-----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, HQwicgVtb/OpeAO4k/A/D9igfaotAQIoyrNbYb0/CQSZwmhbmLTdII/XGNgqBEGS jvmhrWXcPUqFOfrPOp18vw== 0000921530-03-000199.txt : 20030319 0000921530-03-000199.hdr.sgml : 20030319 20030319172306 ACCESSION NUMBER: 0000921530-03-000199 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20030319 GROUP MEMBERS: GEORGE SOROS GROUP MEMBERS: QIH MANAGEMENT INVESTOR, L.P. GROUP MEMBERS: QIH MANAGEMENT LLC GROUP MEMBERS: QUANTUM INDUSTRIAL PARTNERS LDC GROUP MEMBERS: SFM DOMESTIC INVESTMENTS LLC GROUP MEMBERS: SOROS FUND MANAGEMENT LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BLUEFLY INC CENTRAL INDEX KEY: 0001030896 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 133612110 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-52401 FILM NUMBER: 03609619 BUSINESS ADDRESS: STREET 1: 42 WEST 39TH ST CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2129448000 MAIL ADDRESS: STREET 1: 42 WEST 39TH ST CITY: NEW YORK STATE: NY ZIP: 10018 FORMER COMPANY: FORMER CONFORMED NAME: PIVOT RULES INC DATE OF NAME CHANGE: 19970305 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SOROS FUND MANAGEMENT LLC CENTRAL INDEX KEY: 0001029160 IRS NUMBER: 133914976 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 888 SEVENTH AVENUE 33RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10106 BUSINESS PHONE: 2128721054 MAIL ADDRESS: STREET 1: C/O AKIN, GUMP, STRAUSS,HAUER,FELD, STREET 2: 399 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D/A 1 bluefly_13da18.txt BLUEFLY, INC. MARCH 17, 2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 18)* BLUEFLY, INC. ------------------------------- (Name of Issuer) Common Stock, Par Value $0.01 Per Share ---------------------------------------------- (Title of Class of Securities) 096227103 ------------------------------- (CUSIP Number) Stephen M. Vine, Esq. Akin Gump Strauss Hauer & Feld LLP 590 Madison Avenue New York, New York 10022 (212) 872-1000 ------------------------------------------ (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 17, 2003 ----------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [ ]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See ss.240.13d-7 for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Continued on following pages Page 1 of 23 Pages Exhibit Index: Page 13 CUSIP No. 096227103 Page 2 of 23 Pages 1 Names of Reporting Persons I.R.S. Identification Nos. of above persons (entities only). QUANTUM INDUSTRIAL PARTNERS LDC 2 Check the Appropriate Box if a Member of a Group (See Instructions) a. [ ] b. [X] 3 SEC Use Only 4 Source of Funds (See Instructions) Not Applicable 5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization Cayman Islands 7 Sole Voting Power Number of 46,914,240 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 46,914,240 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 46,914,240 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] 13 Percent of Class Represented By Amount in Row (11) 89.1% 14 Type of Reporting Person (See Instructions) OO; IV CUSIP No. 096227103 Page 3 of 23 Pages 1 Names of Reporting Persons I.R.S. Identification Nos. of above persons (entities only). QIH MANAGEMENT INVESTOR, L.P. 2 Check the Appropriate Box if a Member of a Group (See Instructions) a. [ ] b. [X] 3 SEC Use Only 4 Source of Funds (See Instructions) Not Applicable 5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 46,914,240 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 46,914,240 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 46,914,240 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] 13 Percent of Class Represented By Amount in Row (11) 89.1% 14 Type of Reporting Person (See Instructions) PN; IA CUSIP No. 096227103 Page 4 of 23 Pages 1 Names of Reporting Persons I.R.S. Identification Nos. of above persons (entities only). QIH MANAGEMENT LLC 2 Check the Appropriate Box if a Member of a Group (See Instructions) a. [ ] b. [X] 3 SEC Use Only 4 Source of Funds (See Instructions) Not Applicable 5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 46,914,240 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 46,914,240 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 46,914,240 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] 13 Percent of Class Represented By Amount in Row (11) 89.1% 14 Type of Reporting Person (See Instructions) OO CUSIP No. 096227103 Page 5 of 23 Pages 1 Names of Reporting Persons I.R.S. Identification Nos. of above persons (entities only). SOROS FUND MANAGEMENT LLC 2 Check the Appropriate Box if a Member of a Group (See Instructions) a. [ ] b. [X] 3 SEC Use Only 4 Source of Funds (See Instructions) Not Applicable 5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 46,914,240 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 46,914,240 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 46,914,240 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] 13 Percent of Class Represented By Amount in Row (11) 89.1% 14 Type of Reporting Person (See Instructions) OO; IA CUSIP No. 096227103 Page 6 of 23 Pages 1 Names of Reporting Persons I.R.S. Identification Nos. of above persons (entities only). SFM DOMESTIC INVESTMENTS LLC 2 Check the Appropriate Box if a Member of