Document:

FIRST AMENDMENT TO REVOLVING CREDIT LOAN AGREEMENT
               --------------------------------------------------

     THIS FIRST AMENDMENT TO REVOLVING  CREDIT LOAN AGREEMENT (the  "Amendment")
is made this 26th day of January, 2000, by and between INTELLIGROUP, INC., a New
Jersey  corporation  (the  "Borrower")  and PNC BANK,  NATIONAL  ASSOCIATION,  a
national banking association (the "Lender").

     WHEREAS,  the  Borrower  and the Lender are parties to a certain  Revolving
Credit Loan Agreement dated January 29, 1999 (the "Loan Agreement"), relating to
financing by the Lender to the Borrower  (all  capitalized  terms used,  but not
specifically  defined herein,  shall have the meaning provided for such terms in
the Loan Agreement); and

     WHEREAS,  certain  Events of Default have occurred under the Loan Agreement
with respect to the financial covenants as set forth in Article VIII of the Loan
Agreement; and

     WHEREAS,  the  Borrower has  requested  and the Lender has agreed to, among
other  things,  waive  such  Events  of  Default  and  amend  certain  terms and
conditions of the Loan Agreement as set forth herein; and

     WHEREAS,  as  a  condition  precedent  to  the  Lender  entering  into  the
Amendment,  the Lender requires that the Borrower and all domestic  Subsidiaries
pledge   substantially  all  of  their  assets  to  the  Lender  to  secure  the
Obligations; and

     WHEREAS,  to induce the Lender to amend certain terms and conditions of the
Loan Agreement, the Borrower has offered to execute and deliver the Amendment.

     NOW,  THEREFORE,  in  consideration  of the foregoing and of other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the Lender and the Borrower agree as follows:

     1. The term  "Revolving  Credit  Facility" in the first recital of the Loan
Agreement is hereby amended from "up to Thirty Million ($30,000,000.00) Dollars"
to "up to Fifteen Million ($15,000,000.00) Dollars".

     2. Article I of the Loan  Agreement,  the  definition of (i)  "Consolidated
EBITDA" is amended by adding the word  "(Loss)"  after the word  "Income" on the
third line  thereof  and adding  "and (d)  non-recurring  items"  after the word
"operations"  on the last line  thereof  and (ii)  "Consolidated  Net Income" is
amended by adding the word  "(Loss)"  after the word  "Income"  on the first and
third lines thereof.

     3. Article I of the Loan Agreement is hereby amended by

<PAGE>

adding the following new Subsections as follows:

          "Borrowing  Certificate":  The  borrowing  certificate  in the form of
           ----------------------
Exhibit "G" annexed hereto and made a part hereof.

          "Collateral": All --
           ----------------

          (i)  inventory  of  the  Borrower,  whether  now  owned  or  hereafter
acquired,  including,  without  limitation,  raw  materials,  work  in  process,
finished goods, consigned inventory,  and materials used or consumed in business
and other goods held for sale or lease or  furnished  or to be  furnished  under
contracts of service;

          (ii)  accounts  of the  Borrower,  whether now  existing or  hereafter
arising,  including,  without  limitation,  all accounts receivable and contract
rights  and any  rights  to  payment  for goods  sold or leased or for  services
rendered which are not evidenced by an instrument or chattel  paper,  whether or
not such rights have been earned by performance;

          (iii)  equipment  of the  Borrower,  whether  now  owned or  hereafter
acquired,  including,  without  limitation,   machinery,  trade  and  production
equipment,  furniture,  furnishings,  fixtures,  and all other goods used by the
Borrower which do not constitute inventory or farm products;

          (iv)   instruments   (including,   without   limitation,    negotiable
instruments and non-negotiable  instruments),  investment  property  (including,
without limitation, certificated securities, uncertificated securities, security
entitlements,  securities accounts, commodity contracts and commodity accounts),
chattel paper, general intangibles  (including,  without limitation,  income tax
refunds, copyrights, licenses, rights, patents, patent rights, franchise rights,
distributorship  rights,  trademarks,  trademark rights, trade dress,  formulae,
customer lists, goodwill, and trade secrets), and documents of title (including,
without limitation, bills of lading, dock warrants, dock receipts, and warehouse
receipts),  all of the  Borrower,  whether now owned or  existing  or  hereafter
arising or acquired;

          (v)  interests  of the Borrower in goods or  merchandise,  whether now
owned or  existing  or  hereafter  arising or  acquired,  as to which an account
receivable has arisen; and

          (vi)  as to all of the  foregoing  (i)  through  (v)  inclusive,  cash
proceeds,  non-cash  proceeds and products  thereof,  additions  and  accessions
thereto,  replacements  and  substitutions  therefor,  and  all  related  books,
records, journals, computer print-outs and data, of the Borrower.

          "Qualified Account Receivable":  An account receivable which meets all
           ----------------------------
of the following  requirements from the time it

                                      -2-
<PAGE>

comes into existence until it is collected in full -

          (i) The account  receivable has not been  outstanding more than ninety
(90) days from the date of the invoice evidencing the account receivable. In the
event more than thirty (30%)  percent of the accounts  receivable  from a single
account debtor or group of affiliated  account  debtors is more than ninety (90)
days outstanding from the date of the invoice,  any and all accounts  receivable
due from such single account debtor or group of affiliated account debtors shall
be deemed unqualified;

          (ii) In the  event  the  account  receivable  from the  three  largest
account  debtors or group of  affiliated  account  debtors is in excess of sixty
(60%) percent of total accounts receivable of the Borrower, that portion of such
aggregate  accounts  receivable  in  excess  of such  percentage  shall not be a
Qualified Account  Receivable for the purposes herein,  unless credit insurance,
acceptable to the Lender, against such account receivables, has been assigned to
the Lender;

          (iii) The  account  receivable  arose out of an  enforceable  order or
contract for the performance of services by the Borrower,  which have been fully
and satisfactorily performed, or from the absolute sale of goods by the Borrower
in which the  Borrower had the sole and complete  ownership,  all in  accordance
with such order or contract  (including  contracts  in which  payments are to be
made according to time and materials  billing),  and the goods have been shipped
or delivered to the account debtor, evidence of which the Borrower has delivered
or will deliver to the Lender, if requested by the Lender,  such as invoices and
shipping and delivery  receipts.  Without  limiting this paragraph,  the account
receivable must have arisen from  transactions with third parties located in the
United  States of  America,  or  otherwise  where  secured by a letter of credit
acceptable to the Lender;

          (iv)  The  Borrower  has  sole  and  absolute  title  to  the  account
receivable,  the account  receivable  is not subject to any prior or  subsequent
Liens  except for that of the Lender and the account  receivable  does not arise
out of an order or  contract  which,  by its  terms,  forbids  or makes  void or
unenforceable the Liens thereon of the Lender;

          (v) The Lender  shall have a  perfected  security  interest,  first in
priority, upon the account receivable;

