Page 18 of 51 Pages
EXHIBIT OOO
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT, dated as of March
12, 2003 (this "Agreement"), is entered into by and between BLUEFLY, INC., a
Delaware corporation (the "Company"), and the investors listed on Schedule 1
hereto (each, an "Investor" and, collectively, the "Investors").
RECITALS
WHEREAS, the Investors desire to purchase from the Company, and the
Company desires to issue and sell to the Investors, 4,027.123 shares (the
"Purchased Shares") of Series D Convertible Preferred Stock, par value $.01 per
share (the "Series D Preferred Stock"), of the Company on the terms, and subject
to the conditions, contained herein;
WHEREAS, the Investors currently own, among other things, (a) an
aggregate of two thousand, one hundred (2,100) shares of the Company's Series
2002 Convertible Preferred Stock, par value $.01 per share (the "Series 2002
Preferred Stock"), (b) convertible demand promissory notes, dated September 27,
2002, issued by the Company in the aggregate principal amount of two million
dollars ($2,000,000), and with accrued and unpaid interest thereon, as of the
date hereof, in the aggregate amount of $27,123 (the "2002 Notes") and (c)
convertible demand promissory notes, dated January 28, 2003, issued by the
Company in the aggregate principal amount of one million dollars ($1,000,000),
and with accrued and unpaid interest thereon, as of the date hereof, in the
aggregate amount of $9,425 (the "2003 Notes");
WHEREAS, the 2002 Notes are prepayable at the Company's option, and
the Company desires to use a portion of the proceeds of the sale of the
Purchased Shares to prepay all outstanding principal and interest on the 2002
Notes; and
WHEREAS, the Series 2002 Preferred Stock and the 2003 Notes are
convertible, at the holder's option, into the equity securities sold by the
Company in any round of financing consummated after the date of their issuance,
and the Investors desire, pursuant to the conversion provisions of the Series
2002 Preferred Stock and the 2003 Notes, to convert their Series 2002 Preferred
Stock and 2003 Notes into an aggregate of 3,109.425 shares of Series D Preferred
Stock (the "Conversion Shares," and, together with the Purchased Shares, the
"Shares").
AGREEMENT
NOW, THEREFORE, in consideration for the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
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ARTICLE I
PURCHASE AND SALE OF SHARES
----------------------------
SECTION 1.1 Purchased Shares; Prepayment of 2002 Notes. Subject to the
terms and conditions hereof: (a) the Company hereby issues and sells to the
Investors, and each Investor hereby purchases from the Company, the number of
Purchased Shares set forth opposite such Investor's name in Schedule 1, for a
purchase price of one thousand dollars ($1,000) per share, resulting in an
aggregate purchase price for all Purchased Shares sold pursuant to the terms
hereof of $4,027,123 (the "Purchase Price"); (b) the Company hereby exercises
its right to prepay each 2002 Note in full pursuant to Section 2(b) thereof, and
directs that the portion of the Purchase Price set forth opposite each
Investor's name in Schedule 1 (the "Retained Amount") be retained by such
Investor as payment in full of all outstanding principal and interest under such
Investor's 2002 Note (the aggregate of such Retained Amounts equaling
$2,027,123); and (c) each Investor hereby waives any right to notice of
prepayment required under Section 2(b) of such Investor's 2002 Note, and accepts
the relevant Retained Amount as payment in full of all outstanding principal and
interest under such Investor's 2002 Notes. Simultaneously with the execution of
this Agreement, in order to further evidence the transactions described in
clauses (b) and (c) above, each Investor is returning its 2002 Note to the
Company for cancellation.
SECTION 1.2 Conversion Shares. Subject to the terms and conditions
hereof, each Investor hereby: (a) converts all outstanding principal and
interest under its 2003 Note (the aggregate amount of which is set forth
opposite such Investor's name on Schedule 1) into the number of shares of Series
D Preferred Stock set forth opposite such Investor's name on Schedule 1; (b)
converts all of its shares of Series 2002 Preferred Stock (the aggregate number
of shares of which is set forth on Schedule 1) into the number of shares of
Series D Preferred Stock set forth opposite such Investor's name on Schedule 1;
and (c) waives any right to notice of the issuance of the Purchased Shares
pursuant to Section 5(a) of each 2003 Note and Section 5 of the Certificate of
Powers, Designations, Preferences and Rights of the Series 2002 Preferred Stock.
