sflyexh10-02.htm


     

     

    


     

    


     

    LEASE
AGREEMENT

     

    LIBERTY
COTTON CENTER, LLC

    Landlord

     

    AND

     

    SHUTTERFLY,
INC.

    Tenant

     

    AT

     

    Building
13

    4410
East Cotton Center Blvd.

    Phoenix,
Arizona 85040

     

    
      
        
           

        

         


      

      
         


        
          

        

      

      
         


        
          LEASE AGREEMENT


          


          INDEX

          §            
Section Page

          


        

      

    

    

      
        	
                1.

              	
                Basic
      Lease Terms and Definitions

              	
                1

              
	
                2.

              	
                Premises

              	
                2

              
	
                3.

              	
                Use

              	
                2

              
	
                4.

              	
                Term;
      Possession

              	
                2

              
	
                5.

              	
                Early
      Occupancy

              	
                2

              
	
                6.

              	
                Options
      to Extend Term

              	
                3

              
	
                7.

              	
                Option
      to Terminate

              	
                4

              
	
                8.

              	
                Rent;
      Taxes

              	
                4

              
	
                9.

              	
                Operating
      Expenses

              	
                4

              
	
                10.

              	
                Utilities

              	
                5

              
	
                11.

              	
                Insurance;
      Waivers; Indemnification

              	
                5

              
	
                12.

              	
                Maintenance
      and Repairs

              	
                6

              
	
                13.

              	
                Compliance

              	
                6

              
	
                14.

              	
                Signs

              	
                7

              
	
                15.

              	
                Alterations

              	
                7

              
	
                16.

              	
                Mechanics’
      Liens

              	
                8

              
	
                17.

              	
                Landlord’s
      Right of Entry

              	
                8

              
	
                18.

              	
                Damage
      by Fire or Other Casualty

              	
                8

              
	
                19.

              	
                Condemnation

              	
                8

              
	
                20.

              	
                Quiet
      Enjoyment

              	
                9

              
	
                21.

              	
                Assignment
      and Subletting

              	
                9

              
	
                22.

              	
                Subordination;
      Mortgagee’s Rights

              	
                9

              
	
                23.

              	
                Tenant’s
      Certificate; Financial Information

              	
                10

              
	
                24.

              	
                Surrender

              	
                10

              
	
                25.

              	
                Defaults
      - Remedies

              	
                10

              
	
                26.

              	
                Tenant’s
      Authority

              	
                12

              
	
                27.

              	
                Liability
      of Landlord and Tenant

              	
                12

              
	
                28.

              	
                Tenant
      Improvements; Tenant Allowance

              	
                12

              
	
                29.

              	
                Major
      Work

              	
                14

              
	
                30.

              	
                Emergency
      Generator

              	
                14

              
	
                31.

              	
                Option
      to Purchase

              	
                15

              
	
                32.

              	
                Brokers;
      Recognition and Indemnity

              	
                15

              
	
                33.

              	
                Guaranty.

              	
                16

              
	
                34.

              	
                Notices

              	
                16

              
	
                35.

              	
                Miscellaneous

              	
                16

              


      

      
 

    


    
      
        
                                                               


        

         


      

      
         


        
          

        

      

      
         


      

    


    LEASE
AGREEMENT

     

    THIS LEASE AGREEMENT is made
by and between LIBERTY COTTON
CENTER, LLC, a Delaware limited liability company (“Landlord”) and SHUTTERFLY, INC., a
corporation organized under the laws of Delaware (“Tenant”), and is dated as of
the date on which this Lease has been fully executed by Landlord and Tenant (the
“Date of this Lease”).

     

    1. Basic
Lease Terms and Definitions.

     

    (a) Premises:  Building
13, consisting of approximately 101,269 rentable square feet as shown on Exhibit “A”.

     

    Address:  4410 East
Cotton Center Blvd, Phoenix, Arizona 85040

     

    (b) Building:  The
building structure located on the Premises.

     

    (c) Term:  Eighty-four
(84) months (plus any partial month from the Commencement Date until the first
day of the next full calendar month during the Term).

     

    (d) Commencement
Date:  Later of (a) March 1, 2009, or (b) Substantial
Completion of the Tenant Improvements and receipt of the Certificate of
Occupancy for the Premises.

     

    (e) Expiration
Date:  The last day of the Term.

     

    (f) Minimum Annual
Rent:  Payable in monthly installments as follows:

     

    
      	
              Lease
      Months

            	
              Annual

            	
              Monthly

            	
              Lease
      Months

            	
              Annual

            	
              Monthly

            
	
              1-6

            	
              $0.00

            	
              $0.00

            	
              37-48

            	
              $1,637,329

               

            	
              $136,444

               

            
	
              7-12

            	
              $607,614

               

            	
              $101,269

               

            	
              49-60

            	
              $1,686,449

               

            	
              $140,537

               

            
	
              13-24

            	
              $1,543,340

               

            	
              $128,612

               

            	
              61-72

            	
              $1,737,042

               

            	
              $144,754

               

            
	
              25-36

            	
              $1,589,640

               

            	
              $132,470

               

            	
              73-84

            	
              $1,789,154

               

            	
              $149,096

               

            


    

    


     

    (g) Annual Operating
Expenses:  $387,860.27, payable in monthly installments of
$32,321.69, subject to adjustment as provided in this Lease.

     

    (h) Tenant’s Share: 100% (also see
Definitions)

     

    (i) Use:  manufacturing,
warehousing and distribution, general office, data center, back office and
ancillary uses, and for any other legal purpose approved by Landlord in writing
(which approval shall not be unreasonably withheld, delayed or
conditioned).

     

    (j) Security
Deposit:  None.

     

    (k) Addresses For
Notices:

     

    Landlord:               LIBERTY COTTON CENTER,
LLC

    2390 E.
Camelback Rd., Suite 318

    Phoenix,
Arizona  85016

    Attention:
Senior Vice President/City Manager

    


    


    


    
      	
              Tenant:

            	
              Shutterfly,
      Inc.

            


    

    2800
Bridge Parkway

    Redwood
City, CA 94065

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

    


    (l) Guarantor:  None.

     

    (m) Additional Defined
Terms:  See Rider 1 for the definitions of other capitalized
terms.

     

    (n) Contents:  The
following are attached to and made a part of this Lease:

     

    Rider 1 –
Additional
Definitions                                                              

    Exhibits:                        “A”
– Plan showing Premises

                   “B”
– Building Rules

                   “C” –
Estoppel Certificate Form

                   “D”
– Space Plan and Scope of Work for Tenant Improvements

                   “E” –
Parking

                   “F”
– Additional Provisions

                   “G”
– Tenant Work

                   “H”
-- Contractor Agreement (Warranty Page)

    


    2. Premises.  Landlord
leases to Tenant and Tenant leases from Landlord the Premises, together with the
right in common with others to use the Common Areas.  Tenant accepts
the Premises, Building and Common Areas “AS IS”, without relying on any
representation, covenant or warranty by Landlord other than as expressly set
forth in this Lease.  Landlord and Tenant stipulate and agree to the
rentable square footage set forth in Section 1(a) without regard to actual
measurement.

     

    3. Use.  Tenant
shall occupy and use the Premises only for the Use specified in Section l
above.  Tenant shall have access to and the right to use the Premises
to conduct business for Tenant’s permitted use at all times, twenty-four (24)
hours a day, seven (7) days a week, during the entire Term, subject to
Landlord’s rights to maintain, repair and/or replace any portion of the Property
as Landlord deems reasonably necessary or appropriate.  Tenant shall
not permit any conduct or condition which shall endanger, disturb or otherwise
interfere with any other Building occupant’s normal operations or with the
management of the Building beyond that which is commercially
reasonable.  Except as otherwise provided in this Lease, Tenant shall
not use or permit the use of any portion of the Property for outdoor storage or
installations outside of the Premises.  Tenant may use all Common
Areas only for their intended purposes.  Landlord shall have exclusive
control of all Common Areas at all times.

     

    4. Term; Possession.  The
Term of this Lease shall commence on the Commencement Date and shall end on the
Expiration Date, unless sooner terminated in accordance with this
Lease.  Except as otherwise provided in this Lease, if Landlord is
delayed in delivering possession of all or any portion of the Premises to Tenant
as of the Commencement Date, Tenant will take possession on the date Landlord
delivers possession, which date will then become the Commencement Date (and the
Expiration Date will be extended so that the length of the Term remains
unaffected by such delay).  Except as otherwise provided in this
Lease, Landlord shall not be liable for any loss or damage to Tenant resulting
from any delay in delivering possession due to the holdover of any existing
tenant or other circumstances outside of Landlord’s reasonable
control.

     

    5. Early
Occupancy.  Subject to Force
Majeure Delays and Tenant Delays, Tenant and its authorized agents, employees
and contractors shall at all reasonable times on or after January 15, 2009 and
prior to the Commencement Date have the right, at Tenant’s own risk, expense and
responsibility, to access the Premises, provided that in so doing Tenant shall
not interfere with or delay the work to be performed by Landlord pursuant to
Section 28 hereof.  If Tenant accesses the Premises prior to the
Commencement Date, Tenant shall abide by the terms and conditions of this Lease
as if the term of this Lease had already commenced, except that Tenant shall
have no obligation to pay the Minimum Annual Rent, Annual Operating Expenses and
any other additional Rent or sums payable by Tenant to Landlord pursuant to this
Lease, until the Commencement Date (it being acknowledged that nothing herein
shall impact the initial Minimum Annual Rent abatement during the first six (6)
months of the Term).  Any such use of the Premises is also subject to,
and Tenant must comply with and observe, all applicable laws, all safety rules
and procedures, and all other terms and conditions of this Lease.  In
no event may Tenant conduct business in the Premises during such early access
period.  Landlord shall not be liable for any loss or damage to Tenant
resulting from any delay in delivering possession due to the holdover of any
existing tenant or other circumstances outside of Landlord’s reasonable
control.  Notwithstanding the foregoing, in the event that the
Premises are not available for access to Tenant on January 15, 2009, Tenant
shall receive a credit to Minimum Annual Rent equal to one (1) day of Minimum
Annual Rent for each day thereafter for which the Premises are not available,
which credits shall be applied to the first payment of Minimum Annual
Rent.  

     

    6. Options
to Extend Term.  Provided that (a)
Landlord has not given Tenant notice of a monetary default and/or a material
non-monetary Event of Default   more than seven (7) times
preceding the Expiration Date, (b) Tenant is not in default under this Lease
beyond any applicable notice and cure period(s) nor is there any event that with
the giving of notice and/or the passage of time would constitute a default, and
(c) Tenant  (or a transferee permitted under Section 21(b)) is the
occupant of at least seventy five percent (75%) of the Premises, Tenant shall
have the right and option to extend the Term for three (3) additional periods of
sixty (60) months each, exercisable by giving Landlord prior written notice
(“Tenant’s Notice”), at least two hundred seventy (270) days in advance of the
Expiration Date (as may be extended by a renewal term) of Tenant's election to
extend the Term; it being agreed that time is of the essence and that this
option is personal to Tenant and any transferee permitted under Section 21(b)
and is non-transferable to any assignee or sublessee other than any transferee
permitted under Section 21(b).  Such extension shall be under the same
terms and conditions as provided in this Lease except as follows:

     

    (a) the additional period shall begin on the Expiration Date (as
may be extended by a renewal term);

     

    (b) all
references to the Term in this Lease shall be deemed to mean the Term as
extended pursuant to this Section; and

     

    (c) the
Minimum Annual Rent payable with its determination of Fair Market Value by
Tenant shall be ninety five percent (95%) of the Fair Market Rental for the
Premises.  Landlord shall provide Tenant with written notice of its
proposed determination of Fair Market Value for the Premises within thirty (30)
days after receipt of Tenant’s Notice.  The parties shall have
forty-five (45) days after Landlord has provided Tenant with Landlord’s proposed
determination of Fair Market Value for the Premises in order to agree on the
Minimum Annual Rent during such extended term.  If the parties fail to
agree on the Minimum Annual Rent for such extended term during that period, then
(i) either party may elect to terminate this Lease at the end of the applicable
term or (ii) the parties may agree to determine the Fair Market Rental through
an appraisal.  In the event the parties elect to establish the Fair
Market Rental through an appraisal process, Landlord and Tenant shall each
appoint one appraiser within thirty (30) days thereafter; provided, however,
that if either party fails to designate an appraiser within the time period
specified, then the appraiser who is designated shall conclusively determine the
Fair Market Rental.  If two (2) appraisers are designated, then they
shall submit within thirty (30) days after the second thereof has been
designated their appraisals of the Fair Market Rental.  Landlord and
Tenant intend that the "Fair Market Rental" shall be deemed to be the rentable
square feet of industrial space that is then being charged for industrial space
located in industrial buildings in the vicinity of  the greater
Phoenix industrial market that are comparable in quality and offer similar
amenities to the Premises and involving arms length, new leases with similar
terms and conditions, taking into account the savings to the Landlord in putting
a new tenant into possession of the Premises and all concessions offered in such
other arms length new leases in the market (including without limitation free
rent, tenant improvement allowances, leasing commissions, and moving
allowances).  The spaces used for comparison shall be comparable in
size, quality and design to the Premises, and such spaces used for comparison
shall be comparable to the Premises with respect to their location within such
buildings, the quality and quantity of tenant improvements installed at each
landlord's expense, and the financial strength of Tenant, and, if available,
shall factor uses similar to Tenant’s permitted Use as set forth in Article 1(i)
of this Lease.  Should the two appraisers be unable to agree within
said thirty (30) days, the two appraisers shall each submit an independent
written appraisal and together they shall designate one (1) additional person as
appraiser within five (5) days following the expiration of said thirty (30) day
period; provided however, that if the difference between the two appraisals is
five percent (5%) or less of the lowest appraisal, then an additional appraiser
shall not be designated and the Fair Market Rental shall equal the average of
the two (2) appraisals that are submitted.  The third appraiser shall
submit an independent written appraisal within thirty (30) days following his or
her appointment.  If the two appraisers cannot agree upon a third
appraiser, then either party hereunder may request that the presiding Judge of
the Maricopa County Superior Court appoint such third appraiser.  The
Fair Market Rental shall be equal to the average of the two (2) written
appraisals which are closest, and third (3rd) appraisal shall be
disregarded.  Each party shall bear the costs of the appraiser
appointed by it.  If three (3) appraisers are appointed, each party
shall bear the cost of the appraiser appointed by it and the parties shall share
equally in the cost of the third appraiser.  No person shall be
appointed or designated an appraiser unless he or she is (i) an independent
appraiser who is a currently certified member of the American Institute of Real
Estate Appraisers (with MM designation) and unless he or she has at least five
(5) years experience as an appraiser in Maricopa County, or (ii) a real estate
broker with at least ten (10) years experience in leasing of commercial office
space in the vicinity of the Premises.  The third appraiser shall not
have ever been employed (full-time or part-time or on a consulting basis) by
Landlord or Tenant.  In the event that the Fair Market Rental is not
established before the commencement of the extended term, Tenant shall continue
to pay the Minimum Annual Rent in effect as of the end of the original term;
when the Fair Market Rental has been established, the new Minimum Annual Rent
shall be retroactively effective as of the beginning of the extended term, and
Tenant shall pay Landlord any deficiency with in thirty (30) days after the
establishment of the new Minimum Annual Rent.  If Tenant has overpaid
the Minimum Annual Rent during such period, such overpayment shall be offset
against rent thereafter coming due.  Notwithstanding the foregoing, if
either Landlord or Tenant is not satisfied with the Fair Market Rental
determined by the appraisal process, such party may elect to terminate this
Lease at the end of the applicable term by providing written notice to the other
party within ten (10) days after the Fair Market Rent is determined by the
appraiser(s).

     

    7. Option to
Terminate.  Tenant shall have
the right and option, exercisable by giving Landlord a minimum of nine (9)
months prior written notice thereof, to terminate this Lease at the expiration
of the sixtieth (60) full month of the Term and by paying Landlord a
cancellation fee (on or prior to such expiration date) equal to the sum of (i)
nine (9) months (or ten (10) months if Tenant elects to utilize any portion of
the Additional Allowance, as hereinafter defined) of what would have been the
then existing Minimum Annual Rent during months sixty one (61) through sixty
nine (69) at the time of giving notice, plus (ii) nine (9) months (or ten (10)
months if Tenant elects to utilize any portion of the Additional Allowance, as
hereinafter defined) of estimated Operating Expenses to be paid by Tenant for
months sixty one (61) through sixty nine (69), such Operating Expenses to be
reconciled pursuant to Section 9 below thereafter.  Tenant shall pay
all Rent under this Lease and abide by all of the terms and conditions of this
Lease through and including such early termination date.

