Sample Business Contracts

Employment Agreement - RedEnvelope Inc. and Hilary Billings

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                                 April 10, 2002

Dear Hilary,

         This letter agreement sets forth the terms and conditions of your
position with RedEnvelope, Inc. (the "Company").

         1.       POSITION.

                  a.       You will continue to have the titles and
responsibilities of the Chairman of the Board and Chief Marketing Officer of the
Company. You will continue to report directly to the Company's Board of
Directors in your capacity as Chairman and you will report to the Company's
Chief Executive Officer in your capacity as Chief Marketing Officer.

                  b.       You agree to the best of your ability and experience
that you will at all times loyally and conscientiously perform all of your
duties and obligations to the Company. During your employment, you further agree
that you (i) will devote substantially all of your business time and attention
to the business of the Company, at the Company's headquarters or in your home
office (as you determine and as is necessary, in your reasonable judgment, to
fulfill your obligations hereunder); (ii) will not render commercial or
professional services of any nature to any person or organization, whether or
not for compensation, without the prior written consent of the Company's Board
of Directors; and (iii) will not directly or indirectly engage or participate in
any business or activity that is competitive in any manner with the business of
the Company. Nothing in this letter agreement will prevent you from: (i)
accepting speaking or presentation engagements in exchange for honoraria; (ii)
serving on advisory boards or boards of charitable organizations, so long as
such service does not unduly interfere with the performance of your duties to
the Company; or (iii) owning, directly or indirectly, no more than one percent
(1%) of the outstanding equity securities of a corporation whose stock is listed
on a national stock exchange.

         2.       COMPENSATION.

                  a.       BASE SALARY. Commencing April 4, 2002, you will be
paid a base monthly salary of $25,000, which is equivalent to $300,000 on an
annualized basis, subject to applicable tax withholding. Your salary will be
payable pursuant to the Company's regular payroll policy (or in the same manner
as other similarly situated employees of the Company).

                  b.       BONUS. You will not be entitled to a bonus for fiscal
year 2003 (i.e., the fiscal year ending March 31, 2003), unless otherwise
determined by the Company's Board of Directors. You will be eligible, subject to
approval by the Company's Board of Directors, for annual bonuses in subsequent
fiscal years pursuant to an incentive compensation plan that will be developed
by Company management and the Board of Directors.

         3.       STOCK OPTIONS.

                  a.       CURRENT OPTION. You currently hold a total of 888,888
shares, and unexercised options to purchase an additional 630,000 shares, of
Company common stock, in each


case subject to the vesting requirements and restrictions on transfer set forth
in the respective stock purchase agreements and stock option agreements

                  b.       PERCENTAGE INTEREST. If, at any time prior to the
earlier to occur of the closing of: (i) an initial public offering of the
Company's Common Stock ("IPO") or (ii) a Change of Control (as defined below) of
the Company, your total option and shareholdings in the Company are below three
percent (3%) of the total outstanding shares, options, warrants and other
convertible securities (including unallocated stock options), then the Company
will recommend to the Board of Directors that additional options be granted to
you at the then fair market value to ensure that your ownership percentage is
equal to 3%. The vesting schedule associated with any such options will be
identical to the vesting arrangement with the options and stock held by you. In
other words, if you are 75% vested in your options and shares owned prior to
such issuance, then the new issuance shall be vested in 75% of such amount. The
rights granted pursuant to this paragraph shall immediately terminate upon the
closing of an IPO or a Change of Control, whichever occurs first.

                  c.       ADDITIONAL GRANTS. Subject to the discretion of the
Company's Board of Directors, you may be eligible to receive additional grants
of stock options or purchase rights from time to time in the future, on such
terms and subject to such conditions as the Board of Directors shall determine
as of the date of any such grant.

                  d.       SPECIAL OPTION EXERCISE PROVISIONS. Notwithstanding
anything to the contrary in any of your stock option agreements, the 1999 Plan
or any other document or agreement, (i) you will have a period of 12 months
following a termination of your employment relationship with the Company as a
result of your death or disability (or, if earlier, the expiration date of the
term of the option) to exercise any and all stock options held by you that are
vested as of the date of such termination, (ii) your options will be
transferable to a trust for your benefit, or for the benefit of an immediate
family member, as permitted by applicable law, (iii) all of your options will
permit the use of a full-recourse, five-year term promissory note, in the same
form as previously used by you to exercise options (with such changes as the
plan Administrator reasonably deems necessary), as an acceptable form of payment
upon exercise of any of the Shares, and (iv) you will have three years from the
date of termination of your employment (or, if earlier, the expiration date of
the term of the option) for any reason (other than death or disability) to
exercise any and all stock options held by you that are vested as of the date of
such termination.

