Exhibit 10.2
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated as of the 2nd day of March,1999, between
INTERNET FASHION MALL LLC, a Delaware limited liability company with offices at
000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Company"), and XXXXXX XXXXXX,
with his principal place of business at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 ("Consultant").
The Company desires to engage Consultant to perform consulting services for
the Company, and Consultant desires to perform such services, on the terms and
conditions hereinafter set forth.
1. SERVICES; TERM
Consultant hereby agrees to provide his services as a consultant to
the Company with respect to matters relating to the fashion and apparel business
and the management and operations of the Company, and other matters as requested
by the Company for a term (the "Term") beginning on the date hereof and ending
on the earlier of (a) three years from the date hereof or (b) two years
following the earlier of the date of the consummation of an initial public
offering ("IPO") of the Company or the IPO Company (the "IPO Closing Date"),
subject to earlier termination as herein provided. As used in this Agreement,
the term "IPO Company" means any corporation or other entity, the shares or
other equity securities of which are issued to the members of the Company in
consideration for the conversion, exchange or cancellation of their membership
interests, or the transfer of their membership interests to the IPO Company.
During the Term, Consultant shall provide services to the Company hereunder of
at least 30 hours per month. All services requested
of Consultant by the Company shall be solely those commensurate with those
typically provided by a senior advisor of Consultant's standing in the fashion
apparel industry. The Company hereby acknowledges that Consultant has
significant other commitments, and that in making requests for Consultant's
services, including requests for out of town travel, the Company will use
reasonable efforts to honor such previous commitments and the Consultant will
use reasonable efforts to honor reasonable requests of the Company. If, on the
twentieth day of any month, the Company believes that Consultant has not
provided at least 20 hours of services to the Company in the first 20 days of
such month, the Company shall so notify Consultant in a writing that includes
the aggregate number of hours of services which the Company believes Consultant
has provided in such month through the date of such notice.
2. CASH COMPENSATION.
In consideration of Consultant's services hereunder, the Company
agrees to pay Consultant, subject to his earlier termination in accordance with
the terms of this Agreement prior to the end of the Term, an aggregate of
$150,000.00 of cash compensation, which shall accrue monthly in arrears as set
forth in this paragraph 3 at the rate of $6,250.00 per month on each of the
first 12 monthly anniversaries of the date hereof and $3,125.00 on each of the
13th through 36th monthly anniversaries of the date hereof; provided that if the
IPO Closing Date occurs during the first 12 months of the Term, the Company
shall accrue $25,000.00 of compensation as of such Closing Date and accrue
$4,166.00 of compensation on the 13th through the 24th monthly anniversaries of
the date hereof; provided, further, that if the IPO Closing Date occurs
following the 12th month of the Term and prior to the 24th month of the Term,
any of the remaining portion of the $150,000 payable to Consultant that has not
yet accrued under this paragraph 3 shall accrue in equal
monthly installments beginning on the monthly anniversary hereof next occurring
after the IPO Closing Date and ending on the 24th monthly anniversary of the
date hereof. In addition to the foregoing compensation, (a) if options are
issued pursuant to paragraph 3(b), the Company shall pay Consultant additional
compensation in the aggregate amount of $50,000.00, which shall accrue in equal
monthly installments beginning on the monthly anniversary hereof next occurring
after the IPO Closing Date and ending on the twenty-fourth monthly anniversary
following the IPO Closing Date; and (b) if options are issued pursuant to
paragraph 3(c), the Company shall pay Consultant additional compensation in the
aggregate amount of $100,000.00, which shall accrue in equal monthly
installments beginning on the IPO Closing Date and ending on the twenty-fourth
monthly anniversary following the IPO Closing Date. The compensation accrued
pursuant to this paragraph 2 shall be payable to Consultant upon demand
following the expiration of the Term or the earlier termination of this
Agreement; provided, that prior to the IPO Closing Date, such accrued
compensation will be payable upon such demand only if and to the extent excess
cash flow of the Company is available therefor. Notwithstanding any language
above, total compensation under this paragraph (paragraph 2) shall not exceed
$150,000.