     

    8. Rent; Taxes.  Tenant
agrees to pay to Landlord, without demand, deduction or offset, Minimum Annual
Rent and Annual Operating Expenses for the Term.  Tenant shall pay the
Monthly Rent, in advance, on the first day of each calendar month during the
Term, at Landlord’s address designated in Section 1 above unless Landlord
designates otherwise; provided that Monthly Rent for the seventh (7th) month
of the first Lease Year shall be paid within ten (10) days after the
Commencement Date.  If the Commencement Date is not the first day of
the month, the Monthly Rent for that partial month shall be apportioned on a per
diem basis and shall be paid on or before the Commencement
Date.  Tenant shall pay Landlord a service and handling charge equal
to 5% of any Rent not paid within ten (10) days after the date
due.  In addition, any Rent, including such charge, not paid within
fifteen (15) days after the due date will bear interest at the Interest Rate
from the date due to the date paid.  Tenant shall pay before
delinquent all taxes levied or assessed upon, measured by, or arising from:
(a) the conduct of Tenant’s business; (b) Tenant’s leasehold estate;
or (c) Tenant’s property.  Additionally, Tenant shall pay to
Landlord all sales, use, transaction privilege, or other excise tax that may at
any time be levied or imposed upon, or measured by, any amount payable by Tenant
under this Lease.

     

    9. Operating
Expenses.  The amount of the Annual Operating Expenses set
forth in Section 1(g) above represents Tenant’s Share of the estimated
Operating Expenses for the calendar year in which the Term
commences.  Landlord may adjust such amount from time to time (but not
more than once per Lease Year) if the estimated Annual Operating Expenses
increase or decrease; Landlord may also invoice Tenant separately from time to
time for Tenant’s Share of any extraordinary or unanticipated Operating
Expenses.  By April 30th of each year (and as soon as practical after
the expiration or termination of this Lease or, at Landlord’s option, after a
sale of the Property), Landlord shall provide Tenant with a statement of
Operating Expenses for the preceding calendar year or part
thereof.  Within 30 days after delivery of the statement to Tenant,
Landlord or Tenant shall pay to the other the amount of any overpayment or
deficiency then due from one to the other or, at Landlord’s option, Landlord may
credit Tenant’s account for any overpayment.  If Tenant does not give
Landlord notice within ninety (90) days after receiving Landlord’s statement
that Tenant disagrees with the statement and specifying the items and amounts in
dispute, Tenant shall be deemed to have waived the right to contest the
statement.  Landlord’s and Tenant’s obligation to pay any overpayment
or deficiency due the other pursuant to this Section shall survive the
expiration or termination of this Lease.  Notwithstanding any other
provision of this Lease to the contrary, Landlord may, in its reasonable
discretion, determine from time to time the method of computing and allocating
Operating Expenses, including the method of allocating Operating Expenses to
various types of space within the Building to reflect any disparate levels of
services provided to different types of space.  If the Building is not
fully occupied during any period, Landlord may make a reasonable adjustment
based on occupancy in computing the Operating Expenses for such period so that
Operating Expenses are computed as though the Building had been fully
occupied.  With respect to each year following the first full year in
which Landlord has received it full assessments, increases in "Controllable
Operating Expenses" shall not exceed 10% per year (on a cumulative basis)
without Tenant's prior written consent (which consent may be withheld by Tenant
in its sole discretion). Controllable Operating Expenses means all those
Operating Expenses chargeable to Tenant pursuant to this Lease (including,
without limitation, any roof repair and maintenance), but expressly excludes
real estate and association taxes and assessments, HVAC repair, maintenance and
replacement, utilities and insurance.

     

    Tenant
shall be entitled at any reasonable time during regular business hours, but no
more than once in each calendar year, after giving to Landlord at least five (5)
business days prior written notice, to inspect in Landlord’s business office all
Landlord’s records necessary to satisfy itself that all Annual Operating
Expenses have been correctly allocated to Tenant, for either or both of the two
(2) calendar years immediately preceding the year during which such notice is
given, and to obtain an audit thereof by a reputable, independent certified
public accountant (selected by Tenant and who also provides non-auditing
services to Tenant) to determine the accuracy of Landlord’s certification of the
amount of Annual Operating Expenses charged Tenant.  If it is
determined that Tenant’s liability for Annual Operating Expenses for either such
calendar year is less than ninety percent (90%) of that amount which Landlord
previously certified to Tenant for such calendar year, Landlord shall promptly
pay to Tenant the reasonable cost of such audit and regardless of such
percentage shall refund promptly to Tenant the amount of the additional rent
paid by Tenant for such calendar year which exceeds the amount for which Tenant
actually is liable, as determined following such audit.  Except as set
forth above, Tenant shall bear the total cost of any such audit.

     

    10. Utilities.  Tenant
shall pay for water, sewer, gas, electricity, heat, power, telephone and other
communication services and any other utilities supplied to the
Premises.  Landlord represents and warrants to its actual knowledge
that the following utilities shall be separately metered as of the Commencement
Date:  all utilities other than water services. Except to the extent
Landlord elects to provide any such services and invoice Tenant for the cost or
include the cost in Operating Expenses, Tenant shall obtain service in its own
name and timely pay all charges directly to the provider.  Landlord
shall not be responsible or liable for any interruption in such services, nor
shall such interruption affect the continuation or validity of this Lease,
provided, however, that Rent shall abate if any utility service is not provided
to the Premises for more than five (5) continuous days due to Landlord’s
negligence. Landlord shall have the exclusive right to select, and to change,
the companies providing such services to the Building or
Premises.  Any wiring, cabling or other equipment necessary to connect
Tenant’s telecommunications equipment shall be Tenant’s responsibility, and
shall be installed in a manner approved by
Landlord.   

     

    11. Insurance;
Waivers; Indemnification.

     

    (a) During
the Term, Landlord shall carry the following insurance:

     

    (i) All Risk
or special risk form (or equivalent) property insurance (including a vandalism
and malicious mischief endorsement and sprinkler leakage coverage, and also
covering such other risks as Landlord or Landlord's lender may require) on the
Premises, Building, Property and common areas (but excluding any personal
property which Tenant is obligated to insure) in an amount not less than one
hundred percent (100%) of the full replacement cost thereof (excluding footings,
foundations and excavation), and including commercially reasonable rental loss
coverage for losses covered by such insurance policy.  Such insurance shall
include insurance on the Tenant Improvements up to the Tenant Improvement
Allowance.  The deductible under the property policy shall not exceed
such amount appropriate given prudent risk management
practices. 

     

    (ii)           
Commercial general liability insurance coverage, including bodily injury and
property damage with a combined single limit of not less than Five Million
Dollars ($5,000,000.00). Landlord may satisfy its insurance obligations under
this Lease by blanket, umbrella and/or excess liability coverage, so long as the
coverage afforded under the applicable policy is not reduced or diminished as a
result thereof.  Landlord agrees to provide Tenant with not less than
thirty (30) days' prior written notice to Tenant of policy cancellation, except
for cancellation due to non-payment of premium which requires only ten (10) days
notice by law.  Such insurance shall be effected under valid and
enforceable policies issued by reputable insurers permitted to do business in
the State of Arizona and rated in Best’s Insurance Guide, or any successor
thereto as having a “Best’s Rating” of “A-” and a “Financial Size Category” of
at least “X” or, if such ratings are not then in effect, the equivalent thereof
or such other financial rating as Lessee may at any time consider
appropriate. 

    


     

    (b) Tenant,
at its expense, shall keep in effect commercial general liability insurance,
including contractual liability insurance, covering Tenant’s use of the
Property, with such coverages and limits of liability as Landlord may reasonably
require, but not less than a $1,000,000 combined single limit with a $5,000,000
general aggregate limit (which general aggregate limit may be satisfied by an
umbrella liability policy) for bodily injury or property damage; however, such
limits shall not limit Tenant’s liability hereunder.  Tenant shall
also maintain property insurance on the value of the Tenant Improvements over
and above the Tenant Improvement Allowance.  The policies shall add
Landlord, Liberty Property Trust and at Landlord’s request, any Mortgagee(s), as
additional insureds, shall be written on an “occurrence” basis and not on a
“claims made” basis.  The insurer shall be authorized to issue such
insurance in which the Property is located and rated at least “A-, X” in the
most current edition of Best’s Insurance Reports.  Tenant shall
deliver to Landlord on or before the Commencement Date or any earlier date on
which Tenant accesses the Premises, and no later than 30 days after the date of
each policy renewal, a certificate of insurance evidencing such
coverage.

     

    (c) Landlord
and Tenant each waive, and release each other from and against, all claims for
recovery against the other for any loss or damage to the property of such party
arising out of fire or other casualty coverable by a standard “Causes of
Loss-Special Form” property insurance policy with, in the case of Tenant, such
endorsements and additional coverages as are considered good business practice
in Tenant’s business, even if such loss or damage shall be brought about by the
fault or negligence of the other party or its Agents; provided, however, such
waiver by Landlord shall not be effective with respect to Tenant’s liability
described in Section 13(f) below.  This waiver and release is
effective regardless of whether the releasing party actually maintains the
insurance described above in this subsection and is not limited to the amount of
insurance actually carried, or to the actual proceeds received after a
loss.  Each party shall have its insurance company that issues its
property coverage waive any rights of subrogation, and shall have the insurance
company include an endorsement acknowledging this waiver, if
necessary.   Tenant assumes all risk of damage to Tenant’s
personal property within the Property, including any loss or damage caused by
water leakage, fire, windstorm, explosion, theft or any other perils typically
covered by standard property insurance policies, except to the extent caused by
Landlord’s breach of any of its obligations under this Lease.

     

    (d) Subject
to subsection (c) above, and except to the extent caused by the negligence
or willful misconduct of Landlord or its Agents, Tenant will indemnify, defend,
and hold harmless Landlord and its Agents from and against any and all claims,
actions, damages, liability and expense (including fees of attorneys,
investigators and experts) which may be asserted against, imposed upon, or
incurred by Landlord or its Agents and arising out of or in connection with loss
of life, personal injury or damage to property in or about the Premises or
arising out of the occupancy or use of the Property by Tenant or its Agents or
occasioned wholly or in part by any act or omission of Tenant or its Agents,
whether prior to, during or after the Term.  Tenant’s obligations
pursuant to this subsection shall survive the expiration or termination of this
Lease, but only to the extent that the causes giving rise to Tenant's
obligations under this Article 11.(d) occur before the expiration of this
Lease.

     

    (e) Subject
to the terms of this Lease, Landlord will protect, indemnify and hold harmless
Tenant and its Agents from and against any and all claims, actions, damages,
liability and expense (including fees of attorneys, investigators and experts)
in connection with loss of life, personal injury or damage to property caused to
any person in or about the Premises occasioned wholly or in part by the
negligence of Landlord or its Agents, except to the extent such loss, injury or
damage was caused by the negligence of Tenant or its Agents. In case any action
or proceeding is brought against Tenant and/or its Agents by reason of the
foregoing, Landlord, at its expense, shall resist and defend such action or
proceeding, or cause the same to be resisted and defended by counsel (reasonably
acceptable to Tenant and its Agents) designated by the insurer whose policy
covers such occurrence or by counsel designated by Landlord and approved by
Tenant and its Agents. Landlord’s obligations pursuant to this Section shall
survive the expiration or termination of this Lease, but only to the extent that
the causes giving rise to Landlord’s obligations under this Article 11.(e) occur
before the expiration of this Lease.

     

    12. Maintenance
and Repairs.

     

    (a) Landlord
shall Maintain the:  (i) Building footings, foundations, structural
steel columns and girders, floor slab and other structural components of the
Property at Landlord’s sole expense; (ii) Building exterior walls; (iii)
Building Systems; and (iv) Common Areas.  Costs incurred by
Landlord under the foregoing subsections (ii), (iii) and (iv) will be included
in Operating Expenses provided that to the extent any heating, ventilation and
air conditioning system, or other Building System, equipment or fixture
exclusively serves the Premises, Landlord may elect either to Maintain the same
at Tenant’s sole expense and bill Tenant directly or by notice to Tenant require
Tenant to Maintain the same at Tenant’s expense.

     

    Notwithstanding
the foregoing, Landlord shall be responsible for any repairs or replacements of
any heating, ventilation and air conditioning system ("HVAC"):

     

    (i) located
in the office area, and to the extent any such single repair or replacement
exceeds $1,000.00 per unit, Landlord shall pass on to Tenant for the remainder
of the Term its pro rata share of such cost amortized over the useful life of
such repair or replacement determined in accordance with generally accepted
accounting principles, and

     

    (ii) located
in the warehouse area, and to the extent any such single repair or replacement
exceeds $1,000.00 per unit, Landlord shall pass on to Tenant for the remainder
of the Term its pro rata share of such cost amortized over the remainder of the
Term.

     

    Notwithstanding
the foregoing, any repair or replacement of the HVAC that results from damage
caused by Tenant or Tenant's Agents shall be the sole responsibility of Tenant
at Tenant's sole expense.  Landlord shall be responsible for securing
the HVAC maintenance contract at Tenant's sole expense.  In the event
Landlord’s HVAC maintenance contract exceeds prevailing market financial terms,
Tenant shall have the right to require Landlord to bid out such contract upon
expiration of the existing contract.  If Tenant becomes aware of any
condition that is Landlord’s responsibility to repair, Tenant shall promptly
notify Landlord of the condition.

     

    Notwithstanding
the foregoing, Landlord shall Maintain the roof and the costs thereof shall be
shared as follows:

     

    (i)           to
the extent any single repair costs less than $10,000.00, Tenant shall promptly
reimburse Landlord for such cost;

     

    (ii)           to
the extent any single repair costs $10,000.00 or more, Landlord shall pass on to
Tenant for the remainder of the Term its pro rata share of such cost amortized
over the useful life of such roof repair determined in accordance with generally
accepted accounting principles.

     

    (iii)           if
during the Term the entire structure of the roof must be replaced, Landlord
shall replace the roof at Landlord’s sole expense.

    


    Notwithstanding
the foregoing, any repair or replacement of the roof that results from damage
caused by Tenant or Tenant's Agents shall be the sole responsibility of Tenant
at Tenant's sole expense.

     

    (b) Except as
provided in subsection (a) above, Tenant at its sole expense shall Maintain the
interior, non-structural portions of the Premises and all fixtures and equipment
in the Premises.  All repairs and replacements by Tenant shall utilize
materials and equipment which are comparable to those originally used in
constructing the Building and Premises.  Alterations, repairs and
replacements to the Property, including the Premises, made necessary because of
Tenant’s Alterations or installations or any use or circumstances special or
particular to Tenant or any act or omission of Tenant or its Agent, shall be
made by Landlord or Tenant as set forth above, but at the sole expense of Tenant
to the extent not covered by any applicable insurance proceeds paid to
Landlord.

     

    13. Compliance.

     

    (a) Tenant
will, at its expense, promptly comply with all Laws now or subsequently
pertaining to Tenant’s use or occupancy of the Premises  or Tenant’s
business conducted within the Premises.  Tenant will pay any taxes or
other charges by any authority on Tenant’s property or trade fixtures or
relating to Tenant’s use of the Premises.  Neither Tenant nor its
Agents shall use the Premises in any manner that under any Law would require
Landlord to make any Alteration to or in the Building or Common Areas (without
limiting the foregoing, Tenant shall not use the Premises in any manner that
would cause the Premises or the Property to be deemed a “place of public
accommodation” under the ADA if such use would require any such
Alteration).  Notwithstanding anything to the contrary contained in
this Lease, Landlord shall be responsible for compliance with the ADA, and any
other Laws regarding accessibility, with respect to the Premises, except to the
extent such compliance is required (i) by Tenant’s particular use or occupancy
of the Premises or as a result of Tenant’s business conducted within the
Premises, or (ii) as a result of any Alteration performed by Tenant after the
Commencement Date.

     

    (ii)          Except
for Tenant's obligations pursuant to Article 13(a)(i) above, Landlord,
throughout the Term of this Lease, shall comply with all Laws concerning the
Property, and such compliance costs shall (subject to the Exclusions, as
hereinafter defined) be chargeable to Tenant as Operating Expenses; provided,
however, that in the event that Landlord receives notice that the Building is
not in compliance with applicable Laws existing as of the Commencement Date,
Landlord shall make such modifications as may be required by order or directive
of any applicable governmental authority in order to bring the Building into
compliance with applicable Laws as of the Commencement Date without cost or
expense to Tenant and without including such cost or expense as an Operating
Expense.

     

    (b) Tenant
will comply, and will use reasonable efforts to cause its Agents to comply, with
the Building Rules.

