Document:

EX-10.7

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                                     WARRANT

                           to Purchase Common Stock of

                                  PEAPOD, INC.,
                             a Delaware corporation

                           ________________________

                                Warrant No. [__]

                      Original Issue Date: [______], 2000

                           ________________________

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                                TABLE OF CONTENTS
                                                                            Page

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

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

         2.1  Manner of Exercise...............................................8
         2.2  Payment of Taxes................................................10
         2.3  Fractional Shares...............................................10
         2.4  Reduced Exercise Price..........................................11

3.       TRANSFER, DIVISION AND COMBINATION...................................11

         3.1  Transfer........................................................11
         3.2  Division and Combination........................................11
         3.3  Expenses........................................................11
         3.4  Maintenance of Books............................................11

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

         4.1  Upon Issuance of Common Stock...................................12
         4.2  Upon Acquisition of Common Stock................................12
         4.3  Provisions Applicable to Adjustments............................13
         4.4  Upon Stock Dividends or Splits..................................14
         4.5  Upon Combinations...............................................15
         4.6  Upon Reclassifications, Reorganizations, Consolidations or
                Mergers.......................................................15
         4.7  Deferral in Certain Circumstances...............................16
         4.8  Other Anti-Dilution Provisions..................................16
         4.9  Appraisal Procedure.............................................16
         4.10  Adjustment of Number of Shares Purchasable.....................16
         4.11  Exceptions.....................................................17
         4.12  Notice of Adjustment of Exercise Price.........................17
         4.13  Other Dilutive Events..........................................17

5.       NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION;
          NOTICE OF EXPIRATION................................................18

6.       RESERVATION AND AUTHORIZATION OF COMMON STOCK;
          REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY.........18

7.       NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS........19

         7.1  Notices of Corporate Actions....................................19
         7.2  Taking of Record................................................20
         7.3  Closing of Transfer Books.......................................20

8.       TRANSFER RESTRICTIONS................................................20

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

9.       LOSS OR MUTILATION...................................................22

10.      OFFICE OF THE COMPANY................................................22

11.      FINANCIAL AND BUSINESS INFORMATION...................................22

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

13.      MISCELLANEOUS........................................................24

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

ANNEX A  SUBSCRIPTION FORM

ANNEX B  ASSIGNMENT FORM

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

                                Warrant No. [___]

                                     WARRANT

                  TO PURCHASE 32,894,270 SHARES OF COMMON STOCK
                           (SUBJECT TO ADJUSTMENT) OF

                                  PEAPOD, INC.

     THIS IS TO CERTIFY THAT  KONINKLIJKE  AHOLD N.V., (the  "Purchaser") or its
registered assigns, is entitled,  at any time prior to the Expiration Date (such
term,  and  certain  other  capitalized  terms  used  herein  being  hereinafter
defined), to purchase from Peapod, Inc., a Delaware corporation (the "Company"),
32,894,270  shares of the Common Stock of the Company  (subject to adjustment as
provided  herein),  at a purchase  price per share  equal to $3.75 (the  initial
"Exercise Price"), subject to adjustment as provided herein.

1.   DEFINITIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     "HSR Approval"  shall mean the expiration of all waiting  periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and applicable
rules and  regulations  and any similar state acts applicable to the issuance of
Series B Preferred Stock as contemplated by the Purchase Agreement.

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

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

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

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

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

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

     "Outside  Date" shall mean the date that is one  hundred  and twenty  (120)
days  after the date  hereof  or, if the Holder  exercises  this  Warrant or the
Warrants  (Credit  Agreement)  and as a  direct  result  of such  exercise,  the
Stockholders  Meeting (as defined in the  Purchase  Agreement)  is delayed,  one
hundred  and twenty  (120) days plus the number of days of such delay  after the
date hereof.

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

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

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

     "Previously  Issued  Warrants"  shall mean the Warrant dated April 10, 2000
issued by the Company to the Purchaser,  and all warrants  issued upon transfer,
division or combination  of, or in  substitution  for, such warrant or any other
such warrant.

     "Purchase  Agreement" shall mean the Purchase Agreement,  dated as of April
14, 2000, by and between the Company and the Purchaser.

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

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

     "Series B Preferred  Stock"  shall mean the Series B Preferred  Stock to be
authorized  pursuant to the  Certificate  of Designation in the form attached as
Exhibit I to the Purchase Agreement.

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

     "Stockholder   Approval"   shall  mean  the   approval  by  the   Company's
stockholders  of the issuance of the shares of Series B Preferred  Stock and the
Warrants,  and the other  transactions  contemplated  pursuant  to the  Purchase
Agreement.

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

     "Subsidiary" shall mean a subsidiary of the Company.

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

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

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

     "Warrants  (Credit  Agreement)"  shall mean the Warrant (Credit  Agreement)
issued by the Company to the Purchaser pursuant to the Purchase  Agreement,  and
all  warrants   issued  upon  transfer,   division  or  combination  of,  or  in
substitution for, such warrant or any other such warrant.

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

 2.  EXERCISE OF WARRANT

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

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

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

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

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

     (f) On the  date  of  exercise  of  the  Warrants  the  Company  shall  use
commercially  reasonable  efforts to  satisfy  all the  conditions  set forth in
Section 7.2 of the  Purchase  Agreement  other than the  condition  set forth in
Section  7.2(n),  provided that if the Company shall have used its  commercially
reasonable efforts to satisfy such conditions and such conditions shall not have
been satisfied,  the Holder shall have no rights or remedies arising as a result
of such failure.

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

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

     2.4 Reduced  Exercise Price. On the Outside Date, in the event that the HSR
Approval or the Stockholders Approval shall not have been obtained, the Exercise
Price shall be reduced to an amount equal to 50% of the Exercise Price in effect
immediately prior to the Outside Date.

3.   TRANSFER, DIVISION AND COMBINATION

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

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

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

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

4.   ANTIDILUTION PROVISIONS

     The number of shares of Common Stock for which this Warrant is  exercisable
and the Exercise  Price shall be subject to adjustment  from time to time as set
forth in this Section 4.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     4.6 Upon Reclassifications,  Reorganizations, Consolidations or Mergers. In
the event of any capital  reorganization of the Company, any reclassification of
the stock of the Company  (other than a change in par value or from par value to
no par  value  or from no par  value  to par  value  or as a  result  of a stock
dividend  or  subdivision,  split-up  or  combination  of  shares),  any sale or
transfer  to another  Person of the  property  of the  Company as an entirety or
substantially as an entirety, or any consolidation or merger of the Company with
or into another corporation (where the Company is not the surviving  corporation
or where there is a change in or distribution with respect to the Common Stock),
each Warrant shall after such reorganization,  reclassification,  consolidation,
transfer or merger be exercisable  for the kind and number of shares of stock or
other  securities  or property of the  Company or of the  successor  corporation
resulting from such consolidation, transfer or surviving such merger, if any, to
which  the  holder  of  the  number  of  shares  of  Common  Stock   deliverable
(immediately  prior  to  the  time  of  such  reorganization,  reclassification,
consolidation  or merger) upon exercise of such Warrant would have been entitled
upon such reorganization,  reclassification,  consolidation, transfer or merger.
The   provisions   of  this  clause   shall   similarly   apply  to   successive
reorganizations, reclassifications, consolidations, transfers, or mergers.

     Notwithstanding  anything  contained in this Agreement to the contrary,  in
the event that the Company  shall  effect any of the  transactions  described in
this Section 4.6, each person (other than the Company)  which may be required to
issue a new  Warrant  as  provided  above  shall  assume by  written  instrument
delivered  to, and  reasonably  satisfactory  to, the Majority  Warrant  Holders
(i) the  obligations  of the Company  under this  Agreement  (and if the Company
shall survive the consummation of such transaction,  such assumption shall be in
addition to, and shall not release the Company from, any continuing  obligations
of the Company under this  Agreement)  and (ii) the obligation to deliver to all
Holders such new Warrants as, in  accordance  with the  foregoing  provisions of
this Section 4.6, such Holders may be entitled to receive, and such Person shall
have similarly  delivered to such Holders an opinion of counsel for such Person,
which counsel shall be reasonably  satisfactory to the Majority Warrant Holders,
stating that this Agreement shall  thereafter  continue in full force and effect
and that the terms hereof (including,  without limitation, all of the provisions
of this Section  4.6,  shall be  applicable  to the stock,  securities,  cash or
property  which such person may be required to deliver  upon any exercise of any
of the  Warrants  or such new  Warrant or the  exercise  of any rights  pursuant
hereto.

