EX-10.1











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                                     WARRANT

                           to Purchase Common Stock of



                                  PEAPOD, INC.,
                             a Delaware corporation




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                                Warrant No. [__]


                       Original Issue Date: April 10, 2000



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                                TABLE OF CONTENTS


                                                                            Page



1.    DEFINITIONS............................................................1


2.    EXERCISE OF WARRANT....................................................8

      2.1  Manner of Exercise................................................8
      2.2  Payment of Taxes..................................................9
      2.3  Fractional Shares................................................10
      2.4  Reduced Exercise Price...........................................10

3.    TRANSFER, DIVISION AND COMBINATION....................................10

      3.1  Transfer.........................................................10
      3.2  Division and Combination.........................................11
      3.3  Expenses.........................................................11

4.    ANTIDILUTION PROVISIONS...............................................11

      4.1  Upon Issuance of Common Stock....................................11
      4.2  Upon Acquisition of Common Stock.................................12
      4.3  Provisions Applicable to Adjustments.............................12
      4.4  Upon Stock Dividends or Splits...................................14
      4.5  Upon Combinations................................................14
      4.6  Upon Reclassifications, Reorganizations, Consolidations or
            Mergers.........................................................14
      4.7  Deferral in Certain Circumstances................................15
      4.8  Other Anti-Dilution Provisions...................................15
      4.9  Appraisal Procedure..............................................15
      4.10  Adjustment of Number of Shares Purchasable......................15
      4.11  Exceptions......................................................16
      4.12  Notice of Adjustment of Exercise Price..........................16
      4.13  Other Dilutive Events...........................................16

5.    NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION; NOTICE OF
      EXPIRATION............................................................17


6.    RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH
      OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY.............................17


7.    NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS.........18

      7.1  Notices of Corporate Actions.....................................18
      7.2  Taking of Record.................................................19
      7.3  Closing of Transfer Books........................................19

8.    TRANSFER RESTRICTIONS.................................................19

      8.1  Restrictions on Transfers........................................19
      8.2  Restrictive Legends..............................................20
      8.3  Termination of Securities Law Restrictions.......................21

9.    LOSS OR MUTILATION....................................................21


10.   OFFICE OF THE COMPANY.................................................21


11.   FINANCIAL AND BUSINESS INFORMATION....................................21


12.   DILUTION FEE..........................................................23


13.   MISCELLANEOUS.........................................................23

      13.1  Nonwaiver.......................................................23
      13.2  Notice Generally................................................23
      13.3  Indemnification.................................................24
      13.4  Limitation of Liability.........................................24
      13.5  Remedies........................................................24
      13.6  Successors and Assigns..........................................24
      13.7  Amendment.......................................................24
      13.8  Severability....................................................25
      13.9  Headings........................................................25
      13.10  GOVERNING LAW; JURISDICTION....................................25
      13.11  WAIVER OF JURY TRIAL...........................................26


ANNEX A  SUBSCRIPTION FORM

ANNEX B  ASSIGNMENT FORM


<PAGE>


NEITHER THIS WARRANT NOR ANY OF THE  SECURITIES  ISSUABLE UPON  EXERCISE  HEREOF
HAVE BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY STATE  SECURITIES LAW. THE WARRANTS  REPRESENTED BY THIS  CERTIFICATE AND
THE  SECURITIES  ISSUABLE UPON  EXERCISE  HEREOF MAY NOT BE  TRANSFERRED,  SOLD,
ASSIGNED,  EXCHANGED,  MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
OR  ENCUMBERED  WITHOUT  COMPLIANCE  WITH THE  PROVISIONS  OF, AND ARE OTHERWISE
RESTRICTED BY THE PROVISIONS OF, THE ACT, THE RULES AND  REGULATIONS  THEREUNDER
AND THIS WARRANT.  THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
SHALL BE  ENTITLED  TO THE  BENEFITS  RELATING  TO THIS  WARRANT  OF ALL  FUTURE
AGREEMENTS TO BE ENTERED INTO WITH THE PURCHASER OR ITS AFFILIATES.

                                Warrant No. [___]



                                     WARRANT

                   TO PURCHASE 100,000 SHARES OF COMMON STOCK
                           (SUBJECT TO ADJUSTMENT) OF

                                  PEAPOD, INC.


     THIS IS TO CERTIFY THAT Koninklijke Ahold NV, a company organized under the
laws  of The  Netherlands,  (the  "Purchaser")  or its  registered  assigns,  is
entitled, at any time prior to the Expiration Date (such term, and certain other
capitalized  terms used herein  being  hereinafter  defined),  to purchase  from
Peapod,  Inc., a Delaware  corporation  (the  "Company"),  100,000 shares of the
Common Stock of the Company  (subject to  adjustment as provided  herein),  at a
purchase price per share equal to $3.00 (the initial "Exercise Price"),  subject
to adjustment as provided herein.

1.   DEFINITIONS

     As used in this Warrant  (including the  Subscription  Form), the following
terms have the respective meanings set forth below:

     "Additional  Warrants"  shall  mean  warrants  issued to the  Purchaser  in
connection with the provision of a credit facility by the Purchaser and warrants
issued to the  Purchaser in connection  with the purchase of Preferred  Stock by
the Purchaser.

     "Affiliate"  shall  mean,  with  respect to any  person,  any other  person
directly or indirectly  controlling or controlled by or under direct or indirect
common control with such specified  person and, shall include (a) in the case of
a person who is an individual,  (i) members of such specified person's immediate
family (as defined in  Instruction 2 of Item 404(a) of Regulation  S-K under the
Securities Act) and (ii) trusts,  the trustee and all beneficiaries of which are
such specified person or members of such person's immediate family as determined
in accordance with the foregoing clause (i), and (b) any person that directly or
indirectly  owns more than 5% of any class of capital stock or other interest of
such specified person. For the purposes of this definition, "control," when used
with respect to any person means the power to direct the management and policies
of such person, directly or indirectly,  whether through the ownership of voting
securities, by contract or otherwise; and the terms "affiliated,"  "controlling"
and "controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing,  for purposes of this Warrant, the Purchaser and its Affiliates shall
not be deemed Affiliates of the Company.

     "After-Tax  Basis" when  referring to a payment that is required  hereunder
(the "target  amount"),  shall mean a total payment (the "total  amount")  that,
after  deduction of all  federal,  state and local taxes that are required to be
paid by the recipient in respect of the receipt or accrual of such total amount,
is equal to the target amount.

     "Agreed  Rate"  shall  mean  the rate of  interest  announced  publicly  by
Citibank,  N.A. in New York,  New York,  from time to time, as Citibank,  N.A.'s
base rate.

     "Appraisal Procedure" if applicable,  shall mean the following procedure to
determine  the fair  market  value,  as to any  security,  for  purposes  of the
definition  of "Fair Value" or the fair market value,  as to any other  property
(in  either  case,  the  "valuation  amount").  The  valuation  amount  shall be
determined in good faith by the Board of Directors;  provided,  however, that if
the Majority  Warrant  Holders  disagree  with such  valuation  amount  within a
reasonable  period of time (not to exceed twenty (20) days after notice thereof)
the  valuation  amount  shall be  determined  by an  investment  banking firm of
national recognition,  which firm shall be reasonably acceptable to the Board of
Directors and the Majority  Warrant  Holders.  If the Board of Directors and the
Majority  Warrant  Holders  are  unable to agree upon an  acceptable  investment
banking firm within ten (10) days after the date either party  proposed that one
be  selected,  the  investment  banking  firm will be selected by an  arbitrator
located  in New York  City,  New  York,  selected  by the  American  Arbitration
Association (or if such  organization  ceases to exist,  the arbitrator shall be
chosen by a court of competent  jurisdiction).  The arbitrator  shall select the
investment  banking firm (within ten (10) days of his appointment)  from a list,
jointly prepared by the Board of Directors and the Majority Warrant Holders,  of
not more than six  investment  banking firms of national  standing in the United
States,  of which no more than three may be named by the Board of Directors  and
no more than three may be named by the Majority Warrant Holders.  The arbitrator
may consider,  within the ten-day  period  allotted,  arguments from the parties
regarding  which  investment  banking firm to choose,  but the  selection by the
arbitrator  shall be made in its sole discretion from the list of six. The Board
of Directors  and the Majority  Warrant  Holders  shall submit their  respective
valuations  and other  relevant data to the  investment  banking  firm,  and the
investment  banking firm shall as soon as  practicable  thereafter  make its own
determination of the valuation  amount.  The final valuation amount for purposes
hereof shall be the average of the two valuation  amounts closest  together,  as
determined  by the  investment  banking firm,  from among the valuation  amounts
submitted  by the Company and the  Majority  Warrant  Holders and the  valuation
amount calculated by the investment banking firm. The determination of the final
valuation amount by such investment-banking firm shall be final and binding upon
the  parties.  The Company  shall pay the fees and  expenses  of the  investment
banking firm and arbitrator (if any) used to determine the valuation  amount. If
required by any such  investment  banking firm or arbitrator,  the Company shall
execute  a  retainer  and  engagement  letter  containing  reasonable  terms and
conditions,  including, without limitation,  customary provisions concerning the
rights of  indemnification  and  contribution  by the  Company  in favor of such
investment  banking firm or arbitrator  and its officers,  directors,  partners,
employees, agents and Affiliates.

