EMPLOYMENT AGREEMENT

EXHIBIT 10.13

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is entered into as of July 1, 2006, by and

between Bluefly, Inc., a Delaware corporation (the "Company"), and Patrick C.

Barry ("Barry").

RECITALS

WHEREAS, the Company desires to provide for the continued retention of

the services of Barry as the Chief Operating Officer and Chief Financial Officer

of the Company in accordance with the terms and conditions of this Agreement.

WHEREAS, Barry desires to serve the Company as its Chief Operating

Officer and Chief Financial Officer 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 Barry agree as

follows:

1. TERM

The Company hereby agrees to employ Barry as the Chief Operating

Officer and Chief Financial Officer of the Company, and Barry hereby agrees to

serve in such capacity, for a term commencing on the date hereof and ending July

1, 2009, upon the terms and subject to the conditions contained in this

Agreement; provided, however, that if the Company does not provide Barry 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, Barry shall serve as the Chief

Operating Officer and Chief Financial Officer of the Company reporting directly

to the Chief Executive Officer of the Company, 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 Chief Executive Officer and 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, Barry shall report directly to, and have such powers, authority,

functions, duties and responsibilities as are reasonably assigned to him by, the

Chief Executive Officer of the division or subsidiary that currently comprises

the Company or to a senior executive officer of such other entity. It is

understood that the duties of Barry, should the Company become a division or

subsidiary of another entity, shall be generally consistent with his 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 principal location of Barry'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

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Manhattan), although Barry understands and agrees that he will be required to

travel from time to time for business reasons. Barry shall devote substantially

all of his business time to the performance of his duties as the Chief Operating

Officer and Chief Financial Officer of the Company during the term of this

Agreement. Barry 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 Barry

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 Barry to the Company during the term of this

Agreement, the Company shall pay him a minimum base salary of three hundred

fifty thousand dollars ($350,000) per year ("Base Salary"), payable in

accordance with the standard payroll practices of the Company, subject to

increases in the sole discretion of the Compensation Committee of the Board (the

"Compensation Committee"), taking into account merit, corporate and individual

performance and general business conditions, including changes in the "cost of

living index."

4. INCENTIVE COMPENSATION/EXCHANGE OF OPTIONS FOR RESTRICTED

STOCK AND DEFERRED STOCK UNITS; NEW GRANT OF DEFERRED STOCK

UNITS

a. Incentive Compensation. For each fiscal year during the Term,

Barry shall be eligible to receive a performance bonus as follows: provided that

Barry remains employed with the Company through the last day of such fiscal

year, Barry will be eligible to earn a performance bonus on the basis of the

achievement of certain targets to be set for each fiscal year by the

Compensation Committee of the Board of Directors in its sole discretion.

b. Exchange of Certain Outstanding Options Held by Barry

for Restricted Stock and Deferred Stock Units.

(i) Options Exchanged for Restricted Stock. Barry hereby forfeits all

of his rights to the options listed on Exhibit A hereto to purchase shares of

common stock of the Company ("Shares"), and in consideration for such forfeiture

the Company is simultaneously with the execution of this Agreement, (x) granting

to Barry a Restricted Stock Award under the Company's 2005 Stock Incentive Plan

(the "Plan") for 269,965 Shares in the form attached hereto as Exhibit B and (y)

paying to Barry a cash bonus equal to $123,204. The cash bonus is intended to

compensate Barry for the income taxes payable on the Restricted Stock Award. The

shares subject to the Restricted Stock Award shall vest in full on January 1,

2007.

(ii) Options Exchanged for Deferred Stock Unit Award. Barry hereby

forfeits all of his rights to the options to purchase Shares listed on Exhibit C

hereto, and in consideration for such forfeiture, the Company is, simultaneously

with the execution of this Agreement, granting to Barry under the Plan, a

Deferred Stock Unit Award for and representing 45,837 underlying Shares under

the Plan in the form attached hereto as Exhibit D.

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(iii) Additional Deferred Stock Unit Award. Subject to the approval by

the stockholders of the Company of an amendment to the Plan to increase the

number of shares available for grant thereunder and the maximum annual award to

any one participant under the Plan, Barry shall be granted under the Plan an

additional Deferred Stock Unit Award (the "Supplementary DSUs") for and

representing 4,062,692 underlying Shares in the form attached hereto as Exhibit

E. The Deferred Stock Units making up the Deferred Stock Unit Awards referred to

in subparagraphs 4(b)(ii) and 4(b)(iii) of this Agreement are hereinafter

referred to as the "DSUs".

(iv) Terms of the DSUs. The DSUs are not Shares, but rather a promise

to deliver actual Shares in the future. The DSUs awarded hereunder will be

credited to an unfunded, bookkeeping account of the Company maintained on

Barry's behalf and will be distributable and subject to the restrictions

contained in the Plan and in the applicable DSU Award.

(A) Vesting of DSUs. The DSUs shall vest as follows: (I)

one-third of the Supplementary DSUs shall vest in four equal

quarterly installments commencing on October 1, 2006 (e.g.,

the first of four equal quarterly vesting periods will begin

on October 1, 2006 so that 25% of such DSUs shall have vested

as of January 1, 2007) (the "One-Year DSUs"), (II) both (a)

one-third of the Supplementary DSUs and (b) the 45,837 DSUs

issued in exchange for options with a vesting date prior to

August 31, 2007, shall vest in eight equal quarterly

installments commencing on October 1, 2006 (e.g., the first of

eight equal quarterly vesting periods will begin on October 1,

2006 so that 12.5% of such DSUs shall have vested as of

January 1, 2007) (collectively, the "Two-Year DSUs"), and

(III) one-third of the Supplementary DSUs shall vest in twelve

equal quarterly installments commencing on October 1, 2006

(e.g., the first of twelve equal quarterly vesting periods

will begin on October 1, 2006 so that approximately 8.33% of

such DSUs shall have vested as of January 1, 2007)

(collectively, the "Three-Year DSUs").

