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CUSIP NO. 000000000
NOTE AND WARRANT PURCHASE AGREEMENT
among
BLUEFLY, INC.,
QUANTUM INDUSTRIAL PARTNERS LDC
and
SFM DOMESTIC INVESTMENTS LLC
Dated: March 28, 2000
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CUSIP NO. 000000000
TABLE OF CONTENTS
Page
----
Section 1. DEFINITIONS...............................................1
1.1 Definitions...............................................1
1.2 Investment Agreement......................................2
1.3 Other Definitions.........................................2
Section 2. PURCHASE AND SALE OF THE SECURITIES.......................3
2.1 Closing...................................................3
2.2 Transactions at the Closing...............................3
2.3 Standby Commitment........................................3
Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............4
3.1 Representations and Warranties............................4
3.2 Compliance with Terms and Conditions of Investment
Agreement.................................................5
3.3 Representations and Warranties in Connection with the
Transactions Contemplated Herein..........................5
Section 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..........7
Section 5. CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO
CLOSE.....................................................8
5.1 Representations and Warranties............................8
5.2 Compliance with this Agreement............................8
5.3 Securities................................................9
5.4 Consents and Approvals....................................9
Section 6. CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE......9
6.1 Representations and Warranties............................9
6.2 Compliance with this Agreement............................9
6.3 Consents and Approvals....................................9
6.4 Payment of Purchase Price.................................10
Section 7. COVENANTS.................................................10
7.1 Covenants of the Company..................................10
7.2 Mutual Covenants..........................................11
Section 8. INDEMNIFICATION...........................................11
Section 9. REGISTRATION RIGHTS.......................................11
Section 10. TERMINATION OF AGREEMENT..................................12
10.1 Termination...............................................12
10.2 Survival..................................................12
Section 11. MISCELLANEOUS.............................................12
11.1 Survival of Representations, Warranties and Covenants.....12
11.2 Notices...................................................12
11.3 Successors and Assigns....................................12
11.4 Amendment and Waiver......................................12
11.5 Counterparts..............................................13
11.6 Headings..................................................13
11.7 GOVERNING LAW.............................................13
11.8 Severability..............................................13
i
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11.9 Rules of Construction.....................................13
11.10 Entire Agreement..........................................13
11.11 Fees......................................................13
11.12 Publicity; Confidentiality................................14
11.13 Further Assurances........................................14
EXHIBITS
A-1 Form of Warrant
A-2 Form of Senior Convertible Note
SCHEDULES
2.2 Shares and Purchase Price
ii
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CUSIP NO. 000000000
NOTE AND WARRANT PURCHASE AGREEMENT
NOTE AND WARRANT PURCHASE AGREEMENT (the "Agreement"), dated as of
March 28, 2000, by and among Bluefly, Inc., a New York corporation (the
"Company"), and the purchasers listed on Schedule 1 hereto (the "Purchasers").
WHEREAS, pursuant to an Investment Agreement dated as of July 27,
1999, by and among the Company, the Purchasers and Pilot Capital Corp. (the
"Investment Agreement"), each of the Purchasers has invested in shares of the
Company's Series A Preferred Stock;
WHEREAS, the Company anticipates concluding during 2000 a
Next Round Financing (as defined below);
WHEREAS, prior to the Next Round Financing the Company wishes to
sell to each Purchaser, and each Purchaser wishes to purchase from the Company:
(i) a senior convertible promissory note, in the aggregate principal amount set
forth opposite such Purchaser's name on Schedule 2.2 hereto, having the terms
and conditions set forth in the form of Note attached hereto as Exhibit A-1 (the
"Senior Convertible Notes") and (ii) a warrant (the "Warrants" and, together
with the Senior Convertible Notes, the "Securities") having the terms and
conditions set forth in the form of Warrant attached hereto as Exhibit A-2; and
WHEREAS, the Purchasers are willing to commit to provide the Company
with additional financing at the option of the Company.
NOW, THEREFORE, in consideration of the mutual terms and conditions
herein contained, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Definitions. As used in this Agreement, the following
definitions shall apply:
"By-Laws" means the amended and restated By-Laws of the Company, as
in effect on the date hereof and on the Closing Date.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Company, as the same was amended pursuant to Section 5.6 of
the Investment Agreement and as in effect on the Closing Date.
