EXHIBIT 10.2

THIS  WARRANT AND THE  SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN  REGISTERED
UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED,  AND MAY NOT BE  TRANSFERRED  IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.



                                  WARRANT NO. 3

                           To Purchase Common Stock of

                         BAGCRAFT CORPORATION OF AMERICA

                                  Warrant No. 3
                     No. of Shares of Common Stock: 1419.54

















<PAGE>



                                TABLE OF CONTENTS

Section                                                                     Page

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

         2.       EXERCISE OF WARRANT..........................................6
                  -------------------
                  2.1.     Manner of Exercise..................................6
                           ------------------
                  2.2.     Payment of Taxes....................................8
                           ----------------
                  2.3.     Fractional Shares...................................8
                           -----------------
                  2.4.     Continued Validity..................................8
                           ------------------

         3.       TRANSFER, DIVISION AND COMBINATION...........................9
                  ----------------------------------
                  3.1.     Transfer............................................9
                           --------
                  3.2.     Division and Combination............................9
                           ------------------------
                  3.3.     Expenses............................................9
                           --------
                  3.4.     Maintenance of Books................................9
                           --------------------

         4.       ADJUSTMENTS..................................................9
                  -----------
                  4.1.     Stock Dividends, Subdivisions and Combinations......9
                           ----------------------------------------------
                  4.2.     Certain Other Distributions........................10
                           ---------------------------
                  4.3.     Issuance of Additional Shares of Common Stock......11
                           ---------------------------------------------
                  4.4.     Issuance of Warrants or Other Rights...............14
                           ------------------------------------
                  4.5.     Issuance of Convertible Securities.................14
                           ----------------------------------
                  4.6.     Superseding Adjustment.............................15
                           ----------------------
                  4.7.     Other Provisions Applicable to
                           Adjustments under this Section.....................16
                           ------------------------------
                  4.8.     Reorganization, Reclassification,
                           Merger, Consolidation or Disposition of Assets.....18
                           ----------------------------------------------
                  4.9.     Other Action Affecting Common Stock................19
                           -----------------------------------
                  4.10.    Certain Limitations................................19
                           -------------------

         5.       NOTICES TO WARRANT HOLDERS..................................19
                  5.1.     Notice of Adjustments..............................19
                  5.2.     Notice of Corporate Action.........................20

         6.       NO IMPAIRMENT...............................................20

         7.       RESERVATION AND AUTHORIZATION OF COMMON STOCK;
         REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
         AUTHORITY............................................................21

         8.      TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS...........22

         9.       RESTRICTIONS ON TRANSFERABILITY.............................22
                  9.1.     Restrictive Legend.................................22

                                       -i-

<PAGE>



                  9.2.     Notice of Proposed Transfers;
                           Request for Registration...........................22
                           ------------------------
                  9.3.     Required Registration..............................23
                           ---------------------
                  9.4.     Incidental Registration............................24
                           -----------------------
                  9.5.     Registration Procedures............................24
                           -----------------------
                  9.6.     Expenses...........................................26
                           --------
                  9.7.     Indemnification and Contribution...................27
                           --------------------------------
                  9.8.     Termination of Restrictions........................28
                           ---------------------------
                  9.9.     Listing on Securities Exchange.....................29
                           ------------------------------
                  9.10.    Certain Limitations on Registration Rights.........29
                           ------------------------------------------
                  9.11.    Selection of Managing Underwriters.................29
                           ----------------------------------

         10.      SUPPLYING INFORMATION.......................................29

         11.      LOSS OR MUTILATION..........................................30

         12.      OFFICE OF COMPANY...........................................30

         13.      FINANCIAL AND BUSINESS INFORMATION..........................30
                  ----------------------------------
                  13.1.     Monthly and Quarterly Information.................30
                            ---------------------------------
                  13.2.     Annual Information................................31
                            ------------------
                  13.3.     Filings...........................................31
                            -------

         14.      REPURCHASE BY COMPANY OF WARRANT............................32
                  --------------------------------
                  14.1.     Obligation to Repurchase Warrant..................32
                            --------------------------------
                  14.2.     Option to Repurchase Warrant......................33
                            ----------------------------
                  14.3.      Subsequent Public Offering or Sale...............34
                             ----------------------------------
                  14.4.     Determination and Payment of Repurchase Price.....34
                            ---------------------------------------------

         15.      APPRAISAL...................................................35

         16.      LIMITATION OF LIABILITY.....................................35

         17.      PARTICIPATION IN CORPORATE DISTRIBUTIONS AND
         TAKE-ALONG RIGHTS....................................................36

         18.      MISCELLANEOUS...............................................37
                  -------------
                  18.1.      Nonwaiver and Expenses...........................37
                             ----------------------
                  18.2.      Notice Generally.................................37
                             ----------------
                  18.3.      Indemnification..................................38
                             ---------------
                  18.4.      Remedies.........................................38
                             --------
                  18.5.      Successors and Assigns...........................38
                             ----------------------
                  18.6.      Amendment........................................38
                             ---------
                  18.7.      Severability.....................................38
                             ------------
                  18.8.      Headings.........................................39
                             --------
                  18.9.      Governing Law....................................39
                             -------------

                                      -ii-

<PAGE>



                              EXHIBITS AND ANNEXES


         Exhibit A          -       Subscription Form
         Exhibit B         -        Assignment Form



         Annex A           -        Take-Along Letter Agreement




                                      -iii-

<PAGE>



THIS  WARRANT AND THE  SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN  REGISTERED
UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED,  AND MAY NOT BE  TRANSFERRED  IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF
THIS WARRANT.


No. of Shares of Common Stock: 1419.54                    Warrant No. 3



                                     WARRANT

                           To Purchase Common Stock of

                         BAGCRAFT CORPORATION OF AMERICA


                  THIS IS TO CERTIFY THAT GENERAL ELECTRIC CAPITAL CORPORATION,
or registered assigns, is entitled, at any time prior to the Expiration Date (as
hereinafter  defined),  to purchase  from  BAGCRAFT  CORPORATION  OF AMERICA,  a
Delaware corporation ("Company"), 1419.54 shares of Common Stock (as hereinafter
defined and subject to  adjustment  as  provided  herein),  in whole or in part,
including  fractional parts, at a purchase price of $0.001 per share, all on the
terms and conditions and pursuant to the provisions hereinafter set forth.

                  This Warrant No. 3 is given in substitution  for Warrant No. 2
which was issued by Company to General Electric Capital  Corporation on December
30, 1996, and surrendered for cancellation on the Closing Date concurrently with
the issuance of this Warrant No. 3.

                  Notwithstanding  any  contrary  provision of this or any other
Loan Document, if Company fully consummates a sale of all Common Stock or all or
substantially all of its assets and properties on or prior to April 30, 1998 for
cash consideration of not less than $92,500,000 in immediately  available funds,
then this Warrant  shall  represent  the lesser of (a) 1234.46  shares of Common
Stock and (b) the number of shares of Common Stock  represented  by this Warrant
immediately  prior to such  transaction,  in each case subject to  adjustment as
provided herein.

1.   DEFINITIONS

                  As  used  in  this  Warrant,  the  following  terms  have  the
respective meanings set forth below:

                  "Additional  Shares of Common  Stock" shall mean all shares of
Common Stock issued by Company after the  Commencement  Date, other than Warrant
Stock.

                  "Affiliate Accounts" shall mean, at any time of determination,
all  Accounts  (including  principal,  interest and all other  amounts  owing or
outstanding in respect thereof) owing




                                       -1-

<PAGE>



to Company from any of its Affiliates (including,  without limitation,  ARTRA or
BCA), without giving effect to (a) creditworthiness,  probability of collection,
payment  ability  or  any  other  write-off,  write-down  or  concept  of  value
diminution  or  adjustment  and  without  giving  effect  or (b) any  accounting
treatment having the effect of recharacterizing any such Account into any equity
account or other account having similar effect.

                  "Appraised  Value"  shall  mean,  in  respect  of any share of
Common Stock on any date of  determination,  the fair market value of such share
of Common Stock  determined  (a) without giving effect to the discount for (i) a
minority  interest or (ii) any lack of  liquidity  of the Common Stock or to the
fact that Company may have no class of equity registered under the Exchange Act,
(b) assuming that any and all then outstanding  shares of preferred stock of the
Company and accrued dividends  thereon were canceled and permanently  retired as
of any date of  determination  without any requirement of payment by the Company
in respect thereof,  (c) without  duplication,  after decreasing the fair market
value  of such  share  of  Common  Stock  by the  amount  of the PST  Adjustment
attributable  thereto and (d) treating all Affiliate Accounts as if paid in full
in cash to Borrower without any contingency or offsetting adjustment.  Such fair
market  per share of Common  Stock  shall be based on the value of  Company in a
sale as a whole and on a going  concern  basis  between  a  willing  buyer and a
willing seller, neither acting under compulsion,  as determined by an investment
banking firm selected in accordance with the terms of Section 15, divided by the
number of Fully Diluted Outstanding shares of Common Stock.

                  "ARTRA" shall mean ARTRA GROUP  Incorporated,  a  Pennsylvania
corporation.

                  "BCA" shall mean BCA Holdings, Inc., a Delaware corporation.

                  "Book  Value"  shall  mean,  in respect of any share of Common
Stock on any date of determination, the consolidated book value of Company as of
the last day of any month  immediately  preceding  such  date of  determination,
divided by the number of Fully  Diluted  Outstanding  shares of Common  Stock as
determined  in  accordance  with GAAP by  Coopers & Lybrand or any other firm of
independent   certified  public  accountants  of  recognized  national  standing
selected by Company and reasonably acceptable to the Majority Holders,  provided
that,  for purposes of any such  determination  (a) it shall be assumed that any
and all then  outstanding  shares of preferred  stock of the Company and accrued
dividends  thereon  were then  canceled  and  permanently  retired  without  any
requirement  of  payment  by  the  Company  in  respect  thereof,   (c)  without
duplication,  the book value of Company shall be decreased by the PST Adjustment
and (d) all  Affiliate  Accounts  shall be treated as if paid in full in cash to
Borrower without any contingency or offsetting adjustment.

                  "Business  Day" shall  mean any day that is not a Saturday  or
Sunday or a day on which  banks are  required or  permitted  to be closed in the
State of Illinois.

                  "Closing  Date" shall mean the date set forth on the signature
page to this Warrant.

                  "Commencement Date" shall mean December 17, 1993.


                                       -2-

<PAGE>



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

                  "Common Stock" shall mean (except where the context  otherwise
indicates) the Common Stock,  $.001 par value,  of Company as constituted on the
Commencement  Date,  and any  capital  stock into which  such  Common  Stock may
thereafter  be changed,  and shall also include (i) capital  stock of Company of
any other class (regardless of how denominated)  issued to the holders of shares
of Common Stock upon any reclassification thereof which is also not preferred as
to dividends or assets over any other class of stock of Company and which is not
subject  to  redemption  and (ii)  shares of common  stock of any  successor  or
acquiring  corporation (as defined in Section 4.8) received by or distributed to
the  holders of Common  Stock of Company in the  circumstances  contemplated  by
Section 4.8.

                  "Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other  securities which are convertible into or exchangeable,
with or without  payment of additional  consideration  in cash or property,  for
Additional Shares of Common Stock,  either immediately or upon the occurrence of
a specified date or a specified event.

                  "Current  Market Price" shall mean, in respect of any share of
Common Stock on any date of determination, the highest of:

                  (a) the Book Value per share of Common Stock at such date;

                  (b) the  Appraised  Value per share of Common Stock as at such
date; and

                  (c) if there  shall  then be a public  market  for the  Common
         Stock, an amount  determined in accordance  with the following  clauses
         (i) and (ii):

                           (i) The  average  of the daily  market  prices for 30
                  consecutive  Business Days commencing 45 days before such date
                  shall  be  determined  in  accordance  with  (ii)  below  (the
                  "Unadjusted Price Per Share").  The Unadjusted Price Per Share
                  shall then be multiplied  the number of shares of Common Stock
                  Fully Diluted Outstanding (the result being referred to as the
                  "Unadjusted  Gross Value").  The Unadjusted  Gross Value shall
                  then be  increased  by an  amount  equal to (A) the  aggregate
                  amount  which  would then be payable by the Company if it then
                  redeemed and permanently retired all shares of its outstanding
                  preferred stock,  including accrued dividends less (B) the PST
                  Adjustment plus (C) the amount of all Affiliate  Accounts,  as
                  if paid in full in cash to Borrower without any contingency or
                  offsetting adjustment  (collectively,  the "Gross-Up Amount").
                  The sum of the Unadjusted Gross Amount and the Gross-Up Amount
                  is herein  referred to as the  "Adjusted  Gross  Amount".  The
                  Adjusted  Gross  Amount shall then be divided by the number of
                  shares of Common Stock Fully  Diluted  Outstanding  to yield a
                  per share amount.

                           (ii) For  purposes of the  foregoing  clause (i), the
                  daily market price for each such Business Day shall be (A) the
                  last sale price on such day on the principal stock

                                       -3-

<PAGE>



                  exchange on which such Common Stock is then listed or admitted
                  to trading, (B) if no sale takes place on such day on any such
                  exchange,  the  average of the last  reported  closing bid and
                  asked  prices  on such day as  officially  quoted  on any such
                  exchange,  (C) if the  Common  Stock  is not  then  listed  or
                  admitted to trading on any stock exchange,  the average of the
                  last reported  closing bid and asked prices on such day in the
                  over-the-counter   market,   as   furnished  by  the  National
                  Association of Securities  Dealers Automatic  Quotation System
                  or the National  Quotation  Bureau,  Inc., (D) if neither such
                  corporation  at  the  time  is  engaged  in  the  business  of
                  reporting  such prices,  as furnished by any similar firm then
                  engaged in such business,  or (E) if there is no such firm, as
                  furnished by any member of the NASD  selected  mutually by the
                  Majority  Holders and  Company  or, if they cannot  agree upon
                  such  selection,  as selected by two such members of the NASD,
                  one of which shall be selected by the Majority Holders and one
                  of which shall be selected by Company.

                  "Current  Warrant  Price" shall mean, in respect of a share of
Common Stock at any date herein specified,  the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date.

                  "Deferral  Notice" shall have the meaning set forth in Section
14.1(a).

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.

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

                  "Expiration Date" shall mean February 27, 2003.

                  "Fully  Diluted   Outstanding"  shall  mean,  when  used  with
reference to Common Stock,  at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant, and other options or
warrants to purchase,  or securities  convertible  into,  shares of Common Stock
outstanding  on such date which  would be deemed  outstanding  for  purposes  of
determining  book  value or net  income  per  share in  accordance  with GAAP by
Coopers & Lybrand or any other firm of independent  certified public accountants
of recognized national standing selected by Company and reasonably acceptable to
the Majority Holders.

