steve_rechtreleaseagmt.htm


    Exhibit 10.21



    SEPARATION
AGREEMENT

    AND
GENERAL RELEASE OF CLAIMS

     

    THIS
SEPARATION AGREEMENT AND GENERAL RELEASE OF CLAIMS (“Agreement”) is entered into
by and between Stephen E. Recht, his heirs, successors, assigns, agents or
representatives of any kind (collectively, “Employee”) and Shutterfly, Inc., its
officers, directors, stockholders, investors, assigns, attorneys, agents,
independent contractors, employees, predecessors, successors, affiliates or
other representatives of any kind (collectively, the “Company”).  This
Agreement will become effective on the eighth day after it is signed by Employee
(the “Effective Date”), provided that Employee has not revoked this Agreement
(by written notice to Doug Appleton, Vice President, Legal at the Company) prior
to that date in accordance with the revocation terms contained
herein.

     

    RECITALS

     

    A. Employee
is employed by the Company as its Chief Financial Officer pursuant to the terms
of an offer letter dated June 23, 2004 (the “Offer Letter”).

     

    B. Employee’s
employment relationship with the Company shall be terminated without
cause.

     

    C. In
accordance with the Offer Letter, Employee is entitled to certain severance
benefits in exchange for signing this Agreement.  In addition,
Employee shall be provided with additional severance benefits not set forth in
the Offer Letter.

     

    Accordingly,
in consideration of the terms, conditions and covenants contained herein, the
parties agree as follows:

     

    1. Termination of Employment; Transition
Period.  Employee’s employment relationship with the Company
shall be terminated as of the earlier of (a) February 9, 2008, or (b) the date
he enters into a working relationship as an employee, independent contractor,
consultant, or other type of worker in exchange for compensation of any kind
(the “Termination Date”), subject to the following provisions:

     

    (a) Through
the Termination Date, Employee will provide continued employment services to the
Company to transition his work to the new Chief Financial Officer for the
Company, as requested by the Company (the “Transition Period”).

     

    (b) In the
event Employee enters into a working relationship as an employee, independent
contractor, consultant, or other type of worker in exchange for compensation of
any kind during the Transition Period, he must notify the Company and the
Termination Date will be as of the date of such notice.

     

    2. Severance
Benefits.  As of the Termination Date, Employee will be paid
all final wages and accrued, unused paid time off that Employee earned during
his employment with the Company through the Termination Date in accordance with
applicable law.

     

    In addition to these mandatory payments
and benefits, upon the Termination Date (provided the Employee has not
terminated this Agreement prior to February 9, 2008 and Employee is not in
breach of this Agreement), Employee shall receive the following severance
benefits:

     

    (a) Severance
payment.  A severance payment in the amount of Two Hundred
Fifty Thousand Dollars ($250,000.00), which is equal to twelve (12) months’ pay
at Employee’s final base pay rate, and less applicable
withholding taxes and regular deductions, payable in a lump sum within three (3)
days following the Termination Date, but no earlier than eight (8) days
following Employee’s execution of this Agreement, provided that Employee has not
revoked this Agreement.

     

    (b) Accelerated Stock
Vesting.  Employee shall vest in such additional number of
shares as would have vested in the twelve (12) months following the Termination
Date.

     

    (c) Bonus.  In the event
that the Company pays bonuses to the senior executive officers of the Company ,
and provided that Employee is providing satisfactory performance in accordance
with this Agreement, Employee shall receive his year-end bonus payment pro-rata
with the other senior executive officers, payable in a lump sum no later than
three (3) days following the Termination Date, but no earlier than eight (8)
days following Employee’s execution of this Agreement, provided that Employee
has not revoked this Agreement.

     

    (d) COBRA premiums.  If
Employee is covered under the Company’s group health plan as of the Termination
Date and he timely elects to continue his group coverage pursuant to
federal/state law (COBRA), the Company will reimburse Employee upon submission
of written proof of premium payment for six (6) months of the applicable COBRA
premiums as COBRA is provided in accordance with the terms of the applicable
plans and the law, beginning on the first of the month following Company’s
receipt of Employee’s COBRA election notice until the earlier of (i) the date
Employee becomes covered under another group or individual health plan, or (ii)
the last day of the six-month period described herein.  Employee shall
at all times be responsible for making his premium payments pursuant to COBRA in
order to maintain such coverage, and the Company shall not be responsible for
making any direct payments to any health care or insurance provider on behalf of
Employee.

