<PAGE>1

                       SETTLEMENT AGREEMENT, RESIGNATION,
                            AND FULL GENERAL RELEASE

     This Settlement Agreement,  Resignation,  and Release ("Agreement") is made
and  entered  into on  January 5, 1998 by and  between  PAYLESS  CASHWAYS,  INC.
("PAYLESS") and DAVID STANLEY ("STANLEY").

     WHEREAS, STANLEY was employed by PAYLESS on April 10, 1980, and is entitled
to the benefits of an Employment Agreement dated as of June 16, 1995, as amended
on August 20, 1997 (the "Employment Agreement"), and

     WHEREAS,  PAYLESS and STANLEY  mutually  wish to terminate  the  employment
status of STANLEY,  and STANLEY'S  employment  with PAYLESS shall end on January
13, 1998; and

     WHEREAS, PAYLESS AND STANLEY have agreed that STANLEY shall retire as Chief
Executive  Officer  and  resign  as a  Director,  but that for  purposes  of his
severance benefits  STANLEY'S  termination shall be regarded as a termination of
his employment without cause by PAYLESS;

     NOW THEREFORE,  in  consideration  of the mutual  promises,  agreements and
releases contained in this Agreement, the parties agree as follows:

1.  PAYLESS' AGREEMENTS

     1. EFFECTIVE DATE.

     PAYLESS  acknowledges  that the effective date of this  Agreement  shall be
January 13, 1998 (the "Effective Date") and that STANLEY will not be required to
perform services for PAYLESS after the Effective Date.

     2. SEVERANCE BENEFITS

PAYLESS agrees to provide STANLEY the severance benefits set forth below.

          1. Lump Sum Payment.

               (1) PAYLESS  agrees to pay STANLEY on the  Effective  Date a lump
sum payment  (less  applicable  payroll  deductions)  in the amount set forth on
Schedule I hereto. As set forth in Schedule I, such lump sum payment consists of
(A) the  amount  that  STANLEY  would  have  received  as base  salary  from the
Effective Date through March 1, 1999 (the "Severance Period") (based on his base
salary in effect on January 5, 1998), (B) the remaining


<PAGE>2


amount due STANLEY under the PAYLESS  Reorganization  Retention Plan, and (C) an
amount for unused earned  vacation days through the Effective Date. In addition,
PAYLESS shall pay STANLEY on the Effective Date or as promptly  thereafter as is
practicable an amount equal to any previously unreimbursed business expenses.

               (2) PAYLESS also agrees to pay, in lieu of  contributions  to the
Payless  Cashways,  Inc.  Employee  Savings Plan which would otherwise have been
made  on  STANLEY's  behalf  during  the  Severance   Period,   and  in  partial
consideration for the Release of Liability contained herein in Paragraph B.2, an
additional  lump sum payment (less  applicable  payroll  deductions)  of $20,000
(Twenty Thousand Dollars).

          2. Continuation of Benefits.  PAYLESS agrees that during the Severance
Period it will provide  STANLEY with health,  life and dental benefits and other
benefits  substantially  equivalent  to those  that  STANLEY  was  receiving  or
entitled to receive  under the  Employment  Agreement  on January 5, 1998.  Such
benefits are described in Schedule II and shall be provided during the Severance
Period (or, if longer,  the period  during which such  benefits  would have been
provided  at PAYLESS'  expense  under  applicable  plans of PAYLESS in effect on
January 5, 1998). Except as may be indicated in Schedule II, such benefits shall
be provided at the same coverage  levels that were in effect on January 5, 1998,
and such  benefits  shall be provided at PAYLESS'  expense,  subject to the same
cost sharing  provisions,  if any, as existed on such date.  After the Severance
Period,  STANLEY  shall be eligible for COBRA  continuation  coverage of health,
life, dental and disability benefits for a period of 18 months or such period as
may then be provided by law. Notwithstanding the foregoing, STANLEY shall not be
entitled  to receive  such  benefits to the extent that  STANLEY  obtains  other
employment that provides  comparable benefits during the twelve months following
termination  of  employment,   provided,  however,  that  STANLEY  is  under  no
obligation to seek other employment during such period.

