January 5, 2005 Dear Jeff:


Exhibit 10.08
January 5, 2005
Dear Jeff:
     On behalf of the Board of Directors of Shutterfly, Inc. (the “Company”), I am pleased to offeryou employment with the Company on the terms set forth in this letter agreement (the “Agreement”).
     1. Position. Commencing on January 17, 2005 (the “Commencement Date”), you will beemployed by the Company full time as its President and Chief Executive Officer (“CEO”). You will bethe highest ranking executive officer of the Company and will report only to the board of directorsof the Company (the “Board”). In this role, you will have overall operating responsibility for theday-today management of the Company, including the authority to hire and/or fire any officer (afterconsultation with the Board) or any employee of the Company. You will also be appointed to theBoard during the term of your employment as CEO. Beginning on the Commencement Date, you will beexpected to devote your full working time and attention to the business of the Company, and youwill not render services to any other business without the prior approval of the Board or, directlyor indirectly, engage or participate in any business that is competitive in any manner with thebusiness of the Company; provided, however that you may serve in any capacity with a civic,educational or charitable organization, or as a member of the board of directors or committeesthereof of InQ Incorporated or any other company’s board or committee thereof that does notinterfere with your duties to the Company. You will also be expected to comply with and be bound bythe Company’s operating policies, procedures and practices that are from time to time in effectduring the term of your employment.
     2. Compensation Benefits.
          (a) Salary. Your starting base annual salary will be Two-Hundred Seventy-Five ThousandDollars ($275,000), payable in accordance with the Company’s normal payroll practices, with suchpayroll deductions and withholdings as are required by law. Your base salary will be reviewedannually by the Compensation Committee of the Board (the “Committee”).
          (b) Bonus. You will be eligible to receive an annual target bonus equal to up to fiftypercent (50%) of your then annual base salary (the “Target Bonus”), as approved by the Committee,based upon your achievement of performance milestones and conditions established for you by theCommittee after consultation with you. You will first be eligible to be paid such a bonus at theend of calendar 2005 for the full year.
          (c) Benefits. You will be eligible for normal vacation, health insurance, 401(k) andother benefits offered to Company executives.
     3. Stock Option. Upon the commencement of your employment, the Company will grant youan option under the Company’s 1999 Stock Plan to purchase One Million, Thirty-Eight Thousand, OneHundred and Forty-Six (1,038,146) shares of the Company’s Common Stock (the “Option”), whichrepresents five and one half percent (5.5%) (your “Pro-Rata Percentage”)of the Fully Diluted Capitalization of the Company (as defined below), at an exercise price equal



to the fair market value of the Company’s Common Stock on the date of the grant, asdetermined in good faith by the Board. The “Fully Diluted Capitalization of the Company” shall meanall outstanding securities of the Company (on an as converted or exercised basis) as of theCommencement Date, including all outstanding options and warrants and the unallocated reserved poolunder the Company’s equity plans (including any increases thereto related to the Option) andincluding the Option. The Option will vest over four (4) years as follows: 25% of the total numberof shares subject to the Option will vest on the twelve (12) month anniversary of the CommencementDate and thereafter 2.0833% of the total number of shares subject to the Option will vest at theend of each full month of continuous employment. Vesting will depend on your continued employmentwith the Company and will be subject to the terms of Section 6 of this Agreement and the terms andconditions of the 1999 Stock Plan and related Stock Option Agreement.
     The Option shall be granted as an incentive stock option to the maximum extent permitted underSection 422 of the Internal Revenue Code of 1986, as amended (the “Code”) and, thereafter, shall begranted as a non-qualified stock option, and such options shall be issued under separate optionnotices and agreements designated as an incentive stock option or non-qualified stock option, asappropriate.
     In the event you terminate employment with the Company as a result of Involuntary Termination,Termination without Cause or Termination for Disability, each as defined below, you may exercisethe vested portions of the Option during the twelve (12) month period commencing on the date ofyour termination of employment, provided, however, that in no event may the Option be exercisedafter its expiration date. In the event you terminate employment with the Company as the result ofyour death, the vested portions of the Option may be exercised during the twelve (12) month periodcommencing on the date of your death, provided, however, that in no event may the Option beexercised after its expiration date. In the event you terminate employment with the Company as aresult of Voluntary Termination or Termination for Cause, you may exercise the vested portions ofthe Option during the period allowed under the 1999 Stock Plan.
     4. Employment and Termination. Your employment with the Company will be at-will andmay be terminated by you or by the Company at any time for any reason as follows:
          (a) You may terminate your employment upon written notice to the Board for “Good Reason,” asdefined below (an “Involuntary Termination”);
          (b) You may terminate your employment upon written notice to the Board at any time withoutGood Reason (“Voluntary Termination”);
          (c) The Company may terminate your employment upon written notice to you at any time followinga determination that there is “Cause,” as defined below, for such termination (“Termination forCause”);
          (d) The Company may terminate your employment upon written notice to you at any time without“Cause,” as defined below, for such termination (“Termination without Cause”);



