EMPLOYMENT AGREEMENT
Exhibit 10.54
This Employment Agreement (the “Agreement”) is entered into by and between Xxx Xxxxxxxxx
(“Executive”) and RedEnvelope, Inc. (the “Company”), a Delaware Corporation (collectively, the
“parties”).
I. POSITION AND RESPONSIBILITIES
A. Position. Upon the Effective Date (as defined below), the Company shall employ Executive
to render services in the position of President and Chief Executive Officer reporting to the
Company’s Board of Directors (the “Board”). Executive shall perform such duties and
responsibilities as are normally related to such position in accordance with the standards of the
industry. Executive shall abide by the rules, regulations, and practices as adopted or modified
from time to time in the Company’s sole discretion. Executive shall also serve as an officer,
director, or in such other executive capacity on behalf of any of the Company’s affiliated entities
as requested by the Company without any additional compensation. Executive also will serve as a
member of the Board.
B. Term.
This Agreement will be effective on February 21, 2006 (the “Effective Date”) and
shall continue until Executive’s employment is terminated in accordance with Sections III below
(the “Term”).
C. Other Activities. By executing this Agreement, Executive agrees to serve in such position
and to devote appropriate time, attention, loyalty and efforts to the performance of Employee’s
duties. Except upon the prior written consent of the Company, Executive will not, during the term
of this Agreement, (i) accept any other employment, or (ii) engage, directly or indirectly, in any
other business activity (whether or not pursued for pecuniary advantage) that might interfere with
Executive’s duties and responsibilities hereunder or create a conflict of interest with the
Company.
D. No Conflict. Executive represents and warrants that Executive’s execution of this
Agreement, Executive’s employment with the Company, and the performance of Executive’s proposed
duties under this Agreement shall not violate any obligations Executive may have to any other
employer, person or entity, including any obligations with respect to proprietary or confidential
information of any other person or entity.
E. Background Check. Notwithstanding any other provision of this Agreement or any other
understanding or representation to the contrary, this Agreement is conditioned upon Executive’s
successful completion of a background check conducted in accordance with the Company’s customary
practices and completed within thirty (30) days after the Effective Date.
II. COMPENSATION AND BENEFITS
A. Base Salary. In consideration of the services to be rendered under this Agreement, the
Company shall pay Executive a salary at the rate of Three Hundred and Seventy Five Thousand Dollars
($375,000.00) per year (“Base Salary”) payable in accordance with the Company’s regularly established payroll practices. Executive will be eligible for
annual increases, but not decreases, to his Base Salary in the discretion of the Board.
B. Incentive Compensation. Executive shall be eligible to participate in an incentive
compensation plan (“Incentive Plan”) to be established by the Board. Executive’s annual incentive
compensation target shall be 100% of Base Salary based on performance metrics agreed upon by
Executive and the Board. The final amount of any Incentive Plan payment shall be determined by
Executive’s achievement of targets set by the Board and otherwise in accordance with the terms of
the Incentive Plan. Executive must be employed on the date each Incentive Plan payment is
distributed in order to be eligible for and earn such payment; provided, however, that if the
Company terminates Executive’s employment other than for Cause, Executive will receive a pro rata
payout of his incentive compensation target for the year in which his employment terminates.
C. Restricted Stock. Subject to the Board’s approval, Executive will participate in a plan to
receive 200,000 shares of restricted common stock of the Company. Executive will vest in 25% of
these shares on the Effective Date. Beginning with Executive’s 13th month of employment with the
Company, Executive shall vest in 1/36th of the remaining shares per month thereafter. Executive’s
right to the Company restricted common stock described herein shall be subject to and in accordance
with the terms of the applicable restricted common stock or other similar plan document(s) to be
provided by the Company and executed by Executive. As provided in more detail in the applicable
restricted common stock or other similar plan document(s) and subject to the terms thereof and any
applicable securities law requirements, any tax withholding obligations associated with Executive’s
restricted stock grant may, at the Executive’s option, be satisfied by withholding from those
shares of restricted stock issuable to Executive the whole number of shares sufficient to satisfy
the minimum applicable tax withholding obligation.
