<PAGE>1


                       SETTLEMENT AGREEMENT, RESIGNATION,
                            AND FULL GENERAL RELEASE

     This Settlement Agreement,  Resignation,  and Release ("Agreement") is made
and  entered  into on January 17, 1998 by and  between  PAYLESS  CASHWAYS,  INC.
("PAYLESS") and G. MICHAEL BUCHEN ("BUCHEN").

     WHEREAS,  BUCHEN was  employed by PAYLESS on August 5, 1974 and is entitled
to the benefits of an  Employment  Agreement  dated as of October 17,  1996,  as
amended as of June 30, 1997 and August 20, 1997, (the "Employment  Agreement") ;
and

     WHEREAS,  PAYLESS and BUCHEN  mutually  wish to  terminate  the  employment
status of BUCHEN, and BUCHEN'S  employment with PAYLESS shall end on January 30,
1998; and

     WHEREAS,  PAYLESS AND BUCHEN have agreed that BUCHEN shall resign as Senior
Vice  President-Merchandising,  but that for purposes of his severance  benefits
BUCHEN'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.  A   PAYLESS' AGREEMENTS

     1. EFFECTIVE DATE.

     PAYLESS acknowledges that the effective date of this Agreement shall be
January 30, 1998 (the "Effective  Date") and that BUCHEN will not be required to
perform services for PAYLESS after the Effective Date.

     2. SEVERANCE BENEFITS

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

          1. Lump Sum Payment.

               (1) PAYLESS agrees to pay BUCHEN 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 BUCHEN 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 July 21, 1997),  (B) the remaining amount due BUCHEN under the PAYLESS
Reorganization Retention Plan, and (C) an amount for unused earned vacation days
through  the  Effective  Date.  In  addition,  PAYLESS  shall pay  BUCHEN on the
Effective  Date or as promptly  thereafter as is  practicable an amount equal to
any


<PAGE>2


previously unreimbursed business expenses.

               (2) PAYLESS also agrees to pay, in lieu of matching contributions
to the Payless  Cashways,  Inc. Employee Savings Plan which would otherwise have
been made on BUCHEN'S behalf during the Severance  Period,  and in consideration
for the Release of Liability  contained  herein in Paragraph  B.2, an additional
lump sum payment (less applicable  payroll  deductions) of $10,000 (Ten Thousand
Dollars).

          2. Continuation of Benefits.  PAYLESS agrees that during the Severance
Period it will provide BUCHEN with health,  life (including  supplemental  death
benefits),  and dental  benefits  substantially  equivalent to those received by
eligible active employees of PAYLESS. 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  health,  life and dental  benefits  shall be
provided at the same coverage levels  provided to eligible  active  employees of
PAYLESS, and such benefits shall be provided at PAYLESS' expense, subject to the
same cost sharing  provisions,  if any. In addition,  PAYLESS agrees that during
the Severance Period it will provide BUCHEN with disability  benefits similar to
those that BUCHEN was receiving or was entitled to receive under the  Employment
Agreement, except that during the Severance Period, such benefits will provide a
maximum monthly  benefit of $5,000.00.  Such benefits are listed in Schedule II.
After the  Severance  Period,  BUCHEN shall be eligible  for COBRA  continuation
coverage of health and dental  benefits for a period of 18 months or such period
as may then be provided  by law.  BUCHEN  shall not be entitled to receive  such
benefits to the extent that he obtains other  employment prior to the end of the
Severance Period that provides  comparable  benefits,  provided,  however,  that
BUCHEN 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 BUCHEN under the Payless  Cashways,  Inc.
Amended Retirement Plan (the "Pension Plan") and BUCHEN'S eligibility  therefor,
BUCHEN'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 foregoing, then on the Effective Date PAYLESS shall pay BUCHEN 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 July 21,
1997. The present value payable  hereunder  shall be calculated  using GATT rate
currently in effect under the Pension Plan.

          4.  Automobile.  PAYLESS  also  agrees  to a lump  sum  payment  (less
applicable payroll deductions) of $8,161.62 in lieu of car allowance, to be paid
on the Effective Date.  BUCHEN and PAYLESS agree that the lease, and use, of his
company car will be terminated.


