Exhibit 10.19

                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT is entered into as of July 1, 2006, by and
between Bluefly, Inc., a Delaware corporation (the "Company"), and Melissa
Payner-Gregor ("Payner").

                                    RECITALS

         WHEREAS, the Company desires to provide for the continued retention of
the services of Payner as the Chief Executive Officer and a member of the Board
of Directors of the Company in accordance with the terms and conditions of this
Agreement.

         WHEREAS, Payner desires to serve the Company as its Chief Executive
Officer and a member of the Board of Directors in accordance with the terms and
conditions of this Agreement.

         NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Payner agree as
follows:

         1.    TERM

         The Company hereby agrees to employ Payner as the Chief Executive
Officer of the Company, and Payner hereby agrees to serve in such capacity, for
a term commencing on the date hereof and ending July 1, 2009, upon the terms and
subject to the conditions contained in this Agreement; provided, however, that
if the Company does not provide Payner with written notice of its desire not to
renew this Agreement at least 90 days prior to the end of the then current term
(including any one year renewal term that is created as a result of this
proviso), this Agreement shall automatically extend for one year from the end of
the then current term.

         2.    DUTIES

         During the term of this Agreement, Payner shall serve as the Chief
Executive Officer of the Company reporting directly to the Board of Directors of
the Company, and she shall perform such duties, and have such powers, authority,
functions, duties and responsibilities for the Company as are reasonably
assigned to her by the Board of Directors of the Company (the "Board") and as
are consistent with the duties, responsibilities, and activities of a senior
executive officer of the Company. To the extent that the Company becomes a
division or subsidiary of another entity, Payner shall report directly to, and
have such powers, authority, functions, duties and responsibilities as are
reasonably assigned to her by, the Chief Executive Officer or comparable officer
of such other entity. It is understood that the duties of Payner, should the
Company become a division or subsidiary of another entity, shall be generally
consistent with her duties prior to such event, but shall take into account the
changes associated with running a division or subsidiary, rather than an entire
entity.

         The Company will use best efforts to nominate Payner to the Board and
recommend that the Company's stockholders vote in favor of the election of
Payner to the Board at the next meeting of stockholders and every annual meeting
thereafter during the term of this Agreement.

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Payner will accept any such nomination and continue to serve as a member of the
Board if and when elected.

         The principal location of Payner's employment shall be at the Company's
principal office which shall be located in the New York City vicinity (i.e.
within a twenty (20) mile radius of Manhattan), although Payner understands and
agrees that she will be required to travel from time to time for business
reasons. Payner shall devote substantially all of her business time to the
performance of her duties as the Chief Executive Officer of the Company during
the term of this Agreement. Payner shall not, directly or indirectly, render
professional services to any other person or entity, without the consent of the
Company's Board of Directors; provided, however, that nothing contained herein
shall prevent Payner from rendering any service to any charitable organization
or family business so long as it does not interfere unreasonably with her duties
and obligations hereunder.

         3.    COMPENSATION

         For services rendered by Payner to the Company during the term of this
Agreement, the Company shall pay her a minimum base salary of five hundred
thousand dollars ($500,000) per year ("Base Salary"), payable in accordance with
the standard payroll practices of the Company, subject to increases in the sole
discretion of the Compensation Committee of the Board (the "Compensation
Committee"), taking into account merit, corporate and individual performance and
general business conditions, including changes in the "cost of living index."

         4.    INCENTIVE COMPENSATION/EXCHANGE OF OPTIONS FOR RESTRICTED STOCK
               AND DEFERRED STOCK UNITS; NEW GRANT OF DEFERRED STOCK UNITS

               a.  Incentive Compensation. For each fiscal year during the
Term, Payner shall be eligible to receive a performance bonus as follows:
provided that Payner remains employed with the Company through the last day of
such fiscal year, Payner will be eligible to earn a performance bonus on the
basis of the achievement of certain targets to be set for each fiscal year by
the Compensation Committee of the Board of Directors in its sole discretion.

               b.  Exchange of Certain Outstanding Options Held by Payner for
Restricted Stock and Deferred Stock Units.

         (i) Options Exchanged for Restricted Stock. Payner hereby forfeits all
of her rights to the options listed on Exhibit A hereto to purchase shares of
common stock of the Company ("Shares"), and in consideration for such forfeiture
the Company is simultaneously with the execution of this Agreement, (x) granting
to Payner a Restricted Stock Award under the Company's 2005 Stock Incentive Plan
(the "Plan") for 591,256 Shares in the form attached hereto as Exhibit B and (y)
paying to Payner a cash bonus equal to $394,686. The cash bonus is intended to
compensate Payner for the income taxes payable on the Restricted Stock Award.
The shares subject to the Restricted Stock Award shall vest in full on January
1, 2007.