                  e.       SPECIAL VESTING. In the event of a Change of Control
of the Company, then 25% of your unvested options or shares remaining as of the
effective date of the Change of Control will become immediately vested. As used
herein, a "Change of Control" shall mean any of the following: (i) a merger of
the Company into another entity (other than a merger effected solely for the
purpose of changing the state of domicile of the Company), (ii) any other
transaction in which more than 50% of the voting control of the Company is
transferred (other than an equity financing of the Company in which the Company
is the surviving entity), including, without limitation, the sale of more than
50% of the outstanding shares of the Company's capital stock, (iii) the sale of
all or substantially all of the assets of the Company, or (iv) immediately prior
to the liquidation or dissolution of the Company. If your employment is
terminated by the Company or its successor within the twelve (12) month period
following a Change of Control, for any reason other than



Cause, then an additional 25% of your unvested options or shares remaining as of
the effective date of the Change of Control will become immediately vested.

                  f.       NOTES EXTENSION. You and the Company acknowledge that
there are currently two promissory notes (the "Notes") outstanding which you
used to finance the purchase of shares of Company stock, each dated July 21,
1999, the first in the principal amount of $19,166.30 and the second in the
principal amount of $24,389.20. The Company will, concurrently with the
execution of this letter agreement, amend the Notes to extend the maturity dates
thereof from July 20, 2003 until July 20, 2007.

         4.       BENEFITS.

                  a.       INSURANCE BENEFITS; INDEMNIFICATION. You will
continue to participate in the standard benefits plans currently available to
other similarly situated employees, including group medical insurance, subject
to any eligibility requirements imposed by such plans. In addition, the Company
currently indemnifies all officers and directors to the maximum extent permitted
by law (and advances expenses for which indemnification is available to the
maximum extent permitted by law) and the Company has entered into its standard
form of Indemnification Agreement with you giving you such protection. The
Company will also maintain, at its sole expense, during the period of your
service as a director or officer of the Company or any of its affiliated
entities and for such additional period of time as you are subject to claims
arising therefrom, director and officer liability insurance in such amounts and
subject to such limitations as the Company shall, in good faith, determine.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain such insurance coverage if the Company determines in good faith that:
(i) such insurance cannot be obtained or maintained on terms that are
commercially reasonable; (ii) if the premium costs for such insurance are
substantially disproportionate to the amount of coverage provided; (iii) if the
coverage provided by such insurance is limited by exclusions so as to provide an
insufficient benefit; or (iv) if you are covered by similar insurance maintained
by a parent or subsidiary of the Company.

                  b.       VACATION. You will be entitled to twenty-three (23)
days of paid time off per year (exclusive of Company holidays), subject to the
applicable cap on accrual and other terms of the Company's vacation policy.

You have previously executed, and remain bound by the terms of, the Company's
Confidential Information and Invention Assignment Agreement (the
"Confidentiality Agreement").

         6.       AT-WILL EMPLOYMENT. Subject only to the Company's obligations
described in Section 7 below, your employment with the Company will be on an "at
will" basis, meaning that either you or the Company may terminate your
employment at any time for any reason or no reason, without further obligation.

         7.       SEVERANCE BENEFITS. Upon termination of your employment with
the Company, you will be entitled to receive benefits only as set forth in this
Section 7 or as otherwise provided by applicable law. Your entitlement to these
severance benefits will be conditioned upon your signing (and not revoking) and
delivering to the Company of (i) a general mutual release of all claims
(provided that the Company shall not be required to release any claims arising
from a



material breach by you of the Confidentiality Agreement) substantially in the
form attached hereto as Exhibit A and (ii) a resignation from all of your
positions with the Company.

