-----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, EsL8G6xpw2cNZ7lIBNStzamPkgCQX7vrl5im+BhFKDMcYCEoIqBYhP1G2Qihf2wh cTPFtNWnSkaV27GAlf9c7w== 0000947871-09-000819.txt : 20091224 0000947871-09-000819.hdr.sgml : 20091224 20091224122212 ACCESSION NUMBER: 0000947871-09-000819 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20091224 DATE AS OF CHANGE: 20091224 GROUP MEMBERS: LEE S. AINSLIE III GROUP MEMBERS: MAVERICK CAPITAL MANAGEMENT, LLC GROUP MEMBERS: MAVERICK CAPITAL, LTD. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BLUEFLY INC CENTRAL INDEX KEY: 0001030896 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 133612110 STATE OF INCORPORATION: DE FISCAL YEAR END: 0403 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-52401 FILM NUMBER: 091260031 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: MAVERICK CAPITAL LTD CENTRAL INDEX KEY: 0000934639 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: 18TH FLOOR CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 214.880.4050 MAIL ADDRESS: STREET 1: 300 CRESCENT COURT STREET 2: 18TH FLOOR CITY: DALLAS STATE: TX ZIP: 75201 SC 13D/A 1 ss80694_sc13da.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 4)* BLUEFLY, INC. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $0.01 par value per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 096227301 - -------------------------------------------------------------------------------- (CUSIP Number) Maverick Capital, Ltd. Attention: General Counsel 300 Crescent Court, 18th Floor Dallas, Texas 75201 (214) 880-4000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) December 21, 2009 - -------------------------------------------------------------------------------- (Date of Event Which Requires Filing of this Amendment) 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. 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(b) 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) SCHEDULE 13D - -------------------- --------------------- CUSIP No. 096227301 Page 2 of 9 Pages - -------------------- --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS Maverick Capital, Ltd. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) 75-2482446 - -------------------------------------------------------------------------------- 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 BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Texas - -------------------------------------------------------------------------------- | 7 | SOLE VOTING POWER | | | | 3,723,897 ---------------------------------------------------------- NUMBER OF | 8 | SHARED VOTING POWER SHARES | | BENEFICIALLY | | 0 OWNED BY ---------------------------------------------------------- EACH | 9 | SOLE DISPOSITIVE POWER REPORTING | | PERSON | | 3,723,897 WITH ---------------------------------------------------------- | 10 | SHARED DISPOSITIVE POWER | | | | 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,723,897 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.05% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) IA - -------------------------------------------------------------------------------- - -------------------- --------------------- CUSIP No. 096227301 Page 3 of 9 Pages - -------------------- --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS Maverick Capital Management, LLC I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) 75-2686461 - -------------------------------------------------------------------------------- 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 BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Texas - -------------------------------------------------------------------------------- | 7 | SOLE VOTING POWER | | | | 3,723,897 ---------------------------------------------------------- NUMBER OF | 8 | SHARED VOTING POWER SHARES | | BENEFICIALLY | | 0 OWNED BY ---------------------------------------------------------- EACH | 9 | SOLE DISPOSITIVE POWER REPORTING | | PERSON | | 3,723,897 WITH ---------------------------------------------------------- | 10 | SHARED DISPOSITIVE POWER | | | | 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,723,897 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.05% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) HC - -------------------------------------------------------------------------------- - -------------------- --------------------- CUSIP No. 096227301 Page 4 of 9 Pages - -------------------- --------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS Lee S. Ainslie III I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) - -------------------------------------------------------------------------------- 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 BOX 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 | | | | 3,723,897 ---------------------------------------------------------- NUMBER OF | 8 | SHARED VOTING POWER SHARES | | BENEFICIALLY | | 0 OWNED BY ---------------------------------------------------------- EACH | 9 | SOLE DISPOSITIVE POWER REPORTING | | PERSON | | 3,723,897 WITH ---------------------------------------------------------- | 10 | SHARED DISPOSITIVE POWER | | | | 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,723,897 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 20.05% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (See Instructions) IN - -------------------------------------------------------------------------------- CUSIP No. 096227301 Page 5 of 9 Pages Item 1. Security and Issuer. This Amendment No. 4 amends the Schedule 13D filed on June 15, 2006 and all amendments thereto (this "Amendment") and relates to the Common Stock, par value $0.01 per share (the "Shares"), of Bluefly, Inc. (the "Issuer"), a Delaware corporation with its principal executive offices located at 42 West 39th Street, New York, New York. Item 2. Identity and Background. (a) This Amendment is being filed on behalf of each of the following persons (collectively, the "Reporting Persons"): (i) Maverick Capital, Ltd. ("Maverick Capital"), a limited partnership organized under the laws of Texas; (ii) Maverick Capital Management, LLC ("Maverick"), a limited liability company organized under the laws of Texas; and (iii) Lee S. Ainslie III ("Mr. Ainslie"), a natural person. (b) - (c) The Reporting Persons Maverick Capital is a registered investment adviser under the Investment Advisers Act of 1940, as amended that acts as investment manager of portfolio funds which hold Shares of the Issuer, as more particularly described in Item 6 below. Maverick Capital has its principal offices at 300 Crescent Court, 18th Floor, Dallas, Texas 75201. Maverick's principal business purpose is to serve as general partner of Maverick Capital. Maverick has its principal offices at 300 Crescent Court, 18th Floor, Dallas, Texas 75201. Mr. Ainslie is the manager of Maverick who is granted sole investment discretion pursuant to Maverick's limited liability company regulations. Mr. Ainslie has his principal office at 767 Fifth Avenue, 11th Floor, New York, New York 10153. (d) - (e) During the past five years, to the best of the Reporting Persons' knowledge, none of the Reporting Persons have been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws on finding any violation with respect to such laws. (f) Mr. Ainslie is a citizen of the United States. CUSIP No. 096227301 Page 6 of 9 Pages Item 3. Source and Amount of Funds or Other Considerations. The information set forth in Item 6 hereof is hereby incorporated by reference into this Item 3. Item 4. Purpose of Transaction. The information set forth in Item 6 hereof is hereby incorporated by reference into this Item 4. The Reporting Persons reserve the right to acquire, or cause to be acquired, additional securities of the Issuer, to dispose of, or cause to be disposed, such securities at any time or to formulate other purposes, plans or proposals regarding the Issuer or any of its securities, to the extent deemed advisable in light of general investment and trading policies of the Reporting Persons, market conditions or other factors. Item 5. Interest in Securities of the Issuer. (a) - (b) Based on the information provided by the Issuer, the number of shares outstanding was 18,552,737 as of December 21, 2009. The Reporting Persons may be deemed directly or indirectly, including by reason of their mutual affiliation, to be the beneficial owners of 3,723,897 Shares. Such Shares constitute approximately 20.05% of the issued and outstanding Shares. Maverick is the general partner of Maverick Capital, and pursuant to the terms of Maverick's limited liability company regulations, Mr. Ainslie was appointed as manager of Maverick with sole investment discretion. As a result, Mr. Ainslie, directly and indirectly through Maverick Capital and Maverick, has the sole power to direct the vote and to direct the disposition of the 3,723,897 Shares. (c) Except as disclosed in Item 3, none of the Reporting Persons has effected any transaction in the Shares during the past sixty days. (d) To the best knowledge of the Reporting Persons, no other person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Shares beneficially owned by the Reporting Persons. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. On March 26, 2008, Maverick Capital, pursuant to the respective investment management agreements with Maverick Fund USA, Ltd. ("Fund USA"), Maverick Fund, L.D.C. ("Fund LDC") and Maverick Fund II, Ltd. ("Fund II" and together with Fund USA and Fund LDC, the "Portfolio Funds"), and on behalf of the Portfolio Funds entered into a Standby Commitment Agreement in relation to three million dollars ($3,000,000) of debt financing (the CUSIP No. 096227301 Page 7 of 9 Pages "Commitment Amount"), by and among the Issuer, the Portfolio Funds and certain other investors (the "Commitment Agreement", a copy of which is attached as Exhibit B and is incorporated herein by reference in response to this Item 6). On July 23, 2008, the Issuer borrowed the full Commitment Amount pursuant to the Note Purchase Agreement dated July 23, 2008 (the "Note Purchase Agreement", a copy of which is attached as Exhibit C and is incorporated herein by reference in response to this Item 6), pursuant to which the Portfolio Funds acquired Convertible Promissory Notes (the "Notes", copies of which are attached as Exhibits D, E and F and are incorporated herein by reference in response to this Item 6) granting to the Portfolio Funds the right to convert the Notes into a number of Shares equal to the quotient obtained by dividing the aggregate amount of the principal amount of such Notes to be converted by (i) $3.65 or (ii) equity securities sold by the Issuer in subsequent rounds of financing for cash at a conversion price based on the lowest price per share paid by any investor in such subsequent round of financing. On December 21, 2009, the Issuer sold Shares at a price of $1.70 per share (the "Conversion Price") to a party unrelated to the Portfolio Funds, and the Portfolio Funds exercised their rights to convert the Notes at the Conversion Price into 665,471 Shares. On December 21, 2009, the Portfolio Funds, the Issuer, Quantum Industrial Partners LDC ("QIP"), SFM Domestic Investments, LLC ("SFM" and, together with QIP, the "Soros Parties"), Prentice Capital Partners, LP, Prentice Capital Partners QP, LP, Prentice Capital Offshore, Ltd., S.A.C. Capital Associates, LLC ("SAC"), GPC XL III, LLC, PEC I, LLC (collectively, the "Prentice Parties"; the Soros Parties, the Portfolio Funds and the Prentice Parties, collectively, the "Existing Stockholders") and Rho Ventures VI, L.P. ("Rho"; the Soros Parties, the Portfolio Funds, the Prentice Parties and Rho, collectively, the "Stockholders") entered into an Amended and Restated Voting Agreement (the "Amended and Restated Voting Rights Agreement", a copy of which is attached as Exhibit G and is incorporated herein by reference in response to this Item 6), which amended and restated a voting agreement entered into by the Issuer and the Existing Stockholders dated as of June 15, 2006. Pursuant to Section 1.1 of the Amended and Restated Voting Agreement, subject to shareholder approval, the Board of Directors of the Issuer (the "Board") shall be restructured into a classified board upon the closing of the sale to Rho by the Issuer of the balance of the 8,823,529 Shares not already purchased by Rho in the first closing (the "Rho Transaction"). Pursuant to Section 1.2 of the Amended and Restated Voting Agreement, the Soros Parties are entitled to designate two members to serve on the Board, Rho is entitled to designate two members to serve on the Board, the Portfolio Funds are entitled to designate one member to serve on the Board, and the Prentice Parties (other than SAC) are entitled to designate one member to serve on the Board. Pursuant to Section 1.4 of the Amended and Restated Voting Agreement, the Stockholders agreed to vote all Shares owned by them in favor of the persons designated by each of the Stockholders. Pursuant to Section 1.5 of the Amended and Restated Voting Agreement, each of Rho, the Soros Parties, the Portfolio Funds, and the Prentice Parties (other than SAC) will be entitled to have one director designated by them serve on any committee of the Board, subject to applicable law, rules and regulations (including stock exchange regulations), and, if the Issuer establishes an executive committee of the Board, to have each of their director designees under the Amended and Restated Voting Agreement serve on such executive committee of the Board. Pursuant to Section 2.1 of the Amended and Restated Voting Agreement, the Existing Stockholders agreed to vote a specified percentage of their Shares in favor of the reclassification of the Board and approval of the Rho Transaction. Pursuant to Section 2.2 of the Amended and Restated Voting Agreement, until 90 days after the date of the Amended and Restated Voting Agreement, the Portfolio Funds and the Prentice Parties agreed, subject to certain exceptions, not to, without the prior written consent of the Soros Parties, Rho and the Issuer sell, offer to sell, or enter into any swap, arrangement or similar transaction that transfers Shares, or publicly announce an intention to make such a transaction (the "Lock-Up Restrictions"). Furthermore, if Rho or another person introduced by Rho, makes an offer to the Portfolio Funds to purchase at least 50% of the Shares held by the Portfolio Funds on December 21, 2009 on pricing terms no less favorable than those in the Securities Purchase Agreement dated as of December 21, 2009 between the Issuer and Rho, and otherwise satisfying certain other specified conditions, and the Portfolio Funds do not accept such offer, then the Portfolio Funds will continue to be subject to the Lock-Up Restrictions until December 21, 2010. On December 21, 2009, the Portfolio Funds, the Issuer, the Soros Parties, the Prentice Parties and Rho entered into a Registration Rights Agreement (the "Registration Rights Agreement", a copy of which is attached as Exhibit H and is incorporated herein by reference in response to this Item 6). The foregoing descriptions of the Commitment Agreement, the Note Purchase Agreement, the Registration Rights Agreement,and the Amended and Restated Voting Rights Agreement do not purport to be complete and are qualified in their entirety by the terms of each such documents which are incorporated herein by reference. Item 7. Materials to be Filed as Exhibits. The information set forth in the Exhibit Index is incorporated herein by reference. CUSIP No. 096227301 Page 8 of 9 Pages SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this Amendment is true, complete and correct. Dated: December 24, 2009 MAVERICK CAPITAL, LTD. By: Maverick Capital Management, LLC, its General Partner By: Lee S. Ainslie III, Manager By: /s/ John T. McCafferty ----------------------------- John T. McCafferty Under Power of Attorney dated February 13, 2003 MAVERICK CAPITAL MANAGEMENT, LLC By: Lee S. Ainslie III, Manager By: /s/ John T. McCafferty ----------------------------- John T. McCafferty Under Power of Attorney dated February 13, 2003 LEE S. AINSLIE III By: /s/ John T. McCafferty ----------------------------- John T. McCafferty Under Power of Attorney dated February 13, 2003 CUSIP No. 096227301 Page 9 of 9 Pages EXHIBIT INDEX ------------- A. Power of Attorney, dated as of February 13, 2003, granted by Mr. Ainslie in favor of John T. McCafferty.