     "Appraised  Value" per share of Common Stock as of a date specified  herein
shall  mean  the  value  of such a share  as of such  date as  determined  by an
investment  bank of  nationally  recognized  standing  selected  jointly  by the
Majority  Warrant  Holders and the  Company.  If the  Company  and the  Majority
Warrant Holders cannot agree on a mutually acceptable  investment bank, then the
Company and the Majority  Warrant  Holders shall each choose one such investment
bank and the  respective  chosen firms shall jointly  select a third  investment
bank,  which shall make the  determination.  The Company shall pay the costs and
fees of each such  investment  bank (including any such investment bank selected
by the Majority Warrant Holders), and the decision of the investment bank making
such  determination of Appraised Value shall be final and binding on the Company
and all affected  Holders of Warrants or Warrant  Stock.  Such  Appraised  Value
shall be determined as a pro rata portion of the value of the Company taken as a
whole,  based on the higher of (A) the value derived from a hypothetical sale of
the entire  Company as a going  concern by a willing  seller to a willing  buyer
(neither  acting  under any  compulsion)  and (B) the  liquidation  value of the
entire  Company.  No discount shall be applied on account of (i) any Warrants or
Warrant Stock  representing a minority  interest,  (ii) any lack of liquidity of
the Common  Stock or the  Warrants,  (iii) the fact that the Warrants or Warrant
Stock may constitute "restricted  securities" for securities law purposes,  (iv)
the existence of any call option or (v) any other grounds.

     "Book Value" per share of Common Stock as of a date specified  herein shall
mean the consolidated  book value of the Company and its Subsidiaries as of such
date divided by the number of shares of Common Stock  Outstanding  on such date.
Such book value shall be determined in accordance  with GAAP,  except that there
shall be no  reduction  in such book value by reason of any  amount  that may be
required  either as an offset to or reserve  against  retained  earnings or as a
deduction  from book value as a result of the issuance,  existence,  anticipated
exercise of, or anticipated cost to the Company of the repurchase of, any of the
Warrants.

     "Business  Day" shall mean a day other  than a  Saturday,  Sunday or day on
which  banking  institutions  in New York are  authorized  or required to remain
closed.

     "Commission" shall mean the Securities and Exchange Commission or any other
federal  agency  then   administering  the  Securities  Act  and  other  federal
securities laws.

     "Common Stock" shall mean the Common Stock of the Company,  par value $0.01
per share, as constituted on the Original Issue Date, and any capital stock into
which such Common Stock may  thereafter  be changed,  and shall also include (i)
capital stock of the Company of any other class  (regardless of how denominated)
issued to the  holders of shares of any Common  Stock upon any  reclassification
thereof  which is also not  preferred as to dividends  or  liquidation  over any
other class of stock of the Company and which is not subject to  redemption  and
(ii)  shares of common  stock of any  successor  or  acquiring  corporation  (as
defined in Section 4.6  hereof)  received  by or  distributed  to the holders of
Common  Stock of the Company in the  circumstances  contemplated  by Section 4.6
hereof.

     "Company"  shall  mean  Peapod,  Inc.,  a  Delaware  corporation,  and  any
successor corporation.

     "Current  Market Price" shall mean as of any specified  date the average of
the Daily  Market  Price of one share of the Common Stock for the shorter of (x)
the 10  consecutive  Business Days  immediately  preceding  such date or (y) the
period   commencing  on  the  Business  Day  next  following  the  first  public
announcement  by the Company of any event  giving rise to an  adjustment  of the
Exercise Price pursuant to Section 4 below and ending on such date.

     "Daily Market Price" shall mean,  with respect to one share of Common Stock
and for any  Business  Day: (i) if the Common Stock is then listed on a national
securities  exchange or is authorized  for quotation on NASDAQ and is designated
as a National Market System security, the last sale price of one share of Common
Stock, regular way, on such day on the principal stock exchange or market system
on which such Common Stock is then listed or authorized for quotation, or, if no
such sale takes  place on such day,  the  average of the  closing  bid and asked
prices  for one  share of Common  Stock on such day as  reported  on such  stock
exchange  or market  system or (ii) if the  Common  Stock is not then  listed or
authorized for quotation on any national  securities exchange or designated as a
National  Market System security on NASDAQ but is traded  over-the-counter,  the
average of the  closing  bid and asked  prices for one share of Common  Stock as
reported on NASDAQ or the  Electronic  Bulletin  Board or in the National  Daily
Quotation Sheets, as applicable.

     "Designated Office" shall have the meaning set forth in Section 10 hereof.

     "Dilution Fee" shall have the meaning set forth in Section 12 hereof.

     "Dilution  Fee Payment Date" shall have the meaning set forth in Section 12
hereof.

     "Exchange Act" shall mean the Securities  Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

     "Excluded  Securities"  shall have the  meaning  set forth in Section  4.11
hereof.

     "Exercise Date" shall have the meaning set forth in Section 2.1 hereof.

     "Exercise Notice" shall have the meaning set forth in Section 2.1 hereof.

     "Exercise  Period"  shall mean the  period  during  which  this  Warrant is
exercisable pursuant to Section 2.1 hereof.

     "Exercise  Price" shall mean,  in respect of a share of Common Stock at any
date herein  specified,  the initial Exercise Price set forth in the preamble of
this  Warrant,  as adjusted  from time to time  pursuant  to Sections  2.4 and 4
hereof.

     "Expiration  Date" shall mean the tenth  anniversary  of the Original Issue
Date.

     "Fair Value" per share of Common Stock as of any specified  date shall mean
(A) if the Common  Stock is publicly  traded on such date,  the  Current  Market
Price per share or (B) if the Common Stock is not publicly  traded on such date,
(1) the fair market value per share of Common Stock as  determined in good faith
by the Board of  Directors  of the Company and set forth in a written  notice to
each Holder or (2) if the  Majority  Warrant  Holders  object in writing to such
price as  determined  by the Board of  Directors  within  thirty (30) days after
receiving notice of same, the Appraised Value per share as of such date.

     "GAAP" shall mean generally accepted accounting principles set forth in the
opinions and  pronouncements of the Accounting  Principles Board of the American
Institute of Certified Public  Accountants and statements and  pronouncements of
the Financial Accounting Standards Board, which are in effect from time to time,
consistently applied.

     "Holder"  shall mean (a) with respect to this Warrant,  the person in whose
name the  Warrant  set forth  herein is  registered  on the books of the Company
maintained  for such purpose and (b) with respect to any other Warrant or shares
of Warrant  Stock,  the person in whose  name such  Warrant or Warrant  Stock is
registered on the books of the Company maintained for such purpose.

     "Lien"  shall mean any  mortgage or deed of trust,  pledge,  hypothecation,
assignment,   deposit  arrangement,  lien,  charge,  claim,  security  interest,
easement or encumbrance, or preference,  priority or other security agreement or
preferential  arrangement of any kind or nature whatsoever  (including,  without
limitation,  any lease or title retention agreement,  any financing lease having
substantially  the same economic effect as any of the foregoing,  and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code or comparable law of any jurisdiction).

     "Majority   Warrant   Holders"   shall  mean,   with  respect  to  a  given
determination,  the Holders of Warrants and Additional Warrants representing the
right to acquire more than fifty  percent  (50%) of the Common Stock  underlying
all of the then outstanding Warrants and Additional Warrants.

     "NASD" shall mean the National Association of Securities Dealers,  Inc., or
any successor corporation thereto.

     "NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting
system.

     "Opinion  of  Counsel"  shall mean a written  opinion  of  outside  counsel
experienced  in Securities  Act matters  chosen by the Holder of this Warrant or
Warrant Stock issued upon the exercise  hereof and reasonably  acceptable to the
Company.

     "Original Issue Date" shall mean the date on which this Warrant was issued,
as set forth on the cover page of this Warrant.