3. OPTION COMPENSATION
(a) As additional compensation for Consultant's services hereunder,
the Company hereby sells, grants, assigns and transfers to Consultant and
Consultant hereby purchases and accepts from the Company, pursuant to a
subscription agreement between the Company and Consultant, entered into
simultaneously herewith (the "Subscription Agreement"), five-year options,
exercisable
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at $500.00 for each one-hundredth (1/100) of a percent of all of the membership
interests of the Company (or if the membership interests of the Company are held
by the IPO Company and the former holders of the membership interests hold
common stock of the IPO Company, exercisable at a price per share equal to
$50,000.00 divided by the number of shares of common stock of the IPO Company
issued in respect of each 1% membership interest in the Company), to purchase
membership interests of the Company (or, if the membership interests of the
Company are held by IPO Company and the former holders of the membership
interests hold common stock of the IPO Company, such number of shares of common
stock), which in the aggregate shall be equal to the membership interest that a
holder of a 3% membership interest of the Company owned as of the date hereof
would be entitled to at the date of issuance of such options (in each case,
after giving effect to subsequent issuances of membership interests that would
reduce the percentage interest of the holder of a 3% membership interest as of
such date and/or issuances of securities convertible into or exchangeable or
exercisable for any such membership interests or subdivisions or combinations of
such common stock (collectively, "Subsequent Events")) as a holder of the
membership interests of the Company (or the shares of common stock of the IPO
Company).
(b) In addition to the options provided for in paragraph 3(a), if
during the Term, the Company or the IPO Company completes an IPO under the
Securities Act of 1933 which places an implied post-IPO valuation on the
membership interests of Company or the common stock of the IPO Company, as the
case may be, of at least $60 million but less than $70 million (based on the
gross proceeds per security paid in the IPO), then Consultant shall receive
options with the same
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expiration date, exercise price and other terms as the options described in
paragraph 3(a), except that the exercise price per membership interest (or per
share) of such options shall be equal to 25% of the gross proceeds per
membership interests (or per share) received by the Company in the IPO, to
purchase a number of shares of the Company's common stock upon the IPO Closing
Date (or promptly thereafter) equal to membership interests of the Company (or
to the number of shares of the IPO Company's common stock) that a holder of a 1%
membership interest received as of the date hereof would be entitled to at the
IPO Closing Date (in each case, after giving effect to Subsequent Events) as a
holder of the membership interests of the Company (or the shares of common stock
of the IPO Company).
(c) In addition to the options provided for in paragraph 3(a), if,
during the Term, the Company or the IPO Company completes an IPO which places an
implied post-IPO valuation on the membership interests of Company or the common
stock of the IPO Company, as the case may be, of at least $70 million (based on
the gross proceeds per security paid in the IPO), then Consultant shall receive
options with the same expiration date and other terms as the options described
in paragraph 3(a), except that the exercise price per membership interests (or
per share) of such options shall be equal to 25% of the gross proceeds per
membership interests (or per share) received by the Company in the IPO, to
purchase membership interests of the Company (or a number of shares of the IPO
Company's common stock) upon the IPO Closing Date (or promptly thereafter) equal
to the membership interests of the Company (or the number of shares of the IPO
Company's common stock) that a holder of a 2% membership interest received as of
the date hereof would be entitled to
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at the IPO Closing Date (after giving effect to Subsequent Events) as a holder
of the membership interests of the Company (or the shares of common stock of the
IPO Company).
(d) In no event shall Consultant acquire aggregate membership
interests (or shares of common stock) of the Company or the IPO Company pursuant
to this paragraph 3 hereof greater than the percentage membership interest (or
number of shares of common stock) that a holder of a 5% membership interest of
the Company received as of the date hereof would be entitled to thereafter in
accordance with the provisions of paragraphs 3(a) and 3(b) or (c) (after giving
effect to Subsequent Events) as a holder of the membership interests of the
Company (or the shares of common stock of the IPO Company). All options shall be
transferable by Consultant to Family Donees, as such term is defined in the
Subscription Agreement.
