EXHIBIT 99.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into as of October 14, 2004, by and
between Bluefly, Inc., a Delaware corporation (the "Company"), and Xxxxxx
Xxxxxxx ("Xxxxxxx").
RECITALS
1. The Company desires to retain the services of Xxxxxxx as Chief
Marketing Officer of the Company in accordance with the terms and conditions of
this Agreement.
2. Xxxxxxx will serve the Company as Chief Marketing Officer 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 Xxxxxxx agree as
follows:
1. TERM
The Company hereby agrees to employ Xxxxxxx as Chief Marketing Officer
of the Company, and Xxxxxxx hereby agrees to serve in such capacity, for a term
commencing on October 25, 2004 (the "Starting Date") and ending on September 30,
2007 (as the same may be earlier terminated pursuant to the terms of this
Agreement, the "Employment Term"), upon the terms and subject to the conditions
contained in this Agreement.
2. DUTIES
During the Employment Term, Xxxxxxx shall serve as Chief Marketing
Officer of the Company, and shall be responsible for the duties attendant to
such office and such other managerial duties and responsibilities with the
Company consistent with such office as may be reasonably assigned from time to
time by the Chief Executive Officer and/or President of the Company. During the
Employment Term, Xxxxxxx shall report to the Chief Executive Officer and/or
President of the Company.
The principal location of Xxxxxxx'x employment shall be in the New York
City vicinity (i.e., within a 20 mile radius), although Xxxxxxx understands and
agrees that she will be required to travel from time to time for business
reasons. Xxxxxxx shall diligently and faithfully perform her obligations under
the Agreement and shall devote her (except as set forth below) full professional
and business time to the performance of her duties as Chief Marketing Officer of
the Company during the Employment Term. Except as set forth below, Xxxxxxx shall
not, directly or
indirectly, render business services to any other person or entity, without the
consent of the Company's Chief Executive Officer. Notwithstanding the foregoing,
Xxxxxxx shall be entitled to spend a portion of her professional and business
time in performing marketing consulting services for clients of her existing
consulting business (the "Consulting Business"), provided that (a) the
performance of such services does not in any way interfere with the performance
of her duties hereunder and (b) Xxxxxxx shall obtain the prior written approval
of the Company's Chief Executive Officer prior to commencing the performance of
services for any particular client of the Consulting Business.
3. BASE SALARY
For services rendered by Xxxxxxx to the Company during the Employment
Term, the Company shall pay her a base salary of $300,000 per year, payable in
accordance with the standard payroll practices of the Company, subject to annual
increases in the sole discretion of the Chief Executive Officer and the
Company's Board of Directors, taking into account the financial and operating
performance of the Company's business and divisions and a qualitative assessment
of Xxxxxxx'x performance during such year.
4. BONUS/OPTIONS
a. On the Starting Date, Xxxxxxx shall receive a signing
bonus of $25,000. During the Employment Term, Xxxxxxx shall be eligible to
receive a bonus set by the Company's Board of Directors in its sole discretion
and based on such factors as the Board of Directors deems appropriate, provided
that Xxxxxxx'x bonus for the year ended December 31, 2005 shall be a minimum of
$50,000. All bonuses shall be paid in accordance with the Company's standard
payroll practices, net of any applicable withholding.
b. The Company hereby agrees to cause, on the Starting
Date, the issuance to Xxxxxxx of options ("Options") to purchase 400,000 shares
of the Company's common stock, $.01 par value ("Common Stock"). The Options
shall be issued pursuant to, and in accordance with, the Company's 1997 Stock
Option Plan (the "Plan"). The Options shall be Incentive Stock Options (as
defined in the Plan) to the extent allowed by law, and shall be exercisable at a
price equal to the Fair Market Value (as defined in the Plan) of the Common
Stock on the date hereof. The Options shall vest over a thirty-six (36) month
period as follows: (i) 16.667% of the Options shall vest on the six month
anniversary of the date of grant and (ii) 2.778% of the Options shall vest each
month thereafter until all such Options shall have vested; provided, that, (a)
in the event that Xxxxxxx'x employment with the Company is terminated as a
result of a Change of Control (as hereinafter defined) at any time on or prior
to the first anniversary of the Starting Date, fifty percent (50%) of any
unvested options shall automatically vest as of the date of such termination;
and (b) in the event that Xxxxxxx'x employment with the Company is terminated
without cause or as a result of a Constructive Termination at any time during
the Employment Term after the first anniversary of the Starting Date, all such
options shall be
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immediately vested. The Term of each Option shall be 10 years from the date of
grant. In the event of the termination of Xxxxxxx'x employment for any reason,
she shall have 90 days within which to exercise any vested Options and any
unvested Options shall be forfeited. During the Term of this Agreement, Xxxxxxx
shall be eligible to participate in the Company's future stock option grants as
determined appropriate by the Committee in its sole discretion.
c. 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 more than 50% (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
(c)(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 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
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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.
