<PAGE>

                                                                     Exhibit 4.1


            THE SECURITIES REPRESENTED BY THIS
            CERTIFICATE HAVE NOT BEEN REGISTERED
            UNDER THE SECURITIES ACT OF 1933, AS
            AMENDED (THE "SECURITIES ACT"), OR
            APPLICABLE STATE SECURITIES LAWS. THE
            SECURITIES HAVE BEEN ACQUIRED FOR
            INVESTMENT AND MAY NOT BE OFFERED FOR
            SALE, SOLD, TRANSFERRED OR ASSIGNED
            UNLESS (1) THERE IS AN EFFECTIVE
            REGISTRATION STATEMENT UNDER SUCH ACT
            COVERING SUCH SECURITIES, OR (2) THE
            SALE IS MADE IN ACCORDANCE WITH RULE
            144 OR ANOTHER APPLICABLE EXEMPTION
            UNDER THE SECURITIES ACT.


WARRANT NO. W-001                                888,788 SHARES OF COMMON STOCK


                               WARRANT CERTIFICATE

                                   ALLOY, INC.


            Alloy, Inc. (the "Issuer"), a Delaware corporation, for value
received, hereby certifies that Fletcher International, Ltd., or registered
assigns, is entitled to purchase from the Issuer EIGHT HUNDRED EIGHTY-EIGHT
THOUSAND SEVEN HUNDRED EIGHTY-EIGHT (888,788) duly authorized, validly issued,
fully paid and non-assessable shares (subject to the adjustments contained in
this Warrant and in the Agreement between Fletcher International, Ltd. and the
Issuer dated as of January 25, 2002 (the "Main Agreement")) of common stock, par
value $0.01 per share (the "Common Stock") of the Issuer at the purchase price
per share of TWENTY-ONE DOLLARS AND NINETY-FOUR CENTS ($21.94) (the "Stock
Purchase Price") at any time or from time to time prior to 12:01 A.M., New York
City time, on January 28, 2012 (or such later date as may be determined
pursuant to the terms hereof) (the "Termination Date"), all subject to the
terms, conditions and adjustments set forth below in this Warrant.



            This Warrant was issued on January 28, 2002 pursuant to the Main
Agreement, is subject to the terms and conditions thereof and the holder of this
Warrant (the "Holder") is subject to certain restrictions set forth in the Main
Agreement and shall be entitled to certain rights and privileges set forth in
the Main Agreement. This Warrant is the Warrant referred to as the "Warrant" in
the Main Agreement. Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Main Agreement. A copy of the
Main Agreement may be obtained by the registered Holder hereof upon written
request to the Issuer.


1.    Exercise of Warrant.


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      1.1 Manner of Exercise. This Warrant may be exercised by the Holder
hereof, in whole or in part, at any time and from time to time, on any Business
Day, by facsimile, mail or overnight courier delivery of a notice in
substantially the form attached to this Warrant (or a reasonable facsimile
thereof) duly executed by such Holder (a "Warrant Exercise Notice"). The closing
of each exercise shall take place (i) on the second (2nd) Business Day
following, and excluding, the date the Warrant Exercise Notice is delivered (the
"Warrant Notice Date"), (ii) at the option of the Holder, such later date as the
conditions set forth in Section 1.2 have been waived or satisfied or (iii) any
other date upon which the exercising Holder and the Issuer mutually agree (each,
a "Warrant Closing Date") unless the Holder shall have withdrawn the Warrant
Exercise Notice prior to the closing of such exercise on such Warrant Closing
Date by written notice to the Issuer regardless of whether such conditions have
been waived or satisfied.

            (a) This Warrant may be exercised by the Holder hereof by paying
      cash to Issuer in the amount equal to the product of (i) the number of
      shares of Common Stock for which the Warrant is being exercised (without
      giving effect to any adjustment thereof) multiplied by (ii) the Stock
      Purchase Price.

            (b) In lieu of payment of the Stock Purchase Price in cash as set
      forth in Section 1(a), the Holder hereof may exercise this Warrant by
      specifying in the Warrant Exercise Notice that such Holder has elected to
      exercise this Warrant on a net exercise basis, in which case the number of
      shares of Common Stock that the Issuer shall issue shall be computed as of
      the Warrant Closing Date using the following formula:

                                  X = Y*(A-B)/A

                        Where:

                        X = the number of shares to be issued to the Holder
                        hereof;

                        Y = the number of shares of Common Stock otherwise
                        purchasable under this warrant pursuant to the Warrant
                        Exercise Notice (as adjusted to the date of such
                        calculation);

                        A = the Daily Market Price of one share of the Common
                        Stock issuable at the date of such calculation;

                        B = the Warrant Price (as defined below) (as adjusted to
                        the date of such calculation).

      1.2 Conditions to Closing. It shall be a condition of the exercising
Holder's obligation to close on each Warrant Closing Date that each of the
following are satisfied, unless waived by such Holder:

            (a) the Issuer shall represent and warrant that each of the
      following are true and correct as of such Warrant Closing Date:


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<PAGE>
                  (i) Issuer is validly existing in good standing under the laws
            of Delaware or the laws of another state of the United States.

                  (ii) The sale, issuance and delivery of the shares of Common
            Stock issuable on such Warrant Closing Date have been duly
            authorized by all requisite corporate action on the part of Issuer
            and no further consent or authorization of Issuer, its Board of
            Directors or its stockholders is required in connection with such
            issuance.

                  (iii) No consent, approval, authorization or order of any
            court, governmental agency or other body is required for sale,
            issuance and delivery of the shares of Common Stock issuable on such
            Warrant Closing Date.

                  (iv) None of the sale, issuance and delivery of the shares of
            Common Stock issuable on such Warrant Closing Date (A) violates,
            conflicts with, results in a breach of, or constitutes a default (or
            an event which with the giving of notice or the lapse of time or
            both would be reasonably likely to constitute a default) or creates
            any rights in respect of any person under (1) the certificates of
            incorporation or by-laws of Issuer or any of its subsidiaries, (2)
            any decree, judgment, order, law, treaty, rule, regulation or
            determination of any court, governmental agency or body, or
            arbitrator having jurisdiction over Issuer or any of its
            subsidiaries or any of their respective properties or assets, (3)
            the terms of any bond, debenture, indenture, credit agreement, note
            or any other evidence of indebtedness, or any agreement, stock
            option or other similar plan, lease, mortgage, deed of trust or
            other instrument to which Issuer or any of its subsidiaries is a
            party, by which Issuer or any of its subsidiaries is bound, or to
            which any of the properties or assets of Issuer or any of its
            subsidiaries is subject, (4) the terms of any "lock-up" or similar
            provision of any underwriting or similar agreement to which Issuer
            or any of its subsidiaries is a party, or (5) any rule or regulation
            of the Nasdaq applicable to Issuer or the transactions contemplated
            hereby; or results in the creation or imposition of any lien, charge
            or encumbrance upon any of the shares of Common Stock issuable on
            such Warrant Closing Date or upon any of the properties or assets of
            Issuer or any of its subsidiaries.

                  (v) When issued to Holder against payment therefor, the shares
            of Common Stock issuable on such Warrant Closing Date:

                              (1) will have been duly and validly authorized,
      duly and validly issued, fully paid and non-assessable;

                              (2) will be free and clear of any security
      interests, liens, claims or other encumbrances attaching as a result of
      any action or inaction on the part of Issuer; and


                                       3
<PAGE>
                              (3) will not have been issued or sold in violation
      of any preemptive or other similar rights of the holders of any securities
      of Issuer or any other person.

                  (vi) The offer and sale of the shares of Common Stock issuable
            on such Warrant Closing Date will, assuming the continued accuracy
            of Holder's representations and warranties contained in Section 5 of
            the Main Agreement and compliance by Holder with the applicable
            covenants and agreements contained in Section 9 of the Main
            Agreement, be made in accordance with an exemption from the
            registration requirements of the Securities Act and any applicable
            state law. Neither Issuer nor any agent on its behalf has solicited
            or will solicit any offers to sell or has offered to sell or will
            offer to sell shares of Common Stock to any person or persons so as
            to bring the sale of the shares of Common Stock issuable on such
            Warrant Closing Date by Issuer within the registration provisions of
            the Securities Act.