a Group (See Instructions) a. [ ] b. [X] 3 SEC Use Only 4 Source of Funds (See Instructions) Not Applicable 5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 1,535,123 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 1,535,123 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 1,535,123 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [X] 13 Percent of Class Represented By Amount in Row (11) 12.4% 14 Type of Reporting Person (See Instructions) OO CUSIP No. 096227103 Page 7 of 23 Pages 1 Names of Reporting Persons I.R.S. Identification Nos. of above persons (entities only). GEORGE SOROS (in the capacity described herein) 2 Check the Appropriate Box if a Member of a Group (See Instructions) a. [ ] b. [X] 3 SEC Use Only 4 Source of Funds (See Instructions) Not Applicable 5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] 6 Citizenship or Place of Organization United States 7 Sole Voting Power Number of 48,449,363 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 48,449,363 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 48,449,363 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] 13 Percent of Class Represented By Amount in Row (11) 89.7% 14 Type of Reporting Person (See Instructions) IA Page 8 of 23 Pages This Amendment No. 18 to Schedule 13D relates to shares of Common Stock, $0.01 par value per share (the "Shares"), of Bluefly, Inc. (the "Issuer"). This Amendment No. 18 supplementally amends the initial statement on Schedule 13D, dated August 6, 1999, and all amendments thereto (collectively, the "Initial Statement"), filed by the Reporting Persons (as defined herein). This Amendment No. 18 is being filed by the Reporting Persons to report, among other things, that QIP (as defined herein) agreed to amend the terms of the Reimbursement Agreement with the Issuer to increase the amount and extend the terms of the Standby Letter of Credit as described herein. In connection with this agreement, QIP and SFM Domestic Investments (as defined herein) each received from the Issuer warrants to purchase Shares. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Initial Statement. The Initial Statement is supplementally amended as follows. Item 2. Identity and Background This Statement is being filed on behalf of each of the following persons (collectively, the "Reporting Persons"): (i) Quantum Industrial Partners LDC ("QIP"); (ii) QIH Management Investor, L.P. ("QIHMI"); (iii) QIH Management LLC ("QIH Management"); (iv) Soros Fund Management LLC ("SFM LLC"); (v) SFM Domestic Investments LLC ("SFM Domestic Investments"); and (vi) Mr. George Soros ("Mr. Soros"). This Statement relates to the Shares held for the accounts of QIP and SFM Domestic Investments. Item 3. Source and Amount of Funds or Other Consideration The information set forth in Item 6 hereof is hereby incorporated by reference into this Item 3. In consideration for and as a condition to QIP's agreement to increase the amount of the Standby Letter of Credit (as defined herein) from $1.5 million to $2.0 million and to extend the term of the Standby Letter of Credit until November 15, 2004, QIP and SFM Domestic Investments each received from the Issuer, among other things, a Standby Extension Warrant (as defined herein). Pursuant to an understanding between QIP and SFM Domestic Investments, SFM Domestic Investments has agreed to reimburse QIP for its proportionate share (based upon QIP's and SFM Domestic Investments' relative ownership in the Issuer) of monies paid by QIP pursuant to the Standby Letter of Credit. 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. Page 9 of 23 Pages Item 5. Interest in Securities of the Issuer The information set forth in Item 6 hereof is hereby incorporated by reference into this Item 5. According to information provided to the Reporting Persons from the Issuer, as of March 19, 2003, 11,240,568 Shares were outstanding. (a) (i) Each of QIP, QIHMI, QIH Management and SFM LLC may be deemed the beneficial owner of 46,914,240 Shares (approximately 89.1% of the total number of Shares outstanding assuming the exercise and conversion of all of the securities held for the account of QIP). This number consists of A) 5,287,082 Shares, B) 3,806,923 Shares issuable upon the conversion of 445,410 shares of Series A Preferred Stock, C) 26,503,095 Shares issuable upon the conversion of 8,607,843 shares of Series B Preferred Stock, D) 1,274,078 Shares currently issuable upon the conversion of 968.3 shares of Series C Preferred Stock held for the account of QIP, E) 9,092,525 Shares currently issuable upon the conversion of the 6,910.319 shares of Series D Preferred Stock held for the account of QIP, and F) 950,537 Shares issuable upon the exercise of warrants held for the account of QIP, (ii) SFM Domestic Investments may be deemed the beneficial owner of 1,535,123 Shares (approximately 12.4% of the total number of Shares outstanding assuming the exercise and conversion of all the securities held for its account). This number consists of A) 172,995 Shares, B) 124,700 Shares issuable upon the conversion of 14,590 shares of Series A Preferred Stock held for its account, C) 866,942 Shares issuable upon the conversion of 281,571 shares of Series B Preferred Stock held for its