Exhibit 10.7







         


 


EMPLOYMENT AGREEMENT


 


 


This EMPLOYMENT AGREEMENT (this “Agreement”)
is entered into as of June 12, 2012, by and between Bluefly, Inc., a Delaware corporation (the “Company”), and Scott
Erdman (“Erdman”).


 


         RECITALS


 


WHEREAS, the Company wishes to hire Erdman
to serve as its Senior Vice President of Merchandising, and Erdman wishes to serve in such capacity, on the terms and conditions
set forth herein.


 


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 Erdman agree as follows:


 


		1.	TERM



 


The Company hereby agrees to employ Erdman
as Senior Vice President of Merchandising of the Company, and Erdman hereby agrees to serve in such capacity, for a term commencing
on June 11, 2012 or such other date as may mutually be agreed by the parties (the “Starting Date”) and ending on June
30, 2015 (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.


 


		2.	DUTIES



 


During the Employment Term, Erdman shall
serve as Senior Vice President of Merchandising 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
to him from time to time.


 


The principal location of Erdman’s
employment shall be in the New York City vicinity (i.e., within a 20 mile radius), although Erdman understands and agrees that
he will be required to travel from time to time for business reasons. Erdman 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 Senior Vice President
of Merchandising of the Company during the Employment Term. Erdman shall not, directly or indirectly, render business services
to any other person or entity, without the consent of the Company's Chief Executive Officer.






    	           



    	 



    







		3.	BASE SALARY



 


For services rendered by Erdman to the Company
during the Employment Term, the Company shall pay him a base salary of $300,000 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 Erdman’s performance during such year.


 


		4.	BONUS; OPTIONS



 


a. During the Employment Term, Erdman shall
be eligible to receive a bonus of up to thirty percent (30%) of his annual salary as set by the Company’s Board of Directors
in its sole discretion and based on such factors as the Board of Directors deems appropriate. 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 Erdman is employed as of the date such bonus is paid.


 


b. As of the last day of the calendar month
in which the Starting Date occurs, the Company will issue to Erdman options (“Options”) to purchase 300,000 shares
of the Company's common stock, $.01 par value (“Common Stock”) pursuant to, and in accordance with, the Company's 2005
Stock Incentive Plan (the “Plan”). The Options will be Incentive Stock Options (as defined in the Plan) to the extent
allowed by law, and will be exercisable at a price equal to the Fair Market Value (as defined in the Plan) of the Common Stock
on the date of issuance. The Options will vest over a forty-eight (48) month period as follows: (i) 12.5% of the Options shall
vest on the six month anniversary of the date of grant and (ii) 2.0833% of the Options shall vest each month thereafter until all
such Options shall have vested. The Term of the Options will be 10 years from the date of grant, and will otherwise be granted
in accordance with the terms of the Plan and the Company’s standard stock option agreement.


 


		5.	EXPENSE REIMBURSEMENT AND PERQUISITES



 


a.         During the Term of this Agreement, Erdman
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. Any such reimbursement
will be made to Erdman as soon as administratively feasible following submission of such documentation of such expense, but shall
be made no later than the calendar year following the calendar year in which such expense is incurred by Erdman. In the event that
any such reimbursement is taxable to Erdman, such reimbursement shall be made as soon practical upon Erdman’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.






    	2



    	 



    
 


 


b.         During the Employment Term, Erdman shall
be entitled to participate in all health insurance, 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 permitted by law.


 


		6.	NON-COMPETITION; NON-SOLICITATION



 


a.          In consideration of the offer of employment,
severance benefits and Options to be granted to Erdman hereunder, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, during the Non-Competition Term, Erdman 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; (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 Erdman 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 any person, corporation, partnership, firm or other entity which sells or has plans to sell ten (10) or more brands of luxury
or high-end designer apparel and/or fashion accessories at prices that are consistently discounted to manufacturer’s suggested
retail prices. However, nothing in this Agreement shall preclude Erdman 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 three percent (3%) of the publicly-traded equity securities of such Competitive Business. For purposes of this agreement,
the “Non-Competition Term” shall mean a period beginning upon the commencement of the Employment Term and ending on
the one (1) year anniversary of the end of the Employment Term.