            (b) all shares of Common Stock to be issued upon such Warrant
      Closing Date shall be (i) duly listed and admitted to trading on the
      Nasdaq NMS, New York Stock Exchange or the American Stock Exchange upon
      issuance, and (ii) registered with the SEC and freely tradable in
      accordance with Section 4 of the Main Agreement, subject to the provisions
      and exceptions contained in Section 4 of the Main Agreement;


            (c) such Holder shall have received a certificate of the Chief
      Executive Officer or the Chief Financial Officer of the Issuer dated such
      date and to the effect of subsections (a) and (b);

            (d) on such Warrant Closing Date, the Issuer shall have delivered to
      the Holder an opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
      P.C. (or such other counsel reasonably satisfactory to such Holder)
      reasonably satisfactory to such Holder, dated the date of delivery,
      confirming in substance the matters covered in Section 1.2(a) of this
      Warrant;

            (e) the issuance of Common Stock shall not cause the Issuer to
      exceed the Maximum Number (as defined in the Main Agreement); and

            (f) as of such Warrant Closing Date, the Company shall have
      delivered to the Holder all Restatement Notices required to be delivered
      following a Restatement, in accordance with the provisions of the Main
      Agreement, and no Restatement shall have occurred on or after the date on
      which the Warrant Exercise Notice is delivered and before the Warrant
      Closing Date.

The Issuer shall use its best efforts to cause each of the foregoing conditions
to be satisfied at the earliest possible date. If the condition set forth above
in paragraph (b)(ii) of this Section 1.2 is not satisfied, (x) Holder shall be
entitled to all remedies available at law or in equity in respect of the
Issuer's failure to issue all of the Registered Common Stock required to be
issued pursuant to this Section 1, and (y) the Issuer, upon the written demand,
from time to time, of Holder, shall


                                       4
<PAGE>
issue unregistered Common Stock for a portion or all of the shares of Common
Stock to be issued as set forth in such written demand and shall use its best
efforts to cause such condition to be satisfied. In such cases, upon
satisfaction of the condition set forth in the above paragraph (b)(ii), the
Issuer shall deliver written notice to such Holder of such satisfaction. If such
condition is not satisfied or waived prior to the second (2nd) Business Day
following, and excluding, the date the Warrant Exercise Notice is delivered,
then (x) the Holder may, at its sole option, and at any time, withdraw the
Warrant Exercise Notice by written notice to the Issuer regardless of whether
such condition has been satisfied or waived as of the withdrawal date and, after
such withdrawal, shall have no further obligations with respect to such Warrant
Exercise Notice and may submit a Warrant Exercise Notice on any future date with
respect to the shares referenced in the original Warrant Exercise Notice;
provided, however, that if Holder shall not have withdrawn a Warrant Exercise
Notice by written notice delivered by the corresponding Warrant Closing Date,
then the Issuer shall place in escrow by 5 p.m., New York City time, on such
Warrant Closing Date an amount of cash equal to one hundred four percent (104%)
of the product of (x) the number of shares of Registered Common Stock due under
this Section 1 multiplied by (y) (A) the Daily Market Price calculated as of
such Warrant Notice Date minus (B) the amount otherwise payable under Section
1.1(a). If such condition is not satisfied within sixty (60) calendar days after
and including such Warrant Closing Date, the Issuer shall cause the escrow agent
to deliver such cash to Holder in lieu of the Issuer 's obligations to issue
stock upon such exercise of the Warrant; provided, however, that the Holder
shall not be obligated to pay any consideration to exercise the Warrant in order
to receive the cash payment specified immediately above; provided, further,
however, that this Warrant shall be deemed exercised with respect to such number
of shares of Registered Common Stock as was the subject of such Warrant Exercise
Notice and due to be issued under this Section 1.

      1.3 When Exercise Effective. Each exercise of this Warrant shall be deemed
to have been effected immediately prior to 6:30 PM (time in effect in New York
City on such date) on the Business Day on which the Warrant Exercise Notice is
delivered as provided in Section 1.1, and at such time the Person or Persons in
whose name or names any certificate or certificates for shares of Common Stock
(or Other Securities) shall be issuable upon such exercise as provided in
Section 1.4 shall be deemed to have become the Holder or Holders of record
thereof; provided, however, that such exercise shall not be deemed effective if
at or prior to 6:30 PM (time in effect in New York City on such date) on the
Warrant Closing Date the Holder delivers written notice of withdrawal to the
Issuer as set forth in Section 1.2.

      1.4 Delivery of Warrant and Payment. On the Warrant Closing Date, the
registered Holder shall surrender this Warrant Certificate to the Issuer at the
address set forth for notices to the Issuer in Section 17 of the Main Agreement
and (a) shall deliver payment in cash, by wire transfer to the Issuer's account
designated in Section 17 of the Main Agreement or such other account as Issuer
may designate of immediately available funds or by certified or official bank
check payable to the order of the Issuer, to the extent that the Warrant is
exercised in accordance with Section 1.1(a) above or (b) if exercising this
Warrant on a net exercise basis in accordance with Section 1.1(b) above, shall
have so specified in the Warrant Exercise Notice delivered by such Holder and,
in either such case, such Holder shall thereupon be entitled to receive the
number of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock (or Other Securities) determined as provided in Sections 2, 3
and 4 hereof.


                                       5
<PAGE>
      1.5 Delivery of Stock Certificates, etc. On a Warrant Closing Date, the
Issuer at its expense (including the payment by it of any applicable issue
taxes) shall cause to be issued in the name of and delivered to the Holder
hereof or as such Holder may direct,

            (a) via facsimile and at such address specified by the Holder via a
      reputable overnight courier, a delivery notice in the form of Exhibit 2
      hereto and one or more certificates for the number of duly authorized,
      validly issued, fully paid and nonassessable shares of Common Stock (or
      Other Securities) to which such Holder shall be entitled upon such
      exercise plus, in lieu of any fractional share to which such Holder would
      otherwise be entitled, cash in an amount equal to the same fraction of the
      Daily Market Price per share on the Business Day next preceding the date
      of such exercise, and

            (b) in case such exercise is in part only, at such address specified
      by the Holder via reputable overnight courier, a new Warrant of like
      tenor, calling in the aggregate on the face or faces thereof for the
      number of shares of Common Stock equal (without giving effect to any
      adjustment thereof) to the number of such shares called for on the face of
      this Warrant minus the number of such shares designated by the Holder upon
      such exercise as provided in Section 1.1.

      1.6 Best Efforts. For so long as any of the Common Stock issuable to
Holder pursuant to this Warrant has not been so issued, Issuer will use its best
efforts to cause the representations and warranties contained in Section 1.2(a)
to be and remain true and correct.

      1.7 Compliance with Nasdaq 20% Rule.

            (a) If the number of shares of Common Stock issued and issuable
      under this Warrant plus the number of shares of Common Stock issued under
      the Main Agreement on any date (each a "Trigger Date") would result in
      Holder receiving more than seventeen and one-half percent (17.5%) of the
      shares of Common Stock outstanding as of the date of the Main Agreement
      (the "Original Number") and Holder's receipt of twenty percent (20%) or
      more of the Original Number would require the approval (the "Required
      Consent") of the holders of Common Stock pursuant to the listing
      requirements or rules of Nasdaq, Issuer (A) will not issue Common Shares
      to the extent that the total number of shares of Common Stock issued under
      the Warrant and the Main Agreement would exceed nineteen and ninety-nine
      one-hundredths percent (19.99%) of the Original Number, (B) will either
      (i) notify Holder within five (5) Business Days of Issuer's election to
      make the payment specified in Section 1.7(b) or (ii) notify Issuer's
      stockholders of a stockholder meeting for the purpose of voting on the
      Required Consent within twenty (20) Business Days from and including the
      Trigger Date, which meeting will be held on or before the sixtieth (60th)
      calendar day after and including the Trigger Date, and will otherwise use
      its best efforts to obtain, on or before the one-hundred-twentieth (120th)
      calendar day after and including the Trigger Date, the Required Consent
      for the issuance of all Common Shares issued or issuable under the Main
      Agreement and upon exercise of the rights under this Warrant, including,
      but not limited to, recommending to Issuer's stockholders that such
      stockholders give the Required Consent and not withdrawing such
      recommendation. If the Required Consent has not


                                       6
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      been obtained within such one hundred twenty (120)-day period, Issuer
      shall make the payment specified in Section 1.7(b).

