-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wq5eLzCJclWKiSFbKmMY5+INHwHlEiDE7POHlNLn4UsiuwlAyoWqr2nszTLP67OC vyA/mrvC4wQZLzPlQ4wq8g== 0000921530-05-000461.txt : 20050630 0000921530-05-000461.hdr.sgml : 20050630 20050630170435 ACCESSION NUMBER: 0000921530-05-000461 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20050630 DATE AS OF CHANGE: 20050630 GROUP MEMBERS: GEORGE SOROS GROUP MEMBERS: QIH MANAGEMENT INVESTOR, L.P. GROUP MEMBERS: QIH MANAGEMENT LLC GROUP MEMBERS: QUANTUM INDUSTRIAL PARTNERS LDC GROUP MEMBERS: SFM DOMESTIC INVESTMENTS LLC GROUP MEMBERS: SOROS FUND MANAGEMENT LLC 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: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-52401 FILM NUMBER: 05929281 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: SOROS FUND MANAGEMENT LLC CENTRAL INDEX KEY: 0001029160 IRS NUMBER: 133914976 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 888 SEVENTH AVENUE 33RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10106 BUSINESS PHONE: 2128721054 MAIL ADDRESS: STREET 1: C/O AKIN, GUMP, STRAUSS,HAUER,FELD, STREET 2: 399 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D/A 1 bluefly_13da22.txt AMENDMENT NO. 22 TO SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 22)* BLUEFLY, INC. -------------------------------------- (Name of Issuer) Common Stock, Par Value $0.01 Per Share -------------------------------------- (Title of Class of Securities) 096227103 -------------------------------------- (CUSIP Number) Stephen M. Vine, Esq. Akin Gump Strauss Hauer & Feld LLP 590 Madison Avenue New York, New York 10022 (212) 872-1000 -------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) June 24, 2005 -------------------------------------- (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 ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [ ]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See ss.240.13d-7 for other parties to whom copies are to be sent. * 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 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Continued on following pages Page 1 of 15 Pages Exhibit Index: Page 15 SCHEDULE 13D CUSIP No. 096227103 Page 2 of 15 Pages 1 Names of Reporting Persons I.R.S. Identification Nos. of above persons (entities only). QUANTUM INDUSTRIAL PARTNERS LDC 2 Check the Appropriate Box if a Member of a Group (See Instructions) a. [ ] b. [X] 3 SEC Use Only 4 Source of Funds (See Instructions) OO 5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization Cayman Islands 7 Sole Voting Power Number of 46,510,226 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 46,510,226 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 46,510,226 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] 13 Percent of Class Represented By Amount in Row (11) 82.2% 14 Type of Reporting Person (See Instructions) OO; IV SCHEDULE 13D CUSIP No. 096227103 Page 3 of 15 Pages 1 Names of Reporting Persons I.R.S. Identification Nos. of above persons (entities only). QIH MANAGEMENT INVESTOR, L.P. 2 Check the Appropriate Box if a Member of a Group (See Instructions) a. [ ] b. [X] 3 SEC Use Only 4 Source of Funds (See Instructions) AF 5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 46,510,226 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 46,510,226 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 46,510,226 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] 13 Percent of Class Represented By Amount in Row (11) 82.2% 14 Type of Reporting Person (See Instructions) PN; IA SCHEDULE 13D CUSIP No. 096227103 Page 4 of 15 Pages 1 Names of Reporting Persons I.R.S. Identification Nos. of above persons (entities only). QIH MANAGEMENT LLC 2 Check the Appropriate Box if a Member of a Group (See Instructions) a. [ ] b. [X] 3 SEC Use Only 4 Source of Funds (See Instructions) AF 5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 46,510,226 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 46,510,226 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 46,510,226 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] 13 Percent of Class Represented By Amount in Row (11) 82.2% 14 Type of Reporting Person (See Instructions) OO SCHEDULE 13D CUSIP No. 096227103 Page 5 of 15 Pages 1 Names of Reporting Persons I.R.S. Identification Nos. of above persons (entities only). SOROS FUND MANAGEMENT LLC 2 Check the Appropriate Box if a Member of a Group (See Instructions) a. [ ] b. [X] 3 SEC Use Only 4 Source of Funds (See Instructions) AF 5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 46,510,226 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 46,510,226 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 46,510,226 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] 13 Percent of Class Represented By Amount in Row (11) 82.2% 14 Type of Reporting Person (See Instructions) OO; IA SCHEDULE 13D CUSIP No. 096227103 Page 6 of 15 Pages 1 Names of Reporting Persons I.R.S. Identification Nos. of above persons (entities only). SFM DOMESTIC INVESTMENTS LLC 2 Check the Appropriate Box if a Member of a Group (See Instructions) a. [ ] b. [X] 3 SEC Use Only 4 Source of Funds (See Instructions) OO 5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 1,521,376 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 1,521,376 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 1,521,376 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] 13 Percent of Class Represented By Amount in Row (11) 9.1% 14 Type of Reporting Person (See Instructions) OO SCHEDULE 13D CUSIP No. 096227103 Page 7 of 15 Pages 1 Names of Reporting Persons I.R.S. Identification Nos. of above persons (entities only). GEORGE SOROS (in the capacity described herein) 2 Check the Appropriate Box if a Member of a Group (See Instructions) a. [ ] b. [X] 3 SEC Use Only 4 Source of Funds (See Instructions) AF 5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization United States 7 Sole Voting Power Number of 48,031,602 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 48,031,602 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 48,031,602 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] 13 Percent of Class Represented By Amount in Row (11) 82.9% 14 Type of Reporting Person (See Instructions) IA Page 8 of 15 Pages This Amendment No. 22 to Schedule 13D relates to shares of Common Stock, $0.01 par value per share (the "Shares"), of Bluefly, Inc. (the "Issuer"). This Amendment No. 22 supplementally amends the initial statement on Schedule 13D, dated August 6, 1999, and all amendments thereto (collectively, the "Initial Statement"), filed by the Reporting Persons (as defined herein). This Amendment No. 22 is being filed by the Reporting Persons to report that QIP (as defined herein) and SFM Domestic Investments (as defined herein) have entered into an agreement with the Issuer and third party investors as described herein, whereby QIP and SFM Domestic Investments each sold and transferred to the third party investors shares of an existing series of preferred stock of the Issuer convertible into Shares and simultaneously purchased from the Issuer shares of a new series of preferred stock of the Issuer convertible into Shares, as more fully described in Item 6 herein. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Initial Statement. The Initial Statement is supplementally amended as follows. Item 2. Identity and Background This Statement is being filed on behalf of each of the following persons (collectively, the "Reporting Persons"): (i) Quantum Industrial Partners LDC ("QIP"); (ii) QIH Management Investor, L.P. ("QIHMI"); (iii) QIH Management LLC ("QIH Management"); (iv) Soros Fund Management LLC ("SFM LLC"); (v) SFM Domestic Investments LLC ("SFM Domestic Investments"); and (vi) Mr. George Soros ("Mr. Soros"). This Statement relates to the Shares and other securities convertible into Shares held for the accounts of QIP and SFM Domestic Investments. QIHMI is a minority shareholder of, and is vested with investment discretion with respect to portfolio assets held for the account of, QIP. The sole general partner of QIHMI is QIH Management. SFM LLC is the sole managing member of QIH Management. Mr. Soros is the Chairman of SFM LLC and the sole managing member of SFM Domestic Investments. On December 27, 2002, Mr. Soros appealed a decision of the 11e Chambre du Tribunal Correctionnel in Paris, France that fined him 2.2 million euros on December 20, 2002 based on a finding of insider trading with respect to trading in securities of Societe Generale in 1988. On March 24, 2005, the Paris Court of Appeal affirmed the decision of the 11e Chambre du Tribunal Correctionnel. Mr. Soros intends to file a further appeal at the French Cour de Cassation and, if that appeal is not successful, an additional action with the European Court of Justice. Mr. Soros has elected to provide the foregoing information on a voluntary basis. Item 3. Source and Amount of Funds or Other Consideration The information set forth in Item 6 hereof is hereby incorporated by reference into this Item 3. Simultaneously with its receipt of the $2,904,600 proceeds of its sale of shares of the Issuer's Series D Convertible Preferred Stock, par value $.01 per share (the "Series D Preferred Stock"), to third party investors pursuant to the Preferred Stock and Warrant Purchase Agreement (the "Purchase Agreement") dated as of June 24, 2005 among the Issuer, QIP, SFM Domestic Investments and the Page 9 of 15 Pages other parties thereto (the "New Investors") as described in Item 6, QIP expended such proceeds to purchase shares of the Issuer's Series F Convertible Preferred Stock, $.01 par value per share ("Series F Preferred Stock"), pursuant to the Purchase Agreement. Simultaneously with its receipt of the $95,400 proceeds of its sale of shares of Series D Preferred Stock to the New Investors pursuant to the Purchase Agreement, SFM Domestic Investments expended such proceeds to purchase shares of the Series F Preferred Stock pursuant to the Purchase Agreement. Item 5. Interest in Securities of the Issuer The information set forth in Item 6 hereof is hereby incorporated by reference into this Item 5. According to information filed by the Issuer with the Securities and Exchange Commission on its most recent Form 10-Q for the quarterly period ended March 31, 2005, the number of Shares outstanding was 15,341,015 as of May 2, 2005. (a) (i) Each of QIP, QIHMI, QIH Management and SFM LLC may be deemed the beneficial owner of 46,510,226 Shares (approximately 82.2% of the total number of Shares outstanding assuming the exercise and conversion of all of the securities held for the account of QIP). This number consists of (A) 5,287,082 Shares, (B) 3,806,923 Shares issuable upon the conversion of 445,410 shares of Series A Preferred Stock, (C) 26,503,095 Shares issuable upon the conversion of 8,607,843 shares of Series B Preferred Stock, (D) 1,274,078 Shares issuable upon the conversion of 968.3 shares of Series C Preferred Stock, (E) 6,142,450 Shares issuable upon the conversion of 4,668.262 shares of Series D Preferred Stock, (F) 1,274,078 Shares issuable upon the conversion of 968.3 shares of Series E Preferred Stock, (G) 950,537 Shares issuable upon the exercise of warrants held for the account of QIP, (H) 20,000 Shares issuable in the aggregate upon the exercise of options held for the benefit of QIP by employees of SFM LLC who serve on the Issuer's board of directors, and (I) 1,251,983 Shares issuable upon the conversion of 2,904.6 shares of Series F Preferred Stock. (ii) SFM Domestic Investments may be deemed the beneficial owner of 1,521,376 Shares (approximately 9.1% of the total number of Shares outstanding assuming the exercise and conversion of all the securities held for its account). This number consists of (A) 172,995 Shares, (B) 124,700 Shares issuable upon the conversion of 14,590 shares of Series A Preferred Stock held for its account, (C) 866,942 Shares issuable upon the conversion of 281,571 shares of Series B Preferred Stock held for its account, (D) 41,710 Shares currently issuable upon the conversion of 31.7 shares of Series C Preferred Stock held for its account, (E) 201,091 Shares issuable upon the conversion of 152.829 shares of Series D Preferred Stock, (F) 41,710 Shares issuable upon the conversion of 31.7 shares of Series E Preferred Stock, (G) 31,107 Shares issuable upon the exercise of warrants held for its account, and (H) 41,121 Shares issuable upon the conversion of 95.4 shares of Series F Preferred Stock. (iii) Mr. Soros may be deemed to be the beneficial owner of 48,031,602 Shares (approximately 82.9% of the total number of Shares outstanding assuming the exercise and conversion of all of the securities held for the accounts of QIP and SFM Domestic Investments). This number consists of (A) 46,510,226 Shares which may be deemed to be beneficially owned by QIP and described above, and (B) 1,521,376 Shares which may be deemed to be beneficially owned by SFM Domestic Investments as described above. Mr. Soros disclaims beneficial ownership of any securities not held directly for his account. Page 10 of 15 Pages (b) (i) Each of QIP, QIHMI, QIH Management and SFM LLC may be deemed to have sole power to direct the voting and disposition of the 46,510,226 Shares which may be deemed to be beneficially owned by QIP as described above. (ii) SFM Domestic Investments may be deemed to have the sole power to direct the voting and disposition of the 1,521,376 Shares which may be deemed to be beneficially owned by SFM Domestic Investments as described above. (iii) Mr. Soros (as a result of his position with SFM LLC and in his capacity as the sole managing member of SFM Domestic Investments) may be deemed to have the sole power to direct the voting and disposition of the 48,031,602 Shares which may be deemed to be beneficially owned by QIP and SFM Domestic Investments as described above. (c) Except for the transactions described in Item 6 below, which were effected in a privately negotiated transaction, there have been no transactions effected with respect to the Shares since April 29, 2005 (60 days prior to the date hereof) by any of the Reporting Persons. (d) (i) The shareholders of QIP, including Quantum Industrial Holdings Ltd., a British Virgin Islands international business company, have the right to participate in the receipt of dividends from, or proceeds from the sale of, the securities held for the account of QIP in accordance with their ownership interests in QIP. (ii) Certain members of SFM Domestic Investments have the right to participate in the receipt of dividends from, or proceeds from the sale of, the securities held for the account of SFM Domestic Investments. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer Preferred Stock and Warrant Purchase Agreement - ---------------------------------------------- On June 24, 2005, the Issuer entered into the Purchase Agreement (a copy of which is incorporated by reference hereto as Exhibit EEEE and is incorporated herein by reference in response to this Item 6). Pursuant to the terms of the Purchase Agreement, (i) QIP simultaneously sold to the New Investors shares of the Series D Preferred Stock for an aggregate purchase price of $2,904,600 and purchased from the Issuer 2,904.6 shares of Series F Preferred Stock for an aggregate purchase price of $2,904,600; and (ii) SFM Domestic Investments simultaneously sold to the New Investors shares of the Series D Preferred Stock for an aggregate purchase price of $95,400 and purchased from the Issuer 95.4 shares of Series F Preferred Stock for an aggregate purchase price of $95,400. In addition, the New Investors purchased from the Issuer shares of Series F Preferred Stock and warrants to purchase Shares (the "New Investor Warrants"). Subject to certain conditions and limitations, the Issuer has agreed to use its commercially reasonable efforts to cause the registration of Shares issuable upon conversion or exercise, as applicable, of the securities purchased under the Purchase Agreement as well as any Shares issued in lieu of any cash payments Page 11 of 15 Pages of any dividends on the Series F Preferred Stock and Series D Preferred Stock purchased under the Purchase Agreement. The Issuer has agreed to put forth proposals seeking stockholder approval of the anti-dilution adjustment provisions of the Series F Preferred Certificate of Designations at the Issuer's next annual meeting of Shareholders and to recommend that the stockholders of the Issuer vote in favor of the approval of such provisions. In addition, QIP and SFM Domestic Investments have agreed to vote all shares of the Issuer held by them in favor of the approval of such anti-dilution adjustment provisions. The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by the terms of such document which is incorporated herein by reference in response to this Item 6. Certificate of Powers, Designations, Preferences and Rights of Series F Preferred Stock - ----------------------------------------------------------------------- Pursuant to the terms of the Certificate of Powers, Designations, Preferences and Rights of Series F Convertible Preferred Stock (the "Series F Preferred Certificate of Designations") (a copy of which is incorporated by reference hereto as Exhibit FFFF and is incorporated herein by reference in response to this Item 6) filed by the Issuer with the Delaware