Simultaneously with the execution of this Agreement, in order to further
evidence the transactions described in clauses (a) and (b) above, each Investor
is returning its 2003 Note and its shares of Series 2002 Preferred Stock to the
Company for cancellation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors as follows:
SECTION 2.1 Organization, etc. The Company and its Subsidiary (as
defined in Section 2.4(b)) have each been duly formed, and are each validly
existing as a corporation in good standing under the laws of their respective
States of incorporation, and are each qualified to do business as a foreign
corporation in each jurisdiction in which the failure to be so qualified could
reasonably be expected to have a material adverse effect on the assets,
liabilities, condition (financial or other), business or results of operations
of the Company and its Subsidiary taken as a whole (a "Material Adverse
Effect"). The Company and its Subsidiary each have the requisite corporate power
and
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authority to own, lease and operate their respective properties and to conduct
their respective businesses as presently conducted. The Company has the
requisite corporate power and authority to enter into, execute, deliver and
perform all of its duties and obligations under this Agreement and to consummate
the transactions contemplated hereby.
SECTION 2.2 Authorization. The execution, delivery and performance of
this Agreement, the issuance of the Shares and the prepayment of the 2002 Notes
have been duly authorized by all necessary corporate action on the part of the
Company, including, without limitation, the due authorization by the affirmative
votes of a majority of the disinterested directors of the Company's Board of
Directors.
SECTION 2.3 Validity; Enforceability. This Agreement has been duly
executed and delivered by the Company, and constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by, or subject to,
any bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and subject to general principles
of equity.
SECTION 2.4 Capitalization.
(a) As of the date hereof, the authorized capital stock of the
Company consists of 92,000,000 shares of common stock, $0.01 par value per share
(the "Common Stock"), and 25,000,000 shares of preferred stock, $0.01 par value
per share, of which 500,000 shares have been designated Series A Convertible
Preferred Stock, 9,000,000 shares have been designated Series B Convertible
Preferred Stock, 2,100 shares have been designated Series 2002 Convertible
Preferred Stock, 3,500 shares have been designated Series C Convertible
Preferred Stock and 7,150 shares have been designated Series D Convertible
Preferred Stock. Without giving effect to the transactions contemplated by this
Agreement, the issued and outstanding capital stock of the Company consists of
(i) 11,024,568 shares of Common Stock, (ii) 460,000 shares of Series A
Convertible Preferred Stock, (iii) 8,889,414 shares of Series B Convertible
Preferred Stock, (iv) 2,100 shares of Series 2002 Convertible Preferred Stock
and (v) 1,000 shares of Series C Convertible Preferred Stock. All such shares of
the Company have been duly authorized and are fully paid and non-assessable.
Except as set forth on Schedule 2.4 hereto or as otherwise contemplated by this
Agreement, there are no outstanding options, warrants or other equity securities
that are convertible into, or exercisable for, shares of the Company's capital
stock.
(b) The only Subsidiary of the Company is Clothesline
Corporation. The Company owns all of the issued and outstanding capital stock of
its Subsidiary, free and clear of all liens and encumbrances. All of such shares
of capital stock are duly authorized, validly issued, fully paid and
non-assessable, and were issued in compliance with the registration and
qualification requirements of all applicable federal, state and foreign
securities laws. There are no options, warrants, conversion privileges,
subscription or purchase rights or other rights presently outstanding to
purchase or otherwise acquire any authorized but unissued, unauthorized or
treasury shares of capital stock or other securities of, or any proprietary
interest in, the Company's Subsidiary, and there is no outstanding security of
any kind convertible into or exchangeable for
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such shares or proprietary interest. "Subsidiary" means, with respect to the
Company, a corporation or other entity of which 50% or more of the voting power
of the outstanding voting equity securities or 50% or more of the outstanding
economic equity interest is held, directly or indirectly, by the Company.
SECTION 2.5 Governmental Consents. The execution and delivery by
the Company of this Agreement, and the performance by the Company of the
transactions contemplated hereby, do not and will not require the Company to
effectuate or obtain any registration with, consent or approval of, or notice to
any federal, state or other governmental authority or regulatory body, other
than periodic and other filings under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and listing applications and/or notifications to
The Nasdaq SmallCap Market and The Boston Stock Exchange with respect to the
issuance of the Shares and/or the shares of Common Stock issuable upon
conversion of the Shares. The parties hereto agree and acknowledge that, in
making the representations and warranties in the foregoing sentence of this
Section 2.5, the Company is relying on the representations and warranties made
by the Investors in Section 3.4.
