
county, municipal, local or other statute, law, ordinance or regulation which
relates to or deals with human health or the environment, including, without
limitation, all regulations promulgated by a regulatory body pursuant to any
such statute, law, ordinance or regulation.

 
(2)  The terms "Hazardous Substance" and "Hazardous Substances" shall mean and
refer to asbestos, radon, urea-formaldehyde, polychlorinated biphenyls ("PCBs"),
or substances containing PCBs, nuclear fuel or materials, radioactive materials,
explosives, known carcinogens, petroleum products and bi-products, and any
substance defined as hazardous or toxic or as a contaminant or pollutant in, or
the release or disposal of which is regulated by any Environmental Law.

(b)  Landlord's Representations and Warranties.  Landlord represents that,
except as set forth in that certain “Report of Phase I Environmental Site
Assessment Update” dated May 15, 2006 prepared for Landlord by MACTEC:

 
(1)  no Hazardous Substances are now or have ever been located, produced,
treated, stored, transported, incorporated, discharged, emitted, released,
deposited or disposed of in, upon, under, over or from the Building in violation
of any Environmental Law;

 
(2)  no threats exist of a discharge, release or emission of Hazardous
Substances in, upon, under, over or from the Building into the environment in
violation of any Environmental Law;

 
(3)  the Building has not ever been used as or for a mine, a landfill, a dump or
other disposal facility, industrial or manufacturing purposes, auto repair, a
dry cleaner, or a gasoline service station;

 
(4)  neither the Building nor any part thereof is in violation of any
Environmental Law, no notice of any such violation or any alleged violation
thereof has ever been issued or given by any governmental entity or agency, and
there is not now nor has there ever been any investigation or report involving
the Building by any governmental entity or agency which is in any way related to
Hazardous Substances;

 
(5)  no person, party or private or governmental agency or entity has given any
notice of or asserted any claim, cause of action, penalty, cost or demand for
payment or compensation, directly or indirectly, resulting from or allegedly
resulting from any activity or event described in (1), (2) or (4) above;

 
(6)  there are not now, nor have there ever been, any actions, suits,
proceedings or damage settlements relating in any way to Hazardous Substances
in, upon, under, over or from the Building;

 
(7)  the Building is not listed in the United States Environmental Protection
Agency's National Priorities List of Hazardous Waste Sites, CERCLIS, or any
other list of hazardous sites maintained by any federal, state or local
governmental agency;

 
(8)  the Building is subject to no lien or claim for lien in favor of any
governmental entity or agency as a result of any release or threatened release
of any Hazardous Substances.

 
 

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EXHIBIT “E-1”

Parking

[TO BE ATTACHED AFTER LEASE EXECUTION ONCE AGREED TO BY PARTIES]

 
 

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EXHIBIT “F”

TENANT:                                _________________________
PROJECT:                                _________________________

To:           Landlord

Re:           Lease Pertaining to ________________________ (the "Project")

Ladies and Gentlemen:

The undersigned, as tenant ("Tenant"), hereby states and declares as follows:

1.           Tenant is the lessee under that certain lease (the "Lease")
pertaining to the Project which is dated _______.

2.           The Lease is for the following portion of the Project
______________________________(the "Demised Premises") (if the entire Project,
so state):

3.           The Lease has not been modified or amended except by the following
documents (if none, so state): _________

4.           The initial term of the Lease commenced on _________, 2____ and
shall expire on ______, 2_____, unless sooner terminated in accordance with the
terms of the Lease.

Very truly yours,

TENANT:

Shutterfly, Inc.,
a Delaware corporation

By ___________________________
Name: ________________________
Its: ___________________________

AGREED TO THIS ___ DAY OF ___, 200_:

LANDLORD:

3915 SHOPTON ROAD, LLC

By: ________________________
Name: _____________________
Its: ________________________

 
 

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FIRST AMENDMENT TO LEASE

THIS FIRST AMENDMENT TO LEASE (this “First Amendment”) is made and entered into
as of this 26th day of February 2007, by and between 3915 SHOPTON ROAD, LLC, a
North Carolina limited liability company (hereinafter referred to as
"Landlord"), and SHUTTERFLY, INC., a Delaware corporation (hereinafter referred
to as "Tenant").

