<SUBMISSION>
<ACCESSION-NUMBER>0000921530-05-000461
<TYPE>SC 13D/A
<PUBLIC-DOCUMENT-COUNT>7
<FILING-DATE>20050630
<DATE-OF-FILING-DATE-CHANGE>20050630
<GROUP-MEMBERS>GEORGE SOROS
<GROUP-MEMBERS>QIH MANAGEMENT INVESTOR, L.P.
<GROUP-MEMBERS>QIH MANAGEMENT LLC
<GROUP-MEMBERS>QUANTUM INDUSTRIAL PARTNERS LDC
<GROUP-MEMBERS>SFM DOMESTIC INVESTMENTS LLC
<GROUP-MEMBERS>SOROS FUND MANAGEMENT LLC
<SUBJECT-COMPANY>
<COMPANY-DATA>
<CONFORMED-NAME>BLUEFLY INC
<CIK>0001030896
<ASSIGNED-SIC>5961
<IRS-NUMBER>133612110
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>SC 13D/A
<ACT>34
<FILE-NUMBER>005-52401
<FILM-NUMBER>05929281
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>42 WEST 39TH ST
<CITY>NEW YORK
<STATE>NY
<ZIP>10018
<PHONE>2129448000
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>42 WEST 39TH ST
<CITY>NEW YORK
<STATE>NY
<ZIP>10018
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>PIVOT RULES INC
<DATE-CHANGED>19970305
</FORMER-COMPANY>
</SUBJECT-COMPANY>
<FILED-BY>
<COMPANY-DATA>
<CONFORMED-NAME>SOROS FUND MANAGEMENT LLC
<CIK>0001029160
<IRS-NUMBER>133914976
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>SC 13D/A
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>888 SEVENTH AVENUE 33RD FLOOR
<CITY>NEW YORK
<STATE>NY
<ZIP>10106
<PHONE>2128721054
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>C/O AKIN, GUMP, STRAUSS,HAUER,FELD,
<STREET2>399 PARK AVENUE
<CITY>NEW YORK
<STATE>NY
<ZIP>10022
</MAIL-ADDRESS>
</FILED-BY>
<DOCUMENT>
<TYPE>SC 13D/A
<SEQUENCE>1
<FILENAME>bluefly_13da22.txt
<DESCRIPTION>AMENDMENT NO. 22 TO SCHEDULE 13D
<TEXT>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  SCHEDULE 13D

                    Under the Securities Exchange Act of 1934
                               (Amendment No. 22)*

                                  BLUEFLY, INC.
                     --------------------------------------
                                (Name of Issuer)

                    Common Stock, Par Value $0.01 Per Share
                     --------------------------------------
                         (Title of Class of Securities)

                                    096227103
                     --------------------------------------
                                 (CUSIP Number)

                              Stephen M. Vine, Esq.
                       Akin Gump Strauss Hauer & Feld LLP
                               590 Madison Avenue
                            New York, New York 10022
                                 (212) 872-1000
                     --------------------------------------
                  (Name, Address and Telephone Number of Person
                Authorized to Receive Notices and Communications)

                                 June 24, 2005
                     --------------------------------------
                      (Date of Event which Requires Filing
                               of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [ ].

Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss.240.13d-7 for other
parties to whom copies are to be sent.

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

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

                          Continued on following pages
                               Page 1 of 15 Pages
                             Exhibit Index: Page 15

<PAGE>

                                  SCHEDULE 13D

CUSIP No. 096227103                                           Page 2 of 15 Pages


1        Names of Reporting Persons
         I.R.S. Identification Nos. of above persons (entities only).

                  QUANTUM INDUSTRIAL PARTNERS LDC

2        Check the Appropriate Box if a Member of a Group (See Instructions)
                                                     a. [ ]
                                                     b. [X]

3        SEC Use Only


4        Source of Funds (See Instructions)

                  OO

5        Check if Disclosure of Legal Proceedings Is Required Pursuant to Items
         2(d) or 2(e)

                  [ ]

6        Citizenship or Place of Organization

                  Cayman Islands

                           7        Sole Voting Power
 Number of                                  46,510,226
  Shares
Beneficially               8        Shared Voting Power
 Owned By                                   0
   Each
 Reporting                 9        Sole Dispositive Power
  Person                                    46,510,226
   With
                           10       Shared Dispositive Power
                                            0

11       Aggregate Amount Beneficially Owned by Each Reporting Person

                  46,510,226

12       Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
         Instructions)

                  [X]

13       Percent of Class Represented By Amount in Row (11)

                  82.2%

14       Type of Reporting Person (See Instructions)

                  OO; IV



<PAGE>

                                  SCHEDULE 13D

CUSIP No. 096227103                                           Page 3 of 15 Pages


1        Names of Reporting Persons
         I.R.S. Identification Nos. of above persons (entities only).

                  QIH MANAGEMENT INVESTOR, L.P.

2        Check the Appropriate Box if a Member of a Group (See Instructions)
                                                     a. [ ]
                                                     b. [X]

3        SEC Use Only


4        Source of Funds (See Instructions)

                  AF

5        Check if Disclosure of Legal Proceedings Is Required Pursuant to Items
         2(d) or 2(e)

                  [ ]

6        Citizenship or Place of Organization

                  Delaware

                           7        Sole Voting Power
 Number of                                  46,510,226
  Shares
Beneficially               8        Shared Voting Power
  Owned By                                  0
   Each
 Reporting                 9        Sole Dispositive Power
  Person                                    46,510,226
   With
                           10       Shared Dispositive Power
                                            0

11       Aggregate Amount Beneficially Owned by Each Reporting Person

                  46,510,226

12       Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
         Instructions)

                  [X]

13       Percent of Class Represented By Amount in Row (11)

                  82.2%

14       Type of Reporting Person (See Instructions)

                  PN; IA




<PAGE>

                                  SCHEDULE 13D

CUSIP No. 096227103                                           Page 4 of 15 Pages


1        Names of Reporting Persons
         I.R.S. Identification Nos. of above persons (entities only).

                  QIH MANAGEMENT LLC

2        Check the Appropriate Box if a Member of a Group (See Instructions)
                                                     a. [ ]
                                                     b. [X]

3        SEC Use Only


4        Source of Funds (See Instructions)

                  AF

5        Check if Disclosure of Legal Proceedings Is Required Pursuant to Items
         2(d) or 2(e)

                  [ ]

6        Citizenship or Place of Organization

                  Delaware

                           7        Sole Voting Power
 Number of                                  46,510,226
  Shares
Beneficially               8        Shared Voting Power
  Owned By                                  0
   Each
 Reporting                 9        Sole Dispositive Power
  Person                                    46,510,226
   With
                           10       Shared Dispositive Power
                                            0

11       Aggregate Amount Beneficially Owned by Each Reporting Person

                  46,510,226

12       Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
         Instructions)

                  [X]

13       Percent of Class Represented By Amount in Row (11)

                  82.2%

14       Type of Reporting Person (See Instructions)

                  OO




<PAGE>

                                  SCHEDULE 13D

CUSIP No. 096227103                                           Page 5 of 15 Pages


1        Names of Reporting Persons
         I.R.S. Identification Nos. of above persons (entities only).

                  SOROS FUND MANAGEMENT LLC

2        Check the Appropriate Box if a Member of a Group (See Instructions)
                                                     a. [ ]
                                                     b. [X]

3        SEC Use Only


4        Source of Funds (See Instructions)

                  AF

5        Check if Disclosure of Legal Proceedings Is Required Pursuant to Items
         2(d) or 2(e)

                  [ ]

6        Citizenship or Place of Organization

                  Delaware

                           7        Sole Voting Power
 Number of                                  46,510,226
  Shares
Beneficially               8        Shared Voting Power
  Owned By                                  0
   Each
 Reporting                 9        Sole Dispositive Power
  Person                                    46,510,226
   With
                           10       Shared Dispositive Power
                                            0

11       Aggregate Amount Beneficially Owned by Each Reporting Person

                  46,510,226

12       Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
         Instructions)

                  [X]

13       Percent of Class Represented By Amount in Row (11)

                  82.2%

14       Type of Reporting Person (See Instructions)

                  OO; IA




<PAGE>

                                  SCHEDULE 13D

CUSIP No. 096227103                                           Page 6 of 15 Pages

1        Names of Reporting Persons
         I.R.S. Identification Nos. of above persons (entities only).

                  SFM DOMESTIC INVESTMENTS LLC

2        Check the Appropriate Box if a Member of a Group (See Instructions)
                                                     a. [ ]
                                                     b. [X]

3        SEC Use Only


4        Source of Funds (See Instructions)

                  OO

5        Check if Disclosure of Legal Proceedings Is Required Pursuant to Items
         2(d) or 2(e)

                  [ ]

6        Citizenship or Place of Organization

                  Delaware

                           7        Sole Voting Power
 Number of                                  1,521,376
  Shares
Beneficially               8        Shared Voting Power
  Owned By                                  0
   Each
 Reporting                 9        Sole Dispositive Power
  Person                                    1,521,376
   With
                           10       Shared Dispositive Power
                                            0

11       Aggregate Amount Beneficially Owned by Each Reporting Person

                  1,521,376

12       Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
         Instructions)

                  [X]

13       Percent of Class Represented By Amount in Row (11)

                  9.1%

14       Type of Reporting Person (See Instructions)

                  OO




<PAGE>

                                  SCHEDULE 13D

CUSIP No. 096227103                                           Page 7 of 15 Pages


1        Names of Reporting Persons
         I.R.S. Identification Nos. of above persons (entities only).

                  GEORGE SOROS (in the capacity described herein)

2        Check the Appropriate Box if a Member of a Group (See Instructions)
                                                     a. [ ]
                                                     b. [X]

3        SEC Use Only

4        Source of Funds (See Instructions)

                  AF

5        Check if Disclosure of Legal Proceedings Is Required Pursuant to Items
         2(d) or 2(e)

                  [ ]

6        Citizenship or Place of Organization

                  United States

                           7        Sole Voting Power
 Number of                                  48,031,602
  Shares
Beneficially               8        Shared Voting Power
 Owned By                                   0
   Each
 Reporting                 9        Sole Dispositive Power
  Person                                    48,031,602
   With
                           10       Shared Dispositive Power
                                            0

11       Aggregate Amount Beneficially Owned by Each Reporting Person

                  48,031,602

12       Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
         Instructions)

                  [ ]

13       Percent of Class Represented By Amount in Row (11)

                  82.9%

14       Type of Reporting Person (See Instructions)

                  IA




<PAGE>

                                                              Page 8 of 15 Pages

     This  Amendment  No. 22 to Schedule 13D relates to shares of Common  Stock,
$0.01 par value per share (the "Shares"), of Bluefly, Inc. (the "Issuer").  This
Amendment No. 22  supplementally  amends the initial  statement on Schedule 13D,
dated August 6, 1999, and all  amendments  thereto  (collectively,  the "Initial
Statement"),  filed by the Reporting Persons (as defined herein). This Amendment
No. 22 is being  filed by the  Reporting  Persons to report that QIP (as defined
herein) and SFM Domestic  Investments  (as defined  herein) have entered into an
agreement with the Issuer and third party investors as described herein, whereby
QIP and SFM Domestic  Investments  each sold and  transferred to the third party
investors  shares  of an  existing  series  of  preferred  stock  of the  Issuer
convertible into Shares and simultaneously purchased from the Issuer shares of a
new series of preferred  stock of the Issuer  convertible  into Shares,  as more
fully described in Item 6 herein.  Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Initial  Statement.  The Initial
Statement is supplementally amended as follows.

Item 2.  Identity and Background

     This  Statement is being filed on behalf of each of the  following  persons
(collectively, the "Reporting Persons"):

     (i) Quantum Industrial Partners LDC ("QIP");

     (ii) QIH Management Investor, L.P. ("QIHMI");

     (iii) QIH Management LLC ("QIH Management");

     (iv) Soros Fund Management LLC ("SFM LLC");

     (v) SFM Domestic Investments LLC ("SFM Domestic Investments"); and

     (vi) Mr. George Soros ("Mr. Soros").

     This Statement relates to the Shares and other securities  convertible into
Shares held for the  accounts of QIP and SFM  Domestic  Investments.  QIHMI is a
minority  shareholder of, and is vested with investment  discretion with respect
to portfolio  assets held for the account of, QIP.  The sole general  partner of
QIHMI is QIH Management.  SFM LLC is the sole managing member of QIH Management.
Mr.  Soros  is the  Chairman  of SFM LLC and the  sole  managing  member  of SFM
Domestic Investments.

     On December 27, 2002,  Mr. Soros  appealed a decision of the 11e Chambre du
Tribunal  Correctionnel  in Paris,  France that fined him 2.2  million  euros on
December 20, 2002 based on a finding of insider  trading with respect to trading
in securities of Societe Generale in 1988. On March 24, 2005, the Paris Court of
Appeal affirmed the decision of the 11e Chambre du Tribunal  Correctionnel.  Mr.
Soros intends to file a further  appeal at the French Cour de Cassation  and, if
that appeal is not successful,  an additional  action with the European Court of
Justice.  Mr.  Soros has  elected  to provide  the  foregoing  information  on a
voluntary basis.

Item 3.  Source and Amount of Funds or Other Consideration

     The  information  set  forth in Item 6 hereof  is  hereby  incorporated  by
reference into this Item 3.

     Simultaneously  with its receipt of the $2,904,600  proceeds of its sale of
shares of the Issuer's Series D Convertible  Preferred Stock, par value $.01 per
share (the "Series D Preferred Stock"), to third party investors pursuant to the
Preferred Stock and Warrant Purchase Agreement (the "Purchase  Agreement") dated
as of June 24, 2005 among the Issuer,  QIP,  SFM  Domestic  Investments  and the


<PAGE>

                                                              Page 9 of 15 Pages

other parties thereto (the "New Investors") as described in Item 6, QIP expended
such proceeds to purchase shares of the Issuer's Series F Convertible  Preferred
Stock,  $.01 par value per share ("Series F Preferred  Stock"),  pursuant to the
Purchase  Agreement.  Simultaneously with its receipt of the $95,400 proceeds of
its sale of shares of Series D Preferred Stock to the New Investors  pursuant to
the Purchase  Agreement,  SFM Domestic  Investments  expended  such  proceeds to
purchase  shares  of the  Series F  Preferred  Stock  pursuant  to the  Purchase
Agreement.

Item 5. Interest in Securities of the Issuer

     The  information  set  forth in Item 6 hereof  is  hereby  incorporated  by
reference into this Item 5.

     According  to  information  filed by the  Issuer  with the  Securities  and
Exchange  Commission on its most recent Form 10-Q for the quarterly period ended
March 31, 2005,  the number of Shares  outstanding  was  15,341,015 as of May 2,
2005.

     (a) (i) Each of QIP,  QIHMI,  QIH  Management and SFM LLC may be deemed the
beneficial owner of 46,510,226 Shares  (approximately  82.2% of the total number
of  Shares  outstanding  assuming  the  exercise  and  conversion  of all of the
securities  held for the account of QIP).  This number consists of (A) 5,287,082
Shares,  (B) 3,806,923  Shares issuable upon the conversion of 445,410 shares of
Series A Preferred Stock, (C) 26,503,095  Shares issuable upon the conversion of
8,607,843 shares of Series B Preferred Stock, (D) 1,274,078 Shares issuable upon
the conversion of 968.3 shares of Series C Preferred Stock, (E) 6,142,450 Shares
issuable upon the  conversion of 4,668.262  shares of Series D Preferred  Stock,
(F) 1,274,078  Shares  issuable upon the  conversion of 968.3 shares of Series E
Preferred  Stock, (G) 950,537 Shares issuable upon the exercise of warrants held
for the account of QIP, (H) 20,000  Shares  issuable in the  aggregate  upon the
exercise  of options  held for the  benefit of QIP by  employees  of SFM LLC who
serve on the Issuer's board of directors, and (I) 1,251,983 Shares issuable upon
the conversion of 2,904.6 shares of Series F Preferred Stock.

     (ii)  SFM  Domestic  Investments  may be  deemed  the  beneficial  owner of
1,521,376 Shares  (approximately  9.1% of the total number of Shares outstanding
assuming  the  exercise  and  conversion  of all  the  securities  held  for its
account).  This  number  consists  of (A) 172,995  Shares,  (B)  124,700  Shares
issuable upon the  conversion of 14,590 shares of Series A Preferred  Stock held
for its account,  (C) 866,942  Shares  issuable  upon the  conversion of 281,571
shares of Series B  Preferred  Stock held for its  account,  (D)  41,710  Shares
currently  issuable  upon the  conversion  of 31.7  shares of Series C Preferred
Stock held for its account,  (E) 201,091 Shares  issuable upon the conversion of
152.829 shares of Series D Preferred  Stock, (F) 41,710 Shares issuable upon the
conversion  of 31.7  shares of  Series E  Preferred  Stock,  (G)  31,107  Shares
issuable  upon the  exercise of warrants  held for its  account,  and (H) 41,121
Shares issuable upon the conversion of 95.4 shares of Series F Preferred Stock.

     (iii) Mr.  Soros may be deemed  to be the  beneficial  owner of  48,031,602
Shares  (approximately  82.9% of the total number of Shares outstanding assuming
the exercise and  conversion of all of the  securities  held for the accounts of
QIP and SFM Domestic Investments). This number consists of (A) 46,510,226 Shares
which may be deemed to be beneficially owned by QIP and described above, and (B)
1,521,376  Shares which may be deemed to be  beneficially  owned by SFM Domestic
Investments as described above. Mr. Soros disclaims  beneficial ownership of any
securities not held directly for his account.


<PAGE>

                                                             Page 10 of 15 Pages

     (b) (i) Each of QIP,  QIHMI,  QIH  Management  and SFM LLC may be deemed to
have sole power to direct the voting and  disposition of the  46,510,226  Shares
which may be deemed to be beneficially owned by QIP as described above.

     (ii) SFM  Domestic  Investments  may be  deemed  to have the sole  power to
direct the voting and disposition of the 1,521,376 Shares which may be deemed to
be beneficially owned by SFM Domestic Investments as described above.