          3.   Retirement   Benefits.   PAYLESS  agrees  that  for  purposes  of
determining  the benefits  payable to STANLEY under the Payless  Cashways,  Inc.
Amended Retirement Plan (the "Pension Plan") and STANLEY's eligibility therefor,
STANLEY's  date of separation  from PAYLESS shall be deemed to be March 1, 1999,
his age shall be deemed to be his age on such date and the amount  allocable  to
base pay  included  in the lump  sum  payment  in  paragraph  A.2.a(i)  shall be
included in determining  career average pay. If the terms of the Pension Plan do
not permit the forgoing, then on the Effective Date PAYLESS shall pay STANLEY an
amount equal to the present  value of the  additional  retirement  benefits that
would have accrued had he continued to perform  services for PAYLESS through the
Severance Period at the same rate of compensation as was in effect on January 5,
1998.  The present value payable  hereunder  shall be calculated  using the GATT
rate currently in effect under the Pension Plan.

          4. Car  Allowance.  PAYLESS  also agrees to a lump sum  payment  (less
applicable payroll  deductions) of $8,400 in lieu of car allowance to be paid on
the Effective Date.


3.       DEATH OF STANLEY


<PAGE>3


     The death of STANLEY  prior to the  expiration of this  Agreement  will not
void this Agreement,  but the terms thereof will survive his death. In the event
that STANLEY dies prior to receipt of all sums set forth in section A.2.  above,
then any and all such remaining  sums not yet received by STANLEY  otherwise due
under  this  Agreement  shall  become  due  and  payable  to  the  beneficiaries
hereinafter listed: Principal Beneficiary:  Trust under agreement dated March 6,
1995,  between David Stanley,  as Donor, and David Stanley and Jean B. Keffeler,
as Trustees..

     4. STOCK INCENTIVE

     The parties acknowledge that STANLEY has no vested stock incentives.

     5. TELEPHONE, E-MAIL AND COMPUTER ACCESS

     For a period of three  months  after the  Effective  Date  STANLEY  will be
provided  telephone  answering  and e-mail  services  and  remote  access to the
Company's Microsoft Outlook and Quicken programs.

     6. INDEMNIFICATION

     Set forth as  Schedules  III  through V hereto  are  provisions  of PAYLESS
Certificate of Incorporation and Bylaws relating to Indemnification of directors
and officers and an  Indemnification  Agreement dated November 26, 1997, between
PAYLESS   and   STANLEY(collectively    "Indemnification   Provisions").    Such
Indemnification Provisions are incorporated by this reference and made a part of
this Agreement in their entirety.  PAYLESS  acknowledges and agrees that STANLEY
and his estate are  entitled to the benefit of such  Indemnification  Provisions
notwithstanding his termination of service and that such provisions apply to his
service  as a director  and  officer  of  PAYLESS  and any of its  predecessors.
PAYLESS  further  acknowledges  that  the  Indemnification  Provisions  obligate
PAYLESS,  among other matters, to indemnify STANLEY against any and all expenses
(including costs and attorneys' fees) which be might incur as a witness or party
with respect to that certain matter pending in the United States  District Court
for the Southern District of Iowa captioned PAYLESS Cashways, Inc. Partners [et.
al.] v.  PAYLESS  Cashways,  Inc.  [et.  al.].  PAYLESS  agrees  to  honor  such
obligations  with respect to such  proceeding  or any other  proceeding to which
STANLEY  may become a party or witness by reason of the fact that he served as a
director or officer of PAYLESS, except as may be provided in the Indemnification
Provisions. PAYLESS further agrees that as to STANLEY, any amendments or changes
to the  Indemnification  Provisions  or the  insurance  coverages  described  in
paragraph A.7 below will not adversely affect STANLEY without  STANLEY's written
consent,  and that breach by STANLEY of any provision of this AGREEMENT will not
constitute  grounds by PAYLESS to change  such  coverages  or to  terminate  its
obligations   under  this   Agreement   or   otherwise   with   respect  to  the
Indemnification Provisions.  PAYLESS and STANLEY agree that said Indemnification
Agreement is hereby amended to delete section 9.6 thereof in its entirety.

