**EXHIBIT 10.40****RESTRICTED STOCK AGREEMENT****ALLOY, INC.**     AGREEMENT made as ofthe                     dayof                     ,20       (the “GrantDate”), between Alloy, Inc. (the “Company”), aDelaware corporation having its principal place of business inNew York, New York,and                     of  (the“Participant”).     WHEREAS, the Company has adopted the Alloy, Inc. [name of plan](the “Plan”) to promote the interests of the Companyby providing an incentive for employees, directors andconsultants of the Company or its Affiliates;     WHEREAS, pursuant to the provisions of the Plan, the Companywishes to offer for sale to the Participant shares of theCompany’s common stock, $.01 par value per share(“Common Stock”), in accordance with the provisions ofthe Plan, all on the terms and conditions hereinafter set forth;     WHEREAS, Participant wishes to accept said offer; and     WHEREAS, the parties hereto understand and agree that any termsused and not defined herein have the meanings ascribed to suchterms in the Plan.     NOW, THEREFORE, in consideration of the premises and the mutualcovenants contained herein and for other good and valuableconsideration, the receipt and sufficiency of which are herebyacknowledged, the parties hereto hereby agree as follows:     1. *Terms of Purchase.*  TheParticipant hereby accepts the offer of the Company to issue tothe Participant, in accordance with the terms of the Plan andthisAgreement,                     Sharesof the Company’s Common Stock (such shares, subject toadjustment pursuant to Section 7 of the Plan andSubsection 2.1(i) hereof, the “Granted Shares”)at a purchase price per share of$          (the“Purchase Price”), [such Purchase Price to be paid,pursuant to the provisions of Section 9 of the Plan, byvirtue of past services rendered to the Company,] receipt ofwhich is hereby acknowledged by the Company.[Alternative — Payment shall be made in accordancewith Section 9 of the Plan.]     2.1. *Company’s Lapsing Repurchase Right.*     (a) *Lapsing Repurchase Right.* Except as setforth in Subsections 2.1(b), 2.1(c) and 2.1(d) hereof, iffor any reason the Participant no longer is an employee,director or consultant of the Company or an Affiliate priorto                     ,20       , the Company (orits designee) shall have the option, but not the obligation, topurchase from the Participant (or the Participant’sSurvivor), and, if the Company exercises such option, theParticipant (or the Participant’s Survivor) shall beobligated to sell to the Company (or its designee), at a priceper Granted Share equal to the Purchase Price, all or any partof the Granted Shares set forth in clauses (i),(ii) and (iii) below (the “Lapsing RepurchaseRight”). The Company’s Lapsing Repurchase Right shallbe valid for a period of one year commencing with the date ofsuch termination of employment or service. Notwithstanding anyother provision hereof, if the Company is prohibited during suchone year period from exercising its Lapsing Repurchase Right bySection 160 of the Delaware General Corporation Law asamended from time to time (or any successor provision), then thetime period during which such Lapsing Repurchase Right may beexercised shall be extended until 30 days after the Companyis first not so prohibited.          (i) If such termination is prior    to                     ,    20       , the Company shall    have the option to repurchase all of the Granted Shares acquired    by the Participant hereunder.           (ii) If such termination is on or    after                     ,    20       , the Company shall    have the option to repurchase all of the Granted Shares    less                     of    the Granted Shares for each full year elapsed after

 
     such date that the Participant continues to serve as an    employee, director or consultant of the Company or an Affiliate.           (iii) Notwithstanding anything to the contrary contained in    this Agreement, if the Company or an Affiliate terminates the    Participant’s employment or service for “cause”    (as defined in the Plan) or if the Administrator determines,    within 90 days after the Participant’s termination,    that either prior or subsequent to the Participant’s    termination the Participant engaged in conduct that would    constitute “cause,” the Company shall have the option    to repurchase all of the Granted Shares acquired by the    Participant hereunder at the Purchase Price.     (b) *Effect of Termination for Disability or uponDeath.