EXHIBIT 99.2
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT, dated as of January 9,
2004 (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, 1,543,209 shares (the
"Shares") of common stock, par value $.01 per share (the "Common Stock"), of the
Company and warrants in the form attached hereto as Exhibit A (the "Warrants"),
exercisable to purchase up to an aggregate of 385,801 shares of Common Stock at
an exercise price of $3.96 per share of Common Stock, on the terms and subject
to the conditions contained herein.
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:
ARTICLE I
PURCHASE AND SALE OF THE COMMON STOCK AND THE WARRANT
SECTION 1.1 Purchase and Sale of the Common Stock. Subject to the terms
and conditions hereof, the Company hereby issues and sells to the Investors, and
each Investor hereby purchases from the Company, the number of Shares set forth
opposite such Investor's name in Schedule 1, for a purchase price of $3.24 for
one share of Common Stock, resulting in an aggregate purchase price for all
Shares sold pursuant to the terms hereof of $5,000,000.00. In connection with
such purchase and sale, the Company shall issue to each Investor the number of
Warrants set forth opposite such Investor's name in Schedule 1. This Agreement
shall not be deemed effective until such time as the entire purchase price
(subject to a $10,000 holdback for reimbursement obligations under Section 6.1)
is paid to the Company.
SECTION 1.2 Legal Opinion. Simultaneously with the purchase and sale of
the Shares and the Warrants pursuant to Section 1.1, the Company shall cause its
counsel to deliver to the Investors a legal opinion in the form agreed to by the
Company and the Investors.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY
The Company represents and warrants to, and agrees with, 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 the State 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 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 and the issuance of the Shares, the Warrants and the shares of
Common Stock issuable upon exercise of the Warrants (the "Warrant Shares") have
been duly authorized by all necessary corporate action on the part of the
Company.
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 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, 3,500 shares have been
designated Series C Convertible Preferred Stock, 7,150 shares have been
designated Series D Convertible Preferred Stock and 1,000 shares have been
designated Series E Convertible Preferred Stock. Without giving effect to the
transactions contemplated by this Agreement, as of December 31, 2003, the issued
and outstanding capital stock of the Company consists of (i) approximately
12,894,166 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) 1,000 shares of Series C Convertible Preferred Stock, (v) 7,136.548 shares
of Series D Convertible Preferred Stock and (vi) 1,000 shares of Series E
Convertible Preferred Stock. All such shares of the Company have been
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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 such shares or proprietary
interest. "Subsidiary" means, with respect to the Company, a corporation or
other entity of which more than 50% of the voting power of the outstanding
voting equity securities or more than 50% of the outstanding economic equity
interest are 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 (including, without
limitation, the Nasdaq SmallCap Market and The Boston Stock Exchange), other
than (i) periodic and other filings under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), (ii) the listing of the Shares and the Warrant
Shares with the Boston Stock Exchange (which the Company covenants and agrees to
complete on a timely basis following the Closing), (iii) the filing of a
notification with the Nasdaq SmallCap Market with respect to the issuance of the
Shares and the Warrants (which the Company covenants and agrees to complete on a
timely basis following the Closing) and (iv) as otherwise required to comply
with the obligations of the Company under Section 4.1 hereof. 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 or its Subsidiary, (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, Series B Convertible Preferred
Stock, Series C Convertible Preferred Stock, Series D Convertible Preferred
Stock and Series E Convertible Preferred Stock, and the waiver by the holders of
the Company's convertible notes of their conversion rights with respect to the
transactions contemplated hereby (all of which have been
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obtained), require any consent, approval, authorization or permit of, or filing
or notification to, any person, company or entity (including, without
limitation, any stockholder or holder of the Company's equity securities) 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 (collectively, "Agreements") 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. The Company is in compliance, in all
material respects, with the listing requirements of the Nasdaq SmallCap Market.
No material default or breach by the Company or its Subsidiary exists under any
material Agreement, other than any such default or breach that could not
reasonably be expected to have a Material Adverse Effect.
SECTION 2.7 Issuances of Securities. The Shares and the Warrants have
been validly issued, and, upon payment therefor, will be fully paid and
non-assessable. Upon the exercise of the Warrants in accordance with the terms
thereof, the Warrant Shares will be validly issued, fully paid and
non-assessable. The offering, issuance, sale and delivery of the Shares and the
Warrants 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. Neither the Company, nor its Subsidiary, nor any of
its affiliates, nor any person acting on its or their behalf, has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offer and/or sale of
the Shares, the Warrants and the Warrant Shares pursuant to this Agreement to be
integrated with prior offerings by the Company for purposes of the Securities
Act or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the Nasdaq SmallCap Market.
Neither the Company, nor its Subsidiary, nor any of its affiliates, nor any
person acting on its or their behalf, will take any action or steps that would
cause the offer and/or sale of the Shares, the Warrants and the Warrant Shares
to be integrated with other offerings. The Company will not conduct any offering
other than the transactions contemplated hereby that will be integrated with the
offer or issuance of the Shares, the Warrants and the Warrant Shares. Other than
registration statements on Form S-8 relating to the Company's stock option
plans, there is no registration statement under the Securities Act currently on
file with the Commission, whether effective or pending, with respect to the
Company's securities.
