Document:

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                                                                     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-[  ]                                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 [       ],(1) 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 [       ] 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)   10th anniversary of the warrant issuance date.
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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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                  (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

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                              (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 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

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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.

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      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

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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

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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

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                  (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,

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                  (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 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 the date of the
            Main Agreement, 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) 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 __, 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<PAGE>
                                                                    EXHIBIT 10.3

                                 FIREPOND, INC.
                              AMENDED AND RESTATED
                                 1997 STOCK PLAN

<PAGE>

                                 FIREPOND, INC.
                      AMENDED AND RESTATED 1997 STOCK PLAN

SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS

     The name of this plan is the Firepond, Inc. 1997 Stock Plan (the "Plan").
The purpose of the Plan is to enable Firepond, Inc. (the "Company") to retain
and attract executives and other key employees, directors and consultants who
contribute to the Company's success by their ability, ingenuity and industry,
and to enable such individuals to participate in the long-term success and
growth of the Company by giving them a proprietary interest in the Company.

     For purposes of the Plan, the following terms shall be defined as set forth
below:

     a.   "BOARD" means the Board of Directors of the Company as it may be
          comprised from time to time.

     b.   "CAUSE" means means (i) any material breach by the optionee of any
          agreement to which the optionee and the Company or its Subsidiaries
          are parties, including breach of covenants not to compete and
          covenants relating to the protection of confidential information and
          proprietary rights of the Company or its Subsidiaries which breach is
          not cured pursuant to the terms of such agreement, (ii) any act (other
          than retirement) or omission to act by the optionee which would
          reasonably be likely to have a material adverse effect on the business
          of the Company or its Subsidiaries or on the optionee's ability to
          perform services for the Company or its Subsidiaries, including,
          without limitation, the conviction or plea of guilty or nolo contendre
          to any crime (other than ordinary traffic violations) which impairs
          the optionee's ability to perform his or her duties, (iii) any
          material misconduct or willful and deliberate non-performance of
          duties by the optionee in connection with the business or affairs of
          the Company or its Subsidiaries, (iv) the optionee's theft,
          dishonesty, or falsification of the Company's or its Subsidiaries'
          documents or records, or (v) the optionee's improper use or disclosure
          of the Company's or its Subsidiaries' confidential or proprietary
          information. All references herein to the Company or its Subsidiaries
          shall include any successor entity thereof.

     c.   "CODE" means the Internal Revenue Code of 1986, as amended from time
          to time, or any successor statute.

     d.   "COMMITTEE" means the Committee referred to in Section 2 of the Plan.
          If at any time no Committee shall be in office, then the functions of
          the Committee specified in the Plan shall be exercised by the Board,
          unless the Plan specifically states otherwise.

     e.   "CONSULTANT" means any person, including an advisor, engaged by the
          Company or a Parent Corporation or a Subsidiary of the Company to
          render services and who is compensated for such services and who is
          not an employee of the Company or any Parent Corporation or Subsidiary
          of the Company. A director who is not an employee may serve as a
          Consultant.

     f.   "COMPANY" means Firepond, Inc., a corporation organized under the laws
          of the State of Delaware (or any successor corporation).

     g.   "DEFERRED STOCK" means an award made pursuant to Section 8 below of
          the right to receive stock at the end of a specified deferral period.

<PAGE>
     h.   "DISABILITY" means permanent and total disability as determined by the
          Committee.

     i.   "EARLY RETIREMENT" means retirement, with consent of the Committee at
          the time of retirement, from active employment with the Company and
          any Subsidiary or Parent Corporation of the Company.

     j.   "FAIR MARKET VALUE" of Stock on any given date shall be determined by
          the Committee as follows:

          (a)  if the Stock is listed for trading on one or more national
               securities exchanges, or is traded on The Nasdaq Stock Market,
               the last reported sales price on the principal such exchange or
               The Nasdaq Stock Market on the date in question, or if such Stock
               shall not have been traded on such principal exchange on such
               date, the last reported sales price on such principal exchange or
               The Nasdaq Stock Market on the first day prior thereto on which
               such Stock was so traded, or

          (b)  if the Stock is not listed for trading on a national securities
               exchange or The Nasdaq Stock Market, but is traded in the
               over-the-counter market, including The Nasdaq Small Cap Market,
               the closing bid price for such Stock on the date in question, or
               if there is no such bid price for such Stock on such date the
               closing bid price on the first day prior thereto on which such
               price existed; or

          (c)  if neither (a) or (b) is applicable, by any means fair and
               reasonable by the Committee, which determination shall be final
               and binding on all parties.

     k.   "INCENTIVE STOCK OPTION" means any Stock Option intended to be and
          designated as an "Incentive Stock Option" within the meaning of
          Section 422 of the Code.