                  "GAAP" shall mean generally accepted accounting  principles in
the United States of America as from time to time in effect.

                  "GE Capital" shall mean General Electric Capital  Corporation,
a New York corporation.


                                       -4-

<PAGE>



                  "Holder"  shall mean the Person in whose name the  Warrant set
forth herein is registered on the books of Company maintained for such purpose.

                  "Initial Holder" shall mean GE Capital.

                  "Liabilities"  shall mean the  "Obligations" as defined in the
Loan Agreement.

                  "Loan  Agreement"  shall mean the Second  Amended and Restated
Credit  Agreement  dated as of the Closing  Date by and  between  Company and GE
Capital  as Agent and  Lender  and the  other  Lenders  from time to time  party
thereto,  or any successor  agreement  between such parties,  as the same may be
amended, restated, modified or supplemented and in effect from time to time.

                  "Majority   Holders"   shall  mean  the  holders  of  Warrants
exercisable  for in  excess of 50% of the  aggregate  number of shares of Common
Stock  then  purchasable  upon  exercise  of all  Warrants,  whether or not then
exercisable.

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

                  "Offering"  shall  have  the  meaning  set  forth  in  Section
14.1(b).

                  "Other  Property"  shall have the meaning set forth in Section
4.8.

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

                  "Person"  shall  mean  any  individual,  sole  proprietorship,
partnership,  joint  venture,  trust,  incorporated  organization,  association,
corporation, limited liability company, institution, public benefit corporation,
entity or  government  (whether  federal,  state,  county,  city,  municipal  or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).

                  "PST" shall mean Plastic Specialties and Technologies, Inc., a
Delaware corporation.

                  "PST Adjustment" shall mean an amount equal to $5,768,812, (a)
$4,135,000 of which  constitutes the prior amount paid to redeem 41,350 PST-Held
Shares and satisfy  unpaid  dividends  accrued (but not forgiven)  thereon as of
(but not after) the  Commencement  Date, (b) $865,000 of which  constitutes  the
amount  necessary to redeem the remaining 8,650 PST-Held Shares and (c) $768,812
of which constitutes the amount necessary to satisfy unpaid dividends accrued on
such remaining PST-Held Shares as of (but not after) the Commencement Date.


                                       -5-

<PAGE>



                  "PST-Held Shares" shall mean shares of the Company's preferred
stock issued to PST prior to the Commencement Date.

                  "Repurchase Price" shall have the meaning set forth in Section
14.4.

                  "Restricted  Common  Stock"  shall mean shares of Common Stock
which are, or which upon their  issuance on the exercise of this  Warrant  would
be,  evidenced  by a  certificate  bearing the  restrictive  legend set forth in
Section 9.1(a).

                  "Sale" shall have the meaning set forth in Section 14.1(b).

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

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

                  "Transfer  Notice" shall have the meaning set forth in Section
9.2.

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

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

                  "Warrant   Stock"  shall  mean  the  shares  of  Common  Stock
purchased by the holders of the Warrants upon the exercise thereof.

                  Except as otherwise set forth herein,  all  capitalized  terms
used but not defined herein shall have the respective  meanings ascribed thereto
in the Loan  Agreement,  regardless  of whether the Loan  Agreement  shall be in
effect. Furthermore,  notwithstanding the termination of any other Loan Document
prior to the termination of this Warrant,  for purposes of each reference herein
to any such  Loan  Document  or term  used  herein  but  defined  therein,  such
reference  shall be given  effect to as if such Loan  Document  shall then be in
full force and effect.

2.   EXERCISE OF WARRANT

                  2.1 Manner of  Exercise.  From and after the Closing  Date and
until 5:00 P.M., New York time, on the Expiration Date, Holder may exercise this
Warrant,  on any  Business  Day,  for all or any part of the number of shares of
Common Stock purchasable hereunder.

                                       -6-

<PAGE>




                  In order to exercise this Warrant, in whole or in part, Holder
shall  deliver  to  Company at its  principal  office at 3900 West 43rd  Street,
Chicago,  Illinois  60632 or at the  office  or  agency  designated  by  Company
pursuant to Section 12:

                  (i) a written  notice of Holder's  election  to exercise  this
         Warrant,  which  notice  shall  specify  the number of shares of Common
         Stock to be purchased;

                  (ii) payment of the Warrant Price  applicable  with respect to
         the shares being purchased; and

                  (iii) this Warrant.

Such  notice  shall  be  substantially  in the  form  of the  subscription  form
appearing  at the end of this  Warrant as Exhibit A, duly  executed by Holder or
its agent or  attorney.  Upon receipt  thereof,  Company  shall,  as promptly as
practicable, and in any event within five (5) Business Days thereafter,  execute
or cause to be  executed  and  deliver  or cause  to be  delivered  to  Holder a
certificate or certificates  representing the aggregate number of full shares of
Common Stock  issuable  upon such  exercise,  together  with cash in lieu of any
fraction  of  a  share,  as  hereinafter  provided.  The  stock  certificate  or
certificates so delivered shall be, to the extent possible, in such denomination
or  denominations  as such  Holder  shall  request  in the  notice  and shall be
registered  in the name of Holder  or,  subject to Section 9, such other name as
shall be  designated  in the notice.  This Warrant  shall be deemed to have been
exercised  and such  certificate  or  certificates  shall be deemed to have been
issued,  and Holder or any other Person so  designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes,  as
of the date the notice and the Warrant  Price and this  Warrant are  received by
Company as described above and all taxes required to be paid by Holder,  if any,
pursuant to Section 2.2 prior to the issuance of such shares have been paid.  If
this Warrant shall have been exercised in part,  Company  shall,  at the time of
delivery of the certificate or certificates  representing Warrant Stock, deliver
to  Holder a new  Warrant  evidencing  the  rights of  Holder  to  purchase  the
unpurchased shares of Common Stock called for by this Warrant, which new Warrant
shall in all other respects be identical  with this Warrant,  or, at the request
of  Holder,  appropriate  notation  may be  made on this  Warrant  and the  same
returned  to  Holder.  Notwithstanding  any  provision  herein to the  contrary,
Company  shall not be required to register  shares in the name of any Person who
acquired  this Warrant (or part hereof) or any Warrant Stock  otherwise  than in
accordance with this Warrant.

At the option of the holder  hereof,  payment of the Warrant Price shall be made
by:

                  (a) wire  transfer of funds to an account in a bank located in
         the United States designated by the Company for such purpose;

                  (b)  certified or official  bank check payable to the order of
the Company;

                  (c) deducting from the shares delivered upon exercise hereof a
         number of shares having an aggregate  Current  Market Price on the date
         of exercise equal to the aggregate

                                       -7-

<PAGE>



                  purchase price for all shares as to which this Warrant is then
being exercised (and so directing the Company in the notice);

                  (d) by application  of the  Liabilities as provided in Section
2.5 hereof; or

                  (e) by any combination of such methods.

                  If  a  Holder  surrenders  any  Note  issued  under  the  Loan
Agreement having an aggregate value which exceeds the aggregate Warrant Price, a
new Note shall be issued under the Loan Agreement in the principal  amount equal
to that portion of such surrendered  principal amount not applied to the Warrant
Price  not paid in cash to the  Holder;  provided,  however,  that such new Note
shall be in a principal  amount  equal to the next lowest  integral  multiple of
$1,000 and the Company  shall pay in cash to the Holder the  difference  between
the Warrant Price and such in next lowest integral multiple of $1,000.

                  2.2 Payment of Taxes. All shares of Common Stock issuable upon
the  exercise  of this  Warrant  pursuant to the terms  hereof  shall be validly
issued, fully paid and nonassessable and without any preemptive rights.  Company
shall pay all expenses in connection with, and all taxes and other  governmental
charges  that may be imposed  with  respect  to, the issue or  delivery  thereof
(other than any income taxes imposed on Holder in connection  herewith),  unless
such tax or charge is  imposed by law upon  Holder,  in which case such taxes or
charges  shall be paid by Holder and  (except  with  respect to any such  income
taxes) reimbursed to Holder by Company .

                  2.3 Fractional Shares.  Company shall not be required to issue
a  fractional  share of Common  Stock upon  exercise of any  Warrant.  As to any
fraction of a share which the Holder of one or more  Warrants,  the rights under
which are  exercised  in the same  transaction,  would  otherwise be entitled to
purchase upon such exercise,  Company shall pay a cash  adjustment in respect of
such final  fraction  in an amount  equal to the same  fraction  of the  Current
Market Price per share of Common Stock on the date of exercise.

                  2.4  Continued  Validity.  A holder of shares of Common  Stock
issued  upon the  exercise  of this  Warrant,  in whole or in part (other than a
holder who acquires  such shares after the same have been publicly sold pursuant
to a  Registration  Statement  under the Securities Act or sold pursuant to Rule
144  thereunder),  shall  continue to be entitled with respect to such shares to
all rights to which it would have been entitled as Holder under  Sections 9, 10,
13 and 17 of this  Warrant.  Company  will, at the time of each exercise of this
Warrant,  in whole or in part,  upon the  request of the holder of the shares of
Common Stock issued upon such exercise hereof,  acknowledge in writing,  in form
reasonably  satisfactory to such holder, its continuing  obligation to afford to
such holder all such rights;  provided,  however, that if such holder shall fail
to make  any  such  request,  such  failure  shall  not  affect  the  continuing
obligation of Company to afford to such holder all such rights.





                                       -8-

<PAGE>




3    TRANSFER, DIVISION AND COMBINATION

                  3.1 Transfer.  Subject to  compliance  with Sections 9 and 14,
transfer of this Warrant and all rights hereunder, in whole or in part, shall be
registered  on the books of  Company to be  maintained  for such  purpose,  upon
surrender  of this  Warrant at the  principal  office of Company  referred to in
Section 2.1 or the office or agency  designated  by Company  pursuant to Section
12, together with a written assignment of this Warrant substantially in the form
of Exhibit B hereto duly executed by Holder or its agent or attorney and if such
transfer is not to be made  pursuant to Section 14, funds  sufficient to pay any
transfer  taxes payable upon the making of such  transfer.  Upon such  surrender
and, if required, such payment, Company shall, subject to Section 9, execute and
deliver a new Warrant or Warrants in the name of the assignee or  assignees  and
in the denomination specified in such instrument of assignment,  and shall issue
to the  assignor a new Warrant  evidencing  the  portion of this  Warrant not so
assigned,  and this Warrant shall promptly be canceled.  A Warrant,  if properly
assigned in compliance  with Section 9, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new Warrant issued.

                  3.2  Division  and  Combination.  Subject  to  Section 9, this
Warrant may be divided or combined with other Warrants upon presentation  hereof
at the aforesaid  office or agency of Company,  together  with a written  notice
specifying the names and  denominations  in which new Warrants are to be issued,
signed by Holder or its agent or attorney.  Subject to  compliance  with Section
3.1 and  with  Section  9, as to any  transfer  which  may be  involved  in such
division  or  combination,  Company  shall  execute and deliver a new Warrant or
Warrants  in  exchange  for the Warrant or Warrants to be divided or combined in
accordance with such notice.

                  3.2 Expenses.  Company shall prepare, issue and deliver at its
own expense  (other than transfer  taxes) the new Warrant or Warrants under this
Section 3.

                  3.3 Maintenance of Books.  Company agrees to maintain,  at its
aforesaid  office or agency,  books for the registration and the registration of
transfer of the Warrants.

4.   ADJUSTMENTS

                  The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant,  shall be subject to adjustment  from time to time as set forth in
this Section 4.  Company  shall give each Holder  notice of any event  described
below which  requires an  adjustment  pursuant to this  Section 4 at the time of
such event.

                  4.1 Stock Dividends,  Subdivisions and Combinations. If at any
time Company shall:

                  (a)  take  a record  of  the  holders of its Common  Stock for
         the  purpose of  entitling  them to receive a dividend  payable  in, or
         other distribution of, Additional Shares of Common Stock,


                                       -9-

<PAGE>



                   (b)  subdivide its  outstanding  shares of Common  Stock into
         a larger number of shares of Common Stock, or

                   (c)  combine its  outstanding shares of  Common Stock into  a
         smaller number of shares of Common Stock,

then:  (i) the  number  of shares of Common  Stock  for which  this  Warrant  is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record  holder of the same
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to the  occurrence  of such event would own or be entitled to
receive  after the happening of such event;  and (ii) the Current  Warrant Price
shall be adjusted  to equal (A) the  Current  Warrant  Price  multiplied  by the
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to the  adjustment  divided  by (B) the  number of shares for
which this Warrant is exercisable immediately after such adjustment.

                  4.2 Certain Other Distributions.  If at any time Company shall
take a record of the holders of its Common  Stock for the  purpose of  entitling
them to receive any dividend or other distribution of:

                  (a) cash (other than a cash  distribution or dividend  payable
         out of earnings or earned surplus legally  available for the payment of
         dividends  under  the  laws of the  jurisdiction  of  incorporation  of
         Company),

                  (b) any evidences of its indebtedness, any shares of its stock
         or any other  securities  or property of any nature  whatsoever  (other
         than  cash,  Convertible  Securities  or  Additional  Shares  of Common
         Stock), or

                  (c) any warrants or other rights to subscribe  for or purchase
         any evidences of its indebtedness, any shares of its stock or any other
         securities  or  property  of any nature  whatsoever  (other  than cash,
         Convertible Securities or Additional Shares of Common Stock),

then:

                   (i) the  number  of shares  of  Common  Stock for which  this
         Warrant is  exercisable  shall be  adjusted to equal the product of the
         number of shares of Common Stock for which this Warrant is  exercisable
         immediately prior to such adjustment by a fraction;

                           (A) the  numerator  of  which  shall  be the  Current
                  Market  Price per share of Common  Stock at the date of taking
                  such record, and

                           (B) the  denominator  of which shall be such  Current
                  Market  Price  per  share of Common  Stock  minus  the  amount
                  allocable to one share of Common Stock of

                                    (x) any such cash so distributable, plus


                                      -10-

<PAGE>



                                    (y) the fair  value (as  determined  in good
                           faith  by the  Board  of  Directors  of  Company  and
                           supported  by an opinion from an  investment  banking
                           firm of recognized  national  standing  acceptable to
                           the Majority  Holders) of any and all such  evidences
                           of indebtedness, shares of stock, other securities or
                           property  or  warrants  or  other   subscription   or
                           purchase rights so distributable; and

                  (ii) the Current  Warrant Price shall be adjusted to equal (A)
         the Current Warrant Price  multiplied by the number of shares of Common
         Stock for which this Warrant is  exercisable  immediately  prior to the
         adjustment  divided by (B) the number of shares for which this  Warrant
         is exercisable immediately after such adjustment.