     "Outstanding"  shall mean, when used with reference to Common Stock, at any
date as of which the number of shares  thereof is to be  determined,  all issued
shares of Common  Stock,  except shares then owned or held by or for the account
of the  Company or any  Subsidiary,  and shall  include  all shares  issuable in
respect  of  outstanding  scrip  or  any  certificates  representing  fractional
interests in shares of Common Stock.

     "person"  shall  mean any  individual,  partnership,  corporation,  limited
liability  company,  joint venture,  association,  joint-stock  company,  trust,
unincorporated  organization,  government  or  agency or  political  subdivision
thereof, or other entity.

     "Preferred Stock" shall mean convertible preferred stock of the Company.

     "Restricted  Common  Stock" shall mean shares of Common Stock which are, or
which upon their issuance on the exercise of this Warrant would be, evidenced by
a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof.

     "Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

     "Share  Withholding  Option"  shall have the  meaning  set forth in Section
2.1(c) hereof.

     "subsidiary"  shall mean,  with respect to any person,  (a) a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by a subsidiary of such person,  or by such person and one or more  subsidiaries
of such person,  (b) a partnership  in which such person or a subsidiary of such
person is, at the date of determination,  a general partner of such partnership,
or (c) any other  person  (other than a  corporation)  in which such  person,  a
subsidiary  of such person or such person and one or more  subsidiaries  of such
person, directly or indirectly, at the date of determination thereof, has (i) at
least a  majority  ownership  interest,  (ii) the power to elect or  direct  the
election of the directors or other  governing body of such person,  or (iii) the
power to direct or cause the  direction  of the  affairs or  management  of such
person.  For purposes of this definition,  a person is deemed to own any capital
stock or other  ownership  interest if such person has the right to acquire such
capital stock or other ownership  interest,  whether through the exercise of any
purchase option, conversion privilege or similar right.

     "Subsidiary" shall mean a subsidiary of the Company.

     "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest therein, which would constitute a "sale" thereof or a transfer of a
beneficial interest therein within the meaning of the Securities Act.

     "Warrant  Price"  shall mean an amount equal to (i) the number of shares of
Common Stock being  purchased  upon exercise of all or a portion of this Warrant
pursuant to Section 2.1 hereof,  multiplied by (ii) the Exercise Price as of the
date of such exercise.

     "Warrants"  shall mean this Warrant and all warrants  issued upon transfer,
division or combination  of, or in  substitution  for, this Warrant or any other
such  Warrant.  All  Warrants  shall at all times be  identical  as to terms and
conditions, except as to the number of shares of Common Stock for which they may
be exercised and their date of issuance.

     "Warrant  Stock"  generally  shall mean the shares of Common Stock  issued,
issuable or both (as the context may require) upon the exercise of Warrants.

2.   EXERCISE OF WARRANT

     2.1  Manner of  Exercise.  (a) From and after the  Original  Issue Date and
until  5:00 P.M.,  New York time,  on the  Expiration  Date,  the Holder of this
Warrant may from time to time exercise  this  Warrant,  on any Business Day, for
all or any part of the number of shares of Common Stock  purchasable  hereunder.
In order to exercise  this  Warrant,  in whole or in part,  the Holder shall (i)
deliver to the Company at its Designated Office a written notice of the Holder's
election to exercise this Warrant (an "Exercise Notice"),  which Exercise Notice
shall be  irrevocable  and  specify  the number of shares of Common  Stock to be
purchased,  together  with this  Warrant and (ii) pay to the Company the Warrant
Price in  accordance  with Section  2.1(c) (the date on which both such delivery
and payment shall have first taken place being hereinafter sometimes referred to
as the  "Exercise  Date").  Such  Exercise  Notice  shall  be in the form of the
subscription form appearing at the end of this Warrant as Annex A, duly executed
by the Holder or its duly authorized agent or attorney.

     (b) Upon  receipt  by the  Company of such  Exercise  Notice,  Warrant  and
payment (if applicable),  the Company shall, as promptly as practicable,  and in
any event  within five (5)  Business  Days  thereafter,  execute (or cause to be
executed) and deliver (or cause to be delivered) to the Holder a certificate  or
certificates  representing  the aggregate  number of full shares of Common Stock
issuable  upon such  exercise,  together  with cash in lieu of any fraction of a
share, as hereafter provided. The stock certificate or certificates so delivered
shall be, to the extent possible,  in such  denomination or denominations as the
exercising  Holder shall reasonably  request in the Exercise Notice and shall be
registered in the name of the Holder or, subject to Section 8 below,  such other
name as shall be designated in the Exercise Notice. This Warrant shall be deemed
to have been  exercised,  and such stock  certificate or  certificates  shall be
deemed to have been issued,  and the Holder or any other person so designated to
be named therein shall be deemed to have become a holder of record of the shares
evidenced by such stock certificate or certificates for all purposes,  as of the
Exercise Date.

     (c) Payment of the Warrant  Price shall be made at the option of the Holder
by one or more of the  following  methods:  (i) by delivery  of a  certified  or
official  bank check in the amount of such Warrant Price payable to the order of
the Company,  (ii) by instructing  the Company to withhold a number of shares of
Warrant Stock then issuable upon exercise of this Warrant with an aggregate Fair
Value equal to such Warrant  Price (the "Share  Withholding  Option"),  (iii) by
surrendering  to the Company shares of Common Stock  previously  acquired by the
Holder  with an  aggregate  Fair  Value  equal to such  Warrant  Price,  (iv) by
surrendering to the Company dividends due and owing by the Company to the Holder
equal  to such  Warrant  Price,  or (v) by  providing  to the  Company  goods or
services with a fair value  determined  by the Board of Directors  equal to such
Warrant  Price (or if the  Majority  Warrant  Holders  object in writing to such
determination  within  thirty  (30) days  after  receiving  notice  of same,  as
determined  by an  independent  expert of national  recognition  in the relevant
industry,  which expert shall be reasonably acceptable to the Board of Directors
and the Majority Warrant Holders, and if the Board of Directors and the Majority
Warrant Holders are unable to agree upon an acceptable independent expert within
ten (10) days after the date either party  proposed  that one be  selected,  the
independent  expert will be selected by an arbitrator  located in New York City,
New  York,  selected  by  the  American  Arbitration  Association  (or  if  such
organization  ceases  to  exist,  the  arbitrator  shall be chosen by a court of
competent  jurisdiction)).  In the event of any  withholding of Warrant Stock or
surrender  of Common  Stock  pursuant  to clause  (ii) or (iii)  above where the
number of shares  whose Fair Value is equal to the Warrant  Price is not a whole
number,  the number of shares withheld by or surrendered to the Company shall be
rounded up to the nearest  whole share and the Company shall make a cash payment
to the Holder based on the incremental  fraction of a share being so withheld by
or surrendered to the Company in an amount determined in accordance with Section
2.3 hereof.

     (d) If this Warrant shall have been  exercised in part,  the Company shall,
at the time of delivery of the  certificate  or  certificates  representing  the
shares of  Common  Stock  being  issued,  deliver  to the  Holder a new  Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant.  Such new Warrant shall in all other  respects
be  identical  to this  Warrant.  Notwithstanding  any  provision  herein to the
contrary,  the Company shall not be required to register  shares of Common Stock
in the name of any person who  acquired  this  Warrant  (or part  hereof) or any
shares of Warrant Stock otherwise than in accordance with this Warrant.

     (e) All Warrants delivered for exercise shall be canceled by the Company.

     2.2 Payment of Taxes. All shares of Common Stock issuable upon the exercise
of this Warrant pursuant to the terms hereof shall be validly issued, fully paid
and  nonassessable,  issued without  violation of any preemptive rights and free
and clear of all Liens  (other than any created by actions of the  Holder).  The
Company shall pay all expenses in connection  with, and all issuance,  transfer,
stamp and other similar taxes and other governmental charges that may be imposed
with  respect  to, the issue or delivery  thereof,  unless such tax or charge is
imposed by law upon the  Holder,  in which  case such taxes or charges  shall be
paid by the Holder and the Company  shall  reimburse  the Holder  therefor on an
After-Tax Basis. The Company shall not,  however,  be required to pay any tax or
governmental  charge which may be payable in respect of any Transfer involved in
the issue and delivery of shares of Common Stock  issuable upon exercise of this
Warrant in a name other than that of the Holder of the Warrants to be exercised,
and no such  issue or  delivery  shall  be made  unless  and  until  the  person
requesting such issue has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company that such tax has been paid.

