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Employment Letter - Alloy Inc. and Robert Bernard

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  • Sales Representative Contract. Independent sales representatives offer companies the potential to increase the sale of products or services without the burden of increasing headcount. Both parties should understand how commissions are calculated, when commissions will be paid, as well as how the representative will treat confidential information from the company and whether the representative may also sell a competing line of products or services.
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                                   Alloy, Inc.
                                Employment Letter

October 27, 2003

Robert Bernard

Dear Robert,

On behalf of Alloy, Inc. (the "Company"),  I am very pleased to provide you with
the employment  letter (the "Letter") setting forth terms and conditions of your
employment  by  Company.  The  following  sets  forth  the  proposed  terms  and
conditions of the Company's offer to employ you. We hope that you choose to join
the Company and look forward to a mutually beneficial relationship.

1. Position: Your initial position will be Chief Executive Officer of Retail and
Direct Consumer  division based out of the Company's office located in New York,
NY. You will report to the Chief Operating  Officer and Chief Executive  Officer
of the Company.  As the  Company's  employee,  we expect you to devote your full
time and energies to the business and affairs of the Company, and to perform any
and all duties and responsibilities  associated with this position and as may be
reasonably  assigned  to  you  by  the  Company;   provided,   however,  Company
acknowledges  and  consents to you serving as a director  of  Newgistics  on the
condition  that such  directorship  does not present a conflict of interest with
the Company or its any of its  subsidiaries  or affiliates or conflict with your
duties of Chief  Executive  Officer of Retail and Direct  Consumer  Division and
does not  require  more than 10 hours of your time  during any given  month.  In
addition to your primary  duties,  you shall perform such other services for the
Company as may be  reasonably  assigned to you from time to time by the Company.
Your  performance  will be  reviewed  on a periodic  basis as long as you remain
employed by the Company. You acknowledge that you will be named as an "Executive
Officer" in the filings made by the Company  pursuant to the  provisions  of the
Securities  Exchange Act of 1934, as amended (the "Exchange  Act"),  and as such
you  will be  subject  to  various  requirements  and  restrictions  imposed  on
executive  officers by the  Exchange  Act and Company  policies,  including  the
reporting  requirements of Section 16(a) of the Exchange Act, the  "short-swing"
profit rules of Section 16(b) of the Exchange Act and the policies about trading
in  Company  securities  set forth in the  "Securities  Trades  By  Alloy,  Inc.
Personnel" policy statement.



<PAGE>

2.  Starting  Date/Nature  of  Relationship:  If you  accept  this  offer,  your
employment  with the Company  shall  commence  on October 27, 2003  ("Employment
Commencement Date").

3.  Compensation  and  Benefits:  Your initial base salary shall be $600,000 per
annum  ($23,076.92 on a bi-weekly  basis) (the "Base Salary"),  plus, for fiscal
year ending January 31, 2005 a potential  bonus up to 60% of the Base Salary for
financial  targets achieved and an additional bonus up to 20% of the Base Salary
at the discretion of the Company's Board of Directors.  In addition,  during the
first year of your employment with the Company, the Company agrees to pay to you
an additional  $350.00 per diem for each day you are required to stay  overnight
in the New York City area.

         In  addition,  you shall be  entitled  to receive  options to  purchase
200,000  shares  of the  Company's  Common  Stock,  par value  $0.01 per  share,
pursuant  to one of Alloy's  stock plans (the  "Initial  Option  Grants").  Such
options shall be  exercisable at a purchase price per share equal to the closing
price of Alloy's  Common Stock on the NASDAQ market on the business day prior to
Employment  Commencement  Date.  The options  shall have the  following  vesting
schedule:  50,000  options  shall  vest  on  the  one  year  anniversary  of the
Employment  Commencement Date and 25,000 options shall vest on each of April 27,
2005,  October 27, 2005,  April 27, 2006,  October 27, 2006,  April 27, 2007 and
October 27, 2007.  The options shall have terms of ten (10) years and be subject
to the terms and conditions  set forth in the Company's  form option  agreement.
The Initial  Option grants shall vest in the event that the Company sells all or
substantially all of its merchandise business upon such sale.

         In  addition to your Base  Salary,  you will be entitled to receive the
various benefits  offered by the Company to its employees.  Benefits offered may
be modified or changed from time to time at the discretion of the Company. Where
a particular benefit is subject to a formal plan,  eligibility to participate in
and  receive  any  particular  benefit  of the plan is  governed  solely  by the
applicable  plan document.  Should you ever have any  questions,  you should ask
Beth Stankard,  Alloy's VP, Human  Resources,  for a copy of the applicable plan
document.

4.  Confidentiality:  The Company  considers the protection of its  confidential
information,  proprietary  materials  and  goodwill to be  extremely  important.
Consequently,  as a condition of this offer of  employment  and your  subsequent
employment,  you are required to sign the  Non-Competition  and  Confidentiality
Agreement (the "Agreement") enclosed with this letter.

5. Expenses: The Company agrees to reimburse you for all reasonable business and
travel expenses  incurred by you in accordance  with its business  reimbursement
policy as stated in the Company Employee  Handbook.  For the avoidance of doubt,
during the first year of your  employment,  the Company  agrees to reimburse you
for any reasonable  travel  expenses  incurred as a result of traveling  between
your Ohio  residence  and the New York  office  or other  business  location  as
necessary.  In addition, the Company agrees to reimburse you the amount expended
by you for medical insurance coverage  beginning on the Employment  Commencement
Date until such time as you are covered  under the Company's  medical  insurance
plan.


