Exhibit 10.42


                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT is entered into as of December 31, 2002, by
and between Bluefly, Inc., a Delaware corporation (the "Company"), and E.
Kenneth Seiff ("Seiff").

                                    RECITALS

         WHEREAS, Seiff and the Company entered into an Employment Agreement
dated as of December 29, 1999, that provides, among other things, that Seiff
shall be the Company's Chief Executive Officer and Chairman of the Board of
Directors until December 31, 2002;

         WHEREAS, the Company desires to continue to retain the services of
Seiff as the Chief Executive Officer and Chairman of the Board of Directors of
the Company in accordance with the terms and conditions of this Agreement.

         WHEREAS, Seiff desires to continue to serve the Company as its Chief
Executive Officer and Chairman 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 Seiff agree as
follows:

         1.   TERM

         The Company hereby agrees to continue to employ Seiff as the Chief
Executive Officer and Chairman of the Board of Directors of the Company, and
Seiff hereby agrees to serve in such capacity, for a term commencing on the date
hereof and ending June 30, 2005 upon the terms and subject to the conditions
contained in this Agreement; provided, however, that if the Company does not
provide Seiff 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, Seiff shall serve as the Chief
Executive Officer and Chairman of the Board of Directors of the Company
reporting directly to the Board of Directors of the Company (the "Board"), and
he shall perform such duties, and have such powers, authority, functions, duties
and responsibilities for the Company as are reasonably assigned to him by the
the Board and as are consistent with the duties, responsibilities, and
activities of the most senior executive officer of the Company. To the extent
that the Company becomes a division or subsidiary of another entity, Seiff shall
report directly to, and have such powers, authority, functions, duties and
responsibilities as are reasonably assigned to him by, the Chief

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Executive Officer, President or comparable officer of the parent company or the
company, as the case may be.

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

         3.   COMPENSATION

         For services rendered by Seiff to the Company during the term of this
Agreement, the Company shall pay him a minimum base salary of Two Hundred and
Seventy-Five Thousand Dollars ($275,000) 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.   PROFIT PARTICIPATION/INCENTIVE AWARD/OPTIONS

              a.    Profit Participation. For each fiscal year during the Term,
Seiff shall be eligible to participate in the Bluefly, Inc. Key Executive Profit
Participation Plan.

              b.    Incentive Award.

              (i)   In consideration for Seiff agreeing to the non-competition
                    and non-solicitation provisions of paragraph 6 and the
                    confidentially and invention provisions of paragraph 9, and
                    subject to the conditions set forth in this paragraph 4(b),
                    upon the occurrence of a "Realization Event" (as defined in
                    paragraph 4(b)(iv)), Seiff shall be entitled to receive a
                    payment from the Company equal to 1.6% of the "Aggregate
                    Consideration" (as defined in paragraph 4(b)(iii)), less
                    applicable withholding taxes ("Award"). Subject to paragraph
                    4(b)(ii) hereof, the amount payable in respect of an Award
                    shall be payable in the same type or types of consideration
                    received by other shareholders of the Company (and, if more
                    than one type of consideration is given, payment will be
                    made in the same relative percentages of each type of
                    consideration received by other shareholders), with one-half
                    of the Award payable as soon as is administratively
                    practicable after the occurrence of a Realization Event, and
                    the other one-half of the Award payable on the first
                    anniversary of the Realization Event, provided that Seiff
                    remains employed with the Company at that


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                    time, or, if earlier, upon the termination of Seiff's
                    employment with the Company (A) by the Company without
                    "Cause" (as defined below), (B) by way of a "Constructive
                    Termination" (as defined below) or (C) on account of death
                    or "permanent disability" (as described in paragraph
                    7(a)(ii) below); provided that if Seiff's employment with
                    the Company is terminated for any reason other than as
                    described above prior to the first anniversary after the
                    date of the Realization Event, then the second one-half of
                    the Award shall be permanently forfeited. Notwithstanding
                    anything to the contrary herein, the consideration received
                    by Seiff will be subject to any hold-back, escrow, indemnity
                    or similar arrangement to the same extent to which the
                    consideration to be received by other shareholders in the
                    Company is subject.