          (e) Your employment will automatically terminate upon your death or upon your disability asdetermined by the Board (“Termination for Death or Disability”); provided that “disability” shallmean your complete inability to perform your job responsibilities for a period of one hundredeighty (180) consecutive days or one hundred eighty (180) days in the aggregate in any twelve (12)month period.
     5. Definitions. As used in this Agreement, the following terms have the followingmeanings:
          (a) “Good Reason” means your resignation within three (3) months following (i) a change inyour title of President and CEO or in your reporting to the Board, or a material reduction in yourduties or responsibilities that is inconsistent with your position, provided, further, that GoodReason shall also include the circumstance where following a Change of Control, as defined below,you are not the President and CEO of a successor entity to the Company following a Change inControl (or otherwise your duties and responsibilities for such successor entity to the Company arematerially reduced from those described in Section 1 herein as would be applied to the successorentity following a Change of Control); (ii) a requirement by the Company that you relocate yourprincipal office to a facility more than 60 (sixty) miles from the Company’s current Redwood City,California headquarters; or (iii) a material reduction in your annual base salary (other than inconnection with a general decrease in the salary of all executives of the Company), in any case,without your written consent.
          (b) “Cause” means your (i) gross negligence or willful misconduct in the performance of yourduties after a notice is delivered to you which specifically identifies the manner in which theCompany believes you have engaged in gross negligence or willful misconduct and you have beenprovided with a reasonable opportunity to cure any alleged gross negligence or willful misconductin the performance of your duties; (ii) commission of any act of fraud or material dishonesty withrespect to the Company; (iii) conviction of, or plea of guilty or “no contest” to, a felony or acrime of moral turpitude or dishonesty which demonstrably materially damages the Company; (iv)material breach of any proprietary information and inventions agreement with the Company, includingthe Invention Assignment and Confidentiality Agreement referred to in Section 7 below, or any otherunauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v)repeated failure to follow the lawful written or oral directions of the Board after receivingwritten notification of such failure from the Board and a reasonable opportunity to cure suchfailure which shall not be less than 40 days following such notice. No act or. failureto act by you shall be considered “willful” if done or omitted by you in good faith with reasonablebelief that your action or omission was in the best interests of the Company.
          (c) “Change in Control” means (i) any person or entity becoming the beneficial owner, directlyor indirectly, of securities of the Company representing fifty (50%) percent of the total votingpower of all its then outstanding voting securities; (ii) a merger or consolidation of the Companyin which its voting securities immediately prior to the merger orconsolidation do not represent, or are not converted into securities that represent, amajority of the voting power of all voting securities of the surviving entity immediately after themerger or consolidation; (iii) a sale of substantially all of the assets of the Company; or (iv) aliquidation or dissolution of the Company.