"Financials" means the Audited Financials and the Unaudited
Financials.
"Material Adverse Effect" means a circumstance, fact, change,
development or effect (i) that could or could reasonably be expected to have a
materially adverse effect on the properties, results of operations, business,
domestic prospects or condition (financial or otherwise) of the Company taken as
a
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whole, or (ii) that adversely effects the ability of the Company to consummate
the transactions contemplated by this Agreement in any material respect or
impairs or delays the ability of the Company to effect the Closing.
"Next Round Financing" means the closing of a private placement of
Next Round Securities which results in gross proceeds to the Company of $10
million in one or more tranches.
"Next Round Securities" means the Company's Common Stock or
securities convertible into or exercisable for the Company's Common Stock in the
Next Round Financing.
"Quarterly Reports" means the Company's Quarterly Reports on Form
10-QSB for the quarters ended September 30, 1999, June 30, 1999, March 31, 1999,
and September 30, 1998, each as filed with the SEC.
"SEC Documents" means the Annual Reports, the Quarterly Reports and
all other documents filed by the Company with the SEC on or after January 1,
1998 and prior to the date hereof pursuant to Section 13 or 15(d) of the
Exchange Act (including all exhibits and schedules thereto and documents
incorporated by reference therein), but shall not include any portion of any
document which is not deemed to be filed under applicable SEC rules and
regulations.
"Transaction Documents" means collectively, this Agreement
(including the schedules attached hereto), the Senior Convertible Notes and the
Warrants.
"Unaudited Financials" means the unaudited quarterly consolidated
financial statements and the related notes included in the SEC Documents, and
the unaudited financial statements and notes for the year ended December 31,
1999, all of which have previously been delivered by the Company to the
Purchasers.
Investment Agreement. Capitalized terms not otherwise defined herein
shall have the meanings set forth for such terms in the Investment Agreement.
Other Definitions. The following terms are defined in the section
referred to opposite such term.
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Term Section
----- -------
Agreement Recitals
Closing 2.1
Closing Date 2.1
Investment Agreement Recitals
Purchase Price 2.2
Purchasers Recitals
Securities Recitals
Senior Convertible Notes Recitals
Standby Commitment 2.3
Warrants Recitals
SECTION 2. PURCHASE AND SALE OF THE SECURITIES
2.1 Closing. Subject to the terms and conditions of this Agreement,
the closing of the sale and purchase of the Securities (the "Closing") shall
take place at the offices of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, 1285
Avenue of the Americas, Xxx Xxxx, Xxx Xxxx 00000-0000 on the date hereof or on
such other date and time as the Purchasers and the Company may mutually agree
(the "Closing Date").
2.2 Transactions at the Closing. At the Closing, subject to the
terms and conditions of this Agreement, each of the Purchasers severally (and
not jointly) shall purchase and acquire from the Company, and the Company shall
issue and sell to the Purchasers, Senior Convertible Notes and Warrants for an
aggregate purchase price of $3,000,000 (the "Purchase Price"). At the Closing,
the Company shall deliver to each Purchaser a duly executed Senior Convertible
Note, in the aggregate principal amount set forth opposite such Purchaser's name
on Schedule 2.2 hereto, and a duly executed Warrant to purchase the amount of
shares of Next Round Securities as set forth in the Warrant, each registered in
the name of such Purchaser or its nominees, with appropriate issue stamps, if
any, affixed at the expense of the Company, free and clear of any Lien, against
payment by each Purchaser of the portion of the Purchase Price payable in
respect thereof as set forth opposite such Purchaser's name on Schedule 2.2
hereto by wire transfer of immediately available funds to an account designated
by the Company.