SECTION 2.6 No Violation. The execution and delivery of this
Agreement and the performance by the Company of the transactions contemplated
hereby will not (i) conflict with or result in a breach of any provision of the
articles of incorporation or by-laws of the Company, (ii) result in a default or
breach of, or, except for the approval of the holders of the Company's Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series 2002 Convertible Preferred Stock and the Series C Convertible Preferred
Stock, require any consent, approval, authorization or permit of, or filing or
notification to, any person, company or entity under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, loan, factoring
arrangement, license, agreement, lease or other instrument or obligation to
which the Company or its Subsidiary is a party or by which the Company or its
Subsidiary or any of their respective assets may be bound or (iii) violate any
law, judgment, order, writ, injunction, decree, statute, rule or regulation of
any court, administrative agency, bureau, board, commission, office, authority,
department or other governmental entity applicable to the Company or its
Subsidiary, except, in the case of clause (ii) or (iii) above, any such event
that could not reasonably be expected to have a Material Adverse Effect or
materially impair the transactions contemplated hereby.
SECTION 2.7 Issuance of Shares. The Shares have been validly
issued, and, upon payment therefor, will be fully paid and non-assessable. The
offering, issuance, sale and delivery of the Shares as contemplated by this
Agreement are exempt from the registration and prospectus delivery requirements
of the Securities Act of 1933, as amended (the "Securities Act"), are being made
in compliance with all applicable federal and (except for any violation or
non-compliance that could not reasonably be expected to have a Material Adverse
Effect) state laws and regulations concerning the offer, issuance and sale of
securities, and are not being issued in violation of any preemptive or other
rights of any stockholder of the Company. The parties hereto agree and
acknowledge that, in making the representations and warranties in the foregoing
sentence of this Section 2.7, the Company is relying on the representations and
warranties made by the Investors in Section 3.4.
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SECTION 2.8 Absence of Certain Developments. Since December 31,
2001, there has not been any: (i) material adverse change in the condition,
financial or otherwise, of the Company and its Subsidiary (taken as a whole) or
in the assets, liabilities, properties or business of the Company and its
Subsidiary (taken as a whole); (ii) declaration, setting aside or payment of any
dividend or other distribution with respect to, or any direct or indirect
redemption or acquisition of, any capital stock of the Company; (iii) waiver of
any valuable right of the Company or its Subsidiary or cancellation of any
material debt or claim held by the Company or its Subsidiary; (iv) material
loss, destruction or damage to any property of the Company or its Subsidiary,
whether or not insured; (v) acquisition or disposition of any material assets
(or any contract or arrangement therefor) or any other material transaction by
the Company or its Subsidiary otherwise than for fair value in the ordinary
course of business consistent with past practice; or (vi) other agreement or
understanding, whether in writing or otherwise, for the Company or its
Subsidiary to take any action of the type, or any action that would result in an
event of the type, specified in clauses (i) through (v).
SECTION 2.9 Commission Filings. The Company has filed all
required forms, reports and other documents with the Securities and Exchange
Commission (the "Commission") for periods from and after January 1, 2001
(collectively, the "Commission Filings"), each of which has complied in all
material respects with all applicable requirements of the Securities Act and/or
the Exchange Act (as applicable). The Company has heretofore made available to
the Investors all of the Commission Filings, including the Company's Annual
Report on Form 10-K for the year ended December 31, 2001 and the Company's
Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2002,
June 30, 2002 and September 30, 2002. As of their respective dates, the
Commission Filings did not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim consolidated
financial statements of the Company included or incorporated by reference in
such Commission Filings have been prepared in accordance with generally accepted
accounting principles, consistently applied ("GAAP") (except as may be indicated
in the notes thereto or, in the case of the unaudited consolidated statements,
as permitted by Form 10-Q), complied as of their respective dates in all
material respects with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto, and fairly
present, in all material respects, the consolidated financial position of the
Company and its Subsidiary as of the dates thereof and the results of operations
for the periods then ended (subject, in the case of any unaudited consolidated
interim financial statements, to the absence of footnotes required by GAAP and
normal year-end adjustments).
SECTION 2.10 Brokers. Neither the Company, nor any of its
officers, directors or employees, has employed any broker or finder, or incurred
any liability for any brokerage fees, commissions, finder's or other similar
fees or expenses in connection with the transactions contemplated hereby.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor represents and warrants to the Company, severally but
not jointly, as follows:
SECTION 3.1 Organization, etc. Such Investor has been duly formed and
is validly existing and in good standing under the laws of its jurisdiction of
organization. Such Investor has the requisite organizational power and authority
to enter into, execute, deliver and perform all of its duties and obligations
under this Agreement and to consummate the transactions contemplated hereby.