* Except as otherwise provided inSubsection 2.1(a)(iii) above, the following rules apply ifthe Participant ceases to be an employee, director or consultantof the Company or an Affiliate by reason of Disability or death:to the extent the Company’s Lapsing Repurchase Right hasnot lapsed as of the date of Disability or death, as case maybe, the Company may exercise such Lapsing Repurchase Right;provided, however, that the Company’s Lapsing RepurchaseRight shall be deemed to have lapsed to the extent of a pro rataportion of the Granted Shares through the date of Disability ordeath, as would have lapsed had the Participant not becomeDisabled or died, as the case may be. The proration shall bebased upon the number of days accrued in such current vestingperiod prior to the Participant’s date of Disability ordeath, as the case may be.     (c) *Effect of Termination Without“Cause”.* Except as otherwise provided inSubsection 2.1(a)(iii) above, the Company’s LapsingRepurchase Right shall terminate, and the Participant’sownership of all Granted Shares then owned by the Participantshall become vested, if the Company or an Affiliate terminatesthe Participant’s employment or service other than for“cause” (as defined in the Plan).     (d) *Effect of Change in Control.* Except asotherwise provided in Subsection 2.1(a)(iii) above, theCompany’s Lapsing Repurchase Right shall terminate, and theParticipant’s ownership of all Granted Shares then owned bythe Participant shall become vested, upon a Change of Control ofthe Company.     *Change of Control* means the occurrence of any ofthe following events:          (i) *Ownership.*  Any “Person” (as    such term is used in Sections 13(d) and 14(d) of the    Securities Exchange Act of 1934, as amended) becomes the    “Beneficial Owner” (as defined in Rule 13d-3    under said Act), directly or indirectly, of securities of the    Company representing 50% or more of the total voting power    represented by the Company’s then outstanding voting    securities (excluding for this purpose the Company or its    Affiliates or any employee benefit plan of the Company) pursuant    to a transaction or a series of related transactions which the    Board of Directors does not approve; or           (ii) *Merger/ Sale of Assets.*  A merger or    consolidation of the Company whether or not approved by the    Board of Directors, other than a merger or consolidation which    would result in the voting securities of the Company outstanding    immediately prior thereto continuing to represent (either by    remaining outstanding or by being converted into voting    securities of the surviving entity or the parent of such    corporation) at least 50% of the total voting power represented    by the voting securities of the Company or such surviving entity    or parent of such corporation outstanding immediately after such    merger or consolidation, or the stockholders of the Company    approve an agreement for the sale or disposition by the Company    of all or substantially all of the Company’s assets; or           (iii) *Change in Board Composition.*  A    change in the composition of the Board of Directors, as a result    of which less than a majority of the directors are Incumbent    Directors. “Incumbent Directors” shall mean directors    who either (A) are directors of the Company as of    April 2, 2004, or (B) are elected, or nominated for    election, to the Board of Directors with the affirmative votes    of at least a majority of the Incumbent Directors at the time of    such election or nomination (but shall not include an individual    whose election or nomination is in connection with an actual or    threatened proxy contest relating to the election of directors    to the Company).     (e) *Closing.* If the Company exercises theLapsing Repurchase Right, the Company shall notify theParticipant, or, in the case of the Participant’s death,his or her Survivor, in writing of its intent to repurchase