     6. Separation Benefits. Upon termination of your employment with the Company for anyreason, you will receive payment for all unpaid salary and vacation accrued as of the date of yourtermination of employment, and your benefits will be continued under the Company’s then existingbenefit plans and policies for so long as provided under the terms of such plans and policies andas required by applicable law. Under certain circumstances, and in all events conditioned upon yourexecution of a release and waiver of claims against the Company, its officers and directors andstockholders in a form acceptable to the Company, the form of which is attached hereto asExhibit A, you will be entitled to receive severance benefits as set forth below inaddition to those described above, but you will not be entitled to any other compensation, award ordamages with respect to your employment or termination.
          (a) In the event of your Voluntary Termination, Termination for Cause or Termination for Deathor Disability, you will not be entitled to any cash severance benefits or additional vesting of anyCompany equity-based awards, including Company stock options.
          (b) In the event of your Termination without Cause or your Involuntary Termination, you willbe entitled to (i) a lump sum payment equivalent to your then-current base salary for a period oftwelve (12) months and the maximum Target Bonus for the year in which the termination occurred; and(ii) accelerated vesting of that portion of the Option that would have vested over the next twelve(12) months immediately following such Involuntary Termination or Termination without Cause.
          (c) In the event of your Involuntary Termination or Termination without Cause within twelve(12) months following the closing of a Change in Control, in lieu of any payment under Section 6(b)above, you will be entitled to (i) a lump sum payment equivalent to your then-current base salaryfor a period of fifteen (15) months and the maximum Target Bonus for the year in which thetermination occurred plus an additional one fourth (1/4) of the maximum Target Bonus for the yearin which the termination occurred; and (ii) accelerated vesting of: (A) if such Change in Controlcloses within twelve (12) months of the Commencement Date, such portion of the Option so that, whenadded to your then vested portion of the Option as of the date of such Involuntary Termination orTermination without Cause, you will be vested in total in that number of shares as would have beenvested as of the date twenty-four (24) months following the Commencement Date absent yourtermination; or (B) if such Change in Control closes more than twelve (12) months after theCommencement Date, any portion of the Option that is not vested immediately prior to suchInvoluntary Termination or Termination without Cause,
          (d) No payments due you hereunder shall be subject to mitigation or offset.
          (e) In the event of your Termination without Cause or Involuntary Termination, the Companywill pay the premiums for your COBRA coverage (should you elect to convert your health coverageunder COBRA) until the earlier of the following: (A) the 12-month anniversary of your last day of employment with the Company or (B) you become covered byanother employer’s health plan.
     7. Confidential Information and Invention Assignment Agreement. On or prior to theCommencement Date, you will sign the Company’s standard form of Invention Assignment



and Confidentiality Agreement, a form of which is attached hereto as Exhibit B. Nothing in thisAgreement alters the terms and conditions of that Invention Assignment and ConfidentialityAgreement.
     8. Arbitration. The parties agree that any dispute regarding the interpretation orenforcement of this Agreement shall be decided by confidential, final and binding arbitrationconducted in Santa Clara County by Judicial Arbitration and Mediation Services (“JAMS”) under thethen existing JAMS rules rather than by litigation in court, trial by jury, administrativeproceeding or in any other forum. The prevailing party shall be entitled to receive from the otherparty its reasonable attorney’s fees and expenses, and all other actual costs and expenses,relating to such arbitration, and of enforcement of JAMS’ decision.
     9. Parachute Payments. In the event that the severance and other benefits provided toyou pursuant to this Agreement and any other agreement, benefit, plan, or policy of the Company (i)constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) but forthis Section 9, such severance and benefits would be subject to the excise tax imposed by Section4999 of the Code, then your severance and other benefits under this Agreement and any otheragreement, benefit, plan, or policy of the Company shall be payable either: (a) in full; or (b) asto such lesser amount which would result in no portion of such severance and other benefits beingsubject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, takinginto account the applicable federal, state and local income taxes (applying the then highestmarginal tax rates) and the excise tax imposed by Section 4999, results in the receipt by you on anafter-tax basis, of the greatest mount of severance and other benefits under this Agreement and anyother agreement, benefit, plan, or policy of the Company.
     Unless you and the Company otherwise agree in writing, any determination required under thisSection 9 shall be made in writing by independent public accountants agreed to by you and theCompany (the “Accountants”), whose determination shall be conclusive and binding upon you and theCompany for all purposes. For purposes of making the calculations required by this Section 9, theAccountants may make reasonable assumptions and approximations concerning applicable taxes and mayrely on reasonable, good faith interpretations concerning the applications of Sections 280G and4999 of the Code. You and the Company shall furnish to the Accountants such information anddocuments as the Accountants may reasonably request in order to make a determination under thisSection 9. ‘The Company shall bear all costs the Accountants may reasonably incur in connectionwith calculations contemplated by this Section 9.
     Notwithstanding the foregoing, in the event that the severance and other benefits provided toyou pursuant to this Agreement and any other agreement, benefit, plan, or policy of the Companyconstitute “parachute payments” within the meaning of Section 280G of the Code, and provided theCompany is not then publicly traded, you may request that the Company seek to obtain theapproval of such severance and other benefits by more than 75 percent of the votingpower of all outstanding stock of the Company in accordance with Q&A — 7 of the TreasuryRegulations under Section 280G of the Code. The Company shall bear all costs incurred in connectionwith soliciting the requested stockholder approval. If such stockholder approval is obtained thenthe reduction provisions of the first paragraph of this Section 9 shall not apply.



