EXHIBIT 4.2

                                                                  EXECUTION COPY

THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN REGISTERED UNDER
THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "ACT"),  AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE  REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE  ARE ALSO SUBJECT TO  ADDITIONAL  RESTRICTIONS  ON TRANSFER,  VOTING
PROVISIONS  AND CERTAIN OTHER  AGREEMENTS  SET FORTH IN THE CO-SALE,  VOTING AND
PREEMPTIVE   RIGHTS   AGREEMENT   AMONG  THE   COMPANY   AND   CERTAIN   OF  ITS
SECURITYHOLDERS.  THE HOLDER HEREOF MAY OBTAIN A COPY OF SUCH AGREEMENT  WITHOUT
CHARGE AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS.

THE  COMPANY'S  OBLIGATIONS  TO THE HOLDER  PURSUANT  TO SECTION  9.1(C) OF THIS
WARRANT  ARE SUBJECT TO A  SUBORDINATION  AGREEMENT  DATED AS OF JULY 24,  2000,
AMONG ALLOU HEALTH & BEAUTY CARE,  INC.,  ALLOU  DISTRIBUTORS,  INC.,  THE OTHER
BORROWERS NAMED THEREIN, FLEET CAPITAL CORPORATION, AS AGENT, AND THE HOLDERS OF
THE SENIOR  SUBORDINATED  NOTES,  WHICH,  AMONG OTHER THINGS,  SUBORDINATES  THE
COMPANY'S  OBLIGATIONS UNDER SECTION 9.1(C) HEREOF TO THE COMPANY'S  OBLIGATIONS
TO CERTAIN HOLDERS OF SENIOR DEBT, AS MORE FULLY DESCRIBED IN THAT SUBORDINATION
AGREEMENT.

                        ALLOU HEALTH & BEAUTY CARE, INC.

                      CLASS A COMMON STOCK PURCHASE WARRANT

                                                            Brentwood, New York
                                                                  July 25, 2000

No. 1

         ALLOU  HEALTH  &  BEAUTY  CARE,  INC.,  a  Delaware   corporation  (the
"COMPANY"),  for value received,  hereby certifies that RFE INVESTMENT  PARTNERS
VI, L.P., or its  registered  assigns,  is entitled to purchase from the Company
ONE MILLION THREE HUNDRED THOUSAND (1,300,000) duly authorized,  validly issued,
fully paid and nonassessable shares of Class A Common Stock, par value $.001 per
share (the "CLASS A COMMON  STOCK"),  of the Company at the  purchase  price per
share of $4.50 ("INITIAL  WARRANT PRICE"),  as subject to increase or adjustment
as set forth in  Section  2.7 , at any time or from  time to time  prior to 5:00
P.M.,  New York City  time,  on July 25,  2007 or such  earlier or later date as
provided in Section 9 hereof (such date, the "EXPIRATION  DATE"), all subject to
the terms,  conditions  and  adjustments  set forth  below in this  Warrant  (as
defined  below).  The price at which this Warrant may be exercised (the "WARRANT
PRICE") shall initially be equal to the Initial Warrant Price,  and shall remain
in effect  until a further  adjustment  or  readjustment  thereof is required by
Section 2.


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         This Warrant is one of the Class A Common Stock Purchase Warrants (each
a "WARRANT"  and  collectively,  the  "WARRANTS,"  such term to include any such
warrants issued in substitution  therefor)  originally issued in connection with
the execution and delivery of that certain Senior  Subordinated Note and Warrant
Purchase  Agreement  dated  as  of  July  25,  2000  (as  amended,  modified  or
supplemented  from  time to time,  the  "PURCHASE  AGREEMENT")  by and among the
Company, the other Borrowers named therein and the Purchasers named therein (the
"PURCHASERS"). All capitalized terms used herein which are not otherwise defined
in  Section  14  hereof  shall  have the  meanings  set  forth  in the  Purchase
Agreement.

1.       EXERCISE, CONVERSION OR EXCHANGE OF WARRANT

         1.1      MANNER OF EXERCISE OR CONVERSION; PAYMENT.

                  1.1.1  Exercise.  This  Warrant may be exercised by the holder
         hereof,  in whole  or in  part,  during  normal  business  hours on any
         Business Day on or prior to the  Expiration  Date, by surrender of this
         Warrant to the  Company at its office  maintained  pursuant  to Section
         13.2(a) hereof, accompanied by a subscription in substantially the form
         attached  to this  Warrant (or a  reasonable  facsimile  thereof)  duly
         executed by such holder and  accompanied by payment,  (i) in cash, (ii)
         by certified  check payable to the order of the Company,  (iii) by wire
         transfer,  or (iv) by the  surrender by such holder to the Company,  at
         the  aforesaid  offices,  of any of the Company's  Senior  Subordinated
         Notes due July 25, 2005 (the "NOTES") held by such holder, and all such
         Notes so  surrendered  shall be  credited  against  such  payment in an
         amount  equal  to the  principal  amount  of such  Notes  plus  accrued
         interest thereon to the date of the surrender, or by any combination of
         any of the foregoing methods, in the amount obtained by multiplying (a)
         the number of shares of Class A Common Stock (without  giving effect to
         any  adjustment  thereof)  designated in such  subscription  by (b) the
         Initial  Warrant Price,  and such holder shall thereupon be entitled to
         receive the number of duly authorized,  validly issued,  fully paid and
         nonassessable  shares of Class A Common  Stock  (or  Other  Securities)
         determined as provided in Sections 2 through 4 hereof.

                  1.1.2  Conversion.  If  instead  of  exercising  this  Warrant
         pursuant to the terms of Section 1.1.1 above,  the holder hereof elects
         to convert this  Warrant,  in whole or in part,  into shares of Class A
         Common  Stock,  then such holder  shall  surrender  this Warrant to the
         Company at its office  maintained  pursuant to Section  13.2(a)  hereof
         during  normal  business  hours on any  Business Day on or prior to the
         Expiration Date accompanied by a conversion notice in substantially the
         form attached to this Warrant (or a reasonable  facsimile thereof) duly
         executed by such holder, and such holder shall thereupon be entitled to
         receive a number of duly  authorized,  validly  issued,  fully paid and
         nonassessable  shares of Class A Common  Stock  (or  Other  Securities)
         equal to:

                  (i)      an amount equal to:

                           (a)      the number of shares of Class A Common Stock
                                    (or Other Securities) determined as provided
                                    in  Sections  2 through 4 hereof  which such
                                    holder  would be  entitled  to receive  upon
                                    exercise  of this  Warrant for the number of
                                    shares of Class A Common Stock designated in
                                    such  conversion
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                                    notice  multiplied  by  the  Current  Market
                                    Price of  each  such share of Class A Common
                                    Stock   (or  such  Other   Securities)   so
                                    receivable upon such exercise

                                      minus

                           (b)      an amount  equal to (x) the number of shares
                                    of  Class A  Common  Stock  (without  giving
                                    effect to any adjustment thereof) designated
                                    in such conversion  notice multiplied by (y)
                                    the Initial Warrant Price

                  divided by

                  (ii)     the Current  Market Price of each such share of Class
                           A Common Stock (or Other Securities).

                  1.1.3  Exchange.  If instead of exercising or converting  this
         Warrant  pursuant to the terms of Section 1.1.1 or Section 1.1.2 above,
         the holder hereof may exchange this Warrant,  in whole or in part,  for
         shares of Class A Common Stock,  then such holder shall  surrender this
         Warrant to the  Company at its office  maintained  pursuant  to Section
         13.2(a)  hereof during normal  business hours on any Business Day on or
         prior to the  Expiration  Date  accompanied  by an  exchange  notice in
         substantially  the  form  attached  to this  Warrant  (or a  reasonable
         facsimile  thereof) duly executed by such holder, and such holder shall
         thereupon be entitled to receive a number of duly  authorized,  validly
         issued, fully paid and nonassessable shares of Class A Common Stock (or
         Other Securities) equal to:

                  (i)      an amount equal to:

                           (a)      the number of shares of Class A Common Stock
                                    (or Other Securities) determined as provided
                                    in  Sections  2 through 4 hereof  which such
                                    holder  would be  entitled  to receive  upon
                                    exercise  of this  Warrant for the number of
                                    shares of Class A Common Stock designated in
                                    such  exchange  notice   multiplied  by  the
                                    Current  Market  Price of each such share of
                                    Class  A  Common   Stock   (or  such   Other
                                    Securities) so receivable upon such exercise

                                    minus

                           (b)      an amount  equal to (x) the number of shares
                                    of  Class A  Common  Stock  (without  giving
                                    effect to any adjustment thereof) designated
                                    in such  exchange  notice  multiplied by (y)
                                    the Initial Warrant Price

                  divided by

                  (ii)     the Current  Market Price of each such share of Class
                           A Common Stock (or Other Securities).

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         For all purposes of this Warrant  (other than this  Section  1.1),  any
         reference  herein to the  exercise of this  Warrant  shall be deemed to
         include a reference to the  conversion or exchange of this Warrant into
         Class A Common Stock (or Other Securities) in accordance with the terms
         of Section 1.1.2. and Section 1.1.3.

         1.2 WHEN  EXERCISE  EFFECTIVE.  Each  exercise of this Warrant shall be
deemed to have been effected  immediately  prior to the close of business on the
Business Day on which this Warrant is  surrendered to the Company as provided in
Section  1.1  hereof,  and at such time the  Person or  Persons in whose name or
names any  certificate  or  certificates  for shares of Class A Common Stock (or
Other  Securities)  shall be issuable  upon such exercise as provided in Section
1.3  hereof  shall be deemed to have  become  the  holder or  holders  of record
thereof.

