Document:

<PAGE>

               Amended and Restated Term Sheet: Supply Agreement,
                         dated as of September 24, 1999

1.       Term              15 years from Effective Date (September 24, 1999).

2.       Merchandise       Substantially all requirements (not less than 95%)
                           for grocery, bakery, candy, store supplies and all
                           Perishables. Perishables means items in the following
                           categories: meat (other than frozen), deli, seafood
                           (other than frozen), produce, dairy and floral.
                           Substantially all requirements (not less than 95%)
                           for frozen (mainline), frozen bakery, ice cream,
                           frozen meat, frozen seafood and ice for the Northern
                           division, *
                           GU is not required to purchase from C&S, (i) products
                           that, as of the date hereof, are supplied by direct
                           store delivery vendors other than C&S ; provided,
                           that if C&S elects to warehouse any such item, GU
                           will support C&S and will purchase its requirements
                           of such item from C&S, provided that the C&S pricing
                           on such item is cost-competitive, and (ii) the
                           following promotional items that are delivered direct
                           from the manufacturer to the store: paper, modular
                           displays, powdered drinks, water, detergents and, as
                           agreed to, seasonal items.
                           Notwithstanding any other provision to the contrary,
                           if GU is not purchasing the Minimum Purchases from
                           C&S, then GU shall purchase all (as opposed to
                           substantially all) of its requirements from C&S of
                           the products carried by C&S, and GU shall not seek to
                           cross-dock product carried by C&S. Furthermore,
                           absent a service level deficiency, GU will not
                           purchase from a secondary supplier product carried by
                           C&S.

3.       Base Price        *

4.       Other Pricing Provisions   *

5.       Quality control.  C&S will not substitute any item without GU's prior
         authorization *

6.       Payments.

         a.       General.  *

         b.       Produce.  *

         c.       [Terms of seasonal distributions to come]

October 15, 1999

*Material omitted and filed separately with the SEC pursuant to a request for
Confidential Treatment.

<PAGE>

         d.       New Stores.  *

         e.       Time is of the essence. If GU fails to make any payment when
                  due under the Agreement, C&S shall both give notice to GU of
                  such failure to receive payment and shall have the right to
                  stop shipping product under this Agreement. If all payments
                  due and owing are not received within 72 hours from receipt by
                  GU of such notice, C&S shall have the right to terminate this
                  Agreement. Notwithstanding the foregoing, GU shall have the
                  right to dispute price, quantities and whether such amount is
                  due and owing, and GU will notify C&S promptly if it believes
                  there is an error. The parties agree to use their best efforts
                  to resolve such dispute within 2 weeks after delivery of such
                  notice.

         f.       Notice. The supply agreement shall require any notice to be
                  provided to the President, Chief Financial Officer and General
                  Counsel of the party receiving the notice.

         g.       Letter of Credit.   *

7.       Review Rights. The parties agree to work to develop a weekly price file
         reconciliation process as follows. C&S will transmit to GU all cost
         information on a weekly basis three weeks prior to billing. GU will
         match the C&S cost file to GU's cost file and transmit an exception
         report back to C&S the next day. The parties will then meet to resolve
         any cost discrepancies prior to billing. GU may also review C&S's Base
         Price information on a quarterly basis, commencing such review within
         180 days following the end of the applicable Contract Quarter and
         completing such review within 210 days of the end of the Contract
         Quarter under review. Any review shall be conducted by individuals
         knowledgeable regarding industry standards and customs, and such
         persons shall keep all such information strictly confidential. Within
         30 days of the end of the GU's review, C&S will reimburse GU for any
         actual findings that C&S over-billed GU (including any upcharges or
         other fees under the supply agreement related to such over-billed
         amount), and correspondingly GU will pay C&S for any actual findings
         that C&S under-billed GU (including any upcharges or other fees under
         the supply agreement related to such under-billed amount). It is the
         intent of the parties that the weekly data transmittal and GU's review
         of such information shall be the primary mechanism to ensure pricing
         accuracy.

8.       Standard Credit. * The parties have established an overage/shortage
         program with respect to all Merchandise categories, attached hereto
         (the "Standard Credit Policy"). The Standard Credit Policy also
         provides for store delivery documentation and remedy procedures in the
         event of a "missing pallet." Product shortages that exceed the standard
         credit program cap will be investigated to determine the whereabouts of
         the product. A

                                       2

October 15, 1999

*Material omitted and filed separately with the SEC pursuant to a request for
Confidential Treatment.