7.       LIABILITY INSURANCE


<PAGE>4


     PAYLESS  currently  maintains  $30  million  in  directors'  and  officers'
liability  insurance that provides  coverage for STANLEY and other directors and
officers of PAYLESS.  The  coverage  period,  including  the run-off  provisions
provided for thereunder,  continue through  December 2, 2003.  PAYLESS agrees to
maintain  such  directors'  and  officers'  liability  insurance  coverage or to
provide  similar  coverage to STANLEY so that STANLEY will remain  insured under
similar  coverage at current  levels until  December 2, 2003 with respect to the
period of time that STANLEY served as a director or officer of PAYLESS.  PAYLESS
has  given  STANLEY  a copy of  such  policy  and  will  give  him a copy of any
amendment or rider promptly after it becomes effective.

     8. NON-COMPETE PROVISIONS

     PAYLESS agrees that the provisions of Section 5 of the Employment Agreement
do not apply after the Effective Date.

     9. RELEASE OF LIABILITY

     PAYLESS  releases  STANLEY of all claims and demands of any kind,  known or
unknown,  which it may have against STANLEY as of the Effective Date or which it
may have had at any time before the  Effective  Date for any acts which  STANLEY
committed or omitted during his  employment  with PAYLESS.  PAYLESS  understands
that it is releasing STANLEY, to the maximum extent permissible by law, from any
liability which STANLEY may have had to it, known or unknown,  at any time up to
and including the Effective Date.

2.  STANLEY'S AGREEMENTS

     1. VOLUNTARY RESIGNATION

     STANLEY and PAYLESS acknowledge that STANLEY does and he does hereby retire
from PAYLESS and voluntarily  resign his employment as Chief  Executive  Officer
and resign as a  Director,  effective  as of the  Effective  Date.  STANLEY  and
PAYLESS  acknowledge that the resignation which is the subject of this Agreement
has  been  effected  by the  mutual  and  amicable  agreement  of both  parties.
Notwithstanding  the  foregoing  STANLEY  will,  at  PAYLESS'  request,  provide
transitional  advisory services to PAYLESS' acting Chief Executive Officer for a
period  ending  April 30, 1998 and may  continue  to occupy his  current  office
during the month of  January,  1998.  Such  service  will be  performed  without
compensation other than  reimbursement of business expenses.  The hours (if any)
during which STANLEY performs such  transitional  advisory services on any given
day shall be  determined  by him,  although  he will use  reasonable  efforts to
respond timely to accommodate  the reasonable  requests of PAYLESS' acting Chief
Executive Officer for his services.

     2. RELEASE OF LIABILITY


<PAGE>5


     STANLEY  releases  PAYLESS from the terms of the  Employment  Agreement and
acknowledges that further  obligations of STANLEY and PAYLESS in that Employment
Agreement  are  extinguished  upon  execution  of  this  Agreement,   except  as
specifically noted herein.  STANLEY  understands that he is releasing PAYLESS to
the maximum extent permissible by law, from any liability which STANLEY believes
PAYLESS may have had to him, at any time up to and  including  the date he signs
this Agreement. STANLEY waives any legal right or claims STANLEY may have or may
have had,  including claims of race, color,  national origin, sex or gender, age
or  disability  discrimination,  arising under the Title VII of the Civil Rights
Acts of 1964,  the  Rehabilitation  Act of 1973,  the Civil  Rights  Act of 1866
(Section  1981),  the  Americans  with  Disabilities  Act of 1990,  the Employee
Retirement  Income  Security Act of 1974, the Age  Discrimination  in Employment
Act, the Family and Medical  Leave Act of 1993,  the Missouri  Human Rights Act,
the Missouri  Workers  Compensation  Act and the Missouri Service Letter Act and
under any other federal, state, or local statute,  regulation,  or common law of
any state, including any and all claims in tort or contract;  provided, however,
that nothing  contained in this Release of Liability  shall modify or in any way
detract from the indemnification provisions of Paragraph A.5 herein.