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

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

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

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

     4.11  Exceptions.  Section 4 shall not apply to (i) any  issuance of Common
Stock upon  exercise of any options or warrants  outstanding  on April 14, 2000,
(ii) the  issuance  of shares of Common  Stock,  in an  aggregate  amount not to
exceed  500,000  shares to McLane Group,  L.P.,  (iii) the issuance of shares of
Common  Stock,  in an  aggregate  amount  not to exceed  2,600,000  shares  upon
exercise  of  options  or  warrants  that  have  been  approved  by the Board of
Directors,  or any issuance of such  options or warrants,  (iv) shares of Common
Stock issued pursuant to the Company's  current  employee stock purchase plan in
an amount not to exceed  114,000 shares (the  securities  referred to in clauses
(i),  (ii),  (iii)  and  (iv)  being  collectively   referred  to  as  "Excluded
Securities"),  (iv) any  issuance  of  Common  Stock in an  underwritten  public
offering  at a price  per share at least  equal to the  Exercise  Price  then in
effect if the  underwriting  discount does not exceed 7%, or (v) the issuance of
Series B Preferred Stock to the Purchaser pursuant to the Purchase Agreement.

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

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

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

     4.13 Other Dilutive Events.  If any event occurs as to which the provisions
of this Section 4 are not strictly applicable or, if strictly applicable,  would
not  fairly and  adequately  protect  the  conversion  rights of the  Holders in
accordance with the essential intent and principles of such provisions, then the
Board of  Directors  shall  make such  adjustments  in the  application  of such
provisions, in accordance with such essential intent and principles, as shall be
reasonably necessary to protect such purchase rights as aforesaid; provided that
no such  adjustment  will increase the Exercise  Price or decrease the number of
shares of Common  Stock  obtainable  as  otherwise  determined  pursuant to this
Section 4.

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

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

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

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

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

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

     7.1 Notices of Corporate Actions.

     In case:

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

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

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

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

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

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

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

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

8.   TRANSFER RESTRICTIONS

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

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

     8.2 Restrictive Legends.

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

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

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

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

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

9.   LOSS OR MUTILATION

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

10.  OFFICE OF THE COMPANY

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

11.  FINANCIAL AND BUSINESS INFORMATION

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

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

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

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

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

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

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

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

12.  DILUTION FEE

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

13.  MISCELLANEOUS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     (c) THE COMPANY  HEREBY  WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING UNDER OR WITH RESPECT HERETO.
<PAGE>
     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and its corporate  seal to be impressed  hereon and attested by its Secretary or
an Assistant Secretary.

                                            PEAPOD, INC.

                                            By:_________________________________
                                               Name:
                                               Title:

Attest:

By:_____________________________
   Name:
   Title:

<PAGE>
                                     ANNEX A

                                SUBSCRIPTION FORM

                 [To be executed only upon exercise of Warrant]

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

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

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

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

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

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

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

                                             ___________________________________
                                             (Name of Registered Owner)
                                             ___________________________________
                                             (Signature of Registered Owner)
                                             ___________________________________
                                             (Street Address)
                                             ___________________________________
                                             (City)    (State)    (Zip Code)

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

<PAGE>
                                     ANNEX B

                                 ASSIGNMENT FORM

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

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

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

Dated: _____________                        Print Name: ________________________

                                            Signature: _________________________

                                            Witness: ___________________________

NOTICE:  The  signature  on this  assignment  must  correspond  with the name as
written  upon the  face of the  within  Warrant  in  every  particular,  without
alteration or enlargement or any change whatsoever.EX-10.8

                           CERTIFICATE OF DESIGNATIONS
                                       OF
                              SERIES B CONVERTIBLE
                                 PREFERRED STOCK
                                       OF
                                  PEAPOD, INC.

                         (Pursuant to Section 151 of the
                        Delaware General Corporation Law)

     PEAPOD, INC., a Delaware corporation (the "Company"), hereby certifies that
the following resolution was duly approved and adopted by the Board of Directors
of the  Company  at a  meeting  duly held on April 13,  2000,  which  resolution
remains in full force and effect on the date hereof:

     RESOLVED, that pursuant to the authority expressly granted to and vested in
the  Board of  Directors  of the  Company  (the  "Board  of  Directors")  by the
provisions  of the Amended and  Restated  Certificate  of  Incorporation  of the
Company (the  "Certificate  of  Incorporation")  and its  Restated  By-Laws (the
"Bylaws"),  and in accordance with Section 151 of the General Corporation Law of
the State of Delaware,  there is hereby created,  out of the 5,000,000 shares of
Preferred  Stock,  par value  $0.01 per share,  of the  Company  authorized  and
unissued in Article Fourth of the Certificate of  Incorporation  (the "Preferred
Stock"),  a series of the Preferred Stock  consisting of 730,000  shares,  which
series shall have the following powers, designations,  preferences and relative,
participating,  optional  or other  rights,  and the  following  qualifications,
limitations  and  restrictions   (in  addition  to  any  powers,   designations,
preferences  and  relative,  participating,  optional or other  rights,  and any
qualifications,  limitations and  restrictions,  set forth in the Certificate of
Incorporation which are applicable to the Preferred Stock):

     Section 1.  Designation of Amount.  The 730,000  shares of Preferred  Stock
shall be designated  the "Series B Convertible  Preferred  Stock" (the "Series B
Preferred Stock"), par value $0.01 per share and the authorized number of shares
constituting such series shall be 730,000.

     Section 2. Certain Definitions,

     Unless the context otherwise requires,  the terms defined in this Section 1
shall have, for all purposes of this  resolution,  the meanings  specified (with
terms  defined  in the  singular  having  comparable  meanings  when used in the
plural).

     "Additional  Dividend  Payment  Date"  shall have the  meaning set forth in
Section 3(g).

     "Additional Dividends" shall have the meaning set forth in Section 3(g).

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

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

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

     "Change of  Control"  shall  mean the  occurrence  of any of the  following
events:

          (i) the  adoption or approval by the Board of Directors of the Company
     of a plan or proposal  relating to the sale or other  disposition of all or
     substantially all of the assets of the Company;

          (ii) the adoption or approval by the Board of Directors of the Company
     of a plan or proposal  relating to the liquidation,  dissolution or winding
     up of the Company;

          (iii) the acquisition by any individual, entity or group (other than a
     group including the Purchaser),  including any "person," within the meaning
     of  Section  13(d)(3)  or  14(d)(2)  of the  Exchange  Act,  of  beneficial
     ownership within the meaning of Rule 13d-3  promulgated  under the Exchange
     Act, of more than 50% of the then outstanding shares of Common Stock;

          (iv) the first day on which the individuals  (other than the Preferred
     Stock  Directors) who are members of the Board of Directors as of April 14,
     2000  (collectively,  the  "Incumbent  Board")  cease  for  any  reason  to
     constitute  a  majority  of the  Board  of  Directors;  provided  that  any
     individual  who becomes a director of the Company  subsequent  to April 14,
     2000,  whose  appointment  or  nomination  for  election  by the  Company's
     stockholders,  was  approved  by the  vote of at  least a  majority  of the
     directors then  comprising the Incumbent  Board shall be deemed a member of
     the Incumbent  Board;  and provided,  further,  that any individual who was
     initially  elected as a director of the Company as a result of an actual or
     threatened  election  contest,  as such  terms  are used in Rule  14a-11 of
     Regulation 14A  promulgated  under the Exchange Act, or any other actual or
     threatened  solicitation  of  proxies  or  consents  by or on behalf of any
     person other than the Board of Directors shall not be deemed to be a member
     of the Incumbent Board;

          (v) the 30th  consecutive  day on which the Common  Stock is no longer
     listed for  trading on a United  States  national  securities  exchange  or
     authorized for quotation in the NASDAQ Stock Market; or

          (vi) the Company  shall have failed to comply in any material  respect
     with any of its  agreements  contained in any of the  Documents,  provided,
     that,  if such failure to comply is capable of being  cured,  30 days shall
     have elapsed  since such failure to comply and such failure  shall not have
     been cured.

     "Change of Control  Election"  shall have the  meaning set forth in Section
6(a).

     "Change of Control  Redemption  Price"  shall have the meaning set forth in
Section 6(a).

     "Common  Stock" shall mean the common stock,  par value $.01 per share,  of
the Company.

     "Conversion Date" shall have the meaning set forth in Section 8(e).

     "Conversion Price" shall have the meaning set forth in Section 8(b).

     "Credit and  Security  Agreements"  shall have the meaning set forth in the
Purchase Agreement.

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

     "Dividend Rate" shall have the meaning set forth in Section 3(a).