A  reclassification  of the Common Stock  (other than a change in par value,  or
from par value to no par value or from no par value to par value) into shares of
Common  Stock  and  shares  of any  other  class  of  stock  shall  be  deemed a
distribution  by Company to the  holders of its Common  Stock of such  shares of
such other  class of stock  within the  meaning of this  Section 4.2 and, if the
outstanding  shares of Common  Stock  shall be changed  into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be  deemed  a  subdivision  or  combination,  as the  case may be,  of the
outstanding shares of Common Stock within the meaning of Section 4.1.

                  4.3 Issuance of Additional Shares of Common Stock.

          If at any time Company shall (except as hereinafter provided) issue or
sell any Additional  Shares of Common Stock in exchange for  consideration in an
amount per Additional  Share of Common Stock less than the Current Warrant Price
at the time the Additional Shares of Common Stock are issued, then:

                  (i) the Current  Warrant  Price as to the number of shares for
         which this Warrant is  exercisable  prior to such  adjustment  shall be
         reduced to a price  determined by multiplying the Current Warrant Price
         then in effect by a fraction

                           (A) the  numerator of which is an amount equal to (x)
                  the number of shares of Common Stock  Outstanding  immediately
                  prior to such issue or sale  multiplied  by the then  existing
                  Current  Warrant Price,  plus (y) the  consideration,  if any,
                  received by Company upon such issue or sale, and

                           (B) the  denominator  of which is the total number of
                  shares of Common  Stock  Outstanding  immediately  after  such
                  issue or sale; and

                  (ii) the  number  of shares  of  Common  Stock for which  this
         Warrant is exercisable  shall be adjusted to equal the product obtained
         by multiplying the Current Warrant Price in effect immediately prior to
         such  issue or sale by the  number of shares of Common  Stock for which
         this Warrant is exercisable immediately prior to such issue or sale and
         dividing the product  thereof by the Current  Warrant  Price  resulting
         from the adjustment made pursuant to clause (i) above.

                                      -11-

<PAGE>




[Example:  Assume  Current  Warrant  Price is $1.00  per  share,  90,000  shares
outstanding  and Warrant is for 10,000 shares.  Company issues 10,000 shares for
$.10 per share or $1,000 total. Current Warrant Price is adjusted by multiplying
$1.00 by the following fraction:

numerator          =        (90,000 x $1.00) + $1,000        =        $91,000
                            -------------------------                 -------
denominator        =            90,000 + 10,000              =        100,000

Resulting Current Warrant Price = $0.91 per share.

Number of Warrant  Shares is then  adjusted by  multiplying  10,000 by $1.00 and
dividing  the result  (which is  $10,000) by the new  Current  Warrant  Price of
$0.91.  $10,000/$0.91  = 10,989.  So the  adjusted  number  of shares  for which
Warrant may be exercised is 10,989.]

                  (b)  If at any  time  Company  shall  (except  as  hereinafter
provided)  at any time issue or sell any  Additional  Shares of Common Stock for
consideration  in an amount per  Additional  Share of Common Stock less than the
Current Market Price, then:

                  (i) the  number  of shares  of  Common  Stock  for which  this
         Warrant is exercisable  shall be adjusted to equal the product obtained
         by  multiplying  the  number of shares of Common  Stock for which  this
         Warrant  is  exercisable  immediately  prior to such issue or sale by a
         fraction  (A) the  numerator  of which shall be the number of shares of
         Common Stock Outstanding  immediately after such issue or sale, and (B)
         the  denominator of which shall be the number of shares of Common Stock
         Outstanding  immediately prior to such issue or sale plus the number of
         shares which the aggregate  offering  price of the total number of such
         Additional  Shares of Common  Stock would  purchase at the then Current
         Market Price; and

                  (ii) the Current  Warrant Price as to the number of shares for
         which this Warrant is  exercisable  prior to such  adjustment  shall be
         adjusted by  multiplying  such Current  Warrant Price by a fraction (X)
         the  numerator  of which  shall be the  number of shares for which this
         Warrant is exercisable immediately prior to such issue or sale; and (Y)
         the  denominator of which shall be the number of shares of Common Stock
         purchasable immediately after such issue or sale.

[Example:  Assume  Current  Market  Price is $10.00  per  share,  90,000  shares
outstanding, Warrant is for 10,000 shares and Current Warrant Price is $1.00 per
share. Company issues 10,000 shares for $1.00 per share or $10,000 total.

Number of Warrant  Shares is adjusted  by  multiplying  10,000 by the  following
fraction:

numerator         =              (90,000 + 10,000)                 =  100,000
                           ---------------------------------          -------
denominator       =        90,000 + ($10,000 divided by $10)       =   91,000

10,000 x  (100,000/91,000)  = 10,989. So the adjusted number of shares for which
Warrant may be exercised is 10,989.]


                                      -12-

<PAGE>



Current  Warrant  Price is then adjusted by  multiplying  $1.00 by the following
fraction:

numerator            =       10,000
denominator          =       10,989

Resulting adjusted Current Warrant Price = $0.91 per share.]

                  (c) If at any time Company  (except as  hereinafter  provided)
shall  issue or sell any  Additional  Shares of  Common  Stock in  exchange  for
consideration  in an amount per Additional  Shares of Common Stock which is less
than the  Current  Warrant  Price and less  than the  Current  Market  Price (as
defined above) at the time the Additional Shares of Common Stock are issued, the
adjustment  required  under  Section  4.3 shall be made in  accordance  with the
formula in paragraph (a) or (b) above which results in the lower Current Warrant
Price  following  such  adjustment.  The provisions of paragraphs (a) and (b) of
Section 4.3 shall not apply to any issuance of Additional Shares of Common Stock
for which an adjustment  is provided  under Section 4.1 or 4.2. No adjustment of
the number of shares of Common Stock for which this Warrant shall be exercisable
shall be made under paragraph (a) or (b) of Section 4.3 upon the issuance of any
Additional  Shares of Common Stock which are issued  pursuant to the exercise of
any  warrants  or other  subscription  or  purchase  rights or  pursuant  to the
exercise of any conversion or exchange rights in any Convertible Securities,  if
any such  adjustment  shall  previously have been made upon the issuance of such
warrants or other rights or upon the issuance of such Convertible Securities (or
upon the issuance of any warrant or other rights  therefor)  pursuant to Section
4.4 or Section 4.5.

                  (d) If any  Additional  Shares of Common  Stock are  issued or
sold in exchange for  consideration  in an amount per Additional Share of Common
Stock equal to or greater than the Current  Warrant Price and the Current Market
Price at the time the Additional Shares are issued, then:

                  (i) the  number  of shares  of  Common  Stock  for which  this
         Warrant is exercisable  shall be adjusted to equal the product obtained
         by  multiplying  the  number of shares of Common  Stock for which  this
         Warrant  is  exercisable  immediately  prior  to such  adjustment  by a
         fraction  (A) the  numerator  of which shall be the number of shares of
         Common  Stock  Outstanding  immediately  after  the  issuance  of  such
         Additional  Shares of Common Stock,  and (B) the  denominator  of which
         shall be the number of shares of Common Stock  Outstanding  immediately
         prior to the issuance of such Additional Shares of Common Stock; and

                  (ii) the Current  Warrant  Price as to the number of shares of
         Common  Stock for  which  this  Warrant  is  exercisable  prior to such
         adjustment  shall not change but the Current  Warrant Price for each of
         the incremental number of shares of Common Stock for which this Warrant
         becomes  exercisable  after such adjustment  shall be equal to the fair
         value of such consideration per Additional Share of Common Stock.


                                      -13-

<PAGE>



[Example:  Assume  Current  Market  Price is $10.00  per  share,  90,000  shares
outstanding, Warrant is for 10,000 shares and Current Warrant Price is $1.00 per
share. Company issues 10,000 shares for $20.00 per share or $200,000 total.

Number of Warrant  Shares is adjusted  by  multiplying  10,000 by the  following
fraction:

numerator         =       (90,000 + 10,000)         =       100,000
                          -----------------                 -------
denominator       =                90,000           =        90,000

10,000 x (100,000/90,000) = 11,111  This equals 10% on a fully-diluted basis.

Current  Warrant Price for the original  10,000 Warrant Shares remains $1.00 per
share. Current Warrant Price for the additional 1,111 Warrant Shares is equal to
the fair value of the consideration received for the shares sold by the Company,
in this case  $20.00 per share.  The effect is to give the Holder a  pre-emptive
right to maintain the 10% by acquiring the additional shares at the sale price.]

                  4.4  Issuance  of  Warrants  or Other  Rights.  If at any time
Company  shall take a record of the holders of its Common  Stock for the purpose
of entitling them to receive a distribution  of, or shall in any manner (whether
directly  or by  assumption  in a  merger  in  which  Company  is the  surviving
corporation)  issue or sell,  any warrants or other  rights to subscribe  for or
purchase any Additional  Shares of Common Stock or any  Convertible  Securities,
whether or not the rights to  exchange  or convert  thereunder  are  immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such warrants or other rights or upon conversion or exchange of such
Convertible  Securities  shall be less than either the Current  Warrant Price or
the Current Market Price in effect  immediately  prior to the time of such issue
or sale, then the number of shares for which this Warrant is exercisable and the
Current  Warrant Price shall be adjusted as provided in Section 4.3 on the basis
that the maximum number of Additional  Shares of Common Stock issuable  pursuant
to all such  warrants or other rights or necessary to effect the  conversion  or
exchange of all such Convertible  Securities shall be deemed to have been issued
and outstanding and Company shall have received all of the consideration payable
therefor,  if any, as of the date of the actual issuance of the number of Shares
for which this Warrant is  exercisable  and such  warrants or other  rights.  No
further  adjustments of the Current  Warrant Price shall be made upon the actual
issue of such Common Stock or of such  Convertible  Securities  upon exercise of
such warrants or other rights or upon the actual issue of such Common Stock upon
such conversion or exchange of such Convertible Securities.

                  4.5 Issuance of Convertible Securities. If at any time Company
shall  take a record of the  holders  of its  Common  Stock for the  purpose  of
entitling  them to receive a  distribution  of, or shall in any manner  (whether
directly  or by  assumption  in a  merger  in  which  Company  is the  surviving
corporation)  issue or sell,  any  Convertible  Securities,  whether  or not the
rights to exchange or convert  thereunder are immediately  exercisable,  and the
price per share for which  Common  Stock is  issuable  upon such  conversion  or
exchange  shall be less than either the Current  Warrant Price or Current Market
Price in effect  immediately  prior to the time of such issue or sale,  then the
number of Shares for which this Warrant is exercisable  and the Current  Warrant
Price shall be adjusted as provided in Section 4.3 on the basis that the maximum
number of Additional Shares of Common

                                      -14-

<PAGE>



Stock  necessary to effect the  conversion  or exchange of all such  Convertible
Securities shall be deemed to have been issued and outstanding and Company shall
have received all of the consideration  payable therefor, if any, as of the date
of actual issuance of such Convertible  Securities.  No adjustment of the number
of Shares for which this Warrant is  exercisable  and the Current  Warrant Price
shall be made  under  this  Section  4.5 upon the  issuance  of any  Convertible
Securities  which are issued  pursuant to the  exercise of any warrants or other
subscription  or  purchase  rights  therefor,   if  any  such  adjustment  shall
previously  have been made upon the  issuance of such  warrants or other  rights
pursuant  to Section  4.4.  No further  adjustments  of the number of Shares for
which this Warrant is  exercisable  and the Current  Warrant Price shall be made
upon the actual issue of such Common Stock upon  conversion  or exchange of such
Convertible  Securities and, if any issue or sale of such Convertible Securities
is made upon  exercise  of any  warrant or other  right to  subscribe  for or to
purchase any such Convertible  Securities for which adjustments of the number of
Shares for which this Warrant is exercisable  and the Current Warrant Price have
been or are to be made  pursuant  to  other  provisions  of this  Section  4, no
further  adjustments  of  the  number  of  Shares  for  which  this  Warrant  is
exercisable  and the Current Warrant Price shall be made by reason of such issue
or sale.

                  4.6  Superseding  Adjustment.  (a) If,  at any time  after any
adjustment  of the number of shares of Common  Stock for which  this  Warrant is
exercisable  and the  Current  Warrant  Price  shall have been made  pursuant to
Section 4.4 or Section 4.5 as the result of any issuance of warrants,  rights or
Convertible  Securities,  such warrants or rights, or the right of conversion or
exchange in such other Convertible  Securities,  shall expire or be rescinded or
canceled or be determined  to be illegal,  and all or a portion of such warrants
or rights,  or the right of  conversion  or  exchange  with  respect to all or a
portion of such other Convertible Securities, as the case may be, shall not have
been  exercised  (because  they have  expired,  been  rescinded  or  canceled or
determined to be illegal), then, for each outstanding Warrant:

                  (i) such previous  adjustment to the Warrant made with respect
         to the  issuance of such  warrants,  rights or  Convertible  Securities
         shall be rescinded  and annulled  and any  Additional  Shares of Common
         Stock which were deemed to have been issued (but not in fact issued) by
         virtue of the  computation  made in connection  with the  adjustment so
         rescinded and annulled shall no longer be deemed to have been issued by
         virtue of such computation; and

                  (ii) a new  adjustment of the number of shares of Common Stock
         for which this Warrant is  exercisable  and the Current  Warrant  Price
         shall be made on the basis of:

                           (A)  treating any  Additional  Shares of Common Stock
                  which were in fact issued pursuant to such warrants, rights or
                  Convertible   Securities   as  having   been  issued  for  the
                  consideration per share which was received; and

                           (B)   treating   any  such   warrants  or  rights  or
                  Convertible  Securities (if any) which then remain outstanding
                  and are not expired,  rescinded,  canceled or declared illegal
                  as having been newly granted or issued  immediately  after the
                  time  of  such   expiration,   rescinding,   cancellation   or
                  declaration   of   illegality   and  treating  the  number  of
                  Additional  Shares of Common Stock or other property  issuable
                  pursuant

                                      -15-

<PAGE>



                  to such warrants,  rights or Convertible  Securities as having
                  been  issued  on such  date for the  consideration  receivable
                  therefor thereunder on such date.