     l.   "NON-EMPLOYEE DIRECTOR" shall have the meaning set forth in Rule
          16b-3(b)(3) as promulgated by the Securities and Exchange Commission
          under the Securities Exchange Act of 1934, as amended, or any
          successor definition adopted by the Commission.

     m.   "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
          Incentive Stock Option, and is intended to be and is designated as a
          "Non-Qualified Stock Option."

     n.   "NORMAL RETIREMENT" means retirement from active employment with the
          Company and any Subsidiary or Parent Corporation of the Company on or
          after age 65.

     o.   "OUTSIDE DIRECTOR" means a director who

          (a)  is not a current employee of the Company or any member of an
               affiliated group which includes the Company,

          (b)  is not a former employee of the Company who receives compensation
               for prior services (other than benefits under a tax-qualified
               retirement plan) during the taxable year,

          (c)  has not been an officer of the Company;

          (d)  does not receive remuneration from the Company, either directly
               or indirectly, in any capacity other than as a director, except
               as otherwise permitted under Code Section 162(m) and regulations
               thereunder. For this purpose, remuneration includes any

<PAGE>

               payment in exchange for goods or services. This definition shall
               be further governed by the provisions of Code Sections 162(m) and
               regulations promulgated thereunder.

     p.   "PARENT CORPORATION" means any corporation (other than the Company) in
          an unbroken chain of corporations ending with the Company if each of
          the corporations (other than the Company) owns stock possessing 50% or
          more of the total combined voting power of all classes of stock in one
          of the other corporations in the chain.

     q.   "RESTRICTED STOCK" means an award of shares of Stock that are subject
          to restrictions under Section 7 below.

     r.   "RETIREMENT" means Normal Retirement or Early Retirement.

     s.   "STOCK" means the Common Stock of the Company.

     t.   "STOCK APPRECIATION RIGHT" means the right pursuant to an award
          granted under Section 6 below to surrender to the Company all or a
          portion of a Stock Option in exchange for an amount equal to the
          difference between

          (i)  Fair Market Value, as of the date such Stock Option or such
               portion thereof is surrendered, of the shares of Stock covered by
               such Stock Option or such portion thereof and

          (ii) the aggregate exercise price of such Stock Option or such portion
               thereof.

     u.   "STOCK OPTION" means any option to purchase shares of Stock granted
          pursuant to Section 5 below.

     v.   "SUBSIDIARY" means any corporation (other than the Company) in an
          unbroken chain of corporations beginning with the Company if each of
          the corporations (other than the last corporation in the unbroken
          chain) owns stock possessing 50% or more of the total combined voting
          power of all classes of stock in one of the other corporations in the
          chain.

     w.   "TRANSACTION" means the dissolution or liquidation of the Company,
          (ii) the sale of all or substantially all of the assets of the Company
          on a consolidated basis to an unrelated person or entity, (iii) a
          merger, reorganization or consolidation between the Company and
          another person or entity (other than a holding company or Subsidiary
          of the Company) as a result of which, the holders of the Company's
          outstanding voting power immediately prior to such transaction do not
          own a majority of the outstanding voting power of the surviving or
          resulting entity immediately upon completion of such transaction, (iv)
          the sale of all of the Stock of the Company to an unrelated person or
          entity or (v) any other transaction in which the owners of the
          Company's outstanding voting power prior to such transaction do not
          own at least a majority of the outstanding voting power of the
          relevant entity after the transaction, in each case, regardless of the
          form thereof

SECTION 2. ADMINISTRATION.

     The Plan shall be administered by the Board of Directors or by a Committee
of not less than two directors, all of whom shall be Non-Employee Directors upon
the Company becoming subject to the insider reporting requirements of Section 16
of the Securities Exchange Act of 1934, as amended, and also Outside Directors
upon the Company becoming subject to the requirements of Rule 162(m) of the
Code. Committee members shall be appointed by the Board of Directors of the
Company and shall serve

<PAGE>

at the pleasure of the Board. Any and all functions of the Committee specified
in the Plan may be exercised by the Board, unless the Plan specifically states
otherwise.

     The Committee shall have the power and authority to grant to eligible
employees, directors or Consultants, pursuant to the terms of the Plan: (i)Stock
Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, or (iv)Deferred
Stock awards. In particular, the Committee shall have the authority:

              (i)    to select the officers, directors and other key employees
                     of the Company and its Subsidiaries and other eligible
                     persons to whom Stock Options, Stock Appreciation Rights,
                     Restricted Stock and Deferred Stock awards may from time to
                     time be granted hereunder;

              (ii)   to determine whether and to what extent Incentive Stock
                     Options, Non-Qualified Stock Options, Stock Appreciation
                     Rights, Restricted Stock and Deferred Stock awards, or a
                     combination of the foregoing, are to be granted hereunder,

              (iii)  to determine the number of shares to be covered by each
                     such award granted hereunder,

