Exhibit 10.40
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into as of July 31, 2002, by and
between Bluefly, Inc., a Delaware corporation (the "Company"), and Xxxxxxxx
Xxxxxx ("Xxxxxx").
RECITALS
WHEREAS, Xxxxxx and the Company entered into an Employment Agreement
dated June 15, 1998 that provides, among other things, that Xxxxxx shall be the
Company's Executive Vice President until July 31, 2002;
WHEREAS, the Company desires to continue to retain the services of
Xxxxxx as the Executive Vice President of the Company in accordance with the
terms and conditions of this Agreement.
WHEREAS, Xxxxxx desires to continue to serve the Company as its
Executive Vice President in accordance with the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Xxxxxx agree as
follows:
1. TERM
The Company hereby agrees to continue to employ Xxxxxx as the Executive
Vice President of the Company, and Xxxxxx hereby agrees to serve in such
capacity, for a term commencing on the date hereof and ending June 30, 2005 upon
the terms and subject to the conditions contained in this Agreement; provided,
however, that if the Company does not provide Xxxxxx with written notice of its
desire not to renew this Agreement at least 90 days prior to the end of the then
current term (including any one year renewal term that is created as a result of
this proviso), this Agreement shall automatically extend for one year from the
end of the then current term.
2. DUTIES
During the term of this Agreement, Xxxxxx shall serve as the Executive
Vice President of the Company reporting directly to the Chief Executive Officer
or the President of the Company, and he shall perform such duties, and have such
powers, authority, functions, duties and responsibilities for the Company as are
reasonably assigned to him by the Chief Executive Officer, the President and/or
the Board of Directors of the Company (the "Board") and as are consistent with
the duties, responsibilities, and activities of a senior executive officer of
the Company. To the extent that the Company becomes a division or subsidiary of
another entity, Xxxxxx shall report directly to, and have such powers,
authority, functions, duties and responsibilities as are reasonably assigned to
him by, the Chief Executive Officer, President or comparable officer of such
division or subsidiary.
The principal location of Xxxxxx' employment shall be at the Company's
principal office which shall be located in the New York City vicinity (i.e.
within a 20 mile radius of Manhattan), although Xxxxxx understands and agrees
that he will be required to travel from time to time for business reasons.
Xxxxxx shall devote substantially all of his business time to the performance of
his duties as the Executive Vice President of the Company during the term of
this Agreement. Xxxxxx shall not, directly or indirectly, render professional
services to any other person or entity, without the consent of the Company's
Chief Executive Officer; provided, however, that nothing contained herein shall
prevent Xxxxxx from rendering any service to any charitable organization or
family business so long as it does not interfere unreasonably with his duties
and obligations hereunder.
3. COMPENSATION
For services rendered by Xxxxxx to the Company during the term of this
Agreement, the Company shall pay him a minimum base salary of Two Hundred and
Twenty-Five Thousand Dollars ($225,000) per year ("Base Salary"), payable in
accordance with the standard payroll practices of the Company, subject to
increases in the sole discretion of the Compensation Committee of the Board (the
"Compensation Committee"), taking into account merit, corporate and individual
performance and general business conditions, including changes in the "cost of
living index."
4. PROFIT PARTICIPATION/INCENTIVE AWARD/OPTIONS
a. Profit Participation. For each fiscal year during the Term,
Xxxxxx shall be eligible to participate in the Bluefly, Inc. Key Executive
Profit Participation Plan.
b. Incentive Award.
