Exhibit (d)(7)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into as of July 1, 2006, by and
between Bluefly, Inc., a Delaware corporation (the "Company"), and Xxxxxxx
Xxxxxx-Xxxxxx ("Xxxxxx").
RECITALS
WHEREAS, the Company desires to provide for the continued retention of
the services of Payner as the Chief Executive Officer and a member of the Board
of Directors of the Company in accordance with the terms and conditions of this
Agreement.
WHEREAS, Payner desires to serve the Company as its Chief Executive
Officer and a member of the Board of Directors 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 Payner agree as
follows:
1. TERM
The Company hereby agrees to employ Payner as the Chief Executive
Officer of the Company, and Payner hereby agrees to serve in such capacity, for
a term commencing on the date hereof and ending July 1, 2009, upon the terms and
subject to the conditions contained in this Agreement; provided, however, that
if the Company does not provide Payner 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, Payner shall serve as the Chief
Executive Officer of the Company reporting directly to the Board of Directors of
the Company, and she shall perform such duties, and have such powers, authority,
functions, duties and responsibilities for the Company as are reasonably
assigned to her by 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, Payner shall report directly to, and
have such powers, authority, functions, duties and responsibilities as are
reasonably assigned to her by, the Chief Executive Officer or comparable officer
of such other entity. It is understood that the duties of Payner, should the
Company become a division or subsidiary of another entity, shall be generally
consistent with her duties prior to such event, but shall take into account the
changes associated with running a division or subsidiary, rather than an entire
entity.
The Company will use best efforts to nominate Payner to the Board and
recommend that the Company's stockholders vote in favor of the election of
Payner to the Board at the next meeting of stockholders and every annual meeting
thereafter during the term of this Agreement.
Payner will accept any such nomination and continue to serve as a member of the
Board if and when elected.
The principal location of Payner's employment shall be at the Company's
principal office which shall be located in the New York City vicinity (i.e.
within a twenty (20) mile radius of Manhattan), although Payner understands and
agrees that she will be required to travel from time to time for business
reasons. Payner shall devote substantially all of her business time to the
performance of her duties as the Chief Executive Officer of the Company during
the term of this Agreement. Payner shall not, directly or indirectly, render
professional services to any other person or entity, without the consent of the
Company's Board of Directors; provided, however, that nothing contained herein
shall prevent Payner from rendering any service to any charitable organization
or family business so long as it does not interfere unreasonably with her duties
and obligations hereunder.
3. COMPENSATION
For services rendered by Payner to the Company during the term of this
Agreement, the Company shall pay her a minimum base salary of five hundred
thousand dollars ($500,000) 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. INCENTIVE COMPENSATION/EXCHANGE OF OPTIONS FOR RESTRICTED
STOCK AND DEFERRED STOCK UNITS; NEW GRANT OF DEFERRED STOCK
UNITS
a. Incentive Compensation. For each fiscal year during
the Term, Payner shall be eligible to receive a performance bonus as follows:
provided that Payner remains employed with the Company through the last day of
such fiscal year, Payner will be eligible to earn a performance bonus on the
basis of the achievement of certain targets to be set for each fiscal year by
the Compensation Committee of the Board of Directors in its sole discretion.
b. Exchange of Certain Outstanding Options Held by
Payner for Restricted Stock and Deferred Stock Units.
(i) Options Exchanged for Restricted Stock. Payner hereby forfeits
all of her rights to the options listed on Exhibit A hereto to purchase shares
of common stock of the Company ("Shares"), and in consideration for such
forfeiture the Company is simultaneously with the execution of this Agreement,
(x) granting to Payner a Restricted Stock Award under the Company's 2005 Stock
Incentive Plan (the "Plan") for 591,256 Shares in the form attached hereto as
Exhibit B and (y) paying to Payner a cash bonus equal to $394,686. The cash
bonus is intended to compensate Payner for the income taxes payable on the
Restricted Stock Award. The shares subject to the Restricted Stock Award shall
vest in full on January 1, 2007.
