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                                                                   EXHIBIT 10.12

May 24, 2001

PERSONAL AND CONFIDENTIAL

Don C. Peterson
2990 Sussex Road
Orono, MN 55356

Dear Don:

We feel that you will play the critical role in defining Net Perception's
ongoing strategy and driving the Company's operating performance. Accordingly,
we are pleased to offer you the position of President and Chief Executive
Officer. This letter (together with the attachments hereto and the documents
referred to herein) will comprise the terms and conditions of your employment
with the Company.

1.   POSITION. You will serve in a full-time capacity as President and Chief
     Executive Officer and will be elected to the Board of Directors at its next
     regularly scheduled meeting, if not sooner. You will report directly to the
     Board of Directors. Your employment shall commence immediately upon your
     execution of this agreement.

2.   BASE SALARY AND PERFORMANCE BONUS. Your starting annual base salary will be
     $200,000, payable semi-monthly, subject to legally required withholding, in
     accordance with the Company's standard payroll practices for salaried
     employees. In addition, you will be eligible to earn an annual performance
     bonus of up to $100,000, subject to your meeting criteria mutually
     determined by the Company's Board of Directors (or its Compensation
     Committee) and you. The Company, through its Compensation Committee, agrees
     to review the amount of your base salary and annual performance bonus on at
     least an annual basis.

3.   STOCK OPTIONS. If you accept this offer, you will be awarded an option to
     purchase 750,000 shares of the Company's common stock. Such option shall be
     an ISO (as defined in the Company's 1999 Equity Incentive Plan) to the
     maximum extent permitted by law, and an NSO (as defined in the Company's
     1999 Equity Incentive Plan) as to the remainder. The per share exercise
     price of the option will be the closing price per share of the common stock
     on your first day of employment. The option will vest over a four-year
     period. The option will vest with respect to the first 25% of the shares
     upon your completion of 12 months of service and with respect to an
     additional 1/48 of the shares for each month of your employment after your
     one-year anniversary. The option will be granted under, and will be subject
     to the terms and conditions of, the Company's 1999 Equity Incentive Plan, a
     copy of which is attached as Exhibit A-1, and a standard form stock option
     agreement, a copy of which is attached as Exhibit A-2, with the additional
     terms attached hereto as Exhibit A-3. The 1999 Equity Incentive Plan
     includes option acceleration provisions in the event there is a Change of
     Control during your employment. The Company, through its Compensation
     Committee, will review on at least an annual basis whether you should be
     awarded additional options to purchase shares of the Company.

4.   SEVERANCE UPON TERMINATION BY THE COMPANY WITHOUT CAUSE. If your employment
     is terminated by the Company without Cause (as defined in the Change in
     Control Severance Plan referred to in paragraph 5 below and consistent with
     paragraph 2 of Exhibit A-3), or due to your inability to perform the duties
     and responsibilities of your position by reason of illness or other
     physical or mental impairment for a period of ninety consecutive days or
     more, Net Perceptions will provide you with twelve-month base salary
     severance plus benefits described in paragraph 6 below, contingent on your
     signing a release of claims against the Company, and provided that you
     shall not be entitled to receive severance or benefits under this paragraph
     to the extent you have received severance or benefits under paragraph 5.



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Mr. Don Peterson
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5.   CHANGE OF CONTROL SEVERANCE. If a Change in Control (as defined in the
     Change in Control Severance Plan attached to this letter as Exhibit B)
     occurs during your employment, you will be entitled to receive twelve month
     base salary severance, upon the same terms and subject to the same
     conditions (consistent with paragraph 2 of Exhibit A-3) as participants in
     the Change in Control Severance Plan are entitled to receive the six month
     severance pay provided for therein, provided that you shall not be entitled
     to receive severance under this paragraph 5 to the extent you have received
     severance under paragraph 4.

6.   BENEFITS. You will be eligible to receive standard Company benefits as are
     available to other employees of the Company and as may change from time to
     time. These currently include: medical/dental/vision insurance, life
     insurance, long and short-term disability insurance, paid vacation, and
     holidays. A summary of the Company's current benefits is attached as
     Exhibit C.