          (vi) The Borrower has not received any note, trade  acceptance,  draft
or other instrument with respect to or in payment for the account receivable nor
any  chattel  paper  with  respect  to the  goods  giving  rise  to the  account
receivable,  except such  instruments or chattel paper of which the Borrower has
notified the Lender;

                                      -3-
<PAGE>

          (vii)  The  account   receivable  is  not  subject  to  any  set  off,
counterclaim,  defense,  allowance or adjustment other than discounts for prompt
payment  shown on the  invoice,  or to dispute,  objection  or  complaint by the
account  debtor  concerning  its  liability on the account  receivable,  and the
goods,  the sale of which  gave rise to the  account  receivable,  have not been
returned,  rejected,  lost or damaged,  and the amount  shown on the  Borrower's
books and on any invoice or  statement  delivered  to the Lender is owing to the
Borrower, and no partial payment has been made thereon by anyone;

          (viii) The account receivable arose in the ordinary course of business
of  the  Borrower  and  no  notice  of  bankruptcy,  receivership,   insolvency,
dissolution,  termination of existence,  credit  impairment,  or the like of the
account  debtor,  and no notice of death of the  account  debtor or any  partner
thereof, has been received by the Borrower or the Lender;

          (ix) The account debtor  obligated on the account  receivable is not a
Person  which  directly  or  indirectly,  through  one or  more  intermediaries,
controls,  or is controlled  by, or is under common  control with, the Borrower,
including,  without  limitation,  any Subsidiary or Affiliate as to the Borrower
and the Borrower as to any Subsidiary or Affiliate;

          (x)  The  Lender  has not  notified  the  Borrower  that  the  account
receivable or account  debtor is  unsatisfactory  in the sole  discretion of the
Lender due to lack of creditworthiness of the account debtor; and

          (xi) Any of the  accounts  receivable  which arose out of  contract(s)
with  the  United   States  of  America,   or  its   departments,   agencies  or
instrumentalities,  of which the  Borrower  has notified the Lender and executed
any  necessary  writings in order that all money due or to become due under such
contracts  shall be assigned to the Lender and proper  notice of the  assignment
given under the Federal Assignment of Claims Act.

     For the purposes of this Section,  "Qualified Unbilled Accounts Receivable"
shall mean Qualified Accounts Receivable that have not been invoiced, but all of
the work for such invoice has been performed and completed and is expected to be
billed within thirty (30) days of completion of such work.

     4. Article I of the Loan Agreement, the terms "Commitment" and "Rating
Matrix", are hereby amended and changed to read as follows:

          "Commitment" shall mean, at any particular time during the term of the
           ----------
Revolving Credit Facility, the principal amount of the Revolving Credit Facility
which the  Lender has  committed  to make  available  to the  Borrower,  as said
principal amount may be permanently  reduced by the Borrower pursuant to Section
                                                                         -------

                                      -4-
<PAGE>

2.01(v) of this Loan  Agreement.  As of the date of the  Amendment,  the initial
-------
amount committed is $15,000,000.00.

          "Rating  Matrix"  shall  mean the  following  matrix  upon  which  (i)
           --------------
interest rates  described in Section 2.02 hereof and (ii) certain fees described
                             ------------
in  Section  2.03  hereof  are   determined  on  the  basis  of  the  Borrower's
    -------------
Consolidated Cash Flow Leverage Ratio:

                   (All Amounts Expressed in Basis Points)

      Consolidated Cash Flow  Applicable  Applicable
      Leverage Ratio                      Index            Margin*
------------------------------------------------------------------
I     less than 1.00 to 1                 25.0              150.0

II    less than 1.50 to 1 but
      greater than or equal
      to 1.00 to 1                        25.0              175.0

III   less than 2.00 to 1 but
      greater than or equal
      to 1.50 to 1                        30.0              225.00

IV    less than or equal to
      2.50 to 1 but greater
      than 2.00 to 1                      35.0              250.00

*   Any adjustment to the Eurodollar  Rate Option as a result of a change to the
Consolidated  Cash Flow Leverage Ratio shall not take effect until the first day
of the subsequent Fiscal Quarter following the receipt of the calculation of the
Consolidated  Cash Flow Leverage  Ratio from the  Borrower.  For the purposes of
this  Amendment,  pricing shall be  established  at Level IV  hereinabove  until
receipt and satisfactory  review by Lender of the financial  reports as required
by Article V of the Loan Agreement for the Fiscal Quarter ended June 30, 2000.

     5. Article II of the Loan Agreement, Section 2.01(i) is hereby amended and
changed to read as follows:

          "Section 2.01 Revolving Credit Facility.
                        -------------------------

          (i) Availability. (a) Subject to the terms and conditions set forth in
              ------------
this Loan  Agreement and provided no Event of Default shall have occurred and be
continuing, the Lender hereby agrees to make available to the Borrower from time
to time  during  the  period  from the  Closing  Date to the  Business  Day next
preceding  the  Revolving  Credit  Termination  Date,   revolving  credit  loans
(hereinafter  each  individually  referred to as a  "Revolving  Credit Loan" and
collectively referred to as the "Revolving Credit Loans") in amounts which shall
not  exceed,  in the  aggregate  for all  Revolving  Credit  Loans  at any  time
outstanding, the lesser of (i) the Commitment, or (ii) up to eighty (80%)

                                      -5-
<PAGE>

percent of the Qualified  Accounts  Receivable plus, until April 30, 2000, up to
twenty-five (25%) percent of Qualified  Unbilled Accounts  Receivable.  Advances
against  Qualified  Unbilled  Accounts   Receivable  shall  at  no  time  exceed
$2,000,000.00 in the aggregate and Qualified Unbilled Accounts  Receivable shall
not be available  for  calculation  of the  borrowing  formulas set forth herein
after April 30,  2000.  The  Revolving  Credit  Loans shall be  evidenced by the
Amended and Restated Revolving Credit Loan Note. The Lender is hereby authorized
to record the date and amount of each  Revolving  Credit Loan made by the Lender
and the date and amount of each payment or prepayment of principal  thereof made
by the  Borrower  on the  schedule  annexed  to and  constituting  a part of the
Amended and Restated  Revolving Credit Loan Note, and any such recordation shall
constitute  prima facie evidence of the accuracy of the information so recorded.
At no time shall the aggregate outstanding Revolving Credit Loans exceed Fifteen
Million  ($15,000,000.00)  Dollars.  If the outstanding  amount of the Revolving
Credit Loans shall  exceed the amount of the  Revolving  Credit  Facility at any
time,  such excess shall be immediately  due and payable to the Lender and shall
be secured by the Collateral."

     6.  Article  II of the Loan  Agreement  is hereby  amended  by  adding  new
Sections 2.12 and 2.13 as follows:

          "2.12 Security Interest.  In consideration of the Lender's granting to
                -----------------
the Borrower the Revolving Credit Loans and Letters of Credit in accordance with
the terms and conditions of this Loan Agreement, the Borrower, to secure payment
and performance of all of the Obligations of the Borrower to the Lender,  hereby
grants to the Lender a  security  interest  in the  Collateral,  which  security
interest  shall remain in full force and effect until all of the  Obligations of
the Borrower to the Lender are fully paid and satisfied.