                  a.       In the event of the termination of your employment by
the Company without "Cause", or as a result of your "Constructive Termination"
(as such terms are defined below), you will be entitled to receive (i) a cash
amount equal to twelve (12) months of your then-current base salary (less
applicable tax withholding), which benefit will be paid over the twelve (12)
month period following your execution of the release agreement on the Company's
normal payroll dates in equal installments, and (ii) twelve (12) months,
measured from the date of termination, of continued insurance coverage under
COBRA to be paid for by the Company.

                  b.       For purposes of this letter agreement, "Cause" for
your termination by the Company will mean your: (i) gross negligence in the
performance of your job responsibilities; (ii) failure or refusal to comply with
the lawful directives of the Company's Board of Directors not inconsistent with
your position and responsibilities (other than a refusal to incur any of (i) -
(iv) under the definition of Constructive Termination below); (iii) willful
misconduct that the Company reasonably determines is materially detrimental to
the business or reputation of the Company; (iv) dishonest or fraudulent conduct
in the performance of your job responsibilities or that the Company reasonably
determines is materially detrimental to the business or reputation of the
Company; (v) conviction of a felony; (vi) material breach of your
Confidentiality Agreement or your duties of confidentiality owed to any third
parties as a result of your position with the Company; or (vii) death; provided,
however, that an occurrence of any of (i) through (iii) above shall constitute
Cause hereunder only after the Company has provided you with written notice of
such gross negligence, failure or misconduct and a reasonable opportunity for
you to cure such gross negligence, failure or misconduct (assuming such gross
negligence, failure or misconduct is capable of being cured). For purposes of
the immediately preceding proviso, a majority of the disinterested members of
the Company's Board of Directors shall determine whether a cure has been
effected or whether a reasonable opportunity to cure was provided.

                  c.       For purposes of this letter agreement, "Constructive
Termination" will mean your resignation from all of your positions with the
Company within thirty (30) days following: (i) a material reduction or change in
your title, job duties, authority, responsibilities or job requirements
inconsistent with your position with the Company; (ii) any material reduction of
your base compensation; (iii) any elimination of a material benefit provided to
you pursuant to your employment with the Company; (iv) a relocation of your
place of employment more than twenty-five (25) miles from San Francisco,
California; (v) the Company's failure to cure any material breach by it of the
terms of this letter agreement or the Indemnification Agreement referenced
herein within a reasonable time following written notice from you to the
Company's Board of Directors, in each case under (i) through (v) above, other
than with your written consent; or (vi) the actual occurrence of any
"constructive termination" of you by the Company under any applicable provision
of California law.

                  d.       Notwithstanding the foregoing, in the event that the
Company terminates your employment without Cause and as a result of your
physical or mental impairment which prevents performance of the essential
functions of your position, the amount of cash payment that you would otherwise
be entitled to receive pursuant to Section 7(a)(i) above shall be reduced by



the gross amount of disability insurance proceeds that you are entitled to
receive, due to such impairment, during the twelve (12) month period following
such termination.

         8.       ATTORNEY FEES. The Company shall reimburse you for up to
$5,000 of the attorney or other professional fees reasonably incurred by you in
connection with the review and negotiation of the terms of this letter agreement
prior to the date hereof upon submission of an invoice or other suitable

         9.       BUSINESS EXPENSES. The Company shall reimburse you, following
submission of appropriate documentation, for the reasonable travel,
entertainment, cellular telephone and other business expenses incurred in
connection with your duties to the Company, subject to the Company's expenditure
and reimbursement guidelines.

                            [signature page follows]



To indicate your acceptance of these terms and conditions, please sign and date
this letter in the space below. This letter agreement may not be modified or
amended except by a written agreement, signed by the Company and by you. This
letter agreement will be governed by California law, without regard to the
conflicts of laws provisions thereof. This letter agreement, together with the
related documents referenced above, constitutes the entire agreement between the
parties with respect to the subject matter hereof, and supersedes and replaces
any and all prior or contemporaneous agreements or understandings, either
written or oral, relating to the subject matter hereof including, without
limitation, the letter agreement dated July 1, 1999, along with any amendments

Very truly yours,                            ACCEPTED AND AGREED:

REDENVELOPE, INC.                            HILARY BILLINGS

By: /s/ Alison L. May                        /s/ Hilary Billings
   -----------------------------------       -----------------------------------

Title: Pres & CEO                                     6.10.02