     (iii)  Mr.  Soros  (as a  result  of his  position  with SFM LLC and in his
capacity as the sole managing member of SFM Domestic  Investments) may be deemed
to have the sole power to direct the voting and  disposition  of the  48,031,602
Shares  which  may be deemed to be  beneficially  owned by QIP and SFM  Domestic
Investments as described above.

     (c)  Except  for the  transactions  described  in Item 6 below,  which were
effected in a privately negotiated transaction,  there have been no transactions
effected  with  respect to the Shares since April 29, 2005 (60 days prior to the
date hereof) by any of the Reporting Persons.

     (d) (i) The  shareholders of QIP,  including  Quantum  Industrial  Holdings
Ltd., a British Virgin Islands international business company, have the right to
participate in the receipt of dividends  from, or proceeds from the sale of, the
securities  held for the  account  of QIP in  accordance  with  their  ownership
interests in QIP.

     (ii)  Certain  members  of SFM  Domestic  Investments  have  the  right  to
participate in the receipt of dividends  from, or proceeds from the sale of, the
securities held for the account of SFM Domestic Investments.

     (e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
        Securities of the Issuer


Preferred Stock and Warrant Purchase Agreement
----------------------------------------------

     On June 24, 2005, the Issuer entered into the Purchase Agreement (a copy of
which is  incorporated  by reference  hereto as Exhibit EEEE and is incorporated
herein by  reference  in response to this Item 6).  Pursuant to the terms of the
Purchase  Agreement,  (i) QIP simultaneously sold to the New Investors shares of
the Series D Preferred  Stock for an aggregate  purchase price of $2,904,600 and
purchased  from the Issuer  2,904.6  shares of Series F  Preferred  Stock for an
aggregate  purchase  price of  $2,904,600;  and (ii)  SFM  Domestic  Investments
simultaneously  sold to the New Investors shares of the Series D Preferred Stock
for an aggregate  purchase  price of $95,400 and purchased  from the Issuer 95.4
shares of Series F Preferred  Stock for an aggregate  purchase price of $95,400.
In addition,  the New  Investors  purchased  from the Issuer  shares of Series F
Preferred Stock and warrants to purchase Shares (the "New Investor Warrants").

     Subject to certain conditions and limitations, the Issuer has agreed to use
its commercially reasonable efforts to cause the registration of Shares issuable
upon conversion or exercise,  as applicable,  of the securities  purchased under
the Purchase Agreement as well as any Shares issued in lieu of any cash payments


<PAGE>

                                                             Page 11 of 15 Pages

of any  dividends on the Series F Preferred  Stock and Series D Preferred  Stock
purchased under the Purchase Agreement.

     The Issuer has agreed to put forth proposals seeking  stockholder  approval
of the anti-dilution adjustment provisions of the Series F Preferred Certificate
of  Designations  at the Issuer's  next annual  meeting of  Shareholders  and to
recommend that the  stockholders  of the Issuer vote in favor of the approval of
such provisions.  In addition,  QIP and SFM Domestic  Investments have agreed to
vote all  shares of the  Issuer  held by them in favor of the  approval  of such
anti-dilution adjustment provisions.

     The foregoing  description of the Purchase Agreement does not purport to be
complete and is qualified in its entirety by the terms of such document which is
incorporated herein by reference in response to this Item 6.

Certificate of Powers, Designations, Preferences and Rights of Series F
Preferred Stock
-----------------------------------------------------------------------

     Pursuant  to  the  terms  of  the  Certificate  of  Powers,   Designations,
Preferences  and Rights of Series F Convertible  Preferred  Stock (the "Series F
Preferred  Certificate of  Designations")  (a copy of which is  incorporated  by
reference  hereto as Exhibit  FFFF and is  incorporated  herein by  reference in
response  to this Item 6) filed by the Issuer  with the  Delaware  Secretary  of
State on June 24, 2005,  the shares of Series F Preferred  Stock are entitled to
cumulative  dividends  at a rate  of 7% per  annum,  compounding  annually.  The
dividends  are payable  only upon a conversion  of the Series F Preferred  Stock
into Shares or a liquidation,  dissolution or winding up of the Issuer. Series F
Preferred  Stockholders are entitled to a preference over any junior  securities
on  liquidation,  dissolution or winding up of the Issuer in an amount per share
equal to the greater of (i) $1,000 plus any accrued but unpaid dividends on such
share and (ii) the amount that the holder of such share would receive if it were
to  convert  such  share  into a Share  immediately  prior to such  liquidation,
dissolution or winding up.

     Holders of Series F  Preferred  Stock are  entitled  to vote on all matters
submitted to a vote of the Issuer's stockholders,  voting as a single class with
the holders of Shares, on an as-converted basis.  Notwithstanding the foregoing,
holders of Series F Preferred Stock are not entitled to vote with respect to the
approval of the  anti-dilution  adjustment  provisions of the Series F Preferred
Certificate of Designations.

     Each share of Series F Preferred Stock is convertible, at the option of the
holder thereof, into a number of fully paid and nonassessable Shares obtained by
dividing  (i)  $1,000  by (ii)  $2.32 (as  adjusted,  the  "Series F  Conversion
Price").  The Series F Conversion  Price may be adjusted  pursuant to a weighted
average formula upon the occurrence of certain events  described in the Series F
Preferred  Certificate of  Designations.  In addition,  upon the issuance by the
Issuer of  securities  at a price per share  (the "New Issue  Price")  less than
$1.50,  the Series F  Conversion  Price will be  adjusted to equal the New Issue
Price. Upon conversion, the accrued and unpaid dividends on each share of Series
F Preferred  Stock are paid, at the option of the Issuer,  in cash or in Shares.
The Issuer agreed not to take any action which results in the  adjustment of the
Series F  Conversion  Price if the total  number of Shares  issued and  issuable
after such action upon  conversion of the Series F Preferred  Stock would exceed
the total number of Shares then  authorized  to be  outstanding  by the Issuer's
Certificate of Incorporation.


<PAGE>

                                                             Page 12 of 15 Pages

     Each share of Series F  Preferred  Stock will  automatically  convert  into
Shares in the manner described in the immediately  preceding  paragraph upon (i)
the date on which the last sale  price of the Shares on NASDAQ or, if not quoted
on NASDAQ, on any other national securities exchange has been at least two times
the Series F Conversion  Price for twenty  consecutive  trading days or (ii) the
date on which an aggregate of 50% of the Issuer's  Convertible  Preferred  Stock
outstanding  immediately preceding the filing of the Certificate of Designations
has been converted to Shares. For the purposes of this description of the Series
F Preferred Certificate of Designations, "Convertible Preferred Stock" means the
Issuer's Series A Convertible  Preferred Stock,  Series B Convertible  Preferred
Stock,  Series C Convertible  Preferred  Stock,  Series D Convertible  Preferred
Stock and Series E Convertible Preferred Stock.

     At any time and from time to time after the date on which an  aggregate  of
50%  of  the  Issuer's  Convertible  Preferred  Stock  outstanding   immediately
preceding the filing of the Series F Preferred  Certificate of Designations  has
been  converted  to Shares,  the Issuer may redeem for cash all of the shares of
Series F Preferred Stock at price per share of $1,000 plus any accrued an unpaid
dividends on such share.

     The  foregoing  description  of  the  Series  F  Preferred  Certificate  of
Designations does not purport to be complete and is qualified in its entirety by
the  terms of the  Series F  Preferred  Certificate  of  Designations,  which is
incorporated herein by reference in response to this Item 6.

Waiver and Consent of the Holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock and Convertible Promissory Notes
-----------------------------------------------------------------------------

     On June 24, 2005, QIP and SFM Domestic Investments,  as the sole holders of
the Series A  Preferred  Stock,  Series B  Preferred  Stock,  Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock executed the Waiver
and Consent of the Holders of Series A  Convertible  Preferred  Stock,  Series B
Convertible  Preferred Stock, Series C Preferred Stock, Series D Preferred Stock
and Series E  Preferred  Stock (the  "Waiver and  Consent")  (a copy of which is
incorporated  by  reference  hereto as Exhibit GGGG and  incorporated  herein by
reference in response to this Item 6).  Pursuant to the Waiver and Consent,  (i)
the  designation  of the Series F Preferred  Stock was approved in all respects;
(ii) the issuance and sale of the shares of Series F Preferred Stock and the New
Investor  Warrants  and the issuance of Shares upon  conversion  of the Series F
Preferred  Stock and/or the exercise of the New Investor  Warrants were approved
in all  respects;  (iii)  the  preemptive  rights  of the  holders  of  Series A
Preferred Stock,  Series B Preferred Stock,  Series C Preferred Stock,  Series D
Preferred  Stock and Series E Preferred  Stock were  waived with  respect to the
issuance and sale of the Series F Preferred Stock and the New Investor  Warrants
and the  issuance of Shares  upon  conversion  of the Series F  Preferred  Stock
and/or the exercise of the New Investor  Warrants;  and (iv) the Note Conversion
Rights (as defined in the Waiver and  Consent)  were waived with  respect to the
issuance of the Series F Preferred Stock and the New Investor Warrants.

     The foregoing  description of the Waiver and Consent does not purport to be
complete  and is  qualified  in its  entirety  by the  terms of the  Waiver  and
Consent, which is incorporated herein by reference in response to this Item 6.


<PAGE>

                                                             Page 13 of 15 Pages

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


Item 7.  Material to be Filed as Exhibits

     The Exhibit Index is incorporated herein by reference.






<PAGE>

                                                             Page 14 of 15 Pages

                                   SIGNATURES

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



Date: June 29, 2005                          QUANTUM INDUSTRIAL PARTNERS LDC

                                             By:  /s/ Jay Schoenfarber
                                                  ------------------------------
                                                  Jay Schoenfarber
                                                  Attorney-in-Fact


                                             QIH MANAGEMENT INVESTOR, L.P.

                                             By:  QIH Management LLC,
                                                  its General Partner

                                             By:  Soros Fund Management LLC,
                                                  its Managing Member

                                             By:  /s/ Jay Schoenfarber
                                                  ------------------------------
                                                  Jay Schoenfarber
                                                  Assistant General Counsel


                                             QIH MANAGEMENT LLC

                                             By:  Soros Fund Management LLC,
                                                  its Managing Member

                                             By:  /s/ Jay Schoenfarber
                                                  ------------------------------
                                                  Jay Schoenfarber
                                                  Assistant General Counsel


                                             SOROS FUND MANAGEMENT LLC

                                             By:  /s/ Jay Schoenfarber
                                                  ------------------------------
                                                  Jay Schoenfarber
                                                  Assistant General Counsel


                                             SFM DOMESTIC INVESTMENTS LLC

                                             By:  /s/ Jay Schoenfarber
                                                  ------------------------------
                                                  Jay Schoenfarber
                                                  Attorney-in-Fact

                                             GEORGE SOROS

                                             By:  /s/ Jay Schoenfarber
                                                  ------------------------------
                                                  Jay Schoenfarber
                                                  Attorney-in-Fact


<PAGE>

                                                             Page 15 of 15 Pages

                                  EXHIBIT INDEX


EEEE.         Form of the Preferred Stock and Warrant Purchase Agreement, dated
              as of June 24, 2005, by and among Bluefly, Inc. and the other
              parties thereto.

FFFF.         Form of the Certificate of Powers, Designations, Preferences and
              Rights of Series F Convertible Preferred Stock of Bluefly,
              Inc.

GGGG.         Waiver and Consent of the Holders of Series A Convertible
              Preferred Stock, Series B Convertible Preferred Stock, Series C
              Convertible Preferred Stock, Series D Convertible Preferred Stock,
              Series E Convertible Preferred Stock and Convertible Promissory
              Notes of Bluefly, Inc.

HHHH.         Power of Attorney, dated as of May 23, 2005, granted by Quantum
              Industrial Partners LDC in favor of Jodye Anzalotta, Armando
              Belly, Maryann Canfield, Gavin Murphy, Jay Schoenfarber, Robert
              Soros and Abbas F. Zuaiter.

IIII.         Power of Attorney, dated as of June 16, 2005, granted by Mr.
              George Soros in favor of Jodye Anzalotta, Armando Belly, Maryann
              Canfield, Jay Schoenfarber and Robert Soros.

JJJJ.         Power of Attorney, dated as of May 23, 2005, granted by SFM
              Domestic Investments LLC in favor of Jodye Anzalotta, Armando
              Belly, Maryann Canfield, Gavin Murphy, Jay Schoenfarber, Robert
              Soros and Abbas F. Zuaiter.




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>2
<FILENAME>bluefly_exheeee.txt
<DESCRIPTION>PURCHASE AGREEMENT
<TEXT>
                 PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
                 ----------------------------------------------


     THIS PREFERRED STOCK AND WARRANT PURCHASE  AGREEMENT,  dated as of June 24,
2005 (this  "Agreement"),  is  entered  into by and  between  BLUEFLY,  INC.,  a
Delaware  corporation (the "Company"),  Quantum Industrial Partners LDC ("QIP"),
SFM  Domestic  Investments,  LLC  ("SFM,"  and,  together  with QIP,  the "Soros
Parties") and Investors  listed on the signature page attached  hereto (the "New
Investors").  The New Investors and the Soros Parties are sometimes  referred to
collectively as the "Investors").

                                    RECITALS
                                    --------

     WHEREAS, the Investors desire to purchase from the Company, and the Company
desires to issue and sell to the Investors,  seven thousand  (7,000) shares (the
"Series  F  Shares")  of the  Company's  newly-designated  Series F  Convertible
Preferred Stock, par value $.01 per share (the "Series F Preferred  Stock"),  of
the  Company  and  warrants  in the  form  attached  hereto  as  Exhibit  A (the
"Warrants,"   and,   together  with  the  Series  F  Shares  the  "Newly  Issued
Securities"),  exercisable  to purchase up to an aggregate of 603,448  shares of
the Company's  Common Stock,  $.01 par value (the "Common Stock") at an exercise
price of $2.87 per  share of Common  Stock,  on the  terms  and  subject  to the
conditions contained herein;

     WHEREAS,  simultaneously  with the  purchase  and sale of the Newly  Issued
Securities, the New Investors desire to purchase from the Soros Parties, and the
Soros Parties desire to sell to the New  Investors,  the number of shares of the
Company's  Series D Convertible  Preferred  Stock, par value $.01 per share (the
"Series D Preferred Stock") set forth on Schedules 2A and 2B (collectively,  the
"Existing Preferred Shares").

                                    AGREEMENT
                                    ---------

     NOW, THEREFORE, in consideration for the mutual covenants contained herein,
and for other good and valuable  consideration,  the receipt and  sufficiency of
which are hereby  acknowledged,  the  parties  hereto,  intending  to be legally
bound, agree as follows:

                                   ARTICLE I
   PURCHASE AND SALE OF NEWLY ISSUED SECURITIES AND EXISTING PREFERRED SHARES
   --------------------------------------------------------------------------

     SECTION 1.1 Purchase and Sale of Newly  Issued  Securities.  Subject to the
terms  and  conditions  hereof,  the  Company  hereby  issues  and  sells to the
Investors,  and each Investor hereby purchases from the Company:  (a) the number
of Series F Shares set forth opposite such  Investor's name in Schedule 1, for a
purchase price of $1,000 per share ("Series F Subscription  Amount"),  resulting
in an aggregate  purchase price for all Shares sold pursuant to the terms hereof
of


                                       1
<PAGE>

$7,000,000.00; and (b) the number of Warrants set forth opposite such Investor's
name in Schedule 1, for a purchase price of $0.125 per Warrant (the "Warrant
Subscription Amount," and, together with the Series F Subscription Amount, the
"Subscription Amount"), resulting in an aggregate purchase price for all
Warrants of $75,431.

     SECTION 1.2 Purchase and Sale of Existing Preferred Shares.  Simultaneously
with the  purchase and sale of the Newly Issued  Securities,  the Soros  Parties
hereby  sell,  transfer  and assign  the  Existing  Preferred  Shares to the New
Investors for an aggregate purchase price of $3,000,000.  The number of Existing
Preferred  Shares sold by each Soros Party,  the face value and aggregate amount
of accrued and unpaid  dividends on such shares and the  purchase  price of such
shares is set forth in  Schedule  2A. The number of  Existing  Preferred  Shares
purchased by each New Investor,  the face value and aggregate  amount of accrued
and unpaid dividends on such shares and the purchase price of such shares is set
forth in Schedule 2B.

     SECTION 1.3 Closing. Upon the terms and subject to the conditions set forth
herein, each Investor shall deliver to the Company via wire transfer immediately
available funds equal to their Subscription Amount and the Company shall deliver
to each Investor their respective Newly Issued Securities as determined pursuant
to Section  1.1 and the other  items set forth in Section  1.4  issuable  at the
closing.  Upon  satisfaction  of the  conditions  set forth in Sections 1.4, the
closing shall occur at the offices of the Escrow Agent,  or such other  location
as the parties shall mutually agree.

     SECTION 1.4  Deliveries.

     a)   On the  closing  date,  the  Company  shall  deliver  or  cause  to be
          delivered  to the Escrow  Agent  with  respect  to each  Investor  the
          following:

               (i) this Agreement duly executed by the Company;

               (ii) a legal opinion of Company Counsel, in the form agreed to by
                    the parties;

               (iii) a  certificate  evidencing  a number  of shares of Series F
                    Preferred   Stock   equal  to  such   Investor's   Series  F
                    Subscription Amount divided by 1,000, registered in the name
                    of such Investor;

               (iv) a  Warrant  registered  in the  name  of  such  Investor  to
                    purchase up to a number of shares of Common  Stock set forth
                    on  Schedule  1,  with an  exercise  price  equal to  $2.87,
                    subject to adjustment therein; and

               (v)  the Escrow Agreement duly executed by the
                               Company.

     b)   On the  Closing  Date,  each  Investor  shall  deliver  or cause to be
          delivered to the Escrow Agent the following:

               (i)  this Agreement duly executed by such Investor;


                                       2
<PAGE>

               (ii) such Investor's  Subscription Amount by wire transfer to the
                    account of the Escrow Agent (provided that the Soros Parties
                    Subscription Amount shall be paid as described below);

               (iii) the  purchase  price  for  such  New  Investor's   Existing
                    Preferred  shares by wire  transfer  to the  account  of the
                    Escrow Agent to be disbursed to the Company on behalf of the
                    Soros  Parties  as  payment  in full of  their  Subscription
                    Amount);

               (iv) the Escrow  Agreement duly executed by such Investor  (other
                    than the Soros  Parties,  who are not  parties to the Escrow
                    Agreement).

     c)   On the Closing  Date,  the Soros  Parties shall deliver or cause to be
          delivered to the Escrow Agent the following:

               (i)  a  certificate  evidencing  a number of  shares of  Existing
                    Preferred Shares as set forth on Schedule 2A.