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SECTION 2.8 Absence of Certain Developments. Since September 30, 2003,
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 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, 2002 (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, 2002 and the Company's Quarterly Report on Form 10-Q
for the quarterly periods ended March 31, 2003, June 30, 2003 and September 30,
2003. 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 financial statements and unaudited
interim financial statements of the Company included or incorporated by
reference in such Commission Filings have been prepared in accordance with GAAP
(except as may be indicated in the notes thereto or, in the case of the
unaudited 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 financial
position of the Company as of the dates thereof and the results of operations
for the periods then ended (subject, in the case of any unaudited interim
financial statements, to the absence of footnotes required by GAAP and normal
year-end adjustments).
SECTION 2.10 Brokers. Except for Enable Capital LLC ("Enable") and
Broadband Capital Management, LLC ("Broadband"), neither the Company, nor any of
its officers, directors or employees, has employed any broker or finder, or
(except for compensation due to Enable and Broadband, for which the Company will
be solely responsible) 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, WARRANTIES AND AGREEMENTS OF THE INVESTORS
Each Investor represents and warrants to, and agrees with, 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 and the Warrants to such Investor have not been registered under the
Securities Act, or the securities laws of any state or regulatory body and 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 Shares, the Warrants, and any certificate for the Warrant 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."
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(b) Such Investor is acquiring the Shares, the Warrants and
Warrant Shares for investment and not with a view to the resale or distribution
thereof and is acquiring such securities for its own account.
(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, or together
with its advisors, 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. To such Investor's knowledge, neither it, 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) Such Investor has adequate funds immediately available
to satisfy all of its obligations hereunder and shall immediately upon its
execution of this Agreement wire in full the aggregate purchase price set forth
on Schedule I opposite its name.
(f) 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 and the
Warrant 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
(to the extent applicable) the filing with the Commission of a Schedule 13D
under the Exchange Act with respect to the acquisition by such Investor of the
Shares and the Warrants.
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
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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 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, commissions, finder's or other similar fees or
expenses in connection with the transactions contemplated hereby.
Notwithstanding the foregoing, the parties understand that Enable may have
provided services to Enable Growth Partners, LP in connection with the
transactions contemplated hereby, but no liability for any brokerage fees,
commissions, finder's or other similar fees or expenses has been incurred in
connection therewith by the Company or any Investor, other than Enable.
ARTICLE IV
COVENANTS
SECTION 4.1 Registration Rights.
(a) The Company shall: (i) prepare and file with the
Commission a registration statement under the Securities Act (as the same may be
amended or supplemented from time to time, the "Registration Statement") with
respect to the offer and sale of the Shares and the Warrant Shares
(collectively, the "Registrable Securities") within thirty (30) days of the date
hereof; and (ii) use commercially reasonable efforts to cause the Registration
Statement to be declared effective by the Commission within ninety (90) days of
the date of Closing. Provided that no undisclosed Potential Material Event then
exists, the Company shall cause the Registration Statement to be declared
effective by the Commission within three business days of receiving notification
from the Commission that it is willing to issue a declaration of effectiveness.
The Company shall not file any registration statement under the Securities Act
(other than a registration statement on Form S-8 relating to Common Stock
underlying stock options or a registration statement on Form S-4 relating to
securities issued in connection with a merger or acquisition) prior to the
filing of the Registration Statement. No securities of the Company other than
the Registrable Securities and the securities listed on Schedule 4.1(a) hereof
shall be included in the Registration Statement. The Company shall use
commercially reasonable efforts to maintain the effectiveness of such
Registration Statement until the earliest to occur of the following (the
"Registration Termination Date"): (i) all of the Registrable Securities have
been disposed of by the Investors pursuant to the Registration Statement; or
(ii) (A) the Shares can be resold pursuant to clause (k) of Rule 144,
promulgated under the Securities Act, or any similar provisions then in effect
("Rule 144"), or can otherwise be resold pursuant to Rule 144 at any time
regardless of the volume restrictions of clause (e) of Rule 144 and (B) the
Warrant Shares can be resold pursuant to Rule 144 (including, without
limitation,
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in connection with a cashless exercise of the Warrants in accordance with the
terms thereof) or are otherwise freely-tradable without registration.
(b) The Investors will promptly furnish to the Company in
writing all information reasonably requested by the Company for use in
connection with the preparation of the Registration Statement and obtaining the
effectiveness thereof. Each Investor hereby represents and warrants, severally
but not jointly, that all such information furnished by it shall be true,
accurate and complete. Notwithstanding anything in this Agreement to the
contrary, the Company shall not be required to include the Registrable
Securities of an Investor in the Registration Statement in the event that such
Investor breaches any of the representations, warranties or covenants contained
in this Section 4.1(b), or such Investor's inclusion in the Registration
Statement causes the Commission to delay the effectiveness of the Registration
Statement, and such breach or delay could reasonably be expected to cause the
Company to incur Liquidated Damages (as hereinafter defined). Any such Investor
whose Registrable Securities are not included in the Registration Statement
pursuant to the foregoing shall hereinafter be referred to as a "Breaching
Investor."
(c) If at any time or from time to time after the date of
effectiveness of the Registration Statement, the Company notifies the Investors
in writing of the existence of a Potential Material Event (as defined below), no
Investor shall offer or sell any of the Registrable Securities, or engage in any
other transaction involving or relating to the Registrable Securities, from the
time of the giving of notice with respect to a Potential Material Event until
such Investor receives written notice from the Company that such Potential
Material Event either has been disclosed to the public or no longer constitutes
a Potential Material Event (such period of time hereinafter referred to as a
"Blackout Period"). As used herein, "Potential Material Event" means any of the
following: (i) the possession by the Company of material information not ripe
for disclosure in a registration statement, which shall be evidenced by
determinations in good faith by the Board of Directors of the Company that
disclosure of such information in the registration statement would be
detrimental to the business and affairs of the Company; or (ii) any material
engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information. No Blackout Period shall exceed thirty
consecutive days, and there shall be no more than 45 days during any calendar
year in which a Blackout Period is in effect. Any period of time during which a
Blackout Period is in effect in excess of the limitations set forth in the
preceding sentence is hereinafter referred to as a "Non-Permissible Blackout
Period."
