EMPLOYEE STOCK PURCHASE PLAN

       Phar-Mor,  Inc. (the "Company") does hereby  establish its Employee Stock
Purchase Plan (the "Plan") as follows:

     1.  Purpose of the Plan.  The Plan is intended to provide a method  whereby
eligible  employees of the Company and its Subsidiaries will have an opportunity
to acquire a proprietary  interest in the Company through the purchase of shares
of common stock of the Company. The Company believes that employee participation
in the  ownership  of the  Company is of benefit to both the  employees  and the
Company.  The Company  intends to have the plan  qualify as an  "employee  stock
purchase  plan" under Section 423 of the Code. The provisions of the Plan shall,
accordingly,  be  construed  so as to allow  participation  in a manner  that is
consistent with the  requirements of that Section of the Code. The Company shall
issue Shares under the Plan which are  authorized  and unissued  Shares,  Shares
issued and held by the Company as treasury stock or Shares purchased on the open
market, as may be determined from time-to time by the Board of Directors.

     2.Definitions

     Account.  "Account"  means the funds that are  accumulated  with respect to
each individual Participant as a result of payroll deductions for the purpose of
purchasing   Shares  under  the  Plan.   The  funds  that  are  allocated  to  a
Participant's   Account   shall  at  all  times  remain  the  property  of  that
Participant,  but such funds may be  commingled  with the  general  funds of the
Company.

       Authorization.  "Authorization" means the payroll deduction authorization
form submitted by employees to the Company in accordance  with the  instructions
thereon to authorize regular payroll  deductions under the Plan, as provided for
in Section 6.

     Base Pay.  "Base Pay" means an employee's  regular  straight time salary or
earnings  (determined prior to any reduction thereof for amounts  contributed to
an  employee  benefit  plan of the  Company or a  subsidiary  as the result of a
salary reduction  agreement intended to satisfy Section 125, 402(e)(3) of 402(h)
of the Code or the  successor  thereto  and not  including  overtime  and  bonus
payments).

     Board.  The "Board" means the Board of Directors of the Company.
Code.  The "Code" means the Internal Revenue Code of 1986, as amended.
ESPP Agent.  The "ESPP Agent" is a qualified  stock brokerage or other financial
services firm that has been designated from  time-to-time by the Company.  Grant
Date.  The "Grant  Date"  means the January 1, April 1, July 1, and October 1 on
which options to purchase  Stock are granted to an employee who is a Participant
in the Plan on that date.  The first  Grant Date shall not be any  earlier  than
October 1, 1997.




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    Holding Period.  The "Holding  Period" shall mean the holding period that is
set  forth in  Section  423(a)  of the  Code,  which,  as of the  date  that the
Company's Board of Directors adopted this Plan, is the later of (a) that two (2)
year period after the Grant Date and (b) that one (1) year period after transfer
to a Participant of any Shares under the Plan.

       Participant.  "Participant" means an employee who, pursuant to Section 3,
is eligible to participate in the Plan and has complied with the requirements of
Section 6.

       Purchase Price. "Purchase Price" means the price at which options granted
by the Company to a Participant are exercised pursuant to Section 4.

       Quarterly Purchase Date. The "Quarterly Purchase Date" means the last day
of any calendar quarter in which options are granted to Participants,  or if not
a business day, the immediately preceding business day.

       Shares.  "Shares" means shares of the Company's  common stock,  $0.01 par
value per share, that will be sold to Participants under the Plan.

       Subsidiaries. "Subsidiaries" shall mean any present or future or domestic
or foreign corporation that: (i) qualifies as a "subsidiary  corporation" of the
Company  as that term is  defined  in  Section  424 of the Code,  and (ii) whose
employees have been  designated by the Board to be eligible,  subject to Section
3, to be Participants under the Plan.