2.3 Standby Commitment.
(a) The Purchasers hereby commit, jointly but not severally,
(the "Standby Commitment") that, in addition to the payment of the Purchase
Price, they shall provide the Company (on a pro rata basis based on the
allocation of the Purchase Price as set forth in Section 2.2 hereof), at the
Company's option up to an aggregate of $12 million (the "Commitment Amount") at
any time prior to January 1, 2001 in one or more tranches as requested by the
Company; provided, however, that the Commitment Amount shall be reduced by the
gross proceeds received by the Company or any of its Subsidiaries from the
issuance after the date hereof of any equity or convertible securities,
(excluding financing provided by the Purchasers pursuant to this Agreement and
any trade payables and other financing arrangements entered into in the ordinary
course of business, but including, for purposes of clarification, the Next
Round). The Standby Commitment shall be provided on terms that are consistent
with those in the market at the time the Standby Commitment is drawn for similar
investments by investors similar to the Purchasers in companies similar to the
Company.
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CUSIP NO. 000000000
(b) The Company shall notify the Purchasers in writing within
two Business Days of the receipt of any funds that would reduce the Commitment
Amount; provided that the Commitment Amount shall automatically be reduced
whether or not the Company provides such notice.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser as
follows:
3.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 3 of the Investment Agreement
(including, except as otherwise noted below, the schedules referenced in such
representations and warranties and any updates attached hereto), except for
Sections 3.2, 3.3, 3.4, 3.13 and 3.27, are true and correct in all material
respects as of the date hereof and as of the Closing Date as if made at and on
such dates, except that in reaffirming any such representation or warranty that:
(a) refers to the term "Material Adverse Effect", the Company
reaffirms such representation or warranty as if such term were defined pursuant
to Section 2.1 hereof;
(b) refers to the term "SEC Documents" the Company reaffirms
such representation or warranty as if the term "SEC Documents" were defined
pursuant to Section 2.1 hereof;
(c) references SEC Documents or other statements or documents
filed with the SEC as of a certain date, the Company reaffirms such
representation or warranty as if any such references referred to filings through
the date hereof;
(d) refers to the term "Financials" or "Unaudited Financials"
the Company reaffirms such representation or warranty as if such terms were
defined pursuant to Section 2.1 hereof; and
(e) refers to the term "Certificate of Incorporation" or
"By-Laws", the Company reaffirms such representation or warranty as if such
terms were defined pursuant to Section 2.1 hereof.
3.2 Compliance with Terms and Conditions of Investment Agreement.
The Company has performed and complied in all material respects with all of its
agreements and conditions set forth in the Investment Agreement and the other
Transaction Documents (as such term was defined in the Investment Agreement).
3.3 Representations and Warranties in Connection with the
Transactions Contemplated Herein.
(a) Power and Authority. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations under this Agreement. The execution, delivery and
performance by the Company of this Agreement and each of the other Transaction
Documents and the consummation by the Company of the transactions contemplated
hereby have been duly authorized and approved by the Board of Directors and no
further corporate action on the part of the Company (including, but not limited
to, any shareholder approvals, but excluding corporate actions necessary to
authorize any amendment of the Certificate of Incorporation necessary to create
and establish the terms of the Next Round Securities and shareholder approvals
necessary to issue the Next
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Round Securities) is necessary to authorize the execution, delivery and
performance by the Company of this Agreement or the consummation by the Company
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by the Company and is a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).
(b) No Contravention, Conflict, Breach, Etc. The execution,
delivery and performance of this Agreement and each Transaction Document by the
Company and the consummation of the transactions contemplated hereby and thereby
will not conflict with, contravene or result in a breach or violation of any of
the terms and provisions of, or constitute a default under, or result in the
creation or imposition of any Encumbrance upon any assets or properties of the
Company or any of its Subsidiaries or cause the Company or any of its
Subsidiaries to be required to redeem, repurchase or offer to repurchase any of
their respective indebtedness under (i) the Certificate of Incorporation, the
By-Laws, or any other organizational document of the Company or the certificate
of incorporation, the by-laws or other organizational document of any of its
Subsidiaries, (ii) any material Law of any Governmental Authority having
jurisdiction over the Company or any of its Subsidiaries or any of their
respective assets, properties or operations or (iii) any indenture, mortgage,
loan agreement, note or other material agreement or instrument for borrowed
money, any guarantee of any agreement or instrument for borrowed money or any
material lease, permit, license or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound or to which any of the assets, properties or
operations of the Company or any of its Subsidiaries is subject.
