Contract
Exhibit 10.3
This instrument is subject to the terms of aN Intercreditor Agreement, dated AUGUST 13, 2012, between Xxxxx Fargo BANK, NATIONAL ASSOCIATION, PRENTICE CONSUMER PARTNERS, LP, A DELAWARE LIMITED PARTNERSHIP AND RHO VENTURES VI, L.P., A DELAWARE LIMITED PARTNERSHIP (the “INTERCREDITOR AGREEMENT”). payor shall furnish a copy of THE intercreditor agreement upon written request and without charge.
THE OFFER AND SALE OF THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE. THIS NOTE AND ANY SECURITIES ISSUABLE UPON THE CONVERSION HEREOF MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. CERTIFICATES REPRESENTING ANY SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE SHALL INCLUDE A LEGEND TO SIMILAR EFFECT AS THE FOREGOING.
BLUEFLY, INC.
SECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTE
$1,500,000
| New York, New York | August 13, 2012 |
FOR VALUE RECEIVED, the undersigned, BLUEFLY, INC., a Delaware corporation (the “Payor” or the “Company”), promises to pay to the order of Rho Ventures VI L.P., a Delaware limited partnership, or its registered assign (the “Payee”), the principal sum of One Million Five Hundred Thousand Dollars ($1,500,000) and interest on the outstanding principal balance as set forth herein.
(a) The outstanding principal balance of this Secured Subordinated Convertible Promissory Note (this “Note”) shall bear interest at an annual rate equal to 12% per annum, with interest accruing, from and including the date hereof, on a cumulative, compounding basis. Interest shall be computed on the basis of a 365- or 366-day year, as the case may be, and the actual number of days elapsed, and, subject to Section 5, shall be payable only upon repayment of the principal on any Repayment Date (as defined below) in cash.
(b) The outstanding principal and all accrued and unpaid interest shall be paid in full upon the earliest to occur of (i) August 13, 2013, (ii) a Change of Control (as defined below) and (iii) the date on which the Company consummates a debt or equity financing
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(other than a Permitted Refinancing) resulting in proceeds to the Company of at least $7,500,000 (excluding for this purpose any proceeds received by the Company on account of the conversion of any notes, including this Note, or the exercise of any warrants, in each case, whether currently outstanding or hereafter issued) (the “Maturity Date”), unless repaid earlier pursuant to the provisions of Section 2 (the date of any payment pursuant to Section 2 and the Maturity Date, collectively referred to as a “Repayment Date”) or unless converted into Conversion Securities (as defined below) pursuant to Section 5 on or prior to the Maturity Date. On a Repayment Date, the Payor shall pay the applicable amount of principal and interest in lawful money of the United States of America by wire or bank transfer of immediately available funds to an account designated by the Payee in writing from time to time. “Change of Control” means (1) the Company consummating a transaction or series of related transactions to effectuate any sale or other disposition of all or substantially all of its assets, (2) the Company consummating a consolidation or merger with or into another entity (other than a merger of the Company with and into one of its wholly-owned subsidiaries), (3) any “Person” (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or “group” (as defined in Rule 13d-5, promulgated under the Exchange Act) other than Payee and/or its affiliates and one or more of Quantum Industrial Partners, LDC, SFM Domestic Investments, LLC, Maverick Capital, Ltd., Rho Ventures, L.P., Prentice Capital Management, LP and/or their affiliates or any group that includes any such Person, becoming the beneficial owner (as determined by Rule 13d-3, promulgated under the Exchange Act), directly or indirectly, of outstanding shares of 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 stockholders of the Company in the election of directors, or (4) any other sale of a majority of the outstanding equity of the Company, in one transaction or in a series of transactions.
2. Prepayment Upon Event of Default.
(a) Upon the occurrence of an Event of Default (under Section 3(d) or (e)), the outstanding principal of and all accrued interest on this Note shall be accelerated and shall automatically become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are expressly waived by the Payor, notwithstanding anything contained herein to the contrary.
(b) Subject to the terms of the Intercreditor Agreement, the Payee shall, at their sole option, have the right to require Payor to pay the outstanding principal of and all accrued interest on this Note upon the occurrence of any Event of Default under Section 3(a), (b), (c), (f), (g) or (h).
(c) Any prepayment under this Section 2 shall include payment of reasonable costs and expenses, if any, of the Payee associated with such prepayment.