     

    (c) Tenant
agrees not to do anything or fail to do anything which will increase the cost of
Landlord’s insurance (unless Tenant agrees to pay for such increase) or which
will prevent Landlord from procuring policies (including public liability) from
companies and in a form reasonably satisfactory to Landlord.  If any
breach of the preceding sentence by Tenant causes the rate of fire or other
insurance to be increased, Tenant shall pay the amount of such increase as
additional Rent within 30 days after being billed.

     

    (d) Landlord
hereby discloses to Tenant that the Premises and Building are a portion of a
larger development known as Cotton Center, and that Cotton Center consists of
certain improvements for the benefit of all owners and occupants in Cotton
Center, in accordance with the following recorded documents (collectively, the "
Cotton Center CC&Rs"):  (i) Declaration of Covenants,
Conditions, Easements and Restrictions dated December 24, 1998, recorded
in Instrument No. 98-1169010, (ii) Supplementary Declaration
dated April 15, 1999, recorded in Instrument No. 99-0361560, and (iii) Supplementary Declaration
dated October 30, 2000, recorded in Instrument No.
2000-830360.    Pursuant to the Cotton Center CC&Rs,
residents of Cotton Center are assessed association fees and other charges,
which cover, among other items, repair and maintenance of improvements within
Cotton Center, such as sidewalks, curbs, landscape areas, fountains and
lighting.  Tenant hereby acknowledges prior receipt of the Cotton
Center CC&Rs.

     

    (e) Landlord
further discloses to Tenant that the Premises and Building are subject to the
following recorded documents (collectively, the "Allred Cotton Center
CC&Rs"):  (i) Declaration of Covenants,
Conditions, and Restrictions and Grant of Easements dated November, 2000,
recorded in Instrument No. 2000-0862293, (ii) First Amendment to Declaration of
Covenants, Conditions, and Restrictions and Grant of Easements dated
March 8, 2001, recorded in Instrument No. 2001-0182782, and (iii) Second Amendment to Declaration of
Covenants, Conditions, and Restrictions and Grant of Easements dated
March 11, 2002, recorded in Instrument No.
2002-029648.    Pursuant to the Allred Cotton Center
CC&Rs, residents of Cotton Center are assessed association fees and other
charges, which cover, among other items, repair and maintenance of improvements
within Cotton Center, such as sidewalks, curbs, landscape areas, fountains and
lighting.  Tenant hereby acknowledges prior receipt of the Allred
Cotton Center CC&Rs.

     

    (f) Tenant
agrees that (i) no activity will be conducted on the Premises that will use
or produce any Hazardous Materials, except for activities which are part of the
ordinary course of Tenant’s business and are conducted in accordance with all
Environmental Laws (“Permitted Activities”); (ii) the Premises will not be
used for storage of any Hazardous Materials, except for materials used in the
Permitted Activities which are properly stored in a manner and location
complying with all Environmental Laws; (iii) no portion of the Premises or
Property will be used by Tenant or Tenant’s Agents for disposal of Hazardous
Materials; (iv) Tenant will deliver to Landlord copies of all Material
Safety Data Sheets and other written information prepared by manufacturers,
importers or suppliers of any chemical; and (v) Tenant will immediately
notify Landlord of any violation by Tenant or Tenant’s Agents of any
Environmental Laws or the release or suspected release of Hazardous Materials
in, under or about the Premises, and Tenant shall immediately deliver to
Landlord a copy of any notice, filing or permit sent or received by Tenant with
respect to the foregoing.  If at any time during or after the Term,
any portion of the Property is found to be contaminated and such contamination
was caused by Tenant or Tenant’s Agents or subject to conditions prohibited in
this Lease caused by Tenant or Tenant’s Agents, Tenant will indemnify, defend
and hold Landlord harmless from all claims, demands, actions, liabilities,
costs, expenses, attorneys’ fees, damages and obligations of any nature arising
from or as a result thereof, and Landlord shall have the right to direct
remediation activities, all of which shall be performed at Tenant’s
cost.  Tenant’s obligations pursuant to this subsection shall expire
on the last day of the second year after the expiration or earlier termination
date of this Lease.

     

    14. Signs.  Tenant
shall not place any signs on the Property without the prior consent of Landlord
(which consent shall not be unreasonably withheld, delayed or conditioned),
other than signs that are located wholly within the interior of the Premises and
not visible from the exterior of the Premises.  Tenant shall maintain
all signs installed by Tenant in good condition. Tenant shall remove its signs
at the termination of this Lease, shall repair any resulting damage, and shall
restore the Property to its condition existing prior to the installation of
Tenant’s signs.

     

    15. Alterations.  Except
for non-structural Alterations that (i) do not exceed $50,000 in the
aggregate, (ii) are not visible from the exterior of the Premises,
(iii) do not affect any Building System or the structural strength of the
Building, (iv) do not require penetrations into the floor, ceiling or
walls, and (v) do not require work within the walls, below the floor or
above the ceiling, Tenant shall not make or permit any Alterations in or to the
Premises without first obtaining Landlord’s consent, which consent shall not be
unreasonably withheld, delayed or conditioned.  With respect to any
Alterations made by or on behalf of Tenant (whether or not the Alteration
requires Landlord’s consent): (i) not less than 10 days prior to commencing
any Alteration, Tenant shall deliver to Landlord the plans, specifications and
necessary permits for the Alteration, together with certificates evidencing that
Tenant’s contractors and subcontractors have adequate insurance coverage adding
Landlord, Liberty Property Trust and any other associated or affiliated entity
as their interests may appear as additional insureds, (ii) Tenant shall
obtain Landlord’s prior written approval of any contractor or subcontractor,
(iii) the Alteration shall be constructed with new materials, in a good and
workmanlike manner, and in compliance with all Laws and the plans and
specifications delivered to, and, if required above, approved by Landlord, and
(iv) Tenant shall pay Landlord all reasonable costs and expenses in
connection with Landlord’s review of Tenant’s plans and specifications, and of
any supervision or inspection of the construction Landlord deems
necessary.

     

    Any
Alteration by Tenant (other than Tenant Improvements up to the value of the
Tenant Improvement Allowance) shall be the property of Tenant until the
expiration or termination of this Lease; at that time without payment by
Landlord the Alteration shall remain on the Property and become the property of
Landlord, unless Landlord gives written notice to Tenant (in accordance with the
next sentence) to remove it, in which event Tenant will remove it, will repair
any resulting damage and will restore the Premises to the condition existing
prior to Tenant’s Alteration.  At Tenant’s request prior to Tenant
making any Alterations, Landlord will notify Tenant whether Tenant is required
to remove the Alterations (“Required Removal Alterations”) at the expiration or
termination of this Lease. Notwithstanding the foregoing, Tenant shall have the
right (but not the obligation except as to Required Removal Alterations) to
remove any and all Alterations upon expiration of the Lease, provided that
Tenant repairs any damage to the Premises caused by such removal. Tenant may
install its trade fixtures, furniture and equipment in the Premises, provided
that the installation and removal of them will not affect any structural portion
of the Property, any Building System or any other equipment or facilities
serving the Building or any occupant.  Notwithstanding anything to the
contrary contained in this Lease, Tenant shall have no obligation or right to
remove the Tenant Improvements (as hereinafter defined).

     

    16. Mechanics’
Liens.  Tenant promptly shall pay for any labor, services,
materials, supplies or equipment furnished to Tenant in or about the
Premises.  Tenant shall keep the Premises and the Property free from
any liens arising out of any labor, services, materials, supplies or equipment
furnished or alleged to have been furnished to Tenant.  Tenant shall
take all steps permitted by law in order to avoid the imposition of any such
lien.  Should any such lien or notice of such lien be filed against
the Premises or the Property, Tenant shall discharge the same by bonding or
otherwise within thirty (30) days after Tenant has notice that the lien or claim
is filed regardless of the validity of such lien or claim.

     

    17. Landlord’s
Right of Entry.  Tenant shall permit Landlord and its Agents to
enter the Premises at all reasonable times following reasonable notice (except
in an emergency) to inspect, Maintain, or make Alterations to the Premises or
Property, to exhibit the Premises for the purpose of sale or financing, and,
during the last 12 months of the Term, to exhibit the Premises to any
prospective tenant.  Landlord will make reasonable efforts not to
inconvenience Tenant in exercising such rights, but Landlord shall not be liable
for any interference with Tenant’s occupancy resulting from Landlord’s
entry.

     

    18. Damage by
Fire or Other Casualty.  If the Premises or Common Areas shall
be damaged or destroyed by fire or other casualty, Tenant shall promptly notify
Landlord, and Landlord, subject to the conditions set forth in this Section,
shall repair such damage and restore the Premises or Common Areas to
substantially the same condition in which they were immediately prior to such
damage or destruction, but not including the repair, restoration or replacement
of the fixtures, equipment, or Alterations installed by or on behalf of Tenant
(other than the Tenant Improvements).  Landlord shall notify Tenant,
within 30 days after the date of the casualty, if Landlord anticipates that the
restoration will take more than 180 days from the date of the casualty to
complete; in such event, either Landlord or Tenant (unless the damage was caused
by Tenant) may terminate this Lease effective as of the date of casualty by
giving notice to the other within 30 days after Landlord’s notice. If the
restoration actually takes more than 240 days from the date of the casualty to
complete, in such event Tenant (unless the damage was caused by Tenant) may
terminate this Lease effective as of the date of casualty by giving notice to
the other within 210 days from the date of the casualty.  If a
casualty occurs during the last 12 months of the Term, Landlord may terminate
this Lease unless Tenant has the right to extend the Term for at least 3 more
years and does so within 30 days after the date of the
casualty.  Moreover, Landlord may terminate this Lease if the loss is
not covered by the insurance required to be maintained by Landlord under this
Lease.  Tenant will receive an abatement of Minimum Annual Rent,
Annual Operating Expenses and other Rent to the extent the Premises are rendered
untenantable as a result of the casualty.

     

    19. Condemnation.  If
(a) all of the Premises are Taken, (b) any part of the Premises is
Taken and the remainder is insufficient in Landlord’s or Tenant’s opinion for
the reasonable operation of Tenant’s business, or (c) any of the Property
is Taken, and, in Landlord’s opinion, it would be impractical or the
condemnation proceeds are insufficient to restore the remainder, then this Lease
shall terminate as of the date the condemning authority takes
possession.  If this Lease is not terminated, Landlord shall restore
the Building to a condition as near as reasonably possible to the condition
prior to the Taking, the Minimum Annual Rent, Annual Operating Expenses and
other Rent shall be abated for the period of time all or a part of the Premises
is untenantable in proportion to the square foot area untenantable, and this
Lease shall be amended appropriately.  The compensation awarded for a
Taking shall belong to Landlord, except as provided in the next
sentence.  Except for any relocation benefits and award for loss of
business, Tenant’s Alterations, trade fixtures and equipment to which Tenant may
be entitled provided same do not reduce the amount of Landlord’s award, Tenant
hereby assigns all claims against the condemning authority to Landlord,
including, but not limited to, any claim relating to Tenant’s leasehold
estate.

     

    20. Quiet
Enjoyment.  Landlord covenants that Tenant, upon performing all
of its covenants, agreements and conditions of this Lease, shall have quiet and
peaceful possession of the Premises as against anyone claiming by or through
Landlord, subject, however, to the terms of this Lease.

     

    21. Assignment
and Subletting.

     

    (a) Except as
provided in Section (b) below, Tenant shall not enter into nor permit any
Transfer voluntarily or by operation of law, without the prior consent of
Landlord, which consent shall not be unreasonably withheld, delayed or
conditioned.  Without limitation, Tenant agrees that Landlord’s
consent shall not be considered unreasonably withheld if (i) the proposed
transferee is an existing tenant of Landlord or an affiliate of Landlord,
(ii) the business, business reputation or creditworthiness of the proposed
transferee is unacceptable to Landlord,   or (iii) Tenant is in default
under this Lease or any act or omission has occurred which would constitute a
default with the giving of notice and/or the passage of time. A consent to one
Transfer shall not be deemed to be a consent to any subsequent
Transfer.  In no event shall any Transfer relieve Tenant from any
obligation under this Lease.  Landlord’s acceptance of Rent from any
person shall not be deemed to be a waiver by Landlord of any provision of this
Lease or to be a consent to any Transfer.  Any Transfer not in
conformity with this Section 21 shall be void at the option of
Landlord.

     

    (b) Landlord’s
consent shall not be required in the event of any Transfer by Tenant to an
Affiliate provided that (i),  Tenant provides Landlord notice of the
Transfer at least 15 days prior to the effective date, and (ii) in the case
of an assignment or sublease, Tenant delivers to Landlord within 30 days after
the effective date an assumption agreement executed by Tenant and the Affiliate,
together with a certificate of insurance evidencing the Affiliate’s compliance
with the insurance requirements of Tenant under this Lease.

     

    (c) The
provisions of subsection (a) above notwithstanding, if Tenant proposes to
Transfer all of the Premises (other than to an Affiliate), Landlord may
terminate this Lease, either conditioned on execution of a new lease between
Landlord and the proposed transferee or without that condition.  If
Tenant proposes to enter into a Transfer of less than all of the Premises (other
than to an Affiliate), Landlord may amend this Lease to remove the portion of
the Premises to be transferred, either conditioned on execution of a new lease
between Landlord and the proposed transferee or without that
condition.

     

    (d) If any
assignment or sublease provides for the receipt by, on behalf of or on account
of Tenant of any consideration of any kind whatsoever (including, without
limitation, a premium rental for a sublease or a lump sum payment for an
assignment) in excess of the Minimum Annual Rent and/or additional rent payable
under this Lease (or in the case of a subletting of less than all of the
Premises, in excess of the pro rata portion of the Minimum Annual Rent and/or
additional rent allocable to the portion of the Premises proposed to be sublet),
any such excess shall be retained by Tenant.

     

    (e) If Tenant
requests Landlord’s consent to a Transfer, Tenant shall provide Landlord, at
least 15 days prior to the proposed Transfer, current financial statements of
the transferee certified by an executive officer of the transferee, a complete
copy of the proposed Transfer documents, and any other information Landlord
reasonably requests.  Immediately following any approved assignment or
sublease, Tenant shall deliver to Landlord an assumption agreement reasonably
acceptable to Landlord executed by Tenant and the transferee, together with a
certificate of insurance evidencing the transferee’s compliance with the
insurance requirements of Tenant under this Lease.  Tenant agrees to
reimburse Landlord for reasonable administrative and attorneys’ fees in
connection with the processing and documentation of any Transfer for which
Landlord’s consent is requested.

     

    22. Subordination;
Mortgagee’s Rights.

     

    (a) Tenant
accepts this Lease subject and subordinate to any Mortgage now or in the future
affecting the Premises, provided that Tenant’s right of possession of the
Premises shall not be disturbed by the Mortgagee so long as Tenant is not in
default under this Lease beyond the expiration of an applicable notice and cure
period.  This clause shall be self-operative, but within twenty (20)
days after request, Tenant shall execute and deliver any further instruments
confirming the subordination of this Lease and any further instruments of
attornment that the Mortgagee  may reasonably request and so long as
the Mortgagee shall execute and deliver a non-disturbance agreement in the form
reasonably requested by the Mortgagee.  However, any Mortgagee may at
any time subordinate its Mortgage to this Lease, without Tenant’s consent, by
giving notice to Tenant, and this Lease shall then be deemed prior to such
Mortgage without regard to their respective dates of execution and delivery;
provided that such subordination shall not affect any Mortgagee’s rights with
respect to condemnation awards, casualty insurance proceeds, intervening liens
or any right which shall arise between the recording of such Mortgage and the
execution of this Lease.

     

    (b) No
Mortgagee shall be (i) liable for any act or omission of a prior landlord,
(ii) subject to any rental offsets or defenses against a prior landlord,
(iii) bound by any amendment of this Lease made without its written
consent, or (iv) bound by payment of Monthly Rent more than one month in
advance or liable for any other funds paid by Tenant to Landlord unless such
funds actually have been transferred to the Mortgagee by
Landlord.  Landlord represents and warrants that as of the Date of
this Lease there is no Mortgage encumbering the Property.  Landlord
covenants that between the Date of this Lease and the Commencement Date,
Landlord shall not encumber the Property with any Mortgage; provided, however,
that Landlord shall have the right to so encumber the Property during such
period so long as the Mortgagee agrees in writing that such Mortgagee shall be
liable for Landlord’s obligations under the Lease to perform and complete the
Tenant Improvements (as hereinafter defined) and to make available to Tenant the
Tenant Improvements Allowance and Additional Allowance (each as hereinafter
defined).

     

    (c) The
provisions of Sections 18 and 19 above notwithstanding, Landlord’s obligation to
restore the Premises after a casualty or condemnation shall be subject to the
consent and prior rights of any Mortgagee.