4. NO BENEFITS
Consultant shall not be entitled to participate in any employee
health, life insurance or other benefit plans of the Company.
5. EXPENSES
The Company shall reimburse Consultant for reasonable out-of-pocket
expenses incurred by him in connection with the performance of his services
hereunder, provided such expenses are approved in advance by the Managing Member
of the Company.
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6. TERMINATION
(a) (i) The Term of this Agreement shall end automatically upon the
death of Consultant and may be earlier terminated by a majority in interest of
the Members of the Company (excluding Consultant and/or any affiliate of
Consultant, if he or such affiliate is then a member of the Company), but only
(i) upon Consultant's being unable to perform the services requested by the
Company for an extended period due to illness, accident or other disability, or
(ii) for cause. Prior to any termination for cause, the Company shall (A)
provide Consultant with written notice signed by each Member seeking such
termination, specifying in reasonable detail the cause complained of and a
reasonable time frame for cure not to exceed 30 days, if such cause is
susceptible of cure (a "Termination Notice"), and (B) within ten business days
of Consultant's request, given not later than ten business days after the
expiration of the cure period provided in the Termination Notice, or if no cure
period is provided, within ten business days of Consultant's receipt of the
Termination Notice, provide Consultant with an in person hearing before a
meeting of all the members of the Company (at which Consultant may be
accompanied by counsel). In the event of an IPO, prior to any termination for
cause, the Company shall (A) provide Consultant with written notice signed by a
majority of the members of the Board of Directors of the Company or the IPO
Company seeking such termination, specifying in reasonable detail the cause
complained of and a reasonable time frame for cure not to exceed 30 days, if
such cause is susceptible of cure and (B) within ten business days of
Consultant's request, given not later than ten business days after expiration of
the cure period provided in the termination notice, provide Consultant with an
in person meeting of the majority of
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the members of the Board of Directors of the Company (at which Consultant may
be accompanied by counsel).
(ii) The term of this Agreement may be terminated prior to the
end of the stated Term by Consultant if, prior to the IPO Closing Date, Xxxxxxxx
Xxxxxxx is no longer an active member of senior management, and equity holder
in, the Company, the IPO Company or any entity that, directly or indirectly,
controls the Company (a "Change of Control"), within 30 days following written
notice from the Company to Consultant of any such Change of Control, which
notice from the Company shall be given as promptly as practicable, but in any
event within ten days of any Change of Control. In addition, this Agreement may
be terminated by Consultant prior to the end of the Term (A) pursuant to
paragraph 10(a) or (b) for good reason prior to the end of the Term upon a
showing that (1) the Company has materially breached any representations or
warranties contained in any of the Transaction Documents, PROVIDED, HOWEVER,
that Consultant may not terminate for any such breach after the earlier of the
IPO Closing Date or one year from the date hereof; or (2) the Company has
committed a material breach under any of the Transaction Documents; PROVIDED,
HOWEVER, that Consultant may not terminate for any such breach after one year
from the date of any such breach. Prior to any such termination by Consultant
for good reason, Consultant shall (a) provide the Company with written notice,
signed by Consultant, seeking such termination, specifying in reasonable detail
the good reason complained of and a reasonable time frame for cure not to exceed
30 days if such good reason is susceptible of cure (a "Consultant Termination
Notice"), and (b) within ten business days of the Company's request, given not
later than ten business days after the expiration of the cure period provided in
the Consultant Termination Notice, or if no cure period
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is provided, within ten business days of the Company's receipt of the Consultant
Termination Notice, provide the Company with an in person meeting attended by
Consultant regarding such termination (at which the Company's representatives
may be accompanied by counsel).
(iii) In the event that this Agreement is terminated in
accordance with paragraph 6(1)(i) or (ii), the Company shall have no further
obligation to Consultant under this Agreement after the date of such termination
except to pay all accrued, but theretofore unpaid, cash compensation, on demand,
and any unvested options shall terminate and be of no effect, except as provided
in paragraph 6(d) below.
