Unassociated Document


    
      Exhibit
10.1

      AMENDED
AND RESTATED EMPLOYMENT AGREEMENT

      


      This
AMENDED AND RESTATED EMPLOYMENT AGREEMENT is entered into as of April 27, 2010,
by and between Bluefly, Inc., a Delaware corporation (the “Company”), and
Melissa Payner-Gregor (“Payner”).

      


      RECITALS

      


      WHEREAS,
the Company currently employs Payner as Chief Executive Officer pursuant to an
Employment Agreement dated as of July 1, 2006 (as amended to date, the “Previous
Agreement”).

      


      WHEREAS,
The parties wish to amend and restate the Previous Agreement in its entirety
pursuant to the terms hereof.

      


      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 ending
on December 31, 2012, 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.  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.  In addition, commencing on January 1, 2011, the Base
Salary shall be subject to an annual cost of living adjustment based on
adjustments to the United States Consumer Price Index.

      


      
        4.           
  INCENTIVE
COMPENSATION

      

      


      For each
fiscal year during the Term, provided that Payner remains employed with the
Company as of December 31 of such fiscal year, Payner will be eligible to earn
the following bonuses:  (i) a performance bonus based upon the
achievement of one or more targets to be set for each fiscal year by the
Compensation Committee in its sole discretion, and subject to a pro rata
adjustment for underachievement or overachievement of the targets within
limits determined by the Committee in its sole discretion; and (ii) such
additional performance bonus for each fiscal year as may be determined by the
Compensation Committee in its sole discretion.  Any bonus payable under
this section, shall be paid no later than March 15th of the
fiscal year following the fiscal year to which such bonus relates.

      


      
        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.  In the event that any such
reimbursement is taxable to Payner, such reimbursement shall be made as soon
practical upon Payner’s submission of a request to be reimbursed, but in all
events such reimbursement will be made prior to the end of the calendar year
next following the calendar year in which the applicable expense was
incurred.

       

      
        
          
          

        

        
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      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 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).

      


      
        6.           
  NON-COMPETITION;
NON-SOLICITATION

      

      


      a.    
In consideration of all equity or equity derivative awards received or to be
received from the Company by Payner and the 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 

       

      
        
          
          

        

        
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      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.

      


      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 during the Employment Term,
      which, for purposes of this Agreement shall be deemed to have occurred
      upon (A) the removal of Payner without her consent from her position as
      Chief Executive Officer of the Company, or (B) the material breach by the
      Company of this Agreement; provided, however, that a
  

                


        

      

       

      
        
          
          

        

        
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      Constructive
Termination shall not be deemed to have occurred unless: (1) Payner gives the
Company notice within ninety (90) days after an event or occurrence which Payner
believes constitutes a Constructive Termination, specifying the event or
occurrence which Payner believes constitutes a Constructive Termination; and (2)
the Company fails to cure such act or failure to act within thirty (30) days
after 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
or (y) the remaining term of the applicable vested stock option.  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 within 60 days of
any such termination, 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

       

      
        
          
          

        

        
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      paid, as
well as the following severance and noncompetition payments set forth below (the
“Severance Benefits”):

      


      
        
          	
                	
                  (i) 

                	
                  the
      then-current Base Salary for a period of twelve (12) months commencing on
      the 60th
      day after the date of
termination;

                


        

      

      


      
        
          	
                	
                  (ii) 

                	
                  any
      unvested stock options, Restricted Stock or other equity derivatives 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 and (y) the
      remaining term of the applicable stock
option.

                


        

      

      


      
        
          	
                	
                  (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 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, one half of any unvested stock options granted to Payner
which are outstanding as of the date of that Change of Control and have not yet
vested (“Unvested Options”) shall be deemed to be fully vested as of that
date.  Subject to paragraph 7(c), the remaining one half of the
Unvested Options 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.

      


      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 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

       

      
        
          
          

        

        
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      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”), (IV) any acquisition by Rho Ventures VI, L.P. or any of
its affiliates (collectively, “Rho”), or (V) 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 Person (other than Soros, Rho or any employee benefit plan
sponsored or maintained by the

       

      
        
          
          

        

        
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      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.     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 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.  With respect
      to any such reduced payments the payments will be reduced in the following
      order: first against the latest scheduled cash payments (if necessary,
      to

                


        

      

       

      
        
          
          

        

        
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      zero), then to
current cash payments and benefits (if necessary, to zero) and then to non-cash
payments and benefits.

       

      
        
          	
                	
                  (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 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.

                


        

      

       

      
        
          
          

        

        
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                  (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, 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

       

      
        
          
          

        

        
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      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.

      


      
        
          	
                	
                  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.

       

      
        
          
          

        

        
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                  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, including (without limitation), the Previous
Agreement.

      


      
        
          	
                	
                  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:

       

      
        
          
          

        

        
          - 12
-

          
            

          

        

        
          
          

        

      

       

      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

      


      


      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.

       

      
        
          
          

        

        
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                  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 / David Wassong

              	 
      
	 
      	 
      	
                David
      Wassong – Chairman of the Board

              	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                / s / Melissa Payner-Gregor

              	 
      
	 
      	 
      	
                Melissa
      Payner-Gregor

              	 
      


      

      


      
        
          
          

        

        
          - 14
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