(i) In consideration for Xxxxxx agreeing to the non-competition
and non-solicitation provisions of paragraph 6 and the
confidentially and invention provisions of paragraph 9, and
subject to the conditions set forth in this paragraph 4(b),
upon the occurrence of a "Realization Event" (as defined in
paragraph 4(b)(iv)), Xxxxxx shall be entitled to receive a
payment from the Company equal to 1.2% of the "Aggregate
Consideration" (as defined in paragraph 4(b)(iii)), less
applicable withholding taxes ("Award"). Subject to paragraph
4(b)(ii) hereof, the amount payable in respect of an Award
shall be payable in the same type or types of consideration
received by other shareholders of the Company (and, if more
than one type of consideration is given, payment will be
made in the same relative percentages of each type of
consideration received by other shareholders), with one-half
of the Award payable as soon as is administratively
practicable after the occurrence of a Realization Event, and
the other one-half of the Award payable on the first
anniversary of the Realization Event, provided that Xxxxxx
remains employed with the Company at that time, or, if
earlier, upon the termination of Xxxxxx' employment with the
Company (A) by the Company without "Cause" (as defined
below), (B) by way of a "Constructive Termination" (as
defined below) or (C) on account
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of death or "permanent disability" (as described in
paragraph 7(a)(ii) below); provided that if Xxxxxx'
employment with the Company is terminated for any reason
other than as described above prior to the first anniversary
after the date of the Realization Event, then the second
one-half of the Award shall be permanently forfeited.
Notwithstanding anything to the contrary herein, the
consideration received by Xxxxxx will be subject to any
hold-back, escrow, indemnity or similar arrangement to the
same extent to which the consideration to be received by
other shareholders in the Company is subject.
(ii) Xxxxxx shall be entitled to a payment of the Award in
accordance with paragraph 4(b)(i) hereof if (A) a
Realization Event occurs while Xxxxxx is employed by the
Company or (B) Xxxxxx' employment is terminated without
"Cause" (as defined in paragraph 7(a)(iv) hereof) or Xxxxxx
terminates his employment on account of a "Constructive
Termination" (as defined in paragraph 7(a)(iii) hereof) and
within 180 days following such termination a Realization
Event is consummated. Except as provided in the preceding
sentence, Xxxxxx shall have no right to the Award if a
Realization Event is consummated following the termination
of Xxxxxx' employment with the Company.
(iii) For purposes of this Agreement, "Aggregate Consideration"
shall mean the total fair market value (as reasonably
determined by the Compensation Committee at the time of the
closing of the Realization Event) of the cash, securities
and other consideration paid or payable, or otherwise to be
distributed directly to the Company's stockholders in
connection with a Realization Event.
(iv) For purposes of this Agreement, "Realization Event" means a
"Change of Control" (as defined in paragraph 8) in which
cash, securities or other consideration is paid or payable,
or otherwise to be distributed directly to the Company's
stockholders
(v) Notwithstanding any provision of this Agreement to the
contrary, in the event Xxxxxx materially breaches the
provisions of paragraphs 6 or 9 hereof, Xxxxxx hereby agrees
that the Company may, in addition to any other remedies it
may have, reclaim any amount paid to Xxxxxx pursuant to this
paragraph 4(b).
(vi) It is understood that the Company intends to allocate an
aggregate of 5% of the Aggregate Consideration, less
applicable withholding taxes, to senior executives of the
Company. Currently 4% of the Aggregate Consideration has
been allocated amongst Xxxxxx, E. Xxxxxxx Xxxxx and Xxxxxxx
Xxxxx, and 1% of the Aggregate Consideration may, in the
Company's discretion, be allocated to one or more additional
senior executive[s]. Notwithstanding paragraph 4(b)(i), if
any portion of such 1% has not been allocated at the time of
a Realization Event (such
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unallocated portion, the "Unallocated Award"), Xxxxxx' Award
shall be increased by 30% of the Unallocated Award, less
applicable withholding taxes.
c. Options. Xxxxxx shall be eligible to participate in grants
of stock options as is deemed appropriate by the Compensation Committee.
5. EXPENSE REIMBURSEMENT AND PERQUISITES
a. During the term of this Agreement, Xxxxxx shall be entitled
to reimbursement of all reasonable and actual out-of-pocket expenses incurred by
him in the performance of his services to the Company consistent with corporate
policies, provided that the expenses are properly accounted for.
b. During each calendar year of the term of this Agreement,
Xxxxxx shall be entitled to reasonable vacation with full pay; provided,
however, that Xxxxxx shall schedule such vacations at times convenient to the
Company.
c. During the term of this Agreement, the Company shall provide
Xxxxxx with a minimum of $500,000 worth of term life insurance, subject to
availability on commercially reasonable terms, major medical insurance coverage,
and Xxxxxx shall be entitled to participate in all dental insurance and
disability plans and other medical, insurance, and employee benefit plans
instituted by the Company from time to time on the same terms and conditions as
those offered to other senior executive officers of the Company, to the extent
permitted by law.