(b) The options issued pursuant to paragraph 3(a) shall vest and
become exercisable as follows: 50% of such options shall vest and become
exercisable in equal monthly installments of 4.1666% each on each of the first
12 monthly anniversaries of the date hereof, and 50% of such options shall vest
and become exercisable in equal monthly installments of 2.0833% each on each of
the 13th through the 36th monthly anniversaries of the date hereof; provided
that if the IPO Closing Date occurs during the first 12 months of the Term,
there shall immediately vest and be payable (i) on the IPO Closing Date a number
of options equal to 50% of the total number of such options and (ii) on the
twelfth monthly anniversary of the date hereof, such number of options as shall
result in 66% of such options being vested and exercisable on or prior to the of
the twelfth month of the Term, with any theretofore unvested options up to such
66% vesting in equal monthly installments on each monthly anniversary of the
date hereof through the twelfth such anniversary; and the remaining 34% of such
options vesting in equal
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monthly installments on each monthly anniversary of the date hereof from the
13th through 24th monthly anniversaries of the date hereof; provided, further,
that if the IPO closing date occurs following the 12th month of the Term and
prior to the 24th month of the Term, all of the Consultant's previously unvested
options shall vest and become exercisable (in equal monthly installments)
beginning on the first monthly anniversary following the IPO Closing Date and
ending on the last day of the 24th monthly anniversary of the date hereof.
(c) The options issued pursuant to paragraph 3(b) or 3(c), as the case
may be, shall vest and become exercisable in equal monthly installments
beginning on the last day of the month in which the IPO Closing Date occurs and
ending on the twenty-fourth month of the Term.
(d) If Consultant shall die or this Agreement shall be terminated
prior to the date that all of the issued options have vested hereunder by the
Company for then upon the date of his death, or such termination by the Company,
as the case may be, 50% of any issued but theretofore unvested options shall
automatically vest and be exercisable by Xxxxxx'x estate or legal
representatives; provided that if this Agreement is terminated by Consultant
pursuant to clause (A) of paragraph 6(1)(ii), then (A) Consultant shall be
entitled to retain only such options as have vested prior to the earlier of the
date of such termination and the sixth option vesting date hereunder (B) any
other vested options shall, upon notice from the Company, be automatically
forfeited and (C) any unvested options shall terminate and be of no effect.
7. CONFIDENTIAL INFORMATION
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(a) All Confidential Information (as hereinafter defined) which
Consultant may now possess, may obtain during or after the Term, or may create
prior to the end of the Term relating to the business of the Company or any of
its customers, suppliers or partners shall not be used, published, disclosed or
made accessible by him to any other person, firm or corporation, either during
or after the Term, except during the Term in the business and for the benefit of
the Company, without the prior written consent of the members of the Company. As
used herein, the term "Confidential Information" shall mean and be limited to
information (whether written or oral) of the Company furnished by the Company to
Consultant in connection with the consulting services provided by Consultant
hereunder, or prior to the date hereof in connection with the transaction
between FM/CCP Investment Partners, LLC and the Company closing on the date
hereof which contains or reflects any information which is secret and
proprietary to the business of the Company; provided that the term Confidential
Information does not include information which (i) is or becomes publicly
available other than as a result of a disclosure by Consultant or (ii) is or
becomes available to Consultant on a non-confidential basis from a source (other
than the Company or its representatives, including its attorneys, accountants
and financial advisors) which, to the best of Consultant's knowledge and good
faith, is not prohibited from disclosing such information to Consultant by a
legal, contractual or fiduciary obligation to the Company.
(b) Since a breach of the provisions of this paragraph 7 could not
adequately be compensated by money damages, the Company shall be entitled, in
addition to any other right and
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remedy available to it, to an injunction restraining such breach or a threatened
breach, and in either case no bond or other security shall be required in
connection therewith.