<PAGE>

         Credit will not be issued under the following circumstances:

         a.       the product is located at the store,
         b.       the product is located at another site and reshipped,
         c.       the load has been audited, witnessed and verified as complete
                  without error,
         d.       the delivery receipt and load documentation indicate that the
                  product was received at the store.

<PAGE>

         If a store disagrees with the outcome of the investigation, it may
         immediately appeal its claim through GU's operations liaison, who in
         turn may contact the C&S customer service manager (Janet Gauthier). The
         parties will work to provide further information and reach an agreeable
         solution within 5 working days. If an agreement cannot be reached, the
         GU Vice President of Operations may contact the C&S Vice President of
         Sales (Marilyn Tillinghast) for final resolution. Through this process,
         the parties will resolve any and all disputes involving amounts in
         excess of the standard credit within fourteen days of one party
         notifying the other that a dispute exists. Both parties shall authorize
         and empower their respective designees to resolve such disputes.

9.       Delivery Schedule.  *

         a.       Delivery Requirements.  *

         b.       Delivery Service Level. "Delivery Service Level" means a
                  percentage reflecting the ratio of (i) the number of orders
                  delivered on-time by C&S to GU in any week per the Delivery
                  Schedule, to (ii) the total number of orders scheduled for
                  delivery by C&S to GU during such week, per the Delivery
                  Schedule. Delivery Service Level percentages will not be
                  adversely affected by any event of force majeure or any
                  nonperformance or error by GU including, without limitation,
                  delivery delays caused by GU. For example, if a truck arrives
                  at a store but no receiving crew is present, then C&S will not
                  be responsible for the delay delivering at subsequent stops
                  due to such GU mistake. C&S will provide GU a weekly Delivery
                  Service Level Reconciliation Report showing the times of all
                  deliveries during such week.

         c.       Delivery Service Level Deficiency. If, for any reason other
                  than a breach, nonperformance or error by GU or an event of
                  force majeure, C&S fails to achieve a * Delivery Service Level
                  (the "Targeted Service Level") for any * during the Term (the
                  "Measurement Period") and GU gives notice of such alleged
                  delivery service level deficiency to C&S, then such failure
                  shall constitute a "Delivery Service Level Deficiency". In the
                  event of a Delivery Service Level Deficiency, C&S shall use
                  its reasonable best efforts to immediately restore the
                  Delivery Service Level to at least * .

                                       3

October 15, 1999

*Material omitted and filed separately with the SEC pursuant to a request for
Confidential Treatment.

<PAGE>

         d.       Cure of Delivery Schedule Breach. If, during the week
                  following the occurrence of a Delivery Service Level
                  Deficiency (the "Delivery Penalty Week"), the Delivery Service
                  Level is restored to at least * then the Delivery Service
                  Level Deficiency shall be cured and a new Measurement Period
                  shall begin.

         e.       Delivery Service Level Deficiency Penalty. If C&S fails to
                  restore the Delivery Service Level to * during the Delivery
                  Penalty Week, then C&S will rebate to GU the load fees and
                  stop charges with respect to those deliveries that were not
                  timely delivered during such week and each subsequent week
                  until the Delivery Service Level is restored to *.

         f.       Delivery Service Level Termination. If the Delivery Service
                  Level is below * for * , and prior to the end of the * , GU
                  has provided C&S with notice that it intends to terminate the
                  agreement, and prior to the end of * , C&S has not restored
                  the Delivery Service Level to at least * , then GU may
                  terminate the agreement within seven days following the end
                  of * .