Secretary of State on June 24, 2005, the shares of Series F Preferred Stock are entitled to cumulative dividends at a rate of 7% per annum, compounding annually. The dividends are payable only upon a conversion of the Series F Preferred Stock into Shares or a liquidation, dissolution or winding up of the Issuer. Series F Preferred Stockholders are entitled to a preference over any junior securities on liquidation, dissolution or winding up of the Issuer in an amount per share equal to the greater of (i) $1,000 plus any accrued but unpaid dividends on such share and (ii) the amount that the holder of such share would receive if it were to convert such share into a Share immediately prior to such liquidation, dissolution or winding up. Holders of Series F Preferred Stock are entitled to vote on all matters submitted to a vote of the Issuer's stockholders, voting as a single class with the holders of Shares, on an as-converted basis. Notwithstanding the foregoing, holders of Series F Preferred Stock are not entitled to vote with respect to the approval of the anti-dilution adjustment provisions of the Series F Preferred Certificate of Designations. Each share of Series F Preferred Stock is convertible, at the option of the holder thereof, into a number of fully paid and nonassessable Shares obtained by dividing (i) $1,000 by (ii) $2.32 (as adjusted, the "Series F Conversion Price"). The Series F Conversion Price may be adjusted pursuant to a weighted average formula upon the occurrence of certain events described in the Series F Preferred Certificate of Designations. In addition, upon the issuance by the Issuer of securities at a price per share (the "New Issue Price") less than $1.50, the Series F Conversion Price will be adjusted to equal the New Issue Price. Upon conversion, the accrued and unpaid dividends on each share of Series F Preferred Stock are paid, at the option of the Issuer, in cash or in Shares. The Issuer agreed not to take any action which results in the adjustment of the Series F Conversion Price if the total number of Shares issued and issuable after such action upon conversion of the Series F Preferred Stock would exceed the total number of Shares then authorized to be outstanding by the Issuer's Certificate of Incorporation. Page 12 of 15 Pages Each share of Series F Preferred Stock will automatically convert into Shares in the manner described in the immediately preceding paragraph upon (i) the date on which the last sale price of the Shares on NASDAQ or, if not quoted on NASDAQ, on any other national securities exchange has been at least two times the Series F Conversion Price for twenty consecutive trading days or (ii) the date on which an aggregate of 50% of the Issuer's Convertible Preferred Stock outstanding immediately preceding the filing of the Certificate of Designations has been converted to Shares. For the purposes of this description of the Series F Preferred Certificate of Designations, "Convertible Preferred Stock" means the Issuer's Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock, Series D Convertible Preferred Stock and Series E Convertible Preferred Stock. At any time and from time to time after the date on which an aggregate of 50% of the Issuer's Convertible Preferred Stock outstanding immediately preceding the filing of the Series F Preferred Certificate of Designations has been converted to Shares, the Issuer may redeem for cash all of the shares of Series F Preferred Stock at price per share of $1,000 plus any accrued an unpaid dividends on such share. The foregoing description of the Series F Preferred Certificate of Designations does not purport to be complete and is qualified in its entirety by the terms of the Series F Preferred Certificate of Designations, which is incorporated herein by reference in response to this Item 6. Waiver and Consent of the Holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Convertible Promissory Notes - ----------------------------------------------------------------------------- On June 24, 2005, QIP and SFM Domestic Investments, as the sole holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock executed the Waiver and Consent of the Holders of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock (the "Waiver and Consent") (a copy of which is incorporated by reference hereto as Exhibit GGGG and incorporated herein by reference in response to this Item 6). Pursuant to the Waiver and Consent, (i) the designation of the Series F Preferred Stock was approved in all respects; (ii) the issuance and sale of the shares of Series F Preferred Stock and the New Investor Warrants and the issuance of Shares upon conversion of the Series F Preferred Stock and/or the exercise of the New Investor Warrants were approved in all respects; (iii) the preemptive rights of the holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock were waived with respect to the issuance and sale of the Series F Preferred Stock and the New Investor Warrants and the issuance of Shares upon conversion of the Series F Preferred Stock and/or the exercise of the New Investor Warrants; and (iv) the Note Conversion Rights (as defined in the Waiver and Consent) were waived with respect to the issuance of the Series F Preferred Stock and the New Investor Warrants. The foregoing description of the Waiver and Consent does not purport to be complete and is qualified in its entirety by the terms of the Waiver and Consent, which is incorporated herein by reference in response to this Item 6. Page 13 of 15 Pages 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. Item 7. Material to be Filed as Exhibits The Exhibit Index is incorporated herein by reference. Page 14 of 15 Pages SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this Statement is true, complete and correct. Date: June 29, 2005 QUANTUM INDUSTRIAL PARTNERS LDC By: /s/ Jay Schoenfarber ------------------------------ Jay Schoenfarber Attorney-in-Fact QIH MANAGEMENT INVESTOR, L.P. By: QIH Management LLC, its General Partner By: Soros Fund Management LLC, its Managing Member By: /s/ Jay Schoenfarber ------------------------------ Jay Schoenfarber Assistant General Counsel QIH MANAGEMENT LLC By: Soros Fund Management LLC, its Managing Member By: /s/ Jay Schoenfarber ------------------------------ Jay Schoenfarber Assistant General Counsel SOROS FUND MANAGEMENT LLC By: /s/ Jay Schoenfarber ------------------------------ Jay Schoenfarber Assistant General Counsel SFM DOMESTIC INVESTMENTS LLC By: /s/ Jay Schoenfarber ------------------------------ Jay Schoenfarber Attorney-in-Fact GEORGE SOROS By: /s/ Jay Schoenfarber ------------------------------ Jay Schoenfarber Attorney-in-Fact Page 15 of 15 Pages EXHIBIT INDEX EEEE. Form of the Preferred Stock and Warrant Purchase Agreement, dated as of June 24, 2005, by and among Bluefly, Inc. and the other parties thereto. FFFF. Form of the Certificate of Powers, Designations, Preferences and Rights of Series F Convertible Preferred Stock of Bluefly, Inc. GGGG. Waiver and Consent of the Holders of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred Stock, Series D Convertible Preferred Stock, Series E Convertible Preferred Stock and Convertible Promissory Notes of Bluefly, Inc. HHHH. Power of Attorney, dated as of May 23, 2005, granted by Quantum Industrial Partners LDC in favor of Jodye Anzalotta, Armando Belly, Maryann Canfield, Gavin Murphy, Jay Schoenfarber, Robert Soros and Abbas F. Zuaiter. IIII. Power of Attorney, dated as of June 16, 2005, granted by Mr. George Soros in favor of Jodye Anzalotta, Armando Belly, Maryann Canfield, Jay Schoenfarber and Robert Soros. JJJJ. Power of Attorney, dated as of May 23, 2005, granted by SFM Domestic Investments LLC in favor of Jodye Anzalotta, Armando Belly, Maryann Canfield, Gavin Murphy, Jay Schoenfarber, Robert Soros and Abbas F. Zuaiter. EX-99 2 bluefly_exheeee.txt PURCHASE AGREEMENT PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT ---------------------------------------------- THIS PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT, dated as of June 24, 2005 (this "Agreement"), is entered into by and between BLUEFLY, INC., a Delaware corporation (the "Company"), Quantum Industrial Partners LDC ("QIP"), SFM Domestic Investments, LLC ("SFM," and, together with QIP, the "Soros Parties") and Investors listed on the signature page attached hereto (the "New Investors"). The New Investors and the Soros Parties are sometimes referred to collectively as the "Investors"). RECITALS -------- WHEREAS, the Investors desire to purchase from the Company, and the Company desires to issue and sell to the Investors, seven thousand (7,000) shares (the "Series F Shares") of the Company's newly-designated Series F Convertible Preferred Stock, par value $.01 per share (the "Series F Preferred Stock"), of the Company and warrants in the form attached hereto as Exhibit A (the "Warrants," and, together with the Series F Shares the "Newly Issued Securities"), exercisable to purchase up to an aggregate of 603,448 shares of the Company's Common Stock, $.01 par value (the "Common Stock") at an exercise price of $2.87 per share of Common Stock, on the terms and subject to the conditions contained herein; WHEREAS, simultaneously with the purchase and sale of the Newly Issued Securities, the New Investors desire to purchase from the Soros Parties, and the Soros Parties desire to sell to the New Investors, the number of shares of the Company's Series D Convertible Preferred Stock, par value $.01 per share (the "Series D Preferred Stock") set forth on Schedules 2A and 2B (collectively, the "Existing Preferred Shares"). AGREEMENT --------- NOW, THEREFORE, in consideration for the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: ARTICLE I PURCHASE AND SALE OF NEWLY ISSUED SECURITIES AND EXISTING PREFERRED SHARES -------------------------------------------------------------------------- SECTION 1.1 Purchase and Sale of Newly Issued Securities. Subject to the terms and conditions hereof, the Company hereby issues and sells to the Investors, and each Investor hereby purchases from the Company: (a) the number of Series F Shares set forth opposite such Investor's name in Schedule 1, for a purchase price of $1,000 per share ("Series F Subscription Amount"), resulting in an aggregate purchase price for all Shares sold pursuant to the terms hereof of 1 $7,000,000.00; and (b) the number of Warrants set forth opposite such Investor's name in Schedule 1, for a purchase price of $0.125 per Warrant (the "Warrant Subscription Amount," and, together with the Series F Subscription Amount, the "Subscription Amount"), resulting in an aggregate purchase price for all Warrants of $75,431. SECTION 1.2 Purchase and Sale of Existing Preferred Shares. Simultaneously with the purchase and sale of the Newly Issued Securities, the Soros Parties hereby sell, transfer and assign the Existing Preferred Shares to the New Investors for an aggregate purchase price of $3,000,000. The number of Existing Preferred Shares sold by each Soros Party, the face value and aggregate amount of accrued and unpaid dividends on such shares and the purchase price of such shares is set forth in Schedule 2A. The number of Existing Preferred Shares purchased by each New Investor, the face value and aggregate amount of accrued and unpaid dividends on such shares and the purchase price of such shares is set forth in Schedule 2B. SECTION 1.3 Closing. Upon the terms and subject to the conditions set forth herein, each Investor shall deliver to the Company via wire transfer immediately available funds equal to their Subscription Amount and the Company shall deliver to each Investor their respective Newly Issued Securities as determined pursuant to Section 1.1 and the other items set forth in Section 1.4 issuable at the closing. Upon satisfaction of the conditions set forth in Sections 1.4, the closing shall occur at the offices of the Escrow Agent, or such other location as the parties shall mutually agree. SECTION 1.4 Deliveries. a) On the closing date, the Company shall deliver or cause to be delivered to the Escrow Agent with respect to each Investor the following: (i) this Agreement duly executed by the Company; (ii) a legal opinion of Company Counsel, in the form agreed to by the parties; (iii) a certificate evidencing a number of shares of Series F Preferred Stock equal to such Investor's Series F Subscription Amount divided by 1,000, registered in the name of such Investor; (iv) a Warrant registered in the name of such Investor to purchase up to a number of shares of Common Stock set forth on Schedule 1, with an exercise price equal to $2.87, subject to adjustment therein; and (v) the Escrow Agreement duly executed by the Company. b) On the Closing Date, each Investor shall deliver or cause to be delivered to the Escrow Agent the following: (i) this Agreement duly executed by such Investor; 2 (ii) such Investor's Subscription Amount by wire transfer to the account of the Escrow Agent (provided that the Soros Parties Subscription Amount shall be paid as described below); (iii) the purchase price for such New Investor's Existing Preferred shares by wire transfer to the account of the Escrow Agent to be disbursed to the Company on behalf of the Soros Parties as payment in full of their Subscription Amount); (iv) the Escrow Agreement duly executed by such Investor (other than the Soros Parties, who are not parties to the Escrow Agreement). c) On the Closing Date, the Soros Parties shall deliver or cause to be delivered to the Escrow Agent the following: (i) a certificate evidencing a number of shares of Existing Preferred Shares as set forth on Schedule 2A. ARTICLE II REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY --------------------------------------------------------- The Company represents and warrants to, and agrees with, the Investors as follows: SECTION 2.1 Organization, etc. The Company and its Subsidiary (as defined in Section 2.4(b)) have each been duly formed, and are each validly existing as a corporation in good standing under the laws of the State of their respective States of incorporation, and are each qualified to do business as a foreign corporation in each jurisdiction in which the failure to be so qualified could reasonably be expected to have a material adverse effect on the assets, liabilities, condition (financial or other), business or results of operations of the Company and its Subsidiary taken as a whole (a "Material Adverse Effect"). The Company and its Subsidiary each have the requisite corporate power and authority to own, lease and operate their respective properties and to conduct their respective businesses as presently conducted. The Company has the requisite corporate power and authority to enter into, execute, deliver and perform all of its duties and obligations under this Agreement and to consummate the transactions contemplated hereby. SECTION 2.2 Authorization. The execution, delivery and performance of this Agreement and the issuance of the Newly Issued Securities and the shares of Common Stock (the "Conversion Shares") issuable upon exercise of the Warrants and/or conversion of the Series F Shares and the Existing Preferred Shares, and/or in lieu of any cash payments of any dividends on the Existing Preferred Shares and the Series F Shares (collectively, the "Convertible Securities") have been duly authorized by all necessary corporate action on the part of the Company. 