RECITALS:

A.  Landlord and Tenant have previously entered into that certain Lease
Agreement dated December 22, 2006 (the “Lease”) for the occupancy of
approximately 102,400 rentable square feet of space (the “Premises”) known as
building Shopton 18-B, in the Shopton Ridge Business Park, Charlotte, North
Carolina (the “Building”).

B.  Landlord and Tenant desire to amend the Lease as hereinafter set forth.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Landlord and Tenant do hereby enter into this
First Amendment and amend the Lease as set forth below.  All terms used but not
defined herein shall have the meanings set forth in the Lease.

 
1.
Commencement Date.  The Commencement Date, which is defined in the first
sentence of Section 2 of the Lease, is hereby amended to mean “the later of May
30, 2007 or upon substantial completion of Phase I of Landlord’s Work, as
defined in Exhibit “C” attached to this First Amendment and made a part hereof.”

 
2.
Delivery of Possession.  Section 4 of the Lease is hereby deleted in its
entirety and the following is substituted in lieu thereof:

“Landlord will deliver the Premises to Tenant in phases beginning with Phase I
delivered on the Commencement Date, with Landlord’s Work for each Phase (as
defined in Paragraph 1 of Exhibit ”C” attached hereto) substantially completed
in accordance with the Final Plans and Specifications (as defined in paragraph 1
of said Exhibit ”C”), subject to revisions as mutually agreed to in writing by
Landlord and Tenant, as evidenced, if requested by Tenant, by the certification
of Landlord’s architect or other designated engineering  representative.  Tenant
shall be given access to the Premises upon written request to Landlord not more
than sixty (60) days prior to the Commencement Date, for the purposes of
preparing the Premises for Tenant’s use.  With the exception of any Annual
Rental payments due, all terms and conditions of this Lease shall apply to
Tenant upon such occupancy.  Tenant shall coordinate such occupancy with
Landlord and shall not interfere with Landlord’s completion of Landlord’s
Work.  If Landlord for any reason whatsoever cannot substantially complete
Landlord’s Work and deliver possession of Phase I to Tenant on the Commencement
Date as above specified, this Lease shall not be void or voidable nor shall
Landlord be liable to Tenant for any loss or damage resulting therefrom; but in
that event  (except to the extent that any such delay(s) has been caused by
Tenant or its agent(s), employee(s), contractor(s) or subcontractor(s)
(collectively, “Tenant Delay Factors”), and provided that in each such instance
Landlord first gives Tenant written notice that if Tenant does not so cure its
act or omission within two (2) business days the same will thereafter be
considered a Tenant Delay Factor, the Commencement Date shall be adjusted to be
the date when Landlord does in fact substantially complete Landlord’s Work and
deliver possession of Phase I to Tenant.  Notwithstanding anything herein to the
contrary, in the event Landlord’s Work for Phase I is not complete by the date
(such date referred to herein as the “Delivery Date”) which is one hundred
twenty (120) days after approval (or deemed approval) by Landlord and Tenant of
the Final Phase I Plans and Specification (as hereinafter defined), except for
reasons of Tenant Delay Factors or force majeure (which force majeure delays
shall only be extended by up to 90 days), Tenant shall be granted three (3) days
of free Minimal Rental for every day beyond the Delivery Date until Landlord’s
Work for Phase I has been complete, and the Rent Commencement Date shall be
adjusted accordingly.  In the event Landlord is unable to deliver the Premises
by September 30, 2007, Tenant may terminate this Lease with no further
obligation by providing Landlord written notice on or before October 10, 2007.”

 
3.
Upfit of the Premises.  Exhibit “C” to the Lease, Upfit of the Premises, is
hereby deleted in its entirety and the revised Exhibit “C” attached hereto is
substituted in lieu thereof.

 
4.
Exhibit “E” to the Lease.

a. Section 5 of Exhibit “E” to the Lease is hereby deleted in its entirety and
the following substituted therefor:

