December 28, 1998
Lou Zambello
50 Woodland Road
Pownal, Maine 04609
Dear Candidate:
eToys Inc. (the "Company") is pleased to offer you employment on the
following terms:
POSITION. You will serve in a full-time capacity as Senior Vice President of
Operations of the Company. You will report to the Company's Chief Executive
Officer. You will be encouraged to participate in meetings of the Company's
Board of Directors (the "Board") at the discretion of the Company's Chief
Executive Officer. Your start date will be December 31st, 1998.
CASH COMPENSATION. You will be paid a monthly salary of not less than
$16,667.00, which is equivalent to $200,000 on an annual basis, payable in
monthly installments in accordance with the Company's standard payroll
practices for salaried employees. In addition, you will receive a signing
bonus of $115,000 payable on a schedule to be mutually agreed to by you and
the Company, but in no case later than January 31st, 2000. You will vest
with respect to your signing bonus in 12 equal monthly installments for each
of the 12 months during which you continue to be employed by the Company
following the commencement of your employment. If the Company terminates
your employment for any reason, with or without cause (see definition of
"cause" below) prior to the end of this 12 month period, or if you end your
employment with the Company, you will be obligated to refund to the Company
the unvested portion of your signing bonus. If the Company terminates your
employment without cause within the first 12 months of your employment, you
will receive a severance payment of $100,000, which is equivalent to 6 months
of salary. Your cash compensation will be reviewed annually by the Board.
STOCK OPTIONS. In connection with the commencement of your employment, the
Company will recommend that the Board of Directors grant you stock options to
purchase 275,000 shares of the Company's Common Stock. The exercise price
will be equal to the fair market value of the Common Stock on the date of
grant. The option will be an incentive stock option to the maximum extent
permitted by applicable tax law and will be subject to the terms and
conditions applicable to options granted under the Company's 1997 Stock Plan,
as described in that Plan and the applicable stock option agreement
(including customary transfer and "lock-up" restrictions.) The option will
be immediately exercisable, but the purchased shares will be subject to
repurchase by the Company at the exercise price in the event that your
employment terminates before you vest in the shares. You will vest in 1/4th
of the option shares after twelve months of employment, and the balance will
vest in monthly installments over the next 36 months of employment, as
described in the applicable stock option agreement. If you are terminated by
the Company without Cause within the first 6 months of employment, you will
vest a number of shares equivalent to 1/8th of the option shares. If you are
terminated by the Company without Cause within the first 6-12 months of
employment, you will vest a number of shares equivalent to 1/48th of the
option shares for each month of employment. If there is a change of control
of the Company during the two year period immediately following the date of
the commencement of your employment with the Company, you will vest in an
additional number of unvested option shares equal to the number in which you
would have vested if your employment had continued through the expiration of
such two year period.
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"Cause" means (a) willful and repeated failure to comply with the lawful
directions of the Board, (b) gross negligence or willful misconduct in the
performance of your duties to the Company, (c) commission of any act of fraud
against, or the misappropriation of material property belonging to, the
Company or (d) conviction of a crime that is materially injurious to the
business or reputation of the Company, in each case as determined in good
faith by the Board.
BENEFITS.
a. INSURANCE BENEFITS. The Company will provide you with standard medical
and dental insurance benefits. In addition, the Company currently
indemnifies all officers and directors to the maximum extent permitted
by law, and you will be requested to enter into the Company's standard
form of Indemnification Agreement giving you such protection. Pursuant
to the Indemnification Agreement, the Company will agree to advance any
expenses for which indemnification is available to the extent allowed
by applicable law.
b. VACATION. You will be entitled to 3 weeks paid vacation per year
MOVING ASSISTANCE. For the first 6 months of your employment, it is
anticipated that your family will remain in Maine, until the end of the
school year. After 6 months, it is expected that you and your family will
move to the Los Angeles area. The company will pay a moving company to
transport your belongings to the Los Angeles area.
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. Like all Company
employees, you will be required, as a condition to your employment with the
Company, to sign the Company's standard Employee Information and Inventions
Agreement, a copy of which is attached hereto as Exhibit A.
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 and for any reason, with or without cause. Any
contrary representations which 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 written agreement signed by you and a duly authorized
officer of the Company.
PROOF OF RIGHT TO WORK. 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 and, in such event, you
would not be entitled to the severance payment set forth in the preceding
paragraph.
WITHHOLDING TAXES. All forms of cash compensation referred to in this letter
are subject to reduction to reflect applicable withholding and payroll taxes.
CONFIDENTIALITY OF TERMS. You agree to follow the Company's strict policy
that employees must not disclose, either directly or indirectly, any
information, including any of the terms of this agreement, regarding salary,
bonuses, or stock purchase or option allocations to any person, including
other employees of the Company; provided, however, that you may discuss such
terms with members of your immediate family and any legal, tax, or accounting
specialists who provide you with individual legal, tax or accounting advice.
ENTIRE AGREEMENT. This letter and the Exhibit attached hereto contain all
of the terms of your employment with the Company and supersede any prior
understandings or agreements, whether oral or written, between you and the
Company.
AMENDMENT AND GOVERNING LAW. This letter agreement may not be amended or
modified except by an express written agreement signed by you and a duly
authorized officer of the Company. The terms of this letter agreement and
the resolution of any disputes will be governed by California law.
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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 Employee
Information and Inventions Agreement and returning them to me. This offer of
employment is contingent upon the satisfactory completion of reference checks
regarding you past employment. 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.
We look forward to your decision to join eToys Inc. no later than December
29th, 1998 at 5 p.m. Pacific Standard Time.
Very truly yours,
/s/ Toby Lenk
By:
Toby Lenk
Chief Executive Officer
eToys Inc.
I have read and accept this employment offer:
/s/ Lou Zambello
Signature of Candidate
Dated December 29th, 1998
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