SC 13D/A

0001193125-12-476065.txt : 20121120 0001193125-12-476065.hdr.sgml : 20121120 20121119194956 ACCESSION NUMBER: 0001193125-12-476065 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20121120 DATE AS OF CHANGE: 20121119 GROUP MEMBERS: HABIB KAIROUZ GROUP MEMBERS: JOSHUA RUCH GROUP MEMBERS: MARK LESCHLY GROUP MEMBERS: RHO CAPITAL PARTNERS LLC GROUP MEMBERS: RMV VI, L.L.C. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BLUEFLY INC CENTRAL INDEX KEY: 0001030896 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 133612110 STATE OF INCORPORATION: DE FISCAL YEAR END: 0403 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-52401 FILM NUMBER: 121216215 BUSINESS ADDRESS: STREET 1: 42 WEST 39TH ST CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2129448000 MAIL ADDRESS: STREET 1: 42 WEST 39TH ST CITY: NEW YORK STATE: NY ZIP: 10018 FORMER COMPANY: FORMER CONFORMED NAME: PIVOT RULES INC DATE OF NAME CHANGE: 19970305 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: RHO Ventures VI LP CENTRAL INDEX KEY: 0001419636 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 152 West 57th Street STREET 2: 23rd Floor CITY: New York STATE: NY ZIP: 10019 BUSINESS PHONE: (212) 751-6677 MAIL ADDRESS: STREET 1: 152 West 57th Street STREET 2: 23rd Floor CITY: New York STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: RHO Ventues VI LP DATE OF NAME CHANGE: 20071128 SC 13D/A 1 d441585dsc13da.htm SC 13D/A SC 13D/A

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO RULE 13d-l(a) AND AMENDMENTS THERETO FILED PURSUANT

TO RULE 13d-2(a)

(Amendment No. 4)*

Bluefly, Inc.

(Name of Issuer)

Common Stock, Par Value $0.01 Per Share

(Title of Class of Securities)

096227103

(CUSIP number)

Jeffrey I. Martin, Esq.

152 West 57th Street, 23rd Floor

New York, NY 10019

(212) 751-6677

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

November 13, 2012

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box ¨.

(Continued on the following pages)

(Page 1 of 18 Pages)

*	The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (the “Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act.


(1)	Names of reporting persons Rho Ventures VI, L.P.
(2)	Check the appropriate box if a member of a group (a) ¨ (b) x
(3)	SEC use only
(4)	Source of funds WC
(5)	Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e) ¨
(6)	Citizenship or place of organization Delaware
Number of shares beneficially owned by each reporting person with		(7)	Sole voting power 13,852,056
		(8)	Shared voting power 0
		(9)	Sole dispositive power 13,852,056
		(10)	Shared dispositive power 0
(11)	Aggregate amount beneficially owned by each reporting person 13,852,056
(12)	Check box if the aggregate amount in Row (11) excludes certain shares ¨
(13)	Percent of class represented by amount in Row 11 45.3%(1)
(14)	Type of reporting person PN


(1)	Names of reporting persons Rho Capital Partners LLC
(2)	Check the appropriate box if a member of a group (a) ¨ (b) x
(3)	SEC use only
(4)	Source of funds AF
(5)	Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e) ¨
(6)	Citizenship or place of organization Delaware
Number of shares beneficially owned by each reporting person with		(7)	Sole voting power 13,852,056
		(8)	Shared voting power 0
		(9)	Sole dispositive power 13,852,056
		(10)	Shared dispositive power 0
(11)	Aggregate amount beneficially owned by each reporting person 13,852,056
(12)	Check box if the aggregate amount in Row (11) excludes certain shares ¨
(13)	Percent of class represented by amount in Row 11 45.3%(1)
(14)	Type of reporting person OO


(1)	Names of reporting persons RMV VI, L.L.C.
(2)	Check the appropriate box if a member of a group (a) ¨ (b) x
(3)	SEC use only
(4)	Source of funds AF
(5)	Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e) ¨
(6)	Citizenship or place of organization Delaware
Number of shares beneficially owned by each reporting person with		(7)	Sole voting power 13,852,056
		(8)	Shared voting power 0
		(9)	Sole dispositive power 13,852,056
		(10)	Shared dispositive power 0
(11)	Aggregate amount beneficially owned by each reporting person 13,852,056
(12)	Check box if the aggregate amount in Row (11) excludes certain shares ¨
(13)	Percent of class represented by amount in Row 11 45.3% (1)
(14)	Type of reporting person OO


(1)	Names of reporting persons Joshua Ruch
(2)	Check the appropriate box if a member of a group (a) ¨ (b) x
(3)	SEC use only
(4)	Source of funds AF
(5)	Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e) ¨
(6)	Citizenship or place of organization Republic of South Africa and United States
Number of shares beneficially owned by each reporting person with		(7)	Sole voting power 13,852,056
		(8)	Shared voting power 0
		(9)	Sole dispositive power 13,852,056
		(10)	Shared dispositive power 0
(11)	Aggregate amount beneficially owned by each reporting person 13,852,056
(12)	Check box if the aggregate amount in Row (11) excludes certain shares ¨
(13)	Percent of class represented by amount in Row 11 45.3% (1)
(14)	Type of reporting person IN


(1)	Names of reporting persons Habib Kairouz
(2)	Check the appropriate box if a member of a group (a) ¨ (b) x
(3)	SEC use only
(4)	Source of funds AF
(5)	Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e) ¨
(6)	Citizenship or place of organization Canada and United States
Number of shares beneficially owned by each reporting person with		(7)	Sole voting power 13,868,637
		(8)	Shared voting power 0
		(9)	Sole dispositive power 13,868,637
		(10)	Shared dispositive power 0
(11)	Aggregate amount beneficially owned by each reporting person 13,868,637
(12)	Check box if the aggregate amount in Row (11) excludes certain shares ¨
(13)	Percent of class represented by amount in Row 11 45.4% (1)
(14)	Type of reporting person IN

(1) Assumes that there are 28,598,933 shares of common stock, par value $0.01 per share, of Bluefly, Inc. outstanding as of August 30, 2012 as reported in the Information Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934, as amended, of Bluefly, Inc., filed with the Securities and Exchange Commission on October 10, 2012. Includes 1,475,702 shares of Common Stock underlying the Notes (as defined below) as of the date hereof and 476,190 shares of Common Stock underlying the Warrant (as defined below). Also includes 1,875 shares of Common Stock as a result of the vesting in full on February 2, 2011 of restricted stock granted to Mr. Kairouz in connection with his appointment as a member of the Board on December 21, 2009 and 14,706 options to purchase shares of Common Stock under the Issuer’s 2005 Stock Incentive Plan.


(1)	Names of reporting persons Mark Leschly
(2)	Check the appropriate box if a member of a group (a) ¨ (b) x
(3)	SEC use only
(4)	Source of funds AF
(5)	Check box if disclosure of legal proceedings is required pursuant to Item 2(d) or 2(e) ¨
(6)	Citizenship or place of organization Kingdom of Denmark
Number of shares beneficially owned by each reporting person with		(7)	Sole voting power 13,852,056
		(8)	Shared voting power 0
		(9)	Sole dispositive power 13,852,056
		(10)	Shared dispositive power 0
(11)	Aggregate amount beneficially owned by each reporting person 13,852,056
(12)	Check box if the aggregate amount in Row (11) excludes certain shares ¨
(13)	Percent of class represented by amount in Row 11 45.3% (1)
(14)	Type of reporting person IN

Introduction

This Amendment No. 4 to Schedule 13D (this “Amendment No. 4) amends the Statement on Schedule 13D filed on December 28, 2009, as amended by Amendment No. 1 to Schedule 13D filed on February 26, 2010, Amendment No. 2 to Schedule 13D filed on September 7, 2011, and Amendment No. 3 to Schedule 13D filed on August 15, 2012, and is being filed by Rho Capital Partners LLC, a Delaware limited liability company (“Rho Capital”), RMV VI, L.L.C., a Delaware limited liability company (“RMV”), Rho Ventures VI, L.P., a Delaware limited partnership (“Rho Ventures”), Joshua Ruch, Habib Kairouz and Mark Leschly (together, the “Reporting Persons”) and relates to their beneficial ownership of shares (the “Shares”) of common stock, par value $0.01 per share (the “Common Stock”), of Bluefly, Inc., a corporation organized under the laws of the state of Delaware (the “Issuer”).

ITEM 4.

Purpose of Transaction.

December 2009 Securities Purchase Agreement

On December 21, 2009, Rho Ventures and the Issuer entered into a Securities Purchase Agreement (the “December 2009 Purchase Agreement”) pursuant to which Rho Ventures agreed to acquire from the Issuer (i) 2,786,337 shares of Common Stock at a purchase price of $1.70 per share (the “Initial Shares”) at an initial closing on December 21, 2009 (the “Initial Closing”) and (ii) 6,037,192 shares of Common Stock at a purchase price of $1.70 per share (the “Remaining Shares”) at a second closing (the “Second Closing”) scheduled to occur no later than three trading days following the requisite approval (the “Stockholder Approval”) of the issuance of the Remaining Shares by the Issuer’s stockholders (the “Second Closing Date”). The Stockholder Approval occurred on February 23, 2010. The Second Closing occurred on February 25, 2010. The source of funds for the purchase at the Initial Closing and the Second Closing was the working capital of Rho Ventures.

September 2011 Securities Purchase Agreement

On September 7, 2011, Rho Ventures and the Issuer entered into a Securities Purchase Agreement (the “September 2011 Purchase Agreement”) pursuant to which Rho Ventures acquired from the Issuer 2,777,777 shares of Common Stock at a purchase price of $1.80 per share (the “2011 Shares”) at a closing that took place on the same date (the “2011 Closing”). The source of funds for the purchase of the 2011 Shares was the working capital of Rho Ventures.

August 2012 Note and Warrant Purchase Agreement

On August 13, 2012, Rho Ventures and the Issuer entered into a Note and Warrant Purchase Agreement (the “August 2012 Purchase Agreement”) pursuant to which Rho Ventures purchased from the Issuer a secured convertible subordinated promissory note in an aggregate principal amount of $1,500,000 (the “Note”) and a warrant to acquire 476,190 shares of Common Stock at an exercise price of $1.05 per share (subject to adjustment in the event of stock splits, stock dividends, reclassifications and the like) (the “Warrant”), which Warrant may be exercised at the option of Rho Ventures for cash or on a cashless basis until August 13, 2019. The conversion of the Note and the exercise of the Warrant, in each case, into equity securities of the Company, was subject to the prior receipt by the Issuer and the effectiveness of the requisite approval of the Issuer’s stockholders of the issuance of such equity securities (the “2012 Stockholder Approval”). Pursuant to the terms of the August 2012 Purchase Agreement, each of the Investors party thereto (including Rho Ventures) agreed to vote or cause to be voted all shares of the Issuer’s voting stock that were beneficially owned by such Investor (or its Affiliates) or over which such Investor had or shared voting control in favor of the 2012 Stockholder Approval and agreed to deliver a

duly executed written consent of stockholders within ten days of the closing of the transactions contemplated by the August 2012 Purchase Agreement. On October 10, 2012, the Issuer filed with the Securities and Exchange Commission an Information Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934, as amended, which Information Statement disclosed that the 2012 Stockholder Approval had been obtained.