         (ii) Options Exchanged for Deferred Stock Unit Award. Payner hereby
forfeits all of her rights to the options to purchase Shares listed on Exhibit C
hereto, and in consideration for such

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forfeiture, the Company is, simultaneously with the execution of this Agreement,
granting to Payner under the Plan, a Deferred Stock Unit Award for and
representing 126,904 underlying Shares under the Plan in the form attached
hereto as Exhibit D.

         (iii) Additional Deferred Stock Unit Award. Subject to the approval by
the stockholders of the Company of an amendment to the Plan to increase the
number of shares available for grant thereunder and the maximum annual award to
any one participant under the Plan, Payner shall be granted under the Plan an
additional Deferred Stock Unit Award (the "Supplementary DSUs") for and
representing 4,201,832 underlying Shares in the form attached hereto as Exhibit
E. The Deferred Stock Units making up the Deferred Stock Unit Awards referred to
in subparagraphs 4(b)(ii) and 4(b)(iii) of this Agreement are hereinafter
referred to as the "DSUs".

         (iv) Terms of the DSUs. The DSUs are not Shares, but rather a promise
to deliver actual Shares in the future. The DSUs awarded hereunder will be
credited to an unfunded, bookkeeping account of the Company maintained on
Payner's behalf and will be distributable and subject to the restrictions
contained in the Plan and in the applicable DSU Award.

               (A) Vesting of DSUs. The DSUs shall vest as follows: (I)
               one-third of the Supplementary DSUs shall vest in four equal
               quarterly installments commencing on October 1, 2006 (e.g., the
               first of four equal quarterly vesting periods will begin on
               October 1, 2006 so that 25% of such DSUs shall have vested as of
               January 1, 2007) (the "One-Year DSUs"), (II) both (a) one-third
               of the Supplementary DSUs and (b) the 126,904 DSUs issued in
               exchange for options with a vesting date prior to August 31,
               2007, shall vest in eight equal quarterly installments commencing
               on October 1, 2006 (e.g., the first of eight equal quarterly
               vesting periods will begin on October 1, 2006 so that 12.5% of
               such DSUs shall have vested as of January 1, 2007) (collectively,
               the "Two-Year DSUs"), and (III) one-third of the Supplementary
               DSUs shall vest in twelve equal quarterly installments commencing
               on October 1, 2006 (e.g., the first of twelve equal quarterly
               vesting periods will begin on October 1, 2006 so that
               approximately 8.33% of such DSUs shall have vested as of January
               1, 2007) (collectively, the "Three-Year DSUs").

               (B) Termination of Employment; Forfeiture. In the event that
               Payner's employment is terminated prior to the vesting of any of
               such DSUs, unless such termination is a Constructive Termination
               or a termination without Cause as such terms are defined in
               paragraph 7 below (in which case the vesting shall be accelerated
               as set forth therein), all unvested DSUs as of the date of such
               termination shall be forfeited immediately by Payner.

               (C) Distribution of DSUs. Subject to paragraph 4(b)(iv)(B), all
               of the vested DSUs underlying a Deferred Stock Unit Award will be
               distributable in Shares on the date of distribution on the
               earliest to occur of: (I) (a) with respect to the One-Year DSUs
               only, October 1, 2007, (b) with respect to the Two-Year DSUs
               only, October 1, 2008, and (c) with respect to the Three-Year
               DSUs only, October 1, 2009, (II) death, (III) the date on which
               Payner is "disabled" (as such term is defined in Section
               409A(a)(2)(C) of the Internal Revenue Code of 1986, as

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               amended ("Code") and the official guidance issued thereunder),
               (IV) subject to paragraph 7(c), the effective date of Payner's
               Constructive Termination or termination without Cause, or (V) to
               the extent provided in paragraph 8, immediately following a
               Change of Control (as defined below) and thereafter.

               (D) No Rights as Shareholders. Payner shall not have any rights
               of a Shareholder with respect to the DSUs, including the right to
               vote such shares or the right to receive dividends or other
               distributions made with respect to the shares, until the Shares
               underlying the DSUs are distributed to Payner. However, if any
               dividends are paid on the Shares underlying the DSUs, whether in
               cash or stock, Payner will be credited with "Dividend Rights."
               Such Dividend Rights shall be credited to Payner's DSU account as
               follows: Payner shall be credited with additional DSUs equal to
               the value of such dividend on the date such dividend is paid
               divided by the Fair Market Value (as determined under the Plan)
               on the date the dividend is paid multiplied by the number of DSUs
               credited to Payner on the date the dividend is paid. The Dividend
               Rights credited to Payner will be subject to the same
               restrictions applicable to the DSUs to which they relate as
               initially credited to Payner under this paragraph 4(b).