     10. Indemnification Agreement. Upon your commencement of employment with the Company,the Company will enter into a mutually acceptable standard form of indemnification agreement forofficers and directors, to indemnify you against certain liabilities you may incur as an officer ordirector of the Company.
     11. Nonsolicitation. During the term of your employment with the Company and for oneyear after the termination of your employment with the Company, you will not, on behalf of yourselfor any third party, directly or indirectly, solicit or attempt to induce any employee of theCompany to terminate his or her employment with the Company, except (i) that you may on your behalf(or on behalf of a third party) engage in a general solicitation for employment, provided thatneither you nor such third party, at your direction, have targeted such recruitment efforts at theCompany, (ii) that you may on your behalf (or on behalf of a third party) employ any person whoeither responds to such general solicitation or otherwise contacts you or such third party on hisor her own initiative without solicitation or encouragement, directly or indirectly, by you or suchthird party, or (iii) following cessation of employment by an employee of the Company, without anysolicitation or encouragement, directly or indirectly, by you or such third party.
     12. Reimbursement of Legal Expenses. The Company agrees to bear all expenses relatedto the drafting, negotiation and execution of this Agreement, including the reasonable fees andexpenses of your counsel, Morrison & Foerster LLP, in an amount not to exceed $15,000, such limitdetermined on an after-tax basis so that all such fees and expenses plus your taxes associated withsuch payment are paid by the Company (applying the then highest marginal tax rates).
     13. D&O Insurance. You acknowledge that the Company currently does not maintaindirectors’ and officers’ liability insurance coverage. Within 90 days following the CommencementDate, it is acknowledged that you will recommend to the Board directors’ and officers’ liabilityinsurance coverage for all of the Company’s directors and officers with a reputable insurancecompany or association in such customary amounts and in such customary form as would reasonably beexpected for the Company and that the Board will in reasonable good faith evaluate such insurancefor adoption by the Company at that time.
     14. Liquidation Bonus Plan. Promptly following the Commencement Date, the Board willadopt a bonus plan (the “Liquidation Bonus Plan”) and thereupon seek any requisite stockholderapprovals for such plan. The Liquidation Bonus Plan will provide that in the event of aliquidation, dissolution, or winding up of the Company, including in connection with the eventsdescribed in sub-section 2(e)(i) of Article IV of the Company’s restated certificate ofincorporation filed August 27, 2004 (the “Restated Certificate) (any of these events, a“Liquidation”), you will be entitled to receive as a bonus a portion (the “Bonus Portion’) of theproceeds of such Liquidation which are available fox distribution to the Company’s stockholders.The Bonus Portion will equal (i) your Current Vested Percentage (as defined below) multiplied bythe aggregate amount of the proceeds of any such Liquidation which,before giving effect to the Liquidation Bonus Plan, are available for distribution to theCompany’s stockholders, minus (ii) the sum of (A) the aggregate exercise price under the Option ofthe shares which represent the Current Vested Percentage, to the extent you have not already paidsuch exercise price to the Company, and (B) any amounts which you receive in connection with theLiquidation in respect of the shares of Common Stock subject to the Option. For



