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                     BUTTREY FOOD AND DRUG STORES COMPANY

                      NONQUALIFIED STOCK OPTION AGREEMENT



          This NONQUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is entered
into as of the _____ day of ___________ 1996 (the "Grant Date") by and between
BUTTREY FOOD AND DRUG STORES COMPANY, a Delaware corporation (the "Company"),
and ________________ ("Optionee") pursuant to the Company's 1996 Non-Employee
Directors Stock Option Plan (the "Plan").


                                R E C I T A L S
                                - - - - - - - -

          A.   The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its stockholders
to give certain non-employee directors of the Company an opportunity to purchase
shares of the Company's Common Stock, $.01 par value per share (the "Common
Stock");

          B.   The Board has adopted and approved the Plan for the purpose of
granting nonqualified stock options to certain non-employee directors; and

          C.   The Company has determined to grant Optionee an option to
purchase shares of Common Stock of the Company in connection with Optionee's
election to receive such option pursuant to the terms and conditions of the
Plan.


                               A G R E E M E N T
                               - - - - - - - - -

          NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants contained herein, the parties hereto agree as follows:

          1.   Option; Number of Shares; Price.  The Company hereby grants to
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Optionee the right to purchase (the "Option"), on the terms and conditions
hereinafter set forth, up to a maximum of ________ shares (the "Shares") of the
Common Stock of the Company, at a purchase price of $_____ per share (the
"Option Price") to be paid in accordance with Section 6 hereof.  The Option and
the right to purchase all or any portion of the Shares is subject to the terms
and conditions stated in this Agreement and in the Plan, including but not
limited to the provisions of Sections 3, 4(d), 7 and 8 of the Plan and Sections
3 and 8 hereof pursuant to which the Option is subject to modification and
termination.  The Option is not intended to qualify for treatment as an
                            ---                                        
incentive stock option under Section 422 of the Internal Revenue Code of 1986,
as amended.
<PAGE>
 
          2.   Vesting.  The Option shall vest and become exercisable in full
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on, and only if Optionee continues to serve as a Director until, the Annual
Meeting of Stockholders following the Grant Date.  Notwithstanding anything
contained in this Section 2 to the contrary, (a) if the Optionee is subject to
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), this Option shall not be exercisable during the first six (6) months
after the date hereof, and (b) the Option shall be subject to termination as set
forth in Sections 3 and 8 hereof and in Section 3, 4(d), 7 and 8 of the Plan.

          3.   Termination or Expiration.  This Agreement and the Option shall
               -------------------------                                      
terminate upon the first to occur of the following:

               (i)    ten years from the date of this Agreement;

               (ii)   the termination of the Option as provided in Section 8 of
          this Agreement; or

               (iii)  six months after Optionee ceases to be a non-employee
          director of Company for any reason (including death or disability).

In the event of termination pursuant to clause (iii) of this Section 3, the
Option may be exercised during such six month period only to the extent the
Option was vested on the date Optionee ceased to be a non-employee director of
Company.

          4.   Non-Transferability of the Option.  The Option and the rights and
               ---------------------------------                                
privileges conferred hereunder are exercisable only by Optionee (or Optionee's
guardian or legal representative) during Optionee's lifetime and may not be
sold, transferred, assigned, pledged, hypothecated or otherwise disposed of in
any way (whether by operation of law or otherwise) other than by will or by the
laws of descent and distribution, and shall not be subject to execution,
attachment or similar process.  Any attempt to sell, transfer, assign, pledge,
hypothecate or otherwise dispose of the Option or of any right or privilege
conferred hereunder contrary to the provisions hereof shall be null and void.

          5.   Adjustments.  Pursuant to Section 7 of the Plan, the number or
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kind of shares issuable upon exercise of the Option and/or the Option Price is
subject to adjustment in the event of certain stock splits, stock dividends,
reclassifications, recapitalizations and similar events affecting the
outstanding shares of Common Stock.