3. Events of Default. An “Event of Default” shall occur if:
(a) the Payor shall default in the payment of the principal of or interest payable on this Note, when and as the same shall become due and payable, whether at maturity or at a date fixed for prepayment or by acceleration or otherwise and such default with respect to the payment of interest shall continue unremedied for two days;
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(b) the Payor shall fail to observe or perform any covenant or agreement contained in this Note, and such failure shall continue for ten business days after Payor receives notice of such failure;
(c) any representation, warranty, certification or statement made by or on behalf of the Payor in this Note or in any certificate, writing or other document delivered pursuant hereto shall prove to have been incorrect in any material respect when made;
(d) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (A) relief in respect of Payor or of a substantial part of Payor's respective property or assets, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law (any such law, a “Bankruptcy Law”), (B) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for a substantial part of the property or assets of any Payor, (C) the winding up or liquidation of any Payor; and such proceeding or petition shall continue undismissed for 60 days, or an order or decree approving or ordering any of the foregoing shall be entered;
(e) the Payor shall (A) voluntarily commence any proceeding or file any petition seeking relief under a Bankruptcy Law, (B) consent to the institution of or the entry of an order for relief against it, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (d), above, (C) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for a substantial part of the property or assets of the Payor, (D) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (E) make a general assignment for the benefit of creditors, (F) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (G) take any action for the purpose of effecting any of the foregoing;
(f) one or more judgments or orders for the payment of money in excess of $250,000 in the aggregate shall be rendered against the Payor and such judgment(s) or order(s) shall continue unsatisfied and unstayed for a period of 30 days;
(g) the Payor shall default in the payment of any principal, interest or premium, or any observance or performance of any covenants or agreements, with respect to indebtedness (excluding trade payables and other indebtedness entered into in the ordinary course of business) in excess of $125,000 in the aggregate for borrowed money or any obligation which is the substantive equivalent thereof and such default shall continue for more than the period of grace, if any, or of any such indebtedness or obligation shall be declared due and payable prior to the stated maturity thereof;
(h) any material provisions of this Note shall terminate or become void or unenforceable or the Payor shall so assert in writing.
(a) Grant of Security. Subject to the terms of the Intercreditor Agreement, the Company hereby grants to and creates in favor of Payee a continuing security
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interest and lien under the UCC (as defined below) and all other applicable laws in and to all Collateral (as defined below), as security for the full and timely payment, observance and performance of this Note. “Collateral” means any and all of the now existing and hereafter acquired personal property assets of the Company and its subsidiaries.
(b) Rights in Collateral. Company represents, warrants and covenants that it has and shall have at all times good and valid title to all of the Collateral, free and clear of all Liens (as such term is defined in that certain Amended and Restated Credit Agreement, dated as of June 17, 2011, by and between Bluefly, Inc. and Xxxxx Fargo Bank, National Association, as amended, restated or refinanced from time to time (the “Credit Agreement”)), other than (i) Liens in favor of Xxxxx Fargo Bank, National Association under the Credit Agreement and (ii) Permitted Encumbrances (as such term is defined in the Credit Agreement). Company represents and warrants that this Note creates a valid security interest in the Collateral and, upon the filing of financing statements in the State of Delaware, such security interest shall constitute a perfected lien on and security interest in all Collateral in which a security interest may be perfected by filing a financing statement pursuant to the Uniform Commercial Code (the “UCC”).
(c) Preservation of Security Interest. Company shall diligently preserve and protect Payee’s security interest in the Collateral and shall, at its expense, cause such security interest to be and remain perfected so long as this Note or any portion thereof or obligation hereunder remains outstanding and unpaid and, for such purposes, Company shall, from time to time at Payee’s reasonable request and at Company’s expense, file or record, or cause to be filed or recorded, such instruments, documents and notices (including, without limitation, financing statements and continuation statements) as may be necessary to perfect and continue such security interests. Company shall do all such other acts and things and shall execute and deliver all such other instruments and documents as Payee may reasonably request from time to time to protect and preserve the priority of Payee’s security interest in the Collateral, as a perfected security interest in the Collateral.
(i) Subject to the terms and conditions of this Section 5 and to stockholder approval (and so subject only to the extent required by the rules of the Nasdaq Capital Market or any other national securities exchange or quotation system upon which the Payor’s common stock, par value $0.01 per share (“Common Stock”), may be listed from time to time), the Payee shall have the right, at its option, , upon or immediately following the consummation of any Subsequent Round of Financing (as defined below), to convert all of the outstanding principal and interest of this Note (the “Principal Obligations”) into a number of fully paid and nonassessable Subsequent Round Securities (with the most favorable terms received by any investor in such Subsequent Round of Financing) equal to the quotient obtained by dividing the aggregate amount of Principal Obligations to be converted by the lowest price per Subsequent Round Security paid by any investor in such Subsequent Round of Financing. Written notice of a Subsequent Round of Financing stating the date on which such Subsequent Round of Financing is expected to become effective and describing the terms and conditions of
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such Subsequent Round of Financing shall be delivered by the Company to, and received by, the Payee not less than 10 days prior to the consummation of such Subsequent Round of Financing.