(1) B. Standby Commitment Agreement, dated as of March 26, 2008, by and among Bluefly, Inc., Quantum Industrial Partners LDC, SFM Domestic Investments LLC, Maverick Fund USA, Ltd., Maverick Fund, L.D.C., and Maverick Fund II, Ltd.(2) C. Note Purchase Agreement, dated as of July 23, 2008, entered into by and among Bluefly, Inc., Quantum Industrial Partners LDC, SFM Domestic Investments LLC, Maverick Fund USA, Ltd., Maverick Fund, L.D.C., and Maverick Fund II, Ltd.(3) D. Convertible Promissory Note, dated July 23, 2008, issued to Maverick Fund USA, Ltd.(3) E. Convertible Promissory Note, dated July 23, 2008, issued to Maverick Fund, L.D.C.(3) F. Convertible Promissory Note, dated July 23, 2008, issued to Maverick Fund II, Ltd.(3) G. Amended and Restated Voting Agreement, dated as of December 21, 2009 by and among Bluefly, Inc., Quantum Industrial Partners LDC, SFM Domestic Investments, LLC, Maverick Fund USA, Ltd., Maverick Fund, L.D.C., Maverick Fund II, Ltd., Prentice Capital Partners, LP, Prentice Capital Partners QP, LP, Prentice Capital Offshore, Ltd., S.A.C. Capital Associates, LLC, GPC XL III, LLC, PEC I, LLC and Rho Ventures VI, L.P. H. Registration Rights Agreement, dated as of December 21, 2009 by an among Bluefly, Inc., Quantum Industrial Partners LDC, SFM Domestic Investments, LLC, Maverick Fund USA, Ltd., Maverick Fund, L.D.C., Maverick Fund II, Ltd., Prentice Capital Partners, LP, Prentice Capital Partners QP, LP, Prentice Capital Offshore, Ltd., GPC XL III, LLC, PEC I, LLC, S.A.C. Capital Associates, LLC, and Rho Ventures VI, L.P. - ------------------------------------------------------------------------------- (1) Incorporated by reference to Maverick Capital's Schedule 13G filed with SEC on February 14, 2003. (2) Incorporated by reference to Maverick Capital's Schedule 13D/A filed with the SEC on March 28, 2008. (3) Incorporated by reference to Maverick Capital's Schedule 13D/A filed with the SEC on July 25, 2008. EX-99.G 2 ss80694_ex99g.txt EXECUTION COPY AMENDED AND RESTATED VOTING AGREEMENT THIS AMENDED AND RESTATED VOTING AGREEMENT (this "Agreement") dated as of December 21, 2009, by and among Bluefly, Inc., a Delaware corporation (the "Company"), Quantum Industrial Partners LDC ("QIP"), SFM Domestic Investments, LLC, ("SFM" and, together with QIP, the "Soros Parties"), Maverick Fund USA, Ltd., Maverick Fund, L.D.C., Maverick Fund II, Ltd. (collectively, the "Maverick Parties"), Prentice Capital Partners, LP, Prentice Capital Partners QP, LP, Prentice Capital Offshore, Ltd., S.A.C. Capital Associates, LLC ("SAC"), GPC XLIII, LLC, PEC I, LLC (collectively, the "Prentice Parties"; the Soros Parties, the Maverick Parties and the Prentice Parties, collectively, the "Existing Stockholders") and Rho Ventures VI, LP ("Rho"; the Soros Parties, the Maverick Parties, the Prentice Parties and Rho, collectively, the "Stockholders"). WHEREAS, the Company and the Existing Stockholders have entered into that certain Voting Agreement dated as of June 15, 2006 (the "Existing Agreement"); WHEREAS, the Company and Rho have entered into a Securities Purchase Agreement, dated as of December 21, 2009 (the "Securities Purchase Agreement"), pursuant to which the Company has agreed to sell, and Rho has agreed to purchase, an aggregate of 8,823,529 shares of the Company's common stock, par value $0.01 per share (the "Common Stock"), which shall be consummated in two separate closings; an initial closing at which Rho will purchase a number of shares of Common Stock equal to 19.9% of the Company's outstanding Common Stock (the "Initial Closing"), and a second closing at which Rho will purchase the remaining shares of Common Stock not purchased at the Initial Closing (the "Second Closing"), which Second Closing shall take place following approval by the Company's stockholders of the issuance of such remaining shares, as required by the rules and regulations of the NASDAQ Capital Market (the "Stockholder Approval Condition"); and WHEREAS, it is a condition to the parties' obligations under the Securities Purchase Agreement that the Company and the Existing Stockholders amend and restate the Existing Agreement, for the purpose of setting forth the terms and conditions pursuant to which (i) the Company's Board of Directors (the "Board") shall be restructured into a classified board, (ii) the Stockholders shall vote their shares of Common Stock in favor of certain designees to the Board and (iii) the Existing Stockholders shall vote their shares of Common Stock in support of the Stockholder Approval Condition and the Board Restructuring Condition (as hereinafter defined). 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 to amend and restate the Existing Agreement as follows: ARTICLE I BOARD OF DIRECTORS ------------------ SECTION 1.1 Board Restructuring. Subject to receipt of stockholder approval to amend the Company's certificate of incorporation to effect the Board Restructuring (the "Board Restructuring Condition"), at the Second Closing, the Board shall be restructured into a ten member Board consisting of three classes of directors with staggered terms, as follows (the "Board Restructuring"): (i) three directors shall be up for election in 2012, which shall consist of one designee of the Soros Parties, one designee of Rho, and one outside independent director; (ii) three directors shall be up for election in 2011, which shall consist of one designee of the Soros Parties, one designee of Rho, and the Company's Chief Executive Officer; and (iii) four directors shall be up for election in 2010, which shall consist of two outside directors, one designee of Maverick, and one designee of Prentice. Prior to receipt of approval by the Company's stockholders of the Board Restructuring Condition, the Board shall continue as a declassified Board consisting of between 10 and 12 members, including the members nominated in accordance with Section 1.2. Subsequent to the earlier of (i) the receipt of approval by the Company's stockholders of the Board Restructuring Condition or (ii) the date of the Company's receipt of the Rho Notice (pursuant to, and as defined in, that certain Registration Rights Agreement dated as of the date hereof among the Company and the Stockholders), the Board shall have no more than 10 members unless otherwise agreed in writing by Rho and Soros. SECTION 1.2 Designation of Directors. As of the Initial Closing and, except as otherwise provided herein, continuing subsequent to the receipt of approval by the Company's stockholders of the Board Restructuring Condition or the date of the Company's receipt of the Rho Notice, as applicable, (a) subject to Section 1.6(a), the Soros Parties shall be entitled to designate to serve on the Board, two designees; (b) subject to Section 1.6(b), Rho shall be entitled to designate to serve on the Board, two designees, one of which such designees shall be elected to the Board immediately after the date hereof and the other such designee shall be elected to the Board in January 2010; (c) subject to Section 1.6(c), the Maverick Parties shall be entitled to designate to serve on the Board, one designee; and (d) subject to Section 1.6(d), the Prentice Parties (other than SAC) shall be entitled to designate to serve on the Board, one designee. SECTION 1.3 Nomination. Subject to limitations, if any, imposed by stock exchange rules in effect from time to time or stock exchange interpretations requiring Board representation to be proportional to stock ownership ( "Proportionality Requirements"), the Company agrees to cause the persons designated pursuant to Section 1.2 to be nominated for election in accordance with such person's term (or staggered term, as the case may be) at meetings of the stockholders of the Company called with respect to the election of members of the Board, and at every 2 adjournment or postponement thereof, and on each action or approval by written consent with respect to the election of members of the Board consistent with such person's term or staggered term (as the case may be). SECTION 1.4 Agreement to Vote. (a) The Stockholders hereby agree that at any meeting of the stockholders of the Company, however called, or at any adjournment or postponement thereof or in any other circumstances upon which a vote, consent or other approval (including by written consent) is sought for the election of members to the Board (a "Board Vote"), the Stockholders shall (a) when a Board Vote is held, appear at such Board Vote or otherwise cause all shares of capital stock of the Company owned by them to be counted as present thereat for the purpose of establishing a quorum and (b) vote (or cause to be voted) all shares of capital stock of the Company owned by them in favor of the persons designated pursuant to Section 1.2. The failure of any Stockholder entitled to designate nominees pursuant to Section 1.2 to fully exercise its respective designation rights shall not constitute a waiver or dimunition of such rights nor shall it prevent such Stockholder from exercising such rights prospectively. (b) Should a person designated pursuant to Section 1.2 be unwilling or unable to serve, or otherwise cease to serve (including by means of removal in accordance with the following clause (c)), the Stockholders who originally nominated such director shall be entitled to designate any replacement director. (c) If (i) the Soros Parties propose to remove any director designated by the Soros Parties, (ii) Rho proposes to remove any director designated by Rho, (iii) the Maverick Parties propose to remove any director designated by the Maverick Parties or (iv) the Prentice Parties propose to remove any director designated by the Prentice Parties, the Stockholders agree to cooperate in, and shall vote all shares of capital stock of the Company owned by them (or, if any action is being taken by written consent, execute a written consent) in support of, such removal and any resulting vacancy shall be filled in accordance with the preceding clause (b). The Stockholders agree not to take any action to remove, with or without cause, any director other than in accordance with the foregoing. SECTION 1.5 Committees of the Board of Directors. (a) The Company and the Soros Parties agree that, subject to applicable law, rules or regulations (including stock exchange regulations), the Soros Parties have the right to have one person designated by the Soros Parties pursuant to Section 1.2(a) serve on any committee of the Board; provided that if the Nasdaq rules require that such committee must consist of members who are "independent" (as defined in applicable Nasdaq rules), then such designee must be "independent". (b) The Company and Rho agree that, subject to applicable law, rules or regulations (including stock exchange regulations), Rho has the right to have one person designated by Rho pursuant to Section 1.2(b) serve on any committee of the Board; provided that if the 3 Nasdaq rules require that such committee must consist of members who are "independent" (as defined in applicable Nasdaq rules), then such designee must be "independent". (c) The Company and the Maverick Parties agree that, subject to applicable law, rules or regulations (including stock exchange regulations), the Maverick Parties have the right to have one person designated by the Maverick Parties pursuant to Section 1.2(c) serve on any committee of the Board; provided that if the Nasdaq rules require that such committee must consist of members who are "independent" (as defined in applicable Nasdaq rules), then such designee must be "independent". (d) The Company and the Prentice Parties (other than SAC) agree that, subject to applicable law, rules or regulations (including stock exchange regulations), the Prentice Parties (other than SAC) have the right to have one person designated to the Board by the Prentice Parties pursuant to Section 1.2(d) serve on any committee of the Board; provided that if the Nasdaq rules require that such committee must consist of members who are "independent" (as defined in applicable Nasdaq rules), then such designee must be "independent". (e) The parties hereto agree that if the Company establishes an Executive Committee (or a committee with executive or similar functions) of the Board (the "Executive Committee"), then (i) the persons designated by the Soros Parties pursuant to Section 1.2(a) shall serve on such Executive Committee, (ii) the persons designated by Rho pursuant to Section 1.2(b) shall serve on such Executive Committee, (iii) the person designated by the Maverick Parties pursuant to Section 1.2(c) shall serve on such Executive Committee and (iv) the person designated by the Prentice Parties pursuant to Section 1.2(d) shall serve on such Executive Committee. SECTION 1.6 Resignation. (a) (i) If the Soros Parties dispose of their capital stock of the Company so that they own less than the greater of 50% of their Current Shares or the minimum number of shares that are required to be owned under applicable Nasdaq rules and regulations with respect to the Proportionality Requirements which would allow the Soros Parties to designate two directors to serve on the Board, they shall cause one of the directors designated by them pursuant to Section 1.2(a) to resign from the Board. (ii) If the Soros Parties dispose of their capital stock of the Company so that they own less than the greater of 25% of their Current Shares or