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the Granted Shares. Such notice may be mailed by the Company upto and including the last day of the time period provided forabove for exercise of the Lapsing Repurchase Right. The noticeshall specify the place, time and date for payment of therepurchase price (the “Closing”) and the number ofGranted Shares with respect to which the Company is exercisingthe Lapsing Repurchase Right. The Closing shall be not less thanten days nor more than 60 days from the date of mailing ofthe notice, and the Participant or the Participant’sSurvivor with respect to the Granted Shares which the Companyelects to repurchase shall have no further rights as the ownerthereof from and after the date specified in the notice. At theClosing, the repurchase price shall be delivered to theParticipant or the Participant’s Survivor and the GrantedShares being repurchased, duly endorsed for transfer, shall, tothe extent that they are not then in the possession of theCompany, be delivered to the Company by the Participant or theParticipant’s Survivor.     (f) *Escrow.* The certificates representing allGranted Shares acquired by the Participant hereunder which fromtime to time are subject to the Lapsing Repurchase Right shallbe delivered to the Company and the Company shall hold suchGranted Shares in escrow as provided in thisSubsection 2.1(f). Promptly following receipt by theCompany of a written request from the Participant, the Companyshall release from escrow and deliver to the Participant acertificate for the whole number of Granted Shares, if any, asto which the Company’s Lapsing Repurchase Right has lapsed.In the event of a repurchase by the Company of Granted Sharessubject to the Lapsing Repurchase Right, the Company shallrelease from escrow and cancel a certificate for the number ofGranted Shares so repurchased. Any securities distributed inrespect of the Granted Shares held in escrow, including, withoutlimitation, shares issued as a result of stock splits, stockdividends or other recapitalizations, shall also be held inescrow in the same manner as the Granted Shares.     (g) *Prohibition on Transfer.* The Participantrecognizes and agrees that all Granted Shares which are subjectto the Lapsing Repurchase Right may not be sold, transferred,assigned, hypothecated, pledged, encumbered or otherwisedisposed of, whether voluntarily or by operation of law, otherthan to the Company (or its designee). However, the Participant,with the approval of the Administrator, may transfer the GrantedShares for no consideration to or for the benefit of theParticipant’s Immediate Family (including, withoutlimitation, to a trust for the benefit of the Participant’sImmediate Family or to a partnership or limited liabilitycompany for one or more members of the Participant’sImmediate Family), subject to such limits as the Administratormay establish, and the transferee shall remain subject to allthe terms and conditions applicable to this Agreement prior tosuch transfer and each such transferee shall so acknowledge inwriting as a condition precedent to the effectiveness of suchtransfer. The term “Immediate Family” shall mean theParticipant’s spouse, former spouse, parents, children,stepchildren, adoptive relationships, sisters, brothers, niecesand nephews and grandchildren (and, for this purpose, shall alsoinclude the Participant. The Company shall not be required totransfer any Granted Shares on its books which shall have beensold, assigned or otherwise transferred in violation of thisSubsection 2.1(g), or to treat as the owner of such GrantedShares, or to accord the right to vote as such owner or to paydividends to, any person or organization to which any suchGranted Shares shall have been so sold, assigned or otherwisetransferred, in violation of this Subsection 2.1(g).     (h) *Failure to Deliver Granted Shares to beRepurchased.* If the Granted Shares to be repurchased bythe Company under this Agreement are not in the Company’spossession pursuant to Subsection 2.1(f) above or otherwiseand the Participant or the Participant’s Survivor fails todeliver such Granted Shares to the Company (or its designee),the Company may elect (i) to establish a segregated accountin the amount of the repurchase price, such account to be turnedover to the Participant or the Participant’s Survivor upondelivery of such Granted Shares, and (ii) immediately totake such action as is appropriate to transfer record title ofsuch Granted Shares from the Participant to the Company (or itsdesignee) and to treat the Participant and such Granted Sharesin all respects as if delivery of such Granted Shares had beenmade as required by this Agreement. The Participant herebyirrevocably grants the Company a power of attorney which shallbe coupled with an interest for the purpose of effectuating thepreceding sentence.     (i) *Adjustments.* The Plan contains provisionscovering the treatment of Shares in a number of contingenciessuch as stock splits and mergers. Provisions in the Plan foradjustment with respect to the Shares and the related provisionswith respect to successors to the business of the Company arehereby made applicable hereunder and are incorporated herein byreference; provided, however, that in the event of a
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Change of Control (as defined in Section 2.1(d) above),100% of the Shares which would have vested in each vestinginstallment remaining under this Option will be vested forpurposes hereof.     3. *Legend.* In addition to any legend requiredpursuant to the Plan, all certificates representing the GrantedShares to be issued to the Participant pursuant to thisAgreement shall have endorsed thereon a legend substantially asfollows:     “The shares represented by this certificate are subject to    restrictions set forth in a Restricted Stock Agreement dated as    of                                         ,    20          with    this Company, a copy of which Agreement is available for    inspection at the offices of the Company or will be made    available upon request.”     4. *Purchase for Investment; Securities LawCompliance.* If the offering and sale of the GrantedShares have not been effectively registered under the1933 Act, the Participant hereby represents and warrantsthat he or she is acquiring the Granted Shares for his or herown account, for investment, and not with a view to, or for salein connection with, the distribution of any such Granted Shares.The Participant specifically acknowledges and agrees that anysales of Granted Shares shall be made in accordance with therequirements of the 1933 Act, in a transaction as to whichthe Company shall have received an opinion of counselsatisfactory to it confirming such compliance. The Participantshall be bound by the provisions of the following legend whichshall be endorsed upon the certificate(s) evidencing the Sharesissued:     “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.”     5. *Incorporation of the Plan.* The Participantspecifically understands and agrees that the Granted Sharesissued under the Plan are being sold to the Participant pursuantto the Plan, a copy of which Plan the Participant acknowledgeshe or she has read and understands and by which Plan he or sheagrees to be bound. The provisions of the Plan are incorporatedherein by reference.     6. *Tax Liability of the Participant and Payment ofTaxes.* The Participant acknowledges and agrees that anyincome or other taxes due from the Participant with respect tothe Granted Shares issued pursuant to this Agreement, including,without limitation, the Lapsing Repurchase Right, shall be theParticipant’s responsibility. Without limiting theforegoing, the Participant agrees that, to the extent that thelapsing of restrictions on disposition of any of the GrantedShares or the declaration of dividends on any such shares beforethe lapse of such restrictions on disposition results in theParticipant’s being deemed to be in receipt of earnedincome under the provisions of the Code, the Company shall beentitled to immediate payment from the Participant of the amountof any tax required to be withheld by the Company.     Upon execution of this Agreement, the Participant may file anelection under Section 83 of the Code in substantially theform attached as Exhibit B. The Participantacknowledges that if she does not file such an election, as theGranted Shares are released from the Lapsing Repurchase Right inaccordance with Section 2.1, the Participant will haveincome for tax purposes equal to the fair market value of theGranted Shares at such date, less the price paid for the GrantedShares by the Participant.     7. *Equitable Relief.* The Participantspecifically acknowledges and agrees that in the event of abreach or threatened breach of the provisions of this Agreementor the Plan, including the attempted transfer of the GrantedShares by the Participant in violation of this Agreement,monetary damages may not be adequate to compensate the Company,and, therefore, in the event of such a breach or threatenedbreach, in addition to any right to damages, the Company shallbe entitled to equitable relief in any court having competentjurisdiction. Nothing herein shall be construed as prohibitingthe Company from pursuing any other remedies available to it forany such breach or threatened breach.     8. *No Obligation to Maintain Relationship.*The Company is not by the Plan or this Agreement obligated tocontinue the Participant as an employee, director or consultantof the Company or an Affiliate.