The August 2012 Purchase Agreement contains customary representations and warranties. In connection with the issuance of the Note, the Issuer, Rho Ventures and certain of the Issuer’s other creditors entered into an intercreditor agreement, whereby the parties thereto established lien priority, relative rights and other creditors’ rights matters with respect to the Note and the Issuer’s other outstanding indebtedness. As described below, this intercreditor agreement was superseded by the Amended and Restated Intercreditor Agreement. The source of funds for the purchase of the Note and Warrant was the working capital of Rho Ventures.

The Note bears interest at an annual rate equal to 12% per annum, with interest accruing on a cumulative, compounding basis. The Note matures on the earliest to occur of (i) August 13, 2013, (ii) a change of control of the Issuer (as defined therein) and (iii) the date on which the Issuer consummates a debt or equity financing resulting in proceeds to the Issuer of at least $7,500,000 (the “Maturity Date”). The Note is secured by certain assets of the Issuer and its subsidiaries as set forth under the Note and the Amended and Restated Intercreditor Agreement.

Prior to the Maturity Date, immediately following the Issuer’s consummation of the offer and sale for cash of its equity securities resulting in proceeds to the Issuer of at least $7,500,000 (the “Subsequent Financing”), and subject to the prior receipt and effectiveness of 2012 Stockholder Approval, Rho Ventures has the right, at its option to convert all of the outstanding principal and interest of the Note (the “Principal Obligations”) into a number of fully paid and nonassessable equity securities sold in the Subsequent Financing equal to the quotient obtained by diving the aggregate amount of Principal Obligations to be converted by the lowest price paid by any investor in the Subsequent Financing (the “Subsequent Financing Securities”). In addition, at any time and from time to time prior to the Maturity Date, and subject to the prior receipt and effectiveness of 2012 Stockholder Approval, Rho Ventures has the right, at its option, to convert all or any portion of the Principal Obligations into a number of fully paid and nonassessable shares of Common Stock equal to the quotient obtained by diving the aggregate amount of Principal Obligations to be converted by $1.05.

Events of default under the Note include, among others, payment defaults, covenant defaults, and certain bankruptcy-type events involving the Issuer. Upon an event of default, the outstanding Principal Obligations shall be accelerated and Rho Ventures shall, at its option, have the right, subject to the Amended and Restated Intercreditor Agreement, to require the Issuer to pay the outstanding Principal Obligations.

November 2012 Amendments

On November 13, 2012, Rho Ventures and the Issuer entered into an Amendment No. 1 to Secured Subordinated Promissory Note (the “Note Amendment”) and amended and restated the Intercreditor Agreement(the “Amended and Restated Intercreditor Agreement”) in connection with the entry by the Issuer into a new senior credit facility with a new senior lender that refinanced in full the Issuer’s prior senior credit facility. The Note Amendment provides that the rights and obligations of the parties thereunder are subject to the terms of the Amended and Restated Intercreditor Agreement, and also included an acknowledgment by Rho Ventures that the entry by the Issuer into the new senior credit facility (as presently constituted) did not result in the occurrence of the Maturity Date under the Note. The Amended and Restated Intercreditor Agreement now makes reference to the obligations of the Issuer

under the new senior credit facility and the rights of the new senior lender thereunder, and establishes lien priority, relative rights and other creditors’ rights matters with respect to the Note and the Issuer’s other outstanding indebtedness, including the new senior credit facility.

Registration Rights Agreement

Shelf Registration Statement

In connection with the December 2009 Purchase Agreement, Rho Ventures entered into a Registration Rights Agreement, dated December 21, 2009 (the “December 2009 Registration Rights Agreement”), with the Issuer and certain existing holders of Common Stock (the “Existing Holders”). In connection with the acquisition by Rho Ventures of the 2011 Shares, Rho Ventures entered into an Amended and Restated Registration Rights Agreement, dated September 7, 2011 (the “Amended and Restated Registration Rights Agreement”). The Amended and Restated Registration Rights Agreement terminated all registration rights granted under the December 2009 Registration Rights Agreement and replaces the December 2009 Registration Rights Agreement in its entirety. Under the Amended and Restated Registration Rights Agreement, the Issuer was required to file a “shelf” registration statement (the “Shelf Registration Statement”) covering the Shelf Registrable Securities (which included the 2011 Shares) held by the Shelf Holders (as such terms are defined in the Amended and Restated Registration Rights Agreement) no later than November 15, 2011. The Shelf Registration Statement was filed by the Issuer on November 14, 2011 and was declared effective by the U.S. Securities and Exchange Commission on February 7, 2012. The Amended and Restated Registration Rights Agreement also obligates the Issuer to maintain the effectiveness of the Shelf Registration Statement and the previously filed “shelf” registration statement covering the Initial Shares and Remaining Shares until all securities covered by such registration statements are sold or otherwise can be sold pursuant to Rule 144 without any restrictions.

Piggy-Back Registration

Under the Amended and Restated Registration Rights Agreement, if the Issuer registers any securities in an underwritten public offering, Rho Ventures and the Existing Holders will have the right to include their shares in the registration statement, subject to customary exceptions. The underwriters of any underwritten offering will have the right to limit the number of such shares that may be registered.

Demand Registration

The Amended and Restated Registration Rights Agreement also provides that, at any time, subject to certain exceptions, Rho Ventures has the right to demand on no more than two occasions that the Issuer file a registration statement (a “Demand Registration Statement”) within 45 days, covering the offering and sale of the Demand Registrable Securities (as defined in the Amended and Restated Registration Rights Agreement). The Issuer is not obligated to effect more than two Demand Registration Statements at the request of Rho Ventures, effect more than one Demand Registration Statement in any six month period or effect any Demand Registration Statement if the aggregate offering price is less than $10 million.

The Issuer may delay the filing of a Demand Registration Statement under specified conditions, such as for a period of time while the Issuer pursues an underwritten public offering if its board of directors (the “Board”) deems it advisable to delay such filing. Such postponements cannot exceed 120 days from the date of the notice from the Issuer.

The Issuer will pay all registration expenses, other than underwriting discounts and commissions, related to the Issuer’s performance of the Amended and Restated Registration Rights Agreement. The Amended and Restated Registration Rights Agreement contains customary cross-indemnification provisions. The registration rights granted under the Amended and Restated Registration Rights Agreement have no expiration date.

Under the August 2012 Purchase Agreement, Rho Ventures is entitled to registration rights in respect of the shares of Common Stock or the Subsequent Financing Securities issuable upon conversion of the Note and the Common Stock issuable upon exercise of the Warrant, in each case, consistent with the registration rights granted pursuant to the Amended and Restated Registration Rights Agreement, as set forth in the August 2012 Purchase Agreement.

Voting Agreement

In connection with the December 2009 Purchase Agreement, Rho Ventures entered into an Amended and Restated Voting Agreement, dated December 21, 2009 (the “Voting Agreement”), with the Issuer and the Existing Stockholders (as defined in the Voting Agreement), pursuant to which Rho Ventures and the Existing Stockholders agreed to vote their shares of Common Stock to effect the restructuring of the Board such that the Board shall consist of ten members consisting of three classes with staggered terms, as further specified in the Voting Agreement (the “Board Restructuring”). The Board Restructuring was approved on February 23, 2010 and was implemented on the Second Closing Date. In addition, pursuant to the Voting Agreement, (i) Rho Ventures has the right to designate two designees to serve on the Board and the Issuer agreed to cause such designees to be nominated for election at meetings of the stockholders called for the purpose of electing directors (or in connection with any written consent of stockholders in lieu thereof) and (ii) the Existing Stockholders have the right to designate an aggregate of four designees, as specified in the Voting Agreement. The Issuer also agreed in the Voting Agreement to appoint the designees of Rho Ventures and the Existing Stockholders to certain committees of the Board. Pursuant to this right, Rho Ventures has designated Habib Kairouz as its representative on the Board.

Under the Voting Agreement, Rho Ventures and the Existing Stockholders agreed that at any meeting or action by written consent of stockholders at which or pursuant to which directors of the Issuer are to be elected, Rho Ventures and such Existing Stockholders will vote all shares of the Issuer’s capital stock owned by them in favor of the designees of Rho Ventures and the designees of the Existing Stockholders. In addition, Rho Ventures agreed that, if Rho Ventures disposes of its capital stock of the Issuer such that Rho Ventures owns less than the greater of (i) 28% of the stock owned by Rho Ventures after the Second Closing, or (ii) the minimum amount required under Nasdaq rules to allow Rho Ventures to designate two of its allotted Board designees, then Rho Ventures must cause one director designated by Rho Ventures to resign from the Board. Rho Ventures also agreed that, if Rho Ventures disposes of its capital stock of the Issuer such that Rho Ventures owns less than the greater of (i) 14% of the stock owned by Rho Ventures after the Second Closing, or (ii) the minimum amount required under Nasdaq rules to allow Rho Ventures to designate one of its allotted Board designees, then Rho Ventures must cause each of the directors designated by Rho Ventures to resign from the Board. The Existing Stockholders agreed to similar restrictions with respect their Board designees.

In addition, Rho Ventures and the Existing Stockholders were subject to “lock-up” provisions pursuant to which they could not, without the Issuer’s prior written consent, sell, hypothecate, pledge or otherwise transfer any shares of the Issuer’s capital stock, directly or indirectly, including through any derivative transaction, or publicly announce an intention thereof, which “lock-up” period with respect to Rho Ventures expired on the one year anniversary of the date of the Initial Closing.

Lock-Up Agreements

In connection with the 2011 Closing, Rho Ventures entered into a Lock-Up and Support Agreement, dated September 7, 2011 (the “Lock-Up and Support Agreement”), with the Issuer and the Stockholders (as defined in the Lock-Up and Support Agreement) pursuant to which Rho Ventures and the Stockholders agreed that they would not, without the prior written consent of (i) the Issuer and (ii) each of the purchasers of Common Stock under the September 2011 Purchase Agreement (the “Purchasers”), sell, hypothecate, pledge or otherwise transfer any shares of the Issuer’s capital stock, directly or indirectly, including through any derivative transaction, or publicly announce an intention thereof, which “lock-up” period with respect to Rho Ventures expired on the one year anniversary of the date of the 2011 Closing. The Lock-Up and Support Agreement also provided that, in any circumstances upon which a vote, consent or other approval (including by written consent) is sought with respect to the Stockholder Approval Condition, each Stockholder will vote the shares of the Issuer’s capital stock held by it, other than the shares acquired under the September 2011 Purchase Agreement, in favor of the ballot item necessary to satisfy the Stockholder Approval Condition.