SECTION 3.2 Authority. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary organizational or other
action on the part of such Investor.
SECTION 3.3 Validity; Enforceability. This Agreement has been duly
executed and delivered by such Investor, and constitutes the legal, valid and
binding obligation of such Investor, enforceable against such Investor in
accordance with its terms, except as such enforceability may be limited by, or
subject to, any bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and subject to
general principles of equity.
SECTION 3.4 Investment Representations.
(a) Such Investor acknowledges that the offer and sale of the
Shares to such Investor have not been registered under the Securities Act, or
the securities laws of any state or regulatory body, are being offered and sold
in reliance upon exemptions from the registration requirements of the Securities
Act and such laws and may not be transferred or resold without registration
under such laws unless an exemption is available. The certificates representing
the Shares will be imprinted with a legend in substantially the following form:
"THE OFFER AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER SUCH ACT AND UNDER ANY APPLICABLE STATE
SECURITIES LAWS UNLESS, IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND STATE SECURITIES LAWS IS AVAILABLE."
(b) Such Investor is acquiring the Shares for investment, and not
with a view to the resale or distribution thereof, and is acquiring such Shares
for its own account.
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(c) Such Investor is an "accredited investor" (as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act), is
sophisticated in financial matters and is familiar with the business of the
Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
Such Investor has had the opportunity to investigate on its own the Company's
business, management and financial affairs and has had the opportunity to review
the Company's operations and facilities and to ask questions and obtain whatever
other information concerning the Company as such Investor has deemed relevant in
making its investment decision.
(d) Such Investor is in compliance with the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001. Neither such Investor, nor any of its principal
owners, partners, members, directors or officers is included on: (i) the Office
of Foreign Assets Control list of foreign nations, organizations and individuals
subject to economic and trade sanctions, based on U.S. foreign policy and
national security goals; (ii) Executive Order 13224, which sets forth a list of
individuals and groups with whom U.S. persons are prohibited from doing business
because such persons have been identified as terrorists or persons who support
terrorism or (iii) any other watch list issued by any governmental authority,
including the Commission.
(e) No representations or warranties have been made to such
Investor by the Company or any director, officer, employee, agent or affiliate
of the Company, other than the representations and warranties of the Company set
forth herein, and the decision of such Investor to purchase the Shares is based
on the information contained herein, the Commission Filings and such Investor's
own independent investigation of the Company.
SECTION 3.5 Governmental Consents. The execution and delivery by such
Investor of this Agreement, and the performance by such Investor of the
transactions contemplated hereby, do not and will not require such Investor to
effectuate or obtain any registration with, consent or approval of, or notice to
any federal state or other governmental authority or regulatory body, except for
the filing with the Commission of a Form 4 and an amendment to such Investor's
Schedule 13D under the Exchange Act with respect to its acquisition of the
Shares.
SECTION 3.6 No Violation. The execution and delivery of this Agreement
and the performance by such Investor of the transactions contemplated hereby,
will not (i) conflict with or result in a breach of any provision of the
articles of incorporation, by-laws or similar organizational documents of such
Investor or (ii) violate any law, judgment, order, writ, injunction, decree,
statute, rule or regulation of any court, administrative agency, bureau, board,
commission, office, authority, department or other governmental entity
applicable to such Investor, except, in the case of clause (ii) above, any such
violation that could not reasonably be expected to materially impair the
transactions contemplated hereby.
SECTION 3.7 Brokers. Neither such Investor, nor any of its officers,
directors or employees, has employed any broker or finder, or incurred any
liability for any brokerage fees,
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commissions, finder's or other similar fees or expenses in connection with the
transactions contemplated hereby.
ARTICLE IV
SURVIVAL; INDEMNIFICATION
SECTION 4.1 Survival. The representations and warranties contained in
Articles II and III hereof shall survive until the first anniversary of the date
hereof.
SECTION 4.2 Indemnification. Each party (including its officers,
directors, employees, affiliates, agents, successors and assigns (each an
"Indemnified Party")) shall be indemnified and held harmless by the other
parties hereto (each an "Indemnifying Party") for any and all liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments and
penalties (including, without limitation, reasonable attorneys' fees and
expenses) actually suffered or incurred by them (collectively, "Losses"),
arising out of or resulting from the breach of any representation or warranty
made by an Indemnifying Party contained in this Agreement. Notwithstanding the
foregoing, the aggregate liability of any Investor under this Article IV shall
in no event exceed fifty percent (50%) of the purchase price paid by such
Investor for the Shares purchased by it and the aggregate liability of the
Company under this Article IV shall in no event exceed fifty percent (50%) of
the purchase price paid by the Investors for the Shares, except that the
Company's liability for a violation of any of the representations and warranties
contained in the first two sentences of Section 2.7 may exceed such limitation,
but shall in no event exceed one hundred percent (100%) of the purchase price
paid by the Investors for the Shares.