              (ii)  Seiff shall be entitled to a payment of the Award in
                    accordance with paragraph 4(b)(i) hereof if (A) a
                    Realization Event occurs while Seiff is employed by the
                    Company or (B) Seiff's employment is terminated without
                    "Cause" (as defined in paragraph 7(a)(iv) hereof) or Seiff
                    terminates his employment on account of a "Constructive
                    Termination" (as defined in paragraph 7(a)(iii) hereof) and
                    within 180 days following such termination a Realization
                    Event is consummated. Except as provided in the preceding
                    sentence, Seiff shall have no right to the Award if a
                    Realization Event is consummated following the termination
                    of Seiff's employment with the Company.

              (iii) For purposes of this Agreement, "Aggregate Consideration"
                    shall mean the total fair market value (as reasonably
                    determined by the Compensation Committee at the time of the
                    closing of the Realization Event) of the cash, securities
                    and other consideration paid or payable, or otherwise to be
                    distributed directly to the Company's stockholders in
                    connection with a Realization Event.

              (iv)  For purposes of this Agreement, "Realization Event" means a
                    "Change of Control" (as defined in paragraph 8) in which
                    cash, securities or other consideration is paid or payable,
                    or otherwise to be distributed directly to the Company's
                    stockholders

              (v)   Notwithstanding any provision of this Agreement to the
                    contrary, in the event Seiff materially breaches the
                    provisions of paragraphs 6 or 9 hereof, Seiff hereby agrees
                    that the Company may, in addition to any other remedies it
                    may have, reclaim any amount paid to Seiff pursuant to this
                    paragraph 4(b).

              (vi)  It is understood that the Company intends to allocate an
                    aggregate of 5% of the Aggregate Consideration, less
                    applicable withholding taxes, to senior executives of the
                    Company. Currently 4% of the Aggregate Consideration has
                    been allocated amongst Seiff, Jonathan Morris and Patrick
                    Barry, and 1% of the Aggregate Consideration may, in the


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<PAGE>

                    Company's discretion, be allocated to one or more additional
                    senior executive(s). Notwithstanding paragraph 4(b)(i), if
                    any portion of such 1% has not been allocated at the time of
                    a Realization Event (such unallocated portion, the
                    "Unallocated Award"), Seiff's Award shall be increased by
                    40% of the Unallocated Award, less applicable withholding
                    taxes.

              c.   Options. Seiff shall be eligible to participate in grants of
stock options as is deemed appropriate by the Compensation Committee.

         5.   EXPENSE REIMBURSEMENT AND PERQUISITES

              a.   During the term of this Agreement, Seiff shall be entitled to
reimbursement of all reasonable and actual out-of-pocket expenses incurred by
him in the performance of his 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,
Seiff shall be entitled to reasonable vacation with full pay; provided, however,
that Seiff shall schedule such vacations at times convenient to the Company.

              c.   During the term of this Agreement, the Company shall provide
Seiff with a minimum of $1,000,000 worth of term life insurance, subject to
availability on commercially reasonable terms, major medical insurance coverage,
and Seiff shall be entitled to participate in all dental insurance and
disability plans 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.

         6.   NON-COMPETITION; NON-SOLICITATION

              a.   In consideration of the offer of employment 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) Seiff 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 his 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 while Seiff was employed by
the Company; 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,


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partnership, firm or other entity itself) whose primary business is internet
based selling or consignment 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 Seiff from investing his
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 his beneficially owning, at any time, more than three percent
(3%) of the publicly-traded equity securities of such Competitive Business.

              b.   Seiff 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. Seiff agrees that any breach of the covenants contained
in this paragraph 6 would irreparably injure the Company. Accordingly, Seiff
agrees that the Company, in addition to pursuing any other remedies it may have
in law or in equity, may obtain an injunction against Seiff 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 two
(2) years 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 Seiff 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, Seiff receives notice in writing
from the Company of any material breach of any of the covenants contained in
this paragraph 6 by him and Seiff cures such material breach within twenty-one
(21) days of the date he receives such notice, then the Company will continue
the Severance Benefits provided pursuant to paragraph 7(b) below; provided, that
Seiff shall not be entitled to Severance Benefits for periods during which he
was in material breach of such covenants.