      Withdrawal Notice.  "Withdrawal Notice" means a notice, in a form designed
by the Company,  that a  Participant  who wishes to withdraw  from the Plan must
submit to the  Company  pursuant to Section 13 prior to the  Quarterly  Purchase
Date.

     3. Employees Eligible to Participate. Any employee of the Company or any of
its  Subsidiaries  who  (a)  is in  the  employ  of  the  Company  or any of its
Subsidiaries  on the Grant Date,  (b) has been so employed  for at least  ninety
(90) days prior to the Grant Date, and (c) is customarily employed for more than
twenty (20) hours per week and for more that five (5) months per  calendar  year
during such employment is eligible to participate in the Plan,  except employees
as provided in Section 19.

     4. Purchase  Price.  The Purchase  Price per Share shall be ninety  percent
(90%) of the fair market value of the stock on the Quarterly Purchase Date. Fair
market value shall mean the closing price on the NASDAQ National Market.

     5. Number of Shares  Reserved  Under the Plan. The maximum number of Shares
that will be  offered  under  the Plan is  500,000.  If, on any date,  the total
number of Shares for which purchase rights are to be granted pursuant to Section
8 exceeds  the number of Shares  then  available  under this  Section 5,  (after
deduction of all Shares (a) that have been purchased under the Plan, and (b) for
which  options to purchase are then  outstanding),  the Company shall make a pro
rata  allocation  of the Shares  that  remain  available  in as nearly a uniform
manner as shall be practicable and as it shall  determine,  in its sole judgment
to be equitable.  In such event, each Participant's  payroll deductions shall be
reduced  accordingly,  and the Company shall give to each  Participant a written
notice of such reduction.




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     6.  Participation.  An eligible  employee may become a  Participant  on any
Grant Date (after July 1, 1997) by completing the Authorization  provided by the
Company  and  submitting  it to the Company at the time  specified  prior to the
Grant Date to which it relates.  The Authorization  shall authorize an after-tax
regular payroll  deduction from the pay of the  Participant  commencing with the
first pay date following the Grant Date. Payroll deductions and participation in
the Plan shall continue for any employee submitting an Authorization, until such
employee  becomes  ineligible to  participate  in the Plan or withdraws from the
Plan or the Plan is terminated.  A Participant  who ceases to participate in the
Plan may again  participate in the Plan on any following Grant Date on which the
Participant  is eligible to do so, but only once in the  calendar  year in which
participation ceases, by completing and filing an Authorization with the Company
at the time specified prior to the Grant Date to which it relates.

     7.     Payroll Deduction.

     7.1 At the time the Authorization is filed with the Company and for so long
as a Participant  participates in the Plan, each Participant shall authorize the
Company to make payroll  deductions  of a fixed dollar amount per pay period not
less than Ten Dollars ($10.00) up to a maximum of One Hundred Dollars  ($100.00)
per week; provided,  however, that no payroll deduction shall exceed ten percent
(10%) of Base Pay.  The amount of the  minimum  fixed  dollar  deduction  may be
adjusted by the Board of Directors from time-to-time.

     7.2  Each  Participant's  payroll  deductions  shall  be  credited  to that
Participant's  Account.  A Participant may not make a separate cash payment into
such   Account  nor  may  payment  for  Shares  be  made  from  other  than  the
Participant's Account.

     7.3 A Participant's  payroll  deductions  shall begin on the first pay date
following the applicable  Grant Date, and shall end on the date the  Participant
becomes ineligible to participate in the Plan or withdraws from the Plan, or the
Plan is terminated.

     7.4 A Participant may increase or decrease the amount of his or her payroll
deductions,  subject to the limits  herein,  by delivering a new  Authorization.
Only one (1) increase or decrease in the amount of payroll  deductions  shall be
permitted in a calendar year. A new  Authorization  shall take effect as soon as
it can be processed by the Company.

