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                              FANNIE MAY HOLDINGS, INC.
                                1998 STOCK BONUS PLAN

1.   PURPOSES.

     This 1998 Stock Bonus Plan (this "Plan") is designed to promote the
long-term success of Fannie May Holdings, Inc., a Delaware corporation
("Holdings"), and its subsidiaries by strengthening Holdings' ability to attract
and retain highly competent management employees and to provide a means to
encourage stock ownership and proprietary interest in Holdings.

     This Plan provides for the issuance of the right to acquire shares of Class
A Common Stock (as hereinafter defined) to those management employees who can
significantly enhance the long-term performance of Holdings and its subsidiaries
and is intended to provide, in combination with other forms of compensation and
benefits, a total compensation program which is competitive with the reward
programs of other similar enterprises in the candy and confectionery industries.

2.   ELIGIBILITY.

     Any management employee of the Company (as hereinafter defined) shall be
eligible to receive one or more awards under this Plan.  The participants in
this Plan shall be determined by the Board of Directors of Holdings (the
"Board"), in its sole discretion, from management employees who, in the Board's
sole judgment, have a significant opportunity to influence the growth of the
Company or whose outstanding performance or potential merit further incentive
and reward for continued employment and accomplishment. 

3.   DEFINITIONS.

     As used in this Plan, the following terms have the following respective
meanings:
     
     (a)  "BOARD" has the meaning provided in SECTION 2 hereof.
     
     (b)  "BONUS" means a stock bonus granted under this Plan.
               
     (c)  "CLASS A COMMON STOCK" means Holdings' Class A common stock, $0.01 par
value per share.

     (d)  "CODE" means the Internal Revenue Code of 1986, as amended.

     (e)  "COMMON STOCK" means Holdings' common stock of whatever class, whether
voting or non-voting.    
     
     (f)  "COMPANY" means Holdings and any subsidiaries of Holdings.

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     (g)  "CONSIDERATION" has the meaning provided in SECTION 7 hereof.
     
     (h)  "DESIGNATED BENEFICIARY" means the person or persons who upon the
death of a Holder shall have acquired, by written designation of the Holder or
by will, the laws of descent and distribution, or other legal proceeding, the
right to the Common Stock acquired by the Holder under this Plan.
          
     (i)  "EFFECTIVE DATE" has the meaning provided in SECTION 4 hereof.

     (j)  "EMPLOYMENT" means the employment of a Holder by the Company. 

     (k)  "EXECUTIVE SUBSCRIPTION AGREEMENT" has the meaning provided in SECTION
7 hereof.
     
     (l)  "HOLDER" means a person (or, upon such individual's death, his or her
Designated Beneficiary) who holds Common Stock pursuant to this Plan.

     (m)  "HOLDINGS" has the meaning provided in SECTION 1 hereof.

     (n)  "PERMITTED TRANSFEREE" means the Holder's spouse and/or Designated
Beneficiaries, any trust or similar entity all of the beneficiaries of which
are, or a corporation, partnership or limited liability company all of the
stockholders, partners or members of which are, the Holder and/or the Holder's
spouse and Designated Beneficiaries.
     
     (o)  "PERSON" means a natural person, partnership, limited partnership,
limited liability company, trust, business trust, estate, association,
corporation, custodian, nominee or any other individual or entity in its own or
any represented capacity.
     
     (p)  "PLAN" has the meaning provided in SECTION 1 hereof.
                         
     (q)  "SECURITIES ACT" has the meaning provided in SECTION 10 hereof.

     (r)  "SHAREHOLDERS AGREEMENT" means that certain Shareholders Agreement
dated as of October 30, 1991 and amended by the First Amendment thereto dated as
of July 2, 1997 by and among all of the holders of Holdings' Common Stock, as
may be further amended, restated, supplemented or otherwise modified from time
to time in accordance with the terms thereof.
     
     (s)  "TRANSFER" has the meaning provided in SECTION 12 hereof.

4.   EFFECTIVE DATE; TERMINATION.

     This Plan is effective as of July 1, 1998 (the "Effective Date").  This
Plan shall terminate at the close of business on the tenth anniversary of the
Effective Date, unless terminated earlier under SECTION 14(a) hereof. 
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5.   ADMINISTRATION OF THIS PLAN.