(d) [INTENTIONALLY OMITTED.]
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(e) All registration and filing fees, fees and expenses of
compliance with securities laws, printing expenses and all independent certified
public accountants fees and expenses of counsel to the Company and other persons
retained by the Company will be borne by the Company. The Company shall have no
obligation to pay any fees or expenses of brokers, underwriters, or (except as
set forth in Section 6.1) counsel or others retained by any of the Investors in
connection with the sale, or potential sale, of the Registrable Securities.
(f) The Company agrees to indemnify, to the fullest extent
permitted by law, the Investors and their respective officers, directors,
partners, employees, advisors and agents against any and all Loss (as
hereinafter defined) arising out of or based upon any untrue, or alleged untrue,
statement of a material fact contained in the Registration Statement or arising
out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except (i) insofar as the same are caused by or
contained in any information furnished by an Investor pursuant to Section 4.1(b)
or (ii) insofar as the same are caused by a failure by an Investor to deliver an
updated prospectus that has been filed with the Commission and made available to
such Investor or its representatives for delivery to a purchaser. Each Investor
agrees to indemnify, to the fullest extent permitted by law, the Company, the
other Investors and their respective officers, directors, partners, employees,
advisors and agents against any and all Loss arising out of or based upon any
untrue, or alleged untrue statement of a material fact contained in the
Registration Statement or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading (i) insofar as the same
are caused by or contained in any information furnished by indemnifying Investor
pursuant to Section 4.1(b) or (ii) insofar as the same are caused by a failure
by the indemnifying Investor to deliver an updated prospectus that has been
filed with the Commission and made available to such Investor or its
representatives for delivery to a purchaser. Any indemnity obligation arising
under this Section 4.1 shall be governed by the provisions of Section 5.2.
Notwithstanding the foregoing, the liability of any Investor under this Section
4.1(f) shall not exceed the proceeds received by such Investor in connection
with any sale of the Shares and the Warrant Shares.
(g) In the event that the Registration Statement is not
filed within 30 days from the Closing Date (the "Filing Deadline"), then the
Company shall be obligated to pay to the Investors (other than the Breaching
Investors) liquidated damages (the "Filing Liquidated Damages") equal to (i)
0.0333% of the aggregate purchase price for each day during the period beginning
on the day after the Filing Deadline and ending on the earlier of (A) the date
the Registration Statement is filed and (B) the 60th day after the Closing Date,
plus (ii) 0.0667% of the aggregate purchase price for each day during the period
beginning on the 61st day after the Closing Date and ending on the earlier of
(A) the date the Registration Statement is filed and (B) the Effectiveness
Deadline (as hereinafter defined).
(h) In the event that the Registration Statement has not
been declared effective within 90 days from the Closing Date (the "Effectiveness
Deadline"), then the Company shall be
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obligated to pay to the Investors (other than the Breaching Investors)
liquidated damages (the "Effectiveness Liquidated Damages") equal to (i) 0.0333%
of the aggregate purchase price for each day (or, in the event that the
Registration Statement was not filed on or before the 61st day after the Closing
Date, 0.0667% for each day prior to the filing of the Registration Statement)
during the period beginning on the day after the Effectiveness Deadline and
ending on the earlier of (A) the date that the Registration Statement is
declared effective and (B) the 150th day after the Closing, plus (iv) 0.0067% of
the aggregate purchase price for each day during the period beginning on the
151st day after the Closing and ending on the earlier of (A) the date that the
Registration Statement is declared effective and (B) the Registration
Termination Date.
(i) In the event that any Non-Permissible Blackout Period
occurs, the Company shall be obligated to pay to the Investors liquidated
damages (the "Blackout Liquidated Damages," and, together with the Filing
Liquidated Damages and the Effectiveness Liquidated Damages, the "Liquidated
Damages") equal to 0.0333% of the aggregate purchase price for each day during
such Non-Permissible Blackout Period, provided that, at such time as the
aggregate number of days in all Non-Permissible Blackout Periods exceeds thirty,
the Blackout Liquidated Damages shall thereafter be paid at the rate of 0.0667%
per day.
(j) If the Company is required to pay any Liquidated
Damages, it shall pay to each Investor a pro-rata share based on the allocations
in Schedule I. All such amounts shall be paid within 10 days of the receipt by
the Company of a written notice from the Investors indicating that such amounts
are due, provided that Investors shall not provide more than one such written
notice in any 30-day period. Other than the Investors' rights to specific
performance under Section 6.11, the Liquidated Damages shall constitute the sole
and exclusive remedy of the Investors for a breach by the Company of its
obligations under this Section 4.1.
(k) The Company shall furnish to the Investors such number
of conformed copies of the Registration Statement and the prospectus included
therein, in conformity with the requirements of the Securities Act, that the
Investors may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities.
(l) In connection with any sale of Registrable Securities
pursuant to the Registration Statement, in lieu of delivering physical
certificates representing the Registrable Securities, if the Company's transfer
agent is participating in the Depositary Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of an Investor, so long as the
certificates therefore are not required to bear a legend, the Company shall
cause its transfer agent to electronically transmit the Registrable Securities
by crediting the account of the Investor's prime broker with DTC through its
Deposit Withdrawal Agent Commission system within three (3) business days of
such request.