the minimum number of shares that are required to be owned under applicable Nasdaq rules and regulations with respect to the Proportionality Requirements which would allow the Soros Parties to designate one director to serve on the Board (a "Soros Termination Event"), they shall cause each of the directors designated by them pursuant to Section 1.2(a) to resign from the Board. (b) (i) If Rho disposes of its capital stock of the Company so that it owns less than the greater of 28% of its Current Shares or the minimum number of shares that are required to be owned under applicable Nasdaq rules and regulations with respect to the Proportionality Requirements which would allow Rho to designate two directors to serve on the 4 Board, it shall cause one of the directors designated by it pursuant to Section 1.2(b) to resign from the Board. (ii) If Rho disposes of its capital stock of the Company so that it owns less than the greater of 14% of its Current Shares or the minimum number of shares that are required to be owned under applicable Nasdaq rules and regulations with respect to the Proportionality Requirements which would allow Rho to designate one director to serve on the Board (a "Rho Termination Event"), it shall cause each of the directors designated by it pursuant to Section 1.2(b) to resign from the Board. (c) If the Maverick Parties dispose of their capital stock of the Company so that they own less than the greater of 50% of their Current Shares or the minimum number of shares that are required to be owned under applicable Nasdaq rules and regulations with respect to the Proportionality Requirements which would allow the Maverick Parties to designate one director to serve on the Board (a "Maverick Termination Event"), they shall cause the director designated by them pursuant to Section 1.2(c) to resign from the Board. (d) If the Prentice Parties dispose of their capital stock of the Company so that they own less than the greater of 50% of their Current Shares or the minimum number of shares that are required to be owned under applicable Nasdaq rules and regulations with respect to the Proportionality Requirements which would allow the Prentice Parties to designate one director to serve on the Board (a "Prentice Termination Event"), they shall cause the director designated by them pursuant to Section 1.2(d) to resign from the Board. (e) "Current Shares" shall mean (i) with respect to the Maverick Parties and the Prentice Parties, the shares of capital stock of the Company beneficially owned by the Maverick Parties or the Prentice Parties, as applicable, immediately following the closing of the transactions contemplated by the Stock Purchase Agreement, dated as of June 5, 2006, by and among the Company, the Soros Parties, the Maverick Parties and the Prentice Parties (the "Original Closing"), including shares of capital stock of the Company issuable upon exercise of warrants or options outstanding immediately following the Original Closing and (ii) with respect to the Soros Parties and Rho, the shares of capital stock of the Company owned by or for the benefit of the Soros Parties or Rho, as applicable, immediately following the Initial Closing, including shares of capital stock of the Company issuable upon exercise of warrants or options outstanding immediately following the Initial Closing; provided, that, with respect to Rho, if the Second Closing occurs, "Current Shares" shall mean the shares of Common Stock of the Company owned by or for the benefit of Rho immediately following the Second Closing, including shares of capital stock of the Company issuable upon exercise of warrants or options outstanding immediately following the Second Closing. (f) If either a Maverick Termination Event or a Prentice Termination Event occurs, then the size of the Board shall be reduced by the number of directors resigning from the Board and, for so long as Rho and/or Soros respectively owns 10% or more of the outstanding Common Stock, the size of the Board may not be increased to larger than an eight member Board without the prior written consent of Rho and/or Soros (as applicable). 5 SECTION 1.7 Liability. No Party who shall vote or consent or withhold consent or make a request in their capacity as a stockholder of the Company with respect to any securities subject to this Agreement on, to or from any matter in compliance with the terms hereof shall, as a result of any such vote or consent or withholding of consent or making of a request, have any obligation or liability to any other party hereto (whether such other party shall also vote or consent or withhold consent or make a request with respect to any securities, then subject to this Agreement). SECTION 1.8 Reimbursement of Expenses; Director Fees. The Company shall reimburse the directors for all reasonable out-of-pocket expenses incurred in connection with their attendance at meetings of the Board and any committees thereof, including without limitation travel, lodging and meal expenses. For the avoidance of doubt, directors designated by Rho shall receive (a) equity based compensation for serving on the Board and on any committees thereof equivalent to the equity based compensation paid to other non-management directors for such service and (b) cash compensation for serving on the Board and any committees thereof equivalent to the cash compensation paid to the directors designated to the Board by any of the Existing Stockholders. SECTION 1.9 D&O Insurance. To the extent available on commercially reasonable terms, the Company shall obtain and maintain customary director and officer indemnity insurance on commercially reasonable terms and the terms of such insurance shall be reasonably acceptable to (i) for so long as Rho is entitled to designate at least one director for election to the Board pursuant to Section 1.2(b), Rho, and (ii) for so long as Soros is entitled to designate at least one director for election to the Board pursuant Section 1.2(a), Soros. SECTION 1.10 Information. Each Stockholder and the Company agrees and acknowledges that the directors designated by Rho may share confidential, non-public information about the Company with Rho; provided that Rho agrees to keep such information confidential and agrees to comply with all applicable securities laws in connection therewith, and provided, further, that information protected by attorney client privilege or attorney work product will not be disclosed to the extent such disclosure will cause the loss of such privilege. ARTICLE II SUPPORT AGREEMENT; LOCK-UP -------------------------- SECTION 2.1 Support Agreement. The Existing Stockholders hereby agree that at any meeting of the stockholders of the Company, however called, or at any adjournment or postponement thereof or in any other circumstances upon which a vote, consent or other approval (including by written consent) is sought (a "Company Stockholders' Vote"), the Existing Stockholders shall (a) when a Company Stockholders' Vote is held, appear at such Company Stockholders' Vote or otherwise cause all Eligible Vote Shares to be counted as present thereat for the purpose of establishing a quorum and (b) vote (or cause to be voted) all Eligible Vote Shares in favor of the Stockholder Approval Condition and the Board Restructuring Condition. "Eligible Vote Shares " means, with respect to a particular Existing Stockholder, the aggregate number of shares of Common Stock held by such Existing Stockholder, multiplied by the Specified Portion. "Specified Portion" means the percentage of the shares of Common Stock owned by the Existing 6 Stockholders, which (when aggregated with the shares of Common Stock purchased by Rho at the Initial Closing or otherwise beneficially owned by it and eligible to be voted in such Company Stockholders' Vote) equals 40% of the outstanding shares of Common Stock of the Company. The Specified Portion shall be allocated among the Existing Stockholders on a pro rata basis in proportion to their respective share ownership as of the date of the Company Stockholders' Vote. SECTION 2.2 Lock-Up. (a) Maverick/Prentice Lock-Up. (i) Subject to section 2.2(a)(ii), until the date that is 90 days from the date hereof (the "Prentice/Maverick Initial Lock-Up Termination Date"), neither the Maverick Parties nor the Prentice Parties will, without the prior written consent of the Soros Parties, Rho and the Company, (1) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, any shares of capital stock of the Company, (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any shares of capital stock of the Company, or any securities exchangeable for or any other rights to purchase any shares of capital stock of the Company or (3) publicly announce an intention to effect any transaction specified in clause (1) or (2) (such restrictions being referred to herein as the "Prentice/Maverick Lock-Up Restrictions"). Notwithstanding anything to the contrary contained herein, the Prentice/Maverick Lock-Up Restrictions shall not apply to any sale of Common Stock by the Maverick Parties or the Prentice Parties to Rho or an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, or any other form of entity unaffiliated with Rho (a "Rho Co-Investor"), if (A) such sale is approved in writing by Rho and, to the extent required under Nasdaq rules and regulations, the Company's shareholders and (B) in the case of a sale to a Rho Co-Investor, the Rho Co-Investor was introduced to Prentice or Maverick (as applicable) by Rho. Notwithstanding anything to the contrary contained herein, the Maverick Parties and Prentice Parties hereby each covenant and agree that they will comply with the requirements of Section 2.1 with respect to any shares held by them as of the record date of any Company Stockholders' Vote with respect to the Stockholder Approval Condition or Board Restructuring Condition, regardless of any transaction effected pursuant to Section 2.2(a)(i)(1) or (2) hereof. (ii) The Prentice/Maverick Lock-Up Restrictions shall continue to apply with respect to the Prentice Parties or the Maverick Parties (as the case may be) until the one year anniversary of the Initial Closing (or such earlier date as Rho and/or Soros is permitted to sell securities that are subject to the lock-up set forth in Section 2.2(b) hereof) if Rho and/or a Rho Co-Investor shall have offered, in writing, (and in the case of such a written offer, the Prentice Parties or the Maverick Parties, as the case may be, shall not have accepted such an offer), on or prior to the Prentice/Maverick Initial Lock-Up Termination Date, to purchase for cash at least 50% (or, in the case of Prentice, 100%) of the shares of Common Stock owned by the Prentice Parties or the Maverick Parties (as the case may be) as of the date hereof on pricing terms no less favorable than those included in the Securities 7 Purchase Agreement, with such purchase to be consummated within 20 days of delivery of such written notice. In connection with any such sale to Rho and/or a Rho Co-Investor, neither the Prentice Parties nor the Maverick Parties (as the case may be) shall be required to make any representations or warranties concerning the Company. Notwithstanding anything contained in this Section 2.2(a)(ii) to the contrary, the lock-up restrictions applicable to (1) the Prentice Parties hereunder shall not apply to any transfer by any of the Prentice Parties to any person so long as Prentice Capital Management, L.P. remains the beneficial owner of the transferred securities; and (2) the Maverick Parties hereunder shall not apply to any transfer by any of the Maverick Parties to any person so long as Maverick Capital, Ltd. remains the beneficial owner of the transferred securities. For purposes of this Section 2.2(a)(ii) only, the term "Prentice Parties" shall not include SAC. (b) Soros/Rho Lock-Up. Until the one year anniversary of the date of the Initial Closing, neither the Soros Parties nor Rho will, without the prior written consent of non-selling party (i.e., Rho or Soros Parties), (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, any shares of capital stock of the Company, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any shares of capital stock of the Company, or any securities exchangeable for or any other rights to purchase any shares of capital stock of the Company or (iii) publicly announce an intention to effect any transaction specified in clause (i) or (ii). Notwithstanding anything contained in this Section 2.2(b) to the contrary, the lock-up restrictions applicable to the Soros Parties hereunder shall not apply to any transfer by the Soros Parties to (1) any of Soros Fund Management LLC or George Soros or any of their respective affiliates, (2) any person or entity that is managed (x) by Soros Fund Management LLC or (y) by any person or entity that is an Affiliate of Soros Fund Management LLC or (3) any person or entity that is a charitable organization established by George Soros or any of the members of George Soros' family. ARTICLE III REPRESENTATIONS AND WARRANTIES ------------------------------ OF EXISTING STOCKHOLDERS ------------------------ Each Existing Stockholder hereby, for itself and for no other Existing Stockholder, represents and warrants to the Stockholders as follows: SECTION 3.1 Authorization; Binding Agreement. Such Existing Stockholder has all requisite legal right, power, authority and capacity to execute and deliver this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly and validly executed and delivered by or on behalf of such Existing Stockholder and, assuming its due authorization, execution and delivery by or on behalf of such Existing Stockholder, constitute the legal, valid and binding obligations of such Existing Stockholder, enforceable against such Existing Stockholder in accordance with its respective terms, subject to the effect of any applicable bankruptcy, insolvency, moratorium or similar law affecting creditors' rights generally. SECTION 3.2 No Conflict; Required Filings and Consents. 