ULTRA PAC, INC.
                             1996 STOCK OPTION PLAN


         1.) Purposes. The principal purposes of the Ultra Pac, Inc. (the
"Company") 1996 Stock Option Plan (the "Plan") are (a) to improve individual
performance by providing long-term incentives and rewards to employees and
consultants of the Company, (b) to assist the Company in attracting, retaining
and motivating employees and consultants with experience and ability, and (c) to
associate the interests of such persons with those of the Company's
shareholders.

         Options granted under this Plan are Non-Qualified Options.

         This Plan is separate from the Company's 1991 Stock Option Plan and the
Company's Outside Directors' Stock Option Plan.

         2.) Definitions. For purposes of this Plan, the following terms shall
have the meanings indicated below:

                  (01) "Capital Stock" - any of the Company's authorized but
         unissued shares of voting common stock, no par value per share.

                  (02) "Code" - the Internal Revenue Code of 1986, as amended
         from time to time.

                  (03) "Company" - Ultra Pac, Inc., a Minnesota corporation and
         any of its Subsidiaries.

                  (04) "Exchange Act" - the Securities Exchange Act of 1934, as
         amended.

                  (05) "Fair Market Value" - the price per share determined as
         follows: (a) if the security is listed for trading on one or more
         national securities exchanges (including the Nasdaq National Market
         System), the reported last sales price on such principal exchange on
         the date in question, or if such security shall not have been traded on
         such principal exchange on such date, the reported last sales price on
         such principal exchange on the first day prior thereto on which such
         security was so traded; or (b) if the security is not listed for
         trading on a national securities exchange (including the Nasdaq
         National Market System) but is traded in the over-the-counter market,
         the mean of the highest and lowest bid prices for such security on the
         date in question, or if there are no such bid prices for such security
         on such date, the mean of the highest and lowest bid prices on the
         first day prior thereto on which such prices existed; or (c) if neither
         (a) nor (b) is applicable, by any means deemed fair and reasonable by
         the Committee (as defined below), which determination shall be final
         and binding on all parties.

                  (06) "Non-Qualified Stock Option" - an option, not intended to
         qualify as an Incentive Stock Option as defined in Section 422 of the
         Code, to purchase Capital Stock of the Company.

                  (07) "Option" - the term shall refer to a Non-Qualified Stock
         Option.

                  (08) "Option Agreement" - a written agreement pursuant to
         which the Company grants an option to an Optionee and sets the terms
         and conditions of the option.

                  (09) "Option Date" - the date upon which an Option Agreement
         for an option granted pursuant to this Plan is duly executed by or on
         behalf of the Company.

                  (10) "Option Stock" - the voting common stock of the Company,
         no par value per share, (subject to adjustment as described in Section
         7) reserved for options pursuant to this Plan, or any other class of
         stock of the Company which may be substituted therefor by exchange,
         stock split or otherwise.

                  (11) "Optionee" - an officer, management level employee, other
         employee, and consultant of the Company to whom an option has been
         granted under the Plan.

                  (12) "Plan" - this 1996 Stock Option Plan, as amended
         hereafter from time to time.

                  (13) A "Subsidiary" - any corporation in an unbroken chain of
         corporations beginning with the Company, if, at the time of granting
         the option, each of the corporations other than the last corporation in
         the chain owns stock possessing fifty percent (50%) or more of the
         total combined voting power of all classes of stock in one of the other
         corporations in such chain. The term shall include any subsidiaries
         which become such after adoption of this Plan.

          3.) Options Available Under Plan. The Company's authorized Capital
Stock in an amount equal to 200,000 shares is hereby made available, and shall
be reserved for issuance under this Plan. The aggregate number of shares
available under this Plan shall be subject to adjustment on the occurrence of
any of the events and in the manner set forth in Section 7. Except as provided
in Section 7, in no event shall the number of shares reserved be reduced below
the number of shares issuable upon exercise of outstanding Options. If an Option
shall expire or terminate for any reason without having been exercised in full,
the unpurchased shares, shall (unless the Plan shall have been terminated)
become available for other Options under the Plan.

          4.) Administration. The Plan shall be administered by a committee
consisting of not less than two (2) members of the Board of Directors of the
Company (the "Committee") who are "disinterested" within the meaning of and to
the extent required by the General Rules and Regulations promulgated pursuant to
Section 16 of the Exchange Act (the "Section 16 Regulations"). Any such
committee shall exercise those functions delegated to it by the Board of
Directors. To the extent permitted by the Section 16 Regulations, the Board of
Directors may serve as the Committee.