     

    Employee
further understands that the severance benefits set forth in Sections 2(a)-(d)
above shall be provided contingent upon Employee’s execution of and compliance
with the terms of this Agreement.  Employee understands and
acknowledges that he shall not be entitled to any payments or benefits from the
Company other than those expressly set forth in this Section 2, and that he
would not be entitled to the payment and benefits set forth in Sections 2(a)-(d)
above in the absence of signing this Agreement

     

    3. General Release.

     

    In
consideration of the severance compensation and benefits to be paid to Employee
pursuant to Section 2(a)-(d) above, Employee and his heirs, successors, assigns,
agents or representatives of any kind fully release the Company, its officers,
directors, stockholders, investors, assigns, attorneys, agents, independent
contractors, employees, predecessors, successors, affiliates or other
representatives of any kind (the “Released Parties”) of and from any and all
claims, liabilities, obligations, demands, actions and causes of action, whether
now known or unknown, that Employee now has, or at any other time had, or shall
or may have against those Released Parties based upon or arising out of any
matter, cause, fact, thing, act or omission whatsoever occurring or existing at
any time up to and including the Effective Date of this Agreement.

     

    This
release includes specifically but not exclusively and without limiting the
generality of the foregoing, any claims of breach of contract, wrongful
termination, retaliation, fraud, defamation, infliction of emotional distress or
discrimination based upon national origin, race, age, sex, sexual orientation,
disability or other personal characteristic protected by state and federal law
or any other form of discrimination or harassment under the Civil Rights Act of
1964, the Age Discrimination In Employment Act of 1967, as amended, the Older
Workers Benefit Protection Act, the Americans with Disabilities Act, the Fair
Employment and Housing Act, the California Labor Code or any other applicable
state or federal law.  However, this Release is not intended to bar
any claims that, by statute, may not be waived, such as claims for workers’
compensation benefits, unemployment insurance benefits, and any challenges to
the validity of Employee’s release of claims under the Age Discrimination in
Employment Act of 1967, as amended, as set forth in this Agreement.

     

    Employee
acknowledges that he has read section 1542 of the Civil Code of the State of
California, which states in full:

     

    A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.

     

    Notwithstanding
Section 1542, Employee agrees that this Agreement shall act as a release of all
past and future claims that may arise from or related to his employment or
termination from employment with the Company, whether such claims are currently
known or unknown, foreseen or unforeseen, contingent or
absolute.  Employee intentionally and specifically waives any rights
he may have under the provisions of Section 1542, as well as under any other
statutes or common law principles of similar effect, and assumes full
responsibility for any injuries, damages, losses or liabilities that he may
hereafter incur with respect to such claims.

     

    4. No Assignment or Transfer; No
Voluntary Participation in Claims.  Employee represents and
warrants that there has been no assignment or other transfer of any interest in
any claim that he may have against the Company and agrees to indemnify and hold
the Company harmless from any liabilities, claims, demands, damages, costs,
expenses and attorneys’ fees incurred by the Company as a result of any
assertion of assignment or transfer.

     

    Employee
agrees that he shall not voluntarily participate in any claim, action,
complaint, or lawsuit considered or brought against the Company, and that he
shall not encourage or solicit other persons or entities to consider or bring
any claim, action, complaint, or lawsuit against the Company, at any time, now
or in the future.  Nothing in this section shall prohibit Employee
from responding to a valid subpoena or other order of a court or agency with
appropriate jurisdiction to compel his response.

    


    5. Review
/ Revocation Period.

     

    (a) Employee
acknowledges and agrees that (i) Employee has read and understands the
terms of this Agreement; (ii) Employee has been advised in writing to
consult with an attorney before executing this Agreement; (iii) that
Employee has obtained and considered such legal counsel as Employee deems
necessary; (iv) that Employee has been given up to twenty-one (21) days to
consider whether or not to enter into this Agreement (although Employee may
elect not to use the full 21-day period at Employee’s option); and (v) that
by signing this Agreement, Employee acknowledges that Employee does so freely,
knowingly, and voluntarily.

     

    (b) This
Agreement shall not become effective or enforceable until the eighth day after
Employee signs this Agreement.  Employee may revoke Employee’s acceptance of
this Agreement within seven (7) days after the date Employee signs
it.  Employee’s revocation must be in writing and received by Doug
Appleton, Vice President, Legal at the Company by 5:00 p.m. Pacific Time on the
seventh day following his execution of this Agreement in order to be
effective.  If Employee does not revoke his acceptance within the
seven (7) day period, Employee’s acceptance of this Agreement shall become
binding and enforceable on the Effective Date and the benefits described above
shall become due and payable in accordance with Section 2.