6. NON-COMPETITION; NON-SOLICITATION
a. In consideration of the offer of employment and severance
benefits hereunder, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, during the term of this
Agreement and during the "Non-Competition Period" (as defined in paragraph 6(c)
below) Xxxxxx shall not, without the prior written consent of the Company,
anywhere in the world, directly or indirectly, (i) enter into the employ of or
render any services to any "Competitive Business" (as defined below); (ii)
engage in any Competitive Business for his own account; (iii) become associated
with or interested in any Competitive Business as an individual, partner,
shareholder, creditor, director, officer, principal, agent, employee, trustee,
consultant, advisor or in any other relationship or capacity; (iv) employ or
retain, or have or cause any other person or entity to employ or retain, any
person who was employed or retained by the Company while Xxxxxx was employed by
the Company; or (v) solicit, interfere with, or endeavor to entice away from the
Company, for the benefit of a Competitive Business, any of its customers or
other persons with whom the Company has a contractual relationship. For purposes
of this Agreement, a "Competitive Business" shall mean: (a) any person,
corporation, partnership, firm or other entity whose primary business is the
sale or consignment of off-price apparel and/or off-price fashion accessories;
(b) any division of a person, corporation, partnership, firm or other entity
(but not the person, corporation, partnership, firm or other entity itself)
whose primary business is internet based selling or consignment of ten (10) or
more brands of off-price apparel and/or off-price fashion accessories;
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or (c) the off-price divisions of Nordstrom, Saks Fifth Avenue, Neiman Marcus or
the off-price division of another retailer of ten (10) or more brands of apparel
and/or fashion accessories. However, nothing in this Agreement shall preclude
Xxxxxx from investing his personal assets in the securities of any corporation
or other business entity which is engaged in a Competitive Business if such
securities are traded on a national stock exchange or in the over-the-counter
market and if such investment does not result in his beneficially owning, at any
time, more than three percent (3%) of the publicly-traded equity securities of
such Competitive Business.
x. Xxxxxx and the Company agree that the covenants of
non-competition and non-solicitation contained in this paragraph 6 are
reasonable covenants under the circumstances, and further agree that if, in the
opinion of any court of competent jurisdiction, such covenants are not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of these covenants as to the
court shall appear not reasonable and to enforce the remainder of these
covenants as so amended. Xxxxxx agrees that any breach of the covenants
contained in this paragraph 6 would irreparably injure the Company. Accordingly,
Xxxxxx agrees that the Company, in addition to pursuing any other remedies it
may have in law or in equity, may obtain an injunction against Xxxxxx from any
court having jurisdiction over the matter, restraining any further violation of
this paragraph 6.
c. The "Non-Competition Period" shall extend for a period of
two (2) years following the end of the term of this Agreement; provided, however
that, in the event that the Agreement is terminated by the Company without
"Cause" (as defined in paragraph 7(a)(iv)), or by Xxxxxx pursuant to a
"Constructive Termination" (as defined in paragraph 7(a)(iii)), the
Non-Competition Period shall expire on the first anniversary of the termination
of this Agreement (the "Modified Non-Competition Period"); and further provided
that in the event that during the Non-Competition Period or the Modified
Non-Competition Period, as the case may be, Xxxxxx receives notice in writing
from the Company of any material breach of any of the covenants contained in
this paragraph 6 by him and Xxxxxx cures such material breach within twenty-one
(21) days of the date he receives such notice, then the Company will continue
the Severance Benefits provided pursuant to paragraph 7(b) below; provided, that
Xxxxxx shall not be entitled to Severance Benefits for periods during which he
was in material breach of such covenants.