     2.3  Fractional  Shares.  The  Company  shall  not be  required  to issue a
fractional  share of  Common  Stock  upon  exercise  of any  Warrant.  As to any
fraction of a share that the Holder of one or more  Warrants,  the rights  under
which are  exercised  in the same  transaction,  would  otherwise be entitled to
purchase upon such  exercise,  the Company shall pay to such Holder an amount in
cash equal to such fraction multiplied by the Fair Value.

3.   TRANSFER, DIVISION AND COMBINATION

     3.1 Transfer. Subject to compliance with Section 8 hereof, each transfer of
this Warrant and all rights hereunder,  in whole or in part, shall be registered
on the books of the Company to be maintained for such purpose, upon surrender of
this Warrant at the  Designated  Office,  together with a written  assignment of
this  Warrant in the form of Annex B hereto  duly  executed by the Holder or its
agent or attorney and funds  sufficient to pay any transfer  taxes  described in
Section 2.2 in connection with the making of such transfer.  Upon such surrender
and delivery  and, if required,  such  payment,  the Company  shall,  subject to
Section 8,  execute  and  deliver a new  Warrant or  Warrants in the name of the
assignee or assignees and in the  denominations  specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned and this Warrant shall promptly be cancelled.  A
Warrant,  if properly assigned in compliance with Section 8, may be exercised by
the new Holder for the purchase of shares of Common Stock  without  having a new
Warrant issued.

     3.2 Division and  Combination.  Subject to compliance  with the  applicable
provisions  of this  Warrant  including,  without  limitation,  Section  8, this
Warrant may be divided or combined with other Warrants upon presentation  hereof
at the Designated  Office,  together with a written notice  specifying the names
and  denominations in which new Warrants are to be issued,  signed by the Holder
or its agent or attorney.  Subject to compliance with the applicable  provisions
of this  Warrant as to any  transfer  which may be involved in such  division or
combination,  the Company shall execute and deliver a new Warrant or Warrants in
exchange  for the Warrant or  Warrants  to be divided or combined in  accordance
with such notice.

     3.3  Expenses.  The  Company  shall  prepare,  issue and deliver at its own
expense  (other than pursuant to Section 2.2 hereof) any new Warrant or Warrants
required to be issued under this Section 3.

     3.4 Maintenance of Books. The Company agrees to maintain, at the Designated
Office, books for the registration and transfer of the Warrants.

4.   ANTIDILUTION PROVISIONS

     The number of shares of Common Stock for which this Warrant is  exercisable
and the Exercise  Price shall be subject to adjustment  from time to time as set
forth in this Section 4. The Company agrees that, at the election of the Holder,
the  antidilution  provisions  in this  Section 4 shall be revised to conform to
antidilution provisions in warrants issued in connection with the provision of a
credit  facility by the  Purchaser  or the  purchase of  Preferred  Stock by the
Purchaser.  The  Holder  agrees  that,  at  the  election  of the  Company,  the
exceptions  to the  antidilution  provisions in Section 4.11 shall be revised to
conform to the exceptions to the  antidilution  provisions in warrants issued in
connection  with the  provision  of a credit  facility by the  Purchaser  or the
purchase of Preferred Stock by the Purchaser.

     4.1 Upon Issuance of Common  Stock.  If the Company  shall,  at any time or
from time to time after the Original  Issuance Date,  issue any shares of Common
Stock,  options to purchase or rights to subscribe for Common Stock,  securities
by their terms  convertible into or exchangeable for Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable securities,
other  than  shares of  Preferred  Stock  issued to the  Purchaser  or  Excluded
Securities,  without  consideration  or for  consideration  per share  less than
either (a) the Exercise Price or (b) the Fair Value of the Common Stock, in each
case,  in effect  immediately  prior to the  issuance  of such  Common  Stock or
securities,  then such  Exercise  Price shall  forthwith  be adjusted to a price
equal  to the  lower  of (x) the  Exercise  Price in  effect  immediately  prior
thereto,  or (y) the lowest  consideration  per share for which  such  shares of
Common Stock or such options,  rights or convertible or exchangeable  securities
are issued (plus the additional consideration required to be paid upon exercise,
exchange or conversion of such options,  rights or convertible  or  exchangeable
securities).

     4.2 Upon  Acquisition  of Common  Stock.  If the Company or any  Subsidiary
shall,  at any time or from  time to time  after  the  Original  Issuance  Date,
directly or indirectly,  redeem, purchase or otherwise acquire (a) any shares of
Common Stock for a consideration per share greater than the Fair Value of shares
of Common Stock  immediately prior to such event, or (b) any options to purchase
or rights to subscribe for Common Stock,  securities by their terms  convertible
into or  exchangeable  for Common Stock  (other than shares of  Preferred  Stock
issued to the Purchaser that are redeemed  according to their terms), or options
to  purchase  or  rights  to  subscribe  for such  convertible  or  exchangeable
securities,  in either case, for a  consideration  per share of Common Stock for
which  such  options,  rights or  convertible  or  exchangeable  securities  are
exercisable,  convertible or exchangeable,  that is greater than the amount,  if
any, by which the Fair Value of shares of Common Stock immediately prior to such
event  exceeds the per share  exercise,  exchange,  subscription,  conversion or
purchase price applicable to such options, rights or convertible or exchangeable
securities,  then, in the case of (a) or (b), the Exercise Price shall forthwith
be lowered to a price equal to the price obtained by multiplying:

          (i) the Exercise Price in effect immediately prior to such event, by

          (ii) a fraction of which (x) the  denominator  shall be the Fair Value
     per  share of  Common  Stock  immediately  prior to such  event and (y) the
     numerator shall be the result of dividing:

               (A) (1) the  product of (a) the number of shares of Common  Stock
          outstanding on a fully-diluted  basis and (b) the Fair Value per share
          of Common Stock, in each case,  immediately prior to such event, minus
          (2) the aggregate consideration paid by the Company in such event, by

               (B) the  number  of  shares  of  Common  Stock  outstanding  on a
          fully-diluted  basis immediately prior to such event, minus the number
          of shares of Common  Stock  purchased  or  acquired,  or for which the
          options,  rights or convertible or  exchangeable  securities  acquired
          were exercisable, convertible or exchangeable.

     For purposes of this Section 4, "fully  diluted  basis" shall be determined
in accordance with the treasury method of GAAP and Section 4.3.

     4.3  Provisions  Applicable  to  Adjustments.   For  the  purposes  of  any
adjustment of an Exercise  Price pursuant to Sections 4.1 and 4.2, the following
provisions shall be applicable:

               (i) In the case of the  issuance  of  Common  Stock for cash in a
          public  offering  or private  placement,  the  consideration  shall be
          deemed  to be the  amount  of  cash  paid  therefor  before  deducting
          therefrom any discounts,  commissions or placement fees payable by the
          Company to any  underwriter or placement  agent in connection with the
          issuance and sale thereof.

               (ii)  In  the  case  of  the  issuance  of  Common  Stock  for  a
          consideration  in whole or in part other than cash, the  consideration
          other  than  cash  shall be  deemed to be the Fair  Value  thereof  as
          determined in accordance with the Appraisal Procedure.

               (iii) In the case of the  issuance  of  options  to  purchase  or
          rights to  subscribe  for  Common  Stock,  securities  by their  terms
          convertible  into or  exchangeable  for  Common  Stock,  or options to
          purchase or rights to subscribe for such  convertible or  exchangeable
          securities,  except  for  shares  of  Preferred  Stock  issued  to the
          Purchaser or options to acquire Excluded Securities:

                    (A) the aggregate  maximum  number of shares of Common Stock
               deliverable  upon  exercise of such options to purchase or rights
               to subscribe for Common Stock shall be deemed to have been issued
               at the  time  such  options  or  rights  were  issued  and  for a
               consideration  equal  to  the  consideration  (determined  in the
               manner  provided in  subparagraphs  (i) and (ii) above),  if any,
               received by the  Company  upon the  issuance  of such  options or
               rights plus the minimum  purchase  price provided in such options
               or rights for the Common Stock covered thereby;

                    (B) the aggregate  maximum  number of shares of Common Stock
               deliverable  upon  conversion  of  or in  exchange  of  any  such
               convertible  or  exchangeable  securities or upon the exercise of
               options to purchase or rights to subscribe  for such  convertible
               or exchangeable  securities and subsequent conversion or exchange
               thereof  shall be  deemed  to have  been  issued at the time such
               securities,   options,   or  rights   were   issued   and  for  a
               consideration equal to the consideration  received by the Company
               for any such securities and related options or rights  (excluding
               any cash  received  on  account of  accrued  interest  or accrued
               dividends),  plus the  additional  consideration,  if any,  to be
               received by the Company upon the  conversion  or exchange of such
               securities or the exercise of any related  options or rights (the
               consideration  in  each  case  to be  determined  in  the  manner
               provided in paragraphs (i) and (ii) above);