10.      Service Level.

         a.       Service Level Reporting. C&S will electronically transmit to
                  GU a daily Service Level Reconciliation Report showing, * .

         b.       Service Level. "Service Level" means a percentage reflecting
                  (i) the number of cases shipped divided by (ii) the number of
                  cases ordered, less unauthorized, discontinued, over-pulled,
                  and manufacturers' out-of-stock cases. The term
                  "manufacturer's out-of-stock cases" refers to commodity
                  shortages and cases that are unavailable from the manufacturer
                  or cut by the manufacturer; provided, that C&S placed orders
                  for such cases within the normal lead time. The Service Level
                  will not be adversely affected by any nonperformance or error
                  by GU, including without limitation errors in booking
                  advertising and feature items (including sales levels of
                  feature items in excess of projections made by GU and
                  adjustments to pre-orders where applicable), GU's directions
                  with respect to items procured by GU, or any event of force
                  majeure. C&S will use its commercially reasonable best efforts
                  to achieve a Service Level of * .

         c.       Service Level Deficiency. If, for any reason other than a
                  breach, nonperformance or error by GU or an event of force
                  majeure, C&S fails to maintain a * Service Level (the
                  "Targeted Service Level") for * during the Term (the
                  "Measurement Period") and GU gives notice of such alleged
                  service level deficiency to C&S, then such failure shall
                  constitute a Service Level Deficiency. In the event of a
                  Service
                                       4

October 15, 1999

*Material omitted and filed separately with the SEC pursuant to a request for
Confidential Treatment.

<PAGE>

                  Level Deficiency, C&S shall use its reasonable best efforts
                  to immediately restore the Targeted Service Level * .

         d.       Cure of Delivery Schedule Breach. If, during the week
                  following the occurrence of a Service Level Deficiency (the
                  "Service Penalty Week"), the Service Level is restored to at
                  least * , then the Service Level Deficiency shall be cured and
                  a new Measurement Period shall begin.

         e.       Service Level Deficiency Penalty/Third Party Sourcing. If C&S
                  fails to restore the Targeted Service Level during the Service
                  Penalty Week, then GU will be entitled to either (i) the
                  Penalty Payment during such week and each subsequent week
                  until the the Targeted Service Level is restored ("Penalty
                  Period") or (ii) * . The Penalty Payment shall be equal to:
                  (i) the difference between * and the average actual service
                  level percentage during the Penalty Period, multiplied by (ii)
                  the number of cases delivered during the Penalty Period,
                  multiplied by (iii) * . The Penalty Payment shall be paid
                  within 15 days of the end of the Contract Quarter in which the
                  Penalty Period occurs. *

         f.       Service Level Termination. If the Service Level is below * for
                  * in a Contract Year, and prior to the end * , GU has provided
                  C&S with notice that it intends to terminate the agreement,
                  and prior to the end * , C&S has not restored the Targeted
                  Service Level to at least * , then GU may terminate the
                  agreement within seven days following the end * . Furthermore,
                  if (a) there have * in a Contract Year, (b) during such
                  deficiencies the Service Level was below * , and (c) within
                  seven days following the * , GU has provided C&S with notice
                  that it intends to terminate the agreement, then GU may
                  terminate the agreement within seven days following the end *
                  .

         g.       Example of Penalty Payment. If a Penalty Period lasted for one
                  week, the average actual service level during such Penalty
                  Period was * , the number of cases delivered during such
                  Penalty Period was * .

11.      Fees. Upcharges are on Base Price and exclusive of ripening fees.
         Merchandise shall be placed in a category classification according to
         C&S's historical practices, subject to a list of grand-fathered items,
         if any, attached to the supply agreement). The following fees shall
         apply:

         Grocery, supplies, candy (full case)                     *
                  Delivery Fee - first stop                       *
                               - each additional                  *

                                       5

October 15, 1999

*Material omitted and filed separately with the SEC pursuant to a request for
Confidential Treatment.

<PAGE>

         Perishables

                  Meat and deli                                   *
                  Produce                                         *
                  Dairy upcharge                                  *
                  Delivery Fee
                           All Perishables delivered on same truck
                               - first stop                       *
                               - each additional                  *
                  Banana ripening                                 *
                  Stone Fruit ripening                            *

         Frozen and ice cream                                     *
                  *
                  Delivery     - first stop                       *
                               - each additional
                                                                  *

         Label Charge                                             *

         Restocking Fee (charged on Base Price)                   *

         Special Deliveries                                       *
                  (extra delivery on already scheduled run)

         ASAP deliveries                                          *
                  (additional run; cost adjustable for additional fuel/cost)

         Trailer rental (pick-up and delivery involves a mileage charge of
         $1.20/mile, based upon current trip rates and fuel costs; trailer
         rental is subject to increase for increases in third party rental
         charges)

                  dry                                                  *
                  refrigerated                                         *
                  turkey (extended use with maintenance)               *

12.      Full truckload fee. [Deleted]

13.      Bales/totes/cross-dock/reclamation pick-up. * . To assist C&S in
         managing its own inventory and the Service Level requirements herein,
         GU shall inform C&S of when GU has purchased/received Merchandise into
         Montgomery and GU's intended distribution of such product.