11
ARTICLE V
SURVIVAL; INDEMNIFICATION
SECTION 5.1 Survival. The representations and warranties contained in
Articles II and III hereof shall survive until the first anniversary of the date
hereof.
(a) 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 (hereinafter a "Loss"), arising
out of or resulting from the breach of any representation or warranty made by an
Indemnifying Party contained in this Agreement. Notwithstanding anything to the
contrary otherwise contained herein: (i) no party's obligations under this
Article V shall include any obligation to compensate for punitive damages; (ii)
the liability of any Investor under this Section 5.1 shall not exceed the
proceeds received by such Investor in connection with any sale of the Shares and
the Warrant Shares; and (iii) the liability of the Company under this Section
5.1 shall not exceed the sum of (A) 125% of the Purchase Price, increased to
150% of the Purchase Price on the first anniversary of the date hereof, and (B)
any reasonable attorneys' fees and expenses incurred in connection with such
Loss.
SECTION 5.2 Indemnification Procedure. The obligations and liabilities
of the Indemnifying Party under this Article V with respect to Losses arising
from claims of any third party which are subject to the indemnification provided
for in this Article V ("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 V 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 V. 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 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 each jurisdiction for which the Indemnified
Party reasonably determines counsel is required, at the expense of the
Indemnifying
12
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 VI
MISCELLANEOUS
SECTION 6.1 Expenses. The Company shall reimburse Investors for up to
$30,000 of reasonable legal expenses incurred in connection with the negotiation
of this Agreement and the review of the Registration Statement, subject to the
receipt of appropriate supporting documentation and the receipt of all amounts
owed by the Investors hereunder. 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.
SECTION 6.2 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
clause (b) so as to permit the non-disclosing parties to seek a protective order
or otherwise contest
13
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. Subject
to the foregoing, the Company and the Investors shall use commercially
reasonable efforts to issue an agreed-upon press release regarding the
transactions contemplated hereby within two (2) business days of the Closing.
SECTION 6.3 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 6.4 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 without the prior written consent of the other parties;
provided, that the Shares, the Warrants and the Warrant Shares may be
transferred pursuant to the Registration Statement or in accordance with the
legend set forth in Section 3.4(a). 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 6.5 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 6.6 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 6.7 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: Xxxxxxx X. Xxxxx - CFO/COO
14
With a copy to:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
To the Investors: To the addresses set forth on Schedule 1.
With a copy to:
Grushko & Xxxxxxx, P.C.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx Xxxxxxx
SECTION 6.8 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 6.9 Governing Law; Choice of Forum. 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. Each of the parties
hereto hereby irrevocably and unconditionally submits to the exclusive
jurisdiction of any court of the State of New York or any federal court sitting
in the City of New York for purposes of any suit, action or other proceeding
arising out of this Agreement (and agrees not to commence any action, suit or
proceedings relating hereto except in such courts). Each of the parties hereto
agrees that service of any process, summons, notice or document by U.S.
registered mail at its address set forth herein shall be effective service of
process for any action, suit or proceeding brought against it in any such court.
Each of the parties hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement, which is brought by or against it, in the courts of the State
of New York or any federal court sitting in the State of New York and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any
15
such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
SECTION 6.10 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 party, 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 6.11 Specific Performance. Each of the parties hereto, in
addition to being entitled to exercise all of its rights hereunder, including
recovery of damages, shall be entitled to specific performance of its rights
under this Agreement. Each party agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
[Signature page follows]
16
IN WITNESS WHEREOF, this Agreement has been duly executed on the date
first set forth above.
BLUEFLY, INC.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------
Name: Xxxxxxx X. Xxxxx
Title: COO and CFO
LONGVIEW FUND, LP
By: /s/ S. Xxxxxxx Xxxxxxx
---------------------------
Name: S. Xxxxxxx Xxxxxxx
Title: Managing Member and
COO Viking Asset
Management, LLC
as General Partner
to Longview Fund, LP
LONGVIEW EQUITY FUND, LP
By: /s/ Xxxxx X. Xxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxx
Title: Investment Manager
LONGVIEW INTERNATIONAL EQUITY
FUND, LP
By: /s/ Xxxxx X. Xxxxxxx
---------------------------
Name: Xxxxx X. Xxxxxxx
Title: Investment Manager
17
ALPHA CAPITAL AKTIENGESELLSCHFT
By: /s/ Xxxxxx Xxxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxxx
Title: Director
GAMMA OPPORTUNITY CAPITAL
PARTNERS, LP
By: /s/ Xxxxxxxxxxx Xxxxxxx
---------------------------
Name: Xxxxxxxxxxx Xxxxxxx
Title: Managing Director
ENABLE GROWTH PARTNERS, LP
By: /s/ Xxxxx Xxxxxx
---------------------------
Name: Xxxxx Xxxxxx
Title: Managing Partner
GENESIS MICROCAP, INC.
By: /s/ Xxxxxxxx Xxxxxxx
---------------------------
Name: Xxxxxxxx Xxxxxxx
Title:
BARUCHA LLC
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: TTEE
18
X.X. XXXX ASSOCIATES, L.P.