     3. COOPERATION AGREEMENT

     STANLEY also agrees to cooperate  and assist  PAYLESS in the  investigation
and  handling  of  any  actual  or  threatened  court  action,   arbitration  or
administrative  proceeding  or dispute  involving  any matter that arose  during
STANLEY's  employment  (including,  but not limited to, testifying in deposition
and/or court and providing  information to PAYLESS).  PAYLESS  acknowledges  and
agrees that it is  responsible  for any and all  expenses  (including  costs and
attorneys' fees) that STANLEY may incur in connection with any such proceeding.

     4. ADEQUACY OF CONSIDERATION

     STANLEY  acknowledges  that the sum paid by PAYLESS under this Agreement is
adequate  consideration for STANLEY'S  execution of this Agreement,  and further
acknowledges  that  the sum is in  excess  of the  amounts  to which he would be
entitled  under the  existing  Employment  Agreement,  policies or  practices of
PAYLESS.

     5. CONFIDENTIALITY AND NON-SOLICITATION

     STANLEY agrees that  notwithstanding the provisions of this Agreement,  the
provisions of Section 4 of his  Employment  Agreement  will continue to apply in
accordance with their terms after the Effective Date.


3.  OTHER AGREEMENTS

     1. NON-DISPARAGEMENT


<PAGE>6


     STANLEY  and PAYLESS  acknowledge  and agree that  disparaging  or critical
statements  made by STANLEY  about  PAYLESS or its board  members,  officers and
employees of PAYLESS or disparaging  statements  made by board members or senior
officers of PAYLESS about STANLEY would be uniquely detrimental to the interests
of  both  parties.  Therefore,  STANLEY  agrees  to  refrain  from  making  such
disparaging  or  critical  statements  about  PAYLESS,  or  its  board  members,
officers,  and  employees of PAYLESS,  and PAYLESS  agrees that  PAYLESS'  board
members and senior officers (i.e. the Chairman,  acting Chief Executive Officer,
President  and the  senior  vice  presidents)  will  refrain  from  making  such
disparaging or critical  statements about STANLEY.  All other provisions of this
Agreement  notwithstanding,  PAYLESS agrees that any statements  made by STANLEY
during any  testimony  given by him as part of any  deposition,  court  hearing,
trial,  arbitration  hearing or similar  proceeding,  shall not be  considered a
disparaging or critical  statement,  and STANLEY agrees that any statements made
by PAYLESS or its board members,  officers,  and employees of PAYLESS during any
testimony given by any of them as part of any deposition,  court hearing, trial,
arbitration   hearing,  or  similar  proceeding,   shall  not  be  considered  a
disparaging or critical statement.

     2. NO ADMISSION OF LIABILITY

     STANLEY  acknowledges that this Agreement shall not in any way be construed
as an admission by PAYLESS of any liability on the part of PAYLESS, and that all
such liability is expressly denied by PAYLESS.  Likewise,  PAYLESS  acknowledges
that this Agreement shall not in any way be construed as an admission by STANLEY
of any liability on the part of STANLEY and that all such liability is expressly
denied by STANLEY.

     3. VOLUNTARY NATURE OF AGREEMENT AND ADVICE OF COUNSEL

     STANLEY  acknowledges  that he has read  this  Agreement  and any  attached
exhibits,  understands  their terms, and signs the Agreement  voluntarily of his
own free will,  without coercion or duress,  and with full  understanding of the
significance and binding effect of the Agreement. STANLEY has consulted with his
attorney before signing this Agreement. STANLEY further acknowledges that he has
been represented by counsel with respect to his pending and potential claims and
has thoroughly discussed all aspects of this Agreement with his attorney.