account, D) 41,710 Shares currently issuable upon the conversion of 31.7 shares of Series C Preferred Stock held for its account, E) 297,669 Shares issuable upon the conversion of 226.229 shares of Series D Preferred Stock held for its account, and F) 31,107 Shares issuable upon the exercise of warrants held for its account, (iii) Mr. Soros may be deemed the beneficial owner of 48,449,363 Shares (approximately 89.7% of the total number of Shares outstanding assuming the exercise and conversion of all of the securities held for the accounts of QIP and SFM Domestic Investments). This number consists of A) 46,914,240 Shares which may be deemed to be beneficially owned by QIP as described above, and B) 1,535,123 Shares which may be deemed to be beneficially owned by SFM Domestic Investments as described above. Mr. Soros disclaims beneficial ownership of any securities not held directly for his account. (b) (i) Each of QIP, QIHMI, QIH Management and SFM LLC (by virtue of the QIP contract) may be deemed to have the sole power to direct the voting and disposition of the 46,914,240 Shares which may be deemed to be beneficially owned by QIP as described above. Page 10 of 23 Pages (ii) SFM Domestic Investments may be deemed to have the sole power to direct the voting and disposition of the 1,535,123 Shares which may be deemed to be beneficially owned by SFM Domestic Investments as described above. (iii) Mr. Soros (as a result of his position with SFM LLC and in his capacity as the sole managing member of SFM Domestic Investments) may be deemed to have the sole power to direct the voting and disposition of the 48,449,363 Shares which may be deemed to be beneficially owned by QIP and SFM Domestic Investments as described above. (c) Except for the transactions described in Item 6 below, which were effected in a privately negotiated transaction, there have been no transactions effected with respect to the Shares since March 14, 2003 (the date of the last filing on Schedule 13D) by any of the Reporting Persons. (d) (i) The shareholders of QIP, including Quantum Industrial Holdings, Ltd., a British Virgin Islands international business company, have the right to participate in the receipt of dividends from, or proceeds from the sales of, the securities held for the account of QIP in accordance with their ownership interests in QIP. (ii) Certain members of SFM Domestic Investments have the right to participate in the receipt of dividends from, or proceeds from the sale of, the securities held for the account of SFM Domestic Investments. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. On March 17, 2003, the Issuer entered into Amendment #2 to Reimbursement Agreement with QIP ("Amendment #2"), amending the Reimbursement Agreement (a copy of which is incorporated hereto by reference as Exhibit SS to Amendment No. 10 to the Initial Statement. A copy of the form of Amendment #2 is incorporated by reference hereto as Exhibit RRR, and is incorporated herein by reference in response to this Item 6. Pursuant to Amendment #2, the Issuer and QIP amended the Reimbursement Agreement to (1) increase the amount of the Standby Letter of Credit from $1.5 million to $2.0 million, and (2) extend the term of the Standby Letter of Credit until November 15, 2004. As partial consideration for and as a condition of QIP's agreement to enter into Amendment #2, and SFM Domestic Investments' agreement to reimburse QIP for its proportionate share (based upon QIP's and SFM Domestic Investments' relative ownership in the Issuer) of monies paid by QIP pursuant to the Standby Letter of Credit, the Issuer agreed to issue warrants to QIP and SFM Domestic Investments granting them the right to subscribe for and purchase an aggregate amount of 25,000 shares. Of this amount, (1) QIP was granted the right to subscribe for and purchase 24,208 Shares and (2) SFM Domestic Investments was granted the right to subscribe for and purchase 792 Shares (collectively, the "Standby Extension Warrants"). A copy of the form of the Standby Extension Warrants is incorporated by reference hereto as Exhibit SSS, and is incorporated herein by reference in response to this Item 6. The exercise price of the Standby Extension Warrants is $0.78 per share. The Standby Extension Warrants are exercisable immediately beginning on March 17, 2003 and expire on March 17, 2013. Page 11 of 23 Pages The foregoing description of Amendment #2 and the Standby Extension Warrants do not purport to be complete and are qualified in their entirety by the terms of the related documents which are incorporated herein by reference. Except as set forth herein, the Reporting Persons do no have any contracts, arrangements, understandings or relationships with respect to any securities of the Issuer. Item 7. Material to be Filed as Exhibits The Exhibit Index is incorporated herein by reference. Page 12 of 23 Pages SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this Statement is true, complete and correct. Date: March 19, 2003 QUANTUM INDUSTRIAL PARTNERS LDC By: /s/ John F. Brown ----------------------------------- John F. Brown Attorney-in-Fact QIH MANAGEMENT INVESTOR, L.P. By: QIH Management LLC, its General Partner By: Soros Private Funds Management LLC, its Managing Member