          6.   Exercise of Option.  Subject to Sections 4(c), 5, 6 and 8 of the
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Plan, on or after the vesting of the Option in accordance with Section 2 hereof
and until termination of the Option in accordance with Sections 3 and 7 hereof,
the Option may be exercised by Optionee (or, such other person specified in
Section 4 hereof) to the extent exercisable as determined under Section 2
hereof, upon delivery of the following to the Company at its principal executive
offices:

                                      2.
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          (a) a written notice of exercise which identifies this Agreement and
states the number of full Shares (which may not be less than one hundred (100),
or all of the Shares if less than one hundred (100) Shares then remain covered
by the Option) of Shares then being purchased;

          (b) a check, cash or any combination thereof in the amount of the
Option Price (or payment of the Option Price in such other form of lawful
consideration as the Board may approve from time to time under the provisions of
Section 3 of the Plan, including without limitation and in the sole discretion
of the Board, the assignment and transfer by Optionee to the Company of
outstanding shares of Common Stock theretofore held by Optionee in a manner
intended to comply with the provisions of Rule 16b-3 under the Exchange Act, if
applicable).  Such shares of Common Stock delivered in payment of the Option
Price shall be valued at fair market value as determined by the Board on the
basis of the average, rounded to the nearest eighth, of the Quoted Prices of a
share of Common Stock for the five consecutive business days prior to the day as
of which the fair market value of the Common Stock is being determined.  The
"Quoted Price" of a share of Common Stock shall be the last reported sales price
of the Common Stock as reported by the NASDAQ National Market System ("NASDAQ"),
or if the Common Stock is listed on a securities exchange, the last reported
sales price of the Common Stock on such exchange which shall be for consolidated
trading if applicable to such exchange, or if the Common Stock is not so
reported or listed, the average of the last reported bid and asked price of the
Common Stock;

          (c) a check or cash in the amount reasonably requested by the Company
to satisfy the Company's withholding obligations under federal, state or other
applicable tax laws with respect to the taxable income, if any, recognized by
Optionee in connection with the exercise, in whole or in part, of the Option
(unless the Board has determined to allow the Optionee to, and the Optionee
elects, to pay such tax by reducing the number of shares of Common Stock issued
upon exercise of the Option (for which purpose such shares shall be valued at
fair market value as determined by the board according to subparagraph (b)
above) or unless the Company and Optionee shall have made other arrangements for
deductions or withholding from Optionee's wages, bonus or other income paid to
Optionee by the Company or the Subsidiary, provided such arrangements satisfy
the requirements of applicable tax laws); and

          (d) a written representation and undertaking, if requested by the
Company pursuant to Section 7(b) hereof, in such form and substance as the
Company may require, setting forth the investment intent of Optionee, or a
successor, as the case may be, and such other agreements, representations and
undertakings as described in the Plan.

     7.   Representations and Warranties of Optionee.
          ------------------------------------------ 

          (a) Optionee represents and warrants that the Option and the Shares
issuable upon exercise of the Option are being acquired by Optionee for
Optionee's personal

                                      3.
<PAGE>
 
account, for investment purposes only, and not with a view to the distribution,
resale or other disposition of the Option or the Shares issuable upon exercise
of the Option.

          (b) Optionee acknowledges that the Company may issue Shares upon the
exercise of the Option without registering such Common Stock under the
Securities Act of 1933, as amended (the "Act"), on the basis of certain
exemptions from such registration requirement.  Accordingly, Optionee agrees
that Optionee's exercise of the Option may be expressly conditioned upon
Optionee's delivery to the Company of such representations and undertakings as
the Company may reasonably require in order to secure the availability of such
exemptions, including a representation that Optionee is acquiring the Shares for
investment and not with a present intention of selling or otherwise disposing of
such Shares.  Optionee acknowledges that, because Shares received upon exercise
of an Option may be unregistered, Optionee may be required to hold the Shares
indefinitely unless they are subsequently registered for resale under the Act or
an exemption from such registration is available.

          (c) Optionee acknowledges receipt of this Agreement granting the
Option, and the Plan, and understands that all rights and liabilities connected
with the Option are set forth herein and in the Plan.

     8.   Termination Upon Certain Events.  Upon the dissolution, liquidation
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or sale of all or substantially all of the business, properties and assets of
the Company, or upon any reorganization, merger or consolidation in which the
Company does not survive, or upon any reorganization, merger or consolidation in
which the Company does survive and the Company's stockholders have the
opportunity to receive cash, securities of another corporation or other property
in exchange for their capital stock of the Company, or upon sale of
substantially all the property of the Company to, or the acquisition of stock
representing more than eighty percent (80%) of the voting power of the stock of
the Company then outstanding by, another corporation or person, this Agreement
and each outstanding Option granted hereunder shall terminate; provided, that in
such event (i) if Optionee is not tendered an option by the surviving
corporation in accordance with all of the terms of clause (ii) immediately below
or does not accept any such substituted option which is so tendered, Optionee
shall have the right until three (3) days before the effective date of such
dissolution, liquidation, reorganization, merger or consolidation to exercise,
in whole or in part, any unexpired Option or Options issued to Optionee to the
extent the Option was vested as of such effective date; or (ii) in its sole and
absolute discretion, the surviving corporation in any reorganization, merger or
consolidation may, but shall not be so obligated to, tender to Optionee an
option or options to purchase shares of the surviving corporation, and such new
option or options shall contain such terms and provisions as shall be required
to substantially preserve the rights and benefits of the Option or any portion
thereof then outstanding under this Agreement and, if accepted by Optionee, such
new option shall replace the Option under this Agreement.