         1.3 DELIVERY OF STOCK  CERTIFICATES,  ETC. As soon as practicable after
each exercise of this Warrant, in whole or in part, and in any event within five
(5) Business Days  thereafter,  the Company at its sole expense  (including  the
payment by it of any  applicable  issue  taxes)  shall cause to be issued in the
name of and delivered to the holder hereof or, subject to Section 10 hereof,  as
such holder (upon payment by such holder of any applicable  transfer  taxes) may
direct:

                           (a) a certificate or  certificates  for the number of
                  duly authorized,  validly issued, fully paid and nonassessable
                  shares of Class A Common Stock (or Other  Securities) to which
                  such  holder  shall be  entitled  upon such  exercise  (or, if
                  requested  by the Holder  and  subject  to the  provisions  of
                  Section 10), the Company  shall cause the holder's  account or
                  the  holder's  designee's  account with The  Depository  Trust
                  Company to be credited with such number of shares  through The
                  Depository Trust Company's Deposit Withdrawal Agent Commission
                  system  (or  any  successor  system))  plus,  in  lieu  of any
                  fractional  share to which  such  holder  would  otherwise  be
                  entitled,  cash in an amount equal to the same fraction of the
                  Market Price per share on the Business Day next  preceding the
                  date of such exercise; and

                           (b) in case  such  exercise  is in part  only,  a new
                  Warrant or Warrants  of like tenor,  dated the date hereof and
                  calling in the  aggregate on the face or faces thereof for the
                  remaining  number of shares of Class A Common  Stock  issuable
                  upon exercise hereof.

         1.4 COMPANY TO REAFFIRM OBLIGATIONS.  The Company shall, at the time of
each  exercise  of  this  Warrant,  upon  the  request  of  the  holder  hereof,
acknowledge  in writing its  continuing  obligation to afford to such holder all
rights (including without limitation any rights to registration, pursuant to the
Registration  Rights  Agreement  referred  to in  Section 8 hereof and any other
rights  afforded  to such  holder  pursuant  to the  Purchase  Agreement  or the
Co-Sale,  Voting and Preemptive  Rights  Agreement with respect to the shares of
Class A Common  Stock or Other  Securities  issued upon such  exercise) to which
such holder shall continue to be entitled after such exercise in accordance with
the terms of this Warrant; provided, however, that if the holder of this Warrant
shall  fail to make  any  such  request,  such  failure  shall  not  affect  the
continuing  obligation  of the Company to afford such rights to such holder upon
the terms and  conditions of the  Registration  Rights  Agreement,  the Purchase
Agreement and the Co-Sale, Voting and Preemptive Rights Agreement.

2.       ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.

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         2.1 GENERAL;  NUMBER OF SHARES;  WARRANT PRICE. The number of shares of
Class A Common  Stock  which the holder of this  Warrant  shall be  entitled  to
receive upon each exercise  hereof shall be determined by multiplying the number
of shares of Class A Common Stock which would  otherwise (but for the provisions
of this Section 2) be issuable upon such  exercise,  as designated by the holder
hereof  pursuant  to  Section  1.1  hereof,  by the  fraction  of which  (i) the
numerator is the Initial  Warrant Price and (ii) the  denominator is the Warrant
Price  in  effect  on  the  date  of  such  exercise;  provided,  however,  that
notwithstanding  anything  to the  contrary  contained  in this  Section  2, the
Warrant Price shall not be adjusted for:

                  (a)  issuances,  grants  or sales in each  fiscal  year of the
         Company  of up to an  aggregate  of three  hundred  thousand  (300,000)
         shares (subject to adjustments pursuant to Section 2.4 and Section 2.6)
         Additional  Shares of Class A Common  Stock (or Options or  Convertible
         Securities for Additional Shares of Class A Common Stock) to employees,
         directors or non-affiliated  consultants of the Company (such number of
         securities,  the "MANAGEMENT OPTIONS"), in each case, for consideration
         per share at least  equal to the  Warrant  Price in effect  immediately
         prior to such  issuance,  grant or sale  pursuant  to the Stock  Option
         Plans (as defined in the Purchase Agreement); or

                  (b) issuances of Additional Shares of Class A Common Stock (or
         Options or  Convertible  Securities  for  Additional  Shares of Class A
         Common  Stock) to the holder in  connection  with the  exercise  by the
         holder of such holder's pre-emptive rights set forth in Section 2(c) of
         the Co-Sale, Voting and Preemptive Rights Agreement;

                  (c) any  sales of  Additional  Shares of Class A Common Stock
          in a Qualified Public Offering;

                  (d) the issuance of Class A Common Stock (or Other Securities)
         to the holders  upon any  exercise  of the  Warrants or pursuant to the
         Notes; or

                  (e) issuances of Additional  Shares of Class A Common Stock as
         full or  partial  consideration  for the  consummation  of a  Permitted
         Acquisition.

         2.2      ADJUSTMENT OF WARRANT PRICE.

                  2.2.1  Issuance of Additional  Shares of Common Stock.  In the
         event  the  Company  at any time or from  time to time  after  the date
         hereof shall issue or sell Additional Shares of Common Stock (including
         Additional  Shares of Common  Stock  deemed  to be issued  pursuant  to
         Section 2.3 or 2.4 hereof) without  consideration or for  consideration
         per share less than the Warrant  Price in effect  immediately  prior to
         such issue or sale, then, and in each such case, subject to Section 2.7
         hereof,  such Warrant  Price shall be reduced,  concurrently  with such
         issue or sale, to a price  (calculated to the nearest $.001) determined
         by multiplying such Warrant Price by a fraction:

                           (a) the numerator of which shall be (i) the number of
                  shares of Common Stock  outstanding  immediately prior to such
                  issue or sale plus (ii) the  number of shares of



<PAGE>

                  Common  Stock which the  aggregate  consideration  received by
                  the Company for the total number of such Additional  Shares of
                  Common  Stock so issued or sold would purchase at such Warrant
                  Price; and

                           (b) the  denominator  of which shall be the number of
                  shares of Common  Stock  outstanding  immediately  after  such
                  issue or sale.

                  2.2.2  Dividends  and  Distributions.  In the  event  that the
Company at any time or from time to time after the date  hereof  shall  declare,
order,  pay  or  make  a  dividend  or  other  distribution  (including  without
limitation  any  distribution  of  cash,  other  or  additional  stock  or other
securities   or  property  or   Options,   by  way  of  dividend  or   spin-off,
reclassification,   recapitalization  or  similar  corporate   rearrangement  or
otherwise)  on the Common  Stock,  other than a dividend  payable in  Additional
Shares of Common Stock that is subject to Section 2.4 hereof,  then, and in each
such case the holder hereof shall be entitled to receive an amount of cash equal
to such dividend or other  distribution  when the same is made to the beneficial
owners of the Common Stock as if this Warrant had been  converted into shares of
Common Stock in accordance  with the  provisions  of Section  1.1.2  immediately
prior to the close of business on the day immediately preceding the record date.

         2.3 TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES.  In the event that
the Company at any time or from time to time after the date hereof  shall issue,
sell,  grant or  assume,  or shall fix a record  date for the  determination  of
holders  of  any  class  of  securities  entitled  to  receive  any  Options  or
Convertible  Securities,  then,  and in each such case,  the  maximum  number of
Additional  Shares of Common  Stock  (as set  forth in the  instrument  relating
thereto,  without  regard to any provisions  contained  therein for a subsequent
adjustment of such number the purpose of which is to protect  against  dilution)
at any time  issuable  upon the  exercise  of such  Options  or,  in the case of
Convertible  Securities and Options therefor, the conversion or exchange of such
Convertible Securities,  shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue,  sale, grant or assumption or, in case such
a record date shall have been fixed,  as of the close of business on such record
date (or,  if the  Common  Stock  trades on an  ex-dividend  basis,  on the date
immediately  prior  to  the  commencement  of  ex-dividend  trading);  provided,
however, that such Additional Shares of Common Stock shall not be deemed to have
been issued unless the consideration  per share (determined  pursuant to Section
2.5 hereof) of such shares would be less than the Warrant Price in effect on the
date of and  immediately  prior to such  issue,  sale,  grant or  assumption  or
immediately  prior to the close of  business  on such  record  date (or,  if the
Common Stock trades on an ex-dividend  basis, on the date  immediately  prior to
the  commencement  of  ex-dividend  trading),  as the case may be; and provided,
further,  that in any such case in which  Additional  Shares of Common Stock are
deemed to be issued:

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

                           (b) if such  Options  or  Convertible  Securities  by
         their terms  provide,  with the passage of time or  otherwise,  for any
         increase in the  consideration  payable to the Company,  or decrease in
         the number of  Additional  Shares of Common  Stock  issuable,  upon the
         exercise,  conversion  or  exchange  thereof  (by  change  of  rate  or
         otherwise),  then the Warrant Price  computed upon the original  issue,
         sale, grant or assumption thereof (or upon the occurrence of the





<PAGE>

         record  date,  or  the  date  immediately  prior   to  the commencement
         of ex-dividend trading, as the case may be, with respect thereto),  and
         any subsequent adjustments based thereon, shall, upon any such increase
         or decrease becoming effective,  be recomputed to reflect such increase
         or  decrease  insofar  as it  affects  such  Options,  or the rights of
         conversion or exchange  under such  Convertible  Securities,  which are
         outstanding at such time;

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

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

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

                           (d) no  readjustment  pursuant  to clause  (b) or (c)
         above  (either  individually  or  cumulatively  together with all prior
         readjustments  as  made  in  respect  of such  Options  or  Convertible
         Securities)  shall have the effect of increasing the Warrant Price by a
         proportion  (relative to the Warrant Price in effect  immediately prior
         to  such  readjustment)  in  excess  of the  inverse  of the  aggregate
         proportional  adjustment  thereof  made in respect of the issue,  sale,
         grant or assumption of such Options or Convertible Securities.

If the consideration provided for in any Option or the additional consideration,
if any,  payable upon the  conversion  or exchange of any  Convertible  Security
shall  be  reduced,  or the rate at  which  any  Option  is

<PAGE>


exercisable or any  Convertible  Security  is convertible  into or exchangeable
for shares of Common Stock shall be  increased,  at any time under or by reason
of provisions with respect thereto designed to protect against dilution,  then,
effective  concurrently with each such change, the Warrant Price then in effect
shall first be adjusted to  eliminate  the effects (if any) of the issuance (or
deemed  issuance) of such Option or  Convertible  Security on the Warrant Price
and then  readjusted as if such Option or Convertible  Security had been issued
on the date of such change with the terms in effect after such change, but only
if as a result of such adjustment the Warrant Price then in effect hereunder is
thereby reduced.