By: George Soros its Sole Member By: /s/ John F. Brown ----------------------------------- John F. Brown Attorney-in-Fact QIH MANAGEMENT LLC By: Soros Private Funds Management LLC, its Managing Member By: George Soros its Sole Member By: /s/ John F. Brown ----------------------------------- John F. Brown Attorney-in-Fact SOROS FUND MANAGEMENT LLC By: /s/ John F. Brown ----------------------------------- John F. Brown Assistant Counsel SFM DOMESTIC INVESTMENTS LLC By: George Soros Its Managing Member By: /s/ John F. Brown ----------------------------------- John F. Brown Attorney-in-Fact GEORGE SOROS By: /s/ John F. Brown ----------------------------------- John F. Brown Attorney-in-Fact Page 13 of 23 Pages EXHIBIT INDEX RRR. Form of Amendment No. 2 to Reimbursement Agreement, dated March 17, 2003, by and between Bluefly, Inc. and Quantum Industrial Partners LDC..... 14 SSS. Form of Warrant to Purchase Shares of Bluefly, Inc., dated March 17, 2003, issued to Quantum Industrial Partners LDC............................... 15 EX-99 3 bluefly13da18_exhrrr.txt EXHIBIT RRR 31703 Page 14 of 23 Pages EXHIBIT RRR AMENDMENT #2 TO REIMBURSEMENT AGREEMENT March 17, 2003 Bluefly, Inc. 42 West 39 Street New York, New York 10018 Gentlemen: Reference is made to the Reimbursement Agreement (the "Reimbursement Agreement") dated as of March 30, 2001, as amended, between Bluefly, Inc., a Delaware corporation, and Quantum Industrial Partners LDC, a Cayman Island limited duration company. This will confirm that the Reimbursement Agreement is hereby amended as follows: 1. The first sentence in Section 1 is deleted in its entirety and the following is substituted in its place and stead: "QIP hereby agrees to procure and maintain a Standby Letter of Credit until November 15, 2004, as Account Party, for the benefit of Lender in an amount equal to $2,000,000 for delivery by March 17, 2003." 2. The following language is added to the end of Section 6 (a): "As partial consideration for and a condition to its increasing the value of and maintaining the Standby Letter of Credit from March 17, 2003 until November 15, 2004, the Soros Entities shall each receive from Borrower a warrant substantially in the form attached as Exhibit A hereto (provided, however, that the warrants issued pursuant to this sentence shall have an exercise price equal to the Current Market Price as of March 17, 2003 and an expiration date of March 17, 2013 to purchase that number of shares of the Common Stock obtained by multiplying TWENTY FIVE THOUSAND (25,000) by such Soros Entity's Percentage Interest (as defined in Section 6(c) below)." Except as herinabove specifically set forth, the Reimbursement Agreement shall continue unmodified. Very truly yours, QUANTUM INDUSTRIAL PARTNERS LDC By: --------------------------------- Name: Title: Agreed: BLUEFLY, INC. By: -------------------- Name: Title: EX-99 4 bluefly13da18_exhsss.txt EXHIBIT SSS 31703 Page 15 of 23 Pages EXHIBIT SSS THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED, QUALIFIED, APPROVED OR DISAPPROVED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SUCH ACT OR LAWS AND NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY AUTHORITY HAS PASSED ON OR ENDORSED THE MERITS OF THESE SECURITIES. WARRANT ___ WARRANT TO PURCHASE SHARES OF COMMON STOCK OF BLUEFLY, INC. THIS IS TO CERTIFY THAT QUANTUM INDUSTRIAL PARTNERS LDC, or its registered assigns (the "Holder"), is the owner of the right to subscribe for and to purchase from BLUEFLY, INC., a Delaware corporation (the "Company"), - ---------------------(the "Number Issuable"), fully paid, duly authorized and non-assessable shares of Common Stock at a price per share equal to the Current Market Price as of March 17, 2003, which is SEVENTY-EIGHT CENTS ($0.78), (the "Exercise Price"), at any time, in whole or in part, on or after March 17, 2003 (the "Effective Date") through 5:00 PM New York City time, on March 17, 2013 (the "Expiration Date") all on the terms and subject to the conditions hereinafter set forth (the "Warrants"). The Number Issuable and the Exercise Price are subject to further adjustment from time to time pursuant to the provisions of Section 2 of this Warrant Certificate. Capitalized terms used herein but not otherwise defined shall have the meanings given to them in Section 12 hereof. Section 1. Exercise of Warrants. (a) Subject to the last paragraph of this Section 1, the Warrants evidenced hereby may be exercised, in whole or in part, by the Holder hereof at any time or from time to time, on or after the Effective Date and on or prior to the Expiration Date upon delivery to the Company at the principal executive office of the Company in the United States of America, of (A) this Warrant Certificate, (B) a written notice stating that such Holder elects to exercise the Warrants evidenced hereby in accordance with the provisions of this Section 1 and specifying the number of Warrants being exercised and the name or names in which the Holder wishes the certificate or certificates for shares of Common Stock to be issued and (C) payment of the Exercise Price for such Warrants, which shall be payable by any one or any Page 16 of 23 Pages combination of the following: (i) cash; (ii) certified or official bank check