         The Company shall grant Options pursuant to the Plan upon
determinations of the Committee as to which of the eligible persons shall be
granted Options, the number of shares to be Optioned and the term during which
any such Options may be exercised. The Committee may from time to time adopt
rules and regulations for carrying out the Plan and interpretations and
constructions of any provision of the Plan, which shall be final and conclusive.

         5.) Eligibility for Non-Qualified Options. Non-Qualified Options may be
granted only to an officer, management level employee, other employee or
consultant of the Company or a subsidiary. No further restrictions are placed on
the Committee in determining eligibility for granting Non-Qualified Options.

          6.) Terms and Conditions of Options. Whenever the Committee shall
designate an Optionee, it shall communicate to the Secretary of the Company the
name of the Optionee, the number of shares to be Optioned and such other terms
and conditions as it shall determine, not inconsistent with the provisions of
this Plan. The President or other officer of the Company shall then enter into
an Option Agreement with the Optionee, complying with and subject to the
following terms and conditions and setting forth such other terms and conditions
of the Option as determined by the Committee:

                  (01) Number of Shares and Option Price. The Option Agreement
         shall state the total number of shares to which it pertains. The price
         of the Option Stock for a Non-Qualified Stock Option shall be
         determined by the Committee and may be less than the Fair Market Value
         at the Option Date. The Option price shall be subject to adjustment as
         provided in Section 7 hereof.

                  (02) Time and Manner of Exercise of Option. The vesting and
         time of exercise of each Option shall be determined from time to time
         by the Committee and shall be set forth in the Option Agreement with
         each Optionee. In no event may an Option be exercised after ten (10)
         years from the date on which the Option was granted.

                  (03) Termination of Employment, Except Death or Disability. In
         the event that an Optionee shall cease to be employed by the Company
         for any reason other than his or her death, disability or "for cause,"
         such Optionee shall have the right to exercise any vested outstanding
         Options which were exercisable at the time of termination of employment
         at any time within three (3) months after the termination of the
         employee or until the earlier date of termination thereof under this
         Plan or the Option Agreement. Any vested Options not exercised within
         the three (3) month period shall terminate at the expiration of such
         period. In the event that the Optionee shall be terminated "for cause"
         including but not limited to: (i) willful breach of any agreement
         entered into with the Company; (ii) misappropriation of the Company's
         property, fraud, embezzlement, other acts of dishonesty against the
         Company; or (iii) conviction of any felony or crime involving moral
         turpitude, the Option shall terminate as of the date of the Optionee's
         termination of employment.

                  (04) Death or Disability of Optionee. If the Optionee shall
         die or become disabled within the definition of Section 105(d)(4) of
         the Code, (i) while in the employ of the Company or any Subsidiary, or
         (ii) within a period of three (3) months after the termination of his
         or her employment with the Company or any Subsidiary as provided in
         paragraph (03) of this section, and in either case shall not have fully
         exercised his or her vested Options, any vested Options granted
         pursuant to the Plan which were exercisable at the date of termination
         of employment shall be exercisable only within six (6) months following
         his or her death or date of disability or until the earlier originally
         stated expiration thereof. In the case of death, such Option shall be
         exercised pursuant to subparagraph (06) of this Section by the person
         or persons to whom the Optionee's rights under the Option shall pass by
         the Optionee's will or by the laws of descent and distribution, and
         only to the extent that such Options were exercisable at the time of
         death.

                  (05) Transfer of Option. Each Option granted hereunder shall,
         by its terms, be not transferable by the Optionee other than by will or
         by the laws of descent and distribution, and shall be, during the
         Optionee's lifetime, exercisable only by the Optionee or Optionee's
         guardian or legal representative. Except as permitted by the preceding
         sentence, each Option granted under the Plan and the rights and
         privileges thereby conferred shall not be transferred, assigned or
         pledged in any way (whether by operation of law or otherwise), and
         shall not be subject to execution, attachment or similar process. Upon
         any attempt to so transfer, assign, pledge, or otherwise dispose of the
         Option, or of any right or privilege conferred thereby, contrary to the
         provisions of the Option or the Plan, or upon levy of any attachment or
         similar process upon such rights and privileges, the Option, and such
         rights and privileges, shall immediately become null and void.

                  (06) Manner of Exercise of Options. An Option may be
         exercised, in whole or in part, at such time or times and with such
         rights with respect to such shares which have accrued and are in
         effect. Such Option shall be exercisable only by: (i) written notice to
         the Company of intent to exercise the Option with respect to a
         specified number of shares of stock; (ii) tendering the original Option
         Agreement to the Company; and (iii) payment to the Company of the
         amount of the Option purchase price for the number of shares of stock
         with respect to which the Option is then exercised. Payment of the
         Option purchase price may be made in cash (including certified check,
         bank draft or postal or express money order), by delivery of shares of
         common stock of the Company with a Fair Market Value equal to the
         Option purchase price, by a combination of cash and such shares, whose
         value together with such cash shall equal the Option purchase price or
         by any other method of payment which the Committee shall approve;
         provided, however, that there shall be no such exercise at any one time
         as to fewer than one hundred (100) shares or all of the remaining
         shares then purchasable by the Optionee or person exercising the
         Option. When shares of stock are issued to the Optionee pursuant to the
         exercise of an Option, the fact of such issuance shall be noted on the
         Option Agreement by the Company before the Option Agreement is returned
         to the Optionee. When all shares of Optioned stock covered by the
         Option Agreement have been issued to the Optionee, or the Option shall
         expire, the Option Agreement shall be cancelled and retained by the
         Company.

                  (07) Option Certificate. The Board of Directors shall have
         discretion to issue a certificate representing an Option granted
         pursuant to this Plan. Such certificate shall be surrendered to the
         Company upon exercise of the Option.

                  (08) Delivery of Certificate. Except where shares are held for
         unpaid withholding taxes, between fifteen (15) and thirty (30) days
         after receipt of the written notice and payment specified above, the
         Company shall deliver to the Optionee certificates for the number of
         shares with respect to which the Option has been exercised, issued in
         the Optionee's name; provided, however, that such delivery shall be
         deemed effected for all purposes when the Company, or the stock
         transfer agent for the Company, shall have deposited such certificates
         in the United States mail, postage prepaid, addressed to the Optionee
         and the address specified in the written notice of exercise.

                  (09) Other Provisions. The Option Agreements under this
         Section shall contain such other provisions as the Committee shall deem
         advisable.

          7.) Adjustments. In the event that the outstanding shares of the
common stock of the Company are changed into or exchanged for a different number
or kind of shares or other securities of the Company or of another corporation
by reason of any reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares or dividends payable in
capital stock, appropriate adjustment shall be made in the number and kind of
shares as to which Options may be granted under the Plan and as to which
outstanding Options or portions thereof then unexercised shall be exercisable,
to the end that the proportionate interest of the participant shall be
maintained as before the occurrence of such event; such adjustment in
outstanding Options shall be made without change in the total price applicable
to the unexercised portion of such Options and with a corresponding adjustment
in the Option Price per share. No such adjustment shall be made which shall,
within the meaning of any applicable sections of the Code, constitute a
modification, extension or renewal of an Option or a grant of additional
benefits to a participant.

         If the Company does not exercise its right under paragraph 12 hereof to
accelerate the date of any Options and is a party to a merger, consolidation,
reorganization or similar corporate transaction and if, as a result of that
transaction, its shares of common stock are exchanged for: (i) other securities
of the Company or (ii) securities of another corporation which has assumed the
outstanding options under the Plan or has substituted for such Options its own
Options, then each Optionee shall be entitled (subject to the conditions stated
herein or in such substituted Options, if any), in respect of that Optionee's
Options, to purchase that amount of such other securities of the Company or of
such other corporation as is sufficient to ensure that the value of the
Optionee's Options immediately before the corporate transaction is equivalent to
the value of such Options immediately after the transaction, taking into account
the Option Price of the Option before such transaction, the fair market value
per share of the common stock immediately before such transaction and the fair
market value immediately after the transaction, of the securities then subject
to that Option (or to the option substituted for that Option, if any). Upon the
happening of any such corporate transaction, the class and aggregate number of
shares subject to the Plan which have been heretofore or may be hereafter
granted under the Plan shall be appropriately adjusted to reflect the events
specified in this clause.

          8.) Rights as Stockholder. An Optionee shall not, by reason of any
Option granted hereunder, have any right of a stockholder of the Company with
respect to the shares covered by his Option until such shares shall have been
issued to the Optionee.

          9.) No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon the Optionee to exercise such Option. Neither shall
the Plan confer upon the Optionee any rights respecting continued employment nor
limit the Optionee's rights or the Company's rights to terminate such
employment.

          10.) Withholding Taxes. Whenever under the Plan shares of Option Stock
are to be issued upon exercise of the Options granted hereunder and prior to the
delivery of any certificate or certificates for said shares by the Company, the
Company shall have the right to require the Optionee to remit to the Company an
amount sufficient to satisfy any federal and state withholding or other
employment taxes resulting from such exercise. In the event that withholding
taxes are not paid within five days after the date of exercise, to the extent
permitted by law the Company shall have the right, but not the obligation, to
cause such withholding taxes to be satisfied by reducing the number of shares of
stock deliverable or by offsetting such withholding taxes against amounts
otherwise due from the Company to the Optionee. If withholding taxes are paid by
reduction of the number of shares deliverable to Optionee, such shares shall be
valued at the Fair Market Value as of the fifth business day following the date
of exercise.

          11.) Purchase for Investment; Rights of Holder on Subsequent
Registration. Unless the shares to be issued upon exercise of an Option granted
under the Plan have been effectively registered under the Securities Act of 1933
as now in force or hereafter amended (the "1933 Act"), the Company shall be
under no obligation to issue any shares covered by any Option unless the person
who exercises such Option, whether such exercise is in whole or in part, shall
give a written representation and undertaking to the Company which is
satisfactory in form and scope to counsel for the Company and upon which, in the
opinion of such counsel, the Company may reasonably rely, that he or she is
acquiring the shares issued to him or her pursuant to such exercise of the
Option for his or her own account as an investment and not with a view to, or
for sale in connection with, the distribution of any such shares, and that he or
she will make no transfer of the same except in compliance with any rules and
regulations in force at the time of such transfer under the 1933 Act, or any
other applicable law, and that if shares are issued without such registration a
legend to this effect may be endorsed on the securities so issued. In the event
that the Company shall, nevertheless, deem it necessary or desirable to register
under the 1933 Act or other applicable statutes any shares with respect to which
an Option shall have been exercised, or to qualify any such shares for exemption
from the 1933 Act or other applicable statutes, then the Corporation shall take
such action at its own expense and may require from each participant such
information in writing for use in any registration statement, prospectus,
preliminary prospectus or offering circular as is reasonably necessary for such
purpose and may require reasonable indemnity to the Company and its officers and
directors from such holder against all losses, claims, damages and liabilities
arising from such use of the information so furnished and caused by any untrue
statement of any material fact required to be stated therein or necessary to
make the statement therein not misleading in light of the circumstances under
which they were made.

          12.) Modification of Outstanding Options. The Committee, without the
consent of the Optionee, may accelerate the exercisability of an outstanding
Option upon the merger, consolidation, reorganization or similar transaction
with another entity and shorten the time period within which an Optionee must
exercise his or her Options. In addition, the Committee, at any time, may
authorize modification of any outstanding Option with the consent of the
participant when and subject to such conditions as are deemed to be in the best
interests of the Company and in accordance with the purposes of the Plan.

          13.) Foreign Employees. Without amending the Plan, the Committee may
grant Options to eligible employees who are foreign nationals on such terms and
conditions different from those specified in this Plan as may in the judgment of
the Committee be necessary or desirable to foster and promote achievement of the
purposes of the Plan, and, in furtherance of such purposes the Committee may
make such modification, amendments, procedures, subplans and the like as may be
necessary or advisable to comply with provisions of laws in other countries in
which the Company operates or has employees.

         14.) Approval of Board of Directors. This Plan is subject to approval
of the majority of the members of the Board of Directors of the Company.

         15.) Liquidation. Upon the complete liquidation of the Company, any
unexercised Options theretofore granted under this Plan shall be deemed
cancelled, except as otherwise provided in Section 7 in connection with a
merger, consolidation or reorganization of the Company.

         16.) Restrictions on Issuance of Shares. Notwithstanding the provisions
of Section 6, the Company may delay the issuance of shares covered by the
exercise of any Option and the delivery of a certificate for such shares until
one of the following conditions shall be satisfied:

                  (01) The shares with respect to which the Option has been
         exercised are at the time of the issue of such shares effectively
         registered under applicable Federal and state securities acts as now in
         force or hereafter amended; or

                  (02) A no-action letter in respect of the issuance of such
         shares shall have been obtained by the Company from the Securities and
         Exchange Commission and any applicable state securities commissioner;
         or

                  (03) Counsel for the Company shall have given an opinion,
         which opinion shall not be unreasonably conditioned or withheld, that
         such shares are exempt from registration under applicable federal and
         state securities acts as now in force or hereafter amended.

         It is intended that all exercises of Options shall be effective, and
the Company shall use its best efforts to bring about compliance with the above
conditions within a reasonable time, except that the Company shall be under no
obligation to cause a registration statement or a post-effective amendment to
any registration statement to be prepared at its expense solely for the purpose
of covering the issue of shares in respect of which any option may be exercised.

         17.) Termination and Amendment of the Plan. This Plan shall terminate
ten (10) years after March 14, 1996, the effective date of the Plan, or at such
earlier time as the Board of Directors shall determine. Any termination shall
not affect any Options then outstanding under the Plan.

         The Board may make such modifications of the Plan as it shall deem
advisable, including, but not limited to the following: (a) increase the number
of shares reserved for Options under this Plan, (b) increase the maximum term of
the Options provided for herein, or (c) change the class of persons eligible to
receive Options under the Plan.