     "Documents"  shall  mean  the  Purchase   Agreement,   the  Warrants,   the
Registration  Rights  Agreement,  the Services  Agreement,  the  Certificate  of
Incorporation,  the  Bylaws,  the  Credit  and  Security  Agreements,  the Joint
Development and Licensing Agreement,  the Voting Agreements and this Certificate
of Designations.

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

     "Exercise Period" shall have the meaning set forth in Section 6(a).

     "Event of Non-Compliance"  shall mean (i) any failure of the Company or the
Board of Directors to comply with Section 7 of this Certificate of Designations,
Article  VIII of the Bylaws of the  Company,  (ii) any failure of the Company or
the  Board  of  Directors  to  comply  with  Section  3 of this  Certificate  of
Designations  or any failure of the Board of Directors of the Company to declare
a  quarterly  dividend  payment  provided  for in  Section  3(a) or to pay  such
dividend on the dividend  payment date provided  therefor in Section 3(b), (iii)
any failure of the Company or the Board of  Directors  to comply with Section 5,
6, 8 or 9 of this Certificate of Designations;  provided, that a failure to give
a  notice  within  a  specified   time  period  shall  be  deemed  an  Event  of
Non-Compliance  only until such notice is given (unless the delay in giving such
notice adversely affects the ability of the person to whom such notice was given
to  exercise  the rights  with  respect to which such notice was given) (iv) any
other  failure of the Company to comply in any material  respect with any of its
agreements in any of the Documents;  provided, however, that if any such failure
to comply is capable of being  cured,  30 days  shall  have  elapsed  since such
failure  has not been cured or (v) any  obligation  of the  Company,  whether as
principal,  guarantor,  surety or other obligor, for the payment of indebtedness
for  borrowed  money in  excess  of  $10,000,000  (x)  shall  become or shall be
declared due and payable prior to the expressed  maturity thereof,  or (y) shall
not be paid when due or within any grace  period for the  payment  thereof,  and
such default shall remain uncured for 30 days.

     "Excluded Securities" shall have the meaning set forth in Section 8(d).

     "Fair Market  Value"  shall mean,  as of any  specified  date and as to any
security,  the Ten Day Average of the closing prices of such security's sales on
all  domestic  securities  exchanges  on which such  security may at the time be
listed, or, if there have been no sales on any such exchange on any day included
in the Ten Day  Average,  the average of the highest bid and lowest asked prices
on all such  exchanges at the end of such day, or, if on any day included in the
Ten  Day  Average,   such  security  is  not  so  listed,  the  average  of  the
representative bid and asked prices quoted in the NASDAQ Stock Market as of 4:00
P.M., New York City time, on such day, or, if on any day included in the Ten Day
Average such security is not quoted in the NASDAQ Stock  Market,  the average of
the  highest  bid  and  lowest   asked  prices  on  such  day  in  the  domestic
over-the-counter   market  as  reported  by  the  National   Quotation   Bureau,
Incorporated,  or any similar or successor  organization  (and in each such case
excluding any trades that are not bona fide, arm's length  transactions).  If at
any time such  security  is not listed on any  domestic  securities  exchange or
quoted in the NASDAQ Stock Market or the domestic  over-the-counter  market, the
"Fair Market Value" of such  security  shall be the fair market value thereof as
determined in accordance  with the Appraisal  Procedure,  using any  appropriate
valuation  method,  assuming an  arms-length  sale to an independent  party.  In
determining  the fair market value of Common Stock,  a sale of all of the issued
and outstanding Common Stock will be assumed,  without giving regard to the lack
of liquidity of such stock due to any  restrictions  (contractual  or otherwise)
applicable  thereto or any  discount  for  minority  interests  and assuming the
conversion or exchange of all securities then  outstanding  that are convertible
into or  exchangeable  for  Common  Stock and the  exercise  of all  rights  and
warrants then  outstanding  and  exercisable to purchase shares of such stock or
securities  convertible into or exchangeable for shares of such stock; provided,
however  that such  assumption  will not include  those  securities,  rights and
warrants  convertible  into  Common  Stock  where the  conversion,  exchange  or
exercise  price per  share is  greater  than the fair  market  value;  provided,
further,  however, that fair market value shall be determined with regard to the
relative  priority  of each  class or series  of Common  Stock (if more than one
class or series  exists.)  "Fair  Market  Value"  means with respect to property
other than securities, the "fair market value" determined in accordance with the
Appraisal Procedure.

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

     "HSR Approval"  shall mean the expiration of all waiting  periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and applicable
rules and  regulations  and any similar state acts applicable to the issuance of
Series B Preferred Stock as contemplated by the Documents.

     "Joint  Development  and  Licensing  Agreement"  shall have the meaning set
forth in the Purchase Agreement.

     "Liquidation Preference" shall have the meaning set forth in Section 4.

     "New  Securities"  shall mean any shares of capital  stock of the  Company,
whether or not now  authorized,  and securities of any type whatsoever that are,
or may become,  convertible  into or  exchangeable  or exercisable for shares of
capital stock, other than (i) Excluded  Securities;  (ii) the Series B Preferred
Stock (or the Common Stock issuable upon conversion thereof); (iii) the Warrants
(and Common Stock  issuable  upon  exercise  thereof);  (iv)  securities  issued
pursuant  to the  Company's  bona fide  acquisition  of another  corporation  by
merger,  purchase of  substantially  all assets or other  reorganization,  which
acquisition  has been  approved by the Board of  Directors;  and (v)  securities
issued in connection with any stock split, stock dividend or recapitalization of
the Company for which an  adjustment  is made to the terms of  conversion of the
Series B Preferred Stock hereunder.

     "Original Issuance Date" shall mean, with respect to any shares of Series B
Preferred Stock, the date of issuance of such shares.

     "Outside  Date" shall mean the date that is one  hundred  and twenty  (120)
days after the date hereof or, if the Purchaser  exercises any Warrants and as a
direct  result of such  exercise,  the  Stockholders  Meeting (as defined in the
Purchase  Agreement)  is delayed,  one  hundred  and twenty  (120) days plus the
number of days of such delay after the date hereof.

     "Permitted  Transferee"  shall mean, with respect to any person,  any other
person.

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

     "Preferred  Stock  Director"  shall have the  meaning  set forth in Section
7(b).

     "Previously  Issued Warrant" shall mean the warrant,  dated as of April 10,
2000,  issued by the Company in favor of the  Purchaser  for  100,000  shares of
Common Stock.

     "Pro Rata Amount"  shall mean,  at any time,  with respect to any holder of
shares of Series B  Preferred  Stock,  the ratio of (i) the  number of shares of
Common Stock held by such holder (on a fully-diluted  basis),  to (ii) the total
number of shares of Common Stock of the Company  outstanding (on a fully-diluted
basis),  in the case of both  clauses (i) and (ii),  including  all  outstanding
securities  convertible  into or exchangeable or exercisable for Common Stock on
an as-converted or exercised basis (including,  but not limited to, the Series B
Preferred  Stock and  outstanding  options and warrants  exercisable  for Common
Stock).

     "Purchase  Agreement" shall mean the Purchase Agreement,  dated as of April
13, 2000, by and between the Company and the Purchaser.

     "Purchaser"  shall mean  Koninklijke  Ahold  N.V.,  a public  company  with
limited liability incorporated under the laws of the Netherlands.

     "Redemption Date" shall have the meaning set forth in Section 5.

     "Redemption Price" shall have the meaning set forth in Section 5.

     "Registration   Rights  Agreement"  shall  mean  the  registration   rights
agreement  to be entered into by the Company and the  Purchaser  pursuant to the
Purchase Agreement.

     "Requisite  Holders"  shall mean the  holders of at least a majority of the
then outstanding Shares.

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

     "Series  B  Preferred  Stock"  shall  mean  the  Series B  Preferred  Stock
authorized hereby.

     "Shares"  shall mean,  collectively,  shares of converted  Common Stock and
shares of Series B Preferred Stock. Whenever this Certificate refers to a number
or  percentage of Shares,  such number or percentage  shall be calculated as if,
immediately  prior to such  calculation,  all shares of Series B Preferred Stock
and all other  convertible  or  exchangeable  securities  and all  warrants  and
options held by the Purchaser and its Permitted  Transferees  had been converted
into shares of Common Stock in  accordance  with their terms,  regardless of the
existence of any restrictions on such conversion or exercise.

     "Stockholder   Approval"   shall  mean  the   approval  by  the   Company's
stockholders  of the  issuance  of all  shares of Series B  Preferred  Stock and
Warrants pursuant to the Purchase Agreement.

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

     "Subsidiary" shall mean a subsidiary of the Company.

