exhibit10-04.htm


    Exhibit
10.04


    


    


    August
30, 2001

    


    Peter
Elarde

    5009
Dorking Ct

    Newark,
CA 94560

    


    


    Dear
Peter:

    


    On behalf
of Shutterfly, Inc. (the “Company”), I am pleased to offer you the full-time
position of Vice President of Product Marketing reporting to the Company’s Chief
Marketing Officer.  By signing this letter agreement, you confirm to
the Company that you have no contractual commitments or other legal obligations
that would prohibit you from performing your duties to the Company.

    


    Base
Salary:

    The
Company will pay you a base salary at the monthly rate of $13,750.00, subject to
all applicable deductions and withholdings and payable in accordance with the
Company’s standard payroll policies.

    


    Bonus:

    You will
also be eligible to be considered for an incentive bonus with a target amount of
$4,125.00 per quarter.  The bonus (if any) will be awarded based on
your achievement of criteria established by the Company’s Chief Marketing
Officer, including but not limited to the Company achievement of its financial
target objectives.  Thus, your total target bonus is a maximum of
$16,500.00 per annum.  The terms and conditions of your target bonus
goals will be developed within 60 days of your start date.  The first
eligible bonus period will be December 2001.  Each quarterly bonus (if
any) will be paid after the Company’s books for that quarter have been closed
and will be earned by you only if you are employed by the Company at the time of
payment.

    


    Vacation:

    Upon
accepting the offer, the Company has agreed to waive the accrual period for 15
days of Paid Time Off (PTO), making you instantly eligible for that
time.

    


    Stock
Options:

    Subject
to the approval of the Company’s Board of Directors, you will be granted an
option to purchase 600,000 shares of the Company’s Common Stock, at an exercise
price per share equal to the fair market value of the Common Stock per share on
the date the Board of Directors 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 (the “Plan”) and the execution of a stock option agreement
pursuant to such plan.  The option can be immediately exercisable, but
the purchased shares will be subject to repurchase by the Company at the
exercise price if your service terminates for any reason before you vest in the
shares.  You will vest in 25% of the option shares upon your
completion of each of the next 36 months of service, as described in the
applicable stock option agreement.

    


    As a
regular, full time employee of Shutterfly, you will be provided with the Company
benefit package.  The Company’s existing plans for group life, health
and accident insurance may change from time to time.

    


    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 letter agreement 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 I-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 agreement 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.

     

    Peter, 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 agreement to Connie Tedrow, no
later than September 4, 2001.

    


    Very
truly yours,

    /s/ Andrew
Young

    Andrew
Young

    CMO

    


    


    


    


    I accept
Shutterfly’s offer of employment and agree to the terms in this letter agreement
and its attachments.  I acknowledge that except for the Employee
Proprietary Information and Inventions Agreement attached to the letter
agreement, this letter agreement is the entire agreement related to my
employment with Shutterfly and supersedes all prior or contemporaneous oral or
written communication and representations.  This letter 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 agreement
and its attachments.

    


    /s/ Peter
Elarde

    Peter
Elarde

    Septenber
4, 2001