8. NON-COMPETITION
Consultant agrees that, without the prior written consent of the
Company, he will not, during the Term or for a period of six (6) months from the
date of termination of this Agreement, voluntarily or involuntarily, for any
reason whatsoever, directly or indirectly, individually or on behalf of persons
not now parties to this Agreement, be a partner, stockholder, director, officer,
principal, agent or employee of, or in any other capacity or relationship,
engage in any business or employment with, or aid or endeavor to assist any
business or legal entity that is a direct competition of the company and in
engaged in the business of marketing or sale of fashion, apparel, footwear,
beauty or related lifestyle products of accessories over the Internet (the
"Business"); PROVIDED, HOWEVER, that (a) this paragraph 8 shall not proscribe
Consultant's ownership, either directly or indirectly, of either less than five
percent (5%) of any class of securities which are listed on a national
securities exchange or of any limited partnership, investment fund or other form
of investment over which Consultant has no investment control; (b) for purposes
of this paragraph 8, Gymboree and Blackberry, Inc. shall be deemed not to be
engaged in the Business; and (c) this paragraph 8 shall not proscribe
Consultant's engaging in any activity otherwise prohibited by this paragraph 8
on behalf of any business or legal entity that is primarily a seller of retail
goods and which is engaged in the Business if and only if (i) its gross revenues
from the Business constitute less than 10% of the gross revenues of such
business or legal entity; and (ii) Consultant's activities for
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such business or legal entity do not involve the Business, other than on a DE
MINIMIS basis. The Company and Consultant acknowledge the reasonableness of this
covenant not to compete and the reasonableness of the geographic area and
duration of time which are a part of said covenant.
9. RELATIONSHIP OF THE PARTIES
Nothing contained in this Agreement shall authorize, empower or
constitute either Consultant or the Company as the agent the other in any
manner; authorize or empower either Consultant or the Company to assume or
create any obligation or responsibility whatsoever, express or implied, on
behalf of or in the name of the other; or authorize or empower either Consultant
or the Company to bind the other in any manner or to make any representation,
warranty or commitment on behalf of the other.
10. SERVICE AS A DIRECTOR
(a) The Company has indicated that it intends, in compliance with all
necessary procedures, to invite Consultant to serve on its board of directors,
and Consultant has, based on the facts and circumstances of the Company
heretofore disclosed to him, agreed to accept such invitation. The Company
acknowledges and agrees that Consultant may, subject to the remaining provisions
of this paragraph 10(a), decline to serve as a director or resign as a director
if he terminates this Agreement upon a Change of Control or for good cause
pursuant to paragraph 6(a)(ii). Notwithstanding anything to the contrary herein,
in the event Consultant, in good faith, declines to serve as a director, or
terminates his directorship the Company shall have no claim
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whatsoever in respect thereof, and the sole result thereof shall be the lapse of
Consultant's options to the extent provided herein. The Company and Consultant
agree to use their respective best efforts (which shall not, however, include
the payment by the Company of any fees or expenses of Xxxxxx, including, without
limitation, the fees and expenses of Xxxxxx'x counsel) to enable Consultant to
fulfill his due diligence obligations in connection with the filing of the
registration statement for the IPO (including any amendment thereto).
Notwithstanding the foregoing, if the managing underwriter for the IPO is an
underwriter generally-recognized to be of lesser standing in the financial
community than Gruntal & Co., LLC and Consultant or the Company are unable to
agree on the fulfillment of such due diligence obligations prior to the filing
of the registration statement for the IPO (or any amendment thereto), then
Consultant may terminate this Agreement for good cause upon notice to the
Company, if such disagreement is not resolved prior to earlier of the date of
such filing or five business days following the date of such notice. Consultant
agrees to serve as a director of the Company or the IPO Company, commencing upon
the IPO Closing Date and, at the option of the Company, ending upon the
termination of this Agreement, subject to the other provisions of 10(a) and
6(a)(ii).