(ii) Options Exchanged for Deferred Stock Unit Award. Payner hereby
forfeits all of her rights to the options to purchase Shares listed on Exhibit C
hereto, and in consideration for such
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forfeiture, the Company is, simultaneously with the execution of this Agreement,
granting to Payner under the Plan, a Deferred Stock Unit Award for and
representing 126,904 underlying Shares under the Plan in the form attached
hereto as Exhibit D.
(iii) Additional Deferred Stock Unit Award. Subject to the approval
by the stockholders of the Company of an amendment to the Plan to increase the
number of shares available for grant thereunder and the maximum annual award to
any one participant under the Plan, Payner shall be granted under the Plan an
additional Deferred Stock Unit Award (the "Supplementary DSUs") for and
representing 4,201,832 underlying Shares in the form attached hereto as Exhibit
E. The Deferred Stock Units making up the Deferred Stock Unit Awards referred to
in subparagraphs 4(b)(ii) and 4(b)(iii) of this Agreement are hereinafter
referred to as the "DSUs".
(iv) Terms of the DSUs. The DSUs are not Shares, but rather a
promise to deliver actual Shares in the future. The DSUs awarded hereunder will
be credited to an unfunded, bookkeeping account of the Company maintained on
Payner's behalf and will be distributable and subject to the restrictions
contained in the Plan and in the applicable DSU Award.
(A) Vesting of DSUs. The DSUs shall vest as follows: (I)
one-third of the Supplementary DSUs shall vest in four equal
quarterly installments commencing on October 1, 2006 (e.g.,
the first of four equal quarterly vesting periods will begin
on October 1, 2006 so that 25% of such DSUs shall have vested
as of January 1, 2007) (the "One-Year DSUs"), (II) both (a)
one-third of the Supplementary DSUs and (b) the 126,904 DSUs
issued in exchange for options with a vesting date prior to
August 31, 2007, shall vest in eight equal quarterly
installments commencing on October 1, 2006 (e.g., the first of
eight equal quarterly vesting periods will begin on October 1,
2006 so that 12.5% of such DSUs shall have vested as of
January 1, 2007) (collectively, the "Two-Year DSUs"), and
(III) one-third of the Supplementary DSUs shall vest in twelve
equal quarterly installments commencing on October 1, 2006
(e.g., the first of twelve equal quarterly vesting periods
will begin on October 1, 2006 so that approximately 8.33% of
such DSUs shall have vested as of January 1, 2007)
(collectively, the "Three-Year DSUs").
(B) Termination of Employment; Forfeiture. In the event
that Payner's employment is terminated prior to the vesting of
any of such DSUs, unless such termination is a Constructive
Termination or a termination without Cause as such terms are
defined in paragraph 7 below (in which case the vesting shall
be accelerated as set forth therein), all unvested DSUs as of
the date of such termination shall be forfeited immediately by
Payner.
(C) Distribution of DSUs. Subject to paragraph
4(b)(iv)(B), all of the vested DSUs underlying a Deferred
Stock Unit Award will be distributable in Shares on the date
of distribution on the earliest to occur of: (I) (a) with
respect to the One-Year DSUs only, October 1, 2007, (b) with
respect to the Two-Year DSUs only, October 1, 2008, and (c)
with respect to the Three-Year DSUs only, October 1, 2009,
(II) death, (III) the date on which Payner is "disabled" (as
such term is defined in Section 409A(a)(2)(C) of the Internal
Revenue Code of 1986, as
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amended ("Code") and the official guidance issued thereunder),
(IV) subject to paragraph 7(c), the effective date of Payner's
Constructive Termination or termination without Cause, or (V)
to the extent provided in paragraph 8, immediately following a
Change of Control (as defined below) and thereafter.