                                   ARTICLE II
            REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY
            ---------------------------------------------------------

     The Company  represents  and warrants to, and agrees with, the Investors as
follows:

     SECTION 2.1  Organization,  etc. The Company and its Subsidiary (as defined
in Section 2.4(b)) have each been duly formed,  and are each validly existing as
a corporation in good standing  under the laws of the State of their  respective
States of  incorporation,  and are each  qualified  to do  business as a foreign
corporation in each  jurisdiction  in which the failure to be so qualified could
reasonably  be  expected  to  have a  material  adverse  effect  on the  assets,
liabilities,  condition (financial or other),  business or results of operations
of the  Company  and its  Subsidiary  taken  as a  whole  (a  "Material  Adverse
Effect"). The Company and its Subsidiary each have the requisite corporate power
and  authority to own,  lease and operate  their  respective  properties  and to
conduct their respective businesses as presently conducted.  The Company has the
requisite  corporate  power and  authority to enter into,  execute,  deliver and
perform all of its duties and obligations under this Agreement and to consummate
the transactions contemplated hereby.

     SECTION 2.2 Authorization.  The execution, delivery and performance of this
Agreement  and the  issuance of the Newly  Issued  Securities  and the shares of
Common Stock (the  "Conversion  Shares")  issuable upon exercise of the Warrants
and/or  conversion  of the Series F Shares and the  Existing  Preferred  Shares,
and/or in lieu of any cash payments of any  dividends on the Existing  Preferred
Shares and the Series F Shares (collectively, the "Convertible Securities") have
been  duly  authorized  by all  necessary  corporate  action  on the part of the
Company.


                                       3
<PAGE>

     SECTION 2.3 Validity; Enforceability. This Agreement has been duly executed
and  delivered  by the Company,  and  constitutes  the legal,  valid and binding
obligation of the Company,  enforceable  against the Company in accordance  with
its terms,  except as such  enforceability may be limited by, or subject to, any
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and subject to general  principles of
equity.

     SECTION 2.4  Capitalization.

          (a) As of the date hereof, the authorized capital stock of the Company
     consists of  92,000,000  shares of Common  Stock and  25,000,000  shares of
     preferred  stock,  $0.01 par value per share,  of which 500,000 shares have
     been designated Series A Convertible Preferred Stock, 9,000,000 shares have
     been designated  Series B Convertible  Preferred  Stock,  3,500 shares have
     been designated  Series C Convertible  Preferred  Stock,  7,150 shares have
     been designated  Series D Convertible  Preferred  Stock,  1,000 shares have
     been designated Series E Convertible  Preferred Stock and 7,000 shares have
     been designated Series F Convertible Preferred Stock. Without giving effect
     to the  transactions  contemplated by this Agreement,  as of June 23, 2005,
     the issued and  outstanding  capital stock of the Company  consisted of (i)
     approximately  15,667,740  shares of Common Stock,  (ii) 460,000  shares of
     Series A Convertible  Preferred  Stock,  (iii) 8,889,414 shares of Series B
     Convertible  Preferred  Stock,  (iv) 1,000  shares of Series C  Convertible
     Preferred  Stock,  (v) 7,136.548  shares of Series D Convertible  Preferred
     Stock and (vi) 1,000 shares of Series E Convertible  Preferred  Stock.  All
     such shares of the Company have been duly authorized and are fully paid and
     non-assessable.  Except as set forth on Schedule 2.4 hereto or as otherwise
     contemplated by this Agreement,  there are no outstanding options, warrants
     or other equity  securities that are convertible  into, or exercisable for,
     shares of the  Company's  capital  stock.  The face value and  accrued  and
     unpaid  dividends  on the  Existing  Preferred  Stock  are as set  forth on
     Schedule  2. The face value of each share of  Existing  Preferred  Stock is
     currently  convertible  into Common Stock at the rate of $0.76 per share of
     Common Stock.

          (b) The only Subsidiary of the Company is Clothesline Corporation. The
     Subsidiary has no operations or assets.  The Company owns all of the issued
     and  outstanding  capital  stock of its  Subsidiary,  free and clear of all
     liens  and  encumbrances.  All of such  shares  of  capital  stock are duly
     authorized, validly issued, fully paid and non-assessable,  and were issued
     in compliance with the registration and  qualification  requirements of all
     applicable  federal,  state  and  foreign  securities  laws.  There  are no
     options, warrants,  conversion privileges,  subscription or purchase rights
     or other rights presently  outstanding to purchase or otherwise acquire any
     authorized but unissued,  unauthorized  or treasury shares of capital stock
     or other  securities  of, or any  proprietary  interest  in, the  Company's
     Subsidiary,  and there is no outstanding  security of any kind  convertible
     into or exchangeable for such shares or proprietary interest.  "Subsidiary"
     means, with respect to the Company,  a corporation or other entity of which
     more  than  50% of  the  voting  power  of the  outstanding  voting  equity
     securities or more than 50% of the outstanding economic equity interest are
     held, directly or indirectly, by the Company.

     SECTION 2.5 [INTENTIONALLY OMITTED]


                                       4
<PAGE>

     SECTION 2.6  No Violation. The execution and delivery of this Agreement and
the performance by the Company of the transactions  contemplated hereby will not
(i)  conflict  with or result in a breach of any  provision  of the  articles of
incorporation  or by-laws of the  Company or its  Subsidiary,  (ii)  result in a
default  or breach  of,  or,  except  for the  approval  of the  holders  of the
Company's Series A Convertible  Preferred Stock, Series B Convertible  Preferred
Stock.  Series C Convertible  Preferred  Stock,  Series D Convertible  Preferred
Stock and Series E Convertible Preferred Stock, and the waiver by the holders of
the Company's  convertible  notes of their conversion rights with respect to the
transactions contemplated hereby (all of which have been obtained),  require any
consent, approval, authorization or permit of, or filing or notification to, any
person,  company or entity (including,  without  limitation,  any stockholder or
holder of the Company's equity securities) under any of the terms, conditions or
provisions of any note, bond, mortgage,  indenture, loan, factoring arrangement,
license, agreement, lease or other instrument or obligation to which the Company
or its Subsidiary is a party or by which the Company or its Subsidiary or any of
their  respective  assets  may be bound  (collectively,  "Agreements")  or (iii)
violate any law, judgment,  order, writ,  injunction,  decree,  statute, rule or
regulation  of any court,  administrative  agency,  bureau,  board,  commission,
office,  authority,  department or other  governmental  entity applicable to the
Company or its  Subsidiary,  except,  in the case of clause (ii) or (iii) above,
any such event that could not reasonably be expected to have a Material  Adverse
Effect or materially impair the transactions contemplated hereby. The Company is
in compliance,  in all material respects,  with the listing  requirements of the
Nasdaq  SmallCap  Market.  No  material  default or breach by the Company or its
Subsidiary exists under any material  Agreement,  other than any such default or
breach that could not reasonably be expected to have a Material Adverse Effect.

     SECTION 2.7  Issuances  of  Securities.  The Series F Shares,  the Existing
Preferred  Shares and the Warrants have been validly  issued,  and, upon payment
therefor, will be fully paid and non-assessable. Upon the exercise or conversion
of the  Convertible  Securities  in  accordance  with  the  terms  thereof,  the
Conversion  Shares will be validly issued,  fully paid and  non-assessable.  The
offering,  issuance,  sale and delivery of the Newly Issued  Securities  and the
Existing  Preferred Shares as contemplated by this Agreement are exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933,
as  amended  (the  "Securities  Act"),  are being  made in  compliance  with all
applicable  federal and (except for any violation or  non-compliance  that could
not  reasonably  be expected to have a Material  Adverse  Effect) state laws and
regulations  concerning the offer, issuance and sale of securities,  and are not
being issued in violation of any  preemptive or other rights of any  stockholder
of the Company.  The parties  hereto agree and  acknowledge  that, in making the
representations  and  warranties in the foregoing  sentence of this Section 2.7,
the  Company  is  relying  on the  representations  and  warranties  made by the
Investors in Section 3.4.

     SECTION 2.8 Absence of Certain  Developments.  Since March 31, 2005,  there
has not been any: (i) material  adverse  change in the  condition,  financial or
otherwise,  of the  Company  and its  Subsidiary  (taken  as a whole)  or in the
assets,  liabilities,  properties or business of the Company and its  Subsidiary
(taken as a whole);  (ii) declaration,  setting aside or payment of any dividend
or


                                       5
<PAGE>

other  distribution  with  respect to, or any direct or indirect  redemption  or
acquisition  of, any capital stock of the Company;  (iii) waiver of any valuable
right of the Company or its Subsidiary or  cancellation  of any material debt or
claim held by the Company or its Subsidiary;  (iv) material loss, destruction or
damage to any property of the Company or its Subsidiary, whether or not insured;
(v)  acquisition  or  disposition  of any  material  assets (or any  contract or
arrangement  therefor) or any other  material  transaction by the Company or its
Subsidiary  otherwise  than for fair value in the  ordinary  course of  business
consistent with past practice; or (vi) other agreement or understanding, whether
in writing or otherwise, for the Company or its Subsidiary to take any action of
the type specified in clauses (i) through (v).

     SECTION 2.9  Commission Filings.  The Company has filed all required forms,
reports and other  documents with the Securities  and Exchange  Commission  (the
"Commission")  for periods  from and after  January 1, 2003  (collectively,  the
"Commission Filings"),  each of which has complied in all material respects with
all  applicable  requirements  of the Securities Act and/or the Exchange Act (as
applicable).  All of the  Commission  Filings,  including the  Company's  Annual
Report on Form  10-K for the year  ended  December  31,  2004 and the  Company's
Quarterly  Report on Form 10-Q for the quarterly period ended March 31, 2005 are
available  through the Commission's Web site. As of their respective  dates, the
Commission  Filings did not contain any untrue  statement of a material  fact or
omit to state a material fact necessary in order to make the statements made, in
light of the  circumstances  under  which they were made,  not  misleading.  The
audited financial  statements and unaudited interim financial  statements of the
Company  included or incorporated  by reference in such Commission  Filings have
been prepared in  accordance  with GAAP (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Form 10-Q),
complied as of their respective  dates in all material  respects with applicable
accounting   requirements  and  the  published  rules  and  regulations  of  the
Commission with respect thereto,  and fairly present,  in all material respects,
the financial position of the Company as of the dates thereof and the results of
operations  for the periods then ended  (subject,  in the case of any  unaudited
interim financial  statements,  to the absence of footnotes required by GAAP and
normal  year-end  adjustments).  The  Company  has  complied,  in  all  material
respects, with the provisions of the Sarbanes-Oxley act of 2002.

     SECTION 2.10  Brokers.  Except for HPC Capital  Management,  Inc.  ("HPC"),
neither the  Company,  nor any of its  officers,  directors  or  employees,  has
employed  any broker or finder,  or (except  for the finders fee due to HPC from
the  Company,  for which the Company  will be solely  responsible)  incurred any
liability for any brokerage fees, commissions, finder's or other similar fees or
expenses in connection with the transactions contemplated hereby.

     SECTION 2.11  Filings, Consents and Approvals.  The Company is not required
to obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration  with, any court or other federal,  state, local
or  other  governmental  authority  or  other  Person  in  connection  with  the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) filings  required  pursuant to Section 6.3,  (ii) the filing with
the Commission of the Registration  Statement and a proxy statement with respect
to the  Shareholders

                                       6
<PAGE>

Meeting,  (iii) the filing of the Series F Certificate of Designations  with the
Secretary  of  State of the  State  of  Delaware  and  (iv)  the  notice  and/or
application(s)  to the Nasdaq Stock Market and the Boston Stock Exchange for the
issuance  and  sale  of the  Newly  Issued  Securities  and the  listing  of the
Conversion  Shares for trading thereon in the time and manner  required  thereby
(collectively, the "Required Approvals").

     SECTION  2.12  Litigation.  There is no action,  suit,  inquiry,  notice of
violation,  proceeding  or  investigation  pending or, to the  knowledge  of the
Company,  threatened against or affecting the Company,  any Subsidiary or any of
their respective properties before or by any court, arbitrator,  governmental or
administrative agency or regulatory authority (federal,  state, county, local or
foreign)  (collectively,  an "Action") which (i) adversely affects or challenges
the legality,  validity or enforceability  of any of this Agreement,  the Escrow
Agreement,  the Series F Certificate  of  Designations  and the other  documents
delivered in connection herewith (collectively,  the "Transaction Documents") or
the  Securities or (ii) could,  if there were an unfavorable  decision,  have or
reasonably  be  expected  to result in a Material  Adverse  Effect.  Neither the
Company nor any  Subsidiary,  nor, to the Company's  knowledge,  any director or
officer  thereof,  is or has been the subject of any Action involving a claim of
violation of or liability  under federal or state  securities laws or a claim of
breach of fiduciary  duty that could  reasonably  be expected to have a Material
Adverse Effect.  There has not been, and to the knowledge of the Company,  there
is not pending or contemplated,  any  investigation by the Commission  involving
the Company or any current or former  director  or officer of the  Company.  The
Commission  has not  issued  any  stop  order  or  other  order  suspending  the
effectiveness  of  any  registration  statement  filed  by  the  Company  or any
Subsidiary under the Exchange Act or the Securities Act.

     SECTION 2.13  Compliance.  Neither the Company nor any Subsidiary (i) is in
default  under or in violation  of (and no event has occurred  that has not been
waived that, with notice or lapse of time or both,  would result in a default by
the Company or any  Subsidiary  under),  nor has the  Company or any  Subsidiary
received  notice  of a  claim  that  it is in  default  under  or  that it is in
violation of, any indenture,  loan or credit agreement or any other agreement or
instrument  to which it is a party  or by which it or any of its  properties  is
bound  (whether or not such default or violation  has been  waived),  (ii) is in
violation of any order of any court,  arbitrator or governmental  body, or (iii)
is or  has  been  in  violation  of  any  statute,  rule  or  regulation  of any
governmental authority, including without limitation all foreign, federal, state
and local laws  applicable to its business except in each case as could not have
a Material Adverse Effect.

     SECTION 2.14  Registration  Rights.  Other than each of the  Investors,  no
Person has any right to cause the Company to effect the  registration  under the
Securities Act of any securities of the Company.

     SECTION 2.15  Listing and  Maintenance  Requirements. The Company's  Common
Stock is  registered  pursuant to Section  12(g) of the  Exchange  Act,  and the
Company has taken no action  designed to, or which to its knowledge is likely to
have the effect of,  terminating the  registration of the Common Stock under the
Exchange Act nor has the Company received any  notification  that the


                                       7
<PAGE>

Commission is contemplating terminating such registration.  The Company has not,
in the 12 months  preceding  the date hereof,  received  notice from any Trading
Market on which the Common  Stock is or has been  listed or quoted to the effect
that  the  Company  is  not  in  compliance  with  the  listing  or  maintenance
requirements  of such  Trading  Market.  The  Company  is,  and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements in all material respects.

     SECTION 2.16  Acknowledgment  Regarding  Investors' Purchase of Securities.
The Company  acknowledges and agrees that each of the Investors is acting solely
in the capacity of an arm's  length  Investor  with  respect to the  Transaction
Documents  and  the  transactions   contemplated  hereby.  The  Company  further
acknowledges  that no Investor is acting as a financial  advisor or fiduciary of
the Company (or in any similar  capacity) with respect to this Agreement and the
transactions  contemplated hereby and any advice given by any Investor or any of
their respective representatives or agents in connection with this Agreement and
the  transactions  contemplated  hereby is merely  incidental to the  Investors'
purchase of the Securities. The Company further represents to each Investor that
the Company's decision to enter into this Agreement has been based solely on the
independent  evaluation of the transactions  contemplated  hereby by the Company
and its representatives.

                                  ARTICLE III
           REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE INVESTORS
           -----------------------------------------------------------

     Each Investor  represents and warrants to, and agrees with, the Company and
to each other, severally but not jointly, as follows:

     SECTION 3.1  Organization,  etc.  Such Investor has been duly formed and is
validly  existing and in good  standing  under the laws of its  jurisdiction  of
organization. Such Investor has the requisite organizational power and authority
to enter into,  execute,  deliver and perform all of its duties and  obligations
under this Agreement and to consummate the transactions contemplated hereby.

     SECTION 3.2  Authority.  The  execution,  delivery and  performance of this
Agreement  have been duly  authorized by all necessary  organizational  or other
action on the part of such Investor.

     SECTION 3.3 Validity; Enforceability. This Agreement has been duly executed
and delivered by such Investor,  and  constitutes  the legal,  valid and binding
obligation  of such  Investor,  enforceable  against such Investor in accordance
with its terms,  except as such enforceability may be limited by, or subject to,
any bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and subject to general principles
of equity.

     SECTION 3.4  Soros Ownership. Each of the Soros Parties,  severally but not
jointly,  represents  and warrants to the New Investors  that it owns all of the
Existing  Preferred Stock to be sold by it to the New Investors pursuant to this
Agreement free and clear of all liens and

                                       8
<PAGE>

encumbrances,  and that the face value and accrued and unpaid  dividends  of its
Existing Preferred Stock are as set forth on Schedule 2.

     SECTION 3.5  Investment Representations.