payable to the order of the Company; (iii) by the surrender (which surrender shall be evidenced by cancellation of the number of Warrants represented by any Warrant Certificate presented in connection with a Cashless Exercise (as defined below)) of a Warrant or Warrants (represented by one or more relevant Warrant Certificates), and without the payment of the Exercise Price in cash, in return for the delivery to the surrendering Holder of such number of shares of Common Stock equal to the number of shares of the Common Stock for which such Warrant is exercisable as of the date of exercise (if the Exercise Price were being paid in cash or certified or official bank check) reduced by that number of shares of Common Stock equal to the quotient obtained by dividing (x) the aggregate Exercise Price (assuming no Cashless Exercise) to be paid by (y) the Market Price of one Share of Common Stock on the Business Day which immediately precedes the day of exercise of the Warrant; or (iv) by the delivery of shares of the Common Stock having a value (as defined by the next sentence) equal to the aggregate Exercise Price to be paid, that are either held by the Holder or are acquired in connection with such exercise, and without payment of the Exercise Price in cash. Any share of Common Stock delivered as payment for the Exercise Price in connection with an In-Kind Exercise (as defined below) shall be deemed to have a value equal to the Market Price of one Share of Common Stock on the Business Day that immediately precedes the day of exercise of the Warrants. An exercise of a Warrant in accordance with clause (iii) is herein referred to as a "Cashless Exercise" and an exercise of a Warrant in accordance with clause (iv) is herein referred to as an "In-Kind Exercise." The documentation and consideration, if any, delivered in accordance with subsections (A), (B) and (C) are collectively referred to herein as the "Warrant Exercise Documentation." (b) As promptly as practicable, and in any event within five (5) Business Days after receipt of the Warrant Exercise Documentation, the Company shall deliver or cause to be delivered (A) certificates representing the number of validly issued, fully paid and non-assessable shares of Common Stock specified in the Warrant Exercise Documentation, (B) if applicable, cash in lieu of any fraction of a share, as hereinafter provided, and (C) if less than the full number of Warrants evidenced hereby are being exercised or used in a Cashless Exercise, a new Warrant Certificate or Certificates, of like tenor, for the number of Warrants evidenced by this Warrant Certificate, less the number of Warrants then being exercised and/or used in a Cashless Exercise. Such exercise shall be deemed to have been made at the close of business on the date of delivery of the Warrant Exercise Documentation so that the Person entitled to receive shares of Common Stock upon such exercise shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time. (c) The Company shall pay all expenses incurred by the Company in connection with and taxes and other governmental charges (other than income taxes of the Holder) that may be imposed in respect of, the issue or delivery of any shares of Common Stock issuable upon the exercise of the Warrants evidenced hereby. The Company shall not be required, however, to pay any tax or other charge imposed in connection with any transfer involved in the issue of any certificate for shares of Common Stock, as the case may be, in any name other than that of the registered holder of the Warrant evidenced hereby. (d) In connection with the exercise of any Warrants evidenced hereby, no fractions of shares of Common Stock shall be issued, but in lieu thereof the Company shall pay a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the Market Price for one Share of Common Stock on the Business Day which immediately precedes the day of exercise. If more than one (1) such Warrant shall be exercised by the holder thereof at the same time, the number of full shares of Common Stock issuable on such exercise shall be computed on the basis of the total number of Warrants so exercised. Page 17 of 23 Pages Section 2. Certain Adjustments. (a) The number of shares of Common Stock purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment as follows: (i) Stock Dividends, Subdivision, Combination or Reclassification of Common Stock. If at any time after the date of the issuance of this Warrant the Company shall (i) pay a dividend on Common Stock in shares of its capital stock, (ii) combine its outstanding shares of Common Stock into a smaller number of shares, (iii) subdivide its outstanding shares of Common Stock as the case may be, or (iv) issue by reclassification of its shares of Common Stock any shares of capital stock of the Company, then, on the record date for such dividend or the effective date of such subdivision or split-up, combination or reclassification, as the case may be, the number and kind of shares to be delivered upon exercise of this Warrant will be adjusted so that the Holder will be entitled to receive the number and kind of shares of capital stock that such Holder would have owned or been entitled to receive upon or by reason of such event had this