By: /s/ Xxxxx Xxxxxxxx Hull
---------------------------
Name: Xxxxx Xxxxxxxx Xxxx
Title: General Partner
19
SCHEDULE 1
INVESTORS AND SHARE AND WARRANT ALLOCATIONS
AGGREGATE
SHARES PURCHASE WARRANTS PURCHASE
NAME AND ADDRESS OF INVESTOR PURCHASED PRICE ISSUED PRICE
-------------------------------------- --------- -------- -------- -----------
Longview Fund, LP 308,642 $ 3.24 77,160 $ 1,000,000
0000 Xxxxxx Xxxxxx #000
Xxxxxxxxxx, XX 00000
Attn: S. Xxxxxxx Xxxxxxx
Fax: (000) 000-0000
Longview Equity Fund, LP 617,284 $ 3.24 154,321 $ 2,000,000
00 Xxxxxxxx Xx.
Xxxxxxxxxxxx, XX 00000
Attn: S. Xxxxxxx Xxxxxxx
Fax: (000) 000-0000
Longview International Equity Fund, LP 277,778 $ 3.24 69,444 $ 900,000
00 Xxxxxxxx Xx.
Xxxxxxxxxxxx, XX 00000
Attn: S. Xxxxxxx Xxxxxxx
Fax: (000) 000-0000
Alpha Capital Aktiengesellscft 123,457 $ 3.24 30,864 $ 400,000
Xxxxxxxxx 0
0000 Xxxxxxxxxxx
Vaduz, Lichtenstein
Attn: Xxxxxx Xxxxxxxx
Fax: 000-00-00000000
Gamma Opportunity Capital Partners, LP 61,728 $ 3.24 15,432 $ 200,000
British Colonial Centre of Commerce
One Bay Street, Suite 401
Nassau (NP), The Bahamas
Attn: X. Xxxxxxx
Fax: (000) 000-0000
20
Enable Growth Partners, LP 46,296 $ 3.24 11,574 $ 150,000
Xxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
Fax: (000) 000-0000
Genesis Microcap Inc. 54,012 $ 3.24 13,503 $ 175,000
000 Xxxxx Xxxxx
Xxxxxx X00 0XX, Xxxxxxx
Attn: Xxxxxxxx X. Xxxxxxx
Fax: 000-000-0000-0000
Barucha LLC 23,148 $ 3.24 5,787 $ 75,000
00 Xxxxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxx
Fax: (000) 000-0000
X.X. Xxxx Associates, L.P. 30,864 $ 3.24 7,716 $ 100,000
00 Xxxxxx Xxxxxx
Xxxxxx Xxxxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxxx Hull
Fax: (000) 000-0000
21
SCHEDULE 2.4
CAPITALIZATION
As of the date hereof (except as otherwise provided below), 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 3,931,623 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 27,370,037 shares of Common Stock.
3. Warrants to purchase an aggregate of 1,319,144 shares of Common
Stock are issued and outstanding.
4. Options issued to purchase approximately 8,479,370 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. 1,000 shares of Series C Convertible Preferred Stock (the
"Series C Stock") are issued and outstanding. The Series C Stock
is convertible into 1,315,788 shares of Common Stock.
6. 7,136.548 shares of Series D Convertible Preferred Stock (the
"Series D Stock") are issued and outstanding. The Series D Stock
is convertible into 9,390,194 shares of Common Stock.
7. 1,000 shares of Series E Convertible Preferred Stock (the
"Series E Stock") are issued and outstanding. The Series E Stock
is convertible into 1,315,788 shares of Common Stock.
8. Convertible Promissory Notes, dated July 16, 2003, in the
aggregate principal amount of $2,000,000 (the "July Notes"). The
July Notes are convertible into Subsequent Round Securities (as
defined therein).
9. Convertible Promissory Notes, dated October 17, 2003, in the
aggregate principal amount of $2,000,000 (the "October Notes").
The July Notes are convertible into Subsequent Round Securities
(as defined therein).
22
SCHEDULE 4.1(A)
SECURITIES THAT MAY BE INCLUDED
IN THE REGISTRATION STATEMENT
1. Up to 1,500,000 shares of Common Stock beneficially owned by Quantum
Industrial Partners LDC and SFM Domestic Investments LLC.
2. 37,500 shares of Common Stock issuable upon the exercise of a stock
option granted to The Wall Street Group, Inc.
3. 300,000 shares of Common Stock issuable upon the exercise of warrants
granted to Xxxxxx Xxxx Trading.
23
EXHIBIT A
THE OFFER AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED, QUALIFIED, APPROVED OR DISAPPROVED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SUCH
ACT OR LAWS AND NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER
FEDERAL OR STATE REGULATORY AUTHORITY HAS PASSED ON OR ENDORSED THE MERITS OF
THESE SECURITIES.
WARRANT NO. __
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF
BLUEFLY, INC.
THIS IS TO CERTIFY THAT [_________________] [INSERT NAME OF INVESTOR],
or its registered assigns (the "Holder"), is the owner of the right to subscribe
for and to purchase from BLUEFLY, INC., a Delaware corporation (the "Company"),
[_________] [25% OF THE NUMBER OF SHARES OF COMMON STOCK PURCHASED] (the "Number
Issuable"), fully paid, duly authorized and non-assessable shares of Common
Stock at a price per share equal to $3.96, (the "Exercise Price"), at any time,
in whole or in part, on or after January 9, 2004 (the "Effective Date") through
5:00 PM New York City time, on January 8, 2009 (the "Expiration Date") all on
the terms and subject to the conditions hereinafter set forth (the "Warrants").