SECTION 4.3 Indemnification Procedure. The obligations and liabilities
of the Indemnifying Party under this Article IV with respect to Losses arising
from claims of any third party that are subject to the indemnification provided
for in this Article IV ("Third Party Claims") shall be governed by and
contingent upon the following additional terms and conditions: if an Indemnified
Party shall receive notice of any Third Party Claim, the Indemnified Party shall
give the Indemnifying Party notice of such Third Party Claim promptly after the
receipt by the Indemnified Party of such notice (which notice shall include the
amount of the Loss, if known, and method of computation thereof, and containing
a reference to the provisions of this Agreement in respect of which such right
of indemnification is claimed or arises); provided, however, that the failure to
provide such notice shall not release the Indemnifying Party from any of its
obligations under this Article IV except to the extent the Indemnifying Party is
materially prejudiced by such failure and shall not relieve the Indemnifying
Party from any other obligation or liability that it may have to any Indemnified
Party otherwise than under this Article IV. Upon written notice to the
Indemnified Party within five (5) days of the receipt of such notice, the
Indemnifying Party shall be entitled to assume and control the defense of such
Third Party Claim at its or his expense and through counsel of its or his choice
(which counsel shall be reasonably satisfactory to the Indemnified Party);
provided, however, that, if there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the reasonable judgment
of counsel to the Indemnified Party for the same counsel to represent both the
Indemnified Party and the Indemnifying Party, then the Indemnified Party shall
be entitled to retain its or his own counsel in
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each jurisdiction for which the Indemnified Party reasonably determines counsel
is required, at the expense of the Indemnifying Party. In the event the
Indemnifying Party exercises the right to undertake any such defense against any
such Third Party Claim as provided above, the Indemnified Party shall cooperate
with the Indemnifying Party in such defense and make available to such
Indemnifying Party, at the Indemnifying Party's expense, all witnesses,
pertinent records, materials and information in the Indemnified Party's
possession or under the Indemnified Party's control relating thereto as is
reasonably required by the Indemnifying Party. Similarly, in the event the
Indemnified Party is, directly or indirectly, conducting the defense against any
such Third Party Claim, the Indemnifying Party shall cooperate with the
Indemnified Party in such defense and make available to the Indemnified Party,
at the Indemnifying Party's expense, all such witnesses (including himself),
records, materials and information in the Indemnifying Party's possession or
under the Indemnifying Party's control relating thereto as is reasonably
required by the Indemnified Party. No such Third Party Claim may be settled by
the Indemnifying Party on behalf of the Indemnified Party without the prior
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld); provided, however, in the event that the Indemnified
Party does not consent to any such settlement that would provide it with a full
release from indemnified Loss and would not require it to take, or refrain from
taking, any action, the Indemnifying Party's liability for indemnification shall
not exceed the amount of such proposed settlement. The Indemnified Party will
refrain from any act or omission that is inconsistent with the position taken by
the Indemnifying Party in the defense of a Third Party Claim unless the
Indemnified Party determines that such act or omission is reasonably necessary
to protect its own interest.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Change of Control Provision. For so long as any of the
Shares are owned by the Investors or their affiliates, the Company will not
agree to, or take any action to approve or otherwise facilitate any, merger or
consolidation or Change of Control (including granting approvals required under
applicable anti-takeover statutes), unless provision has been made for the
holders of the Shares to receive from the acquiror or any other person or entity
(other than the Company) as a result of and in connection with the transaction
an amount in cash equal to the aggregate liquidation preference for the Shares
held by them, as set forth in the Certificate of Powers, Designations,
Preferences and Rights of the Series D Preferred Stock. The parties hereto agree
that irreparable damage would occur in the event that the provisions of this
Section 5.1 were not performed in accordance with their terms and the Investors
shall be entitled to specific performance of the terms of this Section 5.1 in
addition to any other remedies at law or in equity. For purposes of this Section
5.1: a "Change of Control" shall mean any of the following (i) any person or
"group" (within the meaning of Section 13(d)(3) of the Exchange Act) becoming
the beneficial owner, directly or indirectly, of outstanding shares of Capital
Stock of the Company entitling such Person or Persons to exercise 50% or more of
the total votes entitled to be cast at a regular or special meeting, or by
action by written consent, of the shareholders of the Company in the election of
directors (the term "beneficial owner" shall be determined in accordance with
Rule 13d-3 of the Exchange Act), (ii) a majority of the Board of Directors of
the Company shall consist of Persons other than Continuing Directors, (iii) a
recapitalization, reorganization, merger,
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consolidation or similar transaction, in each case with respect to which all or
substantially all the Persons who are the respective beneficial owners, directly
or indirectly, of the outstanding shares of Capital Stock of the Company