                                       7

October 15, 1999

*Material omitted and filed separately with the SEC pursuant to a request for
Confidential Treatment.

<PAGE>

14.      Frozen Holiday Turkeys/Shrimp. With respect to holiday turkeys and
         shrimp (including to the extent that GU wishes C&S to handle frozen
         holiday turkeys or shrimp for the Southern and Eastern divisions prior
         to such goods becoming Merchandise hereunder), * .

15.      Forward Buy Reserve. C&S will handle forward buy   *

                                       7

October 15, 1999

*Material omitted and filed separately with the SEC pursuant to a request for
Confidential Treatment.

<PAGE>

16.      Marketing Funds.
         a.       Amount:      *  .
         b.       Schedule:    Payments within 14 days of the following dates
         *

17.      Suspension of Marketing Funds, New Store Advertising Credits and
         Construction Credits. C&S shall suspend the payment of any Marketing
         Funds, New Store Advertising Credits and Construction Credits otherwise
         due and payable to GU upon:
         a.       an Event of Insolvency with respect to GU; provided, that this
                  paragraph 17(a) will not apply, if GU is a debtor under
                  Chapter 11 of the Bankruptcy Code and GU has assumed the
                  supply agreement as part of the bankruptcy case;
         b.       a default under the supply agreement; or
         c.       material default under material credit agreement, indenture or
                  other debt instrument unless such default is waived by all of
                  the appropriate lenders and such waiver is not conditioned or
                  temporary.
         Upon such suspension, C&S shall give notice of and the reason for such
         suspension. If GU cures such defect, then it shall give notice to C&S
         of such cure, and C&S shall pay such suspended payment within three
         business days of receipt of such notice.

18.      *

19.      Volume Incentive.   *

20.      Reduced Volume Surcharge.   *

21.      Lost Future Volume Surcharge. If GU's future purchases from C&S are
         reduced because C&S has terminated the agreement for cause, then upon
         such termination, GU shall immediately pay to C&S the amount set forth
         across from the Contract Year in which C&S terminated the Agreement: *

22.      Reclamation. * GU will participate in C&S' reclamation program for all
         Merchandise other than produce, floral, meat, seafood and private
         label. This product will be scanned at C&S' reclamation center within
         seven days after the product is picked up from Grand Union Stores, and
         Grand Union will receive credit, on a bi-weekly basis, for *

23.      Third Party Deductions.

         a.       General. From time to time, GU may ask C&S to act as its agent
                  to deduct amounts that are due from manufacturers to GU. C&S
                  has the right, in its discretion, to refuse to honor any third
                  party deduction request that GU may

                                       8

October 15, 1999

*Material omitted and filed separately with the SEC pursuant to a request for
Confidential Treatment.

<PAGE>

                  make. If C&S makes a deduction on GU's behalf and the
                  manufacturer disputes the deduction made by C&S, GU agrees to
                  indemnify and defend C&S against and hold C&S harmless from
                  any claim by the manufacturer related to such deduction. If
                  C&S repays any deduction that C&S makes on GU's behalf, GU
                  will, upon notice from C&S, repay such amount to C&S. GU will
                  insure that supply of Merchandise from manufacturers to C&S is
                  not adversely affected by any third party deductions that C&S
                  may take on GU's behalf. Service Level shall not be adversely
                  affected by an interruption in the supply of Merchandise from
                  a manufacturer to C&S if the interruption is caused by the
                  refusal of the manufacturer to ship product to C&S and such
                  refusal is attributable to a disputed deduction that C&S has
                  taken on GU's behalf. C&S will add to each deduction from a
                  vendor a fee of no less than * to process the deduction made
                  by C&S on GU's behalf; provided, that with respect to private
                  label vendors, C&S will only add a fee of * . Each Friday, C&S
                  will reimburse GU for all deductions collected during the
                  preceding seven day period, less C&S' fee.

         b.       Perishable Accruals. *

         c.       Direct Booking Errors. *

24.      Termination by C&S. C&S may terminate this Agreement for cause. Cause
         shall be
         a.       nonpayment of amounts owed hereunder uncured for 72 hours
                  following receipt by GU of written notice;
         b.       other material breach uncured after 90 days following receipt
                  by GU of written notice;
         c.       Event of Insolvency; but no termination if GU otherwise
                  compliant; and
         d.       GU purchases (Base Price) less than * from C&S in any Contract
                  Year.