7. TERMINATION
a. This Agreement (other than as specifically stated herein),
the employment of Xxxxxx, and Xxxxxx' position as Executive Vice President of
the Company shall terminate upon the first to occur of:
(i) his death;
(ii) his "permanent disability," due to injury or sickness for a
continuous period of four (4) months, or a total of eight
months in a 12-month period (vacation time excluded), during
which time Xxxxxx is unable to attend to his ordinary and
regular duties;
(iii) a "Constructive Termination" by the Company, which, for
purposes of this Agreement, shall be deemed to have occurred
upon (A) the removal of
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Xxxxxx from his position as Executive Vice President of the
Company, (B) the material breach by the Company of this
Agreement, including any material diminution in the nature
or scope of the authorities, powers, functions, duties or
responsibilities of Xxxxxx as Executive Vice President and a
senior executive officer of the Company (or to the extent
that the Company becomes a division or subsidiary of another
entity, the authorities, powers, functions, duties or
responsibilities of an Executive Vice President or senior
executive officer of such division or subsidiary); provided
that no such breach shall be considered a Constructive
Termination unless Xxxxxx has provided the Company with
written notice of such breach and the Company has failed to
cure such breach within the thirty (30) day period following
his receipt of such notice;
(iv) the termination of this Agreement at any time without Cause
(as defined below) by the Company;
(v) subject to compliance with the notice provisions contained
in paragraph 1 of this Agreement, the non-renewal of this
Agreement by the Company and/or the Board of Directors;
(vi) the termination of this Agreement for "Cause", which, for
purposes of this Agreement, shall mean that (1) Xxxxxx has
been convicted of a felony or any serious crime involving
moral turpitude, or engaged in materially fraudulent or
materially dishonest actions in connection with the
performance of his duties hereunder, (2) Xxxxxx has
willfully and materially failed to perform his duties
hereunder, (3) Xxxxxx has breached the terms and provisions
of this Agreement in any material respect, or (4) Xxxxxx has
failed to comply in any material respect with the Company's
written policies of conduct of which he had actual notice,
including with respect to trading in securities; provided
that the Company shall not have any right to terminate this
Agreement for Cause pursuant to clauses (2), (3) or (4) of
this sub-paragraph (vi) as a result of a breach that can be
cured unless the Company has provided Xxxxxx with written
notice of such breach and Xxxxxx has failed to cure such
breach within the ten (10) day period following his receipt
of such notice; or
(vii) the termination of this Agreement by Xxxxxx, which shall
occur on not less than thirty (30) days prior written notice
from Xxxxxx.
b. In the event that this Agreement is terminated, other than
as a result of a Constructive Termination or by the Company without Cause, the
Company shall pay Xxxxxx his accrued but unpaid Base Salary and unreimbursed
business expenses and bonuses that have been earned and awarded but not yet paid
as of the date of his termination of employment and shall make no other payments
or provide any other benefits under this Agreement. In the event that this
Agreement is terminated by the Company without Cause pursuant to paragraph
7(a)(iv) or through a Constructive Termination pursuant to paragraph 7(a)(iii),
and subject to Xxxxxx'x execution of a mutual release reasonably acceptable to
the Company and Xxxxxx, the Company
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shall pay Xxxxxx his Base Salary through the date of termination, plus
unreimbursed business expenses and bonuses that have been earned and awarded but
not yet paid, as well as the following severance and noncompetition payments set
forth below (the "Severance Benefits"):
(i) the then-current Base Salary for a period of six months from
the date of termination;
(ii) any unvested stock options that have been granted to Xxxxxx
which are outstanding as of the date of such termination
shall be deemed to be fully vested as of that date;
(iii) the Company shall maintain in effect, or reimburse Xxxxxx
for the cost of maintaining, the medical and dental
insurance and disability and hospitalization plans of the
Company as well as any Company sponsored life insurance
policy in which Xxxxxx participates as of the date of such
termination for a period of one year from the date of
termination.
The Severance Benefits shall be payable in periodic installments in accordance
with the Company's standard payroll practices.
