Unassociated Document


    Exhibit
10.4

     

    CONSENT
AND SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

     

    THIS
CONSENT AND SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as
of December 21, 2009, is made with respect to the LOAN AND SECURITY AGREEMENT,
dated as of July 26, 2005 (as amended, modified, supplemented or restated and in
effect from time to time, the “Loan Agreement”),
between WELLS FARGO RETAIL FINANCE, LLC (herein, the “Lender”), a Delaware
limited liability company with offices at One Boston Place, 18th Floor, Boston,
Massachusetts 02109, and BLUEFLY, INC. (the “Borrower”), a
Delaware corporation with its principal executive offices at 42 West 39th
Street, New York, New York  10018.

     

    BACKGROUND:

     

    The
Borrower has informed the Lender that the Borrower intends to issue 8,823,529
shares of common stock having a par value of $0.01 to Rho Ventures VI, L.P.
(“Rho”) for a
purchase price of $1.70 per share (the “Specified
Transaction”);

     

    The
Borrower has informed the Lender that in connection with the Specified
Transaction and as a condition precedent thereto certain of the Subordinated
Entities shall convert the Convertible Promissory Notes (as such term is defined
in the Subordinated Note Documents) into common shares of the Borrower and that
in connection with such conversion the Borrower desires to pay the Subordinated
Entities cash interest for the period ending November 30, 2009 in the aggregate
amount of $332,081.17 plus interest thereafter accruing (the “Cash
Interest”)

     

    The Borrowers have requested that the
Lender (i) consent to the Specified Transaction to the extent necessary to
prevent the occurrence of a Default under the Loan Agreement as a result of the
Specified Transaction, (ii) consent to the payment of the Cash Interest
and (iii) amend
certain terms and conditions of the Loan Agreement, and the Lender is willing to
do so on the terms and conditions set forth in this Seventh
Amendment.

     

    In
consideration of the mutual covenants contained herein and benefits to be
derived herefrom, the parties hereto agree as follows:

     

    SECTION
1. Capitalized
Terms. All capitalized terms used herein and
not otherwise defined shall have the same meaning herein as in the Loan
Agreement.

     

    SECTION 2.
Consent
to Specified Transaction.  Subject to
satisfaction of each and all of the preconditions to effectiveness set forth in
SECTION 5 below, the Lender hereby consents to (i) the consummation by the
Borrower of the Specified Transaction; (ii) the payment by the Borrower to and
receipt by certain of the Subordinated Entities of the of the Cash Interest
notwithstanding Section 4.19(b) of the Loan Agreement and Section 2.2(a) of the
Subordination Agreement.

     

    SECTION
3. Limited
Scope of Waiver and Consent.  The consent to
the Specified Transaction contained in SECTION 2 above (i) is a limited,
one-time consent, (ii) shall not be deemed to constitute to any similar
transaction or any other event which is prohibited by the terms of the Loan
Agreement, and (iii) is granted by the Lender in reliance upon the Borrower’s
representations, warranties and agreements set forth herein.

     

    SECTION
4. Amendment
to Loan Agreement.  The provisions of
the Loan Agreement are hereby amended as follows:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    4.1
Article 1 of the Loan Agreement is
hereby amended as follows:

     

    The
definition of “Change of
Control” contained therein is deleted in its entirety and replaced with
the following:

     

    "Change in
Control":   The occurrence of
any of the following:

     

    (a)           The acquisition, by any group of persons
(within the meaning of the Exchange Act) or by any Person, other than by one or
more of the Subordinated Entities, Prentice Capital Management, L.P. or Rho
Ventures VI, L.P.  and/or their affiliates, of beneficial ownership
(within the meaning of Rule 13d-3 of the Exchange Act) of 35% or more of the
issued and outstanding capital stock of the Borrower having the right, under
ordinary circumstances, to vote for the election of directors of the Borrower,
which Person or group of Persons thereby becomes the largest shareholder of
Borrower.

     

    (b)            More than half of the persons who were
directors of the Borrower on the first day of any period consisting of Twelve
(12) consecutive calendar months (the first of which Twelve (12) month periods
commencing with the first day of the month during which this Agreement was
executed) (together with any new directors whose nomination for election by the
equity holders of the Borrower, was approved by a vote of at least a majority of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved), cease, for any reason other  than death or disability, to
be directors of the Borrower.

