Exhibit 10.03
 

March 21, 2005
 
Dan McCormick
660 Pullman Rd
Hillsborough, CA 94010
 
Dear Dan,
 
On behalf of Shutterfly, Inc. (the "Company"), I am pleased to offer you the
full-time position of Sr. Director of Business Development reporting to the Head
of Business Development. By signing this letter, you confirm to the Company that
you have no contractual commitments or other legal obligations that would
prohibit you from performing your duties for the Company.
 
Base Salary:
The Company will pay you a starting base pay at the rate of $160,000.00,
annually, subject to all applicable deductions and withholdings and payable in
accordance with the Company's standard payroll policies.
 
Bonus:
You will be eligible to be considered for an incentive bonus, which is being
reviewed and approved by the Company's Compensation Committee. The bonus (if
any) will be awarded based on your achievement of criteria established by the
Company's Compensation Committee, including but not limited to the Company's
achievement of its financial target objectives. The terms and conditions of your
target bonus goals will be developed within 60 days of your start date.
 
Stock Options:
Subject to the approval of the Company's Board of Directors, you will be granted
an option to purchase 70,000 shares of the Company's Common Stock, at an
exercise price equal to the fair market value of the Common Stock on the date
the Board grants your stock option or on your first date of employment with the
Company, whichever is later. Your option will be subject to all of the terms,
conditions and restrictions of the Company's 1999 Stock Plan and the execution
of a stock option agreement pursuant to such plan.
 
Benefits:
As a regular, full time employee of Shutterfly, you will be provided with the
Company benefit package. This package includes, but not limited to accruing up
to 20 days of Personal Time Off within the first year of employment. The
Company's existing plans for group life, medical, dental, vision and accident
insurance may change from time to time.
 
Severance:
If the Company terminates your employment for any reason other than Cause within
the first 12 months of employment (as defined in the next paragraph), then the
Company will pay you severance pay for a period of three (3) months. Your
monthly severance pay will be paid at the rate of your monthly base salary in
effect at the time of the termination of your employment and 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 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 letter agreement, the Proprietary Information and Inventions Agreement
between you and the Company, or any other written agreement between you and the
Company; (b) any failure to comply with the Company's written 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 the United States or any State; or (d) misconduct.
 
All portions of this offer will be in effect as of the above stated start date
once this letter is signed by both parties.

Shutterfly is excited about having you join our team. We feel we are a great
company and take pride in treating our employees with dignity and respect. As
you well know, there are numerous laws that both the employee and employer must
understand and accept. The next several paragraphs list the legal requirements
associated with becoming a Shutterfly employee.
 
This offer of employment is contingent upon you completing, signing, and
returning to us, this offer letter and the Employee Proprietary Information and
Inventions Agreement and Shutterfly's Employment Application. In addition, by
accepting these terms of employment, you represent that you have not brought and
will not bring with you to the Company, or utilize in the course of your
employment by the Company, any confidential or proprietary information or
materials of any prior employer.
 
For purposes of federal immigration law (Immigration Reform and Control Act of
1986) you are required to provide documentary evidence of your eligibility for
employment in the United States. Please bring the appropriate documentation, as
listed on the enclosed 1-9 Form, with you to New Hire Orientation.
 
Employment with the Company is for no specific period of time. Your employment
with the Company will be "at will," meaning that either you or the Company may
terminate your employment at any time and for any reason, with or without Cause.
Any contrary representations that may have been made to you are superseded by
this offer. This is the full and complete agreement between you and the Company
on this term. Although your job duties, title, compensation and benefits, as
well as the Company's personnel policies and procedures, may change from time to
time, the "at will" nature of your employment may only be changed in an express
written agreement signed by you and the Chief Executive Officer of the Company.
 
While you render services to the Company, you agree that you will not engage in
any other employment, consulting or other business activity without the prior
written consent of the Company. While you render services to the Company, you
also will not assist any person or entity in competing with the Company, in
preparing to compete with the Company or in hiring any employees or consultants
of the Company.
 
All forms of compensation referred to in this letter are subject to reduction to
reflect applicable withholding and payroll taxes and other deductions required
by law.
 
Finally, by accepting this offer, you and the Company agree to waive any rights
to a trial before a judge or jury and agree to arbitrate before a neutral
arbitrator any and all claims or disputes arising out of this letter agreement
and any and all claims arising from or relating to your employment with the
Company, including (but not limited to) claims against any current or former
employee, director or agent of the Company, claims of wrongful termination,
retaliation, discrimination, harassment, breach of contract, breach of the
covenant of good faith and fair dealing, defamation, invasion of privacy, fraud,
misrepresentation, constructive discharge or failure to provide a leave of
absence, claims regarding commissions, stock options or bonuses, infliction of
emotional distress or unfair business practices.
 
The arbitrator's decision must be written and must include the findings of fact
and law that support the decision. The arbitrator's decision will be final and
binding on both parties, except to the extent applicable law allows for judicial
review of arbitration awards. The arbitrator may award any remedies that would
otherwise be available to the parties if they were to bring the dispute in
court. The arbitration will be conducted in accordance with the National Rules
for the Resolution of Employment Disputes of the American Arbitration
Association; provided, however that the arbitrator must allow the discovery
authorized by the California Arbitration Act or that the arbitrator deems
necessary for you and the Company to vindicate your respective claims or
defenses. The arbitration will take place in San Mateo County or, at your
option, the county in which you primarily worked with the Company at the time
when the arbitrable dispute or claim first arose.
 
You and the Company will share the costs of arbitration equally, except that the
Company will bear the cost of the arbitrator's fee and any other type of expense
or cost that you would not be required to bear if you were to bring the dispute
or claim in court. Both the Company and you will be responsible for their own
attorneys' fees, and the arbitrator may not award attorneys' 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 or unemployment insurance claims or (b) claims concerning the
validity, infringement or enforceability of any trade secret, patent right,
copyright or any other trade secret or intellectual property held or sought by
either you or the Company (whether or not arising under the Employee Proprietary
Information and Inventions Agreement between you and the Company).
 
If you would like to review a copy of the AAA Employment Dispute Resolution
rules, please contact Connie Tedrow in the Human Resources Department.
 
To schedule your New Hire Orientation, please call Connie Tedrow. Failure to
attend Orientation may result in an unnecessary delay of your first paycheck as
well as a delay in your employee benefit coverage.
 
Dan, we are pleased to welcome you to Shutterfly. Realizing this is an important
decision for you, we believe this position is an excellent opportunity and we
are confident it will provide you with personal challenge and potential growth
opportunities. We believe you will find Shutterfly an exciting and fulfilling
place to work. Please signify your acceptance of our offer by signing below and
returning this letter to Connie Tedrow, no later than March 17,2005.
 
 
Very Truly Yours,
/s/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 its attachments. I acknowledge that except for the Employee Proprietary
Information and Inventions Agreement attached to the letter, this letter is the
entire agreement related to my employment with Shutterfly and supersedes all
prior or contemporaneous oral or written communication and representations. This
agreement (offer of employment, attachments and Employee Proprietary Information
and Inventions Agreement) can only be modified in writing, by signed agreement
from the Chief Executive Officer. I accept this offer voluntarily and not in
reliance on any promises other than those contained in this letter and its
attachments.
 
 
 /s/Dan McCormick
Dan McCormick Name, Signature    Name, Printed      3-21-05   Today's Date