          (a) Such  Investor  acknowledges  that the offer and sale of the Newly
     Issued  Securities,  the Existing Preferred Shares or the Conversion Shares
     (collectively,  the "Securities") to such Investor have not been registered
     under the Securities Act, or the securities laws of any state or regulatory
     body and are being  offered and sold in reliance upon  exemptions  from the
     registration  requirements  of the Securities Act and such laws and may not
     be  transferred or resold  without  registration  under such laws unless an
     exemption  is  available.  The  Securities,  and  any  certificate  for the
     Conversion  Shares will be  imprinted  with a legend in  substantially  the
     following form:

          "THE OFFER AND SALE OF THE SECURITIES  REPRESENTED BY THIS CERTIFICATE
          HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
          OR THE  SECURITIES  LAWS OF ANY STATE AND SUCH  SECURITIES  MAY NOT BE
          SOLD,  TRANSFERRED,  ASSIGNED,  PLEDGED,  HYPOTHECATED,  OR  OTHERWISE
          DISPOSED OF EXCEPT  PURSUANT TO A REGISTRATION  STATEMENT WITH RESPECT
          TO SUCH  SECURITIES  WHICH IS  EFFECTIVE  UNDER SUCH ACT AND UNDER ANY
          APPLICABLE  STATE  SECURITIES  LAWS UNLESS,  IN THE OPINION OF COUNSEL
          REASONABLY   SATISFACTORY  TO  THE  COMPANY,  AN  EXEMPTION  FROM  THE
          REGISTRATION  REQUIREMENTS  OF SUCH ACT AND STATE  SECURITIES  LAWS IS
          AVAILABLE."

          (b) Such Investor is acquiring the  Securities  for investment and not
     with a view to the resale or  distribution  thereof and is  acquiring  such
     securities for its own account.  Such Investor is purchasing the Securities
     in the  ordinary  course of  business  and, as of the date  hereof,  has no
     agreements or  understandings,  directly or indirectly,  with any person to
     distribute the Securities.

          (c) Such Investor is an "accredited investor" (as that term is defined
     in Rule 501 of  Regulation D  promulgated  under the  Securities  Act),  is
     sophisticated in financial matters and is familiar with the business of the
     Company  so that it is capable  of  evaluating  the merits and risks of its
     investment  in the  Company  and  has  the  capacity  to  protect  its  own
     interests. Such Investor has had the opportunity to investigate on its own,
     or together  with its  advisors,  the Company's  business,  management  and
     financial  affairs  and has had the  opportunity  to review  the  Company's
     operations and  facilities  and to ask questions and obtain  whatever other
     information  concerning the Company as such Investor has deemed relevant in
     making its investment decision.

          (d) Such Investor is in compliance with the Uniting and  Strengthening
     America by Providing  Appropriate  Tools Required to Intercept and Obstruct
     Terrorism Act of 2001. To such Investor's knowledge, neither it, nor any of
     its principal owners, partners, members, directors


                                       9
<PAGE>

     or officers is included on: (i) the Office of Foreign  Assets  Control list
     of foreign nations,  organizations and individuals  subject to economic and
     trade sanctions,  based on U.S. foreign policy and national security goals;
     (ii)  Executive  Order 13224,  which sets forth a list of  individuals  and
     groups with whom U.S.  persons are prohibited  from doing business  because
     such  persons have been  identified  as  terrorists  or persons who support
     terrorism  or  (iii)  any  other  watch  list  issued  by any  governmental
     authority, including the Commission.

          (e) Such Investor has adequate funds immediately  available to satisfy
     all of its obligations  hereunder and shall  immediately upon its execution
     of this  Agreement  wire in full the aggregate  purchase price set forth on
     Schedule I opposite its name.

          (f) No  representations  or warranties have been made to such Investor
     by the Company or any director,  officer,  employee,  agent or affiliate of
     the Company,  other than the  representations and warranties of the Company
     set forth herein,  and the decision of such Investor to purchase the Shares
     and  the  Warrant  is  based  on  the  information  contained  herein,  the
     Commission Filings and such Investor's own independent investigation of the
     Company.

     SECTION 3.6  Governmental  Consents.  The  execution  and  delivery by such
Investor  of  this  Agreement  and  the  performance  by  such  Investor  of the
transactions  contemplated  hereby, do not and will not require such Investor to
effectuate or obtain any registration with, consent or approval of, or notice to
any federal state or other governmental authority or regulatory body, except for
(to the extent  applicable)  the filing with the  Commission  of a Schedule 13D,
Form 3 and/or  Form 4 under the  Exchange  Act with  respect to the  acquisition
and/or sale by such Investor of the Securities.

     SECTION 3.7  No Violation. The execution and delivery of this Agreement and
the performance by such Investor of the transactions  contemplated  hereby, will
not (i) conflict  with or result in a breach of any provision of the articles of
incorporation,  by-laws or similar organizational  documents of such Investor or
(ii) violate any law, judgment,  order, writ, injunction,  decree, statute, rule
or regulation of any court,  administrative agency,  bureau, board,  commission,
office,  authority,  department or other governmental  entity applicable to such
Investor,  except any such  violation  that could not  reasonably be expected to
materially  impair  the  transactions  contemplated  hereby  or have a  Material
Adverse Effect.

     SECTION  3.8  Brokers.  Neither  such  Investor,  nor any of its  officers,
directors  or  employees,  has  employed  any broker or finder,  or incurred any
liability for any brokerage fees, commissions, finder's or other similar fees or
expenses in connection with the transactions contemplated hereby.

     SECTION 3.9 Short Sales and Confidentiality Prior To The Date Hereof. Other
than the transaction  contemplated hereunder,  such Investor has not directly or
indirectly,  nor  has  any  Person  acting  on  behalf  of or  pursuant  to  any
understanding  with such Investor,  executed any  disposition,  including  Short
Sales (but not including the location and/or reservation of borrowable shares of


                                       10
<PAGE>

Common Stock),  in the  securities of the Company  during the period  commencing
from the time that such Investor first received a term sheet from the Company or
any  other  Person  setting  forth  the  material  terms  of  the   transactions
contemplated    hereunder   until   the   date   hereof   ("Discussion   Time").
Notwithstanding the foregoing, in the case of a Investor that is a multi-managed
investment  vehicle whereby separate portfolio managers manage separate portions
of such Investor's assets and the portfolio managers have no direct knowledge of
the investment  decisions made by the portfolio managers managing other portions
of such Investor's  assets,  the representation set forth above shall only apply
with respect to the portion of assets managed by the portfolio manager that made
the investment  decision to purchase the Securities  covered by this  Agreement.
Other  than  to  other  Persons  party  to this  Agreement,  such  Investor  has
maintained the  confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction).



                                   ARTICLE IV
                                    COVENANTS
                                    ---------

     SECTION 4.1  Registration Rights.

          (a) The Company shall use its commercially reasonable best efforts to:
     (i) prepare and file with the Commission a registration statement under the
     Securities  Act (as the same may be  amended or  supplemented  from time to
     time, the  "Registration  Statement") with respect to the offer and sale of
     the Conversion Shares (collectively,  the "Registrable  Securities") within
     forty-five (45) days of the date of hereof; and (ii) cause the Registration
     Statement to be declared  effective by the  Commission  within  ninety (90)
     days of the date hereof.  Provided that no undisclosed  Potential  Material
     Event then exists, the Company shall cause the Registration Statement to be
     declared  effective  by  the  Commission  within  three  business  days  of
     receiving  notification  from the Commission  that it is willing to issue a
     declaration of  effectiveness.  The Company shall not file any registration
     statement under the Securities Act (other than a registration  statement on
     Form  S-8  relating  to  Common  Stock   underlying   stock  options  or  a
     registration  statement  on Form  S-4  relating  to  securities  issued  in
     connection  with a  merger  or  acquisition)  prior  to the  filing  of the
     Registration  Statement.  The  Company  shall use  commercially  reasonable
     efforts to maintain the effectiveness of such Registration  Statement until
     the  earliest  to occur of the  following  (the  "Registration  Termination
     Date"): (i) all of the Registrable  Securities have been disposed of by the
     Investors  pursuant  to  the  Registration   Statement;  or  (ii)  (A)  the
     Conversion  Shares  issuable  upon  conversion  of the  Series F Shares and
     Existing Preferred Shares can be resold pursuant to clause (k) of Rule 144,
     promulgated  under the Securities  Act, or any similar  provisions  then in
     effect ("Rule 144"), or can otherwise be resold pursuant to Rule 144 at any
     time  regardless of the volume  restrictions  of clause (e) of Rule 144 and
     (B) the Conversion Shares issuable upon exercise of the Warrants (including
     pursuant to any cashless exercise provision included therein) can be resold
     pursuant to Rule 144 or are otherwise freely-tradable without registration.


                                       11
<PAGE>

          (b) Each Investor will promptly  furnish to the Company in writing all
     information  reasonably requested by the Company for use in connection with
     the   preparation   of  the   Registration   Statement  and  obtaining  the
     effectiveness  thereof.  Each Investor,  severally but not jointly,  hereby
     represents and warrants that all such information  furnished by it shall be
     true,  accurate and  complete.  In addition,  each  Investor  covenants and
     agrees that it will comply with all applicable securities laws when trading
     the Company's  Common Stock.  To the extent that any Investor  breaches its
     representations,  warranties or covenants  under this Section  4.1(b),  and
     such breach could  reasonably be expected to cause a delay in, or adversely
     impact, the effectiveness of the Registration Statement, the Company shall,
     without  penalty,  be  authorized  to remove  such  Investor's  Registrable
     Securities from inclusion in the Registration Statement.

          (c)  If  at  any  time  or  from  time  to  time  after  the  date  of
     effectiveness  of the  Registration  Statement,  the Company  notifies  the
     Investors  in writing of the  existence of a Potential  Material  Event (as
     defined  below),  the  Investors  shall  not  offer  or  sell  any  of  the
     Registrable  Securities,  or engage in any other  transaction  involving or
     relating  to the  Registrable  Securities,  from the time of the  giving of
     notice with  respect to a  Potential  Material  Event  until such  Investor
     receives written notice from the Company that such Potential Material Event
     either  has  been  disclosed  to the  public  or no  longer  constitutes  a
     Potential Material Event (such period of time hereinafter  referred to as a
     "Blackout Period"). As used herein, "Potential Material Event" means any of
     the following:  (i) the  possession by the Company of material  information
     not  ripe  for  disclosure  in a  registration  statement,  which  shall be
     evidenced by  determinations in good faith by the Board of Directors of the
     Company that disclosure of such information in the  registration  statement
     would be  detrimental  to the business and affairs of the Company;  or (ii)
     any material engagement or activity by the Company which would, in the good
     faith  determination of the Board of Directors of the Company, be adversely
     affected by  disclosure  in a  registration  statement at such time,  which
     determination  shall be  accompanied by a good faith  determination  by the
     Board of Directors of the Company that the registration  statement would be
     materially misleading absent the inclusion of such information. No Blackout
     Period shall exceed  ninety  consecutive  days,  and there shall be no more
     than 120 days  during any  calendar  year in which a Blackout  Period is in
     effect.

          (d) All  registration and filing fees, fees and expenses of compliance
     with  securities  laws,  printing  expenses and all  independent  certified
     public  accountants  fees and  expenses of counsel to the Company and other
     persons  retained by the Company will be borne by the Company.  The Company
     shall  have  no  obligation  to  pay  any  fees  or  expenses  of  brokers,
     underwriters,  or (except as set forth in  Section  6.2)  counsel or others
     retained by any Investor in connection with the sale, or potential sale, of
     the Registrable Securities.

          (e) The Company agrees to indemnify,  to the fullest extent  permitted
     by law,  each Investor and its officers,  directors,  partners,  employees,
     advisors  and  agents  against  any and all Loss (as  hereinafter  defined)
     arising out of or based upon any untrue, or alleged untrue,  statement of a
     material fact contained in the Registration  Statement or arising out of or
     based upon any  omission or alleged  omission  to state  therein a material
     fact required to be stated therein or necessary to make


                                       12
<PAGE>
     the statements  therein not misleading,  except (i) insofar as the same are
     caused  by or  contained  in any  information  furnished  by such  Investor
     pursuant  to  Section  4.1(b) or (ii)  insofar  as the same are caused by a
     failure by such  Investor  to deliver an updated  prospectus  that has been
     filed  with the  Commission  and made  available  to such  Investor  or its
     representatives for delivery to a purchaser. Each Investor,  severally, but
     not jointly,  agrees to indemnify,  to the fullest extent permitted by law,
     the Company and its officers, directors,  partners, employees, advisors and
     agents against any and all Loss arising out of or based upon any untrue, or
     alleged untrue  statement of a material fact contained in the  Registration
     Statement or arising out of or based upon any omission or alleged  omission
     to state therein a material fact required to be stated therein or necessary
     to make the  statements  therein not misleading (i) insofar as the same are
     caused  by or  contained  in any  information  furnished  by such  Investor
     pursuant  to  Section  4.1(b) or (ii)  insofar  as the same are caused by a
     failure by such  Investor  to deliver an updated  prospectus  that has been
     filed  with the  Commission  and made  available  to such  Investor  or its
     representatives  for  delivery to a  purchaser.  Any  indemnity  obligation
     arising  under this  Section  4.1 shall be governed  by the  provisions  of
     Section 5.2.  Notwithstanding the foregoing, the liability of each Investor
     under this Section 4.1(e) shall not exceed the net proceeds  received by it
     in connection with any sale of the Registrable Securities.

          (f)  The  Company  shall  furnish  to each  Investor  such  number  of
     conformed copies of the Registration  Statement and the prospectus included
     therein,  in conformity  with the  requirements of the Securities Act, that
     such  Investor  may  reasonably  request  from  time to time  in  order  to
     facilitate the disposition of the Registrable Securities.

     In  connection  with any sale of  Registrable  Securities  pursuant  to the
     Registration   Statement,  in  lieu  of  delivering  physical  certificates
     representing the Registrable Securities, if the Company's transfer agent is
     participating  in the  Depositary  Trust  Company  ("DTC")  Fast  Automated
     Securities Transfer program,  upon request of the applicable  Investor,  so
     long as the certificates  therefore are not required to bear a legend,  the
     Company  shall cause its  transfer  agent to  electronically  transmit  the
     Registrable  Securities by crediting the account of such  Investor's  prime
     broker  with DTC through its Deposit  Withdrawal  Agent  Commission  system
     within three (3) business days of such request.

     SECTION 4.2  Conversion  of Existing  Preferred  Shares.  The New Investors
hereby covenant and agree that the Existing  Preferred  Shares purchased by them
pursuant to this Agreement shall automatically be converted into Common Stock in
accordance with their terms upon the occurrence of an Automatic Conversion Event
(as such term is defined in the Company's  Certificate of Powers,  Designations,
Preferences  and Rights of Series F Convertible  Preferred  Stock (the "Series F
Certificate  of  Designations")).  The  provisions  of this Section 4.2 shall be
deemed the New Investors' and their assigns'  irrevocable notice of its election
to  convert  the  Existing  Preferred  Shares,  effective  immediately  upon the
occurrence of an Automatic Conversion Event, in accordance with Section 6 of the
Series F  Certificate  of  Designations.  For  purposes  of  clarification,  the
provisions of this Section 4.2 shall require the automatic conversion by the New
Investors  and their  assigns'  Existing  Preferred  Shares even if the Series F
Convertible  Preferred  Stock is not

                                       13
<PAGE>

automatically  converted  into Common Stock upon the  occurrence of an Automatic
Conversion  Event as a result of the provisions of Section 6.2(ii) of the Series
F Certificate of Designations.

     SECTION  4.3  Stockholder  Approval  of Series F  Anti-Dilution  Adjustment
Provisions.  The Company hereby  covenants and agrees to include the approval of
the Series F  Anti-Dilution  Adjustment  Provisions  (as defined in the Series F
Certificate  of  Designations)  as an item to be voted  upon at the next  annual
meeting (the "Shareholders Meeting") of its shareholders (provided that Series F
Shares remain  outstanding at such time), and to recommend that the shareholders
of the  Company  vote in favor of the  approval  of such  provisions.  The Soros
Parties hereby covenant and agree to vote all shares of the Company held by them
in  favor  of the  approval  of the  Series F  Anti-Dilution  Provisions  at the
Shareholders  Meeting.  In accordance with the terms of the Series F Certificate
of Designations,  the Series F Anti-dilution  Adjustment  Provisions will not be
operative until such shareholder approval is obtained.

     SECTION 4.4 Payment of Dividends on Existing  Preferred  Stock. The Company
hereby  covenants and agrees with the New Investors  that all currently  accrued
and unpaid  dividends on the Existing  Preferred Stock will be paid in shares of
Common  Stock  in  accordance  with  the  terms of the  Certificate  of  Powers,
Designations,  Preferences and Rights of Series D Convertible Preferred Stock of
the Company so long as at the time of issuance  such shares of Common  Stock may
be  resold  pursuant  to  an  effective  registration   statement.  If  no  such
registration statement is effective then all accrued and unpaid dividends on the
Existing  Preferred shall be paid in cash, or restricted  stock at the option of
the holder,  if noted in the conversion  notice.  The provisions of this Section
4.4 shall be deemed the Company's  irrevocable election to pay such dividends in
shares of Common Stock, rather than cash, subject to the foregoing.

                                   ARTICLE V
                            SURVIVAL; INDEMNIFICATION
                            -------------------------

     SECTION 5.1  Survival.  The  representations  and  warranties  contained in
Articles II and III hereof shall survive until the first anniversary of the date
hereof.