         7.   TERMINATION

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

              (i)   his death;

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


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<PAGE>

              (iii) a "Constructive Termination" by the Company, which, for
                    purposes of this Agreement, shall be deemed to have occurred
                    upon (A) the removal of Seiff from his position as Chief
                    Executive Officer and Chairman of the Board of Directors 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 Seiff as Chief Executive Officer and
                    Chairman of the Board of Directors 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 a chief executive officer or senior executive officer of
                    such division or subsidiary); provided that no such breach
                    shall be considered a Constructive Termination unless Seiff
                    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 his 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) Seiff 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 his duties hereunder, (2) Seiff has willfully
                    and materially failed to perform his duties hereunder, (3)
                    Seiff has breached the terms and provisions of this
                    Agreement in any material respect, or (4) Seiff has failed
                    to comply in any material respect with the Company's written
                    policies of conduct of which he 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 that can be cured
                    unless the Company has provided Seiff with written notice of
                    such breach and Seiff has failed to cure such breach within
                    the ten (10) day period following his receipt of such
                    notice; or

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

              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 Seiff his 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 his termination of employment and shall


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<PAGE>

make no other payments or provide any other benefits under this Agreement. 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 Seiff's execution of a mutual release
reasonably acceptable to the Company and Seiff, the Company shall pay Seiff his
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"):

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

              (ii)  any unvested stock options that have been granted to Seiff
                    which are outstanding as of the date of such termination
                    shall be deemed to be fully vested as of that date;

              (iii) the Company shall maintain in effect, or reimburse Seiff
                    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 Seiff 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.

         8.   CHANGE OF CONTROL

              a.   In the event that a Change of Control (as defined below)
occurs during the term of this Agreement, any stock options granted to Seiff
which are outstanding as of the date of that Change in Control shall be deemed
to be fully vested as of that date. 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 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;


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                  (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 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 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 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.

              b.   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.

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


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                  (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 Seiff, cancel any outstanding
stock options and pay to Seiff, in cash or stock, or any combination thereof,
the value of such stock options 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 stock option award agreement to which Seiff is a party.

              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 Seiff, 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 Seiff with respect thereto
                    (including without limitation under Section 4999 of the
                    Internal Revenue Code of 1986, as amended ("Code")),
                    determined by applying the highest marginal rates of such
                    taxes that applied to Seiff's taxable income for the
                    immediately preceding taxable year, or such other rate(s) as
                    Seiff shall in his sole discretion certify as likely to
                    apply to Seiff 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 Seiff to tax under Section 4999 of the Code, it
                    shall determine whether some amount of Agreement Payments
                    would


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                    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 Seiff notice to that effect
                    and a copy of the detailed calculation thereof, and Seiff
                    may then elect, in his 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 his or her election
                    within ten business days of his receipt of notice. If no
                    such election is made by Seiff 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 Seiff promptly of such
                    election. All reasonable determinations made by the
                    Accounting Firm under this paragraph 8(d) shall be binding
                    upon the Company and Seiff. As promptly as practicable
                    following such determination, the Company shall pay to or
                    distribute for the benefit of Seiff such Agreement Payments
                    as are then due to Seiff under this Agreement and shall
                    promptly pay to or distribute for the benefit of Seiff in
                    the future such Agreement Payments as become due to Seiff
                    under this Agreement.

