Exhibit 10.5

ALLOY, INC.

EXECUTIVE INCENTIVE BONUS PLAN

 

1. PURPOSE

The purpose of this Alloy, Inc. Executive Incentive Bonus Plan (the “Plan”) is
to provide a means through which the Company (as defined, to include selected
subsidiaries and affiliates) may provide incentives to attract key executives to
enter and remain in the employ of the Company and to provide a means whereby
these individuals can contribute to the growth, profitability and increased
shareholder value of the Company. The Plan is intended to be a Code
Section 162(m) plan that, upon approval by the shareholders of the Company,
permits the Company to pay performance compensation to Covered Employees and
maintain its deduction for compensation expenses, in accordance with
Section 162(m)(4)(C) and the regulations issued thereunder.

 

2. DEFINITIONS

 

  (a) Bonus – Cash and the performance incentive awards granted to an Executive
pursuant to the terms and conditions of the Plan.

 

  (b) Board - The Board of Directors of Alloy, Inc.

 

  (c) Code - The Internal Revenue Code of 1986, as amended.

 

  (d) Committee - The Compensation Committee of the Board, or such other
committee or sub-committee of the Board or Compensation Committee that is
designated by the Board to administer the Plan, in compliance with requirements
of Section 162(m) of the Code.

 

  (e) Company – Alloy, Inc. and any subsidiary of the Company that Committee
designates as a participating Company in this Plan.

 

  (f) Covered Employee – A “covered employee” is an employee of the Company who
as of the close of the tax year, (i) is the principal executive officer (“PEO”)
(within the meaning of the compensation disclosure rules promulgated under the
Securities Exchange Act of 1934 (the Act)) of the Company or an individual
acting in that capacity, or (ii) is an employee with respect to whom the Company
is obligated to report annual compensation to its shareholders by reason of the
employee being among the three highest compensated officers for the tax year
(other than the PEO).

 

  (g) Executives – An Executive is an officer of the Company, including Covered
Employees, deemed to be an executive officer by the Committee, in accordance
with the Company’s standard practices and procedures.

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  (h) Extraordinary Items - A sale of a division or subsidiary of the Company, a
merger or consolidation of the Company, a reorganization or dissolution of the
Company or such other Extraordinary Items as determined by the Committee in its
sole discretion.

 

  (i) Performance Period - The period of time, which can be any month, quarter,
semi- annual or annual period of time, established by the Committee for the
establishment of performance goals.

 

3. ELIGIBILITY

 

  (a) Only Executives of the Company are eligible for participation in the Plan.
In order to participate in the Plan, for any Performance Period, an Executive
must be designated for participation in accordance with the Plan and the
selection procedures established by the Committee. If an employee becomes an
Executive mid-way through a Performance Period, then such Executive may be
eligible for participation in the Plan on a pro-rated basis, with a Bonus set
under the Plan equal to the Bonus that would have been set for the entire
Performance Period multiplied by the number of weeks of the Executive’s
participation over the total number of weeks in the Performance Period.

 

  (b) If an employee ceases to be an Executive or an employee of the Company for
any other reason during a Performance Period, no Bonus shall be paid to that
employee for that Performance Period, unless otherwise provided for in an
agreement by and between the Company and that Executive.

 

4. BONUS AWARDS

 

  (a) Awards of bonuses under the Plan shall be based on one or more of the
following performance goals: (i) net income, (ii) earnings per share,
(iii) return on equity, (iv) gross margin, (v) return on assets, (vi) net sales,
(vii) new products, (viii) expansion of facilities, (ix) customer satisfaction,
(x) earnings, (xi) debt management, (xii) free cash flow, or (xiii) objective
personal improvement. Performance goals may be set by the Committee on an
individual, area of responsibility, business segment or Company-wide basis, or
any combination thereof. Without in any way limiting the foregoing, performance
goals for Executives may be typically established to measure performance as
described on the attached Schedule A, incorporated herein Unless otherwise
specifically approved by the Committee, the methods for calculating performance
goals shall exclude Extraordinary Items.

 

  (b)

The Committee shall administer the Plan and shall have full power and authority
to construe, interpret, and administer the Plan necessary to comply with the
requirements of Section 162(m) of the Code. The Committee’s decisions shall be
final, conclusive, and binding upon all

 

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persons. The Committee shall certify in writing prior to commencement of payment
of the Bonus that the performance goal or goals under which the bonus is to be
paid has or have been achieved. The Committee in its sole discretion has the
authority to reduce the amount of a Bonus otherwise allocated to an Executive
upon attainment of the performance goal established for any Performance Period
provided that a reduction in the amount of one Executive’s Bonus does not result
in an increase in the amount of any other Executive’s Bonus.

 

  (c) Promptly after the beginning of a Performance Period, the Committee shall:
(i) determine the performance criteria; (ii) determine the Executives eligible
to participate in the Plan for the applicable Performance Period; and
(iii) determine the method for computing the amount of Bonus payable to each
Executive if the performance goal is achieved.

 

  (d) The maximum Bonus amount that can be paid to any Executive with respect to
any one fiscal year cannot exceed $4,000,000. Bonus awards may be in the form of
cash or equity awards under the Alloy, Inc. 2007 Employee, Director and
Consultant Stock Incentive Plan (or any successor plan), as determined by the
Committee.

 

  (e) Bonus amounts shall be paid or granted within 90 days after the close of
the applicable Performance Period. An Executive must be employed by the Company
on the date on which any Bonus is paid to receive actual payment, except as
specifically provided for in any other agreement by and between Executive and
the Company

 

5. NONASSIGNABILITY

No Bonus or any other benefit under the Plan shall be assignable or transferable
by the participant during the participant’s lifetime except as otherwise
approved by the Committee.

 

6. NO RIGHT TO CONTINUED EMPLOYMENT

Nothing in the Plan shall confer upon any employee any right to continue in the
employ of the Company or shall interfere with or restrict in any way the right
of the Company to discharge an employee at any time for any reason whatsoever,
with or without good cause.

 

7. EFFECTIVE DATE

The effective date of this Plan is December 6, 2007.

 

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Schedule A: Typical Objective Criteria

Financial performance

EBITDA, and year-over-year EBITDA improvement

Free Cash Flow

Operational performance

Achievement of specific operational goals

improved productivity

reduction of costs

increased margins

Individual executive performance

management efficiency

developing and maintaining the skills necessary to work in a high-growth company

recognizing and pursuing new business opportunities

initiating and implementing programs to enhance our growth and successes;

leadership capabilities, such as the ability to motivate others and build a
strong management team;

demonstration of Company values in an effort to promote a culture of excellence
and integrity.

Strategic Company objectives and activities

acquisitions, dispositions or joint ventures and expansion;

 

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