“5.           Right of First Refusal on Building 18-C (50,000 square feet
minimum).  So long as Tenant is not in default of this Lease beyond applicable
cure periods, Tenant shall have the option of leasing a minimum of 50,000 square
feet in Building 18-C from its owner, which is an affiliate of Landlord
(“Landlord’s Affiliate”).  Tenant must exercise such right, if at all, by
providing written notice to Landlord on or before the date which is three (3)
months from the date that Tenant receives notice from Landlord of the completion
of the Building 18-C shell.  The terms and conditions of any lease in Building
18-C shall (i) be on the same terms and conditions as this Lease (including,
without limitation, eight (8) months free Annual Rental), as may be adjusted
based on the actual square footage leased (i.e. the rental rate and improvement
allowance shall be the same per square foot, but will be adjusted if the lease
for Building 18-C is not for 102,400 square feet), and (ii) (subject to approval
by Landlord, Landlord’s Affiliate, the applicable lenders for Landlord and
Landlord’s Affiliate and further subject to applicable Legal Requirements) give
Tenant the right, at Tenant’s sole cost and expense (subject to application of
the Improvements Allowance and the Additional Tenant Improvement Allowance, each
as hereinafter defined), to (a) block-off the back side of the driveway between
Building 18-C and Building 18-B and create an enclosed walkway between such
buildings as shown on Exhibit “E-2” attached hereto (the “Walkway”), and (b) lay
conduit between such buildings.  Tenant acknowledges that it will be solely
responsible for all maintenance and repair of the Walkway and upon written
demand from Landlord must remove the same at the expiration or earlier
termination of the Lease and restore the parking lot to its condition prior to
installation of the Walkway.  In the event any such lease is executed for space
in Building 18-C (the “18-C Lease”), the Term of this Lease shall be amended to
be a full eighty-nine (89) months from the commencement date of the new 18-C
Lease (at the same 3% annual increases in Minimum Rent) such that both leases
are coterminous. Notwithstanding anything in this Lease to the contrary, the
right of first refusal granted to Tenant pursuant to this paragraph (i) is not
applicable during the final twelve (12) months of the initial Term or any
Renewal Term, unless Tenant has exercised its next Renewal Term, if any, in
accordance with this Lease, and (ii) shall have no impact on Tenant’s right to
exercise its Termination Right for the Premises in accordance with paragraph 3
of this Exhibit “E” (it being understood and agreed that Tenant shall also have
the right to terminate the lease for Building 18-C at the same time as the
Premises by reimbursing Landlord for all unamortized costs for the Building 18-C
transaction (as described in paragraph 3 of this Exhibit “E”).”

b.           Section 7 of Exhibit “E” to the Lease is hereby deleted in its
entirety and the following substituted therefor:

“7.           Parking.   During the term of this Lease (as same may be
extended), Tenant shall have the right to park vehicles in a minimum of 275
unreserved parking stalls on the property known as Shopton 18B, as reflected on
Exhibit “E-1” attached hereto.  Landlord acknowledges that it will work with
Tenant to provide extra parking areas in the rear of the Premises, or work with
Tenant to find a suitable solution such as cross-parking with the adjacent
buildings, in the event that (i) there are any parking problems during the term
of the Lease, or (ii) Tenant anticipates a short-term increase in the number of
parking stalls required to support peak production periods, or (iii) Tenant
determines that it needs more than 275 parking spaces.  Tenant acknowledges that
such 275 parking stalls will be available only until Tenant constructs the
Walkway, if at all, and subsequent to such Walkway construction, Tenant’s
parking stalls will be reduced beyond 275 stalls by the number lost for Tenant’s
Walkway.”

c.           Section 8 (Contingency) of Exhibit “E” to the Lease is hereby
deleted in its entirety.

 
5.
Ratification.  Except as modified and amended by this First Amendment, all terms
and conditions of the Lease shall remain in full force and effect.

 
 

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Second Amendment as
of the date set forth above.

LANDLORD:

3915 SHOPTON ROAD, LLC,
a North Carolina limited liability company

By:  /s/Paul Herndon                                         
         Name: Paul Herndon
         Title: Vice President

TENANT:

SHUTTERFLY, INC.,
a Delaware corporation

By: /s/Stephen E. Recht      
Name: Stephen E. Recht                                 
Title: Chief Financial Officer                                         

 
 

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EXHIBIT “C”

Upfit of Premises

1.           LANDLORD’S WORK

Landlord, at Tenant’s sole cost and expense (except as provided in paragraph 2
of this Exhibit ”C”) shall construct all improvements to the Premises which
constitute a part of Landlord’s Work (collectively, the “Improvements”) in a
good and workmanlike manner and in accordance with the Final Plans and
Specifications (as hereinafter defined) and all applicable Legal
Requirements.  “Landlord’s Work” shall mean that certain work related to
Tenant’s occupancy of the Premises which shall be mutually agreed upon by
Landlord and Tenant.   Tenant acknowledges that Landlord’s Work shall proceed in
multiple phases (each a “Phase”).  Tenant has not yet completed final design
plans for all Phases. Landlord and Tenant shall mutually decide upon the scope
and completion date(s) for each of the Phases.