     8.  Granting of Right to  Purchase.  On each Grant Date,  the Plan shall be
deemed to have granted  automatically to each Participant a right to purchase as
many  Shares  (including  fractional  Shares)  as may  be  purchased  with  such
Participant's  Account on the next following Quarterly Purchase Date, subject to
the limitations of the Plan.

     9. Purchase of Shares.  On the Quarterly  Purchase Date,  each  Participant
whose  Account has not been  refunded  due to the death of such  Participant  or
ineligibility to participate in the Plan shall be deemed to have carried out the
right to purchase, and shall be deemed to have purchased at the number of Shares
(including fractional Shares) that may be purchased


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       with such  Participant's  Account on the  Quarterly  Purchase Date at the
Purchase Price.

     10. Carryover of Account.  Following the purchase of Shares on an Quarterly
Purchase Date, any balance of a Participant's  Account shall be used to purchase
Shares on the next Quarterly  Purchase Date,  unless the Participant has advised
the Company otherwise in writing,  in which case the Company shall refund to the
Participant  the funds  that  remain  in the  Participant's  Account  as soon as
practicable thereafter or unless the Participant's Account is otherwise refunded
under the applicable terms of the Plan.

     11.  Participant's  Rights as a Shareholder.  No Participant shall have any
rights of a  shareholder  with  respect to any Shares until the Shares have been
purchased in accordance with Section 9 and issued by the Company.

     12.     Evidence of Ownership of Shares.

     12.1 Promptly  following each Quarterly  Purchase Date, the Shares that are
purchased  by each  Participant  shall  be  deposited  into an  account  that is
established in the Participant's name with the ESPP Agent.

     12.2 A Participant may direct, by written notice to the Company prior to an
Quarterly Purchase Date, that the ESPP Agent account be established in the names
of the  Participant  and one  such  other  person  as may be  designated  by the
Participant as a joint tenant with right of survivorship,  tenants in common, or
community property, to the extent and in the manner permitted by applicable law.

     12.3 A Participant  shall be free to undertake a disposition,  as that term
is defined in Section  424(c) of the Code (which  generally  includes  any sale,
exchange,  gift or transfer of legal title), of Shares in the Participant's ESPP
Agent account at any time, whether by sale, exchange,  gift or other transfer of
title.  A  Participant  may move such Shares to an account at another  brokerage
firm of the Participant's choosing or request that a certificate that represents
the Shares be issued and delivered to the Participant.

     13.  Withdrawal.  A Participant may terminate his or her  participation and
withdraw  from the Plan at any time  prior  to the  Quarterly  Purchase  Date by
delivering a Withdrawal Notice to the Company,  in which event the Company shall
carry out the purchase of Shares with the balance of Participant's Account prior
to Participant's  withdrawal on the next Quarterly  Purchase Date.  (Thereafter,
such  Participant  may again  participate in the Plan in accordance with Section
6.)

     14.  Interest.  No  interest  shall be paid or allowed  on a  Participant's
Account.

     15. Rights Not  Transferable.  No  Participant  shall be permitted to sell,
assign, transfer, pledge, or otherwise dispose of or encumber such Participant's
Account or any rights and  interest to purchase or to receive  Shares  under the
Plan, and such Account and rights and interests shall not be




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liable for, or subject to, a Participant's debtors,  contracts,  or liabilities.
If any such action is taken by the Participant or any valid claim is made by any
party  with  respect  to  such  Account  or  rights  and  interest,  whether  by
garnishment,  levy,  attachment or otherwise,  such  Participant  shall cease to
participate in the Plan, no further payroll  deductions  shall be taken from the
pay due and owing to the  Participant,  and the  balance  in such  Participant's
Account shall be refunded to the Participant.