              (iv)  While it is the intention of the Company and Seiff to reduce
                    the amounts payable or distributable to Seiff hereunder only
                    if the aggregate Net After Tax Receipts to Seiff 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 Seiff 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 Seiff 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 Seiff which the
                    Accounting Firm reasonably believes has a high probability
                    of success determines that an Overpayment has been made,
                    then Seiff shall repay to the any such Overpayment to the
                    Company within ten business days of his 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 Seiff.


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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.   Seiff recognizes that the services to be performed by him are
special, unique and extraordinary in that, by reason of his employment under
this Agreement, he 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, Seiff covenants
and agrees with the Company that he will not, directly or indirectly, at any
time during the term of this Agreement or thereafter, except in the performance
of his 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 he may learn or has learned by reason of his association with
the Company. If Seiff shall be required to make such disclosure pursuant to
court order, subpoena or other government process, he shall notify the Company
of the same, by personal delivery or electronic means, confirmed by mail, within
twenty-four (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.   Seiff 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
Seiff 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 his employment with
the Company.

              c.   Seiff 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 Seiff for the Company during his 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


                                       11
<PAGE>

Developments shall be the sole property of the Company, and Seiff hereby assigns
to the Company, without further compensation, all of his 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.   Seiff 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, Seiff 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.   Seiff 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. Seiff 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.   Seiff represents and warrants to the Company that he was
advised to consult with an attorney of Seiff's own choosing concerning this
Agreement and that Seiff has done so.

              b.   Seiff represents and warrants to the Company that the
execution, delivery and performance of this Agreement by Seiff complies with all
laws applicable to Seiff or to which his properties are subject and does not
violate, breach or conflict with any agreement by which he or his 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 Seiff (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 Seiff of the covenants
contained in paragraphs 6 and 9 of this Agreement.


                                       12
<PAGE>

         12.  INDEMNIFICATION

              a.   The Company agrees that it shall to the fullest extent
permitted by law indemnify and hold Seiff harmless and shall pay and reimburse
Seiff for any loss, cost, damage, injury or other expense (including without
limitation reasonable attorneys' fees) which Seiff incurs by reason of being or
having been an officer or director of the Company or by reason of the fact that
Seiff 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 Seiff) provided that Seiff executes and deliver to the Company
an undertaking to repay any amounts so advanced in the event that it shall be
determined that Seiff 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 Seiff's employment hereunder.

              b.   In the event that Seiff asserts his right of indemnification
under paragraph 12(a) above, the Company shall have the right to select Seiff's
counsel provided that there is no material conflict of interest between the
Company and Seiff and provided such counsel is reasonably acceptable to Seiff.
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 Seiff is provided with a
general release from the Company and the claimant in form and substance
reasonably satisfactory to Seiff and no restrictions are imposed on Seiff as a
result of the settlement.

         13.  ENTIRE AGREEMENT

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

         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 Seiff 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:


                                       13
<PAGE>

         If to the Company, to:

                  Bluefly, Inc.
                  42 West 39th Street, 9th Floor
                  New York, NY 10018
                  Attn: E. Kenneth Seiff

         With a copy to:

                  Paul, Weiss, Rifkind, Wharton & Garrison|
                  1285 Avenue of the Americas
                  New York, New York 10019-6064
                  Attn: Michael J. Segal, Esq.

         If to Seiff, to:

                  E. Kenneth Seiff
                  350 East 72 Street
                  Apt. 15B
                  New York, New York 10021


         With a copy to:

                  Eric Seiff
                  Seiff and Kretz
                  645 Madison Avenue
                  New York, New York 10022


         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

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


                                       14
<PAGE>

         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 first above written.

                                      BLUEFLY, INC.


                                      By:  /S/ Neal Moszkowski
                                         ---------------------------------------
                                           Neal Moszkowski
                                           Member of the Board of Directors


                                            /S/ E. Kenneth Seiff
                                      ------------------------------------------
                                            E. Kenneth Seiff


                                       15