Note and Warrant Purchase Agreement - Bluefly Inc., Quantum Industrial Partners LDC and SFM Domestic Investments LLC
NOTE AND WARRANT PURCHASE AGREEMENT
NOTE AND WARRANT PURCHASE AGREEMENT, dated as of January 28, 2003 (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, (a) convertible demand
promissory notes in the aggregate principal amount of one million dollars
($1,000,000), in the form attached hereto as Exhibit A (the "Notes") and (b)
warrants to purchase an aggregate of 25,000 shares of the common stock, par
value $0.01 per share ("Common Stock"), of the Company in the form attached
hereto as Exhibit B (the "Warrants," and together with the Notes, the
"Securities"), 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 SECURITIES
SECTION 1.1 Notes. Subject to the terms and conditions hereof, the
Company hereby issues and sells to the Investors, and each Investor hereby
purchases from the Company, a Note in the aggregate principal amount set forth
opposite such Investor's name in Schedule 1.
SECTION 1.2 Warrants. Subject to the terms and conditions hereof, the
Company hereby issues and sells to the Investors, and each Investor hereby
purchases from the Company, Warrants to purchase the number of shares of Common
Stock set forth opposite such Investor's name in Schedule 1.
SECTION 1.3 Purchase Price. The aggregate purchase price for the Notes
and Warrants to be purchased by each Investor is the amount set forth opposite
such Investor's name in Schedule 1.
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors as follows:
SECTION 2.1 Organization, etc. The Company and its Subsidiary (as
defined in Section 2.4(b)) have each been duly formed, and are each validly
existing as a corporation in good standing under the laws of their respective
States of incorporation, and are each qualified to do business as a foreign
corporation in each jurisdiction in which the failure to be so qualified could
reasonably be expected to have a material adverse effect on the assets,
liabilities, condition (financial or other), business or results of operations
of the Company and its Subsidiary taken as a whole (a "Material Adverse
Effect"). The Company and its Subsidiary each have the requisite corporate power
and authority to own, lease and operate their respective properties and to
conduct their respective businesses as presently conducted. The Company has the
requisite corporate power and authority to enter into, execute, deliver and
perform all of its duties and obligations under this Agreement and to consummate
the transactions contemplated hereby.
SECTION 2.2 Authorization. The execution, delivery and performance of
this Agreement and the issuance of the Securities have been duly authorized by
all necessary corporate action on the part of the Company, including, without
limitation, the due authorization by the affirmative votes of a majority of the
disinterested directors of the Company's Board of Directors.
SECTION 2.3 Validity; Enforceability. This Agreement and the Notes have
each been duly executed and delivered by the Company, and constitute the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by, or subject to, any bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and subject to general principles of equity.
SECTION 2.4 Capitalization.
(a) As of the date hereof, the authorized capital stock of the Company
consists of 92,000,000 shares of common stock, $0.01 par value per share (the
"Common Stock"), and 25,000,000 shares of preferred stock, $0.01 par value per
share, of which 500,000 shares have been designated Series A Convertible
Preferred Stock, 9,000,000 shares have been designated Series B Convertible
Preferred Stock, 2,100 shares have been designated Series 2002 Convertible
Preferred Stock and 3,500 shares have been designated Series C Convertible
Preferred Stock. The issued and outstanding capital stock of the Company
consists of (i) 10,787,549 shares of Common Stock, (ii) 460,000 shares of Series
A Convertible Preferred Stock, (iii) 8,889,414 shares of Series B Convertible
Preferred Stock, (iv) 2,100 shares of Series 2002 Convertible Preferred Stock
and (v) 1,000 shares of Series C 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
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as otherwise contemplated by this Agreement, there are no outstanding options,
warrants or other equity securities that are convertible into, or exercisable
for, shares of the Company's capital stock.
(b) The only Subsidiary of the Company is Clothesline Corporation. The
Company owns all of the issued and outstanding capital stock of its Subsidiary,
free and clear of all liens and encumbrances. All of such shares of capital
stock are duly authorized, validly issued, fully paid and non-assessable, and
were issued in compliance with the registration and qualification requirements
of all applicable federal, state and foreign securities laws. There are no
options, warrants, conversion privileges, subscription or purchase rights or
other rights presently outstanding to purchase or otherwise acquire any
authorized but unissued, unauthorized or treasury shares of capital stock or
other securities of, or any proprietary interest in, the Company's Subsidiary,
and there is no outstanding security of any kind convertible into or
exchangeable for such shares or proprietary interest. "Subsidiary" means, with
respect to the Company, a corporation or other entity of which 50% or more of
the voting power of the outstanding voting equity securities or 50% or more of
the outstanding economic equity interest is held, directly or indirectly, by the
Company.