          2.13  Collateral  and  Proceeds  of  Collateral.   The  Lender  hereby
                -----------------------------------------
authorizes and permits the Borrower to receive all amounts due on the Collateral
from the account debtor thereof, as Lender's collection agent, but at Borrower's
own cost and expense  subject to the  direction and control of the Lender at all
times.  Upon the occurrence  and during the  continuance of an Event of Default,
the Lender may terminate said authority and permission at any time."

     7.  Article  IV of the Loan  Agreement  is hereby  amended  by  adding  new
Sections 4.04 and 4.05 as follows:

          "4.04 Lender's Security Interest. The security interest granted by the
                --------------------------
Borrower  to the  Lender  is a valid  and  perfected  security  interest  in the
Collateral and the Agreement is enforceable in accordance with its terms."

          "4.05 Place of Business. (a) The Borrower's
                -----------------

                                      -6-
<PAGE>

principal  place of business and all other  places of business and  locations of
the Borrower's Collateral are as set forth on Schedule 4.05.

          (b) Location of Collateral and Books and Records.
              --------------------------------------------

                  (i) With  the  exception  of  lap-top  computers  owned by the
Borrower and utilized by its employees, all of the Collateral is located only at
the addresses set forth on Schedule 4.05.

                  (ii)  All  of the  records  of the  Borrower  relating  to the
Collateral,  and the  other  books,  records,  journals,  orders,  receipts  and
correspondence  of the  Borrower,  are  located at only the  principal  place of
business  and other  places of  business of the  Borrower  set forth in Schedule
4.05,  except the  corporate  minute  books and related  records of the Borrower
which are or may be maintained at the office of the Borrower's counsel."

     8.   Article V of the Loan  Agreement, Sections  5.02(i) and  5.02(ii)  are
hereby amended by adding the following sentence at the end of each Section:

          "Such  information  shall  include  a report  prepared  by  management
stating in  comparative  form the  corresponding  figures from the  consolidated
budget of the Borrower and Subsidiaries for such period."

     9.   Article V of the Loan  Agreement, Section  5.02,  is hereby amended by
adding new Subsections (xi), (xii), (xiii) and (xiv) as follows:

          (xi) Financial Reporting Requirements.
               --------------------------------

               The Borrower shall deliver to the Lender the following:

               (a)   Upon  each  request  for an  advance  under  the  Revolving
Credit Loan, a Borrowing Certificate;

               (b)   Within  fifteen  (15) days  after the end of each  calendar
month  (commencing  with the  month in which  this  Amendment  is  executed  and
continuing  until all of the  Obligations  of the  Borrower  to the  Lender  are
satisfied) a Borrowing  Certificate and an aging report,  setting forth, in such
form as the Lender shall reasonably require, the amount or amounts due and owing
on, and aging of, the accounts receivable of the Borrower according to the books
and records of the Borrower as of the close of such  preceding  calendar  month,
together with a  reconciliation  report  satisfactory  to the Lender showing all
sales,  collections,  payments and  adjustments  to accounts  receivable  on the
Borrower's books as of the close of the

                                      -7-
<PAGE>

preceding month.

          (xii)  Qualified  Accounts Receivable.  The Borrower shall not, to its
                 ------------------------------
knowledge at such time, submit or represent to the Lender any account receivable
as a Qualified  Account  Receivable or Qualified  Unbilled  Accounts  Receivable
which does not meet every  requirement  in every respect of a Qualified  Account
Receivable or Qualified  Unbilled Accounts  Receivable,  as the case may be, and
shall  notify the Lender  promptly,  in  writing,  when any  account  receivable
against which a loan or advance was, or may be, made pursuant to Section 2.01(a)
ceases to meet any of those requirements.

          (xiii) Additional Collateral.
                 ---------------------

                 (a)    The  Borrower  shall  deliver  to  the  Lender  (i)  all
instruments and chattel paper  (including all executed  copies  thereof,  except
such executed copies retained by the obligors thereunder)  representing proceeds
of Collateral, and (ii) promptly at the Lender's request, all invoices, original
bills of lading,  documents of title, original contracts, and any other writings
relating thereto,  and other writings or evidence of performance of contracts or
evidence of shipment or delivery of the merchandise sold or services rendered in
connection therewith;  and the Borrower shall deliver to the Lender, promptly at
the Lender's request, from time to time, additional copies of any or all of such
papers or writings,  and such other  information with respect to any of the said
Collateral and such schedules of accounts receivable and other writings,  as the
Lender may in its sole  discretion deem to be necessary or effectual to evidence
any loan made pursuant to this Agreement or to evidence,  enforce or perfect the
Lender's  security interest in the Collateral,  to facilitate  collection of the
Collateral, or to carry into effect the provisions and intent of this Agreement,
all at the sole expense of the Borrower.

                 (b)   The  Lender  may from time to time in the  Lender's  sole
discretion  hold and treat any deposits or other sums at any time credited by or
due from the Lender to the Borrower and any  securities or other property of the
Borrower in possession of the Lender,  whether for safekeeping or otherwise,  as
collateral  security  for  and  apply  or set off the  same  against  any of the
Obligations  of the Borrower to the Lender.  Without  limiting the generality of
the foregoing,  if at any time the amount of the loans or advances by the Lender
as allowed by this  Agreement  shall be exceeded,  the Borrower shall pay to the
Lender, in immediately  available funds, the amount of such excess if the Lender
so requests, or the Lender may charge such amount against any deposit account of
the Borrower with the Lender.

          (xiv)  Accounts  Relating  to  Contracts  With the  United  States  of
                 ---------------------------------------------------------------
America.  If  any  of  the  accounts,  chattel  paper,  general  intangibles  or
-------
instruments constituting Collateral arise out of

                                      -8-
<PAGE>

contracts  with  the  United  States  or  any of its  departments,  agencies  or
instrumentalities,  the  Borrower  shall  notify  the  Lender  and  execute  any
necessary  writings  in order  that all money due or to  become  due under  such
contracts  shall be assigned to the Lender and proper  notice of the  assignment
given under the Federal Assignment of Claims Act."

     10.  Article VI of the Loan  Agreement,  Section 6.05, is hereby amended by
adding the following to the end of the Section:

          "The  Borrower  shall,   and  shall  cause  each  domestic   Corporate
Guarantor,  to cause all such  insurance  policies  to name the Lender as lender
loss payee and additional insured."

