Exhibit 10.54
EMPLOYMENT AGREEMENT
     This Employment Agreement (the “Agreement”) is entered into by and between
Ken Constable (“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.

 

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     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
     A. Severance. 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
sue 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:
   
 
   
149 New Montgomery Street
         
 
   
San Francisco, CA 94105
         
 
   
Executive’s Notice Address:
   
 
   
[home address]
   
 
   

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.:
  Ken Constable:
 
   
Date: February 18, 2006
  Date: February 18, 2006
 
   
By: /s/ Daniel R. Lyle
  /s/ Ken Constable
 
   
Daniel R. Lyle
   
Chairman of the Board of Directors
   

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