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The Participant acknowledges: (i) that the Plan isdiscretionary in nature and may be suspended or terminated bythe Company at any time; (ii) that the grant of the Sharesis a one-time benefit which does not create any contractual orother right to receive future grants of shares, or benefits inlieu of shares; (iii) that all determinations with respectto any such future grants, including, but not limited to, thetimes when shares shall be granted, the number of shares to begranted, the purchase price, and the time or times when eachshare shall be free from a lapsing repurchase right, will be atthe sole discretion of the Company; (iv) that theParticipant’s participation in the Plan is voluntary;(v) that the value of the Shares is an extraordinary itemof compensation which is outside the scope of theParticipant’s employment contract, if any; and(vi) that the Shares are not part of normal or expectedcompensation for purposes of calculating any severance,resignation, redundancy, end of service payments, bonuses,long-service awards, pension or retirement benefits or similarpayments.     9. *Notices.* Any notices required or permittedby the terms of this Agreement or the Plan shall be given byrecognized courier service, facsimile, registered or certifiedmail, return receipt requested, addressed as follows:     If to the Company:     Alloy, Inc.     151 W. 26th Street     11th Floor     New York, NY 10001     Attention: Chief Executive Officer     If to the Participant:or to such other address or addresses of which notice in thesame manner has previously been given. Any such notice shall bedeemed to have been given on the earliest of receipt, onebusiness day following delivery by the sender to a recognizedcourier service, or three business days following mailing byregistered or certified mail.     10. *Benefit of Agreement.* Subject to theprovisions of the Plan and the other provisions hereof, thisAgreement shall be for the benefit of and shall be binding uponthe heirs, executors, administrators, successors and assigns ofthe parties hereto.     11. *Governing Law.* This Agreement shall beconstrued and enforced in accordance with the laws of the Stateof Delaware, without giving effect to the conflict of lawprinciples thereof. For the purpose of litigating any disputethat arises under this Agreement, whether at law or in equity,the parties hereby consent to exclusive jurisdiction in New Yorkand agree that such litigation shall be conducted in the courtsof New York, New York or the federal courts of the United Statesfor the Southern District of New York.     12. *Severability.* If any provision of thisAgreement is held to be invalid or unenforceable by a court ofcompetent jurisdiction, then such provision or provisions shallbe modified to the extent necessary to make such provision validand enforceable, and to the extent that this is impossible, thensuch provision shall be deemed to be excised from thisAgreement, and the validity, legality and enforceability of therest of this Agreement shall not be affected thereby.     13. *Entire Agreement.* This Agreement,together with the Plan, constitutes the entire agreement andunderstanding between the parties hereto with respect to thesubject matter hereof and supersedes all prior oral or writtenagreements and understandings relating to the subject matterhereof. No statement, representation, warranty, covenant oragreement not expressly set forth in this Agreement shall affector be used to interpret, change or restrict the express termsand provisions of this Agreement provided, however, in anyevent, this Agreement shall be subject to and governed by thePlan.     14. *Modifications and Amendments; Waivers andConsents.* The terms and provisions of this Agreement maybe modified or amended as provided in the Plan. Except asprovided in the Plan, the terms and provisions of this Agreementmay be waived, or consent for the departure therefrom granted,only by written document executed by the party entitled to thebenefits of such terms or provisions. No such waiver or consentshall be deemed to be or shall constitute a waiver or consentwith respect to any other terms or provisions of
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this Agreement, whether or not similar. Each such waiver orconsent shall be effective only in the specific instance and forthe purpose for which it was given, and shall not constitute acontinuing waiver or consent.     15. *Consent of Spouse.* If the Participant ismarried as of the date of this Agreement, the Participant’sspouse shall execute a Consent of Spouse in the form ofExhibit A hereto, effective as of the date hereof. Suchconsent shall not be deemed to confer or convey to the spouseany rights in the Granted Shares that do not otherwise exist byoperation of law or the agreement of the parties. If theParticipant marries or remarries subsequent to the date hereof,the Participant shall, not later than 60 days thereafter,obtain his or her new spouse’s acknowledgement of andconsent to the existence and binding effect of all restrictionscontained in this Agreement by such spouse’s executing anddelivering a Consent of Spouse in the form of Exhibit A.     16. *Counterparts.* This Agreement may beexecuted in one or more counterparts, and by different partieshereto on separate counterparts, each of which shall be deemedan original, but all of which together shall constitute one andthe same instrument.     17. *Data Privacy.* By entering into thisAgreement, the Participant: (i) authorizes the Company andeach Affiliate, and any agent of the Company or any Affiliateadministering the Plan or providing Plan record keepingservices, to disclose to the Company or any of its Affiliatessuch information and data as the Company or any such Affiliateshall request in order to facilitate the grant of Shares and theadministration of the Plan; (ii) waives any data privacyrights he or she may have with respect to such information; and(iii) authorizes the Company and each Affiliate to storeand transmit such information in electronic form.**[THE NEXT PAGE IS THE SIGNATURE PAGE]**