(D) No Rights as Shareholders. Payner shall not have any
rights of a Shareholder with respect to the DSUs, including
the right to vote such shares or the right to receive
dividends or other distributions made with respect to the
shares, until the Shares underlying the DSUs are distributed
to Payner. However, if any dividends are paid on the Shares
underlying the DSUs, whether in cash or stock, Payner will be
credited with "Dividend Rights." Such Dividend Rights shall be
credited to Payner's DSU account as follows: Payner shall be
credited with additional DSUs equal to the value of such
dividend on the date such dividend is paid divided by the Fair
Market Value (as determined under the Plan) on the date the
dividend is paid multiplied by the number of DSUs credited to
Payner on the date the dividend is paid. The Dividend Rights
credited to Payner will be subject to the same restrictions
applicable to the DSUs to which they relate as initially
credited to Payner under this paragraph 4(b).
(E) Tax Withholding. Payner shall be responsible to
fulfill any withholding tax requirements on the DSUs as
specified in the Plan and as required by applicable law.
Payner shall notify the Company no later than fifteen business
days prior to a distribution date, as to whether she intends
to make a cash payment to the Company for the withholding
amount or would like the Company to make arrangements for such
payment. If she elects to have the Company make the
arrangements or fails to provide the required notice, the
Company shall satisfy such withholding tax requirements,
through withholding distribution of a portion of the DSUs
equal to the withholding obligation based on the Fair Market
Value of the Shares already owned by Payner on the date of
distribution; provided that if the Company's Board of
Directors determines that it would not be prudent to use the
Company's cash flow for such purpose, the Company shall advise
Payner who can then arrange to sell Shares for the purpose of
satisfying the withholding tax requirement prior to the
distribution of the applicable Shares.
5. EXPENSE REIMBURSEMENT AND PERQUISITES
a. During the term of this Agreement, Payner 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, provided that the expenses are properly accounted for.
b. During each calendar year of the term of this
Agreement, Payner shall be entitled to reasonable vacation with full pay;
provided, however, that Payner shall schedule such vacations at times convenient
to the Company.
c. During the term of this Agreement, the Company shall
provide an annual allowance of twenty seven thousand five hundred dollars
($27,500) for the purchase of term life
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insurance by the Company for the benefit of Payner (which shall be in lieu of
any other life insurance benefit) and the purchase of a supplemental disability
insurance policy, which together with any other group coverage offered by the
Company, provide for coverage of the maximum allowable disability benefit.
Payner shall be entitled to participate in all dental insurance and disability
plans, major medical insurance 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.
d. During the term of this Agreement, the Company will
provide Payner with a monthly housing allowance of four thousand dollars
($4,000). The housing allowance for the period ending April 30, 2007 has been
paid in a lump sum prior to the date hereof.
6. NON-COMPETITION; NON-SOLICITATION
a. In consideration of the Incentive Award 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) Payner 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 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 on the date of termination of
this Agreement or who had been employed by the Company within the nine month
period prior to the date of termination of this Agreement, except if, at the
time of such employment or retention, such person had not been employed by the
Company during the nine month period immediately preceding such employment or
retention; 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, and, in either
such case, consists of ten (10) or more brands of off-price apparel and/or
off-price fashion accessories; 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 Payner 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 3% of the publicly-traded equity
securities of such Competitive Business.
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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. Payner agrees that any breach of the covenants
contained in this paragraph 6 would irreparably injure the Company. Accordingly,
Payner agrees that the Company, in addition to pursuing any other remedies it
may have in law or in equity, may obtain an injunction against Payner 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 eighteen months 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 Payner
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, Payner receives notice in
writing from the Company of any material breach of any of the covenants
contained in this paragraph 6 by her and Payner cures such material breach
within 21 days of the date she receives such notice, then the Company will
continue the Severance Benefits provided pursuant to paragraph 7(b) below;
provided, that Payner shall not be entitled to Severance Benefits for periods
during which she was in material breach of such covenants.