SECTION 2.5 Governmental Consents. The execution and delivery by the
Company of this Agreement, and the performance by the Company of the
transactions contemplated hereby, do not and will not require the Company to
effectuate or obtain any registration with, consent or approval of, or notice to
any federal, state or other governmental authority or regulatory body, other
than periodic and other filings under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and listing applications and/or notifications to
The Nasdaq SmallCap Market and The Boston Stock Exchange with respect to the
issuance of the Common Stock issuable upon exercise of the Warrants. 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, the Series B Convertible Preferred Stock and the Series C
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 or its Subsidiary is a party or by which the Company or its
Subsidiary or any of their respective 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 or its
Subsidiary, except, in the case of clause (ii) or (iii) above, any such event
that could not reasonably be expected to have a Material Adverse Effect or
materially impair the transactions contemplated hereby.
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SECTION 2.7 Issuances of Securities. The Securities have been validly
issued, and, upon payment therefor, will be fully paid and non-assessable. The
offering, issuance, sale and delivery of the Securities 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,
except as disclosed in the Company's public filings, there has not been any: (i)
material adverse change in the condition, financial or otherwise, of the Company
and its Subsidiary (taken as a whole) or in the assets, liabilities, properties
or business of the Company and its Subsidiary (taken as a whole); (ii)
declaration, setting aside or payment of any dividend or other distribution with
respect to, or any direct or indirect redemption or acquisition of, any capital
stock of the Company; (iii) waiver of any valuable right of the Company or its
Subsidiary or cancellation of any material debt or claim held by the Company or
its Subsidiary; (iv) material loss, destruction or damage to any property of the
Company or its Subsidiary, whether or not insured; (v) acquisition or
disposition of any material assets (or any contract or arrangement therefor) or
any other material transaction by the Company or its Subsidiary otherwise than
for fair value in the ordinary course of business consistent with past practice;
or (vi) other agreement or understanding, whether in writing or otherwise, for
the Company or its Subsidiary to take any action of the type, or any action that
would result in an event 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 Reports on Form
10-Q for the quarterly periods ended March 31, 2002, June 30, 2002 and September
30, 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 consolidated financial
statements and unaudited interim consolidated financial statements of the
Company included or incorporated by reference in such Commission Filings have
been prepared in accordance with generally accepted accounting principles,
consistently applied ("GAAP") (except as may be indicated in the notes thereto
or, in the case of the unaudited consolidated statements, as permitted by Form
10-Q), complied as of their respective dates in all material respects with
applicable accounting
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requirements and the published rules and regulations of the Commission with
respect thereto, and fairly present, in all material respects, the consolidated
financial position of the Company and its Subsidiary as of the dates thereof and
the results of operations for the periods then ended (subject, in the case of
any unaudited consolidated interim financial statements, to the absence of
footnotes required by GAAP and normal year-end adjustments).
SECTION 2.10 Brokers. Neither the Company, 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor represents and warrants to the Company, severally but not
jointly, as follows:
SECTION 3.1 Organization, etc. Such Investor has been duly formed and
is validly existing and in good standing under the laws of its jurisdiction of
organization. Such Investor has the requisite organizational power and authority
to enter into, execute, deliver and perform all of its duties and obligations
under this Agreement and to consummate the transactions contemplated hereby.
SECTION 3.2 Authority. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary organizational or other
action on the part of such Investor.
SECTION 3.3 Validity; Enforceability. This Agreement has been duly
executed and delivered by such Investor, and constitutes the legal, valid and
binding obligation of such Investor, enforceable against such Investor in
accordance with its terms, except as such enforceability may be limited by, or
subject to, any bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and subject to
general principles of equity.
SECTION 3.4 Investment Representations.
(a) Such Investor acknowledges that the offer and sale of the
Securities to such Investor have not been registered under the Securities Act,
or the securities laws of any state or regulatory body, 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 certificates
representing the Warrants 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,
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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 Securities for investment, and not
with a view to the resale or distribution thereof, and is acquiring such
securities for its own account.
(c) Such Investor is an "accredited investor" (as that term is defined
in Rule 501 of Regulation D promulgated under the Securities Act), is
sophisticated in financial matters and is familiar with the business of the
Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
Such Investor has had the opportunity to investigate on its own 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 Securities 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 Form 4 and an amendment to such Investor's
Schedule 13D under the Exchange Act with respect to its acquisition of the
Securities.
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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, in the case of clause (ii) above, 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.
ARTICLE IV
SURVIVAL; INDEMNIFICATION
SECTION 4.1 Survival. The representations and warranties contained in
Articles II and III hereof shall survive until the first anniversary of the date
hereof.
SECTION 4.2 Indemnification. Each party (including its officers,
directors, employees, affiliates, agents, successors and assigns (each an
"Indemnified Party")) shall be indemnified and held harmless by the other
parties hereto (each an "Indemnifying Party") for any and all liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments and
penalties (including, without limitation, reasonable attorneys' fees and
expenses) actually suffered or incurred by them (collectively, "Losses"),
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 IV shall
in no event exceed fifty percent (50%) of the purchase price paid by such
Investor for the Securities purchased by it and the aggregate liability of the
Company under this Article IV shall in no event exceed fifty percent (50%) of
the purchase price paid by the Investors for the Securities, 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 Securities.
SECTION 4.3 Indemnification Procedure. The obligations and liabilities
of the Indemnifying Party under this Article IV with respect to Losses arising
from claims of any third party that are subject to the indemnification provided
for in this Article IV ("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
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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 IV 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 IV.