     "Ten Day Average" means,  with respect to any prices and in connection with
the  calculation  of Fair Market Value,  the average of such prices over the ten
consecutive  Business Days ending on the Business Day  immediately  prior to the
day as of which "Fair Market Value" is being determined.

     "Voting  Agreements"  shall  have the  meaning  set  forth in the  Purchase
Agreement.

     "Warrants" shall have the meaning set forth in the Purchase Agreement.

     Section 3. Dividends. (a) The holders of the outstanding shares of Series B
Preferred  Stock shall be entitled to receive,  when,  as and if declared by the
Board of  Directors  out of funds of the  Company  legally  available  therefor,
cumulative  dividends,  accumulating  on a daily basis at the Dividend Rate from
the Original  Issuance  Date for such shares  through and  including the date on
which  such  dividends  are paid.  The  "Dividend  Rate"  shall be (i) if either
Stockholder  Approval or HSR Approval has not been obtained prior to the Outside
Date or there shall exist any Event of  Non-Compliance,  in each case, 12.5% per
annum for all quarterly dividend periods commencing on or after the Outside Date
and ending on or before the date, if any, on which both Stockholder Approval and
HSR Approval have been  obtained or, as the case may be,  commencing on the date
of the  occurrence of such Event of  Non-Compliance  and ending on the date that
such Event of Non-Compliance is cured and (ii) for all other quarterly  dividend
periods,  8% per  annum.  The  amount  of any  dividends  per  share of Series B
Preferred  Stock for any full quarterly  period shall be computed by multiplying
the  Dividend  Rate  for  such  quarterly  dividend  period  by the  Liquidation
Preference per share and dividing the result by four.  Dividends  payable on the
shares of Series B  Preferred  Stock for any period  less than a full  quarterly
dividend  period  shall be  computed  on the basis of a  360-day  year of twelve
30-day months and the actual number of days elapsed for any period less than one
month.

     (b) Dividends shall be payable in arrears on the last day of each of March,
June, September and December, commencing on June 30, 2000; provided that: (i) if
any such payment date is not a Business Day, then such dividend shall be payable
on the next  Business  Day, and (ii)  accumulated  and unpaid  dividends for any
prior quarterly  period may be paid at any time.  Dividends shall  accumulate on
shares of Series B  Preferred  Stock from their  Original  Issuance  Date and be
cumulative  whether  or not  earned or  declared  and  whether  or not there are
profits, surplus or other funds of the Company legally available for the payment
of dividends.  Each such dividend  shall be paid to the holders of record of the
Series B  Preferred  Stock as they  shall  appear on the stock  register  of the
Company on such record date,  not exceeding  forty-five  (45) days nor less than
ten (10) days  preceding  any dividend  payment  date,  as shall be fixed by the
Board of Directors of the Company or a duly authorized committee thereof.

     (c) [intentionally omitted]

     (d) Holders of shares of the Series B Preferred  Stock shall be entitled to
full cumulative  dividends,  as herein provided, on the Series B Preferred Stock
and no  additional  amounts,  except as set forth in  paragraph  (g)  below.  No
interest,  or sum of money in lieu of  interest,  shall be payable in respect of
any dividend  payment or payments on the Series B Preferred Stock that may be in
arrears.

     (e) Unless and until full  cumulative  dividends  on the shares of Series B
Preferred  Stock in respect of all past  quarterly  dividend  periods  have been
paid, and the full amount of dividends on the shares of Series B Preferred Stock
in respect of the then current quarterly  dividend period shall have been or are
contemporaneously  declared in full and sums set aside for the payment  thereof,
(i) no  dividends  shall be paid or  declared  or set aside for payment or other
distribution  upon the Common  Stock,  or any other capital stock of the Company
ranking  junior to the Series B Preferred  Stock as to dividends  (together with
the Common  Stock,  "Junior  Stock"),  other than in shares of, or  warrants  or
rights to acquire, Junior Stock; and (ii) no shares of Junior Stock or any other
Securities of the Company or any warrants,  rights, calls or options (other than
any  cashless  exercises  of  options  or option  buybacks)  exercisable  for or
convertible  into a share of Junior Stock or any other Securities of the Company
shall  be  redeemed,   retired,   purchased   or  otherwise   acquired  for  any
consideration  (or any payment made to or  available  for a sinking fund for the
redemption  of any such  shares)  by the  Company or any  Subsidiary  (except by
conversion into or exchange for shares of Junior Stock).

     (f) The terms  "accumulated  dividends,"  "accrued  dividends,"  "dividends
accumulated,"  "dividends  accrued" and  "dividends  in arrears,"  whenever used
herein with  reference to shares of Series B Preferred  Stock shall be deemed to
mean an amount  which shall be equal to dividends  thereon at the Dividend  Rate
per share from the date or dates on which such dividends  commence to accumulate
to the end of the then  current  quarterly  dividend  period for such  Preferred
Stock (or, in the case of redemption, to the date of redemption), whether or not
earned or  declared  and  whether  or not  assets for the  Company  are  legally
available  therefor,  and if full dividends are not declared or paid,  then such
dividends  shall  cumulate,   with  additional  dividends  thereon,   compounded
quarterly,  at the Dividend Rate,  for each  quarterly  period during which such
dividends remain unpaid, less the amount of all such dividends paid, or declared
in full and sums set aside for the payment thereof, upon such shares of Series B
Preferred Stock.

     (g) In the event any  dividends  are  declared or paid with  respect to the
Common Stock or any Junior Stock, the holders of the Series B Preferred Stock as
of the record date established by the Board of Directors for such dividend shall
be entitled to receive as additional  dividends (the "Additional  Dividends") an
amount (whether in the form of cash,  securities or other property) equal to the
amount (and in the form) of the  dividends  that such holder would have received
had the Series B Preferred Stock been converted into Common Stock as of the date
immediately prior to the record date of such dividend, such Additional Dividends
to be payable on the payment  date of the dividend  established  by the Board of
Directors (the "Additional Dividend Payment Date"). The record date for any such
Additional Dividends shall be the record date for the applicable  dividend,  and
any such Additional Dividends shall be payable to the persons in whose name this
Series  B  Preferred  Stock  is  registered  at the  close  of  business  on the
applicable record date.

     (h)  Notwithstanding  anything  to the  contrary  herein,  in the event any
conversion,  redemption  or  liquidation  occurs  as of a date  other  than on a
dividend  payment date, the holders of Series B Preferred  Stock shall be paid a
pro rata  dividend  equal to the dividend  payable for that  quarterly  dividend
period  multiplied  by a fraction,  the numerator of which is the number of days
that have elapsed since the last dividend  payment date and the  denominator  of
which is the  number  of days in the  quarterly  dividend  period  in which  the
conversion, redemption or liquidation occurs.

     (i)  Immediately  prior  to  authorizing  or  making  any  distribution  in
redemption or  liquidation  with respect to the Series B Preferred  Stock (other
than a  purchase  or  acquisition  of Series B  Preferred  Stock  pursuant  to a
purchase or exchange offer made on the same terms to holders of all  outstanding
Series B Preferred  Stock),  the Board of Directors  shall, to the extent of any
funds legally available  therefor,  declare a dividend on the Series B Preferred
Stock payable on the distribution date in an amount equal to any accumulated and
unpaid dividends on the Series B Preferred Stock as of such date.

     Section  4.  Liquidation  Preference.   In  the  event  of  a  liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary,  the
holders  of Series B  Preferred  Stock then  outstanding  shall be  entitled  to
receive out of the  available  assets of the  Company,  whether  such assets are
stated  capital or surplus  of any  nature,  an amount on such date equal to the
greater  of (a) $100 per share of Series B  Preferred  Stock  (the  "Liquidation
Preference")  plus the amount of any accumulated and unpaid dividends as of such
date,  calculated  pursuant  to Section 3  hereinabove,  or (b) the amount  that
holders of the Series B Preferred Stock would be entitled to receive if they had
converted  all of their  shares of Series B Preferred  Stock into  Common  Stock
immediately prior to such  liquidation,  dissolution or winding up. Such payment
shall be made before any payment shall be made or any assets  distributed to the
holders of any class or series of the Common  Stock or any other class or series
of the Company's  capital stock ranking junior as to  liquidation  rights to the
Series B Preferred Stock. If upon any such  liquidation,  dissolution or winding
up of the Company the assets available for payment of the Liquidation Preference
are  insufficient to permit the payment to the holders of the Series B Preferred
Stock of the full preferential amounts described in this paragraph, then all the
remaining  available  assets shall be distributed  among the holders of the then
outstanding  Series B Preferred  Stock pro rata  according to the number of then
outstanding shares of Series B Preferred Stock held by each holder thereof.  The
merger or  consolidation  of the  Company  shall be  considered  a  liquidation,
dissolution  or winding up of the Company for purposes of this Section 4 (unless
in  connection   therewith  the  liquidation  of  the  Company  is  specifically
approved).