3 SECTION 2.3 Validity; Enforceability. This Agreement has been duly executed and delivered by the Company, and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by, or subject to, any bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and subject to general principles of equity. SECTION 2.4 Capitalization. (a) As of the date hereof, the authorized capital stock of the Company consists of 92,000,000 shares of Common Stock and 25,000,000 shares of preferred stock, $0.01 par value per share, of which 500,000 shares have been designated Series A Convertible Preferred Stock, 9,000,000 shares have been designated Series B Convertible Preferred Stock, 3,500 shares have been designated Series C Convertible Preferred Stock, 7,150 shares have been designated Series D Convertible Preferred Stock, 1,000 shares have been designated Series E Convertible Preferred Stock and 7,000 shares have been designated Series F Convertible Preferred Stock. Without giving effect to the transactions contemplated by this Agreement, as of June 23, 2005, the issued and outstanding capital stock of the Company consisted of (i) approximately 15,667,740 shares of Common Stock, (ii) 460,000 shares of Series A Convertible Preferred Stock, (iii) 8,889,414 shares of Series B Convertible Preferred Stock, (iv) 1,000 shares of Series C Convertible Preferred Stock, (v) 7,136.548 shares of Series D Convertible Preferred Stock and (vi) 1,000 shares of Series E Convertible Preferred Stock. All such shares of the Company have been duly authorized and are fully paid and non-assessable. Except as set forth on Schedule 2.4 hereto or as otherwise contemplated by this Agreement, there are no outstanding options, warrants or other equity securities that are convertible into, or exercisable for, shares of the Company's capital stock. The face value and accrued and unpaid dividends on the Existing Preferred Stock are as set forth on Schedule 2. The face value of each share of Existing Preferred Stock is currently convertible into Common Stock at the rate of $0.76 per share of Common Stock. (b) The only Subsidiary of the Company is Clothesline Corporation. The Subsidiary has no operations or assets. The Company owns all of the issued and outstanding capital stock of its Subsidiary, free and clear of all liens and encumbrances. All of such shares of capital stock are duly authorized, validly issued, fully paid and non-assessable, and were issued in compliance with the registration and qualification requirements of all applicable federal, state and foreign securities laws. There are no options, warrants, conversion privileges, subscription or purchase rights or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued, unauthorized or treasury shares of capital stock or other securities of, or any proprietary interest in, the Company's Subsidiary, and there is no outstanding security of any kind convertible into or exchangeable for such shares or proprietary interest. "Subsidiary" means, with respect to the Company, a corporation or other entity of which more than 50% of the voting power of the outstanding voting equity securities or more than 50% of the outstanding economic equity interest are held, directly or indirectly, by the Company. SECTION 2.5 [INTENTIONALLY OMITTED] 4 SECTION 2.6 No Violation. The execution and delivery of this Agreement and the performance by the Company of the transactions contemplated hereby will not (i) conflict with or result in a breach of any provision of the articles of incorporation or by-laws of the Company or its Subsidiary, (ii) result in a default or breach of, or, except for the approval of the holders of the Company's Series A Convertible Preferred Stock, Series B Convertible Preferred Stock. Series C Convertible Preferred Stock, Series D Convertible Preferred Stock and Series E Convertible Preferred Stock, and the waiver by the holders of the Company's convertible notes of their conversion rights with respect to the transactions contemplated hereby (all of which have been obtained), require any consent, approval, authorization or permit of, or filing or notification to, any person, company or entity (including, without limitation, any stockholder or holder of the Company's equity securities) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, loan, factoring arrangement, license, agreement, lease or other instrument or obligation to which the Company or its Subsidiary is a party or by which the Company or its Subsidiary or any of their respective assets may be bound (collectively, "Agreements") or (iii) violate any law, judgment, order, writ, injunction, decree, statute, rule or regulation of any court, administrative agency, bureau, board, commission, office, authority, department or other governmental entity applicable to the Company or its Subsidiary, except, in the case of clause (ii) or (iii) above, any such event that could not reasonably be expected to have a Material Adverse Effect or materially impair the transactions contemplated hereby. The Company is in compliance, in all material respects, with the listing requirements of the Nasdaq SmallCap Market. No material default or breach by the Company or its Subsidiary exists under any material Agreement, other than any such default or breach that could not reasonably be expected to have a Material Adverse Effect. SECTION 2.7 Issuances of Securities. The Series F Shares, the Existing Preferred Shares and the Warrants have been validly issued, and, upon payment therefor, will be fully paid and non-assessable. Upon the exercise or conversion of the Convertible Securities in accordance with the terms thereof, the Conversion Shares will be validly issued, fully paid and non-assessable. The offering, issuance, sale and delivery of the Newly Issued Securities and the Existing Preferred Shares as contemplated by this Agreement are exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the "Securities Act"), are being made in compliance with all applicable federal and (except for any violation or non-compliance that could not reasonably be expected to have a Material Adverse Effect) state laws and regulations concerning the offer, issuance and sale of securities, and are not being issued in violation of any preemptive or other rights of any stockholder of the Company. The parties hereto agree and acknowledge that, in making the representations and warranties in the foregoing sentence of this Section 2.7, the Company is relying on the representations and warranties made by the Investors in Section 3.4. SECTION 2.8 Absence of Certain Developments. Since March 31, 2005, there has not been any: (i) material adverse change in the condition, financial or otherwise, of the Company and its Subsidiary (taken as a whole) or in the assets, liabilities, properties or business of the Company and its Subsidiary (taken as a whole); (ii) declaration, setting aside or payment of any dividend or 5 other distribution with respect to, or any direct or indirect redemption or acquisition of, any capital stock of the Company; (iii) waiver of any valuable right of the Company or its Subsidiary or cancellation of any material debt or claim held by the Company or its Subsidiary; (iv) material loss, destruction or damage to any property of the Company or its Subsidiary, whether or not insured; (v) acquisition or disposition of any material assets (or any contract or arrangement therefor) or any other material transaction by the Company or its Subsidiary otherwise than for fair value in the ordinary course of business consistent with past practice; or (vi) other agreement or understanding, whether in writing or otherwise, for the Company or its Subsidiary to take any action of the type specified in clauses (i) through (v). SECTION 2.9 Commission Filings. The Company has filed all required forms, reports and other documents with the Securities and Exchange Commission (the "Commission") for periods from and after January 1, 2003 (collectively, the "Commission Filings"), each of which has complied in all material respects with all applicable requirements of the Securities Act and/or the Exchange Act (as applicable). All of the Commission Filings, including the Company's Annual Report on Form 10-K for the year ended December 31, 2004 and the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005 are available through the Commission's Web site. As of their respective dates, the Commission Filings did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. The audited financial statements and unaudited interim financial statements of the Company included or incorporated by reference in such Commission Filings have been prepared in accordance with GAAP (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Form 10-Q), complied as of their respective dates in all material respects with applicable accounting requirements and the published rules and regulations of the Commission with respect thereto, and fairly present, in all material respects, the financial position of the Company as of the dates thereof and the results of operations for the periods then ended (subject, in the case of any unaudited interim financial statements, to the absence of footnotes required by GAAP and normal year-end adjustments). The Company has complied, in all material respects, with the provisions of the Sarbanes-Oxley act of 2002. SECTION 2.10 Brokers. Except for HPC Capital Management, Inc. ("HPC"), neither the Company, nor any of its officers, directors or employees, has employed any broker or finder, or (except for the finders fee due to HPC from the Company, for which the Company will be solely responsible) incurred any liability for any brokerage fees, commissions, finder's or other similar fees or expenses in connection with the transactions contemplated hereby. SECTION 2.11 Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) filings required pursuant to Section 6.3, (ii) the filing with the Commission of the Registration Statement and a proxy statement with respect to the Shareholders 6 Meeting, (iii) the filing of the Series F Certificate of Designations with the Secretary of State of the State of Delaware and (iv) the notice and/or application(s) to the Nasdaq Stock Market and the Boston Stock Exchange for the issuance and sale of the Newly Issued Securities and the listing of the Conversion Shares for trading thereon in the time and manner required thereby (collectively, the "Required Approvals"). SECTION 2.12 Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an "Action") which (i) adversely affects or challenges the legality, validity or enforceability of any of this Agreement, the Escrow Agreement, the Series F Certificate of Designations and the other documents delivered in connection herewith (collectively, the "Transaction Documents") or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor, to the Company's knowledge, any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty that could reasonably be expected to have a Material Adverse Effect. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act. SECTION 2.13 Compliance. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business except in each case as could not have a Material Adverse Effect. SECTION 2.14 Registration Rights. Other than each of the Investors, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company. SECTION 2.15 Listing and Maintenance Requirements. The Company's Common Stock is registered pursuant to Section 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the 7 Commission is contemplating terminating such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements in all material respects. SECTION 2.16 Acknowledgment Regarding Investors' Purchase of Securities. The Company acknowledges and agrees that each of the Investors is acting solely in the capacity of an arm's length Investor with respect to the Transaction Documents and the transactions contemplated hereby. The Company further acknowledges that no Investor is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by any Investor or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to the Investors' purchase of the Securities. The Company further represents to each Investor that the Company's decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives. ARTICLE III REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE INVESTORS ----------------------------------------------------------- Each Investor represents and warrants to, and agrees with, the Company and to each other, severally but not jointly, as follows: SECTION 3.1 Organization, etc. Such Investor has been duly formed and is validly existing and in good standing under the laws of its jurisdiction of organization. Such Investor has the requisite organizational power and authority to enter into, execute, deliver and perform all of its duties and obligations under this Agreement and to consummate the transactions contemplated hereby. SECTION 3.2 Authority. The execution, delivery and performance of this Agreement have been duly authorized by all necessary organizational or other action on the part of such Investor. SECTION 3.3 Validity; Enforceability. This Agreement has been duly executed and delivered by such Investor, and constitutes the legal, valid and binding obligation of such Investor, enforceable against such Investor in accordance with its terms, except as such enforceability may be limited by, or subject to, any bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and subject to general principles of equity. SECTION 3.4 Soros Ownership. Each of the Soros Parties, severally but not jointly, represents and warrants to the New Investors that it owns all of the Existing Preferred Stock to be sold by it to the New Investors pursuant to this Agreement free and clear of all liens and 8 encumbrances, and that the face value and accrued and unpaid dividends of its Existing Preferred Stock are as set forth on Schedule 2. SECTION 3.5 Investment Representations. (a) Such Investor acknowledges that the offer and sale of the Newly Issued Securities, the Existing Preferred Shares or the Conversion Shares (collectively, the "Securities") to such Investor have not been registered under the Securities Act, or the securities laws of any state or regulatory body and are being offered and sold in reliance upon exemptions from the registration requirements of the Securities Act and such laws and may not be transferred or resold without registration under such laws unless an exemption is available. The Securities, and any certificate for the Conversion Shares will be imprinted with a legend in substantially the following form: "THE OFFER AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS UNLESS, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND STATE SECURITIES LAWS IS AVAILABLE." (b) Such Investor is acquiring the Securities for investment and not with a view to the resale or distribution thereof and is acquiring such securities for its own account. Such Investor is purchasing the Securities in the ordinary course of business and, as of the date hereof, has no agreements or understandings, directly or indirectly, with any person to distribute the Securities. (c) Such Investor is an "accredited investor" (as that term is defined in Rule 501 of Regulation D promulgated under the Securities Act), is sophisticated in financial matters and is familiar with the business of the Company so that it is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. Such Investor has had the opportunity to investigate on its own, or together with its advisors, the Company's business, management and financial affairs and has had the opportunity to review the Company's operations and facilities and to ask questions and obtain whatever other information concerning the Company as such Investor has deemed relevant in making its investment decision. (d) Such Investor is in compliance with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001. To such Investor's knowledge, neither it, nor any of its principal owners, partners, members, directors 9 or officers is included on: (i) the Office of Foreign Assets Control list of foreign nations, organizations and individuals subject to economic and trade sanctions, based on U.S. foreign policy and national security goals; (ii) Executive Order 13224, which sets forth a list of individuals and groups with whom U.S. persons are prohibited from doing business because such persons have been identified as terrorists or persons who support terrorism or (iii) any other watch list issued by any governmental authority, including the Commission. (e) Such Investor has adequate funds immediately available to satisfy all of its obligations hereunder and shall immediately upon its execution of this Agreement wire in full the aggregate purchase price set forth on Schedule I opposite its name. (f) No representations or warranties have been made to such Investor by the Company or any director, officer, employee, agent or affiliate of the Company, other than the representations and warranties of the Company set forth herein, and the decision of such Investor to purchase the Shares and the Warrant is based on the information contained herein, the Commission Filings and such Investor's own independent investigation of the Company. SECTION 3.6 Governmental Consents. The execution and delivery by such Investor of this Agreement and the performance by such Investor of the transactions contemplated hereby, do not and will not require such Investor to effectuate or obtain any registration with, consent or approval of, or notice to any federal state or other governmental authority or regulatory body, except for (to the extent applicable) the filing with the Commission of a Schedule 13D, Form 3 and/or Form 4 under the Exchange Act with respect to the acquisition and/or sale by such Investor of the Securities. SECTION 3.7 No Violation. The execution and delivery of this Agreement and the performance by such Investor of the transactions contemplated hereby, will not (i) conflict with or result in a breach of any provision of the articles of incorporation, by-laws or similar organizational documents of such Investor or (ii) violate any law, judgment, order, writ, injunction, decree, statute, rule or regulation of any court, administrative agency, bureau, board, commission, office, authority, department or other governmental entity applicable to such Investor, except any such violation that could not reasonably be expected to materially impair the transactions contemplated hereby or have a Material Adverse Effect. SECTION 3.8 Brokers. Neither such Investor, nor any of its officers, directors or employees, has employed any broker or finder, or incurred any liability for any brokerage fees, commissions, finder's or other similar fees or expenses in connection with the transactions contemplated hereby. SECTION 3.9 Short Sales and Confidentiality Prior To The Date Hereof. Other than the transaction contemplated hereunder, such Investor has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Investor, executed any disposition, including Short Sales (but not including the location and/or reservation of borrowable shares of 10 Common Stock), in the securities of the Company during the period commencing from the time that such Investor first received a term sheet from the Company or any other Person setting forth the material terms of the transactions contemplated hereunder until the date hereof ("Discussion Time"). Notwithstanding the foregoing, in the case of a Investor that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Investor's assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Investor's assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement, such Investor has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). ARTICLE IV COVENANTS --------- SECTION 4.1 Registration Rights. (a) The Company shall use its commercially reasonable best efforts to: (i) prepare and file with the Commission a registration statement under the Securities Act (as the same may be amended or supplemented from time to time, the "Registration Statement") with respect to the offer and sale of the Conversion Shares (collectively, the "Registrable Securities") within forty-five (45) days of the date of hereof; and (ii) cause the Registration Statement to be declared effective by the Commission within ninety (90) days of the date hereof. Provided that no undisclosed Potential Material Event then exists, the Company shall cause the Registration Statement to be declared effective by the Commission within three business days of receiving notification from the Commission that it is willing to issue a declaration of effectiveness. The Company shall not file any registration statement under the Securities Act (other than a registration statement on Form S-8 relating to Common Stock underlying stock options or a registration statement on Form S-4 relating to securities issued in connection with a merger or acquisition) prior to the filing of the Registration Statement. The Company shall use commercially reasonable efforts to maintain the effectiveness of such Registration Statement until the earliest to occur of the following (the "Registration Termination Date"): (i) all of the Registrable Securities have been disposed of by the Investors pursuant to the Registration Statement; or (ii) (A) the Conversion Shares issuable upon conversion of the Series F Shares and Existing Preferred Shares can be resold pursuant to clause (k) of Rule 144, promulgated under the Securities Act, or any similar provisions then in effect ("Rule 144"), or can otherwise be resold pursuant to Rule 144 at any time regardless of the volume restrictions of clause (e) of Rule 144 and (B) the Conversion Shares issuable upon exercise of the Warrants (including pursuant to any cashless exercise provision included therein) can be resold pursuant to Rule 144 or are otherwise freely-tradable without registration. 