(c) Consents. No consent, approval, authorization, order,
registration, filing or qualification ("Consents") of or with any (i)
Governmental Authority, (ii) stock exchange on which the securities of the
Company are traded or (iii) other Person (whether acting in an individual,
fiduciary or other capacity) is required to be made or obtained by the Company
or any of its Subsidiaries for the execution, delivery and performance by the
Company of this Agreement and each of the other Transaction Documents and the
consummation of the transactions contemplated hereby (other than the Next Round
Financing or the drawdown of the Standby Commitment), except Consents which are
not material to the business or operations of the Company and its Subsidiaries,
taken as a whole, or to the consummation of the transactions contemplated by
this Agreement or Consents required for the listing of the shares of Common
Stock underlying the Warrants on the NASDAQ and the Boston Stock Exchange.
(d) Capitalization. As of the date hereof, the issued and
outstanding capital stock of the Company consists of 4,924,906 shares of Common
Stock and 500,000 shares of Series A Preferred Stock. As of the Closing Date,
the authorized capital stock of the Company will consist of 15,000,000 shares of
Common Stock (of which 175,000 shares shall have been reserved for the
Purchasers in connection with the transactions contemplated hereby) and
2,000,000 shares of Preferred Stock, $.01 par value, of which 500,000 shares
shall have been designated Series A Preferred Stock. As of the first closing of
the Next Round, sufficient numbers of shares of Next Round Securities and, as
appropriate, of shares of Common Stock into which such shares of Next Round
Securities are convertible or for which they are exercisable, shall be
authorized and reserved as required by the documents to be negotiated in
connection with the Next Round and as necessary to permit conversion of the
maximum amount then potentially payable by the Company under the Senior
Convertible Notes into Next Round Securities.
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CUSIP NO. 000000000
All such shares of Capital Stock of the Company are or shall have
been duly authorized and: (a) in the case of shares of Common Stock or Next
Round Securities issued upon conversion of the Senior Convertible Notes or
exercise of the Warrants, shall be fully paid and non-assessable upon such
conversion, and (b) in the case of shares of Common Stock issued upon
conversion, exchange, and/or exercise of such Next Round Securities, shall be
fully paid and non-assessable upon the conversion, exchange, or payment of the
exercise price contemplated by the Next Round Securities.
Except as set forth in Schedule 3.4 of this Agreement, as
contemplated by the Investment Agreement, or as contemplated by this Agreement,
there are no shares of capital stock of the Company reserved for issuance.
Except for: (a) the Warrants, (b) the Senior Convertible Notes, (c) the Next
Round Securities (including those into which the Senior Convertible Notes are
convertible), (d) the Series A Preferred, and (e) as set forth in Schedule 3.4
of this Agreement, there are no options, warrants or other rights to purchase
shares of Capital Stock or other securities of the Company or any of its
Subsidiaries, or securities convertible into or exercisable for shares of
Capital Stock or other securities of the Company or any of its Subsidiaries.
Except as set forth in Schedule 3.4 to this Agreement, as required by the
Transaction Documents (as such term is defined in the Investment Agreement), or
as required by the Transaction Documents (as such term is defined in this
Agreement), neither the Company nor any Subsidiary is obligated in any manner to
issue shares of its Capital Stock or other securities. Except as contemplated
hereby and for relevant state and federal securities laws, there are no
restrictions on each Purchaser's ability to transfer shares of Capital Stock of
the Company.
(e) Exemption from Registration; Restrictions on Offer and
Sale of Same or Similar Securities. Assuming the representations and warranties
of the Purchasers set forth in Section 4 hereof are true and correct in all
material respects, the offer and sale of the Securities made pursuant to this
Agreement will be exempt from the registration requirements of the Act. Neither
the Company nor any Person acting on its behalf has, in connection with the
offering of the Securities, engaged in (i) any form of general solicitation or
general advertising (as those terms are used within the meaning of Rule 502(c)
under the Act), (ii) any action involving a public offering within the meaning
of Section 4(2) of the Act, or (iii) any action that would require the
registration under the Act of the offering and sale of the Securities pursuant
to this Agreement or that would violate applicable state securities or "blue
sky" laws. The Company has not made, any offer or sale of shares of its Capital
Stock, if as a result the offer and sale of the securities contemplated hereby,
or any of them, could fail to be entitled to exemption from the registration
requirements of the Act. As used herein, the terms "offer" and "sale" have the
meanings specified in Section 2(3) of the Act.