purposes of this paragraph your “Current Vested Percentage” shall equal (x) a percentage determined by dividing thethen actual number of your vested shares under the Option (including such number of shares thathave become vested under the Option by virtue of Section 6) by the aggregate number of shares ofthe Company’s Common Stock subject to the Option (except that if a Liquidation occurs during thefirst twelve (12) months following the Commencement Date, such percentage described in thissub-section 14(x) shall in no event be less than 25%), multiplied by (y) your Pro-Rata Percentage.Any Bonus Portion, including as applicable portions thereof, shall be payable to you at suchtime(s) and in such form(s) of consideration, including as applicable in proportions thereof, asthe proceeds of the Liquidation are paid to the Company’s stockholders in connection with theLiquidation. For purposes of calculating any Bonus Portion, the value of any non-cash proceeds ofthe Liquidation shall be determined in accordance with sub-section 2(e)(ii) of Article IV theRestated Certificate. The Liquidation Bonus Plan and any rights under this Section 14 shallterminate upon the Company’s closing of an initial public offering as defined in sub-sectionB.4.(b)(i) of Article IV of the Restated Certificate.
     15. Rights of First Offer. The Company agrees that, subject to obtaining requisitestockholder consents, you shall have rights of first offer with respect to future sales of Shares(as defined below) by the Company on substantially the terms and. conditions of therights of first offer held by “Major Investors” under Section 2.4 of the Company’s Fourth Amendedand Restated Investor Rights Agreement, dated October 11, 2002 (the “Rights Agreement”) subject tothe following: (i) for purposes of this Section 15, “Shares will be defined as setforth in Section 2.4 of the Rights Agreement; (ii) for purposes of calculating under Section 2.4(b)of the Rights Agreement the portion of the Shares you may elect to purchase, such portion willequal up to the proportion that the number of shares of Common Stock subject to the Option bears tothe total number of shares of Common Stock of the Company then outstanding (assuming fullconversion of all convertible securities); and (iii) for clarity, in addition to the issuancescarved out from the rights of first offer in Section 2.4(d) (i) through (viii) of the RightsAgreement, the rights of first offer held by you shall also not be applicable to any options orother stock grants made from the unallocated reserved pool under the Company’s equity plans, assuch pool may from time-to-time be increased by the Board in its sole discretion. Promptlyfollowing the Commencement Date the Company shall in good faith seek all requisite stockholderapproval to provide you with the rights described in this Section 15.
     16. Miscellaneous.
          (a) Absence of Conflicts. You represent that your performance of your duties underthis Agreement will not breach any other agreement as to which you are a party.
          (b) Entire Agreement. This Agreement, including the attached exhibits, if any,represents the entire agreement between the parties concerning the subject matter of youremployment by the Company.
          (c) Successors. This Agreement is binding on and may be enforced by the Company andits successors and assigns and is binding on and may be enforced by you and your heirs and legalrepresentatives. Any successor to Company or substantially all of its business (whether bypurchase, merger, consolidation or otherwise) will in advance assume in writing and be bound by allof the Company’s obligations under this Agreement.



          (d) Notices. Notices hereunder must be in writing and will be deemed to have beengiven when personally delivered or two days after mailed by U.S. registered or certified mail,return receipt requested and postage prepaid. Mailed notices to you will be addressed to you at thehome address which you have most recently communicated to Company in writing. Notices to Companywill be addressed to its Chairman of the Board at Company’s corporate headquarters.
          (e) Waiver. No provision of this Agreement will be modified or waived except inwriting signed by you and an officer of Company duly authorized by the Board. No waiver by eitherparty of any breach of this agreement by the other party will be considered a waiver of any otherbreach of this Agreement.
          (f) Governing Law. This Agreement will be governed by the laws of the State ofCalifornia without reference to conflict of laws provisions.
     17. Acceptance. This offer will remain open until January 7, 2005 and your start datewill be January 17, 2005. If you decide to accept our offer, and I hope you will, please sign theenclosed copy of this letter in the space indicated and return it to me. Your signature willacknowledge that you have read and understood and agreed to the terms and conditions of thisAgreement and the attached documents, if any. Should you have anything else that you wish todiscuss, please do not hesitate to call me.
     We look forward to the opportunity to welcome you to the Company.
      Best regards,
      /s/ Nancy Schoendorf
      Nancy Schoendorf
      Member of Board of Directors
      Shutterfly, Inc.
/s/Jeff Housenbold
Jeff Housenbold
cc: Board of Directors, Shutterfly, Inc.