For purposes of Agreement, the term "Affiliate" shall mean any
entity that directly or indirectly is controlled by, controls or is under common
control with the Company.
5. EXPENSE REIMBURSEMENT AND PERQUISITES
a. During the Term of this Agreement, Xxxxxxx shall be
entitled to reimbursement of all reasonable and actual out-of-pocket expenses
incurred by her in the performance of her services to the Company consistent
with corporate policies, if any, provided that the expenses are properly
accounted for.
b. During each calendar year of the Employment Term,
Xxxxxxx shall be entitled to reasonable vacation with full pay in accordance
with they Company's then-current vacation policies; provided, however, that
Xxxxxxx shall schedule such vacations at times convenient to the Company.
x. Xxxxxxx shall be entitled to participate in all health
insurance, dental insurance, long-term disability insurance and other employee
benefit plans instituted by the Company from time to time on the same terms and
conditions as other similarly situated
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employees of the Company, to the extent permitted by law. In addition, Xxxxxxx
shall be a covered officer under the Company's now existing and any future
Directors and Officers liability policy.
6. NON-COMPETITION; NON-SOLICITATION
a. In consideration of the offer of employment, severance
benefits and Options to be granted to Xxxxxxx hereunder, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, during the Non-Competition Term, Xxxxxxx 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; (ii) engage in any Competitive Business for her 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
Xxxxxxx 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 any person, corporation, partnership, firm or other entity which sells or
has plans to sell ten (10) or more brands of luxury or high-end designer apparel
and/or fashion accessories at prices that are consistently discounted to
manufacturer's suggested retail prices. However, nothing in this Agreement shall
preclude: (a) Xxxxxxx from investing her 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 her
beneficially owning, at any time, more than three percent (3%) of the
publicly-traded equity securities of such Competitive Business; or (b) Xxxxxxx'x
husband (whether in his name, her name or through an entity controlled by either
of them) from making non-controlling investments in Competitive Businesses. For
purposes of this agreement, the "Non-Competition Term" shall mean a period
beginning upon the commencement of the Employment Term and ending on the one (1)
year anniversary of the end of the Employment Term; provided that, in the event
that the Employment Term is less than one (1) year, the duration of time by
which the Non-Competition Term extends beyond the Employment Term shall not
exceed the total number of days in the Employment Term.
x. Xxxxxxx 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. Xxxxxxx agrees that
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any breach of the covenants contained in this paragraph 6 would irreparably
injure the Company. Accordingly, Xxxxxxx agrees that the Company, in addition to
pursuing any other remedies it may have in law or in equity, may obtain an
injunction against Xxxxxxx from any court having jurisdiction over the matter,
restraining any further violation of this paragraph 6.
7. TERMINATION
a. This Agreement, the employment of Xxxxxxx, and Xxxxxxx'x
position as Chief Marketing Officer of the Company shall terminate upon the
first to occur of:
(i) her death;
(ii) her "permanent disability," due to injury or sickness
for a continuous period of four (4) months, or a total
of eight months in a twenty-four month period (vacation
time excluded), during which time Xxxxxxx is unable in
substantial part to attend to her ordinary and regular
duties, provided that the Company shall give Xxxxxxx
thirty (30) days' written notice prior to any such
termination;
(iii) a "Constructive Termination" by the Company during the
Employment Term, which, for purposes of this Agreement,
shall be deemed to have occurred upon (A) the removal of
Xxxxxxx without her consent from her position as, or a
material diminution of her duties as, Chief Marketing
Officer of the Company, or (B) the material breach by
the Company of this Agreement (including, without
limitation, a change in reporting structure that is not
consistent with Section 2 of this Agreement); provided
that no such breach shall be considered a Constructive
Termination unless Xxxxxxx has provided the Company with
at least thirty (30) days' prior written notice of such
breach and the Company has failed to cure such breach
within such thirty (30) day period;
(iv) the termination of this Agreement at any time without
cause by the Company;
(v) the termination of this Agreement for cause, which, for
purposes of this Agreement, shall mean that (1) Xxxxxxx
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 her duties hereunder, or (2)
Xxxxxxx has willfully and materially failed to perform
her duties hereunder, or (3) Xxxxxxx has willfully or
negligently breached the terms and provisions of this
Agreement in any material respect, or (4) Xxxxxxx has
failed to comply in
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any material respect with the Company's policies of
conduct that have been communicated to her, including
with respect to trading in securities, provided that the
Company shall provide Xxxxxxx with at least five (5)
business days' prior written notice of any such failure
to comply and an opportunity to cure such failure, to
the extent curable; or
(vi) the termination of this Agreement by Xxxxxxx, which
shall occur on not less than 60 days prior written
notice from Xxxxxxx.