(f) Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable by the Company
in connection with the transactions contemplated hereby based on any agreement,
arrangement or understanding with the Company or any of its Subsidiaries or any
action taken by any such entity other than fees that may be due to Credit Suisse
First Boston in connection with the Next Round Financing, as placement agent for
such financing.
(g) Disclosure; Agreement and Other Documents. This Agreement
(including, but not limited to, the provisions incorporating language contained
in the Investment Agreement), the other Transaction Documents and each of the
certificates furnished to the Purchasers by the Company in connection with the
purchase and sale of the Securities, taken as a whole, do not contain
Page 25 of 62 Pages
CUSIP NO. 000000000
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each of the Purchasers hereby represents and warrants (severally as
to itself and not jointly) to the Company that the representations and
warranties of such Purchaser contained in Section 4 of the Investment Agreement
are true and correct in all material respects as of the date hereof and as of
the Closing Date as if made at and on such dates, except that in reaffirming any
representation or warranty of the Company contained in Section 4 of the
Investment Agreement that refers to:
(a) the term "this Agreement" or the "other Transaction
Documents" each Purchaser reaffirms such representation or warranty as if such
terms were defined pursuant to Section 2.1 hereof;
(b) transactions contemplated by "this Agreement" or the
"Transaction Documents", each Purchaser reaffirms such representation or
warranty as if such terms were deferred pursuant to Section 2.1 hereof;
(c) "SEC Documents," each Purchaser reaffirms such
representation or warranty as if the term "SEC Documents" were defined pursuant
to Section 2.1 hereof;
(d) to the term "First Shares," each Purchaser reaffirms such
representation or warranty as if it referred to the term "Securities;" and
(e) to the terms "First Closing" or "Second Closing," each
Purchaser reaffirms such representation or warranty as if they referred to the
"Closing," or as such terms are defined pursuant to Section 2.1. hereof.
SECTION 5. CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE
The obligation of the Purchasers to purchase the Securities and to
pay the Purchase Price, and to perform any obligations hereunder shall be
subject to the satisfaction as determined by, or waiver by, the Purchasers of
the following conditions on or before the Closing Date:
5.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 3 hereof shall be true and
correct in all material respects at and on the Closing Date as if made at and on
such date, except to the extent that any representation and warranty expressly
speaks as of an earlier date, in which case such representation and warranty is
true and correct as of such date and any variance in such representation and
warranty following such date may only be the result of activities or
transactions which have taken place after the date hereof and which are
contemplated by this Agreement.
5.2 Compliance with this Agreement. The Company shall have performed
and complied in all material respects with all of its agreements and conditions
set forth herein that are required to be performed or complied with by the
Company as of the Closing Date.
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5.3 Securities. At the Closing, the Company shall have delivered
to each of the Purchasers a Senior Convertible Note and a Warrant pursuant to
Section 2.2 hereof.
5.4 Consents and Approvals. All consents, exemptions,
authorizations, or other actions by, or notices to, or filings with Governmental
Authorities and other Persons in respect of all Requirements of Law and with
respect to those Contractual Obligations of the Company which are necessary or
required in connection with the execution, delivery or performance (including
the issuance of the Senior Convertible Notes, and any Shares of Common Stock
issuable upon exercise of the Warrants) by, or enforcement against, the Company
of this Agreement (other than the Next Round Financing or the drawdown of the
Standby Commitment) and each of the other Transaction Documents shall have been
obtained and be in full force and effect, except for consents, exceptions,
authorizations or other actions which would not have a Material Adverse Effect
and would not prevent the consummation of the transactions contemplated by this
Agreement, and each of the Purchasers shall have been furnished with appropriate
evidence thereof.
