EXHIBIT II
THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AND INTERCREDITOR
AGREEMENT, DATED MARCH 26, 2008, BETWEEN XXXXX FARGO RETAIL FINANCE, LLC, A
DELAWARE LIMITED LIABILITY COMPANY, [QUANTUM INDUSTRIAL PARTNERS LDC, A
CAYMAN ISLANDS LIMITED DURATION COMPANY, SFM DOMESTIC INVESTMENTS LLC, A
DELAWARE LIMITED LIABILITY COMPANY, MAVERICK FUND USA, LTD., A TEXAS LIMITED
PARTNERSHIP, MAVERICK FUND, L.D.C., A CAYMAN ISLANDS EXEMPTED LIMITED
DURATION COMPANY AND MAVERICK FUND II, LTD., A CAYMAN ISLANDS EXEMPTED
COMPANY.] PAYOR SHALL FURNISH A COPY OF SUCH SUBORDINATION AND INTERCREDITOR
AGREEMENT UPON WRITTEN REQUEST AND WITHOUT CHARGE.
THE OFFER AND SALE OF THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE.
THIS NOTE AND ANY SECURITIES ISSUABLE UPON THE CONVERSION HEREOF MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
CERTIFICATES REPRESENTING ANY SECURITIES ISSUABLE UPON CONVERSION OF THIS
NOTE SHALL INCLUDE A LEGEND TO SIMILAR EFFECT AS THE FOREGOING.
BLUEFLY, INC.
CONVERTIBLE PROMISSORY NOTE
$[________]
New York, New York [________], 200[_]
FOR VALUE RECEIVED, the undersigned, BLUEFLY, INC., a Delaware
corporation (the "Payor" or the "Company"), promises to pay to the order of
[___________] or its registered assign (the "Payee"), the principal sum of
[______] Dollars ($[______]) and interest on the outstanding principal balance
as set forth herein.
1. Interest Rate; Payment.
(a) The outstanding principal balance of this Convertible Promissory
Note (this "Note") shall bear interest at an annual rate equal to 8% per annum,
with interest
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accruing, from and including the date hereof, on a cumulative, compounding
basis. Interest shall be computed on the basis of a 365- or 366-day year, as the
case may be, and the actual number of days elapsed, and, subject to Section 5,
shall be payable only upon repayment of the principal on any Repayment Date (as
defined below) in cash.
(b) The outstanding balance of any amount owed under this Note
which is not paid when due shall bear interest at the rate of 2.0% per annum
(the "Default Interest") above the rate that would otherwise be in effect under
this Note with the Default Interest accruing, from and including such due date,
on a cumulative, compounding basis.
(c) The outstanding principal and all accrued and unpaid interest
shall be paid in full no later than [______], 201[_](1) (the "Maturity Date"),
unless repaid earlier pursuant to the provisions of Section 2 (the date of any
payment pursuant to Section 2 and the Maturity Date, collectively referred to as
a "Repayment Date") or unless converted into Conversion Securities (as defined
below) pursuant to Section 5 on or prior to the Maturity Date. On a Repayment
Date, the Payor shall pay the applicable amount of principal and interest in
lawful money of the United States of America by wire or bank transfer of
immediately available funds to an account designated by the Payee in writing
from time to time.
2. Prepayment.
(a) Mandatory Prepayment.
(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) The holders of a Majority of Notes Outstanding shall,
at their sole option, have the right to require the Payor to pay the outstanding
principal of and all accrued interest on this Note upon the occurrence of any of
the following events: (1) an Event of Default under Section 3(a), (b), (c), (f),
(g) or (h), (2) the Company entering into an agreement to effectuate any sale or
other disposition of all or substantially all of its assets, in one transaction
or in a series of transactions, (3) the Company entering into an agreement to
effectuate any consolidation or merger with or into another entity, or (4) any
sale of a majority of the outstanding equity of the Company (or any other event
that constitutes a Change of Control (as defined below) of the Company), in one
transaction or in a series of transactions. Immediately upon the occurrence of
either of the events set forth in clauses (1), (2) or (3) above, or immediately
upon obtaining knowledge that any person has entered into an agreement to
effectuate the event set forth in clause (4) above, the Company shall give
written notice of such event to the Payee. "Change of Control" means any
"Person" (as defined in Section 3(a)(9) of
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1 To be the later of three years following issuance and three years and three
months following the date of the debt commitment.
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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 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.
(iii) Any mandatory 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. No notice of prepayment shall in any
way prohibit the Payee from converting this Note pursuant to Section 5.
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 five
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
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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), (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. Reserved.
5. Conversion.
(a) Right to Convert.