7. TERMINATION
a. This Agreement (other than as specifically stated
herein), the employment of Payner, and Payner's position as Chief Executive
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 twelve (12) month period
(vacation time excluded), during which time Payner is
unable to attend to her 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 Payner from her
position as Chief Executive Officer 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 Payner as
Chief Executive Officer and a senior executive
officer of the Company (or to the extent that the
Company becomes a division or
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subsidiary of another entity, the authorities,
powers, functions, duties or responsibilities of the
Chief Executive Officer or senior executive officer
of such division or subsidiary); provided that no
such breach shall be considered a Constructive
Termination unless Payner 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 its 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)
Payner 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, (2) Payner has willfully and materially
failed to perform her reasonably assigned duties
hereunder, (3) Payner has breached the terms and
provisions of this Agreement in any material respect,
or (4) Payner has failed to comply in any material
respect with the Company's written policies of
conduct of which she 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 unless the Company has provided Payner with
written notice of such breach and Payner has failed
to cure such breach within the twenty day period
following her receipt of such notice; or
(vii) the termination of this Agreement by Payner, which
shall occur on not less than thirty (30) days prior
written notice from Payner.
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 Payner her 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 her termination of employment and shall make no other payments
or provide any other benefits under this Agreement except that, unless this
Agreement is terminated for Cause, any other vested stock options shall be
exercisable for a period equal to the lesser of (x) one year from the date this
Agreement is terminated; (y) the remaining term of the applicable vested stock
option and (z) the period required to avoid any tax imposed under Section 409A
of the Code. 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 Payner's execution
of a mutual release reasonably acceptable to the Company and Payner, the Company
shall pay Payner her 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"):
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(i) the then-current Base Salary for a period of twelve
(12) months from the date of termination;
(ii) any unvested stock options, Restricted Stock or DSUs
that have been granted to Payner which are
outstanding as of the date of such termination shall
be deemed to be fully vested as of that date and such
stock options shall be exercisable for a period equal
to the lesser of (x) one year from the date of
termination of this Agreement; (y) the remaining term
of the applicable stock option; and (z) the period
required to avoid any tax imposed under Section 409A
of the Code.
(iii) the Company shall maintain in effect, or reimburse
Payner 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 Payner 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.
c. Notwithstanding anything herein to the contrary, if
any payments due under this Agreement (including, but not limited to the
distribution of the DSUs hereunder) would subject Payner to any tax imposed
under Section 409A of the Code if such payments were made at the time otherwise
provided herein, then the payments that cause such taxation shall be payable in
a single lump sum on the first day which is at least six (6) months after the
date of Payner's "separation from service" as set forth in Code Section
409A(2)(A)(i) and the official guidance issued thereunder
8. CHANGE OF CONTROL
a. In the event that a Change of Control (as defined
below) occurs during the term of this Agreement, any unvested stock options,
Restricted Stock and one half of any DSUs granted to Payner which are
outstanding as of the date of that Change of Control and have not yet vested
("COC Unvested DSUs") shall be deemed to be fully vested as of that date.
Subject to paragraph 7(c), the remaining one half of the COC Unvested DSUs shall
vest on the earliest to occur of (x) the scheduled vesting date and (y) twelve
(12) months from the date of such Change of Control, subject, in each case, to
Payner's continued employment with the Company on such dates and (z) Payner's
Constructive Termination or termination without Cause following such Change of
Control. The DSUs that become vested due to the application of this paragraph 8
shall be distributable upon the date that they become vested.
b. 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 00x-0
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xxxxxxxxxxx xxxxx xxx Xxxxxxxx Xxx) of fifty percent (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 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 fifty percent (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
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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 thirty percent (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.
c. 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.
d. 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;
(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 Payner, cancel any outstanding
DSUs and pay to Payner, in cash or stock, or any combination thereof, the value
of such DSUs 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
DSU Award Agreement to which Payner is a party.
e. 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 Payner,
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 Payner with respect thereto
(including without limitation under Section 4999 of
the Code, determined by applying the highest marginal
rates of such taxes that applied to Payner's taxable
income for the immediately
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preceding taxable year, or such other rate(s) as
Payner shall in her sole discretion certify as likely
to apply to Payner 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 Payner 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.