                  (b) If, at any time  after  any  adjustment  of the  number of
shares of Common  Stock for which this  Warrant is  exercisable  and the Current
Warrant Price shall have been made pursuant to Section 4.4 or Section 4.5 as the
result of any  issuance  of  warrants,  rights or  Convertible  Securities,  the
consideration  per share for which shares of Common Stock are issuable  pursuant
to such warrants or rights or Convertible  Securities  shall be increased solely
by virtue of  provisions  therein  contained  for an automatic  increase in such
consideration  per share upon the  occurrence of a specified date or event then,
for each outstanding Warrant:

                  (i) such previous adjustment made with respect to the issuance
         of such warrants,  rights or Convertible  Securities shall be rescinded
         and  annulled  and any  Additional  Shares of Common  Stock  which were
         deemed to have been  issued  (but not in fact  issued) by virtue of the
         computation  made in  connection  with the  adjustment so rescinded and
         annulled  shall no longer  be  deemed to have been  issued by virtue of
         such computation; and

                  (ii) a new  adjustment of the number of shares of Common Stock
         for which this Warrant is  exercisable  and the Current  Warrant  Price
         shall be made on the basis of:

                           (A)  treating  the  number  of  Additional  Shares of
                  Common Stock or other property,  if any,  theretofore actually
                  issued pursuant to the previous  exercise of any such warrants
                  or rights or  Convertible  Securities as having been issued on
                  the  date  or  dates  of  any  such   exercise   and  for  the
                  consideration actually received therefor; and

                           (B)   treating   any  such   warrants  or  rights  or
                  Convertible Securities which then remain outstanding as having
                  been  granted  or  issued  immediately  after the time of such
                  increase of the  consideration  per share for which  shares of
                  Common  Stock  or  other  property  are  issuable  under  such
                  warrants  or  rights  or  other  Convertible   Securities  and
                  treating  the number of  Additional  Shares of Common Stock or
                  other property issuable  pursuant to such warrants,  rights or
                  Convertible  Securities as having been issued on such date for
                  the consideration  receivable  therefor after giving effect to
                  such increase in the consideration per share.

                  4.7 Other  Provisions  Applicable  to  Adjustments  under this
Section.  The  following  provisions  shall  be  applicable  to  the  making  of
adjustments  of the number of shares of Common  Stock for which this  Warrant is
exercisable and the Current Warrant Price provided for in this Section 4:

                           Computation of Consideration.  To the extent that any
         Additional Shares of Common Stock or any Convertible  Securities or any
         warrants or other  rights to subscribe  for or purchase any  Additional
         Shares of Common Stock or any  Convertible  Securities  shall be issued
         for cash consideration,  the consideration received by Company therefor
         shall be the amount of the cash  received by Company  therefor,  or, if
         such  Additional  Shares of Common Stock or Convertible  Securities are
         offered by Company for subscription, the subscription



                                      -16-

<PAGE>



         price,  or, if such  Additional  Shares of Common Stock or  Convertible
         Securities  are sold to  underwriters  or dealers  for public  offering
         without a subscription  offering, the initial public offering price (in
         any such case  subtracting  any amounts paid or receivable  for accrued
         interest  or accrued  dividends  and without  taking  into  account any
         compensation, discounts or expenses paid or incurred by Company for and
         in the  underwriting  of, or otherwise in connection with, the issuance
         thereof). To the extent that such issuance shall be for a consideration
         other than cash, then, except as herein otherwise  expressly  provided,
         the amount of such  consideration  shall be deemed to be the fair value
         of such  consideration  at the time of such  issuance as  determined in
         good faith by the Board of Directors of Company. In case any Additional
         Shares of Common Stock or any Convertible Securities or any warrants or
         other rights to subscribe  for or purchase  such  Additional  Shares of
         Common Stock or  Convertible  Securities  shall be issued in connection
         with any merger in which Company issues any  securities,  the amount of
         consideration  therefor  shall  be  deemed  to be the  fair  value,  as
         determined in good faith by the Board of Directors of Company,  of such
         portion of the assets and business of the  nonsurviving  corporation as
         such Board in good faith shall  determine  to be  attributable  to such
         Additional Shares of Common Stock, Convertible Securities,  warrants or
         other rights,  as the case may be. The consideration for any Additional
         Shares of Common  Stock  issuable  pursuant  to any  warrants  or other
         rights to subscribe for or purchase the same shall be the consideration
         received by Company for issuing such  warrants or other rights plus the
         additional  consideration  payable to  Company  upon  exercise  of such
         warrants or other rights.  The  consideration for any Additional Shares
         of Common  Stock  issuable  pursuant  to the  terms of any  Convertible
         Securities shall be the  consideration  received by Company for issuing
         warrants or other rights to subscribe for or purchase such  Convertible
         Securities,  plus the  consideration  paid or  payable  to  Company  in
         respect  of  the  subscription  for or  purchase  of  such  Convertible
         Securities,  plus the  additional  consideration,  if any,  payable  to
         Company  upon the  exercise of the right of  conversion  or exchange in
         such Convertible Securities. In case of the issuance at any time of any
         Additional Shares of Common Stock or Convertible  Securities in payment
         or  satisfaction  of any  dividends  upon any class of stock other than
         Common  Stock,  Company  shall  be  deemed  to have  received  for such
         Additional   Shares  of  Common  Stock  or  Convertible   Securities  a
         consideration  equal  to  the  amount  of  such  dividend  so  paid  or
         satisfied.

                  (b) When  Adjustments to Be Made. The adjustments  required by
this  Section  4 shall be made  whenever  and as often  as any  specified  event
requiring an adjustment shall occur, except that any adjustment of the number of
shares of Common  Stock  for  which  this  Warrant  is  exercisable  that  would
otherwise be required may be postponed  (except in the case of a subdivision  or
combination  of shares of the Common  Stock,  as provided for in Section 4.1) up
to, but not beyond the date of exercise if such  adjustment  either by itself or
with other adjustments not previously made adds or subtracts less than 1% of the
shares of Common Stock for which this Warrant is exercisable  immediately  prior
to the making of such adjustment.  Any adjustment  representing a change of less
than such minimum  amount  (except as  aforesaid)  which is  postponed  shall be
carried  forward  and  made  as soon as such  adjustment,  together  with  other
adjustments  required by this Section 4 and not previously made, would result in
a minimum adjustment or on the date of exercise. For the purpose of


                                      -17-

<PAGE>



         any adjustment, any specified event shall be deemed to have occurred at
         the close of business on the date of its occurrence.

                   (c)     Fractional Interests.  In computing adjustments under
         this  Section 4,  fractional  interests  in Common Stock shall be taken
         into account to the nearest 1/10th of a share.

                   (d)     When Adjustment Not Required. If Company shall take a
         record of the holders of its Common  Stock for the purpose of entitling
         them to receive a dividend or  distribution or subscription or purchase
         rights  and  shall,   thereafter   and  before  the   distribution   to
         stockholders  thereof,  legally abandon its plan to pay or deliver such
         dividend,   distribution,   subscription  or  purchase   rights,   then
         thereafter no  adjustment  shall be required by reason of the taking of
         such record and any such adjustment  previously made in respect thereof
         shall be rescinded and annulled.

                   (e)     Escrow  of  Warrant  Stock.  If  after  any  property
         becomes  distributable  pursuant  to this  Section  4 by  reason of the
         taking of any record of the holders of Common  Stock,  but prior to the
         occurrence  of the event for which  such  record is taken,  and  Holder
         exercises this Warrant,  any Additional Shares of Common Stock issuable
         upon  exercise  by reason of such  adjustment  shall be deemed the last
         shares  of  Common   Stock  for  which  this   Warrant   is   exercised
         (notwithstanding  any other provision to the contrary  herein) and such
         shares or other  property shall be held in escrow for Holder by Company
         to be issued to Holder upon and to the extent  that the event  actually
         takes  place,   upon  payment  of  the  then  Current   Warrant  Price.
         Notwithstanding  any other  provision  to the contrary  herein,  if the
         event for which such record was taken  fails to occur or is  rescinded,
         then such  escrowed  shares  shall be canceled by Company and  escrowed
         property returned.

                   (f)     Challenge to Good Faith  Determination.  Whenever the
         Board of Directors of Company shall be required to make a determination
         in good faith of the fair value of any item under this  Section 4, such
         determination  may be challenged in good faith by the Majority Holders,
         and any  dispute  shall be resolved by an  investment  banking  firm of
         recognized  national standing selected by Company and acceptable to the
         Majority Holders.

                  4.8 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case Company shall reorganize its capital,  reclassify
its capital stock,  consolidate or merge with or into another corporation (where
Company  is not the  surviving  corporation  or where  there  is a change  in or
distribution with respect to the Common Stock of Company),  or sell, transfer or
otherwise dispose of all or substantially  all its property,  assets or business
to  another  corporation  and,  pursuant  to the  terms of such  reorganization,
reclassification,  merger,  consolidation  or disposition  of assets,  shares of
common stock of the successor or acquiring  corporation,  or any cash, shares of
stock or other  securities  or  property  of any  nature  whatsoever  (including
warrants or other  subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring  corporation ("Other Property"),  are
to be received by or distributed to the holders of Common Stock of Company, then
each Holder shall have the right  thereafter  to receive,  upon exercise of such
Holder's Warrant, the number of shares of common stock of the successor or


                                      -18-

<PAGE>



acquiring  corporation or of Company,  if it is the surviving  corporation,  and
Other  Property  receivable  upon  or  as  a  result  of  such   reorganization,
reclassification,  merger, consolidation or disposition of assets by a holder of
the  number of shares of Common  Stock for which  this  Warrant  is  exercisable
immediately   prior  to  such  event.  In  case  of  any  such   reorganization,
reclassification,  merger, consolidation or disposition of assets, the successor
or acquiring  corporation (if other than Company) shall expressly assume the due
and punctual observance and performance of each and every covenant and condition
of this Warrant to be performed and observed by Company and all the  obligations
and  liabilities  hereunder,  subject  to such  modifications  as may be  deemed
appropriate  (as  determined  by resolution of the Board of Directors of Company
acting  in good  faith) in order to  provide  for  adjustments  of shares of the
Common  Stock for which this  Warrant is  exercisable  which  shall be as nearly
equivalent as practicable to the adjustments provided for in this Section 4. For
purposes of this  Section  4.8,  "common  stock of the  successor  or  acquiring
corporation"  shall include stock of such  corporation of any class which is not
preferred  as to  dividends  or  assets  over any  other  class of stock of such
corporation  and which is not subject to  redemption  and shall also include any
evidences  of  indebtedness,  shares  of  stock or other  securities  which  are
convertible into or exchangeable for any such stock,  either immediately or upon
the arrival of a specified  date or the  happening of a specified  event and any
warrants  or other  rights to  subscribe  for or purchase  any such  stock.  The
foregoing  provisions  of this Section 4.8 shall  similarly  apply to successive
reorganizations,  reclassifications,  mergers,  consolidations or disposition of
assets.

                  4.9 Other Action  Affecting  Common Stock. In case at any time
or from time to time  Company  shall  take any  action in  respect of its Common
Stock  (other than the payment of dividends  permitted by Section  4.2(a) or any
other action  described  in this  Section 4), then,  unless such action will not
have a materially  adverse effect upon the rights of the Holders,  the number of
shares of Common  Stock or other  stock for which this  Warrant  is  exercisable
and/or the  purchase  price  thereof  shall be adjusted in such manner as may be
equitable in the circumstances.

                  4.10 Certain Limitations.  Notwithstanding  anything herein to
the contrary,  Company agrees not to enter into any transaction which, by reason
of any adjustment  hereunder,  would cause the Current  Warrant Price to be less
than the par value per share of Common Stock.

5.   NOTICES TO WARRANT HOLDERS

                  5.1 Notice of  Adjustments.  Whenever  the number of shares of
Common  Stock for which this  Warrant is  exercisable,  or whenever the price at
which a share  of such  Common  Stock  may be  purchased  upon  exercise  of the
Warrants,  shall be adjusted  pursuant  to Section 4,  Company  shall  forthwith
prepare a certificate to be executed by the chief  financial  officer of Company
setting forth, in reasonable  detail, the event requiring the adjustment and the
method by which such  adjustment was calculated  (including a description of the
basis on which the Board of  Directors of Company  determined  the fair value of
any evidences of indebtedness,  shares of stock, other securities or property or
warrants or other  subscription or purchase rights referred to in Section 4.2 or
4.7(a)),  specifying the number of shares of Common Stock for which this Warrant
is exercisable  and (if such adjustment was made pursuant to Section 4.8 or 4.9)
describing  the number and kind of any other  shares of stock or Other  Property
for which this Warrant is  exercisable,  and any change in the purchase price or
prices thereof, after giving effect to such adjustment or change. Company


                                      -19-

<PAGE>



shall promptly  cause a signed copy of such  certificate to be delivered to each
Holder in  accordance  with Section  17.2.  Company  shall keep at its office or
agency  designated  pursuant to Section 12 copies of all such  certificates  and
cause the same to be  available  for  inspection  at said office  during  normal
business  hours  by  any  Holder  or  any  prospective  purchaser  of a  Warrant
designated by a Holder thereof.

                  5.2 Notice of Corporate Action. If at any time

                  (a)  Company shall take a record of the holders  of its Common
         Stock for the purpose of entitling  them to receive a dividend or other
         distribution,  or any right to subscribe  for or purchase any evidences
         of its  indebtedness,  any  shares  of stock of any  class or any other
         securities or property, or to receive any other right, or

                  (b)  there shall be any capital reorganization of Company, any
         reclassification or recapitalization of the capital stock of Company or
         any  consolidation or merger of Company with, or any sale,  transfer or
         other disposition of all or substantially  all the property,  assets or
         business of Company to, another corporation, or

                  (c)  there shall be a  voluntary or  involuntary  dissolution,
         liquidation or winding up of Company;

then,  in any one or more of such  cases,  Company  shall  give to Holder (i) at
least ten (10) days'  prior  written  notice of the date on which a record  date
shall be selected for such  dividend  distribution  or right or for  determining
rights to vote in respect of any such reorganization,  reclassification, merger,
consolidation, sale, transfer, disposition,  dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization,  reclassification,  merger,
consolidation, sale, transfer, disposition,  dissolution, liquidation or winding
up, at least ten (10) days' prior written notice of the date when the same shall
take  place.  Such notice in  accordance  with the  foregoing  clause also shall
specify  (i) the date on which any such record is to be taken for the purpose of
such dividend,  distribution  or right,  the date on which the holders of Common
Stock shall be entitled to any such  dividend,  distribution  or right,  and the
amount   and   character   thereof,   and  (ii)  the  date  on  which  any  such
reorganization,   reclassification,   merger,  consolidation,   sale,  transfer,
disposition,  dissolution,  liquidation  or  winding up is to take place and the
time,  if any such time is to be fixed,  as of which the holders of Common Stock
shall be entitled to exchange  their  shares of Common Stock for  securities  or
other property deliverable upon such reorganization,  reclassification,  merger,
consolidation, sale, transfer, disposition,  dissolution, liquidation or winding
up. Each such written notice shall be sufficiently  given if addressed to Holder
at the last address of Holder appearing on the books of Company and delivered in
accordance with Section 17.2.