Each director of the Issuer, including Habib Kairouz, and the Issuer’s chief executive officer, chief financial officer and chief operating officer executed a Lock-Up Agreement, dated September 7, 2011 (the “Lock-Up Agreement”), in favor of the Issuer and each Purchaser, pursuant to which such directors and officers of the Issuer agreed that they would not, without the prior written consent of (i) the Issuer and (ii) each Purchaser, offer, pledge, announce the intention to sell, sell, contract to sell, or otherwise transfer or dispose, including through any derivative transaction, any shares of the Issuer’s capital stock, which “lock-up” period expired on the one year anniversary of the date of the 2011 Closing.

The foregoing descriptions of the December 2009 Purchase Agreement, the September 2011 Purchase Agreement, the Amended and Restated Registration Rights Agreement, the Voting Agreement, the Lock-Up and Support Agreement, the Lock-Up Agreement, the August 2012 Purchase Agreement, the Note, the Warrant, the Amended and Restated Intercreditor Agreement and the Note Amendment (collectively, the “Agreements”) do not purport to be complete and are qualified in their entirety by the terms of each such document, which are attached hereto as exhibits and are incorporated herein by reference.

As a result of the arrangements described above, including, but not limited, to the Voting Agreement, the Lock-Up and Support Agreement and the August 2012 Purchase Agreement, the Reporting Persons and the Existing Stockholders may be deemed to comprise a “group” within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, although neither the fact of this filing nor any of the information contained herein shall be deemed to be an admission by the Reporting Persons that a “group” exists.

The Reporting Persons take no responsibility for any filings made by the Existing Stockholders or the completeness or accuracy of any information contained therein.

November 2012 Share Purchase

On November 13, 2012, Rho Ventures purchased 298,858 shares of Common Stock in a privately negotiated transaction with a third party (the “November 2012 Shares”). The purchase price paid by Rho Ventures was $1.00 per share (the “Per Share Purchase Price”), or $298,858 in the aggregate, and was paid in cash from working capital. In addition, the stock purchase agreement pursuant to which the purchase was effected (the “Stock Purchase Agreement”) provides that if prior to the date on which the Issuer first publicly announces earnings for the fiscal year ending December 31, 2012, Rho Ventures or any of its affiliates enters into a definitive agreement to acquire all of the shares of Common Stock not currently owned by it and its affiliates for a per share purchase price (the “Acquisition Per Share Purchase Price”) greater than the Per Share Purchase Price, then Rho Ventures will pay the seller, for each share sold by the seller to Rho Ventures, an amount in cash in immediately available funds equal to the positive difference, if any, between the Acquisition Per Share Purchase Price and the Per Share Purchase Price. In the Stock Purchase Agreement, the seller acknowledged that Rho Ventures had no current plans or intent to engage in any transaction that would trigger the foregoing additional payment required.

The foregoing description of the Stock Purchase Agreement does not purport to be complete and is qualified in its entirety by the terms of the Stock Purchase Agreement, which is attached hereto as an exhibit and is incorporated herein by reference.

Additional Disclosure

Except as set forth herein, the Reporting Persons do not have any contracts, arrangements, understandings or relationships with respect to any securities of the Issuer.

The Initial Shares, Remaining Shares, the 2011 Shares, the Notes and the Warrants, and the November 2012 Shares were acquired solely for investment purposes. Rho Ventures does not have any present plans or proposals that relate to or would result in any change in the business, policies, management, structure or capitalization of the Issuer. Rho Ventures reserves the right to acquire, or dispose of, additional securities of the Issuer in the ordinary course of its business, to the extent deemed advisable in light of its general investment and trading policies, market conditions or other factors. The Reporting Persons may engage in discussions from time to time with other stockholders of the Issuer, including the Existing Stockholders, regarding the acquisition by the Reporting Persons or others of shares of the Issuer’s Common Stock held by such stockholders. Rho Ventures will continue to evaluate the business and prospects of the Issuer, and its present and future interest in, and intentions with respect to, the Issuer, and in connection therewith expects from time to time to consult with management and other stockholders of the Issuer.

Other than as described above and as set forth in the Agreements, the Reporting Persons do not have any plans or proposals which would result in any of the following:

(a) The acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer;

(b) An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries;

(d) Any change in the present Board or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board;

(e) Any material change in the present capitalization or dividend policy of the Issuer;

(f) Any other material change in the Issuer’s business or corporate structure;

(g) Changes in the Issuer’s charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person;

(h) Causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association;

(i) A class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended; or

(j) Any action similar to any of those enumerated above.

ITEM 5.

Interest in Securities of the Issuer.

(a)-(b) Rho Ventures may be deemed to have sole power to direct the voting and disposition of 13,852,056 shares of Common Stock (inclusive of 1,475,702 shares of Common Stock underlying the Notes as of the date hereof and 476,190 shares of Common Stock underlying the Warrant), representing approximately 45.3% (calculated in accordance with Rule 13d-3 under the Securities Exchange Act of 1934 (“Rule 13d-3”)) of the 28,598,933 shares of common stock, par value $0.01 per share, of Bluefly, Inc. outstanding as of August 30, 2012 as reported in the Information Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934, as amended, of Bluefly, Inc., filed with the Securities and Exchange Commission on October 10, 2012.

RMV, as the general partner of Rho Ventures, and Rho Capital, as the managing member of RMV, each may be deemed to have sole power to direct the voting and disposition of 13,852,056 shares of Common Stock (inclusive of 1,475,702 shares of Common Stock underlying the Notes as of the date hereof and 476,190 shares of Common Stock underlying the Warrant), representing approximately 45.3% (calculated in accordance with Rule 13d-3) of the 28,598,933 shares of common stock, par value $0.01 per share, of Bluefly, Inc. outstanding as of August 30, 2012 as reported in the Information Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934, as amended, of Bluefly, Inc., filed with the Securities and Exchange Commission on October 10, 2012.

Joshua Ruch, as a managing member of Rho Capital, may be deemed to have sole power to direct the voting and disposition of 13,852,056 shares of Common Stock (inclusive of 1,475,702 shares of Common Stock underlying the Notes as of the date hereof and 476,190 shares of Common Stock underlying the Warrant), representing approximately 45.3% (calculated in accordance with Rule 13d-3) of the 28,598,933 shares of common stock, par value $0.01 per share, of Bluefly, Inc. outstanding as of August 30, 2012 as reported in the Information Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934, as amended, of Bluefly, Inc., filed with the Securities and Exchange Commission on October 10, 2012.

Habib Kairouz, as a managing member of Rho Capital, may be deemed to have sole power to direct the voting and disposition of 13,868,637 shares of Common Stock (inclusive of 1,475,702 shares of Common Stock underlying the Notes as of the date hereof, 476,190 shares of Common Stock underlying the Warrant, and 14,706 shares underlying stock options as described below, as well as 1,875 shares of common stock as described below), representing approximately 45.4% (calculated in accordance with Rule 13d-3) of the 28,598,933 shares of common stock, par value $0.01 per share, of Bluefly, Inc. outstanding as of August 30, 2012 as reported in the Information Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934, as amended, of Bluefly, Inc., filed with the Securities and Exchange Commission on October 10, 2012. Mr. Kairouz beneficially owns 1,875 shares of Common Stock as a result of the vesting in full on February 2, 2011 of restricted stock granted to Mr. Kairouz in connection with his appointment as a member of the Board on December 21, 2009 and 14,706 options to purchase shares of Common Stock under the Issuer’s 2005 Stock Incentive Plan.

Mark Leschly, as a managing member of Rho Capital, may be deemed to have sole power to direct the voting and disposition of 13,852,056 shares of Common Stock (inclusive of 1,475,702 shares of Common Stock underlying the Notes as of the date hereof and 476,190 shares of Common Stock underlying the Warrant), representing approximately 45.3% (calculated in accordance with Rule 13d-3) of the 28,598,933 shares of common stock, par value $0.01 per share, of Bluefly, Inc. outstanding as of August 30, 2012 as reported in the Information Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934, as amended, of Bluefly, Inc., filed with the Securities and Exchange Commission on October 10, 2012.

Each of Messrs. Ruch, Kairouz and Leschly disclaim beneficial ownership of the shares of Common Stock beneficially owned by Rho Ventures, RMV and Rho Capital.

(c) Except as described in this Amendment No. 4, none of the Reporting Persons has effected any transaction in the securities of the Issuer in the last 60 days.

(d) No persons other than the Reporting Persons and their investment clients have the right to participate in the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock covered hereby.

(e) Not Applicable.

ITEM 6.

Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer.

The information set forth in Item 4 hereof is hereby incorporated by reference into this Item 6.

Habib Kairouz beneficially owns 1,875 shares of Common Stock as a result of the vesting in full on February 2, 2011 of restricted stock granted to Mr. Kairouz in connection with his appointment as a member of the Board on December 21, 2009. Mr. Kairouz also holds 14,706 options to purchase shares of Common Stock with an exercise price of $2.50 per share, which were granted on August 3, 2011 and vested in full on August 3, 2012 and expire on August 3, 2021. In addition, Mr. Kairouz was granted 22,321 options to purchase shares of Common Stock with an exercise price of $1.12 per share on August 8, 2012, which vests in full on August 8, 2013 and expires on August 8, 2022. These options to purchase Common Stock were granted to Mr. Kairouz in connection with his service as a member of the Board.

ITEM 7.

Materials to be Filed as Exhibits.