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     IN WITNESS WHEREOF, the parties hereto have executed thisAgreement as of the day and year first above written. ALLOY, INC.     By:        Name:  Title:     PARTICIPANT:        Print name:
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**Exhibit A****CONSENT OF SPOUSE**     I,                                         ,spouseof                                         ,acknowledge that I have read the RESTRICTED STOCK AGREEMENTdated asof                     ,200 (the “Agreement”) to which this Consent isattached as Exhibit A and that I know its contents.Capitalized terms used and not defined herein shall have themeanings assigned to such terms in the Agreement. I am awarethat by its provisions the Granted Shares granted to my spousepursuant to the Agreement are subject to a Lapsing RepurchaseRight in favor of Alloy, Inc. (the “Company”) andthat, accordingly, the Company has the right to repurchase up toall of the Granted Shares of which I may become possessed as aresult of a gift from my spouse or a court decree and/or anyproperty settlement in any domestic litigation.     I hereby agree that my interest, if any, in the Granted Sharessubject to the Agreement shall be irrevocably bound by theAgreement and further understand and agree that any communityproperty interest I may have in the Granted Shares shall besimilarly bound by the Agreement.     I agree to the Lapsing Repurchase Right described in theAgreement and I hereby consent to the repurchase of the GrantedShares by the Company and the sale of the Granted Shares by myspouse or my spouse’s legal representative in accordancewith the provisions of the Agreement. Further, as part of theconsideration for the Agreement, I agree that at my death, if Ihave not disposed of any interest of mine in the Granted Sharesby an outright bequest of the Granted Shares to my spouse, thenthe Company shall have the same rights against my legalrepresentative to exercise its rights of repurchase with respectto any interest of mine in the Granted Shares as it would havehad pursuant to the Agreement if I had acquired the GrantedShares pursuant to a court decree in domestic litigation.     **I AM AWARE THAT THE LEGAL, FINANCIAL AND RELATED MATTERSCONTAINED IN THE AGREEMENT ARE COMPLEX AND THAT I AM FREE TOSEEK INDEPENDENT PROFESSIONAL GUIDANCE OR COUNSEL WITH RESPECTTO THIS CONSENT. I HAVE EITHER SOUGHT SUCH GUIDANCE OR COUNSELOR DETERMINED AFTER REVIEWING THE AGREEMENT CAREFULLY THAT IWILL WAIVE SUCH RIGHT.**     Dated as ofthe           dayof                     ,200     .       Print name:
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**Exhibit B****Election to Include Gross Income in Year****of Transfer Pursuant to Section 83(b)****of the Internal Revenue Code of 1986, as amended**     In accordance with Section 83(b) of the Internal RevenueCode of 1986, as amended (the “Code”), the undersignedhereby elects to include in his gross income as compensation forservices the excess, if any, of the fair market value of theproperty (described below) at the time of transfer over theamount paid for such property.     The following sets for the information required in accordancewith the Code and the regulations promulgated hereunder:     1. The name, address and social security number of theundersigned are:     Name:     Address:     Social Security No.:     2. The description of the property with respect to whichthe election is being made is as follows:                              (                    )    shares (the “Shares”) of Common Stock, $.01 par    value per share, of Alloy, Inc., a Delaware corporation (the    “Company”).     3. This election is made for the calendaryear                     ,with respect to the transfer of the property to the Taxpayeron                     .     4. Description of restrictions: The property is subject tothe following restrictions:          If taxpayer’s employment with the Company or an Affiliate    is terminated, the Company may repurchase all or any portion of    the Shares determined as set forth below at the acquisition    price paid by the taxpayer:          A. If the termination takes place on or prior    to                     ,    the Purchase Option will apply to all of the Shares.           B. If the termination takes place    after                     ,    200     , the number of Shares to which    the Purchase Option applies shall    be  (                    )    Shares    less                     (                    )    Shares for each full twelve (12) month period elapsed    after                     ,    200     if the taxpayer is employed by    the Company or an Affiliate.     5. The fair market value at time of transfer (determinedwithout regard to any restrictions other than restrictions whichby their terms will never lapse) of the property with respect towhich this election is being made was not more than$           perShare.     6. The amount paid by taxpayer for said property was$           perShare.     7. A copy of this statement has been furnished to theCompany.     Signedthis           dayof                     ,200     .       Print Name:
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