March 25, 2005 Dear Doug,


Exhibit 10.12
March 25, 2005
Dear Doug,
On behalf of Shutterfly, Inc. (the “Company”), I am pleased to offer you the full-time position ofSenior Vice President Business & Corporate Development reporting to Jeff Housenbold, President &CEO. By signing this letter, you confirm to the Company that you have no contractual commitmentsor other legal obligations that would prohibit you from performing your duties for the Company.
Your base salary will be $225,000, annually, subject to all applicable deductions and withholdingpayable in accordance with the Company’s standard payroll policies. In addition, you will beeligible to be considered for an incentive bonus, which will be submitted to and reviewed andapproved by the Company’s Compensation Committee. The bonus (if any) will be awarded based on yourachievement of criteria established by the Company’s Compensation Committee, including but notlimited to the Company’s achievement of its financial target objectives.
Stock Options:
You will be granted an option to purchase 200,000 shares of the Company’s Common Stock, at anexercise price equal to the fair market value of the Common Stock on the date the Board grants yourstock option or on your first date of employment with the Company, whichever is later. Your optionwill be subject to all of the terms, conditions and restrictions of the Company’s 1999 Stock Planand the execution of a stock option agreement pursuant to such plan.
If the Company is subject to a Change in Control (as defined in the Plan), merger or acquisition,whereas, (1) you will no longer be SVP Business & Corporate Development of Shutterfly, or (2) yourrole is materially diminished, or (3) the corporate office is moved and you choose not to relocatewith the company, then Shutterfly will agree to pay you severance pay of 6 months following thetermination of your employment and accelerate your vesting schedule by 12 months from that date.Your severance pay will be paid in accordance with the Company’s standard payroll procedures.However, to receive this severance pay you must have (a) signed a general release (in a formprescribed by the Company) and (b) returned all Company property. If the Company is subject to aChange in Control (as defined in the Plan), merger or acquisition, whereas, you continue to reportto the Board of Shutterfly, the severance and accelerated vesting will not be offered.
If the Company terminates your employment for any reason other than Cause (as defined in the nextparagraph), then the Company will pay you severance pay for a period of 6 months and accelerateyour vesting schedule by 6 months from that date following the termination of your employment.Your monthly severance pay will be paid at the rate of your monthly base salary in effect at thetime of the termination of your employment and in accordance with the Company’s standard payrollprocedures. However, to receive this severance pay you must have (a) signed a general release (ina form prescribed by the Company) and (b) returned all Company property.



For all purposes under this letter agreement, “Cause” means (a) any breach of this letteragreement, the Proprietary Information and Inventions Agreement between you and the Company, or anyother written agreement between you and the Company; (b) any failure to comply with the Company’swritten policies or rules, as they may be in effect from time to time during your employment; (c)commission, conviction of, or a plea of “guilty’ or “no contest” to, a felony under the laws of theUnited States or any State; (d) neglect of duties; or (e) misconduct.
All portions of this offer will be in effect as of the above stated start date once this letter issigned by both parties.
As a regular, full time employee of Shutterfly, you will be provided with the Company benefitpackage. The Company’s existing plans for group life, health and accident insurance may changefrom time to time.
Shutterfly is excited about having you join our team. We feel we are a great company and takepride in treating our employees with dignity and respect. As you well know, there are numerouslaws that both the employee and employer must understand and accept. The next several paragraphslist the legal requirements associated with becoming a Shutterfly employee.
This offer of employment is contingent upon you completing, signing, and returning to us, thisoffer letter and the Employee Proprietary Information and Inventions Agreement. In addition, byaccepting these terms of employment, you represent that you have not brought and will not bringwith you to the Company, or utilize In the course of your employment by the Company, anyconfidential or proprietary information or materials of any prior employer.
For purposes of federal immigration law (Immigration Reform and Control Act of 1986) you arerequired to provide documentary evidence of your eligibility for employment in the United States.Please bring the appropriate documentation, as listed on the enclosed I-9 Form, with you to NewHire Orientation.
Further, your employment with Shutterfly is “at will” and may be terminated by either the employeeor the Company at any time, for any reason, with or without cause and with or without notice.Nothing in this offer is to be construed as a contract of employment for any specific length oftime.
Finally, by accepting this offer, you agree to be bound by an agreement to arbitrate set forth inthis paragraph, which means that if a dispute arises between you and the Company during youremployment or after, the dispute would be resolved by a neutral arbitrator, rather than through alawsuit. The neutral arbitrator will be selected and the arbitration conducted pursuant to theEmployment Dispute Resolution rules of the American Arbitration Association (AAA). This paragraphcovers all disputes arising from your employment, including (1) claims for wages, benefits orcompensation, (2) all torts and contract claims of any kind, including disputes concerning thisparagraph, and (3) claims based on any federal or state law, including discrimination, harassmentor retaliation. The only claims not covered by this paragraph are worker’s compensation andunemployment compensation claims. In addition, this paragraph does not preclude the Company fromenforcing in court its rights under the Employee Proprietary Information and Inventions Agreementor any other agreement concerning



intellectual property, proprietary or confidential information or inventions and any lawsconcerning these subjects. Except as provided in the previous two sentences, arbitration is theexclusive remedy for all disputes covered by this paragraph, including whether a particular disputeis covered by this paragraph, and is binding on both parties, which means that BOTH YOU AND THECOMPANY WAIVE ANY RIGHT TO A JURY TRIAL. If you would like to review a copy of the AAA EmploymentDispute Resolution rules, please contact Connie Tedrow in the Human Resources Department.
Doug, we are pleased to welcome you to Shutterfly. Please signify your acceptance of our offer bysigning it below and returning this letter to Connie Tedrow, no later than March 30, 2004.
Very truly yours,
/s/ Jeff Housenbold
Jeff Housenbold
Chief Executive Officer
cc: Human Resources File



I accept Shutterfly’s offer of employment and agree to the terms in this letter and itsattachments. I acknowledge that except for the Employee Proprietary Information and InventionsAgreement attached to the letter, this letter is the entire agreement related to my employment withShutterfly and supersedes all prior or contemporaneous oral or written communication andrepresentations. This agreement (offer of employment, attachments and Employee ProprietaryInformation and Inventions Agreement) can only be modified in writing, by signed agreement from theChairman of the Board. I accept this offer voluntarily and not in reliance on any promises otherthan those contained in this letter and attachments.
/s/ Doug Galen
  Doug Galen    
Name, Signature
  Name Printed    

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