          (a)  Indemnification.  Each party (including its officers,  directors,
     employees, affiliates, agents, successors and assigns (each an "Indemnified
     Party")) shall be indemnified and held harmless by the other parties hereto
     (each  an  "Indemnifying  Party")  for  any and  all  liabilities,  losses,
     damages,  claims,  costs and  expenses,  interest,  awards,  judgments  and
     penalties  (including,  without limitation,  reasonable attorneys' fees and
     expenses)  actually  suffered or incurred by them  (hereinafter  a "Loss"),
     arising  out of or  resulting  from the  breach  of any  representation  or
     warranty  made  by an  Indemnifying  Party  contained  in  this  Agreement.
     Notwithstanding anything to the contrary otherwise contained herein: (i) no
     party's  obligations  under this Article V shall include any  obligation to
     compensate for punitive  damages;  (ii) the liability of any Investor under
     this Section 5.1 shall not exceed the proceeds received by such Investor in
     connection with any sale of the Securities;  and (iii) the liability of the
     Company  to any  Investor  under  this  Section  5.1 shall not  exceed  the
     purchase price of the Newly Issued Securities paid by such Investor.


                                       14
<PAGE>

     SECTION 5.2 Indemnification  Procedure.  The obligations and liabilities of
the Indemnifying  Party under this Article V with respect to Losses arising from
claims of any third party which are subject to the indemnification  provided for
in this Article V ("Third  Party  Claims")  shall be governed by and  contingent
upon the following  additional  terms and  conditions:  if an Indemnified  Party
shall receive notice of any Third Party Claim, the Indemnified  Party shall give
the  Indemnifying  Party  notice of such Third  Party Claim  promptly  after the
receipt by the Indemnified  Party of such notice (which notice shall include the
amount of the Loss, if known, and method of computation  thereof, and containing
a reference to the  provisions of this  Agreement in respect of which such right
of indemnification is claimed or arises); provided, however, that the failure to
provide  such notice  shall not release the  Indemnifying  Party from any of its
obligations under this Article V except to the extent the Indemnifying  Party is
materially  prejudiced  by such  failure and shall not relieve the  Indemnifying
Party from any other obligation or Liability that it may have to any Indemnified
Party  otherwise  than  under  this  Article  V.  Upon  written  notice  to  the
Indemnified  Party  within  five (5) days of the  receipt  of such  notice,  the
Indemnifying  Party  shall be entitled to assume and control the defense of such
Third Party Claim at its or his expense and through counsel of its or his choice
(which  counsel  shall be reasonably  satisfactory  to the  Indemnified  Party);
provided,  however,  that, if there exists or is reasonably  likely to exist, in
the  reasonable  opinion  of  counsel to the  Indemnified  Party a  conflict  of
interest  that would make it  inappropriate  in the  reasonable  judgment of the
Indemnified  Party for the same counsel to represent both the Indemnified  Party
and the  Indemnifying  Party,  then the  Indemnified  Party shall be entitled to
retain its or his own  counsel in each  jurisdiction  for which the  Indemnified
Party  reasonably  determines  counsel  is  required,  at  the  expense  of  the
Indemnifying  Party. In the event the Indemnifying  Party exercises the right to
undertake any such defense against any such Third Party Claim as provided above,
the  Indemnified  Party  shall  cooperate  with the  Indemnifying  Party in such
defense and make  available  to such  Indemnifying  Party,  at the  Indemnifying
Party's expense, all witnesses,  pertinent records, materials and information in
the  Indemnified  Party's  possession or under the  Indemnified  Party's control
relating thereto as is reasonably required by the Indemnifying Party. Similarly,
in the event the Indemnified  Party is,  directly or indirectly,  conducting the
defense  against  any such Third  Party  Claim,  the  Indemnifying  Party  shall
cooperate with the  Indemnified  Party in such defense and make available to the
Indemnified  Party,  at the  Indemnifying  Party's  expense,  all such witnesses
(including  himself),  records,  materials and  information in the  Indemnifying
Party's possession or under the Indemnifying Party's control relating thereto as
is reasonably  required by the Indemnified  Party. No such Third Party Claim may
be settled by the Indemnifying  Party or the Indemnified  Party on behalf of the
other without the prior written consent of the other (which consent shall not be
unreasonably  withheld);  provided,  however,  in the event that the Indemnified
Party does not consent to any such  settlement that would provide it with a full
release from  indemnified Loss and would not require it to take, or refrain from
taking, any action, the Indemnifying Party's liability for indemnification shall
not exceed the amount of such proposed  settlement.  The Indemnified  Party will
refrain from any act or omission that is inconsistent with the position taken by
the  Indemnifying  Party  in the  defense  of a Third  Party  Claim  unless  the
Indemnified  Party determines that such act or omission is reasonably  necessary
to protect its own interest.


                                       15
<PAGE>

                                   ARTICLE VI
                                  MISCELLANEOUS
                                  -------------

     SECTION 6.1 Simultaneous  Closing of Transactions.  The consummation of the
purchase and sale of the Newly  Issued  Securities  and the  Existing  Preferred
Shares shall be deemed to have occurred  simultaneously,  and no portion of such
transactions  shall be deemed  completed until all such  transactions  have been
consummated.

     SECTION 6.2  Expenses.  The Company  shall  reimburse  Palisades  for up to
$25,000 of reasonable legal expenses incurred in connection with the negotiation
of this Agreement and the review of the Registration  Statement,  subject to the
receipt of appropriate  supporting  documentation and the receipt of all amounts
owed by the  Investors  hereunder.  Except  as  provided  above,  all  costs and
expenses,  including,  without  limitation,  fees and  disbursements of counsel,
incurred in  connection  with the  negotiation,  execution  and delivery of this
Agreement and its related  documents  shall be paid by the party  incurring such
costs and expenses, whether or not the Closing shall have occurred.

     SECTION 6.3 Publicity.  The Company shall,  prior to 9:00 a.m., EST, on the
first Business Day following the Closing,  issue a press release  announcing the
consummation of the transactions  contemplated hereby (which press release shall
be subject to the  reasonable  approval of HPC and the Soros Parties) and shall,
within four  Business  Days of the closing,  file with the  Commission a Current
Report on Form 8-K  regarding  the same.  Except as set forth above or as may be
required by applicable law or the rules of any securities  exchange or market on
which securities of the Company are traded,  no party hereto shall issue a press
release or public announcement or otherwise make any disclosure  concerning this
Agreement and the transactions  contemplated  hereby,  without prior approval of
the others; provided, however, that nothing in this Agreement shall restrict the
Company or any Investor from  disclosing  such  information  (a) that is already
publicly  available,  (b) that may be required or appropriate in response to any
summons or subpoena  (provided that the disclosing  party will use  commercially
reasonable  efforts  to notify the other  parties in advance of such  disclosure
under  this  clause  (b) so as to permit  the  non-disclosing  parties to seek a
protective order or otherwise contest such disclosure,  and the disclosing party
will use  commercially  reasonable  efforts to cooperate,  at the expense of the
non-disclosing  parties,  in  pursuing  any  such  protective  order)  or (c) in
connection with any litigation  involving disputes as to the parties' respective
rights and obligations hereunder.

     SECTION 6.4 Non-Public Information.  The Company covenants and agrees that,
except as otherwise  contemplated by the Transaction  Documents,  neither it nor
any other  Person  acting on its behalf  will  provide  any New  Investor or its
agents or counsel with any  information  that the Company  believes  constitutes
material non-public  information,  unless such New Investor shall have indicated
that it desires to receive material non-public information and written agreement
regarding  the  confidentiality  and use of such  information  shall  then be in
effect.  The Company  understands  and confirms that each New Investor  shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.


                                       16
<PAGE>

     SECTION 6.5  Reservation and Listing of Securities.

          (a) The  Company  shall  maintain a reserve  from its duly  authorized
     shares of Common Stock for issuance  pursuant to the Transaction  Documents
     in such amount as may be required to fulfill its  obligations in full under
     the Transaction Documents (the "Required Minimum").

          (b) If, on any  date,  the  number of  authorized  but  unissued  (and
     otherwise  unreserved)  shares  of Common  Stock is less than the  Required
     Minimum on such date,  then the Board of Directors of the Company shall use
     commercially  reasonable  efforts  to amend the  Company's  certificate  or
     articles of incorporation to increase the number of authorized but unissued
     shares of Common  Stock to at least the Required  Minimum at such time,  as
     soon as  possible  and in any event not later  than the 90th day after such
     date.

          (c) The  Company  shall,  if  applicable:  (i) in the time and  manner
     required by the Trading  Market,  prepare and file with such Trading Market
     an additional  shares  listing  application  covering a number of shares of
     Common  Stock at least  equal to the  Required  Minimum on the date of such
     application,  (ii) take all steps  necessary to cause such shares of Common
     Stock to be approved for listing on the Trading  Market as soon as possible
     thereafter,  (iii) provide to the Investors  evidence of such listing,  and
     (iv)  maintain  the listing of such Common Stock on any date at least equal
     to the  Required  Minimum  on such date on such  Trading  Market or another
     Trading Market.

     SECTION 6.6  Short Sales and Confidentiality  After The Date  Hereof.  Each
Investor  severally  and not jointly  with the other  Investors  covenants  that
neither  it  nor  any  affiliates  acting  on  its  behalf  or  pursuant  to any
understanding  with it will  execute  any short sales as defined in Rule 3b-3 of
the Exchange Act ("Short  Sales") during the period after such calendar day when
the  Investor  was first  contacted by anyone  regarding  an  investment  in the
Company  ("Discussion  Time")  and  ending  at the time  that  the  transactions
contemplated  by this  Agreement  are first  publicly  announced as described in
Section 6.3. Each Investor,  severally and not jointly with the other Investors,
covenants  that  until  such  time  as the  transactions  contemplated  by  this
Agreement  are  publicly  disclosed  by the Company as described in Section 6.3,
such Investor will maintain,  the  confidentiality of all disclosures made to it
in connection with this  transaction  (including the existence and terms of this
transaction).  Each Investor  understands  and  acknowledges,  severally and not
jointly  with any  other  Investor,  that the  Commission  currently  takes  the
position that coverage of short sales of shares of the Common Stock "against the
box"  prior  to the  Effective  Date  of the  Registration  Statement  with  the
Securities  is a violation of Section 5 of the  Securities  Act, as set forth in
Item  65,  Section  5 under  Section  A, of the  Manual  of  Publicly  Available
Telephone  Interpretations,  dated  July 1997,  compiled  by the Office of Chief
Counsel,  Division of Corporation  Finance.  Notwithstanding  the foregoing,  no
Investor makes any representation,  warranty or covenant hereby that it will not
engage in Short Sales in the  securities  of the Company after the time that the
transactions  contemplated  by this  Agreement are first  publicly  announced as
described in Section 6.3,  provided that all such  transactions will comply with
all applicable securities laws.


                                       17
<PAGE>

Notwithstanding the foregoing, in the case of a Investor that is a multi-managed
investment  vehicle whereby separate portfolio managers manage separate portions
of such Investor's assets and the portfolio managers have no direct knowledge of
the investment  decisions made by the portfolio managers managing other portions
of such  Investor's  assets,  the covenant set forth above shall only apply with
respect to the portion of assets managed by the portfolio  manager that made the
investment decision to purchase the Securities covered by this Agreement.

     SECTION 6.7  Entire  Agreement. This  Agreement and any other  agreement or
instrument to be delivered expressly pursuant to the terms hereof constitute the
entire  Agreement  between the parties hereto with respect to the subject matter
hereof and supersede all previous  negotiations,  commitments  and writings with
respect to such subject matter.

     SECTION 6.8  Assignments;  Parties in Interest.  Neither this Agreement nor
any of the rights,  interests or obligations hereunder may be assigned by any of
the parties  hereto  without  the prior  written  consent of the other  parties;
provided,  that:  (a) the  Securities  may be  transferred  (i)  pursuant to the
Registration  Statement  or (ii) in  accordance  with the  legend  set  forth in
Section  3.4(a);  and (b) in  connection  with any transfer of  Securities  (the
"Transferred   Securities")  by  Palisades  permitted  by  clause  (a)(ii),  the
Registration  Rights contained in Section 4.1, and the obligation to convert the
Existing  Preferred  Shares  contained in Section  4.2,  shall be deemed to have
automatically  been  transferred to, and assumed by, the transferee with respect
to the Transferred  Securities,  and the transferee shall be required to execute
documentation  agreeing  to the  transfer  and  assumption  of such  rights  and
obligations.  This  Agreement  shall be  binding  upon and  inure  solely to the
benefit of each party  hereto,  and  nothing  herein,  express  or  implied,  is
intended  to or shall  confer  upon any  person  not a party  hereto  any right,
benefit or remedy of any nature whatsoever under or by reason hereof,  except as
otherwise provided herein.

     SECTION  6.9  Amendments.  This  Agreement  may not be amended or  modified
except by an  instrument  in writing  signed  by, or on behalf  of, the  parties
against whom such amendment or modification is sought to be enforced.

     SECTION  6.10  Descriptive  Headings.  The  descriptive  headings  of  this
Agreement are inserted for convenience of reference only and do not constitute a
part of and shall not be utilized in interpreting this Agreement.

     SECTION 6.11 Notices and Addresses. Any notice, demand, request, waiver, or
other communication under this Agreement shall be in writing and shall be deemed
to have been duly given on the date of service,  if personally served or sent by
facsimile;  on the business day after notice is delivered to a courier or mailed
by express  mail, if sent by courier  delivery  service or express mail for next
day  delivery;  and on the fifth  business day after  mailing,  if mailed to the
party to whom notice is to be given,  by first class  mail,  registered,  return
receipt requested, postage prepaid and addressed as follows:

To Company:                Bluefly, Inc.


                                       18
<PAGE>

                           42 West 39th Street, 9th Floor
                           New York, New York 10018
                           Fax:     (212) 354-3400
                           Attn:    Chief Financial Officer and General Counsel

                           With a copy to:

                           Dechert LLP
                           30 Rockefeller Plaza
                           New York, New York 10112
                           Fax:     (212) 698-3599
                           Attn:    Richard A. Goldberg, Esq.


To the Investors: To the addresses set forth on Schedule 1.

     SECTION  6.12  Severability.  In the  event  that  any  provision  of  this
Agreement  becomes or is declared  by a court of  competent  jurisdiction  to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the  application of such provision to other persons or
circumstances  will be  interpreted so as reasonably to effect the intent of the
parties hereto.  The parties further agree to replace such void or unenforceable
provision of this  Agreement  with a valid and  enforceable  provision that will
achieve,  to the extent possible,  the economic,  business and other purposes of
such void or unenforceable provision.

     SECTION  6.13  Governing  Law;  Choice of Forum.  This  Agreement  shall be
governed by and construed in  accordance  with the internal laws of the State of
New York,  without  regard to conflicts of law  principles.  Each of the parties
hereto  hereby  irrevocably  and   unconditionally   submits  to  the  exclusive
jurisdiction  of any court of the State of New York or any federal court sitting
in the City of New York for  purposes  of any suit,  action or other  proceeding
arising out of this  Agreement  (and agrees not to commence any action,  suit or
proceedings  relating hereto except in such courts).  Each of the parties hereto
agrees  that  service  of any  process,  summons,  notice  or  document  by U.S.
registered  mail at its address set forth herein  shall be effective  service of
process for any action, suit or proceeding brought against it in any such court.
Each of the parties hereto hereby  irrevocably  and  unconditionally  waives any
objection to the laying of venue of any action,  suit or proceeding  arising out
of this Agreement, which is brought by or against it, in the courts of the State
of New York or any  federal  court  sitting  in the State of New York and hereby
further irrevocably and unconditionally  waives and agrees not to plead or claim
in any such court that any such action,  suit or proceeding  brought in any such
court has been brought in an inconvenient forum.

     SECTION 6.14  Counterparts;  Facsimile  Signatures.  This  Agreement may be
executed in one or more  counterparts,  all of which shall be considered one and
the same agreement and shall become effective when one or more counterparts have
been signed by each of the parties and


                                       19
<PAGE>

delivered to the other party, it being understood that all parties need not sign
the same  counterpart.  This  Agreement  may be  executed  by  facsimile,  and a
facsimile  signature  shall  have the  same  force  and  effect  as an  original
signature on this Agreement.

     SECTION 6.15 Independent  Nature of Investors'  Obligations and Rights. The
obligations of each Investor under any Transaction  Document are several and not
joint with the  obligations  of any other  Investor,  and no  Investor  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Investor under any  Transaction  Document.  Nothing  contained  herein or in any
Transaction  Document,  and no action  taken by any Investor  pursuant  thereto,
shall be deemed to constitute the Investors as a partnership,  an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Investors  are in any way acting in  concert or as a group with  respect to such
obligations or the transactions  contemplated by the Transaction Documents. Each
Investor  shall be  entitled  to  independently  protect and enforce its rights,
including without  limitation the rights arising out of this Agreement or out of
the other  Transaction  Documents,  and it shall not be necessary  for any other
Investor to be joined as an additional party in any proceeding for such purpose.
Each Investor has been  represented  by its own separate  legal counsel in their
review and negotiation of the Transaction Documents.  The Company has elected to
provide all  Investors  with the same terms and  Transaction  Documents  for the
convenience of the Company and not because it was required or requested to do so
by the Investors.

     SECTION 6.16 Specific Performance.  Each of the parties hereto, in addition
to being entitled to exercise all of its rights hereunder, including recovery of
damages,  shall be  entitled to specific  performance  of its rights  under this
Agreement.  Each  party  agrees  that  monetary  damages  would not be  adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this  Agreement  and  hereby  agrees to waive the  defense  in any action for
specific performance that a remedy at law would be adequate.

                            [Signature page follows]








                                       20
<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed on the date
first set forth above.

                                        BLUEFLY, INC.

                                        By: ____________________________________
                                            Name:   Jonathan P. Freedman
                                            Title:  Vice President and General
                                                    Counsel



                                        QUANTUM INDUSTRIAL PARTNERS LDC

                                        By: ____________________________________
                                            Name:
                                            Title:



                                        SFM DOMESTIC INVESTMENTS LLC

                                        By: ____________________________________
                                            Name:
                                            Title:



                                        PEF ADVISORS LTD

                                        By: ____________________________________
                                            Name:
                                            Title:



                                        PALISADES MASTER FUND LP

                                        By: Discovery Management Ltd.

                                        By: ____________________________________
                                            Name:
                                            Title:




                                       21
<PAGE>

                                        JGB CAPITAL L.P.

