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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES 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.
SENIOR CONVERTIBLE NOTE
$95,100
New York, New York October 2, 2000
FOR VALUE RECEIVED, the undersigned, BLUEFLY, INC., a New York
corporation (the "Payor" or the "Company"), promises to pay to the order of SFM
DOMESTIC INVESTMENTS LLC or its registered assign (the "Payee"), the principal
sum of NINETY-FIVE THOUSAND ONE HUNDRED DOLLARS ($95,100.00) and interest on the
outstanding principal balance as set forth herein.
1. Securities Purchase Agreement. This Senior Convertible Note is
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the Senior Convertible Note issued pursuant to the Note and Warrant Purchase
Agreement, dated as of the date hereof, among the Payor, the Payee and Quantum
Industrial Partners LDC (the "Securities Purchase Agreement"). The Payee is
entitled to the benefits of (and subject to the obligations expressly contained
in) this Senior Convertible Note and the Securities Purchase Agreement and may
enforce the agreements of the Payor contained herein and therein and exercise
the remedies provided for hereby and thereby or otherwise available in respect
hereto and thereto. Capitalized terms used herein without definition shall have
the meaning ascribed to such terms in the Securities Purchase Agreement.
2. Interest Rate; Payment.
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(a) The outstanding principal balance of this Senior Convertible
Note shall bear interest at an annual rate equal to 8% 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 only
upon repayment of the principal on any Repayment Date (as defined below).
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(b) The outstanding balance of any amount owed under this Senior
Convertible Note which is not paid when due shall bear interest at the rate of
2% per annum (the "Default Interest") above the rate that would otherwise be in
effect under this Senior Convertible 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 January 2, 2002 (the "Maturity
Date"), unless repaid earlier pursuant to the provisions of Section 3 (the date
of any payment pursuant to Section 3 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.
(3) Prepayment.
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(a) Mandatory Prepayment.
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(i) Upon the occurrence of an Event of Default (as defined
in Section 5), the outstanding principal of and all accrued interest on this
Senior Convertible 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 Payee shall, at its sole option, have the right to
require the Payor to pay the outstanding principal of and all accrued interest
on this Senior Convertible Note upon the occurrence of any of the following
events: (1) Payor 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, (2) the Company entering into an agreement to
effectuate any consolidation or merger into another entity, or (3) any sale of a
majority of the outstanding equity of the Company (or any other event that
constitutes a Change of Control of the Payor), in one transaction or in a series
of transactions. Immediately upon the occurrence of either of the events set
forth in clauses (1) or (2) above, or immediately upon obtaining knowledge that
any person has entered into an agreement to effectuate, the event set forth in
clause (3) above, the Payor shall give written notice of such event to the
Payee. Change of Control means any Person or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act), other than Payee and its Affiliates,
becoming the beneficial owner, 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 (the term "beneficial owner" shall be determined in accordance with
Rule 13d-3 of the Exchange Act).
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(iii)Any mandatory prepayment under this Section 3(a) shall
include payment of reasonable costs and expenses, if any, associated with such
prepayment.
(b) Optional Prepayment. The Payor may prepay all or any portion
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of this Senior Convertible Note, at any time, by paying an amount equal to the
outstanding principal amount of this Senior Convertible Note, or the portion of
this Senior Convertible Note called for prepayment, together with interest
accrued and unpaid thereon to the date of prepayment and any other amounts due
under this Senior Convertible Note and the Securities Purchase Agreement,
without penalty or premium.
4. Mandatory Conversion.
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(a) This Senior Convertible Note plus interest accrued and
unpaid thereon shall be automatically converted simultaneously with the Next
Round Financing (the "Triggering Event') into that number of fully paid and
non-assessable Next Round Securities which is equal to the quotient obtained by
dividing the then outstanding principal amount of this Senior Convertible Note
plus interest accrued and unpaid thereon to the date of conversion by the price
per Next Round Security paid in the Next Round Financing.