<PAGE>

6. Life  Insurance  Policy:  The Company agrees to pay an annual premium no more
than $20,000 for a term life  insurance  policy for the benefit of a beneficiary
to be designated by you.

7. Vacation: You shall be entitled four (4) weeks paid vacation per year.

8.  Termination  of  Employment:  (a) In the event the Company  terminates  your
employment  without  "Cause"  (as  hereinafter  defined) on or before the second
anniversary of the Employment  Commencement Date (the "Anniversary  Date"),  the
Company  shall pay to you the amount of salary  payable to you under this Letter
through the Anniversary  Date.  "Cause" shall mean (a) the commission of any act
of fraud, embezzlement or dishonesty by you; (b) any material act or omission by
you  adversely  affecting the business  and/or  affairs of Company or any of its
subsidiaries  or affiliates or which is detrimental  to the business  and/or the
reputation of the Company or any of its affiliates or subsidiaries except as the
result of your  exercise  of your  business  judgment  based upon the facts made
available to you at the time you exercised  such  judgment;  (c) your failure to
perform your employment  duties, as the same may be changed from time to time in
accordance  with the  provisions  set forth  herein and failure by you to remedy
such failure within ten (10) days following  written notice from Company to you;
(d) a  material  breach of any term or  provision  by you of this  Letter or any
other  agreement  entered  into by Company  and you which  failure  you have not
remedied within ten (10) days following  written notice from Company to you; (e)
failure to meet the reasonable performance levels and other criteria established
by the Company's  Board of Directors from time to time as  communicated  to you;
and (f) upon your death or "Disability" (as hereinafter  defined).  "Disability"
shall mean your inability to perform the services contemplated due to a physical
or  mental  disability,  for a  period  of  sixty  (60)  days,  whether  or  not
consecutive, during any 360-day period.

         (b) If you  resign  or the  Company  terminates  your  employment,  the
Company  may at its option  elect to pay to you an optional  payment  ("Optional
Payment") as follows:

         (i)      an amount  equal to the Base  Salary , in which case you,  you
                  hereby acknowledge and agree that the "Noncompete  Period" set
                  forth in Section 2.3 of the Agreement shall be extended for an
                  additional one year period; or

         (ii)     an amount equal to one-half the Base Salary, in which case you
                  acknowledge and agree that the  "Noncompete  Period" set forth
                  in  Section  2.3 of the  Agreement  shall be  extended  for an
                  additional six (6) months.


<PAGE>

         9. Potential Spin Off. You  acknowledge and understand that the Company
is considering a "spin off" of the Company's various  merchandising units into a
new publicly  traded company  ("SpinCo").  In connection with such spin off, all
Initial  Option Grants shall be deemed vested as of the date when public trading
of SpinCo's  common stock  commences (the "Spin Off Completion  Date").  You and
Company,  on  behalf  of  SpinCo,  further  agree  to enter  into an  employment
arrangement for a period of two years commencing on the Spin Off Completion Date
which  arrangement  shall be on substantially  similar terms as those herein set
forth except that any options  granted to you shall be on terms set forth in the
following paragraph.

         In  addition,  to the  extent not  against  the  recommendation  of the
Company's  professional  advisors  after taking into  consideration  the size of
SpinCo, Company will, or will cause SpinCo to, create a pool of options equal to
no more than 10% of the fully diluted shares of SpinCo  ("Management  Options"),
with 50% of the  Management  Options  to be  issued  to you  with  12.5% of such
options  vesting on each six month  anniversary of the Spin Off Completion  Date
and exercisable  during the ten (10) year period  beginning on the date of issue
at a purchase  price per share equal to the closing price of SpinCo common stock
on the Spin Off  Completion  Date.  The  remaining  Management  Options shall be
reserved  for  issuance  to senior  management  members of SpinCo on terms to be
determined by SpinCo's board of directors. In the event that SpinCo cannot issue
to you the  number  of  options  contemplated  above,  Company  and you agree to
negotiate  in good faith to provide  you with  substantially  the same  economic
benefit.

10. The Company may assign its rights and obligations hereunder to any person or
entity that succeeds to all or  substantially  all of the Company's  business or
that aspect of the Company's business in which you are principally involved. You
may not assign any of your rights and obligations  under this Letter without the
prior written consent of the Company.

11.  Miscellaneous:  This letter,  together with the Agreement,  constitutes our
entire  offer  regarding  the terms and  conditions  of your  employment  by the
Company.  It supersedes  any prior  agreements,  or other promises or statements
(whether oral or written)  regarding the offered terms of employment.  The terms
of your  employment  shall be  governed  by the law of the  State  of New  York,
without  giving effect to its principles of conflicts of laws. By accepting this
offer of  employment,  you  expressly  agree that any action,  demand,  claim or
counterclaim  concerning  any aspect of your  employment  relationship  with the
Company shall be resolved by a judge alone,  and you waive and forever  renounce
your right to a trial before a civil jury.

         You may accept this offer of  employment  and the terms and  conditions
hereof by signing the enclosed additional copy of this letter and the Agreement,
which  execution  will evidence your agreement with the terms and conditions set
forth herein and therein.

         I am delighted to offer you the opportunity to join our Company, and we
look forward to your joining us.



<PAGE>

ALLOY, INC.


By: /s/  Beth Stankard
    -----------------------------------------------
    Beth Stankard - Vice President, Human Resources


Accepted and Agreed:


By: /s/ Robert Bernard
    ------------------------------------------------
    Print Name: Robert Bernard

Date: October 27, 2003
      ----------------------------------------------