8. CHANGE OF CONTROL
a. In the event that a Change of Control (as defined below)
occurs during the term of this Agreement, any stock options granted to Xxxxxx
which are outstanding as of the date of that Change in Control shall be deemed
to be fully vested as of that date. For purposes of this Agreement, "Change of
Control" shall be deemed to occur upon:
(1) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or
more (on a fully diluted basis) of either (A) the then outstanding shares of
common stock of the Company, taking into account as outstanding for this purpose
such common stock issuable upon the exercise of options or warrants, the
conversion of convertible stock or debt, and the exercise of any similar right
to acquire such common stock (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
Agreement, the following acquisitions shall not constitute a Change of Control:
(I) any acquisition by the Company or any "Affiliate" (as defined below), (II)
any acquisition by any employee benefit plan sponsored or maintained by the
Company or any Affiliate, (III) any acquisition by Quantum Industrial Partners
LDC, Xxxxx Fund Management LLC and/or SFM Domestic Investments LLC and/or any of
their affiliates (collectively, "Xxxxx"), or (IV) any acquisition which complies
with clauses (A), (B) and (C) of sub-paragraph (a)(5) hereof;
(2) Individuals who, on the date hereof, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the date hereof, whose election or
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nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as a nominee
for director, without written objection to such nomination) shall be an
Incumbent Director; provided, however, that no individual initially elected or
nominated as a director of the Company as a result of an actual or threatened
election contest with respect to directors or as a result of any other actual or
threatened solicitation of proxies or consents by or on behalf of any person
other than the Board shall be deemed to be an Incumbent Director;
(3) the dissolution or liquidation of the Company;
(4) the sale of all or substantially all of the business or
assets of the Company; or
(5) the consummation of a merger, consolidation, statutory
share exchange or similar form of corporate transaction involving the Company
that requires the approval of the Company's stockholders, whether for such
transaction or the issuance of securities in the transaction (a "Business
Combination"), unless immediately following such Business Combination: (A) more
than 50% of the total voting power of (x) the corporation resulting from such
Business Combination (the "Surviving Corporation"), or (y) if applicable, the
ultimate parent corporation that directly or indirectly has beneficial ownership
of sufficient voting securities eligible to elect a majority of the directors of
the Surviving Corporation (the "Parent Corporation"), is represented by the
Outstanding Company Voting Securities that were outstanding immediately prior to
such Business Combination (or, if applicable, is represented by shares into
which the Outstanding Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of the Company's Voting
Securities among the holders thereof immediately prior to the Business
Combination, (B) no Person (other than Xxxxx or any employee benefit plan
sponsored or maintained by the Surviving Corporation or the Parent Corporation),
is or becomes the beneficial owner, directly or indirectly, of 30% or more of
the total voting power of the outstanding voting securities eligible to elect
directors of the Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) and (C) at least a majority of the members of the board
of directors of the Parent Corporation (or, if there is no Parent Corporation,
the Surviving Corporation) following the consummation of the Business
Combination were Board members at the time of the Board's approval of the
execution of the initial agreement providing for such Business Combination.
b. For purposes of this paragraph 8, the term "Affiliate" shall
mean any entity that directly or indirectly is controlled by, controls or is
under common control with the Company.
c. Notwithstanding any provision of this Agreement to the
contrary, in the event of any of the following:
(1) the Company is merged or consolidated with another
corporation or entity and, in connection therewith, consideration is received by
stockholders of the Company in a form other than stock or other equity interests
of the surviving entity;
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(2) all or substantially all of the assets of the Company are
acquired by another person;
(3) the reorganization or liquidation of the Company; or
(4) the Company shall enter into a written agreement to
undergo an event described in clauses (1), (2) or (3) above:
then the Compensation Committee may, in its sole and reasonable discretion and
upon at least 10 business days advance notice to Xxxxxx, cancel any outstanding
stock options and pay to Xxxxxx, in cash or stock, or any combination thereof,
the value of such stock options based upon the price per share of stock received
or to be received by other stockholders of the Company in the event. The terms
of this sub-paragraph 8(c) may be varied by the Compensation Committee in any
particular stock option award agreement to which Xxxxxx is a party.
d. Reduction of Payments in Certain Cases.