Exhibit 1:		Joint Filing Agreement as required by Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended*

Exhibit 2:		Securities Purchase Agreement, between the Issuer and the Purchaser identified therein, dated December 21, 2009*

Exhibit 3:		Amended and Restated Voting Agreement, between the Company and each of the Stockholders identified therein, dated December 21, 2009*

Exhibit 4:		Securities Purchase Agreement, between the Issuer and the Purchaser identified therein, dated September 7, 2011**

Exhibit 5:		Amended and Restated Registration Rights Agreement, between the Issuer and the Investors identified therein, dated September 7, 2011**

Exhibit 6:		Lock-Up and Support Agreement, between the Issuer and each of the Stockholders identified therein, dated September 7, 2011**

Exhibit 7:		Lock-Up Agreement, among Habib Kairouz, the Issuer and each of the Purchasers identified therein, dated September 7, 2011**

Exhibit 8:		Note and Warrant Purchase Agreement, among the Issuer, Rho Ventures and the other investors party thereto, dated August 13, 2012***


Exhibit 9:		Secured Subordinated Convertible Promissory Note, between the Issuer and Rho Ventures, dated August 13, 2012***

Exhibit 10:		Warrant to Purchase Shares of Common Stock of Bluefly, Inc., between the Issuer and Rho Ventures, dated August 13, 2012***

Exhibit 11:		Amendment No. 1 to Secured Subordinated Promissory Note, between the Issuer and Rho Ventures, dated November 13, 2012⁺

Exhibit 12:		Intercreditor Agreement, dated November 13, 2012 by and among Prentice Consumer Partners, L.P., Rho Ventures VI, L.P., Salus Capital Partners, LLC, in its capacity as administrative agent and collateral agent, the Issuer, and EVT Acquisition Co., LLC

Exhibit 13:		Securities Purchase Agreement, between Rho Ventures and Melissa Payner, dated November 13, 2012

*	Incorporated by reference to the Schedule 13D filed by the Reporting Persons on December 28, 2009.

**	Incorporated by reference to the Schedule 13D filed by the Reporting Persons on September 7, 2011.

***	Incorporated by reference to the Schedule 13D filed by the Reporting Persons on August 15, 2012.

⁺	Incorporated by reference to Exhibit 10.3 to the Issuer’s Current Report on Form 8-K dated November 13, 2012, filed with the Securities and Exchange Commission on November 19, 2012.

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, each of the undersigned hereby certifies that the information set forth in this statement is true, complete and correct.

EXECUTED as a sealed instrument this 19^th day of November, 2012.


RHO VENTURES VI, L.P.

By:		/s/ Jeffrey I. Martin
		Jeffrey I. Martin
		Authorized Signer

RHO CAPITAL PARTNERS LLC

By:		/s/ Jeffrey I. Martin
		Jeffrey I. Martin
		Authorized Signer

RMV VI, L.L.C.

By:		/s/ Jeffrey I. Martin
		Jeffrey I. Martin
		Authorized Signer

/s/ Joshua Ruch
Joshua Ruch

/s/ Habib Kairouz
Habib Kairouz

/s/ Mark Leschly
Mark Leschly

EXHIBIT INDEX


Exhibit 1:		Joint Filing Agreement as required by Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended*

Exhibit 2:		Securities Purchase Agreement, between the Issuer and the Purchaser identified therein, dated December 21, 2009*

Exhibit 3:		Amended and Restated Voting Agreement, between the Company and each of the Stockholders identified therein, dated December 21, 2009*

Exhibit 4:		Securities Purchase Agreement, between the Issuer and the Purchaser identified therein, dated September 7, 2011**

Exhibit 5:		Amended and Restated Voting Agreement, between the Issuer and each of the Stockholders identified therein, dated December 21, 2009*

Exhibit 6:		Lock-Up and Support Agreement, between the Issuer and each of the Stockholders identified therein, dated September 7, 2011**

Exhibit 7:		Lock-Up Agreement, among Habib Kairouz, the Issuer and each of the Purchasers identified therein, dated September 7, 2011**

Exhibit 8:		Note and Warrant Purchase Agreement, among the Issuer, Rho Ventures and the other investors party thereto, dated August 13, 2012***

Exhibit 9:		Secured Subordinated Convertible Promissory Note, between the Issuer and Rho Ventures, dated August 13, 2012***

Exhibit 10:		Warrant to Purchase Shares of Common Stock of Bluefly, Inc., between the Issuer and Rho Ventures, dated August 13, 2012***

Exhibit 11:		Amendment No. 1 to Secured Subordinated Promissory Note, between the Issuer and Rho Ventures, dated November 13, 2012⁺

Exhibit 12:		Intercreditor Agreement, dated November 13, 2012 by and among Prentice Consumer Partners, L.P., Rho Ventures VI, L.P., Salus Capital Partners, LLC, in its capacity as administrative agent and collateral agent, the Issuer, and EVT Acquisition Co., LLC

Exhibit 13:		Securities Purchase Agreement, between Rho Ventures and Melissa Payner, dated November 13, 2012

*	Incorporated by reference to the Schedule 13D filed by the Reporting Persons on December 28, 2009.

**	Incorporated by reference to the Schedule 13D filed by the Reporting Persons on September 7, 2011.

***	Incorporated by reference to the Schedule 13D filed by the Reporting Persons on August 15, 2012.

⁺	Incorporated by reference to Exhibit 10.3 to the Issuer’s Current Report on Form 8-K dated November 13, 2012, filed with the Securities and Exchange Commission on November 19, 2012.

EX-99.12 2 d441585dex9912.htm INTERCREDITOR AGREEMENT Intercreditor Agreement

Exhibit 12

INTERCREDITOR AGREEMENT

This Intercreditor Agreement (this “Agreement”) is made as of November 13, 2012 by and among (i) Prentice Consumer Partners, L.P., a Delaware limited partnership (“Prentice”) and Rho Ventures VI, L.P., a Delaware limited partnership (“Rho”, and together with Prentice, the “Junior Creditors”, and each, a “Junior Creditor”), (ii) Salus Capital Partners, LLC, in its capacity as administrative agent and collateral agent (together with its successors and assigns in such capacity, the “Senior Agent”) and (iii) Bluefly, Inc., a Delaware corporation (“Bluefly”) and EVT Acquisition Co., LLC, a New York limited liability company (together with Bluefly, collectively, the “Borrowers”).

W I T N E S S E T H

WHEREAS, reference is made to that certain Credit Agreement dated as of November 13, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the “Senior Credit Agreement”) by and among, among others, the Borrowers, the lenders from time to time party thereto and the Senior Agent, pursuant to which such lenders have agreed to extend credit to the Borrowers upon the terms and subject to the conditions specified in the Senior Credit Agreement. All of the Borrowers’ and the other Loan Parties’ obligations under the Senior Credit Agreement and the other Senior Loan Documents (as defined below) are secured by liens on and security interests in substantially all of the now existing and hereafter acquired personal property assets of the Borrowers and the other Loan Parties granted to the Senior Agent (the “Collateral”).

WHEREAS, reference is further made to that certain Note and Warrant Purchase Agreement dated as of August 13, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the “Junior Credit Agreement”) by and among Bluefly and Prentice and Rho, as Investors, pursuant to which Bluefly has issued, among other securities, (a) $1,500,000 in the aggregate principal amount of secured subordinated notes to Prentice and (b) $1,500,000 of secured convertible subordinated notes to Rho (collectively, the “Junior Notes”). All of Bluefly’s obligations under the Junior Credit Agreement and the other Junior Loan Documents (as defined below) are secured by liens on and security interests in the Collateral.

WHEREAS, pursuant to the terms of the Senior Credit Agreement, the Junior Creditors and the Borrowers are required to enter into this Agreement with the Senior Agent.

NOW, THEREFORE, in consideration of the foregoing and for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Definitions. The following terms shall have the following meanings in this Agreement. All other terms not defined herein shall have the meanings ascribed to them in the Senior Credit Agreement.

“Bankruptcy Code” shall mean Chapter 11 of Title 11 of the United States Code, as amended from time to time and any successor statute and all rules and regulations promulgated thereunder.

“Collateral” has the meaning set forth in the Recitals.

“Distribution” means, with respect to any indebtedness, obligation or security, including the Junior Debt, (a) any payment or distribution by any Person of cash, securities or other property, by set-off or otherwise, on account of such indebtedness, obligation or security, or (b) any redemption, purchase or other acquisition of such indebtedness, obligation or security by any Person.

“Enforcement Action” shall mean (a) to take from or for the account of any Person, by set-off or in any other manner, the whole or any part of any moneys which may now or hereafter be owing by any such Person with respect to the Junior Debt, (b) to sue for payment of, or to initiate or participate with others in any suit, action or proceeding against any Person to (i) enforce payment of or to collect the whole or any part of the Junior Debt or (ii) commence judicial enforcement of any of the rights and remedies under the Junior Loan Documents or applicable law with respect to the Junior Debt, (c) to accelerate the Junior Debt, (d) to cause the Borrowers or any other Loan Party to honor any redemption or mandatory prepayment obligation under the Junior Loan Documents, (e) to notify account debtors or directly collect accounts receivable or other payment rights of the Borrowers or any other Loan Party or (f) to take any action under the provisions of any state or federal law, including, without limitation, the Uniform Commercial Code, or under any contract or agreement, to enforce, foreclose upon, take possession of or sell the Collateral.

“Identified Senior Event of Default” shall mean any Event of Default described in Section 8.01 of the Senior Credit Agreement.

“Insolvency Proceeding” shall mean, as to any Person, any of the following: any case or proceeding with respect to such Person under the Bankruptcy Code or any other federal or state bankruptcy, insolvency, reorganization or other law affecting creditors’ rights or any other or similar proceedings seeking any stay, reorganization, arrangement, composition or readjustment of the obligations and indebtedness of such Person or any proceeding seeking the appointment of any trustee, receiver, liquidator, custodian or other insolvency official with similar powers with respect to such Person or any of its assets or any proceeding for liquidation, dissolution or other winding up of the business of such Person or any assignment for the benefit of creditors or any marshalling of assets of such Person.

“Junior Credit Agreement” has the meaning set forth in the Recitals.

“Junior Debt” shall mean all of the obligations of the Borrowers or any other Loan Party to any Junior Creditor, whether now existing or hereafter arising and evidenced by or incurred pursuant to the Junior Loan Documents.

“Junior Event of Default” shall mean any “Event of Default” as such term is defined in any of the Junior Loan Documents.

“Junior Loan Documents” shall mean the Junior Credit Agreement and the Junior Notes and all agreements, documents and instruments entered into in connection therewith.

“Junior Notes” has the meaning set forth in the Recitals.

“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance (including, but not limited to, easements, rights of way and the like), lien (statutory or otherwise), security agreement or transfer intended as security, including without limitation, any conditional sale or other title retention agreement, the interests of a lessor under a capital lease or any financing lease having substantially the same economic effect as any of the foregoing.

“Paid in Full” shall mean that, with respect to the Obligations under the Senior Loan Documents, (a) all of such Obligations (other than contingent obligations or indemnification obligations for which no underlying claim has been asserted) have been indefeasibly paid,

performed or discharged in full (with all such Obligations consisting of monetary or payment obligations having been paid in full in cash), (b) no Person has any further right to obtain any loans, letters of credit or other extensions of credit under the documents relating to such Obligations and (c) any and all letters of credit or similar instruments issued under such documents have been cancelled and returned (or backed by stand-by guarantees or cash collateralized) in accordance with the terms of such documents.

