BLUEFLY INC
EXHIBIT 10.4
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>bi60991ex104.txt
<DESCRIPTION>EXHIBIT 10.4
<TEXT>
                                                                    EXHIBIT 10.4

                                  BLUEFLY, INC.
                               42 West 39th Street
                            New York, New York 10018

                                                                    June 6, 2006

Wells Fargo Retail Finance, LLC
One Boston Place, Suite 1800
Boston, MA 02108
Attention: Jennifer Blanchette, Vice President

         Re:  Waiver Letter

         Dear Jennifer:

         This letter (this "Letter) has been written to request the waiver by
Lender (as hereinafter defined) of certain provisions of the Loan and Security
Agreement dated July 26, 2005 (the "Loan Agreement) between BLUEFLY, INC. (the
"Borrower"), a Delaware corporation with its principal executive offices at 42
West 39th Street, New York, New York 10018, and WELLS FARGO RETAIL FINANCE, LLC,
(the "Lender"), and certain other Loan Documents. Terms used and not otherwise
defined herein shall have the meanings provided in the Loan Agreement.

         We have previously provided you with a spreadsheet which sets forth a
series of proposed transactions (the "Equity Transactions") involving, among
other things, the conversion of certain preferred stock of the Borrower into
common stock, the payment of certain dividends to holders of such preferred
stock of the Borrower, the repayment of certain subordinated indebtedness and
related matters. Certain of the proposed transactions require Lender's consent
under the terms of certain Loan Documents.

         A.       WAIVERS.

         The Borrower specifically requests that the Lender waive the following
provisions of the Loan Documents, subject to compliance with the terms set forth
in Section B below, in order to permit the Equity Transactions to be completed:

1.       Section 2.2 of the Subordination Agreement in order to permit the
         payment to the Subordinated Creditors (as therein defined) of a
         Distribution (as therein defined) in the amount of not more than
         $5,600,000.00 which shall constitute payment in full of all
         indebtedness due and owing to the Subordinated Creditors;

2.       Section 4.19 of the Loan Agreement in order to permit:

         (a)      the payment to holders of Borrower's preferred stock of a cash
                  dividend in the amount of not more than $22,000,000.00; and

         (b)      the payment to holders of Borrower's Series F Preferred Stock
                  in the amount of not more than $150,000.00 which shall be
                  sufficient to cause the redemption of all Class F Preferred
                  Stock.

                                        1
<PAGE>

         B.       CONDITIONS.

         The Borrower understands and agrees that the Lender's consent to the
terms of this Letter are conditioned upon receipt by the Lender of:

1.       Evidence that not less than $15,000,000 in net proceeds of the Equity
         Transactions shall have been deposited in either the Operating Account
         or another account subject to a Blocked Account Agreement;

2.       (i) A copy of a payoff letter from the Subordinated Creditors
         acknowledging they have been paid in full and releasing Borrower from
         all claims and encumbrances, and (ii) copies of any notes issued to the
         Subordinated Creditors marked "cancelled" or a similar marking
         indicating they have been paid in full and are no longer outstanding;

3.       A copy of all documents, instruments and agreements, along with all
         schedules, exhibits, and disclosures thereto, evidencing the Equity
         Transactions, as well as evidence of all corporate authorizations,
         board resolutions and the like; and

4.       Reimbursement from the Borrower for all costs, expenses, and legal fees
         incurred in connection with the negotiation and preparation of this
         Letter and all documents, instruments, and agreements incidental
         hereto.

         C.       RATIFICATION; WAIVER OF CLAIMS; REPRESENTATIONS AND
                  WARRANTIES.

1.       Except as provided herein, all terms and conditions of the Loan
         Agreement and each of the other Loan Documents shall remain in full
         force and effect. The Borrower hereby ratifies, confirms and re-affirms
         all terms and provisions of the Loan Documents and confirms that no
         Default or Event of Default has occurred and is continuing.

2.       There is no basis nor set of facts on which any amount (or any portion
         thereof) owed by the Borrower under the Loan Agreement or any other
         Loan Document could be reduced, offset, waived, or forgiven, by
         rescission or otherwise; nor is there any claim, counterclaim, offset,
         or defense (or other right, remedy, or basis having a similar effect)
         available to the Borrower with regard thereto; nor is there any basis
         on which the terms and conditions of any of the Liabilities could be
         claimed to be other than as stated on the written instruments which
         evidence such Liabilities.

3.       The Borrower hereby acknowledges and agrees that it has any offsets,
         defenses, claims, or counterclaims against the Lenders or its parent,
         affiliates, predecessors, successors, or assigns, or its officers,
         directors, employees, attorneys, or representatives, with respect to
         the Liabilities, or otherwise, and that if the Borrower now has, or
         ever did have, any offsets, defenses, claims, or counterclaims against
         the Lender or its parent, affiliates, predecessors, successors or
         assigns, or its officers, directors, employees, attorneys, or
         representatives, whether known or unknown, at law or in equity, from
         the beginning of the world through this date and through the time of
         execution of this Letter, all of them are hereby expressly WAIVED, and
         the Borrower hereby RELEASES the Lender and its officers, directors,
         employees, attorneys, representatives, affiliates, predecessors,
         successors, and assigns from any liability therefor.

                                        2
<PAGE>

         If the Lender is in agreement with the terms of this Letter, please
sign the enclosed copy of this letter and return it to the Borrower at the
address indicated above.

                                        Sincerely,

                                        BLUEFLY, INC., as Borrower

                                        By:    /s/ Patrick C. Barry
                                               ---------------------------------
                                        Print Name: Patrick C. Barry
                                        Title: CFO/COO

         Acknowledged and Agreed:

         WELLS FARGO RETAIL FINANCE, LLC, as Lender

         By:    /s/ Jennifer L. Blanchette
                -----------------------------------
         Print Name: Jennifer L. Blanchette
         Title: Vice President

                                        3
</TEXT>
</DOCUMENT>