     The Board shall be responsible for administering this Plan.  The Board
shall have all the powers vested in it by the terms of this Plan, such powers to
include exclusive authority (within the limitations described herein) to select
the management employees to be granted Bonuses under this Plan and to determine
the terms and conditions of each Bonus to be made to each management employee
selected.  The Board shall have full and exclusive power and authority to
administer and interpret this Plan, consistent with the terms of this Plan, and
to adopt such rules, regulations, agreements, guidelines and instruments for the
administration of this Plan and for the conduct of its business as the Board
deems necessary or advisable.  The Board's interpretation of this Plan,
consistent with the terms of this Plan, and all actions taken and determinations
made by the Board pursuant to the powers vested in it hereunder, shall be
conclusive and binding on all parties concerned, including the Company and  all
Holders.

6.   SHARES OF CLASS A COMMON STOCK SUBJECT TO THIS PLAN.

     Subject to SECTION 11  hereof, the shares of Class A Common Stock that may
be issued under this Plan shall not exceed thirty-three (33) shares of Class A
Common Stock.  Any shares of Class A Common Stock issued pursuant to a Bonus
which for any reason are redeemed by Holdings or forfeited by a Holder shall
again be available for issuance under this Plan.  

7.   CONSIDERATION.

     The consideration (the "Consideration") received in exchange for shares of
Class A Common Stock under this Plan shall be as determined by the Board in its
sole discretion and set forth in a subscription agreement to be entered into
between Holdings and the Holder concurrently with the grant of a Bonus under
this Plan (as may be amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms thereof, each an "Executive
Subscription Agreement"). In addition, prior to or concurrently with delivery to
a Holder of a certificate representing Class A Common Stock issued, the Board
may require that such Holder pay any and all amounts necessary to satisfy
applicable federal, state and local tax requirements relating to such issuance
(including all withholding requirements).

8.   TERMINATION OF EMPLOYMENT.

     The Board, in its sole discretion, may make the shares of Class A Common
Stock issued pursuant to a Bonus subject, in whole or in part, to forfeiture,
call, redemption or put in the event of any termination of the respective
Holder's Employment.  The terms and conditions of any such forfeiture, call,
redemption or put provisions shall be set forth in the Holder's Executive
Subscription Agreement.


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9.    SHAREHOLDERS AGREEMENT.  

     Each share of Class A Common Stock issued pursuant to this Plan shall be
subject to the terms of the Shareholders Agreement.  Each Holder who becomes a
Holder of shares of Class A Common Stock shall become a party to the
Shareholders Agreement as a "Shareholder" and a "Holder" thereunder by executing
an amendment or restatement of the Shareholders Agreement or a supplementary
agreement to that effect, which supplementary agreement may be incorporated into
an Executive Subscription Agreement.  Each certificate representing shares of
Class A Common Stock issued under this Plan shall bear substantially the
following legend:   

          "THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON
          COMPLIANCE WITH, THE PROVISIONS OF AN EXECUTIVE SUBSCRIPTION
          AGREEMENT, DATED           , BETWEEN HOLDINGS AND THE ORIGINAL
          HOLDER OF THE CLASS A COMMON STOCK REPRESENTED BY THIS
          CERTIFICATE (THE "SUBSCRIPTION AGREEMENT").  THE SUBSCRIPTION
          AGREEMENT GRANTS CERTAIN PURCHASE RIGHTS TO HOLDINGS (OR ITS
          ASSIGNEES) UPON TERMINATION OF SUCH HOLDER'S SERVICE WITH THE
          COMPANY.  A COPY OF THE ABOVE REFERENCED AGREEMENT IS ON FILE AT
          THE PRINCIPAL OFFICE OF THE COMPANY.

          THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
          REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
          STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
          OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
          STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES UNLESS THE
          ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
          SECURITIES REASONABLY SATISFACTORY TO THE ISSUER STATING THAT
          SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM
          THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT
          OR THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT. 

          THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
          RESTRICTIONS CONTAINED IN A SHAREHOLDERS AGREEMENT DATED AS OF
          OCTOBER 30, 1991, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE
          SECRETARY OF THE COMPANY."


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10.  COMPLIANCE WITH SECURITIES LAWS.

     (a)  Unless the Class A Common Stock issued is registered under the
Securities Act of 1933, as amended (the "Securities Act"), and the securities
laws of all other appropriate jurisdictions, the obligation of Holdings to issue
Class A Common Stock pursuant to this Plan shall be subject to receipt from the
Holder of a written representation to the effect that the Holder acknowledges
and represents and warrants to Holdings that he has been advised by Holdings
that: (i) the shares of Class A Common Stock have not been registered under the
Securities Act; (ii) the shares of Class A Common Stock  must be held
indefinitely and the Holder must continue to bear the economic risk of the
investment in the shares of Class A Common Stock unless an offer and sale of
such shares of Class A Common Stock is subsequently registered under the
Securities Act and all applicable state securities laws or an exemption from
such registration is available; (iii) there is no established market for the
shares of Class A Common Stock and it is not anticipated that there will be any
public market for the shares of Class A Common Stock in the foreseeable future;
(iv) Rule 144 promulgated under the Securities Act is not presently available
with respect to the sale of any securities of Holdings, and Holdings has made no
covenant to make such Rule available; (v) when and if shares of Class A Common
Stock may be disposed of without registration under the Securities Act in
reliance on Rule 144, such disposition can be made only in limited amounts and
in accordance with the terms and conditions of such Rule; (vi) if the Rule 144
exemption is not available, public offer or sale without registration will
require the availability of an exemption under the Securities Act; (vii) a
restrictive legend shall be placed on the certificates representing the shares
of Class A Common Stock; and (viii) a notation shall be made in the appropriate
records of Holdings indicating that the shares of Class A Common Stock are
subject to restrictions on transfer and, if Holdings should at some time in the
future engage the services of a securities transfer agent, appropriate
stop-transfer instructions will be issued to such transfer agent with respect to
the shares of Class A Common Stock.

     (b)  In addition, the obligation of Holdings to issue Class A Common Stock
shall be subject to receipt from the Holder of a written representation to the
effect that the Holder acknowledges and represents and warrants to Holdings
that: (i) the Holder's financial situation is such that he can afford to bear
the economic risk of holding the shares of Class A Common Stock for an
indefinite period of time, has adequate means for providing for his current
needs and personal contingencies, and can afford to suffer complete loss of his
investment in the shares of Class A Common Stock; (ii) the Holder's knowledge
and experience in financial and business matters are such that he is capable of
evaluating the merits and risks of the investment in the shares of Class A
Common Stock as contemplated by this Plan; (iii) the Holder understands that the
shares of Class A Common Stock are a speculative investment which involve a high
degree of risk of loss of his investment therein, there are substantial
restrictions on the transferability of the shares of Class A Common Stock, and,
on the date hereof and for an indefinite period, there will be no public market
for the shares of Class A Common Stock and, accordingly, it may not be possible
for the Holder to liquidate his investment in case of emergency, if at all; (iv)
in making his decision to acquire the shares of Class A Common Stock under this
Plan, the Holder has relied upon independent investigations made by him and, to
the extent believed by the Holder to be appropriate, his 


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representatives, including his own professional, financial, tax and other
advisors;  (v) the Holder and his representatives have been given the
opportunity to examine all documents and to ask questions of, and to receive
answers from, Holdings and their representatives concerning the terms and
conditions of the acquisition of the shares of Class A Common Stock and to
obtain any additional information which the Holder or his representatives deem
necessary; (vi) the Holder is a management employee of the Company and as such
has a high level of familiarity with the business, operations, financial
condition and prospect of Holdings; and (vii) the Holder understands that no
dividends are expected to be paid on the shares of Class A Common Stock in the
foreseeable future.
     