              (iv)   to determine the terms and conditions, not inconsistent
                     with the terms of the Plan, of any award granted hereunder
                     (including but not limited to, any restriction on any Stock
                     Option or other award and/or the shares of Stock relating
                     thereto), which authority shall be exclusively vested in
                     the Committee (and not the Board) for purposes of
                     establishing performance criteria used with Restricted
                     Stock and Deferred Stock awards provided, however, in the
                     event of a merger or asset sale, the applicable provisions
                     of Sections 5(c) and 7(c) of the Plan shall govern. the
                     acceleration of the vesting of any Stock option or awards;

              (v)    to determine whether, to what extent and under what
                     circumstances Stock and other amounts payable with respect
                     to an award under this Plan shall be deferred either
                     automatically or at the election of the participant.

     The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
form time to time, deem advisable; to interpret the terms and provisions of the
Plan as it shall, from time to time, deem advisable; to interpret the terms and
provisions of the Plan and any award issued under the Plan (and any agreements
relating thereto); and to otherwise supervise the administration of the Plan.
The Committee may delegate to executive officers of the Company the authority to
exercise the powers specified in (i), (ii), (iii), (iv) and (v) above with
respect to persons who are not executive officers of the Company.

     All decisions made by the Committee pursuant to the provisions of the Plan
shall be final and binding on all persons, including the Company and Plan
participants.

SECTION 3. STOCK SUBJECT TO PLAN.

     The total number of shares of Stock reserved and available for distribution
under the Plan shall be 14,095,222. Such shares may consist, in whole or in
part, of authorized and unissued shares.

     Subject to paragraph (b)(iv) of Section 6 below, if any shares that have
been optioned cease to be subject to Stock Options or if any shares subject to
any Restricted Stock or Deferred Stock award granted hereunder are forfeited or
such award otherwise terminates without a payment being made to the participant,
such shares shall again be available for distribution in connection with future
awards under the Plan.

<PAGE>

     In the event of any merger; reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding options granted under the Plan, and in the number of
shares subject to Restricted Stock or Deferred Stock awards granted under the
Plan as may be determined by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.
Such adjusted option price shall also be used to determine the amount payable by
the Company upon the exercise of any Stock Appreciation Right associated with
any Option.

SECTION 4. ELIGIBILITY

     Officers, directors, other key employees of the Company and Subsidiaries,
and Consultants who are responsible for or contribute to the management, growth
and profitability of the business of the Company and its Subsidiaries are
eligible to be granted Stock Options, Stock Appreciation Rights, Restricted
Stock or Deferred Stock awards under the Plan. The optionees and participants
under the Plan shall be selected from time to time by the Committee, in its sole
discretion, from among those eligible, and the Committee shall determine, in its
sole discretion, the number of shares covered by each award.

     Notwithstanding the foregoing, upon the Company becoming subject to the
requirements of Section 162(m) of the Code, no person shall receive grants or
awards under this Plan which exceed 1,500,000 shares during any fiscal year of
the Company.

SECTION 5. STOCK OPTIONS.

     Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

     The Stock Options granted under the Plan may be of two types: (i)Incentive
Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock Options
shall be granted under the Plan after May 7, 2007.

     The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options (in each
case with or without Stock Appreciation Rights). To the extent that any option
does not qualify its an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.

     Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
as to disqualify either the Plan or any Incentive Stock Option under Section 422
of the Code. The preceding sentence shall not preclude any modification or
amendment to an outstanding Incentive Stock Option, whether or not such
modification or amendment results in disqualification of such Stock Option as an
Incentive Stock Option provided the optionee consents in writing to the
modification or amendment.

     Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.

          (a)  OPTION PRICE. The option price per share of Stock purchasable
               under a Stock Option shall be determined by the Committee at the
               time of grant. In no event shall

<PAGE>

               the option price per share of Stock purchasable under an
               Incentive Stock Option be less than 100% of Fair Market Value on
               the date the option is granted. If an employee owns or is deemed
               to own (by reason of the attribution rules applicable under
               Section 424(d) of the Code) more than 10% of the combined voting
               power of all classes of stock of the Company or any Parent
               Corporation or Subsidiary and an Incentive Stock Option is
               granted to such employee, the option price shall be no less than
               110% of the Fair Market Value of the Stock on the date the option
               is granted.

          (b)  OPTION TERM. The term of each Stock Option shall be fixed by the
               Committee, but no Incentive Stock Option shall be exercisable
               more than ten years after the date the option is granted. If an
               employee owns or is deemed to own (by reason of the attribution
               rules of Section 424(d) of the Code) more than10% of the combined
               voting power of all classes of stock of the Company or any Parent
               Corporation or Subsidiary and an Incentive Stock Option is
               granted to such employee, the term of such option shall be no
               more than five years from the date of grant.