(b) In connection with Consultant's service as a director, the Company
or the IPO Company shall provide Consultant, in his capacity as a director, with
indemnification rights, directors' and officers' liability insurance in the
amount of $5 million, provided that if coverage in such amount requires the
Company to expend for premiums in excess of $100,000 for two years of coverage,
then in such lesser amount as the Company may obtain through the expenditure in
premiums of $100,000 for two years of coverage, "33 Act" insurance providing
such coverage as the
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non-management directors of the Company (or the IPO Company) as a group shall
reasonably request and the right to avail himself, at the expense of the Company
(or the IPO Company), of counsel afforded to the other non-executive directors
of the Company (or the IPO Company) on a collective basis, all upon customary
terms to be reasonably agreed to by the Company (or the IPO Company) and
Consultant.
11. NOTICES
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, sent by overnight courier or facsimile transmission or
delivered against receipt to the party to whom it is to be given at the address
of such party set forth in the preamble to this Agreement (or to such other
address as the party shall have furnished in writing in accordance with the
provisions of this paragraph 11. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof; any
notice sent by overnight courier shall be deemed given on the next business day
after delivery to the courier; any notice sent by facsimile transmission shall
be deemed given upon receipt (electronically or otherwise); and any notice
delivered against receipt shall be deemed given upon receipt, except in each
case for a notice changing a party's address which shall be deemed given at the
time of receipt thereof.
12. WAIVER
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Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
13. BINDING EFFECT; ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
parties hereto, the successors and assigns of the Company and the assigns, heirs
and personal representatives of Consultant; PROVIDED, HOWEVER, that, except with
respect to the Consultant's right to transfer, assign or otherwise convey his
options, as provided for in paragraph 3, the Consultant may not assign, transfer
or otherwise convey any of his rights or delegate any of his duties under this
Agreement without the written consent of the Company.
14. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to principles governing
conflicts of law. The Company irrevocably consents to the jurisdiction of the
courts of the State of New York and of any federal court located in such State,
in each case sitting in New York County, in connection with any action or
proceeding arising out of or relating to this Agreement or a breach of this
Agreement. In any such
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action or proceeding, the Company waives personal service of any summons,
complaint or other process and agrees that service thereof may be made in
accordance with paragraph 11.
15. ENTIRE AGREEMENT
This Agreement, together with the Subscription Agreement, the
Registration Rights Agreement referred to in Section 6 of the Subscription
Agreement and the letter of even date herewith from the Company to Consultant
and FM/CCP Investment Partners, LLC, represents the entire agreement with
respect to the subject matter hereof, supersedes any prior oral or written
agreements or undertakings between the parties with respect thereto and may not
be modified or amended except in a writing duly executed by each of the parties
hereto.
16. SEVERABILITY
If at any time any of the covenants contained in this Agreement shall
be deemed invalid or unenforceable by the laws of any jurisdiction wherein it is
to be enforced, by reason of being vague or unreasonable as to duration, or
geographic scope, or scope of activities restricted, or for any other reason,
such covenants shall be considered divisible as to such portion or duration and
such covenants shall become and be immediately amended and reformed with respect
to such jurisdiction only to include such covenants as are enforceable by the
court or other body having jurisdiction of this Agreement; and the parties agree
that such covenants, as so amended and reformed, shall be valid and binding as
though the invalid or unenforceable portion had not been included herein.
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17. REMEDIES
Consultant acknowledges that the Company would not have an adequate
remedy at law in the event of Consultant's breach of its covenants contained in
paragraphs 7 and/or 8, and therefore agrees that the Company shall be entitled
to injunctive relief in addition to any other rights and remedies available
under this Agreement or at law or in equity in the event of any such breach by
Consultant. Each party hereto waives any claim for consequential or special
damages in respect of any breach of any provision hereof
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
INTERNET FASHION MALL LLC
By: /s/ Xxxxxxxx Xxxxxxx
---------------------------
Name: Xxxxxxxx Xxxxxxx
Title: Managing Member
/s/ Xxxxxx Xxxxxx
-------------------------------
Xxxxxx Xxxxxx
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