LONG-TERM INCENTIVE AWARD AGREEMENT

     This Long-Term Incentive Award Agreement is made and entered into as of the
6th day of March,  1997,  between  PAMIDA,  INC.  (the  "Company"),  a  Delaware
corporation, and FRANK A. WASHBURN (the "Executive").

                                   *  *  *

     WHEREAS,  the  Company  is a wholly  owned  subsidiary  of Pamida  Holdings
Corporation ("Holdings"), a Delaware corporation; and

     WHEREAS, the Executive is employed by the Company in an executive capacity;
and

     WHEREAS,  the Company  desires to provide an incentive to the  Executive to
remain in the employ of the Company and to put forth his best  efforts on behalf
of the Company; and

     WHEREAS,  the Company  desires to align the interests of the Executive with
the  interests of the  stockholders  of Holdings by basing such  incentive  upon
possible  future  appreciation  in the  market  price  of the  Common  Stock  of
Holdings;

     NOW, THEREFORE, the Company and the Executive agree as follows:

     1. GRANT OF LONG-TERM  INCENTIVE  AWARD.  The Company  hereby grants to the
Executive a Long-Term  Incentive Award consisting of 68,750  Appreciation Units.
The Company makes no representation or warranty to the Executive with respect to
the possible future value of the Long-Term Incentive Award.

     2.  LONG-TERM  INCENTIVE  AWARD  PAYMENT.  If the  Executive  is a  regular
full-time employee of the Company at the close of business on March 5, 2000, and
at the close of  business  on that date has been  continuously  employed  by the
Company on a regular full-time basis since the date of this agreement,  then the
Company  agrees to pay to the  Executive in cash or before  April 15,  2000,  an
amount equal to the product of (a) the number of Appreciation Units set forth in
Paragraph 1 multiplied by (b) the positive  difference,  if any,  resulting from
the  subtraction of (I) $3.0625 from (II) the lesser of (i) the Average Price or
(ii) $9.0625. If there is no positive difference  resulting from the subtraction
referred to in the preceding  sentence,  then no payment shall be due or made to
the Executive under this Paragraph 2. For purposes of this Paragraph 2, "Average
Price" means the arithmetic average of the closing prices of the Common Stock of
Holdings on the  American  Stock  Exchange on the first twenty (20) trading days
subsequent  to March 5, 2000, on which the Common Stock of Holdings is traded on
such  Exchange.  If the Common  Stock of Holdings is not listed on the  American
Stock Exchange during the relevant period subsequent to March 5, 2000, then such
closing  prices shall be  determined  by reference  to the  principal  market or
exchange  in or on which the  Common  Stock of  Holdings  is traded  during  the
relevant  period.  If the Executive is not a regular  full-time  employee of the
Company at the close of business on March 5, 2000,  or if the  Executive has not
been  continuously  employed by the Company on a regular  full-time basis during
the period from March 6, 1997,  through March 5, 2000,  then the Executive shall
not be entitled to receive any Long-Term  Incentive  Award  payment  pursuant to
this Paragraph 2.

     3. DEATH OR DISABILITY OF THE EXECUTIVE. If the Executive dies prior to the
close of business on March 5, 2000, or if the  Executive  ceases to be a regular
full-time  employee of the Company prior to such time by reason of a Disability,
then the Board of Directors of Holdings shall have the authority, exercisable in
its sole and absolute discretion, to approve the payment to the Executive (or to
the Executive's  estate,  in the event of the  Executive's  death) of all or any
portion of the Long-Term  Incentive Award payment which the Executive would have
received  on March  6,  2000,  pursuant  to  Paragraph  2 if the  Executive  had
satisfied  the  conditions  set forth in  Paragraph  2 for the  receipt  of such
payment; but the Executive shall have no right to receive any amount pursuant to
this Paragraph 3 unless a  discretionary  payment is so approved by the Board of
Directors of Holdings.  If a discretionary  payment pursuant to this Paragraph 3
is approved by the Board of Directors of  Holdings,  then such payment  shall be
made at such  time as the  Board of  Directors  of  Holdings  may  specify.  For
purposes of this agreement,  "Disability"  means a physical or mental illness or
incapacity  of the  Executive  which has  resulted in a  determination  that the
Executive  is entitled  to receive  benefits  (a) under a  long-term  disability
insurance  policy  maintained by the Company for the Executive or (b) if no such
insurance  policy  is then in  existence,  under  the  federal  social  security
disability insurance program.

     4. CHANGE OF CONTROL OF HOLDINGS.  If,  after a Holdings  Change of Control
but prior to March 6, 2000, (a) the Executive  ceases to be a regular  full-time
employee of the Company (a  "Termination"),  (b) on the date of the  Termination
(the  "Termination  Date") the Executive had been  continuously  employed by the
Company on a regular  full-time basis since the date of this agreement,  (c) the
Termination occurred other than as a result of the Executive's death,  voluntary
resignation or retirement,  or Disability,  and (d) on the Termination  Date (i)
Holdings owned at least a majority of the then outstanding  voting capital stock
of the Company and (ii) the Common Stock of Holdings was publicly  traded on the
American Stock Exchange or another  recognized United States securities  market,
then the Company  agrees to pay to the Executive in cash within twenty (20) days
after the  Termination  Date an amount equal to the product of (a) the number of
Appreciation  Units set forth in  Paragraph  1  multiplied  by (b) the  positive
difference,  if any, resulting from the subtraction of (I) $3.0625 from (II) the
lesser  of (i) the  Average  Price or (ii)  $9.0625.  If  there  is no  positive
difference resulting from the subtraction referred to in the preceding sentence,
then no payment  shall be due or made to the Executive  under this  Paragraph 4.
For purposes of this Paragraph 4, "Average  Price" means the arithmetic  average
of the closing  prices of the Common  Stock of Holdings  on the  American  Stock
Exchange on the twenty (20) most recent  trading  days prior to the  Termination
Date on which the Common Stock of Holdings was traded on such  Exchange.  If the
Common Stock of Holdings is not listed on the American Stock Exchange during the
relevant period prior to the Termination Date, then such closing prices shall be
determined by reference to the  principal  market or exchange in or on which the
Common Stock of Holdings is traded during the relevant  period.  For purposes of
this Paragraph 4, "Holdings  Change of Control" means the happening of either of
the following events:

(a)  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 of the 1934
     Act) of thirty  percent  (30%) or more of the  outstanding  voting  capital
     stock of Holdings, or

(b)  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.

     5. CHANGE OF CONTROL OF THE COMPANY. If, prior to March 6, 2000, there is a
Company  Change of Control and on the effective  date of such Company  Change of
Control (the "Effective Date") the Executive is a regular full-time  employee of
the  Company  (and  has been so  employed  continuously  since  the date of this
agreement),  then the Company shall pay to the Executive within twenty (20) days
after the  Effective  Date an amount  equal to the  product of (a) the number of
Appreciation  Units set forth in  Paragraph  1  multiplied  by (b) the  positive
difference,  if any, resulting from the subtraction of (I) $3.0625 from (II) the
lesser  of (i) the  Average  Price or (ii)  $9.0625.  If  there  is no  positive
difference resulting from the subtraction referred to in the preceding sentence,
then no payment  shall be due or made to the Executive  under this  Paragraph 5.
For purposes of this Paragraph 5, "Average  Price" means the arithmetic  average
of the closing  prices of the Common  Stock of Holdings  on the  American  Stock
Exchange on the twenty (20) most recent trading days prior to the Effective Date
on which the Common  Stock of Holdings  was traded on such  Exchange;  provided,
that if there are fewer than twenty (20)  trading  days  between the date of the
first  public  announcement  of  a  proposed  Company  Change  of  Control  (the
"Announcement  Date")  and the  Effective  Date,  then  only  the  trading  days
following  the  Announcement  Date shall be taken into  account for  purposes of
determining  the Average Price;  provided,  further,  that if the Effective Date
occurs on or before the  Announcement  Date, then the Average Price shall be the
fair market value of the consideration received or to be received by Holdings or
the  stockholders  of  Holdings,  as the case may be, in  connection  with or by
reason of the  transaction  resulting or which will result in the Company Change
of Control,  in either case  determined on a per share basis with respect to the
shares of Common Stock of Holdings then  outstanding  (including,  to the extent
applicable,  shares of Common Stock  issuable  upon the exercise of  outstanding
options  to  purchase  shares of the Common  Stock of  Holdings);  and  provided
further,  that if the company Change of Control  involves an issuer tender offer
or other "going private" transaction, then the Average Price shall be the amount
per  outstanding  share of Common  Stock of  Holdings  paid or to be paid by the
purchaser in such issuer tender offer or other "going private"  transaction.  If
the Common Stock of Holdings is not listed on the American Stock Exchange during
the relevant  period prior to the Effective Date, then such closing prices shall
be determined  by reference to the  principal  market or exchange in or on which
the Common Stock of Holdings is traded during the relevant period.  For purposes
of this  Paragraph 5, "Company  Change of Control" means the happening of any of
the following events:

(a)  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 voting capital stock of
     Holdings   immediately  prior  to  the  effectiveness  of  such  merger  or
     consolidation  do not own a majority  of the  outstanding  shares of voting
     capital stock of the surviving or resulting corporation in such merger,

(b)  Holdings  ceases  to own a  majority  of the  outstanding  shares of voting
     capital stock of the Company  (unless such event results from the merger of
     the Company into  Holdings,  with no change in the  ownership of the voting
     capital stock of Holdings),

(c)  the  Company  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 a majority of the  outstanding  shares of
     voting  capital  stock of the  surviving or resulting  corporation  in such
     merger or consolidation,

(d)  the  stockholders  of the  Company  vote  (or act by  written  consent)  to
     dissolve  the  Company  or  to  sell  or   otherwise   dispose  of  all  or
     substantially all of the property and assets of the Company, or

(e)  the Common  Stock of Holdings  ceases to be publicly  traded  because of an
     issuer tender offer or other "going private" transaction.

     6. TERMINATION  WITHOUT CAUSE. If (a) the Company terminates the employment
of the Executive  without Cause (a "Discharge"),  including but not limited to a
constructive  Discharge  arising from a material  reduction  in the  Executive's
duties or a material  reduction in the Executive's  rank or base salary,  (b) on
the effective  date of the Discharge  (the  "Discharge  Date") the Executive had
been continuously employed by the Company on a regular full-time basis since the
date of this agreement, and (c) the Discharge occurred other than as a result of
the Executive's death, voluntary resignation or retirement, or Disability,  then
the Company agrees to pay to the Executive in cash within twenty (20) days after
the  Discharge  Date  an  amount  equal  to the  product  of (a) the  number  of
Appreciation  Units set forth in  Paragraph  1  multiplied  by (b) the  positive
difference,  if any, resulting from the subtraction of (I) $3.0625 from (II) the
lesser  of (i) the  Average  Price or (ii)  $9.0625.  If  there  is no  positive
difference resulting from the subtraction referred to in the preceding sentence,
then no payment  shall be due or made to the Executive  under this  Paragraph 6.
For purposes of this Paragraph 6, "Average  Price" means the arithmetic  average
of the closing  prices of the Common  Stock of Holdings  on the  American  Stock
Exchange on the twenty (20) most recent trading days prior to the Discharge Date
on which the Common Stock of Holdings was traded on such Exchange. If the Common
Stock of  Holdings  is not  listed on the  American  Stock  Exchange  during the
relevant  period prior to the Discharge  Date, then such closing prices shall be
determined by reference to the  principal  market or exchange in or on which the
Common Stock of Holdings is traded during the relevant  period.  For purposes of
this  Paragraph 6, "Cause"  shall mean only (i) the  Executive's  confession  or
conviction  of  theft,  fraud,  embezzlement,   or  any  other  crime  involving
dishonesty with respect to the Company or any parent,  subsidiary,  or affiliate
of the Company, (ii) the Executive's excessive absenteeism (other than by reason
of physical injury,  disease, or mental illness) without reasonable cause, (iii)
habitual and material  negligence  by the  Executive in the  performance  of his
duties and  responsibilities  as an  executive of the Company and his failure to
cure such  negligence  within  thirty  (30) days after his  receipt of a written
notice from the Company  setting forth in reasonable  detail the  particulars of
such  negligence,  or (iv)  material  failure by the  Executive to comply with a
lawful  directive  of the Company  and his  failure to cure such  non-compliance
within  thirty (30) days after his receipt of a written  notice from the Company
setting forth in reasonable detail the particulars of such non-compliance.

     7. NATURE OF INCENTIVE AWARD.  Although the value, if any, of the Long-Term
Incentive  Award will be derived  from the market  price of the Common  Stock of
Holdings,  neither the  Long-Term  Incentive  Award nor the  Appreciation  Units
constitute  or shall be deemed for any purpose to be or represent  capital stock
of or equity interests of any kind in Holdings or the Company. Nothing contained
in this agreement shall be construed for any purpose to constitute the Executive
a  stockholder  of Holdings or the Company at any time or to give the  Executive
any of the rights of a stockholder of Holdings or the Company at any time.

     8.  NONASSIGNABILITY.   Neither  the  Long-Term  Incentive  Award  nor  the
Appreciation  Units nor any  interest in the  Long-Term  Incentive  Award or the
Appreciation  Units nor any of the  Executive's  rights and interests under this
agreement  may be assigned or  transferred  by the Executive in whole or in part
either  directly or by operation of law or otherwise;  and neither the Long-Term
Incentive  Award nor the  Appreciation  Units nor any interest in the  Long-Term
Incentive Award or the Appreciation  Units nor any of the Executive's rights and
interests  under  this  agreement  may  be  pledged,  encumbered,  or  otherwise
subjected to any obligation or liability of the Executive. However, in the event
of the death of the Executive after the applicable preconditions to his right to
receive a payment under this  agreement  have been fully  satisfied but prior to
his receipt of such payment,  the Executive's estate shall succeed to such right
and shall be entitled to receive such payment.

     9. RIGHT OF DISCHARGE  RESERVED.  This  agreement is not, and shall not for
any purpose be deemed to constitute, an employment agreement between the Company
and the  Executive.  Nothing  contained  in this  agreement,  including  but not
limited to the grant of a Long-Term  Incentive  Award to the Executive,  confers
upon the  Executive  the right to  continue  in the employ of the Company or any
parent or subsidiary of the Company for any particular  period of time or in any
particular  capacity  or affects  any right  which the  Company or any parent or
subsidiary of the Company may have to terminate the employment of the Executive.

     10. CAPITAL STOCK  ADJUSTMENT.  In the event that the number of outstanding
shares of Common Stock of Holdings is increased by reason of a stock dividend or
a stock split,  the number of  Appreciation  Units  granted to the  Executive in
Paragraph 1 shall be proportionately  increased and the dollar amounts set forth
in clauses (b)(I) and (II) of Paragraphs 2, 4, 5, and 6 shall be proportionately
decreased  for the  purpose of  computing  the  amount,  if any,  payable to the
Executive  pursuant  to  this  agreement.  In  the  event  that  the  number  of
outstanding shares of Common Stock of Holdings is reduced by reason of a reverse
stock split or a  combination  of shares of the Common  Stock of  Holdings,  the
number of  Appreciation  Units  granted to the Executive in Paragraph 1 shall be
proportionately decreased and the dollar amounts set forth in clauses (b)(I) and
(II) of  Paragraphs  2, 4, 5, and 6 shall be  proportionately  increased for the
purpose of computing the amount,  if any,  payable to the Executive  pursuant to
this  agreement.  The  purpose  of this  Paragraph  10 is to  maintain  the same
economic position for the Executive and the Company immediately after such stock
dividend,  stock split,  reverse stock split,  or  combination  of shares as the
Executive  and the Company had  immediately  before such stock  dividend,  stock
split,  reverse stock split,  or  combination  of shares;  and this Paragraph 10
shall be construed and applied so as to achieve such objective.  Any adjustments
required  pursuant to this  Paragraph 10 shall be made and  communicated  to the
Executive and the Company by the Board of Directors of Holdings  promptly  after
the occurrence of the event that  necessitates such adjustment (or in advance of
such event, effective upon the occurrence of such event).

     11. CAPTIONS.  The captions of the various paragraphs of this agreement are
for the purpose of convenient  reference  only and are not intended to define or
limit the contents of such paragraphs.

     12. CREDITOR STATUS. The Executive shall have no legal or equitable rights,
interests,  or claims in or to any particular property or assets of the Company,
all of which shall be and remain the general unrestricted assets of the Company.
If any amount becomes payable to the Executive  under this agreement,  including
but not  limited to a  discretionary  payment to the  Executive's  estate in the
event of the Executive's death, the Executive or his estate, as the case may be,
shall be and have the status of a general unsecured creditor of the Company; and
this agreement  constitutes a mere unfunded and unsecured  contingent promise of
the Company to make a certain payment in the future if all of the  preconditions
to such payment are fully satisfied.

     13.  WITHHOLDING;  PAYROLL TAXES. To the extent required by applicable laws
in effect at the time a  payment,  if any,  is made under  this  agreement,  the
Company shall withhold from such payment any taxes or other obligations required
to be withheld from such payment by federal, state, or local laws.

     14. UNFUNDED PLAN. This agreement and any similar  agreements  concurrently
being entered into with other  executives of the Company  together are and shall
be an  unfunded  plan  within the  meaning  of the  Employee  Retirement  Income
Security Act of 1974  ("ERISA")  for purposes of Title I of ERISA and for income
tax purposes.

     15. GOVERNING LAW. All rights and obligations under this agreement shall be
construed and interpreted in accordance with the laws of Delaware.

     16. BINDING EFFECT.  This agreement shall be binding upon the Company,  the
Executive, and their respective heirs, personal representatives, successors, and
assigns.  However,  nothing  contained in this  paragraph  shall be construed to
allow the Executive to make any assignment which is otherwise prohibited by this
agreement.

     IN WITNESS  WHEREOF,  the Company and the Executive have duly executed this
agreement as of the date first above written.

                                        PAMIDA, INC., a Delaware corporation

                                    By: /S/ STEVEN S. FISHMAN
                                        Chairman of the Board and
                                        Chief Executive Officer


                                        /S/ FRANK A. WASHBURN
                                        Frank A. Washburn