immediately prior to such recapitalization, reorganization, merger,
consolidation or similar transaction, will own less than 50% of the combined
voting power of the then outstanding shares of Capital Stock of the Company
resulting from such recapitalization, reorganization, merger, consolidation or
similar transaction, (iv) the sale or other disposition of all or substantially
all the assets of the Company in one transaction or in a series of related
transactions, (v) any transaction occurs (other than one described in (iv) or
(v))), the result of which is that the Common Stock is not required to be
registered under Section 12 of the Exchange Act and in which the holders of
Common Stock of the Company do not receive common stock of the Person surviving
such transaction which is required to be registered under Section 12 of the
Exchange Act, or (vi) immediately after any merger, consolidation,
recapitalization or similar transaction, a "group" (within the meaning of
Section 13(d)(3) of the Exchange Act), other than a group that includes the
Investors and/or their affiliates, shall be the beneficial owners, directly or
indirectly, of outstanding shares of Capital Stock of the Company (or any Person
surviving such transaction) entitling them collectively to exercise 50% or more
of the total voting power of shares of Capital Stock of the Company (or the
surviving Person in such transaction) and in connection with or as a result of
such transaction, the Company (or such surviving Person) shall have incurred or
issued additional indebtedness such that the total indebtedness so incurred or
issued equals at least 50% of the consideration payable in such transaction;
"Capital Stock" shall mean, with respect to the Company, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, the Company's capital stock; and "Person"
shall mean any individual, firm, corporation, partnership, limited liability
company, trust, incorporated or unincorporated association, joint venture, joint
stock company, governmental authority or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity; and "Continuing
Directors" shall mean any member of the Board of Directors on the date hereof
and any other member of the Board of Directors who shall be recommended or
elected to succeed or become a Continuing Director by a majority of the
Continuing Directors who are then members of the Board of Directors.
SECTION 5.2 Registrable Securities. The shares of Common Stock
issuable upon the conversion of the Shares (the "New Registrable Securities")
shall be deemed "Registrable Securities" under the terms of the Investment
Agreement by and among the Company, the Company's predecessor and the Investors,
dated November 13, 2000 (the "Series B Investment Agreement") (subject to the
provisions of Section 13.1(a) of the Series B Investment Agreement), and the
parties hereto (who also constitute all of the parties to the Series B
Investment Agreement) hereby amend the definition of "Registrable Securities"
contained in the Series B Investment Agreement so that such definition includes
the New Registrable Securities, along with any other securities already included
within the definition thereof.
SECTION 5.3 Standby Commitment. The Investors hereby irrevocably
agree, severally but not jointly, that they shall provide the Company up to an
aggregate of one million dollars ($1,000,000) (the "Commitment Amount"). The
Commitment Amount may be drawn by the Company, at its option (as determined by
the disinterested members of the Board of Directors of
Page 28 of 51 Pages
the Company) at any time prior to January 1, 2004 in one or more tranches;
provided, however, that the Company may draw from the Commitment Amount only at
such time as its total cash balances are less than one million dollars
($1,000,000); and provided, further, that the Commitment Amount shall be reduced
by the gross cash proceeds received by the Company or any of its subsidiaries
from the issuance after the date hereof of any equity or convertible securities,
excluding the issuance of equity or convertible securities in connection with:
(1) financing provided by the Investors pursuant to this Agreement, (2) any
trade payables and other financing arrangements entered into in the ordinary
course of business and (3) any financing or credit accommodations received by
the Company pursuant to the Financing Agreement, dated March 30, 2001, between
the Company and Xxxxxxxxx & Xxxxxxxxx, Inc., as the same may be amended or
supplemented from time to time. Any and all draws against the Commitment Amount
shall be effected through the purchase of newly-designated shares of Series E
Convertible Preferred Stock ("Series E Preferred Stock") on terms and conditions
substantially identical to those set forth herein, with the Series E Preferred
Stock having rights substantially identical to the Series D Preferred Stock
except that: (a) the conversion price of the Series E Preferred Stock shall be
the lower of (i) the conversion price of the Series D Preferred Stock and (ii)
the average closing price of the Common Stock on the Nasdaq SmallCap Market for
the ten (10) trading days preceding the issuance of the Series E Preferred
Stock; and (b) the Series E Preferred Stock shall not be convertible into Common
Stock (and shall not be entitled to vote with the Common Stock on matters
submitted to a vote of the holders of the Common Stock) until such time as the
Company's stockholders approve the conversion rights of the Series E Preferred
Stock to the extent such approval is required by the rules of the Nasdaq
SmallCap Market or any other national securities exchange or quotation system
upon which the Common Stock may be listed from time to time. The Company shall
notify the Investors in writing within two (2) 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. The obligation of Quantum Industrial Partners LDC in respect of the
Commitment Amount shall be limited to 96.83% of the entire Commitment Amount,
and the obligation of SFM Domestic Investments LLC shall be limited to 3.17% of
the entire Commitment Amount.