 


b.          Erdman 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. Erdman agrees that any breach
of the covenants contained in this paragraph 6 would irreparably injure the Company. Accordingly, Erdman agrees that the Company,
in addition to pursuing any other remedies it may have in law or in equity, may obtain an injunction against Erdman from any court
having jurisdiction over the matter, restraining any further violation of this paragraph 6.






    	3



    	 



    
 


 


		7.	TERMINATION



 


a.         This Agreement, the employment of Erdman,
and Erdman’s position as Senior Vice President of Merchandising 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 twenty-four month period (vacation time excluded),
during which time Erdman is unable perform his 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 Erdman
without his consent from his position as Senior Vice President of Merchandising of the Company, or (B) the material breach by
the Company of this Agreement; provided that no such breach shall be considered a Constructive Termination unless (1) Erdman
gives the Company written notice within ninety (90) days after an event or occurrence that he believes constitutes a Constructive
Termination, specifying the event or occurrence that he believes constitutes a Constructive Termination and (2) the Company has
failed to cure such breach within such ninety (90) day period;



 


		(iv)	the termination of this Agreement at any time without
cause by the Company;



 


		(v)	the termination of this Agreement for cause, which, for
purposes of this Agreement, shall mean that (1) Erdman 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,
or (2) Erdman has willfully and materially failed to perform his duties hereunder, provided that the Company shall provide Erdman
with at least ten (10) business days’ prior written notice of any such failure to perform and an opportunity to cure such
failure, to the extent curable or (3) Erdman has willfully or negligently breached the terms and provisions of this Agreement
in any material respect, provided that the Company shall provide Erdman with at least ten (10) business days’ prior written
notice of any such breach and an opportunity to cure such breach, to the extent curable or (4) Erdman has failed to comply in
any material respect with the Company's policies of conduct that have been communicated to her, including with respect to



 


 



    	4



    	 



    



 


	 	 	trading
in securities, provided that the Company shall provide Erdman with at least ten (10) business days’ prior written notice
of any such failure to comply and an opportunity to cure such failure, to the extent curable; or 
	 	 	 
		(vi)	the termination of this Agreement by Erdman, which shall occur on not less than thirty (30) days prior written notice from
Erdman.



 


b.          In the event that this Agreement is
terminated during the first year of the Employment Term for any reason, or is terminated after the first year of the Employment
Term pursuant to paragraphs 7(a)(i), 7(a)(ii), 7(a)(v) or 7(a)(vi), the Company shall pay Erdman his base salary only through the
date of termination. In the event that this Agreement is terminated after the first year of the Employment Term but during the
remainder of the Employment Term pursuant to paragraphs 7(a)(iii) or 7(a)(iv), the Company shall pay Erdman, in lieu of all salary,
compensation payments and perquisites set forth in paragraphs 3, 4 and 5 (including bonus payments and unvested option grants,
but excluding vested option grants) and contingent upon his continued performance of his obligations under Section 6, severance
payments (the "Severance Payments") equal to the then-current base salary for a period of twelve (12) weeks. The Severance
Payments shall be payable in periodic installments in accordance with the Company's standard payroll practices and will be subject
to any applicable withholding, and shall be conditioned upon Erdman executing a full release of any claims against the Company,
in a form reasonably satisfactory to the Company, which becomes effective within 60 days of such termination. The Severance Payments
will commence when such release becomes effective; notwithstanding the foregoing, if such 60 day period begins in one calendar
year and ends in a subsequent calendar year, the Severance Payments will not commence until the second calendar year.


 


c.         Notwithstanding anything herein to the
contrary, if any payments due under this Agreement (including, but not limited to any payments related to the Options) would subject
Erdman 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 Erdman’s "separation from service" as set forth in Code Section 409A(2)(A)(i) and the official guidance
issued thereunder.