                    (C) on any change in the number of shares or exercise  price
               of Common Stock  deliverable upon exercise of any such options or
               rights or conversions of or exchanges for such securities,  other
               than a change resulting from the antidilution provisions thereof,
               the applicable  Exercise  Price shall  forthwith be readjusted to
               such  Exercise   Price  as  would  have  been  obtained  had  the
               adjustment  made upon the  issuance  of such  options,  rights or
               securities  not  converted  prior to such  change or  options  or
               rights  related to such  securities  not converted  prior to such
               change been made upon the basis of such change;

                    (D)  upon  the   expiration  of  any  such  options  or  the
               termination of any rights, convertible securities or exchangeable
               securities,  the  applicable  Exercise  Price shall  forthwith be
               readjusted to such Exercise Price as would have been in effect at
               the time of such  expiration  or  termination  had such  options,
               rights, convertible securities or exchangeable securities, to the
               extent  outstanding  immediately  prior  to  such  expiration  or
               termination, never been issued; and

                    (E) no further  adjustment  of the Exercise  Price  adjusted
               upon  the  issuance  of any  such  options,  rights,  convertible
               securities or exchangeable  securities  shall be made as a result
               of the actual  issuance  of Common  Stock on the  exercise of any
               such rights or options or any  conversion or exchange of any such
               securities.

     4.4 Upon  Stock  Dividends  or Splits.  If, at any time after the  Original
Issuance Date, the number of shares of Common Stock  outstanding is increased by
a stock  dividend  payable  in  shares of Common  Stock or by a  subdivision  or
split-up  of shares of Common  Stock,  then,  following  the record date for the
determination  of  holders  of Common  Stock  entitled  to  receive  such  stock
dividend, or to be affected by such subdivision or split-up,  the Exercise Price
shall be  appropriately  decreased  so that the number of shares of Common Stock
purchasable on exercise of the Warrants shall be increased in proportion to such
increase in outstanding shares.

     4.5 Upon  Combinations.  If, at any time after the Original  Issuance Date,
the number of shares of Common Stock  outstanding  is decreased by a combination
of the  outstanding  shares of Common  Stock into a smaller  number of shares of
Common Stock,  then,  following the record date to determine  shares affected by
such  combination,  the Exercise Price shall be appropriately  increased so that
the number of shares of Common  Stock  purchasable  on  exercise  of each of the
Warrants  shall be  decreased  in  proportion  to such  decrease in  outstanding
shares.

     4.6 Upon Reclassifications,  Reorganizations, Consolidations or Mergers. In
the event of any capital  reorganization of the Company, any reclassification of
the stock of the Company  (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 stock
dividend  or   subdivision,   split-up  or  combination   of  shares),   or  any
consolidation or merger of the Company with or into another  corporation  (where
the Company is not the  surviving  corporation  or where there is a change in or
distribution  with respect to the Common  Stock),  each Warrant shall after such
reorganization,  reclassification,  consolidation,  or merger be exercisable for
the kind and number of shares of stock or other  securities  or  property of the
Company or of the successor  corporation  resulting from such  consolidation  or
surviving  such  merger,  if any, to which the holder of the number of shares of
Common Stock deliverable  (immediately prior to the time of such reorganization,
reclassification,  consolidation  or merger) upon exercise of such Warrant would
have been entitled upon such reorganization,  reclassification, consolidation or
merger.  The  provisions  of this clause  shall  similarly  apply to  successive
reorganizations, reclassifications, consolidations, or mergers.

     4.7 Deferral in Certain Circumstances.  In any case in which the provisions
of this  Section 4 shall  require  that an  adjustment  shall  become  effective
immediately  after a record  date of an event,  the  Company may defer until the
occurrence  of such event issuing to the Holder of any Warrant  exercised  after
such record date and before the  occurrence  of such event the shares of capital
stock issuable upon such exercise by reason of the  adjustment  required by such
event and issuing to such Holder only the shares of capital stock  issuable upon
such exercise before giving effect to such adjustments;  provided, however, that
the Company shall deliver to such Holder an appropriate  instrument or due bills
evidencing such Holder's right to receive such additional shares.

     4.8 Other Anti-Dilution Provisions. If the Company has issued or issues any
securities  on  or  after  the  Original  Issuance  Date  containing  provisions
protecting  the holder or holders  thereof  against  dilution in any manner more
favorable to such holder or holders thereof than those set forth in this Section
4, such provisions (or any more favorable portion thereof) shall be deemed to be
incorporated  herein as if fully set forth in this  Warrant  and,  to the extent
inconsistent  with  any  provision  of  this  Warrant,  shall  be  deemed  to be
substituted therefor.

     4.9  Appraisal  Procedure.  In any case in  which  the  provisions  of this
Section  4 shall  necessitate  that the  Appraisal  Procedure  be  utilized  for
purposes of  determining  an adjustment to the Exercise  Price,  the Company may
defer until the completion of the Appraisal  Procedure and the  determination of
the adjustment (1) issuing to the Holder of any Warrant exercised after the date
of the event that requires the adjustment and before completion of the Appraisal
Procedure and the  determination of the adjustment,  the shares of capital stock
issuable upon such exercise by reason of the  adjustment  required by such event
and issuing to such Holder only the shares of capital  stock  issuable upon such
exercise  before giving effect to such  adjustment and (2) paying to such Holder
any amount in cash in lieu of a fractional  share of capital  stock  pursuant to
Section 2.3 above;  provided,  however,  that the Company  shall deliver to such
holder an appropriate  instrument or due bills evidencing such holder's right to
receive such additional shares or cash.

     4.10 Adjustment of Number of Shares Purchasable. Upon any adjustment of the
Exercise  Price as provided in Section 4.1, 4.2, 4.4, 4.5 or 4.6, the Holders of
the Warrants shall thereafter be entitled to purchase upon the exercise thereof,
at the Exercise Price  resulting from such  adjustment,  the number of shares of
Common  Stock  (calculated  to the  nearest  1/100th  of a  share)  obtained  by
multiplying the Exercise Price in effect immediately prior to such adjustment by
the number of shares of Common Stock issuable on the exercise hereof immediately
prior to such  adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment.

     4.11  Exceptions.  Section 4 shall not apply to (i) any  issuance of Common
Stock upon  exercise  of any  options or warrants  outstanding  on the  Original
Issuance  Date,  (ii) the  issuance  of shares of Common  Stock in an  aggregate
amount not to exceed 500,000 shares  (subject to adjustment on the same basis as
is the number of shares for which this Warrant is  exercisable as a result of an
event specified in Section 4.4, 4.5 or 4.6) upon exercise of options or warrants
that have been  approved  by the Board of  Directors,  or any  issuance  of such
options or warrants,  (iii) in addition to options and  warrants  referred to in
clause (ii) of this  Section  4.11,  options or  warrants to purchase  shares of
Common Stock issued  pursuant to an employee stock option plan or employee stock
incentive plan approved by the Board of Directors and the Company's stockholders
on or after the date on which the Holder  has  representatives  constituting  at
least a majority  of the Board of  Directors  of the  Company,  or any shares of
Common Stock issued upon  exercise of such options or warrants  (the  securities
referred to in clauses  (i),  (ii) and (iii) being  collectively  referred to as
"Excluded  Securities"),  (iv) any issuance of Common  Stock in an  underwritten
public  offering at a price per share at least equal to the Exercise  Price then
in effect if the  underwriting  discount does not exceed 7%, or (v) the issuance
of Preferred  Stock and warrants to the Purchaser  that is  contemplated  by the
letter dated April 4, 2000 from the Purchaser to the Company.

     4.12 Notice of Adjustment of Exercise Price. Whenever the Exercise Price is
adjusted as herein provided:

          (i)  the  Company  shall  compute  the  adjusted   Exercise  Price  in
     accordance  with this Section 4 and shall prepare a  certificate  signed by
     the  Company's  independent  accounting  firm,  setting  forth the adjusted
     Exercise  Price and showing in reasonable  detail the facts upon which such
     adjustment is based, and such certificate  shall forthwith be filed at each
     office or agency maintained for such purpose or exercise of Warrants; and

          (ii) a notice  stating that the Exercise  Price has been  adjusted and
     setting forth the adjusted  Exercise  Price shall  forthwith be prepared by
     the Company,  and as soon as practicable after it is prepared,  such notice
     shall be mailed by the  Company at its expense to all Holders at their last
     addresses as they shall appear in the stock register.

