<PAGE>


                                               CORPORATE MANAGEMENT
                                                  INCENTIVE PLAN


                                                 TABLE OF CONTENTS


         TOPIC                                                              PAGE

         Plan Objectives.......................................................1

         Plan Features

                  Eligibility Requirements.....................................2
                  Target Incentive Award.......................................2

         Incentive Award Determination.........................................3

         Plan Procedures.......................................................4

         Incentive Award Distribution..........................................6

         Plan Administration...................................................6






                                                                   December 1998






<PAGE>1


                              CORPORATE MANAGEMENT
                                 INCENTIVE PLAN


PLAN OBJECTIVES

Compensation  is a  critical  factor in  attracting,  retaining  and  motivating
management personnel.  Incentive  compensation is a vital component of the total
compensation  package.  The  philosophy of an incentive  plan combined with base
compensation  creates an effective total compensation  program that is essential
to the overall long-term success of our Company.

The plan objectives are to:

          -   Recognize and reward superior  performance for the achievement of
              a critical  performance  objective,  the  achievement  of Earnings
          -   Before  Interest,  Taxes &  Depreciation  (EBITD)  at a  specified
              level.

          -   Provide a competitive total compensation package.

          -   Promote a sense of team effort in which all management  personnel
              share in the rewards of superior performance.


<PAGE>2


                              CORPORATE MANAGEMENT
                                 INCENTIVE PLAN


ELIGIBILITY REQUIREMENTS

To be eligible for participation in the Corporate Management Incentive Plan, you
must be a  regular,  full-time  employee,  grade  508 or  above.  You  may  also
participate in the plan if you are a regular,  full time employee performing the
duties of Field Auditor. In addition, you must:

          -   be continuously employed by the Company throughout  the incentive 
              period,

          -   have  acceptable  overall  performance  and  not  engage  in  any
              behavior, which would be grounds for termination during the entire
              incentive period and the period up to distribution.

Employees  begin  participation  in the plan on their date of hire or  promotion
into an eligible position.


TARGET INCENTIVE AWARD

The  target  incentive  percentage  multiplied  by the  employee's  actual  base
compensation  earned  during the  incentive  period  reflects the  participant's
target incentive award. The target percentage for Corporate  Management is shown
below:
<TABLE>
<CAPTION>

                                                     Annual Incentive Target
                  Salary Grade                       % of Base Compensation
                  ------------                       ----------------------
                      <S>                                       <C>

                      508                                       12.0%*
                      509                                       14.0%
                      510                                       16.0%
                      511                                       18.0%
                      512                                       24.0%
                      513                                       40.0%
                      514                                       40.0%
                      515                                       50.0%
                      516                                       50.0%
                      517                                       50.0%
                      518                                       75.0%
<FN>
                  * Also applies to Field Auditors.
</FN>
</TABLE>

The  target  incentive  award  will  remain  unchanged  for the  balance  of the
incentive period unless those conditions  outlined in the Plan Procedures occur.
(See Plan Procedures  beginning on page 4). Actual base compensation paid during
the year will be used in calculating earned awards.

<PAGE>3

                                 INCENTIVE PLAN


INCENTIVE AWARD DETERMINATION

The  incentive  award under the plan will be earned  based upon  achievement  of
EBITD at a specified level. Shown below is the award schedule.
<TABLE>
<CAPTION>

                              % of Budgeted                     Earned
                                EBITD                           EBITD
                                Attained                       Award Percent
                                ----------                     -------------
                     <S>                              <C>

                                   90%                              50%
                                   91%                              55%
                                   92%                              60%
                                   93%                              65%
                                   94%                              70%
                                   95%                              75%
                                   96%                              80%
                                   97%                              85%
                                   98%                              90%
                                   99%                              95%
                                  100%                             100%
                                  101%                             105%
                                  102%                             110%
                                  103%                             115%
                                  104%                             120%
                                  105%                             125%
                                  106%                             130%
                                  107%                             135%
                                  108%                             140%
                                  109%                             145%
                                  110%                             150%
                     Greater than 110%*               Greater than 150%
<FN>
*For the CEO,  grade 518, the schedule will continue in similar  increments  for
  performance above 110% with no cap.
</FN>
</TABLE>

SAMPLE PAYOUT CALCULATION

Actual Base      x     Target Incentive    x     Earned EBITD      =   Incentive
Compensation           Percent                   Award Percent         Payment


<PAGE>4


                              CORPORATE MANAGEMENT
                                 INCENTIVE PLAN

PLAN PROCEDURES

Prorated awards shall occur in accordance with the following guidelines.