For purposes of this Lease, Landlord’s Work for each Phase shall be deemed
“substantially complete” when (i) Landlord has completed Landlord’s Work for
such Phase except for punchlist items which do not prevent or materially impair
Tenant’s use or occupancy of such Phase, (ii) Tenant can occupy the completed
Phase for the purpose of carrying on its intended business therein,  and (iii)
Landlord has procured a temporary or permanent certificate of occupancy for such
Phase, which shall allow Tenant to operate its business within the
Phase.  Landlord represents and warrants that the Building has been constructed
in (a) a good and workmanlike manner, (b) in accordance with applicable Legal
Requirements, and (c) in accordance with Landlord’s base building shell
specifications per the architectural drawings dated February 21, 2006 prepared
by Merriman Schmitt which have been approved by both Tenant and Landlord (the
“Base Building”).

Notwithstanding anything contained herein to the contrary, Tenant (and not
Landlord) shall be solely responsible for any increases in the cost of
Landlord’s Work which are attributable to (i) any change orders requested by
Tenant to the Final Plans and Specifications which are agreed to between
Landlord and Tenant and/or (ii) any Tenant Delay Factors (as described in
Paragraph 4 of the Lease).  Such cost increases (subject to application of the
Improvements Allowance and Additional Tenant Improvement Allowance, each as
hereinafter defined) shall be payable by Tenant to Landlord within 30 days of
Landlord’s written demand therefor.

Landlord shall have the final plans and specifications prepared for Phase I of
Landlord’s Work (the “Final Phase I Plans and Specifications”) and delivered to
Tenant for its review and approval (which approval shall not be unreasonably
withheld) on or before March 13, 2007.    Tenant, acting reasonably and in good
faith, shall have seven (7) days from Landlord’s delivery of the Final Phase I
Plans and Specifications to advise Landlord, in writing, as to whether or not
Tenant desires any changes to the Final Phase I Plans and Specifications.  If
Tenant fails to respond during such seven (7) day period, Tenant shall
automatically be deemed to have approved the Final Phase I Plans and
Specifications.  Landlord, acting reasonably and in good faith, shall have four
(4) business days from Tenant’s delivery of Tenant’s response to advise Tenant,
in writing, as to whether or not Landlord desires any changes to Tenant’s
proposed changes to the Final Phase I Plans and Specifications.  If Landlord
fails to respond during such four (4) day period, Landlord shall automatically
be deemed to have approved Tenant’s proposed changes to the Final Phase I Plans
and Specifications.

Landlord, acting reasonably and in good faith, shall have seven (7) days from
Tenant’s delivery of the final plans and specifications for the Phases (other
than Phase I) of Landlord’s Work (the “Final Remaining Phases Plans and
Specifications”) to advise Tenant, in writing, as to whether or not Landlord
desires any changes to the Final Remaining Phases Plans and Specifications.  If
Landlord fails to respond during such seven (7) day period, Landlord shall
automatically be deemed to have approved the Final Remaining Phases Plans and
Specifications.  Tenant, acting reasonably and in good faith, shall have four
(4) business days from Landlord’s delivery of Landlord’s response to advise
Landlord, in writing, as to whether or not Tenant desires any changes to
Landlord’s proposed changes to the Final Remaining Phases Plans and
Specifications.  If Tenant fails to respond during such four (4) business day
period, Tenant shall automatically be deemed to have approved Landlord’s
proposed changes to the Final Remaining Phases Plans and Specifications.  Within
seven (7) business days after the Final Remaining Phases Plans and
Specifications have been finally approved (or deemed approved) by Landlord and
Tenant, Landlord shall submit such Final Remaining Phases Plans and
Specifications to the contractors for bidding purposes in accordance with the
provisions set forth below.

The Final Phase I Plans and Specifications and the Final Remaining Phases Plans
and Specifications, shall sometimes collectively be referred to as the “Final
Plans and Specifications.”