6.   NO IMPAIRMENT

                  Company   shall  not  by  any   action,   including,   without
limitation,   amending  its   certificate  of   incorporation   or  through  any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities  or any other  voluntary  action,  avoid or seek to avoid the
observance or performance  of any of the terms of this Warrant,  but will at all
times in good faith

                                      -20-

<PAGE>



assist  in the  carrying  out of all such  terms  and in the  taking of all such
actions as may be  necessary  or  appropriate  to  protect  the rights of Holder
against  impairment.  Without limiting the generality of the foregoing,  Company
will (a) not  increase  the par value of any shares of Common  Stock  receivable
upon the exercise of this Warrant  above the amount  payable  therefor upon such
exercise  immediately  prior to such  increase  in par value,  (b) take all such
action as may be necessary or  appropriate in order that Company may validly and
legally  issue  fully  paid and  nonassessable  shares of Common  Stock upon the
exercise  of this  Warrant,  and (c) use its best  efforts  to  obtain  all such
authorizations,  exemptions or consents from any public  regulatory  body having
jurisdiction  thereof as may be  necessary  to enable  Company  to  perform  its
obligations under this Warrant.

                  Upon the  request of Holder,  Company  will at any time during
the period  this  Warrant is  outstanding  (but not more often than twice in any
year)  acknowledge in writing,  in form reasonably  satisfactory to Holder,  the
continuing validity of this Warrant and the obligations of Company hereunder.


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

                  From and after the Closing  Date,  Company  shall at all times
reserve and keep  available  for issue upon the exercise of Warrants such number
of its authorized  but unissued  shares of Common Stock as will be sufficient to
permit the exercise in full of all  outstanding  Warrants.  All shares of Common
Stock which shall be so issuable,  when issued upon  exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and  nonassessable,  and not subject to preemptive
rights.

                  Before  taking  any action  which  would  cause an  adjustment
reducing  the current  Warrant  Price  below the then par value,  if any, of the
shares of Common Stock  issuable upon  exercise of the  Warrants,  Company shall
take any  corporate  action  which may be  necessary  in order that  Company may
validly and legally  issue fully paid and  non-assessable  shares of such Common
Stock at such adjusted Current Warrant Price.

                  Before  taking any action which would result in an  adjustment
in the number of shares of Common Stock for which this Warrant is exercisable or
in the Current Warrant Price,  Company shall obtain all such  authorizations  or
exemptions  thereof,  or consents  thereto,  as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.

                  If any shares of Common  Stock  required  to be  reserved  for
issuance upon exercise of Warrants require  registration or  qualification  with
any governmental  authority or other  governmental  approval or filing under any
federal or state law  (otherwise  than as  provided  in  Section 9) before  such
shares may be so issued,  Company  will in good  faith and as  expeditiously  as
possible and at its expense  endeavor to cause such shares to be duly registered
or qualified.





                                      -21-

<PAGE>




8.   TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS

                  In the case of all dividends or other distributions by Company
to the  holders of its  Common  Stock with  respect  to which any  provision  of
Section 4 refers to the taking of a record of such holders, Company will in each
such  case  take  such a record  and will  take  such  record as of the close of
business  on a  Business  Day.  Company  will  not  at  any  time,  except  upon
dissolution,  liquidation  or winding up of  Company,  close its stock  transfer
books or Warrant  transfer  books so as to result in  preventing or delaying the
exercise or transfer of any Warrant.

9.   RESTRICTIONS ON TRANSFERABILITY

                  The Warrants and the Warrant  Stock shall not be  transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section  9,  which  conditions  are  intended  to  ensure  compliance  with  the
provisions of the  Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant,  agrees to be bound by
the provisions of this Section 9.

                  9.1 Restrictive  Legend.  (a) Except as otherwise  provided in
this Section 9, each  certificate  for Warrant Stock  initially  issued upon the
exercise of this Warrant,  and each  certificate for Warrant Stock issued to any
subsequent  transferee  of any such  certificate,  shall be stamped or otherwise
imprinted with a legend in substantially the following form:

                  "The  shares  represented  by this  certificate  have not been
                  registered  under the Securities Act of 1933, as amended,  and
                  are subject to the conditions  specified in a certain  Warrant
                  No. 3 dated February 27, 1998,  originally  issued by Bagcraft
                  Corporation of America.  No transfer of the shares represented
                  by this  certificate  shall be valid or  effective  until such
                  conditions  have  been  fulfilled.  A copy of the form of said
                  Warrant is on file with the Secretary of Bagcraft  Corporation
                  of America.  The holder of this certificate,  by acceptance of
                  this certificate, agrees to be bound by the provisions of such
                  Warrant."

                  (v)  Except as  otherwise  provided  in this  Section  9, each
Warrant shall be stamped or otherwise  imprinted with a legend in  substantially
the following form:

                  "This Warrant and the securities  represented  hereby have not
                  been registered  under the Securities Act of 1933, as amended,
                  and may not be transferred in violation of such Act, the rules
                  and regulations thereunder or the provisions of this Warrant."

                  9.2 Notice of Proposed  Transfers;  Request for  Registration.
Prior to any  Transfer or  attempted  Transfer of any  Warrants or any shares of
Restricted  Common Stock, the holder of such Warrants or Restricted Common Stock
shall give ten (10) days' prior written notice (a "Transfer  Notice") to Company
of such holder's intention to effect such Transfer, describing the


                                      -22-

<PAGE>



manner and  circumstances of the proposed  Transfer,  and obtain from counsel to
such holder who shall be reasonably satisfactory to Company, an opinion that the
proposed  Transfer  of such  Warrants  or such  Restricted  Common  Stock may be
effected  without  registration  under the Securities  Act. After receipt of the
Transfer Notice and opinion, Company shall, within five days thereof, notify the
holder of such  Warrants  or such  Restricted  Common  Stock as to whether  such
opinion is reasonably  satisfactory  and, if so, such holder shall  thereupon be
entitled  to  Transfer  such  Warrants  or  such  Restricted  Common  Stock,  in
accordance  with the terms of the Transfer  Notice.  Each  certificate,  if any,
evidencing  such shares of  Restricted  Common Stock  issued upon such  Transfer
shall bear the restrictive  legend set forth in Section 9.1(a), and each Warrant
issued upon such Transfer shall bear the restrictive legend set forth in Section
9.1(b),  unless in the opinion of such  counsel  such legend is not  required in
order to ensure  compliance  with the Securities Act. The holder of the Warrants
or the Restricted  Common Stock,  as the case may be, giving the Transfer Notice
shall not be entitled to Transfer such Warrants or such Restricted  Common Stock
until receipt of notice from Company under this Section 9.2(a) that such opinion
is reasonably satisfactory.

                  The holders of Warrants and Warrant Stock shall have the right
to request registration of such Warrant Stock pursuant to Sections 9.3 and 9.4.

                  9.3 Required Registration.  After receipt of a written request
from the  holder of  Warrants  and/or  Warrant  Stock  representing  at least an
aggregate of fifty percent (50%) of the total of (i) all shares of Warrant Stock
then  subject to purchase  upon  exercise of all warrants and (ii) all shares of
Warrant Stock then outstanding, and which are Restricted Common Stock requesting
that Company effect the registration of Warrant Stock issuable upon the exercise
of such  holder's  Warrants or of any of such  holder's  Warrant Stock under the
Securities  Act and  specifying  the intended  method or methods of  disposition
thereof  (which the Company shall be reasonably  satisfied will not be illegal),
Company  shall  promptly  notify all  holders of Warrants  and Warrant  Stock in
writing of the receipt of such request and each such holder,  in addition to any
rights under  Section 9.4, may elect (by written  notice sent to Company  within
ten  (10)  Business  Days  from  the  date  of  such  holder's  receipt  of  the
aforementioned Company's notice) to have its shares of Warrant Stock included in
such registration thereof pursuant to this Section 9.3. Thereupon Company shall,
as expeditiously as is possible, use its best efforts to effect the registration
under the  Securities  Act of all shares of Warrant Stock which Company has been
so requested to register by such holders for sale, all to the extent required to
permit  the  disposition  (in  accordance  with the  intended  method or methods
thereof,  as aforesaid) of the Warrant Stock so registered;  provided,  however,
that Company shall not be required to effect more than two (2)  registrations of
any Warrant Stock pursuant to this Section 9.3, unless Company shall be eligible
to file a registration  statement on Form S-3 (or other  comparable  short form)
under the  Securities  Act, in which event there shall be no limit on the number
of such registrations pursuant to this Section 9.3.

                  If the managing underwriter advises the prospective sellers in
writing that the aggregate number of shares of Warrant Stock and other shares of
Common  Stock,  if  any,   requested  to  be  registered  by  other  holders  of
registration  rights or  proposed to be  included  in such  registration  by the
Company  should be less than the  number  of shares of  Warrant  Stock and other
shares of Common  Stock  requested or proposed to be  registered,  the number of
shares of  Warrant  Stock and  other  shares of Common  Stock to be sold by each
prospective seller (including the Company) shall


                                      -23-

<PAGE>



be reduced as follows:  first,  the number of shares of Common Stock proposed to
be  registered  by the holders of Common Stock  possessing  registration  rights
granted by the Company  other than under or arising from this  Warrant  shall be
reduced to zero,  if  necessary;  second,  the number of shares of Common  Stock
proposed to be registered by the Company shall be reduced to zero, if necessary;
and third, the number of shares of Warrant Stock proposed to be included in such
registration  shall be reduced pro rata among the prospective  sellers of shares
of Warrant Stock to be sold in the proposed  distribution.  If such  underwriter
determines  that the  number of shares of Common  Stock  proposed  to be sold is
insufficient  to proceed with such  registration or  qualification,  the Company
shall immediately  recapitalize its Common Stock to enable such registration and
qualification to be completed as such underwriter advises.

                  9.4 Incidental  Registration.  If Company at any time proposes
to file on its  behalf  and/or  on behalf of any of its  security  holders  (the
"demanding security holders") a Registration  Statement under the Securities Act
on any  form  (other  than a  Registration  Statement  on Form S-4 or S-8 or any
successor  form  for  securities  to be  offered  in a  transaction  of the type
referred  to in Rule 145 under the  Securities  Act or to  employees  of Company
pursuant  to  any  employee   benefit  plan,   respectively)   for  the  general
registration  of securities to be sold for cash with respect to its Common Stock
or any other class of equity  security  (as  defined in Section  3(a)(11) of the
Exchange Act) of Company, it will give written notice to all holders of Warrants
or Warrant Stock at least 60 days before the initial  filing with the Commission
of such Registration Statement, which notice shall set forth the intended method
of  disposition  of the  securities  proposed to be registered  by Company.  The
notice shall offer to include in such filing any or all of the aggregate  number
of shares of  Warrant  Stock  then  outstanding  and any or all of the shares of
Common  Stock for which this  Warrant is then  exercisable,  as such holders may
request.

                  Each  holder of any such  Warrants or any such  Warrant  Stock
desiring to have Warrant  Stock  registered  under this Section 9.4 shall advise
Company in  writing  within 30 days after the date of receipt of such offer from
Company,  setting forth the amount of such Warrant Stock for which  registration
is  requested.  Company  shall  thereupon  include in such  filing the number of
shares of Warrant Stock for which  registration is so requested,  subject to the
next sentence,  and shall use its best efforts to effect  registration under the
Securities Act of such shares. If the managing  underwriter of a proposed public
offering shall advise Company in writing that, in its opinion,  the distribution
of the Warrant Stock requested to be included in the  registration  concurrently
with the  securities  being  registered  by Company or such  demanding  security
holder would materially and adversely affect the distribution of such securities
by Company or any selling  stockholders,  then the Company and each  prospective
seller may sell that  proportion of the shares of Common Stock to be sold in the
proposed  distribution which the number of shares of Common Stock proposed to be
sold by such  prospective  seller bears to the aggregate  number of Common Stock
proposed to be sold by all prospective sellers including the Company.  Except as
otherwise  provided in Section 9.6, all expenses of such  registration  shall be
borne by Company.

                  9.5  Registration  Procedures.  If Company is  required by the
provisions of this Section 9 to use its best efforts to effect the  registration
of  any  of  its  securities   under  the  Securities  Act,   Company  will,  as
expeditiously as possible:


                                      -24-

<PAGE>



                   (a)       prepare and file with the Commission a Registration
         Statement  with respect to such  securities and use its best efforts to
         cause such Registration  Statement to become and remain effective for a
         period of time required for the  disposition of such  securities by the
         holders thereof, but not to exceed 90 days;

                   (b)       prepare   and  file   with  the   Commission   such
         amendments  and  supplements  to such  Registration  Statement  and the
         prospectus  used in  connection  therewith  as may be necessary to keep
         such Registration Statement effective and to comply with the provisions
         of the Securities Act with respect to the sale or other  disposition of
         all securities covered by such Registration Statement until the earlier
         of such  time as all of such  securities  have  been  disposed  of in a
         public offering or the expiration of 90 days;

                   (c)       furnish  to  such  selling  security  holders  such
         number of copies of a summary prospectus or other prospectus, including
         a preliminary  prospectus,  in conformity with the  requirements of the
         Securities  Act, and such other  documents,  as such  selling  security
         holders may reasonably request;

                   (d)       use its best  efforts to  register  or qualify  the
         securities  covered  by such  Registration  Statement  under such other
         securities  or blue sky laws of such  jurisdictions  within  the United
         States  and  Puerto  Rico  as each  holder  of  such  securities  shall
         reasonably request or as shall be required by the managing  underwriter
         (provided, however, that Company shall not be obligated to qualify as a
         foreign  corporation to do business under the laws of any  jurisdiction
         in which it is not then  qualified  or to file any  general  consent to
         service or process),  and do such other  reasonable  acts and things as
         may  be  required  of  it to  enable  such  holder  to  consummate  the
         disposition  in such  jurisdiction  of the  securities  covered by such
         Registration Statement;

                   (e)       furnish,  at the  request of any holder  requesting
         registration of Warrant Stock pursuant to Section 9.3, on the date that
         such shares of Warrant Stock are delivered to the underwriters for sale
         pursuant to such  registration  or, if such Warrant  Stock is not being
         sold through underwriters,  on the date that the Registration Statement
         with respect to such shares of Warrant Stock becomes effective,  (1) an
         opinion,  dated  such date,  of the  independent  counsel  representing
         Company  for  the  purposes  of  such  registration,  addressed  to the
         underwriters,  if any,  and if such  Warrant  Stock is not  being  sold
         through  underwriters,  then to the  holders  making such  request,  in
         customary form and covering matters of the type customarily  covered in
         such legal opinions; and (2) a comfort letter dated such date, from the
         independent  certified public accountants of Company,  addressed to the
         underwriters,  if any,  and if such  Warrant  Stock is not  being  sold
         through  underwriters,  then to the holder  making such request and, if
         such accountants refuse to deliver such letter to such holder,  then to
         Company  in  a  customary  form  and  covering   matters  of  the  type
         customarily covered by such comfort letters as the underwriters or such
         holders  shall  reasonably  request.  Such  opinion  of  counsel  shall
         additionally  cover  such  other  legal  matters  with  respect  to the
         registration  in respect of which such  opinion is being  given as such
         holders holding a majority of the Warrant Stock being so registered may
         reasonably request.  Such letter from the independent  certified public
         accountants shall additionally cover such other financial



                                      -25-

<PAGE>



         matters  (including  information  as to the period ending not more than
         five (5)  Business  Days prior to the date of such letter) with respect
         to the  registration  in respect of which such letter is being given as
         the holders holding a majority of the Warrant Stock being so registered
         may reasonably request;

                   (f)       enter  into  customary  agreements   (including  an
         underwriting  agreement in customary  form) and take such other actions
         as are  reasonably  required  in order to expedite  or  facilitate  the
         disposition of such Registrable Securities; and

                   (g)       otherwise  use its best  efforts to comply with all
         applicable rules and regulations of the Commission,  and make available
         to its security  holders,  as soon as reasonably  practicable,  but not
         later  than 18 months  after  the  effective  date of the  Registration
         Statement, an earnings statement covering the period of at least twelve
         (12) months  beginning  with the first full month  after the  effective
         date of such Registration  Statement,  which earnings  statements shall
         satisfy the provisions of Section 11(a) of the Securities Act.