     

    23. Tenant’s
Certificate; Financial Information.  Within twenty (20) days
after Landlord’s request from time to time, (a) Tenant shall execute,
acknowledge and deliver to Landlord, for the benefit of Landlord, Mortgagee, any
prospective Mortgagee, and any prospective purchaser of Landlord’s interest in
the Property, an estoppel certificate in the form of attached Exhibit “C” (or other
form requested by Landlord), modified as necessary to accurately state the facts
represented (provided Landlord shall not make such request more than 2 times per
calendar year), and (b) Tenant shall furnish to Landlord, Landlord’s
Mortgagee, prospective Mortgagee and/or prospective purchaser reasonably
requested financial information, unless such financial information is available
to the general public over the internet.

     

    24. Surrender.

     

    (a) On the
date on which this Lease expires or terminates, Tenant shall return possession
of the Premises to Landlord in as good condition as same were in on the
Commencement Date, except for ordinary wear and tear, except for casualty or
condemnation damage or other conditions that Tenant is not required to remedy
under this Lease, and for acts of God and the elements.  Prior to the
expiration or termination of this Lease, Tenant shall remove from the Property
all wiring and cabling (unless Landlord directs Tenant otherwise), all
furniture, trade fixtures and equipment, and all other personal property
installed by Tenant or its assignees or subtenants.  Tenant shall
repair any damage resulting from such removal and shall restore the Property to
good order and condition.  Any of Tenant’s personal property not
removed as required shall be deemed abandoned, and Landlord, at Tenant’s
expense, may remove, store, sell or otherwise dispose of such property in such
manner as Landlord may see fit and/or Landlord may retain such property or sale
proceeds as its property.  If Tenant does not return possession of the
Premises to Landlord in the condition required under this Lease, Tenant shall
pay Landlord all resulting damages Landlord may suffer.

     

    (b) Provided
Tenant gives Landlord not less than six (6) months prior written notice of such
holdover, Tenant shall have the right to holdover in possession of the Premises
for up to four (4) months (the “Initial Holdover Period”) under the same terms
and conditions of this Lease, with the exception that (i) the Minimum Monthly
Rent during the Initial Holdover Period shall be 103% of the immediately
preceding Minimum Monthly Rent, (ii) Tenant shall be allowed to vacate the
Premises at any time during such four (4) month period after giving Landlord
thirty (30) days prior written notice, and (iii) Tenant shall not be liable for
any damages, including consequential damages, that Landlord suffers as a result
of the holdover.  If notice was not properly provided by Tenant for
the Initial Holdover Period or if Tenant remains in possession of the Premises
after the expiration or termination of the Initial Holdover Period, Tenant’s
occupancy of the Premises shall be that of a tenancy at
will.  Tenant’s occupancy during any holdover period after the Initial
Holdover Period (or after the Expiration Date if notice was not property given
by Tenant for the Initial Holdover Period) shall otherwise be subject to the
provisions of this Lease (unless clearly inapplicable), except that the Minimum
Monthly Rent shall be 125% of the immediately preceding Minimum Monthly Rent
during the holdover period.   No holdover or payment by Tenant
after the expiration or termination of the Initial Holdover Period shall operate
to extend the Term or prevent Landlord from immediate recovery of possession of
the Premises by summary proceedings or otherwise.  Any provision in
this Lease to the contrary notwithstanding, any holdover by Tenant (other than
during the Initial Holdover Period) shall constitute a default on the part of
Tenant under this Lease entitling Landlord to exercise, without obligation to
provide Tenant any notice or cure period, all of the remedies available to
Landlord in the event of a Tenant default, and Tenant shall be liable for all
damages, including consequential damages, that Landlord suffers as a result of
the holdover.

     

    25. Defaults
- Remedies.

     

    (a) It shall
be an Event of Default:

     

    (i) If Tenant
does not pay in full when due any and all Rent and, except as provided in
Section 25(c) below, Tenant fails to cure such default on or before the
date that is ten (10) days after Landlord gives Tenant notice of
default;

     

    (ii) If Tenant
enters into or permits any Transfer in violation of Section 21
above;

     

    (iii) If Tenant
fails to observe and perform or otherwise breaches any other provision of this
Lease, and, except as provided in Section 25(c) below, Tenant fails to cure
the default on or before the date that is  thirty (30) days after
Landlord gives Tenant notice of default; provided, however, if the default
cannot reasonably be cured within thirty (30) days following Landlord’s giving
of notice, Tenant shall be afforded additional reasonable time to cure the
default if Tenant begins to cure the default within ten (10) days following
Landlord’s notice and continues diligently in good faith to completely cure the
default; or

     

    (iv) If Tenant
becomes insolvent or makes a general assignment for the benefit of creditors or
offers a settlement to creditors, or if a petition in bankruptcy or for
reorganization or for an arrangement with creditors under any federal or state
law is filed by or against Tenant, or a bill in equity or other proceeding for
the appointment of a receiver for any of Tenant’s assets is commenced, or if any
of the real or personal property of Tenant shall be levied upon; provided that
any proceeding brought by anyone other than Landlord or Tenant under any
bankruptcy, insolvency, receivership or similar law shall not constitute an
Event of Default until such proceeding has continued unstayed for more than
ninety (90) consecutive days.

     

    (b) If an
Event of Default occurs, Landlord shall have the following rights and remedies
provided same are exercised in accordance with applicable Laws:

     

    (i) Landlord,
without any obligation to do so, may upon fourteen (14) days prior written
notice (except in emergency) to Tenant elect to cure the default on behalf of
Tenant, in which event Tenant shall reimburse Landlord upon demand for any sums
paid or costs incurred by Landlord (together with an administrative fee of 15%
thereof) in curing the default, plus interest at the Interest Rate from the
respective dates of Landlord’s incurring such costs, which sums and costs
together with interest at the Interest Rate shall be deemed additional
Rent;

     

    (ii) To enter
and repossess the Premises, by breaking open locked doors if necessary, and
remove all persons and all or any property, by action at law or otherwise,
without being liable for prosecution or damages.  Landlord may, at
Landlord’s option, make Alterations and repairs in order to relet the Premises
and relet all or any part(s) of the Premises for Tenant’s
account.  Tenant agrees to pay to Landlord on demand any deficiency
(taking into account all costs incurred by Landlord) that may arise by reason of
such reletting.  In the event of reletting without termination of this
Lease, Landlord may at any time thereafter elect to terminate this Lease for
such previous breach;

     

    (iii) To
accelerate the whole or any part of the Rent for the balance of the Term, and
declare the same to be immediately due and payable; and

     

    (iv) To
terminate this Lease and the Term without any right on the part of Tenant to
save the forfeiture by payment of any sum due or by other performance of any
condition, term or covenant broken.

     

    (c) If
Landlord elects to accelerate Rent pursuant to Section 23(b)(iii) above,
Landlord shall be entitled to recover the following amounts (reduced by the
amount of loss of Rent that Tenant proves could be reasonably
avoided):

     

    (i) The worth
at the time of award of any unpaid Rent and other charges which has been earned
at the time of such termination; plus

     

    (ii) The worth
at the time of award of the amount of any Rent and other charges which would
have been earned after termination until the award; plus

     

    (iii) The worth
at the time of award of the amount of any unpaid Rent and other charges which
Tenant would have paid for the balance of the Term after the time of award;
plus

     

    (iv) Any other
amount necessary to compensate Landlord for all the detriment proximately caused
by Tenant’s failure to perform its obligations under this Lease or which in the
ordinary course of things would be likely to result therefrom, including without
limitation, any costs or expenses incurred by Landlord in (a) maintaining or
preserving the Premises after such default, (b) recovering possession of the
Premises, including reasonable attorneys’ fees therefore, (c) expenses of
reletting the Premises to a new tenant, including necessary renovations or
alterations of the Premises, reasonable attorneys’ fees incurred, and leasing
commissions incurred; plus

     

    (v) Such
other amounts in addition to or in lieu of the foregoing as may be permitted
from time to time by the laws of the State where the Project is
located.

     

    As used
in subparagraphs (i), (ii) and (iii) above, the “worth at the time of award” is
computed by allowing interest on unpaid amounts at the rate of 6.0% per
annum.

     

    For
purposes of this Section 25, all Rent other than Minimum Annual Rent, shall, for
purposes of calculating any amount due under the provisions of subparagraph
(iii) above, be computed on the basis of the average monthly amount of Rent
payable by Tenant during the immediately preceding 36 month period, except that
if it becomes necessary to compute such rental before such 36 months of the Term
expired, then such Rent shall be computed on the basis of the average monthly
amount of  Rent payable during such shorter period.

     

    (d) Any
provision to the contrary in this Section 25 notwithstanding,
(i) Landlord shall not be required to give Tenant the notice and
opportunity to cure provided in Section 25(a) above more than twice in any
consecutive 12-month period, and thereafter Landlord may declare an Event of
Default without affording Tenant any of the notice and cure rights provided
under this Lease, and (ii) Landlord shall not be required to give such
notice prior to exercising its rights under Section 25(b) if Tenant fails
to comply with the provisions of Sections 16, 32 or 23 in an
emergency.

     

    (e) No waiver
by Landlord of any breach by Tenant shall be a waiver of any subsequent breach,
nor shall any forbearance by Landlord to seek a remedy for any breach by Tenant
be a waiver by Landlord of any rights and remedies with respect to such or any
subsequent breach.  Efforts by Landlord to mitigate the damages caused
by Tenant’s default shall not constitute a waiver of Landlord’s right to recover
damages hereunder.  No right or remedy herein conferred upon or
reserved to Landlord is intended to be exclusive of any other right or remedy
provided herein or by law, but each shall be cumulative and in addition to every
other right or remedy given herein or now or hereafter existing at law or in
equity.  No payment by Tenant or receipt or acceptance by Landlord of
a lesser amount than the total amount due Landlord under this Lease shall be
deemed to be other than on account, nor shall any endorsement or statement on
any check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord’s right to recover
the balance of Rent due, or Landlord’s right to pursue any other available
remedy.

     

    (f) Notwithstanding
anything to the contrary contained herein, Landlord shall make reasonable effort
to mitigate its damages to the extent required under applicable Laws; provided
that if, after the date hereof, the Laws shall change so that Landlord shall not
be required to perform any mitigation of its damages, following repossession of
the Premises, Landlord agrees to make commercially reasonable efforts to re-let
the Premises at such rates and under such terms as are then commercially
reasonable.

     

    (g) If either
party commences an action against the other party arising out of or in
connection with this Lease, the prevailing party shall be entitled to have and
recover from the other party attorneys’ fees, costs of suit, investigation
expenses and discovery costs, including costs of appeal.

     

    (h) Landlord
and Tenant waive the right to a trial by jury in any action or proceeding based
upon or related to, the subject matter of this Lease.

     

    26. Tenant’s
and Landlord’s Authority.  Tenant represents and warrants to
Landlord that:  (a) Tenant is duly formed, validly existing and
in good standing under the laws of the state under which Tenant is organized,
and qualified to do business in the state in which the Property is located, and
(b) the person(s) signing this Lease are duly authorized to execute and
deliver this Lease on behalf of Tenant.  Landlord represents and
warrants to Tenant that:  (a) Landlord is duly formed, validly
existing and in good standing under the laws of the state under which Landlord
is organized, and qualified to do business in the state in which the Property is
located, and (b) the person(s) signing this Lease are duly authorized to
execute and deliver this Lease on behalf of Landlord.

     

    27. Liability
of Landlord and Tenant.  The word “Landlord” in this Lease
includes the Landlord executing this Lease as well as its successors and
assigns, each of which shall have the same rights, remedies, powers, authorities
and privileges as it would have had it originally signed this Lease as
Landlord.  Any such person or entity, whether or not named in this
Lease, shall have no liability under this Lease after it ceases to hold title to
the Premises except for obligations already accrued.  Tenant shall
look solely to Landlord’s successor in interest for the performance of the
covenants and obligations of the Landlord hereunder which subsequently
accrue.  Landlord shall not be deemed to be in default under this
Lease unless Tenant gives Landlord notice specifying the default and Landlord
fails to cure the default within a reasonable period following Tenant’s
notice.  Neither Landlord nor any principal of Landlord nor any owner
of the Property, whether disclosed or undisclosed, shall have any personal
liability with respect to any of the provisions of this Lease or the Premises;
Tenant shall look solely to the equity of Landlord in the Property for the
satisfaction of any claim by Tenant against Landlord.

     

    In no
event shall Landlord or Tenant be liable to the other party for any loss of
business or profits of such party or for consequential, punitive or special
damages of any kind, except for Tenant’s liability for damages under Section
24(b) above.

     

    28. Tenant Improvements; Tenant
Allowance.

     

    (a) Landlord,
through the Contractor and subcontractors, shall complete construction of the
improvements agreed upon between Landlord and Tenant (the "Tenant Improvements")
in accordance with this Section 28.  Landlord and shall deliver
such Premises in its then “as is” condition, except as set forth in this
Lease.  Landlord agrees to complete such construction at Tenant’s sole
expense (except as otherwise provided in Exhibit
“D” attached hereto) equal to the aggregate of all costs, expenses and
fees incurred by or on behalf of Landlord in connection therewith (the “Tenant’s
Cost”), including without limitation (i) architectural, engineering and design
costs (whether incurred by Landlord or Tenant), (ii) the cost charged to
Landlord by Landlord’s general contractor (the "Contractor") and all
subcontractors for performing such construction, and (iii) the cost to Landlord
of performing directly any portion of such construction.  Landlord
agrees to credit Tenant with an allowance equal to Forty-Three and 00/100
Dollars ($43.00) per rentable square foot of the Premises (the “Tenant
Improvement Allowance”).  Landlord and Tenant hereby agree that the
Minimum Annual Rent hereunder is subject to adjustment based upon the aggregate
cost of the Tenant Improvements, including out-of-pocket expenses and reasonable
soft costs, as follows: in the event that the actual aggregate costs of the
Tenant Improvements are an amount less than $43.00 per rentable square foot (the
“Cost Savings”), the Minimum Annual Rent hereunder shall be decreased each year
by an amount equal to seven percent (7%) of the difference between (i) $43.00
per rentable square foot multiplied by 101,269 rentable square feet, and (ii)
the actual aggregate cost of the Tenant Improvements.  In lieu of the
foregoing, Tenant shall have the right upon notice to Landlord to apply the Cost
Savings towards additional improvements to the Premises.  In addition, Tenant may
request an additional tenant improvement allowance equal to Four and 00/100
Dollars per rentable square foot of the Premises (the “Additional Allowance”),
which amounts (i) would be amortized at a rate per annum equal to ten percent
(10%) and the resulting monthly amount so amortized will be added to the Monthly
Minimum Rent, and (ii) may be applied towards the Tenant Improvements or
additional tenant improvements, but not furniture, fixtures and
equipment.  Landlord shall obtain or cause  Contractor to
obtain all applicable licenses, permits and approvals to complete the Tenant
Improvements in accordance with all applicable Laws.  Landlord
covenants to require Contractor to construct and complete the Tenant
Improvements in accordance with the Final Drawings (as defined below), in a good
and workmanlike manner and in compliance with all Laws.

     

    (b) Space Plan. Landlord and
Tenant have agreed upon a space plan and scope of work for the Tenant
Improvements as set forth on Exhibit
"D" attached hereto (the “Space Plan and Scope of Work for Tenant
Improvements”).  

     

    (c) Construction Drawings and
Specifications.  On or before September 1, 2008, Tenant will
provide Landlord with construction drawings and specifications for the Tenant
Improvements for Landlord's review and approval.  Landlord will review
and approve or provide comments to the construction drawings and specifications,
which approval Landlord shall not unreasonably withhold, condition or delay, the
construction drawings and specifications in writing to Tenant within fifteen
(15) business days after receiving the construction drawings and specifications
from Tenant.  If Landlord reasonably disapproves the construction
drawings, Landlord shall specifically describe any reasons for such disapproval
in a written notice to Tenant.  If Tenant disagrees to the objections
Landlord has to the construction drawings and specifications, Landlord and
Tenant shall use diligent and good faith efforts to resolve any such dispute in
a prompt manner.  Thereafter, Tenant will provide appropriately
revised construction drawings and specifications to Landlord reflecting any such
changes that were agreed upon on or before the date that is five (5) business
days following Tenant's receipt of Landlord’s disapproval of the construction
drawings and specifications if there is no disagreement or five (5) business
days after resolution of the dispute if there is disagreement.  All
revisions to the construction drawings and specifications will be clouded,
blacklined, or otherwise clearly marked to highlight such revisions for easy
identification as a revised item.  The agreed upon construction
drawings and specifications are hereinafter referred to herein as the "Final
Drawings".