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

         2.5      COMPUTATION OF CONSIDERATION. For the purposes of this Section
2:

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

                                    (i)  insofar  as it  consists  of  cash,  be
                           computed at the amount of cash  actually  received by
                           the Company net of any  expenses  paid or incurred by
                           the Company or any commissions or compensations  paid
                           or concessions or discounts  allowed to underwriters,
                           dealers  or others  performing  similar  services  in
                           connection with such issue or sale;

                                    (ii)  insofar  as it  consists  of  property
                           (including   securities)  other  than  cash  actually
                           received  by the  Company,  be  computed  at the fair
                           market value thereof (as reasonably determined by the
                           Board of  Directors  of the Company in good faith) at
                           the time of such  issue  or sale net of any  expenses
                           paid or incurred by the  Company in  connection  with
                           the receipt of or valuation of such property;

                                    (iii) insofar as it consists neither of cash
                           nor of other  property,  be  computed  as  having  no
                           value; and

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

                           (b) Additional  Shares of Common Stock deemed to have
                  been issued  pursuant to Section 2.3 hereof shall be deemed to
                  have been issued for a consideration  per share  determined by
                  dividing:

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

                  by

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

                           (c) Additional  Shares of Common Stock deemed to have
                  been issued  pursuant to Section 2.4 hereof shall be deemed to
                  have been issued for no consideration.

         2.6 ADJUSTMENT FOR COMBINATIONS, ETC. In case the outstanding shares of
Common  Stock  shall  be  combined  or  consolidated,   by  reclassification  or
otherwise,  into a lesser number of shares of Common Stock, the Warrant Price in
effect   immediately   prior  to  such  combination  or   consolidation   shall,
concurrently  with the  effectiveness of such combination or  consolidation,  be
proportionately increased.

         2.7      ADJUSTMENTS UPON ACHIEVING THRESHOLDS.

                  2.7.1  Achievement  of Certain  Financial  Thresholds - Fiscal
Year Ending March 31, 2001. Both the Initial Warrant Price and the Warrant Price
shall be increased by $.50 per share (as  adjusted for splits,  reverse  splits,
combinations, stock dividends and the like) if either:

                           (i) (A) EBIT for the  Company's  fiscal  year  ending
         March 31, 2001 equals or exceeds  5.5% of Revenues for such fiscal year
         and (B) Revenues for such fiscal year exceed $700,000,000 or

                           (ii) Diluted EPS for the Company's fiscal year ending
         March 31, 2001 exceeds $1.15 (as adjusted for splits,  reverse  splits,
         combinations, stock dividends and the like).

<PAGE>

                  2.7.2  Achievement  of Certain  Financial  Thresholds - Fiscal
Year Ending March 31, 2002. Both the Initial Warrant Price and the Warrant Price
shall be increased by $.50 per share (as  adjusted for splits,  reverse  splits,
combinations, stock dividends and the like) if either:

                           (i) (A) EBIT for the  Company's  fiscal  year  ending
         March 31, 2002 equals or exceeds 5.75% of Revenues for such fiscal year
         and (B) Revenues for such fiscal year equal or exceed $825,000,000 or

                           (ii) Diluted EPS for the Company's fiscal year ending
         March 31, 2002 exceeds $1.40 (as adjusted for splits,  reverse  splits,
         combinations, stock dividends and the like).

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

         2.9 SHARES DEEMED OUTSTANDING.  For all purposes of the computations to
be made pursuant to this Section 2, (i) there shall be deemed to be  outstanding
all shares of Common  Stock  issuable  pursuant  to the  exercise of Options and
conversion  of  Convertible  Securities  outstanding  on the date of the Initial
Closing  which are  specifically  listed in the  Exhibits  and  Schedules to the
Purchase Agreement,  including,  without limitation, the Warrants and all shares
which are issuable pursuant to the Options and Convertible  Securities listed in
Exhibit 2.12A to the Purchase  Agreement,  (ii) immediately after all Additional
Shares of Common Stock are deemed to have been issued pursuant to Section 2.3 or
2.4 hereof,  such  Additional  Shares shall be deemed to be  outstanding,  (iii)
treasury  shares shall not be deemed to be  outstanding  and (iv) no  adjustment
shall be made in the Warrant  Price upon the  issuance of shares of Common Stock
pursuant to Options and Convertible Securities so deemed to be outstanding,  but
this  Section  2.9 shall not prevent  other  adjustments  in the  Warrant  Price
arising by virtue of such outstanding Options or Convertible Securities pursuant
to the provisions of Section 2.3 hereof;  provided,  however, that, for purposes
of calculating  adjustments  to the Warrant  Price,  there shall be deemed to be
outstanding  immediately after giving effect to any issuance of shares of Common
Stock,  Options or  Convertible  Securities  all shares of Common Stock issuable
upon the  exercise of Options and  conversion  of  Convertible  Securities  then
outstanding (including, without limitation, the Warrants) after giving effect to
antidilution   provisions   contained  in  all  such  outstanding   Options  and
Convertible  Securities  which  cause an  adjustment  in the number of shares of
Common Stock so issuable,  either by virtue of such issuance of shares of Common
Stock,  Options or Convertible  Securities or by virtue of the operation of such
antidilution provisions.

         2.10 CONTEST RIGHTS; APPRAISAL AND REVIEW RIGHTS. (a) If the holders of
Warrants  entitling  such  holders to purchase a majority of the Warrant  Shares
subject to purchase  upon  exercise of  Warrants  at the time  outstanding  (the
"REQUIRED INTEREST") reasonably disagree with the Company's determination of the
Market Price for the Common Stock,  of the fair market value of any property (or
securities)  given to the  Company  as  consideration  for the  issue or sale of
Additional  Shares of Common Stock,  or the amount of EBIT,  Revenues or Diluted
EPS, then such holders shall by notice to the Company (a


<PAGE>

"NOTICE") given within thirty (30) days after the Company's determination elect
to dispute such  determination,  and such dispute shall be resolved as set forth
in clause (b) of this Section (in the case of disputes as to  determinations  of
Market Price or fair market value) or clause (c) of this Section (in the case of
disputes as to EBIT, Revenues or Diluted EPS).

                  (b) The Company and the Required Interest shall jointly within
thirty  (30) days  after a Notice  shall  have  been  given,  engage a  mutually
acceptable  Appraiser to make an independent  determination  of the Market Price
for the Common Stock or of the fair market value of any property (or securities)
given to the Company as consideration for the issue or sale of Additional Shares
of Common  Stock,  as the case may be. In  arriving  at its  determination,  the
Appraiser  shall base any valuation  upon (i) in the case of the Market Price of
the Common Stock, the fair market value of the Company assuming that the Company
were sold as a going  concern,  without  regard to the  existence of any control
block,  the anticipated  impact upon current market prices of any such sale, the
lack of or lack of depth of a market for the Common Stock, the Warrants or other
securities  of the Company,  or any other  factors  concerning  the liquidity or
marketability  of the Common  Stock,  the  Warrants or other  securities  of the
Company,  and (ii) in the  case of the fair  market  value of any  property  (or
securities)  given to the  Company  as  consideration  for the  issue or sale of
Additional  Shares of Common  Stock,  the fair market value of such property (or
securities)  assuming  that  such  property  (or  securities)  were  sold  to an
unaffiliated  third  party  in  an  arm's-length  transaction.  The  Appraiser's
determination  shall be final and  binding  on the  Company  and all  holders of
Warrants. The costs of conducting an appraisal shall be borne as follows:

                           (i) in the  case  of a  determination  of the  Market
                  Price  for  the   Common   Stock,   (A)  if  the   Appraiser's
                  determination  is greater  than the  Company's  determination,
                  then the  costs of  conducting  the  appraisal  shall be borne
                  entirely   by  the   Company,   or  (B)  if  the   Appraiser's
                  determination   is  less  than  or  equal  to  the   Company's
                  determination,  then the  costs of  conducting  the  appraisal
                  shall  be  borne  entirely  by the  holders  of the  Warrants;
                  provided,  however that each of the holders shall bear no more
                  than  their  pro rata  share of the  costs of  conducting  the
                  appraisal,  assuming  for this  purpose  that the Warrants had
                  been converted into shares of Common Stock in accordance  with
                  the provisions of Section 1.1.2 immediately prior to the close
                  of  business  on the  day  immediately  preceding  the day the
                  Appraiser's  determination is delivered to the Company and the
                  holders  and that the total  equity of the Company is measured
                  on a Fully  Diluted  Basis (with  respect to each,  holder its
                  "PRO RATA SHARE").

                           (ii)  in the  case  of a  determination  of the  fair
                  market  value of any  property  (or  securities)  given to the
                  Company as  consideration  for the issue or sale of Additional
                  Shares of Common Stock,  (A) if the Appraiser's  determination
                  is greater than the Company's determination, then the costs of
                  conducting  the  appraisal  shall  be  borne  entirely  by the
                  Company or (B) if the Appraiser's  determination  is less than
                  or equal to the  Company's  determination,  then the  costs of
                  conducting  the  appraisal  shall  be  borne  entirely  by the
                  holders of the  Warrants;  provided,  however that each of the
                  holders  shall  bear no more than  their Pro Rata Share of the
                  costs of conducting the appraisal.

                  (c) In the case of a dispute as to EBIT,  Revenues  or Diluted
EPS, the Company and the Required Interest shall jointly within thirty (30) days
after a Notice shall have been given,  engage an Auditor to make an  independent
determination of EBIT,  Revenues or Diluted EPS, as the case may be.





<PAGE>

The Auditor  shall have full  access to the  financial  accounting  records and
workpapers of the Company as well as the Company's  employees and auditors.  The
Auditor's  determination  as to EBIT,  Revenues or Diluted  EPS, as  applicable,
shall be final and binding on the Company and all holders of Warrants. The costs
of conducting the review of the determination of EBIT,  Revenues or Diluted EPS,
as applicable, shall be borne as follows:


                           (i) if the  Auditor's  determination  is  greater
          than  the Company's  determination, then the costs of conducting the
          Auditor's determination shall be borne entirely by the Company, or

                           (ii) if the Auditor's  determination  is less than or
         equal to the Company's determination,  then the costs of conducting the
         Auditor's  determination  shall be borne entirely by the holders of the
         Warrants; provided, however that each of the holders shall bear no more
         than  their Pro Rata  Share of the costs of  conducting  the  Auditor's
         determination.

