Exhibit 99.4
SOROS FUND MANAGEMENT LLC
888 Seventh Avenue
New York, NY 10106
Telephone: (212) 262-6300
FEE LETTER
July 26, 2005
Bluefly, Inc.
42 West 39th Street
New York, New York 10018
Attn: Patrick C. Barry
Chief Operating Officer and Chief Financial Officer
Re: Quantum Industrial Partners LDC $2,000,000 Standby Letter of
Credit as Collateral for Bluefly, Inc.'s Loan from Wells Fargo
Retail Finance, LLC
Ladies and Gentlemen:
This letter (the "Fee Letter") will confirm our understanding with
respect to certain fees to be paid to Soros Fund Management LLC ("SFM") by
Bluefly, Inc. (the "Borrower") in connection with (i) the loan and security
agreement dated the dated hereof (the "Loan Agreement") between Borrower and
Wells Fargo Retail Finance, LLC ("Wells Fargo"), whereby Quantum Industrial
Partners LDC ("QIP"), a shareholder of Borrower, is required to maintain a
$2,000,000 standby letter of credit ("Standby Letter of Credit") as collateral
under the Loan Agreement, and (ii) the reimbursement agreement dated the date
hereof (the "Reimbursement Agreement") between Borrower, QIP, and SFM, whereby
the Borrower has agreed, among other things, to reimburse QIP for the Standby
Letter of Credit. Unless otherwise defined herein, all terms not defined herein
shall have the meaning given them in the Loan Agreement.
In consideration for SFM, as manager of QIP, arranging and procuring the
Standby Letter of Credit, the Borrower shall pay to SFM the following fees for
so long as the Standby Letter of Credit remains outstanding:
1. Standby Letter of Credit Availability Fee. The Borrower shall
pay to SFM a Standby Letter of Credit availability fee equal to the Standby Fee
for L/C's (as determined in Section 2.18(a) of the Loan Agreement and may change
from time to time) per annum (including an additional two percent (2%) per
annum, as per the terms of Section 2.18(a) of the Loan Agreement, if an Event of
Default has occurred and is continuing) of the undrawn amount of such Standby
Letter of Credit, due and payable on the Closing Date and each anniversary
thereof, and nonrefundable.
Bluefly, Inc.
July 26, 2005
Page 2
2. Fees Wholly-Earned. The Standby Letter of Credit Availability
Fee shall be wholly-earned when paid and shall not be refundable in whole or in
part under any circumstances.
3. Miscellaneous. This Fee Letter constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior and current understandings and agreements, whether
written or oral. Any changes to this Fee Letter must be agreed in writing by the
parties hereto. This Fee Letter may be executed in any number of counterparts
(and delivery of an executed counterpart by telecopier will be effective as
delivery of a manually executed counterpart), which together will constitute one
agreement, and will be governed by and construed in accordance with the internal
laws of the State of New York without regard to New York's conflict of laws
rules. The parties hereto hereby waive any right to trial by jury with respect
to any claim, action, suit or proceeding arising out of or contemplated by this
Fee Letter.
Please acknowledge your agreement to the foregoing by signing the
enclosed counterpart of this Fee Letter and returning the executed counterpart
to SFM.
Sincerely,
SOROS FUND MANAGEMENT LLC
By /s/ Jay A. Schoenfarber
------------------------
Name: Jay A. Schoenfarber
Title: Attorney-In-Fact
The terms of the foregoing Fee Letter
are hereby acknowledged and accepted as
of the date thereof:
BLUEFLY, INC.
By /s/ Patrick C. Barry
--------------------
Name: Patrick C. Barry
Title: COO and CFO