                  It shall be a condition precedent to the obligation of Company
to take any action pursuant to this Section 9 in respect of the securities which
are to be  registered  at the request of any holder of Warrants or Warrant Stock
that such  holder  shall  furnish  to Company  such  information  regarding  the
securities held by such holder and the intended method of disposition thereof as
Company shall  reasonably  request,  and as shall be required in connection with
the action  taken by  Company,  and,  if such  registration  is  pursuant  to an
underwriting,  such holder shall enter into an underwriting  agreement customary
for such transactions.

                  9.6 Expenses.  All expenses incurred in complying with Section
9, including,  without  limitation,  all registration and filing fees (including
all  expenses  incident to filing with the NASD),  printing  expenses,  fees and
disbursements  of counsel for Company,  the reasonable  fees and expenses of one
firm acting as counsel  for the  selling  security  holders  (selected  by those
holding a majority  of the shares  being  registered),  expenses  of any special
audits  incident  to or  required  by any  such  registration  and  expenses  of
complying with the securities or blue sky laws of any jurisdictions  pursuant to
Section 9.5(d), shall be paid by Company, except that

                   (a)       all such expenses in connection  with any amendment
         or supplement to the  Registration  Statement or prospectus  filed more
         than 90 days after the effective  date of such  Registration  Statement
         because any holder of Warrant Stock has not effected the disposition of
         the securities requested to be registered shall be paid by such holder;
         and

                   (b)       Company shall not be liable for any fees, discounts
         or  commissions  to any  underwriter  or any fees or  disbursements  of
         counsel for any  underwriter in respect of the securities  sold by such
         holder of Warrant  Stock except to the same extent that the Company has
         agreed to pay fees,  discounts or commissions to any underwriter and/or
         fees and disbursements of counsel for any underwriter in respect of the
         securities being sold by any other selling stockholder of the Company.



                                      -26-

<PAGE>



                  9.7  Indemnification  and  Contribution.  In the  event of any
registration  of any of the Warrant Stock under the  Securities  Act pursuant to
this Section 9, Company  shall  indemnify  and hold  harmless the holder of such
Warrant  Stock,  such holder's  directors  and  officers,  and each other Person
(including each  underwriter)  who  participated in the offering of such Warrant
Stock  and  each  other  Person,  if  any,  who  controls  such  holder  or such
participating  Person  within the  meaning of the  Securities  Act,  against any
losses, claims,  damages or liabilities,  joint or several, to which such holder
or any such director or officer or  participating  Person or controlling  Person
may become  subject under the  Securities  Act or any other statute or at common
law,  insofar as such  losses,  claims,  damages or  liabilities  (or actions in
respect thereof) arise out of or are based upon:

                  (i)  any  alleged  untrue   statement  of  any  material  fact
         contained, on the effective date thereof, in any Registration Statement
         under which such securities  were registered  under the Securities Act,
         any preliminary  prospectus or final prospectus  contained therein,  or
         any amendment or supplement thereto; or

                  (ii) any  alleged  omission to state  therein a material  fact
         required  to be stated  therein  or  necessary  to make the  statements
         therein  not  misleading,  and  shall  reimburse  such  holder  or such
         director, officer or participating Person or controlling Person for any
         legal or any other expenses  reasonably incurred by such holder or such
         director,  officer or  participating  Person or  controlling  Person in
         connection  with  investigating  or  defending  any such  loss,  claim,
         damage, liability or action;

provided,  however,  that  Company  shall  not be liable in any such case to the
extent that any such loss, claim,  damage or liability arises out of or is based
upon any alleged untrue statement or alleged omission made in such  Registration
Statement,  preliminary  prospectus,  prospectus  or amendment or  supplement in
reliance upon and in conformity with written information furnished to Company by
such holder  specifically  for use  therein or (in the case of any  registration
pursuant to Section 9.3) so furnished for such purposes by any underwriter. Such
indemnity shall remain in full force and effect  regardless of any investigation
made by or on behalf of such holder or such director,  officer or  participating
Person or controlling  Person, and shall survive the transfer of such securities
by such holder.

                  (b) Each holder of any Warrant Stock,  by acceptance  thereof,
agrees to indemnify  and hold harmless  Company,  its directors and officers and
each other  Person,  if any,  who  controls  Company  within the  meaning of the
Securities  Act against any losses,  claims,  damages or  liabilities,  joint or
several, to which Company or any such director or officer or any such Person may
become  subject under the  Securities Act or any other statute or at common law,
insofar as such losses,  claims,  damages or liabilities  (or actions in respect
thereof)  arise out of or are based  upon  information  in writing  provided  to
Company  by  such  holder  of such  Warrant  Stock  specifically  for use in the
following  documents  and  contained,   on  the  effective  date  thereof:   any
Registration   Statement  under  which  securities  were  registered  under  the
Securities  Act at the request of such holder,  any  preliminary  prospectus  or
final prospectus contained therein, or any amendment or supplement thereto.



                                      -27-

<PAGE>



                  (c) If the indemnification provided for in this Section 9 from
the  indemnifying  party is  unavailable to an  indemnified  party  hereunder in
respect of any losses,  claims,  damages,  liabilities  or expenses  referred to
therein,  then the indemnifying  party, in lieu of indemnifying such indemnified
party,  shall contribute to the amount paid or payable by such indemnified party
as a result of such losses,  claims,  damages,  liabilities  or expenses in such
proportion as is appropriate  to reflect the relative fault of the  indemnifying
party and  indemnified  parties in connection with the actions which resulted in
such losses,  claims,  damages,  liabilities  or expenses,  as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information  supplied by, such indemnifying party or
indemnified  parties,  and the parties'  relative intent,  knowledge,  access to
information and  opportunity to correct or prevent such action.  The amount paid
or payable by a party as a result of the losses,  claims,  damages,  liabilities
and  expenses  referred  to above  shall be deemed to include any legal or other
fees or  expenses  reasonably  incurred  by such  party in  connection  with any
investigation or proceeding.

                  The  parties  hereto  agree  that it  would  not be  just  and
equitable if contribution pursuant to this Section 9.7(c) were determined by pro
rata allocation or by any other method of allocation which does not take account
of  the  equitable  considerations  referred  to in  the  immediately  preceding
paragraph. No Person guilty of fraudulent  misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to  contribution  from
any Person who was not guilty of such fraudulent misrepresentation.

                  9.8 Termination of Restrictions. Notwithstanding the foregoing
provisions  of Section 9, the  restrictions  imposed  by this  Section  upon the
transferability  of the Warrants,  the Warrant Stock and the  Restricted  Common
Stock and the legend  requirements  of  Section  9.1 shall  terminate  as to any
particular Warrant or share of Warrant Stock or Restricted Common Stock:

                  (a)  when  and so  long  as  such  security  shall  have  been
         effectively  registered  under  the  Securities  Act  and  disposed  of
         pursuant thereto; or

                  (b) when  Company  shall have  received  an opinion of counsel
         reasonably  satisfactory  to it that  such  shares  may be  transferred
         without registration thereof under the Securities Act.

Whenever  the  restrictions  imposed  by  Section 9 shall  terminate  as to this
Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive
from  Company,  at the expense of Company,  a new Warrant  bearing the following
legend in place of the restrictive legend set forth hereon:

                  "THE RESTRICTIONS ON  TRANSFERABILITY  OF THE
                  WITHIN WARRANT CONTAINED IN SECTION 9  HEREOF
                  TERMINATED ON __________, ____, AND ARE OF NO
                  FURTHER FORCE AND EFFECT."



                                      -28-

<PAGE>



All Warrants issued upon  registration of transfer,  division or combination of,
or in  substitution  for,  any Warrant or Warrants  entitled to bear such legend
shall have a similar legend endorsed thereon.  Whenever the restrictions imposed
by this Section shall  terminate as to any share of Restricted  Common Stock, as
hereinabove  provided,  the holder  thereof  shall be entitled  to receive  from
Company, at Company's expense, a new certificate  representing such Common Stock
not bearing the restrictive legend set forth in Section 9.1(a).

                  9.9 Listing on Securities Exchange.  If Company shall list any
shares of Common Stock on any securities exchange, it will, at its expense, list
thereon,  maintain and, when necessary,  increase such listing of, all shares of
Common  Stock  issued  or,  to  the  extent  permissible  under  the  applicable
securities exchange rules, issuable upon the exercise of this Warrant so long as
any shares of Common Stock shall be so listed during any such Exercise Period.

                  9.10   Certain    Limitations    on    Registration    Rights.
Notwithstanding the other provisions of Section 9:

                  (a) Company  shall not be  obligated  to register  the Warrant
         Stock of any holder if, in the opinion of counsel to Company reasonably
         satisfactory  to the  holder  and its  counsel  (or,  if the holder has
         engaged an investment banking firm, to such investment banking firm and
         its counsel),  the sale or other  disposition of such holder's  Warrant
         Stock,  in the manner  proposed by such  holder (or by such  investment
         banking firm), may be effected  without  registering such Warrant Stock
         under the Securities Act; and

                  (b) if Company has had a registration  statement under which a
         holder  had a right to have its  Warrant  Stock  included  pursuant  to
         Sections  9.3 or 9.4  declared  effective  within one year prior to the
         date of any request  pursuant to Section 9.3, then, until such one year
         period has  expired,  Company  shall not be  obligated  to register the
         Warrant Stock of any holder pursuant to Section 9.3; provided, however,
         that if any holder elected to have shares of its Warrant Stock included
         under such  registration  statement but some or all of such shares were
         excluded pursuant to the penultimate sentence of Section 9.4, then such
         one-year period shall be reduced to six months.

                  9.11   Selection  of  Managing   Underwriters.   The  managing
underwriter or  underwriters  for any offering of Warrant Stock to be registered
pursuant  to Section  9.3 shall be  selected by the holders of a majority of the
shares being so registered  (other than any shares being registered  pursuant to
Section  9.4) and  shall be  reasonably  acceptable  to  Company.  The  managing
underwriter or  underwriters  for any offering of Warrant Stock to be registered
pursuant to Section 9.4 shall be selected by the Company but shall be reasonably
acceptable  to  holders  of a majority  of the  shares of  Warrant  Stock  being
registered in such registration.

10.  SUPPLYING INFORMATION

                  Company shall cooperate with each Holder of a Warrant and each
holder of  Restricted  Common  Stock 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


                                      -29-

<PAGE>



Commission  as a  condition  to  the  availability  of  an  exemption  from  the
Securities Act for the sale of any Warrant or Restricted Common Stock.

11.  LOSS OR MUTILATION

                  Upon receipt by Company from any Holder of evidence reasonably
satisfactory  to it of the  ownership  of and the loss,  theft,  destruction  or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood  that  the  written  agreement  of GE  Capital  shall  be  sufficient
indemnity,  so long as GE Capital is not then the  subject  of a  bankruptcy  or
insolvency  proceeding  and has not made an  assignment  for the  benefit of its
creditors),  and in case of mutilation upon surrender and  cancellation  hereof,
Company  will  execute and deliver in lieu hereof a new Warrant of like tenor to
such Holder; provided, in the case of mutilation, no indemnity shall be required
if this Warrant in identifiable form is surrendered to Company for cancellation.

12.  OFFICE OF COMPANY

                  As long as any of the  Warrants  remain  outstanding,  Company
shall maintain an office or agency (which may be the principal executive offices
of Company)  where the Warrants may be presented for exercise,  registration  of
transfer, division or combination as provided in this Warrant.

13.  FINANCIAL AND BUSINESS INFORMATION

                  13.1  Monthly and  Quarterly  Information.  (a) While the Loan
Agreement is in effect,  the Company  will deliver to each Holder  copies of the
monthly  financial  statements  required to be  delivered to the agent under the
Loan Agreement  (the "Agent"),  as and when the same are delivered to the Agent.
Thereafter,  until such time (if ever) as the Company  shall  become a reporting
company under the Exchange Act, the Company will deliver to each Holder,  within
thirty  (30) days after the end of each  fiscal  month of the Company (a "Fiscal
Month"),   consolidated  and  consolidating   financial  and  other  information
regarding  the Company and its  Subsidiaries,  certified by the chief  financial
officer of the Company,  including (i) unaudited  balance sheets as of the close
of such Fiscal Month and the related statements of income and cash flow for that
portion of the Fiscal Year ending as of the close of such Fiscal  Month and (ii)
unaudited  statements  of income and cash flows for such Fiscal  Month,  in each
case setting forth in comparative form the figures for the corresponding  period
in the prior year and the  figures  contained  in the  budget,  all  prepared in
accordance with GAAP (subject to normal year-end  adjustments and except for the
absence of footnotes  and except as otherwise  disclosed  therein in  reasonable
detail),  and accompanied by the certification of the chief executive officer or
chief  financial  officer of the Company  that all of such  financial  and other
information is true, complete and correct and presents fairly in accordance with
GAAP  (subject  to normal  year-end  adjustments  and except for the  absence of
footnotes and except as otherwise disclosed therein in reasonable  detail),  the
financial  position,  results of operations  and statements of cash flows of the
Company and its Subsidiaries, on both a consolidated and consolidating basis, as
at the end of such Fiscal Month and for the period then ended.

                  (b) From and after the date,  if ever,  upon which the Company
shall  become a reporting  company  under the Exchange  Act,  the Company  shall
provide to each Holder, as and when


                                      -30-

<PAGE>



required  to be filed with the  Commission,  copies of all  quarterly  financial
statements and other financial  reports required to be filed with the Commission
or which the Company elects to file with the Commission or otherwise to publicly
disclose.