“Permitted Distributions” means the regularly scheduled or mandatory repayments, repurchases, redemptions or defeasances of any Junior Debt owed to either Prentice or Rho under the Junior Loan Documents, including, without limitation, any scheduled payments of interest thereunder that may be payable to Prentice.

“Person” means any natural person, corporation, general or limited partnership, limited liability company, firm, trust, association, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity.

“Refinancing Senior Loan Documents” shall mean any financing documentation which replaces the Senior Loan Documents and pursuant to which any Senior Debt under any of the Senior Loan Documents is refinanced, as such financing documentation may be amended, restated, supplemented or otherwise modified from time to time.

“Senior Credit Agreement” has the meaning set forth in the Recitals.

“Senior Creditors” shall mean, collectively, the Senior Agent, the lenders party to the Senior Credit Agreement from time to time and each other holder from time to time of the Senior Debt. For the avoidance of doubt, the Senior Creditors shall include each “Credit Party” as defined in the Senior Credit Agreement.

“Senior Debt” shall mean all obligations, liabilities and indebtedness of every nature of the Borrowers and the other Loan Parties from time to time owed to the Senior Creditors under the Senior Loan Documents, including, without limitation, the Obligations (as defined in the Senior Credit Agreement), any debtor-in-possession financing furnished by the Senior Creditors after the commencement of an Insolvency Proceeding, together with (a) any amendments, modifications, renewals or extensions thereof and (b) any interest, fees and other charges accruing thereon or due or to become due with respect thereto after the commencement of any Insolvency Proceeding, without regard to whether or not such interest, fees and other charges is an allowed claim. Senior Debt shall be considered to be outstanding whenever any commitment under any Senior Loan Document is outstanding.

“Senior Loan Documents” shall mean the Senior Credit Agreement and all “Loan Documents” (as defined in the Senior Credit Agreement) and, after any refinancing of the Senior Debt under the Senior Loan Documents, the applicable Refinancing Senior Loan Documents.

All terms defined in the Uniform Commercial Code as in effect in the State of New York (the “UCC”) on the date hereof, unless otherwise defined herein, shall have the meanings set forth therein. All references to any term in the plural shall include the singular and all references to any term in the singular shall include the plural. All references to sections, clauses or paragraphs shall be references to sections, clauses and paragraphs in this Agreement unless otherwise stated.

2. Subordination.

Subordination of Junior Debt to Senior Debt. Unless and until this Agreement is terminated by written notice from the Senior Agent and all Senior Debt is Paid in Full, each Junior Creditor hereby agrees with the Senior Agent that the Junior Debt is and shall be subject and subordinate to the Senior Debt, whether now existing or hereafter arising. Each holder of Senior Debt, whether such Senior Debt is now outstanding or hereafter created, incurred, assumed or guaranteed, shall be deemed to have acquired Senior Debt in reliance upon the provisions contained in this Agreement. Notwithstanding the terms of the Junior Loan Documents, each of the Borrowers hereby agrees that it will not make, and each Junior Creditor hereby agrees that it will not accept, any Distribution with respect to the Junior Debt until the Senior Debt has been Paid in Full; provided, however, that in the case of Rho only, the Junior Debt owed to Rho may be converted into Equity Interests in Bluefly at any time and from time to time in accordance with the terms of the Junior Loan Documents; and provided further, however, that so long as the Payment Conditions have been satisfied, and subject to the terms of this Agreement and Section 7.07(b)(ii) of the Senior Credit Agreement, the Borrowers may pay, and the Junior Creditors may accept, Permitted Distributions. If any Distribution on account of the Junior Debt that is not permitted to be made by the Borrowers or accepted by the Junior Creditors under this Agreement is made and received by any Junior Creditor, such Distribution shall not be commingled with any of the assets of such Junior Creditor, shall be held in trust by such Junior Creditor for the benefit of the Senior Creditors and shall be promptly paid over to the Senior Agent for application to the payment of the Senior Debt then remaining unpaid until all Senior Debt has been Paid in Full.

Subordination of Liens and Security Interests; Agreement Not to Contest; Agreement to Release Liens.

Until the Senior Debt has been Paid in Full, each Junior Creditor’s security interest in and Lien on the Collateral to secure the Junior Debt shall be and hereby are subordinate for all purposes and in all respects to the Senior Agent’s security interests in and Liens on the Collateral to secure the Senior Debt, regardless of the order or time of attachment, or the order, time or manner of perfection, or the order or time of filing or recordation of any document or instrument, or other method of perfecting a Lien. The Lien priorities set forth in the immediately preceding sentence shall not be altered or otherwise affected by any amendment, modification, supplement, extension, renewal, restatement, replacement or refinancing of any of the Senior Debt or the Junior Debt, by any failure to perfect the Senior Agent’s security interest in the Collateral, the subordination of the Senior Agent’s Lien on the Collateral, the avoidance or invalidation of the Senior Agent’s Lien or by any other action or inaction which any Senior Creditor may take or fail to take in respect of the Collateral.

ii.

Each of the Senior Agent and each Junior Creditor shall be solely responsible for perfecting and maintaining the perfection of its Lien in and to each item constituting the Collateral. This Agreement is intended solely to govern the respective Lien priorities as between the Senior Agent and the Junior Creditors and shall not impose on the Senior Agent or any other Senior Creditor or any Junior Creditor any obligations in respect of the disposition of proceeds of foreclosure on any Collateral which would conflict with prior perfected claims therein in favor of any other Person or any order or decree of any court or other governmental authority or any applicable law. Each Junior Creditor agrees that it will not at any time contest the validity, perfection, priority or enforceability of the Senior Debt, the Senior Loan Documents, or the liens and security interests of the Senior Agent in the Collateral securing the Senior Debt.

iii.

Notwithstanding anything to the contrary contained in any agreement between any Junior Creditor and any Borrower or any other Loan Party, until the Senior Debt has been Paid in Full, only the Senior Agent shall have the right to restrict or permit, or approve or disapprove, the sale, transfer, release or other disposition of the Collateral or take any action with respect to the Collateral without any consultation with or the consent of any Junior Creditor. In the event that the Senior Agent releases or agrees to release any of its Liens or security interests in any portion of the Collateral in connection with the sale or other disposition thereof or any of the Collateral is sold or retained pursuant to a foreclosure or similar action, each Junior Creditor shall promptly consent to such sale or other disposition and promptly execute and deliver to the Senior Agent such consent to such sale other disposition, termination statements and releases as the Senior Agent shall reasonably request to effect the release of the liens and security interests of such Junior Creditor in such Collateral. In the event of any sale, transfer, or other disposition (including a casualty loss or taking through eminent domain) of the Collateral, the proceeds resulting therefrom (including insurance proceeds) shall be applied in accordance with the terms of the Senior Loan Documents until such time as the Senior Debt has been Paid in Full.

3. Standstill Provisions. Until the Senior Debt has been Paid in Full, the Senior Agent shall have the exclusive right to manage, perform and enforce (or not enforce) the terms of the Senior Loan Documents with respect to the Collateral, to exercise and enforce all privileges and rights thereunder according to its discretion and the exercise of its business judgment, including, without limitation, the exclusive right to take or retake control or possession of any Collateral and to hold, prepare for sale, process, sell, lease, dispose of, or liquidate any Collateral. In that regard, no Junior Creditor shall, without the prior written consent of the Senior Agent, take any Enforcement Action with respect to any Junior Debt or the Collateral. Notwithstanding the foregoing, each Junior Creditor may, subject to Section 8 of this Agreement, file and defend proofs of claim against any Borrower in any Insolvency Proceeding involving such Borrower. Any Distributions or other proceeds of any Enforcement Action obtained by any Junior Creditor in violation of the foregoing prohibition shall in any event be held in trust by it for the benefit of the Senior Creditors and promptly paid or delivered to the Senior Agent in the form received until all Senior Debt has been Paid in Full. Each Junior Creditor waives any and all rights to affect the method or challenge the appropriateness of any action by the Senior Creditors with respect to management, performance and enforcement of the Senior Loan Documents and the enforcement and exercise of all privileges, rights and remedies. The Senior Creditors shall not have any liability to any Junior Creditor in respect of any Junior Creditor’s failure to obtain repayment in full of the Junior Debt.

4. No Subrogation. No Junior Creditor shall be subrogated to the rights of the Senior Creditors with respect to receipt of Distributions on account of the Junior Debt unless and until all of the Senior Debt shall have been Paid in Full. For the purposes of such subrogation, no Distributions made to the holders of the Senior Debt to which any Junior Creditor would be entitled except for this Agreement and no payments made pursuant to the provisions of this Agreement to the Senior Agent or any other Senior Creditor by such Junior Creditor shall, as among the Borrowers, their creditors and such Junior Creditor, be deemed to be a payment by the Borrowers to or on account of the Junior Debt. Each Junior Creditor agrees that in the event that all or any part of a payment made with respect to the Senior Debt is recovered from the holders of the Senior Debt in an Insolvency Proceeding or otherwise, any Distribution received by such Junior Creditor with respect to the Junior Debt at any time after the date of the payment that is so recovered, whether pursuant to the right of subrogation provided for in this Agreement or

otherwise, shall be deemed to have been received by such Junior Creditor in trust as property of the holders of the Senior Debt and such Junior Creditor shall forthwith deliver the same to the Senior Agent for application to the Senior Debt, until the Senior Debt has been paid in full.

5. Modifications and Amendments.

Modifications to Senior Loan Documents. The Senior Creditors may at any time and from time to time without the consent of or notice to any Junior Creditor, without incurring liability to any Junior Creditor and without impairing or releasing the obligations of any Junior Creditor under this Agreement, change the manner or place of payment or extend the time of payment of or renew or alter any of the terms of the Senior Debt (including any increase in the amount thereof), or amend in any manner any Senior Loan Document.

Modifications to Junior Loan Documents. Until the Senior Debt has been Paid in Full, and notwithstanding anything to the contrary contained in the Junior Loan Documents, the Borrowers and the Junior Creditors shall not, without the prior written consent of the Senior Creditor, agree to any amendment, modification, or supplement to the Junior Loan Documents if such amendment, modification or supplement would add or change any terms in a manner materially adverse to the Borrowers, any other Loan Party or any Senior Creditor (it being understood and agreed that the addition of any Junior Event of Default not existing on the date hereof would be materially adverse to the Borrowers, the other Loan Parties and the Senior Creditors), or shorten the final maturity or require any payment to be made sooner than originally scheduled or increase the interest rate applicable thereto.

