EMPLOYMENT AGREEMENT

Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT is entered into as of August 31, 2009, by and between Bluefly, Inc., a Delaware corporation (the “Company”), and Bradford Matson (“Matson”).

RECITALS

1.           The Company desires to retain the services of Matson as Chief Marketing Officer of the Company in accordance with the terms and conditions of this Agreement.

2.           Matson will serve the Company as Chief Marketing 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 Matson agree as follows:

The Company hereby agrees to employ Matson as Chief Marketing Officer of the Company, and Matson hereby agrees to serve in such capacity, for a term commencing on  August 31, 2009 (the “Starting Date”) and ending on September 30, 2012 (as the same may be earlier terminated pursuant to the terms of this Agreement, the “Employment Term”), upon the terms and subject to the conditions contained in this Agreement.

During the Employment Term, Matson shall serve as Chief Marketing Officer of the Company, and shall be responsible for the duties attendant to such office and such other managerial duties and responsibilities with the Company consistent with such office as may be reasonably assigned from time to time by the Chief Executive Officer and/or President of the Company.

The principal location of Matson’s employment shall be in the New York City vicinity (i.e., within a 20 mile radius), although Matson understands and agrees that he will be required to travel from time to time for business reasons.  Matson shall diligently and faithfully perform his obligations under the Agreement and shall devote his full professional and business time to the performance of his duties as Chief Marketing Officer of the Company during the Employment Term.  Matson shall not, directly or indirectly, render business services to any other person or entity, without the consent of the Company's Chief Executive Officer.

For services rendered by Matson to the Company during the Employment Term, the Company shall pay him a base salary of $350,000 per year, payable in accordance with the standard payroll practices of the Company, subject to annual increases in the sole discretion of the Chief Executive Officer and the Company's Board of Directors, taking into account the financial and operating performance of the Company's business and divisions and a qualitative assessment of Matson’s performance during such year.

a.           During the Employment Term, Matson shall be eligible to receive a bonus set by the Company’s Board of Directors in its sole discretion and based on such factors as the Board of Directors deems appropriate, provided that any bonus for the 2009 calendar year will be pro-rated based upon the number of months that Matson served as an employee of the Company.  All bonuses shall be paid in accordance with the Company’s standard payroll practices, net of any applicable withholding.  No bonus will be payable under this Section unless Matson is employed as of the date such bonus is awarded.

b.           The Company hereby agrees to cause, on the Starting Date, the issuance to Matson of options (“Options”) to purchase 10,000 shares of the Company's common stock, $.01 par value (“Common Stock”).  The Options shall be issued pursuant to, and in accordance with, the Company's 2005 Stock Incentive Plan (the “Plan”).  The Options shall be Incentive Stock Options (as defined in the Plan) to the extent allowed by law, and shall be exercisable at a price equal to the Fair Market Value (as defined in the Plan) of the Common Stock on the date hereof.  The Options shall vest in (36) equal monthly installments, with the first such installment vesting on the one month anniversary of the date of grant; provided, that in the event that Matson’s employment with the Company is terminated without cause or as a result of a Constructive Termination at any time during the Employment Term, all such options shall be immediately vested.  The Term of each Option shall be 10 years from the date of grant.  In the event of the termination of Matson's employment for any reason, he shall have 90 days within which to exercise any vested Options and any unvested Options shall be forfeited.  During the Term of this Agreement, Matson shall be eligible to participate in the Company's future stock option grants as determined appropriate by the Committee in its sole discretion.

c.           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 more than 50% (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, SFM Domestic Investments LLC, Prentice Capital Offshore, Ltd., Prentice Capital Management, LP, S.A.C. Capital Associates, LLC, Maverick Fund, L.D.C., Maverick Fund II, Ltd., Maverick Fund USA, Ltd.  and/or any of their respective affiliates (collectively, the “Existing Stockholders”), or (IV) any acquisition which complies with clauses (A), (B) and (C) of sub-paragraph (c)(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 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 the Existing Stockholders 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.

For purposes of Agreement, the term “Affiliate” shall mean any entity that directly or indirectly is controlled by, controls or is under common control with the Company.

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

b.     During each calendar year of the Employment Term, Matson shall be entitled to reasonable vacation with full pay in accordance with they Company’s then-current vacation policies; provided , however , that Matson shall schedule such vacations at times convenient to the Company.

c.           Matson shall be entitled to participate in all health insurance (National Oxford), dental insurance, long-term disability insurance and other employee benefit plans instituted by the Company from time to time on the same terms and conditions as other similarly situated employees of the Company, to the extent per