8 (a) The execution and delivery of this Agreement by such Existing Stockholder do not, and the performance of this Agreement by such Existing Stockholder will not, (i) conflict with or violate any statute, law, rule, regulation, order, judgment or decree applicable to such Existing Stockholder or by which such Existing Stockholder or any of such Existing Stockholder's material properties or assets is bound or affected, (ii) violate or conflict with the Certificate of Incorporation, Bylaws or other equivalent organizational documents of such Existing Stockholder, or (iii) result in or constitute (with or without notice or lapse of time or both) any breach of or default under, or give to another party any right of termination, amendment, acceleration or cancellation of, or result in the creation of any lien or encumbrance or restriction on any of the material property or assets of such Existing Stockholder pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which such Existing Stockholder is a party or by which such Existing Stockholder or any of such Existing Stockholder's material properties or assets is bound or affected; except in the case of the foregoing clauses (i), (ii) and (iii), where such violation, conflict, breach, default, right of termination, amendment, acceleration or cancellation, lien, encumbrance or restriction would not, or would reasonably be expected not to, prevent or materially delay the performance by such Existing Stockholder of such Existing Stockholder's obligations under this Agreement. There is no beneficiary or holder of a voting trust certificate or other interest of any trust of which such Existing Stockholder is a trustee whose consent is required for the execution and delivery of this Agreement or the consummation by such Existing Stockholder of the transactions contemplated by this Agreement. (b) The execution and delivery of this Agreement by such Existing Stockholder do not, and the performance of this Agreement by such Existing Stockholder will not, require any consent, approval, order, permit or governmental, authorization or permit of, or filing with or notification to, any third party or any governmental, regulatory or administrative authority, agency or commission, domestic or foreign, except as may be required under the Exchange Act, and except where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, or would reasonably be expected not to, prevent or materially delay the performance by such Existing Stockholder of such Existing Stockholder's obligations under this Agreement. Other than as contained in this Agreement, such Existing Stockholder does not have any understanding in effect with respect to the voting or transfer of any shares of capital stock of the Company owned by such Existing Stockholder. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF --------------------------------- THE COMPANY AND RHO ------------------- Each of the Company and Rho hereby, jointly and not severally, represents and warrants to the Existing Stockholders as follows: SECTION 4.1 Authorization; Binding Agreement. Each of the Company and Rho has all requisite legal right, power, authority and capacity to execute and deliver this Agreement and to perform its obligations hereunder, and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by or on behalf of each of the Company and Rho and, assuming its due authorization, execution and delivery by or on behalf of 9 the Existing Stockholders, constitutes the legal, valid and binding obligation of the Company and Rho, enforceable against the Company and Rho in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency, moratorium or similar law affecting creditors' rights generally. SECTION 4.2 No Conflict; Required Filings and Consents. (a) The execution and delivery of this Agreement by each of the Company and Rho will not, (i) conflict with or violate any statute, law, rule, regulation, order, judgment or decree applicable to the Company or Rho or by which the Company or Rho or any of the Company's or Rho's respective material properties or assets is bound or affected, (ii) violate or conflict with the Certificate of Incorporation, Bylaws or other equivalent organizational documents of the Company or Rho, or (iii) result in or constitute (with or without notice or lapse of time or both) any breach of or default under, or give to another party any right of termination, amendment, acceleration or cancellation of, or result in the creation of any lien or encumbrance or restriction on any of the respective material property or assets of the Company or Rho pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or Rho is a party or by which the Company or Rho or any of the Company's or Rho's respective material properties or assets is bound or affected; except in the case of the foregoing clauses (i), (ii) and (iii), where such violation, conflict, breach, default, right of termination, amendment, acceleration or cancellation, lien, encumbrance or restriction would not, or would reasonably be expected not to, prevent or materially delay the performance by the Company or Rho of any of their respective obligations under this Agreement. (b) The execution and delivery of this Agreement by each of the Company or Rho do not, and the performance of this Agreement by each of the Company or Rho will not, require any consent, approval, order, permit or governmental, authorization or permit of, or filing with or notification to, any third party or any governmental, regulatory or administrative authority, agency or commission, domestic or foreign, except as may be required under the Exchange Act, and except where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, or would reasonably be expected not to, prevent or materially delay the performance by the Company or Rho of the Company's or Rho's respective obligations under this Agreement. ARTICLE V MISCELLANEOUS ------------- SECTION 5.1 Further Assurances. From time to time and without additional consideration, the Company and each of the Stockholders shall execute and deliver, or cause to be executed and delivered, such additional transfers, assignments, endorsements, proxies, consents and other instruments, and shall take such further actions, as the Company or any of the Stockholders may reasonably request for the purpose of carrying out and furthering the intent of this Agreement. 10 SECTION 5.2 Entire Agreement. This Agreement, the Securities Purchase Agreement and the other documents executed in connection therewith (collectively, the "Transaction Documents") 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, including, without limitation, the Existing Agreement. SECTION 5.3 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. 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. In the event that any Stockholder desires to transfer any shares of capital stock (or rights to purchase shares of capital stock) owned by such Stockholder to any affiliate of such Stockholder, then it shall be a condition to such transfer that any such affiliate transferee agree to become a party to, and bound by, this Agreement in the same capacity as the Stockholder that transferred such shares of capital stock (or rights to purchase shares of capital stock) to it. SECTION 5.4 Term. (a) The rights and obligations of the Soros Parties hereunder (except with respect to their obligation to cause directors designated by them to resign under Section 1.6(a)) shall automatically terminate upon occurrence of a Soros Termination Event. (b) The rights and obligations of Rho hereunder (except with respect to their obligation to cause directors designated by them to resign under Section 1.6(b)) shall automatically terminate upon occurrence of a Rho Termination Event. (c) The rights and obligations of the Maverick Parties hereunder (except with respect to their obligation to cause directors designated by them to resign under Section 1.6(c)) shall automatically terminate upon occurrence of a Maverick Termination Event. (d) The rights and obligations of the Prentice Parties hereunder (except with respect to their obligation to cause directors designated by them to resign under Section 1.6(d)) shall automatically terminate upon the occurrence of a Prentice Termination Event. SECTION 5.5 Amendments. This Agreement may not be amended or modified except by an instrument in writing signed by, or on behalf of, the parties against whom such amendment or modification is sought to be enforced. SECTION 5.6 Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience of reference only and do not constitute a part of and shall not be utilized in interpreting this Agreement. SECTION 5.7 Notices and Addresses. Any notice, demand, request, waiver, or other communication under this Agreement shall be in writing and shall be deemed to have been duly 11 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 the Company: Bluefly, Inc. 42 West 39th Street, 9th Floor New York, New York 10018 Facsimile: (212) 354-3400 Attention: Chief Financial Officer With a copy (which shall not constitute notice) to: Dechert LLP 1095 Avenue of the Americas New York, New York 10036 Facsimile: (212) 698-3599 Attention: Richard A. Goldberg, Esq. To the Soros Parties: Quantum Industrial Partners LDC SFM Domestic Investments LLC c/o Soros Fund Management LLC 888 Seventh Avenue New York, New York 10106 Facsimile: (646) 731-5584 Attention: Jay Schoenfarber To the Maverick Parties: Maverick Fund USA, Ltd. Maverick Fund, L.D.C. Maverick Fund II, Ltd. c/o Maverick Capital, Ltd. 300 Crescent Court, 18th Floor Dallas, Texas 75201 Facsimile: (214) 880-4042 Attention: General Counsel With a copy (which shall not constitute notice) to: Shearman & Sterling, LLP 599 Lexington Avenue New York, New York 10022 Facsimile.: (646) 848-8902 Attention: Stephen M. Besen 12 To the Prentice Parties (other than SAC): Prentice Capital Management, L.P. 623 Fifth Avenue, 32nd Floor New York, New York 10022 Attention: Michael Zimmerman Facsimile: (212) 756-1480 With a copy (which shall not constitute notice) to: Lowenstein Sandler PC 1251 Avenue of the Americas New York, NY 10020 Attention: Matthew B. Hoffman Facsimile: (973) 422-6807 To SAC: S.A.C. Capital Associates, LLC c/o S.A.C. Capital Advisors, LLC 72 Cummings Point Road Stamford, CT 06902 Attention: Peter A. Nussbaum With a copy (which shall not constitute notice) to: Prentice Capital Management, L.P. 623 Fifth Avenue, 32nd Floor New York, New York 10022 Attention: Michael Zimmerman Facsimile: (212) 756-1480 To Rho: Rho Ventures VI, L.P. Carnegie Hall Tower 152 West 57th Street, 23rd Floor New York, New York 10019 Telephone No.: (212) 751-6677 Facsimile No.: (212.751.3613 Attention: Jeffrey I. Martin, Esq. With a copy to (which shall not constitute notice) to: Goodwin Procter LLP The New York Times Building 620 Eighth Avenue New York, New York Telephone No.: (212) 813-8800 Facsimile No.: (212) 355-3333 13 Attention: Stephen M. Davis, Esq. SECTION 5.8 Severability. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. SECTION 5.9 Governing Law; Choice of Forum; Jury Waiver. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS LAW, PROVIDED THAT THE PROVISIONS SET FORTH HEREIN AND ANY CLAIMS OR DISPUTES ARISING OUT OF OR RELATED TO SUCH PROVISIONS OR THE SUBJECT MATTER THEREOF THAT ARE REQUIRED TO BE GOVERNED BY THE DELAWARE GENERAL CORPORATION LAW SHALL BE GOVERNED BY THE DELAWARE GENERAL CORPORATION LAW The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may only be brought in the United States District Court for the Southern District of New York or any New York State court sitting in the Borough of Manhattan in New York City, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law (as defined in the Investment Agreement), any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. SECTION 5.10 Counterparts; Facsimile Signatures. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other 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. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 5.11 Independent Nature of Stockholders' Obligations and Rights. The obligations of each Stockholder this Agreement are several and not joint with the obligations of any other Stockholder, and no Stockholder shall be responsible in any way for the performance of the obligations of any other Stockholder under this Agreement. Nothing contained herein or in any Transaction Document, and no action taken by any party hereto pursuant thereto, shall be deemed to constitute any Stockholder as a partnership, an association, a joint venture or any other kind of 14 entity with any other Stockholder, or create a presumption that the Stockholders 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 Stockholder 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 Stockholder to be joined as an additional party in any proceeding for such purpose. Each Stockholder has been represented by its own separate legal counsel in their review and negotiation of the Transaction Documents. SECTION 5.12 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. SECTION 5.13 No Violations. Each of the parties hereto agree that no party hereto shall be obligated to comply with any provisions of this Agreement relating to the voting of shares of capital stock of the Company if doing so would constitute a violation of law or public policy. [Signature pages follow] 15 IN WITNESS WHEREOF, this Amended and Restated Voting Agreement has been duly executed on the date first set forth above. BLUEFLY, INC. By: ---------------------------------- Name: Title: QUANTUM INDUSTRIAL PARTNERS LDC By: ---------------------------------- Name: Title: SFM DOMESTIC INVESTMENTS LLC By: ---------------------------------- Name: Title: MAVERICK FUND USA, LTD By: MAVERICK CAPITAL, LTD., as its Investment Manager By: ---------------------------------- Name: Title: MAVERICK FUND L.D.C. By: MAVERICK CAPITAL, LTD., as its Investment Manager By: ---------------------------------- Name: Title: MAVERICK FUND II, LTD By: MAVERICK CAPITAL, LTD., as its Investment Manager By: ---------------------------------- Name: Title: PRENTICE CAPITAL PARTNERS, LP By: Prentice Capital GP, LLC By: ---------------------------------- Name: Michael Weiss Title: Managing Director PRENTICE CAPITAL PARTNERS QP, LP By: Prentice Capital GP, LLC By: ---------------------------------- Name: Michael Weiss Title: Managing Director PRENTICE CAPITAL OFFSHORE, LTD. By: Prentice Capital Management, LP, its investment manager By: ---------------------------------- Name: Michael Weiss Title: Chief Financial Officer GPC XLIII, LLC By: Prentice Capital Management, LP, its advisor By: ---------------------------------- Name: Michael Weiss Title: Chief Financial Officer PEC I, LLC By: Prentice Capital Management, LP, its manager By: ---------------------------------- Name: Michael Weiss Title: Chief Financial Officer S.A.C. CAPITAL ASSOCIATES, LLC By: S.A.C. Capital Advisors, LLC By: ---------------------------------- Name: Peter A. Nussbaum Title: General Counsel RHO VENTURES VI, L.P. By: ---------------------------------- Name: Title: EX-99.H 3 ss80694_ex99h.txt EXECUTION COPY REGISTRATION RIGHTS AGREEMENT ----------------------------- THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as of December 21, 2009, by and among Bluefly, Inc., a Delaware corporation (the "Company"), Quantum Industrial Partners LDC ("QIP"), SFM Domestic Investments, LLC ("SFM" and, together with QIP, "Soros"), Maverick Fund USA, Ltd. ("Maverick USA"), Maverick Fund, L.D.C. ("Maverick Fund"), Maverick Fund II, Ltd. ("Maverick Fund II" and, together with Maverick USA and Maverick Fund, "Maverick"), Prentice Capital Partners, LP ("PCP"), Prentice Capital Partners QP, LP ("PCP QP"), Prentice Capital Offshore, Ltd. ("PC Offshore"), GPC XL III, LLC ("GPC"), PEC I, LLC ("PEC"), and S.A.C. Capital Associates, LLC ("SAC" and, together with PCP, PCP QP, PC Offshore, GPC and PEC, "Prentice"; Soros, Maverick and Prentice are referred to collectively herein as the "Existing Holders"), and Rho Ventures VI, L.P. ("Rho"; Soros, Maverick, Prentice and Rho are referred to collectively herein as the "Investors"). WHEREAS, the Existing Holders have been granted certain registration rights pursuant to various purchase agreements, investment agreements and standby commitment agreements (collectively, the "Prior Agreements"); WHEREAS, the Existing Holders desire to terminate the registration rights granted pursuant to the Prior Agreements and to accept the registration rights created pursuant hereto in lieu of the rights granted to them under the Prior Agreements; WHEREAS, the Company and Rho have entered into a Securities Purchase Agreement, dated as of December 21, 2009 (the "2009 Securities Purchase Agreement"), pursuant to which Rho has agreed to purchase, and the Company has agreed to sell, an aggregate of 8,823,529 shares (the "Shares") of the Company's common stock, par value $.01 per share (the "Common Stock"), upon the terms and subject to the conditions set forth therein; and WHEREAS, the Company desires to grant to Rho the registration rights set forth herein with respect to the Shares. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. 1.1 Defined Terms. The following capitalized terms used herein have the following meanings: "2008 Note Purchase Agreement" means the Note Purchase Agreement, dated as of July 23, 2008, by and among the Company, Soros and Maverick. "2008 Standby Commitment" means the Standby Commitment Agreement, dated as of March 26, 2008, by and among the Company, Soros and Maverick. "2009 Securities Purchase Agreement" has the meaning set forth in the recitals to this Agreement. "Additional Shelf Registration Statement" has the meaning set forth in Section 2.2.3. "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. "Agreement" has the meaning set forth in the preamble to this Agreement. "Approved Underwriter" has the meaning set forth in Section 2.5.2. "Blackout Period" has the meaning set forth in Section 2.6. "Board Restructuring" has the meaning set forth in the Voting Agreement. "Commission" means the Securities and Exchange Commission, or any other federal agency then administering the Securities Act or the Exchange Act. "Common Stock" has the meaning set forth in the recitals to this Agreement. "Company" has the meaning set forth in the preamble to this Agreement. "Company Underwriter" has the meaning set forth in Section 2.4.1. "Cut Back Shares" has the meaning set forth in 2.2.3. "Deferral Notice" has the meaning set forth in Section 2.5.5. "Deferral Period" has the meaning set forth in Section 2.5.5. "Demand Registrable Securities" means, collectively, the Soros Registrable Securities and the Rho Registrable Securities. "Demand Registration" has the meaning set forth in Section 2.5.1. "Demand Registration Statement" has the meaning set forth in Section 2.5.1. "Demanding Holders" has the meaning set forth in Section 2.5.1. "Event" has the meaning set forth in Section 2.2.4. "Event Date" has the meaning set forth in Section 2.2.4. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "Existing Holders" has the meaning set forth in the preamble to this Agreement. "Existing Holders Registration Statement" has the meaning set forth in Section 2.3. 2 "Existing Shelf Registrable Securities" means the shares of Common Stock and the shares of Common Stock underlying securities exercisable for or convertible into shares of Common Stock, the resale of which was registered by the Existing Holders Registration Statement. "Filing Deadline" has the meaning set forth in Section 2.2.1. "FINRA" has the meaning set forth in Section 3.1.13. "GPC" has the meaning set forth in the preamble to this Agreement. "Holders' Counsel" has the meaning set forth in Section 3.1.1. "Indemnified Party" has the meaning set forth in Section 4.3. "Indemnifying Party" has the meaning set forth in Section 4.3. "Inspector" has the meaning set forth in Section 3.1.9. "Investors" has the meaning set forth in the preamble to this Agreement. "Maverick" has the meaning set forth in the preamble to this Agreement. "Maverick 2008 Registrable Securities" means (i) the 19,797.9 shares of Common Stock issuable upon exercise of warrants issued to Maverick pursuant to the 2008 Standby Commitment Agreement, (ii) the shares of Common Stock issuable upon conversion of the convertible notes issued to Maverick pursuant to the 2008 Note Purchase Agreement and (iii) any shares of Common Stock that may be issued upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the Common Stock described in the foregoing clauses (i) and (ii). "Maverick Fund" has the meaning set forth in the preamble to this Agreement. "Maverick Fund II" has the meaning set forth in the preamble to this Agreement. "Maverick Registrable Securities" means the shares of Common Stock, and the shares of Common Stock underlying securities exercisable for or convertible into shares of Common Stock, acquired by Maverick directly from the Company on or prior to the date hereof. "Maverick USA" has the meaning set forth in the preamble to this Agreement. "No Second Closing Notice Date" has the meaning set forth in Section 2.2.1. "PC Offshore" has the meaning set forth in the preamble to this Agreement. "PCP" has the meaning set forth in the preamble to this Agreement. "PCP QP" has the meaning set forth in the preamble to this Agreement. 3 "PEC" has the meaning set forth in the preamble to this Agreement. "Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity or enterprise of whatever nature. "Piggy-Back Registrable Securities" means, collectively, the Soros Registrable Securities, the Maverick Registrable Securities, the Prentice Registrable Securities and the Rho Registrable Securities. "Piggy-Back Registration" has the meaning set forth in Section 2.4.1. "Potential Material Event" has the meaning set forth in Section 2.6. "Prentice" has the meaning set forth in the preamble to this Agreement. "Prentice Registrable Securities" means the shares of Common Stock, and the shares of Common Stock underlying securities exercisable for or convertible into shares of Common Stock, acquired by Prentice directly from the Company on or prior to the date hereof. "Prior Agreements" has the meaning set forth in the recitals to this Agreement. "QIP" has the meaning set forth in the preamble to this Agreement. "Records" has the meaning set forth in Section 3.1.9. "Registrable Securities" means, collectively, the Soros Registrable Securities, the Maverick Registrable Securities, the Prentice Registrable Securities and the Rho Registrable Securities. "Registration Expenses" has the meaning set forth in Section 3.3. "Requesting Holders" has the meaning set forth in Section 2.4.1. "Required Effectiveness Deadline" has the meaning set forth in Section 2.2.1. "Rho" has the meaning set forth in the preamble to this Agreement. "Rho Notice" means a notice, if any, delivered by Rho to the Company stating that the Second Closing will not occur as a result of the failure to (x) satisfy the Stockholder Approval Condition, or (y) effect the Board Restructuring. "Rho Registrable Securities" means (i) the 8,823,529 shares of Common Stock acquired by Rho pursuant to the 2009 Stock Purchase Agreement and (ii) any shares of Common Stock that may be issued upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the Common Stock described in the foregoing clause (i). 4 "Rule 144" means Rule 144 promulgated under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Rule 415" means Rule 415 promulgated under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "SAC" has the meaning set forth in the preamble to this Agreement. "Second Closing" has the meaning set forth in the 2009 Securities Purchase Agreement. "Second Closing Date" has the meaning set forth in the 2009 Securities Purchase Agreement. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "SFM" has the meaning set forth in the preamble to this Agreement. "Shares" has the meaning set forth in the recitals to this Agreement. "Shelf Holders" means, collectively, Soros, Maverick and Rho. "Shelf Registrable Securities" means, collectively, the Rho Registrable Securities, the Soros 2008 Registrable Securities and the Maverick 2008 Registrable Securities. "Shelf Registration Statement" has the meaning set forth in Section 2.2.1. "Soros" has the meaning set forth in the preamble to this Agreement. "Soros 2008 Registrable Securities" means (i) the 32,701 shares of Common Stock issuable upon exercise of warrants issued to Soros pursuant to the 2008 Standby Commitment Agreement, (ii) the shares of Common Stock issuable upon conversion of the convertible notes issued to Soros pursuant to the 2008 Note Purchase Agreement and (iii) any shares of Common Stock that may be issued upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the Common Stock described in the foregoing clauses (i) through (ii). "Soros Registrable Securities" mean the shares of Common Stock, and the shares of Common Stock underlying securities exercisable for or convertible into shares of Common Stock, acquired by Soros directly from the Company on or prior to the date hereof. "Stockholder Approval Condition" has the meaning set forth in the 2009 Securities Purchase Agreement. 5 "Voting Agreement" means the Amended and Restated Voting Agreement, dated as of December 21, 2009, by and among the Company and the Investors. "Withdrawal Period" has the meaning set forth in Section 2.5.5. 1.2 General Interpretive Principles. 1.2.1. All share information in this Agreement reflects the 1 for 10 reverse stock split effected by the Company on April 3, 2008. 1.2.2. Whenever used in this Agreement, except as otherwise expressly provided or unless the context otherwise requires, any noun or pronoun shall be deemed to include the plural as well as the singular and to cover all genders. The name assigned to this Agreement and the section captions used herein are for convenience of reference only and shall not be construed to affect the meaning, construction or effect hereof. Unless otherwise specified, the terms "hereof," "herein," hereunder" and similar terms refer to this Agreement as a whole (including exhibits, schedules and disclosure statements hereto), and references herein to Sections refer to Sections of this Agreement. 2. REGISTRATION RIGHTS. 2.1 Termination of Prior Registration Rights; Securities Subject to this Agreement. 2.1.1. Termination of Prior Registration Rights. The Company and the Existing Holders hereby terminate all registration rights granted to the Existing Holders under the Prior Agreements. The Existing Holders hereby agree to accept the registration rights afforded by this Agreement in lieu of the registration rights granted to them under the Prior Agreement. Following the execution hereof, this Agreement shall embody all of the registration rights granted to the Investors. 2.1.2. Securities Subject to this Agreement. For the purposes of this Agreement, Registrable Securities will cease to be Registrable Securities when such Registrable Securities are sold and otherwise transferred pursuant to Rule 144 under the Securities Act or a registration statement covering such Registrable Securities has been declared effective under the Securities Act by the Commission and such Registrable Securities have been disposed of pursuant to such effective registration statement or such Registrable Securities can be sold under Rule 144 without volume limitations. 2.2 Shelf Registration. 2.2.1. 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 "Shelf Registration Statement") with respect to the offer and sale of the Shelf Registrable Securities within thirty (30) days following the first to occur of (x) the Second Closing Date or (y) the date of the Company's receipt of the Rho Notice (such date of receipt being referred to herein as the "No Second Closing Notice Date") (or forty-five (45) days following such date if such thirty (30) day deadline falls within the period during which the Company is preparing its audited financial 6 statements) (the first to occur of subsections (x) and (y) of this Section 2.2.1 shall collectively be referred to as the "Filing Deadline") and (ii) cause the Shelf Registration Statement to be declared effective by the Commission, subject to receipt of necessary information from the Shelf Holders, within one hundred and eighty (180) days following (x) the Second Closing Date or (y) the No Second Closing Notice Date, as the case may be (the one hundred and eightieth (180th) day following such date being referred to herein as the "Required Effectiveness Deadline"). The Company shall use commercially reasonable best efforts to maintain the effectiveness of such Shelf Registration Statement until the earliest to occur of the following (x) all of the Shelf Registrable Securities have been disposed of by Shelf Holders pursuant to the Shelf Registration Statement, (y) all of the Shelf Registrable Securities can be resold, without registration, pursuant to Rule 144 without volume limitations or (z) the Company is no longer a public company subject to the rules and regulations of the Exchange Act. 2.2.2. The Shelf Holders will promptly furnish to the Company in writing all information reasonably requested by the Company for use in connection with the preparation of the Shelf Registration Statement and obtaining the effectiveness thereof. The Shelf Holders hereby severally and not jointly represent and warrant 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. 