6. Waiver of Certain Rights by Junior Creditors.

Marshaling. Each Junior Creditor hereby waives any rights it may have under applicable law to assert the doctrine of marshaling or to otherwise require any Senior Creditor to marshal any property of the Borrowers or any other Loan Party for the benefit of such Junior Creditor.

Rights Relating to Senior Agent’s Actions with Respect to the Collateral. Each Junior Creditor hereby waives, to the extent permitted by applicable law, any rights which it may have to enjoin or otherwise obtain a judicial or administrative order preventing the Senior Agent from taking, or refraining from taking, any action with respect to all or any part of the Collateral. Without limitation of the foregoing, each Junior Creditor hereby agrees (a) that it has no right to direct or object to the manner in which the Senior Agent applies the proceeds of the Collateral resulting from the exercise by the Senior Agent of rights and remedies under the Senior Loan Documents and (b) that the Senior Agent has not assumed any obligation to act as the agent for such Junior Creditor with respect to the Collateral. The Senior Agent shall have the exclusive right to enforce rights and exercise remedies with respect to the Collateral until the Senior Debt has been Paid in Full. In exercising rights and remedies with respect to the Collateral, the Senior Agent may enforce the provisions of the Senior Loan Documents and exercise remedies thereunder, all in such order and in such manner as it may determine in the exercise of its sole business judgment. Such exercise and enforcement shall include, without limitation, the rights to sell or otherwise dispose of Collateral, to incur expenses in connection with such sale or disposition and to exercise all the rights and remedies of a secured lender under the Uniform Commercial Code of any applicable jurisdiction. In conducting any public or private sale under the UCC, the Senior Agent shall give each Junior Creditor written notice of such sale; provided, however, that 10 days’ notice shall be deemed to be commercially reasonable notice.

Preservation of Rights. The Senior Agent shall have no duty to protect or preserve any rights pertaining to any of the Collateral in its possession and the Senior Agent shall not have any liability to any Junior Creditor for any claims and liabilities at any time arising with respect to the Collateral in its possession.

Collateral Bailee. In the event that possession or control of any Collateral is required under applicable law to perfect a lien therein, then each of the Senior Agent and each Junior Creditor agrees that it shall hold or control any such Collateral in its possession or control as collateral bailee for the other.

7. Representations and Warranties.

Each Junior Creditor hereby represents and warrants to the Senior Agent that as of the date hereof: (a) such Junior Creditor has the power and authority to enter into, execute, deliver, and carry out the terms of this Agreement, all of which have been duly authorized by all proper and necessary action; (b) the execution of this Agreement by such Junior Creditor will not violate or conflict with the organizational documents of such Junior Creditor, the Junior Loan Documents or any law, regulation or order or require any consent or approval which has not been obtained; and (c) this Agreement is the legal, valid, and binding obligation of such Junior Creditor, enforceable against such Junior Creditor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and by equitable principles.

The Senior Agent hereby represents and warrants to each Junior Creditor that as of the date hereof: (a) the Senior Agent has the power and authority to enter into, execute, deliver, and carry out the terms of this Agreement, all of which have been duly authorized by all proper and necessary action; (b) the execution of this Agreement by the Senior Agent will not violate or conflict with the organizational documents of the Senior Agent, the Senior Loan Documents or any law, regulation or order or require any consent or approval which has not been obtained; and (c) this Agreement is the legal, valid, and binding obligation of the Senior Agent, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’ rights generally and by equitable principles.

8. Liquidation, Dissolution, Bankruptcy.

This Agreement, which the parties hereto expressly acknowledge is a “subordination agreement” under Section 510(a) of the Bankruptcy Code, shall be effective before, during and after the commencement of an Insolvency Proceeding. All references in this Agreement to any Borrower or any other Loan Party shall include such Person as a debtor-in-possession and any receiver or trustee for such Person in any Insolvency Proceeding.

In the event of any Insolvency Proceeding involving any Borrower or any other Loan Party:

All Senior Debt shall first be Paid in Full and all commitments to lend under the Senior Loan Documents shall be terminated before any Distribution, whether in cash, securities or other property, shall be made to any Junior Creditor on account of any Junior Debt.

ii.

Any Distribution, whether in cash, securities or other property which would otherwise, but for the terms hereof, be payable or deliverable in respect of the Junior Debt shall be delivered to the Senior Agent, and applied in accordance with the terms of the Senior Loan Documents. Each Junior Creditor irrevocably authorizes, empowers, and directs any debtor, debtor in possession, receiver, trustee, liquidator, custodian, conservator or other Person having authority, to pay or otherwise deliver all such Distributions to the Senior Agent as set forth above. Each Junior Creditor also irrevocably authorizes and empowers the Senior Agent, in the name of such Junior Creditor, to demand, sue for, collect and receive any and all such Distributions.

iii.

Each Junior Creditor agrees not to initiate, prosecute or participate in any claim, action or other proceeding challenging the enforceability, validity, perfection or priority of any portion of the Senior Debt or any Liens and security interests securing any portion of the Senior Debt.

iv.

Each Junior Creditor agrees that the Senior Creditors may consent to the use of cash collateral or provide debtor-in-possession financing to the Borrowers and the other Loan Parties on such terms and conditions and in such amounts as the Senior Creditors, in their sole discretion, may decide and, in connection therewith, the Borrowers and the other Loan Parties may grant to the Senior Agent liens and security interests upon all of the property of the Borrowers and the other Loan Parties, which liens and security interests (i) shall secure payment of all Senior Debt owing to the Senior Creditors (whether such Senior Debt arose prior to the commencement of any Insolvency Proceeding or at any time thereafter) and all other financing provided by the Senior Creditors during such Insolvency Proceeding and (ii) shall be superior in priority to the Liens in favor of any Junior Creditor on the property of the Borrowers and the other Loan Parties. Each Junior Creditor agrees that it will not object to or oppose any such cash collateral usage or debtor-in-possession financing or any sale or other disposition of any property securing all of any part of the Senior Debt free and clear of security interests, liens, or other claims of any Junior Creditor under Section 363 of the Bankruptcy Code or any other provision of the Bankruptcy Code, if the Senior Creditors have consented to such sale or disposition. Each Junior Creditor agrees not to assert any right it may have to “adequate protection” of such Junior Creditor’s interest in any Collateral in any Insolvency Proceeding and agrees that it will not seek to have the automatic stay lifted with respect to any Collateral without the prior written consent of the Senior Agent; provided that, the Senior Agent will not object to any request by any Junior Creditor for adequate protection replacement liens on all pre-petition and post-petition property of the Borrowers upon which the Senior Agent is also granted adequate protection replacement liens, with such liens in favor of such Junior Creditor being subject in all respects to this Agreement; provided further that other than such replacement liens no Junior Creditor will seek any other form of adequate protection. Each Junior Creditor waives any claim it may now or hereafter have arising out of the Senior Creditors’ election, in any Insolvency

Proceeding, of the application of Section 1111(b)(2) of the Bankruptcy Code, and/or any borrowing or grant of a security interest under Section 364 of the Bankruptcy Code by any Borrower or any other Loan Party, as debtor in possession. Each Junior Creditor agrees that it will not provide, or offer to provide, any debtor-in-possession financing to the Borrowers or any other Loan Party without the prior written consent of the Senior Agent.

Each Junior Creditor agrees to execute, verify, deliver, and file any proofs of claim in respect of the Junior Debt reasonably requested by the Senior Agent in connection with any such Insolvency Proceeding and hereby irrevocably authorizes the Senior Agent to file such proofs of claim upon the failure of such Junior Creditor to do so prior to three (3) Business Days before the expiration of the time to file any such proof of claim; provided, however, that the Senior Agent shall not be permitted to vote such claim and all voting rights with respect thereto shall be retained by the Junior Creditors. Each of the Junior Creditors agrees not to vote for any plan of reorganization that does not provide for the prior payment in full of the Senior Debt or otherwise vote its claims or interests in any Insolvency Proceeding (including voting for, or supporting, confirmation of any plans of reorganization) in a manner that would be inconsistent with such Junior Creditor’s covenants and agreements contained herein. For the avoidance of doubt, the Senior Agent shall have no affirmative obligation to file any such proof of claim on behalf of any Junior Creditor.

vi.

The Senior Debt shall continue to be treated as Senior Debt and the provisions of this Agreement shall continue to govern the relative rights and priorities of the Senior Creditors and the Junior Creditors even if all or part of the Senior Debt or the Liens or security interests securing the Senior Debt are subordinated, set aside, avoided, invalidated, or disallowed in connection with any such Insolvency Proceeding, and this Agreement shall be reinstated if at any time any payment of any of the Senior Debt is rescinded or must otherwise be returned by any holder of Senior Debt or any representative of such holder.

vii.

Each of the Borrowers, the Senior Agent and each Junior Creditor acknowledges and agrees with respect to the Collateral that (i) the grants of Liens on the Collateral pursuant to the Senior Loan Documents and the Junior Loan Documents constitute separate and distinct grants of Liens and (ii) because of, among other things, their differing rights in the Collateral, the Senior Debt and the Junior Debt are fundamentally different from one another and must be separately classified in any plan of reorganization proposed or adopted in an Insolvency Proceeding of any Borrower or any other Loan Party. To further effectuate the intent of the parties as provided in the immediately preceding sentence, if it is determined by a court of competent jurisdiction that the claims of the Senior Creditors and the Junior Creditors in respect of any Collateral, constitute only one secured claim (rather than separate classes of senior and junior secured claims), then the Senior Creditors shall be entitled to receive, in addition to amounts distributed to them from, or in respect of, the Collateral in respect of principal, pre-petition interest and other claims, all amounts owing in respect of post-petition interest, fees, costs and other charges, irrespective of whether a claim for such amounts is allowed or allowable in such liquidation or Insolvency Proceeding, before any Distribution from, or in respect of, any such Collateral is made in respect of the claims held by any Junior Creditor with each

Junior Creditor hereby acknowledging and agreeing to turn over to the Senior Agent amounts otherwise received or receivable by it to the extent necessary to effectuate the intent of this sentence, regardless of whether such turnover has the effect of reducing the claim or recovery of such Junior Creditor.

9. Miscellaneous.

No impairment. No right of the Senior Creditors to enforce the provisions hereof shall at any time in any way be prejudiced or impaired by any act taken in good faith, or failure to act, which failure to act is in good faith, by the Senior Creditors or by any noncompliance by the Borrowers or any other Loan Party with the terms and provisions and covenants herein. Each Junior Creditor and each Borrower (on behalf of itself and each other Loan Party) agree not to take any action to avoid or to seek to avoid the observance and performance of the terms and conditions hereof, and shall at all times in good faith carry out all such terms and conditions.