(i) For purposes of this paragraph 8(d) (A) a "Payment"
shall mean any payment or distribution in the nature of
compensation to or for the benefit of Xxxxxx, whether
paid or payable pursuant to this Agreement or otherwise;
(B) "Agreement Payment" shall mean a Payment paid or
payable pursuant to this Agreement (disregarding this
paragraph); (C) "Net After Tax Receipt" shall mean the
"Present Value" (as defined below) of a Payment net all
of federal, state and local taxes imposed on Xxxxxx with
respect thereto (including without limitation under
Section 4999 of the Internal Revenue Code of 1986, as
amended ("Code")), determined by applying the highest
marginal rates of such taxes that applied to Xxxxxx'x
taxable income for the immediately preceding taxable
year, or such other rate(s) as Xxxxxx shall in his sole
discretion certify as likely to apply to Xxxxxx in the
relevant tax year(s); (D) "Present Value" shall mean
such value determined in accordance with Section
280G(d)(4) of the Code; and (E) "Reduced Amount" shall
mean the smallest aggregate amount of Agreement Payments
which (I) is less than the sum of all Agreement Payments
and (II) results in aggregate Net After Tax Receipts
which are equal to or greater than the Net After Tax
Receipts which would result if the aggregate Agreement
Payments were any other amount less than the sum of all
Agreement Payments.
(ii) Anything in this Agreement to the contrary
notwithstanding, in the event that a nationally
recognized certified public accounting firm designated
by the Company (the "Accounting Firm") shall determine
that receipt of all Payments would subject Xxxxxx to tax
under Section 4999 of the Code, it shall determine
whether some amount of Agreement Payments would meet the
definition of a "Reduced Amount." If said firm
reasonably determines that there is a Reduced Amount,
the aggregate Agreement Payments shall be reduced to
such Reduced Amount.
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(iii) If the Accounting Firm reasonably determines that
aggregate Agreement Payments should be reduced to the
Reduced Amount, the Company shall promptly give Xxxxxx
notice to that effect and a copy of the detailed
calculation thereof, and Xxxxxx may then elect, in his
sole discretion, which and how much of the Agreement
Payments shall be eliminated or reduced (as long as
after such election the present value of the aggregate
Agreement Payments equals the Reduced Amount), and shall
advise the Company in writing of his or her election
within ten business days of his receipt of notice. If no
such election is made by Xxxxxx within such ten-day
period, the Company may elect which of such Agreement
Payments shall be eliminated or reduced (as long as
after such election the present value of the aggregate
Agreement Payments equals the Reduced Amount) and shall
notify Xxxxxx promptly of such election. All reasonable
determinations made by the Accounting Firm under this
paragraph 8(d) shall be binding upon the Company and
Xxxxxx. As promptly as practicable following such
determination, the Company shall pay to or distribute
for the benefit of Xxxxxx such Agreement Payments as are
then due to Xxxxxx under this Agreement and shall
promptly pay to or distribute for the benefit of Xxxxxx
in the future such Agreement Payments as become due to
Xxxxxx under this Agreement.
(iv) While it is the intention of the Company and Xxxxxx to
reduce the amounts payable or distributable to Xxxxxx
hereunder only if the aggregate Net After Tax Receipts
to Xxxxxx would thereby be increased, as a result of the
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that amounts
will have been paid or distributed by the Company to or
for the benefit of Xxxxxx pursuant to this Agreement
which should not have been so paid or distributed
("Overpayment") or that additional amounts which will
have not been paid or distributed by the Company to or
for the benefit of Xxxxxx pursuant to this Agreement
could have been so paid or distributed ("Underpayment"),
in each case, consistent with the calculation of the
Reduced Amount hereunder. In the event that the
Accounting Firm, based upon the assertion of a
deficiency by the Internal Revenue Service against
either the Company or Xxxxxx which the Accounting Firm
reasonably believes has a high probability of success
determines that an Overpayment has been made, then
Xxxxxx shall repay to the any such Overpayment to the
Company within ten business days of his receipt of
notice of such Overpayment. In the event that the
Accounting Firm, based upon controlling precedent or
substantial authority, reasonably determines that an
Underpayment has occurred, any such underpayment shall
be promptly paid by the Company to or for the benefit of
Xxxxxx.
(v) All fees and expenses of the Accounting Firm in
implementing the provisions of this paragraph 8(d) shall
be borne by the Company.