11 (b) Each Investor will promptly furnish to the Company in writing all information reasonably requested by the Company for use in connection with the preparation of the Registration Statement and obtaining the effectiveness thereof. Each Investor, severally but not jointly, hereby represents and warrants that all such information furnished by it shall be true, accurate and complete. In addition, each Investor covenants and agrees that it will comply with all applicable securities laws when trading the Company's Common Stock. To the extent that any Investor breaches its representations, warranties or covenants under this Section 4.1(b), and such breach could reasonably be expected to cause a delay in, or adversely impact, the effectiveness of the Registration Statement, the Company shall, without penalty, be authorized to remove such Investor's Registrable Securities from inclusion in the Registration Statement. (c) If at any time or from time to time after the date of effectiveness of the Registration Statement, the Company notifies the Investors in writing of the existence of a Potential Material Event (as defined below), the Investors shall not offer or sell any of the Registrable Securities, or engage in any other transaction involving or relating to the Registrable Securities, from the time of the giving of notice with respect to a Potential Material Event until such Investor receives written notice from the Company that such Potential Material Event either has been disclosed to the public or no longer constitutes a Potential Material Event (such period of time hereinafter referred to as a "Blackout Period"). As used herein, "Potential Material Event" means any of the following: (i) the possession by the Company of material information not ripe for disclosure in a registration statement, which shall be evidenced by determinations in good faith by the Board of Directors of the Company that disclosure of such information in the registration statement would be detrimental to the business and affairs of the Company; or (ii) any material engagement or activity by the Company which would, in the good faith determination of the Board of Directors of the Company, be adversely affected by disclosure in a registration statement at such time, which determination shall be accompanied by a good faith determination by the Board of Directors of the Company that the registration statement would be materially misleading absent the inclusion of such information. No Blackout Period shall exceed ninety consecutive days, and there shall be no more than 120 days during any calendar year in which a Blackout Period is in effect. (d) All registration and filing fees, fees and expenses of compliance with securities laws, printing expenses and all independent certified public accountants fees and expenses of counsel to the Company and other persons retained by the Company will be borne by the Company. The Company shall have no obligation to pay any fees or expenses of brokers, underwriters, or (except as set forth in Section 6.2) counsel or others retained by any Investor in connection with the sale, or potential sale, of the Registrable Securities. (e) The Company agrees to indemnify, to the fullest extent permitted by law, each Investor and its officers, directors, partners, employees, advisors and agents against any and all Loss (as hereinafter defined) arising out of or based upon any untrue, or alleged untrue, statement of a material fact contained in the Registration Statement or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make 12 the statements therein not misleading, except (i) insofar as the same are caused by or contained in any information furnished by such Investor pursuant to Section 4.1(b) or (ii) insofar as the same are caused by a failure by such Investor to deliver an updated prospectus that has been filed with the Commission and made available to such Investor or its representatives for delivery to a purchaser. Each Investor, severally, but not jointly, agrees to indemnify, to the fullest extent permitted by law, the Company and its officers, directors, partners, employees, advisors and agents against any and all Loss arising out of or based upon any untrue, or alleged untrue statement of a material fact contained in the Registration Statement or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (i) insofar as the same are caused by or contained in any information furnished by such Investor pursuant to Section 4.1(b) or (ii) insofar as the same are caused by a failure by such Investor to deliver an updated prospectus that has been filed with the Commission and made available to such Investor or its representatives for delivery to a purchaser. Any indemnity obligation arising under this Section 4.1 shall be governed by the provisions of Section 5.2. Notwithstanding the foregoing, the liability of each Investor under this Section 4.1(e) shall not exceed the net proceeds received by it in connection with any sale of the Registrable Securities. (f) The Company shall furnish to each Investor such number of conformed copies of the Registration Statement and the prospectus included therein, in conformity with the requirements of the Securities Act, that such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities. In connection with any sale of Registrable Securities pursuant to the Registration Statement, in lieu of delivering physical certificates representing the Registrable Securities, if the Company's transfer agent is participating in the Depositary Trust Company ("DTC") Fast Automated Securities Transfer program, upon request of the applicable Investor, so long as the certificates therefore are not required to bear a legend, the Company shall cause its transfer agent to electronically transmit the Registrable Securities by crediting the account of such Investor's prime broker with DTC through its Deposit Withdrawal Agent Commission system within three (3) business days of such request. SECTION 4.2 Conversion of Existing Preferred Shares. The New Investors hereby covenant and agree that the Existing Preferred Shares purchased by them pursuant to this Agreement shall automatically be converted into Common Stock in accordance with their terms upon the occurrence of an Automatic Conversion Event (as such term is defined in the Company's Certificate of Powers, Designations, Preferences and Rights of Series F Convertible Preferred Stock (the "Series F Certificate of Designations")). The provisions of this Section 4.2 shall be deemed the New Investors' and their assigns' irrevocable notice of its election to convert the Existing Preferred Shares, effective immediately upon the occurrence of an Automatic Conversion Event, in accordance with Section 6 of the Series F Certificate of Designations. For purposes of clarification, the provisions of this Section 4.2 shall require the automatic conversion by the New Investors and their assigns' Existing Preferred Shares even if the Series F Convertible Preferred Stock is not 13 automatically converted into Common Stock upon the occurrence of an Automatic Conversion Event as a result of the provisions of Section 6.2(ii) of the Series F Certificate of Designations. SECTION 4.3 Stockholder Approval of Series F Anti-Dilution Adjustment Provisions. The Company hereby covenants and agrees to include the approval of the Series F Anti-Dilution Adjustment Provisions (as defined in the Series F Certificate of Designations) as an item to be voted upon at the next annual meeting (the "Shareholders Meeting") of its shareholders (provided that Series F Shares remain outstanding at such time), and to recommend that the shareholders of the Company vote in favor of the approval of such provisions. The Soros Parties hereby covenant and agree to vote all shares of the Company held by them in favor of the approval of the Series F Anti-Dilution Provisions at the Shareholders Meeting. In accordance with the terms of the Series F Certificate of Designations, the Series F Anti-dilution Adjustment Provisions will not be operative until such shareholder approval is obtained. SECTION 4.4 Payment of Dividends on Existing Preferred Stock. The Company hereby covenants and agrees with the New Investors that all currently accrued and unpaid dividends on the Existing Preferred Stock will be paid in shares of Common Stock in accordance with the terms of the Certificate of Powers, Designations, Preferences and Rights of Series D Convertible Preferred Stock of the Company so long as at the time of issuance such shares of Common Stock may be resold pursuant to an effective registration statement. If no such registration statement is effective then all accrued and unpaid dividends on the Existing Preferred shall be paid in cash, or restricted stock at the option of the holder, if noted in the conversion notice. The provisions of this Section 4.4 shall be deemed the Company's irrevocable election to pay such dividends in shares of Common Stock, rather than cash, subject to the foregoing. ARTICLE V SURVIVAL; INDEMNIFICATION ------------------------- SECTION 5.1 Survival. The representations and warranties contained in Articles II and III hereof shall survive until the first anniversary of the date hereof. (a) Indemnification. Each party (including its officers, directors, employees, affiliates, agents, successors and assigns (each an "Indemnified Party")) shall be indemnified and held harmless by the other parties hereto (each an "Indemnifying Party") for any and all liabilities, losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including, without limitation, reasonable attorneys' fees and expenses) actually suffered or incurred by them (hereinafter a "Loss"), arising out of or resulting from the breach of any representation or warranty made by an Indemnifying Party contained in this Agreement. Notwithstanding anything to the contrary otherwise contained herein: (i) no party's obligations under this Article V shall include any obligation to compensate for punitive damages; (ii) the liability of any Investor under this Section 5.1 shall not exceed the proceeds received by such Investor in connection with any sale of the Securities; and (iii) the liability of the Company to any Investor under this Section 5.1 shall not exceed the purchase price of the Newly Issued Securities paid by such Investor. 14 SECTION 5.2 Indemnification Procedure. The obligations and liabilities of the Indemnifying Party under this Article V with respect to Losses arising from claims of any third party which are subject to the indemnification provided for in this Article V ("Third Party Claims") shall be governed by and contingent upon the following additional terms and conditions: if an Indemnified Party shall receive notice of any Third Party Claim, the Indemnified Party shall give the Indemnifying Party notice of such Third Party Claim promptly after the receipt by the Indemnified Party of such notice (which notice shall include the amount of the Loss, if known, and method of computation thereof, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises); provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article V except to the extent the Indemnifying Party is materially prejudiced by such failure and shall not relieve the Indemnifying Party from any other obligation or Liability that it may have to any Indemnified Party otherwise than under this Article V. Upon written notice to the Indemnified Party within five (5) days of the receipt of such notice, the Indemnifying Party shall be entitled to assume and control the defense of such Third Party Claim at its or his expense and through counsel of its or his choice (which counsel shall be reasonably satisfactory to the Indemnified Party); provided, however, that, if there exists or is reasonably likely to exist, in the reasonable opinion of counsel to the Indemnified Party a conflict of interest that would make it inappropriate in the reasonable judgment of the Indemnified Party for the same counsel to represent both the Indemnified Party and the Indemnifying Party, then the Indemnified Party shall be entitled to retain its or his own counsel in each jurisdiction for which the Indemnified Party reasonably determines counsel is required, at the expense of the Indemnifying Party. In the event the Indemnifying Party exercises the right to undertake any such defense against any such Third Party Claim as provided above, the Indemnified Party shall cooperate with the Indemnifying Party in such defense and make available to such Indemnifying Party, at the Indemnifying Party's expense, all witnesses, pertinent records, materials and information in the Indemnified Party's possession or under the Indemnified Party's control relating thereto as is reasonably required by the Indemnifying Party. Similarly, in the event the Indemnified Party is, directly or indirectly, conducting the defense against any such Third Party Claim, the Indemnifying Party shall cooperate with the Indemnified Party in such defense and make available to the Indemnified Party, at the Indemnifying Party's expense, all such witnesses (including himself), records, materials and information in the Indemnifying Party's possession or under the Indemnifying Party's control relating thereto as is reasonably required by the Indemnified Party. No such Third Party Claim may be settled by the Indemnifying Party or the Indemnified Party on behalf of the other without the prior written consent of the other (which consent shall not be unreasonably withheld); provided, however, in the event that the Indemnified Party does not consent to any such settlement that would provide it with a full release from indemnified Loss and would not require it to take, or refrain from taking, any action, the Indemnifying Party's liability for indemnification shall not exceed the amount of such proposed settlement. The Indemnified Party will refrain from any act or omission that is inconsistent with the position taken by the Indemnifying Party in the defense of a Third Party Claim unless the Indemnified Party determines that such act or omission is reasonably necessary to protect its own interest. 