                  (c) In the case of any  pending  dispute  s to the  number  of
         shares  issuable  hereunder,  the  Company  shall  nevertheless,   upon
         exercise,  conversion or exchange, promptly issue such number of shares
         of Common Stock that is not disputed.

3.       CONSOLIDATION, MERGER, ETC.

         3.1   ADJUSTMENTS   FOR   CONSOLIDATION,   MERGER,   SALE  OF   ASSETS,
REORGANIZATIONS,  ETC. In the event that the  Company  after the date hereof (a)
shall  consolidate  with or merge  into any  other  Person  and shall not be the
continuing or surviving  corporation  of such  consolidation  or merger,  or (b)
shall permit any other Person to consolidate  with or merge into the Company and
the Company shall be the continuing or surviving  Person but, in connection with
such  consolidation or merger,  if any class of Common Stock or Other Securities
shall be changed into or exchanged  for stock or other  securities  of any other
Person or cash or any other Property, or (c) shall transfer all or substantially
all of its  properties  or  assets to any other  Person,  or (d) shall  effect a
capital reorganization or reclassification of any class of Common Stock or Other
Securities  (other  than a capital  reorganization  or  reclassification  to the
extent  that such  capital  reorganization  or  reclassification  results in the
issuance  of  Additional  Shares of Common  Stock  for which  adjustment  in the
Warrant Price is provided in Section 2.2.1 or 2.2.2  hereof),  then,  and in the
case of each such transaction (other than a Mandatory Repurchase Event, which is
governed by Section 3.3 below), proper provision shall be made so that, upon the
basis and the terms and in the manner  provided in this  Warrant,  the holder of
this Warrant,  upon the exercise  hereof at any time after the  consummation  of
such  transaction,  shall be entitled to receive (at the aggregate Warrant Price
in effect at the time of such consummation for all Class A Common Stock or Other
Securities issuable upon such exercise  immediately prior to such consummation),
in lieu of the Common  Stock or Other  Securities  issuable  upon such  exercise
prior to such  consummation,  the greatest  amount of securities,  cash or other
property to which such holder would actually have been entitled as a stockholder
upon such  consummation  if such holder had exercised the rights  represented by
this Warrant  immediately prior thereto,  subject to adjustments  (subsequent to
such consummation) as nearly equivalent as possible to the adjustments  provided
for in Sections 2, 3 and 4 hereof; provided, however, that if a purchase, tender
or exchange  offer  shall have been made to and  accepted by the holders of more
than 50% of the outstanding  shares of Common Stock (or any class thereof),  and
if the holder of such Warrants so designates in a notice given to the Company on
or before the date  immediately  preceding the date of the  consummation of such
transaction,  then the holder of such Warrants  shall be entitled to receive the
greatest amount of securities,

<PAGE>

cash or other property to which such  holder  would  actually have been entitled
as a stockholder  if the  holder of such  Warrants had exercised  such Warrants
prior to the  expiration  of such  purchase,  tender  or   exchange  offer  and
accepted such offer,  subject to adjustments  (from and  after the consummation
of such purchase,  tender or exchange offer) as nearly   equivalent as possible
to the adjustments provided for in Sections 2, 3 and 4 hereof.

         3.2 ASSUMPTION OF OBLIGATIONS.  Notwithstanding  anything  contained in
the Warrants,  the Company shall not effect any of the transactions described in
clauses (a) through (d) of Section  3.1 hereof  (other than a  transaction  that
qualifies  as a  Mandatory  Repurchase  Event,  which is governed by Section 3.3
below) unless,  prior to the consummation  thereof,  each person (other than the
Company)  which may be  required  to  deliver  any  stock,  securities,  cash or
property upon the exercise of this Warrant as provided  herein shall assume,  by
written  instrument  delivered  to,  and  satisfactory  to,  the  holder of this
Warrant,  (a) the  obligations  of the Company  under this  Warrant  (and if the
Company shall survive the  consummation  of such  transaction,  such  assumption
shall be in addition to, and shall not release the Company from,  any continuing
obligations of the Company under this Warrant),  (b) any continuing  obligations
of the Company under the Registration  Rights Agreement,  the Purchase Agreement
and the Co-Sale,  Voting and Preemptive  Rights Agreement and (c) the obligation
to deliver to such holder such shares of stock, securities, cash or property as,
in accordance  with the foregoing  provisions of this Section 3, such holder may
be entitled to receive,  and such Person shall have similarly  delivered to such
holder an opinion of counsel for such Person, which counsel and opinion shall be
satisfactory to such holder, stating that this Warrant shall thereafter continue
in full force and effect and the terms hereof (including  without limitation all
of the  provisions  of  this  Section  3)  shall  be  applicable  to the  stock,
securities,  cash or property  which such Person may be required to deliver upon
any  exercise of this  Warrant or the  exercise of any rights  pursuant  hereto.
Nothing in this Section 3 shall be deemed to authorize the Company to enter into
any transaction not otherwise permitted by the Purchase Agreement.

         3.3 MANDATORY  REPURCHASE EVENT. In the event of a Mandatory Repurchase
Event,  the  provisions of this Section 3.3 shall apply,  and to the extent that
such  provisions  conflict  with or are  otherwise  inconsistent  with any other
provisions of this Warrant, the provisions of this Section 3.3 shall control:

                  3.3.1  CONSIDERATION  FOR  WARRANTS.  In  the  event  of  such
Mandatory  Repurchase  Event,  the  holder  of this  Warrant  shall be given the
opportunity to either:

         (a)  exercise or convert  this  Warrant in the manner  contemplated  by
Section 1.1 prior to the  consummation  of the  Mandatory  Repurchase  Event and
thereafter participate in such Mandatory Repurchase Event as a holder of Class A
Common Stock; or

         (b)      upon the  consummation  of  the  Mandatory  Repurchase  Event,
receive in exchange for such rights consideration equal to the product of:

                           (1) the amount of  consideration on a per share basis
                  received  by the  holders  of the  Class  A  Common  Stock  in
                  connection  with the  Mandatory  Repurchase  Event  minus  the
                  Warrant Price; and

                           (2) the number of shares of Class A Common  Stock (or
                  Other Securities) determined as provided in Sections 2 through
                  4 hereof  which such holder  would be
<PAGE>

                  entitled to receive upon exercise of this Warrant) immediately
                  prior to the consummation of the Mandatory Repurchase Event.

                  3.3.2  ASSUMPTION  OF  OBLIGATIONS.  If the  holder  elects to
exercise this Warrant  prior to the  consummation  of the  Mandatory  Repurchase
Event, the Company shall not consummate the Mandatory  Repurchase Event,  unless
prior to the consummation  thereof,  the holder of this Warrant has received (i)
that number of duly  authorized,  validly issued,  fully paid and  nonassessable
shares of Class A Common Stock (or Other  Securities)  determined as provided in
Sections  2 through 4 hereof;  and (ii) a  written  instrument  executed  by the
Company  (or any  successor  or  assignee),  satisfactory  to the  holder,  that
acknowledges all of the continuing obligations of the Company (or such successor
or assignee),  if any, under the  Registration  Rights  Agreement,  the Purchase
Agreement and the Co-Sale, Voting and Preemptive Rights Agreement.

4.  OTHER  DILUTIVE  EVENTS.  In case any  event  shall  occur  as to which  the
provisions of Section 2 or 3 hereof are not strictly  applicable but the failure
to make any adjustment  would not, in the opinion of the holder of this Warrant,
fairly  protect the purchase  rights  represented  by this Warrant in accordance
with the essential  intent and principles of such  Sections,  then, in each such
case, at the reasonable  request of such holder,  the Company shall appoint,  at
its sole expense,  an accounting  firm of recognized  national  standing  (which
shall  be  completely  independent  of  the  Company  and  shall  be  reasonably
satisfactory  to the holder or holders of the  Required  Interest),  which shall
give their opinion upon the adjustment,  if any, on a basis  consistent with the
essential  intent  and  principles  established  in  Sections  2 and  3  hereof,
necessary to preserve, without dilution, the purchase rights represented by this
Warrant.  Upon receipt of such opinion,  the Company shall  promptly mail a copy
thereof to the holder of this Warrant and shall make the  adjustments  described
therein.

5. NO  DILUTION  OR  IMPAIRMENT.  The Company  shall not,  by  amendment  of its
certificate   of   incorporation   or   through   any   consolidation,   merger,
reorganization,  transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but shall 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  dilution  or  other  impairment.  Without  limiting  the
generality of the  foregoing,  the Company (a) shall not permit the par value of
any shares of stock  receivable  upon the exercise of this Warrant to exceed the
amount payable  therefor upon such  exercise,  (b) 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 stock on the exercise of
the Warrants  from time to time  outstanding,  and (c) shall not take any action
which  results in any  adjustment  of the Warrant  Price if the total  number of
shares of Common Stock (or Other Securities)  issuable after the action upon the
exercise  of all of the  Warrants  would  exceed  the total  number of shares of
Common Stock (or Other Securities) then authorized by the Company's  certificate
of incorporation and available for the purpose of issuance upon such exercise.