            (b) If the Issuer notifies Holder of Issuer's election under Section
      1.7(a)(B)(i) or fails to obtain the Required Consent prior to the
      expiration of the one hundred twenty (120)-day period described in Section
      1.7(a)(B)(ii), Issuer shall pay to the Holder, in cash, on the Business
      Day immediately following such event, an amount equal to the price of a
      European option determined pursuant to the Black-Scholes formula as
      computed using the Bloomberg Professional Service for the number of shares
      of Common Stock issuable upon exercise of the portion of the Warrant which
      would (on such date) result in the issuance of a total number of shares of
      Common Stock issued under the Main Agreement and the Warrant exceeding
      nineteen and ninety-nine one-hundredths percent (19.99%) of the Original
      Number, using the variables specified in Section 3.1(B) (substituting
      "Business Day following such event" for "date such Change of Control was
      consummated" wherever it appears therein). The Holder shall not be
      obligated to pay any consideration (including, but not limited to, the
      Stock Purchase Price) in order to receive the consideration specified in
      this paragraph (b). Upon receipt by the Holder of the consideration
      specified in this paragraph (b), such portion of the Warrant shall be
      deemed to have been exercised.

2.    Adjustment of Common Stock Issuable Upon Exercise.

      2.1 General; Warrant Price. The number of shares of Common Stock which the
Holder of this Warrant shall be entitled to receive upon each exercise hereof
shall be determined by multiplying the number of shares of Common Stock which
would otherwise (but for the provisions of Section 2, 3 and 4) be issuable upon
such exercise, as designated by the Holder hereof pursuant to Section 1.1, by a
fraction of which (a) the numerator is the Stock Purchase Price and (b) the
denominator is the Warrant Price in effect on the date of such exercise. The
"Warrant Price" shall initially be the Stock Purchase Price and shall be
adjusted and readjusted from time to time as provided in Sections 2, 3 and 4
hereof and, as so adjusted or readjusted, shall remain in effect until a further
adjustment or readjustment thereof is required by Sections 2, 3 and 4 hereof.

      2.2 Adjustment of Warrant Price.

            (a) Issuance of Additional Shares of Common Stock. In case the
      Issuer at any time or from time to time after the date hereof shall issue
      or sell Additional Shares of Common Stock (including Additional Shares of
      Common Stock deemed to be issued pursuant to Section 2.3 or 2.4) without
      consideration or for a consideration per share less than the Warrant Price
      in effect immediately prior to such issue or sale, then, and in each such
      case, subject to Section 2.8, such Warrant Price shall be reduced,
      concurrently with such issue or sale, to a price (calculated to the
      nearest .001 of a cent) determined by multiplying such Warrant Price by a
      fraction;

                  (i) the numerator of which shall be (1) the number of shares
            of Common Stock outstanding immediately prior to such issue or sale
            (on a fully-diluted basis calculated using the treasury method in
            accordance with


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            generally accepted accounting principles) plus (2) the number of
            shares of Common Stock which the aggregate consideration received or
            to be received by the Issuer for the total number of such Additional
            Shares of Common Stock so issued or sold would purchase at such
            Warrant Price, and

                  (ii) the denominator of which shall be the number of shares of
            Common Stock outstanding immediately after such issue or sale (on a
            fully-diluted basis calculated using the treasury method in
            accordance with generally accepted accounting principles),

            provided that, for the purposes of this Section 2.2(a) (x)
            immediately after any Additional Shares of Common Stock are deemed
            to have been issued pursuant to Section 2.3 or 2.4, such Additional
            Shares of Common Stock shall be deemed to be outstanding, and (y)
            treasury shares shall not be deemed to be outstanding.

            (b) Dividends and Distributions. In case the Issuer at any time or
      from time to time after the date hereof shall declare, order, pay or make
      a dividend or other distribution (including, without limitation, any
      distribution of other or additional stock or other securities or property
      or Options by way of dividend or spin-off, reclassification,
      recapitalization or similar corporate rearrangement) on the Common Stock,
      other than a dividend payable in Additional Shares of Common Stock, then,
      subject to Section 2.8, provision shall be made so that the Holder shall
      receive upon exercise hereof in addition to the number of shares of Common
      Stock receivable thereupon, the kind and amount of securities, cash or
      other property which the Holder would have been entitled to receive had
      the Holder exercised this Warrant for such number of shares of Common
      Stock on the date of such dividend record date and had the Holder
      thereafter, during the period from the date of such dividend to and
      including the date of exercise, retained such securities, cash or other
      property receivable by the Holder as aforesaid during such period, giving
      application to all adjustments called for during such period under this
      Warrant.

      2.3 Treatment of Options and Convertible Securities. In case the Issuer at
any time or from time to time after the date hereof shall issue, sell, grant or
assume, or shall fix a record date for the determination of Holders of any class
of securities entitled to receive, any Options or Convertible Securities (other
than Options or Convertible Securities that constitute Excluded Securities),
then, and in each such case, the maximum number of Additional Shares of Common
Stock (as set forth in the instrument relating thereto, without regard to any
provisions contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue, sale, grant or assumption or, in case such a record date
shall have been fixed, as of the close of business on such record date (or, in
the case of Options or Convertible Securities with terms described in Section
2.3(b), the date of any change, increase or decrease described in Section
2.3(b)) (or, if the Common Stock trades on an ex-dividend basis, on the date
prior to the commencement of ex-dividend trading), provided that such Additional
Shares of


                                       8
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Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 2.5) of such shares would be less than
the Warrant Price in effect on the date of and immediately prior to such issue,
sale, grant or assumption or immediately prior to the close of business on such
record date (or, if the Common Stock trades on an ex-dividend basis, on the date
prior to the commencement of ex-dividend trading), as the case may be, and
provided, further, that in any such case in which Additional Shares of Common
Stock are deemed to be issued

            (a) no further adjustment of the Warrant Price shall be made upon
      the subsequent issue or sale of Convertible Securities or shares of Common
      Stock upon the exercise of such Options or the conversion or exchange of
      such Convertible Securities;

            (b) if such Options or Convertible Securities by their terms
      provide, with the passage of time or otherwise, for any change in the
      consideration payable to the Issuer, or increase or decrease in the number
      of Additional Shares of Common Stock issuable, upon the exercise,
      conversion or exchange thereof (by change of rate or otherwise), the
      Warrant Price computed upon the original issue, sale, grant or assumption
      thereof (or upon the occurrence of the record date, or date prior to the
      commencement of ex-dividend trading, as the case may be, with respect
      thereto), and any subsequent adjustments based thereon, shall, upon any
      such increase or decrease becoming effective, be recomputed to reflect
      such increase or decrease insofar as it affects such Options, or the
      rights of conversion or exchange under such Convertible Securities, which
      are outstanding at such time;