     Section 5.  Mandatory  Redemption.  On the eighth  anniversary  of the date
hereof (the "Redemption  Date"), the Company shall redeem for cash all shares of
Series B Preferred  Stock that are then  outstanding  and any shares of Series B
Preferred Stock then issuable in respect of accumulated but unpaid dividends, in
each case, at a redemption  price per share equal to the Liquidation  Preference
thereof plus the amount of any accumulated and unpaid  dividends as of such date
("Redemption  Price").  Not more than sixty (60) nor less than  thirty (30) days
prior to the Redemption Date, notice by first class mail, postage prepaid, shall
be given to each  holder of  record of the  Series B  Preferred  Stock,  at such
holder's address as it shall appear upon the stock transfer books of the Company
on such date.  Each such notice of  redemption  shall be  irrevocable  and shall
specify  the  date  that is the  Redemption  Date,  the  Redemption  Price,  the
identification of the shares to be redeemed,  the place or places of payment and
that payment will be made upon presentation and surrender of the  certificate(s)
evidencing  the  shares  of Series B  Preferred  Stock to be  redeemed  and that
dividends on the shares of the Series B Preferred  Stock cease to  accumulate on
the Redemption  Date. On or after the Redemption  Date, each holder of shares of
Series B Preferred Stock shall surrender the certificate  evidencing such shares
to the Company at the place  designated  in such notice and shall  thereupon  be
entitled to receive  payment of the Redemption  Price in the manner set forth in
the notice. If, on the Redemption Date, funds in cash in an amount sufficient to
pay the  aggregate  Redemption  Price  for all  outstanding  shares  of Series B
Preferred Stock shall be available  therefor and shall have been irrevocably set
aside  and  deposited  with a bank or trust  company  in trust for  purposes  of
payment of such Redemption Price,  then,  notwithstanding  that the certificates
evidencing any shares so called for redemption shall not have been  surrendered,
the shares  shall no longer be deemed  outstanding,  the holders  thereof  shall
cease to be stockholders,  and all rights  whatsoever with respect to the shares
so called  for  redemption  (except  the right of the  holders  to  receive  the
Redemption Price upon surrender of their certificates therefor) shall terminate.
If at the Redemption  Date, the Company does not have  sufficient  funds legally
available to redeem all the outstanding  shares of Series B Preferred Stock, the
Company shall take all measures permitted under the Delaware General Corporation
Law to increase the amount of its capital and surplus legally available, and the
Company  shall  purchase as many  shares of Series B  Preferred  Stock as it may
legally redeem,  ratably from the holders thereof in proportion to the number of
shares held by them, and shall thereafter from time to time, as soon as it shall
have funds available therefor, redeem as many shares of Series B Preferred Stock
as it legally may until it has redeemed all of the outstanding  shares of Series
B Preferred Stock.

     Section 6. Optional Redemption.

     (a) Change of Control.  In the event that any Change of Control shall occur
at any time while any shares of Series B Preferred Stock are  outstanding,  each
holder of Series B  Preferred  Stock shall have the right to give notice that it
is  exercising  a Change of Control  election (a "Change of Control  Election"),
with respect to all or any number of such holder's  shares of Series B Preferred
Stock,  during the period (the "Exercise  Period") beginning on the 10th day and
ending on the 30th day after the date of such Change of  Control.  Upon any such
election,  the Company shall redeem for cash each of such holder's shares to the
extent permitted by applicable law, at a redemption price per share equal to the
Liquidation  Preference  thereof  plus the  amount  of  accumulated  and  unpaid
dividends  as of the date of  redemption,  plus an amount per share equal to the
dividends that would have  accumulated on the Series B Preferred  Stock,  at the
Dividend  Rate then in effect,  from the date of redemption to and including the
fifth anniversary of April 14, 2000 (the "Change of Control Redemption Price").

     (b) On or before  the tenth  (10th)  day  after a Change  of  Control,  the
Company  shall mail to all holders of record of the Series B Preferred  Stock at
their respective  addresses as the same shall appear on the books of the Company
as of such date, a notice disclosing (i) the Change of Control,  (ii) the Change
of Control Redemption Price per share of the Series B Preferred Stock applicable
hereunder,  and (iii) the procedure which the holder must follow to exercise the
redemption right provided above. To exercise the Change of Control Election,  if
applicable,  a holder of the Series B Preferred  Stock must  deliver  during the
Exercise  Period  written  notice to the Company (or an agent  designated by the
Company  for such  purpose)  of the  holder's  exercise of the Change of Control
Election,  accompanied  by each  certificate  evidencing  shares of the Series B
Preferred  Stock with  respect to which the Change of Control  Election is being
exercised,  duly endorsed for transfer.  On or prior to the fifth (5th) Business
Day after  expiration  of the  Exercise  Period,  the Company  shall  accept for
payment  all shares of Series B  Preferred  Stock  properly  surrendered  to the
Company (or an agent  designated  by the Company  for such  purpose)  during the
Exercise  Period for redemption in connection with the exercise of the Change of
Control  Election and shall cause  payment to be made in cash for such shares of
Series B Preferred  Stock. If at the time of any Change of Control,  the Company
does not have sufficient  capital and surplus legally  available to purchase all
of the outstanding  shares of Series B Preferred  Stock,  the Company shall take
all measures  permitted under the Delaware  General  Corporation Law to increase
the amount of its capital and surplus legally  available,  and the Company shall
offer in its written notice of such Change of Control to purchase as many shares
of Series B Preferred  Stock as it has capital  and  surplus  legally  available
therefor,  ratably from the holders thereof in proportion to the total number of
shares  tendered,  and shall  thereafter  from time to time, as soon as it shall
have capital and surplus legally available  therefor,  offer to purchase as many
shares of Series B  Preferred  Stock as it has  capital  and  surplus  available
therefor  until it has  offered to  purchase  all of the  outstanding  shares of
Series B Preferred Stock.

     (c)  Optional   Redemption  by  Company.  At  any  time  after  the  eighth
anniversary  of April 14, 2000,  the Company may, upon sixty (60) days notice to
the holders of the Series B Preferred Stock,  redeem all, but not less than all,
of the then outstanding shares of Series B Preferred Stock for cash in an amount
per share equal to 103% of the Redemption Price.

     (d) Status of Redeemed Shares. Any shares of Series B Preferred Stock which
shall at any time have been  redeemed  pursuant to Section 5 or 6 hereof  shall,
after such  redemption,  have the status of  authorized  but unissued  shares of
Preferred Stock, without designation as to series.

     Section 7. Voting  Rights.  (a) Except as otherwise  provided by applicable
law and in addition to any voting rights  provided by law, the holders of Series
B Preferred Stock:

          (i) shall be entitled to vote  together with the holders of the Common
     Stock as a single class on all matters  submitted  for a vote of holders of
     Common Stock;

          (ii) shall  have such  other  voting  rights as are  specified  in the
     Certificate of Incorporation  or as otherwise  provided by Delaware General
     Corporation Law; and

          (iii) shall be entitled to receive notice of any stockholders' meeting
     in  accordance  with the  Certificate  of  Incorporation  and Bylaws of the
     Company.

     Each share of Series B Preferred  Stock shall entitle the holder thereof to
cast one vote for each vote that such holder  would be entitled to cast had such
holder  converted its Series B Preferred Stock into shares of Common Stock as of
the date  immediately  prior to the record date for determining the stockholders
of the Company eligible to vote on any such matter.