25.      Termination by GU. GU may terminate this Agreement for cause. Cause
         shall be:
         a.       nonpayment of amounts owed hereunder uncured for 72 hours
                  following receipt by C&S of written notice;
         b.       material breach uncured after 90 days following receipt by C&S
                  of written notice;
         c.       Event of Insolvency; but no termination if C&S otherwise
                  compliant; and
         d.       As set forth in Sections 9 or 10.

26.      Termination Fees.
         a.       If C&S terminates for cause, GU shall immediately pay a
                  termination fee to C&S of * .
         b.       If GU terminates for cause, C&S shall immediately pay a
                  termination fee to GU of * .

                                       9

October 15, 1999

*Material omitted and filed separately with the SEC pursuant to a request for
Confidential Treatment.

<PAGE>

27.      Transfer of Assets.
         a.       Notice. GU will provide C&S with written notice of any GU plan
                  to sell, transfer, assign or otherwise convey ownership (a
                  "Sale") in one or more store. Such notice shall be given at
                  the earliest practicable time and shall state, among other
                  things, the name of the proposed purchaser, the location of
                  the store to be sold, the approximate timetable for
                  consummating the Sale and the purchaser's plans for supplying
                  the store in the aftermath of the Sale, if such plan is known
                  to GU. Such notice shall be given, at the latest, thirty (30)
                  days in advance of the date scheduled for the proposed Sale;
                  provided that such notice shall be given at least six months
                  in advance if the Sale involves five stores or more.
         b.       Prorated Sale Fee and Repayment of New Store Advertising
                  Credits and Construction Credits. *

28.      Disclosure. Each party shall inform the other party (i) of any and all
         defaults occurring under either a material Credit Agreement or any
         other material lending agreement, and (ii) if remaining amounts of
         credit available to under its lines of credit falls * or (iii) if the
         party has been purchased by a competitor of the other party. In
         addition, for so long as a party is a public reporting entity, then
         such party shall provide the other with its respective 10-Q's and 10-Ks
         (complete copies with any and all exhibits) upon the filing of such
         documents with the SEC. If a party is not a public reporting entity,
         then such party shall provide the other party its respective quarterly
         financials (income statement, balance sheet and cash flow statement)
         within 45 days of the end of the first three fiscal quarters and within
         60 days of the end of the respective fiscal year.

29.      Termination of Prior Agreements. Upon execution of the new supply
         agreement, the Northern Agreement and New York Agreement will terminate
         with no liability by either party to the other (including for any
         audits of prior years under such agreements or for forward buy reserve
         storage charges), except * .

30.      Binding Effect. Binding upon and inure to the benefit of GU and C&S and
         their respective successors and assigns.

                                       10

October 15, 1999

*Material omitted and filed separately with the SEC pursuant to a request for
Confidential Treatment.

<PAGE>

         The parties acknowledge and agree that this Term Sheet confirms their
agreement as to the material terms of the supply relationship between the
parties going forward. The parties agree that they shall move expeditiously to
memorialize the agreed upon terms contained herein in a more formal supply
agreement within thirty days of the date hereof.

AGREED TO AND ACCEPTED

THE GRAND UNION COMPANY                    C&S WHOLESALE GROCERS, INC.

/x/ Gary M. Philbin                        /x/ Ronald J. Wright
-------------------------------------      ------------------------------------
Gary Philbin                               Ronald J. Wright
                                           President
President

                                       11

October 15, 1999

*Material omitted and filed separately with the SEC pursuant to a request for
Confidential Treatment.<PAGE>

                             The Grand Union Company

                 1995 Non-Employee Directors' Stock Option Plan

                      AMENDED AND RESTATED DECEMBER 9, 1999

      1. Purpose. The purpose of this 1995 Non-Employee Directors' Stock Option
Plan (the "Plan") is to advance the interests of The Grand Union Company (the
"Company") by enhancing the ability of the Company to attract and retain
non-employee directors who are in a position to make significant contributions
to the success of the Company and to reward directors for such contributions
through ownership of shares of the Company's Common Stock (the "Stock").