     

    (d) Contractor Bids;
Budget.  Promptly following agreement between Landlord and
Tenant of the construction drawings, Landlord and Tenant shall each submit the
names of two (2) general contractors for construction trade bidding and bid
analysis.  Landlord shall submit the construction drawings to each of
the general contractors selected by Landlord and Tenant.  Each general
contractor shall have five (5) days from the submission date (the "Bid
Expiration Date") on which to bid the costs and expenses and timing related to
the Tenant Improvements.  Not later than five (5) days after the Bid
Expiration Date, Landlord and Tenant shall select the Contractor, but will give
primary consideration to (i) the price of the Tenant Improvements, (ii) the
timing for completion of the Tenant Improvements, and (iii) the general
reputation of the party bidding on the Tenant Improvements.  After
Landlord and Tenant select the Contractor, the Contractor will promptly submit
the construction drawings and specifications for permits.  Any delay
in the permitting process not caused by Landlord shall be a Force Majeure
Delay.

     

    (e) Changes to Construction Drawings and
Specifications.  Tenant will immediately notify Landlord if
Tenant desires to make any changes to the Tenant Improvements after the
construction drawings and specifications have been agreed upon.  If
Landlord approves the revisions, Landlord or Contractor will notify Tenant of
the anticipated additional cost and delay in completing the Tenant Improvements
that would be caused by such revisions.  If Landlord reasonably
disapproves the revisions, Landlord will notify Tenant of the reasons for
disapproval and will cooperate with Tenant to resolve the
disagreements.  Tenant will approve or disapprove the increased cost
and delay within 5 business days after such notice.  If Tenant
approves, Landlord will prepare, and Landlord and Tenant will execute, a change
order describing the revisions and the anticipated additional cost and
delay.  If Tenant disapproves, the changes will not be made unless
Landlord and Tenant can agree upon a resolution within 5 business days
thereafter.  Any delay relating to a request for revisions or a change
order is a Tenant Delay.  If Landlord reasonably estimates that the
change order will cause the cost of the Tenant Improvements to exceed the Tenant
Improvement Allowance (and to the extent applicable, the Additional Allowance),
or if the cost of the Tenant Improvements already exceeds the Tenant Improvement
Allowance (and to the extent applicable, the Additional Allowance), Landlord may
require Tenant to deposit such estimated additional cost with Landlord before
the change order work is performed.

     

    (f) Landlord’s Approval
Rights.  Landlord may withhold its approval of any changes to
the space plan, construction drawings and specifications, change orders, or
other work requested by Tenant which Landlord reasonably determines may require
work which: (a) exceeds or adversely affects the structural integrity of the
Building; (b) will increase the cost of operation or maintenance of any of the
systems of the Property (unless Tenant agrees in writing to pay for such
increased costs); (c) does not conform to applicable building codes, policies or
procedures or is not approved by any governmental authority with jurisdiction
over the Premises; (d) may detrimentally affect the uniform appearance of the
Property; (e) is not a building standard item or an item of equal or higher
quality; or (f) is reasonably disapproved by Landlord for any other
reason.

     

    (g) Tenant’s
Representative.  Tenant designates Bjorn Hansen as the
representative of Tenant having authority to approve the construction drawings
and specifications, request or approve any change order, give and receive all
notices, consents, approvals and directions regarding the Tenant Improvements,
and to otherwise act for and bind Tenant in all matters relating to the Tenant
Improvements.  Bjorn Hansen’s email address is bhansen@shutterfly.com
and telephone number is 650-610-3547.

     

    (h) Substantial
Completion.  Landlord will use commercially reasonable efforts
to achieve Substantial Completion of the Tenant Improvements on or before March
1, 2009, subject to Tenant Delays, delays in agreement on the construction
drawings and specifications, third party and government approvals, disputes
between Landlord and Tenant and Force Majeure Delays.  If Landlord is
unable to achieve Substantial Completion on or before March 1, 2009, as extended
for Tenant Delays, delays in agreement on the construction drawings and
specifications, third party and government approvals and disputes between
Landlord and Tenant and Force Majeure Delay, Tenant shall receive a credit to
Minimum Annual Rent equal to one (1) day of Minimum Annual Rent for each day
thereafter for which Landlord is unable to achieve Substantial Completion, which
credits shall be applied to the first payment of Minimum Annual
Rent.

     

    If
Landlord is unable to achieve Substantial Completion on or before May 31, 2009,
as extended for Tenant Delays (but not Force Majeure Delay), Tenant may
immediately terminate this Lease by written notice to Landlord no later than
June 7, 2009 as its sole and exclusive remedy.  Landlord shall not
liable to Tenant for any resulting loss or damage; provided, however, that
Landlord (a) will appropriately adjust the Commencement Date and (b) agrees that
the Minimum Annual Rent credit referenced in the immediately preceding paragraph
shall remain in the event Tenant does not elect to
terminate.  Alternatively, if Landlord reasonably believes that it
will be unable to achieve Substantial Completion on or before May 31, 2009, as
extended for Tenant Delays, delays in agreement on the construction drawings and
specifications, third party and government approvals and disputes between
Landlord and Tenant, Landlord may provide written notice of the same to Tenant,
upon which Tenant may within fifteen (15) days of receipt of such notice,
terminate this Lease by written notice to Landlord as its sole and exclusive
remedy and Landlord shall promptly return to Tenant all prepaid rent previously
paid to Landlord.  In the event Tenant has not terminated within such
time periods set forth above, this Lease shall remain in full force and
effect.  Landlord shall not liable to Tenant for any resulting loss or
damage; provided, however, that Landlord will appropriately adjust the
Commencement Date.

     

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

    

    
    

     

    (i) Punch
List.  Landlord shall give Tenant estimates of the schedule for
completion of the Tenant Improvements and endeavor to provide thirty (30) days
prior written notice of the anticipated date the Premises will be ready for
occupancy.  Not later than thirty (30) days after the date of
Substantial Completion of the Tenant Improvements, Landlord and Tenant’s
Representative will inspect the Premises and develop a “punch list” of any
Tenant Improvement items which were either not properly completed or are in need
of repair.  Landlord will complete (or repair, as the case may be) the
items listed on the punch list with commercially reasonable diligence and speed,
but in no event later than sixty (60) days after the punch list is
developed.  If Tenant does not inspect the Premises with Landlord as
reasonably requested by Landlord within thirty (30) days after the date of
Substantial Completion, Tenant will be deemed to have accepted the Premises as
delivered.

     

    (j) Tenant Finish
Work.  All finish work and decoration and other work desired by
Tenant and not included within the Tenant Improvements to be performed by
Landlord as set forth in the approved construction drawings and specifications
will be designed, furnished and installed by Tenant at Tenant’s sole expense and
will not be chargeable against the Tenant Improvement
Allowance.  Tenant will perform all such work in the same manner and
following the same procedures as are provided in this Lease for alterations to
the Premises.  Landlord is under no obligation to perform, inspect, or
supervise any such work, and Landlord shall have no liability or responsibility
whatsoever therefor.  Landlord hereby approves the Tenant work set
forth on Exhibit
“G” attached hereto (the “Tenant Work”).

     

    (k) Landlord's
Warranty.  Landlord agrees to provide Tenant with a one (1)
year warranty regarding the Tenant Improvements in the same form attached hereto
as Exhibit "I" and which
shall be contained in the  contractor agreement for the construction
of the Tenant Improvements.

     

    29. Major
Work.  Landlord agrees to use commercially reasonably efforts
during the months of November and December to (a) avoid planning and performing
significant maintenance on the improvements on the Premises, or (b) causing an
interruption to the Building Systems, in either case which would materially
limit access to the Premises or Common Areas.

     

    30. Emergency
Generator.  Landlord
acknowledges that Tenant shall have the right to (i) install emergency
generator(s) in the “truck court” area of the Premises, subject to Tenant’s
compliance with all applicable Laws and Building Rules, (ii) test the
generator(s) on a monthly basis, and (iii) notwithstanding anything to the
contrary contained the Lease, to remove such generator(s) at the expiration of
the Lease.

     

    31. Option to
Purchase.  

     

    (a) Tenant
shall have the option to purchase the Premises not later than the expiration of
the first (1st)  year of the Term by giving written notice to Landlord
not later than thirty (30) days  prior to the expiration of such year
(the “Purchase Notice”); it being agreed that time is of the
essence.  Upon exercise by Tenant of its option to purchase, this
Lease and the Purchase Notice shall constitute an agreement of sale and purchase
between the parties whereby Landlord shall agree to sell and Tenant shall agree
to purchase the Premises upon the following terms and conditions:

     

    (i) The
purchase price for the Premises shall be Twenty Six Million Three Hundred
Thousand and 00/100 Dollars ($26,300,000.00), plus any of the Additional
Allowance utilized by Tenant.

     

    (ii) Settlement
for the purchase of the Premises shall be held at Landlord’s office at 2390 E.
Camelback Road, Suite 318, Phoenix, Arizona 85016 at 10:00 a.m. on a date which
is no later than the expiration of the second year of the Term or, if such date
is not a business day, on the first business day thereafter.

     

    (iii) The
purchase price shall be payable by Tenant to Landlord at the time of settlement
by wire transfer of immediately available federal funds.

     

    (iv) Landlord
and Tenant shall share equally in the payment for any documentary stamps to be
affixed to the deed of conveyance and any realty transfer taxes imposed upon or
in connection with the conveyance.  All amounts prepaid by Landlord
for operating expenses and any other charges which are applicable to the period
of time after settlement and which have not been paid previously by Tenant shall
be paid by Tenant to Landlord at the time of settlement. Tenant shall pay to
Landlord all Rent that accrues pursuant to this Lease prior to the date of
settlement.

     

    (v) Landlord
shall convey to Tenant a good and marketable fee simple title to the Premises by
Special Warranty Deed which shall be in sufficient form to be recorded, in which
Landlord shall covenant and agree that the grantor has not done, committed, or
knowingly or willingly suffered to be done or committed, any act, matter or
thing whatsoever whereby the Premises granted, or any part thereof, is charged
or encumbered.  Tenant shall accept title to the Premises subject to
existing leases; any and all taxes; all restrictions, encumbrances and
exceptions of record existing on the date of this Lease; all liens,
restrictions, encumbrances and exceptions hereafter created by Landlord with the
written consent of Tenant; any mortgage as described in subsection (vi) below;
all utility easements and public road rights-of-way hereafter created by
Landlord which are reasonably desirable for the development and/or maintenance
of the Premises, lands adjacent to the Premises, or both; any violations of
building codes, fire laws and other laws and regulations; any liens,
encumbrances and exceptions not created by or resulting from the act, omission
or default of Landlord; all zoning rules, regulations, restrictions or
ordinances; all standard title objections of the title insurance company
insuring Tenant's title; and any liens, encumbrances and exceptions created or
suffered by Tenant; provided, however, that if Landlord cannot convey title as
aforesaid at the time of settlement, Landlord shall have the right, at its
option, to postpone the date of settlement for sixty (60) days during which time
Landlord shall attempt to cure or satisfy the title defects.  Landlord
shall not be required to bring any action or proceeding or otherwise incur any
expense to cure or satisfy the title defects.  If Landlord is unable
to deliver title as required above, Tenant either shall accept such title as
Landlord can deliver, without abatement of the purchase price, or rescind its
exercise of its purchase option and this Lease shall continue in effect, except
that Tenant thereafter shall have no option to purchase and this Section shall
be deemed to be null and void and of no further force or
effect.  Tenant's title shall be insurable as aforesaid at ordinary
rates by any reputable title insurance company.

     

    (vi) Landlord
shall have the right to require the purchase of the Premises by Tenant pursuant
to this Section to be structured as a tax deferred exchange under Section 1031
of the Internal Revenue Code and the regulations adopted thereunder, or such
substantially equivalent provision of the Internal Revenue Code as is then
applicable to sales of Premises; in which event Tenant shall execute such
documents and instruments as may be reasonably required by Landlord to
facilitate a tax deferred exchange under applicable law.

     

    (b) The
option to purchase set forth in this Section shall terminate automatically if at
any time during the Term, including without limitation at any time after Tenant
delivers the Purchase Notice, Tenant defaults under any of the provisions of
this Lease and Landlord gives Tenant written notice of such default; in which
event this Section shall be deemed to be null and void and of no further force
or effect.  In addition, the option to purchase shall terminate
automatically if Tenant transfers this Lease (as described in Section 21) or if
the Premises is wholly or partially destroyed by casualty or taken by a
condemnation or otherwise for any public or quasi-public use.

     

    32. Right
of First Offer.
  If and when the next “spec” building to be built in the next
phase of the Cotton Center (individually, the “Additional Space”) first becomes
available for rental during the term of this Lease and provided that (a)
Landlord has not given Tenant notice of a monetary default and/or a material
non-monetary Event of Default more than seven (7) times preceding the Expiration
Date, (b) Tenant is not in default under this Lease beyond any applicable notice
and cure period(s) nor is there any event that with the giving of notice and/or
the passage of time would constitute a default, and (c) Tenant  (or a
transferee permitted under Section 21(b)) is the occupant of at least seventy
five percent (75%) of the Premises, Tenant shall have the right of first offer
to lease all of the Additional Space, subject to the following:

     

    (a)           Landlord
shall notify Tenant when the Additional Space first becomes available for rental
by any party and Tenant shall have ten (10) business days following receipt of
such notice within which to notify Landlord in writing that Tenant is interested
in negotiating terms for leasing such Additional Space and to have its offer
considered by Landlord prior to the leasing by Landlord of the Additional Space
to a third party.  If Tenant notifies Landlord within such time period
that Tenant is so interested, then Landlord and Tenant shall have 30 days
following Landlord’s receipt of such notice from Tenant within which to
negotiate mutually satisfactory terms for the leasing of the Additional Space by
Tenant and to execute an amendment to this Lease incorporating such terms or a
new lease for the Additional Space.

    


    (b)           If
Tenant does not notify Landlord within such 10 business days of its interest in
leasing the Additional Space or if Tenant does not execute such amendment or
lease within such 30 days, if applicable, then this right of first offer to
lease the Additional Space will lapse and be of no further force or effect and
Landlord shall have the right to lease all or part of the Additional Space to
any other party at any time on any terms and conditions acceptable to
Landlord.

     

            (c)           This
right of first offer to lease the Additional Space is a one-time right if and
when each Additional Space first becomes available, is personal to Tenant and
any transferee permitted under Section 21(b) of the Lease and is
non-transferable to any assignee or sublessee (other than any transferee
permitted under Section 21(b) of the Lease) or other party.

     

    33. Brokers;
Recognition and Indemnity.  

     

    (a) Tenant
and Landlord represent and warrant to each other that Cushman & Wakefield,
as Tenant’s broker, and CB Richard Ellis, as Landlord’s broker, are the only
brokers or finders that either has had any dealings, negotiations or
consultations with relating to the Premises or this transaction and that no
other broker or finder called the Premises to Tenant’s attention for lease or
took any part in any dealings, negotiations or consultations relating to the
Premises or this Lease.  Such named brokers are entitled to a
commission on an “if, as and when” rent is collected basis in accordance with a
separate agreement.

     

    (b) Tenant
agrees to be responsible for, indemnify, defend and hold harmless Landlord from
and against all costs, fees (including, without limitation, attorney’s fees),
expenses, liabilities and claims incurred or suffered by Landlord arising from
any breach by Tenant of Tenant’s foregoing representation and
warranty.  Landlord agrees to be responsible for, indemnify, defend
and hold harmless Tenant from and against all costs, fees (including, without
limitation, attorney’s fees), expenses, liabilities and claims incurred or
suffered by Tenant arising from any breach by Landlord of Landlord’s foregoing
representation and warranty.

     

    34. Guaranty.                           Intentionally
deleted.

     

    35. Notices.  Any
notice, consent or other communication under this Lease shall be in writing and
addressed to Landlord or Tenant at their respective addresses specified in
Section 1 above (or to such other address as either may designate by notice
to the other) with a copy to any Mortgagee or other party designated by
Landlord.  Each notice or other communication shall be deemed given if
sent by prepaid overnight delivery service or by certified mail, return receipt
requested, postage prepaid or in any other manner, with delivery in any case
evidenced by a receipt, and shall be deemed to have been given on the day of
actual delivery to the intended recipient or on the business day delivery is
refused.  The giving of notice by Landlord’s attorneys,
representatives and agents under this Section shall be deemed to be the acts of
Landlord.

     

    36. Miscellaneous.

     

    (a) The
captions in this Lease are for convenience only, are not a part of this Lease
and do not in any way define, limit, describe or amplify the terms of this
Lease.