CHAPTER 6. CONDITIONS TO THE OBLIGATION OF THE COMPANY TO CLOSE
The obligations of the Company to issue and sell the Senior
Convertible Notes and the Warrants and to perform its other obligations
hereunder, shall be subject to the satisfaction as determined by, or waiver by,
the Company of the following conditions on or before the Closing Date:
6.1 Representations and Warranties. The representations and
warranties of the Purchasers contained in Section 4 hereof shall be true and
correct at and on the Closing Date as if made at and on such date, except to the
extent that any representation and warranty expressly speaks as of an earlier
date, in which case such representation and warranty is true and correct as of
such date and any variance in such representation and warranty following such
date may only be the result of activities or transactions which have taken place
after the date hereof and which are contemplated by this Agreement.
6.2 Compliance with this Agreement. The Purchasers shall have
performed and complied in all material respects with all of their agreements and
conditions set forth herein that are required to be performed or complied with
by the Purchasers on or before the Closing Date.
6.3 Consents and Approvals. All consents, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons in respect of all Requirements of Law
and with respect to those Contractual Obligations of the Purchasers which are
necessary or required in connection with the execution, delivery or performance
(including the purchase of the Senior Convertible Notes and the Warrants, but
excluding the conversion of the Senior Convertible Notes, the exercise of the
Warrants, and the conversion or exercise of the Next Round Securities) by, or
enforcement against, the Purchasers of this Agreement shall have been obtained
and be in full force and effect, and the Company shall have been furnished with
appropriate evidence thereof.
6.4 Payment of Purchase Price. The Company shall have received the
Purchase Price.
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SECTION 7. COVENANTS
7.1 Covenants of the Company. The Company hereby covenants and
agrees with the Purchasers with respect to this Section 7, so long as they hold
any capital stock of the Company -- except to the extent that a particular
section of this Section 7 provides for an earlier termination, as follows:
(a) SEC Filings. From and after the date of this Agreement,
the Company agrees that it will use commercially reasonable efforts to file with
the SEC, within the time periods specified in the SEC's rules and regulations
for as long as they are applicable to the Company, (i) all quarterly and annual
financial information required to be filed with the SEC on Forms 10-QSB and
10-KSB, (ii) all current reports required to be filed with the SEC on Form 8-K
and (iii) any other information required to be filed with the SEC.
(b) Reservation of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Capital Stock, solely
for the purpose of issue or delivery upon conversion or exercise of the
Securities and of the conversion or exercise of shares of Capital Stock issued
upon such conversion or exercise, the number of shares of each class of Capital
Stock that are required to be issued upon such conversion or exercise. The
Company shall issue such shares of Capital Stock in accordance with the terms of
this Agreement, the other Transaction Documents and the Certificate of
Incorporation, and otherwise comply with the terms hereof and thereof.
(c) Registration and Listing. To the extent the reservation of
any shares of Capital Stock required to be reserved pursuant to Section 7.2 of
this Agreement requires registration with or approval of any Governmental
Authority under any Federal or state or other applicable law before such shares
of Capital Stock may be issued or delivered upon conversion or exercise, the
Company will in good faith and as expeditiously as possible cause such shares of
Capital Stock to be duly registered or approved, as the case may be. So long as
the shares of Common Stock are quoted on the NASDAQ or listed on any national
securities exchange, the Company will, if permitted by the rules of such system
or exchange, quote or list and keep quoted or listed on such system or exchange,
upon official notice of issuance, all shares of Common Stock issuable or
deliverable upon exercise of the Warrants or the conversion or exchange of Next
Round Securities into which the Senior Convertible Notes are convertible.
(d) Mutual Covenants. The parties agree that the anti-dilution
provision of Section 6(e)(ii) of the Certificate of Amendment of the Certificate
of Incorporation shall not apply as a result of the issuance of the Warrants.
SECTION 8. INDEMNIFICATION.