          (c)  EXERCISABILITY. Stock Options shall be exercisable at such time
               or times as determined by the Committee at or after grant. If the
               Committee provides, in its discretion, that any option is
               exercisable only in installments, the Committee may waive such
               installment exercise provisions at any time, provided, however,
               that upon the Company becoming subject to the requirements of
               Section 16 of the Securities Exchange Act of 1934, as amended, a
               Stock Option granted to an officer, director or 10% shareholder
               of the Company shall not be exercisable for a period of six (6)
               months after the date of grant UNLESS the Stock Option has been
               approved by the Board, the ------ Committee or shareholders of
               the Company. Notwithstanding anything contained in the Plan to
               the contrary, the Committee may, in its discretion, accelerate,
               extend or vary the term of any Stock Option or any installment
               thereof, whether or not the optionee is then employed by the
               Company, if such action is deemed to be in the best interests of
               the Company

               The grant of an option pursuant to the Plan shall not limit in
          any way the right or power of the Company to make adjustments,
          reclassifications, reorganizations or changes of its capital or
          business structure or to merge, exchange or consolidate or to
          dissolve, liquidate, sell or transfer all or any part of its business
          or assets.

          (d)  METHOD OF EXERCISE. Stock Options may be exercised in whole or in
               part at any time during the option period by giving written
               notice of exercise to the Company specifying the number of shares
               to be purchased. Such notice shall be accompanied by payment in
               full of the purchase price, either by check, or by any other form
               of legal consideration deemed sufficient by the Committee and
               consistent with the Plan's purpose and applicable law, including
               promissory notes or a properly executed exercise notice together
               with irrevocable instructions to a broker acceptable to the
               Company to promptly deliver to the Company the amount of sale or
               loan proceeds to pay the exercise price. As determined by the
               Committee at the time of grant or exercise, in its sole
               discretion, payment in full or in part may also be made in the
               form of Stock already owned by the optionee (which in the case of
               Stock acquired upon exercise of an option have been owned for
               more than six months on the date of surrender)or, in the case of
               the exercise of a Non-Qualified Stock Option, Restricted Stock or
               Deferred Stock subject to an award hereunder (based, in each
               case, on the Fair Market Value of the Stock on the date the
               option is exercised, as determined by the Committee), provided,
               however, that, in the case of an Incentive Stock Option, the
               right to make a payment in the form of already owned shares may
               be authorized only at the time the option is granted, and
               provided further that in the event payment is made in the form of
               shares of Restricted Stock or a Deferred Stock award, the

<PAGE>

               optionee will receive a portion of the option shares in the form
               of and in an amount equal to, the Restricted Stock or Deferred
               Stock award tendered as payment by the optionee. If the terms of
               an option so permit, an optionee may elect to pay all or part of
               the option exercise price by having the Company withhold from the
               shares of Stock that would otherwise be issued upon exercise that
               number of shares of Stock having a Fair Market Value equal to the
               aggregate option exercise price for the shares with respect to
               which such election is made. No shares of Stock shall be issued
               until full payment therefor has been made. An optionee shall
               generally have the rights to dividends and other rights of a
               shareholder with respect to shares subject to the option when the
               optionee has given written notice of exercise, has paid in full
               for such shares, and, if requested, has given the representation
               described in paragraph (a) of Section 12.

          (e)  NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be
               transferable by the optionee otherwise than by will or by the
               laws of descent and distribution, and all Stock Options shall be
               exercisable, during the optionee's lifetime, only by the optionee
               or by the optionee's legal representative or guardian in the
               event of the optionee's incapacity. Notwithstanding the
               foregoing, the Board in its sole discretion may provide in any
               Stock Option agreement that the optionee may transfer, without
               consideration for the transfer, his or her Non-Qualified Stock
               Options to members of his or her immediate family, to trusts for
               the benefit of such family members, or to partnerships in which
               such family members are the only partners or to limited liability
               companies in which such family members are the only members,
               provided that the transferee agrees in writing with the Company
               to be bound by all of the terms and conditions of this Plan and
               the applicable Option.

          (f)  TERMINATION BY DEATH. Unless otherwise provided by the Committee,
               if an optionee's employment by the Company and any Subsidiary or
               Parent Corporation terminates by reason of death, the Stock
               Option may thereafter be immediately exercised, to the extent
               then exercisable, by the legal representative of the estate or by
               the legatee of the optionee under the will, of the optionee, for
               a Period of three months from the date of such death or until the
               expiration of the stated term of the option, whichever period is
               shorter.

          (g)  TERMINATION BY REASON OF DISABILITY. Unless otherwise provided by
               the Committee, if an optionee's employment by the Company and any
               Subsidiary or Parent Corporation terminates by reason of
               Disability, any Stock Option held by such optionee may thereafter
               be exercised, to the extent it was exercisable at the time of
               termination due to Disability, but may not be exercised after
               twelve months from the date of such termination of employment or
               the expiration of the stated term of the option, whichever period
               is the shorter. In the event of termination of employment by
               reason of Disability, if an Incentive Stock Option is exercised
               after the expiration of the exercise periods that apply for
               purposes of Section 422 of the Code, the option will thereafter
               be treated as a Non-Qualified Stock Option.