               (E) Tax Withholding. Payner shall be responsible to fulfill any
               withholding tax requirements on the DSUs as specified in the Plan
               and as required by applicable law. Payner shall notify the
               Company no later than fifteen business days prior to a
               distribution date, as to whether she intends to make a cash
               payment to the Company for the withholding amount or would like
               the Company to make arrangements for such payment. If she elects
               to have the Company make the arrangements or fails to provide the
               required notice, the Company shall satisfy such withholding tax
               requirements, through withholding distribution of a portion of
               the DSUs equal to the withholding obligation based on the Fair
               Market Value of the Shares already owned by Payner on the date of
               distribution; provided that if the Company's Board of Directors
               determines that it would not be prudent to use the Company's cash
               flow for such purpose, the Company shall advise Payner who can
               then arrange to sell Shares for the purpose of satisfying the
               withholding tax requirement prior to the distribution of the
               applicable Shares.

         5.    EXPENSE REIMBURSEMENT AND PERQUISITES

               a.  During the term of this Agreement, Payner shall be entitled
to reimbursement of all reasonable and actual out-of-pocket expenses incurred by
her in the performance of her services to the Company consistent with corporate
policies, provided that the expenses are properly accounted for.

               b.  During each calendar year of the term of this Agreement,
Payner shall be entitled to reasonable vacation with full pay; provided,
however, that Payner shall schedule such vacations at times convenient to the
Company.

               c.  During the term of this Agreement, the Company shall provide
an annual allowance of twenty seven thousand five hundred dollars ($27,500) for
the purchase of term life

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insurance by the Company for the benefit of Payner (which shall be in lieu of
any other life insurance benefit) and the purchase of a supplemental disability
insurance policy, which together with any other group coverage offered by the
Company, provide for coverage of the maximum allowable disability benefit.
Payner shall be entitled to participate in all dental insurance and disability
plans, major medical insurance and other medical, insurance, and employee
benefit plans instituted by the Company from time to time on the same terms and
conditions as those offered to other senior executive officers of the Company,
to the extent permitted by law.

               d.  During the term of this Agreement, the Company will provide
Payner with a monthly housing allowance of four thousand dollars ($4,000). The
housing allowance for the period ending April 30, 2007 has been paid in a lump
sum prior to the date hereof.

         6.    NON-COMPETITION; NON-SOLICITATION

               a.  In consideration of the Incentive Award and severance
benefits hereunder, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, during the term of this
Agreement and during the "Non-Competition Period" (as defined in paragraph 6(c)
below) Payner shall not, without the prior written consent of the Company,
anywhere in the world, directly or indirectly, (i) enter into the employ of or
render any services to any "Competitive Business" (as defined below); (ii)
engage in any Competitive Business for her own account; (iii) become associated
with or interested in any Competitive Business as an individual, partner,
shareholder, creditor, director, officer, principal, agent, employee, trustee,
consultant, advisor or in any other relationship or capacity; (iv) employ or
retain, or have or cause any other person or entity to employ or retain, any
person who was employed or retained by the Company on the date of termination of
this Agreement or who had been employed by the Company within the nine month
period prior to the date of termination of this Agreement, except if, at the
time of such employment or retention, such person had not been employed by the
Company during the nine month period immediately preceding such employment or
retention; or (v) solicit, interfere with, or endeavor to entice away from the
Company, for the benefit of a Competitive Business, any of its customers or
other persons with whom the Company has a contractual relationship. For purposes
of this Agreement, a "Competitive Business" shall mean: (a) any person,
corporation, partnership, firm or other entity whose primary business is the
sale or consignment of off-price apparel and/or off-price fashion accessories;
(b) any division of a person, corporation, partnership, firm or other entity
(but not the person, corporation, partnership, firm or other entity itself)
whose primary business is internet based selling or consignment, and, in either
such case, consists of ten (10) or more brands of off-price apparel and/or
off-price fashion accessories; or (c) the off-price divisions of Nordstrom, Saks
Fifth Avenue, Neiman Marcus or the off-price division of another retailer of ten
(10) or more brands of apparel and/or fashion accessories. However, nothing in
this Agreement shall preclude Payner from investing her personal assets in the
securities of any corporation or other business entity which is engaged in a
Competitive Business if such securities are traded on a national stock exchange
or in the over-the-counter market and if such investment does not result in her
beneficially owning, at any time, more than 3% of the publicly-traded equity
securities of such Competitive Business.

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               b.  Payner and the Company agree that the covenants of
non-competition and non-solicitation contained in this paragraph 6 are
reasonable covenants under the circumstances, and further agree that if, in the
opinion of any court of competent jurisdiction, such covenants are not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of these covenants as to the
court shall appear not reasonable and to enforce the remainder of these
covenants as so amended. Payner agrees that any breach of the covenants
contained in this paragraph 6 would irreparably injure the Company. Accordingly,
Payner agrees that the Company, in addition to pursuing any other remedies it
may have in law or in equity, may obtain an injunction against Payner from any
court having jurisdiction over the matter, restraining any further violation of
this paragraph 6.