     11.  Article VII of the Loan Agreement,  Section 7.02(ii) is hereby amended
and changed to read as follows:

          "(ii) As used in this Section 7.02, a sale, other disposition or lease
of assets  shall be deemed to cover a  "substantial  part" of the  assets of the
Borrower and the  Corporate  Guarantors  only if, on a pro forma basis,  the net
book value of such assets  when added to the net book value of all other  assets
sold,  otherwise  disposed  of or  leased  by the  Borrower  and  the  Corporate
Guarantors during any Fiscal Year of such sale, other disposition or lease, on a
consolidated  basis  exceeds  five  (5%)  percent  of the  consolidated  assets,
provided however,  notwithstanding the foregoing,  the Borrower may transfer its
assets  pertaining to its internet  business to SeraNova,  Inc., a  wholly-owned
Subsidiary  of the  Borrower  and  such  transfer  shall  not be  considered  in
determining whether the five (5%) percent threshold above has been exceeded."

     12.  Article VII of the Loan Agreement,  Section 7.04 is hereby amended and
changed by adding new subsection (viii) as follows:

          "(viii)  Debt  due  from   SeraNova,   Inc.  which  shall  not  exceed
$10,000,000.00 at any time.

     13.  Article VII of the Loan Agreement,  Section 7.11 is hereby amended and
changed by adding new subsections (iv) and (v) as follows:

          "(iv)  Notwithstanding  anything herein to the contrary,  the Borrower
may execute and deliver to the Lender  agreements  of guaranty  with  respect to
credit  extended by the Lender to SeraNova,  Inc., a wholly-owned  Subsidiary of
the Borrower.

          (v)  Contingent  Obligations  contemplated  by the Loan  Agreement  as
amended by the Amendment."

     14.  Article VIII of the Loan Agreement,  Sections 8.02 and

                                      -9-
<PAGE>

8.03 are hereby amended and changed to read as follows:

          "8.02 Minimum  Consolidated  Net Worth.  The Borrower shall maintain a
                --------------------------------
Consolidated Net Worth of no less than the following  amounts for the applicable
Fiscal Quarter:

                                                Minimum
            Fiscal Quarter Ended          Consolidated Net Worth
            --------------------          ----------------------

            December 31, 1999                  $45,950,000.00
            March 31, 2000                     $45,400,000.00
            June 30, 2000                      $47,800,000.00
            September 30, 2000                 $50,200,000.00

plus one hundred  (100%)  percent of net cash  proceeds from the issuance by the
----
Borrower,  if at all, of additional  equity  securities or other equity  capital
investments after September 30, 1999.

Thereafter,  the Borrower will not at any time permit its Consolidated Net Worth
to be less than an amount equal to the sum of (i) $50,200,000.00 plus (ii) fifty
                                                                 ----
(50%)  percent of the positive  Consolidated  Net Income for the Fiscal  Quarter
ending  December  31,  2000,  plus (iii)  fifty  (50%)  percent of the  positive
                              ----
Consolidated  Net Income for each Fiscal Year ending  after  December  31, 2000,
plus (iv) an amount  equal to one hundred  (100%)  percent of net cash  proceeds
----
from the issuance by the Borrower after September 30, 1999, of additional equity
securities or other equity capital investments.

          8.03  Capital  Expenditures.  The  Borrower  shall not enter  into any
                ---------------------
agreement  to purchase  and/or pay for, or become  obligated  to pay for capital
expenditures, long term leases, Capital Leases or sale lease-backs, in an amount
at any time outstanding aggregating in excess of $5,000,000.00 during any Fiscal
Year.

                It is agreed and  understood that for the  Fiscal Quarters ended
December 31, 1999 through and including  September  30, 2000 only,  the Borrower
shall not be required to comply with the requirements of Sections 8.01,  Maximum
Consolidated Cash Flow Leverage Ratio and 8.04, Minimum Fixed
Charge Coverage Ratio."

     15.  Article  VIII of the Loan  Agreement  is hereby  amended by adding new
Section 8.05 as follows:

          "Section 8.05 Minimum Consolidated EBITDA. The Borrower shall maintain
                        ---------------------------
a Consolidated  EBITDA of no less than the following  amounts for the applicable
Fiscal Quarter:

                                      -10-
<PAGE>

            Fiscal Quarter Ended          Minimum Consolidated EBITDA
            --------------------          ---------------------------

            December 31, 1999                   ($750,000.00)
            March 31, 2000                           -0-
            June 30, 2000                      $4,500,000.00
            September 30, 2000 and
            each Fiscal Quarter thereafter     $4,500,000.00

     16.  Article IX of the Loan  Agreement,  Section 9.02 is hereby  amended by
adding new Subsections (iv) through (xi) as follows:

          "(iv) Upon the  occurrence  and during the  continuance of an Event of
Default, endorse the name of the Borrower upon any and all checks, drafts, money
orders and other  instruments for the payment of monies which are payable to the
Borrower and constitute proceeds of the Collateral;

          (v) Sign  financing  statements in the name of the  Borrower,  or file
financing statements without the Borrower's signature,  in any relevant state to
perfect  or  maintain  the  Lender's  security  interest  in  any  or all of the
Collateral;

          (vi) The Lender shall have all of those  rights and remedies  provided
in the Loan Documents,  in the Uniform  Commercial Code and other applicable law
in force and effect in New Jersey from time to time;

          (vii) Upon the  occurrence  and during the  continuance of an Event of
Default,  in  protecting,  exercising  or  enforcing  its  interests,  rights or
remedies under this  Agreement,  receive,  open and dispose of mail addressed to
the Borrower, provided that the Lender shall return to the Borrower all mail not
related  to the  Collateral  or to any of  the  Obligations,  and in  connection
therewith,  give such  notice to any office or  officials  of the United  States
Postal Service,  or any successor thereof,  to effect such changes of address as
the Lender may deem  necessary so that all mail addressed to the Borrower may be
delivered directly to the Lender;

          (viii)  Require the  Borrower to assemble the  Collateral  and make it
available at the principal  place of business or other places of business of the
Borrower to allow the Lender to take possession or dispose of the Collateral;

          (ix) Take possession of and sell or otherwise dispose of any or all of
the Collateral at public or private sale, and if notice of such sale or of other
action by the Lender is required by applicable law, the Borrower agrees that ten
(10) days notice to the Borrower shall be  sufficient,  which the Lender and the
Borrower herewith agree to be commercially reasonable;

          (x) Subrogate to all of the Borrower's interests,

                                      -11-
<PAGE>

rights and remedies in respect to the  Collateral,  including  the right to stop
delivery,  and (upon  notice  from the  Borrower  that the  account  debtor  has
returned,  rejected, revoked acceptance of or failed to return the goods or that
the goods have been reconsigned or diverted) the right to take possession of and
to sell or dispose of the goods; and

          (xi) The Lender may send a notice of  assignment  and/or notice of the
Lender's  security interest to any and all account debtors or to any third party
holding or otherwise  concerned with any of the  Collateral,  and thereafter the
Lender shall have the sole right to collect the accounts  receivable and/or take
possession of the Collateral and the books and records relating thereto.