                  13.2 Annual  Information.  (a) While the Loan  Agreement is in
effect,  the Company will deliver to each Holder copies of the annual  financial
statements  required  to be  delivered  to the  Agent  as and  when the same are
delivered  to the Agent.  Thereafter,  until such time (if ever) as the  Company
shall become a reporting company under the Exchange Act, for each fiscal year of
the Company (a "Fiscal  Year"),  the Company will deliver to each Holder audited
financial statements for the Company and its Subsidiaries, on a consolidated and
consolidating  basis,  consisting of balance sheets as of the end of such Fiscal
Year and  statements  of income and  retained  earnings  and cash flows for such
Fiscal Year,  setting forth in comparative form in each case the figures for the
previous Fiscal Year, which financial statements shall be prepared in accordance
with  GAAP,   certified  (only  with  respect  to  the  consolidated   financial
statements) without qualification, by an independent certified public accounting
firm of national  standing and  accompanied  by: (i) the annual  letters to such
accountants  in connection  with their audit  examination  detailing  contingent
liabilities and material litigation  matters,  and (ii) the certification of the
chief executive  officer or chief financial officer of the Company that all such
financial  statements  are true,  complete  and correct  and  present  fairly in
accordance  with  GAAP  the  financial  position,   results  of  operations  and
statements of cash flows of the Company and its Subsidiaries,  on a consolidated
basis,  as at the end of such year and for the period  then  ended.  Such annual
financial  statements shall be delivered to each Holder  contemporaneously  with
filing thereof with the Commission by the Company's  parent  corporation,  ARTRA
Group,  Incorporated  ("ARTRA")  so long as ARTRA shall be a  reporting  company
under the Exchange  Act, but within one hundred  twenty (120) days after the end
of each Fiscal Year for any period occurring after the date (if ever) upon which
ARTRA shall cease to be a reporting company under the Exchange Act.

                  (b) From and after the date,  if ever,  upon which the Company
shall  become a reporting  company  under the Exchange  Act,  the Company  shall
provide to each Holder,  as and when  required to be filed with the  Commission,
copies of all annual  financial  statements,  annual reports to stockholders and
proxy statements required to be filed with the Commission.

                  13.3 Filings. Company will file on or before the required date
all regular or periodic  reports  (pursuant to the Exchange  Act) required to be
filed  with the  Commission  and will  deliver  to Holder  promptly  upon  their
becoming  available one copy of each report,  notice or proxy  statement sent by
Company or ARTRA to the Company's or ARTRA's stockholders generally, and of each
regular or periodic report  (pursuant to the Exchange Act) and any  Registration
Statement,  prospectus or written communication (other than transmittal letters)
(pursuant  to the  Securities  Act),  filed by  Company  or  ARTRA  with (i) the
Commission  or (ii) any  securities  exchange on which shares of Common Stock or
any class of securities of ARTRA are listed.






                                      -31-

<PAGE>




14   REPURCHASE BY COMPANY OF WARRANT

                  14.1 Obligation to Repurchase Warrant.

                  (a)  From  time  to  time  during  the  period  ending  on the
Expiration Date and commencing on the earliest to occur of:

                  (i) February 27, 2000

                  (ii) the  occurrence  of a merger (other than where Company is
         the  surviving  corporation  and there is no change in or  distribution
         with respect to its Common  Stock),  sale of  substantially  all of the
         assets  or sale of the  majority  of the  outstanding  shares of Common
         Stock of Company;

                  (iii)  repayment  of a material  portion  of the  indebtedness
         evidenced  by the Notes  issued  under the Loan  Agreement  with  funds
         derived from any source other than (A) operating income of the Company,
         or (B) additional capital contributed by the Company's stockholders and
         obtained  by them  without any direct or  indirect  credit  support (by
         guaranty or otherwise) from the Company;

                  (iv) the date upon which a public offering of any class of the
         Company's securities becomes effective; and

                  (v) the  acceleration  of the  maturities  of the Notes issued
         under the Loan  Agreement  pursuant  to the  occurrence  of an Event of
         Default under the Loan Agreement;

(the "Repurchase  Period"),  upon written notice from any Holder,  Company shall
repurchase,  on the date and in the manner set forth in Section 14.4 below, from
such Holder all or the portion of this Warrant  designated in such notice for an
amount  determined  by  multiplying  (x) the  number of  shares of Common  Stock
subject  to  this  Warrant  or  portion  thereof  being  repurchased  by (y) the
difference  between the Current Market Price per share of Common Stock as of the
date of such notice and the Current  Warrant  Price per share of Common Stock as
of the date of such notice; provided, however, that if no Event of Default under
the Loan  Agreement  shall have occurred and then be  continuing,  Company shall
have the right, upon delivery of a written notice (the "Deferral Notice") to the
Holder within thirty (30) days following its receipt of the  repurchase  notice,
to satisfy its obligations under this Section 14.1 to repurchase this Warrant or
a portion thereof by effecting,  at Company's expense, within one hundred twenty
(120)  days  after  the date of the  Deferral  Notice,  an  underwritten  public
offering on a firm commitment basis of the shares of Common Stock subject to the
Warrant  requested  to be  repurchased,  the net  proceeds  (after  underwriting
discounts and  commissions)  of which shall not be less than the amount required
for such  repurchase,  in which event such  repurchase  of the Warrant  shall be
deferred and such underlying  Common Stock shall be sold pursuant to such public
offering. Nothing herein shall preclude the exercise by Holder of any portion of
this Warrant exercisable at any time prior to such repurchase.


                                      -32-

<PAGE>



                  (b) Notwithstanding the provisions of Section 14.1(a),  if, at
any time  during the  period  between  the date on which any  Holder  shall have
exercised its rights under this Section 14.1 to cause Company to repurchase  all
or a portion of such  Holder's  Warrant  through and including the date on which
such Holder has received in cash the amount payable by the Company in respect of
such repurchase (the "Sale Period"),  (i) any shares of Common Stock are sold by
the  Company  or  any  stockholder  of  the  Company  pursuant  to an  effective
Registration  Statement  filed  with the  Commission  with  respect  to a public
offering of Common Stock (an  "Offering")  or (ii) Company shall  consolidate or
merge  with,  sell not less  than 90% of its  Common  Stock  to,  or sell all or
substantially  all  of  its  property  and  assets  to,  any  Person,   and  the
consideration   received  by   stockholders  in  connection  with  such  merger,
consolidation  or sale shall consist solely of cash (a "Sale"),  then (1) in the
case of an  Offering,  if the net  offering  price per share to  Company  (after
deduction of all underwriters' discounts, fees, commissions and expenses related
to any such offering which would be payable by Holder if such Warrant Shares had
been  registered and sold in such offering  under Section 9 hereof,  but without
deducting the value of any warrants,  options or other rights granted or sold by
Company to any such  underwriter)  upon  consummation  of such  offering,  after
deducting  the Current  Warrant  Price per share of the Common  Stock as of such
date  (even  though  beyond  the  expiration  of the Sale  Period)  exceeds  the
Repurchase  Price per share of Common  Stock paid to any Holder for the  Warrant
upon any such repurchase,  Company shall forthwith upon the consummation of such
offering pay to such Holder the amount of such excess  multiplied  by the number
of shares of Common Stock  subject to the Warrant  repurchased  as an additional
amount of Repurchase  Price hereunder and (2) in the case of a Sale, such Holder
shall  (whether  or not such  Holder  shall  have  previously  surrendered  such
Holder's  Warrant for  repurchase  by Company  pursuant  to this  Section 14) be
entitled  to  receive,  on the date of such  Sale,  the higher of (A) the amount
payable to such  Holder as  determined  pursuant  to Section  14.1(a) and (B) an
amount  equal to the amount of cash such Holder  would have  received  upon such
Sale had such Holder's Warrant (or the portion thereof being  repurchased)  been
fully  exercised  immediately  prior thereto less the aggregate  Current Warrant
Price  payable at the time of such Sale for the purchase of the shares of Common
Stock then  subject to such  Holder's  Warrant  (or the  portion  thereof  being
repurchased).

                  (c) Notwithstanding any provision contained in this Warrant to
the  contrary,  should  Company for any reason  fail to perform its  obligations
arising  under  Section  14.1  hereof,  such  obligations  shall in all respects
continue until Company has fulfilled such obligations.

                  14.2  Option to  Repurchase  Warrant.  From time to time on or
after (a) the Closing Date, in the case of the successful consummation of a sale
of not less  than 90% of the  Common  Stock or all or  substantially  all of the
Company's  property and assets, in each case for cash  consideration in the form
of immediately available funds and (b) in all other cases, February 27, 2000, in
each case until the Expiration  Date, and, with respect to any shares of Warrant
Stock requested to be registered  pursuant to Section 9.3 hereof,  Company shall
have the right,  upon  written  notice to any Holder,  to  repurchase  from such
Holder, from any source of funds legally available therefor,  on the date and in
the manner set forth in Section 14.4 below,  all or any part of the Warrant then
held by such Holder for an amount (subject to the adjustment provided in Section
14.3  below)  determined  by  multiplying  the number of shares of Common  Stock
subject to such Warrant or portion  thereof being  repurchased by the difference
between the Current Market Price per share of


                                      -33-

<PAGE>



Common  Stock as of the date of such  notice and the Current  Warrant  Price per
share of Common Stock as of the date of such  notice;  provided,  however,  that
nothing  herein  shall  preclude  the  exercise by Holder of any portion of this
Warrant exercisable at any time prior to such repurchase.

                  14.3  Subsequent  Public  Offering or Sale.  In the event that
Company  exercises its  repurchase  right pursuant to Section 14.2 hereof and at
any time within six (6) months following the date of such repurchase an Offering
or a Sale shall be consummated  then (a) in the case of an Offering,  if the net
offering  price per  share to  Company  (after  deduction  of all  underwriters'
discounts,  fees,  commissions  and expenses  related to any such offering which
would be payable by Holder if such Warrant  Shares had been  registered and sold
in such offering under Section 9 hereof,  but without deducting the value of any
warrants,  options  or  other  rights  granted  or sold by  Company  to any such
underwriter)  upon  consummation  of such offering,  after deducting the Current
Warrant  Price per share of the Common Stock as of such date (even though beyond
the expiration of such 6-month period) exceeds the Repurchase Price per share of
Common  Stock  paid to any  Holder  for the  Warrant  upon any such  repurchase,
Company  shall  forthwith  upon the  consummation  of such  offering pay to such
Holder the amount of such  excess  multiplied  by the number of shares of Common
Stock subject to the Warrant  repurchased as an additional  amount of Repurchase
Price hereunder and (b) in the case of a Sale, such Holder shall (whether or not
such  Holder  shall  have  previously  surrendered  such  Holder's  Warrant  for
repurchase  by Company  pursuant to this Section 14) be entitled to receive,  on
the date of such Sale,  the higher of (i) the amount  payable to such  Holder as
determined pursuant to Section 14.1(a) and (ii) an amount equal to the amount of
cash such Holder would have received  upon such Sale had such  Holder's  Warrant
(or the portion  thereof being  repurchased)  been fully  exercised  immediately
prior  thereto less the aggregate  Current  Warrant Price payable at the time of
such Sale for the  purchase of the shares of Common  Stock then  subject to such
Holder's Warrant (or the portion thereof being repurchased).

                  14.4  Determination  and  Payment  of  Repurchase  Price.  The
purchase price for any repurchase  pursuant to this Section 14 (the  "Repurchase
Price")  shall  be  determined  within  ninety  (90)  days  of the  date  of the
repurchase notice received or given by Company pursuant to Section 14.1 or 14.2,
and shall be payable in cash within twenty (20) days  following the date of such
determination of the Repurchase Price. On the date of any repurchase of Warrants
pursuant to this Section 14, each Holder  shall assign to Company such  Holder's
Warrant or portion  thereof being  repurchased,  as the case may be, without any
representation or warranty (other than customary  representations and warranties
as to  ownership,  absence  of  liens  and  due  authority  to  consummate  such
transaction),  by the surrender of such Holder's Warrant at the principal office
of Company referred to in Section 2.1 against payment therefor of the Repurchase
Price by, at the option of such  Holder,  (i) wire  transfer  to an account in a
bank located in the United  States  designated  by such Holder for such purpose,
(ii) a  certified  or  official  bank  check  drawn on a member  of the New York
Clearing  House  payable  to the order of such  Holder or (iii) in the case of a
sale of not  less  than  90%  (but  not  all) of the  Common  Stock,  securities
identical  to those  received by the selling  stockholders  of the Common  Stock
pursuant to such sale,  ratably  according to the percentage of aggregate shares
of Common Stock not so sold by such selling  stockholders (with the remainder of
the  Repurchase  Price being paid as the Holder may request  pursuant to clauses
(i) or  (ii)  above).  If  less  than  all  of any  Holder's  Warrant  is  being
repurchased, Company shall, pursuant to Section 3, cancel such


                                      -34-

<PAGE>



Warrant  and issue in the name of, and deliver to, such Holder a new Warrant for
the portion not being repurchased.

                  (b) Each Holder  shall have the right at any time to object to
the  determination  of  Current  Market  Value  pursuant  to this  Section 14 by
specifying  in writing to Company the nature of its objection  and,  unless such
objection is resolved by agreement of Company and such Holder,  Company and such
Holder  shall  each have the right to  subject  the  disputed  determination  to
separate firms of independent  accountants of recognized national standing for a
joint  resolution of the  objection of such Holder  (which firms of  independent
accountants may, in either case, be the firms of accountants  regularly retained
by Company or such Holder).  If such firms cannot jointly  resolve the objection
of such Holder, then, unless otherwise directed by agreement of Company and such
Holder,  such  firms  shall in their  sole  discretion  choose  another  firm of
independent certified public accountants of recognized national standing,  which
is not the regular  auditor of such Holder or Company,  which firm shall resolve
such objection.  In either case, for purposes hereof the  determination  so made
shall be conclusive and binding on Company, such Holder and all Persons claiming
under or through any of them,  and any adjustment in the  determination  of Book
Value and the  Repurchase  Price per share of Common Stock  resulting  from such
determination  shall be made. The cost of any such determination shall be borne:
(i) by Company if it results in an increase of the  aggregate  Repurchase  Price
for all shares of Common Stock issuable upon the exercise  hereof of ten percent
(10%) or more;  (ii) by such Holder if it results in a decrease of the aggregate
Repurchase  Price for all  shares of Common  Stock  issuable  upon the  exercise
hereof of ten percent  (10%) or more;  and (iii)  equally by the Company and the
Holder in any other case.

                  (c) Any  repurchase  by Company  of all or any  portion of the
Warrant  pursuant to Section 14.1 which is delayed by (1) the failure of Company
to determine the  Repurchase  Price within the time periods  required in Section
14.4(a) or (2) an objection by any Holder of the Warrant to any determination of
Book Value  pursuant  to Section  14.4(b)  shall be  consummated  within 10 days
after,  as the case may be, the  determination  of the  Repurchase  Price or the
resolution of such objection.

                  (d) In the  event  that the  determination  of the  Repurchase
Price  requires an opinion from an investment  banking firm or accounting  firm,
all costs and fees associated therewith shall be paid by Company.