               c.  The "Non-Competition Period" shall extend for a period of
eighteen months following the end of the term of this Agreement; provided,
however that, in the event that the Agreement is terminated by the Company
without "Cause" (as defined in paragraph 7(a)(iv)), or by Payner pursuant to a
"Constructive Termination" (as defined in paragraph 7(a)(iii)), the
Non-Competition Period shall expire on the first anniversary of the termination
of this Agreement (the "Modified Non-Competition Period"); and further provided
that in the event that during the Non-Competition Period or the Modified
Non-Competition Period, as the case may be, Payner receives notice in writing
from the Company of any material breach of any of the covenants contained in
this paragraph 6 by her and Payner cures such material breach within 21 days of
the date she receives such notice, then the Company will continue the Severance
Benefits provided pursuant to paragraph 7(b) below; provided, that Payner shall
not be entitled to Severance Benefits for periods during which she was in
material breach of such covenants.

         7.    TERMINATION

               a.  This Agreement (other than as specifically stated herein),
the employment of Payner, and Payner's position as Chief Executive Officer of
the Company shall terminate upon the first to occur of:

               (i)   her death;

               (ii)  her "permanent disability," due to injury or sickness for
                     a continuous period of four (4) months, or a total of eight
                     months in a twelve (12) month period (vacation time
                     excluded), during which time Payner is unable to attend to
                     her ordinary and regular duties;

               (iii) a "Constructive Termination" by the Company, which, for
                     purposes of this Agreement, shall be deemed to have
                     occurred upon (A) the removal of Payner from her position
                     as Chief Executive Officer of the Company, (B) the material
                     breach by the Company of this Agreement, including any
                     material diminution in the nature or scope of the
                     authorities, powers, functions, duties or responsibilities
                     of Payner as Chief Executive Officer and a senior executive
                     officer of the Company (or to the extent that the Company
                     becomes a division or subsidiary of another entity, the
                     authorities, powers, functions, duties or responsibilities
                     of the Chief Executive Officer or senior executive officer
                     of such division or

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                     subsidiary); provided that no such breach shall be
                     considered a Constructive Termination unless Payner has
                     provided the Company with written notice of such breach and
                     the Company has failed to cure such breach within the
                     thirty (30) day period following its receipt of such
                     notice;

               (iv)  the termination of this Agreement at any time without
                     Cause (as defined below) by the Company;

               (v)   subject to compliance with the notice provisions contained
                     in paragraph 1 of this Agreement, the non-renewal of this
                     Agreement by the Company and/or the Board of Directors;

               (vi)  the termination of this Agreement for "Cause", which, for
                     purposes of this Agreement, shall mean that (1) Payner has
                     been convicted of a felony or any serious crime involving
                     moral turpitude, or engaged in materially fraudulent or
                     materially dishonest actions in connection with the
                     performance of her duties hereunder, (2) Payner has
                     willfully and materially failed to perform her reasonably
                     assigned duties hereunder, (3) Payner has breached the
                     terms and provisions of this Agreement in any material
                     respect, or (4) Payner has failed to comply in any material
                     respect with the Company's written policies of conduct of
                     which she had actual notice, including with respect to
                     trading in securities; provided that the Company shall not
                     have any right to terminate this Agreement for Cause
                     pursuant to clauses (2), (3) or (4) of this sub-paragraph
                     (vi) as a result of a breach unless the Company has
                     provided Payner with written notice of such breach and
                     Payner has failed to cure such breach within the twenty day
                     period following her receipt of such notice; or

               (vii) the termination of this Agreement by Payner, which shall
                     occur on not less than thirty (30) days prior written
                     notice from Payner.

               b.  In the event that this Agreement is terminated, other than as
a result of a Constructive Termination or by the Company without Cause, the
Company shall pay Payner her accrued but unpaid Base Salary and unreimbursed
business expenses and bonuses that have been earned and awarded but not yet paid
as of the date of her termination of employment and shall make no other payments
or provide any other benefits under this Agreement except that, unless this
Agreement is terminated for Cause, any other vested stock options shall be
exercisable for a period equal to the lesser of (x) one year from the date this
Agreement is terminated; (y) the remaining term of the applicable vested stock
option and (z) the period required to avoid any tax imposed under Section 409A
of the Code. In the event that this Agreement is terminated by the Company
without Cause pursuant to paragraph 7(a)(iv) or through a Constructive
Termination pursuant to paragraph 7(a)(iii), and subject to Payner's execution
of a mutual release reasonably acceptable to the Company and Payner, the Company
shall pay Payner her Base Salary through the date of termination, plus
unreimbursed business expenses and bonuses that have been earned and awarded but
not yet paid, as well as the following severance and noncompetition payments set
forth below (the "Severance Benefits"):

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               (i)   the then-current Base Salary for a period of twelve (12)
                     months from the date of termination;

               (ii)  any unvested stock options, Restricted Stock or DSUs that
                     have been granted to Payner which are outstanding as of the
                     date of such termination shall be deemed to be fully vested
                     as of that date and such stock options shall be exercisable
                     for a period equal to the lesser of (x) one year from the
                     date of termination of this Agreement; (y) the remaining
                     term of the applicable stock option; and (z) the period
                     required to avoid any tax imposed under Section 409A of the
                     Code.