     Pursuant to the terms of the parties’ Letter Agreement (the “Agreement”) dated January ___,2005, Jeff Housenbold (“Employee”) and Shutterfly, Inc. (“Company”) agree to the following GeneralRelease Agreement (“Release”).
     1. Waiver of Claims. In consideration for the Company’s payments and promises setforth in Section 2 of the Agreement, Employee agrees to hereby release and waive any and all claimshe may have against the Company and its owners, agents, officers, shareholders, employees,directors, attorneys, subscribers, subsidiaries, affiliates, successors and assigns (collectivelyReleasees”), whether known or not known, including, without limitation, claims underany employment laws, including, but not limited to, claims of unlawful discharge, breach ofcontract, breach of the covenant of good faith and fair dealing, fraud, violation of public policy,defamation, physical injury, emotional distress, claims for additional compensation or benefitsarising out of his employment or separation of employment, claims under Title VII of the 1964 CivilRights Act, as amended, the California Fair Employment and Housing Act and any other laws and/orregulations relating to employment or employment discrimination, including, without limitation,claims based on age or under the Age Discrimination in Employment Act or Older Workers BenefitProtection Act, and/or claims based upon disability or under the Americans with Disabilities Act.By signing below, Employee expressly waives any benefits of Section 1542 of the Civil Code of theState of California, which provides as follows:
The Company and Employee agree that the waiver and release set forth in this section shall be andremain in effect as to the matters released. The waiver and release do not extend to anyobligations of the Company created under the Agreement, nor do they affect in any way Employee’srights to be indemnified by the Company pursuant td California Labor Code Section 2802 andCalifornia Corporations Code Section 317 for any acts or omissions by Employee during hisemployment with the Company.
     2. Return of Company Property. Employee hereby represents and warrants to the Companythat he has returned all real or intangible property or data of the Company of any type whatsoeverthat has been in his possession or control, provided that, Employee may retain the two Companylaptops and the Blackberry hardware device that the Company has previously provided to him,provided that on or before the Resignation Date Employee deletes all Company data and materialsstored on the laptops and device and electronically transmit same to the Company.



     3. Proprietary Information and Invention Assignment Agreement. Employee herebyacknowledges that he is bound by the Proprietary Information and Inventions Agreement signed by himand that as a result of his employment with the Company he had access to the Company’s ProprietaryInformation and will continue to have access to the Company’s Proprietary Information (as definedin the Proprietary Information and Inventions Assignment Agreement), and that he will continue tohold all Proprietary Information in strictest confidence and that he will not make use of suchProprietary Information on behalf of anyone.
     4. Legal and Equitable Remedies, The parties have the right to enforce the Agreementand/or the Release and any of the provisions by injunction, specific performance or other equitablerelief without prejudice to any other rights or remedies the parties may have at law or in equityfor breach of the Agreement
     5. Confidentiality. The contents, terms and conditions of the Agreement and/or Releasemust be kept confidential by Employee and may not be disclosed except to his immediate family,accountant or attorneys or pursuant to subpoena or court order. Any breach of this confidentialityprovision will be deemed a material breach of the Agreement and the Release.
     6. No Admission of Liability. The Agreement and Release are not and shall not beconstrued or contended by Employee to be an admission or evidence of any wrongdoing or liability onthe part of Releasees, their representatives, heirs, executors, attorneys, agents, partners,officers, shareholders, directors, employees, subsidiaries, affiliates, divisions, successors orassigns. The Agreement and the Release shall be afforded the maximum protection allowable underCalifornia Evidence Code Section 1152 and/or any other state or Federal provisions of similareffect.
     7. Entire Agreement. The Agreement and the Release constitute the entire agreementbetween Employee and the Releasees with respect to the subject matter hereof and supersede allprior negotiations and agreements, whether written or oral, relating to such subject matter otherthan the Employee Invention Agreement referred to above. Employee acknowledges that neitherReleasees nor their agents or attorneys have made any promise, representation or warrantywhatsoever, either express or implied, written or oral, which is not contained in the Agreement orthe Release for the purpose of inducing him to execute the Release, and Employee acknowledges thathe has executed this Release in reliance only upon such promises, representations and warranties asare contained herein.
     8. Arbitration. Employee and the Company agree to waive any rights to a trial before ajudge or jury and agree to arbitrate before a neutral arbitrator any and all claims or disputesarising out of this letter agreement and any and all claims arising from or relating to Employee’semployment with the Company, including (but not limited to) claims against any current or formeremployee, director or agent of the Company claims of wrongful termination, retaliation,discrimination, harassment, breach of contract, breach of the covenant of good faith and fairdealing, defamation, invasion of privacy, fraud, misrepresentation, constructive discharge orfailure to provide a leave of absence, claims regarding commission, stock options or bonuses,infliction of emotional distress or unfair business practices.