b. In the event that this Agreement is terminated during
the Employment Term pursuant to paragraphs 7(a)(i), 7(a)(ii), 7(a)(v) or
7(a)(vi) (or pursuant to paragraphs 7(a)(iii) or 7(a)(iv) during the first six
months of the Employment Term), the Company shall pay Xxxxxxx her base salary
only through the date of termination. In the event that this Agreement is
terminated during the Employment Term pursuant to paragraphs 7(a)(iii) or
7(a)(iv) at any time after the first six months of the Employment Term, the
Company shall pay Xxxxxxx, in lieu of all salary, compensation payments and
perquisites set forth in paragraphs 3, 4 and 5 (including bonus payments and
unvested option grants, but excluding vested option grants) and contingent upon
her continued performance of her obligations under Section 6, severance payments
(the "Severance Payments") as follows:
(i) the then-current base salary for a period of ninety (90)
days, if Xxxxxxx is terminated after the six month
anniversary of her employment with the Company and prior
to the end of the first year of the Employment Term; or
(ii) the then-current base salary for a period of one-hundred
eighty (180) days, if Xxxxxxx is terminated at any time
after the end of the first year of the Employment Term
and prior to the end of the Employment Term.
The Severance Payments shall be payable in periodic installments in accordance
with the Company's standard payroll practices and will be subject to any
applicable withholding.
8. CONFIDENTIALITY
x. Xxxxxxx recognizes that the services to be performed by
her are special, unique and extraordinary in that, by reason of her employment
under this Agreement, she 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,
Xxxxxxx covenants and agrees with the Company that she will not at any time
during the Term of this Agreement or thereafter, except in the performance of
her 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
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process, directly or indirectly, disclose any secret or confidential information
that she may learn or has learned by reason of her association with the Company.
If Xxxxxxx shall be required to make such disclosure pursuant to court order,
subpoena or other government process, she 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 (such expenses to be advanced by the Company as
reasonably required by Xxxxxxx), shall (i) take all necessary and lawful steps
reasonably 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, trade secrets and
other intellectual property, designs, manuals, confidential reports, supplier
names and pricing, customer names and prices paid, financial information or
business plans.
x. Xxxxxxx 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 Xxxxxxx relating to the business of the Company shall be and will remain
the sole and exclusive property of the Company and all such materials containing
confidential information shall be promptly delivered and returned to the Company
immediately upon the termination of her employment with the Company.
x. Xxxxxxx 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 Xxxxxxx while performing her services hereunder to the Company,
whether or not during normal working hours or on the premises of the Company and
which relate in any manner to the business 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 Xxxxxxx hereby assigns to the
Company, without further compensation, all of her rights, title and interests in
and to the Developments and any and all related patents, patent applications,
copyrights, copyright applications, trademarks and trade names in the United
States and elsewhere.
x. Xxxxxxx 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,
Xxxxxxx 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.
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x. Xxxxxxx agrees that any breach of this paragraph 8 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. Xxxxxxx understands and agrees that the rights and
obligations set forth in paragraph 8 shall survive the termination or expiration
of this Agreement.
9. REPRESENTATIONS AND WARRANTIES
x. Xxxxxxx represents and warrants to the Company that she
was advised to consult with an attorney of Xxxxxxx'x own choosing concerning
this Agreement.
x. Xxxxxxx represents and warrants to the Company that, to
the best of her knowledge, the execution, delivery and performance of this
Agreement by Xxxxxxx complies with all laws applicable to Xxxxxxx or to which
her properties are subject and does not violate, breach or conflict with any
agreement by which she or her assets are bound or affected.
10. INDEMNIFICATION
The Company shall indemnify and hold Xxxxxxx harmless to the fullest
extent permitted by law from and against any and all claims, losses,
liabilities, damages and expenses including, but not limited to, reasonable
attorneys' fees incurred by, imposed upon or asserted against Xxxxxxx as a
result of or arising out of any acts or omission by Xxxxxxx in her capacity as
an officer, director, employee or consultant of the Company.
11. GOVERNING LAW; ARBITRATION
This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the internal 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 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 Xxxxxxx of the covenants contained in
paragraphs 6 and 8 of this Agreement.
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12. ENTIRE AGREEMENT
This Agreement contains all of the understandings between Xxxxxxx and
the Company pertaining to Xxxxxxx'x employment with the Company, and it
supersedes all undertakings and agreements, whether oral or in writing,
previously entered into between them.
13. 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 Xxxxxxx 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.
14. NOTICES
Any notice to be given hereunder shall be in writing and delivered
personally or sent by overnight delivery or 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:
If to the Company, to:
Bluefly, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Chief Executive Officer
If to Xxxxxxx, to:
at the address then on file in the Company's payroll system
Any such notice shall be deemed given upon receipt.
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
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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 paragraphs.
18. 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/ Xxxxxxx Xxxxxx-Xxxxxx
--------------------------------------
Xxxxxxx Xxxxxx-Xxxxxx
Chief Executive Officer and President
EMPLOYEE
/s/ Xxxxxx Xxxxxxx
--------------------------------------
Xxxxxx Xxxxxxx
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