               (iii) the Company shall maintain in effect, or reimburse Payner
                     for the cost of maintaining, the medical and dental
                     insurance and disability and hospitalization plans of the
                     Company as well as any Company sponsored life insurance
                     policy in which Payner participates as of the date of such
                     termination for a period of one year from the date of
                     termination.

The Severance Benefits shall be payable in periodic installments in accordance
with the Company's standard payroll practices.

               c.  Notwithstanding anything herein to the contrary, if any
payments due under this Agreement (including, but not limited to the
distribution of the DSUs hereunder) would subject Payner to any tax imposed
under Section 409A of the Code if such payments were made at the time otherwise
provided herein, then the payments that cause such taxation shall be payable in
a single lump sum on the first day which is at least six (6) months after the
date of Payner's "separation from service" as set forth in Code Section
409A(2)(A)(i) and the official guidance issued thereunder

         8.    CHANGE OF CONTROL

               a.  In the event that a Change of Control (as defined below)
occurs during the term of this Agreement, any unvested stock options, Restricted
Stock and one half of any DSUs granted to Payner which are outstanding as of the
date of that Change of Control and have not yet vested ("COC Unvested DSUs")
shall be deemed to be fully vested as of that date. Subject to paragraph 7(c),
the remaining one half of the COC Unvested DSUs shall vest on the earliest to
occur of (x) the scheduled vesting date and (y) twelve (12) months from the date
of such Change of Control, subject, in each case, to Payner's continued
employment with the Company on such dates and (z) Payner's Constructive
Termination or termination without Cause following such Change of Control. The
DSUs that become vested due to the application of this paragraph 8 shall be
distributable upon the date that they become vested.

               b.  For purposes of this Agreement, "Change of Control" shall be
deemed to occur upon:

                   (1) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3

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promulgated under the Exchange Act) of fifty percent (50%) or more (on a fully
diluted basis) of either (A) the then outstanding shares of common stock of the
Company, taking into account as outstanding for this purpose such common stock
issuable upon the exercise of options or warrants, the conversion of convertible
stock or debt, and the exercise of any similar right to acquire such common
stock (the "Outstanding Company Common Stock") or (B) the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this Agreement, the
following acquisitions shall not constitute a Change of Control: (I) any
acquisition by the Company or any "Affiliate" (as defined below), (II) any
acquisition by any employee benefit plan sponsored or maintained by the Company
or any Affiliate, (III) any acquisition by Quantum Industrial Partners LDC,
Soros Fund Management LLC, and/or SFM Domestic Investments LLC and/or any of
their affiliates (collectively, "Soros"), or (IV) any acquisition which complies
with clauses (A), (B) and (C) of sub-paragraph (a)(5) hereof ;

                   (2) Individuals who, on the date hereof, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the date hereof, whose election or nomination for election was approved by a
vote of at least two-thirds of the Incumbent Directors then on the Board (either
by a specific vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without written objection to
such nomination) shall be an Incumbent Director; provided, however, that no
individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board shall be deemed to
be an Incumbent Director;

                   (3) the dissolution or liquidation of the Company;

                   (4) the sale of all or substantially all of the business or
assets of the Company; or

                   (5) the consummation of a merger, consolidation, statutory
share exchange or similar form of corporate transaction involving the Company
that requires the approval of the Company's stockholders, whether for such
transaction or the issuance of securities in the transaction (a "Business
Combination"), unless immediately following such Business Combination: (A) more
than fifty percent (50%) of the total voting power of (x) the corporation
resulting from such Business Combination (the "Surviving Corporation"), or (y)
if applicable, the ultimate parent corporation that directly or indirectly has
beneficial ownership of sufficient voting securities eligible to elect a
majority of the directors of the Surviving Corporation (the "Parent
Corporation"), is represented by the Outstanding Company Voting Securities that
were outstanding immediately prior to such Business Combination (or, if
applicable, is represented by shares into which the Outstanding Company Voting
Securities were converted pursuant to such Business Combination), and such
voting power among the holders thereof is in substantially the same proportion
as the voting power of the Company's Voting Securities among the holders thereof
immediately prior to the Business Combination, (B) no

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Person (other than Soros or any employee benefit plan sponsored or maintained by
the Surviving Corporation or the Parent Corporation), is or becomes the
beneficial owner, directly or indirectly, of thirty percent (30% ) or more of
the total voting power of the outstanding voting securities eligible to elect
directors of the Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) and (C) at least a majority of the members of the board
of directors of the Parent Corporation (or, if there is no Parent Corporation,
the Surviving Corporation) following the consummation of the Business
Combination were Board members at the time of the Board's approval of the
execution of the initial agreement providing for such Business Combination.

