Exhibit
10.39
 
 AMENDED
AND RESTATED EMPLOYMENT AGREEMENT
 
 This
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”)  is
entered into as of December 31, 2010, by and between Bluefly, Inc., a Delaware
corporation (the “Company”), and Martin J. Keane III (“Keane”).
 
 RECITALS
 
 1.           Keane
currently serves as Senior Vice President of E-Commerce of the Company pursuant
to an Employment Agreement between the parties dated October 20, 2009 (the
“Original Agreement”).
 
 2.           The
Company and Keane desire to amend and restate the Original Agreement in its
entirety in order to effect certain amendments that the parties deem advisable
in light of recent interpretations promulgated under Section 409A of the
Code.
 
 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 Keane agree as follows:
 
 1.           TERM
 
 The
Company hereby agrees to employ Keane as Senior Vice President of E-Commerce of
the Company, and Keane hereby agrees to serve in such capacity, for a term
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, Keane shall serve as Senior Vice President of E-Commerce 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, President and/or Chief Operating Officer of the
Company.
 
 The
principal location of Keane’s employment shall be in the New York City vicinity
(i.e., within a 20 mile radius), although Keane understands and agrees that he
will be required to travel from time to time for business
reasons.  Keane 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 Senior Vice President of
E-Commerce of the Company during the Employment Term.  Keane 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 Keane to the Company during the Employment Term, the
Company shall pay him a base salary of $260,000 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 Keane’s
performance during such year.
 
 4.           BONUS
 
 During
the Employment Term, Keane 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.  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 Keane is employed as of the date such bonus is paid.
 
 
 5.           EXPENSE REIMBURSEMENT AND
PERQUISITES
 
 a.           During
the Term of this Agreement, Keane 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.  Any
such reimbursement will be made to Keane as soon as administratively feasible
following submission of such documentation of such expense, but shall be made no
later than the calendar year following the calendar year in which such expense
is incurred by Keane.  In the event that any such reimbursement is
taxable to Keane, such reimbursement shall be made as soon practical upon
Keane’s submission of a request to be reimbursed, but in all events such
reimbursement will be made prior to the end of the calendar year next following
the calendar year in which the applicable expense was incurred.
 
 b.           During
each calendar year of the Employment Term, Keane shall be entitled to reasonable
vacation with full pay in accordance with the Company’s then-current vacation
policies; provided, however, that Keane
shall schedule such vacations at times convenient to the Company.
 
 c.           Keane
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, Keane shall be a
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  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 Keane hereunder, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, during the
Non-Competition Term, Keane 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 Keane 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 Keane
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.           Keane
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.  Keane agrees
that any breach of the covenants contained in this paragraph 6 would irreparably
injure the Company.  Accordingly, Keane agrees that the Company, in
addition to pursuing any other remedies it may have in law or in equity, may
obtain an injunction against Keane from any court having jurisdiction over the
matter, restraining any further violation of this paragraph 6.
 
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  7.           TERMINATION
 
 a.           This
Agreement, the employment of Keane, and Keane’s position as Senior Vice
President of E-Commerce 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 Keane is unable in
      substantial part to attend to his ordinary and regular duties, provided
      that the Company shall give Keane 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 Keane without his consent from his position as
      Senior Vice President of E-Commerce 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)
      Keane gives the Company notice within ninety (90) days after an event or
      occurrence which Keane believes constitutes a Constructive Termination,
      specifying the event or occurrence which Keane 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) Keane 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) Keane has willfully and
      materially failed to perform his duties hereunder, or (3) Keane has
      willfully or negligently breached the terms and provisions of this
      Agreement in any material respect, or (4) Keane has failed to comply in
      any material respect with the Company's policies of conduct that have been
      communicated to him, including with respect to trading in securities,
      provided that the Company shall provide Keane 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
 
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  (vi)
              the
      termination of this Agreement by Keane, which shall occur on not less than
      30 days prior written notice from
Keane.
 
 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
Keane 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 Keane, 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”).  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
Keane executing an effective release of any claims against the Company, in a
form reasonably satisfactory to the Company, which becomes effective within 60
days of such termination.  The Severance Payments will commence when
such release becomes effective; notwithstanding the foregoing, if such 60 day
period begins in one calendar year and ends in a subsequent calendar year, the
Severance Payments will not commence until the second calendar
year.  Except as provided in this paragraph, upon any termination of
employment, all other rights Keane may have to base salary, perquisites or other
compensation as set forth in paragraphs 3, 4, and/or 5, including, without
limitation, bonus payments and unvested option grants, but excluding any vested
option, shall be forfeited.
 
 c.           Notwithstanding
anything herein to the contrary, if any payments due under this Agreement would
subject Keane 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 Keane’s "separation from service" as set
forth in Code Section 409A(2)(A)(i) and the official guidance issued
thereunder.
 
 
 8.           CONFIDENTIALITY
 
 a.           Keane
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, Keane 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
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  has
learned by reason of his association with the Company.  If Keane 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 Keane), 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.           Keane
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 Keane
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.           Keane
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 Keane 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 Keane 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.           Keane
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, Keane shall sign all applications,
assignments, instruments and papers and perform all acts necessary or desired by
the Company in order to protect its rights and interests in any
Developments.
 
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  e.           Keane
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.  Keane 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.           Keane
represents and warrants to the Company that he was advised to consult with an
attorney of Keane's own choosing concerning this Agreement.
 
 b.           Keane
represents and warrants to the Company that, to the best of his knowledge, the
execution, delivery and performance of this Agreement by Keane complies with all
laws applicable to Keane 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
Keane 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
Keane as a result of or arising out of any acts or omission by Keane in his
capacity as an officer, director, employee or consultant of the
Company.
 
 
 11.           GOVERNING LAW; CHOICE OF
FORUM
 
 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.  Any dispute
arising hereunder shall be subject to the exclusive jurisdiction of the federal
and State courts located in New York, New York, and each of the parties hereto
hereby irrevocably submits to such jurisdiction and waives any objection to such
venue.
 
 12.           ENTIRE
AGREEMENT
 
 This
Agreement contains all of the understandings between Keane and the Company
pertaining to Keane’s employment with the Company, and it supersedes all
undertakings and agreements, whether oral or in writing, previously entered into
between them, including (without limitation) the Original
Agreement.
 
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  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 Keane 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
Keane, 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.
 
 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.
  8
  
 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.
 
  9
  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 / Martin J. Keane
III________
 Martin J.
Keane III
 
 
 
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