SOROS FUND MANAGEMENT LLC
SC 13D/A, EX-99.FF, 2000-10-13
Previous: SOROS FUND MANAGEMENT LLC, SC 13D/A, EX-99.EE, 2000-10-13
Next: SOROS FUND MANAGEMENT LLC, SC 13D/A, EX-99.GG, 2000-10-13



                                                             Page 43 of 87 Pages

THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"),  OR THE  SECURITIES  LAWS OF ANY STATE.  THE  SECURITIES MAY NOT BE
TRANSFERRED  EXCEPT PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE  EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

                                  BLUEFLY, INC.

                             SENIOR CONVERTIBLE NOTE

$2,904,900

New York, New York                                               October 2, 2000

          FOR  VALUE  RECEIVED,  the  undersigned,  BLUEFLY,  INC.,  a New  York
corporation  (the  "Payor" or the  "Company"),  promises  to pay to the order of
QUANTUM  INDUSTRIAL  PARTNERS LDC or its registered  assign (the  "Payee"),  the
principal  sum of TWO MILLION NINE HUNDRED FOUR  THOUSAND  NINE HUNDRED  DOLLARS
($2,904,900.00)  and interest on the outstanding  principal balance as set forth
herein.

          1.   Securities  Purchase  Agreement.  This Senior Convertible Note is
               -------------------------------
               the  Senior  Convertible  Note  issued  pursuant  to the Note and
               Warrant Purchase  Agreement,  dated as of the date hereof,  among
               the  Payor,  the  Payee  and SFM  Domestic  Investments  LLC (the
               "Securities  Purchase  Agreement").  The Payee is entitled to the
               benefits of (and subject to the obligations  expressly  contained
               in) this  Senior  Convertible  Note and the  Securities  Purchase
               Agreement and may enforce the  agreements of the Payor  contained
               herein and therein and exercise the remedies  provided for hereby
               and thereby or otherwise available in respect hereto and thereto.
               Capitalized  terms used herein without  definition shall have the
               meaning  ascribed  to  such  terms  in  the  Securities  Purchase
               Agreement.

          2.   Interest Rate; Payment.
               ----------------------

               (a)  The outstanding principal balance of this Senior Convertible
                    Note shall bear  interest  at an annual rate equal to 8% per
                    annum, with interest  accruing,  from and including the date
                    hereof, on a cumulative,  compounding basis.  Interest shall
                    be computed on the basis of a 365- or 366-day  year,  as the


<PAGE>
                                                             Page 44 of 87 Pages

                    case may be,  and the  actual  number of days  elapsed,  and
                    shall be payable only upon repayment of the principal on any
                    Repayment Date (as defined below).

               (b)  The outstanding balance of any amount owed under this Senior
                    Convertible  Note  which is not paid  when  due  shall  bear
                    interest  at  the  rate  of  2%  per  annum  (the   "Default
                    Interest")  above the rate that would otherwise be in effect
                    under this Senior Convertible Note with the Default Interest
                    accruing, from and including such due date, on a cumulative,
                    compounding basis.

               (c)  The  outstanding   principal  and  all  accrued  and  unpaid
                    interest shall be paid in full no later than January 2, 2002
                    (the "Maturity Date"), unless repaid earlier pursuant to the
                    provisions of Section 3 (the date of any payment pursuant to
                    Section 3 and the Maturity Date, collectively referred to as
                    a "Repayment  Date").  On a Repayment  Date, the Payor shall
                    pay the  applicable  amount of  principal  and  interest  in
                    lawful money of the United States of America by wire or bank
                    transfer  of  immediately  available  funds  to  an  account
                    designated by the Payee in writing from time to time.

          (3)  Prepayment.
               ----------

               (a)  Mandatory Prepayment.
                    --------------------

                    (i)  Upon the  occurrence of an Event of Default (as defined
in Section 5), the  outstanding  principal  of and all accrued  interest on this
Senior  Convertible  Note shall be accelerated  and shall  automatically  become
immediately due and payable,  without presentment,  demand, protest or notice of
any  kind,  all of which are  expressly  waived  by the  Payor,  notwithstanding
anything contained herein to the contrary.