The Holder shall not be entitled to exercise this Warrant on an
exercise date, in connection with that number of shares of Common Stock that
would be in excess of the sum of (i) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates on an exercise date, and
(ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this limitation is being made
on an exercise date, which would result in beneficial ownership by the Holder
and its affiliates of more than 9.99%
of the outstanding shares of Common Stock on such date. For the purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder
shall not be limited to aggregate exercises which would result in the issuance
of more than 9.99%. The restriction described in this paragraph may be revoked
upon and effective after sixty-one (61) days prior notice from the Holder to the
Company.
The Number Issuable and the Exercise Price are subject to further
adjustment from time to time pursuant to the provisions of Section 2 of this
Warrant Certificate.
This Warrant is being issued pursuant to that certain Common Stock and
Warrant Purchase Agreement, dated as of January 9, 2004, by and among the
Company and the Investors listed on Schedule I thereto (the "Purchase
Agreement") Capitalized terms used herein but not otherwise defined herein shall
have the meanings given to them in the Purchase Agreement.
Section 1. Exercise of Warrants.
(a) Subject to the last paragraph of this Section 1, the
Warrants evidenced hereby may be exercised, in whole or in part, by the Holder
hereof at any time or from time to time, on or after the Effective Date and on
or prior to the Expiration Date upon delivery to the Company at the principal
executive office of the Company in the United States of America, of (A) this
Warrant Certificate, (B) a written notice stating that such Holder elects to
exercise the Warrants evidenced hereby in accordance with the provisions of this
Section 1 and specifying the number of Warrants being exercised and the name or
names in which the Holder wishes the certificate or certificates for shares of
Common Stock to be issued and (C) payment of the Exercise Price for such
Warrants, which shall be payable by (x) cash, or (y) certified or official bank
check payable to the order of the Company. The documentation and consideration,
if any, delivered in accordance with subsections (A), (B) and (C) are
collectively referred to herein as the "Warrant Exercise Documentation." In the
event that, at any time after the one year anniversary of the Closing Date, the
Registration Statement is not effective, the Holder may, in lieu of payment of
the Exercise Price in cash, make such payment by way of a "cashless exercise"
through the written election of the Holder to have withheld by the Company from
the shares of Common Stock otherwise deliverable upon exercise, Common Stock
having an aggregate Market Price on the date of exercise equal to the Exercise
Price.
(b) As promptly as practicable, and in any event within three
(3) Business Days after receipt of the Warrant Exercise Documentation, the
Company shall deliver or cause to be delivered (A) certificates representing the
number of validly issued, fully paid and nonassessable shares of Common Stock
specified in the Warrant Exercise Documentation, (B) if applicable, cash in lieu
of any fraction of a share, as hereinafter provided, and (C) if less than the
full number of Warrants evidenced hereby are being exercised, a new Warrant
Certificate or Certificates, of like tenor, for the number of Warrants evidenced
by this Warrant Certificate, less the number of
2
Warrants then being exercised. Such exercise shall be deemed to have been made
at the close of business on the date of delivery of the Warrant Exercise
Documentation so that the Person entitled to receive shares of Common Stock upon
such exercise shall be treated for all purposes as having become the record
holder of such shares of Common Stock at such time. In lieu of delivering
physical certificates pursuant to clause (A) above, if the Company's transfer
agent is participating in the Depositary Trust Company ("DTC") Fast Automated
Securities Transfer program and the certificates therefore are not required to
bear a legend, the Company shall cause its transfer agent to electronically
transmit such shares of Common Stock by crediting the account of the Investor's
prime broker with DTC through its Deposit Withdrawal Agent Commission system.
(c) The Company shall pay all expenses incurred by it in
connection with taxes and other governmental charges (other than income taxes of
the Holder) that may be imposed in respect of, the issue or delivery of any
shares of Common Stock issuable upon the exercise of the Warrants evidenced
hereby. The Company shall not be required, however, to pay any tax or other
charge imposed in connection with any transfer involved in the issue of any
certificate for shares of Common Stock, as the case may be, in any name other
than that of the registered holder of the Warrant evidenced hereby.
(d) In connection with the exercise of any Warrants evidenced
hereby, no fractions of shares of Common Stock shall be issued, but in lieu
thereof the Company shall pay a cash adjustment in respect of such fractional
interest in an amount equal to such fractional interest multiplied by the Market
Price for one share of Common Stock on the Business Day which immediately
precedes the day of exercise. If more than one (1) such Warrant shall be
exercised by the holder thereof at the same time, the number of full shares of
Common Stock issuable on such exercise shall be computed on the basis of the
total number of Warrants so exercised.
Section 2. Certain Adjustments.
(a) The number of shares of Common Stock purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to adjustment
as follows:
(i) Stock Dividends, Subdivision, Combination or
Reclassification of Common Stock. If at any time after the date of the issuance
of this Warrant the Company shall (i) pay a dividend on Common Stock in shares
of its Capital Stock, (ii) combine its outstanding shares of Common Stock into a
smaller number of shares, (iii) subdivide its outstanding shares of Common Stock
as the case may be, or (iv) issue by reclassification of its shares of Common
Stock any shares of Capital Stock of the Company, then, on the record date for
such dividend or the effective date of such subdivision or split-up, combination
or reclassification, as the case may be, the number and kind of shares to be
delivered upon exercise of this Warrant will be adjusted so that the Holder will
be entitled to receive the number and kind of shares of Capital Stock that such
Holder would have owned or been entitled to receive upon or by reason of
3
such event had this Warrant been exercised immediately prior thereto, and the
Exercise Price will be adjusted as provided below in paragraph 2(a)(v).