2.2.3. Notwithstanding anything to the contrary herein, if at any time the Commission takes the position that the offering of some or all of the Shelf Registrable Securities in the Shelf Registration Statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415 as a result of a characterization by the Commission of the transaction described by the Shelf Registration Statement as a primary offering by the Company, the Company shall use its commercially reasonable best efforts to persuade the Commission that the offering contemplated by the Registration Statement is a valid secondary offering and not an offering "by or on behalf of the issuer" as defined in Rule 415. In the event that, despite the Company's commercially reasonable best efforts and compliance with the terms of this Section 2.2.3 the Commission refuses to alter its position, the Company shall (i) remove from the Shelf Registration Statement such portion of the Shelf Registrable Securities (the "Cut Back Shares") and/or (ii) agree to such restrictions and limitations on the registration and resale of the Shelf Registrable Securities as the Commission may require to assure the Company's compliance with the requirements of Rule 415; provided, however, that the Company shall have no liability to any Investor pursuant to Section 2.2.4 or otherwise as a result of the failure to register any Cut Back Shares as a result of the Commission's application of Rule 415 despite the Company's commercially reasonable best efforts to persuade the Commission that the offering contemplated by the Shelf Registration Statement is a valid secondary offering and not an offering "by or on behalf of the issuer" as defined in Rule 415. Any Cut-Back Shares required to be removed from the Shelf Registration Statement shall be removed (i) first, from the Soros 2008 Registrable Securities and the Maverick 2008 Registrable Securities covered by such Shelf Registration Statement until all of the Soros 2008 Registrable Securities and the Maverick 2008 Registrable Securities have been removed (and, among them, on a pro rata basis based on the number of Soros 2008 Registrable Securities and Maverick 2008 Registrable Securities outstanding as of the date of this Agreement) and (ii) second, from the Rho Registrable Securities covered by such Shelf Registration Statement. As soon as practicable following such intervening period of time as shall be required by the Commission or Commission guidance prior to the filing thereof, the 7 Company shall file one or more additional registration statements covering the resale of as many Cut Back Shares allowed by the Commission or Commission guidance to be so registered while maintaining the Company's compliance with Rule 415 (each, an "Additional Shelf Registration Statement"). Any such Additional Shelf Registration Statement shall cover (i) first, the Rho Registrable Securities until all of the Rho Registrable Securities are covered and (ii) second, the Soros 2008 Registrable Securities and the Maverick 2008 Registrable Securities (on a pro rata basis based on the number of Soros 2008 Registrable Securities and Maverick 2008 Registrable Securities outstanding as of the date of this Agreement). The Company shall use its commercially reasonable best efforts to file each Additional Shelf Registration Statement on or prior to 10 business days after such day that represents the first opportunity that the Commission allows the Additional Registration Statement to be filed without the offering of the shares registered thereunder being deemed a primary offering and cause each Additional Shelf Registration Statement to be declared effective no later than, as applicable (a) five business days after the Company receives notice from the Commission that the Additional Shelf Registration Statement will not become subject to review or (b) if the Additional Shelf Registration Statement becomes subject to review by the Commission, 90 days after the filing thereof. With regard to any such Additional Shelf Registration Statement, all of the provisions of this Section 2.2.3 shall again be applicable to the Cut Back Shares. The Company shall give Rho, Soros and Maverick prompt notice of the amount of Shelf Registrable Securities excluded from each Additional Shelf Registration Statement. Each Additional Shelf Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Shares on Form S-3, in which case such registration shall be on another appropriate form in accordance with the Securities Act and the Exchange Act). 2.2.4. If: (i) the Shelf Registration Statement is not filed on or prior to the Filing Deadline or (ii) the Shelf Registration Statement is not declared effective by the Commission (or otherwise does not become effective) on or prior to the Required Effectiveness Deadline (any such failure or breach being referred to as an "Event," and the date on which such Event occurs being referred to as "Event Date"), then, in addition to any other rights available to Rho: (x) on such Event Date the Company shall issue to Rho warrants to purchase shares of Common Stock equal to 1% of the fully diluted outstanding shares of Common Stock for each full 30-day period following the Filing Deadline or the Required Effectiveness Deadline (as applicable) until such time as the Shelf Registration Statement is filed or declared effective by the Commission (or otherwise becomes effective), as applicable; provided however, that such warrant issuances shall not exceed, in the aggregate, 10% of the fully diluted outstanding shares of Common Stock; provided further, however, if the Stockholder Approval Condition shall not have been satisfied, in lieu of such warrant issuances, the Company shall pay to Rho on such Event Date an amount in cash, as partial liquidated damages and not as a penalty, equal to 1% of the aggregate amount invested by Rho in the Company on each full 30-day period following the Filing Deadline or the Required Effectiveness Deadline (as applicable) until such time as the Shelf Registration Statement is filed or declared effective by the Commission (or otherwise becomes effective), as applicable, up to a maximum amount of 10% of such invested amount. If the Company fails to pay any partial liquidated damages pursuant to this Section 2.2.4 in full within seven days after the date payable, the Company will pay interest thereon at the rate of 10% per annum (or such lesser amount that is permitted to be paid by applicable law) to Rho, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily 8 pro rata basis prior to the time such Shelf Registration Statement is declared effective by the Commission (or otherwise becomes effective). 2.2.5. In the event that any warrants are issued pursuant to Section 2.2.4, the Company's Board of Directors shall adopt a resolution in accordance with the procedures set forth in Rule 16b-3 promulgated under the Exchange Act so that the acquisition by Rho and its affiliates (and any directors designated by Rho in accordance with the terms of Voting Agreement) of the securities pursuant to this Agreement shall be an exempt transaction for purposes of Section 16 of the Exchange Act. 2.3 Maintenance of Effectiveness of Existing Registration Statement. The Company has on file an effective registration statement on Form S-3 (File No. 333-136866) registering the resale of the Existing Shelf Registrable Securities (the "Existing Holders Registration Statement"). The Company shall use commercially reasonable best efforts to maintain the effectiveness of the Existing Holders Registration Statement until the earliest to occur of the following (x) all of the Existing Shelf Registrable Securities have been disposed of by the Existing Holders pursuant to the Existing Holder Registration Statement or otherwise, (y) all of the Existing Holder Registrable Securities can be resold, without registration, pursuant to Rule 144 without volume limitations or (z) the Company is no longer a public company subject to the rules and regulations of the Exchange Act. 2.4 Piggy-Back Registration. 2.4.1. Participation. If the Company proposes to file a registration statement under the Securities Act with respect to an underwritten offering by the Company for its own account or for the account of any stockholder of any class of the Company's securities (other than a registration statement on Form S-4 or S-8 or any successor forms thereto) (a "Piggy-Back Registration"), then the Company shall, at such time, give prompt written notice of such proposed filing to each of the holders of Piggy-Back Registrable Securities, and such notice shall describe in detail the proposed registration and distribution and shall offer such holders the opportunity to register the number of Piggy-Back Registrable Securities as each such holder may request. The Company shall, and shall use commercially reasonable best efforts (within ten (10) days of the notice provided for in the preceding sentence) to cause the managing underwriter or underwriters of a proposed underwritten offering (the "Company Underwriter") to, permit the holders of Piggy-Back Registrable Securities who have requested in writing (within ten (10) days of the giving of the notice of the proposed filing by the Company) to participate in the registration for such offering (the "Requesting Holders") to include such Piggy-Back Registrable Securities in such offering on the same terms and conditions as the securities of the Company included therein. 2.4.2. Priority for Piggy-Back Registration. In connection with any Piggy-Back Registration by the Company for its own account, the Company shall not be required to include any Piggy-Back Registrable Securities therein unless the holders thereof accept the terms of the underwriting as agreed upon between the Company and the Company Underwriter. If, in the written opinion of the Company Underwriter, the registration of all, or part, of the Piggy-Back Registrable Securities which the Requesting Holders have requested to be included in the Piggy-Back Registration is likely to have a significant adverse effect on such Piggy-Back Registration, 9 then the Company shall be required to include in such Piggy-Back Registration only that number of Piggy-Back Registrable Securities, if any, which the Company Underwriter believes may be sold without causing such adverse effect, and the amount of securities to be offered in such Piggy-Back Registration shall be (i) first, 100% of the securities that the Company proposes to sell (ii) second, and only if all the securities referred to in clause (i) have been included, the number of Piggy-Back Registrable Securities that, in the opinion of the Company Underwriter, can be sold without having such adverse effect, with such number to be allocated pro rata among the Requesting Holders based on the relative number of Piggy-Back Registrable Securities then held by each such Requesting Holder. If any Requesting Holder would thus be entitled to include more shares than such holder requested to be registered, the excess shall be allocated among other Requesting Holders pro rata based upon their total ownership of Registrable Securities and such other shares of capital stock. In connection with any Demand Registration by the Company for the account of any stockholder of any class of the Company's securities, the priority of the securities to be registered for the benefit of any holder exercising its Piggy-Back Registration rights shall be as set forth in Section 2.5.3. 2.5 Demand Registration. 2.5.1. Request for Registration. At any time after the date hereof, either Rho or Soros (the "Demanding Holders") may make a written demand requiring the Company to effect the registration under the Securities Act of all or part of its Demand Registrable Securities in the form of an underwritten offering (a "Demand Registration"), and, subject to the limitations set forth in Section 2.5.2, the Company shall be required to effect such Demand Registration pursuant to and subject to the terms herein. Any demand for a Demand Registration shall specify the number of Demand Registrable Securities proposed to be sold and the intended methods of disposition thereof. Subject to the limitations set forth in Section 2.5.2., within forty-five (45) days of a request for a Demand Registration, the Company shall file a registration statement relating to such Demand Registration (the "Demand Registration Statement"), and shall use its commercially reasonable best efforts to cause such Demand Registration Statement to be declared by the Commission. 2.5.2. Limitations on Demand Registrations. The Company shall not be obligated to (i) effect more than two (2) Demand Registrations in respect of the Demand Registrable Securities held by Soros, (ii) effect more than two (2) Demand Registrations in respect of the Demand Registrable Securities held by Rho, (iii) effect more than one (1) Demand Registration in any six (6) month period or (iv) effect any Demand Registration where the aggregate price to the public of the Demand Registrable Securities proposed to be sold is less than $10 million. The managing underwriter or underwriters of a Demand Registration shall be a nationally recognized investment banking firm selected by the Company with the consent of the Demanding Holders, which consent will not be unreasonably delayed or withheld (the "Approved Underwriter"). If Soros and/or Rho participates in an offering pursuant to Section 2.4.1, Soros and/or Rho, as applicable, will be deemed to have used one (1) of its Demand Registrations to the extent the conditions set forth in Section 2.5.4 are satisfied and Soros and/or Rho, as applicable, was permitted by the Company Underwriter, in writing, to include in such offering at least 50% of the Registrable Securities owned by Soros and/or Rho, as applicable, as of the date of this Agreement, or such lesser number as was requested by Soros and/or Rho to be included in such offering. 10 2.5.3. Priority of Securities Registered Pursuant to Demand Registrations. If the Approved Underwriter advises the Company in writing that in its opinion the number of securities requested to be included in a Demand Registration exceeds the number which can be sold in such Demand Registration without being likely to have a significant adverse effect on such Demand Registration, the securities to be included in such Demand Registration (i) first, shall be allocated pro rata among the Demanding Holders who have requested to participate in such Demand Registration based on the relative number of Demand Registrable Securities then held by each such holder, (ii) second, and only if all the securities referred to in clause (i) have been included, the number of securities that the Company proposes to include in such Demand Registration that, in the opinion of the Approved Underwriter, can be sold without having such adverse effect and (iii) next, and only if all the securities referred to in clause (ii) have been included, the number of Piggy-Back Registrable Securities that, in the opinion of the Company Underwriter, can be sold without having such adverse effect, with such number to be allocated pro rata among the Requesting Holders based on the relative number of Piggy-Back Registrable Securities then held by each such Requesting Holder. 