                                        By: ____________________________________
                                            Name:
                                            Title:



                                        CRESCENT INTERNATIONAL, LTD.

                                        By: ____________________________________
                                            Name:
                                            Title:



                                        SRG CAPITAL, LLC

                                        By: ____________________________________
                                            Name:
                                            Title:



                                        BRISTOL INVESTMENT FUND, LTD.

                                        By: ____________________________________
                                            Name:
                                            Title:



                                        PORTSIDE GROWTH AND OPPORTUNITY FUND

                                        By: ____________________________________

                                            Name:
                                            Title:



                                       22

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>bluefly_exhffff.txt
<DESCRIPTION>CERTIFICATE
<TEXT>

                CERTIFICATE OF POWERS, DESIGNATIONS, PREFERENCES

                  AND RIGHTS OF SERIES F CONVERTIBLE PREFERRED

                             STOCK OF BLUEFLY, INC.

     BLUEFLY, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation" or the "Company"),
DOES HEREBY CERTIFY THAT:

     Pursuant to authority conferred upon the Board of Directors of the
Corporation (the "Board") by the Certificate of Incorporation of the Corporation
(the "Certificate of Incorporation"), and pursuant to the provisions of ss. 151
of the Delaware General Corporation Law (the "DGCL"), the Board, at a meeting
held on June 14, 2005, duly adopted the following resolution providing for the
voting powers, designations, preferences and rights, and the qualifications,
limitations and restrictions, of the Series F Convertible Preferred Stock.

     WHEREAS, the Certificate of Incorporation provides for two classes of
shares known as common stock, $0.01 par value per share (the "Common Stock"),
and preferred stock, $.01 par value per share (the "Preferred Stock"); and

     WHEREAS, the Board is authorized by the Certificate of Incorporation to
provide for the issuance of the shares of Preferred Stock in one or more series,
and by filing a certificate pursuant to the DGCL, to establish from time to time
the number of shares to be included in any such series and to fix the voting
powers, designations, preferences and rights of the shares of any such series,
and the qualifications, limitations and restrictions thereof.

     NOW, THEREFORE, BE IT RESOLVED, that the Board deems it advisable to, and
hereby does, designate a Series F Convertible Preferred Stock and fixes and
determines the voting powers, designations, preferences and rights, and the
qualifications, limitations and restrictions relating to the Series F
Convertible Preferred Stock as follows:

1. Designation/Ranking. There shall hereby be created and established a series
of Preferred Stock, and the shares of such series of Preferred Stock shall be
designated "Series F Convertible Preferred Stock" (referred to herein as the
"Series F Convertible Preferred Stock"). The Series F Convertible Preferred
Stock shall rank pari passu with the Corporation's Series A Convertible
Preferred Stock, $.01 par value per share (the "Series A Convertible Preferred
Stock"), the Corporation's Series B Convertible Preferred Stock, $.01 par value
per share (the "Series B Convertible Preferred Stock"), the Corporation's Series
C Convertible Preferred Stock, $.01 par value per share (the "Series C
Convertible Preferred Stock"), the Corporation's Series D Convertible Preferred
Stock, $.01 par value per share (the "Series D Convertible Preferred Stock"),
and the Corporation's Series E Convertible Preferred Stock, $.01 par value per
share (the "Series E Convertible Preferred Stock," and, together with the Series
A Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock
and the Series F Convertible Preferred Stock, the "Convertible Preferred Stock")
and senior to the Corporation's Common Stock and all other Preferred Stock of
the Corporation ranking junior to the Convertible Preferred Stock, with

<PAGE>



respect to the payment of distributions on liquidation, dissolution or winding
up of the Corporation and with respect to the payment of dividends.

2. Authorized Number. The number of shares constituting the Series F Convertible
Preferred Stock shall be Seven Thousand (7,000) shares.

3. Dividends.

     3.1 The holders of the Series F Convertible Preferred Stock shall be
entitled to receive, out of funds legally available for such purpose, dividends
which shall accrue at the rate of seven percent (7%) per annum of the Series F
Face Value (as defined in Section 4.1 hereof) of such stock and shall compound
annually, payable only upon: (i) the conversion of the Series F Convertible
Preferred Stock pursuant to Section 6 hereof; or (ii) Liquidation (as defined in
Section 4.1 hereof) of the Corporation under Section 4 hereof. Except in
connection with a Series F Liquidation Payment (as defined in Section 4.1
hereof) made under Section 4 hereof (which shall require payment in cash), the
Corporation, in its sole discretion (as determined by a vote of the uninterested
directors of the Corporation), may elect to pay such dividends in shares of
Common Stock (provided that a registration statement with respect to the re-sale
of such shares by such holder is then in effect), in which case such Common
Stock dividends shall be equal to the number of shares of Common Stock obtained
by dividing the cash value of such dividend by the Market Price (as hereinafter
defined) of the Common Stock on the date that such dividend is paid. For all
purposes hereof, the "Market Price" of the Common Stock on a given date shall
mean the closing bid price of the Common Stock on Nasdaq (or whatever other
quotation system or exchange the Common Stock may then principally be traded on)
on the last trading day prior to such date. If on any such date the shares of
Common Stock are not listed or admitted for trading on any national securities
exchange or quoted by NASDAQ or a similar service, the Market Price for the
Common Stock shall be the fair market value of the Common Stock on such date as
determined in good faith by the Board of Directors of the Corporation.

     3.2 Dividends on each share of Series F Convertible Preferred Stock shall
be cumulative and shall accrue from the date of issuance of such share of Series
F Convertible Preferred Stock. The date on which the Corporation initially
issues any share of Series F Convertible Preferred Stock shall be its "Issue
Date," regardless of the number of times transfer of such shares is made on the
stock records maintained by or for the Corporation and regardless of the number
of certificates that may be issued to evidence such share.

     3.3 In addition to the right to receive dividends pursuant to Section 3.1
above, each holder of a share of Series F Convertible Preferred Stock shall have
the right, at any time after the Issue Date, if the Board of Directors of the
Corporation shall declare a dividend or make any other distribution (including,
without limitation, in cash or other property or assets, but excluding any stock
split effected as a stock dividend), to holders of shares of Common Stock, to
receive, out of funds legally available therefor, a dividend or distribution in
an amount equal to the amount of such dividend or distribution receivable by a
holder of the number of shares of Common Stock into which such share of Series F
Convertible Preferred Stock is convertible on the record date for such dividend
or distribution. Any such amount shall be paid to the holders of shares of
Series F Convertible Preferred Stock at the same time such dividend or
distribution is made to the holders of Common Stock.


<PAGE>


4. Liquidation

     4.1 Upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary (a "Liquidation"), each holder shall be paid
for each share of Series F Convertible Preferred Stock held by it, before any
distribution or payment is made upon any stock ranking junior to the Series F
Convertible Preferred Stock, an amount equal to the greater of: (i) $1,000 per
share (the "Series F Face Value") plus, in the case of each share, an amount
equal to all accrued but unpaid dividends thereon, through the date payment
thereof is made and (ii) the amount that the holder of such share of Series F
Convertible Preferred Stock would receive if it were to convert (without regard
to any limitation or restriction on conversion and without actually requiring
such share to be so converted) such share of Series F Convertible Preferred
Stock into share(s) of Common Stock immediately prior to such Liquidation. The
holders of Series F Convertible Preferred Stock shall not be entitled to any
further payment. The amount payable pursuant to the first sentence of this
Section 4.1 with respect to one share of Series F Convertible Preferred Stock is
sometimes referred to as the "Series F Liquidation Payment" (and, together with
the Series A Liquidation Payment (as defined in the Certificate of
Incorporation), the Series B Liquidation Payment (as defined in the Certificate
of Incorporation), any amounts payable upon a Liquidation with respect to one
share of Series C Convertible Preferred Stock, any amounts payable upon a
Liquidation with respect to one share of Series D Convertible Preferred Stock
and any amounts payable upon a Liquidation with respect to one share of Series E
Convertible Preferred Stock, the "Liquidation Payment"), and the amounts so
payable with respect to all shares of Series F Convertible Preferred Stock are
sometimes referred to as the "Series F Liquidation Payments" (and, together with
the Series A Liquidation Payments (as defined in the Certificate of
Incorporation), the Series B Liquidation Payments (as defined in the Certificate
of Incorporation), the amounts so payable with respect to all shares of Series C
Convertible Preferred Stock, the amounts so payable with respect to all shares
of Series D Convertible Preferred Stock and the amounts so payable with respect
to all shares of Series E Convertible Preferred Stock, the "Liquidation
Payments").

     4.2 If upon such Liquidation, the assets to be distributed among the
holders of Convertible Preferred Stock shall be insufficient to permit payment
to the holders of Convertible Preferred Stock of the Liquidation Payments, then
the entire assets of the Corporation to be so distributed shall be distributed
ratably among the holders of Convertible Preferred Stock. Upon any such
Liquidation after the holders of Convertible Preferred Stock shall have been
paid in full the Liquidation Payments to which they shall be entitled, the
remaining net assets of the Corporation may be distributed to the holders of
securities ranking junior to the Convertible Preferred Stock.

     4.3 Written notice of such Liquidation stating a payment date, the amount
of the Series F Liquidation Payments and the place where said Series F
Liquidation Payments shall be payable, shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, not less than 10 days prior to the payment date stated therein, to the
holders of record of Series F Convertible Preferred Stock, such notice to be
addressed to each such holder at its address as shown by the records of the
Corporation.

     4.4 The Series F Convertible Preferred Stock shall, with respect to
distribution of assets and rights upon Liquidation, rank senior to each class or
series of capital stock of the


<PAGE>


Corporation hereafter created which does not expressly provide that it ranks on
parity with or is senior to the Series F Convertible Preferred Stock with
respect to distribution of assets and rights upon the liquidation, dissolution
or winding up of the Corporation.

5. Voting Rights. Holders of Series F Convertible Preferred Stock shall be
entitled to notice of any stockholders' meeting. Except as otherwise required by
law, at any annual or special meeting of the Corporation's stockholders, or in
connection with any written consent in lieu of any such meeting, the holders of
each outstanding share of Series F Convertible Preferred Stock shall be entitled
to cast, in respect of such share, the number of votes equal to the number of
full shares of Common Stock into which such share of Series F Convertible
Preferred Stock is then convertible (calculated by rounding any fractional share
up to the nearest whole number) on the date for determination of stockholders
entitled to vote at the meeting. Notwithstanding the foregoing, holders of the
Series F Convertible Preferred Stock shall not be entitled to cast, in respect
of such shares, any votes with respect to the approval of the Series F
Anti-Dilution Adjustment Provisions (as hereinafter defined). Except as set
forth herein or otherwise required by law, the Series F Convertible Preferred
Stock and the Common Stock shall vote together as a single class on each matter
submitted to the stockholders (including, without limitation, any merger or sale
of all or substantially all of the assets of the Company), and not by separate
class or series.

6. Conversions. The holders of shares of Series F Convertible Preferred Stock
shall have the following conversion rights.

     6.1 Right to Convert. Subject to the terms and conditions of this Section
6.1, the holder of any share or shares of Series F Convertible Preferred Stock
shall have the right, at its option at any time and from time to time, to
convert any such shares (or fractions thereof) of Series F Convertible Preferred
Stock (except that upon any Liquidation, the right of conversion shall terminate
at the close of business on the business day immediately preceding the date
fixed for payment of the amount distributable on the Series F Convertible
Preferred Stock) into such number of fully paid and nonassessable shares of
Common Stock as is obtained by (x) multiplying the number of shares of Series F
Convertible Preferred Stock to be so converted by the Series F Face Value and
(y) dividing the result by the Series F Conversion Price (as defined below)
applicable to such share, determined as provided below, in effect on the date
the certificate is surrendered for conversion; plus, at the Company's option (as
determined by a vote of the disinterested directors of the Corporation), either
a number of shares of Common Stock (valued at the then current Market Price), or
an amount in cash, as the case may be, equal to any accrued but unpaid dividends
on the shares of Series F Convertible Preferred Stock so converted.

     The initial Series F Conversion Price per share for shares of Series F
Convertible Preferred Stock shall be $2.32 per share, as adjusted pursuant to
the further provisions of this Section 6 (such price as last adjusted, being
referred to as the "Series F Conversion Price").

     Holders shall effect conversions by providing the Company with the form of
conversion notice attached hereto as Annex A (a "Notice of Conversion"), along
with a stock certificate representing the shares to be so converted. Each Notice
of Conversion shall specify the number of shares of Preferred Stock to be
converted, the number of shares of Preferred Stock owned prior to the conversion
at issue, the number of shares of Preferred Stock owned subsequent to the


<PAGE>


conversion at issue and the date on which such conversion is to be effected,
which date may not be prior to the date the Holder delivers such Notice of
Conversion to the Company by facsimile (the "Conversion Date"). If no Conversion
Date is specified in a Notice of Conversion, the Conversion Date shall be the
date that such Notice of Conversion to the Company is deemed delivered
hereunder.

     The Company shall not effect any conversion of the Preferred Stock, and the
Holder shall not have the right to convert any portion of the Preferred Stock to
the extent that after giving effect to such conversion, the Holder (together
with the Holder's affiliates), as set forth on the applicable Notice of
Conversion, would beneficially own in excess of 4.99% of the number of shares of
the Common Stock Outstanding immediately after giving effect to such conversion.
For purposes of the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its affiliates shall include the number of
shares of Common Stock issuable upon conversion of the Preferred Stock with
respect to which the determination of such sentence is being made, but shall
exclude the number of shares of Common Stock which would be issuable upon (A)
conversion of the remaining, nonconverted Series F Face Value of Preferred Stock
beneficially owned by the Holder or any of its affiliates and (B) exercise or
conversion of the unexercised or nonconverted portion of any other securities of
the Company (including the Warrants) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially owned by the
Holder or any of its affiliates. Except as set forth in the preceding sentence,
for purposes of this Section, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act, it being acknowledged by
Holder that the Company is not representing to Holder that such calculation is
in compliance with Section 13(d) of the Exchange Act and Holder is solely
responsible for any schedules required to be filed in accordance therewith.. To
the extent that the limitation contained in this Section applies, the
determination of whether the Preferred Stock is convertible (in relation to
other securities owned by the Holder together with any affiliates) and of which
shares of Preferred Stock is convertible shall be in the sole discretion of such
Holder, and the submission of a Notice of Conversion shall be deemed to be such
Holder's determination of whether the shares of Preferred Stock may be converted
(in relation to other securities owned by such Holder) and which shares of the
Preferred Stock is convertible, in each case subject to such aggregate
percentage limitations. To ensure compliance with this restriction, the Holder
will be deemed to represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the restrictions set
forth in this paragraph and the Company shall have no obligation to verify or
confirm the accuracy of such determination. For purposes of this Section, in
determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as reflected in the
most recent of the following: (A) the Company's most recent Form 10-Q or Form
10-K, as the case may be, (B) a more recent public announcement by the Company
or (C) any other notice by the Company or the Company's transfer agent setting
forth the number of shares of Common Stock Outstanding. Upon the written request
of the Holder, the Company shall within two Business Days confirm in writing to
the Holder the number of shares of Common Stock then outstanding. In any case,
the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including the Preferred Stock, by the Holder or its affiliates since the date as
of which such number of outstanding shares of Common Stock was reported. The
provisions of this Section may be waived by the Holder upon,


<PAGE>


at the election of the Holder, not less than 61 days' prior notice to the
Company, and the provisions of this Section shall continue to apply until such
61st day (or such later date, as determined by the Holder, as may be specified
in such notice of waiver). The foregoing provision shall only apply to the New
Investors (as defined in the Purchase Agreement).

     6.2 Automatic Conversion; Redemption at Company's Option.

          (i)  Upon the occurrence of an Automatic Conversion Event (as
               hereinafter defined), except as provided in Section 6.2(ii)
               below), --------------- each outstanding share of Series F
               Convertible Preferred Stock shall automatically, with no further
               action required to be taken by the Corporation or the holder
               thereof, be converted into such number of fully paid and
               nonassessable shares of Common Stock as is obtained by (x)
               multiplying the number of shares of Series F Convertible
               Preferred Stock to be so converted by the Series F Face Value and
               (y) dividing the result by the Series F Conversion Price
               applicable to such share in effect on the date the certificate is
               surrendered for conversion; plus, at the Company's option (as
               determined by a vote of the disinterested ---- directors of the
               Corporation), either a number of shares of Common Stock (valued
               at the then current Market Price), or an amount in cash, as the
               case may be, equal to any accrued but unpaid dividends on the
               shares of Series F Convertible Preferred Stock so converted. The
               Company shall send each registered Holder written notice of an
               Automatic Conversion Event (other than an Automatic Conversion
               Event that does not result in the automatic conversion of the
               shares of Series F Convertible Preferred Stock due to the
               provisions of Section 6.2(ii) below) within two (2) business days
               of its occurrence. An "Automatic ---------------- ----------
               Conversion Event" shall be deemed to have occurred upon the
               earlier of: (A) the date on which the last ----------------- sale
               price of the Common Stock on NASDAQ or, if not quoted on NASDAQ,
               on any other national securities exchange has been at least two
               times the Series F Conversion Price for twenty consecutive
               trading days (provided that a registration statement is then in
               effect with respect to the resale of the Common Stock to be
               delivered in connection with the conversion of the Series F
               Convertible Preferred Stock and the Existing Preferred Stock (as
               defined in the Purchase Agreement)); or (B) the date (the
               "Existing Preferred --------------------- Conversion Date") on
               which an aggregate of fifty percent (50%) of the Convertible
               Preferred Stock ---------------- outstanding immediately prior to
               the filing of this Certificate (measured by reference to the
               number of shares of Common Stock issuable upon the conversion of
               such Convertible Preferred Stock) has been converted to Common
               Stock. For purposes of this Certificate, the "Purchase Agreement"
               shall mean that certain ------------------- Preferred Stock and
               Warrant Purchase Agreement, dated as of the date hereof, by and
               among the Company and the initial holders of the Series F
               Convertible Preferred Stock.