In the essence of time, Landlord shall hire DSS Corporation as the general
contract for Landlord Work.  DSS Corporation agrees to competitively bid the
work to all subcontractors and open-book all bids for Tenant and Landlord review
and selection.  DSS Corporation shall receive a “cost plus 5%” fee.  Tenant
shall have the opportunity to review and provide input concerning the
subcontractor bids, which Tenant agrees to do in a timely and good faith manner.

Tenant acknowledges and agrees that Tenant Delay Factors, as defined in
paragraph 4 of the Lease, shall include, without limitation, any delays
resulting from (i) change orders to the Final Phase I Plans and Specifications
or subsequent approved plans and specifications for the remaining phases of
construction, requested by Tenant or by those acting for or under the direction
of Tenant; (ii) the performance or completion by Tenant, or any entity or person
employed by Tenant, of any work in or about the Premises; (iii) the failure of
Tenant to supply adequate information to Landlord to prepare the Final Phase I
Plans and Specifications by March 13, 2007; or (iv) the failure of Landlord and
Tenant to mutually agree on the Final Phase I Plans and Specifications or
subsequent plans and specifications for the remaining phases of construction in
a timely manner, provided that in each such instance Landlord first gives Tenant
two (2) business days notice that if Tenant does not  so cure its act or
omission  the same will thereafter be considered a Tenant Delay Factor.

Except to the extent expressly provided in the Lease, Landlord shall have no
liability or obligation whatsoever to remedy, replace or correct any alleged
defects and deficiencies in Landlord’s Work; provided, however, that Landlord
specifically warrants that  (i) all loading doors will be properly operational
for three (3) months after the Commencement Date, absent any negligence of
Tenant, and (ii) Landlord shall throughout the term of this Lease (as same may
be extended) be responsible for repairing any latent defects in the Improvements
at Landlord’s sole cost.  Landlord shall, to the extent permitted by law, assign
all warranties associated with the Premises to, and cooperate with, Tenant in
the enforcement of any express warranties or guarantees of workmanship or
materials given by any contractors, subcontractors, architects, draftsmen, or
materialmen relative to Landlord’s Work, the roof or any relevant Building
systems.  Notwithstanding anything to the contrary contained herein or in the
Lease, Landlord shall not be responsible, to any extent whatsoever, for the
repair, remediation or correction of any alleged deficiencies or defects in any
materials and workmanship in and concerning Landlord’s Work to the extent that
the existence or occurrence of such defects or deficiencies are the result of,
or due to, any negligent, willful or intentional or other acts or omissions of
Tenant, its agents, employees, contractors, subcontractors, representatives or
invitees.  Tenant may not conduct any activities on the Premises that would have
the effect of rendering any relevant warranties related to the performance of
Landlord’s Work void (unless previously approved by the Landlord), and if Tenant
does conduct any such activities and renders any relevant warranty void,
Landlord will no longer have any obligations under the terms of the Lease with
respect to the component, element or feature of the Improvements that the
warranty voided by Tenant’s activities had previously covered.  Except as
otherwise provided in this Lease, at no time during the Lease term (as same may
be extended pursuant to any renewal option, if any) shall Tenant have any right,
of any nature whatsoever, to withhold the timely payment of any rental due under
the Lease as a result of, or due to, or because of, any alleged breaches by
Landlord under the Lease or the alleged existence of any defects or deficiencies
in the Improvements.

Landlord shall obtain all applicable licenses, permits and approvals to complete
the Tenant Improvements in accordance with all applicable laws.

Landlord shall give Tenant estimates of the schedule for completion of each
Phase of the Improvements and thirty (30) days prior written notice of the
anticipated date each Phase of the Premises will be ready for occupancy.  Within
thirty (30) days following the Commencement Date, and thereafter within thirty
(30) days following the completion of each remaining Phase, Landlord and Tenant
shall mutually conduct a walk-through of the Premises and compile a punch list
which sets forth any corrective work to be performed by Landlord with respect to
the Improvements which Landlord, upon receipt, shall diligently pursue to
correct.

Landlord represents and warrants to Tenant with respect to each completed Phase,
that as of the date each Phase is delivered to Tenant:

(i)           such Phase, including the HVAC, electrical, mechanical, plumbing,
sewer and other systems serving that Phase within the Building, shall be in good
working order;

(ii)           the Improvements within such completed Phase, and the Building
upon completion of all Phases, shall not violate any covenants or restrictions
of record (if any), or any applicable Legal Requirements having jurisdiction
over the Project, and

(iii)          Landlord shall deliver each Phase to Tenant clean and free of
debris.