D. Stock Options. Subject to the Board’s approval, Executive will participate in the
Company’s annual employee stock option offerings in an amount of no less than 20,000 shares of
common stock of the Company per year. Beginning with the first month after Executive is awarded
any such grant, Executive shall vest in 1/48th of his stock options under the grant and
an additional 1/48th of his stock options per month going forward. The 1/48th per month
vesting schedule will apply separately to any grant that Executive may receive during his
employment. Executive’s rights to the Company stock options described herein shall be subject to
and in accordance with the terms of the applicable stock option plan document(s) to be provided by
the Company and executed by Executive.
E. Benefits. Executive shall be eligible to participate in the employee health and medical
benefit plans and programs made generally available by the Company to similarly-situated employees,
in accordance with terms and subject to the conditions and eligibility requirements of such plans
and programs.
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F. Expenses. The Company shall reimburse Executive for reasonable business expenses incurred
in the performance of Executive’s duties hereunder in accordance with the Company’s expense
reimbursement policies and procedures.
G. Moving Allowance. The Company will provide Executive with a payment in the amount of One
Hundred Thousand Dollars ($100,000.00) for assistance in Executive’s relocation from San Diego to
San Francisco for his employment under this Agreement. The Company will increase the amount it
pays to Executive to the extent necessary to account for income tax that is assessed to Executive
on this amount so that the net amount of this moving allowance that Executive receives after income
taxes is One Hundred Thousand Dollars $100,000.00.
III. TERMINATION OF EMPLOYMENT
A. At-Will Employment. Executive’s employment with the Company shall be “at-will” at all
times. Either Executive or the Company may terminate Executive’s employment at any time, without
advance notice or Cause, for any reason or no reason at all, notwithstanding anything to the
contrary contained in or arising from any statements, policies or practices of the Company relating
to the employment, discipline or termination of its employees. Upon and after such termination,
all obligations of the Company under this Agreement shall cease, except as otherwise provided in
this Agreement.
B. Termination for Cause. For purposes of this Agreement, the Company may terminate
Executive’s employment for “Cause” if Executive: (i) commits a felony or any crime involving
dishonesty, breach of trust, moral turpitude, or harm to any person; (ii) engages in conduct that
is in bad faith and materially injurious to the Company, including but not limited to,
misappropriation of any the Company property, misappropriation of trade secrets, fraud or
embezzlement; (iii) commits a material breach of this Agreement or his Proprietary Information
(attached hereto as Exhibit A), which breach, if curable, is not cured within thirty (30)
days after written notice to Executive from the Company; or (iv) willfully refuses to implement or
follow a lawful policy or directive of the Company, which breach, if curable, is not cured within
thirty (30) days after written notice to Executive from the Company. Other than for a violation of
subsections (iii) and (iv) above, the Company may terminate Executive’s employment for Cause at any
time, without any advance notice. The Company shall pay to Executive all compensation to which
Executive is entitled up through the date of termination, subject to any other rights or remedies
of the Company under law; and thereafter all obligations of the Company under this Agreement shall
cease.
C. By Death. Executive’s employment shall terminate automatically upon Executive’s death.
The Company shall pay to Executive’s beneficiaries or estate, as appropriate, any compensation then
due and owing. Nothing in this Section shall affect any entitlement of Executive’s heirs or
devisees to the benefits of any life insurance plan or other applicable benefits.
D. By Disability. If Executive becomes eligible for long term disability benefits or if, in
the sole opinion of the Company, which shall reasonably be rendered, Executive is unable
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to carry out the responsibilities and functions of the position held by Executive by reason of any illness
or physical or mental impairment for more than sixty (60) consecutive days or more than ninety (90)
days in any twelve-month period, then, to the extent permitted by law, the Company may terminate Executive’s employment.
Nothing in this Section shall affect Executive’s rights under any disability plan in which Executive is a participant.
