Document:

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

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

          PEAPOD, INC., a Delaware corporation (the "Company"), hereby certifies
that the  following  resolution  was duly  approved  and adopted by the Board of
Directors of the Company on October 11, 2000, which  resolution  remains in full
force and effect on the date hereof:

          RESOLVED,  that  pursuant to the  authority  expressly  granted to and
vested in the Board of Directors of the Company  (the "Board of  Directors")  by
the provisions of the Amended and Restated  Certificate of  Incorporation of the
Company (the  "Certificate  of  Incorporation")  and its  Restated  By-Laws (the
"Bylaws"),  and in accordance with Section 151 of the General Corporation Law of
the State of Delaware,  there is hereby created, out of the 10,000,000 shares of
Preferred  Stock,  par value  $0.01 per share,  of the  Company  authorized  and
unissued in Article Fourth of the Certificate of  Incorporation  (the "Preferred
Stock"),  a series of the Preferred Stock  consisting of 730,000  shares,  which
series shall have the following powers, designations,  preferences and relative,
participating,  optional  or other  rights,  and the  following  qualifications,
limitations  and  restrictions   (in  addition  to  any  powers,   designations,
preferences  and  relative,  participating,  optional or other  rights,  and any
qualifications,  limitations and  restrictions,  set forth in the Certificate of
Incorporation which are applicable to the Preferred Stock):

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

          Section 2. Certain Definitions.

          Unless  the  context  otherwise  requires,  the terms  defined in this
Section  2  shall  have,  for all  purposes  of this  resolution,  the  meanings
specified  (with terms defined in the singular having  comparable  meanings when
used in the plural).

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

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

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

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

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

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

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

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

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

          (iv) the first day on which the individuals  (other than the Preferred
     Stock  Directors) who are members of the Board of Directors as of April 14,
     2000  (collectively,  the  "Incumbent  Board")  cease  for  any  reason  to
     constitute  a  majority  of the  Board  of  Directors;  provided  that  any
     individual  who becomes a director of the Company  subsequent  to April 14,
     2000,  whose  appointment  or  nomination  for  election  by the  Company's
     stockholders,  was  approved  by the  vote of at  least a  majority  of the
     directors then  comprising the Incumbent  Board shall be deemed a member of
     the Incumbent  Board;  and provided,  further,  that any individual who was
     initially  elected as a director of the Company as a result of an actual or
     threatened  election  contest  (defined  to  be  an  actual  or  threatened
     solicitation   by  a  person  or  group  for  the  purpose  of  opposing  a
     solicitation  by any other  person or group with respect to the election or
     removal of  directors) or any other actual or  threatened  solicitation  of
     proxies or consents  by or on behalf of any person  other than the Board of
     Directors shall not be deemed to be a member of the Incumbent Board;

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

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

          "Change  of Control  Election"  shall  have the  meaning  set forth in
Section 5(a).

          "Change of Control  Redemption Price" shall have the meaning set forth
in Section 5(a).

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

          "Conversion Date" shall have the meaning set forth in Section 7(e).

          "Conversion Price" shall have the meaning set forth in Section 7(b).

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

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

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

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

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

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

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

          "Exercise Period" shall have the meaning set forth in Section 5(a).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

          "Subsidiary" shall mean a subsidiary of the Company.

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

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

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

          Section 3.  Dividends.  (a) The holders of the  outstanding  shares of
Series C Preferred Stock shall be entitled to receive,  when, as and if declared
by the  Board  of  Directors  out of  funds  of the  Company  legally  available
therefor,  cumulative  dividends,  accumulating on a daily basis at the Dividend
Rate from the Original  Issuance  Date through and  including  the date on which
such  dividends  are paid.  The  "Dividend  Rate" shall be (i) from the Original
Issuance  Date  until  June 30,  2008  (x) if there  shall  exist  any  Event of
Non-Compliance, 12.5% per annum for all quarterly dividend periods commencing on
the date of the  occurrence  of such Event of  Non-Compliance  and ending on the
date that  such  Event of  Non-Compliance  is cured and (y) 8% per annum for all
other quarterly  dividend periods from the Original Issuance Date until June 30,
2008 and (ii) 16% per annum for all  quarterly  dividend  periods from and after
June 30, 2008. The amount of any dividends per share of Series C Preferred Stock
for any full quarterly period shall be computed by multiplying the Dividend Rate
for such quarterly  dividend period by the Liquidation  Preference per share and
dividing  the  result  by four.  Dividends  payable  on the  shares  of Series C
Preferred Stock for any period less than a full quarterly  dividend period shall
be  computed  on the basis of a 360-day  year of twelve  30-day  months  and the
actual number of days elapsed for any period less than one month.

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

          (c) [intentionally omitted]

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

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

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

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

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

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

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

          Section 5. Optional Redemption.

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

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

          (c)  Optional  Redemption  by  Company.  At any time  after the eighth
anniversary  of April 14, 2000, the Company may, upon sixty (60) days' notice to
the holders of the Series C Preferred Stock,  redeem all, but not less than all,
of the then outstanding shares of Series C Preferred Stock at a redemption price
per share equal to the  Liquidation  Preference  thereof  plus the amount of any
accumulated and unpaid dividends as of such date (the "Redemption Price").

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

          Section  6.  Voting  Rights.  (a)  Except  as  otherwise  provided  by
applicable law and in addition to any voting rights provided by law, the holders
of Series C Preferred Stock:

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

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

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

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

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

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

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

          Section 7. Conversion Rights.

          (a) General.  Subject to and upon  compliance  with the  provisions of
this  Section 7, the holders of the shares of Series C Preferred  Stock shall be
entitled, at their option, at any time prior to the date fixed for redemption of
such shares,  to convert all or any such shares of Series C Preferred Stock into
a number of fully paid and  nonassessable  shares of Common Stock (calculated as
to each conversion to the nearest  1/100th of a share).  The number of shares of
Common  Stock to which a holder of Series C  Preferred  Stock  shall be entitled
upon conversion  shall be determined by dividing (i) the Liquidation  Preference
of such  Series C  Preferred  Stock  (including  shares  issuable  in respect of
accumulated but unpaid dividends), plus the amount of any accumulated but unpaid
dividends as of the Conversion  Date by (ii) the  Conversion  Price in effect at
the close of business on the  Conversion  Date  (determined  as provided in this
Section 7).

          (b) Conversion  Price. The conversion  price (the "Conversion  Price")
shall  initially be $3.75 per share of Preferred  Stock,  subject to  adjustment
from time to time in accordance with Section 7(d).

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

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

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

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

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

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

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

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

          For  purposes of this Section  7(d),  "fully  diluted  basis" shall be
determined in accordance with the treasury method of GAAP and paragraph (iii) of
this  Section  7(d).

               (iii) For the purposes of any  adjustment  of a Conversion  Price
pursuant  to  paragraphs  (i) and  (ii)  of this  Section  7(d),  the  following
provisions shall be applicable:

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

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

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

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

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

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

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

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

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

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

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

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

          (vii)  Deferral  in  Certain  Circumstances.  In any case in which the
provisions of this Section 7(d) shall  require that an  adjustment  shall become
effective  immediately  after a record  date of an event,  the Company may defer
until the  occurrence  of such  event (1)  issuing to the holder of any Series C
Preferred  Stock  converted  after such record date and before the occurrence of
such event the shares of capital stock  issuable upon such  conversion by reason
of the  adjustment  required  by such event and  issuing to such holder only the
shares of capital stock  issuable upon such  conversion  before giving effect to
such adjustments,  and (2) paying to such holder any amount in cash in lieu of a
fractional  share of capital  stock  pursuant to Section  7(c) above;  provided,
however, that the Company shall deliver to such holder an appropriate instrument
or due bills  evidencing such holder's right to receive such  additional  shares
and such cash.

          (viii) Other Anti-Dilution  Provisions.  (1) If the Company has issued
or issues  any  securities  on or after  April 14,  2000  containing  provisions
protecting  the holder or holders  thereof  against  dilution in any manner more
favorable to such holder or holders thereof than those set forth in this Section
7(d), such provisions (or any more favorable portion thereof) shall be deemed to
be incorporated herein as if fully set forth in this Certificate of Designations
and,  to the extent  inconsistent  with any  provision  of this  Certificate  of
Designations,  shall be deemed to be substituted  therefor;  or (2) if any event
occurs  as to  which  the  foregoing  provisions  of this  Section  7(d) are not
strictly applicable or, if strictly applicable,  would not fairly and adequately
protect the conversion  rights of the holders of the Series C Preferred Stock in
accordance with the essential intent and principles of such provisions, then the
Board of  Directors  shall  make such  adjustments  in the  application  of such
provisions, in accordance with such essential intent and principles, as shall be
reasonably  necessary to protect such purchase  rights as  aforesaid,  but in no
event shall any such  adjustment  have the effect of increasing  the  Conversion
Price or  decreasing  the  number of shares of Common  Stock  issuable  upon the
conversion of the Series C Preferred Stock.

          (ix) Appraisal Procedure.  In any case in which the provisions of this
Section  7(d) shall  necessitate  that the  Appraisal  Procedure be utilized for
purposes of determining an adjustment to the Conversion  Price,  the Company may
defer until the completion of the Appraisal  Procedure and the  determination of
the  adjustment  (1)  issuing to the  holder of any share of Series C  Preferred
Stock  converted  after the date of the event that requires the  adjustment  and
before  completion  of the  Appraisal  Procedure  and the  determination  of the
adjustment,  the shares of capital stock issuable upon such conversion by reason
of the  adjustment  required  by such event and  issuing to such holder only the
shares of capital stock  issuable upon such  conversion  before giving effect to
such  adjustment  and (2) paying to such  holder any amount in cash in lieu of a
fractional  share of capital  stock  pursuant to Section  7(c) above;  provided,
however, that the Company shall deliver to such holder an appropriate instrument
or due bills  evidencing such holder's right to receive such  additional  shares
and such cash.

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

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

          (e)  Exercise  of  Conversion  Privilege.  In  order to  exercise  the
conversion privilege,  the holder of any share of Series C Preferred Stock shall
surrender the  certificate  evidencing  such share of Series C Preferred  Stock,
duly  endorsed or  assigned to the Company in blank,  at any office or agency of
the Company  maintained  for such purpose,  accompanied by written notice to the
Company at such office or agency that the holder elects to convert such Series C
Preferred  Stock or, if less than the entire amount  thereof is to be converted,
the portion thereof to be converted. Series C Preferred Stock shall be deemed to
have been converted  immediately prior to the close of business on the date (the
"Conversion  Date") of surrender of such shares of Series C Preferred  Stock for
conversion in accordance  with the  foregoing  provisions,  and at such time the
rights of the  holder of such  shares  of Series C  Preferred  Stock as a holder
shall  cease,  and the person or persons  entitled to receive  the Common  Stock
issuable upon conversion  shall be treated for all purposes as the record holder
or  holders  of such  Common  Stock as and  after  such  time.  As  promptly  as
practicable on or after the  Conversion  Date, the Company shall issue and shall
deliver at any office or agency of the Company  maintained  for the surrender of
Series C Preferred  Stock a certificate or  certificates  for the number of full
shares of Common Stock issuable upon  conversion,  together with payment in lieu
of any  fraction of a share,  as provided  in Section  7(c).  In the case of any
certificate  evidencing shares of Series C Preferred Stock which is converted in
part only,  upon such  conversion  the Company  shall  execute and deliver a new
certificate evidencing the number of shares of Series C Preferred Stock that are
not converted.

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

          (i) the  Company  shall  compute  the  adjusted  Conversion  Price  in
     accordance with Section 7(d) and shall prepare a certificate  signed by the
     Company's independent accounting firm setting forth the adjusted Conversion
     Price and showing in reasonable detail the facts upon which such adjustment
     is based, and such  certificate  shall forthwith be filed at each office or
     agency  maintained  for such purpose for  conversion  of shares of Series C
     Preferred Stock; and

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

          (g)  Notice of Certain Corporate Action.

               In case:

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

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

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

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

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

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

          (h) Company to Reserve  Common  Stock.  The Company shall at all times
reserve and keep available,  free from preemptive  rights, out of the authorized
but unissued  Common Stock or out of the Common Stock held in treasury,  for the
purpose of effecting the conversion of Series C Preferred Stock, the full number
of shares of Common Stock then issuable upon the  conversion of all  outstanding
shares of Series C Preferred Stock. Before taking any action that would cause an
adjustment  reducing the  conversion  price below the then par value (if any) of
the shares of Common Stock deliverable upon conversion of the Series C Preferred
Stock,  the Company will take any  corporate  action that, in the opinion of its
counsel,  is necessary  in order that the Company may validly and legally  issue
fully paid and non-assessable shares of Common Stock at such adjusted conversion
price.
          (i) Taxes on  Conversions.  The Company  will pay any and all original
issuance, transfer, stamp and other similar taxes that may be payable in respect
of the issue or delivery  of shares of Common  Stock on  conversion  of Series C
Preferred Stock pursuant hereto. The Company shall not, however,  be required to
pay any tax which may be  payable in respect  of any  transfer  involved  in the
issue and  delivery  of shares of Common  Stock in a name other than that of the
holder of the share(s) of Series C Preferred Stock to be converted,  and no such
issue or  delivery  shall be made  unless and until the person  requesting  such
issue has paid to the Company the amount of any such tax, or has  established to
the satisfaction of the Company that such tax has been paid.

          Section 8.  Preemptive  Rights.  (a) Each holder of Series C Preferred
Stock shall have the right to purchase its Pro Rata Amount of any New Securities
that the Company may, from time to time, propose to sell and issue. In the event
the Company  proposes to issue any New Securities,  it shall give all holders of
Series C Preferred Stock written  notice,  at their last addresses as they shall
appear in the stock  register,  at least 20 Business Days before such  issuance,
describing  the type of New  Securities,  the  price and  number  of shares  (or
principal amount) and the general terms upon which the Company proposes to issue
the same.  Each such holder shall have 20 Business Days from the date of receipt
of any such notice to agree to purchase up to the amount of New Securities equal
to such holder's Pro Rata Amount of such New  Securities  for the price and upon
the  general  terms  specified  in the  notice by giving  written  notice to the
Company,  at its  principal  office or such other address as may be specified by
the Company in its written notice to the holders,  of such holder's intention to
purchase  such  New  Securities  at  the  initial  closing  of the  sale  of New
Securities  and the number of such New  Securities  that such holder  intends to
purchase.

          (b) In the  event a  holder  of  Series  C  Preferred  Stock  fails to
exercise in full its right of  participation  within said 20 Business Day period
as set forth in Section  8(a)  above,  the  Company  shall have thirty (30) days
thereafter to sell additional  amounts of New Securities  respecting  which such
holder's option was not exercised,  at the price and upon the terms specified in
the Company's notice. The Company shall not issue or sell any additional amounts
of New  Securities  after the  expiration  of such 30-day  period  without first
offering  such  securities  to the  holders of Series C  Preferred  Stock in the
manner provided above.

          (c) The  rights  set forth in this  Section  8,  including  the notice
provisions relating thereto, may be waived by the Requisite Holders.

          Section 9. Event of Non-Compliance.

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

          Section 10.  Indemnification  and  Insurance.  (a) The  Company  shall
indemnify its directors to the fullest extent authorized or permitted by law, as
now or hereafter in effect, and such right to indemnification  shall continue as
to a person who has ceased to be a director  of the  Company  and shall inure to
the  benefit  of  his  or  her  heirs,   executors   and   personal   and  legal
representatives;  provided,  however,  that,  except for  proceedings to enforce
rights to  indemnification,  the Company shall not be obligated to indemnify any
director (or his or her heirs,  executors or personal or legal  representatives)
in  connection  with a  proceeding  (or part  thereof)  initiated by such person
unless such  proceeding  (or part thereof) was authorized or consented to by the
Board of Directors.  The right to  indemnification  conferred by this Section 10
shall  include  the right to be paid by the  Company  the  expenses  incurred in
defending or otherwise  participating  in any proceeding in advance of its final
disposition.  The  rights to  indemnification  and to the  advance  of  expenses
conferred in this Section 10 shall not be exclusive of any other right which any
person  may  have or  hereafter  acquire  under  the  Company's  Certificate  of
Incorporation  or  Bylaws,  any  statute,  agreement,  vote of  stockholders  or
disinterested directors or otherwise. Any repeal or modification of this Section
10 or this Certificate of Designations  shall not adversely affect any rights to
indemnification  and to the advancement of expenses of a director of the Company
existing at the time of such repeal or modification  with respect to any acts or
omissions occurring prior to such repeal or modification.

          (b) The Company shall purchase and maintain insurance on behalf of any
person who is or was a director of the Company  against any  liability  asserted
against such person and incurred by such person in any such capacity, or arising
out of such person's  status as such,  whether or not the Company would have the
power or the obligation to indemnify  such person  against such liability  under
the provisions of Section 10(a). Such insurance shall be in amounts and on other
terms as are customary for corporations similar in size to the Company.
<PAGE>
          IN WITNESS  WHEREOF,  the  Company  has  caused  this  Certificate  of
Designations to be signed by Andrew Parkinson, its Chairman, and attested by Dan
Rabinowitz, its Secretary, this 11th day of October, 2000.

                                     By:
                                        ----------------------------------------
                                        Name:  Andrew Parkinson
                                        Title: Chairman

Attested:

By:
   ----------------------------------------
   Secretary<PAGE>   1
                                                                   EXHIBIT 10.23

                               FIRST AMENDMENT TO
                            364-DAY CREDIT AGREEMENT

         THIS FIRST AMENDMENT TO 364-DAY CREDIT AGREEMENT (this "AMENDMENT") is
entered into as of September 21, 2000, among NORTHERN BORDER PARTNERS, L.P., a
Delaware limited partnership ("BORROWER"), NORTHERN BORDER INTERMEDIATE LIMITED
PARTNERSHIP, a Delaware limited partnership ("INTERMEDIATE PARTNERSHIP"), BANK
OF AMERICA, N.A., as Administrative Agent (the "ADMINISTRATIVE AGENT") for the
Lenders under the Credit Agreement hereinafter referenced, and the Lenders (as
defined in the Credit Agreement) party hereto.

         Reference is made to the 364-Day Credit Agreement dated as of June 28,
2000 (the "CREDIT AGREEMENT") among Borrower, Administrative Agent, SunTrust
Bank as Syndication Agent, Bank One, NA, as Documentation Agent, and the Lenders
party thereto, as amended by First Amendment (the "PRIOR FIRST AMENDMENT") dated
as of June 28, 2000. Unless otherwise defined in this Amendment, capitalized
terms used herein shall have the meaning set forth in the Credit Agreement; all
Section and Schedule references herein are to Sections and Schedules in the
Credit Agreement; and all Paragraph references herein are to Paragraphs in this
Amendment.

                                    RECITALS

         A. Borrower, through its wholly-owned Subsidiary NBP Energy Pipelines,
L.L.C., proposes to purchase, from Enron North America Corp., interests in three
limited liability companies that operate natural gas pipeline and gathering
systems, and in connection with such purchase, Borrower has requested that
Lenders agree to amend certain provisions of the Credit Agreement, as herein set
forth.

         B. Subject to the terms and conditions of this Amendment, Lenders are
willing to agree to such amendments.

         C. This First Amendment is executed in replacement and substitution for
the Prior First Amendment.

         Accordingly, for adequate and sufficient consideration, the parties
hereto agree, as follows:

PARAGRAPH 1.  AMENDMENTS.

         1.1 DEFINITIONS.

         (a) The definition of "APPLICABLE MARGIN" is hereby amended by adding
the following paragraph to the end thereof:

                  During the period September 21, 2000 to (but not including)
             the effective date of a Pricing/Capitalization Ratio Election
             pursuant to SECTION 10.13(b), the pricing grid set forth above (the
             "PRIMARY PRICING GRID") shall not apply, and in lieu thereof the
             pricing grid set forth below (the "ALTERNATIVE PRICING GRID") shall
             apply. Effective September 21, 2000, Category 1 pricing shall
             apply. Thereafter, for so long as the Alternative Pricing Grid is
             in effect, any increase or decrease in the Applicable Margin and
             Applicable Amount resulting from a change in the Capitalization
             Ratio shall become effective from

                                                                 FIRST AMENDMENT
                                                        364-DAY CREDIT AGREEMENT
<PAGE>   2

             and after the fifth Business Day after the date a Compliance
             Certificate and accompanying financial statements are delivered
             pursuant to SECTIONS 9.3(a) OR (b), provided, that if Borrower
             fails to deliver a quarterly or annual Compliance Certificate and
             accompanying financials statements when due in accordance with one
             of such Sections while the Alternative Pricing Grid is in effect,
             then Category 1 pricing shown in the Alternative Pricing Grid shall
             apply as of the fifth Business Day after the date such Compliance
             Certificate and accompanying financial statements were due. In
             addition, Borrower may at any time while the Alternative Pricing
             Grid is in effect deliver to the Administrative Agent a certificate
             of a Responsible Officer setting forth the Capitalization Ratio,
             and specifying the amount of Funded Debt and Capitalization used in
             the calculation thereof, together with such supporting information
             as may be required by the Administrative Agent, and the Applicable
             Margin and Applicable Amount shall be adjusted from and after the
             fifth Business Day after delivery of such certificate.

                            ALTERNATIVE PRICING GRID

<TABLE>
<CAPTION>
                                           APPLICABLE MARGIN
                                       -------------------------
                                                      EURODOLLAR
                                       BASE RATE         RATE
                    CAPITALIZATION     BORROWINGS     BORROWINGS    UTILIZATION    UNUSED COMMITMENT FEE
                        RATIO            (BPS)          (BPS)        FEE (BPS)             (BPS)
                  ----------------     ----------     ----------   -------------  -------------------------
<S>                                    <C>            <C>          <C>            <C>
                  Category 1              0.0           125.0           0.0       The higher of
                  Applies if                                                      (x) 20.00 bps and
                  Capitalization                                                  (y) the amount that
                  Ratio is greater                                                would apply if the
                  than or equal to                                                Primary Pricing Grid
                  40%                                                             were in effect, based
                                                                                  on the Index Debt as
                                                                                  therein set forth
                  ----------------     ----------     ----------   -------------  -------------------------
                  Category 2              0.0           112.5      0.0;           The higher of
                  Applies whenever                                 provided,      (x) 20.00 bps and
                  Category 1 does                                  however, that  (y) the amount that
                  not apply, until:                                if the Index   would apply if the
                  Capitalization                                   Debt Rating    Primary Pricing Grid
                  Ratio is less                                    is in          were in effect, based
                  than or equal to                                 Category 5 as  on the Index Debt as
                  35% and a Pricing/                               shown on the   therein set forth
                  Capitalization                                   Primary
                  Ratio Election is                                Pricing Grid,
                  made or deemed                                   then the
                  made                                             Utilization
                                                                   Fee shall be
                                                                   12.5 basis
                                                                   points
                  -----------------------------------------------------------------------------------------
</TABLE>

                                       2                         FIRST AMENDMENT
<PAGE>   3

                  If the Capitalization Ratio reduces to 35% or less at any time
             while the Alternative Pricing Grid is in effect, then the
             Alternative Pricing Grid shall remain in effect unless and until a
             Pricing/Capitalization Ratio Election is made or deemed made.

         (b) The definitions of "DEBT" and "FUNDED DEBT" each are amended hereby
by adding the following words to the end of subclause (e) thereof:

             ", provided, however, that the obligations referenced in this
             subclause (e) shall not include indebtedness (which is not assumed
             or guaranteed by Borrower or any Subsidiary of Borrower) under the
             Fort Union Project Finance Documents which is secured by Liens on
             the limited liability company interests of ECT Powder River, L.L.C.
             in Fort Union, L.L.C., nor indebtedness (which is not assumed or
             guaranteed by Borrower or any Subsidiary of Borrower) which is
             secured by Liens on the limited liability company interests of ECT
             Wind River, L.L.C. in Lost Creek, L.L.C."

         (c) The following definitions shall be alphabetically inserted in
SECTION 1.1 to read, as follows:

             ALTERNATIVE PRICING GRID means the second of the two pricing grids
             that are set forth in the definition of APPLICABLE MARGIN.

             ENRON NORTH AMERICA PURCHASE means the purchase by Guarantor,
             through its Subsidiary NBP Energy Pipelines, L.L.C., of the
             interests of Enron North America Corp. ("ENA") in Enron Midstream
             Services, L.L.C., ECT Wind River, L.L.C. and ECT Powder River,
             L.L.C. pursuant to the Purchase and Sale Agreement dated September
             21, 2000 between NBP Energy Pipelines, L.L.C. and ENA, for a
             purchase price not to exceed $205 million (as such purchase price
             may be adjusted pursuant to the terms of said Purchase and Sale
             Agreement).

             FORT UNION, L.L.C. means Fort Union Gas Gathering, L.L.C., a
             Delaware limited liability company.

             FORT UNION PROJECT FINANCE DOCUMENTS means the Construction and
             Term Credit Agreement dated as of April 16, 1999 among Fort Union,
             L.L.C. as Borrower, BankBoston, N.A., as Administrative Agent and
             the other Lenders and Agents parties thereto, and the other
             agreements executed as security therefor or pursuant thereto, as
             the same may from time to time be amended.

             LOST CREEK CONSTRUCTION LOAN SPONSOR GUARANTEE means the Sponsor
             Guarantee dated as of September 24, 1999 in favor of Barclays Bank
             PLC, as administrative agent, as supplemented by Guarantee
             Supplement No. 1 dated September 24, 1999, as in effect on
             September 21, 2000.

             LOST CREEK, L.L.C. means Lost Creek Gathering Company, L.L.C., a
             Delaware limited liability company.

             LOST CREEK PROJECT FINANCE DOCUMENTS means the Construction and
             Term Credit Agreement dated as of September 24, 1999 among Lost
             Creek, L.L.C. as

                                       3                         FIRST AMENDMENT
<PAGE>   4

             Borrower, Barclays Bank PLC, as Administrative Agent and the other
             Lenders party thereto and the other agreements executed as security
             therefor or pursuant thereto, as the same may from time to time be
             amended.

             PRICING/CAPITALIZATION RATIO ELECTION means an election pursuant to
             SECTION 10.13(B).

             PRIMARY PRICING GRID means the first of the two pricing grids that
             are set forth in the definition of APPLICABLE MARGIN.

             SENIOR NOTES has the meaning set forth in Section 11.7(a).

         1.2 DEBT AND GUARANTIES. SECTION 10.1 is amended by adding the word
"and" to the end of Section 10.1(b)(vii) and adding the following new SECTION
10.1(b)(viii) and SECTION 10.1(b)(ix):

                     (viii) The guaranty by Intermediate Partnership of
             Borrower's obligations under the Senior Notes; and

                     (ix) Debt of Intermediate Partnership and Borrower pursuant
             to the Lost Creek Construction Loan Sponsor Guarantee, provided
             that the principal amount of the loan guaranteed pursuant thereto
             may not exceed 35% of $66 million;

         1.3 LIENS. SECTION 10.2 is amended by changing the period (".") at the
end of SECTION 10.2(e) to a comma (","), and by adding the following new
SECTIONS 10.2(f) AND (g):

             (f) Liens on the limited liability company interests in Fort Union,
             L.L.C. which are owned by ECT Powder River L.L.C., a Delaware
             limited liability company, which Liens secure amounts owed under
             the Fort Union Project Finance Documents; and

             (g) Liens on the limited liability company interests in Lost Creek,
             L.L.C. which are owned by ECT Wind River, L.L.C., a Delaware
             limited liability company, which Liens secure amounts owed under
             the Lost Creek Project Finance Documents.

         1.4 CAPITALIZATION RATIO. SECTION 10.13 is amended in its entirety to
read as follows:

             10.13 CAPITALIZATION RATIO. (a) Borrower and Intermediate
             Partnership (unconsolidated with other Subsidiaries) shall never
             permit the Capitalization Ratio to be greater than the ratio set
             forth below at any time during the time periods set forth below:

                                       4                         FIRST AMENDMENT
<PAGE>   5

<TABLE>
<CAPTION>
                                                                  MAXIMUM CAPITALIZATION
                           PERIOD                                          RATIO
                           ------------------------------------- --------------------------
<S>                                                              <C>
                           I.   9/21/00 through 3/30/01*                    45%
                           ------------------------------------- --------------------------
                           II.  3/31/01 through 9/29/01*                    40%
                           ------------------------------------- --------------------------
                           III. 9/30/01 and thereafter                      35%
                           ------------------------------------- --------------------------
</TABLE>

       * assuming that Borrower has not made Pricing/Capitalization Ratio
         Election pursuant to SECTION 10.13(b)

         (b) (i) Notwithstanding the foregoing, if, at any time during Periods I
and II above the Capitalization Ratio is 35% or lower, Borrower may make an
election (a "PRICING/CAPITALIZATION RATIO ELECTION") in accordance with the
requirements of this SECTION 10.13(b). From and after the effective date of the
Pricing/Capitalization Ratio Election, Borrower and Intermediate Partnership
(unconsolidated with other Subsidiaries) shall never permit the Capitalization
Ratio to be greater than 35%. From and after the effective date of the
Pricing/Capitalization Ratio Election, the Primary Pricing Grid shall apply.

         (ii) Borrower may make the Pricing/Capitalization Ratio Election by
delivering written notice to the Administrative Agent (a) stating that Borrower
is making the "Pricing/Capitalization Ratio Election" pursuant to SECTION
10.13(b) of the Credit Agreement, and (b) specifying the effective date of such
election (which must be not sooner than the fifth Business Day following the
date of delivery of such election). Together with such notice Borrower shall
deliver a certificate of a Responsible Officer setting forth the Capitalization
Ratio and supporting detail. A Pricing/Capitalization Ratio Election (x) must be
given not less than five (5) Business Days before the specified effective date,
(y) may be made only once, and (z) shall be irrevocable.

         (iii) If not earlier made, Borrower shall be deemed to have made a
Pricing/Capitalization Ratio Election effective September 30, 2001, provided
that on such date the Capitalization Ratio shall be 35% or lower, as required by
SECTION 10.13(a).

                                       5                         FIRST AMENDMENT
<PAGE>   6

         1.5 SCHEDULE 8.3. SCHEDULE 8.3 is hereby amended by adding the
following:

             Subsidiaries of NBP Energy Pipelines, L.L.C.

<TABLE>
<CAPTION>
                             Name of Subsidiary                       Percentage Owned
                             ------------------                       ----------------
<S>                                                                   <C>
                  ECT Powder River, LLC, a Delaware                         100%
                  limited liability company

                  ECT Wind River, LLC, a Delaware limited                   100%
                  liability company

                  Enron Midstream Services, L.L.C., a                       100%
                  Delaware limited liability company
</TABLE>

PARAGRAPH 2 EFFECTIVE DATE. Notwithstanding any contrary provision, this
Amendment is not effective until the date (the "EFFECTIVE DATE") upon which the
following conditions have been satisfied:

         (a) The Administrative Agent shall have received counterparts of this
Amendment, executed by Borrower, Guarantor and the Required Lenders.

         (b) The Administrative Agent shall have received a certificate executed
by a Responsible Officer of Borrower stating that (1) there has not occurred a
material adverse change since December 31, 1999 in the business, assets,
liabilities (actual or contingent), operations or condition (financial or
otherwise) of the Borrower and its Subsidiaries taken as a whole or in the facts
and information regarding such entities as represented to date, (2) the Enron
North America Purchase (as defined in this Amendment) is occurring on the
Effective Date of this Amendment, and (3) no actions by, or in respect of, or
filing with, any Governmental Authority are required as a condition to the
consummation of the Enron North America Purchase, except such actions and
filings as have been taken or made.

         (c) Borrower shall have paid all fees required to be paid to the
Administrative Agent for its account and for the account of the Lenders
executing this Amendment.

PARAGRAPH 3 ACKNOWLEDGMENT AND RATIFICATION. As a material inducement to
Administrative Agent and the Lenders to execute and deliver this Amendment,
Borrower and Guarantor each (a) consent to the agreements in this Amendment and
(b) agree and acknowledge that the execution, delivery, and performance of this
Amendment shall in no way release, diminish, impair, reduce, or otherwise affect
the respective obligations of Borrower or Guarantor under the Loan Documents to
which it is a party, which Loan Documents shall remain in full force and effect,
and all guaranties and Rights thereunder are hereby ratified and confirmed.

PARAGRAPH 4 REPRESENTATIONS. As a material inducement to Lenders to execute and
deliver this Amendment, Borrower and Guarantor each represent and warrant to
Lenders (with the knowledge and intent that Lenders are relying upon the same in
entering into this Amendment) that as of the Effective Date of this Amendment
and as of the date of execution of this Amendment, (a) all representations and
warranties in the Loan Documents are true and correct in all material respects
as though made on the date hereof, except to the extent that any of them speak
to a different specific date, and (b) no Potential Default or Default exists.

PARAGRAPH 5 EXPENSES. Borrower shall pay all costs, fees, and expenses paid or
incurred by Administrative Agent incident to this Amendment, including, without
limitation, the reasonable fees and

                                       6                         FIRST AMENDMENT
<PAGE>   7

expenses of Administrative Agent's counsel in connection with the negotiation,
preparation, delivery, and execution of this Amendment and any related
documents.

         D. PARAGRAPH 6 MISCELLANEOUS. This Amendment is executed in replacement
and substitution for the Prior First Amendment, and the Prior First Amendment is
hereby superceded and replaced in its entirety. This Amendment is a "Loan
Document" referred to in the Credit Agreement. The provisions relating to Loan
Documents in Section 14 of the Credit Agreement are incorporated in this
Amendment by reference. Unless stated otherwise (a) the singular number includes
the plural and vice versa and words of any gender include each other gender, in
each case, as appropriate, (b) headings and captions may not be construed in
interpreting provisions, (c) this Amendment must be construed, and its
performance enforced, under New York law, (d) if any part of this Amendment is
for any reason found to be unenforceable, all other portions of it nevertheless
remain enforceable, and (e) this Amendment may be executed in any number of
counterparts with the same effect as if all signatories had signed the same
document, and all of those counterparts must be construed together to constitute
the same document.

PARAGRAPH 7 ENTIRE AGREEMENT. THIS AMENDMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES ABOUT THE SUBJECT MATTER OF THIS AMENDMENT AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

PARAGRAPH 8 PARTIES. This Amendment binds and inures to the benefit of Borrower,
Guarantor, Administrative Agent, Lenders, and their respective successors and
assigns.

         The parties hereto have executed this Amendment in multiple
counterparts to be effective as of the Effective Date.

                     REMAINDER OF PAGE INTENTIONALLY BLANK.
                           SIGNATURE PAGES TO FOLLOW.

                                       7                         FIRST AMENDMENT
<PAGE>   8

                                           NORTHERN BORDER PARTNERS, L.P.

                                           By:  /s/ Jerry L. Peters
                                                --------------------------------
                                                Name: Jerry L. Peters
                                                Title: Chief Financial &
                                                       Accounting Officer

                                                                 FIRST AMENDMENT
<PAGE>   9

                                           NORTHERN BORDER INTERMEDIATE
                                           LIMITED PARTNERSHIP, Guarantor

                                           By:  /s/ Jerry L. Peters
                                                --------------------------------
                                                Name: Jerry L. Peters
                                                Title: Chief Financial &
                                                       Accounting Officer

                                                                 FIRST AMENDMENT
<PAGE>   10

                                         BANK OF AMERICA, N.A.,
                                         as Administrative Agent and as a Lender

                                         By:   /s/ Denise A. Smith
                                               ---------------------------------
                                               Denise A. Smith
                                               Managing Director

                                                                 FIRST AMENDMENT
<PAGE>   11

                                         SUNTRUST BANK

                                         By:   /s/ Steven J. Newby
                                               ---------------------------------
                                               Name: Steven J. Newby
                                               Title: Vice President

                                                                 FIRST AMENDMENT
<PAGE>   12

                                         BANK ONE, NA

                                         By:   /s/ Helen A. Carr
                                               ---------------------------------
                                               Name: Helen A. Carr
                                               Title: First Vice President

                                                                 FIRST AMENDMENT
<PAGE>   13

                                         BANK OF MONTREAL

                                         By:   /s/ J. R. Whitmore
                                               ---------------------------------
                                               Name: J. R. Whitmore
                                               Title: Director

                                                                 FIRST AMENDMENT
<PAGE>   14

                                         ROYAL BANK OF CANADA

                                         By:   /s/ David A. McCluskey
                                               ---------------------------------
                                               Name: David A. McCluskey
                                               Title: Manager

                                                                 FIRST AMENDMENT
<PAGE>   15

                                         THE FUJI BANK, LIMITED

                                         By:   /s/ Jacques Azagury
                                               ---------------------------------
                                               Name: Jacques Azagury
                                               Title: Senior Vice President
                                                      & Manager

                                                                 FIRST AMENDMENT
<PAGE>   16

                                         FIRST NATIONAL BANK OF OMAHA

                                         By:   /s/ Jeff Sims
                                               ---------------------------------
                                               Name: Jeff Sims
                                               Title: Vice President

                                                                 FIRST AMENDMENT

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