 


		8.	CONFIDENTIALITY



 


a.         Erdman 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, Erdman covenants and agrees


 






    	5



    	 



    
 


 


with the Company
that he will not 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 Erdman 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
(such expenses to be advanced by the Company as reasonably required by Erdman), shall (i) take all necessary and lawful steps reasonably
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, trade secrets and other intellectual property, designs, manuals, confidential reports, supplier names and pricing,
customer names and prices paid, financial information or business plans.


 


Notwithstanding the preceding paragraph,
“confidential information” shall not include any information which


 


		(i)	was publicly known and made generally available in the public domain prior to the time of disclosure by the Company to Erdman;



 


		(ii)	becomes publicly known and made generally available after disclosure by the Company to Erdman through no action of Erdman;
or



 


		(iii)	was known to Erdman prior to its disclosure by the Company or is obtained by Erdman from a third party without a breach of
such third party’s obligations of confidentiality.



 


b.         Erdman 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 Erdman
relating to the business of the Company shall be and will remain the sole and exclusive property of the Company and all such materials
containing confidential information shall be promptly delivered and returned to the Company immediately upon the termination of
his employment with the Company.


 


c.         Erdman 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


 






    	6



    	 



    
 


 


created, made, conceived or reduced to practice by Erdman
while performing his services hereunder to the Company, whether or not during normal working hours or on the premises of the Company
and which relate in any manner to the business of the Company (all of which are collectively referred to in this Agreement as "Developments").
All Developments shall be the sole property of the Company, and Erdman 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 trade names in the United States and elsewhere.


 


d.         At the Company’s expense, Erdman
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 and at its expense, Erdman 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.         Erdman agrees that any breach of this
paragraph 8 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. Erdman understands and agrees that the
rights and obligations set forth in paragraph 8 shall survive the termination or expiration of this Agreement.


 


		9.	REPRESENTATIONS AND WARRANTIES



 


a.         Erdman represents and warrants to the
Company that he was advised to consult with an attorney of Erdman's own choosing concerning this Agreement.


 


b.         Erdman represents and warrants to the
Company that, the execution, delivery and performance of this Agreement by Erdman complies with all laws applicable to Erdman 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, including (without limitation) any non-competition or similar agreement to which Erdman is bound. Erdman hereby agrees
to indemnify and hold the Company harmless from any loss, claim or damages (including, without limitation, attorneys’ fees)
incurred as a result of any actual or alleged breach of any of the foregoing representations and warranties.


 


		10.	GOVERNING LAW



 


This Agreement shall be deemed a contract
made under, and for all purposes shall be construed in accordance with, the internal laws of the State of New York, without giving
effect to its conflict of law provisions. Any dispute arising hereunder shall be subject to the exclusive jurisdiction of the federal
and State courts located in New York, New York, and each of the


 






    	7



    	 



    
 


 


parties hereto hereby irrevocably submits to such jurisdiction
and waives any objection to such venue.


 


		11.	ENTIRE AGREEMENT



 


This Agreement contains all of the understandings
between Erdman and the Company pertaining to Erdman’s employment with the Company, and it supersedes all undertakings and
agreements, whether oral or in writing, previously entered into between them.


 


		11.	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 Erdman 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.


 


		12.	NOTICES



 


Any notice to be given hereunder shall be
in writing and delivered personally or sent by overnight delivery or 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:


 


If to the Company, to:


 


Bluefly, Inc.


42 West 39th Street


New York, NY 10018


Attn: Chief Executive Officer


 


 


If to Erdman, to:


 


at the address then on file in the Company’s
payroll system


 


Any such notice shall be deemed given upon receipt.


 


		13.	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






    	8



    	 



    
 


 


Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.


 


		14.	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 paragraphs.


 


		15.	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.


 


 


 






    	9



    	 



    
 


 


IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the date first above written.


 


	 	BLUEFLY, INC.	 
	 	 	 	 
	 	By:	/ s/ Kara B. Jenny	 
	 	 	Kara B. Jenny	 
	 	 	Chief Financial Officer	 
	 	 	 	 
	 	 	 	 
	 	EMPLOYEE	 
	 	 	 	 
	 	/ s/ Scott Erdman	 
	 	Scott Erdman	 


 


 


 









 


 








    	10