     4.13 Other Dilutive Events. If any corporate action shall occur as to which
the provisions of this Section 4 are not strictly applicable but as to which the
failure to make any adjustment  would  adversely  affect the purchase  rights or
value  represented by the Warrants in accordance  with the essential  intent and
principles  of this  Section 4 (which are to place the  Holder in a position  as
nearly equal as possible to the position the Holder would have  occupied had the
Holder  purchased  shares of Common Stock on the date hereof) then, in each such
case,  the  Company  shall  appoint  a  firm  of  independent  certified  public
accountants of recognized  national  standing (which may be the regular auditors
of the Company) to give their  opinion upon the  adjustment,  if any, on a basis
consistent with the essential intent and principles  established in this Section
4, necessary to preserve,  without dilution,  the purchase rights represented by
the  Warrants.  Upon receipt of such  opinion,  the Company will promptly mail a
copy  thereof to the Holders and will make the  adjustments  described  therein;
provided that no such  adjustment  will increase the Exercise  Price or decrease
the number of shares of Common Stock obtainable as otherwise determined pursuant
to this Section 4.

     5.  NO  IMPAIRMENT;   REGULATORY  COMPLIANCE  AND  COOPERATION;  NOTICE  OF
EXPIRATION

     (a) The Company  shall not by any action,  including,  without  limitation,
amending its charter documents or through any reorganization,  reclassification,
transfer  of  assets,  consolidation,  merger,  dissolution,  issue  or  sale of
securities or any other  similar  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  actions as may be necessary  or  appropriate  to protect the
rights of the Holder against impairment.  Without limiting the generality of the
foregoing,  the  Company  shall  take all such  action  as may be  necessary  or
appropriate  in order that the Company may validly and legally  issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, free
and  clear of all  Liens,  and  shall use its best  efforts  to obtain  all such
authorizations,  exemptions or consents from any public  regulatory  body having
jurisdiction  thereof as may be  necessary  to enable the Company to perform its
obligations under this Warrant.

     (b) The Company  shall  deliver to each Holder of Warrants on or before six
months prior to the tenth anniversary of the Original Issue Date, but no earlier
than nine months  prior to the tenth  anniversary  of the  Original  Issue Date,
advance notice of such tenth anniversary and of the anticipated Expiration Date.
If the Company  fails to fulfill in a timely  manner the notice  obligation  set
forth in the prior  sentence,  it shall  provide such notice as soon as possible
thereafter.

     6.  RESERVATION AND  AUTHORIZATION  OF COMMON STOCK;  REGISTRATION  WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY

     From and after the  Original  Issue Date,  the  Company  shall at all times
reserve and keep  available  for issuance upon the exercise of the Warrants such
number  of its  authorized  but  unissued  shares  of  Common  Stock  as will be
sufficient  to permit the  exercise  in full of all  outstanding  Warrants.  All
shares of Common Stock issuable  pursuant to the terms hereof,  when issued upon
exercise of this  Warrant  with payment  therefor in  accordance  with the terms
hereof,  shall be duly and validly issued and fully paid and nonassessable,  not
subject to  preemptive  rights and shall be free and clear of all Liens.  Before
taking any action that would result in an  adjustment in the number of shares of
Common Stock for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such  authorizations or exemptions thereof, or consents
thereto,  as may be necessary from any public  regulatory  body or bodies having
jurisdiction  over such  action.  If any shares of Common  Stock  required to be
reserved  for  issuance  upon  exercise  of  Warrants  require  registration  or
qualification  with any  governmental  authority  under any federal or state law
(other than under the  Securities Act or any state  securities  law) before such
shares may be so issued,  the Company will in good faith and as expeditiously as
possible and at its expense endeavor to cause such shares to be duly registered.

7.   NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS

     7.1 Notices of Corporate Actions.

     In case:

     (a) the Company  shall take an action or an event shall  occur,  that would
require an Exercise Price adjustment pursuant to Section 4; or

     (b) the Company  shall grant to the holders of its Common  Stock  rights or
warrants to subscribe  for or purchase any shares of capital stock of any class;
or

     (c) of any  reclassification  of the Common Stock (other than a subdivision
or  combination  of  the  outstanding   shares  of  Common  Stock),  or  of  any
consolidation,  merger or share exchange to which the Company is a party and for
which approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or

     (d) of the voluntary or involuntary dissolution,  liquidation or winding up
of the Company; or

     (e) the Company or any Subsidiary  shall commence a tender offer for all or
a portion of the  outstanding  shares of Common  Stock (or shall  amend any such
tender  offer to change the maximum  number of shares being sought or the amount
or type of consideration being offered therefor);

then the Company shall cause to be filed at each office or agency maintained for
such  purpose,  and shall cause to be mailed to all Holders of Warrants at their
last  addresses  as they shall  appear in the stock  register,  at least 30 days
prior  to the  applicable  record,  effective  or  expiration  date  hereinafter
specified,  a notice  stating  (x) the date on which a record is to be taken for
the purpose of such  dividend,  distribution  or granting of rights or warrants,
or, if a record is not to be taken,  the date as of which the  holders of Common
Stock of record who will be entitled to such dividend,  distribution,  rights or
warrants  are to be  determined,  (y) the date on which  such  reclassification,
consolidation,  merger, share exchange, sale, transfer, dissolution, liquidation
or winding up is  expected to become  effective,  and the date as of which it is
expected  that  holders of Common  Stock of record shall be entitled to exchange
their shares of Common Stock for securities,  cash or other property deliverable
upon  such  reclassification,   consolidation,  merger,  share  exchange,  sale,
transfer, dissolution,  liquidation or winding up, or (z) the date on which such
tender  offer  commenced,  the date on which such tender  offer is  scheduled to
expire unless extended,  the consideration  offered and the other material terms
thereof (or the material terms of the amendment thereto). Such notice shall also
set forth such facts with respect  thereto as shall be  reasonably  necessary to
indicate the effect of such action on the Exercise Price and the number and kind
or class of shares or other securities or property which shall be deliverable or
purchasable  upon the occurrence of such action or deliverable  upon exercise of
the Warrants. Neither the failure to give any such notice nor any defect therein
shall  affect the  legality or validity of any action  described  in clauses (a)
through (e) of this Section 7.1.

     7.2 Taking of Record.  In the case of all dividends or other  distributions
by the  Company to the  holders of its  Common  Stock with  respect to which any
provision  of any  Section  hereof  refers  to the  taking  of a record  of such
holders,  the  Company  will in each such case take such a record  and will take
such record as of the close of business on a Business Day.

     7.3 Closing of Transfer  Books.  The Company shall not at any time,  except
upon  dissolution,  liquidation  or winding up of the  Company,  close its stock
transfer  books or  Warrant  transfer  books so as to  result in  preventing  or
delaying the exercise or transfer of any Warrant.

8.   TRANSFER RESTRICTIONS

         The Holder,  by acceptance  of this Warrant,  agrees to be bound by the
provisions of this Section 8.

     8.1  Restrictions  on  Transfers.  Neither  this  Warrant nor any shares of
Restricted  Common Stock issued upon the exercise  hereof shall be  transferred,
sold,  assigned,  exchanged,   mortgaged,  pledged,  hypothecated  or  otherwise
disposed  of or  encumbered  except in  compliance  with the  provisions  of the
Securities  Act, the rules and  regulations  thereunder  and this Warrant.  Each
certificate,  if any,  evidencing such shares of Restricted  Common Stock issued
upon any such Transfer, other than in a public offering pursuant to an effective
registration  statement,  shall bear the restrictive legend set forth in Section
8.2(a),  and each Warrant issued upon such Transfer  shall bear the  restrictive
legend set forth in Section 8.2(b),  unless the Company  determines that, or the
Holder  delivers to the Company an Opinion of Counsel to the effect  that,  such
legend is not required for the purposes of compliance  with the Securities  Act.
Holders of the  Warrants or the  Restricted  Common  Stock,  as the case may be,
shall not be entitled to Transfer such Warrants or such Restricted  Common Stock
except in accordance with this Section 8.1.