               c.  For purposes of this paragraph 8, the term "Affiliate" shall
mean any entity that directly or indirectly is controlled by, controls or is
under common control with the Company.

               d.  Notwithstanding any provision of this Agreement to the
contrary, in the event of any of the following:

               (1)   the Company is merged or consolidated with another
corporation or entity and, in connection therewith, consideration is received by
stockholders of the Company in a form other than stock or other equity interests
of the surviving entity;

               (2)   all or substantially all of the assets of the Company are
acquired by another person;

               (3)   the reorganization or liquidation of the Company; or

               (4)   the Company shall enter into a written agreement to undergo
an event described in clauses (1), (2) or (3) above:

then the Compensation Committee may, in its sole and reasonable discretion and
upon at least 10 business days advance notice to Payner, cancel any outstanding
DSUs and pay to Payner, in cash or stock, or any combination thereof, the value
of such DSUs based upon the price per share of stock received or to be received
by other stockholders of the Company in the event. The terms of this
sub-paragraph 8(c) may be varied by the Compensation Committee in any particular
DSU Award Agreement to which Payner is a party.

               e.  Reduction of Payments in Certain Cases.

               (i)   For purposes of this paragraph 8(d) (A) a "Payment" shall
                     mean any payment or distribution in the nature of
                     compensation to or for the benefit of Payner, whether paid
                     or payable pursuant to this Agreement or otherwise; (B)
                     "Agreement Payment" shall mean a Payment paid or payable
                     pursuant to this Agreement (disregarding this paragraph);
                     (C) "Net After Tax Receipt" shall mean the "Present Value"
                     (as defined below) of a Payment net all of federal, state
                     and local taxes imposed on Payner with respect thereto
                     (including without limitation under Section 4999 of the
                     Code, determined by applying the highest marginal rates of
                     such taxes that applied to Payner's taxable income for the
                     immediately

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                     preceding taxable year, or such other rate(s) as Payner
                     shall in her sole discretion certify as likely to apply to
                     Payner in the relevant tax year(s); (D) "Present Value"
                     shall mean such value determined in accordance with
                     Section 280G(d)(4) of the Code; and (E) "Reduced Amount"
                     shall mean the smallest aggregate amount of Agreement
                     Payments which (I) is less than the sum of all Agreement
                     Payments and (II) results in aggregate Net After Tax
                     Receipts which are equal to or greater than the Net After
                     Tax Receipts which would result if the aggregate Agreement
                     Payments were any other amount less than the sum of all
                     Agreement Payments.

               (ii)  Anything in this Agreement to the contrary notwithstanding,
                     in the event that a nationally recognized certified public
                     accounting firm designated by the Company (the "Accounting
                     Firm") shall determine that receipt of all Payments would
                     subject Payner to tax under Section 4999 of the Code, it
                     shall determine whether some amount of Agreement Payments
                     would meet the definition of a "Reduced Amount." If said
                     firm reasonably determines that there is a Reduced Amount,
                     the aggregate Agreement Payments shall be reduced to such
                     Reduced Amount.

               (iii) If the Accounting Firm reasonably determines that aggregate
                     Agreement Payments should be reduced to the Reduced Amount,
                     the Company shall promptly give Payner notice to that
                     effect and a copy of the detailed calculation thereof, and
                     Payner may then elect, in her sole discretion, which and
                     how much of the Agreement Payments shall be eliminated or
                     reduced (as long as after such election the present value
                     of the aggregate Agreement Payments equals the Reduced
                     Amount), and shall advise the Company in writing of her
                     election within ten business days of her receipt of notice.
                     If no such election is made by Payner within such ten-day
                     period, the Company may elect which of such Agreement
                     Payments shall be eliminated or reduced (as long as after
                     such election the present value of the aggregate Agreement
                     Payments equals the Reduced Amount) and shall notify Payner
                     promptly of such election. All reasonable determinations
                     made by the Accounting Firm under this paragraph 8(d) shall
                     be binding upon the Company and Payner. As promptly as
                     practicable following such determination, the Company shall
                     pay to or distribute for the benefit of Payner such
                     Agreement Payments as are then due to Payner under this
                     Agreement and shall promptly pay to or distribute for the
                     benefit of Payner in the future such Agreement Payments as
                     become due to Payner under this Agreement.