Warrant been exercised immediately prior thereto, and the Exercise Price will be adjusted as provided below in paragraph 2(a)(v). (ii) Extraordinary Distributions. If at any time after the date of issuance of this Warrant, the Company shall distribute to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation and Common Stock is not changed or exchanged) cash, evidences of indebtedness, securities or other assets (excluding (A) ordinary course cash dividends to the extent such dividends do not exceed the Company's retained earnings and (B) dividends payable in shares of capital stock for which adjustment is made under Section 2(a)(i), or rights, options or warrants to subscribe for or purchase securities of the Company), then in each such case the number of shares of Common Stock to be delivered to such Holder upon exercise of this Warrant shall be increased so that the Holder thereafter shall be entitled to receive the number of shares of Common Stock determined by multiplying the number of shares such Holder would have been entitled to receive immediately before such record date by a fraction, the denominator of which shall be the Exercise Price on such record date minus the then fair market value (as reasonably determined by the Board of Directors of the Company in good faith) of the portion of the cash, evidences of indebtedness, securities or other assets so distributed or of such rights or warrants applicable to one share of the Common Stock (provided that such denominator shall in no event be less than $.01) and the numerator of which shall be the Exercise Price. (iii) Reorganization, etc. If at any time after the date of issuance of this Warrant any consolidation of the Company with or merger of the Company with or into any other Person (other than a merger or consolidation in which the Company is the surviving or continuing corporation and which does not result in any reclassification of, or change (other than a change in par value or from par value to no par value or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of either Common Stock) or any sale, lease or other transfer of all or substantially all of the assets of the Company to any other person (each, a "Reorganization Event"), shall be effected in such a way that the holders of the Common Stock shall be entitled to receive cash, stock, other securities or assets (whether such cash, stock, other securities or assets are issued or distributed by the Company or another Person) with respect to or in exchange for the Common Stock, then, upon exercise of this Warrant, the Holder shall have the right to receive the kind and amount of cash, stock, other securities or assets receivable upon such Reorganization Event by a holder of the number of shares of the Common Stock that such holder would have been entitled to receive upon exercise of this Warrant had this Warrant been exercised immediately before such Reorganization Event, subject to adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Page 18 of 23 Pages Section 2(a). The Company shall not enter into any of the transactions referred to in this Section 2(a)(iii) unless effective provision shall be made so as to give effect to the provisions set forth in this Section 2(a)(iii). (iv) Carryover. Notwithstanding any other provision of this Section 2(a), no adjustment shall be made to the number of shares of either Common Stock to be delivered to the Holder (or to the Exercise Price) if such adjustment represents less than .05% of the number of shares to be so delivered, but any lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment that together with any adjustments so carried forward shall amount to .05% or more of the number of shares to be so delivered. (v) Exercise Price Adjustment. Whenever the Number Issuable upon the exercise of the Warrant is adjusted as provided pursuant to this Section 2(a), the Exercise Price per share payable upon the exercise of this Warrant shall be adjusted by multiplying such Exercise Price immediately prior to such adjustment by a fraction, of which the numerator shall be the Number Issuable upon the exercise of the Warrant immediately prior to such adjustment, and of which the denominator shall be the Number Issuable immediately thereafter; provided, however, that the Exercise Price for each Share of the Common Stock shall in no event be less than the par value of a share of such Common Stock. (v) Notice of Adjustment. Whenever the Number Issuable or the Exercise Price is adjusted as herein provided, the Company shall promptly mail by first class mail, postage prepaid, to the Holder, notice of such adjustment or adjustments setting forth the Number Issuable and the Exercise Price after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Section 3. No Redemption. The Company shall not have any right to redeem any of the Warrants evidenced hereby. Section 4. Notice of Certain Events. In case at any time or from time to time (i) the Company shall declare any dividend or any other distribution to all holders of Common Stock, (ii) the Company shall authorize the granting to the holders of Common Stock of rights or warrants to subscribe for or purchase any additional shares of stock of any class or any other right, (iii) the Company