     8.2 Restrictive Legends.

     (a) Except as otherwise  provided in this Section 8, each  certificate  for
Warrant  Stock  initially  issued upon the  exercise of this  Warrant,  and each
certificate  for Warrant Stock issued to any  subsequent  transferee of any such
certificate,   shall  be  stamped  or  otherwise  imprinted  with  a  legend  in
substantially the following form:

     "THE SHARES  REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
     THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES
     LAW. THE SHARES  REPRESENTED BY THIS  CERTIFICATE  MAY NOT BE  TRANSFERRED,
     SOLD, ASSIGNED,  EXCHANGED,  MORTGAGED,  PLEDGED, HYPOTHECATED OF OTHERWISE
     DISPOSED OF OR ENCUMBERED  WITHOUT  COMPLIANCE  WITH THE PROVISIONS OF, AND
     ARE OTHERWISE  RESTRICTED BY THE  PROVISIONS  OF, THE ACT AND THE RULES AND
     REGULATIONS THEREUNDER."

     (b) Except as otherwise  provided in this Section 8, each Warrant  shall be
stamped or otherwise  imprinted  with a legend in  substantially  the  following
form:

     "NEITHER  THIS WARRANT NOR ANY OF THE  SECURITIES  ISSUABLE  UPON  EXERCISE
     HEREOF HAVE BEEN  REGISTERED  UNDER THE  SECURITIES ACT OF 1933, AS AMENDED
     (THE "ACT"),  OR ANY STATE SECURITIES LAW. THE WARRANT  REPRESENTED BY THIS
     CERTIFICATE  AND  THE  STOCK  ISSUABLE  UPON  EXERCISE  HEREOF  MAY  NOT BE
     TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OF
     OTHERWISE  DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS
     OF, AND ARE OTHERWISE  RESTRICTED BY THE  PROVISIONS OF, THE ACT, THE RULES
     AND REGULATIONS THEREUNDER AND THIS WARRANT."

     8.3  Termination  of  Securities  Law  Restrictions.   Notwithstanding  the
foregoing  provisions of this Section 8, the restrictions imposed by Section 8.1
upon the transferability of the Warrants and the Restricted Common Stock and the
legend  requirements  of  Section  8.2(a)  and  (b)  shall  terminate  as to any
particular  Warrant or shares of Restricted  Common Stock when the Company shall
have received  from the Holder  thereof an Opinion of Counsel to the effect that
such legend is not required in order to ensure  compliance  with the  Securities
Act. Whenever the restrictions imposed by Section 8.1 shall terminate as to this
Warrant,  as herein  above  provided,  the Holder  hereof  shall be  entitled to
receive from the Company,  at the expense of the Company,  a new Warrant with no
restrictive  legend,  and  none of the  Warrants  issued  upon  registration  of
transfer,  division or combination of, or in  substitution  for, such Warrant or
Warrants shall have any similar  restrictive  legend endorsed thereon.  Whenever
the  restrictions  imposed by this  Section  shall  terminate as to any share of
Restricted  Common Stock, as herein above provided,  the Holder thereof shall be
entitled  to  receive  from  the  Company,  at  the  Company's  expense,  a  new
certificate  representing  such Common Stock not bearing the restrictive  legend
set forth in Section 8.2(a).

9.   LOSS OR MUTILATION

     Upon  receipt  by the  Company  from  any  Holder  of  evidence  reasonably
satisfactory  to it of the  ownership  of and the loss,  theft,  destruction  or
mutilation of this Warrant and an indemnity  reasonably  satisfactory  to it (it
being understood that the written  indemnification  agreement of or affidavit of
loss of the Holder shall be a sufficient  indemnity) and, in case of mutilation,
upon surrender and cancellation  hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor to such Holder; provided, however, that,
in the case of  mutilation,  no  indemnity  shall be required if this Warrant in
identifiable form is surrendered to the Company for cancellation.

10.  OFFICE OF THE COMPANY

     As  long as any of the  Warrants  remain  outstanding,  the  Company  shall
maintain an office or agency,  which may be the principal  executive  offices of
the Company (the "Designated  Office"),  where the Warrants may be presented for
exercise,  registration of transfer, division or combination as provided in this
Warrant.  Such Designated Office shall initially be the office of the Company at
9933 Woods  Drive,  Skokie,  Illinois  60077.  The Company may from time to time
change  the  Designated  Office to  another  office of the  Company or its agent
within the United States by notice given to all registered  Holders at least ten
(10) Business Days prior to the effective date of such change.

11.  FINANCIAL AND BUSINESS INFORMATION

     If at any time prior to the Expiration Date, the Company is not required to
file reports  under  Section 13 or 15(d) of the Exchange  Act, the Company shall
furnish to Holders of Warrants the following:

     (a) Quarterly  Reports.  As soon as  available,  but not later than 45 days
after the end of each quarterly  accounting period,  (A) a consolidated  balance
sheet of the Company as of the end of such period and consolidated statements of
income,  cash flows and  changes  in  stockholders'  equity  for such  quarterly
accounting  period  and for the  period  commencing  at the end of the  previous
fiscal year and ending with the end of such period,  setting  forth in each case
in comparative form the corresponding  figures for the  corresponding  period of
the preceding  fiscal year, all prepared in accordance  with generally  accepted
accounting  principles   consistently   applied,   subject  to  normal  year-end
adjustments  and  the  absence  of  footnote  disclosure,  and (B) a  report  by
management  of the Company of the  operating  and  financial  highlights  of the
Company and its Subsidiaries for such period, which shall include an analysis of
the operations of the Company and its Subsidiaries for such period.

     (b) Annual Reports. As soon as available,  but not later than 90 days after
the end of each  fiscal  year of the  Company,  audited  consolidated  financial
statements of the Company,  which shall include statements of income, cash flows
and changes in stockholders'  equity for such fiscal year and a balance sheet as
of the last day thereof,  each prepared in accordance  with  generally  accepted
accounting principles,  consistently applied, and accompanied by the report of a
"Big  5"  firm of  independent  certified  public  accountants  selected  by the
Company's  Board  of  Directors  (the   "Accountants").   The  Company  and  its
Subsidiaries  shall  maintain a system of  accounting  sufficient  to enable its
Accountants to render the report referred to in this Section 11(b).

     (c) Miscellaneous. Promptly upon becoming available, each of the following:

          (i)  notification in writing of the existence of any default under any
     material  agreement  or  instrument  to  which  the  Company  or any of its
     Subsidiaries is a party or by which any of their assets are bound;

          (ii) upon request,  copies of all reports prepared for or delivered to
     the management of the Company or its Subsidiaries by its accountants; and

          (iii) upon request,  any other routinely  collected financial or other
     information  available  to  management  of the Company or its  Subsidiaries
     (including, without limitation, routinely collected statistical data).

     The Company shall comply with any written  request from any Holder that the
Company not provide such Holder with any of the  foregoing  information  for any
period of time.

12.  DILUTION FEE

     In the event any  dividends  are declared with respect to the Common Stock,
the Holder of this  Warrant as of the record  date  established  by the Board of
Directors for such dividend  shall be entitled to receive as a dilution fee (the
"Dilution  Fee") an amount  (whether  in the form of cash,  securities  or other
property)  equal to the  amount  (and in the  form) of the  dividends  that such
Holder  would have  received had this  Warrant  been  exercised  for purchase of
Common  Stock  immediately  prior  to the  record  date of such  dividend,  such
Dilution Fee to be payable on the payment date of the  dividend  established  by
the Board of Directors  (the "Dilution Fee Payment  Date").  The record date for
any such Dilution Fee shall be the record date for the applicable dividend,  and
any such Dilution Fee shall be payable to the persons in whose name this Warrant
is registered at the close of business on the applicable record date.

13.  MISCELLANEOUS

     13.1  Nonwaiver.  No course of dealing or any delay or failure to  exercise
any right  hereunder on the part of the Company or the Holder shall operate as a
waiver of such right or otherwise  prejudice  the rights,  powers or remedies of
such person.

     13.2 Notice Generally.  Any notice,  demand,  request,  consent,  approval,
declaration,  delivery or  communication  hereunder  to be made  pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing and
either delivered in person with receipt acknowledged or by reputable air courier
service with tracking capability and charges prepaid or by facsimile,  addressed
as follows:

     (a) if to any Holder of this  Warrant or of Warrant  Stock  issued upon the
exercise hereof, at its last known address appearing on the books of the Company
maintained for such purpose;

     (b) if to the Company, at the Designated Office;

or at such  other  address  as may be  substituted  by  notice  given as  herein
provided.  The giving of any notice required  hereunder may be waived in writing
by the party  entitled to receive such notice.  Every notice,  demand,  request,
consent, approval, declaration,  delivery or other communication hereunder shall
be  deemed to have  been  duly  given or served on the date on which  personally
delivered, with receipt acknowledged,  or three (3) Business Days after the same
shall have been  deposited in the United  States  mail,  or one (1) Business Day
after the same  shall have been sent by  Federal  Express or another  recognized
overnight courier service.