               (iv)  While it is the intention of the Company and Payner to
                     reduce the amounts payable or distributable to Payner
                     hereunder only if the aggregate Net After Tax Receipts to
                     Payner would thereby be increased, as a result of the
                     uncertainty in the application of Section 4999 of the Code
                     at the time of the initial determination by the Accounting
                     Firm hereunder, it is possible that amounts will have been
                     paid or distributed by the Company to or for

                                     - 11 -
<PAGE>

                     the benefit of Payner pursuant to this Agreement which
                     should not have been so paid or distributed ("Overpayment")
                     or that additional amounts which will have not been paid or
                     distributed by the Company to or for the benefit of Payner
                     pursuant to this Agreement could have been so paid or
                     distributed ("Underpayment"), in each case, consistent with
                     the calculation of the Reduced Amount hereunder. In the
                     event that the Accounting Firm, based upon the assertion of
                     a deficiency by the Internal Revenue Service against either
                     the Company or Payner which the Accounting Firm reasonably
                     believes has a high probability of success determines that
                     an Overpayment has been made, then Payner shall repay to
                     the any such Overpayment to the Company within ten business
                     days of her receipt of notice of such Overpayment. In the
                     event that the Accounting Firm, based upon controlling
                     precedent or substantial authority, reasonably determines
                     that an Underpayment has occurred, any such underpayment
                     shall be promptly paid by the Company to or for the benefit
                     of Payner.

               (v)   All fees and expenses of the Accounting Firm in
                     implementing the provisions of this paragraph 8(d) shall be
                     borne by the Company.

         9.    CONFIDENTIALITY; INVENTIONS

               a.  Payner recognizes that the services to be performed by her
are special, unique and extraordinary in that, by reason of her employment under
this Agreement, she may acquire or has acquired confidential information and
trade secrets concerning the operation of the Company, its predecessors, and/or
its affiliates, the use or disclosure of which could cause the Company, or its
affiliates substantial loss and damages which could not be readily calculated
and for which no remedy at law would be adequate. Accordingly, Payner covenants
and agrees with the Company that she will not, directly or indirectly, at any
time during the term of this Agreement or thereafter, except in the performance
of her obligations to the Company or with the prior written consent of the Board
of Directors or as otherwise required by court order, subpoena or other
government process, directly or indirectly, disclose any secret or confidential
information that she may learn or has learned by reason of her association with
the Company. If Payner shall be required to make such disclosure pursuant to
court order, subpoena or other government process, she shall notify the Company
of the same, by personal delivery or electronic means, confirmed by mail, within
24 hours of learning of such court order, subpoena or other government process
and, at the Company's expense, shall (i) take all reasonably necessary and
lawful steps required by the Company to defend against the enforcement of such
subpoena, court order or government process, and (ii) permit the Company to
intervene and participate with counsel of its choice in any proceeding relating
to the enforcement thereof. The term "confidential information" includes,
without limitation, information not in the public domain and not previously
disclosed to the public or to the trade by the Company's management with respect
to the Company's or its affiliates' facilities and methods, studies, surveys,
analyses, sketches, drawings, notes, records, software, computer-stored or
disk-stored information, processes, techniques, research data, marketing and
sales information, personnel data, trade secrets and other intellectual
property, designs, design concepts, manuals, confidential reports,

                                     - 12 -
<PAGE>

supplier names and pricing, customer names and prices paid, financial
information or business plans.

               b.  Payner confirms that all confidential information is and
shall remain the exclusive property of the Company. All memoranda, notes,
reports, software, sketches, photographs, drawings, plans, business records,
papers or other documents or computer-stored or disk-stored information kept or
made by Payner relating to the business of the Company shall be and will remain
the sole and exclusive property of the Company and shall be promptly delivered
and returned to the Company immediately upon the termination of her employment
with the Company.

               c.  Payner shall make full and prompt disclosure to the Company
of all inventions, improvements, ideas, concepts, discoveries, methods,
developments, software and works of authorship, whether or not copyrightable,
trademarkable or licensable, which are created, made, conceived or reduced to
practice by Payner for the Company during her services with the Company, whether
or not during normal working hours or on the premises of the Company (all of
which are collectively referred to in this Agreement as "Developments"). All
Developments shall be the sole property of the Company, and Payner hereby
assigns to the Company, without further compensation, all of her rights, title
and interests in and to the Developments and any and all related patents, patent
applications, copyrights, copyright applications, trademarks and tradenames in
the United States and elsewhere.

               d.  Payner shall assist the Company in obtaining, maintaining and
enforcing patent, copyright and other forms of legal protection for intellectual
property in any country. Upon the request of the Company, Payner shall sign all
applications, assignments, instruments and papers and perform all acts necessary
or desired by the Company in order to protect its rights and interests in any
Developments.

               e.  Payner agrees that any breach of this paragraph 9 will cause
irreparable damage to the Company and that, in the event of such breach, the
Company will have, in addition to any and all remedies of law, including rights
which the Company may have to damages, the right to equitable relief including,
as appropriate, all injunctive relief or specific performance or other equitable
relief. Payner understands and agrees that the rights and obligations set forth
in paragraph 9 shall survive the termination or expiration of this Agreement.

         10.   REPRESENTATIONS AND WARRANTIES

               a.  Payner represents and warrants to the Company that she was
advised to consult with an attorney of Payner's own choosing concerning this
Agreement and that Payner has done so.

               b.  Payner represents and warrants to the Company that the
execution, delivery and performance of this Agreement by Payner complies with
all laws applicable to Payner or to which her properties are subject and does
not violate, breach or conflict with any agreement by which she or her assets
are bound or affected.