6. REPORTS AS TO ADJUSTMENTS.  In each case of any adjustment or readjustment in
the  shares  of Class A Common  Stock (or Other  Securities)  issuable  upon the
exercise of this  Warrant,  the chief  financial  officer of the  Company  shall
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant, showing in reasonable detail the method of calculation thereof and
the facts upon which such  adjustment  or  readjustment  is based,  including  a
statement of (a) the




<PAGE>

consideration  received or to be  received  by the  Company for any  Additional
Shares of Common  Stock  issued or sold or deemed to have been  issued,  (b) the
number of shares of Common Stock  outstanding or deemed to be  outstanding,  (c)
any amounts which are relevant under Section 2.7, to the extent applicable,  and
(d) the Initial Warrant Price and the Warrant Price in effect  immediately prior
to such issue or sale and as adjusted and  readjusted  (if required by Section 2
hereof) on account thereof. The Company shall forthwith mail a copy of each such
report to each  holder of a Warrant and shall,  upon the written  request at any
time of any holder of a Warrant,  furnish to such holder a like  report  setting
forth the Initial  Warrant Price and the Warrant Price at the time in effect and
showing in  reasonable  detail how it was  calculated.  In  connection  with the
preparation of its quarterly financial  statements,  the Company shall cause its
regular  auditors (or such other  independent  certified  public  accountants of
recognized  national  standing) to verify all such computations  (other than (i)
any  computation of the fair market value of property or (ii) any  determination
of Market  Price,  both as determined in good faith by the Board of Directors of
the  Company)  that have been made by the chief  financial  officer  during  the
immediately preceding fiscal quarter. The Company shall forthwith mail a copy of
such  accountants'  report to each holder of a Warrant.  The Company  shall also
keep  copies of all such  reports at its office  maintained  pursuant to Section
13.2(a)  hereof and shall cause the same to be available for  inspection at such
office  during  normal  business  hours  by  any  holder  of a  Warrant  or  any
prospective purchaser of a Warrant designated by the holder thereof. The Company
shall,  upon request,  promptly  provide to any requesting  holder a copy of all
current reports under this Section 6.

7.       NOTICES OF CORPORATE ACTION.  In the event of

                           (a) any  taking  by the  Company  of a record  of the
                  holders  of  any  class  of  securities  for  the  purpose  of
                  determining  the holders  thereof who are  entitled to receive
                  any dividend or other distribution,  or any right to subscribe
                  for,  purchase or otherwise acquire any shares of stock of any
                  class or any other  securities or property,  or to receive any
                  other right, or

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

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

                           (d) any  issuance  of any Common  Stock,  Convertible
                  Security  or  Option  by the  Company  (other  than  issuances
                  contemplated  by Section  2.1(a) or  issuances  to  employees,
                  officers,  or  directors  approved by the  Company's  Board of
                  Directors),

the Company shall mail to each holder of a Warrant a notice  specifying  (i) the
date or expected date on which any such record is to be taken for the purpose of
such  dividend,  distribution  or right,  and the amount and  character  of such
dividend,  distribution  or right,  (ii) the date or expected  date on which any
such reorganization, reclassification,  recapitalization, consolidation, merger,
transfer,  dissolution,  liquidation  or winding-up is to take place,  (iii) the
time,  if any such time is to be fixed,  as of which  the  holders  of record of
Common Stock (or Other Securities) shall be entitled to exchange their shares of



<PAGE>

Common  Stock  (or  Other  Securities)  for the  securities  or  other  property
deliverable  upon  such  reorganization,   reclassification,   recapitalization,
consolidation,  merger, transfer,  dissolution,  liquidation or winding-up and a
description in reasonable  detail of the  transaction  and (iv) the date of such
issuance,  together  with a  description  of the  security  so  issued  and  the
consideration  received by the Company therefor.  Such notice shall be mailed at
least forty-five (45) days prior to the date therein specified,  or such shorter
period as may apply under the Purchase  Agreement.

8.  REGISTRATION  OF WARRANTS AND COMMON STOCK. If any shares of Class A Common
Stock  required to be reserved for purposes of exercise of this Warrant  require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities  Act) before such shares may be issued upon
exercise,  the  Company  shall,  at its sole  expense  and as  expeditiously  as
possible,  use its best  efforts to cause such shares to be duly  registered  or
approved,  as the case may be.  The  shares of Class A Common  Stock  (and Other
Securities) issuable upon exercise of this Warrant shall constitute  Registrable
Shares (as such term is defined in the Registration  Rights  Agreement).  To the
extent set forth in the Registration Rights Agreement, each holder of any shares
of Class A Common  Stock (and Other  Securities)  issued  upon  exercise of this
Warrant  shall be  entitled to all of the  benefits  afforded to a holder of any
such Registrable Shares under the Registration Rights Agreement and such holder,
by its acceptance of this Warrant,  agrees to be bound by and to comply with the
terms and conditions of the  Registration  Rights  Agreement  applicable to such
holder  as a holder  of such  Registrable  Shares.  At any such  time as Class A
Common Stock is listed on any national  securities  exchange or  designated as a
national  market system  security by the NASD , the Company  shall,  at its sole
expense,  obtain  promptly  and  maintain  the approval for listing on each such
exchange or obtain promptly and maintain the  designation,  upon official notice
of issuance, of the shares of Class A Common Stock issuable upon exercise of the
then-outstanding  Warrants and maintain the listing or the  designation  of such
shares after their  issuance;  and the Company  shall also list on such national
securities  exchange or shall apply for,  shall  register under the Exchange Act
and shall  maintain such listing or such  designation  of, any Other  Securities
that at any time are issuable upon exercise of the Warrants,  if and at the time
that  any  securities  of the  same  class  shall  be  listed  on such  national
securities exchange or so designated.

9.       CONDITIONAL REDEMPTION OF WARRANTS.

         9.1  CONDITIONAL  PUT RIGHT.  (a) If and only if the Company's  Diluted
EPS, EBIT or trading volume (described in Section 9.1(d) below) fails to achieve
any  one of  the  respective  thresholds  specified  as at or of the  end of the
applicable  fiscal year (as set forth in Section  9.1(d)  below) (the "Put Right
Condition"),  then  the  holder  or  holders  of  the  Required  Interest  shall
automatically  have the right to demand  at any time on or after  July 25,  2005
that the Company  purchase all (100%) of the Warrants held by all holders at the
Redemption  Price by delivery of a written  notice to the Company (the date that
such notice is delivered to the Company shall  hereinafter be referred to as the
"PUT  DEMAND  DATE").  The  Redemption  Price shall be payable to such holder in
immediately available funds as soon as reasonably  practicable (the "PUT PAYMENT
DATE"),  but in no event  later than sixty (60) days after the Put Demand  Date,
upon surrender of this Warrant to the Company at its office maintained  pursuant
to Section  13.2(a) hereof or, if requested by such holder without  surrender of
this Warrant,  by wire transfer to any account in The City of New York specified
by notice to the Company.

         (b) Upon  surrender of this Warrant in accordance  with the  procedures
set forth in  Section  9.1(a),  the right to  purchase  shares of Class A Common
Stock  represented  by this Warrant  shall  terminate,  and this  Warrant  shall
represent  the right of the holder to  receive  only the  applicable  Redemption
Price





<PAGE>

from the Company in accordance  with Section 9.1. The holder's  right to demand
redemption  of this  Warrant  pursuant to this  Section 9.1 shall be referred to
herein as the holder's "PUT RIGHT."

         (c)  Default;  Automatic  Conversion  into Debt.  In the event that the
Company fails to purchase all of the Warrants  held by all holders  within sixty
(60) days of the Put Demand  Date (the "PUT  DEMAND  PERIOD"),  then on the next
succeeding  day,  all of the  rights  heretofore  represented  by this  Warrant,
including  the  holder's  right to  purchase  shares  of  Class A  Common  Stock
represented by this Warrant,  shall convert,  automatically  and irrevocably and
without any further action or  acknowledgment  on the part of the Company or the
holder,  into an unsecured senior  subordinated  obligation (which shall only be
subordinated  to the Senior  Debt  pursuant to the Senior  Credit  Subordination
Agreement)  of the  Company  to pay to  such  holder,  an  amount  equal  to the
Redemption  Price,  together with accrued  interest  (based on a 360-day year of
30-day months) on the unpaid  principal  amount thereof at a rate which shall be
equal to:

                  (i) the rate of interest  per annum  which is then  payable on
         the Notes,  if the  Borrowers  shall not have paid all of such Notes in
         full as of the Put Demand Date, or

                  (ii) if the Notes shall have previously been paid in full, the
         rate of  interest  per annum which was payable on the Notes on the date
         on which the Notes were paid in full.

Such  interest  shall be payable  quarterly  in arrears on July 25,  October 25,
January 25 and April 25 of each year until such obligation is paid or prepaid in
full. Commencing on the one year anniversary of the expiration of the Put Demand
Period,  the rate of interest  payable on such obligation  shall increase by one
percent (1.00%) per annum as of such first anniversary and as of the end of each
three month period after such first  anniversary,  until such obligation is paid
or prepaid  in full or until  such  interest  rate  reaches  the lesser of (i) a
maximum  rate of eighteen  percent  (18.00%)  per annum or (ii) the maximum rate
permitted by applicable  law.  Nothing in this Section  9.1(c) shall require the
Company to pay  interest at a rate in excess of the maximum  rate  permitted  by
applicable law. The obligation of the Company  created  pursuant to this Section
9.1(c) may be prepaid by the Company at any time without premium or penalty. All
payments of  principal  and  interest on such  obligation  shall be made by wire
transfer of immediately  available funds to an account or accounts designated in
writing by the holder.

         (d)(i) The Put Right Condition shall be deemed automatically  satisfied
if and  when  the  Company  has  failed  to  achieve  any  one of the  following
conditions as at or as of the end of each applicable fiscal year:


<TABLE>
<CAPTION>

------------------------ ---------------------- ---------------------- ----------------------
<S>                     <C>                    <C>                     <C>
Fiscal Year End          Put Right Condition    Put Right Condition    Put Right Condition
                         satisfied if Diluted   satisfied if EBIT      satisfied if average
                         EPS for any such       for any such Fiscal    daily trading volume
                         fiscal year is not     Year is not greater    for Class A Common
                         greater than:          than:                  Stock (as reported
                                                                       by AMEX) for any
                                                                       such fiscal year is
                                                                       not greater than:
------------------------ ---------------------- ---------------------- ----------------------
March 31, 2001           $1.25*                 $32,000,000            50,000 shares*
------------------------ ---------------------- ---------------------- ----------------------
<PAGE>


------------------------ ---------------------- ---------------------- ----------------------
March 31, 2002           $1.50*                 $40,000,000            80,000 shares*
------------------------ ---------------------- ---------------------- ----------------------
March 31, 2003           $1.80*                 $48,000,000            100,000 shares*
------------------------ ---------------------- ---------------------- ----------------------

</TABLE>

         *As adjusted for splits, reverse splits, stock dividends and the like.