Except as provided in Section 5(c) of the Lease, Tenant shall have no obligation
to restore the Premises to their original condition as of the Commencement Date
upon lease termination or expiration of the Lease.

Landlord agrees that there shall be no construction management fee payable by
Tenant to Landlord to oversee the construction of the Improvements.

2.           IMPROVEMENTS ALLOWANCE

Notwithstanding anything to the contrary herein, Landlord shall contribute an
amount (such amount being the “Improvements Allowance”) not to exceed $16.00 per
rentable square foot of the Premises ($1,638,400.00 based on the rentable square
footage of 102,400) towards the costs incurred by Landlord and/or Tenant in
designing, planning and constructing the Improvements.  In the event the costs
incurred in connection with designing, planning and constructing the
Improvements exceed the Improvements Allowance (subject to application of the
Additional Tenant Improvement Allowance, as hereinafter defined), Tenant shall
be solely responsible for bearing and paying any such excess costs within thirty
(30) days of Landlord’s written demand therefor.  In the event the costs
incurred by Landlord and/or Tenant in connection with designing, planning and
constructing the Improvements are less than the Improvements Allowance, Tenant
shall provide Landlord with written notice prior to August 31, 2007 which may
direct Landlord to pay such excess amounts directly to Tenant’s
contractor/vendors for additional improvements to the Premises conducted by or
for Tenant, or apply such excess amounts against the Minimum Rental payment(s)
next due from Tenant until such excess amounts have been exhausted.  Without
limiting the foregoing, Landlord acknowledges that “the costs incurred by
Landlord and/or Tenant in designing, planning and construction the Improvements”
shall be deemed to include the cost to obtain any and all (i) operating
permit(s) that Tenant may be required to obtain (if any) in order for Tenant to
operate for Tenant’s permitted use as described in Article 6(a) of this Lease;
(ii) construction permits (including costs associated with any “express review”
process); (iii) space planning; (iv) construction documents; (v) upfit costs;
and (vi) any additional costs associated with the upfit.

3.           ADDITIONAL TENANT IMPROVEMENT ALLOWANCE

Upon written request to Landlord, Landlord agrees to provide Tenant with an
additional improvement allowance up to a maximum of $250,000.00 (the “Additional
Tenant Improvement Allowance”) to be used by Tenant for additional improvements
to the Premises, and/or furniture, fixtures or equipment for the Premises.  Any
such elected Additional Tenant Improvement Allowance shall be amortized over the
entire eighty-nine (89) month term at an annual interest rate of ten percent
(10%) and paid by Tenant as part of the Minimum Rent due under the
Lease.  Landlord and Tenant shall amend this Lease as necessary to reflect such
increased rent obligation.

 
 

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EXHIBIT “E-1”

Parking
[exhibite-1cltamendment.gif]

 
 

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EXHIBIT “E-2”

Enclosed Walkway
[exhibite-2cltamendment.gif]

 
 

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SECOND AMENDMENT TO LEASE

THIS SECOND AMENDMENT TO LEASE (this “Second Amendment”) is made and entered
into this 31st day of October, 2007, by and between 3915 SHOPTON ROAD, LLC, a
North Carolina limited liability company (hereinafter referred to as
"Landlord"), 4015 SHOPTON ROAD, LLC, a North Carolina limited liability company
(“Temporary Landlord”) and SHUTTERFLY, INC., a Delaware corporation (hereinafter
referred to as "Tenant").

RECITALS:

A.  Landlord and Tenant have previously entered into that certain Lease
Agreement dated December 22, 2006; as amended by that certain First Amendment to
Lease dated February 26, 2006, (as amended, the “Lease”) for the occupancy of
approximately 102,400 rentable square feet of space (the “Premises”) known as
building Shopton 18-B, in the Shopton Ridge Business Park, Charlotte, North
Carolina (the “Building”).

B.  Temporary Landlord owns that certain building adjacent to the Premises known
as Shopton 18-C (the “Temporary Building”).  Tenant desires to lease temporary
storage space from Temporary Landlord upon the same terms and conditions as the
Lease, except as set forth herein.