     4. CONSIDERATION PERIOD AND REVOCATION

     STANLEY  received this Agreement on January 5, 1998.  STANLEY  acknowledges
that he has had a reasonable lime. and has had adequate  opportunity to consider
the terms of the  Agreement  and  whether  or not to enter  into the  Agreement.
STANLEY has twenty-one (21) calendar days,  after the date STANLEY  received the
Agreement,  within  which to consider the  Agreement,  although he may return it
sooner if he desires.  STANLEY may revoke the  Agreement by delivering a written
notice  of   revocation  to  E.  J.  Holland,   Jr  .,  Sr.   Vice-President   -
Administration/Secretary, within seven (7) calendar days after STANLEY signs the
Agreement.   The  provisions  of  this  Agreement  will  become   effective  and
enforceable  on the  Effective  Date,


<PAGE>7


which is the eighth (8th)  calendar  day  following  the date STANLEY  signs the
Agreement.

     5. BINDING EFFECT

     This Agreement will be binding upon STANLEY and his heirs,  administrators,
representatives,  executors,  successors  and  assigns,  and  will  inure to the
benefit of PAYLESS and its  successors  and assigns.  Similarly,  this agreement
will be binding on PAYLESS, its officers,  agents and successors in interest and
assigns and will inure to the benefit of STANLEY and his heirs,  administrators,
representatives, executors, successors and assigns.

     6. NEWS RELEASES

     PAYLESS agrees that before it makes any public announcements concerning the
resignation of STANLEY in any newspaper,  trade publication,  radio, television,
or  other  form  of  public  communication,  it  will  submit  such  a  prepared
announcement to STANLEY for his review and approval.  No such  announcement will
be made without the prior approval of STANLEY.  STANLEY agrees that his approval
shall not be unreasonably refused.

     7. GOVERNING LAW

     This Agreement will be interpreted and enforced in accordance with the laws
of the State of Missouri.

     8. SEVERABILITY

     Should any provision of this Agreement be declared or determined by a court
of  competent  jurisdiction  to  be  invalid  or  otherwise  unenforceable,  the
remaining  parts,  terms and provisions  shall  continue to be valid,  legal and
enforceable,  and will be performed and enforced to the fullest extent permitted
by law.

     9. COMPLETE AGREEMENT

     Except for the Indemnification  Provisions and rights and obligations under
directors' and officers'  liability  insurance  policy referred to in paragraphs
A.6 and A.7, which this Agreement merely  supplements but which otherwise remain
in  full   force  and   effect,   and  except   for  the   confidentiality   and
non-solicitation provision referred to in Paragraph B.5, this Agreement contains
the entire  agreement  between  STANLEY and PAYLESS  with respect to the subject
matter  hereof and,  except as  otherwise  noted  herein,  supersedes  all prior
agreements  or  understandings  between them. No change or waiver of any part of
this  Agreement  will be valid  unless in writing and signed by both STANLEY and
PAYLESS.

     10. ARBITRATION

     The parties  hereby agree that any dispute  arising  hereunder or any claim
for breach or


<PAGE>8


violation of any item hereof shall be submitted to  arbitration  pursuant to the
rules  of the  American  Arbitration  Association  ("AAA")  to a panel  of three
arbitrators  selected by mutual  agreement  of the parties or, if the parties do
not mutually agree on the arbitrators,  in accordance with the rules of the AAA.
The award  determination of the arbitrators  shall be final and binding upon the
parties  without right of appeal.  Either party shall have the right to bring an
action in any court of competent  jurisdiction  to enforce this Paragraph and to
enforce any arbitrators'  award rendered  pursuant to this Paragraph.  The venue
for all  proceedings in arbitration  hereunder and for any judicial  proceedings
related thereto shall be in Kansas City, Missouri.


     IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year set forth first above written.