                    (ii) The Payee shall, at its sole option,  have the right to
require the Payor to pay the outstanding  principal of and all accrued  interest
on this Senior  Convertible  Note upon the  occurrence  of any of the  following
events:  (1) Payor  entering into an agreement to  effectuate  any sale or other
disposition of all or substantially  all of its assets, in one transaction or in
a  series  of  transactions,  (2) the  Company  entering  into an  agreement  to
effectuate any consolidation or merger into another entity, or (3) any sale of a
majority  of the  outstanding  equity of the  Company  (or any other  event that
constitutes a Change of Control of the Payor), in one transaction or in a series
of  transactions.  Immediately  upon the  occurrence of either of the events set
forth in clauses (1) or (2) above, or immediately upon obtaining  knowledge that
any person has entered into an agreement to  effectuate,  the event set forth in
clause  (3) above,  the Payor  shall  give  written  notice of such event to the
Payee.  Change of Control  means any Person or "group"  (within  the  meaning of
Section  13(d)(3) of the  Exchange  Act),  other than Payee and its  Affiliates,
becoming the beneficial owner, directly or indirectly,  of outstanding shares of
stock of the Company entitling such Person or Persons to exercise 50% or more of
the total  votes  entitled  to be cast at a regular  or special  meeting,  or by
action by written consent, of the stockholders of the Company in the election of
directors (the term  "beneficial  owner" shall be determined in accordance  with
Rule 13d-3 of the Exchange Act).

<PAGE>
                                                             Page 45 of 87 Pages

                    (iii)Any mandatory  prepayment under this Section 3(a) shall
include payment of reasonable costs and expenses,  if any,  associated with such
prepayment.

               (b)  Optional Prepayment. The Payor may prepay all or any portion
                    -------------------
of this Senior  Convertible  Note, at any time, by paying an amount equal to the
outstanding  principal amount of this Senior Convertible Note, or the portion of
this Senior  Convertible  Note called for  prepayment,  together  with  interest
accrued and unpaid  thereon to the date of prepayment  and any other amounts due
under  this  Senior  Convertible  Note and the  Securities  Purchase  Agreement,
without penalty or premium.

          4.   Mandatory Conversion.
               --------------------

               (a)  This  Senior  Convertible  Note plus  interest  accrued  and
unpaid thereon shall be  automatically  converted  simultaneously  with the Next
Round  Financing  (the  "Triggering  Event')  into that number of fully paid and
non-assessable  Next Round Securities which is equal to the quotient obtained by
dividing the then outstanding  principal amount of this Senior  Convertible Note
plus interest  accrued and unpaid thereon to the date of conversion by the price
per Next Round Security paid in the Next Round Financing.

               (b)  Promptly  after  the  Triggering  Event  the  Company  shall
deliver or cause to be delivered to the holder of this Senior Convertible Note a
certificate  or  certificates   representing   the  number  of  fully  paid  and
non-assessable   shares  of  Next  Round   Securities  into  which  this  Senior
Convertible Note may be converted.  Such conversion shall be deemed to have been
made simultaneously with the conclusion of the Next Round Financing, so that the
rights of the holder as a holder of this  Senior  Convertible  Note shall  cease
with respect to this Senior  Convertible Note at such time  (including,  without
limitation,  the right to receive the principal of this Senior  Convertible Note
other than in the form of Next Round Securities), interest shall cease to accrue
hereon and the person or persons  entitled to receive the Next Round  Securities
deliverable upon conversion of this Senior Convertible Note shall be treated for
all purposes as having become the record  holders of such Next Round  Securities
at such time, and such  conversion  shall be at the conversion rate in effect at
such time.

               (c)  The Company  covenants that it will at all times reserve and
keep available out of its authorized Next Round Securities (at such time as such
Securities  are  authorized)  solely for the purpose of issue or  delivery  upon
conversion of this Senior  Convertible Note as herein  provided,  such number of
Next  Round  Securities  as  shall  then be  issuable  or  deliverable  upon the
conversion of this Senior  Convertible Note. The Company covenants that all Next
Round Securities which shall be so issuable or deliverable shall, when issued or
delivered, be duly and validly issued and fully paid and non-assessable.