     16.  Retirement,  Death or  Termination  of  Employment.  In the event of a
Participant's  termination of employment  with the Company and all  subsidiaries
for any reason (including  retirement,  death or disability) or in the event the
corporation by which  Participant  is employed  ceases to be a Subsidiary of the
Company,  no further payroll deduction shall be taken from any pay due and owing
to such Participant.  In the event of a Participant's  termination of employment
due to the death of such Participant,  the balance in such Participant's Account
shall be refunded to his or her estate, or if none, to the person(s) entitled to
his or her  estate  under  the  intestate  laws of the  state in which he or she
resides.  In the event of a  Participant's  termination  of  employment  for any
reason other than death,  on the following  Quarterly  Purchase Date,  each such
Participant shall be deemed to have carried out the right to purchase, and shall
be deemed to have  purchased  at the  number  of  Shares  (including  fractional
Shares) that may be purchased with such  Participant's  Account on the Quarterly
Purchase Date.

     17. Amendment, Modification, Suspension or Discontinuance of this Plan. The
Board may amend the Plan at any time and for any reason, provided, however, that
no such amendment shall be effective without the approval of the shareholders of
the Company if the  amendment  (a)  increases the number of Shares to be offered
under the Plan (other than as provided for herein) or (b) decreases the Purchase
Price per share or if such  approval  is required  to meet the  requirements  of
Section 423 of the Code or  Securities  and Exchange  Commission  Rule 16b-3 (or
successors thereto).

     18.   Changes   in   Capitalization.   In  the  event  of   reorganization,
recapitalization,  stock split, stock dividend,  combination of shares,  merger,
consolidation, offerings of rights, or any other change in the capital structure
of the  Company,  the  Board may make such  adjustment,  if any,  as it may deem
appropriate in the number,  kind, and the price of the Shares that are available
for  purchase  under the Plan,  and in the number of Shares  that an employee is
entitled to purchase all to the end that a Participant's  proportionate interest
shall be maintained as before the  occurrence  of such event.  (Such  adjustment
made by the Board shall be conclusive.)

     19. Share Ownership.  Notwithstanding  anything herein to the contrary,  no
Participant  shall be granted a right to purchase  any Shares  under the Plan if
such  Participant,  immediately  after the granting of such rights,  owns Shares
that account for (including all shares that may be purchased  under  outstanding
rights and options) five percent (5%) or more of the total combined voting power
or value of all  classes of shares of the  Company or its  Subsidiaries  (or its
parent with in the  meaning of Section  424(e) of the Code).  For the  foregoing
purposes,  the rules of Section  424(d) of the Code shall  apply in  determining
share ownership. In addition, no Participant shall




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be granted a right to  purchase  any  Shares  under the Plan that  permits  such
Participant's  rights to purchase  Shares  under all  "employee  stock  purchase
plans" of the Company and its  Subsidiaries (or its parent within the meaning of
423(e) of the Code) to accrue at a rate that exceeds  $25,000 of the fair market
value of such shares  (determined at the time such right to purchase is granted)
for each  calendar  year in which such right to purchase is  outstanding  at any
time (as  interpreted  and applied in accordance  with Section 423(b) (8) of the
Code).

     20. Administration.  The Plan shall be administered by the Board, which may
engage the ESPP  Agent to assist in the  administration  of the Plan.  The Board
shall be vested with full authority and discretion to (a) administer,  construe,
and interpret the Plan, (b) define the terms of the Plan,  (c) prescribe,  amend
and rescind rules and regulations  for the Plan, (d) correct any defect,  supply
any omission or reconcile any  inconsistency in the Plan, and (e) make all legal
and factual determinations  necessary or advisable for the administration of the
Plan. All determinations,  decisions, or actions of the Board in connection with
the  construction,  interpretation,  administration  or  application of the Plan
shall be final,  conclusive,  and binding upon all  Participants and any and all
persons that claim rights or interests under or through a Participant. The Board
may delegate any or all of its authority  hereunder to a committee of the Board,
as it may designate.

     21. Notices.  All notices or other  communications  by a Participant to the
Company under or in  connection  with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location,  or by
the person,  that is designated by the Company from time to time for the receipt
thereof,  and,  in  the  absence  of  such  designation,   the  Company's  Legal
Department; Attention: General Counsel.