(ii) Extraordinary Distributions. If at any time after
the date of issuance of this Warrant, the Company shall distribute to all
holders of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the continuing or surviving
corporation and Common Stock is not changed or exchanged) cash, evidences of
indebtedness, securities or other assets (excluding (A) ordinary course cash
dividends to the extent such dividends do not exceed the Company's retained
earnings and (B) dividends payable in shares of Capital Stock for which
adjustment is made under Section 2(a)(i), or rights, options or warrants to
subscribe for or purchase securities of the Company), then in each such case the
number of shares of Common Stock to be delivered to such Holder upon exercise of
this Warrant shall be increased so that the Holder thereafter shall be entitled
to receive the number of shares of Common Stock determined by multiplying the
number of shares such Holder would have been entitled to receive immediately
before such record date by a fraction, the denominator of which shall be the
Exercise Price on such record date minus the then fair market value (as
reasonably determined by the Board of Directors of the Company in good faith) of
the portion of the cash, evidences of indebted-ness, securities or other assets
so distributed or of such rights or warrants applicable to one share of the
Common Stock (provided that such denominator shall in no event be less than
$.01) and the numerator of which shall be the Exercise Price.
(iii) Reorganization, etc. If at any time after the date
of issuance of this Warrant any consolidation of the Company with or merger of
the Company with or into any other Person (other than a merger or consolidation
in which the Company is the surviving or continuing corporation and which does
not result in any reclassification of, or change (other than a change in par
value or from par value to no par value or from no par value to par value, or as
a result of a subdivision or combination) in, outstanding shares of Common
Stock) or any sale, lease or other transfer of all or substantially all of the
assets of the Company to any other person (each, a "Reorganization Event"),
shall be effected in such a way that the holders of the Common Stock shall be
entitled to receive cash, stock, other securities or assets (whether such cash,
stock, other securities or assets are issued or distributed by the Company or
another Person) with respect to or in exchange for the Common Stock, then, upon
exercise of this Warrant, the Holder shall thereafter have the right to receive
only the kind and amount of cash, stock, other securities or assets receivable
upon such Reorganization Event by a holder of the number of shares of the Common
Stock that such holder would have been entitled to receive upon exercise of this
Warrant had this Warrant been exercised immediately before such Reorganization
Event, subject to adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 2(a). The Company
shall not enter into any of the transactions referred to in this Section
2(a)(iii) unless effective provision shall be made so as to give effect to the
provisions set forth in this Section 2(a)(iii).
4
(iv) Carryover. Notwithstanding any other provision of
this Section 2(a), no adjustment shall be made to the number of shares of either
Common Stock to be delivered to the Holder (or to the Exercise Price) if such
adjustment represents less than 1% of the number of shares to be so delivered,
but any lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment that together with any
adjustments so carried forward shall amount to 1% or more of the number of
shares to be so delivered.
(v) Exercise Price Adjustment. Whenever the Number
Issuable upon the exercise of the Warrant is adjusted as provided pursuant to
this Section 2(a), the Exercise Price per share payable upon the exercise of
this Warrant shall be adjusted by multiplying such Exercise Price immediately
prior to such adjustment by a fraction, of which the numerator shall be the
Number Issuable upon the exercise of the Warrant immediately prior to such
adjustment, and of which the denominator shall be the Number Issuable
immediately thereafter; provided, however, that the Exercise Price for each
Share of the Common Stock shall in no event be less than the par value of a
share of such Common Stock.
(vi) Notice of Adjustment. Whenever the Number Issuable
or the Exercise Price is adjusted as herein provided, the Company shall promptly
mail by first class mail, postage prepaid, to the Holder, notice of such
adjustment or adjustments setting forth the Number Issuable and the Exercise
Price after such adjustment, setting forth a brief statement of the facts
requiring such adjustment and setting forth the computation by which such
adjustment was made.
Section 3. No Redemption. The Company shall not have any right to
redeem any of the Warrants evidenced hereby.
Section 4. Notice of Certain Events. In case at any time or from time
to time (i) the Company shall declare any dividend or any other distribution to
all holders of Common Stock, (ii) the Company shall authorize the granting to
the holders of Common Stock of rights or warrants to subscribe for or purchase
any additional shares of stock of any class or any other right, (iii) the
Company shall authorize the issuance or sale of any other shares or rights which
would result in an adjustment to the Number Issuable pursuant to Section
2(a)(i), (ii) or (iii), (iv) there shall be any capital reorganization or
reclassification of Common Stock of the Company or consolidation or merger of
the Company with or into another Person, or any sale or other disposition of all
or substantially all the assets of the Company or (v) there shall be a voluntary
or involuntary dissolution, liquidation or winding up of the Company, then, in
any one or more of such cases the Company shall mail to the Holder at such
Holder's address as it appears on the transfer books of the Company, as promptly
as practicable but in any event at least 10 days prior to the date on which the
transactions contemplated in Section 2(a)(i), (ii) or (iii) a notice stating (a)
the date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants or, if a record is not to be taken, the date as
of which the holders of record of either Common Stock to be entitled to such
dividend, distribution, rights or warrants are to be determined or (b) the date
on which such
5
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up is expected to become effective. Such notice also
shall specify the date as of which it is expected that the holders of record of
the Common Stock shall be entitled to exchange the Common Stock for shares of
stock or other securities or property or cash deliverable upon such
reorganization, reclassification, consolidation, merger, sale, conveyance,
dissolution, liquidation or winding up.