     No remedy referred to herein is intended to be exclusive, but each shall be
cumulative  and in addition to any other  remedy  referred to above or otherwise
available  to the  Lender  at law or in  equity.  The  Lender  shall be under no
obligation  whatsoever to proceed first against the Collateral before proceeding
against any other of the Collateral.  It is expressly agreed and understood that
all of the Collateral stands as equal security for all Obligations, and that the
Lender  shall  have  the  right  to  proceed  against  or sell any or all of the
Collateral  in  any  order  or  simultaneously,  as  the  Lender,  in  its  sole
discretion, shall determine."

     17. Upon execution of this Amendment,  the Borrower shall pay the Lender an
amendment  and  waiver  fee of  $100,000.00  which  shall  be fully  earned  and
non-refundable upon receipt.

     18. The Borrower shall pay on demand all reasonable  legal fees,  recording
expenses and other reasonable and necessary disbursements of the Lender incident
to the preparation, execution and delivery of this Amendment.

     19. The Borrower  acknowledges  that its obligations to the Lender pursuant
to the Loan Agreement,  as amended herein,  are due and owing by the Borrower to
the Lender without any defenses, set-offs,  recoupments, claims or counterclaims
of any kind as of the  date  hereof.  To the  extent  that  any  such  defenses,
set-offs,  recoupments, claims or counterclaims may exist as of the date hereof,
the Borrower waives and releases the Lender from the same.

     20. The  Borrower  hereby  agrees  with,  reaffirms  and  acknowledges  the
representations and warranties contained in the Loan Agreement. Furthermore, the
Borrower  represents that the  representations  and warranties  contained in the
Loan Agreement continue to be true and in full force and effect. This agreement,
reaffirmation and  acknowledgment is given to the Lender by the Borrower without
defenses,  claims or  counterclaims  of any kind.  To the  extent  that any such
defenses,  claims or

                                      -12-
<PAGE>

counterclaims against the Lender may exist, the Borrower waives and releases the
Lender from the same.

      21. The Borrower ratifies and reaffirms all terms,  covenants,  conditions
and agreements contained in the Loan Agreement.

      22. All other terms and conditions of the Loan Agreement,  and any and all
Exhibits annexed thereto and all other writings submitted by the Borrower to the
Lender pursuant thereto, shall remain unchanged and in full force and effect.

      23. This Amendment shall not constitute a waiver or modification of any of
the Lender's rights and remedies or of any of the terms, conditions, warranties,
representations,  or  covenants  contained  in the  Loan  Agreement,  except  as
specifically  set forth above,  and the Lender hereby reserves all of its rights
and remedies pursuant to the Loan Agreement and applicable law.

      24. The failure of the Borrower to satisfy any of the terms and conditions
of this Amendment shall constitute an Event of Default under the Loan Agreement,
and the Lender  shall be  entitled to all of its rights and  remedies  under the
Loan Agreement and applicable law.

      25. This Amendment may be executed in  counterparts,  each of which,  when
taken together, shall be deemed to be one and the same instrument.

      Executed on the date first written above.

WITNESS:                                  INTELLIGROUP, INC.

/s/ Edward G. Carr                        By: /s/ Nicholas Visco
---------------------------------            ----------------------
Edward G. Carr

                                          PNC BANK, NATIONAL ASSOCIATION

                                          By: /s/ Gary Wessels
                                             ----------------------
                                              Gary Wessels,
                                              Vice President<PAGE>

                                  EXHIBIT 4.2

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION
OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.

                                 eMACHINES, INC.

                           WARRANT TO PURCHASE SHARES
                                 OF COMMON STOCK

No. ______

     THIS CERTIFIES THAT, for value received, [HOLDER] and its assignees are
entitled to subscribe for and purchase [number] shares of the fully paid and
nonassessable Common Stock (as adjusted pursuant to Section 4 hereof, the
"Shares") of eMACHINES, INC., a Delaware corporation (the "Company"), at the
price of $____ [$2.4 billion divided by number of eMachines shares outstanding
immediately after the Effective Time on an as-converted basis assuming the
exercise or conversion of all outstanding options, warrants, rights or
convertible securities] per share (such price and such other price as shall
result, from time to time, from the adjustments specified in Section 4 hereof is
herein referred to as the "Warrant Price"), subject to the provisions and upon
the terms and conditions hereinafter set forth. As used herein, (a) the term
"Date of Grant" shall mean [Closing Date]_________, 1999 and (b) the term "Other
Warrants" shall mean any other warrants issued by the Company in connection with
that certain Agreement and Plan of Reorganization dated as of November 24, 1999
by and among the Company, eMachines Acquisition Corp. and FreePC, Inc. (the
"Agreement and Plan of Reorganization"), and any warrant issued upon transfer or
partial exercise of this Warrant. The term "Warrant" as used herein shall be
deemed to include Other Warrants unless the context clearly requires otherwise.

     1. Term. The purchase right represented by this Warrant is exercisable, in
        ----
whole at any time or in part, at any time and from time to time from the Date of
Grant on or before 5:00 P.M., Pacific Time on the date (the "Expiration Date")
that is the earlier of (i) ___________, 2001 [two years after Closing Date] or
(ii) one (1) year after the closing of the Company's initial public offering of
its Common Stock (the "IPO") effected pursuant to a Registration Statement on
form S-1 (or its successor) filed under the Securities Act of 1933, as amended
(the "Act"); provided that, notwithstanding the foregoing, (x) the purchase
             -------- ----
right represented by this Warrant shall not be exercisable during the 120 day
period following the closing of the Company's IPO, (y) the purchase right
represented by this Warrant shall not be exercisable until the expiration or
early termination of any applicable waiting periods imposed by the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and (z) if
on or before the Expiration Date, the holder of this
<PAGE>

Warrant has sent a notice of exercise to Company and holder has not been able to
complete the exercise of the purchase right represented by this Warrant prior to
the Expiration Date because of restrictions under the HSR Act or because the
Expiration Date is within the 120 day period following closing of the Company's
IPO, the holder shall be entitled to complete the process of exercising this
Warrant, for a period of ten (10) business days following termination of such
HSR Act restrictions and/or the 120 day period following the closing of the
Company's IPO, in accordance with the procedures contained herein,
notwithstanding the fact that completion of the exercise of this Warrant would
take place after the Expiration Date.

     2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section
        ----------------------------------------------------
1 hereof, the purchase right represented by this Warrant may be exercised by the
holder hereof, in whole or in part and from time to time, at the election of the
holder hereof, by (a) the surrender of this Warrant (with the notice of exercise
substantially in the form attached hereto as Exhibit A-1 duly completed and
executed) at the principal office of the Company and by the payment to the
Company, by certified or bank check, or by wire transfer to an account
designated by the Company (a "Wire Transfer") of an amount equal to the then
applicable Warrant Price multiplied by the number of Shares then being purchased
(the "Exercise Amount"); (b) if in connection with a registered public offering
of the Company's securities, the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A-2 duly completed and executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by certified or
bank check or by Wire Transfer from the proceeds of the sale of shares to be
sold by the holder in such public offering of an amount equal to the Exercise
Amount; (c) exercise of the "net issuance" right provided for in Section 10.2
hereof; or (d) by means of any "easy sale" exercise pursuant to Section 10.3
hereof. The person or persons in whose name(s) any certificate(s) representing
the Shares shall be issuable upon exercise of this Warrant shall be deemed to
have become the holder(s) of record of, and shall be treated for all purposes as
the record holder(s) of, the shares represented thereby (and such shares shall
be deemed to have been issued) immediately prior to the close of business on the
date or dates upon which this Warrant is exercised. In the event of any exercise
of the rights represented by this Warrant, certificates for the shares of stock
so purchased shall be delivered to the holder hereof as soon as possible after
such exercise and, unless this Warrant has been fully exercised or expired, a
new Warrant representing the portion of the Shares, if any, with respect to
which this Warrant shall not then have been exercised shall also be issued to
the holder hereof as soon as possible.

