Unassociated Document


    

      Exhibit
10.1

      EMPLOYMENT
AGREEMENT

      


      


      This
EMPLOYMENT AGREEMENT is entered into as of August 31, 2009, by and between
Bluefly, Inc., a Delaware corporation (the “Company”), and Bradford Matson
(“Matson”).

      


      RECITALS

      


      1.           The
Company desires to retain the services of Matson as Chief Marketing Officer of
the Company in accordance with the terms and conditions of this
Agreement.

      


      2.           Matson
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 Matson agree as follows:

      


      
        	
                 
      

              	
                1.

              	
                TERM

              


      

      


      The
Company hereby agrees to employ Matson as Chief Marketing Officer of the
Company, and Matson hereby agrees to serve in such capacity, for a term
commencing on  August 31, 2009 (the “Starting Date”) and ending on
September 30, 2012 (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, Matson 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 Matson’s employment shall be in the New York City vicinity
(i.e., within a 20 mile radius), although Matson understands and agrees that he
will be required to travel from time to time for business
reasons.  Matson 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.  Matson 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 Matson 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 Matson’s
performance during such year.

      


      
        	
                 
      

              	
                4.

              	
                BONUS/OPTIONS

              


      

      


      a.           During
the Employment Term, Matson 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 any bonus for the 2009
calendar year will be pro-rated based upon the number of months that Matson
served as an employee of the Company.  All bonuses shall be paid in
accordance with the Company’s standard payroll practices, net of any applicable
withholding.  No bonus will be payable under this Section unless
Matson is employed as of the date such bonus is awarded.

      


      b.           The
Company hereby agrees to cause, on the Starting Date, the issuance to Matson of
options (“Options”) to purchase 10,000 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 in (36) equal monthly
installments, with the first such installment vesting on the one month
anniversary of the date of grant; provided, that in the event that Matson’s
employment with the Company is terminated without cause or as a result of a
Constructive Termination at any time during the Employment Term, 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
Matson's 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, Matson 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

       


      
        
           


        

        
          2

          
            

          

        

        
           


        

      


      (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, Soros Fund Management LLC, SFM
Domestic Investments LLC, Prentice Capital Offshore, Ltd., Prentice Capital
Management, LP, S.A.C. Capital Associates, LLC, Maverick Fund, L.D.C., Maverick
Fund II, Ltd., Maverick Fund USA, Ltd.  and/or any of their respective
affiliates (collectively, the “Existing Stockholders”), 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 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 the Existing Stockholders or any employee
benefit plan sponsored or maintained by the Surviving

       


      
        
           


        

        
          3

          
            

          

        

        
           


        

      


      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, Matson 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, Matson shall be entitled to
reasonable vacation with full pay in accordance with they Company’s then-current
vacation policies; provided, however, that Matson
shall schedule such vacations at times convenient to the Company.

      


      c.           Matson
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, Matson 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 Matson hereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, during the
Non-Competition Term, Matson 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


      
        
           


        

        
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      employ or
retain, any person who was employed or retained by the Company while Matson 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 Matson 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.

      


      b.           Matson
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.  Matson agrees
that any breach of the covenants contained in this paragraph 6 would irreparably
injure the Company.  Accordingly, Matson agrees that the Company, in
addition to pursuing any other remedies it may have in law or in equity, may
obtain an injunction against Matson from any court having jurisdiction over the
matter, restraining any further violation of this paragraph 6.

      


      
        	
                 
      

              	
                7.

              	
                TERMINATION

              


      

      


      a.           This
Agreement, the employment of Matson, 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 Matson is unable in
      substantial part to attend to his ordinary and regular duties, provided
      that the Company shall give Matson 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

              


      


      
        
           


        

        
          5

          
            

          

        

        
           


        

      


      occurred
upon (A) the removal of Matson 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 a
Constructive Termination shall not be deemed to have occurred unless: (1) Matson
gives the Company notice within ninety (90) days after an event or occurrence
which Matson believes constitutes a Constructive Termination, specifying the
event or occurrence which Matson believes constitutes a Constructive
Termination; and (2) the Company fails to cure such act or failure to act within
thirty (30) days after receipt of such notice.

      


      
        	
                 
      

              	
                (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) Matson 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) Matson has willfully and
      materially failed to perform his duties hereunder, or (3) Matson has
      willfully or negligently breached the terms and provisions of this
      Agreement in any material respect, or (4) Matson 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,
      provided that the Company shall provide Matson 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 Matson, which shall occur on not less
      than 30 days prior written notice from
Matson.

              


      

      


      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
Matson 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 Matson, 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, the then-current base salary for a period of one-hundred eighty
(180) days (the “Severance Payments”), if Matson is terminated 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 Matson executing a full release of any claims against the
Company, in a form reasonably satisfactory to the Company.


      
        
           


        

        
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                8.

              	
                CONFIDENTIALITY

              


      

      


      a.           Matson
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, Matson 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 Matson shall be
required to make such disclosure pursuant to court order, subpoena or other
government process, he shall notify the Company of the same, by personal
delivery or electronic means, confirmed by mail, within twenty-four (24) hours
of learning of such court order, subpoena or other government process and, at
the Company's expense (such expenses to be advanced by the Company as reasonably
required by Matson), 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.

      


      b.           Matson
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 Matson
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.

      


      c.           Matson
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 Matson 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


      
        
           


        

        
          7

          
            

          

        

        
           


        

      


      sole
property of the Company, and Matson 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.

      


      d.           Matson
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, Matson 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.

      


      e.           Matson
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.  Matson 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

              


      

      


      a.           Matson
represents and warrants to the Company that he was advised to consult with an
attorney of Matson's own choosing concerning this Agreement.

      


      b.           Matson
represents and warrants to the Company that, to the best of his knowledge, the
execution, delivery and performance of this Agreement by Matson complies with
all laws applicable to Matson 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
Matson 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
Matson as a result of or arising out of any acts or omission by Matson 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


      
        
           


        

        
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      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 Matson of the covenants contained in paragraphs 6 and 8 of
this Agreement.

      


      
        	
                 
      

              	
                12.

              	
                ENTIRE
      AGREEMENT

              


      

      


      This
Agreement contains all of the understandings between Matson and the Company
pertaining to Matson’s 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 Matson 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.

      42 West
39th Street

      New York,
NY 10018

      Attn:
Chief Executive Officer

      


      


      If to
Matson, to:


      
        
           


        

        
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      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.

      


      
        	
                 
      

              	
                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/
      Melissa Payner-Gregor	 
	 	 	

                      Melissa
      Payner-Gregor

                      Chief
      Executive Officer

                    	 
	 	 	 	 
	 	 	 	 


            

          

        



      
        
          
            
              
                
                  	 	EMPLOYEE	 
	 	 	 	 
	
                           

                        	/s/
      Bradford Matson	 
	 	Bradford
      Matson 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 


                

              

            

          

        

      

      



      
        
           


        

        
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