(b) Promptly after the Triggering Event the Company shall
deliver or cause to be delivered to the holder of this Senior Convertible Note a
certificate or certificates representing the number of fully paid and
non-assessable shares of Next Round Securities into which this Senior
Convertible Note may be converted. Such conversion shall be deemed to have been
made simultaneously with the conclusion of the Next Round Financing, so that the
rights of the holder as a holder of this Senior Convertible Note shall cease
with respect to this Senior Convertible Note at such time (including, without
limitation, the right to receive the principal of this Senior Convertible Note
other than in the form of Next Round Securities), interest shall cease to accrue
hereon and the person or persons entitled to receive the Next Round Securities
deliverable upon conversion of this Senior Convertible Note shall be treated for
all purposes as having become the record holders of such Next Round Securities
at such time, and such conversion shall be at the conversion rate in effect at
such time.
(c) The Company covenants that it will at all times reserve and
keep available out of its authorized Next Round Securities (at such time as such
Securities are authorized) solely for the purpose of issue or delivery upon
conversion of this Senior Convertible Note as herein provided, such number of
Next Round Securities as shall then be issuable or deliverable upon the
conversion of this Senior Convertible Note. The Company covenants that all Next
Round Securities which shall be so issuable or deliverable shall, when issued or
delivered, be duly and validly issued and fully paid and non-assessable.
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5. 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 Senior Convertible 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 Senior Convertible Note, the Securities Purchase
Agreement or the Warrants 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 Senior Convertible Note or the
Securities Purchase Agreement 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, (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
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$50,000 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) the Payor shall incur any indebtedness senior to this Senior
Convertible Note; or
(i) any material provisions of this Senior Convertible Note, the
Securities Purchase Agreement, or the Warrants shall terminate or become void or
unenforceable or the Payor shall so assert in writing.
6. Senior Status. The indebtedness evidenced by this Senior
Convertible Note is senior in right of payment to all other indebtedness of the
Payor and Xxxxx agrees not to incur any indebtedness, which by its terms is
senior in right of payment to this Senior Convertible Note.
7. Suits for Enforcement.
(a) Upon the occurrence of any one or more Events of Default,
the holder of this Senior Convertible Note may proceed to protect and enforce
its rights by suit in equity, action at law or by other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained in
the Securities Purchase Agreement or in aid of the exercise of any power granted
in this Senior Convertible Note, or may proceed to enforce the payment of this
Senior Convertible Note, or to enforce any other legal or equitable right it may
have as a holder of this Senior Convertible Note.
(b) The holder of this Senior Convertible 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 under the Securities
Purchase Agreement, the Payor will pay to the holder of this Senior Convertible
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.
8. Notices. All notices, demands and other communications provided
for or permitted hereunder shall be made in the manner and to the addresses set
forth in Section 11.2 of the Securities Purchase Agreement.
9. Successors and Assigns. This Senior Convertible 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 under this Senior
Convertible Note without the prior written consent of Payee. The Payee may
assign all or a portion of their rights or obligations under this Senior
Convertible Note to an Affiliate without the prior written consent of the Payor.
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10. Amendment and Waiver.
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(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 Senior Convertible Note, any waiver of any provision of this
Senior Convertible Note and any consent to any departure by the Payor from the
terms of any provision of this Senior Convertible 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.
11. Headings. The headings in this Senior Convertible Note are for
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convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
12. GOVERNING LAW. THIS SENIOR CONVERTIBLE NOTE SHALL BE GOVERNED BY
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AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
13. Costs and Expenses. The Payor hereby agrees to pay on demand all
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reasonable out-of-pocket costs, fees, expenses, disbursements and other charges
(including but not limited to the fees, expenses, disbursements and other
charges of Xxxx, Xxxxx, Xxxxxxx, Xxxxxxx & Xxxxxxxx, special 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 settlements of this Senior Convertible Note or the indebtedness
arising hereunder.
14. Waiver of Jury Trial and Setoff. The Payor hereby waives trial by
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jury in any litigation in any court with respect to, in connection with, or
arising out of this Senior Convertible Note or any instrument or document
delivered pursuant to this Senior Convertible 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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15. Consent to Jurisdiction. The Payor hereby irrevocably consents to
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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 Senior Convertible Note or any document or
instrument delivered pursuant to this Agreement.
16. 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.
17. Entire Agreement. This Senior Convertible Note, the Warrants and
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the Securities Purchase Agreement 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 Senior
Convertible Note supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
18. Further Assurances. The Payor shall execute such documents and
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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 Senior Convertible Note.
BLUEFLY, INC.
By: /S/ XXX XXXXX
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Name: XXX XXXXX
Title: CHIEF EXECUTIVE OFFICER