          (h)  TERMINATION BY REASON OF RETIREMENT. Unless otherwise provided by
               the Committee, if an optionee's employment by the Company and any
               Subsidiary or Parent Corporation terminates by reason of
               Retirement and the terms of the Stock Option so provide, any
               Stock Option held by such optionee may thereafter be exercised to
               the extent it was exercisable at the time of such Retirement, but
               may not be exercised after three months from the date of such
               termination of employment or the expiration of the stated term of
               the option, whichever period is the shorter. In the event of
               termination of employment by reason of Retirement, if an
               Incentive Stock Option is exercised after the expiation of the
               exercise periods that apply for purposes

<PAGE>

               of Section 422 of the Code, the option will thereafter be treated
               as a Non-Qualified Stock Option.

          (i)  OTHER TERMINATION. In the event an optionee's continuous status
               as an employee or Consultant terminates (other than upon the
               optionee's death, Retirement or Disability), the optionee may
               exercise his or her Option, but only within such period of time
               as is determined by the Committee, and only to the extent that
               the optionee was entitled to exercise it at the date of
               termination(but in no event later than the expiration of the term
               of such Option as set forth in the Notice of Grant). In the case
               of an Incentive Stock Option, the Committee shall determine such
               period of time when the Option is granted. If such period of time
               with respect to an Incentive Stock Option exceeds 90 days and the
               Option is exercised after 90 days from the date of termination,
               such Option shall thereafter be treated as a Non-Qualified Stock
               Option. In the event an optionee's employment with the Company is
               terminated for Cause, or under such other circumstances as the
               Committee shall define in the option grant, all Stock Options
               granted to such optionee shall immediately terminate.

          (j)  ANNUAL LIMIT ON INCENTIVE STOCK OPTION. The aggregate Fair Market
               Value (determined as of the time the Stock Option is granted) of
               the Common Stock with respect to which an Incentive Stock Option
               under this Plan or any other plan of the Company and any
               Subsidiary or Parent Corporation is exercisable for the first
               time by an optionee during any calendar year shall not exceed
               $100,000.

          (k)  DIRECTORS. The Board of Directors may amend this Plan to provide
               for annual automatic grants to directors who are not employees of
               the Company upon such terms and conditions as the Board deems
               advisable. In the event discretionary Stock Options are granted
               to members of the Committee, such Stock Options shall be granted
               by the Board.

SECTION 6. STOCK APPRECIATION RIGHTS.

     (a)  GRANT AND EXERCISE. Stock Appreciation Rights may be granted in
          conjunction with all or part of any Stock Option granted under the
          Plan. In the case of a Non-Qualified Stock Option, such rights may be
          granted either at or after the time of the grant of such Option. In
          the case of an Incentive Stock Option, such rights may be granted only
          at the time of the grant of the Stock Option.

     In the event Stock Appreciation Rights are granted to members of the
Committee, such rights shall be granted by the Board.

     A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that a
Stock Appreciation Right granted with respect to less than the full number of
shares covered by a related stock Option shall not be reduced until the exercise
or termination of the related Stock Option exceeds the number of shares not
covered by the Stock Appreciation Right.

     A Stock Appreciation Right may be exercised by an optionee, in accordance
with paragraph (b) of this Section 6, by surrendering the applicable portion of
the related Stock Option. Upon such exercise and surrender, the optionee shall
be entitled to receive an amount determined in the manner prescribed in
paragraph (b) of this Section 6. Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.

<PAGE>

     (b)  TERMS AND CONDITIONS. Stock Appreciation Rights shall be subject to
          such terms and conditions, not inconsistent with the provisions of the
          Plan, as shall be determined from time to time by the Committee,
          including the following: Stock Appreciation Rights shall be
          exercisable only at such time or times and to the extent that the
          Stock Options to which they relate shall be exercisable in accordance
          with the provisions of Section 5 and this Section 6 of the Plan.

              (i)    Upon the exercise of a Stock Appreciation Right, an
                     optionee shall be entitled to receive up to, but not more
                     than, an amount in cash or shares of Stock equal in value
                     to the excess of the Fair Market Value of one share of
                     Stock over the option price per share specified in the
                     related option multiplied by the number of shares in
                     respect of which the Stock Appreciation Right shall have
                     been exercised, with the Committee having the right to
                     determine the form of payment.

              (ii)   Stock Appreciation Rights shall be transferable only when
                     and to the extent that the underlying Stock Option would be
                     transferable under Section 5 of the Plan.