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 counsel to 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 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 V
MISCELLANEOUS
SECTION 5.1 Registrable Securities. The shares of Common Stock issuable
upon the exercise of the Warrants (collectively, the "New Registrable
Securities"), shall be deemed "Registrable Securities" under the terms of the
Investment Agreement by and among the Company, the Company's predecessor and the
Investors, dated November 13, 2000 (the "Series B Investment Agreement")
(subject to the provisions of Section 13.1(a) of the Series B Investment
Agreement), and the parties hereto (who also constitute all of the parties to
the Series B Investment Agreement)
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hereby amend the definition of "Registrable Securities" contained in the Series
B Investment Agreement so that such definition includes the New Registrable
Securities, along with any other securities already included within the
definition thereof.
SECTION 5.2 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 5.3 Entire Agreement. This Agreement and any other agreement or
instrument to be delivered expressly pursuant to the terms hereof constitute the
entire Agreement between the parties hereto with respect to the subject matter
hereof and supersede all previous negotiations, commitments and writings with
respect to such subject matter.
SECTION 5.4 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 5.5 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 5.6 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 5.7 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
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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) 840-1903
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.
SECTION 5.8 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 5.9 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. The parties agree that the federal and
state courts located in New York, New York shall have exclusive jurisdiction
over any dispute involving this Agreement or the transactions contemplated
hereby, and each party hereby irrevocably submits to the jurisdiction of, and
waives any objection to the laying of venue in, such courts.
SECTION 5.10 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 parties, 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.
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SECTION 5.11 Expenses. The Company shall reimburse the Investors for
their reasonable legal fees and expenses incurred in connection with the
negotiation of this Agreement and the transactions contemplated hereby. 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.
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IN WITNESS WHEREOF, this Agreement has been duly executed on the date
first set forth above.
BLUEFLY, INC.
By: /S/ Jonathan Morris
---------------------------
Name: Jonathan Morris
Title: Executive Vice President
QUANTUM INDUSTRIAL PARTNERS LDC
By: /S/ John F. Brown
---------------------------
Name: John F. Brown
Title: Attorney in fact
SFM DOMESTIC INVESTMENTS LLC
By: /S/ John F. Brown
---------------------------
Name: John F. Brown
Title: Attorney in fact
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SCHEDULE 1
INVESTORS AND SHARE AND NOTE ALLOCATIONS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Shares Issuable on Aggregate Principal Aggregate Purchase
Name and Address of Investor Exercise of Warrants Amount of Note Price
---------------------------- -------------------- -------------- ------------------
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Quantum Industrial Partners LDC 24,208 $968,300 $968,300
Kaya Flamboyan 9
Villemstad
Curacao
Netherlands-Antilles
with a copy to:
Soros Fund Management LLC
888 Fifth Avenue
New York, New York 10106
Facsimile: (212) 664-0544
Attn: John F. Brown, Esq.
-----------------------------------------------------------------------------------------------------------------------
SFM Domestic Investments LLC 792 $31,700 $31,700
c/o Soros Fund Management LLC
888 Fifth Avenue
New York, New York 10106
Facsimile: (212) 664-0544
Attn: John F. Brown, Esq.
-----------------------------------------------------------------------------------------------------------------------
TOTAL 25,000 $1,000,000 $1,000,000
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
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SCHEDULE 2.4
CAPITALIZATION
As of the date hereof (except as otherwise provided below), but without
giving effect to the transactions contemplated by this Agreement, the following
equity securities are outstanding and convertible into, or exercisable for
shares of Common Stock:
1. 460,000 shares of Series A Convertible Preferred Stock (the
"Series A Stock") are issued and outstanding. The Series A
Stock is convertible into 3,931,624 shares of Common Stock.
2. 8,889,414 shares of Series B Convertible Preferred Stock (the
"Series B Stock") are issued and outstanding. The Series B
Stock is convertible into 13,227,273 shares of Common Stock.
3. Warrants to purchase an aggregate of 1,069,144 shares of
Common Stock are issued and outstanding.
4. As of December 31, 2002, options issued to purchase 8,508,412
shares of Common Stock are issued and outstanding under the
Company's 1997 Stock Option Plan, as amended, and 2000 Stock
Option Plan, as amended.
5. 2,100 shares of Series 2002 Convertible Preferred Stock (the
"Series 2002 Stock") are issued and outstanding. The Series
2002 Stock is convertible into Subsequent Round Securities (as
defined in the Certificate of Designations relating to the
Series 2002 Stock), and such Subsequent Round Securities may
include Common Stock or securities convertible into Common
Stock.
6. 1,000 shares of Series C Convertible Preferred Stock (the
"Series C Stock") are issued and outstanding. The Series C
Stock is convertible into 1,075,270 shares of Common Stock.
7. Convertible promissory notes (the "Convertible Notes") in the
aggregate principal amount of $2,000,000 are issued and
outstanding. The Convertible Notes, without regard to interest
accumulated thereon, are convertible into 2,000 shares of
Series C Convertible Preferred Stock, which are convertible
into 2,150,540 shares of Common Stock.
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