(a) Except as otherwise provided in this Section 8, the
Company agrees to indemnify, defend and hold harmless each Purchaser and its
Affiliates and their respective officers, directors, agents, employees,
subsidiaries, partners, members and controlling persons to the fullest extent
permitted by law from and against any and all claims, losses, liabilities,
damages, deficiencies, judgements, assessments, fines, settlements, costs or
expenses (including interest, penalties and reasonable fees, disbursements and
other charges of counsel) (collectively, "Losses") based upon, arising out of or
otherwise in respect of any inaccuracy in or any breach of any surviving
representation, warranty, covenant or agreement of the Company contained in any
Transaction Document. Notwithstanding the foregoing, the Company's liability
pursuant to this Section 8 shall in no event exceed $15,000,000.
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(b) Except as otherwise provided in this Section 8, the
Purchasers, severally and not jointly, agree to indemnify, defend and hold
harmless the Company and its respective officers, directors, agents, employees,
subsidiaries, partners, members and controlling persons to the fullest extent
permitted by law from and against any and all Losses based upon, arising out of
or otherwise in respect of any inaccuracy in or any breach of any surviving
representation, warranty, covenant or agreement (excluding the Standby
Commitment) of the Purchasers contained in any Transaction Document.
Notwithstanding the foregoing, the Purchasers' liability pursuant to this
Section 8 shall in no event exceed $3,000,000.
SECTION 9. REGISTRATION RIGHTS.
(a) The Company and each of the Purchasers hereby agree and
acknowledge that the shares of Common Stock for which the Warrants are
exercisable and any Common Stock issuable upon the conversion or exchange of the
Next Round Securities are Registrable Securities, as such term is defined in the
Investment Agreement, and that, until the closing of the Next Round, the
provisions of Section 9 of the Investment Agreement shall apply to all Persons
of record holding the Senior Convertible Notes or the Warrants (or any shares of
Registrable Securities issued, directly or indirectly, as a result of a
conversion under a Senior Convertible Note or as a result of an exercise of a
Warrant).
(b) Upon completion of the Next Round, the Purchasers shall
have the option to decide whether the registration rights and related provisions
set forth in Section 9 of the Investment Agreement shall apply to the Warrants
or whether the registration rights and related provisions agreed to in the final
documentation negotiated in connection with the Next Round Financing shall
apply.
SECTION 10. TERMINATION OF AGREEMENT
10.1 Termination. For purposes of clarification: (1) the Company
shall have no obligation to issue securities pursuant to the Standby Commitment
and (2) the Purchasers shall have no obligations to fund the Standby Commitment
after the earlier of (i) that date on which the Company has received financing
proceeds aggregating $15 million and (ii) December 31, 2000.
10.2 Survival. If this Agreement is terminated and the transactions
contemplated hereby are not consummated as described above, this Agreement shall
become void and of no further force and effect; provided, however, that (i) a
breaching party shall be liable to the non-breaching party for damages caused by
such breach; (ii) none of the non-breaching parties hereto shall have any
liability in respect of a termination of this Agreement pursuant to Section
10.1(a) or Section 10.1(b); and provided further, that none of the parties
hereto shall have any liability for speculative or unforeseeable damages
resulting from a termination of this Agreement.
SECTION 11. MISCELLANEOUS
11.1 Survival of Representations, Warranties and Covenants. The
representations and warranties, covenants and agreements contained herein shall
survive for a period of eighteen months following the Closing Date.
11.2 Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in the manner set forth in the
Investment Agreement.
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11.3 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. Subject to applicable securities laws, each of the Purchasers
may assign any of its rights under this Agreement to any of its Affiliates but
any such assignment shall not relieve any Purchaser from its obligations
hereunder. The Company may not assign any of its rights under this Agreement and
each of the other Transaction Documents, except to a successor-in-interest to
the Company, without the written consent of all of the Purchasers.
11.4 Amendment and Waiver.
(a) No failure or delay on the part of the Company or the
Purchasers in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy.
(b) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company or the Purchasers from the terms of
any provision of this Agreement, shall be effective (i) only if it is made or
given in writing and signed by the Company and the Purchasers, and (ii) only in
the specific instance and for the specific purpose for which made or given.
Except where notice is specifically required by this Agreement, no notice to or
demand on the Company in any case shall entitle the Company to any other or
further notice or demand in similar or other circumstances.