            (c) upon the expiration (or purchase by the Issuer and cancellation
      or retirement) of any such Options which shall not have been exercised or
      the expiration of any rights of conversion or exchange under any such
      Convertible Securities which (or purchase by the Issuer and cancellation
      or retirement of any such Convertible Securities the rights of conversion
      or exchange under which) shall not have been exercised, the Warrant Price
      computed upon the original issue, sale, grant or assumption thereof (or
      upon the occurrence of the record date, or date prior to the commencement
      of ex-dividend trading, as the case may be, with respect thereto), and any
      subsequent adjustments based thereon, shall, upon such expiration (or such
      purchase by the Issuer and cancellation or retirement, as the case may
      be), be recomputed as if:

                  (i) in the case of Options for Common Stock or Convertible
            Securities, the only Additional Shares of Common Stock issued or
            sold were the Additional Shares of Common Stock, if any, actually
            issued or sold upon the exercise of such Options or the conversion
            or exchange of such Convertible Securities and the consideration
            received therefor was the consideration actually received by the
            Issuer for the issue, sale, grant or assumption of all such Options,
            whether or not exercised, plus the consideration actually received
            by the Issuer upon such exercise, or for the issue or sale of all
            such Convertible Securities which were actually converted or
            exchanged, plus the additional consideration, if any, actually
            received by the Issuer upon such conversion or exchange, and


                                       9
<PAGE>
                  (ii) in the case of Options for Convertible Securities, only
            the Convertible Securities, if any, actually issued or sold upon the
            exercise of such Options were issued at the time of the issue, sale,
            grant or assumption of such Options, and the consideration received
            by the Issuer for the Additional Shares of Common Stock deemed to
            have then been issued was the consideration actually received by the
            Issuer for the issue, sale, grant or assumption of all such Options,
            whether or not exercised, plus the consideration deemed to have been
            received by the Issuer (pursuant to Section 2.5) upon the issue or
            sale of such Convertible Securities with respect to which such
            Options were actually exercised;

            (d) no readjustment pursuant to subdivision (b) or (c) above shall
      have the effect of increasing the Warrant Price by an amount in excess of
      the amount of the adjustment thereof originally made in respect of the
      issue, sale, grant or assumption of such Options or Convertible
      Securities; and

            (e) in the case of any such Options which expire by their terms not
      more than 30 days after the date of issue, sale, grant or assumption
      thereof, no adjustment of the Warrant Price shall be made until the
      expiration or exercise of all such Options, whereupon such adjustment
      shall be made in the manner provided in subdivision (c) above.

      2.4 Treatment of Stock Dividends, Stock Splits, etc. In case the Issuer at
any time or from time to time after the date hereof shall declare or pay any
dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of Holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.

      2.5 Computation of Consideration.

      For the purposes of this Section 2:

            (a) the consideration for the issue or sale of any Additional Shares
      of Common Stock shall, irrespective of the accounting treatment of such
      consideration,

                  (i) insofar as it consists of cash, be computed at the amount
            of cash received by the Issuer plus any expenses paid or incurred by
            the Issuer or any commissions or compensations paid or concessions
            or discounts allowed to underwriters, dealers or others performing
            similar services in connection with such issue or sale, but without
            adding or deducting any other payments or expenses,


                                       10
<PAGE>
                  (ii) insofar as it consists of property (including securities)
            other than cash, be computed at the fair value thereof at the time
            of such issue or sale, as determined in good faith by the Board of
            Directors of the Issuer, and

                  (iii) in case Additional Shares of Common Stock are issued or
            sold together with other stock or securities or other assets of the
            Issuer for a consideration which covers both, be the portion of such
            consideration so received, computed as provided in clauses (i) and
            (ii) above, allocable to such Additional Shares of Common Stock, all
            as determined in good faith by the Board of Directors of the Issuer;

            (b) Additional Shares of Common Stock deemed to have been issued
      pursuant to Section 2.3, relating to Options and Convertible Securities,
      shall be deemed to have been issued for a consideration per share
      determined by dividing

                  (i) the total amount, if any, received and receivable by the
            Issuer as consideration for the issue, sale, grant or assumption of
            the Options or Convertible Securities in question, plus the minimum
            aggregate amount of additional consideration (as set forth in the
            instruments relating thereto, without regard to any provision
            contained therein for a subsequent adjustment of such consideration
            to protect against dilution) payable to the Issuer upon the exercise
            in full of such Options or the conversion or exchange of such
            Convertible Securities or, in the case of Options for Convertible
            Securities, the exercise of such Options for Convertible Securities
            and the conversion or exchange of such Convertible Securities, in
            each case computing such consideration as provided in the foregoing
            subdivision (a),

      by

                  (ii) the maximum number of shares of Common Stock (as set
            forth in the instruments relating thereto, without regard to any
            provision contained therein for a subsequent adjustment of such
            number to protect against dilution) issuable upon the exercise of
            such Options or the conversion or exchange of such Convertible
            Securities (including the full conversion or exchange of all Options
            and Convertible Securities underlying such Options and Convertible
            Securities); and

            (c) Additional Shares of Common Stock deemed to have been issued
      pursuant to Section 2.4, relating to stock dividends, stock splits, etc.,
      shall be deemed to have been issued for no consideration.

      2.6 Adjustments for Combinations, etc. In case the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or


                                       11
<PAGE>
consolidation shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.

      2.7 Dilution in Case of Other Securities. In case any Other Securities
shall be issued or sold or shall become subject to issue or sale upon the
conversion or exchange of any stock (or Other Securities) of the Issuer (or any
issuer of Other Securities or any other Person referred to in Section 3) or to
subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Issuer (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this Section 2, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this Section 2 with respect to the Warrant Price shall be made
as nearly as possible in the manner so provided and applied to determine the
amount of Other Securities from time to time receivable upon the exercise of the
Warrant, so as to protect the Holder or Holders of the Warrant against the
effect of such dilution.

      2.8 Minimum Adjustment of Warrant Price If the amount of any adjustment of
the Warrant Price required pursuant to this Section 2 would be less than one
tenth (1/10) of one percent (1%) of the Warrant Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one tenth (1/10)
of one percent (1%) of such Warrant Price.

3.    Consolidation, Merger, etc.

      3.1 Adjustments for Consolidation, Merger, Sale of Assets, Reorganization,
etc.

      (i) In case on or after the Main Agreement Date (a) the Company is party
to any acquisition of the Company by means of merger or other form of corporate
reorganization in which outstanding shares of the Company are exchanged for
securities or other consideration issued, or caused to be issued, by the
Acquiring Person or its Parent, subsidiary or affiliate, (b) the Company is
party to a sale of all or substantially all of the assets of the Company (on a
consolidated basis) in a single transaction or series of related transactions,
(c) there is any other transaction or series of related transactions by the
Company or relating to the Common Stock (including without limitation, any stock
purchase or tender or exchange offer) in which the power to cast the majority of
the eligible votes at a meeting of the Company's stockholders at which directors
are elected is transferred to a single entity or group acting in concert, or (d)
the Company is party to a capital reorganization or reclassification of the
Common Stock or Other Securities (other than a reorganization or
reclassification resulting in the issue of Additional Shares of Common Stock for
which adjustment in the Warrant Price is provided in Section 2.2(a) or 2.2(b)),
then, and in the case of each such transaction (each of which is referred to
herein as "Change of Control"), proper provision shall be made so that, upon the
basis and the terms and in the manner provided herein, the Holder, upon the
exercise thereof, in whole or in part, at any time and from time to time after
the consummation of such Change of Control, shall be entitled to receive (at the
aggregate price payable by such Holder in effect at the time of such
consummation for all Common Stock or Other Securities issuable upon such
exercise immediately prior to such consummation (unless expressly exempted from
payment by this


                                       12
<PAGE>
Section 3.1)), in lieu of the cash, Common Stock or Other Securities issuable
upon such exercise prior to such consummation, the stock, and other securities,
cash and property set forth in such of the following clauses (A) and (B) as such
Holder shall elect (which election shall be made at least five (5) Business Days
before such consummation) in whole or in part:

                        A. the stock and other securities, cash and property to
                  which such Holder would have been entitled upon such
                  consummation if such Holder had exercised such Warrant
                  immediately before the consummation of such Change of Control,
                  subject to adjustments (subsequent to such corporate action)
                  as nearly equivalent as possible to the adjustments provided
                  for in Section 2 and this Section 3; and/or

                        B. cash in an amount equal to the price of a European
                  option determined pursuant to the Black-Scholes formula as
                  computed using the Bloomberg Professional Service for the
                  number of shares of Common Stock (or Other Securities)
                  issuable upon exercise of the portion of the Warrant for which
                  this clause (B) is elected, using the following variables: (i)
                  the "current price" shall be the closing price per share for
                  the Common Stock (or Other Securities) as reported by the
                  Bloomberg Professional Service for the primary exchange or
                  quotation system on which such Common Stock (or Other
                  Securities) traded on the Business Day immediately before the
                  date such Change of Control was consummated; (ii) the "strike
                  price" shall be the Warrant Price as of the Business Day
                  immediately before the date such Change of Control was
                  consummated; (iii) the "interest rate" shall be the yield to
                  maturity for a U.S. Treasury security with a time to maturity
                  equivalent to the time between the Business Day immediately
                  before the date such Change of Control was consummated and the
                  Termination Date; (iv) "volatility" shall be equal to the
                  number (but in no event greater than seventy-five percent
                  (75%)) reported by the Bloomberg Professional Service for the
                  260-Business-Day period as of the Business Day immediately
                  before the date such Change of Control was consummated; (v)
                  the "expiration date" shall be the Termination Date; (vi)
                  "trading date" shall be the Business Day immediately before
                  the date such Change of Control was consummated; and (vii)
                  "dividend yield" shall be zero percent (0%). The Holder shall
                  not be obligated to pay any consideration (including, but not
                  limited to, the Stock Purchase Price) in order to receive the
                  consideration specified in this clause (B).

            (ii) The foregoing notwithstanding, if the Acquiring Person, its
      Parent or the Company, as the case may be, shall combine, subdivide or
      reclassify its Capital Stock, or shall declare any dividend payable in
      shares of its Capital Stock, or shall take any other action of a similar
      nature affecting such shares, the stock and other securities, cash and
      property in clause (A) and the cash deliverable in clause (B) shall be
      adjusted to the extent appropriate to reflect such event, including
      appropriate adjustments to account for any such event that occurs during
      any of the measurement periods set forth in such clauses.


                                       13
<PAGE>
      3.2 Assumption of Obligations. Notwithstanding anything contained in the
Warrant or in the Main Agreement to the contrary, the Issuer will not effect a
Change of Control unless, prior to the consummation thereof, each Person (other
than the Issuer) which may be required to deliver any stock, securities, cash or
property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the Holder of
this Warrant, (a) the obligations of the Issuer under this Warrant (and if the
Issuer shall survive the consummation of such transaction, such assumption shall
be in addition to, and shall not release the Issuer from, any continuing
obligations of the Issuer under this Warrant), and (b) the obligation to deliver
to such Holder such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this Section 3, such Holder may be
entitled to receive, and such Person shall have similarly delivered to such
Holder an opinion of counsel for such Person, which counsel shall be reasonably
satisfactory to such Holder, stating that this Warrant shall thereafter continue
in full force and effect and the terms hereof (including, without limitation,
all of the provisions of this Section 3) shall be applicable to the stock,
securities, cash or property which such Person may be required to deliver upon
any exercise of this Warrant or the exercise of any rights pursuant hereto.
Nothing in this Section 3 shall be deemed to authorize the Issuer to enter into
any transaction not otherwise permitted by Section 8 of the Main Agreement.

4.    Other Dilutive Events, Restatements.

            (a) In case any event shall occur as to which the provisions of
      Sections 2 and 3 are not strictly applicable (including, without
      limitation, the repurchase by the Issuer of Options or Convertible
      Securities) but the failure to make any adjustment would not fairly
      protect the purchase rights represented by this Warrant in accordance with
      the essential intent and principles of such Sections, then, in each such
      case, the Issuer shall notify the Holder of such event and, upon demand by
      the Holder, the Issuer shall appoint an investment bank of recognized
      national standing, which shall give their opinion upon the adjustment, if
      any, on a basis consistent with the essential intent and principles
      established in Sections 2 and 3, necessary to preserve the value of the
      purchase rights represented by this Warrant. Such opinion shall include
      the basis for the calculations and conclusions contained therein in
      reasonable detail. Upon receipt of such opinion, the Issuer will promptly
      deliver a copy thereof via facsimile and overnight courier to the Holder
      or Holders of this Warrant and shall make the adjustments described
      therein. Upon written request by Holder, Issuer shall provide Holder with
      reasonable access to such information as may be necessary to evaluate the
      calculations and conclusions contained in such opinion. Within twenty (20)
      Business Days of receiving all such information Holder may dispute the
      conclusions of such opinion by providing a written notice of dispute to
      Issuer, which notice shall include the basis for the calculations and
      conclusions contained therein in reasonable detail. If Issuer and Holder
      are unable to agree to the appropriate calculation of such adjustment
      within ten (10) Business Days of such notice from Holder, then an
      independent nationally-recognized investment bank selected by Holder and
      reasonably acceptable to Issuer shall be appointed to resolve the dispute,
      and such investment bank's decision shall be final and binding upon the
      Issuer and the Holder. The costs of such independent investment bank shall
      be shared equally by Issuer and Holder.


                                       14
<PAGE>
            (b) Restatements.


                  (i) If a Restatement occurs on or before the date that is
            sixty days following the effective date of the first Registration
            Statement filed pursuant to the provisions of Section 4(a) of the
            Main Agreement to be declared effective (provided that if the
            Registration Statement is not available for all Common Shares during
            such sixty-day period or if there should occur a "market stand-off"
            during such sixty-day period, then such period shall be extended by
            one Business Day for each Business Day that the Registration
            Statement is not so available or Holder is subject to such "market
            stand-off"), then on the date that Investor delivers a written
            notice to Alloy electing one of the time periods specified in clause
            (aa) or (bb) below, the Warrant Price shall be adjusted by
            multiplying the Warrant Price then in effect by the quotient of (x)
            the lesser of (1) the Average Price of Common Stock calculated as
            of, or (2) the average of the Daily Prices for the five Business
            Days ending on and including, either of the following dates, in the
            sole discretion of the Holder: (aa) the date forty Business Days
            after and excluding the related Restatement Date and (bb) the date
            forty Business Days after and excluding any date on which Issuer
            files restated financial statements with the SEC with respect to
            such Restatement divided by (y) the Stock Purchase Price. Provided,
            that in no event shall any such adjustment cause an increase in the
            Warrant Price, and provided, that in no event shall any such
            adjustment cause the additional number of shares of Common Stock
            issuable hereunder as a result of such adjustment to exceed eight
            hundred eighty-eight thousand seven hundred eighty-eight (888,788),
            as adjusted for stock splits, stock dividends and the like.



                  (ii) If a Restatement occurs after the date that is sixty days
            following the effective date of the first Registration Statement
            filed pursuant to the provisions of Section 4(a) of the Main
            Agreement to be declared effective (provided that if the
            Registration Statement is not available for all Common Shares during
            such sixty-day period or if there should occur a "market stand-off"
            during such sixty-day period, then such period shall be extended by
            one Business Day for each Business Day that the Registration
            Statement is not so available or Holder is subject to such "market
            stand-off") and before the second anniversary of such effective
            date, then on the date that Investor delivers a written notice to
            Alloy electing one of the time periods specified in clause (aa) or
            (bb) below, the Warrant Price shall be adjusted by multiplying the
            Warrant Price then in effect by the quotient of (x) the lesser of
            (xx) the Average Price of Common Stock calculated as of, or (yy) the
            average of the Daily Prices for the five Business Days ending on and
            including, either of the following dates, in the sole discretion of
            the Holder: (aa) the date forty Business Days after and excluding
            the related Restatement Date and (bb) the date forty Business Days
            after and excluding any date on which Issuer files restated
            financial statements with the SEC with respect to such



                                       15
<PAGE>
            Restatement divided by (y) the Average Price calculated as of ten
            Business Days before and excluding the Restatement Date. Provided,
            that in no event shall any such adjustment cause an increase in the
            Warrant Price, and provided, that in no event shall any such
            adjustment cause the Warrant Price to decrease in excess of fifty
            percent (50%) of the Warrant Price immediately prior to such
            adjustment.