(ii) Subject to the terms and conditions of this Section 5 and to stockholder approval (and so subject only to the extent required by the rules of the Nasdaq Capital Market or any other national securities exchange or quotation system upon which the Common Stock may be listed from time to time), the Payee shall also have the right, at its option, at any time and from time to time, to convert all or any portion of the Principal Obligations into a number of fully paid and nonassessable shares of Common Stock equal to the quotient obtained by dividing the aggregate amount of Principal Obligations to be converted by $1.05 (such quotient, the “Conversion Price”).
(d) Certain Adjustments. The provisions of this paragraph (d) shall apply only to any conversion of this Note pursuant to Section 5(a)(ii).
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adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 5(d). The Company shall not enter into any of the transactions referred to in this paragraph (d)(iii) unless effective provision shall be made so as to give effect to the provisions set forth in this paragraph (d)(iii).
“Conversion Securities” means Common Stock or Subsequent Round Securities, as applicable.
“Permitted Refinancing” means the incurrence of any indebtedness of the Company or any of its subsidiaries in exchange for, or the net proceeds of which are used to refinance indebtedness of the Company or any of its subsidiaries incurred pursuant to the Credit Agreement, provided that the aggregate amount committed by the lenders in any such refinancing indebtedness is not greater than 110% of the aggregate amount committed by the lenders under the Credit Agreement that is being so refinanced, plus the amount of any fees and expenses associated therewith.
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“Subsequent Round of Financing” means the offer and sale for cash by the Company of its equity securities resulting in proceeds to the Company of at least $7,500,000 (excluding for this purpose any proceeds received by the Company on account of the conversion of any notes, including this Note, or the exercise of any warrants, in each case, whether currently outstanding or hereafter issued).
“Subsequent Round Securities” means the equity securities sold in the Subsequent Round of Financing; provided that, to the extent that two or more types or classes of equity securities are sold as a unit in the Subsequent Round of Financing, “Subsequent Round Securities” shall mean a unit consisting of the same types or classes of equity securities, in the same proportion, as the units sold in the Subsequent Round of Financing.
(a) Upon the occurrence of any one or more Events of Default, subject to the Intercreditor Agreement, the holder of this Note may proceed to protect and enforce its rights by suit in equity, action at law or by other appropriate proceeding in aid of the exercise of any power granted in this Note, or may proceed to enforce the payment of this Note, or to enforce any other legal or equitable right it may have as a holder of this Note.
(b) The holder of this Note may direct the time, method and place of conducting any proceeding for any remedy available to itself.
(c) In case of any Event of Default, the Payor will pay to the holder of this Note such amounts as shall be sufficient to cover the reasonable costs and expenses of such holder due to such Event of Default, including without limitation, costs of collection and reasonable fees, disbursements and other charges of counsel incurred in connection with any action in which the holder prevails.
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assign any of its rights or obligations under this Note without the prior written consent of Payee. The Payee may assign all or a portion of their rights or obligations under this Note to an affiliate without the prior written consent of the Payor.
(a) No failure or delay on the part of the Payor or Payee 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. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Payor or Payee at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any provision of this Note, any waiver of any provision of this Note and any consent to any departure by the Payor from the terms of any provision of this Note, shall be effective (i) only if it is made or given in writing and signed by the Payor and the Payee and (ii) only in the specific instance and for the specific purpose for which made or given.
12. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
15. Consent to Jurisdiction. The Payor hereby irrevocably consents to the nonexclusive jurisdiction of the courts of the State of New York and of any federal court located in such State in connection with any action or proceeding arising out of or relating to this Note or any document or instrument delivered pursuant to this Agreement.
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| BLUEFLY, INC. | |||
| By: | / s / Xxxxxx Xxxx | ||
| Name: | Xxxxxx Xxxx | ||
| Title: | CEO | ||
Agreed to and accepted as of the date
first written above:
RHO VENTURES VI, L.P.
By: RMV VI, L.L.C., its General Partner
By: Rho Capital Partners LLC, its Managing Member | |||
| By: | / s / Xxxxxxx Xxxxxx | ||
| Name: | Xxxxxxx Xxxxxx | ||
| Title: | Attorney-in-fact | ||