15 ARTICLE VI MISCELLANEOUS ------------- SECTION 6.1 Simultaneous Closing of Transactions. The consummation of the purchase and sale of the Newly Issued Securities and the Existing Preferred Shares shall be deemed to have occurred simultaneously, and no portion of such transactions shall be deemed completed until all such transactions have been consummated. SECTION 6.2 Expenses. The Company shall reimburse Palisades for up to $25,000 of reasonable legal expenses incurred in connection with the negotiation of this Agreement and the review of the Registration Statement, subject to the receipt of appropriate supporting documentation and the receipt of all amounts owed by the Investors hereunder. Except as provided above, all costs and expenses, including, without limitation, fees and disbursements of counsel, incurred in connection with the negotiation, execution and delivery of this Agreement and its related documents shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred. SECTION 6.3 Publicity. The Company shall, prior to 9:00 a.m., EST, on the first Business Day following the Closing, issue a press release announcing the consummation of the transactions contemplated hereby (which press release shall be subject to the reasonable approval of HPC and the Soros Parties) and shall, within four Business Days of the closing, file with the Commission a Current Report on Form 8-K regarding the same. Except as set forth above or as may be required by applicable law or the rules of any securities exchange or market on which securities of the Company are traded, no party hereto shall issue a press release or public announcement or otherwise make any disclosure concerning this Agreement and the transactions contemplated hereby, without prior approval of the others; provided, however, that nothing in this Agreement shall restrict the Company or any Investor from disclosing such information (a) that is already publicly available, (b) that may be required or appropriate in response to any summons or subpoena (provided that the disclosing party will use commercially reasonable efforts to notify the other parties in advance of such disclosure under this clause (b) so as to permit the non-disclosing parties to seek a protective order or otherwise contest such disclosure, and the disclosing party will use commercially reasonable efforts to cooperate, at the expense of the non-disclosing parties, in pursuing any such protective order) or (c) in connection with any litigation involving disputes as to the parties' respective rights and obligations hereunder. SECTION 6.4 Non-Public Information. The Company covenants and agrees that, except as otherwise contemplated by the Transaction Documents, neither it nor any other Person acting on its behalf will provide any New Investor or its agents or counsel with any information that the Company believes constitutes material non-public information, unless such New Investor shall have indicated that it desires to receive material non-public information and written agreement regarding the confidentiality and use of such information shall then be in effect. The Company understands and confirms that each New Investor shall be relying on the foregoing representations in effecting transactions in securities of the Company. 16 SECTION 6.5 Reservation and Listing of Securities. (a) The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may be required to fulfill its obligations in full under the Transaction Documents (the "Required Minimum"). (b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors of the Company shall use commercially reasonable efforts to amend the Company's certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 90th day after such date. (c) The Company shall, if applicable: (i) in the time and manner required by the Trading Market, prepare and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing on the Trading Market as soon as possible thereafter, (iii) provide to the Investors evidence of such listing, and (iv) maintain the listing of such Common Stock on any date at least equal to the Required Minimum on such date on such Trading Market or another Trading Market. SECTION 6.6 Short Sales and Confidentiality After The Date Hereof. Each Investor severally and not jointly with the other Investors covenants that neither it nor any affiliates acting on its behalf or pursuant to any understanding with it will execute any short sales as defined in Rule 3b-3 of the Exchange Act ("Short Sales") during the period after such calendar day when the Investor was first contacted by anyone regarding an investment in the Company ("Discussion Time") and ending at the time that the transactions contemplated by this Agreement are first publicly announced as described in Section 6.3. Each Investor, severally and not jointly with the other Investors, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company as described in Section 6.3, such Investor will maintain, the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Each Investor understands and acknowledges, severally and not jointly with any other Investor, that the Commission currently takes the position that coverage of short sales of shares of the Common Stock "against the box" prior to the Effective Date of the Registration Statement with the Securities is a violation of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under Section A, of the Manual of Publicly Available Telephone Interpretations, dated July 1997, compiled by the Office of Chief Counsel, Division of Corporation Finance. Notwithstanding the foregoing, no Investor makes any representation, warranty or covenant hereby that it will not engage in Short Sales in the securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced as described in Section 6.3, provided that all such transactions will comply with all applicable securities laws. 17 Notwithstanding the foregoing, in the case of a Investor that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Investor's assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Investor's assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. SECTION 6.7 Entire Agreement. This Agreement and any other agreement or instrument to be delivered expressly pursuant to the terms hereof constitute the entire Agreement between the parties hereto with respect to the subject matter hereof and supersede all previous negotiations, commitments and writings with respect to such subject matter. SECTION 6.8 Assignments; Parties in Interest. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by any of the parties hereto without the prior written consent of the other parties; provided, that: (a) the Securities may be transferred (i) pursuant to the Registration Statement or (ii) in accordance with the legend set forth in Section 3.4(a); and (b) in connection with any transfer of Securities (the "Transferred Securities") by Palisades permitted by clause (a)(ii), the Registration Rights contained in Section 4.1, and the obligation to convert the Existing Preferred Shares contained in Section 4.2, shall be deemed to have automatically been transferred to, and assumed by, the transferee with respect to the Transferred Securities, and the transferee shall be required to execute documentation agreeing to the transfer and assumption of such rights and obligations. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing herein, express or implied, is intended to or shall confer upon any person not a party hereto any right, benefit or remedy of any nature whatsoever under or by reason hereof, except as otherwise provided herein. SECTION 6.9 Amendments. This Agreement may not be amended or modified except by an instrument in writing signed by, or on behalf of, the parties against whom such amendment or modification is sought to be enforced. SECTION 6.10 Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience of reference only and do not constitute a part of and shall not be utilized in interpreting this Agreement. SECTION 6.11 Notices and Addresses. Any notice, demand, request, waiver, or other communication under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service, if personally served or sent by facsimile; on the business day after notice is delivered to a courier or mailed by express mail, if sent by courier delivery service or express mail for next day delivery; and on the fifth business day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered, return receipt requested, postage prepaid and addressed as follows: To Company: Bluefly, Inc. 18 42 West 39th Street, 9th Floor New York, New York 10018 Fax: (212) 354-3400 Attn: Chief Financial Officer and General Counsel With a copy to: Dechert LLP 30 Rockefeller Plaza New York, New York 10112 Fax: (212) 698-3599 Attn: Richard A. Goldberg, Esq. To the Investors: To the addresses set forth on Schedule 1. SECTION 6.12 Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. SECTION 6.13 Governing Law; Choice of Forum. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to conflicts of law principles. Each of the parties hereto hereby irrevocably and unconditionally submits to the exclusive jurisdiction of any court of the State of New York or any federal court sitting in the City of New York for purposes of any suit, action or other proceeding arising out of this Agreement (and agrees not to commence any action, suit or proceedings relating hereto except in such courts). Each of the parties hereto agrees that service of any process, summons, notice or document by U.S. registered mail at its address set forth herein shall be effective service of process for any action, suit or proceeding brought against it in any such court. Each of the parties hereto hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, which is brought by or against it, in the courts of the State of New York or any federal court sitting in the State of New York and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. SECTION 6.14 Counterparts; Facsimile Signatures. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and 19 delivered to the other party, it being understood that all parties need not sign the same counterpart. This Agreement may be executed by facsimile, and a facsimile signature shall have the same force and effect as an original signature on this Agreement. SECTION 6.15 Independent Nature of Investors' Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. Each Investor has been represented by its own separate legal counsel in their review and negotiation of the Transaction Documents. The Company has elected to provide all Investors with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by the Investors. SECTION 6.16 Specific Performance. Each of the parties hereto, in addition to being entitled to exercise all of its rights hereunder, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. Each party agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. [Signature page follows] 20 IN WITNESS WHEREOF, this Agreement has been duly executed on the date first set forth above. BLUEFLY, INC. By: ____________________________________ Name: Jonathan P. Freedman Title: Vice President and General Counsel QUANTUM INDUSTRIAL PARTNERS LDC By: ____________________________________ Name: Title: SFM DOMESTIC INVESTMENTS LLC By: ____________________________________ Name: Title: PEF ADVISORS LTD By: ____________________________________ Name: Title: PALISADES MASTER FUND LP By: Discovery Management Ltd. By: ____________________________________ Name: Title: 21 JGB CAPITAL L.P. By: ____________________________________ Name: Title: CRESCENT INTERNATIONAL, LTD. By: ____________________________________ Name: Title: SRG CAPITAL, LLC By: ____________________________________ Name: Title: BRISTOL INVESTMENT FUND, LTD. By: ____________________________________ Name: Title: PORTSIDE GROWTH AND OPPORTUNITY FUND By: ____________________________________ Name: Title: 22 EX-99 3 bluefly_exhffff.txt CERTIFICATE CERTIFICATE OF POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES F CONVERTIBLE PREFERRED STOCK OF BLUEFLY, INC. BLUEFLY, INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation" or the "Company"), DOES HEREBY CERTIFY THAT: Pursuant to authority conferred upon the Board of Directors of the Corporation (the "Board") by the Certificate of Incorporation of the Corporation (the "Certificate of Incorporation"), and pursuant to the provisions of ss. 151 of the Delaware General Corporation Law (the "DGCL"), the Board, at a meeting held on June 14, 2005, duly adopted the following resolution providing for the voting powers, designations, preferences and rights, and the qualifications, limitations and restrictions, of the Series F Convertible Preferred Stock. WHEREAS, the Certificate of Incorporation provides for two classes of shares known as common stock, $0.01 par value per share (the "Common Stock"), and preferred stock, $.01 par value per share (the "Preferred Stock"); and WHEREAS, the Board is authorized by the Certificate of Incorporation to provide for the issuance of the shares of Preferred Stock in one or more series, and by filing a certificate pursuant to the DGCL, to establish from time to time the number of shares to be included in any such series and to fix the voting powers, designations, preferences and rights of the shares of any such series, and the qualifications, limitations and restrictions thereof. NOW, THEREFORE, BE IT RESOLVED, that the Board deems it advisable to, and hereby does, designate a Series F Convertible Preferred Stock and fixes and determines the voting powers, designations, preferences and rights, and the qualifications, limitations and restrictions relating to the Series F Convertible Preferred Stock as follows: 1. Designation/Ranking. There shall hereby be created and established a series of Preferred Stock, and the shares of such series of Preferred Stock shall be designated "Series F Convertible Preferred Stock" (referred to herein as the "Series F Convertible Preferred Stock"). The Series F Convertible Preferred Stock shall rank pari passu with the Corporation's Series A Convertible Preferred Stock, $.01 par value per share (the "Series A Convertible Preferred Stock"), the Corporation's Series B Convertible Preferred Stock, $.01 par value per share (the "Series B Convertible Preferred Stock"), the Corporation's Series C Convertible Preferred Stock, $.01 par value per share (the "Series C Convertible Preferred Stock"), the Corporation's Series D Convertible Preferred Stock, $.01 par value per share (the "Series D Convertible Preferred Stock"), and the Corporation's Series E Convertible Preferred Stock, $.01 par value per share (the "Series E Convertible Preferred Stock," and, together with the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock and the Series F Convertible Preferred Stock, the "Convertible Preferred Stock") and senior to the Corporation's Common Stock and all other Preferred Stock of the Corporation ranking junior to the Convertible Preferred Stock, with respect to the payment of distributions on liquidation, dissolution or winding up of the Corporation and with respect to the payment of dividends. 2. Authorized Number. The number of shares constituting the Series F Convertible Preferred Stock shall be Seven Thousand (7,000) shares. 3. Dividends. 3.1 The holders of the Series F Convertible Preferred Stock shall be entitled to receive, out of funds legally available for such purpose, dividends which shall accrue at the rate of seven percent (7%) per annum of the Series F Face Value (as defined in Section 4.1 hereof) of such stock and shall compound annually, payable only upon: (i) the conversion of the Series F Convertible Preferred Stock pursuant to Section 6 hereof; or (ii) Liquidation (as defined in Section 4.1 hereof) of the Corporation under Section 4 hereof. Except in connection with a Series F Liquidation Payment (as defined in Section 4.1 hereof) made under Section 4 hereof (which shall require payment in cash), the Corporation, in its sole discretion (as determined by a vote of the uninterested directors of the Corporation), may elect to pay such dividends in shares of Common Stock (provided that a registration statement with respect to the re-sale of such shares by such holder is then in effect), in which case such Common Stock dividends shall be equal to the number of shares of Common Stock obtained by dividing the cash value of such dividend by the Market Price (as hereinafter defined) of the Common Stock on the date that such dividend is paid. For all purposes hereof, the "Market Price" of the Common Stock on a given date shall mean the closing bid price of the Common Stock on Nasdaq (or whatever other quotation system or exchange the Common Stock may then principally be traded on) on the last trading day prior to such date. If on any such date the shares of Common Stock are not listed or admitted for trading on any national securities exchange or quoted by NASDAQ or a similar service, the Market Price for the Common Stock shall be the fair market value of the Common Stock on such date as determined in good faith by the Board of Directors of the Corporation. 3.2 Dividends on each share of Series F Convertible Preferred Stock shall be cumulative and shall accrue from the date of issuance of such share of Series F Convertible Preferred Stock. The date on which the Corporation initially issues any share of Series F Convertible Preferred Stock shall be its "Issue Date," regardless of the number of times transfer of such shares is made on the stock records maintained by or for the Corporation and regardless of the number of certificates that may be issued to evidence such share. 