     3. Stock Fully Paid; Reservation of Shares. The Company hereby covenants
        ---------------------------------------
that at all times there shall be reserved for issuance and delivery upon
exercise of this Warrant such number of shares of Common Stock or other shares
of capital stock of the Company as are from time to time issuable upon exercise
of this Warrant and, from time to time, will take all steps necessary to amend
its Certificate of Incorporation to provide sufficient reserves of shares of
Common Stock issuable upon exercise of this Warrant. All such shares shall be
duly authorized, and when issued upon such exercise, shall be validly issued,
fully paid and non-assessable, free and clear of all liens, security interests,
charges and other encumbrances or restrictions on sale and free and clear of all
preemptive rights, except encumbrances or restrictions arising (i) under federal
or state securities laws or (ii) pursuant to the Rights and Restrictions
Agreement (as such term is defined in the Agreement and Plan of Reorganization),
if applicable.

                                      -2-
<PAGE>

     4. Adjustment of Warrant Price and Number of Shares. The number and kind of
        ------------------------------------------------
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:

     (a) Reclassification or Merger. In case of any reclassification, conversion
         --------------------------
or other change of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is the acquiring and
the surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
duly execute and deliver to the holder of this Warrant a new Warrant (in form
and substance satisfactory to the holder of this Warrant), so that the holder of
this Warrant shall have the right to receive, at a total purchase price not to
exceed that payable upon the exercise of the unexercised portion of this
Warrant, and in lieu of the shares of Common Stock theretofore issuable upon
exercise of this Warrant, (i) the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification,
conversion, change or merger by a holder of the number of shares of Common Stock
then purchasable under this Warrant, or (ii) in the case of such a merger or
sale of all or substantially all of the assets of the Company in which the
consideration paid consists all or in part of assets other than securities of
the successor or purchasing corporation, the securities of the successor or
purchasing corporation having a value at the time of the transaction equivalent
to the value of the Common Stock at the time of the transaction. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant. The provisions of
this subparagraph (a) shall similarly apply to successive reclassifications,
conversions, changes, mergers and transfers.

     (b) Adjustment for Stock Splits, Stock Subdivisions or Combinations of
         ------------------------------------------------------------------
Shares. The Warrant Price shall be proportionally decreased and the number of
------
shares of Common Stock issuable upon exercise of this Warrant (or any shares of
stock or other securities at the time issuable upon exercise of this Warrant)
shall be proportionally increased to reflect any stock split or subdivision of
the Company's Common Stock. The Warrant Price shall be proportionally increased
and the number of shares of Common Stock issuable upon exercise of this Warrant
(or any shares of stock or other securities at the time issuable upon exercise
of this Warrant) shall be proportionally decreased to reflect any combination of
the Company's Common Stock.

     (c) Stock Dividends and Other Distributions. If the Company at any time
         ---------------------------------------
while this Warrant is outstanding and unexpired shall (i) pay a dividend with
respect to Common Stock payable in Common Stock, then the Warrant Price shall be
adjusted, from and after the date of determination of shareholders entitled to
receive such dividend or distribution, to that price determined by multiplying
the Warrant Price in effect immediately prior to such date of determination by a
fraction (A) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(B) the

                                      -3-
<PAGE>

denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution; or (ii) make any
other distribution with respect to Common Stock (except any distribution
specifically provided for in Sections 4(a) and 4(b)), then, in each such case,
provision shall be made by the Company such that the holder of this Warrant
shall receive upon exercise of this Warrant a proportionate share of any such
dividend or distribution as though it were the holder of the Common Stock as of
the record date fixed for the determination of the shareholders of the Company
entitled to receive such dividend or distribution.

     (d) Adjustment of Number of Shares. Upon each adjustment in the Warrant
         ------------------------------
Price, the number of Shares purchasable hereunder shall be adjusted, to the
nearest whole share, to the product obtained by multiplying the number of Shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately prior to
such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter.

     5. Notice of Adjustments. Whenever the Warrant Price or the number of
        ---------------------
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall give notice of the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such notice to be mailed, by first
class mail, postage prepaid (notwithstanding Section 13 hereof) to the holder of
this Warrant at such holder's last known address.

     6. Fractional Shares. No fractional shares of Common Stock will be issued
        -----------------
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value of
the Common Stock on the date of exercise as determined in accordance with
Section 10.2(c)(ii) or 10.2(c)(iii), as applicable.

     7. Compliance with Act; Disposition of Warrant or Shares of Common Stock.
        ---------------------------------------------------------------------

     (a) Compliance with Act. The holder of this Warrant, by acceptance hereof,
         -------------------
agrees that this Warrant, and the Shares to be issued upon exercise hereof are
being acquired for investment and that such holder will not offer, sell or
otherwise dispose of this Warrant, or any Shares except under circumstances
which will not result in a violation of the Act or any applicable state
securities laws. Upon exercise of this Warrant, unless the Shares being acquired
are registered under the Act and any applicable state securities laws or an
exemption from such registration is available, the holder hereof shall confirm
in writing that the Shares so purchased are being acquired for investment and
not with a view toward distribution or resale in violation of the Act and shall
confirm such other matters related thereto as may be reasonably requested by the
Company. This Warrant and all Shares issued upon exercise of this Warrant
(unless registered under the Act and any applicable state securities laws) shall
be stamped or imprinted with a legend in substantially the following form:

     "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE
     OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION
     STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE,

                                      -4-
<PAGE>

     REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT
     REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE
     GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS
     OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED,
     DIRECTLY OR INDIRECTLY."

Said legend shall be removed by the Company, upon the request of a holder, at
such time as the restrictions on the transfer of the applicable security shall
have terminated. In addition, in connection with the issuance of this Warrant,
the holder specifically represents to the Company by acceptance of this Warrant
as follows:

     (1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
in violation of the Act.

     (2) The holder understands that this Warrant has not been registered under
the Act or registered or qualified under any applicable state securities laws,
in reliance upon a specific exemption therefrom, which exemption depends upon,
among other things, the bona fide nature of the holder's investment intent as
expressed herein.

     (3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and qualified under
any applicable state securities laws, or unless exemptions from registration and
qualification are otherwise available. The holder is aware of the provisions of
Rule 144, promulgated under the Act.