SECTION 5.4 Stockholder Approval. The Company shall put forth
proposals at its next annual or special meeting of stockholders seeking approval
of the conversion rights of the Series D Preferred Stock and the Series E
Preferred Stock. The Company shall take all reasonable action to convene a
meeting of stockholders of the Company to be held on or before December 31, 2003
to approve the foregoing matters.
SECTION 5.5 Publicity. Except as may be required by applicable law or
the rules of any securities exchange or market on which securities of the
Company are traded, no party hereto shall issue a press release or public
announcement or otherwise make any disclosure concerning this Agreement and the
transactions contemplated hereby, without prior approval of the others;
provided, however, that nothing in this Agreement shall restrict the Company or
any Investor from disclosing such information (a) that is already publicly
available, (b) that may be required or appropriate in response to any summons or
subpoena (provided that the disclosing party will use commercially reasonable
efforts to notify the other parties in advance of such disclosure under this
Page 29 of 51 Pages
clause (b) so as to permit the non-disclosing parties to seek a protective order
or otherwise contest such disclosure, and the disclosing party will use
commercially reasonable efforts to cooperate, at the expense of the
non-disclosing parties, in pursuing any such protective order) or (c) in
connection with any litigation involving disputes as to the parties' respective
rights and obligations hereunder.
SECTION 5.6 Entire Agreement. This Agreement and any other agreement
or instrument to be delivered expressly pursuant to the terms hereof constitute
the entire Agreement between the parties hereto with respect to the subject
matter hereof and supersede all previous negotiations, commitments and writings
with respect to such subject matter.
SECTION 5.7 Assignments; Parties in Interest. Neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing herein,
express or implied, is intended to or shall confer upon any person not a party
hereto any right, benefit or remedy of any nature whatsoever under or by reason
hereof, except as otherwise provided herein.
SECTION 5.8 Amendments. This Agreement may not be amended or modified
except by an instrument in writing signed by, or on behalf of, the parties
against whom such amendment or modification is sought to be enforced.
SECTION 5.9 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience of reference only and do not constitute a
part of and shall not be utilized in interpreting this Agreement.
SECTION 5.10 Notices and Addresses. Any notice, demand, request,
waiver, or other communication under this Agreement shall be in writing and
shall be deemed to have been duly given on the date of service, if personally
served or sent by facsimile; on the business day after notice is delivered to a
courier or mailed by express mail, if sent by courier delivery service or
express mail for next day delivery; and on the fifth business day after mailing,
if mailed to the party to whom notice is to be given, by first class mail,
registered, return receipt requested, postage prepaid and addressed as follows:
To Company: Bluefly, Inc.
00 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxxx X. Xxxxxx
With a copy to:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
Page 30 of 51 Pages
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
To the Investors: To the address set forth on Schedule 1.
SECTION 5.11 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
SECTION 5.12 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 conflicts of law principles. The parties agree that the federal and
state courts located in New York, New York shall have exclusive jurisdiction
over any dispute involving this Agreement or the transactions contemplated
hereby, and each party hereby irrevocably submits to the jurisdiction of, and
waives any objection to the laying of venue in, such courts.
SECTION 5.13 Counterparts; Facsimile Signatures. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart. This Agreement
may be executed by facsimile, and a facsimile signature shall have the same
force and effect as an original signature on this Agreement.
