Bluefly and Soros Sign Definitive Financing Agreements; Company Receives $5 Million Tranche of Financing That Could Raise Up to $25 Million.

Business Editors

NEW YORK--(BUSINESS WIRE)--Nov. 14, 2000

Bluefly, Inc. (NASDAQ SmallCap: BFLY), a leading Internet retailer of designer fashions and home furnishings at outlet store prices (www.bluefly.com), announced today that it has signed a definitive agreement with Soros Private Equity Partners under which affiliates of Soros would invest up to an additional $15 million in the company. In connection with the signing of the agreement, Soros provided the company with a $5 million tranche of the financing in the form of a loan, which would convert into preferred stock following the receipt of shareholder approval.

In addition, under the terms of the agreement, the company would offer the public shareholders of the company the right to purchase up to an aggregate of $20 million of common stock at $2.34 per share. If the public shareholders purchase less than $20 million of common stock, Soros would purchase, at $2.34 per share, the difference between $20 million and the amount purchased by the public shareholders, up to a total $10 million.

Subject to shareholder approval of the issuance of preferred stock, the $15 million in debt financing previously provided to the company by Soros (and the $5 million loaned in connection with the signing of the agreement) would be converted into preferred stock at a price of $2.34 per share, and the conversion price of the $10 million of preferred stock previously issued to Soros and other investors would be reduced to $2.34 per share. All of the preferred stock would earn dividends at the rate of 8% per year, payable in cash or stock, at the company's option, upon conversion.

Assuming consummation of the transactions outlined in the agreement, Soros would own a majority of the company's voting and equity interests. In addition, the preferred stock would provide Soros with veto rights over a number of company actions and would allow Soros to control any vote of the company's Board of Directors. Closing of the transactions outlined in the agreement is subject to a number of conditions, including approval by the shareholders of the company.

The company expects to have a shareholders meeting to vote upon the transactions outlined in the agreement during January or February 2001. Assuming shareholder approval is obtained and the other closing conditions are satisfied, the company expects that the final closing for the transaction would be in March or April 2001.

Credit Suisse First Boston advised the special committee of the company's Board of Directors in connection with its consideration of the transaction.

This press release does not constitute an offer of any securities for sale. No securities have yet been registered under the Securities Act of 1933, as amended, and no securities may be offered or sold absent registration or an applicable exemption from registration requirements.

Bluefly is a NASDAQ SmallCap public company headquartered in New York City, in the heart of the fashion district. Distinguishing itself with discounts of up to 75%, products from more than 350 designers and a 90-day money back guarantee, Bluefly.com aims to be the world's first full service outlet store for designer fashions. Its innovative MyCatalog feature is designed to eliminate the "hit-or-miss" aspect of off-price shopping by allowing shoppers to see only those products that are available for sale and match their interests. The online merchant has established strategic alliances with many of the most visited Web Sites and portals including AOL, Excite, MSN, Netcenter, Women.com and Yahoo! For more information, visit www.bluefly.com.

This press release may include statements that constitute "forward-looking" statements, usually containing the words "believe", "project", "expect", or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. The risks and uncertainties are detailed from time to time in reports filed by the company with the Securities and Exchange Commission, including Forms 8-A, 8-K, 10-QSB, and 10-KSB. These risks and uncertainties include, but are not limited to, the following: the Company's limited working capital, need for additional capital and potential inability to raise such capital; the competitive nature of the business and the potential for competitors with greater resources to enter such business; risks of litigation for sale of unauthentic or damaged goods and litigation risks related to sales in foreign countries; consumer acceptance of the Internet as a medium for purchasing apparel; recent losses and anticipated future losses; potential adverse effects on gross margin resulting from mark downs and allowances; the capital intensive nature of such business (taking into account the need for advertising to promote such business); the dependence on third parties and certain relationships for certain services, including uncertainty arising from a lack of operating history with the company's new fulfillment center; the successful hiring and retaining of personnel; the dependence on continued growth of online commerce; rapid technological change; online commerce security risks; the startup nature of the Internet business; governmental regulation and legal uncertainties; management of potential growth; and unexpected changes in fashion trends.