Document:

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                                                                   Exhibit 10.14

                                  PEAPOD, INC

              AMENDED AND RESTATED 1997 LONG-TERM INCENTIVE PLAN

                               I.  INTRODUCTION

          1.1  Purposes.  The purposes of the 1997 Long-Term Incentive Plan (the
               --------
"Plan") of Peapod, Inc. (the "Company"), and its subsidiaries from time to time
(individually a "Subsidiary" and collectively the "Subsidiaries"), are (a) to
align the interests of the Company's stockholders and the recipients of awards
under this Plan by increasing the proprietary interest of such recipients in the
Company's growth and success, (b) to advance the interests of the Company by
attracting and retaining officers and other key employees, and well-qualified
persons who are not officers or employees of the Company ("non-employee
directors") for service as independent contractors, consultants or directors of
the Company and (c) to motivate such employees, independent contractors,
consultants and non-employee directors to act in the long-term best interests of
the Company's stockholders. For purposes of this Plan, references to employment
by the Company shall also mean employment by a Subsidiary.

          1.2  Certain Definitions.
               -------------------

          "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2, as in effect on the effective date of this
Plan, under the Exchange Act; provided, however, that no director or officer of
                              --------  -------
the Company shall be deemed an Affiliate or Associate of any other director or
officer of the Company solely as a result of his or her being a director or
officer of the Company.

          "Agreement" shall mean the written agreement evidencing an award
hereunder between the Company and the recipient of such award.

          "Beneficial Owner" (including the terms "Beneficially Own" and
"Beneficial Ownership"), when used with respect to any Person, shall be deemed
to include any securities which:

          (a) such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly (determined as provided in Rule 13d-3,
as in effect on the effective date of this Plan, under the Exchange Act);

          (b) such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has:

          (i) the right to acquire (whether such right is exercisable
     immediately or only after the passage of time or upon the satisfaction of
     any conditions, or both) pursuant to any written or oral agreement,
     arrangement or understanding (other than customary
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     agreements with and among underwriters and selling group members with
     respect to a bona fide public offering of securities), upon the exercise of
     any options, warrants, rights or conversion or exchange privileges or
     otherwise; provided, however, that a Person shall not be deemed the
                --------  -------
     Beneficial Owner of, or to Beneficially Own securities tendered pursuant to
     a tender or exchange offer made by or on behalf of such Person or any of
     such Person's Affiliates or Associates until such tendered securities are
     accepted for purchase or exchange; or

          (ii)  the right to vote pursuant to any written or oral agreement,
     arrangement or understanding; provided, however, that a Person shall not be
                                   --------  -------
     deemed the Beneficial Owner of, or to Beneficially Own, any security
     otherwise subject to this item (ii) if such agreement, arrangement or
     understanding to vote (1) arises solely from a revocable proxy or consent
     given to such Person or any of such Person's Affiliates or Associates in
     response to a public proxy or consent solicitation made pursuant to, and in
     accordance with, the applicable rules and regulations under the Exchange
     Act and (2) is not also then reportable by such Person on Schedule 13D (or
     any comparable or successor report then in effect) under the Exchange Act;
     or

          (iii) the right to dispose of pursuant to any written or oral
     agreement, arrangement or understanding (other than customary agreements
     with and among underwriters and selling group members with respect to a
     bona fide public offering of securities); or

          (c)   are beneficially owned, directly or indirectly, by any other
Person with which such Person or any of such Person's Affiliates or Associates
has any written or oral agreement, arrangement or understanding (other than
customary agreements with and among underwriters and selling group members with
respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent contemplated by the proviso to
item (ii) of subparagraph (b) of the first paragraph of this definition) or
disposing of any securities of the Company.

          Notwithstanding the first paragraph of this definition, no director or
officer of the Company shall be deemed to be the "Beneficial Owner" of, or to
"Beneficially Own," shares of Common Stock or other securities of the Company
beneficially owned by any other director or officer of the Company solely as a
result of his or her being a director or officer of the Company.

          "Board" shall mean the Board of Directors of the Company.

          "Bonus Stock" shall mean shares of Common Stock which are not subject
to a Restriction Period or Performance Measures.

          "Bonus Stock Award" shall mean an award of Bonus Stock under this
Plan.

          "Cause" shall mean embezzlement or misappropriation of corporate
funds, other act of dishonesty, significant activities harmful to the reputation
of the Company, willful refusal to perform or substantial disregard of an
employee's duties or significant violation of any statutory or common law duty
of loyalty to the Company.

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          "Change in Control" shall have the meaning set forth in Section
6.8(b).

          "Code" shall mean the Internal Revenue Code of 1986, as amended.

          "Committee" shall mean the Committee designated by the Board,
consisting of two or more members of the Board, each of whom shall be (a) a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange Act
and (b) an "outside director" within the meaning of Section 162(m) of the Code,
subject to any transition rules applicable to the definition of outside
director.

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

          "Conversion" shall mean the conversion effected in accordance with
that certain Conversion Agreement and Plan of Reorganization pursuant to which
(i) all equity interests in Peapod LP, an Illinois limited partnership ("Old
Peapod"), will be transferred to the Company for shares of Common Stock, (ii)
Old Peapod will dissolve, (iii) all assets and liabilities of Old Peapod will be
transferred to the Company and (iv) outstanding options and warrants for equity
interests in Old Peapod will be converted into options and warrants for shares
of Common Stock.

          "Company" has the meaning specified in Section 1.1.

          "Directors Options" shall have the meaning set forth in Section 5.1.

          "Disability" shall mean the inability for a continuous period of at
least six months of the holder of an award to perform substantially such
holder's duties and responsibilities, as determined solely by the Committee.

          "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.

          "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

          "Exempt Person" shall mean each of Andrew B. Parkinson and Thomas L.
Parkinson and each Affiliate thereof.

          "Fair Market Value" shall mean, on the commencement of the Company's
initial public offering of Common Stock, the initial public offering price of a
share of Common Stock, and thereafter, the last sale price of a share of Common
Stock as reported in the National Association of Securities Dealers Automated
Quotation National Market System on the date as of which such value is being
determined, or, if the Common Stock is listed on a national securities exchange,
the last sale price of a share of Common Stock on the principal national stock
exchange on which the Common Stock is traded on the date as of which such value
is being determined, or, if there shall be no reported transactions for such
date, on the next preceding date for which transactions were reported; provided,
                                                                       --------
however, that if Fair Market Value for any date cannot be so determined, Fair
-------
Market Value shall be determined by the Committee by whatever means or method as
the Committee, in the good faith exercise of its discretion, shall at such time
deem appropriate.

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          "Free-Standing SAR" shall mean an SAR which is not issued in tandem
with, or by reference to, an option, which entitles the holder thereof to
receive, upon exercise, shares of Common Stock (which may be Restricted Stock),
cash or a combination thereof with an aggregate value equal to the excess of the
Fair Market Value of one share of Common Stock on the date of exercise over the
base price of such SAR, multiplied by the number of such SARs which are
exercised.

          "Incentive Stock Option" shall mean an option to purchase shares of
Common Stock that meets the requirements of Section 422 of the Code, or any
successor provision, which is intended by the Committee to constitute an
Incentive Stock Option.

          "Incumbent Board" shall have the meaning set forth in Section
6.8(b)(ii) hereof.

          "Mature Shares" shall mean shares of Common Stock for which the holder
thereof has good title, free and clear of all liens and encumbrances and which
such holder either (a) has held for at least six months or (b) has purchased on
the open market.

          "Non-Employee Director" shall mean any director of the Company who is
not an officer or employee of the Company or any Subsidiary (except in the
definition of Committee, in which case "Non-Employee Director" shall have the
meaning set forth in Rule 16b-3 under the Exchange Act).

          "Non-Statutory Stock Option" shall mean a stock option which is not an
Incentive Stock Option.

          "Old Options" shall mean the outstanding options to purchase equity
interests in Old Peapod, which options are being exchanged in the Conversion for
options to purchase a like number of shares of Common Stock in the Company.

          "Performance Measures" shall mean the criteria and objectives,
established by the Committee, which shall be satisfied or met (a) as a condition
to the exercisability of all or a portion of an option or SAR or (b) during the
applicable Restriction Period or Performance Period as a condition to the
holder's receipt, in the case of a Restricted Stock Award, of the shares of
Common Stock subject to such award, or, in the case of a Performance Share
Award, of payment with respect to such award.  Such criteria and objectives may
include one or more of the following:  the attainment by a share of Common Stock
of a specified Fair Market Value for a specified period of time, earnings per
share, return to stockholders (including dividends), return on equity, earnings
of the Company, revenues, market share, cash flows or cost reduction goals, or
any combination of the foregoing.  If the Committee desires that compensation
payable pursuant to any award subject to Performance Measures be "qualified
performance-based compensation" within the meaning of section 162(m) of the
Code, the Performance Measures shall be established by the Committee no later
than the end of the first quarter of the Performance Period or Restriction
Period, as applicable (or such other time designated by the Internal Revenue
Service).

          "Performance Period" shall mean any period designated by the Committee
during which the Performance Measures applicable to a Performance Share Award
shall be measured.

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          "Performance Share" shall mean a right, contingent upon the attainment
of specified Performance Measures within a specified Performance Period, to
receive one share of Common Stock, which may be Restricted Stock, or in lieu
thereof, the Fair Market Value of such Performance Share in cash.

          "Performance Share Award" shall mean an award of Performance Shares
under this Plan.

          "Permanent and Total Disability" shall have the meaning set forth in
Section 22(e)(3) of the Code or any successor thereto.

          "Person" shall mean any individual, firm, corporation, partnership or
other entity, and shall include any successor (by merger or otherwise) of any of
the forgoing.

          "Restricted Stock" shall mean shares of Common Stock which are subject
to a Restriction Period.

          "Restricted Stock Award" shall mean an award of Restricted Stock under
this Plan.

          "Restriction Period" shall mean any period designated by the Committee
during which the Common Stock subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the Agreement relating to such
award.

          "SAR" shall mean a stock appreciation right which may be a Free-
Standing SAR or a Tandem SAR.

          "Stock Award" shall mean a Restricted Stock Award or a Bonus Stock
Award.

          "Substitute Options" shall mean the options to purchase shares of
Common Stock in the Company that are being substituted in the Conversion for the
outstanding options to purchase equity interests in Old Peapod.

          "Tandem SAR" shall mean an SAR which is granted in tandem with, or by
reference to, an option (including a Non-Statutory Stock Option granted prior to
the date of grant of the SAR), which entitles the holder thereof to receive,
upon exercise of such SAR and surrender for cancellation of all or a portion of
such option, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise over the base
price of such SAR, multiplied by the number of shares of Common Stock subject to
such option, or portion thereof, which is surrendered.

          "Tax Date" shall have the meaning set forth in Section 6.5.

          "Ten Percent Holder" shall have the meaning set forth in Section
2.1(a).

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          1.3  Administration.  This Plan shall be administered by the
               --------------
Committee.  Subject to Section 6.1, any one or a combination of the following
awards may be made under this Plan to eligible persons:  (a) options to purchase
shares of Common Stock in the form of Incentive Stock Options or Non-Statutory
Stock Options, (b) SARs in the form of Tandem SARs or Free-Standing SARs, (c)
Stock Awards in the form of Restricted Stock or Bonus Stock and (d) Performance
Shares.  The Committee shall, subject to the terms of this Plan, select eligible
persons for participation in this Plan and determine the form, amount and timing
of each award to such persons and, if applicable, the number of shares of Common
Stock, the number of SARs and the number of Performance Shares subject to such
an award, the exercise price or base price associated with the award, the time
and conditions of exercise or settlement of the award and all other terms and
conditions of the award, including, without limitation, the form of the
Agreement evidencing the award.  The Committee shall, subject to the terms of
this Plan, interpret this Plan and the application thereof, establish rules and
regulations it deems necessary or desirable for the administration of this Plan
and may impose, incidental to the grant of an award, conditions with respect to
the award, such as limiting competitive employment or other activities.  All
such interpretations, rules, regulations and conditions shall be conclusive and
binding on all parties.

          The Committee may delegate some or all of its power and authority
hereunder to the Chief Executive Officer or other executive officer of the
Company as the Committee deems appropriate; provided, however, that the
                                            --------  -------
Committee may not delegate its power and authority with regard to (a) the grant
of an award under this Plan to any person who is a "covered employee" within the
meaning of Section 162(m) of the Code or who, in the Committee's judgment, is
likely to be a covered employee at any time during the period an award hereunder
to such employee would be outstanding or (b) the selection for participation in
this Plan of an officer or other person subject to Section 16 of the Exchange
Act or decisions concerning the timing, pricing or amount of an award to such an
officer or other person.

          No member of the Board of Directors or Committee, and neither the
Chief Executive Officer nor any other executive officer to whom the Committee
delegates any of its power and authority hereunder, shall be liable for any act,
omission, interpretation, construction or determination made in connection with
this Plan in good faith, and the members of the Board of Directors and the
Committee and the President and Chief Executive Officer or other executive
officer shall be entitled to indemnification and reimbursement by the Company in
respect of any claim, loss, damage or expense (including attorneys' fees)
arising therefrom to the full extent permitted by law, except as otherwise may
be provided in the Company's Certificate of Incorporation and/or By-laws, as the
same may be amended or restated from time to time, and under any directors' and
officers' liability insurance that may be in effect from time to time.

          A majority of the Committee shall constitute a quorum.  The acts of
the Committee shall be either (a) acts of a majority of the members of the
Committee present at any meeting at which a quorum is present or (b) acts
approved in writing by a majority of the members of the Committee without a
meeting.

          Notwithstanding anything to the contrary herein, any grant of awards
to a Non-Employee Director shall require the approval of the Board.

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          1.4  Eligibility.  Participants in this Plan shall consist of
               -----------
employees who are such directors, officers or other key employees of the Company
and its Subsidiaries, as well as such independent contractors and consultants,
as the Committee, in its sole discretion, may select from time to time.  The
Committee's selection of a person to participate in this Plan at any time shall
not require the Committee to select such person to participate in this Plan at
any other time.  Non-Employee Directors shall also be eligible to participate in
this Plan in accordance with Article V.

          1.5  Shares Available.  Subject to adjustment as provided in Sections
               ----------------
6.7 and 6.8, 4,300,000 shares of Common Stock shall be available under this
Plan, reduced by the sum of the aggregate number of shares of Common Stock (a)
that are issued upon the grant of a Stock Award and (b) which become subject to
outstanding options, including Directors' Options, outstanding Free-Standing
SARs and outstanding Performance Shares.  To the extent that shares of Common
Stock subject to an outstanding option (other than in connection with the
exercise of a Tandem SAR), Free-Standing SAR or Performance Share are not issued
or delivered by reason of the expiration, termination, cancellation or
forfeiture of such award or by reason of the delivery or withholding of shares
of Common Stock to pay all or a portion of the exercise price of an award, if
any, or to satisfy all or a portion of the tax withholding obligations relating
to an award, then such shares of Common Stock shall again be available under
this Plan.

          Shares of Common Stock to be delivered under this Plan shall be made
available from authorized and unissued shares of Common Stock, or authorized and
issued shares of Common Stock reacquired and held as treasury shares or
otherwise or a combination thereof.

          To the extent required by Section 162(m) of the Code and the rules and
regulations thereunder, the maximum number of shares of Common Stock with
respect to which options (excluding the Substitute Options) or SARs, Stock
Awards or Performance Share Awards, or a combination thereof may be granted
during any calendar year to any person shall be 330,000 subject to adjustment as
provided in Section 6.7.

          1.6  Substitute Options.  Notwithstanding anything to the contrary
               ------------------
herein, the exercise price, vesting schedule and expiration of the Substitute
Options shall be as set forth in the new option agreements covering such
Substitute Options, which agreements reflect certain terms of the Old Options.

               II.  STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

          2.1  Stock Options.  The Committee may, in its discretion, grant
               -------------
options to purchase shares of Common Stock to such eligible persons as may be
selected by the Committee.  Each option, or portion thereof, that is not an
Incentive Stock Option, shall be a Non-Statutory Stock Option.  Each Incentive
Stock Option shall be granted within ten years of the effective date of this
Plan.  To the extent that the aggregate Fair Market Value (determined as of the
date of grant) of shares of Common Stock with respect to which options
designated as Incentive Stock Options are exercisable for the first time by a
participant during any calendar year (under this Plan or any other plan of the
Company, or any parent or Subsidiary) exceeds the amount

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(currently $100,000) established by the Code, such options shall constitute Non-
Statutory Stock Options.

          Options shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not inconsistent with the
terms of this Plan, as the Committee shall deem advisable:

          (a) Number of Shares and Purchase Price.  The number of shares of
              -----------------------------------
Common Stock subject to an option shall be determined by the Committee.  The
purchase price per share of Common Stock purchasable upon exercise of the option
shall be determined by the Committee; provided, however, that the purchase price
                                      --------  -------
per share of Common Stock purchasable upon exercise of an option shall not be
less than 100% of the Fair Market Value of a share of Common Stock on the date
of grant of such option; provided further, that if an Incentive Stock Option
                         -------- -------
shall be granted to any person who, at the time such option is granted, owns
capital stock possessing more than ten percent of the total combined voting
power of all classes of capital stock of the Company (or of any parent or
Subsidiary) (a "Ten Percent Holder"), the purchase price per share of Common
Stock shall be the price (currently 110% of Fair Market Value) required by the
Code in order to constitute an Incentive Stock Option.

          (b) Option Period and Exercisability.  The period during which an
              --------------------------------
option may be exercised shall be determined by the Committee; provided, however,
                                                              --------  -------
that no Incentive Stock Option shall be exercised later than ten years after its
date of grant; provided further, that if an Incentive Stock Option shall be
granted to a Ten Percent Holder, such option shall not be exercised later than
five years after its date of grant.  The Committee may, in its discretion,
establish Performance Measures which shall be satisfied or met as a condition to
the grant of an option or to the exercisability of all or a portion of an
option.  The Committee shall determine whether an option shall become
exercisable in cumulative or non-cumulative installments and in part or in full
at any time.  An exercisable option, or portion thereof, may be exercised only
with respect to whole shares of Common Stock, except that if the remaining
option then exercisable is for less than a whole share, such remaining amount
may be exercised.

          (c) Method of Exercise.  An option may be exercised (i) by giving
              ------------------
written notice to the Company specifying the number of whole shares of Common
Stock to be purchased and accompanied by payment therefor in full (or
arrangement made for such payment to the Company's satisfaction) either (1) in
cash, (2) by delivery of Mature Shares having a Fair Market Value, determined as
of the date of exercise, equal to the aggregate purchase price payable by reason
of such exercise, (3) by authorizing the Company to withhold whole shares of
Common Stock which would otherwise be delivered upon exercise of the option
having a Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (4) in cash by a
broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (5) a combination of (1), (2) and (3), in each
case to the extent set forth in the Agreement relating to the option, (ii) if
applicable, by surrendering to the Company any Tandem SARs which are canceled by
reason of the exercise of the option and (iii) by executing such documents as
the Company may reasonably request.  The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (2)-(5).  Any fraction of a
share of Common Stock which would be required to pay such purchase price shall
be disregarded and the remaining amount due shall be paid in cash by the
optionee.

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No certificate representing Common Stock shall be delivered until the full
purchase price therefor has been paid.

          (d)  Additional Options.  The Committee shall have the authority to
               ------------------
include in any Agreement relating to an option a provision entitling the
optionee to an additional option in the event such optionee exercises the option
represented by such option agreement, in whole or in part, by delivering
previously owned whole shares of Common Stock in payment of the purchase price
in accordance with this Plan and such Agreement.  Any such additional option
shall be for a number of shares of Common Stock equal to the number of delivered
shares, shall have a purchase price determined by the Committee in accordance
with this Plan, shall be exercisable on the terms and subject to the conditions
set forth in the Agreement relating to such additional option.

          2.2  Stock Appreciation Rights.  The Committee may, in its discretion,
               -------------------------
grant SARs to such eligible persons as may be selected by the Committee.  The
Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR or a
Free-Standing SAR.

          SARs shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem advisable:

          (a)  Number of SARs and Base Price.  The number of SARs subject to an
               -----------------------------
award shall be determined by the Committee.  Any Tandem SAR related to an
Incentive Stock Option shall be granted at the same time that such Incentive
Stock Option is granted.  The base price of a Tandem SAR shall be the purchase
price per share of Common Stock of the related option.  The base price of a
Free-Standing SAR shall be determined by the Committee; provided, however, that
                                                        --------  -------
such base price shall not be less than 100% of the Fair Market Value of a share
of Common Stock on the date of grant of such SAR.

          (b)  Exercise Period and Exercisability.  The Agreement relating to an
               ----------------------------------
award of SARs shall specify whether such award may be settled in shares of
Common Stock (including shares of Restricted Stock) or cash or a combination
thereof.  The period for the exercise of an SAR shall be determined by the
Committee; provided, however, that no Tandem SAR shall be exercised later than
           --------  -------
the expiration, cancellation, forfeiture or other termination of the related
option.  The Committee may, in its discretion, establish Performance Measures
which shall be satisfied or met as a condition to the exercisability of an SAR.
The Committee shall determine whether an SAR may be exercised in cumulative or
non-cumulative installments and in part or in full at any time.  An exercisable
SAR, or portion thereof, may be exercised, in the case of a Tandem SAR, only
with respect to whole shares of Common Stock and, in the case of a Free-Standing
SAR, only with respect to a whole number of SARs.  If an SAR is exercised for
shares of Restricted Stock, a certificate or certificates representing such
Restricted Stock shall be issued in accordance with Section 3.2(c) and the
holder of such Restricted Stock shall have such rights of a stockholder of the
Company as determined pursuant to Section 3.2(d).  Prior to the exercise of an
SAR for shares of Common Stock, including Restricted Stock, the holder of such
SAR shall have no rights as a stockholder of the Company with respect to the
shares of Common Stock subject to such SAR.

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          (c) Method of Exercise.  A Tandem SAR may be exercised (i) by giving
              ------------------
written notice to the Company specifying the number of whole SARs which are
being exercised, (ii) by surrendering to the Company any options which are
canceled by reason of the exercise of the Tandem SAR and (iii) by executing such
documents as the Company may reasonably request.  A Free-Standing SAR may be
exercised (i) by giving written notice to the Company specifying the whole
number (or if the remaining SAR then exercisable is for less then one whole
share, such remaining amount) of SARs which are being exercised and (ii) by
executing such documents as the Company may reasonably request.

          2.3 Termination of Employment or Service with the Company.
              -----------------------------------------------------

          (a) Disability.  Subject to paragraph (f) below and Section 6.8, and
              ----------
unless otherwise specified in the Agreement relating to an option or SAR, as the
case may be, if the employment or service with the Company of the holder of an
option or SAR terminates by reason of Disability, each option and SAR held by
such holder shall be exercisable only to the extent that such option or SAR, as
the case may be, is exercisable on the effective date of such holder's
termination of employment or service and may thereafter be exercised by such
holder (or such holder's legal representative or similar person) until and
including the earliest to occur of (i) the date which is three months (or such
other period as set forth in the Agreement relating to such option or SAR) after
the effective date of such holder's termination of employment or service and
(ii) the expiration date of the term of such option or SAR.

          (b) Retirement.  Subject to paragraph (f) below and Section 6.8, and
              ----------
unless otherwise specified in the Agreement relating to an option or SAR, as the
case may be, if the employment or service with the Company of the holder of an
option or SAR terminates by reason of retirement on or after age 65 with the
consent of the Company, each option and SAR held by such holder shall be
exercisable only to the extent that such option or SAR, as the case may be, is
exercisable on the effective date of such holder's termination of employment or
service and may thereafter be exercised by such holder (or such holder's legal
representative or similar person) until and including the earliest to occur of
(i) the date which is three months (or such other period as set forth in the
Agreement relating to such option or SAR) after the effective date of such
holder's termination of employment or service and (ii) the expiration date of
the term of such option or SAR.

          (c) Death.  Subject to paragraph (f) below and Section 6.8, and unless
              -----
otherwise specified in the Agreement relating to an option or SAR, as the case
may be, if the employment or service with the Company of the holder of an option
or SAR terminates by reason of death, each option and SAR held by such holder
shall be exercisable only to the extent that such option or SAR, as the case may
be, is exercisable on the date of such holder's death, and may thereafter be
exercised by such holder's executor, administrator, legal representative,
beneficiary or similar person, as the case may be, until and including the
earliest to occur of (i) the date which is one year (or such other period as set
forth in the Agreement relating to such option or SAR) after the date of death
and (ii) the expiration date of the term of such option or SAR.

          (d) Other Termination.  If the employment or service with the Company
              -----------------
of the holder of an option or SAR is terminated by the Company for Cause, each
option and SAR held

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by such holder shall terminate automatically on the effective date of such
holder's termination of employment or service.

          Subject to paragraph (f) below and Section 6.8, and unless specified
in the Agreement relating to an option or SAR, as the case may be, if the
employment or service with the Company of the holder of an option or SAR
terminates for any reason other than Disability, retirement on or after age 65
with the consent of the Company, death or for Cause, each option and SAR held by
such holder shall be exercisable only to the extent that such option or SAR is
exercisable on the effective date of such holder's termination of employment or
service and may thereafter be exercised by such holder (or such holder's legal
representative or similar person) until and including the earliest to occur of
(i) the date which is three months (or such other period as set forth in the
Agreement relating to such option or SAR) after the effective date of such
holder's termination of employment or service and (ii) the expiration date of
the term of such option or SAR.

          (e) Death Following Termination of Employment or Service.  Subject to
              ----------------------------------------------------
paragraph (f) below and Section 6.8, and unless otherwise specified in the
Agreement relating to an option or SAR, as the case may be, if the holder of an
option or SAR dies during the three-month period following termination of
employment or service by reason of Disability, or if the holder of an option or
SAR dies during the three-month period following termination of employment or
service by reason of retirement on or after age 65 with the consent of the
Company, or if the holder of an option or SAR dies during the three-month period
following termination of employment or service for any reason other than
Disability or retirement on or after age 65 with the consent of the Company (or,
in each case, such other period as set forth in the Agreement relating to such
option or SAR), each option and SAR held by such holder shall be exercisable
only to the extent that such option or SAR is exercisable on the effective date
of such holder's termination and may thereafter be exercised by the holder's
executor, administrator, legal representative, beneficiary or similar person, as
the case may be, until and including the earliest to occur of (i) the date which
is one year (or such other period as set forth in the Agreement relating to such
option or SAR) after the date of death and (ii) the expiration date of the term
of such option or SAR.

          (f) Termination of Employment or Service - Incentive Stock Options.
              --------------------------------------------------------------
Subject to Section 6.8 and unless otherwise specified in the Agreement relating
to the option, if the employment or service with the Company of a holder of an
incentive stock option terminates by reason of Permanent and Total Disability
(as defined in Section 22(e)(3) of the Code), each incentive stock option held
by such optionee shall be exercisable only to the extent that such option is
exercisable on the effective date of such optionee's termination of employment
or service by reason of Permanent and Total Disability, and may thereafter be
exercised by such optionee (or such optionee's legal representative or similar
person) until and including the earliest to occur of (i) the date which is three
months (or such other period no longer than one year as set forth in the
Agreement relating to such option) after the effective date of such optionee's
termination of employment or service by reason of Permanent and Total Disability
and (ii) the expiration date of the term of such option.

          Subject to Section 6.8 and unless otherwise specified in the Agreement
relating to the option, if the employment or service with the Company of a
holder of an Incentive Stock

                                       11
<PAGE>

Option terminates by reason of death, each Incentive Stock Option held by such
optionee shall be exercisable only to the extent that such option is exercisable
on the date of such optionee's death and may thereafter be exercised by such
optionee's executor, administrator, legal representative, beneficiary or similar
person until and including the earliest to occur of (i) the date which is one
year (or such other period as set forth in the Agreement relating to such
option) after the date of death and (ii) the expiration date of the term of such
option.

          If the employment or service with the Company of the optionee of an
Incentive Stock Option is terminated by the Company for Cause, each Incentive
Stock Option held by such optionee shall terminate automatically on the
effective date of such optionee's termination of employment or service.

          Subject to Section 6.8 and unless otherwise specified in the Agreement
relating to the option, if the employment or service with the Company of a
holder of an Incentive Stock Option terminates for any reason other than
Permanent and Total Disability, death or Cause, each Incentive Stock Option held
by such optionee shall be exercisable only to the extent such option is
exercisable on the effective date of such optionee's termination of employment
or service, and may thereafter be exercised by such holder (or such holder's
legal representative or similar person) until and including the earliest to
occur of (i) the date which is three months after the effective date of such
optionee's termination of employment or service and (ii) the expiration date of
the term of such option.

          If the holder of an Incentive Stock Option dies during the three-month
period following termination of employment or service by reason of Permanent and
Total Disability (or such other period as set forth in the Agreement relating to
such option), or if the holder of an Incentive Stock Option dies during the
three-month period following termination of employment or service for any reason
other than Permanent and Total Disability, death or Cause, each Incentive Stock
Option held by such optionee shall be exercisable only to the extent such option
is exercisable on the effective date of such optionee's termination and may
thereafter be exercised by the optionee's executor, administrator, legal
representative, beneficiary or similar person until and including the earliest
to occur of (i) the date which is one year (or such other period as set forth in
the Agreement relating to such option) after the date of death and (ii) the
expiration date of the term of such option.

                              III.  STOCK AWARDS

          3.1  Stock Awards.  The Committee may, in its discretion, grant Stock
               ------------
Awards to such eligible persons as may be selected by the Committee.  Subject to
adjustment as provided in Sections 6.7 and 6.8 of this Plan, the aggregate
number of shares of Common Stock available under this Plan for all Stock Awards
shall not exceed 500,000 of the aggregate number of shares of Common Stock
available under this Plan.  The Agreement relating to a Stock Award shall
specify whether the Stock Award is a Restricted Stock Award or Bonus Stock
Award.

          3.2  Terms of Stock Awards.  Stock Awards shall be subject to the
               ---------------------
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable.

                                       12
<PAGE>

          (a) Number of Shares and Other Terms.  The number of shares of Common
              --------------------------------
Stock subject to a Restricted Stock Award or Bonus Stock Award and the
Performance Measures (if any) and Restriction Period applicable to a Restricted
Stock Award shall be determined by the Committee.

          (b) Vesting and Forfeiture.  The Agreement relating to a Restricted
              ----------------------
Stock Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of the
shares of Common Stock subject to such award (i) if specified Performance
Measures are satisfied or met during the specified Restriction Period or (ii) if
the holder of such award remains continuously in the employment or service of
the Company during the specified Restricted Period and for the forfeiture of the
shares of Common Stock subject to such award (x) if specified Performance
Measures are not satisfied or met during the specified Restriction Period or (y)
if the holder of such award does not remain continuously in the employment or
service of the Company during the specified Restriction Period.

          Bonus Stock Awards shall not be subject to any Performance Measures or
Restriction Periods.

          (c) Share Certificates.  During the Restriction Period, a certificate
              ------------------
or certificates representing a Restricted Stock Award shall be registered in the
holder's name and may bear a legend, in addition to any legend which may be
required pursuant to Section 6.6, indicating that the ownership of the shares of
Common Stock represented by such certificate is subject to the restrictions,
terms and conditions of this Plan and the Agreement relating to the Restricted
Stock Award.  All such certificates shall be deposited with the Company,
together with stock powers or other instruments of assignment (including a power
of attorney), each endorsed in blank with a guarantee of signature if deemed
necessary or appropriate by the Company, which would permit transfer to the
Company of all or a portion of the shares of Common Stock subject to the
Restricted Stock Award in the event such award is forfeited in whole or in part.
Upon termination of any applicable Restriction Period (and the satisfaction or
attainment of applicable Performance Measures), or upon the grant of a Bonus
Stock Award, in each case subject to the Company's right to require payment of
any taxes in accordance with Section 6.5, a certificate or certificates
evidencing ownership of the requisite number of shares of Common Stock shall be
delivered to the holder of such award.

          (d) Rights with Respect to Restricted Stock Awards.  Unless otherwise
              ----------------------------------------------
set forth in the Agreement relating to a Restricted Stock Award, and subject to
the terms and conditions of a Restricted Stock Award, the holder of such award
shall have all rights as a stockholder of the Company, including, but not
limited to, voting rights, the right to receive dividends and the right to
participate in any capital adjustment applicable to all holders of Common Stock;
provided, however, that a distribution with respect to shares of Common Stock,
--------  -------
other than a distribution in cash, shall be deposited with the Company and shall
be subject to the same restrictions as the shares of Common Stock with respect
to which such distribution was made.

          (e) Awards to Certain Executive Officers.  Notwithstanding any other
              ------------------------------------
provision of this Article III, and only to the extent necessary to ensure the
deductibility of the award to the

                                       13
<PAGE>

Company, the Fair Market Value of the number of shares of Common Stock subject
to a Stock Award granted to a "covered employee" within the meaning of Section
162(m) of the Code shall not exceed $1,000,000 (i) at the time of grant in the
case of a Stock Award granted upon the attainment of Performance Measures or
(ii) in the case of a Restricted Stock Award with Performance Measures which
shall be satisfied or met as a condition to the holder's receipt of the shares
of Common Stock subject to such award, on the earlier of (x) the date on which
the Performance Measures are satisfied or met and (y) the date the holder makes
an election under Section 83(b) of the Code.

          3.3  Termination of Employment or Service.  Subject to Section 6.8 and
               ------------------------------------
unless otherwise set forth in the Agreement relating to a Restricted Stock
Award, if the employment or service with the Company of the holder of such award
terminates, the portion of such award which is subject to a Restriction Period
shall terminate as of the effective date of such holder's termination of
employment or service and shall be forfeited and such portion shall be canceled
by the Company.

                         IV.  PERFORMANCE SHARE AWARDS

          4.1  Performance Share Awards.  The Committee may, in its discretion,
               ------------------------
grant Performance Share Awards to such eligible persons as may be selected by
the Committee.

          4.2  Terms of Performance Share Awards.  Performance Share Awards
               ---------------------------------
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem advisable.

          (a)  Number of Performance Shares and Performance Measures.  The
               -----------------------------------------------------
number of Performance Shares subject to any award and the Performance Measures
and Performance Period applicable to such award shall be determined by the
Committee.

          (b)  Vesting and Forfeiture.  The Agreement relating to a Performance
               ----------------------
Share Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
award, if specified Performance Measures are satisfied or met during the
specified Performance Period, and for the forfeiture of such award, if specified
Performance Measures are not satisfied or met during the specified Performance
Period.

          (c)  Settlement of Vested Performance Share Awards.  The Agreement
               ---------------------------------------------
relating to a Performance Share Award (i) shall specify whether such award may
be settled in shares of Common Stock (including shares of Restricted Stock) or
cash or a combination thereof and (ii) may specify whether the holder thereof
shall be entitled to receive, on a current or deferred basis, dividend
equivalents, and, if determined by the Committee, interest on any deferred
dividend equivalents, with respect to the number of shares of Common Stock
subject to such award.  If a Performance Share Award is settled in shares of
Restricted Stock, a certificate or certificates representing such Restricted
Stock shall be issued in accordance with Section 3.2(c) and the holder of such
Restricted Stock shall have such rights of a stockholder of the Company as
determined pursuant to Section 3.2(d).  Prior to the settlement of a Performance
Share Award in shares of Common Stock, including Restricted Stock, the holder of
such award shall have no

                                       14
<PAGE>

rights as a stockholder of the Company with respect to the shares of Common
Stock subject to such award.

          4.3  Termination of Employment or Service.  Subject to Section 6.8 and
               ------------------------------------
unless otherwise set forth in the Agreement relating to a Performance Share
Award, if the employment or service with the Company of the holder of such award
terminates, the portion of such award which is subject to a Performance Period
on the effective date of such holder's termination of employment or service
shall be forfeited and such portion shall be canceled by the Company.

               V.  PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS

          5.1  Eligibility.  Each Non-Employee Director may be granted options
               -----------
to purchase shares of Common Stock in accordance with this Article V
(collectively "Directors Options").  All options granted under this Article V
shall constitute Non-Statutory Stock Options.

          5.2  Grants of Stock Options.  The Board, in its discretion, may grant
               -----------------------
Non-Statutory Stock Options to any Non-Employee Director in accordance with this
Article V.  The Board shall determine with respect to each Director Option (a)
the number of shares of Common Stock subject to an option, (b) the purchase
price per share of Common Stock purchasable upon exercise of the option, (c) the
period during which an option may be exercised and (d) whether an option shall
become exercisable in cumulative or non-cumulative installments and in part or
in full at any time.

          5.3  Termination of Directorship.
               ---------------------------

          (a)  Disability.  Subject to Section 6.8 and unless otherwise
               ----------
specified in the Agreement relating to the option, if the holder of an option
granted under this Article V ceases to be a director of the Company by reason of
Disability, each such option held by such holder shall be exercisable only to
the extent that such option is exercisable on the effective date of such
holder's ceasing to be a director and may thereafter be exercised by such holder
(or such holder's guardian, legal representative or similar person) until the
earliest to occur of the (i) date which is three months after the effective date
of such holder's ceasing to be a director and (ii) the expiration date of the
term of such option.

          (b)  Retirement.  Subject to Section 6.8 and unless otherwise
               ----------
specified in the Agreement relating to the option, if the holder of an option
granted under this Article V ceases to be a director of the Company on or after
age 65, each such option held by such holder shall be exercisable only to the
extent that such option is exercisable on the effective date of such holder's
ceasing to be a director and may thereafter be exercised by such holder (or such
holder's legal representative or similar person) until the earliest to occur of
the (i) date which is three months after the effective date of such holder's
ceasing to be a director and (ii) the expiration date of the term of such
option.

          (c)  Death.  Subject to Section 6.8 and unless otherwise specified in
               -----
the Agreement relating to the option, if the holder of an option granted under
this Article V ceases to

                                       15
<PAGE>

be a director of the Company by reason of death, each such option held by such
holder shall be fully exercisable and may thereafter be exercised by such
holder's executor, administrator, legal representative, beneficiary or similar
person, as the case may be, until the earliest to occur of (i) the date which is
one year after the date of death and (ii) the expiration date of the term of
such option.

          (d) Other Termination.  Subject to Section 6.8 and unless otherwise
              -----------------
specified in the Agreement relating to the option, if the holder of an option
granted under this Article V ceases to be a director of the Company for any
reason other than Disability, retirement on or after age 65 or death, each such
option held by such holder shall be exercisable only to the extent such option
is exercisable on the effective date of such holder's ceasing to be a director
and may thereafter be exercised by such holder (or such holder's legal
representative or similar person) until the earliest to occur of (i) the date
which is three months after the effective date of such holder's ceasing to be a
director and (ii) the expiration date of the term of such option.

          (e) Death Following Termination of Directorship.  Subject to Section
              -------------------------------------------
6.8 and unless otherwise specified in the Agreement relating to the option, if
the holder of an option granted under this Article V dies during the three-month
period following such holder's ceasing to be a director of the Company by reason
of Disability, or if such a holder dies during the three-month period following
such holder's ceasing to be a director of the Company on or after age 65, or if
such a holder dies during the three-month period following such holder's ceasing
to be a director for any reason other than by reason of Disability or retirement
on or after age 65, each such option held by such holder shall be exercisable
only to the extent that such option is exercisable on the effective date of such
holder's ceasing to be a director and may thereafter be exercised by the
holder's executor, administrator, legal representative, beneficiary or similar
person, as the case may be, until the earliest to occur of the (i) date one year
after the date of death and (ii) the expiration date of the term of such option.

          5.4 Directors Options.  Each Directors Option shall be subject to the
              -----------------
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Board shall
deem advisable:

          (a) Option Period and Exercisability.  Directors Options shall become
              --------------------------------
exercisable as provided in the Agreement relating to the option.  Unless
otherwise specified in the Agreement relating to the option, if at any time
prior to the time that a Directors Option first becomes exercisable, a Non-
Employee Director shall no longer be a member of the Board, such Directors
Option shall become void and of no further force or effect.

          (b) Purchase Price.  The purchase price for the shares of Common Stock
              --------------
subject to any Directors Option shall be equal to the purchase price determined
by the Board that is set forth in the Agreement relating to the option.  Such
Directors Options shall be exercisable in accordance with Section 2.1(c).

          (c) Restrictions on Transfer.  Directors Options shall be subject to
              ------------------------
the transfer restrictions and other provisions of Section 6.4.

                                       16
<PAGE>

          (d)  Expiration.  Unless otherwise specified in the Agreement relating
               ----------
to the option, each Directors Option which has become exercisable pursuant to
Section 5.4(a), to the extent not theretofore exercised, shall expire on the
first to occur of (i) the date which is three months after the first date on
which the Non-Employee Director shall no longer be a member of the Board or the
Board of Directors of a Subsidiary and (ii) the tenth anniversary of the date of
grant of such option; provided, however, that if the Non-Employee Director shall
                      --------  -------
die within such three-month period following the date on which he shall have
ceased to serve as such a director or if the Non-Employee Director shall cease
to be a director of the Company by reason of death, such option may be exercised
at any time within the one-year period following the date of death to the extent
not theretofore exercised (but in no event later than the tenth anniversary of
the date of grant).

                                 VI.  GENERAL

          6.1  Effective Date and Term of Plan; Submission to Stockholders. This
               -----------------------------------------------------------
Plan shall be submitted to the stockholders of the Company for approval and, if
approved by the affirmative vote of a majority of the voting power of the shares
of capital stock of the Company entitled to vote thereon, shall become effective
as of the commencement of the IPO.  This Plan shall terminate ten years after
its effective date unless terminated earlier by the Board.  Termination of this
Plan shall not affect the terms or conditions of any award granted prior to
termination.

          Awards hereunder may be made at any time prior to the termination of
this Plan, provided that no award may be made later than ten years after the
effective date of this Plan.  In the event that this Plan is not approved by the
stockholders of the Company, this Plan and any awards hereunder shall be void
and of no force or effect.

          6.2  Amendments.  The Board may amend this Plan as it shall deem
               ----------
advisable, subject to any requirement of stockholder approval required by
applicable law, rule or regulation, including Section 162(m) and Section 422 of
the Code; provided, however, that no amendment shall be made without stockholder
          --------  -------
approval if such amendment would (a) reduce the minimum purchase price in the
case of an option or the base price in the case of an SAR, (b) effect any change
inconsistent with Section 422 of the Code or (c) extend the term of this Plan.
No amendment may impair the rights of a holder of an outstanding award without
the consent of such holder.

          6.3  Agreement.  Each award under this Plan shall be evidenced by an
               ---------
Agreement setting forth the terms and conditions applicable to such award.  No
award shall be valid until an Agreement is executed by the Company and the
recipient of such award and, upon execution by each party and delivery of the
Agreement to the Company, such award shall be effective as of the effective date
set forth in the Agreement.  The Board may amend any Agreement as it shall deem
advisable, provided that no such amendment (i) shall contain provisions that are
inconsistent with the terms of the Plan or (ii) shall impair the rights of a
holder of an outstanding award without the consent of such holder.

                                       17
<PAGE>

          6.4  Non-Transferability of Stock Options, SARs and Performance
               ----------------------------------------------------------
Shares.  No option, SAR or Performance Share shall be transferable other than
------
(i) by will, the laws of descent and distribution or pursuant to beneficiary
designation procedures approved by the Company or (ii) as otherwise set forth in
the Agreement relating to such award.  Each option, SAR or Performance Share may
be exercised or settled during the participant's lifetime only by the holder or
the holder's legal representative or similar person.  Except as permitted by the
second preceding sentence, no option, SAR or Performance Share may be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to execution,
attachment or similar process, and any attempt to so sell, transfer, assign,
pledge, hypothecate, encumber or otherwise dispose of such option, SAR or
Performance Share shall be null and void and of no force or effect.

          6.5  Tax Withholding.  The Company shall have the right to require,
               ---------------
prior to the issuance or delivery of any shares of Common Stock or the payment
of any cash pursuant to an award made hereunder, payment by the holder of such
award of any Federal, state, local or other taxes which may be required to be
withheld or paid in connection with such award.  An Agreement may provide that
(i) the Company shall withhold whole shares of Common Stock which would
otherwise be delivered to a holder, having an aggregate Fair Market Value
determined as of the date the obligation to withhold or pay taxes arises in
connection with an award (the "Tax Date"), or withhold an amount of cash which
would otherwise be payable to a holder, in the amount necessary to satisfy any
such obligation or (ii) the holder may satisfy any such obligation by any of the
following means:  (1) a cash payment to the Company, (2) delivery to the Company
of Mature Shares having an aggregate Fair Market Value, determined as of the Tax
Date, equal to the amount necessary to satisfy any such obligation, (3)
authorizing the Company to withhold whole shares of Common Stock which would
otherwise be delivered having an aggregate Fair Market Value, determined as of
the Tax Date, or withhold an amount of cash which would otherwise be payable to
a holder, equal to the amount necessary to satisfy any such obligation, (4) in
the case of the exercise of an option, a cash payment by a broker-dealer
acceptable to the Company to whom the optionee has submitted an irrevocable
notice of exercise or (5) any combination of (1), (2) and (3), in each case to
the extent set forth in the Agreement relating to the award; provided, however,
                                                             --------  -------
that the Committee shall have sole discretion to disapprove of an election
pursuant to any of clauses (2)-(5).  An Agreement may provide for shares of
Common Stock to be delivered or withheld having an aggregate Fair Market Value
in excess of the minimum amount required to be withheld.  Any fraction of a
share of Common Stock which would be required to satisfy such an obligation
shall be disregarded and the remaining amount due shall be paid in cash by the
holder.

          6.6  Restrictions on Shares.  Each award made hereunder shall be
               ----------------------
subject to the requirement that if at any time the Company determines that the
listing, registration or qualification of the shares of Common Stock subject to
such award upon any securities exchange or under any law, or the consent or
approval of any governmental body, or the taking of any other action is
necessary or desirable as a condition of, or in connection with, the delivery of
shares thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company.  The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any award made hereunder bear a legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited

                                       18
<PAGE>

except in compliance with the Securities Act of 1933, as amended, and the rules
and regulations thereunder.

          6.7  Adjustment.  Except as provided in Section 6.8, in the event of
               ----------
any stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off or other
similar change in capitalization or event, or any distribution to holders of
Common Stock other than a regular cash dividend, the number and class of
securities available under this Plan, the number and class of securities subject
to each outstanding option and the purchase price per security, the terms of
each outstanding SAR, the number and class of securities subject to each
outstanding Stock Award, and the terms of each outstanding Performance Share
shall be appropriately adjusted by the Committee, such adjustments to be made in
the case of outstanding options and SARs without an increase in the aggregate
purchase price or base price.  The decision of the Committee regarding any such
adjustment shall be final, binding and conclusive.  If any such adjustment would
result in a fractional security being (a) available under this Plan, such
fractional security shall be disregarded, or (b) subject to an award under this
Plan, the Company shall pay the holder of such award, in connection with the
first vesting, exercise or settlement of such award, in whole or in part,
occurring after such adjustment, an amount in cash determined by multiplying (i)
the fraction of such security (rounded to the nearest hundredth) by (ii) the
excess, if any, of (1) the Fair Market Value on the vesting, exercise or
settlement date over (2) the exercise or base price, if any, of such award.

          6.8  Change in Control.
               -----------------

          (a)  (i)  Notwithstanding any provision in this Plan or any Agreement,
     in the event of a Change in Control pursuant to Section (b)(iii) or (iv)
     below, (1) all outstanding options and SARS shall immediately become
     exercisable in full, (2) the Restriction Period applicable to any
     outstanding Restricted Stock Award shall lapse, (3) the Performance Period
     applicable to any outstanding Performance Share shall lapse and (4) the
     Performance Measures applicable to any outstanding Restricted Stock Award
     (if any) and to any outstanding Performance Share shall be deemed to be
     satisfied at the maximum level.  If, in connection with such Change in
     Control, holders of Common  Stock receive solely shares of common stock
     that are registered under Section 12 of the Exchange Act, there shall be
     substituted for each share of Common Stock available under this Plan,
     whether or not then subject to an outstanding award, the number and class
     of shares into which each outstanding share of Common Stock shall be
     converted pursuant to such Change in Control.  If, in connection with such
     Change in Control, holders of Common Stock receive solely cash and shares
     of common stock that are registered under Section 12 of the Exchange Act,
     each outstanding award shall be surrendered to and canceled by the Company,
     and the holder shall receive, within ten days of the occurrence of such
     Change in Control, a proportionate amount of cash in the manner provided in
     Section (a)(ii) below, and there shall be substituted for the award
     surrendered a similar award reflecting a proportionate number of the class
     of shares into which each outstanding share of Common Stock shall be
     converted to such Change in Control.  In the event of any such
     substitution, the proportion of cash and common stock, the purchase price
     per share in the case of an option and the base price in the case of an
     SAR, and any other terms of outstanding awards shall be appropriately
     adjusted by the Committee, such

                                       19
<PAGE>

     adjustments to be made in the case of outstanding options and SARs without
     an increase in the aggregate purchase price or base price; provided, that
                                                                --------
     the proportion of cash and common stock substituted for outstanding awards
     shall reflect the approximate proportion of cash and common stock received
     by holders of Common Stock in such Change in Control. If, in connection
     with a Change in Control, holders of Common Stock receive any portion of
     the consideration in a form other than cash or shares of common stock that
     are registered under Section 12 of the Exchange Act, each share of Common
     Stock available under this Plan, whether or not then subject to an
     outstanding award, shall be substituted or surrendered for such proportion
     of common stock, cash or other consideration as shall be determined by the
     Committee pursuant to Section 6.7.

          (ii) Notwithstanding any provision in this Plan or any Agreement, in
     the event of a Change in Control pursuant to Section (b)(i) or (ii) below,
     or in the event of a Change in Control pursuant to Section (b)(iii) or (iv)
     below in connection with which the holders of Common Stock receive cash,
     each outstanding award shall be surrendered to the Company by the holder
     thereof, and each such award shall immediately be canceled by the Company,
     and the holder shall receive, within ten days of the occurrence of a Change
     in Control pursuant to Section (b)(i) or (ii) below or within ten days of
     the approval of the stockholders of the Company contemplated by Section
     (b)(iii) or (iv) below, a cash payment from the Company in an amount equal
     to (1) in the case of an option, the number of shares of Common Stock then
     subject to such option, multiplied by the excess, if any, of the greater of
     (A) the highest per share price offered to stockholders of the Company in
     any transaction whereby the Change in Control takes place or (B) the Fair
     Market Value of a share of Common Stock on the date of occurrence of the
     Change in Control, over the purchase price per share of Common Stock
     subject to the option; (2) in the case of a Free-Standing SAR, the number
     of shares of Common Stock then subject to such SAR, multiplied by the
     excess, if any, of the greater of (A) the highest per share price offered
     to stockholders of the Company in any transaction whereby the Change in
     Control takes place or (B) the Fair Market Value of a share of Common Stock
     on the date of occurrence of the Change in Control, over the base price of
     the SAR; and (3) in the case of a Restricted Stock Award or Performance
     Share Award, the number of shares of Common Stock or the number of
     Performance Shares, as the case may be, then subject to such award,
     multiplied by the greater of (A) the highest per share price offered to
     stockholders of the Company in any transaction whereby the Change in
     Control takes place or (B) the Fair Market Value of a share of Common Stock
     on the date of occurrence of the Change in Control.  In the event of a
     Change in Control, each Tandem SAR shall be surrendered by the holder
     thereof and shall be canceled simultaneously with the cancellation of the
     related option.  Except as may be provided in an agreement relating to an
     award, the Company may, but is not required to, cooperate with any person
     who is subject to Section 16 of the Exchange Act to assure that any cash
     payment in accordance with the foregoing to such person is made in
     compliance with Section 16 and the rules and regulations thereunder.

          (b)  "Change in Control" shall mean:

          (i)  the acquisition by any individual, entity or group (a "Person"),
     including any "person" within the meaning of Section 13(d)(3) or 14(d)(2)
     of the Exchange Act, of

                                       20
<PAGE>

     Beneficial Ownership of 20% or more of either (1) the then outstanding
     shares of common stock of the Company (the "Outstanding Company Common
     Stock") or (2) the combined voting power of the then outstanding securities
     of the Company entitled to vote generally in the election of directors (the
     "Outstanding Company Voting Securities"); providing however, the following
                                               ---------
     acquisitions shall not constitute a Change of Control: (A) any acquisition
     directly from the Company (excluding any acquisition resulting from the
     exercise of an exercise, conversion or exchange privilege unless the
     security being so exercised, converted or exchanged was acquired directly
     from the Company), (B) any acquisition by the Company, (C) any acquisition
     by an Exempt Person, (D) any acquisition by an employee benefit plan (or
     related trust) sponsored or maintained by the Company or any corporation
     controlled by the Company, or (E) any acquisition by any corporation
     pursuant to a transaction which complies with clauses (1), (2) and (3) of
     subsection (iii) of this Section 6.8(b); provided further, that for
     purposes of clause (B), if any Person (other than an Exempt Person, the
     Company or any employee benefit plan (or related trust) sponsored or
     maintained by the Company or any corporation controlled by the Company)
     shall become the Beneficial Owner of 20% or more of the Outstanding Company
     Common Stock or 20% or more of the Outstanding Company Voting Securities by
     reason of an acquisition by the Company, and such Person shall, after such
     acquisition by the Company, become the Beneficial Owner of any additional
     shares of the Outstanding Company Common Stock or any additional
     Outstanding Company Voting Securities and such Beneficial Ownership is
     publicly announced, such additional Beneficial Ownership shall constitute a
     Change in Control;

         (ii)  individuals who, as of the date hereof, constitute the Board of
     Directors (the "Incumbent Board") cease for any reason to constitute at
     least a majority of such Board; provided that any individual who becomes a
     director of the Company subsequent to the date hereof whose appointment, or
     whose nomination for election by the Company's stockholders, was approved
     by the vote of at least 66-2/3% 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 shall not be deemed a member of the Incumbent Board;

         (iii) approval by the stockholders of the Company of a reorganization,
     merger or consolidation or sale or other disposition of all or
     substantially all of the assets of the Company (a "Corporate Transaction");
     excluding, however, a Corporate Transaction pursuant to which (1) all or
     substantially all of the individuals or entities who are the Beneficial
     Owners, respectively, of the Outstanding Company Common Stock and the
     Outstanding Company Voting Securities immediately prior to such Corporate
     Transaction will Beneficially Own, directly or indirectly, more than 60%
     of, respectively, the outstanding shares of common stock, and the combined
     voting power of the outstanding securities of such corporation entitled to
     vote generally in the election of directors, as the case may be, of the
     corporation resulting from such Corporate Transaction (including, without
     limitation, a corporation which as a result of such

                                       21
<PAGE>

     transaction owns the Company or all or substantially all of the Company's
     assets either directly or indirectly) in substantially the same proportions
     relative to each other as their Beneficial Ownership, immediately prior to
     such Corporate Transaction, of the Outstanding Company Common Stock and the
     Outstanding Company Voting Securities, as the case may be, (2) no Person
     (other than an Exempt Person; the Company; any employee benefit plan (or
     related trust) sponsored or maintained by the Company or any corporation
     controlled by the Company; the corporation resulting from such Corporate
     Transaction; and any Person which Beneficially Owned, immediately prior to
     such Corporate Transaction, directly or indirectly, 20% or more of the
     Outstanding Company Common Stock or the Outstanding Company Voting
     Securities, as the case may be) will Beneficially Own, directly or
     indirectly, 20% or more of, respectively, the outstanding shares of common
     stock of the corporation resulting from such Corporate Transaction or the
     combined voting power of the outstanding securities of such corporation
     entitled to vote generally in the election of directors and (3) individuals
     who were members of the Incumbent Board will constitute at least a majority
     of the members of the board of directors of the corporation resulting from
     such Corporate Transaction; or

          (iv) approval by the stockholders of the Company of a plan of complete
     liquidation or dissolution of the Company.

          Notwithstanding anything to the contrary herein, no Change of Control
shall be deemed to have taken place as a result of the issuance of shares of
Common Stock by the Company or the sale of shares of Common Stock by its
stockholders in connection with the Company's initial public offering.

          6.9  No Right of Participation or Employment/Service.  No person shall
               -----------------------------------------------
have any right to participate in this Plan.  Neither this Plan nor any award
made hereunder shall confer upon any person any right to continued employment or
service by the Company, any Subsidiary or any affiliate of the Company or affect
in any manner the right of the Company, any Subsidiary or any affiliate of the
Company to terminate the employment or service of any person at any time without
liability hereunder.

          6.10 Rights as Stockholder.  No person shall have any right as a
               ---------------------
stockholder of the Company with respect to any shares of Common Stock or other
equity security of the Company which is subject to an award hereunder unless and
until such person becomes a stockholder of record with respect to such shares of
Common Stock or equity security.

          6.11 Governing Law.  This Plan, each award hereunder and the related
               -------------
Agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.

                                       22<PAGE>
                                                                  EXHIBIT 10.16

                       FORM OF INDEMNIFICATION AGREEMENT

          THIS INDEMNIFICATION AGREEMENT (this "Agreement") was entered into as
of the ___ day of _____, ____ and amended and restated as of this ___ day of
_____, ____, between Peapod, Inc., a Delaware corporation (the "Company"), and
_____________ (the "Indemnitee").

          WHEREAS, it is essential to the Company and its stockholders to
attract and retain qualified and capable directors, officers, employees, agents
and fiduciaries;

          WHEREAS, the Restated Certificate of Incorporation of the Company (the
"Certificate of Incorporation") and Restated By-Laws (the "By-Laws") requires
the Company to indemnify, and permits the Company to advance expenses to, its
directors and officers to the extent not prohibited by law, and allows the
Company to indemnify employees and agents;

          WHEREAS, in recognition of Indemnitee's need for protection against
personal liability in order to induce Indemnitee to serve or continue to serve
the Company in an effective manner, and, in the case of directors and officers,
to supplement or replace the Company's directors' and officers' liability
insurance coverage, and in part to provide Indemnitee with specific contractual
assurance that the protection promised by the Certificate of Incorporation and
By-Laws will be available to Indemnitee (regardless of, among other things, any
amendment to or revocation of the Certificate of Incorporation or By-Laws or any
change in the composition of the Company's Board of Directors or any acquisition
transaction relating to the Company), the Company, with the prior approval of
the Company's stockholders, wishes to provide the Indemnitee with the benefits
contemplated by this Agreement; and

          WHEREAS, as a result of the provision of such benefits Indemnitee has
agreed to serve or to continue to serve the Company;

          NOW, THEREFORE, the parties hereto hereby agree as follows:

          1.  Definitions.  The following terms, as used herein, shall have the
              -----------
following respective meanings:

          (a)  A Change in Control:  shall be deemed to have occurred if any of
                 -----------------
the following shall have occurred:

     (1)  the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act, of beneficial ownership
<PAGE>

within the meaning of Rule 13d-3 promulgated under the Exchange Act, of 20% or
more of either (i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power of
the then outstanding securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
                                                                     --------
however, that the following acquisitions shall not constitute a Change in
-------
Control: (A) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of an exercise, conversion or exchange
privilege in respect of outstanding convertible or exchangeable securities
unless the security being so exercised, converted or exchanged was acquired
directly from the Company), (B) any acquisition by the Company, (C) any
acquisition by an Exempt Person, (D) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, (E) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation involving the Company, if, immediately
after such reorganization, merger or consolidation, each of the conditions
described in clauses (i), (ii) and (iii) of subsection (3) of this Section
(1)(c) shall be satisfied; and provided further that, for purposes of clause
                               -------- -------
(B), if any Person (other than the Company or any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company) shall become the beneficial owner of 20% or more of
the Outstanding Company Common Stock or 20% or more of the Outstanding Company
Voting Securities by reason of an acquisition by the Company and such Person
shall, after such acquisition by the Company, become the beneficial owner of any
additional shares of the Outstanding Company Common Stock or any additional
Outstanding Company Voting Securities and such beneficial ownership is publicly
announced, such additional beneficial ownership shall constitute a Change in
Control;

          (2) individuals who, as of the date of the consummation of the
Company's initial public offering of Common Stock, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
such Board; provided, however, that any individual who becomes a director of the
            --------  -------
Company subsequent to the date hereof whose appointment, or whose nomination for
election by the Company's stockholders, was approved by the vote of at least 66-
2/3% of the directors then comprising the Incumbent Board shall be deemed to
have been a member of the Incumbent Board; and provided further, that no
                                               -------- -------
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 shall be deemed to have been a member of the Incumbent
Board;

                                       2
<PAGE>

          (3) approval by the stockholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which (i) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will beneficially own, directly
or indirectly, more than 60% of, respectively, the outstanding shares of common
stock, and the combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
indirectly) in substantially the same proportions relative to each other as
their beneficial ownership, immediately prior to such Corporate Transaction, of
the Outstanding Company Common Stock and the Outstanding Company Voting
Securities, as the case may be, (ii) no Person (other than an Exempt Person; the
Company; any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company; the corporation
resulting from such Corporate Transaction; and any Person which beneficially
owned, immediately prior to such Corporate Transaction, directly or indirectly,
20% or more of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities, as the case may be) will beneficially own, directly or
indirectly, 20% or more of, respectively, the outstanding shares of common stock
of the corporation resulting from such Corporate Transaction or the combined
voting power of the outstanding securities of such corporation entitled to vote
generally in the election of directors and (iii) individuals who were members of
the Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate Transaction;
or

          (4) approval by the stockholders of the Company of a plan of complete
liquidation or dissolution of the Company.

          (b) Claim:  means any threatened, pending or completed action, suit,
              -----
arbitration or proceeding, or any inquiry or investigation, whether brought by
or in the right of the Company or otherwise, that Indemnitee in good faith
believes might lead to the institution of any such action, suit, arbitration or
proceeding, whether civil, criminal, administrative, investigative or other, or
any appeal therefrom.

                                       3
<PAGE>

          (c)  Equity Security:  shall have the meaning given to such term under
               ---------------
Rule 3a11-1 of the General Rules and Regulations under the Exchange Act as in
effect on the date hereof.

          (d)  "Exempt Person" means each of Andrew B. Parkinson and Thomas L.
                -------------
Parkinson and any Affiliate (as such term is defined in Rule 12b-1 under the
Securities Exchange Act of 1934, as in effect on the date hereof, "Affiliate")
thereof.

          (e)  Exchange Act:  means the Securities and Exchange Act of 1934, as
               ------------
amended.

          (f)  D&O Insurance:  means any valid directors' and officers'
               -------------
liability insurance policy maintained by the Company for the benefit of the
Indemnitee, if any.

          (g)  Determination:  means a determination, and Determined means a
               -------------                              ----------
matter which has been determined based on the facts known at the time, by:  (i)
a majority vote of a quorum of disinterested directors, or (ii) if such a quorum
is not obtainable, or even if obtainable, if a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or, in the event
there has been a Change in Control, by the Special Independent Counsel (in a
written opinion) selected by Indemnitee as set forth in Section 6, or (iii) a
majority of the disinterested stockholders of the Company, or (iv) a final
adjudication by a court of competent jurisdiction.

          (h)  Excluded Claim:  means any payment for Losses or Expenses in
               --------------
connection with any Claim:  (i) based upon or attributable to Indemnitee gaining
in fact any personal profit or advantage to which Indemnitee is not entitled; or
(ii) for the return by Indemnitee of any remuneration paid to Indemnitee without
the previous approval of the stockholders of the Company which is illegal; or
(iii) for an accounting of profits in fact made from the purchase or sale by
Indemnitee of securities of the Company within the meaning of Section 16 of the
Exchange Act or similar provisions of any state law; or (iv) resulting from
Indemnitee's knowingly fraudulent, dishonest or willful misconduct; or (v) the
payment of which by the Company under this Agreement is not permitted by
applicable law.

          (i)  Expenses:  means any reasonable expenses incurred by Indemnitee
               --------
as a result of a Claim or Claims made against Indemnitee for Indemnifiable
Events including, without limitation, attorneys' fees and all other costs,
expenses and obligations paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim relating to any
Indemnifiable Event.

                                       4
<PAGE>

          (j)  Fines:  means any fine, penalty or, with respect to an employee
               -----
benefit plan, any excise tax or penalty assessed with respect thereto.

          (k)  Indemnifiable Event:  means any event or occurrence, occurring
               -------------------
prior to or after the date of this Agreement, related to the fact that
Indemnitee is, was or has agreed to serve as, a director, officer, employee,
trustee, agent or fiduciary of the Company, or is or was serving at the request
of the Company as a director, officer, employee, trustee, agent or fiduciary of
another corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise, or by reason of anything done or not done by Indemnitee,
including, but not limited to, any breach of duty, neglect, error, misstatement,
misleading statement, omission, or other act done or wrongfully attempted by
Indemnitee, or any of the foregoing alleged by any claimant, in any such
capacity.

          (l)  Losses:  means any amounts or sums which Indemnitee is legally
               ------
obligated to pay as a result of a Claim or Claims made against Indemnitee for
Indemnifiable Events including, without limitation, damages, judgments and sums
or amounts paid in settlement of a Claim or Claims, and Fines.

          (m)  Person:  means any individual, partnership, corporation, business
               ------
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.

          (n)  Potential Change in Control:  shall be deemed to have occurred if
               ---------------------------
(A) the Company enters into an agreement, the consummation of which would result
in the occurrence of a Change in Control; (B) any Person (including the Company)
publicly announces an intention to take or to consider taking actions which if
consummated would constitute a Change in Control; or (C) the Board of Directors
adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.

          (o)  Relative:  means a Person's spouse, parents, children, siblings,
               --------
mother- and father-in-law, sons- and daughters-in-law, and brothers- and
sisters-in-law.

          (p)  Reviewing Party:  means any appropriate person or body consisting
               ---------------
of a member or members of the Company's Board of Directors or any other person
or body appointed by the Board (including the Special Independent Counsel
referred to in Section 6) who is not a party to the particular Claim for which
Indemnitee is seeking indemnification.

                                       5
<PAGE>

          (q)  Subsidiary:  means any corporation of which a majority of any
               ----------
class of Equity Security is owned, directly or indirectly, by the Company.

          (r)  Trust:  means the trust established pursuant to Section 7 hereof.
               -----

          (s)  Voting Shares:  means any issued and outstanding shares of
               -------------
capital stock of the Company entitled to vote generally in the election of
directors.

          2.   Basic Indemnification Agreement.  In consideration of, and as an
               -------------------------------
inducement to, the Indemnitee rendering valuable services to the Company, the
Company agrees that in the event Indemnitee is or becomes a party to or witness
or other participant in, or is threatened to be made a party to or witness or
other participant in, a Claim by reason of (or arising in part out of) an
Indemnifiable Event, the Company will indemnify Indemnitee to the fullest extent
authorized by law, against any and all Losses and Expenses (including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Losses and Expenses) of such Claim, whether or not such Claim
proceeds to judgment or is settled or otherwise is brought to a final
disposition, subject in each case, to the further provisions of this Agreement.

          3.   Limitations on Indemnification.  Notwithstanding the provisions
               ------------------------------
of Section 2, Indemnitee shall not be indemnified and held harmless from any
Losses or Expenses (a) which have been Determined, as provided herein, to
constitute an Excluded Claim; (b) to the extent Indemnitee is indemnified by the
Company and has actually received payment pursuant to the Certificate of
Incorporation, By-Laws, D&O Insurance or otherwise; or (c) other than pursuant
to the last sentence of Section 4(d) or Section 15, in connection with any claim
initiated by Indemnitee, unless the Company has joined in or the Board of
Directors has authorized such claim.

          4.   Indemnification Procedures.
               --------------------------

          (a)  Promptly after receipt by Indemnitee of notice of any Claim,
Indemnitee shall, if indemnification with respect thereto may be sought from the
Company under this Agreement, notify the Company of the commencement thereof;
provided, however, that the failure to give such notice promptly shall not
--------  -------
affect or limit the Company's obligations with respect to the matters described
in the notice of such Claim, except to the extent that the Company is prejudiced
thereby.  Indemnitee agrees further not to make any admission or effect any
settlement with respect to such Claim without the consent of the Company, except
any Claim with respect to which the Indemnitee has undertaken the defense in
accordance with the second to last sentence of Section 4(d).

                                       6
<PAGE>

          (b)  If, at the time of the receipt of such notice, the Company has
D&O Insurance in effect, the Company shall give prompt notice of the
commencement of Claim to the insurers in accordance with the procedures set
forth in the respective policies.  The Company shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of
Indemnitee, all Losses and Expenses payable as a result of such Claim.

          (c)  To the extent the Company does not, at the time of the Claim have
applicable D&O Insurance, or if a Determination is made that any Expenses
arising out of such Claim will not be payable under the D&O Insurance then in
effect, the Company shall be obligated to pay the Expenses of any Claim in
advance of the final disposition thereof and the Company, if appropriate, shall
be entitled to assume the defense of such Claim, with counsel satisfactory to
Indemnitee, upon the delivery to Indemnitee of written notice of its election so
to do.  After delivery of such notice, the Company will not be liable to
Indemnitee under this Agreement for any legal or other Expenses subsequently
incurred by Indemnitee in connection with such defense other than reasonable
Expenses of investigation; provided that Indemnitee shall have the right to
                           -------- ----
employ its counsel in such Claim but the fees and expenses of such counsel
incurred after delivery of notice from the Company of its assumption of such
defense shall be at the Indemnitee's expense; provided further that if:  (i) the
                                              -------- -------
employment of counsel by Indemnitee has been previously authorized by the
Company, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, or (iii) the Company shall not, in fact, have employed counsel to
assume the defense of such action, the reasonable fees and expenses of counsel
shall be at the expense of the Company.

          (d)  All payments on account of the Company's indemnification
obligations under this Agreement shall be made within sixty (60) days of
Indemnitee's written request therefor unless a Determination is made that the
Claims giving rise to Indemnitee's request are Excluded Claims or otherwise not
payable under this Agreement, provided that all payments on account of the
                              -------- ----
Company's obligation to pay Expenses under Section 4(c) of this Agreement prior
to the final disposition of any Claim shall be made within 20 days of
Indemnitee's written request therefor and such obligation shall not be subject
to any such Determination but shall be subject to Section 4(e) of this
Agreement.  In the event the Company takes the position that Indemnitee is not
entitled to indemnification in connection with the proposed settlement of any
Claim, Indemnitee shall have the right at his own expense to undertake defense
of any such Claim, insofar as such proceeding involves Claims against the
Indemnitee, by written notice given to the Company within 10 days

                                       7
<PAGE>

after the Company has notified Indemnitee in writing of its contention that
Indemnitee is not entitled to indemnification; provided, however, that the
                                               --------  -------
failure to give such notice within such 10-day period shall not affect or limit
the Company's obligations with respect to any such Claim if such Claim is
subsequently determined not to be an Excluded Claim or otherwise to be payable
under this Agreement, except to the extent that the Company is prejudiced
thereby. If it is subsequently determined in connection with such proceeding
that the Indemnifiable Events are not Excluded Claims and that Indemnitee,
therefor, is entitled to be indemnified under the provisions of Section 2
hereof, the Company shall promptly indemnify Indemnitee.

          (e)  Indemnitee hereby expressly undertakes and agrees to reimburse
the Company for all Losses and Expenses paid by the Company in connection with
any Claim against Indemnitee in the event and only to the extent that a
Determination shall have been made by a court of competent jurisdiction in a
decision from which there is no further right to appeal that Indemnitee is not
entitled to be indemnified by the Company for such Losses and Expenses because
the Claim is an Excluded Claim or because Indemnitee is otherwise not entitled
to payment under this Agreement.

          (f)  In connection with any Determination as to whether Indemnitee is
entitled to be indemnified hereunder the burden of proof shall be on the Company
to establish that Indemnitee is not so entitled.

          5.  Settlement.  The Company shall have no obligation to indemnify
              ----------
Indemnitee under this Agreement for any amounts paid in settlement of any Claim
effected without the Company's prior written consent.  The Company shall not
settle any Claim in which it takes the position that Indemnitee is not entitled
to indemnification in connection with such settlement without the consent of
Indemnitee, nor shall the Company settle any Claim in any manner which would
impose any Fine or any obligation on Indemnitee, without Indemnitee's written
consent.  Neither the Company nor Indemnitee shall unreasonably withhold its or
his consent to any proposed settlement.

          6.  Change in Control; Extraordinary Transactions.  The Company and
              ---------------------------------------------
Indemnitee agree that if there is a Change in Control of the Company (other than
a Change in Control which has been approved by a majority of the Company's Board
of Directors who were directors immediately prior to such Change in Control)
then all Determinations thereafter with respect to the rights of Indemnitee to
be paid Losses and Expenses under this Agreement shall be made only by a special
independent counsel (the "Special Independent Counsel") selected by Indemnitee
and approved by the Company (which approval shall not be unreasonably withheld)
or by a court of competent jurisdiction.  The Company shall pay the

                                       8
<PAGE>

reasonable fees of such Special Independent Counsel and shall indemnify such
Special Independent Counsel against any and all reasonable expenses (including
reasonable attorneys' fees), claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.

          The Company covenants and agrees that, in the event of a Change in
Control which is a Corporate Transaction as defined in (3) of Section 1(a), the
Company will use its best efforts (a) to have the obligations of the Company
under this Agreement including, but not limited to those under Section 7,
expressly assumed by the surviving, purchasing or succeeding entity, or (b)
otherwise adequately to provide for the satisfaction of the Company's
obligations under this Agreement, in a manner reasonably acceptable to the
Indemnitee.

          7.  Establishment of Trust.  In the event of a Potential Change in
              ----------------------
Control, the Company shall, upon written request by Indemnitee, create a trust
(the "Trust") for the benefit of Indemnitee and from time to time upon written
request of Indemnitee shall fund the Trust in an amount sufficient to satisfy
any and all Losses and Expenses which are actually paid or which Indemnitee
reasonably determines from time to time may be payable by the Company under this
Agreement.  The amount or amounts to be deposited in the Trust pursuant to the
foregoing funding obligation shall be determined by the Reviewing Party, in any
case in which the Special Independent Counsel is involved.  The terms of the
Trust shall provide that upon a Change in Control:  (i) the Trust shall not be
revoked or the principal thereof invaded without the written consent of
Indemnitee; (ii) the trustee of the Trust shall advance, within 20 days of a
request by Indemnitee, any and all Expenses to Indemnitee (and Indemnitee hereby
agrees to reimburse the Trust under the circumstances under which Indemnitee
would be required to reimburse the Company under Section 4(e) of this
Agreement); (iii) the Company shall continue to fund the Trust from time to time
in accordance with the funding obligations set forth above; (iv) the trustee of
the Trust shall promptly pay to Indemnitee all Losses and Expenses for which
Indemnitee shall be entitled to indemnification pursuant to this Agreement; and
(v) all unexpended funds in the Trust shall revert to the Company upon a final
determination by a court of competent jurisdiction in a final decision from
which there is no further right of appeal that Indemnitee has been fully
indemnified under the terms of this Agreement.  The trustee of the Trust shall
be chosen by Indemnitee.

          8.  No Presumption.  For purposes of this Agreement, the termination
              --------------
of any Claim by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere, or its equivalent,
                                           ---- ----------
shall not, of itself, create a presumption that Indemnitee did not meet any
particular

                                       9
<PAGE>

standard of conduct or have any particular belief or that a court has determined
that indemnification is not permitted by applicable law.

          9.   Non-exclusivity, Etc.  The rights of Indemnitee hereunder shall
               ---------------------
be in addition to any other rights Indemnitee may have under the Certificate of
Incorporation, the Company's By-Laws, the Delaware General Corporation Law, any
vote of stockholders or disinterested directors or otherwise, both as to action
in Indemnitee's official capacity and as to action in any other capacity by
holding such office, and shall continue after Indemnitee ceases to serve the
Company as a director, officer, employee, agent or fiduciary, for so long as
Indemnitee shall be subject to any Claim by reason of (or arising in part out
of) an Indemnifiable Event. To the extent that a change in the Delaware General
Corporation Law (whether by statute or judicial decision) permits greater
indemnification by agreement than would be afforded currently under the
Certificate of Incorporation and this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by such change.

          10.  Liability Insurance; Notice Regarding Insurance.
               -----------------------------------------------

          (a)  To the extent the Company maintains an insurance policy or
policies providing directors' and officers' liability insurance, Indemnitee, if
an officer or director of the Company, shall be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for any director or officer of the Company.

          (b)  The Company shall provide notice to the Indemnitee in the event
that (i) the Company's then current D&O Insurance will not be renewed or will
lapse and the Company will not obtain new D&O Insurance in an amount not
materially less than, and with a scope of coverage not materially less than,
that of the terminating D&O Insurance or (ii) the Company's then current D&O
Insurance will be reduced to a material extent in amount or scope.  Such notice
shall be provided at least thirty (30) days prior to such expiration or
reduction in amount or scope, as the case may be.

          11.  Subrogation.  In the event of payment under this Agreement, the
               -----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.

          12.  Partial Indemnity, Etc.  If Indemnitee is entitled under any
               -----------------------
provision of this Agreement to indemnification by the

                                       10
<PAGE>

Company for some or a portion of the Losses and Expenses of a Claim but not,
however, for all of the total amount thereof, the Company shall nevertheless
indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.
Moreover, notwithstanding any other provision of this Agreement, to the extent
that Indemnitee has been successful on the merits or otherwise in defense of any
or all Claims relating in whole or in part to any Indemnifiable Event or in
defense of any issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified against all Expenses incurred in connection
therewith.

          13.  Contribution.  If the indemnification or reimbursement provided
               ------------
for hereunder is finally judicially determined by a court of competent
jurisdiction to be unavailable to Indemnitee in respect of any Losses or
Expenses of a Claim (other than for any reason specified in Section 3 hereof),
then the Company agrees, to the extent permitted by applicable law, in lieu of
indemnifying Indemnitee, to contribute to the amount paid or payable by
Indemnitee as a result of such Losses or Expenses in such proportion as is
appropriate to reflect the relative benefits accruing to the Company and
Indemnitee with respect to the events giving rise to such Losses or Expenses.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law, then the Company agrees to contribute to the
amount paid or payable by Indemnitee as a result of such Losses or Expenses in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and of Indemnitee with respect to the
events giving rise to such Losses or Expenses.  For purposes of this Section 13,
(i) the relative benefits accruing to the Company shall be deemed to be the
benefits accruing to it and to all of its directors, officers, employees and
agents (other than Indemnitee), as a group and treated as one person (the
"Company Group"), and the relative benefits accruing to Indemnitee shall be
deemed to be an amount not greater than Indemnitee's compensation from the
Company during the first year in which the events giving rise to such Losses or
Expenses are alleged to have occurred, and (ii) the relative fault of the
Company shall be deemed to be the fault of the Company Group, and the relative
fault of the Company and Indemnitee shall be determined by reference to the
relative intent, knowledge and access to information of the Company Group and
Indemnitee and their relative opportunity to have altered or prevented the
events giving rise to such Losses or Expenses.

          14.  Liability of Company.  Indemnitee agrees that neither the
               --------------------
stockholders nor the directors nor any officer, employee, representative or
agent of the Company shall be personally liable for the satisfaction of the
Company's obligations under this Agreement and Indemnitee shall look solely

                                       11
<PAGE>

to the assets of the Company for satisfaction of any claims hereunder.

          15.  Enforcement.
               -----------

          (a)  Indemnitee's right to indemnification and other rights under this
Agreement shall be specifically enforceable by Indemnitee only in the state or
Federal courts of the States of Delaware or Illinois and shall be enforceable
notwithstanding any adverse Determination by the Company's Board of Directors,
independent legal counsel, the Special Independent Counsel or the Company's
stockholders and no such Determination shall create a presumption that
Indemnitee is not entitled to be indemnified hereunder.  In any such action the
Company shall have the burden of proving that indemnification is not required
under this Agreement.

          (b)  In the event that any action is instituted by Indemnitee under
this Agreement, or to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all court costs and reasonable expenses,
including reasonable counsel fees, incurred by Indemnitee with respect to such
action, unless the court determines that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous.

          16.  Severability.  In the event that any provision of this Agreement
               ------------
is determined by a court to require the Company to do or to fail to do an act
which is in violation of applicable law, such provision (including any provision
within a single section, paragraph or sentence) shall be limited or modified in
its application to the minimum extent necessary to avoid a violation of law,
and, as so limited or modified, such provision and the balance of this Agreement
shall be enforceable in accordance with their terms to the fullest extent
permitted by law.

          17.  Governing Law.  This Agreement shall be governed by and construed
               -------------
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State.

          18.  Consent to Jurisdiction.  The Company and Indemnitee each hereby
               -----------------------
irrevocably consents to the jurisdiction of the courts of the States of Delaware
and Illinois for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agrees that any action instituted
under this Agreement shall be brought only in the state and Federal courts of
the States of Delaware and Illinois.

          19.  Notices.  All notices or other communications required or
               -------
permitted hereunder shall be sufficiently given for

                                       12
<PAGE>

all purposes if in writing and personally delivered, telegraphed, telexed, sent
by facsimile transmission or sent by registered or certified mail, return
receipt requested, with postage prepaid addressed as follows, or to such other
address as the parties shall have given notice of pursuant hereto:

          (a)  If to the Company, to:

               _________________________
               9933 Woods Drive
               Skokie, Illinois  60077-1031
               Telephone:  (847) 583-9400
               Facsimile:  (847) 583-9540

          (b)  If to Indemnitee, to:

               _________________________
               _________________________
               _________________________
               _________________________
               Telephone:  _____________
               Facsimile:  _____________

          20.  Counterparts.  This Agreement may be signed in counterparts, each
               ------------
of which shall be an original and all of which, when taken together, shall
constitute one and the same instrument.

          21.  Successors and Assigns.  This Agreement shall be (i) binding upon
               ----------------------
all successors and assigns of the Company, including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, and (ii) binding
upon and inure to the benefit of any successors and assigns, heirs, and personal
or legal representatives of Indemnitee.

          22.  Amendment; Waiver.  No amendment, modification, termination or
               -----------------
cancellation of this Agreement shall be effective unless made in a writing
signed by each of the parties hereto.  No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.

                                       13
<PAGE>

          IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the day and year first above written.

                              PEAPOD, INC.

                              By:___________________________
                                 Name:
                                 Title:

                              ______________________________
                              (Indemnitee)

                                       14

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