SECTION 5.14 Expenses. The Company shall reimburse the Investors for
their reasonable legal fees and expenses incurred in connection with the
negotiation of this Agreement and the transactions contemplated hereby. Except
as provided above, all costs and expenses, including, without limitation, fees
and disbursements of counsel, incurred in connection with the negotiation,
execution and delivery of this Agreement and its related documents shall be paid
by the party incurring such costs and expenses, whether or not the closing shall
have occurred.
Page 31 of 51 Pages
IN WITNESS WHEREOF, this Agreement has been duly executed on the date
first set forth above.
BLUEFLY, INC.
By:
-------------------------------
Name:
Title:
QUANTUM INDUSTRIAL PARTNERS LDC
By:
-------------------------------
Name:
Title:
SFM DOMESTIC INVESTMENTS LLC
By:
-------------------------------
Name:
Title:
Page 32 of 51 Pages
SCHEDULE 1
INVESTORS AND SHARE ALLOCATIONS
-------------------------------
Shares
Aggregate Issued
Principal Shares Upon
Aggregate and Issues Shares of Conver-
Purchase Interest Upon 2002 sion of
Price for Outstanding Conversion Preferred 2002 Total
Name and Address Shares Shares Retained Under of Stock Preferred Shares Total
of Investor Purchased Purchased Amount 2003 Note 2003 Note Converted Stock Issued Funded
---------------- --------- --------- -------- ----------- --------- -------- ------- ------ ------
------------------------------------------------------------------------------------------------------------------------------------
Quantum Industrial 3,899.463 $3,899,463 $1,962,863 $977,426 977.426 2,033.43 2,033.43 6,910.319 $1,936,600
Partners LDC
Xxxx Xxxxxxxxx 0
Xxxxxxxxxx
Xxxxxxx
Xxxxxxxxxxx-Xxxxxxxx
with a copy to:
Xxxxx Fund
Management LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
00000
Facsimile:
(000) 000-0000
Attn:
Xxxx X. Xxxxx, Esq.
------------------------------------------------------------------------------------------------------------------------------------
SFM Domestic
Investments LLC 127.660 $127,660 $64,260 $31,999 31.999 66.57 66.57 226.229 $63,400
c/x Xxxxx Fund
Management LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
00000
Facsimile:
(000) 000-0000
Attn:
Xxxx X. Xxxxx, Esq.
------------------------------------------------------------------------------------------------------------------------------------
TOTAL 4,027.123 $4,027,123 $2,027,123 $1,009,425 1,099.425 2,100 2,100 7,136.548 $2,000,000
------------------------------------------------------------------------------------------------------------------------------------
Page 33 of 51 Pages
SCHEDULE 2.4
CAPITALIZATION
As of the date hereof, but without giving effect to the transactions
contemplated by this Agreement, the following equity securities are outstanding
and convertible into, or exercisable for shares of Common Stock:
1. 460,000 shares of Series A Convertible Preferred Stock (the
"Series A Stock") are issued and outstanding. The Series A
Stock is convertible into 3,931,624 shares of Common Stock.
2. 8,889,414 shares of Series B Convertible Preferred Stock (the
"Series B Stock") are issued and outstanding. The Series B
Stock is convertible into 22,336,913 shares of Common Stock.
3. Warrants to purchase an aggregate of 1,094,144 shares of
Common Stock are issued and outstanding.
4. Options issued to purchase 9,525,412 shares of Common Stock
are issued and outstanding under the Company's 1997 Stock
Option Plan, as amended, and 2000 Stock Option Plan, as
amended.
5. 2,100 shares of Series 2002 Preferred Stock are issued and
outstanding. The Series 2002 Preferred Stock is convertible
into Subsequent Round Securities (as defined in the
Certificate of Designations relating to the Series 2002
Stock), and such Subsequent Round Securities may include
Common Stock or securities convertible into Common Stock.
6. 1,000 shares of Series C Convertible Preferred Stock (the
"Series C Stock") are issued and outstanding. The Series C
Stock is convertible into 1,075,270 shares of Common Stock.
7. 2002 Notes in the aggregate principal amount of $2,000,000 are
issued and outstanding. The 2002 Notes, without regard to
interest accumulated thereon, are convertible into 2,000
shares of Series C Stock, which are convertible into 2,150,540
shares of Common Stock.
8. 2003 Notes in the aggregate principal amount of $1,000,000 are
issued and outstanding. The 2003 Notes are convertible into
Subsequent Round Securities (as defined in the 2003 Notes),
and such Subsequent Round Securities may include Common Stock
or securities convertible into Common Stock.