                  (iii) Issuer shall deliver to Holder a written notice within
            five (5) Business Days of each Restatement, (i) stating the date on
            which a Restatement has occurred and (ii) including the documents in
            which the Restatement was publicly disclosed. Only one adjustment of
            the Warrant Price shall be made pursuant to clause (i) or (ii) above
            with respect to any announcement of an intention to restate and the
            subsequent related filing of restated financial statements shall be
            permitted, so long as the content of such announcement and of such
            subsequent related filing shall not materially differ.

5. No Impairment.The Issuer will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder of this Warrant against
impairment. Without limiting the generality of the foregoing, the Issuer (a)
will not permit the par value of any shares of stock receivable upon the
exercise of this Warrant to exceed the amount payable therefor upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Issuer may validly and legally issue fully paid and nonassessable
shares of stock on the exercise of the Warrants from time to time outstanding,
and (c) will not take any action which results in any adjustment of the Warrant
Price if the total number of shares of Common Stock (or Other Securities)
issuable after the action upon the exercise of all of the Warrants would exceed
the total number of shares of Common Stock (or Other Securities) then authorized
by the Issuer's certificate of incorporation and available for the purpose of
issue upon such exercise.

6. Accountants' Report as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable upon
the exercise of this Warrant, the Issuer at its expense will promptly compute
such adjustment or readjustment in accordance with the terms of this Warrant and
cause independent certified public accountants of recognized national standing
(which may be the regular auditors of the Issuer) selected by the Issuer to
verify such computation (other than any computation of the fair value of
property as determined in good faith by the Board of Directors of the Issuer)
and prepare a report setting forth such adjustment or readjustment and showing
in reasonable detail the method of calculation thereof and the facts upon which
such adjustment or readjustment is based, including but not limited to a
statement of (a) the consideration received or to be received by the Issuer for
any Additional Shares of Common Stock issued or sold or deemed to have been
issued, (b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Warrant Price in effect immediately prior to such issue
or sale and as adjusted and readjusted (if required by Section 2, 3


                                       16
<PAGE>
or 4) on account thereof. The Issuer will forthwith mail a copy of each such
report to each Holder of a Warrant and will, upon the written request at any
time of any Holder of a Warrant, furnish to such Holder a copy of the most
recent report setting forth the Warrant Price in effect as of the date such
report is delivered and showing in reasonable detail how it was calculated. The
Issuer will also keep copies of all such reports at its principal office and
will cause the same to be available for inspection at such office during normal
business hours by any Holder of a Warrant or any prospective purchaser of a
Warrant designated by the Holder thereof.

7.    Notices of Corporate Action.

      In the event of :

            (a) any taking by the Issuer of a record of the holders of any class
      of securities for the purpose of determining the holders thereof who are
      entitled to receive any dividend (other than a regular periodic dividend
      payable in cash out of earned surplus in an amount not exceeding the
      amount of the immediately preceding cash dividend for such period) or
      other distribution, or any right to subscribe for, purchase or otherwise
      acquire any shares of stock of any class or any other securities or
      property, or to receive any other right, or

            (b) any capital reorganization of the Issuer, any reclassification
      or recapitalization of the capital stock of the Issuer or any
      consolidation or merger involving the Issuer and any other Person or any
      transfer of all or substantially all the assets of the Issuer to any other
      Person, or

            (c) any voluntary or involuntary dissolution, liquidation or
      winding-up of the Issuer,

the Issuer will mail to the Holder a notice specifying (i) the date or expected
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right, and (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
delivered to Holder at least 10 Business Days prior to the date therein
specified, but in no event later than the date notice is delivered to any holder
of Common Stock.

8. Reservation of Shares. For so long as the Warrant represented hereby has not
been exercised in full, the Issuer shall at all times prior to the Termination
Date reserve and keep available, free from pre-emptive rights, out of its
authorized but unissued capital stock, the number of shares required to permit
the full exercise of this Warrant (assuming it were exercised in the manner
provided for in Section 1.1(a) hereof). In the event the number of Common Shares
(or other securities) issuable hereunder exceeds the authorized number of shares
of Common Stock (or other securities), the Issuer shall promptly take all
actions necessary to increase the


                                       17
<PAGE>
authorized number, including causing its Board of Directors to call a special
meeting of stockholders, recommend such increase and not withdraw such
recommendation.

9.    Transfer and Assignment.

      9.1 By accepting delivery of this Warrant Certificate, the registered
Holder hereof covenants and agrees with the Issuer not to exercise the Warrant
or transfer the Warrant or the Common Shares represented hereby except in
compliance with the terms of the Main Agreement and this Warrant Certificate.

      9.2 By accepting delivery of this Warrant Certificate, the registered
Holder hereof covenants and agrees with the Issuer that no Warrant may be sold
or assigned, in whole or in part, unless such sale or assignment complies with
applicable federal and state securities laws and until such Holder shall deliver
to the Issuer (i) written notice of such transfer and of the name and address of
the transferee and such notice has been received by the Issuer; (ii) a written
agreement of the transferee to comply with the terms of this Warrant Certificate
and, solely insofar as it relates to this Warrant, the Main Agreement; and (iii)
a certificate of the transferee that such transfer complies with applicable
federal and state securities laws; provided, however that, subject to the
foregoing, nothing in this Warrant Certificate shall limit the right or ability
of the Holder to engage in transactions with respect to the Warrant or the
underlying Common Shares except as provided in the Main Agreement. If a portion
of the Warrant is transferred, all rights of the registered Holder hereunder may
be exercised by the transferee provided that any registered Holder of the
Warrant may deliver a Warrant Exercise Notice only with respect to the Common
Shares subject to such Holder's portion of the Warrant.

      9.3 The Issuer will pay all documentary stamp taxes (if any) attributable
to the issuance of Common Shares upon the exercise of the Warrant by the
registered Holder hereof; provided, however, that the Issuer shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
involved in the registration of the Warrant Certificate or any certificates for
Common Shares in a name other than that of the registered Holder of the Warrant
Certificate surrendered upon the exercise of a Warrant, and the Issuer shall not
be required to issue or deliver the Warrant Certificate or certificates for
Common Shares unless or until the person or persons requesting the issuance
thereof shall have paid to the Issuer the amount of such tax or shall have
established to the reasonable satisfaction of the Issuer that such tax has been
paid.

10. Lost or Stolen Warrant. In case this Warrant Certificate shall be mutilated,
lost, stolen or destroyed, the Issuer may in its discretion issue in exchange
and substitution for and upon cancellation of the mutilated Warrant Certificate,
or in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor, but only upon receipt of
evidence reasonably satisfactory to the Issuer of such loss, theft or
destruction of such Warrant Certificate and indemnity, if requested, reasonably
satisfactory to the Issuer. Applicants for a substitute Warrant Certificate
shall also comply with such other reasonable regulations and pay such other
reasonable charges as the Issuer may prescribe.