2.5.4. Effective Registration. A registration will not count as a Demand Registration until the registration statement filed with the Commission with respect to such Demand Registration has been declared effective and the Company has complied with all of its obligations under this Agreement with respect thereto; provided, however, that if, after such registration statement has been declared effective and during the period such registration statement is effective the offering of Demand Registrable Securities pursuant to such Demand Registration is interfered with by any stop order or injunction of the Commission or any other governmental agency or court, such registration statement with respect to such Demand Registration will be deemed not to have been declared effective, unless and until, such stop order or injunction is removed, rescinded or otherwise terminated; provided, further, that the Company shall not be obligated to file a second registration statement until a registration statement that has been filed is counted as a Demand Registration or is terminated 2.5.5. Deferral of Registration. Notwithstanding the foregoing, if, at any time prior to the effective date of the registration statement with respect to a Demand Registration, the Company is (i) pursuing an underwritten offering of shares of its capital stock for its own account, or engaged in or proposes to engage in (A) a material financing, (B) an acquisition of the capital stock or substantially all the assets of any other person (other than in the ordinary course of business) or (C) any disposition of material assets (other than in the ordinary course of business), any tender offer or any merger, consolidation, corporate reorganization or restructuring or other similar transaction; and (ii) the Board of Directors, using good faith, determines that it would be detrimental to the Company for a registration statement to be filed at such time, the Company may defer the filing of a registration statement with respect to any Demand Registration required by this Section 2.5 until a date not later than 120 days from the date of the Deferral Notice (as defined below) (the "Deferral Period"). If the Board of Directors of the Company makes such determination, the Company shall give written notice (the "Deferral Notice") of such determination to the holders of Registrable Securities; provided, that, the Company may exercise its right to delay a Demand Registration hereunder only once in any twelve-month period. The Company shall notify the holders of the expiration of the Deferral Period and shall cause the registration statement with respect to the Demand Registration to be filed on the fifth business day following the expiration of the Deferral Period (the "Withdrawal 11 Period") (or, if registration on such date is not practicable, as promptly as possible thereafter) unless, prior to the expiration of the Withdrawal Period, the holders holding a majority of Demand Registrable Securities to be included in any such Demand Registration, by written notice to the Company, withdraw the request made under this Section 2.5, in which case, such request shall not count as one of the Demand Registrations permitted hereunder and the Company shall pay all Registration Expenses in connection with such registration. 2.6 Blackout Period. If at any time or from time to time after the date of effectiveness of any registration statement that the Company is required to effect or maintain pursuant to this Section 2, the Company notifies the holders of Registrable Securities in writing of the existence of a Potential Material Event (as defined below), such holders shall not offer or sell any of the Registrable Securities covered by any such registration statement, or engage in any other transaction involving or relating to such Registrable Securities, from the time of the giving of notice with respect to a Potential Material Event until such holder 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 thirty (30) consecutive days, and there shall be no more than sixty (60) days (which need not be consecutive) during any twelve-month period in which a Blackout Period is in effect. 3. REGISTRATION PROCEDURES. 3.1 Obligations of the Company. Subject to the registration procedures set forth in Sections 2.2, 2.4 and 2.5, in connection with the Company's registration obligations under Section 2, the Company shall use its commercially reasonable best efforts to effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of distribution thereof as expeditiously as reasonably practicable, and in connection therewith the Company shall: 3.1.1. prepare and file with the Commission a registration statement, and use its commercially reasonable best efforts to cause such registration statement to become effective under the Securities Act; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company shall (A) before the filing of such registration statement and the prospectus included therein or any amendments or supplements thereto, provide counsel selected by the holders of a majority of the Registrable Securities being registered in such registration ("Holders' Counsel") copies of all such documents in substantially the form proposed to be filed, to enable the Investors and Holders' Counsel to review such documents prior to the filing thereof, and the Company shall make such 12 reasonable changes thereto as may be reasonably requested by the Investors and (B) notify the Holders' Counsel and each seller of Registrable Securities of any stop order issued or threatened by the Commission and take all reasonable action required to prevent the entry of such stop order or to remove it if entered. Notwithstanding the foregoing, to the extent Rho Registrable Securities are included on a registration statement, with respect to such registration statement, Rho's counsel shall be promptly notified about any events described, and afforded the rights set forth, in subsections (A) and (B) hereof; 3.1.2. prepare and file with the Commission such amendments, including post-effective amendments, and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and in compliance with the provisions of the Securities Act until all Registrable Securities and other securities covered by such Registration Statement have been disposed of in accordance with the intended method(s) of distribution set forth in such registration statement (which period shall not exceed ninety (90) days (or until such earlier date on which the Company Underwriter shall notify the Company that it is unable to sell the balance of the Registrable Securities covered by such registration statement) in the case of a registration statement filed with respect to and used solely for an underwritten offering, and the applicable period set forth in this Agreement in any other case; 3.1.3. furnish to each seller of Registrable Securities, prior to filing a registration statement, copies of such registration statement as is proposed to be filed, and thereafter such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as each such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; 3.1.4. cause its counsel to issue to the Company's transfer agent, within two business days of the effectiveness date of a registration statement with respect to any of the Registrable Securities, an appropriate opinion or opinions (or a letter from the Company acceptable to the transfer agent) substantially to the effect that the Registrable Securities covered by such registration statement are subject to an effective registration statement and can be reissued free of restrictive legend, provided that the Company has not advised the transfer agent orally or in writing that the opinion has been withdrawn; 3.1.5. use reasonable efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller of Registrable Securities requests, and to continue such qualification in effect in such jurisdiction for as long as is permissible pursuant to the laws of such jurisdiction, or for as long as any such seller requests or until all of such Registrable Securities are sold, whichever is shortest, and do any and all other acts and things which may be reasonably necessary or advisable to enable any such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller; provided, however, that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3.1.4, (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction; 13 3.1.6. use reasonable efforts to cause the Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the seller or sellers of Registrable Securities to consummate the disposition of such Registrable Securities; 3.1.7. notify each seller of Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, and the Company shall promptly prepare a supplement or amendment to such prospectus and furnish to each seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, after delivery to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made; 3.1.8. enter into and perform customary agreements (including an underwriting agreement in customary form with the underwriter, if any, selected as provided herein) and take such other actions as are reasonably required in order to facilitate the disposition of such Registrable Securities; 3.1.9. make available for inspection by any seller of Registrable Securities, any managing underwriter participating in any disposition pursuant to such registration statement, Holders' Counsel and any attorney, accountant or other agent retained by any such seller or any managing underwriter (each, an "Inspector" and collectively, the "Inspectors"), during regular business hours and upon reasonable advance notice, all financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees, and the independent public accountants of the Company, to supply all information reasonably requested by any such Inspector in connection with such registration statement; 3.1.10. if such sale is pursuant to an underwritten offering, obtain a "cold comfort" letter from the Company's independent public accountants in customary form and covering such matters of the type customarily covered by "cold comfort" letters as Holders' Counsel or the managing underwriter reasonably requests; 3.1.11. furnish, at the request of any seller of Registrable Securities on the date such securities are delivered to the underwriters for sale pursuant to such registration or, if such securities are not being sold through underwriters, on the date the registration statement with respect to such securities becomes effective, an opinion, dated such date, of counsel representing the Company for the purposes of such registration, addressed to the underwriters, if any, and to the seller making such request, covering such legal matters with respect to the registration in 14 respect of which such opinion is being given as such seller may reasonably request and are customarily included in such opinions; 3.1.12. cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed, provided, that the applicable listing requirements are satisfied; 3.1.13. cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the Financial Industry Regulatory Authority ("FINRA"); 3.1.14. promptly notify each Investor whose shares of Common Stock are covered by such registration statement, and promptly confirm such notice in writing, if such notice was verbally given, (A) when the registration statement covering the Registrable Securities has become effective and when any post effective amendments thereto have become effective, (B) of the receipt of any comments from the Commission with respect to any such document or a document incorporated by reference therein, and (C) of any request by the Commission or any other federal or state securities authority for amendments or supplements to the registration statement or a prospectus or for additional information after the registration statement has become effective, and 3.1.15. use reasonable efforts to take all other steps necessary to effect the registration of the Registrable Securities contemplated hereby. 3.2 Notice to Discontinue. Each holder of Registrable Securities agrees that, upon receipt of any written notice from the Company of the happening of any event of the kind described in Section 3.1.7, such holder shall forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.1.7 and, if so directed by the Company, such holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such holder's possession, of the prospectus covering such Registrable Securities which is current at the time of receipt of such notice. If the Company shall give any such notice, the Company shall extend the period during which such registration statement shall be maintained effective pursuant to this Agreement (including without limitation the period referred to in Section 3.1.2) by the number of days during the period from and including the date of the giving of such notice pursuant to Section 3.1.7 to and including the date when the holder shall have received the copies of the supplemented or amended prospectus contemplated by and meeting the requirements of Section 3.1.7. 3.3 Registration Expenses. The Company shall pay all expenses (other than underwriting discounts and commissions) arising from or incident to the Company's performance of, or compliance with, this Agreement, including without limitation, (i) Commission, stock exchange, NASDAQ and FINRA registration and filing fees, (ii) all fees and expenses incurred by Company in complying with securities or blue sky laws (including reasonable fees, charges and disbursements of counsel in connection with blue sky qualifications 15 of the Registrable Securities), (iii) all printing, messenger and delivery expenses, and (iv) the fees, charges and disbursements of counsel to the Company and of its independent public accountants and any other accounting and legal fees, charges and expenses incurred by the Company (including without limitation any expenses arising from any special audits incident to or required by any registration or qualification) in connection with any Demand Registration pursuant to the terms of this Agreement, regardless of whether such registration statement is declared effective. All of the expenses described in this Section 3.3 are referred to herein as "Registration Expenses." 4. INDEMNIFICATION AND CONTRIBUTION. 4.1 Indemnification by the Company. To the fullest extent permitted by law, the Company will indemnify each holder of Registrable Securities, each of its officers, directors, agents, partners, members, stockholders and employees of each such Person, and each Person, if any, who controls such holder within the meaning of the Securities Act or Exchange Act, with respect to each registration which has been effected pursuant to this Agreement against all claims, losses, damages and liabilities, including, without limitation, fees and other expenses reasonably incurred in connection with any investigation relating to, or defending, any such claims, losses, damages and liabilities (or actions in respect thereof), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement filed with the Commission in connection with such registration, including any preliminary prospectus or final prospectus contained therein, any amendments or supplements thereto or any "issuer free writing prospectus" (as defined in Rule 433 under the Securities Act) related thereto, or based on 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; provided, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based solely upon written information regarding such holder furnished to the Company by such holder expressly for use in such registration statement. 