         (ii)  The  Company  covenants  to give  written  notice  to the  holder
promptly  upon learning of  satisfaction  of a Put Right  Condition,  and in any
event,  no later than the time of the filing or required filing of the Company's
Annual  Report on Form 10-K with the SEC,  for the fiscal  year in which the Put
Right  Condition  was  satisfied  (provided  that failure to deliver such notice
shall not be deemed to limit the fact that the Put Right  Condition  shall  have
been automatically satisfied).

10.      RESTRICTIONS ON TRANSFER.

         10.1 RESTRICTIVE LEGENDS. Except as otherwise permitted by this Section
10, each certificate for Class A Common Stock (or Other Securities)  issued upon
the exercise of any Warrant, each certificate issued upon the direct or indirect
transfer of any such Class A Common  Stock (or Other  Securities),  all Warrants
issued pursuant to the Purchase Agreement and each Warrant issued upon direct or
indirect  transfer or in  substitution  for any  Warrant  pursuant to Section 13
hereof shall be transferable only upon satisfaction of the conditions  specified
in Section 4.1 of the  Purchase  Agreement  and in this  Section 10 and shall be
stamped or otherwise  imprinted with legends in substantially  the form required
by Section 4.1 of the Purchase  Agreement.  Any or all of this Warrant,  and the
rights and benefits of the holder hereunder,  may be assigned to a transferee or
assignee in  connection  with  transfer or  assignment by such holder (a) to any
person or entity  provided  that (i) such transfer may be effected in accordance
with applicable  securities  laws, (ii) such transferee or assignee  acquires at
least  100,000  Warrants  or shares of  Registrable  Securities  and (iii)  such
transferee or assignee is a mutual fund, bank,  institutional investor, or other
fund,  investment  partnership  or other entity which  regularly  engages in the
purchase  or  holding  of  securities  which  are  characterized  as  "mezzanine
securities"  or  which  are  otherwise  similar  to the  Notes  and/or  Warrants
(provided  that the  condition in this clause (iii) shall no longer be effective
if a Default or Event of Default has occurred under the Purchase Agreement or if
the interest rate under the Notes has been adjusted pursuant to Sections 2.1.2 -
2.1.4  of the  Purchase  Agreement),  (b) to any  person  or  entity  which is a
majority-owned  subsidiary  of a Holder or controls,  is  controlled by or under
common control with the holder,  (c) to a member of the advisory board of, or to
a member  of,  the  holder,  (d) to a  constituent  partner of the holder or the
estate of such a  constituent  partner or a  liquidating  trust for the  benefit
thereof or to any affiliated fund of the holder,  and (e) to a successor trustee
of the holder in its  capacity  as  trustee.  Any such  transfer  or  assignment
permitted  hereby  shall  inure to the  benefit  of,  and be binding  upon,  the
successors, assigns, heirs, executors and administrators of the parties hereto.

         10.2 NOTICE OF  PROPOSED  TRANSFER;  OPINION OF  COUNSEL.  Prior to any
transfer  of any  Restricted  Securities  which  are not  registered  under  any
effective  registration  statement  under the  Securities  Act,  and  subject to
compliance with any  restrictions on transfer  contained in the Co-Sale,  Voting
and Preemptive Rights Agreement, the holder thereof shall give written notice to
the Company of such holder's  intention to effect such transfer and to comply in
all other  respects with this Section 10.2.  Each such notice (a) shall describe
the manner and circumstances of the proposed  transfer,  and (b) shall designate
counsel  reasonably  acceptable to the Company for the holder giving such notice
(who may be


<PAGE>

in-house counsel for such holder). The holder giving such notice shall submit a
copy thereof to the counsel designated in such notice. The following  provisions
shall then apply:

                                    (i) If in the  opinion of such  counsel  the
                           proposed    transfer   may   be   effected    without
                           registration of such Restricted  Securities under the
                           Securities Act and applicable  state securities laws,
                           such holder  shall  thereupon be entitled to transfer
                           such  Restricted  Securities in  accordance  with the
                           terms of the notice  delivered  by such holder to the
                           Company.    Each   certificate    representing   such
                           Restricted  Securities  issued upon or in conjunction
                           with such transfer shall bear the restrictive legends
                           required by Section 10.1  hereof,  unless the related
                           restrictions on transfer provided for in the Purchase
                           Agreement shall have ceased and terminated as to such
                           Restricted   Securities   pursuant  to  Section  10.3
                           hereof.

                                    (ii) If in the  opinion of such  counsel the
                           proposed transfer may not legally be effected without
                           registration of such Restricted  Securities under the
                           Securities Act or applicable  state  securities  laws
                           (such  opinion  to  state  the  basis  of  the  legal
                           conclusions reached therein),  thereafter such holder
                           shall not be  entitled to  transfer  such  Restricted
                           Securities until either (x) receipt by the Company of
                           a further  notice  from such  holder  pursuant to the
                           foregoing   provisions   of  this  Section  10.2  and
                           fulfillment of the provisions of clause (i) above, or
                           (y) such Restricted  Securities have been effectively
                           registered   under   the   Securities   Act  and  any
                           applicable state securities laws.

The Company shall pay the reasonable fees and  disbursements  of counsel for any
holder of  Restricted  Securities  and of counsel for the Company in  connection
with all opinions rendered by them pursuant to this Section 10.2 and pursuant to
Section 10.3 hereof.

         Notwithstanding  any  other  provision  of  this  Section  10 or of the
Purchase  Agreement,  no opinion of counsel  shall be necessary  for a direct or
indirect  transfer of  Restricted  Securities,  or any portion  thereof,  by the
holder thereof to a subsidiary,  shareholder,  partner, advisory board member or
other  affiliate  of such  holder,  if the  transferee  agrees in  writing to be
subject to the terms hereof and to the  Co-Sale,  Voting and  Preemptive  Rights
Agreement to the same extent as if such transferee  were the original  Purchaser
hereof.

         10.3  TERMINATION OF  RESTRICTIONS.  The  restrictions  imposed by this
Section 10 upon the  transferability  of Restricted  Securities  shall cease and
terminate as to any particular  Restricted  Securities (a) when such  Restricted
Securities shall have been  effectively  registered under the Securities Act, or
(b) when, in the opinion of both counsel for the holder  thereof and counsel for
the  Company,  such  restrictions  are no  longer  required  in order to  ensure
compliance  with the  Securities  Act or Section 4.1 of the Purchase  Agreement.
Whenever  such  restrictions  shall  cease and  terminate  as to any  Restricted
Securities,  the holder  thereof  shall be entitled to receive from the Company,
without expense (other than  applicable  transfer taxes, if any), new securities
of like tenor bearing the applicable legends required by Section 10.1 hereof.

11. AVAILABILITY OF INFORMATION. The Company shall, for so long as it is subject
to the reporting



<PAGE>


requirements  of  Section  13 or 15(d) of the  Exchange  Act,  comply  with the
reporting  requirements  of Section 13 and 15(d) of the  Exchange  Act and shall
comply with all public information reporting  requirements of the SEC (including
Rule 144  promulgated by the SEC under the Securities  Act) from time to time in
effect and relating to the  availability of an exemption from the Securities Act
for the sale of any Restricted Securities. The Company shall also cooperate with
each holder of any Restricted Securities in supplying such information as may be
reasonably  necessary  for such  holder  to  complete  and file any  information
reporting forms presently or hereafter required by the SEC as a condition to the
availability  of an  exemption  from  the  Securities  Act for  the  sale of any
Restricted Securities. The Company shall furnish to each holder of any Warrants,
promptly upon their  becoming  available,  copies of all  financial  statements,
reports,  notices and proxy  statements sent or made available  generally by the
Company to its stockholders,  and copies of all regular and periodic reports and
all  registration  statements  and  prospectuses  filed by the Company  with any
securities exchange or with the SEC.

12.  RESERVATION OF STOCK,  ETC. The Company shall at all times reserve and keep
available,  solely for issuance and delivery upon exercise of the Warrants,  the
number of shares of Class A Common Stock (or Other Securities) from time to time
issuable  upon exercise of all Warrants at the time  outstanding.  All shares of
Class A Common  Stock  (or  Other  Securities)  issuable  upon  exercise  of any
Warrants shall be duly authorized and, when issued upon such exercise,  shall be
validly issued and, in the case of shares,  fully paid and nonassessable with no
liability on the part of the holders thereof.

13.      OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.

         13.1  OWNERSHIP OF WARRANTS.  The Company may treat the person in whose
name any Warrant is registered on the register kept at the office of the Company
maintained  pursuant to Section  13.2(a)  hereof as the owner and holder thereof
for all purposes,  notwithstanding  any notice to the contrary,  except that, if
and when any Warrant is properly  assigned in blank,  the Company may (but shall
not be obligated  to) treat the bearer  thereof as the owner of such Warrant for
all purposes,  notwithstanding any notice to the contrary. Subject to Section 10
hereof,  a Warrant,  if  properly  assigned,  may be  exercised  by a new holder
without a new Warrant first having been issued.

         13.2     OFFICE; TRANSFER AND EXCHANGE OF WARRANTS.

                           (a) The Company  shall  maintain an office (which may
         be an agency maintained at a bank) in either Brentwood, New York or the
         Borough  of  Manhattan,  City of New  York,  New  York  where  notices,
         presentations  and demands in respect of this  Warrant may be made upon
         it. Such office may be maintained at 50 Emjay Boulevard, Brentwood, New
         York,  until such time as the Company  shall  notify the holders of the
         Warrants of any change of  location of such office  within the State of
         New York.

                           (b) The Company  shall cause to be kept at its office
         maintained  pursuant  to  Section  13.2(a)  hereof a  register  for the
         registration  and transfer of the Warrants.  The names and addresses of
         holder of Warrants, the transfer thereof and the names and addresses of
         transferees  of Warrants  shall be  registered  in such  register.  The
         Person  in whose  names any  Warrant  shall be so  registered  shall be
         deemed and treated as the owner and holder  thereof for all purposes of
         this  Warrant,  and the Company  shall not be affected by any notice to
         the contrary.