11. Warrant Agent. The Issuer (and any corporation into which the Issuer is
merged or any corporation resulting from any consolidation to which the Issuer
is a party) shall serve as warrant


                                       18
<PAGE>
agent (the "Warrant Agent") under this Warrant. The Warrant Agent hereunder
shall at all times maintain a register (the "Warrant Register") of the Holders
of this Warrant. Upon 30 days' notice to the registered Holder hereof, the
Issuer may appoint a new Warrant Agent. Such new Warrant Agent shall be American
Stock Transfer & Trust Company or a corporation doing business and in good
standing under the laws of the United States or any state thereof, and having a
combined capital and surplus of not less than $100,000,000. The combined capital
and surplus of any such new Warrant Agent shall be deemed to be the combined
capital and surplus as set forth in the most recent report of its condition
published by such Warrant Agent prior to its appointment; provided that such
reports are published at least annually pursuant to law or to the requirements
of a federal or state supervising or examining authority. After acceptance in
writing of such appointment by the new Warrant Agent, it shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further assurance,
conveyance, act or deed; but if for any reason it shall be reasonably necessary
or expedient to execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Issuer and shall be legally
and validly executed and delivered by the Issuer. Any corporation into which any
new Warrant Agent may be merged or any corporation resulting from any
consolidation to which any new Warrant Agent shall be a party or any corporation
to which any new Warrant Agent transfers substantially all of its corporate
trust or shareholders services business shall be a successor Warrant Agent under
this Warrant without any further act; provided that such corporation (i) would
be eligible for appointment as successor to the Warrant Agent under the
provisions of this Section 11 or (ii) is a wholly owned subsidiary of the
Warrant Agent. Any such successor Warrant Agent shall promptly cause notice of
its succession as Warrant Agent to be delivered via reputable overnight courier
to the registered Holder hereof at such Holder's last address as shown on the
Warrant Register.

12. Definitions. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:

      12.1 "Acquiring Person" means, in connection with any Change of Control:,
(i) the continuing or surviving corporation of a consolidation or merger with
the Company (if other than the Company), (ii) the transferee of all or
substantially all of the properties or assets of the Company, (iii) the
corporation consolidating with or merging into the Company in a consolidation or
merger in connection with which the Common Stock is changed into or exchanged
for stock or other securities of any other Person or cash or any other property,
(iv) the entity or group acting in concert acquiring or possessing the power to
cast the majority of the eligible votes at a meeting of the Company's
stockholders at which directors are elected or, (v) in the case of a capital
reorganization or reclassification described in clause (d) of the definition of
Change of Control, the Company.

      12.2 "Additional Shares of Common Stock" means all shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to Section 2.3 or
2.4, deemed to be issued) by the Issuer after the date hereof, whether or not
subsequently reacquired or retired by the Issuer, other than shares issued upon
the exercise of the Warrants; provided, however, that this term shall not
include Excluded Securities.

      12.3 "Common Stock" as defined in the introduction to this Warrant, such
term to include any stock into which such Common Stock shall have been changed
or any stock resulting


                                       19
<PAGE>
from any reclassification of such Common Stock, and all other stock of any class
or classes (however designated) of the Issuer the Holders of which have the
right, without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference to Common Stock
shares.

      12.4 "Convertible Securities" means any evidences of indebtedness, shares
of stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.

      12.5 "Daily Market Price" means, on any date, the amount per share of the
Common Stock (or, for purposes of determining the Daily Market Price of the
common stock of an Acquiring Person or its Parent under Section 3, the common
stock of such Acquiring Person or such Parent), equal to (i) the daily
volume-weighted average price on the Nasdaq (or, in the case of an Acquiring
Person or its Parent, on the national securities exchange on which such entity's
common stock is admitted for trading) or, if no such sale takes place on such
date, the average of the closing bid and asked prices on the Nasdaq thereof on
such date, in each case as reported by Bloomberg, L.P. (or by such other Person
as the Holder and the Company may agree), or (ii) if such Common Stock or common
stock of an Acquiring Person or its Parent is not then listed or admitted to
trading on the Nasdaq, the higher of (x) the book value per share thereof as
determined by any firm of independent public accountants of recognized standing
selected by the Board of Directors of the Company as of the last calendar day of
any month ending within sixty (60) calendar days preceding the date as of which
the determination is to be made or (y) the fair value per share thereof
determined in good faith by an independent, nationally recognized appraisal firm
selected by the Company and reasonably acceptable to the Holder (whose fees and
expenses shall be borne by Company), subject to adjustment for stock splits,
recombinations, stock dividends and the like.

      12.6 "Excluded Securities" means each of the following:

            (a) Common Stock, Options or Convertible Securities issued in
      connection with the acquisition of a bona fide operating company or assets
      for use in Issuer's business or any business that Issuer proposes to
      engage in following such acquisition, whether through purchase, merger,
      consolidation, tender offer or otherwise, provided that the primary
      purpose of Issuer entering into any such transaction will not be to raise
      capital, directly or indirectly, or otherwise to avoid the anti-dilution
      provisions of this Warrant;


            (b) Except for purposes of Section 2.4, Common Stock issued or
      issuable pursuant to any stock split, dividend or distribution payable in
      additional shares of Common Stock or other securities or rights
      convertible into, or entitling the holder thereof to receive directly or
      indirectly, additional shares of Common Stock without payment of any
      consideration by such holder;


            (c) Common Stock, Options or Convertible Securities issued or
      issuable to employees, consultants or directors of Issuer directly or
      pursuant to a stock option plan, employee stock purchase plan or
      restricted stock plan, or other similar arrangements related to
      compensation for services in effect on the date of the Main Agreement, or


                                       20
<PAGE>
      similar plans or arrangements approved by Issuer's Board of Directors
      after the date of the Main Agreement, in each case in the ordinary course
      of business; provided, that "ordinary course of business" for these
      purposes shall include stock option or warrant grants to officers and
      employees previously employed by the seller or its affiliates in an
      acquisition described in clause (a) above;

            (d) Common Stock issued or issuable upon the exercise of any options
      or warrants to purchase Common Stock outstanding on the date of the Main
      Agreement or upon conversion of any securities convertible into Common
      Stock outstanding on the date of the Main Agreement, in each case in
      accordance with the terms of such options, warrants or securities in
      effect on the date of the Main Agreement;

            (e) Common Stock, Options or Convertible Securities issued or
      issuable to any bank or equipment lessor in a transaction primarily for
      non-equity financing purposes (which transaction, by way of example and
      without limitation, shall not include notes convertible or exchangeable
      for Common Stock or other equity securities of Issuer), provided, that the
      Daily Market Price (determined as of the closing date of such transaction)
      of Common Stock multiplied by the number of shares of Common Stock
      issuable in connection with such transaction or series of related
      transactions (or upon exercise of Options or conversion of Convertible
      Securities issuable in connection with such transaction or series of
      related transactions) shall not exceed ten percent (10%) of the total
      amount of debt financing provided by such bank or equipment lessor in such
      transaction or series of related transactions;

            (f) Common Stock, Options or Convertible Securities issued or
      issuable to strategic partners in transactions primarily for the purposes
      of establishing (1) strategic alliances in the media, advertising, direct
      marketing, entertainment, leisure, retail or wholesale distribution
      industries or (2) contractual relationships with persons who will assist
      in the marketing and promoting of Issuer and its subsidiaries and their
      respective products and services (and not primarily for financing
      purposes);

            (g) Common Stock, Options or Convertible Securities issued or
      issuable in connection with the implementation of a "poison pill" or
      similar anti-takeover mechanism; and

            (h) Common Stock issued or issuable upon exercise of this Warrant.

      12.7 "Issuer" as defined in the introduction to this Warrant, means Alloy,
Inc. and any corporation which shall succeed to or assume the obligations of
Alloy, Inc.

      12.8 "Options" means any rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.

      12.9 "Other Securities" means any stock (other than Common Stock) and
other securities of the Issuer or any other Person (corporate or otherwise)
which the Holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the


                                       21
<PAGE>
Warrants, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities.

      12.10 "Parent" as to any Acquiring Person, means any corporation which (a)
controls the Acquiring Person directly or indirectly through one or more
intermediaries, (b) is required to include the Acquiring Person in the
consolidated financial statements contained in such Parent's Annual Report on
Form 10-K (if Parent is required to file such a report) or would be required to
so include the Acquiring Person in such Parent's consolidated financial
statements if they were prepared in accordance with U.S. GAAP and (c) is not
itself included in the consolidated financial statements of any other Person
(other than its consolidated subsidiaries).

