Common Stock and Warrant Purchase Agreement - Bluefly Inc., Breider Moore & Co. LLC, Quantum Industrial Partners LDC, SFM Domestic Investments LLC and Enable Growth Partners LP
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT, dated as of May 24, 2002
(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, 5,620,609 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 1,405,153 shares of Common Stock
at an exercise price of $1.88 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 Investors hereby purchases from the Company, the number of Shares set for
opposite such Investor's name in Schedule 1, for a purchase price of $1.57 per
share, resulting in an aggregate purchase price for all Shares sold pursuant to
the terms hereof of $8,824,355.87.
SECTION 1.2 Purchase and Sale of the Warrant. 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 Warrants set
forth opposite such Investor's name in Schedule 1, for a purchase price of
$0.125 per Warrant, resulting in an aggregate purchase price for all Warrants
sold pursuant to the terms hereof of $175,644.13.
<PAGE>
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 has been duly formed, is
validly existing as a corporation in good standing under the laws of the State
of Delaware, and is 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 (a
"Material Adverse Effect"). The Company has the requisite corporate power and
authority to own, lease and operate its properties and to conduct its business
as presently conducted and 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. As of the date hereof, the authorized capital
stock of the Company consists of 40,000,000 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 and
9,000,000 shares have been designated Series B Convertible Preferred Stock.
Without giving effect to the transactions contemplated by this Agreement, the
issued and outstanding capital stock of the Company consists of (i) 9,205,331
shares of Common Stock, (ii) 500,000 shares of Series A Convertible Preferred
Stock and (iii) 8,910,782 shares of Series B Convertible Preferred Stock. All
such shares of the Company have been 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.
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, other than (i)
2
<PAGE>
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 Nasdaq SmallCap Market and The Boston Stock Exchange and (iii) 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, (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 and Series B Convertible Preferred Stock, require any consent,
approval, authorization or permit of, or filing or notification to, any person,
company or entity 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 is a party or by
which the Company or any of its assets may be bound 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, 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.
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.
SECTION 2.8 Absence of Certain Developments. Since December 31, 2001,
there has not been any: (i) material adverse change in the condition, financial
or otherwise, of the Company or in the assets, liabilities, properties or
business of the Company; (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 cancellation of any material debt or claim
held by the Company; (iv) material loss,
3
<PAGE>
destruction or damage to any property of the Company, 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 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 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, 2001 (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, 2001 and the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2002. 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"), neither
the Company, nor any of its officers, directors or employees, has employed any
broker or finder, or (except for compensation due to Enable, 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.
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
4
<PAGE>
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."
(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
5
<PAGE>
had the opportunity to investigate on its own 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. Neither such Investor, 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) 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
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 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.
6
<PAGE>
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 by the Investors of the Shares and the Warrant Shares within
forty-five (45) 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. The Company shall use
commercially reasonable efforts to maintain the effectiveness of such
Registration Statement until the earliest to occur of the following: (i) all of
the Shares and the Warrant Shares have been disposed of by the Investors
pursuant to the Registration Statement or otherwise transferred (or in the case
of the Warrant Shares, all of the Warrants pursuant to which such Warrant Shares
are issuable have expired); or (ii) the Shares and the Warrant Shares can be
resold pursuant to subsection (k) of Rule 144, promulgated under the Securities
Act, or any similar provisions then in effect.
(b) The Investors will 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.
(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 Shares or Warrant Shares, or engage in
any other transaction involving or relating to the Shares or Warrant Shares,
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. 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.
7
<PAGE>
(d) To the extent not inconsistent with applicable law, each
Investor agrees that, in connection with any registered public offering of the
Company's equity securities, it will not effect any public sale or distribution
of any of the Shares or the Warrant Shares, including a sale pursuant to Rule
144 under the Securities Act, during the 10 days prior to, and during the 90
days beginning on, the effective date of the Company's registration statement
(except as part of such registration) with respect to such registered public
offering, if and to the extent reasonably requested by the Company in writing in
the case of a non-underwritten public offering or to the extent reasonably
requested by the underwriter in the case of an underwritten public offering.
(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, counsel or
others retained by any of the Investors in connection with the sale, or
potential sale, of the Shares or Warrant Shares.
