EXHIBIT 10.38
INCENTIVE STOCK OPTION AGREEMENT
ALLOY, INC.
      AGREEMENT made as of «GRANTDATE» between Alloy, Inc. (the “Company”), a
Delaware corporation, and «FIRSTNAME» «LASTNAME», an employee of the Company or
one of its Affiliates (the “Employee”).
      WHEREAS, the Company desires to grant to the Employee an Option to
purchase shares of its common stock, par value $.01 per share (the “Shares”),
under and for the purposes set forth in the iTurf Inc. Amended and Restated 1999
Stock Incentive Plan, as amended (the “Plan”); and
      WHEREAS, the Company and the Employee understand and agree that any terms
used and not defined herein have the same meanings as in the Plan; and
      WHEREAS, the Company and the Employee each intend that the Option granted
herein qualify as an ISO.
      NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:
      1. GRANT OF OPTION. The Company hereby grants to the Employee the right
and option to purchase all or any part of an aggregate of «SHARESWRITTEN»
(«SHARESNUM») Shares, on the terms and conditions and subject to all the
limitations set forth herein and in the Plan, which is incorporated herein by
reference. The Employee acknowledges receipt of a copy of the Plan.
      2. PURCHASE PRICE. The purchase price of the Shares covered by this Option
shall be $«PRICE» per Share, subject to adjustment, as provided in the Plan, in
the event of a stock split, reverse stock split or other events affecting the
holders of Shares. Payment shall be made in accordance with Paragraph 6.3(d) of
the Plan.
      3. EXERCISABILITY OF OPTION. Subject to the terms and conditions set forth
in this Agreement and the Plan, the Option granted hereby shall become
exercisable as follows:

          On or after the first anniversary of
the date of this Agreement       up to «VEST1WRIT»
(«VEST1NUM») Shares On or after the second anniversary of
the date of this Agreement       up to an additional «VEST2WRIT» («VEST2NUM»)
Shares On or after the third anniversary of
the date of this Agreement       up to an additional «VEST3WRIT» («VEST3NUM»)
Shares On or after the fourth anniversary of
the date of this Agreement       up to an additional «VEST4WRIT» («VEST4NUM»)
Shares

      The foregoing rights are cumulative and are subject to the other terms and
conditions of this Agreement and the Plan.
      4. TERM OF OPTION. This Option shall terminate ten (10) years from the
date of this Agreement or, if the Employee owns as of the date hereof more than
ten percent (10%) of the total combined voting power of all classes of capital
stock of the Company or an Affiliate, five (5) years from the date of this
Agreement, but shall be subject to earlier termination as provided herein or in
the Plan.
      If the Employee ceases to be an employee of the Company or of an Affiliate
(for any reason other than the death or Disability of the Employee or
termination of the Employee’s employment for “cause” (as defined in the Plan)),
this Option may be exercised, if it has not previously terminated, within three
(3) months after the date the Employee ceases to be an employee of the Company
or an Affiliate, or within the originally

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prescribed term of this Option, whichever is earlier, but may not be exercised
thereafter. In such event, this Option shall be exercisable only to the extent
that this Option has become exercisable and is in effect at the date of such
cessation of employment.
      Notwithstanding the foregoing, in the event of the Employee’s Disability
or death within three (3) months after the termination of employment, the
Employee or the Employee’s Survivors may exercise this Option within one
(1) year after the date of the Employee’s termination of employment, but in no
event after the date of expiration of the term of this Option.
      If the Employee’s employment is terminated by the Employee’s employer for
“cause” (as defined in the Plan), the Employee’s right to exercise any
unexercised portion of this Option shall cease as of such termination, and this
Option shall thereupon terminate. Notwithstanding anything herein to the
contrary, if subsequent to the Employee’s termination as an employee, but prior
to the exercise of this Option, the Board of Directors of the Company determines
that, either prior or subsequent to the Employee’s termination, the Employee
engaged in conduct which would constitute “cause,” then the Employee shall
immediately cease to have any right to exercise this Option and this Option
shall thereupon terminate.
      In the event of the Disability of the Employee, as determined in
accordance with the Plan, this Option shall be exercisable within one (1) year
after the Employee’s termination of employment or, if earlier, within the term
originally prescribed by this Option. In such event, this Option shall be
exercisable:

        (a) To the extent exercisable but not exercised as of the date of
Disability; and           (b) If rights to exercise this Option accrue
periodically, to the extent of a pro rata portion of any additional rights to
exercise this Option as would have accrued had the Employee not become Disabled
prior to the end of the accrual period which next ends following the date of
Disability. The proration shall be based upon the number of days during the
accrual period prior to the date of Disability.

      In the event of the death of the Employee while an employee of the Company
or of an Affiliate, this Option shall be exercisable by the Employee’s Survivors
within one (1) year after the date of death of the Employee or, if earlier,
within the originally prescribed term of this Option. In such event, this Option
shall be exercisable:

        (x) To the extent exercisable but not exercised as of the date of death;
and           (y) If rights to exercise this Option accrue periodically, to the
extent of a pro rata portion of any additional rights to exercise this Option as
would have accrued had the Employee not died prior to the end of the accrual
period which next ends following the date of death. The proration shall be based
upon the number of days during the accrual period prior to the Employee’s death.

      5. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of
this Agreement, this Option may be exercised by written notice to the Company at
its principal executive office, in substantially the form of Exhibit A attached
hereto. Such notice shall state the number of Shares with respect to which this
Option is being exercised and shall be signed by the person exercising this
Option. Payment of the purchase price for such Shares shall be made in
accordance with Paragraph 6.3(d) of the Plan. The Company shall deliver a
certificate or certificates representing such Shares as soon as practicable
after the notice shall be received, provided, however, that the Company may
delay issuance of such Shares until completion of any action or obtaining of any
consent, which the Company deems necessary under any applicable law (including,
without limitation, state securities or “blue sky” laws). The certificate or
certificates for the Shares as to which this Option shall have been so exercised
shall be registered in the name of the person or persons so exercising this
Option (or, if this Option shall be exercised by the Employee and if the
Employee shall so request in the notice exercising this Option, shall be
registered in the name of the Employee and another person jointly, with right of
survivorship) and shall be delivered as provided above to or upon the written
order of the person or persons exercising this Option. If this Option shall be
exercised, pursuant to Section 4 hereof, by any person or persons other than the
Employee, such notice shall be accompanied by appropriate proof of the right of
such person or persons to exercise this Option. All Shares that shall be
purchased upon the exercise of this Option as provided herein shall be fully
paid and nonassessable.

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      6. PARTIAL EXERCISE. Exercise of this Option to the extent above stated
may be made in part at any time and from time to time within the above limits,
except that no fractional share shall be issued pursuant to this Option.
      7. NON-ASSIGNABILITY. This Option shall not be transferable by the
Employee otherwise than by will or by the laws of descent and distribution. This
Option shall be exercisable, during the Employee’s lifetime, only by the
Employee (or, in the event of legal incapacity or incompetency, by the
Employee’s guardian or representative) and shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process. Any attempted transfer,
assignment, pledge, hypothecation or other disposition of this Option or of any
rights granted hereunder contrary to the provisions of this Section 7, or the
levy of any attachment or similar process upon this Option shall be null and
void.
      8. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. The Employee shall have no
rights as a stockholder with respect to Shares subject to this Agreement until
registration of the Shares in the Company’s share register in the name of the
Employee. Except as is expressly provided in the Plan with respect to certain
changes in the capitalization of the Company, no adjustment shall be made for
dividends or similar rights for which the record date is prior to the date of
such registration.
      9. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. The Plan contains provisions
covering the treatment of Options in a number of contingencies such as stock
splits and mergers. Provisions in the Plan for adjustment with respect to stock
subject to Options and the related provisions with respect to successors to the
business of the Company are hereby made applicable hereunder and are
incorporated herein by reference.
      10. TAXES. The Employee acknowledges that any income or other taxes due
from him or her with respect to this Option or the Shares issuable pursuant to
this Option shall be the Employee’s responsibility. In the event of a
Disqualifying Disposition (as defined in Section 15 below) or if this Option is
converted into a Non-Qualified Option and such Non-Qualified Option is
exercised, the Company may withhold from the Employee’s remuneration, if any,
the appropriate amount of federal, state and local withholding taxes
attributable to such amount that is considered compensation includable in such
person’s gross income. At the Company’s discretion, the amount required to be
withheld may be withheld in cash from such remuneration, or in kind from the
Shares otherwise deliverable to the Employee on exercise of this Option. The
Employee further agrees that, if the Company does not withhold an amount from
the Employee’s remuneration sufficient to satisfy the Company’s income tax
withholding obligation, the Employee will reimburse the Company on demand, in
cash, for the amount under-withheld.
      11. PURCHASE FOR INVESTMENT. Unless the offering and sale of the Shares to
be issued upon the particular exercise of this Option shall have been
effectively registered under the Securities Act of 1933, as now in force or
hereafter amended (the “1933 Act”), the Company shall be under no obligation to
issue the Shares covered by such exercise unless and until the following
conditions have been fulfilled:

        (a) The person(s) who exercise this Option shall warrant to the Company,
at the time of such exercise, that such person(s) are acquiring such Shares for
their own respective accounts, for investment, and not with a view to, or for
sale in connection with, the distribution of any such Shares, in which event the
person(s) acquiring such Shares shall be bound by the provisions of the
following legend which shall be endorsed upon the certificate(s) evidencing the
Shares issued pursuant to such exercise:

  “The shares represented by this certificate have been taken for investment and
they may not be sold or otherwise transferred by any person, including a
pledgee, unless (1) either (a) a Registration Statement with respect to such
shares shall be effective under the Securities Act of 1933, as amended, or
(b) the Company shall have received an opinion of counsel satisfactory to it
that an exemption from registration under such Act is then available, and
(2) there shall have been compliance with all applicable state securities
laws;” and

        (b) If the Company so requires, the Company shall have received an
opinion of its counsel that the Shares may be issued upon such particular
exercise in compliance with the 1933 Act without registration thereunder.
Without limiting the generality of the foregoing, the Company may delay issuance
of the

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  Shares until completion of any action or obtaining of any consent, which the
Company deems necessary under any applicable law (including without limitation
state securities or “blue sky” laws).

      12. RESTRICTIONS ON TRANSFER OF SHARES. If, in connection with a
registration statement filed by the Company pursuant to the Securities Act, the
Company or its underwriter so requests, the Employee will agree not to sell any
Shares for a period not to exceed 180 days following the effectiveness of such
registration.
      13. NO OBLIGATION TO EMPLOY. Neither the Company nor any of its Affiliates
are obligated by the Plan or this Option to continue the Employee as an employee
of the Company or any of its Affiliates.
      14. OPTION IS INTENDED TO BE AN ISO. The parties each intend that this
Option be an ISO so that the Employee (or the Employee’s Survivors) may qualify
for the favorable tax treatment provided to holders of Options that meet the
standards of Section 422 of the Code. Any provision of this Agreement or the
Plan which conflicts with the Code so that this Option would not be deemed an
ISO is null and void and any ambiguities shall be resolved so that this Option
qualifies as an ISO. Nonetheless, if this Option is determined not to be an ISO,
the Employee understands that neither the Company nor any Affiliate is
responsible to compensate him or her or otherwise make up for the treatment of
this Option as a Non-qualified Option and not as an ISO. The Employee should
consult with the Employee’s own tax advisors regarding the tax effects of this
Option and the requirements necessary to obtain favorable tax treatment under
Section 422 of the Code, including, but not limited to, holding period
requirements.
      15. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. The Employee agrees to
notify the Company in writing immediately after the Employee makes a
Disqualifying Disposition of any of the Shares acquired pursuant to the exercise
of this Option. A Disqualifying Disposition is defined in Section 424(c) of the
Code and includes any disposition (including any sale) of such Shares before the
later of (a) two years after the date the Employee was granted this Option or
(b) one year after the date the Employee acquired Shares by exercising this
Option, except as otherwise provided in Section 424(c) of the Code. If the
Employee has died before the Shares are sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
      16. NOTICES. Any notices required or permitted by the terms of this
Agreement or the Plan shall be given by hand delivery or by recognized courier
service, facsimile, registered or certified mail, return receipt requested,
addressed as follows:
      If to the Company to: The Company at its principal business office
      If to the Employee to: The Employee at the address set forth below
or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice shall be deemed to have been given upon
the earlier of receipt, one business day following delivery to a recognized