3.3 In addition to the right to receive dividends pursuant to Section 3.1 above, each holder of a share of Series F Convertible Preferred Stock shall have the right, at any time after the Issue Date, if the Board of Directors of the Corporation shall declare a dividend or make any other distribution (including, without limitation, in cash or other property or assets, but excluding any stock split effected as a stock dividend), to holders of shares of Common Stock, to receive, out of funds legally available therefor, a dividend or distribution in an amount equal to the amount of such dividend or distribution receivable by a holder of the number of shares of Common Stock into which such share of Series F Convertible Preferred Stock is convertible on the record date for such dividend or distribution. Any such amount shall be paid to the holders of shares of Series F Convertible Preferred Stock at the same time such dividend or distribution is made to the holders of Common Stock. 4. Liquidation 4.1 Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (a "Liquidation"), each holder shall be paid for each share of Series F Convertible Preferred Stock held by it, before any distribution or payment is made upon any stock ranking junior to the Series F Convertible Preferred Stock, an amount equal to the greater of: (i) $1,000 per share (the "Series F Face Value") plus, in the case of each share, an amount equal to all accrued but unpaid dividends thereon, through the date payment thereof is made and (ii) the amount that the holder of such share of Series F Convertible Preferred Stock would receive if it were to convert (without regard to any limitation or restriction on conversion and without actually requiring such share to be so converted) such share of Series F Convertible Preferred Stock into share(s) of Common Stock immediately prior to such Liquidation. The holders of Series F Convertible Preferred Stock shall not be entitled to any further payment. The amount payable pursuant to the first sentence of this Section 4.1 with respect to one share of Series F Convertible Preferred Stock is sometimes referred to as the "Series F Liquidation Payment" (and, together with the Series A Liquidation Payment (as defined in the Certificate of Incorporation), the Series B Liquidation Payment (as defined in the Certificate of Incorporation), any amounts payable upon a Liquidation with respect to one share of Series C Convertible Preferred Stock, any amounts payable upon a Liquidation with respect to one share of Series D Convertible Preferred Stock and any amounts payable upon a Liquidation with respect to one share of Series E Convertible Preferred Stock, the "Liquidation Payment"), and the amounts so payable with respect to all shares of Series F Convertible Preferred Stock are sometimes referred to as the "Series F Liquidation Payments" (and, together with the Series A Liquidation Payments (as defined in the Certificate of Incorporation), the Series B Liquidation Payments (as defined in the Certificate of Incorporation), the amounts so payable with respect to all shares of Series C Convertible Preferred Stock, the amounts so payable with respect to all shares of Series D Convertible Preferred Stock and the amounts so payable with respect to all shares of Series E Convertible Preferred Stock, the "Liquidation Payments"). 4.2 If upon such Liquidation, the assets to be distributed among the holders of Convertible Preferred Stock shall be insufficient to permit payment to the holders of Convertible Preferred Stock of the Liquidation Payments, then the entire assets of the Corporation to be so distributed shall be distributed ratably among the holders of Convertible Preferred Stock. Upon any such Liquidation after the holders of Convertible Preferred Stock shall have been paid in full the Liquidation Payments to which they shall be entitled, the remaining net assets of the Corporation may be distributed to the holders of securities ranking junior to the Convertible Preferred Stock. 4.3 Written notice of such Liquidation stating a payment date, the amount of the Series F Liquidation Payments and the place where said Series F Liquidation Payments shall be payable, shall be delivered in person, mailed by certified or registered mail, return receipt requested, or sent by telecopier or telex, not less than 10 days prior to the payment date stated therein, to the holders of record of Series F Convertible Preferred Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation. 4.4 The Series F Convertible Preferred Stock shall, with respect to distribution of assets and rights upon Liquidation, rank senior to each class or series of capital stock of the Corporation hereafter created which does not expressly provide that it ranks on parity with or is senior to the Series F Convertible Preferred Stock with respect to distribution of assets and rights upon the liquidation, dissolution or winding up of the Corporation. 5. Voting Rights. Holders of Series F Convertible Preferred Stock shall be entitled to notice of any stockholders' meeting. Except as otherwise required by law, at any annual or special meeting of the Corporation's stockholders, or in connection with any written consent in lieu of any such meeting, the holders of each outstanding share of Series F Convertible Preferred Stock shall be entitled to cast, in respect of such share, the number of votes equal to the number of full shares of Common Stock into which such share of Series F Convertible Preferred Stock is then convertible (calculated by rounding any fractional share up to the nearest whole number) on the date for determination of stockholders entitled to vote at the meeting. Notwithstanding the foregoing, holders of the Series F Convertible Preferred Stock shall not be entitled to cast, in respect of such shares, any votes with respect to the approval of the Series F Anti-Dilution Adjustment Provisions (as hereinafter defined). Except as set forth herein or otherwise required by law, the Series F Convertible Preferred Stock and the Common Stock shall vote together as a single class on each matter submitted to the stockholders (including, without limitation, any merger or sale of all or substantially all of the assets of the Company), and not by separate class or series. 6. Conversions. The holders of shares of Series F Convertible Preferred Stock shall have the following conversion rights. 6.1 Right to Convert. Subject to the terms and conditions of this Section 6.1, the holder of any share or shares of Series F Convertible Preferred Stock shall have the right, at its option at any time and from time to time, to convert any such shares (or fractions thereof) of Series F Convertible Preferred Stock (except that upon any Liquidation, the right of conversion shall terminate at the close of business on the business day immediately preceding the date fixed for payment of the amount distributable on the Series F Convertible Preferred Stock) into such number of fully paid and nonassessable shares of Common Stock as is obtained by (x) multiplying the number of shares of Series F Convertible Preferred Stock to be so converted by the Series F Face Value and (y) dividing the result by the Series F Conversion Price (as defined below) applicable to such share, determined as provided below, in effect on the date the certificate is surrendered for conversion; plus, at the Company's option (as determined by a vote of the disinterested directors of the Corporation), either a number of shares of Common Stock (valued at the then current Market Price), or an amount in cash, as the case may be, equal to any accrued but unpaid dividends on the shares of Series F Convertible Preferred Stock so converted. The initial Series F Conversion Price per share for shares of Series F Convertible Preferred Stock shall be $2.32 per share, as adjusted pursuant to the further provisions of this Section 6 (such price as last adjusted, being referred to as the "Series F Conversion Price"). Holders shall effect conversions by providing the Company with the form of conversion notice attached hereto as Annex A (a "Notice of Conversion"), along with a stock certificate representing the shares to be so converted. Each Notice of Conversion shall specify the number of shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned prior to the conversion at issue, the number of shares of Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date may not be prior to the date the Holder delivers such Notice of Conversion to the Company by facsimile (the "Conversion Date"). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Company is deemed delivered hereunder. The Company shall not effect any conversion of the Preferred Stock, and the Holder shall not have the right to convert any portion of the Preferred Stock to the extent that after giving effect to such conversion, the Holder (together with the Holder's affiliates), as set forth on the applicable Notice of Conversion, would beneficially own in excess of 4.99% of the number of shares of the Common Stock Outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion of the Preferred Stock with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted Series F Face Value of Preferred Stock beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including the Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act, it being acknowledged by Holder that the Company is not representing to Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and Holder is solely responsible for any schedules required to be filed in accordance therewith.. To the extent that the limitation contained in this Section applies, the determination of whether the Preferred Stock is convertible (in relation to other securities owned by the Holder together with any affiliates) and of which shares of Preferred Stock is convertible shall be in the sole discretion of such Holder, and the submission of a Notice of Conversion shall be deemed to be such Holder's determination of whether the shares of Preferred Stock may be converted (in relation to other securities owned by such Holder) and which shares of the Preferred Stock is convertible, in each case subject to such aggregate percentage limitations. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. For purposes of this Section, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in the most recent of the following: (A) the Company's most recent Form 10-Q or Form 10-K, as the case may be, (B) a more recent public announcement by the Company or (C) any other notice by the Company or the Company's transfer agent setting forth the number of shares of Common Stock Outstanding. Upon the written request of the Holder, the Company shall within two Business Days confirm in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the Preferred Stock, by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The provisions of this Section may be waived by the Holder upon, at the election of the Holder, not less than 61 days' prior notice to the Company, and the provisions of this Section shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). The foregoing provision shall only apply to the New Investors (as defined in the Purchase Agreement). 6.2 Automatic Conversion; Redemption at Company's Option. (i) Upon the occurrence of an Automatic Conversion Event (as hereinafter defined), except as provided in Section 6.2(ii) below), --------------- each outstanding share of Series F Convertible Preferred Stock shall automatically, with no further action required to be taken by the Corporation or the holder thereof, be converted into such number of fully paid and nonassessable shares of Common Stock as is obtained by (x) multiplying the number of shares of Series F Convertible Preferred Stock to be so converted by the Series F Face Value and (y) dividing the result by the Series F Conversion Price applicable to such share in effect on the date the certificate is surrendered for conversion; plus, at the Company's option (as determined by a vote of the disinterested ---- directors of the Corporation), either a number of shares of Common Stock (valued at the then current Market Price), or an amount in cash, as the case may be, equal to any accrued but unpaid dividends on the shares of Series F Convertible Preferred Stock so converted. The Company shall send each registered Holder written notice of an Automatic Conversion Event (other than an Automatic Conversion Event that does not result in the automatic conversion of the shares of Series F Convertible Preferred Stock due to the provisions of Section 6.2(ii) below) within two (2) business days of its occurrence. An "Automatic ---------------- ---------- Conversion Event" shall be deemed to have occurred upon the earlier of: (A) the date on which the last ----------------- sale price of the Common Stock on NASDAQ or, if not quoted on NASDAQ, on any other national securities exchange has been at least two times the Series F Conversion Price for twenty consecutive trading days (provided that a registration statement is then in effect with respect to the resale of the Common Stock to be delivered in connection with the conversion of the Series F Convertible Preferred Stock and the Existing Preferred Stock (as defined in the Purchase Agreement)); or (B) the date (the "Existing Preferred --------------------- Conversion Date") on which an aggregate of fifty percent (50%) of the Convertible Preferred Stock ---------------- outstanding immediately prior to the filing of this Certificate (measured by reference to the number of shares of Common Stock issuable upon the conversion of such Convertible Preferred Stock) has been converted to Common Stock. For purposes of this Certificate, the "Purchase Agreement" shall mean that certain ------------------- Preferred Stock and Warrant Purchase Agreement, dated as of the date hereof, by and among the Company and the initial holders of the Series F Convertible Preferred Stock. (ii) Notwithstanding Section 6.2(i), the shares of Series F Convertible Preferred Stock shall not automatically be converted into Common Stock upon the occurrence of the Existing Preferred Conversion Date if (A) the closing bid price of the Common Stock on the last trading day prior to such date was less than $1.23 or (B) a registration statement is not then in effect with respect to the resale of the Common Stock to be delivered in connection with the conversion of the Series F Convertible Preferred Stock and the Existing Preferred Stock. (iii)At any time and from time to time following the Existing Preferred Conversion Date, in the event that the Series F Convertible Preferred Stock has not automatically been converted into Common Stock as a result of the provisions of Section 6.2(ii), the Company shall have the right, at its option and on thirty days' prior written notice to each Holder, to redeem any and all shares of Series F Convertible Preferred Stock for cash at a price per share equal to the Series F Face Value of such share plus any accrued and unpaid dividends. 6.3 Issuance of Certificates; Time Conversion Effected. Within three Business Days after the delivery of a Notice of Conversion and the surrender of the certificate or certificates for the shares of Series F Convertible Preferred Stock to be converted as set forth above, the Corporation shall issue and deliver, or cause to be issued and delivered, to the holders, registered in such name or names as such holders may direct, a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such shares of Series F Convertible Preferred Stock. In lieu of delivering physical certificates pursuant to the foregoing, if the Company's transfer agent is participating in the Depositary Trust Company ("DTC") Fast Automated Securities Transfer program and the certificates therefore are not required to bear a legend, the Company shall cause its transfer agent to electronically transmit such shares of Common Stock by crediting the account of the Investor's prime broker with DTC through its Deposit Withdrawal Agent Commission system. 6.4 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of Series F Convertible Preferred Stock into Common Stock. If any fractional share of Common Stock would, except for the provisions of the first sentence of this Section 6.3, be delivered upon such conversion, the Corporation, in lieu of delivering such fractional share, shall round the number of shares to be delivered to the nearest whole number. 