     

    (b) This
Lease represents the entire agreement between the parties hereto and there are
no collateral or oral agreements or understandings between Landlord and Tenant
with respect to the Premises or the Property.  No rights, easements or
licenses are acquired in the Property or any land adjacent to the Property by
Tenant by implication or otherwise except as expressly set forth in this
Lease.  This Lease shall not be modified in any manner except by an
instrument in writing executed by the parties.  The masculine (or
neuter) pronoun and the singular number shall include the masculine, feminine
and neuter genders and the singular and plural number.  The word
“including” followed by any specific item(s) is deemed to refer to examples
rather than to be words of limitation.  The word “person” includes a
natural person, a partnership, a corporation, a limited liability company, an
association and any other form of business association or
entity.  Both parties having participated fully and equally in the
negotiation and preparation of this Lease, this Lease shall not be more strictly
construed, nor any ambiguities in this Lease resolved, against either Landlord
or Tenant.

     

    (c) Each
covenant, agreement, obligation, term, condition or other provision contained in
this Lease shall be deemed and construed as a separate and independent covenant
of the party bound by, undertaking or making the same, not dependent on any
other provision of this Lease unless otherwise expressly
provided.  All of the terms and conditions set forth in this Lease
shall apply throughout the Term unless otherwise expressly set forth
herein.

     

    (d) If any
provisions of this Lease shall be declared unenforceable in any respect, such
unenforceability shall not affect any other provision of this Lease, and each
such provision shall be deemed to be modified, if possible, in such a manner as
to render it enforceable and to preserve to the extent possible the intent of
the parties as set forth herein.  This Lease shall be construed and
enforced in accordance with the laws of the state in which the Property is
located.

     

    (e) This
Lease shall be binding upon and inure to the benefit of Landlord and Tenant and
their respective heirs, personal representatives and permitted successors and
assigns.  All persons liable for the obligations of Tenant under this
Lease shall be jointly and severally liable for such obligations.

     

    (f) Tenant
shall not record this Lease or any memorandum without Landlord’s prior
consent.

     

    (g) This
Lease may be executed simultaneously in two or more counterparts each of which
shall be deemed an original, but all of which shall constitute one and the same
Lease.  Landlord and Tenant agree that the delivery of an executed
copy of this Lease by facsimile or by email of a *.pdf file shall be legal and
binding and shall have the same full force and effect as if an original executed
copy of this Lease had been delivered.

     

    (h)             See
Exhibit
“F” attached hereto and made a part hereof for additional terms and
conditions of this Lease.

    


     


    
      
        
           

        

         


      

      
         


        
          

        

      

      
         


      

    


    


     

    Landlord
and Tenant have executed this Lease on the respective date(s) set forth
below.

     

    
      	 
      	 
      	
              Landlord:

            
	
              Date
      signed: August 22, 2008

               

            	 
      	
              LIBERTY
      COTTON CENTER, LLC

              By:  Liberty
      Cotton Center II, LLC, its sole Member

              By:  Liberty
      Property Limited Partnership, its sole Member

              By: Liberty Property Trust, Sole
      General Partner

               

              By: /s/ Robert
      Goldschmidt

              Name: Robert
      Goldschmidt

              Title: Senior Vice President,
      Regional Director

               

                             
      By: /s/ William P.
      Hankowsky

              Name: William P.
      Hankowsky

              Title: Chairman, President and
      CEO

               

            
	 
      	 
      	
              Tenant:

            
	
              Date
      signed: August 15, 2008

               

            	 
      	
              SHUTTERFLY, INC., a
      Delaware corporation

               

                  By:  /s/ Mark J.
      Rubash         

                  Name:
      Mark J.
      Rubash                      

                  Title: Senior
      Vice President & Chief Financial
      Officer         

            
	 
      	 
      	 
      


    


    
      
        
                                                                        


          


        

         


      

      
         


        
          

        

      

      
         


      

    


    Rider 1 to Lease
Agreement

     

    (Multi-Tenant
Industrial)

     

    ADDITIONAL
DEFINITIONS

     

    “ADA”
means the Americans With Disabilities Act of 1990 (42 U.S.C. § 1201 et seq.), as amended and
supplemented from time to time.

     

    “Affiliate”
means (i) any entity controlling, controlled by, or under common control
of, Tenant, (ii) any successor to Tenant by merger, consolidation or
reorganization, and (iii) any purchaser of all or a substantial portion of
the assets of Tenant.

     

    “Agents”
of a party means such party’s employees, agents, representatives, contractors,
licensees or invitees.

     

    “Alteration”
means any addition, alteration or improvement to the Premises or Property, as
the case may be.

     

    “Building
Rules” means the rules and regulations attached to this Lease as Exhibit “B” as they may be
amended from time to time.

     

    “Building
Systems” means any electrical, mechanical, structural, plumbing, sewer, heating,
ventilating, air conditioning, sprinkler, life safety or security systems
serving the Building.

     

    “Common
Areas” means all areas and facilities as provided by Landlord from time to time
for the use or enjoyment of all tenants in the Building or Property, including,
if applicable, driveways, sidewalks, parking, loading, truck court and
landscaped areas.

     

    “Environmental
Laws” means all present or future federal, state or local laws, ordinances,
rules or regulations (including the rules and regulations of the federal
Environmental Protection Agency and comparable state agency) relating to the
protection of human health or the environment.

     

    “Event of
Default” means a default described in Section 25(a) of this Lease.

     

    "Force
Majeure Delay" means delays caused by strikes, lockouts, boycotts or other labor
problems, casualties, discontinuance of any utility or other service required
for Landlord's construction of the Tenant Improvements, unavailability or
shortages of materials or other problems in obtaining materials necessary for
Landlord's construction of the Tenant Improvements, inability to obtain
necessary governmental permits and approvals (including building permits or
certificates of occupancy), war, riot, civil insurrection, accidents, crime,
weather, acts of God, natural disasters, governmental preemption in connection
with a declared emergency, or any other matter beyond the control of Landlord
(or beyond the reasonable control of Landlord's contractors or subcontractors
construction of the Tenant Improvements).

     

    “Hazardous
Materials” means pollutants, contaminants, toxic or hazardous wastes or other
materials the removal of which is required or the use of which is regulated,
restricted, or prohibited by any Environmental Law.

     

    “Interest
Rate” means interest at the rate of 1 1/4% per month.

     

    “Land”
means the lot or plot of land on which the Building is situated or the portion
thereof allocated by Landlord to the Building.

     

    “Laws”
means all laws, ordinances, rules, orders, regulations, guidelines and other
requirements of federal, state or local governmental authorities or of any
private association or contained in any restrictive covenants or other
declarations or agreements, now or subsequently pertaining to the Property or
the use and occupation of the Property.

     

    “Lease
Year” means the period from the Commencement Date through the succeeding 12 full
calendar months (including for the first Lease Year any partial month from the
Commencement Date until the first day of the first full calendar month) and each
successive 12-month period thereafter during the Term.

     

    “Maintain”
means to provide such maintenance, repair and, to the extent necessary and
appropriate, replacement, as may be needed to keep the subject property in good
condition and repair.

     

    “Monthly
Rent” means the monthly installment of Minimum Annual Rent plus the monthly
installment of estimated Annual Operating Expenses payable by Tenant under this
Lease.

     

    “Mortgage”
means any mortgage, deed of trust or other lien or encumbrance on Landlord’s
interest in the Property or any portion thereof, including without limitation
any ground or master lease if Landlord’s interest is or becomes a leasehold
estate.

     

    “Mortgagee”
means the holder of any Mortgage, including any ground or master lessor if
Landlord’s interest is or becomes a leasehold estate.

     

    “Operating
Expenses” means all costs, fees, charges and expenses incurred or charged by
Landlord in connection with the ownership, operation, maintenance and repair of,
and services provided to, the Property, including, but not limited to,
(i) the charges at standard retail rates for any utilities provided by
Landlord pursuant to Section 10 of this Lease, (ii) the cost of
insurance carried by Landlord pursuant to Section 11 of this Lease,
together with the cost of any deductible paid by Landlord in connection with an
insured loss but not in excess of $20,000 per insured loss,
(iii) Landlord’s cost to Maintain the Property, subject to the provisions
of Section 12 of this Lease, (iv) the cost of trash collection,
(v) to the extent not otherwise payable by Tenant pursuant to
Section 8 of this Lease, all levies, taxes (including real estate taxes,
sales taxes and gross receipt taxes), assessments, liens, license and permit
fees, together with the reasonable cost of successfully contesting any of the
foregoing, which are applicable to the Term, and which are imposed by any
authority or under any Law, or pursuant to any recorded covenants or agreements,
upon or with respect to the Property, or any improvements thereto, or directly
upon this Lease or the Rent or upon amounts payable by any subtenants or other
occupants of the Premises, or against Landlord because of Landlord’s estate or
interest in the Property, (vi) the annual amortization (over their
estimated economic useful life or payback period, whichever is shorter) of the
costs (including reasonable financing charges) of capital improvements or
replacements, and (vii) a management fee not to exceed 2.5% of annual Rent
and administrative fee.

     

    The
foregoing notwithstanding, Operating Expenses shall not
include (the “Exclusions”):  (i) depreciation on the Building,
(ii) financing and refinancing costs (except as provided above), interest
on debt or amortization payments on any mortgage, or rental under any ground or
underlying lease, (iii) leasing commissions, advertising expenses, tenant
improvements or other costs directly related to the leasing of the Property,
(iv) income, excess profits or corporate capital stock tax imposed or
assessed upon Landlord, unless such tax or any similar tax is levied or assessed
in lieu of all or any part of any taxes includable in Operating Expenses above,
(v) any and all costs of Landlord in complying with its obligations under
Section (d) of Exhibit
“F” (Environmental Matters), including, without limitation, the costs and
expenses of clean-up, remediation, environmental surveys/assessments, compliance
with Environmental Laws (as hereinafter defined), consulting fees, treatment and
monitoring charges, transportation expenses and disposal fees, etc. (the
“Landlord’s Environmental Cost Exclusion”), (vi) capital improvements and
replacement of capital items except as provided in the prior paragraph, and
(vii) replacements of the roof, foundation or structure of the Building If
Landlord elects to prepay real estate taxes during any discount period, Landlord
shall be entitled to the benefit of any such prepayment.  Landlord
shall have the right to directly perform (by itself or through an affiliate) any
services provided under this Lease provided that the Landlord’s charges included
in Operating Expenses for any such services shall not exceed competitive market
rates for comparable services.

     

    “Property”
means the Land, the Premises, the Common Areas, and all appurtenances to
them.

     

    “Rent”
means the Minimum Annual Rent, Annual Operating Expenses and any other amounts
payable by Tenant to Landlord under this Lease.

     

    “Substantial
Completion” means when (a) a Certificate of Occupancy has been issued for the
Premises covering the Tenant Improvements; and (b) Tenant can use the Premises
for its intended purposes without material interference to Tenant conducting its
ordinary business activities.

     

    “Taken”
or “Taking” means acquisition by a public authority having the power of eminent
domain by condemnation or conveyance in lieu of condemnation.

     

    “Tenant
Delay” means any delay caused or contributed to by Tenant, including, without
limitation, with respect to the Tenant Improvements, any delay from any
revisions Tenant proposes to the approved construction drawings and
specifications, provided that in each such instance Landlord first gives Tenant
three (3) business days notice that if Tenant does not so cure its act or
omission the same will thereafter be considered a Tenant Delay.  A
Tenant Delay excuses Landlord’s performance of any obligation related thereto
for a period equal to (a) the duration of the act, occurrence or omission that
constitutes the Tenant Delay, or (b) if longer, the period of delay actually
caused by the Tenant Delay.

     

    “Tenant’s
Share” means the percentage obtained by dividing the rentable square feet of the
Premises by the rentable square feet of the Building, as set forth in
Section 1 of this Lease.

     

    “Transfer”
means (i) any assignment, transfer, pledge or other encumbrance of all or a
portion of Tenant’s interest in this Lease, (ii) any sublease, license or
concession of all or a portion of Tenant’s interest in the Premises,
(iii) any transfer of a controlling interest in Tenant (except if Tenant is
a corporation whose stock is publicly traded on a national stock exchange), or
(iv) any merger or consolidation with another entity.

     


    
      
        
           

           

        

         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
“A”

     

    PLAN
SHOWING PREMISES

     

    


    
      
        
           

        

         


      

      
         


        
          

        

      

      
         


      

    


    


     

    


     

    EXHIBIT
“B”

     

    


     

    BUILDING
RULES

     

    1.           Any
sidewalks, lobbies, passages and stairways shall not be obstructed or used by
Tenant for any purpose other than ingress and egress from and to the
Premises.  Landlord shall in all cases retain the right to control or
prevent access by all persons whose presence, in the reasonable judgment of
Landlord, shall be prejudicial to the safety, peace or character of the
Property.

     

    2.           The
toilet rooms, toilets, urinals, sinks, faucets, plumbing or other service
apparatus of any kind shall not be used for any purposes other than those for
which they were installed, and no sweepings, rubbish, rags, ashes, chemicals or
other refuse or injurious substances shall be placed therein or used in
connection therewith or left in any lobbies, passages, elevators or stairways
except in connection with any Permitted Activities.

     

    3.           Tenant
shall not impair in any way the fire safety system and shall comply with all
safety, fire protection and evacuation procedures and regulations established by
Landlord or any governmental agency.  No person shall go on the roof
without Landlord’s prior written permission.

     

    4.           Skylights,
windows, doors and transoms shall not be covered or obstructed by Tenant, and
Tenant shall not install any window covering which would affect the exterior
appearance of the Building, except as approved in writing by
Landlord.  Tenant shall not remove, without Landlord’s prior written
consent, any shades, blinds or curtains in the Premises.

     

    5.           Without
Landlord’s prior written consent, Tenant shall not hang, install, mount, suspend
or attach anything from or to any sprinkler, plumbing, utility or other
lines.  If Tenant hangs, installs, mounts, suspends or attaches
anything from or to any doors, windows, walls, floors or ceilings, Tenant shall
spackle and sand all holes and repair any damage caused thereby or by the
removal thereof at or prior to the expiration or termination of the
Lease.

     

    6.           Tenant
shall have the right to change any locks or place additional locks upon any
doors provided that tenant provides a pass key to Landlord.

     

    7.           Tenant
shall not use nor keep in the Building any matter having an offensive odor, nor
explosive or highly flammable material(except in connection with any Permitted
Activities and otherwise in compliance with all applicable Laws), nor shall any
animals other than handicap assistance dogs in the company of their masters be
brought into or kept in or about the Property.

     

    8.           If
Tenant desires to introduce electrical, signaling, telegraphic, telephonic,
protective alarm or other wires, apparatus or devices, Landlord shall direct
where and how the same are to be placed, and except as so directed, no
installation boring or cutting shall be permitted.  Landlord shall
have the right to prevent and to cut off the transmission of dangerous current
of electricity into or through the Building or the Premises and to require the
changing of wiring connections or layout at Tenant’s expense, to the extent that
Landlord may deem necessary to prevent such dangerous current of electricity,
and further to require compliance with such reasonable rules as Landlord may
establish relating thereto, and in the event of non-compliance with the
requirements or rules, Landlord shall have the right immediately to cut wiring
or to do what it considers necessary to remove the danger.  All wires
installed by Tenant must be clearly tagged at the distributing boards and
junction boxes and elsewhere where required by Landlord, with the number of the
office to which said wires lead, and the purpose for which the wires
respectively are used, together with the name of the concern, if any, operating
same.

     

    9.           Tenant
shall not place weights anywhere beyond the safe carrying capacity of the
Building.  As of the date of the Lease, the floor load bearing
capacity is 3,000 psi at 28 days.