                                     - 13 -
<PAGE>

         11.   GOVERNING LAW; ARBITRATION

         This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of New
York, without giving effect to its conflict of law provisions. Except as set
forth below, any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be resolved by arbitration in accordance
with the rules of the American Arbitration Association (the "AAA") then
pertaining in the City of New York, New York, by a single arbitrator to be
mutual agreed upon by the parties or, if they are unable to so agree, by an
arbitrator selected by the AAA. The parties shall be entitled to a minimal level
of discovery as determined by the arbitrator. The arbitrator shall be empowered
to award attorney's fees and costs to Payner (but not the Company) if he or she
deems such award appropriate. Judgment upon any award rendered by the arbitrator
may be entered in any court having jurisdiction thereof. Nothing contained in
this paragraph 11 or the remainder of this Agreement shall be construed so as to
deny the Company the right and power to seek and obtain injunctive relief in a
court of equity for any breach or threatened breach by Payner of the covenants
contained in paragraphs 6 and 9 of this Agreement.

         12.   INDEMNIFICATION

               a.  The Company agrees that it shall to the fullest extent
permitted by law indemnify and hold Payner harmless and shall pay and reimburse
Payner for any loss, cost, damage, injury or other expense (including without
limitation reasonable attorneys' fees) which Payner incurs by reason of being or
having been an officer or director of the Company or by reason of the fact that
Payner is or was serving at the request of the Company as a director, officer,
employee, fiduciary or other representative of the Company. All indemnification
shall be paid by the Company in advance of the final disposition of the matter
(as incurred by Payner) provided that Payner executes and deliver to the Company
an undertaking to repay any amounts so advanced in the event that it shall be
determined that Payner is not entitled to indemnification hereunder. This
indemnification obligation is in addition to any other indemnification provision
contained in the Company's By-laws or pursuant to any other document, instrument
or agreement and shall survive the term of Payner's employment hereunder.

               b.  In the event that Payner asserts her right of indemnification
under paragraph 12(a) above, the Company shall have the right to select Payner's
counsel provided that there is no material conflict of interest between the
Company and Payner and provided such counsel is reasonably acceptable to Payner.
Notwithstanding the foregoing, the Company shall have the right to participate
in, or fully control, any proceeding, compromise, settlement, resolution or
other disposition of the claim or proceeding so long as Payner is provided with
a general release from the Company and the claimant in form and substance
reasonably satisfactory to Payner and no restrictions are imposed on Payner as a
result of the settlement.

         13.   ENTIRE AGREEMENT

         This Agreement together with any stock option agreements to which
Payner and the Company are a party contain all of the understandings between
Payner and the Company pertaining to Payner's employment with the Company and
supersedes all undertakings and agreements, whether oral or in writing,
previously entered into between them.

                                     - 14 -
<PAGE>

         14.   AMENDMENT OR MODIFICATION; WAIVER

         No provision of this Agreement may be amended or modified unless such
amendment or modification is agreed to in writing, signed by Payner and by an
officer of the Company duly authorized to do so. Except as otherwise
specifically provided in this Agreement, no waiver by either party of any breach
by the other party of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or any prior or subsequent time.

         15.   NOTICES.

         Any notice to be given hereunder shall be in writing and delivered
personally or sent by certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such other
address as such party may subsequently designate by like notice:

         If to the Company, to:

               Bluefly, Inc.
               42 West 39th Street, 9th Floor
               New York, NY 10018
               Attn: Chairman of Compensation Committee

         With a copy to:

               Dechert LLP
               30 Rockefeller Plaza
               23rd Floor
               New York, New York 10112
               Attention:  Richard Goldberg

         If to Payner, to:

               Melissa Payner-Gregor
               c/o Bluefly, Inc.
               42 West 39th Street, 9th Floor
               New York, NY 10018

                                     - 15 -
<PAGE>

         With a copy to:

               Howard J. Rubin, Esq.
               Davis & Gilbert LLP
               1740 Broadway
               New York, New York  10019

         16.   SEVERABILITY

         In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, the remaining
provisions or portions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.

         17.   TITLES

         Titles of the paragraphs of this Agreement are intended solely for
convenience of reference and no provision of this Agreement is to be construed
by reference to the title of any paragraph.

         18.   DUTY TO MITIGATE

         Payner shall not be obligated to seek other employment by way of
mitigation of the amounts payable to her under any provision of this Agreement.

         19.   COUNTERPARTS

         This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date written below.


                                            BLUEFLY, INC.


                                            By: /s/ Neal Moszkowski
                                                --------------------------------
                                                Member of Compensation Committee


                                                /s/ Melissa Payner-Gregor
                                                --------------------------------
                                                Melissa Payner-Gregor


DATED:  November 14, 2006

                                     - 16 -