              (iii)  Upon the exercise of a Stock Appreciation Right, the Stock
                     Option or part thereof to which such Stock Appreciation
                     Right is related shall be deemed to have been exercised for
                     the purpose of the limitation set forth in Section 3 of the
                     Plan on the number of shares of Stock to be issued under
                     the Plan, but only to the extent of the number of shares
                     issued or issuable under the Stock Appreciation Right at
                     the time of exercise based on the value of the Stock
                     Appreciation Right at such time.

              (iv)   A Stock Appreciation Right granted in connection with an
                     Incentive Stock Option may be exercised only if and when
                     the market price of the Stock subject to the Incentive
                     Stock Option exceeds the exercise price of such Option.

SECTION 7. RESTRICTED STOCK.

     (a)  ADMINISTRATION. Shares of Restricted Stock may be issued either alone
          or in addition to other awards granted under the Plan. The Committee
          shall determine the officers, directors, key employees and Consultants
          of the Company and Subsidiaries to whom, and the time or times at
          which, grants of Restricted Stock will be made, the number of shares
          to be awarded, the time or times within which such awards may be
          subject to forfeiture, and all other conditions of the awards. The
          Committee may also condition the grant of Restricted Stock upon the
          attainment of specified performance goals. The provisions of
          Restricted Stock awards need not be the same with respect to each
          recipient.

     In the event Restricted Stock awards are granted to members of the
Committee, such awards shall be granted by the Board.

     (b)  AWARDS AND CERTIFICATES. The prospective recipient of an award of
          shares of Restricted Stock shall not have any rights with respect to
          such award, unless and until such recipient has executed an agreement
          evidencing the award and has delivered a fully executed copy thereof
          to the Company, and has otherwise complied with the then applicable
          terms and conditions.

              (i)    Each participant shall be issued a stock certificate in
                     respect of shares of Restricted Stock awarded under the
                     Plan. Such certificate shall be registered in the name of
                     the participant and shall bear an appropriate legend
                     referring to the

<PAGE>

                     terms, conditions, and restrictions applicable to such
                     award, substantially in the following form:

                            "The transferability of this certificate and the
                     shares of stock represented hereby are subject to the terms
                     and conditions (including forfeiture) of the Firepond, Inc.
                     1997 Stock Plan and an Agreement entered into between the
                     registered owner and Firepond, Inc. Copies of such Plan and
                     Agreement are on file in the offices of Firepond, Inc.,
                     Waltham Woods Corporate Center, 890 Winter Street, Waltham,
                     MA 02451."

              (ii)   The Committee shall require that the stock certificates
                     evidencing such shares be held in custody by the Company
                     until the restrictions thereon shall have lapsed, and that,
                     as a condition of any Restricted Stock award, the
                     participant shall have delivered a stock power, endorsed in
                     blank, relating to the Stock covered by such award.

     (c)  RESTRICTIONS AND CONDITIONS. The shares of Restricted Stock awarded
          pursuant to the Plan shall be subject to the following restrictions
          and conditions:

              (i)    Subject to the provisions of this Plan and the award
                     agreement, during a period set by the Committee commencing
                     with the date of such award (the "Restriction Period"), the
                     participant shall not be permitted to sell, transfer,
                     pledge or assign shares of Restricted Stock awarded under
                     the Plan. Within these limits, the Committee may provide
                     for the lapse of such restrictions in installments where
                     deemed appropriate.

              (ii)   Except as provided in paragraph (c)(i) of this Section
                     7,the participant shall have, with respect to the shares of
                     Restricted Stock all of the rights of a shareholder of the
                     Company, including the right to vote the shares and the
                     right to receive any cash dividends. The Committee, in its
                     sole discretion, may permit or require the payment of cash
                     dividends to be deferred and, if the Committee so
                     determines, reinvested in additional shares of Restricted
                     Stock (to the extent shares are available under Section 3
                     and subject to paragraph (f) of Section 12). Certificates
                     for shares of unrestricted Stock shall be delivered to the
                     grantee promptly after, and only after, the period of
                     forfeiture shall have expired without forfeiture in respect
                     of such shares of Restricted Stock.

              (iii)  Subject to the provisions of the award agreement and
                     paragraph (c)(iv) of this Section 7, upon termination of
                     employment directorship (if the award was based on services
                     as a director) or consulting relationship for any reason
                     during the Restriction Period, all shares still subject to
                     restriction shall be forfeited by the participant.

              (iv)   In the event of special hardship circumstances of a
                     participant whose employment is unforeseeable emergency of
                     a participant still in service, the Committee may, in its
                     sole terminated (other than for Cause),including death,
                     Disability or Retirement or in the event of an discretion,
                     when it finds that a waiver would be in the best interest
                     of the Company, waive in whole or in part any or all
                     remaining restrictions with respect to such participant's
                     shares of Restricted Stock.