C.  Landlord and Tenant desire to amend the Lease as hereinafter set forth and
Temporary Landlord executes this Second Amendment evidencing its consent and
acknowledgement of the terms and conditions of lease of the Temporary Premises.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Landlord and Tenant do hereby enter into this
Second Amendment and amend the Lease as set forth below.  All terms used but not
defined herein shall have the meanings set forth in the Lease.  All Recitals are
incorporated herein as if fully set forth below.

1. Signage.  Landlord hereby approves the signage proposal as defined in Exhibit
“A” attached to this Second Amendment and made a part hereof. Tenant agrees to
remove said signage from the Building upon Lease expiration or earlier
termination and return any portion of the Building façade affected by such
signage removal to its original condition, ordinary wear and tear excepted.

2.           Temporary Premises.  Landlord hereby leases to Tenant, and Tenant
hereby accepts and rents from Landlord, for the period of November 1, 2007
(“Temporary Premises Commencement Date”) through and including January 31, 2008
(the “Temporary Premises Term”, that certain office/warehouse space (the
“Temporary Premises”) containing approximately 19,200 rentable square feet as
shown on the attached Exhibit B in the Temporary Building.  Tenant acknowledges
that Landlord shall be permitted to show the Temporary Premises to prospective
tenants upon reasonable notice to Tenant.  Landlord shall use commercially
reasonable efforts not to interfere with Tenant’s use of the Temporary Premises
during such showings.

3.           Temporary Premises Rent.  During the Temporary Premises Term,
Tenant shall pay to Landlord, without notice, demand, reduction, setoff or any
defense, and in addition to all payments due under the Lease for the Premises:
(i) a monthly rental of $3,200.00; and (ii) Tenant’s prorate share of all taxes,
insurance and common area maintenance costs for the Temporary Space, in advance,
on or before the first day of each month of the Temporary Premises Term.

4.           Temporary Premises Improvements.  Tenant agrees to accept the
Premises in its “AS-IS”, “WHERE-IS” condition.  Notwithstanding anything in the
Lease regarding approval to the contrary, Tenant may, without any further
approval or notice to Landlord, at Tenant’s sole cost and expense, including all
permits, if any, in a good and workmanlike manner, perform the following
improvements in the Temporary Premises: (i) erect an interior chain-link fence
dividing the Temporary Premises from the remaining premises in the Building,
provided, however, that Tenant shall be responsible for removing the fence upon
expiration of the Temporary Premises Term; (ii) erect an exterior, temporary
ramp to the rear door of the Temporary Premises; and (iii) install floor lamps.

5.           Lease.  With the exception of anything noted in this Second
Amendment, the terms and conditions of Sections 5 through 35 the Lease shall
govern the lease of the Temporary Premises and both Temporary Landlord and
Tenant hereby agree to be bound by all such terms and conditions, except, with
respect to the Temporary Premises as follows:

a.  
All references in the Lease to the “Premises” shall be deemed to mean the
Temporary Premises;

b.  
All references in the Lease to the “Building” shall be deemed to mean the
Temporary Building;

c.  
The last sentence of Section 14 (Governmental Orders) is hereby deleted in its
entirety.

d.  
Notwithstanding anything in the Lease to the contrary, Tenant shall only be
obligated to insure its personal property stored within the Premises.

e.  
The first sentence of Section 9(a) is hereby deleted in its entirety and the
following substituted therefor:

“Except as provided in Article 10 (Tenant’s Covenant to Repair), Landlord, at
Landlord's sole cost and expense, shall keep the entire Building in good repair
and maintenance (including replacements) at all times, for the proper operation
of the Building in a manner generally consistent with the maintenance and repair
(including replacements) of comparable properties, including, without
limitation, the Temporary Premises, the common areas, the Building's windows,
roof, foundation, structure and walls, and mechanical and electrical systems,
which include, but are not limited to, the heating, electrical, air
conditioning, ventilation and plumbing systems.”

 
f.
Section 10 (Tenant’s Covenant to Repair) is hereby deleted in its entirety and
the following substituted therefor.

“Except as provided in Article 9 (Landlord's Covenant to Repair and  Replace),
13 (Damage or Destruction of Premises), 19 (Eminent Domain), and reasonable wear
and tear, Tenant shall at all times repair all damage to the Temporary Premises
caused by Tenants or it employees, contractors, agents and invitees, and return
any portion of the Premises affected by such damage to its original condition.”

