Homeland Holding Corporation
                  Wayne S. Peterson Stock Option Agreement


           This Stock Option Agreement ("Agreement") is made the      day of
         , 1998, by and between Homeland Holding Corporation, a Delaware 
corporation ("Holding"), and Wayne S. Peterson ("Holder").

                                Recitals
     
           A.    The Holder and Homeland Stores, Inc., a Delaware corporation
("Stores"), are parties to that certain letter agreement dated July 2, 1998
("Employment Agreement"), under which the Holder will become an officer and an
employee of Holding and Stores. Stores is a wholly- owned subsidiary of Holding.

           B.    To induce the Holder to enter into the Employment Agreement,
Holding has committed to grant the Holder the option to purchase an aggregate
of 50,000 shares of Common Stock, par value $0.01 per share ("Common Stock"),
of Holding.

           C.    This Agreement sets forth the terms and the conditions on which
Holding is granting such option to the Holder.

           For good and valuable consideration, the receipt and the sufficiency
of which are hereby acknowledged, Holding and the Holder agree as follows:

          1.    Grant of Stock Option. Holding hereby grants to the Holder the
option ("Option") to purchase an aggregate of 50,000 shares of Common Stock of
Holding on the terms and subject to the conditions contained herein.

           2.    Purchase Price.  The purchase price of the shares of Common 
Stock subject to the Option shall be equal to the last sales price on the date
on which the Holder commences employment as an officer and an employee of 
Holding and Homeland or, if no shares were traded on such date, on the 
immediately preceding date on which shares were traded

           Upon any exercise of the Option, unless otherwise permitted, the 
Holder shall pay in cash the purchase price with respect to the shares of 
Common Stock for which the Option is then being exercised in cash. The Board
of Directors of Holding ("Board") or, if there is a Stock Option Committee 
("Committee"), the Committee may permit the Holder (a) to pay such purchase 
price by transferring to Holding shares of Common Stock equal in value (as 
determined by the Board or, if there is a Committee, the Committee) to the 
purchase price or (b) to pay in cash the aggregate par value of the shares of
Common Stock for which the Option is then being exercised and to pay the balance
of the purchase price  on terms and subject to conditions determined by the
Board or, if there is a Committee, the Committee.

          3.   Option Vesting Schedule.  The Option shall be exercisable as 
follows:

                Number of Shares     First Date of Exercise

                     10,000        First Anniversary of Date of Employment
                     10,000        Second Anniversary of Date of Employment
                     10,000        Third Anniversary of Date of Employment
                     10,000        Fourth Anniversary of Date of Employment
                     10,000        Fifth Anniversary of Date of Employment

           The First Date of Exercise shall mean, with respect to each group
of shares of Common Stock covered by the Option, the date on which the Option
becomes exercisable with respect to such shares of Common Stock. Such shares
may be purchased either in whole or in part at any time and from time to time
on or after the First Date of Exercise and prior to the Expiration Date (as 
defined below).

           If there is a Change in Control (as defined below), the Option shall
be immediately exercisable in its entirety and the Holder shall have the right
to exercise the Option in its entirety at any time and from time to time prior
to the Expiration Date. The term "Change of Control" means (a) the earliest date
a new shareholder or a related group of new shareholders acquires beneficial 
ownership of 30% or more of the then issued and outstanding Common Stock, (b)
the date on which Holding ceases to own all of the issued and outstanding 
capital stock of Stores or (c) the date on which Holding or Stores disposes of
50% or more of its assets.

           The Board or, if there is a Committee, the Committee may also 
accelerate the vesting of the Option.

          4.    Term of Option.  The Option shall expire and terminate on the
earliest of (a) ten (10) years from the date the Option is granted; (b) 
termination of the employment of the Holder as an officer and an employee for
Cause (as defined in the Employment Agreement); and (c) forty-five (45) days 
after the termination of the employment of the Holder as an officer or an 
employee other than for Cause ("Expiration Date").

           If the Holder dies or becomes disabled during the period in which 
the Holder is an officer or an employee of Holding or within the period of 
time, if any, after termination of such employment during which the Holder is
entitled to exercise the Option, the legal representative of the Holder shall
have the right to exercise the Option.

           The Holder shall have none of the rights of a stockholder with 
respect to the shares of Common Stock subject to the Option until the date of
issuance of the shares to the Holder and only after such shares are fully
paid.

           5.      Nontransferability.  The Option is not assignable or 
transferable by the Holder, other than by will or the laws of descent and 
distribution. During the life of Holder, the rights of the Holder under this 
Agreement may be exercised only by the Holder. Any attempted assignment or
transfer, voluntarily or by operation of law, that is not permitted by this 
Section 5 shall be null and void and without effect.

           6.     Adjustments.  The Board, or, if there is a Committee, the 
Committee may adjust the number and the kind of shares covered by the Option 
and the price per share thereof as the Board or the Committee, as the case may
be, determines, in its sole discretion and in good faith, is equitably required
to prevent dilution or enlargement of the rights of the Holder that would 
otherwise result from (a) any stock dividend, stock split, combination of 
shares, recapitalization or other change in the capital structure of Holding;
(b) any merger, consolidation, separation, reorganization or partial or 
complete liquidation; or (c) any other corporate transaction or any other event
having an effect similar to any of the foregoing events.

           No fractional shares shall be issuable upon any exercise of the 
Option following an adjustment and the aggregate  purchase price shall be 
appropriately reduced on account of any fractional share not issued.

           7.      Investment Intent.  The Holder represents and agrees for
the Holder and the Holder's legal representatives that any shares of Common 
Stock or other securities purchased under the Option will be acquired for 
investment only and not with a view to distribution. 

           8.      Exercise  of Option.  The Option may be exercised by 
delivering to the Secretary of Holding notice in writing (in form satisfactory
to Holding) of the Holder's election to exercise the Option for a specified 
and permitted number of shares of Common Stock and by paying the purchase price
for the shares of Common Stock for which the Option is then being exercised.

            9.      Governing  Law;  Interpretation.    This Agreement shall 
be subject to, and governed by, the internal laws of the State of Oklahoma, 
irrespective of the fact that one or more of the parties now is, or may become
a resident of, a different state.

           The interpretation and the construction by the Board or, if there 
is a Committee, the Committee of any provision of this Agreement and any 
determination by the Board or, if there is a Committee, in connection herewith
shall be final and conclusive. No member of the Board or the Committee, if any,
shall be liable for any action or any determination taken or made in good faith.

            10.     Section Headings.  Section headings contained in this 
Agreement are for reference purposes only and shall not affect in any way the
construction or the interpretation of this Agreement.

           IN  WITNESS WHEREOF, Holding and the Holder have executed and 
delivered this Agreement on the date first above written.

                                    Homeland Holding Corporation


                                    By:       /s/  David B. Clark
                                         David B. Clark
                                         President and Chief Executive Officer



                                              /s/  Wayne  S. Peterson
                                         Wayne S. Peterson