1.       New Hires.

         Employees  hired  into  an  eligible  position  will  be  eligible  for
         incentive pay on their date of hire.  Earned incentive awards are based
         on the plan  formula  and the actual  base  compensation  earned in the
         eligible position during the performance period.

2.       Promoted Into Eligible Position.

         Employees  promoted  into an eligible  position  will be  eligible  for
         incentive  pay on their job begin  date.  Earned  incentive  awards are
         based on the plan  formula and the actual base  compensation  earned in
         the eligible position during the performance period.

3.       Promoted From One Eligible Position to Another Eligible Position.

         If an  employee  is  promoted  into a  position  which has a  different
         formula for determining  the target  incentive  award,  the old formula
         will be calculated on the actual base compensation earned in the former
         position,  and the new formula  will be  calculated  on the actual base
         compensation earned in the new position.

4.       Reclassification.

         If an employee's current position is reclassified and assigned to a new
         grade in the Payless Cashways' job classification  program,  the target
         incentive  award will be adjusted in accordance with the procedures for
         a  promotion,  if  assigned  to a higher  grade or for a  demotion,  if
         assigned to a lower grade.

5.       Transfer.

         Employees  who  transfer  between  locations  will  be  eligible  for a
         prorated incentive based on the actual base compensation earned at each
         location  during  the  performance  period  and  the  fiscal  year  end
         performance against budget for each location.

6.       Demotion.

         If an employee is demoted into a position which has a different formula
         for determining  the target  incentive  award,  the old formula will be
         calculated  on the  actual  base  compensation  earned  in  the  former
         position  and the new  formula  will be  calculated  on the actual base
         compensation earned in the new position.
<PAGE>5

                              CORPORATE MANAGEMENT
                                 INCENTIVE PLAN

PLAN PROCEDURES (Cont'd.)

         An eligible employee who is demoted to a position which is not eligible
         for  participation  in the plan will receive a prorated  award based on
         the plan  formula and the actual base  compensation  earned  during the
         performance period.


7.       Interrupted Service.

         If an employee's  service is  interrupted  during the plan year,  for a
         period in excess of 90 days due to short or long term disability and/or
         other approved leaves of absence,  he/she shall receive,  if earned, an
         incentive award,  which has been prorated based on the plan formula and
         the  actual  base  compensation  earned  during the plan year or fiscal
         quarter(s) plus first 90 days of leave.


The following guidelines apply in cases of employee separation:

1.       Involuntary Termination.

         An  employee  in the  plan  who,  during  the  performance  period,  is
         involuntarily  terminated  for such  reasons  as  facility  closing  or
         reduction in force,  shall be ineligible for any incentive payments for
         the current performance period.

         An  employee  in the plan who,  at any time prior to  distribution,  is
         involuntarily   terminated  for  performance   deficiencies   shall  be
         ineligible for any incentive payments.

2.       Termination for Violation of Company Policy.

         An  employee  in the plan who,  at any time prior to  distribution,  is
         involuntarily  terminated or resigns in lieu of involuntary termination
         for violation of Company  policy shall be ineligible  for any incentive
         payments.

3.       Voluntary Termination.

         An  employee  in  the  plan  who  terminates   voluntarily  during  the
         performance  period shall be ineligible for any incentive  payments for
         the current performance period.

<PAGE>6


                              CORPORATE MANAGEMENT
                                 INCENTIVE PLAN


INCENTIVE AWARD DISTRIBUTION

Distribution of earned  incentive  awards shall be made by February 15 following
the end of the plan year.

Awards are issued by check and are subject to applicable government  withholding
taxes.  Participant  elected benefit  deductions,  such as MoneyBuilder  will be
taken from incentive award payments.

Incentive Pay Discrepancies

Errors in the  calculation of an employee's  incentive award must be reported to
the Compensation  Department  within 30 days of receipt.  All corrected  amounts
will be added to the employee's next regularly scheduled paycheck.

PLAN ADMINISTRATION

This  plan is  established  as of the  first  day of the  fiscal  year of  1999,
November 29, 1998, and continues each fiscal year unless modified by appropriate
company action.

Payless  Cashways,  Inc.  reserves  the  right to amend or  terminate  the plan.
Administration  of the  Corporate  Management  Incentive  Plan will be under the
direction of the Vice  President - Human  Resources.  The Vice President - Human
Resources,  will resolve questions that may arise relating to the interpretation
or administration of the plan.