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9. CONFIDENTIALITY; INVENTIONS
x. Xxxxxx recognizes that the services to be performed by him
are special, unique and extraordinary in that, by reason of his employment under
this Agreement, he may acquire or has acquired confidential information and
trade secrets concerning the operation of the Company, its predecessors, and/or
its affiliates, the use or disclosure of which could cause the Company, or its
affiliates substantial loss and damages which could not be readily calculated
and for which no remedy at law would be adequate. Accordingly, Xxxxxx covenants
and agrees with the Company that he will not, directly or indirectly, at any
time during the term of this Agreement or thereafter, except in the performance
of his obligations to the Company or with the prior written consent of the Board
of Directors or as otherwise required by court order, subpoena or other
government process, directly or indirectly, disclose any secret or confidential
information that he may learn or has learned by reason of his association with
the Company. If Xxxxxx shall be required to make such disclosure pursuant to
court order, subpoena or other government process, he shall notify the Company
of the same, by personal delivery or electronic means, confirmed by mail, within
twenty-four (24) hours of learning of such court order, subpoena or other
government process and, at the Company's expense, shall (i) take all reasonably
necessary and lawful steps required by the Company to defend against the
enforcement of such subpoena, court order or government process, and (ii) permit
the Company to intervene and participate with counsel of its choice in any
proceeding relating to the enforcement thereof. The term "confidential
information" includes, without limitation, information not in the public domain
and not previously disclosed to the public or to the trade by the Company's
management with respect to the Company's or its affiliates' facilities and
methods, studies, surveys, analyses, sketches, drawings, notes, records,
software, computer-stored or disk-stored information, processes, techniques,
research data, marketing and sales information, personnel data, trade secrets
and other intellectual property, designs, design concepts, manuals, confidential
reports, supplier names and pricing, customer names and prices paid, financial
information or business plans.
x. Xxxxxx confirms that all confidential information is and
shall remain the exclusive property of the Company. All memoranda, notes,
reports, software, sketches, photographs, drawings, plans, business records,
papers or other documents or computer-stored or disk-stored information kept or
made by Xxxxxx relating to the business of the Company shall be and will remain
the sole and exclusive property of the Company and shall be promptly delivered
and returned to the Company immediately upon the termination of his employment
with the Company.
x. Xxxxxx shall make full and prompt disclosure to the Company
of all inventions, improvements, ideas, concepts, discoveries, methods,
developments, software and works of authorship, whether or not copyrightable,
trademarkable or licensable, which are created, made, conceived or reduced to
practice by Xxxxxx for the Company during his services with the Company, whether
or not during normal working hours or on the premises of the Company (all of
which are collectively referred to in this Agreement as "Developments"). All
Developments shall be the sole property of the Company, and Xxxxxx hereby
assigns to the Company, without further compensation, all of his rights, title
and interests in and to the
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Developments and any and all related patents, patent applications, copyrights,
copyright applications, trademarks and tradenames in the United States and
elsewhere.
x. Xxxxxx shall assist the Company in obtaining, maintaining and
enforcing patent, copyright and other forms of legal protection for intellectual
property in any country. Upon the request of the Company, Xxxxxx shall sign all
applications, assignments, instruments and papers and perform all acts necessary
or desired by the Company in order to protect its rights and interests in any
Developments.
x. Xxxxxx agrees that any breach of this paragraph 9 will cause
irreparable damage to the Company and that, in the event of such breach, the
Company will have, in addition to any and all remedies of law, including rights
which the Company may have to damages, the right to equitable relief including,
as appropriate, all injunctive relief or specific performance or other equitable
relief. Xxxxxx understands and agrees that the rights and obligations set forth
in paragraph 9 shall survive the termination or expiration of this Agreement.
10. REPRESENTATIONS AND WARRANTIES
x. Xxxxxx represents and warrants to the Company that he was
advised to consult with an attorney of Xxxxxx' own choosing concerning this
Agreement and that Xxxxxx has done so.
x. Xxxxxx represents and warrants to the Company that the
execution, delivery and performance of this Agreement by Xxxxxx complies with
all laws applicable to Xxxxxx or to which his properties are subject and does
not violate, breach or conflict with any agreement by which he or his assets are
bound or affected.