     (b) Disposition of Warrant or Shares. With respect to any offer, sale or
         --------------------------------
other disposition of this Warrant or any Shares acquired pursuant to the
exercise of this Warrant prior to registration of such Warrant or Shares, the
holder hereof agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
holder's counsel, or other evidence, if reasonably satisfactory to the Company,
to the effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Act as then in effect or any federal or
state securities law then in effect) of this Warrant or the Shares and
indicating whether or not under the Act certificates for this Warrant or the
Shares to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to ensure compliance with
such law. Upon receiving such written notice and opinion or other reasonably
satisfactory evidence, the Company, as promptly as practicable, shall notify
such holder that such holder may sell or otherwise dispose of this Warrant or
such Shares, all in accordance with the terms of the notice delivered to the
Company. If the holder has not delivered an opinion of counsel to such effect
and a determination has been made pursuant to this Section 7(b) that such other
evidence is not reasonably satisfactory to the Company, the Company shall so
notify the holder promptly with details thereof after such determination has
been made. Notwithstanding the foregoing, this Warrant or such Shares may, as to
such federal laws, be offered, sold or otherwise disposed of in accordance with
Rule 144 or 144A (or any successor exemptions) under the Act,

                                      -5-
<PAGE>

provided that the Company shall have been furnished with such information as the
Company may reasonably request to provide a reasonable assurance that the
provisions of Rule 144 or 144A (or any such successor exemption) have been
satisfied. Each certificate representing this Warrant or the Shares thus
transferred (except a transfer pursuant to Rule 144 or 144A (or any such
successor exemption)) shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with such laws, unless in the
aforesaid opinion of counsel for the holder, such legend is not required in
order to ensure compliance with such laws. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.

     (c) Applicability of Restrictions. Neither any restrictions of any legend
         -----------------------------
described in this Warrant nor the requirements of Section 7(b) above shall apply
to any transfer or grant of a security interest in, this Warrant (or the Common
Stock obtainable upon exercise thereof) or any part hereof (i) to a partner of
the holder if the holder is a partnership or to a member of the holder if the
holder is a limited liability company, (ii) to a partnership of which the holder
is a partner or to a limited liability company of which the holder is a member,
or (iii) to any affiliate of the holder if the holder is a corporation;
provided, however, in any such transfer, if applicable, the transferee shall on
--------  -------
the Company's request agree in writing to be bound by the terms of this Warrant
as if an original holder hereof.

     8. Rights as Shareholders. No holder of this Warrant, as such, shall be
        ----------------------
entitled to vote or receive dividends or be deemed the holder of Shares, nor
shall anything contained herein be construed to confer upon the holder of this
Warrant, as such, any of the rights of a shareholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or (subject to (S) 10.1 below) to receive
notice of meetings, or to receive dividends or subscription rights or otherwise
until this Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.

     9. Rights and Restrictions Agreement. In the case of holders who are
        ---------------------------------
Warrant Holders (as such term is defined in the Rights and Restrictions
Agreement), the Shares issuable upon the exercise of this Warrant are subject to
certain registration rights and restrictions as set forth in the Rights and
Restrictions Agreement.

     10. Additional Rights.
         ------------------

          10.1  Notices of Record Date.  In case:
                ----------------------

          (a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or

          (b) of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the Capital Stock of the Company, or any conveyance of all or substantially all
of the assets of the Company to another corporation in which holders of the
Company's stock are to receive stock, securities or property of another
corporation; or

                                      -6-
<PAGE>

          (c) of any voluntary dissolution, liquidation or winding-up of the
Company; or

          (d) of any redemption or conversion of all outstanding Common Stock;

then, and in each such case, the Company will mail or cause to be mailed to the
Registered holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock or (such stock or
securities as at the time are receivable upon the exercise of this Warrant),
shall be entitled to exchange their shares of Common Stock (or such other stock
or securities), for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered at least
thirty (30) days prior to the date therein specified.

     10.2  Right to Convert Warrant into Stock:  Net Issuance.
           --------------------------------------------------

     (a) Right to Convert. In addition to and without limiting the rights of the
         ----------------
holder under the terms of this Warrant, the holder shall have the right to
convert this Warrant or any portion thereof (the "Conversion Right") into shares
of Common Stock as provided in this Section 10.2 at any time or from time to
time during the term of this Warrant other than the 120 day period following the
closing of the Company's IPO. Upon exercise of the Conversion Right with respect
to a particular number of shares subject to this Warrant (the "Converted Warrant
Shares"), the Company shall deliver to the holder (without payment by the holder
of any exercise price or any cash or other consideration) that number of shares
of fully paid and nonassessable Common Stock as is determined according to the
following formula:

                    X =   B - A
                        ---------
                            Y

     Where:     X  =  the number of shares of Common Stock that shall be issued
         to the holder

                Y  =  the fair market value of one share of  Common Stock

                A  =  the aggregate Warrant Price of the specified number of
         Converted Warrant Shares immediately prior to the exercise of the
         Conversion Right (i.e., the number of Converted Warrant Shares
         multiplied by the Warrant Price)

                B  =  the aggregate fair market value of the specified number of
         Converted Warrant Shares (i.e. the number of Converted Warrant Shares
         multiplied by the fair market value of one Converted Warrant Share)

No fractional shares shall be issuable upon exercise of the Conversion Right,
and, if the number of shares to be issued determined in accordance with the
foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9

                                      -7-
<PAGE>

of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.

     (b) Method of Exercise. The Conversion Right may be exercised by the holder
         ------------------
by the surrender of this Warrant at the principal office of the Company together
with a written statement (which may be in the form of Exhibit A-1 or Exhibit A-2
hereto) specifying that the holder thereby intends to exercise the Conversion
Right and indicating the number of shares subject to this Warrant which are
being surrendered (referred to in Section 10.2(a) hereof as the Converted
Warrant Shares) in exercise of the Conversion Right. Such conversion shall be
effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified therein (the
"Conversion Date"), and, at the election of the holder hereof, may be made
contingent upon the closing of the sale of the Company's Common Stock to the
public in a public offering pursuant to a Registration Statement under the Act
(a "Public Offering"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of the
shares remaining subject to this Warrant, shall be issued as of the Conversion
Date and shall be delivered to the holder promptly following the Conversion
Date.

     (c) Determination of Fair Market Value. For purposes of this Section 10.2,
"fair market value" of a share of Common Stock as of a particular date (the
"Determination Date") shall mean:

          (i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the Securities and Exchange Commission, then the initial "Price to
Public" specified in the final prospectus with respect to such offering.