(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 clause (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 clause (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 5.3.
SECTION 4.2 Board of Directors. For so long as Breider Moore & Co., LLC
("Breider Moore") continues to own, beneficially and of record, at least five
percent (5%) of the outstanding shares of voting stock of the Company, the
Company will use commercially reasonable efforts to nominate a representative of
Breider Moore to the Company's Board of Directors and to recommend that the
Company's stockholders vote in favor of the election of such representative to
8
<PAGE>
the Company's Board of Directors; provided that Breider Moore and the Company
shall mutually agree as to the identity of such representative. In connection
with the foregoing, Breider Moore represents and warrants that, within the
preceding five years, none of the following has occurred with respect to it or
any of its principal owners, partners, members, directors or officers: (i) a
petition under the Federal bankruptcy laws or any state insolvency law was filed
by or against, or a receiver, fiscal agent or similar officer was appointed by a
court for the business or property of such person or entity, or any partnership
in which such person or entity was a general partner at or within two years
before the time of such filing, or any corporation or business association of
which such person was an executive officer at or within two years before the
time of such filing; (ii) such person or entity was convicted in a criminal
proceeding or is a named subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses); (iii) such person or entity was
the subject of any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining he, she or it from, or otherwise limiting, the following
activities: (A) acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the Commodity Futures
Trading Commission, or an associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company, bank, savings
and loan association or insurance company, or engaging in or continuing any
conduct or practice in connection with such activity, (B) engaging in any type
of business practice or (C) engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection with any
violation of Federal or State securities laws or Federal commodities laws; (iv)
such person or entity was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any Federal or State authority
barring, suspending or otherwise limiting for more than 60 days the right of
such person to engage in any activity described in clause (iii)(A), or to be
associated with persons engaged in any such activity; (v) such person or entity
was found by a court of competent jurisdiction in a civil action or by the
Commission to have violated any Federal or State securities law, and the
judgment in such civil action or finding by the Commission has not been
subsequently reversed, suspended or vacated; and (vi) such person or entity was
found by a court of competent jurisdiction in a civil action or by the Commodity
Futures Trading Commission to have violated any Federal commodities law, and the
judgment in such civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or vacated.
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
9
<PAGE>
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 the foregoing, the aggregate liability of any Investor under
this Article V shall in no event exceed fifty percent (50%) of the purchase
price paid by such Investor for the Shares and Warrants purchased by it and the
aggregate liability of the Company under this Article V shall in no event exceed
fifty percent (50%) of the purchase price paid by the Investors for the Shares
and the Warrants, except that the Company's liability for a violation of any of
the representations and warranties contained in the first two sentences of
Section 2.7 may exceed such limitation, but shall in no event exceed one hundred
percent (100%) of the purchase price paid by the Investors for the Shares and
the Warrants.
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 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
10
<PAGE>
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 Breider Moore for up to
$10,000 of reasonable legal expenses incurred in connection with the negotiation
of this Agreement, subject to the receipt of appropriate supporting
documentation. 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 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.
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.
11
<PAGE>
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 (whether by operation of law or otherwise) without the prior
written consent of the other parties. 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.
42 West 39th Street, 9th Floor
New York, New York 10018
Fax: (212) 354-3400
Attn: Jonathan B. Morris
With a copy to:
Swidler Berlin Shereff Friedman, LLP
405 Lexington Avenue
New York, New York 10174
Fax: (212) 891-9598
Attn: Richard A. Goldberg, Esq.
To the Investors: To the address set forth on Schedule 1.
12
<PAGE>
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. 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.
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.
[Signature page follows]
13
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed on the date
first set forth above.
BLUEFLY, INC.
By: /s/ E. Kenneth Seiff
---------------------------------
Name: E. Kenneth Seiff
Title: Chief Executive Officer
BREIDER MOORE & CO., LLC
By: /s/ W. Joseph Breider
---------------------------------
Name: W. Joseph Breider
Title: Managing Director
QUANTUM INDUSTRIAL PARTNERS LDC
By: /s/ Jodye M. Anzalotta
---------------------------------
Name: Jodye M. Anzalotta
Title: Attorney-in-fact
SFM DOMESTIC INVESTMENTS LLC
By: /s/ Jodye M. Anzalotta
---------------------------------
Name: Jodye M. Anzalotta
Title: Attorney-in-fact
Enable Growth Partners, L.P.