11.  DILUTION AND OTHER ADJUSTMENTS.

     In the event the shares of Class A Common Stock, as presently constituted,
shall be changed into or exchanged for a different number or kind of shares of
stock or other securities of Holdings or of another corporation (whether by
reason of merger, consolidation, recapitalization, reclassification, split,
reverse split, combination of shares or otherwise) or if the number of such
shares of Class A Common Stock shall be increased through the payment of a stock
dividend, then there shall be substituted for or added to each share of Class A
Common Stock under this Plan, the number and kind of shares of stock or other
securities into which each outstanding share of Class A Common Stock shall be so
changed, or for which each such share of Class A Common Stock shall be
exchanged, or to which each such share of Class A Common Stock shall be
entitled, as the case may be.

12.  RESTRICTIONS ON TRANSFER.

     (a)  The Holder agrees that he will not sell, transfer, assign, pledge,
hypothecate or otherwise dispose of ("Transfer") all or any portion of the
shares of Class A Common Stock granted to him pursuant to this Plan otherwise
than (i) to a Permitted Transferee, or (ii) in accordance with the terms of this
Plan, any agreement  thereunder and the Shareholders Agreement.  Notwithstanding
this SECTION 12, the provisions of SECTION 8 with regard to the termination of
employment of the Holder shall continue in full force and effect and shall apply
to the rights contained herein whether then held by the Holder or any transferee
of the Holder.    

     (b)  Holdings shall not be required: (i) to reflect on its books any
purported Transfer of shares of Class A Common Stock in violation of any of the
provisions set forth in this Plan, any agreement thereunder or the Shareholders
Agreement; (ii) to treat any purported transferee of such shares of Class A
Common Stock as a record owner of such shares of Class A Common Stock; or (iii)
to afford such purported transferee any right to vote, or to receive dividends
in respect of, such shares of Class A Common Stock.

     (c)  As a condition to any Transfer to a Permitted Transferee, the
Permitted Transferee shall execute and deliver to Holdings a valid and binding
agreement satisfactory to Holdings and its legal counsel to the effect that any
shares of Class A Common Stock so Transferred shall continue to be subject to
all of the provisions and conditions of this Plan, any agreement thereunder and
the 


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Shareholders Agreement, and that such Permitted Transferee agrees to be jointly
and severally bound with the Holder hereby and thereby as if an original party
hereto and thereto; and further provided that no Transfer to any Permitted
Transferee shall relieve the Holder of any obligation or liability under this
Plan, any agreement thereunder or the Shareholders Agreement.

13.  MISCELLANEOUS PROVISIONS.

     (a)  All Bonuses granted under this Plan shall be evidenced by an Executive
Subscription Agreement in such form and containing such terms and conditions
(not inconsistent with this Plan) as the Board shall adopt.
     
     (b)  No employee or other person shall have any right to be granted an
award under this Plan.  None of this Plan, any Executive Subscription Agreement,
any Common Stock or any action taken hereunder shall be construed as giving any
employee any right to be retained in the employ of the Company or shall
interfere with or restrict in any way the rights of the Company, which are
hereby reserved, to discharge any employee at any time for any reason
whatsoever, with or without cause.

     (c)  The costs and expenses of administering this Plan shall be borne by
Holdings and not charged to any Holder or to any person granted a Bonus.

     (d)  During the term of this Plan, Holdings will at all times reserve and
keep available such numbers of shares of Class A Common Stock as may be issuable
under this Plan.

     (e)  In the event that a court of competent jurisdiction determines that
Holdings has failed to perform in any material respect any of its obligations
under this Plan or any Executive Subscription Agreement, Holdings shall pay all
reasonable attorneys' fees and disbursements incurred by a Holder in enforcing
its rights hereunder or thereunder with respect to such failure to perform.

14.  AMENDMENTS.

     (a)  This Plan may be amended by the Board as it deems necessary or
appropriate to achieve the purposes of this Plan.  The Board may suspend this
Plan or terminate this Plan at any time, provided, that no such action shall
adversely affect any outstanding Bonus or Class A Common Stock issued pursuant
to a Bonus.

     (b)  The Board, in its sole discretion, may amend outstanding Executive
Subscription Agreements or this Plan as it relates to a Bonus without the
consent of the Holders party thereto, but not in any manner adversely affecting
the rights, interests or obligations of the Holders thereunder.