<PAGE>3


     3. DEATH OF BUCHEN

     The death of BUCHEN prior to the expiration of this Agreement will not void
this Agreement,  but the terms thereof will survive his death. In the event that
BUCHEN 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 BUCHEN  otherwise due under
this  Agreement  shall become due and payable to the  beneficiaries  hereinafter
listed: Principal Beneficiary: Carol A. Buchen.

     4. STOCK INCENTIVE

     The parties acknowledge that BUCHEN has no vested stock incentives.

     5. OUT PLACEMENT

     PAYLESS  will  provide  BUCHEN at  PAYLESS'  expense  with  executive-level
outplacement  services at Rights  Associates,  including an office and telephone
transfer services.

     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 December 2, 1997,  between
PAYLESS   and   BUCHEN   (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 BUCHEN
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 an officer of PAYLESS and any of its  predecessors.  PAYLESS  further
acknowledges that the Indemnification  Provisions obligate PAYLESS,  among other
matters,  to indemnify BUCHEN against any and all expenses  (including costs and
attorneys' fees) which he 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 BUCHEN may become a party or
witness by reason of the fact that he served as an officer of PAYLESS, except as
may be provided in the Indemnification  Provisions.  PAYLESS further agrees that
as to BUCHEN, any amendments or changes to the Indemnification Provisions or the
insurance  coverages  described in paragraph A.7 below will not adversely affect
BUCHEN  without  BUCHEN'S  written  consent,  and that  breach  by BUCHEN 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 BUCHEN agree that
said  Indemnification  Agreement is hereby amended to delete section 9.6 thereof
in its entirety.


<PAGE>4


     7. LIABILITY INSURANCE

     PAYLESS  currently  maintains  $30  million  in  directors'  and  officers'
liability  insurance  that  provides  coverage for BUCHEN and other  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 BUCHEN so that BUCHEN will remain insured under similar  coverage at
current  levels  until  December 2, 2003 with respect to the period of time that
BUCHEN served as an officer of PAYLESS.  PAYLESS has given BUCHEN 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  BUCHEN of all claims and  demands of any kind,  known or
unknown,  which it may have against  BUCHEN as of the Effective Date or which it
may have had at any time  before the  Effective  Date for any acts which  BUCHEN
committed or omitted during his  employment  with PAYLESS.  PAYLESS  understands
that it is releasing BUCHEN, to the maximum extent  permissible by law, from any
liability  which BUCHEN may have had to it, known or unknown,  at any time up to
and including the Effective Date.

2.  BUCHEN'S AGREEMENTS

     1. VOLUNTARY RESIGNATION

     BUCHEN  and  PAYLESS  acknowledge  that  BUCHEN  does  and he  hereby  does
voluntarily  resign  his  employment  as  Senior  Vice  President-Merchandising,
effective as of the  Effective  Date.  BUCHEN 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
BUCHEN will, at PAYLESS'  request,  provide  transitional  advisory  services to
PAYLESS for a period  ending  April 30,  1998.  Such  service  will be performed
without  compensation other than  reimbursement of business expenses.  The hours
(if any) during which BUCHEN 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  for his
services.

     2. RELEASE OF LIABILITY.

     BUCHEN  releases  PAYLESS from the terms of the  Employment  Agreement  and


<PAGE>5


acknowledges  that further  obligations of BUCHEN and PAYLESS in that Employment
Agreement  are  extinguished  upon  execution  of  this  Agreement,   except  as
specifically  noted herein.  BUCHEN  understands that he is releasing PAYLESS to
the maximum extent  permissible by law, from any liability which BUCHEN believes
PAYLESS may have had to him, at any time up to and  including  the date he signs
this  Agreement.  BUCHEN waives any legal right or claims BUCHEN 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.6 herein.

     3. COOPERATION AGREEMENT

     BUCHEN 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 BUCHEN'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
BUCHEN may incur in connection with any such proceeding.

     4. ADEQUACY OF CONSIDERATION

     BUCHEN  acknowledges  that the sum paid by PAYLESS under this  Agreement is
adequate  consideration  for BUCHEN'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

     BUCHEN 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.