By: /s/ Mitch Levine
---------------------------------
Name: Mitch Levine
Title: General Partner
14
<PAGE>
SCHEDULE 1
INVESTORS AND SHARE AND WARRANT ALLOCATIONS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
Purchase Price Purchase Aggregate
Shares for Warrants Price for Purchase
Name and Address of Investor Purchased Shares Purchased Warrants Price
---------------------------- --------- -------------- --------- --------- ---------
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Breider Moore & Co., LLC 4,371,585 $6,863,388 1,092,896 $136,612 $7,000,000
One Embarcadero Center
Suite 4100
San Francisco, California 94111
Facsimile: (415) 981-9211
Attention: Joe Breider
with a copy to:
Thomas C. McNally III
455 Market Street
19th Floor
San Francisco, California 94105
Facsimile: (415) 882-3232
------------------------------------------------------------------------------------------------------------------------
Quantum Industrial Partners LDC 1,148,998 $1,803,926.75 287,250 $35,906.25 $1,839,833
Kaya Flamboyan 9
Willemstad
Curacao
Netherlands-Antilles
with a copy to:
Soros Fund Management LLC
888 Seventh Avenue
New York, New York 10106
Facsimile: (212) 582-9688
Attn: Richard Holahan, Esq.
------------------------------------------------------------------------------------------------------------------------
SFM Domestic Investments LLC 37,575 $58,992.75 9,394 $1,174.25 $60,167
c/o Soros Fund Management LLC
888 Seventh Avenue
New York, New York 10106
Facsimile: (212) 582-9688
Attn: Richard Holahan, Esq.
------------------------------------------------------------------------------------------------------------------------
Enable Growth Partners, L.P. 62,451 $98,048.37 15,613 $1,951.63 $100,000
One Sansome Street, Suite 2900
San Francisco, California 94104
Facsimile: (415) 265-4794
Attn: Mitch Levine
------------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
SCHEDULE 2.4
CAPITALIZATION
As of the date hereof, 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. 500,000 shares of Series A Convertible Preferred Stock (the "Series
A Stock") are issued and outstanding. The Series A Stock is
convertible into 4,273,504 shares of Common Stock.
2. 8,910,782 shares of Series B Convertible Preferred Stock (the
"Series B Stock") are issued and outstanding. The Series B Stock is
convertible into 8,910,782 shares of Common Stock.
3. Warrants to purchase an aggregate of 1,022,500 shares of Common
Stock are issued and outstanding.
4. Options issued to purchase 4,367,703 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.
16
<PAGE>
EXHIBIT 10.39
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. 1
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 $1.88, (the "Exercise Price"), at
any time, in whole or in part, on or after May 28, 2002 (the "Effective Date")
through 5:00 PM New York City time, on May 28, 2007 (the "Expiration Date") all
on the terms and subject to the conditions hereinafter set forth (the
"Warrants").
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.
Capitalized terms used herein but not otherwise defined shall have
the meanings given to them in Section 12 hereof.
<PAGE>
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."
(b) As promptly as practicable, and in any event within five
(5) 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 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.
(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.
2
<PAGE>
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 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
3
<PAGE>
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).
(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 2% 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 2% 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)
4
<PAGE>
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 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
5
<PAGE>
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 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.
6
<PAGE>
"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 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" unless
holders of at least 15% of Common Stock issued or issuable upon exercise of the
Warrants request that the Company obtain an opinion of a nationally recognized
investment banking firm chosen by the Company (who shall bear the expense) and
reasonably acceptable to such requesting holders of the Warrants, in which event
the Fair Market Value shall be as determined by such investment banking firm.
"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
7
<PAGE>
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
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed as of this 24th day of May, 2002.
BLUEFLY, INC.
By: /s/ E. Kenneth Seiff
------------------------------
Name: E. Kenneth Seiff
Title: Chief Executive Officer
9
<PAGE>
[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: ___________________________
10