The arbitrator’s decision must be Mitten and must include the findings of fact and law that supportthe decision. The arbitrator’s decision will be final and binding on both parties, except to theextent applicable law allows for judicial review of arbitration awards. The arbitrator may awardany remedies that would otherwise be available to the parties if they were to bring the dispute incourt. The arbitration will be conducted in accordance with the National Rules for the Resolutionof Employment Disputes of the American Arbitration Association; provided, however that thearbitrator must allow the discovery authorized by the California Arbitration Act or that thearbitrator deems necessary for Employee and the Company to vindicate their respective claims ordefenses. The arbitration will take place in San Mateo County or, at Employee’s option, the countyin which Employee primarily worked with the Company at the time when the arbitrable dispute orclaim first arose.
Employee and the Company will share the costs of arbitration equally, except that the Company willbear the cost of the arbitrator’s fee and any other type of expense or costs that Employee wouldnot be required to bear if he had brought the dispute or claim in court. Both the Company andEmployee will be responsible for their own attorney’s fees, and the arbitrator may not awardattorneys’ fees unless a statute or contract at issue specifically authorizes such an award,
This arbitration provision does not apply to the following: (a) workers’ compensation orunemployment insurance claims or (b) claims concerning the validity, infringement or enforceabilityof any trade secret, patent right, copyright or any other trade secret or intellectual propertyheld or sought by either Employee or the Company (whether or not arising under the ProprietaryInformation and Inventions Assignment Agreement between Employee and the Company).
     9. Modification. It is expressly agreed that this Release may not be altered, amended,modified, or otherwise changed in any respect except by another written agreement that specificallyrefers to this Release, executed by authorized representatives of each of the parties.
     10. Review of Agreement and Effective Date of Release. The Company hereby advisesEmployee to consult with his own attorney concerning the terms of this Release. He understands thathe may take up to twenty-one (21) days to consider this Release and, by signing below, affirms thathe was advised to consult with an attorney prior to signing this Release. Employee also understandshe may revoke this Release within seven (7) days of signing this document. This Release will beeffective on the 8th day after Employee signs it.
Accepted and agreed to by:
Jeff Housenbold



     The following confines an agreement between me (Jeff Housenbold), and Shutterfly, Inc., aDelaware corporation (the “Company”), which is a material part of the consideration for myemployment by Company:
     1. I have not entered into, and I agree I will not enter into, any agreement either written ororal in conflict with this Agreement or my employment with Company. I will not violate anyagreement with or rights of any third party or, except as expressly authorized by Company inwriting hereafter, use or disclose my own or any third party’s confidential information orintellectual property when acting within the scope of my employment or otherwise on behalf ofCompany. Further, I have not retained anything containing any confidential information of a prioremployer or other third party, whether or not created by me.
     2. Company shall own all right, title and interest (including patent rights, copyrights, tradesecret rights, mask work rights, sui generis database rights and all other intellectual andindustrial property rights throughout the world) relating to any and all inventions (whether or notpatentable), works of authorship, mask works, designs, know-how, ideas and information made orconceived or reduced to practice, in whole or in part, by me during the term of my employment withCompany to and only to the fullest extent allowed by California Labor Code Section 2870 (which isattached as Appendix A) (collectively “Inventions”) and I will promptly disclose all Inventions toCompany. I will also disclose anything I believe is excluded by Section 2870 so that the Companycan make an independent assessment. I hereby make all assignments necessary to accomplish theforegoing. I shall further assist Company, at Company’s expense, to further evidence, record andperfect such assignments, and to perfect, obtain, maintain, enforce, and defend any rightsspecified to be so owned or assigned. I hereby irrevocably designate and appoint Company and itsagents and attorneys-in-fact to act for and in my behalf to execute and file any document and to doall other lawfully permitted acts to further the purposes of the foregoing with the same legalforce and effect as if executed by me. If anything created by me prior to my employment relates inany way to Company’s actual or proposed business, I have listed it on Appendix B. If I use or(except pursuant to this Section 2) disclose my own or any third party’s confidential informationor intellectual property when acting within the scope of my employment or otherwise on behalf ofCompany, Company will have and I hereby grant Company a perpetual, irrevocable, worldwideroyalty-free, non-exclusive, sublicensable right and license to exploit and exercise all suchconfidential information and intellectual property rights.
     3. To the extent allowed by law, paragraph 2 includes all rights of paternity, integrity,disclosure and withdrawal and any other rights that may be known as or referred to as “moralrights,” “artist’s rights,” “droit moral,” or the like (collectively “Moral Rights”). To the extentI retain any such Moral Rights under applicable law, I hereby ratify and consent to any action thatmay be taken with respect to such Moral Rights by or authorized by Company and agree not to assertany Moral Rights with respect thereto. I will confirm any such ratifications, consents andagreements from time to time as requested by Company.