7.   PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. As with all Company
     employees, you will be required, as a condition to your employment with the
     Company, to sign the Company's standard Proprietary Information and
     Inventions Agreement, a copy of which is attached hereto as Exhibit D.

8.   PERIOD OF EMPLOYMENT. Your employment with the Company will be "at will,"
     meaning that either you or the Company will be entitled to terminate your
     employment at any time for any reason, with or without cause. Any contrary
     representations that may have been made to you are superseded by this
     offer. This is the full and complete agreement between you and the Company
     on this term. Although your job duties, title, compensation and benefits,
     as well as the Company's personnel policies and procedures, may change from
     time to time, the "at will" nature of your employment may only be changed
     in an express writing signed by you and the Board of Directors of the
     Company.

9.   OUTSIDE ACTIVITIES. During the period that you render services to the
     Company, you will not engage in any employment, business or activity that
     is in any way competitive with the business or proposed business of the
     Company, or any other gainful employment, business or activity, without the
     written consent of the Company. You also will not assist any other person
     or organization in competing with the Company or in preparing to engage in
     competition with the business or proposed business of the Company. Finally,
     you will not recruit, or assist any other person or organization in
     recruiting, any of the Company's employees on behalf of another employer.
     You may participate in community activities including as a member of the
     board of a charitable or public service organization.

10.  SUCCESSORS. The terms set forth in this letter are binding on any successor
     to the Company.


11.  ENTIRE AGREEMENT. This letter and all of the exhibits or other documents
     attached hereto or referred to herein contain all of the terms of your
     employment with the Company and supersede any prior representations or
     agreements, whether oral or written, between you and the Company.

We hope that you find the foregoing terms acceptable. You may indicate your
agreement with these terms and accept this offer by signing and dating both the
enclosed duplicate original of this letter and the enclosed Proprietary
Information and Inventions Agreement and returning them to the Company. As
required by law, your employment with the Company is also contingent upon your
providing legal proof of your identity and authorization to work in the United
States. This offer, if not accepted, will expire at the close of business on May
24, 2001. Don, we are very excited about the potential of you joining Net
Perceptions to bring us the leadership and vision for success. If you have any
questions, please feel free to contact me.

Very truly yours,
NET PERCEPTIONS, INC.

/s/ Steven Snyder
-----------------
Steven Snyder
CEO

I Have Read And Accept This Employment Offer:

Signature of /s/ Don C. Peterson
             -------------------
Dated:  May 24, 2001

cc:      Ann Winblad
         John Riedl
         Will Lansing
         John Kennedy

Exhibits:
    [A-1] 1999 Equity Incentive Plan
    [A-2] Standard Form Stock Option Agreement
    [A-3] Revisions to Standard Form Stock Option Agreement
    [B] Change in Control Severance Plan
    [C] 2001 Benefits Summary
    [D] Proprietary Information and Inventions Agreement
    [E] Application for Employment


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Mr. Don Peterson
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                                   EXHIBIT A-3
                NET PERCEPTIONS, INC. 1999 EQUITY INCENTIVE PLAN

       REVISIONS TO STANDARD FORM STOCK OPTION AGREEMENT - DON C. PETERSON

1.     Delete in its entirety the second sentence appearing under the heading
MISCONDUCT and add the following text in its place: The term "Misconduct" shall
have the meaning set forth in the 1999 Equity Incentive Plan.

2.     A new third paragraph under the heading INVOLUNTARY TERMINATION shall be
added, to read as follows:

                  The Corporation agrees that "a change in your position with
                  the Corporation which materially reduces your level of
                  responsibility," within the meaning of the foregoing
                  paragraph, shall be deemed to have occurred in the event that
                  you cease to be the Chief Executive Officer reporting to the
                  Board of Directors of the Corporation.

3.     A new section shall be added, to read as follows:

                  LIMITATION The Corporation agrees that the Committee (within
                  the meaning of the ON PAYMENTS Corporation's 1999 Equity
                  Incentive Plan) shall not specify in writing that this option
                  shall be subject to Article 18 of the Corporation's 1999
                  Equity Incentive Plan.