               (ii) Notwithstanding Section 6.2(i), the shares of Series F
                    Convertible Preferred Stock shall not automatically be
                    converted into Common Stock

<PAGE>


                    upon the occurrence of the Existing Preferred Conversion
                    Date if (A) the closing bid price of the Common Stock on the
                    last trading day prior to such date was less than $1.23 or
                    (B) a registration statement is not then in effect with
                    respect to the resale of the Common Stock to be delivered in
                    connection with the conversion of the Series F Convertible
                    Preferred Stock and the Existing Preferred Stock.

               (iii)At any time and from time to time following the Existing
                    Preferred Conversion Date, in the event that the Series F
                    Convertible Preferred Stock has not automatically been
                    converted into Common Stock as a result of the provisions of
                    Section 6.2(ii), the Company shall have the right, at its
                    option and on thirty days' prior written notice to each
                    Holder, to redeem any and all shares of Series F Convertible
                    Preferred Stock for cash at a price per share equal to the
                    Series F Face Value of such share plus any accrued and
                    unpaid dividends.

     6.3 Issuance of Certificates; Time Conversion Effected. Within three
Business Days after the delivery of a Notice of Conversion and the surrender of
the certificate or certificates for the shares of Series F Convertible Preferred
Stock to be converted as set forth above, the Corporation shall issue and
deliver, or cause to be issued and delivered, to the holders, registered in such
name or names as such holders may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
shares of Series F Convertible Preferred Stock. In lieu of delivering physical
certificates pursuant to the foregoing, if the Company's transfer agent is
participating in the Depositary Trust Company ("DTC") Fast Automated Securities
Transfer program and the certificates therefore are not required to bear a
legend, the Company shall cause its transfer agent to electronically transmit
such shares of Common Stock by crediting the account of the Investor's prime
broker with DTC through its Deposit Withdrawal Agent Commission system.

     6.4 Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of Series F Convertible Preferred Stock into Common Stock. If
any fractional share of Common Stock would, except for the provisions of the
first sentence of this Section 6.3, be delivered upon such conversion, the
Corporation, in lieu of delivering such fractional share, shall round the number
of shares to be delivered to the nearest whole number.

     6.5 Anti-Dilution Adjustments. The Series F Conversion Price shall be
subject to adjustment as follows if any of the events listed below occur after
the Issue Date but, with respect to a share of Series F Convertible Preferred
Stock, prior to the conversion of such share of Series F Convertible Preferred
Stock into Common Stock.

               (i)  In case the Corporation shall (x) pay a dividend or make a
                    distribution on its Common Stock in shares of its Common
                    Stock, (y) subdivide or reclassify its outstanding Common
                    Stock into a greater number of shares, or (z) combine or
                    reclassify its outstanding Common Stock into a smaller
                    number of shares, the Series F Conversion Price in effect
                    immediately prior to such event shall be adjusted so that
                    the holder of any share of the Series F Convertible
                    Preferred Stock thereafter surrendered for conversion


<PAGE>


                    shall be entitled to receive the number of shares of Common
                    Stock which it would have owned or have been entitled to
                    receive after the happening of such event had the share of
                    such Series F Convertible Preferred Stock been converted
                    immediately prior to the happening of such event. An
                    adjustment made pursuant to this paragraph shall become
                    effective immediately after the record date in the case of a
                    dividend or distribution and shall become effective on the
                    effective date in the case of subdivision, combination or
                    reclassification. If any dividend or distribution is not
                    paid or made, the Series F Conversion Price then in effect
                    shall be appropriately readjusted.

               (ii) In case the Corporation shall pay, issue or distribute to
                    its holders of capital stock any shares of capital stock of
                    the Corporation or evidences of indebtedness or cash or
                    other assets (excluding (w) regular cash dividends payable
                    out of earnings in the ordinary course and distributed
                    ratably to the holders of Convertible Preferred Stock, (x)
                    distributions paid from retained earnings of the Corporation
                    and distributed ratably to the holders of Convertible
                    Preferred Stock, (y) dividends or distributions referred to
                    in clause (i) above and (z) dividends or distributions paid
                    or made to holders of shares of ---------- Convertible
                    Preferred Stock in the manner provided in Section 3 above)
                    or rights, options or warrants to --------- subscribe for or
                    purchase any of its securities then, in each such case, the
                    Series F Conversion Price shall be adjusted so that it shall
                    equal the price determined by multiplying the Series F
                    Conversion Price in effect immediately prior to the date of
                    the distribution by a fraction the numerator of which shall
                    be the Series F Conversion Price less the then fair market
                    value (as determined by the Board of Directors, whose
                    determination, if made in good faith, shall be conclusive)
                    of the portion of the capital stock, cash or assets or
                    evidences of indebtedness so distributed, or of the
                    subscription rights, options or warrants so distributed or
                    of such convertible or exchangeable securities, with respect
                    to one share of Common Stock, and the denominator of which
                    shall be the Series F Conversion Price in effect immediately
                    prior to the date of the distribution. Such adjustment shall
                    be made whenever any such distribution is made, and shall
                    become effective retroactive to the record date for the
                    determination of stockholders entitled to receive such
                    distribution. If any such distribution is not made or if any
                    or all of such rights, options or warrants expire or
                    terminate without having been exercised, the Series F
                    Conversion Price then in effect shall be appropriately
                    readjusted.

               (iii)Whenever the Series F Conversion Price is adjusted as
                    herein provided or as provided in Section 6.6(a), the
                    -------------- Corporation shall promptly file with the
                    conversion agent (or, if there is no conversion agent, the
                    secretary of the Corporation) an officer's certificate
                    setting forth such Series F Conversion Price after the
                    adjustment and setting forth a brief statement of the facts
                    requiring the adjustment, which certificate shall be
                    conclusive evidence of the correctness of the adjustment.
                    Promptly after delivery of the


<PAGE>


                    certificate, the Corporation shall prepare a notice of the
                    adjustment of such Series F Conversion Price setting forth
                    such Series F Conversion Price and the date on which the
                    adjustment becomes effective and shall mail the notice of
                    such adjustment of the Series F Conversion Price (together
                    with a copy of the officer's certificate setting forth the
                    facts requiring such adjustment) to the holder of each share
                    of the Series F Convertible Preferred Stock at such holder's
                    last address as shown on the stock books of the Corporation.

     6.6 Additional Adjustment.

          (a) In case the Corporation shall (i) sell or issue shares of its
Common Stock, (ii) issue rights, options or warrants to subscribe for or
purchase shares of Common Stock or (iii) issue or sell other rights for the
purchase of shares of Common Stock or securities convertible into or
exchangeable into shares of Common Stock (any such shares, rights, options,
warrants or other securities issued in the case of one or more of the events
described in the immediately preceding clauses (i), (ii) and (iii) (excluding
those issuances referred to in Section 6.6(c) hereof) hereinafter referred to,
collectively, the "Securities"), at a price per share (the "New Issue Price")
less than the Series F Conversion Price, then in each such case the Series F
Conversion Price in effect immediately prior to the issuance of such Securities
shall be adjusted so that it shall equal the price determined by multiplying the
Series F Conversion Price in effect immediately prior to the issuance of such
Securities by a fraction the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of the Securities
plus the number of shares of Common Stock which the aggregate consideration
received for the issuance of the Securities would purchase at the Series F
Conversion Price in effect immediately prior to the issuance of such Securities,
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after the issuance of the Securities (after giving
effect to the full exercise, conversion or exchange, as applicable, of such
Securities). Notwithstanding the foregoing, in the event that the Corporation
shall sell or issue any Securities at a New Issue Price less than $1.50, then,
in each such case, the Series F Conversion Price in effect immediately prior to
the issuance of such Securities shall be adjusted so that it shall equal the New
Issue Price. The adjustment provided for in this Section 6.6(a) shall be made
successively whenever any Securities are issued (provided, however, that no
further adjustments in the Series F Conversion Price shall be made upon the
subsequent exercise, conversion or exchange, as applicable of such Securities
pursuant to the original terms of such Securities) and shall become effective
immediately after such issuance. In determining whether any Securities entitle
the holders of the Common Stock to subscribe for or purchase shares of Common
Stock at less than the Series F Conversion Price, and in determining the New
Issue Price of the shares of Common Stock so offered, there shall be taken into
account any consideration received by the Corporation for such Securities, any
consideration required to be paid upon the exercise, conversion or exchange, as
applicable, of such Securities and the value of all such consideration (if other
than cash) shall be determined in good faith by the Board of Directors of the
Corporation. If any or all of such Securities are not so issued or expire or
terminate without having been exercised, converted or exchanged, the Series F
Conversion Price then in effect shall be appropriately readjusted to the Series
F Conversion Price that would then be in effect had the adjustments made upon
the issuance of such Securities been made upon the basis of only the number of
shares of Common Stock delivered pursuant to Securities actually exercised,
converted or


<PAGE>


exchanged. For purposes of this Section 6.6(a), the number of shares of Common
Stock at any time outstanding shall not include shares held in treasury of the
Corporation or by any subsidiary of the Corporation.

          (b) Notwithstanding anything herein to the contrary, Section 6.6(a)
shall not be effective until such time as the Corporation's stockholders approve
the provisions contained therein (the "Series F Anti-Dilution Adjustment
Provisions") to the extent such approval ("Stockholder Approval") is required by
the rules of the Nasdaq SmallCap Market or any other national securities
exchange or quotation system upon which the Common Stock may be listed from time
to time. To the extent that any Securities are, prior to the Corporation
obtaining Stockholder Approval, issued at a New Issue Price that would, but for
the foregoing sentence, result in an adjustment to the Series F Conversion
Price: (i) the Series F Conversion Price shall be deemed immediately so adjusted
upon the Corporation obtaining Stockholder Approval; and (ii) to the extent that
any Holder converts any shares of Series Convertible Preferred Stock between the
time of the issuance of such Securities and the time that Stockholder Approval
is obtained, such Holder shall be entitled to receive, immediately upon the
Corporation obtaining Stockholder Approval, an additional number of shares of
Common Stock equal to the difference between the number of shares that such
Holder would have received had the Series F Conversion Price been so adjusted as
of the time of such conversion and the number of shares that such Holder
actually received upon such conversion.

          (c) The provisions of Section 6.6(a) shall not apply at any time to:
(a) the issuance of any equity securities issued at or above then fair market
value pursuant to the Corporation's employee option or stock incentive plans
approved by the Board of Directors of the Corporation; (b) any equity securities
issued at then fair market value as consideration for services of non-employee
third parties provided to the Corporation; and (c) the issuance of any equity
securities pursuant to the exercise or conversion of convertible or other
derivative securities outstanding as of the date hereof (provided no amendments
to the terms of such conversion or exercise are made after the date hereof).

     6.7 Reorganization, Recapitalization or Reclassification. If any merger,
consolidation, capital reorganization, recapitalization or reclassification of
the capital stock of the Corporation (other than a merger or consolidation of
the Corporation in which the Corporation is the surviving corporation and which
does not result in a reclassification or change in the outstanding shares of
Common Stock), or a sale, lease or other transfer of all or substantially all of
the assets of the Corporation, shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities or assets (other
than cash dividends payable out of earnings or surplus in the ordinary course of
business) with respect to or in exchange for Common Stock, and the shares of
Series F Convertible Preferred Stock are not otherwise to be converted or
exchanged pursuant to the terms of such transaction, then, as a condition of
such merger, reorganization, recapitalization, reclassification or sale, lawful
and adequate provisions shall be made whereby each holder of a share or shares
of Series F Convertible Preferred Stock shall thereupon have only the right to
receive upon conversion of such share or shares of Series F Convertible
Preferred Stock, upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of Common Stock immediately theretofore
receivable upon the conversion of such share or shares of Series F Convertible
Preferred Stock (the "Pre-Merger Conversion Shares"), such shares of stock,
securities or assets (including cash) as may be issued


<PAGE>


or payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of Pre-Merger Conversion Shares.

     6.8 Other Notice. In case at any time:

          (i)  the Corporation shall declare any dividend upon its Common Stock
               payable in cash or stock or make any other distribution to the
               holders of its Common Stock;

          (ii) the Corporation shall offer for subscription pro rata to the
               holders of its Common Stock any additional shares of stock of any
               class or other rights;

          (iii) there shall be any capital reorganization or reclassification of
               the capital stock of the Corporation, or a consolidation or
               merger of the Corporation with or into another entity or
               entities, or a sale, lease, abandonment, transfer or other
               disposition of all or substantially all its assets; or

          (iv) there shall be a voluntary or involuntary dissolution or winding
               up of the Corporation;

               then, in any one or more of said cases, the Corporation shall
give, by delivery in person, certified or registered mail, return receipt
requested or telecopier, addressed to each holder of any shares of Series F
Convertible Preferred Stock at the address of such holder as shown on the books
of the Corporation, (i) at least 10 days' prior written notice of the date on
which the books of the Corporation shall close or a record shall be taken for
such dividend, distribution or subscription rights or for determining rights to
vote in respect of any such reorganization, reclassification, consolidation,
merger, disposition, dissolution or winding up and (ii) in the case of any such
reorganization, reclassification, consolidation, merger, disposition,
dissolution or winding up, at least 10 days' prior written notice of the date
when the same shall take place. Such notice in accordance with the foregoing
clause (i) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto and such notice in accordance with the foregoing clause (ii)
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
disposition, dissolution or winding up, as the case may be.

     6.9 Stock to be Reserved. The Corporation covenants that all shares of
Common Stock that shall be so issued shall be duly authorized, validly issued,
fully paid and nonassessable by the Corporation and free from all taxes, liens
and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Corporation covenants that it will from time to
time take all such action as may be requisite to assure that the par value per
share of the Common Stock is at all times equal to or less than the Series F
Conversion Price in effect at the time. The Corporation will take all such
action as may be necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable law or regulation, or of any
requirement of any national securities exchange or quotation system upon which
the Common Stock may be listed. The Corporation will not take any action that
results in any


<PAGE>


adjustment of the Series F Conversion Price if the total number of shares of
Common Stock issued and issuable after such action upon conversion of the Series
F Convertible Preferred Stock would exceed the total number of shares of Common
Stock then authorized by the Certificate of Incorporation.

     6.10 Reissuance of Preferred Stock. Shares of Series F Convertible
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged or converted, shall not be reissued as
shares of Series F Convertible Preferred Stock and shall (upon compliance with
any applicable provisions of the General Corporation Law of the State of
Delaware) have the status of authorized but unissued shares of Preferred Stock
of the Corporation undesignated as to series and may be designated or
redesignated and issued or reissued, as the case may be, as part of any series
of Preferred Stock of the Corporation other than Series F Convertible Preferred
Stock.

     6.11 Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of Series F Convertible Preferred Stock shall be made without
charge to the holders thereof for any issuance tax in respect thereof, provided
that the Corporation shall not be required to pay any tax that may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the holder of the Series F Convertible Preferred
Stock which is being converted.

     6.12 Closing of Books. The Corporation will at no time close its transfer
books against the transfer of any Series F Convertible Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Series F Convertible Preferred Stock in any manner that interferes with the
timely conversion of such Series F Convertible Preferred Stock, except as may
otherwise be required to comply with applicable laws.

     6.13 Minimum Adjustment. No reduction of the Series F Conversion Price
shall be made if the amount of any such reduction would be an amount less than
$.025, but any such amount shall be carried forward and reduction with respect
thereof shall be made at the time of and together with any subsequent reduction
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate $.025 or more.

7. Adjustment of Face Value. In case the Corporation shall subdivide or
reclassify its outstanding Series F Convertible Preferred Stock into a greater
number of shares or combine or reclassify its outstanding Series F Convertible
Preferred Stock into a smaller number of shares, the Series F Face Value in
effect immediately prior to such event shall be adjusted to reflect such
increase or decrease. An adjustment made pursuant to this Section 7 shall become
effective on the effective date of subdivision, combination or reclassification.



                 [Remainder of page intentionally left blank.]


<PAGE>


          IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designations this 23rd day of June, 2005.



                                    BLUEFLY, INC.


                                    By:/s/ Melissa Payner-Gregor
                                       --------------------------------
                                    Name:  Melissa Payner-Gregor
                                    Title: Chief Executive Officer and President




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>4
<FILENAME>bluefly_exhgggg.txt
<DESCRIPTION>WAIVER AND CONSENT
<TEXT>

                               WAIVER AND CONSENT
                                OF THE HOLDERS OF
                      SERIES A CONVERTIBLE PREFERRED STOCK,
                      SERIES B CONVERTIBLE PREFERRED STOCK,
                      SERIES C CONVERTIBLE PREFERRED STOCK,
                      SERIES D CONVERTIBLE PREFERRED STOCK,
                      SERIES E CONVERTIBLE PREFERRED STOCK
                                       AND
                          CONVERTIBLE PROMISSORY NOTES
                                OF BLUEFLY, INC.

          The undersigned, constituting the holders of all of the issued and
outstanding shares of the Series A Convertible Preferred Stock (the "Series A
Preferred Stock"), the Series B Convertible Preferred Stock (the "Series B
Preferred Stock"), the Series C Convertible Preferred Stock (the "Series C
Preferred Stock"), the Series D Convertible Preferred Stock (the "Series D
Preferred Stock") and the Series E Convertible Preferred Stock (the "Series E
Preferred Stock"), and all of the convertible promissory notes of the Company
dated July 16, 2003 and October 17, 2003 (collectively, the "Promissory Notes"),
of Bluefly, Inc., a Delaware corporation (the "Corporation"), hereby covenant
and agree as follows and adopt the following resolutions pursuant to Section 228
of the General Corporation Law of the State of Delaware in lieu of holding
meetings of the holders of Series A Preferred Stock (the "Series A Preferred
Stockholders"), the holders of Series B Preferred Stock (the "Series B Preferred
Stockholders"), the holders of Series C Preferred Stock (the "Series C Preferred
Stockholders"), the holders of the Series D Preferred Stock (the "Series D
Preferred Stockholders") and the holders of the Series E Preferred Stock (the
"Series E Preferred Stockholders"), and direct that this waiver and consent be
filed with the minutes of the Corporation:

          WHEREAS, the Corporation desires to issue and sell to PEF Advisors,
LLC, Quantum Industrial Partners LDC and SFM Domestic Investments LLC
(collectively, the "Investors"), pursuant to a Preferred Stock and Warrant
Purchase Agreement substantially in the form attached hereto as Exhibit A (the
"Preferred Stock Purchase Agreement") for an aggregate purchase price of
$7,000,000, an aggregate of 7,000 shares (the "Purchased Shares") of
newly-designated Series F Convertible Preferred Stock, par value $0.01 per share
(the "Series F Preferred Stock"), having the rights and preferences set forth in
the Certificate of Designations of Series F Preferred Stock attached hereto as
Exhibit B;

          WHEREAS, pursuant to the Preferred Stock Purchase Agreement, the
Company will also sell to the Investors warrants (the "Warrants") to purchase
shares of the Company's Common Stock, $.01 par value (the "Common Stock").