E. For Good Reason. Executive may terminate his employment for “Good Reason” if Executive
provides written notice to the Company of his intent to resign for Good Reason no later than thirty
(30) days after the occurrence of such Good Reason. For purposes of this Agreement, “Good Reason”
shall mean the occurrence of one or more of the following without Executive’s express written
consent: (i) a material diminution in Executive’s title, duties, responsibilities or authority
with the Company; (ii) a reduction in Executive’s salary, bonus, benefits or other compensation;
(iii) the Company’s unreasonable failure to pay Executive any compensation due to him under this
Agreement, which failure is not cured within thirty (30) days’ after written notice by Executive to
the Company of such failure; (iv) relocation of the Company’s headquarters more than 75 miles from
San Francisco, California; or (v) a material breach by the Company of its obligations under this
Agreement.
IV. SEVERANCE AND CHANGE OF CONTROL
X. Xxxxxxxxx. In the event that Executive’s employment is terminated by the Company without
Cause, by Executive’s Death, by Executive’s Disability, or by Executive for Good Reason (as defined
in Section III), Executive (or Executive’s heirs in the case of Executive’s Death) will receive the
benefits enumerated in subsections A(1) and A(2) below (collectively, the “Severance Benefits”),
subject to Section IV.C.
1. Payment of (a) Executive’s then-current Base Salary and (b) COBRA premiums for continuation
of his Company health insurance benefits both in the form of salary continuation both for a period
of twelve (12) months (the “Severance Period”) in accordance with the Company’s normal payroll
practices; provided, however, that Executive will not be eligible to continue his participation in
the Company’s disability, pension and 401(k) plans during the Severance Period, or any other
welfare benefit plan that prohibits Executive’s continued participation following the termination
date;
2. Accelerated vesting of 25% of Executive’s then unvested shares of restricted common stock
(referenced in Section II.C.) and 100% of Executive’s then unvested stock options (referenced in
Section II.D.) subject to and in accordance with the terms of the applicable restricted common
stock, stock option, or other similar plan document(s) to be provided by the Company and executed
by Executive.
B. Change of Control. If the Company is involved in a Change of Control (as defined below),
then in addition to the Severance Benefits described in Section IV.A.1. only (in no event shall
Executive be eligible to receive the Severance Benefit described in Section IV.A.2 and any of the
Change of Control Benefits) to which Executive may be entitled, Executive will also be entitled to
acceleration of his then-unvested shares of restricted common stock and stock options in accordance
with subsections B(1) and B(2) below (collectively,
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“Change of Control Benefits”) and subject to and in accordance with the terms of the applicable restricted common stock, stock option, or other
similar plan document(s) to be provided by the Company and executed by Executive:
1. Fifty percent (50%) of Executive’s then unvested shares of restricted common stock
(referenced in Section II.C.) and 100% of Executive’s then unvested stock options (referenced in
Section II.D.) shall vest if the Company, without Executive’s consent, terminates his employment,
other than for Cause or Executive terminates his employment for Good Reason within six (6) months
after a Change of Control.
2. Twenty-five percent (25%) of Executive’s then unvested shares of restricted common stock
(referenced in Section II.C.) and 100% of Executive’s then unvested stock options (referenced in
Section II.D.) shall vest if Executive voluntarily terminates his employment without Good Reason
within six (6) months after a Change of Control.
