Demers, 25, had one goal, two assists and 10 penalty minutes in 22 games with the Sharks in 2012-13. An ankle injury sidelined him for all but one game in the Stanley Cup Playoffs.
He would have become a restricted free agent had he not signed before July 5
"Jason is a highly competitive puck-moving defenseman that creates offense from the back end," Sharks general manager Doug Wilson said. "We're looking forward to seeing him come back healthy and continue his growth with us."
Drafted by San Jose with the 186th pick in the 2008 NHL Draft, Demers has 11 goals and 61 points in 205 NHL games, all with the Sharks.
Reid, 23, played 34 games with the Worcester Sharks in the American Hockey League in 2012-13, totaling 10 goals and 11 assists.
Reid originally was signed by the Sharks as a free agent April 15, 2011.