(i) Subject to the terms and conditions of this Section 5
and to stockholder approval (and so subject only to the extent required by the
rules of the Nasdaq Capital Market or any other national securities exchange or
quotation system upon which the Payor's common stock, par value $0.01 per share
("Common Stock"), may be listed from time to time), the Payee shall have the
right, at its option, at any time and from time to time, upon or following the
consummation of any Subsequent Round of
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Financing (as defined below), to convert
all or any portion of the principal amount of this Note (the "Principal
Obligations") into a number of fully paid and nonassessable Subsequent Round
Securities (with the most favorable terms received by any investor in such
Subsequent Round of Financing) equal to the quotient obtained by dividing the
aggregate amount of Principal Obligations to be converted by the lowest price
per Subsequent Round Security paid by any investor in such Subsequent Round of
Financing. Written notice of a Subsequent Round of Financing stating the date on
which such Subsequent Round of Financing is expected to become effective and
describing the terms and conditions of such Subsequent Round of Financing shall
be delivered by the Company to, and received by, the Payee not less than 10 days
prior to the consummation of such Subsequent Round of Financing.
(ii) Subject to the terms and conditions of this Section 5 and to
stockholder approval (and so subject only to the extent required by the rules
of the Nasdaq Capital Market or any other national securities exchange or
quotation system upon which the Common Stock may be listed from time to
time), the Payee shall have the right, at its option, at any time and from
time to time, to convert all or any portion of the Principal Obligations into
a number of fully paid and nonassessable shares of Common Stock equal to the
quotient obtained by dividing the aggregate amount of Principal Obligations
to be converted by $[____].(2)
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(2) To equal the 20-day trailing average trading price on the date the Note is
issued.
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(b) Procedure for Conversion. In order to convert all or any portion of
the Principal Obligations, the Payee shall (i) surrender this Note, duly
endorsed, at the office of the Payor and (ii) simultaneously with such
surrender, notify the Payor in writing of its election to convert all or a
portion of the Principal Obligations, which notice shall specify the amount
of Principal Obligations to be so converted, and whether such conversion is
for Common Stock or Subsequent Round Securities. The date on which the Note
is surrendered for conversion is referred to herein as the "Conversion
Date." As soon as practicable after the Conversion Date, the Payee shall be
entitled to receive a certificate or certificates, registered in such name or
names as the Payee may direct, representing the Conversion Securities
issuable upon conversion of the applicable Principal Obligations, along with
a new promissory note, in the same form as this Note, reflecting any
Principal Obligations that have not been so converted and any obligations in
respect of accrued and unpaid interest on converted Principal Obligations;
provided that the Payee shall be treated for all purposes as the record
holder of such Conversion Securities as of the Conversion Date. The issuance
of Conversion Securities upon conversion of any Principal Obligations shall
be made without charge to the Payee for any issuance tax in respect thereof,
provided that the Payor shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and delivery of
any certificate in a name other than that of the Payee.
(c) Reservation of Shares. Payor shall reserve and keep available solely
for issuance upon the conversion of Principal Obligations such number of
shares of Conversion Securities as will from time to time be sufficient to
permit the conversion of all outstanding Principal Obligations, and, if
applicable, shall take all action to increase the authorized number of
Conversion Securities if at any time there shall be insufficient authorized
but unissued Conversion Securities to permit such reservation or permit the
conversion of all outstanding Principal Obligations. The Payor covenants
that all Conversion Securities that shall be so issued shall be duly
authorized, validly issued, fully paid and non-assessable by the Payor, not
subject to any preemptive rights, and free from any taxes, liens and charges
with respect to the issue thereof. The Payor will take all such action as
may be necessary to ensure that all such Conversion Securities may be so
issued without violation of any applicable law or regulation, or any
requirement of any national securities exchange or quotation system upon
which the Common Stock may be listed.
(d) Certain Definitions. For purposes of this Note, the following terms
shall have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa):
"Conversion Securities" means Common Stock or Subsequent Round
Securities, as applicable.
"Majority of Notes Outstanding" means a majority of the aggregate
outstanding principal amount of notes issued pursuant to the Note Purchase
Agreement dated as of [___], 200[_] by and between the Payor and the
Investors party thereto.
"Subsequent Round of Financing" means the offer and sale for cash
by the Company of its equity securities.
"Subsequent Round Securities" means the equity securities sold in
the Subsequent Round of Financing; provided that, to the extent that two or
more types or classes of equity securities are sold as a unit in the
Subsequent Round of Financing, "Subsequent Round Securities" shall mean a
unit consisting of the same types or classes of equity securities, in the
same proportion, as the units sold in the Subsequent Round of Financing.
6. Suits for Enforcement.
(a) Upon the occurrence of any one or more Events of Default, 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.
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(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 Purchase Agreement, dated as of the date hereof, by
and among the Payor and the investors listed on Schedule 1 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 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.
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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
Convertible Promissory Note on the date first above written.
BLUEFLY, INC.
By:
________________________________
Name:
Title:
Agreed to and accepted as of the date
first written above:
[PAYEE]
By: ________________________________
Name:
Title:
