RETENTION BONUS AGREEMENT

     This Retention Bonus Agreement is entered into this 2nd day of April, 1999,
by and between PAMIDA, INC. ("Pamida"),  a Delaware  corporation,  and GEORGE R.
MIHALKO (the "Employee").


                              W I T N E S S E T H:

     WHEREAS, the Employee currently is a key executive of Pamida; and

     WHEREAS,  an entity which might have an interest in acquiring  the business
of Pamida  would be more  likely to pursue  such a  transaction  and to pay full
value for such business if such entity could  reasonably  expect the Employee to
remain in the employ of Pamida or Pamida's successor following such acquisition;
and

     WHEREAS,  Pamida  desires to induce the Employee to remain in the employ of
Pamida or Pamida's successor if a Retention Event (as defined below) occurs;

     NOW,  THEREFORE,  in consideration of the premises and of the covenants set
forth in this  agreement,  the parties  hereto,  intending to be legally  bound,
agree as follows:

     1. For purposes of this agreement,  a "Retention  Event" shall be deemed to
have occurred upon the happening of any of the following events:

     (a)  Pamida  Holdings  Corporation   ("Holdings")  is  merged  or
          consolidated into another corporation, and immediately after
          such merger or consolidation  becomes  effective the holders
          of a majority of the outstanding  shares of capital stock of
          Holdings  immediately  prior  to the  effectiveness  of such
          merger or  consolidation do not own (directly or indirectly)
          a majority of the outstanding shares of voting capital stock
          of the surviving or resulting  corporation in such merger or
          consolidation.

     (b)  Holdings  ceases to own (directly or  indirectly) a majority
          of the outstanding  shares of voting capital stock of Pamida
          (unless  such event  results  from the merger of Pamida into
          Holdings,  with no material  change in the  ownership of the
          voting capital stock of Holdings, or from the dissolution of
          Pamida and the continuation of its business by Holdings).

     (c)  Pamida is merged or  consolidated  into a corporation  other
          than  Holdings,  and  at  any  time  after  such  merger  or
          consolidation   becomes  effective  Holdings  does  not  own
          (directly  or  indirectly)  a  majority  of the  outstanding
          shares of voting capital stock of the surviving or resulting
          corporation in such merger or consolidation.

     (d)  Pamida sells or otherwise  disposes of all or  substantially
          all of the property  and assets of Pamida,  other than to an
          entity or group of entities which  immediately prior to such
          transaction   is  under   common   ownership   (directly  or
          indirectly) with Pamida.

     (e)  Any person,  entity,  or group of persons within the meaning
          of Sections 13(d) or 14(d) of the Securities Exchange Act of
          1934 (the "1934 Act") and the rules promulgated  thereunder,
          other  than  399  Venture  Partners,  Inc.  or  any  of  its
          affiliates  (as  defined in Rule 12b-2  under the 1934 Act),
          becomes  the  beneficial  owner  (within the meaning of Rule
          13d-3 under the 1934 Act) of thirty percent (30%) or more of
          the  outstanding  voting capital stock of Holdings,  and 399
          Venture Partners,  Inc. and its affiliates then collectively
          own less than twenty  percent (20%) of the aggregate  number
          of shares of Common  Stock  and  Nonvoting  Common  Stock of
          Holdings then outstanding (unless 399 Venture Partners, Inc.
          and/or its  affiliates are part of the group owning such 30%
          or more).

     (f)  During  any  period  of  two  consecutive   years  or  less,
          individuals who at the beginning of such period  constituted
          the Board of Directors of Holdings cease, for any reason, to
          constitute  at least a majority of the Board of Directors of
          Holdings,  unless the election or nomination for election of
          each new  director of Holdings  who took office  during such
          period was approved by a vote of at least  two-thirds of the
          directors  of  Holdings  still in office at the time of such
          election or  nomination  for election who were  directors of
          Holdings  at the  beginning  of such  period or  unless  399
          Venture  Partners,  Inc. or Citicorp Venture  Capital,  Inc.
          approves any such replacement director.

     2. If (i) a Retention Event occurs, (ii) the Employee is employed by Pamida
at the time the Retention  Event occurs,  and (iii) the Employee  remains in the
employ of Pamida (or of the entity which succeeds to the business of Pamida upon
the occurrence of the Retention Event) for a continuous period of six (6) months
after the effective date of the Retention Event, then within ten (10) days after
the elapse of such 6-month  period  Pamida agrees to pay the Employee the sum of
$160,000.00 as a retention bonus in consideration of such continued employment.

     3. If (i) a Retention Event occurs, (ii) the Employee is employed by Pamida
immediately prior to the time the Retention Event occurs,  and (iii) either upon
the  effective  date of the  Retention  Event or within six (6) months after the
effective  date of the Retention  Event Pamida (or the entity which  succeeds to
the business of Pamida upon the  occurrence of the Retention  Event)  terminates
the employment of the Employee  without  cause,  then within ten (10) days after
the effective date of such  termination  of employment  Pamida agrees to pay the
Employee the sum of $160,000.00 in consideration  of the Employee's  willingness
to remain in the employ of Pamida or such  successor  after the  occurrence of a
Retention Event.

     4.  For  purposes  of this  agreement,  "cause"  shall  mean  only  (i) the
Employee's confession or conviction of theft, fraud, embezzlement,  or any other
crime involving dishonesty with respect to Pamida or any parent,  subsidiary, or
affiliate of Pamida,  (ii) the Employee's  excessive  absenteeism (other than by
reason of physical injury, disease, or mental illness) without reasonable cause,
(iii) the Employee's material violation of the provisions of any confidentiality
or nondisclosure agreement with Pamida or any parent,  subsidiary,  or affiliate
of  Pamida,  (iv)  habitual  and  material  negligence  by the  Employee  in the
performance  of the  Employee's  duties and  responsibilities  as an employee of
Pamida and the  Employee's  failure to cure such  negligence  within thirty (30)
days  after  the  Employee's  receipt  of a  written  notice  from the  Board of
Directors  or Chief  Executive  Officer of Pamida  setting  forth in  reasonable
detail the particulars of such  negligence,  (v) material  noncompliance  by the
Employee with the Employee's  obligations  under any  employment  agreement with
Pamida to which the  Employee is a party and the  Employee's  failure to correct
such  non-compliance  within thirty (30) days after the Employee's  receipt of a
written notice from the Board of Directors or Chief Executive  Officer of Pamida
setting forth in reasonable  detail the particulars of such  non-compliance,  or
(vi) material  failure by the Employee to comply with a lawful  directive of the
Board of  Directors  or Chief  Executive  Officer of Pamida  and the  Employee's
failure to cure such non-compliance within thirty (30) days after the Employee's
receipt  of a written  notice  from the Board of  Directors  or Chief  Executive
Officer of Pamida  setting forth in reasonable  detail the  particulars  of such
non-compliance.  For  purposes of this  Paragraph  4, neither the results of the
operations  of  Pamida  nor any  business  judgment  made in good  faith  by the
Employee shall constitute an independent  basis for termination for cause of the
Employee's employment by Pamida. For purposes of this Paragraph 4, references to
"Pamida"  shall include an entity which  succeeds to the business of Pamida upon
the  occurrence of a Retention  Event.  The  provisions of this  Paragraph 4 are
subject in all events to the provisions of Paragraph 8.

     5. If the  employment  of the  Employee  by Pamida (or by the entity  which
succeeds to the  business of Pamida upon the  occurrence  of a Retention  Event)
terminates  either upon the effective date of the Retention  Event or within six
(6) months after the Effective  Date of the  Retention  Event for a reason other
than the  termination  of such  employment  by Pamida or such  successor  entity
without cause, then the Employee shall not be entitled to any payment under this
agreement.

     6. If no Retention Event has occurred by the close of business on March 11,
2000,  then this agreement  automatically  will terminate at such time;  and, in
such event,  Pamida will have no further  obligation to the Employee  under this
agreement.

     7. This agreement shall be binding upon Pamida and Pamida's  successors and
assigns and shall inure to the benefit of the Employee and the Employee's  heirs
and personal  representatives.  In connection with any Retention  Event,  Pamida
shall take such actions as may be  necessary to assure  either that a sufficient
amount of its  unencumbered  funds will remain  available  to fully  satisfy the
obligations of Pamida under this agreement or that such  obligations are assumed
by a financially  responsible entity whose creditworthiness is at least equal to
that of Pamida.

     8.  This  agreement  is not,  and shall  not for any  purpose  be deemed to
constitute,  an  employment  or  severance  agreement  between  Pamida  and  the
Employee.  Nothing in this agreement shall confer upon the Employee the right to
remain  in the  employ  of Pamida  for any  particular  period of time or in any
particular capacity or affect any right which Pamida or the Employee may have to
terminate the  employment  relationship  between  Pamida and the Employee at any
time, for any reason, with or without cause.

     9. This agreement shall be governed by and construed in accordance with the
laws of Nebraska.

     10.  The  Employee   understands   that  Pamida  desires  to  maintain  the
confidentiality  of this agreement and its terms and further desires to maintain
the confidentiality of any discussions or negotiations that Pamida may undertake
with respect to a possible Retention Event. Accordingly, the Employee agrees not
to disclose to or discuss with anyone the existence of this  agreement or any of
the terms of this  agreement  without  the prior  written  approval of the Chief
Executive  Officer of Pamida  prior to the  written  public  disclosure  of this
agreement  and its terms by Pamida or  Holdings,  except that the  Employee  may
discuss  this  agreement  with the  Chief  Executive  Officer,  Chief  Operating
Officer,  Chief Financial Officer, and Senior Vice President-Human  Resources of
Pamida.  The Employee  further  agrees not to disclose to or discuss with anyone
the existence or possible  existence of any  discussions  or  negotiations  that
Pamida has  undertaken  or may  undertake  with respect to a possible  Retention
Event  so long as such  discussions  or  negotiations  have  not  been  publicly
disclosed in writing by Pamida or Holdings;  provided, that, at the direction of
the Chief Executive Officer, Chief Operating Officer, or Chief Financial Officer
of Pamida,  the Employee may discuss  matters  relating to a possible  Retention
Event  with such  persons  and to such  extent as may be  specified  by any such
executive officer of Pamida in such directions.  If the Employee violates any of
the  confidentiality  provisions  of this  Paragraph 10 at any time prior to the
consummation of a Retention Event, then the Board of Directors of Pamida, in its
sole and absolute discretion, may terminate this agreement, and Pamida thereupon
shall  have no  further  obligation  or  liability  to the  Employee  under this
agreement.

     IN WITNESS WHEREOF, Pamida and the Employee have executed this agreement on
the day and year first above written.


                                        PAMIDA, INC., a Delaware corporation

                                        By: /s/Steven S. Fishman
                                            --------------------
                                        Title: Chairman of the Board and Chief
                                               Executive Officer


                                            /s/George R. Mihalko
                                            --------------------
                                            George R. Mihalko, Employee