Sample Business Contracts

Employment Agreement - RedEnvelope Inc. and Allison L. May

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                                 March 12, 2002

Alison L. May
22 Jersey Street
San Francisco, CA 94114

Dear Alison:

         On behalf of RedEnvelope, Inc. (the "Company"), I am pleased to offer
you the full-time position of Chief Executive Officer and President of the
Company. The terms of your new position with the Company are as set forth below:

         1.       POSITION.

                  a. You will become the Chief Executive Officer and President
of the Company, working out of the Company's headquarters office in San
Francisco, California. You will also be appointed to the Company's Board of
Directors in connection with your employment with the Company. As Chief
Executive Officer and President, you will have the duties, responsibilities and
authority customarily associated with such position, including responsibility
for the overall management of the Company. You will report directly to the
Company's Board of Directors.

                  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; (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 (including,
without limitation, the advisory board of the Lioness Fund), 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.       START DATE. Subject to fulfillment of any pre-conditions
imposed by this letter agreement, you will commence this new position with the
Company on April 8, 2002 (the "Start Date").




                  a.       This offer of employment is contingent upon the
successful completion of a reference check by the Company, including a check of
your personal references and other information relevant to employment.

                  b.       For purposes of federal immigration law, you will be
required to provide to the Company documentary evidence of your identity and
eligibility for employment in the United States. Such documentation must be
provided to us within three (3) business days of your date of hire, or our
employment relationship with you may be terminated.

         4.       COMPENSATION.

                  a.       BASE SALARY. You will be paid a base monthly salary
of $27,083.33, which is equivalent to $325,000 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 you will develop
with the Board of Directors.

         5.       STOCK OPTIONS.

                  a.       INITIAL GRANT. In connection with the commencement of
your employment, the Company will recommend that the Board of Directors grant
you a stock option to purchase such number of shares of the Company's Common
Stock as equals four percent (4%) of the Company's outstanding Common Stock as
calculated upon the earlier of (i) June 30, 2002 or (ii) immediately following
the final closing of the Company's next round of Preferred Stock financing
(currently anticipated to be a Series F Preferred Stock) in which the Company
raises, through all closings thereof, aggregate gross proceeds of at least $5
million, with an exercise price equal to the fair market value on the date of
the grant (the "Shares"). For purposes of the immediately preceding sentence,
the calculation of the Company's outstanding Common Stock will include all
then-outstanding shares of Preferred Stock on an as-converted basis, all
then-outstanding options on an as-exercised basis, all then-outstanding warrants
on an as-exercised (and, if applicable, as-converted) basis, and any authorized
but unissued option shares in the Company's employee stock option pool. These
option shares will vest at the rate of 25% of the total number of Shares on the
twelve (12) month anniversary of your Vesting Commencement Date (as defined in
your Stock Option Agreement, which date will be your Start Date, as defined
above) and 1/48th of the total number of Shares each month thereafter for the
succeeding three years on the monthly anniversary of your Vesting Commencement
Date. Vesting will, of course, depend on your continued employment with the
Company. The option will be an incentive stock option to the maximum extent
allowed by applicable law and will be subject to the terms of the Company's 1999
Stock Plan and the Stock Option Agreement (including the related notice of stock
option grant) between



you and the Company, which will be consistent with the terms of this letter
agreement. The option will be exercisable for 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) and will be transferable to a trust for your benefit, or for the benefit
of an immediate family member, as permitted by applicable law. The Stock Option
Agreement will permit the use of a full-recourse, five-year term promissory
note, with such terms and conditions as the plan Administrator determines to be
appropriate, as an acceptable form of payment upon exercise of any of the

                  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 or the sale of all or substantially all of
the assets of the Company, or (iii) immediately prior to the liquidation or
dissolution of the Company.

                  b.       SUBSEQUENT OPTION GRANTS. Subject to the discretion
of the Company's Board of Directors, which will consider the matter at least
annually, 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.

         6.       BENEFITS.

                  a.       INSURANCE BENEFITS; INDEMNIFICATION. The Company will
provide you with the opportunity 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 will enter into its standard form of Indemnification Agreement (in the
form enclosed herewith) 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 (20) days of
paid time off per year (exclusive of Company holidays), pro-rated from the Start
Date for the remainder of this calendar year, and subject to the applicable cap
on accrual and other terms of the Company's vacation policy.

Your acceptance of this offer and commencement of employment with the Company is
contingent upon the execution, and delivery to an officer of the Company, of the
Company's Confidential Information and Invention Assignment Agreement, a copy of
which is enclosed for your review and execution (the "Confidentiality
Agreement"), prior to or on your Start Date.

         8.       AT-WILL EMPLOYMENT. Subject only to the Company's obligations
described in Section 9 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.

         9.       SEVERANCE BENEFITS. Upon termination of your employment with
the Company, you will be entitled to receive benefits only as set forth in this
Section 9 or as otherwise provided by applicable law. Your entitlement to these
severance benefits will be conditioned upon your execution and delivery 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) 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, 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 9(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

         10.      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 your employment prior
to the Start Date upon submission of an invoice or other suitable documentation.

         11.      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.



         We are all delighted to be able to extend you this offer and look
forward to working with you. To indicate your acceptance of the Company's offer,
please sign and date this letter in the space provided below and return it to
me, along with a signed and dated copy of the Confidentiality Agreement. This
letter agreement, together with the Confidentiality Agreement and other
documents referenced herein, set forth the terms of your employment with the
Company and supersede any prior representations or agreements, whether written
or oral. 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.

Very truly yours,                            ACCEPTED AND AGREED:

REDENVELOPE, INC.                            ALISON L. MAY

By: /s/ Hilary Billings                      /s/ Alison L. May
   -----------------------------------       -----------------------------------
Title: Chairman and CMO                      March 15, 2002

Attachment A: Confidential Information and Invention Assignment Agreement
Attachment B: Indemnification Agreement