Contract

Exhibit 10.2

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 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.

BLUEFLY, INC.

SECURED SUBORDINATED 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 Prentice Consumer Partners, LP, 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.

1. Interest Rate; Payment.

(a) The outstanding principal balance of this Secured Subordinated Promissory Note (this “Note”) shall bear interest at an annual rate equal to 15% 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 shall be payable quarterly in cash, with any accrued but unpaid interest payable 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 (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 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”). 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., Prentice Capital Management, LP, Rho Ventures, L.P. 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. “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 (as defined below), 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.

2. Prepayment.

(a) Prepayment Upon Event of Default.

(i) 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.

(ii) 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).

(iii) Any prepayment under this Section 2(a) shall include payment of reasonable costs and expenses, if any, of the Payee associated with such prepayment.

(b) Optional Prepayment. The Company may, at its option, without premium or penalty, upon five (5) days’ prior written notice to the Payee, repay the unpaid principal amount of this Note, at any time in whole or from time to time in part, together with interest accrued thereon to the date of prepayment. Any such prepayment shall be applied first to the payment of accrued interest and then to repayment of principal. Upon any partial prepayment of the unpaid principal amount of this Note, the Holder shall make notation on this Note of the portion of the principal so prepaid.

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;

(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.

4. Security.

(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 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.

5. Financial Covenant. For so long as this Note remains outstanding, the Company shall at all times maintain Total Current Assets (as reflected in the financial statements

of the Company filed from time to time with the United States Securities and Exchange Commission and prepared in accordance with GAAP) in excess of $20,000,000. “Total Current Assets” means cash, marketable securities, accounts receivable, inventory (including prepaid inventory), prepaid expenses and other current items as reflected in the line item entitled “Total Current Assets” on the consolidated balance sheet of the Company and its subsidiaries that will be converted into cash within 12 months of the date of such consolidated balance sheet, calculated on a net basis consistent with the Company’s past practice with respect to calculation of “Total Current Assets.”

6. Suits for Enforcement.

(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.

7. Notices. All notices, demands and other communications provided for or permitted hereunder shall be made in accordance with the provisions of the Note and Warrant Purchase Agreement, dated as of the date hereof, by and among the Payor and the investors party thereto.

8. Successors and Assigns. This Note shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto. The Payor may not 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.

9. Amendment and Waiver.

(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.

10. Headings. The headings in this Note are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

11. 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.

12. Costs and Expenses. The Payor hereby agrees to pay on demand all reasonable out-of-pocket costs, fees, expenses, disbursements and other charges (including but not limited to the reasonable fees, expenses, disbursements and other charges of counsel to the Payee) of the Payee arising in connection with any consent or waiver granted or requested hereunder or in connection herewith, and any renegotiation, amendment, work-out or settlement of this Note or the indebtedness arising hereunder.

13. Waiver of Jury Trial and Setoff. The Payor hereby waives trial by jury in any litigation in any court with respect to, in connection with, or arising out of this Note or any instrument or document delivered pursuant to this Note, or the validity, protection, interpretation, collection or enforcement thereof, or any other claim or dispute howsoever arising, between any Payor and the Payee; and the Payor hereby waives the right to interpose any setoff or counterclaim or cross-claim in connection with any such litigation, irrespective of the nature of such setoff, counterclaim or cross-claim except to the extent that the failure so to assert any such setoff, counterclaim or cross-claim would permanently preclude the prosecution of the same.

14. 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.

15. Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof.

16. Entire Agreement. This Note is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter hereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Note supersedes all prior agreements and understandings between the parties with respect to such subject matter.

17. Further Assurances. The Payor shall execute such documents and perform such further acts (including, without limitation, obtaining any consents, exemptions, authorizations or other actions by, or giving any notices to, or making any filings with, any

governmental authority or any other Person) as may be reasonably required or desirable to carry out or to perform the provisions of this Note.

IN WITNESS WHEREOF, the Payor has executed and delivered this Secured Subordinated Promissory Note on the date first above written.

	BLUEFLY, INC.

	By:	/ s / Xxxxxx Xxxx
	Name:	Xxxxxx Xxxx
	Title:	CEO

Agreed to and accepted as of the date
first written above:

PRENTICE CONSUMER PARTNERS, LP

By: Prentice Consumer Partners GP, LLC, its General Partner

By:	/ s / Xxxxx Xxxxxx
Name:	Xxxxx Xxxxxx
Title:	Managing Partner

Document Metadata

Table of Contents

Contract

Document Metadata