Junior Debt Not Affected. The subordination provisions of this Agreement are and are intended solely for the purposes of defining the relative rights of the Junior Creditors, on the one hand, and the Senior Creditors, on the other hand, as among themselves. Subject to this Agreement, as between the Borrowers and the Junior Creditors, nothing contained herein shall impair the unconditional and absolute obligation of the Borrowers to the Junior Creditors to pay the Junior Debt as such Junior Debt shall become due and payable. No person other than the Senior Creditors and the Junior Creditors and their respective successors and assigns shall have any rights hereunder.

Continuing Subordination; Termination of Agreement. This is a continuing agreement of subordination and the Senior Creditors may continue, at any time and without notice to the Junior Creditors, to extend credit or other financial accommodations and loan monies to or for the benefit of the Borrowers on the faith hereof. This Agreement shall remain in full force and effect until the Senior Debt has been Paid in Full, after which this Agreement shall terminate without further action on the part of the parties hereto.

Amendments; Modifications. This Agreement constitutes the entire agreement and understanding of the parties relating to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, whether oral or written, relating to the subject matter hereof. Any modification or waiver of any provision of this Agreement, or any consent to any departure by any party from the terms hereof, shall not be effective in any event unless the same is in writing and signed by the Senior Agent and the Junior Creditors, and then such modification, waiver, or consent shall be effective only in the specific instance and for the specific purpose given. Any notice to or demand on any party hereto in any event not specifically required hereunder shall not entitle the party receiving such notice or demand to any other or further notice or demand in the same, similar or other circumstances unless specifically required hereunder.

Further Assurances. Each party to this Agreement promptly will execute and deliver such further instruments and agreements and do such further acts and things as may be reasonably requested in writing by any other party hereto that may be necessary or desirable in order to effect fully the purposes of this Agreement.

Successors and Assigns. This Agreement shall inure to the benefit of, and shall be binding upon, the respective successors and assigns of the Senior Creditors, the Junior Creditors, and the Borrowers and the other Loan Parties. To the extent permitted under the Senior Loan Documents, the Senior Creditors may, from time to time, without notice to the Junior Creditors, assign or transfer any or all of the Senior Debt or any interest therein to any Person and, notwithstanding any such assignment or transfer, or any subsequent assignment or transfer, the Senior Debt shall, subject to the terms hereof, be and remain Senior Debt for purposes of this Agreement, and every permitted assignee or transferee of any of the Senior Debt or of any interest therein shall, to the extent of the interest of such permitted assignee or transferee in the Senior Debt, be entitled to rely upon and be the third party beneficiary of the subordination provided under this Agreement and shall be entitled to enforce the terms and provisions hereof to the same extent as if such assignee or transferee were initially a party hereto. Each Junior Creditor further acknowledges that this Agreement will inure to the benefit of any third Person who refinances or succeeds to or replaces any or all of the Senior Debt, whether such successor financing or replacement occurs by transfer, assignment or repayment without the necessity of any further writing; however, each Junior Creditor agrees, upon request of such third Person, to execute and deliver an agreement with such Person containing terms substantially identical to those contained herein (subject to changing names of parties, documents and addresses, as appropriate).

Conflict. In the event of any conflict between any term, covenant, or condition of this Agreement and any term, covenant or condition of the Junior Loan Documents, the provisions of this Agreement shall control and govern.

Senior Creditors’ Rights and Remedies. The rights, remedies, powers, privileges, and discretions of the Senior Creditors hereunder (hereinafter, the “Senior Creditors’ Rights and Remedies”) shall be cumulative and not exclusive of any rights or remedies which it would otherwise have. No delay or omission by any Senior Creditor in exercising or enforcing any of the Senior Creditors’ Rights and Remedies shall operate as, or constitute, a waiver thereof. No waiver by any Senior Creditor of any of the Senior Creditors’ Rights and Remedies or of any default or remedy under any other agreement with the Borrowers, any other Loan Party or any Junior Creditor shall operate as a waiver of any other default hereunder or thereunder. No exercise of the Senior Creditors’ Rights and Remedies and no other agreement or transaction, of whatever nature, entered into between any Senior Creditor and the Junior Creditors and/or between any Senior Creditor and the Borrowers or any other Loan Party at any time shall preclude any other or further exercise of the Senior Creditors’ Rights and Remedies. No waiver by any Senior Creditor of any of the Senior Creditors’ Rights and Remedies on any one occasion shall be deemed a continuing waiver. All of the Senior Creditors’ Rights and Remedies and all of the Senior Creditors’ rights, remedies, powers, privileges, and discretions under any other agreement with the Junior Creditors and/or the Borrowers or any other Loan Party shall be cumulative, and not alternative or exclusive, and may be exercised by the Senior Creditors at such time or times and in such order of preference as the Senior Creditors in their sole discretion may determine.

Headings. The paragraph headings used in this Agreement are for convenience only and shall not affect the interpretation of any of the provisions hereof.

Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or electronic mail shall be effective as delivery of a manually executed counterpart of this Agreement.

Severability. In the event that any provision of this Agreement is deemed to be invalid, illegal or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court or governmental authority, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the affected provision shall be modified to the minimum extent permitted by law so as most fully to achieve the intention of this Agreement.

Specific Performance. The Senior Creditors may demand specific performance of this Agreement. The Junior Creditors and each Borrower, on behalf of itself and each other Loan Party, each hereby irrevocably waives any defense based on the adequacy of a remedy at law and any other defense which might be asserted to bar the remedy of specific performance in any action which may be brought by any Senior Creditor.

Expenses. In the event that the Senior Creditors undertake any action that is reasonably necessary in order to enforce the provisions of this Agreement (whether or not suit is commenced), the Borrowers and the other Loan Parties shall pay all reasonable costs and expenses incurred by the Senior Creditors in connection therewith, including, without limitation, reasonable attorneys’ fees.

Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF, BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

Jurisdiction; Consent to Service of Process.

EACH OF THE JUNIOR CREDITORS AND EACH BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE JUNIOR CREDITORS AND EACH BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE SENIOR

CREDITORS MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY JUNIOR CREDITOR, THE BORROWERS OR ANY OTHER LOAN PARTY OR THEIR RESPECTIVE PROPERTIES IN THE COURTS OF ANY JURISDICTION.

ii.

EACH OF THE JUNIOR CREDITORS AND EACH BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN PARAGRAPH (I) OF THIS SECTION. EACH OF THE JUNIOR CREDITORS AND EACH BORROWER AND EACH OTHER LOAN PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

iii.

Each of the Junior Creditors and each Borrower and each other Loan Party agrees that any action commenced by such Person asserting any claim or counterclaim arising under or in connection with this Agreement shall be brought solely in a court referred to in Paragraph (i) of this Section.

Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT EACH OTHER PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

Notices. All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy or electronic mail, as follows:

if to the Borrowers, to: Bluefly, Inc., Attention: Kara B. Jenny (Fax No. 786-513-3736, email: kara.jenny@bluefly.com), with a copy to Dechert LLP, Attention: Richard Goldberg (Fax No. 212-698-3599, email: richard.goldberg@dechert.com);

ii.

if to Prentice, to: Prentice Consumer Partners, L.P., 623 Fifth Avenue, 32nd Floor, New York, New York 10022, with a copy to Goodwin Procter LLP, Attention: Stephen M. Davis (Fax No. 212-355-3333, email: sdavis@goodwinprocter.com);

iii.

if to Rho, to: Rho Ventures VI, L.P., 152 West 57th Street, 23rd Floor, New York, New York 10022, with a copy to Goodwin Procter LLP, Attention: Stephen M. Davis (Fax No. 212-355-3333, email: sdavis@goodwinprocter.com); and

iv.

if to the Senior Agent, to: Salus Capital Partners, LLC, Attention: Danielle L. Prentis (Fax No. 781-459-0058, email: dprentis@saluscapital.com), with a copy to Choate, Hall & Stewart LLP, Attention: John F. Ventola (Fax No. 617-248-4000, email: jventola@choate.com);

Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

[SIGNATURE PAGES TO FOLLOW]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date above first written.


JUNIOR CREDITORS: PRENTICE CONSUMER PARTNERS, LP
By:		/s/ Mario Ciampi
Name:		Mario Ciampi
Title:		Managing Partner
RHO VENTURES VI, L.P. By: RMV VI, L.L.C., its General Partner By: Rho Capital Partners LLC, its Managing Member
By:		/s/ Jeffrey Martin
Name:		Jeffrey Martin
Title:		Attorney-in-fact


SENIOR AGENT: SALUS CAPITAL PARTNERS, LLC
By:		/s/ Marc S. Price
Name:		Marc S. Price
Title:		Senior Vice President


BORROWERS: BLUEFLY, INC.
By:		/s/ Joseph Park
Name:		Joseph Park
Title:		Chief Executive Officer
EVT ACQUISITION CO., LLC
By:		/s/ Joseph Park
Name:		Joseph Park
Title:		Chief Executive Officer

EX-99.13 3 d441585dex9913.htm SECURITIES PURCHASE AGREEMENT Securities Purchase Agreement

Exhibit 13

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (the “Agreement”) is made as of November 13, 2012 (the “Effective Date”), by and between Rho Ventures VI, L.P., a Delaware limited partnership (the “Purchaser”), and Melissa Payner (the “Seller”).

The Seller desires to sell, and the Purchaser desires to buy, 298,858 shares (the “Shares”) of the Common Stock, par value $.01 per share (the “Common Stock”), of Bluefly, Inc., a Delaware corporation (the “Company”), for a price per share of One U.S. Dollar ($1.00) (“Per Share Purchase Price”) on the terms and conditions set forth in this Agreement. It is the intention of the parties to this Agreement, that the transactions contemplated by this Agreement be a private sale of securities that is exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the satisfaction of the conditions for the so-called “Section 4 (1 1/2)” private resale exemption.

In consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

PURCHASE AND SALE OF THE SHARES

Section 1.01 Purchase and Sale of Shares. Subject to and in reliance upon the representations, warranties, terms and conditions of this Agreement, the Seller hereby agrees to sell, transfer and assign all of Seller’s right, title and interest in and to the Shares to the Purchaser, and the Purchaser hereby agrees to purchase the Shares from the Seller at a price per Share equal to the Per Share Purchase Price, for an aggregate purchase price of Two Hundred Ninety-Eight Thousand Eight Hundred Fifty-Eight U.S. Dollars ($298,858) (the “Purchase Price”).