      2. Administration. The Plan shall be administered by a committee (the
"Committee") of the Board of Directors (the "Board") of the Company designated
by the Board for that purpose. Unless and until a Committee is appointed, the
Plan shall be administered by the entire Board, and references in the Plan to
the "Committee" shall be deemed references to the Board. The Committee shall
have authority, not inconsistent with the express provisions of the Plan (a) to
issue options granted in accordance with the formula set forth in this Plan to
Eligible Directors as defined below; (b) to prescribe the form or forms of
instruments evidencing awards and any other instruments required under the Plan
and to change such forms from time to time; (c) to adopt, amend and rescind
rules and regulations for the administration of the Plan; and (d) to interpret
the Plan and to decide any questions and settle all controversies and disputes
that may arise in connection with the Plan. Such determinations of the Committee
shall be conclusive and shall bind all parties.

      3. Eligibility of Directors for Stock Options. Directors eligible to
receive options under the Plan ("Eligible Directors") shall be those directors,
who are not, at the time they become an Eligible Director, employees of the
Company or of any subsidiary of the Company and (i) who are directors on the
Effective Date of this Plan (which shall be the eligibility date for such
directors) or (ii) who are first elected a director of the Company after the
Effective Date of this Plan (which election date shall be the eligibility date
for any such director).

      4. Grant of Options; Exercise Price. Each individual who is an Eligible
Director shall, on his or her eligibility date as determined under Section 3,
automatically be granted an option ("Option") to purchase 10,000 shares of Stock
of the Company (subject to adjustment as provided in Sections 5 and 10) at an
exercise price equal to the Fair Market Value of the Stock on the effective date
of grant. Thereafter, on each date that an Eligible Director is elected to a new
one-year term of office, such Eligible Director shall automatically be granted
an Option to purchase 5,000 shares of Stock of the Company (subject to
adjustment as provided in Sections 5 and 10) at an exercise price equal to the
Fair Market Value of the Stock on the effective date of grant. All options shall
expire ten years after the effective date of grant.

      5. Number of Shares. The number of shares of Stock of the Company which
may be issued upon the exercise of Options granted under the Plan, including
shares forfeited pursuant to Section 7, shall not exceed 250,000 in the
aggregate,

<PAGE>

subject to increase under Section 10, which increases and appropriate
adjustments as a result thereof shall be made by the Committee, whose
determination shall be binding on all persons.

      6. Stock to be Delivered. Shares of Stock to be delivered pursuant to an
Option granted under this Plan may constitute an original issue of authorized
Stock or may consist of previously issued Stock acquired by the Company, as
shall be determined by the Board. The Board and the proper officers of the
Company shall take any appropriate action required for such delivery. No
fractional shares shall be delivered under the Plan.

      The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan (a) until all conditions of the Option have been satisfied, (b)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulation have been complied with, (c) if the outstanding Stock is at
the time listed on the New York Stock Exchange or any other stock exchange,
until the shares to be delivered have been listed or authorized to be listed on
the New York Stock Exchange or such other exchange upon official notice of
notice of issuance, and (d) until all other legal matters in connection with the
issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
Options, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.

      If an Option is exercised by the Eligible Director's legal representative,
the Company will be under no obligation to deliver Stock pursuant to such
exercise until the Company is satisfied as to the authority of such
representative.

      7. Exercisability; Exercise; Payment of Exercise Price.

      All Options granted under the Plan prior to July 1, 1996, shall, subject
to initial stockholder approval of the Plan, become exercisable immediately as
to one-third of the shares, on the first anniversary of the grant date as to the
second third of the shares and as to one share of any remainder, and on the
second anniversary of the grant date as to the last third of the shares and the
second share of any two-share remainder.