          (ii) If the Conversion Right is not exercised in connection with and
contingent upon a Public Offering, then as follows:

               (A) If traded on a securities exchange, the fair market value of
     the Common Stock shall be deemed to be the average of the closing prices of
     the Common Stock on such exchange over the 30-day period ending five
     business days prior to the Determination Date;

               (B) If traded on the NASDAQ Stock Market or other over-the-
     counter system, the fair market value of the Common Stock shall be deemed
     to be the average of the closing bid prices of the Common Stock over the
     30-day period ending five business days prior to the Determination Date;
     and

               (C) If there is no public market for the Common Stock, then fair
     market value shall be determined by mutual agreement of the holder of this
     Warrant and the Company provided, however, that if the Company and the
                             --------  -------
     Holder cannot agree on such value, such value shall be determined by an
     independent valuation firm experienced in valuing businesses such as the
     Company and jointly selected in good faith by the Company and the Holder.
     Fees and expenses of the valuation firm shall be paid for by the Company.

                                      -8-
<PAGE>

          10.3.  "Easy Sale" Exercise.  In lieu of the payment methods set forth
                 --------------------
in Section 10.2 above, when permitted by law and applicable regulations
(including Nasdaq and NASD rules), the holder hereof may pay the Exercise Amount
through a "same day sale" commitment from such holder (and if applicable a
broker-dealer that is a member of the National Association of Securities Dealers
(a "NASD Dealer")), whereby the holder irrevocably elects to exercise this
Warrant and to sell at least that number of shares so purchased to pay the
Exercise Amount (and up to all of the shares so purchased) and the Holder (or,
if applicable, the NASD Dealer) commits upon sale (or, in the case of the NASD
Dealer, upon receipt) of such shares to forward the Exercise Amount directly to
the Company, with any sale proceeds in excess of the Exercise Amount being for
the benefit of the holder hereof.

     11. Modification and Waiver. This Warrant and any provision hereof may be
         -----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by either (i) the Company and the holders of warrants representing at
least fifty percent (50%) of the Common Stock issuable upon the exercise of all
Other Warrants, or (ii) the party against which enforcement of the same is
sought.

     12. Notices. Any notice, request, communication or other document required
         -------
or permitted to be given or delivered to the holder hereof or the Company shall
be delivered, or shall be sent by certified or registered mail, postage prepaid,
to each such holder (or its successors or assigns) at its address as shown on
the books of the Company or to the Company at the address indicated therefor on
the signature page of this Warrant.

     13. Binding Effect on Successors. This Warrant shall be binding upon any
         ----------------------------
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon the exercise or conversion of
this Warrant shall survive the exercise, conversion and termination of this
Warrant and all of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the holder hereof.

     14. Lost Warrants or Stock Certificates. The Company covenants to the
         -----------------------------------
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.

     15. "Market Stand-Off" Agreement. By acceptance of this Warrant, the holder
         ----------------------------
hereof agrees that upon the request of the Company or the underwriters managing
any underwritten offering of the Company's securities, not to sell or otherwise
transfer or dispose of any Common Stock (or other securities) of the Company
acquired upon exercise of this Warrant held by the holder (other than those
included in the registration) during the 120 day period following the effective
date of a registration statement of the Company filed under the Act.
Notwithstanding the foregoing, to the extent the holder hereof is subject to the
market standoff agreement set forth in Section 12 of the

                                      -9-
<PAGE>

Rights and Restrictions Agreement, as amended from time to time, the holder
shall have no obligation under this Section 15.

     16. Descriptive Headings. The descriptive headings of the several
         --------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.

     17. Governing Law. This Warrant shall be construed and enforced in
         -------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Delaware.

     18. Survival of Representations, Warranties and Agreements. All
         ------------------------------------------------------
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.

     19. Remedies. In case any one or more of the covenants and agreements
         --------
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.

     20. No Impairment of Rights. The Company will not, by amendment of its
         -----------------------
Charter or through any other means, 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.

     21. Severability. The invalidity or unenforceability of any provision of
         ------------
this Warrant in any jurisdiction shall not affect the validity or enforceability
of such provision in any other jurisdiction, or affect any other provision of
this Warrant, which shall remain in full force and effect.

     22. Recovery of Litigation Costs. If any legal action or other proceeding
         ----------------------------
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Warrant, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.

     23. Entire Agreement; Modification. This Warrant constitutes the entire
         ------------------------------
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter. This Warrant and any provision hereof may only be

                                      -10-
<PAGE>

amended, waived, discharged or terminated by an agreement in writing signed by
the party against which enforcement of the amendment, waiver, discharge or
termination is sought.

     24. No Conflicting Agreements. The Company will not on or after the date of
         -------------------------
this Warrant enter into any agreement with respect to its securities which
conflicts with the rights granted to the holders hereof or otherwise conflicts
with the provisions hereof. The rights granted to the holder hereunder do not in
any way conflict with the rights granted to holders of the Company's securities
under any other agreements, except rights that have been waived. Notwithstanding
the foregoing, the holders acknowledge that the Company may, from time to time,
issue warrants and other rights to purchase shares of stock of the Company,
including Common Stock

           [The remainder of this page is intentionally left blank.]

                                      -11-
<PAGE>

     The Company has caused this Warrant to be duly executed and delivered as of
the Date of Grant specified above.

                                    EMACHINES, INC.

                                    By:
                                       ----------------------------------
                                       STEPHEN DUKKER

                                       CHIEF EXECUTIVE OFFICER

                                    Address: 14350 Myford Road, Suite 100
                                             Irvine, California 92606

                                      -12-
<PAGE>

                                  EXHIBIT A-1

                               NOTICE OF EXERCISE

     To: eMACHINES, INC. (the "Company")

     1.   The undersigned hereby:

     ___  elects to purchase_______ shares of Common Stock of the Company
          pursuant to the terms of the attached Warrant, and tenders herewith
          payment of the purchase price of such shares in full, or

     ___  elects to exercise its net issuance rights pursuant to Section 10.2 of
          the attached Warrant with respect to____ shares of Common Stock.

     2. Please issue a certificate or certificates representing ____ shares in
the name of the undersigned or in such other name or names as are specified
below:

                                                                       (Name)
-----------------------------------------------------------------------

-----------------------------------------------------------------------
                                                                       (Address)
-----------------------------------------------------------------------

     3. The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.

                                                            (Signature)
                                    ------------------------
     Date:
          ---------------------

                                      -13-
<PAGE>

                                  EXHIBIT A-2

                               NOTICE OF EXERCISE

     To:  eMACHINES, INC. (the "Company")

     1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S, filed, 19, the undersigned hereby:

     ___  elects to purchase ____ shares of Common Stock of the Company (or such
          lesser number of shares as may be sold on behalf of the undersigned at
          the Closing) pursuant to the terms of the attached Warrant, or

     ___  elects to exercise its net issuance rights pursuant to Section 10.2 of
          the attached Warrant with respect to____ Shares of Common Stock.

     2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such _____________ shares.

     3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $_________________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such shares,
the undersigned agrees to deliver the difference to the Company prior to the
Closing.

                                                            (Signature)
                                 ---------------------------

     Date:
          ------------------

                                      -14-
<PAGE>

                                    EXHIBIT B

                                     CHARTER

                                      -15-

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