<PAGE>6


3.  OTHER AGREEMENTS

     1. NON-DISPARAGEMENT

     BUCHEN and  PAYLESS  acknowledge  and agree that  disparaging  or  critical
statements  made by BUCHEN  about  PAYLESS or its board  members,  officers  and
employees or disparaging  statements made by board members or senior officers of
PAYLESS  about BUCHEN  would be uniquely  detrimental  to the  interests of both
parties.  Therefore,  BUCHEN 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 executive
officers will refrain from making such disparaging or critical  statements about
BUCHEN. All other provisions of this Agreement  notwithstanding,  PAYLESS agrees
that any statements  made by BUCHEN 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 BUCHEN 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

     BUCHEN  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 BUCHEN
of any liability on the part of BUCHEN and that all such  liability is expressly
denied by BUCHEN.

     3. VOLUNTARY NATURE OF AGREEMENT AND ADVICE OF COUNSEL

     BUCHEN  acknowledges  that he has  read  this  Agreement  and any  attached
schedules,  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.  BUCHEN has consulted with his
attorney before signing this Agreement.  BUCHEN 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.


<PAGE>7


     4. CONSIDERATION PERIOD AND REVOCATION

     BUCHEN  received this  Agreement on January 17, 1998.  BUCHEN  acknowledges
that he has had a reasonable time, and has had adequate  opportunity to consider
the terms of the  Agreement  and  whether  or not to enter  into the  Agreement.
BUCHEN has  twenty-one  (21) calendar days,  after the date BUCHEN  received the
Agreement,  within  which to consider  the  Agreement,  although he may sign and
deliver it to PAYLESS  sooner if he desires.  BUCHEN 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
BUCHEN  signs the  Agreement.  The  provisions  of this  Agreement  will  become
effective and  enforceable  on the eighth (8th)  calendar day following the date
BUCHEN signs the Agreement.

     5. BINDING EFFECT

     This Agreement  will be binding upon BUCHEN 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 BUCHEN 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 BUCHEN in any newspaper, trade publication, radio, television, or
other form of public communication,  it will submit such a prepared announcement
to BUCHEN for his review and approval. No such announcement will be made without
the prior  approval  of BUCHEN.  BUCHEN  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.


<PAGE>8


     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  BUCHEN 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 BUCHEN and
PAYLESS.

     10. ARBITRATION

     The parties  hereby agree that any dispute  arising  hereunder or any claim
for breach or 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.                    G. MICHAEL BUCHEN

By:  /s/ Donald E. Roller                 /s/  G. Michael Buchen
   -----------------------                ------------------------
Name:  Donald E. Roller                   Date:  January 17, 1998

Title:  Acting Chief Executive Officer

Date:  January 21, 1998


<PAGE>9


              Schedule I to G. Michael Buchen Settlement Agreement
                          Lump sum payment computation



Severance Period Base Salary                    $ 296,153.85
   (13 months at $275,000 base rate
     in effect on 1/21/97)

Unpaid Retention Bonus                             41,250.00
   (50% of 30% of $275,000)

Unused Vacation Days
   (6 weeks pay at $275,000 per annum)             31,730.77

Additional Lump Sum Payment, pursuant to           10,000.00
   P.  A(2)(a)(ii)

Automobile Allowance                                8,161.62
                                                  ----------
         Total                                  $ 387,296.24


<PAGE>10


              Schedule II to G. Michael Buchen Settlement Agreement
                              Benefit Continuation



Group Medical/Vision
Group Dental
Long Term Disability and Supplemental  Disability  (limited to a maximum monthly
     benefit of $5,000.00)
GroupLife  Insurance  and  Supplemental  Death  Benefits  during  the  Severance
     Period, and a $275,000 life insurance policy thereafter
Annual Physical in early 1998
1997 Tax Preparation ($1,000 limit)


<PAGE>11


             Schedule III to G. Michael Buchen 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 G. Michael Buchen 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 G. Michael Buchen Settlement Agreement

                            INDEMNIFICATION AGREEMENT