     

    10.           The
use of rooms as sleeping quarters is strictly prohibited at all
times.

     

    11.           Tenant
shall have the exclusive right, at Tenant’s sole risk and responsibility, to use
four hundred (400) parking spaces at the Property in the locations shown on
Exhibit
“E” attached hereto.  Tenant shall comply with all reasonable
parking regulations promulgated by Landlord from time to time for the orderly
use of the vehicle parking areas, including without limitation the following:
Parking shall be limited to automobiles, passenger or equivalent vans,
motorcycles, light four wheel pickup trucks and (in designated areas)
bicycles.  No vehicles shall be left in the parking lot overnight
without Landlord’s prior written approval; provided, however, that Tenant
shall  have the right to stage trailers on-site and in front of the
dock doors serving the Premises 24 hours per day, seven (7) days per week (the “Stage
Trailers”).  Parked vehicles shall not be used for vending or any
other business or other activity while parked in the parking
areas.  Vehicles shall be parked only in striped parking spaces,
except for (i) loading and unloading, which shall occur solely in zones marked
for such purpose, and be so conducted as to not unreasonably interfere with
traffic flow within the Property or with loading and unloading areas of other
tenants, and (ii) the Stage Trailers.  Employee and tenant vehicles
shall not be parked in spaces marked for visitor parking or other specific
use.  All vehicles entering or parking in the parking areas shall do
so at owner’s sole risk and Landlord assumes no responsibility for any damage,
destruction, vandalism or theft.  Tenant shall cooperate with Landlord
in any measures implemented by Landlord to control abuse of the parking areas,
including without limitation access control programs, tenant and guest vehicle
identification programs, and validated parking programs, provided that no such
validated parking program shall result in Tenant being charged for spaces to
which it has a right to free use under its Lease.  Each vehicle owner
shall promptly respond to any sounding vehicle alarm or horn, and failure to do
so may result in temporary or permanent exclusion of such vehicle from the
parking areas.  Any vehicle which violates the parking regulations may
be cited, towed at the expense of the owner, temporarily or permanently excluded
from the parking areas, or subject to other lawful
consequence.   Landlord shall ensure that all parking areas shall
be adequately lit for 24-hour use in accordance with local
code.  Parking areas shall properly drain and all existing excessive
cracks and potholes shall be repaired by Landlord prior to the Commencement
date.

     

    12.           If
Landlord designates the Building as a non-smoking building, Tenant and its
Agents shall not smoke in the Building nor at the Building entrances and
exits.

     

    13.           If
at Tenant’s request, Landlord consents to Tenant having a dumpster at the
Property, Tenant shall locate the dumpster in the area designated by Landlord
and shall keep and maintain the dumpster clean and painted with lids and doors
in good working order and, at Landlord’s request, locked.

     

    14.           Tenant
shall provide Landlord with a written identification of any vendors engaged by
Tenant to perform services for Tenant at the Premises (examples: cleaners,
security guards/monitors, trash haulers, telecommunications
installers/maintenance).

     

    15.           Tenant
shall comply with any move-in/move-out rules provided by Landlord.

     

    16.           Tenant
shall use reasonable best efforts to cause all of Tenant’s Agents to comply with
these Building Rules.

     

    17.           Landlord
reserves the right to rescind, suspend or modify any rules or regulations and to
make such other rules and regulations as, in Landlord’s reasonable judgment, may
from time to time be needed for the safety, care, maintenance, operation and
cleanliness of the Property.  Notice of any action by Landlord
referred to in this section, given to Tenant, shall have the same force and
effect as if originally made a part of the foregoing Lease.  New rules
or regulations will not, however, materially adversely affect Tenant's tenancy
as contemplated herein or the operation of Tenant’s business.

     

    18.           These
Building Rules are not intended to give Tenant any rights or claims in the event
that Landlord does not enforce any of them against any other tenants or if
Landlord does not have the right to enforce them against any other tenants and
such nonenforcement will not constitute a waiver as to Tenant; provided,
however, that Landlord shall make all reasonable efforts to enforce the Building
Rules uniformly against all tenants in the Property.

     


    
      
        
           

          


        

         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
“C”

     

    


     

    TENANT
ESTOPPEL CERTIFICATE

     

    Please
refer to the documents described in Schedule 1 hereto, (the “Lease Documents”)
including the “Lease” therein described; all defined terms in this Certificate
shall have the same meanings as set forth in the Lease unless otherwise
expressly set forth herein.  The undersigned Tenant hereby certifies
that it is the tenant under the Lease.  Tenant hereby further
acknowledges that it has been advised that the Lease may be collaterally
assigned in connection with a proposed financing secured by the Property and/or
may be assigned in connection with a sale of the Property and certifies both to
Landlord and to any and all prospective mortgagees and purchasers of the
Property, including any trustee on behalf of any holders of notes or other
similar instruments, any holders from time to time of such notes or other
instruments, and their respective successors and assigns (the “Beneficiaries”)
that as of the date hereof:

     

    1.           The
information set forth in attached Schedule 1 is true and correct.

     

    2.           Tenant
is in occupancy of the Premises and the Lease is in full force and effect, and,
except by such writings as are identified on Schedule l, has not been modified,
assigned, supplemented or amended since its original execution, nor are there
any other agreements between Landlord and Tenant concerning the Premises,
whether oral or written.

     

    3.           All
conditions and agreements under the Lease to be satisfied or performed by
Landlord have been satisfied and performed.

     

    4.           To
the actual knowledge, without inquiry, of the person making the certification,
(i) Tenant is not in default under the Lease Documents, (ii) Tenant has not
received any notice of default under the Lease Documents, and,  (iii)
there are no events which have occurred that, with the giving of notice and/or
the passage of time, would result in a default by Tenant under the Lease
Documents.

     

    5.           Tenant
has not paid any Rent due under the Lease more than 30 days in advance of the
date due under the Lease and, to the actual knowledge, without inquiry, of the
person making the certification, Tenant has no rights of setoff, counterclaim,
concession or other rights of diminution of any Rent due and payable under the
Lease except as set forth in Schedule 1.

     

    6.           To
the actual knowledge, without inquiry, of the person making the certification,
(i) there are no uncured defaults on the part of Landlord under the Lease
Documents, (ii) Tenant has not sent any notice of default under the Lease
Documents to Landlord, (iii) there are no events which have occurred that, with
the giving of notice and/or the passage of time, would result in a default by
Landlord thereunder, and (iv) at the present time Tenant has no claim against
Landlord under the Lease Documents.

     

    7.           Except
as expressly set forth in the Lease, there are no provisions for any, and Tenant
has no, options with respect to the Premises or all or any portion of the
Property.

     

    8.           No
action, voluntary or involuntary, is pending against Tenant under federal or
state bankruptcy or insolvency law.

     

    9.           The
undersigned has the authority to execute and deliver this Certificate on behalf
of Tenant and acknowledges that all Beneficiaries will rely upon this
Certificate in purchasing the Property or extending credit to Landlord or its
successors in interest.

     

    10.           This
Certificate shall be binding upon the successors, assigns and representatives of
Tenant and any party claiming through or under Tenant and shall inure to the
benefit of all Beneficiaries.

     

     

    IN
WITNESS WHEREOF, Tenant has executed this Certificate this ____ day of
__________, 2____.

     

    _______________________________________

    Name of
Tenant

     

    By:                                                                           

    Title:

    


    



    
      
        
          -

          


        

         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
1 TO TENANT ESTOPPEL CERTIFICATE

     

    


     

    Lease Documents, Lease Terms
and Current Status

     

    
      	
              A.

            	
              Date
      of Lease:

            


    

     

    
      	
              B.

            	
              Parties:

            


    

     

    
      	
               
      

            	
              1.

            	
              Landlord:

            


    

     

    
      	
               
      

            	
              2.

            	
              Tenant:

            


    

     

    
      	
              C.

            	
              Premises:

            


    

     

    
      	
              D.

            	
              Modifications,
      Assignments, Supplements or Amendments to
Lease:

            


    

     

    
      	
              E.

            	
              Commencement
      Date:

            


    

     

    
      	
              F.

            	
              Expiration
      of Current Term:

            


    

     

    
      	
              G.

            	
              Option
      Rights:

            


    

     

    
      	
              H.

            	
              Security
      Deposit Paid to Landlord: $

            


    

     

    
      	
              I.

            	
              Current
      Minimum Annual Rent: $

            


    

     

    
      	
              J.

            	
              Current
      Annual Operating Expenses: $

            


    

     

    
      	
              K.

            	
              Current
      Total Rent: $

            


    

     

    
      	
              L.

            	
              Square
      Feet Demised:

            


    

     


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    EXHIBIT
“D”

     

    


     

    SPACE
PLAN AND SCOPE OF WORK FOR TENANT IMPROVEMENTS

     

    
      	
              1.  

            	
              Landlord
      shall design and construct, at Landlord’s sole cost and expense, dropping
      the foundation to accommodate five (5) dock-high standard loading doors,
      in accordance with final plans to be mutually agreed upon by the parties
      (it being understood and agreed that such cost and expense shall not be
      considered Tenant’s Costs and the Tenant Improvement Allowance and
      Additional Allowance shall not apply thereto).  The balance of
      the dock construction, including levelers, roll-up doors and any other
      tenant specific door improvements relating thereto, shall be at Tenant’s
      sole cost (subject to the Tenant Improvement Allowance and Additional
      Allowance).

            


    

     

    
      	
              2.  

            	
              See
      attached Space Plans (2 pages).

            


    

    


    
      	
              3.  

            	
              See
      attached specifications (2 pages).

            


    

    


     

     

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

    

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      Tenant
Improvements

      


       

      
        	
                1.  

              	
                Provide
      30,000 square feet of office area(s), break room, lockers and restrooms
      that will accommodate up to 400 employees.  The office area will
      include:

              


      

       

      
        	
                1.1.  

              	
                Offices
      and conference rooms.

              


      

       

      
        	
                1.1.1.  

              	
                Lighting
      controls shall be by motion sensor.

              


      

      
        	
                1.1.2.  

              	
                High
      traffic doors will have kick and push
plates.

              


      

       

      
        	
                1.2.  

              	
                Toilet
      rooms similar to the attached plan.

              


      

       

      
        	
                1.2.1.  

              	
                Women’s
      total toilet fixtures adequate for 200 female
  employees

              


      

      
        	
                1.2.2.  

              	
                Men’s
      total toilet fixtures adequate for 200 mail
  employees

              


      

       

      
        	
                1.2.3.  

              	
                Sink
      and Toilet Fixtures shall have motion sensors for
  operation

              


      

       

      
        	
                1.3.  

              	
                Break
      Room will have 82+ lineal feet of counter space and
  include

              


      

       

      
        	
                1.3.1.  

              	
                Shelving
      space and power for 6 microwaves per break
room

              


      

      
        	
                1.3.2.  

              	
                2  twenty
      four inch sinks in the break room

              


      

      
        	
                1.3.3.  

              	
                15
      outlets for refrigerators and vending
machines

              


      

      
        	
                1.3.4.  

              	
                Water
      piping for an ice machine, will include appropriate floor or wall drain
      line.

              


      

       

      
        	
                1.4.  

              	
                Computer
      Room of approximately 10,000 sq.ft.

              


      

       

      
        	
                1.4.1.  

              	
                This
      room will have its own 400 amp 480 volt service panel and climate control
      HVAC system

              


      

       

      
        	
                1.5.  

              	
                A
      fully functional security system with card readers at each exterior door
      and at doors to the data room and the production area. The system is to be
      centrally monitored and have cameras at all key
  areas.

              


      

       

      
        	
                1.6.  

              	
                On
      the ground floor equivalent windows (10 feet and lower) install a security
      film (3M's'  Ultra 400 Series film or
    equivalent).

              


      

       

      
        	
                1.7.  

              	
                Final
      plans will be mutually agreed upon by Landlord and
      Tenant.  Note, office walls exposed to the warehouse shall vary
      in height and painted white or to the specification of the
      tenant.

              


      

       

      
        	
                2.  

              	
                Lighting
      -  Provide for a minimum of 70’ foot-candles at 36” above the
      slab utilizing T-5 high output fluorescent fixtures, with motion sensors
      and lighting area circuits as approved by Tenant. The lighting system will
      have central controls near the main office area and shall be controlled by
      the building automation system energy management system. All lighting
      controls to meet code requirements.

              


      

       

      
        	
                3.  

              	
                Emergency
      Lighting – Will be designed to utilize the existing T-5 fixtures at the
      appropriate ratio to comply with appropriate building and fire
      codes.

              


      

       

      
        	
                4.  

              	
                Warehouse
      Ventilation – Provide for ample air exchanges in the warehouse to allow
      for “comfortable” working conditions in the warehouse using a fully
      integrated HVAC system for the entire building.  System will be
      directed by the building energy management system.  Please
      describe the complete system exhaust including zoning and
      controls.

              


      

       

      
        	
                5.  

              	
                Loading
      Docks – Provide eight (8) loading dock doors serving one side of the
      Premises – each position will include the following as designated by
      Shutterfly.com:

              


      

       

       

      
        	
                5.1.  

              	
                Provide
      Manual dock plates at each dock high door approved by
    Tenant.

              


      

      
        	
                5.2.  

              	
                Provide
      Dock Bumpers

              


      

      
        	
                5.3.  

              	
                Provide
      2 air compressors as specified by Tenant with all necessary piping and
      T’s.

              


      

      
        	
                5.4.  

              	
                Provide
      door rail guards, Z-Guard or bollard, painted safety yellow, on all dock
      doors serving the premises.

              


      

      
        	
                5.5.  

              	
                Provide
      swing lights and fans (Rite-Hite Coolman
2500).

              


      

      
        	
                5.6.  

              	
                Provide
      duplex outlet at each loading
position.

              


      

      
        	
                5.7.  

              	
                Provide
      five (5) dock high doors and three (3) grade level doors.  Dock
      ramp area to have necessary
drainage.

              


      

      
        	
                5.8.  

              	
                The
      doors at ramp or drive-in positions will be motor
  operated.

              


      

       

      
        	
                6.  

              	
                Building
      Electrical –

              


      

       

      
        	
                6.1.  

              	
                Provide
      for 3 battery charging stations including ventilation (plan to be
      provided).

              


      

      
        	
                6.2.  

              	
                Provide
      distribution panels as provide in plans to be
  provided.

              


      

      
        	
                6.3.  

              	
                Provide
      a dual source for power supply and divide the major components between the
      two sources. Ie. Lighting, outlets,
equipment

              


      

      
        	
                6.4.  

              	
                Duplex
      outlet at all entry doors as designated on the
  plan.

              


      

      
        	
                6.5.  

              	
                Electrical
      wiring & installation will be compliant with all applicable
      codes.

              


      

       

       

      
        	
                7.  

              	
                Warehouse
      Floor –

              


      

       

      
        	
                7.1.  

              	
                Wash
      and seal coat the warehouse floor with Ashford or equivalent product to
      provide for an anti dust finish and reflective qualities to enhance
      lighting. Caulk all areas of the warehouse floor. The floor must also be
      level and free of obstructions (previous rack anchors) or pits as such
      will not be acceptable to Tenant.

              


      

       

      
        	
                8.  

              	
                Doorbell
      at the trucker’s entrance’s (two locations) to the
      building.  Locations shall be provided by
  Tenant.

              


      

       

      
        	
                9.  

              	
                Traffic
      flow lines indicating traffic direction in the parking lot. As well as at
      each parking stall to reserve for
Shutterfly.

              


      

       

      
        	
                10.  

              	
                Warehouse
      walls - Paint the interior warehouse walls white or the color specified by
      Tenant, from floor to roof deck.

              


      

       

      
        	
                11.  

              	
                Building
      Columns - Paint all interior columns caution yellow up to 12’ and the
      remainder of the column white.  Up to 50% of the building
      columns to be painted red floor to ceiling to denote a fire extinguisher
      placement.

              


      

       

      
        	
                12.  

              	
                Warehouse
      Insulation – Building insulation should be to the r-factor required to
      meet the desired LEED certification.  Please specify what the
      Landlord is proposing.

              


      

       

      
        	
                13.  

              	
                Verify
      and provide for fiber connectivity to the MDF room from two
      locations.  Please provide a plan for where fiber will come into
      the building as well. Minimum conduit size 4 inch per location. Provide
      all necessary data and telephone wiring within the
      facility.  This will include CAT 5 to each work
      station.

              


      

       

      
        	
                14.  

              	
                Provide
      for a NFPA 72 fire alarm system in the Premises. Fire Alarm monitoring to
      be provided by the Landlord, preferably by an FM Global approved central
      station.

              


      

       

      
        	
                15.  

              	
                Provide
      an ESFR sprinkler system in the Data Room. Provide in rack sprinklers for
      high rack storage in Bulk Storage Area approx. 10,000 square
      feet

              


      

       

      
        	
                16.  

              	
                Provide
      bollards or similar protection for all internal roof
    drains.

              


      

       

      
        	
                17.  

              	
                Provide
      a parking plan to accommodate 400 employee parking stalls. Exterior
      lighting should provide lighting per code with light pollution mitigation
      to support LEED certification.  Landlord shall provide preferred
      parking for carpool parking to support 5% of the FTE building
      population.  Landlord shall also provide designated spots for
      hybrid vehicles which shall include electrical recharging
      stations.

              


      

       

      
        	
                18.  

              	
                Building
      Signage – Provide lighted box letter sign with 6 foot letters. Also all
      required interior signage.

              


      

       

      
        	
                19.  

              	
                Smoking
      Areas – Provide one 800 sq.ft. fenced and covered outside smoking
      areas.

              


      

       

      
        	
                20.  