              (v)    Notwithstanding anything contained in the Plan to the
                     contrary, the Committee may, in its discretion, accelerate,
                     extend or vary the terms or the lapsing of the

<PAGE>

                     restrictions placed on any Restricted Stock award granted
                     pursuant to this Plan if such action is deemed to be in the
                     best interests of the Company.

SECTION 8. DEFERRED STOCK AWARDS.

     (a)  ADMINISTRATION. Deferred Stock may be awarded either alone or in
          addition to other awards granted under the Plan. The Committee shall
          determine the officers, directors, key employees and Consultants of
          the Company and Subsidiaries to whom and the time or times at which
          Deferred Stock shall be awarded, the number of Shares of Deferred
          Stock to be awarded to any participant or group of participants, the
          duration of the period (the "Deferral Period") during which and the
          conditions under which, receipt of the Stock will be deferred, and the
          terms and conditions of the award in addition to those contained in
          paragraph (b) of this Section 8. The Committee may also condition the
          grant of Deferred Stock upon the attainment of specified performance
          goals. The provisions of Deferred Stock awards need not be the same
          with respect to each recipient.

     In the event Deferred Stock awards are granted to members of the Committee,
such awards shall be granted by the Board.

     (b)  TERMS AND CONDITIONS

              (i)    Subject to the provisions of this Plan and the award
                     agreement, Deferred Stock awards may not be sold, assigned,
                     transferred, pledged or otherwise encumbered during the
                     Deferral Period. At the expiration of the Deferral Period
                     (or Elective Deferral Period, where applicable), share
                     certificates shall be delivered to the participant, or his
                     legal representative, in a number equal to the shares
                     covered by the Deferred Stock award.

              (ii)   Amounts equal to any dividends declared during the Deferral
                     Period with respect to the number of shares covered by a
                     Deferred Stock award will be paid to the participant
                     currently or deferred and deemed to be reinvested in
                     additional Deferred Stock or otherwise reinvested, all as
                     determined at the time of the award by the Committee, in
                     its sole discretion.

              (iii)  Subject to the provisions of the award agreement and
                     paragraph (b)(iv) of this Section 8, upon termination of
                     employment, directorship (if the award was based on
                     services as a director) or consulting relationship for any
                     reason during the Deferral Period for a given award, the
                     Deferred Stock in question shall be forfeited by the
                     participant.

              (iv)   In the event of special hardship circumstances of a
                     participant whose employment is terminated (other than for
                     Cause) including death, Disability or Retirement, or in the
                     event of an unforeseeable emergency of a participant still
                     in service, the Committee may, in its sole discretion, when
                     it finds that a waiver would be in the best interest of the
                     Company, waive in whole or in part any or all of the
                     remaining deferral limitations imposed hereunder with
                     respect to any or all of the participant's Deferred Stock.

              (v)    A participant may elect to further defer receipt of the
                     award for a specified period or until a specified event
                     (the "Elective Deferral Period"), subject in each case to
                     the Committee's approval and to such terms as are
                     determined by the Committee, all in its sole discretion.
                     Subject to any exceptions adopted by the Committee, such
                     election must generally be made prior to completion of one
                     half

<PAGE>

                     of the Deferral Period for a Deferred Stock award (or for
                     an installment of such an award).

              (vi)   Each award shall be confirmed by, and subject to the terms
                     of, a Deferred Stock agreement executed by the Company and
                     the participant.

SECTION 9. TRANSFER LEAVE OF ABSENCE, ETC.

       For purposes of the Plan, the following events shall not be deemed a
termination of employment:

               (a)  a transfer of an employee from the Company to a Parent
                    Corporation or Subsidiary, or from a Parent Corporation or
                    Subsidiary to the Company, or from one Subsidiary to
                    another;

               (b)  a leave of absence, approved in writing by the Committee,
                    for military service or sickness, or for any other purpose
                    approved by the Company if the period of such leave does not
                    exceed ninety (90) days (or such longer period as the
                    Committee may approve, in its sole discretion); and

               (c)  a leave of absence in excess of ninety (90) days, approved
                    in writing by the Committee, but only if the employee's
                    right to reemployment is guaranteed either by a statute or
                    by contract, and provided that, in the case of any leave of
                    absence, the employee returns to work within 30 days after
                    the end of such leave.

SECTION 10. AMENDMENTS AND TERMINATION.

     The Board may amend, after, or discontinue the Plan, but no amendment
alteration, or discontinuation shall be made (i) which would adversely impair
the rights of an optionee or participant under a Stock Option, Restricted Stock
or other Stock-based award theretofore granted, without the optionee's or
participant's consent, or (ii) which without the approval of the shareholders of
the Company would cause the Plan to no longer comply with Rule 16b-3 under the
Securities Exchange Act of 1934, Section 422 of the Code or any other regulatory
requirements.