PAYLESS CASHWAYS, INC.                      DAVID STANLEY

By:  /s/ Peter G. Danis, Jr.                /s/  David Stanley
     -----------------------                ----------------------
Name:  Peter G.Danis, Jr.                   Date:  January 5, 1998

Title:  Chairman

Date:  January 5, 1998


<PAGE>9


                Schedule I to David Stanley Settlement Agreement
                         (Lump sum payment computation)



Severance Period Base Salary -                         $ 750,000.00
Unpaid Retention Bonus                                    97,500.00
Unused Vacation Through Effective Date                    62,500.00
                                                      -------------
                   Total                               $ 910,000.00


<PAGE>10


                Schedule II to David Stanley Settlement Agreement
                             (Benefit Continuation)



Group Medical/Vision
Group Dental
Group    Life and Supplemental Death Benefits during the Severance Period, and a
         $650,000 life insurance policy thereafter
Annual Physical in early 1998
1997 Tax Preparation ($1,000 limit)


<PAGE>11

               Schedule III to David Stanley Settlement Agreement

                          CERTIFICATE OF INCORPORATION
                            INDEMNIFICATION PROVISION


                                  ARTICLE VIII
                           INDEMNIFICATION; INSURANCE

     The directors and officers of the  corporation  shall be indemnified to the
maximum extent permitted by law. Without limiting the foregoing, each person who
was or is made a party or is threatened  to be made a party to any action,  suit
or  proceeding,   whether  civil,  criminal,   administrative  or  investigative
(hereinafter a "proceeding"),  by reason of the fact that he or she, or a person
of whom he or she is the legal  representative,  is or was a director or officer
of the corporation,  or is or was serving, at the request of the corporation, as
a director, officer, employee, fiduciary or agent of another corporation or of a
partnership,  joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation, to the fullest extent which it is empowered to
do so by the  Delaware  General  Corporation  Law,  as the  same  exists  or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment  permits the corporation to provide broader  indemnification
rights  than  said  law  permitted  the  corporation  to  provide  prior to such
amendment),   against  all  expenses,  judgments,  fines  and  amounts  paid  in
settlement  actually and reasonably  incurred by such person in connection  with
such proceeding, including attorneys' fees, and such indemnification shall inure
to the  benefit of his or her heirs,  executors  and  administrators;  provided,
however,  that,  except  as  provided  in the  bylaws  of the  corporation,  the
corporation  shall  indemnify  any  such  person  seeking   indemnification   in
connection  with a proceeding  initiated by such person only if such  proceeding
was authorized by the board of directors of the corporation.  Expenses  incurred
by a director  or officer of the  corporation  in  defending a civil or criminal
action,  suit or proceeding  shall be paid by the  corporation in advance of the
final  disposition  of  such  action,  suit or  proceeding  upon  receipt  of an
undertaking  by or on behalf of the  director or officer to repay such amount if
it is ultimately  determined  that the director or officer is not entitled to be
indemnified by the corporation as authorized by the Delaware General Corporation
Law. The foregoing right of indemnification and advancement of expenses shall be
a  contract  right  and  shall in no way be  exclusive  of any  other  rights of
indemnification  and  advancement  of  expenses  to which any such  director  or
officer  may  be  entitled  by  law,  agreement,  vote  of  stockholders  or  of
disinterested  directors  or  otherwise.   All  rights  of  indemnification  and
advancement of expenses  hereunder  shall survive any repeal or  modification of
this  Article VIII as to any set of facts or  proceeding  then  existing,  shall
continue  as to a person who has ceased to be an officer or  director  and shall
inure to the  benefit  of the  heirs,  executors  and  administrators  of such a
director or officer. The procedures with respect to indemnification shall be set
forth in the bylaws of the corporation.


<PAGE>12


     The corporation may maintain  insurance,  at its expense, to protect itself
and any  person  who is or was a  director,  officer,  employee  or agent of the
corporation  or is or  was  serving  at the  request  of  the  corporation  as a
director, officer, employee or agent of another corporation,  partnership, joint
venture, trust or other enterprise against any such expense,  liability or loss,
whether or not the  corporation  would have the power to  indemnify  such person
against such expense,  liability or loss under the Delaware General  Corporation
Law.