4.2 Indemnification by the Investors. To the fullest extent permitted by law, each of the holders of Registrable Securities will, if Registrable Securities held by it are included in the securities as to which any registration pursuant to this Agreement is being effected, severally and not jointly indemnify the Company, each of its directors and officers, each Person who controls the Company within the meaning of the Securities Act or the Exchange Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement filed in connection with such registration, including any preliminary prospectus or final prospectus contained therein, any amendments or supplements thereto or any "issuer free writing prospectus" related thereto, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements by such holder therein not misleading, and will reimburse the Company, its directors and officers and Persons who control the company for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is actually made in such registration statement, including any preliminary or final prospectus contained therein, any amendments or supplements thereto or any 16 "issuer free writing prospectus" related thereto, in reliance upon and in conformity with written information regarding such holder furnished to the Company by such holder expressly for use in such registration statement. Notwithstanding the provisions of this Section 4.2, the liability of each Investor (including any transferee of the registration rights) under this Section 4.2 shall not exceed the net proceeds actually received by such Investor in connection with any sale of the Registrable Securities. 4.3 Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder (the "Indemnified Party") agrees to give prompt written notice to the indemnifying party (the "Indemnifying Party") after the receipt by the Indemnified Party of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which the Indemnified Party intends to claim indemnification or contribution pursuant to this Agreement; provided, that the failure so to notify the Indemnifying Party shall not relieve the Indemnifying Party of any liability that it may have to the Indemnified Party hereunder unless, and only to the extent that, such failure results in the Indemnifying Party's forfeiture of substantial rights or defenses. If notice of commencement of any such action is given to the Indemnifying Party as above provided, the Indemnifying Party shall be entitled, after written notice to the Indemnified Party, to participate in and, to the extent it may wish, jointly with any other Indemnifying Party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and reasonably satisfactory to such Indemnified Party. The Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel (other than reasonable costs of investigation) shall be paid by the Indemnified Party unless (i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party fails to assume the defense of such action within a reasonable period of time and with counsel satisfactory to the Indemnified Party in its reasonable judgment, (iii) the Indemnified Party to any such action (including any impleaded parties) have been advised by such counsel that either (A) representation of such Indemnified Party and the Indemnifying Party by the same counsel would be inappropriate under applicable standards of professional conduct or (B) there may be one or more legal defenses available to the Indemnified Party which are different from or additional to those available to the Indemnifying Party. No Indemnifying Party shall, without the prior written consent of each Indemnified Party, settle, compromise or consent to the entry of any judgment unless such settlement, compromise or consent includes an unconditional release of the Indemnified Party from all liability relating thereto. All fees and expenses required to be paid to the Indemnified Party pursuant to this Section 4.3 shall be advanced periodically during the course of the Indemnified Party's investigation or defense; provided, however, that the obligations of any Indemnified Party to advance fees and expenses to an Indemnified Party shall be subject to the receipt by such Indemnified Party of an undertaking by or on behalf of the Indemnified Party to repay the amounts so advanced if (and to the extent) it is subsequently determined that the Indemnified Party is not entitled to indemnification with respect to such investigation or defense. In either of such cases the Indemnifying Party shall not have the right to assume the defense of such action on behalf of such Indemnified Party. No Indemnifying Party shall be liable for any settlement entered into without its written consent, which consent shall not be unreasonably withheld, conditioned or delayed. 4.4 Contribution. If the indemnification provided for in this Section 4 from the Indemnifying Party is applicable by its terms but unavailable to an Indemnified Party hereunder 17 in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall severally and not jointly contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative faults of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Sections 4.1, 4.2, 4.3, any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 4, no Investor (including any transferee of the registration rights) shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Investor from the sale of the Registrable Securities subject to the claim, loss, damage, liability or action exceeds the amount of any damages that such Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person. 5. UNDERWRITING AND DISTRIBUTION. 5.1 Rule 144. The Company covenants that for so long as it is a public company subject to the rules and regulations of the Exchange Act, it shall take such action as each holder of Registrable Securities may reasonably request (including providing any information necessary to comply with Rules 144 under the Securities Act), all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such rules may be amended from time to time, or (b) any similar rules or regulations hereafter adopted by the Commission. The Company shall, upon the request of any holder of Registrable Securities, deliver to such holder a written statement as to whether the Company has complied with such requirements. 5.2 Holdback Agreements. 5.2.1. Restrictions on Public Sale by Holders of Registrable Securities. To the extent not inconsistent with applicable law, and provided that all of the Company's executive officers, directors and, to the extent they are parties to this Agreement, holders of five percent or more of the outstanding capital stock of the Company enter into substantially similar agreements, the Investors agree that, in connection with a registered public offering of the Company's equity 18 securities, they will not effect any public sale or distribution of any Registrable Securities or of any securities convertible into or exchangeable or exercisable for such Registrable Securities, including a sale pursuant to Rule 144 under the Securities Act, during the 90 days beginning on, the effective date of the Company's registration statement (except as part of such registration), if and to the extent reasonably requested by the Company in writing in the case of a non-underwritten public offering or to the extent reasonably requested by the Company Underwriter or Approved Underwriter in writing in the case of an underwritten public offering. 5.2.2. Restrictions on Public Sale by the Company. The Company agrees not to effect any public sale or distribution of any of its equity securities, or any securities convertible into or exchangeable or exercisable for such equity securities (except pursuant to registrations on Forms S-4 or S-8 of the Securities Act or any successor or other forms not available for registering equity securities for sale to the public) during the ten business days prior to, and during the 30 day period beginning on the effective date of any registration statement in which the holders of Registrable Securities are participating unless such registration statement also relates to securities being offered by the Company. In addition, the Company agrees not to file, without the consent of Rho, any registration statement for an underwritten offering of its securities until a Shelf Registration Statement or one or more Additional Shelf Registration Statements covering all of the Rho Registrable Securities has been declared effective by the SEC. 6. MISCELLANEOUS. 6.1 Term. This Agreement shall terminate with respect to each Investor on the date such Investor no longer owns any Registrable Securities. For the avoidance of doubt, this Agreement shall continue to remain in effect with respect to any other Investor that continues to own Registrable Securities. The provisions of Section 4 and Section 5.1 shall survive any termination. 6.2 Assignment; Binding Effect. This Agreement and the rights, duties and obligations of each Investor hereunder may be assigned (in whole or in part) by such Investor to transferees or assignees of all or any portion of its Registrable Securities, but only if (i) the such Investor (or subsequent transferor) agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being transferred or assigned, (iii) at or before the time the Company received the written notice contemplated by clause (ii) of this sentence, the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained in this Agreement, (iv) the transferee is an "accredited investor" as that term is defined in Rule 501 of Regulation D and (v) insofar as any assignment covers the Demand Registration Rights, the transferee or assignee is acquiring at least 50% of the Registrable Securities owned by such Investor and its Affiliates immediately prior to such transfer and such Investor and its transferee or assignee allocate the Demand Registration Rights between them so as not to increase the number of unused Demand Registrations available to such Investor and its Affiliates in effect immediately prior to such transfer. This Agreement and the 19 provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and their respective successors. 6.3 Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of delivery, if delivered personally or by facsimile, upon confirmation of receipt, (b) on the first business day following the date of dispatch if delivered by a recognized next-day courier services, or (c) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid, to the parties to this Agreement at the following address or to such other address either party to this Agreement shall specify by notice to the other party: If to the Company: Bluefly, Inc. 42 West 39th Street New York, New York 10018 Telephone No.: (212) 944-8000 Facsimile No.: (212) 354-3400 Attention: Chief Financial Officer With a copy to (which shall not constitute notice): Dechert LLP 1095 Avenue of the Americas New York, NY 10036 Telephone No.: (212) 698 3500 Facsimile No.: (212 698 3599 Attention: Richard A. Goldberg, Esq. If to Soros: Quantum Industrial Partners LDC SFM Domestic Investments LLC c/o Soros Fund Management LLC 888 Seventh Avenue New York, New York 10106 Telephone No.: (212) 320-5584 Facsimile No.: (646) 731-5584 Attention: Jay Schoenfarber If to Maverick: Maverick Fund USA, Ltd. Maverick Fund, L.D.C. Maverick Fund II, Ltd. c/o Maverick Capital, Ltd. 300 Crescent Court, 18th Floor Dallas, Texas 75201 Telephone No.: (214) 880-4059 Facsimile No.: (214) 880-4042 Attention: General Counsel 20 With a copy to (which shall not constitute notice): Shearman & Sterling, LLP 599 Lexington Avenue New York, New York 10022 Telephone No.: (212) 848-8902 Facsimile No.: (646) 848-8902 Attention: Stephen M. Besen If to Prentice: Prentice Capital Management, L.P. 623 Fifth Avenue, 32nd Floor New York, NY 10022 Facsimile No.: (212) 756-1480 Attention: Michael Zimmerman With a copy to (which shall not constitute notice): Lowenstein Sandler PC 1251 Avenue of the Americas New York, NY 10020 Facsimile No.: (973) 422-6807 Attention: Matthew B. Hoffman If to Rho: Rho Ventures VI, L.P. Carnegie Hall Tower 152 West 57th Street, 23rd Floor New York, New York 10019 Telephone No.: (212) 751-6677 Facsimile No.: (212.751.3613 Attention: Jeffrey I. Martin, Esq. With a copy to (which shall not constitute notice): Goodwin Procter LLP The New York Times Building 620 Eighth Avenue New York, New York Telephone No.: (212) 813-8800 Facsimile No.: (212) 355-3333 Attention: Stephen M. Davis, Esq. 6.4 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be deemed to be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforced in accordance with its terms to the maximum extent permitted by 21 applicable law. 6.5 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. 6.6 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties and/or their affiliates with respect to the subject matter of this Agreement. 6.7 Modifications and Amendments. Any provision of this Agreement may be amended or modified if, but only if, such amendment or modification is in writing and is duly executed and delivered by the Company and the Investors. 6.8 Titles and Headings. Titles and headings of sections of this Agreement are for convenience only and shall not affect the construction of any provision of this Agreement. 6.9 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may only be brought in the United States District Court for the Southern District of New York or any New York State court sitting in the Borough of Manhattan in New York City, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law (as defined in the Investment Agreement), any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. 6.10 Waiver of Trial by Jury. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 22 EXECUTION COPY IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be executed and delivered by their duly authorized representatives as of the date first written above. BLUEFLY, INC. By: ___________________________ Name: Title: QUANTUM INDUSTRIAL PARTNERS LDC By: ___________________________ Name: Title: SFM DOMESTIC INVESTMENTS LLC By: ___________________________ Name: Title: MAVERICK FUND USA, LTD By: MAVERICK CAPITAL, LTD., as its Investment Manager By: ___________________________ Name: Title: MAVERICK FUND L.D.C. By: MAVERICK CAPITAL, LTD., as its Investment Manager By: ___________________________ Name: Title: MAVERICK FUND II, LTD By: MAVERICK CAPITAL, LTD., as its Investment Manager By: ___________________________ Name: Title: PRENTICE CAPITAL PARTNERS, LP By: Prentice Capital GP, LLC By: ___________________________ Name: Title: PRENTICE CAPITAL PARTNERS QP, LP By: Prentice Capital GP, LLC By: ___________________________ Name: Title: PRENTICE CAPITAL OFFSHORE, LTD. By: Prentice Capital Management, LP By: ___________________________ Name: Title: GPC XLIII, LLC By: Prentice Capital Management, LP By: ___________________________ Name: Title: PEC I, LLC By: Prentice Capital Management, LP By: ___________________________ Name: Title: S.A.C. CAPITAL ASSOCIATES, LLC By: S.A.C. Capital Advisors, LLC By: ___________________________ Name: Title: RHO VENTURES VI, L.P. By: ___________________________ Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----