shall authorize the issuance or sale of any other shares or rights which would result in an adjustment to the Number Issuable pursuant to Section 2(a)(i), (ii) or (iii), (iv) there shall be any capital reorganization or reclassification of Common Stock of the Company or consolidation or merger of the Company with or into another Person, or any sale or other disposition of all or substantially all the assets of the Company, or (v) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company, then, in any one or more of such cases the Company shall mail to the Holder at such Holder's address as it appears on the transfer books of the Company, as promptly as practicable but in any event at least 10 days prior to the date on which the transactions contemplated in Section 2(a)(i), (ii) or (iii) a notice stating (a) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants or, if a record is not to be taken, the date as of which the holders of record of either Common Stock to be entitled to such dividend, distribution, rights or warrants are to be determined, or (b) the date on which such reclassification, consolidation, merger, sale, conveyance, dissolution, liquidation or winding up is expected to become effective. Such notice also shall specify the date as of which it is expected that the holders of record of the Common Stock shall be entitled to exchange the Common Stock for shares of stock or other securities or property or cash deliverable upon such reorganization, reclassification, consolidation, merger, sale, conveyance, dissolution, liquidation or winding up. Page 19 of 23 Pages Section 5. Certain Covenants. The Company covenants and agrees that all shares of Capital Stock of the Company which may be issued upon the exercise of the Warrants evidenced hereby will be duly authorized, validly issued and fully paid and non-assessable. The Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants, such number of its authorized but un-issued shares of Common Stock as will from time to time be sufficient to permit the exercise of all outstanding Warrants, and shall take all action required to increase the authorized number of shares of Common Stock if at any time there shall be insufficient authorized but un-issued shares of Common Stock to permit such reservation or to permit the exercise of all outstanding Warrants. Section 6. Registered Holder. The persons in whose names this Warrant Certificate is registered shall be deemed the owner hereof and of the Warrants evidenced hereby for all purposes. The registered Holder of this Warrant Certificate, in their capacity as such, shall not be entitled to any rights whatsoever as a stockholder of the Company, except as herein provided. Section 7. Transfer of Warrants. Any transfer of the rights represented by this Warrant Certificate shall be effected by the surrender of this Warrant Certificate, along with the form of assignment attached hereto, properly completed and executed by the registered Holder hereof, at the principal executive office of the Company in the United States of America, together with an appropriate investment letter and opinion of counsel, if deemed reasonably necessary by counsel to the Company to assure compliance with applicable securities laws. Thereupon, the Company shall issue in the name or names specified by the registered Holder hereof and, in the event of a partial transfer, in the name of the registered Holder hereof, a new Warrant Certificate or Certificates evidencing the right to purchase such number of shares of Common Stock as shall be equal to the number of shares of Common Stock then purchasable hereunder. Section 8. Denominations. The Company covenants that it will, at its expense, promptly upon surrender of this Warrant Certificate at the principal executive office of the Company in the United States of America, execute and deliver to the registered Holder hereof a new Warrant Certificate or Certificates in denominations specified by such Holder for an aggregate number of Warrants equal to the number of Warrants evidenced by this Warrant Certificate. Section 9. Replacement of Warrants. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant Certificate and, in the case of loss, theft or destruction, upon delivery of an indemnity reasonably satisfactory to the Company (in the case of an insurance company or other institutional investor, its own unsecured indemnity agreement shall be deemed to be reasonably satisfactory), or, in the case of mutilation, upon surrender and cancellation thereof, the Company will issue a new Warrant Certificate of like tenor for a number of Warrants equal to the number of Warrants evidenced by this Warrant Certificate. Section 10. Governing Law. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. Section 11. Rights Inure to Registered Holder. The Warrants evidenced by this Warrant Certificate will inure to the benefit of and be binding upon the registered Holder thereof and the Company and their respective successors and permitted assigns. Nothing in this Warrant Certificate shall be construed to give to any Person other than the Company and the registered Holder thereof any legal or Page 20 of 23 Pages equitable right, remedy or claim under this Warrant Certificate, and this Warrant Certificate shall be for the sole and exclusive benefit of the Company and such registered Holder. Nothing in this Warrant Certificate shall be construed to give the registered Holder hereof any rights as a Holder of shares of either Common Stock until such time, if any, as the Warrants evidenced by this Warrant Certificate are exercised in accordance with the provisions hereof. Section 12. Definitions. For the purposes of this Warrant Certificate, the following terms shall have the meanings indicated below: "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the City of New York, New York are authorized or required by law or executive order to close. "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents (however designated) of such Person's capital stock (or equivalent ownership interests in a Person not a corporation) whether now outstanding or hereafter issued, including, without limitation, any rights, warrants or options to purchase such Person's capital stock. "Common Stock" shall mean the common stock of the Company. "Common Stock Equivalent" means any security or obligation which is by its terms convertible into or exercisable for shares of Common Stock, including, without limitation, any option, warrant or other subscription or purchase right with respect to Common Stock. "Current Market Price" per share shall mean, as of the date of determination, (a) the average of the daily Market Prices under clause (a), (b) or (c) of the definition thereof, as applicable, of the Common Stock during the immediately preceding ten (10) trading days ending on such date, and (b) if the Common Stock is not then listed or admitted to trading on any national securities exchange or quoted in the over-the-counter market, then the Market Price under clause (d) of the definition thereof on such date. "Market Price" shall mean, per share of Common Stock, on any date specified herein: (a) if the Common Stock is listed on a national securities exchange, the Closing Price per share of Common Stock on such date published in The Wall Street Journal (National Edition) or, if no such closing price on such date is published in The Wall Street Journal (National Edition), the average of the closing bid and asked prices on such date, as officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading; or (b) if the Common Stock is not then listed or admitted to trading on any national securities exchange, but is designated as a national market system security, the last trading price of the Common Stock on such date; or (c) if there shall have been no trading on such date or if the Common Stock is not so designated, the average of the reported closing bid and asked price of the Common Stock, on such date as shown by NASDAQ and reported by any member firm of the NYSE selected by the Company; or (d) if none of (a), (b) or (c) is applicable, a market price per share determined in good faith by the Board of Directors of the Company, which shall be deemed to be "Fair Market Value" unless holders of at least 15% of Common Stock issued or issuable upon exercise of the Warrants request that the Company obtain an opinion of a nationally recognized investment banking firm chosen by the Company (who shall bear the expense) and reasonably acceptable Page 21 of 23 Pages to such requesting holders of the Warrants, in which event the Fair Market Value shall be as determined by such investment banking firm. "NASDAQ" means the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System. "NYSE" shall mean the New York Stock Exchange, Inc. "Person" shall mean any individual, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. Section 13. Notices. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, courier services or personal delivery, (a) if to the Holder of a Warrant, at such Holder's last known address appearing on the books of the Company; and (b) if to the Company, at its principal executive office in the United States, or such other address as shall have been furnished to the party given or making such notice, demand or other communication. All such notices and communications shall be deemed to have been duly given: (i) when delivered by hand, if personally delivered; (ii) when delivered to a courier if delivered by commercial overnight courier service; and (iii) five (5) Business Days after being deposited in the mail, postage prepaid, if mailed. Page 22 of 23 Pages IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed as of this 17th day of March 2003. BLUEFLY, INC. By: ------------------------------------- Name: Title: Page 23 of 23 Pages [Form of Assignment Form] [To be executed upon assignment of Warrants] The undersigned hereby assigns and transfers this Warrant Certificate to ------------------- whose Social Security Number or Tax ID Number is - ---------------------- and whose record address is -------------------------- - --------------------, and irrevocably appoints ---------------------------- as agent to transfer this security on the books of the Company. Such agent may substitute another to act for such agent. Signature: ------------------------------------- Signature Guarantee: ------------------------------------- Date: ---------------------- -----END PRIVACY-ENHANCED MESSAGE-----