<PAGE>13


                Schedule IV to David Stanley Settlement Agreement

                                     BYLAWS
                           INDEMNIFICATION PROVISIONS


                                    ARTICLE V
                INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS

     Section 1.  Procedure for  Indemnification  of Directors and Officers.  Any
indemnification  of a  director  or  officer  of the  corporation  or advance of
expenses under Article VIII of the  certificate of  incorporation  shall be made
promptly,  and in any event within thirty days,  upon the written request of the
director or officer.  If a determination by the corporation that the director or
officer is entitled to  indemnification  pursuant to this Article V is required,
and the corporation  fails to respond within sixty days to a written request for
indemnity,  the corporation shall be deemed to have approved the request. If the
corporation  denies a  written  request  for  indemnification  or  advancing  of
expenses, in whole or in part, or if payment in full pursuant to such request is
not made within thirty days, the right to indemnification or advances as granted
by this Article V shall be  enforceable  by the director or officer in any court
of  competent  jurisdiction.  Such  person's  costs  and  expenses  incurred  in
connection with successfully  establishing his or her right to  indemnification,
in  whole or in  part,  in any such  action  shall  also be  indemnified  by the
corporation.  It shall be a defense  to any such  action  (other  than an action
brought to enforce a claim for expenses  incurred in defending any proceeding in
advance of its final  disposition  where the required  undertaking,  if any, has
been tendered to the corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law for
the corporation to indemnify the claimant for the amount claimed, but the burden
of  such  defense  shall  be on the  corporation.  Neither  the  failure  of the
corporation (including its board of directors,  independent legal counsel or its
stockholders)  to have made a  determination  prior to the  commencement of such
action  that  indemnification  of the  claimant  is proper in the  circumstances
because he or she has met the  applicable  standard  of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the corporation
(including   its  board  of   directors,   independent   legal  counsel  or  its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a  presumption  that the claimant has
not met the applicable standard of conduct.

     Section 2. Article Not  Exclusive.  The rights to  indemnification  and the
payment of expenses  incurred in defending a proceeding  in advance of its final
disposition  conferred  in this  Article V shall not be  exclusive  of any other
right  which  any  person  may have or  hereafter  acquire  under  any  statute,
provision  or the  certificate  of  incorporation,  bylaw,  agreement,  vote  of
stockholders or disinterested directors or otherwise.


<PAGE>14


     Section  3.  Employees  and  Agents.  Persons  who are not  covered  by the
foregoing  provisions of this Article V and who are or were  employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise,  may be indemnified to the extent authorized at any time or
from  time to time by the board of  directors.  Expenses  (including  attorneys'
fees)  incurred  by  employees  and  agents  may be paid  upon  such  terms  and
conditions, if any, as the board of directors deems appropriate;  provided, that
such expenses may only be paid by the  corporation  in advance of a proceeding's
final  disposition  upon  receipt  of an  undertaking  by or on  behalf  of such
employee or agent to repay such amount if it shall ultimately be determined that
he or she is not entitled to be indemnified by the corporation.

     Section 4.  Contract  Rights.  The  provisions  of this  Article V shall be
deemed to be a contract  right  between  the  corporation  and each  director or
officer who serves in any such capacity at any time while this Article V and the
relevant  provisions of the Delaware General Corporation Law or other applicable
law are in effect,  and any repeal or modification of this Article V or any such
law shall not affect any rights or obligations then existing with respect to any
state of facts or proceeding then existing.

     Section  5.  Merger or  Consolidation.  For  purposes  of this  Article  V,
references  to "the  corporation"  shall  include,  in addition to the resulting
corporation,  any  constituent  corporation  (including  any  constituent  of  a
constituent)  absorbed  in a  consolidation  or merger  which,  if its  separate
existence  had  continued,  would have had power and  authority to indemnify its
directors,  officers,  and  employees  or  agents,  so that any  person who is a
director,  officer,  employee or agent of such constituent  corporation or is or
was  serving  at the  request of such  constituent  corporation  as a  director,
officer, employee or agent of another corporation,  partnership,  joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving  corporation  as he or she would have
with  respect to such  constituent  corporation  if its separate  existence  had
continued.


<PAGE>15


                Schedule V to David Stanley Settlement Agreement

                            INDEMNIFICATION AGREEMENT