15.  OTHER BENEFIT AND COMPENSATION PROGRAMS.


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<PAGE>

     Unless otherwise specifically determined by the Board, stock received by
Holders under this Plan is intended to be "non-qualified compensation" under the
Code and shall not be deemed a part of a Holder's regular, recurring
compensation for purposes of calculating payments or benefits from any Holdings
benefit plan or severance program.  Further, Holdings may adopt other
compensation programs, plans or arrangements as it deems appropriate or
necessary.

16.  REGULATORY APPROVALS.

     The implementation of this Plan and the issuance of shares of Class A
Common Stock under this Plan shall be subject to Holdings' procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over this Plan or the shares of Class A Common Stock issued pursuant to it.

17.  SUCCESSORS AND ASSIGNS; BINDING EFFECT.

     The provisions of this Plan shall be binding upon the parties hereto and
their respective heirs, legal representatives, successors and permitted assigns,
including, without limitation, the Holder's Designated Beneficiary, the estate
of such Holder and the executor, administrator or trustee of such estate, or any
receiver or trustee in bankruptcy or representative of the Holder's creditors.

18.  SEVERABILITY. 

     The invalidity, illegality or unenforceability of one or more of the
provisions of this Plan or any agreements thereunder in any jurisdiction shall
not affect the validity, legality or enforceability of the remainder of this
Plan or any agreements thereunder in such jurisdiction or the validity, legality
or enforceability of this Plan or any agreements thereunder, including any such
provision, in any other jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest extent
permitted by law.   
          
19.  APPLICABLE LAW.  

     THIS PLAN AND ANY AGREEMENTS ENTERED INTO THEREUNDER SHALL BE GOVERNED BY,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS OF ANY STATE.

     IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR
ARISING OUT OF THIS PLAN OR ANY AGREEMENTS ENTERED INTO THEREUNDER OR THE
VALIDITY, INTERPRETATION OR ENFORCEMENT HEREOF OR ANY OTHER CLAIM OR DISPUTE
HOWEVER ARISING  BETWEEN HOLDINGS AND THE HOLDER, THE HOLDER, TO THE FULLEST
EXTENT THAT HE MAY EFFECTIVELY DO SO, WAIVES ANY RIGHT TO TRIAL BY JURY.  THE
HOLDER AGREES THAT THIS SECTION 19 IS A SPECIFIC AND MATERIAL ASPECT OF THE PLAN
AND ANY AGREEMENT ENTERED 


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<PAGE>

INTO THEREUNDER AND ACKNOWLEDGES THAT HOLDINGS WOULD NOT ENTER INTO AN AGREEMENT
UNDER THIS PLAN IF THIS SECTION 19 WERE NOT A PART HEREOF.  

20.  ARBITRATION.  

     Any dispute between any of the parties concerned, including the Company and
all Holders and any other management employee of the Company relating to or in
respect of this Plan and agreements entered into thereunder, their negotiation,
execution, performance, subject matter, or any course of conduct or dealing or
actions under or in respect of this Plan or such agreements, including without
limitation any claim under the Securities Act, the Securities Exchange Act of
1934, as amended, any other state or federal law relating to securities or fraud
or both, shall be submitted to, and resolved exclusively pursuant to,
arbitration in accordance with the commercial arbitration rules of the American
Arbitration Association.  Such arbitration shall take place in Chicago,
Illinois. Decisions as to findings of fact pursuant to such arbitration shall be
final, conclusive and binding on the parties.  Within thirty (30) days following
the award of any arbitrator hereunder, any party may apply to a court of
competent jurisdiction for a resolution of any questions of law bearing on such
award, and no such award shall be binding and enforceable unless the
arbitrator's determinations as to such questions of such law have been
judicially approved or until the passage of such thirty (30) day period without
such application having been made.  Any final award shall be enforceable as a
judgment of a court of record.  

21.  DESCRIPTIVE HEADINGS.  

     The headings in this Plan are for convenience of reference only and shall
not limit or otherwise affect the meaning of terms contained herein.

                        [End of text of 1998 Stock Bonus Plan]


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