Section 1.02 Gross-Up. Notwithstanding Section 1.01, in the event that during the period between the Effective Date and the date on which the Company first publicly announces earnings for the fiscal year ending December 31, 2012, the Purchaser or any of its affiliates enters into a definitive agreement to acquire all of the shares of Common Stock not currently owned by it and its affiliates, collectively, for a per share purchase price (the “Acquisition Per Share Purchase Price”) greater than the Per Share Purchase Price, then the Purchaser hereby agrees to pay the Seller within two (2) business days following consummation of such acquisition, for each Share sold by the Seller to the Purchaser hereunder, an amount in cash in immediately available funds equal to the positive difference, if any, between the Acquisition Per Share Purchase Price and the Per Share Purchase Price. The Seller acknowledges that the Purchaser has no current plans or intent to engage in any transaction that would trigger the payment required by this Section 1.02.

Section 1.03 The Closing. The closing of the purchase and sale of the Shares under this Agreement (the “Closing”) shall take place on the Effective Date. At the Closing, the Seller shall deliver to the Purchaser a stock certificate representing the Shares either (i) endorsed for transfer to the Purchaser or (ii) accompanied by an executed stock power sufficient to transfer such Shares to the Purchaser against payment of the Purchase Price therefore by the Purchaser in cash by wire transfer.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLERS

The Seller hereby represents and warrants to the Purchaser as follows:

Section 2.01 Authority and Approvals. The Seller has the power and authority to enter into and perform her obligations under this Agreement, and all action necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby has been duly and validly taken. The Agreement has been duly and validly executed and delivered by the Seller. Assuming this Agreement constitutes a valid and binding agreement of the Purchaser, this Agreement constitutes a valid and binding agreement of the Seller, enforceable against the Seller in accordance with its terms.

Section 2.02 The Shares. The Seller is the record and beneficial owner of the Shares and the Shares are the only shares of Common Stock owned by the Seller or any of her family members or affiliates. Except for this Agreement, there is no agreement, arrangement or understanding with any other Person regarding the sale or transfer of any Shares, and there exist no liens, claims, options, proxies, voting agreements, charges or encumbrances of any kind affecting the Shares. Upon transfer of the Shares to the Purchaser at the Closing against payment of the Purchase Price, the Purchaser will acquire ownership of the Shares, free and clear of all liens, claims, options, proxies, voting agreements, charges or encumbrances of any kind affecting the Shares. The Seller represents (a) she acquired the Shares for investment purposes only and not with a view toward distribution or resale in violation of any applicable securities laws, and (b) that she is selling the Shares, as principal, for her own account and not as a broker or agent for another party. As used in this Agreement, the term “Person” shall be construed broadly to mean any natural person, corporation, general partnership, limited partnership, limited liability company, union, association, court or government agency, board or other entity or instrumentality.

Section 2.03 Conflicts. The execution, delivery and performance of this Agreement will not (i) violate, conflict with, or result in the breach, acceleration, default or termination of, or otherwise give any other contracting party the right to terminate, accelerate, modify or cancel any of the terms, provisions, or conditions of any material agreements or instrument to which the Seller is a party or by which her or her assets may be bound, or (ii) constitute a violation of any material applicable law, rule or regulation, or of any judgment, order, injunctive, award or decree of any court, administrative agency or other governmental authority applicable to the Seller.

Section 2.04 Broker’s Fees. The Seller has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

Section 2.05 Excluded Information.

(a) The Seller acknowledges that the Purchaser is an existing stockholder of the Company and that the Purchaser may have access to and may possess material nonpublic information regarding the Company not known to the Seller (the “Excluded Information”). The Excluded Information may or may not be material, may or may not have been publicly disclosed by or on behalf of the Company or the Purchaser, directly or indirectly, and may or may not be available to the Seller from sources other than the Company or the Purchaser. The Seller hereby assumes and accepts the risk that the Excluded Information will not be known to the Seller before making a binding commitment to consummate the sale of the Shares hereunder to the Purchaser and of the impact of the Excluded Information on the value of the Shares the Seller is selling to the Purchaser hereunder. The Seller further represents, warrants and acknowledges that she: (a) is a sophisticated seller with respect to the Shares, (b) has adequate information concerning the Shares, (c) has conducted, to the extent she deemed necessary, an independent investigation of such matters as, in her judgment, is necessary for her to make an informed investment decision with respect to the sale of the Shares to the Purchaser and with respect to the Purchaser as the purchaser of the Shares, and (d) has not relied upon the Purchaser for any investigation into, assessment of, or evaluation with respect to the sale of the Shares to the Purchaser or with respect to the Purchaser as the purchaser of the Shares.

(b) The Seller acknowledges that she has been afforded (i) the opportunity to receive information (including the Excluded Information) about the Company and its financial condition, results of operations, business, properties, management and prospects, and (ii) the opportunity to ask such questions of, and to receive answers from, representatives of the Purchaser concerning such information (including the Excluded Information), in each case sufficient to enable her to evaluate a decision to sell the Shares to the Purchaser.

(i) agrees that neither the Purchaser nor its directors, officers, partners, stockholders, members, investors, employees, attorneys, agents or representatives shall have any liability to the Seller or her affiliates with respect to the existence, possession or non-disclosure of any Excluded Information, whether arising directly or indirectly, primarily or secondarily, by contract or operation of law or otherwise, including as a matter of contribution, indemnification, set-off, rescission, or reimbursement;

(ii) waives any right, claim or cause of action, at law or in equity, arising from or relating to, directly or indirectly, the existence, possession or non-disclosure of any Excluded Information, including without limitation pursuant to

Sections 10(b) and 20A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or the rules and regulations promulgated by the Securities and Exchange Commission under the Exchange Act, and relinquishes all rights and remedies accorded by applicable law to a seller of securities with respect to the Shares to the maximum extent permitted by law, as well as all rights to participate in any claim, action or remedy others may now or hereafter have with respect to the foregoing; and

(iii) with respect to the purchase and sale of the Shares, releases and discharges the Purchaser and its directors, officers, partners, stockholders, members, investors, employees, attorneys, agents or representatives and all successors and assigns thereto (each a “Released Party”) of and from any and all suits, demands, obligations, liabilities, claims and causes of action, contingent or otherwise, of every kind and nature, at law and in equity, which the Seller and/or her affiliates, successors or assigns may have against any Released Party, to the extent arising from or in connection with the existence, possession or non-disclosure of any Excluded Information whether asserted, unasserted, absolute, contingent, known or unknown.

(d) The Seller hereby represents to each Released Party that (i) it has not assigned any claim or possible claim against the Released Parties, (ii) it fully intends to release all claims against the Released Parties as set forth above, and (iii) it has been advised by, and has consulted with, counsel with respect to the execution and delivery of this Agreement and has been fully apprised of the consequences of the waivers and releases set forth in this Section 2.05.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser represents and warrants to the Seller as follows:

Section 3.01 Authorization of Agreement. The Purchaser has the power and authority to enter into and perform its obligations under this Agreement, and all action necessary on the part of the Purchaser to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby has been duly and validly taken. This Agreement has been duly and validly executed and delivered by the Purchaser. Assuming this Agreement constitutes a valid and binding obligation of the Seller, this Agreement constitutes a valid and binding agreement of the Purchaser, enforceable against the Purchaser in accordance with its terms.

Section 3.02 Experience; Purchase for Investment; Transfer. The Purchaser is an existing stockholder of the Company and has sufficient knowledge and experience in investing in companies similar to the Company so as to be able to evaluate the risks and merits of its investment in the Shares and is able financially to bear the risks thereof. The Purchaser is acquiring the Shares for its own account, for investment only, and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or

selling the Shares in violation of applicable law, and the Purchaser has no present or contemplated agreement, undertaking, arrangement obligation, indebtedness, or commitment providing for the distribution or sale thereof. The Purchaser acknowledges and agrees that the Shares have not been registered under the Securities Act and may not be sold, pledged or otherwise transferred by the Purchaser without compliance with the registration provisions of the Securities Act or an exemption therefrom.

Section 3.03 Conflicts. The execution, delivery and performance of this Agreement will not (i) violate, conflict with, or result in the breach, acceleration, default or termination of, or otherwise give any other contracting party the right to terminate, accelerate, modify or cancel any of the terms, provisions, or conditions of the organizational documents of the Purchaser or any material agreements or instrument to which the Purchaser is a party or by which it or its assets may be bound, or (ii) constitute a violation of any material applicable law, rule or regulation, or of any judgment, order, injunctive, award or decree of any court, administrative agency or other governmental authority applicable to the Purchaser.

Section 3.04 Broker’s Fees. The Purchaser has no liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement.

ARTICLE IV

MISCELLANEOUS

Section 4.01 Expenses. Each party hereto shall pay its own expenses incurred in connection with this Agreement, including, but not limited to, any fees payable to an agent, broker, investment or commercial banker, person or firm acting on behalf of or under the authority of such party who is entitled to any broker’s or finder’s fee or any other commission or fee directly or indirectly in connection with any of the transactions contemplated herein.

Section 4.02 Severability. If any provision of this Agreement shall be held invalid or unenforceable, each other provision hereof shall be given effect to the extent possible without such invalid or unenforceable provision and to that extent, the provisions of this Agreement shall be severable.

Section 4.03 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be delivered personally, mailed by certified or registered mail, postage prepaid, or sent by facsimile, with confirmation of receipt, addressed to such address as such party shall have furnished to the other parties in writing in accordance herewith. All such notices, requests, demands and other communications shall, when mailed (registered or certified mail, return receipt requested, postage prepaid), or personally delivered, be effective four days after deposit in the mails or when personally delivered, respectively, addressed as aforesaid, unless otherwise provided herein and, when telecopied, shall be effective upon actual receipt.

Section 4.04 Modifications, Consents and Waivers. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by each of the parties hereto. Any party hereto may waive compliance, with respect to any obligations owed to such party, with any provision of this Agreement. Any waiver hereunder shall be effective only if made in a writing signed by the party to be charged therewith and only in the specific instance and for the purpose for which given. No failure or delay on the part of any party in exercising any right, power, or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any further exercise thereof or the exercise of any other right, power or privilege.

Section 4.05 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of laws thereof.

Section 4.06 Execution in Counterparts. This Agreement may be executed by the parties individually or in counterparts, each of which shall be an original and all of which taken together shall constitute one and the same agreement.

Section 4.07 Headings. Article and section headings used in this Agreement are for convenience only and shall not affect the interpretation or construction of any provision of this Agreement.

Section 4.08 Entire Agreement. This Agreement and the Exhibits hereto contain the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersede all prior agreements and understandings relating to such subject matter.

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IN WITNESS WHEREOF, the parties have caused this Stock Purchase Agreement to be executed as of the date first above written.

PURCHASER:

RHO VENTURES VI, L.P.

By: RMV VI LLC, its General Partner

By: Rho Capital Partners LLC, its Managing

Member

/s/ Jeffrey Martin

Name: Jeffrey Martin

Title: Attorney-in-Fact

SELLER:

MELISSA PAYNER

/s/ Melissa Payner