<PAGE>
                                                             Page 46 of 87 Pages

          5.   Events of Default. An "Event of Default" shall occur if:
               -----------------

               (a)  the Payor shall  default in the payment of the  principal of
or interest payable on this Senior  Convertible Note, when and as the same shall
become due and payable, whether at maturity or at a date fixed for prepayment or
by  acceleration  or  otherwise  and such default with respect to the payment of
interest shall continue unremedied for two days;

               (b)  the Payor shall fail to observe or perform  any  covenant or
agreement  contained in this Senior  Convertible  Note, the Securities  Purchase
Agreement or the Warrants and such failure shall continue for five business days
after Payor receives notice of such failure;

               (c)  any  representation,  warranty,  certification  or statement
made by or on  behalf  of the  Payor  in  this  Senior  Convertible  Note or the
Securities  Purchase Agreement or in any certificate,  writing or other document
delivered  pursuant  hereto  shall prove to have been  incorrect in any material
respect when made;

               (d)  an   involuntary   proceeding   shall  be  commenced  or  an
involuntary petition shall be filed in a court of competent jurisdiction seeking
(A) relief in respect of Payor or of a  substantial  part of Payor's  respective
property or assets, under Title 11 of the United States Code, as now constituted
or hereafter  amended,  or any other  Federal or state  bankruptcy,  insolvency,
receivership  or  similar  law (any  such  law,  a  "Bankruptcy  Law"),  (B) the
appointment  of a receiver,  trustee,  custodian,  sequestrator,  conservator or
similar  official for a substantial part of the property or assets of any Payor,
(C) the winding up or liquidation of any Payor;  and such proceeding or petition
shall  continue  undismissed  for 60 days,  or an order or decree  approving  or
ordering any of the foregoing shall be entered;

               (e)  the Payor shall (A)  voluntarily  commence any proceeding or
file any petition  seeking  relief  under a  Bankruptcy  Law, (B) consent to the
institution  of or the  entry of an order  for  relief  against  it,  or fail to
contest in a timely and appropriate  manner, any proceeding or the filing of any
petition described in clause d, (C) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator,  conservator or similar official for
a  substantial  part of the property or assets of the Payor,  (D) file an answer
admitting the material  allegations  of a petition  filed against it in any such
proceeding,  (E) make a general  assignment  for the benefit of  creditors,  (F)
become unable, admit in writing its inability or fail generally to pay its debts
as they  become due or (G) take any action for the purpose of  effecting  any of
the foregoing;

               (f)  one or more  judgments or orders for the payment of money in
excess of $250,000 in the aggregate shall be rendered against the Payor and such
judgment(s) or order(s) shall continue  unsatisfied and unstayed for a period of
30 days;

               (g)  the Payor  shall  default in the  payment of any  principal,
interest or premium,  or any  observance  or  performance  of any  covenants  or
agreements,  with respect to  indebtedness  (excluding  trade payables and other
indebtedness  entered  into in the  ordinary  course of  business)  in excess of
$50,000 in the  aggregate  for  borrowed  money or any  obligation  which is the
substantive equivalent thereof and such default shall continue for more than the
period of grace,  if any, or of any such  Indebtedness  or  obligation  shall be
declared due and payable prior to the stated maturity thereof;

<PAGE>
                                                             Page 47 of 87 Pages

               (h)  the Payor shall incur any indebtedness senior to this Senior
Convertible Note; or

               (i)  any material provisions of this Senior Convertible Note, the
Securities Purchase Agreement, or the Warrants shall terminate or become void or
unenforceable or the Payor shall so assert in writing.

          6.   Senior  Status.   The  indebtedness   evidenced  by  this  Senior
               --------------
Convertible Note is senior in right of payment to all other  indebtedness of the
Payor and Payor  agrees  not to incur  any  indebtedness,  which by its terms is
senior in right of payment to this Senior Convertible Note.