     The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively to the extent such amendment is
consistent with the terms of this Plan, but no such amendment shall impair the
rights of any holder without his or her consent except to the extent authorized
under the Plan. The Committee may also substitute new Stock Options for
previously granted Stock Options, including previously granted Stock Options
having higher Stock Option prices.

SECTION 11. UNFUNDED STATUS OF PLAN.

     The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.

<PAGE>

SECTION 12. GENERAL PROVISIONS.

     (a)  The Committee may require each person purchasing shares pursuant to a
          Stock Option under the Plan to represent to and agree with the Company
          in writing that the optionee is acquiring the shares without a view to
          distribution thereof. The certificates for such shares may include any
          legend which the Committee deems appropriate to reflect any
          restrictions on transfer.

     All certificates for shares of Stock delivered under the Plan pursuant to
any Restricted Stock, Deferred Stock or other Stock-based awards shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem, advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.

     (b)  Subject to paragraph (d) below, recipients of Restricted Stock,
          Deferred Stock and other Stock-based awards under the Plan (other than
          Stock Options) are not required to make any payment or provide
          consideration other than the rendering of services.

     (c)  Nothing contained in this Plan shall prevent the Board of Directors
          from adopting other or additional compensation arrangements, subject
          to stockholder approval if such approval is required; and such
          arrangements may be either generally applicable or applicable only in
          specific cases. The adoption of the Plan shall not confer upon any
          employee of the Company or any Subsidiary any right to continued
          employment with the Company or a Subsidiary, as the case may be, nor
          shall it interfere in any way with the right of the Company or a
          Subsidiary to terminate the employment of any of its employees at any
          time.

     (d)  Each participant shall, no later than the date as of which any part of
          the value of an award first becomes includible as compensation in the
          gross income of the participant for Federal income tax purposes, pay
          to the Company, or make arrangements satisfactory to the Committee
          regarding payment of, any Federal, state, or local taxes of any kind
          required by law to be withheld with respect to the award. The
          obligations of the Company under the Plan shall be conditional on such
          payment or arrangements and the Company and Subsidiaries shall, to the
          extent permitted by law, have the right to deduct any such taxes from
          any payment of any kind otherwise due to the participant. With respect
          to any award under the Plan, if the terms of such award so permit, a
          participant may elect by written notice to the Company to satisfy part
          or all of the withholding tax requirements associated with the award
          by (1) authorizing the Company to retain from the number of shares of
          Stock that would otherwise be deliverable to the participant, or (ii)
          delivering to the Company from shares of Stock already owned by the
          participant, that number of shares having an aggregate Fair Market
          Value equal to part or all of the tax payable by the participant under
          this Section 12(d). Any such election shall be in accordance with, and
          subject to, applicable tax and securities laws, regulations and
          rulings.

     (e)  At the time grant, the Committee may provide in connection with any
          grant made under this Plan that the shares of Stock received as a
          result of such grant shall be subject to a repurchase right in favor
          of the Company, pursuant to which the participant shall be required to
          offer to the Company upon termination of employment for any reason any
          shares that the participant acquired under the Plan, with the price
          being the then Fair Market Value of the Stock or, in the case of a
          termination for Cause, an amount equal to the cash consideration paid
          for the Stock, subject to such other terms and conditions as the
          Committee may specify at the time of grant. The Committee may, at the
          time of the grant of an award under the Plan, provide the Company with
          the right to repurchase, or require the forfeiture of shares of Stock

<PAGE>

          acquired pursuant to the Plan by any participant who at any time
          within two years after termination of employment with the Company,
          directly or indirectly competes with, or is employed by a competitor
          of the Company.

     (f)  The reinvestment of dividends in additional Restricted Stock (or in
          Deferred Stock or other types of Plan awards) at the time of any
          dividend payment shall only be permissible in the Committee (or the
          company's chief financial officer) certifies in writing that under
          Section 3 sufficient shares are available for such reinvestment
          (taking into account then outstanding Stock Options and other Plan
          awards).

     (g)  The Plan is expressly made subject to the approval by shareholders of
          the Company. If the Plan is not so approved by the shareholders on or
          before one year after this Plan's adoption by the Board of Directors,
          this Plan shall not come into effect. The offering of the shares
          hereunder shall be also subject to the effecting by the Company of any
          registration or qualification of the shares under any federal or state
          law or the obtaining of the consent or approval of any governmental
          regulatory body which the Company shall determine, in its sole
          discretion, is necessary or desirable as a condition to or in
          connection with, the offering or the issue or purchase of the shares
          covered thereby.

     (h)  This Plan and all Options and actions taken thereunder shall be
          governed by the laws of the Commonwealth of Massachusetts, applied
          without regard to conflict of law principles thereof.

-------------------------------------------
Approved by the shareholders on May 7, 1997

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