6.5 Anti-Dilution Adjustments. The Series F Conversion Price shall be subject to adjustment as follows if any of the events listed below occur after the Issue Date but, with respect to a share of Series F Convertible Preferred Stock, prior to the conversion of such share of Series F Convertible Preferred Stock into Common Stock. (i) In case the Corporation shall (x) pay a dividend or make a distribution on its Common Stock in shares of its Common Stock, (y) subdivide or reclassify its outstanding Common Stock into a greater number of shares, or (z) combine or reclassify its outstanding Common Stock into a smaller number of shares, the Series F Conversion Price in effect immediately prior to such event shall be adjusted so that the holder of any share of the Series F Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock which it would have owned or have been entitled to receive after the happening of such event had the share of such Series F Convertible Preferred Stock been converted immediately prior to the happening of such event. An adjustment made pursuant to this paragraph shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective on the effective date in the case of subdivision, combination or reclassification. If any dividend or distribution is not paid or made, the Series F Conversion Price then in effect shall be appropriately readjusted. (ii) In case the Corporation shall pay, issue or distribute to its holders of capital stock any shares of capital stock of the Corporation or evidences of indebtedness or cash or other assets (excluding (w) regular cash dividends payable out of earnings in the ordinary course and distributed ratably to the holders of Convertible Preferred Stock, (x) distributions paid from retained earnings of the Corporation and distributed ratably to the holders of Convertible Preferred Stock, (y) dividends or distributions referred to in clause (i) above and (z) dividends or distributions paid or made to holders of shares of ---------- Convertible Preferred Stock in the manner provided in Section 3 above) or rights, options or warrants to --------- subscribe for or purchase any of its securities then, in each such case, the Series F Conversion Price shall be adjusted so that it shall equal the price determined by multiplying the Series F Conversion Price in effect immediately prior to the date of the distribution by a fraction the numerator of which shall be the Series F Conversion Price less the then fair market value (as determined by the Board of Directors, whose determination, if made in good faith, shall be conclusive) of the portion of the capital stock, cash or assets or evidences of indebtedness so distributed, or of the subscription rights, options or warrants so distributed or of such convertible or exchangeable securities, with respect to one share of Common Stock, and the denominator of which shall be the Series F Conversion Price in effect immediately prior to the date of the distribution. Such adjustment shall be made whenever any such distribution is made, and shall become effective retroactive to the record date for the determination of stockholders entitled to receive such distribution. If any such distribution is not made or if any or all of such rights, options or warrants expire or terminate without having been exercised, the Series F Conversion Price then in effect shall be appropriately readjusted. (iii)Whenever the Series F Conversion Price is adjusted as herein provided or as provided in Section 6.6(a), the -------------- Corporation shall promptly file with the conversion agent (or, if there is no conversion agent, the secretary of the Corporation) an officer's certificate setting forth such Series F Conversion Price after the adjustment and setting forth a brief statement of the facts requiring the adjustment, which certificate shall be conclusive evidence of the correctness of the adjustment. Promptly after delivery of the certificate, the Corporation shall prepare a notice of the adjustment of such Series F Conversion Price setting forth such Series F Conversion Price and the date on which the adjustment becomes effective and shall mail the notice of such adjustment of the Series F Conversion Price (together with a copy of the officer's certificate setting forth the facts requiring such adjustment) to the holder of each share of the Series F Convertible Preferred Stock at such holder's last address as shown on the stock books of the Corporation. 6.6 Additional Adjustment. (a) In case the Corporation shall (i) sell or issue shares of its Common Stock, (ii) issue rights, options or warrants to subscribe for or purchase shares of Common Stock or (iii) issue or sell other rights for the purchase of shares of Common Stock or securities convertible into or exchangeable into shares of Common Stock (any such shares, rights, options, warrants or other securities issued in the case of one or more of the events described in the immediately preceding clauses (i), (ii) and (iii) (excluding those issuances referred to in Section 6.6(c) hereof) hereinafter referred to, collectively, the "Securities"), at a price per share (the "New Issue Price") less than the Series F Conversion Price, then in each such case the Series F Conversion Price in effect immediately prior to the issuance of such Securities shall be adjusted so that it shall equal the price determined by multiplying the Series F Conversion Price in effect immediately prior to the issuance of such Securities by a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the issuance of the Securities plus the number of shares of Common Stock which the aggregate consideration received for the issuance of the Securities would purchase at the Series F Conversion Price in effect immediately prior to the issuance of such Securities, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after the issuance of the Securities (after giving effect to the full exercise, conversion or exchange, as applicable, of such Securities). Notwithstanding the foregoing, in the event that the Corporation shall sell or issue any Securities at a New Issue Price less than $1.50, then, in each such case, the Series F Conversion Price in effect immediately prior to the issuance of such Securities shall be adjusted so that it shall equal the New Issue Price. The adjustment provided for in this Section 6.6(a) shall be made successively whenever any Securities are issued (provided, however, that no further adjustments in the Series F Conversion Price shall be made upon the subsequent exercise, conversion or exchange, as applicable of such Securities pursuant to the original terms of such Securities) and shall become effective immediately after such issuance. In determining whether any Securities entitle the holders of the Common Stock to subscribe for or purchase shares of Common Stock at less than the Series F Conversion Price, and in determining the New Issue Price of the shares of Common Stock so offered, there shall be taken into account any consideration received by the Corporation for such Securities, any consideration required to be paid upon the exercise, conversion or exchange, as applicable, of such Securities and the value of all such consideration (if other than cash) shall be determined in good faith by the Board of Directors of the Corporation. If any or all of such Securities are not so issued or expire or terminate without having been exercised, converted or exchanged, the Series F Conversion Price then in effect shall be appropriately readjusted to the Series F Conversion Price that would then be in effect had the adjustments made upon the issuance of such Securities been made upon the basis of only the number of shares of Common Stock delivered pursuant to Securities actually exercised, converted or exchanged. For purposes of this Section 6.6(a), the number of shares of Common Stock at any time outstanding shall not include shares held in treasury of the Corporation or by any subsidiary of the Corporation. (b) Notwithstanding anything herein to the contrary, Section 6.6(a) shall not be effective until such time as the Corporation's stockholders approve the provisions contained therein (the "Series F Anti-Dilution Adjustment Provisions") to the extent such approval ("Stockholder Approval") is required by the rules of the Nasdaq SmallCap Market or any other national securities exchange or quotation system upon which the Common Stock may be listed from time to time. To the extent that any Securities are, prior to the Corporation obtaining Stockholder Approval, issued at a New Issue Price that would, but for the foregoing sentence, result in an adjustment to the Series F Conversion Price: (i) the Series F Conversion Price shall be deemed immediately so adjusted upon the Corporation obtaining Stockholder Approval; and (ii) to the extent that any Holder converts any shares of Series Convertible Preferred Stock between the time of the issuance of such Securities and the time that Stockholder Approval is obtained, such Holder shall be entitled to receive, immediately upon the Corporation obtaining Stockholder Approval, an additional number of shares of Common Stock equal to the difference between the number of shares that such Holder would have received had the Series F Conversion Price been so adjusted as of the time of such conversion and the number of shares that such Holder actually received upon such conversion. (c) The provisions of Section 6.6(a) shall not apply at any time to: (a) the issuance of any equity securities issued at or above then fair market value pursuant to the Corporation's employee option or stock incentive plans approved by the Board of Directors of the Corporation; (b) any equity securities issued at then fair market value as consideration for services of non-employee third parties provided to the Corporation; and (c) the issuance of any equity securities pursuant to the exercise or conversion of convertible or other derivative securities outstanding as of the date hereof (provided no amendments to the terms of such conversion or exercise are made after the date hereof). 6.7 Reorganization, Recapitalization or Reclassification. If any merger, consolidation, capital reorganization, recapitalization or reclassification of the capital stock of the Corporation (other than a merger or consolidation of the Corporation in which the Corporation is the surviving corporation and which does not result in a reclassification or change in the outstanding shares of Common Stock), or a sale, lease or other transfer of all or substantially all of the assets of the Corporation, shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets (other than cash dividends payable out of earnings or surplus in the ordinary course of business) with respect to or in exchange for Common Stock, and the shares of Series F Convertible Preferred Stock are not otherwise to be converted or exchanged pursuant to the terms of such transaction, then, as a condition of such merger, reorganization, recapitalization, reclassification or sale, lawful and adequate provisions shall be made whereby each holder of a share or shares of Series F Convertible Preferred Stock shall thereupon have only the right to receive upon conversion of such share or shares of Series F Convertible Preferred Stock, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore receivable upon the conversion of such share or shares of Series F Convertible Preferred Stock (the "Pre-Merger Conversion Shares"), such shares of stock, securities or assets (including cash) as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of Pre-Merger Conversion Shares. 6.8 Other Notice. In case at any time: (i) the Corporation shall declare any dividend upon its Common Stock payable in cash or stock or make any other distribution to the holders of its Common Stock; (ii) the Corporation shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights; (iii) there shall be any capital reorganization or reclassification of the capital stock of the Corporation, or a consolidation or merger of the Corporation with or into another entity or entities, or a sale, lease, abandonment, transfer or other disposition of all or substantially all its assets; or (iv) there shall be a voluntary or involuntary dissolution or winding up of the Corporation; then, in any one or more of said cases, the Corporation shall give, by delivery in person, certified or registered mail, return receipt requested or telecopier, addressed to each holder of any shares of Series F Convertible Preferred Stock at the address of such holder as shown on the books of the Corporation, (i) at least 10 days' prior written notice of the date on which the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, disposition, dissolution or winding up and (ii) in the case of any such reorganization, reclassification, consolidation, merger, disposition, dissolution or winding up, at least 10 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto and such notice in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, disposition, dissolution or winding up, as the case may be. 6.9 Stock to be Reserved. The Corporation covenants that all shares of Common Stock that shall be so issued shall be duly authorized, validly issued, fully paid and nonassessable by the Corporation and free from all taxes, liens and charges with respect to the issue thereof, and, without limiting the generality of the foregoing, the Corporation covenants that it will from time to time take all such action as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the Series F Conversion Price in effect at the time. The Corporation will take all such action as may be necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirement of any national securities exchange or quotation system upon which the Common Stock may be listed. The Corporation will not take any action that results in any adjustment of the Series F Conversion Price if the total number of shares of Common Stock issued and issuable after such action upon conversion of the Series F Convertible Preferred Stock would exceed the total number of shares of Common Stock then authorized by the Certificate of Incorporation. 6.10 Reissuance of Preferred Stock. Shares of Series F Convertible Preferred Stock that have been issued and reacquired in any manner, including shares purchased or redeemed or exchanged or converted, shall not be reissued as shares of Series F Convertible Preferred Stock and shall (upon compliance with any applicable provisions of the General Corporation Law of the State of Delaware) have the status of authorized but unissued shares of Preferred Stock of the Corporation undesignated as to series and may be designated or redesignated and issued or reissued, as the case may be, as part of any series of Preferred Stock of the Corporation other than Series F Convertible Preferred Stock. 6.11 Issue Tax. The issuance of certificates for shares of Common Stock upon conversion of Series F Convertible Preferred Stock shall be made without charge to the holders thereof for any issuance tax in respect thereof, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of the Series F Convertible Preferred Stock which is being converted. 6.12 Closing of Books. The Corporation will at no time close its transfer books against the transfer of any Series F Convertible Preferred Stock or of any shares of Common Stock issued or issuable upon the conversion of any shares of Series F Convertible Preferred Stock in any manner that interferes with the timely conversion of such Series F Convertible Preferred Stock, except as may otherwise be required to comply with applicable laws. 6.13 Minimum Adjustment. No reduction of the Series F Conversion Price shall be made if the amount of any such reduction would be an amount less than $.025, but any such amount shall be carried forward and reduction with respect thereof shall be made at the time of and together with any subsequent reduction which, together with such amount and any other amount or amounts so carried forward, shall aggregate $.025 or more. 7. Adjustment of Face Value. In case the Corporation shall subdivide or reclassify its outstanding Series F Convertible Preferred Stock into a greater number of shares or combine or reclassify its outstanding Series F Convertible Preferred Stock into a smaller number of shares, the Series F Face Value in effect immediately prior to such event shall be adjusted to reflect such increase or decrease. An adjustment made pursuant to this Section 7 shall become effective on the effective date of subdivision, combination or reclassification. [Remainder of page intentionally left blank.] IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designations this 23rd day of June, 2005. BLUEFLY, INC. By:/s/ Melissa Payner-Gregor -------------------------------- Name: Melissa Payner-Gregor Title: Chief Executive Officer and President EX-99 4 bluefly_exhgggg.txt WAIVER AND CONSENT WAIVER AND CONSENT OF THE HOLDERS OF SERIES A CONVERTIBLE PREFERRED STOCK, SERIES B CONVERTIBLE PREFERRED STOCK, SERIES C CONVERTIBLE PREFERRED STOCK, SERIES D CONVERTIBLE PREFERRED STOCK, SERIES E CONVERTIBLE PREFERRED STOCK AND CONVERTIBLE PROMISSORY NOTES OF BLUEFLY, INC. The undersigned, constituting the holders of all of the issued and outstanding shares of the Series A Convertible Preferred Stock (the "Series A Preferred Stock"), the Series B Convertible Preferred Stock (the "Series B Preferred Stock"), the Series C Convertible Preferred Stock (the "Series C Preferred Stock"), the Series D Convertible Preferred Stock (the "Series D Preferred Stock") and the Series E Convertible Preferred Stock (the "Series E Preferred Stock"), and all of the convertible promissory notes of the Company dated July 16, 2003 and October 17, 2003 (collectively, the "Promissory Notes"), of Bluefly, Inc., a Delaware corporation (the "Corporation"), hereby covenant and agree as follows and adopt the following resolutions pursuant to Section 228 of the General Corporation Law of the State of Delaware in lieu of holding meetings of the holders of Series A Preferred Stock (the "Series A Preferred Stockholders"), the holders of Series B Preferred Stock (the "Series B Preferred Stockholders"), the holders of Series C Preferred Stock (the "Series C Preferred Stockholders"), the holders of the Series D Preferred Stock (the "Series D Preferred Stockholders") and the holders of the Series E Preferred Stock (the "Series E Preferred Stockholders"), and direct that this waiver and consent be filed with the minutes of the Corporation: WHEREAS, the Corporation desires to issue and sell to PEF Advisors, LLC, Quantum Industrial Partners LDC and SFM Domestic Investments LLC (collectively, the "Investors"), pursuant to a Preferred Stock and Warrant Purchase