courier service or three business days following mailing by registered or
certified mail.
      17. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the law of the State of Delaware, without giving effect to the
conflict of law principles thereof.
      18. BENEFIT OF AGREEMENT. Subject to the provisions of the Plan and the
other provisions hereof, this Agreement shall be for the benefit of and shall be
binding upon the heirs, executors, administrators, successors and assigns of the
parties hereto.
      19. ENTIRE AGREEMENT. This Agreement, together with the Plan, embodies the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior oral or written agreements
and understandings relating to the subject matter hereof. No statement,
representation, warranty, covenant or agreement not expressly set forth in this
Agreement shall affect or be used to interpret, change or restrict, the express
terms and provisions of this Agreement, provided, however, in any event, this
Agreement shall be subject to and governed by the Plan.
      20. MODIFICATIONS AND AMENDMENTS. The terms and provisions of this
Agreement may be modified or amended as provided in the Plan.

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      21. WAIVERS AND CONSENTS. Except as provided in the Plan, the terms and
provisions of this Agreement may be waived, or consent for the departure
therefrom granted, only by written document executed by the party entitled to
the benefits of such terms or provisions. No such waiver or consent shall be
deemed to be or shall constitute a waiver or consent with respect to any other
terms or provisions of this Agreement, whether or not similar. Each such waiver
or consent shall be effective only in the specific instance and for the purpose
for which it was given, and shall not constitute a continuing waiver or consent.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

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      IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer, and the Employee has hereunto set his or her
hand, all as of the day and year first above written.

  ALLOY, INC.

  By: 

 
 
  Name: 

  Title:

  EMPLOYEE    
 
  Signature     Name:   «FIRSTNAME» «LASTNAME»

  Address: c/o Alloy, Inc.
151 West 26th Street
11th Floor
New York, New York 10001

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Exhibit A
NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
[Form For Registered Shares]
TO: ALLOY, INC.
IMPORTANT NOTICE: This form of Notice of Exercise may only be used at such time
as the Company has filed a Registration Statement with the Securities and
Exchange Commission under which the issuance of the Shares for which this
exercise is being made is registered and such Registration Statement remains
effective.
Ladies and Gentlemen:
      I hereby exercise my Incentive Stock Option to purchase
                     shares (the “Shares”) of the common stock, par value
$.01 per share, of Alloy, Inc. (the “Company”), at the exercise price of
$«PRICE » per share, pursuant to and subject to the terms of that certain
Incentive Stock Option Agreement between the undersigned and the Company dated
as of «GRANTDATE». I understand the nature of the investment I am making and the
financial risks thereof. I am aware that it is my responsibility to have
consulted with competent tax and legal advisors about the relevant national,
state and local income tax and securities laws affecting the exercise of this
Option and the purchase and subsequent sale of the Shares.
      I am paying the option exercise price for the Shares as follows:
      Please issue the stock certificate for the Shares (check one):
[          ] to me; or [          ] to me and
                                                               , as joint
tenants with right of survivorship and mail the certificate to me at the
following address:
                                                                                .
      My mailing address for shareholder communications, if different from the
address listed above,
is:                                                                                                                                                                                    

  Very truly yours,    
 
  «FIRSTNAME» «LASTNAME» (signature)    
 
  Date     «SSNO»   Social Security Number

A-1