(iii) If the Accounting Firm reasonably determines that
aggregate Agreement Payments should be reduced to the
Reduced Amount, the Company shall promptly give
Payner notice to that effect and a copy of the
detailed calculation thereof, and Payner may then
elect, in her 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
her election within ten business days of her receipt
of notice. If no such election is made by Payner
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 Payner
promptly of such election. All reasonable
determinations made by the Accounting Firm under this
paragraph 8(d) shall be binding upon the Company and
Payner. As promptly as practicable following such
determination, the Company shall pay to or distribute
for the benefit of Payner such Agreement Payments as
are then due to Payner under this Agreement and shall
promptly pay to or distribute for the benefit of
Payner in the future such Agreement Payments as
become due to Payner under this Agreement.
(iv) While it is the intention of the Company and Payner
to reduce the amounts payable or distributable to
Payner hereunder only if the aggregate Net After Tax
Receipts to Payner 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
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the benefit of Payner 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 Payner 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 Payner which
the Accounting Firm reasonably believes has a high
probability of success determines that an Overpayment
has been made, then Payner shall repay to the any
such Overpayment to the Company within ten business
days of her 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 Payner.
(v) All fees and expenses of the Accounting Firm in
implementing the provisions of this paragraph 8(d)
shall be borne by the Company.
9. CONFIDENTIALITY; INVENTIONS
x. Xxxxxx 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, Payner covenants and agrees with the Company that she will not,
directly or indirectly, 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 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 Payner 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 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,
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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 Payner 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 her 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 Payner for the Company during her 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 Payner 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 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,
Payner 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. Payner 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
she was advised to consult with an attorney of Payner's own choosing concerning
this Agreement and that Payner has done so.
x. Xxxxxx represents and warrants to the Company that
the execution, delivery and performance of this Agreement by Payner complies
with all laws applicable to Payner 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.
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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 Payner (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 Payner of the covenants
contained in paragraphs 6 and 9 of this Agreement.
12. INDEMNIFICATION
a. The Company agrees that it shall to the fullest
extent permitted by law indemnify and hold Payner harmless and shall pay and
reimburse Payner for any loss, cost, damage, injury or other expense (including
without limitation reasonable attorneys' fees) which Payner incurs by reason of
being or having been an officer or director of the Company or by reason of the
fact that Payner 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 Payner) provided that Payner executes and deliver
to the Company an undertaking to repay any amounts so advanced in the event that
it shall be determined that Payner 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 Payner's employment
hereunder.
b. In the event that Payner asserts her right of
indemnification under paragraph 12(a) above, the Company shall have the right to
select Payner's counsel provided that there is no material conflict of interest
between the Company and Payner and provided such counsel is reasonably
acceptable to Payner. 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 Payner is provided with a general release from the Company and the claimant
in form and substance reasonably satisfactory to Payner and no restrictions are
imposed on Payner as a result of the settlement.
13. ENTIRE AGREEMENT
This Agreement together with any stock option agreements to which
Payner and the Company are a party contain all of the understandings between
Payner and the Company pertaining to Payner's employment with the Company and
supersedes all undertakings and agreements, whether oral or in writing,
previously entered into between them.
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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 Payner 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:
If to the Company, to:
Bluefly, Inc.
00 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Chairman of Compensation Committee
With a copy to:
Dechert LLP
00 Xxxxxxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxx
If to Payner, to:
Xxxxxxx Xxxxxx-Xxxxxx
c/o Bluefly, Inc.
00 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
With a copy to:
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Xxxxxx X. Xxxxx, Esq.
Xxxxx & Xxxxxxx LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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
Payner shall not be obligated to seek other employment by way of
mitigation of the amounts payable to her 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date written below.
BLUEFLY, INC.
By: /s/ Xxxx Xxxxxxxxxx
--------------------------------
Member of Compensation Committee
/s/ Xxxxxxx Xxxxxx-Xxxxxx
--------------------------------
Xxxxxxx Xxxxxx-Xxxxxx
DATED: November 14, 2006
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