      12.11 "Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.

      12.12 "Registered Common Stock" means Common Stock that has been
registered under the Securities Act and is freely tradable.

      12.13 "Termination Date" means the date set forth in the first paragraph
hereof, provided that the Termination Date shall be extended by one day for each
day over sixty (60) in the aggregate (counting all such instances, regardless of
the length of each such instance) that the Registration Requirement (as defined
in the Main Agreement) is not satisfied.

13. Remedies. The Issuer stipulates that the remedies at law of the Holder of
this Warrant in the event of any default or threatened default by the Issuer in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.

14. No Rights or Liabilities as Stockholder. Nothing contained in this Warrant
shall be construed as conferring upon the Holder hereof any rights as a
stockholder of the Issuer or as imposing any obligation on such Holder to
purchase any securities or as imposing any liabilities on such Holder as a
stockholder of the Issuer, whether such obligation or liabilities are asserted
by the Issuer or by creditors of the Issuer.

15. Notices. All notices and other communications under this Warrant shall be in
writing and shall be delivered by a nationally recognized overnight courier,
postage prepaid, addressed (a) if to Holder or the Issuer, in the manner
provided in the Main Agreement, or (b) if to any other Holder of any Warrant, at
the registered address of such Holder as set forth in the register kept at the
principal office of the Issuer, provided that the exercise of any Warrant shall
be effective in the manner provided in Section 1.

16. Amendments. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.

17. Descriptive Headings. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.


                                       22
<PAGE>
18. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE
OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

19. Judicial Proceedings; Waiver of Jury. Any judicial proceeding brought
against the Issuer with respect to this Warrant may be brought in any court of
competent jurisdiction in the State of New York or of the United States of
America for the Southern District of New York and, by execution and delivery of
this Warrant, each of the Issuer and Holder (a) accepts, generally and
unconditionally, the nonexclusive jurisdiction of such courts and any related
appellate court, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Warrant, subject to any rights of appeal, and
(b) irrevocably waives any objection the Issuer or Holder may now or hereafter
have as to the venue of any such suit, action or proceeding brought in such a
court or that such court is an inconvenient forum. Each of the Issuer and Holder
hereby waives personal service of process and consents, that service of process
upon it may be made by certified or registered mail, return receipt requested,
at its address specified or determined in accordance with the provisions of
Section 15, and service so made shall be deemed completed on the third Business
Day after such service is deposited in the mail or, if earlier, when delivered.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of any party to bring proceedings
against the other party in the courts of any other jurisdiction. EACH PARTY
HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS WARRANT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.

    This Warrant Certificate shall not be valid unless signed by the Issuer.

                  [REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]


                                       23
<PAGE>
      IN WITNESS WHEREOF, Alloy, Inc. has caused this Warrant Certificate to be
signed by its duly authorized officer.


Dated: January 28, 2002                ALLOY, INC.



                                       By: /s/ Samuel A. Gradess
                                          --------------------------------------
                                       Name: Samuel A. Gradess
                                       Title: Chief Financial Officer
<PAGE>
                                                                       EXHIBIT 1


                        [FORM OF WARRANT EXERCISE NOTICE]

                  (To Be Executed Upon Exercise Of the Warrant)


                                     [DATE]


Alloy, Inc.
151 West 26th Street
New York, NY 10001
Attention:  Chief Financial Officer

               Re:    Warrant No. W-[  ]

Ladies and Gentlemen:

      The undersigned is the registered Holder of the above-referenced warrant
(the "Warrant") issued by Alloy, Inc. (the "Issuer"), evidenced by copy of the
Warrant Certificate attached hereto, and hereby elects to exercise the Warrant
to purchase [___________](2) Common Shares (as defined in such Warrant
Certificate) [cash exercise: and shall deliver on the Warrant Closing Date via
wire transfer of immediately available funds or by certified or official bank
check] [cashless exercise: and, pursuant to Section 1.1(b) of the Warrant
Certificate shall be deemed to have tendered] $ by wire transfer or by certified
or official bank check to the order of Alloy, Inc. as payment for such Common
Shares in accordance with the terms of such Warrant Certificate.

      In accordance with the terms of the attached Warrant Certificate, the
undersigned requests that certificates for such shares be registered in the name
of and delivered to the undersigned at the following address:

                        [Ms. Ele Stathatos
                        c/o Lehman Brothers Inc.
                        101 Hudson Street
                        Jersey City, NJ 07302
                        Telephone:  (201) 524-5628]

      The undersigned will deliver the original of the Warrant Certificate no
later than the second Business Day after and excluding the date of this notice.


----------

(2)   Insert here the number of shares called for on the face of this Warrant
      (or, in the case of a partial exercise, the portion thereof as to which
      this Warrant is being exercised), in either case without making any
      adjustment for Additional Shares of Common Stock or any other stock or
      other securities or property or cash which, pursuant to the adjustment
      provisions of this Warrant, may be delivered upon exercise. In the case of
      partial exercise, a new Warrant or Warrants will be issued and delivered,
      representing the unexercised portion of the Warrant, to the Holder
      surrendering the Warrant.
<PAGE>
      [If the number of Common Shares to be delivered is less than the total
number of Common Shares deliverable under the Warrant, insert the following --
The undersigned requests that a new warrant certificate substantially identical
to the attached Warrant Certificate be issued to the undersigned evidencing the
right to purchase the number of Common Shares equal to (x) the total number of
Common Shares deliverable under the Warrant less (y) [_____________](3).]

                                       [FLETCHER INTERNATIONAL, LTD., by its
                                       duly authorized investment advisor,
                                       FLETCHER ASSET MANAGEMENT, INC.]


                                       By:
                                          --------------------------------------
                                       Name:
                                       Title:



                                       By:
                                          --------------------------------------
                                       Name:
                                       Title:


ACKNOWLEDGED:

ALLOY, INC.


By:
   ------------------------------
Name:
Title:


----------

(3)   Insert here the number of shares identified in the footnote immediately
      preceding this one.


                                       2
<PAGE>
                                                                       EXHIBIT 2


                   [FORM OF WARRANT EXERCISE DELIVERY NOTICE]


                                     [Date]



Fletcher International, Ltd.
c/o Fletcher Asset Management, Inc.
22 East 67th Street
New York, NY  10021
Attention: [Peter Zayfert]
Telephone: (212) 284-4800
Facsimile: (212) 284-4801

Ladies and Gentlemen:

      Reference is made to the Agreement (the "Main Agreement") dated as of
January 25, 2002 by and between Alloy, Inc. ("Alloy") and Fletcher
International, Ltd. Capitalized terms not otherwise defined herein shall have
the meanings ascribed thereto in the Main Agreement.

      This notice confirms that the Warrant has been exercised by the Holder
with respect to ______________ shares of Common Stock at a Warrant Price (as
defined in the Warrant Certificate) of $_____________. Attached are copies of
the front and back of the _________ original stock certificates, each
representing ___________ shares of Common Stock, together with a copy of the
overnight courier air bill which will be used to ship such stock certificates.
Also attached is a reissued warrant certificate, as provided in Section 1.5 of
the Warrant Certificate. We will send the original stock certificates by
overnight courier to the following address:

                        [TO COME]

                        with a copy to:

                        Fletcher International, Ltd.
                        c/o Fletcher Asset Management, Inc.
                        22 East 67th Street
                        New York, NY  10021-5805
                        Attention: Peter Zayfert
<PAGE>
                                       ALLOY, INC.



                                       By:
                                          --------------------------------------
                                       Name:
                                       Title:


                                       2
<PAGE>
Exhibit 1: Form of Warrant Exercise Notice......................................

Exhibit 2: Form of Warrant Exercise Delivery Notice.............................
<PAGE>
                                   ALLOY, INC.



                               WARRANT CERTIFICATE



                          DATED AS OF JANUARY [ ], 2002