6.            This Second Amendment may be executed in counterparts, which when
taken together, shall constitute the entire agreement.  Temporary Landlord,
Landlord and Tenant agree that the delivery of an executed copy of this Second
Amendment by facsimile or by email of a *.pdf file with an original to follow
shall be legal and binding and shall have the same force and effect as if an
original executed copy of this Second Amendment had been delivered.

7.            Ratification.  Except as modified and amended by this Second
Amendment, all terms and conditions of the Lease shall remain in full force and
effect.

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Second Amendment as
of the date set forth above.

LANDLORD:

3915 SHOPTON ROAD, LLC,
a North Carolina limited liability company

By:   /s/ Paul Herndon                                        
         Name: Paul Herndon
         Title: Vice President

TENANT:

SHUTTERFLY, INC.,
a Delaware corporation

By:   /s/ Stephen E. Recht        
Name: Stephen E. Recht                                                        
Title:   Chief Financial
Officer                                                                        

TEMPORARY LANDLORD:

4015 SHOPTON ROAD, LLC,
a North Carolina limited liability company

By:    /s/ Paul Herndon                                       
         Name: Paul Herndon
         Title: Vice President

 
 

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EXHIBIT “A”

Tenant’s Signage Proposal

[exhibitato2ndamendment.gif]

 
 

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EXHIBIT “B”

Temporary Premises Floor Plan
 
[exhibitbto2ndamendment.gif]

 
 

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ADDENDUM TO SECOND AMENDMENT TO LEASE

THIS ADDENDUM TO SECOND AMENDMENT TO LEASE (this “Addendum”) is made and entered
into this 3rd day of January, 2008, by and between 3915 SHOPTON ROAD, LLC, a
North Carolina limited liability company (hereinafter referred to as
"Landlord"), 4015 SHOPTON ROAD, LLC, a North Carolina limited liability company
(“Temporary Landlord”) and SHUTTERFLY, INC., a Delaware corporation (hereinafter
referred to as "Tenant").

RECITALS:

A.  Landlord, Temporary Landlord and Tenant have previously entered into that
certain temporary lease arrangement more particularly described in the Second
Amendment to Lease dated October 31, 2007; (the “Second Amendment”) between
Temporary Landlord, Tenant and Landlord for the temporary occupancy of
approximately 19,200 rentable square feet of space (the “Temporary Premises”) in
the building commonly known as Shopton 18-C, in the Shopton Ridge Business Park,
Charlotte, North Carolina (the “Building”).

B.  Landlord, Temporary Landlord and Tenant desire to amend Second Amendment to
allow Tenant to remain in the Premises until March 31, 2008.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Landlord, Temporary Landlord and Tenant do
hereby enter into this Addendum and amend the Lease as set forth below.  All
terms used but not defined herein shall have the meanings set forth in the
Second Amendment.  All Recitals are incorporated herein as if fully set forth
below.

1.           Temporary Premises.  Landlord, Temporary Landlord and Tenant hereby
amend the Second Amendment such that the Temporary Premises Term shall expire on
March 31, 2008.

2.            Counterpart Execution.  This Amendment may be executed in
counterparts, which when taken together, shall constitute the entire
agreement.  Landlord, Temporary Landlord and Tenant agree that the delivery of
an executed copy of this Addendum by facsimile or by email of a *.pdf file with
an original to follow shall be legal and binding and shall have the same force
and effect as if an original executed copy of this Addendum had been delivered.

3.            Ratification.  Except as modified and amended by this Addendum,
all terms and conditions of the Second Amendment shall remain in full force and
effect.

 
 

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IN WITNESS WHEREOF, Landlord, Temporary Landlord and Tenant have executed this
Addendum as of the date set forth above.

LANDLORD:

3915 SHOPTON ROAD, LLC,
a North Carolina limited liability company

By:   /s/Paul Herndon                                        
         Name: Paul Herndon
         Title: Vice President

 

TENANT:

SHUTTERFLY, INC.,
a Delaware corporation

By: /s/Douglas Appleton          
Name: Douglas S.
Appleton                                                               
Title:   VP, Legal                                                                        

TEMPORARY LANDLORD:

4015 SHOPTON ROAD, LLC,
a North Carolina limited liability company

By:   /s/Paul Herndon                                        
         Name: Paul Herndon
         Title: Vice President

 
 

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