     (b) In addition to the other voting rights set forth herein, for so long as
the Purchaser  shall own at least one share of Series B Preferred  Stock and the
Purchaser and its  Permitted  Transferees  collectively  hold a number of Shares
that equals or exceeds the following percentages, the following provisions shall
apply:

          (i) The holders of Series B Preferred  Stock shall have the  exclusive
     right, voting as a single class, to elect the following number of directors
     to serve on the Board of Directors  (each such director is referred to as a
     "Preferred  Stock  Director")  in the  event  that  the  Purchaser  and its
     Permitted  Transferees  collectively  beneficially  own  securities  of the
     Company that constitute, or if converted into Common Stock would constitute
     the following  percentages of the aggregate  issued and outstanding  Common
     Stock:  (w) less than 10%, no Preferred Stock  Directors;  (x) at least 10%
     but no more than 33-1/3%,  three (3)  Preferred  Stock  Directors  (for the
     purposes of this clause (x), the Previously Issued Warrant and the Warrants
     shall  be  included  in  the  calculation  of  the  Purchaser's  beneficial
     ownership);  (y) at least  33-1/3% but no more than 70%, six (6)  Preferred
     Stock Directors (for the purposes of this clause (y), the Previously Issued
     Warrant  and the  Warrants  shall be  included  in the  calculation  of the
     Purchaser's  beneficial  ownership);  and  (z)  at  least  70%,  seven  (7)
     Preferred  Stock  Directors  (for the  purposes  of this  clause  (z),  the
     Previously  Issued  Warrant and the  Warrants  shall not be included in the
     calculation of the  Purchaser's  beneficial  ownership);  provided that, so
     long as any loans or  commitments  made to the  Company  by the  holders of
     Series  B  Preferred  Stock  or  any of  their  respective  affiliates  are
     outstanding,  the  holders  of  Series B  Preferred  Stock  shall  have the
     exclusive  right,  voting as a single  class,  to elect three (3) Preferred
     Stock  Directors.  In any such  election  the holders of Series B Preferred
     Stock  shall be  entitled  to cast one vote per share of Series B Preferred
     Stock  held of  record  on the  record  date for the  determination  of the
     holders of Series B Preferred Stock entitled to vote on such election. Each
     of the initial Preferred Stock Directors shall be appointed by the Board of
     Directors on or before April 14, 2000 and shall be apportioned by the Board
     of Directors  among the three  classes of directors so as to ensure that no
     one class  has more  than one  director  more  than any  other  class;  and
     thereafter the Preferred  Stock Directors shall be elected at the same time
     as the other  directors of the same class are elected.  The Preferred Stock
     Directors  shall  serve  until the annual  meeting of  stockholders  of the
     Company at which the term of other  directors  of the same class  expire or
     until their respective  successors shall be elected and shall qualify.  Any
     Preferred  Stock Director may be removed by, and shall not be removed other
     than by, the vote of the  Requisite  Holders,  at a vote of the  holders of
     then outstanding  shares of Series B Preferred Stock,  voting as a separate
     class,  at a meeting  called  for such  purpose  or by  written  consent as
     permitted by law and the  Certificate  of  Incorporation  and Bylaws of the
     Company.  If for  any  reason  a  vacancy  exists  in the  Preferred  Stock
     Directors, by reason of death, resignation,  retirement,  disqualification,
     removal or  otherwise,  such vacancy  shall be filled by the holders of the
     Series B Preferred  Stock voting as a separate class in accordance with the
     voting  procedures  set forth in this Section  7(b).  The  Preferred  Stock
     Directors  shall be  appointed  by the Board of  Directors to serve on each
     committee of the Board of Directors in at least the same  proportions  that
     the  number of  Preferred  Stock  Directors  bears to the  total  number of
     directors then comprising the Board of Directors.

          (ii) The Company will not, and will not permit any of its Subsidiaries
     to,  directly or  indirectly,  without  approval of the Requisite  holders,
     voting as a separate class, take action (or fail to take action) prohibited
     by the Purchase Agreement.

     Section 8. Conversion Rights.

     (a) General.  Subject to and upon  compliance  with the  provisions of this
Section  8, the  holders  of the  shares of Series B  Preferred  Stock  shall be
entitled, at their option, at any time prior to the date fixed for redemption of
such shares,  to convert all or any such shares of Series B Preferred Stock into
a number of fully paid and  nonassessable  shares of Common Stock (calculated as
to each conversion to the nearest  1/100th of a share).  The number of shares of
Common  Stock to which a holder of Series B  Preferred  Stock  shall be entitled
upon conversion  shall be determined by dividing (i) the Liquidation  Preference
of such  Series B  Preferred  Stock  (including  shares  issuable  in respect of
accumulated but unpaid dividends), plus the amount of any accumulated but unpaid
dividends as of the Conversion  Date by (ii) the  Conversion  Price in effect at
the close of business on the  Conversion  Date  (determined  as provided in this
Section 8).

     (b) Conversion  Price. The conversion price (the "Conversion  Price") shall
initially be $3.75 per share of Preferred Stock, subject to adjustment from time
to time in accordance with Section 8(d).

     (c)  Fractions  of Shares.  No  fractional  shares of Common Stock shall be
issued upon  conversion of shares of Series B Preferred  Stock. If more than one
share of Series B Preferred  Stock shall be  surrendered  for  conversion at one
time by the same holder,  the number of full shares of Common Stock to be issued
and which shall be computed  on the basis of the  aggregate  number of shares of
Series B Preferred  Stock so  surrendered.  Instead of any fractional  shares of
Common Stock which would  otherwise be issuable upon conversion of any shares of
Series B Preferred  Stock, the Company shall pay a cash adjustment in respect of
such  fractional  share in an  amount  equal  to the  product  of such  fraction
multiplied  by the  Fair  Market  Value  of one  share  of  Common  Stock on the
Conversion Date.

     (d) Adjustments to Conversion  Price. The Conversion Price shall be subject
to adjustment from time to time as follows:

          (i) Upon Issuance of Common Stock.  If the Company shall,  at any time
     or from time to time  after  April  14,  2000,  issue any  shares of Common
     Stock,  options  to  purchase  or rights to  subscribe  for  Common  Stock,
     securities  by their  terms  convertible  into or  exchangeable  for Common
     Stock,  or options to purchase or rights to subscribe for such  convertible
     or exchangeable securities, other than Series B Preferred Stock or Excluded
     Securities,  without consideration or for consideration per share less than
     either (x) the Conversion Price in effect immediately prior to the issuance
     of such Common  Stock or  securities  or (y) the Daily  Market Price of the
     Common  Stock on the  Business  Day on which the  pricing of such  issuance
     occurs,  then the Conversion  Price shall  forthwith be adjusted to a price
     equal to the lower of (I) the Conversion Price in effect  immediately prior
     thereto,  or (II) the lowest  consideration per share for which such shares
     of Common Stock or such  options,  rights or  convertible  or  exchangeable
     securities  are issued (plus the  additional  consideration  required to be
     paid upon  exercise,  exchange or  conversion  of such  options,  rights or
     convertible or exchangeable securities).

          (ii)  Upon  Acquisition  of  Common  Stock.  If  the  Company  or  any
     Subsidiary  shall,  at any time or from time to time after April 14,  2000,
     directly  or  indirectly,  redeem,  purchase or  otherwise  acquire (x) any
     shares of Common Stock for a consideration  per share greater than the Fair
     Market Value of the Common Stock  immediately  prior to such event,  or (y)
     any  options to  purchase  or rights to  subscribe  for Common  Stock,  any
     securities by their terms convertible into or exchangeable for Common Stock
     (other than shares of Series B Preferred Stock that are redeemed  according
     to their terms), or any options to purchase or rights to subscribe for such
     convertible or exchangeable securities, in either case, for a consideration
     per share of Common Stock for which such options,  rights or convertible or
     exchangeable securities are exercisable,  convertible or exchangeable, that
     is greater  than the  amount,  if any,  by which the Fair  Market  Value of
     Common  Stock  immediately  prior  to such  event  exceeds  the  per  share
     exercise, exchange,  subscription,  conversion or purchase price applicable
     to such options, rights or convertible or exchangeable securities, then, in
     the case of (x) or (y), the Conversion  Price shall forthwith be lowered to
     a price equal to the price obtained by multiplying:

               (A) the  Conversion  Price in  effect  immediately  prior to such
          event, by

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

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

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

               For purposes of this Section 8(d), "fully diluted basis" shall be
          determined  in  accordance  with  the  treasury  method  of  GAAP  and
          paragraph (iii) of this Section 8(d).

               (iii) For the purposes of any  adjustment  of a Conversion  Price
          pursuant  to  paragraphs  (i)  and  (ii)  of this  Section  8(d),  the
          following provisions shall be applicable:

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

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

                    (3) In the case of the  issuance  of options to  purchase or
               rights to subscribe for Common  Stock,  securities by their terms
               convertible  into or exchangeable for Common Stock, or options to
               purchase  or  rights  to  subscribe  for  such   convertible   or
               exchangeable securities,  except for Shares of Series B Preferred
               Stock or options to acquire Excluded Securities:

                    (a)  the aggregate  maximum number of shares of Common Stock
                         deliverable  upon  exercise of such options to purchase
                         or rights to subscribe for Common Stock shall be deemed
                         to have been issued at the time such  options or rights
                         were  issued  and  for a  consideration  equal  to  the
                         consideration  (determined  in the manner  provided  in
                         subparagraphs  (1) and (2) above),  if any, received by
                         the Company upon the issuance of such options or rights
                         plus  the  minimum  purchase  price  provided  in  such
                         options or rights for the Common Stock covered thereby;

                    (b)  the aggregate  maximum number of shares of Common Stock
                         deliverable  upon  conversion  of or in exchange of any
                         such convertible or exchangeable securities or upon the
                         exercise of options to purchase or rights to  subscribe
                         for such  convertible  or  exchangeable  securities and
                         subsequent  conversion  or  exchange  thereof  shall be
                         deemed to have been issued at the time such securities,
                         options,  or rights were issued and for a consideration
                         equal to the consideration  received by the Company for
                         any such  securities  and  related  options  or  rights
                         (excluding  any cash  received  on  account  of accrued
                         interest  or accrued  dividends),  plus the  additional
                         consideration,  if any,  to be  received by the Company
                         upon the  conversion or exchange of such  securities or
                         the  exercise  of any  related  options or rights  (the
                         consideration  in  each  case to be  determined  in the
                         manner provided in paragraphs (1) and (2) above);

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

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

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

          (iv) Upon Stock  Dividends,  Subdivisions  or Splits.  If, at any time
     after April 14, 2000,  the number of shares of Common Stock  outstanding is
     increased  by a stock  dividend  payable in shares of Common  Stock or by a
     subdivision  or split-up of shares of Common  Stock,  then,  following  the
     record date for the  determination  of holders of Common Stock  entitled to
     receive  such stock  dividend,  or to be  affected by such  subdivision  or
     split-up, the Conversion Price shall be appropriately decreased so that the
     number of  shares  of  Common  Stock  issuable  on  conversion  of Series B
     Preferred  Stock  shall be  increased  in  proportion  to such  increase in
     outstanding shares.

          (v) Upon  Combinations.  If, at any time  after  April 14,  2000,  the
     number of shares of Common Stock  outstanding is decreased by a combination
     of the  outstanding  shares of Common Stock into a smaller number of shares
     of Common  Stock,  then,  following  the record  date to  determine  shares
     affected by such  combination,  the Conversion Price shall be appropriately
     increased  so that the  number  of  shares  of  Common  Stock  issuable  on
     conversion of each share of Series B Preferred  Stock shall be decreased in
     proportion to such decrease in outstanding shares.

          (vi)  Upon  Reclassifications,   Reorganizations,   Consolidations  or
     Mergers.  In the event of any capital  reorganization  of the Company,  any
     reclassification  of the stock of the  Company  (other than a change in par
     value or from par  value to no par  value or from no par value to par value
     or as a result of a stock dividend or subdivision,  split-up or combination
     of shares),  or any  consolidation  or merger of the  Company  with or into
     another corporation (where the Company is not the surviving  corporation or
     where  there is a change in or  distribution  with  respect  to the  Common
     Stock),   each  share  of  Series  B  Preferred   Stock  shall  after  such
     reorganization,  reclassification,  consolidation, or merger be convertible
     into the kind and number of shares of stock or other securities or property
     of  the  Company  or of  the  successor  corporation  resulting  from  such
     consolidation or surviving such merger,  if any, to which the holder of the
     number of shares of Common Stock deliverable (immediately prior to the time
     of such  reorganization,  reclassification,  consolidation  or merger) upon
     conversion  of such Series B Preferred  Stock would have been entitled upon
     such  reorganization,   reclassification,   consolidation  or  merger.  The
     provisions   of  this   clause   shall   similarly   apply  to   successive
     reorganizations, reclassifications, consolidations, or mergers.

          Notwithstanding anything contained in this Certificate of Designations
     to the  contrary,  in the event that the  Company  shall  effect any of the
     transactions  described  in this clause (vi),  each person  (other than the
     Company)  which may be  required to issue a new share of Series B Preferred
     Stock as provided above, shall assume by written  instrument  delivered to,
     and reasonably  satisfactory to, the Requisite  Holders (i) the obligations
     of the Company under this  Certificate of Designations  (and if the Company
     shall survive the consummation of such  transaction,  such assumption shall
     be in addition to, and shall not release the Company from,  any  continuing
     obligations of the Company under this Certificate of Designations) and (ii)
     the  obligation to deliver to all holders of Series B Preferred  Stock such
     new share of Series B Preferred  Stock as, in accordance with the foregoing
     provisions  of this clause (vi),  such holders of Series B Preferred  Stock
     may be entitled to receive,  and such person shall have similarly delivered
     to such holders of Series B Preferred  Stock an opinion of counsel for such
     person,  which counsel shall be  reasonably  satisfactory  to the Requisite
     Holders,  stating that this  Certificate of Designations  shall  thereafter
     continue  in full force and effect  and that the terms  hereof  (including,
     without  limitation,  all of the  provisions of this clause (vi),  shall be
     applicable to the stock, securities, cash or property which such person may
     be required to deliver upon any conversion of any of the Series B Preferred
     Stock or such new share of Series B Preferred  Stock or the exercise of any
     right pursuant hereto.

          (vii)  Deferral  in  Certain  Circumstances.  In any case in which the
     provisions  of this Section 8(d) shall  require  that an  adjustment  shall
     become effective  immediately  after a record date of an event, the Company
     may defer until the  occurrence  of such event (1) issuing to the holder of
     any Series B Preferred  Stock  converted  after such record date and before
     the occurrence of such event the shares of capital stock issuable upon such
     conversion by reason of the  adjustment  required by such event and issuing
     to such  holder  only the  shares  of  capital  stock  issuable  upon  such
     conversion before giving effect to such adjustments, and (2) paying to such
     holder any amount in cash in lieu of a  fractional  share of capital  stock
     pursuant to Section 8(c) above;  provided,  however, that the Company shall
     deliver to such holder an  appropriate  instrument or due bills  evidencing
     such holder's right to receive such additional shares and such cash.

          (viii) Other Anti-Dilution  Provisions.  (1) If the Company has issued
     or issues any securities on or after April 14, 2000  containing  provisions
     protecting  the holder or holders  thereof  against  dilution in any manner
     more  favorable  to such holder or holders  thereof than those set forth in
     this Section 8(d), such provisions (or any more favorable  portion thereof)
     shall be  deemed  to be  incorporated  herein as if fully set forth in this
     Certificate  of  Designations  and,  to the  extent  inconsistent  with any
     provision  of this  Certificate  of  Designations,  shall be  deemed  to be
     substituted  therefor; or (2) if any event occurs as to which the foregoing
     provisions of this Section 8(d) are not strictly applicable or, if strictly
     applicable,  would not fairly and adequately  protect the conversion rights
     of the  holders  of the Series B  Preferred  Stock in  accordance  with the
     essential  intent  and  principles  of such  provisions,  then the Board of
     Directors   shall  make  such   adjustments  in  the  application  of  such
     provisions,  in accordance with such essential  intent and  principles,  as
     shall be reasonably necessary to protect such purchase rights as aforesaid,
     but in no event shall any such adjustment have the effect of increasing the
     Conversion  Price or  decreasing  the  number of  shares  of  Common  Stock
     issuable upon the conversion of the Series B Preferred Stock.

          (ix) Appraisal Procedure.  In any case in which the provisions of this
     Section 8(d) shall necessitate that the Appraisal Procedure be utilized for
     purposes of determining an adjustment to the Conversion  Price, the Company
     may  defer  until  the  completion  of  the  Appraisal  Procedure  and  the
     determination  of the  adjustment (1) issuing to the holder of any share of
     Series  B  Preferred  Stock  converted  after  the date of the  event  that
     requires the  adjustment and before  completion of the Appraisal  Procedure
     and the  determination  of the  adjustment,  the  shares of  capital  stock
     issuable upon such conversion by reason of the adjustment  required by such
     event and issuing to such holder only the shares of capital stock  issuable
     upon such conversion before giving effect to such adjustment and (2) paying
     to such holder any amount in cash in lieu of a fractional  share of capital
     stock pursuant to Section 8(c) above;  provided,  however, that the Company
     shall  deliver  to such  holder  an  appropriate  instrument  or due  bills
     evidencing such holder's right to receive such  additional  shares and such
     cash.

          (x)  Exceptions.  Section  8(d) shall not apply to (1) any issuance of
     Common Stock upon  exercise of any options or warrants  outstanding  on the
     date  hereof,  (2) the  issuance of shares of Common  Stock in an aggregate
     amount not to exceed 500,000 shares to McLane Group, L.P., (3) the issuance
     of shares of Common  Stock in an aggregate  amount not to exceed  2,600,000
     shares upon  exercise of options or warrants that have been approved by the
     Board of Directors, or any issuance of such options or warrants, (4) shares
     of Common Stock issued  pursuant to the Company's  current  employee  stock
     purchase  plan in an amount not to exceed  114,000  shares (the  securities
     referred to in clauses (1), (2), (3) and (4) being collectively referred to
     as "Excluded Securities"),  or (5) any issuance of Common Stock in a widely
     distributed  underwritten  public  offering  at a price  per share at least
     equal to the Conversion Price then in effect if the  underwriting  discount
     does not exceed 7%.

          (xi) On the Outside Date, in the event that the Company shall not have
     obtained  the HSR  Approval,  the  Conversion  Price shall be reduced to an
     amount equal to 50% of the Conversion Price in effect  immediately prior to
     the Outside Date.

     Notwithstanding the foregoing,  in the case of shares of Series B Preferred
Stock  called for  redemption,  conversion  rights  will  expire at the close of
business  on the  redemption  date  unless the  Company  defaults  in making the
payment due upon redemption.

     (e) Exercise of Conversion  Privilege.  In order to exercise the conversion
privilege,  the holder of any share of Series B Preferred  Stock shall surrender
the certificate evidencing such share of Series B Preferred Stock, duly endorsed
or  assigned  to the  Company in blank,  at any office or agency of the  Company
maintained  for such purpose,  accompanied  by written  notice to the Company at
such office or agency that the holder  elects to convert such Series B Preferred
Stock or, if less than the entire amount thereof is to be converted, the portion
thereof to be converted.  Series B Preferred  Stock shall be deemed to have been
converted  immediately  prior  to  the  close  of  business  on  the  date  (the
"Conversion  Date") of surrender of such shares of Series B Preferred  Stock for
conversion in accordance  with the  foregoing  provisions,  and at such time the
rights of the  holder of such  shares  of Series B  Preferred  Stock as a holder
shall  cease,  and the person or persons  entitled to receive  the Common  Stock
issuable upon conversion  shall be treated for all purposes as the record holder
or  holders  of such  Common  Stock as and  after  such  time.  As  promptly  as
practicable on or after the  Conversion  Date, the Company shall issue and shall
deliver at any office or agency of the Company  maintained  for the surrender of
Series B Preferred  Stock a certificate or  certificates  for the number of full
shares of Common Stock issuable upon  conversion,  together with payment in lieu
of any  fraction of a share,  as provided  in Section  8(c).  In the case of any
certificate  evidencing shares of Series B Preferred Stock which is converted in
part only,  upon such  conversion  the Company  shall  execute and deliver a new
certificate evidencing the number of shares of Series B Preferred Stock that are
not converted.

     (f) Notice of Adjustment of Conversion Price. Whenever the Conversion Price
is adjusted as herein provided:

          (i) the  Company  shall  compute  the  adjusted  Conversion  Price  in
     accordance with Section 8(d) and shall prepare a certificate  signed by the
     Company's independent accounting firm setting forth the adjusted Conversion
     Price and showing in reasonable detail the facts upon which such adjustment
     is based, and such  certificate  shall forthwith be filed at each office or
     agency  maintained  for such purpose for  conversion  of shares of Series B
     Preferred Stock; and

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

     (g) Notice of Certain Corporate Action.

     In case:

          (i) the Company  shall take an action,  or an event shall occur,  that
     would require a Conversion Price adjustment pursuant to Section 8(d);

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

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

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

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

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

     (h) Company to Reserve Common Stock. The Company shall at all times reserve
and keep  available,  free from  preemptive  rights,  out of the  authorized but
unissued  Common  Stock or out of the  Common  Stock held in  treasury,  for the
purpose of effecting the conversion of Series B Preferred Stock, the full number
of shares of Common Stock then issuable upon the  conversion of all  outstanding
shares of Series B Preferred Stock. Before taking any action that would cause an
adjustment  reducing the  conversion  price below the then par value (if any) of
the shares of Common Stock deliverable upon conversion of the Series B Preferred
Stock,  the Company will take any  corporate  action that, in the opinion of its
counsel,  is necessary  in order that the Company may validly and legally  issue
fully paid and non-assessable shares of Common Stock at such adjusted conversion
price.

     (i)  Taxes  on  Conversions.  The  Company  will  pay any and all  original
issuance, transfer, stamp and other similar taxes that may be payable in respect
of the issue or delivery  of shares of Common  Stock on  conversion  of Series B
Preferred Stock pursuant hereto. The Company shall not, however,  be required to
pay any tax which may be  payable in respect  of any  transfer  involved  in the
issue and  delivery  of shares of Common  Stock in a name other than that of the
holder of the share(s) of Series B Preferred Stock to be converted,  and no such
issue or  delivery  shall be made  unless and until the person  requesting  such
issue has paid to the Company the amount of any such tax, or has  established to
the satisfaction of the Company that such tax has been paid.

     Section 9. Preemptive  Rights.  (a) Each holder of Series B Preferred Stock
shall have the right to purchase its Pro Rata Amount of any New Securities  that
the Company may, from time to time,  propose to sell and issue. In the event the
Company  proposes  to issue any New  Securities,  it shall  give all  holders of
Series B Preferred Stock written  notice,  at their last addresses as they shall
appear in the stock  register,  at least 20 Business Days before such  issuance,
describing  the type of New  Securities,  the  price and  number  of shares  (or
principal amount) and the general terms upon which the Company proposes to issue
the same.  Each such holder shall have 20 Business Days from the date of receipt
of any such notice to agree to purchase up to the amount of New Securities equal
to such holder's Pro Rata Amount of such New  Securities  for the price and upon
the  general  terms  specified  in the  notice by giving  written  notice to the
Company,  at its  principal  office or such other address as may be specified by
the Company in its written notice to the holders,  of such holder's intention to
purchase  such  New  Securities  at  the  initial  closing  of the  sale  of New
Securities  and the number of such New  Securities  that such holder  intends to
purchase.

     (b) In the event a holder of Series B Preferred  Stock fails to exercise in
full its right of participation  within said 20 Business Day period as set forth
in Section 9(a) above,  the Company  shall have thirty (30) days  thereafter  to
sell additional amounts of New Securities  respecting which such holder's option
was not  exercised,  at the price and upon the terms  specified in the Company's
notice.  The  Company  shall not  issue or sell any  additional  amounts  of New
Securities  after the  expiration of such 30-day period  without first  offering
such  securities  to the  holders  of  Series B  Preferred  Stock in the  manner
provided above.

     (c) The rights set forth in this Section 9, including the notice provisions
relating thereto, may be waived by the Requisite Holders.

     Section 10. Event of  Non-Compliance.  Upon the  occurrence of any Event of
Non-Compliance,  the Company shall give the holders of Series B Preferred  Stock
prompt notice of such occurrence and shall use reasonable  commercial efforts to
cure promptly such Event of Non-Compliance.

     Section 11. Indemnification and Insurance.  (a) The Company shall indemnify
its  directors to the fullest  extent  authorized or permitted by law, as now or
hereafter in effect,  and such right to  indemnification  shall continue as to a
person who has ceased to be a director  of the  Company  and shall  inure to the
benefit of his or her heirs,  executors and personal and legal  representatives;
provided,   however,   that,   except  for  proceedings  to  enforce  rights  to
indemnification,  the Company  shall not be obligated to indemnify  any director
(or his or her  heirs,  executors  or  personal  or  legal  representatives)  in
connection  with a proceeding (or part thereof)  initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors.  The right to  indemnification  conferred  by this  Section  11 shall
include the right to be paid by the Company the  expenses  incurred in defending
or  otherwise   participating   in  any  proceeding  in  advance  of  its  final
disposition.  The  rights to  indemnification  and to the  advance  of  expenses
conferred in this Section 11 shall not be exclusive of any other right which any
person  may  have or  hereafter  acquire  under  the  Company's  Certificate  of
Incorporation  or  Bylaws,  any  statute,  agreement,  vote of  stockholders  or
disinterested directors or otherwise. Any repeal or modification of this Section
11 or this Certificate of Designations  shall not adversely affect any rights to
indemnification  and to the advancement of expenses of a director of the Company
existing at the time of such repeal or modification  with respect to any acts or
omissions occurring prior to such repeal or modification.

     (b) The Company  shall  purchase  and  maintain  insurance on behalf of any
person who is or was a director of the Company  against any  liability  asserted
against such person and incurred by such person in any such capacity, or arising
out of such person's  status as such,  whether or not the Company would have the
power or the obligation to indemnify  such person  against such liability  under
the provisions of Section 11(a). Such insurance shall be in amounts and on other
terms as are customary for corporations similar in size to the Company.

<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Certificate of Designations
to be signed by  ________________,  its _________,  and attested by ___________,
its Secretary, this ____ day of __________, 2000.

                                            By:_________________________________
                                               Name:
                                               Title:

Attested:

By:_________________________
   Secretary

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