3. For purposes of this Agreement, “Change of Control” means
a. a sale of all or substantially all of the Company’s assets: or
b. any merger, consolidation or other business combination transaction of the Company with or
into another corporation, entity or person, other than a transaction in which the holders of at
least a majority of the shares of voting capital stock of the Company outstanding immediately prior
to such transaction continue to hold (either by such shares remaining outstanding or by their being
converted into shares of voting capital stock of the surviving entity) a majority of the total
voting power represented by the shares of voting capital stock of the Company (or the surviving
entity) outstanding immediately after such transaction; or
c. the direct or indirect acquisition (including by way of a tender or exchange offer) by any
person, or persons acting as a group, of beneficial ownership or a right to acquire beneficial
ownership of shares representing a majority of the voting power of the then outstanding shares of
capital stock of the Company; or
d. the individuals who, as of the effective date of the Company’s initial public offering of
its securities, are members of the Board (the “Incumbent Board”), cease for any reason to
constitute at least fifty percent (50%) of the Board; provided however that if the election, or
nomination for election by the Company’s stockholders, of any new director was approved by a vote
of at least fifty percent (50%) of the Incumbent Board, such new Director shall be considered as a
member of the Incumbent Board.
C. Executive’s eligibility for Severance Benefits and/or Change of Control Benefits under this
Agreement is conditioned on (a) Executive having first signed a reasonable and customary general
release of claims and covenant not to xxx with terms mutually agreed upon by the parties, which
agreement shall not be unreasonably withheld and (b) Executive’s continued adherence to Section VI
of this Agreement beyond his employment with the Company. If Executive fails to comply with any of
his obligations under subsections (a) and
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(b) above, Executive’s eligibility for and receipt of the
Severance Benefits and/or Change of Control Benefits shall immediately cease. The parties agree
that a nominal failure of Executive to comply that does not compromise or potentially compromise
the Company’s trade secrets, confidential or proprietary information, or the Company’s business interests shall not
constitute a breach of this Section IV.C.
V. TERMINATION OBLIGATIONS
A. Return of Property. Executive agrees that all property (including without limitation all
equipment, tangible proprietary information, documents, records, notes, contracts and
computer-generated materials) furnished to or created or prepared by Executive incident to
Executive’s employment belongs to the Company and shall be promptly returned to the Company upon
termination of Executive’s employment or at any other time upon request by the Company.
B. Post-Termination Cooperation. Upon termination of employment for any reason, Executive
agrees to immediately resign any and all offices, directorships, and other positions held by him in
or on behalf of the Company effective the date of Executive’s termination from the Company.
Executive shall also cooperate with the Company’s reasonable requests in the defense of any action
brought by any third party against the Company that relates to Executive’s employment by the
Company or relates to any matter that occurred during Executive’s employment with the Company. The
Company will compensate Executive at the rate of $500 per day for Executive’s time spent in
cooperating with the Company as described above.
C. Continuing Obligations. Executive understands and agrees that Executive’s obligations
under Sections V, VI, and VIII herein, and Executive’s obligations under the Proprietary
Information and Inventions Agreement shall survive the termination of Executive’s employment for
any reason and the termination of this Agreement.
| VI. | INVENTIONS AND PROPRIETARY INFORMATION; PROHIBITIONS ON COMPETITION, SOLICITATION, AND THIRD PARTY INFORMATION |
A. Proprietary Information Agreement. Executive agrees to sign and be bound during and after
his employment by the terms of the Proprietary Information and Inventions Agreement attached as
Exhibit A to this Agreement.
B. Non-Disclosure of Third Party Information. Executive represents and warrants and covenants
that Executive shall not disclose to the Company, or use, or induce the Company to use, any
proprietary information or trade secrets of others at any time, including but not limited to any
proprietary information or trade secrets of any former employer, if any. Executive further
specifically and expressly acknowledges that no officer or other employee or representative of the
Company has requested or instructed Executive to disclose or use any such third party proprietary
information or trade secrets.
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C. Non-Competition. Executive shall not in any market or country in which the Company
conducts its business, during any period of employment for the Company, directly or indirectly, act
as an independent contractor or consultant for or to, or be a director, officer, trustee, employee,
owner, shareholder, member or partner of, any other business or organization, if such business or organization is now or shall then be competing with the
Company, or invest in the securities of any other business or organization if such business or
organization is now or shall then be competing with the Company, except that Executive may own less
than one percent (1%) of the common stock of any entity traded on any national exchange or NASDAQ.