11. GOVERNING LAW; ARBITRATION
This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of New
York, without giving effect to its conflict of law provisions. Except as set
forth below, any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be resolved by arbitration in accordance
with the rules of the American Arbitration Association (the "AAA") then
pertaining in the City of New York, New York, by a single arbitrator to be
mutual agreed upon by the parties or, if they are unable to so agree, by an
arbitrator selected by the AAA. The parties shall be entitled to a minimal level
of discovery as determined by the arbitrator. The arbitrator shall be empowered
to award attorney's fees and costs to Xxxxxx (but not the Company) if he or she
deems such award appropriate. Judgment upon any award rendered by the arbitrator
may be entered in any court having jurisdiction thereof. Nothing contained in
this paragraph 11 or the remainder of this Agreement shall be construed so as to
deny the Company the right and power to seek and obtain injunctive relief in a
court of equity for any breach or threatened breach by Xxxxxx of the covenants
contained in paragraphs 6 and 9 of this Agreement.
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12. INDEMNIFICATION
a. The Company agrees that it shall to the fullest extent
permitted by law indemnify and hold Xxxxxx harmless and shall pay and reimburse
Xxxxxx for any loss, cost, damage, injury or other expense (including without
limitation reasonable attorneys' fees) which Xxxxxx incurs by reason of being or
having been an officer or director of the Company or by reason of the fact that
Xxxxxx is or was serving at the request of the Company as a director, officer,
employee, fiduciary or other representative of the Company. All indemnification
shall be paid by the Company in advance of the final disposition of the matter
(as incurred by Xxxxxx) provided that Xxxxxx executes and deliver to the Company
an undertaking to repay any amounts so advanced in the event that it shall be
determined that Xxxxxx is not entitled to indemnification hereunder. This
indemnification obligation is in addition to any other indemnification provision
contained in the Company's By-laws or pursuant to any other document, instrument
or agreement and shall survive the term of Xxxxxx' employment hereunder.
b. In the event that Xxxxxx asserts his right of indemnification
under paragraph 12(a) above, the Company shall have the right to select Xxxxxx'
counsel provided that there is no material conflict of interest between the
Company and Xxxxxx and provided such counsel is reasonably acceptable to Xxxxxx.
Notwithstanding the foregoing, the Company shall have the right to participate
in, or fully control, any proceeding, compromise, settlement, resolution or
other disposition of the claim or proceeding so long as Xxxxxx is provided with
a general release from the Company and the claimant in form and substance
reasonably satisfactory to Xxxxxx and no restrictions are imposed on Xxxxxx as a
result of the settlement.
13. ENTIRE AGREEMENT
This Agreement together with any stock option agreements to which
Xxxxxx and the Company are a party contain all of the understandings between
Xxxxxx and the Company pertaining to Xxxxxx' employment with the Company and
supersedes all undertakings and agreements, whether oral or in writing,
previously entered into between them.
14. AMENDMENT OR MODIFICATION; WAIVER
No provision of this Agreement may be amended or modified unless such
amendment or modification is agreed to in writing, signed by Xxxxxx and by an
officer of the Company duly authorized to do so. Except as otherwise
specifically provided in this Agreement, no waiver by either party of any breach
by the other party of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or any prior or subsequent time.
15. NOTICES
Any notice to be given hereunder shall be in writing and delivered
personally or sent by certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently designate by like notice:
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If to the Company, to:
Bluefly, Inc.
00 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: E. Xxxxxxx Xxxxx
With a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx|
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxxx X. Xxxxx, Esq.
If to Xxxxxx, to:
Xxxxxxxx Xxxxxx
Address on file at Company.
16. SEVERABILITY
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, the remaining
provisions or portions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
17. TITLES
Titles of the paragraphs of this Agreement are intended solely for
convenience of reference and no provision of this Agreement is to be construed
by reference to the title of any paragraph.
18. DUTY TO MITIGATE
Xxxxxx shall not be obligated to seek other employment by way of
mitigation of the amounts payable to him under any provision of this Agreement.
19. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
BLUEFLY, INC.
By: /S/ E. Xxxxxxx Xxxxx
--------------------
E. Xxxxxxx Xxxxx
Chief Executive Officer
/S/ Xxxxxxxx Xxxxxx
--------------------
Xxxxxxxx Xxxxxx
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