     22.     Termination of Plan.

     22.1 This Plan shall terminate at the earliest of the following:

            (a)  July 1, 2002;
            (b) The date of the filing of a  statement  of intent to dissolve by
the  Company or the  effective  date of a merger or  consolidation  wherein  the
Company is not to be the surviving corporation, which merger or consolidation is
not between or among a  corporation  related to the  Company.  In such event,  a
Participant  shall  be  treated  with  respect  to  such  Share  for  which  the
Participant  has been granted a right to purchase in the same manner,  as nearby
as  reasonably  possible as a holder of a Share  subject to options is otherwise
treated in such event.
           (c) The date the Board acts to terminate the Plan; and
           (d) The date when all of the Shares that were  reserved  for issuance
hereunder have been purchased.

     22.2  Upon  termination  of the  Plan,  the  Company  shall  refund to each
Participant the balance of each Participant's Account that is not otherwise used
to purchase Shares.






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     23.  Limitations  on Sale of Stock  Purchased  Under the Plan.  The Plan is
intended to provide Shares for  investment and not for resale.  The Company does
not,  however,  intend to restrict or  influence  the conduct of any  employee's
affairs.  An employee,  therefore,  may sell Shares that are purchased under the
Plan at any time,  subject to compliance  with any applicable  federal and state
securities laws. THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE
PRICE OF THE SHARES.

     24. Governmental Regulations.  The Company's obligation to sell and deliver
Shares under this Plan is subject to any governmental  approval that is required
in connection with the authorization, issuance, or sale of such Shares. No right
to  purchase  Shares or  purchase  and  delivery  of Shares  shall be granted or
exercised  if the same would be contrary to law or the  regulations  of any duly
constituted  authority  having  jurisdiction  or  would  disqualify  the Plan as
"employee stock purchase plan" under Section 423 of the Code.

     25. No Employment Rights. The Plan does not, directly or indirectly, create
any right for the benefit of any  employee or class of employees to purchase any
Shares under the Plan, or create in any employee or class of employees any right
with respect to continuation  of employment by the Company,  and it shall not be
deemed  to  interfere  in any way with the  Company's  right  to  terminate,  or
otherwise modify, an employee's employment at any time.

     26. Effective Date and Approvals.  The Plan shall be effective September 1,
1997,  subject to its adoption by the Board by that date and subject to approval
of the  stockholders  of the Company (in accordance  with applicable law for the
issuance of corporate  stock or options)  within (12) months before or after the
date  the Plan is  adopted  by the  Board.  If the  Plan is not so  adopted  and
approved, it shall not be effective.

     27. Exchange Act. Notwithstanding any contrary provisions, any Participants
that are directors,  executive officers and 10% or greater  shareholders subject
to Section 16 of the Securities Exchange Act of 1934 (or successor thereto) must
effect transactions  hereunder in accordance with Section 16 of the 1934 Act and
the rules promulgated  thereunder.  In this regard, it is intended that the Plan
comply with Rule 16b-3, and in order to maintain  compliance with Rule 16b-3, as
well as the 1934 Act, the Board may make such rules and impose such  limitations
as it deems  advisable.  Moreover,  in the  event  the Plan  does not  include a
provision  required by Rule 16b-3 to be stated  therein,  such provision  (other
than one relating to eligibility  requirements to purchase Shares, the amount of
Shares that may be purchased  or the price for the purchase of Shares)  shall be
deemed  to  be   incorporated  by  reference  into  the  Plan  with  respect  to
Participants subject to Section 16 of the 1934 Act.




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      28.  Governing  Law. The law of the  Commonwealth  of  Pennsylvania  shall
govern  all  matters  that  relate  to this  Plan,  except  to the  extent it is
superseded by the laws of the United States.

Date Adopted by Board:  June 5, 1997

Date Approved by Shareholders: February 17, 1998