      All Options granted under the Plan on or after July 1, 1996, shall,
subject to initial stockholder approval of the Plan, become exercisable six
months after the grant date as to one-third of the shares, on the earlier of the
first anniversary of the grant date or the annual meeting of stockholders
closest thereto as to the second third of the shares and as to one share of any
remainder, and on the earlier of the second anniversary of the grant date or the
annual meeting of stockholders closest thereto as to the last third of the
shares and the second share of any two-share remainder.

      Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Committee and (2) payment in full as provided below for the
number of shares for which the Option is exercised.

                                                                               2
<PAGE>

      The exercise price of Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) through the delivery of shares
of Stock which have been outstanding and held by the Option holder for at least
six months and which have a Fair Market Value on the last business day preceding
the date of exercise equal to the exercise price, or (3) by delivery of a two
year-term promissory note of the Eligible Director to the Company, bearing
interest on amounts outstanding at a rate equal to the prime rate as published
in The Wall Street Journal on the effective date of grant plus 2%, or (4) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price, or (5) by
any combination of the permissible forms of payment.

      To the extent shares of Stock covered under an Option are not delivered
because the Option lapses or is terminated, such forfeited shares may be
regranted in another Option within the limits set forth in Section 5.

      8. Termination of Options.

      a. Death or Disability. If an Eligible Director ceases to be a director by
reason of death or total and permanent disability (as determined by the
Committee), the following will apply:

      All Options held by the Eligible Director that are not exercisable on the
thirtieth day after termination of the Eligible Director's status as a director
will terminate as of such date. All Options that are exercisable as of said
thirtieth day will continue to be exercisable until the earlier of (1) the first
anniversary of the date on which the Eligible Director's status as a director
ended or (2) the date on which the Option would have terminated had the Eligible
Director remained a director. If the Eligible Director has died or is totally or
permanently disabled, the Option may be exercised within such limits by the
Eligible Director's legal representative.

      b. Other Termination. If an Eligible Director's service with the Company
terminates for any reason other than death or incapacity as provided above, all
Options held by the director that are not then exercisable shall terminate.
Options that are exercisable on the date of such termination (other than
termination upon a removal for cause, in which event all Options shall
immediately terminate) shall continue to be exercisable until the earlier of (1)
one year thereafter or (2) the date on which the Option would have terminated
had the director remained an Eligible Director, and after completion of that
period, such Options shall terminate to the extent not previously exercised,
expired or terminated.

      c. Certain Corporate Transactions. In the event of a Change of Control of
the Company, each outstanding Option not otherwise exercisable shall become
immediately exercisable in full on the twentieth (20th) trading day prior to the
effective date of the Change of Control. Subject to the last paragraph of this
section, the Company shall pay to those Option holders whose Options have been
terminated, an amount equal to the Option Value, such payment to be made by cash
or certified check within 30 days after the Change in Control. The Option Value
shall be determined as the difference between the exercise price of the Option
and the Market Price times the number of shares

                                                                               3
<PAGE>

covered by the Option. The Market Price shall be determined as the average of
the Fair Market Value, as determined under section 11, for the period of twenty
(20) trading days ending on the effective date of the Change of Control.

      "Change of Control" means any of the following: (1) any person, entity or
Group (persons or entities acting together) is or becomes the beneficial owner
of more than 50% of the Voting Stock of the Company; (2) a consolidation,
merger, or sale of substantially all of the assets of the Company, with the
effect that any person, entity or Group becomes the beneficial owner of more
than 50% of the Voting Stock of the Company or the Company is not the surviving
entity; (3) during any consecutive two-year period commencing July 1, 1996,
individuals who constituted the Board of Directors at the beginning of such
period, together with any new directors whose election by the Board or
nomination for election by stockholders was approved by 2/3 of the directors who
were in office at the beginning of the period or whose election or nomination
was so approved, cease to constitute a majority of the Board then in office; or
(4) any order, judgment or decree of dissolution or split-up of the Company, and
such order remains undischarged or unstayed for a period in excess of 60 days.
For purposes of this provision, "more than 50% of the Voting Stock" means more
than 50% of one or more classes of stock pursuant to which the holders have the
general power to vote for the election of members of the Board of Directors, and
the aggregate of such classes for which the person, entity or Group holds more
than 50% has the power to elect more than 50% of the members of the Board of
Directors.