D. Non-Solicitation. Executive shall not, during any period of employment for the Company and
for a period of one (1) year thereafter, regardless of the reason for termination, directly or
indirectly, (a) solicit, endeavor to solicit the services, as an employee, consultant, or in any
capacity, or solicit or entice to quit their employment with the Company, any of the Company’s
employees or other service providers; or (b) encourage, entice, or in any way influence any party
to diminish, cease, or refrain from any business relationship or arrangement of any kind with the
Company. The parties agree that this Section VI.D. is not intended and shall not be applied to
prevent Executive from lawfully engaging in competitive activities after his employment with the
Company.
VII. INDEMNIFICATION
Executive shall be covered by the Company’s insurance policy or policies providing liability
insurance for directors, officers, employees, agents or fiduciaries of the Company in accordance
with and subject to the terms and conditions of such policy or policies.
VIII. ARBITRATION
Any dispute, controversy, or claim arising under, out of, in connection with, or in relation
to this Agreement, or the breach termination, validity or enforceability of any provision of this
Agreement (“Arbitrable Claims”), will be settled by final and binding arbitration conducted in
accordance with and subject to the Judicial Arbitration and Mediation Service’s (“JAMS’”)
then-current JAMS Employment Arbitration Rules and Procedures (the “JAMS Rules”), or such other
alternative dispute resolution provider or process agreed by the parties. Unless otherwise
mutually agreed upon by the parties, the arbitration hearings shall be conducted in San Francisco,
California. A single arbitrator shall be selected in accordance with the JAMS Rules (the
“Arbitrator”) and the Arbitrator shall allow such discovery as is appropriate, consistent with the
purposes of arbitration in accomplishing fair, speedy and cost effective resolution of disputes.
Judgment upon the award rendered in any such arbitration may be entered in any court having
jurisdiction thereof, or application may be made to such court for a judicial acceptance of the
award and an enforcement of such award, as the law of such jurisdiction may require or allow.
Other than those matters involving injunctive relief as a remedy that cannot, as a matter of law,
be awarded by the Arbitration, or any action necessary to enforce the award of the Arbitrator, the
parties agree that the provisions of this Section VIII are a complete defense to any suit, action,
or other proceeding instituted in any court or before any administrative tribunal with respect to
any dispute, controversy or claim arising under or in connection with this Agreement. THE PARTIES
HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN REGARD TO THE ARBITRABLE CLAIMS.
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IX. AMENDMENTS; WAIVERS; REMEDIES
This Agreement may not be amended or waived except by a writing signed by Executive and by a
duly authorized officer of the Company with the approval of a super majority of the Board. Failure
to exercise any right under this Agreement shall not constitute a waiver of such right. Any waiver
of any breach of this Agreement shall not operate as a waiver of any subsequent breaches. All
rights or remedies specified for a party herein shall be cumulative and in addition to all other
rights and remedies of the party hereunder or under applicable law.
X. ASSIGNMENT; BINDING EFFECT
A. Assignment. The performance of Executive is personal hereunder, and Executive agrees that
Executive shall have no right to assign and shall not assign or purport to assign any rights or
obligations under this Agreement. This Agreement may be assigned or transferred by the Company;
and nothing in this Agreement shall prevent the consolidation, merger or sale of the Company or a
sale of any or all or substantially all of its assets. Executive expressly acknowledges and agrees
that the Company itself shall have the right to enforce any and all of Executive’s obligations
hereunder, either together with or separately from the Company, provided, however, that the Company
shall not be considered as Executive’s employer as a result of such status or in any other respect.
B. Binding Effect. Subject to the foregoing restriction on assignment by Executive, this
Agreement shall inure to the benefit of and be binding upon each of the parties; the affiliates,
officers, directors, agents, successors and assigns of the Company; and the heirs, devisees,
spouses, legal representatives and successors of Executive.
XI. NOTICES
All notices or other communications required or permitted hereunder shall be made in writing
and shall be deemed to have been duly given if delivered: (a) by hand; (b) by a nationally
recognized overnight courier service; or (c) by United States first class registered or certified
mail, return receipt requested, to the principal address of the other party, as set forth below.