11.5 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
11.6 Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
11.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
11.8 Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
11.9 Rules of Construction. Unless the context otherwise requires,
"or" is not exclusive, and references to sections or subsections refer to
sections or subsections of this Agreement.
11.10 Entire Agreement. This Agreement, together with the exhibits
and schedules hereto, and the other Transaction Documents, are intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. There are no
restrictions,
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CUSIP NO. 000000000
promises, warranties or undertakings, other than those set forth or referred to
herein or therein, except those set forth in the Transaction Documents (as such
term is defined in the Investment Agreement).
11.11 Fees. Upon the Closing, the Company shall reimburse the
Purchasers for their reasonable out-of-pocket expenses (including attorney's
fees, disbursements and other charges) incurred in connection with the
transactions contemplated by this Agreement; provided, however, that the Company
shall not be obligated to reimburse the Purchasers for any reasonable
out-of-pocket expenses in excess of $25,000 in the aggregate.
11.12 Publicity; Confidentiality.
(a) Except as may be required by applicable law or the rules
of any securities exchange or market on which shares of Common Stock are traded,
none of the parties hereto shall issue a publicity release or public
announcement or otherwise make any disclosure concerning this Agreement, the
transactions contemplated hereby without prior approval by the other parties
hereto; provided, however, that nothing in this Agreement shall restrict any
Purchaser or the Company from disclosing information (i) that is already
publicly available, (ii) that was known to such Purchaser or the Company on a
non-confidential basis prior to its disclosure by the Company or such Purchaser,
as the case may be, (iii) that may be required or appropriate in response to any
summons or subpoena or in connection with any litigation, provided that such
Purchaser or the Company, as the case may be, will use reasonable efforts to
notify the Company or the Purchaser, as the case may be, in advance of such
disclosure so as to permit the Company or the Purchaser, as the case may be, to
seek a protective order or otherwise contest such disclosure, and such Purchaser
or the Company, as the case may be, will use reasonable efforts to cooperate, at
the expense of the Company, with the Company or the Purchaser, as the case may
be, in pursuing any such protective order, (iv) to the extent that such
Purchaser or the Company as the case may be reasonably believes it appropriate
in order to protect its investment in the Shares in order to comply with any
Requirement of Law, (v) to such Purchaser's or the Company's, as the case may
be, officers, directors, agents, employees, members, partners, controlling
persons, auditors or counsel, (vi) to Persons who are parties to similar
confidentiality agreements or (vii) to the prospective transferee who executes a
confidentiality agreement in connection with any contemplated transfer of any of
the Shares. If any announcement is required by law or the rules of any
securities exchange or market on which shares of Common Stock are traded to be
made by any party hereto, prior to making such announcement such party will, to
the extent practicable, deliver a draft of such announcement to the other
parties and shall give the other parties reasonable opportunity to comment
thereon.
(b) Unless substantially in the form previously disclosed, the
Purchasers shall have the opportunity to review and reasonably modify any
provision of any publicly release or public announcement or document which is to
be released to the public or filed with the SEC, which provision mentions the
Purchasers or any of their Affiliates, prior to the release of such document to
the public or the filing of such document with the SEC.
11.13 Further Assurances. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers hereunto duly authorized
on the date first above written.
BLUEFLY, INC.
By: /s/ E. Xxxxxxx Xxxx
-------------------
Name: E. Xxxxxxx Xxxx
Title: Chief Executive Officer
QUANTUM INDUSTRIAL PARTNERS LDC
By: /s/ Xxxxxxx X. Xxxx
-----------------------
Name: Xxxxxxx X. Xxxx
Title: Attorney-in-Fact
SFM DOMESTIC INVESTMENTS LLC
By: /s/ Xxxxxxx X. Xxxx
-----------------------
Name: Xxxxxxx X. Xxxx
Title: Attorney-in-Fact
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Schedule 2.2
SHARES AND PURCHASE PRICE
Purchase Price and
Aggregate Principal
Amount of Senior
Purchaser Convertible Note
--------- ----------------
Quantum Industrial Partners LDC $ 2,904,900
SFM Domestic Investments LLC $ 95,100
TOTAL $ 3,000,000.00