     

    4.2
Article 2 of the Loan Agreement is
hereby amended as follows:

     

    4.2.1
Section 2.14 of the Loan Agreement
is hereby deleted in its entirety and replaced with the
following:

     

    In addition to any other fee to be paid
by the Borrower on account of the Revolving Credit, the Borrower shall pay the
Lender the "Unused Line
Fee" (so referred to herein) of
0.75% per annum of the
average difference, during the month just ended (or relevant period with respect
to the payment being made on the Termination Date) between the Revolving Credit
Ceiling and the aggregate of the unpaid principal balance of the Loan Account
and the undrawn Stated Amount of L/C's outstanding during the relevant
period.  The Unused Line Fee shall be paid in arrears, on the first
day of each month after the execution of this Agreement and on the Termination
Date.

     

    SECTION
5. Conditions
Precedent.  This Amendment
shall not be effective until each of the following conditions have been
satisfied, as determined by the Lender in its discretion:

     

    5.1
The Lender shall have received counterparts of this Amendment duly executed by
each of the parties hereto.

     

    5.2 All
corporate and shareholder action on the part of the Borrower necessary for the
valid execution, delivery and performance by the Borrower of this Amendment
shall have been duly and effectively taken and evidence thereof reasonably
satisfactory to the Lender shall have been provided to the Lender.

     

    
      
         

      

      
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    5.3 After
giving effect to this Amendment, the representations and warranties in the Loan
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date hereof, as though made on such date (except to
the extent that such representations and warranties relate solely to an earlier
date, in which case they shall be true and correct as of such earlier
date).

     

    5.4 After
giving effect to this Amendment, no Default or Event of Default shall have
occurred and be continuing on the date hereof, nor shall result from the
consummation of the transactions contemplated herein.

     

    5.5 The
Specified Transaction shall have been consummated and Rho shall have purchased
the Initial Shares (as defined it the Purchase Agreement) for the Initial
Purchase Price (as defined it the Purchase Agreement).

     

    5.6 The
Borrower shall have paid to the Lender an amendment fee in the amount of
$20,000.00 (the “Amendment Fee”) in
consideration for the amendment contained herein.  The Amendment Fee
shall be fully earned upon the date hereof, and shall not be subject to refund
or rebate under any circumstances.

     

    5.7 The
Borrower shall have paid in full all reasonable costs and expenses of the Lender
(including, without limitation, reasonable attorneys’ fees) in connection with
the preparation, negotiation, execution and delivery of this
Amendment.

     

    SECTION 6. Waiver of
Claims.

     

    6.1 The
Borrower, for itself and on behalf of its officers, directors, employees,
attorneys, representatives, administrators, successors, and assigns hereby
acknowledges and agrees that it has no offsets, defenses, claims, or
counterclaims against the Lender, or its officers, directors, employees,
attorneys, representatives, parent, affiliates, participants, successors, or
assigns (collectively, “Credit Parties”) with
respect to the Liabilities, or otherwise, and that if the Borrower now has, or
ever did have, any offsets, defenses, claims, or counterclaims against any
Credit Party, whether known or unknown, at law or in equity, from the beginning
of the world through this date and through the time of execution of this
Amendment, all of them are hereby expressly WAIVED, and the Borrower
hereby RELEASES the
Credit Parties from any liability therefor.

     

    
      
         

      

      
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    SECTION 7. Miscellaneous.

     

    7.1
Except as provided herein, all of the terms and conditions of the Loan Agreement
and the other Loan Documents remain in full force and effect.

     

    7.2 This
Amendment may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which shall be deemed to be an
original, but all of which taken together shall constitute one and the same
agreement.  Delivery of an executed counterpart of this Amendment by
telefacsimile or electronic mail shall be equally as effective as delivery of an
original executed counterpart of this Amendment.  Any party delivering
an executed counterpart of this Amendment by telefacsimile or electronic mail
also shall deliver an original executed counterpart of this Amendment but the
failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Amendment.

     

    7.3 This
Amendment expresses the entire understanding of the parties with respect to the
transactions contemplated hereby.  No prior negotiations or
discussions shall limit, modify, or otherwise affect the provisions
hereof.

     

    7.4 THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE COMMONWEALTH OF
MASSACHUSETTS.

     

    [SIGNATURE
PAGES FOLLOW]

     

    
      
         

      

      
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    IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.

     

     

     

     

    BORROWER:

    


    BLUEFLY,
INC.

    


    By:     
/s/ Kara B.
Jenny                           


    Name:
Kara B.
Jenny                                


    Title:  
Chief Financial
Officer                 


    


    LENDER:

    


    WELLS
FARGO RETAIL FINANCE, LLC

    


    By:     
/s/ Michele L.
Ayov                     
                  


    Name:
Michele L.
Ayov                           


    Title:  
Vice
President