     13.3 Indemnification.  If the Company fails to make, when due, any payments
provided for in this  Warrant,  the Company  shall pay to the Holder  hereof (a)
interest  at the Agreed Rate on any amounts due and owing to such Holder and (b)
such  further  amounts as shall be  sufficient  to cover any costs and  expenses
including,  but not limited to, reasonable attorneys' fees and expenses incurred
by such  Holder in  collecting  any  amounts due  hereunder.  The Company  shall
indemnify,  save and hold  harmless  the Holder  hereof  and the  Holders of any
Warrant  Stock  issued  upon the  exercise  hereof  from and against any and all
liability,  loss, cost, damage,  reasonable attorneys' and accountants' fees and
expenses,   court  costs  and  all  other  out-of-pocket  expenses  incurred  in
connection  with or arising  from any default  hereunder  by the  Company.  This
indemnification  provision  shall be in addition to the rights of such Holder or
Holders to bring an action  against the Company for breach of contract  based on
such default hereunder.

     13.4  Limitation  of  Liability.  No  provision  hereof,  in the absence of
affirmative  action by the Holder to  purchase  shares of Common  Stock,  and no
enumeration herein of the rights or privileges of the Holder hereof,  shall give
rise to any  liability of such Holder to pay the Exercise  Price for any Warrant
Stock other than  pursuant to an exercise of this Warrant or any  liability as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.

     13.5 Remedies. Each Holder of Warrants and/or Warrant Stock, in addition to
being  entitled to exercise  its rights  granted by law,  including  recovery of
damages,  shall be entitled to specific performance of its rights provided under
this Warrant.  The Company  agrees that  monetary  damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Warrant and hereby  agrees,  in an action for specific  performance,  to
waive the defense that a remedy at law would be adequate.

     13.6 Successors and Assigns. Subject to the provisions of Sections 3.1, 8.1
and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit
of  and be  binding  upon  the  successors  of the  Company  and  the  permitted
successors and assigns of the Holder hereof.  The provisions of this Warrant are
intended to be for the benefit of all Holders  from time to time of this Warrant
and to the extent applicable, all Holders of shares of Warrant Stock issued upon
the exercise  hereof  (including  transferees),  and shall be enforceable by any
such Holder.

     13.7  Amendment.  This  Warrant and all other  Warrants  may be modified or
amended or the provisions  hereof waived with the written consent of the Company
and the Majority Warrant Holders,  provided that no such Warrant may be modified
or amended to reduce the number of shares of Common Stock for which such Warrant
is  exercisable  or to increase  the price at which such shares may be purchased
upon  exercise  of such  Warrant  (before  giving  effect to any  adjustment  as
provided therein) without the written consent of the Holder thereof.

     13.8 Severability.  Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any  provision of this Warrant  shall be  prohibited  by or invalid under
applicable  law,  such  provision  shall be  ineffective  to the  extent of such
prohibition or invalidity,  without invalidating the remainder of such provision
or the remaining provisions of this Warrant.

     13.9 Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.

     13.10  GOVERNING  LAW;  JURISDICTION.  (a) IN ALL  RESPECTS,  INCLUDING ALL
MATTERS  OF  CONSTRUCTION,  VALIDITY  AND  PERFORMANCE,  THIS  WARRANT  AND  THE
OBLIGATIONS  ARISING  HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK,  EXCEPT WITH RESPECT TO
THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF
AND THE  RIGHTS AND  DUTIES OF THE  COMPANY  WITH  RESPECT  TO  REGISTRATION  OF
TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.

     (b) ANY LEGAL  ACTION OR  PROCEEDING  WITH  RESPECT TO THIS  WARRANT MAY BE
BROUGHT  IN THE  COURTS  OF 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,  THE  COMPANY  HEREBY  ACCEPTS  FOR  ITSELF AND IN RESPECT OF ITS
PROPERTY,  GENERALLY  AND  UNCONDITIONALLY,  THE  JURISDICTION  OF THE AFORESAID
COURTS. THE COMPANY FURTHER  IRREVOCABLY  CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE  AFOREMENTIONED  COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING
OF COPIES  THEREOF BY  REGISTERED OR CERTIFIED  MAIL,  POSTAGE  PREPAID,  TO THE
COMPANY AT ITS ADDRESS PROVIDED PURSUANT TO SECTION 13.2, SUCH SERVICE TO BECOME
EFFECTIVE  SEVEN DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE RIGHT
OF THE HOLDER OF THIS WARRANT TO SERVE  PROCESS IN ANY OF THE MATTERS  PERMITTED
BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY
IN ANY OTHER  JURISDICTION.  THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH  IT MAY  NOW OR  HEREAFTER  HAVE  TO THE  LAYING  OF  VENUE  OF ANY OF THE
AFORESAID  ACTIONS OR  PROCEEDINGS  ARISING  OUT OF OR IN  CONNECTION  WITH THIS
WARRANT BROUGHT IN THE COURTS  REFERRED TO ABOVE AND HEREBY FURTHER  IRREVOCABLY
WAIVES AND  AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH  ACTION
OR  PROCEEDING  BROUGHT  IN ANY SUCH COURT HAS BEEN  BROUGHT IN AN  INCONVENIENT
FORUM.

     (c) THE COMPANY  HEREBY  WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING UNDER OR WITH RESPECT HERETO.

<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and its corporate  seal to be impressed  hereon and attested by its Secretary or
an Assistant Secretary.

                                          PEAPOD, INC.


                                          By:_________________________________
                                             Name:
                                             Title:

Attest:


By:_____________________________
   Name:
   Title:


<PAGE>

                                     ANNEX A

                                SUBSCRIPTION FORM

                 [To be executed only upon exercise of Warrant]

     The undersigned Holder of this Warrant  irrevocably  exercises this Warrant
for the  purchase of ______  shares  Common  Stock of Peapod,  Inc. and herewith
makes  payment  of the  Warrant  Price  as  follows  (check  one or  more of the
following):

         o        by delivery  herewith of a certified or official bank check in
                  the amount of such Warrant  Price  payable to the order of the
                  Company;

         o        hereby instructs the Company to withhold a number of shares of
                  Warrant Stock then issuable upon exercise of this Warrant with
                  an aggregate Fair Value equal to such Warrant Price;

         o        herewith  surrenders  to the  Company  shares of Common  Stock
                  previously acquired by the Holder with an aggregate Fair Value
                  equal to such Warrant Price; or

         o        herewith  surrenders to the Company dividends due and owing by
                  the Company to the Holder equal to such Warrant Price; or

         o        by providing to the Company  goods  or  services  with  a fair
                  value equal to such Warrant Price;

all at the price and on the terms and  conditions  specified in this Warrant and
requests that  certificates for the shares of Common Stock hereby purchased (and
any securities or other  property  issuable upon such exercise) be issued in the
name of  and delivered to ______________________________  whose    address    is
_________________________________  and, if such shares of Common Stock shall not
include all of the shares of Common Stock  issuable as provided in this Warrant,
that a new  Warrant  of like  tenor and date for the  balance  of the  shares of
Common   Stock   issuable   hereunder   be   delivered   to   the   undersigned.




                                     -----------------------------------
                                     (Name of Registered Owner)


                                     -----------------------------------
                                     (Signature of Registered Owner)


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


                                     -----------------------------------
                                     (City)    (State)    (Zip Code)

NOTICE:  The signature on this  subscription  must  correspond  with the name as
written  upon the  face of the  within  Warrant  in  every  particular,  without
alteration or enlargement or any change whatsoever.


<PAGE>

                                     ANNEX B


                                 ASSIGNMENT FORM


     FOR VALUE RECEIVED the undersigned  registered owner of this Warrant hereby
sells,  assigns and transfers unto the assignee named below all of the rights of
the  undersigned  under this  Warrant,  with  respect to the number of shares of
Common Stock set forth below:

                                                               No. of Shares of
Name and Address of Assignee                                   Common Stock
----------------------------                                   -----------------


and  does  hereby  irrevocably  constitute  and  appoint   _____________________
attorney-in-fact  to  register  such  transfer  onto the books of  Peapod,  Inc.
maintained for the purpose, with full power of substitution in the premises.

Dated: _____________                    Print Name: ________________________

                                        Signature: _________________________

                                        Witness: ___________________________



NOTICE:  The  signature  on this  assignment  must  correspond  with the name as
written  upon the  face of the  within  Warrant  in  every  particular,  without
alteration or enlargement or any change whatsoever.