          7.   Suits for Enforcement.
               ---------------------

               (a)  Upon the  occurrence  of any one or more  Events of Default,
the holder of this  Senior  Convertible  Note may proceed to protect and enforce
its rights by suit in equity, action at law or by other appropriate  proceeding,
whether for the specific  performance of any covenant or agreement  contained in
the Securities Purchase Agreement or in aid of the exercise of any power granted
in this Senior  Convertible  Note, or may proceed to enforce the payment of this
Senior Convertible Note, or to enforce any other legal or equitable right it may
have as a holder of this Senior Convertible Note.

               (b)  The holder of this  Senior  Convertible  Note may direct the
time,  method and place of conducting any proceeding for any remedy available to
itself.

               (c)  In  case  of any  Event  of  Default  under  the  Securities
Purchase Agreement,  the Payor will pay to the holder of this Senior Convertible
Note such  amounts  as shall be  sufficient  to cover the  reasonable  costs and
expenses  of such  holder  due to  such  Event  of  Default,  including  without
limitation,  costs of collection and reasonable  fees,  disbursements  and other
charges of counsel  incurred in  connection  with any action in which the holder
prevails.

          8.   Notices. All notices,  demands and other communications  provided
for or permitted  hereunder shall be made in the manner and to the addresses set
forth in Section 11.2 of the Securities Purchase Agreement.

          9.   Successors and Assigns.  This Senior Convertible Note shall inure
to the benefit of and be binding upon the  successors  and permitted  assigns of
the parties hereto. The Payor may not assign any of its rights under this Senior
Convertible  Note  without  the prior  written  consent of Payee.  The Payee may
assign  all or a  portion  of their  rights or  obligations  under  this  Senior
Convertible Note to an Affiliate without the prior written consent of the Payor.

<PAGE>
                                                             Page 48 of 87 Pages

          10.  Amendment and Waiver.
               --------------------

               (a)  No  failure  or delay  on the part of the  Payor or Payee in
exercising  any  right,  power or remedy  hereunder  shall  operate  as a waiver
thereof,  nor shall any single or partial  exercise of any such right,  power or
remedy  preclude  any other or further  exercise  thereof or the exercise of any
other right,  power or remedy.  The remedies  provided for herein are cumulative
and are not  exclusive  of any  remedies  that may be  available to the Payor or
Payee at law, in equity or otherwise.

               (b)  Any  amendment,  supplement  or  modification  of or to  any
provision of this Senior  Convertible  Note, any waiver of any provision of this
Senior  Convertible  Note and any consent to any departure by the Payor from the
terms of any provision of this Senior  Convertible  Note, shall be effective (i)
only if it is made or given in writing and signed by the Payor and the Payee and
(ii) only in the specific  instance and for the specific  purpose for which made
or given.

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

          12.  GOVERNING LAW. THIS SENIOR  CONVERTIBLE NOTE SHALL BE GOVERNED BY
               -------------
AND  CONSTRUED  IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK,  WITHOUT
REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.

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

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

<PAGE>
                                                             Page 49 of 87 Pages

          15.  Consent to Jurisdiction. The Payor hereby irrevocably consents to
               -----------------------
the nonexclusive  jurisdiction of the courts of the State of New York and of any
federal court located in such State in connection  with any action or proceeding
arising out of or relating to this Senior  Convertible  Note or any  document or
instrument delivered pursuant to this Agreement.

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

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

          18.  Further  Assurances.  The Payor shall execute such  documents and
               -------------------
perform  such  further  acts  (including,  without  limitation,   obtaining  any
consents, exemptions,  authorizations or other actions by, or giving any notices
to, or making any filings with, any governmental  authority or any other Person)
as may be  reasonably  required  or  desirable  to carry out or to  perform  the
provisions of this Senior Convertible Note.

                                        BLUEFLY, INC.


                                        By:     /S/ KEN SEIFF
                                                -------------------------------
                                                Name:  KEN SEIFF
                                                Title: CHIEF EXECUTIVE OFFICER


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission