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                         DOMINICK'S SUPERMARKETS, INC.
                         1996 EQUITY PARTICIPATION PLAN


     Dominick's Supermarkets, Inc., a Delaware corporation (the "Company"), has
adopted its 1996 Equity Participation Plan (the "Plan"), effective October 28,
1996, for the benefit of its eligible employees, consultants and directors.

     The purposes of this Plan are as follows:

     (1) To provide an additional incentive for employees, consultants and
directors to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company stock and/or
rights which recognize such growth, development and financial success.

     (2) To enable the Company to obtain and retain the services of employees,
consultants and directors considered essential to the long-term success of the
Company by offering them an opportunity to own stock in the Company and/or
rights which will reflect the growth, development and financial success of the
Company.

                                  ARTICLE I

                                 DEFINITIONS

     1.1 General.  Wherever the following terms are used in this Plan they shall
have the meanings specified below, unless the context clearly indicates
otherwise.

     1.2 Award Limit.  "Award Limit" shall mean 500,000 shares of Common Stock.

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

     1.4 Change in Control.  "Change in Control" shall mean a change in
ownership or control of the Company effected through either of the following
transactions:

           (a) any person or related group of persons (other than the Company
      or a person that, as of the date of this Plan, directly or indirectly
      possesses the ability to elect, or cause the election of, a majority of
      members of the Board) directly or indirectly acquires beneficial
      ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
      securities possessing more than fifty percent (50%) of the total combined
      voting power of the Company's outstanding securities pursuant to a tender
      or exchange offer made directly to the Company's stockholders which the
      Board does not recommend such stockholders accept; or

           (b) there is a change in the composition of the Board over a period
      of thirty-six (36) consecutive months (or less) such that a majority of
      the Board members ceases, by reason of one or more proxy contests for the
      election of Board members, to be comprised of individuals who either (i)
      have been Board members continuously since the beginning of such period
      or (ii) have been elected or nominated for election as Board members
      during such period by at least a majority of the Board members described
      in clause (i) who were still in office at the time such election or
      nomination was approved by the Board.


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

    1.6 Committee.  "Committee" shall mean the Board, or a committee thereof
appointed as provided in Section 9.1.

    1.7 Common Stock.  "Common Stock" shall mean the voting common stock of the
Company, par value $.01 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any preferred
stock and any warrants, options or other rights to purchase Common Stock.  Debt
securities of the Company convertible into Common Stock shall be deemed equity
securities of the Company.

    1.8 Company.  "Company" shall mean Dominick's Supermarkets, Inc., a
Delaware corporation, or any successor thereto.

    1.9 Corporate Transaction.  "Corporate Transaction" shall mean any of the
following stockholder-approved transactions to which the Company is a party:

           (a) a merger or consolidation in which the Company is not the
      surviving entity, except for a transaction the principal purpose of which
      is to change the State in which the Company is incorporated, form a
      holding company or effect a similar reorganization as to form, whereupon
      this Plan and all Options are assumed by the successor entity;

           (b) the sale, transfer, exchange or other disposition of all or
      substantially all of the assets of the Company, in complete liquidation
      or dissolution of the Company in a transaction not covered by the
      exceptions to clause (a), above; or

           (c) any reverse merger in which the Company is the surviving entity
      but in which securities possessing more than fifty percent (50%) of the
      total combined voting power of the Company's outstanding securities are
      transferred or issued to a person or persons different from those who
      held such securities immediately prior to such merger.

    1.10 Deferred Stock.  "Deferred Stock" shall mean Common Stock awarded
under Article VII of this Plan.

    1.11 Director.  "Director" shall mean a member of the Board.

    1.12 Dividend Equivalent.  "Dividend Equivalent" shall mean a right to
receive the equivalent value (in cash or Common Stock) of dividends paid on
Common Stock, awarded under Article VII of this Plan.

    1.13 Employee.  "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.

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

    1.15 Fair Market Value.  "Fair Market Value" of a share of Common Stock as
of a given date shall be (i) the closing price of a share of Common Stock on
the principal exchange on which



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shares of Common Stock are then trading, if any (or as reported on any
composite index which includes such principal exchange), on the trading day
previous to such date, or if shares were not traded on the trading day previous
to such date, then on the next preceding date on which a trade occurred, or
(ii) if Common Stock is not traded on an exchange but is quoted on NASDAQ or a
successor quotation system, the mean between the closing representative bid and
asked prices for the Common Stock on the trading day previous to such date as
reported by NASDAQ or such successor quotation system; or (iii) if Common Stock
is not publicly traded on an exchange and not quoted on NASDAQ or a successor
quotation system, the Fair Market Value of a share of Common Stock as
established by the Committee (or the Board, in the case of Options granted to
Independent Directors) acting in good faith.

    1.16 Grantee.  "Grantee" shall mean an Employee or consultant granted a
Performance Award, Dividend Equivalent, Stock Payment or Stock Appreciation
Right, or an award of Deferred Stock, under this Plan.

    1.17 Incentive Stock Option.  "Incentive Stock Option" shall mean an option
which conforms to the applicable provisions of Section 422 of the Code and
which is designated as an Incentive Stock Option by the Committee.

    1.18 Independent Director.  "Independent Director" shall mean a member of
the Board who is not an Employee of the Company.

    1.19 Non-Qualified Stock Option.  "Non-Qualified Stock Option" shall mean
an Option which is not designated as an Incentive Stock Option by the Committee
(or the Board, in the case of Options granted to Independent Directors).

    1.20 Option.  "Option" shall mean a stock option granted under Article III
of this Plan.  An Option granted under this Plan shall, as determined by the
Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided, however, that Options granted to Independent Directors and
consultants shall be Non-Qualified Stock Options.

    1.21 Optionee.  "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.

    1.22 Performance Award.  "Performance Award" shall mean a cash bonus, stock
bonus or other performance or incentive award that is paid in cash, Common
Stock or a combination of both, awarded under Article VII of this Plan.

    1.23 Plan.  "Plan" shall mean the 1996 Equity Participation Plan of
Dominick's Supermarkets, Inc.

    1.24 QDRO.  "QDRO" shall mean a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder.

    1.25 Restricted Stock.  "Restricted Stock" shall mean Common Stock awarded
under Article VI of this Plan.

    1.26 Restricted Stockholder.  "Restricted Stockholder" shall mean an
Employee or consultant granted an award of Restricted Stock under Article VI of
this Plan.



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    1.27 Rule 16b-3.  "Rule 16b-3" shall mean that certain Rule 16b-3 under the
Exchange Act, as such Rule may be amended from time to time.

    1.28 Stock Appreciation Right.  "Stock Appreciation Right" shall mean a
stock appreciation right granted under Article VIII of this Plan.

    1.29 Stock Payment.  "Stock Payment" shall mean (i) a payment in the form
of shares of Common Stock, or (ii) an option or other right to purchase shares
of Common Stock, as part of a deferred compensation arrangement, made in lieu
of all or any portion of the compensation including, without limitation,
salary, bonuses and commissions, that would otherwise become payable to a key
Employee or consultant in cash, awarded under Article VII of this Plan.

    1.30 Subsidiary.  "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock
possessing 50 percent or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.

    1.31 Termination of Consultancy.  "Termination of Consultancy" shall mean
the time when the engagement of an Optionee, Grantee or Restricted Stockholder
as a consultant to the Company or a Subsidiary is terminated for any reason,
with or without cause, including, without limitation, by resignation,
discharge, death or retirement; but excluding terminations where there is a
simultaneous commencement of employment with the Company or any Subsidiary.
The Committee, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Consultancy, including,
without limitation, the question of whether a Termination of Consultancy
resulted from a discharge for good cause, and all questions of whether
particular leaves of absence constitute Terminations of Consultancy.
Notwithstanding any other provision of this Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate a consultant's service at
any time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.

    1.32 Termination of Directorship.  "Termination of Directorship" shall mean
the time when an Optionee who is an Independent Director ceases to be a
Director for any reason, including, without limitation, a termination by
resignation, failure to be elected, death or retirement.  The Board, in its
sole and absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Directorship with respect to Independent
Directors.

    1.33 Termination of Employment.  "Termination of Employment" shall mean the
time when the employee-employer relationship between an Optionee, Grantee or
Restricted Stockholder and the Company or any Subsidiary is terminated for any
reason, with or without cause, including, without limitation, a termination by
resignation, discharge, death, disability or retirement; but excluding (i) at
the discretion of the Committee, terminations where there is a simultaneous
reemployment or continuing employment of an Optionee, Grantee or Restricted
Stockholder by the Company, a Subsidiary, an affiliate of the Company or any 
other company managed by The Yucaipa Companies ("Yucaipa"), (ii) at the
discretion of the Committee, terminations which result in a temporary severance
of the employee-employer relationship, and (iii) at the discretion of the
Committee, terminations which are followed by the simultaneous
establishment of a consulting relationship by the Company, a Subsidiary, an
affiliate of the Company or any other company managed by Yucaipa with the
former employee.  The Committee, in its absolute discretion, shall determine
the effect of all matters and questions relating to Termination of Employment,
including, without limitation, the question of whether a Termination of
Employment resulted from a discharge for good cause, and all questions of
whether particular leaves of absence 

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constitute Terminations of Employment;  provided, however, that with respect to
Incentive Stock Options, a leave of absence, change in status from an employee
to an independent contractor or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent
that, such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section.  Notwithstanding
any other provision of this Plan, the Company or any Subsidiary has an absolute
and unrestricted right to terminate an Employee's employment at any time for
any reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.

                                  ARTICLE II

                             SHARES SUBJECT TO PLAN

     2.1 Shares Subject to Plan.

     (a) The shares of stock subject to Options, awards of Restricted Stock,
Performance Awards, Dividend Equivalents, awards of Deferred Stock, Stock
Payments or Stock Appreciation Rights shall be Common Stock. The aggregate
number of such shares which may be issued upon exercise of such options or
rights or upon any such awards under the Plan shall not exceed one million
(1,000,000).  The shares of Common Stock issuable upon exercise of such Options
or rights or upon any such awards may be either previously authorized but
unissued shares or treasury shares.

     (b) The maximum number of shares which may be subject to Options or Stock
Appreciation Rights granted under the Plan to any individual in any fiscal year
shall not exceed the Award Limit.  To the extent required by Section 162(m) of
the Code, shares subject to Options which are canceled continue to be counted
against the Award Limit and if, after grant of an Option, the price of shares
subject to such Option is reduced, the transaction is treated as a cancellation
of the Option and a grant of a new Option and both the Option deemed to be
canceled and the Option deemed to be granted are counted against the Award
Limit.  Furthermore, to the extent required by Section 162(m) of the Code, if,
after grant of a Stock Appreciation Right, the base amount on which stock
appreciation is calculated is reduced to reflect a reduction in the Fair Market
Value of the Common Stock, the transaction is treated as a cancellation of the
Stock Appreciation Right and a grant of a new Stock Appreciation Right and both
the Stock Appreciation Right deemed to be canceled and the Stock Appreciation
Right deemed to be granted are counted against the Award Limit.

     2.2 Add-back of Options and Other Rights.  If any Option, or other right to
acquire shares of Common Stock under any other award under this Plan, expires
or is canceled without having been fully exercised, or is exercised in whole or
in part for cash as permitted by this Plan, the number of shares
subject to such Option or other right but as to which such Option or other
right was not exercised prior to its expiration, cancellation or exercise may
again be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1.  Furthermore, any shares subject to Options or other awards which
are adjusted pursuant to Section 10.3 and become exercisable with respect to
shares of stock of another corporation shall be considered cancelled and may
again be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1.   Shares of Common Stock which are delivered by the Optionee or
Grantee or withheld by the Company upon the exercise of any Option or other
award under this Plan, in payment of the exercise price thereof, may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1.  If any share of Restricted Stock is forfeited by the Grantee or
repurchased by the Company pursuant to Section 6.6 hereof, such share may again
be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1.  Notwithstanding the




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provisions of this Section 2.2, no shares of Common Stock may again be
optioned, granted or awarded if such action would cause an Incentive Stock
Option to fail to qualify as an incentive stock option under Section 422 of the
Code.

                                 ARTICLE III

                              GRANTING OF OPTIONS

     3.1 Eligibility.  Any Employee or consultant selected by the Committee
pursuant to Section 3.4(a)(i) shall be eligible to be granted an Option.  Each
Independent Director of the Company shall be eligible to be granted Options at
the times and in the manner set forth in Section 3.4(d).

     3.2 Disqualification for Stock Ownership.  No person may be granted an
Incentive Stock Option under this Plan if such person, at the time the
Incentive Stock Option is granted, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any then existing Subsidiary or parent corporation (within the meaning of
Section 422 of the Code) unless such Incentive Stock Option conforms to the
applicable provisions of Section 422 of the Code.

     3.3 Qualification of Incentive Stock Options.  No Incentive Stock Option
shall be granted to any person who is not an Employee.

     3.4 Granting of Options

     (a) The Committee shall from time to time, in its absolute discretion, and
subject to applicable limitations of this Plan:

           (i) Determine which Employees are key Employees and select from
      among the key Employees or consultants (including Employees or
      consultants who have previously received Options or other awards under
      this Plan) such of them as in its opinion should be granted Options;

           (ii) Subject to the Award Limit, determine the number of shares to
      be subject to such Options granted to the selected key Employees or
      consultants;

           (iii) Subject to Section 3.3, determine whether such Options are to
      be Incentive Stock Options or Non-Qualified Stock Options and whether
      such Options are to qualify as performance-based compensation as
      described in Section 162(m)(4)(C) of the Code; and

           (iv) Determine the terms and conditions of such Options, consistent
      with this Plan; provided, however, that the terms and conditions of
      Options intended to qualify as performance-based compensation as
      described in Section 162(m)(4)(C) of the Code shall include, but not be
      limited to, such terms and conditions as may be necessary to meet the
      applicable provisions of Section 162(m) of the Code.

     (b) Upon the selection of a key Employee or consultant to be granted an
Option, the Committee shall instruct the Secretary of the Company to issue the
Option and may impose such conditions on the grant of the Option as it deems
appropriate.  Without limiting the generality of the preceding sentence, the
Committee may, in its discretion and on such terms as it deems appropriate,




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require as a condition on the grant of an Option to an Employee or consultant
that the Employee or consultant surrender for cancellation some or all of the
unexercised Options, awards of Restricted Stock or Deferred Stock, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments or
other rights which have been previously granted to him or her under this Plan
or otherwise.  An Option, the grant of which is conditioned upon such
surrender, may have an option price lower (or higher) than the exercise price
of such surrendered Option or other award, may cover the same (or a lesser or
greater) number of shares as such surrendered Option or other award, may
contain such other terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, exercise period or any other term or condition of such
surrendered Option or other award.

     (c) Any Incentive Stock Option granted under this Plan may be modified by
the Committee to disqualify such option from treatment as an "incentive stock
option" under Section 422 of the Code.

     (d) The Board shall from time to time, in its absolute discretion, and
subject to applicable limitations of this Plan:

         (i) Determine whether, in its opinion, the Independent Directors (or 
any of them) should be granted Non-Qualified Stock Options;

         (ii) Subject to the Award Limit, determine the number of shares to be
subject to such Non-Qualified Stock Options granted to selected Independent
Directors; and

         (iii) Determine the terms and conditions of such Non-Qualified Stock
Options, consistent with this Plan.


                                  ARTICLE IV

                                TERMS OF OPTIONS

    4.1 Option Agreement.  Each Option shall be evidenced by a written stock
option agreement, which shall be executed by the Optionee and an authorized
officer of the Company and which shall contain such terms and conditions as the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall determine, consistent with this Plan.  Stock option agreements
evidencing Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code.  Stock option agreements evidencing Incentive Stock Options
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.

    4.2 Option Price.  The price per share of the shares subject to each Option
shall be set by the Committee (or the Board, in the case of Options granted to
Independent Directors); provided, however, that such price shall be no less
than the par value of a share of Common Stock, unless otherwise permitted by
applicable state law, and (i) in the case of Incentive Stock Options and
Non-Qualified Stock Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, such price shall
not be less than 100% of the Fair Market Value of a share of Common Stock on
the date the Option is granted; (ii) in the case of Incentive Stock Options
granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting


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power of all classes of stock of the Company or any Subsidiary or
parent corporation thereof (within the meaning of Section 422 of the Code) such
price shall not be less than 110% of the Fair Market Value of a share of Common
Stock on the date the Option is granted; and (iii) in the case of Options
granted to Independent Directors, such price shall equal 100% of the Fair
Market Value of a share of Common Stock on the date the Option is granted.

     4.3 Option Term.  The term of an Option shall be set by the Committee (or
the Board, in the case of Options granted to Independent Directors) in its
discretion; provided, however, that in the case of Incentive Stock Options, the
term shall not be more than ten (10) years from the date the Incentive Stock
Option is granted, or five (5) years from such date if the Incentive Stock
Option is granted to an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation thereof
(within the meaning of Section 422 of the Code).  Except as limited by the
requirements of Section 422 of the Code and regulations and rulings thereunder
applicable to Incentive Stock Options, the Committee may extend the term of any
outstanding Option in connection with any Termination of Employment or
Termination of Consultancy of the Optionee, or amend any other term or
condition of such Option relating to such a termination.

     4.4 Option Vesting

     (a) The period during which the right to exercise an Option in whole or in
part vests in the Optionee shall be set by the Committee (or the Board, in the
case of Options granted to Independent Directors) and the Committee (or the
Board, in the case of Options granted to Independent Directors) may determine
that an Option may not be exercised in whole or in part for a specified period
after it is granted; provided, however, that unless the Committee (or the
Board, in the case of Options granted to Independent Directors) otherwise
provides in the terms of the Option or otherwise, no Option shall be
exercisable by any Optionee who is then subject to Section 16 of the Exchange
Act within the period ending six months and one day after the date the Option
is granted.  At any time after grant of an Option, the Committee (or the Board,
in the case of Options granted to Independent Directors) may, in its sole and
absolute discretion and subject to whatever terms and conditions it selects,
accelerate the period during which an Option vests.

     (b) No portion of an Option which is unexercisable at Termination of
Employment, Termination of Directorship or Termination of Consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee (or the Board, in the case of Options granted to
Independent Directors) in the case of Options granted to Employees or
consultants either in the Stock Option Agreement or by action of the Committee
(or the Board, in the case of Options granted to Independent Directors)
following the grant of the Option.

     (c) To the extent that the aggregate Fair Market Value of stock with
respect to which "incentive stock options" (within the meaning of Section 422
of the Code, but without regard to Section 422(d) of the Code) are exercisable
for the first time by an Optionee during any calendar year (under the Plan and
all other incentive stock option plans of the Company and any Subsidiary)
exceeds $100,000, such Options shall be treated as Non-Qualified Options to the
extent required by Section 422 of the Code.  The rule set forth in the
preceding sentence shall be applied by taking Options into account in the order
in which they were granted.  For purposes of this Section 4.4(c), the Fair
Market Value of stock shall be determined as of the time the Option with
respect to such stock is granted.


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      4.5 Consideration.  In consideration of the granting of an Option, the
Optionee shall agree, in the written stock option agreement, to remain in the
employ of (or to consult for or to serve as an Independent Director of, as
applicable) the Company or any Subsidiary for a period of at least one year (or
such shorter period as may be fixed in the stock option agreement or by action
of the Committee (or the Board, in the case of Options granted to Independent
Directors) following grant of the Option) after the Option is granted (or, in
the case of an Independent Director, until the next annual meeting of
stockholders of the Company).  Nothing in this Plan or in any Stock Option
Agreement hereunder shall confer upon any Optionee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary, or as a
director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Optionee at any time for any reason whatsoever, with or
without good cause.

                                  ARTICLE V

                              EXERCISE OF OPTIONS

     5.1 Partial Exercise.  An exercisable Option may be exercised in whole or
in part.  However, an Option shall not be exercisable with respect to
fractional shares and the Committee (or the Board, in the case of Options
granted to Independent Directors) may require that, by the terms of the Option,
a partial exercise be with respect to a minimum number of shares.

     5.2 Manner of Exercise.  All or a portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of the
Company or his office:

     (a) A written notice complying with the applicable rules established by
the Committee (or the Board, in the case of Options granted to Independent
Directors) stating that the Option, or a portion thereof, is exercised.  The
notice shall be signed by the Optionee or other person then entitled to
exercise the Option or such portion;

     (b) Such representations and documents as the Committee (or the Board, in
the case of Options granted to Independent Directors), in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations.  The Committee or Board may,
in its absolute discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without limitation, placing
legends on share certificates and issuing stop-transfer notices to agents and
registrars;

     (c) In the event that the Option shall be exercised pursuant to Section
10.1 by any person or persons other than the Optionee, appropriate proof of the
right of such person or persons to exercise the Option; and

     (d) Full cash payment to the Secretary of the Company for the shares with
respect to which the Option, or portion thereof, is exercised.  However, the
Committee (or the Board, in the case of Options granted to Independent
Directors), may in its discretion (i) allow a delay in payment up to thirty
(30) days from the date the Option, or portion thereof, is exercised; (ii)
allow payment, in whole or in part, through the delivery of shares of Common
Stock owned by the Optionee, duly endorsed for transfer to the Company with a
Fair Market Value on the date of delivery equal to the aggregate exercise price
of the Option or exercised portion thereof; (iii) allow payment, in whole or in
part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option
exercise equal to the aggregate exercise price of the Option or exercised


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portion thereof; (iv) allow payment, in whole or in part, through the delivery
of property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee or the Board; (vi) allow payment, in
whole or in part, through the delivery of a notice that the Optionee has placed
a market sell order with a broker with respect to shares of Common Stock then
issuable upon exercise of the Option, and that the broker has been directed to
pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs 
(ii), (iii), (iv), (v) and (vi).  In the case of a promissory note, the
Committee (or the Board, in the case of Options granted to Independent
Directors) may also prescribe the form of such note and the security to be
given for such note.  The Option may not be exercised, however, by delivery of
a promissory note or by a loan from the Company when or where such loan or
other extension of credit is prohibited by law.

     5.3 Conditions to Issuance of Stock Certificates.  The Company shall not be
required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:

     (a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;

     (b) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations of
the Securities and Exchange Commission or any other governmental regulatory
body which the Board shall, in its absolute discretion, deem necessary or
advisable;

     (c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee (or Board, in the case of
Options granted to Independent Directors) shall, in its absolute discretion,
determine to be necessary or advisable;

     (d) The lapse of such reasonable period of time following the exercise of
the Option as the Committee (or Board, in the case of Options granted to
Independent Directors) may establish from time to time for reasons of
administrative convenience; and

     (e) The receipt by the Company of full payment for such shares, including
payment of any applicable withholding tax.

     5.4 Rights as Stockholders.  The holders of Options shall not be, nor have
any of the rights or privileges of, stockholders of the Company in respect of
any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.

     5.5 Ownership and Transfer Restrictions.  The Committee (or Board, in the
case of Options granted to Independent Directors), in its absolute discretion,
may impose such restrictions on the ownership and transferability of the shares
purchasable upon the exercise of an Option as it deems appropriate.  Any such
restriction shall be set forth in the respective Stock Option Agreement and may
be referred to on the certificates evidencing such shares.  The Committee may
require the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(i) two years from the date of granting such Option to such Employee


                                       10


<PAGE>   11

or (ii) one year after the transfer of such shares to such Employee.
The Committee may direct that the certificates evidencing shares
acquired by exercise of an Option refer to such requirement to give prompt
notice of disposition.


                                  ARTICLE VI

                           AWARD OF RESTRICTED STOCK

     6.1 Award of Restricted Stock

     (a) The Committee may from time to time, in its absolute discretion:

           (i) Select from among the key Employees or consultants (including
      Employees or consultants who have previously received other awards under
      this Plan) such of them as in its opinion should be awarded Restricted
      Stock; and

           (ii) Determine the purchase price, if any, and other terms and
      conditions applicable to such Restricted Stock, consistent with this
      Plan.

     (b) The Committee shall establish the purchase price, if any, and form of
payment for Restricted Stock; provided, however, that such purchase price shall
be no less than the par value of the Common Stock to be purchased, unless
otherwise permitted by applicable state law.  In all cases, legal consideration
shall be required for each issuance of Restricted Stock.

     (c) Upon the selection of a key Employee or consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company to
issue such Restricted Stock and may impose such conditions on the issuance of
such Restricted Stock as it deems appropriate.

     6.2 Restricted Stock Agreement.  Restricted Stock shall be issued only
pursuant to a written restricted stock agreement, which shall be executed by
the selected key Employee or consultant and an authorized officer of the
Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with this Plan.

     6.3 Consideration.  As consideration for the issuance of Restricted Stock,
in addition to payment of any purchase price, the Restricted Stockholder shall
agree, in the written Restricted Stock Agreement, to remain in the employ of,
or to consult for, the Company or any Subsidiary for a period of at least one
year after the Restricted Stock is issued (or such shorter period as may be
fixed in the Restricted Stock Agreement or by action of the Committee following
grant of the Restricted Stock).  Nothing in this Plan or in any Restricted
Stock Agreement hereunder shall confer on any Restricted Stockholder any right
to continue in the employ of, or as a consultant for, the Company or any
Subsidiary or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Restricted Stockholder at any time for any reason whatsoever, with or
without good cause.

     6.4 Rights as Stockholders.  Upon delivery of the shares of Restricted
Stock to the escrow holder pursuant to Section 6.7, the Restricted Stockholder
shall have, unless otherwise provided by the Committee, all the rights of a
stockholder with respect to said shares, subject to the restrictions in his
Restricted Stock Agreement, including the right to receive all dividends and
other distributions paid or made with respect to the shares; provided, however,
that in the discretion of the Committee, any extra-

                                       11


<PAGE>   12



ordinary distributions with respect to the Common Stock shall be
subject to the restrictions set forth in Section 6.5.


     6.5 Restriction.  All shares of Restricted Stock issued under this Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Restricted Stock
Agreement, be subject to such restrictions as the Committee shall provide,
which restrictions may include, without limitation, restrictions concerning
voting rights and transferability and restrictions based on duration of
employment with the Company, Company performance and individual performance;
provided, however, that unless the Committee otherwise provides in the terms of
the Restricted Stock Agreement or otherwise, no share of Restricted Stock
granted to a person subject to Section 16 of the Exchange Act shall be sold,
assigned or otherwise transferred until at least six months and one day have
elapsed from the date on which the Restricted Stock was issued, and provided,
further, that by action taken after the Restricted Stock is issued, the
Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions imposed by the terms of the
Restricted Stock Agreement.  Restricted Stock may not be sold or encumbered
until all restrictions are terminated or expire.  Unless provided otherwise by
the Committee, if no consideration was paid by the Restricted Stockholder upon
issuance, a Restricted Stockholder's rights in unvested Restricted Stock shall
lapse upon Termination of Employment or, if applicable, upon Termination of
Consultancy with the Company.

     6.6 Repurchase of Restricted Stock.  The Committee shall provide in the
terms of each individual Restricted Stock Agreement that the Company shall have
the right to repurchase from the Restricted Stockholder the Restricted Stock
then subject to restrictions under the Restricted Stock Agreement immediately
upon a Termination of Employment or, if applicable, upon a Termination of
Consultancy between the Restricted Stockholder and the Company, at a cash price
per share equal to the price paid by the Restricted Stockholder for such
Restricted Stock; provided, however, that provision may be made that no such
right of repurchase shall exist in the event of a Termination of Employment or
Termination of Consultancy without cause, or following a change in control of
the Company or because of the Restricted Stockholder's retirement, death or
disability, or otherwise.

     6.7 Escrow.  The Secretary of the Company or such other escrow holder as
the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Restricted Stock Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.

     6.8 Legend.  In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Committee shall cause a legend or legends to be
placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Restricted Stock Agreements, which legend
or legends shall make appropriate reference to the conditions imposed thereby.


                                 ARTICLE VII

                  PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
                        DEFERRED STOCK, STOCK PAYMENTS

     7.1 Performance Awards.  Any key Employee or consultant selected by the
Committee may be granted one or more Performance Awards.  The value of such
Performance Awards may be linked to the market value, book value, net profits
or other measure of the value of Common Stock or





                                       12


<PAGE>   13
other specific performance criteria determined appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined
by the Committee, or may be based upon the appreciation in the market
value, book value, net profits or other measure of the value of a specified
number of shares of Common Stock over a fixed period or periods determined by
the Committee.  In making such determinations, the Committee shall consider
(among such other factors as it deems relevant in light of the specific type of
award) the contributions, responsibilities and other compensation of the
particular key Employee or consultant.

     7.2 Dividend Equivalents.  Any key Employee or consultant selected by the
Committee may be granted Dividend Equivalents based on the dividends declared
on Common Stock, to be credited as of dividend payment dates, during the period
between the date an Option, Stock Appreciation Right, Deferred Stock or
Performance Award is granted, and the date such Option, Stock Appreciation
Right, Deferred Stock or Performance Award is exercised, vests or expires, as
determined by the Committee.  Such Dividend Equivalents shall be converted to
cash or additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee.  With
respect to Dividend Equivalents granted with respect to Options intended to be
qualified performance-based compensation for purposes of Section 162(m) of the
Code, such Dividend Equivalents shall be payable regardless of whether such
Option is exercised.

     7.3 Stock Payments.  Any key Employee or consultant selected by the
Committee may receive Stock Payments in the manner determined from time to time
by the Committee.  The number of shares shall be determined by the Committee
and may be based upon the Fair Market Value, book value, net profits or other
measure of the value of Common Stock or other specific performance criteria
determined appropriate by the Committee, determined on the date such Stock
Payment is made or on any date thereafter.

     7.4 Deferred Stock.  Any key Employee or consultant selected by the
Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee.  The number of shares of Deferred Stock
shall be determined by the Committee and may be linked to the market value,
book value, net profits or other measure of the value of Common Stock or other
specific performance criteria determined to be appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined
by the Committee.  Common Stock underlying a Deferred Stock award will not be
issued until the Deferred Stock award has vested, pursuant to a vesting
schedule or performance criteria set by the Committee.  Unless otherwise
provided by the Committee, a Grantee of Deferred Stock shall have no rights as
a Company stockholder with respect to such Deferred Stock until such time as
the award has vested and the Common Stock underlying the award has been issued.

     7.5 Performance Award Agreement, Dividend Equivalent Agreement, Deferred
Stock Agreement, Stock Payment Agreement.  Each Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment shall be
evidenced by a written agreement, which shall be executed by the Grantee and an
authorized Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.

     7.6 Term.  The term of a Performance Award, Dividend Equivalent, award of
Deferred Stock and/or Stock Payment shall be set by the Committee in its
discretion.

     7.7 Exercise Upon Termination of Employment.  A Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment is exercisable or
payable only while the




                                       13


<PAGE>   14


Grantee is an Employee or consultant; provided that the Committee may
determine that the Performance Award, Dividend Equivalent, award of Deferred
Stock and/or Stock Payment may be exercised or paid subsequent to Termination
of Employment or Termination of Consultancy without cause, or following a
change in control of the Company, or because of the Grantee's retirement, death
or disability, or otherwise.

     7.8 Payment on Exercise.  Payment of the amount determined under Section
7.1 or 7.2 above shall be in cash, in Common Stock or a combination of both, as
determined by the Committee.  To the extent any payment under this Article VII
is effected in Common Stock, it shall be made subject to satisfaction of all
provisions of Section 5.3.

     7.9 Consideration.  In consideration of the granting of a Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment, the
Grantee shall agree, in a written agreement, to remain in the employ of, or to
consult for, the Company or any Subsidiary for a period of at least one year
after such Performance Award, Dividend Equivalent, award of Deferred Stock
and/or Stock Payment is granted (or such shorter period as may be fixed in such
agreement or by action of the Committee following such grant).  Nothing in this
Plan or in any agreement hereunder shall confer on any Grantee any right to
continue in the employ of, or as a consultant for, the Company or any
Subsidiary or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Grantee at any time for any reason whatsoever, with or without good cause.

                                 ARTICLE VIII

                           STOCK APPRECIATION RIGHTS

     8.1 Grant of Stock Appreciation Rights.  A Stock Appreciation Right may be
granted to any key Employee or consultant selected by the Committee.  A Stock
Appreciation Right may be granted (i) in connection and simultaneously with the
grant of an Option, (ii) with respect to a previously granted Option, or (iii)
independent of an Option.  A Stock Appreciation Right shall be subject to such
terms and conditions not inconsistent with this Plan as the Committee shall
impose and shall be evidenced by a written Stock Appreciation Right Agreement,
which shall be executed by the Grantee and an authorized officer of the
Company.  The Committee, in its discretion, may determine whether a Stock
Appreciation Right is to qualify as performance-based compensation as described
in Section 162(m)(4)(C) of the Code and Stock Appreciation Right Agreements
evidencing Stock Appreciation Rights intended to so qualify shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code.  Without limiting the generality of the foregoing,
the Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition of the grant of a Stock Appreciation Right to an
Employee or consultant that the Employee or consultant surrender for
cancellation some or all of the unexercised Options, awards of Restricted Stock
or Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments, or other rights which have been previously
granted to him under this Plan or otherwise.  A Stock Appreciation Right, the
grant of which is conditioned upon such surrender, may have an exercise price
lower (or higher) than the exercise price of the surrendered Option or other
award, may cover the same (or a lesser or greater) number of shares as such
surrendered Option or other award, may contain such other terms as the
Committee deems appropriate, and shall be exercisable in accordance with its
terms, without regard to the number of shares, price, exercise period or any
other term or condition of such surrendered Option or other award.


                                       14


<PAGE>   15

     8.2 Coupled Stock Appreciation Rights

     (a) A Coupled Stock Appreciation Right ("CSAR") shall be related to a
particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.

     (b) A CSAR may be granted to the Grantee for no more than the number of
shares subject to the simultaneously or previously granted Option to which it
is coupled.

     (c) A CSAR shall entitle the Grantee (or other person entitled to exercise
the Option pursuant to this Plan) to surrender to the Company unexercised a
portion of the Option to which the CSAR relates (to the extent then exercisable
pursuant to its terms) and to receive from the Company in exchange therefor an
amount determined by multiplying the difference obtained by subtracting the
Option exercise price from the Fair Market Value of a share of Common Stock on
the date of exercise of the CSAR by the number of shares of Common Stock with
respect to which the CSAR shall have been exercised, subject to any limitations
the Committee may impose.


     8.3 Independent Stock Appreciation Rights

     (a) An Independent Stock Appreciation Right ("ISAR") shall be unrelated to
any Option and shall have a term set by the Committee.  An ISAR shall be
exercisable in such installments as the Committee may determine.  An ISAR shall
cover such number of shares of Common Stock as the Committee may determine;
provided, however, that unless the Committee otherwise provides in the terms of
the ISAR or otherwise, no ISAR granted to a person subject to Section 16 of the
Exchange Act shall be exercisable until at least six months have elapsed from
(but excluding) the date on which the Option was granted.  The exercise price
per share of Common Stock subject to each ISAR shall be set by the Committee.
An ISAR is exercisable only while the Grantee is an Employee or consultant;
provided that the Committee may determine that the ISAR may be exercised
subsequent to Termination of Employment or Termination of Consultancy without
cause, or following a change in control of the Company, or because of the
Grantee's retirement, death or disability, or otherwise.

     (b) An ISAR shall entitle the Grantee (or other person entitled to
exercise the ISAR pursuant to this Plan) to exercise all or a specified portion
of the ISAR (to the extent then exercisable pursuant to its terms) and to
receive from the Company an amount determined by multiplying the difference
obtained by subtracting the exercise price per share of the ISAR from the Fair
Market Value of a share of Common Stock on the date of exercise of the ISAR by
the number of shares of Common Stock with respect to which the ISAR shall have
been exercised, subject to any limitations the Committee may impose.

     8.4 Payment and Limitations on Exercise

     (a) Payment of the amount determined under Section 8.2(c) and 8.3(b) above
shall be in cash, in Common Stock (based on its Fair Market Value as of the
date the Stock Appreciation Right is exercised) or a combination of both, as
determined by the Committee.  To the extent such payment is effected in Common
Stock it shall be made subject to satisfaction of all provisions of Section 5.3
above pertaining to Options.

     (b) Grantees of Stock Appreciation Rights may be required to comply with
any timing or other restrictions with respect to the settlement or exercise of
a Stock Appreciation Right, including a window-period limitation, as may be
imposed in the discretion of the Board or Committee.






                                       15


<PAGE>   16

     8.5 Consideration.  In consideration of the granting of a Stock
Appreciation Right, the Grantee shall agree, in the written Stock Appreciation
Right Agreement, to remain in the employ of, or to consult for, the Company or
any Subsidiary for a period of at least one year after the Stock Appreciation
Right is granted (or such shorter period as may be fixed in the Stock
Appreciation Right Agreement or by action of the Committee following grant of
the Restricted Stock).  Nothing in this Plan or in any Stock Appreciation Right
Agreement hereunder shall confer on any Grantee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Grantee at
any time for any reason whatsoever, with or without good cause.

                                  ARTICLE IX

                                 ADMINISTRATION

     9.1 Committee.  The Committee shall consist of the entire Board until such
time as the Board shall, in its sole discretion, appoint a committee of the
Board to administer the Plan.  Any such committee shall consist solely of two
or more Independent Directors appointed by and holding office at the pleasure
of the Board, each of whom is a "non-employee director" as defined by Rule
16b-3 and, to the extent that Incentive Stock Options and Stock Appreciation
Rights granted under the Plan are intended to qualify as performance-based
compensation under Section 162(m) of the Code after the expiration of the
transition period specified in Treasury Regulation Section 1.162-27(f), an
"outside director" for purposes of Section 162(m) of the Code.  Appointment of
Committee members shall be effective upon acceptance of appointment.  Committee
members may resign at any time by delivering written notice to the Board.
Vacancies in the Committee may be filled by the Board.

     9.2 Duties and Powers of Committee.  It shall be the duty of the Committee
to conduct the general administration of this Plan in accordance with its
provisions.  The Committee shall have the power to interpret this Plan and the
agreements pursuant to which Options, awards of Restricted Stock or Deferred
Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments are granted or awarded, and to adopt such rules for the
administration, interpretation, and application of this Plan as are consistent
therewith and to interpret, amend or revoke any such rules.  Notwithstanding
the foregoing, the full Board, acting by a majority of its members in office,
shall conduct the general administration of the Plan with respect to Options
granted to Independent Directors.  Any such grant or award under this Plan need
not be the same with respect to each Optionee, Grantee or Restricted
Stockholder.  Any such interpretations and rules with respect to Incentive
Stock Options shall be consistent with the provisions of Section 422 of the
Code.  In its absolute discretion, the Board may at any time and from time to
time exercise any and all rights and duties of the Committee under this Plan
except with respect to matters which under Rule 16b-3 or Section 162(m) of the
Code, or any regulations or rules issued thereunder, are required to be
determined in the sole discretion of the Committee.

     9.3 Majority Rule; Unanimous Written Consent.  The Committee shall act by a
majority of its members in attendance at a meeting at which a quorum is present
or by a memorandum or other written instrument signed by all members of the
Committee.

     9.4 Compensation; Professional Assistance; Good Faith Actions.  Members of
the Committee shall receive such compensation for their services as members as
may be determined by the Board.  All expenses and liabilities which members of
the Committee incur in connection with the administration of this Plan shall be
borne by the Company.  The Committee may, with the approval of the Board,
employ attorneys, consultants, accountants, appraisers, brokers, or other
persons.  The




                                       16


<PAGE>   17


Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons.  All actions taken and all interpretations and determinations made by
the Committee or the Board in good faith shall be final and binding upon all
Optionees, Grantees, Restricted Stockholders, the Company and all other
interested persons.  No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to this Plan, Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, and all members of the Committee and the Board shall be fully
protected by the Company in respect of any such action, determination or
interpretation.


                                  ARTICLE X

                            MISCELLANEOUS PROVISIONS

     10.1 Not Transferable.  Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments under this Plan may not be sold, pledged, assigned, or
transferred in any manner other than by will or the laws of descent and
distribution or pursuant to a QDRO, unless and until such rights or awards have
been exercised, or the shares underlying such rights or awards have been
issued, and all restrictions applicable to such shares have lapsed.  No Option,
Restricted Stock award, Deferred Stock award, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment or interest or right
therein shall be liable for the debts, contracts or engagements of the
Optionee, Grantee or Restricted Stockholder or his successors in interest or
shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect,
except to the extent that such disposition is permitted by the preceding
sentence.

     During the lifetime of the Optionee or Grantee, only he may exercise an
Option or other right or award (or any portion thereof) granted to him under
the Plan, unless it has been disposed of pursuant to a QDRO.  After the death
of the Optionee or Grantee, any exercisable portion of an Option or other right
or award may, prior to the time when such portion becomes unexercisable under
the Plan or the applicable Stock Option Agreement or other agreement, be
exercised by his personal representative or by any person empowered to do so
under the deceased Optionee's or Grantee's will or under the then applicable
laws of descent and distribution.

     10.2 Amendment, Suspension or Termination of this Plan.  Except as 
otherwise provided in this Section 10.2, this Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any time or
from time to time by the Board.  However, without approval of the Company's
stockholders given within twelve months before or after the action by the Board
or the Committee, no action of the Board or the Committee may, except as
provided in Section 10.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan or modify the
Award Limit, and no action of the Board or the Committee may be taken that
would otherwise require stockholder approval as a matter of applicable law,
regulation or rule.  No amendment, suspension or termination of this Plan
shall, without the consent of the holder of Options, Restricted Stock awards,
Deferred Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments, alter or impair any rights or obligations under
any Options, Restricted Stock awards, Deferred Stock Awards, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments
theretofore granted or awarded, unless the award itself otherwise expressly so
provides.  No





                                       17


<PAGE>   18

Options, Restricted Stock, Deferred Stock, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments may be granted or
awarded during any period of suspension or after termination of this Plan, and
in no event may any Incentive Stock Option be granted under this Plan after the
first to occur of the following events:

     (a) The expiration of ten years from the date the Plan is adopted by the
Board; or


     (b) The expiration of ten years from the date the Plan is approved by the
Company's stockholders under Section 10.4.

     10.3 Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.

     (a) Subject to Section 10.3(d), in the event that the Committee (or the
Board, in the case of Options granted to Independent Directors) determines that
any dividend or other distribution (whether in the form of cash, Common Stock,
other securities, or other property), recapitalization, reclassification, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer,
exchange or other disposition of all or substantially all of the assets of the
Company (including, but not limited to, a Corporate Transaction), or exchange
of Common Stock or other securities of the Company, issuance of warrants or
other rights to purchase Common Stock or other securities of the Company, or
other similar corporate transaction or event, in the Committee's sole
discretion (or in the case of Options granted to Independent Directors, the
Board's sole discretion), affects the Common Stock such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to an Option, Restricted Stock Award,
Performance Award, Stock Appreciation Right, Dividend Equivalent, Deferred
Stock Award or Stock Payment, then the Committee (or the Board, in the case of
Options granted to Independent Directors) shall, in such manner as it may deem
equitable, adjust any or all of

           (i) the number and kind of shares of Common Stock (or other
      securities or property) with respect to which Options, Performance
      Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments
      may be granted under the Plan, or which may be granted as Restricted
      Stock or Deferred Stock (including, but not limited to, adjustments of
      the limitations in Section 2.1 on the maximum number and kind of shares
      which may be issued and adjustments of the Award Limit),

           (ii) the number and kind of shares of Common Stock (or other
      securities or property) subject to outstanding Options, Performance
      Awards, Stock Appreciation Rights, Dividend Equivalents, or Stock
      Payments, and in the number and kind of shares of outstanding Restricted
      Stock or Deferred Stock, and

           (iii) the grant or exercise price with respect to any Option,
      Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
      Payment.

     (b) Subject to Section 10.3(d), in the event of any Change in Control,
Corporate Transaction or other transaction or event described in Section
10.3(a) or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicable laws, regulations, or
accounting principles, the Committee (or the Board, in the case of Options
granted to Independent Directors) in its discretion




                                       18


<PAGE>   19

is hereby authorized to take any one or more of the following actions whenever
the Committee (or the Board, in the case of Options granted to Independent
Directors) determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any option, right or other
award under this Plan, to facilitate such transactions or events or to give
effect to such changes in laws, regulations or principles:


           (i) in its sole and absolute discretion, and on such terms and
      conditions as it deems appropriate, the Committee (or the Board, in the
      case of Options granted to Independent Directors) may provide, either by
      the terms of the agreement or by action taken prior to the occurrence of
      such transaction or event and either automatically or upon the optionee's
      request, for either the purchase of any such Option, Performance Award,
      Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or any
      Restricted Stock or Deferred Stock for an amount of cash equal to the
      amount that could have been attained upon the exercise of such option,
      right or award or realization of the optionee's rights had such option,
      right or award been currently exercisable or payable or fully vested or
      the replacement of such option, right or award with other rights or
      property selected by the Committee (or the Board, in the case of Options
      granted to Independent Directors) in its sole discretion;

           (ii) in its sole and absolute discretion, the Committee (or the
      Board, in the case of Options granted to Independent Directors) may
      provide, either by the terms of such Option, Performance Award, Stock
      Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted
      Stock or Deferred Stock or by action taken prior to the occurrence of
      such transaction or event that it cannot be exercised after such event;

           (iii) in its sole and absolute discretion, and on such terms and
      conditions as it deems appropriate, the Committee (or the Board, in the
      case of Options granted to Independent Directors) may provide, either by
      the terms of such Option, Performance Award, Stock Appreciation Right,
      Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred
      Stock or by action taken prior to the occurrence of such transaction or
      event, that immediately prior to the occurrence of such transaction or
      event, each outstanding Option, Performance Award, Stock Appreciation
      Right, Dividend Equivalent, Stock Payment, Restricted Stock, or Deferred
      Stock Award shall become fully exercisable for all of the shares of
      Common Stock at the time subject to such rights or fully vested, as
      applicable, and may be exercised for any or all of those shares as
      fully-vested shares of Common Stock for a specified period of time prior
      to such transaction or event, notwithstanding anything to the contrary in
      (a) Section 4.4 or (b) the provisions of such Option, Performance Award,
      Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or
      Restricted Stock or Deferred Stock;

           (iv) in its sole and absolute discretion, and on such terms and
      conditions as it deems appropriate, the Committee (or the Board, in the
      case of Options granted to Independent Directors) may provide, either by
      the terms of such Option, Performance Award, Stock Appreciation Right,
      Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred
      Stock or by action taken prior to the occurrence of such transaction or
      event, that upon such event, such option, right or award be assumed by
      the successor or survivor corporation, or a parent or subsidiary thereof,
      or shall be substituted for by similar options, rights or awards covering
      the stock of the successor or survivor corporation, or a parent or
      subsidiary thereof, with appropriate adjustments as to the number and
      kind of shares and prices;

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<PAGE>   20


           (v) in its sole and absolute discretion, and on such terms and
      conditions as it deems appropriate, the Committee (or the Board, in the
      case of Options granted to Independent Directors) may make adjustments in
      the number and type of shares of Common Stock (or other securities or
      property) subject to outstanding Options, Performance Awards, Stock
      Appreciation Rights, Dividend Equivalents, or Stock Payments, and in the
      number and kind of outstanding Restricted Stock or Deferred Stock and/or
      in the terms and conditions of (including the grant or exercise price), 
      and the criteria included in, outstanding options, rights and awards and 
      options, rights and awards which may be granted in the future; and

           (vi) in its sole and absolute discretion, and on such terms and
      conditions as it deems appropriate, the Committee may provide either by
      the terms of a Restricted Stock award or Deferred Stock award or by
      action taken prior to the occurrence of such event that, for a specified
      period of time prior to such event, the restrictions imposed under a
      Restricted Stock Agreement or a Deferred Stock Agreement upon some or all
      shares of Restricted Stock or Deferred Stock may be terminated, and, in
      the case of Restricted Stock, some or all shares of such Restricted Stock
      may cease to be subject to repurchase under Section 6.6 or forfeiture
      under Section 6.5 after such event.

     (c) Subject to Section 10.3(d) and 10.8, the Committee (or the Board, in
the case of Options granted to Independent Directors) may, in its discretion,
include such further provisions and limitations in any Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or
Restricted Stock or Deferred Stock agreement or certificate, as it may deem
equitable and in the best interests of the Company.

     (d) With respect to Incentive Stock Options and Non-Qualified Stock
Options and Stock Appreciation Rights intended to qualify as performance-based
compensation under Section 162(m) of the Code, no adjustment or action
described in this Section 10.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code or would cause such option or stock
appreciation right to fail to so qualify under Section 162(m) of the Code, as
the case may be, or any successor provisions thereto.  Furthermore, no such
adjustment or action shall be authorized to the extent such adjustment or
action would result in short-swing profits liability under Section 16 or
violate the exemptive conditions of Rule 16b-3 unless the Committee (or the
Board, in the case of Options granted to Independent Directors) determines that
the option or other award is not to comply with such exemptive conditions.  The
number of shares of Common Stock subject to any option, right or award shall
always be rounded to the next whole number.

     10.4 Approval of Plan by Stockholders.  This Plan will be submitted for the
approval of the Company's stockholders within twelve months of the date of the
Board's initial adoption of this Plan.  Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments may be granted and
Restricted Stock or Deferred Stock may be awarded prior to such stockholder
approval, provided that such Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments shall not be exercisable and
such Restricted Stock or Deferred Stock shall not vest prior to the time when
this Plan is approved by the stockholders, and provided further that if such
approval has not been obtained at the end of said twelve-month period, all
Options, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments previously granted and all Restricted Stock or Deferred Stock
previously awarded under this Plan shall thereupon be canceled and become null
and void.

                                     20

<PAGE>   21


     10.5 Tax Withholding.  The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Optionee, Grantee or
Restricted Stockholder of any sums required by federal, state or local tax law
to be withheld with respect to the issuance, vesting or exercise of any Option,
Restricted Stock, Deferred Stock, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment.  The Committee (or the Board, in the case
of Options granted to Independent Directors) may in its discretion and in
satisfaction of the foregoing requirement allow such Optionee, Grantee or
Restricted Stockholder to elect to have the Company withhold shares of Common
Stock otherwise issuable under such Option or other award (or allow the return
of shares of Common Stock) having a Fair Market Value equal to the sums
required to be withheld.

     10.6 Loans.  The Committee may, in its discretion, extend one or more loans
to key Employees in connection with the exercise or receipt of an Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment granted under this Plan, or the issuance of Restricted Stock or
Deferred Stock awarded under this Plan.  The terms and conditions of any such
loan shall be set by the Committee.

     10.7 Forfeiture Provisions.  Pursuant to its general authority to determine
the terms and conditions applicable to awards under the Plan, the Committee (or
the Board, in the case of Options granted to Independent Directors) shall have
the right (to the extent consistent with the applicable exemptive conditions of
Rule 16b-3) to provide, in the terms of Options or other awards made under the
Plan, or to require the recipient to agree by separate written instrument, that
(i) any proceeds, gains or other economic benefit actually or constructively
received by the recipient upon any receipt or exercise of the award, or upon
the receipt or resale of any Common Stock underlying such award, must be paid
to the Company, and (ii) the award shall terminate and any unexercised portion
of such award (whether or not vested) shall be forfeited, if (a) a Termination
of Employment, Termination of Consultancy or Termination of Directorship occurs
prior to a specified date, or within a specified time period following receipt
or exercise of the award, or (b) the recipient at any time, or during a
specified time period, engages in any activity in competition with the Company,
or which is inimical, contrary or harmful to the interests of the Company, as
further defined by the Committee (or the Board, as applicable).

     10.8 Limitations Applicable to Section 16 Persons and Performance-Based
Compensation.  Notwithstanding any other provision of this Plan, this Plan, and
any Option, Performance Award, Stock Appreciation Right, Dividend Equivalent or
Stock Payment granted, or Restricted Stock or Deferred Stock awarded, to any
individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive
rule under Section 16 of the Exchange Act (including any amendment to Rule
16b-3) that are requirements for the application of such exemptive rule.  To
the extent permitted by applicable law, the Plan, Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents, Stock Payments, Restricted
Stock and Deferred Stock granted or awarded hereunder shall be deemed amended
to the extent necessary to conform to such applicable exemptive rule.
Furthermore, notwithstanding any other provision of this Plan, any Option or
Stock Appreciation Right intended to qualify as performance-based compensation
as described in Section 162(m)(4)(C) of the Code shall be subject to any
additional limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations or rulings issued
thereunder that are requirements for qualification as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and this Plan
shall be deemed amended to the extent necessary to conform to such
requirements.

     10.9 Effect of Plan Upon Options and Compensation Plans.  The adoption of
this Plan shall not affect any other compensation or incentive plans in effect
for the Company or any 

                                     21


<PAGE>   22


Subsidiary.  Nothing in this Plan shall be construed to limit the right
of the Company (i) to establish any other forms of incentives or compensation
for Employees, Directors or Consultants of the Company or any Subsidiary or
(ii) to grant or assume options or other rights otherwise than under this Plan
in connection with any proper corporate purpose including, without limitation,
the grant or assumption of options in connection with the acquisition by
purchase, lease, merger, consolidation or otherwise, of the business, stock or
assets of any corporation, partnership, limited liability company, firm or
association.

     10.10 Compliance with Laws.  This Plan, the granting and vesting of 
Options, Restricted Stock Awards, Deferred Stock Awards, Performance Awards, 
Stock Appreciation Rights, Dividend Equivalents or Stock Payments under this
Plan and the issuance and delivery of shares of Common Stock and the
payment of money under this Plan or under Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments granted or
Restricted Stock or Deferred Stock awarded hereunder are subject to compliance
with all applicable federal and state laws, rules and regulations (including,
but not limited to, state and federal securities law and federal margin
requirements) and to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be necessary or
advisable in connection therewith.  Any securities delivered under this Plan
shall be subject to such restrictions, and the person acquiring such securities
shall, if requested by the Company, provide such assurances and representations
to the Company as the Company may deem necessary or desirable to assure
compliance with all applicable legal requirements.  To the extent permitted by
applicable law, this Plan and the Options, Restricted Stock Awards, Deferred
Stock Awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments granted or awarded hereunder shall be deemed
amended to the extent necessary to conform to such laws, rules and regulations.

     10.11 Titles.  Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Plan.

     10.12 Governing Law.  This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Illinois without regard to conflicts of laws thereof.

                                    *  *  *

     I hereby certify that the foregoing Plan was duly adopted by Dominick's
Supermarkets, Inc. on October 28, 1996.

     Executed on this 28th day of October, 1996.





                                                /s/ Darren W. Karst
                                                -------------------------
                                                      Secretary






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