<PAGE>

                           (c)  Upon  the  surrender  of any  Warrant,  properly
         endorsed, for registration of transfer or for exchange at the office of
         the Company maintained  pursuant to Section 13.2(a) hereof, the Company
         at its expense shall (subject to compliance with Section 10 hereof,  if
         applicable)  execute  and  deliver  to or upon the order of the  holder
         thereof a new Warrant or  Warrants  of like tenor,  in the name of such
         holder or as such holder (upon payment by such holder of any applicable
         transfer  taxes) may direct,  calling in the  aggregate  on the face or
         faces  therefor for the number of shares of Class A Common Stock called
         for on the face or faces of the Warrant or Warrants so surrendered.

         13.3 REPLACEMENT OF WARRANTS.  Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of any Warrant and, in
the case of any such loss,  theft or destruction of any Warrant held by a Person
other than a Purchaser or any institutional investor, upon delivery of indemnity
satisfactory  to the  Company  in form and  amount  or,  in the case of any such
mutilation, upon surrender of such Warrant for cancellation at the office of the
Company  maintained  pursuant to Section 13.2(a) hereof, the Company at its sole
expense shall execute and deliver,  in lieu thereof, a new Warrant of like tenor
and dated the date hereof.

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

         "ADDITIONAL  SHARES  OF  COMMON  STOCK"  means  all  shares  (including
treasury shares) of Common Stock, issued or sold (or, pursuant to Section 2.3 or
2.4 hereof,  deemed to be issued) by the Company after the date hereof,  whether
or not subsequently  reacquired or retired by the Company, other than the shares
of Common Stock issued upon the exercise of Warrants.

         "APPRAISER" means an independent  nationally recognized investment bank
or other qualified financial  institution  reasonably  acceptable to the Company
and the Required Interest.

         "AUDITOR"  means  a  nationally  recognized  and  independent  firm  of
certified  public  accountants  reasonably  acceptable  to the  Company  and the
Required Interest.

         "BUSINESS  DAY"  shall  have  the  meaning  given  to such  term in the
Purchase Agreement. Any reference to "days" (unless Business Days are specified)
shall mean calendar days.

         "CLASS A COMMON STOCK" shall have the meaning given to such term in the
introduction to this Warrant.

         "CLOSING  DATE"  shall  have  the  meaning  given  to such  term in the
Purchase Agreement.

         "COMMON  STOCK"  shall  have  the  meaning  given  to such  term in the
Purchase Agreement.

         "COMPANY" shall have the meaning given to such term in the introduction
to this  Warrant,  such term to include any  corporation  or other  entity which
shall succeed to or assume the  obligations  of the Company in  compliance  with
Section 3 hereof.



<PAGE>

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

         "CO-SALE,  VOTING AND PREEMPTIVE  RIGHTS  AGREEMENT" means that certain
Co-Sale,  Voting and Preemptive  Rights  Agreement dated as of July 25, 2000, by
and among the Company, the Jacobs Family Holders named therein and the Mezzanine
Lenders named therein, as from time to time in effect.

         "CURRENT MARKET PRICE" means on any date specified herein,  the average
daily Market Price during the period of the most recent 20  consecutive  trading
days,  ending on the second trading day immediately  preceding such date, except
that if no class of the Common  Stock is then  listed or  admitted to trading on
any  national  securities  exchange or quoted in the  over-counter  market,  the
Current Market Price shall be the Market Price on such date.

         "DILUTED  EPS"  shall  mean  Net  Income  from  continuing  operations,
excluding  one-time  and  extraordinary  events,  as set forth in the  Company's
audited financial  statements filed with the SEC divided by the number of shares
of Common Stock  outstanding  as of the end of the  applicable  fiscal year on a
Fully Diluted Basis.

         "EBIT"  shall  have  the  meaning  given to such  term in the  Purchase
Agreement.  EBIT, for any given fiscal year, shall be derived from the Company's
audited financial statements filed with the SEC.

         "EXCHANGE  ACT"  means  the  Securities  Exchange  Act of 1934,  or any
similar  federal  statute,  and the rules and regulations of the SEC thereunder,
all as the same shall be in effect at the time.

         "EXPIRATION  DATE"  shall  have the  meaning  given to such term in the
introduction to this Warrant.

         "FULLY  DILUTED  BASIS"  means  at  any  time  (i)  as  applied  to any
calculation  of the number of securities of the Company,  after giving effect to
(x) all shares of Common Stock and Other  Securities of the Company  outstanding
at the time of  determination,  and (y) all shares of the Company's Common Stock
or Other  Securities  issuable upon the exercise of any Convertible  Security or
Option,  including  without  limitation,  those shares issuable upon exercise or
conversion of the Convertible Securities or Options that may be held by Research
Works, Ltd., JWGenesis and Gruntal & Co. and the other Convertible Securities or
Options listed in Exhibit 2.12A to the Purchase  Agreement;  and (ii) as applied
to any calculation of value, after giving effect to the foregoing securities and
the payment of any  consideration  payable upon the exercise of any  Convertible
Security or Option referred to in clause (y) above if such Convertible  Security
or Option were exercisable at such time.

         "GAAP"  shall  mean  United  States   generally   accepted   accounting
principles consistently applied.

         "INITIAL WARRANT PRICE" shall have the meaning assigned to such term in
the introduction to this Warrant.

         "MANDATORY  REPURCHASE EVENT" shall have the meaning given to such term
in the Purchase Agreement.

<PAGE>

         "MARKET PRICE" means on any date specified herein, the amount per share
of Class A Common Stock or Other Security or asset,  as applicable  equal to (a)
the last sale price of Class A Common Stock or such Other Security, regular way,
on such date or, if no such sale takes  place on such date,  the  average of the
closing bid and asked prices  thereof on such date,  in each case as  officially
reported on the principal national  securities  exchange on which Class A Common
Stock or such Other  Security is then  listed or admitted to trading,  or (b) if
Class A Common  Stock or such Other  Security  is not then listed or admitted to
trading on any  national  securities  exchange but is  designated  as a national
market  system  security by the NASD,  the last trading  price of Class A Common
Stock or such Other  Security  on such date,  or (c) if Class A Common  Stock or
such Other  Security is not then  listed or admitted to trading on any  national
exchange or designated as a national  market system  security by the NASD, or if
the  asset  to be  valued  is  property,  then  the fair  market  value  thereof
determined  in good faith by the Board of  Directors of the Company as of a date
which is within fifteen (15) days of the date as of which the  determination  is
to be made.

         "NASD" means the National Association of Securities Dealers, Inc.

         "NET INCOME"  shall have the meaning given to such term in the Purchase
Agreement.

         "NOTES" shall have the meaning given to such term in Section 1.1.1.

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

         "OTHER  SECURITIES" means any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive,  or shall have
received,  upon the  exercise of  Warrants,  in lieu of or in addition to Common
Stock and  which at any time  shall be  issuable  or shall  have been  issued in
exchange for or in replacement of Common Stock or Other  Securities  pursuant to
Section 3 hereof or otherwise.

         "PERSON"  means an  individual,  a  partnership,  a  limited  liability
company, a corporation,  an association, a joint stock company, a trust, a joint
venture,  an  unincorporated  organization  or any  federal,  state,  county  or
municipal  governmental or quasi-governmental  agency,  department,  commission,
board, bureau,  instrumentality or similar entity,  foreign or domestic,  having
jurisdiction over either the Company or any holder of a Warrant.

         "PRO RATA SHARE"  shall have the meaning  given to such term in Section
2.10(b)(i).

         "PURCHASE  AGREEMENT"  shall have the meaning given to such term in the
introduction to this Warrant.

         "PURCHASERS"  shall  have  the  meaning  given  to  such  term  in  the
introduction to this Warrant.

         "PUT  DEMAND  DATE"  shall have the  meaning  assigned  to such term in
Section 9.1.

         "PUT DEMAND  PERIOD"  shall have the  meaning  assigned to such term in
Section 9.1.

<PAGE>

         "PUT  PAYMENT  DATE"  shall have the  meaning  assigned to such term in
Section 9.1.

         "PUT  RIGHT"  shall have the  meaning  assigned to such term in Section
9.1.

         "QUALIFIED  PUBLIC  OFFERING"  means the closing of the Company's first
underwritten  offering to the public after the Initial  Closing Date pursuant to
an effective  registration  statement under the Securities Act provided that (a)
such  registration  statement covers the offer and sale of Common Stock of which
the aggregate net proceeds  attributable to sales for the account of the Company
exceed $25,000,000 and (b) such Common Stock is listed for trading on any of the
New York Stock  Exchange,  the American  Stock  Exchange or the NASDAQ  National
Market.

         "REDEMPTION  PRICE"  means an  amount  equal to $8.00 per  Warrant,  as
adjusted  for  splits,  reverse  splits,  stock  dividends  and  the  like.  The
Redemption  Price  shall not be  reduced  by the  amount of the  then-applicable
Warrant  Price.  For  example,  if there  have been no splits,  reverse  splits,
combinations, stock dividends or the like, if the Warrants are redeemed when the
Warrant Price is $4.50,  the holder shall receive $8.00 per Warrant,  regardless
of the Warrant Price.

         "REGISTRATION  RIGHTS AGREEMENT" means that certain Registration Rights
Agreement by and between the Company and the Securityholders named therein dated
as of July 25, 2000, as from time to time in effect.

         "RESTRICTED  SECURITIES"  means all of the following:  (a) any Warrants
bearing the applicable legend or legends referred to in Section 10.1 hereof, (b)
any shares of Common Stock (or other Securities) which have been issued upon the
exercise of Warrants and which are  evidenced by a certificate  or  certificates
bearing the applicable  legend or legends  referred to in such Section,  and (c)
unless the  context  otherwise  requires,  any shares of Common  Stock (or Other
Securities)  which are at the time  issuable  upon the  exercise of Warrants and
which,  when so issued,  shall be evidenced  by a  certificate  or  certificates
bearing the applicable legend or legends referred to in such Section.

         "REQUIRED  INTEREST"  shall have the  meaning  assigned to such term in
Section 2.10.

         "REVENUES"  shall  mean  net  revenues,  as  reflected  in the  audited
financial statements filed by the Company with the SEC for the applicable fiscal
year, as computed in accordance  with GAAP in a manner  consistent with practice
prior to the initial closing date under the Purchase Agreement.