              	
                Bicycle
      Storage and Changing Rooms – Secure bicycle storage and changing rooms
      will be built to support 0.5% of the FTE building population. Will include
      1 showers for each men’s and women’s changing
  room.

              


      

       

      
        	
                21.  

              	
                Compactor
      - Provide electrical service to two electrically powered trash compactor.
      Assume  the compactor specs
(208V).

              


      

       

      
        	
                22.  

              	
                Ensure
      there are 3,000 amps of 480/277-volt-3-phase power to serve the Premises
      and distributed throughout the warehouse as indicated by the
      Tenant.  Please state the allowance Landlord shall provide for
      distribution of power.

              


      

      


      
        	
                23.  

              	
                Provide
      for 70,000 square feet of “production area”, which must be climate
      controlled at a temperature of 70-80 degF, 40-60%
  humidity.

              


      

       

      
        	
                24.  

              	
                Provide
      with in the building allowance Architectural and Engineering fee for both
      Shutterfly’s and local Architects and
Engineers.

              


      

       

      
        	
                25.  

              	
                Provide
      the office and open area furniture. This will include Meeting Rooms, Break
      rooms, Reception, Workrooms as well as system furniture for the open
      office area.

              


      

       

      


      



      
        
           


        

        
           


          
            

          

        

        
           


        

      




    EXHIBIT
“E”

     

    


     

    PARKING

     

     

    


    
      
        
                                                                  

        

         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
“F”

     

    


     

    ADDITIONAL
PROVISIONS

     

    (a)           Intentionally
Deleted.

    


     

    (b)           No
Landlord’s Lien.  Landlord waives any and all rights to any
landlord lien and/or similar lien which Landlord would otherwise possess (now
and in the future) at common law, by statute or otherwise, against any and all
of Tenant’s fixtures, personal property and other assets currently and in the
future owned or held by Tenant.

     

    (c)           Landlord
Representations and Warranties.  Landlord hereby represents, to
its actual knowledge (which means to the actual knowledge of John DiVall)
without any duty of inquiry,  that as of the date hereof:

    


    
      	
               
      

            	
              (i)

            	
              the
      Building, including the HVAC, electrical, mechanical, plumbing, sewer and
      other systems currently serving the Building, are in good working
      order;

            


    

    


    
      	
               
      

            	
              (ii)

            	
              the
      Building does not violate any covenants or restrictions of record (if
      any), or any applicable Laws having jurisdiction over the Property, and
      Landlord has not received any written notice of any such
      violation.

            


    

    


    In the
event Landlord received notice, between the date hereof and the Commencement
Date, that any of the representations above are incorrect, whether Landlord had
actual knowledge of such fact or not, Landlord shall (a) promptly notify Tenant
of such inaccuracy, and (b) use commercially reasonable efforts to correct the
matter at issue in a prompt manner at Landlord’s sole cost and expense;
provided, that such obligations shall in no way apply to inaccuracies caused by
the Tenant or Tenant's Agents.

     

    (d)           Intentionally
Deleted.

    


    (e)             Environmental
Matters.

    


    (i)  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.; and
      the Occupational Safety and Health Act, 29 U.S.C. § 651, 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 (i) 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; and (ii) fungi, bacteria, other
      microorganisms and microbial substances that are present at levels
      regulated by Environmental Law or that may be harmful to human health and
      safety.

            


    

    


    (ii)  Landlord's
Representations and Warranties.  Except as shown in any Phase I
Environmental Assessments listed in Attachment
1 to this Exhibit
“F”, Landlord represents to its actual knowledge (which means to the
actual knowledge of John DiVall) without any duty of inquiry that:

    


    
      	
               
      

            	
              (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
      Property;

            


    

    


    
      	
               
      

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

            


    

    


    
      	
               
      

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

            


    

    


    
      	
               
      

            	
              (4)  neither
      the Property 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 Property 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 Property;

            


    

    


    
      	
               
      

            	
              (7)  the
      Property 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
      Property 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;

            


    

    


    
      	
               
      

            	
              (9)  no
      aboveground or underground tanks are located under, in, on or about the
      Property, or have ever been located under, in, on or about the Property
      and have been subsequently removed or
filled;

            


    

    


    
      	
               
      

            	
              (10)  all
      sewers, sumps and drains are in good working
  order.

            


    

    


    (iii)
Landlord's
Indemnification.  Landlord shall indemnify, defend and hold
Tenant harmless against any and all actions, claims, demands, judgments,
penalties, liabilities, costs, damages and expenses, including court costs and
attorney's fees (but excluding any consequential, incidental, special, or
punitive damages) incurred by Tenant, directly or indirectly, resulting from the
incorrectness or untruthfulness of any warranty or representation set forth in
subparagraph (b) above, or from the existence of any Hazardous Substances
deposited in, upon, under, over or from the Property by Landlord, Landlord's
agents, employees, invitees or contractors, unless such Hazardous Substance is
deposited in, upon, under, over or from the Property by Tenant or Tenant's
Agent's.  Each of the representations and warranties of Landlord set
forth within subparagraph (b) above and all of Landlord's obligations under this
subparagraph (c) shall expire on the expiration or earlier termination date of
this Lease.

    


    (e)           Tenant's
Remedies.  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 all rights available to it at law or in
equity, and shall have the further right to take the necessary actions to
perform Landlord's uncured obligations hereunder and invoice Landlord for the
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 invoice 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 said sum from Minimum Annual Rent.

    


    (f)           
Confidentiality.   Landlord and Tenant each covenant that
all financial and other terms contained in this Lease (the “Confidential
Information”) shall be kept confidential by such party, its directors, officers,
employees, agents and representatives.   Landlord and
Tenant  may only disclose the Confidential Information to their
respective directors, officers, employees, agents and representatives who need
to know such information.  Landlord and Tenant each agree that it shall
inform such persons of the confidential nature of the Confidential Information
and shall be liable for any unauthorized disclosure by such
persons.  “Confidential information” does not include Confidential
Information that otherwise becomes generally known in the industry or to the
public through no act of such party in breach of this Lease or any other party
in violation of an existing confidentiality agreement with the party or any
subsidiary or affiliate or Confidential Information which is required to be
disclosed by court order or applicable law.  Notwithstanding the
foregoing, Tenant acknowledges and agrees that Landlord intends to issue a press
release in connection with the Lease, and in that regard, will not unreasonably
withhold or delay its consent to any such press release.

    


     


    
      
        
          
            	
                     

                  	
                  	 
      


          

          


        

         


      

      
         


        
          

        

      

      
         


      

    


    

      ATTACHMENT
1 TO EXHIBIT “F”

       

      PHASE I ENVIRONMENTAL
ASSESSMENTS

       

      FINAL

       

      Phase
I Environmental Site Assessment

       

      Cotton
Center – Building 13

      4410
East Cotton Center Boulevard

      Phoenix,
AZ 85040

      


       

      Prepared
For:

       

      Liberty
Property Trust

      500
Chesterfield Parkway

      Malvern,
Pennsylvania 19355

      


       

      URS Job
Number: 19997311.00002


    

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
“G”

     

    


     

    TENANT
WORK

     

    The
following is work that Shutterfly will perform outside the scope the Tenant
Allowance. The work is first listed in major groups and then in more detail
below each grouping.

    


    
      	
              A.  

            	
              All
      work listed in Exhibit A that is not completed within the tenant allowance
      or within the additional tenant allowance that is to be amortized over the
      term of the lease. This could include any item listed in Exhibit A. As the
      cost of the tenant work is determined items will be removed from the
      Exhibit A listing an may be added to the Exhibit G
  listing.

            


    

    
      	
              B.  

            	
              Tenant
      supplied equipment.

            


    

    
      	
              1.  

            	
              Photographic
      print development equipment.

            


    

    
      	
              a.  

            	
              Install  equipment

            


    

    
      	
              b.  

            	
              Install
      containment curbs

            


    

    
      	
              c.  

            	
              Install
      chemical piping

            


    

    
      	
              d.  

            	
              Install
      anchorage

            


    

    
      	
              e.  

            	
              Install
      ducting

            


    

    
      	
              f.  

            	
              Install
      all electrical and data

            


    

    
      	
              2.  

            	
              Digital
      printing equipment

            


    

    
      	
              a.  

            	
              Install
      equipment

            


    

    
      	
              b.  

            	
              Install
      cooling system

            


    

    
      	
              c.  

            	
              Install
      anchorage

            


    

    
      	
              d.  

            	
              Install
      ducting

            


    

    
      	
              e.  

            	
              Install
      drainage

            


    

    
      	
              f.  

            	
              Install
      all electrical and data

            


    

    
      	
              3.  

            	
              Storage
      racking equipment

            


    

    
      	
              4.  

            	
              Book
      binding equipment

            


    

    
      	
              5.  

            	
              Chemical
      storage equipment

            


    

    
      	
              a.  

            	
              Install
      racks

            


    

    
      	
              b.  

            	
              Install
      piping

            


    

    
      	
              c.  

            	
              Install
      drainage

            


    

    
      	
              d.  

            	
              Install
      containment pallets

            


    

    
      	
              e.  

            	
              Connect
      water lines

            


    

    
      	
              6.  

            	
              Data
      processing equipment

            


    

    
      	
              a.  

            	
              Install
      equipment

            


    

    
      	
              b.  

            	
              Install
      all required racks and cabling

            


    

    
      	
              c.  

            	
              Install
      all cable tray and hooks as
required

            


    

    
      	
              d.  

            	
              Install
      all necessary cooling

            


    

    
      	
              e.  

            	
              Install
      all power supply , UPS and
generators

            


    

    
      	
              7.  

            	
              Data
      storage equipment

            


    

    
      	
              a.  

            	
              Install
      equipment

            


    

    
      	
              b.  

            	
              Install
      all required racks and cabling

            


    

    
      	
              c.  

            	
              Install
      all cable tray and hooks as
required

            


    

    
      	
              d.  

            	
              Install
      all necessary cooling

            


    

    
      	
              e.  

            	
              Install
      all power supply, UPS and generators as
required

            


    

    
      	
              8.  

            	
              Audio
      visual equipment

            


    

    
      	
              a.  

            	
              Install
      all projectors and screens

            


    

    
      	
              b.  

            	
              Install
      all cabling and power as required

            


    

    
      	
              9.  

            	
              Office
      work area equipment installation

            


    

    
      	
              a.  

            	
              Copiers

            


    

    
      	
              b.  

            	
              Printers

            


    

    
      	
              c.  

            	
              Faxes

            


    

    
      	
              d.  

            	
              Telephone
      systems

            


    

    
      	
              e.  

            	
              Misc.
      Equipment including clocks

            


    

    
      	
              10.  

            	
              Office
      signage

            


    

    
      	
              a.  

            	
              Door

            


    

    
      	
              b.  

            	
              Entry

            


    

    
      	
              c.  

            	
              Safety

            


    

    
      	
              d.  

            	
              All
      signage not required by occupancy

            


    

    
      	
              11.  

            	
              All
      manner of office accessories

            


    

    
      	
              12.  

            	
              Trash
      collection equipment

            


    

    
      	
              a.  

            	
              Compactors

            


    

    
      	
              b.  

            	
              Trash
      binds

            


    

    
      	
              13.  

            	
              Kitchen
      equipment

            


    

    
      	
              a.  

            	
              Refrigerators

            


    

    
      	
              b.  

            	
              Micro
      waves

            


    

    
      	
              c.  

            	
              Vending
      machines

            


    

    
      	
              14.  

            	
              Photographic
      displays, artwork and lighting

            


    

    
      	
              15.  

            	
              Additional
      bollards where required

            


    

    
      	
              16.  

            	
              Office
      furniture including system
furniture

            


    

    
      	
              17.  

            	
              Additional
      millwork when required

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
“H”

    


    


    CONTRACTOR
AGREEMENT (WARRANTY PAGE)

    


    

     

    

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      FIRST AMENDMENT TO
LEASE

      


      This First Amendment to Lease Agreement
(“First Amendment”) is made as of October 29, 2008 (“Date of this Amendment”),
by and between LIBERTY COTTON
CENTER, LLC, a Delaware limited liability company (“Landlord”) and SHUTTERFLY, INC., a
corporation organized under the laws of Delaware (“Tenant”).

      


      WITNESSETH:

      


      WHEREAS, by Lease Agreement dated
August 22, 2008 between Landlord and Tenant (the “Original Lease”), Landlord
leased to Tenant and Tenant leased from Landlord the premises consisting of
101,269 square feet of space (“Premises”) in that certain building located at
4410 East Cotton Center Blvd, Phoenix, Arizona; and

      


      WHEREAS, it is now the desire of
Landlord and Tenant to amend the Lease as set forth herein (the Original Lease,
as amended by this First Amendment, shall be referred to as the
“Lease”).

      


      NOW,
THEREFORE, in consideration of the mutual covenants herein contained, Landlord
and Tenant hereby agree, effective as of the Date of this Amendment, the
Original Lease is amended as follows:

      


      1. Incorporation of
Recitals.  The recitals set forth above are made a part of this
First Amendment, are incorporated by reference herein and are acknowledged as
true and accurate.

      


      2.           The
following is added as a new Section 28(l) to the end of Article 28 (Tenant
Improvements; Tenant Allowance) of the Lease:

      


      “(l)  Additional
Provisions.   Notwithstanding anything to the contrary
contained in Sections 28(a) through (k) above:

      


      Landlord
and Tenant hereby agree that (i) Landlord has provided Tenant with an estimated
budget set forth in a letter from Richard A. Weiblan of Landlord dated October
28, 2008 to Mr. Bjorn Hansen (the "Budget") reflecting aggregate estimated costs
for the Tenant Improvements and related costs and fees in an amount equal to
$5,608,311.00 (the “TI Amount”), and (ii) the general contractor shall be
Renaissance (the “General Contractor”).  Landlord agrees to use
commercially reasonable efforts to enter into a maximum guaranteed price
construction contract acceptable to Landlord with the General Contractor
(modified as appropriate) to construct the Tenant
Improvements.  Landlord and Tenant further agree that in the event
there are additional unforeseen costs over and above the sum of (i) TI Amount
and (ii) the aggregate of approved additional costs for Change Orders, if any,
requested by Tenant and approved by Landlord in accordance with Section 28(e)
(“Cost Overruns”), Tenant shall be responsible up to a maximum of $4,000,000 of
such Cost Overruns.  Landlord shall pay the TI Amount (less the Tenant
Improvement Allowance per Section 28), approved Tenant Change Orders and any
Cost Overruns directly to the General Contractor, and Tenant shall reimburse
Landlord for such amounts within fifteen (15) days after receipt of an invoice
or written demand from Landlord.

      


      Landlord
and Tenant agree and acknowledge that none of the foregoing shall affect or
limit Tenant’s rights under Section 28(a) to request the Additional
Allowance.”

      


      3.           The
following sentence in lines 16-18 of Section 28(a) is hereby deleted in its
entirety:

      


      “In lieu
of the foregoing, Tenant shall have the right upon notice to Landlord to apply
the Cost Savings towards additional improvements to the Premises.”

      


      Landlord and Tenant hereby confirm that
in the event there is any Cost Savings with respect to the Tenant Improvements,
such Cost Savings shall be applied to decrease the Minimum Annual Rent in
accordance with the fifth sentence of Section 28(a) of the Original
Lease.

      


      4.           Counterparts.  This
First Amendment may be executed in counterparts, which when taken together,
shall constitute the entire agreement.  Landlord and Tenant agree that
the delivery of an executed copy of this First 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
First Amendment had been delivered.

      


      5.           Reaffirmation.  To
the extent that terms are (a) defined in this First Amendment but are not
defined in the Lease, such terms shall have the meanings given hereto in this
First Amendment; and (b) used, but not defined in this First Amendment, such
terms shall have the meanings given thereto in the Lease. Except as specifically
amended and modified herein, all of the terms, covenants or conditions of the
Lease shall remain in full force and effect.

      


       

      IN WITNESS WHEREOF, Landlord and Tenant
have caused this First Amendment to be executed as of the day and year first
above written.

      


      


       

      
        	 
      	 
      	
                Landlord:

              
	 
      	 
      	
                LIBERTY
      COTTON CENTER, LLC

                By:  Liberty
      Cotton Center II, LLC, its sole Member

                By:  Liberty
      Property Limited Partnership, its sole Member

                By: Liberty Property Trust, Sole
      General Partner

                 

                 

                By:
      /s/ John
      DiVall

                Name:
      John DiVall

                Title:
      Senior Vice President

                 

              
	 
      	 
      	
                Tenant:

              
	 
      	 
      	
                SHUTTERFLY, INC., a
      Delaware corporation

                 

                By: /s/ Doug
      Appleton          

                Name:
      Doug
      Appleton                      

                Title:
      Vice President,
      Legal