     4. I agree that all Inventions and all other business, technical and financial information(including, without limitation, the Company’s business plan, proposed products and services,proposed names, marks and other identifiers, and the identity of and information relating tocustomers or employees) I develop, learn or obtain during the term of my employment that relate toCompany or the business or demonstrably anticipated business of Company or that are received by orfor Company in confidence, constitute “Proprietary Information.” I will hold in confidence and notdisclose or, except within the scope of my employment, use any Proprietary Information. However, Ishall not be obligated under this paragraph with respect to information I can document is orbecomes readily publicly available without restriction through no fault of mine. Upon terminationof my employment, I will promptly return to Company all items containing or embodying ProprietaryInformation (including all copies), except that I may keep my personal copies of (i) mycompensation records, (ii) materials distributed to shareholders generally and (iii) thisAgreement. I also recognize and agree that I have no expectation of privacy with respect toCompany’s telecommunications, networking or information processing systems (including, withoutlimitation, stored computer files, email messages and voice messages) and that my activity and anyfiles or messages on or using any of those systems may be monitored at any time without notice.
     5. I acknowledge and reaffirm my nonsolicitation obligations under Section 11 of theAgreement.
     6. I agree that during the term of my employment with Company (whether or not during businesshours), I will not engage in any activity that is in any way competitive with the business ordemonstrably anticipated business of Company, and I will not assist any other person ororganization in competing or in preparing to compete with any business or demonstrably anticipatedbusiness of Company.
     7. I agree that this Agreement is not an employment contract for any particular term and thatI have the right to resign and Company has the right to terminate my employment at will, at anytime, for any or no reason, with or without cause. In addition, this Agreement does not purport toset forth all of the terns and conditions of my employment, and, as an employee of Company, I haveobligations to Company which are not set forth in this Agreement. However, the terms of thisAgreement govern over any inconsistent terms and can only be changed by a subsequent writtenagreement signed by the President of Company.
     8. I agree that my obligations under paragraphs 2, 3, 4 and 5 of this Agreement shall continuein effect after termination of my employment, regardless of the reason or reasons for termination,and whether such termination is voluntary or involuntary on my part, and that Company is entitledto communicate my obligations under this Agreement to any future employer or potential employer ofmine. My obligations under paragraphs 2, 3 and 4 also shall be binding upon my heirs, executors,assigns, and administrators and shall inure to the benefit of Company, it subsidiaries, successorsand assigns.
     9. Any dispute in the meaning, effect or validity of this Agreement shall be resolved inaccordance with the laws of the State of California without regard to the conflict of lawsprovisions thereof. I further agree that if one or more provisions of this Agreement are held to beillegal or unenforceable under applicable California law, such illegal or unenforceable portion(s)



shall be limited or excluded from this Agreement to the minimum extent required so that thisAgreement shall otherwise remain in full force and effect and enforceable in accordance with itsterms. I also understand that any breach of this Agreement will cause irreparable harm to Companyfor which damages would not be an adequate remedy, and, therefore, Company will be entitled toinjunctive relief with respect thereto in addition to any other remedies.
, 2005   Employee
      Jeff Housenbold
Accepted and agreed to:
Name (Printed)



     California Labor Code Section 2870. Application of provision providing that employee shallassign or offer to assign rights in invention to employer.
     (a) Any provision in an employment agreement which provides that an employee shall assign, oroffer to assign, any of his or her rights in an invention to his or her employer shall not apply toan invention that the employee developed entirely on his or her own time without using theemployer’s equipment, supplies, facilities, or trade secret information except for those inventionsthat either:
     (1) Relate at the time of conception or reduction to practice of the invention to theemployer’s business, or actual or demonstrably anticipated research or development of theemployer; or
     (2) Result from any work performed by the employee for his employer.
     (b) To the extent a provision in an employment agreement purports to require an employee toassign an invention otherwise excluded from being required to be assigned under subdivision (a),the provision is against the public policy of this state and is unenforceable.