      Notwithstanding the foregoing, the termination of Options and the payment
of Option Values described in the first paragraph of this section shall not
apply with respect to any transaction in which the Option Holder receives either
(i) a replacement option allowing the Option Holder to receive, on the same
terms as in the original Option, the greatest amount of securities, cash or
other property to which such holder would have been entitled as a holder of
Common Stock upon consummation of the transaction if such holder had exercised
the rights represented by the Option held by such holder immediately prior to
the transaction, or (ii) if pooling of interests is a condition of the
transaction, a replacement equity interest which enables the transaction to
qualify for pooling of interests.

      9.  General Provisions

      a. Documentation of Options. Options will be evidenced by written
instruments prescribed by the Committee from time to time. Such instruments may
be in the form of agreements, to be executed by both an Eligible Director and
the Company, or certificates, letters or similar instruments, which need not be
executed by an Eligible Director but acceptance of which will evidence agreement
to the terms thereof.

      b. Rights as a Stockholder. An option holder shall not have the rights of
a stockholder with respect to Options under the Plan except as to Stock actually
received by him or her under the Plan.

      c. Tax Withholding. The Eligible Director or other appropriate person
shall remit to the Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the Committee with
regard to such

                                                                               4
<PAGE>

requirements, prior to the delivery of any Stock. If and to the extent that such
withholding is required, the Committee may permit the Eligible Director such
other person to elect at such time and in such manner as the Committee provides
to have the Company hold back from the shares to be delivered, or to deliver to
the Company, Stock having a value calculated to satisfy the withholding
requirement.

      d. Nontransferability of Options. No Option may be transferred other than
by will or by the laws of descent and distribution, and during a director's
lifetime an Option may be exercised only by the director (or, in the event of
the director's incapacity, the person or persons legally appointed to act on the
director's behalf).

      10. Adjustments in the Event of Certain Transactions.

      a. In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution to common stockholders other than normal cash dividends, the
Committee will make any appropriate adjustments to the maximum number of shares
that may be delivered under the Plan under Section 5 above.

      b. In any event referred to in paragraph (a), the Committee will also make
any appropriate adjustments to the number and kind of shares of stock or
securities subject to Options then outstanding or subsequently granted, exercise
prices relating to Options and any other provision of Options affected by such
change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan.

      11. Fair Market Value. For purposes of the Plan, Fair Market Value of a
share of Stock on any date will be the last sale price as reported by the
principal exchange on which the Stock is traded or by the National Association
of Securities Dealers, Inc. Automated Quotations System or such other similar
system then in use, on that date; or, if on any such a date such Stock is not
quoted by any such organization, the average of the closing bid and asked prices
with respect to such Stock, as furnished by a professional market maker making a
market in such Stock selected by the Committee; or if such prices are not
available, the fair market value of such Stock as of such date as determined in
good faith by the Committee.

      12. Effective Date and Term. This Plan, having been approved by the Board
of Directors on December 12, 1995, shall become, in accordance with the term of
the approving vote of the Board, effective on December 12, 1995 (the "Effective
Date"), subject to approval of this Plan by vote of a majority of the
shareholders of the Company present and eligible to vote on the question at an
annual or special meeting of stockholders held not later than December 12, 1996.
Options may be granted under the Plan prior to the date of stockholder approval,
and options so granted shall be effective on the effective date of grant subject
to stockholder approval of the Plan as provided in this Section. No Options may
be awarded under this Plan after December 12, 2005, but the Plan shall continue
thereafter while previously awarded Options remain subject to the Plan.

                                                                               5
<PAGE>

      13. Effect of Termination, and Amendment. Neither adoption of the Plan nor
the grant of Options to an Eligible Director shall confer upon any person any
right to continued status as a director with the Company or any subsidiary or
affect in any way the right of the Company or subsidiary to terminate a director
relationship at any time or shall affect the Company's right to grant to such
director options or other stock awards that are not subject to the Plan, to
issue to such director stock as a bonus or otherwise, or to adopt other plans or
arrangements under which stock may be issued to directors. The Committee may at
any time terminate the Plan as to any further grants of Options. The Committee
may at any time or times amend the Plan for any purpose which may at the time be
permitted by law, but in no event (except to comply with the provisions of the
Internal Revenue Code, the Employee Retirement Income Security Act or the rules
thereunder) more than once in any six-month period.

                                                                               6

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