Agreement substantially in the form attached hereto as Exhibit A (the "Preferred Stock Purchase Agreement") for an aggregate purchase price of $7,000,000, an aggregate of 7,000 shares (the "Purchased Shares") of newly-designated Series F Convertible Preferred Stock, par value $0.01 per share (the "Series F Preferred Stock"), having the rights and preferences set forth in the Certificate of Designations of Series F Preferred Stock attached hereto as Exhibit B; WHEREAS, pursuant to the Preferred Stock Purchase Agreement, the Company will also sell to the Investors warrants (the "Warrants") to purchase shares of the Company's Common Stock, $.01 par value (the "Common Stock"). WHEREAS, Sections 5.5.1 and 5.6.1 of the Corporation's certificate of incorporation (the "Certificate of Incorporation") provide that, without the approval of the holders of a majority of each of the Series A Preferred Stock and Series B Preferred Stock, each voting separately as a class, the Corporation shall not, among other things, issue or sell securities of the Corporation; WHEREAS, Section 5.1 of the respective Certificates of Designations relating to each of the Series C Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock (collectively, the "Certificates of Designations") provide that, without the approval of the holders of a majority of each of the Series C Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock, each voting separately as a class, the Corporation shall not, among other things, issue or sell securities of the Corporation; WHEREAS, Section 5.11 of the Certificate of Incorporation provides certain preemptive rights to the Series A Preferred Stockholders and Series B Preferred Stockholders with respect to certain proposed issuances of securities of the Corporation; WHEREAS, Section 9 of each of the Certificates of Designations provides certain preemptive rights to the Series C Preferred Stockholders, Series D Preferred Stockholders and Series E Preferred Stockholders (as applicable) with respect to certain proposed issuances of securities of the Corporation; and WHEREAS, each of the Promissory Notes provides the holder thereof with the right to convert such note into Shares and Warrants in connection with the transactions contemplated by the Preferred Stock Purchase Agreement (the "Note Conversion Rights"). NOW, THEREFORE, BE IT: RESOLVED, that (1) the designation of the Series F Preferred Stock, (2) the issuance and sale to the Investors, pursuant to the Preferred Stock Purchase Agreement, of the Shares and the Warrants and (3) the issuance of shares of Common Stock upon the conversion of the Shares and/or exercise of the Warrants are each hereby approved in all respects; and it is further RESOLVED, that the preemptive rights granted to the Series A Preferred Stockholders and Series B Preferred Stockholders pursuant to Section 5.11 of the Certificate of Incorporation, and the preemptive rights granted to the Series C Preferred Stockholders, Series D Preferred Stockholders and Series E Preferred Stockholders pursuant to Section 9 of the applicable Certificate of Designations are hereby waived with respect to (1) the issuance and sale of the Shares and the Warrants to the Investors pursuant to the Preferred Stock Purchase Agreement and (2) the issuance of shares of Common Stock upon the conversion of the Shares and/or exercise of the Warrants; and it is further RESOLVED, that the Note Conversion Rights are hereby waived with respect to the issuance of the Shares and the Warrants; and it is further RESOLVED, that this waiver and consent may be executed in one or more counterparts, each of which shall be deemed an original and all of which, when taken together, shall be deemed one and the same instrument. IN WITNESS WHEREOF, the undersigned have caused this waiver and consent to be executed as of this 24th day of June, 2005. QUANTUM INDUSTRIAL PARTNERS LDC By: ____________________________ Name: Title: SFM DOMESTIC INVESTMENTS LLC By: ____________________________ Name: Title: EX-99 5 bluefly_exhhhhh.txt POWER OF ATTORNEY QUANTUM INDUSTRIAL PARTNERS LDC LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENT, that the undersigned QUANTUM INDUSTRIAL PARTNERS LDC (the "Company"), an exempted limited duration company organized and existing under the laws of the Cayman Islands, does, pursuant to duly adopted resolutions of its managing director dated as of the date hereof, hereby designate, constitute and appoint: JODYE ANZALOTTA of 888 Seventh Avenue, New York, New York 10106; ARMANDO BELLY of 888 Seventh Avenue, New York, New York 10106; MARYANN CANFIELD of 888 Seventh Avenue, New York, New York 10106; GAVIN MURPHY of 888 Seventh Avenue, New York, New York 10106; JAY SCHOENFARBER of 888 Seventh Avenue, New York, New York 10106; ROBERT SOROS of 888 Seventh Avenue, New York, New York 10106; ABBAS F. ZUAITER of 888 Seventh Avenue, New York, New York 10106; or any one of them, acting singly and not jointly, with power of substitution, as its true and lawful agents and attorneys-in-fact (each, an "Attorney-in-Fact"): (1) to open accounts of any kind or nature whatsoever at any institution of any kind or nature whatsoever in any jurisdiction or location (a "Financial Institution") and to sign related account opening documents for the Company; (2) to give instructions for the settlement of transactions relating to the acquisition, disposition and holding for the Company's account of: (a) any securities, debt obligations, commodities and currencies; (b) any puts, calls or other options, any contracts for forward or future delivery, and any other contracts of any kind relating to any of the foregoing; (c) any derivative instruments of any kind pertaining to, or providing investment exposure with respect to, any of the foregoing, whether relating to a specific security, debt instrument, commodity or currency, or relating to a basket or index comprised, or based in changes in the level of prices, rates or values, of any group or combination thereof; (d) any other instruments or contracts of a kind dealt in by security or commodity brokers or dealers, or other Financial Institutions; (e) any combination of any of the foregoing; in each case whether now existing or hereafter developed, and whether the transaction is effected on any securities or commodity exchange, board of trade or contract market or through any inter-dealer or other over-the-counter market in any jurisdiction or location (including, without limiting the generality of the foregoing, capital stock; shares or other units of mutual funds and investment companies; preorganization certificates and subscriptions; warrants; partnership interests or units; bonds, notes and debentures, whether subordinated, convertible or otherwise, and whether issued by a governmental or private issuer; commercial paper; certificates of deposit; bankers acceptances; trade acceptances; trust receipts; depository receipts; assignments of or participations in bank loans; trade credit claims; equity swaps, commodity swaps and interest rate swaps; equity index contracts; interest rate index contracts; repurchase agreements and reverse repurchase agreements; master agreements; and guaranties); (3) to give instructions or make arrangements for: (a) trading on margin; (b) effecting short sales; (c) entering into repurchase agreements; (d) otherwise obtaining credit or borrowing funds or any securities or other instruments or assets; and (e) providing collateral security in relation to any of the foregoing in connection with the acquisition, financing or re-financing, carrying or disposition of any of the items referred to in paragraph (2) above, and to cover, discharge or otherwise terminate any of the foregoing arrangements; (4) to give instructions for payments and deliveries in connection with any of the foregoing transactions; (5) to exercise all rights, powers and privileges appurtenant to the ownership, and any related financing, of any item held for the Company's account (including the right to vote or consent, and the right to lend any such item to any other person); (6) to execute and deliver, in the name of and on behalf of the Company, any investment management agreements and discretionary trading authorizations with investment advisers other than Soros Fund Management LLC and any and all such other agreements, deeds, instruments, receipts, certificates and other documents in connection therewith; and (8) to execute all such documents and to take all such other actions as any of them may consider necessary or advisable in connection with any of the foregoing. Each Attorney-in-Fact is hereby authorized and empowered to perform all other acts and deeds, which he or she in his or her sole discretion deems necessary or appropriate to carry out to the fullest extent the terms and the intent of the foregoing. All past acts of each Attorney-in-Fact in furtherance of the foregoing are hereby ratified and confirmed. Execution of this Limited Power of Attorney shall constitute a revocation of any and all previously executed limited powers of attorney of the Company appointing attorneys-in-fact to open accounts of any kind and nature whatsoever, sign opening documents and take all the actions set forth in this Limited Power of Attorney. This Power of Attorney shall expire on October 1, 2005. IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed effective as of this 23rd day of May 2005. QUANTUM INDUSTRIAL PARTNERS LDC By: Curacao Corporation Company N.V. Managing Director By: /s/ Sharine M. J. Salsbach ---------------------------- Sharine M. J. Salsbach By: /s/ Gwendel C.G. Sint Jago ---------------------------- Gwendel C.G. Sint Jago EX-99 6 bluefly_exhiiii.txt POWER OF ATTORNEY POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENT, that I, GEORGE SOROS, hereby make, constitute and appoint each of ARMANDO T. BELLY, JODYE ANZALOTTA, MARYANN CANFIELD, JAY SCHOENFARBER and ROBERT SOROS. acting individually, as my agent and attorney-in-fact for the purpose of executing in my name, (a) in my personal capacity or (b) in my capacity as Chairman of, member of or in other capacities with Soros Fund Management LLC ("SFM LLC") and each of its affiliates or entities advised by me or SFM LLC, all documents, certificates, instruments, statements, filings and agreements ("documents") to be filed with or delivered to any foreign or domestic governmental or regulatory body or required or requested by any other person or entity pursuant to any legal or regulatory requirement relating to the acquisition, ownership, management or disposition of securities, futures contracts or other investments, and any other documents relating or ancillary thereto, including without limitation all documents relating to filings with the Commodity Futures Trading Commission and National Futures Association, the United States Securities and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934 (the "Act") and the rules and regulations promulgated thereunder, including all documents relating to the beneficial ownership of securities required to be filed with the SEC pursuant to Section 13(d) or Section 16(a) of the Act and any information statements on Form 13F required to be filed with the SEC pursuant to Section 13(f) of the Act. All past acts of these attorneys-in-fact in furtherance of the foregoing are hereby ratified and confirmed. Execution of this power of attorney revokes that certain Power of Attorney dated as of the 11th March 2005 with respect to the same matters addressed above. This power of attorney shall be valid from the date hereof until revoked by me. IN WITNESS WHEREOF, I have executed this instrument as of the 16th day of June 2005. /s/ Daniel Eule ------------------------------- Daniel Eule Attorney-in-Fact for George Soros EX-99 7 bluefly_exhjjjj.txt LIMITED POWER OF ATTORNEY SFM DOMESTIC INVESTMENTS LLC LIMITED POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENT, that the undersigned SFM DOMESTIC INVESTMENTS LLC (the "Company"), a limited liability company organized and existing under the laws of the State of Delaware, does, pursuant to duly adopted resolutions of its managing member dated as of the date hereof, hereby designate, constitute and appoint: JODYE ANZALOTTA of 888 Seventh Avenue, New York, New York 10106; ARMANDO BELLY of 888 Seventh Avenue, New York, New York 10106; MARYANN CANFIELD of 888 Seventh Avenue, New York, New York 10106; GAVIN MURPHY of 888 Seventh Avenue, New York, New York 10106; JAY SCHOENFARBER of 888 Seventh Avenue, New York, New York 10106; ROBERT SOROS of 888 Seventh Avenue, New York, New York 10106; ABBAS F. ZUAITER of 888 Seventh Avenue, New York, New York 10106; or any one of them, acting singly and not jointly, with power of substitution, as its true and lawful agents and attorneys-in-fact (each, an "Attorney-in-Fact"): (1) to open accounts of any kind or nature whatsoever at any institution of any kind or nature whatsoever in any jurisdiction or location (a "Financial Institution") and to sign related account opening documents for the Company; (2) to give instructions for the settlement of transactions relating to the acquisition, disposition and holding for the Company's account of: (a) any securities, debt obligations, commodities and currencies; (b) any puts, calls or other options, any contracts for forward or future delivery, and any other contracts of any kind relating to any of the foregoing; (c) any derivative instruments of any kind pertaining to, or providing investment exposure with respect to, any of the foregoing, whether relating to a specific security, debt instrument, commodity or currency, or relating to a basket or index comprised, or based in changes in the level of prices, rates or values, of any group or combination thereof; (d) any other instruments or contracts of a kind dealt in by security or commodity brokers or dealers, or other Financial Institutions; (e) any combination of any of the foregoing; in each case whether now existing or hereafter developed, and whether the transaction is effected on any securities or commodity exchange, board of trade or contract market or through any inter-dealer or other over-the-counter market in any jurisdiction or location (including, without limiting the generality of the foregoing, capital stock; shares or other units of mutual funds and investment companies; preorganization certificates and subscriptions; warrants; partnership interests or units; bonds, notes and debentures, whether subordinated, convertible or otherwise, and whether issued by a governmental or private issuer; commercial paper; certificates of deposit; bankers acceptances; trade acceptances; trust receipts; depository receipts; assignments of or participations in bank loans; trade credit claims; equity swaps, commodity swaps and interest rate swaps; equity index contracts; interest rate index contracts; repurchase agreements and reverse repurchase agreements; master agreements; and guaranties); (3) to give instructions or make arrangements for: (a) trading on margin; (b) effecting short sales; (c) entering into repurchase agreements; (d) otherwise obtaining credit or borrowing funds or any securities or other instruments or assets; and (e) providing collateral security in relation to any of the foregoing in connection with the acquisition, financing or re-financing, carrying or disposition of any of the items referred to in paragraph (2) above, and to cover, discharge or otherwise terminate any of the foregoing arrangements; (4) to give instructions for payments and deliveries in connection with any of the foregoing transactions; (5) to exercise all rights, powers and privileges appurtenant to the ownership, and any related financing, of any item held for the Company's account (including the right to vote or consent, and the right to lend any such item to any other person); (6) to execute and deliver, in the name of and on behalf of the Company, any investment management agreements and discretionary trading authorizations with investment advisers other than Soros Fund Management LLC and any and all such other agreements, deeds, instruments, receipts, certificates and other documents in connection therewith; (7) to authorize other agents to take any of the foregoing actions; and (8) to execute all such documents and to take all such other actions as any of them may consider necessary or advisable in connection with any of the foregoing. Each Attorney-in-Fact is hereby authorized and empowered to perform all other acts and deeds, which he or she in his or her sole discretion deems necessary or appropriate to carry out to the fullest extent the terms and the intent of the foregoing. All past acts of the each Attorney-in-Fact if furtherance of the foregoing are hereby ratified and confirmed. Execution of this Limited Power of Attorney shall constitute a revocation of any and all previously executed limited powers of attorney of the Company appointing attorneys-in-fact to open accounts of any kind and nature whatsoever, sign opening documents and take all the actions set forth in this Limited Power of Attorney. This Power of Attorney shall expire on October 1, 2005. IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed effective as of the 23rd day of May 2005. SFM DOMESTIC INVESTMENTS LLC By: /s/ Gavin Murphy -------------------------------- Gavin Murphy Manager -----END PRIVACY-ENHANCED MESSAGE-----