Section 5. Certain Covenants. The Company covenants and agrees that
all shares of Capital Stock of the Company that may be issued upon the exercise
of the Warrants evidenced hereby will be duly authorized, validly issued and
fully paid and nonassessable. The Company shall at all times reserve and keep
available for issuance upon the exercise of the Warrants, such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the exercise of all outstanding Warrants, and shall take
all action required to increase the authorized number of shares of Common Stock
if at any time there shall be insufficient authorized but unissued shares of
Common Stock to permit such reservation or to permit the exercise of all
outstanding Warrants.
Section 6. Registered Holder. The persons in whose names this Warrant
Certificate is registered shall be deemed the owner hereof and of the Warrants
evidenced hereby for all purposes. The registered Holder of this Warrant
Certificate, in their capacity as such, shall not be entitled to any rights
whatsoever as a stockholder of the Company, except as herein provided.
Section 7. Transfer of Warrants. Any transfer of the rights
represented by this Warrant Certificate shall be effected by the surrender of
this Warrant Certificate, along with the form of assignment attached hereto,
properly completed and executed by the registered Holder hereof, at the
principal executive office of the Company in the United States of America,
together with an appropriate investment letter and opinion of counsel, if deemed
reasonably necessary by counsel to the Company, to assure compliance with
applicable securities laws. Thereupon, the Company shall issue in the name or
names specified by the registered Holder hereof and, in the event of a partial
transfer, in the name of the registered Holder hereof, a new Warrant Certificate
or Certificates evidencing the right to purchase such number of shares of Common
Stock as shall be equal to the number of shares of Common Stock then purchasable
hereunder.
Section 8. Denominations. The Company covenants that it will, at its
expense, promptly upon surrender of this Warrant Certificate at the principal
executive office of the Company in the United States of America, execute and
deliver to the registered Holder hereof a new Warrant Certificate or
Certificates in denominations specified by such Holder for an aggregate number
of Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.
Section 9. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate and, in the case of loss, theft or destruction, upon
delivery of an indemnity reasonably satisfactory to the Company (in the case of
an insurance company or other institutional investor, its own unsecured
indemnity
6
agreement shall be deemed to be reasonably satisfactory), or, in the case of
mutilation, upon surrender and cancellation thereof, the Company will issue a
new Warrant Certificate of like tenor for a number of Warrants equal to the
number of Warrants evidenced by this Warrant Certificate.
Section 10. Governing Law. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.
Section 11. Rights Inure to Registered Holder. The Warrants evidenced
by this Warrant Certificate will inure to the benefit of and be binding upon the
registered Holder thereof and the Company and their respective successors and
permitted assigns. Nothing in this Warrant Certificate shall be construed to
give to any Person other than the Company and the registered Holder thereof any
legal or equitable right, remedy or claim under this Warrant Certificate, and
this Warrant Certificate shall be for the sole and exclusive benefit of the
Company and such registered Holder. Nothing in this Warrant Certificate shall be
construed to give the registered Holder hereof any rights as a Holder of shares
of either Common Stock until such time, if any, as the Warrants evidenced by
this Warrant Certificate are exercised in accordance with the provisions hereof.
Section 12. Definitions. For the purposes of this Warrant Certificate,
the following terms shall have the meanings indicated below:
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in the City of New York, New York are authorized
or required by law or executive order to close.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock (or equivalent ownership interests in a Person not a corporation)
whether now outstanding or hereafter issued, including, without limitation, any
rights, warrants or options to purchase such Person's capital stock.
"Common Stock" shall mean the common stock, par value $.01 per share,
of the Company.
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) if the Common Stock is listed on a national securities
exchange, the Closing Price per share of Common Stock on such date published in
The Wall Street Journal (National Edition) or, if no such closing price on such
date is published in The Wall Street Journal (National Edition), the average of
the closing bid and asked prices on such date, as officially reported on the
principal national securities exchange on which the Common Stock is then listed
or admitted to trading; (b) if the Common Stock is not then listed or admitted
to trading on any national securities exchange, but
7
is designated as a national market system security, the last trading price of
the Common Stock on such date; (c) if there shall have been no trading on such
date or if the Common Stock is not so designated, the average of the reported
closing bid and asked price of the Common Stock, on such date as shown by NASDAQ
and reported by any member firm of the NYSE selected by the Company; or (d) if
none of (a), (b) or (c) is applicable, a market price per share determined in
good faith by the Board of Directors of the Company, which shall be deemed to be
"Fair Market Value".
"NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotations System.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
Section 13. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, courier
services or personal delivery, (a) if to the Holder of a Warrant, at such
Holder's last known address appearing on the books of the Company; and (b) if to
the Company, at its principal executive office in the United States, or such
other address as shall have been furnished to the party given or making such
notice, demand or other communication. All such notices and communications shall
be deemed to have been duly given: (i) when delivered by hand, if personally
delivered; (ii) when delivered to a courier if delivered by commercial overnight
courier service; and (iii) five (5) Business Days after being deposited in the
mail, postage prepaid, if mailed.
[Signature page to follow.]
8
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of this 9th day of January, 2004.
BLUEFLY, INC.
By:
------------------------
Name:
Title:
9
[Form of Assignment Form]
[To be executed upon assignment of Warrants]
The undersigned hereby assigns and transfers this Warrant
Certificate to ___________________ whose Social Security Number or Tax ID Number
is _________________ and whose record address is ______________________________,
and irrevocably appoints ________________ as agent to transfer this security on
the books of the Company. Such agent may substitute another to act for such
agent.
Signature:
-------------------------------
Signature Guarantee:
--------------------------------
Date: _________________
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