EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into as of September 19, 2005, by
and between Bluefly, Inc., a Delaware corporation (the "Company"), and Xxxxxxxx
Xxxxxx ("Xxxxxx").
RECITALS
1. The Company desires to retain the services of Xxxxxx as Chief
Marketing Officer of the Company in accordance with the terms and conditions of
this Agreement.
2. Xxxxxx 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 Xxxxxx agree as
follows:
1. TERM
The Company hereby agrees to employ Xxxxxx as Chief Marketing Officer of
the Company, and Xxxxxx hereby agrees to serve in such capacity, for a term
commencing on September 19, 2005 (the "Starting Date") and ending on September
30, 2008 (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, Xxxxxx 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.
The principal location of Xxxxxx'x employment shall be in the New York
City vicinity (i.e., within a 20 mile radius), although Xxxxxx understands and
agrees that he will be required to travel from time to time for business
reasons. Xxxxxx shall diligently and faithfully perform his obligations under
the Agreement and shall devote his full professional and business time to the
performance of his duties as Chief Marketing Officer of the Company during the
Employment Term. Xxxxxx shall not, directly or indirectly, render business
services to any other person or entity, without the consent of the Company's
Chief Executive Officer.
3. BASE SALARY
For services rendered by Xxxxxx to the Company during the
Employment Term, the Company shall pay him a base salary of $350,000 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 Xxxxxx'x performance during such year.
4. BONUS/OPTIONS
a. During the Employment Term, Xxxxxx 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, so long as Xxxxxx remains employed by the Company at the time that bonuses
are awarded for the year ended December 31, 2006, his bonus for such year 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 Xxxxxx 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 2005 Stock
Incentive 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 Xxxxxx'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 Xxxxxx'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
immediately vested. The Term of each Option shall be 10 years from the date of
grant. In the event of the termination of Xxxxxx'x employment for any reason, he
shall have 90 days within which to exercise any vested Options and any unvested
Options shall be forfeited. During the Term of this Agreement, Xxxxxx 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:
2
(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 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
3
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, Xxxxxx shall be
entitled to reimbursement of all reasonable and actual out-of-pocket expenses
incurred by him in the performance of him 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, Xxxxxx
shall be entitled to reasonable vacation with full pay in accordance with they
Company's then-current vacation policies; provided, however, that Xxxxxx shall
schedule such vacations at times convenient to the Company.
x. Xxxxxx shall be entitled to participate in all health
insurance (National Oxford), 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 employees of the
Company, to the extent permitted by law. In addition, Xxxxxx shall be a covered
officer under the Company's now existing and any future Directors and Officers
liability policy.
d. In the event that Xxxxxx has relocated himself and his
family to the New York City vicinity on or before December 31, 2007 the Company
will promptly pay Xxxxxx $50,000 in cash. In the event that receives a
relocation payment and Xxxxxx'x employment with the Company terminates prior to
June 30, 2008 other than pursuant to paragraph 7(a)(i), 7(a)(ii), 7(a)(iii) or
7(a)(iv), Xxxxxx shall within 30 days of his termination date pay the Company
$50,000. The parties agree that the foregoing is not intended as a liquidated
damages clause and shall not limit any of the other rights or remedies of the
parties.
4
e. During the term of this Agreement, for the months from
September 2005 up to August 2006, the Company will pay for appropriate monthly
temporary housing (estimated to be $3,000 per month), as reasonably determined
by the Company, and two monthly round-trip coach flights from New York to
Chicago. It is essential that Xxxxxx submit receipts directly to the Company on
a monthly basis to be reimbursed.
6. NON-COMPETITION; NON-SOLICITATION
a. In consideration of the offer of employment, severance
benefits and Options to be granted to Xxxxxx hereunder, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, during the Non-Competition Term, 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; (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 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 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 him
beneficially owning, at any time, more than three percent (3%) of the
publicly-traded equity securities of such Competitive Business. 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 two (2) year
anniversary of the end of the Employment Term.
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
5
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.
7. TERMINATION
a. This Agreement, the employment of Xxxxxx, and Matson's
position as Chief Marketing Officer 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 twenty-four month period (vacation
time excluded), during which time Xxxxxx is unable in
substantial part to attend to his ordinary and regular
duties, provided that the Company shall give Xxxxxx
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
Xxxxxx without his consent from his position as Chief
Marketing Officer of the Company, or (B) the material
breach by the Company of this Agreement; provided that
no such breach shall be considered a Constructive
Termination unless Xxxxxx 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) 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, or (2)
Xxxxxx has willfully and materially failed to perform
his duties hereunder, or (3) Xxxxxx has willfully or
negligently 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 policies of conduct that have been
communicated to her, including with respect to trading
in securities,
6
provided that the Company shall provide Xxxxxx 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 Xxxxxx, which shall
occur on not less than 30 days prior written notice from
Xxxxxx.
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), the Company shall pay Xxxxxx his 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), the Company shall
pay Xxxxxx, 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 his continued
performance of his 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 Xxxxxx is terminated 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 Xxxxxx 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, and shall be conditioned upon Xxxxxx executing a full
release of any claims against the Company, in a form reasonably satisfactory to
the Company.
8. CONFIDENTIALITY
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 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
7
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 Xxxxxx), 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. 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 all such materials containing
confidential information 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 while performing his 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 Xxxxxx hereby assigns to the
Company, without further compensation, all of his 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. 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 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
8
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 8 shall survive the
termination or expiration of this Agreement.
9. REPRESENTATIONS AND WARRANTIES
x. Xxxxxx represents and warrants to the Company that he
was advised to consult with an attorney of Xxxxxx'x own choosing concerning this
Agreement.
x. Xxxxxx represents and warrants to the Company that, to
the best of his knowledge, 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.
10. INDEMNIFICATION
The Company shall indemnify and hold Xxxxxx 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 Xxxxxx as a result
of or arising out of any acts or omission by Xxxxxx in his 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 he 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 8 of this Agreement.
9
12. ENTIRE AGREEMENT
This Agreement contains all of the understandings between Xxxxxx and the
Company pertaining to Xxxxxx'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 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.
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 Xxxxxx, 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 Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
10
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.
11
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
By: /s/ Xxxxxxxx Xxxxxx
----------------------------------------
Xxxxxxxx Xxxxxx
12