          WHEREAS, Sections 5.5.1 and 5.6.1 of the Corporation's certificate of
incorporation (the "Certificate of Incorporation") provide that, without the
approval of the holders of a majority of each of the Series A Preferred Stock
and Series B Preferred Stock, each voting separately as a class, the Corporation
shall not, among other things, issue or sell securities of the Corporation;

          WHEREAS, Section 5.1 of the respective Certificates of Designations
relating to each of


<PAGE>


the Series C Preferred Stock, the Series D Preferred Stock and the Series E
Preferred Stock (collectively, the "Certificates of Designations") provide that,
without the approval of the holders of a majority of each of the Series C
Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock,
each voting separately as a class, the Corporation shall not, among other
things, issue or sell securities of the Corporation;

          WHEREAS, Section 5.11 of the Certificate of Incorporation provides
certain preemptive rights to the Series A Preferred Stockholders and Series B
Preferred Stockholders with respect to certain proposed issuances of securities
of the Corporation;

          WHEREAS, Section 9 of each of the Certificates of Designations
provides certain preemptive rights to the Series C Preferred Stockholders,
Series D Preferred Stockholders and Series E Preferred Stockholders (as
applicable) with respect to certain proposed issuances of securities of the
Corporation; and

          WHEREAS, each of the Promissory Notes provides the holder thereof with
the right to convert such note into Shares and Warrants in connection with the
transactions contemplated by the Preferred Stock Purchase Agreement (the "Note
Conversion Rights").

NOW, THEREFORE, BE IT:

          RESOLVED, that (1) the designation of the Series F Preferred Stock,
(2) the issuance and sale to the Investors, pursuant to the Preferred Stock
Purchase Agreement, of the Shares and the Warrants and (3) the issuance of
shares of Common Stock upon the conversion of the Shares and/or exercise of the
Warrants are each hereby approved in all respects; and it is further

          RESOLVED, that the preemptive rights granted to the Series A Preferred
Stockholders and Series B Preferred Stockholders pursuant to Section 5.11 of the
Certificate of Incorporation, and the preemptive rights granted to the Series C
Preferred Stockholders, Series D Preferred Stockholders and Series E Preferred
Stockholders pursuant to Section 9 of the applicable Certificate of Designations
are hereby waived with respect to (1) the issuance and sale of the Shares and
the Warrants to the Investors pursuant to the Preferred Stock Purchase Agreement
and (2) the issuance of shares of Common Stock upon the conversion of the Shares
and/or exercise of the Warrants; and it is further

          RESOLVED, that the Note Conversion Rights are hereby waived with
respect to the issuance of the Shares and the Warrants; and it is further

          RESOLVED, that this waiver and consent may be executed in one or more
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall be deemed one and the same instrument.


<PAGE>


          IN WITNESS WHEREOF, the undersigned have caused this waiver and
consent to be executed as of this 24th day of June, 2005.


                                               QUANTUM INDUSTRIAL PARTNERS LDC


                                               By: ____________________________
                                               Name:
                                               Title:


                                               SFM DOMESTIC INVESTMENTS LLC


                                               By: ____________________________
                                               Name:
                                               Title:



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>5
<FILENAME>bluefly_exhhhhh.txt
<DESCRIPTION>POWER OF ATTORNEY
<TEXT>

                         QUANTUM INDUSTRIAL PARTNERS LDC
                            LIMITED POWER OF ATTORNEY


     KNOW ALL MEN BY THESE  PRESENT,  that the  undersigned  QUANTUM  INDUSTRIAL
PARTNERS LDC (the "Company"), an exempted limited duration company organized and
existing under the laws of the Cayman  Islands,  does,  pursuant to duly adopted
resolutions  of its  managing  director  dated  as of the  date  hereof,  hereby
designate, constitute and appoint:

     JODYE ANZALOTTA of 888 Seventh Avenue, New York, New York 10106;

     ARMANDO BELLY of 888 Seventh Avenue, New York, New York 10106;

     MARYANN CANFIELD of 888 Seventh Avenue, New York, New York 10106;

     GAVIN MURPHY of 888 Seventh Avenue, New York, New York 10106;

     JAY SCHOENFARBER of 888 Seventh Avenue, New York, New York 10106;

     ROBERT SOROS of 888 Seventh Avenue, New York, New York 10106;

     ABBAS F. ZUAITER of 888 Seventh Avenue, New York, New York 10106;

or any one of them,  acting singly and not jointly,  with power of substitution,
as   its   true   and   lawful   agents   and   attorneys-in-fact    (each,   an
"Attorney-in-Fact"):

(1)  to open accounts of any kind or nature whatsoever at any institution of any
     kind or nature  whatsoever  in any  jurisdiction  or location (a "Financial
     Institution")  and to  sign  related  account  opening  documents  for  the
     Company;

(2)  to give  instructions  for the settlement of  transactions  relating to the
     acquisition, disposition and holding for the Company's account of:

     (a)  any securities, debt obligations, commodities and currencies;

     (b)  any puts, calls or other options,  any contracts for forward or future
          delivery,  and any other  contracts of any kind relating to any of the
          foregoing;

     (c)  any  derivative  instruments  of any kind  pertaining to, or providing
          investment  exposure  with respect to, any of the  foregoing,  whether
          relating  to  a  specific  security,  debt  instrument,  commodity  or
          currency,  or  relating  to a basket or index  comprised,  or based in
          changes  in the  level of  prices,  rates or  values,  of any group or
          combination thereof;


<PAGE>


     (d)  any other  instruments  or contracts of a kind dealt in by security or
          commodity brokers or dealers, or other Financial Institutions;

     (e)  any combination of any of the foregoing;

in each case  whether  now  existing  or  hereafter  developed,  and whether the
transaction is effected on any securities or commodity exchange,  board of trade
or contract market or through any inter-dealer or other over-the-counter  market
in any jurisdiction or location  (including,  without limiting the generality of
the  foregoing,  capital  stock;  shares  or other  units of  mutual  funds  and
investment companies; preorganization certificates and subscriptions;  warrants;
partnership   interests  or  units;   bonds,   notes  and  debentures,   whether
subordinated,  convertible or otherwise, and whether issued by a governmental or
private issuer;  commercial paper; certificates of deposit; bankers acceptances;
trade  acceptances;  trust  receipts;  depository  receipts;  assignments  of or
participations in bank loans; trade credit claims; equity swaps, commodity swaps
and interest rate swaps; equity index contracts;  interest rate index contracts;
repurchase agreements and reverse repurchase agreements;  master agreements; and
guaranties);

(3)      to give instructions or make arrangements for:

          (a)  trading on margin;

          (b)  effecting short sales;

          (c)  entering into repurchase agreements;

          (d)  otherwise  obtaining  credit or borrowing funds or any securities
               or other instruments or assets; and

          (e)  providing collateral security in relation to any of the foregoing

in  connection  with the  acquisition,  financing or  re-financing,  carrying or
disposition  of any of the items  referred  to in  paragraph  (2) above,  and to
cover, discharge or otherwise terminate any of the foregoing arrangements;

(4)  to give  instructions for payments and deliveries in connection with any of
     the foregoing transactions;

(5)  to exercise all rights, powers and privileges appurtenant to the ownership,
     and any  related  financing,  of any item  held for the  Company's  account
     (including  the  right to vote or  consent,  and the right to lend any such
     item to any other person);

(6)  to execute and deliver,  in the name of and on behalf of the  Company,  any
     investment management  agreements and discretionary trading  authorizations
     with  investment  advisers other than Soros Fund Management LLC and any and
     all such other agreements,


<PAGE>


     deeds,   instruments,   receipts,   certificates  and  other  documents  in
     connection therewith; and

(8)  to execute all such  documents and to take all such other actions as any of
     them may consider  necessary or  advisable  in  connection  with any of the
     foregoing.

     Each  Attorney-in-Fact  is hereby  authorized  and empowered to perform all
other  acts  and  deeds,  which he or she in his or her  sole  discretion  deems
necessary or  appropriate  to carry out to the fullest  extent the terms and the
intent of the foregoing.  All past acts of each  Attorney-in-Fact in furtherance
of the foregoing are hereby ratified and confirmed.

     Execution of this Limited Power of Attorney  shall  constitute a revocation
of any and all  previously  executed  limited  powers of attorney of the Company
appointing attorneys-in-fact to open accounts of any kind and nature whatsoever,
sign opening  documents and take all the actions set forth in this Limited Power
of Attorney. This Power of Attorney shall expire on October 1, 2005.

     IN WITNESS  WHEREOF,  the  undersigned  has caused  this  instrument  to be
executed effective as of this 23rd day of May 2005.

                                          QUANTUM INDUSTRIAL PARTNERS LDC

                                          By:  Curacao Corporation Company N.V.
                                               Managing Director

                                               By:  /s/ Sharine M. J. Salsbach
                                                    ----------------------------
                                                    Sharine M. J. Salsbach

                                                By:  /s/ Gwendel C.G. Sint Jago
                                                    ----------------------------
                                                    Gwendel C.G. Sint Jago



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>6
<FILENAME>bluefly_exhiiii.txt
<DESCRIPTION>POWER OF ATTORNEY
<TEXT>

                                POWER OF ATTORNEY


KNOW ALL MEN BY THESE PRESENT, that I, GEORGE SOROS, hereby make, constitute and
appoint  each of  ARMANDO T.  BELLY,  JODYE  ANZALOTTA,  MARYANN  CANFIELD,  JAY
SCHOENFARBER   and  ROBERT  SOROS.   acting   individually,   as  my  agent  and
attorney-in-fact  for the purpose of  executing  in my name,  (a) in my personal
capacity or (b) in my capacity as Chairman of, member of or in other  capacities
with  Soros  Fund  Management  LLC  ("SFM  LLC") and each of its  affiliates  or
entities  advised by me or SFM LLC, all  documents,  certificates,  instruments,
statements,  filings and agreements  ("documents") to be filed with or delivered
to any  foreign or  domestic  governmental  or  regulatory  body or  required or
requested  by any other  person or entity  pursuant  to any legal or  regulatory
requirement relating to the acquisition, ownership, management or disposition of
securities,  futures  contracts or other  investments,  and any other  documents
relating or  ancillary  thereto,  including  without  limitation  all  documents
relating to filings with the Commodity  Futures Trading  Commission and National
Futures  Association,  the United States Securities and Exchange Commission (the
"SEC") pursuant to the Securities Act of 1933 or the Securities  Exchange Act of
1934 (the "Act") and the rules and regulations promulgated thereunder, including
all documents relating to the beneficial  ownership of securities required to be
filed with the SEC pursuant to Section 13(d) or Section 16(a) of the Act and any
information statements on Form 13F required to be filed with the SEC pursuant to
Section 13(f) of the Act.

All past acts of these  attorneys-in-fact  in  furtherance  of the foregoing are
hereby ratified and confirmed.

Execution of this power of attorney revokes that certain Power of Attorney dated
as of the 11th March 2005 with respect to the same matters addressed above.

This power of attorney shall be valid from the date hereof until revoked by me.

IN WITNESS  WHEREOF,  I have executed this instrument as of the 16th day of June
2005.




                                                /s/ Daniel Eule
                                                -------------------------------
                                                    Daniel Eule
                                                    Attorney-in-Fact
                                                    for George Soros





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>7
<FILENAME>bluefly_exhjjjj.txt
<DESCRIPTION>LIMITED POWER OF ATTORNEY
<TEXT>

                          SFM DOMESTIC INVESTMENTS LLC
                            LIMITED POWER OF ATTORNEY


     KNOW  ALL  MEN  BY  THESE  PRESENT,   that  the  undersigned  SFM  DOMESTIC
INVESTMENTS  LLC (the  "Company"),  a limited  liability  company  organized and
existing under the laws of the State of Delaware, does, pursuant to duly adopted
resolutions  of  its  managing  member  dated  as of  the  date  hereof,  hereby
designate, constitute and appoint:

     JODYE ANZALOTTA of 888 Seventh Avenue, New York, New York 10106;

     ARMANDO BELLY of 888 Seventh Avenue, New York, New York 10106;

     MARYANN CANFIELD of 888 Seventh Avenue, New York, New York 10106;

     GAVIN MURPHY of 888 Seventh Avenue, New York, New York 10106;

     JAY SCHOENFARBER of 888 Seventh Avenue, New York, New York 10106;

     ROBERT SOROS of 888 Seventh Avenue, New York, New York 10106;

     ABBAS F. ZUAITER of 888 Seventh Avenue, New York, New York 10106;

or any one of them,  acting singly and not jointly,  with power of substitution,
as   its   true   and   lawful   agents   and   attorneys-in-fact    (each,   an
"Attorney-in-Fact"):

(1)  to open accounts of any kind or nature whatsoever at any institution of any
     kind or nature  whatsoever  in any  jurisdiction  or location (a "Financial
     Institution")  and to  sign  related  account  opening  documents  for  the
     Company;

(2)  to give  instructions  for the settlement of  transactions  relating to the
     acquisition, disposition and holding for the Company's account of:

     (a)  any securities, debt obligations, commodities and currencies;

     (b)  any puts, calls or other options,  any contracts for forward or future
          delivery,  and any other  contracts of any kind relating to any of the
          foregoing;

     (c)  any  derivative  instruments  of any kind  pertaining to, or providing
          investment  exposure  with respect to, any of the  foregoing,  whether
          relating  to  a  specific  security,  debt  instrument,  commodity  or
          currency,  or  relating  to a basket or index


<PAGE>


          comprised,  or based in  changes  in the  level  of  prices,  rates or
          values, of any group or combination thereof;

     (d)  any other  instruments  or contracts of a kind dealt in by security or
          commodity brokers or dealers, or other Financial Institutions;

     (e)  any combination of any of the foregoing;

in each case  whether  now  existing  or  hereafter  developed,  and whether the
transaction is effected on any securities or commodity exchange,  board of trade
or contract market or through any inter-dealer or other over-the-counter  market
in any jurisdiction or location  (including,  without limiting the generality of
the  foregoing,  capital  stock;  shares  or other  units of  mutual  funds  and
investment companies; preorganization certificates and subscriptions;  warrants;
partnership   interests  or  units;   bonds,   notes  and  debentures,   whether
subordinated,  convertible or otherwise, and whether issued by a governmental or
private issuer;  commercial paper; certificates of deposit; bankers acceptances;
trade  acceptances;  trust  receipts;  depository  receipts;  assignments  of or
participations in bank loans; trade credit claims; equity swaps, commodity swaps
and interest rate swaps; equity index contracts;  interest rate index contracts;
repurchase agreements and reverse repurchase agreements;  master agreements; and
guaranties);

(3)  to give instructions or make arrangements for:

     (a)  trading on margin;

     (b)  effecting short sales;

     (c)  entering into repurchase agreements;

     (d)  otherwise  obtaining  credit or borrowing  funds or any  securities or
          other instruments or assets; and

     (e)  providing collateral security in relation to any of the foregoing

in  connection  with the  acquisition,  financing or  re-financing,  carrying or
disposition  of any of the items  referred  to in  paragraph  (2) above,  and to
cover, discharge or otherwise terminate any of the foregoing arrangements;

(4)  to give  instructions for payments and deliveries in connection with any of
     the foregoing transactions;

(5)  to exercise all rights, powers and privileges appurtenant to the ownership,
     and any  related  financing,  of any item  held for the  Company's  account
     (including  the  right to vote or  consent,  and the right to lend any such
     item to any other person);

(6)  to execute and deliver,  in the name of and on behalf of the  Company,  any
     investment management  agreements and discretionary trading  authorizations
     with  investment


<PAGE>


     advisers  other than Soros Fund  Management  LLC and any and all such other
     agreements, deeds, instruments,  receipts, certificates and other documents
     in connection therewith;

(7)  to authorize other agents to take any of the foregoing actions; and

(8)  to execute all such  documents and to take all such other actions as any of
     them may consider  necessary or  advisable  in  connection  with any of the
     foregoing.

     Each  Attorney-in-Fact  is hereby  authorized  and empowered to perform all
other  acts  and  deeds,  which he or she in his or her  sole  discretion  deems
necessary or  appropriate  to carry out to the fullest  extent the terms and the
intent  of the  foregoing.  All  past  acts  of  the  each  Attorney-in-Fact  if
furtherance of the foregoing are hereby ratified and confirmed.

     Execution of this Limited Power of Attorney  shall  constitute a revocation
of any and all  previously  executed  limited  powers of attorney of the Company
appointing attorneys-in-fact to open accounts of any kind and nature whatsoever,
sign opening  documents and take all the actions set forth in this Limited Power
of Attorney. This Power of Attorney shall expire on October 1, 2005.


     IN WITNESS  WHEREOF,  the  undersigned  has caused  this  instrument  to be
executed effective as of the 23rd day of May 2005.


                                            SFM DOMESTIC INVESTMENTS LLC




                                            By: /s/ Gavin Murphy
                                                --------------------------------
                                                Gavin Murphy
                                                Manager

</TEXT>
</DOCUMENT>
</SUBMISSION>