The date of notice shall be deemed to be the earlier of (i) actual receipt of notice by any
permitted means, or (ii) five business days following dispatch by overnight delivery service or the
United States Mail. Executive shall be obligated to notify the Company in writing of any change in
Executive’s address. Notice of change of address shall be effective only when done in accordance
with this paragraph.
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Company’s Notice Address:
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000 Xxx Xxxxxxxxxx Xxxxxx |
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Xxx Xxxxxxxxx, XX 00000 |
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Executive’s Notice Address: |
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[home address] |
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XII. SEVERABILITY
If any provision of this Agreement shall be held by a court or arbitrator to be invalid,
unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law,
and the remainder of this Agreement shall remain in full force and effect. In the event that the
time period or scope of any provision is declared by a court or arbitrator of competent
jurisdiction to exceed the maximum time period or scope that such court or arbitrator deems
enforceable, then such court or arbitrator shall reduce the time period or scope to the maximum
time period or scope permitted by law.
XIII. TAXES
All amounts paid under this Agreement (including without limitation Base Salary) shall be paid
less all applicable state and federal tax withholdings and any other withholdings required by any
applicable jurisdiction or authorized by Executive. Notwithstanding any other provision of this
Agreement whatsoever, the Company, in its sole discretion and without Executive’s consent, may
amend or modify this Agreement in any manner to provide for the application and effects of Section
280G and Section 409A of the Code (relating to deferred compensation arrangements) and any related
regulatory or administrative guidance issued by the Internal Revenue Service. The Company shall
have the authority to delay the payment of any benefits payable under this Agreement to the extent
it deems necessary or appropriate to comply with Section 409A(a)(2)(B)(i) of the Code (relating to
payments made to certain “key employees” of certain publicly-traded companies) and in such event,
any such amount to which Executive would otherwise be entitled during the six (6) month period
immediately following Executive’s separation from service will be paid on the first business day
following the expiration of such six (6) month period.
XIV. INTERPRETATION
This Agreement shall be construed as a whole, according to its fair meaning, and not in favor
of or against any party. Sections and section headings contained in this Agreement are for
reference purposes only, and shall not affect in any manner the meaning or interpretation of this
Agreement. Whenever the context requires, references to the singular shall include the plural and
the plural the singular. This Agreement will be governed by the laws of the State of California.
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XV. COUNTERPARTS
This Agreement may be executed by facsimile and in any number of counterparts, each of which
shall be deemed an original of this Agreement, but all of which together shall constitute one and
the same instrument.
XVI. ENTIRE AGREEMENT
This Agreement is intended to be the final, complete, and exclusive statement of the terms of
Executive’s employment by the Company and may not be contradicted by evidence of any prior or
contemporaneous statements or agreements, except for agreements specifically referenced herein.
This Agreement expressly supersedes and replaces any offer letter, employment agreement, or other
agreement between Executive and the Company regarding the terms or conditions of Executive’s
employment. To the extent that the practices, policies or procedures of the Company, now or in the
future, apply to Executive and are inconsistent with the terms of this Agreement, the provisions of
this Agreement shall control.
XVII. EXECUTIVE ACKNOWLEDGEMENT
Executive acknowledges that Executive has had the opportunity to consult legal counsel
concerning this Agreement, Executive has read and understands the Agreement, Executive is fully
aware of its legal effect, and Executive has entered into it freely based on Executive’s own
judgment and not on any representations or promises other than those contained in this Agreement.
In Witness Whereof, the parties have duly executed this Agreement as of the date
first written above.
RedEnvelope, Inc.:
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Xxx Xxxxxxxxx: | |
Date: February 18,
2006
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Date: February 18, 2006 | |
By: /s/ Xxxxxx X. Xxxx |
/s/ Xxx Xxxxxxxxx | |
Xxxxxx X. Xxxx |
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Chairman of the Board of Directors |
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