15.  APPRAISAL

                  The  determination  of the Appraised Value per share of Common
Stock  shall be made by an  investment  banking  firm of  nationally  recognized
standing  selected by Company and  acceptable  to the Majority  Holders.  If the
investment  banking firm  selected by Company is not  acceptable to the Majority
Holders  and  Company  and the  Majority  Holders  cannot  agree  on a  mutually
acceptable  investment banking firm, then the Majority Holders and Company shall
each choose one such  investment  banking firm and the  respective  chosen firms
shall  agree  on  another   investment   banking   firm  which  shall  make  the
determination.  Company shall retain, at its sole cost, such investment  banking
firm as may be necessary for the  determination  of Appraised  Value required by
the terms of this Warrant, except as otherwise provided in Section 14.4(b).


                                      -35-

<PAGE>




16.  LIMITATION OF LIABILITY

                  No provision hereof,  in the absence of affirmative  action by
Holder to purchase  shares of Common  Stock,  and no  enumeration  herein of the
rights or privileges of Holder hereof,  shall give rise to any liability of such
Holder  for the  purchase  price  of any  Common  Stock or as a  stockholder  of
Company,  whether  such  liability  is  asserted by Company or by  creditors  of
Company.


17.  PARTICIPATION IN CORPORATE DISTRIBUTIONS AND TAKE-ALONG RIGHTS

                  17.1 Company's Obligation to Make Payments.

                  (a) Company  shall not  declare,  make or pay any  dividend or
other distribution,  whether in cash, securities or other property, with respect
to its  Common  Stock (a  "Distribution")  unless it  concurrently  makes a cash
payment to the holder of this  Warrant  equal to (1) the amount of cash plus the
fair  value of any  property  or  securities  distributed  with  respect to each
outstanding  share of Common Stock at the time,  as  determined in good faith by
the Board of  Directors  of Company,  multiplied  by (2) the number of shares of
Common Stock then issuable upon exercise of this Warrant.

                  (b) Except for repurchases of Warrant Shares upon the exercise
of the  repurchase  options  contained in Section 14 hereof,  Company  shall not
repurchase or redeem any of its equity securities or any securities  convertible
into or exchangeable for such equity  securities or any warrants or other rights
to purchase such equity securities  unless it concurrently  makes a cash payment
to the holder of this Warrant equal to the product of (i) the quotient  obtained
by dividing (x) the aggregate amount of cash and the aggregate fair value of any
property  paid  out by  Company  in  connection  with  any  such  repurchase  or
redemption at the time, as determined in good faith by the Board of Directors of
Company,  by (y) the  number of shares of Common  Stock  outstanding  on a fully
diluted  (excluding  shares of Common Stock then  issuable upon exercise of this
Warrant) immediately after such repurchase or redemption, and (ii) the number of
shares of Common Stock then issuable upon the exercise of this Warrant. Upon any
such payment by the Company,  the number of shares of Common Stock then issuable
upon the exercise of this Warrant shall be adjusted by multiplying the number of
shares of Common Stock for which this Warrant is exercisable  immediately  prior
to such payment by a fraction (A) the  numerator of which shall be the number of
shares  of  Common  Stock  Outstanding  immediately  after  such  repurchase  or
redemption,  and (B) the  denominator  of which shall be the number of shares of
Common Stock  Outstanding  immediately  prior to such  repurchase or redemption.
Concurrently,  the Holder of this Warrant  shall deliver the same to the Company
for  cancellation  and  the  Company  shall  deliver  to  Holder  a new  Warrant
evidencing the adjusted number of unpurchased  shares of Common Stock called for
by this  Section  17.1(b),  which new  Warrant  shall in all other  respects  be
identical with this Warrant, or, at the request of Holder,  appropriate notation
may be made on this Warrant and the same returned to Holder. [Example: 90 shares
are  outstanding  and Warrant is for 10 shares (10% on a fully  diluted  basis).
Company  redeems  10  shares  for $8  each  ($80  total).  80  shares  are  left
outstanding.  $80  divided  by 80  shares  = $1 per  share.  10 x $1 = $10 to be
delivered to Holder.  Warrant is then adjusted by  multiplying  10  (pre-payment
number of exercisable shares) by 80/90.  Resulting Warrant is for 8.89 shares or
10% of post-redemption stock on a fully-diluted basis.]


                                      -36-

<PAGE>




                  17.2  Take-Along  Rights.  Each  holder of Warrants or Warrant
Shares shall have the right to be taken along in the sale of any Common Stock by
BCA, the principal  stockholder of the Company,  or in any sale of capital stock
of BCA by ARTRA, in accordance with the letter addressed to each holder, and any
assignee, transferee or successor, a copy of which is attached as Annex A hereto
and made a part hereof.

18.  MISCELLANEOUS

                  18.1 Nonwaiver and Expenses. No course of dealing or any delay
or failure to exercise any right  hereunder on the part of Holder shall  operate
as a waiver of such right or  otherwise  prejudice  Holder's  rights,  powers or
remedies.  If  Company  fails to make,  when  due,  any  payments  provided  for
hereunder, or fails to comply with any other provision of this Warrant,  Company
shall pay to Holder such amounts as shall be  sufficient  to cover any costs and
expenses including,  but not limited to, reasonable  attorneys' fees,  including
those of appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights,  powers or remedies
hereunder.

                  18.2 Notice Generally.  Any notice, demand, request,  consent,
approval,  declaration,  delivery or other  communication  hereunder  to be made
pursuant to the provisions of this Warrant shall be  sufficiently  given or made
if in writing and either  delivered in person with receipt  acknowledged or sent
by registered or certified mail, return receipt requested,  postage prepaid,  or
by telecopy and confirmed by telecopy answerback, addressed as follows:

                  (a)        If to any Holder or holder of Warrant Stock, at its
         last known  address  appearing on the books of Company  maintained  for
         such purpose.

                  (b)        If to Company, at:

                             Bagcraft Corporation of America
                             3900 West 43rd Street
                             Chicago, Illinois  60632
                             Attention: Mark Santacrose, Esq.
                             Telecopy Number: (773) 254-8204

                             with a copy to:

                             Philip E. Ruben
                             Kwiatt, Silverman & Ruben, Ltd.
                             500 Central Avenue
                             Northfield, IL  60093
                             Telecopy: (847) 441-7696

or at such  other  address  as may be  substituted  by  notice  given as  herein
provided.  The giving of any notice required  hereunder may be waived in writing
by the party  entitled to receive such notice.  Every notice,  demand,  request,
consent, approval, declaration, delivery or other communication



                                      -37-

<PAGE>



hereunder shall be deemed to have been duly given or served on the date on which
personally  delivered,  with receipt  acknowledged,  telecopied and confirmed by
telecopy  answerback,  or three (3) Business Days after the same shall have been
deposited in the United  States mail,  certified,  or one (1) Business Day after
the same has been deposited with a reputable overnight courier with instructions
to deliver the same on the next  Business  Day.  Failure or delay in  delivering
copies of any notice, demand, request, approval, declaration,  delivery or other
communication  to the person  designated above to receive a copy shall in no way
adversely affect the effectiveness of such notice,  demand,  request,  approval,
declaration, delivery or other communication.

                  18.3  Indemnification.  Company  agrees to indemnify  and hold
harmless Holder from and against any liabilities,  obligations, losses, damages,
penalties,  actions,  judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of (i) Holder's exercise
of this  Warrant  and/or  ownership  of any  shares of Warrant  Stock  issued in
consequence  thereof,  or (ii) any litigation to which Holder is made a party in
its capacity as a stockholder of Company;  provided,  however, that Company will
not be liable hereunder to the extent that any liabilities, obligations, losses,
damages,  penalties,  actions, judgments, suits, claims, costs, attorneys' fees,
expenses  or  disbursements  are found in a final  non-appealable  judgment by a
court to have  resulted  from Holder's  gross  negligence,  bad faith or willful
misconduct in its capacity as a stockholder or warrant holder of Company.

                  18.4 Remedies.  Each holder of Warrant and Warrant  Stock,  in
addition  to being  entitled to exercise  all rights  granted by law,  including
recovery of damages,  will be  entitled  to specific  performance  of its rights
under Section 9 of this Warrant.  Company agrees that monetary damages would not
be adequate  compensation  for any loss  incurred by reason of a breach by it of
the  provisions  of Section 9 of this  Warrant  and  hereby  agrees to waive the
defense  in any action for  specific  performance  that a remedy at law would be
adequate.

                  18.5  Successors  and Assigns.  Subject to the  provisions  of
Sections 3.1 and 9, this Warrant and the rights  evidenced hereby shall inure to
the benefit of and be binding upon the  successors of Company and the successors
and assigns of Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this  Warrant  and,  with respect to
Section 9 hereof, holders of Warrant Stock, and shall be enforceable by any such
Holder or holder of Warrant Stock.

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

                  18.7 Severability.  Wherever possible,  each provision of this
Warrant shall be  interpreted  in such manner as to be effective and valid under
applicable  law, but if any  provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be


                                      -38-

<PAGE>



ineffective  to  the  extent  of  such   prohibition   or  invalidity,   without
invalidating the remainder of such provision or the remaining provisions of this
Warrant.

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

                  18.9  Governing  Law.  This  Warrant  shall be governed by the
internal  laws and  decisions  of the State of Illinois,  without  regard to the
provisions thereof relating to conflict of laws.


                  [Balance  of page left  intentionally  blank;  signature  page
follows.]






                                      -39-

<PAGE>



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


Dated:  February ___, 1998


                                             BAGCRAFT CORPORATION OF AMERICA


                                             By:____________________________

                                             Title:_________________________

Attest:


By:_______________________________

Title:_____________________________



<PAGE>



                                    EXHIBIT A

                                SUBSCRIPTION FORM

                 [To be executed only upon exercise of Warrant]


                  The undersigned  registered owner of this Warrant  irrevocably
exercises  this  Warrant  for the  purchase  of ____  Shares of Common  Stock of
Bagcraft  Corporation  of America and  herewith  makes  payment  therefor in the
amount of $___________ as follows:

         $______________ by wire transfer;

         $______________ by certified or official bank check enclosed herewith;

         $______________  by deducting  from the shares  delivered upon exercise
         hereof a number of shares having an aggregate  Current  Market Price on
         the date of  exercise  equal to the  aggregate  purchase  price for all
         shares as to which this Warrant is then being exercised;

         $_____________ by application of the Liabilities as provided in Section
         2.5 of this Warrant;

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

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

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

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

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

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


<PAGE>



                                    EXHIBIT B

                                 ASSIGNMENT FORM


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

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





and does hereby irrevocably constitute and appoint  attorney-in-fact to register
such transfer on the books of Bagcraft Corporation of America maintained for the
purpose, with full power of substitution in the premises.

Dated:_______________                        Print Name:________________________

                                             Signature:_________________________

                                             Witness:___________________________


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





<PAGE>



                                     ANNEX A


                                February 27, 1998

To Each Holder of a Warrant to Purchase
Common Stock of Bagcraft Corporation of America
and all Assignees, Transferees and
Successors of such Holder:

          Reference is made to the Warrant of even date herewith to purchase the
Common Stock of Bagcraft  Corporation of America,  a Delaware  corporation  (the
"Company"),   issued  to  General  Electric  Capital  Corporation,  a  New  York
corporation ("GE Capital"), (as from time to time amended, replaced, refinanced,
restated, superseded, supplemented or otherwise modified). All capitalized terms
used in this  agreement  which are defined in the Warrant are used as defined in
the Warrant unless the context otherwise requires.

          The undersigned,  BCA Holdings,  Inc., a Delaware  corporation ("BCA")
and ARTRA GROUP Incorporated, a Pennsylvania corporation ("ARTRA"; collectively,
BCA and  ARTRA  are  referred  to  herein  as the  "Controlling  Stockholders"),
warrant,  covenant  and agree with the  holders of the  Warrant  and the Warrant
Stock,  their assignees,  transferees and successors (the  "Warrantholders")  as
follows:

          If any Controlling  Stockholder proposes any sale (other than pursuant
to a public  offering)  (a "Sale) of all or a portion of its common stock of the
Company  ("Common  Stock")  or any class of capital  stock of BCA ("BCA  Stock')
(collectively, Common Stock and BCA Stock are referred to herein as "Controlling
Stock"),  the  Controlling  Stockholders  shall provide for such Sale on a basis
which  includes a ratable share of all shares which have been issued or then are
issuable under the Warrant (collectively "Warrant Stock") on a pro-rata basis.

          1. The Controlling  Stockholders shall give each Warrantholder written
notice of a proposed Sale of Controlling Stock not less than 45 days before such
Sale is to take place. The notice ("Sale Notice") shall set forth:

                           a.    the name and address of the Proposed Purchaser;

                           b.    the name and address  of each  Warrantholder as
         shown on the records of the Company, the number of shares of
         Warrant Stock held by or issuable to each Warrantholder;

                           c.    the number and nature of  shares of Controlling
         Stock proposed to be transferred by the Controlling Stockholders;

                           d.    the proposed amount  and form of  consideration
         and terms and conditions of payment offered by such Proposed Purchaser;
         and



<PAGE>


                   e.  the   signed   agreement   of  the   Proposed   Purchaser
         acknowledging  that he has been  informed of this letter  agreement and
         has  agreed to  purchase  Warrant  Stock in  accordance  with the terms
         hereof.

          2. The take-along  rights  provided in this agreement may be exercised
by any  Warrantholder  (an  "Electing  Warrantholder")  by delivery of a written
notice (a  "Take-Along-Notice")  to the  Company  or ARTRA  (with a copy to each
other Warrantholder) within thirty (30) days after receipt of the Sale Notice. A
Take-Along  Notice  shall state the number of shares of Warrant  Stock which the
Warrantholder wishes to include in such Sale to the Proposed Purchaser.

          3.  The  Warrantholders  shall  be  entitled  to sell to the  Proposed
Purchaser Warrant Stock at the same price per share as the price per share to be
paid  for  Controlling  Stock  and  otherwise  on the  same  terms  as are to be
applicable to the sale of the Controlling Stock, except as provided in paragraph
4 below. The Warrantholders shall be entitled to sell the same percentage of the
Warrant  Stock  held  by  them,  as that  percentage  of the  Controlling  Stock
ultimately sold by the Controlling  Stockholders (after reductions to permit the
sale of the Warrant Stock).

          4. Any  shares of  Warrant  Stock  purchased  from the  Warrantholders
pursuant to this agreement  shall be purchased on terms and conditions  which do
not include the making of any  representations  and  warranties,  indemnities or
other  similar  agreements  other  than  the  representations,   warranties  and
indemnities  as to the  ownership  of such  shares of Warrant  Stock and the due
authority to sell such shares.


BCA HOLDINGS, INC.                              ARTRA GROUP INCORPORATED


By:_______________________                      By:_______________________

Title:______________________                    Title:____________________