                                      4.
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          9.   Limitation of Company's Liability for Nonissuance.  Inability of
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the Company to obtain, from any regulatory body having jurisdiction, authority
reasonably deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any shares of its Common Stock hereunder and under the Plan
shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.

          10.  This Agreement Subject to Plan.  This Agreement is made under the
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provisions of the Plan and shall be interpreted in a manner consistent with it.
To the extent that any provision in this Agreement is inconsistent with the
Plan, the provisions of the Plan shall control.  A copy of the Plan is available
to Optionee at the Company's principal executive offices upon request and
without charge.  The interpretation of the Board of any provision of the Plan,
the Option or this Agreement, and any determination with respect thereto or
hereto by the Board, shall be final, conclusive and binding on all parties.

          11.  Restrictive Legends.  Optionee hereby acknowledges that federal
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securities laws and the securities laws of the state in which Optionee resides
may require the placement of certain restrictive legends upon the Shares issued
upon exercise of the Option, and Optionee hereby consents to the placing of any
such legends upon certificates evidencing the Shares as the Company, or its
counsel, may reasonably deem necessary; provided, however, that any such legend
shall be removed when no longer applicable.

          12.  Cancellation of Option.  Notwithstanding anything herein to the
               ----------------------                                         
contrary, the Company may cancel the Option, or any portion thereof, at any time
if the Company determines that Optionee has (i) committed fraud, embezzlement or
other act of dishonesty involving the Company or any of its subsidiaries; (ii)
engaged in gross misconduct or deliberate disregard of the law; (iii) made any
unauthorized disclosure of any secret or confidential information of the Company
or any of its subsidiaries; (iv) engaged in any conduct which constitutes unfair
competition with the Company or any of its subsidiaries; (v) induced or
attempted to induce an employee of the Company or any of its subsidiaries to
terminate such employee's employment with the Company or any of its
subsidiaries; or (vi) induced or attempted to induce any customer of, or other
person having business relations with the Company or any of its subsidiaries to
terminate or curtail such relationship with the Company or any of its
subsidiaries.

          13.  No Rights as Stockholder, Employee or Director.  Optionee shall
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have no rights as a stockholder of any shares of Common Stock covered by the
Option until the date (the "Exercise Date") of the issuance of a stock
certificate to the Optionee for such shares.  Except as may be provided under
Section 7 of the Plan, the Company will make no adjustment for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the Exercise
Date.  Nothing contained in this Agreement shall confer, intend to confer or
imply any rights to an employment relationship with the Company or the
Subsidiary in favor of Optionee, or

                                      5.
<PAGE>
 
any rights to continue as a director for any period of time or at any particular
rate of compensation.

          14.  Notices.  All notices, requests and other communications
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hereunder shall be in writing and, if given by telegram, telecopy or telex,
shall be deemed to have been validly served, given or delivered when sent, if
given by personal delivery, shall be deemed to have been validly served, given
or delivered upon actual delivery and, if mailed, shall be deemed to have been
validly served, given or delivered three business days after deposit in the
United States mails, as registered or certified mail, with proper postage
prepaid and addressed to the party or parties to be notified, at the following
addresses (or such other address(es) as a party may designate for itself by like
notice):

               If to the Company:

                    Buttrey Food and Drug Stores Company
                    601 6th Street S.W.
                    Great Falls, Montana  59404
                    Attention:  Chief Financial Officer

               If to Optionee:

                    c/o Buttrey Food and Drug Stores Company
                    601 6th Street S.W.
                    Great Falls, Montana  59404
                    Attention:  ________________

          15.  Governing Law.  This Agreement shall be construed under and
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governed by the laws of the State of Delaware without regard to the conflict of
law provisions thereof.

                                      6.
<PAGE>
 
          16.  Counterparts.  This Agreement may be executed in counterparts,
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each of which shall be deemed an original and both of which together shall be
deemed one Agreement.

          IN WITNESS WHEREOF, the Company and Optionee have executed this
Agreement as of the date first above written.

                              THE COMPANY:

                              BUTTREY FOOD AND DRUG STORES 
                              COMPANY, a Delaware corporation


                              By:
                                 ----------------------------

                                Its:
                                    -------------------------

                              OPTIONEE:


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                                      7.