     

    6. Confidentiality.

     

    (a) Employee
acknowledges and agrees that he shall continue to be bound by and comply with
the terms of the proprietary rights, assignment of inventions and/or
confidentiality agreements between the Company and Employee.

     

    (b) Employee
agrees that he shall not directly or indirectly disclose any of the terms of
this Agreement to anyone other than his immediate family, financial advisors or
legal counsel, except as such disclosure may be required for accounting or tax
reporting purposes or as otherwise may be required by law.

     

    (c)
Employee understands and agrees that he may not use or disclose the Company’s
confidential and proprietary business information learned in the course of his
employment with the Company for his own benefit or for the benefit of any other
person or entity.

     

    7. Return of Employer
Property.  On or before the Termination Date, Employee will
return to the Company, in good working condition, all Company property and
equipment that is in Employee’s possession or control, including, but not
limited to, any files, records, computers, computer equipment, passwords, cell
phones, credit cards, keys, programs, manuals, business plans, financial
records, and all documents (and any copies thereof) that Employee prepared or
received in the course of his employment with the Company.

     

    8. Non-Disparagement; No
Defamation.  Company and Employee agree that they will not, at
any time in the future, make any critical or disparaging statements about the
other (in the case of Employee, he shall not disparage the Company, its
products, services, employees or other agents or representatives), unless such
statements are made truthfully in response to a subpoena or other legal
process.

     

    9. Nonsolicitation of Employees and
Customers.  Employee agrees that for a period of one (1) year
following the Termination Date, he will not, either on his own behalf or on
behalf of another person or entity, by using or disclosing the trade secrets or
confidential, proprietary, or business information of the Company: (a) solicit
or take away employees, independent contractors or consultants of the Company
for the purpose of hiring them or encouraging them to refrain from working for
the Company; or (b) solicit or take away suppliers or customers of the Company
or encourage them to refrain from doing business with the
Company.  Notwithstanding the foregoing, nothing prevents Employee
from soliciting business from any supplier or customer of the Company that is
unrelated to the business conducted by the Company.

     

    10. Attorney’s Fees.  In
the event of any legal action relating to or arising out of this Agreement, the
prevailing party shall be entitled to recover from the losing party its
attorneys’ fees and costs incurred in that action.

     

    11. No Admission of
Liability.  Employee and the Company understand and acknowledge
that this Agreement constitutes a compromise and settlement of disputed
claims.  No action taken by the parties hereto, or either of them,
either previously or in connection with this Agreement, shall be deemed or
construed to be (a) an admission of truth or falsity of any claims
heretofore made or (b) an acknowledgement or admission by either Party of
any fault or liability whatsoever to the other party or to any third
party.

     

    12. Consult with
Attorney.  Each party represents that it has been advised of
his or its right to consult with an attorney and to seek legal representation of
his or its choosing in the execution of this Agreement, and has carefully read
and understands the scope and effect of the provisions of this
Agreement.  Neither party has relied upon any representations or
statements made by the other party hereto which are not specifically set forth
in this Agreement.

     

    13. Miscellaneous.  This
Agreement constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior negotiations and agreements,
whether written or oral, with the exception of any stock option agreements
between the parties and any agreements described in Section 6(a)
herein.  This Agreement may be modified or amended only with the
written consent of Employee and an authorized officer of the Company, provided,
however, that the Company may amend or modify this Agreement in order to comply
with the provisions of Section 409A of the Internal Revenue Code, to the
extent applicable.  No oral waiver, amendment or modification will be
effective under any circumstances whatsoever.

     

    EMPLOYEE
UNDERSTANDS THAT HE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS
AGREEMENT AND THAT HE IS GIVING UP ANY LEGAL CLAIMS HE HAS AGAINST THE PARTIES
RELEASED ABOVE BY SIGNING THIS AGREEMENT.  EMPLOYEE ACKNOWLEDGES THAT
HE IS SIGNING THIS AGREEMENT KNOWINGLY, WILLINGLY AND VOLUNTARILY IN EXCHANGE
FOR THE BENEFITS DESCRIBED HEREIN.

     

    
      	
               

               

              Dated:  December
      10, 2007

            	
               

              By:
      /s/ Stephen E. Recht

                  Stephen
      E. Recht

            
	
               

              Dated:  December
      10, 2007

               

            	
               

              SHUTTERFLY,
      INC.

               

              By: /s/
      Jeff Housenbold

                  Jeff
      Housenbold, President & CEO