         "SEC" means the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.

         "SECURITIES  ACT"  means the  Securities  Act of 1933,  or any  similar
federal statute, and the rules and regulations of the SEC thereunder, all as the
same shall be amended and in effect at the time.

         "SENIOR  CREDIT  SUBORDINATION  AGREEMENT"  means that  certain  Senior
Credit Subordination Agreement dated as of even date herewith by and among Fleet
Capital Corporation,  RFE Investment Partners VI, L.P., and the other holders of
the Notes, the Company and the other Borrowers named therein,  as in effect from
time to time.

         "SENIOR DEBT" means the "Senior  Debt" as defined in the  Subordination
Agreement.


<PAGE>

         "WARRANT  PRICE"  shall have the meaning  given to such term in Section
2.1 hereof.

         "WARRANTS"   shall  have  the  meaning   given  to  such  term  in  the
introduction of this Warrant.


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

16. NO RIGHTS OR LIABILITIES AS STOCKHOLDER.  Nothing  contained in this Warrant
shall be  construed  as  conferring  upon the  holder  hereof  any  rights  as a
stockholder  of the  Company or as  imposing  any  obligation  on such holder to
purchase  any  securities  or as imposing  any  liabilities  on such holder as a
stockholder of the Company,  whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.  Notwithstanding  the  foregoing,
the  holder is subject to certain  rights  and  obligations  under the  Co-Sale,
Voting  and  Preemptive  Rights  Agreement,   the  Purchase  Agreement  and  the
Registration Rights Agreement.

17. NOTICES.  Any notice or other  communication in connection with this Warrant
shall be deemed to be  delivered  if in writing  (or,  in the form of a telex or
telecopy) addressed as hereinafter provided and if either (x) actually delivered
at said  address  (evidenced  in the case of a telex by receipt  of the  correct
answerback)  or (y) in the case of a letter,  three  Business  Days  shall  have
elapsed  after the same shall have been  deposited in the United  States  mails,
postage  prepaid  and  registered  or  certified;  (a) if to any  holder  of any
Warrant,  at the registered  address of such holder as set forth in the register
kept at the office of the Company maintained pursuant to Section 13.2(a) hereof;
or (b) if to the  Company,  to the  attention  of its  President  at its  office
maintained  pursuant to Section  13.2(a)  hereof;  provided,  however,  that the
exercise of any Warrant  shall be effective in the manner  provided in Section 1
hereof.

18.  MISCELLANEOUS.  This  Warrant and any term  hereof may be changed,  waived,
discharged or terminated  only by an instrument in writing signed by Company and
the Required Interest; provided, however, that no such change, waiver, discharge
or termination  that would treat the holder of this Warrant in a  discriminatory
manner  may be made  without  the prior  written  consent  of the holder of this
Warrant.  This  Warrant  shall  be  construed,   interpreted,  and  enforced  in
accordance  with,  and  governed  by, the laws of the State of New York  without
giving effect to doctrines  relating to conflicts of laws. The section  headings
in this Warrant are for purposes of convenience  only and shall not constitute a
part hereof.

                              ALLOU HEALTH & BEAUTY CARE, INC.

                              By:
                                 ---------------------------------------
                                    Name:       David Shamilzadeh
                                    Title:      President and Chief Financial
                                                Officer


<PAGE>




                              FORM OF SUBSCRIPTION

                 [To be executed only upon exercise of Warrant]

To ALLOU HEALTH & BEAUTY CARE, INC.

         The  undersigned   registered  holder  of  the  within  Warrant  hereby
irrevocably  exercises  such Warrant for, and purchases  thereunder,  _______(1)
shares  of the  Class A Common  Stock  (_______(2)  shares of the Class A Common
Stock,  after giving effect to all  adjustments  under the Warrant) and herewith
makes payment of $__________  therefor,  and requests that the  certificates for
such shares be issued in the name of, and  delivered  to  _____________________,
whose address is_____________________________________.

Dated:
       ------------------------------------------------------------------------
                             (Signature must conform in all respects to name  of
                              holder as specified on the face of Warrant)


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


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


         The  Company  hereby   acknowledges  this  Notice  and  hereby  directs
[TRANSFER  AGENT] to issue the above  indicated  number of _______(3)  shares of
Common Stock,  in accordance with the Transfer Agent  Instructions  dated , 2000
from the Company and acknowledged and agreed to by [TRANSFER AGENT].

                                            ALLOU HEALTH & BEAUTY CARE, INC.

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


----------
1 Insert here the number of shares  called for on the face of this Warrant (or,
in the case of a partial exercise,  the portion thereof as to which this Warrant
is being exercised), in either case without making any adjustment for Additional
Shares of Common  Stock or any other  stock or other  securities  or property or
cash which,  pursuant  to the  adjustment  provisions  of this  Warrant,  may be
delivered upon  exercise.  In the case of a partial  exercise,  a new Warrant or
Warrants will be issued and delivered,  representing the unexercised  portion of
the Warrant, to the holder surrendering the Warrant.

2 Insert here the "as-adjusted" number of shares.

3 Insert here the "as-adjusted" number of shares stipulated by the holder, after
giving effect to all adjustments under the Warrant.

<PAGE>



                            FORM OF CONVERSION NOTICE

                 [To be executed only upon exercise of Warrant]

To ALLOU HEALTH & BEAUTY CARE, INC.

         The  undersigned   registered  holder  of  the  within  Warrant  hereby
irrevocably  converts such Warrant with respect to ______(4) shares of the Class
A Common Stock (_____(5) shares of the Class A Common Stock, after giving effect
to all  adjustments  under the  Warrant)  which such holder would be entitled to
receive upon the exercise  hereof,  and requests that the  certificates for such
shares be  issued in the name of,  and  delivered  to  ________________________,
whose address is __________________________________.

Dated:
--------------------------------------------------------------------------------
                            (Signature must conform in all respects to name  of
                             older as specified on the face of Warrant)


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


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


         The  Company  hereby   acknowledges  this  Notice  and  hereby  directs
[TRANSFER  AGENT] to issue the above  indicated  number of _______(6)  shares of
Common Stock,  in accordance with the Transfer Agent  Instructions  dated , 2000
from the Company and acknowledged and agreed to by [TRANSFER AGENT].

                                            ALLOU HEALTH & BEAUTY CARE, INC.

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

-------------------------------------
4 Insert here the number of shares  called for on the face of this Warrant (or,
in the case of a partial exercise,  the portion thereof as to which this Warrant
is being exercised), in either case without making any adjustment for Additional
Shares of Common  Stock or any other  stock or other  securities  or property or
cash which,  pursuant  to the  adjustment  provisions  of this  Warrant,  may be
delivered upon  exercise.  In the case of a partial  exercise,  a new Warrant or
Warrants will be issued and delivered,  representing the unexercised  portion of
the Warrant, to the holder surrendering the Warrant.

5 Insert here the "as-adjusted" number of shares.

6 Insert here the "as-adjusted" number of shares stipulated by the holder, after
giving effect to all adjustments under the Warrant.

<PAGE>


                             FORM OF EXCHANGE NOTICE

                 [To be executed only upon exercise of Warrant]

To ALLOU HEALTH & BEAUTY CARE, INC.

         The  undersigned   registered  holder  of  the  within  Warrant  hereby
irrevocably  exchanges  such Warrant with respect to  ________(7)  shares of the
Class A Common Stock (_____(8) shares of the Class A Common Stock,  after giving
effect to all adjustments under the Warrant) which such holder would be entitled
to receive upon the exercise hereof, and requests that the certificates for such
shares be  issued in the name of,  and  delivered  to  ________________________,
whose address is __________________________________.

Dated:
--------------------------------------------------------------------------------
                             (Signature must conform in all respects to name  of
                               holder as specified on the face of Warrant)


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

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


         The  Company  hereby   acknowledges  this  Notice  and  hereby  directs
[TRANSFER  AGENT] to issue the above  indicated  number of _______(9)  shares of
Common Stock,  in accordance with the Transfer Agent  Instructions  dated , 2000
from the Company and acknowledged and agreed to by [TRANSFER AGENT].

                                            ALLOU HEALTH & BEAUTY CARE, INC.

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



-------------------------------------
7 Insert here the number of shares  called for on the face of this Warrant (or,
in in the case of a partial  exercise,  the  portion  thereof  as to which  this
Warrant is being  exercised),  in either case without  making any adjustment for
Additional  Shares of Common  Stock or any other  stock or other  securities  or
property or cash which,  pursuant to the adjustment  provisions of this Warrant,
may be delivered upon exercise. In the case of a partial exercise, a new Warrant
or Warrants will be issued and delivered,  representing the unexercised  portion
of the Warrant, to the holder surrendering the Warrant.

8 Insert here the "as-adjusted" number of shares.

9 Insert here the "as-adjusted" number of shares stipulated by the holder, after
giving effect to all adjustments under the Warrant.

<PAGE>


                               FORM OF ASSIGNMENT

                 [To be executed only upon transfer of Warrant]

         For value  received,  the undersigned  registered  holder of the within
Warrant  hereby sells,  assigns and transfers unto  _______________________  the
rights  represented by such Warrant to purchase  ________(10)  shares of Class A
Common  Stock of ALLOU  HEALTH & BEAUTY  CARE,  INC.  to which and such  Warrant
relates, and appoints  _______________________ Attorney to make such transfer on
the books of ALLOU HEALTH & BEAUTY CARE, INC. maintained for such purpose,  with
full power of substitution in the premises.

Dated:
                                             -----------------------------------
                                            (Signature must conform in all
                                             respects to name  of holder as
                                             specified on the face of Warrant)



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


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

Signed in the presence of:


-------------------------------------
1O Insert here the number of shares  called for on the face of this Warrant (or,
in the case of a partial exercise,  the portion thereof as to which this Warrant
is being exercised), in either case without making any adjustment for Additional
Shares of Common  Stock or any other  stock or other  securities  or property or
cash which,  pursuant  to the  adjustment  provisions  of this  Warrant,  may be
delivered upon  exercise.  In the case of a partial  exercise,  a new Warrant or
Warrants will be issued and delivered,  representing the unexercised  portion of
the Warrant, to the holder surrendering the Warrant.