(B) Termination of Employment; Forfeiture. In the event that

Barry's employment is terminated prior to the vesting of any

of such DSUs, unless such termination is a Constructive

Termination or a termination without Cause as such terms are

defined in paragraph 7 below (in which case the vesting shall

be accelerated as set forth therein), all unvested DSUs as of

the date of such termination shall be forfeited immediately by

Barry.

(C) Distribution of DSUs. Subject to paragraph 4(b)(iv)(B),

all of the vested DSUs underlying a Deferred Stock Unit Award

will be distributable in Shares on the date of distribution on

the earliest to occur of: (I) (a) with respect to the One-Year

DSUs only, October 1, 2007, (b) with respect to the Two-Year

DSUs only, October 1, 2008, and (c) with respect to the

Three-Year DSUs only, October 1, 2009, (II) death, (III) the

date on which Barry is "disabled" (as such term is defined in

Section 409A(a)(2)(C) of the Internal Revenue Code of 1986, as

amended ("Code") and the official guidance issued thereunder),

(IV) subject to paragraph 7(c), the effective date of Barry's

Constructive Termination or

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termination without Cause, or (V) to the extent provided in

paragraph 8, immediately following a Change of Control (as

defined below) and thereafter.

(D) No Rights as Shareholders. Barry shall not have any rights

of a Shareholder with respect to the DSUs, including the right

to vote such shares or the right to receive dividends or other

distributions made with respect to the shares, until the

Shares underlying the DSUs are distributed to Barry. However,

if any dividends are paid on the Shares underlying the DSUs,

whether in cash or stock, Barry will be credited with

"Dividend Rights." Such Dividend Rights shall be credited to

Barry's DSU account as follows: Barry shall be credited with

additional DSUs equal to the value of such dividend on the

date such dividend is paid divided by the Fair Market Value

(as determined under the Plan) on the date the dividend is

paid multiplied by the number of DSUs credited to Barry on the

date the dividend is paid. The Dividend Rights credited to

Barry will be subject to the same restrictions applicable to

the DSUs to which they relate as initially credited to Barry

under this paragraph 4(b).

(E) Tax Withholding. Barry shall be responsible to fulfill any

withholding tax requirements on the DSUs as specified in the

Plan and as required by applicable law. Barry shall notify the

Company no later than fifteen business days prior to a

distribution date, as to whether he intends to make a cash

payment to the Company for the withholding amount or would

like the Company to make arrangements for such payment. If he

elects to have the Company make the arrangements or fails to

provide the required notice, the Company shall satisfy such

withholding tax requirements, through withholding distribution

of a portion of the DSUs equal to the withholding obligation

based on the Fair Market Value of the Shares already owned by

Barry on the date of distribution; provided that if the

Company's Board of Directors determines that it would not be

prudent to use the Company's cash flow for such purpose, the

Company shall advise Barry who can then arrange to sell Shares

for the purpose of satisfying the withholding tax requirement

prior to the distribution of the applicable Shares.

5. EXPENSE REIMBURSEMENT AND PERQUISITES

a. During the term of this Agreement, Barry 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,

Barry shall be entitled to reasonable vacation with full pay; provided, however,

that Barry 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 seventeen thousand five hundred dollars ($17,500)

for the purchase of term life insurance by the Company for the benefit of Barry

(which shall be in lieu of any other life insurance benefit) and the purchase of

a supplemental disability insurance policy, which together

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with any other group coverage offered by the Company, provide for coverage of

the maximum allowable disability benefit. Barry 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.

6. NON-COMPETITION; NON-SOLICITATION

a. In consideration of the Incentive Award and severance

benefits hereunder, and for other good and valuable consideration, the receipt

and sufficiency of which are hereby acknowledged, during the term of this

Agreement and during the "Non-Competition Period" (as defined in paragraph 6(c)

below) Barry 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 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 Barry 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 him

beneficially owning, at any time, more than 3% of the publicly-traded equity

securities of such Competitive Business.

b. Barry 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. Barry agrees that any breach of the covenants contained

in this paragraph 6 would irreparably injure the Company.

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Accordingly, Barry agrees that the Company, in addition to pursuing any other

remedies it may have in law or in equity, may obtain an injunction against Barry

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 Barry 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, Barry receives notice in writing

from the Company of any material breach of any of the covenants contained in

this paragraph 6 by him and Barry cures such material breach within 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 Barry 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 Barry, and Barry's position as Chief Operating Officer and

Chief Financial Officer 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 twelve (12) month period

(vacation time excluded), during which time Barry is

unable to attend to his ordinary and regular duties;

(iii) a "Constructive Termination" by the Company, which,

for purposes of this Agreement, shall be deemed to

have occurred upon (A) the removal of Barry from both

his positions as Chief Operating Officer and Chief

Financial Officer of the Company (it being understood

that the removal of Barry from either such position

shall not be deemed a "Constructive Termination"),

(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 o